Q3 2021 Viad Corp Earnings Call
Tourism recovery in Iceland as international guest arrivals into the Keflavik Airport rebounded to approximately 60% of 2019 Q3 levels.
We've seen steady increases in capture rate of international visitors to Iceland, and we're excited to premier flyover, the real wild west in Iceland actually starting today and that promises to be popular with international and local guests alike.
Let's change gears quickly and talk about the three new attractions, we opened in 2021.
Our suits newest flyover attraction flyover Las Vegas opened successfully on September 1st and has received overwhelmingly positive reviews with an average rating of four five stars across the review platforms in.
In Vegas, we're again seeing the power of diversified attraction content is 45% of our guests to date have purchased the dual feature ticket combining flyover the real wild west experience with flyover Iceland.
Sections with Skylar doing Goldman Skybridge, and flyover Las Vegas.
Our success is a testament to our strong execution focus on pursuits refresh bill by strategy and the power of iconic unforgettable and inspiring experiences.
None of these things can happen, though without the significant efforts of our team members around the world who work so hard through a season that I'm sure most of US will never forget so before turning it back to Steve Let me just share a view into the future as we have some things were pretty excited about first in the Canadian Rockies construction is well underway on the new 88 room hotel and Jasper, which we expect to open to the <unk>.
Public in early summer 2022 <unk>.
Next we anticipate beginning construction in the first quarter of 22 on our fourth flyover attraction flyover, Canada in Toronto located at an ideal development site in tourism destination at the base of the C N tower and adjacent to the Rogers Center.
And while I can't provide specific details I'm pleased to share that we have a robust pipeline of organic growth opportunities from within pursuit.
In addition to visibility to some very compelling by opportunities that were actively exploring.
We're also very pleased to announce the opening of night rise at the summit of the Banff gondola and those of you that haven't seen the release night rises an immersive experience of light sound and wonder is a multi sensory winter edition to the guest experience at the summit of the Banff gondola opening December 2nd and running until March 12th. This is a really unique winter activity and emerges multimedia.
Storytelling in nature for a new and inspiring perspective at such an iconic Bath location nitrites has been created and developed with moment factory Parks, Canada, and the stoning of COTA nation and is a great example of using our refresh bill by strategy to drive guest experiencing compelling reasons to return and visit our attraction.
Finally, we are optimistic that pent up demand for worldwide travel remains strong we continue to see strong demand for our U S location and a significant recovery in our businesses in Banff Jasper Vancouver in Iceland as borders remain open guests are free to move about the world.
You again to our teams around the world and now Steve back to Ya.
Thanks, David now switching over to Ges, the third quarter was a turning point.
With revenue improving from accelerating that activity to $116 million more than four times the revenue in the second quarter and about half of the revenue in the 2019 Prepandemic third quarter.
As expected net square footage and attendance levels.
In North America, we're seeing strength in events for aerospace industrial and defense.
Also encouraged by the level of spending by large corporate clients at trade shows.
In the third quarter, we saw key client spending about 138% of pre pandemic budgets and I believe this level of corporate spending as a strong bellwether for the recovery of log events.
Within our exhibition and conference service lines, the third quarter provided us another opportunity to prove out our new low cost model and I'm pleased with the results.
As discussed on previous calls we were able to make transformational changes to significantly improve our cost structure, including variable is it more of our costs and reducing fixed costs through network rationalization.
During the quarter our team closely manage our variable costs as we quickly ramped up with event activity.
Our freelance labor model allowed us the flexibility to scale up and down based on the variables show schedule and avoid adding unnecessary overhead.
This one is particularly important during the spike of activity we experienced in September.
Additionally, the noncore services like hard to cleaning and storage that we outsource performed well and I'm very happy with our decision.
In the third quarter, we also had an opportunity to test our reduced network footprint and I'm happy to report that we were able to produce several california shows by extending the operational reach of our Nevada facilities in Las Vegas and Reno.
Overall, we're well positioned for improved profitability is the live event industry continues to recover.
Switching over to our brand experience service line, we made significant progress against our strategic goal to grow and expand our work with leading corporate clients experiential.
