# Pursuit Attractions & Hospitality, Inc. (PRSU) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Pursuit Attractions & Hospitality, Inc.'s 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/884219/000095017023005163/vvi-20221231.htm
Accession: 0000950170-23-005163
Filing date: 2023-02-28
Report date: 2022-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/PRSU/
All MD&A years: /company/PRSU/mda/
Previous year: /company/PRSU/mda/fy2021/ (FY 2021)
Next year: /company/PRSU/mda/fy2023/ (FY 2023)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with the consolidated financial statements and related notes. The MD&A is intended to assist in understanding our financial condition and results of operations. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated due to various factors discussed under “Risk Factors,” “Forward-Looking Statements,” and elsewhere in this 2022 Form 10-K.

Overview

We are a leading global provider of extraordinary experiences, including hospitality and leisure activities, experiential marketing, and live events. We operate through three reportable segments: Pursuit, Spiro, and GES Exhibitions.

During the first quarter of 2022, we rebranded GES’ brand experiences business and introduced Spiro to the market to accelerate our growth by servicing the changing needs of today’s brand marketers across a broader spectrum of their experiential marketing needs. Spiro and GES Exhibitions are both live event businesses and are collectively referred to as “GES.”

Results of Operations

Financial Highlights

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in thousands, except per share data)","","2022","","","2021","","","2020","","","% Change 2022 vs. 2021","","% Change 2021 vs. 2020"],["Total revenue","","$","1,127,311","","","$","507,340","","","$","415,435","","","**","","","22.1","%"],["Net income (loss) attributable to Viad","","$","23,220","","","$","(92,655",")","","$","(374,094",")","","**","","","75.2","%"],["Segment operating income (loss)(1)","","$","68,944","","","$","(47,002",")","","$","(116,240",")","","**","","","59.6","%"],["Diluted income (loss) per common share from continuing operations attributable to Viad common stockholders","","$","0.52","","","$","(5.04",")","","$","(18.55",")","","**","","","72.8","%"]]
[[/GREPCENT_TABLE]]

** Change is greater than +/- 100%

(1)
Refer to Note 23 – Segment Information of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2022 Form 10-K) for a reconciliation of the non-GAAP financial measure, segment operating income (loss), to the most directly comparable GAAP measure.

2022 compared with 2021

•
Total revenue increased $620.0 million, primarily due to increased revenue at GES of $507.7 million as live event activity at GES continued to improve and as certain previously canceled shows in 2021 took place during 2022, although on average at reduced capacities from pre-COVID-19 levels. Pursuit revenue increased $112.3 million, primarily due to increased visitation at Pursuit’s Canadian attractions, as well as incremental performance from Pursuit’s new experiences that were opened or acquired after January 1, 2021, which contributed revenue of $43.2 million during 2022 as compared to $15.6 million during 2021.

•
Net income attributable to Viad was $23.2 million during 2022 as compared to a net loss of $92.7 million during 2021. This improvement of $115.9 million was primarily due to higher revenue and a gain on sale of GES’ United States audio-visual production business, ON Services, of $19.6 million, offset in part by higher expenses.

•
Total segment operating income was $68.9 million during 2022 as compared to a loss of $47.0 million during 2021. This improvement of $115.9 million was primarily due to higher revenue at GES and Pursuit, offset in part by a non-cash foreign currency unrealized loss of $4.2 million related to a finance lease remeasurement in addition to a $9.1 million gain on sale of a GES warehouse in Orlando during the 2021 period.

2021 compared with 2020

•
Total revenue increased $91.9 million, primarily due to increased revenue at Pursuit of $110.2 million. Although Pursuit continued to be affected by pandemic-related restrictions in certain international geographies, overall revenue at Pursuit improved from 2020 as health and travel restrictions lessened and people felt more comfortable traveling. Visitation from domestic travelers increased at Pursuit’s Glacier Park Collection and the Alaska Collection. Additionally, Canada’s border reopened during the third quarter of 2021. There also was strong regional and national demand from Canadians as they were required to stay closer to home. GES revenue decreased $18.3 million as live events remained largely shut down during the

18

first half of 2021. Large scale in-person events started to take place during the second half of 2021 with generally lower exhibitor participation and lower attendance than pre-pandemic occurrences.

•
Net loss attributable to Viad improved $281.4 million during 2021 as compared to 2020, primarily reflecting impairment charges of $203.1 million recorded during 2020 and higher restructuring charges of $7.4 million recorded during 2020 as compared to 2021, as well as improved segment operating results during 2021 of $69.2 million.

•
Total segment operating loss improved $69.2 million during 2021 as compared to 2020, primarily due to the increase in revenue at Pursuit, offset in part by the elimination of performance-based incentives in 2020 as a result of the COVID-19 pandemic and GES’ decrease in revenue.

Analysis of Revenue and Operating Results by Reportable Segment

Pursuit

The following table presents a comparison of Pursuit’s reported revenue and segment operating income (loss) for the years ended December 31, 2022, 2021, and 2020.

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in thousands)","","2022","","","2021","","","2020","","","% Change 2022 vs. 2021","","","% Change 2021 vs. 2020"],["Revenue(1):"],["Pursuit:"],["Attractions","","$","153,575","","","$","77,860","","","$","28,126","","","","97.2","%","","**"],["Hospitality","","","130,303","","","","98,878","","","","45,838","","","","31.8","%","","**"],["Transportation","","","12,798","","","","5,578","","","","2,696","","","**","","","**"],["Other","","","2,651","","","","4,732","","","","150","","","","(44.0",")%","","**"],["Total Pursuit","","$","299,327","","","$","187,048","","","$","76,810","","","","60.0","%","","**"],["Segment operating income (loss)(2):"],["Total Pursuit","","$","24,031","","","$","4,609","","","$","(42,343",")","","**","","","**"]]
[[/GREPCENT_TABLE]]

** Change is greater than +/- 100%

(1)
Revenue by line of business does not agree to Note 2 – Revenue and Related Contract Costs and Contract Liabilities of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2022 Form 10-K) as the amounts in the above table include product revenue from food and beverage and retail operations within each line of business.

