Q3

2016

Q3

2015

y-o-y

Change

$ in millions, except per share data

Revenue

$

382.5

$

255.9

49.4

%

Organic Revenue*

359.3

255.9

40.4

%

Net Income Attributable to Viad

$

33.8

$

7.2

**

Income Before Other Items*

35.2

7.8

**

Income Before Other Items per Share*

1.74

0.39

**

Adjusted Segment Operating Income*

$

59.4

$

14.8

**

Adjusted Segment EBITDA*

72.0

24.0

**

•

Revenue of $382.5 million increased 49.4% ($126.5 million) year-over-year or 40.4% ($103.3 million) on an organic basis (which excludes the impact of acquisitions and exchange rate variances).  

o

The organic revenue growth reflects positive show rotation at GES and strong underlying performance at both business groups.

o

The acquisitions of Maligne Lake Tours (January 2016), CATC (March 2016) and ON Services (August 2016) contributed incremental revenue of $31.2 million.

o

Exchange rate variances had an unfavorable impact on revenue of $8.0 million.

•

Adjusted segment operating income, adjusted segment EBITDA and income before other items improved compared to the prior year quarter primarily due to high flow through on the increase in revenue.  

Q3

2016

Q3

2015

y-o-y

Change

$ in millions

Revenue

$

287.0

$

188.9

52.0

%

U.S. Organic Revenue*

224.7

148.3

51.5

%

International Organic Revenue*

68.9

44.9

53.5

%

Adjusted Segment Operating Income*

$

15.3

$

(14.5

)

**

Adjusted Segment Operating Margin*

5.3

%

(7.7

)%

**

Adjusted Segment EBITDA*

$

22.8

$

(8.0

)

**

Adjusted Segment EBITDA Margin*

7.9

%

(4.2

)%

**

Key Performance Indicators:

U.S. Base Same-Show Revenue Growth⁽¹⁾

3.0

%

U.S. Show Rotation Revenue Change (approx.)⁽²⁾

$

67

International Show Rotation Revenue Change (approx.)⁽²⁾

$

18

(1)

Base same-shows are defined as shows produced by GES out of the same city during the same quarter in both the current year and prior year.  Base same-shows represented 28.9% of GES’ U.S. organic revenue during the 2016 third quarter.

(2)

Show rotation refers to shows that take place once every two, three or four years, as well as annual shows that change quarters from one year to the next.

•

GES revenue of $287.0 million increased 52.0% ($98.1 million) year-over-year.  On an organic basis, which excludes the impact of acquisitions and exchange rate variances, revenue increased 52.0% ($98.3 million).

o

U.S. organic revenue increased 51.5% ($76.4 million), primarily due to positive show rotation of approximately $67 million, new business wins and base same-show revenue growth of 3.0%.

o

International organic revenue increased 53.5% ($24.0 million) from the prior year quarter, primarily due to positive show rotation of approximately $18 million, new business wins and same show growth.

•

GES adjusted segment operating income of $15.3 million* increased $29.8 million year-over-year, or $29.6 million on an organic basis.

o

U.S. organic adjusted segment operating income of $14.1 million* increased $23.0 million primarily due to higher revenue and strong operating leverage.

o

International organic adjusted segment operating income of $0.9 million* increased $6.5 million primarily due to higher revenue and strong operating leverage.  

•

The acquisition of ON Services contributed revenue of $7.8 million, adjusted segment operating income of $0.5 million* and adjusted segment EBITDA of $1.7 million* during the 2016 third quarter, in line with prior guidance.

Q3

2016

Q3

2015

y-o-y

Change

$ in millions

Revenue

$

97.4

$

67.1

45.2

%

Organic Revenue*

74.0

67.1

10.4

%

Adjusted Segment Operating Income*

$

44.2

$

29.4

50.5

%

Adjusted Segment Operating Margin*

45.4

%

43.8

%

160 bps

Adjusted Segment EBITDA*

$

49.3

$

31.9

54.3

%

Adjusted Segment EBITDA Margin*

50.6

%

47.6

%

300 bps

Key Performance Indicators:

Same-Store RevPAR⁽¹⁾

$

179

$

161

11.2

%

Same-Store Room Nights Available⁽¹⁾

89,193

88,664

0.6

%

Same-Store Passengers⁽²⁾

941,066

822,480

14.4

%

Same-Store Revenue per Passenger⁽²⁾

$

31

$

30

3.3

%

(1)

Same-store RevPAR is calculated as total rooms revenue divided by the total number of room nights available for all comparable T&R properties during the periods presented, expressed on a constant currency basis.  Comparable properties are defined as those owned by Viad for the entirety of both periods. Accordingly, the third quarter comparisons exclude CATC.

