Viad Corp (VVI) 2007 Q4 法說會逐字稿

Good day and welcome to this Viad Corp 2007 fourth quarter and year-end earnings call.

Today's call will be recorded.

I will now turn the call over to the Director of Investor Relations, Carrie Long.

Please go ahead.

Good morning, and thank you for attending our conference call.

Before we begin, I would like to remind you that statements made during this call which are not historical facts may constitute forward-looking statements, and actual results may differ materially from those projected in these forward-looking statements.

Additional information concerning business and other risk factors that could cause results to materially differ from those in the forward-looking statements can be found in Viad's Annual and quarterly reports filed with the SEC.

This conference may not be recorded or reproduced in transcript, without the expressed written permission of Viad.

During today's call we will be referring to Tables One and Two in our press release.

That press release is available on our website at www.viad.com.

With that said, it is my pleasure to introduce Paul Dykstra, President and CEO of Viad.

Thanks, Carrie.

Good morning everybody.

Belated Happy New Year.

Thanks again for being with us today.

On today's call you will also hear from Kevin Rabbitt, President and CEO of GES Exposition Services, John Jastrem, President and CEO of Exhibitgroup/Giltspur, and Ellen Ingersoll, Viad's Chief Financial Officer.

Before we discuss our 2007 results, I want to first discuss our recent acquisition.

On January 4th, we completed the acquisition of Becker Group, an experiential marketing company, for $24.3 million in cash.

Becker Group is a great addition to Viad's portfolio leading businesses.

Becker Group is an established brand, with deep longstanding customer relationships, cutting edge creative talent, and an exceptional management team and employees.

Like Viad, Becker Group is a values-based organization, that operates with honesty and integrity.

Becker Group specializes in creating immersive entertaining attractions, and brand-based experiences for its clients and venues, including retail centers, movie studios, museums, leading consumer brands, and casinos.

With more than 50 years of experience Becker Group is the leading provider of large-scale holiday-themed events and experiences for regional shopping malls in North America.

Becker Group's retail clients include some of the top retail real estate developers in the world, many of which have been clients for ten or more years.

Becker Group successfully expanded it experiential marketing solutions beyond the retail sector, to include year-round branded attractions, sponsored events, mobile marketing tours, and other place-based marketing solutions for a broad client base.

Recent projects include the museum touring exhibitions "Rockwell's America" and "Robots," as well as touring exhibits to promote the animated films "Ratatouille" and "Cars." Becker Group created a snow globe program at Todman's Retail Centers, featuring and promoting the films, "The Chronicles of Narnia: The Lion, the Witch, and the Wardrobe" and also "Happy Feet."

This acquisition extends Viad's experiential marketing services beyond the trade show environment, and provides excellent opportunities to leverage the capabilities and client relationships of Becker, GES, and Exhibitgroup/Giltspur, to accelerate growth in all three of these businesses.

Becker Group specialized in project design and management, but does not have construction capabilities, or an in-house installation and dismantle team.

As part of Viad, Becker Group will have access to the global resources and talent of both the GES worldwide network and Exhibitgroup/Giltspur, including expert installation and dismantling services, and high-quality custom fabrication capabilities across the U.S.

and abroad.

While significant synergies exist, we based our purchase of Becker Group on its standalone value.

We are still in the process of vetting out the synergy opportunities, but even without synergies, we expect Becker to be accretive to Viad's income in 2008.

We are rapidly integrating Becker, and expect that Becker Group will play a key role in Viad's continued growth and success.

Now let's move on to 2007 results.

As I talk through 2007 you may want to refer to Tables One and Two in the earnings press release.

Overall we produced a solid financial performance in 2007.

I am very excited to report that we reached $1 billion in revenues, and finished the year ahead of our prior guidance.

Full year segment operating income was $68.7 million, and income from continuing operations was $42.5 million, or $2.04 per diluted share.

Income before other items which excludes the favorable resolution of tax matters of $3.1 million, or $0.15 per share, and impairment recoveries of $105,000 after tax, or $0.01 per share, was $39.3 million, or $1.88 per share.

