Viad Corp (VVI) 2017 Q4 法說會逐字稿

Welcome to the Viad Corp. Fourth Quarter Earnings Conference Call. (Operator Instructions) The call is recorded. If you have any objections, you may disconnect at this point.

I'll now turn the meeting over to your host, Ms. Carrie Long. Ma'am, you may begin.

Thank you, and thank you to all of you for joining us for Viad's 2017 Fourth Quarter and Full Year Earnings Conference Call. During the call, you'll be hearing from Steve Moster, our President and CEO; and Ellen Ingersoll, our Chief Financial Officer.

Certain statements made during the call, which are not historical facts, may constitute forward-looking statements. 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 our annual and quarterly reports filed with the SEC. During the call, we'll be referring to certain non-GAAP measures. Important disclosures regarding these measures can be found in Table 2 of our earnings press release, which is available on our website at www.viad.com.

With that, I'll turn the call over to Steve.

Thank you for joining us on today's call. We delivered another year of solid growth and profitability as we continue to make progress towards our strategic goals.

On a consolidated basis, our revenue grew 8.5%, and our adjusted segment EBITDA margin improved 90 basis points to 11.7%. This performance was driven by strong organic growth and strategic acquisitions at both business units. At GES, we reported better-than-expected fourth quarter revenue growth. Our U.S. base same-show revenues were up 6.2%, and our international segment revenue grew by 23% on an organic basis.

Although our revenue performance was strong, operating income came in near the low end of our prior guidance range. This was largely a function of higher-than-anticipated cost at ON Services as we continue to integrate this acquisition and align our resources to maximize synergy. For the full year, GES revenue growth was 7.4%. We saw continued business strength and contributions from our recent acquisition that more than offset our revenue headwind of about $37 million from the combination of a low-margin contract that we did not renew in 2016, negative show rotation and unfavorable exchange rates.

With a broadened suite of live event services, our teams are finding success in the marketplace. The addition of ON Services to our mix of offerings is strengthening our position as the preferred global full-service provider for live events and leading to cross-selling wins. We added audio-visual services to our scope of work for a number of clients, including the Association of Oral and Maxillofacial Surgeons, the Academy of Nutrition and Dietetics and the Food & Nutrition Conference & Expo. I'm also happy to report that we recently resigned the biannual International Manufacturing Technology Show through 2024, and we renewed our multiyear contract with the International Council of Shopping Centers.

In addition, we remain focused on gaining share in the large corporate events space with 2 recent noteworthy wins: Red Hat Summit 2018 and Caterpillar. For Red Hat, we will be the full-service provider for its user conference and other select events. For Caterpillar, who has trusted us to support its brand at exhibitions for many years, we were able to leverage this relationship to win new corporate work for them. This year, we will deliver an educational experience for key Caterpillar dealers in Americas, and we will create a new visitor center experience at its headquarters.

On the international side, we deepened our relationships with some of Europe's leading event organizers with multiyear contract renewals. These renewals have a combined lifetime contract value of approximately $100 million and are proof of the strong collaborative partnerships that we have built with the organizer clients. We have seen great success growing our revenue from corporate clients by leveraging our global full-service capabilities to support their event program needs across the EMEA region.

We also made good progress integrating ON Services and taking actions to position it for improved growth and profitability, including changes in the leadership team and the consolidation of facilities. With those changes now behind us and a stronger sales pipeline, we're excited about 2018. In fact, ON Services started this year on a very positive note, winning a 5-year contract to be the preferred provider of audio-visual services and the exclusive provider for production rigging services for the San Diego Convention Center.

Overall, GES is well positioned to continue to capitalize on the momentum that we've created over the past 3 years. For 2018, we expect to drive continued strong underlying business growth to help offset negative share rotation revenue of approximately $40 million.

Now let me switch gears to Pursuit. Pursuit delivered fourth quarter results that were in line with our prior guidance for the seasonally slow quarter. For the full year, revenue grew 13.4% with adjusted segment EBITDA growth of 30.9%. We saw significant improvement in our key performance indicators. Same-store passengers at our attraction increased 12.5%, with revenue per passenger up 27.3%. At our hospitality assets, same-store RevPAR increased 6.8%. This great performance reflects the power of our Refresh, Build, Buy strategy and revenue management initiatives.

