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Revenue of $402.3 million increased 10.6% ($38.6 million) year-over-year, or 11.1% ($40.5 million) on an organic basis (which excludes the impact of acquisitions and exchange rate variances).  

o

The organic revenue increase reflects continued growth at both GES and Pursuit.

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The acquisitions of Mountain Park Lodges and the Belton Chalet contributed revenue of $3.0 million.

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Exchange rate variances had an unfavorable impact on revenue of $4.9 million.

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Adjusted segment operating income, adjusted segment EBITDA and income before other items increased compared to the prior year quarter primarily due to the increase in revenue.

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The GAAP-basis net income attributable to Viad for the 2019 second quarter also included an $11.6 million, after-tax, charge related to our previously anticipated partial withdrawal from the Central States Pension Plan.

(1)

Base same-shows are defined as shows produced by GES out of the same U.S. city during the same quarter in both the current year and prior year.  Base same-shows represented 26.2% of GES North America’s organic revenue during the 2019 second quarter.

(2)

Show rotation refers to shows that take place once every two, three or four years, as well as annual shows that change quarters from one year to the next.

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GES revenue of $346.9 million increased 10.0% ($31.5 million) year-over-year.  On an organic basis, which excludes the impact of exchange rate variances, revenue increased 11.3% ($35.5 million).

o

North America organic revenue increased 9.0% ($23.5 million) primarily due to growth from corporate clients and new business wins, as well as positive show rotation of approximately $7 million.

o

EMEA organic revenue increased 19.9% ($12.1 million) primarily due to positive show rotation of approximately $12 million.

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GES adjusted segment operating income of $35.3 million* increased $6.2 million year-over-year, and $6.5 million on an organic basis.

o

North America organic adjusted segment operating income of $30.7 million* increased by $6.9 million primarily due to the increase in revenue and cost reductions resulting from the restructuring actions.

o

EMEA organic adjusted segment operating income of $4.9 million* decreased $0.4 million primarily due to the timing of certain expenses and the revenue mix.

(1)

Same-store effective ticket price is calculated as revenue from the sale of attraction tickets divided by the total number of tickets sold for all comparable Pursuit attractions, expressed on a constant currency basis. Same-store revenue per attraction visitor is a similar measure but also takes into consideration ancillary revenue derived from food and beverage and retail offerings at the comparable attractions.  Comparable attractions are defined as those operated by Pursuit for the entirety of both periods.

(2)

Same-store RevPAR is calculated as total rooms revenue divided by the total number of room nights available for all comparable Pursuit properties during the periods presented, expressed on a constant currency basis.  Comparable properties are defined as those operated by Pursuit for the entirety of both periods. Accordingly, the measures shown above do not include the Mountain Park Lodges (acquired June 2019), the Belton Chalet (acquired May 2019), and the Mount Royal Hotel (closed from December 2016 through June 2018 due to fire damage).

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Pursuit revenue of $55.4 million increased 14.6% ($7.1 million) year-over-year. On an organic basis, which excludes the impact of acquisitions and exchange rate variances, revenue increased 10.3% ($5.0 million) primarily due to stronger performance from our food and beverage and retail operations as a result of our refresh projects, our revenue management efforts, and the re-opening of the Mount Royal Hotel.

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Pursuit adjusted segment operating income of $12.0 million* increased $2.0 million year-over-year. Organic adjusted segment operating income of $10.6 million* increased $0.6 million primarily due to the increase in revenue, partially offset by additional costs to support continued expansion of the business.

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The acquisition of Mountain Park Lodges (on June 8, 2019) and the Belton Chalet (on May 21, 2019) contributed $3.0 million in revenue and $1.9 million in adjusted segment EBITDA ($1.2 million attributable to Viad shareholders).

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Exchange rate variances had a negative impact of $0.9 million on revenue and $0.1 million on adjusted segment operating income.

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Our cash flow from operations was $31.4 million for the 2019 second quarter.

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Our capital expenditures for the quarter totaled $27.0 million, comprising $20.0 million for Pursuit and $7.0 million for GES.

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We acquired Mountain Park Lodges properties and the Belton Chalet for an aggregate purchase price of approximately $79 million.

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Our return of capital totaled $2.0 million for the quarter (which represented quarterly dividends of $0.10 per share).  We had 600,067 shares remaining under our current repurchase authorization at June 30, 2019.

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Our debt proceeds (net) totaled $71.7 million for the quarter.

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Our cash and cash equivalents were $45.6 million, debt was $326.6 million, and our debt-to-capital ratio was 39.3% at June 30, 2019.

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We expect consolidated revenue to increase at a mid-single digit rate from 2018 full year revenue, driven by growth at both GES and Pursuit.

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We expect consolidated adjusted segment EBITDA to be in the range of $159 million to $166 million, as compared to $146.3 million* in 2018.

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The outlook for our business units is as follows:

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Our guidance assumes that exchange rates during the remainder of 2019 will approximate $0.76 U.S. Dollars per Canadian Dollar and $1.27 U.S. Dollars per British Pound.  As compared to 2018, we expect exchange rate variances to impact 2019 full year results as follows:

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We expect GES show rotation to have a net negative impact on full year revenue of about $20 million versus 2018.  Show rotation refers to shows that occur less frequently than annually, as well as annual shows that shift quarters from one year to the next.

