Friday, 31 January 2020

Allegiant's 2019 results

The US budget carrier Allegiant has this week reported its latest financial results for the fourth quarter and full year 2019, as well as comparisons to the prior year.

"I am very happy to report our 68th consecutive profitable quarter and another profitable year," stated Maurice J. Gallagher, Jr., chairman and CEO of Allegiant Travel Company. "The airline group successfully grew operating margin from 15 percent in 2018 to over 21 percent in 2019. Our success is very much tied to the efforts of our valued team members, who this year have also voted Allegiant as one of the Top 100 Best Places to Work according to Glassdoor's national survey. We are committed to investing in our people and are happy to report that profit sharing payments to our employees company-wide are up nearly 80 percent from 2018. We could not achieve these outstanding financial and operational results without our dedicated team members, and I thank them for another truly extraordinary year.


"The highlights below show what a remarkable year we had in 2019, post our transition to our all-Airbus fleet. This transition is working as expected regarding both operations and profitability. We had an excellent operational quarter and year, averaging $6.3 million of EBITDA per aircraft this year, as predicted. We recently announced 44 new routes in the coming months - the largest network expansion in company history - which will bring us to more than 500 routes served. We truly are becoming a national brand as our reach stretches from coast to coast. Our non-competitive approach and limited-utilization model continues to work as it has for the past 18 years, allowing us to generate industry-leading profits.

"In closing, I would like to congratulate Scott DeAngelo on his promotion to executive vice president and chief marketing officer. In the nearly two years he has been with us, he has been the critical cog in our efforts to better understand our customers via a more data centric approach. This is a critical requirement in our Allegiant 2.0 evolution. He also led the negotiations in our recent efforts to obtain the Allegiant Stadium naming rights. We are fortunate to have Scott, with his talent and experience on the team as we evolve into a customer-centric travel company in the coming years."



Consolidated
Three Months Ended
December 31,
Percent
Change

Twelve Months
Ended December 31,
Percent
Change
(unaudited)
2019

2018


2019

2018

Total operating revenue (millions)
$
461.1


$
412.1

11.9
%

$
1,841.0


$
1,667.4

10.4
%
Operating income (millions)
92.7


63.1

46.9


364.0


243.5

49.5

Net income (millions)
60.5


41.4

46.1


232.1


161.8

43.4

Diluted earnings per share
$
3.72


$
2.56

45.3


$
14.26


$
10.00

42.6





























































Airline only
Three Months Ended
December 31,
Percent
Change

Twelve Months
Ended December 31,
Percent
Change
(unaudited)
2019

2018


2019

2018

Airline operating revenue (millions)(1)
$
456.6


$
409.9

11.4
%

$
1,822.5


$
1,659.1

9.8
%
Airline operating income (millions)(1)
97.4


68.2

42.8
%

388.7


255.9

51.9
%
Airline operating margin
21.3
%

16.6
%
4.7 pts.

21.3
%

15.4
%
5.9 pts.
Airline diluted earnings per share(1)
$
4.04


$
2.87

40.8
%

$
15.88


$
10.77

47.4
%










Airline CASM ex fuel (cents)(1)
6.50


6.60

(1.5)
%

6.22


6.43

(3.3)
%

(1) Denotes a non-GAAP financial measure. Refer to Appendix A: Non-GAAP Presentation section within this document for further information.



