Q3

2018

Q3

2017

y-o-y

Change

$ in millions, except per share data

Revenue

$

358.2

$

339.1

5.6

%

Organic Revenue*

361.5

339.1

6.6

%

Net Income Attributable to Viad

$

37.4

$

44.7

-16.3

%

Income Before Other Items*

35.0

27.3

28.5

%

Income Before Other Items per Share*

1.72

1.33

29.3

%

Adjusted Segment Operating Income*

$

57.0

$

48.4

17.8

%

Adjusted Segment EBITDA*

73.1

64.1

14.0

%

•

Revenue of $358.2 million increased 5.6% ($19.1 million) year-over-year, or 6.6% ($22.4 million) on an organic basis (which excludes the impact of exchange rate variances).  

o

The organic revenue increase primarily reflects positive show rotation of $28 million at GES.

o

Exchange rate variances had an unfavorable impact of $3.4 million.

•

Adjusted segment operating income, adjusted segment EBITDA and income before other items increased compared to the prior year quarter primarily due to the increase in revenue as well as a reduction in performance-based incentives.  

Q3

2018

Q3

2017

y-o-y

Change

$ in millions

Revenue

$

246.1

$

232.1

6.0

%

U.S. Organic Revenue*

191.7

184.8

3.8

%

International Organic Revenue*

57.6

54.0

6.5

%

Adjusted Segment Operating Income (Loss)*

$

1.2

$

(5.5

)

**

Adjusted Segment Operating Margin*

0.5

%

(2.4

)%

290 bps

Adjusted Segment EBITDA*

$

10.6

$

3.9

**

Adjusted Segment EBITDA Margin*

4.3

%

1.7

%

260 bps

Key Performance Indicators:

U.S. Base Same-Show Revenue Growth⁽¹⁾

5.3

%

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

$

19

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

$

9

(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 29.1% of GES’ U.S. organic revenue during the 2018 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 $246.1 million increased 6.0% ($14.0 million) year-over-year.  On an organic basis, which excludes the impact of exchange rate variances, revenue increased 6.3% ($14.7 million).

o

U.S. organic revenue increased 3.8% ($6.9 million) primarily due to positive show rotation of approximately $19 million and base same-show growth of 5.3%, partially offset by nonrecurring business produced in the 2017 third quarter.

o

International organic revenue increased 6.5% ($3.5 million) primarily due to positive show rotation of approximately $9 million, partially offset by nonrecurring business produced in the 2017 third quarter.

•

GES adjusted segment operating income of $1.2 million* increased $6.7 million year-over-year, and $6.7 million on an organic basis.

o

U.S. organic adjusted segment operating income increased by $5.0 million to $2.3 million* primarily due to a reduction in performance-based incentives and the increase in revenue.

o

International organic adjusted segment operating results improved by $1.8 million to a loss of $1.1 million* primarily due to a reduction in performance-based incentives and the increase in revenue.

Q3

2018

Q3

2017

y-o-y

Change

$ in millions

Revenue

$

112.1

$

107.0

4.7

%

Organic Revenue*

114.7

107.0

7.3

%

Adjusted Segment Operating Income*

$

55.8

$

53.9

3.6

%

Adjusted Segment Operating Margin*

49.8

%

50.4

%

-60 bps

Adjusted Segment EBITDA*

$

62.5

$

60.2

3.7

%

Adjusted Segment EBITDA Margin*

55.8

%

56.3

%

-50 bps

Key Performance Indicators:

Same-Store RevPAR⁽¹⁾

$

203

$

198

2.5

%

Same-Store Room Nights Available⁽¹⁾

107,696

108,015

-0.3

%

Same-Store Passengers⁽²⁾

1,333,204

1,361,934

-2.1

%

Same-Store Revenue per Passenger⁽²⁾

$

45

$

42

7.1

%

(1)

Same-store RevPAR is calculated as total rooms revenue divided by the total number of room nights available for all comparable Pursuit properties during the periods presented, expressed on a constant currency basis.  Comparable properties are defined as those owned by Viad and operating for the entirety of both periods.  Accordingly, the measures shown above do not include the Mount Royal Hotel, which was closed during 2017 due to fire damage.

(2)

Same-store revenue per passenger is calculated as total attractions revenue divided by the total number of passengers for all comparable Pursuit attractions, expressed on a constant currency basis.  Comparable attractions are defined as those owned by Viad for the entirety of both periods.  

