Viad Corp
Q4 2017 Earnings Call Transcript

Published: 9 Feb 2018

[Operator:]

Welcome to the Viad Corp Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. [Operator Instructions]. This call is being recorded. If you have any objections, you may disconnect at this point. I’ll now turn the meeting to your host Ms. Carrie Long. Ma’am you may begin.

[Carrie Long:]

Thank you and thank you to all of you for joining us for Viad's 2017 fourth quarter and full-year earnings conference call. During the call, you'll be hearing from Steve Moster, our President and CEO; and Ellen Ingersoll, our CFO. Certain statements made during the call, which are not historical facts, may constitute forward-looking statements. 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 our annual and quarterly reports filed with the SEC. During the call, we'll be referring to certain non-GAAP measures. Important disclosures regarding these measures can be found in Table 2 of our earnings press release, which is available on our website at www.viad.com. With that, I'll turn the call over to Steve.

[Steve Moster:]

Thank you for joining us on today’s call. We delivered another year of solid growth and profitability as we continue to make progress towards our strategic goals. On a consolidated basis, our revenue grew 8.5% and our adjusted segment EBITDA margin improved 90 basis points to 11.7%. This performance was driven by strong organic growth and strategic acquisitions at both business units. At GES, we reported better-than-expected fourth-quarter revenue growth, our U.S.-base same-show revenues were up 6.2%, and our international segment revenue grew by 23% on an organic basis. Although our revenue performance was strong, operating income came in near the low end of our prior guidance range. This was largely a function of higher than anticipated cost at ON Services as we continue to integrate this acquisition and align our resources to maximize synergies. For the full-year, GES revenue growth was 7.4%. We saw continued business strength and contributions from our recent acquisitions that more than offset a revenue headwind of about $37 million from the combination of a low margin contract that we did not renew in 2016, negative share rotation, and unfavorable exchange rates. With the broadened suite of live event services, our teams are finding success in the marketplace. The addition of ON Services to our mix of offerings is strengthening our position as the preferred global full-service provider for live events and leading the cross-selling wins. We added audiovisual services to our scope of work for a number of clients, including the association of oral and natural facial surgeons, the Academy of Nutrition and Dietetics (corrected by company later) and the Food & Nutrition Conference & Expo. I’m also happy to report that we recently re-signed the biannual international manufacturing technology show through 2024 and we renewed our multi-year contract with the International Council of Shopping Centers. In addition, we remain focused on gaining share in the large corporate event space with two recent noteworthy wins, Red Hat Summit 2018 and Caterpillar. For Red Hat, we will be the full-service provider for its user conference and other select events. For Caterpillar, who have trusted us to support its grand at exhibitions for many years, we were able to leverage this relationship to win new corporate work for them. This year, we will deliver an educational experience for key Caterpillar viewers in America's, and we will create a new business visitor center experience at its headquarters. On the international side, we deepened our relationships with some of Europe's leading event organizers, with multi-year contract renewals. These renewals have a combined lifetime contract value of approximately $100 million and our proof of the strong collaborative partnerships that we have built with the organizer clients. We have seen great