Viad Corp Reports 2019 Third Quarter Results

Viad Corp (NYSE: VVI) today announced third quarter 2019 results that reflect continued business growth and contributions from the Mountain Park Lodges acquisition, largely offset by expected negative show rotation from non-annual events that occurred during the 2018 third quarter.

• Revenue of $362.5 million increased 1.2% ($4.3 million) year-over-year, and decreased 1.6% ($5.8 million) on an organic basis (which excludes the impact of acquisitions and exchange rate variances).
  • The organic revenue decline primarily reflects negative show rotation of $38 million, partially offset by continued growth at both Pursuit and GES.
  • The acquisitions of Mountain Park Lodges and the Belton Chalet contributed revenue of $13.1 million.
  • Exchange rate variances had an unfavorable impact on revenue of $2.9 million.
• The expected declines in adjusted segment operating income and adjusted segment EBITDA were primarily driven by higher performance-based incentives versus the 2018 third quarter.
• Income before other items decreased compared to the prior year quarter primarily due to an increase in income attributable to noncontrolling interests, lower adjusted segment operating income, and higher interest expense. The GAAP-basis net income attributable to Viad also included higher restructuring charges related to GES simplification actions.

Steve Moster, president and chief executive officer, commented, “Our third quarter results reflect solid performance at both GES and Pursuit. We continue to deliver on key strategic goals that are driving profitable growth and strengthening our value proposition for our clients and guests. GES continues to drive strong growth in revenue from corporate clients and Pursuit continues to deliver strong returns from our investments to scale and enhance our guest experiences.”

GES Results

Moster said, “GES continues to make great progress driving growth within the corporate market, and successfully delivered events for some notable new clients during the third quarter. The team’s efforts to increase GES’ share of the corporate event market and relentless focus on business development helped to substantially offset the impact of show rotation during the third quarter. With the exception of some continued softness in the retail sector, we continue to experience growth in the events we produce and solid spending by our corporate clients.”

• GES revenue of $227.4 million decreased 7.6% ($18.7 million) year-over-year. On an organic basis, which excludes the impact of exchange rate variances, revenue decreased 6.7% ($16.5 million) due to negative show rotation of $38 million.
  • North America organic revenue decreased 4.3% ($8.7 million) primarily due to negative show rotation of approximately $29 million, which was substantially offset by continued growth from corporate clients and other new client wins. Our U.S. base same-show revenue decline was driven by one retail show with reduced square footage.
  • EMEA organic revenue decreased 9.2% ($4.4 million) primarily due to negative show rotation of approximately $9 million, partially offset by new client wins and growth from the underlying business.
• GES adjusted segment operating loss of $11.6 million* increased $12.8 million year-over-year, and $12.9 million on an organic basis.
  • North America organic adjusted segment operating loss of $8.6 million* increased by $10.0 million primarily due to accruals for performance-based incentives versus reversals in the 2018 quarter and negative show rotation.
  • EMEA organic adjusted segment operating loss of $3.2 million* increased $3.0 million primarily due to accruals for performance-based incentives versus reversals in the 2018 quarter and negative show rotation.
• Exchange rate variances had a negative impact of $2.2 million on revenue and a positive impact of $0.1 million on adjusted segment operating loss.

Pursuit Results

Moster said, “Pursuit drove revenue growth of 20 percent during the quarter through successful execution of its Refresh, Build, Buy strategy. We delivered strong results from the recently acquired Mountain Park Lodges properties, as well as on an organic basis. Our newly opened West Glacier RV Park had a solid first season and our FlyOver Iceland attraction, which opened at the end of August, is receiving great guest reviews. Additionally, we continued to drive strong same-store growth within our attractions and hospitality properties, reflecting our emphasis on delivering exceptional guest experiences and revenue management efforts.”

• Pursuit revenue of $135.0 million increased 20.5% ($23.0 million) year-over-year. On an organic basis, which excludes the impact of acquisitions and exchange rate variances, revenue increased 9.5% ($10.6 million) primarily due to the opening of several new build projects, as well as stronger performance from recently refreshed experiences and our revenue management efforts.
  • Pursuit drove continued revenue growth from its leading attractions through higher ancillary revenue and dynamic pricing, which resulted in strong same-store revenue per attraction visitor growth of 11.1%. The decrease in same-store attractions visitors was due to the impact of softer visitation from select long-haul markets at certain attractions.
  • Pursuit increased RevPAR by 8.1% year-over-year primarily due to higher ADR driven by our refreshed properties, including the recently renovated Glacier View Lodge and Mount Royal Hotel, and our efforts to maximize revenue across all of our properties.
• Pursuit adjusted segment operating income of $67.6 million* increased $11.8 million year-over-year. Organic adjusted segment operating income of $61.8 million* increased $6.1 million primarily due to the increase in revenue.
• Mountain Park Lodges (acquired on June 8, 2019) and the Belton Chalet (acquired on May 21, 2019) contributed $13.1 million in revenue and $7.4 million in adjusted segment EBITDA ($4.7 million of EBITDA attributable to Viad shareholders).
• Exchange rate variances had a negative impact of $0.7 million on revenue and $0.4 million on adjusted segment operating income.

Cash Flow / Capital Structure

• Our cash flow from operations was $61.6 million for the 2019 third quarter.
• Our capital expenditures for the quarter totaled $14.4 million, comprising $8.5 million for Pursuit and $5.8 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 September 30, 2019.
• Our debt payments (net) totaled $14.9 million for the quarter.
• Our cash and cash equivalents were $56.6 million, debt was $326.2 million, and our debt-to-capital ratio was 38.0% at September 30, 2019.

Business Outlook

2019 Full Year Guidance

Moster said, “We have updated our guidance to reflect a reduced outlook for fourth quarter revenue at GES based on our current sales pipelines, as well as the lower than previously expected third quarter growth at Pursuit, which was primarily due to softer group visitation and the delayed completion and ramp up of certain build and refresh projects. The GES team is aggressively working to secure additional business and manage costs. And, with all of our planned new and refreshed experiences for 2019 fully operational, the Pursuit team is focused on delighting our guests for maximum returns.”

• 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 $153.5 million to $157.5 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 $1.23 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 $15 million to $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 $29 million to $31 million during 2019, inclusive of $19 million to $21 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 $2.5 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 $1.3 million of year-to-date acquisition transaction-related costs.
• We expect our effective tax rate on income before other items to be 29% to 30%.

2019 Fourth Quarter Guidance

• We expect GES fourth quarter results to increase primarily due to positive show rotation and continued new business wins.
• We expect the Mountain Park Lodges and Belton Chalet acquisitions to contribute fourth quarter revenue of $3 million to $5 million. We expect Pursuit fourth quarter operating results to decrease primarily due to additional costs and investments to support continued expansion of the business, including an increase of about $3 million in depreciation and amortization expense.

Conference Call and Web Cast

We will hold a conference call with investors and analysts for a review of third quarter 2019 results on Thursday, October 24, 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 (888) 667-5782 or (402) 220-6425 (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, Las Vegas (expected opening in 2021), and Toronto (expected opening in 2022) 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.