Q3 2022 Sabre Corp Earnings Call

November 2, 2022

The conference will begin shortly to raise your hand during Q&A you can dial star one one.

[music].

Good morning, and welcome to the Sabre third quarter 2022 earnings Conference call. My name is Amy and I will be your operator as a reminder, please note today's call is being recorded.

Now I'll turn the call over to the Vice President of Investor Relations. Kevin Crissey. Please go ahead Sir.

Thanks, Amy and good morning, everyone. Thank you for joining us for our third quarter 2022 earnings call. This morning, we issued an earnings press release, which is available on our website at investors that sabre dot com.

Slide presentation, which accompanies today's prepared remarks is also available during this call on the Sabre Investor Relations Web page a replay of today's call will be available on our website later this morning.

We would like to advise you that our comments contain forward looking statements that reflect our beliefs or expectations about future events, including the duration and effects of COVID-19 industry and recovery trends benefits from our technology transformation and commercial and strategic arrangements, our financial outlook and targets expected revenue costs and expenses.

Cost savings margins and liquidity among others. All forward looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today's conference call more information on these risks and uncertainties is contained in our earnings release issued this morning, and our SEC filings, including our <unk>.

Second quarter, 2022 Form 10-Q, and 2021 Form 10-K.

Today's call will also be presenting certain non-GAAP financial measure measures.

References during today's call to adjusted operating income adjusted net income adjusted EBITDA adjusted EBITDA margin adjusted EPS and free cash flow have been adjusted to exclude certain items.

Most directly comparable GAAP measures and reconciliations for non-GAAP measures are available in the earnings release and other documents posted on our website at investors Sabre Dot com.

Participating with me are Sean Mckeith chair of the Board and Chief Executive Officer, Kurt <unk>, Our President and Mike <unk>, Our Chief Financial Officer, and with that I'll turn the call over to Sean.

Thanks, Kevin and good morning, everyone and thank you for joining us today.

On slide four you can see an overview of the topics Kurt Mike and I will cover on today's call.

As usual I'll start by providing perspective on the trends we are seeing in the travel marketplace, including specific bookings passengers boarded and hospitality Crs transaction trends.

Kurt will then discuss the significant progress we made in the third quarter towards our technology transformation and provide further perspective for how our technology architecture is changing.

He will also update you on a few commercial accomplishments in the quarter.

Finally, Mike will take you through the financial results of the quarter and our financial outlook for the remainder of 2022.

Before I start I want to thank my Sabre team members worldwide over the past few months I've been able to travel and meet with many of them.

Fantastic work they are doing for our customers is helping drive us to be the premier global technology platform and travel.

Turning to slide five I am pleased to report that our air booking volumes improved considerably throughout the quarter.

Volumes, specifically in July were impacted by both airline and airport operational constraints as the quarter progressed, we saw solid improvements, which translated into our best quarter of recovery since the onset of the COVID-19 pandemic. These.

These positive trends continued in October .

The current strength is attributable to the global recovery with Asia Pacific The most pronounced.

So total distribution booking recovery in the third quarter was 57% versus the same period in 2019. This equates to a 64% revenue recovery as a result of the higher booking rate achieved in the third quarter of 2022 versus the third quarter of 2019.

Higher revenue per booking resulted from a continued improvement in international travel.

It solutions passengers boarded recovered 96% in the third quarter versus the same period in 2019 hotels Crs transactions in Q3 were 104% compared to the same period in 2019.

Our key metrics remained strong in October specifically as of the 26th of October distribution bookings were 60% versus the same period in 2019 passengers boarding excluding <unk> volumes were at 86% and Crs transactions were at a 109%.

Moving to slide six last quarter, we noted $100 million annualized revenue opportunity, if our Asia Pacific region were to recover to the average recovery of the other regions I am very pleased to say we are starting to see further positive signs in this region, particularly in international markets, which had been the slowest to recover.

