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Edited Transcript of HUD.N earnings conference call or presentation 11-Mar-20 8:30pm GMT

Q4 2019 Hudson Ltd Earnings Call

Mar 25, 2020 (Thomson StreetEvents) -- Edited Transcript of Hudson Ltd earnings conference call or presentation Wednesday, March 11, 2020 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Adrian Bartella

Hudson Ltd. - CFO

* Cindi Buckwalter

Hudson Ltd. - VP of IR & Corporate Communications

* Roger Fordyce

Hudson Ltd. - CEO & Director

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Conference Call Participants

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* Kimberly Conroy Greenberger

Morgan Stanley, Research Division - MD

* Michael Lasser

UBS Investment Bank, Research Division - MD and Equity Research Analyst of Consumer Hardlines

* Seth Ian Sigman

Crédit Suisse AG, Research Division - United States Hardline Retail Equity Research Analyst

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Presentation

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Operator [1]

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Good day, everyone, and welcome to Hudson's Fourth Quarter and Full Year 2019 Earnings Call. (Operator Instructions) Please also note that today's event is being recorded. At this time, I'd like to turn the call over to Cindi Buckwalter, Vice President of Investor Relations and Corporate Communications for Hudson. Ms. Buckwalter, you may begin.

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Cindi Buckwalter, Hudson Ltd. - VP of IR & Corporate Communications [2]

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Thank you, operator, and good afternoon, everyone. Thanks for joining us. This afternoon, we released our fourth quarter results. You can find a copy of our press release and the presentation on our website at investor.hudsongroup.com, along with our year-end report. On today's call, we have Roger Fordyce, our CEO; and Adrian Bartella, our CFO.

Please note that management may make forward-looking statements regarding their beliefs and expectations as to the company's future business prospects and results. These statements are subject to risks and uncertainties that could cause actual results to differ materially from these statements. Although we believe the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations will be realized. We urge everyone to review the safe harbor statements provided in our earnings release as well as the risk factors contained in our 2019 annual report on Form 20-F, which is available on our website.

During today's call, we'll refer to both IFRS and non-IFRS financial measures of the company's operating and financial results. For information regarding our non-IFRS financial measures and reconciliations to the most directly comparable IRFS (sic) [IFRS] measures, please refer to our earnings release.

And with that, I'll turn the call over to Roger.

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Roger Fordyce, Hudson Ltd. - CEO & Director [3]

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Thank you, Cindi, and good afternoon, everyone. Thank you for joining us to review our fourth quarter and full year 2019 results.

As I conclude my first year as Hudson's CEO, I'm incredibly proud of our outstanding team who has executed our strategic initiatives with discipline in 2019. I remain excited about the future as we stay focused on building on this progress.

Throughout 2019, we continued to win new RFPs, added exciting new brands to our portfolio, including Joe & The Juice, and entered new markets including Indianapolis and St. Pete-Clearwater. We also launched Hudson's new corporate identity and logo, which showcases our strategy to become the all-encompassing travel partner and grow our 4 key pillars: travel convenience, specialty, duty free and food and beverage. Building upon these pillars, during this past year, we announced 2 major acquisitions that strengthen our food and beverage and specialty retail portfolios, OHM Concession Group and Brookstone.

2019 was a transformative year for Hudson, and we're pleased to have concluded the year with demonstrated progress against our strategic priorities. Although we faced several challenges that were outside of our control throughout the year, we saw encouraging top line performance in the fourth quarter. For the year, organic growth was 1.4% and 0.8% for the quarter. We're also pleased to see an improvement in like-for-like sales, driven by some recovery in duty free and rebound in duty paid results. Like-for-like in constant currency grew 1.1% for the year and for the fourth quarter. In addition, we had some exciting new business activity during the fourth quarter that positions us well for the future.

On the retail side of our business, we're pleased to have secured several new wins and extensions. In the second half of 2019, we entered into Indianapolis, a new market for Hudson. We've been able to quickly build a strong relationship with our landlord partners in this airport. And in the fourth quarter, we were successful in winning another contract in this market, exemplifying Hudson's strong reputation as a quality operator and partner of choice for our airport landlords.

