Viad Corp (VVI) 2012 Q2 法說會逐字稿

完整原文

使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主

  • Operator

  • Welcome and thank you for standing by. At this time, all participants are in a listen-only mode. After presentations, we will conduct a question-and-answer session. (Operator Instructions). This 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 Mr. Joe Diaz. Sir, you may begin.

  • Joe Diaz - IR

  • Thank you and good morning. And thank all of you for attending the Viad Corp's Second Quarter 2012 Earnings Conference Call. I would like to remind everyone that certain statements made during this 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 Securities and Exchange Commission.

  • During today's call, we will refer to tables one and two in the Business Group Highlights section of the earnings press release which is available at the Viad website, at www.Viad.com.

  • Today you will hear from Paul Dykstra, Viad's Chairman, President, and Chief Executive Officer; and Ellen Ingersoll, Viad's Chief Financial Officer. Additionally, Steve Moster, President of Viad's Marketing and Events Group; and Michael Hannan, President of Viad's Travel and Recreation Group will be available for comment during the question-and-answer session at the end of the call.

  • And now, I will turn the call to Ellen to discuss the financial results. Ellen?

  • Ellen Ingersoll - CFO

  • Thanks, Joe. Good morning, everyone. Thank you for being with us today. As I cover our second quarter results, you may want to refer to tables one and two in the Business Group Highlights section of our earnings press release.

  • Our second quarter income before other items was $0.29 per share, better that are our prior guidance, and up 11.5% from 2011 second quarter income before other items of $0.26 per share.

  • By definition, income before other items excludes restructuring charges of $0.02 per share in the 2012 quarter and $0.04 per share in the 2011 quarter. The charges are primarily related to the elimination of certain positions and facility consolidations in the Marketing and Events Group.

  • Viad's revenues for the quarter were $246.5 million, up 3.3% from $238.7 million in the 2011 quarter.

  • Segment operating income was $10.5 million, up 6.4% from $9.9 million in the 2011 quarter.

  • Our Marketing and Events Group delivered stronger than anticipated operating profits and was successful driving growth despite negative share rotation and unfavorable foreign exchange rate variances, which negatively impacted revenue by approximately $9 million and $3 million respectively versus the 2011 quarter. As a reminder, share rotation refers to shows that occur less frequently than annually, as well as shows that shift quarters from one year to the next.

  • Overall, second quarter revenue for the Marketing and Events Group increased $2.2 million or 1%, to $216.9 million, and operating income increased $1.1 million to $7.9 million.

  • The US segment posted a revenue increase of $15.3 million or 10.2%, with an operating income increase of $5.4 million. The increases were driven primarily by positive share rotation revenue of approximately $5 million, same show growth, new business wins and continued focus on margin improvement.

  • Base same show revenues or revenues derived from shows derived in the same city during the same quarter each year increased 6.1% to $58.3 million, compared to $54.9 million in the second quarter of 2011.

  • The international segment experienced a revenue decline of $12.3 million or 18.4%, with an operating income decline of $4.3 million. The declines were primarily driven by negative share rotation revenue of approximately $14 million. Additionally, foreign exchange rate variances had an unfavorable impact on revenue and operating income of $2.7 million and $117,000, respectively.

  • Our Travel and Recreation Group delivered inline results for the quarter with strong revenue growth. Second quarter group revenue increased $5.6 million or 23.2% to $29.5 million, while operating income decreased $429,000 to $2.6 million.

  • Excluding the impact of foreign exchange rate variances, which negatively impacted revenue by $1.2 million, and operating income by $287,000, revenue was up $6.7 million, and operating income was down $142,000.

  • The acquisitions of Alaska Denali Travel, the Banff International Hotel and St. Mary Lodge and Resort added $4.3 million in revenue, at essentially breakeven operating results, reflecting the seasonally slow period for these properties. The remaining revenue increase was driven by organic growth, primarily at Brewster's attractions.