•

Pursuit revenue of $112.1 million increased 4.7% ($5.1 million) year-over-year. On an organic basis, which excludes the impact of exchange rate variances, revenue increased 7.3% ($7.8 million) primarily driven by the re-opening of the Mount Royal Hotel, combined with our revenue management efforts across our attractions and hospitality properties.

•

Pursuit adjusted segment operating income of $55.8 million* increased 3.6% ($1.9 million). Organic adjusted segment operating income of $57.3 million* increased $3.4 million primarily due to the increase in revenue.

•

Our cash flow from operations was $70.2 million for the 2018 third quarter.

•

Our capital expenditures for the quarter totaled $21.5 million, comprised of $15.8 million for Pursuit, and $5.7 million for GES.

•

Our return of capital totaled $2.0 million for the quarter (which represented quarterly dividend of $0.10 per share). Viad had 265,449 shares remaining under its current repurchase authorization at September 30, 2018.

•

Our debt payments (net) totaled $40.5 million for the quarter.

•

Our cash and cash equivalents totaled $55.5 million, our debt totaled $200.8 million and our debt-to-capital ratio was 29.6% at September 30, 2018.

•

On October 24, 2018, we amended and restated our credit agreement to provide additional debt capacity through 2023.  The amendment replaced our $175 million revolving credit facility, $125 million term loan and $100 million accordion feature with an expanded $450 million revolving credit facility and $250 million accordion feature.

•

We expect consolidated revenue to decrease at a low single-digit rate from 2017 full year revenue, driven primarily by negative show rotation of $35 million to $40 million at GES, partially offset by continued growth in the underlying business.

•

We expect consolidated adjusted segment EBITDA to be in the range of $146.5 million to $150.5 million, as compared to $154.2 million* in 2017.  This guidance range reflects a reduction from our prior guidance of $154.5 million to $158.5 million primarily due to lower short-term booking revenue at GES, as well as the impact of fires on Pursuit’s peak operating season.

•

Our guidance assumes that exchange rates during the rest of 2018 will approximate $0.77 U.S. Dollars per Canadian Dollar and $1.30 U.S. Dollars per British Pound.  As compared to 2017, we expect exchange rate variances to impact 2018 full year results as follows:

Viad Total

GES

Pursuit

$ in millions, except per share data

Revenue

$

7.0

$

8.5

$

(1.5

)

Adjusted Segment Operating Income

$

(1.5

)

$

—

(1.5

)

Income per Share Before Other Items

$

(0.05

)

•

The outlook for our business units is as follows:

GES

Pursuit

$ in millions

Revenue

Down low-single digits

(from $1,133 in 2017)

Up mid- to high-single digits

(from $174 in 2017)

Adjusted Segment EBITDA

$78.5 to $81.5 (vs. $88.2* in 2017)

$67.5 to $69.5 (vs. $66.0* in 2017)

Depreciation & Amortization

$38 to $39

$18.5 to $19.5

Adjusted Operating Income

$40 to $43 (vs. $50.9* in 2017)

$48.5 to $50.5 (vs. $48.4* in 2017)

Capital Expenditures

$28 to $31

$59 to $62

(inclusive of $19 for the Mount

Royal Hotel and $10 for FlyOver

Iceland)

o

We expect GES show rotation to have a net negative impact on full year revenue of $35 million to $40 million versus 2017.  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 Act.

Q2 Act.

Q3 Act.

Q4 Est.

FY Est.

Show Rotation Revenue ($ in millions)

$

(56

)

$

(15

)

$

28

$

5

$(35) to $(40)

o

We expect GES U.S. base same-show revenue to increase at a low single digit rate.

o

During the 2017 third quarter, GES adjusted segment EBITDA and adjusted segment operating income included income of $2.8 million related to a contract settlement, which will not recur in 2018.

o

We expect Pursuit revenue to be favorably impacted by approximately $4.5 million from the re-opening of the Mount Royal Hotel in July 2018, as well as continued focus on revenue management and refresh efforts across our attraction and hospitality portfolio.

o

We expect start-up costs related to the development of Pursuit’s FlyOver Iceland attraction, which is expected to open in 2019, to approximate $1 million during 2018 ($0.8 million of which was incurred during the first nine months of 2018).  These costs are not included in the adjusted segment EBITDA or adjusted segment operating income guidance ranges above.

o

Our capital expenditure guidance for Pursuit includes approximately $19 million invested to complete the restoration and renovation of the Mount Royal Hotel and approximately $10 million for the development of the FlyOver Iceland attraction. The Mount Royal Hotel expenditures were funded primarily by the property insurance proceeds received during 2017.  The FlyOver Iceland expenditures are being funded primarily out of our 2017 capital contribution relating to the FlyOver Iceland attraction.