During the quarter, we're also pleased to have extended our contract at the world's busiest airport, Atlanta Hartsfield, with a 3-year extension. We also strengthened our partnership with Toronto Pearson International Airport through an 8-year duty-free retail contract extension. This is a key extension and expansion for Hudson as it continues to strengthen our duty-free presence in North America.

In food and beverage, we're very excited to have recently announced an agreement with DFW to open up Plum Market. As part of the agreement, Hudson will license and operate the new 2,400-square-foot Plum Market location in American Airlines' hold-room space in Terminal B. This space highlights our combination concept strategy, as this food and beverage location also includes a retail selection of convenience items along with natural, organic and sustainably-sourced snacks and beverages. Plum Market is another exciting example of how we're adding relevant brand offerings to our portfolio that cater to the ever-changing taste and preferences of our customers.

We also had some notable store openings in the fourth quarter that demonstrate our ability to create customized local concepts. This past holiday season, we collaborated with JFKIAT to create a one-of-a-kind holiday shopping experience in JFK Terminal 4 retail lounge. This pop-up location, Holidays by Hudson, was inspired by a well-known brand -- Bryant Park holiday village in New York City and brought together a locally sourced product assortment, including gift items.

During the quarter, we also opened up a local travel convenience store, 49 Mile Market in San Francisco's Terminal 1, which features local brands and products that travelers would find on the iconic 49-Mile Drive in San Francisco. Holidays by Hudson and 49 Mile Market highlight our ability to combine invaluable convenience with distinctive and memorable experiences to create an unparalleled service for our travelers.

Looking ahead, the 2020 pipeline continues to look robust and more in line with the pipeline of opportunities we saw in 2018. In fact, just barely 3 months into the year, we've already had some exciting early wins. In the New York market, we've secured a new win for 3 locations in JFK Terminal 5, which is a new terminal for Hudson. Our winning package includes 2 travel convenience stores and 1 specialty store, Herschel, which sells high-quality backpacks, travel goods and accessories.

We're also strengthening our partnership with LaGuardia Airport with a contract win for 2 travel convenience locations. We've also expanded our footprint at Atlantic City International Airport through an RFP win for 4 locations, including a new Hudson Dunkin' food and beverage location, our first food and beverage concept at this airport. Lastly, we've signed a contract for a prime convenience package in LAX's new Midfield Concourse. This contract includes 4 locations: 2 travel convenience stores and 2 specialty stores. All Saints, a British fashion retailer that features men and women's ready-to-wear; and NewBeauty, a health and beauty store. This will be the first retail location for NewBeauty and will provide travelers at LAX with top-rated products in the health and beauty space based on the brand's successful luxury samples program called TestTube.

As we continue to grow our business organically and integrate our recent acquisitions, we feel well positioned to compete for the robust pipeline of RFP packages and capture additional white space opportunities as airports continue to invest in infrastructure projects.

I also wanted to provide a quick update on our recent acquisitions. In October, we announced the acquisition of food and beverage operator, OHM Concession Group, which accelerates our expansion into food and beverage service. With OHM, we've added new food and beverage capabilities to our business, including full service, fast casual, sports restaurants and fine dining locations with notable brands like Chick-fil-A, Wolfgang Puck, Einstein Bagels and Jamba Juice. OHM has a long track record as a successful restaurant operator and perfectly complements our quick-service restaurant and grab-and-go expertise. We expect the acquisition to close in the next few weeks. In the interim, Hudson has been partnering closely with the OHM team on various new business opportunities, and we look forward to working closely together to integrate the 2 companies upon the close of the acquisition.

During the fourth quarter, we also announced a deal to acquire the airport assets of Brookstone, adding a strong, well-known and trusted brand to our specialty retail portfolio. In addition to the acquired locations, we have signed agreements for 6 new stores, including a brand-new location we just recently opened up in San Francisco during the first quarter of 2020.

