Emerald Holding (EEX) 10-Q 2017 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38076

Emerald Expositions Events, Inc.

(Exact name of registrant as specified in its charter)

Delaware	42-1775077
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

31910 Del Obispo Street

Suite 200

San Juan Capistrano, California 92675

(Address of principal executive offices, zip code)

(949) 226-5700

(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of October 31, 2017, there were 72,212,769 shares of the Registrant’s common stock, par value $0.01, outstanding.

EMERALD EXPOSITIONS EVENTS, INC.

TABLE OF CONTENTS

		Page
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		1
PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40
PART II. OTHER INFORMATION		41
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	41

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. You can generally identify forward-looking statements by our use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect” “intend,” “may,” “might,” “plan,” “potential” “predict,” “seek” or “should,” or the negative thereof or other variations thereon or comparable terminology. In particular, statements about the markets in which we operate, including growth of our various markets, and our expectations, beliefs, plans, strategies, objectives, prospects, assumptions or future events or performance contained in this report are forward-looking statements.

We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those discussed in this report under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements, or could affect the trading price of our common stock on the New York Stock Exchange. Some of the factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include:

• general economic conditions;

• reputation of a trade show’s brand;

• our ability to secure desirable dates and locations for our trade shows;

• disruptions in global or local travel conditions or terrorist actions and communicable diseases;

• ability to monitor and respond to changing market trends;

• the failure to attract high-quality exhibitors and attendees;

• competition from existing operators or new competitors;

• our top five trade shows generate a significant portion of our revenues;

• risks associated with our acquisition strategy;

• the effect of shifts in marketing and advertising budgets to online initiatives;

• our ability to retain our senior management team and our reliance on key full-time employees;

• the use of third party agents whom we do not control;

• our and our exhibitors’ reliance on a limited number of outside contractors;

• changes in legislation, regulation and government policy;

• our relationships with industry associations;

• risks and costs associated with new trade show launches;

• that we do not own certain of the trade shows that we operate;

• the infringement or invalidation of proprietary rights;

• disruption of our information technology systems;

• the failure to maintain the integrity or confidentiality of employee or customer data;

• risks associated with event cancellations or interruptions;

• risks associated with material litigation;

• our potential inability to utilize tax benefits associated with our favorable tax attributes;

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• risks associated with previously identified or future material weaknesses; and

• other factors beyond our control, including those listed under “Risk Factors” in our final prospectus, dated April 27, 2017, as filed with the Securities and Exchange Commission (“SEC”) pursuant to Rule 424(b) under the Securities Act of 1933 (the “Prospectus”) and in other filings we may make from time to time with the SEC.

Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements contained in this report are not guarantees of future performance and our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from the forward-looking statements contained in this report. In addition, even if our results of operations, financial condition and liquidity, and events in the industry in which we operate, are consistent with the forward-looking statements contained in this report, they may not be predictive of results or developments in future periods.

Any forward-looking statement that we make in this Quarterly Report on Form 10-Q speaks only as of the date of such statement. Except as required by law, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this report.

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Emerald Expositions Events, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value)

	September 30, 2017		December 31, 2016
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	14,021	$	14,942
Trade and other receivables, net of allowance for doubtful accounts of $589    and $693 as of September 30, 2017 and December 31, 2016, respectively		96,228		57,576
Prepaid expenses		11,364		23,044
Total current assets		121,613		95,562
Noncurrent assets
Property and equipment, net		3,471		3,778
Goodwill		971,537		930,321
Other intangible assets, net		529,751		541,172
Other noncurrent assets		1,658		1,686
Total assets	$	1,628,030	$	1,572,519
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable and other current liabilities	$	44,191	$	28,234
Deferred revenues		143,743		171,644
Term loan, current portion		5,650		8,744
Total current liabilities		193,584		208,622
Noncurrent liabilities
Term loan, net of discount and deferred financing fees		549,023		693,322
Deferred tax liabilities, net		163,224		140,049
Other noncurrent liabilities		1,714		2,758
Total liabilities		907,545		1,044,751
Commitments and contingencies (Note 11)
Shareholders’ equity
Common stock, $0.01 par value; authorized shares: 800,000; issued and    outstanding shares: 72,202 and 61,860 at September 30, 2017 and    December 31, 2016, respectively (1)		722		619
Additional paid-in capital (1)		671,316		510,334
Retained earnings		48,447		16,815
Total shareholders’ equity		720,485		527,768
Total liabilities and shareholders’ equity	$	1,628,030	$	1,572,519

(1) Adjusted to reflect the 125-for-one stock split. See Note 9.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Emerald Expositions Events, Inc.

Condensed Consolidated Statements of Income and Comprehensive Income

(unaudited, in thousands, except earnings per share)

	Three Months Ended September 30, 2017		Three Months Ended September 30, 2016		Nine Months Ended September 30, 2017		Nine Months Ended September 30, 2016
Revenues	$	100,404	$	100,526	$	310,197	$	293,296
Other income		6,519		-		6,519		-
Cost of revenues		27,221		23,632		85,379		75,040
Selling, general and administrative expense		29,411		25,004		95,921		74,178
Depreciation and amortization expense		10,848		9,953		32,250		29,827
Operating income		39,443		41,937		103,166		114,251
Interest expense		6,737		11,940		33,234		38,235
Loss on extinguishment of debt		-		-		216		-
Income before income taxes		32,706		29,997		69,716		76,016
Provision for income taxes		13,499		11,570		27,976		29,783
Net income and comprehensive income	$	19,207	$	18,427	$	41,740	$	46,233
Basic earnings per share (1)	$	0.27	$	0.30	$	0.62	$	0.75
Diluted earnings per share (1)	$	0.25	$	0.29	$	0.59	$	0.73
Basic weighted average common shares    outstanding (1)		72,202		61,860		67,756		61,859
Diluted weighted average common shares    outstanding (1)		75,710		63,372		70,844		63,199
Dividend declared per common share	$	0.07	-		$	0.14	-

(1) Adjusted to reflect the 125-for-one stock split. See Note 9.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Emerald Expositions Events, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited, in thousands)

	Nine Months Ended September 30, 2017			Nine Months Ended September 30, 2016
Operating activities
Net income	$	41,740		$	46,233
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense		2,006			2,422
Provision for doubtful accounts		229			459
Depreciation and amortization		32,250			29,827
Amortization and write-off of deferred financing fees and debt discount		4,442			3,826
Unrealized gain on interest rate swap and floor		(912	)		(49	)
Deferred income taxes		23,175			29,746
Other		(25	)		61
Changes in operating assets and liabilities, net of effect of businesses    acquired:
Trade and other receivables		(38,880	)		(30,811	)
Prepaid expenses		12,305			4,771
Other noncurrent assets		553			(32	)
Accounts payable and other current liabilities		20,256			11,141
Deferred revenues		(29,815	)		(20,661	)
Other noncurrent liabilities		(484	)		68
Net cash provided by operating activities		66,840			77,001
Investing activities
Acquisition of businesses		(55,480	)		(16,484	)
Purchases of property and equipment		(330	)		(1,373	)
Purchases of intangible assets		(391	)		(853	)
Net cash used in investing activities		(56,201	)		(18,710	)
Financing activities
Payment of contingent consideration		(8,259	)		(4,530	)
Proceeds from borrowings on revolving credit facility		25,000			-
Repayment of revolving credit facility		(25,000	)		-
Proceeds from borrowings on term loan		13,047			-
Repayment of principal on term loan		(162,798	)		(34,725	)
Fees paid for debt issuance		(2,483	)		-
Repurchase of common stock		-			(81	)
Cash dividends paid		(10,108	)		-
Payment of costs related to the initial public offering		(6,434	)		-
Proceeds from common stock issuance		165,475			101
Net cash used in financing activities		(11,560	)		(39,235	)
Net (decrease) increase in cash and cash equivalents		(921	)		19,056
Cash and cash equivalents
Beginning of period		14,942			16,261
End of period	$	14,021		$	35,317
Supplemental schedule of non-cash investing and financing activities
Contingent consideration related to 2017 acquisitions	$	3,838		$	-

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Emerald Expositions Events, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Basis of Presentation

The unaudited condensed consolidated financial statements include the operations of Emerald Expositions Events, Inc. (“the Company”) and its wholly-owned subsidiaries. These unaudited condensed consolidated financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC for Interim Reporting. All intercompany transactions, accounts and profits, if any, have been eliminated in the unaudited condensed consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

These unaudited condensed consolidated financial statements do not include all disclosures required by GAAP, therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the more detailed audited consolidated financial statements for the year ended December 31, 2016. The December 31, 2016 condensed consolidated balance sheet was derived from the Company’s audited consolidated financial statements for the year ended December 31, 2016, but does not contain all of the footnote disclosures from the annual financial statements.

The results for the three and nine months ended September 30, 2017 are not necessarily indicative of results to be expected for a full year, any other interim periods or any future year or period.

Initial Public Offering

On April 28, 2017, the Company’s stock began trading on the New York Stock Exchange under the symbol “EEX”. On May 3, 2017, the Company completed the initial public offering of its common stock. The Company sold a total of 10,333,333 shares of common stock, for total net proceeds to the Company of approximately $159.1 million after deducting underwriting discounts and commissions and expenses associated with the offering of $16.5 million. The Company used all of its proceeds from the offering plus cash on hand to prepay $159.2 million of borrowings outstanding under the Term Loan Facility (as defined below).

2. Recently Adopted Accounting Pronouncements

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15). ASU 2016-15 clarifies how certain cash receipts and payments should be presented in the statement of cash flows. This standard is effective for fiscal years beginning after December 15, 2016. Adoption of ASU 2016-15 did not have a significant impact on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718) (ASU 2016-09). ASU 2016-09 identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. This standard is effective for fiscal years beginning after December 15, 2016. Adoption of ASU 2016-09 did not have a significant impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The revised guidance will be applied prospectively and is effective for calendar year-end filers in 2020. Management is currently assessing the impact that adopting this new accounting standard will have on the Company’s consolidated financial statements.

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Emerald Expositions Events, Inc

Notes to Condensed Consolidated Financial Statements

(unaudited)

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, in an effort to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standards of this ASU are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Management is currently assessing the impact that adopting this new accounting standard will have on the Company’s consolidated financial statements.

In December 2016, the FASB issued ASU 2016-19, Technical Corrections and Improvements. The amendments in this update include an amendment to FASB ASC Topic 820, Fair Value Measurement and Disclosures to clarify the difference between a valuation approach and a valuation technique. The amendment also requires an entity to disclose when there has been a change in either or both a valuation approach and/or a valuation technique. This update will be effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. Management is currently assessing the impact that adopting this new standard will have on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which will require lessees to recognize most leases on their balance sheets as a right-of-use asset with a corresponding lease liability, and lessors to recognize a net lease investment. Additional qualitative and quantitative disclosures will also be required. This standard is effective for fiscal years beginning after December 15, 2018. Management is currently assessing the impact that adopting this new accounting standard will have on the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10: Recognition and Measurement of Financial Assets and Financial Liabilities), which revised entities’ accounting related to: (i) the classification and measurement of investments in equity securities; and (ii) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. The new guidance is effective for the Company in annual periods ending after December 15, 2017 and requires a modified retrospective approach to adoption. Early adoption is only permitted for the provision related to instrument-specific credit risk. Management is currently assessing the impact that adopting this new accounting standard will have on the Company’s consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. In August 2015, the FASB issued ASU 2015-14 to defer the effective date for annual reporting to periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted as of the original effective date in ASU 2014-09, which is annual reporting periods beginning after December 15, 2016, however, the Company will not early adopt. In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers which affect narrow aspects of the guidance issued in ASU 2014-09. In May 2016, the FASB issued ASU 2016-12, Narrow Scope Improvements and Practical Expedients, which amends and clarifies certain aspects in ASU 2014-09 that include collectibility, presentation of sales and other taxes collected from customers, noncash consideration, contract modifications and completed contracts at transition. In April 2016, the FASB issued ASU 2016-10, Identifying Performance Obligations and Licensing, which amends the guidance in ASU 2014-09 on accounting for licenses of intellectual property and identifying performance obligations. In March 2016, the FASB issued ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which amends the principal versus agent guidance in ASU 2014-09. The standards are to be applied retrospectively and the Company has elected to utilize the full retrospective method. Management has completed its evaluation and does not believe these standards will have a material impact on the Company’s consolidated financial statements.

There have been no other new accounting pronouncements that are expected to have a significant impact on the Company’s condensed consolidated financial statements or notes thereto.

3. Business Acquisitions

In line with the Company’s strategic growth initiatives, the Company acquired the assets and liabilities of several companies during 2017 (collectively, the “2017 acquisitions”) and 2016 (collectively, the “2016 acquisitions”), as

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Emerald Expositions Events, Inc

Notes to Condensed Consolidated Financial Statements

(unaudited)

described below. Each transaction qualified as an acquisition of a business and was accounted for as a
business combination.

2017 Acquisitions:

CEDIA

The Company acquired the assets and liabilities associated with CEDIA Expo (“CEDIA”) on January 25, 2017, for a total purchase price of $36.0 million, which included a negative working capital adjustment of approximately $1.2 million. The acquisition was financed with cash from operations and a draw on the Company’s revolving credit facility.

All of the external acquisition costs of $0.2 million were expensed as incurred and included in selling, general and administrative expenses in the condensed consolidated statements of income and comprehensive income.

The following table summarizes the fair value of the assets and liabilities at the date of acquisition:

(in thousands)	January 25, 2017
Prepaid expenses		300
Goodwill		24,851
Other intangible assets		11,148
Deferred revenues		(1,496	)
Purchase price, including working capital adjustment	$	34,803

InterDrone

The Company acquired the assets and liabilities associated with the International Drone Conference and Exposition (“InterDrone”) on March 10, 2017, for a total purchase price of $8.2 million, which included a negative working capital adjustment of approximately $0.2 million and contingent consideration of $3.8 million. The $4.4 million closing purchase payment was financed with cash from operations. The $3.8 million is scheduled to be settled in the fourth quarter of 2017 and it is primarily contingent upon achievement of certain performance thresholds. The measurement basis used in calculating the contingent consideration include probability weighted estimates regarding the likelihood of achieving revenue and earnings targets for the respective show acquired. The contingent consideration is included in accounts payable and other accrued liabilities in the condensed consolidated balance sheet at September 30, 2017.

