Viad Corp (VVI) 2020 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Viad Corp Third Quarter 2020 Earnings Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Carrie Long, Investor Relations. Thank you. Please go ahead.

Good afternoon, and thank you for joining us for Viad's 2020 Third Quarter Earnings Conference Call. During the call you'll hear from Steve Moster, our President and CEO and also the President of GES; David Barry, our President of Pursuit; 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, quarterly and other current reports filed with the SEC. During the call, we'll be referring to certain non-GAAP measures, including loss or income before other items, adjusted segment EBITDA and adjusted segment operating income or loss. Important disclosures regarding these measures, including reconciliations to net loss or income attributable to Viad, can be found in Table 2 of our earnings press release, which is available on our website at viad.com.

Now I'd like to turn the call over to Steve.

Thank you, Carrie, and good afternoon, everyone. Thank you for joining us on today's call. I hope you're all staying safe and healthy. On this afternoon's call, we'll provide insight into our businesses and how we're navigating the COVID-19 pandemic, and we'll review our third quarter results and liquidity position.

Clearly, the pandemic continues to impact our industries in a material way, and I'm grateful for the extra efforts each of our team members are making to help move our company forward. As David will discuss shortly, Pursuit was able to reopen each of its geographies and generate positive EBITDA during the quarter with several surprising bright spots. And as I'll cover in more detail later, GES continued to take important steps to preserve liquidity and create a lower, more variable cost structure that will benefit us in the future.

While our third quarter results were far below the same period last year, I'm pleased with how we performed in this unprecedented time, and I'm happy to report that we finished the quarter with a strong liquidity position. Ellen will cover our financial results and liquidity toward the end of the call. But first, let's start with some business highlights. I would like to turn the call over to David to provide more color on what's happening across Pursuit. David?

Thanks, Steve. At Pursuit, we know that collecting memories is more important than collecting things. And if this quarter taught us anything, it's that the demand for iconic, unforgettable and inspiring experiences is strong, even in the middle of a global pandemic. Pursuit delivered strong results in Q3 beyond our initial COVID expectations, demonstrating the resiliency of our business model, the strength of our Refresh, Build, Buy strategy and the value of experiences over things.

Each of our worldwide operating geographies successfully reopened and delivered positive third quarter EBITDA. Remarkably, they did so while serving a largely local and regional guest demographic as international borders remain closed and long-haul destination tourism was limited due to the pandemic. We are so thankful for the hard work and dedication of our team members who prove their ability to deliver an outstanding guest experience while maintaining the highest standards of COVID safety. Our operating and support teams contended with a highly dynamic environment and have emerged as a faster, more responsive unit. This team is now even more capable of adapting to rapidly changing circumstances.

So let me spend a few minutes talking about our performance across Pursuit. Starting in Alaska, although pandemic adversely impacted inbound tourism, we managed to get open and remain open at each of our experiences throughout the summer. We served a small but engaged population of domestic long-haul and local Alaskan guests and had a strong finish with a late season surge at our Kenai Fjords tours and the Talkeetna Alaskan Lodge.

Down to Montana, we clearly benefited from a strong and healthy drive market and saw solid visitation from the Western United States with 62% of our visitors being domestic long-haul travelers. Although the east side of Glacier National Park remained closed for the season, we benefited from our recent investments in West Glacier Village and the concentration of guests in and around the west entrance to the park. Performance outpaced 2019 at the majority of our West Glacier business. The West Glacier RV Park and Cabin Village performed strongly year-over-year, with volumes up 45% from 2019.

Retail results were particularly strong, exceeding prior year revenue by 54%. Average daily rates exceeded prior year at 4 of our Glacier Park Collection hotels with average ADR across all properties at $201. RevPAR at 2 properties was up between $4 and $40 and hotel occupancy for the quarter was 72%.

Moving north to Banff Jasper, we saw relatively strong occupancy rates at our 10 hotels with several properties generating year-over-year growth with strong RevPAR and average daily rates. Specifically, 4 of our 7 hotels in Jasper saw ADRs above prior year at an average increase of 15%. Average ADR across all 7 Jasper properties in Q3 was CAD 229, and the Jasper hotels in aggregate saw 68% occupancy in the quarter with most weekends selling out.