(2)
Refer to Note 23 – Segment Information of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2022 Form 10-K) for a reconciliation of the non-GAAP financial measure, segment operating income (loss), to the most directly comparable GAAP measure.

2022 compared with 2021

Pursuit revenue increased $112.3 million driven by stronger leisure travel to Pursuit’s Canadian experiences, resulting from reduced COVID-19 restrictions as well as incremental performance from Pursuit’s new experiences. Visitation at Pursuit’s Canadian attractions increased nearly 90% as compared to 2021 when Pursuit’s operations were impacted by border restrictions and temporary government mandated closures at FlyOver Canada and FlyOver Iceland. Pursuit’s new experiences that were opened or acquired after January 1, 2021, including the Sky Lagoon (opened May 2021), the Golden Skybridge (opened June 2021), FlyOver Las Vegas (opened September 2021), the Glacier Raft Company (acquired April 2022), and the Forest Park Alpine Hotel (opened August 2022), contributed revenue of $43.2 million during 2022 as compared to those attractions acquired or opened in 2021 of $15.6 million.

Pursuit segment operating income increased $19.4 million primarily due to the increase in revenue, offset in part by a non-cash foreign currency unrealized loss of $4.2 million related to a finance lease remeasurement, higher operating costs, including insurance and compensation-related expenses during 2022, as well as COVID-19 wage subsidies received in 2021 of $11.3 million from the Canadian government’s emergency wage subsidy program that did not repeat in 2022.

2021 compared with 2020

Pursuit revenue increased $110.2 million, which reflected the continued strengthening of leisure travel demand during the second half of 2021 versus 2020 as pandemic-related restrictions lessened and as people started to feel more comfortable traveling. Pursuit was affected by consumer discretionary spending on tourism activities. Travel restrictions and border closures due to the COVID-19 pandemic negatively affected long-haul travelers to Canada and Iceland, which affected customer volumes and the results of operations. Pursuit’s seasonal attractions and properties were open starting in the second quarter of 2021 through the end of the year, although some operated at reduced capacities, whereas Pursuit’s properties and attractions were temporarily closed in 2020 from mid-March through

19

most of the second quarter. The Glacier Park Collection and the Alaska Collection experienced increased visitation during the 2021 peak season from strong domestic leisure travel, which resulted in an increase in revenue from the Glacier Park Collection of $27.7 million and from the Alaska Collection of $31.1 million. Pursuit opened or acquired three new attractions in 2021, Sky Lagoon, the Golden Skybridge, and FlyOver Las Vegas, which contributed revenue of $15.6 million during 2021.

Pursuit segment operating income was $4.6 million during 2021 as compared to a loss of $42.3 million during 2020. This improvement was primarily due to the increase in revenue.

Performance Measures

We use the following key business metrics to evaluate the performance of Pursuit’s attractions business:

•
Number of visitors. The number of visitors allows us to assess the volume of tickets sold at each attraction during the period.

•
Revenue per attraction visitor. Revenue per attraction visitor is calculated as total attractions revenue divided by the total number of visitors at all Pursuit attractions during the period. Total attractions revenue includes ticket sales and ancillary revenue generated by attractions, such as food and beverage and retail revenue. Total attractions revenue per visitor measures the total spend per visitor that attraction properties are able to capture, which is important to the profitability of the attractions business.

•
Effective ticket price. Effective ticket price is calculated as revenue from the sale of attraction tickets divided by the total number of visitors at all comparable Pursuit attractions during the period.

We use the following key business metrics, common in the hospitality industry, to evaluate Pursuit’s hospitality business:

•
Revenue per Available Room. RevPAR is calculated as total rooms revenue divided by the total number of room nights available for all comparable Pursuit hospitality properties during the period. Total rooms revenue does not include non-rooms revenue, which consists of ancillary revenue generated by hospitality properties, such as food and beverage and retail revenue. RevPAR measures the period-over-period change in rooms revenue per available room for comparable hospitality properties. RevPAR is affected by average daily rate and occupancy, which have different implications on profitability.

•
Average Daily Rate. ADR is calculated as total rooms revenue divided by the total number of room nights sold for all comparable Pursuit hospitality properties during the period. ADR is used to assess the pricing levels that the hospitality properties are able to realize. Increases in ADR lead to increases in rooms revenue with no substantial effect on variable costs, therefore having a greater impact on margins than increases in occupancy.

•
Occupancy. Occupancy is calculated as the total number of room nights sold divided by the total number of room nights available for all comparable Pursuit hospitality properties during the period. Occupancy measures the utilization of the available capacity at the hospitality properties. Increases in occupancy result in increases in rooms revenue and additional variable operating costs (including housekeeping services, utilities, and room amenity costs), as well as increases in ancillary non-rooms revenue (including food and beverage and retail revenue).

