Joe Diaz - Investor Relations Steve Moster - President and Chief Executive Officer Ellen Ingersoll - Chief Financial Officer.

John Healy - Northcoast Research.

Welcome and thank you for standing-by to the Viad Corp Fourth Quarter Earnings Conference Call. All parties are in a listen-only mode until the question-and-answer session of today’s conference (Operator Instructions). Today's conference is also being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the meeting over to Mr. Joe Diaz. You may begin..

Thank you, and good morning to all of you participating in the Viad Corp year-end 2014 earnings conference call. I'd like to remind everyone that certain statements made during this call, which are not historical facts, may constitute forward-looking statements.

Additional information concerning business and other risk factors that could cause actual results to materially differ from those in the forward-looking statements can be found in Viad's annual and quarterly reports filed with the SEC. During today's call, we'll refer to the earnings press release, which is available on the Viad Web site at viad.com.

Today, you'll hear from Steve Moster, Viad's President and Chief Executive Officer; and Ellen Ingersoll, Viad's Chief Financial Officer. With that, I'd like to turn the call over to Steve Moster.

Steve?.

Thanks, Joe, and good morning everybody. I’d like to thank you all for joining us on the call today. As many of you noticed, it is my first call as CEO of the Company. I am excited to lead the Company going forward, and I appreciate the confidence that the Board has placed in me. We have a solid growth strategy in place.

We have the right people to execute this strategy. And I believe there are many opportunities to grow and improve our business groups in the coming years. Both of our business groups finished 2014 in line with our prior guidance and delivered solid results during the fourth quarter.

For the year, we delivered significant growth in revenue and operating income. GES’s full year operating income increased $11.6 million with revenue growth of 11.8%. Travel & Recreation Group operating income increased $6.3 million with revenue growth of 11.1%.

And Viad’s income per share, before other items, grew by 38.3% to $1.59 versus $1.15 in 2013. At GES, we’re making significant progress against our strategy to become the preferred global full service provider for live events.

GES has a long and strong history providing efficient contracting and exhibit design, construction and program management services to the exhibition market. And we probably hold leading position in the U.S. Canada, UK and the Middle East. This continues to be the cornerstone of our business and remains incredibly important.

We also see great opportunities to expand into new lines of business, extend our prominent and traditional category with live events, including conferences, corporate events and consumer events. This is happening through the launch of new products, entering the new markets and expansion into new geographies.

In late 2013, we launched an in-house audio-visual services team, which quickly gained market share in the U.S. Following this, we acquired Blitz Communications in September 2014, which gave us the in-house audio-visual services in Europe.

In the fourth quarter, we created additional platform for live events by ranging other several firms with revenue generating technologies that we’re seeing, that together, create a wealth of event data.

More specifically, we acquired onPeak and Travel Planners, the leading event accommodations companies, and N200, Europe’s leading event registration company and we also formed our partnership with [Cadmium CD], an award winning conference technology company, to create an exclusive content management solution for event organizers and speakers.

As we execute our growth strategy, our focus is on adding new products and services that are essential to the live event market and that also support our core contracting business. We want to acquire leading players with products designed the meet the current and future needs of our clients.

And we’re focused on areas that can bring an immediate cross-sell opportunity. The live events industry and our clients value our strategy and have responded well to our focus on the full service provider to live events. And we’re having success expanding with the new service lines across geographies.

And a great example of this is our new global agreement with Tarsus, a leading global event organizer that now includes all of its events across the U.S., UK, Europe and United Arab Emirates. Another leading organizer, UBM EMEA has signed on to use our new registration business and our audio-visual services for its UK based events.

We’re also extending our reach within events here in the United States. A couple of key examples include the L.A. Auto Show and the Western Veterinary Conference where we’ve added audio visual services to our scope of work. And we’re winning new corporate event business including tablet conference for 2015 and '16.

Our Travel & Recreation business also continues to make significant progress growing and optimizing our asset base through our refresh bill-buy initiatives. This past year marked the launch of our Glacier Skywalk attraction in Jasper National Park.

The Skywalk exceeded our expectations in terms of passenger presentation and that’s won many awards for innovative design and environmentally sound architecture including the Canadian Design-Build Institute’s Awards of Excellence and the Canadian Consulting Engineering’s Award of Excellence.

We’re also honored that the Skywalk was recently highlighted in Architectural Digest February issue. On the bright side of our strategy we completed the acquisition of the West Glacier properties, which are situation in prime locations in the West entrance of Glacier National Park.

This is a great bolt-on acquisition that gives us additional scale on the glacier market. And I am happy to report that we had strong first year of operation at West Glacier. As we drive growth through our refresh bill buy initiatives, we're focused on high return opportunities to optimize our existing assets and to add scale.

I am thinking about acquisition opportunities, we hold as first priorities to the current geographic locations where we can maximize economies of scale and scope.

As we consider new geographies we're looking for meaningful scale in market share and other iconic natural destinations with perennial demand, preferably with a combination of attraction in hotels. As we head into 2015 we feel strong about the tourism market for two main reasons.