success growing our revenue from corporate clients by leveraging our global full-service capabilities to support their event program needs across the EMEA region. We also made good progress integrating ON Services and taking actions to position it for improved growth and profitability, including changes in leadership team and the consolidation of facilities. With those changes now behind us, and a stronger sales pipeline, we’re excited about 2018. In fact, ON services started this year on a very positive note winning a five-year contract to be the preferred provider of audiovisual services and the exclusive provider for production rigging services for the San Diego Convention Center. Overall, GES is well positioned to continue to capitalize on the momentum that we’ve created over the past three years. For 2018, we expect to drive continued strong underlying business growth to help offset negative share rotation revenue of approximately $40 million. Now, let me switch gears to Pursuit. Pursuit delivered fourth quarter results that were in-line with our prior guidance for the seasonally slow quarter. For the full-year, revenue grew 13.4% with adjusted segment EBITDA growth of 30.9%. We saw significant improvements in our key performance indicators, same-store passengers at our attraction increased 12.5% with revenue per passenger up 27.3%. At our hospitality assets, same-store RevPAR increased 6.8%. This great performance reflects the power of our Refresh, Build, Buy strategy and revenue management initiatives. Our Refresh investments to renovate the Banff Gondola, delivered results that have far exceeded our expectations. As a reminder, we committed $22 million to complete a major renovation of the leading attraction. And its first full-year of operations following the renovations, its revenue grew 57% over the prior pre-renovation period with passenger growth of 20% and a 31% increase in revenue per passenger from ticket sales, retail, and dining. Following the success of our new Sky Bistro restaurant at the Banff Gondola, we completed similar renovations of our dining services at the Glacier Discovery Centre, which provides ticketing and guest services for our Glacier Adventure Tour and Glacier Discovery Centre, Skywalk Attraction. Our team was also busy during 2017 with the reconstruction of the Mount Royal Hotel, which was damaged by fire in late 2016. Utilizing our insurance proceeds of about $30 million and an additional $5 million investment, we are undertaking a complete renovation of the property with its ideal location downtown Banff, at an enhanced guest experience, we will be able to drive stronger RevPAR and return from this asset. The project is progressing well and we’re on pace to reopen the hotel by mid-year 2018. On the Build side of our strategy, we commenced the development of an RV Park and Cabin Village on approximately 100 acres of undeveloped land that we acquired as part of an acquisition in 2014. This new development will have approximately 100 full-size RV Flips and 20 guest cabins. We expect to have the RV Park at least partially online during the 2019 season. And our growth from our Buy initiatives during 2017 was fueled by our acquisition of FlyOver Canada at the end of 2016. This attraction performed well during the first year of our ownership and delivered growth that was in-line with our expectations. In addition to being a fantastic attraction on its own, we like the FlyOver concept because it provides us with a new growth platform. And in November, we announced the expansion of this high margin attraction to Iceland. FlyOver Iceland is currently in development and we expect it to open in 2019. We continue to evaluate additional locations for this type of concept. In summary, 2017 was a year of significant accomplishments and growth for Pursuit and reported to continued growth in 2018. And now, I'll turn it over to Ellen to give us some more color on the financials.