We are also currently in negotiation for 7 additional locations. As part of the agreement, we acquired the right to be the exclusive airport retailer for the brand, which gives us the opportunity to add exclusive Brookstone products to our travel convenience stores. We're excited to roll out Brookstone-branded travel, electronics and everyday gadgets to Hudson stores in the second quarter. We look forward to sharing more on this later in the year. Overall, we're very pleased with the integration to date. Looking ahead, we will continue to look for opportunistic acquisitions, particularly on the food and beverage side, that will further enhance our brand portfolio.

Before I dive into our 2020 strategic initiatives, I wanted to take a moment to address the coronavirus issue. First and foremost, we express our deep concern for all of those that have been impacted by the virus around the world. Although we do not have direct operations in China, Chinese travelers and tourists shop in our duty-free and duty paid locations every day. As we have previously reported, roughly 20% of our total sales are generated from our duty-free business and our duty-free business -- from our duty-free business, a significant portion of those sales come from Chinese passengers.

With the notable drop in air travel to and from China, we have seen a subsequent reduction in traffic and sales. It is important to note, however, that our duty paid business is primarily generated through domestic passengers. And while international passengers do make up a portion of our duty paid sales, it's much more difficult for us to quantify. That said, we are seeing an impact, although to a lesser extent, on our duty paid business. We believe this is due in part to an increasing number of company travel restrictions and event cancelations as well as an overall concern about the coronavirus outbreak. If these conditions persist and extend more prominently to domestic travel, we could see further impact on sales.

I would like to take this opportunity to point out that the travel retail industry is very resilient. Historically, the industry has been able to rebound stronger than ever from major impacts in the past, including events like 9/11, SARS and the 2009 recession. We're confident that the demand for travel will rebound once again from the impact of the virus.

We want to take this opportunity to sincerely thank our employees who are stepping up during this time and remaining committed to providing unparalleled travel experiences for our customers. We will continue to monitor the situation closely, and we'll update you as we have more visibility.

Looking ahead to 2020, and despite the challenges, we remain focused on a number of strategic initiatives. Here are the highlights of just a few. First, expanding our food and beverage. We will continue to seek opportunities to add new capabilities and enhance our food and beverage team. We are fortunate to have Tom Waldron, our Senior Vice President of Food and Beverage, who joined Hudson in June; and Milan Patel, President and CEO of OHM.

We also recently hired Liz Grzechowiak as Vice President, Concepts and Brands, a newly created position on our food and beverage team. Liz comes to Hudson with nearly 2 decades of experience in airport concessions, food and beverage operations and business development and a strong track record of building brands. Most recently, Liz oversaw the development of the Minneapolis Saint Paul International Airport, building out 90 units in 3 years. Her background and expertise will be a great asset to Hudson, helping to strengthen our overall food and beverage brand development and our RFP submissions. With a strong team in place whose focus is accelerating our food and beverage strategy, we look forward to pursuing more food and beverage RFPs in 2020 and beyond.

We've also seen great success with our combination store formats, in which we partner one of our travel convenience or specialty concepts with a quick-service food and beverage concept such as our Hudson/Dunkin combo stores. We'll continue to explore opportunities to open additional combinations concepts, such as our Hudson/Joe & The Juice location in Vancouver, our Plum Market convenience store concept that will open up in DFW in mid-2020. We are also negotiating opportunities to roll out an Ink by Hudson, our bookstore concept, combined with a wine bar.

Our next focus is to continue to grow brand partnerships. We've added some exciting new brands to our portfolio over the last few years, like Joe & The Juice, Plum Market and Brookstone. In 2020, we will look to add new partnerships and expand upon our existing ones, such as Apple. We currently carry a limited number of Apple products in our Hudson and Tech on the Go stores. I'm excited to share that we recently reached an agreement to expand upon the number of Apple SKUs we offer as well as add Apple products to our Ink by Hudson, our Duty Free and Brookstone locations. We expect the full rollout of this to be completed in the second quarter.