The following table provides Pursuit’s key performance indicators:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31, 2022","","","Year Ended December 31, 2021","","","% Change"],["","","As Reported","","","New Experiences(1)","","","Same-Store(2)","","","As Reported","","","New Experiences(1)","","","FX Impact(3)","","","Same-Store(2)","","","As Reported","","","Same-Store(2)"],["Attractions Key Performance Indicators:"],["Number of visitors","","","2,931,266","","","","742,666","","","","2,188,600","","","","1,523,173","","","","330,208","","","","\u2014","","","","1,192,965","","","","92.4","%","","","83.5","%"],["Ticket revenue (in thousands)","","$","114,936","","","$","31,828","","","$","83,108","","","$","61,166","","","$","12,509","","","$","1,461","","","$","47,196","","","","87.9","%","","","76.1","%"],["Effective ticket price","","$","39.21","","","$","42.86","","","$","37.97","","","$","40.16","","","$","37.88","","","$","\u2014","","","$","39.56","","","","(2.4","%)","","","(4.0",")%"],["Attractions revenue (in thousands)","","$","153,575","","","$","40,675","","","$","112,900","","","$","77,860","","","$","15,643","","","$","2,015","","","$","60,202","","","","97.2","%","","","87.5","%"],["Revenue per attraction visitor","","$","52.39","","","$","54.77","","","$","51.59","","","$","51.12","","","$","47.37","","","$","\u2014","","","$","50.46","","","","2.5","%","","","2.2","%"],["Hospitality Key Performance Indicators:"],["Room nights available","","","573,165","","","","14,978","","","","558,187","","","","566,992","","","","\u2014","","","","\u2014","","","","566,992","","","","1.1","%","","","(1.6",")%"],["Rooms revenue (in thousands)","","$","77,019","","","$","2,069","","","$","74,950","","","$","57,603","","","$","\u2014","","","$","1,150","","","$","56,453","","","","33.7","%","","","32.8","%"],["RevPAR","","$","134.37","","","$","138.14","","","$","134.27","","","$","101.59","","","$","\u2014","","","$","\u2014","","","$","99.57","","","","32.3","%","","","34.9","%"],["Occupancy","","","68.1","%","","","53.3","%","","","68.5","%","","","54.0","%","","","\u2014","","","","\u2014","","","","52.7","%","","","26.1","%","","","30.0","%"],["ADR","","$","197.21","","","$","259.19","","","$","195.91","","","$","187.99","","","$","\u2014","","","$","\u2014","","","$","184.23","","","","4.9","%","","","6.3","%"],["Hospitality revenue (in thousands)","","$","130,303","","","$","2,528","","","$","127,775","","","$","98,878","","","$","\u2014","","","$","1,480","","","$","97,398","","","","31.8","%","","","31.2","%"]]
[[/GREPCENT_TABLE]]

20

[[GREPCENT_TABLE]]
[["","","Year Ended December 31, 2021","","","Year Ended December 31, 2020","","","% Change"],["","","As Reported","","","New Experiences(1)","","","Same-Store(2)","","","As Reported","","","New Experiences(1)","","","FX Impact(3)","","","Same-Store(2)","","","As Reported","","","Same-Store(2)"],["Attractions Key Performance Indicators:"],["Number of visitors","","","1,523,173","","","","335,888","","","","1,187,285","","","","678,558","","","","700","","","","\u2014","","","","677,858","","","**","","","","75.2","%"],["Ticket revenue (in thousands)","","$","61,166","","","$","12,651","","","$","48,515","","","$","19,939","","","$","16","","","$","(974",")","","$","20,897","","","**","","","**"],["Effective ticket price","","$","40.16","","","$","37.66","","","$","40.86","","","$","29.38","","","$","23.35","","","$","\u2014","","","$","30.83","","","","36.7","%","","","32.6","%"],["Attractions revenue (in thousands)","","$","77,860","","","$","15,785","","","$","62,075","","","$","28,126","","","$","16","","","$","(1,424",")","","$","29,534","","","**","","","**"],["Revenue per attraction visitor","","$","51.12","","","$","46.99","","","$","52.28","","","$","41.45","","","$","23.35","","","$","\u2014","","","$","43.57","","","","23.3","%","","","20.0","%"],["Hospitality Key Performance Indicators:"],["Room nights available","","","566,992","","","","\u2014","","","","566,992","","","","387,809","","","","\u2014","","","","\u2014","","","","387,809","","","","46.2","%","","","46.2","%"],["Rooms revenue (in thousands)","","$","57,603","","","$","\u2014","","","$","57,603","","","$","26,383","","","$","\u2014","","","$","(1,109",")","","$","27,492","","","**","","","**"],["RevPAR","","$","101.59","","","$","\u2014","","","$","101.59","","","$","68.03","","","$","\u2014","","","$","\u2014","","","$","70.89","","","","49.3","%","","","43.3","%"],["Occupancy","","","54.0","%","","","\u2014","","","","54.0","%","","","49.0","%","","","\u2014","","","","\u2014","","","","49.0","%","","","10.2","%","","","10.2","%"],["ADR","","$","187.99","","","$","\u2014","","","$","187.99","","","$","138.72","","","$","\u2014","","","$","\u2014","","","$","138.72","","","","35.5","%","","","35.5","%"],["Hospitality revenue (in thousands)","","$","98,878","","","$","\u2014","","","$","98,878","","","$","45,838","","","$","\u2014","","","$","(1,513",")","","$","47,351","","","**","","","**"]]
[[/GREPCENT_TABLE]]

(1)
New experiences comprise the following attractions that were opened or acquired after January 1, 2021: Sky Lagoon (opened May 2021), the Golden Skybridge (acquired March 2021 and opened June 2021), FlyOver Las Vegas (opened September 2021), the Glacier Raft Company (acquired April 2022), and Forest Park Alpine Hotel (opened August 2022).

(2)
Same-Store metrics include only attractions and lodging properties that Pursuit operated at full capacity, considering seasonal closures, for the entirety of both periods presented. For experiences located outside the United States, financial metric comparisons to the prior year are expressed on a constant U.S. dollar basis.

(3)
Foreign exchange rate variance effects (or “FX Impact”) represents the adjustments necessary to express prior financial metrics on a constant U.S. dollar basis, using the current year quarterly average exchange rates for previous periods to eliminate the impact of changes in exchange rates for same-store Pursuit experiences located outside of the United States.

