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.
Cash Flow
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.
Financial Position
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.
Capital Allocation
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.
Recent Events
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.
Conference Call and Webcast Details
The Company will hold a conference call to discuss its first quarter
2017 results at 11:00 am EDT on May 25, 2017. The conference call can be
accessed by dialing 1-877-407-9039 (domestic) or 1-201-689-8470
(international). A telephonic replay will be available approximately two
hours after the call by dialing 1-844-512-2921, or for international
callers, 1-412-317-6671. The passcode for the replay is 13661942. The
replay will be available until 11:59 pm EDT on June 1, 2017.
Interested investors and other parties can access the webcast of the
live conference call by visiting the Investors section of Emerald’s
website at http://investor.emeraldexpositions.com.
The online replay will be available on the same website immediately
following the call.
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.
Non-GAAP Financial Information
This press release presents certain “non-GAAP” financial measures. The
components of these non-GAAP measures are computed by using amounts that
are determined in accordance with accounting principles generally
accepted in the United States of America (“GAAP”). A reconciliation of
non-GAAP financial measures used in this press release to their nearest
comparable GAAP financial measures is included in Annex I attached
hereto.
We use Adjusted EBITDA and Acquisition Adjusted EBITDA because we
believe they assist investors and analysts in comparing Emerald’s
operating performance across reporting periods on a consistent basis by
excluding items that we do not believe are indicative of our core
operating performance. Management and Emerald’s board of directors use
Adjusted EBITDA and Acquisition Adjusted EBITDA to assess our financial
performance and believe they are helpful in highlighting trends because
they exclude the results of decisions that are outside the control of
management, while other measures can differ significantly depending on
long-term strategic decisions regarding capital structure, the tax
jurisdictions in which we operate, and capital investments. Further, our
executive incentive compensation is based in part on Acquisition
Adjusted EBITDA. In addition, we use Acquisition Adjusted EBITDA for
purposes of calculating compliance with our debt covenants in our senior
secured credit facilities. Adjusted EBITDA and Acquisition Adjusted
EBITDA should not be considered as alternatives to net income as a
measure of financial performance or to cash flows from operations as a
liquidity measure.
We define Adjusted EBITDA as net income before (i) interest expense,
(ii) loss on extinguishment of debt, (iii) income tax expense, (iv)
depreciation and amortization, (v) stock-based compensation, (vi)
deferred revenue adjustment, (vii) intangible asset impairment charge,
(viii) unrealized loss on interest rate swap and floor, net, (ix) the
Onex management fee and (x) other items that management believes are not
part of our core operations. We define Acquisition Adjusted EBITDA as
Adjusted EBITDA for each period presented as further adjusted for the
results of shows associated with acquisitions made during such period as
if they had been completed as of the first day of the period presented.
We present Free Cash Flow because we believe it is a useful indicator of
liquidity that provides information to management and investors about
the amount of cash generated from our core operations that, after
capital expenditures, can be used to maintain and grow our business, for
the repayment of indebtedness, payment of dividends and to fund
strategic opportunities. Free Cash Flow is a supplemental non-GAAP
measure of liquidity and is not based on any standardized methodology
prescribed by GAAP. Free Cash Flow should not be considered in isolation
or as an alternative to cash flows from operating activities or other
measures determined in accordance with GAAP.
Other companies may compute these measures differently. No non-GAAP
metric should be considered as an alternative to any other measure
derived in accordance with GAAP.
Cautionary Statement Concerning Forward-Looking
Statements
This news release contains certain forward-looking statements, including
full year guidance with respect to revenue growth and an Adjusted EBITDA
range. These statements are based on management’s expectations as well
as estimates and assumptions prepared by management that, although they
believe to be reasonable, are inherently uncertain. These statements
involve risks and uncertainties, including, but not limited to,
economic, competitive, governmental and technological factors outside of
the Company’s control that may cause its business, industry, strategy,
financing activities or actual results to differ materially. See “Risk
Factors” and “Cautionary Note Regarding Forward-Looking Statements” in
the Company’s prospectus dated April 27, 2017 and filed with the
Securities and Exchange Commission pursuant to Rule 424(b)(4) of the
Securities Act of 1933, as amended, on May 1, 2017. The Company
undertakes no obligation to update or revise any of the forward-looking
statements contained herein, whether as a result of new information,
future events or otherwise.
|
|
|
Emerald Expositions Events, Inc.
