Q2 2023 Sabre Corp Earnings Call

August 3, 2023

Call is being recorded I will now turn the call over to the senior director of Investor Relations. Brian Roberts. Please go ahead Sir.

Thank you and good morning, everyone welcome to <unk> second quarter 2023 earnings call. This morning, we issued an earnings press release, which is available on our website at investors Dot <unk> Dot com.

A slide presentation, which accompanies today's prepared remarks is also available during this call on the Sabre Investor Relations webpage.

A replay of today's call will be available on our website later this morning.

We advise you that our comments contain forward looking statements that represent our beliefs or expectations about future events, including the ongoing recovery from the effects of COVID-19 industry trends benefits from our technology transformation commercial and strategic arrangements strategic priorities, our financial outlook and targets.

<unk> revenue adjusted EBITDA free cash flow costs, and expenses cost savings and reductions 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 second quarter 2023 Form 10-Q.

Throughout today's call. We will also be presenting certain non-GAAP financial measures referenced during today's call to adjusted operating income adjusted net income adjusted EBITDA adjusted EBITDA margin adjusted EPS and free cash flow has been adjusted to exclude certain items the.

The 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 Dot <unk> Dot com.

Participating with me are Curt Hecker, President and CEO , and Mike <unk>, Chief Financial Officer, Scott Wilson, EVP, and President of hospitality solutions will be available for Q&A after the prepared remarks.

With that I will turn the call over to Kurt.

Thank you Brian Good morning, everyone and thank you for joining us today.

I'm pleased this morning to be joining you to discuss our accomplishments for the second quarter.

And highlight the upward trend in.

And the underlying fundamentals within our business.

In the second quarter, we significantly exceeded our financial expectations.

And believe this performance is indicative.

Of <unk> ability to compete and win in the dynamic global travel technology marketplace.

We see positive momentum across our key business segments.

That gives us the confidence today to raise our 2023 adjust.

Adjusted EBITDA guidance.

We remain focused on our core strategic objectives that we outlined in our conference call last quarter.

And I am pleased that sabre is delivering on our priorities.

Furthermore, we are on a durable path towards Shapers 2025 financial targets.

Adjusted EBITDA greater than $900 million.

And free cash flow of greater than $500 million.

Before jumping into the detail of today's call.

Let's walk through the agenda.

On slide four you can see an overview of the topics, Mike and I will cover.

First I will review our business highlights from the second quarter.

And then I'll take a few moments to describe some of the underlying data.

That we are seeing which supports our near term revenue expectations.

Next I'll provide detail on our customer successes during the second quarter.

And then update the progress of our technology transformation.

Finally, Mike will take you through the financial results for the second quarter.

And provide an update to our 2023 outlook.

Turning to slide five.

As a reminder, these are our four key strategic priorities.

From the foundation of our long term direction for the company.

As I referred to each priority.

I will provide proof points and recent accomplishments.

From the second quarter that highlight our progress towards achieving each of these objectives.

First generating positive free cash flow and de levering the balance sheet remain our most important financial objectives.

Solid operational execution and.

An improving business fundamentals combined to deliver better Q2 results than we had anticipated.

As I stated previously we are pleased to be able to increase our 2023 adjusted EBITDA guidance here today.

And we now also expect revenue to be within the upper half.

Of the original guidance, we provided on the February earnings call.

During the quarter, we also refinanced a significant portion of our nearest term 2025 debt maturities, which Mike will describe in more detail shortly.

Importantly.

We see sabre transitioning towards positive free cash flow generation.

Beginning in Q3 of this year.

And expect to be free cash flow positive in 2023.

Excluding the impact of restructuring.

And then annually thereafter.

Moving to our second strategic priority.

Which is to deliver sustainable long term growth.

<unk> once again increased its share of industry air bookings on a year on year basis during the second quarter.

In addition, excluding the impact of Expedia, our share of GDS industry volumes has improved versus both second quarter 2022, and 2019 levels.

Our efforts to expand our business with agencies.

And new airline partners continues.

And is the backbone of the distribution growth strategy that we outlined last quarter.

We also achieved significant successes with customers across each of our businesses during the second quarter.

That we expect will support our growth in the coming years.

Our third strategic priority is.

To drive innovation.

And enhance our value proposition with both existing and new customers.

Our technology transformation remains a cornerstone competitive advantage in delivering.

Our products and services quickly and reliably.

And in a secure manner to our customers.

We achieved our technology migration milestones during the second quarter.

And remain on track to achieve our longer term financial and operational goals.

In addition, we made important strides on several of our growth strategies.

That we believe will enhance our overall competitive product suite.

To fulfill our customers' evolving needs.

For example, we expect our acquisition of Tech simply.

To accelerate our development of key products within hospitality solutions.

Including speeding our ability to deliver.

And scale, our retail studio product suite.

Through our hotel customers.

Lastly, we have now completed the vast majority of the resource realignment and cost reduction program that we communicated last quarter.

We are on track to realize $100 million.

We've reduced costs in the second half of 2023.

And an estimated annualized $200 million of reduced costs in 2024.

In summary, during the second quarter.

Our team delivered on the priorities, we outlined to you back in May.

And we are laser focused on achieving our 2023 objectives.

And executing on our durable path.

Towards our 2025 targets.

Now, let's turn to slide six.

Underpinning our optimism for solid industry volume growth in the coming quarters.

The expected increase in capacity.

That can be seen here in the chart.

The latest global airline schedules suggest seat growth of 15% year over year in the third quarter of 2023.

And 19% growth year over year in the month of October .

Industry optimism regarding further capacity growth.

Is being driven by a host of underlying factors.

Including rising aircraft deliveries to global carriers.

Further mitigation of supply constraints from labor and training shortfalls.

And a healthy yield environment and load factors that indicate demand for air travel remains robust.

