Disclaimersgalileokuwait.com/_/media/Corporate/Investors...• Q1 Net Revenue of $548m marginally...
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This document supports the Company’s Q1 2013 Results Presentation, a recording of which will be available on Travelport’s Investor Centre from May 10, 2013
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 materially 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, 2012, filed on March 12, 2013, 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 costs associated with our restructuring efforts, non-cash equity-based compensation, litigation and related costs, foreign
currency (gains) losses on euro denominated debt and earnings hedges, 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.
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Gordon Wilson President and Chief Executive Officer
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(1) Variance is stated excluding the impact of the loss of the United MSA
Q1 2013: Highlights
Financial
• Revenue at $548m – up $23m (+4%) YoY(1)
• Adjusted EBITDA at $127m – up $6m (+5%) YoY(1), including a $3m
benefit from the impact of foreign exchange gains
• Continued quarterly improvement in key business metrics YoY:
– RevPas: +6%
– Gross Margin(1): +5%
– COR Rate: contained to +3%
Operational
• Launched ground-breaking airline merchandising platform (April 2013)
• Signed watershed airline agreements
(full content, merchandising and low cost)
• Extended hotel room offers to more than one million (May 2013)
• Expanded operations in targeted growth regions of Africa and Russia
• Successfully completed refinancing (April 2013)
Industry backdrop
• Slight contraction in global travel trends with air segment volumes YoY
for Q1 (1)%
Q1
2013
Better/(Worse)
than
prior year
Proforma (1)
Better/(Worse)
than prior year
Net Revenue 548 (2) 23
Adjusted
EBITDA 127 (13) 6
Net cash used
in operating
activities
(21) (50) N/A
Q1 RevPas
6%
Q1 Gross
Margin (1)
5%
2013
Air Deals
10
Hotel
Offers
>1m
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Philip Emery Chief Financial Officer
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• Q1 Net Revenue of $548m marginally down on prior year. Excluding the impact of the loss of the United MSA, Q1 Net Revenue is
+4% compared to prior year
• Q1 Adjusted EBITDA of $127m is (9)% lower than prior year. Excluding the impact of the loss of the United MSA, Q1 Adjusted
EBITDA is $6m higher (+5%) compared to prior year, including a $3m benefit from the favorable impact of foreign exchange
• Q1 Adjusted EBITDA includes $(13)m amortization cost of development advances (upfront payments to travel agencies). Working
capital includes $156m of development advances as of March 31, 2013
• Cash flows are reduced compared to prior year:
– Net cash used in operating activities for Q1 2013 of $(21)m is $(50)m lower compared to prior year, primarily as a result of the
decrease in Adjusted EBITDA, fluctuations in normal collections and payments cycles, and an increase in non-operating
payments
– Q1 unlevered free cash flow of $40m is $(56)m lower than prior year and represents 31% of Adjusted EBITDA
• Q1 Interest expense of $70m is $3m higher in 2013, primarily due to a higher underlying effective interest rate
• Refinancing successfully completed in April 2013:
– 97% of 2014 maturities refinanced
– Travelport Group capital structure simplified through exchanging Travelport Holdings Limited PIK loans into equity
– Bondholder litigation settled
– In compliance with all financial covenants as of March 31, 2013
Financial Highlights
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Net Revenue Bridge Q1 2013
Net Revenue
Net Revenue Q1 2013 Better/(Worse)
than prior year
Transaction Processing 510 13
Airline IT Solutions 38 (15)
Net Revenue 548 (2)
Q1 2012
Proforma
Net Revenue
Q1 2012
Net Revenue
United MSA Transaction
Processing
Airline IT
Solutions
Q1 2013
Net Revenue
7
550 525 548
(25)
21 2
+4%