All of the external acquisition costs of $0.4 million were expensed as incurred and included in selling, general and administrative expenses in the condensed consolidated statements of income and comprehensive income.

The following table summarizes the fair value of the assets and liabilities at the date of acquisition:

(in thousands)	March 10, 2017
Prepaid expenses		31
Goodwill		5,511
Other intangible assets		2,826
Deferred revenues		(199	)
Purchase price, including working capital adjustment	$	8,169

Snow Show

The Company acquired the assets and liabilities associated with the SnowSports Industries America Snow Show (“Snow Show”) on May 24, 2017, for a total purchase price of $16.3 million, which included a negative working capital adjustment of approximately $0.3 million. The acquisition was financed with cash from operations.

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Emerald Expositions Events, Inc

Notes to Condensed Consolidated Financial Statements

(unaudited)

All of the external acquisition costs of $0.3 million were expensed as incurred and included in selling, general and administrative expenses in the condensed consolidated statements of income and comprehensive income.

The following table summarizes the fair value of the assets and liabilities at the date of acquisition:

(in thousands)	May 24, 2017
Goodwill		10,854
Other intangible assets		5,826
Deferred revenues		(333	)
Purchase price, including working capital adjustment	$	16,347

In connection with the 2017 acquisitions, the Company recorded goodwill of $41.2 million. In the view of management, the goodwill recorded reflects the future cash flow expectations for the acquired businesses’ market positions in their respective trade show industries. Substantially all of the goodwill recorded is expected to be deductible for income tax purposes.

2016 Acquisitions:

Collective

On August 8, 2016, the Company acquired the assets and liabilities associated with the Swim Collective Trade Show and the Active Collective Trade Show (“Collective”), for a purchase price of $14.1 million, which reflects the contingent consideration payment of $1.3 million during the nine months ended September 30, 2017. The contingent consideration was primarily based upon performance thresholds around revenue and earnings. The liability was re-measured to fair value each reporting period using our most recent internal operational budgets. As a result of our review, a $0.1 million decrease in the fair value of the contingent consideration liability is included in sales, general and administrative expense in the condensed consolidated statements of income and comprehensive income. The measurement period was closed during the second quarter of 2017.

Digital Dealer

On October 11, 2016, the Company acquired the assets and liabilities associated with the Digital Dealer Conference & Expo (“Digital Dealer”), for a purchase price of $19.7 million. The Company paid $4.7 million of contingent consideration during the second quarter of 2017. The remaining $0.2 million contingent consideration, subject to any final working capital adjustment, is scheduled to be settled in the fourth quarter of 2017. The contingent consideration is primarily based upon performance thresholds around revenue and earnings. The liability is re-measured to fair value each reporting period using our most recent internal operational budgets. As a result of our review, a $0.8 million decrease in the fair value of the contingent consideration liability is included in sales, general and administrative expense in the condensed consolidated statements of income and comprehensive income. The contingent consideration liability is included in accounts payable and other accrued liabilities in the condensed consolidated balance sheet at September 30, 2017 and December 31, 2016. In conjunction with the acquisition, there is a $1.0 million contingent compensation payment that is scheduled to be settled in January 2018. Payment of this contingent amount is primarily based upon achievement of certain performance thresholds as well as the continued engagement of the seller. As such, the $1.0 million was determined to be compensation and is being ratably expensed during the requisite service period. During the three and nine months ended September 30, 2017, $0.2 million and $0.6 million, respectively, of the contingent compensation expense was included in sales, general and administrative expense in the condensed consolidated statements of income and comprehensive income. As of September 30, 2017 and December 31, 2016, $0.8 million and $0.2 million was included in accounts payable and other accrued liabilities in the condensed consolidated balance sheets. The measurement period for this acquisition was closed in the third quarter of 2017.

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Emerald Expositions Events, Inc

Notes to Condensed Consolidated Financial Statements

(unaudited)

Pavement

On October 18, 2016, the Company acquired the assets and liabilities associated with the National Pavement Expo (“Pavement”), for a purchase price of $8.7 million, which reflects the contingent consideration payment of $2.3 million during the second quarter of 2017. The contingent consideration was primarily based upon performance thresholds around revenue and earnings. The liability was re-measured to fair value each reporting period using our most recent internal operational budgets. As a result of our review, the $0.9 million increase in the fair value of the contingent consideration liability is included in sales, general and administrative expense in the condensed consolidated statements of income and comprehensive income. The measurement period for this acquisition was closed in the second quarter of 2017.

RFID

On November 15, 2016, the Company acquired the assets and liabilities associated with RFID Journal LIVE! (“RFID LIVE!”) for a purchase price of $5.7 million. In conjunction with the acquisition, there are contingent compensation payments of $2.5 million that are scheduled to be settled during the first quarter of 2018 and 2019, which are primarily contingent upon achievement of certain performance thresholds and the continued employment of the seller. As such, the $2.5 million was determined to be compensation and is being ratably expensed during the requisite service period. During the three and nine months ended September 30, 2017, $0.4 million and $1.3 million, respectively, of the contingent compensation expense was included in sales, general and administrative expense in the condensed consolidated statements of income and comprehensive income. As of September 30, 2017 and December 31, 2016, $1.2 million and $0.2 million, respectively, were included in accounts payable and other accrued liabilities in the condensed consolidated balance sheets. The remaining $0.2 million is included in other noncurrent liabilities as of September 30, 2017, as this amount is scheduled to be settled during the first quarter of 2019. The measurement period for this acquisition was closed in the third quarter of 2017.

ACRE

On December 13, 2016, the Company acquired the assets and liabilities associated with the American Craft Retailers Expo (“ACRE”), for a purchase price of $5.0 million, which includes a negative working capital adjustment of $1.1 million.

Supplemental Pro-Forma Information

Supplemental information on an unaudited pro-forma basis, as if the 2017 and 2016 acquisitions had occurred as of the beginning of the year prior to the year in which the acquisitions closed, is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2017		2016		2017		2016
Revenues	$	106,923	$	113,597	$	321,136	$	320,501
Net income	$	19,207	$	22,073	$	43,415	$	52,406
Basic earnings per share	$	0.27	$	0.36	$	0.64	$	0.85
Diluted earnings per share	$	0.25	$	0.35	$	0.61	$	0.83
Basic weighted average common shares outstanding		72,202		61,860		67,756		61,859
Diluted weighted average common shares outstanding		75,710		63,372		70,844		63,199

Since their respective acquisition dates, the 2017 acquisitions generated revenues of $8.6 million and net income of $2.8 million and $2.7 million, during the three and nine months ended September 30, 2017, respectively.

The unaudited pro-forma supplemental information is based on estimates and assumptions that the Company believes are reasonable and reflects amortization of intangible assets as a result of the acquisitions. This supplemental pro-forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the acquisitions been made at the beginning of the year prior to the year in which the acquisitions closed, nor is it indicative of any future results. Further, the supplemental pro-forma information has not been adjusted for show timing differences or discontinued events.

10

Emerald Expositions Events, Inc

Notes to Condensed Consolidated Financial Statements

(unaudited)

4. Goodwill and Other Intangible Assets

Goodwill

The table below summarizes the changes in the carrying amount of goodwill:

(in thousands)
Balance at December 31, 2016	$	930,321
CEDIA		24,851
InterDrone		5,511
Snow Show		10,854
Balance at September 30, 2017	$	971,537

Other Intangible Assets

Other intangible assets consisted of the following:

(in thousands)	December 31, 2016			Additions			Transfers			September 30, 2017
Indefinite-lived intangible assets
Trade names	$	278,809		$	6,723		$	-		$	285,532
Amortizing intangibles
Customer-related intangibles		382,750			13,077			-			395,827
Computer software		8,047			14			421			8,482
		669,606			19,814			421			689,841
Accumulated amortization
Customer-related intangibles		(124,359	)		(30,808	)		-			(155,167	)
Computer software		(4,394	)		(804	)		-			(5,198	)
		(128,753	)		(31,612	)		-			(160,365	)
Capitalized software in progress		319		377				(421	)		275
Total other intangibles, net	$	541,172		$	(11,421	)	$	-		$	529,751

The amortization expense for the three and nine months ended September 30, 2017 was $10.6 million and $31.6 million, respectively.The amortization expense for the three and nine months ended September 30, 2016 was $9.8 million and $29.3 million, respectively.

5. Property and Equipment

Property and equipment, net, consisted of the following:

(in thousands)	December 31, 2016			Additions			Disposals			September 30, 2017
Leasehold improvements	$	1,825		$	81		$	-		$	1,906
Furniture, equipment and other		4,747		249				(4	)		4,992
		6,572			330			(4	)		6,898
Less: Accumulated depreciation		(2,794	)		(637	)		4			(3,427	)
Property and equipment, net	$	3,778		$	(307	)	$	-		$	3,471

Depreciation expense related to property and equipment for the three and nine months ended September 30, 2017 was $0.2 million and $0.6 million, respectively.  Depreciation expense related to property and equipment for the three and nine months ended September 30, 2016 was $0.2 million and $0.5 million, respectively.

11

Emerald Expositions Events, Inc

Notes to Condensed Consolidated Financial Statements

(unaudited)

6. Long-Term Debt

Senior Secured Credit Facilities

On May 22, 2017 (the “Effective Date”), the Company’s wholly owned subsidiary, Emerald Expositions Holding, Inc. (“EEH”) entered into an amendment and restatement of its senior secured credit facilities.  Prior to the amendment and restatement, the senior secured credit facilities consisted of (a) a seven-year $430.0 million senior secured term loan facility (the “Term Loan Facility”) and (b) a $90.0 million senior secured revolving credit facility (the “Revolving Credit Facility” and, together the “Senior Secured Credit Facilities”). On January 15, 2014, EEH entered into an amendment to the Senior Secured Credit Facilities, to borrow an additional $200.0 million of term loans under the Term Loan Facility to fund a portion of the consideration for its acquisition of George Little Management. On July 21, 2014, EEH entered into a second amendment to the Senior Secured Credit Facilities to lower the interest rate and LIBOR floor rate. On October 28, 2016, EEH entered into a third amendment to the Senior Secured Credit Facilities to (i) borrow an additional $200.0 million of term loans under the Term Loan Facility to fund a portion of the redemption of the 9.000% Senior Notes due 2021 and (ii) increase commitments under the Revolving Credit Facility by $10.0 million to a total of $100.0 million. On May 8, 2017, using the net proceeds from the initial public offering, the Company prepaid $159.2 million of borrowings outstanding under the Term Loan Facility. On May 22, 2017, EEH amended and restated the Senior Secured Credit Facilities (the “Amended and Restated Senior Secured Credit Facilities”).  The Amended and Restated Senior Secured Credit Facilities, which were entered into with a syndicate of lenders and Bank of America, N.A., as administrative agent, consist of (i) a seven-year $565.0 million senior secured term loan facility (the “Amended and Restated Term Loan Facility”), scheduled to mature on May 22, 2024 and (ii) a $150.0 million senior secured revolving credit facility (the “Amended and Restated Revolving Credit Facility”), scheduled to mature on May 23, 2022.  

The Amended and Restated Term Loan Facility proceeds of $563.6 million (net of a $1.4 million original issuance discount) were used to repay the outstanding principal and interest under the Term Loan Facility, pay third party fees of $6.5 million and pay $0.8 million in financing fees related to the increase in commitments under the Revolving Credit Facility and the Amended and Restated Revolving Credit Facility.  An additional $1.5 million in third party fees were paid with cash from operations.  Due to the substantial overlap of lenders under the Term Loan Facility and the Amended and Restated Term Loan Facility, $6.2 million of the $6.5 million in third party fees were recognized as interest expense.  The remaining $0.3 million, together with the $1.5 million in third party fees that were paid with cash from operations, were recorded as deferred financing fees. The $1.4 million original issuance discount and the $0.3 million in deferred financing fees will be amortized over the life of the Amended and Restated Term Loan Facility using the effective interest method.  The $0.8 million in deferred financing fees related to the Amended and Restated Revolving Credit Facility will be amortized over the life of the facility using the effective interest method.    

The Amended and Restated Senior Secured Credit Facilities allow for EEH to choose from the following two interest rate options:

- Alternate Base Rate (“ABR”) loans bear interest at a rate equal to a spread, or applicable margin, above the greatest of (i) the administrative agent’s prime rate, (ii) the Federal Funds Rate plus 50 basis points, and (iii) the one month London Interbank Offered Rate (“LIBOR”) plus 1.00%.

or

- LIBOR loans bear interest at a rate equal to a spread, or applicable margin, over the LIBOR rate.

Initially, the spread, or applicable margin, was 2.00% for ABR loans and 3.00% for LIBOR loans.  Following the first fiscal quarter after the Effective Date, (i) the applicable margin will step down by 0.25% if EEH’s Total First Lien Net Leverage Ratio (as defined in the Amended and Restated Senior Secured Credit Facilities) is lower than 2.75 to 1.00 and (ii) the applicable margin under the Amended and Restated Revolving Credit Facility (but not the Amended and Restated Term Loan Facility) will step down by an additional 0.25% if EEH’s Total First Lien Net Leverage Ratio is less than 2.50 to 1.00.

EEH is required to pay a quarterly commitment fee in respect of the unutilized commitments under the Amended and Restated Revolving Credit Facility in an amount equal to 0.50% per annum, subject to a leverage-based step down.  Upon the issuance of letters of credit under the Amended and Restated Revolving Credit Facility, EEH is required to

12

Emerald Expositions Events, Inc

Notes to Condensed Consolidated Financial Statements

(unaudited)

pay fronting fees, customary issuance and administration fees and a letter of credit fee equal to the then-applicable margin (as determined by reference to LIBOR) for the Amended and Restated Revolving Credit Facility.  

EEH had no borrowings under its Amended and Restated Revolving Credit Facility as of September 30, 2017 and December 31, 2016, respectively. EEH had $0.9 million and $0.6 million in stand-by letters of credit issuances under its Amended and Restated Revolving Credit Facility and its Revolving Credit Facility as of September 30, 2017 and December 31, 2016, respectively.

Payments and Commitment Reductions

The Amended and Restated Term Loan Facility will be paid down in equal quarterly installments of 0.25% of the $565.0 million (the principal amount outstanding at the Effective Date), with the balance due at maturity.  Installment payments on the Amended and Restated Term Loan Facility are due on the last business day of each quarter, commencing on September 29, 2017.  

