Business context and reporting period
This is Viad Corp’s unaudited Form 10-Q for the quarter and six months ended June 30, 2022; Pursuit Attractions & Hospitality is one of its three reportable segments, alongside Spiro and GES Exhibitions. Results are compared with the corresponding 2021 periods. Viad operates travel attractions and hospitality properties through Pursuit and provides experiential marketing and exhibition services through GES.
Key financial metrics
| Metric | Three months ended June 30, 2022 | Six months ended June 30, 2022 |
|---|---|---|
| Revenue | $319.2 million, versus $61.2 million | $496.6 million, versus $90.2 million |
| Net income (loss) attributable to Viad | $19.8 million, versus a $42.0 million loss | $9.2 million loss, versus an $85.2 million loss |
| Segment operating income (non-GAAP) | $36.7 million, versus a $35.0 million loss | $13.9 million, versus a $73.2 million loss |
| Net cash provided by (used in) operating activities | Not presented separately for the quarter | $44.0 million, versus $39.5 million used |
Amounts are in U.S. dollars. Q2 net income attributable to Viad was about 6.2% of revenue; segment operating income was about 11.5%. For the first half, the company remained loss-making at the net income level, while segment operating income was about 2.8% of revenue.
- Revenue mix: Q2 Pursuit revenue was $77.6 million; Spiro was $89.4 million; and GES Exhibitions was $154.6 million, before intersegment eliminations.
- Cash and liquidity: June 30 cash and cash equivalents were $54.5 million; cash, cash equivalents and restricted cash totaled $59.9 million. Reported total available liquidity was $126.8 million, including $72.3 million of revolving-credit capacity.
- Debt: Debt and finance obligations totaled $478.4 million, including $412.6 million of debt. Long-term debt and finance obligations were $469.3 million; current maturities were $9.1 million. Net interest expense was $7.8 million in Q2 and $13.6 million for the first half.
- Balance sheet: Total assets were $1.14 billion and total stockholders’ equity was $75.4 million at June 30. Convertible preferred stock of $132.6 million is presented separately as mezzanine equity.
- Investment and acquisition: First-half capital expenditures were $31.6 million. Viad paid $25.5 million net for the Glacier Raft Company acquisition, funded partly with a $15.0 million revolver borrowing.
Material changes versus the prior comparable period
- Q2 revenue increased by $258.0 million, reflecting resumed in-person events and strong seasonal travel demand. First-half revenue increased by $406.4 million as event activity recovered and Canadian attraction visitation improved from pandemic-related restrictions in 2021.
- Q2 net income attributable to Viad improved by $61.9 million; the first-half net loss narrowed by $76.0 million. Segment operating results improved substantially across Pursuit, Spiro and GES Exhibitions.
- Pursuit’s Q2 revenue rose to $77.6 million from $36.3 million, while its segment operating income was $5.6 million versus an $8.1 million loss. For the first half, Pursuit’s operating loss narrowed to $15.6 million from $26.4 million.
- GES revenue rose to $241.6 million in Q2 from $24.9 million. GES segment operating income was $31.1 million versus a $26.9 million loss. The 2021 first-half comparison included a $9.1 million gain from a GES warehouse sale.
- Operating cash flow swung to $44.0 million provided from $39.5 million used in the prior-year half, primarily due to improved operating results, partly offset by working-capital movements. Receivables used $67.2 million of cash in the 2022 first half.
- Interest expense increased, which management attributed primarily to higher interest rates and debt balances. Cash dividends paid on preferred stock were $3.9 million in the first half.
Outlook, commentary and risks
- Management reported recovering in-person event activity and stronger leisure travel demand, but did not provide formal earnings guidance. It said existing liquidity should fund operations and projected capital outlays, including approximately $100 million of capital expenditures, for at least the next 12 months.
- The revolving facility requires minimum liquidity of $75 million until the lender receives the September 30, 2022 quarter compliance certificate and financial statements. Leverage and interest-coverage tests begin September 30, 2022, with stated thresholds tightening thereafter.
- Results are seasonal: Pursuit’s peak activity is in summer, and GES results can vary with show timing and rotation. Management said pandemic effects remain uncertain, including any renewed travel or event restrictions.
- Other disclosed risks include labor availability and costs, possible union work stoppages, event-client concentration, project delays and cost overruns, acquisition integration, foreign-exchange and interest-rate exposure, and weather or other catastrophic events. The company does not currently hedge its foreign-currency translation or interest-rate exposure.
- Viad received Canadian occupational health and safety charges in May 2022 relating to the 2020 Pursuit Ice Explorer accident, which resulted in three fatalities and other serious injuries. The company said it is cooperating with regulators and believes reserves and insurance are sufficient for potential claims and fines.
- Potential future payments under subsidiary lease and equipment guarantees were stated as up to $95.9 million. The filing also reports $2.2 million in environmental remediation liabilities related to previously sold operations and approximately 100 collective-bargaining agreements.
- Unusual items included $2.1 million of first-half restructuring charges and $0.6 million of impairment charges. Q2 foreign-currency translation losses were $11.5 million, contributing to a first-half translation loss of $8.1 million.
Most important facts for investors to verify
- Whether event volumes and travel demand continue to recover, and whether seasonal revenue converts into sustained operating cash flow.
- Whether Viad meets the $75 million minimum-liquidity requirement and subsequent leverage and interest-coverage tests under its revolving facility.
- Whether planned capital spending, acquisition funding and preferred-stock cash dividends remain consistent with available liquidity and debt levels.
- The development of the Ice Explorer regulatory matter and related claims, including the scope of insurance coverage and any potential financial exposure.
- Whether reported segment improvements persist after accounting for seasonality, show rotation, higher operating costs, foreign-exchange movements and prior-year comparison items.