Classified in: Business, Covid-19 virus
Subjects: EARNINGS, Trade Show, Conference Call, Webcast

Viad Corp Reports 2019 Fourth Quarter and Full Year Results

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

**Change is greater than +/- 100 percent.

Steve Moster, president and chief executive officer, commented, "GES and Pursuit both finished 2019 with solid fourth quarter revenue growth. Our full year results reflect continued organic revenue growth at both businesses, as well as contributions from acquisitions during the year. At Pursuit, we accelerated our pace of growth with investments in new experiences, and GES continues to drive growth within the corporate event space with a differentiated end-to-end offering. We expect significant growth in 2020 as GES benefits from favorable show rotation and our new Pursuit experiences continue to attract additional visitors."

Full Year

• Full year revenue of $1.4 billion increased $75.5 million (5.8%) year-over-year, or $68.9 million (5.3%) on an organic basis (which excludes the impact of acquisitions and exchange rate variances).
  • The increase in organic revenue is due to continued organic growth at both GES and Pursuit, partially offset by negative show rotation at GES of about $15 million.
  • Pursuit acquisitions completed during 2019 contributed revenue of $19.9 million.
  • Exchange rate variances had an unfavorable impact on revenue of $13.3 million.
• The increases in full year adjusted segment operating income and adjusted segment EBITDA were primarily driven by the increase in revenue, partially offset by higher accruals for performance-based incentives, the revenue mix at GES, and additional costs to support the growth initiatives of Pursuit.
• Income before other items was higher than the prior year primarily due to a lower effective tax rate and the increase in adjusted segment operating income, partially offset by higher interest expense and an increase in income attributable to noncontrolling interests.
• The GAAP-basis net income attributable to Viad also included an $11.7 million, after-tax, charge related to our withdrawal from the Central States Pension Plan, a $6.4 million, after-tax, charge related to a legal settlement, higher restructuring charges due to GES simplification actions, and a $4.3 million, after-tax, asset impairment charge.

Fourth Quarter

• Fourth quarter revenue of $321.3 million increased $24.4 million (8.2%) year-over-year, or $21.6 million (7.3%) on an organic basis (which excludes the impact of acquisitions and exchange rate variances).
  • The increase in organic revenue is primarily due to continued organic growth at both GES and Pursuit.
  • Pursuit acquisitions completed during 2019 contributed revenue of $3.8 million.
  • Exchange rate variances had an unfavorable impact on revenue of $1.0 million.
• Adjusted segment EBITDA remained essentially flat year-over-year as revenue growth was offset primarily by accruals for performance-based incentives earned in 2019, the revenue mix at GES, and increased costs to support continued growth at Pursuit. The decrease in adjusted segment operating income also reflects higher depreciation and amortization expense primarily related to Pursuit growth investments.
• The loss before other items decreased primarily due to a higher tax benefit, partially offset by lower adjusted segment operating results and higher interest expense.
• The GAAP-basis net loss attributable to Viad also included a $4.3 million, after-tax, asset impairment charge primarily related to the GES EMEA segment.

GES Results
Moster said, "GES finished 2019 with solid revenue growth and operating results that were in line with our prior guidance. During the year, we undertook various actions that will position GES for greater success in the years to come, including restructurings in North America and EMEA to streamline and improve the cost structure. We also continued to make selective investments in people and capabilities to support our growth within corporate events and to drive productivity gains in our service delivery. With a very strong show rotation schedule in 2020, we expect to drive significant growth in EBITDA and cash flow at GES this year."