Attractions. The incremental increase in the number of visitors from new experiences that were opened or acquired after January 1, 2021 was primarily driven by Sky Lagoon and FlyOver Las Vegas, which contributed approximately 87% of the total increase. The increase in same-store visitors during 2022 as compared to 2021 was driven by higher visitation during 2022, as visitation was impacted in 2021 by border closures and travel restrictions as a result of the COVID-19 pandemic in addition to the temporary government mandated closures at FlyOver Canada and FlyOver Iceland.

The increase in same-store visitors during 2021 as compared to 2020 reflects the temporary closure of our attractions beginning in mid-March 2020 and extending through most of the second quarter of 2020 as a result of COVID-19 in addition to the reopening of the Canadian border during the third quarter of 2021, which accelerated visitation from international travelers. Revenue per attraction visitor increased due to higher effective ticket prices and ancillary revenue.

Hospitality. The increase in RevPAR during 2022 as compared to 2021 was primarily driven by higher occupancy and to a lesser extent by higher ADR driven by revenue management efforts.

Room nights available increased during 2021 as compared to 2020 as all of Pursuit’s properties were fully open during the 2021 peak season, whereas in 2020, Pursuit temporarily closed its properties in mid-March 2020 through most of the second quarter of 2020. The increase in RevPAR and ADR was primarily driven by Pursuit’s properties being open in 2021.

GES

During the first quarter of 2022, we changed our segment reporting as a result of operational changes and how our CODM reviews the financial performance of GES and makes decisions regarding the allocation of resources. Accordingly, GES’ new reportable segments are Spiro and GES Exhibitions. We reclassified prior periods to conform to the current-period presentation.

21

The following table presents a comparison of GES’ reported revenue and segment operating income (loss) for the years ended December 31, 2022, 2021, and 2020:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in thousands)","","2022","","","2021","","","2020","","","% Change 2022 vs. 2021","","","% Change 2021 vs. 2020"],["Revenue:"],["GES:"],["Spiro","","$","277,641","","","$","116,587","","","$","102,027","","","**","","","","14.3","%"],["GES Exhibitions","","","557,880","","","","209,529","","","","238,705","","","**","","","","(12.2",")%"],["Intersegment eliminations","","","(7,537",")","","","(5,824",")","","","(2,107",")","","","(29.4",")%","","**"],["Total GES","","$","827,984","","","$","320,292","","","$","338,625","","","**","","","","(5.4",")%"],["Segment operating income (loss)(1)"],["Spiro","","$","23,133","","","$","(9,556",")","","$","(41,217",")","","**","","","","76.8","%"],["GES Exhibitions","","","21,780","","","","(42,055",")","","","(32,680",")","","**","","","","(28.7",")%"],["Total GES","","$","44,913","","","$","(51,611",")","","$","(73,897",")","","**","","","","30.2","%"]]
[[/GREPCENT_TABLE]]

** Change is greater than +/- 100%

(1)
Refer to Note 23 – Segment Information of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2022 Form 10-K) for a reconciliation of the non-GAAP financial measure, segment operating income (loss), to the most directly comparable GAAP measure.

2022 compared with 2021

Spiro and GES Exhibitions revenue increased $161.1 million and $348.4 million, respectively, primarily driven by increased live event activity at both GES Exhibitions and Spiro and the return of large-scale events that were canceled or postponed into the first half of 2021.

Spiro and GES Exhibitions segment operating income improved $32.7 million and $63.8 million, respectively, from operating losses in the prior year period primarily due to higher revenue, offset in part by higher costs to support increased business activity, as well as a $9.1 million gain on sale of a GES Exhibitions warehouse in Orlando in 2021.

2021 compared with 2020

Spiro revenue increased $14.6 million and GES Exhibitions revenue decreased $29.2 million. The net decrease at GES of $18.3 million was primarily due to show postponements and cancellations as a result of the COVID-19 pandemic beginning in mid-March 2020. During the first half of 2021, Spiro and GES Exhibitions serviced clients primarily with virtual and hybrid events while in-person events remained largely shut down. Larger-scale in-person events began to take place toward the end of the second quarter and during the second half of 2021 with generally lower exhibitor participation and lower attendance than pre-pandemic occurrences. Spiro revenue increased due to virtual and hybrid events during 2021, offset in part by shows completed during the first quarter of 2020 prior to the onset of the pandemic. GES Exhibitions revenue decreased due to large shows completed during the first quarter of 2020 prior to the onset of the pandemic, offset in part by virtual and hybrid events during 2021.

Spiro segment operating loss improved $31.7 million and GES Exhibitions segment operating loss increased $9.4 million. The net operating loss improvement at GES of $22.3 million during 2021 was primarily due to decreased operating costs through the reduction of head count and facilities, implementation of a flex workforce, and a continued focus on managing discretionary costs. GES Exhibitions segment operating loss increased due to a $9.1 million gain on sale of a warehouse in Orlando in 2021, offset by a $13.5 million gain on sale of a warehouse in San Diego in 2020.

22

Other Expenses

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in thousands)","","2022","","","2021","","","2020","","","% Change 2022 vs. 2021","","","% Change 2021 vs. 2020"],["Corporate activities","","$","13,418","","","$","11,689","","","$","8,687","","","","14.8","%","","","34.6","%"],["Gain on sale of ON Services","","$","(19,637",")","","$","\u2014","","","$","\u2014","","","**","","","**"],["Interest expense, net","","$","34,891","","","$","28,324","","","$","17,887","","","","23.2","%","","","58.3","%"],["Other expense, net","","$","2,077","","","$","2,070","","","$","1,594","","","","0.3","%","","","29.9","%"],["Restructuring charges","","$","3,059","","","$","6,066","","","$","13,440","","","","(49.6",")%","","","(54.9",")%"],["Impairment charges","","$","583","","","$","\u2014","","","$","203,076","","","**","","","","(100.0",")%"],["Income tax expense (benefit)","","$","9,973","","","$","(1,788",")","","$","14,246","","","**","","","**"],["Income (loss) from discontinued operations","","$","148","","","$","558","","","$","(1,847",")","","","(73.5",")%","","**"]]
[[/GREPCENT_TABLE]]

** Change is greater than +/- 100%.

Corporate Activities – The increase in corporate activities expense during 2022 relative to 2021 was primarily due to higher performance-based compensation expense. The increase in corporate activities expense during 2021 relative to 2020 was primarily due to higher performance-based compensation expense as we reduced our estimated performance achievement to zero in 2020 as a result of the COVID-19 pandemic, offset in part by fees and expenses related to the equity raise and credit facility amendment in 2020.

