travelport q2 2012 results presentationgalileokuwait.com/_/media/corporate/investors... ·...

1

Travelport

Q2 2012

Results Presentation

Strengthening Content and Product Offering

August 8, 2012

2

Disclaimers

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 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 materiality from those contemplated by forward-looking statements. Travelport Limited (the ‘Company’)

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, 2011 filed on March 22, 2012, 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 and unlevered free cash flow, which are non-GAAP measures. Such measures

may not be comparable to similarly named measures used by other companies. The Company believes Adjusted EBITDA provides

management with a more complete understanding of the underlying results and trends and an enhanced overall understanding of the

Company’s financial liquidity and prospects for the future. Adjusted EBITDA is the primary metric for measuring our business results,

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 a critical measure as it is required to calculate our key financial ratios under our

credit agreement covenants. Adjusted EBITDA is defined as EBITDA adjusted to exclude the impact of purchase accounting, impairment of

goodwill and intangibles assets, expenses incurred to acquire and integrate Travelport’s portfolio of businesses, costs associated with

Travelport’s restructuring efforts, non-cash equity-based compensation, and other adjustments made to exclude expenses management views

as outside the normal course of operations.

Unlevered free cash flow is defined as net cash provided by operations, adjusted to exclude cash interest payments and include capital

expenditures and capital lease payments. The company believes unlevered free cash flow provides management and investors with a more

complete understanding of the underlying liquidity of the core operating business and its ability to meet its current and future financing and

investing needs.

Q2 2012 Highlights

Gordon Wilson, President and CEO

(1) Proforma variance is stated excluding the effects of the loss of the United MSA and foreign exchange 4

Highlights

• Industry

– Continuing, but slower growth in global travel trends

with Q2 air segment volumes +1% YoY

– H1 volumes +3% YoY amid continued macroeconomic

uncertainty

• Travelport

– Adjusted EBITDA in line with management

expectations (Q2 results include the loss of United

Airlines as a hosted airline)

– Q2 Volume (2)% and Q2 Revenue flat YoY (1)

H1 Volume flat and H1 Revenue +1% YoY (1)

– Strong Q2 cash flows from operations

– Significant growth in Air, Hotel & Merchandising

content

– Increased adoption of ‘Point of Sale’ technology

– Acquired Southern Africa franchise and completed

integration

– Japan AXESS development underway and on track

– Successfully refinanced 2013 term loans

Q2 2012

Better/ (Worse)

than

prior year

Proforma (1)

Better/(Worse)

than prior year

Net

Revenue 506 (24) (2)

Adjusted

EBITDA 120 (16) ̶

Cash flows

from

operations

99 62 N/A

H1 2012

Better/(Worse)

than

prior year

Proforma (1)

Better/(Worse)

than prior year

Net

Revenue 1,056 (5) 15

Adjusted

EBITDA 260 (23) (7)

Cash flows

from

operations

128 30 N/A

Q2 2012 Financial Results

Philip Emery, CFO

6

Financial Highlights

• Q2 Revenue is (5)% lower and H1 Revenue is flat compared to prior year. Excluding the impact of foreign exchange

and loss of United MSA, Q2 Revenue is flat and H1 Revenue is +1% compared to prior year

• Q2 Adjusted EBITDA is (12)% lower and H1 Adjusted EBITDA is (8)% lower than prior year. Excluding the impact of

foreign exchange and loss of United MSA, Q2 Adjusted EBITDA is (1)% lower and H1 Adjusted EBITDA is (3)% lower

compared to prior year, which was in line with management expectations

• Q2 and H1 Adjusted EBITDA include $13 million and $28 million of amortization charges for upfront payments to travel

agencies, respectively. Working capital includes $162 million of upfront payments and prepaid commissions as of

June 30, 2012

• H1 Interest expense of $144 million was $5 million lower in 2012 due to a lower effective interest rate, including the

impact of interest rate hedges

• Cash from operations in Q2 of $99 million was $62 million higher compared to prior year as a result of a decrease in

cash interest payments and fluctuations in our collections and payments cycles

• Q2 unlevered free cash flow of $109 million was $34 million higher than prior year and represented 91% of Adjusted

EBITDA. For H1, unlevered free cash flow of $205 million was $(11) million lower than prior year and represented

79% of Adjusted EBITDA

• We are in compliance with all our financial covenants as of June 30, 2012

7

Net Revenue

Revenue Bridge Q2 2012

Net Revenue Q2 2012 Better/(Worse)

than prior year H1 2012 Better/(Worse)

than prior year

Transaction Processing 466 (10) 963 8

Airline IT Solutions 40 (14) 93 (13)

