Attached files
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| 8-K - 8-K - Orbitz Worldwide, Inc. | q22015earningspressrelease.htm |
Exhibit 99.1
Orbitz Worldwide, Inc. Reports Second Quarter 2015 Results
Chicago, August 6, 2015 - Orbitz Worldwide, Inc. (NYSE: OWW) today announced results for the second quarter and six months ended June 30, 2015.
• | Room nights increased 3 percent year-over-year |
• | Net revenue decreased 3 percent year-over-year to $240 million; excluding the impact of foreign exchange fluctuations, net revenue was flat year-over-year |
• | Net loss was $4.3 million |
• | Adjusted EBITDA was $31.9 million |
As a result of the February 12, 2015 announced transaction with Expedia, Inc., the company will no longer provide fiscal 2015 earnings guidance and will not hold a conference call to discuss its second quarter results.
(in thousands, except | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
per share data) | 2015 | 2014 | Change (a) | 2015 | 2014 | Change (a) | |||||||||||
Hotel room night growth (b) | 3 | % | 20 | % | 7 | % | 16 | % | |||||||||
Gross bookings | $3,089,094 | $3,357,698 | (8) | % | $6,306,837 | $6,540,212 | (4) | % | |||||||||
Net revenue | $239,597 | $248,053 | (3) | % | $459,802 | $458,308 | — | % | |||||||||
Net revenue margin (c) | 7.8 | % | 7.4 | % | 0.4 ppt | 7.3 | % | 7.0 | % | 0.3 ppt | |||||||
Net income/(loss) | ($4,251 | ) | $6,881 | ** | ($25,190 | ) | $947 | ** | |||||||||
Basic EPS | ($0.04 | ) | $0.06 | ** | ($0.22 | ) | $0.01 | ** | |||||||||
Diluted EPS | ($0.04 | ) | $0.06 | ** | ($0.22 | ) | $0.01 | ** | |||||||||
Operating cash flow | $9,511 | $49,657 | (81) | % | $174,696 | $206,124 | (15) | % | |||||||||
Capital spending | $16,750 | $13,454 | 24 | % | $29,312 | $21,168 | 38 | % | |||||||||
EBITDA (d) | $20,618 | $36,557 | (44) | % | $21,966 | $61,047 | (64) | % | |||||||||
Adjustments | $11,317 | $8,207 | 38 | % | $20,723 | $12,434 | 67 | % | |||||||||
Adjusted EBITDA (d) | $31,935 | $44,764 | (29) | % | $42,689 | $73,481 | (42) | % | |||||||||
** Not meaningful.
(a) | Percentages are calculated on unrounded numbers. |
(b) | Represents year-over-year growth in stayed hotel room nights. Includes both standalone hotel room nights and hotel room nights included in vacation packages. |
(c) | Represents net revenue as a percentage of gross bookings. |
(d) | Non-GAAP financial measures. Definitions of EBITDA and Adjusted EBITDA and a reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures are contained in Appendix A. |
1
Second Quarter Financial Results
Gross Bookings and Net Revenue
Gross bookings decreased 8 percent year-over-year to $3.1 billion in the second quarter 2015. This decrease was driven by lower air and vacation package volume and lower average booking values per air transaction, partially offset by higher hotel and car volume. Excluding the impact of foreign exchange fluctuations, gross bookings decreased 6 percent year-over-year.
Net revenue decreased 3 percent year-over-year to $239.6 million in the second quarter 2015. This decrease was driven by lower air and vacation package volume and lower net revenue per air and vacation package transaction, partially offset by higher hotel and car transaction volume and higher net revenue per hotel transaction. Excluding the impact of foreign exchange fluctuations, net revenue was flat year-over-year.