Gain on Sale of ON Services – On December 15, 2022, we completed the sale of substantially all of the assets of GES’ United States audio-visual production business, ON Services. We recognized a gain on sale of $19.6 million.

Interest Expense, net – The increase in interest expense during 2022 relative to 2021 was primarily due to higher interest rates in 2022, offset in part by $3.0 million in capitalized interest recorded during 2022. The increase in interest expense during 2021 relative to 2020 was primarily due to higher interest rates and higher debt balances during 2021. Additionally, as a result of the refinance and the repayment of our then $450 million revolving credit facility, we recorded $2.1 million of interest expense related to the write-off of unamortized debt issuance costs during 2021.

Restructuring Charges – Restructuring charges during 2022, 2021, and 2020 were primarily related to facility closures and severance at GES. In response to the COVID-19 pandemic, we accelerated our transformation and streamlining efforts at GES to significantly reduce costs and create a lower and more flexible cost structure focused on servicing our more profitable market segments, as well as charges related to the closure of GES’ United Kingdom based audio-visual services business in 2020. Restructuring charges in 2020 also included the elimination of certain positions at our corporate office.

Impairment Charges – Impairment charges in 2022 of $0.6 million were related to certain software development costs that were no longer being utilized at GES. Impairment charges in 2020 were related to the deteriorating macroeconomic environment caused by the COVID-19 pandemic, which resulted in disruptions to our operations and the decline in our stock price. We recorded non-cash goodwill impairment charges of $185.8 million, a non-cash impairment charge to intangible assets of $15.7 million related to GES’ United States audio-visual production business, and a fixed asset impairment charge of $1.6 million.

Income Tax Expense – The effective income tax rates were 28.8% for 2022, 1.9% for 2021, and a negative 3.9% for 2020. The effective tax rate for 2022 was higher than the blended statutory rate primarily as a result of the higher mix of income earned in foreign jurisdictions where we do not have a valuation allowance. The effective tax rate for 2021 was lower than the blended statutory rate primarily as a result of excluding the tax benefit on losses recognized in the United States, the United Kingdom, and other European countries where we have a valuation allowance. The negative effective tax rate for 2020 was due to the recording of a $25.5 million valuation allowance against our remaining net deferred tax assets in the United States, United Kingdom, and other European countries, as well as no tax benefits on non-deductible goodwill impairments and losses recognized in those jurisdictions.

Liquidity and Capital Resources

We believe that our existing sources of liquidity will be sufficient to fund operations and projected capital outlays for at least the next 12 months and the longer term.

23

When assessing our current sources of liquidity, we include the following:

[[GREPCENT_TABLE]]
[["","","December 31,"],["","","2022","","","2021"],["Unrestricted cash and cash equivalents(1)","","$","59,719","","","$","61,600"],["Available capacity on revolving credit facility(2)","","","86,670","","","","87,422"],["Total available liquidity","","$","146,389","","","$","149,022"]]
[[/GREPCENT_TABLE]]

(1)
As of December 31, 2022, we held approximately $49.2 million of our cash and cash equivalents outside of the United States, consisting of $20.6 million in Canada, $9.0 million in Iceland, $7.7 million in the Netherlands, $6.0 million in the United Arab Emirates, $3.9 million in the United Kingdom, and $2.0 million in other countries.

(2)
Includes our total revolving credit facility of $100 million less outstanding letters of credit of $13.3 million as of December 31, 2022 and $12.6 million as of December 31, 2021.

Cash provided by operating activities, supplemented by our total cash and cash equivalents, is our primary source of liquidity for funding our strategic business requirements. During the year ended December 31, 2022, net cash provided by operating activities was $73.4 million.

Our short-term and long-term funding requirements include debt obligations, capital expenditures, working capital requirements, and potential acquisitions and strategic investments as we focus on scaling Pursuit with investments in high-return unforgettable, inspiring experiences through its Refresh, Build, Buy growth strategy. Our projected capital outlays can be adjusted for changes in the operating environment.

Debt Obligations

Effective July 30, 2021, we entered into a $500 million credit facility (the “2021 Credit Facility”). The 2021 Credit Facility provides for a $400 million term loan with a maturity date of July 30, 2028 (“Term Loan B”) and a $100 million revolving credit facility with a maturity date of July 30, 2026. The $400 million in Term Loan B proceeds were offset in part by $14.8 million in related fees. The proceeds from the Term Loan B were used to repay the $327 million outstanding balance under our then $450 million revolving credit facility. The $100 million revolving credit facility and the remaining proceeds from the Term Loan B have been and will be used to provide for financial flexibility to fund future acquisitions and growth initiatives and for general corporate purposes. On March 23, 2022, we entered into an amendment to the 2021 Credit Facility, which modified the revolving credit facility’s financial covenants. We were in compliance with all covenants under the revolving credit facility as of December 31, 2022. Refer to Note 12 – Debt and Finance Obligations of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2022 Form 10-K) for additional information.

