Emerald Holding, Inc. (EEX) Q2 2017 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Emerald Exposition's Second Quarter 2017 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Mr. Philip Evans, Chief Financial Officer. Please go ahead, sir.

Thank you, operator, and good morning, everyone. We appreciate your participation today in our second quarter 2017 earnings call. With me here in San Juan Capistrano, California is David Loechner, our President and CEO. As a reminder, a replay of this call will be available on the Investor Section of our website through midnight Eastern Time on August 10, 2017. 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 our final prospectus dated April 27, 2017. We do not undertake any duty to update such forward-looking statements. Additionally, during today's call, we'll discuss certain non-GAAP measures, which we believe can be useful in evaluating our performance. Presentation of additional information should not be considered in isolation or as a substitute for results prepared in accordance with U.S. GAAP. Reconciliation of these non-GAAP measures to the most comparable GAAP measure can be found in our earnings release. And at this point, I'll turn the call over to David.

Thank you, Phil and good morning. I'll start by briefly reviewing the highlights of our second quarter performance and will then provide some perspectives on the latest full year outlook that we communicated in our press release earlier today. I also want to spend a few moments to provide additional color on the acquisition of the SIA Snow Show that was completed in this quarter and on the relocation of our Outdoor Retailer shows to Denver, Colorado in 2018, which we announced a few weeks ago. After that, Phil will review our second quarter financial results in more detail and then we will open up the call for your questions. So for the second quarter, we delivered revenue growth of 14% compared to the second quarter of 2016. Approximately 1/3 from organic growth and 2/3 from acquisitions. Our adjusted EBITDA growth of 17% was driven by this strong revenue growth. In the quarter, we staged 14 trade shows and conferences, 10 of which repeated from 2016, 1 was a small launch and 3 were acquired events taking place for the first time under our ownership. Our best performing events in the quarter by revenues were the International Contemporary Furniture Fair, Hospitality Design Expo, and our COUTURE high-end jewelry show. All 3 shows demonstrated good revenue growth as expected. Our Internet Retailer Conference and Expo was broadly flat in revenue with growth from the trade show component offset by some softness in the conference component, which is generally less predictable as participants book their attendance close to the event's dates. We launched a small jewelry show in the quarter that fell modestly short of our expectations. This was the company's third new launch this year and we currently have 2 more new launches planned for the rest of the year. 3 of the brands we acquired last year staged events in the second quarter and in aggregate, these grew approximately 15% in revenues versus the prior year's performance. Clearly this robust growth is not captured in our quoted organic growth rate. However, we will benefit from the strong momentum in future years. We were particularly pleased with the results of the 2 larger events namely Digital Dealer Spring Conference and Expo and RFID Journal Conference and Expo. Our HOW Design Live conference in its second staging since our 2015 acquisition performed very well although we had hoped for an even bigger bounce back after last year's rather disappointing results. At this time, I'd like to provide our latest outlook for 2017's full year growth in total revenue, organic revenue, and adjusted EBITDA which continue to be within the previously committed guidance as outlined in our second quarter press release. We expect our reported and organic revenues to trend towards the lower end of the guidance ranges that we provided at the time we announced our first quarter results. In addition, we expect our adjusted EBITDA to trend just below the midpoint of the previously provided guidance range. The unusual and difficult to predict circumstances that affected several of our third quarter shows have largely firmed up and our communication on where we are tracking with our previously communicated guidance reflects the fact that the outcomes from these events are now largely known. Our Outdoor Retailer summer show as we've discussed previously has been impacted by a challenging political climate in Utah that emerged this year and while totally unrelated to the show, resulted in a partial boycott of our show by some exhibitors and attendees. Revenues for the show were towards the bottom end of our previous expectations. I attended our final show in Salt Lake City last week and it was a strong and vibrant event and passed without any further controversy. We're excited to be able to turn our attentions to planning for 2018 having recently agreed to stage the brand's shows in Denver starting next year. I'll provide some further color on this in a moment. The second issue I highlighted