Making guests and visitors happy at our attractions is such an important part of our DNA. And this summer we've received outstanding guest feedback, which is reflected in our Net Promoter Scores. NPS increased 2.5% from the prior year and now sits in the low 70s. This summer, we proved our ability to successfully launch new iconic experiences despite the ongoing challenges of the pandemic. And as you may recall from prior earnings calls, we slow rolled certain capital projects, putting some on the shelf and rushed others to completion when the pandemic hit. And this strategy has proven to be the right plan for the time and has provided the most immediate returns to the business.

In July, we completed the refresh of the Farm & Fire restaurant located in the lobby of the Elk and Avenue Hotel in Banff. We couldn't be prouder of the guest response to the refreshed experience as Farm & Fire has vaulted to #2 of 105 restaurants in Banff on TripAdvisor, second only to Pursuit's own #1 ranked Sky Bistro located at the top of the Banff Gondola.

In August, we launched Open Top Touring, our newest attraction where guests can enjoy a 90-minute tour of the most scenic and awe inspiring spots around Banff while onboard a custom vehicle, vintage inspired to have the look and feel of a 1930s touring car. It's a new concept that we're really excited about and one that we think has the potential for extension into other iconic markets around the world.

Finally, turning to our FlyOver attractions, in September, we celebrated our first birthday at FlyOver Iceland. And I'm pleased to report that we've rocketed to the near top of guest ratings as the #2 attraction on TripAdvisor for great things to do in Reykjavik. We're now the #1 point of redemption in all of Iceland for government issued travel vouchers. The Icelandic government has been very effective in their management of the global pandemic, and that included issuing all citizens a travel voucher to help boost the local economy. We're very pleased that Icelanders are choosing FlyOver Iceland as their favorite spot to redeem their voucher. FlyOver Iceland continues to climb in popularity and rankings, and we believe strongly in the long-term success of Iceland.

In Vancouver, our FlyOver Canada business felt the effect of closed borders and fewer international visitors and yet still managed to generate positive EBITDA in the quarter. Despite our visitor mix being mostly regional and local, we were pleased with our turnout during the pandemic. Content and location continue to be king in terms of driving visitation and experience. During October, we're showing an exciting new Halloween feature, and during November, we'll be showing our dual feature of FlyOver Canada and FlyOver Iceland in Vancouver.

In sum, despite the challenges of operating in these unprecedented times, we remain focused on our core values and the importance of the hospitality profit chain. Team member engagement, strong guest satisfaction and disciplined execution will continue to drive our strategy and ultimately, our strong financial results. Earlier, I mentioned the strength of our Net Promoter Scores, which exceeded prior year in most categories. And we were equally humbled by the results of our team member engagement survey in which 8 out of 10 staff indicated intent to recommend Pursuit as a great place to work. These high marks in the midst of a global pandemic speak to the strength of our team and hospitality culture.

As we ramp down operations in the fourth quarter, we're focused on planning for 2021 and are encouraged by what we're seeing by way of pacing and booking trends. At many of our locations, we're pacing ahead of same time last year in the coming season as many guests that canceled 2020 itineraries have rebooked for the summer of 2021. RevPAR and ADR trends for 2021 are relatively strong and at some properties are outpacing pre-pandemic levels, and all of which gives us confidence that we'll emerge from the pandemic in a position of strength. We remain positive that many of the current pandemic-related travel restrictions will be lifted ahead of next summer's peak tourism season.

We have so much to be excited about in the coming year, not the least of which are 2 major projects that we look forward to bringing online in the 2021 season. On September 1, we restarted construction on our Las Vegas attraction, FlyOver Las Vegas, and are on track for a fall 2021 opening on the Strip directly opposite Eataly, the Park MGM and the T-Mobile Arena. Filming of FlyOver the Wild West is well underway, and we expect to meet all production and construction deadline. Back in Iceland, our team at Sky Lagoon has made great progress, and we're on track for a late spring 2021 opening, which we anticipate could be well-timed as the travel world begins its return to a more normal cadence. And you can see our progress on this very innovative attraction at SkyLagoon.com.

In closing, we're proud of our efforts to manage cash flow, make the necessary adjustments to our operating structure and investments, while remaining focused on an outstanding staff and guest experience. We're as confident as ever in the strength of our business model, our Refresh, Build, Buy strategy and our very talented team. And as you know, we doubled revenue and EBITDA in the 48 months prior to COVID, so we're focused ahead to 2021 and resuming Pursuit's exciting growth journey.

Steve, back to you.

