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Travelport Worldwide Limited Reports First Quarter 2017 Results

May 11, 2017 Financial No Comments Email Email

Travelport Worldwide Limited (NYSE: TVPT) announced today its financial results for the first quarter ended March 31, 2017.http://rinfo.travelcounsellors.com/au/your-world-better?utm_campaign=Your%20World%20Better&utm_content=World%20of%20Support&utm_medium=eNewsletter%20MREC&utm_source=%20eGlobal

Highlights

  • Net revenue increased 7% to $651 million and net income increased to $56 million
  • Income per share (diluted) of $0.45 and net cash provided by operating activities of $95 million
  • Travel Commerce Platform revenue increased 7%, with revenue growth across all regions
  • Air revenue increased 7% to $474 million, primarily driven by strong market growth and seasonal effects
  • Beyond Air revenue increased 9% to $148 million, including eNett net revenue growth of 22% to $41 million
  • Adjusted EBITDA increased 9% to $169 million and Adjusted Income per Share (diluted) increased 24% to $0.51
  • Free Cash Flow increased by $68 million to $71 million
  • Completed post period-end divestiture of 51% stake in India-based technology development company IGT Solutions Private Ltd. (IGTS)
  • Anticipate full year 2017 earnings and cash flow to be towards the higher end of guidance ranges

Gordon Wilson, President and CEO of Travelport, commented:

“We have started 2017 well with a particularly strong performance in Asia Pacific, the world’s fastest growing and largest travel region, where we grew our air market share and saw our highest level of quarterly revenue growth for over five years.  I am delighted that our leadership positions in airline content and merchandising, hospitality, mobile commerce and commercial payments are translating into greater revenue from existing customers, as well as new business wins across multiple geographies.  We continue to invest in implementing these new wins, as well as in new product and capability extensions that will expand our focused areas of market leadership and support future growth.  Given our positive start to the year, we are confident in our outlook for 2017 and expect our full year earnings and cash flow to come in towards the higher end of our guidance ranges.”

 

Summary

Three months ended

March 31,

(in $ thousands, except per share amounts) 2017 2016  Change
Net revenue 650,763 609,263 7%
Operating income 98,870 79,868 24%
Net income 55,863 17,181 *
Income per share – diluted $0.45 $0.13 *
Adjusted EBITDA 168,553 154,140 9%
Adjusted Operating Income 107,241 96,464 11%
Adjusted Net Income 64,357 50,955 26%
Adjusted Income per Share – diluted $0.51 $0.41 24%
Net cash provided by operating activities 95,022 26,204 *
Free Cash Flow 71,413 3,683 *
Cash dividend per share $0.075 $0.075

* Percentage calculated not meaningful

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

 

Net Revenue
Net revenue is comprised of:
Three Months Ended
March 31,
Change
(in $ thousands) 2017 2016 $ %
Air $   474,475 $    443,884 $   30,591 7
Beyond Air 147,585 135,002 12,583 9
Travel Commerce Platform 622,060 578,886 43,174 7
Technology Services 28,703 30,377 (1,674) (6)
Net Revenue $   650,763 $   609,263 $   41,500 7

 

Net revenue increased by $42 million, or 7%, to $651 million primarily due to growth in Travel Commerce Platform revenue of $43 million, or 7%.  Within Travel Commerce Platform revenue, Air revenue increased by $31 million, or 7%, mainly due to growth in air segments.  Beyond Air revenue increased by $13 million, or 9%.  Within Beyond Air, net revenue for eNett increased by 22% to $41 million primarily due to an increase in the volume of payments settled with existing customers and new customer wins.  Technology Services revenue decreased by $2 million, or 6%, primarily due to lower development revenue and a reduction in hosting activities.

The table below sets forth Travel Commerce Platform revenue by region:

 

Three Months Ended March 31,
(in $ thousands) 2017 2016 % Change
Asia Pacific $    151,015 $          128,495 18
Europe 202,416 194,847 4
Latin America and Canada 28,782 28,036 3
Middle East and Africa 83,553 73,450 14
International 465,766 424,828 10
United States 156,294 154,058 1
Travel Commerce Platform $    622,060 $           578,886 7

 

The table below sets forth Travel Commerce Platform Reported Segments and global RevPas by region:

 

Segments (in thousands)
Three Months Ended March 31,
2017 2016 % Change
Asia Pacific 19,208 16,989 13
Europe 23,497 23,133 2
Latin America and Canada 4,626 4,550 2
Middle East and Africa 9,476 9,721 (3)
International 56,807 54,393 4
United States 36,390 35,580 2
Travel Commerce Platform Reported Segments 93,197 89,973 4
RevPas (in $)
Three Months Ended March 31,
2017 2016 % Change
International $         8.20 $        7.81 5
United States $         4.30 $        4.33 (1)
Travel Commerce Platform RevPas $         6.67 $        6.43 4

 

Reported Segments increased by 3 million, or 4%.  United States Reported Segments increased 2% and International Reported Segments increased 4% with increases in both Air and Beyond Air segments.  Travel Commerce Platform RevPas increased 4% to $6.67, driving a $22 million increase in Travel Commerce Platform revenue.  International RevPas increased 5% to $8.20, and United States RevPas decreased marginally by 1% to $4.30.

