Q3 2019 Earnings Call
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First and by the conference will begin momentarily until such time, there will be music. Thank you at least continued standby.
Welcome to the YOD Corp, third quarter earnings Conference call. At this time all participants are on the listen only mode until the question answer session of today's conference that time to ask your question. Please press star followed by the number one on the phone on mute your phone and record your name and bought it. This call is being recorded you have any objections.
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Yes, your speaker for today calorie long. Please go ahead.
Good afternoon, and thank you for joining us for beyond 2019 third quarter earnings conference call. During the call you'll hear from deep doctor or president and CEO , and Ellen Ingersoll or Chief Financial Officer.
Certain statements made during this call, which are not historical facts may constitute forward looking statements.
Information concerning business. Another one factors that could cause actual results to materially differ from those who are forward looking statements can be found their annual and quarterly reports filed with the FTC.
We'll be referring certain non-GAAP measure during the call, including income or loss before other items adjusted segment EBITDA and adjusted segment operating income or loss.
Disclosures regarding these measures, including reconciliations to net income or loss attributable to be on can be found and able to earnings press release, which is available on www dot dot dot com.
With that I will turn the call over to Steve.
Thank you for joining us on todays call our third quarter was an important quarter with solid execution at both of our businesses.
Pursued we opened several new experiences that will accelerate our growth and drive strong returns and she yes, we continue to realize strong growth within the corporate market and take actions to simplify the business across 30 odd our teams are working hard to drive shareholder value through successful execution.
Our growth strategies.
Personal <unk> third quarter revenue growth of 20% and adjusted segment EBITDA margins of 55.6%.
These results reflect the strength of our refreshed built by strategy and pursuits strong hospitality culture.
On the buy side of our recent acquisitions of seven Mountain Park watches properties and Jasper National Park, and the adult Michel a near Glacier National Park are performing very well.
These properties aren't great fit with our existing experiences and we are delivering faster growth in revpar than we had initially expected.
Additionally, we continue to see opportunities to further enhance the return on these investments for future refresh projects and continued revenue management efforts.
On the build side, we successfully opened two new experiences during the third quarter, including our much anticipated flavor I just want attraction enrichment.
This virtual flight ride over the amazing scenery of Iceland is receiving great guest reviews and continues to gain awareness and interest from tourist and our travel trading partners.
We also opened our newly constructed West Glacier RV Park and cabin village, which is ideally situated at the west entrance to Glacier National Park, near our existing food and beverage and retail offerings.
We were seems strong gas reviews, and our inaugural here and we look forward to building upon our initial success during the 2020 season.
Finally, our 36 room expansion of the when song Lodge in Alaska, which opened at the end of the second quarter continues to perform very well during the third quarter peak season.
With the addition of these were new rooms, we were able to increase the cross sell of our popular and high margin keen on Jordan Marine sightseeing tours.
On the refresh side, we're very happy with the fantastic physical transformation of our Glacier view Lodge at the Columbia, Icefield, which was recently listed among the five best Canadian hotels by doors, as well as our food and beverage and retail offering at Molina Canyon, and Molina Blake in Jasper and.
Flyover, Canada in Vancouver.
We continue to enhance the overall guest experience across all of these locations to ensure we're capturing maximum value from our investments.
Our proven success with other refresh projects such as the Banff gondola and Mount Royal Hotel give us confidence. These projects will continue to develop nicely as our team members manage them to their highest and best use.
Across pursuits existing assets, we continue to drive strong performance through our focus on delivering great guest experiences revenue management and diligent cost management.
On a same store basis, we realize revpar growth of 8.1% our hospitality properties.
5.6% increase in effective ticket price and an 11.1% increase in total revenue per visit or at our attractions.
This was our first year utilizing dynamic pricing and we are very much in the early stages of capitalizing on that initiative.
We rolled it out at the Banff gondola and flyover, Canada this year and realized a healthy increase in effective ticket price that both attractions.
The gondola is on track to produce its strongest year it ever in terms of revenue and revenue per visitor while also maintaining a very high guest experience scores.