on the last call concern the amount of sellable space available for our New York Now summer show at the Javits Convention Center in New York during the convention center's renovation project. Originally we thought we would be able to replace a fair amount of the lost space to renovation by using and selling non-traditional space, but as we've moved through the sales cycle, potential customers that pushed back on more of the space that we earmarked for sale than anticipated. Accordingly for this show too, we expect to be at the lower end of our revenue expectations. New York Now will stage in 3 weeks and we currently have just as many exhibiting companies as last year's show as well as an increase in international participation which are both signs of a strong and extremely stable event. Earlier this week, I was in Las Vegas at our summer ASD show which finished yesterday. We had projected the show to be flat to modestly up versus 2016 in revenues. However, the show ended up being slightly down year-over-year. As I explained on the last earnings call, the summer show has the shorter sales cycle of the 2 ASD shows and this year, the cycle was also almost 15% shorter than in 2016 as our first quarter show staged 3 weeks later than the previous year. We had expected to be able to manage around this, but with longer conversations required with renewing companies partly due to some re-merchandising of the show floor, we simply ran out of time to bring in as much new business. We made good progress on site selling March 2018 and look forward to the substantially longer sales cycle for that show. The fourth show that I highlighted on our last call was Interbike, North America's leading B2B bicycle show and this show is trending to be slightly ahead of our previous expectations. At that time, I referred to the inventory adjustments that need to work their way through the system before the industry and the show can normalize. We have yet to see the second quarter industry numbers, but it seems as though it was slightly better for the quarter for the industry and we're optimistic that next year's show will be noticeably stronger helped by today's announced move to Reno, Nevada in 2018. In fact, several influential brands that have not been significantly represented at the show over the past few years have already indicated their interest in participating in next year's show. Reno was a past home to both Interbike and Outdoor Retailer for many years and we're looking forward to returning there with Interbike. The unusual year-over-year revenue declines in these 4 shows, Outdoor Retailer, New York Now, ASD, and Interbike will all be reported in our third quarter results and will adversely affect that quarter's organic growth rate. Total revenue growth for the third quarter will benefit however from first time contributions from 2 of our 2017 acquisitions CEDIA and InterDrone as well as from several events from our 2016 acquisitions including Collective shows and Digital Dealer. Just before our first earnings call at the end of May, we announced the acquisition of the SIA Snow Show, our second acquisition of an association-owned event this year. This was a significant coup as it brought together the two leading U.S. trade shows in the winter lifestyle and outdoor sports sectors, Outdoor Retailer and SIA and also opened up Denver to us as a potential venue for Outdoor Retailer, which was seeking a new home given the previously discussed issues in Utah. The negotiations to make this deal happen were complex and required us to make transitional concessions on booth pricing in order to be able to bring the 2 winter shows together once in for all. In addition to set the stage for growth and efficiency, we agreed to settle our remaining commitments with Salt Lake City to allow us to move in 2018 earlier than our contracts permitted and rationalize some of the Snow Show contracts. Our second quarter financial results included $8.5 million of one-time costs related to these actions which are highly unusual and a result of the incredibly unique combination of 2 long established shows and the unprecedented political issues we were facing in Utah. That said, we firmly believe that taking this opportunity to unite the 2 industry shows under the Outdoor Retailer plus Snow Show brand in a city that matches the industry's culture and ethos was the right decision and it will provide the best outcome for the industry, the show and Emerald in the coming years. Turning to M&A, so far this year we've closed 3 tuck-in acquisitions including the SIA show for a total purchase consideration of approximately $60 million. As I have previously indicated, the average multiple paid was consistent with our historical experience and all 3 deals were structured as asset acquisitions giving us attractive future tax benefits. We continue to maintain a robust pipeline of opportunities with several tuck-in deals currently active and at various stages of the acquisition process. We remain very optimistic about our ability to expand and diversify the Emerald portfolio through acquisitions. Now I'd like to turn the call over to Phil for a review of our financial results. Phil?

