Emerald Holding(US:EEX)2020-05-05 02:48Financial Data and Key Metrics Changes - Revenues decreased by $37.7 million or 27.4% compared to Q1 2019, primarily due to a $34.3 million reduction from the cancellation of seven events due to COVID-19 [27] - Adjusted EBITDA for Q1 was $23.6 million compared to $57.5 million in the same period last year, reflecting a decrease of $33.9 million [28] - Free cash flow for Q1 was $7.7 million compared to $11.3 million in the previous year [29] - A non-cash goodwill impairment charge of $554 million and a non-cash charge of $59.4 million related to intangible assets were recorded in Q1 due to the impact of COVID-19 [29] Business Line Data and Key Metrics Changes - Organic revenues for Q1 declined by $2.6 million or 2.6% compared to the prior year [28] - The G3 Communications acquisition contributed $3.9 million of revenues in Q1 2020 [27] Market Data and Key Metrics Changes - 14 events have been postponed to the second half of 2020, equating to approximately $12 million of 2019 revenue [10] - 29 events were canceled, accounting for approximately $118 million of 2019 revenue [10] Company Strategy and Development Direction - The company is focusing on ensuring employee and customer safety during the COVID-19 pandemic while maintaining liquidity and resources [6] - There is an emphasis on digital product offerings to provide value through education and networking, which has already resulted in a 15% increase in new customers [23] - The company is committed to maintaining its event cancellation insurance, which covers up to $191 million for 2020 and 2021, including losses from communicable diseases [15][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term viability of the tradeshow business, noting that exhibitors expect to return to pre-COVID spending levels once the health situation improves [12] - The company is optimistic about the support from customer communities and believes demand for marketplaces remains intact [10] - Management acknowledged the uncertainty in the economic environment but emphasized the importance of their insurance coverage and liquidity position [36] Other Important Information - The company has avoided over $30 million of direct costs for canceled events and is actively managing its expense structure to optimize costs [31] - A significant decline in deferred revenue has occurred due to event cancellations, with a pending refund liability of $72 million on the balance sheet [33] Q&A Session Summary Question: Will Emerald still put on shows if participation levels are significantly lower? - Management indicated that decisions will depend on customer interest and the viability of the event, emphasizing the importance of managing customer expectations and experiences [38][39] Question: What are the implications for insurance coverage in the future? - Management noted uncertainty regarding the availability and cost of insurance coverage for 2022 and beyond, acknowledging that it may cost more but is currently locked in for 2021 [41][42] Question: Can you provide a near-term liquidity update? - Management confirmed that the net revolver balance was essentially zero at the end of March and that insurance proceeds are expected to offset refunds [44] Question: What is the current cash burn rate? - Management stated that direct costs for shows are being minimized, and SG&A has been reduced by 25%-30% in Q2 [48] Question: Is there a pandemic exclusion in the insurance policy? - Management clarified that they paid extra for a rider that specifically covers pandemics [50] Question: How is the expense base structured? - Management explained that direct costs are approximately 30% fixed and 70% variable, while over half of SG&A is fixed [52][53] Question: How does the insurance policy cover lost revenue? - Management confirmed that the insurance policy is designed to cover gross profit associated with lost revenue, with a total coverage of $191 million [60][61]