In fact, the gondolas ranked as the number one attraction and banner AD and Sky in vitro fine dining restaurant recently range. The number one ranking of restaurants and ban on trip advisor.
At flyover, Canada, our dynamic pricing efforts enabled us to hold the overall revenue in late 2018, despite lower long haul visitation from to the Vancouver market.
This high margin attraction remains very popular with a trip advisor ranking of number four in its category in Vancouver.
[noise] overall pursued delivered organic revenue growth of 9.5% during the third quarter.
Her flexed great execution by the team, especially considering the effort required to deliver on the various organic growth projects and the integration of Mountain Park lodges.
Now I'll ask Alan to comment on pursuits financial results for the quarter Alan Thanks, Steve and good afternoon, everyone and then third quarter precedes revenue was 135 million adjusted segment EBITDA was 75.1 million and adjusted segment operating income was 67.6 billion.
Compared to the 2018 quarter revenue increased 23 million or 20.5%.
The acquisition that Matt first watches and the balance chalet contributed revenue of $13.1 million during the quarter.
On an organic basis, which excludes tonight pipelines in Belgium, chalet acquisitions, and unfavorable exchange rate very intense revenue increased 10.6 million or 9.5%.
This growth was mainly driven by the opening of our new build projects the West Glacier RV Park and cabin village and a 36 from expansion at the segment.
In Alaska as well as stronger performance from our existing assets as a result of our refresh projects and our revenue management efforts.
Persist adjusted segment EBITDA adjusted segment operating income improved by 12.6 billion at 11.89, respectively from the 2018 corridor. This growth is primarily due an increase in revenue.
The acquisitions amount per advisor said about chalet contributed adjusted segment EBITDA of 7.4 million and adjusted segment operating income of $6.1 million during the quarter.
Back to you Jamie. Thanks, So now let me switch gears to cheat yes.
Team at CES is focused on a strategy to simplify grow and transformed the business what the ultimate goal of achieving a more favorable revenue mix and stronger margin profile.
One of our best opportunities to grow at yes, both topline and profit margin is within the large and fragmented corporate events space and I'm happy to report that we continue to drive strong revenue growth in that area.
During 2018 corporate events represented about 14% of Jvs as total revenue.
So far this year, our revenue from corporate events is up almost 10% year on year.
Third quarter was especially strong for us with some notable new clients, including Starbucks and cloud fees.
On the exhibition in conference side of our business, which still represents the majority of GSS revenue, we saw lower year on year revenue due to negative show rotation during the third quarter.
This was expected and was primarily the result of two large by annual events that took place in 2018 third quarter. We will produce these events again in 2020.
In general when continued to see revenue growth, probably exhibitions and conferences we produce.
We did have one large retail focused exhibition during the quarter that experienced a notable decline which created a drag on our overall base same show growth metric.
Steadily setting that outlier aside our base same show revenue growth was low single digits, reflecting a combination of continued industry growth pricing and our ability to capture exhibitor discretionary spend at the events we produce.
Simplify is another key tenet of GE strategy.
Here, we're focused on streamlining our business improving client satisfaction, making it easier for our teams to execute and lowering our cost to serve clients.
Earlier this year, we undertook some restructuring actions, including facility consolidations in Las Vegas, and various smaller U.S. operations. During the third quarter. We took some additional simplification actions actions to further strengthen our operational efficiency, including rationalizing our facility footprint in Canada.
And streamlining our organizational structure in EMEA.
Sure our year to date restructuring actions, we've removed about $10 million from our cost structure.
We're also pursuing numerous other simplification initiatives across GDS that are driving benefits. One example is a growth investment that we made earlier this year to introduce a new standardize registration counter system for check in that event that is both visually impactful and easier for us to deliver.
Sure.
It's been well received by our clients offering better service to event organizers and a better exhibitor experience, while also enabling us to be more efficient.
This is just one example of how smaller simplification projects converting systematic value to cheat yes.
