Subjects: ERN, CCA, ERP, DIV
Travelport Worldwide Limited Reports Third Quarter 2018 Results
LANGLEY, U.K., Nov. 1, 2018 /PRNewswire/ -- Travelport Worldwide Limited (NYSE: TVPT) today announced its financial results for the third quarter and nine months ended September 30, 2018.
Key Points (for the third quarter unless stated otherwise)
- Net revenue increased 2% to $623 million
- Net income increased 25% to $6 million; Adjusted EBITDA increased 2% to $139 million
- Travel Commerce Platform revenue increased 2% to $598 million
- Beyond Air revenue increased 14% to $193 million, contributing 32% of Travel Commerce Platform revenue (Q3 2017: 29%); eNett net revenue increased 58% to $86 million
- Income per share (diluted) increased 4% to $0.04; Adjusted Income per Share (diluted) increased 74% to $0.31
- Net cash provided by operating activities decreased 13% to $83 million; Free Cash Flow decreased 24% to $48 million
- Anticipate 2018 net revenue, Adjusted EBITDA and Free Cash Flow to be at the lower end of guidance ranges
Gordon Wilson, President and CEO of Travelport, commented:
"We delivered net revenue and Adjusted EBITDA growth of 2% each in the quarter. The continued strong performance of Beyond Air, driven by our virtual payments business eNett, helped us overcome the more challenging market and customer environment we anticipated for the second half of the year.
In the quarter, we continued to build the business in line with our strategy. Our Travel Commerce Platform delivered further business successes, especially in the regional corporate and online sectors where we are clearly benefiting from the investments we are making in the quality of our content and the capabilities and efficiency of our technology. We also strengthened our value proposition by concluding long-term deals to distribute the content of Air India and Jet Airways, in both cases as the preferred distributor. These add to our exclusive distribution contract with IndiGo and give us significant additional advantage in India and key markets beyond it. Furthermore, Travelport made history by becoming the first GDS to transact the booking of flights using IATA's New Distribution Capability (NDC) API protocol. These initiatives will contribute to the onboarding of new business next year, alongside the continued growth of eNett.
Despite these factors and our ongoing focus on the efficiency of our cost base, our business momentum is being tempered by some specific customer headwinds. We remain well positioned for longer term profitable growth given our commercial wins and the ongoing investments we're making in the key areas that differentiate us, including our industry-leading travel content; our search, merchandising and shopping capabilities; and our leading mobile, data and payments solutions."
Summary
Three Months | Nine Months | ||||||||||||||
Ended September 30, | Ended September 30, | ||||||||||||||
(in $ thousands, except per share amounts) | 2018 | 2017 | Change | 2018 | 2017 | Change | |||||||||
Net revenue | 622,585 | 610,842 | 2% | 1,962,431 | 1,873,712 | 5% | |||||||||
Operating income | 44,115 | 61,585 | (28)% | 164,072 | 235,997 | (30)% | |||||||||
Net income | 5,870 | 4,681 | 25% | 72,106 | 94,910 | (24)% | |||||||||
Income per share ? diluted | $ | 0.04 | $ | 0.04 | 4% | $ | 0.55 | $ | 0.76 | (28)% | |||||
Adjusted EBITDA | 139,313 | 136,437 | 2% | 450,413 | 451,996 | ? | |||||||||
Adjusted Operating Income | 79,219 | 76,392 | 4% | 268,211 | 268,465 | ? | |||||||||
Adjusted Net Income | 40,040 | 22,671 | 77% | 146,906 | 137,034 | 7% | |||||||||
Adjusted Income per Share ? diluted | $ | 0.31 | $ | 0.18 | 74% | $ | 1.15 | $ | 1.09 | 6% | |||||
Net cash provided by operating activities | 83,149 | 95,735 | (13)% | 285,435 | 274,342 | 4% | |||||||||
Free Cash Flow | 48,379 | 63,372 | (24)% | 176,199 | 195,150 | (10)% | |||||||||
Cash dividend per share | $ | 0.075 | $ | 0.075 | ? | $ | 0.225 | $ | 0.225 | ? | |||||
________________ | |||||||||||||||
The Company refers to certain non-GAAP financial measures in this press release, including Adjusted EBITDA, Adjusted Operating Income (Loss), Adjusted Net Income (Loss), Adjusted Income (Loss) per Share - diluted, Capital Expenditures, Net Debt and Free Cash Flow. Please refer to pages 10 to 13 of this press release for additional information, including reconciliations of such non-GAAP financial measures. | |||||||||||||||
Discussion of Results for the Third Quarter of 2018
Unless otherwise stated, all comparisons are for the third quarter of 2018 compared to the third quarter of 2017.
Net Revenue
Net revenue is comprised of:
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(in $ thousands) | 2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||
Air | $ | 404,643 | $ | 417,371 | (3) | $ | 1,321,525 | $ | 1,315,500 | ? | |||||
Beyond Air | 192,968 | 168,782 | 14 | 566,740 | 476,474 | 19 | |||||||||
Travel Commerce Platform | 597,611 | 586,153 | 2 | 1,888,265 | 1,791,974 | 5 | |||||||||
Technology Services | 24,974 | 24,689 | 1 | 74,166 | 81,738 | (9) | |||||||||
Net revenue | $ | 622,585 | $ | 610,842 | 2 | $ | 1,962,431 | $ | 1,873,712 | 5 | |||||
Net revenue increased by $12 million, or 2%, to $623 million primarily due to growth in Travel Commerce Platform revenue of $11 million, or 2%. Within Travel Commerce Platform revenue, Beyond Air revenue increased by $24 million, or 14%, offset by a decrease in Air revenue of $13 million, or 3%. The increase in Beyond Air revenue was driven by an increase in eNett net revenue of 58% to $86 million, primarily due to an increase in the volume of payments settled with existing customers, that was partially offset by a decline in the remainder of the Beyond Air portfolio. The decrease in Air revenue was mainly due to a decrease in Air Reported Segments that includes the impact of the loss of a large Pacific-based travel agency and other specific travel agency headwinds, offset by improved pricing and mix. Technology Services revenue remained stable.
