<span style="color: #9c9c9c;">Emerald Holding’s results in the third quarter were decimated by the wide-scale cancellation of trade show events, but Brian Field, interim president and CEO, expressed optimism that live face-to-face events will begin to reemerge in 2021.

Emerald’s results came out on the same day that Surf Expo, one of Emerald’s major shows in the active lifestyle space, announced that it planned to resume holding in-person shows in early January in Orlando, FL. The show will shift from the North/South Hall to the West Concourse of the Orange County Convention Center to accommodate social distancing.

In the active lifestyle space, Emerald Holding’s shows also include Outdoor Retailer, The Sports Licensing & Tailgate Show, Impressions, Swim Collective, and Active Collective.

Pent-Up Demand For In-Person Events
On its quarterly conference call with analysts, Field said Emerald’s survey work, third-party studies and recently staged worldwide shows “demonstrate the clear desire to return to live in-person events.”

He cited the first edition of the Global Recovery Insights 2020 report from UFI and Explori released on October 20 and showed that both exhibitors and attendees overwhelmingly prefer the face-to-face event format. He said, “The survey noted that the social aspect of face-to-face events and the ability to make connections across their community is critical and cannot be achieved or duplicated in a purely digital media.”

Pent-up demand for live shows is also being seen as events slowly start to stage again worldwide, according to Field. For instance, Caravan Salon, the largest RV tradeshow in the world, took place in Dusseldorf, Germany from August 29 to September 6, covering 762,000 square feet and drawing 107,000 attendees. The size of the show was down from coverage of 2.3 million square feet and 268,000 attendees in 2019 but the show’s organizers noted that exhibitors were pleased with both the quality of the attendees and sales levels achieved.

Another encouraging show was Shenzhen International Furniture Exhibition, which took place from August 23-25 in Shenzhen, China. Media reports indicate that exhibitors increased by 75 percent compared to the previous edition of the show while visitor numbers grew nearly 40 percent to 216,000.

Among Emerald’s properties, the IGES gift show, which is set to stage this week in the Smoky Mountains of Tennessee, is seeing exhibitors down by about half, but registered attendees are tracking up 36 percent versus last year’s levels, “which provides further confidence that our market participants are very eager to get back in-person events,” said Field.

Nonetheless, Emerald was forced to cancel all of its large events through year-end, and the cancellations significantly impaired third-quarter results.

Twenty-Nine Event Cancellations In Third Quarter
In the quarter ended September 30, revenues reached $8.5 million, down 88.8 percent from $75.6 million in the year-ago period. Twenty-nine third-quarter events were canceled. The major ones were ASD August, NY NOW August, CEDIA Expo and Modern Day Marine.

The net loss in the quarter came to $15.3 million compared to a net loss of $19.7 million for the third quarter of 2019. The latest quarter benefited from the booking of 16.1 million in event cancellation insurance claims related to events canceled in the first, second and third quarters. The year-ago quarter included $6.1 million cancellation insurance proceeds related to the forced cancellation of the Surf Expo and ISS Orlando due to Hurricane Dorian. The 2019 quarter also included a $26.3 million non-cash impairment charge due to reduced performance expectations for the year.

Adjusted EBITDA for the quarter was a loss of $3.2 million compared to a positive $28.7 million in the same period last year. The impact of event cancellations was only partially offset by the recognition of insurance claim proceeds and continued cost-savings measures.

Looking ahead, Field said Q120 events “are certainly at risk” given the continued restrictions at the state level, combined with the potential for several venues facility closures due to COVID-related government restrictions and venue takeovers. Some of Emerald’s first-quarter events have already been canceled or postponed.

“Despite the uncertainty that remains, our teams continued to actively plan for next year, and are evaluating various scenarios for each event based upon varying levels of attendance combined with the necessary protocols to ensure we provide a safe environment for our customers,” said Field.

Field assured analysts that Emerald can still achieve the same level of margin if smaller trade shows will continue to be necessary as part of COVID-19 recovery. Approximately 70 percent of a live event cost structure is variable versus 30 percent fixed. He said the fixed portion can be managed to help maintain margins.

Field added, “As the environment begins to normalize, we will then determine on an event-by-event basis, what level of attendance is necessary to stage a successful event. What I can say with confidence is that many of our customers are eager to return to face-to-face events, given the ROI that they achieved and the importance of our live in-person events to their businesses.”

Modest Revenue Opportunity Seen For Digital Events
Emerald hosted over 90 digitally delivered events across a variety of formats in the quarter and Field said online events will become “important new revenue streams” for the company as part of an emerging hybrid online/offline model. However, he stressed digital events are “not a replacement for our in-person events” and deliver a modest return for Emerald. He estimates the annualized revenue opportunity from digital events in the size of $10 million range albeit with a strong contribution margin in the near term.

“The more important value of these events is our ability to engage with our exhibitors new ground and to provide them with opportunities to engage their target buying audiences in today’s environment,” said Field. “This in turn should allow our digital content and event platforms to serve as meaningful new customer acquisition vehicles, which by example together generated 62,000 new customer prospects for Emerald over this past quarter.”

Beyond expanding digital, another major initiative is Smart Tech, its unified data initiative that remains on track for delivery in Q121. The project will enable Emerald to house and quickly access customer information across trade shows in one centralized hub to gain greater insights and improve targeting.

Expense control remains a priority and the company has reduced by almost $20 million in expenses on an annualized basis with its year-to-date cost-cutting measures that have included reducing its real estate footprint and headcount as well as consolidating departments.

Emerald has submitted $146.2 million in claims for canceled events and has received $64.3 million in interim prepayments through October. An additional $15.7 million in claim payments were recently approved and additional claims for the second-half cancellations will be submitted.

To shore up its balance sheet, Emerald completed a convertible preferred stock offering in the quarter, which generated $130 million and incremental proceeds on top of those raised in the second quarter. The company ended the third quarter with $327 million of cash that Field said will enable Emerald to take advantage of dislocations in the marketplace. He said, “We believe many high-quality shows will come for sale at attractive valuations.”

Photo courtesy Emerald Holding