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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q/A

 

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

For the quarterly period ended March 31, 2022

or

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

14th 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.

 

 

 

 

 


 

 

EXPLANATORY NOTE

Emerald Holding, Inc. (the “Company”) is filing this Amendment No. 1 (“Amendment No. 1”) to its Quarterly Report on Form 10-Q/A for the period ended March 31, 2022 (the “Original Form 10-Q”), as originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 10, 2022, to amend and restate the Original Form 10-Q as further described below.

As disclosed in the Company’s Current Report on Form 8-K, as filed with the Commission on July 28, 2022, the Company is restating its previously issued unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2022. Subsequent to the filing of the Original Form 10-Q, the Company identified an error relating to a payment due to a third party as a result of the Company’s recognition of insurance claim proceeds associated with a cancelled event in 2021 as a result of COVID-19. The Company determined that upon recognition of the insurance proceeds, the Company did not appropriately record a liability in the amount of $5.1 million, representing the portion of the insurance proceeds that were payable to a third party. As a result of the failure to accrue this payment due to a third party, Other income, net, Operating income (loss), and Income (loss) before income taxes, as reported, were overstated by $5.1 million and Net income (loss) and comprehensive income (loss) were overstated by $6.5 million, inclusive of the impact to the Benefit from income taxes. As a result of the error described, the Company’s previously issued unaudited condensed consolidated statements of income (loss) and comprehensive income (loss) as of and for the three months ended March 31, 2022 were materially misstated.

This Amendment No.1 is presented as of the filing date of the Original Form 10-Q and does not reflect events occurring after that date, or modify or update disclosures in any way other than as required to reflect the Q1 2022 restatement and Q4 2021 adjustment as described below. Accordingly, this Amendment No. 1 should be read in conjunction with the Company’s filings with the SEC subsequent to the date on which the Company filed the Original Form 10-Q.

This Amendment No. 1 sets forth the Original Form 10-Q in its entirety, as amended to reflect the restatement. Among other things, forward-looking statements made in the Original Form 10-Q have not been revised to reflect events that occurred or facts that became known to the Company after the filing of the Original Form 10-Q, and such forward-looking statements should be read in their historical context.

In connection with the Q1 2022 restatement and the filing of this Amendment No. 1, the Company has also adjusted its consolidated balance sheet as of and for the year ended December 31, 2021 contained in the Q1 2022 10-Q in order to correct for an error that the Company determined was not material to the Company’s Q4 and full year 2021 consolidated financial statements as further described in Note 1 “Basis of Presentation”.

The following items have been amended as a result of the restatement:

Part I, Item 1, “Financial Statements”,

Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”,

Part I, Item 4, “Controls and Procedures”, and

Part II, Item 1A, “Risk Factors.”

In accordance with applicable SEC rules, this Amendment No. 1 on Form 10-Q/A includes an updated signature page and certifications of the Company’s Chief Executive Officer and Chief Financial Officer in Exhibits 31.1, 31.2 and 32.1 as required by Rule 12b-15.

Refer to Note 1, “Basis of Presentation”, of Notes to Condensed Consolidated Financial Statements of this Form 10-Q/A for additional information and for the summary of the accounting impacts of these adjustments to the Company’s condensed consolidated financial statements.

The Company has concluded there was an additional material weakness in the Company’s internal control over financial reporting as of March 31, 2022 and that its disclosure controls and procedures remained ineffective as of March 31, 2022. See additional discussion included in Part II Item 1A of this amended quarterly report.

 

 

i

 


 

 

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

 

30

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

48

 

 

 

 

Item 4.

Controls and Procedures

 

48

 

 

 

PART II. OTHER INFORMATION

 

50

 

 

 

 

Item 1.

Legal Proceedings

 

50

 

 

 

 

Item 1A.

Risk Factors

 

50

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

51

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

52

 

 

 

 

Item 4.

Mine Safety Disclosures

 

52

 

 

 

 

Item 5.

Other Information

 

52

 

 

 

 

Item 6.

Exhibits

 

53

 

 

 

ii

 


 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q/A 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/A 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;

1

 


 

 

 

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/A 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.

2

 


 

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

(As Restated)

 

 

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

 

 

12.1

 

 

 

12.5

 

Total current assets

 

 

352.7

 

 

 

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

 

$

1,113.9

 

 

$

1,062.4

 

Liabilities, Redeemable Convertible Preferred Stock and Stockholders’

Deficit

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and other current liabilities

 

$

60.7

 

 

$

48.3

 

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

 

 

252.8

 

 

 

191.7

 

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

 

 

783.7

 

 

 

749.5

 

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

 

 

(758.8

)

 

 

(774.9

)

Total stockholders’ deficit

 

 

(112.9

)

 

 

(121.0

)

Total liabilities, redeemable convertible preferred stock and stockholders’

   deficit

 

$

1,113.9

 

 

$

1,062.4

 

 

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

3

 


 

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

(As Restated)

 

 

 

 

March 31,

2021

 

Revenues

 

$

98.5

 

 

 

 

$

12.9

 

Other income, net

 

 

23.7

 

 

 

 

 

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)

 

 

19.2

 

 

 

 

 

(19.6

)

Interest expense

 

 

3.9

 

 

 

 

 

4.0

 

Income (loss) before income taxes

 

 

15.3

 

 

 

 

 

(23.6

)

Benefit from income taxes

 

 

(0.8

)

 

 

 

 

(8.3

)

Net income (loss) and comprehensive income (loss)

 

$

16.1

 

 

 

 

$

(15.3

)

Accretion to redemption value of redeemable convertible preferred stock

 

 

(9.2

)

 

 

 

 

(8.5

)

Income attributable to preferred stockholders

 

 

(4.4

)

 

 

 

 

 

Net gain (loss) and comprehensive gain (loss) attributable

      to Emerald Holding, Inc. common stockholders

 

$

2.5

 

 

 

 

$

(23.8

)

Basic gain (loss) per share

 

$

0.04

 

 

 

 

$

(0.33

)

Diluted gain (loss) per share

 

$

0.04

 

 

 

 

$

(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.

