Q4 2023 Emerald Holding Inc Earnings Call

Participants

Hervé Sedky; President & CEO; Emerald Holding Inc

David Doft; Chief Financial Officer; Emerald Holding Inc

Barton Crockett; Analyst; Rosenblatt Securities

Allen Klee; Analyst; Maxim Group LLC

Presentation

Operator

Good morning, and welcome to the Emerald Altix Quarter and Full Year 2023 earnings conference call.
Before we begin, let me remind everyone that this call will include certain statements. It is forward-looking in the meeting of the Private Securities Litigation Reform Act of 1990. These include remarks about future expectations, beliefs, estimates and company's statements about projected results for 2024.
Sorry.
Yes, risks, uncertainties another well results differ materially from the indicated forth in the Company's most recently filed periodic reports on Form 10 K and Form 10 Q and filings the Company any duty. Additionally, during today's call, management will discuss non-GAAP measures believes can be useful in evaluating the Company's performance. Presentation of this. Additional information should not be considered an absolute isolation. Yes, results prepared in accordance with GAAP creation of these non-GAAP measures, the most comparable GAAP measure can be found in the companies earnings release MinDOC. This conference is being recorded and a replay of this call will be available on the Investors section company's website through 11.59 P.M. Eastern time. I would now like to turn the call over to Mr. Hervé Sedky.
Yes, go ahead.

