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|Orbitz Worldwide, Inc. Reports Third Quarter 2010 Results|
CHICAGO, Nov. 4, 2010 /PRNewswire via COMTEX/ --
Orbitz Worldwide, Inc. (NYSE: OWW) today announced results for the third quarter and nine months ended September 30, 2010.
"Orbitz Worldwide delivered Adjusted EBITDA growth of 7 percent in the third quarter and solid year over year improvements in gross bookings, transactions and hotel room nights. ebookers delivered another strong quarter of growth with hotel room nights up 57 percent year over year," said Barney Harford, president & CEO of Orbitz Worldwide. "We also successfully completed the migration of our domestic hotel booking path to the global platform during the quarter, significantly improving the hotel booking experience and accelerating our pace of innovation."
Third Quarter 2010 Financial Highlights
The company reported net income of $15.3 million or $0.15 per diluted share for the third quarter 2010 compared with net income of $7.0 million or $0.08 per diluted share for the third quarter 2009. Adjusted EBITDA increased seven percent year over year to $47.4 million from $44.1 million for the third quarter 2009.
Gross Bookings and Net Revenue
Global gross bookings increased 12 percent (13 percent on a constant currency basis) year over year. This increase was due primarily to higher air fares and higher transaction volume. Air gross bookings increased 13 percent (14 percent on a constant currency basis) and non-air gross bookings increased ten percent year over year on both a reported and constant currency basis. Domestic gross bookings increased ten percent and international gross bookings increased 26 percent (29 percent on a constant currency basis) year over year.
Net revenue was $194.5 million for the third quarter 2010, an increase of four percent year over year on both a reported and constant currency basis. Domestic net revenue was up three percent while international net revenue increased eight percent year over year on both a reported and constant currency basis. Net revenue was up primarily due to an increase in standalone hotel transactions, international air transactions and travel insurance revenue. These increases were partially offset by lower advertising revenue and a decline in revenue from the company's airline hosting business.
In order to provide a more comparable view of the company's operating performance across periods, Appendix A to this press 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 press release.
Cost of revenue
Cost of revenue is primarily comprised of customer service costs, credit card processing fees and other costs including ticketing and fulfillment, customer refunds and charge-backs, affiliate commissions and connectivity and other processing costs.
Cost of revenue increased to 19.9 percent of net revenue in the third quarter 2010 due to higher customer service staffing levels, higher credit card processing costs related to stronger merchant hotel gross bookings, higher affiliate commissions due to the expansion of the company's private label business and higher customer refunds.
Selling, general and administrative expense (SG&A)
Selling, general and administrative expense is comprised of wages and benefits, contract labor costs, network communications, systems maintenance and equipment costs and other expenses.
SG&A expense for the third quarter 2010 declined ten percent year over year primarily due to lower employee incentive compensation expense, lower facilities costs and a decline in foreign currency losses and hedging costs.
The company's marketing expense is primarily comprised of online marketing costs, such as search and banner advertising, and offline marketing costs, such as television, radio and print advertising.Marketing expense increased nine percent year over year in the third quarter 2010 to $52.6 million. This increase was due primarily to higher online marketing spending driven by an increase in the cost per transaction for the company's domestic and HotelClub websites and higher transaction volume at ebookers. Marketing expense as a percentage of net revenue for the third quarter 2010 was 27 percent compared with 26 percent for the third quarter 2009.
Orbitz Worldwide incurred net interest expense of $11.2 million in the third quarter 2010 compared with $14.1 million in the third quarter 2009. This year over year decline was due to lower outstanding borrowings on the company's term loan and revolving line of credit facility as well as a lower effective interest rate on the company's term loan. At September 30, 2010, $300.0 million of the $492.0 million outstanding on the company's term loan had fixed interest rates. The weighted average effective interest rate on the term loan was 4.85 percent for the third quarter 2010, down from 6.04 percent for the third quarter 2009.
Orbitz Worldwide reported operating cash flow of $123.6 million for the nine months ended September 30, 2010, an increase of 20 percent year over year. The increase in operating cash flow for the nine months ended September 30, 2010 was primarily driven by higher merchant gross bookings, lower interest payments and the timing of payments related to our marketing spending. These increases were partially offset by lower booking fee revenue, changes in the timing of payments received from vendors, the payment of employee incentive compensation in the first quarter 2010 and changes in other working capital accounts.
