Pursuit Attractions and Hospitality, Inc. (PRSU) Q1 2015 Earnings Report, Transcript and Summary

Welcome to the Viad Corp First Quarter Earnings Conference Call. All parties will be in a listen-only mode. [Operator Instructions]. This call is also being recorded. If you have any objections, you may disconnect. And now I’m turning the meeting over to your host Carrie Long. Ma’am, you may begin.

Good afternoon and thank you for joining us for Viad’s 2015 first quarter earnings conference call. Before we get started, I'd 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 our annual and quarterly reports filed with the SEC. During today's call, we'll be referring to the earnings press release that can be found on Viad website at www.viad.com. During today’s call you'll be hearing from Steve Moster, our President and CEO; and Ellen Ingersoll, our Chief Financial Officer. With that, I'll turn the call over to Steve.

Thanks for joining us on the today’s call. I am pleased to report that our results for the quarter were in line with our prior guidance. Our loss per share before other items was $0.12 versus our guidance for a loss of $0.23 to $0.15. Both business groups performed well during the quarter and aside from updated exchange rate assumptions our expectations for the full year remained unchanged. GES’s first quarter revenue came in better than expected with strong base same-show growth of 7.4% in the U.S. as GES’s operating income was near the high end of guidance. We saw slightly higher than expected overhead cost during the quarter which we expect to recover over the balance of the year. Our recent acquisitions of Blitz, onPeak and N200 met our expectations for the quarter and we're making good progress with the integration and cross-selling. I’d like to discuss in the past these acquisitions bring leading capabilities and event accommodation, even registration and audio-visual services and are accelerating our progress to position GES as the preferred global full service provider for live events. The addition of these complimentary new services set GES apart from our competition and is enabling us to properly grow our business across geographies. We’ve had several recent successes in cross selling our full range of services to existing customers. For example, the emergency nurses association awarded us event accommodation and audio visual services for its annual conference beginning this year. Morgan Stanley awarded us the audio visual services on our next U.S. event following the positive experience using our registration and measurement services. We also extended our new services into the UAE by winning registration services for the -- facility , Gulf Print & Pack and providing audio-visual services to many of these exhibitors that we work with on the IDEX show in Abu Dhabi. Additionally, our AV team recently provided services for Bell Helicopter that included a dramatic attention grabbing unveiling of its newest model at HELI-EXPO. We are also having success and winning new business in under penetrated segments of the live events market, including corporate events and consumer events In the U.S, we recently produce McDonald's Turnaround Summit for U.S. franchise owners. In Canada, our team is preparing for the 2015 Pan Am Games in Toronto. Our Managed [ph] team recently secured event work for both the U.K. and Emirates Skill show in addition to a number of high profile corporate events. And we recently announced a 5-year contract with Twentieth Century Fox and live star entertainment for a new touring exhibition based on the record breaking AVATAR movie. This exhibition will launch in the fall of 2016 just to have the first movie sequel that is scheduled for release. Our core exhibition business also has some great wins in securing major non-annual events for the next few years. We signed IMTS for the next two occurrences in 2016 and 2018 MINExpo for 2016 and CONEXPO-CON/AGG for 2017. Overall, I’m very happy with GES’s progress so far this year and believe we are on track to meet our full year targets. Our Travel & Recreation Group also got off to a good start with first quarter revenue and operating results both at the high end of our guidance. Unseasonably warm weather resulted in a stronger than expected passenger volume as the Banff Gondola, which were up nearly 30% year-over-year and set a new record for the first quarter. The warm weather also resulted and the weak ski season has affected occupancy in RevPAR as the crowds now enlarged [ph]. We also experienced lower room revenue at the Banff International Hotel due to plant renovation work that we undertook during the off season; however, our other year round property in Banff, the Mount Royal Hotel experienced strong growth in RevPAR and occupancy in the quarter. About one third of our room at the Banff International have now been updated and the remaining rooms and public spaces will be renovated during the next off season, starting in the October of 2015 and continuing through May 2016. We are receiving positive guest feedback on the work completed thus far and we expect to realize stronger RevPAR at Banff International once all renovations are finished unto 2016. The Travel & Recreation team is preparing for a busy high season. Our seasonal operations are just beginning to open with more schedule to come online during May or early June. With that strong group of room block request from our major tour operators which is a leading indicator for tourism demand. As compared to 2014, Group room blocks at our properties are currently about 10% stronger in Banff and Jasper and are 30% stronger into [Indiscernible] lake We’re experiencing strong underlying perform from both travel and recreation business and the GES business in 2015. With substancial growth in 16 best amplified by positive show rotation and additionally growth of our core business and newly acquired businesses. And now I’d like to turn the call over to CFO, Ellen Ingersoll for some additional color on the financials. After that, we’ll open up the call for your questions, Ellen?