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8 (1) Proforma variance is stated excluding the impact of the loss of the United MSA
Q1 2013 Better/(Worse)
than prior year
Proforma (1)
Better/(Worse)
than prior year
Net revenue 548 (2) 23
Commissions (258) (5) (10)
Gross margin 290 (7) 13
Telecommunication and technology costs (75) (6) (7)
SG&A (excluding adjustments) (88) — —
Adjusted EBITDA 127 (13) 6
Less adjustments:
Corporate costs (1) (2) (2)
Equity-based compensation — (2) (2)
Litigation and related costs (10) 4 4
Other non-cash 5 11 11
Total adjustments (6) 11 11
EBITDA 121 (2) 17
Less: Depreciation and amortization (52) 5 5
Operating income 69 3 22
Interest expense, net (70) (3) (3)
Loss before income taxes and equity in investment in Orbitz Worldwide (1) — 19
Provision for income taxes (11) (3) (3)
Equity in earnings of investment in Orbitz Worldwide 2 5 5
Net loss (10) 2 21
Summary Income Statements
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Summary Cash Flows
Q1 2013 Q1 2012
Adjusted EBITDA 127 140
Less:
Interest payments (88) (86)
Tax payments (6) (3)
Changes in operating working capital (37) (11)
FASA liability payments — (3)
Defined benefit pension plan funding — (2)
Other adjusting items (17) (6)
Net cash (used in) provided by operating activities (21) 29
Less: Capital expenditures on property and equipment additions (23) (15)
Less: Repayment of capital lease obligations (4) (4)
Free cash flow (48) 10
Other Financing and Investing Activities
Net payment on settlement of foreign exchange derivative contracts (5) (16)
Payment of debt finance costs (2) —
Net movement on revolver borrowings and other 53 (9)
Net decrease in cash and cash equivalents (2) (15)
Free cash flow (48) 10
Add: Interest payments 88 86
Unlevered free cash flow 40 96
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Summary Balance Sheets
March 31,
2013
December 31,
2012
Goodwill and other intangibles 1,879 1,899
PP&E 402 416
Investment in Orbitz Worldwide 7 —
Working capital and other (105) (160)
Net pension and post-retirement benefit liabilities (174) (174)
Net debt (3,219) (3,183)
Total assets less total liabilities (1,210) (1,202)
Equity (1,210) (1,202)
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(1) Subject to a reduction in maturity to May 2014 (1st Lien) or August 2014 (1.5 Lien) under certain circumstances (2) Presented on a proforma basis, assuming the April 15, 2013 refinancing transaction occurred on March 31, 2013. Debt maturities are based
on carrying value, excluding i) amounts due under the Revolving Credit Facility and Capital Leases; and ii) future PIK interest or any exit fees
Debt Maturity
Mar 31, 2013 Dec 31,
2012 Actual Pro-
forma(2)
Revolving Credit Facility 73 73 20
Extended Term Loans (1) Aug-15 1,340 1,340 1,348
Tranche S Term Loans Aug-15 137 137 137
Bank Term Loans and Revolving Credit
Facility 1,550 1,550 1,505
2012 Secured Term Loans (1.5 Lien) (1) Nov-15 171 — 171
Second Priority Secured Notes Dec-16 229 — 225
New Second Priority Senior Secured
Tranche 1 Loans Jan-16 — 624 —
New Second Priority Senior Secured
Tranche 2 Loans Dec-16 — 229 —
Senior Notes due 2014 Sep-14 746 19 752
Senior Notes due 2016 Mar-16 250 — 250
New Fixed Rate Exchange Notes due 2016 Mar-16 — 405 —
New Floating Rate Exchange Notes due
2016 Mar-16 — 187 —
Senior Unsecured Notes 996 611 1,002
Senior Subordinated Notes Sep-16 426 451 431
Capital Leases 92 92 96
Total Travelport Limited Indebtedness 3,464 3,557 3,430
Less: Cash Held as Collateral (137) (137) (137)
Less: Cash and Cash Equivalents (108) (103) (110)
Net Debt 3,219 3,317 3,183
Schedule of Proforma(2) Debt Maturities
Capitalization and Proforma Refinancing Impact
2013 2014 2015 2016 Thereafter
19
1,477
1,896
Actual and Proforma(2)
Covenants Mar 31,
2013
Pro-
forma
Total Leverage Ratio 7.35x 7.55x
Max. Total Leverage Ratio 8.00x 8.00x
First Lien Leverage Ratio 3.53x 3.53x
Max. First Lien Leverage Ratio 4.00x 4.00x
New Senior Secured Leverage Ratio 4.45x 5.49x
Max. Senior Secured Leverage Ratio 6.25x 6.25x