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||
(in thousands) | 2015 | 2014 | Change | 2015 | 2014 | Change | |||
Net Revenue | |||||||||
Standalone Hotel | $99,422 | $90,257 | 10 | % | $183,222 | $157,491 | 16 | % | |
Standalone Air | 61,084 | 71,004 | (14) | % | 124,286 | 141,232 | (12) | % | |
Vacation Package | 37,172 | 43,353 | (14) | % | 67,406 | 76,265 | (12 | )% | |
Advertising and Media | 14,562 | 15,181 | (4) | % | 29,909 | 29,767 | — | % | |
Other | 27,357 | 28,258 | (3) | % | 54,979 | 53,553 | 3 | % | |
Total Net Revenue | $239,597 | $248,053 | (3) | % | $459,802 | $458,308 | — | % | |
Domestic | $186,867 | $182,299 | 3 | % | $359,277 | $336,908 | 7 | % | |
International | 52,730 | 65,754 | (20) | % | 100,525 | 121,400 | (17 | )% | |
Total Net Revenue | $239,597 | $248,053 | (3) | % | $459,802 | $458,308 | — | % | |
• | Standalone hotel net revenue was $99.4 million in the second quarter 2015, up 10 percent year-over-year. This increase was primarily due to higher transaction volume and higher net revenue per transaction. Standalone hotel net revenue represented 42 percent of total second quarter net revenue, up from 36 percent in the second quarter 2014. |
• | Standalone air net revenue was $61.1 million in the second quarter 2015, down 14 percent year-over-year. This decrease was due to lower transaction volume and lower net revenue per transaction. Standalone air net revenue represented 25 percent of total second quarter net revenue, down from 29 percent in the second quarter 2014. |
• | Vacation package net revenue was $37.2 million in the second quarter 2015, down 14 percent year-over-year. This decrease was driven by lower transaction volume and lower net revenue per transaction. Vacation package net revenue represented 16 percent of total second quarter net revenue, down from 17 percent in the second quarter 2014. |
• | Advertising and media net revenue was $14.6 million in the second quarter 2015, down 4 percent year-over-year. Advertising and media net revenue represented 6 percent of total second quarter net revenue in both 2015 and 2014. |
• | Other net revenue was $27.4 million in the second quarter 2015, down 3 percent year-over-year. Other net revenue represented 11 percent of total second quarter net revenue in both 2015 and 2014. |
• | Domestic net revenue was $186.9 million in the second quarter 2015, up 3 percent year-over-year. International net revenue was $52.7 million in the second quarter 2015, down 20 percent year-over-year. Excluding the impact of foreign exchange fluctuations, international net revenue was down 8 percent year-over-year. |
In order to provide a more comparable view of the company's operating performance across periods, Appendix A to this release adjusts gross bookings and net revenue for currency impacts. The company has also included a schedule of trended operating metrics in Appendix B to this release.
2
Operating Expenses
Cost of revenue
Cost of revenue is comprised primarily of costs to operate customer service call centers, credit card and other payment processing fees, and other costs, which include customer refunds, fraudulent transactions and other charge-backs, and connectivity and other processing costs.
Three Months Ended June 30, | $ | % | |||||||||||
2015 | 2014 | Change | Change | ||||||||||
(in thousands) | |||||||||||||
Customer service costs | $21,783 | $19,549 | $2,234 | 11 | % | ||||||||
Credit card processing fees | 18,303 | 18,727 | (424 | ) | (2 | )% | |||||||
Other | 23,811 | 9,362 | 14,449 | 154 | % | ||||||||
Total cost of revenue | $63,897 | $47,638 | $16,259 | 34 | % | ||||||||
% of net revenue | 26.7 | % | 19.2 | % | |||||||||
Cost of revenue as a percent of net revenue for the second quarter 2015 increased to 26.7%. This change was driven primarily by an increase in fraudulent transactions as reflected in the increase in Other expense in the second quarter of 2015 compared with the prior year period. The company has taken extensive action designed to increase its ability to identify, process, mitigate and prevent fraudulent transactions in the future. Excluding the year-over-year increase in expense related to increased levels of fraudulent transactions, cost of revenue as a percentage of revenue increased 63 basis points. Fraudulent transactions are primarily being undertaken by criminals who illegally use credit card information obtained from non-Orbitz Worldwide sources. These fraudulent transactions do not stem from the compromise of Orbitz Worldwide customer information.
Selling, general and administrative (SG&A) expense
SG&A expense is comprised primarily of wages and benefits, contract labor costs, network communications, systems maintenance and equipment costs and other costs, which include legal, foreign currency transaction and hedging costs and other professional and administrative costs.
Three Months Ended June 30, | $ | % | |||||||||||
2015 | 2014 | Change | Change | ||||||||||
(in thousands) | |||||||||||||
Wages and benefits | $40,168 | $43,818 | ($3,650 | ) | (8 | )% | |||||||
Contract labor | 6,346 | 6,115 | 231 | 4 | % | ||||||||
Network communications, systems maintenance and equipment | 6,812 | 7,446 | (634 | ) | (9 | )% | |||||||
Other | 19,236 | 14,639 | 4,597 | 31 | % | ||||||||
Total SG&A | $72,562 | $72,018 | $544 | 1 | % | ||||||||
% of net revenue | 30.3 | % | 29.0 | % | |||||||||
SG&A expense as a percent of net revenue for the second quarter 2015 increased 125 basis points. Excluding the expenses associated with higher legal reserves and the announced transaction with Expedia, Inc., SG&A expense as a percent of net revenue decreased 159 basis points.
Marketing expense
Marketing expense is comprised primarily of online marketing costs, such as search engine marketing and travel research; offline marketing costs, such as television, radio and print advertising; and commissions to affiliates.
Three Months Ended June 30, | $ | % | |||||||||
2015 | 2014 | Change | Change | ||||||||
(in thousands) | |||||||||||
Marketing expense | $82,520 | $89,604 | $(7,084) | (8) | % | ||||||
% of net revenue | 34.4 | % | 36.1 | % | |||||||
Marketing expense as a percent of net revenue for the second quarter 2015 decreased 168 basis points.