Our refresh investments to renovate the Banff Gondola delivered results that have far exceeded our expectations. As a reminder, we committed $22 million to complete a major renovation of this leading attraction. And in its first full year of operations following the renovation, its revenue grew 57% over the prior prerenovation period with passenger growth of 20% and a 31% increase in revenue per passenger from ticket sales, retail and dining. Following the success of our new Sky Bistro restaurant at the Banff Gondola, we completed similar renovations of our dining services at the Glacier Discovery Centre, which provides ticketing and guest services for our Glacier Adventure Tour and Glacier Skywalk attraction.

Our team was also busy during 2017 with the reconstruction of the Mount Royal Hotel, which was damaged by fire in late 2016. Utilizing our insurance proceeds of about $30 million and an additional $5 million investment, we are undertaking a complete renovation of the property. With its ideal location in downtown Banff and an enhanced guest experience, we will be able to drive stronger RevPAR and returns from this asset. The project is progressing well, and we're on pace to reopen the hotel by midyear 2018.

On the build side of our strategy, we commenced the development of an RV park and cabin village on approximately 100 acres of undeveloped land that we acquired as part of an acquisition in 2014. This new development will have approximately 100 full-sized RV slips and 20 guest cabins. We expect to have the RV park at least partially online during the 2019 season.

And our growth from our buy initiatives during 2017 was fueled by our acquisition of FlyOver Canada at the end of 2016. This attraction performed well during the first year of our ownership and delivered growth that was in line with our expectations. In addition to being a fantastic attraction on its own, we like the FlyOver concept because it provides us with a new growth platform. And in November, we announced the expansion of its high margin attraction to Iceland. FlyOver Iceland is currently in development, and we expect it to open in 2019. We continue to evaluate additional locations for this type of concept.

In summary, 2017 was a year of significant accomplishments and growth for Pursuit, and we're poised to continue -- continued growth in 2018.

And now I'll turn it over to Ellen to give us some more color on the financials.

Thanks, Steve. For the fourth quarter, our loss per share before other items was $0.26 versus our prior guidance for a loss of $0.35 to $0.25. This figure does not include the tax -- the impact of tax reform, which I'll comment on a bit later.

Our consolidated fourth quarter revenue increased 8.1% with organic growth of $12.2 million or 5% at GES and $1.3 million or 13.1% at Pursuit. Exchange rate variances favorably impacted fourth quarter revenue by $5 million, and the acquisitions of FlyOver Canada and Poken contributed revenue growth of $2.3 million during the quarter.

Consolidated adjusted segment EBITDA decreased $2.7 million from the 2016 fourth quarter. GES adjusted segment EBITDA decreased $5.4 million, primarily reflecting a less favorable mix of revenue and higher year-over-year costs at ON Services, partially offset by lower performance-based compensation expense. Pursuit adjusted segment EBITDA increased $2.7 million, primarily due to revenue growth from high-margin attractions.

Our income before other items, adjusted segment EBITDA and adjusted segment operating income exclude restructuring charges, impairment charges and recoveries, acquisition transaction-related and integration costs, the impact of tax reform and other tax matters and start-up costs related to the development of our FlyOver Iceland attraction. A reconciliation of these non-GAAP measures to net income can be found in Table 2 of the earnings press release.

As you can see in Table 2, we recorded a net charge of $16.1 million related to tax reform during the fourth quarter. This charge is comprised of $8 million related to the remeasurement of our deferred tax assets due to the lower U.S. corporate tax rate. The remaining $8.1 million related to the deemed repatriation of unremitted earnings of foreign subsidiaries, which is due to the IRS in installments over the next 8 years. We have not completed our accounting for the effective tax reform, and the charges we recorded reflect our best estimates based on information available at this time.

For the full year, our income before other items was $2.62 per share on revenue of $1.3 billion, adjusted segment EBITDA of $152.6 million and adjusted segment operating income of $97.7 million.

As compared to 2016, our full year income before other items increased by $0.24 per share or 10.1%, primarily due to an increase in adjusted segment operating income, partially offset by an increase in net interest expense and increased corporate expenses, driven largely by higher growth performance-based incentives resulting from the increase in our stock price during 2017.

Our consolidated full year revenue increased 8.5% or $102 million. Adjusted segment EBITDA increased by $22.4 million or 17.2%, and adjusted segment operating income increased by $10 million or 11.5%.

