By Eric Smith

<span style="color: #a3a3a3;">With many of its trade shows—including Outdoor Retailer Summer Market in June—already canceled or postponed, Emerald Holding Inc. has shifted into full pivot mode as it works to maintain liquidity through this downturn and convert some events to virtual ones.

On Monday afternoon’s earnings call with analysts, Emerald’s interim president and CEO, Brian Field, outlined the damage done so far to the company’s lineup of trade shows across industries, including outdoors and action sports.

“Through April, we have postponed 14 events to the second half of 2020, which equates to approximately $12 million of 2019 revenue,” he said. “In total, we now have 82 events scheduled from July through December, which in 2019, delivered total revenues of $124 million. We have also made the decision to cancel 29 events, including … Outdoor Retailer Summer Market, which in total accounted for approximately $118 million of 2019 revenue.

“While these have been difficult decisions, we are very encouraged by the strong support that we have received from our customer communities, which demonstrates the importance of our shows to their respective markets. Our customers consistently tell us how eager they are to get back to business, which is a strong indication that the demand for our marketplaces remains intact and should recover over time.”

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The company outlined the impact of the COVID-19 pandemic in its first-quarter earnings report—and the resultant blow to the top and bottom lines was exactly as expected for an organizer of large-scale trade shows.

  • Revenues decreased 27.4 percent to $99.7 million, compared to $137.4 million for Q1 of 2019;
  • Cancellation of seven live events due to the COVID-19 crisis represents the loss of $34.3 million in comparable period prior year revenues;
  • Postponement of two live events due to the COVID-19 crisis expected to push $3.6 million in comparable period prior year revenues to the second half of 2020;
  • Organic revenues, a non-GAAP measure, decreased 2.6 percent to $95.8 million for Q1, compared to $98.4 million for Q1 of 2019;
  • Net loss of $570.1 million for Q1, compared to net income of $26.5 million for Q1 of 2019;
  • Q1 includes non-cash charges of $564 million and $59.4 million, respectively, related to the impairment of goodwill and certain intangible asset;
  • Adjusted EBITDA, a non-GAAP measure, decreased 59 percent to $23.6 million for Q1, compared to $57.5 million for Q1 of 2019;
  • The financial impact of event cancellations in the first quarter is expected to be partially offset in future periods by $31.1 million of event cancellation insurance proceeds, based on claims filed and subject to final claim adjustment, which represents the net amount of expected gross revenues less avoided costs for canceled events;
  • Adjusted net income, a non-GAAP measure, was $27.2 million for Q1, compared to income of $37 million for Q1 of 2019;
  • Net cash provided by operating activities of $8.8 million for Q1 decreased by 24.1 percent, compared to net cash provided by operating activities of $11.6 million for Q1 of 2019; and
  • Free cash flow, a non-GAAP measure, decreased 31.9 percent to $7.7 million for Q1, compared to $11.3 million for Q1 of 2019.

Field then explained the company’s insurance coverage, which is, not surprisingly, robust.

“We are very fortunate to have a comprehensive insurance policy which expressly covers event cancellation and postponement as a result of communicable disease, and we are filing claims for all of our impacted shows,” said CFO David Doft. “We are also working to optimize our operations and cost structure for both the short and long term to ensure we have adequate liquidity to run Emerald for an extended period without any shows staging while staying in compliance with our financial covenants.”

Field said Emerald’s policy provides coverage for gross revenues, less avoided costs, plus certain costs “relating to the taking of remedial action for each of the company’s individual events and conferences occurring within a calendar year.” Emerald’s event cancellation insurance covers up to an aggregate limit of $191 million per year for 2020 and 2021 if losses arise for reasons within the scope of Emerald’s policy.

“The coverage has no deductible and covers the cancellation, postponement and movement of an event, as well as reduced attendance,” Field added.

He also said that Emerald’s coverage “expressly includes losses resulting from the outbreak of communicable diseases. While there is no assurance that the insurance carriers will agree that all of Emerald’s claims are covered under the policy, we believe that all shows that have been canceled or postponed due to COVID-19 to-date should qualify as covered losses with respect to this event cancellation insurance.”

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<span style="color: #a3a3a3;">Emerald has been assembling insurance claims since mid-March when stay-at-home orders rose, and large-scale events started being canceled. So far, the company has submitted $66 million of claims and expects to submit further claims for an estimated $20 million to $30 million of losses over the coming weeks, Field said.

“These claims, if successful, would cover the loss-profit contribution that was expected for the impacted events,” he added. “We will remain transparent and plan to update the investment community as our claims are processed.”

In the meantime, some shows, including Outdoor Retailer, will begin rolling out virtual platforms to somewhat offset the loss of meeting in person.

“We have engaged brands, retailers, reps and partners to better understand the fast-evolving reality of the impact of COVID-19 on their businesses,” said Marisa Nicholson, Outdoor Retailer senior vice president and show director. “With that information, we are designing digital solutions to serve our industry’s needs in ways that best suit these unprecedented times. It’s vital for the outdoor community to unite and stay connected, and we are committed to providing ways to reinforce buyer/seller networks; discover new brands, products and retailers; and access media and marketing tools. It’s our goal to help outdoor businesses navigate the path forward and preserve the passion that drives our industry.”

However, as Field said on Monday’s call—and as Nicholson told SGB Executive when OR was scrapped—digital shows can never quite replace meeting in person.

“Many recognize that these formats cannot replicate the value of face-to-face interactions in the long-term, especially as the building of new relationships or discovering new products requires the in-person interactions that trade shows bring,” Field said. “Inherently, digital tools are limited given the lack of personal contact, the challenges in highlighting product quality, and the difficulty in gathering potential buyers.”

In other news, Emerald announced the April 20 death of former CEO Sally Shankland.