Exhibit 99.1
Orbitz Worldwide, Inc. Reports Third Quarter 2014 Results
Chicago, November 6, 2014 - Orbitz Worldwide, Inc. (NYSE: OWW) today announced results for the third quarter and nine months ended September 30, 2014.
| • | Room nights increased 19 percent year-over-year in the third quarter 2014. |
| • | Net revenue increased 15 percent year-over-year to $253.1 million in the third quarter 2014. |
| • | Net income was $9.0 million in the third quarter 2014. |
| • | Adjusted EBITDA was $46.8 million in the third quarter 2014. |
| (in thousands, except | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| per share data) | 2014 | 2013 | Change (a) | 2014 | 2013 | Change (a) | |||||||||||
| Hotel room night growth (b) | 19 | % | 22 | % | 17 | % | 19 | % | |||||||||
| Gross bookings | $3,149,794 | $2,771,393 | 14 | % | $9,690,006 | $8,958,862 | 8 | % | |||||||||
| Net revenue | $253,135 | $220,919 | 15 | % | $711,443 | $649,577 | 10 | % | |||||||||
| Net revenue margin (c) | 8.0 | % | 8.0 | % | 0.0 ppt | 7.3 | % | 7.3 % | 0.0 ppt | ||||||||
| Net income | $9,037 | $12,982 | (30) | % | $9,984 | $159,743 | (94) | % | |||||||||
| Basic EPS | $0.08 | $0.12 | (33) | % | $0.09 | $1.49 | (94) | % | |||||||||
| Diluted EPS | $0.08 | $0.11 | (27) | % | $0.09 | $1.41 | (94) | % | |||||||||
| Operating cash flow | ($14,310 | ) | ($28,011 | ) | 49 | % | $191,814 | $178,126 | 8 | % | |||||||
| Capital spending | $16,520 | $11,593 | 42 | % | $37,688 | $29,550 | 28 | % | |||||||||
| EBITDA (d) | $40,288 | $40,579 | (1) | % | $101,335 | $70,685 | 43 | % | |||||||||
| Adjustments | $6,499 | $4,480 | 45 | % | $18,933 | $38,902 | (51) | % | |||||||||
| Adjusted EBITDA (d) | $46,787 | $45,059 | 4 | % | $120,268 | $109,587 | 10 | % | |||||||||
** 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 measure are contained in Appendix A. |
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Third Quarter 2014 Financial Results
Gross Bookings and Net Revenue
Gross bookings increased 14 percent year-over-year to $3.1 billion in the third quarter 2014. This increase was driven by higher hotel, car, air and vacation package transaction volume and higher average booking values per hotel, vacation package and air transaction.
Net revenue increased 15 percent year-over-year to $253.1 million in the third quarter 2014. This increase was driven by higher hotel, air, vacation package and car transaction volume and higher net revenue per hotel transaction partially offset by lower net revenue per air and vacation package transaction. The acquisition of certain assets and contracts from the Travelocity Partner Network ("TPN") on February 28, 2014, contributed approximately 8 percentage points to year-over-year net revenue growth for the third quarter 2014.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||
| (in thousands) | 2014 | 2013 | Change | 2014 | 2013 | Change | |||
| Net Revenue | |||||||||
| Standalone Hotel | $104,919 | $83,349 | 26 | % | $262,410 | $224,461 | 17 | % | |
| Standalone Air | 62,765 | 59,455 | 6 | % | 203,997 | 196,170 | 4 | % | |
| Vacation Package | 39,361 | 37,344 | 5 | % | 115,626 | 107,684 | 7 | % | |
| Advertising and Media | 14,461 | 13,840 | 4 | % | 44,228 | 42,426 | 4 | % | |
| Other | 31,629 | 26,931 | 17 | % | 85,182 | 78,836 | 8 | % | |
| Total Net Revenue | $253,135 | $220,919 | 15 | % | $711,443 | $649,577 | 10 | % | |
| Domestic | $187,480 | $159,718 | 17 | % | $524,388 | $474,489 | 11 | % | |
| International | 65,655 | 61,201 | 7 | % | 187,055 | 175,088 | 7 | % | |
| Total Net Revenue | $253,135 | $220,919 | 15 | % | $711,443 | $649,577 | 10 | % | |
| • | Standalone hotel net revenue was $104.9 million in the third quarter 2014, up 26 percent year-over-year. This increase was due to higher transaction volume and higher net revenue per transaction. The TPN acquisition contributed approximately 11 percentage points to year-over-year standalone hotel net revenue growth for the third quarter 2014. Standalone hotel net revenue represented 41 percent of total third quarter net revenue, up from 38 percent in the third quarter 2013. |