Hervé Sedky

Thank you, Julie, and good morning, everyone.
It's great to be with all of you today to discuss our fourth quarter and full year results.
I'll start with a high-level overview of our accomplishments, we review our 2023 performance. And to give an overview of our strategy, David Doft, our CFO, will then provide more detail on our financials and outlook for 2024. I joined Emerald three years ago, and I'm incredibly proud of the work our team has delivered to date. Remember, when we were were up, remember where we were three years ago.
I joined Emerald in January of 2021 in the middle of a global pandemic that brought our business to our screeching halt. I knew then that this was a marathon, not a sprint. We needed to manage through the storm one day at a time thoughtfully and strategically, and we did since then, we've accomplished remarkable milestones fostering moments of success sort of raising the way for an exciting journey ahead.
In 2023, we once again stayed true to our core, drove growth across the business and remained committed to our strategic pillars of customer centricity, 365 day engagements and portfolio optimization. Some of this past year's highlights include we saw the vast majority of our connections brands returned to pre-pandemic levels of revenue performance and most importantly, higher levels of impact and growth in the communities we serve. In fact, just yesterday, I returned from Cabot's the Kitchen and Bath Industry Show where attendance has far surpassed any events in its history across our portfolio.
Our growth was meaningful and we believe we are on a path for continued growth. Our efforts spanned various funds fronts from introducing on-site rebooking and launching our first time exhibitor program, two, expanding into the B to C event landscape with initiatives like NBA call in outdoor adventure X, we implemented important strategic initiatives and investments that are crucial for our ongoing success with the expansion of our Emerald resource hub in Manila, investments in new tools and resources and the addition of Lodestone events to the MOD family, we launched several new events called locations in strategic partnerships. Well, we expanded our international sales reach and welcomed meaningfully higher levels of exhibitors and attendees from outside of the United States.
Our content business underwent significant incremental digital transformation since we made the decision to run it as a stand-alone business unit through resource investment in editorial advertising, lead generation and other media related services. As part of this effort, we launched our first Penn Emerald media property servicing small businesses called Small Business Exchange, which already has 400,000 newsletter subscribers, RJ to check it out actually at w. w. w. dot small business ex Change.com. Simultaneously, our eCommerce businesses expansion into the kitchen and bath home market.
Adding brands like LG's, LG builders and signature kitchen suite divisions as well as Z line, provides a substantial new opportunity for growth, which we believe doubles our total addressable market opportunity for our B2B commerce software. Overall, the elastic business sustained 20% plus growth in a subscription software revenue base with a net revenue retention of 110%.
The progress made on the Emerald platform underscores our commitment to transformation. We have also made progress in supporting our commitments to strengthen diversity equity and inclusion DIMO. This progress stems from the work of our dedicated ZI. Committee as well as the efforts of our teams and brands supporting over 100 successful social programs, partnerships and IT initiatives.
Last year, our commitment to sustainability and MO net zero priority continue to drive forward. We anticipate even greater transformation in 2024, propelling us closer to achieving our sustainability goals. We believe this effort is good for business and many of our customers look to us here for our leadership. With all this, we've enjoyed strong double-digit growth in both revenue and adjusted EBITDA, and I'm confident in our ability to continue to deliver high levels of growth given our razor-sharp focus and investments in long-term growth initiatives.
And these include one freeing up our sales force to hunt for new customers with the implementation of on-site rebooking across our events and enhancing our sales support and lead generation efforts through our Emerald resource hub. Second, expectation that each brand in their annual three year brand operating plan will identify adjacencies and sub expos supporting by our accelerator team that was created to purely focus on launching new brands, thereby catalyzing growth in the exhibitor pace at our events.
Third, driving matchmaking adoption that we are now testing with elements of AI to drive even more relevant matters to our clients directly benefiting their ROI from attending our events, and fourth, transforming how we market to further grow qualified attendance at our events including enhanced focus on growing our databases and broadening our reach into industries via collaboration being our connections and content teams.
We also created new centralized departments within the company that not only gives us tremendous operating leverage, but also ensures the implementation of best practices across the business. These include one, an international sales group to drive growth by curating and expanding our overseas agent network and working with trade commissions, agency and governments to drive sales at Emerald's events. As part of this, we developed and executed a plan to set up country pavilions across our events to highlight these markets and sellers. In total, we believe we can double the percent of revenue from international exhibitors from 11% in 2023 to 20% over the next few years.
