Viad Corp (VVI)

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Viad Corp (VVI)

Q3 2013 Earnings Call

October 25, 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.

Analysts

Stephen Altebrando - Sidoti & Company, LLC

John M. Healy - Northcoast Research

Luisa Lau - Singular Research

Presentation

Operator

Welcome to the Viad Corporation Third Quarter Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now, I will turn the meeting over to Mr. Joe Diaz. Sir, you may begin.

Joe Diaz

Thank you. Good morning, and thank all of you for participating in the Viad Corp third quarter 2013 earnings conference call. I would 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 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 CEO; 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. Paul?

Paul B. Dykstra

Thanks, Joe, and thanks to all of you for participating in today's call. We appreciate your continued interest and support of the company.

I'm pleased to report that our third quarter income before other items of $0.69 per share was better than our prior guidance, reflecting stronger-than-expected performance from our Travel & Recreation Group and in-line performance from our Marketing & Events Group. Consolidated revenue for the quarter was $236.5 million with operating income of $24.6 million. As expected, year-over-year results were impacted by significant negative show rotation in our Marketing & Events group of about $70 million in revenue during the quarter but the team worked diligently to minimize the impact of the lower revenues on operating results and posted solid results for the quarter. Travel & Recreation Group also turned in a very good performance, with all 3 of its business units posting higher revenue and operating income as compared to the 2012 third quarter.

Now, I'll cover some highlights for each business group before turning the call over to Ellen, who will discuss our financial results in more detail.

Marketing & Events Group maintained a strong focus on sales and marketing activities to retain existing business and generate new business and on improving U.S. profit margins through a more efficient service delivery network and rigorous labor management. As I have previously indicated, we set a goal to increase the operating margin of our Marketing & Events Group, 2% in 2012 to 2.5% in 2013. In order to deliver this 50-basis point margin improvement in a down rotation year, a lot of things needed to turn out right for us. While not everything has gone our way this year, it's important to recognize that confronting challenges are part and parcel of running a business and it's our job to stay in the batter's box and not be afraid to swing the bat. It's how you respond to those challenges that defines what an organization is all about. While we've taken a few strikes this year, we've also hit a fair number of doubles and triples that has positioned us for improved operating results this year and beyond. We expect to be able to deliver on our 2.5% operating margin goal this year, with continued improvement in 2014 and beyond. I am proud of the team for maintaining a diligent focus on our key initiatives throughout the year to make this happen.

As it relates to business development, we successfully secured renewals with a number of our larger customers in the U.S. and internationally and, in several cases, the renewal contracts included additional business from those customers. We recently reached an agreement to extend our partnership with the Advanstar, a leading event and marketing services business focused on the fashion, licensing, life sciences and power sports industries. For a number of years, we have produced Advanstar's MAGIC Marketplace event in Las Vegas. This event takes place twice each year, with each occurrence connecting more than 5,000 fashion brands with over 65,000 visitors around the world, across exhibit space that exceeds 1 million square feet. We've also produced Advanstar's ENK events in New York and its brand licensing show in the U.K. With this renewal, Avanstar is also awarding us additional business beginning in 2014, including its project show and its U.S. brand licensing show, 2 nice competitive takeaways. Our ability to bring creative solutions and innovative ideas to Advanstar's events was key to this win.

We also extended our contract with ICSC, the premier global trade association of the shopping center industry to produce its events through 2017. And we picked up ICSC's Florida and Texas events, which were previously produced by a competitor.

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