Welcome to the Emerald fourth quarter and full year 2019 earnings conference call. During today's call, all parties will be in a listening mode. Following the prepared remarks, the conference will be open for questions with instructions to follow at that time. As a reminder, this conference is being recorded. I would now like to turn the call over to Mr. David Doft, incoming Chief Financial Officer. Please go ahead, sir.
Thank you, operator. Good morning, everyone. We appreciate your participation today in our fourth quarter and full year 2019 earnings call. I am very pleased to have Brian Field, Emerald's Interim 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 February 20th, 2020. 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 will discuss non-GAAP measures, including organic revenue, adjusted EBITDA, adjusted net income, and free cash flow, 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 US 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 Brian.
Thank you, David. On today's call, we will begin by reviewing our strategic initiatives and progress we're making, followed by a review of our 2019 results, which we outlined in this morning's earnings press release. We'll then open the call to your questions. Before we begin, I would like to address Sally's resignation and our search for her replacement. Sally is continuing her treatment in her fight against cancer and continues to be an incredible mentor, visionary, and leader to our team. Given the taxing nature of her treatment, however, Sally believed it was prudent to step down as CEO while remaining on the board and assuming a more limited day-to-day employment role as senior advisor. She will continue to provide guidance and leadership to our team as we execute the strategic initiatives designed to return the company to sustainable organic growth.
While we continue to execute on our initiatives, the board has initiated the search for a permanent CEO. Candidates from both inside and outside the events industry are being considered, and I have personally expressed my interest in the role. Turning to Emerald's performance at this point, it is mainly about execution. Sally and I have utilized the major aspects of our current strategy successfully in the past and remain confident that we can achieve similar results here at Emerald, which we expect to drive our future success. While serving as Chief Operating Officer of UBM Americas, I was able to transform the business by enhancing marketing and sales skills, reducing overhead costs, and driving new high-margin product offerings, ultimately leading to improved customer sentiment and profitability. These are all similar points of focus in our current strategy at Emerald.
We remain confident that we have the right plan, and after making a series of senior management hires in 2019 and 2020, the right team in place. Importantly, we've not seen anything over the last eight months that has changed our view regarding our ability to solve Emerald's existing operational challenges, and notably, the board remains committed to our plan. In terms of our business, we took an important and very visible step in rebranding Emerald on February 3rd. This represents the culmination of a months-long process involving a wide range of customer, management, and employee input and which underscores the customer-centric nature of how we are evolving the business. Our rebranding tightly aligns with the strategic framework on which we continue to focus and execute. The four pillars of our strategy that we outlined on our last call remain unchanged.
These four pillars are focusing on customer satisfaction, diversification of our revenue streams, operating efficiently and cost effectively, and pursuing attractive tuck-in acquisitions. Customer satisfaction is the cornerstone of our business. Our focus on driving customer satisfaction has three main components. Deepening our understanding of customer sentiment through ongoing research, developing a 360-degree picture of customer behavior, and through that understanding, offering increasingly relevant personalized experiences and business connections. Finally, providing a value-based pricing framework that offers transparency and expectation alignment. In the end, we want our customers to see us as partners who offer them breakthrough solutions.
Improving customer sentiment and retention are winning byproducts of this kind of behavior and only comes from a deep understanding of the needs and desires of our customers. An example of the deepening of our customer understanding is our use of the research platform Explori, which we began to implement late last year. This platform, integrated with our post-show surveys, allows us to analyze customer sentiment across a variety of measurements, which in turn provides us key insights into areas of future fine-tuning of our show's positioning and broader industry insights. Currently, approximately one-third of our shows are utilizing this platform. As our shows trade over the course of this year, we will continue to onboard them onto this powerful system with our 20 largest shows expected to be on the platform by year-end. To support the 360-degree understanding of our clients, we are actively joining our customer data together.