[Ellen Ingersoll:]

Thanks Steve. For the fourth quarter, our loss per share before other items was $0.26 versus our prior guidance for a loss of $0.35 to $0.25. This figure does not include the impact of tax reform, which I’ll comment on a bit later. Our consolidated fourth quarter revenue increased 8.1%, with organic growth of $12.2 million or 5% at GES, and $1.3 million or 13.1% at Pursuit. Exchange rate variances favorably impacted fourth quarter revenue by $5 million and the acquisitions of FlyOver Canada and Poken contributed revenue growth of $2.3 million during the quarter. Consolidated adjusted segment EBITDA decreased $2.7 million from the 2016 fourth quarter. GES adjusted segment EBITDA decreased $5.4 million, primarily reflecting a less favorable mix of revenue and higher year-over-year cost at ON Services partially offset by lower performance-based compensation expense. Pursuit adjusted segment EBITDA increased $2.7 million, primarily due to revenue growth from high margin attractions. Our income before other items, adjusted segment EBITDA, and adjusted segment operating income, exclude restructuring charges, impairment charges and recoveries, acquisition transaction-related and integration cost, the impact of tax reform and other tax matters, and start-up costs related to the development of our FlyOver Iceland attraction. A reconciliation of these non-GAAP measures to net income can be found in Table 2 of the earnings press release. As you can see in Table 2, we recorded a net charge of $16.1 million, related to tax reform during the fourth quarter. This charge is comprised of 8 million related to the remeasurement of our deferred tax assets, due to lower U.S. corporate tax rate. The remaining $8.1 million related to the deemed repatriation of unremitted earnings of foreign subsidiaries, which is due to the IRS and instalments over the next eight years. We have not completed our accounting for the effects of tax reforms and the charges we recorded reflect our best estimate based on information available at this time. For the full-year, our income before other items was $2.62 per share and revenue of $1.3 billion, adjusted segment EBITDA of $152.6 million, and adjusted segment operating income of $97.7 million. As compared to 2016, our full-year income before other items increased by $0.24 per share or 10.1%, primarily due to an increase in adjusted segment operating income, partially offset by an increase in net interest expense and increased corporate expenses, driven largely by higher accruals for performance-based incentives resulting from the increase in our stock price during 2017. Our consolidated full-year revenue increased 8.5% or $102 million. Adjusted segment EBITDA increased by $22.4 million or 17.2%, and adjusted segment operating income increased by $10 million or 11.5%. And now, I’ll move on to the business group results. GES’ full-year revenue of $1.1 billion increased 7.4% or $78.4 million versus 2016. Revenue from the U.S. segment increased 5.5% or $45.7 million, including incremental revenue of approximately $41 million from the acquisition of ON Services, new business wins, and continued base same-show growth, partially offset by negative show rotation of approximately $11 million. Revenue from our international segment increased 15.8% or $34.2 million, primarily due to new business wins, same-store growth, and positive show rotation of $3 million, partially offset by unfavorable currency translation of approximately $7 million. GES’ full-year adjusted segment EBITDA was $87.4 million, up $7 million from 2016, while adjusted segment operating income decreased by $0.7 million to $50.1 million, primarily reflecting additional depreciation and amortization associated with acquisitions. U.S. adjusted segment operating income decreased $6.5 million, primarily due to $7.1 million increase in depreciation and amortization expense associated with ON Services. U.S. adjusted segment EBITDA increased $1.1 million, primarily due to contributions from ON Services, income of $2.8 million related to a contract settlement, and lower performance-based incentives, partially offset by a less profitable mix of revenue, and cost increases. International adjusted segment operating income increased $5.8 million, primarily due to higher revenue. Pursuit posted full-year revenue of $173.9 million, up 13.4% or $20.5 million versus 2016. Acquisitions and continued organic growth across the majority of our attractions and hospitality assets were the key drivers of our strong year-over-year growth. The acquisitions of FlyOver and CATC contributed incremental revenue of $10 million. Organic growth, which excludes the impact of acquisitions and exchange rate variances accounted for $8.8 million of the revenue increase and was driven mainly by higher passenger volumes and revenue per passenger at our attractions in particular to Banff Gondola and stronger RevPAR across our hospitality assets. Our same store revenue per passenger increased 27.3%, and same store RevPAR grew by 6.8% versus the prior year. Pursuit’s full-year adjusted segment EBITDA was $65.2 million, up $15.4 million or 30.9% from 2016. And adjusted segment operating income was $47.6 million, up $10.7 million or 29.1% from 2016. These increases were primarily driven by revenue growth from our high margin