As we've discussed before international bookings are generally more profitable than domestic bookings for savr Accordingly, as international volume returns more fully we expect our profitability to improve.

Within APAC, our bookings improvement has been most pronounced in Taiwan, and Hong Kong, where travel restrictions have recently been relaxed Hong Kong bookings started Q3 at just 16% of the same period in 2019 by the end of the quarter. The recovery there was 29%.

One is an even better story with a quarter, starting at 17% recovery and ending at 45%.

Turning to slide seven although we are aware of the concerns regarding global economic growth, we don't see evidence of a slowdown in either leisure or corporate demand. In fact, we have seen fares globally remain very strong and well above the fares prior to the COVID-19 pandemic we.

We see the effect for domestic and international flights as depicted here, but also for leisure travel, which tends to book well in advance of departure and for close in corporate travel.

Our own internal review of affairs being sold at Walkup advanced purchased between 7% and 21 days in 21 days and beyond are well above 2019 levels.

It is also important to note that the average fare disparity between the purchase date is very small historically there has been a more pronounced difference in the average fares based on advanced purchase periods.

Higher airfares encourage airlines to increase the number of seats. They plan to fly in fact, we are seeing this materialize with a large U S network carriers.

Current marketing schedules loaded for these carriers in the first quarter of 2023 reflects an increase in total seats to be flown of one 6% versus 2019. This compares to total seats being down 11, and 9% respectively. In the third and fourth quarter of 2022 versus the same period in 2019.

More importantly international growth is outpacing domestic growth in the first quarter of 2023 seats to be flown internationally are currently up three 4% versus being down approximately 10% and approximately three 5% in the third and fourth quarters of 2022 versus the same period in 2019.

Moving to slide eight we thought it would be helpful. Given the news flow regarding a possible economic slowdown.

This slide again this quarter, we believe it provides a perspective for how significantly COVID-19 impacted global air travel in 2000 22022.

In short even with the recovery to date, we believe the opportunity presented by a normalization of travel from Covid is significantly larger than the effect if any prior economic recession on global passenger traffic historically, the largest calendar year drop in global passengers was only about 3% we estimate global pattern.

Traffic in 2022 will likely be about $1 5 billion passengers below what we would expect in a normalized year unaffected by Covid. Obviously this is far greater than the 3%.

Let me now turn the call over to Curt to walk you through the latest regarding our technology transformation and a few commercial highlights Kurt thank.

Thank you Shaun and Hello, everybody.

John Sean first of all thanking my favorite teammates around the world.

They are pressing hard to serve our best serve our customers achieve our goals and position <unk> for continued success.

Now please turn to slide number nine.

We made solid progress in the third quarter toward our 2022 technology milestones and.

And our tech transformation remains on track.

To achieve stated goals by the end of 2024.

As a reminder, our two key technology milestones for 2022 are number one.

To exit our sabre managed data centers and migrate to Google cloud.

And two to offload passenger name record a customer reservation database from the mainframe to Google cloud and to begin client migrations.

In the third quarter, we migrated hospitality solutions enterprise Central reservation system to Google Cloud.

October we migrated the property management system.

Which means we have fully transitioned all of our sonexus.

Google Cloud.

This important accomplishment is expected to make our hospitality business more agile improve velocity and unlock the benefits of greater scale ability provided by Google cloud.

Additionally, we expect that the cost level associated with these actions will abate by year end.

Setting up for better financial performance for hospitality solutions in 2023.

During the third quarter, we also migrated all air shopping from AWS to Google Cloud.

This was the final step on a long journey with initial migration starting in 2017.

When we moved the first workloads into our data centers.

We now have the processing capacity, we expect to need and can focus additional energy on product enhancements that.

That we expect will generate additional value for sabre and our customers.

And finally as you can see in the picture.

<unk> decommissioned at emptied our data center in Plano, Texas.

We are also decommissioned more than 70% of the servers.

And our three other datacenters in Lewisville Austin in Carrollton.

As we've outlined before.