Net Revenue 506 (24) 1,056 (5)

Revenue Bridge H1 2012

530

508 506

(22) (1) (1)

Q2 2011Net Revenue

United Q2 2011ProformaRevenue

TransactionProcessing

Airline ITSolutions

Q2 2012Net Revenue

1,061

1,041

1,056 (20)

(3)

18

H1 2011Net Revenue

United H1 2011ProformaRevenue

TransactionProcessing

Airline ITSolutions

H1 2012Net RevenueMSA MSA

8

Summary Income Statements

(1) Proforma variance is stated excluding the effects of the loss of the United MSA and foreign exchange

Q2 2012

Better/

(Worse)

than prior year

Proforma (1)

Better/

(Worse) than

prior year

H1 2012

Better/

(Worse)

than prior year

Proforma (1)

Better/

(Worse) than

prior year

Net Revenue 506 (24) (2) 1,056 (5) 15

Adjusted EBITDA 120 (16) — 260 (23) (7)

Operating income 63 (3) 13 129 (16) —

Interest expense, net (77) (5) (5) (144) 5 5

Loss from continuing

operations before tax

and equity in earnings

of investment in Orbitz

(14) (8) 8 (15) (11) 5

Net loss (20) (326) (310) (32) (314) (298)

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Summary of Cash Flows

Q2 2012 Better/(Worse)

than prior year H1 2012

Better/(Worse)

than prior year

Adjusted EBITDA 120 (16) 260 (23)

Less:

Cash interest payments (30) 22 (116) 35

Tax payments (1) 5 (4) 5

Changes in operating working capital 43 64 32 23

FASA liability payments (4) — (7) 2

Defined benefit pension plan funding (3) (1) (5) (3)

Other adjusting items (26) (12) (32) (9)

Net cash provided by operating

activities of continuing operations 99 62 128 30

Add cash interest payments 30 (22) 116 (35)

Less capital expenditures (17) (6) (32) (3)

Less repayments of capital leases (3) (3) (7) (3)

Unlevered free cash flow 109 34 205 (11)

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Consolidated Balance Sheets

June 30,

2012

March 31,

2012

December 31,

2011

Goodwill and other intangibles 1,940 1,961 1,981

PP&E 395 411 431

Working capital and other (256) (169) (223)

Net debt (3,067) (3,169) (3,146)

Total assets less total liabilities (988) (966) (957)

Equity (988) (966) (957)

(1) Subject to a reduction in maturity to May 2014 under certain circumstances

(2) Debt maturities table excludes the amounts due under the Revolving Credit Facility and capital leases 11

Capitalization and Debt Maturities

Security Maturity Jun 30,

2012

Dec 31,

2011

Non extended Term Loans Aug-13 — 161

Revolver Credit Facility — 35

Extended Term Loans (1) Aug-15 1,337 1,346

Tranche S Term Loans Aug-15 137 137

Bank Term Loan & Revolving Credit

Facility 1,474 1,679

2012 Secured Term Loans Nov-15 170 —

Second Priority Secured Notes Dec-16 218 211

Senior Notes due 2014 Sep-14 769 776

Senior Notes due 2016 Mar-16 250 250

Senior Unsecured Notes 1,019 1,026

Senior Subordinated Notes Sep-16 424 428

Capital Leases 61 63

Total Travelport Limited Indebtedness 3,366 3,407

Less Cash Held As Collateral (137) (137)

Less Cash & Cash Equivalents (162) (124)

Net Debt 3,067 3,146

• In compliance with all financial covenants as of June 30, 2012

Schedule of Debt Maturities (2)

769

1,644

892

2012 2013 2014 2015 2016 Thereafter

Covenants Jun 30,

2012

Dec 31,

2011

Total Leverage Ratio 6.95x 6.99x

Maximum Total Leverage Ratio 8.00x 8.00x

First Lien Leverage Ratio 3.34x 3.74x

Maximum First Lien Leverage Ratio 4.00x 4.00x

Senior Secured Leverage Ratio 3.73x N/A

Maximum Senior Secured Leverage Ratio 4.95x N/A

Q2 2012 Business Update

Gordon Wilson, President and CEO

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Continued Strategic Execution

• Enhanced Travel Content

– Hotel content has more than trebled since July 2011:

• +340,000 unique hotel properties and +700,000 hotel

offers now available

• Latest agreements with Hotelzon and Tourico

Holidays

– CRS by CWT integrated into Travelport GDS to provide

private, partner-specific, independent hotel content

– 18 new air content agreements signed in 2012,

including China Southern Airlines, Air China, SAA and

kulula.com of South Africa

– New merchandising content deals with Delta, KLM, Air

Canada and easyJet

• Differentiated Product Momentum

– Increased adoption of new ‘Point of Sale’ technology:

• Travelport Universal Desktop now deployed in all

regions

• Travelport Agencia II launched with Air Canada

– New innovative mobile technology launched globally

• Travelport ViewTrip Mobile

• Travelport Mobile Agent

– 170 new users per week registering for Travelport

Rooms and More

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Continued Strategic Execution

• Investing in Key Adjacencies

– Virtual payment card momentum with new eNett

agreements:

• easyJet

• Mastercard

– Partnership with AXESS, Japan’s leading GDS,

development underway

– Number of Travelport Apps downloaded up 54% in Q2

over previous quarter

– Avianca and TACA Airlines expand partnership

• Targeted Geographical Growth

– Successful expansion in Africa

• Completed Southern Africa acquisition and vertical

integration process

• New distributors in Tanzania and Democratic

Republic of Congo

• Technology Investment

– First zTPF core upgrade launched to provide latest

operating software

– No service interruptions or performance issues

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Geography/Customer Segments

• Q2 softening in air volume growth in US (33% of global

GDS volume) and Western Europe (26% of global GDS

volume)

• BRICS region, however, still showing growth in Q2 YoY,

except India and Brazil:

– Russia 59%

– China 21%

– South Africa 4%

• Low Cost Carriers continued segment growth:

– Q2 at 5%

– 7% of Travelport GDS air segments

• Q2 RevPas $5.34 or +2% YoY reflecting:

– New Travelport products and service

– Growth in hotels and advertising sales

Average RevPas in $

Travelport GDS Q2 Segments (in millions)

Region(2) 2012 2011 Better/

(Worse)

Proforma(1)

Better/

(Worse)

Americas 43 45 (5.8)% (1.5)%

Europe 20 21 (3.3)% (3.3)%

APAC 14 14 (4.2)% (4.2)%

MEA 10 10 2.2% 2.2%

Global 87 90 (4.1)% (2.0)%

5.01 5.24 5.13 5.19 5.08

5.34

Q1 Q2 Q3 Q4

2011 2012

(1) Proforma variance is stated excluding the effect of the loss of the United MSA

(2) Brazil is combined with Europe and not Americas

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Summary and Outlook

• Q2 Performance in line with management expectations

– Growth in RevPas

– Positive growth in Gross Margin for the third consecutive quarter (1)

– Cost control benefiting bottom line

– Strong cash flow generation

• Continued macro economic uncertainty and volume challenge in major travel regions (USA / Europe) going into H2

• Continued execution of strategic plan to deliver RevPas growth

– Significant growth in Air, Hotel & Merchandising content

– Increased adoption of ‘Point of Sale’ technology

– Acquired Southern Africa franchise and completed integration

– Japan AXESS development underway and on track

• Successful refinancing of 2013 term loans

– No near term maturities

– In compliance with all financial covenants as of June 30, 2012

(1) Excluding the contribution from the MSA with United and the effect of foreign exchange

“the world’s leading provider of informed travel choice”

Q2 2012 earnings

Appendices


(2) Excluding Brazil 18

Appendix 1: Americas

Q2 Highlights

• New Travelport Universal Desktop customers include

Child Travel Services

• Primary Technology Partner agreements include Your

Travel Center

• Avianca and TACA Airlines expand partnership with

Travelport for Rapid Reprice ticket reissuance software

• Delta to sell Economy Comfort through Travelport

systems

• New Travelport Ticket Exchange Solution provides

efficiency savings for Canadian agents and increases

accuracy

Post period end

• Galileo voted favorite GDS for the third year in a row at

the 2012 Canadian Agents Choice Awards and ninth

time in last 11 years

• Travelport and Air Canada unveil enhanced version of

Travelport AgenciaTM

• Delgado Travel completes successful conversion to

Travelport


Region 2012 2011 Better/

(Worse)

Proforma(1)

Better/

(Worse)

Americas(2) 43 45 (5.8)% (1.5)%

Europe 20 21 (3.3)% (3.3)%

APAC 14 14 (4.2)% (4.2)%

MEA 10 10 2.2% 2.2%

Global 87 90 (4.1)% (2.0)%


(2) Including Brazil

(3) EMD is the new industry standard, Electronic Miscellaneous Document 19

Appendix 2: Europe

Q2 Highlights

• First to deliver EMD(3) (IATA standard) fulfilled

merchandising with KLM for paid seats

• First Irish Travelport Universal Desktop customer

announced as FCm Travel Solutions

• Two new easyJet contracts:

– Expanded full content and distribution agreement

– eNett virtual card payment agreement across Europe

• Rail

– Implementation of thetrainline.com for UK rail booking

through the Universal API

– German agents using Travelport RailMaster receive

industry sales awards for excellence

• Multi-country agreement with Kuoni for scheduled flight

booking

• Travelport Apps downloads up 54% in Q2 over previous

quarter

• Deployment of new Travelport mobile technology

Post period end

• Full content agreement with Bulgaria Air

• Top Dutch online travel agency, TIX.nl agrees to migrate to

Travelport



(Worse)

Proforma(1)

Better/

(Worse)

Americas 43 45 (5.8)% (1.5)%

Europe(2) 20 21 (3.3)% (3.3)%

APAC 14 14 (4.2)% (4.2)%

MEA 10 10 2.2% 2.2%

Global 87 90 (4.1)% (2.0)%

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Appendix 3: Asia Pacific

Q2 Highlights

• AXESS, Japan’s leading GDS, to adopt Travelport

technology

– Long term strategic relationship announced

– Development already underway and on track to go

live in 2014

• Travelport Journey Reporter launched in region

• Deployment of Travelport View Trip Mobile across the

region

• Continued success with Travelport Rooms and More

Post period end

• New full content agreements with Air China and China

Southern

• Pacific management team strengthened through

appointment of new General Manager for the Pacific –

Alex Fitzpatrick



(Worse)

Proforma(1)

Better/

(Worse)

Americas 43 45 (5.8)% (1.5)%

Europe 20 21 (3.3)% (3.3)%

APAC 14 14 (4.2)% (4.2)%

MEA 10 10 2.2% 2.2%

Global 87 90 (4.1)% (2.0)%


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Appendix 4: Middle East and Africa

Q2 Highlights

• Acquisition and integration of Southern Africa distributor

• New distributors appointed in Tanzania and Democratic

Republic of Congo

• Won Irena Travels and renewed agreements with Al Jaraf,

Skyline and Wild Discovery travel agencies

• Agency agreement with Tihama Travel in KSA

• Contract renewal of Nakhal & Cie in Lebanon

• New full content agreements with South African Airways,

kululu.com and Egypt Air

• Pakistan Airlines (PIA) signed up for global distribution

• Universal API contract signed with dnata Travel

Post period end

• First Universal Desktop customer signed up in the Middle

East – Cozmo Travel



(Worse)

Proforma(1)

Better/

(Worse)

Americas 43 45 (5.8)% (1.5)%

Europe 20 21 (3.3)% (3.3)%

APAC 14 14 (4.2)% (4.2)%

MEA 10 10 2.2% 2.2%

Global 87 90 (4.1)% (2.0)%


22

Continued Strategic Execution – Agencia II

23

Appendix 5: Definitions

• Adjusted EBITDA: is defined as EBITDA adjusted to exclude the impact of purchase accounting, impairment of

goodwill and intangibles assets, expenses incurred to acquire and integrate Travelport’s portfolio of businesses, costs

associated with Travelport’s restructuring efforts, non-cash equity-based compensation, and other adjustments made

to exclude expenses management views as outside the normal course of operations

• Unlevered free cash flow: is defined as net cash provided by operations adjusted to exclude cash interest payments

and include capital expenditures and capital lease payments

• Total leverage ratio under the Fourth Amended and Restated Credit Agreement is computed by dividing the total debt

(as defined under our Fourth Amended and Restated Credit Agreement) at the balance sheet date by a number which

is broadly computed from the last twelve months of Travelport Adjusted EBITDA

• First lien leverage ratio under the Fourth Amended and Restated Credit Agreement is computed by dividing the total

first lien debt (as defined under our Fourth Amended and Restated Credit Agreement) as of the balance sheet date by

a number which is broadly computed from the last twelve months of Travelport Adjusted EBITDA

• Senior Secured Leverage Ratio under the 2012 Secured Credit Agreement is computed by dividing the total of the first

lien debt (as defined under our Fourth Amended and Restated Credit Agreement) and the term loans issued under our

2012 Secured Credit Agreement as of the balance sheet date, by a number which is broadly computed from the last

twelve months of Travelport Adjusted EBITDA

• MSA is defined as Master Services Agreement

• TTV is defined as Total Transaction Value

• RevPas is calculated as total transaction processing revenue divided by the number of segments

• YoY is defined as Year on Year

• All figures are in USD $ millions unless otherwise stated

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