I commend the GDS team for taking a balanced approach to capitalizing on growth opportunities, while also finding ways to improve the business its cost structure.
There are truly driving fundamental improvements that will transform GDS is brand market position and financial profile and now I'll turn it back over to Ellen some for some more financial commentary.
Steve for the third quarter two yes. This revenue was 227.4 million adjusted segment EBITDA loss was 2.8 million and adjusted segment operating loss was 111.6.
As compared to the 2018 quarter revenue decreased $18.7 million or 7.6%.
On an organic basis, which excludes the impact of unfavorable exchange rate bearing to that revenue to increase and $16.5 million or 6.7%.
Organic revenue for the North American segment decreased 8.7 million or 4.3%, primarily due to negative share rotation at approximately 29 million, which was largely offset by continued growth from our corporate clients and other investments websites.
In EMEA organic revenue decreased 4.4 million or 9.2%, primarily due to negative share rotation of approximately $9 million.
Mostly offset by new client wins and growth from the underlying business.
GDS is total adjusted segment EBITDA loss and adjusted segment operating loss increased by 13.4 million and 12.8 million respectively from the 2018 quarter.
These increases were primarily driven by higher performance based incentives and lower revenue.
For me as a whole we reported consolidated adjusted segment EBITDA of 72.3 million, which was down 1.1% for the 2018 third quarter as lower results at CES were mostly offset by growth at per se.
Our consolidated cash from operations and 61.6 million for the quarter and we reinvest in 14.4 million back into the business capital expenditures.
We continue to maintain a strong balance sheet with a leverage ratio of 2.3 at September thirtyth.
Got it was 326.2 million and our cash and cash equivalent until and 56.6 area again for the quarter.
Our GAAP basis net income attributable to be at $1.53 per share for the third quarter, which included after tax restructuring charges of 1.3 million.
Generally related to simplification actions at GE Air.
So I ever startup costs and acquisition related costs totaling about 800000 after tax and.
Favorable tax matters of 2.1 million.
Our third quarter income before other items was $1.56 per share as compared to $1.72 per share in 2018 third quarter.
The lower per share earnings versus 2018, primarily reflects an increase in income attributable to non controlling interests.
Lower adjusted segment, EBITDA, and a higher effective tax rate in the quarter.
Our income per share before other items was also lower than our prior guidance range, driven primarily by Dr. Berger visitation and undulate completion and ramp up at certain build a refresh projects at first too.
Well go higher effective tax rate during the quarter.
Next I'll quickly cover our guidance for the remainder of 2019 before turning it back to Steve.
Weve updated our full year outlook to reflect our lower than previously anticipated quarter third quarter growth at per se as wells reduced fourth quarter growth outlook, and yes, which is based on visibility into our current south pipeline for the quarter.
We now expect our consolidated segment adjusted segment EBITDA to be in the range of 153.5 257.5 million as compared to 146.3 million in 2018.
We had previously been expecting and can be in the range of 150 966 areas.
We expect pricing full year revenue and adjusted segment EBITDA to grow by about 20% year over year, reflecting the strength of ours refresh filled by investment and hospitality culture and combined with our revenue management efforts.
Yes, we expect low single digit full year revenue growth through clients, new client wins and growth in corporate events that more than offset expected negative share rotation.
We expect adjusted segment EBITDA It yesterday in the range of 71.5 million to 74.5 million, which is down from 77 million in 2018.
And the primary driver of that decrease is our expectation that Gs will earn performance based incentives in 2019, whereas now were earned Nike EPS under in 2018 management incentive plan.
We expect our full year cash flow from operations to be in the range of 110 to 120 million.
Expects capital expenditures to be in the range of 80 to 89 million, which includes approximately $42 million growth capex at per se is about $10 million of growth Capex and yeah.
Additional guidance for both our full year in fourth quarter can be found their earnings press release.
With that I'll turn it back to Steve. Thanks, Ellen entering this year, we got aggressive plans at both pursuit, Dan Yes, although we're coming up a bit short on those initial expectations I'm very proud of what our team has accomplished so far this year I'm, even more excited about our future prospects.
