Business context and reporting period
Viad Corp’s Form 10-Q covers the quarter and six months ended June 30, 2023. The filing is by Viad Corp (NYSE: VVI), not a separate registrant named Pursuit Attractions & Hospitality, Inc.; Pursuit is one of Viad’s three reportable segments, alongside Spiro and GES Exhibitions. Pursuit operates attractions, hotels, food and beverage, retail, and transportation experiences.
Key financial metrics
Amounts below are in millions of U.S. dollars, except per-share data and percentages.
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $320.3 | $319.2 | $581.1 | $496.6 |
| Income (loss) from continuing operations | $11.7 | $20.1 | ($9.6) | ($10.5) |
| Net income (loss) attributable to Viad | $11.0 | $19.8 | ($9.9) | ($9.2) |
| Diluted EPS from continuing operations attributable to Viad common stockholders | $0.34 | $0.64 | ($0.65) | ($0.69) |
| Segment operating income | $33.4 | $36.7 | $27.9 | $13.9 |
| Operating cash flow | Not stated by quarter | $38.8 | $44.0 |
Q2 consolidated net margin was approximately 3.6% versus 6.3% a year earlier; segment operating income was about 10.4% of revenue versus 11.5%. These are calculated from reported figures and are not company-reported GAAP margin measures.
- Segment results: Pursuit Q2 revenue rose 14% to $88.5 million and segment operating income rose to $9.8 million from $5.6 million. GES revenue fell 4% to $231.8 million and segment operating income fell 24% to $23.6 million. For the first half, Pursuit revenue grew 19.5% to $121.1 million; GES revenue grew 16.4% to $460.0 million.
- Cash flow and investment: First-half capital expenditures were $32.2 million, compared with $31.6 million. Operating cash flow less capital expenditures was approximately $6.6 million. Cash and cash equivalents were $53.2 million at June 30, down from $59.7 million at year-end.
- Debt and liquidity: Debt and finance obligations totaled $467.9 million, including $403.7 million of debt; the current portion was $8.4 million. The company reported $148.2 million of available liquidity, comprising $53.2 million of unrestricted cash and $95.0 million of revolving-credit capacity. The Term Loan B interest rate was 10.2%. The company was in compliance with its credit-facility covenants; reported leverage was 2.91x and interest coverage 3.02x.
- Balance sheet: Total assets were $1.153 billion and total liabilities were $915.5 million. Convertible Series A Preferred Stock was $132.6 million in mezzanine equity and carries a 5.5% cumulative quarterly dividend; $3.9 million of dividends were paid in the first half.
Material changes versus the prior comparable period
- Q2 revenue was nearly flat year over year: Pursuit’s $10.9 million increase was largely offset by a $9.8 million decrease at GES. The GES comparison reflects the 2022 sale of ON Services and event timing shifts, partly offset by live-event activity and show rotation.
- Q2 net income attributable to Viad decreased $8.9 million, primarily from $4.6 million higher net interest expense, increased income tax expense, and costs supporting higher activity. First-half revenue increased 17.0%, but Viad’s net loss widened by $0.7 million as higher interest and tax costs offset improved segment operating income.
- First-half net interest expense increased to $24.6 million from $13.6 million, primarily due to higher rates. Operating cash flow decreased $5.2 million, chiefly due to higher interest and tax payments.
- Q2 Pursuit visitation and revenue were stronger, particularly in Western Canada and Iceland. At GES, Spiro’s Q2 revenue and profit declined, while GES Exhibitions’ first-half revenue and operating income increased materially.
Outlook, risks, contingencies, and unusual items
- Management said international tourism and live-event demand remained strong, with little to no COVID-related disruption in the first half and improving supply-chain and labor conditions. It warned that inflation and higher interest rates have raised interest expense and that macroeconomic effects remain uncertain.
- No specific full-year earnings or revenue guidance is provided in the supplied filing text. The company planned $75–$85 million of capital expenditures over the next 12 months, including about $35 million for select growth projects such as FlyOver Chicago. Management stated existing liquidity should fund operations and projected capital outlays for at least 12 months and longer term.
- Risks include seasonality, event timing and show rotation, tourism and travel disruptions, labor shortages and union work stoppages, customer concentration, project delays or cost overruns, debt and covenant exposure, foreign-exchange movements, and cybersecurity and legal risks.
- The company continues to defend claims arising from a 2020 Pursuit vehicle accident that caused three fatalities and other serious injuries. In May 2023 it resolved Canadian occupational-safety charges, with fines and related payments of approximately $0.3 million U.S.; it believes reserves and insurance are sufficient, subject to deductibles. Environmental remediation liabilities were $2.2 million. Guarantees related to leased facilities and equipment could require up to approximately $89.0 million of payments.
- A material weakness previously identified in controls over foreign-currency liability remeasurement was reported as remediated as of June 30, 2023. Management concluded disclosure controls and procedures were effective at that date.
- Viad entered into an interest-rate cap covering $300 million of Term Loan B borrowings, with a 5.0% SOFR strike rate and maturity in January 2025. It does not hedge foreign-currency translation exposure.
Important facts for investors to verify
- Whether Pursuit’s visitation growth and planned projects translate into sustained revenue and segment profitability, particularly outside the peak summer season.
- GES event schedules, show rotation, client-spending timing, workforce costs, and the continuing effects of the ON Services sale on comparisons.
- Debt-service sensitivity to interest rates, covenant headroom, and the interest-rate cap’s coverage and duration.
- Execution, permitting, costs, and expected returns for planned capital projects, including FlyOver Chicago; FlyOver Canada Toronto was delayed by permitting and related issues.
- Developments in the accident-related claims, insurance coverage and reserves, environmental liabilities, and lease guarantees.
- The terms and cash burden of preferred-stock dividends, and the status of the redeemable minority-interest put option related to FlyOver Iceland; its stated earnings condition had not been met as of June 30, 2023.