VVI
#Thanks, <UNK>, and thank you for joining us on today's call.
We delivered solid first quarter earnings, which were lower than prior year due to negative show rotation.
Both business units reported results that were in line with our expectation.
At GES, we continue to see healthy industry fundamentals and realized our 20th straight quarter of same-show growth.
Our U.S.-based same-show revenue growth was 3.7% for the quarter, which was a bit softer than our recent trend of mid-single-digit growth.
This was expected and was primarily due to one event that experienced a net square footage decline compared to its prior occurrence.
Our efforts to position GES as the preferred global full-service provider for live events continues to drive results.
Our expanded suite of services is strengthening our competitive position and helping to differentiate GES in the marketplace.
The strength of our offering was recently validated by Reed Exhibitions, one of the world's largest event organizers.
Looking to enhance the attendee experience, Reed renewed our registration services contracted for portfolio shows in Dubai and added an expanded suite of technology offerings.
Our new contract includes our softwares and service registration platform, NFC-enabled smart badges and touchpoints, a lead capture app and an intelligent dashboard to drive engagement on the show floor and maximize the experience for all stakeholders.
It's extremely rewarding to deliver innovative tools and services that drive unique value for our customers.
As further validation, we were once again recognized as the best supplier to exhibitors at the 2018 Exhibition News Awards for our leading event technology solutions.
We've won this prestigious award 3 out of the last 4 years, and it's an honor to receive this recognition.
I'm also happy to report that our ON Services audiovisual production business met our expectations for the quarter and captured in-sourcing benefits that drove margin improvement across several events.
We're also seeing solid cross-sell opportunities and strong leads across an array of sectors.
Recently, we won and produced the EarthX conference, which is the world's largest environmental event.
In just 2 months, our ON Services team went from initial discussions with the client to executing on this complex event that included conference sessions, festivities and entertainment with over 800 exhibits spread across 3 buildings.
With our sustainable event planning offering, GES was a natural partner for EarthX, which showcases the latest initiatives, discoveries, research, innovation, policies and corporate practices that are reshaping the future of our planet.
Audiovisual production services is a key component of our growth strategy, particularly as we work to gain additional share in the higher-margin corporate event space, and we continue to solidify and grow our position in that area.
Last month, we partnered with Q2, a leading provider of secure, experience-driven digital banking solutions, to produce its flagship event, CONNECT 18, in San Antonio.
For this event, we designed, built and executed the general session, the breakout sessions, expo, hub and design lab, effectively creating an environment that encouraged conversation for learning, networking and innovation.
We also recently re-signed Tableau Software's annual conference for an additional 3-year period.
We will provide creative strategy and planning, environmental and graphic design and production, show services and interactive installations for Tableau's events.
And another corporate event client, Plexus Worldwide, has chosen to partner with GES for a second year to help strategize and design and produce its 10th annual Plexus Legacy Convention later this year.
Our partnership with Plexus has included product launch designs and strategy, the creation of a full retail store within the convention center hall and mapping out of the attendee flow for 13,000 Plexus ambassadors.
Our exhibitions team also had an important renewal recently with the re-signing of CONEXPO-CON/AGG and IFPE for its 2020 occurrence.
This tri-annual show is a long-standing GES client and the largest exhibition in the Western hemisphere.
Overall, we're encouraged by the health of our industry and the progress that we're making towards our strategic goals.
By adding complementary and higher-margin services to our suite of offerings, we are strengthening our position in the marketplace and we're poised for a successful 2018.
Now let me switch gears to Pursuit.
Our team at Pursuit delivered strong organic growth of 17.7% during a seasonally slow first quarter.
This strength was primarily driven by our revenue management initiatives coupled with the investments that we've made towards our Refresh, Build, Buy strategy.
With most of our operations closed, the growth during this period was primarily driven by the Banff Gondola and the FlyOver Canada attractions.
Our Banff Gondola continues to exceed expectations with revenue up more than 20% from the 2017 quarter.
The improvements we've made to its mountaintop experience, including the new Sky Bistro, an immersive, interactive exhibit and theater and rooftop observation deck, have truly enhanced our guest experience.