| • | Standalone air net revenue was $62.8 million in the third quarter 2014, up 6 percent year-over-year. This increase was due to higher transaction volume offset by lower net revenue per transaction. The TPN acquisition contributed approximately 11 percentage points to year-over-year standalone air net revenue growth for the third quarter 2014. Standalone air net revenue represented 25 percent of total third quarter net revenue, down from 27 percent in the third quarter 2013. |
| • | Vacation package net revenue was $39.4 million in the third quarter 2014, up 5 percent year-over-year. This increase was driven by higher transaction volume offset by lower net revenue per transaction. Vacation package net revenue represented 16 percent of total third quarter net revenue, down from 17 percent in the third quarter 2013. |
| • | Advertising and media net revenue was $14.5 million in the third quarter 2014, up 4 percent year-over-year. Advertising and media net revenue represented 6 percent of total third quarter net revenue in both 2014 and 2013. |
| • | Other net revenue was $31.6 million in the third quarter 2014, up 17 % year-over-year. This increase was primarily due to higher car revenue, which was up 25% year-over-year. Other net revenue represented represented 12 percent of total third quarter net revenue in both 2014 and 2013. |
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, fraud and other charge-backs, and connectivity and other processing costs.
| Three Months Ended September 30, | $ | % | |||||||||||
| 2014 | 2013 | Change | Change | ||||||||||
| (in thousands) | |||||||||||||
| Customer service costs | $20,634 | $14,713 | $5,921 | 40 | % | ||||||||
| Credit card processing fees | 18,266 | 15,418 | 2,848 | 18 | % | ||||||||
| Other | 10,730 | 9,020 | 1,710 | 19 | % | ||||||||
| Total cost of revenue | $49,630 | $39,151 | $10,479 | 27 | % | ||||||||
| % of net revenue | 19.6 | % | 17.7 | % | |||||||||
Cost of revenue as a percent of net revenue for the third quarter 2014 increased 188 basis points. Excluding the acquisition of TPN, cost of revenue as a percent of net revenue was down 29 basis points year-over-year. This leverage was primarily driven by efficiencies at the company's customer service call centers.
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 administrative costs.
| Three Months Ended September 30, | $ | % | |||||||||||
| 2014 | 2013 | Change | Change | ||||||||||
| (in thousands) | |||||||||||||
| Wages and benefits | $42,125 | $40,453 | $1,672 | 4 | % | ||||||||
| Contract labor | 4,976 | 5,119 | (143 | ) | (3 | )% | |||||||
Network communications, systems maintenance and equipment | 7,477 | 6,895 | 582 | 8 | % | ||||||||
| Other | 16,232 | 15,144 | 1,088 | 7 | % | ||||||||
| Total SG&A | $70,810 | $67,611 | $3,199 | 5 | % | ||||||||
| % of net revenue | 28.0 | % | 30.6 | % | |||||||||
SG&A expense as a percent of net revenue for the third quarter 2014 decreased 263 basis points, due to a larger percentage of development costs that were capitalizeable in the quarter, lower legal fees and continued focus on actively managing the cost structure.
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 September 30, | $ | % | |||||||||
| 2014 | 2013 | Change | Change | ||||||||
| (in thousands) | |||||||||||
| Marketing expense | $92,406 | $73,511 | $18,895 | 26 | % | ||||||
| % of net revenue | 36.5 | % | 33.3 | % | |||||||
Marketing expense as a percent of net revenue for the third quarter 2014 increased 323 basis points due to increased marketing spend associated with the launch of the ebookers Bonus+ loyalty program, growth in the private label business and investment across our consumer businesses.
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Interest Expense
Net interest expense decreased $4.0 million in the third quarter 2014 compared with the third quarter 2013. This was due to a combination of a lower weighted average interest rate on the company’s debt, lower letter of credit fees and a gain on the company's interest rate swaps in the current period compared with a loss in the prior year period. For the third quarter 2014, the weighted average interest rate of the company's debt was 97 basis points lower than the third quarter 2013, resulting in lower year-over-year interest expense of $1.1 million.
At September 30, 2014, the company was in compliance with all financial covenants in its credit agreement.
Cash Flow and Liquidity
Operating cash flow was $191.8 million for the nine months ended September 30, 2014, up 8 percent from the same period a year ago.