Marketing is a large and fast growing segment of the corporate marketer's budget.
Have a significant opportunity to grow in this fragmented market at attractive margins and our positioning ges for ongoing success in this area.
Last quarter, we announced that we hired an experienced industry leader just almac to lead our brand experiences team.
Jeff has created and led several of the industry's most successful experiential agencies, Jeff is working with our experienced and proven team to combine our event exhibit an a b capabilities into a single integrated client offering while adding capabilities that will open new revenue streams within the marketing and experiential busy.
This industry.
In addition through revised positioning and marketing of these services within the industry and the addition of new talent.
We will not only expand the service offering available to a robust list of existing clients, but also open our sales focus to a host of new industry segments and clients. A key part of this strategy includes the expansion of our creative and strategic resource offering.
We have initiated the expansion of our creative and strategic capabilities by starting at the top with the addition of John tree honest as Chief Creative Officer.
Jonathan idea driven creative leader with deep experience in defining our overarching strategic direction and creative vision.
He has extensive experience working with clients building, an inspiring multi disciplined creative teams to bring big ideas to life across multiple channels.
John will lead our global team of creative thought leaders as he develops a new expanded host of creative and strategic services to enhance offerings to existing and future clients.
T S doesn't incredible job delivering a broad range of unique and impactful experiences for our clients, including corporate meeting and events digital experiences brand in sports activation product launches strategic exhibition program management, corporate customer centers and consumer pop up events.
During the quarter, we had the opportunity to guide our clients through many new engaging experiences.
Two memorable events for our clients.
Each drew a greater number of exhibitors than the prior occurrence.
A testament to the incredible client service and quality of work provided by our talented teams, we have many new business wins and renewals to celebrate.
[noise] exhibition and conference team won new business from the global business Travel Association, including event accommodations and services in the Midwest Podiatry Association as well as renewed business with the process Expo in Texas Restaurant Association.
Brand experienced team one new business from Santa Fe, one of the top 10 largest pharmaceutical companies in the world as well as renewed business with northwestern mutual and National Society of cutaneous medicine, I'm really proud of what our teams have accomplished is encouraging to see that large scale events have returned as local reece.
Directions, loosen and people are becoming more willing to gather and travel again the value created from face to face live events is irreplaceable cause it is a powerful way to generate sales drive brand awareness and loyalty and interact with attendees.
See a bright future ahead, as we plan to resume the normal cadence of events scheduled in 2022 and.
About 87% of the revenue amount generated in the pre pandemic 2019 third quarter.
Pursuit third quarter revenue was 117.6 million and adjusted segment EBITDA was positive 59.6 million.
As David mentioned earlier pursuit suggested segment EBITDA improved by $39 9 million year over year.
This was largely the result of exceptionally strong visitation from domestic travelers during peak season, with our Glacier Park properties posting record performance.
Our Banff and Jasper experiences were challenged by the Canadian border closure, but had an uptick in demand during the quarter. After restrictions were lifted to fully vaccinated Americans in early August and two other fully vaccinated international travellers in early September.
Additionally, the three new high marched attractions that we open this year, the Sky lagoon Golden Skybridge and fly over Las Vegas collectively contributed an incremental 7.4 million of revenue during the quarter.
Including acquisitions and iconic locations and new flyover locations.
And before I turn it back over to Steve for concluding remarks, I'd like to briefly comment on our financial outlook.
Within person activity, improving we expect that yes. This revenue will continue to improve based on our current level of bookings and pipeline. We currently expect you to generate positive EBITDA during the fourth quarter and we expect that to be partially offset by negative EBITDA from pursuit. During this traditionally slow tourism season.
We currently expect a free cash outflow during the fourth quarter in the range of $35 million to $40 million and this assumes an operating cash outflows somewhere in the range of $20 million and capital expenditures of approximately $15 million and this includes grows capex for new 88 room hotel and Jasper.
We will also make our first quarterly term on the principal payment of $1 million and expect to pay approximately $2 million in cash dividends on a convertible preferred equity.
These expectations are subject to the impact of Covid, including a doctor very well.
We will continue to carefully manage our cashflows and be strong stewards of our capital to maximize shareholder value.
