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Edited Transcript of EEX.N earnings conference call or presentation 1-Aug-19 3:00pm GMT

Q2 2019 Emerald Expositions Events Inc Earnings Call

SAN JUAN CAPISTRANO Aug 6, 2019 (Thomson StreetEvents) -- Edited Transcript of Emerald Expositions Events Inc earnings conference call or presentation Thursday, August 1, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Philip T. Evans

Emerald Expositions Events, Inc. - CFO & Treasurer

* Sally Shankland

Emerald Expositions Events, Inc. - CEO, President & Director

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Conference Call Participants

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* Ashish Sabadra

Deutsche Bank AG, Research Division - Research Analyst

* Ryan C. Leonard

Barclays Bank PLC, Research Division - Research Analyst

* Seth Robert Weber

RBC Capital Markets, LLC, Research Division - Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen, and welcome to Emerald Expositions' second quarter 2019 earnings conference call. (Operator Instructions.] As a reminder, this conference is being recorded.

I would now like to turn the call over to Mr. Philip Evans, Chief Financial Officer. Thank you, sir. Please go ahead.

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Philip T. Evans, Emerald Expositions Events, Inc. - CFO & Treasurer [2]

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Thank you, operator, and good morning, everyone. We appreciate your participation today in our second quarter 2019 earnings call. I'm very pleased to have Sally Shankland, Emerald's President and Chief Executive Officer, with me here today. As a reminder, a replay of this call will be available on the Investors section of the company's website through 11:59 P.M. Eastern Time on August 8, 2019.

Before we begin, let me remind everyone that this call may contain certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include remarks about future expectations, beliefs, estimates, plans and prospects. Such statements are subject to a variety of risks, uncertainties and other factors that could cause actual results to differ materially from those indicated or implied by such statements. Such risks and other factors are set forth in the company's most recently filed periodic reports on Form 10-K and Form 10-Q and subsequent filings. We do not undertake any duty to update such forward-looking statements.

Additionally, during today's call we'll discuss non-GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with U.S. GAAP. A reconciliation of these non-GAAP measures to the most comparable GAAP measure can be found in our earnings release.

Now I'll turn the call over to Sally.

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Sally Shankland, Emerald Expositions Events, Inc. - CEO, President & Director [3]

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Thank you, Phil. I'm very excited to be here today and leading Emerald, given the significant opportunity that I see for our company, our customers, our employees and our shareholders.

On today's call I'll briefly introduce myself, discuss what attracted me to Emerald, give my high-level perspective on the challenges and opportunities within our portfolio and detail certain initiatives we have begun to implement during my first 60 days. I'll then hand the call back to Phil to review our second quarter results and to provide an update on our larger third quarter shows. He will then outline our latest expectations for full year 2019 performance before turning the call back to me for concluding comments. We will then open up the call for your questions.

Before I go any further, however, let me acknowledge my disappointment with our second quarter financial results and the updated full year guidance. I will talk today about some of the immediate actions we have taken and others that we plan to take to address the problems I see in the business. While it may take some time to see the benefit of these actions reflected in improved financial performance, I am confident that we are already on a path that will return the business to profitable growth.

With that said, let me introduce myself. I have spent the majority of my career at UBM, which is now part of Informa, a U.K.-based multinational events, academic publishing and business intelligence company. In the course of my 27-year tenure at UBM, I held a variety of senior leadership roles, including serving as Chief Executive Officer of UBM Americas from 2012 to 2015. While at UBM Americas, I ran a portfolio that was somewhat larger than Emerald's and successfully executed on an M&A strategy resulting in 4 acquisitions, including 2 in Mexico and 1 in Brazil.

I left UBM in 2015 to join McGraw-Hill as the President of its Higher Education Division, where I led the transformation of the business model from a legacy print textbook publisher to a provider of adaptive learning software and services.

In April of this year I joined the Emerald Board of Directors. I was drawn to Emerald's unique mix of market-leading brands and believed that I could lend my perspective to help the business address its challenges and transition back to organic growth. I came away from my first Board meeting realizing that I needed to be involved on a day-to-day basis to effectively drive this change and consequently expressed my interest in the CEO role to the Board. I have faced similar challenges before in my career, and I am confident that I will be able to overcome them again here at Emerald.