This technology transformation is a key driver of the expected savings and margin improvement outlook that we've provided for 2025.

Let me now provide a bit more context.

Turning to slide number 10.

Our unit cost of compute has been falling as we migrate our systems to our lowest cost infrastructure Google cloud.

In fact, our monthly server costs on Google cloud is less than half that.

The cost of our Datacenters, both sabre managed and DXP managed it.

It is also about 15% cheaper than our current monthly server costs on AWS.

This savings is before we have the opportunity to optimize our systems on Google cloud.

Which we believe can create further cost savings.

Now turning to slide 11.

This slide depicts how shapers computing volume has changed over the past two and a half years and.

And how we expect it to change by the end of 2024.

The takeaway from this slide just have significantly less complex we.

We expect our technology architecture will be.

By the end of 2024 as per our original plan.

We expect Google cloud to be part of the key systems, we operate.

And to represent approximately 98% of our computing volume.

Before I turn the call over to Mike I want to comment on recent commercial activity.

In October we announced distribution agreement renewals with two of the largest airlines in the World American and United.

These agreements continue our long standing relationships with these flagship carriers.

And we plan to collaborate to utilized cheaper technology and solutions to.

To help advance their retailing objectives, while also meeting travel buyers need for efficient workflows choice and transparency.

We also strengthened our relationship with BCD travel.

One of the largest corporate travel management companies in the world.

As part of this new agreement BCD will increase its commitment to sabre and.

And we will invest in joint technology development over the coming years.

We look forward to continuing our relationship with BCD.

And we expect booking conversions to accelerate in Q4.

And through the first half of 2023.

In connection with BCD.

And our previously announced expanded relationships with American Express global business travel.

And Hopper we.

We believe these expanded relationships will benefit content suppliers and.

And travelers alike, Mike over to you.

Thanks, Kurt and good morning, everyone turning to slide 12.

Both revenue and adjusted EBITDA results improved year over year in the third quarter of 2022 as the travel recovery re accelerated in mid August from the July slowdown.

Total revenue was $663 million a.

<unk> improvement versus revenue of $441 million.

In Q3 last year, primarily due to the continued recovery in global Air Hotel and other travel bookings.

Distribution revenue totaled $431 million <unk>.

Compared to Q3, 2021 and $245 million.

Our distribution bookings totaled $80 million in the quarter.

Comparing to 2019 net air bookings recovered to 50%, 58% and 59% in July .

August and September and to 56% in the quarter as a whole.

Our average booking fee was $5 38 in the third quarter, which compares to $5 35 last quarter $5 28 in Q1, 2022, and $4 96 in the fourth quarter of 2021.

The sequential improvement is consistent with the recovery extending into more profitable regions and types of travel.

Additionally, the average booking fee achieved and <unk> was 13% higher than in the same period in 2019.

It solutions revenue totaled $173 million in the quarter. This is an improvement versus revenue of $145 million last year. Despite a challenging year over year comparison caused by the sale of our air centre portfolio in the first quarter of 2022.

Passengers boarded totaled $180 million, representing a 96% recovery versus the third quarter of 2019.

Hospitality solutions revenue totaled $67 million and.

Movement versus revenue of $55 million in Q3 2021.

Central reservation system transactions totaled $32 million in the quarter and were 104%.

2019 levels.

Adjusted EBITDA of $34 million was significantly better year over year as the recovery from the COVID-19 pandemic continued the strong year over year improvement in revenue in the quarter was partially offset by increased travel solutions incentives expense and hospitality solutions transaction fees from higher.

Volumes.

As expected our technology cost increased due to higher hosting costs associated with the volume recovery and higher labor and professional service expenses associated with our technology transformation.

Adjusted operating profit adjusted net income and adjusted EPS, all improved versus the prior year.

Free cash flow was negative $123 million in the third quarter to.

To provide some context. It is important to note that there were some disbursements in the third quarter that typically have fallen in the second quarter. These disbursements include payroll timing and agency incentives totaling about $40 million.