We're also excited about the announcement late last year regarding the rollout of our next-gen Hudson store. We will be implementing the latest digital technology to enhance both the experiential as well as transactional capabilities, including self-checkout, mobile wallet options as well as tap-and-go technology that will allow our stores to provide the broadest range of service options. We are also adding digital signage that can be customized by location to support seasonal and local events or promotions. Combined with a more flexible store model that will allow quick merchandise and operational changes, we are prepared to evolve as the changes and needs of our -- as our customers evolve.

We also are progressing our plans to launch our customer-facing app, Hudson Blue this year. This new app will allow our loyal travelers to connect with their Hudson store from their mobile device and gather insight on products and promotions at any time. We look forward to providing updates later in the year.

As you can see, there is much to be excited about for Hudson in 2020. We are an attractive and growing industry with significant white space, driven by opportunities in food and beverage. We have a proven track record of growing existing business and expanding our concession portfolio. Despite headwinds that impact the industry from time to time, we are confident in the travel industry's long-term passenger growth forecast. More importantly, we are confident that our strong business fundamentals, coupled with our exciting growth initiatives and robust 2020 pipeline, will position Hudson well for the future.

I'll now turn it over to Adrian to review our fourth quarter and full year results in more detail.

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Adrian Bartella, Hudson Ltd. - CFO [4]

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Thank you, Roger.

Now turning to the results for the quarter. We are pleased with our financial performance during the fourth quarter as we reported notable improvement across many top line metrics. Our organic growth significantly improved compared to the third quarter, and our net sales was slightly up over last year, driven primarily by the recovery in both our duty-free and duty paid businesses.

In the fourth quarter, turnover increased 0.9% to $475.8 million compared to the fourth quarter of 2018. Organic net sales growth, which is a combination of like-for-like sales and net new business, was up 0.8% during the fourth quarter compared to a tougher comparison of 4.1% growth in the fourth quarter of 2018. Like-for-like sales on a constant currency basis rose 1.1% compared to an increase of 2.5% in Q4 2018. This was primarily driven by stronger duty paid sales, which were up 2.2% on a constant currency basis. The recovery in Q4 duty paid like-for-like sales was driven by strength in our food and beverage and electronic categories. Duty-free was down 2.1% on a constant currency basis, significantly better than the third quarter of down 8% and an improvement of trends in the first half of the year as we anniversaried the slowdown of the Chinese passenger spend.

Regarding the second component of organic growth, net new business, total contribution of net new business was down 0.3% in Q4 as compared to up 2.5% in the fourth quarter of 2018, primarily due to the previously announced closure of 19 locations in New Orleans that took place in November 2019. Gross margin was essentially flat during the fourth quarter at 64.2%. In the quarter, gross margin benefited from our sales mix change towards higher-margin products, which was offset by inventory markdowns and write-offs from our closure of a noncore high-end store in Las Vegas hotel. Excluding the onetime impact of the Las Vegas store closure, gross margin improved by approximately 20 basis points year-over-year to 64.5%.

Beginning January 1, 2019, we have implemented the new lease accounting standard, IFRS 16, which requires the capitalization of fixed concession fees and other rent payments. Excluding the impact of IFRS 16 in Q4 2019, we have experienced slightly lower lease expense as a percentage of turnover at 22.3% compared to 22.8% in Q4 last year.

Personnel expenses rose 4.8% to $112.5 million in the fourth quarter, primarily driven by an increase in health benefit claims, the Brookstone acquisition and separation charges. Excluding the onetime separation charges of $900,000, personnel expenses were $111.6 million or 23.5% of turnover compared to 22.8% last year. Other expenses were $50.5 million in the fourth quarter. This includes $9.7 million of onetime items, primarily related to the acquisition costs from OHM and Brookstone. Excluding onetime items, other expenses were $40.8 million in the fourth quarter compared to $35.5 million in Q4 2018. As a percentage of turnover, other expenses excluding onetime items were 8.6% compared to 7.5% in Q4 2018.