Since starting as CEO on June 1, I've visited our offices across the country, conducted town hall meetings, attended shows and spoken to our customers, our people and our communities. Based on my observations, despite the fact that Emerald has significant room for improvement in a number of areas, I am confident that we have a strong portfolio and dedicated employees, which together provide the foundation for future success.

While I'm still finalizing my detailed strategic plan to return Emerald to profitable growth, which I expect to discuss on our third quarter call at the beginning of November, I would like to preview a few of my focus points for Emerald today.

First, execution and investment. We can and will simply execute better with a more capable and effective organization that is motivated, inspired and makes better use of data and technology to increase sales, marketing and operating effectiveness.

A key step to achieving this goal was the recruitment as COO of Brian Field, with whom I had worked at UBM. Brian has a successful track record of increasing customer satisfaction and driving revenue growth, largely through the application of data and technology best practices. In his first 2 months here, Brian has already kicked off several initiatives focused on nurturing our customers, expanding our revenues, undertaking a more strategic approach to pricing and improving our planning and decision-making through the use of data and tools.

For instance, under Brian's leadership we've launched a standardized event plan framework. The event plan is a diagnostic, forecasting and measurement instrument for evaluating the health of an event, facilitating cross-functional planning and capturing and tracking key performance targets from multiple show metrics including customer experience.

We have also standardized the process and listening tool we use to design and deploy customer surveys and research. This algorithm provides us with actionable data and a precise measure of customer experience and customer-specific opportunities and concerns, which in turn allows us to build better event plans and generate better outcomes.

Being highly disciplined in our processes and using data to plan and track customer experience and other performance metrics allows us to plan accurately, measure how we're doing and to identify trends and issues early, when there is time to take action and course-correct. I believe that some of Emerald's current problems would have been avoided if these approaches had been deployed in the past.

Additional investments already in motion include research and analysis of value-based show pricing opportunities, enrichment of our exhibitor and attendee data and driving increased value for customers by creating integrated solutions beyond pure booth or conference programs. Based on prior experience, I believe that the thoughtful implementation of value-based pricing can drive meaningful booth yield increases as well as improve exhibitor satisfaction levels.

All this is to say that I believe we are taking critical initial steps and making the necessary investments to improve our efficiency and effectiveness and to identify future growth opportunities. We have begun to develop a series of key metrics, some of which are leading indicators to measure the trajectory of our business, and I plan to start sharing some of those externally in 2020 so that we are as transparent as possible on our progress.

My second area of focus is having the right team. A little over a week ago we announced the addition of 3 seasoned executives to our senior team together with a major restructuring of Emerald to better align brands and shared service teams within our portfolio. In addition to the benefit of bringing in talented leaders with fresh perspectives, our new structure will encourage greater accountability, better execution, better cross-selling, more collaboration and accelerated development of new products and services.

In addition, in the course of the restructuring I promoted and expanded the responsibilities of several members of the existing management team and also created 2 new senior positions whose entire roles are to identify and realize growth opportunities. Having the right team and organizational structure in place is an important building block for our future growth and success.

My third area of focus is creating greater value for our customers. We will be laser-focused on getting to know our customers better and on improving their satisfaction and experience through more tailored interactions. For this purpose, I think broadly of our exhibitors, attendees, conference delegates, sponsors and advertisers as all being our customers. Our initiatives here will involve the use of data and technology to gain deeper insights into their individual needs and interests so that we can provide more valuable products and experiences that deliver demonstrable and measurable returns on their time and investments.

For example, we will take a more detailed and comprehensive approach to analyzing how our customers interact with both our content and with each other. These include measuring what our customers read, click on and share online to the interactions they have in our live environments -- which booths they visit, which conference tracks they attend and where and with whom they scan their badges. Over time we will leverage these robust and powerful behavioral profiles to build new and enhanced products and services that strengthen and expand our relationships with our customers, driving revenue growth.

Finally, my fourth area of focus is our employees. I firmly believe that we need to provide an employee value proposition that allows us to recruit, retain and motivate the most capable and dedicated group of employees in our industry. Our investments here will include a new intranet to facilitate communication and sharing of best practices, which we have already begun, new training, development and career planning programs and offering market-leading employee benefits and physical work environments.

The various investments I have just described and those we have previously initiated are having some impact on our margin. We aspire to market-leading profit margins, and our margins have been historically above industry average. We will do our best to mitigate the financial impact of our investments with strong expense discipline and the benefits of a more accountable and effective leadership team.