I'll now move on to the business group results. GES' full year revenue of $1.1 billion increased 7.4% or $78.4 million versus 2016. Revenue from the U.S. segment increased 5.5% or $45.7 million, including incremental revenue of approximately $41 million from the acquisition of ON Services; new business wins; and continued base same-show growth, partially offset by a negative show rotation of approximately $11 million.

Revenue from our international segment increased 13.8% or $34.2 million, primarily due to new business wins; same-show growth; and positive show rotation of $3 million, partially offset by an unfavorable currency translation of approximately $7 million.

GES' full year adjusted segment EBITDA was $87.4 million, up $7 million from 2016, while adjusted segment operating income decreased by $0.7 million to $50.1 million, primarily reflecting additional depreciation and amortization associated with acquisitions.

U.S. adjusted segment operating income decreased $6.5 million, primarily due to a $7.1 million increase in depreciation and amortization expense associated with ON Services. U.S. adjusted segment EBITDA increased $1.1 million, primarily due to contributions from ON Services; income of $2.8 million related to a contract settlement; and lower performance-based incentives, partially offset by a less profitable mix of revenue and cost increases. International adjusted segment operating income increased $5.8 million, primarily due to higher revenue.

Pursuit posted full year revenue of $173.9 million, up 13.4% or $20.5 million versus 2016. Acquisitions and continued organic growth across the majority of our attractions and hospitality assets were the key drivers of our strong year-over-year growth. The acquisitions of FlyOver and CATC contributed incremental revenue of $10 million. Organic growth, which excludes the impact of acquisitions and exchange rate variances, accounted for $8.8 million of the revenue increase and was driven mainly by higher passenger volumes and revenue per passenger at our attractions, in particular, the Banff Gondola and stronger RevPAR across our hospitality assets.

Our same-store revenue per passenger increased 27.3%, and same-store RevPAR grew by 6.8% versus the prior year. Pursuit's full year adjusted segment EBITDA was $65.2 million, up $15.4 million or 30.9% from 2016. And adjusted segment operating income was $47.6 million, up $10.7 million or 29.1% from 2016. These increases were primarily driven by revenue growth from our high-margin attractions.

And now I'll cover some cash flow and balance sheet items before discussing 2018 guidance. Our consolidated cash flow from operations was $113 million for the 2017 full year, up from $100.3 million in 2016, primarily due to favorable working capital. And capital expenditures totaled $56.6 million, up from $49.8 million in 2016, primarily driven by the reconstruction of the Mount Royal Hotel. At December 31, our cash and cash equivalents totaled $53.7 million, debt was $210.2 million and our debt-to-capital ratio was 31.8%.

And now moving onto guidance. For the first quarter, we're expecting a loss per share of $0.57 to $0.47 as compared to income before other items of $0.33 in the 2017 quarter. This change primarily reflects negative show rotation at GES. For GES, we expect first quarter revenue to decrease by approximately $48 million to $58 million from the 2017 quarter with an adjusted segment operating income decrease of approximately $21 million to $23 million. This decrease primarily reflects negative show rotation revenue of about $55 million, certain nonrecurring business, partially offset by favorable exchange rate variances of $6 million.

Additionally, we're expecting low single-digit same-show revenue growth during the first quarter, which is below our recent experience due to one event. We expect to return to a mid-single-digit same-show growth rate over the balance of the year.

Pursuit revenue is expected to be essentially flat to up about $2 million during its seasonally slow first quarter, with a decline in adjusted segment operating results of $500,000 to $2.5 million. The increased operating loss primarily reflects higher overhead expenses due to additional cost to support continued growth of the business as well as the timing of certain expenses. For the 2018 full year, we expect consolidated revenue to increase at a low single-digit rate from 2017, with an increase in adjusted segment EBITDA of approximately $4 million to $8 million.

Depreciation and amortization expense is expected to increase by $5 million to $7 million, primarily as a result of the reopening of the Mount Royal Hotel and other capital investments to support growth and efficiency gains.

Adjusted segment operating income is expected to be in the range of $95.5 million to $99.5 million as compared to $97.7 million in 2017. This guidance anticipates that exchange rate variances will have a positive impact of about $23 million on consolidated revenue, $1.5 million on consolidated adjusted segment operating income and about $0.06 on income before other items per share. These impacts assume exchange rates of $0.81 for the Canadian dollar and $1.39 for the British pound. A $0.01 change in the Canadian dollar would affect our full year revenue by about $2 million, and a $0.01 change in the British pound would affect our full year revenue by $1 million to $1.5 million.