Thanks, David. Now switching over to GES. The live event industry has been acutely affected by COVID-19 pandemic, and GES is no exception. I'm incredibly proud of the team for taking very difficult yet necessary actions to ensure we not only survive but come out stronger on the other side. When the pandemic hit and we began to see widespread event cancelation and postponements, we acted quickly to reduce controllable costs to minimum necessary levels.

We also made the decision to accelerate some transformational changes that provide both near and longer term benefit by freeing up capital, reducing our fixed costs and bringing greater flexibility into our service delivery model. By the end of the third quarter, we had eliminated about 80% of our wages and discretionary costs. Total SG&A expenses for the third quarter were approximately 60% lower year-over-year, and we continue to optimize our cost structure by making permanent changes to our delivery network and client service orientation.

During the quarter, we made significant progress in transforming our office and warehouse delivery network. Across the company, we are changing the way we operate to reduce our physical footprint and drive down fixed facility costs. We are eliminating warehouse space by consolidating into fewer facilities and expanding the range of our major warehouse hubs to service more markets at a lower overall cost. And we're shifting to an office-light model with more people working from home or remotely. GES has long employed a hub-and-spoke model for supporting events around the country, so this is really just taking that approach to the next level.

In San Diego, we completed the sale of a production warehouse and stand ready to service clients in San Diego, primarily from our Las Vegas Hub. We also exited 3 leased facilities during the quarter and announced plans to exit 4 more by year end. Most of these leased facilities were at or near the end of their lease, so the timing to vacate was fairly ideal. There are additional facilities that we intend to address going forward as we continue to create a lower and more variable cost structure.

Hand in hand with facility reductions comes the transformation of our client service orientation, which further supports a lower and more variable cost structure that is also highly responsive to the needs and expectations of our clients. During the third quarter, we simplified our services in EMEA by shutting down our U.K.-based audiovisual service business and will instead utilize third parties to support the AV needs of our clients in the U.K. market. We expect to outsource additional services across the company that we have historically done in-house. Additionally, we're developing our freelance model that will enable us to draw from a flexible talent pool for operations and customer service personnel as needed to support our clients. These changes will allow us to reduce facility and other overhead costs and give us the ability to flex up costs in a variable manner as demand returns and grows.

I'm very excited about the changes we're making to transform GES into a much leaner and more flexible organization. Through the actions we took in the third quarter, exiting various facilities and closing our U.K. AV business, we've raised over $17 million in cash proceeds and we've removed more than $8 million in annualized costs from our network. Our new facility network and service delivery model will provide a nice tailwind for us with improved profitability and more flexibility as the live event industry recovers.

Where we sit today, the road to industry recovery remains unclear. The live events market is reopening in some places around the world, including China, parts of Europe and the Middle East, as well as select cities in the U.S. However, the U.K. has pushed back the reopening of live events until March of 2021. And in the U.S., organizers remain cautious about their ability to hold large scale events despite strong demand from exhibiting companies to participate in a face-to-face forum.

The extended impact of the pandemic on our industry is affecting the competitive landscape, and we're seeing other industry suppliers struggle to stay in business. A recent survey conducted by Exhibitor Media Group revealed that nearly 40% of industry suppliers are either uncertain about their future or expect to go out of business. This will be an opportunity for stronger, well-funded companies like GES to gain market share, particularly in the corporate space where our competitive set is highly fragmented.

We remain optimistic on the longer term prospects for our industry and our business. Although many organizers are still making the difficult decision to cancel or postpone events, many have reported stronger than expected exhibit space sales prior to canceling. In recent surveys of exhibitors and attendees, show a strong interest in returning to live in-person events if appropriate safety precautions are taken. We believe this demonstrates the overall strength of the live event category.

I'm also encouraged by our business development activity during this time. Our exhibition bookings for 2021 are pacing in line with 2019, and we've seen a notable increase in the value of RFPs for corporate clients. While we expect early 2021 will continue to be challenged by ongoing COVID-19 concerns and restrictions, our clients are looking ahead and preparing for the return of live events. We firmly believe that the market will recover and GES will be in a new position of strength with a transformed, highly flexible cost structure and strong client service orientation. As we continue to navigate the near term uncertainty, we are keeping a close rein on controllable costs while we drive important structural change across the business. When in-person event activity resumes, we will be ready to deliver for our clients and shareholders in a new, more profitable way.

And now I'll turn the call over to Ellen to discuss our third quarter results in more detail. Ellen?