  • We also experienced higher SG&A expenses versus the 2011 second quarter, including increased performance-based incentives due to the expectation of stronger full year performance, as well as costs related to additional resources to support our growth strategy as Refresh, Build and Buy.

  • Now, I will cover some cash flow and balance sheet items before turning the call over to Paul. Free cash flow improved to an inflow of $6.9 million for the quarter as compared to an outflow of $20.3 million in the 2011 quarter, primarily reflecting changes in working capital.

  • Capital expenditures were $6.5 million for the 2012 quarter, versus $5.1 million in the 2011 quarter. Depreciation and amortization expense was $8 million versus $7.3 million in the 2011 quarter.

  • And payments on our restructuring reserves were approximately $1.1 million in the 2012 quarter versus $752,000 in the 2011 quarter.

  • Our balance sheet remains strong. At June 30, 2012, Viad's cash and cash equivalents totaled $78 million, compared to $71.6 million at the end of March. And our total debt at the end of June was $2.6 million, with a debt-to-capital ratio of 0.6%.

  • And now I will turn the call over to Paul to update you on operational and strategic highlights.

  • Paul Dykstra - Chairman, President, CEO

  • Thanks, Ellen, and good morning to all of you joining us on today's call. As always, we appreciate your continued interest in Viad.

  • As Ellen indicated, we turned in a very strong performance for the second quarter of 2012. Revenues were up 3.3% versus a comparable quarter last year and segment operating income increased 6.4%.

  • Our Marketing and Events Group delivered growth in operating profits driven by same show growth, a sharp focus on execution and labor management, continuing benefits from our efforts to optimize our service delivery network, and tight control on discretionary spend.

  • Our Travel and Recreation Group had a solid quarter with 23.2% increase in revenues, driven by the additions of our new properties Alaska Denali Travel, the Banff International Hotel and the St. Mary Lodge and Resort, as well as organic growth, including increased visitor traffic at all of Brewster's attractions. As anticipated, the recently acquired properties turned in essentially breakeven results for the quarter. But we do expect to see strong through-put from them during our peak tourism season, which runs from mid-June through mid-September.

  • All told, we are pleased with the progress that is being achieved in both of our business groups. I'm proud of the effort that everyone in our organization has put in to better managing what we do on a day-to-day basis, which includes allocating the appropriate resources to make sure that we achieve the desired results for our customers, and generating improving financial results for the company. Our dedication to providing superior services, capabilities and experiences to our clients and guests also contributes to our ability to drive topline growth.

  • We believe that the value added services and memorable experiences we provide our customers helps us to attain reasonable price increases. It is then up to us to effectively deploy labor and maintain a tight reign on discretionary costs in order to achieve targeted margins. While there's normal seasonality in both of our business groups, I believe we are better positioned today to compete more effectively and to deliver improved year-over-year financial results.

  • Now, let me cover some second quarter highlights for our Marketing and Events Group. And I would like to start by thanking the GES team for delivering great service to our customers and driving topline growth, while also focusing intently on our margin improvement initiatives.

  • As Ellen mentioned earlier, we drove very nice through-put during quarter with a $1.1 million increase in operating income on a $2.2 million increase in revenue, versus the 2011 second quarter. This reflects both improved direct margins on the business we produced, as well as lower SG&A expenses. Through diligent labor management and a more stable pricing environment, we were successful in improving same show margins and margins overall.

  • The lower SG&A costs for the quarter reflect the benefit of actions taken prior quarters to optimize our US service delivery network, including consolidations in the Chicago, Baltimore and San Francisco Bay Area markets. We continue to critically analyze our US network to identify additional opportunities to increase the efficiency of our facilities and to drive better utilization of our inventory and equipment.

  • As Ellen mentioned, base same show revenues for the quarter increased 6.1%, which marks our eighth consecutive quarter of growth. We continue to see general increases in the size of events, number of exhibiting companies, and number of attendees. Additionally, we have been successful in garnering a greater share of the expanding exhibitor spend on the show floor by targeting our show efforts and leveraging new technology to increase the ease of doing business with GES.

