Emerald Up to 60 COVID-19 Show Cancellations; Gets $48M in Insurance Payouts

Emerald Holding canceled 60 events through Q3 due to the pandemic, and some beyond this year, with $197 million in 2019 revenue, said interim CEO Brian Field on a Q2 call Monday. The company postponed 14 events to second-half 2020 that had $8 million in 2019 revenue.

Emerald’s trade show properties include CEDIA Expo, canceled as a physical show next month in Denver and rescheduled as a virtual show for Sept. 15-17 (see 2007090058). Emerald plans to reinstate the Expo as a physical show in September 2021 in Indianapolis. Its $7 million in Q2 revenue compared with $103 million in the 2019 quarter, the result of 20 cancellations, said Chief Financial Officer David Doft.

Emerald was paid $48.2 million for claims on its communicable disease cancellation policies, including $15 million in Q2 and $33.2 million to date in Q3. Emerald owed $45 million in refunds June 30 for canceled shows, and expects to pay those in Q3, said Doft. The company has an incremental $30 million of customer prepayments on hand for all future events, “including many that are scheduled to stage in 2021.”

Emerald had seven canceled events approved for reimbursement by its insurer, said Doft. The $48 million in claim prepayments received is against the expected $66 million full claim value for those events, he said. Emerald is preparing another $40 million of insurance claims for canceled shows, which it expects to submit in coming weeks, and expects to have about $87 million of claim value pending.

“Given our success at cost avoidance for canceled events, we anticipate that even if we have to cancel all events for the remainder of 2020, the amount of our event cancellation insurance claims for 2020 will fall within the $191 million limit of our primary event cancellation insurance policy, as well as the separate $6 million limit specific to our 2020 Summer Surf Expo event,” said Doft.

In Q&A, Doft said Emerald had “a lot of success aggressively avoiding costs” tied to Q2 events. “We also were very successful because of the conditions around COVID to get out of contracts and cancellation fees that we might otherwise be subject to, if it were not for, say, the force majeure of the COVID situation, where venues were forced to be shut by local governments.”

Atlanta, Denver, Las Vegas, New York and Orlando are the “most relevant” cities in Emerald’s event schedule: “We continue to make claims against our events cancellation insurance policy which includes coverage for communicable diseases,” said Field. The company created a preparedness prevention and response plan.

On upcoming shows that haven’t been canceled, Field noted the varying approaches cities and states are taking toward reopening. It’s looking over the next few months to see “where there's still a viable show that can take place safely and working with the local venue management as to how we might be able to design that.” Emerald’s flagship event, KBIS, is still on for Feb. 9-11 in Orlando, says the website.

Field referenced initiatives to transform the company, which he said was challenged by “poor execution, a lack of accountability and a siloed organizational structure” before his arrival over a year ago. Emerald reorganized marketing functions into central teams that share common processes, technology and data, “while allowing us to deliver more quantifiable value out of our marketing spend with 25% less staff,” he said.

Webinars and virtual events arising from the pandemic “have many of the same features” of live events, including keynotes, awards and virtual booths, said Field, “allowing our exhibitors to load their products and host virtual meetings with buyers.” Customers said the virtual features don’t replace the value of in-person shows, he noted: Emerald believes in an emerging hybrid model where virtual components will complement live events “once the medium is safe."

Near term, Emerald projects a “modest revenue opportunity” in the $5 million-$10 million range from virtual offerings, but “the more important value of these events is our ability to engage with our exhibitors year-round and to provide them commercial solutions, particularly in today's environment,” said Field: Virtual platforms also are “meaningful new customer acquisition vehicles.” Webinars and virtual events generated over 50,000 new customer prospects in the past quarter, he said.

Emerald is building a centralized customer data hub to give it “a deep understanding of our customers' interests and behaviors across the landscape of our products and services.” Field envisioned cross-selling and new product development “led by customer insights and data.”

Among Emerald’s cost-saving measures, the company closed three of its 14 offices, whittling rent expense to less than $3 million annually. The company furloughed or permanently reduced about 20% of staff and consolidated marketing and sales groups. It cut its monthly expense rate from $10 million in January to $7 million on June 30, Doft said.

Responding to a question on the long-term impact of COVID-19 on exhibitor and attendees’ sentiment toward live events -- and potential reluctance to return -- Field said that’s one of the reasons Emerald is looking at digital offerings as “real companions” to shows: “There are going to be those customers, both exhibitors and attendees, who, for whatever reason, can't make" the next show or the one beyond that, he said.

Corporate travel budgets could affect future attendance, along with attendees’ concerns about traveling on a plane or being in large gatherings, Field said. Though virtual offerings won’t compete with the value of a live event show floor, “they'll still have the ability to interact, browse new products online, schedule appointments” and to learn, he said. The virtual side is a way to ensure as much “customer continuity as possible,” he said. Shares closed 3.7% higher Tuesday at $2.80.