•

We expect corporate activities expense to approximate $10 million to $11 million, inclusive of $0.4 million of acquisition-related costs incurred during the nine months ended September 30, 2018.

•

We expect our effective tax rate on income before other items to approximate 29%, which is based on our current best estimates regarding the impact of Tax Reform. The higher rate relative to the 21% U.S. federal corporate tax rate is due to our foreign earnings in higher rate jurisdictions, the increase in non-deductible expenses, and an increase in our effective state tax rate.

2018 Guidance

2017

Low End

High End

FX Impact⁽¹⁾

$ in millions, except per share data

Revenue:

GES

$

263.0

$

267.0

to

$

277.0

$

(1.0

)

Pursuit

14.3

14.5

to

16.5

(0.5

)

Adjusted Operating Income (Loss):

GES

$

2.3

*

$

9.0

to

$

12.0

$

—

Pursuit

(5.5

)

*

(6.0

)

to

(4.0

)

—

Income (Loss) per Share Before Other Items

$

(0.26

)

*

$

(0.11

)

to

$

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.

•

We expect GES fourth quarter revenue to increase primarily due to positive show rotation revenue of approximately $5 million. We expect the growth in GES operating income to be driven by lower expenses, including performance-based incentives, as well as the increase in revenue.

•

We expect Pursuit fourth quarter results to increase primarily due to the re-opening of the Mount Royal Hotel and continued focus on revenue management and refresh efforts across our attraction and hospitality portfolio.

•

our ability to successfully integrate and achieve established financial and strategic goals from acquisitions;

•

our dependence on large exhibition event clients;

•

the importance of key members of our account teams to our business relationships;

•

the competitive nature of the industries in which we operate;

•

travel industry disruptions;

•

transportation disruptions and increases in transportation costs;

•

seasonality of our businesses;

•

terrorist attacks, natural disasters and other catastrophic events;

•

fluctuations in general economic conditions;

•

the impact of recent U.S. tax legislation;

•

our exposure to currency exchange rate fluctuations;

•

our multi-employer pension plan funding obligations;

•

our exposure to labor cost increases and work stoppages related to unionized employees;

•

our exposure to cybersecurity attacks and threats;

•

compliance with laws governing the collection, storage, handling and transfer of personal data and our exposure to legal claims and fines for data breaches or improper handling of such data;

•

unanticipated delays and cost overruns of our capital projects, and our ability to achieve established financial and strategic goals of such projects;

•

adverse effects of show rotation on our periodic results and operating margins;

•

the effects of the United Kingdom’s exit from the European Union; and

•

liabilities relating to prior and discontinued operations.

Three months ended September 30,

Nine months ended September 30,

($ in thousands, except per share data)

2018

2017

$ Change

% Change

2018

2017

$ Change

% Change

Revenue:

GES:

U.S.

$

191,699

$

184,761

$

6,938

3.8%

$

636,806

$

684,003

$

(47,197

)

-6.9%

International

56,890

54,040

2,850

5.3%

204,505

203,222

1,283

0.6%

Intersegment eliminations

(2,479

)

(6,682

)

4,203

62.9%

(12,173

)

(17,126

)

4,953

28.9%

Total GES

246,110

232,119

13,991

6.0%

829,138

870,099

(40,961

)

-4.7%

Pursuit

112,053

106,980

5,073

4.7%

170,130

159,581

10,549

6.6%

Total revenue

$

358,163

$

339,099

$

19,064

5.6%

$

999,268

$

1,029,680

$

(30,412

)

-3.0%

Segment operating income (loss):

GES:

U.S.