Thank you, David. The second quarter of the year is typically our third largest by revenue and last year contributed approximately 20% of our full year's revenues. For the second quarter of 2017, we reported revenues of $74.1 million compared to revenues of $65.0 million for the second quarter of 2016, an increase of approximately $9.1 million or 14%. The increase in revenues reflected organic growth of 4.6% and growth from acquisitions of 9.4%. Looking at the first half of the year in aggregate, our revenues increased almost 9% with organic growth of approximately 3.5% and the balance contributed by acquisitions. Cost of revenues of $21.6 million for the second quarter of 2017 increased by 10.2% or approximately $2.0 million from $19.6 million for the second quarter of 2016. This increase was mainly attributable to $1.4 million of incremental costs associated with acquisitions and a further $0.6 million of other cost increases in support of our organic revenue growth. Selling, general and administrative expense of $34.5 million for the second quarter of 2017 increased by 51.3% or approximately $11.7 million from $22.8 million for the second quarter of 2016. As David noted earlier, the 2017 second quarter expense included $8.5 million of one-time cost to settle various contractual commitments associated with the relocation of the Outdoor Retailers show from Salt Lake City to Denver and the integration of the SIA Snow Show. In addition, this quarter we incurred transaction and IPO related costs of $1.5 million, which was $0.8 million higher than the second quarter of 2016. Acquired businesses contributed approximately $1.4 million of incremental SG&A costs and the remaining $1.0 million mainly reflected higher compensation and marketing costs. The net loss for the second quarter of 2017 was $5.8 million, approximately $5.4 million higher than the second quarter of 2016. The variance was largely driven by the one-time settlement costs and increased transaction costs noted earlier and also $6.1 million of charges associated with the post IPO refinancing of the company's long-term loan and revolving credit facility, which is partly offset by lower interest expense on the company's debt as a result of the October 2016 and the recent refinancing exercises. Adjusted EBITDA for the quarter of $29.1 million increased approximately $4.3 million or 17.3% compared to $24.8 million for the second quarter of 2016. This robust increase reflected the period's strong revenue growth together with some modest margin improvement. Adjusted EBITDA for the 6 months of -- first 6 months of 2017 increased by $5.6 million or 5.8% to $102.0 million. The LTM over last 12 months adjusted EBITDA through June 30 was $157.7 million and the LTM acquisition adjusted EBITDA, which adds on the pro forma performance of acquisitions as if they'd be owned throughout the 12-month period, was $164.4 million. While we have the option to include the pro forma adjusted EBITDA of the SIA Snow Show in this LTM acquisition adjusted EBITDA, we conservatively decided not to do so as we do not expect the show to add incremental adjusted EBITDA in 2018. This is because the combined Outdoor Retailer plus Snow Show in January 2018 is not anticipated to equal the aggregate side -- size of the 2 separate 2017 shows and also because booth prices for the combined January 2018 show are lower than Outdoor Retailers prices for the last show, which is a necessary move to a single pricing structure for the combined show. Turning to earnings per share. The adjusted diluted EPS for the quarter was $0.18 and for the first half of the year was $0.75, an increase of 8.7% versus the first half of 2016. As you'll appreciate, we have an asset light business model and our CapEx in the quarter was only $0.3 million, down from $0.6 million in the same quarter last year. Free cash flow, which you will recall we defined as net cash provided by operating activities less CapEx, was $20.6 million for the quarter, which compared with $39.5 million for the second quarter last year. 2 main reasons for this reduction were the higher cash flows related to the one-time cost this quarter, which amounted to an additional $8.5 million or so, and also the adverse impact on the quarter's cash flows of the decline in revenues of the third quarter shows we've previously highlighted. The Emerald Board has approved a $0.07 a share dividend for the third quarter, which amounts to approximately $5.1 million in aggregate and that will be paid at the end of August to shareholders of record on August 17. Our leverage ratio with net debt of approximately $555 million and acquisition adjusted EBITDA of $164.4 million for the 12 months ended June 30 was approximately 3.4x. As we outlined to you in the IPO process and have subsequently reaffirmed, our target leverage range is 2 to 3x acquisition adjusted EBITDA. That said, we are perfectly comfortable with operating slightly above this range when it makes sense to do so. Finally, let me expand on the updated full-year outlook, which David reviewed earlier. At this point in the year, we have over 98% of our 2017 projected full-year booth revenue contracted, including 94% of the projected revenues of the shows that have yet to stage. These percentages are in line with prior year's and give us very good visibility for the full year's likely outcome especially for this largest revenue stream, booth revenues. Clearly as we've either held or are fast approaching the several Q3 shows that we highlighted, it's very difficult to predict due to the unusual circumstances. We now have much greater line of sight to that outlook and as a result, to the company's full-year outlook. Looking at our free cash flow. We don't plan on providing projections each quarter. But that said, given the large one-time items and the third quarter show challenges that have affected our cash flows in the second quarter, I'd like to confirm that our current estimates suggest full-year free cash flow slightly above $100 million. I now hand the call back to David for his concluding remarks.