We are tying information explicitly provided during registration with the behavioral data associated with that customer through their interactions with our content, online products, and behaviors at our events. To support the collection of this information, we have also started to gate our content offerings. To date, approximately 30% of our content offerings are now activated to collect this kind of data, which we subsequently use as building blocks to create a holistic customer profile. We believe these data strategies will support more meaningful and tailored content and experiences for our customers, ultimately driving brand affinity and improved ROI. Finally, we began the process of value-based pricing studies for an initial group of six shows last year. These studies are intended to help better align perceived customer values of available locations and packages at our events with the actual pricing associated with these locations.
Based upon my prior experience, we believe the implementation of these kinds of pricing models can result in low-to-mid single-digit show level improvements in yield, while also supporting improvements in customer sentiment as customers develop a more balanced set of price-to-value expectations. We are continuing this work over the course of 2020 with an additional eight shows scheduled to undertake the process. Given the timing and seasonality of our events, we expect the financial impact of the implementations of our value-based pricing models to begin to materialize in our 2021 show cycles. The second pillar of our strategy focuses on the diversification of our revenue streams. We are pursuing this through an increased focus on integrated sponsorship sales in addition to new show launches.
Our integrated selling program is aimed at introducing booth and non-booth sales packages that together offer our customers unified solutions designed to address their needs and goals while driving new profitable revenue growth for Emerald. These types of programs bundle our year-round platforms where our customers can sponsor specific content areas, extend their own content to targeted audiences, and take over relevant content channels across our websites and print publications, for example, together with at-show offerings such as event guides, sponsored live content tracks, and physical activation opportunities. We also have several anticipated show launches planned for this year. By leveraging our expertise in hosted buyer events, we are expanding our offering to include events targeting the architecture, construction, and engineering of both convenience stores and senior living facilities.
We have also partnered with the International WELL Building Institute, which develops and administers the WELL Building Standard and the WELL AP program, and ASID, the American Society of Interior Designers, to launch a new conference focused on the health and wellness implications of the places and spaces where we spend our lives. While every launch won't be profitable from inception, we believe that investing in these new growth areas offers us opportunities to further expand our portfolio while leveraging existing customer relationships and addressing customer needs. Our third strategic pillar is to operate efficiently and cost-effectively. We continue to analyze and critically assess the impact and ROI of all of our spending and investments by applying a rigorous financial lens to our activities.
Through the centralization of marketing operations and commercial operations, for example, we are creating greater automation of our core functions and consolidation of supporting tool sets, which will provide us scale and allow for more systematic and effective training of our sales and marketing staff. The fourth of our strategic pillars is to pursue attractive tuck-in acquisitions that align and support our existing business. Along with the acquisition of G3 Communications, which we announced the day before our last earnings call, we also completed the acquisition of Shop Eat Surf on December 9th of last year. Shop Eat Surf is a leading B2B news and content website focused on the surf industry, which is supportive of the customer communities that participate in both our Surf Expo and Outdoor Retailer events.
Along with being financially accretive, these acquisitions support our strategy of building year-round platforms that continuously engage and nurture our customers while offering opportunities for cross-platform integrated selling. The execution of our four strategic pillars is designed to return Emerald over time to sustainable organic growth at or above industry levels, as well as deliver solid and consistent adjusted EBITDA growth. Our focus for 2020 is all about execution. As we continue to implement the foundational aspects of our strategic plan, which are well underway, we expect to begin to see the tangible, operational, and financial benefits in 2021. We look forward to updating you on this as we move through the year. Before I turn the call over to David to review our fourth quarter and year-end results, I would like to thank Phil Evans for his contributions to Emerald over the last six-plus years.
As CFO, Phil was instrumental in building the business and in taking the company public in April of 2017. Phil also provided important leadership to the company and to our employees during his tenure as interim CEO prior to Sally and me joining the company in June of last year. We are all very thankful for his many contributions to Emerald. As we look forward, I am very pleased to officially welcome David Doft to Emerald and introduce him to you. David's proven leadership, formidable execution skills, and broad strategic and financial management background, including in turnaround situations, will add depth to our executive team as we execute upon our turnaround and growth strategy. Now, I will turn the call over to David. Welcome, David.
