Allegiant Travel Company · NASDAQ:ALGT
Allegiant Travel — Investor Presentation (November 2013)
40 slides from Allegiant Travel's investor presentation, Nov 7, 2013
Slide 1: Management Presentation November 2013
Management Presentation November 2013
Slide 2: Forward looking statements
Forward looking statements 2 This presentation as well as oral statements made by officers or directors of Allegiant Travel Company, its advisors and affiliates (collectively or separately, the "Company“) will contain forward- looking statements that are only predictions and involve risks and uncert
Slide 3: Unique business model and results
Unique business model and results Highly resilient and profitable – Profitable last 43 quarters (1) – $219mm EBITDA (2) LTM 3Q13 – LTM Return on Capital 15.3% (2) Strong balance sheet – Rated BB- and Ba3 (3) – $304mm unrestricted cash (4) – $180mm debt – Debt/EBITDA 0.9x(2) – $80mm in share repu
Slide 4: Nationwide footprint
Nationwide footprint Based on current published schedule through April 29, 2014 230 routes, 69 operating aircraft 87 small cities, 14 leisure destinations 4 Yellow dots – leisure destinations Blue dots – small cities Large dots - bases
Slide 5: Still small city focused
Still small city focused 31.0% 37.9% 20.7% 10.3% 36.9% 34.5% 14.3% 14.3% 0% 5% 10% 15% 20% 25% 30% 35% 40% <300k 300k - 600k 600k - 900k >900k % o f c it ie s Population – 25 mile catchment area 2006 2013 5 Over 70% current small cities have catchment areas < 600k Origination cities – population w
Slide 6: Staying profitable in small cities
Staying profitable in small cities 6 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec S y ste m b lock h o u rs/ A C/ d a y 2011 2012 2013E 2014E Avg. block hours/AC/day 1 - Peak = sample peak frequency determined from June 11 – Aug 5, 2012, sample off peak = A
Slide 7: Matching capacity to demand
Matching capacity to demand 25% 20% 2% 5% 22% 22% 4% 14% 15% 15% 15% 15% 15% 12% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% Flights per day from Las Vegas % of weekly total ALGT LUV 7 Flights per day from Las Vegas – based on published schedules from Nov 2011 – Oct 2013 Peak day revenue premium Not
Slide 8: Little competition
Little competition 23 207 5 45 85 125 165 205 Routes w competition Routes wo competition Uniquely built to profitably serve small city markets 8 Competitors – overlapping routes Frontier – 1 Spirit – 1 United – 1 Southwest – 12 US Airways - 3 Delta - 4 Hawaiian – 3 Alaska – 3 Sun Country – 1 America
Slide 9: Ancillary air related fees
Ancillary air related fees Steady growth over time – New fees not necessary to drive growth – last new fee 2Q12 – Seasonality exists in ancillary fees 9 $29.07 $30.24 $31.17 $35.72 $34.40 $40.49 $20 $25 $30 $35 $40 $45 2009 2010 2011 2012 YTD 2012 YTD 2013 $ pe r p a s s e n g e r Avg fare – ancil
Slide 10: Our customers "get it"
High 100% 100% 100% 100% 100% 10 90% 90% 90% 90% 90% 9 80% 80% 80% 80% 80% 8 70% 70% 70% 70% 70% 7 60% 60% 60% 60% 60% 6 50% 50% 50% 50% 50% 5 40% 40% 40% 40% 40% 4 30% 30% 30% 30% 30% 3 20% 20% 20% 20% 20% 2 10% 10% 10% 10% 10% 1 0% 0% 0% 0% 0% Low US 1 2 3 4 Unaided Awareness Aided Awareness NET F
Slide 11: Ancillary revenue – third party products