Thanks, Phil. So, let me provide some concluding remarks. While our year-to-date performance has been very solid, I'm obviously disappointed in our expected organic performance this year and the extent to which that has been so significantly impacted by unusual issues that were largely outside of our control. That said, there's a lot to be proud of. 1, we have successfully added 3 high quality trade shows to the portfolio so far this year through acquisition. 2, we have put the political issues that affected Outdoor Retailer behind us and have charted a course to a really great long-term outcome for the industry, the show [ held ]. 3, we worked through ASD's substantially shorter summer sales cycle and restructured our future sales efforts based on our learnings. 4, we've managed our exhibitors through the capacity reduction at the Javits in New York and won't have to deal with any future space issues during the remainder of the renovation project. 5, we have successfully relocated the [indiscernible] show to what appears to be a significantly more attractive venue for that industry. And lastly, we continue to see good organic growth across much of the portfolio as evidenced by our solid second quarter performance and see numerous opportunities to add to that growth through further tuck-in acquisitions. Emerald has a very capable and experienced management team and a dedicated employee base that has rallied strongly to try to offset the financial impact of this year's unprecedented events. We are optimistic about the future growth potential of our portfolio and the enduring strength of our brands in the respective markets. With that, I'd like to ask the operator to open up the line for any questions.

[Operator Instructions] Our first question comes from David Chu with Bank of America.

If I can just start with a housekeeping question. Can you just provide revenue by the 3 segments for the quarter or maybe the growth rates if it's easier?

Because you asked it on the last call so I knew you were going to ask it again. With $74 million growth there; $59 million to trade shows, $8 million for other events and $7 million for other marketing services.

Okay, great. Thank you and then just around the Javits Center I believe construction is expected to finish in like 2021. So will you be able to expand square footage like starting next year as sections get completed as part of the construction or is this usable space largely consistent until like 2021?

Yes -- no they won't be offering any new usable space until the construction is complete. That being said though as demand continues for New York Now and as people get comfortable using some of the ancillary space, there is an opportunity for us to use if we can convince companies to take it. Sometimes when you offer space for the very first time, the first customer going into that space is the most hesitant, but if somebody uses it, the ancillary space once and is successful there, they're more likely to come back and be used again. So there is some potential although we are a bit limited to the space they have available. There is still some ancillary space that people will have to get comfortable using, but it's mostly the same square footage that we'll have available next summer that we have this summer.

Got it and just lastly, you highlighted 5 new shows for the year. Curious how much in revenue contribution should we expect and then just how much did new shows contribute in 2016?

So in both years they contribute -- so our forecast for 2017 is about 0.5% revenue growth from those 5 and it was a similar number in 2016.

Thank you. Our next question comes from Anj Singh with Credit Suisse.

Hi, this is actually Jeff standing in for Anj. First question is how did organic growth in Q2 come out versus what you were expecting and then maybe what drove some of the softness in Q2 revenue versus the expectations?

So that's -- so 4.5% organic growth was pretty much in line with our expectations. I guess if you go back to when we started the year what we have expected out of Q2, really the only places where there was any kind of softness was really in the conference businesses. The HOW Design Live business as David said in his remarks grew nicely double digit growth, but really not quite as high as we expected. And then the other place would have been the IRCE, the Internet Retailer Conference where the conference revenues from that event weren't the size we kind of originally expected and as we've said about conferences, they are a little bit less easily predicted because quite a lot of the revenue occurs on site or over the last few weeks as people register for the conferences.

The expo is a slight bit larger at IRCE, really the quarter performance was kind of in line with our thinking around these strong shows.

Okay, got it. And then how much concern do you have about regaining all of the exhibitors that you lost for Outdoor Retailer as it moves to Denver next year. Maybe if you could talk about that and what you've experienced historically when you've moved shows to different cities?

Typically a move to a different city isn't a material driver in companies participating are not participating and I think the boycott was a highly unusual issue surrounding the Outdoor show. So we'll be in discussions with every single company. There's never a guarantee of any company, but the high likelihood that the company's boycotting would come back is there. We'll approach each one, one at a time, but quite frankly moving to Denver is going to be a positive thing to discuss around the market. So we're not anticipating any material declines relative to the move.

