Q2 2023 Viad Corp Earnings Call

Good afternoon, My name is Asia and I'll be your conference operator today at this time I would like to welcome everyone to the <unk> Corp, second quarter 2023 earnings Conference call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question and answer session. If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If he would like to withdraw your question press the pound key.

Carrie long you may begin your conference.

Slide 23 second quarter earnings Conference call.

We issued our earnings press release after the market close today, along with an earnings presentation, which are both available on our website at <unk> Dot com.

I'll be referencing specific pages from the presentation during the call as we discuss our business performance and outlook.

I also wanted to point out that our earnings press release and presentation contain important disclosures regarding non-GAAP measures that will be referring to during the call, including adjusted EBITDA and income before other items.

During the call you'll hear from Steve Moster, our president and CEO and president of Ges.

Ellen Ingersoll, our Chief Financial Officer, and David Barry Presidential pursuit.

Before turning the call over to Steve I'd like to remind everyone that certain statements made during the call which are not historical facts may constitute forward looking statements information concerning business and other risk factors that could cause actual results to materially differ from those in the forward looking statements can be found in our annual quarterly and other current reports filed with the SEC.

And with that I'd like to turn the call over to Steve who will start on page four of our earnings presentation.

Thanks, Gary Good afternoon, and thank you for joining us to review our strong second quarter results and improved outlook for the remainder of 2023 IMAX.

I am extremely pleased with our performance so far this year.

And as you'll be hearing about in more detail throughout the call I'm happy to report that both Ges and pursuit continue to demonstrate strong momentum this year with high demand for leisure travel and live event activity near 2019 levels.

Yes delivered another very solid quarter with revenue and adjusted EBITDA above our prior guidance range.

I continue to be impressed with the team's focus on margin enhancement and the speed and the strength of Ges's recovery from the pandemic.

Based on <unk> performance and our outlook for the second half, we're raising our full year guidance to reflect the opportunities ahead of us.

Pursuit delivered strong year over year growth in line with our adjusted EBITDA expectations for the quarter.

With the borders open and no travel restrictions in place leisure travelers are actively seeking one of a kind experiences and selecting pursuits iconic and unforgettable experiences.

Pursuits lodging booking pace for the second half of 2023 across all geographies is stronger than the 2019 and 2022 pacing at the same point in the year on.

On the attraction side of the business, we're seeing strong visitation to our geographies and higher conversion to passengers at our attractions.

And now I'd like to turn the call over to Ellen to discuss our second quarter financial performance in more detail Ellen.

Thanks, Steve as shown on page six we delivered consolidated revenue of 323 million. This was up $1 $1 million year over year, driven primarily by higher international tourism into Western Canada, and Iceland, and continued strengthening demand for exhibitions and events, which more than offset.

And anticipating $68 million revenue reduction due to shifts in timing of beds at Ges and Michelle upon services.

Net income attributable to the AD was $11 million for the quarter and our income before other items was $11 8 million as compared to $22 2 million in the 2022 second quarter, primarily reflecting lower adjusted EBITDA at Ges higher interest expense and higher taxes.

Partially offset by higher adjusted EBITDA Christine.

Our consolidated adjusted EBITDA was $42 9 million, which was within our prior guidance range and $4 6 million lower than the 2022 second quarter.

Ges adjusted EBITDA exceeded the high end of our prior guidance range by about $3 million, driven primarily by stronger than expected revenue and pursuit was within our guidance range.

As shown on page seven pursuit second quarter revenue grew 14% to $88 5 million of pursuits. Adjusted EBITDA increased to $19 5 million, which is an improvement of $3 9 million year over year.

As David will expand upon shortly the year over year growth at pursuit was driven by stronger international leisure travel.

And our refresh build buy efforts.

Ges revenue decreased 4% to $231 8 million and Ges's adjusted EBITDA of $26 8 million declined by $8 $3 million.

The $9 $8 million year over year reduction revenue was driven by a few factors first was the sale of on services, which contributed about $16 million in revenue in the 2022 quarter.

