Emerald Holding, Inc. Q3 FY2024 earnings call

• Portfolio optimization: Conducted a review of the event catalog, permanently discontinued 20 unprofitable events, with $20 million in historic run rate revenue. Also canceled a hosted buyer event in early October due to Hurricane Milton, expecting insurance reimbursement. - Third quarter financials: Total revenue was $72.6 million vs $72.5 million prior year quarter. Organic revenue declined 5.3% to $58.7 million. Adjusted EBITDA excluding insurance proceeds grew 56.3% to $12.5 million with an adjusted EBITDA margin of approximately 17.2%. SG&A was $40.8 million vs $41.6 million prior year period, driven by management of overhead costs and lower stock-based compensation. - Cash flow: Generated $6.7 million of free cash flow excluding event cancellation insurance proceeds. - Balance sheet: Healthy cash balance of $188.9 million as of September 30th. S&P upgraded debt from B to B+. Total liquidity $298.9 million. Net debt $221.2 million. - Capital allocation: Balance between acquisitions, investments in business, managing debt leverage, and returns to shareholders. Bought back 743,000 shares in third quarter. Board authorized extension and expansion of share repurchase program. Declared regular quarterly dividend of $0.015 per share.

For the event segment, earlier this year, Emerald conducted a review of its event catalog and decided to accelerate portfolio optimization by pruning several smaller and unprofitable events. Over the past several months, 20 events totaling $20 million in historic run rate revenue were permanently discontinued. $17 million of this total is for events that won't stage in 2024 but staged in 2023, and $3 million is for events that staged in 2024 but won't stage in 2025. These events were not growing and had negative EBITDA margin. The Content segment currently accounts for approximately 5% of total revenue but has continued to perform below expectations, with a low-to-mid single-digit million-dollar shortfall versus expectations for full year 2024, leading to a year-over-year decline in Content revenue.

• 2024 performance: Expect at least $400 million of revenue and at least $100 million of adjusted EBITDA. - 2025 outlook: Expect solid growth and return to margin enhancement aided by portfolio optimization. The removal of unprofitable assets is expected to aid growth and margin in 2025. - Insurance claim: Expect to be reimbursed for the canceled hosted buyer event due to Hurricane Milton as it falls under event cancellation insurance policy.

• Macro-economic and operational impacts on Content business leading to below-expectation performance. - Weather-related event cancellation risk, though expecting insurance reimbursement for the Hurricane Milton-related cancellation. - Uncertainty in international business, particularly in China with potential headwinds depending on election outcomes affecting international revenues.

Q: Could you explain a little bit more about why your outlook for EBITDA is reduced?

A: Three components: cancellation of events where SG&A related to canceled events was already spent this year and not generating contribution margin to fund it; real softness in Content business with low-to-mid single-digit million-dollar impact; hurricane-caused event cancellation hitting about $1 million with unclear timing of insurance recovery.

Q: Is there anything different that you see now or that you know now that should give us any different level of confidence in what you see for 2025 relative to what you saw when you were starting 2024?

A: Pacings for 2025's first half are stronger and more broad-based than at this point last year. More events are outperforming in pacing for next year, and eliminating underperformers and focusing resources on strong brands is a good sign.

Q: Could you talk a little bit about what you're doing with the Blockchain Futurist event?

A: There's a shift in portfolio optimization where identifying emerging assets like Blockchain Futurist can accelerate launch activity in a way that minimizes bottom-line burn. It supplements existing activity and is managed by the Xcelerator team with a launch in Miami planned.

Q: Could you give a little bit more color in terms of the profile of the events that were discontinued and why you think they were underperforming?

A: Largely, discontinued events were adjacency to existing brands like geo extensions or extensions from existing brands that didn't have the uptake or serve customers as expected. NBA Con is a large one that doesn't fit the typical profile of the discontinued events mentioned.

Q: Can you just comment on how the business is tracking relative to pre-pandemic and some of the steps that could make it get back to full performance there?

A: Pre-pandemic is a long time ago and business looks different. Poorer performers were more concentrated in second and third quarters. Stronger brands have bounced back, and eliminating underperformers and focusing on strong brands can help drive growth.

Q: In terms of the hosted buyer event that was impacted by the hurricane, is that something you plan on still trying to host this year or is it just canceled until next year?

A: The event has been canceled altogether for this year.

Q: How you're progressing with integrating and using AI across the business?

A: AI is work in progress. Internal use includes marketing teams using it for e-mail copy, headlines, and landing page copy. It helps scale personalization efforts and improve conversion rates, with tests ongoing and plans to scale as tests progress.