3
Interest Expense
Net interest expense decreased $1.1 million in the second quarter 2015, compared with the second quarter 2014. This was largely due to lower interest expense on the term loan, lower costs related to interest rate swaps and a decrease in non-cash interest expense related to the tax sharing liability. For the second quarter 2015, the weighted average interest rate was 15 basis points lower than the second quarter 2014.
At June 30, 2015, the company was in compliance with all financial covenants in its credit agreement.
Cash Flow and Liquidity
Operating cash flow was $174.7 million for the six months ended June 30, 2015.
At June 30, 2015, available liquidity was $385 million, which was comprised of cash and cash equivalents of $305 million and $80 million available on the undrawn revolving credit facility.
Operational Highlights
Consumer Brands
• | In May, Orbitz Worldwide announced the appointment of Nigel Pocklington as President of ebookers. Nigel is based in London and is responsible for the strategy and all aspects of the ebookers business throughout Europe. |
• | During the second quarter 2015, 36 percent of standalone hotel bookings were made via mobile devices across the company’s global consumer brand portfolio, up from 31 percent in the second quarter 2014. |
• | In June, Orbitz Worldwide announced complimentary registration in the TSA PreCheck® expedited airport screening program for top tier Orbitz Rewards members. |
• | During the second quarter 2015, Orbitz.com launched the latest installment of its successful online video initiative, Orbitz Originals, hosted by award-winning travel expert Richard Bangs. "Orbitz Originals: Illinois," viewable at orbitz.com/Illinois, is a seven-part series produced in partnership with the Illinois Office of Tourism. To date, Orbitz Originals videos highlighting Australia’s Northern Territory, Bermuda, Cancun, the Cayman Islands, Florida, Jackson Hole, New York, Northern Ireland, Puerto Rico, Qatar, Vermont and Western Ireland have generated more than 3 million views by travelers seeking inspiration for future trips. |
Orbitz for Business
• | Orbitz for Business announced a partnership with Visa Inc. to provide corporate clients a turnkey, end-to-end travel and expense solution designed to make booking, reconciliation and reporting more efficient. The solution, Visa Travel Manager, is powered by Orbitz for Business and specifically designed to give mid-market companies control of, and visibility into, employee travel spending as well as access to a fully mobile and consumerized travel booking platform. |
Orbitz Partner Services Group
• | During the second quarter 2015, Orbitz Worldwide signed hotel distribution agreements with Choice Hotels International, Coast Hotels, Barceló Hotels & Resorts and Edda Hotels in addition to Bahia del Duque, Chicago Athletic Association Hotel, Hard Rock Hotel Goa and The Old Course Hotel, Golf Resort & Spa at St. Andrews. |
• | During the second quarter 2015, Orbitz Worldwide signed marketing and promotion agreements with a number of airlines including Air Berlin, Air Namibia, Asiana Airlines, China Southern Airlines, Fiji Airways, FlexFlight, JetAirFly, WOW Air and XL Airways of France. |
• | During the second quarter 2015, Orbitz Worldwide signed partner marketing contracts with a number of destination marketing organizations including Abu Dhabi Tourism, Pro Colombia, Dubai Department of Tourism, Georgia Tourism, Jamaica Tourism, Jordan Tourism, Nashville Convention & Visitors Bureau, Nassau Paradise Island, Destination New South Wales, Tourism New Zealand, Visit Tampa Bay and Texas Tourism. |
4
About Orbitz Worldwide
Orbitz Worldwide (NYSE: OWW) is a global online travel company using technology to transform the way consumers around the world plan and purchase travel. Orbitz Worldwide operates the consumer travel planning sites Orbitz (orbitz.com), ebookers (ebookers.com), HotelClub (hotelclub.com) and CheapTickets (cheaptickets.com). Also within the Orbitz Worldwide family, Orbitz Partner Network (orbitzpartnernetwork.com) delivers private label travel technology solutions to a broad range of partners including some of the world`s largest airlines, bank loyalty programs and travel agencies, and Orbitz for Business (orbitzforbusiness.com) delivers managed travel solutions for companies of all sizes. Orbitz Worldwide makes investor relations information available at investors.orbitz.com.
Forward-Looking Statements
This release and its attachments may contain forward-looking statements that involve risks, uncertainties and other factors concerning, among other things, the company's expected financial performance and its strategic operational plans. The results presented are unaudited. The company's actual results and the effects of future plans, strategies or events could differ materially from those expressed or implied by such forward-looking statements and reported results should not be considered as an indication of future performance. The potential risks, uncertainties and other factors that could cause actual results to differ from those expressed or implied by the forward-looking statements in this release and its attachments include, but are not limited to, risks related to the proposed merger with Expedia, Inc., including uncertainties as to the timing of the completion of the merger and the ability of the parties to complete the merger; the company’s ability to protect against payment and credit card fraud; the company's ability to effectively compete in the travel industry; the termination of any major supplier's participation on the company's websites; the company's ability to renegotiate supplier agreements on acceptable terms; trends, declines, or disruptions affecting the travel industry or the level of travel activity, particularly air travel; change in airline distribution economics; system-related failures, interruptions, or security breaches; the company's ability to maintain and protect its information technology and intellectual property; risks related to search engine algorithms or other traffic generating arrangements; the company’s ability to adapt to technological developments or industry trends; the outcome of pending litigation; risks related to the company's level of indebtedness; risks associated with doing business in multiple currencies and international markets; and general economic and business conditions. More information regarding these and other risks, uncertainties and factors is contained in the section entitled "Risk Factors" in the company's filings with the Securities and Exchange Commission ("SEC"), which are available on the SEC's website at www.sec.gov or the company's Investor Relations website at investors.orbitz.com. You are cautioned not to unduly rely on these forward-looking statements, which speak only as of the date of this release. All information in this release and its attachments is as of August 6, 2015, and Orbitz Worldwide undertakes no obligation to publicly revise any forward-looking statement.
