Viad Corp (VVI)

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Viad Corp. (VVI)

Q2 2008 Earnings Call Transcript

July 25, 2008 9:00 am ET

Executives

Carrie Long - Director, IR

Paul Dykstra - Chairman, President and CEO

Kevin Rabbitt - President and CEO, GES Exposition Services

John Jastrem - President and CEO, Exhibitgroup/Giltspur

Ellen Ingersoll - CFO

Analysts

Troy Mastin - William Blair & Company

Clint Fendley - Davenport & Company

Presentation

Operator

Good morning and thank you for standing by. All participants will be able to listen-only until the question-and-answer portion of today’s conference. (Operator instructions). Today's conference is being recorded, if you have any objections you may disconnect at this time.

I'd now like to turn your conference over to Ms. Carrie Long, Director, Investor Relations. You may begin.

Carrie Long

Thank you, Julie. Good morning everyone and thank you for attending our conference call. Before we begin 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 call may not be recorded or reproduced in transcripts without the expressed written permission of Viad. During today's call we'll refer to tables 1 and 2 in our earnings press release, that press release can be found on our website at www.viad.com.

Now I'll turn it over to Paul Dykstra, President and CEO of Viad Corp.

Paul Dykstra

Thanks Carrie and good morning everybody. Thank you very much for being with us today. On today's call you'll hear from Kevin Rabbitt, although Kevin is fighting some nasty laryngitis. I'll handle the prepared comments for GES and Kevin will conserve his voice and be available for questions at the end. John Jastrem, President of Exhibitgroup/Giltspur and Ellen Ingersoll, Viad's Chief Financial Officer.

As we discuss our second quarter results you may want to refer to tables one and two in the earnings press release. We had a very good quarter and I want to recognize the terrific effort of all of Viad's employees.

Second quarter revenue was $277.2 million with segment operating income of $21.1 million and income from continuing operations of $13.1 million or $0.63 per diluted share. Income before other items, which excludes income from the favorable resolution of tax matters, was $12.2 million or $0.59 per share. These results are better than our prior guidance of $0.37 to $0.48 per share mainly due to stronger than expected revenue growth at Exhibitgroup/Giltspur.

As John will discuss shortly, Exhibitgroup/Giltspur realized a revenue increase of $3.6 million despite negative show rotation of $13 million. The expected year-over-year decline in our income per share was driven by a change in the mix of shows and 2007 second quarter income of $3.9 million from a contract settlement at GES as well as the seasonal operating loss at the Becker Group.

Now let's move on to the individual operating segment results and again you may want to refer to table one of the press release which provides revenue and operating income for each of the operating segments. I will first cover GES.GES had a solid quarter with operating income of $14 million on revenue of $187.6 million. Operating income was at the high end of our prior guidance reflecting strong execution by the GES team and continued growth in the trade show industry.

As compared to the 2007 second quarter revenue was down $5.2 million. This decline was due in part to the loss of a major trade show, which we were able to mostly offset through new business wins and growth in other shows.

Operating income was $8.1 million lower than the 2007 second quarter reflecting several factors including a non-recurring contract settlement of $3.9 million in the 2007 quarter, shift of some shows from higher margin to lower margin geographies, and higher year-over-year staffing levels needed to produce a record revenue year.

During the second quarter we signed $260 million in future bookings, including multi-year renewals with MAGIC and the National Restaurant Association. We currently have over 70% of our remaining 2008-forecasted revenue under contract, and our total revenue backlog for 2008 and beyond stands at $1.4 billion.

I'm also very happy to report that this week we extended our contract with the International Consumer Electronics show. This is the largest annual trade show in North America through 2013. This extension is not included in the backlog figures I just reported.

Our base same-show growth during the quarter was 4.6% reflecting growth across all of our industry sectors. As a reminder base same-show growth is a measure of growth in our shows that occur in the same city and same quarter every year. Base same-shows represented 27% of our total second quarter revenue.

The trade show industry is a reflection of the broader economy and our shows represent every sector of the economy. While the trade show industry as a whole continues to grow at a modest pace, it is experiencing softness in certain sectors and shows, particularly retail and consumer as Kevin discussed last quarter.

During the third quarter we will have a heavier mix of retail and consumer type shows as compared to the second quarter, and as a result we are expecting our base same show growth metric to post a sequential quarter decline. At the same time, we also have a heavier mix of industrial shows, as three major non-annual shows rotate into the third quarter, including IMTS, Mine Expo and The International Woodworking Machinery and Furniture Supply Fair.

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