At September 30, 2014, available liquidity was $330 million, which was composed of cash and cash equivalents of $250 million and $80 million available on the revolving credit facility.
Operational Highlights
Consumer Brands
| • | In August 2014, ebookers launched its rewards program, Bonus+, which is available to consumers across ebookers’ 12 points of sale. The ebookers Bonus+ program gives travelers an opportunity to earn Bonus+ currency when booking hotels, flights and vacation packages on ebookers and then redeem them instantly on tens of thousands of hotels around the world, with no blackout dates and no minimum redemption hurdles. |
| • | During the third quarter 2014, 33 percent of standalone hotel bookings were made via mobile devices across the company's global consumer brand portfolio, up from 27 percent in the third quarter 2013. |
| • | In September 2014, Orbitz.com was named winner of the Outstanding Technology Development Award in the Illinois Technology Association’s 15th annual awards competition. The award recognized a company or organization that developed a technology tool, process or service that made a substantial improvement on business metrics and specifically recognized Orbitz.com for the integration of the Orbitz Rewards loyalty program into the Orbitz.com mobile app. |
Orbitz Partner Network
| • | In November 2014, Orbitz Partner Network signed an agreement with Bank of America that will enable Orbitz Partner Network to provide a variety of services to one of the largest banks in the world. As the cornerstone of the relationship, Orbitz Partner Network expects to power the travel rewards program of Bank of America with its proprietary technology to enable bank customers to use cash as well as their rewards points to make air, hotel and car bookings. Orbitz Partner Network expects to begin powering the Bank of America site in the first half of 2015. |
| • | In October 2014, Orbitz Partner Network signed a multi-year agreement with Hyatt Hotels to power dynamic packaging on the hotel brand's vacation package website, HyattTravel.com. Orbitz Worldwide will package Hyatt-branded hotels with air and car travel products and services that will be available to Hyatt customers through a customized site hosted on Orbitz Worldwide's private label platform. |
| • | In September 2014, Orbitz Partner Network launched an exclusive multi-year partnership with RIU Hotels & Resorts to power dynamic vacation package bookings on the hotel brand's website, riu.com, which offers vacation packages to RIU's properties in Mexico, Central America and the Caribbean. The partnership enables RIU to leverage Orbitz Partner Network's leading technology platform to provide vacation package capabilities on a highly customized private label site. |
Orbitz for Business
| • | Orbitz for Business entered into an agreement with Concur to enable OFB customers to directly connect with Concur's expense solution via Concur's Triplink platform. |
Orbitz Partner Services Group
| • | During the third quarter 2014, Orbitz Worldwide signed marketing and promotion agreements with a number of hotel operators including Dorchester Collection, HMH International, Jetwing Hotels, La Quinta Holdings and Les Hotels Nouvelle France Group. |
| • | During the third quarter 2014, Orbitz Worldwide signed marketing and promotion agreements with a number of airlines including American Airlines, Egypt Air, Peruvian Airlines, Precision Air and TAME Ecuador. |
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| • | During the third quarter 2014, Orbitz Worldwide signed partner marketing contracts with a number of destination marketing organizations including the European Travel Commission, Greater Fort Lauderdale CVB, Illinois Tourism, Montana Tourism, New Orleans CVB, Ponte Vedra and The Beaches CVB, Savannah Area CVB, Tennessee Department of Tourist Development, Tourism Fiji and Tourism New Zealand. |
Outlook
For the full year 2014, the company expects:
| • | Net revenue growth between 9 and 10 percent year-over-year; and |
| • | Adjusted EBITDA growth between 8 and 10 percent year-over-year. |
For the full year 2015, the company expects:
| • | Net revenue growth in the mid single digits year-over-year; and |
| • | Adjusted EBITDA growth in the mid to high single digits year-over-year. |
This outlook assumes foreign exchange rates as of October 31, 2014.
Quarterly Conference Call
Orbitz Worldwide will host a conference call to discuss its third quarter 2014 results at 10:00 a.m. ET (9:00 a.m. CT) on Thursday, November 6, 2014. A live webcast of the conference call can be accessed through the Orbitz Worldwide Investor Relations website at investors.orbitz.com. An archive of the webcast and a transcript will also be available on the website for at least 30 days.