Adjusted EBITDA decreased $5.6 million year-over-year to $47.2 million in Q4 2019. Adjusted EPS attributable to equity holders of the parent was $0.08 for the fourth quarter. Excluding the impact of the new lease accounting standard, IFRS 16, our adjusted EPS was $0.09 for the fourth quarter.

Turning to the full year. Despite the macro challenges we faced, we continued to drive top line growth in 2019. Turnover increased 1.5% to a record of $1.9 billion as compared to 2018. Organic net sales growth was 1.4%. Looking at the components of organic net sales growth, like-for-like sales were 1.1% in constant currency, driven by strength in our duty paid business, particularly fueled by our growth in food and beverage. This compares to 3.7% like-for-like sales growth in 2018.

Net new business was up 0.8% compared to 3.3% last year as a result of the timing of projects and closure of our stores in Newark early last year and New Orleans in November 2019. Full year gross margin expanded 50 basis points to 64.2%, primarily due to improved vendor terms and sales mix shift from lower-margin products to higher-margin products like food and beverage. Lease expense excluding the benefit related to capitalized right of use, which was introduced with the adoption of IFRS 16, decreased as a percentage of revenue from 22.3% in 2018 to 22.1% in 2019. For the year, personnel expenses increased 8.3% to $445.3 million, primarily due to wage increases, executive separation expenses, new store openings and additional public company expenses. Excluding onetime separation charges, personnel expenses were 22.3% (sic) [22.8%] of turnover compared to 21.4% in 2018.

Other expenses increased $8 million or 5% to $166.9 million for 2019 as compared to the prior year due to a number of onetime items that are highlighted in the earnings release. Excluding onetime items, other expenses increased to $156.5 million in 2019 compared to $148 million in 2018 and represented 8% of turnover compared to 7.7% in 2018.

For 2019, adjusted EBITDA margin decreased 60 basis points to 11.8%. Adjusted EPS attributable to equity holders of the parent was $0.65 for 2019. Excluding the impact of the new lease accounting standard, IFRS 16, our adjusted net profit to equity holders of the parent was $63.9 million or $0.69 per share for the year.

Turning to the balance sheet. You can see the line items that are impacted by the adoption of IFRS 16, primarily capitalizing the right-of-use assets and recording the lease obligations. As of December 31, 2019, our net debt, which represents total borrowings excluding lease obligations minus cash, was down $79 million from last year to $231 million, resulting in a net debt to adjusted EBITDA leverage of 1x compared -- down from 1.3x at 2018 year-end.

Cash flows from operating activities for the year were $532 million compared to $233 million in the prior year period. The sharp increase in the cash flow line was mainly driven by the reclassification of lease payments from operating to financing cash flow as a result of IFRS 16. Capital expenditures increased to $72.9 million in 2019 from $69.3 million in 2018 due to higher information technology expenditures.

Looking forward to 2020, we wanted to share with you what we have seen in traffic and sales trends year-to-date. In the first weeks of January, prior to the impact of the coronavirus, our sales increased slightly year-over-year despite the loss of New Orleans store closures in November last year. In the second half of January, as the coronavirus spread beyond China, we began to see lower traffic in our North American markets that extended into February, with sales down approximately 10%. We believe that based on the trends we're currently seeing, the net sales in Q1 2020 will decline by low to mid-teens year-over-year.

Given the widening spread of the coronavirus and its related impact on travel, both business and personal, we expect continued pressure on traffic and sales in the near term. As we can't currently estimate the duration of the future trajectory of travel disruption, we don't believe it's prudent to provide the full year outlook at this time. We do, however, remain optimistic about the stronger pipeline of RFPs this year and our improved competitive position. We expect to close our OHM acquisition early Q2 and to leverage the food and beverage business to drive sales momentum in 2020 and beyond, supported by the benefit of our Brookstone acquisition. We feel great about our ability to execute against the things that are in our control, including implementing efficiency initiatives to ensure disciplined cost management in response to the sales trends.