The table below sets forth Travel Commerce Platform revenue by region:
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(in $ thousands) | 2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||
Asia Pacific | $ | 140,186 | $ | 145,008 | (3) | $ | 426,728 | $ | 437,748 | (3) | |||||
Europe | 202,300 | 185,801 | 9 | 670,082 | 568,811 | 18 | |||||||||
Latin America and Canada | 28,202 | 27,563 | 2 | 87,517 | 83,919 | 4 | |||||||||
Middle East and Africa | 78,824 | 77,494 | 2 | 239,593 | 238,959 | ? | |||||||||
International | 449,512 | 435,866 | 3 | 1,423,920 | 1,329,437 | 7 | |||||||||
United States | 148,099 | 150,287 | (1) | 464,345 | 462,537 | ? | |||||||||
Travel Commerce Platform | $ | 597,611 | $ | 586,153 | 2 | $ | 1,888,265 | $ | 1,791,974 | 5 | |||||
The table below sets forth Travel Commerce Platform Reported Segments and global RevPas by region:
Segments (in thousands) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | ||||||||||
Asia Pacific | 16,764 | 17,807 | (6) | 49,172 | 54,712 | (10) | |||||||||
Europe | 18,658 | 20,117 | (7) | 65,537 | 63,478 | 3 | |||||||||
Latin America and Canada | 4,793 | 4,706 | 2 | 14,231 | 13,862 | 3 | |||||||||
Middle East and Africa | 9,180 | 9,354 | (2) | 28,300 | 28,271 | ? | |||||||||
International | 49,395 | 51,984 | (5) | 157,240 | 160,323 | (2) | |||||||||
United States | 32,184 | 33,413 | (4) | 103,591 | 104,652 | (1) | |||||||||
Travel Commerce Platform Reported Segments | 81,579 | 85,397 | (4) | 260,831 | 264,975 | (2) | |||||||||
RevPas (in $) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | ||||||||||
International | $ | 9.10 | $ | 8.38 | 9 | $ | 9.06 | $ | 8.29 | 9 | |||||
United States | $ | 4.60 | $ | 4.50 | 2 | $ | 4.48 | $ | 4.42 | 1 | |||||
Travel Commerce Platform RevPas | $ | 7.33 | $ | 6.86 | 7 | $ | 7.24 | $ | 6.76 | 7 | |||||
Travel Commerce Platform RevPas increased 7% to $7.33, driving a $38 million increase in Travel Commerce Platform revenue. International RevPas increased 9% to $9.10, and United States RevPas increased 2% to $4.60. Reported Segments decreased 4% due to the impact of the loss of a large Pacific-based travel agency and other specific travel agency headwinds.
International Travel Commerce Platform revenue increased by $14 million, or 3%, with Europe mainly contributing to this increase due to an increase in its RevPas of 17%, offset partially by a decrease in its Reported Segments of 7%. The decrease in Travel Commerce Platform revenue in Asia Pacific of $5 million, or 3%, includes the loss of revenue resulting from the loss of a large Pacific-based travel agency.
Operating Income
Operating income decreased by $17 million, or 28%, to $44 million mainly due to the following:
- $17 million increase in selling, general and administrative expenses ("SG&A") primarily due to an increase in corporate and restructuring costs and the unfavorable movements in the fair value of foreign currency derivative contracts, offset by a decrease in equity-based compensation and related taxes
- $13 million increase in cost of revenue primarily due to incremental costs from the payment solutions business and an increase in travel distribution cost per segment driven by mix and an impairment of customer loyalty payments, offset by a decrease in volume and favorable foreign exchange movements; offset by
- $12 million increase in net revenue
Net Income
Net income increased by $1 million, or 25%, to $6 million due to the following:
- $12 million decrease in income tax expense primarily due to a decrease in pre-tax income and a change in geographical profit mix
- $6 million benefit from a decrease in loss on early extinguishment debt and interest expense, net; offset by
- $17 million decrease in operating income
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased by $13 million, or 13%, to $83 million, primarily due to the negative impact of changes in working capital and higher interest and income tax payments.
Adjusted EBITDA
Adjusted EBITDA increased by $3 million, or 2%, to $139 million due to the following:
- $12 million increase in net revenue; offset by
- $9 million increase within cost of revenue (excluding a $3 million increase related to items that are excluded from net income to determine Adjusted EBITDA) primarily due to incremental costs from the payment solutions business and an increase in travel distribution cost per segment driven by mix that is offset by a decrease in volume and favorable foreign exchange movements
Adjusted Net Income
Adjusted Net Income increased by $17 million, or 77%, to $40 million mainly due to the following:
- $11 million of lower income tax expense (excluding the benefit of a $2 million tax movement related to non-core corporate costs and other adjustments that are excluded from net income to determine Adjusted Net Income) primarily due to a change in geographical profit mix and quarterly phasing in 2017
- $4 million of lower interest expense, net (excluding a $3 million increase related to unrealized unfavorable movements in interest rate swap derivative contracts that are excluded from net income to determine Adjusted Net Income) due to the positive impact of cost incurred in 2017 relating to amendments made to the 2014 senior secured credit agreement, lower amortization of debt finance costs and debt discount and a lower debt balance
- $3 million increase in Adjusted EBITDA
Free Cash Flow
Free Cash Flow decreased by $15 million, or 24%, to a cash inflow of $48 million due to a $13 million decrease in net cash provided by operating activities and a $2 million increase in payments made for additions to property and equipment.