Ancillary revenue – third party products Bundled vacation packages Very high margins – 25% of LTM 3Q13 pre-tax income Wholesale price for hotel & car, we manage margin, no inventory risk Developing tools to spur growth – Customer database – Super PNR – Land only rates – 2014 - begin to roll
Slide 12: Excellent cost structure
Excellent cost structure 11.7 JBLU 12.6 LUV 10.3 ALGT 11.8 ALK(1) 10.0 SAVE 9.5 10 10.5 11 11.5 12 12.5 13 600 700 800 900 1,000 1,100 1,200 T o tal cos t p e r A S M ( c e n ts ) Average stage length (miles) 7.2 JBLU 8.1 LUV 5.5 ALGT 7.5 ALK(1) 6.0 SAVE 5 5.5 6 6.5 7 7.5 8 8.5 600 700 800 900 1,000
Slide 13: Airbus growth will help improve fuel burn
Airbus growth will help improve fuel burn 13 56 58 60 62 64 66 68 4Q11 4Q12 1Q12 1Q13 2Q12 2Q13 3Q12 3Q13 Historical ASMs per gallon Aircraft / seats Gal / BH % of AC 1Q14 MD-80 / 166 950 77% 757 / 223 1,100 9% A319 / 156 750 4% A320 / 177 780* 10% 3Q13 average stage declined 3% vs 2Q13 4Q13 sho
Slide 14: Growing op margin vs growing fuel prices
Growing op margin vs growing fuel prices 2010 2011 2012 LTM 3Q13 Op margin 15.8% 11.1% 14.6% 15.3% Fuel/gal $2.30 $3.07 $3.18 $3.21 YoY 31% 34% 4% 1% EPS $3.32 $2.57 $4.06 $4.66 YoY (12)% (23)% 58% 15% Sys ASMs (b) 6.2 6.4 7.5 8.1 YoY 15% 3% 17% 8% # Cities 73 76 87 88 YoY 6% 4% 15% 1% 14
Slide 15: Best in the world for value creation
Best in the world for value creation 15 Source – Deutsche Bank Airline Research – June 2013 -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Allegiant US Airways Alaska Spirit Air Asia Southwest JetBlue 2012 - ROIC-WACC ROIC – WACC = value creation for shareholders
Slide 16: This business model generates cash
This business model generates cash $127 $190 $219 $87 $105 $178 $60 $0 $50 $100 $150 $200 $250 2011 2012 LTM 3Q13 2014E M ill io n s EBITDA Capex 16 See reconciliation tables 2014E CAPEX represents midpoint of guided range Historic EBITDA vs CAPEX spend
Slide 17: Cumulative return to shareholders
Cumulative return to shareholders $0.6 $17.4 $42.7 $96.5 $98.4 $103.4 $183.4 $14.9 $14.9 $53.5 $53.5 $0 $50 $100 $150 $200 $250 2007 2008 2009 2010 2011 2012 2013 YTD $ m m Share repurchases Dividends 17 2013 YTD as of 3rd quarter 2013 $236.9m returned to shareholders since 2007 $43m remaining in sh
Slide 18: 2014 themes
Airbus Low CAPEX year International New revenue streams 2014 themes 18
Slide 19: Guidance
4Q13 PRASM +3 to 5% 4Q13 TRASM +0.5 to 2.5% 4Q13 CASM ex fuel +4.5 to 6.5% 4Q13 Fixed fee + other revenue $3mm to $5mm FY13 CAPEX $170mm to $180mm FY14 CAPEX $50mm to $70mm 4th Quarter 2013 1st Quarter 2014 Full year 2014 System departures (4) to 0% 8 to 12% System ASMs 4 to 8% 10 to 14%
Slide 20: Appendix
Appendix _—_— allegiant’
Slide 21: GAAP reconciliation EBITDA calculations
GAAP reconciliation EBITDA calculations 21 $mm LTM 3Q13 2012 2011 2010 2009 2008 Net Income 89.6 78.6 49.4 65.7 76.3 35.4 +Provision for Income Taxes 53.2 46.2 30.1 37.6 44.2 19.8 +Other Expenses 7.9 7.8 5.9 1.3 1.6 .7 +Depreciation and Amortization 68.6 57.5 42.0 35.0 29.6 23.5 =EBITDA 219.3 190.1
Slide 22: GAAP reconciliation EBITDA calculations