About Orbitz Worldwide
Orbitz Worldwide (NYSE:OWW) is a leading 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 (orbitz.com/OPN) delivers private label travel technology solutions to a broad range of partners including some of the world`s largest airlines 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, the company's ability to effectively compete in the travel industry; trends, declines, or disruptions affecting the travel industry or the level of travel activity, particularly air travel; the termination of any major supplier's participation on the company's websites; the company's ability to renegotiate supplier agreements on acceptable terms; change in airline distribution economics; the company's ability to maintain and protect its information technology and intellectual property; the outcome of pending litigation; system-related failures, interruptions, or security breaches; 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 November 6, 2014, and Orbitz Worldwide undertakes no obligation to publicly revise any forward-looking statement.
5
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 Brian Wolf
+1 312 894 6890 +1 312 260 8301
chris.chiames@orbitz.com owwIR@orbitz.com
6
Orbitz Worldwide, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share data)
| Three Months Ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Net revenue | $253,135 | $220,919 | $711,443 | $649,577 | ||||||||||||
| Cost and expenses: | ||||||||||||||||
| Cost of revenue | 49,630 | 39,151 | 140,013 | 119,733 | ||||||||||||
| Selling, general and administrative | 70,810 | 67,611 | 209,070 | 209,276 | ||||||||||||
| Marketing | 92,406 | 73,511 | 258,788 | 229,147 | ||||||||||||
| Depreciation and amortization | 14,664 | 13,118 | 43,544 | 41,499 | ||||||||||||
| Impairment of property and equipment | — | 59 | — | 2,636 | ||||||||||||
| Total operating expenses | 227,510 | 193,450 | 651,415 | 602,291 | ||||||||||||
| Operating income | 25,625 | 27,469 | 60,028 | 47,286 | ||||||||||||
| Other expense: | ||||||||||||||||
| Net interest expense | (7,960 | ) | (11,961 | ) | (26,132 | ) | (34,224 | ) | ||||||||
| Other expense | (1 | ) | (8 | ) | (2,237 | ) | (18,100 | ) | ||||||||
| Total other expense | (7,961 | ) | (11,969 | ) | (28,369 | ) | (52,324 | ) | ||||||||
| Income/(loss) before income taxes | 17,664 | 15,500 | 31,659 | (5,038 | ) | |||||||||||
| Provision/(benefit) for income taxes | 8,627 | 2,518 | 2,518 | 21,675 | (164,781 | ) | ||||||||||
| Net income | $9,037 | $12,982 | $9,984 | $159,743 | ||||||||||||
| Net income per share - basic: | ||||||||||||||||
| Net income per share | $0.08 | $0.12 | $0.09 | $1.49 | ||||||||||||
| Weighted-average shares outstanding | 111,034,925 | 108,993,525 | 110,287,532 | 107,516,142 | ||||||||||||
| Net income per share - diluted: | ||||||||||||||||
| Net income per share | $0.08 | $0.11 | $0.09 | $1.41 | ||||||||||||
| Weighted-average shares outstanding | 115,109,023 | 115,657,206 | 114,380,784 | 113,343,038 | ||||||||||||
7
Orbitz Worldwide, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share data)
| September 30, 2014 | December 31, 2013 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $250,115 | $117,385 | |||||
| Accounts receivable (net of allowance for doubtful accounts of $1,522 and $1,186, respectively) | 124,256 | 82,599 | |||||
| Prepaid expenses | 12,524 | 17,113 | |||||
| Due from Travelport, net | 16,509 | 12,343 | |||||
| Other current assets | 20,782 | 13,862 | |||||
| Total current assets | 424,186 | 243,302 | |||||
| Property and equipment (net of accumulated depreciation of $374,003 and $334,720, respectively) | 114,807 | 116,145 | |||||
| Goodwill | 345,388 | 345,388 | |||||
| Trademarks and trade names | 90,240 | 90,398 | |||||
| Other intangible assets, net | 6,289 | 89 | |||||
| Deferred income taxes, non-current | 140,858 | 160,637 | |||||
| Restricted cash | 103,227 | 118,761 | |||||
| Other non-current assets | 39,737 | 32,966 | |||||
