Welcome to the Emerald Expositions second quarter 2017 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions with instructions to follow at that time. 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. 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 investors section of our website through midnight Eastern time on August 10th, 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 27th, 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 US GAAP. Reconciliation of these non-GAAP measures to the most comparable GAAP measure can be found in our earnings release. At this point, I'll turn the call over to David.
Thank you, Phil. 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. For the second quarter, we delivered revenue growth of 14% compared to the second quarter of 2016. Approximately one-third from organic growth and two-thirds from acquisitions. Our adjusted EBITDA growth of 17% was driven by the strong revenue growth.
In the quarter, we staged 14 trade shows and conferences, 10 of which repeated from 2016. One was a small launch, and three 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 three shows demonstrated good revenue growth as expected. Our Internet Retailer Conference & Exhibition 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 two more new launches planned for the rest of the year.
Three 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. We will benefit from their strong momentum in future years. We were particularly pleased with the results of the two larger events, namely Digital Dealer Conference & Expo and RFID Journal LIVE!. 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. 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 Market, 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. Revenue 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 concerned the amount of sellable space available for our NY NOW Summer Show at the Javits Convention Center in New York during the convention center's renovation project. We thought we would be able to replace a fair amount of the lost space to renovation by using and selling non-traditional space. As we've moved through the sales cycle, potential customers have 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 three 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 two ASD shows, and this year, the cycle was also almost 15% shorter than in 2016, as our first quarter show staged three 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 remerchandising 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 four 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 two 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 two winter shows together once and 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 two long-established shows and the unprecedented political issues we are facing in Utah.
That said, we firmly believe that taking this opportunity to unite the two 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 three tuck-in acquisitions, including the SIA show, for a total purchase consideration of approximately $60 million. As I've previously indicated, the average multiple paid was consistent with our historical experience, and all three deals were structured as asset acquisitions, giving 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 costs to settle various contractual commitments associated with the relocation of the Outdoor Retailer 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 were $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 was 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 first six months of 2017 increased by $5.6 million or 5.8% to $102.0 million.
The LTM, or last 12 months, adjusted EBITDA through June 30th was $157.7 million. The LTM acquisition adjusted EBITDA, which adds on the pro forma performance of acquisitions as if they'd been owned throughout the 12-month period, was $164.4 million. While we had 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 + Snow Show in January 2018 is not anticipated to equal the aggregate size of the two separate 2017 shows. Also because booth prices for the combined January 2018 show are lower than Outdoor Retailer's prices for the last show, which was 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 will 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 define 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.
Two 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 the 17th. Our leverage ratio with net debt of approximately $555 million and acquisition-adjusted EBITDA of $164.4 million for the 12 months ended June 30th, was approximately 3.4 times. As we outlined during the IPO process and have subsequently reaffirmed, our target leverage range is two to three times acquisition-adjusted EBITDA.
That said, we're 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 revenues contracted, including 94% of the projected revenues of the shows that have yet to stage. These percentages are in line with prior years and give us very good visibility to 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 as very difficult to predict due to their unusual circumstances, we now have much greater line of sight to their 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. 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'll now hand the call back to David for his concluding remarks.
Thanks, Phil. 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. One, we have successfully added three high-quality trade shows to the portfolio so far this year through acquisition. Two, 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, and Emerald. Three, we've worked through ASD's substantially shorter summer sales cycle and restructured our future sales efforts based on our learnings.
Four, 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. Five, we have successfully relocated the Interbike Show to what appears to be a significantly more attractive venue for that industry. Lastly, we continue to see good organic growth across much of the portfolio, as evidenced by our solid second quarter performance. We 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 their respective markets.
With that, I'd like to ask the operator to open up the line for any questions.
Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from David Xu with Bank of America. Please proceed.
Great. Thank you. If I can just start with a housekeeping question. Can you just provide revenue by the three segments for the quarter? Maybe the growth rates, if it's easier?
Sure. One second. Sorry, David, I got it here. Make sure, because you asked it on the last call, so I knew you were going to ask it again. Yeah. It's $74 million broken down, $59 million for trade shows, $8 million for other events, and $7 million for other marketing services.
Okay, great. Thank you. Just around the Javits Center, I believe construction is expected to finish in like 2021. 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 NY 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. If somebody uses the ancillary space once and is successful, they're more likely to come back and be used again. 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. It's mostly the same square footage that we'll have available next summer that we have this summer.
Got it. Just lastly, you highlighted five new shows for the year. Just curious, how much in revenue contribution should we expect? Just, how much did new shows contribute in 2016?
In both years, our forecast for 2017 is about half a percent revenue growth from those five. It was a similar number in 2016.
Great. Thank you very much.
Thanks, David.
Thanks.
Thank you. Our next question comes from Anj Singh with Credit Suisse. Please proceed.
Thanks. 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? Maybe what drove some of the softness in Q2 revenue versus the expectations?
