Emerald Expositions Events Inc.’s second quarter benefited from Outdoor Retailer Summer Market’s calendar shift into June from July, but revenue for the show was “flat,” the company said Thursday.

Here are the company’s Q2 highlights

  • Revenues increased 31.4 percent to $103 million, compared to $78.4 million for second quarter 2018
  • Net income increased 93.2 percent to $11.4 million, compared to $5.9 million for second quarter 2018
  • Net cash provided by operating activities decreased 16 percent to $28.4 million, compared to $33.8 million for second quarter 2018
  • Adjusted EBITDA, a non-GAAP measure, decreased 15.7 percent to $41.2 million, compared to $48.9 million for second quarter 2018
  • Adjusted Net Income, a non-GAAP measure, decreased 32.6 percent to $22.7 million, compared to $33.7 million for second quarter 2018
  • Free Cash Flow, a non-GAAP measure, decreased 12 percent to $27.8 million, compared to $31.6 million for second quarter 2018

“Our results for the quarter were slightly below our expectations, including a continuation of some of the same trends driving the performance of several of our trade show events earlier in the year,” said Sally Shankland, Emerald’s president and CEO. “While our revised guidance reflects our latest expectation for show-level performance this year, largely driven by current expectations for our second half performance, as well as additional investment being made in the business, I am optimistic about the future and confident that we can improve our execution and change the trajectory of the business, starting with several immediate actions.”

hankland continued, “In my first sixty days, I have met with our senior leadership, visited our offices across the country, and attended several of our shows. I have quickly come to realize that industry trends, our market-specific knowledge and our brands are strong. However, we must quickly optimize our organizational structure, talent and execution; re-energize our culture; and increase our use of technology and data to ensure we are delivering value to our customers. We also need to evaluate our cost structure and the returns we are achieving on our investments. This is all within our control and I have begun taking steps to address these issues. We recently announced new senior leadership, restructured Emerald’s organization, and started several data and technology initiatives designed to improve our organizational and marketing effectiveness. Some of these changes will take time to translate into our results, but I am excited about the opportunity that lies ahead and highly confident that we can solve our challenges and drive sustainable organic growth, as well as continuing to deliver strong free cash flows.”

“Having spent a majority of my career in the events industry, I believe, now more than ever, in the strong fundamentals that drive our business. Trade shows, conferences and other face-to-face events provide a critical medium for conducting commerce, sharing information, networking and the discovery of new and differentiated products and services,” continued Shankland. “I made the decision to lead Emerald because I believe the company’s portfolio is well-positioned for future growth in this attractive industry.”

“Several of our key shows delivered positive results in the second quarter, including HD Expo and COUTURE,” stated Phil Evans, CFO. “However, results from other key shows, including IRCE and ICFF, were below expectations due to lower conference and booth sales. The resulting revenue impact, after giving effect to show timing differences, caused our second quarter Adjusted EBITDA to be modestly lower than we anticipated. This has been reflected in our full-year guidance update, though the revised outlook is largely driven by the current expectations for certain events and Other Marketing Services products in the second half of the year. Looking at both our projected performance for the year versus 2018 and our change in expectations for 2019 since our last earnings call, we have clearly not been effective in reducing our costs as quickly as revenues have softened. This fact, together with the additional brand investments and increased overheads that we added this year, has magnified the effect of our revenue shortfalls on our Adjusted EBITDA. That said, as we address our internal challenges, we expect our long-term growth and cash generation model will continue to be robust.”

Financial & Operational Results

For the second quarter of 2019, Emerald reported revenues of $103 million compared to revenues of $78.4 million for the second quarter of 2018, an increase of $24.6 million, or 31.4 percent. The increase reflected a net $23.7 million addition from several show scheduling differences in the second quarter of 2019, most notably Outdoor Retailer Summer Market and GlobalShop both staging in the second quarter of 2019, versus the third and first quarters of 2018, respectively. Acquisitions made in 2018 contributed $3.6 million of revenue in the second quarter of 2019. After adjusting organic revenues for the second quarters of each of 2018 and 2019 for the show timing differences discussed above, organic revenues for the second quarter of 2019 were down $3.7 million, or 3.6 percent, as compared to the prior year quarter.

The company’s HD Expo and COUTURE shows increased revenues by low- to mid-single digit percentages, while Outdoor Retailer Summer Market was flat in revenues. ICFF experienced a double-digit percentage revenue decline, primarily due to softness from European exhibitors, partly attributable to Brexit uncertainty, and an atypical date conflict with HD Expo. Emerald also experienced a double-digit percentage revenue decline in IRCE and some moderate softness in the GlobalShop show, which co-located for the first time under the RetailX brand. Emerald launched three new events in the quarter, the most successful being CPMG’s C-StorePoint hosted buyer event for the convenience store sector. The company’s Other Marketing Services revenues declined by a double-digit percentage versus the same quarter last year, excluding the contribution of 2018 acquisitions.

