Emerald Holding, Inc. (EEX) Q3 2017 Earnings Report, Transcript and Summary

Good morning ladies and gentlemen, and welcome to the Emerald Expositions Third Quarter 2017 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. [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 third quarter 2017 earnings call. With me here in San Juan Capistrano, California is David Loechner, our President and Chief Executive Officer. As a reminder, a replay of this call will be available on the Investor section of our website through 11:59 p.m. Eastern Time on November 9, 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 this 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. With that, I'll turn the call over to David.

Thank you, Phil. In the third quarter, we produced 14 trade shows in total, including 5 for the first time that came with acquisitions, that we made either late last year or earlier this year. Reported revenues for the quarter were flat compared to the third quarter of 2016, with an organic revenue decline of approximately 8%. Revenues were negatively impacted by approximately 7% as a result of Hurricane Irma, offset by acquisition growth of approximately 14%, and a 1% scheduling benefit. Hurricane Irma had no effect on adjusted EBITDA as we have insurance for these type of occurrences. We will explain the accounting treatment of the insurance proceeds shortly. As we have noted on prior earnings call, several of our third quarter events faced unusual and unrelated circumstances, and declined year-over-year entirely in line with the expectations that we shared at the time of our second quarter earnings call. I'll review the performance in more detail in a moment. Additionally, 2 of our shows Surf Expo and ISS Orlando were impacted by Hurricane Irma and although our cancellation insurance policy cover these effects, the accounting treatment for the insurance proceeds required us to record those amounts as other income, as opposed to revenue. Even though there was no impact on earnings relative to what they would have been [ had the stage ] the events unfold. Yet, we have been able to record the full revenues from these 2 shows as opposed to treating the insurance proceeds as other income. Our revenues would have been approximately $7 million higher than last year and the quarter's revenue growth would have been approximately 6.5%. Lastly, we had a strong contribution from acquisitions in the quarter, including 4 shows for CEDIA Expo and InterDrone, both acquired in the first quarter of this year, and also several shows under our Collective and Digital Dealer brands. Overall, these acquired shows grew revenues by a mid-single digit percentage versus their prior additions, much as we had expected. The quarter's adjusted EBITDA of $ 54.9 million declined by 1.8% versus 2016, and as I previously noted, there was no financial impact on adjusted EBITDA from the disruption to our 2 Florida shows. I would now like to provide a brief update on our 4 largest shows in the quarter, which we have discussed in detail on previous calls. First, our Outdoor Retailer Summer Market show, which took place for the last time in Salt Lake City in July. We saw revenues declined by low double-digit percentage, while the show was smaller than prior year with a number of brands boycotting the show to protest the Utah Governor's stance on certain public lands. Overall, we had another strong and vibrant show. Looking forward, the Outdoor Retailer team and the Outdoor Industry are now focused on the next show in January and our new home Denver, Colorado, which I will discuss in more detail in a moment. The second is ASD, which staged at the end of July through the beginning of August. As we have discussed, our sales efforts on this show were disrupted by the shorter than normal selling cycle and some reconfiguration in the exhibit floor, which also prolonged the renewal sales conversations. As a result, revenues for the show declined in the low single-digit range. The third is New York Now, which takes place in August and declined due to the renovation work at the New York Javits Center that commenced earlier this year, and which reduced the amount of available exhibit space at the facility. Revenues for the show declined by a low to mid-single digit percentage versus the 2016 Summer Show. Lastly, let me talk about Interbike, the leading B2B show for the bike industry that takes place in September, each year. Against the backdrop of an extremely difficult specialty bike retail market in the U.S. and with some increased industry fatigue with the Las Vegas venue. The show size shrunk by nearly a third. In early August, we announced that the show will be part of a newly created Interbike Market Week in Reno Tahoe in 2018, with a consumer festival and enhanced demonstration days preceding the trade show. We're looking forward to a strong first event in the new venue, next year. Overall, the financial performance of these shows in the quarter was in aggregate slightly favorable to our expectations at the time of our second quarter earnings call. Let me now address the unusual weather events that we experienced in August and September, most notably Hurricanes Harvey and Irma. I am happy to report that we had only a few employees that were affected by these storms, and they and their families were all safe and unharmed. With respect to Hurricane Harvey. We don't conduct a lot of business in Texas, and only a small percentage of our exhibitors and attendees come