Viad Corp (VVI)

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Viad Corp (VVI)

Q1 2013 Earnings Call

April 26, 2013 9:00 am ET

Executives

Joe Diaz

Paul B. Dykstra - Chairman, Chief Executive Officer, President and Member of Innovation & Marketing Strategy Committee

Ellen M. Ingersoll - Chief Financial Officer

Steven W. Moster - Group President of Marketing & Events and President of Global Experience Specialists, Inc.

Michael M. Hannan - Group President of Travel & Recreation and President of Brewster Inc - Sub

Analysts

Matt Madej - Northcoast Research

Stephen Altebrando - Sidoti & Company, LLC

Presentation

Operator

Welcome to the First Quarter 2013 Financial Results Conference Call for Viad Corp. [Operator Instructions] This conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to Mr. Joe Diaz. Sir, you may begin.

Joe Diaz

Thank you, Mary Anne, and thanks to all of you for participating on the Viad Corp. First Quarter 2013 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 will refer to Tables 1 and 2 in the Business Group Highlights section of the earnings press release, which is available on the Viad website at www.viad.com.

Today, you will hear from Paul Dykstra, Viad's Chairman, President and Chief Executive Officer; and Ellen Ingersoll, Viad's Chief Financial Officer. Additionally, Steve Moster, President of Viad's Marketing & Events Group; and Michael Hannan, President of Viad's Travel & Recreation Group, will be available for comment during the question-and-answer session at the end of the call.

With that, I'd like to turn the call over to Paul Dykstra, Chairman, President and Chief Executive Officer of Viad Corp. Paul?

Paul B. Dykstra

Thank you, Joe, and thanks to all of you for participating in today's call. We appreciate your continued interest and support of the company. We're off to a very good start in 2013. Both in Marketing & Events Group and the Travel & Recreation Group delivered solid results in the first quarter. Viad's consolidated revenue for the quarter increased 6.1% to $285.2 million and segment operating income more than doubled to $12.8 million.

The Marketing & Events Group performed at a high level during the first quarter, generating a 5.6% increase in revenue and a 67% increase in operating income. Operating margins for the Marketing & Events Group improved by 250 basis points to 6.7%. For the quarter, we were successful in driving improved flow-through on our incremental revenue.

These improvements were driven by our company-wide focus on driving operating efficiencies, including the efficiencies generated through our service delivery network and labor management initiatives, as well as positive show rotation and continued same-show growth. Our aim has been to optimize the utilization of inventory, equipment and labor across a streamlined network of warehousing facilities to reduce costs, operating costs and invested capital while continuing to enhance the service that we deliver to our clients. Overall, we have now reduced our U.S. facility's footprint by approximately 1.2 million square feet, and have realized annualized cost savings of nearly $7 million.

In addition, we continue to realize improvements in our labor-to-revenue ratio. Today, we have greater flexibility to adjust our cost structure to address the ebbs and flows of the business, with the goal of continued improvement in operating margins.

Having completed a successful first quarter, GES is nearly 1/3 of the way to hitting its revenue goal for the year and has delivered better-than-expected operating results, driven by solid day-to-day execution and an intense focus on expense control. It is important to note that these improvements were achieved at the same time that we were driving record highs in our customer service scores.

As it relates to the Travel & Recreation Group, we realized strong year-over-year revenue growth of 25% during the seasonally slow first quarter. This growth was fueled by both organic growth and a full quarter's contribution from the Banff International Hotel, which we acquired in March of 2012. Organic growth was driven by the successful sales and marketing activities and favorable weather conditions, which resulted in increased passenger traffic at our Banff Gondola and higher occupancy at our Grouse Mountain Lodge.

We also benefited from concerted effort to utilize our transportation assets during the slower winter season. And in that regard, Brewster generated incremental transportation revenue in the first quarter through increased charter business and a new 3-year contract with the Lake Louise Ski Resort to transfer skiers in and around the Banff area.

We are pleased with the operational and financial results of our 2 business segments for the first quarter. The entire Viad team continues to maintain a constant focus and discipline on delivering great client service, successfully executing our strategic initiatives and achieving our near and long-term financial goals. I appreciate everything the team does to deliver superior results for our customers and shareholders.

Let me now turn the call over to our Chief Financial Officer, Ellen Ingersoll, for a more detailed review of the first quarter's financial results and our forward-looking guidance. After Ellen's review, I will provide some additional background, and we'll open up the call for questions. Ellen?

Ellen M. Ingersoll

Thanks, Paul. As I cover our first quarter results, you may want to refer to Tables 1 and 2 in the Business Unit Highlights section of our earnings press release.

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