This compares favorably to our prior guidance of $1.72 to $1.78 per share, and reflects an increase of 7.4% from 2006 income before other items of $1.75 per share, despite significant negative show rotation at GES, and the cost of turnaround initiatives at Exhibitgroup/Giltspur.

Growth at GES was bolstered by the acquisition of Melville, and Exhibitgroup/Giltspur is realizing positive results from it's turnaround efforts.

For the fourth quarter revenue was $215.5 million, up $61.2 million, or nearly 40% from the 2006 quarter, including $25.9 million in revenue from Melville.

Fourth quarter segment operating results improved by $3.2 million, to a loss of $705,000, and income before other items was $0.02 per share, which is favorable to our prior guidance of a loss of $0.08 to $0.14 a share.

Relative to our prior guidance, these results reflect stronger than expected results at Exhibitgroup/Giltspur, and solid in-line performance at GES and the Travel and Recreation Services segment, as well as lower corporate expenses and taxes.

We also had very strong free cash flow during the quarter, driven by favorable working capital, as well as strong fourth quarter sales at Exhibitgroup/Giltspur and GES.

Full year 2007 free cash flow was $45.6 million, of which $28.2 million was used to repurchase nearly 800,000 shares of our stock.

Since January 2006,we have repurchased a total of 1.2 million shares.

Now let's move on to the individual operating segment results.

You may want to refer to Table One of the press release, which provides revenues and operating income for each of the operating segments.

First I will turn it over to Kevin Rabbitt to talk about GES.

Kevin.

Thanks, Paul.

GES's revenue increased $49.5 million, or 45.9%, over the 2006 quarter to $157.4 million.

This increase was driven by $25.9 million of revenues from Melville, positive show rotation revenue of $8 million, new business, and continued same show growth.

Operating results in our seasonally slow fourth quarter improved to a loss of $681,000, from a loss of $2.3 million in the 2006 fourth quarter.

For the year, revenue increased $123.7 million, or 19.8%, to $746.7 million, and operating income increased 5.7% to $50.8 million, which was in-line with our prior guidance.

The growth over 2006 was driven by $95.9 million in revenue from Melville, as well as continued same-show growth and new business, which more than offset the impact of negative show rotation revenue of $34 million.

Our full year operating margins were 6.8%, as compared to 7.7% in 2006.

This decline was the result of an increase in insurance claims expense, and cost overruns on certain third quarter shows I discussed last quarter.

Although we faced some challenge in 2007, overall we had a good year with many wins.

Melville has been a huge success.

Our initiatives to drive revenue growth and margin improvement are progressing very well, and results thus far have exceeded our expectations.

Through Melville we are now the exclusive provider of venue services at the new Abu Dhabi National Exhibition Centre.

When all plan phases are complete, this venue will be one of the largest exhibition centers in the Middle East.

The GES worldwide network has several major clients scheduled to hold exhibitions at Abu Dhabi National Exhibition Centre, including Reed Exhibitions, CMP Media, and dmg world media.

We also continued to drive strong same-show growth in our U.S.

operations throughout 2007.

Base same show growth was 8.9% in the fourth quarter, and 10.8% for the full year.

This growth is driven by the efforts of our products and services group to increase penetration, and to exhibitor discretionary spending, and by the overall growth in the industry.

As a reminder base same-show growth is a measure of growth in our U.S.

shows that occur in the same city in the same quarter every year.

Base same shows represented 38% of our 2007 revenue.

The strong same-show growth, along with several new show wins, including Chicago Auto, and True Value, among others, enabled us to more than offset the impact negative show rotation revenue of $34 million.

I will quickly cover our revenue backlog before commenting on our outlook for 2008.

During the fourth quarter we signed over $190 million in future bookings.

Our contracts are typically three to five years in length, and provide us good visibility of our future revenues.

Our show revenue backlog for 2008 and beyond stands at $1.3 billion.