from the state. As a result, we have seen a very modest impact on attendance at our subsequent shows. Our Imprinted Sportswear Fort Worth show that took place in the third week of September was down slightly in attendance. But were still very well received by exhibitors and attendees alike. Looking forward, we have no further events in Texas this year. Hurricane Irma which first made landfall in Florida on September 10 had a greater but still limited effect on our business. Our Surf Expo Summer show and our co-located Imprinted Sportswear show opened at the Orange County Convention Center in Orlando on September 7, and we decided to close the 2 events after just 1 day, so that exhibitors, attendees and our staff could evacuate safely. In the 41 years that Surf Expo has been holding their show, this was the first time that it had to alter the schedule or close the show due to weather conditions. Our next show in Florida after Irma was ICFF Miami, which took place on October 3 and October 4, so not actually in the third quarter. As the show's name indicates, this event was scheduled to take place in Miami. However, the Miami Beach Convention Center was not able to reopen in time for us to stage the event there, and we moved the show up the coast of Fort Lauderdale on short notice. This show, originally launched in 2016 and was only in its second year. I'm pleased to say, it grew nicely over the first year. It was well received by the market, despite the effects of the storm and we're optimistic about its future prospects. The only other event that we have in Florida this year is the Healthcare Design Expo and Conference at the Gaylord Palms in Orlando in mid-November and we expect that event to be unaffected. For the avoidance of doubt, we don't have any operations or stage any events in Puerto Rico or any parts of the Caribbean. As we have noted in the past, in addition to regular business insurance policies, we carry events cancellation insurance for all of our shows. This coverage is no deductible and broadly covers the losses we incur when events are canceled, shortened, moved or otherwise affected by force majeure situations. In the case of Hurricane Irma, we were able to reimburse the vast majority of the booth fees and sponsorship fees back to our customers for Surf Expo, and the Imprinted Sportswear show. And this cost was reimbursed by the insurance carrier. At this point, I would like to make a few comments about the terrible events that took place at the Concert festival in Las Vegas on October 1. Obviously, we have very close ties with the city and have many great partners and friends there. We've included them and all those affected in our thoughts and prayers, since that day. We take security at our events extremely seriously and are working collaboratively with other large trade show companies to address any security issues with the major venues and to spread best practices. Our partners at the Las Vegas Convention and Visitor Authority have advised us after experiencing a slight decline in the days after the shooting, leisure business have since rebounded. They tell us that the recent trade shows have actually seen an increase of visitors and that the city is generally seeing a return to normality in both leisure and business sales which is great news. Let me switch gears and say a few words about Outdoor Retailer and the Snow Show. As you will recall, we acquired the Snow Show in May of this year. And our first combined show will be at the end of January 2018. The acquisition of the Snow Show brought us a number of important benefits including substantially reducing the operating risk of our transition to a 3 show cycle. Opening up Denver as a venue for Outdoor Retailer and bringing together the 2 U.S. trade shows that were clear leaders in the winter lifestyle and outdoor sports sectors. In order to make this deal happen, we had to make short-term transitional concessions on booth pricing in our winter shows starting in 2018, which together with the cost of hosting 3 events, and additional marketing expenses means that our profit margin on a show will be lower in 2018 than 2017. Going forward, beyond 2018, we expect to be able to increase the margin year-over-year as we have done in the past. Importantly, our January 2018, Outdoor Retailer plus Snow Show is effectively sold out already and we have seen a number of brands that boycotted the summer 2017 show in Salt Lake City including Patagonia return for the January '18 show, which reinforces the strength and importance of this franchise. We're highly confident that acquiring the Snow Show was the right long-term strategic decision for Emerald even if the 3 show cycle including the benefits of the acquisition is expected to be only slightly accretive to adjusted EBITDA in the short-term. Before I hand the call back over to Phil, let me say a few words about M&A. While we did not close any acquisitions during the third quarter, we have been working diligently on quite a number of near and medium-term opportunities and I'm optimistic that we will close one or more transactions before the end of the year. It is also worth noting that we reviewed and declined to pursue more than a dozen potential acquisitions in the third quarter because the assets failed to meet our acquisition criteria. While M&A is an important component of our growth strategy, we will remain disciplined acquirers. Now, I'd like to turn the call over to Phil for a review of our financial results. Phil.