GAAP reconciliation EBITDA calculations 22 $mm LTM 3Q13 2012 2011 2010 Net Income 89.6 78.6 49.4 65.7 +Provision for Income Taxes 53.2 46.2 30.1 37.6 +Other Expenses 7.9 7.8 5.9 1.3 +Depreciation and Amortization 68.6 57.5 42.0 35.0 =EBITDA 219.3 190.1 127.4 139.6 Repurchase of common stock 84.1 5.0
Slide 23: GAAP reconciliation Return on equity
GAAP reconciliation Return on equity 23 $mm LTM 3Q13 2012 2011 2010 2009 Net Income ($mm) 89.6 78.6 49.4 65.7 76.3 Sep 2013 Sep 2012 Dec 2012 Dec 2011 Dec 2010 Dec 2009 Total shareholders equity ($mm) 402.4 423.1 400.5 351.5 297.7 292.0 Return on equity 22% 21% 15% 22% ROE = Net income / Avg shareho
Slide 24: GAAP reconciliation Return on capital employed calculation
GAAP reconciliation Return on capital employed calculation $mm LTM 3Q13 2012 2011 2010 + Net income 89.6 78.6 49.4 65.7 + Income tax 53.2 46.2 30.1 37.6 + Interest expense 8.9 8.7 7.2 2.5 - Interest income 1.0 1.0 1.2 1.2 EBIT 150.7 132.5 85.5 104.6 + Interest income 1.0 1.0 1.2 1.2 Tax rate 37.4% 3
Slide 25: GAAP reconciliation Free cash flow calculations
GAAP reconciliation Free cash flow calculations 25 $mm YTD 2013 LTM 3Q13 2012 2011 2010 Cash from operations 150.4 198.4 176.8 129.9 98.0 - CAPEX 161.6 177.8 105.1 88.0 98.5 = Free cash flow (11.2) 20.6 71.7 41.9 (0.5) YTD – through September 2013
Slide 26: GAAP reconciliation Net debt
GAAP reconciliation Net debt 26 $mm Sep 2013 Dec 2012 Dec 2011 Dec 2010 Current maturities of long term debt 13.6 11.6 7.9 16.5 Long term debt, net of current maturities 166.1 139.2 138.2 11.6 Total debt 179.7 150.8 146.1 28.1 Cash and cash equivalents 33.0 89.6 150.7 113.3 Short term investments 25
Slide 27: GAAP reconciliation ROIC – Wolfe Research
GAAP reconciliation ROIC – Wolfe Research 27 $mm LTM 3Q13 2012 2011 LTM income from cont. ops 89 78 49 LTM gross interest expense 9 9 7 Tax rate (38%) 38% 38% 38% Add back: after-tax gross interest exp 6 5 4 LTM operating lease expense x 7 26 0 8 Implied interest on operating lease (7.5%) 2 0 1 Add
Slide 28: Fleet plan – current order book
Fleet plan – current order book 2012 2013E 2014E 2015E MD-80 (150 seat) 13 1 0 0 MD-80 (166 seat) 45 51 53 53 757 (223 seat) 5 6 6 6 A319 (156 seat) 0 3 4 10 A320 (177 seat) 0 7 9 9 Total 64 68 72 78 YoY fleet growth 12% 6% 6% 8% 28 Actual and projected fleet count of in service aircraft – end of pe
Slide 29: Aircraft fuel
Aircraft fuel Converted MD-80s to 166 seats – Improves ASMs per gallon Growing with Airbus aircraft – Airbus is at least 15% more fuel efficient (1) than MD-80 – 177 seat A320, generate more ASMs 29 58.3 58.9 59.1 63.0 62.2 67.4 50.00 55.00 60.00 65.00 70.00 2009 2010 2011 2012 YTD 2012 YTD 2013
Slide 30: Q3 summary - revenue
Q3 summary - revenue 30 $216.9 $228.9 $15.4 $6.7 ($0.4) ($8.1) ($1.5) $205 $210 $215 $220 $225 $230 $235 $240 $245 3Q12 total revenue Scheduled service revenue Ancillary air- related revenue Ancillary third party revenue Fixed fee revenue Other revenue 3Q13 total revenue M ill io n s U S D Scheduled
Slide 31: Revenue momentum
Revenue momentum 31 $76.26 $89.15 $88.90 $89.01 $90.91 $70 $75 $80 $85 $90 $95 $100 2010 2011 2012 YTD 2012 YTD 2013 Average fare - scheduled service $4.34 $5.18 $5.48 $5.57 $5.47 $4.00 $4.50 $5.00 $5.50 $6.00 2010 2011 2012 YTD 2012 YTD 2013 Average fare - ancillary third party products $30.24 $31.