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We expect GES U.S. base same-show revenue to increase at a low single digit rate.

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We expect Pursuit’s 2019 growth to be fueled primarily by investments to support our Refresh, Build, Buy strategy, which are expected to contribute incremental revenue of approximately $28 million to $32 million during 2019, inclusive of $17 million to $19 million from the Mountain Park Lodges and Belton Chalet acquisitions.  Additionally, we expect to realize mid-single digit revenue growth across the rest of our attractions and hospitality assets.

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We expect start-up costs related to the development of Pursuit’s FlyOver attractions to approximate $1.5 million during 2019.  These costs are not included in the adjusted segment EBITDA or adjusted segment operating income guidance ranges above.

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We expect corporate activities expense to be in the range of $11 million to $12 million, including $1.1 million of year-to-date acquisition transaction-related costs.

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We expect our effective tax rate on income before other items to be approximately 29%.

(1)

FX Impact represents the expected effect of year-over-year changes in exchange rates that is incorporated in the low end and high end guidance ranges presented.

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We expect GES third quarter results to decrease primarily due to negative show rotation revenue of approximately $45 million, partially offset by continued new business wins. Our operating income guidance also reflects higher performance-based incentive expense, partially offset by savings from the second quarter restructuring actions.

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We expect Pursuit third quarter results to increase primarily due to our Refresh, Build, Buy investments, and continued focus on revenue management across our attraction and hospitality portfolio.  We expect the Mountain Park Lodges and Belton Chalet acquisitions to contribute third quarter revenue of $11 million to $13 million.

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our ability to successfully integrate and achieve established financial and strategic goals from acquisitions;

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fluctuations in general economic conditions;

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our dependence on large exhibition event clients;

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the importance of key members of our account teams to our business relationships;

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the competitive nature of the industries in which we operate;

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travel industry disruptions;

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unanticipated delays and cost overruns of our capital projects, and our ability to achieve established financial and strategic goals of such projects;

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seasonality of our businesses;

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transportation disruptions and increases in transportation costs;

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natural disasters and other catastrophic events;

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the impact of recent U.S. tax legislation;

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our multi-employer pension plan funding obligations;

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our exposure to labor cost increases and work stoppages related to unionized employees;

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liabilities relating to prior and discontinued operations;

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adverse effects of show rotation on our periodic results and operating margins;

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our exposure to currency exchange rate fluctuations; our exposure to cybersecurity attacks and threats;

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compliance with laws governing the storage, collection, handling, and transfer of personal data and our exposure to legal claims and fines for data breaches or improper handling of such data;

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the effects of the United Kingdom’s exit from the European Union; and

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the effects of changes in the U.S. trade policy.

(A)

Corporate Activities — The increase in corporate activities expense during the three months ended June 30, 2019 relative to 2018 was primarily due to higher acquisition transaction-related costs in 2019. The increase in corporate activities expense during the six months ended June 30, 2019 relative to 2018 was primarily due to an increase in performance-based compensation expense and higher acquisition transaction-related costs in 2019, offset in part by a gain on sale of corporate fixed assets.

(B)

Restructuring Charges — During the three and six months ended June 30, 2019, we recorded restructuring charges primarily related to the elimination of certain positions and facility consolidations at GES. During the three months ended June 30, 2018, we recorded restructuring charges primarily related to the elimination of certain positions at GES. During the six months ended June 30, 2018, we recorded restructuring charges primarily related to the elimination of certain positions at GES and Pursuit.

(C)

Legal Settlement — During the six months ended June 30, 2019, we recorded a charge related to a legal settlement at GES involving a former industry contractor.

(D)

Pension Plan Withdrawal — During the three months ended June 30, 2019, we finalized the terms of a new collective-bargaining agreement with a certain union. The terms include a withdrawal from the under-funded Central States Pension Plan. Accordingly, we recorded a charge of $15.5 million, which represents the estimated present value of future contributions we will be required to make to the plan as a result of this partial withdrawal from the plan.

(E)

Net Interest Expense — The increase in net interest expense for the three and six months ended June 30, 2019 relative to 2018 was primarily due to higher debt balances and interest rates in 2019.

(F)

Income Taxes — Our effective income tax rate for the three months ended June 30, 2019 was 33%, as compared to 28% for the three months ended June 30, 2018.  The increase in the effective rate was primarily related to increased non-deductible expenses and our mix of domestic versus foreign income, which is taxed at higher rates.  For the six months ended June 30, 2019, our effective income tax rate was a 19% benefit on our pre-tax loss, as compared to a 26% tax expense rate on our pre-tax income during the six months ended June 30, 2018.  The lower rate in 2019 was primarily due to increased non-deductible expenses and our mix of domestic versus foreign income, which is taxed at higher rates.

(G)

Income (Loss) from Discontinued Operations — Income from discontinued operations for the three and six months ended June 30, 2019 was primarily related to a favorable legal settlement related to previously sold operations. Loss from discontinued operations for the three months ended June 30, 2018 was primarily related to legal expenses associated with previously sold operations.  Income from discontinued operations for the six months ended June 30, 2018 was primarily related to a favorable legal settlement related to previously sold operations.