We will also reevaluate our overall cost structure as well as determine whether we are achieving the appropriate returns on our new investments. We believe the new investments and other changes we are making will enable us to resume organic top line revenue and EBITDA growth.

To enhance this growth and as part of our overall growth strategy, we can and should be more active on launches and category additions in our existing and adjacent market sectors. Over the last 60 days we've already identified several new opportunities, and I will continue to encourage a more aggressive attitude to launches.

While I'm also interested in continuing with our M&A strategy where it makes most sense to strengthen our existing portfolios and capabilities, we have a lot of work to do on our base business, and so we will continue to be selective when it comes to our M&A activities.

Now I will turn the call over to Phil to discuss our second quarter results and full year outlook.

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Philip T. Evans, Emerald Expositions Events, Inc. - CFO & Treasurer [4]

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Thank you, Sally. As Sally has outlined, we are in the midst of implementing a broad strategy designed to improve our execution, more effectively utilize data and technology, recruit experienced industry executives, focus the organization on creating value for our customers and improve Emerald's culture to the benefit of our employees. Having been more involved in the operational side of the business over the last 9 months as we conducted our CEO search, I saw first-hand how some of our larger shows are handling the various issues we've discussed on prior calls. I'm confident that Sally's initiatives will directly address the core issues that have led to their underperformance and which are impacting our results and our full year guidance. I'm also confident that our challenges are well within our control to solve and the strong competitive positioning of our shows is still intact.

This morning I'm going to briefly review our financial results and spend the majority of my time reviewing our larger shows in the context of the steps we are quickly taking to stabilize their performance.

Turning to our second quarter results, revenue increased by $24.6 million or 31.4% to $103.0 million compared to the year-ago quarter. This growth reflected a net $23.7 million addition from several show scheduling differences in the second quarter of 2019, most notably Outdoor Retail or Summer Market and GlobalShop, which both staged in the second quarter this year versus the third and first quarters of 2018, respectively. As a result, the second quarter is now our second-largest quarter of the year by revenue, with the first quarter still being the largest.

The 2 acquisitions that we completed in the second half of last year contributed $3.6 million of revenues in the second quarter, while our organic revenues adjusted to reflect scheduling differences declined by 3.6%.

Adjusted EBITDA for the second quarter of 2019 of $41.2 million compared with $48.9 million for the equivalent 2018 period, adjusted for the impact of show timing differences. The decrease of $7.7 million or 15.7% was mainly driven by the flow-through of our shortfall in organic revenues together with higher operating costs, partly due to the planned incremental event and organization investments.

Free cash flow, which we define as net cash provided by operating activities less capital expenditures, was $27.8 million for the second quarter of 2019 compared to $31.6 million in the second quarter of 2018, a decrease of 12%. At the end of June our outstanding term loan balance was $533.7 million, and we had $5 million outstanding on the revolving credit facility. With cash on hand of $12.4 million, this resulted in a net debt of $526.3 million and a net leverage ratio of 3.6x our last 12 months adjusted EBITDA.

Now let me turn to our second quarter shows. Outdoor Retail or Summer Market, our largest show in the quarter, was flat in revenues with slight growth in booth revenues offset by lower commissions and other nonbooth revenue streams. HD Expo and COUTURE, our next 2 largest shows by revenue, increased their respective revenues by low to mid-single-digit percentages, which we were pleased with.

All 3 of these shows are clear and distant leaders in their markets, and in our view, capable of stronger growth rates than we experienced this quarter with a more active data and technology-enabled nurturing of exhibitor and attendee relationships and a deeper understanding of the drivers of customer satisfaction within these markets. The new skills and approaches we're starting to deploy should help us accelerate the growth of these shows.

We experienced a double-digit percentage revenue decline at IRCE, driven by lower conference revenues and some moderate softness in the GlobalShop show, which co-located with IRCE for the first time this year under the RetailX brand. The initial post-show research indicates that the new combined RetailX show gained traction with crossover attendees. However, the market reaction was not universally positive. We're conducting further research and, at a minimum, we need to improve the integration of the experience and execution of the show next year. If we had used a robust event plan framework for this co-location like the one we've recently introduced, it's likely that many of these problems we experienced would have been avoided. The RetailX performance accounted for a significant portion of the modest shortfall in the second quarter relative to expectations as of the last call.