4

 


 

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

 

 

$

(774.9

)

 

$

(121.0

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16.1

 

 

 

16.1

 

Balances at March 31, 2022

  (As Restated)

 

 

71,442

 

 

$

443.1

 

 

 

70,130

 

 

$

0.7

 

 

$

645.2

 

 

$

(758.8

)

 

$

(112.9

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

 

5

 


 

 

Emerald Holding, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

(in millions)

 

Three Months

Ended March 31,

2022

(As Restated)

 

 

Three Months

Ended March 31,

2021

 

Operating activities

 

 

 

 

 

 

 

 

Net income (loss)

 

$

16.1

 

 

$

(15.3

)

Adjustments to reconcile net 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

 

 

9.8

 

 

 

(3.2

)

Cancelled event liabilities

 

 

(3.5

)

 

 

(12.2

)

Income tax payable

 

 

(0.8

)

 

 

 

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.

 

 

6

 


 

 

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/A 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 Information”.

Restatement and Revision of Unaudited Condensed Consolidated Financial Statements

Restatement of Previously Issued Financial Statements

In conjunction with the Company’s close process for the second quarter of 2022, management identified an error relating to a payment due to a third party as a result of the Company’s recognition of insurance claim proceeds associated with a cancelled event in 2021 as a result of COVID-19. The Company determined that upon recognition of the insurance proceeds in the first quarter of 2022, the Company did not appropriately record a liability representing the portion of the insurance proceeds that were payable to a third party. As a result of the failure to accrue this payment due to a third party, Other income, net, Operating income (loss), and Income (loss) before income taxes, as reported, were overstated by $5.1 million, Net income (loss) and comprehensive income (loss) were overstated by $6.5 million, inclusive of the impact to the Benefit from income taxes. Additionally, as a result of the error and the participation feature of the 7% Series A Redeemable Convertible Participating Preferred stock, Net income and comprehensive income attributable to Emerald Holding, Inc. common stockholders was overstated by $2.3 million. There was also a corresponding overstatement of the Company’s Prepaid expenses and other current assets of $1.4 million related to the tax impact of correcting the error and an understatement of the Company’s Accounts payable and other current liabilities of $6.7 million, which includes $1.6 million related to the adjustment described further below. As a result of the error described above, management determined the Company’s unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2022 were materially misstated.

 

Revision of Previously Issued Financial Statements

Additionally, management also identified an immaterial error relating to a payment due to another third party as a result of the Company’s recognition of insurance claim proceeds associated with a separate cancelled event in 2021 as a result of COVID-19. Management determined that upon recognition of the insurance proceeds during December of 2021, the Company did not appropriately record a liability in the amount of $1.6 million, representing the portion of the insurance proceeds that were payable to another third party. The failure to accrue this payment due to the other third party resulted in Cost of revenues and Accounts payable and other current liabilities being understated by $1.6 million. Management evaluated the impact of this error on the Company’s Q4 and full year 2021 consolidated financial statements and determined that the consolidated financial statements were not materially misstated. However, in order to correctly state equity in connection with the filing of this Form 10-Q/A, the December 31, 2021 stockholders’ deficit has been corrected to reflect the impact of this immaterial error. The Company will revise its consolidated financial statements as of and for the year ended December 31, 2021 when it files its Form 10-K for the period ended December 31, 2022.

7


Emerald Holding, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

 

The following tables reflect the impact of the restatement to the specific line items presented in the Company’s previously reported unaudited condensed consolidated financial statements as of and for the three-months ended March 31, 2022. (dollars in millions, share data in thousands except earnings per share and share par value):

 

Condensed Consolidated Balance Sheet (unaudited)

 

March 31, 2022

 

(dollars in millions, share data in thousands, except par value)

 

As Originally

Reported

 

 

Adjustments

 

 

As Restated

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

13.5

 

 

 

(1.4

)

 

 

12.1

 

Total current assets

 

 

354.1

 

 

 

(1.4

)

 

 

352.7

 

Total assets

 

$

1,115.3

 

 

$

(1.4

)

 

$

1,113.9

 

Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Deficit

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and other current liabilities

 

$

54.0

 

 

$

6.7

 

 

$

60.7

 

Total current liabilities

 

 

246.1

 

 

 

6.7

 

 

 

252.8

 

Total liabilities

 

 

777.0

 

 

 

6.7

 

 

 

783.7

 

Accumulated deficit

 

 

(750.7

)

 

 

(8.1

)

 

 

(758.8

)

Total stockholders’ deficit

 

 

(104.8

)

 

 

(8.1

)

 

 

(112.9

)

Total liabilities, redeemable convertible preferred stock

   and stockholders’ deficit

 

$

1,115.3

 

 

$

(1.4

)

 

$

1,113.9

 

 

 

 

Three months ended March 31, 2022

 

Condensed Consolidated Statement of Income

   and Comprehensive Income (unaudited)

 

As Originally

Reported

 

 

Adjustments

 

 

As Restated

 

(dollars in millions, share data in thousands except earnings per share)

 

 

 

Other income, net

 

 

28.8

 

 

 

(5.1

)

 

 

23.7

 

Operating income

 

 

24.3

 

 

 

(5.1

)

 

 

19.2

 

Income before income taxes

 

 

20.4

 

 

 

(5.1

)

 

 

15.3

 

Benefit from income taxes