At GES, full year revenue is expected to be up slightly from 2017 with comparable EBITDA. We expect continued same-show growth, new business wins and favorable exchange rate variances to offset negative show rotation revenue of about $40 million.

At Pursuit, we expect full year revenue growth at a high single-digit to low double-digit rate from 2017, with an increase in adjusted segment EBITDA of about $6 million to $8 million. This guidance for Pursuit includes incremental revenue of about $5 million from the Mount Royal Hotel, which is expected to reopen midyear 2018. As a reminder, we received payment for our business interruption insurance claim during the 2017 third quarter. The portion relating to 2017 loss profits was recognized as income during 2017, and the remainder, which relates to 2018 lost profits, will be recognized in income during the first half of 2018.

Additionally, I want to point out that the start-up costs related to the development of our FlyOver Iceland attraction, which is expected to open in 2019, are not included in these guidance ranges. FlyOver Iceland start-up costs are expected to approximate $1 million during 2018 and will be excluded from our adjusted segment EBITDA, adjusted segment operating income and income before other items.

We expect our full year cash flow from operations to be in a range of $105 million to $115 million. And we expect capital expenditures to be about $92 million to $98 million, which includes approximately $19 million to complete the restoration and renovation of the Mount Royal Hotel and approximately $10 million to begin development of the FlyOver Iceland attraction. The Mount Royal Hotel expenditures will be funded primarily from the property insurance proceeds we received during 2017. The FlyOver Iceland expenditures will be funded out of our 2017 capital contribution to acquire the controlling interest in Esja, the Icelandic entity that is developing the FlyOver Iceland attraction.

For 2018, we currently expect our full year effective tax rate to be approximately 28% to 29%. And we expect our effective rate to be higher than the 21% U.S. federal corporate tax rate due to our foreign earnings in higher rate jurisdictions, the increase in nondeductible expenses and an increase in our effective state tax rate.

Again, this is our best estimate based on information at this time. Additional 2018 guidance can be found in the earnings press release. Steve, back to you.

Thanks, Ellen. In closing, I'm very proud of our accomplishments in 2017 and excited about our strategic direction and the progress we're making. In early 2014, we laid out a growth strategy centered around enhancing shareholder value to through improved growth and profitability at both business groups. Since that time, we have completed 5 higher-margin complementary acquisitions that added leading audio-visual, event registration and accommodation services at GES. These acquisitions, combined with our global presence, are enabling us to gain share in adjacent and underpenetrated areas of live events that offer higher margins and strong growth prospects.

At Pursuit, we completed 5 acquisitions that have expanded our business in current markets and taken us into new geographies. We've also made key investments that have grown and enhanced our high-margin attraction portfolio, including the opening of the Glacier Skywalk and the renovation of the Banff Gondola. Our strategy to scale the Pursuit business while maintaining strong EBITDA margin remains a key focus going forward.

In summary, the investment -- the investments we have made in acquisitions and organic growth projects are providing exciting avenues of growth with enhanced profitability. I'm very happy with our progress, and I'm excited about the opportunities that lie ahead. I want to take this opportunity to thank the entire Viad team for driving strong results and for their commitment to our strategy.

And with that, we can open up the call to questions.

(Operator Instructions) Our first question comes from the line of Steve O'Hara from Sidoti & Company.

I guess just 2 things, and I -- maybe I missed it. But for the Mount Royal Hotel, I mean, how much of the peak season do you expect to be able to capture this year with the opening? And what type of growth are you expecting in that property versus what you had last year -- or not last year, but the (inaudible) operating.

In 2015. Yes, Steve, we anticipate opening for our guests on July 1. So we will capture the majority of the high season in the Banff/Jasper area. And so we're very excited. We continue to move forward towards that opening date. And where we stand now, the project is on time and on budget. Ellen, do you want to comment on kind of what this looks like year-over-year from 2016 to 2018 for the Mount Royal?

It's very little revenue change because of the partial season. So we'll have better growth rate comparisons as we have the full year, but the revenue growth won't have a lot of change.

Okay. So I guess -- I mean, just for the season that you're operating. So I mean, from July 1 through the end of the year, what's your expectation about the growth versus what you saw in 2016? I mean, are you assuming 5% growth? I mean, it -- I've seen some of the designs and things like that. I mean, it looks pretty spectacular. I'm just wondering what the expectation is on maybe RevPar or whatever.