Thanks David. The third quarter of the year is typically our second largest by revenue. And last year, contributed a little over 30% of our full year's revenues. For the quarter, we reported revenues of $100.4 million essentially flat compared to the revenues of $100.5 million for the third quarter of 2016. Organic revenues declined by approximately $8.4 million or 8.3% largely reflecting the unusual issues in Outdoor Retailer, New York Now, ASD and Interbike shows that David described earlier. The quarter's revenues decreased by $6.6 million or 6.5% due to Hurricane Irma as were not able to recognize most of the revenues of the 2 shows affected. Although, we recorded offsetting insurance proceeds as previously noted. These adverse effects were practically offset by $13.7 million of revenues from acquisitions including CEDIA Expo and InterDrone that were acquired earlier this year. And an additional $1.2 million from the earlier scheduling of one of our ISS shows. On a year-to-date basis through September, our revenues were up $16.9 million or 5.8% with a slight underlying decline in organic revenues versus the same period last year due to the issues in our third quarter shows. This quarter, we provided a supplemental materials document in which we've included the quarter and year-to-date analysis of reported and organic growth rate by trade shows, other events and other marketing services. At this point, let me explain how the proceeds from our insurance claim on Surf Expo and ISS Orlando have been treated in our quarterly financials. Prior to the show's staging, we received the booth and sponsorship fees related to the shows and we were carrying deferred revenue on our balance sheet waiting to recognize it when the shows took place. However, given the disruption caused by Hurricane Irma, we determined that we should provide credits to our customers for the vast majority of the booth and sponsorship fees for the shows. We therefore only recognize the small non-refunded amount as revenue in the quarter. Our events cancellation insurance covers us for such eventualities and the $6.5 million agreed settlement with the insurance carrier to cover the cost of consumer -- customer credits plus an incremental marketing costs for the next shows less some modest cost savings we achieved due to the shorter shows was recorded as other income in the quarter, resulting in no impact to adjusted EBITDA. The cost of staging these 2 shows were included in cost of revenues in the income statement. Speaking of cost of revenues, these increased by approximately $3.6 million or 15.3% to $27.2 million for the third quarter. The increase over 2016 was mainly attributable to $4.3 million of cost related to acquisitions, partially offset by $0.7 million in net savings in the rest of the portfolio. Selling, general and administrative expense increased by $4.4 million or 17.6% to $29.4 million for the third quarter of 2017. This increase represented additional SG&A related to acquisitions of approximately $2.0 million, $1.9 million in higher onetime contract termination costs, acquisition transaction costs, IPO cost and transition costs and a further $0.5 million of other increases including additional cost from operating as a public company and internalizing our M&A activities. Net income for the third quarter of 2017 increased by approximately $0.8 million or 4.3% to $19.2 million. The small improvement was due to a $5.2 million reduction in interest expense for the quarter, which was the result of refinancing our $200 million, 9% senior notes in the fourth quarter of last year. Reducing our outstanding debt with the net primary proceeds from the IPO of $159 million and the subsequent refinancing of the remaining term loan in May 2017. We anticipate that the interest expense for the fourth quarter will be similar to the third quarter expense. For the third quarter, the favorability and interest expense was offset by modestly lower operating income and a higher tax expense, the latter partly due to the increase in pre-tax profit, but also due to a slightly higher effective tax rate. The effective tax rate for the 9 months through September was 40.1% and we expect this to be broadly reflective of the full year effective rate. Adjusted EBITDA declined by $1.0 million, or 1.8% to $54.9 million for the quarter. This modest decrease reflected the unusual difficulties we experienced in our Outdoor Retailer, ASD, New York Now and Interbike trade shows, partly offset by the strong incremental contribution from recent acquisitions. Adjusted EBITDA for the first 9 months of the year increased by $4.6 million or 3.0% to $156.9 million. The LTM over last 12 months adjusted EBITDA through September 30 was $156.7 million and as we noted on the second quarter earnings call, this number does not include the pro forma adjusted EBITDA of the Snow Show, as we do not anticipate that the acquisition will drive significant incremental profit in the short-term. Turning to earnings per share, the adjusted diluted EPS for the quarter was $0.37 and year-to-date was $1.12, which was flat versus the first 9 months of last year. In the supplemental materials posted on our website, we provided an estimate of the fourth quarter and full year diluted weighted average common shares outstanding. Free cash flow which we defined as net cash provided by operating activities less CapEx was $10.6 million for the quarter which compared with $5.8 million for the third quarter of 2016. The net working capital movements in the quarter was slightly favorable to last year and our CapEx was only $0.1 million, down from $1.2 million in the equivalent quarter last year. Traditionally, the least amount of free cash flow is generated in the first and third calendar quarters of the year with the greatest amounts generated in the second and fourth quarters. The Emerald Board has declared a $0.07 per share dividend for the third quarter, which amounts to approximately $5.1 million in aggregate. The dividend will be paid on or about November 30 to shareholders of record on November 16. Our leverage ratio with net debt of approximately $554 million and acquisition adjusted EBITDA of $156.7 million for the 12 months ended September 30, 2017 was approximately 3.5x, very modestly higher than at the end of the second quarter. As we've discussed, our target leverage range is 2x to 3x. However, we're very comfortable operating just above this range in the short to medium term especially if required to complete larger acquisitions. Turning to the 2017 full year outlook, due to the impact of Hurricane Irma, we will fall below the previously provided guidance ranges for reported and organic revenues. However, if we've been able to report the full revenues of the 2 shows that were affected by Hurricane Irma, we would have trended near to the lower end of our original guidance. Since the financial effects of the hurricane were covered by insurance proceeds. We still expect to be just below the midpoint of the previously provided guidance for adjusted EBITDA. At this point in the year, we have all our projected booth revenues for the year contracted and the only revenue uncertainties relate to a portion of the conference and registration revenues in several of our fourth quarter events. And also to some of the advertising revenues of our publications and their websites. I now hand the call back to David for his concluding remarks.

