Viad Corp Reports 2019 First Quarter Results

Viad Corp (NYSE: VVI) today announced first quarter 2019 results that reflect stronger than anticipated performance at both GES and Pursuit.

• Revenue of $285.6 million increased 2.9% ($8.2 million) year-over-year, or 4.6% ($12.7 million) on an organic basis (which excludes the impact of exchange rate variances).
  • The organic revenue increase primarily reflects same-show growth and new business wins at GES, as well as incremental revenue from Pursuit’s Mount Royal Hotel.
  • Exchange rate variances had an unfavorable impact on revenue of $4.5 million.
• The expected declines in adjusted segment EBITDA and adjusted segment operating results were primarily driven by increased costs to support continued growth at Pursuit.
• The loss before other items increased primarily due to higher interest expense and lower adjusted segment operating results. The GAAP-basis net loss attributable to Viad for the 2019 first quarter also included a $6.4 million, after-tax, charge related to a legal settlement.

Steve Moster, president and chief executive officer, commented, “We delivered better than expected revenue growth and adjusted segment EBITDA during the first quarter. GES continues to drive growth on a same-show basis as well as from new corporate wins. At Pursuit, we continue to realize the benefits of our revenue management efforts and refresh initiatives, and the team is preparing for a strong peak season with many new expansion projects opening in the coming months.”

GES Results

Moster said, “GES realized stronger than anticipated revenue growth during the first quarter, with U.S. base same-show growth of 4 percent and continued progress from our efforts to increase our share of live event spend from corporate brands. As we continue our journey to position GES as the preferred, global full-service provider for live events, with a focus on driving growth in higher margin areas, we also remain focused on generating operating efficiencies across the business. To help ensure we are aligned optimally against our best opportunities, we recently organized the global business under two geographical leaders, one for North America and one for EMEA, who are focused on three strategic themes - Simplify, Grow, and Transform. Accordingly, we are now reporting on the results of each of those geographical segments.”

• GES revenue of $274.9 million increased 2.7% ($7.2 million) year-over-year. On an organic basis, which excludes the impact of exchange rate variances, revenue increased 4.2% ($11.3 million).
  • North America organic revenue increased 0.9% ($1.9 million) primarily due to U.S. base same-show growth of 4.0% and growth from corporate clients, partially offset by negative show rotation of approximately $6 million.
  • EMEA organic revenue increased 18.0% ($8.8 million) primarily due to new business wins, underlying growth and positive show rotation of approximately $4 million.
• GES adjusted segment operating income of $1.7 million* increased $1.1 million year-over-year, and $1.1 million on an organic basis.
  • North America organic adjusted segment operating income of $0.6 million* increased by $0.7 million primarily due to the increase in revenue.
  • EMEA organic adjusted segment operating income of $1.1 million* increased $0.4 million primarily due to the increase in revenue partially offset by higher compensation expense, including performance-based incentives, as well as the timing of expenses.

Pursuit Results

Moster said, “Pursuit delivered organic revenue growth of 14.6 percent during its seasonally slow first quarter, driven primarily by the Mount Royal Hotel, which continues to perform very well since re-opening in July of last year. Most of our properties across Pursuit are just beginning to open for the season, and we continue to be on track to open many new experiences over the next few months, including FlyOver Iceland, the West Glacier RV Park and Cabin Village and the fully remodeled, all-inclusive Glacier View Lodge. We are excited to welcome guests to our new and improved assets during the busy summer tourism season.”

• Pursuit revenue of $10.7 million increased 9.7% ($0.9 million) year-over-year. On an organic basis, which excludes the impact of exchange rate variances, revenue increased 14.6% ($1.4 million) primarily due to the re-opening of the Mount Royal Hotel, as well as continued focus on revenue management and refresh efforts to maximize revenues across our attraction and hotel portfolio.

• Pursuit adjusted segment operating loss of $12.8 million* increased $1.6 million year-over-year. On an organic basis, the operating loss of $13.1 million increased $1.9 million primarily due to higher depreciation expense, as well as additional costs to support continued growth initiatives and the timing of certain other expenses.

Cash Flow / Capital Structure

• Our cash flow from operations was $8.2 million for the 2019 first quarter.
• Our capital expenditures for the quarter totaled $19.5 million, comprising $12.4 million for Pursuit and $7.1 million for GES.
• Our return of capital totaled $2.0 million for the quarter (which represented quarterly dividends of $0.10 per share). We had 600,067 shares remaining under our current repurchase authorization at March 31, 2019.
• Our debt proceeds (net) totaled $13.9 million for the quarter.
• Our cash and cash equivalents were $43.5 million, debt was $251.0 million and our debt-to-capital ratio was 36.6% at March 31, 2019.