In addition, our team is doing a great job driving higher visitation during otherwise offpeak periods at the gondola through programming.
For example, we recently offered a Northern Lights viewing package that was a great success.
As a result, we're experiencing very strong visitation and capturing higher revenue per visitor.
Our other all-season attraction, FlyOver Canada, also performed well during the quarter.
Through our revenue management initiatives and bundling of unique film content, our team was able to drive passenger growth of 8% and a 13% increase in revenue per passenger.
Our development of the FlyOver Iceland attraction is progressing as planned.
Last week, we commenced construction with an official groundbreaking ceremony that attracted local media's interest.
We're also excited to open this new FlyOver location in 2019.
Closer to home, we added to our Banff Jasper Collection with the purchase of a building that serves as a restaurant and gift shop in the Maligne Canyon area of Jasper National Park.
This facility sits at a popular trailhead, about 10 minutes outside of the town of Jasper and along the route to our iconic Maligne Lake tourist attraction.
With a great location and views that overlook the scenic Maligne river, we see strong potential to refresh this asset and drive higher revenue with an improved guest experience.
This operation is a perfect complement to our collection of assets in the Jasper area, providing our guests with idyllic spot to dine and relax on their travel adventures.
We're also making good progress towards our upcoming reopening of the Mount Royal Hotel this peak season.
The upgraded property is scheduled to open on July 1, and we're seeing strong initial demand.
We believe that our efforts to upgrade this hotel will help us realize a higher ADR with continued strong occupancy.
In addition to those exciting projects, our teams are busy preparing for guests ahead of our peak summer tourism season.
Overall, we're off to a great start at Pursuit, and we expect another strong year of growth and profitability from our collection of assets.
And now I'll turn it over to <UNK> to provide some more color on the financials.
<UNK>.
Thanks, Steve.
As Steve mentioned earlier, our results for the first quarter of 2018 were in line with our prior guidance.
Our loss before other items was $0.49 per share on revenue of $277.4 million, adjusted segment EBITDA of $2.5 million and adjusted segment operating loss of $10.5 million.
Compared to the 2017 first quarter, consolidated revenue decreased 14.8% or $48.4 million, adjusted segment EBITDA decreased by $23.1 million and adjusted segment operating results decreased by $24 million.
The expected declines relative to the 2017 first quarter primarily reflect the impact of negative show rotation of $56 million at GES.
Moving on to the business group results.
GES posted first quarter revenue of $267.7 million, adjusted segment EBITDA of $10.4 million and adjusted segment operating income of $641,000.
As compared to the 2017 first quarter, revenue was down 15.8% or $50.2 million.
On an organic basis, which excludes the impact of favorable exchange rate variances, the revenue decline was $56 million or 17.6%.
U.S. segment organic revenue decreased $53.3 million or 20.7% primarily due to negative show rotation of about $52 million and certain nonrecurring business partially offset by continued base same-show growth of 3.7%.
Organic revenue for GES' international segment decreased by $2.5 million or 3.9% primarily due to negative show rotation of approximately $4 million partially offset by new business wins.
GES' adjusted segment EBITDA and adjusted segment operating income decreased $22.2 million and $22.9 million, respectively, from the 2017 quarter.
On an organic basis, those declines were $22.4 million and $22.8 million, respectively, primarily driven by negative show rotation.
Pursuit posted first quarter revenue of $9.7 million, adjusted segment EBITDA of negative $7.9 million and an adjusted segment operating loss of $11.2 million.
As compared to the 2017 first quarter, revenue was up $1.8 million year-over-year or $1.4 million on an organic basis.
The revenue growth during this seasonally slow quarter was primarily driven by higher passenger volumes and revenue per passenger at the Banff Gondola and FlyOver Canada attractions and stronger RevPAR from our hospitality assets.
Our same-store revenue per passenger increased 12%, and same-store RevPAR grew by 12.2% versus the prior year.
Pursuit's adjusted segment EBITDA and adjusted segment operating results decreased by $936,000 and $1.2 million, respectively.