Net Debt
Net Debt decreased from $2,108 million as of December 31, 2017 to $2,061 million as of September 30, 2018 and is comprised of $2,265 million in total debt less $204 million in cash, cash equivalents and restricted cash. The increase in total debt of $35 million reflects (i) $2,154 million principal amount of term loans repaid under the former 2014 senior secured credit agreement and $8 million principal amount of term loans repaid under the 2018 senior secured credit agreement, (ii) $1,400 million principal amount of borrowings under the new 2018 senior secured credit agreement in March 2018, (iii) the issuance of $745 million principal amount of senior secured notes in March 2018 and (iv) a net $42 million increase in capital lease obligations and other indebtedness, and is offset by an $82 million increase in cash, cash equivalents and restricted cash balance as of September 30, 2018 compared to December 31, 2017, contributing to a decrease of $47 million in the Net Debt balance.
Full Year 2018 Financial Guidance
The following forward-looking statements, as well as those made elsewhere within this press release, reflect expectations as of November 1, 2018. We assume no obligation to update these statements. Results may be materially different and are affected by many factors detailed in this release and in Travelport's quarterly and annual Securities and Exchange Commission ("SEC") filings and/or furnishings, which are available on the SEC's website at www.sec.gov.
Our overall guidance ranges for full year 2018 are unchanged from those ranges initially communicated on February 20, 2018, as detailed below. We anticipate net revenue, Adjusted EBITDA and Free Cash Flow to be at the lower end of their respective ranges.
Furthermore, as previously communicated, we anticipate that our virtual payments business, eNett, will grow net revenue by at least 50% for the full year 2018. Our guidance is subject to exchange rate movements given that eNett's net revenue is largely denominated in currencies other than the U.S. dollar.
(in $ millions, except per share amounts) | FY 2018 | Growth |
Net revenue | $2,535 - $2,585 | 4% - 6% |
Adjusted EBITDA (1) | $585 - $605 | (1)% - 3% |
Adjusted Net Income (1) | $170 - $185 | (6)% - 2% |
Adjusted Income per Share ? diluted (2) | $1.34 - $1.46 | (7)% - 1% |
Free Cash Flow (3) | $210 - $230 | 5% - 15% |
(1) | Adjusted EBITDA guidance consists of Adjusted Net Income guidance excluding expected depreciation and amortization of property and equipment and expected amortization of customer loyalty payments of $240 million to $250 million, expected interest expense, net (excluding the impact of unrealized gain (loss) on interest rate derivative instruments) of approximately $110 million and expected related income taxes of approximately $55 million. Adjusted Net Income guidance excludes the expected impact of amortization of acquired intangible assets of approximately $40 million, loss on early extinguishment of debt of $28 million, expected equity-based compensation and related taxes and corporate and restructuring costs of $60 million to $70 million, income from discontinued operations of $28 million related to the release of an indemnity provision for liabilities accrued upon the sale of Gullivers Travel Associates in 2011 and an expected income tax benefit related to the adjustments above of approximately $15 million. We are unable to reconcile Adjusted EBITDA and Adjusted Net Income to net income (loss) determined under U.S. GAAP due to the unavailability of information required to reasonably predict certain reconciling items, such as loss on early extinguishment of debt, impairment of long-lived assets, unrealized gains or losses on foreign currency and interest rate derivative instruments, and the related tax impact of such adjustments along with other tax adjustments. |
(2) | Adjusted Income per Share ? diluted guidance consists of Adjusted Net Income divided by our expected weighted average number of dilutive common shares for 2018 of approximately 127 million. |
(3) | Free Cash Flow guidance reflects expected net cash provided by operating activities for 2018 of $345 million to $365 million less expected cash additions to property and equipment of approximately $140 million. |
Our overall guidance incorporates the expected impact of the adoption of the new revenue recognition standard on a modified retrospective basis. The adoption of this standard did not have a material impact on our consolidated condensed financial statements for the three and nine months ended September 30, 2018. In addition, our guidance assumes spot foreign exchange rates as of October 25, 2018, together with the impact of foreign exchange rate hedges undertaken during 2017 as part of our rolling hedging program.
Impact of Foreign Exchange Movements
Our results of operations are reported in U.S. dollars. With approximately 86% of our net revenue denominated in U.S. dollars in the third quarter of 2018, changes in foreign exchange rates have a low impact on our net revenue. eNett, which represented approximately 14% of our net revenue in the third quarter of 2018, is the largest source of non-U.S. dollar net revenue.
Of our costs and expenses in the third quarter of 2018, excluding depreciation on property and equipment, amortization of customer loyalty payments, amortization of acquired intangible assets and non-core corporate costs, approximately 54% were denominated in U.S. dollars.
