Emerald Holding, Inc. - Quarter Report: 2022 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38076

Emerald Holding, Inc.

(Exact name of registrant as specified in its charter)

Delaware

42-1775077

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

100 Broadway

14^th Floor

New York, New York 10005

(Address of principal executive offices, zip code)

(Registrant’s telephone number, including area code): (949) 226-5700

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

EEX

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 4, 2022, there were 70,130,484 shares of the Registrant’s common stock, par value $0.01, outstanding.

EMERALD HOLDING, INC.

TABLE OF CONTENTS

		Page

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		1

PART I. FINANCIAL INFORMATION		3

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45

Item 4.	Controls and Procedures	45

PART II. OTHER INFORMATION		47

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 3.	Defaults Upon Senior Securities	48

Item 4.	Mine Safety Disclosures	48

Item 5.	Other Information	48

Item 6.	Exhibits	49

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. You can generally identify forward-looking statements by our use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect”, “intend,” “may,” “might,” “plan,” “potential,” “predict,” “seek” or “should,” or the negative thereof or other variations thereon or comparable terminology. In particular, statements about the markets in which we operate, including growth of our various markets, and our expectations, beliefs, plans, strategies, objectives, prospects, assumptions or future events or performance contained in this report are forward-looking statements. In addition, statements contained in this Quarterly Report on Form 10-Q relating to the COVID-19 pandemic, the potential impacts of which are inherently uncertain, are forward-looking statements.

We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those discussed in this report under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements, or could affect the trading price of our common stock on the New York Stock Exchange. Some of the factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include:

•

the extent of the impact of COVID-19 on our business, including any variants or resurgence COVID-19 pandemic; the actions that governments, businesses and individuals take in response to the pandemic, including limiting the size of gatherings; and the impact of COVID-19 on overall demand for face-to-face events;

•

disruptions in global or local travel conditions and quarantines due to COVID-19, other communicable diseases and terrorist actions;

•

our ability to recover proceeds under our current event cancellation insurance policy, including as a result of the litigation we have filed against our insurers, as well as our ability to obtain event cancellation insurance in the future;

•

the potential impairment of intangible assets, including goodwill, on our balance sheet;

•

general economic conditions;

•

our ability to secure desirable dates and locations for our trade shows;

•

ability to assess and respond to changing market trends, including digital and virtual show offerings;

•

the failure to attract high-quality exhibitors and attendees;

•

the failure to fully realize the expected results and/or operating efficiencies from our strategic initiatives;

•

competition from existing operators or new competitors;

•

our top five trade shows generate a significant portion of our revenues;

•

the effect of shifts in marketing and advertising budgets to online initiatives;

•

our ability to retain our senior management team and our reliance on key full-time employees;

•

risks associated with our acquisition strategy and our ability to execute this strategy to accelerate growth;

•

our ability to use digital media and print publications to stay in close contact with our event audiences;

•

our and our exhibitors’ reliance on a limited number of outside contractors;

•

changes in legislation, regulation and government policy;

•

changes in U.S. tariff and import/export regulations;

•

our relationships with industry associations;

•

risks and costs associated with new trade show launches;

•

that we do not own certain of the trade shows that we operate;

•

the infringement or invalidation of proprietary rights;

•

disruption of our information technology systems;

•

the failure to maintain the integrity or confidentiality of employee or customer data;

•

risks associated with event cancellations or interruptions; our potential inability to utilize tax benefits associated with tax deductible amortization expenses; and

•

other factors beyond our control, including those listed under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission (the “SEC”) and in other filings we may make from time to time with the SEC.

Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements contained in this report are not guarantees of future performance and our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from the forward-looking statements contained in this report. In addition, even if our results of operations, financial condition and liquidity, and events in the industry in which we operate, are consistent with the forward-looking statements contained in this report, they may not be predictive of results or developments in future periods.

Any forward-looking statement that we make in this Quarterly Report on Form 10-Q speaks only as of the date of such statement. Except as required by law, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this report.

PART I — FINANCIAL INFORMATION

Item 1.

Financial Statements

Emerald Holding, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(dollars in millions, share data in thousands, except par value)	March 31, 2022			December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	254.4		$	231.2
Trade and other receivables, net of allowances of $1.3 million and $1.2 million as of March 31, 2022 and December 31, 2021, respectively		86.2			46.4
Prepaid expenses and other current assets		13.5			12.5
Total current assets		354.1			290.1
Noncurrent assets
Property and equipment, net		4.4			3.7
Intangible assets, net		226.2			236.7
Goodwill		513.9			514.2
Right-of-use lease assets		14.3			15.1
Other noncurrent assets		2.4			2.6
Total assets	$	1,115.3		$	1,062.4
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Deficit
Current liabilities
Accounts payable and other current liabilities	$	54.0		$	46.7
Cancelled event liabilities		6.3			9.8
Deferred revenues		139.3			118.1
Contingent consideration		36.3			5.1
Right-of-use lease liabilities, current portion		4.5			4.7
Term loan, current portion		5.7			5.7
Total current liabilities		246.1			190.1
Noncurrent liabilities
Term loan, net of discount and deferred financing fees		509.8			510.9
Deferred tax liabilities, net		1.4			1.5
Right-of-use lease liabilities, noncurrent portion		12.0			13.3
Other noncurrent liabilities		7.7			32.1
Total liabilities		777.0			747.9
Commitments and contingencies (Note 13)
Redeemable convertible preferred stock
7% Series A Redeemable Convertible Participating Preferred stock, $0.01 par value; authorized shares at March 31, 2022 and December 31, 2021: 80,000; 71,442 shares issued and outstanding; aggregate liquidation preference of $451.9 million and $444.1 million at March 31, 2022 and December 31, 2021, respectively		443.1			433.9
Stockholders’ deficit
Common stock, $0.01 par value; authorized shares at March 31, 2022 and December 31, 2021: 800,000; 70,130 and 70,026 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively		0.7			0.7
Additional paid-in capital		645.2			653.2
Accumulated deficit		(750.7	)		(773.3	)
Total stockholders’ deficit		(104.8	)		(119.4	)
Total liabilities, redeemable convertible preferred stock and stockholders’ deficit	$	1,115.3		$	1,062.4

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Emerald Holding, Inc.

Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

(unaudited)

	Three Months Ended
(dollars in millions, share data in thousands except earnings per share)	March 31, 2022			March 31, 2021
Revenues	$	98.5		$	12.9
Other income		28.8			14.1
Cost of revenues		34.2			4.0
Selling, general and administrative expense		46.6			30.8
Depreciation and amortization expense		14.3			11.8
Goodwill impairment charge		6.3			—
Intangible asset impairment charge		1.6			—
Operating income (loss)		24.3			(19.6	)
Interest expense		3.9			4.0
Income (loss) before income taxes		20.4			(23.6	)
Benefit from income taxes		(2.2	)		(8.3	)
Net income (loss) and comprehensive income (loss)	$	22.6		$	(15.3	)
Accretion to redemption value of redeemable convertible preferred stock		(9.2	)		(8.5	)
Participation rights on if-converted basis		(8.6	)		—
Net gain (loss) and comprehensive gain (loss) attributable to Emerald Holding, Inc. common stockholders	$	4.8		$	(23.8	)
Basic gain (loss) per share	$	0.07		$	(0.33	)
Diluted gain (loss) per share	$	0.07		$	(0.33	)
Basic weighted average common shares outstanding		70,171			72,245
Diluted weighted average common shares outstanding		70,280			72,245

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Emerald Holding, Inc.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and of Stockholders’ Deficit

(unaudited)

	Three Months Ended March 31, 2022
	(shares in thousands; dollars in millions)
						Total Emerald Holding, Inc. Stockholders' Deficit
	Redeemable Convertible Preferred Stock					Common Stock					Additional Paid-in			Accumulated			Total Stockholders’
	Shares			Amount		Shares			Amount		Capital			Deficit			Deficit
Balances at December 31, 2021		71,442		$	433.9		70,026		$	0.7	$	653.2		$	(773.3	)	$	(119.4	)
Stock-based compensation		—			—		340			—		2.1			—			2.1
Issuance of common stock under equity plans		—			—		20			—		—			—			—
Accretion to redemption value of redeemable convertible preferred stock		—			9.2		—			—		(9.2	)		—			(9.2	)
Repurchase of common stock		—			—		(256	)		—		(0.9	)		—			(0.9	)
Net income and comprehensive income		—			—		—			—		—			22.6			22.6
Balances at March 31, 2022		71,442		$	443.1		70,130		$	0.7	$	645.2		$	(750.7	)	$	(104.8	)

	Three Months Ended March 31, 2021
	(shares in thousands; dollars in millions)
						Total Emerald Holding, Inc. Stockholders' Deficit
	Redeemable Convertible Preferred Stock					Common Stock					Additional Paid-in			Accumulated			Total Stockholders’
	Shares			Amount		Shares			Amount		Capital			Deficit			Deficit
Balances at December 31, 2020		71,445		$	398.3		72,195		$	0.7	$	690.7		$	(695.2	)	$	(3.8	)
Stock-based compensation		—			—		209			—		2.9			—			2.9
Issuance of common stock under equity plans		—			—		18			—		—			—			—
Accretion to redemption value of redeemable convertible preferred stock		(1	)		—		1			—		—			—			—
Redeemable convertible preferred stock conversion		—			8.5		—			—		(8.5	)		—			(8.5	)
Repurchase of common stock		—			—		(149	)		—		(1.2	)		—			(1.2	)
Net loss and comprehensive loss		—			—		—			—		—			(15.3	)		(15.3	)
Balances at March 31, 2021		71,444		$	406.8		72,274		$	0.7	$	683.9		$	(710.5	)	$	(25.9	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Emerald Holding, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in millions)	Three Months Ended March 31, 2022			Three Months Ended March 31, 2021
Operating activities
Net income (loss)	$	22.6		$	(15.3	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock-based compensation expense		2.1			3.0
Provision for credit losses		0.1			0.1
Depreciation and amortization		14.3			11.8
Goodwill impairment		6.3			—
Intangible asset impairment		1.6			—
Non-cash operating lease expense		0.8			0.8
Amortization of deferred financing fees and debt discount		0.3			0.4
Remeasurement of contingent consideration		4.4			0.4
Deferred income taxes		(0.2	)		—
Changes in operating assets and liabilities:
Trade and other receivables		(39.8	)		(11.6	)
Insurance receivables		—			15.4
Prepaid expenses and other current assets		1.1			(10.0	)
Other noncurrent assets		0.2			0.7
Accounts payable and other current liabilities		4.7			(3.2	)
Cancelled event liabilities		(3.5	)		(12.2	)
Income tax payable		(2.2	)		—
Deferred revenues		21.2			24.9
Operating lease liabilities		(1.6	)		(0.8	)
Other noncurrent liabilities		0.6			(2.8	)
Net cash provided by operating activities		33.0			1.6
Investing activities
Purchases of property and equipment		(1.0	)		(0.4	)
Purchases of intangible assets		(2.2	)		(0.6	)
Net cash used in investing activities		(3.2	)		(1.0	)
Financing activities
Payment of contingent consideration for acquisition of businesses		(4.3	)		—
Repayment of principal on term loan		(1.4	)		(1.4	)
Repurchase of common stock		(0.9	)		(0.9	)
Net cash used in financing activities		(6.6	)		(2.3	)
Net increase (decrease) in cash and cash equivalents		23.2			(1.7	)
Cash and cash equivalents
Beginning of period		231.2			295.3
End of period	$	254.4		$	293.6

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Emerald Holding, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1.	Basis of Presentation

The unaudited condensed consolidated financial statements include the operations of Emerald Holding, Inc. (the “Company” or “Emerald”) and its wholly-owned subsidiaries. These unaudited condensed consolidated financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC for Interim Reporting. All intercompany transactions, accounts and profits/losses, if any, have been eliminated in the unaudited condensed consolidated financial statements. In the opinion of management, all recurring adjustments considered necessary for a fair statement of results for the interim period have been included.

These unaudited condensed consolidated financial statements do not include all disclosures required by GAAP, therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the more detailed audited consolidated financial statements for the year ended December 31, 2021. The December 31, 2021 condensed consolidated balance sheet was derived from the Company’s audited consolidated financial statements for the year ended December 31, 2021.

The results for the three months ended March 31, 2022 are not necessarily indicative of results to be expected for a full year, any other interim periods or any future year or period. Results of our reportable segments for the three months ended March 31, 2021 reflect the updated segment presentation discussed below in Note 15 “Segment Reporting”.

Emerald Holding, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Liquidity Position and Management’s Plan

The unprecedented and rapid spread of COVID-19 and the related government restrictions and social distancing measures implemented in the United Stated and throughout the world significantly impacted Emerald’s business from mid-March 2020 through the first half of 2021. Late in the second quarter of 2021, management began to see the positive impacts of successful vaccination rollouts in many countries, with social distancing restrictions easing and live events resuming in the United States. In the second half of 2021, Emerald’s live events business experienced a meaningful restart with the successful execution of 56 in-person events, serving more than 129,000 attendees and 7,500 exhibiting companies. The Company entered 2022 planning to stage a full slate of events and successfully traded 31 in-person events during the first quarter, serving more than 141,000 attendees and 5,700 exhibiting companies. While the Company has been able to resume its full schedule of events in the first quarter of 2022, the ongoing effects of COVID-19 on the Company’s operations have had, and will continue to have, a significant negative impact on its financial results and liquidity, and such negative impact may continue beyond the containment of the COVID-19 pandemic.

The assumptions used to estimate the Company’s liquidity are subject to greater uncertainty because the Company has never previously cancelled or postponed all upcoming events for a period of over a year due to a pandemic. Management cannot estimate with certainty whether event exhibitors and attendees will attend the Company’s events in numbers similar to pre-pandemic editions now that our events have fully resumed. Therefore, current estimates of revenues and the associated impact on liquidity could differ significantly in the future.

The Company continues to pursue full recovery for event cancellation insurance claims relating to events originally scheduled to stage in 2020 and 2021. To date, the Company has submitted claims related to impacted or cancelled events previously scheduled to take place in 2020 and 2021 of $166.8 million and $180.7 million, respectively. Other income recognized to date related to insurance proceeds received or confirmed on the claims related to events previously scheduled to take place in 2020 and 2021 totaled $142.2 million and $71.0 million, respectively. During the three months ended March 31, 2022 and 2021, the Company recorded other income of $28.8 million and $14.1 million, respectively, related to event cancellation insurance claim proceeds deemed to be realizable by management. Of the $28.8 million in other income recognized during the three months ended March 31, 2022, all $28.8 million was received during the period. Outstanding claims are subject to review and adjustment and there is no guarantee or assurance as to the amount or timing of future recoveries from Emerald’s event cancellation insurance policy.