Slide 32: Q3 summary - costs
Q3 summary - costs 32 -3.9% 12.2% -1.0% -3.0% 4.3% 4.7% 30.4% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% Fuel Salary and benefits Station operations Maintenance and repairs Sales and marketing Depreciation Other YoY change in expenses per ASM Fuel Gallons consumed decreased 2.5%, whi
Slide 33: LTM 3Q13 cost per passenger - Low cost drivers
LTM 3Q13 cost per passenger Low cost drivers $54 $45 $54 $61 $10 $16 $11 $13 $11 $5 $10 $14 $21 $21 $46 $36 $20 $24 $29 $36 ALGT SAVE LUV JBLU 33 Source: Company filings Ownership includes depreciation & amortization + aircraft rent Other excludes special items and one-time charges for other carrier
Slide 34: Better equipped to handle higher fuel cost
Better equipped to handle higher fuel cost 2008 2012 % change System ASMs (billions) 4.4 7.5 71% Average # of aircraft 36 60 67% Avg fare – scheduled service $84.97 $88.90 5% Avg ancillary - total $29.43 $41.20 40% Avg fare - total $114.40 $130.10 14% Pre-tax margin 11.0% 13.7% 34 $1.73 $3.22 $4.06
Slide 35: Credit metrics
Credit metrics 15.3% 15.6% 15.3% 5.0% 0% 10% 20% 2011 2012 LTM 3Q13 LUV LTM 3Q13 35 Return on capital employed 15.0% 21.0% 22.0% 8.8% 0% 10% 20% 30% 2011 2012 LTM 3Q13 LUV LTM 3Q13 Return on equity 17.7 x 21.9 x 24.6 x 14.9 x 0 5 10 15 20 25 30 2011 2012 LTM 3Q13 LUV LTM 3Q13 Interest coverage 1.2 x
Slide 36: Producing high returns in the industry
Producing high returns in the industry 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% ALGT SAVE LCC ALK DAL LUV JBLU UAL Third quarter industry ROIC 36 Data as per Hunter Keay at Wolfe Research ALGT – see reconciliation in appendix
Slide 37: Strong cash generation
Strong cash generation $140 $127 $190 $219 $100 $125 $150 $175 $200 $225 $250 2010 2011 2012 LTM 3Q13 $ m m 37 EBITDA $2.9 $2.4 $3.2 $3.5 $2.0 $2.5 $3.0 $3.5 $4.0 2010 2011 2012 LTM 3Q13 $ m m EBITDA per AC Free cash flow $0 $42 $72 $21 -$25 $0 $25 $50 $75 $100 2010 2011 2012 LTM 3Q13 $ m m ($122) (
Slide 38: Returning cash
Returning cash $140 $127 $190 $219 47 52 60 63 64 70 75 20 30 40 50 60 70 80 $100 $125 $150 $175 $200 $225 $250 A v g ai rc raf t $ m m EBITDA Avg AC 38 Cash returned as a % of EBITDA 49.2% 1.5% 22.9% 56.0% 0% 10% 20% 30% 40% 50% 60% 2010 2011 2012 LTM 3Q13 $ m m See reconciliation tables EBITDA vs
Slide 39: Uses of cash
Uses of cash $98 $87 $105 $178 $0 $50 $100 $150 $200 2010 2011 2012 LTM 3Q13 $ m m 39 CAPEX $31.7 $21.2 $9.3 $22.1 $0.0 $50.0 2010 2011 2012 LTM 3Q13 $ m m Debt payments Cash from operations $98 $130 $177 $198 $0 $50 $100 $150 $200 $250 2010 2011 2012 LTM 3Q13 $ m m $69 $2 $44 $123 $0 $50 $100 $150
Slide 40: Low costs even with low utilization
Low costs even with low utilization 7.2 JBLU 6.0 SAVE 7.5 ALK 5.5 ALGT 5 5.5 6 6.5 7 7.5 8 5 6 7 8 9 10 11 12 13 14 CA S M e x f u e l – L T M (ce n ts ) Average daily utilization - LTM CASM ex fuel vs daily utilization 40 LTM as of 3Q13, ALGT – Allegiant, ALK – Alaska mainline, JBLU – JetBlue, Save
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