Exhibit 99.1

 

 

 

Travelport Worldwide Limited Reports Second Quarter and Half Year 2018 Results

 

LANGLEY, U.K., August 2, 2018 — Travelport Worldwide Limited (NYSE: TVPT) today announced its financial results for the second quarter and half year ended June 30, 2018.

 

Key Points (for the second quarter unless stated otherwise)

·Net revenue increased 8% to $662 million
·Net income decreased $27 million to $7 million, primarily driven by unfavorable movements on foreign currency derivative contracts; Adjusted EBITDA increased 7% to $157 million
·Travel Commerce Platform revenue increased 9% to $638 million; Technology Services revenue decreased 15% to $24 million, largely due to the sale of IGT Solutions Private Ltd. (“IGTS”) during Q2 2017
·Beyond Air revenue increased 21% to $194 million, contributing 30% of Travel Commerce Platform revenue (Q2 2017: 27%); eNett net revenue increased 82% to $81 million
·Income per share (diluted) decreased $0.23 to $0.05; Adjusted Income per Share (diluted) increased $0.01 to $0.41
·Net cash provided by operating activities increased 43% to $119 million; Free Cash Flow increased 35% to $81 million
·Reaffirming full year 2018 guidance

 

Gordon Wilson, President and CEO of Travelport, commented:

 

“Travelport has delivered a good quarter, with Travel Commerce Platform revenue up 9% and Adjusted EBITDA up 7%. Our strong performance enabled us to overcome the well-documented loss of a Pacific-based travel agency through winning new business in other regions. In fact, revenue growth accelerated across all regions in the quarter, with air market share growth in Asia, Europe and Latin America. Air revenue was up 5%, and Beyond Air revenue grew 21%, as the latter benefitted from another excellent quarter from our payments business, eNett.

 

Looking ahead, we remain on track to deliver our financial guidance for the full year. This is notwithstanding the likelihood of a more challenging market environment in the second half, due to recent travel demand being adversely impacted by the heatwave in Northern Europe and potential further impacts from higher jet fuel prices and tensions in global trade. Despite this and the impact of terminating our agreement with a European OTA due to their contract breach, we remain well positioned for long-term growth as we continue to invest in our key areas of differentiation, including search, merchandising and shopping, mobile enablement, payments and our industry-leading hybrid cloud architecture. Furthermore, we are on course to deliver the first wave of IATA NDC API-sourced content to our customers.”

 

Summary

  

   Three Months   Six Months 
   Ended June 30,   Ended June 30, 
(in $ thousands, except per share amounts)  2018   2017   Change   2018   2017   Change 
Net revenue   662,008    612,107    8%   1,339,846    1,262,870    6%
Operating income   42,293    74,696    (43)%   119,957    174,412    (31)%
Net income   7,005    34,366    (80)%   66,236    90,229    (27)%
Income per share – diluted  $0.05   $0.28    (83)%  $0.51   $0.72    (29)%
Adjusted EBITDA   156,923    147,006    7%   311,100    315,559    (1)%
Adjusted Operating Income   95,556    84,832    13%   188,992    192,073    (2)%
Adjusted Net Income   51,928    50,006    4%   106,866    114,363    (7)%
Adjusted Income per Share – diluted  $0.41   $0.40    2%  $0.84   $0.91    (9)%
Net cash provided by operating activities   119,189    83,585    43%   202,286    178,607    13%
Free Cash Flow   81,386    60,365    35%   127,820    131,778    (3)%
Cash dividend per share  $0.075   $0.075       $0.150   $0.150     

 

 

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.

 

 1 

 

 


Discussion of Results for the Second Quarter of 2018

 

Unless otherwise stated, all comparisons are for the second quarter of 2018 compared to the second quarter of 2017.