  • Two prime examples of such new technology are our Expresso online ordering and management tool and our GES Mobility customer service protocol. Expresso allows our clients to plan their exhibits online, effortlessly order needed services and supplies, track orders and manage budgets in realtime.

  • Using GES Mobility, our show site exhibitor services professionals bring service right to our exhibitors booth by tablet computers. This allows exhibitors to stay in booth to complete set-up or to continue meeting with clients. Our goal is to optimize the effectiveness of our customers' participation in the event, and in doing so, position GES as the supplier of choice.

  • As always, customer service remains a hallmark of the service that we provide our clients. In that regard, JD Power & Associates recognized GES' call center -- customer satisfaction excellence for the fourth consecutive year. The call center certification program acknowledges a strong commitment by GES call center operations to provide an outstanding customer service experience.

  • Our call center operations successfully passed a detailed audit of more than 100 practices that encompassed the call center's customer satisfaction measure and analysis strategies, recruiting, training, employee incentives, quality assurance capabilities and management roles and responsibilities. This is another important component of our ongoing initiatives to provide a customer experience that generates repeat business and positions GES as the superior option for event, trade show and marketing experiences.

  • During the quarter, we worked on a number of major events, including the National Restaurant Association's, Restaurant Hotel-Motel show that took place in Chicago at McCormick Place in May. This event is the industry's premier showcase for products, equipment and culinary operating trend. With 542,000 net square feet of exhibition space and over 1,900 exhibiting companies, the show attracted more than 61,000 attendees from all 50 states and more than 100 countries. We are proud to have worked closely with this long-time client to produce a successful event with a redesigned show floor that created more excitement and a better experience for show attendees and exhibitors.

  • We also produced ICSC RECon in May in Las Vegas. Hosted by the International Council of Shopping Centers, RECon is the largest real estate convention in the world, providing unparalleled educational, networking and deal-making opportunities for shopping center professionals from around the globe. The show encompassed more than one million square feet of space with more than 1,000 companies exhibiting.

  • The GES team was instrumental in helping ICSC create two new marketing themes within the event to encourage new partnering opportunities among participants. The first theme, the Marketplace Mall, featured 300 exhibitors showcasing the latest products and services for commercial properties. Additionally, the Cities of the World Pavilion was created to highlight cities, municipalities, and economic development corporations looking to discuss new and exhibiting development opportunities in their communities.

  • During June, we produced first of five annual events awarded to GES in the fourth quarter of 2011 by the American Wind Energy Association. The Wind Power Conference and Exhibition, the world's largest wind energy event, took place in Atlanta and represents a notable competitive win for GES. Over the next four years of the contract, GES will produce wind power annual conferences in Chicago, Las Vegas, Orlando and New Orleans.

  • Our ability to attract new business is driven by the capabilities that we can provide our clients, including our national and global reach, as well as the leading-edge customer service that we are known for in the industry. We are pleased to have produced our initial wind power event and we look forward to providing even more efficiencies and positive ROI to conference participants in the coming years.

  • Tonight, eyes and ears around the world will be glued television sets to watch the opening ceremonies of the 2012 London Olympic Summer Games. Melville, the UK-based unit of our Marketing and Events Group, has been contracted to provide a wide variety of services in a large number of venues throughout Great Britain to ensure the successful and seamless execution of London Games. As you may recall, we did some significant work at the 2010 Vancouver Winter Games, including building the Canadian Pavilion for the host nation.

  • Melville is the market leader in the UK and it has secured a good portion of the London Summer Games business because it has the expertise and the capabilities to successfully execute on an event of this magnitude. We are honored to have a hand in this iconic international event. As I said earlier, creativity is an important component of the service that we provide to all of our clients.

  • Earlier in the year we won an American Business Award for our design marketing efforts for IDEXX, a new client and leading veterinary care company. The American Business Awards, or Stevies, are the nation's premier business awards program. More than 3,000 nominations from organizations of all sizes and in virtually every industry were submitted this year for consideration in a wide range of categories.