Thanks, Phil. Despite the previously communicated issues in the third quarter. I want to reiterate that Emerald is a resilient and defensible growing business with exceptional financial characteristics, including high margins and strong cash flow generation. On this latter point, it is worth noting that our free cash flow yield on equity has been consistently in the 6% to 7% range. We are currently in the process of building our 2018 view of the business and it's too early for us to provide full year guidance for next year. We plan to provide this in February when we release our full 2017 financial results. However, we feel very comfortable stating that our organic growth rate for 2018 is expected to meet our 3% to 5% long-term goal, and we expect to supplement this growth with acquisitions. Our pricing outlook for 2018 is also strong and in line with the previously communicated historic range of 2% to 4%. We currently have greater than 80% of our expected booth revenues for the first quarter of 2018 booked and more than 75% of the entire first half's booth revenues contracted. So our visibility into the first half of 2018 is very good and this provides the basis for our growth expectations. Taking into account, in particular the previously noted temporary margin reduction at Outdoor Retailer. As that show consolidates with the Snow Show around a 3 event model. The full year effect of public company costs and other anticipated cost increases, we are currently expecting our adjusted EBITDA margin, which we define as adjusted EBITDA divided by our revenue for the applicable period to trend towards 44% in 2018. Over time, we believe that we can manage our adjusted EBITDA margin back above 45% subject to the margin mix impact of any major acquisitions. Overall, I remain very confident in the quality of our portfolio. Our opportunity to grow both organically and by acquisition and our ability to continue to generate strong cash flows. With that, I'd like to ask the operator to open the line for questions. Operator?

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

So Dave, you just stated that the [ 2000 ] organic revenue growth should meet your long-term 3% to 5% range. Shouldn't we think it to be higher, given that we're going to lap the onetime issues from 2017?

Look, a couple of things, one, to keep in mind. One is the New York Now summer edition, although we saw a decline due to the construction at the facility. We're not going to see a rebound in. That facility won't expand again until 2021. We can talk about -- we should probably talk about Outdoor Retailer and the effect of the 3 show format. Although, keeping in mind, that was a summer effect that we had and we expect that to be on a more normal basis for next year in the summer edition, but it'll look quite similar to previous summer editions where it will near sellout or will be a sellout of the summer facility. Interbike, we're expecting a very small kind of rebound by moving to a new location, retitling it Market Week, adding a consumer festival and dressing it up around the edges. I think, the market will have some recovery, but still as we talked about in the past, there's still a bit of an oversupply of high-end road bikes in the market. So we talked about New York Now. ASD -- we -- couple of things on ASD. I think, it's important to note that we haven't seen the growth that we are expecting, but ultimately, we determine the shortened selling cycle was a good. It had a positive effect on change for how we go to market with that show going forward rather than how we typically done things and start with the renewals and move to the new business last. We're going to restructure our sales organization to work simultaneously with some staff working on renewals from the beginning and some staff working on new business from the beginning. We think that's going to have a lift in the latter half of the year. It's going to take us a bit to reorganize and go to market that way. So we'll probably not going to see any new lift on the summer edition. I'm sorry, on the winter edition although the winter edition has about the same profile as it did in the past and we'll probably get some lift in the summer edition. The Outdoor Retailer is probably one of the largest effects on not getting the -- I shouldn't say the bounce, but the 3 show format and the change of yield for our winter edition is one of the things that's causing us a bit of decline. As you recall, our last winter edition will have -- as we talked about a higher yield than this winter edition given that these 2 shows are coming together and we're harmonizing the booth pricing on that show.