On an organic basis, those declines were $801,000 and $940,000, respectively, which were primarily due to additional cost to support continued growth initiatives across Pursuit as well as the timing of certain expenses.
And now I'll cover some cash flow and balance sheet items before discussing 2018 guidance.
Viad's consolidated cash flow from operations was an outflow of $3.4 million for the 2018 first quarter versus an inflow of $32.2 million in the 2017 quarter primarily due to lower income and changes in working capital.
Capital expenditures totaled $26.6 million for the quarter, up from $14.7 million in 2017 primarily due to investments at Pursuit, including the rebuilding of the Mount Royal Hotel and the purchase of a restaurant and gift shop at Maligne Canyon.
GES often had higher growth CapEx during the quarter primarily within AV, including equipment to service our new contract with the San Diego Convention Center.
At March 31, 2018, our cash and cash equivalents totaled $42.3 million, our debt was $232.2 million and our debt-to-capital ratio was 35.1%.
And now moving on to guidance.
Our full year outlook remains relatively unchanged.
We continue to expect consolidated revenue to increase at a low single-digit rate versus 2017 with adjusted segment EBITDA of about $156.5 million to $160.5 million.
For GES, we continue to expect full year revenue to increase slightly from 2017 as the ON Services acquisition and continued growth in the underlying business more than offset negative show rotation of approximately $40 million.
GES' adjusted segment EBITDA is expected to be in the range of $85 million to $88 million.
For Pursuit, we continue to expect full year revenue to grow at a high single-digit to low double-digit rate with adjusted segment EBITDA in the range of $71 million to $73 million.
This guidance for Pursuit includes incremental revenue of about $5 million for the Mount Royal Hotel, which is expected to reopen in July.
Our full year cash flow from operations is expected to be in the range of $105 million to $115 million, and we expect capital expenditures to be about $92 million to $98 million, which includes approximately $19 million to complete the restoration and renovation of the Mount Royal Hotel and approximately $10 million to begin development of the FlyOver Iceland attraction.
The Mount Royal Hotel expenditures will be funded primarily by the property insurance proceeds we received in 2017.
The FlyOver Iceland expenditures will be funded out of our 2017 capital contribution to acquire the controlling interest in Esja, the Icelandic entity that is developing the FlyOver Iceland attraction.
I also want to point out that we now expect our full year effective tax rate to be approximately 30% for 2018.
This is slightly higher than we had previously guided as we now expect to be subject to the GILTI tax on our foreign earnings.
Our effective rate will be higher than the 21% U.S. federal corporate tax rate due to our foreign earnings in higher rate jurisdictions, the increase in nondeductible expenses, the GILTI tax and an expected increase in our effective state tax rate.
This is our best estimate based on information available at this time.
For the second quarter, we expect income per share of $1 to $1.15 as compared to $1.22 in the 2017 quarter.
The expected decline reflects lower revenue at GES driven by negative show rotation.
Adjusted segment EBITDA and revenue are both expected to decrease versus the '17 quarter.
For GES, we expect second quarter revenue to decrease by approximately $5 million to $20 million from the 2017 quarter primarily as a result of negative show rotation of approximately $15 million.
GES' second quarter adjusted segment operating income is expected to decline about $3.7 million to $6.7 million versus the 2017 quarter primarily due ---+ driven by the lower revenue.
For Pursuit, we expect second quarter revenue to increase by $4.3 million to $7.3 million from the 2017 quarter largely driven by our continued focus on revenue management and refresh efforts across our attraction and hospitality portfolio.
Pursuit's second quarter adjusted segment operating income is expected to be in the range of $9.5 million to $12 million as compared to $10 million in the 2017 quarter and reflects additional cost to support continued growth initiatives.
Additional 2018 guidance can be found in the earnings press release.
Steve, back to you.
Thanks, <UNK>.
In closing, we're off to a solid start for 2018, and I'm proud of the continued effort of the Viad team to deliver strong financial results while also relentlessly pursuing our strategic goals.
The investments we've made in acquisitions and our organic growth projects are providing exciting avenues of growth with enhanced profitability.