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• In compliance with all financial covenants as of March 31, 2013
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April 2013 Refinancing
• Successfully completed comprehensive refinancing on April 15, 2013
– High level of consent achieved at all levels of debt within the capital structure
– 97% of 2014 maturities refinanced
– Plans already underway to deal with residual $19m of Senior Notes due 2014
• Key benefits of the transaction:
– 2014 Debt maturities extended to 2016, allowing more runway to execute on growth initiatives
– Settlement of Bondholder litigation relating to 2011 Restructuring – District Court of Southern District of New York has
dismissed all claims and counterclaims with prejudice
• Saving legal costs and allowing management to focus on the business
– Simplified capital structure through elimination of all debt at Holding Company
• $25m of Travelport Holdings Limited PIK debt refinanced by Travelport Limited and extended to 2016
• Exchange of remaining Travelport Holdings Limited PIK debt reduces overall Group Net Debt by approximately $400m
– Debt trading levels have improved significantly across all tranches
• Travelport will continue to explore opportunities to improve its capital structure position over time
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Gordon Wilson President and Chief Executive Officer
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Q1 2013: Continued Strategic Execution
Enhanced Travel Content
Air
• Signed 10 air agreements with traditional and low cost carriers:
– Americas: American Airlines, Copa Airlines (Panama) and Porter
Airlines (Canada)
– APAC: Scoot (Singapore), Virgin Australia, China Eastern Airlines
and Shanghai Airlines (China)
– MEA: Ethiopian Airways, RAK Airways (UAE)
• Gained significant merchandising strategy momentum:
– Launched Travelport Merchandising Platform™
• Deployed: Alitalia (Italy), Delta (US), easyJet (UK) and Jet2.com (UK)
• Signed: Aegean (Greece), American Airlines
Hotel
• Increased Travelport Rooms and More™ momentum:
– > 450 thousand hotel properties now bookable
– > one million hotel offers available – quadrupled since launch
• Won new hotel aggregator content agreements with:
– Destinations of the World, Quickbeds.com, lowcostbeds.com, Huntington
Travel
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Q1 2013: Continued Strategic Execution
Differentiated Product Momentum
• Launched Travelport Merchandising Platform globally post period
– Travelport Aggregated Shopping™ attained industry-first with
easyJet (UK)
– Travelport Ancillary Services™: BA (UK), Finnair (Finland)
– Travelport Rich Content + Branding™: launch late 2013
– Attracted across-the-board travel industry plaudits
• Increased Point-of-Sale delivery momentum:
– Introduced desktop, mobile and language innovations
Investing in Key Adjacencies
• Continued substantial payment transaction growth in eNett joint
venture
• Signed new AITS agreements:
– Volotea (Spain), transavia.com (Netherlands), TUIfly (Germany)
• Achieved all AXESS (Japan) partnership goals to date
– On track for H2 2013 implementation and delivery
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Travelport Merchandising Platform
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Q1 2013: Continued Strategic Execution
Targeted Geographical Growth
• Won and renewed major customers in all regions, including:
– Americas: ATC Travel Management and Martin Travel (USA); and
Consolid (Latin America)
– APAC: Morning Star (HK); Brooker Travel Group (NZ); and
Zuji (APAC)
– Europe: On the Beach, Holiday Genie and Gray Dawes (UK);
Kuoni (NL); Aero Club (RU); and INT Travel (Poland)
– MEA: Al Tayyar Travel Group, World Holidays, Transcontinents,
Roibek Travel, Al Rajhi Aviation and Asfar Travel (KSA);
Al Badie and SNTTA (UAE); Overseas Travel (Qatar); and
Rickshaw Travels (Tanzania)
• Launched and renewed distributor operations:
– New: Tunisia
– Renewals: Yemen and Ethiopia