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 had 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. The other place would've been the IRCE, the Internet Retailer Conference, where the conference revenues from that event weren't as high as we kind of originally expected. As we've said about conferences, they're a little bit less easily predicted because quite a lot of the revenue occurs on-site over the last few weeks
As people register for the conferences.
The expo is a slight bit larger.
Yeah
at IRCE. The quarter performance was kind of in line with our thinking around these strong shows.
Okay. Got it. How much concern do you have about regaining all 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 or not participating. I think the boycott was a highly unusual issue surrounding the outdoor show. We'll be in discussions with every single company. There's never a guarantee of any company. The high likelihood that the companies boycotting would come back is there. We'll approach each one at a time. Quite frankly, moving to Denver is going to be a positive thing to discuss around the market. We're not anticipating any material declines relative to the move.
Okay, great. One last one from me. You talk about M&A expectations for next year.
Just generally, we've got a great pipeline. We've got things in the pipeline today.
Sure
that we're actively working that we feel will continue to carry forward with our kind of tuck-in strategy for the remainder of this year. I'm sure some of that discussion will trickle over to next year, we have still a robust pipeline with kind of a huge market of, as we've talked about in the past, quite a few actionable targets that we'll be discussing. I don't see a change of strategy. I think we've said we've typically done four to six kind of tuck-in acquisitions. We still see that on the horizon for next year and still probably more to come this year.
Great. Thank you.
Thank you. Our next question comes from Gary Bisbee with RBC. Please proceed.
Hey, guys. Good morning.
Morning, Gary.
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 bounce-back? I guess it would seem from your statements that you clearly expect that at Outdoor Retailer, but the NY NOW issue is maybe it's flat, but not a drag. On the other two, the ASD and the Interbike, what's a reasonable expectation? 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 bounce-back in some of these problem areas?
You may not have heard, because I think we just announced it this morning, Interbike is moving to Reno from its home in Las Vegas. We're adding two days of a consumer festival and a demonstration day ahead of the trade show. We're accelerating the format for the industry. The industry has been very receptive to the move and bringing new elements to the show. 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. 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. We're optimistic about Interbike having a stronger show next year than we had this year.
I think you nailed NY NOW insofar as the facility isn't going to get any bigger next year. 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 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. 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.
Between a lengthened cycle between now and ASD March and next summer, we're optimistic that, A, it won't be a drain. B, we're going to get the growth out of the business that we know the market has it in it. Also, we're continuing to add categories around that show. As you recall, that's a show with a tremendous number of categories. There's always ebb and flows in categories, but we're attacking more new categories in this business. Again, as we've said from the beginning, we believe this business has it in it, 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. Then just more big picture. You've talked about since the separation from Nielsen, investing more in some of the central functions around marketing around database of attendees and exhibitors 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 should think that it's the next few years that that begins to impact the business?
I think each year we'll see some impact as we get into this, with Salesforce and rolling that out across the organization, it's going to take 2018 for that to completely integrate with the business. Pardot, which is the back end business of generating leads. We've developed kind of more of a formalized marketing operations process around our marketing. 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 dashboards, the analytics. Kind of common themes around pricing and our CRM tool, best practices across the organization. I suspect that will roll out throughout 2018, we'll see a bigger lift against that in 2019.
We definitely have our eye on it, and I think it's kind of a rolling positive as we look into 2018, but probably will have a greater effect on our 2019 business.
Okay, great. Thanks a lot.
Our next question comes from Kevin McVeigh with Deutsche Bank. Please proceed.
Great. Thank you. Is there any type of business insurance disruption against the events that happened in Colorado?
All of our events carry business interruption insurance. Should there be a 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 two or three, maybe four times across our shows. We're fully covered across all our shows. I'm not quite sure-
I think Kevin was referring to whether we have any recourse for what just happened on Outdoor Retailer, the answer is no.
That's not a typical business interruption.
No.
That's a choice that the industry kind of leaned on. However, we've learned from that, and we've 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. 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.
Got it. It looks like the EBITDA was a bit better relative to where the revenue came in. Anything that kind of drove that outperformance?
The acquisitions had slightly higher than average contributions in this quarter, that was helpful. It's difficult 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. I'd say that probably the organic growth in EBITDA was probably pretty similar to the organic revenue growth. The acquisitions probably gave us a little bit of a boost.
Got it.
Thank you. Our next question comes from Jeffrey Meuler with Baird. Please proceed.
Yeah. Thank you. Can you give us any sense in terms of roughly how much exhibitor and/or attendee overlap there's typically been between Outdoor Retailer and The Snow Show?
Sure. We'll get more specific internally as we go to market. 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 two. In fact, kind of reminding you of why we put these together is, these two 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 to buy crossover. This is going to create a greater ROI for the business. Although there is crossover, some of the companies didn't show the same product between the two shows. Some companies would show more technical gear at the Outdoor Retailer show and more ski and snowboard-related apparel at the SIA show.
Although we're going to see a bit of an increase in volume across our business, right? We're being affected a bit on the yield of bringing these two longtime shows together. It's going to be a powerful show for the markets as we come together.