In addition, we had about $10 million in cash restructuring costs in the third quarter adjusting for these items, we would've reported meaningful sequential improvement in free cash flow from the second quarter to the third quarter.

<unk> fourth quarter has historically been a seasonally strong period for free cash flow Accordingly, free cash flow will turn positive in the fourth quarter of 2022, driven in part by the continued travel recovery and typical seasonal cash flow favorability.

We ended the third quarter with a cash balance of $804 million.

Moving to slide 13.

You can see a profile of our debt maturities on this slide our nearest maturity is $536 million of our term loan B in February 2024.

We refinanced about 70% of this term loan in two transactions earlier this year, which was supported by strong demand by both previous and new lenders.

At LIBOR, plus 200 term loan B is our lowest cost debt and meaningfully below what is available in markets today, which is the primary reason we have refinanced it overtime.

Our next nearest debt maturities after our term loan B Arent April 2025, we are currently evaluating market opportunities to efficiently refinance our obligations, including our term loan b maturing in February 2024.

Our annual interest expense based on our current debt profile prior to any additional refinancings and current interest rates is about $319 million.

Our net fixed to floating debt is about 60% to 40%.

Every 25 basis points of interest rate changes, our annual interest expense by about $4 million.

Given the recent moves in the U S. Dollar you may be wondering about our foreign exchange exposure, we have historically had about 10% of revenue and 20% of expenses denominated in foreign currency.

With our weighting toward a net expense exposure, we have experienced a modest benefit from the stronger dollar. However, the impact was immaterial to our third quarter results.

Turning to slide 14, moving.

Moving to guidance, we expect fourth quarter of 2022 revenue to be slightly higher than the third quarter as the benefit of the recovery is partially offset by seasonally lower bookings.

We also expect adjusted EBITDA in the fourth quarter of 2020 to be approximately $30 million, assuming a distributions booking percentage recovery in the low <unk> compared to the same period in 2019.

For the full year, we expect adjusted EBITDA of approximately $90 million, assuming distributions book distribution bookings of approximately 55% versus 2019.

This outlook is better than the midpoint of our prior EBITDA guidance for our recovery range of between 50 and 60% importantly.

Importantly, free cash flow will be positive in the fourth quarter and is expected to be positively annually thereafter.

Conclusion travel demand remains strong and the travel recovery is extending around the world. We are on track to achieve our technology transformation goals, and we expect higher profitability going forward.

Operator, please open the line for Q&A.

As a reminder to ask a question you will need to press star one on your telephone please standby, while we compile the Q&A roster.

Yes.

And our first question comes from Matthew Broome with Mizuho Group. Your line is open.

Thanks very much.

So it's definitely good to see your average booking fees continue to improve do you have any updated thoughts in terms of why you believe the average booking fees will level out at and then.

What was the mix between corporate and leisure and international and domestic during the quarter.

Yeah.

Matthew Hi, this is Kurt Thank you for the question I'll start and then hand, it over to Sean So.

Yeah.

Net effective fee.

Previously indicated a range of $5 30 to $5 55 per booking.

We are currently closer to the lower end of this range. So we do believe that there remains some opportunity for revenue per booking to increase as our business mix continues to improve and if you get into the mix Matt.

Things are happening I think.

When you break down sort of short haul long haul and what we're sort of seeing because it does help if you remember the beginning of the pandemic really we saw the leisure is the recovery short haul.

Over a period of time and part of what we have illustrated is actually the gap closing, meaning short haul business has recovered on the corporate side of the equation. What we're watching very closely now is really the international side and this is why we look at the capacity and what's taking place and there is sort of a combination of leisure and corporate with that I would still say leisure.

Is driving that but as capacity continues to be thrown in by the carriers and that's why I noted the three largest carriers in the U S and international capacity their strong belief as it relates to just corporate cover corporate travel recovery because they need the front half. The cabins are you felt so that's sort of what we're seeing right now.

