P Rospectus S Ummary
PROSPECTUS SUMMARY This summary is not complete and may not contain all the information that you should consider before investing in the shares. Please read the entire prospectus carefully, especially “Risk Factors” beginning on page 8. Unless otherwise indicated, all information in this prospectus assumes no exercise of the underwriters’ overallotment option. In this prospectus, the terms “TRX,” “our,” and “we” refer to TRX, Inc. and our subsidiaries and our predecessors except where it is clear that such terms mean only TRX, Inc.TRX, Inc.
We are a leading, independent provider of transaction processing and data integration services to the global travel industry. We also serve clients in other industries involved with or affected by travel-related processes, such as credit card issuers. Our hosted technology and services allow our clients to efficiently manage the activities related to travel and travel-related transactions, as well as the vast number of complex and dynamic data records generated by these transactions.
We generate economies of scale by aggregating transaction volume from numerous large clients. Our clients leverage our aggregated transaction volume, allowing them to shift a portion of their fixed costs to a more flexible, variable structure. We believe this scale typically cannot be achieved internally by our clients and is not currently available from a travel supplier, agency, or Global Distribution System, or GDS. Our scale, combined with our focus on process reengineering and automation, helps our clients reduce travel-related costs on an ongoing basis.
We target clients with significant transaction volume in four areas: travel agencies (traditional and online), travel suppliers, large corporations, and credit card issuers. Our client base includes global leaders in the markets we serve, including American Airlines, American Express, Citibank, and Expedia. During the year ended December 31, 2004, we served more than 150 clients globally.
We offer our processing capabilities and extensive process reengineering expertise through a comprehensive service offering of five hosted technology applications: RESX (online booking), SELEX (agent technology), CORREX (automated processing), TRANXACT (exceptions and settlement), and DATATRAX (data integration). We provide each of our technology applications independently or as a comprehensive, integrated end-to-end processing solution. As a result, we can be compensated for the multiple transactions that may occur during the lifecycle of a single travel reservation.
Our technology is flexible, allowing our clients to both use disparate data from multiple sources and rapidly adapt to changing methods of travel distribution. We are able to collect data for any of our clients in any format from anywhere in the world, and then normalize, validate, and translate this data into client-requested formats. In addition, travel industry participants require flexible booking and processing technology as travel is increasingly delivered through multiple distribution channels.
Over the past five years, we have achieved significant scale and experienced rapid growth as our transaction volumes and data records processed have increased. In 2004, we handled 73.5 million travel processing transactions, up from 9.3 million in 1999, representing a compound annual growth rate of more than 51% during this time period. In data integration, we received data from more than 1,000 distinct data feeds from more than 250 sources in over 40 countries and processed more than 76 million data records for our clients in 2004. We had revenues of $113.5 million for the year ended December 31, 2004.
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Our Markets
We primarily serve the global travel industry, as well as other industries involved with or affected by travel-related processes, such as credit card issuers. The travel industry is among the largest industries globally and is undergoing dramatic and rapid change. Total annual air, lodging, car, cruise, and vacation package bookings are expected to exceed $400 billion in 2006, according to PhoCusWright, an independent travel industry research firm. We believe that industries with travel-related components, such as credit card issuers, are a natural extension for our product and service offerings. According to Credit Card Management, an electronic payments periodical, U.S. charge volume from card-based forms of payment has steadily increased with total transaction expenditures growing from $293 billion in 1989 to $1.5 trillion in 2003.
The markets we serve are experiencing rapid and fundamental change in inventory channels, price transparency, and methods of delivery. Key elements of this change driving our business are:
Our Competitive Strengths
We believe that the following competitive strengths have enabled us to become a leading independent provider of transaction processing and data integration services:
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clients on an individual basis or as part of an integrated solution. We are well positioned to enable change in travel distribution based on our scale, client relationships, flexible service offering, and process reengineering expertise.
Our Growth Strategy
We aim to capitalize on the broad industry trends that affect our travel and travel-related business, as well as act on our own insights to strengthen our market position through the following strategies:
Our principal executive offices are located at 6 West Druid Hills Drive, Atlanta, Georgia 30329, and our telephone number is (404) 929-6100. Our web site is www.trx.com. The information contained on our web site is not incorporated by reference into and does not form any part of this prospectus.
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The Offering
Except as otherwise indicated, the number of shares to be outstanding after this offering throughout this prospectus is based on the number of shares outstanding on February 28, 2005 and excludes:
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Summary Consolidated Financial Data
The following tables set forth a summary of the financial data for our business. This information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes appearing elsewhere in this prospectus. The statement of operations data for the fiscal years ended December 31, 2004, 2003, and 2002 and the balance sheet data as of December 31, 2004 are derived from our audited consolidated financial statements included elsewhere in this prospectus.
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Adjusted EBITDA is used by our management as a supplemental financial measure to evaluate the performance of our business that, when viewed with our GAAP results and the accompanying reconciliation, we believe provides a more complete understanding of factors and trends affecting our business than GAAP measures alone. Management also uses Adjusted EBITDA as one of several criteria to determine performance-based cash compensation. We also regularly communicate our Adjusted EBITDA to our current shareholders and board of directors. We understand that analysts and investors regularly rely on non-GAAP financial measures, such as Adjusted EBITDA, to assess operating performance for companies in our industry. Adjusted EBITDA may be helpful in more clearly highlighting trends in our core businesses that may not otherwise be apparent when relying solely on GAAP financial measures, since Adjusted EBITDA eliminates from losses financial items that have less bearing on our operating performance. In addition, our calculation of Adjusted EBITDA is similar, but not identical, to certain financial ratios used in the financial covenants of our revolving credit facility. Adjusted EBITDA is the most comparable financial measure that is readily available to investors to evaluate our compliance with our financial covenants. A reconciliation of net loss, the most directly comparable GAAP measure, to Adjusted EBITDA for each of the fiscal periods indicated is as follows:Index to Financial Statements
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