As part of our rolling hedging program, we employ foreign exchange forward contracts to hedge a portion of our net exposure to changes in foreign exchange rates, particularly against the British pound, the Euro and the Australian dollar, which are the main non-U.S. dollar components of our costs and expenses. The year-on-year impact of foreign exchange rate movements on Adjusted EBITDA for the third quarter of 2018 was immaterial, net of the impact from realized foreign exchange rate hedges undertaken during 2017.
Dividend
On October 31, 2018, Travelport's Board of Directors declared a cash dividend of $0.075 per common share for the third quarter of 2018. The dividend will be payable on December 20, 2018 to shareholders of record as at market close on December 6, 2018.
Conference Call
The Company's third quarter 2018 earnings conference call will be held later today (on November 1, 2018) beginning at 8:30 a.m. (Eastern Time). A live audiocast of the presentation and accompanying slides will be available via the Investor Center section of Travelport's website at ir.travelport.com. Please visit the site or click the following link to pre-register: https://www.webcaster4.com/Webcast/Page/1138/27638.
A replay of the audiocast will be available on the Investor Center section of Travelport's website shortly after the end of the earnings call, where it will remain for one year thereafter.
Contacts
For further information, please contact:
Investors:
Majid Nazir
Head of Investor Relations
Tel: +44 (0)1753 288 857
[email protected]
Media:
Julian Eccles
Vice President, PR and Corporate Communications
Tel: +44 (0)7720 409 374
[email protected]
About Travelport (www.travelport.com)
Travelport (NYSE: TVPT) is the technology company that makes the experience of buying and managing travel continually better. It operates a travel commerce platform providing distribution, technology, payment and other solutions for the global travel and tourism industry. The Company facilitates travel commerce by connecting the world's leading travel providers with online and offline travel buyers in a proprietary business-to-business (B2B) travel platform.
Travelport has a leadership position in airline merchandising, hotel content and distribution, car rental, mobile commerce and B2B payment solutions. The Company also provides critical IT services to airlines, such as shopping, ticketing, departure control and other solutions. With net revenue of over $2.4 billion in 2017, Travelport is headquartered in Langley, U.K., has over 4,000 employees and is represented in approximately 180 countries and territories.
Forward-Looking Statements
Certain statements in this press release, including outlook and financial guidance, constitute "forward-looking statements" that involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by or that otherwise include the words "believes", "expects", "anticipates", "intends", "projects", "estimates", "plans", "may increase", "may fluctuate" and similar expressions or future or conditional verbs such as "will", "should", "would", "may" and "could" are generally forward-looking in nature and not historical facts. Any statements that refer to expectations or other characterizations of future events, circumstances or results are forward-looking statements.
Various risks that could cause future results to differ from those expressed by the forward-looking statements included in this press release include, but are not limited to: factors affecting the level of travel activity, particularly air travel volume, including security concerns, pandemics, general economic conditions, natural disasters and other disruptions; general economic and business conditions in the markets in which we operate, including fluctuations in currencies, particularly in the U.S. dollar, and the economic conditions in the Eurozone; pricing, regulatory and other trends in the travel industry; our ability to obtain travel provider inventory from travel providers, such as airlines, hotels, car rental companies, cruise lines and other travel providers; our ability to develop and deliver products and services that are valuable to travel agencies and travel providers and generate new revenue streams; maintenance and protection of our information technology and intellectual property; the impact on travel provider capacity and inventory resulting from consolidation of the airline industry; the impact our outstanding indebtedness may have on the way we operate our business; our ability to achieve expected cost savings from our efforts to improve operational and technology efficiency, including through our consolidation of multiple technology vendors and locations and the centralization of activities; our ability to maintain existing relationships with travel agencies and to enter into new relationships on acceptable financial and other terms; and our ability to grow adjacencies, such as payment and mobile solutions; and the impact on business conditions worldwide as a result of political decisions, including the United Kingdom's decision to leave the European Union. Forward-looking information is based on information available at the time and/or management's good faith belief with respect to future events and is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements. These and other potential risks and uncertainties that could cause actual results to differ are more fully detailed under the caption "Risk Factors" in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on February 20, 2018, and our Quarterly Reports on Form 10-Q filed with the SEC on May 3, 2018 and August 2, 2018, and available on the SEC's website at www.sec.gov.
Other unknown or unpredictable factors could also have material adverse effects on our performance or achievements. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this press release may not occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date of this press release. Except to the extent required by applicable securities laws, the Company undertakes no obligation to release any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.
This press release includes certain non-GAAP financial measures as defined under SEC rules. As required by SEC rules, important information regarding such measures is contained below.?