• Opened first wholly-owned Africa operation outside Southern Africa with
Kenya SMO
• Third operation opened in Russian network with office in Vladivostok
Technology Investment
• zTPF upgrade programme ahead of schedule
• SOA investment underpins product development strategy – most recently
Travelport Merchandising Platform
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Travelport Q1 Segments
(in millions)
Region(2) 2013 2012 Better/
(Worse)
Proforma (1)
Better/
(Worse)
Americas 46.0 49.2 (6.7)% (2.1)%
Europe 24.2 23.4 3.7% 3.7%
APAC 14.7 15.1 (2.5)% (2.5)%
MEA 9.8 10.1 (3.0)% (3.0)%
Global 94.7 97.8 (3.2)% (1.0)%
Global Snapshot
• Overall decline of (1)% in overall GDS volume for Q1 2013
– (4)% decline in US and (1)% decline in Europe (together 64% of
global GDS volume)
– Significant growth in certain regions, including 13% in Eastern
Europe, 9% in Africa and 8% in Canada
– Diverse regional variation continues
Travelport
• Excluding the impact of the loss of the United MSA from Q2 2012,
Travelport’s segments were (1)% YoY, in line with global GDS volumes
• Outperforming growth in certain key countries/regions:
– Canada: Travelport +30% vs. overall GDS growth of +8%
– Eastern Europe: Travelport +28% vs. overall GDS growth of +13%
– Western Europe: Travelport +1% vs. overall GDS decline of (3)%
RevPas
• Q1 2013 growth at +6%, reflecting:
– Introduction of new products and services
– Continued growth in hotel and advertising sales
– Growth in eNett payments processing
– Growth in higher yield segments offsets volume contraction
(1) Proforma variance is stated excluding the impact of the loss of the United MSA (2) Brazil is now included within the Americas Region and comparative periods have been represented on a consistent basis
Geography/Customer Segments
RevPas ($)
18
$5.08 $5.34 $5.30
$5.47
Q1 Q2 Q3 Q4
2012 2013
$5.38
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Delivering Performance
Financial
• Grown underlying revenue by 4%(1) and adjusted EBITDA by 5%(1)
• Achieved on-going improvement across financial metrics:
– Eighth consecutive quarter of RevPas growth: 6% YoY for Q1 2013
– Sixth consecutive quarter of increased Gross Margin(1)
– Contained COR Rate growth to 3% for Q1 2013
Operational
• Launched ground-breaking airline merchandising platform (April 2013)
• Signed watershed airline agreements (full content, merchandising and low cost)
• Extended hotel room offers to more than one million (May 2013)
• Expanded operations in targeted growth regions of Africa and Russia
• Driven payments processing momentum
• Continued investment in upgrading technology
Outlook
• Successfully executed refinancing in April 2013, extending our 2014 maturities
• Continuing positive momentum into Q2
Q1 2013: Summary & Outlook
10
Air Deals
6%
RevPas
1m
Hotel Offers
(1) Stated excluding the impact of the loss of the United MSA from Q2 2012
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Q1 2013 Appendices Regional Highlights Definitions
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Q1 2013: The Americas
Q1 2013 Highlights
Operational Highlights
• Airlines:
– Ancillary marketing, content, product services and upgrade agreements:
• Signed global full content agreements with American Airlines and
Copa Airlines
• Deployed Delta Economy Comfort seating
• Travel Agencies:
– Converted, expanded and renewed customers include:
• Converted ATC Travel Management and Martin Travel (USA) and
Consolid (Central and South America)
• Renewed Allegro Group
– Strategic product deployment:
• Launched Travelport Smartpoint App™ for Worldspan Go!™
– Enhanced Travelport Rooms and More™:
• Added Huntington Travel’s Hotel Consolidator Content
Post Period Developments
• Signed full content agreement with Porter Airlines (Canada)
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Q1 2013: Asia Pacific
Operational Highlights
• Airlines:
– Ancillary marketing, content, product services and upgrade agreements:
• Signed content agreements with Scoot, Virgin Australia, China Eastern