attractions. And now I’ll cover some cash flow and balance sheet items before discussing 2018 guidance. Our consolidated cash flow from operations was $113 million for the 2017 full-year, up from $100.3 million in 2016, primarily due to favorable working capital. And CapEx totaled $56.6 million, up from $49.8 million in 2016, primarily driven by the reconstruction of the Mount Royal Hotel. At December 31, our cash and cash equivalents totaled $53.7 million, debt was $210.2 million, and our debt-to-capital ratio was 31.8%. And now moving on to guidance. For the first quarter, we’re expecting a loss per share of $0.57 to $0.47 as compared to income before other items of $0.33 in the 2017 quarter. This change primarily reflects negative show rotation at GES. For GES, we expect first quarter revenue to decrease by approximately $48 million to $58 million from the 2017 quarter, with an adjusted segment operating income decrease of approximately $21 million to $23 million. This decrease primarily reflects negative show rotation revenue of about $55 million, certain non-recurring business, partially offset by favorable exchange rate variances of $6 million. Additionally, we’re expecting low single digit same show revenue growth during the first quarter, which is below our recent experience due to one event. We expect to return to a mid-single-digit same show growth rate over the balance of the year. Pursuit revenue is expected to be essentially flat to up about $2 million, during the seasonally slow first quarter, with a decline in adjusted segment operating results of 500,000 to 2.5 million. The increased operating loss, primarily reflects higher overhead expenses, due to additional cost to support continued growth of the business, as well as the timing of certain expenses. For the 2018 full-year, we expect consolidated revenue to increase at a low-single-digit rate from 2017 with an increase in adjusted segment EBITDA of approximately $4 million to $8 million. Depreciation and amortization expense is expected to increase by $5 million to $7 million, primarily as a result of the reopening of the Mount Royal Hotel, and other capital investments to support growth and efficiency gains. Adjusted segment operating income is expected to be in the range of $95.5 million to $99.5 million, as compared to $97.7 million in 2017. This guidance anticipates that exchange rate variances will have a positive impact of about $23 million on consolidated revenue, $1.5 million on consolidated adjusted segment operating income, and about $0.06 on income before other items per share. These impacts assume exchange rates of $0.81 for the Canadian dollar and $1.39 for the British pound. A $0.01 change in the Canadian dollar would affect our full-year revenue by about $2 million and a $0.01 change in the British pound would affect our full-year revenue by $1.5 million. At GES, full-year revenue is expected to be up slightly from 2017 with comparable EBITDA. We expect to continue same show growth, new business wins, and favorable exchange rate variances to offset negative show rotation revenue of about $40 million. At Pursuit, we expect full-year revenue growth at a high single digit to low double-digit rate from 2017 with an increase in adjusted segment EBITDA of about $6 million to $8 million. This guidance for Pursuit includes incremental revenue of about $5 million from the Mount Royal Hotel, which is expected to reopen in mid-year 2018. As a reminder, we received payment for our business interruption insurance claim during the 2017 third quarter. The portion relating to 2017 loss profits was recognized as income during 2017, and the remainder, which relates to 2018 lost profits will be recognized in income during the first half of 2018. Additionally, I want to point out that the start-up cost related to the development of our FlyOver Iceland attraction which is expected to open in 2019 are not included in these guidance ranges. FlyOver Iceland start-up costs are expected to approximate $1 million during 2018, and will be excluded from our adjusted segment EBITDA, adjusted segment operating income, and income before other items. We expect our full-year cash flow from operations to be in the range of $105 million to $115 million, and we expect capital expenditures to be about $92 million to $98 million, which includes approximately $90 million to complete the restoration and renovation of the Mount Royal Hotel and approximately $10 million to begin development of the FlyOver Iceland attraction. The Mount Royal Hotel expenditures will be funded primarily from the property insurance proceeds we received during 2017. The FlyOver Iceland expenditures will be funded out of our 2017 capital contribution to acquire the controlling interest in Esja, the Icelandic entity that is developing the FlyOver Iceland attraction. For 2018, we currently expect our full-year effective tax rate to be approximately 28% to 29%, and we expect our effective rate to be higher than the 21% U.S. federal corporate tax rate, due to our foreign earnings and higher rate jurisdictions. The increase in non-deductible expenses and an increase in our effective state tax rate. Again, this is our best estimate based on information at this time. Additional 2018 guidance can be found in the earnings press release. Steve, back to you.

