Allegiant Travel Company Third Quarter 2020 Financial Results

LAS VEGAS, Oct. 28, 2020 /PRNewswire/ -- Allegiant Travel Company (NASDAQ: ALGT) today reported the following financial results for the third quarter 2020, as well as comparisons to the prior year:

"As we continue to navigate through the pandemic we have been encouraged by the modest, yet consistent improvements during the third quarter and into the fourth," stated Maurice J. Gallagher, Jr., chairman and CEO of Allegiant Travel Company. "Consumer confidence towards air travel is improving as seen in our quarterly performance. We completed the quarter beating consensus with a loss per share of $4.28, excluding one-time, special items, and the benefit from the CARES Act. Our scheduled capacity year-over-year was down less than seven percent, perhaps the best showing in the industry. Revenue is also trending in the right direction with September totals down 43 percent versus prior year. Although we still have a long road ahead of us, the progress we've seen is a direct reflection of the quality of our people and the nimbleness of the model.

"As we move into the fourth quarter, we remain focused on cash management. Our cash preservation strategy continues to center around maintaining a broad selling presence as well as stripping costs from the business. Our revenue and planning teams have done an exceptional job optimizing our schedule available for sale. We've seen average daily gross bookings increase from just over $2 million per day during the third quarter to over $3 million per day thus far in the fourth quarter. On the cost front, we successfully reduced variable operating expenses by nearly 30 percent, excluding the CARES Act payroll support benefit and one-time special items, which outpaces our reduction in capacity more than threefold. These savings are important in paving the way to cash break-even. Our cash preservation strategies coupled with strategic capital raises over the last several weeks have contributed to our pro forma cash balance of $850 million. 

"Even though we're pleased with recent progress, we remain cautious. We have had to make tough decisions the past few months, including a reduction in our workforce. Although difficult, these steps were necessary to right size our organization to better align with demand. This environment has been difficult for our team members, and I cannot thank them enough for their continued hard work and dedication during this trying time. Their efforts to prioritize health and safety for our passengers, and our leadership efforts to bolster the financial health of the company have laid a solid foundation for our recovery. This has been and will continue to be a slow climb out of this abyss known as COVID. At this point, I believe we are leading the way out towards light ahead in the coming months and year."  

Covid-19 Responses - Update

• Ranked by Safe Travel Barometer as #1 airline among North American carriers and among the top five worldwide for best COVID-19 Traveler Safety Measures, with results based on an independent audit of more than 150 airlines
• Prioritizing the health and safety of our passengers and crew members by upholding the principles of our Going the Distance for Health and Safety program, which include enhanced cleaning protocols, air purity guidelines, and new service practices and boarding procedures designed to provide additional distancing between customers whenever possible
• Accommodating travel flexibility by waiving change and cancellation fees for all customers with future travel through the end of 2020, extending the expiry on credit vouchers to two years, and offering an opt-in option within the booking path to alert customers if their flight has reached 65 percent capacity allowing the option to re-book or receive a refund
• Reduced management and support teams by roughly 300 positions, which includes voluntary leaves
• 25 percent reduction in these work groups
• Includes 220 positions previously disclosed
• Anticipated annual savings of roughly $20 million
• Furloughed roughly 130 pilots, a 13 percent reduction
• 100 furloughed as of October 1, with an additional 30 expected November 1

Third Quarter 2020 Results

• Recorded positive cash inflows for the month of September, excluding a $5 million payment in connection with terminating the loan agreement intended to finance the development of Sunseeker Resorts Charlotte Harbor
• Reduced scheduled third quarter capacity by 6.5 percent
• Completed the quarter with load factor in the month of September of 57.4 percent, the highest month since the onset of the pandemic in March
• Recognized total special charges related to COVID-19 of $33.6 million during the third quarter
• Anticipate fourth quarter capacity to be reduced by 15 percent from prior year but will continue to adjust based on demand trends
• Minimal close-in cancellations during the third quarter and anticipate the fourth quarter will be similar
• Total revenue for the quarter was $201.0 million, down 54.0 percent year over year
• September total revenue down 42.8 percent, the lowest monthly reduction since the onset of the pandemic
• Average total ancillary revenue per passenger (includes air-related charges and third party products) remains strong, despite current yield pressure, at $55.70 per passenger, up 1.5 percent year-over-year
• Operating expense was $234.1 million, down 35.8 percent year-over-year on reduced system-wide capacity of 9.4 percent
• Variable operating expense, defined as total operating expense excluding the benefit of the CARES Act, one-time special items, aircraft leases, and depreciation and amortization, down 29.2 percent versus prior year
• Advertising spend down 75 percent year-over-year, yet website visitors derived by either directly typing www.allegiant.com or by clicking on a marketing email promotional link are up 17 percent versus prior year
• Customer conversion rate is up 36 percent from pre-pandemic levels
• Named #1 airline co-branded credit card two years in a row by USA Today