Yes, we're having success growing in the corporate events phase, while we continue to take simplification actions that are improving our cost structure and make it easier for our team members to do their job and to focus on our clients.
Yes team is focused on closing out 2019 on a strong note. While also preparing for what will be a very busy 2020 next year GDS will produce all three of its major non annual events Conexpo Con AG during the first quarter and I MTS and mine Expo during the third quarter and Tony.
So we expect to realize incremental revenue from positive show rotation of about a $100 million in 2020, while we continue to gain share in corporate events and drive growth in our base same shows.
Pursuit for team remains very busy executing against our refresh build buys growth strategies and continued implementation of dynamic pricing.
We're finalizing our plan for new organic growth investments, we will undertake for 2020 and we continue to make good progress on some of the longer range filled projects that are expected to open in 2021, and 2022, including flyover Las Vegas, Flyover, Canada, Toronto, and a new geothermal would do.
In in Iceland.
We remain very active on the corporate development front, both in evaluating additional fly or locations as well as attraction than hospitality acquisition targets and iconic unforgettable uninspiring locations.
I want to thank the entire team for their tireless effort to continually increase shareholder value through our proven growth strategies I'm excited about what we've accomplished and the new growth opportunities that we are actively pursuing and with that we will open up the call for questions. Simon can you. Please open the call.
Absolutely. Thank you. So much we will now begin to question and answer session. If you would like to ask your question. Please press the star focus by the number one on your phone on mute your phone and record your name to respond to your name is required to introduce your question to cancels or request to make a star followed by the number two.
We have or first question coming from July .
Kartik Mehta from Northcoast research.
I think your line is open.
Thank you Hey, Steven Ellen I wanted to focus a little bit under GBS business.
Steve you talked a little bit about the $100 million show rotation in 2020, I think in the past you've talked about that 100 million positively generating incremental margins around 30% and as you look at GE today, and maybe there's some of the restructuring you've done.
Do you think that's still valid number for margins for that.
Incremental revenue you're going to realize in 2020.
Yes. Thanks for the question Kartik, we're very excited about 20, $20 and producing the non annual events that are coming up but we still believe it will be a $100 million or so in terms of incremental revenue.
Still on those events that incremental revenue will have about 30% flow through to the bottom. So the team is very excited we've been gearing up for some of the the activity that will happen.
In first quarter of next year and.
We're excited about.
Going into 2020.
And then Steve just to CNG as one of things you mentioned is maybe the sales pipeline slowing done and I'm wondering what the waterfall of those sales or how much of that.
2019 versus it impacting 2020.
Really kartik when we came into this year, we're very focused on offsetting some of the negative show rotation that we had coming in so full year basis, we had kind of $15 million to $20 million of.
Negative show rotation that was going to impact us I'm really happy that we were able to not only offset that but continue to grow beyond that so.
As we enter into the fourth quarter, we took a look at our sales pipelines and we recognize that our expectations were a little bit high for the business and we've made the adjustment. So it's really an impact in 19 and not in 2020.
And then just one last question, Steve just on the pursuit business you had strong organic growth at 95%, but just a little bit less so we're expecting park attendance seem to be very strong.
You look at the business.
It was the softness as a result of what you just said long haul flights or was there anything else or was attendance maybe less than you thought.
You know, we're we've had a really strong.
2019 at pursued.
The organic revenue growth was around 10%. These are a lot of projects that we've talked about for really the last year and excited to get there is off the ground and implement and the organic growth that they drove kind of as a testament to the strong experiences that we've created and some of the awards that.
And recognition that we talked about during the call.
So would but we did continue to see.
Lower travel trade volumes Spis specific locations within the pursuit network. So.
Specifically at the ice fields or the Glacier adventure, where we saw less travel trade participation.
We also saw lower long haul visitation into Vancouver, but kartik and a lot in the business, we were able to offset.