(2)

Same-store revenue per passenger is calculated as total attractions revenue divided by the total number of passengers for all comparable T&R attractions, expressed on a constant currency basis.  Comparable attractions are defined as those owned by Viad for the entirety of both periods.  Accordingly, the third quarter comparisons exclude Maligne Lake Tours and CATC.  Same-store passengers and revenue per passenger were affected by the partial closure of the Banff Gondola during the 2016 third quarter; although its lift operations were re-opened on May 1, the dining and retail services previously offered at its upper terminal remained closed for renovations into the latter part of the third quarter.

•

T&R revenue of $97.4 million increased $30.3 million (45.2%) year-over-year. On an organic basis, which excludes the impact of acquisitions and exchange rate variances, revenue increased $7.0 million (10.4%) primarily due to higher passenger volumes at the attractions and higher RevPAR across the hospitality portfolio.

•

T&R adjusted segment operating income of $44.2 million* increased $14.8 million. On an organic basis, operating income increased $4.6 million (15.5%) primarily due to high-margin revenue growth from attractions and hospitality assets.  

•

The acquisitions of Maligne Lake Tours  and CATC contributed revenue of $23.4 million, adjusted segment operating income of $10.3 million* and adjusted segment EBITDA of $12.7 million* during the quarter, exceeding prior guidance.

•

Cash flow from operations was $61.0 million for the 2016 third quarter.

•

Capital expenditures for the quarter totaled $12.0 million, comprised of $6.4 million for GES and $5.5 million for T&R.  

•

Return of capital totaled $2.0 million for the quarter (which represented quarterly dividends of $0.10 per share).  Viad had 440,540 shares remaining under its current repurchase authorization at September 30, 2016.

•

Debt proceeds (net) totaled $63.1 million for the quarter, reflecting the cash payment of $87 million for the acquisition of ON Services.

•

Cash and cash equivalents were $52.7 million, debt was $196.0 million and the debt-to-capital ratio was 34.0% at September 30, 2016.

•

Consolidated revenue is expected to increase by approximately 10 percent from 2015, driven by positive show rotation of about $50 million and continued underlying growth at GES and T&R, as well as the acquisitions of Maligne Lake Tours, CATC and ON Services, partially offset by unfavorable currency translation of approximately $26 million.

•

Consolidated adjusted segment EBITDA is expected to be in the range of $129 million to $132 million, as compared to prior guidance of $120 million to $126 million and $90.6 million* in 2015.

•

2016 income per share before other items is expected to be in the range of $2.29 to $2.39, up from $1.46 in 2015.

•

The outlook for Viad’s business units is as follows:

GES

T&R

$ in millions

Revenue

Up high-single digits

from 2015 ($976.9)

Up 35% to 37%

from 2015 ($112.2)

Adjusted Segment EBITDA

$79.5 to $81.5 (vs. $54.8* in 2015)

$49.5 to $50.5 (vs. $35.8* in 2015)

Depreciation & Amortization

$29 to $30

approx. $13

Adjusted Operating Income

$50 to $52 (vs. $27.7* in 2015)

$36.5 to $37.5 (vs. $27.8* in 2015)

Capital Expenditures

$20 to $22

$25 to $27

o

GES show rotation is expected to have a net positive impact on full year revenue of $50 million versus 2015.  Show rotation refers to shows that occur less frequently than annually, as well as annual shows that shift quarters from one year to the next.

Q1 Actual

Q2 Actual

Q3 Actual

Q4 Est.

FY Est.

