Redefining Travel Commerce - filecache.drivetheweb.comfilecache.drivetheweb.com/mr5ir_travelport/203/download/Q2+2015... · Travelport analyzes its performance using Adjusted EBITDA,

Post on 19-Aug-2018

213 Views

Category:

Documents

0 Downloads

Preview:

Click to see full reader

Transcript

Redefining Travel CommerceQ2 2015 Earnings August 4, 2015

Related to Forward-Looking Statements

Certain items in this presentation and in today’s discussion, including matters relating to revenue, net income and earnings, and

percentages or calculations using these measures, capital structure, future business opportunities, plans, prospects or growth rates and

other financial measurements and non-financial statements in future periods, constitute forward-looking statements. These forward-looking

statements are based on management’s current views with respect to future results and are subject to risks and uncertainties. These

statements are not guarantees of future performance. Actual results may differ materially from those contemplated by forward-looking

statements. Travelport Worldwide Limited (the ‘Company’ or ‘Travelport’) refers you to our filings with the Securities and Exchange

Commission (SEC), including our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on February 27,

2015 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed with the SEC on May 6, 2015, for the quarter

ended June 30, 2015, to be filed on August 4, 2015, for additional discussion of these risks and uncertainties, as well as a cautionary

statement regarding forward-looking statements. Forward-looking statements made during this presentation speak only as of today’s date.

Travelport expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information,

future events or otherwise.

Related to Non-GAAP Financial Information

Travelport analyzes its performance using Adjusted EBITDA, Adjusted Net Income/(Loss), Adjusted Income/(Loss) per Share, Adjusted Free

Cash Flow, Capital Expenditures, Net Debt, Trading Working Capital and Unlevered Adjusted Free Cash Flow, which are non-GAAP

financial measures. Such measures may not be comparable to similarly named measures used by other companies. The Company

believes these measures provide management with a more complete understanding of underlying results, trends and the liquidity of the core

operating business, along with the Company’s ability to meet its current and future financing and investing needs.

Adjusted EBITDA is the primary metric, used to evaluate and understand our underlying operations and business trends, forecasting and

determining future capital investment allocations and is one of the measures used by the Board of Directors to determine incentive

compensation. Capital Expenditures, which impact depreciation and amortization, interest expense and income tax expense, are reviewed

separately by management. Adjusted EBITDA is disclosed so that investors have the same tools as those available to management when

evaluating the results of Travelport. Adjusted EBITDA is defined as net income/loss from continuing operations adjusted to exclude

depreciation and amortization of property and equipment, net interest expense, provision for income taxes, share of earnings (losses) in

equity method investments, loss on extinguishment of debt, gain on sale of shares of Orbitz Worldwide, amortization of Customer Loyalty

Payments (‘CLPs’), costs associated with corporate transactions, costs associated with our restructuring efforts, equity-based

compensation, certain litigation and related costs, unrealized foreign currency (gains) losses on euro denominated debt and earnings

hedges, and other items we believe potentially restrict our ability to assess the results of our underlying business.

2This document supports the Company’s Q2 2015 Results Presentation, a recording of which will be available on Travelport’s

investor relations website shortly after the live presentation on August 4, 2015

Disclaimers

Q22015

Gordon Wilson

President and Chief Executive Officer

3

• Strong Q2 financial performance with Adjusted

Income per Share (diluted) up $0.43

• Over 110 airlines now choosing Travelport to

merchandise their entire product offering

• 15% growth in Asia Pacific and significant new

business in Europe

• Beyond Air progress continues, with revenue up 12%

• Acquired MTT to drive forward growth in the mobile

and digital channel

• Positive outlook for full year 2015

4

Q2 2015 Highlights

Net Revenue

$554m

RevPas

$6.00

Adj. EBITDA

$137m

Adj. Net Income

$35m

Adj. EPS (diluted)

