Viad Corp. (VVI, Financial) is a marketing and events management company made up of various operating segments and a division focused on travel and recreation services. The company significantly relies on its Marketing and Events Group (GES) business unit, which accounts for more than 95% of its overall revenue.
Since the turn of the year 2017, Viad seems to have run out of steam. Its share price has nosedived from a 12-month rally, which has raged a debate among many analysts and caused some to question the company’s resolve in the market. The company’s troubles have been magnified by the increasing rivalry in the market, especially in the marketing and events segment, which happens to have limited barriers to entry. There is encroachment in this business segment with startup events management companies launching their services online at almost no cost.
Right now, some of these startups do not wait for clients to come knocking on their doors. They are aggressive and have invested heavily in marketing campaigns to build up their brands. Above all, they are considerably cheap and flexible with some of their cost items, including venue hire costs that are easily customizable to suit client’s needs. On the contrary, large players in the industry such as Viad cannot afford that level of flexibility.
A quick rundown of Viad’s recent results
Viad has been on a downward movement since reporting fourth quarter and full-year 2016 results in February. This movement ended a 12-month rally that began a year before in February 2016.
In the report, the company’s full-year revenues rose by $115.9 million to $1.2 billion, representing a 10.6% increase year over year. The increase in revenues was attributed to the continued underlying growth in both the Marketing and Events Group (GES) and the Travel and Recreation Group (T&R). The two entities constituted a combined total of about $52 million in revenue growth.
During the 2016 financial year, Viad completed several acquisitions. It acquired ON Services, FlyOver Canada, CATC and the Poken event visitor engagement technology. The move generated the company a further $55.7 million in revenues.
The exchange rate variance also had a say in the results, with the company reporting an unfavorable impact on revenues of $24 million.
How is 2017 shaping up for Viad
Viad's management team has a reason to smile despite the recent downturn in the company’s stock price. On April 27, the company released first-quarter results which reflected better-than-expected performances at GES. Revenue of $325.8 million reflected an increase of 35.0% ($84.4 million) year over year with the organic growth showing a 30.1% ($72.2 million) increase. This signified a positive show rotation at GES and also highlighted underlying growth for both businesses.
Acquisitions contributed a further $19 million but the exchange rate variance had an unfavorable impact on revenue of $4.9 million.
The increase in revenues also translated to an improvement in adjusted segment operating income, adjusted segment EBITDA and income before other items when compared to previous year’s quarter.
What to look out for in the next few quarters
For 2017, consolidated revenue for Viad is expected to increase 5% from full-year 2016 results. The increase is backed by acquisitions completed throughout 2016 and the continued growth in Viad’s underlying businesses.
The consolidated adjusted segment EBITDA is expected to range from $144.5 million to $148.5 million, as compared to $130.2 million in 2016.
Exchange rate variances are expected to impact 2017 full-year results with revenue pull expected to receive an impact of $23 million. Adjusted segment operating income and income per share before other items will be impacted by $2.5 million and $0.08 million respectively.
Conclusion
The alarm bells might be ringing for Viad, but investors should hold onto the stock. Recent acquisitions signify some longevity and certainly a brighter future. Despite the obvious competition from startups and other players in the market, there is hope the stock could soon turn the corner.
Disclosure: I have no position in any stock mentioned in this article.
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