Thanks, Steve. The third quarter was very challenging, but our efforts to maximize revenue at Pursuit, despite travel restrictions and our continued actions to transform the GES cost structure, helped us finish the quarter with a strong liquidity position.

Revenue was $63.1 million, down 82.2% from the 2019 third quarter, primarily due to the COVID-19 pandemic. Adjusted segment EBITDA was $8.1 million, down $64.2 million from the 2019 third quarter. And adjusted segment operating loss was $5.8 million versus income of $56.0 million in the 2019 third quarter.

Net loss attributable to Viad was $30.8 million versus net income of $31.4 million in the 2019 third quarter. The 2020 net loss included restructuring charges of $11.3 million primarily related to transformation efforts at GES to significantly reduce costs and create a lower and more flexible cost structure.

Our net loss before other items was $16.4 million versus net income of $31.7 million in the 2019 third quarter. This non-GAAP measure excludes impairment and restructuring charges, acquisition integration and transaction-related costs, attraction start-up costs and other non-recurring expenses as applicable.

At GES, revenue was $14.3 million, down approximately 93.5%. This decline was largely a result of show cancelations and postponements as well as negative share rotation of approximately $30 million. The revenue earned during the quarter was primarily driven by compensation for work completed on canceled shows and storage, as well as virtual and hybrid events. GES adjusted segment EBITDA, which included a gain of $13.5 million from our San Diego facility, was negative $11.6 million, down from negative $2.8 million in the 2019 third quarter.

As Steve discussed, GES is taking significant strides to improve their cost structure and emerge with a lower breakeven point post COVID-19. GES's highly variable cost structure has allowed us to make swift and significant cost reductions during the pandemic. In the third quarter, we reduced SG&A costs year-over-year by about 60% by eliminating wages and discretionary costs as well as changing our facility footprint. As other facility leases end, we will be able to further reduce fixed costs.

At Pursuit, revenue was $48.8 million, down approximately 63.9%. This decrease was primarily driven by lower visitation due to ongoing border closures and other restrictions from COVID-19. Pursuit adjusted segment EBITDA was positive $19.7 million versus $75.1 million in the 2019 third quarter.

Across Pursuit, we made temporary changes to reduce salaries and use less seasonal workers by maximizing the roles of our full-time employees to control costs. We performed breakeven analysis at the property level to determine appropriate opening and closing dates, and we carefully managed costs based on expected demand to ensure we were EBITDA positive during this peak quarter. Through our prudent efforts to maximize profitability at Pursuit and reduce operating costs at GES, we've limited our third quarter operating cash outflow to approximately $14.7 million. This outflow is lower than our prior guidance, largely due to favorable working capital as well as stronger than expected EBITDA at Pursuit during the quarter.

Our cash flow from investing activities was an inflow of approximately $9.6 million, which included proceeds of about $17.1 million from the sale of GES's San Diego area warehouse and other assets, which more than offset capital expenditures of approximately $7.5 million. The capital expenditures during the quarter were mainly at Pursuit for the FlyOver Las Vegas attraction.

As of September 30, 2020, our debt totaled $259.1 million, down from $475.1 million at the end of the second quarter. During the quarter, we repaid $217.0 million of our outstanding revolver balance, bringing the total amount outstanding down to $230.5 million as of September 30, 2020. The remaining debt balance at the end of the quarter primarily comprises financing lease obligations.

Our revolver debt matures in October 2023, the longer term amendment to our $450 million revolving credit facility, which we secured in August, provides us with financial covenant relief until the third quarter of 2022. During this covenant waiver period, we are required to maintain minimum liquidity of $125 million with a stepdown to $100 million at December 31, 2020.

We ended the third quarter with cash of $56.5 million and available capacity on our revolving credit facility of $209.8 million. Last quarter, we announced that Crestview Partners made an initial investment of $135 million in newly issued perpetual convertible preferred stock with a delayed draw commitment of up to an additional $45 million.

As of September 30, 2020, our total available liquidity was approximately $311 million, including cash, revolver capacity and the delayed draw commitment from Crestview Partners. The actions that we have taken to aggressively reduce costs, secure additional capital and amend our credit facility have preserved cash, strengthened our liquidity position and provided financial flexibility needed to ensure that we can endure the pandemic.

