Pursuit Attractions and Hospitality, Inc. (PRSU) Q4 2015 Earnings Report, Transcript and Summary

Welcome to the Viad Corp Fourth Quarter Earnings Conference Call. Your lines have been placed on a listen-only until the question-and-answer session. [Operator Instructions]. This conference is being recorded. If you have any objections please disconnect at this time. I will now turn the call over to Ms. Carrie Long. Ma’am, you may begin.

Thank you, and good afternoon to those of you on the call. Thanks for joining us. During the call, you will be hearing from Steve Moster, Viad’s President and CEO; and Ellen Ingersoll, our Chief Financial Officer. During the call certain statements will be made, that not historical facts, and they 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 Viad’s annual and quarterly reports filed with the SEC. Additionally, we’ll be referring to certain non-GAAP measures during the call. A discussion and reconciliation of those measures can be found in table two 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.

Thanks and thank you for everybody for joining us on today’s call. We delivered strong results for the 2015 fourth quarter and full year. And we met the financial targets that we set out at the beginning of 2015. Despite various headwinds, including a revenue decline of about $110 million from a combination of share rotation and exchange rate variances, I’m very proud to say that we’re able to hold adjusted segment EBITDA relatively flat to 2014, at both business groups. These results reflect the strength of our businesses, good industry fundamentals and execution against our strategic growth plans. Our Marketing & Events Group benefitted from strong same-show growth, new business wins and solid performance from our 2014 acquisitions. For the year, GES delivered EBITDA of $54.8 million, which essentially was flat in 2014. Despite a revenue headwind of about $97 million from share rotation and exchange rates. GES’ U.S. base same-show growth was 8% for the full year. Similarly, CEIR, the Center for Exhibition Industry Research has reported positive growth in the industry for 2015 and has forecasted continued growth in 2016. Our Travel & Recreation Group also delivered essentially flat, full-year EBITDA of $35.8 million on a revenue decline of about $8.3 million versus 2014. Our focus on margin improvement more than offset revenue headwinds of about $14 million from exchange rates and about $3.5 million due to the combination of forest fire activity at Glacier Park during our peak season and the closure of the Banff Gondola renovations during the fourth quarter. We saw strong growth from Brewster, where revenue was up 6.4% in local currency, led by its high margin attraction. Alaska Denali travel also posted strong revenue growth of 8%, primarily due to increased RevPAR. The industry trends overall are positive, as visitation to National Parks continues to grow. The resiliency of our Travel & Recreation Group is a testament to the great experiences that we deliver for our guests and the iconic locations in which we operate. In 2015, we made significant progress against our growth strategy. Our strategy for the Travel & Recreation Group is to scale the business to more than twice its current size through our Refresh-Build-Buy initiatives. During 2015, we launched a major refresh project to renovate and upgrade our leading attraction the Banff Gondola. The project is progressing well, and we are excited to unveil a new and improved experience later this year. We also announced plans last quarter to streamline our package tours and transportation services at Brewster. While this one have a negative impact on 2016 revenue, it will free-up capital and other resources to drive growth in higher margin areas. Several weeks ago, we announced the acquisition of Maligne Tours, which provides interpretive boat tours and related services at the largest lake in Jasper National Park. Maligne Tours is a world-class asset and a natural fit with our existing Jasper and Banff-based businesses, offering cross-selling opportunities and operational synergies in a geography and service line that we know very well. At GES, our strategy is to leverage our existing leading market share position, within our core services to drive growth in our adjacent areas that offer higher margin and stronger growth prospects. In support of the strategy, we completed four important acquisitions during late 2014 that bring leading capabilities in event housing, registration and data and audio-visual services. These acquisitions were successfully integrated during 2015 and are helping to position GES as the preferred global full service provider for the live events market. Through the strength of our combined offering, we’ve had numerous wins for 2016 and beyond, both from cross-selling our full range of services and from securing new business within corporate and consumer events. I’d like to give you a few examples. We were able to secure a new contract for the registration and combination services for an existing GES client Tarsus for Labelexpo Americas in 2016. We also leveraged our position as the audio-visual service provider on Solar Power International to win the exhibition contracting services on that event for 2016 through 2018. We’re able to extend our contract to produce one of the premier corporate events, Tableau’s Annual U.S. Customer Conference through 2017. And we secure the rights to produce and tour a new consumer event based on the blockbuster movie Avatar that will launch later this year. While we’ve made significant progress against our growth strategy, we still see opportunities to add capabilities in audio-visual and event technologies. And we remain active on the M&A front, pursuing deals that are right strategic fit for us, while also meeting our return requirements. Looking ahead, we expect significant jump in revenue and profit. The midpoint of our 2016 guidance range for a consolidated segment operating income is just over 40% higher than 2015. This growth reflects the benefit of our cross-selling and new business wins at GES, the impact of a stronger share rotation year and the addition of the Maligne Lake Tours, as well as the expectation that will continue to see favorable trend in same-show growth and park visitation. As we’ve discussed in the past, share rotation will be a significant driver of growth in 2016. So the tune of about $50 million to $55 million in revenue. It’s important to note that this has been just a single one year pop for us. We’re coming off a trough year for share rotation in 2015 and have a stronger show schedule for the next three years. In summary, we have very good reasons to be optimistic about 2016 and beyond. Now I want to thank the entire Viad team for their contributions to our success, the execution of our growth strategy is resulting in increased value for our shareholders, additional benefits for our customers and exciting opportunities for our employees. And now, I’ll turn it over to Ellen to provide more color on our financials. Ellen?