About Non-GAAP Financial Measures
This release and its attachments include certain non-GAAP financial measures as defined by the SEC. These measures may be different from non-GAAP measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. generally accepted accounting principles (GAAP). Further information regarding the non-GAAP financial measures included in this release is contained in Appendix A attached to this release.
Media Contact: Investor Contact:
Chris Chiames Adam Patnaude
+1 312 894 6890 +1 312 260 8301
press@orbitz.com OWWIR@orbitz.com
5
Orbitz Worldwide, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share data)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net revenue | $239,597 | $248,053 | $459,802 | $458,308 | |||||||||||
Cost and expenses: | |||||||||||||||
Cost of revenue | 63,897 | 47,638 | 136,380 | 90,383 | |||||||||||
Selling, general and administrative | 72,562 | 72,018 | 143,211 | 138,260 | |||||||||||
Marketing | 82,520 | 89,604 | 158,245 | 166,382 | |||||||||||
Depreciation and amortization | 13,958 | 15,287 | 28,478 | 28,880 | |||||||||||
Total operating expenses | 232,937 | 224,547 | 466,314 | 423,905 | |||||||||||
Operating income/(loss) | 6,660 | 23,506 | (6,512 | ) | 34,403 | ||||||||||
Other expense: | |||||||||||||||
Net interest expense | (7,467 | ) | (8,595 | ) | (15,877 | ) | (18,172 | ) | |||||||
Other expense | — | (2,236 | ) | — | (2,236 | ) | |||||||||
Total other expense | (7,467 | ) | (10,831 | ) | (15,877 | ) | (20,408 | ) | |||||||
Income/(loss) before income taxes | (807 | ) | 12,675 | (22,389 | ) | 13,995 | |||||||||
Provision for income taxes | 3,444 | 5,794 | 2,801 | 13,048 | |||||||||||
Net income/(loss) | ($4,251 | ) | $6,881 | ($25,190 | ) | $947 | |||||||||
Net income/(loss) per share - basic: | |||||||||||||||
Net income/(loss) per share | ($0.04 | ) | $0.06 | ($0.22 | ) | $0.01 | |||||||||
Weighted-average shares outstanding | 112,418,132 | 110,218,036 | 112,007,027 | 109,907,641 | |||||||||||
Net income/(loss) per share - diluted: | |||||||||||||||
Net income/(loss) per share | ($0.04 | ) | $0.06 | ($0.22 | ) | $0.01 | |||||||||
Weighted-average shares outstanding | 112,418,132 | 115,079,178 | 112,007,027 | 114,474,084 | |||||||||||
6
Orbitz Worldwide, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share data)
June 30, 2015 | December 31, 2014 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $304,798 | $188,482 | |||||
Accounts receivable (net of allowance for doubtful accounts of $1,401 and $1,541, respectively) | 161,340 | 132,951 | |||||
Prepaid expenses | 10,806 | 10,039 | |||||
Other current assets | 34,092 | 17,560 | |||||
Total current assets | 511,036 | 349,032 | |||||
Property and equipment (net of accumulated depreciation of $307,433 and $302,031, respectively) | 110,135 | 111,832 | |||||
Goodwill | 351,098 | 351,098 | |||||
Trademarks and trade names | 89,762 | 89,890 | |||||
Other intangible assets, net | 1,144 | 1,300 | |||||
Deferred income taxes, non-current | 135,095 | 135,807 | |||||
Restricted cash | 92,544 | 97,810 | |||||
Other non-current assets | 12,453 | 39,200 | |||||
Total Assets | $1,303,267 | $1,175,969 | |||||
Liabilities and Shareholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $20,237 | $13,954 | |||||
Accrued merchant payable | 504,385 | 366,062 | |||||
Accrued expenses | 165,608 | 158,754 | |||||
Deferred income | 57,334 | 40,816 | |||||
Term loan, current | 24,100 | 25,871 | |||||
Other current liabilities | 5,970 | 1,544 | |||||
Total current liabilities | 777,634 | 607,001 | |||||
Term loan, non-current | 405,499 | 421,879 | |||||
Tax sharing liability | 55,415 | 61,289 | |||||
Other non-current liabilities | 14,733 | 14,702 | |||||
Total Liabilities | 1,253,281 | 1,104,871 | |||||
Commitments and contingencies | |||||||
Shareholders’ Equity: | |||||||
Preferred stock, $0.01 par value, 100 shares authorized, no shares issued or outstanding | — | — | |||||
Common stock, $0.01 par value, 140,000,000 shares authorized, 112,660,845 and 110,758,513 shares issued, respectively | 1,126 | 1,107 | |||||
Treasury stock, at cost, 25,237 shares held | (52 | ) | (52 | ) | |||
Additional paid-in capital | 1,061,616 | 1,060,636 | |||||
Accumulated deficit | (1,025,449 | ) | (1,000,259 | ) | |||
Accumulated other comprehensive income | 12,745 | 9,666 | |||||
Total Shareholders’ Equity | 49,986 | 71,098 | |||||
Total Liabilities and Shareholders’ Equity | $1,303,267 | $1,175,969 | |||||
7
Orbitz Worldwide, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Six Months Ended June 30, | |||||||
2015 | 2014 | ||||||
Operating activities: | |||||||
Net income/(loss) | ($25,190 | ) | $947 | ||||
Adjustments to reconcile net income/(loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization | 28,478 | 28,880 | |||||
Non-cash net interest expense | 4,532 | 5,237 | |||||
Deferred income taxes | 2,271 | 11,556 | |||||
Stock compensation | 7,416 | 6,803 | |||||
Changes in assets and liabilities: | |||||||
Accounts receivable | (29,759 | ) | (63,438 | ) | |||
Accounts payable, accrued expenses and other current liabilities | 15,857 | 24,168 | |||||
Accrued merchant payable | 139,588 | 175,944 | |||||
Deferred income | 16,787 | 21,920 | |||||
Other | 14,716 | (5,893 | ) | ||||
Net cash provided by operating activities | 174,696 | 206,124 | |||||
