Viad Corp Reports 2016 Fourth Quarter and Full Year Results

Viad Corp Reports 2016 Fourth Quarter and Full Year Results

Full Year Revenue Increased 10.6% with Strong Flow-Through to Earnings

Continued Growth Expected in 2017

Viad Corp (NYSE: VVI) today announced 2016 fourth quarter and full year results that were in line with guidance. For the full year, consolidated revenue grew double digits year-over-year, driven by strong performance from both business groups and the acquisitions completed during 2016.

Full Year

• Full year revenue of $1.2 billion increased 10.6% ($115.9 million) year-over-year, or 7.7% ($84.2 million) on an organic basis (which excludes the impact of acquisitions and unfavorable exchange rate variances).

• The increase in organic revenue was primarily due to positive show rotation revenue of approximately $52 million and continued underlying growth in both the Marketing & Events Group (GES) and the Travel & Recreation Group (T&R).
• Acquisitions completed during 2016 contributed revenue of $55.7 million.
• Exchange rate variances had an unfavorable impact on revenue of $24.0 million.

• Adjusted segment operating income, adjusted segment EBITDA, income before other items and net income attributable to Viad improved significantly year-over-year, primarily due to high flow-through on the increase in revenue.

Fourth Quarter

• Fourth quarter revenue of $256.4 million increased 1.9% ($4.7 million) year-over-year, and declined 0.5% ($1.3 million) on an organic basis.

• The organic revenue decline reflects negative show rotation of approximately $15 million at GES, partially offset by strong underlying performance at both business groups.
• Year-over-year revenue growth from acquisitions was $13.6 million.
• Exchange rate variances had an unfavorable impact on revenue of $7.5 million.

• The declines in adjusted segment operating income, adjusted segment EBITDA, income before other items and net income attributable to Viad primarily reflect seasonal operating losses from the acquired businesses of Maligne Lake Tours and CATC, which are closed during the fourth quarter.

Steve Moster, president and chief executive officer, said, “2016 was a great year for Viad. We delivered strong financial results and took important steps to accelerate our growth strategy. Both business groups did an excellent job driving profitable growth with a resulting increase in income per share before other items of 63 percent. We acquired four businesses during the year that enhance our existing offerings and provide economies of scale and scope with strong margins. We also completed a full refresh of our leading attraction, the Banff Gondola. We expect these investments to continue to drive profitable growth and yield solid returns in 2017 and beyond.”

GES Results

Moster said, “GES delivered solid fourth quarter results to finish the year in line with our prior guidance. For the full year, positive show rotation, continued underlying business strength and the acquisition of leading audio-visual services provider ON Services helped to drive top-line growth of 8.0 percent and margin expansion of 200 basis points. The acquisition of ON Services gives us a more meaningful presence in the large and strategically important U.S. audio-visual services market. In addition, we continued to scale our event technology offerings with the launch of our data and registration platform in the Middle East and U.S. during the year. I am very proud of the team's accomplishments in 2016 and we enter 2017 with a healthy sales pipeline and favorable industry conditions, which position us for continued growth.”

GES Full Year

• Full year GES revenue increased 8.0% ($77.9 million) year-over-year. On an organic basis (which excludes the impact of acquisitions and unfavorable exchange rate variances), the increase was 8.1% ($79.2 million).

• U.S. organic revenue increased 11.7% ($84.2 million) driven by positive show rotation revenue of approximately $59 million, base same-show revenue growth of 4.1%, new business wins and increased sales to corporate clients.
• International organic revenue decreased 0.5% ($1.5 million) primarily due to negative show rotation revenue of approximately $7 million, partially offset by new business wins.

• Full year GES adjusted segment operating income increased $23.1 million (83.5%), or $24.0 million (86.8%) on an organic basis.

• U.S. organic adjusted segment operating income increased $26.4 million, primarily due to higher revenue and the strong operating leverage that exists within the GES business.
• International organic adjusted segment operating income decreased $2.3 million, primarily reflecting lower revenue and investments in personnel and assets to support continued growth of the business.