And just based on what you know today. Are there any shows that could face onetime disruptions next year?

I don't see any new unfavorable issues. Much of the portfolio actually, according to our pacing and how we're seeing things today is actually performing quite well. So they are not large enough and strong enough to offset some of the things that I just talked about, but they're performing well. I don't see anything on the horizon that should effect us like we did last year or I should say, this year.

Our next question comes from Peter Christiansen with Citibank.

And this is great news about Vegas. Good to see things turning around. My question. I am going to piggyback over David's question on the 3% to 5%. Is that taking to account the insurance proceeds this year and that impact? Are you thinking this 3% to 5% would be off of I guess what the adjusted revenue would be?

Right, internally, what we're thinking about it that way that it's over the higher number of -- for 2017. That includes kind of normalized revenue for Surf Expo and ISS, absolutely.

And I guess, if we look at the year-over-year decline in EBITDA margin or the anticipated year-over-year decline, how much of that could you haircut is being purely identified with the Snow Show -- the 3 show format?

Clearly we still -- we still haven't finalized the budget. We're still working on that to firm it up. I'd say probably 50 basis points of margin plus or minus is kind of the Outdoor Retailer impact and the public company costs annualizing those. It's probably in the 25 to 30 basis points. Like I said, it's a little rough because we're still in the process of finalizing that and we'll obviously give you kind of more developed thinking in February when we kind of set out 2018 guidance, hopefully.

And I guess, David. I wonder, if you can just give a sense of your experience even in this business long time of whenever you have a disruption like Irma, obviously there are attendees whether exhibitors or just normal attendees that incur out of pocket travel cost and all that? Do you have any sense that that may impact the next round of shows?

We haven't seen it with a onetime item affect the very next show. Occasionally where you have multiple back-to-back years there is some fatigue. I think in our New York Now winter edition, we had a couple of years in a row where we had some snowstorms. It does shake some confidence and takes a couple of shows for everyone to return. It's mostly on the exhibitor side. It's rarely on the attendee side. These are important events for the attendees although they spent money going, a lot of the attendance was limited. So it only effects the ones that did come, and generally the ones that are hardy enough to come during those are the [ best and wearily ] are going to cut back on coming to these events in the future. So no, I don't really see a material impact on the next edition as a result of that.

And then I could be splitting hairs here though, but I guess, the 4 shows you talked about earlier came in slightly favorable versus your previous expectation. But now with the impact of Irma, there is a slight kind of dent there from -- for Q4 [ or for ] the full year of 2017. I am just trying to reconcile those 2 things and see kind of what the net offset is or if I am spitting hairs just, [ so if you ] let me know?

I mean, the improvements was small. We just wanted to make the point that it was close and we were slightly conservative. So it wasn't enough to move the needle at all, so.

I don't think you should read too much into it.

Next question from Gary Bisbee with RBC Capital Markets.

So on the adjusted EBITDA commentary, 44%, I guess, we really need to adjust that for this quarter and the year, for the $6.5 million of insurance. So I guess, if we do that, you're looking at the margin being down more than 100 basis points, if I did the math right, year-over-year, is that right or?

So when we are talking about and sometimes we should, we maybe, I am making this clear. We're always kind of normalizing for the insurance proceeds, kind of in our numbers.

Right. And so treating the [ $6.5 million ] as revenue, so the EBITDA margin really it's [ 51.5% ] or thereabout, if I go off of a $107 million of revenue for the quarter.

We are talking annually and so annually, I think the margin is a little below 45%, and so what we're saying is for the full year 2018. So we're not talking about quarters, we're talking about annually, it's kind of trending down towards a 44% number.