Investing activities: | |||||||
Property and equipment additions | (29,312 | ) | (21,168 | ) | |||
Acquisitions, net of cash acquired | — | (10,000 | ) | ||||
Changes in restricted cash | 5,116 | (17,748 | ) | ||||
Net cash used in investing activities | (24,196 | ) | (48,916 | ) | |||
Financing activities: | |||||||
Payments on and retirement of term loans | (18,151 | ) | (443,250 | ) | |||
Issuance of long-term debt, net of issuance costs | — | 443,256 | |||||
Employee tax withholdings related to net share settlements of equity-based awards | (8,452 | ) | (6,747 | ) | |||
Proceeds from exercise of employee stock options | 2,140 | 143 | |||||
Payments on tax sharing liability | (8,921 | ) | (4,616 | ) | |||
Net cash used in financing activities | (33,384 | ) | (11,214 | ) | |||
Effects of changes in exchange rates on cash and cash equivalents | (800 | ) | 1,288 | ||||
Net increase in cash and cash equivalents | 116,316 | 147,282 | |||||
Cash and cash equivalents at beginning of period | 188,482 | 117,385 | |||||
Cash and cash equivalents at end of period | $304,798 | $264,667 | |||||
Supplemental disclosure of cash flow information: | |||||||
Income tax payments, net | $1,686 | $1,889 | |||||
Cash interest payments | $11,553 | $13,104 | |||||
Non-cash investing activity: | |||||||
Capital expenditures incurred not yet paid | $2,570 | $3,811 | |||||
8
Appendix A: Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA
EBITDA is a performance measure used by management that is defined as net income or net loss plus: net interest expense, provision for income taxes and depreciation and amortization. Adjusted EBITDA represents EBITDA as adjusted for certain non-cash and unusual or non-recurring items as described below. Orbitz Worldwide uses and believes investors and other external users of the company's financial statements benefit from the presentation of EBITDA and Adjusted EBITDA in evaluating its operating performance because:
• | These measures provide greater insight into management decision making at Orbitz Worldwide as they are among the primary metrics by which management evaluates the operating performance of the company's business. Management believes that when viewed with GAAP results and the accompanying reconciliation, EBITDA and Adjusted EBITDA provide additional information that is useful for management and other external users to gain an understanding of the factors and trends affecting the ongoing cash earnings capability of the company's business, from which capital investments are made and debt is serviced. These supplemental measures are used by management and the board of directors to evaluate the company's actual results against management's expectations. |
• | EBITDA measures performance apart from items such as interest expense, income taxes and depreciation and amortization. Management believes that the exclusion of interest expense is necessary to evaluate the cash earnings capability of the business. The company generally only funds working capital requirements with funds borrowed under its revolving credit facility, if at all, in the fourth quarter of the year when its cash balances are typically the lowest. As a result, nearly all of the company's interest expense is not incurred to fund its operating activities. In addition, excluding interest expense from the company's non-GAAP measures is consistent with the company's intent to disclose the ongoing cash earnings capability of the business, from which capital investments are made and debt is serviced. Management believes that the exclusion of non-cash depreciation and amortization is also necessary to evaluate the cash earnings capability of the business. Management believes that the review of its non-GAAP measures in conjunction with other GAAP metrics, such as capital expenditures, is more useful in understanding the company's business than the inclusion of depreciation and amortization expense in the non-GAAP measures used by management, since depreciation and amortization expense has historically fluctuated as a result of purchase accounting and this expense involves management judgment (e.g. estimated useful lives). |
• | Adjusted EBITDA corresponds more closely to the ongoing cash earnings capability of the company's business, by excluding the items described above and items such as litigation settlements that are not driven by core operating results, certain other non-cash items, such as goodwill and intangible asset impairment charges and stock-based compensation, and other unusual and non-recurring items, such as restructuring charges. |
EBITDA and Adjusted EBITDA, as presented for the three and six months ended June 30, 2015 and 2014, are not defined under GAAP and do not purport to be an alternative to net income or net loss as a measure of operating performance. EBITDA and Adjusted EBITDA have certain limitations in that they do not take into account the impact of certain expenses to the company's income statement, such as stock-based compensation, goodwill and intangible asset impairment charges and certain one-time items, if applicable. Because not all companies use identical calculations, this presentation of EBITDA and Adjusted EBITDA may not be comparable to other similarly-titled measures used by other companies.
