Viad Corp Reports 2019 Second Quarter Results

Viad Corp (NYSE: VVI) today announced second quarter 2019 results that reflect continued underlying business growth and contributions from the recent Mountain Park Lodges acquisition.

• Revenue of $402.3 million increased 10.6% ($38.6 million) year-over-year, or 11.1% ($40.5 million) on an organic basis (which excludes the impact of acquisitions and exchange rate variances).
  • The organic revenue increase reflects continued growth at both GES and Pursuit.
  • The acquisitions of Mountain Park Lodges and the Belton Chalet contributed revenue of $3.0 million.
  • Exchange rate variances had an unfavorable impact on revenue of $4.9 million.
• Adjusted segment operating income, adjusted segment EBITDA and income before other items increased compared to the prior year quarter primarily due to the increase in revenue.
• The GAAP-basis net income attributable to Viad for the 2019 second quarter also included an $11.6 million, after-tax, charge related to our previously anticipated partial withdrawal from the Central States Pension Plan.

Steve Moster, president and chief executive officer, commented, “I am happy to report that GES and Pursuit delivered solid year-over-year growth during the second quarter with operating results that were in line with our prior guidance. Additionally, we are accelerating our pace of growth investments at Pursuit. During the second quarter, we acquired a majority stake in the seven Mountain Park Lodges properties in Jasper National Park, as well as the 27-room Belton Chalet near Glacier National Park. We are preparing to open FlyOver Iceland in Reykjavik next month, and we are underway with plans to develop two additional FlyOver locations that are expected to open in 2021 and 2022. We also recently entered into an agreement to be the controlling operator of a new geothermal lagoon attraction in Iceland that is expected to open in 2021.”

GES Results

Moster said, “GES delivered revenue growth of 10 percent and strong margin performance during the second quarter. As expected, our U.S. base same-show revenue was under pressure from select events. We were successful in driving growth in other areas, including the strategically important corporate client segment where we continue to win new business. Additionally, we completed some strategic simplification actions during the quarter, including a facility consolidation in Las Vegas and other restructuring actions that will deliver annualized cost savings of about $8 million primarily within our exhibitions line of business.”

• GES revenue of $346.9 million increased 10.0% ($31.5 million) year-over-year. On an organic basis, which excludes the impact of exchange rate variances, revenue increased 11.3% ($35.5 million).
  • North America organic revenue increased 9.0% ($23.5 million) primarily due to growth from corporate clients and new business wins, as well as positive show rotation of approximately $7 million.
  • EMEA organic revenue increased 19.9% ($12.1 million) primarily due to positive show rotation of approximately $12 million.
• GES adjusted segment operating income of $35.3 million* increased $6.2 million year-over-year, and $6.5 million on an organic basis.
  • North America organic adjusted segment operating income of $30.7 million* increased by $6.9 million primarily due to the increase in revenue and cost reductions resulting from the restructuring actions.
  • EMEA organic adjusted segment operating income of $4.9 million* decreased $0.4 million primarily due to the timing of certain expenses and the revenue mix.

Pursuit Results

Moster said, “Pursuit continues to drive meaningful revenue growth through ongoing efforts to refresh, improve and expand our global collection of travel experiences. On a same-store basis, we realized continued growth in attractions revenue from our revenue management efforts, as well as our enhanced food and beverage and retail offerings. And our same-store RevPAR growth was a healthy 4.9 percent year-over-year. Additionally, we are pleased with the strong start of our new Mountain Park Lodges properties in Jasper National Park. These properties are a great addition to our Banff Jasper Collection, and give us a meaningful bed base in close proximity to several of our high-margin attractions.”

• Pursuit revenue of $55.4 million increased 14.6% ($7.1 million) year-over-year. On an organic basis, which excludes the impact of acquisitions and exchange rate variances, revenue increased 10.3% ($5.0 million) primarily due to stronger performance from our food and beverage and retail operations as a result of our refresh projects, our revenue management efforts, and the re-opening of the Mount Royal Hotel.
• Pursuit adjusted segment operating income of $12.0 million* increased $2.0 million year-over-year. Organic adjusted segment operating income of $10.6 million* increased $0.6 million primarily due to the increase in revenue, partially offset by additional costs to support continued expansion of the business.
• The acquisition of Mountain Park Lodges (on June 8, 2019) and the Belton Chalet (on May 21, 2019) contributed $3.0 million in revenue and $1.9 million in adjusted segment EBITDA ($1.2 million attributable to Viad shareholders).
• Exchange rate variances had a negative impact of $0.9 million on revenue and $0.1 million on adjusted segment operating income.

Cash Flow / Capital Structure

• Our cash flow from operations was $31.4 million for the 2019 second quarter.
• Our capital expenditures for the quarter totaled $27.0 million, comprising $20.0 million for Pursuit and $7.0 million for GES.
• We acquired the Mountain Park Lodges properties and the Belton Chalet for an aggregate purchase price of approximately $79 million.
• 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 June 30, 2019.
• Our debt proceeds (net) totaled $71.7 million for the quarter.
• Our cash and cash equivalents were $45.6 million, debt was $326.6 million, and our debt-to-capital ratio was 39.3% at June 30, 2019.

Business Outlook

2019 Full Year Guidance

Moster said, “We have updated our guidance to reflect additional revenue and profits from our acquisitions of the Mountain Park Lodges properties and the Belton Chalet, partially offset by a later than previously anticipated opening of FlyOver Iceland due to construction delays and a revised outlook for group visitation from certain long-haul markets. Overall, we have raised our adjusted segment EBITDA guidance by approximately $7 million, and we continue to expect healthy underlying revenue growth at both business units.”

• 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 $159 million to $166 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 $1.27 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 $20 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 $28 million to $32 million during 2019, inclusive of $17 million to $19 million from the Mountain Park Lodges and Belton Chalet acquisitions. Additionally, we expect to realize mid-single digit revenue growth across the rest of our attractions and hospitality assets.
• We expect start-up costs related to the development of Pursuit’s FlyOver attractions to approximate $1.5 million during 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 be in the range of $11 million to $12 million, including $1.1 million of year-to-date acquisition transaction-related costs.
• We expect our effective tax rate on income before other items to be approximately 29%.

2019 Third Quarter Guidance

• We expect GES third quarter results to decrease primarily due to negative show rotation revenue of approximately $45 million, partially offset by continued new business wins. Our operating income guidance also reflects higher performance-based incentive expense, partially offset by savings from the second quarter restructuring actions.
• We expect Pursuit third quarter results to increase primarily due to our Refresh, Build, Buy investments, and continued focus on revenue management across our attraction and hospitality portfolio. We expect the Mountain Park Lodges and Belton Chalet acquisitions to contribute third quarter revenue of $11 million to $13 million.

Conference Call and Web Cast

We will hold a conference call with investors and analysts for a review of second quarter 2019 results on Thursday, July 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 (800) 846-0305 or (402) 998-0543 (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 businesses: 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, 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.