Travelport Worldwide announced today its financial results for the first quarter ended March 31, 2015.
Key Points
Q1 financial performance in line with management expectations, including the year-on-year impact of renegotiated legacy contracts with Orbitz Worldwide, Inc. and Delta Air Lines
Q1 2015 net revenue flat at $572 million, with revenue per segment sold (RevPas) up 2% to $5.73. Q1 2015 Adjusted EBITDA of $137 million, down 9% from Q1 2014
Q1 2015 Adjusted Income per Share (diluted) of $0.24, up from $0.05 in Q1 2014
Air revenue down 3% to $432 million in Q1 2015. Anticipated lower volumes in the US and Europe partially offset by good growth in key geographies, in particular from Asia Pacific
Real momentum in Air going into the second half of the year, with over 100 airlines signed for Travelport’s industry-leading Rich Content & Branding merchandising solution and over 60 airlines with content already live
Strong progress continuing in Beyond Air, with revenue up 14% to $110 million in Q1 2015, representing 20% of Travel Commerce Platform revenue (Q1 2014: 18%)
Hospitality segments per 100 airline tickets issued in Q1 2015 increased to 41 (Q1 2014: 37)
Strong eNett growth in line with management expectations, with the gross dollar value of eNett Virtual Account Number transactions (VAN GDV) in Q1 2015 growing by 67% year-on-year, on a constant currency basis
Gordon Wilson, President and CEO of Travelport, commented:
“Travelport is off to a solid start in 2015 with the first quarter in line with our expectations. 2015 continues to be a transition year for Travelport as we move beyond the resolution of two key legacy contracts. Net of these, we are seeing real momentum in our business as we continue to invest in our platform and its ‘go-to-market’ capabilities. Our industry-leading Rich Content & Branding merchandising solution continues to rapidly gain traction across the airline community, with seven of the world’s top ten airlines now participating. We also continue to see double-digit growth in the Beyond Air area of our business. This has been driven by our focus on broadening the available content in hospitality which, in turn, drove an 11% increase in hospitality segments booked per 100 airline tickets, as well as eNett’s continuing expansion. We are excited about the future and remain on course with our guidance for this year.”
Summary
Three months ended
March 31,
(in $ millions, except per share amounts)
2015
2014
Better /
(Worse)
Net revenue
572
572
—
Operating income
34
75
(54)%
Net loss
(7)
(27)
74%
Loss per share – diluted
$(0.07)
$(0.46)
85%
Adjusted EBITDA
137
151
(9)%
Adjusted Net Income
30
3
*
Adjusted Income per Share – diluted
$0.24
$0.05
*
Net cash provided by operating activities
11
23
(52)%
Adjusted Free Cash Flow
(21)
(4)
*
Cash dividend per share
$0.075
—
*
* Not meaningful
The Company refers to certain non-GAAP financial measures in this press release, including Adjusted EBITDA, Adjusted Free Cash Flow, Adjusted Income per Share, Adjusted Net Income, Capital Expenditures, Net Debt, Trading Working Capital and Unlevered Adjusted Free Cash Flow. Please refer to pages 9, 11 and 12 of this press release for additional information, including reconciliations of such non-GAAP financial measures. We have not reconciled Adjusted EBITDA guidance to net income (loss) guidance because we do not provide guidance for share-based compensation expense, provision for income taxes, interest income, interest expense, litigation and related costs, and other items, as certain of these items are out of our control and/or cannot be reasonably predicted.
Discussion of Results
Net Revenue and Adjusted EBITDA
Net revenue is comprised of:
Three Months Ended
March 31,
Change
(in $ millions)
2015
2014
$
%
Air
$ 432
$ 445
$ (13)
(3)
Beyond Air
110
97
13
14
Travel Commerce Platform
542
542
—
—
Technology Services
30
30
—
—
Net Revenue
$ 572
$ 572
$ —
—
Net revenue was $572 million for each of the three months ended March 31, 2015 and 2014. RevPas increased 2% to $5.73 driving an $11 million increase which was offset by lower volumes. International Reported Segments decreased 1% driving $6 million of the decrease and U.S. Reported Segments decreased 3% driving $5 million of the decrease. Overall, Total Reported Segments decreased 2% to 95 million.