Although we are not reissuing financial guidance at this time, I'd like to briefly comment on our liquidity outlook. The fourth quarter will be seasonally slow for Pursuit, and assuming GES remains at a minimal level of revenue, we expect our operating cash burn will approximate $45 million to $50 million. We expect to spend about $10 million on capital projects during the fourth quarter, primarily on the continued development of Pursuit's FlyOver Las Vegas attraction. With our total available liquidity at the end of the third quarter of $311 million and the fourth quarter estimated outflows, we continue to track toward a pro forma liquidity position at year end of $250 million or more. We believe that this position will protect our business as we navigate through this unprecedented time.

Going forward, we will continue to minimize our operating costs while revenues remain challenged and be judicious regarding our level of capital expenditures. Our primary focus for capital is first to withstand the pandemic and secondarily to complete the development of the already started Pursuit growth projects, FlyOver Las Vegas and Sky Lagoon. During 2021, we expect to spend approximately $20 million on FlyOver Las Vegas and minimal start-up capital on Sky Lagoon to complete these projects on time for their planned 2021 opening dates. And we continue to evaluate other growth opportunities that fit with Pursuit's Refresh, Build, Buy strategy that we can act on when the time is right from a liquidity perspective.

Thanks, Ellen. Clearly, the current environment is challenging for our industries and our business. Our teams are responding admirably to the temporary pressures caused by the pandemic to navigate successfully through this period and find new opportunities in the turbulence.

Prior to COVID-19, our company was on an exciting path, creating strong shareholder value and consistently delivering profitable growth. We have a proven track record of generating significant free cash flow and reinvesting it for high returns. We believe we are well positioned to endure the strain of the pandemic, and long term to once again be an opportunistic acquirer of other businesses in our space that have been disrupted by the pandemic. Our businesses have been tested by downturns in the past and have persevered.

We believe that collecting memories is far more important than collecting things and that virtual events cannot replace the rich connections created by in-person interactions. Pursuit's iconic assets and world-class hospitality service create inspiring and unforgettable experiences that cannot be replicated. GES's live face-to-face events provide a powerful and cost effective means to drive business growth. We remain committed to delivering extraordinary experiences to our guests and clients and to creating long-term value for our shareholders.

Thank you again to our hardworking and dedicated employees who make all of this possible. Thank you to our shareholders for your continued support in Viad. And with that, we'll open up the call for questions.

(Operator Instructions) Our first question comes from the line of Tyler Batory of Janney Capital Markets.

Just a couple for me. I'll start with the GES side of things. And Steve, I appreciate the detail and the commentary in your remarks there in terms of giving us a lay of the land. But when you're looking out fourth quarter and into the first half of next year, is there really much activity in terms of exhibitions or conferences? And when you look at some of the bigger events, it seems like the hurdle is really restrictions, at least based on some of the survey data that you cited. So is that really kind of the biggest issue, we just got to move past on this and have some of the restrictions lifted in terms of gatherings? Or do you think there's anything else that we should be keeping an eye on as well?

Thanks for the question, Tyler. I hope you're doing well. In terms of, as we've talked about before, there's been in the fourth quarter -- third and fourth quarter we've seen larger events either canceled or postponed and move into 2021. I would say we're seeing that trend continue into the first quarter of 2021. What I've been surprised by is the underlying demand for some of those events. So as I've talked specifically to some of our clients and understand what they've sold in terms of the floor space to exhibitors or exhibiting companies, I've been surprised at the strength of the demand. The real reason for canceling or postponing is uncertainty around whether or not the local restrictions will allow them to have the event or not. So I think there is -- it's not universal across all events, but I have seen some strong underlying demand that I think once restrictions are lifted, those events will come back and be in a good position.

During this period of time, during the third and fourth quarter and even into the first quarter, we are seeing smaller events take place. We've done a few events recently in Dallas and Atlanta, and we have one scheduled here in a little bit coming up in Las Vegas. They're smaller in scale, and so they don't have the economic impact that some of the large events do. But I'm encouraged by what I see in terms of the small events and our ability and the organizer's ability to produce those in a safe way that will really demonstrate for the market how we might be able to do this at a larger scale. So long answer, but I'm encouraged by what I see. I really think that once restrictions are eased up or we take a chance and do things at a larger scale with safety precautions in place, I think the demand will come back.

Okay. That's very helpful. And switching gears to Pursuit, obviously quite strong the results there. Out of curiosity, was the incident at the Ice, did that have a negative impact on results in the quarter? It's probably tough to quantify it if it did. Could there be any lingering impact into next year from that?