Regarding business travel specifically.

Industry surveys indicate that corporate demand is expected to be healthy.

In the coming quarters.

Respondents to a recent corporate travel survey.

Indicated that they expect passenger volumes to grow by double digits year over year.

In the second half of 'twenty, three and in 2024.

Despite a strong industry backdrop.

We have as we articulated last quarter conservatively planned for one to two points of sequential industry volume growth moving forward.

And should industry growth exceed this level.

We would expect to realize upside to the guidance and targets we have provided.

Turning to slide seven.

During our first quarter earnings call in May.

We use this table to highlight the increasing share of.

GDS industry bookings that we achieved in Q1 and.

And as you can see in this slide.

Our share in Q2 2023.

Again expanded on a year over year basis versus Q2 2022.

Importantly, after removing expedia volumes Sabre was again, a larger proportion of industry our bookings in Q2 'twenty three than.

And then in the second quarter of 2019 and 2022.

If you compare Q2 share of industry or bookings.

Of 33, 7%.

To the 34.0% from the first quarter the slight sequential change was impacted by seasonal shift.

And the geographic mix of bookings between quarters.

Given signed but not yet converted business.

And a robust pipeline.

We expect that our share of industry bookings will continue to increase as we deliver on our growth initiatives.

Please turn to slide eight.

Our team is delivering many successful business wins across both travel solutions.

In hospitality solutions as you can see here on this slide.

We continue to realize increased momentum in hospitality solutions.

Notably, we recently announced a global agreement with Hyatt.

Under which our <unk> central reservation platform.

Will become the main Crs for Hyatt beginning in 2024.

Our platform will offer enhanced reservation capabilities.

And improve the overall guest experience.

In addition to the Hyatt agreement, two well known hotelier brands based in Asia Pacific.

<unk> selected our <unk> platform to help combine and streamline their it infrastructure.

In distribution, we were pleased to sign a new agreement with Air Canada.

And which table will provide agencies with significantly expanded access to content and offers.

Including the airlines dynamically price fares and new ancillary services.

This agreement provides favor with long term access.

To all of Air Canada's content via MDC.

And represents another important example of a leading airline increasing its level of participation with sabre.

The sabre marketplace as a highly efficient place to buy.

And sell travel content, incorporating MDC offers alongside other content sources.

We see NBC and GDS or edit that content as complementary.

With NBC, expanding the breadth of product available and Sabres multi source content platform.

And enhancing our value proposition to both buyers and sellers.

Recently, SAP concur, which has the largest share of corporate online booking volumes globally.

Sure that sabre will be its first NBC integration with a GDS provider.

During the first half of 2023.

We doubled the number of airlines distributing NBC content through the sabre marketplace.

And last quarter additions included United and Aeromexico.

And as we previously announced back in May.

We were also able to bring air India back onto our distribution platform.

Which is supporting our international bookings growth.

And industry positioning in one of the fastest growing regions for air travel globally.

On the agency front in the second quarter, we signed a significant number of agreements.

Examples include a deepening of our relationship with last minute.

And a new long term commitments with inter Nova a top 10 agency in North America.

In it solutions.

We are pleased with the positive response, we're getting from new and existing customers to our intelligent retailing solutions.

And sellers.

Recently, SAP concur, which has the largest share of corporate online booking volumes globally.

Sky airline the low cost Chilean carrier, which is growing rapidly in South America selected our sabre Sonic passenger service system for its core it needs.

Sure that sabre will be its first NBC integration with a GDS provider.

During the first half of 2023.

We doubled the number of airlines distributing and DC content through the shape of marketplace.

In addition, air Serbia recently renewed its PSS agreement.

And is utilizing some of the latest revenue generating solutions that we produce.

And last quarter additions included United and Aeromexico.

We expanded our relationship with all Nippon Airways through our enhanced agreements to improve the carrier's network planning and optimization capabilities for its domestic routes.

And as we previously announced back in May.

We were also able to bring air India back onto our distribution platform.

Which is supporting our international bookings growth.

We also had additional network planning software renewals in the quarter with air China and Delta among others.

And industry positioning in one of the fastest growing regions for air travel globally.

On the agency front in the second quarter, we signed a significant number of agreements.

Lastly, we are also realizing very strong growth in our confirm our payments business.

Examples include a deepening of our relationship with last minute.

However, we do not expect to breakout these details for the foreseeable future.

And a new long term commitments with inter Nova a top 10 agency in North America.

In summary, <unk> achieved a number of commercial wins during the second quarter.

In it solutions.

That will help us deliver on our financial goals.

We are pleased with the positive response, we're getting from new and existing customers to our intelligent retailing solutions.

I will now move on to our technology transformation. Please.

Please turn to slide nine.

Our technology transformation continues to move forward.

Sky airline the low cost Chilean carrier, which is growing rapidly in South America selected our sabre Sonic passenger service system for its core it needs.

And we achieved several short term milestones in Q2.

As of the end of the second quarter, we have successfully migrated 73% of our total compute capacity.

In addition, air Serbia recently renewed its PSS agreement.

And is utilizing some of the latest revenue generating solutions that we produce.

To Google cloud up from 69% one quarter earlier.

We expanded our relationship with all Nippon Airways through our enhanced agreements to improve the carrier's network planning and optimization capabilities for its domestic routes.

Additionally by the end of the second quarter, we had fully decommissioned all 15 sabre managed data centers.

We have now also decommission 68%.

We also had additional network planning software renewals in the quarter with air China and Delta among others.

Of our DXP Tulsa mid range servers.

And are on track to complete the remainder on schedule by year end.

Last we are also realizing very strong growth in our confirm a payments business.

The chart to the right hand side of this slide shows the significant improvements we are seeing in our unit cost of compute.