Second, to pricing moves and strategy to capture the value we create for exhibitors and attendees. We have standardized our pricing processes implemented reporting with visibility into trending and force forecasting, allowing for continuous improvements and improved yields through rate mix changes, removing the dilutionary products, reducing discretionary discounting rate, tier reductions, the introduction of late rates, inventory controls and location based pricing. In total, this has allowed Emerald to improve the overall yield on its products and deliver increases well in excess of inflation. And third, we created a customer experience group, which includes the launch of exhibitor onboarding and first time or programs to help exhibitors leverage best practices to maximize their return on investment at our events, we believe that this program should directly translate into increased customer retention for M-real's and with it higher growth.
Now let's turn to our results. Starting with live events. In 2023, we saw another significant step forward in both revenue and profitability driven by increases in exhibitors, attendees and pricing and what continues to benefit from post-COVID tailwinds, including the removal of international travel restrictions, which persisted into early 2023 in some countries as well as improvements in our customers' supply chains.
Square footage at our trade shows grew 11% year on year while exhibitor count also grew 11% as compared to 2022. As I noted with them, we've implemented on-site rebooking at most of our trade shows, which means we are already selling deeper space for events up to 12 months out. Our sales pacing think gives us a great deal of confidence in our growth trajectory for 2024 with three quarters of targeted boot revenue already under contract and where we project continued increases in our revenue above our industry's historical run rate.
The strength of our business comes from the unique and measurable value we bring to our customers who are themselves business owners looking to maximize the value they get out of their marketing budgets. Trade shows provide a tangible ROI to exhibitors in the form of new customers and purchase orders for nearly half of the small businesses in the U.S. that participate in at least one trade show per year.
Trade shows are their number one selling event of the year. A big part of our ongoing effort has been to clarify the value proposition and make the ROI more transparent by developing value added tools and metrics, which we believe will deliver an even better trade show experience to both exhibitors and attendees. The result is that our customers view our shows as an investment rather than a cost. They know we understand them continuously adapt to the ever-changing needs and that our objective is to help them achieve and even surpass the goals they have set for themselves.
This is what our brand teams focus on each and every day. While our Live Events business remains strong, good performance of our content of our contents business was somewhat muted in 2023. As I noted last quarter, our content business is more broadly exposed to the technology sector where we saw a pullback in ad spend last year. This ultimately put downward pressure on our media business in the full year. However, our strategic growth initiatives, combined with the recovery in the broader economy and with the tech sector approaching the end of its cost-cutting cycle. We expect that the media business to return to growth in 2024.
In terms of our broader strategy in 2023, we continue to execute on the three pillars of value creation for customer centricity, 365 day engagement and portfolio optimization in customer centricity, we're focused on delivering greater value to customers in the form of add on services, actionable data and insights and a clear picture of the return on investor and have been investments customers receive from the marketing dollars be put to work cost Emerald's platform. This improves our stickiness with customers incentivizes them to deploy more marketing dollars with everything that ultimately we expect will help drive higher revenue per customer.
Our second pillar 365 day engagement is about providing multiple entry points to the customer engagement cycle through trade shows, conferences, webinars, media content and our e-commerce platforms that gives buyers and sellers a digital platform for year-round transactions.
Our third pillar is portfolio optimization, which includes both acquisitions. As new event launches. Over time, we expect new. We expect that new launches through Emerald accelerator unit to contribute one to two percentage points of annual revenue growth.
On the acquisition side, we continue to evaluate a large pool of potential acquisitions with the ability to bring Emerald's scale and operational efficiencies to close within a highly fragmented industry. This includes some smaller near term opportunities in the active pipeline that we're working hard to get over the finish line, we took a patient approach to M&A in 2023, walking away from some acquisition opportunities that did not meet our criteria in January 2024, we expanded our hosted buyer event offerings by acquiring hotel interactive and a series of biotech and health tech events.
Combined with our existing CPMG. unit, we now have 29 hosted buyer events on our annual calendar While smaller in size than the traditional trade. So we'd like the hosted buyer events given the high-quality new business leads it provides our customers.
Looking ahead, we continue to expand our opportunity set, building a proprietary pipeline of potential deals, which we expect to pay off with future potential acquisitions to scale and diversify our portfolio between organic growth, acquisitions and new store launches. We believe we've positioned the Company as an engine for double-digit long-term growth with the benefits of operating leverage. We expect to be at 35% EBITDA margins in the coming years with strong continued growth prospects ahead of us.
To conclude, although 2023 came in slightly below our original revenue expectations. It remain a year of powerful growth as we grew revenue more than 17% and adjusted EBITDA by 67%. We're especially excited as we look ahead to 2024 and beyond, where we expect to continue to demonstrate our free cash flow generation and compounding abilities as we look to grow attendance and revenues, expand margins and continue to realize the benefits of our recent investments into our technology and data systems that deliver greater and greater value to our customers every year since they returned to ourselves and with that, let me turn the call over to David.