In summary, we are encouraged by the improvement in organic growth in the fourth quarter and the first few weeks of January, particularly the strength of our duty paid operations, which offers an attractive revenue growth and margin profile. While we currently have traffic and sales pressure related to the coronavirus, the travel retail industry is a resilient one, and we are confident in the long-term potential of our model. We have strong growth prospects, particularly in food and beverage across our retail operations and food and beverage service concessions that help us further diversify our business and also position us to capture significant white space opportunity. And we're operating from a position of financial strength with a strong balance sheet and healthy free cash flow generation. Our distinct operating advantages and industry-leading position enables us to continue to drive growth over the long term.

I will now turn it back over to the operator to open it up to Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question is from Michael Lasser with UBS.

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Michael Lasser, UBS Investment Bank, Research Division - MD and Equity Research Analyst of Consumer Hardlines [2]

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That was helpful commentary about the first quarter being down low to mid-teens. So have you factored in some of the capacity reductions that we're seeing from airlines into that number? And can you give us a sense for the earnings sensitivity to that type of top line decline? It's obvious that there's a lot of variability in the cost structure, but we have not seen a decline like that so it's going to be difficult for us to get a sense for how to model it.

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Adrian Bartella, Hudson Ltd. - CFO [3]

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Michael, it's Adrian. So yes. So we have, in our estimate for Q1, we have accounted for all recent developments and for the trends we've seen in the last week. So technically, most of the reductions in capacity by the airline should be included in it. Coming back to the second part of the question of the flow-through. So as you said, this is a decline we didn't see in the past. We estimate a flow-through between 30% to 50% on EBITDA level, so -- where around $1 of sales would translate in around $0.30 to $0.50 loss in EBITDA.

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Michael Lasser, UBS Investment Bank, Research Division - MD and Equity Research Analyst of Consumer Hardlines [4]

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Okay. And if we try and think about just the duration of this, are there things that the company can do to respond and pare down the cost structure to preserve the profitability? And then are there any covenants or anything from a capital structure we should be mindful of as you continue to navigate through this difficult time?

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Roger Fordyce, Hudson Ltd. - CEO & Director [5]

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Yes. Michael, it's Roger. So I think one of the unique things about our organization is that a good majority of our executives, myself included, were here during the 9/11 and significant recession in 2008, 2009. And actually, we're the team that actually put together the initiatives that helped to keep us as financially healthy as possible during those downturns in the business, allow us to be a healthy company that we are here today.

And we've actually gone back with our team. I've kind of dusted off a lot of the plans and initiatives that were put in place back then during those downturns and implemented many of those today. We're a very, very different company today than we were back during those scenarios. We're a much larger company, more diverse with a much greater focus on duty-free and obviously, being a public company, have certain structures that may not have the same flexibility. But clearly, we understand the implications of something of this magnitude as we've gone through it before and are prepared to implement what we need to do on both the personnel side as well as cost savings.

We're also looking at our capital investments as well too, ensuring that the capital investments are wise ones that are going to give us top line sales or obviously, if there's a new building or something going up, we're addressing those as well, too. So again, this is something that we've been through before. We have a solid plan. We've implemented some initial steps in February. We're looking at additional things as we move into March, and we're seeing the kind of the evolution of this capacity change that you just mentioned.

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Michael Lasser, UBS Investment Bank, Research Division - MD and Equity Research Analyst of Consumer Hardlines [6]

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And if I could just clarify, given those plans and the response you're making, should we assume that the decremental margin that you talked about for the first quarter could be a little bit better moving forward as you look to preserve your cost structure?

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Adrian Bartella, Hudson Ltd. - CFO [7]

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That's correct. So the first quarter historically is the weakest one. So the fixed costs represent the biggest portion of the overall cost than in, let's say, in the second or third quarter. So as we move to the following quarters, taking into account the lower weight of the fixed-cost structure and overhead cost and also all the extra initiatives Roger has mentioned, should result in a lower impact on EBITDA than what we see in the first quarter.

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Operator [8]

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The next question is from Kimberly Greenberger with Morgan Stanley.