Overall sabre is on track to complete the tech transformation.

In summary, <unk> achieved a number of commercial wins during the second quarter that.

At the end of 2024 and.

And deliver annual expense savings of at least $150 million in 2025.

That will help us deliver on our financial goals.

I will now move on to our technology transformation.

Now to slide 10.

Please turn to slide nine.

Our technology transformation continues to move forward and.

In May we announced a resource realignment.

To improve our organizational structure.

And we achieved several short term milestones in Q2.

Lower costs and achieve greater efficiency.

We expect these actions to deliver $100 million in cost savings in the second half of 2023.

To Google cloud up from 69% one quarter earlier.

And an additional $100 million in savings in 2024.

Additionally by the end of the second quarter, we had fully decommissioned all 15 sabre managed data centers.

For a combined $200 million.

And annualized cost reductions.

We were able to complete these actions sooner than we had anticipated.

We have now also decommission 68%.

And began capturing savings in the second quarter, which gives us high confidence in the overall size and timing of these actions.

Of our Dfc Tulsa mid range servers.

And are on track to complete the remainder on schedule by year end.

Now onto slide 11.

The chart to the right hand side of this slide shows the significant improvements we are seeing in our unit cost of compute.

In closing we delivered on our priorities in the second quarter, and we will continue to prioritize free cash flow and Delevering.

Sustainable growth opportunities.

Assistant enhancement of the value proposition that we deliver to our customers.

And deliver annual expense savings of at least $150 million in 2025.

And a more efficient organization with a lower cost structure.

I will now hand, the call over to Mike to walk you through our second quarter performance and our 2023 financial expectations.

Now to slide 10.

In May we announced a resource realignment to improve our organizational structure.

Thanks, Kurt and good morning, everyone.

Lower costs and achieve greater efficiency.

Please turn to slide 12 the.

We expect these actions to deliver $100 million in cost savings in the second half of 2023.

The second quarter was a strong quarter for sabre, we saw industry volume growth in line with our expectations and significantly higher average booking fees compared to Q1 2023 and prior year.

And an additional $100 million in savings in 2024.

For a combined $200 million.

And annualized cost reductions.

As Curt mentioned Sabre continues to grow share on a year over year basis.

We were able to complete these actions sooner than we had anticipated.

And began capturing savings in the second quarter, which gives us high confidence in the overall size and timing of these actions.

Hospitality solutions generated double digit revenue growth with a higher revenue per transaction and contributed to adjusted EBITDA generation sooner than expected.

Now onto slide 11.

In closing we delivered on our priorities in the second quarter.

In addition, we accelerated our cost reduction efforts, which helped drive strong bottom line results and better than expected adjusted EBITDA and free cash flow.

And we will continue to prioritize free cash flow and de levering.

Sustainable growth opportunities the consistent enhancement of the value propositions that we deliver to our customers.

Overall in the second quarter, we gained significant momentum and are optimistic for the remainder of 2023 and beyond.

And a more efficient organization with a lower cost structure.

I will now hand, the call over to Mike to walk you through our second quarter performance and our 2023 financial expectations.

Now referring to the slides.

As you can see from the table, we exceeded our expectations for second quarter revenue adjusted EBITDA and free cash flow.

Thanks, Kurt and good morning, everyone. Please turn to slide 12.

The second quarter was a strong quarter for sabre, we saw industry volume growth in line with our expectations and significantly higher average booking fees compared to Q1 2023 and prior year.

Turning to slide 13.

Q2 revenue was $738 million, an increase of $80 million or 12% versus last year.

As Curt mentioned Sabre continues to grow share on a year over year basis.

Distribution revenue totaled $530 million a.

A $99 million or 23% increase compared to $432 million in Q2 2022.

Hospitality solutions generated double digit revenue growth with a higher revenue per transaction and contributed to adjusted EBITDA generation sooner than expected.

Our distribution bookings totaled $90 million in the quarter, a 12% increase compared to $81 million in Q2 2022.

In addition, we accelerated our cost reduction efforts, which helped drive strong bottom line results and better than expected adjusted EBITDA and free cash flow.

Our average booking fee was $5 87 in the second quarter up 10% from Q2 2022.

Overall in the second quarter, we gained significant momentum and are optimistic for the remainder of 2023 and beyond.

We continue to realize favorable mix into more profitable regions and types of travel, resulting in higher booking fees and we believe that further growth in international volumes should support our booking fee at this level for the foreseeable future.

Now referring to the slides.

As you can see from the table, we exceeded our expectations for second quarter revenue adjusted EBITDA and free cash flow.

Turning to slide 13.

It solutions revenue totaled $140 million in the quarter. This was a $27 million decline versus revenue of $168 million in the comparable prior year period.

Q2 revenue was $738 million, an increase of $80 million or 12% versus last year.

<unk> revenue totaled $530 million, a $99 million or 23% increase compared to $432 million in Q2 2022.

Injuries border totaled $172 million, an 8% improvement from $160 million in Q2 2022.

Yeah.

Second quarter revenue growth from passengers boarded and other it solutions business was more than offset by the impact of $29 million and lower revenue from <unk> migrations. The vast majority of which was the result of the impact of changes in Russian law.

Our distribution bookings totaled $90 million in the quarter, a 12% increase compared to 81 million in Q2 2022.

Our average booking fee was $5 87 in the second quarter up 10% from Q2 2022.

Hospitality solutions revenue totaled approximately $77 million, a $10 million or 16% improvement versus revenue of $66 million in Q2 2022.

The 16 points of revenue growth was driven by eight points of central reservation system transactions growth.

It solutions revenue totaled $140 million in the quarter. This was a $27 million decline versus revenue of $168 million in the comparable prior year period.

And eight points of higher rate per transaction.

