Viad Corp (VVI) 2010 Q1 法說會逐字稿

Welcome to the Viad Corp 2010 first-quarter earnings conference call.

All lines will be in a listen-only mode for today's conference.

(Operator Instructions).

Today's conference is being recorded.

If you have any objections you may disconnect at this time.

I would now like to turn the call over to Carrie Long, Director of Investor Relations, Viad Corp.

You may begin.

Good morning and thank you for attending our conference call.

Before we begin, I would like to remind everyone that certain statements made during the call which are not historical facts may constitute forward-looking statements.

Additional information concerning business and other risk factors that could cause actual 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.

During today's call we will be referring to tables 1 and 2 of our earnings release which can be found on our website at www.Viad.com.

On the call today you will hear from Paul Dykstra, Viad's Chairman, President and CEO, and Ellen Ingersoll, Viad's Chief Financial Officer.

Additionally, Michael Hannon, President of our Travel and Recreation Group, will be available for comments during the question and answer session at the end of the call.

And now I will turn it over to Ellen to discuss our financial results.

Good morning everyone.

Thank you for being with us today.

As I cover our first-quarter results you may want to refer to tables 1 and 2 of our earnings press release.

Our first quarter loss before other items was $0.02 per share, down from 2009 first quarter income before other items of $0.15 per share but better than our prior guidance.

By definition our first quarter income before other items excluding restructuring charges of $0.06 per share and $0.08 per share in 2010 and 2009 respectively.

And unfavorable resolution of tax matters of $0.07 per share in the 2010 quarter.

Including these other items, our 2010 first-quarter net loss was $3 million or $0.15 per share.

Revenues for the quarter were $224.4 million, down $16.6 million or 6.9% from the 2009 first quarter.

Segment operating income was $199,000, down $6.5 million from the 2009 quarter.

These declines were primarily driven by lower Marketing & Events Group revenues, partially offset by stronger revenues from our Travel & Recreation Group.

Marketing & Events Group first-quarter revenues were $216.9 million, down $19.1 million or 8.1% from 2009.

Group operating income was $2.6 million, down $6.5 million from the 2009 quarter.

The year-over-year declines were primarily due to lower US exhibition sales driven by expected same show declines.

Our revenues from US-based same shows, which we define as shows that occur in the same city and same quarter every year, declined by 10%.

Revenues were also impacted by negative share rotation of approximately $8 million which was substantially offset by favorable currency translation of about $6 million(Sic-see press release).

Our Travel & Recreation Group beat our prior guidance from the seasonally slow first quarter and posted year-over-year growth.

Revenue was $7.4 million with an operating loss of $2.4 million.

Excluding foreign currency translation, revenues grew $1.4 million and operating income improved $174,000 versus the 2009 first quarter.

And this was primarily due to increased transportation revenues related to the 2010 Winter Olympic and Paralympic Games.

Now I will cover some balance sheet and cash flow items before turning the call over to Paul.

Our balance sheet remains strong.

At March 31, 2010 Viad's cash and cash equivalents totaled $131 million, and this was up from $116.3 million last quarter, primarily as a result of the sale of a nonoperating asset.

Our total debt at the end of the quarter was $11.6 million with a debt to capital ratio of 2.9%.

Our free cash flow was an inflow of $1.9 million for the quarter versus an outflow of $27.5 million in the 2009 first quarter, reflecting changes in working capital and lower capital expenditures.

Our capital expenditures were $5 million for the 2010 quarter versus $10.6 million in the 2009 quarter.

First quarter depreciation and amortization expense was $6.8 million versus $6.4 million in the 2009 quarter.

And our payments on restructuring reserves were $3 million in the 2010 quarter versus $1.6 million in the 2009 quarter.

Now I will turn the call over to Paul.

Thanks Ellen, and good morning everyone and thank you for being with us this morning.

As Ellen mentioned earlier, we're off to a solid start in 2010 with first quarter results that exceeded our prior guidance.

The Travel & Recreation Group began the year with a stronger than expected quarter as a result of new transportation business executed during the Vancouver Winter Olympic Games and ensuing Paralympics.

While we expect long haul visitation to Western Canada will be hampered somewhat by the soft global economy, Glacier Park's advanced bookings are tracking well ahead of last year partly driven by the centennial anniversary of Glacier National Park.

The Travel & Recreation team is focused on maximizing revenue per available room at our lodging properties, capturing higher revenues for passenger at our Gondola and other attractions and pursuing other initiatives to optimize returns from our existing assets.

As we announced in late March, John Jastrem retired from his position as President of the Marketing & Events Group.