Subject to the certain customary exceptions and limitations, EEH is required to prepay amounts outstanding under the Amended and Restated Term Loan Facility under specified circumstances, including 50.0% of Excess Cash Flow (“ECF”), subject to step-downs to 25% and 0% of excess cash flow at certain leverage based thresholds, and with 100% of the net cash proceeds of asset sales and casualty events in excess of certain thresholds (subject to certain reinvestment rights).

EEH may prepay the loans in whole or part without premium or penalty.  

Guarantees; Collateral; Covenants; Events of Default

All obligations under the Amended and Restated Senior Secured Facility are guaranteed by EEH’s direct parent company and, subject to certain exceptions, by all of EEH’s direct and indirect wholly owned domestic subsidiaries.  As of September 30, 2017, all of EEH’s subsidiaries and EEH’s direct parent have provided guarantees.

Subject to certain limitations, the obligations under the Amended and Restated Senior Secured Credit Facilities are secured by a perfected first priority security interest in substantially all tangible and intangible assets owned by EEH or by any guarantor.

The Amended and Restated Senior Secured Credit Facilities contain customary incurrence-based negative covenants, including limitations on indebtedness; limitations on liens; limitations on certain fundamental changes (including, without limitation, mergers, consolidations, liquidations and dissolutions); limitations on asset sales; limitations on dividends and other restricted payments; limitations on investments, loans and advances; limitations on repayments of subordinated indebtedness; limitations on transactions with affiliates; limitations on changes in fiscal periods; limitations on agreements restricting liens and/or dividends; and limitations on changes in lines of business.  In addition, the Amended and Restated Revolving Credit Facility contains a financial covenant requiring EEH to comply with a 5.50 to 1.00 total first lien net secured leverage ratio test.  This financial covenant is tested quarterly only if the aggregate amount of revolving loans, swingline loans and letters of credit outstanding under the Amended and Restated Revolving Credit Facility (net of up to $10.0 million of outstanding letters of credit) exceeds 35% of the total commitments thereunder.  As of September 30, 2017, this financial covenant has not been triggered and EEH was in compliance with all covenants under the Amended and Restated Senior Credit Facilities.  

EventsofdefaultundertheAmended and Restated Senior Secured Credit Facilitiesinclude,amongothers,nonpaymentofprincipal when due; nonpayment of interest, fees or other amounts; cross-defaults; covenant defaults; material inaccuracy of representations and warranties; certain bankruptcy and insolvency events; material unsatisfied or unstated judgments; certain ERISA events; change of control; or actual or asserted invalidity of any guarantee or security document. There were no events of default under the Amended and Restated Senior Secured Credit Facilities as of September 30, 2017.

13

Emerald Expositions Events, Inc

Notes to Condensed Consolidated Financial Statements

(unaudited)

Long-term debt is comprised of the following indebtedness to various lenders:

(in thousands)	September 30, 2017		December 31, 2016
Term Loan Facility, with interest at LIBOR    plus 3.75% (equal to 4.75%) due 2020, net (a)	$	-	$	702,066
Amended and Restated Term Loan Facility, with interest    at LIBOR plus 3.00% (equal to 4.15%) due 2024, net (b)		554,673		-
Less: Current maturities		5,650		8,744
Long-term debt, net of current maturities, debt discount    and deferred financing fees	$	549,023	$	693,322

(a) Term Loan Facility as of December 31, 2016 is recorded net of unamortized discount of $6.0 million and net of unamortized deferred financing fees $5.2 million.

(b) Amended and Restated Term Loan Facility as of September 30, 2017 is recorded net of unamortized discount of $5.2 million and net of unamortized deferred financing fees of $3.7 million.

During the nine months ended September 30, 2017, EEH made borrowings and repayments of $25.0 million on the Amended and Restated Revolving Credit Facility.  During the nine months ended September 30, 2016, EEH had no activity on the Revolving Credit Facility.  EEH had $0.9 million and $0.6 million in stand-by letter of credit issuances under the Amended and Restated Revolving Credit Facility and the Revolving Credit Facility as of September 30, 2017 and December 31, 2016, respectively.

Interest Expense

Interest expense reported in the condensed consolidated statements of income and comprehensive income consist of the following:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2017		2016		2017		2016
Senior secured term loan	$	6,135	$	6,277	$	21,872	$	19,472
Refinancing charges		-		-		6,151		-
9.00% Senior notes		-		4,500		-		13,500
Noncash interest for amortization of debt discount and    debt issuance costs		372		1,030		4,227		3,826
Realized and unrealized loss on interest rate swap and    floor, net		-		13		182		1,059
Revolving credit facility commitment fees		230		120		802		378
	$	6,737	$	11,940	$	33,234	$	38,235

Interest Rate Swap and Floor

In March 2014, the Company entered into forward interest rate swap and floor contracts to manage and reduce its interest rate risk. The Company’s interest rate swap and floor have an effective date of December 31, 2015 and are settled on the last business day of each month of March, June, September and December, beginning March 31, 2016 through December 31, 2018. The Company made payments of $0.4 million and $1.1 million during the three and nine months ended September 30, 2017 and 2016, respectively, representing the differential between the three-month LIBOR rate 1.296% and 2.705% and 0.631% and 2.705%, respectively, on the principal amount of $100.0 million. The Company marks-to-market its interest rate contracts quarterly with the unrealized and realized gains and losses included in interest expense in the condensed consolidated statements of income and comprehensive income. For the three and nine months ended September 30, 2017, the Company recorded realized losses of $0.4 million and $1.1 million, respectively. For the three and nine months ended September 30, 2016, the Company recorded realized losses of $0.4 million and $1.1 million, respectively. For the three and nine months ended September 30, 2017, the Company recorded unrealized gains of $0.4 million and $0.9 million, respectively.  For the three and nine months ended

14

Emerald Expositions Events, Inc

Notes to Condensed Consolidated Financial Statements

(unaudited)

September 30, 2016, the Company recorded unrealized gains of $0.4 million and $0.1 million, respectively. The liability is included in accounts payable and other current liabilities and noncurrent liabilities in the condensed consolidated balance sheets.

7. Fair Value Measurements

As of September 30, 2017, the Company’s liabilities measured at fair value on a recurring basis are categorized in the table below:

(in thousands)	Total		Level 1		Level 2		Level 3
Liabilities
Interest rate swap and floor (a)	$	1,354	$	-	$	1,354	$	-
Contingent consideration (b)		4,041		-		-		4,041
Total liabilities at fair value	$	5,395	$	-	$	1,354	$	4,041

(a) Included in accounts payable and other current liabilities in the condensed consolidated balance sheets.

(b) Included in accounts payable and other current liabilities in the condensed consolidated balance sheets.

As of December 31, 2016, the Company’s liabilities measured at fair value on a recurring basis are categorized in the table below:

(in thousands)	Total		Level 1		Level 2		Level 3
Liabilities
Interest rate swap and floor (a)	$	2,266	$	-	$	2,266	$	-
Contingent consideration (b)		8,488		-		-		8,488
Total liabilities at fair value	$	10,754	$	-	$	2,266	$	8,488

(a) Included in accounts payable and other current liabilities and other noncurrent liabilities in the condensed consolidated balance sheets.

(b) Included in accounts payable and other current liabilities in the condensed consolidated balance sheets.

The contingent consideration liabilities of $4.0 million as of September 30, 2017 are scheduled to be settled in the fourth quarter of 2017. The unobservable inputs used in calculating contingent consideration include probability weighted estimates regarding the likelihood of achieving revenue and earnings targets for each of the respective shows acquired. These liabilities are re-measured to fair value each reporting period using our most recent internal operational budgets.

The contingent consideration liabilities of $8.5 million at December 31, 2016, were remeasured and the Company made earn out payments of $8.3 million during the nine months ended September 30, 2017. The determination of the fair value of the contingent consideration liabilities could change in future periods based upon our ongoing evaluation of the changes in the probability of achieving the revenue or earnings targets. The changes in the fair value of the liabilities have been recorded in sales, general and administrative expense in the condensed consolidated statements of income and comprehensive income.

The carrying and fair values of the Company’s debt as of September 30, 2017 were $554.7 million and $562.6 million, respectively. The carrying and fair values of the Company’s debt as of December 31, 2016 were $702.1 million and $710.8 million, respectively. The variance between the book value and fair value of the Company’s variable-rate term loans is due to the difference between the period-end market interest rates and the projected market interest rates over the term of the loans, as well as the financial performance of the Company since the issuance of the debt. The Company estimated the fair value of its variable-rate debt using quoted market prices (Level 2 inputs).

15

Emerald Expositions Events, Inc

Notes to Condensed Consolidated Financial Statements

(unaudited)

8. Shareholders’ Equity and Stock-Based Compensation

Emerald Expositions Events, Inc. Common Stock Issuances

On August 1, 2017, the Board of Directors declared and approved a dividend on each share of common stock outstanding on the record date (August 17, 2017), payable to the Company’s common stock holders on August 31, 2017. The dividend payment was $0.07 per share and resulted in an aggregate dividend payment of $5.1 million.

On May 24, 2017, the Board of Directors declared and approved a dividend on each share of common stock outstanding on the record date (June 7, 2017), payable to the Company’s common stock holders on June 21, 2017. The dividend payment was $0.07 per share and resulted in an aggregate dividend payment of $5.1 million.  

On April 28, 2017, the Company’s stock began trading on the New York Stock Exchange under the symbol “EEX”. On May 3, 2017, the Company completed the initial public offering of its common stock. The Company sold a total of 10,333,333 shares of common stock.

On January 31, 2017, the Board of Directors approved and granted 8,625 shares of the Company’s common stock to three independent directors as part of their Board compensation.

On March 11, 2016, the Company paid $0.1 million to repurchase 6,250 shares of the Company’s common stock from a departing member of senior management.

On February 10, 2016, the Company received $0.1 million representing 7,750 shares of the Company’s common stock purchased by an independent director.

On February 9, 2016, the Board of Directors approved and granted 11,625 shares of the Company’s common stock to three independent directors as part of their Board compensation.

Emerald Expositions Events, Inc. 2013 Stock Option Plan (“the 2013 Plan”) and 2017 Omnibus Equity Plan (“the 2017 Plan”)

In April 2017, the Company adopted the 2017 Plan. The Company’s stockholders approved the 2017 Plan and it became effective in connection with the Company’s initial public offering. Under the 2017 Plan, the Company may grant incentive stock options, non-statutory stock options, restricted stock, restricted stock units (“RSUs”) and stock appreciation rights, dividend equivalent rights, share awards and performance-based awards to employees, directors or consultants. The Company has initially reserved 5,000,000 shares of its common stock for issuance under the 2017 Plan.

Restricted Stock Units

In 2017, the Company granted RSUs that contain service and, and in certain instances performance conditions to certain executives and employees. The Company recognizes cumulative stock-based compensation expense for the portion of the awards for which the service period and performance conditions, as applicable, have been satisfied. The stock-based compensation expense recognized in the three and nine months ended September 30, 2017 was $0.3 million.

The Company’s summary of RSU activity under the 2017 Plan was as follows:

	Number of RSUs		Grant Date Fair Value per Share
Unvested balance, December 31, 2016		-	$	-
Granted		90,646		21.76
Forfeited		-		-
Vested		-		-
Unvested balance, September 30, 2017		90,646	$	21.76

16

Emerald Expositions Events, Inc

Notes to Condensed Consolidated Financial Statements

(unaudited)

Stock Options

The Company recognized stock-based compensation expense of $0.4 million, $1.6 million, $0.7 million and $2.3 million for the three and nine months ended September 30, 2017 and 2016, respectively, related to the 2013 and 2017 Plans. Stock-based compensation expense is included in selling, general and administrative expense in the condensed consolidated statements of income and comprehensive income. The related deferred tax benefit for stock-based compensation recognized was $0.3 million, $0.3 million, $0.7 million, and $0.9 million for the three and nine months ended September 30, 2017 and 2016, respectively.

Stock option activity for the nine months ended September 30, 2017, was as follows:

				Weighted-Average
	Number of Options			Exercise Price per Option		Remaining Contractual Term		Aggregate Intrinsic Value
						(years)		(thousands)
Balance, December 31, 2016		7,157,250		$	10.91		6.94
Granted		45,200			22.66		9.98
Exercised		-			-		-
Forfeited		(159,825	)		12.30		7.45
Expired		-			-		-
Balance, September 30, 2017		7,042,625		$	10.96		6.18	$	86,500
Exercisable at September 30, 2017		4,820,825		$	10.81		6.05	$	59,925

The aggregate intrinsic value is the amount by which the fair value of the Company’s common stock exceeded the exercise price of the options at September 30, 2017, for those options for which the market price was in excess of the exercise price.

There was a total of $1.6 million unrecognized stock-based compensation expense at September 30, 2017 related to non-vested stock options expected to be recognized over a weighted-average period of 1.2 years.

9. Earnings Per Share

Basic earnings per share is computed using the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted-average number of common shares outstanding during the period, plus the dilutive effect of outstanding options, using the treasury stock method and the average market price of the Company’s common stock during the applicable period. Certain shares related to some of the Company’s outstanding stock options were excluded from the computation of diluted earnings per share because they were antidilutive in the periods presented, but could be dilutive in the future.

On April 10, 2017, the Company effected a 125-for-one stock split of the Company’s issued and outstanding common shares and increased its authorized shares of common stock to 800,000,000 shares. The par value of the common stock was not adjusted as a result of the stock split. All issued and outstanding share and per share amounts included in the accompanying unaudited condensed consolidated financial statements have been retroactively restated to reflect the stock split. Fractional shares resulting from the stock split were rounded down to the nearest whole share.

17

Emerald Expositions Events, Inc

Notes to Condensed Consolidated Financial Statements

(unaudited)

The details of the computation of basic and diluted earnings per common share are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except for per share data)	2017		2016		2017		2016
Net income	$	19,207	$	18,427	$	41,740	$	46,233
Weighted average common shares outstanding		72,202		61,860		67,756		61,859
Basic earnings per share	$	0.27	$	0.30	$	0.62	$	0.75
Net income	$	19,207	$	18,427	$	41,740	$	46,233
Dilutive effect of stock options		3,508		1,512		3,088		1,340
Diluted weighted average common shares outstanding		75,710		63,372		70,844		63,199
Diluted earnings per share	$	0.25	$	0.29	$	0.59	$	0.73
Anti-dilutive shares excluded from diluted    earnings per share calculation		45		1,653		45		1,652

10. Income Taxes

The Company calculates its provision for income taxes by estimating its annual effective tax rate (estimated annual tax provision divided by estimated annual income before taxes) and applying the effective tax rate to income before taxes for the quarter, plus or minus the tax effects of items that relate uniquely to the quarter, if any.