TRAVELPORT WORLDWIDE LIMITED | |||||||||||||
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS | |||||||||||||
(Unaudited) | |||||||||||||
Three Months | Three Months | Nine Months | Nine Months | ||||||||||
Ended | Ended | Ended | Ended | ||||||||||
September 30, | September 30, | September 30, | September 30, | ||||||||||
(in $ thousands, except share data) | 2018 | 2017 | 2018 | 2017 | |||||||||
Net revenue | $ | 622,585 | $ | 610,842 | $ | 1,962,431 | $ | 1,873,712 | |||||
Costs and expenses | |||||||||||||
Cost of revenue | 400,679 | 388,027 | 1,254,868 | 1,144,572 | |||||||||
Selling, general and administrative | 127,538 | 110,916 | 395,093 | 336,272 | |||||||||
Depreciation and amortization | 50,253 | 50,314 | 148,398 | 156,871 | |||||||||
Total costs and expenses | 578,470 | 549,257 | 1,798,359 | 1,637,715 | |||||||||
Operating income | 44,115 | 61,585 | 164,072 | 235,997 | |||||||||
Interest expense, net | (27,772) | (28,793) | (66,312) | (92,011) | |||||||||
Loss on early extinguishment of debt | (38) | (4,682) | (27,699) | (4,682) | |||||||||
Gain on sale of a subsidiary | ? | ? | ? | 1,217 | |||||||||
Other expense | (266) | (846) | (730) | (2,538) | |||||||||
Income before income taxes | 16,039 | 27,264 | 69,331 | 137,983 | |||||||||
Provision for income taxes | (10,169) | (22,583) | (24,972) | (43,073) | |||||||||
Net income from continuing operations | 5,870 | 4,681 | 44,359 | 94,910 | |||||||||
Income from discontinued operations, net of tax | ? | ? | 27,747 | ? | |||||||||
Net income | 5,870 | 4,681 | 72,106 | 94,910 | |||||||||
Net (income) loss attributable to non-controlling interest in subsidiaries | (762) | 169 | (2,025) | 973 | |||||||||
Net income attributable to the Company | $ | 5,108 | $ | 4,850 | $ | 70,081 | $ | 95,883 | |||||
Income per share ? Basic: | |||||||||||||
Income per share ? continuing operations | $ | 0.04 | $ | 0.04 | $ | 0.34 | $ | 0.77 | |||||
Income per share ? discontinued operations | ? | ? | 0.22 | ? | |||||||||
Basic income per share | $ | 0.04 | $ | 0.04 | $ | 0.56 | $ | 0.77 | |||||
Weighted average common shares outstanding ? Basic | 126,246,210 | 124,469,069 | 125,908,707 | 124,303,716 | |||||||||
Income per share ? Diluted: | |||||||||||||
Income per share ? continuing operations | $ | 0.04 | $ | 0.04 | $ | 0.33 | $ | 0.76 | |||||
Income per share ? discontinued operations | ? | ? | 0.22 | ? | |||||||||
Diluted income per share | $ | 0.04 | $ | 0.04 | $ | 0.55 | $ | 0.76 | |||||
Weighted average common shares outstanding ? Diluted | 128,389,385 | 126,188,372 | 127,854,478 | 125,827,540 | |||||||||
Cash dividends declared per common share | $ | 0.075 | $ | 0.075 | $ | 0.225 | $ | 0.225 | |||||
TRAVELPORT WORLDWIDE LIMITED | |||||
CONSOLIDATED CONDENSED BALANCE SHEETS | |||||
(Unaudited) | |||||
September 30, | December 31, | ||||
(in $ thousands, except share data) | 2018 | 2017 | |||
Assets | |||||
Current assets: | |||||
Cash and cash equivalents | $ | 200,333 | $ | 122,039 | |
Accounts receivable (net of allowances for doubtful accounts of $9,753 and $10,245, respectively) | 248,635 | 206,524 | |||
Other current assets | 125,612 | 109,724 | |||
Total current assets | 574,580 | 438,287 | |||
Property and equipment, net | 495,506 | 431,741 | |||
Goodwill | 1,085,341 | 1,089,590 | |||
Trademarks and tradenames | 313,097 | 313,097 | |||
Other intangible assets, net | 444,602 | 496,180 | |||
Deferred income taxes | 22,359 | 12,796 | |||
Other non-current assets | 72,525 | 76,808 | |||
Total assets | $ | 3,008,010 | $ | 2,858,499 | |
Liabilities and equity | |||||
Current liabilities: | |||||
Accounts payable | $ | 72,094 | $ | 73,278 | |
Accrued expenses and other current liabilities | 574,260 | 509,068 | |||
Current portion of long-term debt | 58,377 | 64,291 | |||
Total current liabilities | 704,731 | 646,637 | |||
Long-term debt | 2,206,171 | 2,165,722 | |||
Deferred income taxes | 37,881 | 34,899 | |||
Other non-current liabilities | 191,273 | 203,562 | |||
Total liabilities | 3,140,056 | 3,050,820 | |||
Commitments and contingencies | |||||
Shareholders' equity (deficit): | |||||
Preference shares ($0.0025 par value; 225,000,000 shares authorized; no shares issued and outstanding as of September 30, 2018 and December 31, 2017) | ? | ? | |||
Common shares ($0.0025 par value; 560,000,000 shares authorized; 128,047,376 shares and 126,967,010 shares issued; 126,306,329 shares and 125,346,613 shares outstanding as of September 30, 2018 and December 31, 2017, respectively) | 320 | 317 | |||
Additional paid in capital | 2,685,806 | 2,700,133 | |||
Treasury shares, at cost (1,741,047 shares and 1,620,397 shares as of September 30, 2018 and December 31, 2017, respectively) | (26,832) | (24,755) | |||
Accumulated deficit | (2,651,308) | (2,722,375) | |||
Accumulated other comprehensive loss | (156,566) | (155,621) | |||
Total shareholders' equity (deficit) | (148,580) | (202,301) | |||
Equity attributable to non-controlling interest in subsidiaries | 16,534 | 9,980 | |||
Total equity (deficit) | (132,046) | (192,321) | |||
Total liabilities and equity | $ | 3,008,010 | $ | 2,858,499 | |
TRAVELPORT WORLDWIDE LIMITED | ||||||
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS | ||||||