Okay, great and then one last one from me. Can you talk about M&A expectations for next year?

So I mean just generally, I mean we've got a great pipeline, we've got things in the pipeline today that we're actively working that we feel we'll continue to carry forward with our kind of tuck-in strategy for the remainder of this year and I'm sure some of that discussion will trickle over to next year and we have a still a robust pipeline with kind of a huge market as we've talked about in the past, quite a few actionable targets that we'll be discussing. So I don't see a change of strategy. I think we've said, we've typically done 4 to 6 kind of tuck-in acquisitions. We still see that on the horizon for next year and still probably more to come this year.

Thank you. Our next question comes from Gary Bisbee with RBC.

So I guess the first question, you've been clear in framing out the challenges you're facing this year, when we think to next year, what's reasonable in terms of expectations for a bounce back. I guess it would seem from your statements that you clearly expect that at Outdoor Retailer, but the New York Now issue is maybe it's flat, but not a drag. On the other 2, the ASD and the Interbike, what's a reasonable expectation and really what I'm wondering is this just do we lose the drag on growth next year or is it reasonable to think that we have somewhat above trend growth as you get bounced back in some of these problem areas?

So you may not of heard because I think we just announced it this morning, but Interbike is moving to Reno from it's home in Las Vegas. We're adding 2 days of a consumer festival and a demonstration day ahead of the trade show. So we're accelerating the format for the industry and the industry has been very receptive to the move and bringing new elements to the show. So we're very optimistic. We're bringing not just a move of the show to another city, but new elements to Interbike to kind of reset and freshen that overall market experience. So we're very optimistic. In fact, we've talked to companies that haven't participated in Interbike in the past and we've gotten interest out of those companies with this new format. So we're optimistic about Interbike having a much stronger show next year than we had this year. I think you nailed New York Now insofar as the facility isn't going to get any bigger next year and we definitely don't see that as a drag on the business following again next year. For ASD, we're reorganizing a bit how our sales staff go to market and spending more time talking to new companies with our more senior staff. We have a much longer lead time coming into the business. We actually have a longer cycle next summer as well. So a year from now, plus we've had learnings in terms of how to attack a shorter cycle. It's still shorter than we would like, but it's longer than it was this year. So between a lengthened cycle, between now and ASD March and next summer, we're optimistic that A, it won't be a drain and B we're going to get the growth out of the business that we know the market has it in it. And also we're continuing to add categories around that choice. As you recall, that's a show with a tremendous number of categories and there's always ebb and flows in categories but we're attacking more new categories in this business. So again as we said from the beginning we believe this business has it in it and with the timeline and the kind of restructure around our sales staff, we believe ASD is going to have the year that we kind of forecasted on this year.

Okay and then just more big picture, you've talked about since the separation from Nielsen, investing more in some of the central functions around marketing and around database of attendees and exhibitors and mining that for opportunities. Can you give us a sense as to where you are with those processes, is this stuff helping growth now or are we still real early in a lot of those corporate investments you've made and should think that it's the next few years that, that begins to impact the business.

I think each year will see some impact as we get into this, but with sales force and rolling that out across the organization, it's going to take '18 for that to completely integrate with the business part out which is the back end business of generating leads. We've developed kind of more of a formalized marketing operations process around our marketing and we're now discussing amongst our team kind of a more formalized sales operations function and role within this business kind of clearly understanding the metrics, the dashboard, the analytics kind of common themes around pricing and our CRM tool, best practices across the organization. So I suspect that will roll out throughout '18 and we'll see a bigger lift against that in '19. We definitely have our eye on it. I think it's kind of a rolling positive as we look into '18, but probably will have a greater effect on our '19 business.

Our next question comes from Kevin McVeigh with Deutsche Bank.

Is there any type of business insurance disruption against the events that happened in Colorado?

So, all of our events carry business interruption insurance should there be kind of a force majeure event on any one of the businesses that we recover kind of the revenue and profit that we would have otherwise seen. In my 30 plus years, we may have used it 2 or 3 or maybe 4 times across our shows, but we're fully covered across all our shows. I'm not quite sure.

Kevin was referring to whether we have any recourse for what just happened on Outdoor Retailer and the answer is no.