Our ICFF show, which has grown strongly over the last 5 years, experienced a double-digit percentage revenue decline this year, primarily due to softness from European exhibitors, partly attributable to Brexit uncertainty and also a date conflict with our own HD Expo that led some exhibitors to miss the ICFF show. As I noted on our first quarter call, we also suffered from resource conflicts and issues that we plan to address in order to continue this brand's robust historical growth rates in the future.

Turning to our expectations for the largest Emerald events in the second half of the year, let me start with ASD, which opened last Saturday and closed yesterday. Overall, we were satisfied with the show's financial performance, which we expect to be slightly favorable to our earlier expectations. We anticipate that revenues will be broadly flat versus the 2018 equivalent show, a significant improvement versus last year's trajectory despite our international sourcing section continuing to feel the effects of the ongoing trade tensions with China. This is a solid performance and supports our view that this franchise has stabilized.

The next largest show staging after ASD is New York NOW, which opens on August 9. As I discussed in detail on our first quarter earnings call, we're introducing numerous new features at this show that we believe will continue the brand's positive momentum towards stability and ultimately to growth. Building on the Retail Renaissance theme, these new initiatives include adding an epicurean kitchen area to attract high-end kitchenware exhibitors, additional health and wellness and upscale jewelry areas, several designer features, multiple experiential elements and a launch of a second edition of the co-located National Stationery Show. As we did with the February show earlier this year, we've actively curated areas of the lifestyle section to allow space for our JA Summer Jewelry Show, to be co-located with New York NOW. Based on current pacing, we expect a revenue percentage decline in the low teens, which reflects a slightly lower recovery than we expected but would still represent a notable improvement in the show's revenue trajectory versus our winter show.

The new tools and approaches that Sally described earlier should be additive to the efforts that the team has made on the last few shows to improve the show experience for exhibitors and attendees. We're excited to see the impact of these efforts for the Winter 2020 show.

In the first half of September we'll stage our Surf Expo Summer and CEDIA Expo shows. Both of these are pacing below our previous expectations. In the case of Surf Expo, whose winter show earlier this year was flat in revenues, we're seeing the effects of a challenging board sports category with consolidation in the paddle sector and a shrinking wakeboard market. We're also experiencing some continued hesitation caused by the hurricane that shortened the show 2 years ago. And overall, we're expecting a mid-single-digit percentage revenue decline.

At this year's show we'll be launching a new visual brand identity, rebranding and repositioning our Demo Day, adding more show floor features and expanding our education programs. We expect to have a successful show that will provide a basis for future growth.

CEDIA Expo takes place the following week in Denver and is expected to be broadly flat in revenues after numerous years of growth. The show has been adversely affected by shifting exhibitor buying behaviors tied to the prolonged trade disputes with China as well as some supplier consolidation in the channel. That said, we'll introduce several new pavilions and categories at the show, including wellness, security solutions and a new product pavilion, and we strongly believe in the attractiveness of this market sector and the long-term growth opportunities it provides.

In the first week of November we'll stage our second Outdoor Retailer Winter Market in Denver which, as you may recall, is the third OR show added last year to complement the longstanding and successful January and Summer editions. The outdoor industry is taking some time to adapt to the 3-show cadence despite the original request from key industry influence and strong industry support for the show to be held at the start of the winter buying season. We continue to consult with the industry; however, we've moderated our expectations for this year's show based on current pacing trends.

Finally, let me talk about Boutique Design New York, or BDNY, which stages at the Javits Center the second week of November. The show is continuing on its strong growth trajectory and is pacing to grow its booth revenues by a high-single-digit percentage, as expected. We're excited to have acquired this excellent franchise last year.

With approximately 95% of our anticipated revenues for the year already sold, we believe we have good visibility into the likely outlook for the full year. Relative to what we conveyed last quarter, we've reduced our revenue guidance for the year at the midpoint by approximately $15 million, of which approximately $3 million is related to underperformance in the second quarter, predominantly in the RetailX shows, ICFF, and in our other marketing services portfolio. The remaining approximately $12 million of this reduction is due to lower forecasted revenue in the second half of the year across a number of our shows, including Surf Expo, CEDIA Expo, Outdoor Retailer Winter Market and also across our other marketing services portfolio.

We've reduced our adjusted EBITDA guidance by approximately $20 million, of which approximately $3 million reflected the flow-through of our second quarter revenue shortfall. Approximately $14 million of the reduction is attributable to the projected $12 million second half revenue shortfall expectations, partly reflecting a slightly unfavorable show mix, with the remaining $3 million due to the forecasted incremental costs of the new management team and several new corporate-level initiatives.