$

2,287

$

(2,664

)

$

4,951

**

$

21,569

$

40,002

$

(18,433

)

-46.1%

International

(1,127

)

(2,858

)

1,731

60.6%

9,176

8,524

652

7.6%

Total GES

1,160

(5,522

)

6,682

**

30,745

48,526

(17,781

)

-36.6%

Pursuit

55,408

53,860

1,548

2.9%

53,770

53,523

247

0.5%

Segment operating income

56,568

48,338

8,230

17.0%

84,515

102,049

(17,534

)

-17.2%

Corporate eliminations

18

18

—

0.0%

51

50

1

2.0%

Corporate activities (Note A)

(3,777

)

(4,425

)

648

14.6%

(8,529

)

(9,886

)

1,357

13.7%

Restructuring charges

(175

)

(255

)

80

31.4%

(999

)

(817

)

(182

)

-22.3%

Impairment recoveries (Note B)

—

24,467

(24,467

)

-100.0%

35

29,098

(29,063

)

-99.9%

Other expense (Note C)

(527

)

(248

)

(279

)

**

(1,308

)

(922

)

(386

)

-41.9%

Net interest expense

(2,507

)

(2,043

)

(464

)

-22.7%

(6,793

)

(6,107

)

(686

)

-11.2%

Income from continuing operations before income taxes

49,600

65,852

(16,252

)

-24.7%

66,972

113,465

(46,493

)

-41.0%

Income tax expense (Note D)

(10,806

)

(20,010

)

9,204

46.0%

(15,282

)

(32,929

)

17,647

53.6%

Income from continuing operations

38,794

45,842

(7,048

)

-15.4%

51,690

80,536

(28,846

)

-35.8%

Income (loss) from discontinued operations (Note E)

(246

)

(101

)

(145

)

**

403

(408

)

811

**

Net income

38,548

45,741

(7,193

)

-15.7%

52,093

80,128

(28,035

)

-35.0%

Net income attributable to noncontrolling interest

(1,287

)

(1,084

)

(203

)

-18.7%

(890

)

(747

)

(143

)

-19.1%

Net loss attributable to redeemable noncontrolling interest

128

—

128

**

289

—

289

**

Net income attributable to Viad

$

37,389

$

44,657

$

(7,268

)

-16.3%

$

51,492

$

79,381

$

(27,889

)

-35.1%

Amounts Attributable to Viad Common Stockholders:

Income from continuing operations

$

37,635

$

44,758

$

(7,123

)

-15.9%

$

51,089

$

79,789

$

(28,700

)

-36.0%

Income (loss) from discontinued operations (Note E)

(246

)

(101

)

(145

)

**

403

(408

)

811

**

Net income

$

37,389

$

44,657

$

(7,268

)

-16.3%

$

51,492

$

79,381

$

(27,889

)

-35.1%

Diluted income per common share:

Income from continuing operations attributable to Viad common shareholders

$

1.84

$

2.19

$

(0.35

)

-16.0%

$

2.49

$

3.91

$

(1.42

)

-36.3%

Income (loss) from discontinued operations attributable to Viad common shareholders

(0.01

)

—

(0.01

)

**

0.02

(0.02

)

0.04

**

Net income attributable to Viad common

   shareholders

$

1.83

$

2.19

$

(0.36

)

-16.4%

$

2.51

$

3.89

$

(1.38

)

-35.5%

Basic income per common share:

Income from continuing operations attributable to Viad common shareholders

$

1.85

$

2.19

$

(0.34

)

-15.5%

$

2.50

$

3.91

$

(1.41

)

-36.1%

Income (loss) from discontinued operations attributable to Viad common shareholders

(0.01

)

—

(0.01

)

**

0.02

(0.02

)

0.04

**

Net income attributable to Viad common shareholders (Note F)

$

1.84

$

2.19

$

(0.35

)

-16.0%

$

2.52

$

3.89

$

(1.37

)

-35.2%

Common shares treated as outstanding for income per share calculations:

Weighted-average outstanding common shares

20,145

20,166

(21

)

-0.1%

20,187

20,130

57

0.3%

Weighted-average outstanding and potentially dilutive common shares

20,387

20,436

(49

)

-0.2%

20,427

20,382

45

0.2%

(A)

Corporate Activities — The decrease in corporate activities expense for the three and nine months ended September 30, 2018 relative to 2017 was primarily due to a decrease in performance-based compensation expense.

(B)

Impairment Recoveries — The impairment recoveries recorded during the three and nine months ended September 30, 2017 were related to insurance proceeds received as a partial settlement for fire damage to our Mount Royal Hotel.

(C)

Other Expense — On January 1, 2018, we adopted ASU 2017-07, which requires retrospective adoption. As a result, we recorded the nonservice cost component of net periodic benefit cost within other expense for the three and nine months ended September 30, 2018, and we reclassified $0.2 million and $0.9 million from operating expenses to other expense for the three and nine months ended September 30, 2017, respectively, to conform to current period presentation.