FY 2019 guidance recap
  • Fuel cost per gallon for 2019 was $2.18three cents higher than our expectation of $2.15
    • Expectation going into fourth quarter was $2.08, whereas actual cost was $2.18
      • Increase drove a $0.29 reduction in our expected fourth quarter EPS
  • Sunseeker Resort project spend expected between $90 to $100 million with actual spend at $48 million
    • No change in anticipated second quarter 2021 opening
    • Lower spend resulted in reduced capitalized interest causing interest expense to be slightly higher than guidance
  • Ended 2019 with 91 total A320 series aircraft, two fewer than expected
    • Incremental two aircraft have been placed in service in early 2020
      • Still expect to have 105 aircraft by end of 2020
  • Airline capex spend exceeded guidance
    • Driven by opportunistic engine acquisitions and earlier than planned aircraft deliveries
Airline only fourth quarter 2019 results
  • Diluted earnings per share were $4.04, an increase of over 40 percent versus last year
  • 21.3 percent operating margin for the quarter, up 4.7 points year over year
  • TRASM increased 2.5 percent despite capacity growth of 8.3 percent
    • Despite a 0.5 percent TRASM headwind from our initial co-branded credit card breakage revenue in fourth quarter 2018
  • Average fare - air related charges (air ancillary) up 13.4 percent year over year
    • Four consecutive quarters of air ancillary in excess of $50 per passenger
  • Third party products revenue up 17.4 percent versus last year
    • Hotel net revenue grew 22 percent and car rental net revenue grew 16 percent, far exceeding passenger growth
  • Operating CASM, excluding fuel, declined 1.5 percent
    • Efficiencies in maintenance along with more targeted marketing spend were the largest drivers of improvement
    • Year over year decrease is less than initial expectations due to higher than expected profit sharing payments to employees and unplanned line maintenance events
Airline only full year 2019 highlights
  • Industry-leading controllable completion of 99.96 percent, up versus prior year
  • On time performance (A-14) for the year was 78.7 percent, up 1.8 points year over year
  • Average fare - third party products revenue up 10.5 percent year over year on a per passenger basis
    • Driven by higher rental car net revenue and increased activity from our co-branded credit card
  • Fixed fee contract revenue of $65 million
    • Highest annual total in the company's history
  • Operating CASM, excluding fuel, declined 3.3 percent
    • Reduction on a unitized basis in every operating expense line item with the exception of depreciation
    • CASM, excluding fuel and profit sharing would have declined 4.4 percent
  • ASMs per gallon up 5.8 percent in 2019 versus 2018
  • EBITDA of $536.9 million, up 40 percent over the prior year
    • Average airline EBITDA per aircraft of $6.3 million
Liquidity and shareholder returns
  • Total cash and investments at December 31, 2019 were $473 million
  • Total debt of $1.4 billion
  • We have 27 unencumbered aircraft
  • Returned $11 million in dividends in the fourth quarter
    • Expect to pay dividend of $0.70 per share on March 12, 2020 to shareholders of record as of March 2, 2020
  • Currently have approximately $85 million in share repurchase authority
  • Drew down $81 million from the revolving credit facility to facilitate aircraft and engine acquisitions
    • Intend to raise long-term financing on these assets individually and use the proceeds to pay down the facility
Non-airline highlights
  • Non-airline businesses resulted in a combined operating loss of $4.7 million during fourth quarter
  • In negotiation with potential buyer for Teesnap

Guidance, subject to revision





Full year 2020 guidance

Previous
Current
Fuel cost per gallon

$2.12
$2.15
Available seat miles (ASMs) / gallon

82.5 to 83.5
82.5 to 83.5




Interest expense (millions)

$75 to $80
$75 to $80
Capitalized interest (millions)

$16 to $19
$16 to $19
Tax rate

23.0% to 24.0%
23.0% to 24.0%
Share count (millions)

16.0
16.0
Earnings per share

$16.50 to $19.00
$16.50 to $19.00




System ASMs - year over year change

10 to 12%
10 to 12%
Scheduled service ASMs - year over year change

10 to 12%
10 to 12%




Depreciation expense (millions)

$180 to $190
$180 to $190
Airline operating CASM excluding fuel - year over year change

(2) to 0%
(2) to 0%




Airline CAPEX - full year 2020



Capital expenditures (millions)

$275 to $295
$275 to $295
Capitalized Airbus deferred heavy maintenance (millions) *

$100 to $120
$100 to $120




Sunseeker Resorts Project - 2020



Expected full year 2020 spend (millions)

$325 to $350
$325 to $350




Sunseeker Resorts Project - Total project **



2018 project spend (millions)


$51
2019 project spend (millions)


$48
Total expected project spend (millions) ***

$470
$470




Other CAPEX - full year 2020****



Capital expenditures (millions)

$15 to $20
$15 to $20

Previous guidance as of November 13, 2019
* Not included in capital expenditure total
** Total project spend includes $25m of pre-operating expense
*** Of the total remaining capex, expect to receive $175m in third party financing from an affiliate of TPG Sixth Street Partners as the last funds in the project, of which 2/3 will be non-recourse to Allegiant Travel Company
**** Includes Allegiant Nonstop