| Total Assets | $1,264,732 | $1,107,686 | |||||
| Liabilities and Shareholders’ Equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $26,552 | $16,432 | |||||
| Accrued merchant payable | 432,023 | 337,308 | |||||
| Accrued expenses | 175,545 | 145,778 | |||||
| Deferred income | 52,171 | 40,616 | |||||
| Term loan, current | 32,225 | 13,500 | |||||
| Other current liabilities | 2,408 | 4,324 | |||||
| Total current liabilities | 720,924 | 557,958 | |||||
| Term loan, non-current | 416,650 | 429,750 | |||||
| Tax sharing liability | 57,414 | 61,518 | |||||
| Other non-current liabilities | 14,999 | 16,738 | |||||
| Total Liabilities | 1,209,987 | 1,065,964 | |||||
| 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, 110,458,498 and 108,397,627 shares issued, respectively | 1,104 | 1,084 | |||||
| Treasury stock, at cost, 25,237 shares held | (52 | ) | (52 | ) | |||
| Additional paid-in capital | 1,057,938 | 1,055,213 | |||||
| Accumulated deficit | (1,007,555 | ) | (1,017,539 | ) | |||
| Accumulated other comprehensive income | 3,310 | 3,016 | |||||
| Total Shareholders’ Equity | 54,745 | 41,722 | |||||
| Total Liabilities and Shareholders’ Equity | $1,264,732 | $1,107,686 | |||||
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Orbitz Worldwide, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
| Nine Months Ended September 30, | |||||||
| 2014 | 2013 | ||||||
| Operating activities: | |||||||
| Net income | $9,984 | $159,743 | |||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 43,544 | 41,499 | |||||
| Impairment of property and equipment | — | 2,636 | |||||
| Amortization of unfavorable contract liability | (312 | ) | (2,685 | ) | |||
| Non-cash net interest expense | 8,199 | 11,225 | |||||
| Deferred income taxes | 19,610 | (165,403 | ) | ||||
| Stock compensation | 9,503 | 10,059 | |||||
| Changes in assets and liabilities: | |||||||
| Accounts receivable | (43,553 | ) | (12,806 | ) | |||
| Due from Travelport, net | (4,190 | ) | (9,744 | ) | |||
| Accounts payable, accrued expenses and other current liabilities | 38,058 | 23,499 | |||||
| Accrued merchant payable | 98,610 | 97,152 | |||||
| Deferred income | 11,892 | 11,930 | |||||
| Other | 469 | 11,021 | |||||
| Net cash provided by operating activities | 191,814 | 178,126 | |||||
| Investing activities: | |||||||
| Property and equipment additions | (37,688 | ) | (29,550 | ) | |||
| Acquisitions, net of cash acquired | (10,000 | ) | — | ||||
| Changes in restricted cash | 13,285 | (91,198 | ) | ||||
| Net cash used in investing activities | (34,403 | ) | (120,748 | ) | |||
| Financing activities: | |||||||
| Payments on and retirement of term loans | (444,375 | ) | (893,405 | ) | |||
| Issuance of long-term debt, net of issuance costs | 443,256 | 877,718 | |||||
Employee tax withholdings related to net share settlements of equity-based awards | (7,099 | ) | (6,282 | ) | |||
| Proceeds from exercise of employee stock options | 342 | 6,991 | |||||
| Payments on tax sharing liability | (10,032 | ) | (13,791 | ) | |||
| Net cash used in financing activities | (17,908 | ) | (28,769 | ) | |||
| Effects of changes in exchange rates on cash and cash equivalents | (6,773 | ) | 1,488 | ||||
| Net increase in cash and cash equivalents | 132,730 | 30,097 | |||||
| Cash and cash equivalents at beginning of period | 117,385 | 130,262 | |||||
| Cash and cash equivalents at end of period | $250,115 | $160,359 | |||||
| Supplemental disclosure of cash flow information: | |||||||
| Income tax payments, net | $2,764 | $1,142 | |||||
| Cash interest payments | $18,202 | $23,410 | |||||
| Non-cash investing activity: | |||||||
| Capital expenditures incurred not yet paid | $3,750 | $4,380 | |||||
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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 nine months ended September 30, 2014 and 2013, 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.