For the three months ended September 30, 2017 and 2016, the Company recorded provisions for income taxes of $13.5 million and $11.6 million, respectively, which resulted in effective tax rates of 41.3% and 38.6%. For the nine months ended September 30, 2017 and 2016, the Company recorded provisions for income taxes of $28.0 million and $29.8 million, respectively, which resulted in effective tax rates of 40.1% and 39.2%. The differences between the statutory and effective tax rates are primarily attributable to the effects of state income taxes.

Liabilities for unrecognized tax benefits and associated interest and penalties were $0.7 million and $0.6 million as of September 30, 2017 and December 31, 2016, respectively.

11. Commitments and Contingencies

Other Income

During the third quarter of 2017, as a result of Hurricane Irma, the Company’s Surf Expo and Imprinted Sportswear Show - Orlando (“ISS Orlando”) were forced to close two days early.  The Company carries cancellation insurance to mitigate losses caused by natural disasters and received confirmation from its insurance carrier that a settlement of approximately $6.5 million will be paid to offset the lost revenues of the affected trade shows.  Management concluded that the receipt of insurance proceeds was realizable prior to September 30, 2017. As a result, during the three and nine months ended September 30, 2017, the Company recorded Other Income of $6.5 million to recognize the amount to be recovered from the insurance company in the condensed consolidated statements of income and comprehensive income.    

Leases and Other Contractual Arrangements

The Company has entered into operating leases and other contractual obligations to secure real estate facilities and trade show venues. These agreements are not unilaterally cancelable by the Company, are legally enforceable and specify fixed or minimum amounts or quantities of goods or services at fixed or minimum prices.

Legal Proceedings and Contingencies

The Company is subject to litigation and other claims in the ordinary course of business. In the opinion of management, the Company’s liability, if any, arising from regulatory matters and legal proceedings related to these matters is not expected to have a material adverse impact on the Company’s condensed consolidated balance sheets, results of operations or cash flows.

18

Emerald Expositions Events, Inc

Notes to Condensed Consolidated Financial Statements

(unaudited)

In the opinion of management, there are no claims, commitments or guarantees pending to which the Company is party that would have a material adverse effect on the condensed consolidated financial statements.

12. Accounts Payable and Other Current Liabilities

Accounts payable and other current liabilities consisted of the following:

	September 30,		December 31,
(in thousands)	2017		2016
Accrued event costs	$	14,743	$	3,647
Customer deposits		6,576		-
Trade payables		6,688		3,812
Accrued personnel costs		5,375		6,965
Contingent consideration		4,041		8,488
Accrued interest		73		102
Other current liabilities		6,695		5,220
Total accounts payable and other current liabilities	$	44,191	$	28,234

Other current liabilities is primarily comprised of corporate accruals and the current portion of the liability related to the interest rate swap and floor contract.

13. Subsequent Events

On October 27, 2017, the Company’s Board of Directors approved, and the Company subsequently declared, the payment of a cash dividend of $0.07 per share for the quarter ending December 31, 2017 to holders of record of the Company’s common stock as of November 16, 2017.  

19

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis of the financial condition and results of our operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes of Emerald Expositions Events, Inc. included in Item 1 of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and the related notes thereto in our final prospectus, dated April 27, 2017, as filed with the Securities and Exchange Commission (“SEC”) pursuant to Rule 424(b) under the Securities Act of 1933 (the “Prospectus”). You should review the disclosures under the headings “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in the Prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. All expressions of the “Company”, “us,” “we,” “our,” and all similar expressions are references to Emerald Expositions Events, Inc., together with its consolidated subsidiaries, unless otherwise expressly stated or the context otherwise requires.

Recent Events

IPO

On May 3, 2017, we completed the initial public offering (“IPO”) of 17,825,000 shares of our common stock at a price of $17.00 per share. We sold 10,333,333 shares, resulting in net proceeds to us after underwriting discounts and expenses of $159.1 million, and funds managed by Onex Partners Manager LP and its affiliates (“Onex”) sold 7,491,667 shares from which we did not receive any proceeds. We used all of the net proceeds from the offering plus cash on hand, to prepay $159.2 million of borrowings outstanding under the Term Loan Facility (as defined below).

Refinancing

On May 22, 2017, our wholly owned subsidiary, Emerald Expositions Holding, Inc. (“EEH”), entered into an amendment and restatement of its senior secured credit facilities which originally consisted of (a) a seven-year $430.0 million senior secured term loan facility (the “Term Loan Facility”), scheduled to mature on June 17, 2020 and (b) a $90.0 million senior secured revolving credit facility (the “Revolving Credit Facility”), scheduled to mature on June 17, 2018 (together, the “Senior Secured Credit Facilities”). The Amended and Restated Senior Secured Credit Facilities, which were entered into with a syndicate of lenders and Bank of America, N.A., as administrative agent, consist of (i) Amended and Restated Term Loan Facility, scheduled to mature on May 22, 2024 and (ii)  the Amended and Restated Revolving Credit Facility, which is scheduled to mature on May 23, 2022. See “—Long Term Debt—Senior Secured Credit Facilities.”

Snow Show Acquisition

In line with our strategic growth initiatives, on May 24, 2017, we acquired Snow Show for a purchase price of approximately $17 million. When acquired, Snow Show was the largest snow sports industry event in North America and was ranked 67th in the TSNN Top 250 trade shows in the United States in 2016. Starting in January 2018, Snow Show will merge with OR to become Outdoor Retailer + Snow Show, endorsed and sponsored by SnowSports Industries America and Outdoor Industry Association.

Overview

We are the largest operator of business-to-business trade shows in the United States, with most of our trade shows dating back several decades. We currently operate more than 55 trade shows, as well as numerous other events. In 2016, our events connected over 500,000 global attendees and exhibitors and occupied over 6.5 million net square feet of exhibition space. We have been recognized with many awards and accolades that reflect our industry leadership as well as the importance of our shows to the exhibitors and attendees we serve.

Our mission is to deliver value to our exhibitors and attendees by producing highly-relevant, industry-leading events that enhance the productivity of an industry’s participants and facilitate interaction between its most influential stakeholders on a regular, scheduled basis. We currently operate trade shows within several diverse industry sectors including Gift, Home & General Merchandise; Sports; Design & Construction; Technology; Jewelry; and others including Photography, Food, Healthcare, Industrials and Military.

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Acquisitions

We are focused on growing our national footprint through the acquisition of high-quality events that are leaders in their specific industry verticals. Since our acquisition by Onex in June 2013 (the “Onex Acquisition”), we have completed 14 strategic acquisitions, with purchase prices, excluding the $335.0 million acquisition of George Little Management (“GLM”) in 2014, ranging from approximately $5.0 million to approximately $36.0 million, and revenues ranging from approximately $1.3 million to approximately $8.3 million. Historically, we have completed acquisitions at EBITDA purchase multiples that are typically in the mid-to-high single digits. Our acquisitions have historically been structured as asset deals that have resulted in the generation of long-lived tax assets, which in turn have reduced our purchase multiples when incorporating the value of the created tax assets. In the future, we intend to look for acquisitions with similarly attractive valuation multiples.

Organic Growth Drivers

We are also focused on generating organic growth by understanding and leveraging the drivers for increased exhibitor and attendee participation at trade shows. Creating new opportunities for exhibitors to influence their market, engage with significant buyers, generate incremental sales and expand their brand’s awareness in their industry builds further demand for exhibit space and strengthens the value proposition of a trade show, generally allowing us to modestly increase booth space pricing annually across our portfolio. At the same time, our trade shows provide attendees with the opportunity to enhance their industry connectivity, develop relationships with targeted suppliers and distributors, discover new products, learn about new industry developments, celebrate their industry’s achievements and, in certain cases, obtain continuing professional education credits, which we believe increases their propensity to return and, consequently, drives high recurring participation among our exhibitors. By investing in and promoting these tangible and return-on-investment linked outcomes, we believe we will be able to continue to enhance the value proposition for our exhibitors and attendees alike, thereby driving strong demand and premium pricing for exhibit space, sponsorship opportunities and attendee registration.

Trends and Other Factors Affecting Our Business

There are a number of existing and developing factors and trends which impact the performance of our business, and the comparability of our results from year to year and from quarter to quarter, including:

• Market Fragmentation — The trade show industry is highly fragmented with the four largest companies, including us, comprising only 9% of the wider U.S. market according to the AMR International Globex Report 2016. This has afforded us the opportunity to acquire other trade show businesses, a growth strategy we expect to continue pursuing. These acquisitions may affect our growth trends, impacting the comparability of our financial results on a year-over-year basis.

• Overall Economic Environment and Industry Sector Cyclicality — Our results of operations are correlated, in part, with the economic performance of the industry sectors that our trade shows serve, as well as the state of the overall economy.

• Lag Time — As the majority of our exhibit space is sold during the year prior to each trade show, there is often a timing difference between changes in the economic conditions of an industry sector vertical and their effect on our results of operations. This lag time can result in a counter-cyclical impact on our results of operations.

• Variability in Quarterly Results — Our business is seasonal, with trade show revenues typically reaching their highest levels during the first and third quarters of each calendar year, and their lowest level during the fourth quarter, entirely due to the timing of our trade shows. This seasonality is typical within the trade show industry. Since event revenue is recognized when a particular event is held, we may also experience fluctuations in quarterly revenue and cash flows based on the movement of annual trade show dates from one quarter to another. Our presentation of Adjusted EBITDA accounts for these quarterly movements and the timing of shows, where applicable and material.

• Utilization of NOLs — As of December 31, 2016, we had $59.9 million of federal net operating losses (“NOLs”). Subject to sufficient taxable income, we expect to utilize substantially all of our NOLs during the year ending December 31, 2017. As a result, our cash taxes will likely increase in future years.

How We Assess the Performance of Our Business

In assessing the performance of our business, we consider a variety of performance and financial measures. The key indicators of the financial condition and operating performance of our business are revenues, cost of revenues, selling, general and administrative expenses, interest expense, depreciation and amortization, income taxes, Adjusted EBITDA, Adjusted Net Income and Free Cash Flow.

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Revenues

We generate revenues primarily from selling trade show exhibit space to exhibitors on a per square foot basis. Other trade show revenue streams include sponsorship, fees for ancillary exhibition services and attendee registration fees. Additionally, we generate revenue through conferences, digital media and print publications that complement our trade shows. We also engage third-party sales agents to support our marketing efforts. More than 95% of our sales are made by our employees, with less than 5% made by third-party sales agents. These agents, who are mainly based in Asia and Europe, are paid a percentage commission on sales.

Cost of Revenues

• Decorating Expenses. We work with general service contractors to both set up communal areas of our trade shows and provide services to our exhibitors, who primarily contract directly with the general service contractors. We will usually select a single general service contractor for an entire show, although it is possible to bid out packages of work within a single show on a piecemeal basis to different task-specific specialists.

• Sponsorship Costs. We often enter into long-term sponsorship agreements with industry trade associations whereby the industry trade association endorses and markets the show to its members in exchange for a percentage of the show’s revenue.

• Venue Costs. Venue costs represent rental costs for the venues, usually convention centers or hotels, where we host our trade shows. Given that convention centers are typically owned by local governments who have a vested interest in stimulating business activity in and attracting tourism to their cities, venue costs typically represent a small percentage of our total cost of revenues.

• Costs of Other Marketing Services. Costs of other marketing services represent paper, printing, postage, contributor and other costs related to digital media and print publications.

• Other Event-Related Expenses. Other event-related costs include temporary labor for services such as security, shuttle buses, speaker fees, food and beverage expenses and event cancellation insurance.

Selling, General and Administrative Expenses

• Labor Costs. Labor costs represent the cost of employees who are involved in sales, marketing, planning and administrative activities. The actual on-site set-up of the events is contracted out to third-party vendors and is included in cost of revenues.

• Miscellaneous Expenses. Miscellaneous expenses are comprised of a variety of other expenses, including advertising and marketing costs, promotion costs, credit card fees, travel expenses, printing costs, office supplies and office rental expense. Direct trade show costs are recorded in cost of revenues. All other costs are recorded in selling, general and administrative expenses.

• Management Fee. Following the Onex Acquisition, we paid a $0.8 million annual management fee under the services agreement between Onex and the Company, (the “Services Agreement”). The Services Agreement with Onex was terminated in connection with the IPO for no consideration.

Interest Expense

Interest expense represents interest payments and refinancing fees paid to our lenders.  During the three and nine months ended September 30, 2016, we paid interest to the lenders under our Senior Secured Credit Facilities and to the holders of $200.0 million in aggregate principal amount of our 9.00% Senior Notes due 2021 (the “9.00% Senior Notes”). On October 28, 2016, we borrowed $200.0 million of incremental term loans under the Term Loan Facility, and we fully redeemed all $200.0 million in aggregate principal amount of the 9.00% Senior Notes with the proceeds of the incremental term loans, cash on hand and proceeds of an $8.0 million borrowing under the Revolving Credit Facility. On May 22, 2017, we refinanced our Senior Secured Credit Facilities with the Amended and Restated Senior Secured Credit Facility.  As a result, interest expense for the three and nine months ended September 30, 2017 principally represents interest paid in respect of the Senior Secured Credit Facilities, as well as interest paid in respect of the Amended and Restated Senior Secured Credit Facilities.  

Because we refinanced our outstanding indebtedness in October 2016 and again in May 2017, interest expense for the periods presented in this report may not be comparable.  In addition, because we reduced our total amount of indebtedness

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outstanding using proceeds from our initial public offering during the second quarter of 2017, interest expense for future periods may not be comparable to interest expense reported for periods prior to the refinancing.  

Depreciation and Amortization

We have historically grown our business through acquisitions and, in doing so, have acquired significant intangible assets, the value of some of which is amortized over time. These acquired intangible assets, unless determined to be indefinite-lived, are amortized over extended periods of seven to ten years from the date of each acquisition for GAAP reporting purposes, or fifteen years for tax purposes.

Income Taxes

Income tax expense consists of federal, state and local taxes based on income in the jurisdictions in which we operate.