We've continued to execute against our brand investment plan, as we believe it's an important component of our efforts to stabilize performance and position us for future growth. That said, we're working with our new management team to reevaluate our entire cost base in the context of our more progressive and data-driven operating model in order to balance continued base spend against spending on the new strategic initiatives discussed by Sally today. We're also assessing the ROI on our current investments to ensure they are generating tangible returns.

Revenue for the year is now expected to range between $362 million and $369 million. The aggregate impact of the prolonged trade tensions with China and Brexit factors is projected to constitute approximately one-third of our year-over-year revenue decline, slightly more than we anticipated at the time of our last call. The main factors determining the scale of our revenue guidance range are the uncertainties related to rest-of-the-year conference revenues, commissions and print and digital advertising revenues, all of which are less easily projected revenue streams.

Adjusted EBITDA is expected to finish within the range of $118 million and $125 million, while free cash flow is expected to fall within the range of $60 million and $65 million. The full list of updated guidance metrics is set out in our earnings release.

Looking at both our projected performance for the full year 2019 versus 2018 and the change in our guidance ranges since our last earnings call, we've clearly not been effective in reducing our costs as quickly as revenues have softened. This fact, together with the additional investments and increased overhead, has magnified the effect of our revenue shortfalls this year on our adjusted EBITDA. As just noted, we plan to rigorously and thoroughly review our costs and investments to identify profit improvement opportunities.

Turning to capital allocation, our approach has not changed. We will continue to be disciplined and remain focused on enhancing shareholder value. Our regular dividend commitment is well established, and we've settled most of the revolving credit facility balance that we had entering the year. As Sally has indicated, we expect to be opportunistic and selective with our M&A program in the short term.

We're also announcing today the approval of a new share repurchase program, whereby the company is authorized to buy shares of its common stock up to the aggregate value of $30 million. The company anticipates funding any share repurchases from its cash on hand and permitted borrowings under the company's credit facilities.

I'll now hand the call back to Sally for her concluding remarks.

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Sally Shankland, Emerald Expositions Events, Inc. - CEO, President & Director [5]

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Thank you, Phil. Our second quarter results and updated full year guidance are undoubtedly disappointing and reflect the challenges that we currently face. That said, I am confident that through improved execution, new leadership and a renewed focus on our customers and on our employees, we can return Emerald to sustained organic growth.

The U.S. trade show industry is expected to grow by a low-single-digit percentage in 2019 according to industry researchers, and the National Retail Federation has forecast 2019 retail sales will increase around 4%. So the market conditions are in place for us to grow if we can execute effectively.

I feel very positively about the impact of the new hires that we were able to attract to the company and the new organizational structure that we've recently put into place. In my first 60 days, we've also made a solid start on changing how we operate the business. It will inevitably take time to see the effects of our initiatives and investments flow through into improved customer satisfaction and ROI, increasing attendance, increased renewal rates, growth in new revenue streams and overall organic revenue growth.

Directionally, I expect 2020 to be a year of operating improvement and increased customer satisfaction that will be rewarded in 2021 with a notable change in our organic revenue trajectory.

Thank you again for your time today. Let me finish by saying that Emerald has a portfolio of industry-leading brands, strong financial characteristics and in my view, a clear path to sustainable organic growth in the future.

Operator, please open the call for questions.

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Questions and Answers

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Operator [1]

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[Operator Instructions.] Our first question comes from the line of Ashish Sabadra with Deutsche Bank.

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Ashish Sabadra, Deutsche Bank AG, Research Division - Research Analyst [2]

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My question was just around the turnaround. So thanks for providing a lot of details on the call and some color on what to expect for 2020 and 2021. But I was just wondering if you plan to put out like a midterm guidance and how quickly should we see the organic growth improvement and margin expansion?

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Sally Shankland, Emerald Expositions Events, Inc. - CEO, President & Director [3]

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So we have already begun the activities that will lead to improvement in our organic growth and in our performance. As you know, this is a business where righting the ship is time consuming because of the way the -- you have a disappointing show; it takes time to return that portfolio to growth. Very difficult for me to say right now that we know we will see the turnaround at X point in time in the future.

What I can tell you is that we have a huge amount already in motion in our first 60 days -- in my first 60 days -- in terms of improving the way we operate the business, improving the way we plan and forecast the business, understanding our customers' perspectives and understanding what levers we need to pull in order to increase their satisfaction and their ROI and also with developing the tools we need to correctly identify what their pain points are and how we address them, and then using those already in our planning for future shows.