And we have over 65% of our 2008 forecasted revenue under contract.

Our revenue visibility is actually even greater than reported backlog percentage indicates, given a certain amount of additional work we can count on getting, due to our leading presence in major exhibition and event cities.

While our growth was constrained in 2007, due to significant negative show rotation, our outlook for 2008 is very strong.

We expect full-year 2008 revenue to increase at a low double-digit rate, and we expect operating income to increase by 14 to 18%.

These increases are expected to be driven by positive show rotation revenue of about $50 million, and continued growth in our base business.

For the first quarter we expect revenues to be in the range of $280 to $295 million, up from $244.9 million in the 2007 quarter.

Operating income is expected to be in the range of $36.5 to $39 million, up from $32.2 million in the 2007 quarter.

The increases over 2007 are expected to be driven by positive show rotation revenue of about $20 million which includes, CONEXPO-CON/AGG & IFPE, an additional month of revenue from Melville, which we had acquired February 1st of 2007, and continued same-show growth.

Show rotation is expected to have a negative impact on second quarter revenue of about five million, and third quarter we expect positive show rotation revenue of about $45 million, including International Manufacturing Technology Show, MINExpo, and the International Woodworking Machinery & Furniture Supply Fair.

And the fourth quarter, we expect negative rotation of about ten million in revenue.

Overall we continue to expect 2008 to be a banner year for GES.

We will benefit from significant positive show rotation, and our underlying business is performing well.

We continue to be successful in our initiatives to drive revenue growth and productivity improvements across the GES worldwide network.

For that, I want to thank the hard working dedicated employees of GES.

While the pricing environment remains somewhat challenging, the industry seems to be holding its upward course.

The International Consumer Electronics Show took place in early January, and was a very successful event, setting a new record for net square footage.

Additionally CONEXPO-CON/AGG & IFPE, which we will service in March, has announced that it expects square footage to exceed 2.2 million, also setting a new record.

The health of these marquee events is a positive early indicator for 2008 shows.

Going forward, we will remain focused on delivering solid results and positioning ourselves for continued success.

We will continue to provide quality products and services, along with Best-in-Class customer service, at a great value to our customers.

As always, the GES team is committed to winning for all our stakeholders.

Thanks, Kevin.

Now I will ask John Jastrem to comment on Exhibitgroup/Giltspur.

John.

Thanks, Paul.

We had a strong finish to the year.

Fourth quarter revenue increased $9.9 million, or 24.7%, to $50 million, much stronger than our prior guidance of $39 to $44 million.

Fourth quarter operating income was $1.4 million, also better than our prior guidance, and up from the 2006 fourth quarter loss of $339,000.

Our full-year revenue increased $19 million, or 12.4% to $172.7 million.

Our operating loss is $4.8 million for the full year, as compared to a loss of $3.5 million in 2006, reflecting the cost of initiatives to reposition the company for future growth.

The improvement over the prior year, and our prior guidance, reflect positive results from our focus on improving the sales pipeline and win rate.

During 2007, we sold more than double the amount of new business than we did in 2006.

The changes we have made in the sales side, and our efforts to embrace a client-centric culture, and consolidative sales approach continue to drive our success.

We have been successful in selling additional value-added consolidative show services, and in growing our international revenues.

While show services work has relatively lower margins than exhibit construction, it is valuable work that enables our clients to realize greater returns on their trade show spending, thereby strengthening our client relationships.

This is a critical part of our turnaround and repositioning efforts.

We are no longer just designing and selling the best exhibits.

We are taking a more holistic approach, working with our clients to put together a successful trade show program, that combines powerful show for presence, with pre- and post-show direct marketing, and program measurement.

We are also focused on understanding the customer's marketing needs, goals, and budget, in order to deliver compelling solutions that maximize the impact of their budget dollars.

By acting as a trusted advisor, and offering the right mix of services at a fair market price, we are able to deliver the best innovative marketing solutions to our clients, thereby increasing client loyalty and longevity, and enabling us to grow, develop, and retain our clients.

