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Segment Information | 3 Months Ended
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Mar. 31, 2020
Segment Reporting [Abstract] |
Segment Information | Segment Information Our reportable segments are based upon our internal organizational structure; the manner in which our operations are managed; the criteria used by our Chief Executive Officer, who is our Chief Operating Decision Maker ("CODM"), to evaluate segment performance; the availability of separate financial information; and overall materiality considerations. Our CODM utilizes Adjusted Gross Profit, Adjusted Operating (Loss) Income and Adjusted EBITDA as the measures of profitability to evaluate performance of our segments and allocate resources. Corporate includes a technology organization that provides development and support activities to our segments. The majority of costs associated with our technology organization are allocated to the segments primarily based on the segments' usage of resources. Benefit expenses, facility costs and depreciation expense on the corporate headquarters building are allocated to the segments based on headcount. Unallocated corporate costs include certain shared expenses such as accounting, finance, human resources, legal, corporate systems, amortization of acquired intangible assets, impairment and related charges, stock-based compensation, restructuring charges, legal reserves and other items not identifiable with one of our segments. We account for significant intersegment transactions as if the transactions were with third parties, that is, at estimated current market prices. The majority of the intersegment revenues and cost of revenues are fees charged by Travel Network to Hospitality Solutions for airline trips booked through our GDS. Our CODM does not review total assets by segment as operating evaluations and resource allocation decisions are not made on the basis of total assets by segment. The performance of our segments is evaluated primarily on Adjusted Gross Profit, Adjusted Operating (Loss) Income and Adjusted EBITDA which are not recognized terms under GAAP. Our uses of Adjusted Gross Profit, Adjusted Operating (Loss) Income and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. We define Adjusted Gross Profit as operating (loss) income adjusted for selling, general and administrative expenses, the cost of revenue portion of depreciation and amortization, restructuring and other costs, amortization of upfront incentive compensation and stock-based compensation included in cost of revenue. We define Adjusted Operating (loss) Income as operating (loss) income adjusted for equity method (loss) income, impairment and related charges, acquisition-related amortization, restructuring and other costs, acquisition-related costs, litigation costs, net, and stock-based compensation. We define Adjusted EBITDA as (loss) income from continuing operations adjusted for depreciation and amortization of property and equipment, amortization of capitalized implementation costs, acquisition-related amortization, amortization of upfront incentive consideration, interest expense, net, loss on extinguishment of debt, other, net, restructuring and other costs, acquisition-related costs, litigation costs, net, stock-based compensation and provision for income taxes. Segment information for the three months ended March 31, 2020 and 2019 is as follows (in thousands):
| Three Months Ended March 31, |  |  |  |  |  |  |  |  |
| 2020 |  | 2019 |  |  |  |  |  |  |
Revenue |  |  |  |  |  |  |  |  |  |
Travel Network | $ | 427,703 |  |  | $ | 773,968 |  |  |  |  |  |  |  |
Airline Solutions | 179,885 |  |  | 212,927 |  |  |  |  |  |  |  |
Hospitality Solutions | 59,237 |  |  | 72,831 |  |  |  |  |  |  |  |
Eliminations | (7,848) |  |  | (10,365) |  |  |  |  |  |  |  |
Total revenue | $ | 658,977 |  |  | $ | 1,049,361 |  |  |  |  |  |  |  |
Adjusted Gross Profit(a) |  |  |  |  |  |  |  |  |  |
Travel Network | $ | 112,169 |  |  | $ | 282,680 |  |  |  |  |  |  |  |
Airline Solutions | 52,027 |  |  | 78,131 |  |  |  |  |  |  |  |
Hospitality Solutions | 5,694 |  |  | 15,710 |  |  |  |  |  |  |  |
Corporate | (2,790) |  |  | (3,431) |  |  |  |  |  |  |  |
Total | $ | 167,100 |  |  | $ | 373,090 |  |  |  |  |  |  |  |
Adjusted Operating (Loss) Income(b) |  |  |  |  |  |  |  |  |  |
Travel Network | $ | 21,972 |  |  | $ | 193,172 |  |  |  |  |  |  |  |
Airline Solutions | (32,579) |  |  | 15,424 |  |  |  |  |  |  |  |
Hospitality Solutions | (16,457) |  |  | (5,717) |  |  |  |  |  |  |  |
Corporate | (45,806) |  |  | (47,117) |  |  |  |  |  |  |  |
Total | $ | (72,870) |  |  | $ | 155,762 |  |  |  |  |  |  |  |
Adjusted EBITDA(c) |  |  |  |  |  |  |  |  |  |
Travel Network | $ | 65,452 |  |  | $ | 242,855 |  |  |  |  |  |  |  |
Airline Solutions | 8,369 |  |  | 58,394 |  |  |  |  |  |  |  |
Hospitality Solutions | (4,855) |  |  | 7,005 |  |  |  |  |  |  |  |
Total segments | 68,966 |  |  | 308,254 |  |  |  |  |  |  |  |
Corporate | (44,563) |  |  | (45,905) |  |  |  |  |  |  |  |
Total | $ | 24,403 |  |  | $ | 262,349 |  |  |  |  |  |  |  |
Depreciation and amortization |  |  |  |  |  |  |  |  |  |
Travel Network | $ | 25,267 |  |  | $ | 30,555 |  |  |  |  |  |  |  |
