Travelport Worldwide Limited Reports Fourth Quarter and Full Year 2016 Results

LANGLEY, U.K., Feb. 21, 2017 /PRNewswire/ -- Travelport Worldwide Limited (NYSE: TVPT) announces its financial results for the fourth quarter and full year ended December 31, 2016.

Key Points (for full year 2016 unless stated otherwise)

• Net revenue increased 6% to $2,351 million. Net income of $15 million, income per share (diluted) of $0.13 and net cash provided by operating activities of $299 million
• Air revenue increased 3% to $1,651 million; Beyond Air revenue growth of 18% to $579 million, contributing 26% of Travel Commerce Platform revenue (2015: 23%)
• eNett net revenue increased 64% to $150 million
• Adjusted EBITDA increased 7% to $574 million, Adjusted Income per Share (diluted) increased 23% to $1.23 and Free Cash Flow increased $35 million to $192 million
• Fourth quarter net revenue increased 2% and Adjusted EBITDA increased 1%. Net loss of $9 million
• Increasing strategic investments and expenditure to drive product innovation and platform performance
• Post period-end, announced strategic sourcing partnership agreement with Tata Consultancy Services and signed agreement to divest 51% stake in India-based technology development company IGT Solutions Private Ltd. (IGTS)
• Issued 2017 guidance, including expected mid single-digit growth for Travel Commerce Platform net revenue partly offset by IGTS divestment, and low single-digit growth for Adjusted EBITDA after strategic growth expenditure

Gordon Wilson, President and CEO of Travelport, commented:

"In 2016, Travelport delivered its highest level of net revenue and Adjusted EBITDA growth over the last five years, as we continued to execute against our strategic objectives.  We achieved consistently strong growth in International regions and realized positive momentum in the United States, where we grew our reported segments by 3% during the fourth quarter.  Our Travel Commerce Platform continues to expand, with Beyond Air growing by 18%, driven by our leading hospitality content and mobile solutions, as well as the ongoing strength of our commercial payments business, eNett, which grew net revenue by 64% in 2016.

Looking ahead, we are delighted to have signed several new and significant agency deals that we expect will drive revenue growth as those customers implement and transact with us.  Moreover, we see several longer-term growth opportunities for our business, which has resulted in us increasing our investment levels commencing from the fourth quarter of 2016 and continuing throughout 2017, particularly in the areas of data and analytics, mobile solutions, payments and technology services.  2017 will see raised capital investments plus a further approximately $20 million of incremental strategic expenditure which, together, will enable further innovation for our customers and support sustainable and profitable long term growth."

Summary

Discussion of Results for the Fourth Quarter and Full Year of 2016

Net Revenue

Net revenue is comprised of:

Fourth Quarter 2016
Net revenue increased by $11 million, or 2%, to $545 million primarily due to growth in Travel Commerce Platform revenue of $15 million, or 3%.  Within Travel Commerce Platform revenue, Air revenue increased marginally by $2 million, mainly due to growth in air segments.  Beyond Air revenue increased by $13 million, or 10%.  Within Beyond Air, net revenue for eNett increased 43% to $37 million primarily due to an increase in the volume of payments settled with existing customers.  Technology Services revenue decreased by $4 million, or 13%, due to a reduction in hosting activities and lower development revenue.

Full Year 2016
Net revenue increased by $130 million, or 6%, to $2,351 million primarily due to growth in Travel Commerce Platform revenue of $135 million, or 6%.  Within Travel Commerce Platform revenue, Air revenue increased by $48 million, or 3%, mainly due to improved pricing and merchandising.  Beyond Air revenue increased by $87 million, or 18%.  Within Beyond Air, net revenue for eNett increased 64% to $150 million driven by the volume of payments settled with existing customers and several new customer implementations.  Technology Services revenue decreased by $5 million, or 4%, due to a reduction in hosting activities and lower development revenue.

The table below sets forth Travel Commerce Platform revenue by region:

The table below sets forth Travel Commerce Platform Reported Segments and global RevPas by region:

Fourth Quarter 2016
Reported Segments increased by 2 million, or 2%.  United States Reported Segments increased 3% and International Reported Segments increased 2% primarily due to an increase in Air segments. Travel Commerce Platform RevPas increased 1% to $6.67, driving a $4 million increase in Travel Commerce Platform revenue. International RevPas increased 3% to $7.94, and United States RevPas decreased 4% to $4.65.

