Viad Corp Reports 2018 Third Quarter Results

GES Continued to

Deliver Base Same-Show Growth

Pursuit Delivered

Organic Revenue Growth of 7.3% Despite Impact of Fires

PHOENIX--(BUSINESS WIRE)--Viad Corp (NYSE: VVI) today announced third quarter 2018 results that

were stronger year-over-year but slightly below prior guidance.

Consolidated revenue grew 5.6% and income before other items increased

28.5%. Net income attributable to Viad declined primarily due to

impairment recoveries of $17.8 million, after-tax, received during the

2017 third quarter related to the Mount Royal Hotel fire.

Steve Moster, president and chief executive officer, commented, “Our

income before other items of $1.72 per share was up significantly from

the 2017 third quarter driven largely by positive show rotation and

same-show growth at GES, as well as continued strength at Pursuit. While

both GES and Pursuit posted year-over-year increases, Pursuit’s growth

was hampered by forest fires that negatively affected visitation.

Additionally, at GES, sales of shorter lead time projects came in below

our targets for the quarter. Overall, we remain encouraged by the

underlying fundamentals of our businesses and our continued progress

against key strategic goals to enhance shareholder value.”

• 
  Revenue of $358.2 million increased 5.6% ($19.1 million)
  year-over-year, or 6.6% ($22.4 million) on an organic basis (which
  excludes the impact of exchange rate variances).
  
  
  
  
  • 
    The organic revenue increase primarily reflects positive show
    rotation of $28 million at GES.
    
  
  
  • 
    Exchange rate variances had an unfavorable impact of $3.4 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 as well as a reduction in
  performance-based incentives.
  

GES Results

Moster said, “GES delivered solid same-show revenue growth of 5.3% and

strong performance from non-annual events during the third quarter. We

also continued to have success leveraging our full suite of services,

including audio-visual production, to win new business in the corporate

event space. However, as a result of lower than expected short-term

bookings, overall revenue growth was below our expectations. Looking

ahead, we remain committed to our strategic goals aimed at expanding in

higher-margin areas of the live events market and we are optimistic

about our future growth prospects.”

• 
  GES revenue of $246.1 million increased 6.0% ($14.0 million)
  year-over-year. On an organic basis, which excludes the impact of
  exchange rate variances, revenue increased 6.3% ($14.7 million).
  
  
  
  
  • 
    U.S. organic revenue increased 3.8% ($6.9 million) primarily due
    to positive show rotation of approximately $19 million and base
    same-show growth of 5.3%, partially offset by nonrecurring
    business produced in the 2017 third quarter.
    
  
  
  • 
    International organic revenue increased 6.5% ($3.5 million)
    primarily due to positive show rotation of approximately $9
    million, partially offset by nonrecurring business produced in the
    2017 third quarter.
    
  
  
  
  


• 
  GES adjusted segment operating income of $1.2 million* increased $6.7
  million year-over-year, and $6.7 million on an organic basis.
  
  
  
  
  • 
    U.S. organic adjusted segment operating income increased by $5.0
    million to $2.3 million* primarily due to a reduction in
    performance-based incentives and the increase in revenue.
    
  
  
  • 
    International organic adjusted segment operating results improved
    by $1.8 million to a loss of $1.1 million* primarily due to a
    reduction in performance-based incentives and the increase in
    revenue.
    
  
  
  
  

Pursuit Results

Moster said, “Pursuit delivered third quarter organic revenue growth of

7.3% despite forest fires that affected tourism in Banff, Jasper and

Glacier National Parks. Poor air quality and visibility due to smoke

resulted in lower year-on-year passenger volumes at our attractions and

reduced occupancy at certain hospitality properties near Glacier

National Park. However, our team did a great job with revenue management

efforts to capture higher same-store revenue per passenger and RevPAR.

Looking ahead, we are very excited about the many organic growth

projects that are in progress and expected to open in 2019. We remain

committed to driving unforgettable and inspiring guest experiences

across all of our iconic destinations.”

• 
  Pursuit revenue of $112.1 million increased 4.7% ($5.1 million)
  year-over-year. On an organic basis, which excludes the impact of
  exchange rate variances, revenue increased 7.3% ($7.8 million)
  primarily driven by the re-opening of the Mount Royal Hotel, combined
  with our revenue management efforts across our attractions and
  hospitality properties.
  


• 
  Pursuit adjusted segment operating income of $55.8 million* increased
  3.6% ($1.9 million). Organic adjusted segment operating income of
  $57.3 million* increased $3.4 million primarily due to the increase in
  revenue.
  

Cash Flow / Capital Structure

• 
  Our cash flow from operations was $70.2 million for the 2018 third
  quarter.
  


• 
  Our capital expenditures for the quarter totaled $21.5 million,
  comprised of $15.8 million for Pursuit, and $5.7 million for GES.
  


• 
  Our return of capital totaled $2.0 million for the quarter (which
  represented quarterly dividend of $0.10 per share). Viad had 265,449
  shares remaining under its current repurchase authorization at
  September 30, 2018.
  


• 
  Our debt payments (net) totaled $40.5 million for the quarter.
  


• 
  Our cash and cash equivalents totaled $55.5 million, our debt totaled
  $200.8 million and our debt-to-capital ratio was 29.6% at September
  30, 2018.
  


• 
  On October 24, 2018, we amended and restated our credit agreement to
  provide additional debt capacity through 2023. The amendment replaced
  our $175 million revolving credit facility, $125 million term loan and
  $100 million accordion feature with an expanded $450 million revolving
  credit facility and $250 million accordion feature.
  

Business Outlook

Our guidance is subject to change as a variety of factors, identified in

the safe harbor language at the end of this press release, can affect

actual results.