$0.29

Adj. FCF1

$54m

1%

4%

6%

$44m

$0.43

$68m

1 Adj. FCF – Adjusted Free Cash Flow

Direct Channel Indirect Channel

Product Features LufthansaTravelport

RC&B

Industry

Standard1

Distinguish between Fare Families

Branded Fares

Flexible Branding by Equipment Type

Tailor Airlines Branding by Cabin

Airline Branding Imagery

Display Upsell Hierarchy Results

Sales Messaging for Branded Fares

Adaptable Branding for Code Shares

Universal ATPCO Ancillaries

Airline Specific Ancillaries

Depict Ancillaries using Icons

Sales Messaging for Ancillaries

1 The industry standard for merchandising branded fares and ancillaries is

“ATPCO Branded Fares” as used by traditional GDS businesses5

Travelport meets airline demands for the ability to show and

book all their content

• Our industry-leading merchandising solution, Rich Content & Branding, continues to gain traction rapidly

• Over 110 airlines signed of which ~80 are retailing their entire product offerings through our industry-

leading point-of-sale applications as they would on their own websites

Rich Content & Branding – live today with LufthansaTravelport – ‘Direct merchandising’ made real today within the

indirect channel

Growing recognition of our industry-leading capabilities driving successes across key geographies

Industry-leading technology and content driving our future

• Known headwinds in air volume during 2015 especially in the US being addressed with significant

new wins in Europe and Asia Pacific, driving international revenue and future growth

• Investments made in our Platform beginning to manifest in leading airline merchandising, higher

hotel and car bookings as well as payments growth. Reflected in ‘same-store-sales’ growth; RevPas

up 4% to $6.00

• MTT a natural add-on to expand our mobile commerce capabilities

6

+9% +3% +3%314 342 352 364

Q2 2012 Q2 2013 Q2 2014 Q2 2015

International revenue continues to grow Leveraging our geographic coverage

66% 67% 68% 70%

CAGR 5%

International

revenue as a % of

Travel Commerce

Platform Revenue

APAC

Europe

+10% LatAm & Canada

MEA

UnitedStates

+15%

(3)%

(5)%

flat

$m

Travel Commerce

Platform Revenue by

Geography -YoY Growth

7

• ~36,000 car rental locations bookable

• Leading German tour distribution (travel-IT)

• 61 cruise lines & tour operators and 12 major rail networks

• B2B payments by travel agencies to travel providers

(eNett)

• Mobile platform and apps for the travel industry (MTT)

• Corporate self-booking tools (Locomote and Hotelzon)

• Digital media B2B advertising (~5,000 advertisers)

BEYOND AIR$122m (+12% Growth YoY)

23% of Travel Commerce

Platform Revenues

Hotel Distribution

• ~650,000 hotel properties bookable

• Retail rates for independent hotels from leading

aggregators (Travelport Rooms and More)

• Corporate rates for independent hotels (Hotelzon)

Car, Tours and Other Distribution

Digital and Mobile Solutions

Payments

Differentiated focus on travel commerce Beyond Air

Acquisition of MTT

• Focused on delivering world-class

mobile solutions to leading airlines,

hotels, TMCs and travel agencies

• Significant enhancement of Travel

Commerce Platform’s mobile

capabilities, spearheading our mobile

growth strategy

• Key element of our digital offering to the

travel industry

• Aligns with airlines’ focus on “front-end”

value creation

• Reinforces Beyond Air growth targets

• Acquisition price @ 2-3x 2016 revenue

and accretive in 2016; funded with cash

8

Value-add adjacency that expands our mobile capabilities, further extending our reach in Beyond Air

Philip Emery

Chief Financial Officer

Q22015

9

Growth seen across the business excluding the YoY impact of renegotiated legacy contracts

10

• Air revenue seeing growth, also after excluding YoY impact of renegotiated legacy contract

• Double-digit growth continues in Beyond Air

• Continued strong revenue growth in Asia Pacific, and Latin America & Canada

• FX has immaterial impact on total net revenue

108 122

410 400

33 32

Q2 2014 Q2 2015

Beyond Air Air Technology Services

77%

23%

Air (Q2 2014: 79%) Beyond Air (Q2 2014: 21%)

