- Strong Q2 financial performance with Adjusted Income per Share (diluted) of $0.29, up $0.43 year over year
- Net revenue up 1% to $554 million; 15% growth in Asia Pacific and RevPas up 4% to $6.00
- Adjusted Free Cash Flow generation of $54 million, up $68 million
- Over 110 airlines participating in the world’s leading merchandising solution within the indirect channel, Travelport Rich Content and Branding, enabling airlines to retail their entire product offering
- Beyond Air revenue up 12% to $122 million, being 23% of Travel Commerce Platform revenue (Q2 2014: 21%)
- eNett revenue growth of 27%; on target to achieve 50% reported revenue growth for the full year
- Hospitality segment attachment up 12% to 48 per 100 airline tickets issued
- Acquisition of MTT to accelerate Travelport’s mobile growth strategy
- Positive outlook for full year 2015
Gordon Wilson, President and CEO of Travelport, commented:
“Our strong second quarter performance means that we now expect full year earnings to be closer to the top end of our guidance ranges for 2015. Looking at the business, I am delighted that more and more airlines are turning to us for our industry-leading merchandising capabilities, including Rich Content and Branding which enables airlines to market their entire product suite and brand propositions through Travelport in the same way they do on their own websites and direct channels. We now have over 110 carriers signed to this solution, including, most recently, all of the Lufthansa Group airlines. To add further strength to our Platform, we completed the acquisition of MTT in July. Mobile travel commerce, in which MTT specializes, is at the forefront of the evolution of how travel is being consumed and, combined with the power, content and reach of our Travel Commerce Platform, will spearhead our growth strategy with an increased digital offering to the travel industry.”
|Three months ended
|Six months ended
|(in $ millions, except per share amounts)||2015||2014||Better / (Worse)||2015||2014||Better / (Worse)|
|Net income (loss)||16||5||236%||9||(22)||140%|
|Income (loss) per share – diluted||$0.12||$0.05||142%||$0.06||$(0.38)||115%|
|Adjusted Net Income (Loss)||35||(9)||*||65||(6)||*|
|Adjusted Income (Loss) per Share – diluted||$0.29||$(0.14)||*||$0.53||$(0.09)||*|
|Net cash provided by operating activities||81||19||*||92||42||119%|
|Adjusted Free Cash Flow||54||(14)||*||33||(18)||283%|
|Cash dividend per share||$0.075||—||*||$0.15||—||*|
* Not meaningful
The Company refers to certain non-GAAP financial measures in this press release, including Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Income (Loss) per Share, Capital Expenditures, Net Debt, Trading Working Capital, Adjusted Free Cash Flow and Unlevered Adjusted Free Cash Flow. Please refer to pages 10, 12 and 13 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 for the Second Quarter of 2015
Unless otherwise stated, all comparisons are for the second quarter of 2015 compared to the second quarter of 2014.
Net Revenue and Adjusted EBITDA
Net revenue is comprised of:
|Three Months Ended
|(in $ millions)||2015||2014||$||%|
|Air||$ 400||$ 410||$ (10)||(2)|
|Travel Commerce Platform||522||518||4||1|
|Net Revenue||$ 554||$ 551||$ 3||1|
Net revenue increased by $3 million, or 1%, to $554 million primarily due to growth in Travel Commerce Platform revenue of $4 million, or 1%. RevPas increased 4% to $6.00 driving a $15 million increase which was offset by lower volumes. International Reported Segments increased 1% driving $3 million of the increase, offset by an 8% decrease in U.S. Reported Segments, due to the impact of our 2014 renegotiated contract with Orbitz Worldwide, Inc. (“Orbitz Worldwide”), driving $14 million of the decrease. Overall, Total Reported Segments decreased 3% to 87 million.
Within Travel Commerce Platform revenue, a $14 million increase in Beyond Air revenue was partially offset by a $10 million decrease in Air revenue. The Air revenue decrease was mainly attributable to lower volumes from our 2014 renegotiated contract with Orbitz Worldwide and the European region, offset by growth in the Asia Pacific region. Beyond Air revenue increased 12% to $122 million primarily driven by continued growth in hospitality and payments. Technology Services revenue decreased marginally by $1 million due to 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 $9 million, or 6%, to $137 million. The decrease is primarily the result of lower volumes and increased expenses as we continue to grow our platform through acquisition, expansion of our go-to-market commercial capabilities and incremental public company administrative expenses.