And that's hard to say that on just the Mount Royal. I mean, our overall RevPAR is expected to grow kind of in the mid-single digits for all of Pursuit. That's what we've planned on for 2018. Mount Royal would be higher, obviously, because we've upgraded the property.

Yes. I think the takeaway is that we do -- we're excited about opening the hotel. We believe it is an elevated experience. And with that elevated experience, we'll be able to drive higher RevPAR than we would versus the prior version of the Mount Royal Hotel.

Okay, okay. And then just on the -- I know it's early, but in terms of thinking about 2019 and the show rotation there. I mean, those -- directionally, does it make sense to think about it similar to what you expect currently in 2018? Or would it be something larger than that, do you think?

I think 2019 is certainly a bit lower than 2018. 2018 has some negative show rotation related to international, which we expect that to be a bit positive in 2019. So I would think about 2019 to be a bit lower than '18.

Meaning -- when you say lower, you mean the show rotation will be less?

Right. So this year in '18, it's 40. In '19, it'll be more in the 25 to 30 range.

Our next question comes from Marco Rodriguez from Stonegate Capital Markets.

I was wondering if we could circle a little bit around on ON Services. I believe you guys called out some additional costs that you guys incurred here in the quarter, and I think you also mentioned you changed leadership there. And I think there were some other items that you called out. Can you just maybe talk a little bit about -- are these additional cost because of the change in leadership? Or are there other costs associated with bringing the integration in online?

The higher cost really relates to -- when you're looking at Q4 of 2016 to Q4 of 2017, we bought ON Services in August of '16. And so there wasn't a tremendous amount of additional cost or integration costs happening in the fourth quarter of 2016. In 2017, we have added resources to expand that business going forward, and so you see some of those higher expenses showing up in the fourth quarter of 2017. Does that make sense?

Yes. And so those expenses are fixed in nature? If I'm understanding you correctly.

It's really -- it's headcount. And so it's really positioning ourselves for future growth in sales and being able to execute that growth.

Got you. Got you, okay. Then kind of shifting gears here a little bit to the RV park. You're looking to have it open partially for the 2019 season. Just wondering if you can maybe kind of walk us through the steps and kind of a time line that you'll be taking here to get that open for '19.

Yes. So we made a little bit of progress at the end of 2017. If you remember, Marco, there were some fires that were in the Glacier Park area, and those prohibited us from starting any type of land clearing to get started on the project. But towards the -- later in the year, the weather was somewhat favorable and we're able to get started, but to a lesser degree than we had anticipated. So that has pushed back -- and we announced this on our last call, that this -- that had pushed back our time line for opening. So we will spend as soon as the weather turns to spring and we're able to get into that property. We have the contracts ready to clear the land and start the construction of the RV park. The majority of that will be happening in 2018, which will allow us to open the bulk of it in 2019. There will still be some elements that we'll be building out in early -- or in the 2019 season selectively to avoid any disruption to our guests that are there. And then, we'll be opening up the full facility in 2020.

Got you. And the CapEx requirements for that, I guess, are relatively minimal in comparison to the overall annual budget you've put out there.

Yes. Yes, they are. And I think we've disclosed those before.

RV park is going to be about $6 million or $7 million in '18.

Got you, okay. And then kind of looking at the FlyOver concept. Obviously, your announcement to expand this into Iceland provides, I guess, you guys, obviously, some potential excitement here into fiscal '19. Just kind of wondering if you could first talk about what are the sort of the criteria you're looking at to expand this concept into other areas? And then if you might be able to talk -- it looks like FlyOver Canada did about $10 million in revenues last -- in fiscal '17. Just kind of wondering if that might kind of like a general run rate for the concept. And then if maybe you could talk just about the difference in the gross margins. I know it's higher margin, but if you can maybe quantify that or give us some sort of a sense as far as how much better they might be.