Net Revenue $m Travel Commerce Platform Revenue

+12%

(2)%

551 554 +1%

(3)%

Net revenue

Adjusted EBITDA

11

• Adjusted EBITDA down by $9m (or 6%) YoY, in line with expectations

• SG&A* costs $13m higher YoY, primarily due to incremental commercial investments in our Platform

• Immaterial FX impact overall with benefit in the cost base offset by hedging expense in SG&A

* SG&A – excluding non-core corporate costs (see appendices for further details)

** Commissions – excluding Amortization of Customer Loyalty Payments (see appendices for further details)

Q2 Adjusted EBITDA ahead of expectation; incremental SG&A investment to further strengthen Platform

Adjusted EBITDA – Q2 Bridge $m

Q2 2014

Adjusted EBITDA

Commissions** TechCosts

SG&A Costs

Q2 2015

AdjustedEBITDA

146137

(2) (13)

3

NetRevenue

3

12

Q2 2014Adjusted Net Loss

Q2 2015Adjusted

Net Income

• Refinanced and strong capital structure delivering lower interest payments

• Adjusted Net Income of $35m, up $44m year over year

• Adjusted Income per Share (diluted) of $0.29, up $0.43 year over year

Adjusted Net Income

Depreciation Amortizationof CLPs

Interest Expense

(9)

35

(2)

48

1

6

Taxes

Adjusted Net Income – Q2 Bridge $m

Strong Q2 financial performance with Adjusted Income per Share up $0.43 year over year

(9)

Adjusted EBITDA

Summary cash flows

* Capex & CLP - Capital Expenditure & Customer Loyalty Payments13

Q2 2014Adjusted

Free Cash Flow

AdjustedEBITDA

Capex & CLP*

WorkingCapital

& Other

(14)

54

(9)16

3

58

Interest& Tax

Q2 2015Adjusted

Free Cash Flow

Strengthened capital structure continues to deliver improved cash flows through 2015

Adjusted Free Cash Flow – Q2 Bridge $m

• Reduced interest payments reflects deleveraged and refinanced capital structure

• Expect FY 2015 working capital to be neutral

• On track to meet full year 2015 Adjusted Free Cash Flow guidance

14

Building a track record of balanced and disciplined capital allocation

• Maintain dividend at 30 cents per share, per annum

• Review shareholder return policy as longer term net

leverage targets are achieved

Returns to equity holders

• Disciplined re-investment in business to drive growth

and increase returnsContinued investment in our Platform

• Mandatory repayment of Term Loan at 1% per annum

• Longer term target to reduce net leverage to below

3x Adjusted EBITDA

Returns to debt holders

• Pursue strategic acquisitions that enhance shareholder value

• Acquisitions must complement existing activities by adding

technology and/or emerging adjacent technologies that could

create significant long term growth

Mergers and Acquisitions

Capital allocation strategy

(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

Positive outlook for full year 2015

* Guidance assumes foreign exchange rates as of July 28, 2015

** Based on expected FY fully diluted shares outstanding of 123m

15The information presented here represent forward-looking statements and reflect our 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 presentation and in our Annual Report on

Form 10-K for the year ended December 31, 2014, filed with the SEC on February 27, 2015 and our Quarterly Report on Form 10-Q for the quarter

ended March 31, 2015, filed on May 6, 2015 and for the quarter ended June 30, 2015, to be filed on August 4, 2015.

