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VVI - Viad Corp


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Starting a new post per the "What are you buying today " thread. I recently took a small position in Viad Corp—about 1.5% of my portfolio. Didn't have time to do a formal writeup like in the past, but I figure some might be interested in my research notes/documents:

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Starting a new post per the "What are you buying today " thread. I recently took a small position in Viad Corp—about 1.5% of my portfolio. Didn't have time to do a formal writeup like in the past, but I figure some might be interested in my research notes/documents:

 

You deserve to be wealthy!

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Starting a new post per the "What are you buying today " thread. I recently took a small position in Viad Corp—about 1.5% of my portfolio. Didn't have time to do a formal writeup like in the past, but I figure some might be interested in my research notes/documents:

 

You deserve to be wealthy!

 

Not sure I follow?

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Starting a new post per the "What are you buying today " thread. I recently took a small position in Viad Corp—about 1.5% of my portfolio. Didn't have time to do a formal writeup like in the past, but I figure some might be interested in my research notes/documents:

 

You deserve to be wealthy!

 

Not sure I follow?

 

Strong critical analysis should be rewarded.

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Starting a new post per the "What are you buying today " thread. I recently took a small position in Viad Corp—about 1.5% of my portfolio. Didn't have time to do a formal writeup like in the past, but I figure some might be interested in my research notes/documents:

 

You deserve to be wealthy!

 

Not sure I follow?

 

Strong critical analysis should be rewarded.

 

Well, in that case, I sure hope you're right!

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There is a lot to like about this company.

Did my homeworks and looked at your data SlowAppreciation; your work is very good.

 

Usually don't find ideas in the touristic area but the nature of their operations has some moat.

I wonder about the motivations behind the idea of spinning out this part of the business at some point but I can live with that.

 

The core business will continue to be their trade show/exhibitions/"experiential" management segment.

What I am working on now is to understand better the long term fundamentals of this business.

I find the thought process is similar, to a certain degree, to what will happen to the movie theater industry.

Thought the following helped:

www.tsnn.com/blog/future-looks-bright-us-exhibitions-market

http://www.iaee.com/wp-content/uploads/2016/04/2016-IAEE-Future-Trends-Impacting-the-Exhibitions-and-Events-Industry-White-Paper.pdf

 

From a participant perspective, I have often wondered about this business and thought that margins were much higher. Will try to understand the drivers behind pricing power.

 

I also wonder about the impact of technology. Video-conference and related is a negative. But the "experiential" part could certainly benefit.

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  • 2 years later...

Short version:

The company is going through a perfect storm. Market cap has been divided by 6 in no time and EV has been divided by 3.

The underlying question is: can they survive somehow?

There is potential for significant appreciation if they make it whole or even if they sell one of two segments.

The work above by SlowAppreciation is helpful and the optimistic perspective can be completed with the following:

http://s21.q4cdn.com/760353948/files/doc_presentations/2019/12/Viad-Investor-Presentation-December-2019.pdf

https://www.valueinvestorsclub.com/idea/VIAD_CORP/1638461453

I really like both businesses (on an unlevered basis).

 

Long version:

This is about various cash flow scenarios and the management skill set to navigate the next leg of the voyage is different.

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Short version:

The company is going through a perfect storm. Market cap has been divided by 6 in no time and EV has been divided by 3.

The underlying question is: can they survive somehow?

There is potential for significant appreciation if they make it whole or even if they sell one of two segments.

The work above by SlowAppreciation is helpful and the optimistic perspective can be completed with the following:

http://s21.q4cdn.com/760353948/files/doc_presentations/2019/12/Viad-Investor-Presentation-December-2019.pdf

https://www.valueinvestorsclub.com/idea/VIAD_CORP/1638461453

I really like both businesses (on an unlevered basis).

 

Long version:

This is about various cash flow scenarios and the management skill set to navigate the next leg of the voyage is different.

 

Just took a quick look, as of 12/31/2019, their major debt is the borrowings of $311M under the credit facility. There is still a $135M undrawn capacity, and the credit facility does not mature until Oct 2023. And they also have about $62M cash.

 

On the other hand, they are gonna for sure break the leverage ratio covenant for 2020. However, it seems that the credit facility is guaranteed by the GES segment, not the Persuit segment.  So in the worse case, they can default and let go of the GES, and the debt-free Persuit segment (high margin business, $80MM EBITDA) is worth more than current market cap of  ~$200M?

 

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Just took a quick look, as of 12/31/2019, their major debt is the borrowings of $311M under the credit facility. There is still a $135M undrawn capacity, and the credit facility does not mature until Oct 2023. And they also have about $62M cash.

 

On the other hand, they are gonna for sure break the leverage ratio covenant for 2020. However, it seems that the credit facility is guaranteed by the GES segment, not the Persuit segment.  So in the worse case, they can default and let go of the GES, and the debt-free Persuit segment (high margin business, $80MM EBITDA) is worth more than current market cap of  ~$200M?