I'll tackle a part of that, and I'll ask Ellen to talk about kind of gross margins going forward. But when we think about different locations, we're looking for iconic destinations that have perennial demand. And so we're looking for -- for example, Vancouver, I believe, has roughly 9 million visitors each year to the city of Vancouver. We are one of the only attractions located near downtown -- within walking distance of downtown. And so that's the type of set-up that we're looking for. And obviously, some of the visitation numbers for Iceland -- and specifically, Reykjavik is what attracted us to the FlyOver Iceland concept. And so we're continuing to look for opportunities very similar to both of those, where you have high visitation, natural beauty, iconic beauty and where we are one of the primary attractions in that area. Ellen, do you want to comment on kind of what we think in terms of future prospects for Iceland?

Sure. So FlyOver Canada is about $10 million in revenue. Iceland will be a bit lower than that. The seating capacity of the attraction is a little bit smaller than in Vancouver. The margins are high on both, just like our other high-margin attractions within the Pursuit group.

Got you, okay. And then just real quick, kind of a housekeeping item here. Just looking at the press release tables. When it comes to GES, the revenues as reported and broken up via acquisition, FX, organic, et cetera, I just want to make sure I'm kind of understanding something here correctly. There's no acquisition revenues for GES U.S. for this quarter. And it looks like the table is also showing that you have about $72 million or so in acquisition revenues for GES U.S. When I look at the prior 9-month period for acquisition revenues in GES in the U.S. side, I've got roughly $56 million, $57 million. Were there some revenues that were reclassed? Or am I missing something here?

So the reason why there isn't acquisition revenue in the fourth quarter for GES U.S. is that ON Services, we had that in both quarters, both '16 and '17. But ON Services is included in the full year 2017. So that number you mentioned, the $72 million, ON Services is included in that full number.

So -- okay. So the additional $25 million or so is in the organic $188 million that you've got in fourth quarter U.S. revenue?

The additional On Services is in the fourth quarter. So if you look at the full year acquisition revenue of $72 million minus the 9 months, that would be the ON Services for the quarter.

Okay. And that's in the organic segment for Q4?

That is correct. Because we had it in both for the full quarter of fourth quarter '16 and '17.

(Operator Instructions) Our next question comes from the line of Peter Rabover from Artko Capital.

Just a couple of questions maybe just to circle back on the FlyOver Iceland, which is a great concept. But I assume the economics of greenfielding it are better than the economics of buying it. So maybe just another way of kind of circling back to the same question. If you're investing $10 million, what do you think the ROIC on something like that will be?

You're right. I mean, when you do a greenfield, it's obviously more favorable economics. It's less expensive to produce it. So I don't think we've actually talked about what the ROIC is on any individual acquisition, but it's safe to assume that it's better than what we've done at FlyOver Canada simply because the start-up cost is less than what we did in -- the acquisition we did in Vancouver.

Okay, great. And then, I guess, just thinking about more of the pipeline for both the GES and Pursuit. Any -- or how -- anything you guys are looking at? I mean, obviously, I'm not asking you to comment on whether you're going to do a deal. But relative to the last few years, is there more opportunity, less, et cetera?

I think it's the same. We've talked a number of times about the pipeline, and we've made progress against kind of our strategic goals. A lot of it through acquisitions, some of it internally. I would say that the M&A pipelines for both businesses are healthy. And we continue to evaluate those opportunities for fit and for financial performance and cultural fit management team. So strong pipelines, and we're going to continue to pursue our growth strategy.

Okay. And then maybe you could just help me out understand. Because I think in the past, with the same-show rotation, it's usually been 1 negative year and 1 positive year. And it sounds like this year, you're having 2 negative years and then the third year is going to be negative. So maybe I'm not understanding how that works. Why are we -- why is it...

Peter, it's not as easy as 1 year on, 1 year off in terms of positive or negative rotation. There are a handful of non-annual events, and they happen at different intervals. So one of them is every 2 years, one of them is every 3 years and one of them is every 4 years. And so it creates more than just an on-year and off-year. So it creates something where, for example, in 2020, all of the non-annuals will actually occur in the same year. But in 2019, none of those major ones happen. So it's not as easy as on and off.

No, no, no. Look, I understand that. I was just surprised. And so like the $40 million this year, is that a big -- or 2018, is that a big like negative operating leverage number? So like, I assume it's not a 1 for 1 7% EBITDA margin, but probably...

No, no, no. It's -- as we've talked about it both in the up and the down cycle, these -- they flow through at a higher flow-through rate.

Okay. Yes, I just wanted to make sure of that. So 2020 would potentially be like a really, really big year on the EBITDA side, that group.

Exactly.