Tyler, it's David. Thank you for the comment, and it's an interesting one. We have felt, obviously, because we closed the attraction following the accident to allow the investigation to proceed. So there is an impact, and we can quantify that for you. I don't have that sitting right in front of me, but we'll quantify that as we go forward. What we're doing right now is supporting the ongoing investigation, which obviously takes time and it's a multiagency investigation. We're supporting the victims of the accident with everything that we can in terms of whether that be financial support in an interim.

We're working hard with our insurers and a variety of others to ensure that support is there. And then we're also supporting our team. So we do expect that the results of the investigation, as they are completed we'll be sharing those. And that we'll have those completed before the end of the winter period and then be in a position that we'll be focused on our operation for next spring. And you know, 18 million guests over 40 years and really a very strong record of safety. And dealing with first making sure we're clear on the cause, which will be a result of the investigation, and then moving forward to make whatever improvements come out of that.

Okay. I appreciate that. And I'm also interested; I know you can't give guidance. When you look at the fourth quarter, it's obviously seasonally slow. But it seemed like August into September there was momentum building across the portfolio in Pursuit. Are you able to say if that's continued into October? Did it get a little bit stronger? Again, I know a lot of the hotels and attractions, because of seasonality, things close down. But I'm just curious with some of that momentum across other areas in the portfolio, FlyOver Iceland, et cetera, have things continued to either strengthen as we went into October?

Yes. We're quite excited with showing Halloween at FlyOver Canada. And as I mentioned in the call, content is really important. So having something to show and then we'll continue through November, showing both FlyOver Canada and FlyOver Iceland in a dual feature. Our hotels in Banff Jasper will remain open. The Banff Gondola continues in operation. Transportation, parts of the transportation business are obviously operating through the fourth quarter, and then retail and food and beverage. We're encouraged in a base way by the yields we're seeing in retail and food. And then this is traditionally a time where our visitors in Western Canada are more regional and local as it's a slower time for destination visitors. So I do think folks are sick of being at home and working on ways to get out and experience things and do it in safe environments.

The other thing I'll mention is that the airport in Calgary is doing a test program, which begins in early November, which will allow travelers. And unfortunately the U.S.-Canadian border remains closed, but for international visitation, folks will be able to take upon arrival a coronavirus test. And then there's a subsequent testing protocol in the days following. I believe it's within 6 days where they're tested again. And if their tests are negative, then they're able to not quarantine for the mandatory 14 days. So we're beginning to see these test programs as well, where airports and travel authorities and the march to the return of the leisure travel market I think has begun. And you see it whether that's what's going on in Hawaii or some of these programs that are opening up. So we remain cautiously optimistic. We're attentive to the various changes and working on delivering the best guest experiences that we can.

Okay. And then moving on to maybe attraction in Las Vegas and the new attraction in Iceland. I think it's a positive, and it's interesting you guys are moving forward in terms of opening them next year. But nobody has a crystal ball, and I understand it's difficult to know what the environment might look like next year. But would you expect to be operating both of those profitably once they open up? I'm just trying to think strategically your thought process in terms of pushing forward, opening those, knowing that there's still a lot of uncertainty in terms of what travel may look like next year.

While there is uncertainty, I think what's fortuitous on our part is that we're in the middle of construction in the toughest time. And so one of the benefits of that is that we continue to be able to put our energy and efforts into the construction. And it's not like we had to close an existing attraction to be building these or doing a refresh project. So these are new attractions that are high margin. We expect that if people are able to travel and visitation is there that we'll be able to operate them profitably. And we're targeting the late spring for Sky Lagoon and obviously the fall for FlyOver Las Vegas.

Okay. A couple of other questions, if I could. Just in the third quarter, can you say what the cash burn was in the GES business? And then I know you gave some numbers in terms of the overall cash burn for the company in the fourth quarter. What is implied in that potential with GES? And if we move into next year and there's still minimal levels of revenue, would you expect this cash burn level to maintain relatively consistent?

So, Tyler, the cash burn in the fourth quarter for GES is about half of the guidance that we gave, so about half of the $45 million to $50 million, consistent in the third quarter and the fourth quarter. Will it look the same in the first quarter? If we have about minimal revenue at GES, it'll look about the same in the first quarter. It all depends on the amount of revenue GES.

Okay. Okay. And then another housekeeping question. Can you clarify the impact from the convertible preferreds at the current stock price? I'm just trying to understand how you guys are accounting for that in your financials and also in the diluted share count, because technically you were above that convertible price.