Aircraft fleet plan by end of period











Aircraft - (seats per AC)
YE19

1Q20

2Q20

3Q20

YE20

A319 (156 seats)
37

38

38

38

38

A320 (177/186 seats)
54

57

63

65

67

Total
91

95

101

103

105


Aircraft listed in table above include only in-service aircraft and future aircraft under contract (subject to change)

Allegiant Travel Company
Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)


Three Months Ended December 31,

Percent

2019

2018

change
OPERATING REVENUE:





Passenger revenue
$
416,976


$
376,258


10.8

Third party products
16,456


14,015


17.4

Fixed fee contract revenue
22,199


17,285


28.4

Other revenue
5,443


4,556


19.5

Total operating revenue
461,074


412,114


11.9

OPERATING EXPENSES:





Salary and benefits
109,859


101,578


8.2

Aircraft fuel
103,574


103,808


(0.2)

Station operations
43,063


38,754


11.1

Depreciation and amortization
41,740


36,710


13.7

Maintenance and repairs
23,243


23,151


0.4

Sales and marketing
19,853


19,290


2.9

Aircraft lease rental


101


(100.0)

Other
27,090


25,634


5.7

Total operating expense
368,422


349,026


5.6

OPERATING INCOME
92,652


63,088


46.9

OTHER (INCOME) EXPENSE:





Interest expense
18,270


15,649


16.7

Capitalized interest
(1,028)


(2,075)


(50.5)

Interest income
(2,485)


(2,967)


(16.2)

Other, net
(740)


12


NM

Total other expense
14,017


10,619


32.0

INCOME BEFORE INCOME TAXES
78,635


52,469


49.9

PROVISION FOR INCOME TAXES
18,113


11,022


64.3

NET INCOME
$
60,522


$
41,447


46.0

Earnings per share attributable to common shareholders(1):





Basic
$3.72


$2.56


45.3

Diluted
$3.72


$2.56


45.3

Weighted average shares outstanding used in computing earnings per share attributable to common shareholders(1):





Basic
16,000


15,976


0.2

Diluted
16,006


15,989


0.1


NM - Not meaningful
(1) The Company's unvested restricted stock awards are considered participating securities as they receive non-forfeitable rights to cash dividends at the same rate as common stock. The Basic and Diluted earnings per share calculations for the periods presented reflect the two-class method mandated by ASC Topic 260, "Earnings Per Share." The two-class method adjusts both the net income and the shares used in the calculation. Application of the two-class method did not have a significant impact on the Basic and Diluted earnings per share for the periods presented.

Allegiant Travel Company
Operating Statistics
(Unaudited)


Three Months Ended December 31,

Percent

2019

2018

change (1)
OPERATING STATISTICS





Total system statistics:





Passengers
3,585,966


3,239,286


10.7

Available seat miles (ASMs) (thousands)
3,928,536


3,605,069


9.0

Operating expense per ASM (CASM) (cents)
9.38


9.68


(3.1)

Fuel expense per ASM (cents)
2.64


2.88


(8.3)

Operating CASM, excluding fuel (cents)
6.74


6.80


(0.9)

ASMs per gallon of fuel
82.8


81.4


1.7

Departures
27,088


24,300


11.5

Block hours
60,684


55,285


9.8

Average stage length (miles)
846


866


(2.3)

Average number of operating aircraft during period
90.1


86.6


4.0

Average block hours per aircraft per day
7.3


6.9


5.8

Full-time equivalent employees at end of period
4,363


3,901


11.8

Fuel gallons consumed (thousands)
47,461


44,299


7.1

Average fuel cost per gallon
$
2.18


$
2.34


(6.8)

Scheduled service statistics:





Passengers
3,516,263


3,183,524


10.5

Revenue passenger miles (RPMs) (thousands)
3,073,055


2,846,246


8.0

Available seat miles (ASMs) (thousands)
3,745,031


3,457,044


8.3

Load factor
82.1
%

82.3
%

(0.2)

Departures
25,541


23,017


11.0

Block hours
57,687


52,814


9.2

Total passenger revenue per ASM (TRASM) (cents)(2)
11.57


11.29


2.5

Average fare - scheduled service(3)
$
65.35


$
71.23


(8.3)

Average fare - air-related charges(3)
$
53.24


$
46.96


13.4

Average fare - third party products
$
4.68


$
4.40


6.4

Average fare - total
$
123.26


$
122.59


0.5

Average stage length (miles)
856


877


(2.4)