Heading into 2008 we will continue to work to increase exhibitor share of mind, to ensure we are in more and larger opportunities, as we refine and improve our offerings.

In order to keep our positive momentum going into 2008 and beyond, we need to continue adding to and developing our talent and technology solutions.

Both of which are key success factors for us.

As with 2007, these investments will be made a bit ahead of the revenue curve, but only as we continue to see progress on top-line growth.

Overall for 2008 we expect full-year revenue to increase at a single-digit rate, with operating results in the range of a loss of two million to breakeven.

For the first quarter, we expect revenue to be in the range of $35 to $40 million, as compared to $34.3 million in the 2007 first quarter.

And we expect an operating loss in the range of $2.5 to $3.5 million, as compared to the 2007 first quarter loss of $4.7 million.

The team we have put in place continues to mature, and drive results around our client-centric culture.

They are committed to providing compelling solutions to our clients' needs, to leveraging our network and global presence as a unified team, and to performing at the highest levels of excellence at all times to drive our growth.

We have made great progress in turning the business around, as evidenced by our strong top line growth and new business wins in 2007.

I would like to thank the EG team for their talent, hard work, and dedication to our clients and our mission.

Going forward, we remain focused on strengthening our client relationships, by providing compelling value-added programs that help our clients achieve their marketing goals within budget.

At the same time, we will also continue to identify and implement initiatives to improve efficiencies and capacity utilization across our network.

The EG team is committed to our mission of positioning EG as the market leader in face-to-face and experiential marketing services.

And growing our business by delivering the highest level of value and innovation to our clients.

Paul, back to you.

Thank you, John.

Now I will cover highlights for the Travel and Recreation segment.

Revenues during its seasonally slow fourth quarter were $8 million, as compared to $6.3 million in the fourth quarter of 2006.

Fourth quarter operating segment loss was $1.5 million, as compared to a loss of $1.2 million in the 2006 quarter.

The Travel and Recreation Services segment had another solid year, finishing in-line with our prior guidance.

For the full year revenues were $84.2 million, up 6.3% from 2006.

Segment operating income was $22.7 million, compared to 2006 operating income with operating margins of 27.0%.

Brewster and Glacier Park both performed very well in 2007.

As compared to 2006, Brewster saw growth in passenger volume at its gondola and an increase in revenues at it's Mount Royal Hotel, driven by strong occupancy and an increase in average daily rates.

Glacier Park realized strong occupancy at it's Inns and Lodges, and an increase in room revenue over 2006.

In addition to growth in the base operations, foreign currency translation also had a favorable impact on our 2007 results.

Our concessionaire contract with the National Park Service at Glacier Park has been extended through the end of 2008, and will likely be extended through 2009.

For 2008, we expect this segment to continue to post solid performance.

Overall we expect revenue to increase at a single-digit rate from 2007 revenue of $84.2 million.

Operating margins are expected to be comparable to 2007.

For the seasonally slow first quarter, we expect revenue to be in the range of $5 to $6 million, with an operating loss in the range of $2.7 to $3.2 million.

I will now ask Ellen Ingersoll to discuss some financial highlights for the quarter.

Ellen.

Thanks, Paul.

As shown in Table Two of the earnings release, adjusted EBITDA was positive $5.4 million during the quarter, versus negative $541,000 in the fourth quarter of 2006.

As shown in Table Two, free cash flow defined as net cash provided by operating activities minus capital expenditures and dividends was $20.4 million for the quarter, versus an outflow of $5.4 million in the 2006 fourth quarter.

Directionally for 2008, free cash flow is expected to approximate net income plus depreciation and amortization, minus capital expenditures and dividends.

And for the full year 2008, our working capital is expected to have a negative impact.

At December 31, 2007, Viad had total cash and cash equivalents of $165.1 million, as compared to $147.7 million at September 30, 2007.

Viad's total debt at the end of the quarter was $14.2 million, with a debt-to-capital ratio of 2.9%.