So, that's not a typical business interruption. That's a choice that the industry kind of leaned on. However, we learned from that and we put in some greater contractual language across our business that helps ensure that we've run across. I mean once you run across something, again in 30 plus years I've never seen it, but we've kind of learned from that and put better language in our contracts that help us deal with that should that same situation arise in Colorado.

And then just it looks like the EBITDA was a bit better relative to where the revenue came in. Anything that kind of drove that outperformance?

I mean the -- the acquisitions had slightly higher than average contributions in this quarter so that was helpful. But it's difficult to -- when we add in acquisitions like this, it's difficult to kind of look precisely at the margins of those because at the same time we're sometimes adding some central resource, which doesn't get allocated. So, I'd say that probably the organic growth in EBITDA was probably pretty similar to the organic revenue growth and then the acquisitions gave us a little bit of a boost.

Our next question comes from Jeff Meuler with Baird.

Can you give us any sense in terms of roughly how much exhibitor and/or attendee overlap there is typically been between Outdoor Retailer and the Snow Show?

We'll get more specific internally as we go to market, but about 28% of the companies that have exhibited at SIA have also exhibited at Outdoor Retailer. A smaller percentage of the attendees overlap between the 2 and in fact kind of reminding you of why we put these together is these 2 businesses are going to create a much more powerful network effect kind of increasing the attendee base across a broader base of exhibiting companies. It also increases the exhibitor company base for all of the attendees that might cross over. This is going to create a greater ROI for the business. So although there is a crossover, some of the companies didn't show the same product between the 2 shows. Some companies would show more technical gear at the outdoor show and more ski and snowboard related apparel at the SIA Show. So although we're going to see bit of an increase in volume across our business, right, we're being affected a bit on the yield of bringing these 2 long time shows together. It's going to be a powerful show for the market as we come together.

Okay. And then I guess the calculus changes when you're acquiring the Snow Show. But the $8.5 million was higher than I would have guessed, was it -- just to clarify, was it only contracted for 2018 or had you -- did you have some things that were contracted beyond 2018 that go into that buyout?

So, we were contracted to produce 2 shows in Salt Lake City in 2018. And so in order to be able to move in 2018 to them, we had to settle with various parties there which would have included the convention center and hotels and other bodies where we have contracts. And then the other piece of this expense in Q2 was that in order to operate the combined OR and SIA Show in 2018 as we'd like, we needed to terminate certain agreements that SIA had in place and so some of those we've done and some of those we still need to do. And so we kind of have a -- we can use Emerald's suppliers and do things in the way that we want to do out of the gate because this is clearly a very important year moving to a 3 show format, integrating 2 shows in a new location and so we need all the pieces to be in place so that we can do what we do.

Okay. That make sense. And then just any sense on the 3 shows that you acquired, the revenue 15% this year over last year's show performance. Are those shows that were already growing at a good rate or are those shows that you meaningfully improved their growth rate by doing things the Emerald way and to the extent to which you can pinpoint on specific things that you did differently? That would be helpful.

So let me start by reminding you that look, we look and have a very kind of stringent criteria around the shows that we acquire and these were market leading growing shows in strong end markets to begin with. So, that was an important kind of criteria for us. We generally get our impact in the second year and onwards. The first year, there's some changes we're able to initiate depending on where they are in their cycle. But mostly it's going to take the second year and sometimes into the third year where are professionalizing sales approach, our pricing discipline, attacking additional revenue streams, kind of the tracking, reporting, the analytics. I mean there's a bit of a small immediate effect we can have, but it's not a material effect. So, these are good businesses we're acquiring and we just see that as a great foundation for making them go from good to great.

Usually -- so I'll just add on to that. Usually when we acquire the show; the venue, the suppliers, the timing; all of those things are already locked in and there's limited amount we can do to apply our scale, our best practices, all the things that kind of we bring to the table. And so as Dave said, by the time we get some -- to some extent in year 2 we can do that and then by the time we've determined those things and being involved, that's when kind of it kicks in our cost savings and other kind of benefits that we bring to the table.

Our next question comes from Manav Patnaik with Barclays.

This is Ryan filling in for Manav. So on the combination of Snow Show and Outdoor Retailer. So I think prior to this deal, you had talked about the inorganic step up in '18 as a result of adding the third show. So, is it safe to say that that step-up is now going to be replaced via this acquisition?

