Segment Information (Tables)

12 Months Ended

Dec. 31, 2019

Segment information for the years ended December 31, 2019, 2018 and 2017 is as follows (in thousands):


	Year Ended December 31,
	2019		2018		2017
Revenue
Travel Network	$	2,882,662	$	2,806,194	$	2,550,470
Airline Solutions	840,338		822,747		816,008
Hospitality Solutions	292,880		273,079		258,352
Eliminations	(40,892)		(35,064)		(26,346)
Total revenue	$	3,974,988	$	3,866,956	$	3,598,484
Adjusted Gross Profit (Loss)^(a)
Travel Network	$	1,016,695	$	1,098,052	$	1,071,249
Airline Solutions	326,610		355,079		366,255
Hospitality Solutions	64,842		83,333		88,477
Corporate	(16,341)		(15,056)		(25,795)
Total	$	1,391,806	$	1,521,408	$	1,500,186
Adjusted Operating Income (Loss) ^(b)
Travel Network	$	648,838	$	755,811	$	746,625
Airline Solutions	80,428		111,146		137,932
Hospitality Solutions	(21,632)		12,881		9,670
Corporate	(194,226)		(178,406)		(188,078)
Total	$	513,408	$	701,432	$	706,149
Adjusted EBITDA^(c)
Travel Network	$	852,856	$	951,709	$	923,615
Airline Solutions	251,442		293,577		296,437
Hospitality Solutions	31,466		52,824		42,784
Total segments	1,135,764		1,298,110		1,262,836
Corporate	(189,404)		(173,720)		(184,265)
Total	$	946,360	$	1,124,390	$	1,078,571
Depreciation and amortization
Travel Network	$	121,083	$	118,276	$	109,579
Airline Solutions	171,014		182,431		158,505
Hospitality Solutions	53,098		39,943		33,114
Total segments	345,195		340,650		301,198
Corporate	69,426		72,694		99,673
Total	$	414,621	$	413,344	$	400,871
Capital Expenditures
Travel Network	$	15,580	$	64,943	$	90,881
Airline Solutions	37,062		98,374		116,948
Hospitality Solutions	11,324		39,160		43,443
Total segments	63,966		202,477		251,272
Corporate	51,200		81,463		65,165
Total	$	115,166	$	283,940	$	316,437

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


	Year Ended December 31,
	2019		2018		2017
Adjusted Gross Profit	$	1,391,806	$	1,521,408	$	1,500,186
Less adjustments:
Selling, general and administrative	576,568		513,526		510,075
Impairment and related charges⁽⁷⁾	—		—		81,112
Cost of revenue adjustments:
Depreciation and amortization⁽¹⁾	340,889		341,653		317,812
Amortization of upfront incentive consideration⁽²⁾	82,935		77,622		67,411
Restructuring and other costs⁽⁴⁾	—		—		12,604
Stock-based compensation	27,997		26,591		17,732
Operating income	$	363,417	$	562,016	$	493,440

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


	Year Ended December 31,
	2019		2018		2017
Adjusted Operating income	$	513,408	$	701,432	$	706,149
Less adjustments:
Joint venture equity income	2,044		2,556		2,580
Impairment and related charges⁽⁷⁾	—		—		81,112
Acquisition-related amortization^(1c)	64,604		68,008		95,860
Restructuring and other costs⁽⁴⁾	—		—		23,975
Acquisition-related costs⁽⁵⁾	41,037		3,266		—
Litigation costs, net⁽⁶⁾	(24,579)		8,323		(35,507)
Stock-based compensation	66,885		57,263		44,689
Operating income	$	363,417	$	562,016	$	493,440

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


	Year Ended December 31,
	2019		2018		2017
Adjusted EBITDA	$	946,360	$	1,124,390	$	1,078,571
Less adjustments:
Impairment and related charges⁽⁷⁾	—		—		81,112
Depreciation and amortization of property and equipment^(1a)	310,573		303,612		264,880
Amortization of capitalized implementation costs^(1b)	39,444		41,724		40,131
Acquisition-related amortization^(1c)	64,604		68,008		95,860
Amortization of upfront incentive consideration⁽²⁾	82,935		77,622		67,411
Interest expense, net	156,391		157,017		153,925
Loss on extinguishment of debt	—		633		1,012
Other, net⁽³⁾	9,432		8,509		(36,530)
Restructuring and other costs⁽⁴⁾	—		—		23,975
Acquisition-related costs⁽⁵⁾	41,037		3,266		—
Litigation costs, net⁽⁶⁾	(24,579)		8,323		(35,507)
Stock-based compensation	66,885		57,263		44,689