Emerald’s renewed event cancellation insurance policies for the year 2022 do not cover losses due to event cancellations caused by the outbreak of communicable diseases, including COVID-19. The aggregate limit for the Company’s renewed 2022 primary event cancellation insurance policy is $100.0 million. The Company also obtained a similar separate event cancellation insurance policy for the Surf Expo Winter 2022 and Surf Expo Summer 2022 shows, with a coverage limit of $8.4 million and $6.5 million for each respective event.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which provides for the ability of employers to delay payment of employer payroll taxes during 2020 after the date of enactment. The Company deferred the payment of more than $1.9 million of employer payroll taxes otherwise due in 2020, with 50% paid back in December 2021 and the remaining 50% due by December 31, 2022. As of March 31, 2022, the liability for this deferred payment is included in accounts payable and other current liabilities in the condensed consolidated balance sheet.

As of March 31, 2022, the Company had $518.2 million of borrowings outstanding under the Amended and Restated Term Loan Facility and no borrowings outstanding under the Revolving Credit Facility. In addition, as of March 31, 2022, the Company had cash and cash equivalents of $254.4 million. As of March 31, 2022, the Company was in compliance with the covenants contained in the Amended and Restated Senior Secured Credit Facilities.

Based on these actions, assumptions regarding the impact of COVID-19, and expected insurance recoveries, management believes that the Company’s current financial resources will be sufficient to fund its liquidity requirements for the next twelve months.

Emerald Holding, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Use of Estimates and Judgments

The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. On an ongoing basis, the Company evaluates its estimates and judgments compared to historical experience and expected trends. The COVID-19 pandemic and related effects are dynamic and ongoing, and the Company has considered its impact when developing its estimates and assumptions. Actual results and outcomes may differ from management's estimates and assumptions.

Segment Reporting

Operating segments are components of an enterprise for which discrete financial reporting information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. Emerald’s CEO was appointed in January 2021 and is considered the CODM. Effective January 31, 2022, Emerald’s CEO changed the way that he evaluates the results of the Company’s operations and as a result, there was a change in reporting segments. The CODM evaluates performance based on the results of seven executive portfolios, which represent the Company’s seven operating segments. Based on an evaluation of economic similarities, five operating segments are aggregated into two reportable segments: Commerce and the Design, Creative and Technology reportable segments. Two operating segments do not meet the quantitative thresholds of a reportable operating segment and did not meet the aggregation criteria set forth in Accounting Standards Codification 280 (“ASC 280”), Segment Reporting, as of March 31, 2022 and as such are referred to as “All Other”. Refer to Note 15, Segment Information, for information regarding the Company’s reportable segments.

2.	Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard (“ASU”) 2021-08 (“ASU 2021-08”), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, creating an exception to the recognition and measurement principles in ASC 805, Business Combinations. The amendments require an acquirer to use the guidance in ASC 606, Revenue from Contracts with Customers, rather than using fair value, when recognizing and measuring contract assets and contract liabilities related to customer contracts assumed in a business combination. This guidance is effective for fiscal years beginning after December 15, 2022, and for interim periods within that year. Early adoption is permitted and the amendments in ASU 2021-08 should be applied to business combinations occurring during the year of adoption. The Company adopted ASU 2021-08 in October 2021 and the adoption did not have a material impact on the Company’s consolidated financial statements.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions and adding further guidance to simplify the accounting for income taxes. The standard removes certain exceptions related to intra-period tax allocations, the methodology for calculating income taxes in interim periods and the recognition of deferred taxes for investments. The standard also clarifies and amends existing guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The Company adopted ASU 2019-12 on January 1, 2021, which did not have a material impact on the Company’s condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides optional guidance for a limited period of time to ease the potential burden of accounting for (or recognizing the effects of) reference rate reform. The amendments in ASU 2020-04 are effective upon issuance through December 31, 2022 and may be applied prospectively to contract modifications made and hedging relationships entered into on or before December 31, 2022. The Company does not expect the adoption of this accounting standard will have a material impact on the Company’s condensed consolidated financial statements.

Emerald Holding, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

There have been no other new accounting pronouncements that are expected to have a significant impact on the Company’s condensed consolidated financial statements or notes thereto.

Revenues

Impact of COVID-19

The global COVID-19 pandemic significantly impacted the Company’s revenues from mid-March 2020 through the first half of 2021. Late in the second quarter of 2021, the Company began to see the positive impacts of successful vaccination rollouts throughout the United States, with social distancing restrictions easing and live events resuming. As a result, the Company was able to hold 31 in-person events during the first quarter of 2022.

Revenue Recognition and Deferred Revenue

Revenue is recognized as the customer receives the benefit of the promised services and performance obligations are satisfied. Revenue is recognized at an amount that reflects the consideration the Company expects to receive in exchange for those services. Customers generally receive the benefit of the Company’s services upon the staging of each trade show or conference event and over the subscription period for access to the Company’s subscription software and services.

A significant portion of the Company’s annual revenue is generated from the production of trade shows and conference events (collectively, “trade shows”), including booth space sales, registration fees and sponsorship fees. Trade show revenues represented approximately 89.0% and 43.4% of total revenues for the three months ended March 31, 2022 and 2021, respectively.

Deferred revenues generally consist of booth space sales, registration fees and sponsorship fees that are invoiced prior to a trade show, as well as upfront payments for software subscription fees, professional services and implementation fees for the Company’s subscription software and services. Current deferred revenues were $139.3 million as of March 31, 2022 and are reported as deferred revenues on the condensed consolidated balance sheets. Long-term deferred revenues as of March 31, 2022 were $0.2 million and are reported as other noncurrent liabilities on the condensed consolidated balance sheets. Total deferred revenues, including the current and noncurrent portions, were $139.5 million as of March 31, 2022. Current and long-term deferred revenues as of December 31, 2021 were $118.1 million and $0.2 million, respectively. Total deferred revenues, including the current and noncurrent portions, were $118.3 million as of December 31, 2021. During the three months ended March 31, 2022 and 2021, the Company recognized revenues of $84.7 million and $5.4 million, respectively, from amounts included in deferred revenue at the beginning of the respective period.

The accounts receivable and deferred revenue balances related to cancelled events have been reclassified to cancelled event liabilities in the condensed consolidated balance sheets as the total amount represents balances which are expected to be refunded to customers. As of March 31, 2022, cancelled event liabilities of $6.3 million represents $1.1 million of deferred revenues for cancelled trade shows and $5.2 million of related accounts receivable credits reclassified to cancelled event liabilities in the condensed consolidated balance sheets.

Performance Obligations

For the Company’s trade shows and other events, sales are deferred and recognized when performance obligations under the terms of a contract with the Company’s customers are satisfied, which is typically at the completion of a show or event. Revenue is measured as the amount of consideration the Company expects to receive upon completion of its performance obligations.

For the Company’s subscription software and services, the Company enters into contracts with customers that often include multiple performance obligations, which are generally capable of being distinct. Fees associated with implementation and professional services are deferred and recognized over the expected customer life, which is four years. Subscription revenue is generally recognized over the term of the contract. The Company’s contracts associated

Emerald Holding, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

with the subscription software and services are typically three-year terms with one-year renewals following the initial three-year term.

For the Company’s other marketing services, revenues are deferred and recognized when performance obligations under the terms of a contract with the Company’s customers are satisfied. This generally occurs in the period in which the publications are issued. Revenue is measured as the amount of consideration the Company expects to receive upon completion of its performance obligations.

The Company applies a practical expedient which allows the exclusion of disclosure information regarding remaining performance obligations if the performance obligation is part of a contract that has an expected duration of one year or less. The Company’s performance obligations greater than one year are immaterial.

Disaggregation of Revenue

The Company’s primary sources of revenue are from trade shows, other events, subscription software and services and other marketing services.

The following table represents revenues disaggregated by type:

	Reportable Segment
	Commerce		Design, Creative, and Technology		All Other		Total
Three Months Ended March 31, 2022	(in millions)
Trade shows	$	54.2	$	23.5	$	0.9	$	78.6
Other events		0.5		8.6		—		9.1
Subscription software and services		—		0.8		3.4		4.2
Other marketing services		2.0		4.6		—		6.6
Total revenues	$	56.7	$	37.5	$	4.3	$	98.5

Three Months Ended March 31, 2021
Trade shows	$	3.6	$	—	$	—	$	3.6
Other events		0.9		1.0		—		1.9
Subscription software and services		—		—		2.3		2.3
Other marketing services		1.2		3.9		—		5.1
Total revenues	$	5.7	$	4.9	$	2.3	$	12.9

Contract Balances

The Company’s contract assets are primarily sales commissions incurred in connection with the Company’s subscription software and services, which are expensed over the expected customer relationship period. As of March 31, 2022, the Company does not have material contract assets.

Contract liabilities generally consist of booth space sales, registration fees, sponsorship fees that are collected prior to the trade show or other event and subscription revenue, implementation fees and professional services associated with the Company’s subscription software and services. Contract liabilities less than one year from the date of the performance obligation are reported on the condensed consolidated balance sheets as deferred revenues. Contract liabilities greater than one year from the date of the performance obligation are reported on the condensed consolidated balance sheets in other noncurrent liabilities.

The Company’s sales commission costs incurred in connection with sales of booth space, registration fees and sponsorship fees at the Company’s trade shows and other events and with sales of advertising for industry publications are generally short term, as sales typically begin up to one year prior to the date of the trade shows and other events. The Company expects the period benefited by each commission to be less than one year, and as a result, the Company

Emerald Holding, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

expenses sales commissions associated with trade shows, other events and other marketing services as incurred. Sales commissions are reported on the condensed consolidated statements of loss and comprehensive loss as selling, general and administrative expense.

Accounts Receivable

The Company monitors collections and payments from its customers and maintains an allowance based upon applying an expected credit loss rate to receivables based on the historical loss rate from similar higher risk customers adjusted for current conditions, including any specific customer collection issues identified, and forecasts of economic conditions. Delinquent account balances are written off after management has determined that the likelihood of collection is remote. The activities in this account, including the current-period provision for expected credit losses for the three months ended March 31, 2022, were not material.

4.	Business Acquisition

MJBiz

See Note 4 to the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on form 10-K regarding the details of the agreement Emerald executed on December 31, 2021 to acquire certain assets and assume certain liabilities associated with MJBiz. During the three months ended March 31, 2022, the Company finalized its analysis of the purchase accounting, including gaining a better understanding of historical MJBizCon registration revenue and its impact on the valuation model. The final analysis of the registration revenue and the associated revision to the average EBITDA growth estimate for MJBiz resulted in an $8.9 million increase in the estimated contingent consideration liability.

The Company’s purchase price allocation and measurement period adjustment for the MJBiz acquisition is presented below:

(in millions)	Fair Value Recognized as of Acquisition Date (as previously reported)			Non-Cash Measurement Period Adjustment⁽¹⁾		Fair Value Recognized as of March 31, 2022 as adjusted
Trade and other receivables	$	0.6		$	—	$	0.6
Prepaid expenses		0.1			—		0.1
Goodwill		113.8		6.0			119.8
Intangible Assets		30.4			2.9		33.3
Deferred Revenues		(1.3	)		—		(1.3	)
Other current liabilities		(1.4	)		—		(1.4	)
Purchase price	$	142.2		$	8.9	$	151.1

(1) During the three months ended March 31, 2022, the Company recorded a non-cash adjustment to reflect a measurement period adjustment. Upon finalizing the analysis of the average EBITDA growth estimate, including gaining a better understanding of historical MJBizCon registration revenue trends, the estimated contingent consideration liability increased by $8.9 million, from approximately $24.0 million to $32.9 million. Such change resulted in an increase to Goodwill of $6.0 million and an increase in Intangible Assets of $2.9 million in the Commerce reportable segment.

Emerald Holding, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

5.	Property and Equipment

Property and equipment, net, consisted of the following:

(in millions)	March 31, 2022			December 31, 2021
Furniture, equipment and other	$	7.4		$	6.5
Leasehold improvements		3.2			3.1
		10.6			9.6
Less: Accumulated depreciation		(6.2	)		(5.9	)
Property and equipment, net	$	4.4		$	3.7

Depreciation expense related to property and equipment for the three months ended March 31, 2022 and 2021 was $0.3 million.

6.	Intangible Assets and Goodwill

Intangible Assets, Net

Intangible assets, net consisted of the following:

(in millions)	Indefinite- lived trade names		Customer relationship intangibles			Definite- lived trade names			Acquired Technology			Acquired Content			Computer software			Capitalized software in progress		Total Intangible Assets
Gross carrying amount at March 31, 2022	$	52.6	$	357.0		$	84.4		$	6.4		$	1.5		$	18.5		$	3.2	$	523.6
Accumulated amortization		—		(271.4	)		(13.4	)		(1.1	)		(0.3	)		(11.2	)		—		(297.4	)
Net carrying amount at March 31, 2022	$	52.6	$	85.6		$	71.0		$	5.3		$	1.2		$	7.3		$	3.2	$	226.2

Gross carrying amount at December 31, 2021	$	54.2	$	354.3		$	84.2		$	6.2		$	1.5		$	13.8		$	5.9	$	520.1
Accumulated amortization		—	$	(259.4	)	$	(12.2	)		(0.9	)		(0.2	)	$	(10.7	)		—		(283.4	)
Net carrying amount at December 31, 2021	$	54.2	$	94.9		$	72.0		$	5.3		$	1.3		$	3.1		$	5.9	$	236.7

Emerald Holding, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Amortization expense for the three months ended March 31, 2022 and March 31, 2021 was $14.0 million and $11.5 million, respectively.

Estimated future amortization expense as of March 31, 2022:

(in millions)	March 31, 2022
2022		40.7
2023		36.7
2024		18.5
2025		13.8
2026		9.9
Thereafter		50.8
	$	170.4

Impairment of Indefinite-Lived Intangible Assets

During the three months ended March 31, 2022, the Company identified an interim impairment trigger for one of its indefinite-lived intangible assets. After performing an interim impairment assessment, the Company recognized an impairment charge of $1.6 million related to its indefinite-lived intangible assets during the three months ended March 31, 2022. The impairment charge is recorded in intangible asset impairment charges on the condensed consolidated statements of income (loss) and comprehensive income (loss). Indefinite-lived intangible impairment charges in the Design, Creative and Technology reportable segment were $1.6 million during the three months ended March 31, 2022.

During the three months ended March 31, 2021, there were no triggering events or changes in circumstances that would indicate the carrying value of the Company’s indefinite-lived intangible assets was impaired. As such, no quantitative assessment for impairment was required during the first quarter of 2021.

Impairment of Long-Lived Assets Other than Goodwill

During the three months ended March 31, 2022, there were no triggering events or changes in circumstances that would indicate the carrying value of the Company’s long-lived assets other than goodwill are not recoverable. As such, no quantitative assessment for impairment was required during the first quarter of 2022 or 2021.

As a result of the ongoing uncertainty surrounding the impact of COVID-19 on Emerald’s operations, there can be no assurance that management will be able to conclude in future periods that it is more likely than not that the Company’s indefinite-lived intangible assets and long-lived assets other than goodwill are not impaired.

