Welcome to Emerald Holdings 4th Quarter 2020 Earnings Conference Call. During today's call, all parties will be in a listen only mode. Following the prepared remarks, the conference will be open for questions with instructions to follow at that time. 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 and 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 ks and Form 10 Q and subsequent filings. The company does not undertake any duty to update such forward looking statements. Additionally, during today's call, management will discuss non with GAAP measures, which it believes can be useful in evaluating the company's performance. The presentation of this additional information should not be considered in isolation or as a substitute for results in prepared accordance with U.
S. GAAP. A reconciliation of these non GAAP measures to the most comparable GAAP measures can be found in the company's earnings release. As a reminder, this conference is being recorded and a replay of this call will be available on the Investors section of the company's website through 11:59 pm Eastern Time on February 25, 2021. I would now like to I turn the call over to Herve Siedke, President and Chief Executive Officer.
Please go ahead.
Thank you, and good morning, everyone. I'm very pleased to be here today and truly appreciate your participation in our Q4 year end 2020 earnings call. Four things I'd like to accomplish today. 1st, give you a bit of background on my journey, including what attracted me to Emerald 2nd, share my vision on how we will make this strong company an even better one by returning it to growth and improved profitability. 3rd, I'll turn it over to David Baft, our Chief Financial Officer, for him to review our Q4 year end 2020 results and close the meeting by sharing our key priorities that build on the accomplishments of the last 18 months, accomplishments that are critical in that they provide Emerald a strong foundation for the future.
David and I will then open the meeting to and answer any questions that you have. To start, I'm very excited to be here today given the opportunity that I see ahead for Emerald and the Exhibitions Industry overall. Having spent my entire career in B2B Businesses, starting with my 22 years at the American Express Company, including serving as Senior Vice President and General Manager of American Express Global Business Travel And more recently, my 6 years at RELX Group as President of the Americas for REIT Exhibitions, I'm keenly aware of the importance of putting the customer first and obsessively focusing on adding value to them. In Emerald, I see a company with a portfolio of industry leading live events and content brands as well as the recent addition of incredibly powerful digital experiences. The company's strong capital position allows us to also expand into new digital mediums while taking advantage of opportunistic acquisitions.
Our industry is going through unprecedented change as a result of COVID-nineteen pandemic that simply cannot and should not be ignored, not only because of the impact on our revenue, but because in unprecedented times, We need to think out of the box and respond with unprecedented creativity, thoughtfulness and resourcefulness. I'm very confident in our ability to come back. Our small business customers rely on trade shows to drive their business by launching new products, Generating leads, entering new geographies. In addition and according to Go Live Together, our industry is a foundational element of how business gets done with 46% of small businesses participating in at least one event annually and 41% of companies in the U. S.
Considering event marketing as their top channel for lead generation. We've seen early signs of a comeback at Emeralds and we're poised to return as the pandemic begins to recede and shows start to stage once again. In fact, the relative success that our exhibitors and attendees experienced at IGES in November and Surfshark Expo in January clearly highlights the vital role that face to face events play in driving connections, commerce and growth for customers and communities. This provides real optimism for the future. The Emerald senior leadership team led by Chief Operating Officer, Brian Field and Chief Financial Officer, David Doft, drove significant and impressive change across the company despite the challenging pandemic environment.
A few notable highlights include the reorganization of the company, expansion to digital mediums, cost reductions and profit improvement initiatives of almost $20,000,000 on an annualized basis. The acquisition of a digital marketplace and raising $400,000,000 in capital to de risk the balance sheet and create flexibility to invest for growth. This is a remarkable set of accomplishments and provides a strong foundation that we will build from as we continue to execute our growth plan, which I will outline shortly. But now let me turn the meeting over to David
Thank you, Herve, and good morning. Our Q4 and full year results mimic much of what we have reported all year since COVID-nineteen began to impact our business. For the Q4, we reported revenues of $12,200,000 which compares to 44 to the cancellation of almost all 4th quarter events due to COVID-nineteen, including Boutique Design New York, Healthcare Design So, PhotoPlus East and Medtrade among others. During the Q4, we were able to successfully stage IGES in Pigeon Forge, Tennessee, where we experienced a 50% decline in revenues, while the number of buyers per exhibitor increased by 15%. This increase drove a strong rise in exhibitor satisfaction given the increase in sales generated.