Thanks, Steve. For the fourth quarter, our income before other items came in just above our prior guidance range at $0.01 per share and revenue of $251.7 million and adjusted segment operating income of $4.8 million. As compared to the 2014 fourth quarter, our income before other items increased by $0.19 per share and adjusted segment operating income increased $4.7 million and the revenue increase of $28.5 million or 12.8%. The year-over-year growth was driven by GES which experienced a revenue increase of $31.1 million or 14.6% versus the 2014 fourth quarter. Share rotation resulted in a net increase in revenue of about $9 million, unfavorable currency translation impacted GES’ revenue by $5.8 million and the acquisitions of onPeak, and N200 contributed incremental revenue of $3.2 million versus the 2014 fourth quarter. Excluding those three factors GES’ fourth quarter revenue was up about $25 million or about 12%. Reflecting U.S. base same-show revenue growth of 13.4%, new business wins and increased sales to corporate clients. GES’ fourth quarter adjusted segment operating income increased by $4.8 million, primarily reflecting higher revenue, partially offset by higher performance-based incentives. The Travel & Recreation Group had a fourth quarter revenue decline of $2.6 million, of which approximately $1.7 million was due to the closure of the Banff Gondola for renovation work and $1.1 million was due to unfavorable exchange rate variances. The seasonal fourth quarter operating loss increased by $0.1 million on lower revenue. For the full year, our income before other items was $1.46 per share, and revenue of $1.1 billion, adjusted segment EBITDA of $90.6 million and adjusted segment operating income of $55.5 million. As compared to 2014, revenue increased 2.3%, and adjusted segment EBITDA decreased by $0.7 million or 0.8%. This slight decline in EBITDA was primarily driven by higher performance-based incentives, reflecting stronger achievement against our targets in 2015 as compared to 2014. Adjusted segment operating income declined by $5.2 million and income before other items declined by $0.29, primarily due to additional non-cash depreciation and amortization expense of $7.3 million, associated with acquisitions completed during the second half of 2014. GES’ full year revenue was $976.9 million, which was up $32.4 million versus 2014. Share rotation resulted in a net decrease in revenue of about $71 million, unfavorable currency translation impacted GES’ revenue by $26 million and the acquisitions of onPeak, Blitz and N200 contributed incremental revenue of $48.3 million versus 2014. Excluding those three factors, GES’ revenue was up about $81.1 million or 8.7%, reflecting U.S. base same-show revenue growth of 8%, new business wins and increased sales to corporate clients. GES’ full year adjusted segment EBITDA was $54.8 million, which was down $0.1 million or 0.2% from 2014 primarily reflecting increased compensation expense including higher performance-based incentives. Adjusted segment operating income decreased by $4.8 million to $27.7 million, reflecting $10.1 million of additional depreciation and amortization expense from the acquisitions completed in the last half of 2014. The Travel & Recreation Group posted full year revenue of $112.2 million, which was down $8.3 million versus 2014. Unfavorable currency translation impacted T&R revenue by $13.7 million and the acquisition of the West Glacier Properties contributed incremental revenue of $0.8 million versus 2014. Excluding those two factors, revenue was up $4.5 million or 3.9%. As Steve discussed earlier, Brewster and Alaska Denali Travel both experienced strong organic growth, while Glacier Park was negatively impacted by forest fire activity during its peak season. As a reminder, we previously quantified the revenue impact of the fires at approximately $1.9 million during the third quarter. Travel & Recreation, full-year adjusted segment EBITDA was $35.8 million and segment operating income was $27.8 million, down $0.6 million and $0.3 million respectively versus 2014. Excluding unfavorable exchange rate variances, adjusted segment EBITDA increased $4.9 million and segment operating income increased $4.3 million, primarily reflecting strong flow-through on attractions revenue growth. Now let’s cover some cash flow and balance sheet items before discussing 2016 guidance. We have consolidated cash flow from operations with $60.7 million for the 2015 full year up from $58.1 million in 2014 primarily due to favorable working capital. And capital expenditures totaled $29.8 million. At December 31, our cash and cash equivalent totaled $56.5 million and debt was $129 million with our debt-to-capital ratio of 27.8%. Now moving on to guidance. For the first quarter, we’re expecting a loss per share of $0.33 to $0.23, that’s compared to a loss of $0.12 in the 2015 quarter. We expect lower first quarter results from both business groups, which will be more than offset over the balance of the year. For GES, we expect first quarter revenue to decrease by approximately $7 million to $17 million from the 2015 quarter, with an adjusted segment operating income decrease of approximately $1.5 million to $4 million. Negative share rotation and unfavorable exchange rate variances are expected to impact GES’ revenue by about $10 million and $5 million respectively versus the 2015 quarter. Travel & Recreation Group revenues expected to decline by $1.5 million to $3.5 million with a drop in operating results of $1.2 million to $2.2 million. The Gondola closure and unfavorable exchange rate variances are expected to impact T&R’s revenue by about $1.8 million and $500,000 respectively. For the 2016 full year, we expect consolidated revenue to increase at a mid-to-high single-digit range from 2015 with an increase in adjusted segment EBITDA of approximately $20 million to $25 million. Adjusted segment operating income is expected to be in the range of $75.5 million to $80.5 million. And as Steve mentioned earlier, the midpoint, as its range reflects growth of just over 40% relative to 2015. This guidance anticipates that exchange rates will represent a more meaningful headwind than previously anticipated when we held our third quarter earnings call. Consolidated revenue is expected to be negatively impacted by about $25 million, including $17 million for GES and $8 million for the Travel & Recreation Group. The impact in consolidated segment operating income is expected to be about $3 million, with an impact on income before other items of about $0.10 per share. These impacts assume exchange rates of $0.70 for the Canadian dollar and $1.45 for the British Pound. A $0.01 change in the Canadian Dollar would affect our full year revenue by about $1.5 million to $2 million and once its change in the British Pound would affect our full year revenue by about $1 million to $1.5 million. For GES, we expect full year revenue to grow at a high single-digit rate from 2015 with growth and adjusted segment operating income of about $23 million to $26 million. GES’ 2016 full year adjusted segment operating margin is expected to approximate 5%, up from 2.8% in 2015. This strong year-over-year growth will be driven primarily by positive share rotation of about $50 million to $55 million, new business wins and continued same-show growth, partially offset by unfavorable exchange rate variances. Out outlook for share rotation revenue by quarter can be found in earnings press release. For the Travel & Recreation Group, we expect full year revenue to decline by a low single-digit rate from 2015 and this is due to a few factors. Number one, revenue from Brewster’s package tours and transportation lines of business are expected to decline by $7 million to $9 million as we streamline those operations to focus on higher return opportunity. Number two, exchange rates are expected to be unfavorable as I previously discussed and number three, we expect a modest full year revenue decline of about $1 million at the Banff Gondola, due to renovation closures early in the year, partially offset by stronger demand for the new experience during the peak third quarter. These factors will be partially offset by the acquisition of Maligne Lake Tours, which is expected to contribute revenue of about $5 million during 2016. Adjusted segment operating income is expected to decrease by about $1.3 million to $3.3 million from 2015, primarily due to unfavorable exchange rates and the gondola renovations. Adjusted segment EBITDA margins are expected to be in line with or better than the 31.9% margin realized in 2015. Our full year cash flow from operations is expected to be in the range of $80 million to $90 million and capital expenditures are expected to be about $45 million to $49 million. Additional, 2016 guidance can be found in the earnings press release and back to you, Steve.

