Viad Corp 10-Q Summary — Quarter Ended September 30, 2019
Entity note: The supplied filing is Viad Corp’s consolidated 10-Q, not a standalone filing for Pursuit Attractions & Hospitality, Inc. Pursuit is one of Viad’s three reportable segments, alongside GES North America and GES EMEA. Unless stated otherwise, amounts below are U.S. dollars.
Business context and reporting period
Viad operates live-event services through GES and travel attractions, lodging, food and beverage, retail, transportation, and travel-planning businesses through Pursuit. The filing covers the three and nine months ended September 30, 2019, compared with the same 2018 periods. Results are seasonal: Pursuit activity peaks in summer, while GES results vary with event timing and show rotation.
Key financial metrics
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $362.5m | $358.2m | $1,050.4m | $999.3m |
| Operating income | $52.1m | $52.8m | $82.4m | $76.0m |
| Income from continuing operations | $34.6m | $38.8m | $30.1m | $51.7m |
| Net income attributable to Viad | $31.4m | $37.4m | $27.5m | $51.5m |
| Diluted EPS from continuing operations | $1.54 | $1.84 | $1.33 | $2.49 |
| Segment operating income, non-GAAP | $54.8m | $56.6m | $90.1m | $84.5m |
For the nine months, operating cash flow was $101.1m, compared with $101.6m in 2018. Capital expenditures were $60.9m; cash paid for acquisitions was $91.0m; and investing cash outflow was $150.8m. Cash increased to $56.6m at September 30, from $44.9m at year-end 2018.
Total debt and finance lease obligations were $324.2m, including $298.9m of debt. The company had $295.4m outstanding under its $450m revolving credit facility, $3.6m of letters of credit, and $151.0m of remaining facility capacity. The revolver’s contractual maturity is October 2023, but borrowings are classified as current because they are due within one year under the facility terms. The company reported compliance with its covenants; leverage was 2.32:1 and interest coverage 10.17:1. Management said existing liquidity was sufficient for operations and capital commitments for at least 12 months.
The nine-month effective tax rate was 26.5%, versus 22.8% in 2018. The filing does not present consolidated gross-margin percentages; segment operating income is a non-GAAP measure and is not directly comparable to GAAP operating income.
Material changes versus prior comparable periods
- Q3 revenue rose 1.2%, while Viad-attributable net income fell 16.0%. Management cited higher GES performance-based incentives and restructuring charges, partly offset by stronger Pursuit results.
- Nine-month revenue grew 5.1%, but Viad-attributable net income declined 46.7%. The decline included a $15.5m multi-employer pension withdrawal charge and an $8.5m legal settlement charge, as well as higher restructuring charges.
- GES Q3 revenue fell to $227.4m from $246.1m, with negative show rotation of approximately $38m and unfavorable foreign exchange contributing. GES recorded a $11.6m segment operating loss, versus $1.2m income in Q3 2018.
- Pursuit Q3 revenue increased 20.5% to $135.0m, including $13.1m of revenue from the Mountain Park Lodges and Belton Chalet acquisitions. Organic revenue increased 9.5%; segment operating income rose 19.8% to $66.4m.
- For the first nine months, Pursuit revenue increased 18.2% and segment operating income increased 20.3%. Same-store attraction visitors declined 4.0% year to date, while revenue per attraction visitor increased 9.3%; nine-month same-store RevPAR rose 5.8%.
- Investing cash outflow increased substantially, primarily due to the Mountain Park Lodges and Belton Chalet acquisitions. Total assets rose to $1,286.4m from $922.5m at December 31, 2018, reflecting acquisitions, lease accounting, and other activity.
Outlook, commentary, and risks
- 2019 outlook: Viad expected GES revenue to increase at a low-single-digit rate, with show rotation reducing revenue by approximately $15m–$20m versus 2018. Pursuit revenue was expected to increase 20%–21.5%, including approximately $19m–$21m from the Mountain Park Lodges and Belton Chalet acquisitions. These are management expectations, not guarantees.
- Management expected GES simplification actions to improve annual cost structure by approximately $10m. Pursuit expected approximately $2.5m of 2019 start-up costs for FlyOver attractions.
- Growth projects included FlyOver Iceland, which opened in August 2019; planned FlyOver Las Vegas and Toronto openings in 2021 and 2022; and a geothermal lagoon attraction near Reykjavik, expected to open in 2021.
- Key risks cited include seasonality and show rotation, economic and travel-industry conditions, dependence on large exhibition clients, acquisition integration, project delays and cost overruns, foreign exchange movements, labor cost increases and work stoppages, pension obligations, transportation disruption, natural disasters, cybersecurity and data-protection issues, Brexit, and trade-policy changes.
- Additional exposures include a $15.5m estimated multi-employer pension withdrawal liability, $2.3m of environmental remediation liabilities for previously sold operations, and up to $76.5m of potential future payments under lease-related guarantees. The company stated that unresolved legal and environmental matters were not expected to materially affect results after provisions and insurance.
- Viad reported no outstanding foreign-currency forward contracts and did not hedge foreign-currency translation exposure. Foreign-currency movements adversely affected reported revenue by approximately $12.3m for the first nine months.
Important facts for investors to verify
- Whether GES event rotation, incentive costs, and restructuring affect subsequent-quarter profitability and the full-year outlook.
- Whether Pursuit’s acquisition-led growth translates into sustained organic growth, cash generation, and returns on invested capital.
- The final purchase accounting and integration results for Mountain Park Lodges, and the performance and funding requirements of the Iceland projects.
- Debt availability, covenant headroom, current classification of revolving borrowings, and exposure to variable interest rates.
- The timing and ultimate cost of pension withdrawal obligations, legal matters, self-insurance claims, environmental liabilities, and lease guarantees.
- How seasonality, foreign exchange, and changes in attraction visitation and lodging rates affect reported results; the filing reports meaningful differences between visitor volumes and per-visitor revenue.