Subsequent to year end, We staged SURF Expo in Orlando, which experienced similar dynamics to IGES and further demonstrated the value of in in person face to face event, which is so important to our customers' businesses. Needless to say, our customer communities are eager to get back to live events and business as usual. Our adjusted EBITDA for the Q4 was $18,300,000 as compared to a negative $1,500,000 in the same period last year. The increase in adjusted EBITDA of $19,800,000 was mainly due to the recognition of $42,700,000 in other income related to event cancellation insurance claim proceeds received or confirmed. This amount was offset by the COVID-nineteen related cancellation of 19 4th quarter events, representing prior year 4th quarter adjusted EBITDA of $18,200,000 All in, for the full year, we canceled 94 events, representing prior year adjusted EBITDA of $141,800,000 4th quarter 2020 adjusted EBITDA also reflected the benefit of cost savings measures that we have implemented throughout the year.
Looking at our event cancellation insurance in more detail, we have submitted $167,400,000 in claims. These claims represent the net amount of budgeted gross revenues less avoided costs for impacted or canceled events previously scheduled to take place in 2020. Through the end of January, we have received insurance claim payments totaling $107,000,000 of which $89,100,000 was received in 2020 $17,900,000 has been received thus far in 2021. Subsequent to this, we have also received approval for an additional $5,300,000 in insurance claim payment. We are actively pursuing collection of the remaining unpaid amounts of filed insurance claims for our canceled 2020 event in addition to claims for our canceled 2021 event.
Looking to the year ahead, we have canceled or postponed All of our Q1 2021 events except SURF EXPO, which as I just discussed successfully staged in January. Additionally, Many of our Q2 events have also been postponed till later in the year. We remain hopeful that the rollout of the vaccine will mitigate the spread of COVID-nineteen pandemic and allow for more activities through the second half of this year. In the meantime, we maintain $191,400,000 of event cancellation insurance for the full year 2021, which we expect to continue to insulate our business from the adverse effects of the pandemic that continues to impact much of the country. We will also be vigilant as we work to mitigate expenses related to canceled events in order to preserve our event cancellation insurance coverage given the uncertain environment.
Turning to free cash flow in the 4th quarter, We experienced an inflow of $4,700,000 which compares to an inflow of $14,100,000 in the year ago Q4. During the Q4, we acquired Edge Spaces in Plum River for a total consideration of $37,700,000 which consisted of $33,300,000 in cash payments and the issuance of approximately 800,000 common shares. Given the cash outflow for these acquisitions, we ended the year with $295,300,000 of cash on our balance sheet as compared to the Q3 of 2020 cash balance of $326,700,000 Additionally, we have full availability of our $150,000,000 revolving credit facility. This brings our total liquidity to more than $445,000,000 As we have discussed, Our $400,000,000 capital raise, combined with our event cancellation insurance policy, has allowed our team to opportunistically invest in the business and position Emerald for growth as the pandemic is brought under control and the exhibition industry begins to normalize. Our acquisition of Plum River and its Elastic Suite technology is a key step in our strategy to bring buyers and sellers together in a digital environment year round and provide them with a platform where they can transact.
Plum River is expected to meaningfully enhance our digital initiatives and is just one of the exciting investment opportunities that we have in front of us as we work to expand our business in the year ahead. We plan to invest in Elastic Suite to expand the platform across our brands as well as make other strategic growth investments in our business as we work to position Emerald for a return to organic growth. We will also remain disciplined and keep a tight rein on our expenses as we strive to balance investment and profitability. Of note, Our cost structure is made up of the direct cost needed to execute events and the SG and A or overhead needed to run the company and manage our portfolio of assets. Direct costs are largely variable, typically 70%.
