Orbitz Worldwide, Inc. Reports Third Quarter 2010 Results
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.
Air net revenue was $65.2 million in the third quarter 2010, up nine percent (ten percent on a constant currency basis) year over year. Domestic air net revenue was relatively flat year over year. International air net revenue increased $5.0 million or 42 percent (47 percent on a constant currency basis) year over year due primarily to higher air transactions and higher average net revenue per airline ticket. For the third quarter 2010, air net revenue, including air net revenue booked as part of a vacation package, represented 38 percent of the company's total net revenue.
• Hotel net revenue was $56.5 million in the third quarter 2010, up eight percent (six percent on a constant currency basis) year over year. Domestic hotel net revenue increased due primarily to higher hotel transactions and higher average net revenue per transaction. The higher average net revenue per transaction was driven by an increase in average daily rates for hotel rooms, fewer promotional coupons issued by the company and an increase in rebates from a payment vendor, partially offset by a lower average length of stay. ebookers also posted another quarter of strong growth in standalone hotel transactions which contributed to the increase in hotel net revenue. Net revenue at HotelClub declined due to lower transactions for European destinations, a continued mix shift towards hotel bookings in lower margin markets and an increase in estimated redemption rates related to its loyalty program. For the third quarter 2010, hotel net revenue, including hotel net revenue booked as part of a vacation package, represented 38 percent of the company's total net revenue.
• Vacation package net revenue increased one percent in the quarter to $30.2 million. Domestic vacation package net revenue was up due to higher average net revenue per transaction driven by higher air fares and higher average daily rates for hotel rooms, the combination of which more than offset lower transactions. International vacation package net revenue increased due primarily to higher transactions, largely offset by lower average net revenue per package.
• Advertising and media revenue decreased 16 percent year over year to $12.2 million, primarily due to a $3.2 million decline in revenue from membership discount programs. Effective March 31, 2010, the company ended the membership discount program previously offered on its domestic websites.
• Other net revenue, which primarily includes car rental, cruise, destination services, travel insurance and airline hosting revenue, increased two percent (three percent on a constant currency basis) year over year. This increase was due primarily to higher net revenue from travel insurance as a result of higher insurance attachment rates, higher average air fares and higher air transactions. Net revenue from car rentals also increased in the third quarter due to higher car rental transactions partially offset by lower average daily rates for car rentals. These increases were offset in part by the decline in airline hosting revenue due to the termination of one of the company's airline hosting agreements in the first quarter 2010.
• In August, Orbitz launched a new hotel search experience on its website. The enhancements introduced to the Orbitz website line up with the Orbitz commitment to give consumers the information, tools and resources needed to make smart decisions when booking a hotel, and reinforce the promise of the tagline in the new Orbitz advertising campaign "When You Orbitz, You Know."
• In October, Orbitz launched its "I Love the Gulf" Promotion, offering up to 40 percent off (1) participating hotels for travel between October 11, 2010 and December 31, 2010.In addition, Orbitz will provide a $50 Restaurant.com Gift Certificate (2) for travelers who book by November 8, 2010.
• In September, Orbitz launched its annual Fall Hotel Sale, offering travelers up to 40 percent off select hotels and $500 off future travel for thousands of hotels worldwide. (3)
• During the third quarter, Orbitz Worldwide signed agreements with a number of European hotel partners, including Iberostar, Viva Hotels, SINA Hotels, Thon Hotels and Dedeman Hotels & Resorts.
• During the third quarter, Orbitz Worldwide signed global contracts with a number of destination marketing organizations, including Visit London, Dominican Republic Tourism Ministry, Costa Rica Tourism & Travel Bureau and Grenada Bureau of Tourism, to promote travel to those destinations. Orbitz Worldwide now has partner marketing agreements with nearly 180 destination marketing organizations.
• Orbitz for Business completed a solid third quarter, delivering 32 percent year over year gross bookings growth. This growth reflects continued acceleration in corporate travel demand and the addition of new customers, such as Cobham PLC and The Lane Construction Corporation - one of America's premier heavy contractors. In addition, Orbitz for Business signed a global expansion contract with Biomet and renewed its contract with Realogy. Orbitz for Business also released two new traveler safety tools - Orbitz for Business Traveler Limit(SM) and Orbitz for Business Traveler Locator(SM) - that give travel managers and senior business leaders the ability to provide increased traveler security and ensure greater business continuity during unforeseen travel disruptions.
• In August, Orbitz for Business entered into a strategic partnership with trip management service TripIt.Available to Orbitz for Business customers, TripIt helps road warriors share travel itineraries with colleagues and clients in their social and professional networks, and provides innovative travel tools that improve the overall travel experience.
• During the third quarter, the company launched a customized private label solution for Alaska Airlines, enabling their customers to book hotels and car rentals using the Orbitz Worldwide global network of suppliers.
• As of September 30, 2010, Orbitz had over 6,000 travel agents participating in itsOrbitz for Agents program, which offers travel agents the opportunity to earn commissions on hotel reservations and customized travel package bookings made on behalf of their customers.
For the full year 2010, the company expects:
• one percent to two percent year over year increase in net revenue;
• 19 percent to 21 percent cost of revenue as a percentage of net revenue;
• marketing expense as a percentage of net revenue for full year 2010 to approximate full year 2009 levels;
• four percent to six percent year over year increase in Adjusted EBITDA; and
• capital expenditures in the range of $39 million to $42 million.