Travel technology provider TRX in the first quarter of 2009 suffered another period of steep losses in revenues and net income as the company continues to diversify its client base through direct corporate client contracts, alter its product development strategy and significantly reduce its cost structure, which is down 40 percent from the same quarter in 2008.
The company late yesterday reported total revenues decreased 31.8 percent to $15 million in the first quarter of 2009 from 2008. The net income loss totaled $43.6 million compared with a $3.4 million loss in the first quarter of 2008, driven by a goodwill, intangible asset and other long-lived asset impairment of $43.7 million.
The company secured about one dozen new clients in the quarter, mostly direct corporate accounts in the $150,000 range, according to TRX president and CEO Shane Hammond. "That is unusual for TRX," he said, adding that other new clients are midsize and smaller travel management companies. "Historically, we would have walked away from that opportunity and kind of what they refer to in the sales world as an elephant hunt."
TRX's top five clients now comprise 69 percent of TRX's revenue. Until a shift in philosophy last year, traditionally the top five made up about 80 percent of revenues, Hammond said, adding that the company plans to acquire more direct corporate relationships and add two to four direct salespeople each quarter.
Of TRX's largest clients, Expedia Inc. accounted for 42 percent of revenues in the first quarter, down from 44 percent in the same period last year, as Expedia last year went to a multi-supplier model for its mid- and back-office technology and saw lower customer volume. American Express Travel Related Services accounted for 15 percent of TRX revenues in the first quarter compared with 12 percent last year.
Sister company BCD Travel also decreased its business with TRX, from $2 million in the first quarter of 2008 to $1.02 million in the first quarter of this year, as BCD shifted some business to competitor GDSX. According to TRX's quarterly filing with the U.S. Securities and Exchange Commission, the TRX-BCD master agreement was extended through Aug. 31 for Correx mid-office services only. A separate three-year agreement for use of TRX's ResX online booking tool, which previously had been part of the master agreement, began on Jan. 1.
BCD remains one of TRX's largest customers, according to Hammond, and uses BCD's TravelTrax product through an agreement with Hi-Mark Software signed before TRX acquired the company in 2006
(BTNonline, Dec. 7, 2006).
When asked about BCD moving some business away from its sibling toward competitor GDSX, majority shareholder and TRX board member and BCD Holdings chairman John Fentener van Vlissingen last month said, "We sometimes may step in. If they don't come to a solution, it's up to each CEO and their staff to make the solution. We don't interfere in the final step. We may slow it down and say you should talk again or more, but we do not say you have to go there. A lot of companies went wrong because they forced people to buy or to acquire from other companies and now you can always blame what went wrong. I want to avoid that."
Van Vlissingen added, "If we protect that too long, it someday will hurt if we start protecting our daughter companies by giving orders from some other company to protect them at the wrong price. That's why it is very good to fight within the market."
Meanwhile, TRX has hit several product-development bumps in the road, including its international online booking tool partnerships and the rollout of its Correx Gen6 mid-office platform. The company now uses a standard product-development life-cycle method, supervised by a vice president who oversees product development.
In the next 30 days, TRX will complete the sunset of its DataTrax product in favor of the software-as-a-service TravelTrax data and reporting platform.
In May 2008, TRX and New Zealand-based Serko Online began a joint-contract online booking tool offering for multinational accounts, with plans to add a European partner. Save for a couple of
Fortune 20 global companies, there has not been much more traction, according to Hammond. ResX will handle European points of sale as no European partner was added.
"It didn't gain legs," Hammond said. "What we found was, we ended up being the broker where the buyers said, 'That's a good idea, why don't you latch us onto that and we'll go talk to them.' "
TRX's plans for the revamp of its mid-office product Correx through its Gen6 initiative were announced almost two years ago
(BTNonline, July 23, 2007), yet some components still are not in use. Gen6's reporting and dashboard capabilities have been added to Correx. The new agent e-mail management and messaging system currently is in a testing phase. The platform's third phase, which enables agencies to program and further develop the software without TRX labor, will not be released until the third quarter.
"We've done a poor job of product management in terms of the external view of what Correx is and the marketing of it," Hammond said, "whereas in the ResX world and the TravelTrax world, it's really well-defined where you get version numbers, you know what is coming and you see the roadmap."
Meanwhile, during the first quarter, several expense segments fell sharply, including technology development, which decreased 57 percent from 2008 to $1.7 million. The company also reduced its workforce in the past several months. Hammond said the company now has about 750 employees worldwide, including 340 based in India, where TRX has reduced the number of employees from 500, as the company scrapped plans to provide IT outsourcing services.
The company has $5.4 million of cash or cash equivalents on hand at the end of the first quarter, about $400,000 more than it had at the end of the first quarter last year.