Issuu on Google+

an ag em en t

se tM

Presentation

Investment Banking Case Competition

Br

ui

n

As

Ice Point Solutions Darren Tan Darryl Tan Fangfei Li Will Wolf


an ag em en t

Company Overview

Valuation and Financial Overview

Orbitz Worldwide (OWW)

(In millions, except per share amounts)

Company Overview

Capitalization

OWW is a leading global online travel company that uses innovative technology to enable leisure and business travelers to search for, plan, and book a broad range of travel products and services. These include airline tickets, hotels, car rentals, cruises, and vacation packages. Growth Potential

Firm Specific Risks

1.10B 422 (188)

Enterprise Value

1.33B

FYE 31-Jan

2014A

Revenue Growth Adj. EBITDA Margin (%)

932.0 10.0% 139.6 15.0%

2015E

2016E

2017E

985.9 5.8% 158.9 16.1%

1043.9 5.9% 167.5 16.0%

1101.1 5.5% 197.1 17.9%

Historical & Projected Adj. EBITDA

As

3 years historical CAGR: 5.85% 6 years projected CAGR: 8.42%

117.7

119.7

139.6

259.5 158.9

167.5

197.1

292.3

227.7

n

115.1

ui

Competition from existing firms and new entrances Relatively small size impairs negotiating power for deals Reliance on search engines and their algorithms to generate traffic Disruptions in third-party providers could negatively impact services Ongoing legal proceedings may amount to additional litigation costs

Br

   

9.62 114

Market Capitalization Net Debt as of Feb 11, 2015 Cash & Cash Equivalents

se tM

OWW is expected to experience revenue growths and cost efficiencies in future periods through the following: 1) Shift of business focus towards hotels 2) Emphasis on mobile app and rewards program to capture growing millennials market 3) International expansion into emerging markets

Share Price as of Feb 11, 2015 Diluted Shares Outstanding

Orbitz Worldwide, Inc. (OWW) - NYSE

2011A 2012A 2013A 2014A 2015E 2016E 2017E 2018E 2019E 2020E


Income statement ($ in millions)

Fiscal Year ended December 31, 2011 2012 2013

2014 Quarterly Breakdown Q2 Q3

Q1

$757.5 2.7%

$766.8 1.2%

$778.8 1.6%

$847.0 8.8%

Cost of goods sold % revenue

$138.3 18.3%

$139.4 18.2%

$147.8 19.0%

$154.4 18.2%

Gross profit % margin

$619.2 81.7%

$627.4 81.8%

$631.0 81.0%

$692.6 81.8%

S,G&A Marketing Depreciation & Amortization EBIT (Operating income) % margin Interest expense Pre-tax income

$244.1 232.8 72.9 ($11.8) (1.6%) 44.1 ($55.9)

$270.6 241.7 60.5 $4.7 0.6% 40.5 ($35.8)

$260.3 253.0 57.0 ($261.9) (33.6%) 36.6 ($298.5)

$280.4 292.5 55.1 $62.0 7.3% 43.8 $18.2

$66.2 76.8 13.6 $10.9 5.2% 9.6 $1.3

$72.0 89.6 15.3 $23.5 9.5% 8.6 $14.9

Adj. EBITDA % margin

$142.3 18.8%

$115.1 15.0%

$119.7 14.1%

$24.5 11.6%

$40.0 5.3%

$44.1 5.7%

$47.0 6.0%

$39.3 4.6%

$7.7 3.7%

LTM 12/31/2014

FYE 2015E

$248.1 18.0%

$253.1 2.0%

$220.6 (12.9%)