So we have much more data than we've previously had, and we're using that to take action to improve our execution and our rigor with respect to planning and delivery of events.

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Ashish Sabadra, Deutsche Bank AG, Research Division - Research Analyst [4]

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And then just a question on the value-based pricing that you mentioned. Have you had a chance to evaluate that with exhibitors, and what has been the reaction like? Any early reactions that you've seen? And maybe any kind of color that you can provide on how should we think about the value-based pricing and does that help drive better revenue per square feet. Any color on that front.

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Sally Shankland, Emerald Expositions Events, Inc. - CEO, President & Director [5]

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Yes. I first instituted it approximately 5 years ago when I was at UBM. It's in use across most of the major exhibition companies, so exhibitors by and large are not unfamiliar with this concept. My experience, and the industry experience in general, is that it leads to increases in revenue and increases in customer satisfaction, and that is obviously a very powerful combination and something that we will be implementing over the coming periods of time. A lot of our pricing is set for 2020, so it will be second half 2020 that we can start to institute some of these programs.

But both the quality of the data has improved, the impact it has on revenue and yield and the impact on customer satisfaction. Even for those whose pricing goes up is quite significant. So we usually see revenue growth pretty standard in the industry in the mid-single digits linked to value-based pricing and commensurate increases in customer satisfaction.

And when you think about most industries, some version of this is in play, and certainly it's widely in play within the trade show industry.

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Ashish Sabadra, Deutsche Bank AG, Research Division - Research Analyst [6]

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And maybe one final question, if I can, just around how do you plan to drive more exhibitors to the show. And maybe all the data initiatives that you've talked about will definitely help. But I was wondering if you're also planning to reach out to more exhibitors or essentially drive more exhibitors and get them to spend more at the show. Any color on that frame. Thanks.

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Sally Shankland, Emerald Expositions Events, Inc. - CEO, President & Director [7]

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Yes, absolutely. So we are fortunate in that our renewal rate is actually quite good, so we have a good renewal rate on existing exhibitors. The challenge we face is in attracting new exhibitors, and the plan that we're already putting into place is better use of the marketing tech stack and better use of the sales tech stack to identify and convert potential exhibitors, so to generate leads and to then nurture those leads and convert them.

Brian Field, the COO whom we've just brought into the business in June, has direct expertise and success in ventures of this nature across his career, so that's what is enabling us to move quickly on getting this done.

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Operator [8]

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Our next question comes from the line of Manav Patnaik with Barclays.

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Ryan C. Leonard, Barclays Bank PLC, Research Division - Research Analyst [9]

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Yes, this is Ryan Leonard on for Manav. Just a question on the visibility in the business. Obviously, at the time of the IPO, the visibility was obviously one of the points that I think was brought up a lot. On the first quarter call, it seemed like there was a higher expectation for the second quarter results. I was wondering if you could just help us understand what changes in those 20-some-odd days that obviously went from low to mid-single-digit revenue growth expectations to what we saw in the quarter, what falls through in that short of amount of time for a business that historically has had very high renewal rates and visibility into the following years or the following quarters?

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Philip T. Evans, Emerald Expositions Events, Inc. - CFO & Treasurer [10]

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Thanks, Ryan. I'll start off and then I'm sure Sally will add to it. So we've always maintained we have pretty high visibility on the booth revenue components of our revenue, which is 70% plus or minus of our total revenues, and particularly 1 or 2 quarters out. What we have is less visibility on the nonbooth revenues, particularly conferences and advertising and digital revenues, and then booth revenues further out in the year.

So what's happened this year is that the second half booth revenues haven't developed as we expected, and the outlook for the nonbooth revenues, particularly the advertising and digital revenues, is quite a bit softer than we thought. Most of this is -- the Q2 numbers were broadly in line with what we were expecting, a little softness in IRCE. But the shows were -- earlier in the year, we were still fairly early in the pacing for those shows. And ones that I've talked about in the comments earlier on Surf and CEDIA and our winter markets, those softened as we went through the year. And the publications and digital products, which we have much less visibility on, those have certainly softened in the second half of the year.

So I think we do have generally good visibility, but there are certain revenue streams and certain shows further out that are kind of more difficult to predict.