Operating income increased by $3 million, or 4%, to $63 million primarily due to lower non-core corporate costs of $12 million (mainly unrealized gain on foreign currency derivative contracts) offset by decrease in Adjusted EBITDA of $9 million.
Net income increased by $11 million to $16 million primarily as a result of a $57 million decrease in interest expense and loss on early extinguishment of debt. This was due to the deleveraging, debt refinancing and IPO transactions completed in 2014, a $4 million improvement related to provision for income taxes and $3 million increase in operating income, offset by a $52 million decrease in gain in sale of shares of Orbitz Worldwide related to the transaction completed in 2014.
Adjusted Net Income (Loss)
Adjusted Net Income (Loss) increased by $44 million to $35 million.
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased by $62 million to $81 million primarily as a result of a $58 million decrease in interest payments.
Adjusted Free Cash Flow
Adjusted Free Cash Flow increased by $68 million, primarily as a result of changes in our net cash provided by operating activities.
Net Debt increased from $2,275 million at December 31, 2014 to $2,310 million at June 30, 2015, and is comprised of $2,459 million in total debt less $149 million in cash, cash equivalents and cash held as collateral.
Industry-leading air merchandising solution continues to rapidly gain traction across the airline community
- During the period, we launched Travelport Smartpoint 6.0, the latest version of our state of the art point-of-sale application designed for travel agencies and travel management companies (TMCs). The new release provides several enhancements including access to Rich Content and Branding, inclusive of airlines’ branded fares and ancillaries, at more key stages of the customer experience.
- Airlines from all major geographies continue to subscribe to our merchandising solutions including Rich Content and Branding, with recent signings including several leading airlines such as Etihad Airways (the national airline of the United Arab Emirates), AirAsia(Asia’s largest low-cost carrier) and Virgin Australia (Australia’s second largest airline).
- Over 110 airlines are now participating in this high value-add distribution capability. Of these, around 80 airlines – including AirCanada, Air China, and the Lufthansa Group (Lufthansa, Austrian Airlines, Brussels Airlines and Swiss) – are actively merchandising their enriched product content through Travelport, including branded fares and ancillaries, in the same way as they do on their own websites.
Significant new wins in Europe and Asia Pacific, and continued strong momentum in corporate and leisure travel
- In Europe, a new and incremental long-term agreement was signed with Unister, a German-based company that operates some of the leading national and international online travel websites, including Germany´s largest online travel agency (OTA). We also won incremental business at Travelgenio, one of the largest and fastest-growing OTAs in Spain.
- Strong momentum continues in Asia Pacific where we signed new or extended agreements with several key travel agencies and OTAs, including new business with two of the largest OTAs in China, Et-Win International and Jintong International. In addition, a new content and data partnership agreement was signed with Alitrip, the online travel platform of the Alibaba Group.
- In Australia and New Zealand, we renewed a multi-year contract with Flight Centre Travel Group, and we were appointed asHelloworld Limited‘s premium preferred travel commerce services partner. Helloworld, formerly Jetset Travelworld, comprises a network in excess of 1,700 locations across Australia and New Zealand, transacting approximately A$5 billion of business in their 2014 financial year.
- New agreements in the global corporate travel space further expanded our reach, including Travel Store, a leading TMC based inPortugal and strategic partner of American Express Global Business Travel, and Montrose Travel, one of the largest TMCs in the U.S.
- We also signed a new and exclusive multi-year contract for the use of our Travel Commerce Platform with the Radius Travel network. Radius, headquartered in the U.S., is one of the world’s leading global TMCs with member agencies operating in more than 80 countries, managing more than US$23 billion of annual corporate travel spending.
Continued strong growth in Beyond Air
- Hospitality segments booked per 100 airline tickets issued via our Platform increased to 48 in Q2 (from 43 in Q2 2014), reflecting the significant increases in hotel and car content that we have made available over the last 18 months.
- Travelport Hotelzon, our corporate hotel booking application, announced its entry into Germany, Spain and Italy, and strengthened its sales and product teams in France, Finland and the U.K. Hotelzon now operates in 14 European countries, compared to four at the time of acquisition in May 2014. The business is delivering significant new corporate customers across Europe, enabling the booking of corporate negotiated rates at independent hotel properties with real-time reservation.
- Car rental bookings continued to see strong growth in Q2, with car rental days sold up 7% year over year.
- eNett continues to grow its share of business at existing customers as well as rapidly adding new customers to its roster. Momentum going into the second half of the year is strong, with eNett recently adding 23 new application programming interface (API) customers who have now fully implemented and are transacting with eNett’s VAN solution.