Okay. Then I guess the calculus changes when you're acquiring The Snow Show. The $8.5 million was higher than I would've guessed. Just to clarify, was it only contracted for 2018, or did you have some things that were contracted beyond 2018 that go into that buyout?
We were contracted to produce two shows in Salt Lake City in 2018. In order to be able to move in 2018 to Denver, we had to settle with various parties there, which would have included the convention center and hotels and other bodies where we had contracts. The other piece of this expense in Q2 was that in order to operate the combined OR SIA show in 2018 as we'd like, we needed to terminate certain agreements that SIA had in place. Some of those we've done, and some of those we still need to do. We can use Emerald 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 three-show format, integrating two shows in a new location.
We need all the pieces to be in place so that we can do what we do.
Okay. That makes sense. Just any sense on the three shows that you acquired that grew 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 improve 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'd be helpful.
Let me start by reminding you that, we look and have a very stringent criteria around the shows that we acquire. These were market-leading growing shows in strong end markets to begin with. That was an important 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. Mostly it's going to take the second year and sometimes into the third year where our professionalizing the sales approach, our pricing discipline, attacking additional revenue streams, the tracking, recording, the analytics. There's a bit of a small, immediate effect we can have, but it's not a material effect. These are good businesses we're acquiring, and we just see that as a great foundation for making them go from good to great.
That's helpful.
Usually, sorry, just to 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 a limited amount we can do to apply our scale, our best practices, all the things that we bring to the table. As Dave says, to some extent in year two, we can do that, and then by the time we've determined those things and been involved, that's when it kicks in that our cost savings and other kind of benefits that we bring to the table.
Thank you.
Thank you. Our next question comes from Manav Patnaik with Barclays. Please proceed.
Hi, this is Ryan filling in for Manav. On the combination of Snow Show and Outdoor Retailer. I think, prior to this deal, you had talked about an organic step-up in 2018 as a result of adding the third show. Is it safe to say that step-up is now going to be replaced via this acquisition?
That's effectively the case. We're expecting that the three OR shows in 2018, the January one being a combined show, will be at least as large as the previous two Outdoor Retailer shows. We've effectively replaced what was previously a launch plan with the addition of the Snow Show. 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 these shows. There's a little bit 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. We have had, as David said, in order to bring the shows together, we had to make some transitional concessions on pricing that will reduce the yield from the winter shows.
Having said all that, this was a very unique opportunity. There were some very unusual financial parameters that we were dealing with here. It solidified the 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 meets the needs of the industry. It strengthens the brand and the portfolio. Over time, we think this is going to be the best thing for the industry, for the show and for Emerald.
That's just relative to the organic growth around the OR 3-show format. The full 2018 business hasn't been rolled up yet. There's great opportunity across the full portfolio for organic growth. That's just relative to SIA and Outdoor.
We're still at the early days, really, of putting a lot of detail around the three OR shows. As you can imagine, when you introduce a new show, we're still working with the market to figure out how people will work in that three-show environment. 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. Then I guess just on that pricing point, you mentioned that you're moving to a more desirable city. You're combining two shows that a lot of your attendees and exhibitors find pretty attractive, and you talk about the power of the combination of the two. I guess, can you help me understand why exactly there's 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.
You're not always dealing in complete market forces. These are two 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. Although maybe market forces would say that's what somebody can do, this is the right thing to do to bring these two 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. This made sense for these two businesses to come together, and it was part of our Kind of important dialogue between the association to ensure it had a smooth transition coming together.
Got it. Then just on ASD, you called out some of the headwinds in the last quarter, and it sounds like it got slightly worse in the past couple of months. I guess with a business like yours that has such good visibility, what exactly changes in between last quarter and this quarter? Is it renewals that maybe have backed away, or is it all new business that maybe just isn't closing as fast as you would like?
It's the latter. Really, honestly, we didn't find any new drivers change between the last quarter and this quarter. We also didn't get the pickup that we had hoped between the last quarter and this quarter in terms of new business. It's just a matter of the outgoing call volume and the ability to bring in more new companies during the last two months of the sales cycle.
Got it. Makes sense. Thank you.
Once again, if you would like to ask a question, please press * one on your telephone keypad. Our next question comes from Peter Christiansen with Citi. Please proceed.
Hi, thanks. Good morning, guys.
Hey, Peter.
Hi. 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 the space in the last couple of weeks with PE s hop taking out Clarion Events. Now that you're public, have you seen interest for deals increase, or have you seen the competition increase? Also, how are you thinking about multiples going forward?
Maybe I can start, Bill.
Okay.
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., 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'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, they're all staying or running within the traditional framework that we've seen in the past. 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. UBM, Informa, Reed, they're very big companies. To buy a single trade show, it's harder for that to move the needle on their individual business. Two or three or four of these for our business moves the needle. I'm not going to say they're not active or interested in the U.S., but we operate in different industries and end markets. It's rare that we see them on these single tuck-in acquisitions.
Great. Thanks.
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. I just want to tell everybody have a great day. Look forward to talking in the future.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.