As we look forward to the next few years, we believe that pursuit same store revenue will recover faster than T. E. S is due to expectations that leisure travel will return more quickly than business travel.
Problem Tyler Batori with Janney Your line is open.
Thank you, Chris and good afternoon.
So a couple of questions for me and maybe I'll start on the on the Ges side of things I. Appreciate all the commentary there Steve I'm interested to dive in a little bit more if we could about the future outlook there specifically.
In the fourth quarter, how thats looking versus the third quarter. You did say you expect positive EBITDA in that business in the fourth quarter.
Whats your expectation in terms of the revenue side of things and I know the third quarter benefited quite a bit from from mine Expo in September but would you expect.
Fourth quarter revenue to accelerate over the over the third quarter and then any other commentary you can provide just generally in terms of the shows that are happening.
Went through some statistics on that square footage and whatnot, but just interested in your perspective on.
Feedback on what you're hearing from folks in the field as they're attending some of these shows and the kind of post COVID-19 or new normal world. If you will.
Yes, Thanks, Tyler Thats a good question so the third quarter. So much of the event activity really happened in September.
That's when we saw a meaningful event activity for the quarter.
You already noted that mine Expo occurred in September as we look forward and I also in my comments I mentioned that it was about 50% of the revenue in the quarter versus.
Pre pandemic levels.
As we look forward I see I do see the revenue accelerating into the fourth quarter. Despite not having a large show like mine Expo, we have a higher volume of events, taking place and so there is.
What you're seeing and.
How you're handling those issues and then each of the business segments.
Hey, David why don't you.
Talk about the pursuit side.
Alright, I will thanks, Tyler it good question I think there's a couple of things that are important one is Canada is.
Re launching its foreign worker program. So for those that are on familiar with that it's generally young people that are taking a gap year from university and traveling to another Commonwealth country, and that's why you'll hear so many Australian and Kiwi accents in Banff and Jasper So when the Canadian government has already begun reopening that program and obviously.
You've got to be fully vaccinated unable to travel from countries that permit travel, but we're beginning to see that.
Reaccelerate and then also we are encouraged by.
The presence of R. J, one visa workers typically in a year, we would hire five to 600 international workers that come for a defined period of time. So those programs are restarting culture matters. So.
Though I think culture really matters. So if you have a strong team member engagement and hospitality culture within your company then you're going to win in the recruitment Donald So we have.
Struggled in places and rallied hard and I think our recruitment efforts we've begun earlier.
We're ahead of where we've been in any other particular year and I'm confident we're going to have the staffing and team members in place to have a very successful some or 22.
Yeah, and Tyler from a <unk> perspective, I will tackle labor and also a supply chain.
It certainly is the industry has recovered.
Travelers who've been itching to get to the Rockies and see things so that accelerated immediately and I think it reflected in a couple of different places like significant and very strong growth.
An average daily rate in our lodging businesses.
In Banff and Jasper and our attraction visit so.
It accelerated it was it as early as we hoped it would be no but generally what we've seen is this trend has continued through the fall we had a very strong October.
And then we're looking forward also to Ah Ah reasonable finished through the end of that fourth quarter. So.
Excited to see the borders reopening and people moving around.
Okay, Great Uhm, that's all for me I appreciate that detail.
Thanks.
We have your next question from Kartika meta with North coast.
Research Airlines open.
Countries that know that they can travel.
We're showing very strong demand coming into the 'twenty two season I'll give you two small examples in glacier.
November of 'twenty, we were sitting pre sold on the books about $4 9 million on November 21, we're sitting at $7 3 million in Jasper.
On November 20, we were about $3 5 million. We're sitting now this November 21 at $5 4 million. So the mix of guests will change the international visitation numbers will increase and that will come from both the U S and countries that are closer some of some countries that are still evolving and coming out of.
<unk>, so India being one where theres been strong acceleration of vaccines, but it may take one more year for folks to be traveling.
But we anticipate that demand for September 'twenty, two is going to be significant and we're doing everything we can to get ready.
And then just.
One last question I apologize, but.
Would you be able to repeat it.
Our expectations for kind of the cash.
