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Travelport Worldwide Limited Reports Second Quarter 2015 ResultsLANGLEY, U.K., Aug. 4, 2015 /PRNewswire/ -- Travelport Worldwide Limited (NYSE: TVPT) announced today its financial results for the second quarter ended June 30, 2015. Key Points
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." Summary
* 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:
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 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 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 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. Business Update Industry-leading air merchandising solution continues to rapidly gain traction across the airline community
Significant new wins in Europe and Asia Pacific, and continued strong momentum in corporate and leisure travel
Continued strong growth in Beyond Air Hospitality
Payments
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.
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. Capital Allocation 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. Dividend 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. Conference Call 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 at ir.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. Contacts Investors: Media: About Travelport (www.travelport.com)
Travelport is headquartered in Langley, U.K. The Company is listed on the New York Stock Exchange and trades under the symbol "TVPT". 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 provider capacity and inventory resulting from consolidation of the airline industry; the impact that our outstanding indebtedness may have on the way we operate our business; financing plans and access to adequate capital on favorable terms; our ability to achieve expected cost savings from our efforts to improve operational efficiency; 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 eNett, in which we own a majority interest. 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 27, 2015 and our Quarterly Report on Form 10-Q filed with the SEC on May 6, 2015, which are 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.
(*) Other—non cash includes (i) unrealized losses (gains) on foreign currency exchange derivative contracts and revaluation losses (gains) on our euro denominated debt of $(16) million and $0 million for the three months ended June 30, 2015 and 2014, respectively, and $(6) million and $(1) million for the six months ended June 30, 2015 and 2014, respectively, and (ii) other (gains) of $(1) million for each of the three months and six months ended June 30, 2015 and $(1) million and $(2) million for the three months and six months ended June 30 2014, respectively.
(*) Other adjusting items relate to payments for costs included within operating income but excluded from Adjusted EBITDA. These comprise of $6 million and $3 million of payments relating to corporate cost payments during the three months ended June 30, 2015 and 2014, respectively and $9 million of payments relating to corporate cost payments for each of the six months ended June 30, 2015 and 2014.
* Not meaningful
TRAVELPORT WORLDWIDE LIMITED 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, and income taxes. Adjusted Free Cash Flow is defined as net cash provided by (used in) operating activities of continuing operations, adjusted to remove the impact of cash paid for other adjusting items which we believe are unrelated to our ongoing operations and to deduct Capital Expenditures. Adjusted Income (Loss) per Share - Diluted is defined as Adjusted Net Income (Loss) for the period divided by weighted average number of dilutive common shares. Adjusted Net Income (Loss) is defined as net income (loss) from continuing operations excluding amortization of acquired intangible assets, gain (loss) on early extinguishment of debt, share of earnings (losses) in equity method investments, and items that are excluded under our debt covenants, such as gain on sale of shares of Orbitz Worldwide, Inc., non-cash equity-based compensation, certain corporate and restructuring costs, certain litigation and related costs, and other non-cash items such as foreign currency gains (losses) on euro denominated debt, and earnings hedges along with any income tax related to these exclusions. 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. Virtual Account Number Gross Dollar Value ("VAN GDV") represents total dollar value of transactions settled via the eNett Virtual Account Number payment solution. The Company analyzes eNett's VAN GDV on a constant currency basis, so that the growth in VAN GDV can be considered excluding movements in foreign exchange rates since the prior period. VAN GDV on a constant currency basis is computed by comparing current period's VAN GDV restated using corresponding prior period's average monthly foreign exchange rates, to prior period's actual VAN GDV. This measure on a constant currency basis is considered to provide useful information to management about eNett's VAN GDV, because it facilitates an evaluation of eNett's year over year performance on a comparable basis. Net Debt is defined as total debt comprising of current and non-current portion of long-term debt minus cash and cash equivalents, and cash held as collateral. Reported Segments means travel provider revenue generating units (net of cancellations) sold by our travel agency network, geographically presented by region based upon the point of sale location. Travel Commerce Platform RevPas ("RevPas") represents revenue per segment and is computed by dividing Travel Commerce Platform revenue by the total number of Reported Segments. Trading Working Capital is defined as assets and liabilities directly related to our core trading operations (accounts receivables and deferred revenue from travel providers and travel agencies, current prepaid travel agency incentive payments and accounts payable and accrued liabilities for commissions and incentives). Unlevered Adjusted Free Cash Flow is defined as Adjusted Free Cash Flow adjusted to remove the impact of cash interest payments. TRAVELPORT WORLDWIDE LIMITED Non-GAAP Financial Measures Adjusted Net Income (Loss) and Adjusted EBITDA are supplemental measures of operating performance that do not represent and should not be considered as alternatives to net income (loss), as determined under U.S. GAAP. In addition, Adjusted Net Income (Loss) and Adjusted EBITDA may not be comparable to similarly named measures used by other companies. We have included Adjusted Net Income (Loss) and Adjusted EBITDA as they are the primary metrics used by management to evaluate and understand the underlying operations and business trends, forecast future results and determine future capital investment allocations. They are also used by our Board to determine incentive compensation for future periods. We believe our important measures of liquidity are Adjusted Free Cash Flow and Unlevered Adjusted Free Cash Flow. These measures are useful indicators of our ability to generate cash to meet our liquidity demands. We believe Adjusted Free Cash Flow and Unlevered Adjusted Free Cash Flow provide investors with an understanding of how assets are performing and measures management's effectiveness in managing cash. We believe these measures give management and investors a better understanding of the cash flows generated by our underlying business, as our interest payments are primarily related to the debt incurred in relation to previous business acquisitions, cash paid for other adjusting items are unrelated to the underlying business and our Capital Expenditures are primarily related to the development of our operating platforms. Adjusted Free Cash Flow and Unlevered Adjusted Free Cash Flow are non-GAAP measures and may not be comparable to similarly named measures used by other companies. These measures should not be considered as measures of liquidity or cash flows from operations as determined under U.S. GAAP. 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, which we believe are ongoing costs of doing business, as well as other items which are not allocated to the operating businesses such as interest expense and related 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 EBITDA and Adjusted Net Income (Loss) 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 statements of operations. The management uses Net Debt to review the Company's 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. We present Trading Working Capital which is a non-GAAP measure. We view Trading Working Capital as a key liquidity measure to understanding our cash sources and uses from operations. 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.
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