Emerald Holding, Inc. (NYSE:EEX) is a leading operator of business-to-business trade shows in the United States, leveraging its events as key market-driven platforms to deliver unique experiences for its customers. With a diversified portfolio of industry-leading trade shows, a focus on customer centricity, and strategic initiatives aimed at driving year-round engagement, Emerald Holding is well-positioned for continued growth and value creation.

Financials

In the fiscal year 2023, Emerald Holding reported annual revenue of $382.8 million and a net loss of $8.2 million. Despite the challenging macroeconomic environment, the company generated $38.3 million in annual operating cash flow and $26.8 million in annual free cash flow, demonstrating the strength of its business model.

For the first quarter of 2024, Emerald Holding reported total revenue of $133.4 million, a 9.1% increase from the prior-year period. The company's Connections segment, which encompasses its trade show business, saw organic revenue growth of 13.0% to $118.6 million, driven by strong demand and increased pricing. The Content and Commerce segments also contributed to the overall revenue growth, with the Commerce segment, led by the Elastic Suite platform, seeing a 15.2% increase in revenues.

Adjusted EBITDA for the first quarter of 2024, excluding insurance proceeds, grew 9% to $39.8 million, representing a margin of approximately 30%. Free cash flow for the quarter, excluding event cancellation insurance proceeds, was $3.8 million.

Business Overview

Emerald Holding operates a diversified portfolio of industry-leading trade shows, conferences, and other events across various sectors, including home and design, outdoor and action sports, food and beverage, and more. The company's Connections segment, which accounts for the majority of its revenue, is the primary driver of its business, with trade shows and other live events generating approximately 92.5% of total revenues in the first quarter of 2024.

The company's Content segment provides digital media and print publications that complement its trade show offerings, while the Commerce segment, led by the Elastic Suite platform, offers business-to-business e-commerce solutions for manufacturers and retailers.

Emerald Holding's strategy is centered around three key pillars: customer centricity, 365-day engagement, and portfolio optimization. The company is focused on improving the customer experience, delivering greater value through add-on services and data-driven insights, and providing multiple touchpoints for customer engagement throughout the year. Additionally, Emerald Holding is actively pursuing strategic acquisitions to expand its reach and strengthen its position in high-growth industry verticals.

Operational Highlights

In the first quarter of 2024, Emerald Holding hosted several successful trade shows, including KBIS (Kitchen & Bath Industry Show), Prosper (the largest gathering of Amazon and other marketplace sellers), and the International Pizza Expo. These events saw record attendance and strong exhibitor participation, underscoring the company's ability to deliver value and drive customer loyalty.

The company's investments in digital tools and data-driven solutions, such as its matchmaking and lead-sharing capabilities, have been well-received by customers, with higher net promoter scores and increased loyalty among users of these services.

Emerald Holding's Commerce segment, led by the Elastic Suite platform, continues to expand its reach, with the recent addition of several large customers in the kitchen and bath industry. The company's Bulletin platform is also gaining traction, powering the New York Now Online event and providing a platform for trade show exhibitors to engage with buyers throughout the year.

Outlook

For the full year 2024, Emerald Holding reaffirmed its guidance, projecting revenue in the range of $415 million to $425 million and adjusted EBITDA of $110 million to $115 million. This guidance implies an adjusted EBITDA margin of approximately 27%, with the company expecting to see continued investment in growth initiatives that may temporarily impact margins.

The company's long-term plan is to deliver run rate organic growth in the mid-to-high single digits, combined with growth from strategic acquisitions in the mid-to-high single digits, to achieve double-digit annual revenue growth overall.

Risks and Challenges

Emerald Holding's business is subject to various risks, including the potential for event cancellations or interruptions due to natural or man-made disasters, changes in economic conditions and industry trends, and competition from existing or new competitors. The company's top five trade shows generate a significant portion of its revenues, making it vulnerable to fluctuations in those events.

Additionally, the company's reliance on a limited number of outside contractors and the potential infringement or invalidation of its proprietary rights pose risks to its operations. The company also faces challenges related to the integration and performance of its acquired businesses.

Liquidity

As of March 31, 2024, Emerald Holding had $186.8 million in cash and cash equivalents and $296.8 million in total liquidity, including full availability on its $110 million credit facility. The company's net debt stood at $225.4 million, resulting in a net leverage ratio of 2.17x its trailing 12-month consolidated EBITDA.

Subsequent to the first quarter, Emerald Holding completed the conversion of all outstanding redeemable convertible preferred shares into common stock, simplifying its capital structure and eliminating a $34 million per year dividend that was only accruing to the benefit of the preferred holders.

Conclusion

Emerald Holding's diversified portfolio of industry-leading trade shows, focus on customer centricity, and strategic initiatives aimed at driving year-round engagement position the company for continued growth and value creation. With a strong financial profile, including healthy cash flow generation and a simplified capital structure, Emerald Holding is well-equipped to execute on its acquisition strategy and invest in initiatives that will drive long-term success.