Viad Corp (VVI)

VVI 
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Viad Corp (VVI)

Q4 2013 Earnings Call

February 07, 2014 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

Analysts

Luisa Lau - Singular Research

Stephen Altebrando - Sidoti & Company, LLC

Presentation

Operator

Welcome to the Viad Corp Fourth Quarter Earnings Conference Call. [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. Good morning, and thank all of you for participating in the Viad Corp year end 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, 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 I extend my appreciation to all of you for your continued interest in Viad and for participating on today's call. I'm happy to report that we realized meaningful growth in bottom line results in 2013 despite revenue headwinds faced by the Marketing & Events Group. Although Viad's total full year revenue of $972.8 million, was 5.1% less than in 2012, operating income increased by 9.6% to $45.9 million, and consolidated operating margins increased by 60 basis points to 4.7%.

Income before other items increased by 15.6% to $1.26 per share. All told, 2013 was a solid year for Viad as we continue to grow our business, develop innovative products and service enhancements and operate in a more cost efficient manner.

The Marketing & Events Group turned in 12.2% growth in full year operating income, which is especially impressive given the $64 million revenue headwind we faced as a result of negative show rotation in the 2012 Summer Olympics.

Heading into 2013, we set very aggressive targets for the Marketing & Events Group to deliver operating margin improvement despite lower revenues. The 2013 full year operating margin came in at 2.4% up from 2% in 2012, and just shy of our 2.5% goal for the year. I'd like to thank Steve Moster and the rest of the GES team for maintaining a sharp focus on driving operation, efficiencies and delivering exceptional customer service to retain existing accounts and win new business.

Our diligent focus on enhancing operating efficiencies and improving our cost structure continues to serve us well. Our U.S. segment realized a 100 basis point improvement in operating margin and operating income was $11 million, nearly double the $5.6 million generated in 2012.

Throughout the year, we continued to make progress in optimizing our U.S. service delivery network, consolidating warehouse operations in the Eastern U.S. and establishing Atlanta as our East region depot. We will continue to make incremental improvements in the East region, but our primary focus has now shifted to the Western U.S. We have already optimized a substantial portion of the West region over the past few years. However, our Las Vegas facility lease will expire in about a year, which provides an opportunity to gain additional efficiencies in that market and across the West region. We are actively evaluating facility options in the Las Vegas Market.

We also made measurable progress with our labor management initiative and we're successful in more effectively managing variable labor across the broad spectrum of the events that GES managed in 2013.

As part of our achieving our margin improvement goals, we set a target to reduce our labor-to-revenue ratio by 50 basis points on U.S. base same-shows. I'm pleased to report that we exceeded this goal with a 70-basis point improvement. This followed a 50-basis point improvement achieved in 2012.

Our continued focus on business development is also paying off with a number of key contract renewals and competitive takeaways during the year. A few recent examples include Bristol-Myers Squibb, a leading bio-pharmaceutical company and longtime GES customer, renewed its contract to manage more than 300 global projects annually through 2015. We are dedicated to provide Bristol-Myers Squib, the highest level of service, which they have come to expect.

We also renewed Novartis, one of the world's leading pharmaceutical companies and another long-term client. Our relationship has steadily grown across a wider platform of Novartis businesses over the course of recent years. With strong team chemistry and providing exceptional service, our contract has been extended through 2015.

After an extensive competitive review, we secured a multi-year contract to continue producing the Los Angeles Auto Show. The LA Auto Show covers more than 870,000 square feet and features the who's who of the auto industry. The show's 3 industry trade days draw more than 16,000 auto industry decision makers and influencers, including more than 4,000 media from 58 countries. Once the trade days end, the following 10 days became one of the best attended auto shows in the world. GES will continue to provide excellent operational execution and innovative award-winning customer service for this exciting and influential annual event. In addition, this new contract adds cutting-edge audiovisual services to the list of solutions we will provide at the show.

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