Emerald Expositions Events (EEX), the largest operator of B2B trade shows in the US, made a successful IPO debut on Friday. It priced its 15.5 mln share IPO at $17, below the $18-$20 expected range. It then opened for trading at $18.73 and closed at $19.50, which was 15% above its offering price. Since the name is not well known, we wanted to use this opportunity to provide some color on what EEX does.
It currently operates more than 50 trade shows, including 31 of the top 250 trade shows in the country. Trade shows are primarily held in convention centers with booths where companies can promote their products to attendees who are authorized buyers for retail or wholesale customers (as opposed to individual consumers, who would typically attend B2C events). Attendees use these shows to fulfill procurement needs, source new suppliers, reconnect with existing suppliers, identify trends, learn about new products and network with industry peers.
The key value proposition of a trade show is its ability to provide otherwise fragmented bases of attendees and exhibitors the opportunity to interact in person and examine a wide variety of products in a short period of time for a reasonably low cost. One of EEX's largest verticals is Gift, Home & General Merchandise. It currently operates 13 trade shows in this sector that are focused on a broad range of consumer goods mostly used in and around the home. Its two largest franchises in this sector are ASD Market Week and NY NOW.
Another big category is Sports. EEX currently operates 18 trade shows in this sector. Examples include Outdoor Retailer and Surf Expo, as well as other leading shows such as Interbike, Imprinted Sportswear Shows and the Sports Licensing & Tailgate Show, each of which is well-known within its respective industry vertical. Another big category is Design & Construction. EEX currently operates five trade shows in this sector including the HD Expo, GlobalShop and the Healthcare Design Expo & Conference, which focus on interior designers, architects, owners/operators, developers etc.
EEX says it benefits from high renewal rates averaging 81% from 2014 to 2016, resulting in a consistent, predictable and recurring revenue stream. It also has significant revenue visibility, with approximately 98% of eventual 2016 revenue from booth space sales (which represents 74% of total 2016 revenue) sold by the end of 2Q16. EEX also has demonstrated the ability to achieve regular annual price increases across its portfolio.
Taking a quick look at the financials, EEX is highly profitable with 2016 revenue of $323.7 mln, up 6% from 2015. Its operating margin in 2016 came in at a robust 31%, that's up from 27% in 2015. Adjusted net margin in 2016 came in at 19.7% vs 19.0% in 2015. And finally, adjusted EBITDA margin in 2016 came in at 47%, up slightly form 2015 at 46.6%. So as you can see, EEX enjoys robust margins.
In terms of revenue growth, you can see it's pretty modest. However, there is good opportunity to grow via acquisition. While the trade show industry on the whole is large, it is highly fragmented, with the four largest for-profit organizers accounting for just 9% of the US market.
In sum, based on Friday' strong move, it seems investors have a strong interest in EEX. Most notable are its huge margins and the possibility for acquisitions down the line. It's a name to keep on the radar.