Travelport Worldwide Limited Reports Second Quarter and Half Year 2018 Results

LANGLEY, U.K., Aug. 2, 2018 /PRNewswire/ — 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. 

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

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

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:  

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(in $ millions, except per share amounts)

FY 2018
Guidance