Viad Corp (VVI)

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Viad Corp (VVI)

Q1 2008 Earnings Call Transcript

April 25, 2008 9:00 am ET

Executives

Carrie Long – Director Investor Relations

Paul Dykstra – Chairman, President, Chief Executive Officer

Kevin Rabbitt – President GES Exposition Services

John Jastrem – President Exhibitgroup/Giltspur

Ellen Ingersoll – Chief Financial Officer

Analysts

Kartik Mehta – FTN Midwest Securities

Troy Mastin – William Blair & Company

Clint Fendley – Davenport & Company

Presentation

Operator

Welcome and thank you for standing by. (Operator instructions) Now I will turn the meeting over to Ms. Carrie Long, Director Investor Relations.

Carrie Long

Good morning and thank you for attending the Viad Corp first quarter 2008 earnings conference call. I’d like to remind you that certain statements made during this call which are not historical facts may constitute forward-looking statements. Actual results may differ materially from those projected in the forward-looking statements.

Additional information concerning business and other risk factors that could cause 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.

This conference call may not be recorded or reproduced in transcripts without the expressed written permission of Viad. During today's call we'll be referring to tables 1 and 2 in our earnings press release which can be found on our website at www.viad.com. With that, I’d like to introduce Paul Dykstra, Chairman, President and CEO of Viad Corp.

Paul Dykstra

On today’s call you’ll also hear from Kevin Rabbitt, President of GES Exposition Services, John Jastrem, President of Exhibitgroup/Giltspur and Ellen Ingersoll, Viad’s Chief Financial Officer. As we discuss our first quarter results you may want to refer to tables 1 and 2 in the earnings press release.

First quarter income from continuing operations was $16.7 million or $0.81 per diluted share and this is in line with our prior guidance of $0.75-$0.86 per share and up 22.7% from 2007 first quarter income of $0.66 per share.

First quarter revenue was $335.4 million, up $51.8 million or 18.2% from the 2007 quarter. And segment-operating income increased 13.8% to $28.6 million. This growth was driven by positive show rotation at GES and strong revenue growth at Exhibitgroup/Giltspur.

Now let’s move on to the individual operating segment results. Again you may want to refer to table 1 of the press release which provides revenues and operating income for each of the operating segments.

First I’d like to turn it over to Kevin Rabbitt to discuss GES.

Kevin Rabbitt

The first quarter was a record quarter for us with revenue of $285.7 million, up $40.8 million or 16.7% from the first quarter of 2007. Operating income increased 11.3% to $35.8 million. This growth was driven in part my show rotation which positively impacted our revenues by $18 million.

During the quarter we serviced four trade shows that will be among the top ten in the trade show week top 200 this year, including the two largest trade shows, the international consumer electronics show and Conexpo-Con/Agg and IFPE, a major construction trade show held every three years. Both these shows experienced growth and set new records for net square footage this year.

International consumer electronics show encompassed over 1.8 million net square feet of exhibit space. And Conexpo-Con/Agg and IFPE grew by more than 20% to 2.4 million net square feet. Producing shows of this magnitude is a significant undertaking and requires considerable resources and a great commitment from the entire GES network.

Our first quarter revenue was also bolstered by $8.7 million from an additional month of revenue at Melville which we acquired on February 1, 2007, as well as continued growth in exhibitor discretionary revenue and new business which included the National Retail Federation’s annual convention and expo and the Philadelphia International Auto Show.

During the quarter we signed nearly $150 million in future bookings. We currently have 60% of our remaining 2008 forecasted revenue under contract and our total revenue backlog for 2008 and beyond stands at $1.3 billion. Even though we had a record quarter, generating operating income of $35.8 million, we missed our operating income guidance by $652,000. This was primarily due to a couple of major shows in the retail sector. The largest was a show that had a date shift and took place after the buying season sports industry.

Because of this timing, some exhibitors chose not to participate and some of those that did participate chose smaller spaces causing freight weight to decline significantly. We had anticipated some decline but clearly underestimated the extent. We also experienced some weakness in other retail consumer shows which resulted in a drag on our overall base same show growth during the quarter.

As a reminder, base same show growth is the measure of growth in our shows that occur in the same city and the same quarter every year. Base same shows represented 44% of our total first quarter revenue.

On a net basis, our first quarter base same shows were essentially flat year over year. If you exclude retail consumer shows, our base same show growth would have been 7.2% for the quarter reflecting continued strength in other sectors including technology, hotel and food service and government and military shows.

And as I mentioned earlier, Conexpo-Con/Agg which is not included in the same show growth measure because it’s a tri-annual event realized very strong growth over its last occurrence in 2005. The trade show industry is a reflection of the broader economy and our shows represent every sector of the economy.

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