Orbitz 2014 Annual Report Download - page 36

Download and view the complete annual report

Please find page 36 of the 2014 Orbitz annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 96

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96

36
primarily by higher transaction volume, and to a slightly lesser degree, an increase in revenue per transaction. International
vacation package net revenue increased $4.6 million for the year ended December 31, 2013, as compared with the prior year.
Excluding the impact of foreign currency fluctuations, international vacation package net revenue increased $4.2 million. The
increase was due to higher net revenue per transaction and higher volume.
Advertising and media. Advertising and media net revenue increased $4.3 million, or 7%, for the year ended
December 31, 2014, compared with the year ended December 31, 2013. Excluding the impact of foreign currency fluctuations,
net revenue from advertising and media increased $4.4 million for the year ended December 31, 2014, as compared with the
prior year. The increase of $4.3 million was due largely to an increase in pay-per-click and other performance advertising,
partially offset by lower display advertising and the shutdown of the Away Network, which occurred in the first quarter of
2013.
Advertising and media net revenue increased $1.0 million, or 2%, on both a reported and constant currency basis for the
year ended December 31, 2013, compared with the year ended December 31, 2012. The increase of $1.0 million was driven by
$4.6 million of higher display advertising, largely offset by a $3.6 million decrease due to the shutdown of the Away Network.
Other. Other net revenue is composed primarily of net revenue from travel insurance, car bookings, cruise bookings, and
attraction and services bookings. Other net revenue increased $10.0 million, or 10%, for the year ended December 31, 2014,
compared with the year ended December 31, 2013. Excluding the impact of foreign currency fluctuations, other net revenue
increased $9.7 million. The increase was due largely to higher car rental net revenue, and to a lesser extent, higher travel
insurance and attractions and services net revenue. The TPN acquisition contributed approximately 5 percentage points to year-
over-year other net revenue growth for the year ended December 31, 2014.
Other net revenue decreased $1.8 million, or 2%, for the year ended December 31, 2013, compared with the year ended
December 31, 2012. Excluding the impact of foreign currency fluctuations, other net revenue decreased $2.3 million. The
decrease was largely driven by lower attractions and services revenue and to a lesser extent, lower cruise revenue.
Costs and Expenses
Cost of Revenue
Our cost of revenue is composed of costs to operate our customer service call centers, credit card and other payment
processing fees and other costs, which include customer refunds, fraud and other charge-backs, hosting costs and connectivity
and other processing costs.
Years Ended
December 31, Increase/
(Decrease) Years Ended
December 31, Increase/
(Decrease)
2014 2013 $ % 2013 2012 $ %
Cost of revenue: (in thousands) (in thousands)
Customer service costs. . . . . . . . . . . . . . . . $ 74,290 $ 58,324 $ 15,966 27% $ 58,324 $ 58,316 $ 8 — %
Credit card processing fees. . . . . . . . . . . . . 68,277 61,421 6,856 11% 61,421 47,946 13,475 28 %
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,207 34,658 2,549 7% 34,658 41,578 (6,920) (17)%
Total cost of revenue. . . . . . . . . . . . . . $ 179,774 $ 154,403 $ 25,371 16% $ 154,403 $ 147,840 $ 6,563 4 %
Cost of revenue increased $25.4 million (a $25.2 million increase excluding the impact of foreign currency fluctuations),
including an increase of $25.2 million related to TPN, for the year ended December 31, 2014, compared with the year ended
December 31, 2013. This was driven by a $16.0 million increase in customer service costs related to the TPN acquisition, a
$6.9 million increase in credit card processing fees reflecting higher merchant volume, and a $5.3 million increase in customer
refunds and fraud, partially offset by lower connectivity and processing costs of $1.5 million and lower ticketing costs of $0.4
million.
Cost of revenue increased $6.6 million on both a reported and constant currency basis for the year ended December 31,
2013 compared with the year ended December 31, 2012. The increase in cost of revenue was due primarily to a $13.5 million
increase in credit card processing fees driven by higher global hotel volume, partially offset by lower customer refunds and
fraud expense of $4.8 million due to efficiencies at the Company’s customer service call centers and lower connectivity and
processing costs of $2.3 million.