Emerald Expositions Reports First Quarter 2019 Financial Results

SAN JUAN CAPISTRANO, Calif.–(BUSINESS WIRE)–Emerald Expositions Events, Inc. (NYSE:EEX) (“Emerald” or the
“Company”), a leading U.S. business-to-business trade show, event and
conference producer, today reported financial results for the first
quarter ended March 31, 2019.

First Quarter 2019 Highlights

• Revenues decreased 3.4% to $137.4 million, compared to $142.2 million
  for first quarter 2018
• Net income decreased 30.4% to $26.5 million, compared to $38.1 million
  for first quarter 2018
• Net cash provided by operating activities decreased 43.7% to $11.6
  million, compared to $20.6 million for first quarter 2018
• Adjusted EBITDA, a non-GAAP measure, decreased 13.2% to $59.4 million,
  compared to $68.4 million for first quarter 2018
• Adjusted Net Income, a non-GAAP measure, decreased 17.2% to $38.5
  million, compared to $46.5 million for first quarter 2018
• Free Cash Flow, a non-GAAP measure, decreased 43.8% to $11.3 million,
  compared to $20.1 million for first quarter 2018

First Quarter 2019 Financial Performance

“We were pleased with our first quarter performance, as we drove good
growth in many of our events, including the Kitchen & Bath Industry
Show, Sports Licensing & Tailgate Show, National Pavement Expo, The
Original Miami Beach Antique Show and the International Pizza Expo.
While our first quarter results were solidly in line with our
expectations, and many of our key franchises are performing well, we are
experiencing moderate softness in our Other Marketing Services portfolio
and several upcoming shows, including ICFF and RetailX, which, taken
together, are causing us to expect our full year financial results to be
in the lower half of our previously communicated full year guidance
range,” reported Phil Evans, Emerald’s Interim President and Chief
Executive Officer and Chief Financial Officer.

Mr. Evans added, “I am encouraged by the progress we have achieved in
our efforts to stabilize our largest shows. While our ASD show has been
adversely impacted by the trade tensions with China, we continued to
grow the core Value & Variety category and have successfully stabilized
the Style and Beauty category, which had previously been a weight on the
show’s results. Additionally, we staged a much-improved NY NOW show at
the beginning of February, which was confirmed by stronger exhibitor and
attendee satisfaction scores and increased attendance. Looking forward,
we are introducing a number of new features to the August NY NOW edition
that we believe will continue our solid momentum towards stabilizing the
franchise. To conclude, I remain confident that we are taking the right
actions to position our portfolio for sustained organic growth.”

Financial & Operational Results

For the first quarter of 2019, Emerald reported revenues of $137.4
million compared to revenues of $142.2 million for the first quarter of
2018, a decrease of $4.8 million, or 3.4%. The decrease reflected a net
$7.4 million reduction from several show scheduling differences in the
first quarter of 2019, most notably GlobalShop staging in the second
quarter of 2019, versus the first quarter of 2018. Acquisitions made in
2018 contributed $3.6 million of revenue in the first quarter of 2019.
After adjusting organic revenues for the first quarter of each of 2018
and 2019 for the show timing differences noted above, organic revenues
for the first quarter of 2019, were down $3.0 million, or 2.2%, versus
the equivalent quarter of the prior year, reflecting good growth in
events for the first quarter of 2019, including the Kitchen & Bath
Industry Show (“KBIS”), Sports Licensing & Tailgate Show, National
Pavement Expo, The Original Miami Beach Antique Show and the
International Pizza Expo, offset by declines that were expected in NY
NOW, National Stationery Show, Outdoor Retailer Snow Show and WPPI. Of
note, revenues of the Company’s ASD March show were virtually flat
versus the prior year’s March show.

Cost of Revenues of $45.9 million for the first quarter of 2019
increased by 10.9%, or $4.5 million, from $41.4 million for the first
quarter of 2018. This increase reflected $2.3 million of incremental
costs related to 2018 acquisitions, and was partially offset by a net
$1.0 million reduction attributable to the show scheduling differences
noted above. The remaining $3.2 million increase in cost of revenues
reflected incremental costs in several of the shows that grew in the
quarter, particularly KBIS, as well as additional show investments, most
notably in the NY NOW event, net of a $0.6 million reduction in
non-recurring other items.

Selling, General & Administrative Expense (“SG&A”) of $35.1 million for
the first quarter of 2019 increased by 8.7%, or $2.8 million, from $32.3
million for the first quarter of 2018. The increase in SG&A for the
first quarter of 2019 reflected approximately $2.8 million in
incremental costs from 2018 acquisitions, $0.4 million in higher
stock-based compensation and $1.7 million in other expense increases,
offset by a net $0.2 million reduction attributable to show scheduling
differences and a reduction of $1.9 million in non-recurring other items.

Net income of $26.5 million for the first quarter of 2019 decreased by
30.4%, or $11.6 million, from $38.1 million for the first quarter of
2018. The key drivers of the decrease were the lower revenues and
increased expenses described above.