Business Outlook

2019 Full Year Guidance

Moster said, “We are encouraged by our solid start to 2019 and our forecast for the full year remains largely unchanged. At GES, we are focused on driving continued same-show growth, new business wins, and efficiency gains as we work to improve the margin profile of the business. At Pursuit, we expect another year of profitable growth and we have many expansion projects underway that we expect will deliver strong returns, revenue and margins. We remain committed to our growth strategies for GES and Pursuit, and to delivering enhanced shareholder value.”

• We expect consolidated revenue to increase at a mid-single digit rate from 2018 full year revenue, driven by growth at both GES and Pursuit.
• We expect consolidated adjusted segment EBITDA to be in the range of $152.5 million to $158.5 million, as compared to $146.3 million* in 2018.
• The outlook for our business units is as follows:

• Our guidance assumes that exchange rates during the remainder of 2019 will approximate $0.76 U.S. Dollars per Canadian Dollar and $1.30 U.S. Dollars per British Pound. As compared to 2018, we expect exchange rate variances to impact 2019 full year results as follows:

• We expect GES show rotation to have a net negative impact on full year revenue of about $25 million versus 2018. Show rotation refers to shows that occur less frequently than annually, as well as annual shows that shift quarters from one year to the next.

• We expect GES U.S. base same-show revenue to increase at a low single digit rate.
• We expect Pursuit’s 2019 growth to be fueled primarily by investments to support our Refresh, Build, Buy strategy, which are expected to contribute incremental revenue of approximately $15 million to $17 million during 2019. Additionally, we expect to realize mid- to high-single digit revenue growth across the rest of our attractions and hospitality assets driven by a combination of our revenue management efforts and strong visitation to our iconic destinations.
• We expect start-up costs related to the development of Pursuit’s FlyOver Iceland attraction, which is expected to open in July 2019, to approximate $1 million during the first six months of 2019. These costs are not included in the adjusted segment EBITDA or adjusted segment operating income guidance ranges above.
• We expect corporate activities expense to approximate $11 million.
• We expect our effective tax rate on income before other items to approximate 29%.

2019 Second Quarter Guidance

• We expect GES second quarter results to increase primarily due to positive show rotation revenue of approximately $20 million and new business wins, partially offset by unfavorable exchange rate variances. Our operating income guidance reflects higher performance-based incentive expense and additional resources to drive growth and profitability in high-value areas.
• We expect Pursuit second quarter revenue to increase primarily due to our refresh efforts and continued focus on revenue management across our attraction and hospitality portfolio. Our operating income guidance reflects additional costs to support continued growth initiatives.

Conference Call and Web Cast

We will hold a conference call with investors and analysts for a review of first quarter 2019 results on Thursday, April 25, 2019 at 5:00 p.m. (ET). To join the live conference, call (877) 917-8933, passcode “Viad”, or access the webcast through Viad’s Web site at www.viad.com. A replay will be available for a limited time at (866) 396-6249 or (203) 369-0511 (no passcode is required), or visit the Viad Web site and link to a replay of the webcast.

About Viad

Viad (NYSE: VVI) generates revenue and shareholder value through two business units: GES and Pursuit. GES is a global, full-service live events company offering a comprehensive range of services to the world's leading brands and event organizers. Pursuit is a collection of inspiring and unforgettable travel experiences in Alaska, Montana, the Canadian Rockies, Vancouver, Reykjavik (opening in July 2019), and Las Vegas (opening in 2021) that includes attractions, lodges and hotels, and sightseeing tours that connect guests with iconic places. Our business strategy focuses on providing superior experiential services to our customers and sustainable returns on invested capital to our shareholders. Viad is an S&P SmallCap 600 company. For more information, visit www.viad.com

Forward-Looking Statements

This press release contains a number of forward-looking statements. Words, and variations of words, such as “will,” “may,” “expect,” “would,” “could,” “might,” “intend,” “plan,” “believe,” “estimate,” “anticipate,” “deliver,” “seek,” “aim,” “potential,” “target,” “outlook,” and similar expressions are intended to identify our forward-looking statements. Similarly, statements that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. These forward-looking statements are not historical facts and are subject to a host of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those in the forward-looking statements.