Goodwill

The table below summarizes the changes in the carrying amount of goodwill:

	Reportable Segment
(in millions)	Commerce (Legacy)			Commerce		Design & Technology			Design, Creative & Technology			All Other			Total
Balance at December 31, 2021	$	337.5		$	—	$	133.7		$	—		$	43.0		$	514.2
Transfers		(337.5	)		342.2		(133.7	)		142.9			(13.9	)		—
Impairments		—			—		—			(5.8	)		(0.5	)		(6.3	)
Measurement period adjustment		—			6.0		—			—			—			6.0
Balance at March 31, 2022	$	—		$	348.2	$	—		$	137.1		$	28.6		$	513.9

Emerald Holding, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Impairment of Goodwill

During the three months ended March 31, 2022, the Company changed its operating segments which resulted in a change in reporting units. Under accounting standards, the Company is required to perform an impairment assessment of its prior reporting units immediately prior to the change in reporting units and immediately after the change on its new reporting units. To the extent that a prior reporting unit was separated into more than one reporting unit, the allocation of goodwill between the components of the old reporting unit was determined based on their relative fair value. The Company recently completed its annual impairment assessment on October 31, 2021 for its old reporting units. As of this impairment assessment, reporting units where fair value exceeded carrying value by less than 5% included $214.6 million of goodwill. Due to the change in reporting units and a number of prior reporting units where fair value of the reporting unit did not significantly exceed its carrying value, the Company performed a quantitative assessment of the fair value of its prior reporting units as of January 31, 2022 using an income approach with assumptions that are considered level 3 inputs and concluded that the carrying value of one reporting units exceeded their respective fair values, resulting in a goodwill impairment of $6.3 million.

The values of the respective reporting units were determined primarily by discounting estimated future cash flows, which were determined based on revenue and expense long-term growth assumptions ranging from zero to of 3.0%, at a weighted average cost of capital (discount rate) ranging from 12.8% to 15.5%. We also performed a fair value assessment of our new reporting units utilizing the similar inputs and there were $0.5 million of impairment for one of the Company’s new reporting units. As of the date of our impairment assessment, reporting units where the fair value of the reporting unit is equal to its carrying value contained $3.1 million of goodwill.

The Company recorded total goodwill impairment of $5.8 million and $0.5 million for the three months ended March 31, 2022 related to the Design, Creative and Technology segment and All Other Category, respectively.

Goodwill is tested for impairment annually on October 31, and between annual tests if the Company becomes aware of an event or a change in circumstances that would indicate the carrying value may be impaired. During the three months ended March 31, 2021, management determined there was no triggering event. As such, no quantitative assessment for impairment was required during the first quarter of 2021.

Debt

Long-term debt related to the Amended and Restated Term Loan Facility is comprised of the following indebtedness to various lenders:

(in millions)	March 31, 2022		December 31, 2021
Amended and Restated Term Loan Facility, with interest at LIBOR plus 2.50% as of March 31, 2022 and December 31, 2021 (equal to 2.71% and 2.59% at March 31, 2022 and December 31, 2021, respectively) due 2024, net^(a)	$	515.5	$	516.6
Less: Current maturities		5.7		5.7
Long-term debt, net of current maturities, debt discount and deferred financing fees	$	509.8	$	510.9

(a)

The Amended and Restated Term Loan Facility, a seven-year $565.0 million senior secured term loan facility, scheduled to mature on May 22, 2024 (the “Amended and Restated Term Loan Facility”), as of March 31, 2022 was recorded net of unamortized discount of $1.2 million and net of unamortized deferred financing fees of $1.6 million. The Amended and Restated Term Loan Facility as of December 31, 2021 was recorded net of unamortized discount of $1.4 million and net of unamortized deferred financing fees of $1.7 million. The fair market value of the Company’s debt under the Amended and Restated Term Loan Facility was $515.6 million as of March 31, 2022.

Emerald Holding, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Revolving Credit Facility

Emerald X had no borrowings outstanding under its Revolving Credit Facility as of March 31, 2022 and December 31, 2021, respectively. Emerald X had $1.0 million in stand-by letters of credit outstanding under the Revolving Credit Facility as of March 31, 2022 and December 31, 2021. Until August 6, 2020, borrowings under the Revolving Credit Facility were subject to an interest rate equal to LIBOR plus 2.75% or ABR plus 1.75%. As a result of the Company’s Total First Lien Net Leverage Ratio decreasing below 2.50 to 1.00 (as defined in the Amended and Restated Senior Secured Credit Facilities), from August 7, 2020 through March 31, 2022, borrowings under the Revolving Credit Facility were subject to an interest rate equal to LIBOR plus 2.25% or ABR plus 1.25%.

Interest Expense

Interest expense reported in the condensed consolidated statements of loss and comprehensive loss consists of the following:

	Three months ended March 31,
(in millions)	2022		2021
Senior secured term loan	$	3.5	$	3.4
Non-cash interest for amortization of debt discount and debt issuance costs		0.3		0.4
Revolving credit facility interest and commitment fees		0.1		0.2
Total interest expense	$	3.9	$	4.0

Covenants

The Revolving Credit Facility contains a financial covenant requiring Emerald X to comply with a 5.50 to 1.00 Total First Lien Net Leverage Ratio, which is defined as the ratio of Consolidated Total Debt (as defined in the Amended and Restated Senior Secured Credit Facilities) secured on a first lien basis, net of unrestricted cash and cash equivalents to trailing four-quarter Consolidated EBITDA (as defined in the Amended and Restated Senior Secured Credit Facilities). This financial covenant is tested on the last day of each quarter only if the aggregate amount of revolving loans, swingline loans and letters of credit outstanding under the Revolving Credit Facility (net of up to $10.0 million of outstanding letters of credit) exceeds 35% of the total commitments thereunder. As of March 31, 2022, the Company was not required to test this financial covenant and Emerald X was in compliance with all covenants under the Amended and Restated Senior Secured Credit Facilities.

8.	Fair Value Measurements and Financial Risk

As of March 31, 2022, the Company’s assets and liabilities measured at fair value on a recurring basis are categorized in the table below:

(in millions)	Total		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents:
Cash	$	44.7	$	44.7	$	—	$	—
Money market mutual funds^(a)		209.7		209.7		—		—
Total assets at fair value	$	254.4	$	254.4	$	—	$	—

Liabilities
Market-based share awards liability^(b)	$	0.4	$	—	$	—	$	0.4
Contingent consideration^(b)		42.9		—		—		42.9
Total liabilities at fair value	$	43.3	$	—	$	—	$	43.3

(a)	The fair values of the Company’s money market mutual funds are based on the closing price of these assets as of the reporting date. The Company’s money market mutual funds are quoted in an active market and classified as Level 1 assets.

Emerald Holding, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

(b)

The market-based share awards liability of $0.4 million as of March 31, 2022 is included within other noncurrent liabilities in the condensed consolidated balance sheet. The fair value of the Company’s market-based share awards and contingent consideration are derived from valuation techniques in which one or more significant inputs are unobservable, including the Company’s own assumptions. Contingent consideration of $36.3 million as of March 31, 2022 is included within Contingent consideration in the condensed consolidated balance sheets and Contingent consideration of $6.6 million is included within other noncurrent liabilities in the condensed consolidated balance sheets.

As of December 31, 2021, the Company’s assets and liabilities measured at fair value on a recurring basis are categorized in the table below:

(in millions)	Total		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents:
Cash and cash equivalents	$	21.5	$	21.5	$	—	$	—
Money market mutual funds^(a)		209.7		209.7		—		—
Total assets at fair value	$	231.2	$	231.2	$	—	$	—

Liabilities
Market-based share awards liability^(b)	$	0.4	$	—	$	—	$	0.4
Contingent consideration^(b)		36.2		—		—		36.2
Total liabilities at fair value	$	36.6	$	—	$	—	$	36.6

(a)	The fair values of the Company’s money market mutual funds are based on the closing price of these assets as of the reporting date. The Company’s money market mutual funds are quoted in an active market and classified as Level 1 assets.

(b)

Included within other noncurrent liabilities in the condensed consolidated balance sheet. The fair value of the Company’s market-based share awards and contingent consideration are derived from valuation techniques in which one or more significant inputs are unobservable, including the Company’s own assumptions.

The market-based share awards liability of $0.4 million as of March 31, 2022 and December 31, 2021, entitles the grantees of these awards the right to receive shares of common stock equal to a maximum cash value of $9.8 million, in the aggregate, upon achievement of specified targeted share prices measured over sixty days within a ninety-day trading period. The liability is measured at fair value and is re-measured to an updated fair value at each reporting period. The Company recognizes stock-based compensation expense for awards subject to market-based vesting conditions regardless of whether it becomes probable that these conditions will be achieved. The stock-based compensation expense is included in selling, general and administrative expense in the condensed consolidated statements of loss and comprehensive loss. Refer to Note 10, Stock-Based Compensation, under the heading Market-based Share Awards for unobservable inputs for the market-based share award liability.

As of March 31, 2022 and December 31, 2021, the Company had $42.9 million and $36.2 million, respectively, in contingent consideration liabilities measured at fair value related to the Company’s acquisitions of G3 Communications, EDspaces, PlumRiver, Sue Bryce Education and MJBiz. The contingent consideration liability of $42.9 million as of March 31, 2022 consists of liabilities of $42.7 million and $0.2 million that are expected to be settled in 2023 and 2024, respectively. Refer to Note 4, Business Acquisitions, for further information related to measurement period adjustment for the MJBiz contingent consideration.

The Company paid $6.5 million in contingent consideration during the three months ended March 31, 2022 in relation to the Company’s acquisition of G3 Communications. The liabilities are re-measured to fair value each reporting period. As a result of the Company’s remeasurements during the first quarter of 2022, the Company recorded a $4.3 million increase in fair value of contingent consideration, which is included in selling, general and administrative expense in the condensed consolidated statements of income and comprehensive income.

Emerald Holding, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The determination of the fair value of the contingent consideration liabilities could change in future periods. Any such changes in fair value will be reported in selling, general and administrative expense in the condensed consolidated statements of income (loss) and comprehensive income (loss).

Financial Risk

The Company’s condensed consolidated financial statements reflect estimates and assumptions made by management that affect the reported amount of assets and liabilities.

9.	Redeemable Convertible Preferred Stock and Stockholders’ Deficit

Redeemable Convertible Preferred Stock

On June 10, 2020, the Company entered into an investment agreement (the “Investment Agreement”) with Onex Partners V LP (“Onex”), pursuant to which the Company agreed to (i) issue to an affiliate of Onex, in a private placement transaction (the “Initial Private Placement”), 47,058,332 shares of redeemable convertible preferred stock for a purchase price of $5.60 per share and (ii) effect a rights offering to holders of its outstanding common stock of one non-transferable subscription right for each share of the Company’s common stock held, with each right entitling the holder to purchase one share of redeemable convertible preferred stock at the Series A Price per share. Onex agreed to purchase (the “Onex Backstop”) any and all redeemable convertible preferred stock not subscribed for in the Rights Offering by stockholders other than affiliates of Onex at the Series A Price per share. On June 29, 2020 (the “First Closing Date”), Emerald received proceeds of $252.0 million, net of fees and expenses of $11.6 million, from the sale of redeemable convertible preferred stock to Onex in the Initial Private Placement. Emerald used $50.0 million of the net proceeds from the sale of redeemable convertible preferred stock to repay outstanding debt under the Revolving Credit Facility and expects to use the remaining proceeds for general corporate purposes, including organic and acquisition growth initiatives. The Rights Offering subscription period started and ended on July 7, 2020 and July 22, 2020, respectively. On July 24, 2020, the Company issued a further 1,727,427 shares of redeemable convertible preferred stock pursuant to the Rights Offering and received proceeds of approximately $9.7 million. Pursuant to the Onex Backstop, on August 13, 2020, an additional 22,660,587 shares of redeemable convertible preferred stock were sold to Onex in exchange for approximately $121.3 million, net of fees and estimated expenses of $5.6 million. The rights of the redeemable convertible preferred stock are summarized below.

Liquidation Preference

Upon liquidation or dissolution of the Company, the holders of redeemable convertible preferred stock are entitled to receive the greater of (a) the accreted liquidation preference, and (b) the amount the holders of redeemable convertible preferred stock would have received if they had converted their redeemable convertible preferred stock into common stock immediately prior to such liquidation or dissolution.

Dividends

Each share of redeemable convertible preferred stock will accumulate dividends at a rate per annum equal to 7% of the accreted liquidation preference, compounding quarterly by adding to the accreted liquidation preference until July 1, 2023 and thereafter, at the Company’s option, paid either in cash or by adding to the accreted liquidation preference. During the three months ended March 31, 2022, the redeemable convertible preferred stock accumulated $7.8 million worth of dividends, bringing the aggregate accreted liquidation preference to $451.9 million as of March 31, 2022. During the three months ended March 31, 2021, the redeemable convertible preferred stock accumulated $7.2 million worth of dividends. Holders of redeemable convertible preferred stock are also entitled to participate in and receive any dividends declared or paid on the Company’s common stock on an as-converted basis, and no dividends may be paid to holders of common stock unless the aggregate accreted liquidation preference on the redeemable convertible preferred stock has been paid or holders of a majority of the outstanding redeemable convertible preferred stock have consented to such dividends.

Emerald Holding, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Conversion Features

Shares of the redeemable convertible preferred stock may be converted at the option of the holder into a number of shares of common stock equal to (a) the amount of the accreted liquidation preference, divided by (b) the applicable conversion price. Each share of redeemable convertible preferred stock had an initial liquidation preference of $5.60 and were initially convertible into approximately 1.59 shares of common stock, which is equivalent to the initial liquidation preference per share of $5.60 divided by the initial conversion price of $3.52 per share. The conversion price is subject to customary anti-dilution adjustments upon the occurrence of certain events, including downward adjustment in the event the Company issues securities, subject to exceptions, at a price that is lower than the fair market value of such securities.

If, at any time following the third anniversary of the First Closing Date the closing price per share of the Company’s common stock exceeds 175% of the then-applicable conversion price for at least 20 consecutive trading days, the Company may, at its option, and subject to certain liquidity conditions, cause any or all of the then outstanding shares of redeemable convertible preferred stock to be converted automatically into common stock at the then applicable conversion price.

Redemption Features

The Company has the right to redeem all, but not less than all, of the redeemable convertible preferred stock on or after June 29, 2026 for a cash purchase price equal to (a) on or after the six-year anniversary of the initial issuance date, 105% of the accreted liquidation preference, (b) on or after the seven-year anniversary of the initial issuance date, 103% of the accreted liquidation preference or (c) on or after the eight-year anniversary of the initial issuance date, the accreted liquidation preference. In addition, if there is a change of control transaction involving the Company prior to the six-year anniversary of the First Closing Date, the Company has the right to redeem all, but not less than all, of the redeemable convertible preferred stock for a cash purchase price equal to the accreted liquidation preference plus the net present value of the additional amount by which the accreted liquidation preference would have otherwise increased from the date of such redemption through the sixth anniversary of the closing. If, after the Company ceases to have a controlling stockholder group, there is a change of control transaction involving the Company, holders of redeemable convertible preferred stock may elect to (x) convert their redeemable convertible preferred stock into shares of common stock at the then current conversion price or (y) require the Company to redeem the redeemable convertible preferred stock for cash, at a price per share equal to the then-unpaid accreted liquidation preference. Although only Unaffiliated Directors (as defined below) can be involved in any decisions with respect to the Company’s rights to exercise the redemption features, the holders of the redeemable convertible preferred stock control the majority of the votes through representation on the board of directors. Therefore, the redeemable convertible preferred stock is required to be accreted to its redemption price on the date the redemption option first becomes exercisable. For the three months ending March 31, 2022 and 2021, the Company recorded $9.2 million and $8.5 million in deemed dividends, respectively, representing the accretion of the redeemable convertible preferred stock to the redemption value.

