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A Bird’s-Eye View of Orbitz Worldwide’s Full Year Performance

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Orbitz posts double-digit growth

In fiscal 2014, Orbitz Worldwide Inc. (OWW) posted double-digit revenue growth on the back of strong hotel bookings. The company experienced a 10% year-over-year growth in its total revenues to $932 million. Orbitz derives its revenues from four primary sources: hotel 38%, air 28%, vacation package 16%, and advertising and media 7%.

Bookings for all these sources increased during the year and contributed to revenue growth. The majority of the growth came from higher revenues from hotel bookings, which increased 19% over the prior year period. This was influenced to a certain degree by the acquisition of Travelocity Partner Network (TPN) in the first quarter of 2014.

From a geographic standpoint, revenues from the United States were 74%, an increase of 12% over the prior year, to $691 million. International revenues at 26% were up 5% year-over-year, including the effect of foreign currency movements.

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Operating earnings show improvement

Orbitz’s acquisition of TPN resulted in higher cost of operations and marketing spend in dollar value. But the 8% year-over-year growth in operating expenses was less than proportional relative to the revenue growth. As a result, reported operating profit margin increased by ~150 bps (basis points) to 8.8% in fiscal 2014.

In fiscal 2013, the company recorded a tax benefit of $165 million due to the release of deferred tax asset valuation allowance. In fiscal 2014, Orbitz booked an income tax provision of $27 million. This resulted in narrower net profit of $17 million realized in fiscal 2014 compared to $165 million in the prior year. On a diluted per share basis, earnings dropped to $0.15 from $1.46 in fiscal 2013.

In comparison, Expedia’s (EXPE) diluted earnings per share increased to $2.99 from $3.09 in the previous year. Priceline Group (PCLN) posted a 26% year-over-year growth in diluted earnings per share.

OWW is a component of the SPDR S&P Retail ETF (XRT) and the iShares Russell 2000 Value ETF (IWN), making up 1.32% and 0.03% of the portfolios, respectively.

In the next part, we’ll take a detailed look at Orbitz’s cash flow generation.

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