(Unaudited) | ||||||
Nine Months | Nine Months | |||||
Ended | Ended | |||||
September 30, | September 30, | |||||
(in $ thousands) | 2018 | 2017 | ||||
Operating activities | ||||||
Net income | $ | 72,106 | $ | 94,910 | ||
Income from discontinued operations, net of tax | (27,747) | ? | ||||
Net income from continuing operations | 44,359 | 94,910 | ||||
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities: | ||||||
Depreciation and amortization | 148,398 | 156,871 | ||||
Amortization of customer loyalty payments | 64,553 | 57,348 | ||||
Impairment of long-lived assets | 14,912 | 685 | ||||
Amortization of debt finance costs and debt discount | 3,613 | 7,791 | ||||
Gain on sale of a subsidiary | ? | (1,217) | ||||
Loss on early extinguishment of debt | 27,699 | 4,682 | ||||
Unrealized loss (gain) on foreign exchange derivative instruments | 23,637 | (27,256) | ||||
Unrealized (gain) loss on interest rate derivative instruments | (11,651) | 1,121 | ||||
Equity-based compensation | 11,845 | 24,445 | ||||
Deferred income taxes | (7,129) | (304) | ||||
Customer loyalty payments | (73,349) | (54,592) | ||||
Pension liability contribution | (1,049) | (1,541) | ||||
Changes in assets and liabilities: | ||||||
Accounts receivable, net | (41,966) | (39,209) | ||||
Other current assets | (12,933) | (7,493) | ||||
Accounts payable, accrued expenses and other current liabilities | 84,249 | 61,504 | ||||
Other | 10,247 | (3,403) | ||||
Net cash provided by operating activities | $ | 285,435 | $ | 274,342 | ||
Investing activities | ||||||
Property and equipment additions | $ | (109,236) | $ | (79,192) | ||
Sale of subsidiary, net of cash disposed | ? | (3,433) | ||||
Net cash used in investing activities | $ | (109,236) | $ | (82,625) | ||
Financing activities | ||||||
Proceeds from term loans | $ | 1,400,000 | $ | 114,000 | ||
Proceeds from issuance of senior secured notes | 745,000 | ? | ||||
Repayment of term loans | (2,161,250) | (181,813) | ||||
Repayment of capital lease obligations and other indebtedness | (30,632) | (29,811) | ||||
Debt finance costs and lender fees | (21,551) | (686) | ||||
Dividend to shareholders | (28,472) | (28,234) | ||||
Purchase of non-controlling interest in a subsidiary | ? | (1,063) | ||||
Proceeds from share issuance under employee share purchase plan and stock options | 8,460 | 2,016 | ||||
Treasury share purchase related to vesting of equity awards | (2,621) | (2,461) | ||||
Other | (2,240) | ? | ||||
Net cash used in financing activities | $ | (93,306) | $ | (128,052) | ||
Effect of changes in exchange rates on cash, cash equivalents and restricted cash | (1,126) | 1,043 | ||||
Net increase in cash, cash equivalents and restricted cash | 81,767 | 64,708 | ||||
Cash, cash equivalents and restricted cash at beginning of period | 122,039 | 139,938 | ||||
Cash, cash equivalents and restricted cash at end of period | $ | 203,806 | $ | 204,646 | ||
Supplemental disclosures of cash flow information | ||||||
Interest payments, net of capitalized interest | $ | 77,419 | $ | 83,294 | ||
Income tax payments, net of refunds | 36,933 | 23,540 | ||||
Non-cash capital lease asset additions | 71,511 | 17,984 | ||||
Non-cash purchase of property and equipment | 4,220 | 3,120 | ||||
TRAVELPORT WORLDWIDE LIMITED | ||||||||||||
NON-GAAP MEASURES | ||||||||||||
(unaudited) | ||||||||||||
Reconciliation of Net Income to Adjusted Net Income, | Three Months Ended | Nine Months Ended | ||||||||||
Adjusted Operating Income and Adjusted EBITDA | September 30, | September 30, | ||||||||||
(in $ thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||
Net income | $ | 5,870 | $ | 4,681 | $ | 72,106 | $ | 94,910 | ||||
Adjustments: | ||||||||||||
Amortization of acquired intangible assets | 10,165 | 10,165 | 30,497 | 30,688 | ||||||||
Gain on sale of a subsidiary | ? | ? | ? | (1,217) | ||||||||
Loss on early extinguishment of debt | 38 | 4,682 | 27,699 | 4,682 | ||||||||
Equity-based compensation and related taxes | (207) | 8,676 | 11,837 | 24,355 | ||||||||
Corporate and restructuring costs | 19,472 | 4,217 | 24,704 | 14,897 | ||||||||
Impairment of long-lived assets | 3,269 | ? | 14,912 | 685 | ||||||||
Income from discontinued operations | ? | ? | (27,747) | ? | ||||||||
Other ? non-cash(1) | 3,580 | (9,285) | 10,538 | (34,498) | ||||||||
Tax adjustments | (2,147) | (465) | (17,640) | 2,532 | ||||||||
Adjusted Net Income | 40,040 | 22,671 | 146,906 | 137,034 | ||||||||
Adjustments: | ||||||||||||
Interest expense, net(2) | 26,597 | 30,673 | 77,963 | 90,890 | ||||||||
Other expense | 266 | ? | 730 | ? | ||||||||
Remaining provision for income taxes | 12,316 | 23,048 | 42,612 | 40,541 | ||||||||
Adjusted Operating Income | 79,219 | 76,392 | 268,211 | 268,465 | ||||||||
Adjustments: | ||||||||||||
Depreciation and amortization of property and equipment | 40,032 | 40,149 | 117,649 | 126,183 | ||||||||
Amortization of customer loyalty payments | 20,062 | 19,896 | 64,553 | 57,348 | ||||||||
Adjusted EBITDA | $ | 139,313 | $ | 136,437 | $ | 450,413 | $ | 451,996 | ||||