That's effectively the case. I mean we're expecting that the three OR shows in 2018, the January one being a combined show, will be larger than -- at least as large as the previous 2 Outdoor Retailer shows. But we've effectively replaced what was previously a launch plan with the addition of the Outdoor -- the Snow Show. And the reason why it isn't necessarily additive and why we decided to be conservative on not assuming that SIA's profits would be incremental is because we are combining the shows and so there's a little bit of kind of overlap there. We're in a new venue where we haven't figured out exactly how to maximize all the space in the venue and we have had, as David said, in order to bring the shows together, we had to make some transitional concessions on pricing that will kind of reduce the [ risk ] from the winter shows. I mean having said all that, this was a very kind of unique opportunity. There were some very unusual financial parameters that we were dealing with here. But it's a solidified strategy to move to the 3-show format, it solved the venue issue that opened up and allowed us to use Denver as a venue, which is very popular with the industry and kind of meets the needs of the industry and it strengthens the brand and the portfolio. And at the time, we think this is going to be kind of the best thing for the industry, for the show and for Emerald.

But, that's just relative to the organic growth around the OR 3-show format. The full 2018 business hasn't been rolled out yet. There's great opportunity across the whole portfolio for organic growth and that's just relative to SIA.

We're still at early days really of putting a lot of detail around the 3 of our shows. As you can imagine when you introduce a new show, we're still working with the market to figure out how our people will work in that 3 show environment and we're trying to be conservative here and we'll be marching to try and grow more than we're maybe indicating here.

Got it and then I guess just on that pricing point. I mean you mentioned that you're moving to a more desirable city, you're combining 2 shows that a lot of your attendees and exhibitors find pretty attractive and you talk about the power of the combination of the 2. So I guess can you help me understand why exactly there is pricing concessions, is it just the moving of locations, is it just to make sure it's full for the first year. It just seems like it would have actually a lot more power to do the opposite?

So you're not always dealing in complete market forces. These are 2 different shows and SIA was owned by an association and had a membership base of which part of their interest was to ensure that they had a smooth transition of bringing these businesses together. And although maybe market forces would say that's what somebody can do, this is the right thing to do to bring these 2 markets together carefully and considerately to ensure that they have the greater ROI in coming together. Look, once that market proves that that's the right thing to operate, over time I'm sure market forces will dictate what the right thing to do is, but this made sense for these 2 businesses to come together and it was part of our kind of important dialog between the association to ensure it had a smooth transition coming together.

[Operator Instructions] Our next question comes from Peter Christiansen with Citibank.

So most of my questions I think have been answered, but I just wanted to get a high level view of competition for deals. You had a pretty sizable deal in this space in the last couple of weeks with [ PE shop ] taking out Clarion Events and now that you're public, have you seen interest for deals increase or have you seen the competition increase and also how you're thinking about multiples going forward?

Maybe I can start, I mean look from our vantage point, dealing, we're not exclusively only looking within the U.S. but that's primarily our shopping zone. This is a highly fragmented business. There's still 9,000 trade shows that occur every year in the U.S. and we're not seeing any change in the acquisition price multiples that we're running up against. I think Clarion, [ Advanstar ] Hanley Wood, some of the bigger ones, the platform companies you know you're going to see a bit more price sensitivity around those because they're more competitive and usually more in an auction format. The tuck-in acquisitions we're doing, we're seeing are consistent across the board in fact like I said, we've not only made several acquisitions, we have several acquisitions in the pipeline and they're all staying or running within the traditional framework that we've seen in the past. So we're not seeing any pressure in the U.S. at all.

Do you believe the platforms are going to become more aggressive in acquiring or taking some of the fragmentation out of the market?

Well again it's a huge market, but these are very -- UBM and [ Formarid ] they are very big companies and to buy a single trade show, it's harder for that to move the needle on their individual business, 2 or 3 or 4 of these for our business moves the needle. I'm not going to say, they are not active or interested in the U.S. but we operate in different industries and end markets and it's rare that we see them on the single tuck-in acquisitions.

Thank you. I would like to turn the floor back over to David Loechner for closing comments.

Okay, well listen, again, thank you for taking the time this afternoon and I just want to tell everybody have a great day and look forward to talking in the future.

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.