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Kimberly Conroy Greenberger, Morgan Stanley, Research Division - MD [9]

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Adrian, I just want to confirm. So Q1, I think you said you expect revenue to be down low to mid-teens. And did you say February was down 10%? Did I hear you correctly on that?

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Adrian Bartella, Hudson Ltd. - CFO [10]

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That's correct, yes. February was down 10%. And for the quarter, we expect the sales to be down low to mid-teens.

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Kimberly Conroy Greenberger, Morgan Stanley, Research Division - MD [11]

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Okay, great. So I don't know if you heard the United, I think it was the CEO yesterday spoke and said that just in the last 3 to 4 days, this is extremely recent data and you may not have yet seen an impact on your business, but he is saying that domestic U.S. net bookings are now down about 70%. That would be new bookings net of cancellations. And so it's -- I would imagine because this has just happened in the last 3 to 4 days, you would not yet have seen it in your business. And I don't know if there's a way to compare your expectation of low to mid-teens decline in revenue for Q1 to what a net bookings number would look like for the airline. Do you -- have you looked at that historically? Is there a way for us to draw some sort of linkage there?

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Roger Fordyce, Hudson Ltd. - CEO & Director [12]

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Unfortunately, it's difficult for us, Kimberly, to understand what a 70% dropping in bookings mean, how recent was that, how long -- how long are those bookings going out. Does it mean that -- it doesn't mean that people wouldn't necessarily, in 3 or 4 weeks from now, if the situation starts to abate and the fears start to ease, that people, all of a sudden, start to rebook or book those plans that they had not yet compared to what the bookings were last year, and I'm assuming those -- that comparison was against last year. So it's really difficult for us to understand what the implication is both short term and long term. And that's why we continue to monitor.

The guidance that we provided is really just based on what we have seen to date and some forecasting of what we are seeing from airlines starting to predict some decline in bookings and capacity. So we're doing our best to try to provide the guidance based on what we know, but we will -- it will take some time for us to really understand, weeks for us to understand what the implication of that specific comment means to us.

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Kimberly Conroy Greenberger, Morgan Stanley, Research Division - MD [13]

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Okay. Great. And then as we look out, do you think we could sort of be back to business as usual as we get to the middle part of the summer? I would imagine the impact here would be fairly short in duration, Roger. But judging by past episodes that you've seen, 9/11, maybe you can refer to that period of time, how quickly did your business bounce back? Was it a matter of 3 months or 4 quarters? Just any sort of way, reflecting on past incidents, that we could think about when the bounce back might begin to happen.

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Roger Fordyce, Hudson Ltd. - CEO & Director [14]

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So the challenge is trying to compare this specific issue or ongoing incidents to the past. Each -- both the 9/11 as well as the recession were very, very unique. The 9/11 issue caused a very, very quick and immediate drop-off in flights. And while they rebounded within a few months, it was from a passenger growth perspective as the airlines have reported, it took them, I guess, 1.5 years to 2 years to get back to the actual passenger numbers of 2001.

But our business model changed as well during that period of time, so we were able to rebound from a sales -- a top line sales perspective a lot quicker. In the 2008-2009 recession period, it was, once again, a relatively quick drop-off but was very heavily driven by financial situations, not so much fear and other incidents that things could more quickly rebound. Again, a big part of what we're seeing right now is the potential risk to the overall financial markets in the economy that we can't sit here today and understand what the short- and long-term implications will be. But we do think -- I'm an optimist, and to your point, I'm hoping that fear is the biggest factor that is driving this right now. Obviously, we want to be cognizant not just for ourselves but for the rest of the traveling public and our employees. We want to be cognizant of health and protecting health and ensuring that we can do our best to continue to keep this virus from spreading here in North America. But again, I can only be an optimist and say it is our expectations and hopes that business does moderate as we enter into the third quarter, which is our peak summer months. What I can tell you is that the demand for travel has always been there. And while people may step away for a while, the demand for travel and the need and the want for travel has always been there and has tended to rebound very, very quickly.

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Operator [15]

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The next question is from Seth Sigman with Crédit Suisse.