Strong Q2 financial performance and momentum heading into the second half of the year

• Strong Q2 performance; expect earnings to be closer to top end of guidance ranges

• Q3 has started well and momentum across the business remains positive

Q22015

Gordon Wilson

President and Chief Executive Officer

16

17

Summary

• Delivered strong Q2 2015 financial

performance

• Significant momentum across the

Travel Commerce Platform into H2

• Continue to extend our industry-

leading Platform by adding leading

mobile capabilities

• Positive full year outlook

AppendicesFinancial Statistics

Operating Statistics

Key Financials

Definitions

Travel Commerce Platform Revenue by Region ($m) Q2 2015 Q2 2014Better /

(worse)H1 2015 H1 2014

Better /

(worse)

Asia Pacific 115 100 15% 233 201 15%

Europe 150 155 (3)% 316 333 (5)%

Latin America & Canada 24 22 10% 48 45 6%

Middle East & Africa 75 75 — 148 147 1%

International 364 352 3% 745 726 3%

% of Travel Commerce Platform revenue 70% 68% 1.7ppts 70% 68% 1.5ppts

United States 158 166 (5)% 319 334 (4)%

Total Travel Commerce Platform revenue 522 518 1% 1,064 1,060 —

19

Financial statistics

Net Revenue ($m) Q2 2015 Q2 2014Better /

(worse)H1 2015 H1 2014

Better /

(worse)

Air 400 410 (2)% 832 855 (3)%

Beyond Air 122 108 12% 232 205 13%

Travel Commerce Platform 522 518 1% 1,064 1,060 —

Technology Services 32 33 (3)% 62 63 (1)%

Net Revenue 554 551 1% 1,126 1,123 —

Travel Commerce Platform revenue as a % of Net revenue 94% 94% 0.2ppts 94% 94% 0.1ppts

Beyond Air revenue as a % of Travel Commerce Platform revenue 23% 21% 2.4ppts 22% 19% 2.4ppts

% of Air segments revenue from away bookings 65% 63% 2.0ppts 65% 63% 1.6ppts

Reported Segments by Region (millions) Q2 2015 Q2 2014Better /

(worse) H1 2015 H1 2014

Better /

(worse)

Asia Pacific 16 14 13% 33 30 12%

Europe 20 22 (8)% 43 47 (9)%

Latin America & Canada 4 4 13% 8 8 10%

Middle East & Africa 10 10 (3)% 20 20 (2)%

International 50 50 1% 104 105 —

United States 37 40 (8)% 78 82 (6)%

Total Reported Segments 87 90 (3)% 182 187 (3)%

20

Operating statistics

Travel Commerce Platform RevPas Q2 2015 Q2 2014Better /

(worse)H1 2015 H1 2014

Better /

(worse)

International RevPas $7.25 $7.07 3% $7.15 $6.95 3%

United States RevPas $4.30 $4.13 4% $4.12 $4.07 1%

Travel Commerce Platform RevPas $6.00 $5.75 4% $5.86 $5.68 3%

Selected Travel Commerce Platform metrics Q2 2015 Q2 2014Better /

(worse)H1 2015 H1 2014

Better /

(worse)

Transaction value processed on the Travel Commerce Platform ($m) 21,611 23,698 (9)% 43,454 46,553 (7)%

Airline tickets issued (millions) 30 31 (4)% 61 64 (3)%

Hotel room nights sold (millions) 17 16 5% 33 31 6%

Car rental days sold (millions) 24 22 7% 45 41 9%

Hospitality segments per 100 airline tickets issued (1) 48 43 12% 45 40 11%

(1) A hospitality segment refers to one complete hospitality booking. For example, a five night hotel stay equals one

hospitality segment. Hospitality includes hotel, car, rail and other non-air bookings.

$m Q2 2015Better /

(worse)

Better /

(worse)H1 2015

Better /

(worse)

Better /

(worse)