 

Net Revenue

 

Net revenue is comprised of:

 

   Three Months Ended June 30,   Six Months Ended June 30, 
(in $ thousands)  2018   2017   % Change   2018   2017   % Change 
Air  $443,947   $423,654    5   $916,882   $898,129    2 
Beyond Air   194,021    160,107    21    373,772    307,692    21 
Travel Commerce Platform   637,968    583,761    9    1,290,654    1,205,821    7 
Technology Services   24,040    28,346    (15)   49,192    57,049    (14)
Net revenue  $662,008   $612,107    8   $1,339,846   $1,262,870    6 

  

Net revenue increased by $50 million, or 8%, to $662 million due to growth in Travel Commerce Platform revenue of $54 million, or 9%. Within Travel Commerce Platform revenue, Beyond Air revenue increased by $34 million, or 21%, and Air revenue increased by $20 million, or 5%. The increase in Beyond Air revenue was driven by an increase in eNett net revenue of 82% to $81 million primarily due to an increase in the volume of payments settled with existing customers. The increase in Air revenue was mainly due to improved pricing, mix and growth in other regions, more than offsetting the impact of the loss of a large Pacific-based travel agency. Technology Services revenue decreased by $4 million, or 15%, primarily due to the sale of IGTS in April 2017.

 

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

 

   Three Months Ended June 30,   Six Months Ended June 30, 
(in $ thousands)  2018   2017   % Change   2018   2017   % Change 
Asia Pacific  $144,991   $141,725    2   $286,542   $292,740    (2)
Europe   223,340    180,594    24    467,782    383,010    22 
Latin America and Canada   29,456    27,574    7    59,315    56,356    5 
Middle East and Africa   81,663    77,912    5    160,769    161,465     
International   479,450    427,805    12    974,408    893,571    9 
United States   158,518    155,956    2    316,246    312,250    1 
Travel Commerce Platform  $637,968   $583,761    9   $1,290,654   $1,205,821    7 

  

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

 

   Segments (in thousands) 
   Three Months Ended June 30,   Six Months Ended June 30, 
   2018   2017   % Change   2018   2017   % Change 
Asia Pacific   16,240    17,697    (8)   32,408    36,905    (12)
Europe   21,232    19,864    7    46,879    43,361    8 
Latin America and Canada   4,728    4,530    4    9,438    9,156    3 
Middle East and Africa   9,492    9,441    1    19,120    18,917    1 
International   51,692    51,532        107,845    108,339     
United States   35,239    34,849    1    71,407    71,239     
Travel Commerce Platform Reported Segments   86,931    86,381    1    179,252    179,578     

 

   RevPas (in $) 
   Three Months Ended June 30,   Six Months Ended June 30, 
   2018   2017   % Change   2018   2017   % Change 
International  $9.28   $8.30    12   $9.04   $8.25    10 
United States  $4.50   $4.48    1   $4.43   $4.38    1 
Travel Commerce Platform RevPas  $7.34   $6.76    9   $7.20   $6.71    7 

 

 2 

 

 

Reported Segments increased marginally by 1% during the three months ended June 30, 2018. Travel Commerce Platform RevPas increased 9% to $7.34, driving a $50 million increase in Travel Commerce Platform revenue. International RevPas increased 12% to $9.28, and United States RevPas increased 1% to $4.50.

 

International Travel Commerce Platform revenue increased by $52 million, or 12%, with growth in all regions. Europe contributed a majority of this increase mainly due to an increase in RevPas of 16% and an increase in Reported Segments of 7%. The increase in Travel Commerce Platform revenue in Asia Pacific of $3 million, or 2%, includes the loss of revenue resulting from the loss of a large Pacific-based travel agency.

 

Operating Income

 

Operating income decreased by $32 million, or 43%, to $42 million due to the following:

·$58 million increase in cost of revenue primarily due to incremental costs from the payment solutions business and an increase in travel distribution cost per segment driven by pricing, mix, volume, unfavorable foreign exchange rate movements and an impairment of customer loyalty payments
·$28 million increase in selling, general and administrative expenses (“SG&A”) primarily due to the unfavorable movements in the fair value of foreign currency derivative contracts; offset by
·$50 million increase in net revenue
·$4 million decrease in depreciation and amortization on property and equipment

 

Net Income

 

Net income decreased by $27 million, or 80%, to $7 million due to the following:

·$32 million decrease in operating income
·$4 million increase in income tax expense primarily due to higher non-deductible interest in the United Kingdom and geographical profit mix; offset by
·$9 million benefit from a decrease in interest expense, net, resulting from the favorable impact of fair value changes on interest rate derivative contracts, lower amortization of debt finance costs and debt discount and a lower debt balance

 

Net Cash Provided by Operating Activities

 

Net cash provided by operating activities increased by $36 million, or 43%, to $119 million, primarily due to the positive impact of changes in working capital and lower interest payments, offset by higher income taxes and customer loyalty payments.