Show Rotation Revenue ($ in millions)

$

(11

)

$

(6

)

$

85

(15

)

$

50

o

GES U.S. base same-show revenue is expected to increase at a mid-single digit rate.

o

ON Services (acquired August 11, 2016) is expected to provide $20 million to $22 million in revenue, adjusted segment EBITDA of $3.5 million to $4.5 million and essentially breakeven operating income.

o

T&R revenue is expected to be negatively impacted by approximately $3 million due to the previously announced rationalization of Brewster’s transportation line of business.

o

The T&R acquisitions of Maligne Lake Tours and CATC are expected to provide $34 million to $35 million in revenue, adjusted segment EBITDA of $12 million to $13 million, and adjusted operating income of approximately $8 million.

•

Exchange rates are assumed to approximate $0.76 U.S. Dollars per Canadian Dollar and $1.22 U.S. Dollars per British Pound during the remainder of 2016.  Exchange rate variances are expected to impact 2016 full year results as follows:

Viad Total

GES

T&R

$ in millions, except per share data

Revenue

$

(26

)

$

(25

)

$

(1

)

Adjusted Segment Operating Income

$

(1.5

)

$

(1.5

)

-

Income per Share Before Other Items

$

(0.04

)

•

Corporate activities expense is expected to approximate $9.5 million to $10.5 million, inclusive of $0.6 million of acquisition transaction-related costs incurred as of September 30, 2016.

•

The effective tax rate on income before other items is assumed to be 33% to 34%.

2016 Guidance

2015

Low End

High End

FX Impact⁽¹⁾

$ in millions, except per share data

Revenue:

GES

$

244.5

$

240

to

$

250

$

(10

)

T&R

7.2

8.5

to

10.5

—

Adjusted Operating Income (Loss):

GES

$

7.7

*

$

7

to

$

9

$

(1

)

T&R

(2.9

)

*

(8.5

)

to

(7.5

)

—

Income (Loss) per Share Before Other Items

$

0.01

*

$

(0.19

)

to

$

(0.09

)

$

(0.04

)

(1)

FX Impact represents the expected effect of year-over-year changes in exchange rates that is incorporated in the low end and high end guidance ranges presented.

•

GES fourth quarter revenue is expected to be relatively in line with the prior year quarter as continued underlying business growth and the acquisition of ON Services help to offset the expected impact of negative show rotation of about $15 million and unfavorable currency translation of approximately $10 million.

•

T&R fourth quarter revenue is expected to increase primarily as a result of the Banff Gondola being fully re-opened (whereas it was closed during the prior year fourth quarter).  The expected decline in adjusted operating income reflects operating losses from Maligne Lake Tours and CATC, which are seasonally closed during the fourth quarter, as well as the timing of certain expenses and higher performance-based incentives.

Three months ended September 30,

Nine months ended September 30,

($ in thousands, except per share data)

2016

2015

$ Change

% Change

2016

2015

$ Change

% Change

Revenue:

Marketing & Events Group (M&E):

U.S.

$

232,484

$

148,314

$

84,170

56.8%

$

636,299

$

550,006

$

86,293

15.7%

International

60,926

44,870

16,056

35.8%

187,689

195,829

(8,140

)

-4.2%

M&E intersegment eliminations

(6,425

)

(4,321

)

(2,104

)

-48.7%

(15,439

)

(13,475

)

(1,964

)

-14.6%

Total Marketing & Events Group

286,985

188,863

98,122

52.0%

808,549

732,360

76,189

10.4%

Travel & Recreation Group (T&R)

97,402

67,083

30,319

45.2%

143,111

105,017

38,094

36.3%

Corporate eliminations (Note A)

(1,922

)

-

(1,922

)

**

(3,086

)

-

(3,086

)

**

Total revenue

$

382,465

$

255,946

$

126,519

49.4%

$

948,574

$

837,377

$

111,197

13.3%

Segment operating income (loss):

Marketing & Events Group:

U.S.