- VAN GDV increased by 57% in Q2 (on a constant currency basis), and by 64% in the first half of 2015, also on a constant currency basis. On a reported basis, VAN GDV increased by 33% in Q2 and by 39% in the first half of 2015.
- eNett net revenue for Q2 was $20 million, representing growth of 27% year over year, which was lower than the second quarter growth in VAN GDV due to adverse currency movements (see Impact of Foreign Exchange Movements below).
- Technology firm Conferma and Sabre Corporation announced the North American launch of a pre-funded virtual payment solution for travel buyers, utilizing eNett’s VAN solution, with a focus on small and medium-sized TMCs.
- eNett also announced a new partnership with MetGlobal, a major global travel company offering wholesale accommodation in over 200,000 hotels across 198 countries.
Acquisition of MTT
On July 3, 2015, Travelport completed its acquisition of Mobile Travel Technologies Ltd. (MTT), a private company based in Dublin, Ireland that is the leading mobile travel platform and mobile technology provider for global airlines and travel companies with customers including easyJet, Singapore Airlines and leading TMC, BCD Travel. The purchase price for the MTT acquisition was €55 million on a cash-free, debt-free basis, which was funded from our cash resources.
We expect the MTT acquisition to be accretive to our financial performance beginning in 2016, including income per share, while having an immaterial impact on our financial performance in 2015. MTT will form part of our Beyond Air portfolio.
Outlook and Financial Guidance
The third quarter of 2015 has started well and momentum across the business remains positive. Our guidance for the full year 2015 is unchanged, as detailed below, although we expect Adjusted EBITDA, Adjusted Net Income and Adjusted Income per Share (diluted) to be closer to the top end of our guidance ranges.
|(in $ millions, except per share amounts)||FY 2015 Guidance|
|Net revenue||$2,160 – $2,240|
|Adjusted EBITDA||$518 – $533|
|Adjusted Net Income||$88 – $103|
|Adjusted Income per Share – diluted||$0.72 – $0.84|
|Adjusted Free Cash Flow||$125 – $150|
This guidance assumes spot foreign exchange rates as of July 28, 2015, together with the impact of foreign exchange rate hedges undertaken during 2014 as part of our rolling hedging program.
The forward-looking statements above, as well as those made elsewhere within this press release, reflect expectations as of August 4, 2015. 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.
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 Q2, exchange rate movements in this currency have a low impact on our reported net revenue. eNett, which represented approximately 4% of our net revenue in Q2, is the largest source of non-U.S. dollar net revenue. Approximately 80% of eNett’s net revenue in Q2 was denominated in currencies other than U.S. dollars.
Of our costs and expenses in Q2, excluding depreciation on property and equipment, amortization of customer loyalty payments, amortization of acquired intangible assets and non-core corporate costs, approximately 70% 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.
Management estimates that the year over year impact of foreign exchange movements on Q2 Adjusted EBITDA was immaterial.
We continuously seek to optimize our allocation of capital in order to meet the strategic needs of the business. This includes investment in the organic growth of the business, pursuing strategic acquisition opportunities, and supporting our dividend policy (see Dividend below), while maintaining a longer term target to reduce our Net Debt to below three times Adjusted EBITDA.
We are clear that any contemplated acquisition must complement our existing activities by adding technology and/or emerging adjacent technologies that could create significant long-term growth and shareholder value.
On July 31, 2015, Travelport’s Board of Directors declared a cash dividend of $0.075 per common share for the second quarter of 2015. The dividend will be payable on September 17, 2015 to shareholders of record on September 3, 2015.
Travelport intends to maintain its current dividend policy of paying quarterly cash dividends in arrears of $0.075 per share of our common stock. The declaration and payment of all future dividends, if any, will be at the discretion of our Board of Directors 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 of Directors may deem relevant.
The Company’s second quarter 2015 earnings conference call will be held later today (on August 4, 2015) beginning at 8:00 a.m. (Eastern Time). A live audiocast of the presentation and accompanying slides will be available via the Investors section of Travelport’s website atir.travelport.com. Please visit the site or follow this link to pre-register. A replay of the audiocast will be made available on the Investors section of Travelport’s website shortly after the end of the earnings call and will be available for one year after the earnings call.
Analyst and Investor Day
Travelport will hold its inaugural Analyst and Investor Day on Thursday, December 17, 2015 in New York, NY. Further details on the agenda and audiocast of this event will be made available prior to the date.