Number one, the strengthening dollar and lower gasoline prices should drive increased U.S. tourism spend. And number two, the cruise line industry is adding another ship to the Alaska route which should drive more overnight guests to Denali. We believe these factors will drive additional visitations to the national parks.

For GES the exhibition industry it's forecasted to continue its low single-digit growth in 2015, the favorable industry trend should help us drive same-store growth in the mid single-digits. Growth in our core business combined with new revenues from new services should more than offset negative show rotation of about $75 million in revenue.

Overall we're expecting strong underlying performance of both businesses in 2015, however this will be now somewhat unfavorable currency translation as the dollar strengthened against other currencies. Looking further ahead to 2016, we expect a much stronger year.

At GES we expect revenue to exceed $1 billion and we expect operating margins to reach or exceed 5%. There'll be three primary drivers of this growth. Number one, we have positive share rotation of slightly be somewhere in the range of $50 million to $60 million in revenue with high throughput operating income.

Number two, the growth of our core business and newly acquired businesses and three our continued focus on labor management and overhead costs. The Travel & Recreation Group should have another year of single-digit organic revenue growth in 2016 with margin expansion as we continue to optimize our assets and enhance our guest experience.

We also remain active on the acquisition front which triggered most of growth even more. And now I would like to turn the call over to our CFO, Ellen Ingersoll for some additional color on the financials. After that we'll open up the call for your questions. Ellen..

Thanks Steve. As Steve mentioned from an operational perspective we finished the year in line with our prior guidance and up significantly from 2013.

We did however incur acquisition transaction related costs of approximately $0.08 per share including these costs our fourth quarter loss before other items per share was $0.25 versus our guidance for a loss of $0.30 to $0.20.

Our segment operating results for the quarter came in at better than guidance as we under spent our forecasted acquisition integration cost by about 1.3 million at GES, notwithstanding that savings in these groups were in line with guidance and delivered stronger year-on-year operating results during the quarter.

Organic revenue growth at GES was 4.6% for the quarter which excludes the impact of acquisitions and currency translations. This growth was driven mainly by U.S. based same-store revenue growth of 17.4% and higher revenue from corporate clients, especially offset by negative share rotation of approximately 6 million.

For the year organic revenue growth was 9.3% or 78.4 million driven primarily by positive share rotation of approximately 65 million. U.S. based same-store growth of 6.4% and new business wins that more than offset us at the international consumer electronics show.

The acquisitions as onPeak, Travel Planners, Blitz and N200 added revenue of 14.8 million for the quarter and 16.7 million for the year, with an aggregate operating loss of about 540,000 for the quarter and about 70,000 for the year.

The operating loss was driven by integration costs and intangible amortization of about 800,000 and 1.7 million respectively, which were incurred mostly in the fourth quarter. Currency translation had a favorable effect on GESs full year revenue and operating income of about 4.4 million and 250,000 respectively.

For the fourth quarter it had a negative effect on revenue of approximately 2.1 million with the negligible impact to operating income.GES full year operating margin improved by 100 basis points for 2013, primarily driven by higher revenue partially offset by the non-recurring $4.8 million gain on sale facility in 2013 and higher performance based incentives.

Additionally as previously discussed the acquisitions provided 16.7 million in revenue with a slight operating loss. For the Travel & Recreation Group organic revenue growth was 1.3% for the seasonally slow fourth quarter which excludes the effect of the acquisitions the Glacier Skywalk and currency translations.

For the year organic revenue growth was 6% or 6.5 million driven primarily by higher passenger volumes increased during the traction and improved RevPAR, especially within the advance market.

The acquisition of the West Glacier properties and the new Glacier Skywalk attraction added revenue that's 345,000 for the quarter and 10.3 million for the year. The operating income contribution was negligible for the fourth quarter and approximately 5.5 million for the year. As expected operating margins for the Skywalk exceeded 50%.

Currency translation had an unfavorable effect on Travel & Recreation Group, the Travel & Recreation Group full year revenue and operating income of approximately 4.7 million and 8 million 75,000 respectively.

For the fourth quarter we had a negative effect on revenue of approximately 700,000 and the positive effect on operating income of approximately 110,000. Travel & Recreation Group’s full year operating margin improved by 320 basis points versus 2013, primarily driven by strong revenue growth from Blitz’s high margin extraction.

Our fourth quarter corporate activities expense was up 4.1 million from 2013, primarily due to CEO transition cost of 2.7 million and the acquisition transaction related cost that I mentioned earlier, which amounted to 1.6 million pretax.

Interest expense increased by 665,000 from the 2013 fourth quarter due to higher debt levels resulting from our recent acquisitions. During the quarter, we spend approximately $90 million from the acquisitions of onPeak, Travel Planners and N200. Our debt at the end of the year was 141 million versus 24 million at the end of the third quarter.

And our debt to capital ratio increased to 28.9%. Free cash flow for the year was 25.7 million, which is slightly better than our prior guidance. Cash and cash equivalents totaled 57 million at year end comparable to the end of the third quarter. Now moving on to guidance for 2015.

For the year, we expect consolidated revenue to be comparable to 2014 as growth in the underlying business and our recent acquisitions offset single-digit range from negative show rotation of about 75 million and unfavorable currency translation of about 35 million.