$

14,543

$

(9,039

)

$

23,582

**

$

37,907

$

12,572

$

25,335

**

International

644

(5,751

)

6,395

**

4,951

6,405

(1,454

)

-22.7%

Total Marketing & Events Group

15,187

(14,790

)

29,977

**

42,858

18,977

23,881

**

Travel & Recreation Group

44,248

29,361

14,887

50.7%

44,733

30,755

13,978

45.4%

Segment operating income

59,435

14,571

44,864

**

87,591

49,732

37,859

76.1%

Corporate eliminations (Note A)

(518

)

-

(518

)

**

(940

)

-

(940

)

**

Corporate activities (Note B)

(2,772

)

(1,354

)

(1,418

)

**

(7,390

)

(6,147

)

(1,243

)

-20.2%

Restructuring charges (Note C)

(1,697

)

(257

)

(1,440

)

**

(3,664

)

(1,542

)

(2,122

)

**

Impairment charges

(120

)

-

(120

)

**

(120

)

-

(120

)

**

Net interest expense (Note D)

(1,445

)

(1,133

)

(312

)

-27.5%

(3,971

)

(2,881

)

(1,090

)

-37.8%

Income from continuing operations before income taxes

52,883

11,827

41,056

**

71,506

39,162

32,344

82.6%

Income tax expense (Note E)

(17,878

)

(3,746

)

(14,132

)

**

(23,652

)

(10,851

)

(12,801

)

**

Income from continuing operations

35,005

8,081

26,924

**

47,854

28,311

19,543

69.0%

Loss from discontinued operations

(221

)

(163

)

(58

)

-35.6%

(771

)

(233

)

(538

)

**

Net income

34,784

7,918

26,866

**

47,083

28,078

19,005

67.7%

Net loss attributable to noncontrolling interest

(992

)

(688

)

(304

)

-44.2%

(765

)

(515

)

(250

)

-48.5%

Net income attributable to Viad

$

33,792

$

7,230

$

26,562

**

$

46,318

$

27,563

$

18,755

68.0%

Amounts Attributable to Viad Common Stockholders:

Income from continuing operations

$

34,013

$

7,393

$

26,620

**

$

47,089

$

27,796

$

19,293

69.4%

Loss from discontinued operations

(221

)

(163

)

(58

)

-35.6%

(771

)

(233

)

(538

)

**

Net income

$

33,792

$

7,230

$

26,562

**

$

46,318

$

27,563

$

18,755

68.0%

Diluted income per common share:

Income from continuing operations attributable to  Viad common shareholders

$

1.68

$

0.37

$

1.31

**

$

2.33

$

1.38

$

0.95

68.8%

Loss from discontinued operations attributable to Viad common shareholders

(0.01

)

(0.01

)

-

0.0%

(0.04

)

(0.01

)

(0.03

)

**

Net income attributable to Viad common shareholders

$

1.67

$

0.36

$

1.31

**

$

2.29

$

1.37

$

0.92

67.2%

Basic income per common share:

Income from continuing operations attributable to Viad common shareholders

$

1.68

$

0.37

$

1.31

**

$

2.33

$

1.38

$

0.95

68.8%

Loss from discontinued operations attributable to Viad common shareholders

(0.01

)

(0.01

)

-

0.0%

(0.04

)

(0.01

)

(0.03

)

**

Net income attributable to Viad common shareholders (Note F)

$

1.67

$

0.36

$

1.31

**

$

2.29

$

1.37

$

0.92

67.2%

Common shares treated as outstanding for Income per share calculations:

Weighted-average outstanding common shares

20,017

19,831

186

0.9%

19,972

19,782

190

1.0%

Weighted-average outstanding and potentially dilutive common shares

20,207

19,974

233

1.2%

20,150

19,946

204

1.0%

(A)

Corporate Eliminations — The corporate eliminations recorded during the three and nine months ended September 30, 2016 represent the elimination of intercompany revenue and profit realized by the Marketing & Events Group for work completed on renovations for the Travel & Recreation Group’s Banff Gondola.

(B)

Corporate Activities — The increase in corporate activities expense for the three months ended September 30, 2016 was primarily due to an increase in performance-based compensation expense. The increase in corporate activities expense for the nine months ended September 30, 2016 was primarily due to an increase in performance-based compensation expense, offset in part by costs related to a shareholder nomination and settlement agreement during 2015 and lower acquisition transaction-related costs in 2016.

(C)

Restructuring Charges — During the three months ended September 30, 2016 and 2015, Viad recorded restructuring charges of $1.7 million and $0.3 million, respectively, primarily related to the elimination of positions and facility consolidations in the Marketing & Events Group. During the nine months ended September 30, 2016 and 2015, Viad recorded restructuring charges of $3.7 million and $1.5 million, respectively, primarily related to the elimination of positions and facility consolidations in the Marketing & Events Group, as well as the elimination of certain positions at Viad's corporate office.