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The following table provides a reconciliation of net income to EBITDA:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||
| Net income | $9,037 | $12,982 | $9,984 | $159,743 | ||||||||||||
| Net interest expense | 7,960 | 11,961 | 26,132 | 34,224 | ||||||||||||
| Provision/(benefit) for income taxes | 8,627 | 2,518 | 21,675 | (164,781 | ) | |||||||||||
| Depreciation and amortization | 14,664 | 13,118 | 43,544 | 41,499 | ||||||||||||
| EBITDA | $40,288 | $40,579 | $101,335 | $70,685 | ||||||||||||
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 September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||
| EBITDA | $40,288 | $40,579 | $101,335 | $70,685 | ||||||||||||
| Impairment of property and equipment (a) | — | 59 | — | 2,636 | ||||||||||||
| Loss on extinguishment of debt | — | — | 2,236 | 18,089 | ||||||||||||
| Stock-based compensation expense | 2,700 | 3,185 | 9,503 | 10,060 | ||||||||||||
| Restructuring (b) | — | (68 | ) | — | 3,681 | |||||||||||
| Acquisition-related integration costs (c) | 512 | — | 2,742 | — | ||||||||||||
| Secondary stock offering costs (d) | 250 | — | 1,067 | — | ||||||||||||
| Tax sharing liability rate adjustment (e) | 2,542 | — | 2,542 | — | ||||||||||||
| Litigation settlements and other (f) | 495 | 1,304 | 843 | 4,436 | ||||||||||||
| Adjusted EBITDA | $46,787 | $45,059 | $120,268 | $109,587 | ||||||||||||
| (a) | Represents impairment of property and equipment in connection with the company's decision to exit certain businesses in 2013. |
| (b) | Represents one-time costs associated with targeted cost actions the company undertook in the first quarter 2013. |
| (c) | Represents one-time acquisition integration costs incurred in connection with the purchase of the Travelocity Partner Network assets in the first quarter 2014. |
| (d) | Represents charges related to secondary stock offering by an affiliate of Travelport Limited. |
| (e) | Represents a rate adjustment to the tax sharing liability with the company's founding airlines. |
(f) Represents charges related to certain legal proceedings and other non-recurring professional fees.
11
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 September 30, | |||||||||
| (in thousands) | Domestic | International | Total Orbitz Worldwide | ||||||
| Gross Bookings | |||||||||
| Q3, 2014 Reported Gross Bookings | $2,537,514 | $612,280 | $3,149,794 | ||||||
| Q3, 2013 Reported Gross Bookings | $2,210,466 | $560,927 | $2,771,393 | ||||||
| Impact of Foreign Exchange Rates | 11,522 | 11,522 | |||||||
| Q3, 2013 Gross Bookings at Constant Currency | $2,210,466 | $572,449 | $2,782,915 | ||||||
| Reported Gross Bookings Growth | 15 | % | 9 | % | 14 | % | |||
| Gross Bookings Growth at Constant Currency | 15 | % | 7 | % | 13 | % | |||
| Net Revenue | |||||||||
| Q3, 2014 Reported Net Revenue | $187,480 | $65,655 | $253,135 | ||||||
| Q3, 2013 Reported Net Revenue | $159,718 | $61,201 | $220,919 | ||||||
| Impact of Foreign Exchange Rates | — | 1,120 | 1,120 | ||||||
| Q3, 2013 Net Revenue at Constant Currency | $159,718 | $62,321 | $222,039 | ||||||
| Reported Net Revenue Growth | 17 | % | 7 | % | 15 | % | |||
| Net Revenue Growth at Constant Currency | 17 | % | 5 | % | 14 | % | |||
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| Nine Months Ended September 30, | |||||||||
| (in thousands) | Domestic | International | Total Orbitz Worldwide | ||||||