We also experienced a shift in timing of events driven by omicron disruptions in early 2022 with approximately $10 million in revenue from Q1 shows that rescheduled into Q2 2022 moving back to their normal scheduled in Q1 'twenty three.

Partially offsetting those two factors was positive share rotation revenue of about $10 million and strong year over year same show growth.

The change in adjusted EBITDA versus the second quarter of 2022, primarily reflects lower revenue as well as increased SG&A expenses relative to the unusually low level Ges was operating risk during the 2022 second quarter, while other than activity was in the early stages of pandemic recovery.

Next I'll quickly cover some balance sheet and cash flow items before David HD dive more deeply.

We ended the business highlights.

Our cash flow from operations during the quarter was an inflow of approximately $28 7 million for.

Our capital expenditures totaled about $21 million and included growth Capex for the flyover Chicago build project and some refresh project at Pyramid Lake Lodge.

We ended the second quarter with total liquidity of $148 2 million, comprising $53 2 million in cash and approximately $95 million of capacity available on our revolving credit facility.

Our debt totaled approximately $477 9 million, including $393 million on our term loan b financing lease obligations of approximately $64 million and other debt of approximately $21 million.

Additional balance sheet and cash flow details can be found in the appendix of our earnings presentation.

And now I'll turn the call over to David to discuss Christine.

Thanks, Alan I'm happy to report that pursuit delivered another quarter of record revenues record second quarter, adjusted EBITDA and improve margins overall, it's exciting to see the world move past Covid restrictions.

Consumer demand for high quality hospitality experience is fueling a significant increase in visitation. This increase visitation and our focus on performance is driving margin expansion at pursuit.

We have strong momentum and tailwind is on our side as we enter the critical third quarter.

More on that to come but first let's jump into our second quarter financial performance starting on page nine.

Overall Q2 revenue grew 14% from 2022, and adjusted EBITA margin improved by 200 basis points.

Growth was driven by stronger international visitation, and our investments to scale and elevate pursuits iconic collection of attractions and hospitality experiences through our refresh build buy strategy and remember refresh build buy as our core growth strategy to drive shareholder value and page nine does a nice job of illustrating how it's working.

Nearly 30% of pursuit second quarter revenue came from new experiences that we've acquired or opened from 2019 forward many of which operate year round.

We continue to see strong momentum from each of these new big buy and build experiences driving year over year revenue growth of 27%.

We also drove strong same store revenue growth from experiences that were operating within pursuit prior to 2019.

Year over year same store experiences were up 9% and revenue.

This impressive growth was driven both by the overall strengthening of international tourism that we're seeing in our geographies and by a refresh and revenue maximization efforts, which is clearly evident in the impressive 19% same store revenue growth, we've driven relative to Q2 of <unk> 19.

The various refresh investments we've made to make our experience is better driving guest satisfaction and creating pricing power and ancillary revenue growth a winning formula for capitalizing on strength in consumer spending and unprecedented demand many of our experiences.

Okay. So next I will hit some highlights of our attractions performance on page 10.

Overall attractions ticket revenue of $36 5 million grew 25% year over year on a 23% increase in visitors and growth and effective ticket price.

Visitors to the new experiences we've opened or acquired from 2019 grew 29% from 22 with strong growth across the board.

Flyover Las Vegas posted the largest gain in number of visitors and a strong year over year growth rate of 41%.

We're happy to see the growth trajectory of this attraction as we continue to drive awareness and broadened our sales channels in the Vegas market.

Our strongest percentage growth in visitation at 62% came from the new Golden Skybridge in British Columbia, where our addition of an exciting mountain coaster and other enhancements to the guest experience are drawing increased visits and outstanding guest reviews.

In Iceland Sky Lagoon continues to put up great numbers with year over year visitation growth of 22%.

Flyover, Iceland saw healthy growth of 12%.

International travel to Iceland is improving and our world class attractions. There are capitalizing on that trend evidenced by growing capture rates of international gas flying into Keflavik International Airport.