International Travel Commerce Platform revenue increased by $41 million, with Asia Pacific contributing primarily to this increase.  Revenue from Asia Pacific increased 18% mainly due to a 13% increase in Reported Segments and growth in payment solutions in Beyond Air.

Adjusted EBITDA
Adjusted EBITDA increased by $14 million, or 9%, to $169 million mainly due to the following:

  • $42 million growth in net revenue; offset by:
  • $30 million increase within cost of revenue (excluding a $6 million net decrease related to items that are excluded from net income to determine Adjusted EBITDA) primarily due to increased travel distribution costs per segment and commission costs from our payment solutions business and an increase in Reported Segments

Operating Income
Operating income increased by $19 million to $99 million mainly due to the following:

  • $14 million increase in Adjusted EBITDA
  • $8 million related to revenue deferred in previous years, offset by:
  • $2 million increase in amortization of customer loyalty payments

Net Income
Net income increased by $39 million to $56 million due to the following:

  • $19 million increase in operating income
  • $25 million decrease in interest expense, net, resulting from an unrealized loss on interest rate derivative contracts recognized in 2016, lower interest rates and a lower debt balance, offset by:
  • $5 million increase in provision for income taxes

Adjusted Net Income
Adjusted Net Income increased by $13 million to $64 million mainly due to the following:

  • $39 million increase in net income, offset by:
  • $17 million decrease in unrealized loss on interest rate derivative contracts recognized in 2016, which is excluded to determine Adjusted Net Income and
  • $8 million decrease in corporate and restructuring, equity-based compensation and other costs, which are excluded to determine Adjusted Net Income

Net Cash Provided by Operating Activities
Net cash provided by operating activities increased by $69 million to $95 million, primarily due to an increase in operating income, improved working capital and lower interest and customer loyalty payments in 2017.

Free Cash Flow
Free Cash Flow increased by $68 million to a cash inflow of $71 million, primarily due to an increase in net cash provided by operating activities.

Net Debt
Net Debt decreased from $2,205 million as of December 31, 2016 to $2,146 million as of March 31, 2017 and is comprised of $2,333 million in total debt less $187 million in cash and cash equivalents.  The decrease in total debt of $12 million and increase of $47 million in the cash and cash equivalents balance as of March 31, 2017 compared to December 31, 2016 resulted in a decrease of $59 million in the Net Debt balance.

Full Year 2017 Financial Guidance

The following forward-looking statements, as well as those made elsewhere within this press release, reflect expectations as of May 9, 2017.  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 guidance for the full year 2017 is unchanged, as detailed below, although we expect Adjusted EBITDA, Adjusted Net Income, Adjusted Income per Share (diluted) and Free Cash Flow to be towards the higher end of our guidance ranges.

 

(in $ millions, except per share amounts) FY 2017
Guidance
Growth
Net revenue $2,425 – $2,475 3% – 5%
Adjusted EBITDA (1) $585 – $595 2% – 4%
Adjusted Net Income (1) $165 – $175 7% – 13%
Adjusted Income per Share – diluted (2) $1.29 – $1.37 5% – 12%
Free Cash Flow (3) $165 – $185 (14)% – (3)%

 

Travelport continues to anticipate that eNett, its commercial payments business, will grow net revenue by at least 20% in 2017. This is subject to exchange rate movements given that eNett’s net revenue is largely denominated in currencies other than the U.S. dollar.

(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 $120 million to $125 million and expected related income taxes of $50 million to $55 million. Adjusted Net Income guidance excludes the expected impact of amortization of intangible assets of approximately $40 million, expected equity-based compensation and related taxes and corporate and restructuring costs of $55 million to $65 million and expected income tax benefit related to these adjustments of $5 million to $10 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 these 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 2017 of approximately 127.5 million.
(3)   Free Cash Flow guidance reflects expected net cash provided by operating activities for 2017 of $295 million to $325 million less cash additions to property and equipment of $130 million to $140 million.

 

This guidance assumes spot foreign exchange rates as of May 2, 2017, together with the impact of foreign exchange rate hedges undertaken during 2016 as part of our rolling hedging program.

Impact of Foreign Exchange Movements

Our results of operations are reported in U.S. dollars.  With approximately 91% of our net revenue denominated in U.S. dollars in the first quarter of 2017, exchange rate movements in this currency have a low impact on our net revenue.  Of our costs and expenses in the first quarter of 2017, excluding depreciation on property and equipment, amortization of customer loyalty payments, amortization of acquired intangible assets and non-core corporate costs, approximately 71% were denominated in U.S. dollars.

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.  The year over year impact of foreign exchange movements had a positive impact to Adjusted EBITDA for the first quarter of 2017.

Dividend

On May 5, 2017, Travelport’s Board of Directors declared a cash dividend of $0.075 per common share for the first quarter of 2017.  The dividend will be payable on June 15, 2017 to shareholders on record as at market close on June 1, 2017.

Investor Day

Travelport will hold an Investor Day on Tuesday, May 23, 2017 in New York, NY.  In addition to management presentations, Travelport will also be conducting product demonstrations of some of its key solutions and innovations.  For attendance in person, please contact Travelport’s investor relations team for further details.

A live webcast of the presentation and accompanying slides will be available via the Investor Center section of Travelport’s website at ir.travelport.com/investor-day, where a replay will also be available and will remain for one year thereafter.

Conference Call

The Company’s first quarter 2017 earnings conference call will be held later today (on May 9, 2017) 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/1138/20529.

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.

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