Travel Commerce Platform revenue remained flat at $542 million. A $13 million increase in Beyond Air revenue was offset by a $13 million decrease in Air revenue. The Air revenue decrease was mainly attributable to lower volumes from our 2014 renegotiated contract with Orbitz Worldwide, Inc. and reduction in the European region, partially offset by growth in the Asia Pacific region. Beyond Air revenue increased 14% to $110 million primarily driven by continued growth in hospitality and payments. Technology Services revenue remained flat at$30 million with the negative impact of our renegotiated Delta Air Lines hosting contract (effective July 1, 2014) being largely offset by growth elsewhere in IT solutions and application development services.
Adjusted EBITDA decreased by $14 million, or 9%, to $137 million. The Adjusted EBITDA decrease of $14 million is primarily the result of lower volumes, increased expenses as we continue to grow our platform through acquisition and expand our go-to-market commercial capabilities, higher non-cash pension costs and incremental public company administrative expenses.
Operating Income
Operating income declined by $41 million, or 54%, to $34 million primarily due to the decrease in Adjusted EBITDA of $14 million, increased non-core corporate costs of $22 million (mainly additional equity-based compensation and unrealized loss on foreign currency derivative contracts) and $5 million higher depreciation and amortization charges.
Net Loss
Net loss decreased by $20 million to $7 million primarily as a result of a $49 million decrease in interest expense and loss on extinguishment of debt due to the deleveraging, debt refinancing and IPO transactions completed in 2014 plus an $11 million improvement related to our non-controlled subsidiary investments (includes a $6 million gain on the sale of all of our remaining shares of Orbitz Worldwide, Inc.), offset by a $41 million decrease in operating income.
Adjusted Net Income
Adjusted Net Income increased by $27 million, to $30 million, in the first quarter of 2015.
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased by $12 million to $11 million primarily as a result of a $34 million increased use of working capital primarily arising as a result of the timing of incentive payments and a decrease in deferred revenue, offset by a $19 million decrease in interest payments and a $3 million decrease in customer loyalty payments.
Adjusted Free Cash Flow
Adjusted Free Cash Flow, which excludes the impact of non-core adjustments, decreased by $17 million, primarily as a result of changes in our net cash provided by operating activities.
Net Debt
Net Debt increased from $2,275 million at December 31, 2014 to $2,300 million at March 31, 2015, and is comprised of $2,431 million in total debt less $131 million in cash, cash equivalents and cash held as collateral.
First Quarter Business Update
Continued Air content leadership and increasing airline participation in our industry-leading merchandising platform
Our industry-leading Rich Content & Branding merchandising solution continues to attract the world’s leading airlines, including seven of the world’s top 10 airlines by passengers boarded.
Airlines from all major geographies continue to subscribe to this unique capability, with recent signings including several leading European airlines such as TAP Portugal, Aegean Airlines of Greece and SAS Airlines, as well as the major Latin American group of carriers, LATAM Airlines.
102 airlines have now signed to upgrade to Travelport’s Rich Content & Branding. 63 airlines are already live with enriched product content within our point-of-sale applications.
Continued momentum with significant new wins in corporate and leisure travel
A new and expanded deal was signed with Hogg Robinson Group plc (HRG), one of the largest global corporate Travel Management Companies (TMCs), with service provision in 120 countries and £341 million in revenue for their financial year ended March 31, 2014. Over the past 18 months, Travelport has benefited from significant growth in transaction volumes with HRG with expansion into Canada and China, as well as growth attributable to HRG’s deployment of the Travelport Smartpoint point-of-sale application.
Our penetration in the global corporate travel space continued further with significant new business wins in multiple geographies, such as Aviatur, the third largest TMC in the Andean region, headquartered in Colombia, and Charleston Travel, a leading TMC in East Africa, headquartered in Kenya.
We were also very pleased to welcome back as customers the XL Travel Group (South Africa) and UNIGLOBE Travel Partners (United States), who elected to return to Travelport from our traditional GDS competitors based on the strength of our content, our point-of-sale applications such as Smartpoint and our customer service and support levels.
We signed new or extended agreements with several key online travel agencies (OTAs) across the world, including new business in Asia with two of the largest OTAs in South Korea, Interpark Tour and Lucky Tour, and with Akbar Travels of India. We added the business of OneTwoTrip, the largest OTA in Russia.