Voting Rights

Certain matters will require the approval of holders of a majority of the redeemable convertible preferred stock, including (i) amendments to the Company’s organizational documents in a manner adverse to the redeemable convertible preferred stock, (ii) the creation or issuance of senior or parity equity securities or (iii) the issuance of any convertible indebtedness, other class of redeemable convertible preferred stock or other equity securities in each case with rights to payments or distributions in which the redeemable convertible preferred stock would not participate on a pro-rata, as-converted basis.

In addition, for so long as the redeemable convertible preferred stock represents more than 30% of the outstanding common stock on an as-converted basis, without the approval of a majority of the directors elected by the holders of the redeemable convertible preferred stock, the Company may not (i) incur new indebtedness to the extent certain financial metrics are not satisfied, (ii) redeem or repurchase any equity securities junior to the redeemable convertible preferred stock, (iii) enter into any agreement for the acquisition or disposition of assets or businesses involving a

Emerald Holding, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

purchase price in excess of $100 million, (iv) hire or terminate the chief executive officer of the Company or (v) make a voluntary filing for bankruptcy or commence a dissolution of the Company.

For so long as the redeemable convertible preferred stock represents a minimum percentage of the outstanding shares of common stock on an as-converted basis as set forth in the Certificate of Designations relating to the redeemable convertible preferred stock, the holders of the redeemable convertible preferred stock shall have the right to appoint up to five members of the Company’s Board of Directors (the “Board”).

All decisions of the Company’s Board with respect to the exercise or waiver of the Company’s rights relating to the redeemable convertible preferred stock shall be determined by a majority of the Company’s directors that are not employees of the Company or affiliated with Onex (“Unaffiliated Directors”), or a committee of Unaffiliated Directors.

As part of the transactions contemplated by the Investment Agreement, the Company and Onex entered into a Registration Rights Agreement whereby Onex is entitled to certain demand and piggyback registration rights in respect of the redeemable convertible preferred stock and the shares of common stock issuable upon conversion thereof.

Dividends

There were no dividends paid or declared during the first quarters of 2022 and 2021.

Share Repurchases

October 2020 Share Repurchase Program (“October 2020 Share Repurchase Program”)

In October 2020, the Company’s Board authorized and approved a $20.0 million share repurchase program. Under the terms of the October 2020 Share Repurchase Program, the Company may, from time to time, purchase shares of its common stock for an aggregate purchase price not to exceed $20.0 million through December 31, 2022, subject to early termination or extension by the Board. The share repurchase program may be suspended or discontinued at any time without notice. The Company repurchased 255,584 shares for $0.9 million during the three months ended March 31, 2022. The Company repurchased 202,208 shares for $1.2 million during the three months ended March 31, 2021. There was $17.4 million remaining available for share repurchases under the October 2020 Share Repurchase Program as of March 31, 2022.

10.	Stock-Based Compensation

The Company recognizes cumulative stock-based compensation expense for the portion of the awards for which the service period and performance or market conditions, as applicable, have been satisfied. Stock-based compensation expense is included in selling, general and administrative expense in the condensed consolidated statements of loss and comprehensive loss. The related deferred tax benefit for stock-based compensation recognized was $0.4 million and $0.8 million for the three months ended March 31, 2022 and 2021, respectively.

2019 Employee Stock Purchase Plan (the “ESPP”)

In January 2019, the Company’s Board approved the ESPP, which was approved by the Company’s stockholders in May 2019. The ESPP requires that participating employees must be customarily employed for at least 20 hours per week, have completed at least 6 months of service, and have compensation (as defined in the ESPP) not greater than $150,000 in the 12-month period before the enrollment date to be eligible to participate in the ESPP. Under the ESPP, eligible employees will receive a 10% discount from the lesser of the closing price on the first day of the offering period and the closing price on the purchase date. The Company reserved 500,000 shares of its common stock for issuance under the ESPP. The ESPP expense recognized by the Company was not material for the three months ended March 31, 2022 and 2021.

Emerald Holding, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Stock Options

The Company recognized stock-based compensation expense relating to stock option activity of $1.3 million and $1.6 million for the three months ended March 31, 2022 and 2021, respectively.

Stock option activity for the three months ended March 31, 2022, was as follows:

				Weighted-Average
	Number of Options			Exercise Price per Option		Remaining Contractual Term		Aggregate Intrinsic Value
	(thousands)					(years)		(millions)
Outstanding at December 31, 2021		14,403		$	8.10		8.1	$	—
Granted		390			5.62
Forfeited		(171	)		8.58
Outstanding at March 31, 2022		14,622		$	8.03		7.8	$	—
Exercisable at March 31, 2022		4,971		$	10.91		5.9	$	—

The aggregate intrinsic value is the amount by which the fair value of the Company’s common stock exceeded the exercise price of the options as of the close of trading hours on the New York Stock Exchange on March 31, 2022 for those options for which the market price was in excess of the exercise price.

There was a total of $10.2 million unrecognized stock-based compensation expense at March 31, 2022 related to unvested stock options expected to be recognized over a weighted-average period of 2.8 years.

Restricted Stock Units (“RSUs”)

The Company periodically grants RSUs that contain service and, in certain instances, performance and market conditions to certain directors, executives and employees. Stock-based compensation expense relating to RSU activity recognized in the three months ended March 31, 2022 and 2021 was $0.8 million and $1.3 million, respectively. There was a total of $4.1 million of unrecognized stock-based compensation expense at March 31, 2022 related to unvested RSUs expected to be recognized over a weighted-average period of 2.4 years.

RSU activity for the three months ended March 31, 2022 was as follows:

(share data in thousands, except per share data)	Number of RSUs (share data in thousands)			Weighted Average Grant Date Fair Value per Share
Unvested balance, December 31, 2021		1,358		$	8.13
Granted		126			3.58
Forfeited		(39	)		11.00
Vested		(472	)		8.11
Unvested balance, March 31, 2022		973		$	7.45

Market-based Share Awards

In January 2020, the Company granted performance-based market condition share awards to one senior executive under the 2017 Omnibus Equity Plan, which entitle this employee the right to receive shares of common stock equal to a maximum value of $4.9 million in the aggregate upon achievement of specified targeted share prices measured over sixty days within a ninety-day trading period. In June 2019, the Company granted performance-based market condition share awards to one senior executive under the 2017 Omnibus Equity Plan, which entitle this employee the right to receive shares of common stock equal to a maximum value of $4.9 million in the aggregate, upon achievement of specified targeted share prices measured over sixty days within a ninety-day trading period. As of March 31, 2022, all outstanding performance-based market condition share awards remain unvested with an estimated weighted average conversion threshold of $21.08 per share, which would result in an estimated 78,041 shares of common stock to be

Emerald Holding, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

issued upon vesting. Each of the estimated 78,041 shares of common stock have a weighted-average grant date fair value of $24.77 per share.

As of each of March 31, 2022 and December 31, 2021, the liability for these awards was $0.4 million, and is reported on the condensed consolidated balance sheets in other noncurrent liabilities. The fair value of performance-based market condition share awards is estimated on the grant date using a risk-neutral Monte Carlo simulation model. The grant date fair value of the remaining outstanding awards granted in 2019 was $0.8 million. The grant date fair value of the 2020 awards was $1.1 million. The Company recognized stock-based compensation expense relating to performance-based market condition share awards of zero and $0.1 million during the three months ended March 31, 2022 and 2021, respectively.

The assumptions used in determining the fair value for the performance-based market condition share awards outstanding at March 31, 2022 were as follows:

		March 31, 2022
Expected volatility		57.50%
Dividend yield		0.00%
Risk-free interest rate		2.40%
Weighted-average expected term (in years)		3.8

The weighted-average expected term of the Company’s performance-based market condition share awards is the weighted-average of the derived service periods for the share awards.

11.	Earnings Per Share

Basic earnings per share is computed using the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted-average number of common shares outstanding during the period, plus the dilutive effect of outstanding options, using the treasury stock method and the average market price of the Company's common stock during the applicable period. Certain shares related to some of the Company's outstanding employee share awards were excluded from the computation of diluted earnings per share because they were antidilutive in the periods presented but could be dilutive in the future. Performance-based market condition share awards are considered contingently issuable shares, which would be included in the denominator for earnings per share if the applicable market conditions have been achieved, and the inclusion of any performance-based market condition share awards is dilutive for the respective reporting periods. For both the three months ended March 31, 2022 and 2021, unvested performance-based market condition share awards were excluded from the calculation of diluted earnings per share because the market conditions had not been met. There were 71,442,407 7% Series A Redeemable Convertible Participating Preferred Stock shares outstanding which were convertible into 128,383,237 shares of common stock at March 31, 2022. These preferred stock shares were anti-dilutive for the three months ended March 31, 2022 and are therefore excluded from the diluted loss per common share calculation.

The Company also included deductions of $8.6 million and zero as adjustments to net income (loss) attributable to common shareholders on the statement of operations and in determining earnings (loss) per share for the March 31, 2022 and March 31, 2021 periods respectively, for the share of undistributed earnings that would be attributable to Series A redeemable convertible preferred stock during the period, in addition to the earnings attributable to the Series A redeemable convertible preferred stock due to the accrued dividends and remeasurements to redemption value.

Emerald Holding, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The details of the computation of basic and diluted earnings per common share are as follows:

	Three Months Ended March 31,
(dollars in millions, share data in thousands except earnings per share)	2022			2021
Net income (loss) and comprehensive income (loss) attributable to Emerald Holding, Inc.	$	22.6		$	(15.3	)
Accretion to redemption value of redeemable convertible preferred stock		(9.2	)		(8.5	)
Participation rights on if-converted basis		(8.6	)		—
Net income (loss) and comprehensive income (loss) attributable to Emerald Holding, Inc. common stockholders	$	4.8		$	(23.8	)
Weighted average common shares outstanding		70,171			72,245
Basic income (loss) per share	$	0.07		$	(0.33	)
Net income (loss) and comprehensive income (loss) attributable to Emerald Holding, Inc. common stockholders	$	4.8		$	(23.8	)
Dilutive effect of stock options		109			—
Diluted weighted average common shares outstanding		70,280			72,245
Diluted income (loss) per share	$	0.07		$	(0.33	)
Anti-dilutive employee share awards excluded from diluted earnings per share calculation		15,418			14,848

12.	Income Taxes

The Company determines its interim income tax benefit by applying the estimated effective income tax rate expected to be applicable for the full fiscal year to the income (loss) before income taxes for the period. In determining the full year effective tax rate estimate, the Company does not include the estimated impact of unusual and/or infrequent items, which may cause significant variations in the expected relationship between income tax expense (benefit) and pre-tax income (loss). Significant judgment is exercised in determining the income tax provision due to transactions, credits and estimates where the ultimate tax determination is uncertain.

The Company’s U.S. federal statutory corporate income tax rate was 21% as of March 31, 2022. For the three months ended March 31, 2022 and 2021, the Company recorded a benefit from income taxes of $2.2 million and $8.3 million, respectively, which resulted in an effective tax rate of negative 10.8% and 35.2 %, respectively. The differences between the U.S. federal statutory and effective tax rates before discrete items are primarily attributable to changes in valuation allowances, nondeductible officer compensation and goodwill impairment.

Liabilities for unrecognized tax benefits and associated interest and penalties were zero as of March 31, 2022 and December 31, 2021, respectively.

13.	Commitments and Contingencies

Leases and Other Contractual Arrangements

The Company has entered into operating leases and other contractual obligations to secure real estate facilities, equipment and trade show venues. These agreements are not unilaterally cancelable by the Company, are legally enforceable and specify fixed or minimum amounts or quantities of goods or services at fixed or minimum prices.

Emerald Holding, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Legal Proceedings and Contingencies

The Company is subject to litigation and other claims in the ordinary course of business. In the opinion of management, the Company’s liability, if any, arising from regulatory matters and legal proceedings related to these matters is not expected to have a material adverse impact on the Company’s condensed consolidated balance sheets, results of operations or cash flows.

In the opinion of management, there are no claims, commitments or guarantees pending to which the Company is party that would have a material adverse effect on the condensed consolidated financial statements.

14.	Accounts Payable and Other Current Liabilities

Accounts payable and other current liabilities consisted of the following:

(in millions)	March 31, 2022		December 31, 2021
Accrued event costs	$	18.5	$	9.5
Accrued personnel costs		14.1		16.0
Trade payables		12.0		12.0
Other current liabilities		9.4		9.2
Total accounts payable and other current liabilities	$	54.0	$	46.7

15.	Segment Information

The Company routinely evaluates whether its operating and reportable segments continue to reflect the way the Chief Operating Decision Maker (the “CODM”) evaluates the business. The determination is based on: (1) how the Company’s CODM evaluates the performance of the business, including resource allocation decisions, and (2) whether discrete financial information for each operating segment is available. The Company considers its Chief Executive Officer to be its CODM.

The CODM evaluates performance based on the results of seven executive brand portfolios, which represent the Company’s seven operating segments. The brands managed by the Company’s segment managers do not necessarily align with specific industry sectors. Due to economic similarities and the nature of services, fulfillment processes of those services and types of customers, five operating segments are aggregated into two reportable segments, the Commerce and the Design, Creative, and Technology reportable segments. In addition, two operating segments did not meet the quantitative thresholds of a reportable segment and did not meet the aggregation criteria set forth in ASC Topic 280, Segment Reporting. Therefore, results for these operating segments are included in the rows labeled "All Other" in the tables below for all periods presented. Six of the executive portfolios generate revenues through the production of trade show events, including booth space sales, registration fees and sponsorship fees. In addition, these six segments generate revenues from marketing activities, including digital and print media. The seventh operating segment generates revenues from Emerald’s software-as-a-service platform.

Operating segment performance is evaluated by the Company’s CODM based on revenues and Adjusted EBITDA, a non-GAAP measure, defined as EBITDA exclusive of general corporate expenses, stock-based compensation expense, impairments and other items. These adjustments are primarily related to items that are managed on a consolidated basis at the corporate level. The exclusion of such charges from each segment is consistent with how the CODM evaluates segment performance.