As a result of federal NOL carryforwards, we do not anticipate significant cash obligations for federal income taxes in 2017. Accordingly, our provision for income taxes consists of current cash taxes primarily related to federal alternative minimum taxes and taxes in states for which we do not have state net operating loss carryforwards. We also record deferred tax charges or benefits primarily associated with our utilization or generation of net operating loss carryforwards and book-to-tax difference related to amortization of goodwill, amortization of intangibles assets, depreciation, stock-based compensation charges and deferred financing costs.

Cash Flow Model

We have favorable cash flow characteristics, as described below (see “—Cash Flows”), as a result of our high profit margins, substantial favorable tax attributes, low capital expenditures and consistently negative working capital. Our working capital is negative as our current assets are consistently lower than our current liabilities. Current assets primarily include accounts receivable and prepaid expenses, while current liabilities primarily include accounts payable and deferred revenues. Cash received prior to an event is recorded as deferred revenue on our balance sheet and recognized in revenue upon completion of each trade show. The implication of having negative working capital is that changes in working capital represent a source of cash as our business grows.

The primary driver for our negative working capital is the sales cycle for a trade show, which typically begins during the prior show. In the interim period between the current show and the following show, we continue to sell to new and past exhibitors and collect payments on contracted exhibit space. We require exhibitors to pay in full in advance of each trade show, whereas the bulk of expenses are paid close to or after the show. Cash deposits start to be received as early as twelve months prior to a show taking place and virtually 100% of booth space revenues are typically received in cash one month prior to a show taking place. This highly efficient cash flow model, where revenue is received in advance of expenses to be paid, creates a working capital benefit.

Free Cash Flow

In addition to net cash provided by operating activities presented in accordance with GAAP, 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 for the repayment of indebtedness and strategic initiatives, including investing in our business, payment of dividends, making strategic acquisitions and strengthening our balance sheet.

Free Cash Flow is a supplemental non-GAAP financial 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 net cash provided by operating activities or other measures determined in accordance with GAAP. Also, Free Cash Flow is not necessarily comparable to similarly titled measures used by other companies.

The most directly comparable GAAP measure to Free Cash Flow is net cash provided by operating activities. For a reconciliation of Free Cash Flow to net cash provided by operating activities, see footnote 4 to the table under the heading “—Results of Operations—Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016.”

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Adjusted EBITDA

Adjusted EBITDA is a key measure of our performance. Adjusted EBITDA is defined as net income before interest expense, loss on extinguishment of debt, income tax expense, depreciation and amortization, stock-based compensation, deferred revenue adjustment, intangible asset impairment charge, the Onex management fee and other items that management believes are not part of our core operations. We present Adjusted EBITDA 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. Management and our 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 performance metrics can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate and capital investments.

Under the Amended and Restated Senior Secured Credit Facilities, our ability to engage in certain activities such as incurring additional indebtedness, making certain investments and paying certain dividends is tied to ratios based on Acquisition Adjusted EBITDA (which is defined as “Consolidated EBITDA” in the credit agreement governing the Amended and Restated Senior Secured Credit Facilities). Adjusted EBITDA and Acquisition Adjusted EBITDA are not defined under GAAP, and are subject to important limitations. We have included the calculation of Adjusted EBITDA for the periods presented, but have not included the calculations of Acquisition Adjusted EBITDA as we did not close any acquisitions during the period presented and the impact of any prior acquisitions is already fully reflected in our calculations of Adjusted EBITDA. Because not all companies use identical calculations, our presentation of Adjusted EBITDA may not be comparable to other similarly titled measures used by other companies.  

The most directly comparable GAAP measure to Adjusted EBITDA is net income. For a reconciliation of Adjusted EBITDA to net income, see footnote 2 to the table under the heading “—Results of Operations—Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016.”

Adjusted Net Income

Adjusted Net Income is defined as net income before refinancing charges, loss on extinguishment of debt; stock-based compensation; deferred revenue adjustment; intangible asset impairment charge; the Onex management fee (for periods prior to our IPO); other items that management believes are not part of our core operations; amortization of deferred financing fees and discount; amortization of (acquired) intangible assets; and 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 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 the Company’s financial performance. Each of the normal recurring adjustments and other adjustments described in this paragraph help management with a measure of our operating performance over time by removing items that are not related to day-to-day operations.

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Adjusted Net Income is not defined under GAAP and is subject to important limitations. We have included the Calculation of Adjusted Net Income for the periods presented. Because not all companies use identical calculations, our presentation of Adjusted Net Income may not be comparable to other similarly titled measures used by other companies. The most directly comparable GAAP measure to Adjusted Net Income is net income. For a reconciliation of Adjusted Net Income to net income, see footnote 3 to the table under the heading “—Results of Operations—Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016.”

Results of Operations

Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016

The tables in this section summarize key components of our results of operations for the periods indicated.

	Three months ended September 30,
	2017		2016
	(dollars in thousands)
Statement of income and comprehensive income    data:
Revenues	$	100,404	$	100,526
Other income		6,519		-
Cost of revenues		27,221		23,632
Selling, general and administrative expense(1)		29,411		25,004
Depreciation and amortization expense		10,848		9,953
Operating income	$	39,443	$	41,937
Interest expense		6,737		11,940
Income before income taxes	$	32,706	$	29,997
Provision for income taxes		13,499		11,570
Net income and comprehensive income	$	19,207	$	18,427
Other financial data:
Adjusted EBITDA(2)	$	54,933	$	55,883
Adjusted Net Income(3)	$	28,251	$	27,348

(1) Selling, general and administrative expenses for the three months ended September 30, 2017 and 2016 included $3.9 million and $2.1 million, respectively, in contract termination, acquisition-related transaction, transition and integration costs, including legal and advisory fees. Also included in selling, general and administrative expenses for each of the three months ended September 30, 2017 and 2016 were stock-based compensation expenses of $0.7 million.

(2) In addition to net income presented in accordance with GAAP, we use Adjusted EBITDA to measure our financial performance. Adjusted EBITDA is a supplemental non-GAAP financial measure of operating performance and is not based on any standardized methodology prescribed by GAAP. Adjusted EBITDA should not be considered in isolation or as alternatives to net income, cash flows from operating activities or other measures determined in accordance with GAAP. Also, Adjusted EBITDA is not necessarily comparable to similarly titled measures presented by other companies.

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, which is included in interest expense in the condensed consolidated statements of (loss) income and comprehensive (loss) income, (ix) the Onex management fee (for periods prior to our IPO) and (x) other items that management believes are not part of our core operations. We present Adjusted EBITDA 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. Management and our board of directors use Adjusted EBITDA to assess our financial performance and believe they are helpful in highlighting trends because it excludes the results of decisions that are outside the control of management, while other performance metrics can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate and capital investments. We reference Adjusted EBITDA frequently in our decision-making because it provides supplemental information that facilitates internal comparisons to the historical operating performance of prior periods. Adjusted EBITDA has limitations as an analytical tool, and you should not consider such measure either in isolation or as a substitute for analyzing our results as reported under GAAP.

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	Three months ended September 30,
	2017		2016
	(dollars in thousands)
Net income	$	19,207	$	18,427
Add:
Interest expense		6,737		11,940
Provision for income taxes		13,499		11,570
Depreciation and amortization expense		10,848		9,953
Stock-based compensation expense(a)		746		687
Management fee(b)		-		188
Other items(c)		3,896		2,035
Scheduling adjustment (d)		-		1,083
Adjusted EBITDA	$	54,933	$	55,883

(a) Represented costs related to stock-based compensation associated with certain employees’ participation in the 2013 Plan and the 2017 Plan.  

(b) Represented the quarterly portion of the annual management fee of $0.8 million payable to an affiliate of Onex under the Services Agreement. In connection with the IPO, the Services Agreement was terminated and the management fee will no longer be paid.

(c) Other items for the three months ended September 30, 2017 included: (i) $1.5 million in one-time contract termination costs, (ii) $1.0 million in transaction costs in connection with certain acquisition transactions that were completed or pending in 2017 and 2016, (ii) $0.6 million in legal, audit and consulting fees related to the IPO and other related activities and (iii) $0.8 million in transition costs. Other items for the three months ended September 30, 2016 included: (i) $1.4 million in transaction costs incurred in connection with certain acquisition transactions that were pending as well as acquisitions that were pursued but not completed in the period and (ii) $0.7 million in transition costs, primarily related to information technology and facility rental charges for terminated leases.

(d) Reflects the EBITDA of a trade show that staged in the fourth quarter of 2016 and the third quarter of 2017.

(3) 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) refinancing charges (ii) loss on extinguishment of debt, (iii) stock-based compensation, (iv) deferred revenue adjustment, (v) intangible asset impairment charge, (vi) the Onex management fee (for periods prior to our IPO), (vii) other items that management believes are not part of our core operations, (viii) amortization of deferred financing fees and discount, (ix) amortization of (acquired) intangible assets and (x) 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 the amortization of 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.

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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.

	Three months ended September 30,
	2017			2016
	(dollars in thousands)
Net income	$	19,207		$	18,427
Add (Deduct):
Stock-based compensation expense(a)		746			687
Management fee(b)		-			188
Other items(c)		3,896			2,035
Amortization of deferred financing fees and discount		372			1,030
Amortization of (acquired) intangible assets(d)		10,387			9,500
Scheduling adjustment (e)		-			1,083
Tax adjustments related to non-GAAP adjustments(f)		(6,357	)		(5,602	)
Adjusted Net Income	$	28,251		$	27,348

(a) Represented costs related to stock-based compensation associated with certain employees’ participation in the 2013 Plan and the 2017 Plan.

(b) Represented the quarterly portion of the annual management fee described in Note 2(b) above.

(c) Represented other items described in Note 2(c) above.

(d) We have historically grown our business through acquisitions and have therefore acquired significant intangible assets the value of which is amortized over time. These acquired intangible assets are amortized over an extended period ranging from seven to ten years from the date of each acquisition.

(e) Represented the scheduling adjustment as described in Note 2 (d) above.

(f) Reflected application of U.S. federal and state enterprise tax rate of 41.3% and 38.6% in the three months ended September 30, 2017 and 2016, respectively.

Revenues

Revenues of $100.4 million for the three months ended September 30, 2017 decreased $0.1 million, or 0.1%, from $100.5 million for the comparable period in the prior year. The decrease in revenues reflected the adverse impact of Hurricane Irma which forced the early closure of the Surf Expo and Imprinted Sportswear Show Orlando (“ISS Orlando”) trade shows (together “the Impacted Trade Shows”) and prevented the recognition of $6.6 million in revenues related to those events.  Our event cancellation insurance carrier has agreed to settle the claim related to the Impacted Trade Shows for $6.5 million which covers the entire lost revenue, net of modest cost savings realized due to the shorter events.  Revenue for the quarter was positively impacted by acquisition-driven growth of 13.6% which was partly offset by an organic decline, excluding the Impacted Trade Shows, of 8.3%. The incremental contributions from acquisitions of $13.7 million largely related to the CEDIA Expo (“CEDIA”), Digital Dealer, The International Drone Conference & Exposition (“InterDrone”) and the Swim and Active Collective Summer trade shows. The organic trade show decline of $7.9 million reflected unusual year over year declines in our Interbike, Outdoor Retailer Summer Market, ASD Summer and NY NOW Summer trade shows.  In addition, other marketing services experienced a $0.5 million decline in the three months ended September 30, 2017 versus the comparable period in the prior year.  Revenue for the three months ended September 30, 2017 included $1.2 million related to a trade show which staged in the fourth quarter of 2016.

Other Income

During the third quarter of 2017, as a result of Hurricane Irma, the Company’s Surf Expo and ISS Orlando were forced to close two days early.  The Company carries cancellation insurance to mitigate losses caused by natural disasters and received confirmation from its insurance carrier that a settlement of approximately $6.5 million will be paid to offset the lost revenues from the affected trade shows.  Management concluded that the receipt of insurance proceeds was realizable prior to September 30, 2017.  As a result, during the three months ended September 30, 2017, the Company recorded Other Income of $6.5 million in the condensed consolidated statements of income and comprehensive income to recognize the amount to be recovered from the insurance company. 

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Cost of Revenues

Cost of revenues of $27.2 million for the three months ended September 30, 2017 increased $3.6 million, or 15.3%, from $23.6 million for the comparable period in the prior year. Incremental costs from acquisitions contributed $4.3 million to cost of revenues while the organic trade show revenue decline resulted in $1.1 million of cost of revenues savings. The remaining $0.4 million increase was primarily attributable to other marketing services costs.

Selling, General and Administrative Expense

Selling, general and administrative expenses of $29.4 million for the three months ended September 30, 2017 increased $4.4 million, or 17.6%, from $25.0 million for the comparable period in the prior year. Incremental costs from acquisitions contributed $2.0 million to selling, general and administrative expense. In addition, one-time expenses increased by $1.9 million primarily due to $1.5 million in contract termination costs incurred during the three months ended September 30, 2017.  The remaining $0.6 million increase was driven mainly by higher salaries and benefits as well as higher business insurance costs.

Depreciation and Amortization Expense

Depreciation and amortization expense of $10.9 million for the three months ended September 30, 2017 increased $0.9 million, or 9.0%, from $10.0 million for the comparable period in the prior year. The increase was primarily comprised of $0.8 million in additional intangible asset amortization related to intangible assets acquired in the ACRE, IGES, Collective, Digital Dealer, Pavement and RFID LIVE! acquisitions (collectively, the “2016 acquisitions”) and the CEDIA, InterDrone and the Snow Show acquisitions (collectively, the “2017 acquisitions”).

Interest Expense

Interest expense of $6.7 million for the three months ended September 30, 2017 decreased $5.2 million, or 43.7%, from $11.9 million for the comparable period in the prior year. The decrease was primarily attributable to the $2.4 million reduction in interest expense resulting from the October 2016 redemption of the $200.0 million 9.00% Senior Notes, which were repaid using $200.0 million in incremental term loan borrowings under the Senior Secured Credit Facilities, which bore interest at a lower rate, and $2.0 million in interest savings attributable to the reduction in the principal amount of our indebtedness from September 30, 2016 to September 30, 2017.   An additional $0.9 million in interest savings was realized from the lower interest rate and extended repayment terms related to the amendment and restatement of our Senior Secured Credit Facilities (see “—Long Term Debt—Senior Secured Credit Facilities”).