Our net interest income for the quarter was $1.1 million, versus $1.8 million in the fourth quarter 2006.

Depreciation and amortization for the quarter was $5.9 million, compared to last year's fourth quarter of 4.8 million.

The full year 2008 forecast is approximately $27 to $29 million.

Capital expenditures were $9.9 million in the fourth quarter of 2007, compared to $5.4 million in the fourth quarter of 2006.

The full year 2008 forecast is approximately $37 million to $39 million.

The increase in 2008 over 2007 is primarily related to technology investments at GES and Exhibitgroup, and the addition of Becker Group.

Payments on Viad's restructuring reserves were $698,000 during the fourth quarter, versus $132,000 in the fourth quarter of 2006.

Full-year 2008 restructuring payments are expected to approximate $2.1 million.

The 2007 income tax rate for the year was 31%, versus 15.8% in 2006.

The 2007 rate reflects aggregate favorable resolution of tax matters of $3.1 million, as compared to $13.2 million in 2006.

The tax rates excluding the favorable resolution of tax matters were 35.9% in 2007, versus 37.2% in 2006.

And with that, I will pass it back to you, Paul.

Thanks, Ellen.

And before wrapping up my comments and opening up the call to questions, let me give some guidance for 2008 full year, and also for the first quarter.

On a full-year basis we expect 2008 to be in the range of $2.17 to $2.32 per share, up significantly from 2007 income before other items of $1.88 per share.

We expect full-year revenue to increase at a low double-digit rate.

Operating income is expected to increase by 18% to 26% for 2007, on revenue of $1 billion and operating income of $68.7 million.

Show rotation is expected to positively impact full year revenues by about $50 million.

The increases over 2007 are also expected to be driven by continued growth in GES' base operations, improved performance at Exhibitgroup/Giltspur, and the addition of Becker Group, and continued solid performance with the Travel & Recreation Services segment.

We expect full year revenue at Becker Group to be in the range of $32 to $36 million, and Becker Group's operating income is expected to be in the range of $1.5 to $3 million, or $3.3 million to $4.8 million excluding the non-cash amortization of acquired intangible assets.

Due to the seasonal nature of this business, it is expected to generate operating losses during the first three quarters of the year.

Our guidance range for 2008 assumes an effective tax rate of approximately 38%, and that compares to the 2007 effective tax rate on income before other items of 35.9%.

For the first quarter, we expect income per diluted share in the range of $0.75 to $0.86, as compared to income before other items of $0.66 per share in the 2007 first quarter.

Revenue is expected to be in the range of $323 to $345 million, including $3 to $4 million from Becker Group.

Segment operating income is expected to be in the range of $28.3 to $32.3 million, including a loss of $1 to $2 million from Becker Group.

This compares to 2007 first quarter revenue of $283.7 million, and operating income of $25.1 million.

The improvement over the 2007 quarter reflects stronger revenue and profit to GES, driven by positive show rotation, new business, and continued same-show growth, as well as improved performance at Exhibitgroup/Giltspur.

In the first quarter, show rotation is expected to positively impact revenues by about $20 million at GES.

In the second quarter, show rotation is expected to negatively impact revenues by $13 million at Exhibitgroup/Giltspur, and about $5 million at GES.

For the third quarter, show rotation is expected to positively impact revenues by about $10 million at Exhibitgroup/Giltspur, and a positive impact of $45 million at GES.

In the fourth quarter, show rotation is expected to negatively impact revenue at GES by about $10 million.

Full year and first quarter guidance for each of our operating segments again can be found in the press release.

In closing, I will say that we are bullish on Viad's prospects for growth in 2008 and beyond.

Despite facing significant negative show rotation at GES and the cost of turnaround initiatives at Exhibitgroup/Giltspur, we produced solid financial performance and progress in 2007.

Revenue at Exhibitgroup increased 12.4% from 2006, indicating that our initiatives are working.

GES continued to drive strong same-show growth and new business wins, while successfully completing the integration of Melville, which expands GES' global operations, and provides a platform for further growth overseas.

