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Segment Information (Tables)

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Summary of Segment Information

Segment information for the three and nine months ended September 30, 2019 and 2018 is as follows (in thousands):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2019				2018				2019				2018
Revenue
Travel Network	$	711,003			$	700,196			$	2,209,603			$	2,141,017
Airline Solutions	208,028				209,388				632,788				620,813
Hospitality Solutions	74,818				69,911				221,525				206,353
Eliminations	(9,650		)		(9,212		)		(30,350		)		(25,155		)
Total revenue	$	984,199			$	970,283			$	3,033,566			$	2,943,028
Adjusted Gross Profit (Loss) (a)
Travel Network	$	248,999			$	268,604			$	783,972			$	842,359
Airline Solutions	83,203				90,428				247,135				264,450
Hospitality Solutions	17,151				23,069				49,628				61,965
Corporate	(2,935		)		(4,315		)		(10,789		)		(12,732		)
Total	$	346,418			$	377,786			$	1,069,946			$	1,156,042
Adjusted Operating Income (Loss) (b)
Travel Network	$	158,938			$	182,533			$	511,907			$	590,380
Airline Solutions	24,644				28,505				62,728				82,030
Hospitality Solutions	(4,008		)		5,826				(15,471		)		9,927
Corporate	(46,500		)		(42,891		)		(143,375		)		(138,782		)
Total	$	133,074			$	173,973			$	415,789			$	543,555
Adjusted EBITDA(c)
Travel Network	$	210,306			$	229,983			$	663,525			$	735,669
Airline Solutions	66,945				74,094				191,284				217,629
Hospitality Solutions	9,618				16,116				24,497				38,830
Total segments	286,869				320,193				879,306				992,128
Corporate	(45,305		)		(41,688		)		(139,758		)		(135,283		)
Total	$	241,564			$	278,505			$	739,548			$	856,845
Depreciation and amortization
Travel Network	$	30,517			$	29,243			$	91,793			$	87,965
Airline Solutions	42,301				45,589				128,556				135,599
Hospitality Solutions	13,626				10,290				39,968				28,903
Total segments	86,444				85,122				260,317				252,467
Corporate	17,171				17,610				51,588				55,084
Total	$	103,615			$	102,732			$	311,905			$	307,551
Capital Expenditures
Travel Network	$	3,215			$	16,963			$	13,078			$	45,002
Airline Solutions	7,919				25,315				31,505				72,485
Hospitality Solutions	2,275				9,291				7,669				27,629
Total segments	13,409				51,569				52,252				145,116
Corporate	11,519				22,209				39,872				60,548
Total	$	24,928			$	73,778			$	92,124			$	205,664

______________________________

(a) The following table sets forth the reconciliation of Adjusted Gross Profit to operating income in our statement of operations (in thousands):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2019				2018				2019				2018
Adjusted Gross Profit	$	346,418			$	377,786			$	1,069,946			$	1,156,042
Less adjustments:
Selling, general and administrative	119,918				130,152				426,014				384,047
Cost of revenue adjustments:
Depreciation and amortization(1)	85,262				85,552				256,775				254,490
Amortization of upfront incentive consideration(2)	20,851				18,207				59,825				57,324
Stock-based compensation	6,927				7,112				21,552				19,184
Operating income	$	113,460			$	136,763			$	305,780			$	440,997

(b) The following table sets forth the reconciliation of Adjusted Operating Income to operating income in our statement of operations (in thousands): 

	Three Months Ended September 30,								Nine Months Ended September 30,
	2019				2018				2019				2018
Adjusted Operating Income	$	133,074			$	173,973			$	415,789			$	543,555
Less adjustments:
Joint venture equity income	1,027				333				1,973				2,455
Acquisition-related amortization(1c)	15,976				16,407				47,971				51,585
Acquisition-related costs(5)	9,696				—				30,337				—
Litigation costs, net(4)	(24,179		)		5,225				(21,355		)		7,073
Stock-based compensation	17,094				15,245				51,083				41,445
Operating income	$	113,460			$	136,763			$	305,780			$	440,997

(c) The following table sets forth the reconciliation of Adjusted EBITDA to income from continuing operations in our statement of operations (in thousands):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2019				2018				2019				2018
Adjusted EBITDA	$	241,564			$	278,505			$	739,548			$	856,845
Less adjustments:
Depreciation and amortization of property and equipment(1a)	78,060				76,226				232,617				225,649
Amortization of capitalized implementation costs(1b)	9,579				10,099				31,317				30,317
Acquisition-related amortization(1c)	15,976				16,407				47,971				51,585
Amortization of upfront incentive consideration(2)	20,851				18,207				59,825				57,324
Interest expense, net	39,743				39,291				117,364				116,809
Loss on extinguishment of debt	—				—				—				633
Other, net(3)	1,769				1,905				6,118				10,746
Acquisition-related costs (5)	9,696				—				30,337				—
Litigation costs, net(4)	(24,179		)		5,225				(21,355		)		7,073
Stock-based compensation	17,094				15,245				51,083				41,445
Provision for income taxes	7,795				25,021				31,783				61,371
Income from continuing operations	$	65,180			$	70,879			$	152,488			$	253,893

______________________________________________________

(1) Depreciation and amortization expenses:

a. Depreciation and amortization of property and equipment includes software developed for internal use.

b. Amortization of capitalized implementation costs represents amortization of upfront costs to implement new customer contracts under our SaaS and hosted revenue model, as well as amortization of contract acquisition costs.

c. Acquisition-related amortization represents amortization of intangible assets resulting from purchase accounting.

(2) Our Travel Network business at times provides upfront incentive consideration to travel agency subscribers at the inception or modification

of a service contract, which are capitalized and amortized to cost of revenue over an average expected life of the service contract, generally

over three years to ten years. This consideration is made with the objective of increasing the number of clients or to ensure or improve customer loyalty. These service contract terms are established such that the supplier and other fees generated over the life of the contract will exceed the cost of the incentive consideration provided up front. These service contracts with travel agency subscribers require that the customer commit to achieving certain economic objectives and generally have terms requiring repayment of the upfront incentive consideration if those objectives are not met.

(3) Other, net primarily includes foreign exchange gains and losses related to the remeasurement of foreign currency denominated balances included in our consolidated balance sheets into the relevant functional currency.

(4) Litigation costs, net represent charges associated with antitrust litigation and for the three months ended September 30, 2019 include the reversal of our previously accrued loss related to the US Airways legal matter for $32 million. See Note 10. Contingencies, to our consolidated financial statements.

(5)

Acquisition-related costs represent fees and expenses incurred associated with the 2018 agreement to acquire Farelogix.

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- Definition

Tabular disclosure of the profit or loss and total assets for each reportable segment. An entity discloses certain information on each reportable segment if the amounts (a) are included in the measure of segment profit or loss reviewed by the chief operating decision maker or (b) are otherwise regularly provided to the chief operating decision maker, even if not included in that measure of segment profit or loss.

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