(D)

Net Interest Expense — The increase in net interest expense for the three months ended September 30, 2016 was primarily due to higher debt balances resulting from acquisitions completed during 2016. The increase in net interest expense for the nine months ended September 30, 2016 was primarily due to higher debt balances resulting from acquisitions completed during 2016, as well as higher interest income received during 2015.

(E)

Income Taxes — The increase in the tax rate for the nine months ended September 30, 2016 was primarily due to a non-cash benefit recorded in the 2015 period related to certain foreign tax assets.

(F)

Income per Common Share — Following is a reconciliation of net income attributable to Viad to net income allocated to Viad common shareholders:

Three months ended September 30,

Nine months ended September 30,

($ in thousands, except per share data)

2016

2015

$ Change

% Change

2016

2015

$ Change

% Change

Net income attributable to Viad

$

33,792

$

7,230

$

26,562

**

$

46,318

$

27,563

$

18,755

68.0%

Less: Allocation to nonvested shares

(454

)

(100

)

(354

)

**

(629

)

(402

)

(227

)

-56.5%

Net income allocated to Viad common shareholders

$

33,338

$

7,130

$

26,208

**

$

45,689

$

27,161

$

18,528

68.2%

Weighted-average outstanding common shares

20,017

19,831

186

0.9%

19,972

19,782

190

1.0%

Basic income per common share attributable to Viad common shareholders

$

1.67

$

0.36

$

1.31

**

$

2.29

$

1.37

$

0.92

67.2%

Three months ended September 30,

Nine months ended September 30,

($ in thousands)

2016

2015

$ Change

% Change

2016

2015

$ Change

% Change

Income before other items:

Net income attributable to Viad

$

33,792

$

7,230

$

26,562

**

$

46,318

$

27,563

$

18,755

68.0%

Loss from discontinued operations attributable to Viad

221

163

58

35.6%

771

233

538

**

Income from continuing operations attributable to Viad

34,013

7,393

26,620

**

47,089

27,796

19,293

69.4%

Restructuring charges, pre-tax

1,697

257

1,440

**

3,664

1,542

2,122

**

Acquisition-related costs and other non-recurring expenses, pre-tax (A)

63

435

(372

)

-85.5%

1,034

2,808

(1,774

)

-63.2%

Impairment charges, pre-tax

120

-

120

**

120

-

120

**

Tax benefit on above items

(676

)

(267

)

(409

)

**

(1,611

)

(1,525

)

(86

)

-5.6%

Favorable tax matters

-

-

-

**

-

(1,563

)

1,563

-100.0%

Income before other items

$

35,217

$

7,818

$

27,399

**

$

50,296

$

29,058

$

21,238

73.1%

(per diluted share)

Income before other items:

Net income attributable to Viad

$

1.67

$

0.36

$

1.31

**

$

2.29

$

1.37

$

0.92

67.2%

Loss from discontinued operations attributable to Viad

0.01

0.01

-

0.0%

0.04

0.01

0.03

**

Income from continuing operations attributable to Viad

1.68

0.37

1.31

**

2.33

1.38

0.95

68.8%

Restructuring charges, pre-tax

0.08

0.01

0.07

**

0.18

0.09

0.09

100.0%

Acquisition-related costs and other non-recurring expenses, pre-tax (A)

-

0.02

(0.02

)

-100.0%

0.05

0.14

(0.09

)

-64.3%

Impairment charges, pre-tax

0.01

-

0.01

**

-

-

-

**

Tax benefit on above items

(0.03

)

(0.01

)

(0.02

)

**

(0.08

)

(0.08

)

-

0.0%

Favorable tax matters

-

-

-

**

-

(0.08

)

0.08

-100.0%

Income before other items

$

1.74

$

0.39

$

1.35

**

$

2.48

$

1.45

$

1.03

71.0%

($ in thousands)

Adjusted EBITDA:

Net income attributable to Viad

$

33,792

$

7,230

$

26,562

**

$

46,318

$

27,563

$

18,755

68.0%

Loss from discontinued operations

221

163

58