And the Travel and Recreation Services segment produced consistently strong operating income and margins.

With some of the headwinds of 2007 behind us now, we are looking forward to a terrific year in 2008.

GES should have a banner year with positive show rotation of about $50 million in revenue, and continued growth in its base business.

Exhibitgroup/Giltspur built some positive momentum in 2007, and we expect it to post stronger operating results, and continue making progress with it's repositioning efforts in 2008.

The addition of Becker Group will provide new opportunities for growth beyond the trade show environment.

Brewster and Glacier Park should continue to produce strong operating margins and cash flow, and our balance sheet remains strong, enabling us to pursue strategic acquisitions, invest in our existing businesses, and return capital to our shareholders.

We remain committed to driving growth and enhancing shareholder value.

With that we will close, and operator if you could open up the line to questions, please.

Thank you.

The question-and-answer session will be conducted electronically.

(OPERATOR INSTRUCTIONS)

And our first question is from Clint Fendley with Davenport.

Thank you.

Good morning, everyone.

Paul, I wondered if you could provide some more color on the seasonality of the Becker Group, and how much this business is geared towards the holidays?

Obviously some of the projects you mentioned wouldn't appear to be biased to the fourth quarter, but your guidance implies otherwise.

Right now, Clint, good morning.

A significant portion of their revenue, I want to say 60 to 65%, is still tied to kind of the holiday themes.

Their seasonality is then heavily swayed to the fourth quarter.

That is one of the things we really liked about this business.

We are extremely slow in most of our other business, especially in the trade show and event space, which provides additional some resources to grow that business, and work through that process during the fourth quarter.

We are also working on a number of major projects that will help smooth this out over time, and these are touring exhibitions, and some of the other projects that I think you were alluding to Clint, and there are significant growth opportunities in that business as we see them.

So we are very, very excited about the opportunities that we have with Becker.

We think it fits very well with our other businesses.

Right now definitely for this year, it will be skewed towards the fourth quarter, but that is also our seasonally very slow quarter in our other businesses, and we have a number of initiatives that will smooth this out over time.

Okay.

That is helpful.

Thank you.

Switching gathers a bit, Kevin, I wondered if you could comment on what the outlook is currently for discretionary spend?

How difficult is this becoming in the current environment?

I know that is something we talked about a couple months ago or so back in Chicago.

Kevin, you want to handle that one?

Sure.

Hey, Clint.

The way I would look at it, I think your questions are related around the economy and what exhibitors, how they are going to react within the current economic situation.

I would say that as I mentioned in my opening comments, the early indicators have been positive.

I mentioned CES as well as CONEXPO-CON/AGG.

From all parts of our business including the exhibitor discretionary side, that we remain cautiously optimistic, but watching it very close.

We believe that the exhibitors see the power of face-to-face marketing as an area to invest in, and a way to grow their business, in times that are good, and times that aren't as good.

You have seen the strong trend so far.

They have a lot of confidence in our products and services group, and how they can continue to gain penetration across our events regardless.

Okay, thanks.

Final question here.

I am not sure, Paul or Ellen, if you could talk about how you are thinking about your capital structure, and your uses of cash at this point in the market cycle?

Thanks, Clint.

I will take that question.

I don't think anything has changed as far as our capital allocation outlook.

Again, our first call for capital is good strategic acquisitions that are a good cultural fit, that we can get at the right price.

We are thinking that in today's environment, given the strength of our Company, and the strength of our balance sheet, we are in very, very good shape, to find some good deals that will enhance our shareholder value over time.

But if we can't, as we have always said, we may be a buyer of our own shares from time to time, but the first call for capital continues to be good deals that make sense for our business.

Good deal, thank you.

Thanks, Clint.

Or next question is from John Healey, FTN Midwest Securities.

Good morning Paul.

First question on the EG business.

A question we often get from investors, is a desire to understand kind of what the end market exposure is for that business.