 

Adjusted EBITDA

 

Adjusted EBITDA increased by $10 million, or 7%, to $157 million due to the following:

·$50 million increase in net revenue
·$4 million decrease in SG&A (excluding a $32 million increase related to non-core corporate costs that are excluded from net income to determine Adjusted EBITDA) primarily driven by cost efficiencies and favorable foreign exchange movements; offset by
·$44 million increase within cost of revenue (excluding a $14 million increase related to items that are excluded from net income to determine Adjusted EBITDA) primarily due to incremental costs from the payment solutions business and an increase in travel distribution cost per segment driven by pricing, mix, volume and unfavorable foreign exchange movements

 

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Adjusted Net Income

 

Adjusted Net Income increased by $2 million to $52 million due to the following:

·$10 million increase in Adjusted EBITDA
·$4 million lower interest expense, net (excluding a $6 million decrease related to unrealized favorable movements in interest rate derivative contracts that are excluded to determine Adjusted Net Income) due to lower amortization of debt finance costs and debt discount and a lower debt balance; offset by
·$12 million of higher income tax expense (excluding a $9 million benefit of a tax movement related to non-core corporate costs and other adjustments made to net income to determine Adjusted Net Income) primarily due to higher non-deductible interest in the United Kingdom and geographical profit mix

 

Free Cash Flow

 

Free Cash Flow increased by $21 million, or 35%, to a cash inflow of $81 million due to a $36 million increase in net cash provided by operating activities, offset by a $15 million increase in payments made for additions to property and equipment.

 

Net Debt

 

Net Debt decreased from $2,108 million as of December 31, 2017 to $2,089 million as of June 30, 2018 and is comprised of $2,273 million in total debt less $184 million in cash and cash equivalents. The increase in total debt of $43 million reflects (i) $2,154 million principal amount of term loans repaid under the former 2014 senior secured credit agreement, (ii) $1,400 million of borrowings under the new 2018 senior secured credit agreement in March 2018, (iii) the issuance of $745 million of senior secured notes in March 2018 and (iv) a net $43 million increase in capital lease obligations and other indebtedness, and is offset by a $61 million increase in cash and cash equivalents balance as of June 30, 2018 compared to December 31, 2017, contributing to a decrease of $19 million in the Net Debt balance.

 

Full Year 2018 Financial Guidance

 

The following forward-looking statements, as well as those made elsewhere within this press release, reflect expectations as of August 2, 2018. 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 overall guidance for the full year 2018 is unchanged, as detailed below:

 

(in $ millions, except per share amounts) FY 2018 Guidance Growth
Net revenue $2,535 - $2,585 4% - 6%
Adjusted EBITDA (1) $585 - $605 (1)% - 3%
Adjusted Net Income (1) $170 - $185 (6)% - 2%
Adjusted Income per Share – diluted (2) $1.34 - $1.46 (7)% - 1%
Free Cash Flow (3) $210 - $230 5% - 15%

 

(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 $250 million to $260 million, expected interest expense, net (excluding the impact of unrealized gain (loss) on interest rate derivative instruments) of approximately $110 million and expected related income taxes of approximately $55 million. Adjusted Net Income guidance excludes the expected impact of amortization of acquired intangible assets of approximately $40 million, loss on early extinguishment of debt of $28 million, expected equity-based compensation and related taxes and corporate and restructuring costs of $60 million to $70 million, income from discontinued operations of $28 million related to the release of an indemnity provision for liabilities accrued upon the sale of Gullivers Travel Associates in 2011 and an expected income tax benefit related to the adjustments above of approximately $15 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 such adjustments along with other tax 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 2018 of approximately 127 million.
(3)Free Cash Flow guidance reflects expected net cash provided by operating activities for 2018 of $340 million to $360 million less expected cash additions to property and equipment of $130 million to $140 million.

 

Our virtual payments business, eNett, achieved net revenue growth of 82% in both the second quarter and first half of 2018. Given its strong start to the year, we now anticipate that eNett will grow net revenue by at least 50% for the full year 2018. Our guidance is subject to exchange rate movements given that eNett’s net revenue is largely denominated in currencies other than the U.S. dollar.