<unk> company is also off to a strong start for its 2023 season with Q2 ticket revenue up 30% year over year.

The Glacier RAF company with an ideal tuck in acquisition last year, leveraging our existing set of lodging food and beverage and retail offerings just outside the west entrance to Glacier National Park.

Now moving on to our same store attractions, where we also saw strong growth year over year same store attractions visitors' grew 21% and all but two of our attractions were above 2019 visitation levels for the corner.

The Banff gondola <unk> operated attraction continues to impress with strong growth versus 2022, and 2019 and I'm pleased to report that we're on track to deliver record full year visitation.

Another standout performer from a same store growth perspective is our marine Lake cruise, which is also up strongly from both 2022 and 2019.

Last quarter on our call I mentioned that fiber, Canada in Vancouver posted first quarter visitation numbers that were nearly on par with pre pandemic levels of Q1, 2019, and I'm very happy to report that Q2 numbers accelerated and exceeded 2019 as our strategy to refresh film content and to show five or films from our other locations.

Paying dividends.

At our Columbia, ICL distractions, the Glacier adventure and the Glacier Skywalk early season visitation is significantly ahead of last year, but still below 2019 levels.

And I have discussed on prior calls how these two attractions typically see a lot of long haul international visitation from travel trade, including APAC groups.

And with the later reopening of many Asian markets for International travel. These group tour operators missed the booking window for 2023 itineraries.

And as we look forward to 'twenty four bookings should be much stronger from this segment.

Knowing this constraint was our reality for 2023, the pursuit team mobilized to maximize visitation from other sources with a strong emphasis on capturing more independent travelers.

One of our key strategies to drive stronger independent traveler visits this year was to increase the amount of pre sold attractions tickets through our pursuit pass.

The pursuit pass was launched this year to help lock in advance commitment and drive stronger visitation across our Banff Jasper attractions by including multiple pursued attractions and one compelling pass product.

And I'm very pleased to report that we have now sold over 75000 pursuit passes.

Equating to nearly $8 million of attractions ticket revenues so far this year.

For the second half of 2023 attractions ticketing revenue in Banff and Jasper is pacing significantly ahead of 'twenty, two with renewed ease of border crossings into Canada, and we remain confident that we'll reach our target of achieving full year same store attractions visits of at least 95% of 2019 levels.

Now, let's switch over to our lodging performance, which we'll reference on page 11 of the earnings presentation.

Q2 rooms revenue of $22 1 million grew 8% from 2022, driven by an increase in available rooms with the new alpine weighing of the Forest Park Hotel that opened in Jasper and mid 'twenty, two and a 3% increase in Revpar.

Overall occupancy remains strong at 68% for the quarter, which is in line with both 22 in 2019.

In Canada, we continued to see stronger year over year occupancy as international visitation to Western Canada improved.

And along with increased demand for rooms, we'd moved Adr's fire and are seeing revpar increases at 10 of the 11 hotels equating to a strong 11% year over year increase.

Last month, we completed the refresh of the founders cabins, a pyramid like large Jeremy Blake largest pursuits premium lodging experienced in Jasper and this exciting project delivered 12 brand new Guestrooms with high end finishes overlooking the stunning pyramid Lake and is open to stellar guest reviews.

In the U S. Most of our properties open for the season during May and June and are off to a solid start.

Q2 did bring some slightly lower occupancy levels year over year, which impacted overall pursuit, revpar and especially our same store revpar metrics for the quarter, which was relatively flat year over year.

This early season timeframe is impacted by opening dates weather and we just remain very optimistic about the peak summer season.

So let's move on to our lodging booking pace as shown on page 12.

2023 bookings for Q3, and Q4 are at or above 2022 levels in each of our operating geographies across Western Canada, Montana and Alaska.

Rooms revenue on the books for Glacier is pacing, 3% ahead of 2020 two's record levels and is up an incredible 33% from 2019.