Fuel gallons consumed (thousands)
45,163


42,346


6.7

Average fuel cost per gallon
$
2.18


$
2.33


(6.4)

Percent of sales through website during period
93.1
%

93.8
%

(0.7)

Other data:





Rental car days sold
426,428


415,094


2.7

Hotel room nights sold
96,396


95,804


0.6


(1) Except load factor and percent of sales through website, which is percentage point change.
(2) Various components of this measurement do not have a direct correlation to ASMs. These figures are provided on a per ASM basis to facilitate comparison with airlines reporting revenues on a per ASM basis.
(3) Reflects division of passenger revenue between scheduled service and air-related charges in Company's booking path.

Allegiant Travel Company
Consolidated Statements of Income
 (in thousands, except per share amounts)
(Unaudited)


Twelve Months Ended December 31,

Percent

2019

2018

change
OPERATING REVENUE:





Passenger revenue
$
1,682,955


$
1,533,701


9.7

Third party products
70,012


58,060


20.6

Fixed fee contract revenue
65,057


50,286


29.4

Other revenue
22,941


25,400


(9.7)

Total operating revenue
1,840,965


1,667,447


10.4

OPERATING EXPENSES:





Salary and benefits
450,448


413,892


8.8

Aircraft fuel
427,827


445,814


(4.0)

Station operations
171,420


161,019


6.5

Depreciation and amortization
155,852


129,351


20.5

Maintenance and repairs
91,713


99,015


(7.4)

Sales and marketing
78,910


73,514


7.3

Aircraft lease rentals


868


(100.0)

Other
100,845


100,515


0.3

Total operating expense
1,477,015


1,423,988


3.7

OPERATING INCOME
363,950


243,459


49.5

OTHER (INCOME) EXPENSE:





Interest expense
76,801


56,116


36.9

Capitalized interest
(4,472)


(2,354)


90.0

Interest income
(12,523)


(9,226)


35.7

Loss on extinguishment of debt
3,677




NM

Other, net
(780)


(395)


97.5

Total other expense
62,703


44,141


42.1

INCOME BEFORE INCOME TAXES
301,247


199,318


51.1

PROVISION FOR INCOME TAXES
69,130


37,516


84.3

NET INCOME
$
232,117


$
161,802


43.5

Earnings per share attributable to common shareholders(1):





Basic
$14.27


$10.02


42.4

Diluted
$14.26


$10.00


42.6

Weighted average shares outstanding used in computing earnings per share attributable to common shareholders(1):





Basic
16,027


15,941


0.5

Diluted
16,041


15,967


0.5


NM - Not meaningful
(1) The Company's unvested restricted stock awards are considered participating securities as they receive non-forfeitable rights to cash dividends at the same rate as common stock. The Basic and Diluted earnings per share calculations for the periods presented reflect the two-class method mandated by ASC Topic 260, "Earnings Per Share." The two-class method adjusts both the net income and the shares used in the calculation. Application of the two-class method did not have a significant impact on the Basic and Diluted earnings per share for the periods presented.

Allegiant Travel Company
Operating Statistics
 (Unaudited)


Twelve Months Ended December 31,

Percent

2019

2018

change (1)
OPERATING STATISTICS





Total system statistics:





Passengers
15,012,149


13,750,199


9.2

Available seat miles (ASMs) (thousands)
16,174,240


14,899,874


8.6

Operating expense per ASM (CASM) (cents)
9.13


9.56


(4.5)

Fuel expense per ASM (cents)
2.65


2.99


(11.4)

Operating CASM, excluding fuel (cents)
6.48


6.57


(1.4)

ASMs per gallon of fuel
82.3


77.8


5.8

Departures
110,542


101,212


9.2

Block hours
248,513


230,123


8.0

Average stage length (miles)
855


868


(1.5)

Average number of operating aircraft during period
85.6


91.0


(5.9)

Average block hours per aircraft per day
8.0


6.9


15.9

Full-time equivalent employees at end of period
4,363


3,901


11.8

Fuel gallons consumed (thousands)
196,442


191,471


2.6

Average fuel cost per gallon
$
2.18


$
2.33


(6.4)

Scheduled service statistics:





Passengers
14,823,267


13,606,103


8.9

Revenue passenger miles (RPMs) (thousands)
13,038,003


12,145,601


7.3

Available seat miles (ASMs) (thousands)
15,545,818


14,340,674


8.4

Load factor
83.9
%

84.7
%

(0.8)

Departures
105,690


96,554


9.5

Block hours
238,361


220,760


8.0

Total passenger revenue per ASM (TRASM) (cents)(2)
11.28


11.10


1.6

Average fare - scheduled service(3)
$
61.58


$
67.01


(8.1)

Average fare - air-related charges(3)
$
51.96


$
45.71


13.7

Average fare - third party products
$
4.72


$
4.27


10.5

Average fare - total
$
118.26


$
116.99


1.1

Average stage length (miles)
859


875


(1.8)

Fuel gallons consumed (thousands)
188,596


183,798


2.6

Average fuel cost per gallon
$
2.18


$
2.32


(6.0)

Percent of sales through website during period
93.3
%

93.8
%

(0.5)

Other data:





Rental car days sold
1,921,930


1,823,451


5.4

Hotel room nights sold
415,593


409,164


1.6


(1) Except load factor and percent of sales through website, which is percentage point change.
(2) Various components of this measurement do not have a direct correlation to ASMs. These figures are provided on a per ASM basis to facilitate comparison with airlines reporting revenues on a per ASM basis.
(3) Reflects division of passenger revenue between scheduled service and air-related charges in Company's booking path.

Summary Balance Sheet
Unaudited (millions)
12/31/2019

12/31/2018

Percent Change






Unrestricted cash and investments





Cash and cash equivalents
$
121.9


$
81.5


49.6
%
Short-term investments
335.9


314.5


6.8

Long-term investments
15.5


51.5


(69.9)

Total unrestricted cash and investments
473.3


447.5


5.8

Debt





Current maturities of long-term debt and finance lease obligations, net of related costs(1)
173.3


152.3


13.8

Long-term debt and finance lease obligations, net of current maturities and related costs
1,248.6


1,119.4


11.5

Total debt
1,421.9


1,271.7


11.8

Total Allegiant Travel Company shareholders' equity
883.6


690.3


28.0


(1) As of December 31, 2018, $428.0 million of the Company's Unsecured Senior Notes (which matured on July 15, 2019) were classified as long-term as the company refinanced the borrowings on a long-term basis in February 2019.

Summary Cash Flow

Twelve Months Ended December 31,

Percent
Unaudited (millions)
2019

2018

Change
Cash provided by operating activities
$
440.6


$
356.6


23.6
%
Purchase of property and equipment, including capitalized interest
(505.2)


(334.8)


50.9

Repurchase of common stock
(18.6)


(3.7)


402.7

Cash dividends paid to shareholders
(45.6)


(45.2)


0.9

Proceeds from the issuance of long-term debt
874.9


211.2


314.3

Principal payments on long-term debt & finance lease obligations
(705.8)


(232.2)


204.0

EPS Calculation
The following table sets forth the computation of net income per share, on a basic and diluted basis, for the periods indicated (share count and dollar amounts other than per-share amounts in table are in thousands):

Three Months Ended
December 31,

Twelve Months Ended
December 31,

2019

2018

2019

2018
Basic:







Net income
$
60,522


$
41,447


$
232,117


$
161,802

Less net income allocated to participating securities
(1,059)


(504)


(3,413)


(2,106)

Net income attributable to common stock
$
59,463


$
40,943


$
228,704


$
159,696

Earnings per share, basic
$
3.72


$
2.56


$
14.27


$
10.02

Weighted-average shares outstanding
16,000


15,976


16,027


15,941

Diluted:







Net income
$
60,522


$
41,447


$
232,117


$
161,802

Less net income allocated to participating securities
(1,058)


(503)


(3,410)


(2,104)

Net income attributable to common stock
$
59,464


$
40,944


$
228,707


$
159,698

Earnings per share, diluted
$
3.72


$
2.56


$
14.26


$
10.00

Weighted-average shares outstanding
16,000


15,976


16,027


15,941

Dilutive effect of stock options and restricted stock
101


29


51


53

Adjusted weighted-average shares outstanding under treasury stock method
16,101


16,005


16,078


15,994

Participating securities excluded under two-class method
(95)


(16)


(37)


(27)

Adjusted weighted-average shares outstanding under two-class method
16,006


15,989


16,041


15,967


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