Emerald Holding, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The following table presents a reconciliation of reportable segment revenues, other income, and Adjusted EBITDA to net income (loss):

	Three Months Ended March 31,
(in millions)	2022			2021⁽¹⁾
Revenues
Commerce	$	56.7		$	5.7
Design, Creative, and Technology		37.5			4.9
All Other		4.3			2.3
Total revenues	$	98.5		$	12.9

Other Income
Commerce	$	1.1		$	6.7
Design, Creative, and Technology		27.0			6.9
All Other		0.7			0.5
Total other income	$	28.8		$	14.1

Adjusted EBITDA
Commerce	$	31.8		$	5.3
Design, Creative, and Technology		37.7			2.1
All Other		(2.3	)		0.8
Subtotal Adjusted EBITDA	$	67.2		$	8.2

General corporate and other expenses	$	(12.8	)	$	(10.9	)
Interest expense		(3.9	)		(4.0	)
Goodwill impairment charge		(6.3	)		—
Intangible asset impairment charge		(1.6	)		—
Depreciation and amortization		(14.3	)		(11.8	)
Stock-based compensation		(2.1	)		(3.0	)
Deferred revenue adjustment		(0.2	)		(0.9	)
Other items		(5.6	)		(1.2	)
Income (loss) before income taxes	$	20.4		$	(23.6	)
(1) Prior year segment disclosures reflect the new reportable segment structure

The Company’s CODM does not receive information with a measure of total assets or capital expenditures for each operating segment as this information is not used for the evaluation of executive brand portfolio performance as the Company’s operations are not capital intensive. Capital expenditure information is provided to the CODM on a consolidated basis. Therefore, the Company has not provided asset and capital expenditure information by reportable segment. Intersegment revenues were immaterial for the three months ended March 31, 2022 and 2021. For the three months ended March 31, 2022 and 2021, substantially all revenues were derived from transactions in the United States.

Emerald Holding, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

16.	Related Party Transactions

Investment funds affiliated with Onex Corporation owned approximately 86.2% of the Company’s common stock on an as-converted basis as of March 31, 2022. Affiliates of Onex Corporation held a 49% ownership position in ASM Global (“ASM”), including SMG Food & Beverage, LLC, a wholly-owned subsidiary of ASM, which the Company has contracted with for catering services at certain of the Company’s trade shows and events and a 97% ownership position in Convex Group Ltd. (“Convex”), which is one of the insurers in the syndicate that provides the Company’s insurance coverage. Additionally, certain of the Company’s future tradeshows and other events may be held at facilities managed by ASM. The Company made payments of $0.3 million and $0.1 million to ASM and ASM managed facilities during the three months ended March 31, 2022 and 2021, respectively. The Company had zero and $0.1 million due to ASM as of March 31, 2022 and December, 31 2021, respectively. The Company made payments of $0.3 million and zero to Convex during the three months ended March 31, 2022 and 2021, respectively. The Company had $0.1 million and zero due to Convex as of March 31, 2022 and December, 31 2021, respectively.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis of the financial condition and results of our operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes of Emerald Holding, Inc. included in Item 1 of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and the related notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “Annual Report”), as filed with the SEC. You should review the disclosures under the headings “Cautionary Note Regarding Forward-Looking Statements” and “Item 1A. Risk Factors” in the Annual Report, for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. All references to the “Company”, “us,” “we,” “our,” and all similar expressions are references to Emerald Holding, Inc., together with its consolidated subsidiaries, unless otherwise expressly stated or the context otherwise requires.

Overview

Emerald is a leading operator of business-to-business trade shows in the United States. Leveraging our shows as key market-driven platforms, we combine our events with effective industry insights, digital tools, and data-focused solutions to create uniquely rich experiences. Emerald strives to build its customers’ businesses by creating opportunities that deliver tangible results.

All of our trade show franchises typically hold market-leading positions within their respective industry verticals, with significant brand value established over a long period of time. Each of our shows is typically held at least annually, with certain franchises offering multiple editions per year. As our shows are frequently the largest and most well attended in their respective industry verticals, we are able to attract high-quality attendees, including those who have the authority to make purchasing decisions on the spot or subsequent to the show. The participation of these attendees makes our trade shows “must-attend” events for our exhibitors, further reinforcing the leading positions of our trade shows within their respective industry verticals. Our attendees use our shows to fulfill procurement needs, source new suppliers, reconnect with existing suppliers, identify trends, learn about new products and network with industry peers, which we believe are factors that make our shows difficult to replace with non-face-to-face events. Our portfolio of trade shows is well-balanced and diversified across both industry sectors and customers.

In addition to organizing our trade shows, conferences and other events, we also operate content and content-marketing websites and related digital products, and produce publications, each of which is aligned with a specific event sector. We also offer business-to-business (“B2B”) commerce and digital merchandising solutions, serving the needs of manufacturers and retailers, through our Elastic Suite platform creating a digital year-round transactional platform for use by Emerald’s customers regardless of their location. In addition to their respective revenues, these products complement our live events by delivering year-round channels for customer acquisition and development.

Reportable Segments

As described in Note 15, Segment Information, to our condensed consolidated financial statements included herein, our business is organized into two reportable segments, consistent with the information provided to our Chief Executive Officer, who is considered the chief operating decision-maker ("CODM"). The CODM evaluates performance based on the results of seven executive brand portfolios, which represent our seven operating segments. Based on an evaluation of economic similarities and the nature of services and types of customers, five of these operating segments have been aggregated into two reportable segments, the Commerce reportable segment and the Design, Creative and Technology reportable segment. The remaining two operating segments do not meet the quantitative thresholds to be considered reportable segments and are included in the “All Other” category. In addition, we have a Corporate-Level Activities category consisting of finance, legal, information technology and administrative functions. Prior year disclosures below have been updated to reflect the new reportable segment structure described in Note 15.

The following discussion provides additional detailed disclosure for the two reportable segments, the All Other category and the Corporate-Level Activity category:

Commerce: This segment includes events and services covering merchandising, licensing, retail sourcing and marketing to enable professionals to make informed decisions and meet consumer demands.

Design, Creative and Technology: This segment includes events and services that support a wide variety of industries connecting businesses and professionals with products, operational strategies, and integration opportunities to drive new business and streamline processes and creative solutions.

All Other: This category consists of Emerald’s remaining operating segments, which provide diverse events, services and eCommerce software solutions but are not aggregated with the reportable segments. Each of the operating segments in the All Other category do not meet the criteria to be a separate reportable segment.

Corporate-Level Activity: This category consists of Emerald’s finance, legal, information technology and administrative functions.

Organic Growth Drivers

We are primarily focused on generating organic growth by understanding and leveraging the drivers for increased exhibitor and attendee participation at trade shows and providing year-round services that provide incremental value to those customers. Creating new opportunities for exhibitors to influence their market, engage and transact with significant buyers, generate incremental sales and expand their brand’s awareness in their industry builds further demand for exhibit space and strengthens the value proposition of a trade show, generally allowing us to modestly increase booth space pricing annually across our portfolio. At the same time, our trade shows provide attendees with the opportunity to enhance their industry connectivity, develop relationships with targeted suppliers and distributors, discover new products, learn about new industry developments, celebrate their industry’s achievements and, in certain cases, obtain continuing professional education credits, which we believe increases their propensity to return and, consequently, drives high recurring participation among our exhibitors. By investing in and promoting these tangible and return-on-investment linked outcomes, we believe we will be able to continue to enhance the value proposition for our exhibitors and attendees alike, thereby driving strong demand and premium pricing for exhibit space, sponsorship opportunities, attendee registration and eCommerce software subscriptions.

Acquisitions

We are also focused on growing our national footprint through the acquisition of high-quality events that are leaders in their specific industry verticals. Since the Onex Acquisition in June 2013, we have completed 22 strategic acquisitions, with purchase prices, excluding the $335.0 million acquisition of George Little Management (“GLM”), ranging from approximately $5.0 million to approximately $151.1 million, and annual revenues ranging from approximately $1.3 million to approximately $25.6 million. Historically, we have completed acquisitions at EBITDA purchase multiples that are typically in the mid-to-high single digits. Our acquisitions have historically been structured as asset deals that have resulted in the generation of long-lived tax assets, which in turn have reduced our purchase multiples when incorporating the value of the created tax assets. In the future, we intend to look for acquisitions with similarly attractive valuation multiples.

Trends and Other Factors Affecting Our Business

There are a number of existing and developing factors and trends which impact the performance of our business, and the comparability of our results from year to year and from quarter to quarter, including:

•

Severe Impact of COVID-19 — The unprecedented and rapid spread of COVID-19 and the related government restrictions and social distancing measures implemented in the United Stated and throughout the world significantly impacted Emerald’s business from mid-March 2020 through the first half of 2021. Late in the second quarter of 2021, management began to see the positive impacts of successful vaccination rollouts in many countries, with social distancing restrictions easing and live events resuming in the United States. In the second half of 2021, Emerald’s live events business experienced a meaningful restart with the successful execution of 56 in-person events, serving more than 129,000 attendees and 7,500 exhibiting companies. We entered 2022 planning to stage a full slate of events and successfully traded 31 in-person events during the first quarter of 2022, serving more than 141,000 attendees and 5,700 exhibiting companies. While we have been able to resume our full schedule of events in the first quarter of 2022, the ongoing effects of COVID-19 on our operations have had, and will continue to have, a significant negative impact on our financial results and liquidity, and such negative impact may continue beyond the containment of the COVID-19 pandemic.

•

Market Fragmentation — The trade show industry is highly fragmented, with the three largest companies, including Emerald, comprising only 10% of the wider U.S. market according to the AMR International Globex Report 2018. This has afforded us the opportunity to acquire other trade show businesses, a growth opportunity we expect to continue pursuing. These acquisitions may affect our growth trends, impacting the comparability of our financial results on a year-over-year basis.

•

Overall Economic Environment and Industry Sector Cyclicality — Our results of operations are correlated, in part, with the economic performance of the industry sectors that our trade shows serve, as well as the state of the overall economy.

•

Lag Time — As the majority of our exhibit space is sold during the twelve months prior to each trade show, there is often a timing difference between changes in the economic conditions of an industry sector vertical and their effect on our results of operations. This lag time can result in a counter-cyclical impact on our results of operations.

•

Variability in Quarterly Results — Our business is seasonal, with trade show revenues typically reaching their highest levels during the first and third quarters of each calendar year, and their lowest level during the fourth quarter, entirely due to the timing of our trade shows. This seasonality is typical within the trade show industry. However, as a result of outside circumstances such as the COVID-19 pandemic, future results may not align with this historical trend. Since event revenue is recognized when a particular event is held, we may also experience fluctuations in quarterly revenue and cash flows based on the movement of annual trade show dates from one quarter to another. Our presentation of Adjusted EBITDA and Organic revenue accounts for these quarterly movements and the timing of shows, where applicable and material.

How We Assess the Performance of Our Business

In assessing the performance of our business, we consider a variety of performance and financial measures. The key indicators of the financial condition and operating performance of our business are revenues, cost of revenues, selling, general and administrative expenses, interest expense, depreciation and amortization, income taxes, Adjusted EBITDA, and Free Cash Flow.

Revenues

We generate revenues primarily from selling trade show exhibit space to exhibitors on a per square foot basis. Other trade show revenue streams include sponsorship, fees for ancillary exhibition services and attendee registration fees. Additionally, we generate revenue through a digital commerce platform, conferences, digital media, online webinars and print publications that complement our trade shows. We also engage third-party sales agents to support our marketing efforts. More than 95% of our sales are made by our employees, with less than 5% made by third-party sales agents.

We define “Organic revenue growth” and “Organic revenue decline” as the growth or decline, respectively, in our revenue from one period to the next, adjusted for the revenue impact of: (i) acquisitions and dispositions, (ii) discontinued events, (iii) material show scheduling adjustments and (iv) event cancellations and postponements for which the Company has received, or expects to receive, claim proceeds from its event cancellation insurance policy. We disclose changes in Organic revenue because we believe it assists investors and analysts in comparing Emerald’s operating performance across reporting periods on a consistent basis by excluding items that we do not believe reflect a true comparison of the trends of the existing event calendar given changes in timing or strategy. Management and Emerald’s Board evaluate changes in Organic revenues to understand underlying revenue trends of its events. Organic revenue is not defined under accounting principles generally accepted in the United States of America (“GAAP”), and has limitations as an analytical tool, and you should not consider such measure either in isolation or as a substitute for analyzing our results as reported under GAAP. Some of these limitations include that Organic revenue reflects certain adjustments that we consider not to be indicative of our ongoing operating performance. Because not all companies use identical calculations, our presentation of Organic revenue may not be comparable to other similarly titled measures used by other companies.

Organic Revenue

The most directly comparable GAAP measure to Organic revenue is revenues. For a reconciliation of Organic revenues to revenues as reported, see Footnote 4 to the table under the heading “—Results of Operations— Three Months Ended March 31, 2022 compared to the Three Months Ended March 31, 2021”.

Cost of Revenues

•

Decorating Expenses. We work with general service contractors to both set up communal areas of our trade shows and provide services to our exhibitors, who primarily contract directly with the general service contractors. We will usually select a single general service contractor for an entire show, although it is possible to bid out packages of work within a single show on a piecemeal basis to different task-specific specialists.

•

Sponsorship Costs. We often enter into long-term sponsorship agreements with industry trade associations whereby the industry trade association endorses and markets the show to its members in exchange for a percentage of the show’s revenue.

•

Venue Costs. Venue costs represent rental costs for the venues, usually convention centers or hotels, where we host our trade shows. Given that convention centers are typically owned by local governments who have a vested interest in stimulating business activity in and attracting tourism to their cities, venue costs typically represent a small percentage of our total cost of revenues.

•

Costs of Other Marketing Services. Costs of other marketing services represent paper, printing, postage, contributor and other costs related to digital media and print publications.

•

Other Event-Related Expenses. Other event-related costs include temporary labor for services such as security, shuttle buses, speaker fees, food and beverage expenses and event cancellation insurance.

Selling, General and Administrative Expenses

•

Labor Costs. Labor costs represent the cost of employees who are involved in sales, marketing, planning and administrative activities. The actual on-site set-up of the events is contracted out to third-party vendors and is included in cost of revenues.

•

Miscellaneous Expenses. Miscellaneous expenses are comprised of a variety of other expenses, including advertising and marketing costs, promotion costs, credit card fees, travel expenses, printing costs, office supplies and office rental expense. Direct trade show costs are recorded in cost of revenues. All other costs are recorded in selling, general and administrative expenses.

Interest Expense

For the periods presented in this report, interest expense principally represents interest payments and certain other fees paid to lenders under our Amended and Restated Senior Secured Credit Facilities.

Depreciation and Amortization

We have historically grown our business through acquisitions and, in doing so, have acquired significant intangible assets, the value of some of which is amortized over time. These acquired intangible assets, unless determined to be indefinite-lived, are amortized over periods of two to 30 years from the date of each acquisition or date of change in estimated useful life under GAAP, or fifteen years for tax purposes. This amortization expense reduces our taxable income.

Income Taxes

Income tax expense consists of federal, state and local taxes based on income in the jurisdictions in which we operate.

We also record deferred tax charges or benefits primarily associated with our utilization or generation of net operating loss carryforwards and book-to-tax differences related to amortization of goodwill, amortization of intangible assets, depreciation, stock-based compensation charges and deferred financing costs.

Adjusted EBITDA

Adjusted EBITDA is a key measure of our performance. Adjusted EBITDA is defined as net income (loss) before interest expense, income tax expense, goodwill and intangible asset impairment charges, depreciation and amortization, stock-based compensation, deferred revenue adjustment, and other items that management believes are not part of our core operations. We present Adjusted EBITDA because we believe it assists investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.