GES Full Year

• Full year GES revenue of $1.1 billion increased $38.0 million (3.4%) year-over-year. On an organic basis, which excludes the impact of exchange rate variances, revenue increased $49.1 million (4.4%).
  • North America organic revenue increased $27.9 million (3.1%) primarily due to continued growth from corporate clients and other new client wins, partially offset by negative show rotation of approximately $27 million.
  • EMEA organic revenue increased $24.9 million (11.4%) primarily due to positive show rotation of approximately $12 million, new client wins, and growth from the underlying business.
• Full year GES adjusted segment operating income of $35.9 million* decreased $3.8 million year-over-year, and $3.4 million on an organic basis.
  • North America organic adjusted segment operating income of $27.9 million* decreased by $2.3 million primarily due to accruals for performance-based incentives earned in 2019 and the revenue mix.
  • EMEA organic adjusted segment operating income of $8.5 million* decreased $1.1 million primarily due to the revenue mix, the timing of certain expenses, and accruals for performance-based incentives earned in 2019.
• Exchange rate variances had a negative impact of $11.2 million on revenue and $0.4 million on adjusted segment operating income.

GES Fourth Quarter

• Fourth quarter GES revenue of $299.6 increased $17.9 million (6.3%) year-over-year. On an organic basis, which excludes the impact of exchange rate variances, revenue increased $18.8 million (6.7%).
  • North America organic revenue increased $11.2 million (4.9%) primarily due to growth from corporate clients and other new business wins.
  • EMEA organic revenue increased $8.4 million (13.8%) primarily due to positive show rotation of approximately $4 million, new client wins, and growth from the underlying business.
• Fourth quarter GES adjusted segment operating income of $10.5 million* increased $1.7 million year-over-year, and $1.9 million on an organic basis.
  • North America organic adjusted segment operating income of $5.1 million* increased by $0.1 million driven by higher revenue, mostly offset by the revenue mix and accruals for performance-based incentives earned in 2019.
  • EMEA organic adjusted segment operating income of $5.8 million* increased $1.8 million primarily due to the increase in revenue, partially offset by accruals for performance-based incentives earned in 2019.
• Exchange rate variances had a negative impact of $0.9 million on revenue and $0.3 million on adjusted segment operating income.

Pursuit Results
Moster said, "Pursuit delivered solid results for its seasonally slow fourth quarter, and strong full year revenue growth of 20 percent. Pursuit's experiences continue to receive great visitor feedback and recognition within the leisure travel industry. During 2019, we accelerated Pursuit's growth trajectory with several new experiences, acquiring eight lodging properties, and commencing plans to open three new world-class attractions over the next three years."

Pursuit Full Year

• Full year Pursuit revenue of $222.8 million increased $37.5 million (20.3%) year-over-year. On an organic basis, which excludes the impact of acquisitions and exchange rate variances, revenue increased $19.8 million (10.7%) primarily due to the opening of several new build and refresh projects as well as stronger performance from our existing assets.
  • Pursuit successfully opened the refreshed food and beverage and retail offerings at Maligne Canyon and Maligne Lake (May), the 36-room expansion at the Windsong Lodge (June), the renovated Glacier View Lodge (June), the West Glacier RV Park & Cabin Village (July), and the FlyOver Iceland attraction (late August).
  • Full year same-store revenue per attraction visitor increased 9.5% year-over-year primarily driven by higher effective ticket prices and ancillary revenues at our recently refreshed experiences and dynamic pricing. The decrease in same-store attraction visitors year-over-year was primarily due to softer visitation from select long-haul markets at certain attractions.
  • Full year same-store RevPAR increased by 5.6% year-over-year primarily due to higher average daily rates at our refreshed properties and our revenue management efforts.
• Full year Pursuit adjusted segment operating income of $58.0 million* increased $8.1 million year-over-year. Organic adjusted segment operating income of $51.5 million* increased $1.6 million primarily due to the increase in revenue, partially offset by additional costs to support continued expansion of the business, including an increase of $2.0 million in depreciation and amortization expense.
• Mountain Park Lodges (acquired in June) and the Belton Chalet (acquired in May) contributed $19.9 million in revenue and $9.5 million in adjusted segment EBITDA ($6.0 million of EBITDA attributable to Viad shareholders).
• Exchange rate variances had a negative impact of $2.1 million on revenue and $0.2 million on adjusted segment operating income.