9
The following table provides a reconciliation of net income/(loss) to EBITDA:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Net income/(loss) | ($4,251 | ) | $6,881 | ($25,190 | ) | $947 | ||||||||||
Net interest expense | 7,467 | 8,595 | 15,877 | 18,172 | ||||||||||||
Provision for income taxes | 3,444 | 5,794 | 2,801 | 13,048 | ||||||||||||
Depreciation and amortization | 13,958 | 15,287 | 28,478 | 28,880 | ||||||||||||
EBITDA | $20,618 | $36,557 | $21,966 | $61,047 | ||||||||||||
EBITDA was adjusted by the items listed and described in more detail below. The following table provides a reconciliation of EBITDA to Adjusted EBITDA:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
EBITDA | $20,618 | $36,557 | $21,966 | $61,047 | ||||||||||||
Loss on extinguishment of debt | — | 2,236 | — | 2,236 | ||||||||||||
Acquisition-related integration costs (a) | 452 | 1,517 | 988 | 2,230 | ||||||||||||
Stock-based compensation expense | 4,474 | 3,918 | 7,416 | 6,803 | ||||||||||||
Secondary stock offering costs (b) | — | 817 | — | 817 | ||||||||||||
Litigation settlements and other (c) | 3,247 | (281 | ) | 4,261 | 348 | |||||||||||
Merger costs (d) | 3,144 | — | 8,058 | — | ||||||||||||
Adjusted EBITDA | $31,935 | $44,764 | $42,689 | $73,481 | ||||||||||||
(a) | Represents one-time acquisition integration costs incurred in connection with the purchase of the Travelocity Partner Network assets in the first quarter 2014. |
(b) Represents charges related to secondary stock offering by an affiliate of Travelport Limited.
(c) Represents charges related to certain legal proceedings.
(d) Represents professional fees related to the announced transaction with Expedia, Inc.
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Gross Bookings and Net Revenue, at Constant Currency
The company's reporting currency is the U.S. dollar. As a result, reported financial results are impacted by the strength or weakness of the U.S. dollar relative to the currencies of the international markets in which the company operates, particularly the pound sterling, Euro, Swiss franc and Australian dollar. Management evaluates the company's operating performance with and without the impact of changes in foreign exchange rates because it believes excluding the impact of foreign exchange rates provides a more comparable view of the company's operating performance across periods. Management believes that when viewed with GAAP results and the accompanying reconciliation, management and other external users are better able to gain an understanding of the factors and trends affecting operating performance. The following table adjusts gross bookings and net revenue for foreign currency impacts across the relevant periods:
Three Months Ended June 30, | |||||||||
(in thousands) | Domestic | International | Total Orbitz Worldwide | ||||||
Gross Bookings | |||||||||
Q2, 2015 Reported Gross Bookings | $2,624,196 | $464,898 | $3,089,094 | ||||||
Q2, 2014 Reported Gross Bookings | $2,729,525 | $628,173 | $3,357,698 | ||||||
Impact of Foreign Exchange Rates | — | (84,301) | (84,301) | ||||||
Q2, 2014 Gross Bookings at Constant Currency | $2,729,525 | $543,872 | $3,273,397 | ||||||
Reported Gross Bookings Growth | (4) | % | (26) | % | (8) | % | |||
Gross Bookings Growth at Constant Currency | (4) | % | (15) | % | (6) | % | |||
Net Revenue | |||||||||
Q2, 2015 Reported Net Revenue | $186,867 | $52,730 | $239,597 | ||||||