Okay. Thanks, and then.

Maybe just on the global business travel group.

That partnership have you seen some volume from that that partnership ramp up during the quarter or perhaps in October .

Matthew Thank you were seeing.

Initial conversions from D.

GBT partnership we will see those.

Conversions accelerate in Q4 and basically through next year.

Acquired Youre going to see BCD and Hopper volume beginning to accelerate during this period collectively this is a tailwind for 2023.

Okay. Thanks very much.

Thank you. Please standby for your next question.

And our next question comes from the line of Mark <unk> with Bernstein. Your line is open.

Thank you very much and it's nice to see the improvement kicking through.

Two questions. If you don't mind, the first is about free cash flow.

Expecting it to turn positive next quarter. It was meaningfully negative you gave us some of the puts and takes but how do we think what's going to be the big driver of that improvement into next quarter and why does that continue to sustain and then I've got some follow ups.

Sure. Thank you Mark for that question.

Let me just provide a little bit of historical context on our free cash flow trends.

You go back to the pre pandemic period, the fourth quarter historically has been a very strong free cash flow period.

For Sabre and it essentially has to do with the timing of payments between when we receive payments from <unk>.

Various partners versus when we make other disbursements to other partners and so just the way those payments flow the fourth quarter tends to be very favorable that as seasonality that we expect to continue and we will see in the fourth quarter.

Let me just to elaborate a little bit more on those trends because I think it may be helpful. Is if you look at our prepared statements looking at Q2 to Q3 to Q4, if you look at Q2.

And you said, we had negative $89 million of free cash flow and you take into account that there was about $40 million payment timing.

That essentially happened in the third quarter that would be more typically occurring in the second quarter, but what that would imply is that the adjusted trends are more like negative $130 million of free cash flow in Q2, more like negative $70 million in Q3, and then with the seasonal benefit.

Positive.

In Q4.

And so with that I would say.

We will be positive free cash flow in the fourth quarter, and we expect to be positive in.

In 2023 and annually thereafter.

Should we figure that's a very helpful should we figure that basically the free cash flow trajectory going forward is mostly the combination of revenue slash mixed growth plus the positive impacts of the cloud transition savings.

I think <unk> got it I think the big items. There are so as we go into 2023, we have a series of <unk>, we have some headwinds too, but more more headwind I mean more tailwind than headwinds.

And the big things are the things you are mentioning obviously, we still have a lot to go in this travel recovery.

<unk> had some really great.

Wins with GBT and Hopper.

And BCD.

As you saw on slide 10 are starting to see the benefit of a lower cost of compute that is a tailwind moving into 2023 and as our business grows.

We expect scale benefits on the SG&A side. So as revenue grows we expect really good flow through from revenue down to EBITDA down to free cash flow. The biggest headwind obviously for us is higher interest rates.

But net net the tailwind from our perspective should far exceed the headwinds.

That's very helpful. Just following up on that.

Yeah, I like the slide 10, it's very impressive to see how much of the average cost of compute has been going down as you're switching should we expect costs to keep the cost per compute.

On Google cloud to decrease meaningfully, whereas the upside from a moving while the existing workloads to cloud and be some optimization and then within the optimization is that more like a single double digit tailwind or could it be better than that.

Yes, Mark let me jump in on this one so first it's sort of the shift over to to just.

Typically with cloud and that is essentially.

The contract that we have in place and as you know that's a very long term contract and we'll be able to have those savings for a long period of time. So that's the bulk of the savings that youre going to get what we're finding right now and this is where the teams are spending a lot of time with the Google Engineers on what are the optimization things that can take place and what's nice about this is we're actually having sort of a tripod.

Conversations with even some of our customers as it relates to their compute requirements and how do we begin to drive efficiencies not only with what.

We are doing but also with some of our customers are doing and this gets into some of those relationships that we're talking about with the agency. So.

We haven't been able to quantify that completely yet mark because we're sort of still working through it but as we gain more clarity, we will definitely be disclosing that.