Important factors that could cause actual results to differ materially from those described in our forward-looking statements include, but are not limited to, the following:

• our ability to successfully integrate and achieve established financial and strategic goals from acquisitions;
• fluctuations in general economic conditions;
• our dependence on large exhibition event clients;
• the importance of key members of our account teams to our business relationships;
• the competitive nature of the industries in which we operate;
• travel industry disruptions;
• unanticipated delays and cost overruns of our capital projects, and our ability to achieve established financial and strategic goals of such projects;
• seasonality of our businesses;
• transportation disruptions and increases in transportation costs;
• natural disasters and other catastrophic events;
• the impact of recent U.S. tax legislation;
• our multi-employer pension plan funding obligations;
• our exposure to labor cost increases and work stoppages related to unionized employees;
• liabilities relating to prior and discontinued operations;
• adverse effects of show rotation on our periodic results and operating margins;
• our exposure to currency exchange rate fluctuations; our exposure to cybersecurity attacks and threats;
• compliance with laws governing the storage, collection, handling, and transfer of personal data and our exposure to legal claims and fines for data breaches or improper handling of such data;
• the effects of the United Kingdom’s exit from the European Union; and
• the effects of changes in the U.S. trade policy.

For a more complete discussion of the risks and uncertainties that may affect our business or financial results, please see Item 1A, “Risk Factors,” of our most recent annual report on Form 10-K filed with the SEC. We disclaim and do not undertake any obligation to update or revise any forward-looking statement in this press release except as required by applicable law or regulation.

Forward-Looking Non-GAAP Measures

We have provided the following forward-looking non-GAAP financial measures: Adjusted Segment EBITDA, Adjusted Segment Operating Income and Income Before Other Items. We do not provide quantitative reconciliations of these forward-looking non-GAAP financial measures to their most directly comparable GAAP financial measures because, due to variability and difficulty in developing accurate projections and/or certain information not being ascertainable or accessible, not all of the information necessary to do so is available to us without unreasonable effort. Consequently, any attempt to disclose such reconciliations would imply a degree of precision that could be confusing or misleading to investors. It is probable that our forward-looking non-GAAP financial measures may be materially different from the corresponding GAAP financial measures.

* Refer to Table Two of this press release for a discussion and reconciliation of this non-GAAP financial measure to its most directly comparable GAAP financial measure

VIAD CORP AND SUBSIDIARIES

TABLE TWO - NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

IMPORTANT DISCLOSURES REGARDING NON-GAAP FINANCIAL MEASURES

'This document includes the presentation of "Income/(Loss) Before Other Items", "Adjusted EBITDA", "Adjusted Segment EBITDA" and "Adjusted Segment Operating Income/(Loss)", which are supplemental to results presented under accounting principles generally accepted in the United States of America (“GAAP”) and may not be comparable to similarly titled measures presented by other companies. These non-GAAP measures are utilized by management to facilitate period-to-period comparisons and analysis of Viad’s operating performance and should be considered in addition to, but not as substitutes for, other similar measures reported in accordance with GAAP. The use of these non-GAAP financial measures is limited, compared to the GAAP measure of net income attributable to Viad, because they do not consider a variety of items affecting Viad’s consolidated financial performance as reconciled below. Because these non-GAAP measures do not consider all items affecting Viad’s consolidated financial performance, a user of Viad’s financial information should consider net income attributable to Viad as an important measure of financial performance because it provides a more complete measure of the Company’s performance.

'Income/(Loss) Before Other Items and Adjusted Segment Operating Income/(Loss) are considered useful operating metrics, in addition to net income attributable to Viad, as potential variations arising from non-operational expenses/income are eliminated, thus resulting in additional measures considered to be indicative of Viad’s performance. Management believes that the presentation of Adjusted EBITDA and Adjusted Segment EBITDA provide useful information to investors regarding Viad’s results of operations for trending, analyzing and benchmarking the performance and value of Viad’s business. Management also believes that the presentation of Adjusted Segment EBITDA for acquisitions and other major capital projects enables investors to assess how effectively management is investing capital into major corporate development projects, both from a valuation and return perspective.

VIAD CORP AND SUBSIDIARIES

TABLE TWO - NON-GAAP FINANCIAL MEASURES (CONTINUED)

(UNAUDITED)

Organic - The term "organic" is used within this document to refer to results without the impact of exchange rate variances and acquisitions, if any, until such acquisitions are included in the entirety of both comparable periods. The impact of exchange rate variances (or "FX Impact") is calculated as the difference between current period activity translated at the current period's exchange rates and the comparable prior period's exchange rates. Management believes that the presentation of "organic" results permits investors to better understand Viad's performance without the effects of exchange rate variances or acquisitions.