Emerald Expositions Reports First Quarter 2017 Financial Results
May 25, 2017
Introduces Full Year Fiscal 2017 Guidance
SAN JUAN CAPISTRANO, Calif.--(BUSINESS WIRE)-- Emerald Expositions Events, Inc. (NYSE:EEX) (“Emerald”) today reported financial results for the first quarter ended March 31, 2017 and provided guidance on management’s current expectations for full year 2017 results.
First Quarter 2017 Highlights
- Revenues increased 6.1% to $135.7 million, compared to $127.8 million for first quarter 2016
- Net income increased by approximately $0.1 million to $28.3 million, compared to $28.2 million for first quarter 2016
- Adjusted EBITDA, a non-GAAP measure, increased 1.7% to $72.9 million, compared to $71.7 million for first quarter 2016
- Free Cash Flow, a non-GAAP measure, decreased by approximately $1.0 million to $28.5 million, compared to $29.5 million for first quarter 2016
- Completed two acquisitions (CEDIA Expo and InterDrone) for a combined purchase consideration of approximately $44 million
“I am pleased with our first quarter results where we delivered total revenue growth of 6%, approximately half organic and half from acquisitions,” said David Loechner, President and Chief Executive Officer of Emerald. “We also added two leading shows to the portfolio in the first quarter and our thesis of acquiring shows from associations, as well as from independent owners, continues to be realized.”
Financial & Operational Results
For the first quarter of 2017, Emerald reported revenues of $135.7 million compared to revenues of $127.8 million for the first quarter of 2016, an increase of approximately $7.9 million, or 6.1%. The increase in revenues reflected organic growth of 2.9% and growth from acquisitions of 3.3%.
Cost of revenues of $36.6 million for the first quarter of 2017 increased by 14.9%, or approximately $4.8 million, from $31.8 million for the first quarter of 2016. This increase was mainly attributable to $1.4 million of incremental costs associated with acquisitions, and $1.6 million in higher sponsorship costs (largely related to growth in the Kitchen & Bath Industry Show), with the remaining $1.8 million attributable to two show launches and modest other cost growth.
Selling, General & Administrative expense of $32.0 million for the first quarter of 2017 increased by 21.1%, or approximately $5.6 million, from $26.4 million for the first quarter of 2016. Acquisitions contributed $1.2 million of incremental costs, while transaction and transition costs of $1.9 million were $0.7 million higher than the first quarter of 2016. During the first quarter of 2017 we also incurred $2.6 million of costs related to our IPO and related sale activities. The remaining $1.1 million increase in Selling, General and Administrative expense mainly reflected higher compensation costs.
Net income increased by approximately $0.1 million to $28.3 million from $28.2 million in the first quarter of 2016, largely reflecting lower interest expense due to the refinancing during the fourth quarter of 2016 of Emerald’s previously outstanding 9% Senior Notes with term loans bearing a lower interest rate, and a lower average debt balance in the first quarter of 2017 compared to the first quarter of 2016. These interest cost savings were largely offset by expenses associated with the Company’s initial public offering and other related transaction costs.
For the first quarter of 2017, Adjusted EBITDA was $72.9 million compared to $71.7 million for the first quarter of 2016, an increase of 1.7%. This performance reflected strong revenue growth partially offset by cost of revenue and selling, general and administrative expenses increasing, as expected, at a greater rate than the increase in revenues.
Adjusted EBITDA for the twelve months ended March 31, 2017 was $153.4 million, compared to $152.1 million for the twelve months ended December 31, 2016. Acquisition Adjusted EBITDA for the twelve months ended March 31, 2017 was $162.2 million, compared to $158.5 million for the twelve months ended December 31, 2016. Adjusted EBITDA and Acquisition Adjusted EBITDA are financial measures that are not calculated in accordance with GAAP. For a discussion of our presentation of Adjusted EBITDA and Acquisition Adjusted EBITDA, see below under the heading “Non-GAAP Financial Information”. For a reconciliation of Adjusted EBITDA and Acquisition Adjusted EBITDA to net income, see Appendix I attached hereto.
Net cash provided by operations decreased by $1.1 million to $28.8 million for the first quarter of 2017 from $29.9 million in the first quarter of 2016. Timing differences on cash interest reduced net cash provided by operations by approximately $2.4 million, while cash taxes were also $0.8 million higher.