Provision for Income Taxes

For the three months ended September 30, 2017 and 2016, we recorded provisions for income taxes of $13.5 million and $11.6 million, respectively, which resulted in an effective tax rate of 41.3% and 38.6% for the three months ended September 30, 2017 and 2016, respectively. The increase in our provision for income taxes of $1.9 million for the three months ended September 30, 2017 compared to the comparable period in the prior year was primarily attributable to the increase in our pre-tax income offset by the increase in our effective rate which was primarily attributable to the mix of pre-tax income generated across the various jurisdictions in which we operate. The deferred tax effects of certain state legislative changes enacted during the period also contributed to the increase in effective rate.

Net Income; Adjusted EBITDA; Adjusted Net Income

Net income of $19.2 million for the three months ended September 30, 2017 increased $0.8 million, from $18.4 million for the comparable period in the prior year. The increase in net income was primarily attributable lower interest expense resulting from the lower interest rate related to the amendment and restatement of our Senior Secured Credit Facilities (see “—Long Term Debt—Senior Secured Credit Facilities”) as well as the redemption of the 9.00% Senior Notes in October 2016.  This increase to net income was partly offset by a higher provision for income taxes and depreciation and amortization expense as well as a lower contribution from the quarter’s four largest trade shows offset by the strong contribution from acquisitions.  

Adjusted EBITDA of $54.9 million for the three months ended September 30, 2017 decreased $1.0 million, or 1.8%, from $55.9 million for the comparable period in the prior year. The decrease in Adjusted EBITDA for the three months ended September 30, 2017 is primarily attributable to the impact of the lower interest expense add-back, which decreased $5.2 million from the comparable period in the prior year, a negative scheduling adjustment of $1.1 million and a decrease in the

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management fee add-back of $0.2 million, partially offset by a $1.9 million increase in the non-recurring expense add-back, a $1.9 million increase in the add-back for income taxes, a $0.9 million increase in the depreciation and amortization add-back and an $0.8 million increase in net income.

Adjusted Net Income for the three months ended September 30, 2017 of $28.2 million increased $1.0 million, or 3.7%, from $27.3 million for the comparable period in the prior year. The reasons for the increase in Adjusted Net Income were the same as the reasons for the decrease in Adjusted EBITDA.  In addition, Adjusted Net Income benefited from the exclusion of the $5.2 million reduction in cash interest expense related to the optional prepayments on our term loans, the October 2016 refinance of the 9.00% Senior Notes and the May 2017 amendment and restatement of our Senior Secured Credit Facilities. This favorable impact was partly offset by a $2.6 million higher reduction for income tax effect of adjustments to net income as well as the exclusion of the $0.6 million increase in amortization of deferred financing fees and discount.

Adjusted EBITDA and Adjusted Net Income are financial measures that are not calculated in accordance with GAAP. For a discussion of our presentation of Adjusted EBITDA, see footnote 2 to the table under the heading “—Results of Operations—Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016.” For a discussion of our presentation of Adjusted Net Income, see footnote 3 to the table under the heading “—Results of Operations—Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016.”

Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016

The tables in this section summarize key components of our results of operations for the periods indicated.

	Nine months ended September 30,
	2017		2016
	(dollars in thousands)
Statement of income and comprehensive income data:
Revenues	$	310,197	$	293,296
Other income		6,519		-
Cost of revenues		85,379		75,040
Selling, general and administrative expense(1)		95,921		74,178
Depreciation and amortization expense		32,250		29,827
Operating income	$	103,166	$	114,251
Interest expense		33,234		38,235
Loss on extinguishment of debt		216		-
Income before income taxes	$	69,716	$	76,016
Provision for income taxes		27,976		29,783
Net income and comprehensive income	$	41,740	$	46,233
Other financial data:
Adjusted EBITDA(2)	$	156,901	$	152,296
Adjusted Net Income(3)	$	79,391	$	70,922
Free Cash Flow(4)	$	66,119	$	74,775

(1) Selling, general and administrative expenses for the nine months ended September 30, 2017 and 2016 included $18.9 million and $4.3 million, respectively, in acquisition-related transaction, transition and integration costs, including legal and advisory fees. Also included in selling, general and administrative expenses for the nine months ended September 30, 2017 and 2016 were stock-based compensation expenses of $1.9 million and $2.3 million, respectively.

(2) For a definition of Adjusted EBITDA and the reasons management uses this metric, see footnote 2 to the table under the heading “—Results of Operations—Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016.”

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	Nine months ended September 30,				Twelve months ended September 30,
	2017		2016		2017
	(dollars in thousands)
Net income	$	41,740	$	46,233	$	17,674
Add:
Interest expense		33,234		38,235		46,399
Loss on extinguishment of debt		216		-		12,996
Income tax expense		27,976		29,783		12,289
Depreciation and amortization expense		32,250		29,827		42,470
Stock-based compensation expense(a)		1,892		2,308		2,482
Deferred revenue adjustment(b)		518		-		821
Management fee(c)		188		563		375
Other items(d)		18,887		4,264		22,313
Scheduling adjustment (e)		-		1,083		(1,083	)
Adjusted EBITDA	$	156,901	$	152,296	$	156,736

(a) Represented costs related to stock-based compensation associated with certain employees’ participation in the 2013 and the 2017 Plan.

(b) Deferred revenue balances in each of the opening balance sheets of acquired assets and liabilities for Pavement and ACRE, reflected the fair value of the assumed deferred revenue performance obligations at the respective acquisition dates. If the businesses had been continuously owned by us throughout the quarterly periods presented, the fair value adjustment of $0.5 million would not have been required and the revenues for the nine months ended September 30, 2017 would have increased by $0.5 million.

(c) Represented the portion of the annual management fee of $0.8 million payable to an affiliate of Onex under the Services Agreement. In connection with the IPO, the Services Agreement was terminated and the management fee will no longer be paid.

(d) Other items for the nine months ended September 30, 2017 included: (i) $10.0 million in contract termination costs, (ii) $3.7 million in transaction costs in connection with certain acquisition transactions that were completed or pending in 2017, (iii) $3.5 million in legal, audit and consulting fees related to the IPO and other related activities and (iv) $1.7 million in transition costs. Other items for the nine months ended September 30, 2016 included: (i) $3.0 million in transaction costs incurred in connection with certain acquisition transactions that were pending as well as acquisitions that were pursued but not completed in the period and (ii) $1.3 million in transition costs, primarily related to information technology and facility rental charges for terminated leases.

(e) Reflects the EBITDA of a trade show that staged in the fourth quarter of 2016 and the third quarter of 2017.

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(3) For a definition of Adjusted Net Income and the reasons management uses this metric, see footnote 3 to the table under the heading “—Results of Operations—Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016.”

	Nine months ended September 30,
	2017			2016
	(dollars in thousands)
Net income	$	41,740		$	46,233
Add (Deduct):
Refinancing charges		6,151			-
Loss on extinguishment of debt		216			-
Stock-based compensation expense(a)		1,892			2,308
Deferred revenue adjustment(b)		518			-
Management fee(c)		188			563
Other items(d)		18,887			4,264
Amortization of deferred financing fees and discount		4,226			3,826
Amortization of (acquired) intangible assets(e)		30,809			28,549
Scheduling adjustment (f)		-			1,083
Tax adjustments related to non-GAAP adjustments(g)		(25,236	)		(15,904	)
Adjusted Net Income	$	79,391		$	70,922

(a) Represented costs related to stock-based compensation associated with certain employees’ participation in the 2013 Plan and the 2017 Plan.

(b) Represented deferred revenue charge as described in Note 2(b) above.

(c) Represented the portion of the annual management fee described in Note 2(c) above.

(d) Represented other items described in Note 2(d).

(e) We have historically grown our business through acquisitions and have therefore acquired significant intangible assets the value of which is amortized over time. These acquired intangible assets are amortized over an extended period ranging from seven to ten years from the date of each acquisition.

(f) Represented the scheduling adjustment as described in Note 2 (e) above.

(g) Reflected application of U.S. federal and state enterprise tax rate of 40.1% and 39.2% in the nine months ended September 30, 2017 and 2016, respectively.

(4) In addition to net cash provided by operating activities presented in accordance with GAAP, 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 for the repayment of indebtedness and strategic initiatives, including investing in our business, payment of dividends, making strategic acquisitions and strengthening our balance sheet.

Free Cash Flow is a supplemental non-GAAP financial 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. Also, Free Cash Flow is not necessarily comparable to similarly titled measures used by other companies.

	Nine months ended September 30,
	2017		2016
	(dollars in thousands)
Net Cash Provided by Operating Activities	$	66,840	$	77,001
Less:
Capital expenditures		721		2,226
Free Cash Flow	$	66,119	$	74,775

Revenues

Revenues of $310.2 million for the nine months ended September 30, 2017 increased $16.9 million, or 5.8%, from $293.3 million for the comparable period in the prior year. The increase in revenues reflected acquisition-driven growth of

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8.2% partly offset by an organic decline of 2.4%. The incremental contributions from acquisitions of $24.0 million largely related to the 2017 acquisitions of CEDIA and InterDrone, as well as the incremental revenues contributed by Pavement, ACRE, Collective, RFID LIVE! and Digital Dealer which we acquired in 2016 after the respective shows were staged. The organic trade show business decrease of $7.6 million primarily reflected the adverse impact of Hurricane Irma which forced the early closure of the Surf Expo and ISS Orlando trade shows and prevented the recognition of $6.6 million in revenues related to those events and a $1.0 million decline in the remaining organic trade show business.  Our event cancellation insurance carrier has agreed to settle the claim related to the Impacted Trade Shows for $6.5 million which covers the entire lost revenue, net of modest cost savings realized due to the shorter events.  In addition, other marketing services experienced a decline of $0.7 million in the nine months ended September 30, 2017 from the comparable period in the prior year.  Revenue for the nine months ended September 30, 2017 included $1.2 million related to a trade show which staged in the fourth quarter of 2016.

Other Income

On September 7, 2017, as a result of Hurricane Irma, the Company’s Surf Expo and ISS Orlando trade shows were forced to close two days early.  We carry cancellation insurance to mitigate losses caused by natural disasters and have received confirmation from our insurance carrier that a settlement of $6.5 million will be paid to offset the lost revenues of the Impacted Trade Shows.  As a result, during the nine months ended September 30, 2017, we recorded other income of $6.5 million to recognize this gain on insurance proceeds in the condensed consolidated statements of income and comprehensive income. 

Cost of Revenues

Cost of revenues of $85.4 million for the nine months ended September 30, 2017 increased $10.4 million, or 13.9%, from $75.0 million for the comparable period in the prior year. Incremental costs from acquisitions contributed $7.1 million to cost of revenues. The organic revenue drove higher costs of $2.0 million. The remaining increase of $1.3 million was principally comprised of $0.9 million related to four event launches during the nine months ended September, 30, 2017 and $0.3 million related to increases in other marketing services.

Selling, General and Administrative Expense

Selling, general and administrative expenses of $95.9 million for the nine months ended September 30, 2017 increased $21.7 million, or 29.2%, from $74.2 million for the comparable period in the prior year. Incremental costs from acquisitions contributed $4.6 million to selling, general and administrative expense. We incurred $10.0 million in contract termination costs, and, $3.5 million of legal, accounting and consulting fees related to the IPO and other transaction-related activities. In addition, we expensed $5.4 million of transaction and transition costs during the nine months ended September 30, 2017, mainly related to our recent acquisitions, an increase of $1.1 million over the comparable period in the prior year. The remaining $2.5 million increase was driven mainly by higher salary, travel and business insurance expense and increased credit card fees partly offset by lower stock-based compensation expense.

Depreciation and Amortization Expense

Depreciation and amortization expense of $32.3 million for the nine months ended September 30, 2017 increased $2.4 million, or 8.0%, from $29.9 million for the comparable period in the prior year. The increase was primarily comprised of $2.3 million in additional intangible asset amortization related to intangible assets acquired in the 2016 acquisitions and the 2017 acquisitions.

Interest Expense

Interest expense of $33.2 million for the nine months ended September 30, 2017 decreased $5.0 million, or 13.1%, from $38.2 million for the comparable period in the prior year. The decrease was primarily attributable to a $11.9 million reduction in interest expense resulting from (i) the $10.9 million in interest savings attributable to the October 2016 redemption of the 9.00% Senior Notes, which were repaid using $200.0 million in incremental term loan borrowings under the Senior Secured Credit Facilities, which bore interest at a lower rate, as well as  the interest savings attributable to the reduction in the principal amount of our indebtedness from September 30, 2016 to September 30, 2017 (ii) the $0.8 million decrease in the amount of realized and unrealized net loss on our interest rate swap and floor agreement compared to the nine months ended September 30, 2016; and (iii) the $0.3 million reduction in interest expense associated with the refinancing that occurred during the second quarter of 2017.  Indebtedness under the Amended and Restated Senior Secured Credit Facilities

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bears interest at a lower rate than applied under the Senior Secured Credit Facilities. We made $7.4 million in scheduled repayments on the term loans between September 30, 2016 and September 30, 2017, as well as optional term loan repayments of $159.2 million in connection with the refinancing that occurred during the second quarter of 2017. Indebtedness under the Amended and Restated Senior Secured Credit Facilities bears interest at a lower rate than applied under the Senior Secured Credit Facilities. These decreases were partly offset by the refinancing fees of $6.1 million related to the amendment and restatement of our Senior Secured Credit Facilities (see “—Long Term Debt—Senior Secured Credit Facilities”), a $0.4 million increase in the amortization of deferred financing fees and original issue discount primarily due to the optional prepayment of $159.2 million in Term Loans using the proceeds of our initial public offering in the second quarter of 2017 and a $0.4 million increase in interest expense on the Company’s revolving credit facility.  

Provision for Income Taxes

For the nine months ended September 30, 2017 and 2016, we recorded provisions for income taxes of $28.0 million and $29.8 million, respectively, which resulted in an effective tax rate of 40.1% and 39.2%, respectively. The decrease in our provision for income taxes of $1.8 million for the nine months ended September 30, 2017 compared to the comparable period in the prior year was primarily attributable to a decrease in our pre-tax income.