Hospitality solutions performed significantly better than our initial expectations and has generated $1 5 million of adjusted EBITDA on a year to date basis.

Passenger's border totaled $172 million, an 8% improvement from $160 million in Q2 2022.

While our initial expectations was that hospitality solutions would be breakeven for 2023, we now expect hospitality solutions to be a meaningful contributor to adjusted EBITDA going forward.

Adjusted EBITDA of $73 million.

In Q2, 2023 versus $24 million in Q2, 2022 represented a $49 million improvement year over year.

Hospitality solutions revenue totaled approximately $77 million.

Free cash flow was negative $57 million in the second quarter, including the impact of restructuring charges, which was better than our prior guidance for a range of between negative $60 million and negative $80 million, including restructuring costs.

A $10 million or 16% improvement versus revenue of $66 million in Q2 2022.

The 16 points of revenue growth was driven by eight points of central reservation system transactions growth.

And eight points of higher rate per transaction.

During the second quarter, we paid down approximately $48 million of term loans from the proceeds of the Air Center sale.

Hospitality solutions performed significantly better than our initial expectations and has generated $1 5 million of adjusted EBITDA on a year to date basis.

This amount was lower than our $80 million expectation discussed on the last earnings call due to the acquisition of Tech Assembly and additional capital investments.

While our initial expectations was that hospitality solutions would be breakeven for 2023, we now expect hospitality solutions to be a meaningful contributor to adjusted EBITDA going forward.

We ended the second quarter with a cash balance of $727 million.

Before moving to guidance, let's discuss the actions we took during the second quarter to begin refinancing our 2025 debt maturities.

Adjusted EBITDA of $73 million in Q2, 2023 versus $24 million in Q2, 2022 represented a $49 million improvement year over year.

The private facility financing, we completed in June when combined with the successful tender offer on the majority of our April 2025 bonds.

<unk> de risk our balance sheet by reducing a significant portion of our nearest term bond maturities.

In addition, we believe the option to defer cash interest on this facility in favor of payment in kind provides substantial optionality and flexibility to our balance sheet and we expect to utilize this feature of the facility for the foreseeable future.

During the second quarter, we paid down approximately $48 million of term loans from the proceeds of the Air Center sale.

This amount was lower than our $80 million expectation discussed on the last earnings call due to the acquisition of Tech simply.

With regards to the remaining 2025 maturities our intent is to refinance our obligations with a focus on efficiency and flexibility.

And additional capital investments.

Moving to slide 14 to discuss our guidance.

We ended the second quarter with a cash balance of $727 million.

We expect third quarter 2023 revenue of approximately $725 million adjusted EBITDA of approximately $100 million in.

Before moving to guidance, let's discuss the actions we took during the second quarter to begin refinancing our 2025 debt maturities.

And positive free cash flow of approximately $20 million <unk>.

The private facility financing, we completed in June when combined with the successful tender offer on the majority of our April 2025 bonds helped de risk our balance sheet by reducing a significant portion of our nearest term bond maturities.

Inclusive of restructuring if you exclude the restructuring impact we would expect positive free cash flow of approximately $50 million.

With regard to sequential trends, we expect Q3 revenue to be slightly lower than Q2, driven by typical seasonal differences between the quarters.

The primary driver of the expected sequential improvement in adjusted EBITDA in Q3 to approximately $100 million from $73 million in Q2 is a near full quarter impact of our cost reduction efforts.

With regards to the remaining 2025 maturities our intent is to refinance our obligations with a focus on efficiency and flexibility.

And our free cash flow, we expect to generate approximately $50 million in Q3.

Excluding the impact of restructuring due to the sequential improvement in adjusted EBITDA and a typical favorable seasonality and working capital dynamics.

Moving to slide 14 to discuss our guidance.

We expect third quarter 2023 revenue of approximately $725 million adjusted EBITDA of approximately $100 million and positive free cash flow of approximately $20 million inclusive of restructuring.

As a reminder, our mandatory preferred shares will convert into common equity on September one 2023 <unk>.

Following this conversion our share count will rise by approximately 47 million shares and our $5 million payment on September one will be our last quarterly dividend payment on the shares.

If you exclude the restructuring impact we would expect positive free cash flow of approximately $50 million.

With regard to sequential trends, we expect Q3 revenue to be slightly lower than Q2, driven by typical seasonal differences between the quarters.

We expect fourth quarter 2023 revenue of approximately $700 million.

Adjusted EBITDA of approximately $110 million and positive free cash flow of approximately $70 million inclusive of restructuring.

The primary driver of the expected sequential improvement in adjusted EBITDA in Q3 to approximately $100 million from $73 million in Q2 is a near full quarter impact of our cost reduction efforts.

Excluding restructuring, we expect positive free cash flow of approximately $85 million.

With regards to sequential trends as noted we expect Q4 revenue at approximately $700 million to be roughly $25 million lower than in Q3, driven by typical seasonality and air distribution bookings.

Excluding the impact of restructuring due to the sequential improvement in adjusted EBITDA and a typical favorable seasonality and working capital dynamics.

As a reminder, and as discussed on prior earnings calls the fourth quarter typically generates approximately 10% fewer air distribution bookings than the quarterly average for given year.

As a reminder, our mandatory preferred shares will convert into common equity on September one 2023.

Despite sequentially lower revenue in the fourth quarter versus the third quarter, we expect a sequential improvement in adjusted EBITDA in Q4 to approximately $110 million from a $100 million in Q3, driven by the full realization of our cost reduction efforts.

We expect fourth quarter 2023 revenue of approximately $700 million.

And our free cash flow, we expect to generate approximately $85 million in Q4, excluding the impact of restructuring due to the sequential improvement in adjusted EBITDA and typical favorable seasonality in working capital dynamics.