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Seth Ian Sigman, Crédit Suisse AG, Research Division - United States Hardline Retail Equity Research Analyst [16]

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My first question is just around the pipeline and the wins. And you guys talked about getting back to normal. Can you help size up the contribution to revenue growth from net new business growth in 2020? And then I'm just wondering, second part of that, does the coronavirus, does that impact the timing at all of the RFP process, of contract wins, of store growth? Just any more color on how that plays out.

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Roger Fordyce, Hudson Ltd. - CEO & Director [17]

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Seth, it's Roger. So to answer your second question first. I mean, as of right now, we have not seen any changes to kind of the anticipated RFP pipeline and the follow-up on RFPs. In fact, our team is, right now, working on a number of RFPs. We have our team attending interviews this week and next week for RFPs already submitted. So as of right now, what we see is no implication to that pipeline. Now that possibly could change if there was some sort of elongated slowdown or diminishment in passenger growth for a long period of time. Airports, airlines could kind of revisit how they're addressing the timing of release of RFPs, but we have not seen that to date. I'm sorry, what was the first question?

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Seth Ian Sigman, Crédit Suisse AG, Research Division - United States Hardline Retail Equity Research Analyst [18]

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The first part of the question was just how do we think about modeling out the contribution to revenue growth and net new business? Obviously, it's going to be more normal this year relative to last year. So just any more color?

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Adrian Bartella, Hudson Ltd. - CFO [19]

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So before the coronavirus appeared, we were expecting to see a mid -- low to mid-single-digit organic growth plus a mid-single-digit contribution from acquisitions. The overall expectations were in high single digits for this year. So the net new business was expected to be slightly positive, primarily because of the pressure from New Orleans. As you may remember, we have closed in November, 19 stores in New Orleans, and the pressure from New Orleans is expected to be around 1.5% for the year. So overall, we're expecting to have a slight positive net new business this year before corona.

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Roger Fordyce, Hudson Ltd. - CEO & Director [20]

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And I also want to stress that the timing of when these contracts come online that we could actually benefit from the consolidation of the top line sales also does vary. As we look at a lot of the wins that we've talked about that are coming about in the first quarter, the timing of a lot of that would be the latter part of this year or early next year. There were even some that actually start out in 2022. So the timing of when these contracts come on board is also a factor in when we could actually add this to net new business. But to Adrian's point, we were anticipating positive net new business for the year 2020.

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Seth Ian Sigman, Crédit Suisse AG, Research Division - United States Hardline Retail Equity Research Analyst [21]

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Okay. And then as we're thinking about what happens on the other side, of the aftermath, I'm not sure what the balance sheets look like of some of your competitors. But based on your experience in the industry, is this something that drives sort of an accelerated pace of consolidation? Does this provide some longer-term growth opportunities for Hudson? How do you think about that?

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Roger Fordyce, Hudson Ltd. - CEO & Director [22]

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Absolutely. Again, if we look at history, some of the acquisitions and consolidations that occurred in the industry happened after some of these tumultuous events that some of the weaker companies didn't survive or just felt that the timing wasn't right for them to be in the industry. So we see not only opportunities through that, but we also have an opportunity to continuously look at RFP wins. We are, as I've indicated in my comments earlier, we're continuing to strengthen our capabilities and ensuring that we are capable of competing very aggressively, where others may not necessarily have the capital or the capabilities or the needs or the wants to be able to pursue some RFPs because they've been weakened by the economic impact. So I think a combination of our strong balance sheet, a combination of our focus and continued focus on developing our skill sets and our capabilities, it will position us well for when the business returns to some normalization.

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Operator [23]

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This concludes our question-and-answer session. I would like to turn the conference back over to Cindi Buckwalter for any closing remarks.

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Cindi Buckwalter, Hudson Ltd. - VP of IR & Corporate Communications [24]

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Thanks, Gary. Thanks, everyone, for joining us today. This concludes today's call. I'll just remind you that we will have a replay of the webcast on the Investor Relations section of our website. So thank you again, and enjoy the rest of your day.

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Operator [25]

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The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.