Management and our Board of Directors use Adjusted EBITDA to assess our financial performance and believe it is helpful in highlighting trends because it excludes the results of decisions that are outside the control of management, while other performance metrics can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate and capital investments. We reference Adjusted EBITDA frequently in our decision-making because it provides supplemental information that facilitates internal comparisons to the historical operating performance of prior periods.

Adjusted EBITDA is not defined under GAAP, and has limitations as an analytical tool, and you should not consider such measure either in isolation or as a substitute for analyzing our results as reported under GAAP. Some of these limitations include that Adjusted EBITDA excludes certain normal recurring expenses and one-time cash adjustments that we consider not to be indicative of our ongoing operating performance. Because not all companies use identical calculations, our presentation of Adjusted EBITDA may not be comparable to other similarly titled measures used by other companies.

The most directly comparable GAAP measure to Adjusted EBITDA is net income (loss). For a reconciliation of Adjusted EBITDA to net income (loss), see Footnote 2 to the table under the heading “—Results of Operations— Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021.”

Cash Flow Model

We typically have favorable cash flow characteristics, as described below (see “—Cash Flows”), as a result of our high profit margins, low capital expenditures and generally negative working capital. Our working capital is negative as our current assets are generally lower than our current liabilities. Current assets primarily include accounts receivable and prepaid expenses, while current liabilities primarily include accounts payable, borrowings under our Amended and Restated Revolving Credit Facility (“Revolving Credit Facility”) and deferred revenues. Cash received prior to an event is recorded as deferred revenue on our balance sheet and recognized as revenue upon completion of each trade show. The implication of having negative working capital is that changes in working capital represent a source of cash as our business grows. As a result of COVID-19, the accounts receivable and deferred revenue balances related to cancelled events have been reclassified to Cancelled event liabilities in the condensed consolidated balance sheets, as the net amount represents balances which we expect will be refunded to our customers. We believe that our business interruption insurance proceeds will largely mitigate this liability.

The primary driver for our negative working capital is the sales cycle for a trade show, which typically begins during the twelve months prior to a show. In the interim period between the current show and the following show, we continue to sell to new and past exhibitors and collect payments on contracted exhibit space. Most of our exhibitors pay in full in advance of each trade show, whereas the bulk of expenses are paid close to or after the show. Cash deposits start to be received as early as twelve months prior to a show taking place and the balance of booth space fees are typically received in cash one month prior to a show taking place. This highly efficient cash flow model, where cash is received in advance of expenses to be paid, creates a working capital benefit.

Free Cash Flow

Free Cash Flow is a supplemental non-GAAP financial measure of liquidity and is not based on any standardized methodology prescribed by GAAP. Free Cash Flow should not be considered in isolation or as an alternative to net cash provided by operating activities or other measures determined in accordance with GAAP. Also, Free Cash Flow is not necessarily comparable to similarly titled measures used by other companies.

The most directly comparable GAAP measure to Free Cash Flow is net cash provided by operating activities. For a reconciliation of Free Cash Flow to net cash provided by operating activities, see Footnote 3 to the table under the heading “—Results of Operations— Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021.”

Results of Operations

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

The tables in this section summarize key components of our results of operations for the periods indicated.

	Three Months Ended March 31,
	2022			2021			Variance $			Variance %
	(unaudited) (dollars in millions)
Statement of income (loss) and comprehensive income (loss) data:
Revenues	$	98.5		$	12.9		$	85.6			663.6	%
Other income		28.8			14.1			14.7			104.3	%
Cost of revenues		34.2			4.0			30.2			755.0	%
Selling, general and administrative expense⁽¹⁾		46.6			30.8			15.8			51.3	%
Depreciation and amortization expense		14.3			11.8			2.5			21.2	%
Goodwill impairment charge		6.3			—			6.3		NM
Intangible asset impairment charge		1.6			—			1.6		NM
Operating income (loss)		24.3			(19.6	)		43.9		NM
Interest expense, net		3.9			4.0			(0.1	)		(2.5	%)
Income (loss) before income taxes		20.4			(23.6	)		44.0		NM
Benefit from income taxes		(2.2	)		(8.3	)		6.1			(73.5	%)
Net income (loss) and comprehensive income (loss)	$	22.6		$	(15.3	)	$	37.9		NM

Other financial data (unaudited):
Adjusted EBITDA⁽²⁾	$	54.4		$	(2.5	)	$	56.9		NM
Free Cash Flow ⁽³⁾	$	29.8		$	0.6		$	29.2		NM
Organic Revenue⁽⁴⁾	$	21.5		$	13.8		$	7.7			55.8	%

(1)

Selling, general and administrative expense for the three months ended March 31, 2022 and 2021 included $5.7 million and $1.2 million, respectively, in acquisition-related transaction, transition and integration costs, including legal and advisory fees. Also included in selling, general and administrative expense for the three months ended March 31, 2022 and 2021 were stock-based compensation expenses of $2.1 million and $3.0 million, respectively.

(2)

In addition to net income (loss) presented in accordance with GAAP, we use Adjusted EBITDA to measure our financial performance. Adjusted EBITDA is a supplemental non-GAAP financial measure of operating performance and is not based on any standardized methodology prescribed by GAAP. Adjusted EBITDA should not be considered in isolation or as alternatives to net income (loss), cash flows from operating activities or other measures determined in accordance with GAAP. Also, Adjusted EBITDA is not necessarily comparable to similarly titled measures presented by other companies.

We define Adjusted EBITDA as net income (loss) before (i) interest expense, (ii) income tax (benefit) expense, (iii) goodwill impairment charges, (iv) intangible asset impairment charges, (v) depreciation and amortization, (vi) stock-based compensation, (vii) deferred revenue adjustment and (viii) other items that management believes are not part of our core operations. We present Adjusted EBITDA because we believe it assists investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Management and our Board of Directors use Adjusted EBITDA to assess our financial performance and believe they are helpful in highlighting trends because it excludes the results of decisions that are outside the control of management, while other performance metrics can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate and capital investments. We reference Adjusted EBITDA frequently in our decision-making because it provides supplemental information that facilitates internal comparisons to the historical operating performance of prior periods. Adjusted EBITDA is not defined under GAAP and has limitations as an analytical tool, and you should not consider such measure either in isolation or as a substitute for analyzing our results as reported under GAAP. Some of these limitations include that Adjusted EBITDA excludes certain normal recurring expenses and one-time cash adjustments

that we consider not to be indicative of our ongoing operative performance. Because not all companies use identical calculations, our presentation of Adjusted EBITDA may not be comparable to other similarly titled measures used by other companies.

	Three Months Ended March 31,
	2022			2021
	(unaudited)
	(dollars in millions)
Net income (loss)	$	22.6		$	(15.3	)
Add (deduct):
Interest expense		3.9			4.0
Benefit from income taxes		(2.2	)		(8.3	)
Goodwill impairment charge^(a)		6.3			—
Intangible asset impairment charge^(b)		1.6			—
Depreciation and amortization expense		14.3			11.8
Stock-based compensation expense^(c)		2.1			3.0
Deferred revenue adjustment^(d)		0.2			0.9
Other items^(e)		5.6			1.2
Scheduling adjustments		—			0.2
Adjusted EBITDA		54.4			(2.5	)

(a)	For the three months ended March 31, 2022 and 2021, goodwill impairment charge represents non-cash charges of $6.3 million and zero, respectively, for goodwill in connection with the Company’s interim testing of goodwill for impairment.

(b)	Intangible asset impairment charges for the three months ended March 31, 2022 and 2021 represent non-cash impairment charges of $1.6 million and zero, respectively, for certain definite-lived intangible assets in connection with the Company’s interim testing of intangibles for impairment.

(c)	Represents costs related to stock-based compensation associated with certain employees’ participation in the 2013 Stock Option Plan (“2013 Plan”), the 2017 Omnibus Equity Plan (the “2017 Plan”) and the 2019 Employee Stock Purchase Plan (the “ESPP”).

(d)

Represents deferred revenue acquired in the PlumRiver Technologies (“PlumRiver”) acquisition that was marked down to the acquisition date fair value due to purchase accounting rules. If the business had been continuously owned by us throughout the quarter periods presented, the fair value adjustments of $0.2 million and $0.9 million for PlumRiver for the three months ended March 31, 2022 and 2021, respectively, would not have been required and the revenues for the three months ended March 31, 2022 and 2021, would have been higher by $0.2 million and $0.9 million, respectively.

(e)

Other items for the three months ended March 31, 2022 included: (i) $4.3 million in expense related to the remeasurement of contingent consideration, (ii) $0.4 million in non-recurring legal, audit and consulting fees, (iii) $0.8 million in transition costs in connection with previous acquisitions and (iv) $0.1 million in transition expenses. Other items for the three months ended March 31, 2021 included: (i) $0.2 million in transaction costs in connection with the PlumRiver LLC and EDspaces acquisition transactions; (ii) $0.6 million in non-recurring legal, audit and consulting fees and (iii) $0.4 million in expense related to the remeasurement of contingent consideration.

(3)

In addition to net cash provided by operating activities presented in accordance with GAAP, we present Free Cash Flow because we believe it is a useful indicator of liquidity that provides information to management and investors about the amount of cash generated from our core operations that, after capital expenditures, can be used for the repayment of indebtedness and strategic initiatives, including investing in our business, payment of dividends, making strategic acquisitions and strengthening our balance sheet. Free Cash Flow is a supplemental non-GAAP financial measure of liquidity and is not based on any standardized methodology prescribed by GAAP. Free Cash Flow should not be considered in isolation or as an alternative to cash flows from operating activities or other measures determined in accordance with GAAP. Also, Free Cash Flow is not necessarily comparable to similarly titled measures used by other companies.

	Three Months Ended March 31,
	2022		2021
	(unaudited)
	(dollars in millions)
Net Cash Provided by Operating Activities	$	33.0	$	1.6
Less:
Capital expenditures		3.2		1.0
Free Cash Flow	$	29.8	$	0.6

(4)

In addition to revenues presented in accordance with GAAP, we present Organic revenue because we believe it assists investors and analysts in comparing Emerald’s operating performance across reporting periods on a consistent basis by excluding items that we do not believe reflect a true comparison of the trends of the existing event calendar given changes in timing or strategy. Management and Emerald’s Board evaluate changes in Organic revenues to understand underlying revenue trends of its events. Our presentation of Organic Revenue adjusts revenue for (i) acquisition revenue, (ii) discontinued events, (iii) COVID-19 cancellations, (iv) COVID-19 postponements and (v) scheduling adjustments.

Organic revenue is a supplemental non-GAAP financial measure of performance and is not based on any standardized methodology prescribed by GAAP. Organic revenue should not be considered in isolation or as an alternative to revenues or other measures determined in accordance with GAAP. Organic revenue is not defined under GAAP, and has limitations as an analytical tool, and you should not consider such measure either in isolation or as a substitute for analyzing our results as reported under GAAP. Some of these limitations include that Organic revenue reflects certain adjustments that we consider not to be indicative of our ongoing operating performance. Because not all companies use identical calculations, our presentation of Organic revenue may not be comparable to other similarly titled measures used by other companies.

	Three Months Ended March 31,
	2022			2021		Variance $			Variance %
	(unaudited) (dollars in millions)
Revenues	$	98.5		$	12.9	$	85.6			663.6	%
Add (deduct):
Acquisition revenues		(2.0	)		—		(2.0	)
COVID-19 prior year cancellations^(a)		(62.7	)		—		(62.7	)
COVID-19 postponements^(b)		(12.3	)		—		(12.3	)
Scheduling adjustments		—			0.9		(0.9	)
Organic revenues	$	21.5		$	13.8	$	7.7			55.8	%

(a)	Represents the increase in 2022 revenues as a result of events that staged in the current year and were cancelled due to COVID-19 in the prior year.

(b)	Represents the increase in revenues from events that staged in the first quarter of 2022 but were postponed to the second half of 2021 due to COVID-19.

Revenues

Revenues of $98.5 million for the three months ended March 31, 2022 increased $85.6 million, from $12.9 million for the comparable period in 2021, primarily due to a more normal schedule of live events trading during the quarter. See “Commerce Segment – Revenues,” “Design, Creative and Technology Segment – Revenues,” and “All Other Category – Revenues” below for a discussion of the factors contributing to the changes in total revenues.

Other Income

Other income of $28.8 million during the three months ended March 31, 2022 increased $14.7 million, from $14.1 million in the comparable period in 2021. Other income was related to event cancellation insurance claims proceeds, all of which were received during the three months ended March 31, 2022. See “Commerce Segment – Other Income,” “Design, Creative and Technology Segment – Other Income,” and “All Other Category – Other Income” below for a discussion of other income by segment.

Cost of Revenues

Cost of revenues of $34.2 million for the three months ended March 31, 2022 increased $30.2 million, from $4.0 million for the comparable period in 2021. See “Commerce Segment – Cost of Revenues,” “Design, Creative and Technology Segment – Cost of Revenues” and “All Other Category – Cost of Revenues” below for a discussion of the factors contributing to the changes in total cost of revenues.

Selling, General and Administrative Expense

Total selling, general and administrative expense consists primarily of compensation and employee-related costs, sales commissions and incentive plans, stock-based compensation expense, marketing expenses, information technology expenses, travel expenses, facilities costs, consulting fees and public reporting costs. Selling, general and administrative expenses of $46.6 million for the three months ended March 31, 2022 increased $15.8 million, or 51.3%, from $30.8 million for the comparable period in 2021. See “Commerce Segment – Selling, General and Administrative Expenses”, “Design, Creative and Technology Segment – Selling, General and Administrative Expenses”, “All Other category – Selling, General and Administrative Expense” and “Corporate - Selling, General and Administrative Expense” below for a discussion of the factors contributing to the changes in total selling, general and administrative expense.

Depreciation and Amortization Expense

Depreciation and amortization expense of $14.3 million for the three months ended March 31, 2022, increased $2.5 million, or 21.2% from $11.8 million for the comparable period in 2021. See “Commerce Segment – Depreciation and Amortization Expense,” “Design, Creative and Technology Segment – Depreciation and Amortization Expense,” “All Other Category – Depreciation and Amortization Expense” and “Corporate – Depreciation and Amortization Expense” below for a discussion of the factors contributing to the changes in total depreciation and amortization expense.

Goodwill Impairment

In the first quarter of 2022, in connection with the change in operating segments that resulted in a change in reporting units we performed an interim goodwill impairment assessment. As a result of this assessment, the Company recorded a $6.3 million non-cash goodwill impairment charge. The impairment consisted of the write-down of goodwill, equal to the excess carrying value of goodwill above fair value, of all of the reporting units included in our Design, Creative and Technology reportable segment and the All Other category. See “Design, Creative and Technology Segment – Goodwill Impairment” and “All Other Category—Goodwill Impairments” below for further discussion of goodwill impairment. No goodwill impairment charges were recorded during the first quarter of 2021.

