March 22, 2023
IES sees $4.8 Million Loss in a Most Unusual Year
A series of (hopefully) non-repeatable events led to a tumultuous year of cost cutting and financial loss
Last week, the Illuminating Engineering Society (IES) published its Annual Report for fiscal year 2022, which ended June 30, 2022. It was a fiscal year with two LightFair events. It was a year that saw an interim Executive Director lead the organization for 8+ months before transitioning to a new leader, Colleen Harper, who joined in March 2022. It was a year that initiated major staff reductions and other cost-cutting measures to help right-size the IES for the new reality of its smaller-than-usual operating budget.
Arguably, no other organization is more important to the lighting industry than the IES. The organization’s strong impact and importance is felt across all aspects of lighting that relate to standards, research, education, training, events and contributions to over one hundred local lighting industry communities across North America and the world.
But the IES has also been struggling financially in recent years. It’s fair to state that nearly all companies and organizations were somehow affected by the COVID pandemic, but some organizations like the IES have felt major lasting impacts that began with COVID-era pivots and, through a series of paradigm shifts, eventually led to a whole new reality of how the organization must now operate amidst a much more challenging landscape.
The IES reported a net loss of $4.8 million in fiscal year 2022. Thanks to $20+ million in pre-COVID assets, the organization has been able to sustain four consecutive years of net losses. As of June 2021, IES assets were $15.2 million. We don’t think it’s time to hit the panic button relating to the health of the organization, but if the IES endures a couple more consecutive years of seven figure losses those sentiments may change.
Membership numbers decline 20%
Total IES membership is down in most categories. The membership grand total at the end of fiscal 2022 was down 20% to 5,830 – compared to 7,315 in 2021. The largest two individual categories, Members + Associates, declined an aggregate of 19%. In some promising news, the sustaining member count – which represents higher dollar corporate members, saw a slight increase to 321, but still has a climb to return to the 579 sustaining members it enjoyed in 2019.
Harper shared the following insights: “As for membership, we are constantly reevaluating our member benefits to make sure we provide what people need from the IES. We recently made the Lighting Science collection in our Lighting Library completely free for all members. The IES is expanding both globally with new Sections and collaborations, and also into adjacent/converging industries with the initiation of new partnerships that elevate the importance of lighting. We also have a renewed focus on empowering our Sections and district/regional leadership in order to grow the IES at the grassroots level.”
In July 2022, the organization announced a 12.5% increase in individual member dues.
$950,000 in investment losses
In 2021 the IES benefitted from $1.42 million in investment gains, but that good fortune was not repeated in fiscal year 2022 as the organization's investments lost $950,000.
The IES operates numerous events including the Annual Conference and the Street & Area Light Conference, but the one major IES event that once generated over $3 million in annual revenue before the pandemic is LightFair. The IES owns a one-third share of LightFair along with partners International Market Centers (IMC) and the International Association of Lighting Designers (IALD).
The one-time $1.2 million LightFair hit
In Fiscal Year 2022, the IES held two LightFair events: A COVID-delayed Lightfair 2021 took place in October, and LightFair 2022 occurred 7 ½ months later in June 2022. The combined revenue share to each of the three LightFair owners for both events was $592,176.
One major and important non-repeatable LightFair expense is that because of the 2020 Las Vegas LightFair cancellation, each partner had to pay $1.2 million in penalties, and that cost was recognized in the IES’ most recent fiscal year.
Moving forward, the organization is braced for lower LightFair revenue and for less frequent LightFair payouts compared to pre-pandemic times. The show announced an every-other-year cadence in 2022 which seemed to please industry stakeholders, but the move will obviously cut the 10 big payouts per decade to only five revenue payouts per decade.
Other cost cutting
The impact of some major cost-cutting actions taken by the IES last year didn’t move the needle on the fiscal year expense line because they happened so late in the year. In late April 2022, the company eliminated several staffers’ jobs leaving a total headcount of 20 employees.
Harper shared, “The IES was too large from a staff perspective for the size of its budget; there is an industry standard for payroll expense as a percentage of total revenue, and by 2019 the Society had far surpassed that threshold.”
Shedding Manhattan office expense – no sublease tenant yet
In September 2022 – which is part of fiscal year 2023 – the organization took steps to reduce its overhead by making its Lower Manhattan office space available for sublease.
After six months on the market, the IES’ Wall Street office has still not been matched with a tenant to sublease the nearly 11,000 square foot office. We recently asked Newmark Realty if the space was still available, and the broker replied “Yes, asking $54/RSF. We will be aggressive. Great space.” Harper told us that real estate brokers are conducting regular tours of the 17th floor property.
The current IES lease expires in 2033. If the organization does indeed sign a tenant that pays $54 per rentable square foot, the IES will realize approximately $592,000 of annual overhead relief.
A $950,000 net loss in Publications
“Publications” as defined in the IES Annual Report constitutes LD+A, Standards, and LEUKOS.
We asked Harper about the Publications P&L and the if the organization is considering the notion of shifting LD+A, the magazine of the IES, to a digital-only format. She told us that “LD+A's value proposition is that it's the only industry periodical that regularly publishes in both print and digital format. Our research shows that both readers and advertisers support this dual platform model.”
The organization has streamlined its publishing and staff expenses and is expecting its Publications team to provide more favorable financial performance moving forward.
No organization ever cost cuts its way to greatness, but there are many examples of organizations that turned negative financial momentum around through responsible financial measures. Under Harper’s leadership, the IES is seemingly focused on doing just that.
With live event revenue being so important to the IES (and the IALD, too) we wonder if we will see stepped up messaging from influential lighting industry thought leaders that vociferously encourage – or even politely pressure – lighting people and companies to once again fully participate in LightFair as part of our “patriotic” duty as lighting people and companies.
The organization asserts that it has plans to engage with companies in different ways, increase awareness on an international scale and proactively offer education on lighting-related developments that may have been perceived as too peripheral before. The IES believes that its future organization will look very different from the IES of the past in ways that will further benefit members and stakeholders.
The IES staff continues to deliver important contributions to lighting industry stakeholders with fewer resources. We applaud and appreciate the employees along with the large volunteer army of lighting people who are working tirelessly on a national and local level to keep the IES healthy and on course to deliver the standards, research, education, training, events and other impactful tools to lighting stakeholders across the world.