We expect total segment EBITDA, defined as segment operating income plus depreciation and amortization, to be in the range of 90 million to 94 million versus 90.5 million in 2014. Depreciation and amortization is expected to be in the range of 38 million to 40 million, which is up from 30.8 million in 2014 due to the recent acquisitions.

Full year revenue at GES is expected to be comparable to 2014 as growth from the core business and acquisitions offset negative show rotation and unfavorable currency translations. We expect core business growth in the mid single digits driven by same store growth in new business wins.

Full year operating margins at GES will be lower than 2014 due to high flow through negative show rotation revenue reflecting the operating leverage that exist within the core contracting business.

As a reminder, we typically see the operating income flow-through of 20% or more on incremental contracting revenues, which is greater than the operating margins from our newly acquired businesses. We expect to realizing operating margin in the range of about 5% to 7% on the GES acquisition with an EBITDA margin of about 23% to 24%.

These ranges include integration cost of about 1.5 million. For the Travel & Recreation Group, we expect a slight increase in full year revenue versus unfavorable currency translation to more than offset by low double digit growth in the underlying business.

In local currency we expect the operating margins of each Travel & Recreation business to improve versus 2014. However, we expect this improvement will be masked by unfavorable currency translation resulting in comparable year annual margins for this segment as a whole. The recent strengthening of the U.S.

dollar relative to most other currencies will have a significant impact on our 2015 results. For the year, we expect currency translation to negatively impact income per share by about $0.16. This is due to an exchange rate of $0.82 for the Canadian dollar and $1.50 for the British pound.

For every one cent change in these currencies, we would expect that the operating income change by approximately 300,000 to 350,000 for our Canadian operations and by approximately 50,000 for our UK operations with minimal translation exposure to other currencies.

Our full year cash flow from operations is expected to be about 50 million and capital expenditures are expected to be about 30 million.

For the first quarter, we expect consolidated revenue to decrease by approximately 28 million to 39 million, driven by negative show rotation revenue of about 40 million and unfavorable currency translations of about 7 million, partially offset by additional revenue from the recent GES acquisition.

And we expect a loss per share in the range of $0.23 to $0.15 versus income per share of $0.36 in the 2014 first quarter due to negative show rotation revenue as well as higher interest expense. And with that we’ll open the call for questions..

(Operator Instructions) And we do have a question in queue from John Healy from Northcoast Research. Your line is now open..

Steve I wanted to ask kind of the strategic question. Over the last four quarters you guys have been fairly active on the M&A front, both on each sides of your business.

And would you taking to home now and having some headwinds from an FX standpoint and to managing the business from a show rotation standpoint, how do you look at the acquisition pipeline? Do you decide to push forward with it even faster because you’ve got good people that are freed up and maybe doing some other things in the business? Or do you look at 2015 as kind of the year where, we've bought the nice properties, we got to get these integrated.

So kind of the appetite for M&A and the speed of what you're going to put out on that front?.

We did have an active year in 2014. It's great to realize some of our growth strategies and get that underway. When I look forward into 2015 there is a balance between integrating the acquisition that we've already made and continuing to progress against our growth strategy.

I see that balance happening in 2015, we have very strong pipeline on both the Travel & Recreation side and on the GES side. And the growth strategy is imperative for our business, and so we’re going to go after that with the balance of making sure that we can integrate fully that this is that we're already acquired into the business.

So there is a balance there John, it's hard to answer it..

And just -- data point standpoint for 2015. Are there any meaningful events that are on the horizon on the GES side of the business, Marketing & Event side of the business from like a union standpoint or anything like that need to be revisited. I now every so often you guys get these contracts that are important to us.

So just wondering how 2015 shapes out from that standpoint, just from that data point..

Yes when we look at our union partner and the agreements we have with them. They tend to be a three year five year period. So every year you'll have roughly that's third of the total expense that comes up for renegotiation. Some years are larger because it's specific union in the city where we do more work and sometimes it's less.

2015 is not especially big year in terms of labor negotiations for us..

And then just last question, just from -- I would say a big picture standpoint and in think you touched on it little bit but the margin goal that you guys have set out.

Do you back those sales or are those under review -- I know you have favorable commentary in the release but how do you feel about 2016 and kind of the multiyear margin goals you guys have laid out..

I feel really strong about the targets that we've set out there for several reasons. Number one, improvements in the core business but then also further progress in our growth strategy in growing the new acquisition that we have on board. Will really lead the further growth within the Marketing & Event segment.

Additionally what we said on the Travel & Recreation side, that we continue to make progress against the growth strategy there and build a scale to the business. And so I would expect that to continue and so I feel very strong about the targets we put there..

I am showing no additional questions at this time..

Thanks for all the questions and your interest in Viad. During my 10 years with the company I have never been really more excited about our strategic direction in the opportunity that lies ahead. And for that I want to thank our talented employees, our clients and our customers and our valued partners as well as our board.

So thank you very much and we look forward to talking to you next quarter..

Thank you. This now concludes today's conference. All parties may disconnect at this time..