Intangible Asset Impairment

Due to the change in operating segments described above, management performed impairment assessments of our indefinite-lived intangible assets during the first quarter of 2022. These assessments resulted in the recognition of a non-cash impairment charge of $1.6 million, which included non-cash impairment charges for certain of our indefinite-lived trade name intangible assets. See “Design, Creative and Technology Segment – Intangible Asset Impairments” below for further discussion of total intangible asset impairments. No intangible asset impairment charges were recorded during the first quarter of 2021.

Segment Results for the Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2022

Commerce

The following represents the change in revenue, expenses and operating (loss) profit in the Commerce reportable segment for the three months ended March 31, 2022 and 2021:

	Three Months Ended March 31,
	2022		2021			Variance $			Variance %
	(unaudited) (dollars in millions)
Revenues	$	56.7	$	5.7		$	51.0			894.7	%
Other income		1.1		6.7			(5.6	)		(83.6	%)
Cost of revenues		15.7		1.8			13.9			772.2	%
Selling, general and administrative expense		10.3		5.4			4.9			90.7	%
Depreciation and amortization expense		8.0		6.0			2.0			33.3	%
Operating income (loss)	$	23.8	$	(0.8	)	$	24.6		NM

Revenues

During the three months ended March 31, 2022, revenues for the Commerce reportable segment increased $51.0 million, or 894.7%, to $56.7 million from $5.7 million for the comparable period in the prior year. The primary driver of the increase was $44.8 million of revenue generated by events that staged in the first quarter of 2022 but were either cancelled in the prior year or postponed to the second half of 2021 due to COVID-19. Organic revenues increased by $5.5 million, or 139.2%, to $9.5 million from $4.0 million for the comparable period in the prior year. This growth was driven by a $4.9 million increase in trade show revenue from events that staged in both periods and a new event that launched in the first quarter of 2022. The remaining increase in revenues was attributable to the acquisition of MJBiz in December 2021.

Other Income

Other income of $1.1 million was recorded for the Commerce reportable segment related to event cancellation insurance claims proceeds for the three months ended March 31, 2022. All of the $1.1 million of other income for the Commerce segment was received during the three months ended March 31, 2022. Other income of $6.7 million was recorded for the Commerce reportable segment related to event cancellation insurance proceeds during the quarter ended March 31, 2021.

Cost of Revenues

During the three months ended March 31, 2022, cost of revenues for the Commerce reportable segment increased $13.9 million, or 772.2%, to $15.7 million from $1.8 million for the comparable period in the prior year. The primary driver of the increase was $12.2 million of costs for events that staged in the first quarter of 2022 but were either cancelled in the prior year period or postponed to the second half of 2021 due to COVID-19. The remaining increase was primarily driven by costs related to the new event that launched in the first quarter of 2022.

Selling, General and Administrative Expense

During the three months ended March 31, 2022, selling, general and administrative expense for the Commerce reportable segment increased $4.9 million, or 90.7%, to $10.3 million, from $5.4 million for the comparable period in 2021. The primary driver of the increase was higher selling and promotional expenses attributable to the return to a more regular event schedule and expenses related to the acquisition of MJBiz in December 2021.

Depreciation and Amortization Expense

During the three months ended March 31, 2022, depreciation and amortization expense for the Commerce reportable segment increased $2.0 million, or 33.3%, to $8.0 million from $6.0 million for the comparable period in 2021. The increase was driven by incremental amortization attributable to the December 2021 acquisition of MJBiz.

Design, Creative and Technology

The following represents the change in revenue, expenses and operating (loss) profit in the Design, Creative and Technology reportable segment for the three months ended March 31, 2022 and 2021:

	Three Months Ended March 31,
	2022		2021			Variance $			Variance %
	(unaudited) (dollars in millions)
Revenues	$	37.5	$	4.9		$	32.6			665.3	%
Other income		27.0		6.9			20.1			291.3	%
Cost of revenues		16.5		2.0			14.5			725.0	%
Selling, general and administrative expense		10.3		7.5			2.8			37.3	%
Depreciation and amortization expense		4.5		4.6			(0.1	)		(2.2	%)
Goodwill impairment charge		5.8		—			5.8		NM
Intangible asset impairment charge		1.6		—			1.6		NM
Operating income (loss)	$	25.8	$	(2.3	)	$	28.1		NM

Revenues

During the three months ended March 31, 2022 revenues for the Design, Creative and Technology reportable segment increased $32.6 million, or 665.3%, to $37.5 million, from $4.9 million for the comparable period in 2021. The primary driver of the increase was $30.0 million of revenue generated by events that staged in the first quarter of 2022 but were either cancelled in the prior year period or postponed to the second half of 2021 due to COVID-19. Organic revenues increased by $1.5 million, or 34.7%, to $5.6 million from $4.2 million for the comparable period in the prior year. The organic revenue increase was primarily attributable to higher print and digital advertising revenues. Revenues during the quarter were also impacted by two small events that staged later in the prior year.

Other Income

Other income of $27.0 million was recorded for the Design, Creative and Technology reportable segment related to event cancellation insurance claims proceeds for the three months ended March 31, 2022. All of the $27.0 million of other income for the Design, Creative and Technology reportable segment was received during the three months ended March 31, 2022. Other income of $6.9 million was recorded for the Design, Creative and Technology reportable segment related to event cancellation insurance proceeds during the quarter ended March 31, 2021.

Cost of Revenues

During the three months ended March 31, 2022, cost of revenues for the Design, Creative and Technology reportable segment increased $14.5 million, or 725.0%, to $16.5 million from $2.0 million for the comparable period in 2021. This was due to events that staged in the first quarter of 2022 but were either cancelled in the prior year or postponed to the second half of 2021 due to COVID-19.

Selling, General and Administrative Expense

During the three months ended March 31, 2022, selling, general and administrative expense for the Design, Creative and Technology reportable segment increased $2.8 million, or 37.3%, to $10.3 million from $7.5 million for the comparable period in 2021. The primary driver of the increase was higher selling, promotional and travel expenses attributable to the return to a more regular event schedule.

Depreciation and Amortization Expense

During the three months ended March 31, 2022, depreciation and amortization expense for the Design, Creative and Technology reportable segment decreased $0.1 million, or 2.2%, to $4.5 million from $4.6 million for the comparable period in 2021.

Goodwill Impairment Charge

Due to the change in operating segments and reporting units described in Note 6 above, management was required to perform an interim goodwill impairment assessment of its old and new reporting units during the first quarter of 2022. As a result of this assessment, a $5.8 million non-cash goodwill impairment charge was recorded in connection with reporting units under the Design, Creative and Technology reportable segment. No goodwill impairment charges were recorded in the Design, Creative and Technology reportable segment during the three months ended March 31, 2021.

Intangible Asset Impairment Charge

In connection with the change in operating segments described above, management performed impairment assessments of indefinite-lived intangible assets during the first quarter of 2022, and as a result, recognized a non-cash impairment charge related to certain indefinite-lived intangible assets under the Design, Creative and Technology segment of $1.6 million. No intangible asset impairment charges were recorded in the Design, Creative and Technology reportable segment during the three months ended March 31, 2021.

All Other Category

The following represents the change in revenue, expenses and operating loss in the All Other category for the three months ended March 31, 2022 and 2021:

	Three Months Ended March 31,
	2022			2021			Variance $			Variance %
	(unaudited) (dollars in millions)
Revenues	$	4.3		$	2.3		$	2.0			87.0	%
Other income		0.7			0.5			0.2			40.0	%
Cost of revenues		2.0			0.2			1.8			900.0	%
Selling, general and administrative expense		5.5			2.7			2.8			103.7	%
Depreciation and amortization expense		0.8			0.7			0.1			14.3	%
Goodwill impairment charge		0.5			—			0.5		NM
Operating loss		(3.8	)		(0.8	)		(3.0	)	NM

Revenues

During the three months ended March 31, 2022 revenues for the All Other category increased $2.0 million, or 87.0%, to $4.3 million from $2.3 million for the comparable period in 2021. The primary drivers of the increase were $1.2 million of additional software subscription revenues as well as $0.9 million in revenue generated by events that staged in the first quarter of 2022 but were cancelled due to COVID-19 in the first quarter of 2021.

Other Income

Other income of $0.7 million was recorded for the All Other category related to event cancellation insurance claims proceeds, which were paid by the insurance provider during the quarter ended March 31, 2022. Other income of $0.5 million was recorded for the All Other category related to event cancellation insurance proceeds during the quarter ended March 31, 2021.

Cost of Revenues

During the three months ended March 31, 2022, cost of revenues for the All Other category increased $1.8 million, or 900.0%, to $2.0 million from $0.2 million for the comparable period in 2021. The primary drivers of the increase were $1.0 million for events that staged in the first quarter of 2022 but were cancelled due to COVID-19 in the first quarter of 2021 and $0.7 million related to the Company’s software subscription business.

Selling, General and Administrative Expense

During the three months ended March 31, 2022, selling, general and administrative expense for the All Other category increased $2.8 million, or 103.7%, to $5.5 million from $2.7 million for the comparable period in 2021. The increase was primarily related to growth in the Company’s software subscription business as well as the continued ramp of the Xcelerator division.

Depreciation and Amortization Expense

During the three months ended March 31, 2022 depreciation and amortization expense for the All Other category increased $0.1 million, or 14.3%, to $0.8 million from $0.7 million for the comparable period in 2021.

Goodwill Impairment Charge

Due to the change in operating segments and reporting units described in Note 6 above, management was required to perform an interim goodwill impairment assessment of its old and new reporting units during the first quarter of 2022. As a result of this assessment, a $0.5 million non-cash goodwill impairment charge was recorded in connection with trade show brands in reporting units under the All Other category. No goodwill impairment charges were recorded in the All Other category during the three months ended March 31, 2021.

Corporate Category

The following represents the change in operating expenses in the Corporate category for the three months ended March 31, 2022 and 2021:

	Three Months Ended March 31,
	2022		2021		Variance $		Variance %
	(unaudited) (dollars in millions)
Selling, general and administrative expense		20.5		15.2		5.3		34.9	%
Depreciation and amortization expense		1.0		0.5		0.5		100.0	%
Total operating expenses	$	21.5	$	15.7	$	5.8		36.9	%

Selling, General and Administrative Expense

During the three months ended March 31, 2022 selling, general and administrative expense for the Corporate category increased $5.3 million, or 34.9%, to $20.5 million from $15.2 million for the comparable period in 2021. The increase was primarily attributable to contingent consideration adjustments recorded during the three months ended March 31, 2022.

Depreciation and Amortization Expense

During the three months ended March 31, 2022 depreciation and amortization expense for the Corporate category increased $0.5 million, or 100%, to $1.0 million from $0.5 million for the comparable period in 2021.

Interest Expense

Interest expense of $3.9 million for the three months ended March 31, 2022 decreased $0.1 million, or 2.5%, from $4.0 million for the comparable period in 2021.

Benefit from Income Taxes

For the three months ended March 31, 2022, the Company recorded a benefit from income taxes of $2.2 million which resulted in an effective tax rate of negative 10.8% for the three months ended March 31, 2022. The Company recorded a benefit from income taxes of $8.3 million and an effective tax rate of 35.2% for the three months ended March 31, 2021. The decrease in the effective tax rate for the three months ended March 31, 2022 is attributable to differences in pre-tax book income (loss) positions in comparison to full year projected results and changes in permanent book-to-tax differences (e.g., nondeductible officer compensation, goodwill impairment, and changes in valuation allowance).

Net Income (Loss)

Net income of $22.6 million for the three months ended March 31, 2022 represented a $37.9 million improvement from net loss of $15.3 million for the comparable period in 2021. The key drivers of the improvement was the increase in revenue and other income related to event cancellation insurance proceeds, partly offset by higher cost of revenues, selling, general and administrative expense, non-cash goodwill impairment charge, intangible asset impairment change and provision for income taxes during the three months ended March 31, 2022.

Adjusted EBITDA

Adjusted EBITDA of $54.4 million for the three months ended March 31, 2022 increased by $56.9 million, from negative $2.5 million for the comparable period in 2021. The increase in Adjusted EBITDA was primarily attributable to a $37.9 million increase in net income and increases in the add-backs for other items primarily due to higher adjustments to the fair value of contingent consideration, goodwill impairment charge, intangible asset impairment charge and depreciation and amortization expense during the period. These were partly offset by lower add-backs for stock-based compensation, deferred revenue adjustment and benefit from income taxes.

Liquidity and Capital Resources

The unprecedented and rapid spread of COVID-19 and the related government restrictions and social distancing measures implemented in the United Stated and throughout the world significantly impacted Emerald’s business from mid-March 2020 through the first half of 2021. Late in the second quarter of 2021, management began to see the positive impacts of successful vaccination rollouts in many countries, with social distancing restrictions easing and live events resuming in the United States. In the second half of 2021, Emerald’s live events business experienced a meaningful restart with the successful execution of 56 in-person events, serving more than 129,000 attendees and 7,500 exhibiting companies. We entered 2022 planning to stage a full slate of events and successfully traded 31 in-person events during the first quarter, serving more than 141,000 attendees and 5,700 exhibiting companies. While we have been able to resume our full schedule of events in the first quarter of 2022, the ongoing effects of COVID-19 on our operations have had, and will continue to have, a significant negative impact on our financial results and liquidity, and such negative impact may continue beyond the containment of the COVID-19 pandemic.

The assumptions used to estimate our liquidity are subject to greater uncertainty because we had never previously cancelled or postponed all upcoming events for a period of over a year due to a pandemic. Management cannot estimate with certainty whether event exhibitors and attendees will attend our events in numbers similar to pre-pandemic editions now that they are fully resumed. Therefore, current estimates of revenues and the associated impact on liquidity could differ significantly in the future.

We continue to pursue full recovery for event cancellation insurance claims relating to events originally scheduled to stage in 2020 and 2021. To date, we have submitted claims related to impacted or cancelled events previously scheduled to take place in 2020 and 2021 of $166.8 million and $180.7 million, respectively. Other income recognized to date, related to insurance proceeds received or confirmed on the claims related to events previously scheduled to take place in 2020 and 2021, totaled $142.2 million and $71.0 million, respectively. During the three months ended March 31, 2022 and 2021, we recorded Other Income of $28.8 million and $14.1 million, respectively, related to event cancellation insurance claim proceeds deemed to be realizable by management. Of the $28.8 million in Other Income recognized in during the three months ended March 31, 2022, all $28.8 million was received during the period. Outstanding claims are subject to review and adjustment and there is no guarantee or assurance as to the amount or timing of future recoveries from Emerald’s event cancellation insurance policy.

Emerald’s renewed event cancellation insurance policies for the year 2022 do not cover losses due to event cancellations caused by the outbreak of communicable diseases, including COVID-19. The aggregate limit for our renewed 2022 primary event cancellation insurance policy is $100.0 million. We also obtained a similar separate event cancellation insurance policy for the Surf Expo Winter 2022 and Surf Expo Summer 2022 shows, with a coverage limit of $8.4 million and $6.5 million, for each respective event.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which provides for the ability of employers to delay payment of employer payroll taxes during 2020 after the date of enactment. The Company deferred the payment of more than $1.9 million of employer payroll taxes otherwise due in 2020, with 50% paid back in December, 2021 and the remaining 50% due by December 31, 2022.