  • GES' designers and marking experts integrated IDEXX's engaging Thrive concept into every touch point at the North American Veterinary Conference, helping IDEXX market to veterinary professionals that the company could help them improve the health of their patients and the health of their practices. The fully integrated Thrive campaign also won the Best of Show Award at the 2012 North American Veterinary Conference, and clearly demonstrated the creative capabilities that differentiate GES.

  • As it relates to Travel and Recreation Group, we look forward to a strong peak season and are excited to have online our most recently acquired properties, Alaska Denali Travel, the Banff International Hotel and the St. Mary Lodge and Resort. It is early but so far we have seen an increase in visitors at Brewster's attractions and in the number of room nights sold in and around Glacier National Park. Also, Alaska Denali Travel is off to a solid start, with strong advanced bookings for the remainder of its operating season.

  • We have an experienced and dedicated team of operators managing our travel and recreation facilities. I would like to thank them for the great deal of time, energy, and resources they have devoted to get all of our operations ready for the 2012 summer vacation season. We go into it with high expectations.

  • We operate an integrated collection of unique hotels and resorts, recreational attractions, sightseeing and ground transportation operations and package tour services that serve the needs of regional and long haul visitors to iconic natural destinations in and adjacent to national parks in North America. These locations have strong perennial visitation and our integrated operating model and approach to market allows us to drive both economies of scale and scope.

  • Through our Refresh, Build and Buy growth strategy, we are making steady progress in bulking up this high margin group. Our first priority under this strategy is to continue to grow in our existing markets, and second, to enter new markets with similar dynamics and ample opportunities to obtain meaningful in-market scale. We have successfully completed four acquisitions in the last year and one-half and continue to have an active acquisition pipeline.

  • In addition to acquisitions, we continue to make progress with our Build and Buy initiatives. In early July, we started construction on the Glacier Discovery Walk attraction in Jasper National Park in Alberta, Canada. The Glacier Discovery Walk will provide an impressive, interpretive guided experience focusing on the unique ecosystem, glaciology and natural and Aboriginal history of the Columbia ice field area in the Canadian Rockies. We look forward to its opening in mid 2013.

  • At our Grouse Mountain Lodge near Glacier National Park, we recently completed a full renovation of the lobby, bar, grill and common areas, as well as 75 guest rooms, approximately half of the guest rooms at the lodge. With the remaining guest rooms scheduled for renovation in the next off season. We are excited to showcase our renovations and have this property available at full capacity for the peak season. We firmly believe there are great opportunities in this business and we are dedicated to building a substantial business in this specialized travel segment.

  • All in all, we are pleased with the results of the quarter. With the strong focus on execution, tight control on discretionary spend and consistent dedication to customer service, I believe we have stepped it up a notch and are executing at a high level.

  • GES is generating momentum in acquiring new business and continues to maintain a very high retention rate with existing clients. I'm happy to report that exhibitor satisfaction rates with our services are even higher this year than they were last year at this time. Customer satisfaction is an important priority and we continue to make measurable gains.

  • At this point, I would like to turn the call back over to Ellen to update our guidance for the third quarter and full year of 2012. Ellen?

  • Ellen Ingersoll - CFO

  • Thanks, Paul. Our current guidance reflects our best estimates based on information available at this time. Marketing and Events Group full year revenues are expected to grow at a single digit rate compared to 2011, with mid-single digit growth in US same show revenues. Share rotation is not expected to have a meaningful impact on full year revenue.

  • Marketing and Events Group segment operating income is expected to increase by $9 million to $13 million, driven primarily by continued improvements in US segment profitability. This is an increase in our prior operating income guidance, reflecting the stronger than expected margin performance that we achieved during the second quarter.

  • Travel and Recreation Group full year revenue is expected to increase by approximately 18% from 2011. And operating margins are expected to approximate 2011 margins of 19.8%. The revenue growth versus 2011 reflects the acquisitions of the Banff International Hotel in March 2012, Alaska Denali Travel in September 2011, and St. Mary Lodge and Resort in June 2011,the availability of all rooms at Many Glacier Hotel following construction closures in 2011, and organic growth. I would also like to point out that this guidance is down slightly from our prior guidance as a result of a change in exchange rate assumptions.