With regards to sequential trends as noted we expect Q4 revenue at approximately $700 million to be roughly $25 million lower than in Q3, driven by typical seasonality and air distribution bookings as a reminder, and as discussed on prior earnings calls the fourth quarter typically Jen.

<unk> fourth quarter has historically been a seasonally strong period for free cash flow driven by timing of when we receive partner receipts in the fourth quarter versus when we make agency payments in the first quarter.

For the full year 2023, we now expect revenue to be within the upper half of the original revenue guidance range provided on the February earnings call and is now expected to be between $2 9 billion and $3 billion.

<unk>, approximately 10% fewer air distribution bookings than the quarterly average for given year.

Despite sequentially lower revenue in the fourth quarter versus the third quarter, we expect a sequential improvement in adjusted EBITDA in Q4 to approximately $110 million from $100 million in Q3, driven by the full realization of our cost reduction efforts.

In addition, we now expect higher adjusted EBITDA for the full year 2023 of approximately $340 million above our prior guidance for adjusted EBITDA of between $300 million and $320 million.

We believe the favorable revenue performance, we have seen in the second quarter and the cost actions, we have already taken support the higher adjusted EBITDA guidance.

Sabre fourth quarter has historically been a seasonally strong period for free cash flow driven by timing of when we receive partner receipts in the fourth quarter versus when we make agency payments in the first quarter.

While we are very optimistic about the potential for air distribution industry volume growth, we continue to conservatively base, our projections on a one to two percentage points sequential improvement going forward.

Also as noted on our prior earnings call, we expect to be free cash flow positive for the full year 2023, excluding the impact of restructuring.

For the full year 2023, we now expect revenue to be within the upper half of the original revenue guidance range provided on the February earnings call and is now expected to be between $2 9 billion.

Included in our assumption for free cash flow in 2023, our restructuring cost of approximately $70 million and capital expenditures of approximately $80 million we.

And $3 billion.

In addition, we now expect higher adjusted EBITDA for the full year 2023 of approximately $340 million.

We increased a portion of our investment spending to support development of certain strategic growth initiatives, such as our multi source concept platform, including NBC.

Above our prior guidance for adjusted EBITDA of between $300 million and $320 million.

In hospitality solutions, we will continue to focus on consistent improvement through product optimization and expect that it will allow us to proactively meet the needs of the evolving travel marketplace.

We believe the favorable revenue performance, we have seen in the second quarter and the cost actions, we have already taken support the higher adjusted EBITDA guidance.

We expect capital expenditures to be in a similar range as 2023 in future years.

Based on this increased investment.

We also now expect approximately $375 million in cash interest cost for the full year 2023.

Also as noted on our prior earnings call, we expect to be free cash flow positive for the full year 2023, excluding the impact of restructuring.

Additionally, our working capital initiatives are on track and we expect to generate at least $125 million in positive cash flow benefit this year from these actions.

Included in our assumption for free cash flow in 2023, our restructuring cost of approximately $70 million and capital expenditures of approximately $80 million.

The second quarter was a meaningful step forward towards the strategic priorities that Kurt highlighted earlier, we continue to believe the company is on a durable path toward achieving long term targets of greater than $900 million and adjusted EBITDA.

We increased a portion of our investment spending to support.

Development of certain strategic growth initiatives, such as our multi source concept platform, including NBC and hospitality solutions. We will continue to focus on consistent improvement through product optimization and expect that it will allow us to proactively meet the needs of the evolving travel marketplace.

And greater than $500 million in free cash flow in 2025 and with that operator. Please open the line for questions.

Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again due to time restraints. We ask that you. Please limit yourself to one question and one follow up question. Please.

We expect capital expenditures to be in a similar range as 2023 in future years based on this increased investment.

We also now expect approximately $375 million in cash interest cost for the full year 2023.

Please standby, while we compile the Q&A roster.

Additionally, our working capital initiatives are on track and we expect to generate at least $125 million in positive cash flow benefit this year from these actions.

And our first question will come from the line of Josh <unk> with Morgan Stanley . Your line is open.

Great Congrats on the upside in the EBITDA performance and improvement for the year.

Question on the <unk> on the air bookings the recovery versus 2019.

Im looking at it right and improved 90 basis points from Q1.

Just wondering like.

Any puts and takes in the quarter.

And how that compares to the one 5%.

On ramp that's assumed going forward.

Josh Thank you.

What we're seeing in Q2 and frankly in the early part of Q3 is consistent with the guidance we provided last quarter.

Which is one to two percentage points of sequential quarterly growth versus the prior quarter, that's relatively consistent between leisure and corporate we.

Please standby, while we compile the Q&A roster.

We are seeing some improvement in Asia relative to where we were early in the year.

And our first question will come from the line of Josh <unk> with Morgan Stanley . Your line is open.

And we do expect as we articulated that the growth going forward is a good chance to be higher than that number but we have planned are forecasting conservatively to be on the safe side.

Great Congrats on the upside in the EBITDA performance and improvement for the year.

Question on the <unk>.

On the air bookings the recovery versus 2019.

Okay got it.

And I know you spent some time reviewing some of the commercial wins.

Im looking at it right and improved 90 basis points from Q1.

Across all businesses.

Was hoping you could.

I'm just wondering like any.

Focus on PSS and just wondering if there were any notable PSS wins or losses to highlight.

Any puts and takes in the quarter.

And how that compares to the one 5%.

Yes, Thank you Josh I articulated in the prepared remarks.

On ramp that's assumed going forward.

Josh Thank you.

Some of the.

Wins or benefits that we've seen through the period overall when you look at I'd solutions, we've stabilized the business. We are now investing in leading next generation retailing solutions to drive long term growth in this portfolio.

What we're seeing in Q2 and frankly in the early part of Q3 is consistent with the guidance we provided last quarter.

Which is one to two percentage points of sequential quarterly growth.