And so I guess that leaves us with very little organic EBITDA growth is the takeaway. So I understand there's been a lot of moving parts here, but given the challenges at some of your biggest shows, given that your commentary a couple of minutes ago indicates you may be expecting some modest improvement in some of them, but not a dramatic snapback, and given how important the largest shows are to the portfolio. What can you say they get us comfortable that you can deliver the mid-single digits or more maybe better EBITDA growth, profit growth over the next couple of years. I think, we've been sitting here thinking, hey this was a tough year, you had some really tough things, but I guess, it's somewhat surprising to me that it looks like we have a second tough year with little organic growth. I mean, what gets you back on track and how do -- help us frame that this really is just a tough spell as opposed to just the way the business delivers.

Well I think a couple of things. Let start with M&A. We've got some good track record on M&A and those acquisitions are starting to bring in some good growth metrics for us, and will continue to be strong for us going forward. Our portfolio is obviously getting bigger and more diversified. There's more products across the portfolio and we actually have favorable organic volume growth within our core businesses. Our kitchen & Bath, our ICFF, our Design Group -- Hospitality Design, all showing good strength. Some of our other trade shows, the Pizza show and then some of the recent acquisitions with Pavement, our Collective shows, all showing good continued growth. We're actually continuing to repeat launches, so we still have 2 of our launches from 2016 that will be in their third year next year. We've got 3 of our acquisitions continuing into their second year from 2017. And then we have another probably 5 or 6 launches that we're baking currently for next year. So there's going to be some new revenues from the launches and continued. And again, we're optimistic that some of our kind of key franchises are still going through transition, Outdoor being the most important and I think there is a fairly big drain just coming on bringing these 2 shows together, harmonizing them and strengthening that story for the market. But absolutely that's the right kind of strong value enhancing transaction for the market in the long-term. So we're kind of swallowing the short-term effect by making sure, we've got that foundation rock solid and that business has the opportunity to do what its done in the past, and continue to provide strong growth. So kind of taking the organic, the inorganic, the launch, the volume of the core business and the long-term benefits around Outdoor Retailer and some recovery within the bicycle space, we're confident in that long-term view of growing the business.

Let me just say something about the financial impacts of Snow Show and Outdoor Retail just so we kind of frame that a little bit. So -- because we have said that we didn't include the Snow Show sort of acquired EBITDA in our numbers because of complicated situation in 2018. And this is going to be very difficult to identify what's incremental, given that we're kind of merging the shows and we're gone to a 2 show winter format. But if you were just to look at the 3 shows, we will have in 2018, so that's the combined January show, the summer show and the new November show, then -- and you compare that to the 2 Outdoor Retailer shows that we had in 2017, which is just the January and summer show, then we do see revenue growth there. The 3 shows are bigger than the 2 shows that we had, but we see only very modest incremental EBITDA growth contribution from that. And that's for the reasons that we mentioned before, which is some yield concessions that we made short-term on the winter shows to be able to bring these 2 association- backed shows into together and because we're holding a third show, so we have all the cost of the third show. So really that's one of the things, Gary, that kind of holds back the organic growth of -- in 2018, that shouldn't happen in 2019, which is really some revenue growth, decent revenue growth, but no real incremental EBITDA. And that's why we're pointing to a lower margin in '18 that we anticipate once we're through that we will be moving up from there.

And so let me just ask 1 question, I know you haven't given guidance but is the right assumption or a reasonable modeling assumption to assume that most of that drag from the change in format at Outdoor Retailer happens in Q1, so that's a negative to EBITDA as we would have otherwise had it modeled and the other 2 are pretty similar or is there some shifting of the mix right from people who had gone to one of the two are now going to that and you're going to lose some later in the year as well. Is it too early to know or can you help us frame that? Thanks.

So the shape, if you are looking at quarters of 2018, the shape does change because we have a smaller show from a revenue and EBITDA perspective in the first quarter, and then we pick up a show in the fourth quarter that we didn't have before. So there is several million dollars of movement between those 2 quarters.

And then, I appreciate the additional revenue breakdown in the PowerPoint you've put on the website. Can we just get a little bit of color to help frame the trends in that and I suppose as part of that, I wanted to ask, are you planning to provide this breakdown going forward every quarter or was there a specific reason to provide this today? Thank you.

We will -- we plan on providing this. It was requested, I think for greater visibility for the different kind of alliance business and so, we will continue to provide this level of detail as we go forward.

And the trend that's been happening there, the trade shows you've talked a lot about, but the other events and the other marketing services just -- is there a high level, like one-liner, on what a reasonable expectation for each of those is. You could provide. I will end the questions there? Thanks.