[Steve Moster:]

Thanks Ellen. In closing, I’m very proud of our accomplishments in 2017 and excited about our strategic direction and the progress we’re making. In early 2014, we laid out a growth strategy centered around enhancing shareholder value to improve growth and profitability at both business groups. Since that time, we have completed five higher margin complementary acquisitions that added leading audiovisual event registration and accommodation services at GES. These acquisitions combined with our global presence, are enabling us to gain share in adjacent and under penetrated areas of live events that offer higher margins and strong growth prospects. At Pursuit, we completed five acquisitions that have expanded our business in current markets and taken us into new geographies. We have also made key investments that have grown and enhanced our high margin attraction portfolio, including the opening of the Glacier Skywalk, and the renovation of the Banff Gondola. Our strategy to scale the Pursuit business, while maintaining strong EBITDA margin, remains a key focus going forward. In summary, in the investments we have made in acquisitions and organic growth projects are providing exciting avenues of growth with enhanced profitability. I’m very happy with our progress and I'm excited about the opportunities that lie ahead. I want to take this opportunity to thank the entire Viad team for driving strong results and for their commitment to our strategy. And with that, we can open up the call to questions.

[Operator:]

Thank you. [Operator Instructions] Mr. Steve shall be begin? Steve Moster Yes.

[Operator:]

Thank you. Our first question comes from the line of Steve O'Hara from Sidoti Company. Steve O'Hara Hi, good afternoon. Steve Moster Good afternoon. Steve O'Hara Thanks for taking my question. I guess, just two things, maybe I missed it, but for the Mount Royal Hotel, I mean how much of the peak season do you expect to be able to capture this year with the opening, and what type of growth are you expecting in that property versus what you had last year, not last year, but [indiscernible]? Steve Moster Yes Steve. We anticipate opening for our guests on July 1. So, we will capture the majority of the high season in the Banff, Jasper area, and so we're very excited and we keep continue to move forward towards that opening date and where we stand now as the project is on time and on budget. Ellen, do you want to comment on kind of what this looks like year-over-year or from 2016 to 2018 for the Mount Royal? Ellen Ingersoll Hi Steve. It’s very little revenue change because of the partial season. So, we will have better growth rate comparisons as have had full-year, but revenue growth won't have a lot of change. Steve O'Hara Okay. So, I guess I mean just for the season that you're operating, so I mean from July 1 through the end of the year what’s your expectation about the growth versus what you saw in 2016, I mean are you assuming 5% growth, I mean I have seen some of the designs and things like that, I mean it looks pretty spectacular, I’m just wondering what the expectation is on maybe RevPAR or whatever? Ellen Ingersoll And that’s hard to say just on Mount Royal. I mean, our overall RevPAR is expected to grow, kind of in the mid-single digits for all of Pursuit, that’s what we’ve planned on for 2018. Mount Royal would be higher obviously because we’ve upgraded the property. Steve Moster I think the take away is that we do - we’re excited about opening the Hotel. We believe it is an elevated experience and with that elevated experience we will be able to drive higher RevPAR than we would versus the prior year version of the Mount Royal Hotel. Steve O'Hara Okay. And then just on the, I know it’s early, but in terms of thinking about 2019 and the show rotation there, I mean does - directionally does it make sense to think about it, is it similar to what you expect currently in 2018, or you know would it be something larger than that, do you think that? Ellen Ingersoll I think 2019 is going to be a bit lower than 2018. 2018 has some negative show rotation related to international, which we expect that to be a bit positive in 2019. So, I would think about 2019 to be a bit lower than 2018. Steve O'Hara Meaning, would you say lower, you mean the show rotation would be less, so it would be… Ellen Ingersoll Right. So, this year in 2018 it’s 40, in 2019 it will be more than the 25, 30 range. Steve O'Hara Okay, great. I’ll jump back in queue. Thank you. Steve Moster Thanks, Steve.

[Operator:]

