Emerald Holding, Inc., the operator of a trade shows, reported a loss in the second quarter ended June 30 but sales bounced back as the company was able to hold 29 in-person trade shows, conferences and other events during the quarter.

Emerald hosts over 140 yearly events across multiple industries. In the outdoor lifestyle space, venues include Outdoor Retailer, Surf Expo, The Sports Licensing & Tailgate Show, Impressions, Swim Collective, and Active Collective.

Highlights

  • The company reaches agreement to settle outstanding insurance litigation for proceeds of $149.25 million; upon expected receipt in the third quarter, total insurance proceeds from 2020 and 2021 canceled and impacted events are expected to equal approximately $372.9 million;
  • In the second quarter of 2022, Emerald successfully traded 29 in-person trade shows, conferences and other events, serving more than 62,000 attendees and 3,600 exhibiting companies;
  • Revenues of $71.4 million for the second quarter 2022 reflect an increase of $56.4 million, or 376.0 percent, from $15.0 million in revenue for the second quarter of 2021;
  • Net loss of $0.7 million for the second quarter 2022, compared to a net loss of $46.5 million for the same quarter in 2021;
  • Adjusted EBITDA, a non-GAAP measure, of $15.6 million for the second quarter of 2022, compared to a negative $13.6 million for the second quarter 2021; 
  • Continuing positive cash generation as bookings for returning events accelerate:
    • Cash provided by operations of $12.2 million for the second quarter 2022, compared to $25.1 million for the second quarter 2021 as last year’s quarter was aided by the significant ramp in customer deposits as pandemic-related restrictions eased;
    • Emerald generated free cash flow, a non-GAAP measure, of $10.5 million for the second quarter 2022 as compared to $23.8 million for the second quarter 2021;
  • Emerald bought back 1.0 million shares of common stock at an average price of $3.38 per share during the second quarter 2022;
  • Emerald ended the quarter with $231.7 million in cash and marketable securities and full availability of its $110 million revolving credit facility;
  • During the second quarter 2022, Emerald acquired substantially all the assets of Advertising Week, a global event and thought leadership platform focused on marketing, media, technology, and culture.

Hervé Sedky, Emerald’s president and CEO, said, “We continue to see clear evidence of ongoing recovery in in-person events as qualified attendee and exhibitor counts track towards pre-pandemic levels. Importantly, our pricing power remains strong, further validating the unique value that our trade shows offer our customers. We believe that almost one-quarter of our shows this year should exceed pre-pandemic revenues, keeping us on track to meet our FY 2022 financial guidance. We not only benefit from operating in a durable industry that has proven its value throughout numerous economic cycles, but also from strong liquidity which supports our strategic growth investments. We plan to further invest in our business as we continue to build Emerald through our three-pronged growth strategy focused on portfolio optimization, 365-day engagement and customer-centricity. The recent acquisitions of Advertising Week and Bulletin, acquired in early June and July 2022, respectively, are  ways in which we’re adding services and technology solutions available year-round that strategically complement Emerald’s existing offering and deliver connected, best-in-class experiences through seamlessly integrating in-person connections, content and commerce. Overall, our high-growth SaaS platform, powerful first-party data, and entry into high-growth industries provide us with a robust model to deliver profitable and sustained growth as we look to the future.”

David Doft, Emerald’s CFO, added, “Our business continues to generate significant free cash flow, supported by our low capital intensity and the favorable working capital dynamics of the events industry, and targeted investments in our technology stack and M&A pipeline. Of note, we ended the second quarter with over $231 million of cash and marketable securities on our balance sheet, having generated $10.5 million in free cash flow in the quarter. We expect to further bolster our balance sheet in the third quarter with the anticipated receipt of an additional $149.25 million in payments relating to the settlement of our insurance litigation. We are particularly pleased with the increasing diversification and durability of our revenue streams, which is the result of extensive efforts to add to our capabilities across content, B2B commerce technology, and advertising and sponsorship offerings in existing and new verticals. Our liquidity and balance sheet flexibility support our efforts to balance our capital allocation between acquisitions, investments in the business, managing our leverage and share buybacks, through which we have retired 3.7 million shares since the beginning of 2021. We have also been successful in managing our cost structure even in the current inflationary environment, and believe we are well positioned to protect and grow our margins over time. As we look to the future, we are on track to generate in excess of $300 million of revenues, more than $50 million of Adjusted EBITDA excluding insurance proceeds, and $70 million of free cash flow excluding insurance proceeds in FY 2022, and the company continues to progress toward its objective of over $100 million of Adjusted EBITDA in 2023.”