Thank you, Brian. Good morning. First, I'd like to join Brian in thanking Phil, as he has been extremely helpful in sharing his insights with me as I've transitioned into the Emerald business over the last month. I'm very excited to be here. Based on what I've already seen over the last several weeks, combined with my 12 years experience as CFO of MDC Partners, a global marketing communications business, I believe we have a strong team and a clear runway for growth here at Emerald. The turnaround strategy that has been previously laid out is solid. I look forward to working with the leadership team to execute it. Given my experience at MDC, I'm a firm believer in the power and staying power of experiential marketing and the face-to-face interactions between sellers and buyers that it enables.
I believe Emerald is well positioned to capitalize on its desirable portfolio of leading events in the U.S. Before I talk more about the future, let me briefly review the company's fourth quarter and full year 2019 financial results. Beginning with the fourth quarter, revenues decreased by $12.1 million, or 21%, over the fourth quarter 2018, with $6 million of the variance due to show staging in the third quarter of this year versus the fourth quarter last year. In addition, we staged the Outdoor Retailer Winter Market during the fourth quarter of 2018, which we did not repeat in 2019. Instead, we made the decision to fold it into the 2020 OR Winter Snow Show. Organic revenue growth for the quarter, adjusted for the previously noted show timing differences and excluding the discontinued Outdoor Retailer Winter Market show, was down 2.5%.
Our adjusted EBITDA for the quarter decreased by $6.2 million to a loss of $1.5 million, reflecting the impact of the discontinued Outdoor Retailer Winter Market show, together with the increased show and corporate investments directed towards improving future growth. The G3 Communications acquisition, which closed in November, added modestly to revenue and adjusted EBITDA in the fourth quarter. We also booked a $59.8 million non-cash impairment charge in the fourth quarter related to the impairment of goodwill as a result of the reevaluation of our operating segments and reporting units, triggered by the reporting changes brought about by our new senior management team structure. As a result, we increased both the number of operating segments and reporting units, and our underperformance in certain reporting units necessitated the impairment charge. Turning to the full year 2019, revenues declined by 5.2% to $360.9 million.
Organic revenues declined by approximately 3% after giving credit to insurance proceeds we received in 2019 to replace lost revenue as a result of the disruption caused by Hurricane Dorian, and also excluding incremental acquisition contributions and discontinued events. adjusted EBITDA for the full year 2019 of $127.8 million decreased by 21.5% versus the full year 2018 due to the organic revenue decline, the discontinuance of several shows, notably Interbike and Outdoor Retailer Winter Market, and the increased investments aimed at improving the company's future performance. Free cash flow for 2019 was $63.9 million, a decrease of $36.5 million, or 36.4%, over 2018. This reduction reflected the year's financial performance and a modest outflow of working capital.
We deployed $12.8 million of our 2019 free cash flow on the acquisition of G3 Communications and reduced our debt by $35.7 million through the paydown of revolver balances and the annual amortization of our term debt. We paid four quarterly dividends totaling $21.3 million and used $8.3 million to repurchase approximately 854,000 shares of our common stock at an average cost of $9.73 per share. We finished 2019 with net debt of $531.2 million, representing a net leverage ratio of 4.2 times our 2019 adjusted EBITDA. We are not satisfied with these results, which we believe were impacted by legacy operational and execution issues, and importantly, do not reflect the underlying quality of Emerald's portfolio and its long-term growth potential. As we move into 2020, our near-term priorities for capital allocation have not changed. We are committed to our quarterly dividends.
We expect to continue to reduce net leverage, and we continue to evaluate tuck-in M&A opportunities that are strong performers in their own right and that can also strengthen our existing brands. Now, I would like to discuss the coming year. To start, the spread of the coronavirus has dominated the news headlines over the last few weeks, and we have been paying close attention as well. Fortunately, our events, unlike others in the industry, are entirely produced in the United States, which minimizes the risk. Nevertheless, last year, 2%-3% of our revenues came from Chinese exhibitors, which must be viewed as at-risk until the virus is under control. We expect to pursue a recovery of losses from any cancellations from our insurance providers and hope that the financial impact will be minimal.