However, with enough advanced notice, a substantial portion of those direct costs can be avoided. We continue to carefully manage commitments for those events yet to stage in order to maximize our ability to avoid further costs given the current circumstances. As part of this, We have driven a significant decline in our annual expense run rate, which we have reduced by almost $20,000,000 along with other profit improvement initiatives. We will continue to review our organization for further opportunities to optimize our operations and deliver efficiencies in the year ahead. We also to reinvest some of the savings in organic growth initiatives to benefit future years.
We finished the 4th quarter with net debt of $230,000,000 representing a net leverage ratio of 1.7 times Our TPM consolidated EBITDA of $134,200,000 per the terms of our credit agreement. As a reminder, our credit agreement has a springing total net leverage covenant of no more than 5.5 times, which kickstand at borrowings under our credit facility exceeds 35% of our revolver capacity of $150,000,000 To conclude, we are very pleased with our success executing our strategic initiatives designed to streamline our operations, improve the performance of our events and more importantly, our customer satisfaction, expanding into new digital mediums, while also reducing our expense structure and preserving capital. As we look to the year ahead, we are focused on accelerating our investments into new growth initiatives that we expect to deliver at least mid single digit organic growth annually over the coming years. We will also manage our capital structure as we work to maintain modest leverage between 2 to 3 times normalized EBITDA. As events return and our growth accelerates, we expect cash generation of our business to markedly improve given the low capital intensity of our business model.
With that, I'll now turn the call back to Herve.
Thank you, David. Looking ahead, we've developed a growth focused framework that builds on the strong accomplishments that David outlined in hyper focused on 3 key imperatives. The first is customer centricity. Our customers must be at the center of everything that we do. To this end, we will focus on identifying our customers' needs and delivering against them to increase value, which we expect will allow us to better retain customers and acquire new ones.
Additionally, we'll have 3 year operating plans for each brand, establish customer advisory boards and optimize key relationships by providing pan emerald solutions to meet their business needs. We will also implement a value based pricing structure that will give our customers the opportunity to choose how they want to do business with Emeralds and in turn pricing will be developed specifically around the value that we deliver. The second key strategic imperative is delivering 365 day customer engagement. Central to this initiative Our 4 strategies: 1, scaling our B2B marketplace, which we acquired through Plum River to support year round commerce and This acquisition was a truly innovative move for Emerald because it demonstrates the insights that we have into our current customer needs and the foresight to secure resources that drive change. Through the Elastic Suite B2B E commerce platform, we expanded our digital commerce capabilities and accelerated Emerald's strategy to provide a 3 65 day per year engagements, while delivering a new heightened degree of customer experience and value.
The benefits of our acquisition of Plum River are twofold. First, the new depth and breadth of resources available To our customers from both the brand and the buyer side, we'll provide a full spectrum of bundled solutions from discovery, connection and lead generation 2 transaction across both in person face to face events as well as year round digital opportunities. 2, further developing and refining our existing content media business by building insights into the model. This should support the shift from an advertising only revenue stream to an advertising and subscription based revenue stream through the collection, analysis and adaptation of insights. 3, we plan to also increase the cadence of digital and hybrid products leveraging what we learned in the past year.
And 4, all of this should benefit from the optimized marketing efforts leveraging data and persona based journey mapping. Lastly, the 3rd key strategic imperative is portfolio optimization. We are working hard to develop a culture of innovation at Emerald with additional growth driven by accretive M and A, including attractive tuck in acquisitions that strengthen Emerald's position in our core categories and support our Focusing on targets that have already achieved scale, creating a new group called Emerald Accelerator to launch new events more aggressively than we have in the past, both subexpos and greenfields and evaluating other B2B marketing solutions that support our 365 day engagement strategy and diversification of our product suites. Over the next 12 months, We will continue to evolve and refine our infrastructure to ensure we become the industry leader in building dynamic, market driven platforms that integrates face to face events with a broad array of industry insights, digital tools and data focused solutions to create uniquely rich experiences. Our commitment is to progressively and strategically secure Emerald's future viability, while ensuring our industry partners and customers Continued growth and resilience.