$932.0 10.0%

$932.0 -

$985.9 5.8%

$42.7 20.3%

$47.6 19.2%

$49.6 19.6%

$39.8 18.0%

$179.8 19.3%

$179.8 19.3%

$181.1 18.4%

$167.5 79.7%

$200.4 80.8%

$203.5 80.4%

$180.8 82.0%

$752.2 80.7%

$752.2 80.7%

$804.8 81.6%

$70.8 92.4 14.7 $25.6 10.1% 8.0 $17.7

$69.1 75.7 14.0 $22.0 10.0% 9.1 $12.9

$278.2 334.5 57.5 $82.0 8.8% 35.2 $46.8

$278.2 334.5 57.5 $82.0 8.8% 35.2 $46.8

$285.7 360.2 50.6 $108.3 11.0%

$117.7 15.1%

$38.8 15.6%

$40.3 15.9%

$36.0 16.3%

$139.6 15.0%

$139.6 15.0%

$158.9 16.1%

$13.5 5.4%

$16.5 6.5%

$13.4 6.1%

$51.1 5.5%

$51.1 5.5%

$54.2 5.5%

n

ui Br

Capital expenditures % revenue

2014

$210.3 (0.7%)

As

Sales revenue % growth

Q4

se tM

2010

an ag em en t

Financial Summary

Orbitz Worldwide, Inc. (OWW) - NYSE

–


an ag em en t

Online Travel Agency Industry

The Online Travel Agency (OTA) Market Market Overview

Growth Potential

Potential Industry Risks

$463B industry

Steady growth expected in all regional markets

Projected to grow to $714B by 2017

Expected to comprise roughly half of all travel sales worldwide by 2020

Poised for rapid growth in all EMs, especially East Asia

Possible replication in other travel booking sectors

Potential entry to the market by traditional search engine firms

Largely shifting away from airfare bookings to high margin hotel and vacation package sector

Dependent upon global discretionary spending; tied to economic stability

Seasonal nature of industry

Positioned for global online penetration

Projected global discretionary spending expected to increase travel expenditures

se tM

The Projected International Expansion for OTAs

800 600 200 0

2016

2017

ui

APAC

2015 LATAM

Europe

US

Br

2014

n

As

400

Orbitz Worldwide, Inc. (OWW) - NYSE

Domestic OTA Industry Shares

Orbitz Expedia Priceline Other


Secure market position translates into strong and stable revenues

 

Considerable market share in the US, Europe and Asia Well recognized and diversified brands with global reach

Opportunities for organic growth

Effective cost management strategies 

Global Platform technology enables cost reduction across subsidiary firms

Minimal capital expenditure requirement 

Existing facilities and equipment are well positioned for growth objectives

ui

Innovative and visionary management Actively pursuing corporate contracts in addition to traditional consumer services

Br

 

n

Poised to adapt to a changing marketplace

Orbitz Stock Information

Ticker Symbol: OWW Industry Name: Online Travel Agencies Current Price (Feb 11, 2015): $9.62 52-week high: $11.8 52-week low: $6.5

Orbitz Stock Price

se tM

  

Increasing traction of Orbitz mobile application and Orbitz Rewards captures millennial markets Improving business mix towards hotels with greater revenue margins International expansion in growing markets Positive industry growth prospects

As

an ag em en t

Investment Thesis

Orbitz Worldwide, Inc. (OWW) - NYSE

Feb 11: $9.62


Leading player in online travel

Recognized and diversified travel solutions

Strong revenues and stable cash flow : • 5 years of consecutive revenue growth with 6.3% CAGR • 12/31/2014 LTM Adj. EBITDA of $139.6 million, stable 15% margin

International Presence

se tM

• Established presence in the United States online travel market with 21% market share • Operates out of 12 countries in Europe and has an expanding presence in Asia • High brand awareness and customer loyalty with 60% repeat customers

an ag em en t

Secure Market Position

Br

ui

n

As

• HotelClub is a global hotel-only brand with an Asia Pacific focus • Ebookers is strategically focused on the European market • Strong global brands specifically catered to corporate travel clients and private label partners • Orbitz for Business service creates custom made flight, transportation, and, hotel package bundles for corporate clients