<unk> the prior quarter, that's relatively consistent between leisure and corporate we.

And we felt very good about the future prospects for this business.

We are seeing some improvement in Asia relative to where we were early in the year.

And we do expect as we articulated that the growth going forward is a good chance to be higher than that number but we have planned are forecasting.

Got it I guess I guess, just ask directly like investors definitely wondering about M&A as I mentioned, the 25 million passenger.

Conservatively to be on the safe side.

PSS when is that.

Does that represent a competitive replacement. Thank you.

Okay got it and I know you spent some time reviewing some of the commercial wins across all businesses.

Thanks, Josh.

We are like our competitor bound by confidentiality. We do believe this referenced as a current sabre customer I would know what the revenue impact for this carrier is very small on an annual basis with a de Minimis EBITDA impact.

Was hoping you could.

Focus on PSS and just wondering if there were any notable PSS wins or losses to highlight.

Yes, Thank you Josh I articulated in the prepared remarks.

And I should note that as we've disclosed before should jetblue be successful in the transaction, they're pursuing with spirit that volume will begin to come on to Sabre next year.

Some of the.

Wins or benefits that we've seen through the period of.

Overall, when you look at I'd solutions, we've stabilized the business. We're now investing in leading next generation retailing solutions to drive long term growth in this portfolio.

Thank you one moment our next.

Question.

And that will come from the line of Victor Chang with Bank of America. Your line is open.

And we felt very good about the future prospects for this business.

Great. Good morning, and thanks for taking my questions and congrats on a very solid quarter.

Got it I guess I guess, just ask directly like investors definitely wondering about M&A asked mentioned 25 million passenger.

Two if I may and just going back to the point on quarter on quarter improvements obviously.

PSS when is that.

Roughly within one to two percentage improvement, but can you give us some color maybe by region as well where you can grow obviously, if we look at M&A as they improve three full percentage points this quarter, which is quite a bit higher than you. I know you talked here. India contrast wanted this quarter sort of what are some of the puts and takes.

Does that represent a competitive replacement. Thank you.

Thanks, Josh.

Like our competitor bound by confidentiality, we do believe this references a current sabre customer.

I would know what the revenue impact for this carrier is very small on an annual basis with a de Minimis EBITDA impact.

For this quarter by region.

<unk> as you might have.

Thank you.

And I should note that as we've disclosed before should jetblue be successful in the transaction, they're pursuing with spirit that volume will begin to come on to Sabre next year.

And I have one more follow up.

Yeah. Thanks Victor.

It's important to note that.

When we look at this but we're not doing is we're not talking about the seasonality quarter on quarter.

Thank you one moment our next question.

We're talking about sequential percentage improvement in the market.

And that will come from the line of Victor Chang with Bank of America. Your line is open.

That is compared on a year on year basis, and so we don't talk about seasonality we understand you.

Great. Good morning, and thanks for taking my questions and congrats on a very solid quarter.

You projected and understand that very well, but we're going to do is talk about quarterly progression and in our share performance as we indicated during the prepared remarks, our share performance continues to outpace our competitive peers and we are seeing sequential improvements quarter on quarter. The greatest improvement on a quarter on quarter basis, if you're looking at versus Q1.

<unk>.

Two if I may and just going back to the point on a quarter on quarter improvements obviously.

Roughly within one to two percentage improvement, but can you give us some color maybe by region as well where youre seeing grow obviously, if we look at M&A as they improve three four percentage points this quarter, which is quite a bit higher than you I know you got India contrasts within this quarter.

We're certainly in Asia Pacific, that's recovering at an elevated or better basis.

And then we see relative improvements across the board.

The corporate travel recovery is relatively slow it's sort of in the upper 70% or so on a percentage basis interestingly given much higher airline and hotel yields in 2019.

And I have one more follow up.

We believe corporate travel spending may actually be in the range of what it was three or four years four years ago.

Yeah. Thanks Victor.

It's important to note that.

When we look at this but we're not doing is we're not talking about the seasonality quarter on quarter.

But theres a governor on the pace of corporate travel recovery, because the way corporate travel budgets are set within the corporate environment.

That may serve as a governor from a balanced this year, although that should begin unleash itself as we go forward through 2024.

That is compared on a year on year basis, and so we don't talk about seasonality, we understand that you.

You projected and understand it very well well, we're going to do is talk about quarterly progression and in our share performance as we indicated during the prepared remarks, our share performance continues to outpace our competitive peers and we are seeing sequential improvements quarter on quarter. The greatest improvement on a quarter on quarter basis, if you're looking at versus Q1.

The one thing Victor I would add you can see in the average booking fee, where we had significant strength both on a sequential basis on a year over year basis that was.

Driven partly by strength in our international markets as Curt mentioned, both APAC and then also Europe .

And in general the booking fees tend to be a little higher in those regions and so that provided a really good tailwind.

We're certainly in Asia Pacific, that's recovering at an elevated or better basis.

On our average booking fee and we generally see that mix continuing as we move forward.

And then we see relative improvements across the board.

Corporate travel recovery is relatively slow it's sort of in the upper 70, or so on a percentage basis interestingly given much higher airline and hotel yields in 2019.

Thank you very good color and.

Hello, volatile, making the hospitality and thinking about <unk> and the two other deals that you alluded to.

Can you give us a bit more color on the economics.

We believe corporate travel spending may actually be in the range of what it was three or four year four years ago.

Contribution obviously you said.

But theres a governor on the pace of corporate travel recovery, because the way corporate travel budgets are set within the corporate environment.

<unk> is the main Crs.

And put it in 'twenty four but I guess, we should only see material contribution by 'twenty and how do you quantify it.

That may serve as a governor from a balanced this year.

On a revenue side and kind of how we think about implementation costs and margin contribution as well.