I mean, other marketing services, it is, as you know, publications and online related to the publications. Those are challenging from a display advertising perspective and we shouldn't expect really any growth from that product line. Although they fulfill a really important kind of support to the trade shows cause in pretty much every case. Actually in every case, they are partnered with the trade shows. So I think, the other events is can go either way, it's a relatively small number and other marketing services, I think, we should expect it will be probably flattish going forward.

Our next question comes from the line of Jeff Meuler with Robert W Baird.

Thank you. Just in terms of the statistic that you gave on the number of shows from an M&A perspective that you looked at and passed would love some perspective behind it. I guess, any change in terms of either the quality of shows that are being shopped around right now or the competitive market for M&A. I mean, appreciate the discipline on your side, but just love some perspective if there's anything unusual on either of those or any other fronts with M&A?

That the number of shows, we just pointed out, and as a frame of reference, that's fairly typical. We're not seeing anything unusual in the M&A market. We're not running up against any other kind of known competitive forces, multiple expectations aren't really changing in terms of what we're seeing. I mean, we put things through an important filter to ensure they meet our portfolio's expectations and growth opportunities there in the right market, there in the many to many categories. They are #1 in their space. And so, we actually have some very good products that we're evaluating right now. And as I said on the call, we expect a couple [ or two ] -- 1 or 2 here still to hit this year. We do have a mix of association shows and other shows that we're looking at. So there really isn't anything unusual in the mix of what we're looking at. Some of the things that come across your desk don't fit our kind of criteria, but nothing in terms of what we've seen is unusual volume activity there.

Okay and then Interbike, did you say, it was down by a third. And if so, I guess, I understand that it's -- well I don't know the end market. But I understand from you that it's a challenging end market right now. And then you, I think, talked about some Vegas fatigue but a third, if I heard you correctly, still seems like a big decline even if the end market is tough. Are there any other competitive pressures there or other contributing factors that may contribute to a decline of a third, just given, I think the way your businesses performed through some other tough end markets. Before I think, it's been much more resilient on that?

Right, we're not really, no, we're not losing business to anybody else. We're finding some of the bigger companies are trying to gather market share in their own way. This is a business, this is an industry that hasn't ultimately been growing as an industry for some time. So there's a lot of market share battles between them. So I think in the case of sales decline by some of these companies, they're just scaling their involvement with our business. They are not necessarily abandoning the business. A couple of the larger brands do their own. They call them road shows. They bring their own customers in to try and talk to them individually to tie up the [ open device ] sooner, to keep their competitor from getting the sale, but there's nothing really unusual. It is a substantial decline in a single year. But I think, it's been building. I think the bicycle market has been challenging for some time and I think, this is kind of a reset for some of these companies in terms of until the pipeline clears out, until we see volume increasing, this probably will be a little bit of the new normal, but we've got very favorable responses to our change of format as in adding a consumer festival, enhancing our demo days, which is very important to the cycling industry and then moving to Reno Tahoe. So we're expecting some modest improvement to that could be better than what we're seeing. But we haven't seen it yet, so there's no reason to be overly optimistic in the bicycle space, where it's not actually a growing sector. It's a market share battle. It's a good sector. It's not necessarily a growing sector from the industry standpoint.

And then finally from me, can you just give us a sense of what types of price increases you can put through at the higher end for a show with good demand and I guess, I'm thinking specifically, Outdoor Retailer. I think you, I mean, you went through the price harmonization. So you have some attendees that are used to paying higher prices and I think you said it was sold out or nearly sold out for the January run. So to the extent to which there is good demand for Outdoor Retailer or just as a general concept. Is there an upper bound 5%, 10% in terms of price increases, you can push through for a show with good demand. Thanks.

So speaking generally on prices across our pricing philosophy, across our entire portfolio. We take a long-term view of consistently increasing price with value and in a moderate rate to keep both the goodwill of the industry and and the ROI for the customer in check. Shows like Outdoor Retailer, look, this is a disruptive year for the model and the changes in coming together and bring 3 shows, in fact, we're asking our industry in some cases to add a show to their schedule. So we're conscious of any 1 show's pricing. As Phil said, kind of the winter market is going to be -- is dictated a bit on the concessions that we made in terms of bringing these 2 shows together. So that's not necessarily market-based pricing initially. We will see in the long run what kind of value these shows come together and bring and it will bring -- it will come back to more market-based pricing, whatever that may be. So we tend to just make sure that we're receptive to the ROI on the market and our day selling more goods, is the show bringing in more value, although, you have a captive audience, they may not have another place to go. We're conscious of ensuring that that will bring in the right return on investment or return on objectives in each and every one of our shows. We don't take a one size fits all. We do have shows that have outsized pricing growth and other shows that are very, very moderate in terms of what's happening in their market conditions.