(D)

Income Taxes — Income taxes went from an effective rate of 29% for the nine months ended September 30, 2017 to an effective rate of 23% for the nine months ended September 30, 2018. The decrease in the effective rate for 2018 was primarily due to a $3.1 million benefit related to reductions in our estimated repatriation tax and the re-measurement of our deferred tax assets, as well as the lower federal tax rate due to Tax Reform, partially offset by increased non-deductible expenses, a higher effective state tax rate and our mix of domestic versus foreign income, which is taxed at higher rates.

(E)

Income (Loss) from Discontinued Operations — The income from discontinued operations for the nine months ended September 30, 2018 was primarily related to a favorable legal settlement related to previously sold operations.  The loss from discontinued operations for the nine months ended September 30, 2017 was primarily related to legal expenses associated with previously sold operations, offset in part by a reduction in an uncertain tax position due to the lapse of statute.

(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)

2018

2017

$ Change

% Change

2018

2017

$ Change

% Change

Net income attributable to Viad

$

37,389

$

44,657

$

(7,268

)

-16.3%

$

51,492

$

79,381

$

(27,889

)

-35.1%

Less: Allocation to nonvested shares

(338

)

(539

)

201

37.3%

(493

)

(993

)

500

50.4%

Adjustment to the redemption value of redeemable noncontrolling interest

(84

)

—

(84

)

**

(174

)

—

(174

)

**

Net income allocated to Viad common shareholders

$

36,967

$

44,118

$

(7,151

)

-16.2%

$

50,825

$

78,388

$

(27,563

)

-35.2%

Weighted-average outstanding common shares

20,145

20,166

(21

)

-0.1%

20,187

20,130

57

0.3%

Basic income per common share attributable to Viad common shareholders

$

1.84

$

2.19

$

(0.35

)

-16.0%

$

2.52

$

3.89

$

(1.37

)

-35.2%

Three months ended September 30,

Nine months ended September 30,

($ in thousands)

2018

2017

$ Change

% Change

2018

2017

$ Change

% Change

Income before other items:

Net income attributable to Viad

$

37,389

$

44,657

$

(7,268

)

-16.3%

$

51,492

$

79,381

$

(27,889

)

-35.1%

(Income) loss from discontinued operations attributable to Viad

246

101

145

**

(403

)

408

(811

)

**

Income from continuing operations attributable to Viad

37,635

44,758

(7,123

)

-15.9%

51,089

79,789

(28,700

)

-36.0%

Restructuring charges, pre-tax

175

255

(80

)

-31.4%

999

817

182

22.3%

Impairment recoveries, pre-tax

—

(24,467

)

24,467

-100.0%

(35

)

(29,098

)

29,063

99.9%

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

649

109

540

**

1,470

1,058

412

38.9%

Tax expense (benefit) on above items

(188

)

6,601

(6,789

)

**

(552

)

7,465

(8,017

)

**

Adjustment related to Tax Reform

(3,109

)

—

(3,109

)

**

(3,109

)

—

(3,109

)

**

Favorable tax matters

—

—

—

**

—

(1,198

)

1,198

-100.0%

Net income attributable to FlyOver Iceland noncontrolling interest

(128

)

—

(128

)

**

(289

)

—

(289

)

**

Income before other items

$

35,034

$

27,256

$

7,778

28.5%

$

49,573

$

58,833

$

(9,260

)

-15.7%

(per diluted share)

Income before other items:

Net income attributable to Viad

$

1.83

$

2.19

$

(0.36

)

-16.4%

$

2.51

$

3.89

$

(1.38

)

-35.5%

(Income) loss from discontinued operations attributable to Viad

0.01

—

0.01

**

(0.02

)

0.02

(0.04

)

**

Income from continuing operations attributable to Viad

1.84

2.19

(0.35

)

-16.0%

2.49

3.91

(1.42

)

-36.3%

Restructuring charges, pre-tax

0.01

0.01

—

0.0%

0.05

0.04

0.01

25.0%

Impairment recoveries, pre-tax

—

(1.20

)

1.20

-100.0%

—

(1.43

)

1.43

-100.0%

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

0.03

0.01

0.02

**

0.07

0.05

0.02

40.0%

Tax expense (benefit) on above items

—

0.32

(0.32

)

-100.0%

(0.02

)

0.38

(0.40

)

**

Adjustment related to Tax Reform

(0.15

)

—

(0.15

)

**

(0.15

)

—