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Emerald: Soft Interbike, OR Summer shows expected to impact revenue

Published May 25, 2017
Company seeks growth through acquisitions in consolidating trade show industry.

SAN JUAN CAPISTRANO, Calif. (BRAIN) — In its first conference call with investors since its public offering in April, Emerald Expositions president and CEO David Loechner was optimistic about growth through acquisitions of shows and further consolidation in the B2B trade show industry. However, Loechner pointed to challenges with Outdoor Retailer and Interbike that will temper full-year organic growth to a range of 0 to 2 percent.

Loechner told analysts that Outdoor Retailer Summer Market, New York Now Summer (a home, lifestyle and gift show) and Interbike will be down this year due to various factors. For Outdoor Retailer, the recent public lands controversy in the state of Utah has negatively affected bookings, with a number of exhibitors and buyers deciding to boycott the show. But Loechner said the downward slide will be transitional and should be minimized once the show moves out of Utah in 2018.

"The protest has nothing to do with the show itself," Loechner said. "We have enjoyed a good relationship with Salt Lake City and we're finalizing plans to relocate the show. But in recent weeks the adverse impact on revenues of the summer 2017 show will be more than anticipated."

The Summer OR show is projected to decline in the "high-single-percentage digits."

Loechner also pointed to a soft market in bike and a desire to move away from Las Vegas as factors affecting the Interbike show.

"We conducted an RFP process and soon we'll announce a new venue for 2018," he said. "The outlook for 2017 is continuing to weaken. Industry data showed bike shipments down 15 percent in units."

Loechner pointed to an inventory oversupply in the channel, coupled with a wet first quarter, as having a negative effect on the show. He said he expected revenues to be down in the double digits this year for Interbike.

"With the benefit of a new venue and improved industry sales, we expect the show to strengthen going forward," Loechner told analysts. "There's a lot of product in the channel coupled with poor sell-through. Companies are pulling back on spending, but Interbike remains a strong show."

Loechner told analysts that the bike market has seen up and down cycles through the years and this is another case of a down cycle but that the long-term picture is good for Interbike.

If all three shows were projected flat, Emerald's guidance range would be 2 to 4 percent growth instead of 0 to 2 percent.

For the first quarter of 2017, Emerald reported revenue of $135.7 million, compared with $127.8 million a year earlier, an increase of $7.9 million or 6.1 percent. The growth was both organic (2.9 percent) and from acquisitions (3.3 percent). Trade show revenue for the quarter was $124 million.

Net income increased to $28.3 million from $28.2 million in the first quarter of last year. Adjusted net income was $38.5 million for the quarter.

Emerald Expositions has acquired three shows so far this year, the CEDIA trade show from the Custom Electronics Design and Installation Association; InterDrone, the largest commercial unmanned aerial vehicle trade show and conference from BZ Media; and the SIA Snow Show from the SnowSports Industries America trade association. And Loechner noted that the company has an active pipeline of acquisition opportunities in various stages and that M&A plays a key role in Emerald's growth plan.

Through its April public offering, Emerald raised $159 million in net proceeds, a capital injection that will allow the company to continue to pursue its M&A strategy.

"Currently there are over 9,000 B2B trade shows held in the U.S. with few buyers. More than two-thirds of the shows we've purchased we were the only bidder," he said. "There is an opportunity to consolidate an extremely fragmented industry through M&A. We look for trade shows that are established. We're generally not looking for fixer-uppers. Of the 9,000 taking place, there are hundreds that match our acquisitions criteria."

Loechner said the U.S. business-to-business trade show industry is a market in excess of $13 billion in 2016 with a growth rate of 4 to 5 percent, and that Emerald is the largest trade show operator in the U.S.

Emerald is projecting total revenue for the full year will reach $348 million to $355 million, or 7.5 to 9.5 percent growth over 2016, with 0 to 2 percent organic revenue growth.

Besides Interbike and Outdoor Retailer, Emerald owns Bicycle Retailer, which is operated under license by NBDA Services Inc.

More information: emeraldexpositions.com/2017/05/emerald-expositions-announces-date-for-first-quarter-2017-conference-call-provides-initial-results-for-first-quarter.

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