Thanks Steve. For the 2015 first quarter we reported a loss before other items at $0.12 per share and adjusted segmented operating loss at 719,000 which excludes acquisition integration cost and total revenue of $264.4 million. As Steve mentioned these results were in line with their prior guidance. The operating results for the fall of businesses were at the high end of our guidance range and our loss per share before other items is slightly better than guidance. We characterize this as inline due to the fact that part of the income per share B [ph] was driven by a revision to our definition at income before other items. At the beginning of the 2015 first quarter, we made a decision to exclude acquisition related costs from income before items to enable investors to better evaluate the performance of the underlying business. These costs are over $0.03 during the 2015 first quarter and included integration costs that are about 400,000 pretax that are reported in GES’s segment operating income and transaction related cost of about 460,000 pretax that are reported in our corporate activities expense line. We have also excluded as a non-recurring expense shareholder nominations instalment agreement cost as well as restructuring charges. A reconciliation income from continuing operations, income before other items can be found in table two of our earnings press release. As compared to 2014, our first quarter results were affected by negative share rotation and unfavourable exchange rate variances partially offset by the results of acquisitions completed during the second half of 2014. Although these factors resulted in net declines year-over-year our underlying businesses performed well. On an organic basis which excludes the impact of acquisitions and exchange rate variances GES posted revenue of $249.5 million during the quarter which is down $28.3 million from 2014 due to negative share rotation partially offset by growth in the base business. Organic revenue for the U.S. segment declined $35.8 million due to negative share rotation revenue for each enrolment, partially offset by strong base same share revenue growth of 7.4%. Organic operating income for the U.S. segment declined $14.6 million from 2014 primarily due to a flow through on the negative share rotation revenue. Additionally, we had slightly higher overhead expenses during the quarter including workers comp claims and other insurance expense [Indiscernible] to offset over the balance of the year. GES’s international segment posted an organic revenue increase of $6.4 million driven by positive share rotation revenue of about $2 million, same share growth and new wins. Organic operating income for the international segment declined by about 720,000 primarily reflecting higher staffing levels to support growth and a less profitable mix as revenue during the quarter. The acquisitions of OnPeak, Blizt and N200 added revenue of $14.1 million for the quarter with adjusted segment operating income of $1.4 million. Adjusted segment EBITDA for the acquisition was $4 million, plus an EBITDA margin of 28.1%. Currency translation had an unfavorable effect on to GES’s first quarter revenue and operating income of approximately $6.7 million and $190,000 respectively. The Travel & Recreation group posted organic revenue of $8.3 million for this seasonally slow first quarter, which is up 6.7% from 2014 primarily reflecting higher passenger volumes a at Brewster's gondola. Organic segment operating loss was $5 million which is in line with the 2014 quarter. The West Glacier Properties which were acquired in July 2014 were seasonally closed with no revenue contribution and an operation loss of about 180,000 during the quarter. Currency translation had an unfavorable effect on Travel & Recreation Group first quarter revenue about $880,000 and a favourable effect on operating results of about $380,000. Our first quarter corporate activities expense was up about $770,000 from 2014 primarily due to acquisition transaction related cost and shareholder nomination and settlement agreement costs totaling about 950,000 in the aggregate. Net interest expense increased about 860,000 from the 2014 first quarter due to higher debt levels resulting for recent acquisition. During the quarter we generated cash from operations of $18 million versus $25.2 million in the 2014 quarter with the decline being driven by lower income partially offset by favourable working capital changes. Capital expenditures were $5.3 million down slightly from $5.5 million in the 2014 quarter. We return to total of $5.8 million to shareholders including $3.8 million in share repurchases and $2 million in regular quarterly dividend payments. Net debt payments were $3.3 million bringing our debt at the end of the quarter to $137.8 million with the debt to capital ratio of 29.9%. Cash and cash equivalents were $57.9 million up slightly from $57 million at year end 2014. Now moving on to guidance. Our full year outlook is relatively unchanged beside from updated exchange rate assumptions as a result of the continued weakening of the Canadian dollar relative to the U.S. dollar; we now expect Travel & Recreation Group revenue to be comparable at 2014 whereas we had previously anticipated a low single-digit rate increase. Overall we expect full year consolidated revenue to be comparable with 2014, hence growth in the underlying business and our recent acquisitions offset significant headwinds from negative show rotation of $70 million and unfavorable currency translation of about $45 million. We expect total adjusted segment EBITDA to be in the range of $89 million to $93 million versus $91.3 million in 2014. Depreciation and amortization as expected to be in the range of $37 million to $39 million, which is up from $30.8 million in 2014 due to the recent acquisitions, acquisition integration expenses which are excluded from adjusted segment EBITDA are expected to approximate $1.5 million. Our full year cash flow from operations is expected to be about $55 million and capital expenditures are expected to be about $30 million. For the second quarter we expect income before other items to be in the range of $0.78 million to $0.88 per share, up from $0.45 per share in the 2014 second quarter. This improvement reflect significant growth of GES driven by the acquisitions of onPeak, Blitz and N200, positive show rotation, same share growth and new business wins as well continued organic growth in the Travel & Recreation group partially offset by unfavorable currency translation. Exchange rate variances are expected negatively impact revenue by about $16 million, adjusted segment operating income by about $2.5 million and income per share by about $0.09 versus the 2014 second quarter. The GES acquisitions are expected to add approximately $20 million to $22 million revenue and $5.5 million to $6 million in adjusted segment operating income. Our July 2014 acquisition of the West Glacier properties does not expected to have a meaningful impact on second quarter result. But the seasonal openings – with seasonal opening in late May we are expecting approximately $1 million in revenue with essentially breakeven operating results from West Glacier during the second quarter. And show rotation is expected to positively impact second revenue by about $15 million. Additional guidance for our business units can be found in the earnings press release. And with that, we’ll open the call up for questions.