For the first quarter of 2019, Adjusted EBITDA was $59.4 million,
compared to $68.4 million for the first quarter of 2018, after adjusting
for the show scheduling differences described above. The decrease in
Adjusted EBITDA of $9.0 million, or 13.2%, was driven predominantly by
the performance of NY NOW, as well as incremental investment spending.
In addition, the Company’s 2018 acquisitions resulted in incremental
expenses that were $1.1 million higher than revenues in the quarter, as
the larger revenue-generating activities of these acquisitions are in
subsequent quarters.

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 $9.0 million to
$11.6 million in the first quarter of 2019, compared to $20.6 million in
the first quarter of 2018, largely reflecting the Company’s operating
performance in the quarter.

Capital expenditures were $0.3 million for the first quarter of 2019,
compared to $0.5 million for the first quarter of 2018.

Free Cash Flow, which the Company defines as net cash provided by
operating activities less capital expenditures, was $11.3 million in the
first quarter of 2019, compared to $20.1 million in the first 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 March 31, 2019, Emerald’s cash and cash equivalents were $10.9
million and gross debt was $560.1 million, resulting in net debt (gross
debt less cash and cash equivalents) of $549.2 million.

Dividend

On April 30, 2019, the Board of Directors approved a 3.4% increase in
the Company’s dividend to $0.075 per share for the quarter ending June
30, 2019 to holders of the Company’s common stock. The cash dividend is
expected to be paid on or about May 28, 2019 to stockholders of record
on May 14, 2019.

Outlook (forward-looking statements) and Key
Assumptions

For the year ending December 31, 2019, Emerald management expects the
Company’s full year performance to be in the lower half of the
previously communicated guidance range, as outlined below:

• Total revenue decline of 0.7% to growth of 2.5%, or revenue in a range
  of approximately $378 million to $390 million
• Organic revenue decline of 1.7% to growth of 1.1%
• Adjusted EBITDA in the range of $140 million to $150 million,
  representing a decrease in the range of 7.9% to 14.1% compared to 2018
• Adjusted Net Income in the range of $76 million to $88 million,
  representing a decrease in the range of 12.2% to 24.2% compared to 2018
• Adjusted Diluted EPS in the range of $1.02 to $1.20, representing a
  decrease in the range of 9.8% to 23.3% compared to 2018
• Free Cash Flow in the range of $80 million to $90 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.

Conference Call and Webcast Details

As previously announced, the Company will hold a conference call to
discuss its first quarter 2019 results at 11:00 am ET on Thursday, May
2, 2019.

The conference call can be accessed by dialing 1-877-407-9039 (domestic)
or 1-201-689-8470 (international). A telephonic replay will be available
approximately two hours after the call by dialing 1-844-512-2921, or for
international callers, 1-412-317-6671. The passcode for the replay is
13689089. The replay will be available until 11:59 pm (Eastern Time) on
May 9, 2019.

Interested investors and other parties can access the webcast of the
live conference call by visiting the Investors section of Emerald’s
website at http://investor.emeraldexpositions.com.
An online replay will be available on the same website immediately
following the call.

About Emerald Expositions

Emerald is a leading operator of business-to-business trade shows in the
United States. We currently operate more than 55 trade shows, as well as
numerous other face-to-face events. In 2018, Emerald’s events connected
over 500,000 global attendees and exhibitors and occupied more than 7.0
million net square feet of exhibition space.

Non-GAAP Financial Information

This press release presents certain “non-GAAP” financial measures. The
components of these non-GAAP measures are computed by using amounts that
are determined in accordance with accounting principles generally
accepted in the United States of America (“GAAP”). A reconciliation of
non-GAAP financial measures used in this press release to their nearest
comparable GAAP financial measures is included in Appendix I attached
hereto.

The Company provides certain elements of its forward-looking 2019
outlook solely on a non-GAAP basis because the Company cannot predict
certain elements that would be required in certain reported GAAP
results. The Company has not presented a quantitative reconciliation of
the forward-looking non-GAAP measures, Adjusted EBITDA and Adjusted Net
Income, to net income, and Free Cash Flow, to net cash provided by
operating activities, their most comparable GAAP financial measures, or
Adjusted Diluted EPS, because it is impractical to forecast certain
items without unreasonable efforts due to the uncertainty and inherent
difficulty of predicting the occurrence and financial impact of and the
periods in which such items may be recognized. For Adjusted EBITDA and
Adjusted Net Income, these items are generally expected to be similar to
the kinds of charges and costs excluded from Adjusted EBITDA and
Adjusted Net Income in prior periods and include, but are not limited
to, acquisition-related expenses, stock-based compensation, income tax
expense, the effects of scheduling adjustments (in the case of Adjusted
EBITDA only) and other assumptions about capital requirements for future
periods. For Free Cash Flow, this includes assumptions about capital
requirements for future periods. The variability of these items may have
a significant impact on our future GAAP financial results.