Balance Sheet, Cash and Liquidity

• Total cash and investments at September 30^th was $709.8 million   
• Total sources of liquidity received during the third quarter around $184.9 million
• Obtained $84 million in financings secured by A320 aircraft and CFM engines
• Entered into a sale leaseback transaction, which included the sale of four A320-series aircraft, three of which closed in the third quarter generating $30 million
• Fourth sale closed in October, generating $10 million
• Federal income tax refund of $48.7 million related to tax net operating losses from 2018
• Expect a federal income tax refund in excess of $125 million related to 2020 net operating losses to be received during the first half of 2021
• Additional payroll support related to the CARES Act of $22.2 million
• In early October, issued $150 million of senior secured notes backed by collateral pledged to existing Term Loan
• Cash balance pro forma for this financing in excess of $850 million
• Debt, net of liquidity, as of September 30^th was $840 million, down roughly $100 million from December 31, 2019
• Third quarter interest expense down 38.8 percent versus prior year
• 3Q20 daily cash burn averaged $1.3 million ⁽¹⁾                         
• Gross bookings averaged just above $2.0 million per day during the quarter
• Includes $15 million of payments to Sixth Street Partners (formerly TSSP) to terminate loan agreement intended to finance the development of Sunseeker Resorts Charlotte Harbor
• As of September 30^th, have 22 unencumbered aircraft and 4 unencumbered spare engines
• Air traffic liability at September 30^th was $334 million
• Balance related to future scheduled flights is $116 million
• Balance related to travel vouchers issued for future use is $218 million

(1) Daily cash burn defined as cash from operations less scheduled debt and rent payments and capital expenditure outflows excluding aircraft and engine acquisitions as they are expected to be financed. Excludes benefits received from CARES Act such as Payroll Support Program funding and tax refunds from net operating loss carry-backs.

Capital Expenditures

• Remaining 2020 spend related to capital expenditures is roughly $130 million
• Includes five previously executed purchase commitments for aircraft
• Roughly $10 million of deferred heavy maintenance
• Full year 2021 capital expenditures, including deferred heavy maintenance, expected to be roughly $125 million
• Includes two previously executed purchase commitments for aircraft
• Expect to have 93 operating aircraft at year end 2020
• Does not include owned aircraft currently in storage programs

Allegiant Travel Company will host a conference call with analysts at 4:30 p.m. ET Wednesday, October 28 to discuss its third quarter 2020 financial results. A live broadcast of the conference call will be available via the Company's Investor Relations website homepage at http://ir.allegiantair.com. The webcast will also be archived in the "Events & Presentations" section of the website.

Allegiant Travel Company

Las Vegas-based Allegiant (NASDAQ: ALGT) is an integrated travel company with an airline at its heart, focused on connecting customers with premier leisure experiences - from vacations to hometown family entertainment. Since 1999, Allegiant Air has linked travelers in small-to-medium cities to world-class vacation destinations with all-nonstop flights and industry-low average fares. Today, Allegiant's all-Airbus fleet serves communities across the nation, with base airfares less than half the cost of the average domestic roundtrip ticket. For more information, visit us at Allegiant.com. Media information, including photos, is available at http://gofly.us/iiFa303wrtF

Media Inquiries: [email protected]

Investor Inquiries: [email protected]

Under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, statements in this press release that are not historical facts are forward-looking statements. These forward-looking statements are only estimates or predictions based on our management's beliefs and assumptions and on information currently available to our management. Forward-looking statements include our statements regarding future airline operations and capacity, the efficacy of cost saving measures, future expenditures, cash burn, the timing of aircraft acquisitions and retirements,  aircraft financings,  expected capital expenditures, as well as other information concerning future results of operations, business strategies, financing plans, industry environment and potential growth opportunities. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words "believe," "expect," "guidance," "anticipate," "intend," "plan," "estimate", "project", "hope" or similar expressions.

Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in the forward-looking statements. Important risk factors that could cause our results to differ materially from those expressed in the forward-looking statements generally may be found in our periodic reports filed with the Securities and Exchange Commission at www.sec.gov. These risk factors include, without limitation, the impact and duration of the COVID-19 pandemic on airline travel and the economy, liquidity issues resulting from the effect of the COVID-19 pandemic on our business, restrictions imposed on us as a result of accepting grants and loans under the Cares Act, an accident involving, or problems with, our aircraft, public perception of our safety, our reliance on our automated systems, our reliance on third parties to deliver aircraft under contract to us on a timely basis, risk of breach of security of personal data, volatility of fuel costs, labor issues and costs, the ability to obtain regulatory approvals as needed , the effect of economic conditions on leisure travel, debt covenants and balances, the ability to finance aircraft to be acquired, terrorist attacks, risks inherent to airlines, our competitive environment, our reliance on third parties who provide facilities or services to us, the possible loss of key personnel, economic and other conditions in markets in which we operate, the ability to successfully develop and finance a resort in Southwest Florida, governmental regulation, increases in maintenance costs and cyclical and seasonal fluctuations in our operating results.