Continued strong growth in Beyond Air
Hospitality
Hospitality segments booked per 100 airline tickets issued via our Platform increased from 37 in Q1 2014 to 41 in Q1 2015, reflective of the significant increases in content Travelport has made available over the last 12 months.
Further expanding our already industry-leading hotel content, we announced an agreement with Germany-based Hotel Reservation Service (HRS) to add their significant hotel portfolio to our Travel Commerce Platform, effective from the fourth quarter of 2015. HRS offers access to 250,000 mostly independent hotels in 190 countries with particular strength in Germany. Around 70,000 of these properties will be new and incremental to Travelport’s existing portfolio.
Hotelzon, our corporate hotel booking application, increased its presence in Europe to 11 countries, from four since our acquisition in May 2014. The business is delivering new corporate customers across all these countries, enabling the booking of corporate negotiated rates at independent hotel properties with real-time reservation. An enhanced version of the primary user interface for Hotelzon was launched in February 2015 and is anticipated to further grow booking activity through ease of use.
Car rental bookings through our platform saw significant growth in Q1, with car rental days sold up 11% year-on-year. In March 2015, we recorded the highest number of car rentals ever recorded in our history in a single month.
We signed a new long-term distribution agreement with Accor Hotels, a leading global hotel operator with more than 3,700 hotels and 480,000 rooms across 92 countries.
Payments
eNett continued its strong progress with VAN GDV growing by 45% (up 67% on a constant currency basis) in the first quarter, year-on-year. Customer numbers continue to increase rapidly, and we have seen strong growth across our customer base.
eNett net revenue for Q1 2015 was $19 million, representing growth of 25% year-on-year, which was lower than the growth in VAN GDV due to adverse currency movements (see Impact of Foreign Exchange Movements below) and the phasing of revenue recognized under a long-term contract in Q1 2014.
During the period, the non-controlling interest holders in eNett International, Optal (formerly PSP International), announced that its wholly owned subsidiary, Optal Financial Limited, is now the primary issuer of eNett VANs globally. This will enhance the flexibility of eNett’s product capabilities as the business moves forward.
Current Trading and Outlook
The second quarter of 2015 has started positively and in line with our expectations, and momentum across the business remains positive. Our guidance for full year 2015, as announced on February 23, 2015, is unchanged.
Impact of Foreign Exchange Movements
Our results of operations are reported in U.S. dollars. With approximately 95% of our net revenue denominated in U.S. dollars in Q1 2015, exchange rate movements in this currency have a low impact on our reported net revenue. eNett, which represented approximately 3% of our net revenue in Q1 2015, is the largest source of non-U.S. dollar net revenue. Approximately 80% of eNett’s net revenue in Q1 2015 was denominated in currencies other than U.S. dollars.
Of our costs and expenses in Q1 2015, excluding depreciation on property and equipment, amortization of customer loyalty payments, amortization of acquired intangible assets and non-core corporate costs, approximately 69% were denominated in U.S. dollars. As disclosed in our 2014 Annual Report on Form 10-K filed with the SEC on February 27, 2015, we employ foreign exchange forward contracts to hedge our 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.
Management estimates that the year-on-year impact of foreign exchange movements on Q1 2015 Adjusted EBITDA was immaterial.
Dividend
On May 1, 2015, Travelport’s Board of Directors declared a cash dividend of $0.075 per common share for the first quarter of 2015. The dividend will be payable on June 18, 2015 to shareholders of record on June 5, 2015.
We intend to continue to pay dividends quarterly in arrears. The declaration and payment of all future dividends, if any, will be at the discretion of our Board and will depend upon our financial condition, earnings, contractual conditions, restrictions imposed by our credit agreement, any future indebtedness or preferred securities or applicable laws and other factors that our Board may deem relevant.
Board of Directors
We have further strengthened our Board through the appointment of a new independent director, Steven Chambers, former Executive Vice President and Chief Information Officer of Visa Europe Ltd. Mr. Chambers has spent most of his professional career in the technology and payments industries and, prior to Visa Europe, Mr. Chambers held various leadership positions with ACI Worldwide, Inc. and First Data Resources. He also previously served as a director of Monitise Plc.
With this appointment, Travelport’s Board of Directors now consists of eight members, all of whom, with the exception of the President and CEO, Gordon Wilson, are independent directors.
Source:- TravelPort
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