Net Income; Adjusted EBITDA; Adjusted Net Income

Net income of $41.7 million for the nine months ended September 30, 2017 decreased $4.5 million, or 9.7%, from $46.2 million for the comparable period in the prior year. The decrease was attributable to higher non-recurring contract termination expenses, audit, legal and consulting costs associated with the IPO, other acquisition costs and refinancing fees, offset by contributions from the 2016 and 2017 acquisitions and lower interest expense as a result of the redemption of the $9.00% Senior Notes in October 2016.

Adjusted EBITDA of $156.9 million for the nine months ended September 30, 2017 increased $4.6 million, or 3.0%, from $152.3 million for the comparable period in the prior year. Adjusted EBITDA for the nine months ended September 30, 2017 primarily benefitted from a $14.6 million increase in the one-time transaction and transition cost add-back which was partially offset by the decrease in net income.  In addition, Adjusted EBITDA benefited from the exclusion of the $2.4 million of higher depreciation and amortization expense and the $0.2 million of loss on extinguishment of debt in the nine months ended September 30, 2017 versus the comparable period in the prior year. These benefits were partly offset by the $5.0 million decrease in the interest expense add-back, the negative scheduling adjustment of $1.1 million and the $0.4 million decrease in stock-based compensation expense as well as the exclusion of the $1.8 million decrease in income tax expense for the nine months ended September 30, 2017.

Adjusted Net Income for the nine months ended September 30, 2017 of $79.4 million increased $8.5 million, or 12.0%, from $70.9 million for the comparable period in the prior year. The reasons for the increase in Adjusted Net Income were the same as the reasons for the increase in Adjusted EBITDA and also reflected an increase due to the $11.2 million reduction in interest expense related to the optional prepayments on our term loans, the October 2016 redemption of the 9.00% Senior Notes and the amendment and restatement of the Senior Secured Credit Facilities and the $0.8 million decrease in the realized and unrealized loss on our interest rate swap and floor agreement.  These increases were offset by a $7.5 million higher reduction for income tax adjustment to net income as well as the exclusion of the $0.4 million increase in amortization of deferred financing fees and discount.

Adjusted EBITDA and Adjusted Net Income are financial measures that are not calculated in accordance with GAAP. For a discussion of our presentation of Adjusted EBITDA, see footnote 2 to the table under the heading “—Results of Operations—Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016.” For a discussion of our presentation of Adjusted Net Income, see footnote 3 to the table under the heading “—Results of Operations—Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016.”

Liquidity and Capital Resources

Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations, including working capital needs, debt service, acquisitions, other commitments and contractual obligations. We consider liquidity in terms of cash flows from operations and their sufficiency to fund our operating and investing activities.

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We expect to continue to finance our liquidity requirements through internally generated funds and borrowings under the Amended and Restated Revolving Credit Facility. We believe that our projected cash flows generated from operations, together with borrowings under the Amended and Restated Revolving Credit Facility are sufficient to fund our principal debt payments, interest expense, working capital needs and expected capital expenditures for the next twelve months. We currently anticipate incurring less than $2 million of capital expenditures for property and equipment during 2017. We may draw on the Amended and Restated Revolving Credit Facility from time to time to fund or partially fund acquisitions.

In connection with the Onex Acquisition, we (i) issued $200.0 million of the 9.00% Senior Notes and (ii) entered into the Senior Secured Credit Facilities, which included $430.0 million of term loans under the Term Loan Facility. On January 15, 2014, EEH entered into an amendment to the Senior Secured Credit Facilities, to borrow an additional $200.0 million of term loans under the Term Loan Facility to fund a portion of the consideration for our acquisition of GLM. On July 21, 2014, EEH entered into a second amendment to the Senior Secured Credit Facilities to lower the Senior Secured Credit Facility’s interest rate and LIBOR floor rate. On October 28, 2016, EEH entered into a third amendment to the Senior Secured Credit Facilities to (i) borrow an additional $200.0 million of term loans under the Term Loan Facility to fund a portion of our redemption of the 9.00% Senior Notes and (ii) increase commitments under the Revolving Credit Facility by $10.0 million to a total of $100.0 million.

On May 8, 2017, using the net proceeds from our initial public offering, we prepaid $159.2 million of borrowings outstanding under the Term Loan Facility. On May 22, 2017, EEH amended and restated the Senior Secured Credit Facilities; the Amended and Restated Senior Secured Credit Facilities now consist of (i) the Amended and Restated Term Loan Facility, a seven-year $565.0 million senior secured term loan facility, scheduled to mature on May 22, 2024 and (ii) the Amended and Restated Revolving Credit Facility, a $150.0 million senior secured revolving credit facility, scheduled to mature on May 22, 2022. See “—Long Term Debt—Senior Secured Credit Facilities.” As of September 30, 2017, we had $563.6 million of borrowings outstanding under the Amended and Restated Term Loan Facility, which included unamortized deferred financing fees of $3.7 million and unamortized original issue discount of $5.2 million, with an additional $149.1 million available to borrow (after giving effect to $0.9 million letters of credit outstanding) under the Amended and Restated Revolving Credit Facility.

The Amended and Restated Senior Secured Credit Facilities contain, a number of covenants imposing certain restrictions on our business. These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise. The restrictions these covenants place on our business operations, include limitations on our or our subsidiaries’ ability to:

• incur or guarantee additional indebtedness;

• make certain investments;

• pay dividends or make distributions on our capital stock;

• sell assets, including capital stock of restricted subsidiaries;

• agree to payment restrictions affecting our restricted subsidiaries;

• consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;

• enter into transactions with our affiliates;

• incur liens; and

• designate any of our subsidiaries as unrestricted subsidiaries.

As of September 30, 2017, we were in compliance with the covenants contained in the Amended and Restated Senior Secured Credit Facilities.

Dividend Policy

We intend to pay quarterly cash dividends on our common stock, which we commenced in the second quarter of 2017 with a dividend of $0.07 per share. The payment of the dividend in future quarters is subject to the discretion of our board of directors and depending upon our results of operations, cash requirements, financial condition, contractual restrictions, restrictions imposed by applicable laws and other factors that our board of directors may deem relevant. Based on the 72,212,769 shares of common stock outstanding as of October 31, 2017, this dividend policy implies a quarterly cash requirement of approximately $5.1 million (or an annual cash requirement of approximately $20.2 million), which amount may be changed or terminated in the future at any time and for any reason without advance notice.

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Our business is conducted through our subsidiaries. Dividends, distributions and other payments from, and cash generated by, our subsidiaries will be our principal sources of cash to repay indebtedness, fund operations and pay dividends. Accordingly, our ability to pay dividends to our stockholders is dependent on the earnings and distributions of funds from our subsidiaries. In addition, the covenants in the agreements governing our existing indebtedness, including the Amended and Restated Senior Secured Credit Facilities, significantly restrict the ability of our subsidiaries to pay dividends or otherwise transfer assets to us. See “—Long Term Debt—Senior Secured Credit Facilities.” We cannot assure you that we will pay dividends on our common stock, and our indebtedness could limit our ability to pay dividends on our common stock.

We did not declare or pay any dividends on our common stock in 2015 or 2016.

Cash Flows

The following table summarizes the changes to our cash flows for the periods presented:

	Nine months ended September 30,
	2017			2016
Statement of Cash Flows Data
Net cash provided by operating activities	$	66,840		$	77,001
Net cash used in investing activities	$	(56,201	)	$	(18,710	)
Net cash used in financing activities	$	(11,560	)	$	(39,235	)

Operating Activities

Operating activities consist primarily of net income adjusted for noncash items that include depreciation and amortization, deferred income taxes, amortization of deferred financing fees and debt discount, share-based compensation and intangible asset impairment charges, plus the effect of changes during the period in our working capital.

Net cash provided by operating activities for the nine months ended September 30, 2017 decreased $10.2 million, or 13.2%, to $66.8 million from $77.0 million during the comparable period in the prior year. The decrease was primarily due to a $6.6 million decrease in change in deferred income tax liabilities due to a larger percentage of our income tax expense flowing through current expense versus deferred, a $4.5 million decrease in net income and a $0.9 million increase in unrealized gain on interest rate swap and floor, which was partly offset by a $0.5 million decrease in cash used for working capital and a $2.4 million increase in depreciation and amortization. Net income plus noncash items provided operating cash flows of $102.9 million and $112.5 million for the nine months ended September 30, 2017 and 2016, respectively. Cash used for operating activities reflects the use of $36.1 million and $35.5 million for working capital in the nine months ended September 30, 2017 and 2016, respectively. Cash provided by operating activities was also negatively impacted by the one-time payment of $10.0 million in contract termination costs and $6.2 million in refinancing fees during the nine months ended September 30, 2017.

Investing Activities

Investing activities consist of business acquisitions, investments in information technology and capital expenditures to furnish or upgrade our offices.

Net cash used in investing activities for the nine months ended September 30, 2017 increased $37.5 million, to $56.2 million from $18.7 million in the comparable period in the prior year. The increase was due to the completion of three acquisitions closing during the nine months ended September 30, 2017, while two acquisitions were completed in the comparable period in the prior year. The three acquisitions were completed for an aggregate cash consideration of $55.5 million. See Note 3 in the notes to the condensed consolidated financial statements for additional information with respect to the acquisitions we closed in the nine months ended September 30, 2017. In 2016, our primary investing cash outflows consisted of $16.5 million for two acquisitions and of $2.2 million for capital expenditures and intangible assets. We have minimal capital expenditure requirements. Capital expenditures totaled $0.7 million and $2.2 million, in the nine months ended September 30, 2017 and 2016, respectively.

Financing Activities

Financing activities primarily consist of borrowing and repayments on our debt to fund business acquisitions and our operations.

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Net cash used in financing activities for the nine months ended September 30, 2017 was $11.6 million, comprised of net proceeds from the issuance of common stock in conjunction with our IPO of $159.1 million and net proceeds from the issuance of term loans under the Amended and Restated Senior Secured Credit Facilities of $13.0 million.  These sources of cash were offset by the use of $159.2 million to prepay our Term Loan Facility; the payment of $8.3 million in contingent consideration related to the 2016 acquisitions; $10.1 million in quarterly dividend payments; $2.5 million in debt issuance costs and $3.6 million in scheduled quarterly principal payments on the Term Loan Facility. Net cash used in financing activities for the nine months ended September 30, 2016 included a $30.0 million optional prepayment on our Term Loan Facility; a payment of $4.5 million related to the Fastener Expo acquisition, which closed in the fourth quarter of 2015; $4.7 million related to scheduled quarterly principal payments on the Term Loan Facility; and a minor cash payment for the repurchase of common stock, which partly offset cash proceeds received from a sale of common stock to a director.

Free Cash Flow

Free Cash Flow of $66.1 million for the nine months ended September 30, 2017 decreased $8.7 million, or 11.6%, from $74.8 million for the comparable period in the prior year.

Free Cash Flow is a financial measure that is not calculated in accordance with GAAP. For a discussion of our presentation of Free Cash Flow, see footnote 4 to the table under the heading “—Results of Operations—Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016.”

Interest Rate Swap and Floor

In March 2014, we entered into forward interest rate swap and floor contracts with the Royal Bank of Canada, which modify our exposure to interest rate risk by effectively converting $100.0 million of floating-rate borrowings under our Term Loan Facility to a fixed rate basis, thus reducing the impact of interest rate changes on future interest expense. The swap agreement involves the receipt of floating rate amounts at three-month LIBOR in exchange for fixed rate interest payments at 2.705% over the life of the agreement without an exchange of the underlying principal amount of $100.0 million. When the three-month LIBOR rate drops below 1.25%, the interest rate floor contract requires us to make variable payments based on an underlying principal amount of $100.0 million and the differential between the three-month LIBOR rate and 1.25%. The interest rate swap and floor have an effective date of December 31, 2015 and are settled on the last business day of each month of March, June, September and December, beginning March 31, 2016 through December 31, 2018.

The interest rate swap and floor have not been designated as effective hedges for accounting purposes. Accordingly, we mark to market the interest rate swap and floor quarterly with the unrealized gain or loss recognized in unrealized net loss on interest swap and floor in our consolidated statements of income and comprehensive income, and the net liability included in accounts payable and other current liabilities and other noncurrent liabilities in the consolidated balance sheets.

For the nine months ended September 30, 2017 we recorded an unrealized net gain of $0.9 million and a realized loss of $1.1 million on our interest rate swap and floor agreement. For the nine months ended September 30, 2016, we recorded no unrealized net loss and a realized loss of $1.1 million on our interest rate swap and floor agreements. The impact of the gains and losses on the interest rate swap and floor agreement is recorded in interest expense. The interest rate swap and floor contracts have been designated as Level 2 financial instruments. At September 30, 2017 and December 31, 2016 the liability related to the swap and floor financial instruments was $1.4 million and $2.3 million, respectively. At September 30, 2017, $1.4 million of the interest rate swap and floor liability is included in accounts payable and other current liabilities on the consolidated balance sheet. At December 31, 2016, $1.5 million on the interest rate swap and floor liability was included in accounts payable and other current liabilities and $0.8 million was included in other noncurrent liabilities on the consolidated balance sheet.

Off-Balance Sheet Commitments

We are not party to, and do not typically enter into any, off-balance sheet arrangements.

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Long-Term Debt

Senior Secured Credit Facilities

On June 17, 2013, EEH, Expo Event Midco, Inc. (“EEM”) and certain of EEH’s subsidiaries entered into the Senior Secured Credit Facilities with a syndicate of lenders and Bank of America, N.A., as administrative agent. The senior secured credit facilities originally consisted of (i) a seven-year $430.0 million senior secured term loan facility, and (ii) a $90.0 million senior secured revolving credit facility. On January 15, 2014, EEH entered into an amendment to the Senior Secured Credit Facilities, to borrow an additional $200.0 million of term loans under the Term Loan Facility to fund a portion of the consideration for our acquisition of GLM. On July 21, 2014, EEH entered into a second amendment to the Senior Secured Credit Facilities to lower the interest rate and LIBOR floor rate. On October 28, 2016, EEH entered into a third amendment to the Senior Secured Credit Facilities to (i) borrow an additional $200.0 million of term loans under the Term Loan Facility to fund a portion of our redemption of the 9.00% Senior Notes and (ii) increase commitments under the Revolving Credit Facility by $10.0 million to a total of $100.0 million. On May 8, 2017, using the net proceeds to us from the IPO, we prepaid $159.2 million of borrowings outstanding under the Term Loan Facility.