Thanks, Ellen. In closing, I’m very excited about our strategic direction and the progress we’re making to deliver strong shareholder value. We’ve got a big year ahead of us in terms of growth and strategic initiatives. And we continue to pursue attractive acquisitions for both GES and the Travel & Recreation Group. Again, I want to thank the entire Viad team for driving strong results and for their commitment to our strategy. And with that Sam, I’d like to open up the call for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question is from John Healy with Northcoast Research. Your line is now open.

Congrats, on another strong year, guys. I wanted to ask a question just from an industry outlook standpoint. Steve, I know you mentioned kind of the industry outlook this year, I was hoping you could expand on that, I haven’t seen those numbers, may be you could talk to – kind of what their outlook is and maybe how that relates to your same-store – same-show revenue outlook. Because when I kind of look at the benefit of share rotation, it seems like the outlook for same-shows is a little bit more kind of that low to mid single-digit growth rather than the kind of the upper single-digit or is a double-digit that you’ve been seen in the last few quarter?

Right. So CEIR, which is the Center for Exhibition Industry Research. Each year, they look, forecast, which looks at the number, the growth and number of attendees and number of exhibitors, the square footage and then the overall revenue for the industry in total. What they’re forecasting going forward is low to – lower single-digit growth in those categories. What we experienced in 2015, as we mentioned earlier on the call was an 8% same-show growth that includes, John, not only the growth and say the square footage, but also pricing increases and us being able to sell additional services into our accounts. So as I look forward, I think CEIR has a consistent view of 2015 and 2016 going forward. They have been in that low single-digit growth. And so what we’ve seen so far is a continuation of that mid single-digit growth for our events.

Okay. Fair enough. And I want to ask just a little bit about the entrance into the audio-visual market. I was hoping you can give us a little better a report card grade there in terms of how you think the team is doing and maybe from a penetration standpoint, how far you think you’ve gotten in terms of creating awareness, how much the portfolio shows that you guys hoping on every year?

Yes, I’ll separate the question into two parts, John. We did, the first part would be what we’re doing in EMEA which is where we did an acquisition at the end of 2014, that acquisition of Blitz Communication allowed us to get scale very quickly within the UK and European market. A lot of their revenue is tied two more corporate events than exhibitions. And so we’ve done a good job of cross-selling into the exhibition space. I still believe there is a lot of room for us to continue to cross-sell in the UK and European market for that side of our business. In the U.S., we have really launched audio-visual services organically. And while we’ve been successful and we’ve had high growth year-over-year. It’s where a low penetration numbers for our total – for our cross-selling and on our events. And so I see a long runway ahead of us for that side of the business.

