Travelport Delivers Accelerating, Broad-Based Growth

Travelport Worldwide (TVPT +0.00%) announced second-quarter 2018 results earlier this month, detailing accelerated revenue growth as new business more than offset the travel-commerce platform company's painful loss of a global distribution system (GDS) contract with Australia-based Flight Centre last year. Travelport also reiterated its previous full-year guidance.

Still, shares have fallen 7% since Travelport's report hit the wires. Now that the dust has settled, let's take a closer look at what it accomplished over the past few months and what investors should expect looking forward.

IMAGE SOURCE: TRAVELPORT

Travelport results: The raw numbers

DATA SOURCE: TRAVELPORT WORLDWIDE. GAAP = Generally accepted accounting principles.

What happened this quarter

• On a non-GAAP basis, which excludes items like stock-based compensation and one-time tax adjustments, net income increased 4%, to $41.9 million and rose 2% on a per-share basis, to $0.41.
• Travelport doesn't provide specific quarterly guidance. For context, most analysts were looking for lower adjusted earnings of $0.30 per share. 
• Adjusted EBITDA rose 7%, to $156.9 million.
• Travel-commerce platform revenue grew 9%, to $638 million, including:
  • 5% growth in air segment revenue, to $443.9 million.
  • 21% growth from beyond air revenue, to $194.0 million, driven by an 81% increase in revenue (to $81 million) from Travelport's eNett commercial payments solution.
• By geography, the change in travel-commerce platform revenue included:
  • 2% growth from the Asia Pacific region, to $145 million.
  • 24% growth in Europe, to $223.3 million.
  • 7% growth in Latin America and Canada, to $29.5 million.
  • 5% growth in the Middle East and Africa.
  • 2% growth from the United States, to $158.5 million.
• Technology services revenue declined 15%, to $24 million, largely driven by last year's sale of IGT Solutions.
• Cash from operations increased 43%, to $119.2 million, and free cash flow rose 35%, to $81.4 million.

What management had to say

Travelport CEO Gordon Wilson described it as a "good quarter," adding:

Our strong performance enabled us to overcome the well-documented loss of a Pacific-based travel agency through winning new business in other regions. In fact, revenue growth accelerated across all regions in the quarter, with air market share growth in Asia, Europe and Latin America. [...] Looking ahead, we remain on track to deliver our financial guidance for the full year. This is notwithstanding the likelihood of a more challenging market environment in the second half, due to recent travel demand being adversely impacted by the heatwave in Northern Europe and potential further impacts from higher jet fuel prices and tensions in global trade. Despite this and the impact of terminating our agreement with a European OTA [online travel agency] due to their contract breach, we remain well positioned for long-term growth as we continue to invest in our key areas of differentiation, including search, merchandising and shopping, mobile enablement, payments and our industry-leading hybrid cloud architecture. Furthermore, we are on course to deliver the first wave of IATA NDC API-sourced content to our customers.

Looking forward

Travelport continues to expect full-year revenue to increase 4% to 6% over 2017, or to a range of $2.535 billion to $2.585 billion. It also still anticipates 2018 adjusted EBITDA of $585 million to $605 million and adjusted net income per share of $1.34 to $1.46.

So why the post-earnings decline? For one, shares still are up more than 50% from their 52-week low set this past February, likely leaving many tempted to take profits off the table despite this solid performance. Wall Street also may be disappointed that Travelport opted not to increase its outlook in light of its relative outperformance this quarter.

Still, I think long-term investors should be more than pleased with where Travelport stands today.