I really appreciate it and look forward to seeing all the numbers start to move in the positive next quarter and congrats lots of hard work great. Thanks. Thanks Mark.

Thank you one moment for our next question.

And our next question comes from the line of James <unk> with Redburn. Your line is open.

Yes, hi, everyone. Thanks for taking my questions.

My first one is just having to think about sort of the debt refinancing given the difference in rates and the size what are your thoughts on refinancing the more expensive and larger 2025 debt before the remaining 2020 timeline, which is comparatively cheaper in the.

The lower absolute value.

Yeah.

Yes, I mean first what I would say is we're obviously thinking about one or 2024 maturities and then followed on by that our 2025 maturities and.

What I would say as well before I joined Sabre one of the things that I was very impressed with us.

How the company has managed its balance sheet, how it's managed financings.

And how it is managed liquidity in what was really an incredibly challenging time and I would just say kudos to Sean and the Treasury team really did an amazing job there.

What I would tell you is we're going to be we're going to be opportunistic and try to approach. It in a way that's most efficient.

For shareholders.

If you look at our proxy in terms of how the markets have changed probably the best proxy is our August refinancing.

Which was a so first plus 500 and so it gives you some idea of at least where the markets were in August when we completed that refinancing relative to our current term loans and our current debt structure.

Alright. Thank you and then just my second one on the free cash flow guide for next year being positive.

Are you able to give a bit of color on the phasing I guess in other words are you looking for that to be positive in both H, one and H two or would you expect <unk> to be negative in <unk> to be positive given sort of the working capital.

I C and H one versus HD.

Yes, James will provide more color and context on the February earnings call regarding how we see the year playing out.

Understood. Thank you.

Thank you one moment for our next question.

And our next question comes from Jed Kelly with Oppenheimer. Your line is open.

Hey.

Great great. Thanks for taking my question.

Two if I may just on one just just on the outlook for next year I think.

Previously I think your outlook it implies that your adjusted tax expense would probably start to decline mid single digits I think starting next year.

Is that still the case and then.

Can you talk about just how the stronger dollar is impacting.

Long haul travel and.

Is there like is there an offset or headwind just by the higher ticketing cost. Thanks.

Yeah, I'll take the first part and Sean will take the second part on technology expense in aggregate, we do expect technology expense in aggregate to be lower in 2023% in 2022, it's made up of two components essentially we have our tech investments essentially our bubble costs those are still significant in 2023.

It's still one of the significant years, and then starts to taper down a bit in 2024. The reason, though we have a net decline in <unk> expense is really because of a lower cost of compute and we're really starting to see the benefit of that so the net of those we would expect to be a slight a slight decrease in tax expense in 2023, but we'll provide more color on 2000.

23 of all on the next earnings call.

This is Shawn I'll pick up on the second question. So if you look at it relative to the strong dollar I think the one thing that we definitely haven't seen is that those individuals within the United States traveling overseas that has been actually called out by the major carriers here in the United States relative to what they think is driving some of that strong demand.

If you think maybe more long term because I think it gets into it was there an impact long term I think the important thing that we keep trying to drive everybody back to is sort of where we are in the recovery cycle and Thats why we call out from a normalized perspective, we're sort of down $1 5 billion passengers and even with some of the headwinds that we're seeing.

<unk> be it on the inflation side are concerned about recession.

The thing that I keep coming back to and pointing out is what we're seeing as it relates to the global global regions and the recoveries that we're seeing in the global regions and I am ecstatic about what we're seeing in APAC right now leisure continues to be strong, but I would tell you is on the business side and this is just looking at the TMC. So this is more specific to the United States, but we have seen.

Actually a progression of improvement has taken place coming out of the third quarter into the month of October that theres been a step up so as that continues to recover we will be the beneficiary of that the other thing that continues to be out. There is just higher average fares right. We're just not seeing average fares came down they came down for a period of time call. It in the July August timeframe when we.

Saul some.