Historically, this is the time that Emerald has indicated financial guidance for the coming year. As has previously been discussed by management, the strategic and operational initiatives that are currently being rolled out are not expected to positively impact growth in 2020, given the seasonal nature of most of the company's events. In addition, the annualized cost structure of the new hires and investment spending to implement the turnaround plan is a headwind to growth and profitability in the near term and will weigh on the company in 2020. We do not expect to see the financial benefits until 2021.
That said, I am personally focused on unpacking the company's cost structure from the bottom up in order to not only uncover efficiency opportunities, but to ensure that we get a return for each of our investments and free up money to invest behind incremental growth opportunities in the future. Given my very recent arrival, I feel that it is premature to give 2020 guidance today. Instead, we plan to do so in conjunction with our Q1 2020 earnings report. At that time, I will be fully up to speed and can appropriately lay out our expectations. Again, I'm excited to be here at Emerald, and although these are early days, I am bullish on our go-forward strategy. I will now turn the call back to Brian for his concluding remarks.
Thank you, David. We have much to do in 2020 to realize our goal to return the company to growth in 2021 and beyond. I'm confident that we have the right strategy and the right team to deliver sustainable organic growth in line with or better than the industry over the medium to long term. David and I, along with the entire Emerald management team, are excited, united, and focused on executing the strategy we have articulated to drive our future success. Thank you once again for your time today. Operator, please open the call for questions.
At this time, we will be conducting a question-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pull for questions. Our first question is from David Chu, Bank of America. Please proceed with your question.
Thank you. I know you're not providing guidance, but can you give us any sense of revenue expectations for the year? Maybe even just discussing if you expect trends to get worse before it gets better.
Hi, David. Good morning. We're not going to comment on the outlook for the year. I apologize for that's the decision that we've made. I think that if you read the quote in the earnings release and my comments, a lot of our focus on my end is on cost. Brian's comments have been about continuing to execute against a strategic plan in order to drive revenue. That's what we're focused on both ends here. Hopefully, we'll be able to continue to report progress against that plan.
Okay. Given that you don't provide a historic recast, it looks like you guys are presenting revenue in a new segment fashion. Can you provide 4Q for trade show, other marketing, and other events so we have a base to work off of?
The new segment reporting was dictated by a change in how the company's being managed by Brian and the structure that was put in place there. The segments that we now report are the segments that we're going to report going forward. Given that we're really unable to break out revenue in other ways that may have been done in the past.
The other marketing services, other events, do they just fall into the three buckets? Is that how we should think about it? I know the majority of your business is trade show, but just trying to get a sense of how to think about those two segments.
Sure. I think I can help you on that. Ultimately, the two primary segments are a split up of the trade show portfolio. The all other bucket is essentially the other marketing services and other revenue streams of the company. It's not perfect in that way, that's because the segments are dictated by how individual parts of the portfolio are managed and who the leaders of those portfolios are. There is a little bit of crossover, but generally, that's going to work as a rule of thumb, in how you look at the business. I think if you aggregated the two main segments, you generally will have a trade show bucket. If you looked at all other, you will generally have everything else.
Just lastly, are you guys going to provide more detailed information by shows so we can, kind of think about the two main segments, or is it just going to be a high-level look, similar to what we've had in the past?
Sure. We're not really going to go into show-level financial information going forward. Ultimately, if you think about the strategy that's been put forth by Brian and Sally, it's about extending our shows out and leveraging our customer base exhibitors and attendees at those shows with more products and services. Thinking about it at trade show level type financials, is actually limiting the opportunity that we see in those properties. That's why the segment actually is, over time, going to, I think, give a lot more clarity and color, because you'll be able to see in the growth numbers, and hopefully, the growth numbers will be there in the future, that the strategy's working through that extension.
As part of portfolio management and optimizing performance, the reality is that we may choose to change how one show works to benefit another show because the total is better for us. That's also why the show-level metrics, we believe are not as relevant going forward. We're going to shift away from commenting at that level.
Okay, should we expect a historical 2019 by quarter and maybe 2018, so we have a sense of what happened over time?