Yeah. Thanks, Victor we are really excited about the Hyatt win.

It augments the enterprise portfolio and that will go on as we said onto the <unk> platform.

You can expect to see highest come on through 2024, when you step back and look at the Hs business overall, what we've articulated before this is another proof point to that which is that youre going to see double digit revenue growth in Hs this year and beyond.

You'll see Hs achieved double digit margin production by the end of next year.

Was <unk>.

Driven partly by strength in our international markets as Curt mentioned, both APAC and then also Europe .

And if a $150 million.

Growth initiatives, and we articulated last quarter that Youll see benefit US 25 versus <unk> 23, we believe that yes will be $50 million of that $1 50, meaning Hs will deliver $50 million of EBITDA in 2025.

And in general the booking fees tend to be a little higher in those regions and so that provided a really good tailwind.

Our average booking fee and we generally see that mix continuing as we move forward.

So we feel great about what this does we don't break out the economics of any individual customer deal, but high. It is clearly one of the leading brands in the world and we think this is quite strategic and financially accretive to this business.

Thank you that's very good color.

And a follow.

Hello, Val manganese hospitality and thinking about higher than the two other deals that you alluded to.

Can you give us a bit more color on the economics.

Thank you as a reminder, if you would like to ask a question. Please press star one one.

Contribution obviously, you said higher as the main Crs.

And you are implementing 24, but I guess, we shall we see material contribution by 'twenty false and how do you quantify it.

And our next question will come from the line of Dan <unk> with Morningstar. Your line is open.

Hey, good morning, guys. Thanks for taking the call and nice execution. This quarter. So just kind of following up you mentioned corporate travel and just looking at some of the hotel operators they talk about SME having.

On revenue side.

Kind of how we think about the implementation costs and margin contribution as well.

Yeah. Thanks, Victor we are really excited about the Hyatt win it augments the enterprise portfolio and that will go on as we said onto the <unk> platform.

Or are they kind of fully recovered in developed markets, but corporate travel is still lagging.

Is this how should we think about this when it relates to the GDS is does do the gds's tend to have more of that larger corporation mixing.

You can expect to see Hyatt come on through 2024, when you step back and look at the Hs business overall, what we've articulated before this is another proof point to that.

As you talk about those budgets may be opening up in being a governor.

Is that youre going to see double digit revenue growth in Hs this year and beyond.

How does that kind of play out between what the hotel operators are seeing versus the GDS.

Youll see Hs achieved double digit margin production by the end of next year.

Yeah, Dan Thank you.

And if a $150 million.

So.

Suggest you're looking at a couple of ways number one is managed corporate travel.

Growth initiatives that we articulated last quarter that you'll see benefit us twenty-five versus 'twenty. Three we believe that yes will be $50 million of that 150, meaning Hs will deliver 50 million of EBITDA in 2025.

And that that changes based on geography, but figure corporations, who spend more than two $3 million a year, where typically procurement is running travel as a category.

So we feel great about what the stars we don't break out the economics of any individual customer deal, but high. It is clearly one of the leading brands in the world and we think this is quite strategic and financially accretive to this business.

You are right that has recovered relatively more slowly we believe in SME are unmanaged corporate travel has recovered unmanaged.

Unmanaged travel tends to go predominantly through travel agencies, but theres a portion of that goes to go and supplier direct.

Versus managed corporate travel tends to go almost entirely through intermediaries through tncs through corporate booking tools effectively through the GDS providers. So as corporate travel continues to recover in the future naturally group accrue predominantly to our business.

Thank you as a reminder, if you would like to ask a question. Please press star one one.

And our next question will come from the line of Dan <unk> with Morningstar. Your line is open.

The other thing to look at interesting, we as I think everybody puts in North American lens on this.

China for example is a larger corporate travel market domestically than the United States, meaning there's a tremendous amount of corporate travel on origination ex U S.

Already kind of fully recovered in developed markets, but corporate travel is still lagging.

And that is recovered relatively more slowly than travel in North America has so we believe there is significant upside in the non U S points of sale as well.

Is this how should we think about this when it relates to the GDS is does do the gds's tend to have more of that larger Corporation mixon.

And the only other thing I would add is if you look at the yield environment at Airlines, which has been very very strong over the last year 18 months you've.

How does that kind of play out between what the hotel operators or are seeing versus the GDS.

<unk> seen some moderation in yield more recently and as you think about that from a corporate travel perspective, if corporate budgets on travel are relatively fixed what that allows for is more segments and more bookings for that same amount.

Yes, Dan Thank you.

Suggest you look at there's a couple of ways number one is managed corporate travel.

And that that changes based on geography, but figure corporations that spend more than two $3 million a year, where typically procurement is running travel as a category.

And we think that has the potential of benefiting us in a moderating yield environment.

Okay makes sense and if I could just ask one more kind of on a different topic here, but.

Youre right that is recovered relatively more slowly we believe in SME are unmanaged corporate travel has recovered unmet.

You kind of gave some information on how to think about the revenue per booking, but what about and how should we think about the revenue per passenger boarding I think.

Obviously, there was the Russia.

Callout, but.

That looked like it was maybe down a little bit sequentially.

Just any thoughts there or anything to call out on how we should think about that moving forward.

Sure obviously the driver of the year over year decline that we talked about was attributable.

Attributable to the migration to the vast majority of which was <unk>.

The other thing to look at interestingly as I think everybody much of North American lens on this.

Associated with changes.

China for example is a larger corporate travel market domestically than the United States, meaning there is a tremendous amount of corporate travel that originates ex U S.

In Russian law.

The way you should think about our revenue.

Airline solutions revenue per Bebe is roughly half of that is fixed based on products, we sell roughly half of it is variable and correlates directly with pvs. So.

