Business context and reporting period
This is Viad Corp’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2022. The filing identifies Viad Corp as the registrant; Pursuit is one of its three reportable segments, alongside Spiro and GES Exhibitions. Viad operates travel attractions and hospitality properties, experiential marketing services, and exhibition services. Results are seasonal, with Pursuit’s peak activity generally in the second and third quarters.
Financial results and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $382.7 million | $233.6 million | $879.3 million | $323.8 million |
| Income (loss) from continuing operations | $45.8 million | $19.5 million | $35.3 million | ($68.8 million) |
| Net income (loss) attributable to Viad | $40.1 million | $15.1 million | $31.0 million | ($70.1 million) |
| Diluted EPS from continuing operations attributable to common stockholders | $1.38 | $0.45 | $0.88 | ($3.80) |
| Segment operating income (loss), non-GAAP | $71.3 million | $40.1 million | $85.2 million | ($33.1 million) |
| Net cash provided by (used in) operating activities | Not provided separately | Not provided separately | $105.5 million | ($2.7 million) |
Q3 net income attributable to Viad was about 10.5% of revenue; segment operating income was about 18.6% of revenue. These are calculated ratios, and segment operating income is a non-GAAP measure that excludes specified corporate, financing, restructuring, impairment, tax, and other items.
- Cash and liquidity: Cash and cash equivalents were $79.2 million at September 30, 2022; restricted cash was an additional $5.0 million. Management reported total available liquidity of $165.8 million, including $86.6 million of revolver capacity.
- Debt and obligations: Debt and finance obligations totaled $466.7 million, of which $399.7 million was debt net of issuance costs and $60.0 million was finance lease obligations. The $397.0 million Term Loan B carried an 8.1% rate at quarter-end. Revolver capacity was $86.6 million after letters of credit.
- Capital investment and funding: Nine-month capital expenditures were $54.8 million and acquisition cash payments were $25.5 million. Management expected approximately $100 million of capital expenditures over the next 12 months and said existing liquidity should fund operations and projected outlays.
- Preferred stock: The $135 million Convertible Series A Preferred Stock had a 5.5% cumulative quarterly dividend; $5.9 million of dividends were declared and paid in cash during the first nine months.
Material changes versus the prior comparable period
- Q3 revenue increased 63.8% year over year; nine-month revenue rose $555.5 million. Management attributed the growth chiefly to resumed in-person events at GES and recovering international tourism and visitation at Pursuit.
- Q3 segment operating income increased $31.2 million. For the first nine months, it improved by $118.3 million from a loss to income; the comparison includes a $9.1 million gain on a GES warehouse sale in the 2021 period.
- GES revenue for the first nine months was $614.1 million versus $160.1 million in 2021. Spiro and GES Exhibitions both moved from segment operating losses to profits, principally on higher event activity and cost discipline.
- Pursuit’s nine-month revenue increased 62.0% to $265.2 million. Management cited stronger Canadian visitation after prior-year border restrictions and contributions from newer or acquired experiences. Nine-month comparable RevPAR rose 34.9%, while comparable attraction revenue per visitor declined 1.2%.
- Operating cash flow improved to $105.5 million from a $2.7 million use of cash, reflecting improved operating results, partly offset by working-capital needs. Investing cash use increased to $80.0 million, including the Glacier Raft Company acquisition and higher capital spending.
- Interest expense increased 18.5% for the nine-month period to $23.9 million, driven mainly by higher interest rates and debt balances. Foreign-currency translation losses were $34.6 million for the nine months, contributing to accumulated other comprehensive loss of $61.0 million at September 30.
Outlook, risks, contingencies, and unusual items
- Management reported stronger tourism and live-event demand in 2022, but provided no specific revenue, earnings, or segment guidance. It cautioned that interim results are not necessarily indicative of full-year results.
- Inflation and rising rates increased interest expense; further effects are uncertain. COVID-19-related travel, labor, and supply-chain disruption may persist, and renewed restrictions or weaker consumer spending could hurt demand.
- Viad was in compliance with its revolving-credit covenants at quarter-end, with a net leverage ratio of 3.10x and interest coverage ratio of 3.89x. The filing said FlyOver Iceland expected it could fail financial covenants beginning with the December 31, 2022 test; a waiver for 2022–2023 was obtained November 2, 2022.
- FlyOver’s goodwill impairment test found estimated fair value about 10% above carrying value; no impairment was recorded. The filing warns that weaker performance or higher discount rates could result in a potentially material future impairment.
- Viad acquired Glacier Raft Company in April for $26.5 million in cash. The preliminary purchase accounting included $16.8 million of goodwill, deductible for tax purposes.
- A 2020 Ice Explorer accident resulted in three fatalities and serious injuries; Canadian occupational-safety charges were received in May 2022. Viad stated its reserves and insurance were believed sufficient, while the outcome of claims and regulatory matters remains uncertain.
- Other exposures include $2.2 million of environmental remediation liabilities for previously sold operations, self-insured claims, union negotiations and possible work stoppages, and guarantees on subsidiary leases with a maximum potential payment of $90.8 million. Management did not expect unresolved litigation or environmental matters to materially affect results, subject to the stated uncertainties.
- Viad does not currently hedge foreign-currency translation or interest-rate exposure. Its businesses are also exposed to seasonality, event scheduling, labor shortages, supply-chain costs, travel disruptions, and the success and timing of capital projects.
Important facts for investors to verify
- Confirm the issuer identity: despite the request metadata naming Pursuit Attractions & Hospitality, Inc., this filing is for Viad Corp, with Pursuit reported as a segment.
- Review the full-year impact of seasonal results, event scheduling, and continuing recovery in travel and live events; the filing gives no formal earnings guidance.
- Track cash conversion and working capital, planned capital spending, acquisition integration, and remaining revolving-credit availability.
- Monitor borrowing costs and covenant headroom, especially the post-waiver FlyOver Iceland covenant position and the rising-rate exposure on variable-rate debt.
- Assess FlyOver visitation and forecasts against the limited goodwill impairment headroom, and follow developments in the Ice Explorer claims and regulatory process.
- Consider the effect of foreign exchange movements, including the substantial year-to-date translation loss, and the cumulative preferred dividend obligation.