Okay, great. And then just one last question. I know you guys say this, but you guys gave out so much information that maybe I missed it. But what's the breakdown between the growth CapEx for 2018 and maintenance CapEx?

I didn't actually break out the growth CapEx for 2018. We did break out major projects in the comments. Mount Royal at $19 million and FlyOver Iceland at $10 million. We just mentioned that the RV park is about $7 million. So those would be the growth -- the major growth projects.

Right. And then any growth on GES?

Our CapEx tends to be about 2% on GES. GES has a couple of touring exhibitions on the growth CapEx side. And then for Pursuit, the maintenance is about 8% of revenue.

Our next question comes from the line of Jamie Yackow from Moab Partners.

Peter actually asked a bunch of my questions. I guess as it relates to the CapEx that you broke out, the FlyOver Iceland, are we double-counting because that money has already been spent? Or am I thinking about that wrong?

No, you're right. So we made the investment in '17. But since we have a majority interest, we consolidate the entire company into our balance sheet and P&L. So when we actually have our -- when we report out for our 10-K, we'll have a noncontrolling interest line in our balance sheet and in our P&L, and that's where the noncontrolling interest will be broken out. But it does show growth in our balance sheet and in our CapEx numbers.

Got it, okay. And then on the show rotation side, I just want to make sure I heard you correctly. For '19, you're assuming negative show rotation at 25 to 30 versus '18?

And that's our best guess right now. It really does depend on how the year goes this year. We might pick up new rotation shows like we did in '17. It depends on how the shows perform this year. So that's really kind of our best guess right now.

Got it. And can you give us a sense of -- I know 2020 is kind of the best of all years. But in terms of show rotation, can you give us some kind of range that we should be thinking about?

I hesitate to give a range. I mean, I can think of the top 3, but I hesitate to give a range because there's more to it than that and that's 2 years out. It's going to be a big number. I mean, you can kind of see how -- what the rotation was in 2008, but it'll be a sizable number.

Yes. Jamie, the last thing that's happened was the increase from 2007 to 2008. And mind you, the business is different. We have some -- we have additional business that we've won in these 10 years, but that's a similar thing.

Okay. And on ON Services -- yes. I mean, look, it's -- it would be helpful for us just because it's kind of like the political years, right, where you've had a couple of negative show rotations and you blend it together to kind of get a normalized run rate type of thing.

Yes. Jamie, I would say that my -- off the top of my head guess is $100 million.

Okay, that's helpful. All right. And then just lastly on ON Services. It seems like the business -- of course, in 2017, it underperformed the expectations. Do you think the bulk of the issues are behind us and we should expect a more favorable 2018, closer to kind of expectations when you bought it? Or how should we think about that?

Yes. I think we're making progress with the business, and it's my expectation that we move towards more run rate margin and revenue growth that we talked about in the acquisition.

(Operator Instructions) Our next question comes from the line of Steve O'Hara from Sidoti & Company.

Just -- can you just remind me what the Mount Royal revenue and EBITDA, if you gave that out for 2016, was?

For 2016, I don't -- we don't typically break out specific hotels. We've given a hospitality number, I believe, for that. Are we giving them out for that region specifically or in total?

I think we did talk about Mount Royal.

Steve, give us one second to see if we can address this.

Okay. I think you did give it out in the past, but -- and I can probably find it if that's the case, but that's okay.

So Steve, we're -- we think we have a lock on...

Yes. The Mount Royal was about -- the revenue was about CAD 8 million in '16, and then the EBITDA was about CAD 3.5 million.

Okay, okay. Great, perfect. And then just on the ON Services with the Cat and -- I can't remember what the other one was -- but -- Red Hat. Is that kind of the primary driver of getting that revenue? Was it ON Services and Poken? Does that -- can you just remind me (inaudible)?

As we've talked about before, when you get into corporate events, a large portion of the spend is on audio-visual. And so our ability to go after opportunities like Red Hat or like the work that we'll do for Caterpillar, it does require us to have an A/V component. And so it's one of the things that we're able to lead with. And yes, it's important for us to have that in order to win that type of business.

Okay. And you said that's typically a higher-margin business than the exhibition is. Correct?

Correct, absolutely.

(Operator Instructions)

Okay. Thanks for your questions and your interest in Viad, and we look forward to speaking with you again next quarter. Thanks a lot. Bye-bye.

And that concludes today's conference. Thank you for participating. You may now disconnect.