__________________ | ||||||||||||
(1) Other?non-cash includes (i) unrealized losses (gains) on foreign currency derivatives contracts of? $2 million and $(7) million for the three months ended September 30, 2018 and 2017, respectively, and $22 million and $(27) million for the nine months ended September 30, 2018 and 2017, respectively, (ii) unrealized losses (gains) on interest rate derivative contracts of? $1 million and $(2) million for the three months ended September 30, 2018 and 2017, respectively, and $(12) million and $1 million for the nine months ended September 30, 2018 and 2017, respectively, (iii) $8 million related to revenue deferred in previous years for the nine months ended September 30, 2017 and (iv) other gains of? $1 million for the nine months ended September 30, 2017. | ||||||||||||
(2) Interest expense, net, excludes the impact of unrealized losses (gains) on interest rate derivative contracts of $1 million and $(2) million for the three months ended September 30, 2018 and 2017, respectively, and $(12) million and $1 million for the nine months ended September 30, 2018 and 2017, respectively, which is included within "Other?non-cash." | ||||||||||||
Reconciliation of net cash provided by operating | Three Months Ended | Nine Months Ended | ||||||||||
activities to Free Cash Flow: | September 30, | September 30, | ||||||||||
(in $ thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||
Net cash provided by operating activities | $ | 83,149 | $ | 95,735 | $ | 285,435 | $ | 274,342 | ||||
Less: capital expenditures on property and equipment additions | (34,770) | (32,363) | (109,236) | (79,192) | ||||||||
Free Cash Flow | $ | 48,379 | $ | 63,372 | $ | 176,199 | $ | 195,150 | ||||
Reconciliation of Net Debt | September 30, | December 31, | ||||||||||
(in $ thousands) | 2018 | 2017 | ||||||||||
Current portion of long-term debt | $ | 58,377 | $ | 64,291 | ||||||||
Non-current portion of long-term debt | 2,206,171 | 2,165,722 | ||||||||||
Total debt | 2,264,548 | 2,230,013 | ||||||||||
Less: cash, cash equivalents and restricted cash | (203,806) | (122,039) | ||||||||||
Net Debt | $ | 2,060,742 | $ | 2,107,974 | ||||||||
TRAVELPORT WORLDWIDE LIMITED | ||||||||||||
NON-GAAP MEASURES | ||||||||||||
(unaudited) | ||||||||||||
Reconciliation of Income per Share ?? Diluted to | Three Months Ended | Nine Months Ended | ||||||||||
Adjusted Income per Share???Diluted | September 30, | September 30, | ||||||||||
(in $) | 2018 | 2017 | 2018 | 2017 | ||||||||
Income per share???diluted | $ | 0.04 | $ | 0.04 | $ | 0.55 | $ | 0.76 | ||||
Per share adjustments to net income to determine Adjusted Income per Share ? diluted | 0.27 | 0.14 | 0.60 | 0.33 | ||||||||
Adjusted Income per Share???diluted | $ | 0.31 | $ | 0.18 | $ | 1.15 | $ | 1.09 | ||||
Three Months Ended | Nine Months Ended | |||||||||||
Reconciliation of Capital Expenditures | September 30, | September 30, | ||||||||||
(in $ thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||
Property and equipment additions | $ | 34,770 | $ | 32,363 | $ | 109,236 | $ | 79,192 | ||||
Repayment of capital lease obligations and other indebtedness | 11,654 | 10,321 | 30,632 | 29,811 | ||||||||
Capital Expenditures | $ | 46,424 | $ | 42,684 | $ | 139,868 | $ | 109,003 | ||||
Other Metrics | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
(in thousands, except where specified) | 2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||
Transaction value processed on the Travel Commerce Platform | $ | 22,217,209 | $ | 21,432,958 | 4 | $ | 68,919,969 | $ | 63,067,084 | 9 | |||||
Percent of Air segment revenue from away bookings | 67% | 67% | 0.5 ppts | 69% | 67% | 2.0 ppts | |||||||||
Hotel room nights sold | 16,965 | 17,615 | (4) | 51,316 | 51,359 | ? | |||||||||
Car rental days sold | 29,245 | 29,841 | (2) | 82,563 | 80,804 | 2 | |||||||||
Hospitality segments per 100 airline tickets issued | 48 | 48 | ? | 45 | 46 | (2) | |||||||||
TRAVELPORT WORLDWIDE LIMITED
DEFINITIONS
(unaudited)
Definitions
Adjusted EBITDA is defined as Adjusted Net Income (Loss) excluding depreciation and amortization of property and equipment, amortization of customer loyalty payments, interest expense, net (excluding unrealized gains (losses) on interest rate derivative instruments), components of net periodic pension and post-retirement benefit costs other than service cost and related income taxes.
Adjusted Income (Loss) per Share ? Diluted is defined as Adjusted Net Income (Loss) for the period divided by the weighted average number of dilutive common shares.
Adjusted Net Income (Loss) is defined as net income (loss) excluding amortization of acquired intangible assets, gain (loss) on early extinguishment of debt, and items that are excluded under our debt covenants, such as, income (loss) from discontinued operations, gain (loss) on sale of subsidiary, non-cash equity-based compensation, certain corporate and restructuring costs, non-cash impairment of long-lived assets, certain litigation and related costs, and other non-cash items such as unrealized foreign currency gains (losses) on earnings hedges, and unrealized gains (losses) on interest rate derivative instruments, along with any income tax related to these exclusions. Tax impacts not related to core operations have also been excluded.