Condensed Consolidated Statements of Income and Comprehensive
Income
(unaudited, in thousands, except earnings per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended March 31,
2017
|
|
|
Three Months
Ended March 31,
2016
|
|
Revenues
|
|
|
|
$
|
135,654
|
|
|
$
|
127,796
|
|
Cost of revenues
|
|
|
|
|
36,589
|
|
|
|
31,844
|
|
Selling, general and administrative expense
|
|
|
|
|
31,965
|
|
|
|
26,392
|
|
Depreciation and amortization expense
|
|
|
|
|
10,575
|
|
|
|
9,943
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
|
56,525
|
|
|
|
59,617
|
|
Interest expense
|
|
|
|
|
9,648
|
|
|
|
13,035
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
|
|
46,877
|
|
|
|
46,582
|
|
Provision for income taxes
|
|
|
|
|
18,530
|
|
|
|
18,406
|
|
|
|
|
|
|
|
|
|
|
Net income and comprehensive income
|
|
|
|
$
|
28,347
|
|
|
$
|
28,176
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
|
$
|
0.46
|
|
|
$
|
0.46
|
|
Diluted earnings per share
|
|
|
|
$
|
0.44
|
|
|
$
|
0.45
|
|
Basic weighted average common shares outstanding
|
|
|
|
|
61,866
|
|
|
|
61,857
|
|
Diluted weighted average common shares outstanding
|
|
|
|
|
63,785
|
|
|
|
63,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Emerald Expositions Events, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except par value)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2017
|
|
December 31,
2016
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
15,850
|
|
$
|
14,942
|
|
Trade and other receivables, net of allowance for doubtful
accounts of $736 and $693 as of
March 31, 2017 and December
31, 2016, respectively
|
|
|
|
|
84,845
|
|
|
57,576
|
|
Prepaid expenses
|
|
|
|
|
14,097
|
|
|
23,044
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
114,792
|
|
|
95,562
|
|
Noncurrent assets
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
3,720
|
|
|
3,778
|
|
Goodwill
|
|
|
|
|
960,683
|
|
|
930,321
|
|
Other intangible assets, net
|
|
|
|
|
544,914
|
|
|
541,172
|
|
Other noncurrent assets
|
|
|
|
|
977
|
|
|
1,686
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
$
|
1,625,086
|
|
$
|
1,572,519
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
Accounts payable and other current liabilities
|
|
|
|
$
|
43,499
|
|
$
|
28,234
|
|
Deferred revenues
|
|
|
|
|
153,240
|
|
|
171,644
|
|
Revolving credit facility
|
|
|
|
|
15,000
|
|
|
—
|
|
Term loan, current portion
|
|
|
|
|
8,744
|
|
|
8,744
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
220,483
|
|
|
208,622
|
|
Noncurrent liabilities
|
|
|
|
|
|
|
|
Term loan, net of discount and deferred financing fees
|
|
|
|
|
691,889
|
|
|
693,322
|
|
Deferred tax liabilities, net
|
|
|
|
|
154,227
|
|
|
140,049
|
|
Other noncurrent liabilities
|
|
|
|
|
1,638
|
|
|
2,758
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
1,068,237
|
|
|
1,044,751
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
|
|
|
Common stock, $0.01 par value; authorized shares: 800,000; issued
and outstanding shares:
61,869 and 61,860 at March 31, 2017
and December 31, 2016, respectively
|
|
|
|
|
619
|
|
|
619
|
|
Additional paid-in capital
|
|
|
|
|
511,068
|
|
|
510,334
|
|
Retained earnings
|
|
|
|
|
45,162
|
|
|
16,815
|
|
|
|
|
|
|
|
|
|
Total shareholders’ equity
|
|
|
|
|
556,849
|
|
|
527,768
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity
|
|
|
|
$
|
1,625,086
|
|
$
|
1,572,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appendix I
Emerald Expositions Events, Inc.