In closing, I'm deeply honored to be leading Emerald today and into the future and look forward to further harnessing Emerald's vast potential. A rock solid foundation has been firmly built through the nimble actions of our management team over the past year, and I'm excited to build upon the successful strategy that is in place to return Emerald to organic growth and improved profitability as the exhibition industry recovers. As we will look back at this historic moment in time, I want Emerald to be seen not only as having successfully improved profitability in the face of tremendous odds caused by global pandemic, but the industry leader that took the additional step of prioritizing creativity, ingenuity and innovation when the world came to a halt. Thank you again for your time today. And now I'll ask the operator to please open the meeting up for questions.
Thank Our first question is from Kevin McVeigh with Credit Suisse. Please proceed.
Great. Thank you. Thank you so much and very helpful I wonder if you could talk a little bit more about the structural impact of the businesses, the transition from more Kind of physical to the digital experience. And then within the context of the physical, is there any way to think about How much of the experience goes outside versus internal and just any way to maybe Frame what we think the revenue contribution can be going forward as things normalize as opposed to maybe where they've been in the past?
Sure. So let me answer that question by helping define what business we're in. We're Essentially in the B2B Marketing Solutions business. So if you really think about what we do and how we serve customers, it's really about supplier And the tools that we've had in the past, the live events, the trade publications, those are the Four tools, the core assets that allow us to deliver against our customers' goals of supplier discovery and lead generation. What we now have is the ability to amplify and to add the transactional portion and that's really critical To see the entire process from beginning to end, the transactional piece, which was not there, allows us to see the entire cycle and to observe what customer behavior is The process of identifying suppliers, getting leads and then transacting.
That gives us enormous amount of insights that we can then turn around and see how we continuously add products and value to the customers that are engaged in that entire chain.
This is David. I'll add that. Hey, David. Hey, thanks for the question. I'll add and I'll reinforce what we've said the last couple of quarters.
We very much believe that the live events are going to come back and come back strong. I think the timing is a question, right, given The pandemic and the timing of vaccine rollout is crucial to that. But all the feedback we're getting from our customer base, from independent studies that trade shows will remain a crucial part of the marketing mix of our customers. But the Herveys point, it doesn't mean we can't do better. And by adding in the 365 day a year engagement, We can drive more value for our customers and more value for us.
Historically, about 10% of our revenue has been Non trade show related, our media properties. We think that could be double or triple over the next few years in terms of our exposure based on continuing to build out these broader capabilities.
Helpful. And then I think I had the numbers right. You had about $191,000,000 of event cancellation insurance for 2021. Is that right, David? Ben, Just can you remind us how long do those policies stay in effect for and are you in the renewal process on them?
Just any thoughts on that?
Sure. So you're correct. That is the limit of our policy for 2021, and the policy does expire at the end of 2021. Given the pandemic, the renewal cycle beyond 'twenty one has been a little slower than usual. And we continue to be in conversations with Our insurance broker and various parties about extending it beyond 2021.
Though admittedly, I would not expect Pandemic coverage beyond 'twenty one. It will likely be a more normal course event cancellation type policy that we'd be able to get.
Makes sense. And so unless you've got bridge enough to It's just a business where you may not necessarily need that beyond 21 the debt fair as well.
That's right. Thank you. All right. Thanks so much.
We have reached the end of our question and answer session. I would like to turn the call back over to management for closing remarks.
Great. Well, I just wanted to thank you all for your time, for your participation on today's call and wish you a very good rest of your day. Thank you.
Thank you. This does conclude today's conference. You may disconnect your lines at this time and thank you for your participation.