Orbitz Worldwide, Inc. (OWW) - NYSE


• Transition to a hotel centric revenue source looks to take advantage of an expanding, high margin market •Focus on ROI-positive variable marketing spending for hotel bookings •Double digit percentage growth in hotel growth for 7 consecutive years •Orbitz for Business service creates custom made flight, transportation, and, hotel package bundles for corporate clients

an ag em en t

Increased Focus in Hotel Sector

Membership for Direct Booking and OTAs

Nonmember Member

Hotel Booking % by Mobile

27

Q2'13

ui

Q1'13

Q3'13

Q4'13

Q1'14

Br

Q4'12

2014

2015

2016

Air

257

256

256

Hotel

350

381

416

Vacation Package

150

158

166

30

n

22

OTA

Projected Breakdown of Revenues

As

25 21

28

se tM

Direct Booking

Orbitz Worldwide, Inc. (OWW) - NYSE


Unique Customer Rewards Programs Orbucks are earned on vacation packages which can only be redeemed on hotel reservations

Offers instant redemption with no blackout dates and no minimum redemption hurdles

Orbitz Rewards Visa credit card is expected to boost international sales

Mobile Applications

Loyalty programs are deeply integrated into mobile applications

Intuitive user interface that is available to both Android and Apple IOS operating systems

Incentivizes members’ further use of OWW’s mobile apps by offering additional Orbucks on bookings

Br

ui

n

As

se tM

an ag em en t

Key Business Value Drivers


Operating schedule ($ in millions)

FYE 2013

LTM 12/31/2014

2021

2022

$932.0 10.0%

$985.9 5.8%

$1,043.9 5.9%

$1,101.1 5.5%

$1,158.1 5.2%

$1,215.2 4.9%

$1,272.3 4.7%

$1,329.5 4.5%

$1,386.6 4.3%

Cost of goods sold % revenue

$154.4 18.2%

$179.8 19.3%

$181.1 18.4%

$191.8 18.4%

$202.3 18.4%

$212.8 18.4%

$223.3 18.4%

$233.8 18.4%

$244.3 18.4%

$254.8 18.4%

Gross profit % margin

$692.6 81.8%

$752.2 80.7%

$804.7 81.6%

$852.1 81.6%

$898.7 81.6%

$945.3 81.6%

$991.9 81.6%

$1,038.6 81.6%

$1,085.2 81.6%

$1,131.8 81.6%

SG&A % revenue

$280.4 33.1%

$278.2 29.8%

$285.7 29.0%

$291.6 27.9%

$297.5 27.0%

$303.4 26.2%

$309.2 25.4%

$315.1 24.8%

$321.0 24.1%

$326.9 23.6%

Marketing % revenue

$292.5 34.5%

$334.5 35.9%

$360.2 36.5%

$393.1 37.7%

$404.2 36.7%

$414.3 35.8%

$423.2 34.8%

$431.1 33.9%

$438.0 32.9%

$443.7 32.0%

EBIT % margin

$62.0 7.3%

$82.0 8.8%

$108.3 11.0%

$120.2 11.5%

$153.1 13.9%

$187.0 16.1%

$222.0 18.3%

$258.1 20.3%

$295.3 22.2%

$333.6 24.1%

Depreciation & Amortization % revenue

$55.1 6.5%

$57.5 6.2%

$50.6 5.1%

$47.3 4.5%

$44.0 4.0%

$40.7 3.5%

$37.4 3.1%

$34.1 2.7%

$30.9 2.3%

$27.6 2.0%

$117.1 13.8%

$139.6 16.5%

$158.9 18.8%

$167.5 19.8%

$197.1 23.3%

$227.7 26.9%

$259.5 30.6%

$292.3 34.5%

$326.2 38.5%

$361.2 42.6%

$2.6 0.3%

– –

– –

– –

– –

– –

– –

– –

– –

– –

$119.7 14.1%

$139.6 15.0%

$158.9 16.1%

$167.5 16.0%

$197.1 17.9%

$227.7 19.7%

$259.5 21.4%

$292.3 23.0%

$326.2 24.5%

$361.2 26.0%

$39.3 4.6%

$51.1 5.5%

$54.2 5.5%

$57.4 5.5%

$30.8 2.8%

$31.8 2.8%

$33.4 2.8%

$35.0 2.8%

$36.6 2.8%

$38.1 2.8%

As

n

ui

Capital expenditures % revenue

Expansionary Phase for the first 3 years: • Higher marketing projections as a percentage of revenue • Adjusted EBITDA growth stagnant for 2016 due to costs