Got you. And then just kind of a final question from a profit contribution standpoint. I know the third quarter looks to be the big share rotation quarter for you. Is there a way that you could maybe kind of help us kind of frame the way profits, maybe, should be contributed during that quarter or maybe kind of size that impact on the business just as we’re kind of laying out the quarters for you guys, I know you provided the annual guidance. But any sort of color that you could provide us in terms of how that all comes together for the year?

I mean, I’ll talk a little bit and I’ll let Ellen jump in as well. Obviously, that we’re expecting a $50 million to $55 million rotation in the full year. As we talked about the first quarter has some negative rotation in that quarter, roughly $10 million. Those are events that either aren’t happening and the non-annual events or there is a shift in the calendar from one quarter to another. The bulk of our positive rotation comes in the third quarter, couple, there is a number of events that make it up the largest ones obviously are the international manufacturing technology show as well as MINExpo. I don’t know, Ellen if you want to comment on…

Yes. I’ll just make comment that’s where the two large share rotations shows come through and we do typically see about 20% throughput on those.

Okay. That’s helpful. Thank you.

Thanks, John.

Thank you, our next question is from Ian Corydon with B. Riley. Your line is now open.

Thank you. Could you just talk about on the Marketing & Event side what the – what the pricing environment likely says?

Yes, thanks Ian. The pricing environment is stable within the exhibition side of our business. We have high client retention rates for our existing clients. We have been able to win some new businesses and new services from our existing clients. I would classify that the overall pricing environment has very stable.

Okay, good. And then on marine how quick can you start cross-selling with your other properties and the area and I think you said there were some operational synergies maybe you could just talk about what those might be?

Sure. We closed on it in early January it will be part of our offering this summer as soon as we’re able to open it up. It will be included from a bundling and marketing perspective into our programs for 2016. So a lot of that synergy to happen immediately in 2016. There is additional benefit down the road as we’re able to work with tour operators to include that into their package for the tour. That will not have an impact in 2016 because a lot of those decisions have happened 12 months or 18 months earlier. From an operational synergy perspective this is very close to our other two attractions which would be the Ice Adventure and also the Glacier Skywalk. And so we see opportunities from a personnel or management perspective as well as some maintenance and recurring maintenance perspective where we see an opportunity for the synergies on the cost side.

Okay, great and appreciate that. The last question just on the acquisition pipeline could you just characterize what you seeing in both businesses in terms of the availability of acquisitions and whether acquisition targets are have rational expenses for what the businesses might be work?

Yes, I think we have active pipelines on both sides of our business the funnel is actually pretty strong getting them to a point where they set our strategic our financial as well as a culture fit always takes time. And so but we do believe that we have a strong pipeline and opportunities that will be able to transact on. I think that bodes well for us not only in 2016 but beyond.

Great, that’s all I have. Thank you.

Thank you.

Thank you. Our next question is from Peter Rabover with Artko Capital. Your line is now open.

Hey, guys how are you. Thanks for the update and great year. I had a few questions. First a small one, so out of the $45 million to $49 million in CapEx for 2016, how much would you say is maintenance versus growth?

Yes, I’m taking a look at it. I would say maintenance is probably closer to $25 million.

Okay, great.

We had a couple of projects going on, we the Banff Gondola and that’s going to be about what is it for 2016 – on Canadian, okay so it’s maybe about $14 million, $15 million in so that would be just for the Gondola alone they’re at the top. And then we also have the Avatar that seems talk about and that’s going to be another couple $3 million or $4 million. Let’s say about $25 million to $30 million with the maintenance.

Okay, great so you’re guiding for 80 to 90 of operating cash flow kind of the run rate for free cash flow it’s 50 to 60 and I guess my question is I mean what your sense for capital allocation going forward. And I know you guys have talked about in the past about splitting up the companies or the capital structure. So I’m just maybe it’s a bigger picture question I’m not committing it to anything but I’m just curious what you are thinking about the future of the two businesses?

