Viad Corp. Form 10-Q — quarter ended March 31, 2019
Entity note: The supplied filing is for Viad Corp. (NYSE: VVI), not a standalone filing by Pursuit Attractions & Hospitality, Inc. Pursuit is one of Viad’s three reportable segments; the consolidated figures below include GES and Pursuit. Amounts are in U.S. dollars unless noted.
Business context and reporting period
Viad provides live-event services through GES North America and GES EMEA, and travel, attractions, hospitality, transportation, and travel-planning services through Pursuit. The filing covers the three months ended March 31, 2019, compared with the same 2018 quarter. Both businesses are seasonal: GES activity varies with event timing, while Pursuit generates most revenue in the second and third quarters.
Financial results and liquidity
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Revenue | $285.6 million | $277.4 million; up 2.9% |
| Loss from continuing operations | $17.9 million | $10.8 million loss |
| Net loss attributable to Viad | $17.8 million | $9.4 million loss |
| Diluted loss per share | $0.89 | $0.47 loss per share |
| Operating cash flow | $8.0 million provided | $3.4 million used |
| Capital expenditures | $19.5 million | $26.6 million |
| Cash and cash equivalents | $43.5 million at March 31 | $44.9 million at December 31, 2018 |
Consolidated operating loss was $13.1 million, versus $13.0 million in Q1 2018. Segment operating loss, a non-GAAP measure, was $11.3 million versus $10.8 million. The filing does not provide a consolidated profit margin measure; the quarter was loss-making. Operating cash flow improved by $11.4 million, primarily due to working-capital changes, including higher contract liabilities.
At March 31, debt was $240.0 million and finance lease obligations were $8.8 million; operating lease liabilities were $63.2 million. The revolving credit facility had $206.5 million of remaining capacity after borrowings and letters of credit. Viad reported a 1.92x leverage ratio and 13.20x interest-coverage ratio and stated it was in compliance with its credit covenants. Current liabilities exceeded current assets ($483.8 million versus $251.3 million); management said available liquidity was sufficient for operations and capital commitments for at least the next 12 months.
Material changes versus the prior comparable period
- Revenue increased $8.2 million, reflecting GES U.S. same-show growth, new GES business, and Mount Royal Hotel revenue, partly offset by $4.5 million of unfavorable foreign-exchange impact.
- Viad’s attributable net loss widened by $8.4 million, principally due to an $8.5 million GES legal-settlement charge and lower segment operating results.
- GES revenue rose 2.7% as reported and 4.2% organically; GES segment operating income increased to $1.7 million from $0.6 million.
- Pursuit revenue rose 9.7% to $10.7 million, including the reopened Mount Royal Hotel and growth initiatives. Its segment operating loss widened to $13.0 million from $11.4 million, reflecting higher depreciation, growth-related costs, and expense timing.
- Interest expense increased 40.9% to $2.9 million, attributed to higher debt balances and interest rates.
- Operating cash flow moved from use to provision of cash, while investing cash use decreased to $18.9 million, mainly due to lower capital expenditures.
Outlook, commentary, and risks
- GES: Management expected 2019 revenue to increase by low single digits from 2018. Show rotation was expected to reduce revenue by about $25 million year over year; U.S. base same-show revenue was expected to grow at a low-single-digit rate. Management anticipated approximately $7 million of unfavorable foreign-exchange impact on revenue and $0.5 million on segment operating income.
- Pursuit: Management expected 2019 revenue growth of 15%–17%, with $15–$17 million of incremental revenue from its Refresh-Build-Buy strategy. FlyOver Iceland was scheduled to open in July 2019; approximately $1 million of start-up costs was expected in the first half of 2019. Management anticipated about $1.5 million of unfavorable foreign-exchange impact on Pursuit revenue.
- Viad anticipated about $4 million of second-quarter restructuring charges for GES staffing reductions and facility consolidations, expected to yield approximately $8 million of annual savings once fully implemented.
- Management was negotiating a potential partial withdrawal from the Central States pension plan; if finalized as contemplated, it expected an approximately $14 million charge.
- Key disclosed risks include event and travel-industry conditions, show timing and rotation, seasonality, labor costs and possible union work stoppages, pension obligations, capital-project delays or overruns, foreign-exchange and interest-rate movements, transportation disruptions, natural disasters, cybersecurity and data-privacy exposure, and Brexit and U.S. trade-policy effects.
- Other notable items: Viad adopted lease-accounting Topic 842 on January 1, 2019, recognizing approximately $59 million of operating-lease right-of-use assets and lease liabilities, with no material income-statement impact. It recorded $2.3 million of environmental remediation liabilities for previously sold operations and disclosed up to $15.5 million of potential payments under lease guarantees.
Most important facts for investors to verify
- Confirm the reporting entity and scope: this is Viad Corp.’s consolidated 10-Q, with Pursuit reported as a segment, not a standalone Pursuit filing.
- Track seasonal execution and whether GES and Pursuit meet their respective 2019 revenue outlooks, including the projected GES show-rotation headwind.
- Monitor Pursuit’s FlyOver Iceland opening, development costs, and expected contribution to the stated growth plan.
- Assess the final terms and timing of any Central States pension-plan withdrawal and the potential $14 million charge.
- Review the legal-settlement payment and remaining litigation, as well as liquidity, revolving-credit availability, covenant compliance, and debt and lease obligations.