 

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Our overall guidance incorporates the expected impact of the adoption of the new revenue recognition standard on a modified retrospective basis. The adoption of this standard did not have a material impact on our consolidated condensed financial statements for the three and six months ended June 30, 2018. In addition, our guidance assumes spot foreign exchange rates as of July 26, 2018, together with the impact of foreign exchange rate hedges undertaken during 2017 as part of our rolling hedging program.

 

Impact of Foreign Exchange Movements

 

Our results of operations are reported in U.S. dollars. With approximately 89% of our net revenue denominated in U.S. dollars in the second quarter of 2018, changes in foreign exchange rates have a low impact on our net revenue. eNett, which represented approximately 12% of our net revenue in the second quarter of 2018, is the largest source of non-U.S. dollar net revenue.

 

Of our costs and expenses in the second quarter of 2018, excluding depreciation on property and equipment, amortization of customer loyalty payments, amortization of acquired intangible assets and non-core corporate costs, approximately 58% were denominated in U.S. dollars.

 

As part of our rolling hedging program, we employ foreign exchange forward contracts to hedge a portion of our net 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. While the year-on-year net impact of foreign exchange rate movements on Adjusted EBITDA for the second quarter of 2018 was adverse, but immaterial, it includes the benefit from realized foreign exchange rate hedges undertaken during 2017.

 

Dividend

 

On August 1, 2018, Travelport’s Board of Directors declared a cash dividend of $0.075 per common share for the second quarter of 2018. The dividend will be payable on September 20, 2018 to shareholders on record as at market close on September 6, 2018.

 

Conference Call

 

The Company’s second quarter 2018 earnings conference call will be held later today (on August 2, 2018) 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/1138/26285.

 

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.

 

Contacts

 

For further information, please contact:

 

Investors:

Majid Nazir

Head of Investor Relations

Tel: +44 (0)1753 288 857

majid.nazir@travelport.com

 

Media:

Julian Eccles

Vice President, PR and Corporate Communications

Tel: +44 (0)7720 409 374

julian.eccles@travelport.com

 

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About Travelport (www.travelport.com)

 

Travelport (NYSE: TVPT) is the technology company that makes the experience of buying and managing travel continually better. It operates a travel commerce platform providing distribution, technology, payment and other solutions for the global travel and tourism industry. The Company facilitates travel commerce by connecting the world’s leading travel providers with online and offline travel buyers in a proprietary business-to-business (B2B) travel platform.

 

Travelport has a leadership position in airline merchandising, hotel content and distribution, car rental, mobile commerce and B2B payment solutions. The Company also provides critical IT services to airlines, such as shopping, ticketing, departure control and other solutions. With net revenue of over $2.4 billion in 2017, Travelport is headquartered in Langley, U.K., has over 4,000 employees and is represented in approximately 180 countries and territories.

 

Forward-Looking Statements

 

Certain statements in this press release, including outlook and financial guidance, constitute “forward-looking statements” that involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by or that otherwise include the words “believes”, “expects”, “anticipates”, “intends”, “projects”, “estimates”, “plans”, “may increase”, “may fluctuate” and similar expressions or future or conditional verbs such as “will”, “should”, “would”, “may” and “could” are generally forward-looking in nature and not historical facts. Any statements that refer to expectations or other characterizations of future events, circumstances or results are 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 travel provider capacity and inventory resulting from consolidation of the airline industry; the impact our outstanding indebtedness may have on the way we operate our business; our ability to achieve expected cost savings from our efforts to improve operational and technology efficiency, including through our consolidation of multiple technology vendors and locations and the centralization of activities; 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 payment and mobile solutions; and the impact on business conditions worldwide as a result of political decisions, including the United Kingdom’s decision to leave the European Union. Forward-looking information is based on information available at the time and/or management’s good faith belief with respect to future events and is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements. 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 20, 2018, and our Quarterly Report on Form 10-Q filed with the SEC on May 3, 2018, and 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. 