Our next question comes from the line of Kevin McVeigh with Deutsche Bank.

Just in terms of the 44% EBITDA target, does that factor in any dilution from deals or is that based on just a pure-organic 3% to 5%?

That's based on the 3% to 5%.

So it doesn't factor any transactions you may potentially close in Q4 or in 2018?

No.

Okay. And then in terms of ICFF, having moved up the coast. Would you've expected that to be even stronger? David, if it wasn't held in Miami and is there probability it goes back to Miami, next year, or how should we think about that?

I think, it was a neutral effect. I don't think it had a positive or negative effect. Quite frankly, the market was quite pleased with Fort Lauderdale. We will probably hold it there again next year for consistency sake. It's a brand new event. But then again, Miami is a very good location, and we do other shows in Miami Beach. And so, we found just up the coast was kind of non affect plus or minus.

Our next question comes from the line of with Anj Singh with Credit Suisse.

This is Katherine Tait on for Anj Singh. Back to M&A, can you just give a little bit more color on the M&A pipeline. Are these comprised of larger or smaller shows? Are they in verticals that you already in today or new ones?. Just some color there would be great. And maybe a little bit on what criteria you look out there too? Thanks.

Sure, I can probably talk about it, this is David. We don't really limit ourselves to a particular sector focus. We clearly know the sectors that we operate in probably are closer to the sectors that we already operate in, but it's not essential that we bring shows in that are in the sectors that we operate in. There are mix of association events, entrepreneurial events and large and small events, quite frankly, as it should be. So there is nothing new within our pipeline that we haven't seen or been focusing on for the past year. I don't think, the mixes is changing. If anything, there may be a bit more receptance for associations to look at producers like us. We're getting a few more conversations going with associations. The more associations take on a model of using a professional operator to produce their events, the more others may look at that. So nothing unusual, nothing out of what we've seen in the past. We said kind of 4 to 6 acquisitions a year is probably what we can stomach. Our Head of Corporate Development that we hired last year is really kind of helping to both stimulate these conversations and work across different organizations, large and small and in fact some are in the U.S. and some are outside the U.S. I'm sorry, Katie also asked about the acquisition criteria. I can just for the purposes of the audience, our kind of funnel, we put things through, they don't need to check every box, but the more boxes they check, the better for us, but are they in a leading market position. Is it a B2B event, is it important to the market, is it important to the attendees and exhibitors. Does it operate in this fragmented many-to-many environment, does it have good growth prospects, is there opportunity for us to add value and can we buy it accretively. That's kind of the criteria we use to take a look at these products in the market.

Next question comes Manav Patnaik with Barclays.

Hi, this is Ryan filling in for Manav. I guess, just to tag on to the M&A. What gives you the confidence to say that you should expect to close the deal by the end of the year, and I ask that just because I know, you mentioned in the past that some of these can be kind of one-off and timing-related, whether or not you're dealing with family-owned businesses or something like that. Is that -- do you have a letter of intent signed. Just curious, what gives you the confidence to say that?

We've been working hard all year long on some deals. Some just take longer and more cautious about moving at the right pace rather than trying to close something for a specific quarter. We're trying to make sure we have the right conversation. These are long-term businesses that we want to make sure that we acquire smartly. And some just take longer than others, and as we near the year-end, we kind of see the finish line on a couple. There is no guarantees that we'll get there, but it just feels like we're nearing the finish line on some conversations that we've been having for quite some time.

And then so on the move to Denver, I think you'd mentioned in the past that the layout there was slightly different. But -- so once we get past all the kind of the moving parts of the combination and the launch of the third show, is the actual exhibit space similar sized to what you had in Salt Lake, bigger or smaller?

For our winter edition, it's slightly larger in space. For summer, it will be about the same size in terms of net square footage sold for the summer edition. It is laid out differently, but for the purposes of calculating that square footage, it's about the same for summer and it's a little bit larger for the winter.

There are no further questions at this time. I would like to turn the call back over to Mr. Loechner for any closing remarks.

Thank everybody for joining our call today and we look forward to talking to you individually and on the road. Thank you everybody, thank you operator.

Thank you, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.