Capital Expenditures

As of December 31, 2022, we had planned capital expenditures of approximately $75 million to $85 million for 2023, including approximately $40 million on select growth projects, such as the development of FlyOver Chicago. We intend to continue making investments to advance Pursuit’s Refresh, Build, Buy growth strategy while maintaining a solid liquidity position.

Other Obligations

We have additional obligations as part of our ordinary course of business, beyond those committed for debt obligations and capital expenditures. Refer to Note 20 – Leases and Other and Note 18 – Pension and Postretirement Benefits of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2022 Form 10-K) for further information. The expected timing of payments of our obligations is estimated based on current information. Timing of payments and actual amounts paid may be different, depending on changes to agreed-upon amounts for certain obligations.

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Cash Flows

Operating Activities

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in thousands)","","2022","","","2021","","","2020"],["Net income (loss)","","$","24,795","","","$","(92,735",")","","$","(376,952",")"],["Depreciation and amortization","","","52,483","","","","53,750","","","","56,565"],["Deferred income taxes","","","1,820","","","","6,012","","","","15,097"],["(Income) loss from discontinued operations","","","(148",")","","","(558",")","","","1,847"],["Restructuring charges","","","3,059","","","","6,066","","","","13,440"],["Impairment charges","","","583","","","","\u2014","","","","203,076"],["Gains on dispositions of property and other assets","","","(272",")","","","(9,374",")","","","(14,935",")"],["Gain on disposition of ON Services","","","(19,637",")","","","\u2014","","","","\u2014"],["Share-based compensation expense","","","10,241","","","","7,727","","","","2,653"],["Multi-employer pension plan withdrawal","","","\u2014","","","","57","","","","462"],["Other non-cash items, net","","","12,843","","","","5,318","","","","8,056"],["Changes in assets and liabilities","","","(12,336",")","","","(14,115",")","","","10,443"],["Net cash provided by (used in) operating activities","","$","73,431","","","$","(37,852",")","","$","(80,248",")"]]
[[/GREPCENT_TABLE]]

2022 compared with 2021

The change in net cash provided by (used in) operating activities of $111.3 million was primarily due to improved segment operating results of $115.9 million and a favorable change in working capital.

2021 compared with 2020

The decrease in net cash used in operating activities of $42.4 million was primarily due to improved segment operating results of $69.2 million, offset in part by an unfavorable change in working capital.

Investing Activities

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in thousands)","","2022","","","2021","","","2020"],["Capital expenditures","","$","(67,170",")","","$","(57,936",")","","$","(53,567",")"],["Cash surrender value of life insurance policies","","","\u2014","","","","\u2014","","","","24,767"],["Cash paid for acquisitions, net","","","(25,494",")","","","(8,227",")","","","\u2014"],["Proceeds from sale of ON Services","","","28,926","","","","\u2014","","","","\u2014"],["Proceeds from dispositions of property and other assets","","","470","","","","14,360","","","","22,027"],["Net cash used in investing activities","","$","(63,268",")","","$","(51,803",")","","$","(6,773",")"]]
[[/GREPCENT_TABLE]]

2022 compared with 2021

The increase in net cash used in investing activities of $11.5 million was primarily due to the Glacier Raft Company acquisition in 2022 of $25.5 million and an increase in capital expenditures, offset in part by proceeds from the sale of ON Services of $28.9 million. During 2021, we used cash in investing activities for the acquisition of the Golden Skybridge, offset in part by proceeds of $14.4 million from the dispositions of property and other assets, primarily from the sale of a GES warehouse in Orlando.

2021 compared with 2020

The increase in net cash used in investing activities of $45.0 million was primarily due to 2020 activity including proceeds from the termination of our life insurance policies and proceeds of $17.1 million from the sale of the GES warehouse in San Diego. In 2021, we used cash in investing activities for the acquisition of the Golden Skybridge, offset in part by the proceeds from the sale of a GES warehouse in Orlando.

25

Financing Activities

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in thousands)","","2022","","","2021","","","2020"],["Proceeds from borrowings","","$","107,580","","","$","461,322","","","$","225,422"],["Payments on debt and finance obligations","","","(103,491",")","","","(345,297",")","","","(275,327",")"],["Dividends paid on common stock","","","\u2014","","","","\u2014","","","","(4,064",")"],["Dividends paid on preferred stock","","","(7,801",")","","","(3,900",")","","","\u2014"],["Distributions to noncontrolling interest, net of contributions from noncontrolling interest","","","(570",")","","","(843",")","","","(1,526",")"],["Payments of debt issuance costs","","","(418",")","","","(1,767",")","","","(1,585",")"],["Payment of payroll taxes on stock-based compensation through shares withheld or repurchased","","","(1,428",")","","","(1,626",")","","","(1,688",")"],["Common stock purchased for treasury","","","\u2014","","","","\u2014","","","","(2,785",")"],["Proceeds from issuance of Convertible Series A Preferred Stock, net of issuance costs","","","\u2014","","","","\u2014","","","","125,763"],["Proceeds from exercise of stock options","","","\u2014","","","","\u2014","","","","2,077"],["Net cash (used in) provided by financing activities","","$","(6,128",")","","$","107,889","","","$","66,287"]]
[[/GREPCENT_TABLE]]

2022 compared with 2021

The change in net cash used in financing activities of $114.0 million was primarily due to net debt proceeds of $4.1 million during 2022 compared to $116.0 million during 2021. In July 2021, we received $400 million in Term Loan B proceeds from the 2021 Credit Facility, which was used to repay the $327 million outstanding balance under our then $450 million revolving credit facility.

2021 compared with 2020

The increase in net cash provided by financing activities of $41.6 million was primarily due to net debt proceeds of $116.0 million during 2021 compared to net debt payments of $49.9 million during 2020. In July 2021, we received $400 million in Term Loan B proceeds from the 2021 Credit Facility, which was used to repay the $327 million outstanding balance under our then $450 million revolving credit facility. Proceeds from the issuance of Convertible Series A Preferred Stock in 2020 were offset in part by the 2020 net debt payments.