Our next question comes from Marco Rodriguez from Stonegate Capital Markets. Marco Rodriguez Good afternoon guys. Thank you for taking my questions. Steve Moster Hi, Marco. Marco Rodriguez I was wondering if we could circle a little bit around on services, I believe you guys called out some additional costs that you guys incurred here in the quarter, and I think you also mentioned, you changed leadership there and I think there was some other item that you called out, can you just maybe talk a little bit about, are these additional costs because of the change in leadership or there are other costs associated with bringing the integration online? Steve Moster The higher cost really relates to, when you're looking at Q4 of 2016 to Q4 of 2017. We bought ON Services in August 2016 and so there wasn't a tremendous amount of additional cost or integration cost happening in the fourth quarter of 2016. In 2017, we have added resources to expand that business going forward and so you see some of this higher expenses showing up in the fourth quarter of 2017. Does that make sense? Marco Rodriguez Yes. And so those expenses are fixed in nature, if I'm understanding you correctly? Steve Moster It’s really, it’s headcount and so it’s really positioning ourselves for future growth in sales and being able to execute that growth. Marco Rodriguez Got you. Okay. And then kind of shifting gears here a little bit to the RV Park, you know you're looking to have it open partially for 2019 season, just wondering if you can maybe walk us through the steps and kind of a timeline that you will be taking here to get that open for 2019? Steve Moster Yes. So, we made a little bit of progress at the end of 2017. If you remember Marco there were some fires that were in the Glacier Park area and those prohibited us from starting any type of land squaring to get started on the project, but towards the - later in the year the weather was somewhat favorable and we were able to get started, but to a lesser degree than we had anticipated. So, that has pushed back and we announced this on our last call that it pushed back our timeline for opening. So, we will spend - as soon as the weather turns to spring and we are able to get into that property. We have the contracts ready to clear the land and start the construction of the RV Park. The majority of that will be happening in 2018, which will allow us to open the bulk of it in 2019. There will still be some elements that will be building out in early or in the 2019 season. Selectively to avoid any disruption to our guests that are there, and they will be opening up the full facility in 2020. Marco Rodriguez Got you. And the CapEx requirements for that, I guess are relatively minimal in comparison to the overall annual budget that you’ve put out there? Steve Moster Yes, they are. And I think we’ve disclosed this before. Marco Rodriguez Okay. Got you. Ellen Ingersoll RV Park is going to be 6 million six or 7 million in 2018. Marco Rodriguez Got you. Okay. And then kind of looking at the FlyOver concept, obviously you are now expecting to expand this into Iceland provides I guess, you guys obviously have some potential excitement here in fiscal 2019, just kind of wondering if you could first talk about what are the sort of the criteria’s you're looking to expand this concept into other area, and then if you might be able to talk, it looks like FlyOver Canada did about $10 million in revenues in fiscal 2017, just kind of wondering if that might be kind of like a general run rate for the concept? And then if maybe you could talk just about the difference in the gross margins, I know it is higher margins, but if you can maybe quantify that or give us some sort of a sense as far as how much better they might be? Steve Moster I’ll tackle a part of that and I’ll ask Ellen to talk about gross margins going forward. When we think about different locations, we’re looking for iconic destinations that have perennial demand. And so, we’re looking for - for example Vancouver, I believe has roughly 9 million visitors each year to the City of Vancouver. We are one of the only attractions located near downtown within walking distance of downtown. And so that’s the type of setup that we’re looking for and honestly some of the visitation numbers for Iceland and specifically, Reykjavik is what attracted us to the FlyOver Iceland concept, and so we’re continuing to look for opportunities very similar to both of those where you have high visitation, natural beauty, iconic beauty, and where we are one of the primary attractions in that area. Ellen, do you want to comment on kind of what we think in terms of future prospects for Iceland? Ellen Ingersoll Sure. So, FlyOver Canada is about $10 million in revenue. Iceland will be a bit lower than that. The seating capacity of the attraction is a little bit smaller than in Vancouver. The margins are high on both, just like our other high margin attractions within the Pursuit Group. Marco Rodriguez Got you. And then just a real quick kind of a housekeeping item here. Just looking at the press release tables, when it comes to GE as the revenues as reported and broken out via acquisition FX, organic et cetera, just wanted to make sure I’m kind of understanding something here correctly, there is no acquisition revenues for GES, U.S. for this quarter and it looks like the table is also showing that you have about 72 million or so in acquisition revenues for GES U.S. When I look at the prior nine-month period for acquisition revenues in GES in the U.S. side, I have got roughly 56 million, 57 million. Where there some revenues that were reclassed or am I missing something here? Ellen Ingersoll So, the reason why there isn’t acquisition revenue in the fourth quarter for GES U.S. is that ON Services we had that in fourth quarters, both 2016 and 2017, but ON Services is included in the full-year 2017. So that number you mentioned the 72 million ON Services is included in that full number. Marco Rodriguez So, okay. So, the additional 25 million or so in the organic 188 million that you’ve got in fourth quarter U.S. revenue? Ellen Ingersoll The additional ON Services is in the fourth quarter. If you look at the full-year acquisition revenue of 72 million, minus the nine months that would be the ON Services for the quarter. Marco Rodriguez Okay. And that’s in the organic segment for Q4? Ellen Ingersoll That is. Correct. We just had in bulk, sorry the full quarter of 2016 and 2017. Marco Rodriguez Okay. All right thanks a lot guys. Appreciate it. Ellen Ingersoll Sure. Steve Moster Thanks, Marco.