David Doft

Thank you, Harvey, and good morning.
Starting this quarter, we have realigned our reporting segments to better reflect how our business is organized and managed. Our connections segment includes all of our live events, while the all other grouping includes our media content assets as well as our software e-commerce assets. This follows the completion of a reorganization executed during the year where we focused leadership around the products and services we provide as opposed to the industries we serve. We expect this will allow us to better share best practices and increase the speed of innovation within Emerald.
This has also had the added benefit of enabling us to streamline our executive team to become less top-heavy for 2023, our connections segment accounted for 89% of total revenue and 97% of adjusted EBITDA pre-corporate expenses. A full breakout of segment performance is available in our earnings release and our investor presentation posted this morning to our website provide some historical trending data for your models.
Turning to our results for the fourth quarter, total revenue was $101.5 million compared to $93.6 million in the prior year quarter. The increase was driven primarily by organic revenue growth and less so from revenue from acquisitions. For the full year 2023, total revenue was $382.8 million compared to $325.9 million in 2022, representing an increase of 17%. Organic revenue for the connections segment, which takes into account the impact of acquisitions and scheduling adjustments, was $87.5 million for the fourth quarter 2023, an increase of $5.7 million or 7% versus the fourth quarter of 2022.
For the full year 2023 organic revenue from connections was $327.5 million, an increase of $47.7 million or 17% versus the full year 2022. Given the decline in our content business. Organic growth in total was an increase of 14.5% for the year. During the full year 2023, we recorded $2.8 million of other income, which hit in Q3, reflecting the remaining insurance proceeds paid to us under our event cancellation insurance as a result of the disruptions during COVID.
Recall that in 2022, we recorded$ 102.8 million of other income, representing a large portion of those insurance proceeds. At this point, we have no remaining COVID related event cancellation claims outstanding. Fourth quarter adjusted EBITDA increased 43% to $35.8 million compared to $25.0 million for the same quarter last year. Full year 2023 adjusted EBITDA, excluding insurance proceeds, was $95.0 million compared to $56.8 million in the full year 2022, an increase of 67%. This also equated to an over 700 basis point improvement in adjusted EBITDA margin, excluding insurance proceeds, as our recovering revenue base leveraged our overhead as planned.
One important item to note is the level of investment we have been making in the business, which we believe should pay off with higher more profitable growth in the future. These include launching new events and building out our scaled e-commerce software solution. While these initiatives contribute revenue to the Company in aggregate, they drag reported adjusted EBITDA margin by four percentage points in 2023.
Fourth quarter free cash flow was $13.5 million compared to an outflow of $1.4 million in the prior year prior year quarter, excluding the impact of the $25 million in taxes paid in 2022 related to last year's insurance settlement recovery. Full year 2023 free cash flow, excluding insurance, was $26 million compared to $6.9 million for 2022, as our increase in adjusted EBITDA was somewhat offset by higher interest expense and timing of payables.
Turning to expenses, on a reported basis, fourth quarter SG&A was $36.1 million versus $17.4 million in the prior year quarter. The year-over-year increase is due largely to 4Q 2020 two's $24 million benefit, some reduction in estimated deferred acquisition consideration from historical acquisitions, which flowed through the P&L as a credit to SG&A as well as other one-time items as described in Schedule three of our earnings release.
For the full year 2023, SG&A was $168.3 million compared to $145.0 million for 2022, largely due to the same dynamics.
Turning to the balance sheet, we had $204.2 million in cash as of December 31, 2023 versus $200.3 million as of September 30th. After funding, the $8.6 million dividend on our convertible preferred stock. Our total liquidity stood at $14.2 million, including full availability on our $110 million credit facility. We believe our balance sheet strength and cash flow generation support our ability to opportunistically invest in and grow our business as well as optimize per-share value of our stock. We expect to continue to balanced capital allocation between acquisitions, investments in our own business, managing debt leverage and opportunistic share buybacks.
While we did not repurchase any common shares in the fourth quarter for the full year 2023, we repurchased a total of 5.1 million shares at an average price of $3.34 per share. At year end, we had $25 million remaining on our existing buyback authorization, which it was which was reloaded by our Board in November.
In lieu of buybacks of common stock, we did fund the quarterly dividend on our convertible preferred stock in cash as opposed to in-kind now that we have the option to do so, we spent approximately $17.2 million on this in the second half of the year, thereby avoiding the issuance of incremental convertible preferred stock that could have converted into 4.9 million common shares at issuance given the $3.52 conversion price.
As of December 31st, we had net debt of $209.1 million, leading to a net leverage ratio as defined in our credit agreement of 2.13 times our trailing 12 months consolidated EBITDA based on the definition in our credit agreement of $98.3 million. The terms of the convertible preferred stock also allow us to force mandatory conversion of all preferred shares if the price of Emerald's common stock closes at $6.17 or higher for 20 consecutive trading days.
If we achieve the closing price requirement, we intend to immediately affect the conversion of the preferred shares and our independent directors have already approved. This yesterday's close represented the 14th straight day, our stock has closed above the threshold. Should we close at $6.17 or higher for each of the six upcoming trading days through March 7, we would be able to execute the mandatory conversion, turn off the 7% dividend paid to the convertible preferred stockholders and save over $34 million per year.
We believe that the conversion of the preferred shares would substantially simplify our capital structure and moderately improve our trading liquidity, making Emerald more attractive to potential investors. Additionally, as some data providers have been treating the convertible preferred stock as debt in their market cap calculations, the conversion into common shares will make it easier for investors to calculate our market cap, which at current prices is approximately $1.3 billion on an as-converted basis.
An overview of our capital structure and the effects of the potential conversion of the preferred shares can be found on slide 12 of our earnings presentation deck, factoring in $62.9 million of common shares outstanding at December 31st, and an additional 139.9 million common shares represented by the convertible preferred shares. As of December 31st, our total share count on an as-converted basis. Basis would be $202.8 million.
As just noted, based on yesterday's closing price, this equates to a market cap of $1.3 billion on an as-converted basis, adding in our net debt estimated contingent consideration of $7 million on our balance sheet for prior acquisitions and a deferred tax asset worth approximately $70 million. This leads to an enterprise value of approximately $1.5 billion.
Turning to guidance, we are initiating full year guidance for 2024 in the range of $415 million to $425 million of revenue and $110 million to $115 million of adjusted EBITDA. This guidance implies an adjusted EBITDA margin of approximately 27% and includes an over 300 basis point drag from continued investment in the growth initiatives I noted previously.
We believe as our business continues to scale and we leverage the investments we have made that we have runway to improve this number as we work our way back overtime to the margins we saw prior to COVID.
Thank you very much for your time. And with that, we'll now open the line for questions you.