 

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TRAVELPORT WORLDWIDE LIMITED

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

   Three Months   Three Months   Six Months   Six Months 
   Ended   Ended   Ended   Ended 
   June 30,   June 30,   June 30,   June 30, 
(in $ thousands, except share data)  2018   2017   2018   2017 
Net revenue   $662,008   $612,107   $1,339,846   $1,262,870 
Costs and expenses                    
Cost of revenue   427,792    369,708    854,189    756,545 
Selling, general and administrative   142,355    114,055    267,555    225,356 
Depreciation and amortization   49,568    53,648    98,145    106,557 
Total costs and expenses   619,715    537,411    1,219,889    1,088,458 
Operating income    42,293    74,696    119,957    174,412 
Interest expense, net   (23,605)   (32,943)   (38,540)   (63,218)
Loss on early extinguishment of debt           (27,661)    
Gain on sale of a subsidiary       1,217        1,217 
Other expense   (371)   (846)   (464)   (1,692)
Income before income taxes    18,317    42,124    53,292    110,719 
Provision for income taxes   (11,312)   (7,758)   (14,803)   (20,490)
Net income from continuing operations   7,005    34,366    38,489    90,229 
Income from discontinued operations, net of tax           27,747     
Net income   7,005    34,366    66,236    90,229 
Net (income) loss attributable to non-controlling interest in subsidiaries   (861)   561    (1,263)   804 
Net income attributable to the Company   $6,144   $34,927   $64,973   $91,033 
Income per share – Basic:                    
Income per share – continuing operations  $0.05   $0.28   $0.30   $0.73 
Income per share – discontinued operations           0.22     
Basic income per share  $0.05   $0.28   $0.52   $0.73 
Weighted average common shares outstanding – Basic   126,043,518    124,357,929    125,737,328    124,219,917 
Income per share – Diluted:                    
Income per share – continuing operations  $0.05   $0.28   $0.29   $0.72 
Income per share – discontinued operations           0.22     
Diluted income per share  $0.05   $0.28   $0.51   $0.72 
Weighted average common shares outstanding – Diluted   126,979,505    125,756,484    126,504,293    125,634,628 
Cash dividends declared per common share  $0.075   $0.075   $0.150   $0.150 

 

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TRAVELPORT WORLDWIDE LIMITED

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

 

   June 30,   December 31, 
(in $ thousands, except share data)  2018   2017 
Assets          
Current assets:          
Cash and cash equivalents  $183,510   $122,039 
Accounts receivable (net of allowances for doubtful accounts of $8,913 and $10,245, respectively)   262,407    206,524 
Other current assets   125,071    109,724 
Total current assets   570,988    438,287 
Property and equipment, net   490,806    431,741 
Goodwill   1,086,193    1,089,590 
Trademarks and tradenames   313,097    313,097 
Other intangible assets, net   470,200    496,180 
Deferred income taxes   22,394    12,796 
Other non-current assets   72,735    76,808 
Total assets  $3,026,413   $2,858,499 
Liabilities and equity          
Current liabilities:          
Accounts payable  $79,037   $73,278 
Accrued expenses and other current liabilities   570,171    509,068 
Current portion of long-term debt   56,527    64,291 
Total current liabilities   705,735    646,637 
Long-term debt   2,216,331    2,165,722 
Deferred income taxes   37,571    34,899 
Other non-current liabilities   197,496    203,562 
Total liabilities   3,157,133    3,050,820 
Commitments and contingencies          
Shareholders’ equity (deficit):          
Preference shares ($0.0025 par value; 225,000,000 shares authorized; no shares issued and outstanding as of June 30, 2018 and December 31, 2017)        
Common shares ($0.0025 par value; 560,000,000 shares authorized; 127,876,316 shares and 126,967,010 shares issued; 126,137,333 shares and 125,346,613 shares outstanding as of June 30, 2018 and December 31, 2017, respectively)   319    317 
Additional paid in capital   2,694,541    2,700,133 
Treasury shares, at cost (1,738,983 shares and 1,620,397 shares as of June 30, 2018 and December 31, 2017, respectively)   (26,792)   (24,755)
Accumulated deficit   (2,656,416)   (2,722,375)
Accumulated other comprehensive loss   (157,153)   (155,621)
Total shareholders’ equity (deficit)   (145,501)   (202,301)
Equity attributable to non-controlling interest in subsidiaries   14,781    9,980 
Total equity (deficit)   (130,720)   (192,321)
Total liabilities and equity  $3,026,413   $2,858,499 