Alaska is 5% ahead of this time last year and up 9% from 2019 and last but certainly not least in Banff and Jasper where international visitation is accelerating rooms revenue on the books is up 29% year over year with our same store properties up 5% from 2019.

Next I want to quickly cover our ancillary revenue streams before providing more color on our outlook for.

Food and beverage and retail offerings are key differentiators and an important part of the guest experience and we once again saw solid year over year revenue growth as we capitalized on the integration of F&B and retail experiences with our attractions and lodging lines of business.

Relative to the same period in 2022, food and beverage revenue increased 12% and retail revenue increased 5%.

Earlier this month, we opened the refreshed and rebranded Alto restaurant at the pyramid like margin Jasper and in just a few short weeks also has skyrocketed to number two of 72 restaurants in Jasper on Tripadvisor second only to our own Terra restaurant at the Crimson, Jasper, which we refreshed and relaunched last summer.

So now let's look ahead at the exciting growth coming our way, we're very encouraged by our own booking pace and are thrilled with the momentum we have heading into the peak summer season.

With strong demand for our geographies and experiences we fully expect to set new records for revenue and adjusted EBITDA during the third quarter and for the full 2023 year.

A key success factor for us is having the right level of talent in place across the organization and we continue to win the war for talent pursued.

I'm Super pleased to say that our efforts to build a strong team and drive record levels of team member engagement have put us in great shape for 'twenty, three with strong staffing levels across all of pursuits geographies to meet the surge in demand, we're seeing as we accelerate into the peak summer months.

Pursuits businesses built such that profitability grows materially with incremental increases in attractions visitation.

As I noted earlier, we realized a 200 basis point year over year improvement in adjusted EBITDA margin during Q2.

And with revenue continuing to accelerate in Q3, we expect to see margins improved by approximately 400 basis points versus Q3 2002.

Revenue management teams are hard at work executing on strategies for regaining pre pandemic attraction visitation volumes at those locations that are more dependent on long haul international visitation and I'm quite happy with the progress we're making against those initiatives.

Our targets for 2023 are well within reach and we are on track to drive continued growth in 'twenty four to achieve our targeted 30, plus EBITDA margin.

In closing, we're very pleased with our results and execution, thus far in 'twenty three and excited about what lies ahead and just quickly I'd like to thank our operating and support teams around the world for helping to deliver a great second quarter and for all of the energy and effort in preparing for the busy times ahead, Steve back to you.

Thanks, David So let me switch gears and provide more insight into the Ges business, which includes both GTS exhibitions and our experiential marketing agency Spyros.

Ges continues to experience strong demand from corporate marketers for trade shows conferences and live events with improving industry fundamentals.

As shown on page 14, Ges delivered $231 $8 million in revenue and $26 $8 million in EBITDA with an 11, 6% EBITDA margin during the quarter. This performance exceeded our second quarter EBITDA guidance range of $20 million to $24 million through stronger than anticipated revenue grew.

Both from the rebound of live events as well as a series of margin enhancing lean activities I'm extremely happy with our performance this quarter.

As Alan highlighted earlier the year over year comparisons are challenging for the GBS this quarter because the second quarter of 'twenty two was such an anomaly.

Omicron concerns subside at the live event industry experienced a very quick rebound during the second quarter of 2022, including some shows that had postponed from Q1 into Q2.

Business activity accelerating much faster than we had expected and significantly outpaced the re staffing of our workforce coming out of the pandemic.

On the exhibition side of Ges, we reached full staffing levels by the fourth quarter of 2022 and have been successful offsetting some of the higher year over year SG&A with lean actions to increase efficiencies at spire. We've continued to selectively add talent and resources to support business development group.

Both from new and existing clients.

Even with these increases we were able to deliver a strong adjusted EBITDA margin in excess of 11% at both exhibition and aspire during the quarter.

Overall, I'm very pleased with Ges's performance and I'm excited about the outlook for the business and the industry.