Issues associated with the operation, but we've seen those sort of improve as well essentially compression that's taking place there and we're seeing that capacity being thrown into the marketplace. So again, all the signs that we're seeing outside of what's happening with the valuation of the U S. Dollar we think that's a tailwind for specifically the U S Airlines, but we're just looking more on a global macro perspective.

And again, we're seeing just green signs relative to what 2023 looks like.

Got it and then just I guess as the airlines kind of get back to normal.

Can you talk about.

Where your conversations are progressing with.

On your solutions segment.

Airlines sort of are they opening up back up like contract negotiations for IP.

Thank you.

Jeff This is Kurt thank you.

So.

First of all we think we're very well positioned for medium to long term growth within the <unk> segment.

The big phenomenon that we're seeing is a real focus by carriers, especially the network carriers on becoming better merchandising and retailing.

There is you may have heard of something called the one order vision, which has been put out by IATA effectively on behalf of the global Airlines and we're in conversations with a number of airlines about helping them solution against that opportunity. So we're very excited about the ability to advance.

That's the the marketplace together with a number of our customers and prospects.

Thank you.

Thank you one moment for our next question.

And our next question comes from Josh Baer with Morgan Stanley . Your line is open.

Great. Thank you for the question I had a couple on on guidance and then longer term targets I guess first thing in Q4 with slightly higher revenue than Q3 can you talk for a minute about the Q4 EBITDA guidance I'm, just wondering why it would move lower versus results.

From this quarter given the higher top line and just all the momentum on international opening up higher margin on the progress on the tech transformation.

Cost of compute savings.

Yes.

The movement from Q3 to Q4, what I would say as Q3 had some favorable cost trends from an SG&A standpoint, and then as we move into Q4, we do have some specific investments within SG&A.

Benefiting.

2000, 22023, and so you just have slightly higher costs moving from Q3 to Q4 and Thats the primary difference.

On adjusted EBITDA.

And I'm sorry, what was the second question, Yes, and then on the 22025 targets just wanted to check the ranges and scenarios.

They'll still stand.

Yes.

Okay and then.

Just like putting some numbers around like just the 80% scenario really you could pick any of them but.

Bridging from the 55% recovery for this year and the $90 million in EBITDA, and then getting to $900 million.

In EBITDA.

80% recovery scenario.

Even if you if you back out like a $150 million in tax savings.

I think I'm getting to a low 50% incremental EBITDA margin on the increased revenue from 'twenty two to 'twenty five.

That.

Is that are the right type of incremental margin or am I missing something.

So what I would say as we think about where we are today. One is we are very bullish on the traveling recovery overall.

We continue to win in the marketplace and you see that with the wins that we recently announced we obviously have the benefit of tough transformation, which as you noted 80% recovery is about $100 million.

About $150 million of savings of 80% recovery, we expect that as revenue grows we should see really good scale from an SG&A standpoint.

So with that if you look at our overall EBITDA margins, we do expect.

EBITDA margins to increase as compared to 2019. If you look at 2019, we had about a 22% adjusted EBITDA margin and if you look at the targets there between.

23% and 28% depending on the range of recovery. So it is reasonable to expect margin improvement that is our expectation at those targeted recovery levels.

Okay. Thank you appreciate it.

And as a reminder to ask a question. Please press star one on your telephone.

One moment please.

Our next question comes from Victor Cheng with Bank of America. Your line is open.

Thanks for taking my questions a couple if I may.

So first of all Keith provide a bit more color on bookings, but covered by region.

Kevin I was just looking at trend.

One percentage point improvement in the last two months and presumably.

About the bulk of that is coming from APAC.

So is it fair to assume that EMEA or U S recovery.

Has somewhat flattened.

Yes, let me let me help you sort of with what we have been seeing so what I would tell you is the once the September and October and October was probably the best month recover that we have seen and this is John on a global basis and what's taking place.