  • Our corporate activities expense is expected to be approximately $9 million. Our full year cash flow from operations is expected to approximate $45 million. And we expect full year capital expenditures of approximately $42 million, which includes an estimated $12.5 million for construction of the Glacier Discovery Walk attraction. And depreciation and amortization expense is expected to approximate $30 million.

  • For the quarter, we expect income before other items per share to be in the range of $0.73 to $0.83, up significantly from $0.06 per share in the 2011 quarter.

  • Revenues are expected to be in the range of $277 million to $293 million compared to $216.2 million in the 2011 quarter.

  • We expect segment operating income to be in the range of $26.5 million to $30 million, as compared to $5.4 million in the 2011 quarter.

  • We expect both business groups to see strong growth in revenues and operating income versus the 2011 third quarter. Year-over-year growth at our Marketing and Events Group is expected to be driven by positive share rotation, continued same show growth, additional revenues related to the London Olympics and our ongoing focus on margin improvement. Year-over-year growth at our Travel and Recreation Group is expected to be driven by the acquisitions of Alaska Denali Travel, and the Banff International Hotel, as well as continued organic growth, including full availability of all rooms at Many Glacier Hotel.

  • Additional details regarding our 2012 outlook can be found in the earnings press release. And with that, let's open the call up for questions.

  • Operator

  • (Operator instructions.) Our first questions from John Healy of Northcoast Research.

  • John Healy - Analyst

  • Thanks. Paul, I wanted to ask a little bit about the Marketing and Events Group. When you look at the margins there, it looks like there was an upside to the guide this quarter on how the margins performed there. And it was nice to see. I want to get your thoughts on what you expect incremental margins the trade show business to be over the next couple of years? Hopefully, as we continue to see growth in that business.

  • Paul Dykstra - Chairman, President, CEO

  • Yes, that's a good question, and margins has been a key area of focus in our Marketing and Events business. So we have been working very hard to get back to more of our historical margins in this business of 5%. And that's taken a lot of hard work in doing a lot of things with our labor management, having some of our old labor contracts, I think as we talked before, roll off, and seeing better outcomes to those -- much more aligned with the current economy. We're also looking at things that we can do with our service delivery network to continue to consolidate and reduce our footprint and reduce our overhead costs. So I think we have had good success so far this year.

  • I think Steve and his team are doing a great job focusing on those key initiatives to help us drive margins. Steve, would you add to that? I think you've got a lot of good things to talk about there.

  • Steve Moster - President, Marketing & Events Group (GES)

  • Yes, thanks, Paul. John, you know, our two primary initiatives of the company right now are around labor management and productivity and then also the project that we call the Service Delivery Network. The goal of the Service Delivery Network is really to improve the cost structure of the business and improve the efficiency of our warehousing operations. And this is a multi-year initiative. And we have really addressed less than half of the facilities so far in the initiative.

  • In 2011 and 2012, we have actually reduced our overall footprint by roughly 300,000 net square feet across six different cities. And since we began the process or this initiative, we have reduced over one million square feet to date. So we think there's more opportunity there. Additionally, it's not only just optimizing the facility space. We're gaining a lot of efficiencies by consolidating some of the key functions in certain geographies.

  • Our second initiative around labor management, as Paul mentioned, in the last 12 months, we have successfully reached mutually favorable agreements with our labor unions in many of the US cities. Those more accurately reflect today's economic reality compared to some of the agreements that were reached previously. Those allow us to minimize the labor increase -- labor rate increase for future years. But also those agreements include favorable changes to the work rules that help us out as well.

  • Beyond that, the onus is on us to improve productivity. You have seen some of the gains we've had in this quarter in better planning and better executing of the events. And I would expect that to continue.