Portion of that based on some of the results that we talked about Mccall like the revenue per passenger at our attractions through some of the dynamic pricing as well as some of the new.
New pieces, we brought on as well as the.
The increase in Revpar for our hospitality assets. So when I look at the underlying business Theres a lot of really strong activity happening that we're super excited about.
We weren't fully over it.
Overcome some of the things like the travel trade.
And lighter visitation.
But we feel really good about some of the underlying parts of the business.
Thank you very much I really appreciate it thanks project.
Thank you over next question is coming from line of Tyler between.
From Janney capital markets Tyler Your line is open.
Thank you good afternoon, everyone. Just a few questions for me on the pursued side of things Steve can you talk a little bit more about what you're seeing the mountain part log property. Thank you mentioned cost or revpar growth over the near initially expected.
But you got about what you're seeing there and then also I'm not sure. If you can discuss any changes specifically that you've implemented on the revenue management side of those properties I know, it's early days, but just just curious what you guys have been able to do there since you've owned them.
Sure. Thanks Tyler.
First off on the Mountain Park Lodge properties as I mentioned during the call, we're seeing greater revpar increases than we expected and as a reminder, we acquire these properties right before the peak season started so our main emphasis was just on executing against the peak season, we were.
We're fortunate that we're able to take price increases and.
And fill up the hotels during the season, so that was a high point and kind of beat our expectations.
And we believe that these strategic strategic acquisition were really serve us well going into the future from a revenue management perspective.
You, specifically mentioned dynamic pricing, which we really are only doing at a couple locations at this point in time most of the Revpar increases that we did with.
Non park lodges were more revenue management, just moving prices along to match what the demand look like so it is less about dynamic pricing and more about just revenue management.
Okay. Perfect. That's helpful. Then I also want to ask about flyover Iceland now that that's been open for a few months now can you give a little more detail how that is performing and what you're seeing over there.
We're very excited about what we're seeing so far from the gas reviews. We we started a little later than we anticipated because a construction delays, but it's getting five star rating from all the visitors that are commenting on trip advisor we've seen a really good pick up it's actually fund to read some of their.
Views from.
Local icelanders, who are saying they've never seen their country presented in such a fascinating way so.
Very excited about the response, we're getting and we're excited about going into the 2020 high season and in Iceland.
Okay, Great and then switching gears to the GI side of things can you talk a little bit more about margin in that business I mean gallon you'd mentioned.
The performance based incentive that's influencing the EBITDA margin in that business, but was there anything else going on with the cost side of things within Jvs.
Where we did quite a bit in cost take outs during the year as Dave talked about but the big year over year margin difference was due to performance based incentives.
Yes did not earning tenants in 2018 bank right at year end.
In Venezuela, Dallas area impacts on that and that that the primary difference at the margin increase.
Okay, Great and then spots question for me.
Any changes to how you're thinking about capital allocation I mean, obviously, the capex is going to be ramping up here.
These flyover projects, but any thoughts on how you're thinking about balancing some of that spending versus potential share repurchases among M&A as well.
Well I think you're right so our.
Capital will ramp up as new assets come online and as we go into 2020 with GPS is non annual rotation. So it sets us up for several good years of of capital.
When we look at the allocation obviously, we look at our track record and we understand that.
We've had a very strong track record and.
The investments that we've made in the business as well as businesses that we have acquired so that will be a priority, but obviously it will be a balanced approach between.
You know investments in the business and looking at share repurchases, when we feel it's appropriate and obviously our dividend as well.
Okay, Great that's all from and thank you. Thanks Tyler.
Thank you again as a reminder, if you'd like to ask a question. Please press star full but number one on your phone in the could you need to prompted to cancel your request of aggressive star followed by the number two.
Our next question is coming from the line of Steve O'hara from Sidoti Company, Steve Your line is open.
Yes, hi, good afternoon.
Yes.
Hi, just a question so performance based incentives were up in 2019.
I guess GPS is down year over year in 2018 is it just kind of resetting the deck in terms of.
Ratcheting, maybe Doug.