Inefficiently ahead of its original plan for the year, which is exciting and a lot of that coming.
Through this time period, so some properties, Brian we're limited because if theyre not winterized and other things and so climate forces you to close them, but definitely.
Strong attendance in lodging occupancy through the fall.
And you talked a little bit about.
Labor and flexing.
Being variable width.
Labor versus historical.
Plans and the fact that labor unions, I think you said no shortage of labor Union ability.
Ability to get workers.
How much of the business relies on labor unions and in the non labor Union areas are you, having any problems with with with other sourcing of labor or is it just for some reason for you guys not an issue.
Brian It's a good question. So let me see if I can help clarify some of my earlier comments.
A large portion of our.
The work that we do at the event itself in terms of the installation of the event is done through our Union partners and we have not seen any.
Shortage in terms of.
Labor for our events, so I feel really good about that in terms of.
Availability and supply of Union labor.
At this point is at five to 10 percentage points, what's the magnitude of myths versus what you thought maybe a quarter I go.
Yeah, and again, our longer term on the side of the business longer term target is to.
Be greater than 8% EBITDA margin and have flowed through an incremental revenue of about 20%.
What I can say today is that I am pleased with the decisions. We made in terms of our cost structure I've seen the.
The changes that we put in place to have a positive impact on our overall profitability.
I'm also happy with the way revenue is scaling back obviously I would like to see it come back quicker.
And the events get back to their Prepandemic side.
Quicker, but.
I am pleased with how the business is performed in.
I think we're still on track in terms of our target as revenue recovers to prepandemic levels to hit the targets.
And Brown one last night.
Go ahead.
No I was going to ship, Yes go ahead on that one.
I was just going to say I'll pile onto the margin question. So as I mentioned earlier in my remarks, So our margin Q3, EBITDA margin adjusted 51% So in line with.
Our expectations and then our mix of guests so as international travelers return those numbers go even higher and so generally people that are.
On a longer vacation.
They are spending patterns are slightly elevated from more of a national visit or a regional Canadian traveling from one place to another but with us it really moves with mix of guests. So we're really happy with how quickly things have returned and you can also send some some energy and I would describe it as celebration of folks that are travelling.
Again.
They'd had a chance to save some money over the pandemic period and they are spending it on things that make them smile and iconic experiences. So yeah. We're seeing strong returns to spending levels just in the way that we anticipated.
And Brian if I could add just right on the Ges side I think it's important to note that our target of 20% flow through an incremental revenue we were able to hit that in the third quarter.
Year over year, so the incremental revenue in the third quarter of 21 over 20.
Had 20% flow through or greater.
Okay, Great and then just lastly.
Within the pursuit division with the opening of Sky Lagoon, and now flyover Las Vegas, clearly important for the growth trajectory of revenues there.
Or you can you will you in the 10-Q kind of share with us what kind of volumes you're doing at those properties.
It's early still so what I can I will share with you a couple of things so.
For 2020, if you look at it and now I'm going to go first on our same store basis. So I'm, excluding sky lagoon Goldman Skybridge in flyover Las Vegas, just to give you an indication on returned then I'll mention those so and.
In 2020.
Today, we're about 602000.
Thousand visitors 2021 that number's nine was 979 at the end of the quarter and obviously, it's grown from there so year to date.
2019 about 2.1 million visitors 2020, 600000 in 2021 $1.2 million so as.
Performance at Sky Lagoon is within our expectations and doing really well and really quite pleased with how that's performing Goldman skybridge exceeding expectations in our first year and if you recall that was Ah.
Very quick move on our part to get that attraction up enrolling in finished and to be able to open and then we had a slight delay with kind of health, Canada rules. So really happy with how that performed and then Vegas is building momentum every day so.
It's early to really be talking about Vegas, yet, but we're excited about how things are performing and what lies ahead.
Okay. Thank you.
Thanks, Brian.
I am showing no further questions at this time I would now like to turn it back to the Minister's team posture, a master president and CEO for any closing remarks.
Yeah, I just want to say thanks for all of our investors for their support and thanks for all the employees for making Q3, such a success, but we will talk to you in another quarter.
Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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