Question and Answer Session

Operator

(Operator Instructions) Barton Crockett, Rosenblatt.

Barton Crockett

Okay. Thanks for taking the question and good morning. I guess I just wanted to have a little bit of more granularity, if I could, on the variance here versus what you guys had been expecting on the you gave a revenue guidance range for the year, and I've repeated that in the third quarter and we came in a little bit below that for the year, you gave EBITDA guidance range guidance range. What kind of came in at the bottom end? And I assume you are expecting better than that. So could you kind of break down what the biggest drivers of the variance were? That would be question number one.
And then kind of related question. Number two, you had 5% kind of organic growth in the fourth quarter and your guidance would have your growth up 8% to 11% revenues, so a reacceleration. And can you talk about how much visibility you have into that. Is that reacceleration what you see in the first quarter and what gives you confidence that acceleration will happen?

David Doft

Sure, Barton, thank you for the question. I'll come. I'll take the first question in terms of the of your question on our performance in the quarter. So there are I would say there are three things.
First, on the content business, while it's a small part of our of our business, as you as you've seen anything we've been we've talked about there are some declines in the quarter, and it's been a difficult year for us and for the industry as a whole. The good news is that we do think that budgets have stabilized and we've made also some investments we have.
We believe that the combined efforts that both in terms of what we've done in addition to some, you know, some of the the processes, the product changes that led to that we've made as well as some hedges that quite honestly that we have built-in to the business in 24. I will we'll de-risk that business for 24. But in terms of 23 performance, that was one of the contributors. The second area is admittedly launches are hard and hard to forecast. So the initial revenue that comes from launches in the near term have some volatility.
And while on the whole and in the long run, they're really exciting, indeed, create some real meaningful opportunity. And as I mentioned over time will create a 1% to 2% of organic growth for Emerald. They do on a short-term basis, create some variability, and that was one of the impacts of course, in the quarter and third, and there is some sector specific volatility of those facilities for us on a quarter-to-quarter basis.
And that's why our organic growth rate fluctuates quarter to quarter. So we had 7% organic growth rate, for instance, this quarter. But based on the sector mix that we have, as an example in the first quarter of 2024, we expect organic growth to accelerate beyond that. So those would be the three areas that contributed contributed to that.

Hervé Sedky

And to add to that, the content business the impact of launches and sector volatility. Yes, I think I'm just building on that. And going to your second question about the reacceleration. I anticipated in the guidance we gave is that that quarter to quarter and sector specific performance of our business, it's not one business. It's an aggregation of events that serve specific industries.
And depending on the quarter, we have an event in some industries and another quarter we have and we have events in other industries, and it's really the sector-specific aspect of it that may lead to the changes in growth rates quarter to quarter where we sit right now at 1Q, we expect to have a nice reacceleration of revenue growth based on the industries we serve in 1Q. Our 1Q also happens to be typically the largest quarter of the year for Emerald, which gives us a tremendous amount of visibility into performance for the year. And survey mentioned in his prepared remarks sitting here today, we have already booked contracts signed three quarters of the booth revenue at our events.
Now there are some other revenue streams around booth revenue of a booth revenue is a very strong proxy for us and highly predictive and based on our analysis of the overall revenue performance of the year. So we're feeling really good where we sit right now and where we're ahead of where we were last year at this point relative to the guidance we put forth to where we ended up in actuals last year. So there's lots of room for offer potential volatility from here. I hope we don't have it, but we built into a plan that we have high confidence in.

