Carrie Long - IR Steve Moster - CEO Ellen Ingersoll - CFO.

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

Thank you and good afternoon for those who are in call thank you for joining us for our third quarter earnings conference call. During call today you will be hearing from Steve Moster, our President and CEO; and Ellen Ingersoll, our CFO. 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 Viad’s annual and quarterly reports filed with the SEC. Additionally, we’ll be referring to certain non-GAAP measures during the call.

A discussion and reconciliation of those measures can be found in table two of the earnings press release which is available on our website at www.viad.com. With that, I'll turn the call over to Steve..

Thank you for joining us on today’s call. I'm happy to report that we once again had a strong performance during the quarter and our results came in a bit better than anticipated. Our income per share before other items was $0.39 as compare to our prior guidance of $0.25 to $0.35.

The expected decline from the 2014 third quarter was due to the timing of non-annual events and unfavorable currency translation. GES’s third quarter performance was better than anticipated on continued broad based strength in our U.S. business.

And same-show revenue growth remain strong at 4.7% for the quarter and we continue to see stronger than expected revenue from our short-term bookings and from our corporate clients. Additionally, the acquisitions we completed last year continue to perform well and are meeting our investment takes.

The additional of best in class event accommodations, Audio-Visual and registration services give us a more comprehensive offering that’s helping us to secure new business for 2016 and beyond. For example Tarsus [ph], an existing GES client recently selected us to provide registration and accommodation services for Label Expo America's in 2016.

We also secured a number of new registration contracts for events in the Middle East from global organizer client including Terrafin and Informa. And we're able to leverage our position and the Audio-Visual service provider on solar power international to win the exhibition contracting services on that event for 2016 through 2018.

Another avenue of growth for us is to increase our share in under-penetrated live event segments. To that end we've added some high profile consumer events to our roster that are great example of what we’re capable of doing.

We recently launched a state of the art internationally touring cinema for the Americas Co World Series that allows sale racing guests to watch the races live and enjoy videos dedicated to the heritage of the races. And we're also working with the Walt Disney Company and Leapfrog to produce Frozen Fall Festival.

This five city tour includes interactive games and activities featuring the beloved characters from Disney's blockbuster animated movie Frozen. I want to thank the entire GES team for the great progress we're making in positioning GES as the preferred global full service provider for live events.

The successful execution of our growth strategy is resulting in increased value for our shareholders, additional benefits for our customers and exciting opportunities for our employees. Looking ahead, we expect strong execution and favorable industry conditions to continue, resulting in meaningful year-over-year growth during the fourth quarter.

With three strong quarters behind us I believe we're firmly on track to hit our 2015 full year financial goals for GES. Now let me switch gears for a second to talk about our Travel & Recreation Group. Our revenue is up 3.1% with a $2.9 million increase in segment operating income when adjusted for unfavorable currency translation.

This growth was slightly below our guidance range due to severe forest fire activity that affected visitation in our markets. During the last earning call I mentioned that our Glacier Park operation was affected by a fire that had temporarily closed the east entrance to the park and a portion of the Going-to-the-sun road.

At the time of our earnings call fire crews were making steady progress containing that fire, the rentals creek fire and by August 7th the east entrance and the Going-to-the-sun road were both reopened.

Unfortunately, a lightning strike on August 9th started a new set of fires known as the Thompson-Divide Complex, it caused additional closures in and around the park during August and into September.

Brewster was somewhat affected by fire activity as smoke from the fires in the state of Washington made its way to Banff and Jasper National Park, impairing visibility and hampering visitation.

As a result of the fires we saw a revenue decline of $1.9 million from our Glacier Park operations that muted overall travel and recreation RevPAR growth and was a drag on the total hospitality revenue. This was more than offset by growth across all Brewster's lines of business and at Alaska Denali travel.

Brewster's revenue grew at 8.1% in local currency led by its high margin attractions where higher effective ticket prices more than offset a slight decline in passengers. Revenue at Alaska Denali travel was up 7.2% driven primarily by an increase in RevPAR for both higher rates and occupancy.

As you may recall we had a very strong start to our peak season this year with second quarter organic revenue growth of 9.8% year-over-year.

Thanks to that strong start and continued growth into the third quarter at Brewster and Alaska Denali travel we expect full year travel and recreation operating income to be similar to 2014 despite the impacts of fires and reduction of about $5 million from unfavorable exchange rate variances.

And for that I want to thank the entire Travel & Recreation team for their successful efforts to drive improved RevPAR at our hospitality assets and higher effective ticket prices at our attractions while also managing costs and driving forward our refresh filled by growth strategy.

As part of that strategy we recently began to plan renovations of the upper terminal of our Banff Gondola attraction that I discussed last quarter. The Gondola is now closed to the public and is scheduled to reopen in phases beginning in May 2016.

By limiting operational closures to our seasonally slow months, we will be minimizing the financial impact of construction activity. Once renovations are fully complete in mid-2016, the upper terminal will boast 25% more square footage with an upgraded dining and retail services and a new experiential area.

We also made great plans to ensure that the Gondola's ongoing success as the must-do attraction in Banff and position it for optimal returns. And now I'd like to turn the call over to Ellen for some additional color on our 2015 financial performance.

Ellen?.