Now I'd like to discuss the second quarter, our Ges exhibitions, which is the global leader in the Tradeshow services to event organizers in North America, Europe , and the United Arab Emirates.

During the second quarter, Ges exhibitions delivered $154 $5 million in revenue $17 $9 million and adjusted EBITDA and an 11, 6% adjusted EBITDA margin as seen on page 15.

As compared to the 2022 second quarter exhibitions revenue was relatively unchanged overall as improving demand offset the impact of shifting event schedules the sale of on services and negative share rotation.

I want to highlight that U S exhibitions same show revenue grew 19% year over year, which was stronger than expected and averaged 98, 5% of 2019 levels.

You will see the global Association of the exhibition industry recently released its 31 addition of the exhibition barometer, which measures the health and trends of the industry.

The report's findings concluded that the majority of international exhibitions has fully return to or surpassed their 2019 revenue levels.

The strength in the speed of the industry recovery is a clear indication of the power of in person face to face events as a marketing channel.

I'm happy to see that our same show exhibition revenue has now recovered to 2019 levels across the globe.

I think it's more important to focus on the future growth potential for Ges as the size of exhibitions fully recovers.

The net square footage of an exhibition strongly correlates to GDS exhibitions revenue the larger the exhibition, but a higher level and quantity of services required by corporate marketers and the event organizer and therefore, the higher revenue for Ges.

As shown on page 16 in the second quarter of 2023, our U S exhibitions have only recovered to about 86% of the net square footage of their 2019 occurrences on a same show basis.

This smaller footprint was driven primarily by fewer corporations exhibiting at events on prior calls I've noted that we're seeing fewer international exhibiting companies and fewer small entrepreneurial companies who have been slower to return.

As these exhibiting companies returned to trade shows and conferences Ges exhibition has the potential to see volume growth of about 14% to reach there in 2019 event side. This is a huge opportunity to drive incremental revenue and profit in 2024 and beyond.

Now turning to page 17, I'd like to discuss the second quarter performance at spire row, which serves as the experiential marketing agency of record for a great roster of Fortune 1000 corporate clients.

During the second quarter aspire or delivered $84 million in revenue $8 9 million and adjusted EBITDA and 11, 1% adjusted EBITDA margin.

Revenue during the second quarter of 2023 was lower year over year, primarily due to the sale of on services shifts in timing of client spend and some non reoccurring business, partially offset by positive share rotation and new client wins.

Overall <unk> continues to see strong spending from its corporate clients with full year marketing budgets at or above 2019 levels.

During the quarter aspire have supported many major aerospace clients at the Paris Air show. It was great to see this non annual events come Roaring back after being cancelled in 2021.

Im also pleased to report that aspire is winning trend continues as the team continues to grow the client roster with marquee clients.

Last quarter I highlighted a large client event when the 2020 for Mcdonalds worldwide Convention in Barcelona, Spain.

Despite our team is currently working side by side with Mcdonald's team and other partners to plan. This amazing event.

During the second quarter Aspire added 10, new experiential marketing clients, bringing the total of new clients won this year 2017, we expect these new clients to contribute about $15 million in revenue during 2023.

As I've done in the past I would like to highlight one of the client wins to give you a better sense of the type of experiences that inspire a competes for and wins. This past weekend inspired delivered two separate business to consumer experiences at the Formula E race in London.

In addition to producing the events VIP hospitality area for the second year in a row for this year's event spiral also designed curated and executed an immersive consumer experience for say back in Formula E sand village.

<unk> VR experience zone was a unique space, highlighting save X technology and ongoing efforts to drive sustainability.

These projects reinforce spyros efforts to build inroads to the business to consumer sports marketing vertical.

And now I'd like to turn the call over to Ellen to review our financial outlook.

Thanks, Keith before covering our third quarter guidance I want to provide some updates on our full year outlook, which is shown on page 19.

And now expect consolidated adjusted EBITDA to be in the range of $126 million to $143 million, which is up from our prior guidance of $124 million to $141 million and from $116 1 million in 2022.