| Gross Bookings | |||||||||
| Q3, 2014 Reported Gross Bookings | $7,744,849 | $1,945,157 | $9,690,006 | ||||||
| Q3, 2013 Reported Gross Bookings | $7,115,362 | $1,843,500 | $8,958,862 | ||||||
| Impact of Foreign Exchange Rates | — | 56,757 | 56,757 | ||||||
| Q3, 2013 Gross Bookings at Constant Currency | $7,115,362 | $1,900,257 | $9,015,619 | ||||||
| Reported Gross Bookings Growth | 9 | % | 6 | % | 8 | % | |||
| Gross Bookings Growth at Constant Currency | 9 | % | 2 | % | 7 | % | |||
| Net Revenue | |||||||||
| Q3, 2014 Reported Net Revenue | $524,388 | $187,055 | $711,443 | ||||||
| Q3, 2013 Reported Net Revenue | $474,489 | $175,088 | $649,577 | ||||||
| Impact of Foreign Exchange Rates | — | 3,883 | 3,883 | ||||||
| Q3, 2013 Net Revenue at Constant Currency | $474,489 | $178,971 | $653,460 | ||||||
| Reported Net Revenue Growth | 11 | % | 7 | % | 10 | % | |||
| Net Revenue Growth at Constant Currency | 11 | % | 5 | % | 9 | % | |||
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Appendix B: Trended Operating Metrics
| 2012 | 2013 | 2014 | |||||||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | |||||||||||||
Gross Bookings (in thousands) | |||||||||||||||||||||||
| Domestic | $2,492,564 | $2,399,412 | $2,087,798 | $1,968,503 | $2,424,956 | $2,479,941 | $2,210,466 | $1,970,655 | $2,477,810 | $2,729,525 | $2,537,514 | ||||||||||||
| International | 650,467 | 570,777 | 562,698 | 505,259 | 677,625 | 604,947 | 560,927 | 508,553 | 704,704 | 628,173 | 612,280 | ||||||||||||
| Total | $3,143,031 | $2,970,189 | $2,650,496 | $2,473,762 | $3,102,581 | $3,084,888 | $2,771,393 | $2,479,208 | $3,182,514 | $3,357,698 | $3,149,794 | ||||||||||||
| Standalone Air | $2,202,538 | $2,155,649 | $1,821,937 | $1,719,165 | $2,027,713 | $2,077,471 | $1,790,232 | $1,621,560 | $1,953,324 | $2,164,643 | $1,969,569 | ||||||||||||
| Non-air | 940,493 | 814,540 | 828,559 | 754,597 | 1,074,868 | 1,007,417 | 981,161 | 857,648 | 1,229,190 | 1,193,055 | 1,180,225 | ||||||||||||
| Total | $3,143,031 | $2,970,189 | $2,650,496 | $2,473,762 | $3,102,581 | $3,084,888 | $2,771,393 | $2,479,208 | $3,182,514 | $3,357,698 | $3,149,794 | ||||||||||||
Year-over-Year Gross Bookings Growth | |||||||||||||||||||||||
| Domestic | 5 | % | (1 | )% | (7 | )% | (4 | )% | (3 | )% | 3 | % | 6 | % | — | % | 2 | % | 10 | % | 15 | % | |
| International | 9 | % | (2 | )% | (6 | )% | 9 | % | 4 | % | 6 | % | — | % | 1 | % | 4 | % | 4 | % | 9 | % | |
| Total | 6 | % | (1 | )% | (7 | )% | (2 | )% | (1 | )% | 4 | % | 5 | % | — | % | 3 | % | 9 | % | 14 | % | |
| Standalone Air | 4 | % | (2 | )% | (10 | )% | (7 | )% | (8 | )% | (4 | )% | (2 | )% | (6 | )% | (4 | )% | 4 | % | 10 | % | |
| Non-air | 10 | % | 2 | % | 1 | % | 13 | % | 14 | % | 24 | % | 18 | % | 14 | % | 14 | % | 18 | % | 20 | % | |
| Total | 6 | % | (1 | )% | (7 | )% | (2 | )% | (1 | )% | 4 | % | 5 | % | — | % | 3 | % | 9 | % | 14 | % | |
| At Constant Currency | |||||||||||||||||||||||
| Domestic | 5 | % | (1 | )% | (7 | )% | (4 | )% | (3 | )% | 3 | % | 6 | % | — | % | 2 | % | 10 | % | 15 | % | |
| International | 10 | % | 6 | % | 2 | % | 11 | % | 4 | % | 6 | % | (1 | )% | (1 | )% | 2 | % | (1 | )% | 7 | % | |
| Total | 6 | % | 1 | % | (5 | )% | (2 | )% | (1 | )% | 4 | % | 4 | % | — | % | 2 | % | 8 | % | 13 | % | |
| Standalone Air | 4 | % | (1 | )% | (9 | )% | (7 | )% | (8 | )% | (4 | )% | (2 | )% | (6 | )% | (4 | )% | 3 | % | 10 | % | |