Yes, I think that’s, we have very strong growth strategies in place. And our goal is to be balanced and how we do capital allocation. But the growth strategy is one of those components. We see a lot of opportunities to continue to grow the businesses. We see attractive opportunities and we're going to pursue those.

Does it still make sense for the two businesses to be together?

I think we – we went through a strategic review a couple of years ago where we looked at that we came out with an opinion on why the two were together, where those synergies, whether or not right now the best way for us to grow and provide better shareholder value is to grow the businesses and that will give us options down the road in terms of other things that Viad can do.

Okay. So you would be open longer term to splitting the company's up or selling, I guess is that one of them.

Yes, we’re always looking at ways to create shareholder value and obviously that’s one of a number of different options for us. But it is in the set of option that would – that we consider.

Yes, I mean, look, you guys have a great history of creating shareholder value and I know you guys are as insiders are putting invested though – not questioning that. I'm just more curious about your decision-making process and what you – how you guys are thinking about it? And what would be the catalyst to doing that. But maybe I'll follow-up on that offline, and I guess the last question you just mentioned you have a pretty high retention rate on the Marketing & Events business and I’d be curious to hear what that is?

Yes, so for our higher than the 90% retention on our Marketing & Events or our GES clients. So we have a strong retention and have had it for a long time.

Okay, great. Thanks again and I look forward to continue to being shareholder.

Yes, thank you.

Thank you. Our next question is from Steve O'Hara with Sidoti & Company. Your line is now open.

Hey, good afternoon.

Hi, Steve.

Just in terms of the acquisitions that you did in 2014 and how much they added to the growth, I mean, what maybe through cross-selling or something else but I mean, what are the adjacencies are you not in that maybe you kind of need to be in or want to be in. That you think could add value or is it more about adding to what you have, and kind of bulking up the options within the offerings that you currently have?

That’s two good questions. I think that if you think about the acquisitions we did in 2014 it got us into – there has been a combination in urban housing. It also brought us into audio-visual and then into registration. I believe that all three are have – still have a lot of runway in terms of our ability to cross-sell into our existing accounts or take some of these service offerings into new geographies. And so that is one element of our growth strategy going forward. However, I still believe that there are other opportunities for us to expand and have additional services for scale going forward. And earlier in the call, I highlighted two which were audio-visual services and also event technologies. So those would be two areas that I could see us adding to our portfolio both in terms of scale and new services going forward.

Okay. And then the previous caller kind of noted the free cash flow production, I mean, I think you guys seem to be able to generate good free cash flow, I mean, have you talked about the uses of that cash or would it be the kind of a balanced approach looking for acquisitions and then maybe debt paydown and dividend payments. I'm just wondering maybe what the priority is there? And then, I mean, it wouldn’t seem like your balance sheet is over levered, I'm just – I wouldn’t expect that would be a big use of cash but if you just talk about that as well.

And we’ve always had a pretty balanced capital allocation of proceed with it. Our organic growth, our acquisitions, share repurchases from time to time and dividends, I would definitely say that the primary use of capital in the future would be related to our growth strategy but we still do have our dividends and we have organic opportunities as well like the Banff Gondola refresh.

Okay. And then, maybe just quickly on that project. Can you just talk about the expected returns and maybe your hurdle rates on projects either in various spaces in the two businesses? Thank you.

Yes, for all of our investments across the board, we’re looking for greater than 15% IRR on any acquisitions or as Ellen mentioned organic projects, that we may take on like the Banff Gondola. And it does meet and exceed our investments or our investment criteria. There’s a portion of our investment in the Banff Gondola that is maintenance that’s needed to happen this building or this facility. We’ve own since 1999 and that’s had minimal capital put into it. So part of the capital is going towards, what I would consider maintenance and part of it is really to create, just an amazing experience on top of Sulphur Mountain, where we’re expanding the footprint by roughly 25%. We’re adding in a lot of interpretive elements to the experience, like a theatre, like knowledge in history about the region. So, yes, it’s definitely exceeds kind of our criteria that we have out there. But a portion of the capital is for more maintenance and the other portion is towards growth.