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.

2018 Full Year Guidance

Moster said, “We continue to drive solid performance in key areas like

same show growth and corporate event wins at GES, and same-store growth

at Pursuit. However, revenue challenges in certain areas have caused us

to reduce our full year expectations for 2018. For Pursuit, our revised

outlook reflects the fire impact on our third quarter results, partially

offset by cost-reduction actions during the fourth quarter. For GES, our

revised outlook reflects a lower level of short-term booking revenue,

which is based on our third quarter experience and our current sales

pipelines for the fourth quarter, as well as a reduction in

performance-based incentives. I remain encouraged by the progress we are

making against our strategic growth goals for both GES and Pursuit and

the positive results we are seeing in key areas. We also have an active

acquisition pipeline, in addition to many organic projects in progress

that will bolster Pursuit’s growth during 2019 and beyond.”

• 
  We expect consolidated revenue to decrease at a low single-digit rate
  from 2017 full year revenue, driven primarily by negative show
  rotation of $35 million to $40 million at GES, partially offset by
  continued growth in the underlying business.
  


• 
  We expect consolidated adjusted segment EBITDA to be in the range of
  $146.5 million to $150.5 million, as compared to $154.2 million* in
  2017. This guidance range reflects a reduction from our prior guidance
  of $154.5 million to $158.5 million primarily due to lower short-term
  booking revenue at GES, as well as the impact of fires on Pursuit’s
  peak operating season.
  


• 
  Our guidance assumes that exchange rates during the rest of 2018 will
  approximate $0.77 U.S. Dollars per Canadian Dollar and $1.30 U.S.
  Dollars per British Pound. As compared to 2017, we expect exchange
  rate variances to impact 2018 full year results as follows:
  

• 
  The outlook for our business units is as follows:
  

• 
  We expect GES show rotation to have a net negative impact on full year
  revenue of $35 million to $40 million versus 2017. 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.
  


• 
  During the 2017 third quarter, GES adjusted segment EBITDA and
  adjusted segment operating income included income of $2.8 million
  related to a contract settlement, which will not recur in 2018.
  


• 
  We expect Pursuit revenue to be favorably impacted by approximately
  $4.5 million from the re-opening of the Mount Royal Hotel in July
  2018, as well as continued focus on revenue management and refresh
  efforts across our attraction and hospitality portfolio.
  


• 
  We expect start-up costs related to the development of Pursuit’s
  FlyOver Iceland attraction, which is expected to open in 2019, to
  approximate $1 million during 2018 ($0.8 million of which was incurred
  during the first nine months of 2018). These costs are not included in
  the adjusted segment EBITDA or adjusted segment operating income
  guidance ranges above.
  


• 
  Our capital expenditure guidance for Pursuit includes approximately
  $19 million invested to complete the restoration and renovation of the
  Mount Royal Hotel and approximately $10 million for the development of
  the FlyOver Iceland attraction. The Mount Royal Hotel expenditures
  were funded primarily by the property insurance proceeds received
  during 2017. The FlyOver Iceland expenditures are being funded
  primarily out of our 2017 capital contribution relating to the FlyOver
  Iceland attraction.
  


• 
  We expect corporate activities expense to approximate $10 million to
  $11 million, inclusive of $0.4 million of acquisition-related costs
  incurred during the nine months ended September 30, 2018.
  


• 
  We expect our effective tax rate on income before other items to
  approximate 29%, which is based on our current best estimates
  regarding the impact of Tax Reform. The higher rate relative to the
  21% U.S. federal corporate tax rate is due to our foreign earnings in
  higher rate jurisdictions, the increase in non-deductible expenses,
  and an increase in our effective state tax rate.
  

2018 Fourth Quarter Guidance

• 
  We expect GES fourth quarter revenue to increase primarily due to
  positive show rotation revenue of approximately $5 million. We expect
  the growth in GES operating income to be driven by lower expenses,
  including performance-based incentives, as well as the increase in
  revenue.
  


• 
  We expect Pursuit fourth quarter results to increase primarily due to
  the re-opening of the Mount Royal Hotel and continued focus on revenue
  management and refresh efforts across our attraction and hospitality
  portfolio.
  

Conference Call and Web Cast

We will hold a conference call with investors and analysts for a review

of third quarter 2018 results on Thursday, October 25, 2018 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) 396-6279 (no

passcode 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, Glacier

National Park, Banff, Jasper and Vancouver that includes attractions,

lodges and hotels, and sightseeing tours that connect guests with iconic

places. 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;
  


• 
  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;
  


• 
  transportation disruptions and increases in transportation costs;
  


• 
  seasonality of our businesses;
  


• 
  terrorist attacks, natural disasters and other catastrophic events;
  


• 
  fluctuations in general economic conditions;
  


• 
  the impact of recent U.S. tax legislation;
  


• 
  our exposure to currency exchange rate fluctuations;
  


• 
  our multi-employer pension plan funding obligations;
  


• 
  our exposure to labor cost increases and work stoppages related to
  unionized employees;
  


• 
  our exposure to cybersecurity attacks and threats;
  


• 
  compliance with laws governing the collection, storage, handling and
  transfer of personal data and our exposure to legal claims and fines
  for data breaches or improper handling of such data;
  


• 
  unanticipated delays and cost overruns of our capital projects, and
  our ability to achieve established financial and strategic goals of
  such projects;
  


• 
  adverse effects of show rotation on our periodic results and operating
  margins;
  


• 
  the effects of the United Kingdom’s exit from the European Union; and
  


• 
  liabilities relating to prior and discontinued operations.
  

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.

* 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.