I'm filling in on an interim basis as we conduct the search for his replacement.

Let me assure you that we are not losing momentum during this leadership transition.

The very experienced GES team is fully engaged in committed to accelerating progress against our key initiative to drive productivity and cost structure improvement while at the same time driving success in winning, retaining and growing client revenues.

As part of the consolidation of the legacy GES and Exhibitgroup organizations, we now have our sales teams aligned with our three primary customer segments -- exhibition organizers, corporate brand marketers and retail shopping centers.

Exhibition sales include planning, designing and producing exhibitions, and events for our organizers, and primarily represents our legacy GES business.

Brand marketer sales include custom exhibits, program and event management services, mobile marketing and touring exhibitions as well as integrated marketing and measurement services provided to corporate brand marketers.

This sales team is made up of a combination of both legacy Exhibitgroup and legacy GES sales professionals.

Retail sales include holiday installations and decor as well as kiosks and retail marketing units, or RMUs, and is primarily comprised of our legacy Becker Group and of our Exhibitgroup retail businesses.

These sales teams are supported by our integrated service delivery network which includes top creative and design talent, high-quality fabrication and graphic capabilities, efficient field service operations and logistics and warehousing capabilities.

As a result of our integration and consolidation efforts we expect to realize the $10 million reduction in US overhead costs this year versus 2009.

Our GES Excellence program, which applies lean principles to drive out non-value add activities, yielded nearly $4 million in variable cost savings during the first quarter, putting us well on our way toward achieving a full year of savings goal of approximately $10 million for the GES Excellence program.

These cost reduction initiatives are critically important to help us offset the impact of the lingering cyclical downturn and the resulting competitive pressures on pricing.

Although the economy continues to be a factor on our client's spending, its effects are abating somewhat.

The 2010 first quarter same show declines of 10% were substantially below the 22.5% decline in 2009, suggesting some stabilization in the exhibition and event industry.

We're also seeing pockets of improvement in certain industry sectors and shows tied to these industries are beginning to improve.

With our new integrated structure we're able to leverage the breadth and depth of our global network to deliver exceptional exhibition, event and experiential marketing solutions to our clients.

During the first quarter, GES signed approximately $83 million in new and renewal exhibition contracts.

Our total exhibition revenue backlog currently stands at more than $1 billion under contract for 2010 and beyond.

Other first quarter highlights include a multimillion dollar civilian project for the Vancouver Olympics.

In the UK Melville has been awarded substantially all of Emap's business effective April 2010.

Emap is the largest show organization organizer in the UK market and previously their business was split between Melville and the number two player in this market.

This was a great competitive win for us.

We also continue to make inroads in the Middle East.

We were awarded the UAE show portfolios for DMG, United Business Media and MECOM Forums as well as Reed Exhibitions' Arabian Travel Market 2010.

These contracts help fortify our position as a leading full-service exhibition and event contractor in this emerging market.

None of this would happen without the extraordinary talent of all of Viad's employees, and I would like to take a moment to recognize our people and thank them for their incredible effort.

Our employees' willingness to embrace new and innovative approaches to managing our business, while continuing to deliver great value and service to our customers, is key to our success.

We're taking the right actions to fundamentally improve the company, from our cost structure to our competitive positioning in the market place, and we're fortunate to have a strong balance sheet with over $130 million in cash and very little debt.

Not many of our competitors have this level of financial stability and this is a competitive advantage that is more valuable than ever in this difficult economy.

With that, I will turn the call back over to Ellen to provide some specific guidance for the 2010 second quarter.

Thanks Paul.

Our current guidance for 2010 reflects our best estimates based on information available at this time.

Our full-year outlook can be found in the earnings press release and remains essentially unchanged from our last quarterly earnings call.

Marketing & Events Group revenues are expected to remain relatively flat to 2009 with positive share rotation of $20 million to $25 million and new business wins offsetting expected same show declines of about 10%.

Our Travel & Recreation Group revenues are expected to be impacted by increased visitation to Glacier National Park as a result of its centennial anniversary.

However, visitation to Banff and Jasper National Parks is expected to decrease slightly due to lingering recessionary pressures on global tourism.

Corporate activities expense is expected to increase by approximately $1 million from 2009, reflecting the reversal of long-term performance-based incentives in 2009.

Our full-year cash flow from operations is expected to approximate $10 million to $15 million.

We expect full-year capital expenditures of approximately $22 million, depreciation and amortization of approximately $30 million and restructuring payments in the range of $6 million to $7 million.