[Operator:]

[Operator Instructions] Our next question comes from the line of Peter Rabover from Artko Capital. Your line is now open. Peter Rabover Hi guys. Good job as always. I have just a couple of questions, maybe just to circle back on the FlyOver Iceland, which is a great concept, but I assume the economics of greenfielding it are better than the economics of buying it. So, maybe just another way of, kind of circling back to the same question, if you’re investing 10 million, what do you think the ROIC on top of something like that would be? Steve Moster You’re right. I mean when you do a greenfield it is obviously more favorable. At times it is less expensive to produce it. So, I don't think we’ve actually talked about what the ROIC is on any individual acquisition, but it’s safe to assume that it’s better than what we’ve done at FlyOver Canada simply because that start-up cost is less than what we did in the acquisition we did in Vancouver. Peter Rabover Okay, great. And then, I guess just thinking about more of the pipeline for both the GES and Pursuit anything you guys are looking at, I mean, I am obviously not asking you to comment on whether you are going to do a deal, but relative to the last few years, is there more opportunity or less, etcetera? Steve Moster I think it’s the same. Peter, we’ve talked a number of times about the pipeline and we’ve made progress against kind of our strategic goals, a lot of it through acquisitions, some of it internally, I would say that the M&A pipelines for both businesses are healthy and we continue to evaluate those opportunities for fit and for financial performance and cultural fit management team. So, strong pipelines and we are going to continue to pursue our growth strategy. Peter Rabover Okay. And then maybe you could just help me out understand, because I think in the past with the same show rotation it has usually been one negative year, one positive year and it sounds like this year you are having two negative years and then the third year is going to be negative. So, maybe I’m not understanding how that works? Why is it? Steve Moster Peter it’s not as easy as one year on, one year off in terms of positive or negative rotation. There are a handful of non-annual events and they happen at different intervals. So, one of them is every two years, one of them is every three years and one of them is every four years. And so, it creates a, more than just an on year and off year. So, it just creates something where, for example in 2020 all of the non-annuals will actually occur in the same year, but in 2019 none of the major ones happen. So, it’s not as easy as on and off. Peter Rabover No, no, I understand that. I was just surprised. So, like the 40 million this year, 2018, is that a big like negative operating leverage numbers, like I assume it’s not a one-for-one 7% EBITDA margin, but probably… Steve Moster As we’ve talked about it, you know both the up and the down cycle, they flow through a higher flow-through rate. Peter Rabover Okay. I just wanted to make sure of that. So, 2020 would potentially be like a really, really big year on the EBITDA side? Steve Moster Exactly. Peter Rabover Okay, great. And then just one last question, I know you guys say this, but you guys give out so much information that maybe I missed it, but what's the breakdown between the growth CapEx for 2018 and maintenance CapEx? Ellen Ingersoll I didn’t actually breakout the growth CapEx for 2018. We did break out major projects in the comments Mount Royal at 19 million and FlyOver Iceland at 10, we just mentioned that the RV Park is about 7. So, those would be the growth. The major growth projects. Peter Rabover Right. Is there any growth on GES? Ellen Ingersoll Our CapEx tends to be about 2% on GES. GES has a couple of throwing exhibitions on the growth CapEx side; and then for Pursuit the maintenance is about 8% of revenue. Peter Rabover All right. Thanks. That's all I have. Steve Moster Thanks Peter.