Q2, 2014 Reported Net Revenue | $182,299 | $65,754 | $248,053 | ||||||
Impact of Foreign Exchange Rates | — | (8,569) | (8,569) | ||||||
Q2, 2014 Net Revenue at Constant Currency | $182,299 | $57,185 | $239,484 | ||||||
Reported Net Revenue Growth | 3 | % | (20) | % | (3) | % | |||
Net Revenue Growth at Constant Currency | 3 | % | (8) | % | — | % | |||
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Six Months Ended June 30, | |||||||||
(in thousands) | Domestic | International | Total Orbitz Worldwide | ||||||
Gross Bookings | |||||||||
Q2, 2015 Reported Gross Bookings | $5,275,271 | $1,031,566 | $6,306,837 | ||||||
Q2, 2014 Reported Gross Bookings | $5,207,335 | $1,332,877 | $6,540,212 | ||||||
Impact of Foreign Exchange Rates | — | (171,476) | (171,476) | ||||||
Q2, 2014 Gross Bookings at Constant Currency | $5,207,335 | $1,161,401 | $6,368,736 | ||||||
Reported Gross Bookings Growth | 1 | % | (23) | % | (4) | % | |||
Gross Bookings Growth at Constant Currency | 1 | % | (11) | % | (1) | % | |||
Net Revenue | |||||||||
Q2, 2015 Reported Net Revenue | $359,277 | $100,525 | $459,802 | ||||||
Q2, 2014 Reported Net Revenue | $336,908 | $121,400 | $458,308 | ||||||
Impact of Foreign Exchange Rates | — | (15,398) | (15,398) | ||||||
Q2, 2014 Net Revenue at Constant Currency | $336,908 | $106,002 | $442,910 | ||||||
Reported Net Revenue Growth | 7 | % | (17) | % | — | % | |||
Net Revenue Growth at Constant Currency | 7 | % | (5) | % | 4 | % | |||
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Appendix B: Trended Operating Metrics
2013 | 2014 | 2015 | |||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | ||||||||||||
Gross Bookings (in thousands) | |||||||||||||||||||||
Domestic | $2,424,956 | $2,479,941 | $2,210,466 | $1,970,655 | $2,477,810 | $2,729,525 | $2,537,514 | $2,249,140 | $2,651,075 | $2,624,196 | |||||||||||
International | 677,625 | 604,947 | 560,927 | 508,553 | 704,704 | 628,173 | 612,280 | 488,641 | 566,668 | 464,898 | |||||||||||
Total | $3,102,581 | $3,084,888 | $2,771,393 | $2,479,208 | $3,182,514 | $3,357,698 | $3,149,794 | $2,737,781 | $3,217,743 | $3,089,094 | |||||||||||
Standalone Air | $2,027,713 | $2,077,471 | $1,790,232 | $1,621,560 | $1,953,324 | $2,164,643 | $1,969,569 | $1,781,245 | $1,944,940 | $1,903,325 | |||||||||||
Non-air | 1,074,868 | 1,007,417 | 981,161 | 857,648 | 1,229,190 | 1,193,055 | 1,180,225 | 956,536 | 1,272,803 | 1,185,769 | |||||||||||
Total | $3,102,581 | $3,084,888 | $2,771,393 | $2,479,208 | $3,182,514 | $3,357,698 | $3,149,794 | $2,737,781 | $3,217,743 | $3,089,094 | |||||||||||
Year-over-Year Gross Bookings Growth | |||||||||||||||||||||
Domestic | (3 | )% | 3 | % | 6 | % | — | % | 2 | % | 10 | % | 15 | % | 14 | % | 7 | % | (4 | )% | |
International | 4 | % | 6 | % | — | % | 1 | % | 4 | % | 4 | % | 9 | % | (4 | )% | (20 | )% | (26 | )% | |
Total | (1 | )% | 4 | % | 5 | % | — | % | 3 | % | 9 | % | 14 | % | 10 | % | 1 | % | (8 | )% | |
Standalone Air | (8 | )% | (4 | )% | (2 | )% | (6 | )% | (4 | )% | 4 | % | 10 | % | 10 | % | — | % | (12 | )% | |
Non-air | 14 | % | 24 | % | 18 | % | 14 | % | 14 | % | 18 | % | 20 | % | 12 | % | 4 | % | (1 | )% | |
Total | (1 | )% | 4 | % | 5 | % | — | % | 3 | % | 9 | % | 14 | % | 10 | % | 1 | % | (8 | )% | |
At Constant Currency | |||||||||||||||||||||
Domestic | (3 | )% | 3 | % | 6 | % | — | % | 2 | % | 10 | % | 15 | % | 14 | % | 7 | % | (4 | )% | |