Thank you. [Operator Instructions] We have a question here coming from Mr. John Healy [ph]. Your line is now open.

Thank you. Steve, I want to ask you a question about what you’re seeing from exhibitor’s participation from European type companies. Curious to know if you’re seeing some of the movements in the currency, if you’re seeing any sort of changes and behaviour with international companies coming over to the U.S. being willing to present and then be active and show -- any color that you there?

Yes. Thanks John. Thanks for the question. We aren’t seeing a lot of changes in the mix of services that international exhibitors are spending on the events that we’ve had. We’re seeing pretty consistent participation from international exhibitors and their spent has looked similar to prior year. So, currently I don’t see an impact of the currency taking place right now.

Got you. And I kind of jump on a little late, but I feel like we’re about nine months or so into the – nine, 12 months into the -- what I say, the increase interest in the audio-visual business. I just curious to know if you could provide us maybe with some color on maybe the amount of business you’re doing there and maybe what the growth rate looks like and maybe what the run rate looks like for that business kind of going forward?

Yes. We got into audio-visual services during acquisition of Blitz Communications in the U.K. then we started audio-visual services in the U.S. organically. And we’ve seen very good uptick in those opportunities, so earlier on in the call I mentioned some of the cross-selling opportunities where we’re really going to our current existing clients and really trying to sell the full suite of services that we’re offering to those and we’ve had very good success on the audio-visual front and on registration and accommodation. So, I’m bullish on audio-visuals specifically and I think that we have a lot of opportunity ahead of us.

And just final question on the M&A front, any thoughts in terms of how active you feel you might be as we move throughout 2015 and how the pipelines of opportunities are for you?

Yes. We’re very encouraged by the progress we’ve made against our strategic initiative and the acquisitions we’ve done in 2014 certainly we’re in meaningful part of that. We continue to have very active pipeline, robust pipeline for both the Travel & Recreation business and the GES business. What we have do is balance those new opportunities with the integration of the acquisitions that we’ve already done. So, we continue to look for good opportunities and I think we have some in horizon.

Okay. Great. Thank you.

Thanks John.

Thank you. [Operator Instructions]. Thank you. At this time we don’t have any questions on the queue.

All right. Perfect. Thank you. Well, thank you, thanks everybody for your questions and your interest in Viad. I’m very excited about our strategic direction and the progress that we’ve made so far. We remained focus meeting our targets for 2015 and delivering greater shareholder value in the years to come. And we look forward to speaking with you again next quarter. Thank you very much.

Thank you. And this concludes today’s conference. Thank you for joining and you may now disconnect.