[Operator:]

Our next question comes from the line of Jamie Yackow from Moab Partners. Your line is now open. Jamie Yackow Hi guys, thanks for all the details. Peter actually asked a bunch of my questions. I guess as it relates to CapEx that you broke out, the FlyOver Iceland, are we double counting because that money has already been spent or am I thinking about that wrong? Ellen Ingersoll No. You are right. So, we made the investment in 2017, but since we have a majority interest we consolidated that entire company into our balance sheet and P&L. So, when we actually have our report out for our 10-K we will have a non-controlling interest line in our balance sheet and in our P&L and that’s where the noncontrolling interest will be broken out, but it does show growth in our balance sheet and in our CapEx numbers. Jamie Yackow Got it. Okay. And then on the show rotation side, I just want to make sure I heard you correctly, for 2019 you are assuming negative show rotation of 25 to 30 versus 2018? Ellen Ingersoll And that’s our best guess right now, it really does depend on how the year goes this year, we might pick up new rotation shows like we did in 2017, it depends on how the show has performed this year, so that’s really kind of our best guess right now. Jamie Yackow Got it. And can you give us a sense of, I know 2020 is kind of the best of all years, but in terms of show rotation, can you give us some kind of range that we should be thinking about? Ellen Ingersoll I hesitate to give a range. I mean, I can think of the top three, but I hesitate to give a range because there is more to it than that and that’s two years out. It’s going to be a big number. I mean you can kind of see how, you know what the other rotation was in 2008, but it will be a sizable number. Steve Moster Yes, Jamie, the last time it happened was it increased from 2007, 2008, and mind you the business is different than we have additional business that we have won in this 10 years, but that is a similar thing. Jamie Yackow And ON Services, it would be helpful for us just because it’s kind of like the political years, right, where you have had a couple or negative show rotations and you are blended together to kind of get a normalized run rate type of thing. Ellen Ingersoll Yes, Jamie I would say on the top of my head guess was 109 million. Jamie Yackow Okay. That’s helpful. All right and then just lastly on ON Services, seems like the business of course in 2017 and underperformed the expectations, do you think the bulk of the issues are behind us and we should expect a more favorable 2018 closer to kind of expectations when you bought it or how should we think about that? Steve Moster I think we are making progress with the business and it’s my expectation that we’ve moved towards more run rate margin and revenue growth that we talked about in the acquisition. Jamie Yackow Okay great. That's it from me. Thanks guys. Steve Moster Thanks Jamie. Ellen Ingersoll Thank you.

[Operator:]

[Operator Instructions] Our next question comes from the line of Steve O'Hara from Sidoti Company. Your line is now open. Steve O'Hara Hi, thanks for taking this follow-up. Just, can you just remind me what the Mount Royal revenue and EBITDA that you gave that out for 2016 was? Steve Moster For 2016, we don't typically break out specific hotels. We haven't given hospitality number, I believe for that. Have we given it out for that region specifically or in total? Ellen Ingersoll I think we can talk [indiscernible]. Steve Moster Steve give us one second, we will see we can address this. Steve O'Hara I think you did give it out in the past, but I probably find it [indiscernible], but that’s okay. Steve Moster We think we have a lock on. Ellen Ingersoll Yes, the Mount Royal was about - the revenue was about $8 million in Canadian in 2016. And then the EBITDA was about 3.5. Steve O'Hara Okay great. Perfect. And then just on the ON Services with the CAD and I can't remember what the other one was, Red Hat, is that kind of the primary driver of getting that revenue was it ON Services and Poken, just remind me … Steve Moster As we have talked about before, you know when you get into corporate events a large portion of the spend is on audiovisual. And so, our ability to go after opportunities like Red Hat or like the work that we will do for Caterpillar it does require us to have an AV component, and so it’s one of the things that we’re able to lead with; and yes, it’s important for us to have that in order to win that type of business. Steve O'Hara Okay. And you said that’s typically a higher margin business than the exhibition business, correct? Steve Moster Correct, absolutely. Steve O'Hara Okay. All right, thank you very much. Steve Moster Thanks Steve. Operator, are you still there?

[Operator:]

I apologize, I was on mute. [Operator Instructions]

[Steve Moster:]

Okay. Thanks for your questions and your interest in Viad, and we look forward to speaking with your again next quarter. Thanks a lot. Bye-bye.

[Operator:]

And that concludes today's conference. Thank you for participating. You may now disconnect.