New Share Repurchase Plan

On October 5, 2020, our Board authorized and approved a new $20.0 million share repurchase program (the “October 2020 share repurchase program”). Share repurchases may be made from time to time through and including December 31, 2022, subject to early termination or extension by the Board, through open market purchases, block transactions, privately negotiated purchases or otherwise. We settled the repurchase of 255,584 shares and 202,208 shares of our common stock for $0.9 million and $1.2 million during the three months ended March 31, 2022 and March 31, 2021, respectively. There was $17.4 million remaining available for share repurchases under the October 2020 Share Repurchase Program as of March 31, 2022.

On October 29, 2021, our Board approved extension and expansion of the October 2020 share repurchase program, which allows for the repurchase of $20.0 million of our Common Stock through December 31, 2022, subject to early termination or extension by the Board. The share repurchase program may be suspended or discontinued at any time without notice.

Suspension of Dividend Policy

On March 20, 2020, due to the negative impact of COVID-19 on our business, the Board temporarily suspended the Company’s regular quarterly cash dividend on its common stock. The payment of dividends in future quarters is subject to the discretion of our Board and depending upon our results of operations, cash requirements, financial condition, contractual restrictions, restrictions imposed by applicable laws and other factors that our Board may deem relevant.

Our business is conducted through our subsidiaries. Dividends, distributions and other payments from, and cash generated by, our subsidiaries will be our principal sources of cash to repay indebtedness, fund operations and pay dividends. Accordingly, our ability to pay dividends to our stockholders is dependent on the earnings and distributions of funds from our subsidiaries. In addition, the covenants in the agreements governing our existing indebtedness, including the Amended and Restated Senior Secured Credit Facilities, significantly restrict the ability of our subsidiaries to pay dividends or otherwise transfer assets to us. We cannot assure you that we will resume paying dividends on our common stock in the future, and our indebtedness could limit our ability to pay dividends on our common stock.

Cash Flows

The following table summarizes the changes to our cash flows for the periods presented:

	Three Months Ended March 31,
	2022			2021
	(unaudited) (dollars in millions)
Statement of Cash Flows Data
Net cash provided by operating activities	$	33.0		$	1.6
Net cash used in investing activities	$	(3.2	)	$	(1.0	)
Net cash used in financing activities	$	(6.6	)	$	(2.3	)

Operating Activities

Operating activities consist primarily of net income (loss) adjusted for non-cash items that include depreciation and amortization, deferred income taxes, amortization of deferred financing fees and debt discount, stock-based compensation, provision for credit losses and goodwill and intangible asset impairment charges, plus the effect of changes during the period in our working capital.

Net cash provided by operating activities for the three months ended March 31, 2022 was $33.0 million, as compared to net cash provided by operating activities of $1.6 million for the three months ended March 31, 2021. Cash provided by operating activities primarily reflects the increase in our net income of $37.9 million and increases in non-cash items of $4.0 million for remeasurement of contingent consideration, $6.3 million for goodwill impairment, $2.5 million for depreciation and amortization and $1.6 million for intangible asset impairment. These were partly offset by an increase in cash used in working capital of $19.7 million. Net income (loss) plus non-cash items provided operating cash flows of $2.3 million and $1.2 million for the three months ended March 31, 2022 and 2021, respectively. Cash provided by operating activities reflects the usage of $19.3 million and generation of $0.4 million for working capital in the three months ended March 31, 2022 and 2021, respectively.

Investing Activities

Investing activities generally consist of business acquisitions and purchases of other productive assets, investments in information technology and capital expenditures to furnish or upgrade our offices.

Net cash used in investing activities for the three months ended March 31, 2022 increased $2.2 million to $3.2 million from $1.0 million in the comparable period in the prior year. The increase was primarily attributable to investments in information technology. No acquisitions were completed during the three months ended March 31, 2022.

Financing Activities

Financing activities primarily consist of proceeds from issuance of preferred stock, borrowing and repayments on our debt to fund business acquisitions and our operations, payments of dividends prior to the suspension of the dividend policy and proceeds from the issuance of common stock associated with stock option exercises.

Net cash used in financing activities for the three months ended March 31, 2022 increased $4.3 million to $6.6 million, compared to $2.3 million for the three months ended March 31, 2021. The increase was due to payments of contingent consideration for acquisition of businesses of $4.3 million during the three months ended March 31, 2022.

Free Cash Flow

Free Cash Flow for the three months ended March 31, 2022 increased $29.2 million, to $29.8 million from $0.6 million for the comparable period in the prior year.

Free Cash Flow is a financial measure that is not calculated in accordance with GAAP. For a discussion of our presentation of Free Cash Flow, see Footnote 3 to the table under the heading “—Results of Operations—Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021.”

Contractual Obligations and Commercial Commitments

There have been no material changes to the contractual obligations as disclosed in the Company’s Annual Report on Form 10-K, filed with the SEC on February 22, 2022, which is accessible on the SEC’s website at www.sec.gov, other than those made in the ordinary course of business.

Goodwill and Intangible Assets

Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the assets acquired and liabilities assumed resulting from acquisitions. Goodwill and indefinite-lived intangible assets are not amortized but instead tested for impairment at least annually or more frequently should an event or circumstances indicate that a reduction in fair value may have occurred. We test for impairment of goodwill and indefinite-lived intangible assets on October 31 of each year, or more frequently if events and circumstances warrant. During the three months ended March 31, 2022, we had a change in operating segments which resulted in a change in reporting units. We reassigned goodwill to the updated reporting units using a relative fair value approach. In relation to this change, we performed a quantitative assessment of the fair value of our goodwill as of January 31, 2022 using an income approach with assumptions that are considered level 3 inputs and concluded that the carrying value of two reporting units exceeded their respective fair values, resulting in a goodwill impairment of $6.3 million. Long-lived assets other than goodwill held and used by the Company, including property and equipment and long-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. During the three months ended March 31, 2022, in conjunction with the change in reporting units, management concluded that the carrying value of one of its reporting units exceeded its fair value. As a result, management determined this

circumstance to be a triggering event for the asset groups associated with this reporting unit, and after performing an interim impairment assessment, we recognized an impairment charge of $1.6 million related to its indefinite-lived intangible assets during the three months ended March 31, 2022. There can be no assurance that we will not be required to recognize additional impairment charges in future periods, including in connection with the impairment test on January 31, or as a result of future impairment tests that may be required based on specific events and circumstances. Such events and circumstances may include the decision to cancel or postpone future live events, a significant change in our business climate, the ongoing impacts associated with the COVID-19 pandemic, economic and industry trends, legal factors, negative operating performance indicators, significant competition or changes in strategy. If the trading price of our common stock decreases significantly we may be required to recognize a non-cash charge relating to impairment of our goodwill and intangible assets, and any such charge may be material in the period in which it is recognized. A prolonged or significant decline in our stock price or market capitalization could be an indicator of goodwill and intangible asset impairment and constitute a triggering event that would require an interim assessment for potential goodwill and intangible asset impairment.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires the appropriate application of certain accounting policies, some of which require us to make estimates and assumptions about future events and their impact on amounts reported in our consolidated financial statements. Since future events and their impact cannot be determined with absolute certainty, the actual results will inevitably differ from our estimates.

We believe the application of our accounting policies, and the estimates inherently required therein, are reasonable. Our accounting policies and estimates are reevaluated on an ongoing basis and adjustments are made when facts and circumstances dictate a change. We base our estimates and judgments on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions. We considered the impacts of the COVID-19 pandemic on our significant estimates and judgments used in applying our accounting policies for the period ended March 31, 2022. However, in light of the pandemic, there is a high degree of uncertainty in applying these judgments and depending on the duration and severity of the pandemic, changes to our estimates and judgments could result in meaningful impacts to our financial statements in future periods.

The policies and estimates discussed below involve the selection or application of alternative accounting policies that are material to our consolidated financial statements. With respect to critical accounting policies, even a relatively minor variance between actual and expected experience can potentially have a materially favorable or unfavorable impact on subsequent results of operations.

Our accounting policies are more fully described in Note 1, Description of Business, Basis of Presentation and Significant Accounting Policies in the notes to our audited consolidated financial statements included in the Annual Report. Management has discussed the selection of these critical accounting policies and estimates with members of our Board of Directors. Given the current impacts to our business, there is a higher degree of uncertainty as to the long-term impacts to our cash flow projections and discount rates used for determining the recoverability of goodwill and intangible assets. Changes to key assumptions, market trends, or continued impacts of macroeconomic events could produce test results in the future that differ, and we could be required to record an impairment charge. There have been no significant changes in the critical accounting policies and estimates described in the Annual Report.

Recently Issued Accounting Pronouncements

See Item 1 of Part I, “Financial Statements—Note 2 – Recent Accounting Pronouncements.”

Recently Adopted Accounting Pronouncements

See Item 1 of Part I, “Financial Statements—Note 2 – Recent Accounting Pronouncements.”

Jumpstart Our Business Act of 2012

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, which we refer to as the JOBS Act. We would cease to be an emerging growth company upon the earliest of: (i) the last day of the first fiscal year in which our annual gross revenues are $1.07 billion or more; (ii) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year; (iii) the date on which we have, during the previous three-year period, issued more than $1.07 billion in non-convertible debt

securities or (iv) the last day of the fiscal year ending December 31, 2022. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. We have elected to take advantage of these reduced disclosure obligations and may elect to take advantage of other reduced reporting obligations in the future.

The JOBS Act permits an emerging growth company like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have chosen to irrevocably “opt out” of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Market risk is the potential loss arising from adverse changes in market rates and prices. Our primary exposure to market risk is interest rate risk associated with our Amended and Restated Senior Secured Credit Facilities. See Note 7, Debt, in the notes to the condensed consolidated financial statements for further description of our Amended and Restated Senior Secured Credit Facilities. As of March 31, 2022, we had $518.2 million of variable rate borrowings outstanding under our Amended and Restated Senior Secured Credit Facilities with respect to which we are exposed to interest rate risk. Holding other variables constant and assuming no interest rate hedging, a 0.25% increase in the average interest rate on our variable rate indebtedness would have resulted in a $1.3 million increase in annual interest expense based on the amount of borrowings outstanding as of March 31, 2022.

Inflation rates may impact the financial statements and operating results in several areas. Inflation influences interest rates, which in turn impact the fair value of our investments and yields on new investments. Operating expenses, including payroll, are impacted to a certain degree by the inflation rate. We do not believe that inflation has had a material effect on our results of operations for the periods presented.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) that are designed to ensure that information required to be disclosed in the Company's reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company will be detected.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as of the end of the period covered by this report. Based upon the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2022, the disclosure controls and procedures were not effective at the reasonable assurance level due to a material weakness in internal control over financial reporting related to the evaluation of the impact of the arrangement’s terms and conditions on the accounting and reporting for preferred stock instruments that existed as of March 31, 2022.

Material Weakness in Internal Control over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.

The Company did not design and maintain effective controls related to the evaluation of the impact of the arrangement’s terms and conditions on the accounting and reporting for preferred stock instruments. This material weakness resulted in the restatement of the Company’s previously filed consolidated financial statements as of and for the year ended December 31, 2020 and the condensed consolidated financial statements as of and for the quarters ended March 31, 2021 and June 30, 2021, as well as the quarterly condensed consolidated financial information for the 2020 interim periods ended June 30, September 30 and December 31, 2020 related to temporary equity, permanent equity, additional paid in capital, accretion to redemption value of redeemable convertible preferred stock, net income (loss) and comprehensive income (loss) attributable to common shareholders, loss per share and the related disclosures. Additionally, this material weakness could result in misstatements of the aforementioned account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

Remediation Plan for the Material Weakness

In order to remediate the material weakness, the Company’s management plans to enhance the design of its control activities related to the evaluation of the impact of the terms and conditions on the accounting and reporting for preferred stock issuances. The material weakness cannot be considered remediated until the newly designed controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting identified in management's evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the Company’s first fiscal quarter of 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1.

Legal Proceedings

From time to time, we may be involved in general legal disputes arising in the ordinary course of our business. We are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, financial condition or results of operations.

On February 22, 2021, the Company filed a complaint in Federal District Court in Orange County, California against its event cancellation insurers under the Company’s 2020 and 2021 event cancellation insurance policies. The insurer defendants are W.R. Berkley Syndicate Limited and Great Lakes Insurance SE. The Company believes the insurers have acted in bad faith and failed to timely pay amounts due and owing on submitted claims. Under this complaint, the Company is seeking to enforce its rights under the policies to receive the maximum applicable coverage for the 2020 and 2021 event cancellations, postponements and reductions, and to receive court-ordered payment on all outstanding submissions for 2020 and 2021 events. By Order dated May 26, 2021, the District Court in Orange County, California denied the insurers motion to transfer venue for this litigation proceeding to New York.

While there is no guarantee or assurance as to the outcome of this litigation or the amount or timing of future recoveries from the Company’s event cancellation insurance policies, the Company believes that all events that have been impacted, cancelled or postponed due to COVID-19 to date should qualify as covered losses under the event cancellation insurance policies and that, to date, the insurers have paid less than what is owed under the policies.

Item 1A.

Risk Factors

Our Annual Report on Form 10-K (“Original 10-K"), filed with the SEC on February 24, 2022 is accessible on the SEC’s website at www.sec.gov, and includes detailed discussions of our risk factors. At the time of this filing, there have been no material changes to the risk factors that were included in our Annual Report on Form Original 10-K, except as follows.

Item 2.

Unregistered Sale of Equity Securities and Use of Proceeds

Share Repurchase Program

In October 2020, we announced that our Board of Directors had authorized a $20 million share repurchase program. Share repurchases may be made from time to time through and including December 31, 2021, subject to early termination or extension by our Board of Directors. The share repurchase program may be suspended or discontinued at any time without notice. There is no minimum number of shares that we are required to repurchase. Shares may be purchased from time to time in the open market or in privately negotiated transactions. Such purchases will be at times and in amounts as we deem appropriate, based on factors such as market conditions, legal requirements and other business considerations.

The following table presents our purchases of common stock during the first quarter ended March 31, 2022, as part of the publicly announced share repurchase program:

(Dollars in millions, except per share data)	Total Number of Shares Purchased as Part of Publicly Announced Program		Average Price Paid Per Share		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program (in millions)
January 1, 2022 - January 31, 2022		—	$	—	$	18.3
February 1, 2022 - February 28, 2022		38,752		3.59		18.2
March 1, 2022 - March 31, 2022		216,832		3.66		17.4
Total		255,584

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

None.

Item 5.

Other Information

None.

Item 6.

Exhibits


*31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

*31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

*32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*101.INS		Inline XBRL Instance Document

*101.SCH		Inline XBRL Taxonomy Extension Schema Document

*101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

*101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

*101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

*101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

*101		The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in Inline XBRL included: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Loss and Comprehensive Loss, (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements

*104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		EMERALD HOLDING, INC.

Date: May 9, 2022	By:	/s/ David Doft
		David Doft
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)