I know in the 2001 timeframe, there was a lot of tech and a lot of Internet companies, primarily making up the bulk of the business for EG, I was hoping you could maybe give us some color on what the customer by industry exposure might look like for that business, and if you're weighted in any certain way?

Let me take a stab at it, and then I will ask John to comment as well.

I think if you look at the business, and we have said, we have always said this for GES, and I think it hold true for the most part for Exhibitgroup too, that shows and spending in the space, kind of go with the health and strength of the industry, and naturally you are going to find some weakness in things tied to mortgages, banking, kind of the financial world, as well as kind of residential housing.

We don't have any significant exposure to those markets.

We continue to watch everything very closely of course, but as of right now, I think we feel pretty good about the industries where most of our clients are operating currently.

That is always subject to change.

I think Kevin mentioned that at GES we will be watching everything very closely, and adjusting spending accordingly.

It is the same way through all of our businesses, including Exhibitgroup and the Travel and Rec segments and Becker too.

Right now I think that is how we see it, John, do you want to add some color to that?

I think you did a really good job of covering that.

I would say that we are very balanced, but I think Paul's points are well taken, that in the industries that are most directly being affected currently, we really have very little exposure to those.

And we are much stronger in industries that the indications are that they are going to go well.

I think the most important thing that we can do right now, as we have started over the last year, is get closer and closer to our clients, understand the industry, look for opportunities to penetrate the businesses that continue to see increasing value and experiential marketing, and again, I think we are pretty positive on what that looks like for the foreseeable future.

Great.

And the same with the EG business, this is kind of a bigger picture question, I was hoping to get your longer-term thoughts, maybe over the next three years of so, hoping to get some color on where you think margins for that business can go, I know you guys have done a great job at taking costs out, and you are moving more to the consultant kind of realm for that business at some angles, I was hoping to get any color where you think margins will be maybe three years from now?

You know, maybe this is where our historical perspective is valuable, because we have seen margins in this business to the mid- to upper-single digits, and I think that is the ultimate goal here, in seeing those margins certainly increase, get them into the black here, and some were in the 6, 7, 8% range over a three-year period I think is reasonable to expect.

Great.

Last question.

The guidance of 217 to 232, does that assume any share repurchase activity?

No.

Thanks, guys.

Thanks a lot, John.

(OPERATOR INSTRUCTIONS) Our next question is from Troy Mastin with William Blair & Company.

Yes, good morning.

First question relates to the strong upside that you saw in Exhibitgroup in the quarter.

I wonder if there is anything specific there, if you may have experienced some unusual project activity?

The reason for the question, is when we look into 2008, your guidance for single-digit growth, while certainly much better than we have seen in some past years it is a little bit down from what I think what you got, low double-digit growth in '07, so I want to understand if maybe this revenue stream might be a little bit lumpy at times?

I think we had a good quarter.

It crossed all of our divisions.

We had strength with some of our international shows, we had strength with our RMU and kiosk business, and strength domestically.

I think our guidance for this year, while certainly we are going to do everything we can to achieve another double-digit growth year, it reflects a little bit of caution given the economy, but we are definitely seeing the strength of the sales repositioning that John and his team, and the client-centric approach that we have had, and getting a lot deeper with our clients, along with new business wins, really help the revenue side.

So I guess you are not suggesting that your trends are in any way less robust in 2008 than 2007?

It may just be initial conservatism and caution?

Is that fair?

I think you have got to watch the spending in this space, given the cautious outlook that we have for the economy, Troy.

Okay.

You have talked about the macro economic backdrop as it relates to GES and EG.

Curious how you feel about the Travel and Rec segment in this environment?

There is a lot of talk about consumer spending slowdown.

Talk about how you see that business being impacted, if at all, I know it is a little bit more global in terms of the consumers that feed that business?

Right now I think we still feel pretty solid about that.

Glacier Park and Brewster both had good years.

We are watching, again, the economy and things that impact travel closely, but we don't see anything that would be significantly different than 2007 impacting visitorship at either Brewster or Glacier.

Okay, great.