Reconciliation of
Non-GAAP Financial Measures (Unaudited)
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
Twelve
Months Ended
March 31,
|
|
Twelve
Months Ended
December 31,
|
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Net income
|
|
|
|
$
|
28.3
|
|
$
|
28.2
|
|
$
|
22.3
|
|
$
|
22.2
|
|
Interest expense
|
|
|
|
|
9.6
|
|
|
13.0
|
|
|
48.0
|
|
|
51.4
|
|
Loss on extinguishment of debt
|
|
|
|
|
-
|
|
|
-
|
|
|
12.8
|
|
|
12.8
|
|
Income tax expense
|
|
|
|
|
18.5
|
|
|
18.4
|
|
|
14.2
|
|
|
14.1
|
|
Depreciation and amortization
|
|
|
|
|
10.6
|
|
|
9.9
|
|
|
40.7
|
|
|
40.0
|
|
Stock-based compensation
|
|
|
|
|
0.6
|
|
|
0.8
|
|
|
2.7
|
|
|
2.9
|
|
Deferred revenue adjustment
|
|
|
|
|
0.5
|
|
|
--
|
|
|
0.8
|
|
|
0.3
|
|
Management fee
|
|
|
|
|
0.2
|
|
|
0.2
|
|
|
0.8
|
|
|
0.8
|
|
Other items(1)
|
|
|
|
|
4.6
|
|
|
1.2
|
|
|
11.1
|
|
|
7.6
|
|
Adjusted EBITDA
|
|
|
|
$
|
72.9
|
|
$
|
71.7
|
|
$
|
153.4
|
|
$
|
152.1
|
|
Acquisitions(2)
|
|
|
|
|
|
|
|
|
8.8
|
|
|
6.1
|
|
Acquisition Adjusted EBITDA
|
|
|
|
|
|
|
|
$
|
162.2
|
|
$
|
158.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
|
2017
|
|
2016
|
|
Net cash provided by operating activities
|
|
|
|
$
|
28.8
|
|
$
|
29.9
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
|
0.3
|
|
|
0.4
|
|
Free Cash Flow
|
|
|
|
$
|
28.5
|
|
$
|
29.5
|
|
(1)
|
|
Other items for the three months ended March 31, 2017 included:
(i) $1.6 million in transaction costs in connection with certain
acquisition transactions that were completed or pending in 2017,
(ii) $2.6 million in legal, audit and consulting fees related to
the IPO and other related activities and (iii) $0.3 million in
transition costs. Other items for the three months ended March 31,
2016 included: (i) $0.9 million in transaction costs incurred in
connection with certain acquisition transactions that were pending
as well as acquisitions that were pursued but not completed in the
period and (ii) $0.3 million in transition costs, primarily
related to information technology and facility rental charges for
terminated leases. Other items for the twelve months ended March
31, 2017 included: (i) $4.7 million in transaction costs in
connection with certain acquisition transactions that were
completed or pending and those that were pursued but not completed
in the period, (ii) $3.9 million in legal, audit and consulting
fees related to the IPO and other sale activities and (iii) $2.4
million in transition costs, primarily related to information
technology and facility rental charges for terminated leases.
Other items for the twelve months ended December 31, 2016 included
(i) $4.0 million in transaction costs incurred in connection with
certain acquisition transactions that were completed or pending
and those that were pursued but not completed during 2016, (ii)
$1.3 million in legal and consulting fees related to this offering
and (iii) $2.3 million in transition costs, primarily related to
information technology and facility rental charges for terminated
leases.
|
|
|
|
|
|
(2)
|
|
Reflects the Adjusted EBITDA of acquisitions completed in 2016 and
to date in 2017 where the results of such acquisitions have not been
captured in our consolidated financial statements for the twelve
month period ended March 31, 2017.
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20170525005363/en/
Source: Emerald Expositions Events, Inc.