Some Show Growth Amid Challenges

By Margo McCall -- Tradeshow Week, 8/9/2004

Tradeshows are finally exhibiting glimmers of growth in some sectors, according to second-quarter earnings reports, although the booth-construction business remains depressed.

Advanstar Communications said it brought in $1.1 million more in tradeshow revenue last quarter than the $20.5 million recorded in the second quarter of 2003. The increase would have been higher had AIIM ON DEMAND not moved to dates in the first quarter and IBS and American Spa Expo not moved to dates in the third quarter, the company said.

"Overall, we feel pretty good about the growth of our tradeshow revenues in the quarter," CFO Dave Montgomery told analysts during Advanstar's conference call.

Montgomery added that this year's Licensing Intl. was 16 percent larger than the previous year's show, while Sensors Expo & Conference-Spring registered a 50-percent gain. Furthermore, he said square footage and revenue at the August MAGIC Marketplace is projected to be up by 5 to 10 percent over 2003.

Paul Dykstra, president of Viad-owned GES Exposition Services, told analysts that the second quarter marked the first in 13 quarters that GES-serviced shows experienced growth. However, conditions still vary by sector, he said, with technology shows struggling and health care, security and construction shows recovering. "Although we're seeing some improvement, the tradeshow and convention industry continues to be challenged," he cautioned.

Montgomery affirmed that view. During the third quarter, he said, Advanstar expects some weakness in its technology and call center events. Because of that, the company scaled back its 2004 operating cash flow to $90 to $93 million, from the previous forecast of $100 million.

Dykstra said positive show rotation should help his division this quarter. GES customers Intl. Manufacturing Technology Show, Intl. Woodworking Machinery & Furniture Supply Fair-U.S.A. and the Intl. Baking Industry Exposition are all scheduled for the third quarter, as is MINExpo Intl., which is held every four years. As well, Dykstra said revenue is beginning to be realized from the products and services division GES launched last November.

Even though companies are buying floor space, they're apparently still holding back on ordering new booths. Kim Fracalossi, president of Viad's Exhibitgroup/Giltspur division, said competitors in the exhibit design and construction business are still practicing "irrational pricing," a factor that led to E/G losing business in late 2003 and early 2004.

Construction spending remains particularly depressed, she said, since companies are using refurbishment to extend booths' life spans to up to seven years, when they previously ordered new booths every three years. "Needless to say, these exhibits are looking tired," she said.

Despite the intensely competitive environment, Fracalossi vowed not to take on money-losing projects. "We will not price irrationally just to win revenue. That is not a strategy for long-term success," she said, adding that the strategy has resulted in competitors "scaling back operations, closing operations or going out of business."

There are signs the general business climate is improving. Overall, the New York-based Advanstar generated $84.7 million in second-quarter revenue, compared with $59.6 million in the second quarter of 2003. Its net loss, however, nearly doubled, widening to $27.8 million, compared with $14.3 million in the year-ago quarter.

Advanstar CEO Joe Loggia said the Thomson Healthcare publications and conferences acquired last year contributed to the revenue increase and are exceeding revenue expectations.

Meanwhile, in its first quarter since MoneyGram was spun off as a separate company, the parent of GES and E/G reported lower results, partly chalked up to negative show rotation. Revenue of $137.4 million at Viad's GES division was down 7 percent from the $147.8 million reported in the second quarter of 2003. E/G's $52.7 million in revenue marked a 31-percent decline from $76.1 million in the year-ago quarter.

During previous quarters, both GES and E/G managed to improve operating results even when revenue declined. But in the second quarter, GES's operating income dropped by 33 percent to $14.1 million and E/G barely broke even, after reporting nearly $3 million in operating income in the second quarter of last year.

In the past, Viad's MoneyGram unit helped balance the quarterly ups and downs of the service contracting and exhibit design and construction divisions. Viad's other remaining business, two travel service firms, are also seasonal.

Viad CEO Robert Bohannon said spinning off MoneyGram will make more capital available for Viad's remaining businesses, hinting that Viad's new $150-million credit line makes acquisitions an increasing possibility. "We see some opportunities in the convention and event industry, primarily on the GES side, in the $50- to $60-million revenue range," Bohannon told analysts during the company's conference call. "As market leaders in the convention and event services industry, we believe we would be the acquirer of choice for privately held competitors who are looking to monetize their holdings."