So the convertible is going to be shown kind of in the -- between the liabilities and equity on the balance sheet at the $135 million minus the cost to do the deal. And then the dividends once declared will be shown through equity just like normal dividends will be. And a reminder, we have to do paid-in capital through the covenant waiver period, which is September 22.

And our next question comes from the line of Barry Haimes of Sage Asset Management.

I had a few. First one, could you just remind us in normal times what GES's market share is typically, ballpark?

Sure, Barry. It really varies by geography. It's roughly 30% in the U.S. for exhibition and about 45% in Canada and then 55% in the U.K. market.

Okay. And then just a follow-up since you mentioned that a number of competitors may exit up to 40%. But whatever number I might assume for that, would you expect to get your pro rata share of that exited business? Or is there any reason that you would do better than that or worse than that, just if we're thinking through that issue?

Yes. And I think on the exhibition side of the business, I don't see a tremendous shift in market share. In the U.S. there's 2 large, stable players that have the majority of the share: us and a privately held company called Freeman. But where I do see the potential for market share gain is on the corporate side of our business where it is a highly fragmented market. And there are a number of players that have already gone into bankruptcy, and we suspect there are several that are teetering on the edge. That's where I believe there's more of an opportunity for market share gain.

Okay. And then just final on this. Just roughly the mix within your business between the exhibition side and the corporate side, again, in normal times?

Yes, at normal times you're probably at $65.35.

Great. Okay. Then I had one question on Pursuit. If we think about 2021 just from a directional point of view, and if you think of 2019 as sort of a good normal year and 2020 is obviously a very disrupted year. If you sort of start thinking that the 2021 is somewhere in the middle of those 2, is there a way to just directionally think about is it sort of in the middle, is it a little closer to 2019, or is it a little closer to 2020? So, just kind of looking for some directional color there, if that's possible, in Pursuit.

It's tough to call it, to be honest, and we're not really going to provide a view to the future right now. But as we get a better sense, we'll be able to share that. I can tell you that we're ahead in pacing, which is positive. But there's a lot of movement from existing, as I mentioned in my remarks, there's a lot of movement from existing bookings in 2020 that move forward to 2021. And so it's early days. And as we know more, I think we'll be in a better position to share that.

Okay. Is the -- the pacing is ahead 2021 versus 2020. Can you relate it to 2019 at all how you're pacing?

Early, early stages, and depending on the pockets, there are some pockets that are pacing positive to 2019 as well. And remember, at this time last year for the 2020 season, there was no view to coronavirus. So I would say the pacing is positive to both years. But again, as I mentioned, it's very early days. So I'd be cautious with extrapolating that further until we get a better view.

Sure. No, that makes total sense. And last question I had was just on the -- in Pursuit on the new projects, could you give us a sort of normal ROIC that you would look to or some sort of range that you look to before going forward with those investments? And if I were to think in terms of we're back in a normal environment and we're thinking of a 5-year average, how much money would you expect to invest in attractions like that per year, or again, on an average normal?

Yes. I think from a liquidity standpoint, one of the important things is that we're not going to speculate as the world is still I think a little bit upside down, working its way to get right side up. And traditionally, we've communicated our investment hurdle rates internally that definitely stronger than our 15% IRR and a strong return on invested capital. But I don't want to speculate into the future as I think there's still so much in flux. But I can say that we've got so many tremendous opportunities just internally in terms of our Refresh, Build, Buy projects, and also, we've been very attentive to what we're looking at industry-wide. And so you want to be opportunistic, and at the same time, you're focused on being super prudent in terms of your own liquidity needs and so on. So I think that will become more clear also as we go forward. And I'm sorry; I don't mean that to sound like a dodgy answer, but it's hard to have a crystal ball with these strange times.

(Operator Instructions) And our next question comes from the line of Kartik Mehta of Northcoast Research.

This is [Alex]. I'm filling in for Kartik. What are your expectations for the trade show environment next year? And then more specifically, what percentage of exhibitors and attendance would you expect next year for the industry?

Yes. I think that obviously a lot of the events in 2020, third and fourth quarter have postponed and canceled, a lot of them postponing into 2021. We see that same level activity in the first quarter of 2021 where there are some postponements and cancelations. But I do think in the back half of the year, as people have postponed events, the number of events I think would increase in the back half of the year and be somewhat concentrated in Q3 and Q4 versus a pre-COVID era. In terms of specific exhibitor counts or percentage, we're going to see how these events come back.