Then the pace of same sales growth has been pretty consistent in the high-single digits, low double-digits.

Any reason that we should expect to see that change in a meaningful way?

And I guess a sub-question to that would be, your penetration of discretionary spend you have historically said is around 10%.

Curious if that has changed in a meaningful way either?

Kevin, do you want to comment on that?

Sure, I will take same-show growth first, Troy.

We certainly saw strong same-show growth in '07.

The 8.9% in Q4, and that compared to 5% in '06 for the same quarter.

The 10.8% overall in the year compared to a little over 9% in '06.

So I don't know, I don't have a crystal ball.

I don't know where, if we will continue in double digits.

I would say being similar with the statement of the economy, is I remain cautiously optimistic, but I wouldn't plan on, we certainly are not planning on the double-digit growth, we plan on kind of mid-single-digit growth, and if it ticks up higher than that, that would be a benefit for us, and something that would be a nice surprise, or at least a nice trend.

Second thing is on the revenue mix is around penetration.

There has not been any many meaningful changes.

We continue to make increases on the exhibitor discretionary side.

We have talked about show mix overall and the elements of our business, and we continue to watch the show mix, and try and make sure that we are keeping a good balance there between the higher margin and the lower margin pieces of our business, and continue to increase penetration, and we are still making very steady progress there, but nothing that moved the dial from a substantial standpoint from mix.

Okay.

Great.

Then I don't think you have given us an early look at show rotation for 2009.

Curious if you would be interested in doing that right now, so we could start to plan out a little bit?

We are still fleshing that out Troy, but clearly 2009 will be down from 2008, given the size of the upside that we have in 2008, but we are also working with our sales force, to both sell into the 'in the year for the year' business for 2008, but also looking ahead to 2009, and making sure that we are selling into that year, so that we continue to grow, regardless of the show rotation impact.

Is there anything that you think you can do to effect some change against the lumpiness that show rotation creates?

Yes, we are constantly trying to do that, Kevin and his team.

We lay out the show schedule by month, so that we are looking at exactly where we are extremely busy, where we are less busy, and trying to sell into those less busy times.

It is easier to do in some months than others, just because of the nature of the industry.

There are not a lot of shows going on in December, for example.

But I think we are gradually making some progress there.

We are aware of that, and constantly looking at how we can balance out our overall business, and again that is kind of where Becker fits in nicely in the fourth quarter mix, between Exhibitgroup and GES.

Finally, on Becker Group, how should we think about this, in terms of it as a platform for you to build out further?

Is it something that you would consider making acquisitions on top of, and if so, how does that change if at all your prioritization of acquisitions?

I think you have historically said your first acquisition targets would be in GES, and then I think maybe you have been saying Travel and Rec, but maybe update us on how you prioritize the different segments in terms of acquisition priorities?

I don't think that priority has changed any.

We think Becker provides a great organic platform here for growth, so I mean, job one will be to maximize everything we can out of that business.

I would say the GES space is probably going to continue to be the #1 look, and then when you look at the Travel and Rec segment, we continue to see opportunities that will be smaller in nature, but certainly some good opportunities.

Okay, thank you very much.

There are no further questions, Mr.

Dykstra.

I will turn the call back to you for closing comments.

Thanks much.

Let me just recap 2007.

Again, we are excited that we reached $1 billion in revenue, solid earnings that exceeded our prior guidance.

I think we made some good acquisitions.

We had the opportunity to buy back some of our shares.

And all of that positioned us very well for growth in 2008.

We will continue to watch the economy very closely, but right now we feel like we are very, very solidly positioned for 2008.

Kevin mentioned the strength of CES and CONEXPO, certainly those are good signs for the industry.

Exhibitgroup is making solid progress.

Travel and Rec has been consistent producers, and Becker Group gives us some great new opportunities there, too.

So I really appreciate your time.

Thanks for being with us today, and we look forward to giving you an update after the end of the first quarter.

Thanks everybody.

This concludes today's conference call.

We thank you for your participation.

Have a wonderful day.