Debt and Finance Obligations

Refer to Note 12 – Debt and Finance Obligations of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2022 Form 10-K) for further discussion all of which is incorporated by reference herein.

Guarantees

Refer to Note 21 – Litigation, Claims, Contingencies, and Other of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2022 Form 10-K) for further discussion all of which is incorporated by reference herein.

Share Repurchases

Our Board of Directors previously authorized us to repurchase shares of our common stock from time to time at prevailing market prices. Effective February 7, 2019, our Board of Directors authorized the repurchase of an additional 500,000 shares. As of December 31, 2022, 546,283 shares remained available for repurchase under all prior authorizations. The Board of Directors’ authorization does not have an expiration date.

Additionally, we repurchased shares related to tax withholding requirements on vested restricted share-based awards.

Critical Accounting Estimates

The consolidated financial statements are prepared in accordance with United States generally accepted accounting principles (“GAAP”). We are required to make estimates and assumptions that affect our reported amounts of assets, liabilities, revenue, and expenses. Critical accounting policies are those policies that are most important to the portrayal of our financial position and results of operations, and that require us to make the most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. We identified and discussed with our audit committee the following critical accounting policies and estimates and the methodology and disclosures related to those estimates:

26

Goodwill and Other Intangible Assets — Goodwill and other intangible assets with indefinite useful lives are not amortized, but instead are tested for impairment at least annually. Intangible assets with finite lives are amortized over their respective estimated useful lives and are reviewed for impairment if an event occurs or circumstances change that would indicate the intangible asset’s carrying value may not be recoverable.

Goodwill is tested for impairment at the reporting unit level on an annual basis as of October 31, and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. Our reporting units are defined, and goodwill is tested, at either an operating segment level or at the component level of an operating segment, depending on various factors including the internal reporting structure of the operating segment, the level of integration among components, the sharing of assets and other resources among components, and the benefits and likely recoverability of goodwill by the component’s operations.

For purposes of goodwill impairment testing, we use a discounted expected future cash flow methodology (income approach) to estimate the fair value of our reporting units. The estimates and assumptions regarding expected future cash flows (the most significant being revenue and EBITDA margins), discount rates, and terminal values require considerable judgment and are based on market conditions, financial forecasts, industry trends, and historical experience.

The most critical assumptions and estimates in determining the estimated fair value of our reporting units relate to the amounts and timing of expected future cash flows for each reporting unit and the reporting unit cost of capital (discount rate) applied to those cash flows. We estimate the assumed reporting unit cost of capital rates (discount rates) using a build-up method based on the perceived risk associated with the cash flows pertaining to the specific reporting unit. In order to assess the reasonableness of our fair value estimates, we perform a reconciliation of the aggregate fair values of our reporting units to our market capitalization.

As noted above, the estimates and assumptions regarding expected future cash flows, discount rates, and terminal values require considerable judgment and are based on market conditions, financial forecasts, industry trends, and historical experience. These estimates have inherent uncertainties, and different assumptions could lead to materially different results. Our goodwill balance was $121.4 million as of December 31, 2022 and $112.1 million as of December 31, 2021 and pertained to our Pursuit business. The discount rates used in our most recent impairment analysis ranged from 11% to 15%.

Pursuit’s goodwill was assigned to, and tested at, the reporting unit level. The results of our most recent impairment analysis performed as of October 31, 2022, indicated that no impairment existed for Pursuit’s reporting units with reported goodwill. The excess of the estimated fair value over the carrying value for the Banff Jasper Collection and the Alaska Collection was significant. The excess of the estimated fair value over the carrying value for the Glacier Park Collection was 17% and FlyOver was 19%. Significant reductions in our reporting unit’s expected future revenue, operating income, or cash flow forecasts and projections, or an increase in a reporting unit’s cost of capital, could trigger additional goodwill impairment testing, which may result in impairment charges that could be material.

If an impairment indicator related to intangible assets is identified, or if other circumstances indicate an impairment may exist, we perform an assessment to determine if an impairment loss should be recognized. This assessment includes a recoverability test to identify if the expected future undiscounted cash flows are less than the carrying value of the related assets. If the results of the recoverability test indicate that expected future undiscounted cash flows are less than the carrying value of the related assets, we perform a measurement of impairment and we recognize any carrying amount in excess of fair value as an impairment. We periodically evaluate the continued recoverability of intangible assets which were previously evaluated due to an impairment indicator to determine if remeasurement is necessary.

Income taxes — We are required to estimate and record provisions for income taxes in each of the jurisdictions in which we operate. Accordingly, we must estimate our actual current income tax liability, and assess temporary differences arising from the treatment of items for tax purposes, as compared to the treatment for accounting purposes. These differences result in deferred tax assets and liabilities, which are included in the Consolidated Balance Sheets. We use significant judgment in forming conclusions regarding the recoverability of our deferred tax assets and evaluate all available positive and negative evidence to determine if it is more-likely-than-not that the deferred tax assets will be realized. To the extent recovery does not appear likely, a valuation allowance must be recorded. We had gross deferred tax assets of $110.8 million as of December 31, 2022 and $117.1 million as of December 31, 2021. We had a valuation allowance against gross deferred tax assets of $101.6 million as of December 31, 2022 and $103.5 million as of December 31, 2021.

While we believe that the deferred tax assets, net of existing valuation allowances, will be utilized in future periods, there are inherent uncertainties regarding the ultimate realization of these assets. It is possible that the relative weight of positive and negative evidence regarding the realization of deferred tax assets may change, which could result in a material increase or decrease in our valuation allowance. Such a change could result in a material increase or decrease to income tax benefit (expense) in the period the assessment was made.