Net Revenue 554 3 1% 1,126 3 —

Adjusted EBITDA 137 (9) (6)% 274 (23) (7)%

Depreciation on property and equipment (39) (2) (3)% (81) (7) (10)%

Amortization of customer loyalty payments (18) 1 4% (36) 1 1%

Interest expense, net (39) 48 56% (78) 92 54%

Provision for income taxes (6) 6 54% (14) 8 38%

Adjusted Net Income 35 44 n/m 65 71 n/m

Amortization of intangible assets (19) 1 1% (38) 1 2%

Non-core corporate costs — 10 n/m (24) (12) n/m

Share of losses in equity method investments — (1) n/m — 3 n/m

Gain on sale of available-for-sale securities — (52) n/m 6 (46) n/m

Loss on early extinguishment of debt — 9 n/m — 14 n/m

Net Income 16 11 236% 9 31 140%

21

Summarized income statement

n/m = not meaningful

Net revenue and Adjusted EBITDA

* SG&A – excluding non-core corporate costs 22

Net Revenue ($m)Q2

2015

Better /

(worse)

Better /

(worse)

Air 400 (10) (2)%

Beyond Air 122 14 12%

Travel Commerce Platform 522 4 1%

Technology Services 32 (1) (3)%

Net Revenue 554 3 1%

Adjusted EBITDA ($m)Q2

2015

Better /

(worse)

Better /

(worse)

Net Revenue 554 3 1%

Commissions (259) (1) —

Add back: Amortization of CLPs 18 (1) (4)%

Technology costs (76) 3 4%

SG&A* (100) (13) (14)%

Adjusted EBITDA 137 (9) (6)%

Adjusted EBITDA Margin 24.7% (1.8)ppts

Net Revenue ($m)H1

2015

Better /

(worse)

Better /

(worse)

Air 832 (23) (3)%

Beyond Air 232 27 13%

Travel Commerce Platform 1,064 4 —

Technology Services 62 (1) (1)%

Net Revenue 1,126 3 —

Adjusted EBITDA ($m)H1

2015

Better /

(worse)

Better /

(worse)

Net Revenue 1,126 3 —

Commissions (529) 6 1%

Add back: Amortization of CLPs 36 (1) (1)%

Technology costs (155) — —

SG&A* (204) (31) (18)%

Adjusted EBITDA 274 (23) (7)%

Adjusted EBITDA Margin 24.4% (2.0)ppts

23

Income per share

Income/(loss) per share ($) Q2 2015 Q2 2014 H1 2015 H1 2014

Income/(loss) per share – Diluted 0.12 0.05 0.06 (0.38)

Adjusted Income/(loss) per Share – Diluted 0.29 (0.14) 0.53 (0.09)

Weighted average shares in issue (millions) Q2 2015 Q2 2014 H1 2015 H1 2014

Weighted average common shares outstanding – Basic 122.3 69.4 121.8 66.3

Weighted average common shares outstanding – Diluted 122.7 71.4 122.7 66.3

Summary cash flows, Capital Expenditures and Net Debt

24

Adjusted Free Cash Flow ($m) Q2 2015 Q2 2014 H1 2015 H1 2014

Adjusted EBITDA 137 146 274 297

Interest payments (35) (93) (73) (150)

Tax payments (6) (6) (13) (13)

Changes in working capital and other related 11 (3) (43) (35)

Customer loyalty payments (19) (19) (42) (45)

Defined benefit plan funding (1) (3) (2) (3)

Capital expenditures (33) (36) (68) (69)

Adjusted Free Cash Flow 54 (14) 33 (18)

Capital Expenditures ($m) Q2 2015 Q2 2014 H1 2015 H1 2014

Capital expenditures on property and equipment additions (25) (28) (52) (54)

Repayment of capital lease obligations (8) (8) (16) (15)

Total (33) (36) (68) (69)

Total Capital Expenditures as % of Net revenue 5.9% 6.4% 6.0% 6.2%

Net Debt ($m) June 30, 2015 March 31, 2015 December 31, 2014

Term Loan principal 2,363 2,369 2,375

Discount (26) (27) (28)

Capital leases and other indebtedness 122 89 93

Cash (127) (107) (139)

Cash held as collateral (22) (24) (26)

Net Debt 2,310 2,300 2,275

25

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, 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 cons tant currency basis is considered

to provide useful information to management about eNett’s VAN GDV, because it facilitates an evaluation of eNett’s year-on-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.

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.

top related