At September 30, 2010, cash and cash equivalents were $139.1 million compared with cash and cash equivalents of $58.9 million at September 30, 2009 (net of $62.7 million of borrowings under the revolving credit facility). The year over year increase in cash is driven in part by the $50.0 million of cash proceeds received from the stock purchase made by Travelport in January 2010.
For the full year 2010, the company expects:
The outlook above assumes relatively stable foreign exchange rates.
Quarterly Conference Call
Orbitz Worldwide will host a conference call to discuss its third quarter 2010 results at 10:00 a.m. EDT (9:00 a.m. CDT) on Thursday, November 4, 2010. A live webcast of the conference call can be accessed through the Orbitz Worldwide Investor Relations website at www.orbitz-ir.com. An archive of the webcast and a transcript will also be available on the website for a period of at least 30 days.
About Orbitz Worldwide
Orbitz Worldwide is a leading global online travel company that uses innovative technology to enable leisure and business travelers to research, plan and book a broad range of travel products. Orbitz Worldwide owns a portfolio of consumer brands that includes Orbitz (www.orbitz.com), CheapTickets (www.cheaptickets.com), ebookers (www.ebookers.com), HotelClub (www.hotelclub.com), RatesToGo (www.ratestogo.com) and the Away Network (www.away.com). Also within the Orbitz Worldwide family, Orbitz Worldwide Distribution (corp.orbitz.com/partnerships/distribution) delivers private label travel solutions to a broad range of partners including many of the world's largest airlines, and Orbitz for Business (www.orbitzforbusiness.com) delivers managed corporate travel solutions for corporations. For more information on partnership opportunities with Orbitz Worldwide, visit corp.orbitz.com.
Orbitz Worldwide uses its Investor Relations website to make information available to its investors and the public at www.orbitz-ir.com. You can sign up to receive email alerts whenever the company posts new information to the website.
Terms and Conditions
(1) Up to 40% savings are available at participating hotels only. Minimum stay requirements and blackout dates may apply and will vary depending on market and hotel. Discounts are available on bookings made by 11/08/10 for travel between 10/11/10 and 12/31/10.
(2) To be eligible for the $50 Restaurant.com Gift Card, travel must be booked by 11/08/10.
(3) Up to 40% savings or free night stays are available at participating hotels only. Minimum stay requirements and blackout dates may apply and will vary depending on market and hotel. Prices shown in search results reflect discount and may exclude taxes and other fees. Discounts are available on bookings made by 10/18/10. $500 Offer: Book a qualifying Orbitz hotel between September 9, 2010 and 11:59 PM (Central Time) on October 18, 2010 for travel by November 15, 2010 and you will receive two coupon codes good for $250 off a qualifying flight + hotel booking of five (5) or more nights. Coupons must be redeemed on Orbitz.com by 11:59 PM (Central Time) on November 15, 2010 for travel between October 21, 2010 and April 15, 2011. Visit www.orbitz.com/sales for complete terms and conditions, including blackout dates.
This press release and its attachments may contain forward-looking statements that involve risks, uncertainties and other factors concerning, among other things, Orbitz Worldwide's (the "Company's") expected financial performance and its strategic operational plans. The results presented are unaudited. The Company's actual results could differ materially from the results 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 by the forward-looking statements in this press release and its attachments include, but are not limited to, the economic recession and general state of the financial markets; competition in the travel industry; factors affecting the level of travel activity, particularly air travel volume; maintenance and protection of the Company's information technology and intellectual property; the outcome of pending litigation; the Company's level of indebtedness; risks associated with doing business in multiple currencies; trends in the travel industry; 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 www.orbitz-ir.com. You are cautioned not to unduly rely on these forward-looking statements, which speak only as of the date of this press release. All information in this press release and its attachments is as of November 4, 2010, and Orbitz Worldwide undertakes no obligation to publicly revise any forward-looking statement.
About Non-GAAP Financial Measures
This press 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 press release is contained in Appendix A attached to this press release.
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 (benefit) 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:
EBITDA and Adjusted EBITDA, as presented for the three and nine months ended September 30, 2010 and September 30, 2009, 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, acquisition-related accounting 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.
The following table provides a reconciliation of net income (loss) to EBITDA:
EBITDA was adjusted by the items listed and described in more detail below. The following table provides a reconciliation of EBITDA to Adjusted EBITDA.
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 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:
SOURCE Orbitz Worldwide, Inc.