Okay. Thank you very much.

Thank you.

Thank you. [Operator Instructions] And our next question is from Greg Eisen with Singular Research. Your line is now open.

Thanks, good afternoon everyone.

Hi, Greg.

I would like to go back to your hoping comments about show rotation. From the way you worded it sounded like you were implying that the negative rotation effect in 2015 would be, we could look at that as kind of a trough level that, the next time around that we have rotation it may not be as great, is that a – am I interpreting that correctly or would you say, is your show rotation in the negative years going forward will be in the similar size?

Greg, show rotation is really those non-annual events. And there’s different cycles some non-annuals are every other years, some are every third year, and then every fourth year. So, it’s definitely an interesting dynamic in terms of how big or small show rotation is each year. 2015 was the trough where there was non-annual shows very few of them actually took place. So, it was a low point in terms of show rotation. Over the next three years, we have what I would call higher show rotation. We talked about $50 million to $55 million in 2016. It’s slightly lower than that in 2017 and 2018. And then, 2019 again, so when you hit one of those years where there are no major non-annual events happening. We believe that over the next three years you have the opportunity to have solid show rotation and the ability the rest of the business to grow along with that, and some of them needed the change. And then, I think, we mystified I didn’t talk about 2020, which is when all of the annual events happen the non-annual events happen at the same time in 2020. It’s similar to what happened in 2012, and so – I’m sorry, 2008. And so, you’ll see a large increase in 2020 as well.

Okay. So if I could kind of repeat what you said 2017 and 2018 will not be negative years on the show rotation side, but should actually – will suffer from that?

2017, 2018 will be slightly negative compared to 2016, that it step down slightly, but it’s not like what you saw coming into 2015.

Okay, it will be slightly negative versus 2016. Okay, I get that. A couple of other questions. Just going back to the AV services business at the start-up mode on the side of the Atlantic, is that a capital significantly capital intensive business? Or is that…

It is a capital intensive business. There are multiple ways of operating that business. At the scale we’re at now, we have not invested in the capital equipment required to do it. We’re stop hiring equipment from third-parties in the marketplace. When we reached a scale that’s appropriate either through organic growth or acquisition, we would be investing capital in that going forward.

Okay. And I guess, what my last question and for me it sounds like I’m a little bit ahead of the whole – Cart ahead of the horse here is being early on asking this, I would guess given the Travel & Recreation side of your business being on the northern Tier. It’s probably less exposed to the Zika Virus risk than anywhere else a tourist would want to go to. Is it a fair, guess that you might see increased demand because people would say, I don’t want to go in that direction I’ll go north instead?

What I would say is that, there are positive trends and the visitations in National Parks they provide a safe haven and natural beauty that drives people there. I don’t know the virus either in North America or South America will have an impact on us. But as I look forward, I’m optimistic about the visitation to our attractions in our hotels in 2016.

Great. Thanks guys for answering my questions.

No problem, thank you.

Thank you. And we show no further questions at this time.

I just want to follow-up real quick on John Healy’s question about, a little bit more color on the quarterly activity. Since we do have really good leverage at GES in the third quarter, that flow-through is more or like 30%, I’ve said 20% before, but it’s more or like 30%, and the Travel & Rec quarter two will be a bit lower due to the Gondola – second quarter – quarter two, yes, second quarter.

Okay, great. Thanks Ellen. Thanks everybody for your questions, and your interest in Viad. We look forward to speaking with you again next quarter. Take care. Thank you.

And this does conclude today’s conference. Thank you for joining. All parties may disconnect at this time.