  • Paul Dykstra - Chairman, President, CEO

  • I think the net/net, John -- back to your original question, is that we certainly expect 20% plus through-put on incremental revenue and continue to look for ways to increase that throughput based on the initiatives that Steve was just talking about.

  • John Healy - Analyst

  • Great. No, that's very helpful. And then when you guys think about 2013, I know it's early, but how should we think about share rotation at all? Is there any initial view of what to expect there?

  • Paul Dykstra - Chairman, President, CEO

  • It will be a down rotation year for GES, because we don't have IMTS or ConExpo. And then 2014 becomes a very good upside rotational year, because that's the one time every six years where both those shows occur. So it's a down rotation year. But we expect to continue to aggressively move down the path in the various initiatives that we have, in improving our cost structure and improving our operating margins. Which will allow us, I think, to continue to grow during 2013. But also sets us up for even more positive results when we hit 2014, in that positive rotation year. So 2013 is challenged a little bit by being in a down rotation year. But I think we are doing a lot of really good things to get through that and will continue to set us up well for the future. Do you have anything to add there?

  • Steve Moster - President, Marketing & Events Group (GES)

  • No, I would just say that we do have some headwinds in 2013. But we expect some of the initiatives to offset some of that. And we look forward to 2014, when there's positive rotation as well.

  • John Healy - Analyst

  • And then last question, how long does the Discovery Walk -- how long will that take before it's completed for you guys?

  • Paul Dykstra - Chairman, President, CEO

  • We started the project -- construction started within the last couple of weeks. We anticipate about a year of construction. And so far everything is going well, and we don't anticipate any delays. But we hope to open up sometime in July of 2013. So we'll catch most of the season -- not the entire season for that project. Michael, anything to add there?

  • Michael Hannan - President, Travel & Recreation Group

  • No, I think you captured, it Paul. I would say it's towards the end of July that we are expecting it, early August next year -- to be open for business.

  • John Healy - Analyst

  • And how much CapEx this year and next year are you planning on doling out for that project?

  • Ellen Ingersoll - CFO

  • We estimated this year about $12.5 million, and next year around $5 million to complete the project. So a lot of the heavy lifting is going to be done this year. And then a little quieter over the winter season, and then finish up in the spring of 2013.

  • John Healy - Analyst

  • Awesome. Thank you.

  • Paul Dykstra - Chairman, President, CEO

  • Thanks, John.

  • Operator

  • (Operator Instructions). Our next question is from Barry Haimes of Sage Asset Management.

  • Barry Haimes - Analyst

  • Hi, everyone. Great quarter. I had just a question on acquisitions. You have been pretty active over the last year or so. And I'm just wondering how are you thinking about them? What the pipeline looks like? Are valuations reasonable, given all the world uncertainty? And just what you are thinking there? Thanks.

  • Paul Dykstra - Chairman, President, CEO

  • Thanks, Barry. Good morning. Yes, we have completed four deals. We have a good pipeline of deals. The criteria is -- obviously it's got to be a good strategic fit. Most of what we have been looking at is in the travel and rec space, given the margins and the returns that we see in that space. Our focus has been in things in and around our existing markets primarily. But also look to -- if there's a market out there that meets other criteria, would consider that as well. The second piece, of course, is a good cultural fit with our organization. And then we've got to find good valuations.

  • So we've had a robust pipeline. We have done some deals. We've walked away from some deals that didn't meet our economic criteria. So we never say that anything is a sure thing, but certainly excited about the opportunities that we have to continue to grow that business.

  • Barry Haimes - Analyst

  • Great. Thank you.

  • Paul Dykstra - Chairman, President, CEO

  • Thank you.

  • Operator

  • At this time, there are no other questions.

  • Paul Dykstra - Chairman, President, CEO

  • Just to wrap up then, thank you again. Appreciate you participating on today's call. We've got a very, very busy third quarter. And we look forward to discussing our results and progress on key initiatives in October with you. Thanks again for being with us. Have a great day.

  • Operator

  • This does conclude today's conference call. You may disconnect your phones at this time.