International Travel Commerce Platform revenue increased by $16 million, with Asia Pacific and Europe contributing to this increase, offset by a decrease in revenue in the Middle East and Africa. Revenue from Asia Pacific and Europe increased 14% and 3%, respectively, mainly due to:

• An increase in Reported Segments of 8% and 2%, respectively
• Growth in payment solutions

Full Year 2016
Reported Segments decreased by 3 million, or 1%.  International Reported Segments increased 2%, offset by a 5% decrease in United States Reported Segments primarily due to the previously advised impact of our renegotiated contract with Orbitz Worldwide in 2014. Travel Commerce Platform RevPas increased 7% to $6.59, driving a $155 million increase in Travel Commerce Platform revenue. International RevPas increased 8% to $8.00, and United States RevPas increased 3% to $4.46.

International Travel Commerce Platform revenue increased by $149 million, with Europe and Asia Pacific contributing most of this increase. Revenue from these two regions increased 14% and 12%, respectively, mainly due to:

• An increase in RevPas of 12% and 6%, respectively
• Reported Segment growth in Asia Pacific
• Growth in payment solutions

Adjusted EBITDA

Fourth Quarter 2016

Adjusted EBITDA increased marginally by $1 million, or 1%, to $131 million mainly due to the following:

• Growth in net revenue of $11 million
• $10 million decrease within selling, general and administrative expense ("SG&A") (excluding a $28 million increase in non-core corporate costs, which are excluded from net (loss) income to determine Adjusted EBITDA) primarily due to the favorable impact of foreign currency exchange rate movement and lower workforce costs, offset by:
• $19 million increase within cost of revenue primarily due to increased travel distribution costs per segment and commission costs from our payment solutions business, increase in Reported Segments and increased costs related to continued expansion of our operations through the acquisition of other businesses and further investment in technology

Full Year 2016

Adjusted EBITDA increased by $39 million, or 7%, to $574 million due to the following:

• Growth in net revenue of $130 million, offset by:
• $86 million increase within cost of revenue (excluding a $4 million increase in amortization of customer loyalty payments, which is excluded from net income to determine Adjusted EBITDA) primarily due to increased travel distribution costs per segment and commission costs from our payment solutions business and increased costs related to continued expansion of our platform through the acquisition of other businesses and investment in technology, partially offset by favorable foreign currency exchange rate movement
• $5 million increase within SG&A (excluding a $50 million increase in non-core corporate costs, which are excluded from net income to determine Adjusted EBITDA) primarily due to an increase in workforce expense due to the continued expansion of our platform through acquisition and investment in our go-to-market capabilities, partially offset by favorable impact of foreign currency exchange movement

Operating Income

Fourth Quarter 2016

Operating income decreased by $19 million to $21 million due to the following:

• $28 million increase in non-core corporate costs within SG&A mainly related to (i) a $9 million increase in corporate and restructuring costs primarily due to a restructuring program committed to in the fourth quarter of 2016, (ii) a $7 million non-cash impairment of long-lived assets, (iii) a $6 million increase in equity-based compensation and related taxes and (iv) a $5 million increase in unrealized losses on foreign currency derivative contracts, offset by:
• $1 million increase in Adjusted EBITDA
• $8 million reduction in depreciation and amortization primarily due to a decrease in amortization on a portion of acquired intangible assets as their useful lives expired

Full Year 2016

Operating income increased by $10 million to $201 million due to the following:

• $39 million increase in Adjusted EBITDA
• $25 million reduction in depreciation and amortization primarily due to a decrease in amortization on a portion of acquired intangible assets as their useful lives expired, offset by:
• $50 million increase in non-core corporate costs within SG&A mainly related to (i) a $20 million increase in corporate and restructuring costs primarily due to a restructuring program committed to in the fourth quarter of 2016, (ii) a $13 million increase in unrealized losses on foreign currency derivative contracts, (iii) an $11 million impairment of long-lived assets and (iv) a $3 million increase in equity-based compensation and related taxes
• $4 million increase in amortization of customer loyalty payments

Net (Loss) Income

Fourth Quarter 2016

Net income decreased by $15 million from a net income of $6 million in 2015 to a net loss of $9 million due to the following:

• $19 million decrease in operating income
• $5 million increase in provision for income taxes and recognition of loss on early extinguishment of debt, offset by:
• $9 million decrease in interest expense resulting from an unrealized gain on interest rate derivative contracts, lower interest rates and lower debt balance

Full Year 2016

Net income decreased by $5 million to $15 million primarily due to the following:

• $10 million increase in operating income, offset by:
• $7 million increase in provision for income taxes and recognition of loss on early extinguishment of debt
• $6 million gain on sale of shares of Orbitz Worldwide recognized in 2015
• $3 million increase in interest expense resulting from an unrealized loss on interest rate derivative contracts, offset by lower interest rates and lower debt balance

Adjusted Net Income

Fourth Quarter 2016

Adjusted Net Income increased marginally by $1 million to $28 million primarily due to the following:

• $15 million decrease in net income
• $5 million decrease in amortization of acquired intangible assets and $2 million increase in unrealized gain on interest rate derivative contracts, which are excluded to determine Adjusted Net Income, offset by:
• $24 million increase of adjustments, net of tax, for non-core corporate costs within SG&A as discussed above

Full Year 2016

Adjusted Net Income increased by $32 million to $154 million due to the following:

• $5 million decrease in net income, offset by:
• $37 million increase of adjustments, net of tax, for non-core corporate costs within SG&A discussed above

Net Cash Provided by Operating Activities

Fourth Quarter 2016
Net cash provided by operating activities decreased by $23 million to $85 million, primarily as a result of higher customer loyalty payments and the impact of fluctuations in working capital.

Full Year 2016
Net cash provided by operating activities increased by $37 million to $299 million, primarily as a result of an increase in operating income, the positive impact of fluctuations in working capital and lower cash interest payments.

Free Cash Flow

Fourth Quarter 2016
Free Cash Flow decreased by $31 million to a cash inflow of $48 million, primarily as a result of a decrease in net cash provided by operating activities and increased cash additions for property and equipment.

Full Year 2016
Free Cash Flow increased by $35 million to a cash inflow of $192 million, primarily as a result of an increase in net cash provided by operating activities, with cash additions for property and equipment remaining stable.

Adjusted Free Cash Flow

Fourth Quarter 2016
Adjusted Free Cash Flow decreased by $45 million to a cash inflow of $25 million, primarily as a result of a decrease in Free Cash Flow and higher repayment towards other indebtedness.

Full Year 2016
Adjusted Free Cash Flow increased by $22 million to a cash inflow of $156 million, primarily as a result of an increase in Free Cash Flow, offset by higher repayment towards other indebtedness.

Net Debt

Net Debt decreased from $2,282 million as of December 31, 2015 to $2,205 million as of December 31, 2016 and is comprised of $2,345 million in total debt less $140 million in cash and cash equivalents. The decrease in total debt of $92 million was offset by a $15 million lower cash and cash equivalents balance as of December 31, 2016 compared to December 31, 2015.

Full Year 2017 Financial Guidance

The following forward-looking statements, as well as those made elsewhere within this press release, reflect expectations as of February 21, 2017.  We assume no obligation to update these statements.  Results may be materially different and are affected by many factors detailed in this release and in Travelport's quarterly and annual Securities and Exchange Commission ("SEC") filings and/or furnishings, which are available on the SEC's website at www.sec.gov.

Looking ahead, Travelport expects the following:

Travelport currently anticipates that eNett, its commercial payments business, will grow net revenue by at least 20% in 2017.  This is subject to exchange rate movements given that eNett's net revenue is largely denominated in currencies other than the U.S. dollar.

This guidance assumes spot foreign exchange rates as of February 14, 2017, together with the impact of foreign exchange rate hedges undertaken during 2016 as part of our rolling hedging program.

Impact of Foreign Exchange Movements

Our results of operations are reported in U.S. dollars.  With approximately 90% of our net revenue denominated in U.S. dollars in the fourth quarter of 2016, exchange rate movements in this currency have a low impact on our net revenue.  Of our costs and expenses in the fourth quarter of 2016, excluding depreciation on property and equipment, amortization of customer loyalty payments, amortization of acquired intangible assets and non-core corporate costs, approximately 64% were denominated in U.S. dollars.

We employ foreign exchange forward contracts to hedge our exposure to changes in foreign exchange rates, particularly against the British pound, the Euro and the Australian dollar, which are the main non-U.S. dollar components of our costs and expenses.  The year over year impact of foreign exchange movements had a positive impact to Adjusted EBITDA for the fourth quarter of 2016.

Dividend

On February 13, 2017, Travelport's Board of Directors declared a cash dividend of $0.075 per common share for the fourth quarter of 2016.  The dividend will be payable on March 16, 2017 to shareholders of record on March 2, 2017.

Changes to the Board of Directors

We have further strengthened our Board of Directors through the appointment of a new independent director, John Smith, effective March 1