Viad Corp Delivers Strong First Quarter 2017 Results

Viad Corp Delivers Strong First Quarter 2017 Results

Earnings per Share Growth Exceeds Guidance

Continued Positive Momentum at Both Business Groups

Viad Corp (NYSE: VVI) today announced first quarter 2017 results that exceeded expectations driven by outperformance at GES. Both business groups executed well during the quarter and posted strong year-over-year revenue growth.

• Revenue of $325.8 million increased 35.0% ($84.4 million) year-over-year, or 30.1% ($72.2 million) on an organic basis (which excludes the impact of acquisitions and exchange rate variances).
  • The organic revenue growth primarily reflects positive show rotation at GES and underlying growth at both business groups.
  • The acquisitions of ON Services (August 2016), FlyOver Canada (December 2016), CATC (March 2016) and the Poken event visitor engagement technology (March 2017) contributed incremental revenue of $19.0 million.
  • Exchange rate variances had an unfavorable impact on revenue of $4.9 million.
• Adjusted segment operating income, adjusted segment EBITDA and income before other items improved compared to the prior year quarter primarily due to high flow through on the increase in revenue.

Steve Moster, president and chief executive officer, commented, “2017 is off to a solid start with GES exceeding our prior guidance and Pursuit coming in near the high-end of guidance. We continue to see favorable trends in our industries and positive momentum in both business groups as we execute against our strategic growth plans. With a strong first quarter behind us, we remain focused on delivering our full-year financial targets.”

GES Results

Moster said, “GES’ growth during the first quarter was driven by positive show-rotation, underlying growth at both our U.S. and International segments and contributions from our acquisition of ON Services. Our team did a great job driving strong flow through on this additional revenue to achieve an adjusted segment EBITDA margin of 10.1% for the quarter. In addition, our investments in audio-visual and event technology continue to offer meaningful growth opportunities. This past quarter we renewed two major show organizer contracts with a broader suite of services and we had numerous corporate event wins. I am very pleased with the progress we have made to position GES as the preferred global, full-service provider of live events and the strong financial results our efforts are driving.”

• GES revenue of $317.9 million increased 34.6% ($81.7 million) year-over-year. On an organic basis, which excludes the impact of acquisitions and exchange rate variances, revenue increased 30.4% ($71.1 million).
  • U.S. organic revenue increased 31.8% ($57.9 million) primarily due to positive show rotation of approximately $52 million, U.S. base same-show revenue growth of 4.1% and new business wins.
  • International organic revenue increased 27.4% ($14.8 million) from the prior year quarter, primarily due to new business wins, positive show rotation of approximately $3 million and same show growth.
• GES adjusted segment operating income of $23.1 million* increased $22.8 million year-over-year, and $23.1 million on an organic basis.
  • U.S. organic adjusted segment operating income of $21.4 million* increased $20.5 million, primarily due to higher revenue and strong operating leverage.
  • International organic adjusted segment operating income of $2.0 million* increased $2.6 million, primarily due to higher revenue.
• The acquisitions of ON Services and the Poken event visitor engagement technology contributed revenue of $17.5 million, an adjusted segment operating loss of $0.4 million* and adjusted segment EBITDA of $2.3 million* during the 2017 first quarter.

Pursuit Results

Moster said, “Pursuit delivered solid results for its seasonally slow first quarter. The newly renovated Banff Gondola and our recent acquisition of FlyOver Canada are both performing well. Additionally, we are making good progress working with our insurance carrier to finalize our property and business interruption insurance claims for the Mount Royal Hotel fire and we continue to develop plans to re-open the hotel with an upgraded guest experience. We are looking forward to a strong peak season for Pursuit with the Canadian national parks celebrating their 150^th anniversary and our leading attraction, the Banff Gondola, fully operational.”

• Pursuit revenue of $7.9 million increased $2.7 million (51.9%) year-over-year. On an organic basis, which excludes the impact of acquisitions and exchange rate variances, revenue increased $1.1 million (20.7%) primarily as a result of the re-opening of the Banff Gondola, which more than offset the closure of the Mount Royal Hotel.
• Pursuit adjusted segment operating loss of $10.0 million* increased $3.5 million year-over-year, primarily due to a full quarter of seasonal losses from CATC. On an organic basis, the operating loss increased $0.9 million primarily due to higher repairs and maintenance costs incurred during the quarter and the timing of certain other expenses.
• The acquisitions of CATC and FlyOver Canada contributed revenue of $1.5 million, an adjusted segment operating loss of $3.1 million* and negative adjusted segment EBITDA of $1.9 million* during the quarter primarily reflecting seasonal losses at CATC.