I'm very happy with our progress, and I am excited about the opportunities that still lie ahead.
And I want to thank the entire Viad team for driving strong results and for their commitment to our strategy.
And with that, we will open it up to questions.
Kristen, can you please open the line.
One of the reasons why we got into these additional services is we did feel like we were under-serving some of our clients' needs and we wanted to break into new segments, specifically, the corporate event segment.
And so by adding those new services, we've been able to do that.
We have always felt that there is a strong opportunity for us and that we're in the early stages of realizing some of that opportunity.
We've made solid progress in terms of some of the cross-selling, but I still believe that there is a lot of room ahead of us.
Yes, I think our existing clients are very excited about us being able to provide them that one-stop shop.
That's the cornerstone to our strategy, and I think it's very well received by our clients, who view it as an easier way to deal with one partner versus a variety of partners.
But as we mentioned in our prepared remarks, it also comes to being able to provide a suite of technology services that allow them a better opportunity to capture data for their events.
So the positive ---+ we received positive feedback from our clients about not only the ease of dealing with us, but how they're leveraging our full range of services.
So we're very encouraged by that, and we continue to be out in the marketplace making progress.
With our current client base, <UNK>, it's usually the same decision-maker who's making the decision across multiple services for that event.
And so we've really repositioned ourselves through a series of campaigns to really illustrate the full depth of the services that we offer, and I think it's been very successful in terms of opening the eyes of our full capability set.
So I'm encouraged by how the team has addressed it.
I'm encouraged by the response that we've had from our clients, and I really think the way we're positioning ourselves with these new services has really taken a hold with our client base, both new and ---+ or both the current clients and prospects.
Yes, it's a small tuck-in acquisition that we did.
And as you can imagine, within the Jasper National Park, being able to find unique assets when they come along, we really want to be able to be in a position where we can pick those up.
It not only supports our other assets in the area, which is obviously the Maligne Lake boat tours, but also the ice adventures, the Glacier Adventure that we have.
So it supports our current assets, plus we believe that it's a market or an opportunity for us to provide a higher-end experience for dining and it really helps us corner kind of that Maligne Canyon area.
So we're excited to bring it on board.
This will be our first year of operating it, and we'll probably make some enhancements after we finish this year ---+ this year's peak season.
We would love to have it open earlier.
However, this ---+ experiences like this take some time to develop, both from construction of the facility, because this is a new build that we're doing and just outside of Reykjavik.
It also takes a while to film the content.
So we are creating a new FlyOver Iceland film, and we're capturing all seasons.
So that's what is creating some of the lead time as well, <UNK>.
So we're still on schedule for 2019, so we really can't ---+ some of the lead times keep us from opening earlier than that.
That's correct.
It's relatively unchanged.
The additional taxes that <UNK> mentioned kind of came up recently.
That's the only really minor thing that we've seen.
And there's just a minor FX changes as well, Steve.
Down from what we said.
No, go ahead.
Right.
So the RV park that we're putting in is actually in Glacier National Park.
It's actually on the west side of it.
West Glacier is where we're locating.
It will be open in 2019.
So we're waiting for the snow to melt to start construction and get that project underway.
In terms of trends, we feel like Glacier National Park, and particularly the west side of Glacier National Park, is an underserved market from an RV and cabin perspective.
And so not thinking about the macro trends but just the local trends, we think that, that is a prime opportunity for us, and that's why we have initiated this project.
In terms of the macro trends, fuel prices have gone up over 2017, but we still see strong demand.
We think that the RV park industry is really hitting strong record years over the last couple years.
So we think that will continue despite the increase in gasoline prices.
Sure.
And didn't say we don't anticipate providing attraction-level detail going forward.
The primary reason why we share that information is our primary job here is to be good stewards of our capital and capital allocation, and we wanted to make sure that our investors and those following Viad understand some of the returns that we're getting specifically on larger investments like the Banff Gondola as an example.
All right, Kristen, I think that sounds like all the questions.
I just want to thank everybody for the questions and their interest in Viad, and we look forward to speaking with you again next quarter.
Buh-bye.