| Non-air | 10 | % | 4 | % | 3 | % | 13 | % | 14 | % | 24 | % | 19 | % | 14 | % | 14 | % | 18 | % | 20 | % | |
| Total | 6 | % | 1 | % | (5 | )% | (2 | )% | (1 | )% | 4 | % | 4 | % | — | % | 2 | % | 8 | % | 13 | % | |
Net Revenue (in thousands) | |||||||||||||||||||||||
| Domestic | $137,343 | $145,073 | $142,297 | $137,378 | $150,206 | $164,565 | $159,718 | $142,634 | $154,609 | $182,299 | $187,480 | ||||||||||||
| International | 52,436 | 55,904 | 56,006 | 52,359 | 52,654 | 61,233 | 61,201 | 54,792 | 55,646 | 65,754 | 65,655 | ||||||||||||
| Total | $189,779 | $200,977 | $198,303 | $189,737 | $202,860 | $225,798 | $220,919 | $197,426 | $210,255 | $248,053 | $253,135 | ||||||||||||
| Standalone Air | $72,244 | $67,313 | $61,917 | $60,064 | $69,251 | $67,464 | $59,455 | $53,528 | $70,228 | $71,004 | $62,765 | ||||||||||||
| Non-air transactional | 105,872 | 118,239 | 121,900 | 112,540 | 120,304 | 142,719 | 147,536 | 127,221 | 125,366 | 161,784 | 175,838 | ||||||||||||
| Non-transactional | 11,663 | 15,425 | 14,486 | 17,133 | 13,305 | 15,615 | 13,928 | 16,677 | 14,661 | 15,265 | 14,532 | ||||||||||||
| Total | $189,779 | $200,977 | $198,303 | $189,737 | $202,860 | $225,798 | $220,919 | $197,426 | $210,255 | $248,053 | $253,135 | ||||||||||||
International as a % of Total Net Revenue | 28 | % | 28 | % | 28 | % | 28 | % | 26 | % | 27 | % | 28 | % | 28 | % | 26 | % | 27 | % | 26 | % | |
| Year-over-Year Net Revenue Growth | |||||||||||||||||||||||
| Domestic | 2 | % | 2 | % | 0 | % | 7 | % | 9 | % | 13 | % | 12 | % | 4 | % | 3 | % | 11 | % | 17 | % | |
| International | 4 | % | (7 | )% | (8 | )% | 8 | % | 0 | % | 10 | % | 9 | % | 5 | % | 6 | % | 7 | % | 7 | % | |
| Total | 3 | % | 0 | % | (2 | )% | 7 | % | 7 | % | 12 | % | 11 | % | 4 | % | 4 | % | 10 | % | 15 | % | |
| Standalone Air | 0 | % | (3 | )% | (3 | )% | 1 | % | (4 | )% | — | % | (4 | )% | (11 | )% | 1 | % | 5 | % | 6 | % | |
| Non-air transactional | 7 | % | 0 | % | (2 | )% | 9 | % | 14 | % | 21 | % | 21 | % | 13 | % | 4 | % | 13 | % | 19 | % | |
| Non-transactional | (16 | )% | 6 | % | (1 | )% | 21 | % | 14 | % | 1 | % | (4 | )% | (3 | )% | 10 | % | (2 | )% | 4 | % | |
| Total | 3 | % | 0 | % | (2 | )% | 7 | % | 7 | % | 12 | % | 11 | % | 4 | % | 4 | % | 10 | % | 15 | % | |
| At Constant Currency | |||||||||||||||||||||||
| Domestic | 2 | % | 2 | % | 0 | % | 7 | % | 9 | % | 13 | % | 12 | % | 4 | % | 3 | % | 11 | % | 17 | % | |
| International | 4 | % | 1 | % | 0 | % | 9 | % | 1 | % | 10 | % | 9 | % | 4 | % | 5 | % | 3 | % | 5 | % | |
| Total | 3 | % | 2 | % | 0 | % | 7 | % | 7 | % | 12 | % | 11 | % | 4 | % | 3 | % | 9 | % | 14 | % | |
| Standalone Air | 0 | % | (1 | )% | 0 | % | 2 | % | (4 | )% | — | % | (6 | )% | (12 | )% | — | % | 3 | % | 5 | % | |
| Non-air transactional | 7 | % | 2 | % | 0 | % | 9 | % | 14 | % | 21 | % | 22 | % | 14 | % | 5 | % | 13 | % | 19 | % | |
| Non-transactional | (16 | )% | 7 | % | 0 | % | 22 | % | 14 | % | 2 | % | (3 | )% | (3 | )% | 10 | % | (3 | )% | 4 | % | |
| Total | 3 | % | 2 | % | 0 | % | 7 | % | 7 | % | 12 | % | 11 | % | 4 | % | 3 | % | 9 | % | 14 | % | |
Orbitz Worldwide Transaction Growth | 1 | % | (4 | )% | (7 | )% | (4 | )% | (4 | )% | 1 | % | (1 | )% | (2 | )% | (1 | )% | 7 | % | 14 | % | |
Orbitz Worldwide Hotel Room Night Growth | 3 | % | 3 | % | 0 | % | 7 | % | 14 | % | 20 | % | 22 | % | 15 | % | 12 | % | 20 | % | 19 | % | |
14