 

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TRAVELPORT WORLDWIDE LIMITED

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   Six Months   Six Months 
   Ended   Ended 
   June 30,   June 30, 
(in $ thousands)  2018   2017 
Operating activities          
Net income  $66,236   $90,229 
Income from discontinued operations, net of tax   (27,747)    
Net income from continuing operations   38,489    90,229 
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:          
Depreciation and amortization   98,145    106,557 
Amortization of customer loyalty payments   44,491    37,452 
Impairment of long-lived assets   11,643    685 
Amortization of debt finance costs and debt discount   2,751    5,369 
Gain on sale of a subsidiary       (1,217)
Loss on early extinguishment of debt   27,661     
Unrealized loss (gain) on foreign exchange derivative instruments   20,838    (20,920)
Unrealized (gain) loss on interest rate derivative instruments   (12,826)   3,001 
Equity-based compensation   11,904    15,522 
Deferred income taxes   (7,489)   203 
Customer loyalty payments   (55,675)   (35,385)
Pension liability contribution   (704)   (1,202)
Changes in assets and liabilities:          
Accounts receivable, net   (55,615)   (41,349)
Other current assets   (8,340)   3,346 
Accounts payable, accrued expenses and other current liabilities   75,981    11,479 
Other   11,032    4,837 
Net cash provided by operating activities  $202,286   $178,607 
           
Investing activities          
Property and equipment additions  $(74,466)  $(46,829)
Sale of subsidiary, net of cash disposed       (3,433)
Net cash used in investing activities  $(74,466)  $(50,262)
           
Financing activities          
Proceeds from term loans  $1,400,000   $ 
Proceeds from issuance of senior secured notes   745,000     
Repayment of term loans   (2,153,750)   (11,875)
Repayment of capital lease obligations and other indebtedness   (18,978)   (19,490)
Debt finance costs and lender fees   (21,524)    
Dividend to shareholders   (19,037)   (18,857)
Purchase of non-controlling interest in a subsidiary       (1,063)
Proceeds from share issuance under employee share purchase plan and stock options   6,080    1,116 
Treasury share purchase related to vesting of equity awards   (2,581)   (2,383)
Other   (680)    
Net cash used in financing activities  $(65,470)  $(52,552)
Effect of changes in exchange rates on cash and cash equivalents   (879)   782 
Net increase in cash and cash equivalents   61,471    76,575 
Cash and cash equivalents at beginning of period   122,039    139,938 
Cash and cash equivalents at end of period  $183,510   $216,513 
           
Supplemental disclosures of cash flow information          
Interest payments, net of capitalized interest  $40,512   $56,447 
Income tax payments, net of refunds   26,131    14,457 
Non-cash capital lease asset additions   61,766    12,174 
Non-cash purchase of property and equipment   4,220     

 

 9 

 

 

TRAVELPORT WORLDWIDE LIMITED

NON-GAAP MEASURES

(unaudited)

 

Reconciliation of Net Income to Adjusted Net Income,  Three Months Ended   Six Months Ended 
Adjusted Operating Income and Adjusted EBITDA  June 30,   June 30, 
(in $ thousands)  2018   2017   2018   2017 
Net income  $7,005   $34,366   $66,236   $90,229 
Adjustments:                    
Amortization of acquired intangible assets   10,166    10,131    20,332    20,523 
Gain on sale of a subsidiary       (1,217)       (1,217)
Loss on early extinguishment of debt           27,661     
Equity-based compensation and related taxes   7,211    7,893    12,044    15,679 
Corporate and restructuring costs   4,017    5,024    5,232    10,680 
Impairment of long-lived assets   11,152        11,643    685 
Income from discontinued operations           (27,747)    
Other – non cash(1)   18,321    (8,839)   6,958    (25,213)
Tax adjustments   (5,944)   2,648    (15,493)   2,997 
Adjusted Net Income   51,928    50,006    106,866    114,363 
Adjustments:                    
Interest expense, net(2)   26,001    29,716    51,366    60,217 
Other expense   371        464     
Remaining provision for income taxes   17,256    5,110    30,296    17,493 
Adjusted Operating Income   95,556    84,832    188,992    192,073 
Adjustments:                    
Depreciation and amortization of property and equipment   39,219    43,517    77,617    86,034 
Amortization of customer loyalty payments   22,148    18,657    44,491    37,452 
Adjusted EBITDA  $156,923   $147,006   $311,100   $315,559 