Mount Royal Hotel Fire Update

On December 29, 2016, the Mount Royal Hotel was damaged by a fire and has been closed until further notice. In the fourth quarter of 2016, as a result of the fire, Viad recorded an asset impairment loss of $2.2 million and an offsetting impairment recovery (and related insurance receivable) as the losses related to the fire are covered by Viad's property and business interruption insurance.

During the first quarter of 2017, Viad received $5.3 million in insurance proceeds as a partial settlement, of which $2.2 million was allocated to the insurance receivable, $2.4 million was recorded as an impairment recovery related to construction-in-progress costs incurred to re-open the hotel and $0.6 million was recorded as contra-expense to offset non-capitalizable costs incurred by the Company. After allocating the insurance proceeds to those losses, the remaining $0.1 million was recorded as a business interruption gain for the recovery of lost profits.

Viad received an additional partial settlement payment of $3.7 million during April 2017. Management continues to work with its insurance carrier to finalize the property and business interruption insurance claims related to the fire, and currently anticipates the hotel will re-open mid-year 2018.

Cash Flow / Capital Structure

• Cash flow from operations was $34.8 million for the 2017 first quarter.
• Capital expenditures for the quarter totaled $14.7 million, comprised of $7.4 million for GES and $7.2 million for Pursuit.
• Return of capital totaled $2.0 million for the quarter (which represented quarterly dividends of $0.10 per share). Viad had 440,540 shares remaining under its current repurchase authorization at March 31, 2017.
• Debt payments (net) totaled $13.7 million for the quarter.
• Cash and cash equivalents were $25.4 million, debt was $238.0 million and the debt-to-capital ratio was 38.6% at March 31, 2017.

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 $15 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 acquisitions of ON Services (August 2016) and the Poken event visitor engagement technology (March 2017) are expected to provide incremental revenue of $47 million to $50 million, incremental adjusted segment EBITDA of $10.5 million to $12.5 million and incremental adjusted segment operating income of $3 million to $5 million.

• GES show rotation is expected to have a net negative impact on full year revenue of about $15 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 Pursuit 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. Combined, these acquisitions are expected to contribute adjusted segment operating income that is in line with 2016, which reflects an incremental first quarter seasonal operating loss of $2.3 million from CATC.
• The Pursuit guidance ranges do not include any additional business interruption gains or capital expenditures related to the Mount Royal Hotel as the timing and amounts have not yet been determined.
• Pursuit’s 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 Pursuit business, with particularly strong growth at the newly renovated Banff Gondola.

• Corporate activities expense is expected to approximate $11 million, inclusive of acquisition transaction-related costs incurred during the first quarter.
• The effective tax rate on income before other items is assumed to approximate 32%.

2017 Second Quarter Guidance

• GES second quarter revenue is expected to increase primarily as a result of an incremental $16 million to $18 million in revenue from the acquisitions of ON Services and the Poken event visitor engagement technology.
• Pursuit second quarter revenue is expected to increase primarily as a result of the re-opening of the Banff Gondola (which was closed for renovations during a portion of the 2016 second quarter) and an incremental $1.5 million to $2.5 million from the acquisition of FlyOver Canada, partially offset by the closure of the Mount Royal Hotel and lower revenue from package tours.
• Adjusted segment operating income is expected to be impacted by additional depreciation and amortization expense of approximately $3 million at GES and approximately $1.5 million at Pursuit, primarily related to acquisitions.

* 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 first quarter 2017 results on Thursday, April 27, 2017 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 (800) 860-4710 (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: 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 iconic travel experiences in Alaska, Montana and Western Canada that showcase the best of Banff, Jasper, Waterton Lakes, 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, the level of interest 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.

Investor Relations:
Viad Corp
Sajid Daudi or Carrie Long
(602) 207-2681
ir@viad.com

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