Airlines and Shanghai Airlines
• Travel Agencies:
– Converted, expanded and renewed customers include:
• Morning Star (Hong Kong), Brooker Travel Group (New Zealand)
– Strategic product deployment:
• Travelport Mobile Agent launched in Pacific
– Appointed George Harb as new Managing Director China
Post Period Developments
• Zuji (part of the Webjet Group) undergoing migration to Travelport
• Quickbeds.com, a leading Australian hotel aggregator, joins Travelport Rooms
and More
Q1 2013 Highlights
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Q1 2013: Europe
Q1 2013 Highlights
Operational Highlights
• Airlines:
– Ancillary marketing, content, product services and upgrade agreements:
• Alitalia merchandising deployed
• Aegean merchandising
• Travel Agencies:
– Converted, expanded and renewed customers include:
• On the Beach – first GDS agreement; Holiday Genie;
Gray Dawes (UK); Kuoni (Netherlands); Aero Club (Russia);
INT Travel (Poland)
– Launched Corporate Booking Tool in Poland
– New operation in Vladivostok (Russia)
Post Period Developments
• Launched integrated travel insurance application in Hungary
• easyJet and jet2.com on new Travelport Merchandising Platform
• Selected as preferred GDS for 12th year running by The Travel Network
Group
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Q1 2013: Middle East & Africa
Operational Highlights
• Airlines:
– Ancillary marketing, content, product services and upgrade agreements:
• Signed new agreements with Ethiopian Airlines and RAK Airways
• Travel Agencies:
– Converted, expanded and renewed customers include:
• Al Tayyar Travel Group; World Holidays; Transcontinents;
Roibek Travel; Al Rajhi Aviation and Asfar Travel (KSA); Al Badie and
SNTTA (UAE); Overseas Travel Bureau (Qatar); Rickshaw Travels
(Tanzania)
– Continued targeted geographic expansion:
• NDC: launched (Tunisia); renewed (Yemen and Ethiopia)
– Strategic product deployment:
• Deployed Agentivity and Travelport Smartpoint App for Worldspan Go!
(MEA); launched Rapid Reprice (South Africa)
Post Period Developments
• Launched first direct operation for travel agents (Kenya)
• Signed new customer contracts with GMP Travel Services, Al Muhajer (UAE)
and Al Futtain (UAE)
• Aggregator, Destinations of The World, joins Travelport Rooms and More
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Q1 2013 Highlights
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Definitions
• Adjusted EBITDA: 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
• COR Rate: Computed by dividing travel agency commission and incentive payments by the number of segments
• First Lien Leverage Ratio: Computed under the Fifth Amended and Restated Credit Agreement by dividing the total first lien debt
(as defined under our Fifth 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
• Free cash flow: Defined as net cash provided by operations adjusted to include capital expenditures and capital lease
payments
• Gross Margin: Defined as Net Revenue less Commissions
• MSA: Defined as Master Services Agreement
• New Senior Secured Leverage Ratio: Computed under the 2013 Secured Credit Agreement by dividing the total of the first lien debt (as
defined under our Fifth Amended and Restated Credit Agreement) and the term loans issued under our
2013 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
• PIK: Defined as Payment In Kind
• RevPas: Computed by dividing total transaction processing net revenue by the number of segments
• Total Leverage Ratio: Computed under the Fifth Amended and Restated Credit Agreement by dividing the total
debt (as defined under our Fifth 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
• Unlevered free cash flow: Defined as net cash provided by operations adjusted to exclude cash interest payments and
include capital expenditures and capital lease payments
• YoY: Defined as Year on Year
All figures are in USD $ millions, unless otherwise stated
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