Watermark little bit lower given nothing was earned in 2018 or are there different things other than.
Bottom line and things like that I guess.
Factored in.
No the incentives there that target.
Categories in the same year over year, we look at operating income margin revenue. When the plan was that for 2018 that targets were not achieved 70 and says were zeroed out mostly in the third quarter of last year, which is why you stated bank year over year and now incentives in the fourth quarter last year for 19.
Okay and targets were set based on the 19 plan and CES is in the money and on those targets.
So far for that forecast that we have right now.
Okay. So, yes, I mean, and I look to closely at it but in terms of the guidance guidance is lower but is that that's more due to pursue is that right.
Yes, well and guidance is lower and main difference in the EBITDA guidance is.
So we were able to common a rotation from a revenue perspective, but the we weren't able to silver kind of set us delta.
Okay, and say one of the one of the differences in the 2019 plan as we obviously anticipated.
And knew about some negative show rotation that was going to impact the business.
We're pleased to have kind of grown.
Yes, so to offset that and even grow beyond that so thats one of the major differences in the business between 2018 in 2019.
Okay. Okay.
And then just going to.
The Mt part lodges and pricing there.
I mean can you just.
Give me a quick idea.
In terms of the pricing actions.
Hello.
I mean, where the I guess I'm just I mean, it seems like positive I, just I'm wondering kind of why.
Our management team no apparently left some money on the table.
In the past or or what was it a matter of.
I'm not marketing.
May be properties effectively or.
You guys being able to do kind of small updates to.
Maybe boost price and a little bit euro there I'm, just wondering I guess I'm just.
Gary.
Sure in terms around part lodges.
We were not able to do any refresh projects or anything like that given the timing of when we acquired properties. We do think thats an opportunity going forward.
But the success that we've had in revenue management at Glacier National Park is really.
It's due to the demand in the Jasper market, which has been strong for the last several years.
And it's about feeling comfortable about taking price added we believe that.
Our centralized revenue management team that looks over all of our properties and all of our attractions from a revenue management perspective that they do a very good job.
We anticipated.
During our acquisition that we would have upside to the revpar and we've exceeded our own expectations. So we're very happy about.
Where we stand and we think that there is further room ahead given that.
In 2020 will have the opportunity to potentially do some refresh or some changes to the properties.
So we think we've we've started kind of on a on a good trail for for that acquisition.
Okay.
Our way to think about.
Where pricing can go.
You know.
Without any rephresh and then maybe with the refresh.
Or maybe even.
You know returns that Youd expect to generate.
Refresh certain properties et cetera.
Sure.
But it's pretty early in the cycle, we just finished.
Operating the peak season of of an acquisition that we took.
Ownership of right before the peak season, so we're still evaluating what those refresh opportunities are and how will move forward.
But I would just point to the success, we've had and I think you're seeing first pain on.
At the second Avenue, and the Mount Royal Hotel, I'm, not saying that we're going to reach that level of refresh.
But it does point to the fact that we believe there's untapped potential in these properties.
And we're going to take advantage of that overtime.
Okay and did you say in terms of the pricing maybe what the differential was in this year last year in that portfolio.
It was there any kind of.
When you look on the table in June I mean, I know, it's kind of July and obviously, the big months, but I think thats more of that your rental market, maybe I'm incorrect.
I did not mention the increase that we experienced year over year, but know that meet our expectation.
In our acquisition model and we're pleased with the outcome.
They are year round properties and.
So we'll continue to use revenue management throughout the full year.
Okay, all right thank very much.
Thanks.
Thank you are there any questions in the Q as of this time again as a reminder, if you'd like to ask your question. Please press star followed by the number one to pencil. Please press star full margin overseas.
When will feed as we framed the incoming questions.
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We showed no further questions at this time.
Alright, Thanks Simon.
Thanks, everybody for your questions and your interest in VR and we look forward to speaking you and speaking with you again next quarter.
Bye.
Thank you that concludes today's conference. Thank you for your participation you may now disconnect.