Start with APAC, if youll remember APAC at the beginning of the year was down and call. It the 80% range, what we've seen with APAC to date and its really looking at the September October timeframe.

They are recovering or they're down less than 40% now so youre thinking about 60% recovery.

We are seeing in the EMEA marketplace has been one that it's probably at the top end of recovery, but we have seen it flattened out a little bit part of that is if you dig into the capacity that has been flown by some of the major carriers within Europe that is slow so we're watching what's happening there in the first quarter.

Well.

Latin America after being hit with some significant cases of Covid has continued to improve greatly and what's happening and then the U S. As we look at it.

And this is where we're looking at essentially the capacity improvements and what's taking place.

We're seeing incremental improvements in our bookings, but it's not the big steps that we were seeing before so I think part of what you're finding is.

There needs to be more capacity in the marketplace because of the demand is sitting there and thats. What airlines are trying to do on a global basis. So it's sort of that demand is there. They are waiting for the supply and we know when the supply is there. The demand is following so that's sort of the breakdown of what we're seeing right now.

Thanks, that's useful.

I've got a couple of follow ups on the volume recovery and just thinking about.

Ethane cash flow positive for full year next year.

Are you thinking in terms of the minimum volume recovery.

For you to be cash flow positive.

Yes, I would say as you noted we expect to be free cash flow positive.

Next year and annually thereafter, we'll provide a lot more color and context on trends and assumptions in next earnings call, but it is not something.

Would be doing on this call.

Gotcha and then.

On the BCD partnership that you announced yesterday.

Is there some material contribution additional contribution to bookings for next year.

Because if I'm not mistaken I thought <unk> was already using sabre has the primary Tds.

Victor Thanks This is Kurt.

So we're very excited about the the BCD partnership it's a long term partnership we did have an existing relationship with BCD.

There is meaningful growth.

With BCD with this partnership.

One theres a commercial partnership to not dissimilar to the GBT relationship we have.

This relationship will involve.

Investment by BCD and technology development being done by Sabre that we'll be sharing with the broader marketplace. So this is as I mentioned on the call a good tailwind for us for next year.

Got it and then.

Just maybe one final point our final question is.

Hospitality.

Whether you have explored any potential sell on hospitality.

Given hotels are increasingly looking for a unified platform across Crs and Pms.

<unk>.

Since <unk> clients to develop a comprehensive pms.

Or if not then do you have plans to invest more in hospitality and hospitality.

Any capabilities that you are looking to extend.

Yes, let me on the hospitality side I think the important thing that Curt has called out and sort of what we look at is the opportunity in that space is very strong. The one thing that we have clearly seen both on the airline side. They occurred had mentioned and what we're seeing on the hospitality side is also the retailing capability. So the focus that we have.

On.

Actually the retailing.

Studio that we have out there is getting sort of really good feedback from our customers and what's taking place.

If you look at it the tech transformation that we've gone through is very significant so that's some of the cost pressure that we've seen as it relates to this year and as we stated that begins to abate really right now so it'll be a tailwind into 2023 I think the other thing if you look at the <unk> acquisition that we made small acquisition, but it's important when you think about retailing capability because it gets into the <unk>.

Side, so again everything that we're lining up as it relates to that is the opportunity. That's there how do we make sure that we're fulfilling.

The hoteliers are looking for and the ability to drive more revenue through retailing capabilities, having the right platform in place.

So like on the airline it we're very focused on how do we grow the hospitality.

Okay.

Got it that's clear thank you.

Thank you I'm showing no further questions at this time I would now like to turn the conference back to Mr. <unk> for closing remarks.

Great. Thank you Amy once again I would like to thank my team members around the world for the hard work and dedication that they continue to have an environment that is really recovering right now as I've mentioned throughout this call. We're seeing a lot of green lights relative to what's taking place.

Have made an enormous amount of progress as it relates to our technology transformation, we're sort of in the last leg right now as we go into 2023 that was the year. We told you is the most significant.

The most significant but it's a piece of the bubble expenses.

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