Any forward-looking statements are based on information available to us today and we undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise.

Detailed financial information follows:

Summary Balance Sheet

Summary Cash Flow

Daily Cash Burn Reconciliation

Daily cash burn defined as cash from operations less debt and rent payments and capital expenditure outflows, excluding aircraft and engine acquisitions. Excludes the impact of the CARES Act Payroll Support Program funding.

EPS Calculation

The following table sets forth the computation of net income (loss) per share, on a basic and diluted basis, for the periods indicated (share count and dollar amounts other than per-share amounts in table are in thousands):

Appendix A
Non-GAAP Presentation
Three and Nine Months Ended September 30, 2020 and 2019
(Unaudited)

Adjusted operating income (loss), adjusted income (loss) before income taxes, adjusted net income (loss) and adjusted diluted earnings (loss) per share, all eliminate the effect of special expenses, related directly to COVID 19, as well as the benefit related to the payroll support grant as provided under the CARES Act, which are not reflective of our ongoing operating performance. The adjusted diluted earnings (loss) per share also ignores a one-time tax benefit allowed under the CARES Act.  As such, all of these are non-GAAP financial measures.

In addition, airline operating expense and adjusted airline operating expense eliminate the effects of non-airline operating activity, which is not reflective of the airline operating performance.

EBITDA, as presented in this press release, and the various adjusted and airline only metrics disclosed, are supplemental measures of our performance that are not required by, or presented in accordance with, accounting principles generally accepted in the United States ("GAAP"). They are not measurements of our financial performance under GAAP and should not be considered in isolation or as an alternative to net income or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of our liquidity.

We define "EBITDA" as earnings before interest, taxes, depreciation and amortization. "Adjusted EBITDA" is EBITDA adjusted to eliminate the effect of special charges and the CARES Act grant. We caution investors that amounts presented in accordance with these definitions may not be comparable to similar measures disclosed by other issuers, because not all issuers and analysts calculate EBITDA and Adjusted EBITDA in the same manner.

We use EBITDA and Adjusted EBITDA to evaluate our operating performance and liquidity and these are among the primary measures used by management for planning and forecasting of future periods. We believe the presentation of these measures is relevant and useful for investors because they allow investors to view results in a manner similar to the method used by management and makes it easier to compare our results with other companies that have different financing and capital structures. EBITDA has important limitations as an analytical tool. These limitations include the following:

• EBITDA does not reflect our capital expenditures, future requirements for capital expenditures or contractual commitments to purchase capital equipment;
• EBITDA does not reflect interest expense or the cash requirements necessary to service principal or interest payments on our debt;
• although depreciation and amortization are non-cash charges, the assets that we currently depreciate and amortize will likely have to be replaced in the future, and EBITDA does not reflect the cash required to fund such replacements; and
• other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure.

Presented below is a quantitative reconciliation of EBITDA to the most directly comparable GAAP financial performance measure, which we believe is net income (loss). We believe the presentation of EBITDA and the various adjusted and airline only measures are relevant and useful for investors because they allow them to better gauge the performance of the airline and to compare our results to other airlines.

In addition to EBITDA and Adjusted EBITDA as defined above, we have included a separate EBITDA as defined by certain credit agreements. This measurement of EBITDA adjusts for losses on impairment, Sunseeker net income/(loss), stock compensation expense, amortization of debt issuance costs, (gain)/loss on disposal of assets, tax provision - in excess of cash paid, special non-recurring items, and other items.

The SEC has adopted rules (Regulation G) regulating the use of non-GAAP financial measures. Because of our use of non-GAAP financial measures in this press release to supplement our consolidated financial statements presented on a GAAP basis, Regulation G requires us to include in this press release a presentation of the most directly comparable GAAP measure, which is operating revenue, operating income (loss), net income (loss), operating expenses, and diluted earnings (loss) per share and a reconciliation of the non-GAAP measures to the most comparable GAAP measure. Our utilization of non-GAAP measurements is not meant to be considered in isolation or as a substitute for operating income (loss), net income (loss) or other measures of financial performance prepared in accordance with GAAP. Our use of these non-GAAP measures may not be comparable to similarly titled measures employed by other companies in the airline and travel industry. The reconciliation of each of these measures to the most comparable GAAP measure for the periods is indicated below.

Reconciliation of Non-GAAP Financial Measures

SOURCE Allegiant Travel Company