Barton Crockett

Okay. Okay. Thank you. For that and on again on the outlook here. So there's no guidance for free cash flow. And how should we think about the free cash flow conversion of this EBITDA that you expect to generate in 24? Any reason why it would be meaningfully different than 23 or any thoughts around that?

Hervé Sedky

I think in 2024, I hope we have a better conversion of free cash flow than in 23. But there was certainly some volatility in 23 around working capital, particularly on the payables side on with some one-off dynamics that we think will reverse and stabilize or be more normalized in the 24 year and on and at least in the traditional reporting of free cash flow of cash flow from operations minus CapEx, the changes in deferred acquisition consideration that flowed through cash flow from operations, but really acquisition related lead to volatility on that front. If you strip out the deferred acquisition consideration changes, you actually would get a better free cash flow and then the straight-up definition of it.
But then we have to stick with that definition and so we do I'm ultimately in 2024 on I think, will we're less likely to have surprises on interest expense. I think we we took a meaningful hit on on interest expense this year, not just from rising rates, but when we extended the maturity of our debt from a widening spread of on those rates, which cost us almost $10 million of interest expense in the year relative to our initial expectations coming into the year. I think this year is going to be I hope will be a bit more predictive on that front.
And hopefully we get surprised with better interest expense if the rate environment improves as many predict, where our initial forecast is for moderately lower CapEx in 2024 than 2023 odd. We're talking low single-digit millions, but it's a it's truly incremental to the flow through of EBITDA to free cash flow going forward. And as I said, we hope to and believe the working capital dynamic will be more normalized in 24. But then one of the reasons we didn't I'd give a formal guidance on it because that working capital volatility is mainly not served us well by putting out numbers that we've had a harder time predicting. But I do think with that more normalized environment, we're looking for working capital to be at least neutral and hopefully additive to cash generation in the year.

Operator

(Operator Instructions) Allen Klee, Maxim Group.

Allen Klee

Yes, good morning. On your software business on, can you talk a little about your plans to grow that and your thoughts on that?
This will be on cash flow breakeven. We're one direction or the other four.
Wonderful.

David Doft

Yes, as I mentioned in my remarks, one of the exciting things about our software business is that we've been able to expand the our total addressable market by entering a new category. So we have been playing largely in our the outdoor apparel sector for a long time, serving industries that are adjacent to some of our events like outdoor retailer and service. And so forth.
Now it entered the kitchen and bath and in more of the indoor categories, if you will. And Tom, in with a number of very large prominent signings with Shell, which is really exciting. So they are the opportunities for us to grow that business are really to enter new categories, and we're doing that in a very thoughtful, disciplined way.
And by leveraging Yum. The relationships in the on the contacts and customers that we have in our business. And with that are we we do foresee continuing that continued growth and profitable profitable I think very real time.

Hervé Sedky

I mean survey and I were at the kitchen and bath show, as he mentioned in his prepared remarks, that that is the new industry that elastic has entered into with the wins that he mentioned. But those wins were announced at the event and it opened a lot of doors and of potential new customer opportunities, especially with the brand names that we've been able to initially sign with are well known in the space and it leads others to look up and evaluate the efficiency opportunity.
They can get by adopting the elastic technology. So it's a really exciting time. It's a very large market in revenues. It's larger than the in the outdoor market, at least in revenues for the products. And we believe for the addressable market for the software, it's at least as large and maybe larger than the categories we've already served. And so we think it only extends the opportunity for a very high growth at that business for a long time to come.

Allen Klee

Okay, great. And if I looked at your guidance for from EBITDA, you have margins going up 24 versus 23. Could you talk a little about what's behind that? And also, you mentioned there's a 4% drag from are new events, some and scaling in your software and different things. Where do you when do you see I mean, you could always be investing in new things, whereas it's something that you might. Where do you see that, that 4% drag might mean, if I'm less.