We use Adjusted EBITDA because we believe it assists investors and
analysts in comparing Emerald’s operating performance across reporting
periods on a consistent basis by excluding items that we do not believe
are indicative of our core operating performance. Management and
Emerald’s board of directors use Adjusted EBITDA to assess our financial
performance and believe it is helpful in highlighting trends because it
excludes the results of decisions that are outside the control of
management, while other measures can differ significantly depending on
long-term strategic decisions regarding capital structure, the tax
jurisdictions in which we operate, and capital investments. Adjusted
EBITDA should not be considered as an alternative to net income as a
measure of financial performance or to cash flows from operations as a
liquidity measure.

We define Adjusted EBITDA as net income before (i) interest expense,
(ii) loss on extinguishment of debt, (iii) income tax expense, (iv)
depreciation and amortization, (v) stock-based compensation, (vi)
deferred revenue adjustment, (vii) intangible asset impairment charge,
(viii) unrealized loss on interest rate swap and floor, net, (ix) the
Onex management fee (which ended prior to the Company’s initial public
offering), (x) material show scheduling adjustments, and (xi) other
items that management believes are not part of our core operations.

In addition to net income presented in accordance with GAAP, we present
Adjusted Net Income because we believe it assists investors and analysts
in comparing our operating performance across reporting periods on a
consistent basis by excluding items that we do not believe are
indicative of our core operating performance. Our presentation of
Adjusted Net Income adjusts net income for (i) loss on extinguishment of
debt, (ii) stock-based compensation, (iii) deferred revenue adjustment,
(iv) intangible asset impairment charge, (v) the Onex management fee
(which ended prior to the Company’s initial public offering), (vi) other
items that management believes are not part of our core operations,
(vii) amortization of deferred financing fees and discount, (viii)
amortization of acquired intangible assets and (ix) tax adjustments
related to non-GAAP adjustments.

We use Adjusted Net Income as a supplemental metric to evaluate our
business’s performance in a way that also considers our ability to
generate profit without the impact of certain items.

For example, it is useful to exclude stock-based compensation expenses
because the amount of such expenses in any specific period may not
directly correlate to the underlying performance of our business, and
these expenses can vary significantly across periods due to timing of
new stock-based awards. We also exclude professional fees associated
with debt refinancing, the amortization of acquired intangible assets
and certain discrete costs, including deferred revenue adjustments,
impairment charges and transaction costs (including professional fees
and other expenses associated with acquisition activity) in order to
facilitate a period-over-period comparison of our financial performance.
This measure also reflects an adjustment for the difference between cash
amounts paid in respect of taxes and the amount of tax recorded in
accordance with GAAP. Each of the normal recurring adjustments and other
adjustments described in this paragraph help to provide management with
a measure of our operating performance over time by removing items that
are not related to day-to-day operations or are noncash expenses.

Adjusted Net Income is a supplemental non-GAAP financial measure of
operating performance and is not based on any standardized methodology
prescribed by GAAP. Adjusted Net Income should not be considered in
isolation or as an alternative to net income, cash flows from operating
activities or other measures determined in accordance with GAAP. Also,
Adjusted Net Income is not necessarily comparable to similarly titled
measures presented by other companies.

Adjusted Diluted EPS is defined as Adjusted Net Income divided by
diluted weighted average common shares outstanding.

We present Free Cash Flow because we believe it is a useful indicator of
liquidity that provides information to management and investors about
the amount of cash generated from our core operations that, after
capital expenditures, can be used to maintain and grow our business, for
the repayment of indebtedness, payment of dividends and to fund
strategic opportunities. Free Cash Flow is a supplemental non-GAAP
measure of liquidity and is not based on any standardized methodology
prescribed by GAAP. Free Cash Flow should not be considered in isolation
or as an alternative to cash flows from operating activities or other
measures determined in accordance with GAAP.

Other companies may compute these measures differently. No non-GAAP
metric should be considered as an alternative to any other measure
derived in accordance with GAAP.

Cautionary Statement Concerning Forward-Looking
Statements

This press release contains certain forward-looking statements,
including assumptions about the expected financial performance of recent
acquisitions, our ability to execute our acquisition strategy to
accelerate growth and full year guidance with respect to revenue growth,
Adjusted Net Income, Adjusted EPS, Free Cash Flow and Adjusted EBITDA.
These statements are based on management’s expectations as well as
estimates and assumptions prepared by management that, although they
believe to be reasonable, are inherently uncertain. These statements
involve risks and uncertainties, including, but not limited to,
economic, competitive, governmental and technological factors outside of
the Company’s control that may cause its business, industry, strategy,
financing activities or actual results to differ materially. See “Risk
Factors” and “Cautionary Note Regarding Forward-Looking Statements” in
the Company’s most recently filed periodic reports on Form 10-K and Form
10-Q and subsequent filings. The Company undertakes no obligation to
update or revise any of the forward-looking statements contained herein,
whether as a result of new information, future events or otherwise.

Contacts

Emerald Expositions Events, Inc.
Philip Evans,
1-866-339-4688 (866EEXINVT)
Interim President & Chief Executive
Officer and Chief Financial Officer
[email protected]