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Sally Shankland, Emerald Expositions Events, Inc. - CEO, President & Director [11]

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So what I would add to that, and I think it's a very important question and I completely understand how that would be surprising. And personally, I 100% agree that the results are unacceptable. I think there are a couple of factors here.

One is that the past many years, the primary focus of the business has been on current year bottom line. That has an inevitable lag effect on revenue that we see in any business. Those tend to be businesses with really good short-term success. But eventually, those chickens come home to roost. And I think that part of the reason the revenue for this year was down so disappointing in general and particularly disappointing now is the fact that we didn't expect this depression in our revenue to occur. And also, there hasn't been the rigor around -- within the business there hasn't been the rigor around forecasting. There's been a tendency to be optimistic and which then in turn, I think, leads to a lack of accountability. And we're in the process of fixing that right now.

And finally, there was an effort to make some serious investments in the business. And what we're seeing right now is declining revenue with some relatively fixed investments. That's a short-term problem, and I believe fully that more rigor around our investments, taking those things that have ROI, investing in things that provide benefit across the portfolio horizontally will allow us to drive more ROI from our investments. And you will see both more accurate forecasting and a better cost control and management of expenses and more measurement of investments from us in the future.

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Ryan C. Leonard, Barclays Bank PLC, Research Division - Research Analyst [12]

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And then on the Outdoor Retailer, can you maybe provide more color there? This is a show that at the time you talked about there was such demand for it. And now it seems like that has gone away. How exactly does something like that happen? Are there ways to schedule maybe smaller shows to start? I'm just surprised to see the demand has already kind of dried up that quickly.

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Philip T. Evans, Emerald Expositions Events, Inc. - CFO & Treasurer [13]

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Well, and I'll start because I have some of the background, and Sally, I'm sure, will contribute, too. So OR's historically had 2 very strong kind of almost tribal shows in January and summer -- well supported, vibrant shows. And the industry strongly indicated a desire for an earlier winter season show. And we listened to the industry, and that led to the introduction of our first winter show in November last year. It wasn't as well supported as we wanted, and that doesn't help when you have launches and you'd like to see some momentum.

That said, some of the industry leaders showed support for the second event, which is this November. But we're still seeing it seems to be taking time for the industry to adopt this new show into the cycle. So we will continue to listen to the industry, work with the industry associations and come up with the best solution. But we've been disappointed, too, and it hasn't played out as we expected it to.

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Ryan C. Leonard, Barclays Bank PLC, Research Division - Research Analyst [14]

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And one more, if I could sneak it in. Sally, coming in and taking a fresh look -- does this portfolio of events look right as currently constituted, or are there areas you think should be expanded on? Are there areas that should be maybe revisited and shrunk? Just kind of your initial take.

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Sally Shankland, Emerald Expositions Events, Inc. - CEO, President & Director [15]

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Yes, it's hard to gauge that at this point, because the things we're doing that impact how the business operates benefit horizontally across the entire business. In addition, as you know, we've brought in new talent and created a new structure where, for example, all of our retail shows are together and where all of our design shows are together. And that structure in and of itself is going to benefit the -- all of the shows in that portfolio due to the opportunities that exist for collaboration and list sharing, cross-portfolio pricing models that are customer focused but also drive additional revenue for us.

So I think we are generally in a great industry with a solid portfolio, and that every challenge we have is something that's in our control to fix.

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Operator [16]

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Our next question comes the line of Seth Weber with RBC Capital Markets.

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Seth Robert Weber, RBC Capital Markets, LLC, Research Division - Analyst [17]

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I actually wanted to follow up on that last question. Sally, I think I heard you say your aim is to sort of accelerate new show launches and things like that. Can you just talk about whether you're changing your kind of return thresholds or the way you look at ROI on introducing new shows or how we should think about the cadence of new shows going forward relative to past? Thanks.

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Sally Shankland, Emerald Expositions Events, Inc. - CEO, President & Director [18]

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That's a great question, Seth. Thank you. So my focus is really on saying where's the white space? And if we look at our markets collectively with joint knowledge across retail, with joint knowledge across design, it gives us an opportunity to identify the white spaces and the opportunities that are there. In addition, we are collecting a lot more data from both exhibitors and attendees that we can mine to know what they want that neither we nor anyone else is delivering right now. And with those 2 factors, it makes it a lot easier for us to create opportunities and launches which are often going to be in adjacencies rather than in something completely new and that we can then use to grow the business organically.