As I mentioned during my comments and during a prior question, we believe that there is strong underlying demand for events, as I've spoken to a number of our clients and I've seen what they've been able to sell in terms of their floor space for events both in 2020 and 2021. I'm encouraged about the level of response that they have. The only thing the other thing I would add is that we're optimistic that some of the restrictions will be lifted and/or we find ways to operate larger events in a safe manner. Just earlier this week there was an announcement from Governor Sisolak of Nevada, and he had indicated that he would try to come up with a plan in order to hold larger scale events in the first quarter of 2021. So there's some encouraging news, and hopefully that's able to come to fruition. I think that would be very good news for the industry as a whole.

Okay. Great. And then just for a follow-up, is there any additional cost measures that you could take, say, if fundamentals don't improve until late next year?

Yes. Some of the cost measures, the cost take-outs that we talked about during today's call really just reflect what we've done up into the quarter. We mentioned a number of facilities that we have exited or are near exiting. There are other opportunities that lie ahead in the future quarters, and we'll take those as appropriate going forward.

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

Just going back to the occupancy rate within Pursuit, I guess, it seemed pretty high. Is that kind of based on the kind of full hotel? Or is that based on kind of a social distanced hotel layout or with rooms closed or something like that?

Hotel, Steve.

Okay. Okay. All right. That's better than what I expected, so that's…

Yes. And what's exciting, too, for us is that talking to colleagues across the industry, obviously the city hotels in the world being more challenged, folks were able to in other markets get occupancy but much tougher to get rate. Looking at Jasper and saying, all right, running in the 68% occupancy at CAD 229 of ADR is very, very positive. So we're quite pleased with how lodging performed.

Yes. Okay. That's helpful. And then just maybe going to the borders and things like that. Can you just remind me with the closure, I think you said a lot or some international markets starting to reopen with Canada. And it sounds like the U.S. isn't one of them based on what you said, or maybe that's just the northern border as opposed to air travel. I know Hawaii just restarted their program I think October 15, and it sounds that Japan might be added to that as well. But are there plans in place to kind of have those kinds of things where within 72 hours that you're tested, you can kind of avoid quarantines? And then what's kind of the main holdback with the U.S. at this point? Is it kind of the level of infection rate or is it something more diplomatic?

Let me cover the U.S.-Canada border closure. So the way that it works is if there's -- obviously, the border remains closed for leisure travel. There's essential travel that's happening if you're a healthcare worker or someone with a justifiable reason for essential travel. Canadians who return to Canada from abroad have a 14-day quarantine. And then there's the pilot program that I mentioned earlier on this call, which is one airport in Canada in Calgary is beginning a testing program for international visitors. The borders that remain open between Canada and the rest of the world, I'd have to go check the Canadian government website to give you really precise information, but other borders are open. The border with the United States remains closed, and it's sort of on a month-to-month basis. So that closure's been extended until November 21. And then sometime I expect in November, we'll get a sense for how that continues.

Looking forward, though, I think that by the end of the first quarter, we expect that borders will be more open and that the testing protocols will have accelerated in a variety of places all around the world. Because every country is working on it, and obviously the impact of air travel and international visitation and so on. And Hawaii is a good example. Iceland's been a very proactive example, other countries and so on. So it's something we're watching very closely and we're keeping a real eye on, and we'll share what we know as we know it.

Okay. No, that's helpful. And then maybe just following up on Tyler's question with the convertible preferred. Is there -- what's the maybe a profit level that you'd have to report relative to the stock price to begin to include the convertible securities into the diluted share count? Is it you have to get to a certain profit level and then the stock price has to be above X? Can you just walk through how that works, maybe on the potential for dilution in the future, assuming there's profits reported?

Yes. The conversion price is $21.25. And obviously, I'm not sure this is what you're asking, but we can force conversion on the third anniversary, and it has to be 200% of that conversion price. But the actual conversion price is $21.25, so anything above that.

Okay. So anything above that, you start to show it in the share count, assuming there's a profit on the diluted shares?

Yes. We have a table in the press release, Steve, on the EPS, but we don't actually show it in the convert. We don't show it in the...

Okay. All right. I'll take a look at it.

Yes. You can see the table in the press release where we show that it's how it affects EPS.

There are no further questions in the queue.

All right. Thank you, everybody, for joining us on the earnings call today, and we look forward to talking to you next quarter.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.