We're working on finalizing some of the historical trending, and I think it's reasonable to believe that we'll provide some aspect of that.
Okay. Thank you.
Our next question is from Seth Weber, RBC Capital Markets. Please proceed with your question.
Hey, guys. Good morning.
Morning.
Brian, you talked about outpacing industry growth a couple of times. Can you just big picture talk about what you think the industry growth really is here going forward? Do you feel like the dynamics of the industry have changed or softened at all, or do you feel like this is still a low single-digit industry grower and big picture, you guys ultimately could be back in that, I think you used to target a 3%-5% type number. Long question, but where do you think industry growth is, I guess?
Yeah. Overall, the industry seems to be continuing to pace now at those same levels. Ours is a little bit different than some of the other big global players, because we're specifically focused on the U.S. versus international markets. The likes of an Informa or a Reed, for example, are highly globally distributed. Our aspiration is to return to overall growth along the lines that you mentioned. Some of the areas that are likely to impact some of those international players, particularly those with a heavy Asian footprint, will be areas we'll be able to ideally, hopefully the coronavirus stays contained. We won't have those kinds of impacts that those international and heavily Asian-weighted companies will have. We believe this is a growth industry, and we're committed to seeing that through.
Okay. Then, I guess just a question maybe for David, how you're thinking about leverage and the balance sheet. You're a little bit over four turns here. Are you comfortable at that level? Does that impact your appetite for M&A? Do you feel like you want to get that lower? It sounds like you're pretty focused on cost control, can you just talk about operating the business at four turns leverage, or do you feel like it needs to be lower? Thanks.
Sure. Thank you. Ultimately, the leverage for the company increased over the course of the year by 0.8 turn of EBITDA. I think that we're better off a little bit lower than here. I don't think there's much risk where we sit right now. Ultimately, if we're lower, we have more flexibility. We're able to be more nimble to pursue opportunities, whether it's increased investment organically or increased investment from an acquisition standpoint. Part of the mindset of returning this business to growth is making sure that we have the wherewithal to make the right investments at the right time. That's a combination of factors. One of them is balance sheet. The other of those is cost structure. I actually believe they go hand in hand.
My view is not really that it's about an absolute cutting of costs, it's about a cutting of unproductive costs so that we can redeploy to growth investment in a way that really, from what I can see, hasn't really been taking place here at the sort of level that I think we need to do.
Right. Following up on that, should we expect some more aggressive pruning of the portfolio? It sounds like you're adding some new shows, but should we expect a more aggressive tact on just exiting shows that are not providing an adequate return?
We have, and this is public knowledge, we've closed off some media properties, for example, that have been unprofitable and that have been misaligned with customer sentiment. Those things that are misaligned to our customer sentiment, and are unprofitable, are things that we've taken charge of very early on this year. To David's point, so that we can redeploy those assets into areas of growth.
Okay. Thank you very much, guys.
Our next question is from Manav Patnaik, Barclays. Please proceed with your question.
Hi, this is Ryan Leonard on for Manav. I'm just curious, and I appreciate that obviously there's some moving pieces, and you can provide guidance on Q1. I think historically, part of the benefit here is that there's been 80% of booth sales are completed by March. Has the visibility in the business changed at all in the last couple of years?
In looking at the data here, and I'm really trying to bring some fresh eyes to some of these things. Under the core revenue stream, I think the visibility has been fairly consistent. For example, the retention rates have been stable, 2019 versus 2018. I think that's an important data point in the wake of what was not the greatest year for the company, that there's an underlying stability that's going on there that we can build off of. At the same time, though, some of the other revenue streams are a little less predictable, a little more near-term to when they get booked and reported around the other marketing services and around the publications. I think that's where there's been a lot of the variance over the last couple of years versus what the company was hoping for.
Going forward, we're going to try to put in place some processes to enhance our visibility around that. Part of that is some of the initiatives that are already underway around centralizing certain functions that allow us to have consistent views of pipelines and things of that nature going forward. That will allow us to be hopefully even better at forecasting than we have been in the past.