International | 4 | % | 6 | % | (1 | )% | (1 | )% | 2 | % | (1 | )% | 7 | % | 3 | % | (8 | )% | (15 | )% | |
Total | (1 | )% | 4 | % | 4 | % | — | % | 2 | % | 8 | % | 13 | % | 12 | % | 4 | % | (6 | )% | |
Standalone Air | (8 | )% | (4 | )% | (2 | )% | (6 | )% | (4 | )% | 3 | % | 10 | % | 11 | % | 2 | % | (10 | )% | |
Non-air | 14 | % | 24 | % | 19 | % | 14 | % | 14 | % | 18 | % | 20 | % | 13 | % | 7 | % | 3 | % | |
Total | (1 | )% | 4 | % | 4 | % | — | % | 2 | % | 8 | % | 13 | % | 12 | % | 4 | % | (6 | )% | |
Net Revenue (in thousands) | |||||||||||||||||||||
Domestic | $150,206 | $164,565 | $159,718 | $142,634 | $154,609 | $182,299 | $187,480 | $166,340 | $172,410 | $186,867 | |||||||||||
International | 52,654 | 61,233 | 61,201 | 54,792 | 55,646 | 65,754 | 65,655 | 54,224 | 47,795 | 52,730 | |||||||||||
Total | $202,860 | $225,798 | $220,919 | $197,426 | $210,255 | $248,053 | $253,135 | $220,564 | $220,205 | $239,597 | |||||||||||
Standalone Air | $69,251 | $67,464 | $59,455 | $53,528 | $70,228 | $71,004 | $62,765 | $53,157 | $63,202 | $61,084 | |||||||||||
Non-air transactional | 120,304 | 142,719 | 147,536 | 127,221 | 125,366 | 161,784 | 175,838 | 148,492 | 141,634 | 163,920 | |||||||||||
Non-transactional | 13,305 | 15,615 | 13,928 | 16,677 | 14,661 | 15,265 | 14,532 | 18,915 | 15,369 | 14,593 | |||||||||||
Total | $202,860 | $225,798 | $220,919 | $197,426 | $210,255 | $248,053 | $253,135 | $220,564 | $220,205 | $239,597 | |||||||||||
International as a % of Total Net Revenue | 26 | % | 27 | % | 28 | % | 28 | % | 26 | % | 27 | % | 26 | % | 25 | % | 22 | % | 22 | % | |
Year-over-Year Net Revenue Growth | |||||||||||||||||||||
Domestic | 9 | % | 13 | % | 12 | % | 4 | % | 3 | % | 11 | % | 17 | % | 17 | % | 12 | % | 3 | % | |
International | — | % | 10 | % | 9 | % | 5 | % | 6 | % | 7 | % | 7 | % | (1 | )% | (14 | )% | (20 | )% | |
Total | 7 | % | 12 | % | 11 | % | 4 | % | 4 | % | 10 | % | 15 | % | 12 | % | 5 | % | (3 | )% | |
Standalone Air | (4 | )% | — | % | (4 | )% | (11 | )% | 1 | % | 5 | % | 6 | % | (1 | )% | (10 | )% | (14 | )% | |
Non-air transactional | 14 | % | 21 | % | 21 | % | 13 | % | 4 | % | 13 | % | 19 | % | 17 | % | 13 | % | 1 | % | |
Non-transactional | 14 | % | 1 | % | (4 | )% | (3 | )% | 10 | % | (2 | )% | 4 | % | 13 | % | 5 | % | (4 | )% | |
Total | 7 | % | 12 | % | 11 | % | 4 | % | 4 | % | 10 | % | 15 | % | 12 | % | 5 | % | (3 | )% | |
At Constant Currency | |||||||||||||||||||||
Domestic | 9 | % | 13 | % | 12 | % | 4 | % | 3 | % | 11 | % | 17 | % | 17 | % | 12 | % | 3 | % | |
International | 1 | % | 10 | % | 9 | % | 4 | % | 5 | % | 3 | % | 5 | % | 6 | % | (2 | )% | (8 | )% | |
Total | 7 | % | 12 | % | 11 | % | 4 | % | 3 | % | 9 | % | 14 | % | 14 | % | 8 | % | — | % | |
Standalone Air | (4 | )% | — | % | (6 | )% | (12 | )% | — | % | 3 | % | 5 | % | 1 | % | (6 | )% | (11 | )% | |
Non-air transactional | 14 | % | 21 | % | 22 | % | 14 | % | 5 | % | 13 | % | 19 | % | 19 | % | 16 | % | 5 | % | |
Non-transactional | 14 | % | 2 | % | (3 | )% | (3 | )% | 10 | % | (3 | )% | 4 | % | 15 | % | 7 | % | (3 | )% | |
Total | 7 | % | 12 | % | 11 | % | 4 | % | 3 | % | 9 | % | 14 | % | 14 | % | 8 | % | — | % | |
Orbitz Worldwide Transaction Growth | (4 | )% | 1 | % | (1 | )% | (2 | )% | (1 | )% | 7 | % | 14 | % | 14 | % | 8 | % | — | % | |
Orbitz Worldwide Hotel Room Night Growth | 14 | % | 20 | % | 22 | % | 15 | % | 12 | % | 20 | % | 19 | % | 18 | % | 13 | % | 3 | % | |
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