Br

Adj. EBITDA % margin

2017

se tM

2020

$847.0 8.8%

EBITDA adjustments % revenue

2016

Fiscal year ended December 31, 2018 2019

Sales revenue % growth

Unadjusted EBITDA % margin

2015

an ag em en t

Operating Model and Discussion of Assumptions

Orbitz Worldwide, Inc. (OWW) - NYSE

COGS increased sharply in 2014 due to the purchase of TPN

Capital expenditures decreasing after the expansionary phase of the first 2 years


Discounted Cash flow ($ in millions)

$187.0 40.7 – 56.9 31.8 13.4 $125.6 94.7

2020

WACC

Implied Share Price 6.3% 6.8% 7.3% 7.8% 8.3%

8.6x 21.5 20.9 20.3 19.7 19.2

Exp. Share Price Growth 6.3% 6.8% 7.3% 7.8% 8.3%

ui

Br

Orbitz Worldwide, Inc. (OWW) - NYSE

8.6x 123.5% 117.1% 111.0% 105.2% 99.5%

9.1x 22.5 21.8 21.2 20.6 20.0

Exit Multiple 9.6x 23.4 22.8 22.1 21.5 20.9

9.1x 133.6% 126.8% 120.3% 114.1% 108.2%

Exit Multiple 9.6x 143.6% 136.5% 129.7% 123.1% 116.9%

2022

2021

$333.6 27.6 – – 38.1 13.5 $309.6 176.1

$295.3 30.9 – 110.9 36.6 13.4 $165.3 100.9

$258.1 34.1 – 89.4 35.0 13.4 $154.5 101.2

$222.0 37.4 – 72.6 33.4 13.4 $140.0 98.4

se tM

$153.1 44.0 – 42.4 30.8 13.5 $110.4 89.3

n

Terminal Value: EV/EBITDA multiple 9.6x WACC 7.3% Terminal value $3,467.3 Discounted terminal value 1,971.9 Equity Value Enterprise value 2,759.9 Less: Total debt (421.9) Plus: Total cash & cash equivalents 188.5 Equity value 2,526.5 Share Price Calculation Total shares outstanding 114.3 Implied share price 22.1 Current share price 9.6 Expected share price growth 129.7%

$120.2 47.3 – 29.2 57.4 13.7 $67.2 58.4

Fiscal year ended December 31, 2019 2018

As

$108.3 50.6 – 17.8 54.2 12.7 $74.2 69.2

WACC

EBIT Plus: Depreciation Plus: Amortization Less: Taxes Less: Capital expenditures Less: Changes in working capital Unlevered free cash flow Discounted free cash flow

2017

2016

2015

an ag em en t

DCF Analysis

10.1x 24.4 23.7 23.0 22.3 21.7

10.6x 25.4 24.6 23.9 23.2 22.5

10.1x 153.7% 146.2% 139.0% 132.1% 125.5%

10.6x 163.8% 155.9% 148.4% 141.1% 134.2%


an ag em en t

Cash Flow Model

As

se tM

Free Cash Flow Summary

2019

2016

2017

2018

2020

2021

2022

IRR given different exit (9.8%) years

1.8%

13.0%

17.1% 18.7% 19.2%

19.2%

19.0%

1.0x

1.4x

1.9x

2.4x

2.9x

3.4x

Orbitz Worldwide, Inc. (OWW) - NYSE

$3,000.0 $2,479.09

$1,973.0

$740.2

$2,500.0 $2,000.0

$1,650.21

4.0x

ui

0.9x

Br

MOIC given different exit years

n

2015

$1,500.0

Net equity

$1,000.0

Total debt

$500.0

$910.0

$506.1

Purchase

–

Exit


Online Travel Agencies ($ in millions)