• The acquisition of ON Services (August 2016) contributed revenue of $21.3 million, adjusted segment EBITDA of $3.8 million* and an adjusted segment operating loss of $0.2 million* during 2016.
• Exchange rate variances had an unfavorable impact on full year revenue and adjusted segment operating income of $22.6 million and $0.7 million, respectively.

GES Fourth Quarter

• Fourth quarter GES revenue increased 0.7% ($1.7 million) year-over-year and declined 1.8% ($4.3 million) on an organic basis.

• U.S. organic revenue increased 3.4% ($5.7 million) driven by base same-show revenue growth of 5.6%, new business wins and increased sales to corporate clients, partially offset by negative show rotation revenue of approximately $7 million.
• International organic revenue decreased 11.1% ($8.5 million) driven primarily by negative show rotation revenue of approximately $8 million.

• Fourth quarter GES adjusted segment operating income increased $0.2 million (2.1%), or $1.2 million (16.0%) on an organic basis.

• U.S. organic adjusted segment operating income increased $1.9 million, primarily due to higher revenue.
• International organic adjusted segment operating income decreased $0.6 million primarily due to lower revenue, partially offset by a more profitable mix of revenue.

• The acquisition of ON Services contributed revenue of $13.5 million, adjusted segment EBITDA of $2.1 million* and an adjusted segment operating loss of $0.8 million* during the fourth quarter.
• Exchange rate variances had an unfavorable impact on fourth quarter revenue and adjusted segment operating income of $7.5 million and $0.3 million, respectively.

T&R Results

Moster said, “Our Travel & Recreation Group delivered strong growth in 2016 and finished the year in line with our prior guidance. Full year revenue grew about 37 percent year-over-year as we made key investments to grow our high-margin attraction and hospitality portfolio, while exiting select lower-margin service lines. Organic revenue grew 7.2 percent on the strength of increased park visitation and our revenue management efforts, which resulted in 10.3 percent growth in same-store passenger volumes at our attractions and same-store RevPAR growth of 11.3 percent at our hospitality assets. In connection with our Refresh, Build, Buy strategy, we acquired three great businesses during the year and completed a major renovation that significantly enhanced our leading attraction, the Banff Gondola. These investments are delivering strong returns, enriching the guest experience and fueling growth in high-margin areas.”

T&R Full Year

• Full year T&R revenue increased 36.7% ($41.2 million) year-over-year. On an organic basis (which excludes the impact of unfavorable exchange rate variances and acquisitions), revenue increased 7.2% ($8.1 million) driven primarily by higher RevPAR across the hospitality assets and higher passenger volumes at the attractions.
• Full year T&R adjusted segment operating income increased $9.1 million (32.6%). On an organic basis, adjusted segment operating income increased $0.5 million (1.8%) primarily reflecting higher organic revenue, partially offset by higher accruals for performance-based incentives and investments to support continued growth of the business.
• The acquisitions completed during 2016, primarily Maligne Lake Tours (January 2016) and CATC (March 2016), contributed full year revenue of $34.4 million, adjusted segment EBITDA of $13.1 million* and adjusted segment operating income of $8.4 million* during the 2016 full year.
• The Mount Royal Hotel in Banff, Canada suffered fire damage on December 29, 2016 and has been closed until further notice. As a result of the fire, an impairment loss of $2.2 million was recorded against the net book value of the hotel assets. The losses related to the fire are covered by Viad’s property and business interruption insurance. Accordingly, the company recorded an offsetting impairment recovery of $2.2 million. Assessment of the full value of the loss is ongoing.
• Exchange rate variances had an unfavorable impact on full year revenue of $1.3 million and a favorable impact on adjusted segment operating income of $0.1 million.