Hervé Sedky

Sure. So I'm wondering both your questions actually play into each other. So we're seeing continued leveraging of our cost base and our investments in 2024. That is driving incremental margin as we grow. And I think you can break down the margin opportunity really in a couple of ways. One is as has more and more of our events scale back to pre-pandemic levels and many have, but some still have a little bit to go.
We get very meaningful leverage of high gross margin revenue coming in that can leverage existing spend. And that's part of the natural cadence that we're looking at over the next couple of years as we work to bring margins back towards historical levels.
And the second is on is the investment areas. Now a business like Elastic Elastic is already breakeven on an EBITDA basis. It's a moderate drag on free cash flow, and we expect it to become profitable as it grows from here and have a meaningful flow through of, again, high gross margin revenue to leverage its existing overhead to get to on margins that are, I think, over time around where the rest of Emerald is.
But that's going to take some growth from here because there is some investment for us to go into new industries are. But when we go into new industries, we've opened up meaningful new revenue opportunities on the launch side on the launch side, again, there largely events and events at certain scale have fairly consistent and predictable gross margin.
And so as we get into years three, four, five of the launch plan, we start to turn the corner from that effort, losing money to that effort becoming self-funding to that effort, making money. And on you'll hear me mention of volatility and a new event launches into true they don't all work.
And the ones that don't work, we stopped doing them. And so they stopped losing money because we stopped doing them.
And then we go and we focus on what does work or we launch new opportunities to give us the optionality of growth. But in aggregate, it's a very high return way to drive incremental growth. And we'd rather launch a self-funding event and go buy one at a time 6, 7, 8 times EBITDA, right say it's a better return on our dollars and better value creation opportunity for our shareholders.
So it makes sense to do that. And so the reason we broke out that that margin impact is because we want investors to understand on where the margins are in the underlying business, the like, let's call it the legacy MRO business or the core animal business relative to the investment areas and so on.
If you take the implied 27% adjusted EBITDA guidance that we have and you add in the 300 basis points that we mentioned as the drag where the underlying business is at 30% in our plan for 2023. That's a lot closer to the historical margins than the reported numbers, what otherwise indicated. And so we're trying to give that visibility to to investors on that front on ultimately and with launches, if none of them work and none of them get to the point where they make money or self funding, we can stop doing them and it doesn't take away from the value of the rest of the portfolio that's contributing margin at a very high level.

Allen Klee

Thank you. And my last question, maybe just going back to guidance. Could you give us what you think of as the factors that might get you to the high end versus the low end of your guidance?

Hervé Sedky

Wonderful. I think there is as with a portfolio like ours, even though there's probably four or five various factors, I think we have out we have built in on our range of views around the media business, given the volatility of that business last year, we surely don't want to overshoot our expectation again.
And so we've put in appropriate hedges around a range on that front similarly on the launch side of the business, which can be volatile on depending on any given period, how well launches do and that we've put some our range of outcomes there and then we've just we've left some some room and range of outcomes on the core event business. And there are different components there.
The boost revenue side tends to be of fairly predictable at the. There are some events that monetize attendees. Attendees tend to sign up later. And so that's a little less visible. And so we like to leave ourselves some room on that front, just in case one industry versus another may have a different attendee on performance at the end of the day.
So those are really the things we think about when we come when we think about revenue, it ranges of revenue and revenue hedges on the on the EBITDA side or the expense side, we then build a plan where we have different levels of spending and investment that's needed against different revenue levels. And so we we've become really good at managing our our expense in real-time as we can. So that we could and make sure that we're delivering on our overall plan.

Operator

No further questions at this time. I will turn the call back over to Ari when.

Hervé Sedky

Well, thank you all very much. And in closing, I want to thank you all for your time for your participation. And as I said, 23 was a year of powerful growth as we grew revenue more than 17% and adjusted EBITDA by 67%.
And we're excited as we look ahead into 2024 and beyond to continue to realize the benefits of our strategy and investments to deliver greater value to our customers, opportunities for our people and expected strong growth to our shareholders.
And with that, I wanted to thank you once again and goodbye.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for joining, and you may now disconnect. Your lines. Thank you.