I'm just a noob but i had made a list of companies "at risk" (the list did not include VIAD) and all of them have recently fully drawn their credit lines. Five days ago, Viad filed that it had notified to do the same in a "proactive" way..

https://www.sec.gov/ix?doc=/Archives/edgar/data/884219/000156459020011482/vvi-8k_20200317.htm

The scenario described is interesting. However, the live-event-services-provider side of the business tends to show lumpy results and 2020 was geared to be a strong year. There will eventually be pent-up demand for GES...

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Just took a quick look, as of 12/31/2019, their major debt is the borrowings of $311M under the credit facility. There is still a $135M undrawn capacity, and the credit facility does not mature until Oct 2023. And they also have about $62M cash.

 

On the other hand, they are gonna for sure break the leverage ratio covenant for 2020. However, it seems that the credit facility is guaranteed by the GES segment, not the Persuit segment.  So in the worse case, they can default and let go of the GES, and the debt-free Persuit segment (high margin business, $80MM EBITDA) is worth more than current market cap of  ~$200M?

I'm just a noob but i had made a list of companies "at risk" (the list did not include VIAD) and all of them have recently fully drawn their credit lines. Five days ago, Viad filed that it had notified to do the same in a "proactive" way..

https://www.sec.gov/ix?doc=/Archives/edgar/data/884219/000156459020011482/vvi-8k_20200317.htm

The scenario described is interesting. However, the live-event-services-provider side of the business tends to show lumpy results and 2020 was geared to be a strong year. There will eventually be pent-up demand for GES...

 

I think this is an interesting idea but I am new to it. The key question is can they survive, so I am focusing on the downside.  Do you have any insights on how they can manage their expenses during several months of no revenue? From the 10K, I can see about $10M a year for corporate SGA and $14M a year of interest expense. But they don't break out the SGA for the GES and Pursuit segment. For the Pursuit segment, it earns most reveue in the summer, which is still 3 months away. Also, they own equity interest in those lodges, instead of operate them directly.

 

They also have $22M operating leases, $73M purchase obligation, $4.4M pension obligation, $3.4M finance lease obligations for 2020. Not sure if these can be negotiated when such a disruption occurred.

 

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...

Just took a quick look, as of 12/31/2019, their major debt is the borrowings of $311M under the credit facility. There is still a $135M undrawn capacity, and the credit facility does not mature until Oct 2023. And they also have about $62M cash.

On the other hand, they are gonna for sure break the leverage ratio covenant for 2020. However, it seems that the credit facility is guaranteed by the GES segment, not the Persuit segment.  So in the worse case, they can default and let go of the GES, and the debt-free Persuit segment (high margin business, $80MM EBITDA) is worth more than current market cap of  ~$200M?

I think this is an interesting idea but I am new to it. The key question is can they survive, so I am focusing on the downside.  Do you have any insights on how they can manage their expenses during several months of no revenue? From the 10K, I can see about $10M a year for corporate SGA and $14M a year of interest expense. But they don't break out the SGA for the GES and Pursuit segment. For the Pursuit segment, it earns most reveue in the summer, which is still 3 months away. Also, they own equity interest in those lodges, instead of operate them directly.

They also have $22M operating leases, $73M purchase obligation, $4.4M pension obligation, $3.4M finance lease obligations for 2020. Not sure if these can be negotiated when such a disruption occurred.

-Liquidity front

A lot of their expenses are variable but, under various scenarios considered, negative cash flows could be significant and the impact is proportional to the time frame (mostly unknown) of the multiple effects that the virus triggered (social gatherings, air transport, tourism not even considering general economic conditions).

Because of the leverage, the time frame does not only mean poor or no profitability for a while, it could be a survival issue.

If you believe in a "V"-shaped recovery, this will do very well.

-Solvency front

I spent some time with the 2nd amended and restated credit agreement (Oct 24 2018) and there are some aspects that are unclear to me. I think the debt is secured by the GES assets and most of the Pursuit assets: the Alaska assets are clearly tied to the debt and there is a "perfected security interest" on 65% of the capital stock of top-tier foreign subs, which possibly excludes the Glacier Park assets. In the 2019 AR, Pursuit total assets are at 589.2M (including 101.9M of GW and IA) and Glacier Park assets (net of GW and IA) can be estimated at about 144M (using a simple rule of three based on rooms). So, if I get this, there would be a reasonable floor of value but below present market cap.

 

This one is hard to model, given the very uncertain outcome possibilities, and the cash burn could be significant. Another poster suggested recently in another thread that one has to balance greed and ignorance. I will focus on the latter in this one, for now.

 

Additional comment:

I guess this would be a case where I would go all in if I had enough liquidity to support it through any scenario and there may be somebody else out there thinking the same thing. If anything remains of this analysis, it's that I've listed a few more touristic destinations on my list.

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