 

 

(1) Other—non cash includes (i) unrealized losses (gains) on foreign currency derivatives contracts of  $20 million and $(12) million for the three months ended June 30, 2018 and 2017, respectively, and $19 million and $(20) million for the six months ended June 30, 2018 and 2017, respectively, (ii) unrealized (gains) losses on interest rate derivative contracts of  $(2) million and $3 million for the three months ended June 30, 2018 and 2017, respectively, and $(13) million and $3 million for the six months ended June 30, 2018 and 2017, respectively, (iii) $8 million related to revenue deferred in previous years for the six months ended June 30, 2017 and (iv) other gains of  $1 million for the six months ended June 30, 2017.

 

(2) Interest expense, net, excludes the impact of unrealized (gains) losses on interest rate derivative contracts of $(2) million and $3 million for the three months ended June 30, 2018 and 2017, respectively, and $(13) million and $3 million for the six months ended June 30, 2018 and 2017, respectively, which is included within “Other—non-cash.”

 

Reconciliation of net cash provided by operating  Three Months Ended   Six Months Ended 
activities to Free Cash Flow:  June 30,   June 30, 
(in $ thousands)  2018   2017   2018   2017 
Net cash provided by operating activities  $119,189   $83,585   $202,286   $178,607 
Less: capital expenditures on property and equipment additions   (37,803)   (23,220)   (74,466)   (46,829)
Free Cash Flow  $81,386   $60,365   $127,820   $131,778 

 

Reconciliation of Net Debt  June 30,   December 31, 
(in $ thousands)  2018   2017 
Current portion of long-term debt  $56,527   $64,291 
Non-current portion of long-term debt   2,216,331    2,165,722 
Total debt   2,272,858    2,230,013 
Less: cash and cash equivalents   (183,510)   (122,039)
Net Debt  $2,089,348   $2,107,974 

 

 10 

 

 

TRAVELPORT WORLDWIDE LIMITED

NON-GAAP MEASURES

(unaudited)

 

Reconciliation of Income per Share –  Diluted to  Three Months Ended   Six Months Ended 
Adjusted Income per Share – Diluted  June 30,   June 30, 
(in $)  2018   2017   2018   2017 
Income per share – diluted  $0.05   $0.28   $0.51   $0.72 
Per share adjustments to net income to determine Adjusted Income per Share – diluted   0.36    0.12    0.33    0.19 
Adjusted Income per Share – diluted  $0.41   $0.40   $0.84   $0.91 

 

   Three Months Ended   Six Months Ended 
Reconciliation of Capital Expenditures  June 30,   June 30, 
(in $ thousands)  2018   2017   2018   2017 
Property and equipment additions  $37,803   $23,220   $74,466   $46,829 
Repayment of capital lease obligations and other indebtedness   10,978    9,979    18,978    19,490 
Capital Expenditures  $48,781   $33,199   $93,444   $66,319 

 

Other Metrics

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
(in thousands, except where specified)  2018   2017   % Change   2018   2017   % Change 
Transaction value processed on the Travel Commerce Platform  $23,447,984   $21,080,389    11   $46,702,760   $41,634,126    12 
Percent of Air segment revenue from away bookings   69%   67%   2.6 ppts    69%   67%   2.6 ppts 
Hotel room nights sold   17,788    17,494    2    34,351    33,744    2 
Car rental days sold   28,635    28,721        53,318    50,963    5 
Hospitality segments per 100 airline tickets issued   47    49    (4)   44    45    (2)

 

 11 

 

 

TRAVELPORT WORLDWIDE LIMITED

DEFINITIONS

(unaudited)

 

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 (excluding unrealized gains (losses) on interest rate derivative instruments), components of net periodic pension and post-retirement benefit costs other than service cost and related income taxes.

 

Adjusted Income (Loss) per Share Diluted is defined as Adjusted Net Income (Loss) for the period divided by the weighted average number of dilutive common shares.