One thing I'd like to chime in on this topic as well is that historically, if you look at our top customer inside of the company, it represents 0.28% of our overall revenue last year. Our top 10 customers represented only 1.81% of our revenue. Now, that's a huge opportunity for us as we're expanding out cross-platform sales, taking individual customers who may be only in one piece of the business and expanding them to multiple parts of our business. That ties back to the overall element of diversifying our revenue and focusing on cross-platform sponsorships on multi-brand sales. That's one example where there's a tremendous amount of upside for us.
Got it. Thanks.
I would just add that those sort of initiatives add visibility, right? When you could sign clients up to multiple shows with broader marketing services around it, you have to plan ahead for that. You're looking at things over a course of a year. Those sort of things will add visibility to our business going forward.
Got it. Thanks. If I could just clarify a little bit on the coronavirus. There had been some impact from Chinese trade tensions this year. Your comment on the revenue at risk, is that as of the ending of 2019, meaning there's some incremental risk? I thought you said some of that could be insured against. I just want to confirm that your insurance applies to exhibitors either not showing up because of this. I just want to clarify that.
Of course. The metric I gave was that our revenue in 2019 for the full year from exhibitors from China was between 2% and 3% of our total revenue. Not a lot, not inconsequential, right? That's real money. Last year, as the company talked about throughout the year on their earnings calls, there was pressure on Chinese exhibitors because of the trade war and the tariffs. 2019 was down from 2018 because of that issue. There was a higher number in 2018, modestly, than what I said. It was a little north of 3%, as opposed to between 2% and 3%. In terms of year-over-year risk, we're looking at the 2019 metric, and we're looking at it in total. I would say that not 100% of that revenue is at risk because some shows have already traded.
As we sit right now, there's a travel ban. People can't come from China here, so they're not going to come to our shows as long as that travel ban is in place. When it comes to the insurance, if somebody has already contracted to be an exhibitor and has to cancel because of the travel ban, which they can't control and we can't control, we believe that there is recoverability from our insurance. We're working through that. There's no guarantee of that'll play out over the coming weeks, I would expect. What insurance would not cover is the theoretical person who never signs up and comes to our show. There's likely to be some impact during the year, with or without insurance, because of that dynamic. That's really hard to quantify.
The totality, as I said, of all our revenue over the course of the full year last year from Chinese exhibitors was between 2% and 3%.
Got it. Thanks. If I could sneak in just kind of a broader question. Obviously, you've said the business has underperformed your expectations. We're now in a little bit of a gap period where we don't really have a 2020 guidance or anything to put a base on. What do you tell investors? What are the metrics that people will see in 2020 to see that the plans you have laid out are on track to grow the business in 2021?
The principal plans, since this is really an executional year, the things that we're focused on right now, and we'll be continuing to talk about how we're progressing, are the very things I outlined earlier in today's call. How we're advancing in deploying our research tools, our Explori tools, how we're progressing against value-based pricing studies across the portfolio, how we're tracking against joining all of our data so that we have a full 360-degree view of the customer. All of these things inherently will be elements that drive the growth in 2021, which is what we're focused on.
Thank you.
Our next question is from Ashish Sabadra, Deutsche Bank. Please proceed with your question.
Hi. Thanks for taking my question. Just a quick follow-up question on earlier question on the industry trend. Even if the exhibition industry is growing low single-digit, based on the industry report, it seems like the discretionary consumer goods and services have been declining. Given some of the top shows, including ASD and NY NOW being focused on discretionary consumer goods and services, how do you think about the industry trend and turning around with your strategic initiative despite the secular headwinds in this business? Thanks.
Yeah. All of these elements, the research, the value-based pricing, tracking and being closer and understanding the needs of our customers will allow us to pivot and continue to refine and define as the industries evolve and change around them, the new types of offerings, the new types of things we do around our customers and to service their ongoing needs. To David's point around portfolio management, this is all around how we begin to evolve and define and grow the portfolio overall, as opposed to just focusing on one particular show or a couple of sectors inside of part of our overall company. As we're pushing, as we're evolving, as we continue to do our bolt-on tuck-in acquisitions, the overall makeup of the portfolio will shift. The dynamics of individual shows and products will shift depending on overall secular trends.