Stock Price

Orbitz

$9.62

The Priceline Group Inc. (PCLN) 1,221.1 TripAdvisor Inc. (TRIP) 82.8 Expedia Inc. (EXPE) 98.9 Travelzoo Inc. (TZOO) 13.0 Extended Stay America, Inc. (STAY) 20.4

52-Week % of 52TEV High Week High High % of 52-Week $12.03 80.0% $1,333.4 1,329.9 111.2 100.1 19.7 24.2

91.8% 74.4% 98.8% 66.1% 84.3%

TEV / EBITDA 9.6x

53,789.0 10,895.0 11,831.0 142.0 6,920.0

18.7x 31.0x 16.7x 5.4x 12.9x

Gross margin

EBITDA margin

80.8%

15.6%

10.3%

4.5%

3.0x

7.4%

11.8x 15.5x 8.7x 12.0x 6.8x

26.1x 53.4x 33.3x 14.2x 106.0x

89.8% 96.8% 79.5% 87.5% 51.4%

39.0% 30.0% 13.1% 9.2% 44.4%

18.1% 16.0% 9.2% 18.4% 11.0%

19.1% 12.5% 4.4% 8.2% 4.9%

1.2x 0.9x 2.3x -4.1x

27.8% 26.4% 8.0% 3.0% 8.6%

11.0x 11.8x 15.5x 6.8x

46.6x 33.3x 106.0x 14.2x

81.0% 87.5% 96.8% 51.4%

27.1% 30.0% 44.4% 9.2%

14.5% 16.0% 18.4% 9.2%

9.8% 8.2% 19.1% 4.4%

1.7x 1.2x 4.1x --

14.8% 8.6% 27.8% 3.0%

se tM

63.6x

Equity purchase multiple 9.6x 10.1x 15.7% 13.5% 17.2% 15.1% 18.7% 16.5% 20.1% 17.9% 21.4% 19.2%

10.6x 11.6% 13.1% 14.6% 15.9% 17.2%

IRR 1.8% 2.3% 2.8% 3.3% 3.8%

As

9.1x 18.0% 19.6% 21.1% 22.5% 23.9%

8.0x

n

8.6x 20.7% 22.3% 23.9% 25.3% 26.7%

P/E ratio

ui

IRR 8.6x 9.1x 9.6x 10.1x 10.6x

16.9x 16.7x 31.0x 5.4x

Br

Equity exit multiple

Mean Median High Low

TEV / 2yr EBITDA

2017 - 2022 capex as % of revenue

Company Name

an ag em en t

Market Comparables and IRR Analysis

Orbitz Worldwide, Inc. (OWW) - NYSE

3.5% 18.1% 18.2% 18.2% 18.1% 18.0%

4.5% 17.8% 17.9% 17.9% 17.8% 17.7%

ROIC

ROA

Total debt / EBITDA EBITDA 10yr CAGR

2017 - 2022 growth rate 5.5% 6.5% 17.8% 18.1% 17.9% 18.2% 17.9% 18.2% 17.8% 18.1% 17.7% 18.0%

7.5% 18.8% 18.9% 18.9% 18.8% 18.7%


Description

an ag em en t

Risks & Mitigations

Mitigating Factors

Orbitz looks to expand into the high growth East Asian market that still possesses the potential to see major swings in market share, currently 26% international revenues

Travel suppliers may choose to sell to consumers directly through their own sites

While major airlines have seen success in promoting their own booking sites, most hotel chains lack the geographic presence to successfully forgo a third-party service

Smaller Relative Size

Relatively small amount of vendors exposes Orbitz to greater risk stemming from overall health of travel industry

Orbitz rapid shift away from providing primarily air travel bookings will further diversify and expand its current industry vendors

Volatile Travel Industry

Most revenues at the mercy of the performance of entire travel industry, which has been recently rather volatile

Projected slow global emergence from recession should steadily ensure a general positive trend in the travel industry for the foreseeable future

As

n

ui

Br

Travel Agency Independence

se tM

OTA market is heavily saturated and highly competitive

Domestic Industry Crowding

Orbitz Worldwide, Inc. (OWW) - NYSE


Credit suisse case competition (1st place) 2015