 

Adjusted Net Income (Loss) is defined as net income (loss) excluding amortization of acquired intangible assets, gain (loss) on early extinguishment of debt, and items that are excluded under our debt covenants, such as, income (loss) from discontinued operations, gain (loss) on sale of subsidiary, non-cash equity-based compensation, certain corporate and restructuring costs, non-cash impairment of long-lived assets, certain litigation and related costs, and other non-cash items such as unrealized foreign currency gains (losses) on earnings hedges, and unrealized gains (losses) on interest rate derivative instruments, along with any income tax related to these exclusions. Tax impacts not related to core operations have also been excluded.

 

Adjusted Operating Income (Loss) is defined as Adjusted EBITDA less depreciation and amortization of property and equipment and amortization of customer loyalty payments.

 

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.

 

Free Cash Flow is defined as net cash provided by (used in) operating activities, less cash used for additions to property and equipment.

 

Net Debt is defined as total debt comprising of current and non-current portion of long-term debt minus cash and cash equivalents.

 

Reported Segments means travel provider revenue generating units (net of cancellations) sold by the Company’s travel agency network, geographically presented by region based upon the point of sale location.

 

Travel Commerce Platform RevPas (“RevPas”) represents Travel Commerce Platform revenue per segment and is computed by dividing Travel Commerce Platform revenue by the total number of Reported Segments.

 

 12 

 

 

TRAVELPORT WORLDWIDE LIMITED

NON-GAAP FINANCIAL MEASURES

(unaudited)

Non-GAAP Financial Measures

 

We utilize non – GAAP (or adjusted) financial measures, including Adjusted EBITDA, Adjusted Operating Income (Loss), Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Share – diluted, to provide useful supplemental information to assist investors in understanding and assessing our performance and financial results on the same basis that management uses internally. These adjusted financial measures provide investors greater transparency with respect to the key metrics used by management to evaluate our core operations, forecast future results, determine future capital investment allocations and understand business trends within the industry. Adjusted Operating Income (Loss) and Adjusted Net Income (Loss) per Share – diluted metrics are also used by our Board of Directors to determine incentive compensation for future periods. Management believes the adjusted financial measures assist investors in the comparison of financial results between periods as such measures exclude certain items that management believes are not reflective of our core operating performance consistent with how management reviews the business.

 

Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Share – diluted, Adjusted Operating Income and Adjusted EBITDA are supplemental measures of operating performance that do not represent, and should not be considered as, alternatives to net income (loss), or net income (loss) per share – diluted, as determined under U.S. GAAP. In addition, these measures may not be comparable to similarly named measures used by other companies.

 

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, as well as other items which are not allocated to the operating businesses such as interest expense (excluding unrealized gains (losses) on interest rate derivative instruments), certain components of net periodic pension and post-retirement benefit costs and related income 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 Net Income (Loss), Adjusted Operating Income (Loss) and Adjusted EBITDA 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 condensed statements of operations.

 

We believe our important measure of liquidity is Free Cash Flow. This measure is useful indicator of our ability to generate cash to meet our liquidity demands. We use Free Cash Flow to conduct and evaluate our operating liquidity. We believe it typically presents an alternate measure of cash flows since purchases of property and equipment are a necessary component of our ongoing operations and provides useful information regarding how cash provided by operating activities compares to the property and equipment investments required to maintain and grow our platform.  We believe it provides investors with an understanding of how assets are performing and measures management’s effectiveness in managing cash.  Free Cash Flow is a non – GAAP measure and may not be comparable to similarly named measures used by other companies.  This measure has limitation in that it does not represent the total increase or decrease in the cash balance for the period, nor do they represent residual cash flow for discretionary expenditures. This measure should not be considered as a measure of liquidity or cash flows from operations as determined under U.S. GAAP.

 

We use Capital Expenditures to determine our total cash spent on acquisition of property and equipment and cash repayment of capital lease obligation and other indebtedness. We believe this measure provides management and investors an understanding of total capital invested in the development of our platform. Capital Expenditures is a non–GAAP measure and may not be comparable to similarly named measures used by other entities. This measure has limitation in that it aggregates cash flows from investing and financing activities as determined under U.S. GAAP.

 

Management uses Net Debt to review our 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.

 

These nonGAAP 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.

 

 13 

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