T&R Fourth Quarter

• Fourth quarter T&R revenue increased 43.3% ($3.1 million) year-over-year. On an organic basis, revenue increased 42.8% ($3.1 million) primarily driven by the fully refreshed Banff Gondola, which was closed for renovation during the prior year quarter.
• Fourth quarter T&R adjusted segment operating loss increased $5.3 million year-over-year. On an organic basis, the adjusted segment operating loss increased $2.2 million primarily due to the timing of certain expenses, higher accruals for performance-based incentives and investments to support continued growth of the business. Additionally, more buses were sold during the 2015 fourth quarter in connection with the restructuring of the transportation line of business, which resulted in a lower gain on sale of assets year-over-year.
• The 2016 acquisitions generated an adjusted segment operating loss of $3.1 million* in the fourth quarter, reflecting the seasonal closures of CATC and Maligne Lake Tours.

Cash Flow / Capital Structure

• Cash flow from operations was an outflow of $15.8 million for the 2016 fourth quarter and an inflow of $99.6 million for the full year.
• Capital expenditures for the quarter totaled $16.8 million, comprising $8.2 million for GES, $9.4 million for T&R (including payments of $0.7 million to GES for work on the Banff Gondola, which were eliminated in consolidation). For the full year, capital expenditures totaled $49.4 million, comprising $20.0 million for GES, $30.0 million for T&R (including payments of $0.7 million to GES, which were eliminated in consolidation) and $0.2 million for the corporate office.
• Return of capital totaled $2.0 million for the quarter and $8.1 million for the full year (which represented quarterly dividends of $0.10 per share). Viad had 440,540 shares remaining under its current repurchase authorization at December 31, 2016.
• Debt proceeds (net) totaled $54.8 million for the quarter, reflecting the cash payment of approximately $50 million for the acquisition of FlyOver Canada (December 29, 2016). For the full year, debt proceeds (net) totaled $120.8 million.
• Cash and cash equivalents were $20.9 million, debt was $250.7 million and the debt-to-capital ratio was 40.4% at December 31, 2016.

Business Outlook

Guidance provided by Viad is subject to change as a variety of factors can affect actual results. Those factors are identified in the safe harbor language at the end of this press release.

Viad has provided the following forward-looking non-GAAP financial measures: Adjusted Segment EBITDA, Adjusted Segment Operating Income and Income Before Other Items. The company does not provide reconciliations of these forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measures because, due to variability and difficulty in making accurate forecasts and projections and/or certain information not being ascertainable or accessible, not all of the information necessary for quantitative reconciliations of these forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measures are available to the company without unreasonable efforts. Specifically, recent acquisitions include preliminary recordings of the fair values of the assets acquired and liabilities assumed as of the acquisition date; purchase price allocations are not yet finalized and are subject to change within the measurement period (up to one year from the acquisition date) as the assessment of property and equipment, intangible assets, and working capital are finalized. 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 the forward-looking non-GAAP financial measures may be materially different from the corresponding GAAP financial measures.

2017 Full Year Guidance

• Consolidated revenue is expected to increase by approximately 5% from 2016 full year revenue, driven primarily by incremental contributions from acquisitions completed during 2016 and continued growth in the underlying business, partially offset by unfavorable currency translation of approximately $23 million, negative show rotation of about $20 million and a $13 million reduction in revenue from package tours as the company completes the rationalization of that line of business in Canada.
• Consolidated adjusted segment EBITDA is expected to be in the range of $144.5 million to $148.5 million, as compared to $130.2 million* in 2016.

• Exchange rates are assumed to approximate $0.74 U.S. Dollars per Canadian Dollar and $1.23 U.S. Dollars per British Pound during 2017. Exchange rate variances are expected to impact 2017 full year results as follows:

The outlook for Viad’s business units is as follows:

• The GES acquisition of ON Services (August 2016) is expected to provide incremental revenue of $45 million to $48 million, incremental adjusted segment EBITDA of $11 million to $13 million and incremental adjusted segment operating income of $4 million to $6 million.
• GES show rotation is expected to have a net negative impact on full year revenue of about $20 million versus 2016. 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.