We're going to be very focused on the needs of our customer markets based upon the intelligence we're gathering. Those are things that we believe will continue to drive organic revenue and growth in business.
That's helpful, Brian. Maybe just a quick question. I was wondering if you could just provide any color on the New York NOW winter show or the ASD, which is coming up in March. Any preliminary colors on those shows, how those are trending compared to your expectations?
Generally speaking for the shows that have occurred already, the overall customer sentiment across that portfolio of shows has been very strong. It's been very supportive, and actually is reflective of the kind of deeper understanding that we now have through the Explori research around what our customers need, which has been very gratifying. That said, as David alluded to earlier, we're not going to speak specifically about individual shows.
Okay, that's helpful. Maybe a final question on leverage. There was the question earlier on leverage as well being slightly on the higher side. As we think about leverage, particularly given the investment, should we think about leverage going up before it comes down? Any thoughts on that, David? Thanks.
Sure. This is still a strong free cash flow-generating business. Even with the hiccup in EBITDA last year, still a pretty strong free cash generating business. I don't believe that our leverage will go up meaningfully from here. I'm not going to speak the next quarter after, but I think as we look to the end of the year, our hope would be that that leverage is down.
That's helpful. Thanks.
Our next question is from Jeff Meuler, Baird. Please proceed with your question.
Hi, it's Jeff on for Steven. Thanks for taking my question. As we think about sort of the growth investments and sort of the incremental spending, is that going to occur mostly sort of in the first part of the year and then sort of roll off or reach a more normalized level in the back half of 2020? Is we sort of getting to a rebase level that's consistent quarter-over-quarter?
Sure. Well, I think a lot of the incremental investment flowed through the year, post the arrival of Sally and Brian and some of the changes they've put in place. We're surely going to annualize that as we move through the first half of 2020. Really through the third quarter, right? First half is going to get the brunt of that year-over-year increase of the investment that came in last year. You could think about the model that way. The other thing I want to point out, just around kind of seasonality, we did make a tweak to the supplemental deck that we posted to our website, where we gave color for all four quarters of the year, recasted 2019 for shows that moved between quarters in 2020.
You have the base of revenue, adjusted EBITDA, and operating income off of which to model the quarters of 2020. I hope that's helpful. We'll continue to look for ways that we could aid in modeling of our business, which I know has been tough given how often shows move around.
Great. Then as far as the value-based pricing goes, I understand that most of the benefit's not going to come until 2021, but I assume that a lot of this would be taking place in 2020. Is there some benefit from value-based pricing in 2020 versus 2019? Or is it pretty flat and then, like I said, all of it comes through in 2021? Then I just want to clarify, that low to mid-single digit that you referenced, is that going to be the benefit for revenue or is that just to the yield and retention?
That's for the yield. As far as the overall financial benefit, it'll happen almost entirely in 2021 based upon the seasonality of the shows. There's the mechanics of understanding what the pricing is, but then there's the communication process to the customers. That's the part that actually is the ramp up.
Keep in mind, the revenue recognition around our shows are when the show actually happens. We might be selling for 12 months ahead of the show, but we don't book the revenue until the show actually is put on.
I actually want to amend the comment I made about it just being yield because frankly also, there is a retention benefit too. It's slightly harder to quantify, but based upon the overall customer's appreciation and acknowledgement of the amount they paid for the value they received, and that's what value-based pricing is all about, there generally is a trend of greater customer satisfaction. That ought to also translate into retention.
Great. Thanks.
We have reached the end of the question and answer session, and I will now turn the call back over to Brian Field for closing remarks.
I want to thank everyone for dialing in and attending today's call. Just wanted to reiterate that David and I and the entire senior management team are confident around the strategy, that this is really an executional year, and that we're extremely focused on delivering that. We look forward to updating you all in progress over the course of this year. Thank you very much, everyone.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.