Provision for income taxes⁽⁸⁾	35,326		57,492		128,037
Income from continuing operations	$	164,312	$	340,921	$	249,576

________________________

(1)Depreciation and amortization expenses (see Note 1. Summary of Business and Significant Accounting Policies for associated asset lives):

(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)In 2019, 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. In 2018, we recognized an expense of $5 million related to our liability under the TRA offset by a gain of $8 million on the sale of an investment. In 2017, we recognized a benefit of $60 million due to a reduction to our liability under the TRA primarily due to a provisional adjustment resulting from the enactment of TCJA which reduced the U.S. corporate income tax rate (see Note 7. Income Taxes), offset by a loss of $15 million related to debt modification costs associated with a debt refinancing. In addition, all periods presented include 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)Restructuring and other costs represents charges associated with business restructuring and associated changes implemented which resulted in severance benefits related to employee terminations, integration and facility opening or closing costs and other business reorganization costs. We recorded $25 million in charges associated with an announced action to reduce our workforce in 2017. These reductions aligned our operations with business needs and implemented an ongoing cost and organizational structure consistent with our expected growth needs and opportunities.

(5)Acquisition-related costs represent fees and expenses incurred associated with the 2019 acquisition of Radixx and the 2018 agreement to acquire Farelogix, which is anticipated to close in 2020. See Note 3. Acquisitions.

(6)Litigation costs, net represent charges associated with antitrust and other foreign non-income tax contingency matters. In 2019, we recognized the reversal of our previously accrued loss related to US Airways legal matter for $32 million. In 2018, we recorded non-income tax expense of $5 million for tax, penalties and interest associated with certain non-income tax claims for historical periods regarding permanent establishment in a foreign jurisdiction. In 2017, we recorded a $43 million reimbursement, net of accrued legal and related expenses, from a settlement with our insurance carriers with respect to the American Airlines litigation. See Note 16. Commitments and Contingencies.

(7)Impairment and related charges represents an $81 million impairment charge recorded in 2017 associated with net capitalized contract costs related to an Airline Solutions' customer based on our analysis of the recoverability of such amounts. See Note 4. Impairment and Related Charges for additional information.

(8)In 2018, the provision for income taxes includes a benefit of $27 million related to the enactment of the TCJA for deferred taxes and foreign tax effects. In 2017, provision for income taxes includes a provisional impact of $47 million recognized as a result of the enactment of the TCJA in December 2017. See Note 7. Income Taxes.

Schedule of Revenues by Geographic Area

Our revenues and long-lived assets, excluding goodwill and intangible assets, by geographic region are summarized below. Revenue of our Travel Network business is attributed to countries based on the location of the travel supplier. For Airline Solutions and Hospitality Solutions, revenue is attributed to countries based on the location of the customer. The majority of our revenues and long-lived assets are derived from the United States, Europe, and Asia-Pacific ("APAC") as follows (in thousands):


	Year Ended December 31,
	2019		2018		2017
Revenue:
United States ⁽¹⁾	$	1,306,450	$	1,346,895	$	1,340,893
Europe	913,245		928,533		777,406
APAC	822,679		820,711		715,740
All Other	932,614		770,817		764,445
Total	$	3,974,988	$	3,866,956	$	3,598,484

________________________

(1)United States includes revenue related to Canada and Mexico in 2018 and 2017 that is reflected in 'All Other' in 2019.

Schedule of Long-Lived Assets by Geographic Area


	As of December 31,
	2019		2018
Long-lived assets
United States ⁽¹⁾	$	622,034	$	773,739
Europe	1,594		3,735
APAC	11,521		7,254
All Other	6,573		5,644
Total	$	641,722	$	790,372

________________________

(1)United States includes long-lived assets related to Canada and Mexico in 2018 and 2017 that is reflected in 'All Other' in 2019.