• GES U.S. base same-show revenue is expected to increase at a mid-single digit rate.
• The T&R acquisitions of CATC (March 2016) and FlyOver Canada (December 2016) are expected to provide incremental revenue of $10 million to $12 million and incremental adjusted segment EBITDA of $2 million to $3.5 million, which reflects an incremental first quarter seasonal operating loss of approximately $3 million from CATC. Combined, these acquisitions are expected to contribute adjusted segment operating income that is in line with 2016.
• T&R revenue is expected to be negatively impacted by approximately $13 million as the company completes the previously announced downsizing of the lower-margin package tours line of business, and by approximately $6 million due to the fire-related closure of the Mount Royal Hotel. Timing of the hotel’s re-opening remains uncertain and this guidance assumes it will remain closed for the entirety of the year. These declines are expected to be offset by growth across the rest of the T&R business, with particularly strong growth at the newly renovated Banff Gondola.

• Corporate activities expense is expected to approximate $10 million.
• The effective tax rate on income before other items is assumed to approximate 32%.

• GES first quarter results are expected to increase primarily as a result of positive show rotation revenue of approximately $50 million, an incremental $13.5 million to $15.5 million in revenue from the ON Services acquisition and continued underlying business growth, partially offset by unfavorable currency translation of approximately $5 million in revenue.
• T&R first quarter revenue is expected to increase primarily as a result of the re-opening of the Banff Gondola (which was closed for renovations during the 2016 first quarter) and an incremental $1 million to $2 million from the acquisition of FlyOver Canada, partially offset by the closure of the Mount Royal Hotel and lower revenue from package tours. The increased operating loss primarily reflects a full quarter of seasonal losses from CATC (acquired March 2016) as that operation is closed during the first quarter.

* 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.

Conference Call and Web Cast

Viad Corp will hold a conference call with investors and analysts for a review of fourth quarter and full year 2016 results on Thursday, February 9, 2017 at 5:00 p.m. (ET). To join the live conference, call (888) 810-6751, 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) 467-2413 (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 its two business groups: the Marketing & Events Group (GES) and the Travel & Recreation Group (T&R). GES is a global, full-service live events company offering a comprehensive range of services to the world's leading brands and event organizers. T&R is a collection of iconic destination travel experiences that showcase the best of Banff, Jasper, Glacier, Denali and Kenai Fjords National Parks. Viad is an S&P SmallCap 600 company. For more information, visit the company's Web site at www.viad.com.

Forward-Looking Statements

As provided by the safe harbor provision under the Private Securities Litigation Reform Act of 1995, Viad cautions readers that, in addition to historical information contained herein, this press release includes certain information, assumptions and discussions that may constitute forward-looking statements. These forward-looking statements are not historical facts, but reflect current estimates, projections, expectations, or trends concerning future growth, operating cash flows, availability of short-term borrowings, consumer demand, new or renewal business, investment policies, productivity improvements, ongoing cost reduction efforts, efficiency, competitiveness, legal expenses, tax rates and other tax matters, foreign exchange rates, and the realization of restructuring cost savings. Actual results could differ materially from those discussed in the forward-looking statements. Viad’s businesses can be affected by a host of risks and uncertainties. Among other things, natural disasters, gains and losses of customers, consumer demand patterns, labor relations, purchasing decisions related to customer demand for exhibition and event services, existing and new competition, industry alliances, consolidation and growth patterns within the industries in which Viad competes, acquisitions, capital allocations, adverse developments in liabilities associated with discontinued operations and any deterioration in the economy, may individually or in combination impact future results. In addition to factors mentioned elsewhere, economic, competitive, governmental, technological, capital marketplace and other factors, including terrorist activities or war, a pandemic health crisis and international conditions, could affect the forward-looking statements in this press release. Additional information concerning business and other risk factors that could cause actual results to materially differ from those in the forward-looking statements can be found in Viad’s annual and quarterly reports filed with the Securities and Exchange Commission.

Information about Viad Corp obtained from sources other than the company may be out-of-date or incorrect. Please rely only on company press releases, SEC filings and other information provided by Viad, keeping in mind that forward-looking statements speak only as of the date made. Viad undertakes no obligation to update any forward-looking statements, including prior forward-looking statements, to reflect events or circumstances arising after the date as of which the forward-looking statements were made.