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We record uncertain tax positions on the basis of a two-step process: first we determine whether it is more-likely-than-not that the tax positions will be sustained on the basis of the technical merits of the position; and, if so, we recognize the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.

Pension and postretirement benefits — Our pension plans use traditional defined benefit formulas based on years of service and final average compensation. Funding policies provide that payments to defined benefit pension trusts shall be at least equal to the minimum funding required by applicable regulations. We presently anticipate contributing $0.6 million to our funded pension plans and $0.8 million to our unfunded pension plans in 2023.

We have defined benefit postretirement plans that provide medical and life insurance for certain eligible employees, retirees, and dependents. The related postretirement benefit liabilities are recognized over the employees’ service period. In addition, we retain the obligations for these benefits for retirees of certain sold businesses. While the plans have no funding requirements, we expect to contribute $0.7 million to the plans in 2023.

The discount rates used in determining future pension and postretirement benefit obligations are based on rates determined by actuarial analysis and management review and reflect the estimated rates of return on a high-quality, hypothetical bond portfolio whose cash flows match the timing and amounts of expected benefit payments. Refer to Note 18 – Pension and Postretirement Benefits of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2022 Form 10-K) for further information.

Share-based compensation — We grant share-based compensation awards to our officers, directors, and certain key employees pursuant to the 2017 Viad Corp Omnibus Incentive Plan, which has a 10-year term and provides for the following types of awards: (a) incentive and non-qualified stock options; (b) restricted stock awards and restricted stock units; (c) performance units or performance shares; (d) stock appreciation rights; (e) cash-based awards; and (f) certain other stock-based awards.

Share-based compensation expense recognized in the consolidated financial statements was $10.2 million in 2022, $7.7 million in 2021, and $2.7 million in 2020. We recorded total tax benefits related to such costs of $0.1 million in both 2022 and 2021. There was no income tax benefit related to such cost in 2020 due to the valuation allowance on our deferred tax assets. No share-based compensation costs were capitalized during 2022, 2021, or 2020.

We account for share-based payment awards that will be settled in cash as liability-based awards. We measure share-based compensation expense of liability-based awards at fair value at each reporting date until the date of settlement based on the number of units expected to vest and, where applicable, the level of achievement of predefined performance goals. These awards are remeasured on each reporting date based on our stock price and the Monte Carlo simulation model. A Monte Carlo simulation requires the use of several assumptions, including historical volatility and correlation between our stock price and the price of the common shares of a comparator group, a risk-free rate of return, and an expected term. We account for share-based awards that will be settled in shares of our common stock as equity-based awards. We measure share-based compensation expense of equity-based awards at fair value on the grant date on a straight-line basis over the vesting period. The estimated number of units to be achieved is updated each reporting period based on the number of units expected to vest and, where applicable, the level of achievement of predefined performance goals, until the date of settlement. The fair value of stock option grants is estimated on the date of grant using the Black-Scholes stock option pricing model. The Black-Scholes model requires the use of several assumptions, including expected volatility, a risk-free interest rate, a forfeiture rate, and expected life. We measure share-based compensation for performance-based options on a straight-line basis over the performance period and the underlying shares expected to be settled are adjusted each reporting period based on estimated future achievement of the respective performance metrics. Service-based options are recognized on a straight-line basis over the requisite service period on a graded-vesting schedule. Refer to Note 3 – Share-Based Compensation of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2022 Form 10-K) for further information.

Self-Insurance Liabilities — We are self-insured up to certain limits for workers’ compensation and general liabilities, which includes automobile, product general liability, and client property loss claims. We have also retained and provided for certain workers’ compensation insurance liabilities in conjunction with previously sold businesses. We are also self-insured for certain employee health benefits. Provisions for losses for claims incurred, including actuarially derived estimated claims incurred but not yet reported, are made based on historical experience, claims frequency, and other factors. We have purchased insurance for amounts in excess of the self-insured levels.

Impact of Recent Accounting Pronouncements

Refer to Note 1 – Overview and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2022 Form 10-K) for further information.

Non-GAAP Measure

In addition to disclosing financial results that are determined in accordance with GAAP, we also disclose segment operating income (loss) as a non-GAAP financial measure. Our use of segment operating income (loss) is supplemental to, but not as a substitute for,

28

other measures of financial performance reported in accordance with GAAP. As not all companies use identical calculations, segment operating income (loss) may not be comparable to similarly titled measures used by other companies. We believe that our use of segment operating income (loss) provides useful information to investors regarding our results of operations for trending, analyzing, and benchmarking our performance and the value of our business.

“Segment operating income (loss)” is net income (loss) attributable to Viad before income (loss) from discontinued operations, corporate activities, interest expense and interest income, income taxes, gains or losses from sales of businesses, restructuring charges, impairment charges, and certain other corporate expenses that are not allocated to the reportable segments and the reduction for income (loss) attributable to noncontrolling interests. Segment operating income (loss) is used to measure the profit and performance of our operating segments to facilitate period-to-period comparisons. Refer to Note 23 – Segment Information of the Notes to Consolidated Financial Statements (Part II, Item 8 of this 2022 Form 10-K) for a reconciliation of segment operating income (loss) to income (loss) from continuing operations before income taxes.

We believe segment operating income (loss) is a useful operating metric as it eliminates potential variations arising from taxes, debt service costs, impairment charges, restructuring charges, strategic dispositions, the reduction of income (loss) attributable to non-controlling interests, and the effects of discontinued operations, resulting in an additional measure considered to be indicative of our ongoing operations and segment performance. Although we use segment operating income (loss) to assess the performance of our business, the use of this measure is limited because this measure does not consider material costs, expenses, and other items necessary to operate our business. As segment operating income (loss) does not consider these items, net income (loss) attributable to Viad should be considered as an important measure of financial performance because it provides a more complete measure of our performance.