I don't think they're necessarily super-high cost, for the very reason that they're being serviced by teams and the data that we are currently collecting. So that's -- I don't think we're going to go launch a show in artificial intelligence, for example, but it is certainly possible that we will do things within the white spaces we see in the markets we already serve in a forward-looking way. So not just what's happening in the market today, but understanding through better listening tools and through better social presence and through better sharing of information and collaboration and accountability and a more rigorous and standardized planning process, we are in a much better position to identify where there are opportunities for us to grow into adjacencies than we were previously.

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Seth Robert Weber, RBC Capital Markets, LLC, Research Division - Analyst [19]

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And then I guess on the flip side of that, though, would you be more aggressive in exiting shows that are underperforming? Would you be more likely to act more quickly, do you feel like, going forward, than the company has been historically to kind of just take shows out of the rotation?

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Sally Shankland, Emerald Expositions Events, Inc. - CEO, President & Director [20]

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Yes, I think that's an important question and one that I can't answer yet. But yes, as we develop our sort of longer-term strategic plan, that will be absolutely one of the things we're looking at. And as I said today, I think mostly we are in really good places, and we're doing things that will make all ships rise with the rising tide. But that does not mean that we're forever going to hold onto everything we have that maybe doesn't fit with directions we start moving in the future. So still TBD.

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Seth Robert Weber, RBC Capital Markets, LLC, Research Division - Analyst [21]

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Okay. And then I guess just a related question. The other marketing business continues to be soft. Is there -- is that core to the company going forward? Is that part of the go-forward framework for the company, or is there some decisions to be made there?

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Sally Shankland, Emerald Expositions Events, Inc. - CEO, President & Director [22]

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So we really need to do a little bit more work about that. I think around that, I think it actually provides a huge opportunity for us because the content that we create has significant value to the rest of the shows we're producing. And one of the new people that I'm bringing in, one of the senior execs that I'm bringing in, is someone who has direct experience in growing for trade show companies their nonbooth, nonconference space. So that, I think, provides us a real opportunity to look with rigor at how we harness these things better. Where can we grow revenue and profits beyond trade show booths? And obviously, OMS plays a role in that.

So I can give you a specific example from the business, and I'm not going to name the customer or the part of the portfolio. But recently in one of our portfolios where we have both OMS and a show, we had a customer who was spending well in the OMS but decided not to take a booth at the show. And leveraging the market knowledge that we have through the OMS, we put together a package of experiential things that were not a booth and did not include a booth but that took place on the show floor. And instead of just selling them a booth, we sold them a couple hundred thousand dollars' worth of show experiences, so things that occurred at the show that were not a booth. And the fact that we had OMS associated with that show enabled us to do that. And that's exactly the kind of thing we want to do more of.

Obviously, we still care about booth revenue; it's our primary source of revenue. But in a changing world, for us to be able to say, “Oh, you don't want to spend $30,000 on a booth? Here, spend a couple hundred thousand dollars on this instead.” Now that doesn't play, obviously, with all of our customers; it only plays with our larger customers. But it's a really good way to leverage what we're doing in OMS. And I think bringing in somebody who will own that responsibility and do careful analysis of the OMS portfolio on how we use those assets will help us both return the portfolio to growth and may include some reemphasis in some areas other than -- more than others. But it gives us opportunity. And that to me is a huge revenue stream available to us that we're not tapping today.

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Operator [23]

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Ladies and gentlemen, that was our final question, and this does conclude today's question-and-answer session. I would like to turn the floor back over to management for any closing remarks.

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Sally Shankland, Emerald Expositions Events, Inc. - CEO, President & Director [24]

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So I just wanted to say that as I have acknowledged, I fully agree that the results are unacceptable. However, everything is in our control that needs to be fixed to return this business to growth. The industry is solid, retail sales are solid, we have a strong portfolio of shows, we have dedicated employees with deep market knowledge, and that gives us the foundation for success. I personally have the experience and the knowledge to lead these sorts of changes, as do people like Brian Field, who has joined us, and the other people who will be joining the team early in September.

So I believe with great confidence that we can right this ship. We're focused, as I said, on execution and investment, on having the right team, on creating value for customers and improving our employee value proposition, because we believe that those things together provide us with the rigor, the discipline, the data, the tools, the people and the strategy we need to turn this around.

So thank you all for listening today, and I'm very excited about the future.

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Operator [25]

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Ladies and gentlemen, this concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.