Pursuit Fourth Quarter

• Fourth quarter Pursuit revenue of $21.7 million increased $6.5 million (43.1%) year-over-year. On an organic basis, which excludes the impact of acquisitions and exchange rate variances, revenue increased $2.8 million (18.2%) during the seasonally slow quarter primarily due to the opening of the FlyOver Iceland attraction as well as additional revenue captured at our recently refreshed properties.
• Fourth quarter Pursuit adjusted segment operating loss of $8.8 million* increased $4.1 million year-over-year. Organic adjusted segment operating loss of $7.9 million* increased $3.1 million primarily due to additional costs to support the growth initiatives of the business, including an increase of $1.8 million in depreciation and amortization expense.
• Mountain Park Lodges (acquired on June 8, 2019) and the Belton Chalet (acquired on May 21, 2019) contributed $3.8 million in revenue and $0.2 million in adjusted segment EBITDA.

Cash Flow / Capital Structure

• Our cash flow from operations was $7.0 million for the fourth quarter and $108.1 million for the full year.
• Our capital expenditures for the quarter totaled $15.3 million, comprising $9.0 million for Pursuit and $6.3 million for GES. For the full year, our capital expenditures totaled $76.1 million, comprising $49.9 million for Pursuit and $26.2 million for GES (inclusive of about $35 million for growth projects at Pursuit and $10 million for growth projects at GES).
• During the second quarter, we acquired the Mountain Park Lodges properties and the Belton Chalet for an aggregate purchase price of approximately $79 million. In the third quarter, we acquired a 51% controlling interest in a new geothermal lagoon attraction for approximately $13 million.
• Our return of capital totaled $2.0 million for the quarter (which represented quarterly dividends of $0.10 per share) and $8.1 million for the full year. We had 600,067 shares remaining under our current repurchase authorization at December 31, 2019.
• Our debt proceeds (net) totaled $13.6 million for the quarter and $84.7 million for the full year.
• Our cash and cash equivalents were $62.0 million, debt was $342.3 million, and our debt-to-capital ratio was 39.0% at December 31, 2019.

Business Outlook
As it is difficult to ascertain the severity or duration of travel disruptions caused by the Coronavirus at this time, our guidance below assumes the Coronavirus will have minimal impact on our first quarter and full year results.

2020 Full Year Guidance

• We expect consolidated revenue to increase at a low-double digit rate from 2019 full year revenue, driven by growth at both GES and Pursuit.
• We expect consolidated adjusted segment EBITDA to be in the range of $195 million to $206 million, as compared to $152.7 million* in 2019.

• The outlook for our business units is as follows:

• Our guidance assumes that exchange rates during 2020 will approximate $0.76 U.S. Dollars per Canadian Dollar and $1.30 U.S. Dollars per British Pound. As compared to 2019, we do not expect exchange rate variances to have a meaningful impact on 2020 full year growth.
• We expect GES show rotation to have a net positive impact on full year revenue of about $100 million versus 2019. 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 2020 growth to be fueled primarily by investments to support our Refresh, Build, Buy strategy, including incremental revenue of $19 million to $21 million from Mountain Park Lodges (acquired June 2019) and FlyOver Iceland (opened late August 2019). Additionally, we expect to realize mid-single to high-single digit revenue growth across the rest of our attractions and hospitality assets.
• We expect start-up costs of $5 million to $6 million related to the development of new Pursuit attractions during 2020. These costs primarily represent non-cash lease expense due to straight-line accounting recognition, and are not included in the adjusted segment EBITDA or adjusted segment operating income guidance ranges above.
• We expect corporate activities expense to approximate $10 million to $11 million.
• We expect our effective tax rate on income before other items to approximate 27%.

2020 First Quarter Guidance

• We expect GES first quarter results to increase primarily due to positive show rotation and continued new business wins.
• We expect the Mountain Park Lodges acquisition and FlyOver Iceland to contribute first quarter revenue of $4 million to $6 million. We expect Pursuit first 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 to review 2019 fourth quarter and full year results on Thursday, February 6, 2020 at 5:00 p.m. (ET). To join the live conference, call (888) 426-8929, 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) 759-4661 or (402) 998-0482 (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.

 

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