As Steve mentioned earlier the increase in our guidance range is based on a significantly stronger than expected growth at Ges that we experienced during the second quarter, we're not adjusting full year guidance for pursuit at this time. However, the strong taking we're seeing lease more room for upside performance in downside risk relative to our full year guide.

<unk>, 4%.

Along with the improvement to our adjusted EBITDA guidance, we're also raising our expectations for full year cash flow from operations.

We now expect an inflow of $75 million to $85 million as compared to prior guidance of 70 to 80 million.

And we continue to plan for 70% to $75 million and capital expenditures for the full year.

Now turning to our third quarter guidance, which is outlined on page 20, we expect consolidated adjusted EBITDA to be in the range of $77 5 million to $89 5 million as compared to $82 million in the 2022 third quarter.

This range reflects significant year over year growth at pursuit and negative share rotation at Ges.

For pursuit, we expect third quarter adjusted EBITDA to be in the range of 87% to $95 million as compared to $75 1 million in the 2022 third quarter.

This growth reflects healthy margin flow through on a stronger year over year revenue, we expect revenue to be in the range of 175 to 190 million as compared to $163 8 million into 2022 third quarter as demand for proceeds experiences continues to strengthen.

For Ges, we expect third quarter adjusted EBITDA to be in the range of negative six to negative <unk>.

First and $10 7 million in the 2022 third quarter due to lower revenue.

We expect revenue to be in the range of $165 million to $180 million as compared to $218 9 million in 2022.

The anticipated year over year revenue decline is due to negative share rotation of approximately $50 million.

And now van services, which contributed about $14 million of the revenue into 2022 third quarter, partially offset by underlying growth.

Regarding third quarter cash flows, we expect operating cash flow of $55 million to $60 million and capital expenditures of 25% to 39, including growth capex of about $15 million.

Before turning the call back to Steve for some concluding remarks, I want to emphasize that our favorable outlook for 2023 shows no signs of slowing consumer demand in either of our businesses.

Given the strength, we are experiencing in leisure travel to perceived markets.

<unk> live event activity, we are comfortable with our planned level of capital spending that said, we stand ready to adjust both capital and operating expenses should the need arise.

We remain committed to maintaining a solid liquidity position by maximizing our cash flows from operations, while selectively investing in high return opportunities to continue scaling Christina through our refresh build buy growth strategy and back to you Steve.

Thanks, Alan and closing, we're thrilled with our performance and the strength, we're seeing in our businesses. So far this year and excited about what lies ahead.

<unk> continues to see positive momentum in the live event sector in pursuit of seeing ongoing acceleration of international visitation and growth across states experiences.

We expect this positive momentum to continue.

And as we look further ahead to 2020 for pursuit is well positioned for ongoing top line growth and margin expansion from the recovery of long haul international travel trade visitation continued ramping of our new experiences and the opening of flyover Chicago.

Ges should also have a much stronger year in 2024 with positive show rotation of approximately $70 million in revenue and an anticipated full recovery of show sizes and corporate marketing budgets.

We expect that 2024 will be the year that ges reaches its adjusted EBITDA margin target of greater than 8%.

Our actions to scale pursuit transform ges exhibitions cost structure and strengthen spyros capabilities are positioning us for strong growth in revenue and profitability. We remain committed to our strategy to create extraordinary experiences and strong returns for our shareholders.

I want to thank our hardworking and dedicated employees and our shareholders for your continued support and beyond.

That will open up the call for questions.

At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

Pause for just a moment to compile the Q&A roster.

Your first question comes from the line of Tyler Batori from Oppenheimer. Your line is open.

Thank you good morning, everyone.

So I want to start the GDS side.

Thanks, Steve.

The guidance there youre, assuming exhibition central revenue approaching 2019 levels, just talk about that a little bit more maybe Europe close.

Close to 90% last quarter, just what's changed there and what's your confidence level that we're not going to be moving moving backwards.

As we move through the rest of this year.