Live Events Resume, Insurance Litigation Settlement

  • Emerald actively returned to staging in-person events beginning in July 2021 and continues to do so to date. During the second quarter of 2022, Emerald successfully traded 29 in-person trade shows, conferences and other events, serving more than 62,000 attendees and 3,600 exhibiting companies. Emerald continues to plan for a full slate of events in 2022.
  • On August 3, 2022, the company reached an agreement with the underwriters to settle outstanding litigation relating to 2020 and 2021 coverage under those policies. As a result, the company expects to receive a total settlement of $149.25 million, of which, $148.54 million is expected to be recognized as Other income, net during the third quarter of 2022.
  • In total, Emerald has submitted insurance claims of approximately $348.4 million, which represents the net amount of expected gross revenues less avoided costs for cancelled events scheduled to take place during the two years. Insurance claim payments received to date total $223.6 million, which includes $2.4 million received in July, subsequent to the quarter end, but excludes payments expected to be received in the third quarter in connection with the litigation settlement. Including the litigation settlement amount, total payments will total $372.9 million. Other income, net recognized to date totals $216.1 million. Including the litigation settlement amount as well as proceeds received in July, Other income, net will total $367.1 million.

Financial & Operational Results, Quarter Ended June 30, 2022

  • For the second quarter of 2022, Emerald reported revenues of $71.4 million compared to revenues of $15.0 million for the first quarter of 2021, an increase of $56.4 million or 376.0 percent. The primary driver of the increase was $45.6 million in revenues related to events that typically stage in the second quarter but had to be moved to dates later in 2021 due to COVID-19. When compared to their 2021 edition, revenue for these events increased $18.9 million or 70.8 percent. In addition, events that were staged in the second quarter of 2022 but had been canceled in the prior year due to COVID-19 generated incremental revenues of $9.2 million. When compared to their last in-person edition, revenue for these events was down $2.1 million, or 16.4 percent. Organic revenues for the second quarter of 2022 were $15.7 million, representing organic revenue growth of $0.8 million, or 5.4 percent, as compared to the prior year second quarter organic revenues of $14.9 million due primarily to a $0.7 million increase in revenues from subscription software as well as several small events that staged in the second quarter of 2022 as well as the second quarter of 2021 offset by softness in other marketing services. Acquisitions that closed after the second quarter of 2021 generated incremental revenues of $0.9 million.
  • The company recognized net loss of $0.7 million for the second quarter of 2022 compared to net loss of $46.5 million for the second quarter of 2021. The improvement in net loss was primarily attributable to the increase in revenues related to the continued return of live events in the second quarter of 2022 and higher event cancellation insurance claims proceeds being received during the second quarter of 2022 compared to the second quarter of 2021. The company recorded $8.1 million of Other Income, net during the second quarter of 2022 as a result of the receipt of event cancellation insurance claims proceeds compared to $2.3 million of Other Income, net recorded during the second quarter of 2021 as a result of the receipt or confirmation of event cancellation insurance claims proceeds.
  • For the second quarter of 2022, Adjusted EBITDA was $15.6 million, compared to negative $13.6 million for the second quarter of 2021. The increase in Adjusted EBITDA of $29.2 million was mainly due to profits generated by the higher number of live events that staged during the quarter compared to the second quarter of 2021 and the higher confirmed or received event cancellation insurance claims proceeds described above. The company’s Adjusted EBITDA for the second quarter of 2022 has been heavily impacted by the timing and receipt of approved claim payments under the company’s event cancellation insurance policy.

Cash Flow

  • Net cash provided by operating activities was $12.2 million in the second quarter of 2022, compared to $25.1 million in the comparable period of the prior year. This decrease is a consequence of a non-recurring but significant ramp in sales that occurred in the second quarter of 2021 from near zero due to the lifting of pandemic-related restrictions as live events prepared to begin staging without the offsetting impact of revenue recognized for events that staged during the quarter. Due to the attractive working capital features of the events business, cash is collected in advance of the events staging (and expenses being incurred) which resulted in significant cash inflows in the second quarter of 2021 when we resumed selling space at our events after an over one-year hiatus due to COVID-19.
  • Capital expenditures were $1.7 million for the second quarter of 2022, compared to $1.3 million for the second quarter of 2021.
  • Free Cash Flow, which the company defines as net cash provided by operating activities less capital expenditures, was $10.5 million in the second quarter of 2022, compared to $23.8 million in the second quarter of 2021.
  • The company bought back 1.0 million shares of common stock at an average price of $3.38 per share during the second quarter 2022. Since the beginning of 2021, the company has bought back 3.7 million shares of common stock.