Viad Corp 2020 Third-Quarter Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. The filing is for Viad Corp, whose Pursuit segment operates attractions and hospitality businesses; it is not a standalone filing for Pursuit Attractions & Hospitality, Inc. Amounts below are in U.S. dollars.
Business context and results
Viad operates GES, a live-events services business, and Pursuit, a travel and attractions business. COVID-19 severely disrupted both: live events remained largely shut down, while Pursuit properties reopened in phases after temporary closures and continued to face travel restrictions.
| Metric | Q3 2020 | First nine months 2020 |
|---|---|---|
| Revenue | $63.1 million, down 82.2% year over year | $389.9 million, down 61.4% |
| Net income (loss) attributable to Viad | $(30.8) million | $(323.6) million |
| Diluted loss per common share | $(1.59) | $(16.07) |
| Operating cash flow | Not separately provided for the quarter | $(45.9) million |
Q3 segment results: GES revenue was $14.3 million and segment operating loss was $18.2 million, compared with revenue of $218.7 million and a loss of $11.6 million in Q3 2019. Pursuit revenue was $48.8 million and segment operating income was $11.5 million, versus $135.0 million and $66.4 million, respectively. For the first nine months, GES recorded a $39.5 million segment operating loss and Pursuit a $26.5 million loss.
Financial position, liquidity, and capital
- At September 30, cash was $56.5 million, down from $62.0 million at year-end 2019. Total reported available liquidity was $311.3 million, including $209.8 million of unused revolver capacity and a $45 million Crestview delayed-draw commitment.
- Total debt and finance lease obligations were $256.2 million, including $233.2 million of debt. Revolver borrowings were $230.5 million; the company reported repaying approximately $217 million of revolver principal during Q3.
- In August, Crestview invested $135 million in perpetual convertible preferred stock; proceeds net of $9.2 million of related fees were $125.8 million. The preferred stock carries a 5.5% cumulative dividend, convertible at $21.25 per common share, and includes a possible additional $45 million investment.
- The amended credit agreement waived financial covenants through September 30, 2022, subject to earlier termination if leverage requirements are met. It requires minimum liquidity of $125 million, stepping down to $100 million on December 31, 2020. The company was not in compliance with financial covenants at September 30 but had obtained the waiver. Cash dividends are prohibited during the waiver period.
- Management stated that the Crestview proceeds, existing cash, and covenant relief were expected to fund operations for at least the next 12 months.
Material changes, outlook, and risks
- COVID-19 drove the sharp revenue decline, operating losses, and negative year-to-date operating cash flow. The company cut costs through furloughs, layoffs, reduced compensation, and lower discretionary spending.
- First-half non-cash impairment charges included $186.1 million of goodwill and $15.7 million of intangible assets; total impairment charges for the nine months were $203.1 million. GES goodwill was fully impaired. Further impairment remains possible as the pandemic and forecasts evolve.
- Restructuring charges were $11.3 million in Q3 and $12.4 million year to date, primarily for GES cost reductions, facility closures, and the closure and liquidation of its U.K. audio-visual business.
- Pursuit same-store Q3 attraction visitors fell 73.1%; hospitality RevPAR fell 45.6%. Most Pursuit properties were operating in Q3, but some remained closed. Management anticipated FlyOver Las Vegas and Sky Lagoon openings in 2021; FlyOver Canada Toronto was delayed to 2023.
- The filing reports a July 2020 Ice Explorer accident en route to the Athabasca Glacier that caused three fatalities and multiple serious injuries. Viad said it was cooperating with the investigation and believed insurance coverage was sufficient, subject to deductibles.
- The company corrected 2019 GES third-party services revenue to a net presentation, reducing reported Q3 and nine-month 2019 revenue and cost of services by equal amounts; management deemed the error immaterial. The filing also identifies continuing uncertainty from travel restrictions, event cancellations, foreign exchange, interest rates and LIBOR transition, labor, and potential future claims.
Important facts for investors to verify
- Whether liquidity remains above the amended credit agreement’s minimum and how much of the $45 million Crestview commitment is available or drawn.
- Actual cash burn, debt and interest costs, and the timing of recovery in live events, travel, and hospitality.
- Assumptions underlying remaining Pursuit goodwill and any additional impairment indicators.
- Developments in the Ice Explorer investigation, insurance coverage, and any claims or liabilities.
- Execution, costs, and timing of planned Pursuit projects, and the effect of preferred dividends, conversion, and change-in-control terms on common shareholders.