Capital expenditures were $0.3 million for the first quarter of 2017, compared to $0.4 million for the first quarter of 2016.
Free Cash Flow, which we define as net cash provided by operating activities less capital expenditures, was $28.5 million for the first quarter of 2017, compared to $29.5 million in the first quarter of 2016, and was also impacted adversely by the timing of interest payments discussed above.
For a discussion of our presentation of Free Cash Flow, see below under the heading “Non-GAAP Financial Information”. For a reconciliation of Free Cash Flow to net cash provided by operating activities, see Appendix I attached hereto.
As of March 31, 2017, Emerald’s cash and cash equivalents were $15.9 million and gross debt was $726.2 million. Net debt (gross debt less cash and cash equivalents) was $710.3 million and Emerald’s net debt leverage ratio at the end of the quarter was 4.4 times Acquisition Adjusted EBITDA for the twelve months ended March 31, 2017.
After giving effect to the repayment of $159.2 million of debt with the proceeds of our initial public offering, as well as the recently completed refinancing of our credit facilities, Emerald’s pro forma net debt outstanding was approximately $550 million, or 3.4 times the Acquisition Adjusted EBITDA for the twelve months ended March 31, 2017.
On January 26, 2017, we announced the acquisition of CEDIA Expo from the Custom Electronics Design & Installation Association. CEDIA Expo is the premier event in the home technology market, serving industry professionals that manufacture, design and integrate goods and services for the connected home. The next show will take place in San Diego in September 2017.
On March 13, 2017, we announced the acquisition of the International Drone Conference and Exposition (“InterDrone”), the largest commercial unmanned aerial vehicle (UAV) trade show and conference. The next InterDrone show will take place in Las Vegas in September 2017.
On May 24, 2017, the Board of Directors approved the payment of a cash dividend of $0.07 per share for the quarter ending June 30, 2017 to holders of the Company’s common stock. The dividend is expected to be paid on or about June 21, 2017 to stockholders of record on June 7, 2017.
On May 3, 2017, the Company applied the net proceeds of $159.2 million from the April 28, 2017 initial public offering to reduce amounts outstanding under its term loan facility. On May 22, 2017, we refinanced our credit facility to reduce the interest rate payable, significantly extend the maturity profile, achieve more favorable terms and increase the revolver commitments. The new $565 million 7-year term loan B has an interest rate of LIBOR + 300 basis points, which is 75 basis points lower than our previous rate, with a step-down to LIBOR + 275 basis points upon achieving a first lien net leverage ratio of 2.75 times. We also incurred a new $150 million 5-year revolving credit facility, representing an increase of $50 million over the Company’s previous revolving credit facility.
On May 24, 2017, we announced the acquisition of the SIA Snow Show from the SnowSports Industries America (SIA) for cash consideration of approximately $16 million. This acquisition brings the industry’s two premier winter sports trade show brands, Outdoor Retailer and the Snow Show, under the Emerald umbrella.
2017 Full Year Guidance
The Company introduced full year guidance as highlighted below:
- Total revenue growth of 7.5% to 9.5%, or $348 million to $355 million
- Organic revenue growth of zero percent to 2.0%
- Adjusted EBITDA of $154 million to $160 million, or growth of 1.2% to 5.2%
Mr. Loechner noted, “While several very specific issues related to a few of our shows are likely to constrain 2017’s overall organic growth rate, I am pleased with the positioning of our business in the industries that we serve, and I am confident that this portfolio will deliver solid organic growth going forward. Strategic acquisitions will also be an important long-term growth driver for our company to supplement this organic growth.”
The range for 2017 Adjusted EBITDA does not include the impact of the SIA Snow Show acquisition as the 2017 event took place prior to our acquisition of the show; however, it does include approximately $3 million of incremental costs in 2017 associated with operating as a public company and strengthening our internal M&A capabilities.
About Emerald Expositions
Emerald is the largest operator of business-to-business trade shows in the United States by net square footage (“NSF”), with most of our trade shows dating back several decades. Emerald currently operates more than 50 trade shows, including 31 of the top 250 trade shows in the country as ranked by TSNN, as well as numerous other events. In 2016, Emerald’s events connected over 500,000 global attendees and exhibitors and occupied over 6.5 million NSF of exhibition space.