Cost of Revenues of $32.3 million for the second quarter of 2019 increased by 32.4 percent, or $7.9 million, from $24.4 million for the second quarter of 2018. This increase reflected $0.9 million of incremental costs related to 2018 acquisitions and a net $5.5 million increase attributable to the show scheduling differences discussed above. The remaining $1.5 million increase in cost of revenues mainly reflected the incremental costs of the company’s new event launches.

Selling, General & Administrative Expense (“SG&A”) of $33.1 million for the second quarter of 2019 increased by 18.2 percent, or $5.1 million, from $28 million for the second quarter of 2018. The increase in SG&A for the second quarter of 2019 reflected approximately $2.6 million in incremental costs from 2018 acquisitions, $0.8 million attributable to show scheduling differences, $1.2 million in higher stock-based compensation and $1.3 million in other expense increases, offset by a reduction of $0.8 million in non-recurring other items.

Net income of $11.4 million for the second quarter of 2019 increased by 93.2 percent, or $5.5 million, from $5.9 million for the second quarter of 2018. The key drivers of the increase were increased revenues due to show scheduling differences, partially offset by lower revenues in the remainder of the portfolio and increased expenses described above.

For the second quarter of 2019, Adjusted EBITDA was $41.2 million, compared to $48.9 million for the second quarter of 2018, after adjusting for the show scheduling differences described above. The decrease in Adjusted EBITDA of $7.7 million, or 15.7 percent, was mainly driven by the combined effect of lower organic revenues, incremental investments in the events that took place in the quarter and in marketing costs incurred for future events.

For a discussion of the company’s presentation of Adjusted EBITDA, which is a non-GAAP measure, see below under the heading “Non-GAAP Financial Information.” For a reconciliation of Adjusted EBITDA to net income see Appendix I attached hereto.

Cash Flow

Net cash provided by operating activities decreased by $5.4 million to $28.4 million in the second quarter of 2019, compared to $33.8 million in the second quarter of 2018, largely reflecting the company’s operating performance in the quarter.

Capital expenditures were $0.6 million for the second quarter of 2019, compared to $2.2 million for the second quarter of 2018.

Free Cash Flow, which the company defines as net cash provided by operating activities less capital expenditures, was $27.8 million in the second quarter of 2019, compared to $31.6 million in the second quarter of 2018.

For a discussion of our presentation of Free Cash Flow, which is a non-GAAP measure, 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.

Liquidity and Financial Position

As of June 30, 2019, Emerald’s cash and cash equivalents were $12.4 million and gross debt was $538.7 million, resulting in net debt (gross debt less cash and cash equivalents) of $526.3 million.

Dividend

On July 30, 2019, the Board of Directors approved the payment of a cash dividend of $0.075 per share for the quarter ending September 30, 2019 to holders of the company’s common stock. The dividend is expected to be paid on or about August 27, 2019 to stockholders of record on August 13, 2019.

Share Repurchase Program

The Board of Directors authorized and approved a new share repurchase program, which will become effective no sooner than the company’s next open trading window on or after August 5, 2019, pursuant to which the company may, from time to time, purchase shares of its common stock for an aggregate repurchase price not to exceed $30 million through open market purchases (either with or without a 10b5-1 plan), block transactions, privately negotiated purchases or otherwise, through and including July 31, 2020, subject to early termination or extension by the Board. The new share repurchase program does not obligate the company to purchase any shares and may be suspended or discontinued at any time without notice. The company anticipates funding any share repurchases from its cash on hand and permitted borrowings under the company’s credit facilities. The timing and amount of any shares repurchased under the new share repurchase program will depend on a variety of factors, including available liquidity, general market and economic conditions, regulatory requirements, capital structure optimization, valuation metrics and other factors.

Outlook (forward-looking statements) and Key Assumptions

The company’s outlook for the year ending December 31, 2019 has been updated to reflect the latest expectations for the full year, which incorporates both anticipated show-level performance for the remainder of the year as well as already executed and planned investment in people and capabilities. Emerald management now expects the financial performance metrics outlined below:

  • Total revenue decline of 3.1 percent to 4.9 percent, or revenue in a range of approximately $362 million to $369 million
  • Organic revenue decline of 3.9 percent to 5.6 percent
  • Adjusted EBITDA in the range of $118 million to $125 million, representing a decrease in the range of 23.3 percent to 27.6 percent compared to 2018
  • Adjusted Net Income in the range of $64 million to $69 million, representing a decrease in the range of 31.1 percent to 36.1 percent compared to 2018
  • Adjusted Diluted EPS in the range of $0.95 to $0.88, representing a decrease in the range of 28.6 percent to 33.8 percent compared to 2018
  • Free Cash Flow in the range of $60 million to $65 million

The above outlook does not incorporate the impact of any acquisitions that Emerald may close in 2019 or other unforeseen developments. See discussion of non-GAAP financial measures at the end of this release.