Viad Corp Delivers Strong Third Quarter 2016 Results

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

**

**

Change is greater than 100%.

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.

**

Change is greater than 100% or 1,000 basis points.

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.

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

Q1 Actual

Q2 Actual

Q3 Actual

Q4 Est.

FY Est.

Show Rotation Revenue ($ in millions)

$(11)

$(6)

$85

$(15)

$50

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)

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

$(1)

T&R

(2.9)*

(8.5)

-

Income (Loss) per Share Before Other Items

$  0.01*

$(0.19)

$(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.

VIAD CORP AND SUBSIDIARIES

TABLE ONE - QUARTERLY RESULTS

(UNAUDITED)

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 income 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

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%

** Change is greater than +/- 100 percent

VIAD CORP AND SUBSIDIARIES

TABLE ONE - NOTES TO QUARTERLY RESULTS

(UNAUDITED)

(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%

** Change is greater than +/- 100 percent

VIAD CORP AND SUBSIDIARIES

TABLE TWO - NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

IMPORTANT DISCLOSURES REGARDING NON-GAAP FINANCIAL MEASURES

This document includes the presentation of "Income/(Loss) Before Other Items", "Adjusted EBITDA", "Adjusted Segment EBITDA" and "Adjusted Segment Operating Income/(Loss)", which are supplemental to results presented under accounting principles generally accepted in the United States of America ("GAAP") and may not be comparable to similarly titled measures presented by other companies.  These non-GAAP measures are utilized by management to facilitate period-to-period comparisons and analysis of Viad's operating performance and should be considered in addition to, but not as substitutes for, other similar measures reported in accordance with GAAP.  The use of these non-GAAP financial measures is limited, compared to the GAAP measure of net income attributable to Viad, because they do not consider a variety of items affecting Viad's consolidated financial performance as reconciled below.  Because these non-GAAP measures do not consider all items affecting Viad's consolidated financial performance, a user of Viad's financial information should consider net income attributable to Viad as an important measure of financial performance because it provides a more complete measure of the Company's performance.

Income/(Loss) Before Other Items and Adjusted Segment Operating Income/(Loss) are considered useful operating metrics, in addition to net income attributable to Viad, as potential variations arising from non-operational expenses/income are eliminated, thus resulting in additional measures considered to be indicative of Viad's performance. Management believes that the presentation of Adjusted EBITDA and Adjusted Segment EBITDA provide useful information to investors regarding Viad's results of operations for trending, analyzing and benchmarking the performance and value of Viad's business.  Management also believes that the presentation of Adjusted Segment EBITDA for acquisitions and other major capital projects enables investors to assess how effectively management is investing capital into major corporate development projects, both from a valuation and return perspective.

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

35.6%

771

233

538

**

Impairment charges

120

-

120

**

120

-

120

**

Interest expense

1,489

1,198

291

24.3%

4,109

3,452

657

19.0%

Income tax expense

17,878

3,746

14,132

**

23,652

10,851

12,801

**

Depreciation and amortization

12,649

9,170

3,479

37.9%

31,206

27,040

4,166

15.4%

Other noncontrolling interest

(661)

(459)

(202)

-44.0%

(691)

(520)

(171)

-32.9%

Adjusted EBITDA

$        65,488

$        21,048

$      44,440

**

$      105,485

$        68,619

$        36,866

53.7%

** Change is greater than +/- 100 percent

(A)

Acquisition-related costs and other non-recurring expenses include:

Three months ended September 30,

Nine months ended September 30,

2016

2015

$ Change

% Change

2016

2015

$ Change

% Change

$                10

$              247

$         (237)

-96.0%

$              422

$              991

$            (569)

-57.4%

53

119

(66)

-55.5%

612

1,069

(457)

-42.8%

-

69

(69)

-100.0%

-

748

(748)

-100.0%

$                63

$              435

$         (372)

-85.5%

$          1,034

$          2,808

$        (1,774)

-63.2%

VIAD CORP AND SUBSIDIARIES

TABLE TWO - NON-GAAP FINANCIAL MEASURES (CONTINUED)

(UNAUDITED)

Organic- The term "organic" is used within this document to refer to results without the impact of exchange rate variances and acquisitions, if any, until such acquisitions are included in the entirety of both comparable periods.  The impact of exchange rate variances (or "FX Impact") is calculated as the difference between current period activity translated at the current period's exchange rates and the comparable prior period's exchange rates.  Management believes that the presentation of "organic" results permits investors to better understand Viad's performance without the effects of exchange rate variances or acquisitions.

Three months ended September 30, 2016

Three months ended September 30, 2015

($ in thousands)

As Reported

Acquisitions(A)

FX Impact

Organic

As Reported

Acquisitions(A)

Organic

Viad Consolidated:

Revenue

$                382,465

$                   31,226

$                   (8,016)

$                359,255

$                255,946

$                            -

$                255,946

Net income attributable to Viad

$                   33,792

$                     7,230

Net income attributable to noncontrolling interest

992

688

Loss from discontinued operations

221

163

Income tax expense

17,878

3,746

Net interest expense

1,445

1,133

Impairment charges

120

-

Restructuring charges

1,697

257

Corporate activities expense

2,772

1,354

Corporate eliminations

518

-

Segment operating income

$                   59,435

$                   10,837

$                      (332)

$                   48,930

$                   14,571

$                            -

$                   14,571

Integration costs

10

10

-

-

247

-

247

Adjusted segment operating income

59,445

10,847

(332)

48,930

14,818

-

14,818

Segment depreciation

9,929

2,470

(175)

7,634

7,434

-

7,434

Segment amortization

2,658

1,081

(93)

1,670

1,702

-

1,702

$                   72,032

$                   14,398

$                      (600)

$                   58,234

$                   23,954

$                            -

$                   23,954

Adjusted segment operating margin

15.5%

34.7%

4.1%

13.6%

5.8%

5.8%

Adjusted segment EBITDA margin

18.8%

46.1%

7.5%

16.2%

9.4%

9.4%

Marketing & Events Group:

Revenue

$                286,985

$                     7,802

$                   (7,956)

$                287,139

$                188,863

$                            -

$                188,863

Segment operating income (loss)

$                   15,187

$                         460