For the second quarter we expect results before other items to be in the range of a loss of $0.05 per share to income of $0.10 per share as compared to 2009 second-quarter income before other items of $0.28 per share.

Revenue is expected to be in the range of $195 million to $210 million as compared to $213.6 million in the 2009 second quarter.

We expect segment operating income to be in the range of $500,000 to $5.5 million as compared to $9.8 million in the 2009 quarter.

The year-over-year second-quarter declines reflect the recessionary declines in exhibition marketing spend as well as higher expense related to performance-based incentives and corporate costs.

Additional details regarding our 2010 outlook can be found in the earnings press release.

And with that, let's open the call for questions.

(Operator Instructions) John Healy, Northcoast Research.

I wanted to talk a little bit about same show revenue trends.

First quarter looked pretty good in terms of where you might have thought things would shake out a few months ago.

And I was trying to get a little bit of color on the outperformance there in terms of what was a little bit better than your expectations for same show revenue trends in the first quarter.

And maybe if you could try to give us a little bit of color on what is taking place in terms of the discretionary and nondiscretionary revenues in that business.

I think we saw a little bit of -- better than what we thought maybe three months ago on healthcare and industrial shows and then made kind of a smattering of shows across our entire portfolio.

We also saw, I think, in some shows where attendance was starting to get a little bit stronger, which is a good leading indicator as we've talked about on prior calls, for future bookings as we move into the 2011 as well.

So I think we're seeing it in little places.

Shows go as their industries go, as we've always said.

And with the general economy starting to strengthen we're starting to see that in pockets of certain sectors.

Okay.

And from an outperformance on the same show revenue side, was it more shows were bigger than you might have thought or more exhibitors in square footage?

Or was it that some of the amenity products and some of the discretionary stuff was holding up better?

It was kind of a mix of all three.

In some places shows came in a little bit bigger square footage wise, some of little better freight density and some more discretionary spending.

So I think it was a little bit of each.

So when you look at the outperformance in the first quarter on that line, I guess is it just you guys being conservative that you don't want to raise your outlook of same show revenue growth for the year yet?

Or is that you just think there might be some shows later in the year that might not be up to those expectations?

Well, I think we still continue to have a lot of visibility challenges and so I would say it is just uncertainty at this point, John.

Okay.

And just a question on the expense line.

The corporate activity line was a little bit less than where it had been for a while.

I was wondering if you were seeing a lot of cost removal efforts in that line item or is there is a little bit of timing associated with that and how should we think about that trending throughout the year.

Sure.

Q1 was down and it was mainly timing.

Q2 was estimated to be about $2 million.

Over the six months it's going to even out.

For the full-year we're going to be up about $1 million and that was mainly due to -- we had some long-term reversals in 2009.

But other than that it is pretty comparable.

Perfect.

Last question for you, Paul.

When you think about the experiential marketing side of the business, what is kind of your thought process on how that business will perform?

You're starting to see some stabilizing trends on the GES side and it sounds like the outlook for shows and exhibitor participation is firming up a little bit.

Is there any color on when you think the exhibit side -- the exhibit building side or the refreshing side might start to come through and maybe how much pent-up demand is there?

Again, it's kind of hard to say right now because our visibility isn't that great.

It held up relatively well for the first quarter.

We are starting to -- we're seeing a pretty good pipeline in our sales process, but decisions are continuing to be delayed and made at the last second.

So that is creating some of the visibility issues.

I think we continue to believe in face-to-face marketing in that at some point exhibits do need to be refreshed.

But exhibitors are continuing to be very judicious in their spending from what we can tell.

Although as the economy firms up and corporate earnings firm up, we're hopeful that will create better budgets as we move through the end of the year and into 2011 certainly.

Okay, great.

Thank you guys.

(Operator Instructions).

We have no further questions at this time.

I would now like to turn the call back to Paul Dykstra for closing comments.

Thank you.

While we are not expecting much topline growth this year, we remain focused on delivering the best results possible by capitalizing on the market opportunities that exist and continuing to drive down costs and delivering high-quality customer service.

Viad is very fortunate to have industry-leading brands and capabilities, talented and dedicated employees and a strong balance sheet.

These assets along with continued investment in our business give us advantages relative to many of our competitors.

In closing I would like to once again thank Viad's employees for their continued hard work and dedication as we continue to transform our company.

And I would also like to thank our customers for their continued loyalty and support.

And I thank you for being with us today and we look forward to updating you on our progress in July.

Thanks a lot.

Have a great day.

Thank you for participating in today's conference.

You may disconnect at this time.