Airline Solutions | 40,948 |  |  | 42,970 |  |  |  |  |  |  |  |
Hospitality Solutions | 11,602 |  |  | 12,723 |  |  |  |  |  |  |  |
Total segments | 77,817 |  |  | 86,248 |  |  |  |  |  |  |  |
Corporate | 18,044 |  |  | 17,195 |  |  |  |  |  |  |  |
Total | $ | 95,861 |  |  | $ | 103,443 |  |  |  |  |  |  |  |
Capital Expenditures |  |  |  |  |  |  |  |  |  |
Travel Network | $ | 2,329 |  |  | $ | 4,986 |  |  |  |  |  |  |  |
Airline Solutions | 6,392 |  |  | 12,490 |  |  |  |  |  |  |  |
Hospitality Solutions | 1,401 |  |  | 3,496 |  |  |  |  |  |  |  |
Total segments | 10,122 |  |  | 20,972 |  |  |  |  |  |  |  |
Corporate | 18,315 |  |  | 16,892 |  |  |  |  |  |  |  |
Total | $ | 28,437 |  |  | $ | 37,864 |  |  |  |  |  |  |  |
______________________________ (a)The following table sets forth the reconciliation of Adjusted Gross Profit to operating (loss) income in our statement of operations (in thousands):
| Three Months Ended March 31, |  |  |  |  |  |
| 2020 |  | 2019 |  |  |  |
Adjusted Gross Profit | $ | 167,100 |  |  | $ | 373,090 |  |  |  |  |
Less adjustments: |  |  |  |  |  |  |
Selling, general and administrative | 198,873 |  |  | 151,391 |  |  |  |  |
Cost of revenue adjustments: |  |  |  |  |  |  |
Depreciation and amortization(1) | 77,373 |  |  | 84,920 |  |  |  |  |
Amortization of upfront incentive consideration(2) | 18,213 |  |  | 19,128 |  |  |  |  |
Stock-based compensation | 7,357 |  |  | 7,244 |  |  |  |  |
Restructuring and other costs(6) | 16,695 |  |  | — |  |  |  |  |
Operating (loss) income | $ | (151,411) |  |  | $ | 110,407 |  |  |  |  |
(b)The following table sets forth the reconciliation of Adjusted Operating (Loss) Income to operating (loss) income in our statement of operations (in thousands):
| Three Months Ended March 31, |  |
| 2020 |  | 2019
Adjusted Operating (Loss) Income | $ | (72,870) |  |  | $ | 155,762 |
Less adjustments: |  |  |
Equity method (loss) income | (686) |  |  | 533 |
Acquisition-related amortization(1c) | 16,801 |  |  | 15,984 |
Acquisition-related costs(5) | 17,827 |  |  | 11,706 |
Litigation costs, net(4) | 1,741 |  |  | 1,438 |
Stock-based compensation | 17,577 |  |  | 15,694 |
Restructuring and other costs(6) | 25,281 |  |  |  | — |
Operating (loss) income | $ | (151,411) |  |  | $ | 110,407 |
(c)The following table sets forth the reconciliation of Adjusted EBITDA to (loss) income from continuing operations in our statement of operations (in thousands):
| Three Months Ended March 31, |  |  |  |  |  |
| 2020 |  | 2019 |  |  |  |
Adjusted EBITDA | $ | 24,403 |  |  | $ | 262,349 |  |  |  |  |
Less adjustments: |  |  |  |  |  |  |
Depreciation and amortization of property and equipment(1a) | 69,513 |  |  | 75,348 |  |  |  |  |
Amortization of capitalized implementation costs(1b) | 9,547 |  |  | 12,111 |  |  |  |  |
Acquisition-related amortization(1c) | 16,801 |  |  | 15,984 |  |  |  |  |
Amortization of upfront incentive consideration(2) | 18,213 |  |  | 19,128 |  |  |  |  |
Interest expense, net | 37,442 |  |  | 38,013 |  |  |  |  |
Other, net(3) | 47,486 |  |  | 1,870 |  |  |  |  |
Restructuring and other costs(6) | 25,281 |  |  | — |  |  |  |  |
Acquisition-related costs (5) | 17,827 |  |  | 11,706 |  |  |  |  |
Litigation costs, net(4) | 1,741 |  |  | 1,438 |  |  |  |  |
Stock-based compensation | 17,577 |  |  | 15,694 |  |  |  |  |
Provision for income taxes | (27,254) |  |  | 11,843 |  |  |  |  |
(Loss) income from continuing operations | $ | (209,771) |  |  | $ | 59,214 |  |  |  |  |
______________________________________________________ (1)Depreciation and amortization expenses: (a) Depreciation and amortization of property and equipment includes software developed for internal use as well as amortization of contract acquisition costs (b) Amortization of capitalized implementation costs represents amortization of upfront costs to implement new customer contracts under our SaaS and hosted revenue model. (c) Acquisition-related amortization represents amortization of intangible assets from the take-private transaction in 2007 as well as intangibles associated with acquisitions since that date. (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 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 a $46 million charge in connection with our proposed acquisition of Farelogix, as well as 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. See Note 3. Acquisitions for further detail regarding the Farelogix acquisition. (4)Litigation costs, net represent charges associated with antitrust and other foreign non-income tax contingency matters. See Note 12. Contingencies. (5)Acquisition-related costs represent fees and expenses incurred associated with the 2018 agreement to acquire Farelogix. (6)Restructuring and other costs represent charges associated with business restructuring and associated changes implemented which resulted in severance benefits related to employee terminations. In the first quarter of 2020, we recorded a $25 million charge associated with an announced action to reduce our workforce in connection with cost savings measures as a result of the market conditions caused by COVID-19.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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