On May 22, 2017, EEH amended and restated the Senior Secured Credit Facilities; the Amended and Restated Senior Secured Credit Facilities now consist of (i) the Amended and Restated Term Loan Facility, a seven-year $565.0 million senior secured term loan facility, scheduled to mature on May 22, 2024 and (ii) the Amended and Restated Revolving Credit Facility, a $150.0 million senior secured revolving credit facility, scheduled to mature on May 23, 2022.

Loans under the Amended and Restated Senior Secured Credit Facilities bear interest at a rate equal to, at EEH’s option, either:

(a) a base rate equal to the greatest of: (i) the administrative agent’s prime rate; (ii) the federal funds effective rate plus 50 basis points and (iii) one month LIBOR plus 1.00%; in each case plus 2.00%, or

(b) LIBOR plus 3.00%; in each case, subject to one step-down of 0.25% upon achievement of a Total First Lien Net Leverage Ratio (as defined in the Amended and Restated Senior Secured Credit Facilities) of 2.75 to 1.00 and, with respect to the Amended and Restated Revolving Credit Facility only, one additional step-down of 0.25% upon achievement of a Total First Lien Net Leverage Ratio of 2.50 to 1.00.

The Amended and Restated Senior Secured Credit Facilities also include an uncommitted incremental facility which, subject to certain conditions, provides for additional term loans in the sum of

(X)(i) if the incremental loans are first lien loans, an amount such that the first lien net leverage ratio does not exceed 4.00:1.00,

(ii) if the incremental loans are junior lien loans, an amount such that the secured net leverage ratio does not exceed 4.00:1.00,

(iii) if the incremental loans are unsecured, an amount such that either the total net leverage ratio does not exceed 5.00:1.00 or the fixed charge coverage ratio is not less than 2.00:1.00,

or, in each case, if the incremental loans are incurred with a permitted acquisition, an amount such that the applicable leverage ratio will not increase as a result of the permitted acquisition (on a pro forma basis giving effect to the incremental loans); plus

(Y) an amount equal to certain prior voluntary prepayments, loan buybacks and commitment reductions of loans under the Amended and Restated Senior Secured Credit Facilities, plus

(Z) an amount equal to the greater of $160 million and 100% of Consolidated EBITDA.

The Amended and Restated Revolving Credit Facility is subject to payment of a commitment fee of 0.50% per annum, calculated on the unused portion of the facility, which may be reduced to 0.375% upon achievement of a Total First Lien Net Leverage Ratio of 3.50 to 1.00. Upon the issuance of letters of credit under the Amended and Restated Senior Secured Credit Facilities, EEH is required to pay fronting fees, customary issuance and administration fees and a letter of credit fee equal to the then-applicable margin (as determined by reference to LIBOR) for the Amended and Restated Revolving Credit Facility.

The Amended and Restated Term Loan Facility requires scheduled quarterly payments, each equal to 0.25% of the original principal amount of the loans made under the Amended and Restated Term Loan Facility on May 22, 2017.

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The Amended and Restated Senior Secured Credit Facilities requires certain mandatory prepayments of outstanding loans under the Amended and Restated Term Loan Facility, subject to certain exceptions, based on (i) a percentage of net cash proceeds of certain asset sales and casualty and condemnation events in excess of certain thresholds (subject to certain reinvestment rights), (ii) net cash proceeds of any issuance of debt, excluding permitted debt issuances and (iii) a percentage of Excess Cash Flow (as defined in the Amended and Restated Senior Secured Credit Facilities) in excess of certain thresholds during a fiscal year.

Subject to certain customary exceptions and limitations, all obligations under the Amended and Restated Senior Secured Credit Facilities are guaranteed by EEM and all of EEH’s direct and indirect wholly-owned domestic subsidiaries, and such obligations and the related guarantees are secured by a perfected first priority security interest in substantially all tangible and intangible assets owned by EEH or by any guarantor.

The Amended and Restated Senior Secured Credit Facilities contain customary incurrence-based negative covenants, including limitations on indebtedness; limitations on liens; limitations on certain fundamental changes (including, without limitation, mergers, consolidations, liquidations and dissolutions); limitations on asset sales; limitations on dividends and other restricted payments; limitations on investments, loans and advances; limitations on payments, repayments and modifications of subordinated indebtedness; limitations on transactions with affiliates; limitations on changes in fiscal periods; limitations on agreements restricting liens and/or dividends; and limitations on changes in lines of business.

In addition, the Amended and Restated Revolving Credit Facility contains a financial covenant requiring EEH to comply with a 5.50 to 1.00 Total First Lien Net Leverage Ratio. This financial covenant is tested quarterly only if the aggregate amount of revolving loans, swingline loans and letters of credit outstanding under the Amended and Restated Revolving Credit Facility (net of up to $10.0 million of outstanding letters of credit) exceeds 35% of the total commitments thereunder.

Events of default under the Amended and Restated Senior Secured Credit Facilities include, among others, nonpayment of principal when due; nonpayment of interest, fees or other amounts; cross-defaults; covenant defaults; material inaccuracy of representations and warranties; certain bankruptcy and insolvency events; material unsatisfied or unstayed judgments; certain ERISA events; change of control; or actual or asserted invalidity of any guarantee or security document.

As of September 30, 2017, we were in compliance with the terms of the Amended and Restated Senior Secured Credit Facilities.  

Senior Notes due 2021

On June 17, 2013, we issued $200.0 million aggregate principal amount of Senior Notes. The interest rate on the Senior Notes was 9.000% with interest payable semi-annually and all principal amounts due on June 15, 2021. On October 28, 2016, we borrowed $200.0 million of incremental term loans under the Term Loan Facility and we fully redeemed all $200.0 million in aggregate principal amount of the Senior Notes with the proceeds of the incremental term loans, cash on hand and proceeds of an $8.0 million borrowing under the Revolving Credit Facility. The Senior Notes were redeemed at a price of 104.50%. In connection with the extinguishment of the Senior Notes, we expensed $3.8 million in unamortized premium paid to the bondholders and bank fees.

Transactions with Respect to our Indebtedness

We may, from time to time, repurchase or otherwise retire or extend our debt and/or take other steps to reduce our debt, lower our interest payments or otherwise improve our financial position. These actions may include open market debt repurchases, negotiated repurchases, other retirements of outstanding debt and/or opportunistic refinancing, amendment or repricing of debt. The amount of debt that may be repurchased or otherwise retired or refinanced, if any, will depend on market conditions, trading levels of our debt, our cash position, compliance with debt covenants and other considerations. Our affiliates may also purchase our debt from time to time, through open market purchases or other transactions. In such cases, our debt may not be retired, in which case we would continue to pay interest in accordance with the terms of the debt, and we would continue to reflect the debt as outstanding in our consolidated balance sheets.

Contractual Obligations and Commercial Commitments

On May 8, 2017, using the net proceeds from the IPO, we prepaid $159.2 million of borrowings outstanding under the Term Loan Facility. On May 22, 2017, we amended and restated our Senior Secured Credit Facilities. See “—Recent Events.” In connection with the IPO, the Services Agreement with Onex was terminated. See “—How we assess the performance of our business—Selling, general and administrative expenses—Management Fee.” Other than the refinancing of our indebtedness and the

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termination of the Services Agreement there have been no material changes to the contractual obligations as disclosed in the Prospectus, other than those made in the ordinary course of business.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the appropriate application of certain accounting policies, some of which require us to make estimates and assumptions about future events and their impact on amounts reported in our consolidated financial statements. Since future events and their impact cannot be determined with absolute certainty, the actual results will inevitably differ from our estimates.

We believe the application of our accounting policies, and the estimates inherently required therein, are reasonable. Our accounting policies and estimates are reevaluated on an ongoing basis and adjustments are made when facts and circumstances dictate a change. We base our estimates and judgments on historical experience and various other factors that we believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions.

The policies and estimates discussed below involve the selection or application of alternative accounting policies that are material to our consolidated financial statements. With respect to critical accounting policies, even a relatively minor variance between actual and expected experience can potentially have a materially favorable or unfavorable impact on subsequent results of operations.

Our accounting policies are more fully described in Note 1, “Description of Business, Basis of Presentation and Significant Accounting Policies” in the notes to our audited consolidated financial statements included in the Prospectus. Management has discussed the selection of these critical accounting policies and estimates with members of our board of directors. There have been no significant changes in the critical accounting policies and estimates described in the Prospectus.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15). ASU 2016-15 clarifies how certain cash receipts and payments should be presented in the statement of cash flows. This standard is effective for fiscal years beginning after December 15, 2016. Adoption of ASU 2016-15 was effective as of the beginning of the Company’s 2016 fiscal year and did not have a significant impact on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718) (ASU 2016-09). ASU 2016-09 identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. This standard is effective for fiscal years beginning after December 15, 2016. Adoption of ASU 2016-09 was effective as of the beginning of the Company’s 2017 fiscal year and did not have a significant impact on its financial statements.

Jumpstart Our Business Act of 2012

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, which we refer to as the JOBS Act. We would cease to be an emerging growth company upon the earliest of: (i) the last day of the first fiscal year in which our annual gross revenues are $1.07 billion or more; (ii) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year; or (iii) the date on which we have, during the previous three-year period, issued more than $1.07 billion in non-convertible debt securities. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. We have elected to take advantage of these reduced disclosure obligations, and may elect to take advantage of other reduced reporting obligations in the future.

The JOBS Act permits an emerging growth company like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have chosen to irrevocably “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the potential loss arising from adverse changes in market rates and prices. Our primary exposure to market risk is interest rate risk associated with the unhedged portion of our Amended and Restated Senior Secured Credit Facilities. See “—Long Term Debt—Senior Secured Credit Facilities” for further description of our Amended and Restated Senior Secured Credit Facilities. As of September 30, 2017, we had $563.6 million of variable rate borrowings outstanding under our Amended and Restated Senior Secured Credit Facilities with respect to which we are exposed to interest rate risk. Holding other variables constant and assuming no interest rate hedging, a 0.25% increase in the average interest rate on our variable rate indebtedness would have resulted in a $1.4 million increase in annual interest expense based on the amount of borrowings outstanding as of September 30, 2017.

In March 2014, we entered into forward interest rate swap and floor contracts with the Royal Bank of Canada, which modify our exposure to interest rate risk by effectively converting $100.0 million of floating-rate borrowings under our Term Loan Facility to a fixed rate basis, thus reducing the impact of interest-rate changes on future interest expense. The swap agreement involves the receipt of floating rate amounts at three-month LIBOR in exchange for fixed rate interest payments at 2.705% over the life of the agreement without an exchange of the underlying principal amount of $100.0 million. When the three-month LIBOR rate drops below 1.25%, the interest rate floor contract requires us to make variable payments based on an underlying principal amount of $100.0 million and the differential between the three-month LIBOR rate and 1.25%. The interest rate swap and floor have an effective date of December 31, 2015 and are settled on the last business day of each month of March, June, September and December, beginning March 31, 2016 through December 31, 2018.

The interest rate swap and floor have not been designated as effective hedges for accounting purposes. Accordingly, in 2016, 2015 and 2014 we marked to market the interest rate swap and floor quarterly with the unrealized and realized gain or loss recognized in interest expense, in the consolidated statements of income (loss) and comprehensive income (loss) and the net liability included in other current liabilities and other noncurrent liabilities in the consolidated balance sheets.

For the nine months ended September 30, 2017 we recorded an unrealized net gain of $0.9 million and a realized loss of $1.1 million on our interest rate swap and floor agreement. For the nine months ended September 30, 2016, we recorded a realized loss of $1.1 million on our interest rate swap and floor agreements. The interest rate swap and floor contracts have been designated as Level 2 financial instruments. At September 30, 2017 and December 31, 2016 the liability related to the swap and floor financial instruments was $1.4 million and $2.3 million, respectively. At September 30, 2017, the $1.4 million of interest rate swap and floor liability is included in accounts payable and other current liabilities on the consolidated balance sheet. At December 31, 2016, $1.5 million on the interest rate swap and floor liability was included in accounts payable and other current liabilities and $0.8 million was included in other noncurrent liabilities on the consolidated balance sheet.

Inflation rates may impact the financial statements and operating results in several areas. Inflation influences interest rates, which in turn impact the fair value of our investments and yields on new investments. Operating expenses, including payrolls, are impacted to a certain degree by the inflation rate. We do not believe that inflation has had a material effect on our results of operations for the periods presented.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)), as of the end of the period covered by this report. Based upon the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2017, the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

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PART II — OTHER INFORMATION

Item  1. Legal Proceedings

From time to time, we may be involved in general legal disputes arising in the ordinary course of our business. We are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, financial condition or results of operations.

Item  1A. Risk Factors

There have been no material changes to our principal risks that we believe are material to our business, results of operations and financial condition, from the risk factors previously disclosed in the Prospectus, dated April 27, 2017, filed pursuant to Rule 424(b)(4), relating to the IPO which is accessible on the SEC’s website at www.sec.gov.

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

None.

Item  3. Defaults Upon Senior Securities

None.

Item  4. Mine Safety Disclosures

None.

Item  5. Other Information

None.

Item  6. Exhibits

3.1	Amended and Restated Certificate of Incorporation of Emerald Expositions Events, Inc., dated as of April 27, 2017 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by Emerald Expositions Events, Inc. with the Securities and Exchange Commission on May 3, 2017).
3.2	Amended and Restated Bylaws of Emerald Expositions Events, Inc. (A Delaware Corporation), dated as of April 27, 2017 (incorporated by reference to Exhibit 3.2 to the Current Report 8-K filed by Emerald Expositions Events, Inc. with the Securities and Exchange Commission on May 3, 2017).
*+10.1	Form of Stock Option Agreement under the 2017 Omnibus Equity Plan (for non-California residents).
*+10.2	Form of Stock Option Agreement under the 2017 Omnibus Equity Plan (for California residents).
*+10.3	Form of Post-IPO Restricted Stock Unit Award Agreement under the 2017 Omnibus Equity Plan.
* 31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
*31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
*32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*101.INS	XBRL Instance Document
*101.SCH	XBRL Taxonomy Extension Schema Document
*101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

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*101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
*101.LAB	XBRL Taxonomy Extension Label Linkbase Document
*101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

+Management compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		EMERALD EXPOSITIONS EVENTS,  INC.
Date: November 2, 2017	By:	/s/ Philip T. Evans
		Philip T. Evans
		Chief Financial Officer and Treasurer
		(Principal Financial Officer and Principal Accounting Officer)

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