Adjusted Operating Income (Loss) is defined as Adjusted EBITDA less depreciation and amortization of property and equipment and amortization of customer loyalty payments.
Capital Expenditures is defined as cash paid for property and equipment plus repayments in relation to capital leases and other indebtedness.
Customer Loyalty Payments are payments made to travel agencies or travel providers with an objective of increasing the number of travel bookings using the Company's Travel Commerce Platform and to improve the travel agencies or travel providers' loyalty, which are instrumented through agreements with a term over a year. Under the contractual terms, the travel agency or travel provider commits to achieve certain economic objectives for the Company. Such costs are specifically identifiable to individual contracts with travel agencies or travel providers, which have determinable contractual lives. Due to the contractual nature of the payments, the Company believes that such assets are appropriately classified as intangible assets.
Free Cash Flow is defined as net cash provided by (used in) operating activities, less cash used for additions to property and equipment.
Net Debt is defined as total debt comprising of current and non-current portion of long-term debt minus cash, cash equivalents and restricted cash.
Reported Segments means travel provider revenue generating units (net of cancellations) sold by the Company's travel agency network, geographically presented by region based upon the point of sale location.
Travel Commerce Platform RevPas ("RevPas") represents Travel Commerce Platform revenue per segment and is computed by dividing Travel Commerce Platform revenue by the total number of Reported Segments.
TRAVELPORT WORLDWIDE LIMITED
NON-GAAP FINANCIAL MEASURES
(unaudited)
Non-GAAP Financial Measures
We utilize non ? GAAP (or adjusted) financial measures, including Adjusted EBITDA, Adjusted Operating Income (Loss), Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Share ? diluted, to provide useful supplemental information to assist investors in understanding and assessing our performance and financial results on the same basis that management uses internally. These adjusted financial measures provide investors greater transparency with respect to the key metrics used by management to evaluate our core operations, forecast future results, determine future capital investment allocations and understand business trends within the industry. Adjusted Operating Income (Loss) and Adjusted Net Income (Loss) per Share ? diluted metrics are also used by our Board of Directors to determine incentive compensation for future periods. Management believes the adjusted financial measures assist investors in the comparison of financial results between periods as such measures exclude certain items that management believes are not reflective of our core operating performance consistent with how management reviews the business.
Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Share ? diluted, Adjusted Operating Income and Adjusted EBITDA are supplemental measures of operating performance that do not represent, and should not be considered as, alternatives to net income (loss), or net income (loss) per share ? diluted, as determined under U.S. GAAP. In addition, these measures may not be comparable to similarly named measures used by other companies.
We believe Adjusted Income (Loss) per Share ? diluted is a useful measure for our investors as it represents, on a per share basis, our consolidated results, taking into account depreciation and amortization on property and equipment and amortization of customer loyalty payments, as well as other items which are not allocated to the operating businesses such as interest expense (excluding unrealized gains (losses) on interest rate derivative instruments), certain components of net periodic pension and post-retirement benefit costs and related income taxes but excluding the effects of certain expenses not directly tied to the core operations of our businesses. Adjusted Income (Loss) per Share ? diluted has similar limitations as Adjusted Net Income (Loss), Adjusted Operating Income (Loss) and Adjusted EBITDA and may not be comparable to similarly named measures used by other companies. In addition, Adjusted Net Income (Loss) does not include all items that affect our net income (loss) and net income (loss) per share for the period. Therefore, we believe it is important to evaluate these measures along with our consolidated condensed statements of operations.
We believe our important measure of liquidity is Free Cash Flow. This measure is useful indicator of our ability to generate cash to meet our liquidity demands. We use Free Cash Flow to conduct and evaluate our operating liquidity. We believe it typically presents an alternate measure of cash flows since purchases of property and equipment are a necessary component of our ongoing operations and provides useful information regarding how cash provided by operating activities compares to the property and equipment investments required to maintain and grow our platform. We believe it provides investors with an understanding of how assets are performing and measures management's effectiveness in managing cash. Free Cash Flow is a non ? GAAP measure and may not be comparable to similarly named measures used by other companies. This measure has limitation in that it does not represent the total increase or decrease in the cash balance for the period, nor do they represent residual cash flow for discretionary expenditures. This measure should not be considered as a measure of liquidity or cash flows from operations as determined under U.S. GAAP.
We use Capital Expenditures to determine our total cash spent on acquisition of property and equipment and cash repayment of capital lease obligation and other indebtedness. We believe this measure provides management and investors an understanding of total capital invested in the development of our platform. Capital Expenditures is a non?GAAP measure and may not be comparable to similarly named measures used by other entities. This measure has limitation in that it aggregates cash flows from investing and financing activities as determined under U.S. GAAP.
Management uses Net Debt to review our overall liquidity, financial flexibility, capital structure and leverage. Further, we believe, certain debt rating agencies, creditors and credit analysts monitor our Net Debt as part of their assessment of our business. Net Debt is not a measurement of our indebtedness under U.S. GAAP and should not be considered in isolation or as alternative to assess our total debt or any other measures derived in accordance with U.S. GAAP.
These non?GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of Travelport's results as reported under U.S. GAAP.
SOURCE Travelport Worldwide Limited
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