Thanks Steve. For the 2015 third quarter we reported income before other items of $0.39 per share on revenue of 255.9 million and adjusted segment operating income of 14.8 million which excludes 247,000 in acquisitions integration cost at GES.

These results were better than our prior guidance as Steve discussed earlier but down from the 2014 third quarter. GES posted total revenue of a 188.9 million for the third quarter which was down 37.8 million year-over-year.

Share rotation resulted in a net decrease in revenue of about 53 million, unfavorable currency translation impacted GES's revenue by about 4.2 million and the acquisitions of onPeak, Blitz and N200 contributed incremental revenue of 8.1 million versus the 2014 third quarter.

Excluding those three factors GES's revenue was up about 11.3 million reflecting continued growth in the U.S. partially offset by small decline in international revenue it was primarily driven by non-recurring revenue from certain 2014 events. GES's consolidated segment operating results decreased 17.2 million to loss of 14.8 million.

This was primarily due to flow through on negative share rotation revenue as well as an expected loss from the acquisitions that reduced operating results by 2.9 million versus the 2014 quarter. The Travel & Recreation Group posted revenue of 67.1 million for the third quarter, which was down 6.1 million year-over-year.

Excluding unfavorable currency translation the impact to Travel &Rec revenue by 8.3 million revenue was up 2.3 million or 3.1% as Steve explained earlier. Travel & Recreation segment operating income was 29.4 million for the quarter, down 1.3 million from the 2014 third quarter also due to currency translation.

Excluding currency translation operating income increased 2.9 million. Segment operating margins improved to 43.8% versus 41.9% in the 2014 quarter primarily reflecting strong flow through on tractions revenue growth.

The consolidated cash flow from operations was 38.3 million during the third quarter down from 53.9 million in the 2014 quarter primarily due to lower income. At September 30, our cash and cash equivalents totaled 75.3 million, debt was a 116.9 million and our debt to capital ratio was 25.2%. Now moving on to guidance.

For the fourth quarter we’re expecting a loss per share of $0.08 to breakeven as compared to a loss of $0.18 in the 2014 quarter. This improvement is expected to be driven by stronger year-over-year performance at GES.

GES's fourth quarter revenue is expected to increase by approximately 16.5 million to 26.5 million from the 2014 quarter with an adjusted segment operating income increase of approximately 2.5 million to 5 million.

This growth is expected to be driven primarily by positive share rotation revenue of about $10 million and growth in the core business partially offset by unfavorable currency translation.

For the Travel & Recreation Group we expect fourth quarter revenue to decrease by approximately 1 million to 3 million from the 2014 quarter with segment operating income that is flat to down about $2 million.

The expected revenue decline reflects unfavorable currency translation and the temporary closer of the Gondola for renovation work during this off-season. Our 2015 full year outlook on the whole is relatively unchanged but there are some pluses and minuses that I'll cover now.

We continue to expect full year consolidated revenue to be comparable to 2014 as growth in the underlying business and our recent acquisitions offset significant headwinds from negative share rotation of about 70 million and unfavorable currency translation of about 40 million.

We had previously expected relatively flat revenue from both GES and Travel & Rec and based on our third quarter results we’re now expecting low single-digit growth from GES to be largely offset by a mid-single digit decline on Travel & Rec. Our expectations regarding adjusted segment operating margin performance for each business remain unchanged.

GES margins are expected to be in the range of 2.6% to 2.9% and the Travel & Rec margins are expected to be comparable to 2014. We expect total adjusted segment EBITDA to be in the range of 87.5 million to 90.5 million versus 91.3 million in 2014.

This was down slightly from our prior guidance range of 89 million to 93 million due to lower revenue from Travel & Rec as a result of the third quarter forest fires. Our full year cash flow from operations is expected to about 60 million and capital expenditures are expected to be about 35 million.

Additional 2015 guidance can be found in the earnings press release. Steve back to you. .

Thanks Ellen, aside from the optionalities [ph] of the forest fires, 2015 is shaping up to be a very good year for us with strong underlying performance from both Travel & Recreation and GES, and we expect 2016 to be considerably better year with segment operating income growth of 40% or more.

GES should see revenue growth in the range of 10% as we benefited from positive share rotation and continued growth of our core businesses as well as newly acquired businesses, and we expect to achieve an operating margin of 5%. For our Travel & Recreation business we’re expecting revenue to be down somewhat from 2015 with improved EBITDA margins.

The revenue decline will be due in part to the temporary closer of the Gondola for construction through May of 2016. We also expect lower revenue from transportation and packaged tours as we make changes to improve the margin and return profile of those business lines by exiting certain low margin capital intensive activities.

While these changes will hamper top line growth, they are right moves for our business and our shareholders. Additionally, we continue to pursue our acquisition strategies for both GES and Travel & Recreation and we have active deal pipelines. This 2016 outlook that I just discussed does not include any potential acquisition.

In closing I’m very excited about our strategic direction and the progress we're making to deliver strong shareholder value this year and in the years to come. I want to thank the entirely Viad team for driving solid results and for their commitment to our strategy. And with that we'll open the call up for some questions.

Becky can you open the call please..

Operator:.

Great okay thanks Becky. Okay thanks for your interest in Viad and we look forward to speaking with you again in the next quarter. Thanks you very much good bye..

Thank you. And that concludes today’s conference. Thank you for participating. You may now disconnect..