And that is recovered relatively more slowly and travel in North America has so we believe there's significant upside in the non U S point of sale as well.

With that mix given roughly half of your revenue per <unk> is variable spv's grow as they have done this quarter youre going to see that result in a lower average revenue per VP justice. The PBS are growing and it only represents about half of the revenue per bebe.

And the only other thing I would add is if you look at the yield environment at Airlines, which has been very very strong over the last year 18 months.

You've seen some moderation in yield more recently and as you think about that from a corporate travel perspective, if corporate budgets on travel are relatively fixed what that allows for is more segments and more bookings for that same amount of dollars and we think that has the potential of benefiting us in a moderating yield environment.

Okay, great. Thank you.

Thanks, guys.

Thank you I'm showing no further questions in the queue at this time I would now like to turn the call back over to.

Actually we do have a question from Jeff <unk> with Barclays One moment.

Okay makes sense and if I could just ask one more kind of on a different topic here, but you kind of gave some information how to think about the revenue per booking, but what about and how should we think about the revenue per passenger boarding I think obviously.

Yes.

Following a successful refinancing of a portion of the two slides how are you looking at addressing the remaining 25 maturities.

Callout, but.

With respect to timing and options.

Obviously, if we perform better yields better economics with how are you looking for 73 years and the converts.

Sure obviously the driver of the year over year decline that we talked about was attributable.

Yes. Thanks for the question first let me just recap a little bit around our thoughts of the refinancing that occurred this quarter.

Attributable to that the migration to the vast majority of which was associated with changes in Russian law.

As we pursue that financing.

And achieved and completed a financing there were a few objectives that had helped achieve one obviously it took out about a third of the 2025.

The way you should think about our revenue our airline solutions revenue per BB is ruffled roughly half of that is fixed based on products, we sell roughly half of it is variable and correlates directly with pvs. So.

Maturities. It also was intentionally focused on the April maturities within 2025, so really extended by a couple of quarters are required refinancing window to the back part now of 2025 and also the <unk>.

With that mix given roughly half of your revenue per BB is variable as PBS grow as they have done this quarter youre going to see that result in a lower average revenue per VP justice to PBS are growing and it only represents about half of the revenue per bebe.

<unk> with the pick option, we believe gave us really good flexibility what I would expect us and we're not going to we're not going to answer specifics with regards to refinancing obviously, given the sensitivity around that but what I would say is youre going to see us continue to focus on.

Okay, great. Thank you.

Yes, guys.

Taking advantage of market opportunities with a focus on efficiency and flexibility and keeping in mind the perspective of our stakeholders and that's how we're going to pursue it going forward, but you should expect us to.

Thank you I'm showing no further questions in the queue at this time I would now like to turn the call back over to <unk>.

Actually we do have a question from Jeff <unk> with Barclays One moment.

In the not too distant future be focused on addressing the remainder of the 2025 maturities.

Yeah.

Following your successful refinancing of a portion of the 20th thrives. How are you looking at addressing the remaining 25 maturities with respect to timing and options.

Okay, and then just on the revenue per booking.

Improvement you saw in the current quarter is that sustainable or should that move around where do you think.

<unk> going.

Obviously, if you perform better youll better economics, but how are you looking for southern creation the converts.

Going to be steady.

From here.

Yes. Thanks for the question a couple a couple of things to unpack.

Yes. Thanks for the question first let me just recap a little bit around our thoughts of the refinancing that occurred this quarter.

Average booking fee.

As you look at the sequential improvement there are really two drivers and these have been the trends over the last 12 months.

As we pursue that financing.

<unk> achieved and completed a financing there were a few objectives that it helped achieve one obviously you took out about a third of the 2025.

One is we have seen a favorable regional mix as we've talked about and we've seen international both in APAC and Europe continued to perform better than they have had and thats been very supportive of average booking fee. The other thing is as we drill down and we look at the mix of carriers and we look at the mix of.

Our bookings, it's a more favorable mix and where we're looking at the underlying trends, we really see both of those trends continuing and so we would expect the average booking fee to remain roughly in this range for the foreseeable future.

Expect is and we're not going to you know, we're not going to answer specifics with regards to refinancing obviously, given the sensitivity around that but what I would say is youre going to see us continue to focus on <unk>.

Okay, Great and last question for me, just I think solutions, you've talked about new business coming on and we were.

Taking advantage of market opportunities with a focus on efficiency and flexibility and keeping in mind the perspective of our of our stakeholders and that's how we're going to pursue it going forward, but you should expect us to.

Lapping some losses.

How do we how do you see the revenue trajectory.

Going forward in that business now.

Sure.

And in the not too distant future be focused on addressing the remainder of the 2025 maturities.

Yeah as you look at the $140 million this quarter.

As Curt mentioned, we have stabilized that business with that being said I would expect us to very small ticked down sequentially going from Q2 to Q3.

Okay and then just on the revenue per booking is the improvement you saw in the current quarter is that sustainable or should that move around.

But generally in the range that we're in right now.

Thank you.

Yes, no. Thanks for the question a couple a couple of things to unpack the average booking fee.

Thank you I'm showing no further questions in the queue. At this time I would now like to turn the call back over to Mr. <unk> for any closing remarks.

As you look.

Thank you and thank you again for joining us. This morning, we appreciate your interest in Sabre and look forward to speaking with all of you again very soon.

One is we have seen a favorable regional mix as we've talked about.

And we've seen international both in APAC and Europe continued to perform better than they've had and that's been very supportive of average booking fee. The other thing is as we drill down and we look at the mix of carriers.

Thank you operator that concludes today's call.

Thank you. Thank you all for participating. This concludes today's program you may now disconnect.

And we look at the mix of our bookings, it's a more favorable mix and when we're looking at the underlying trends, we really see both of those trends continuing and so we would expect the average booking fee to remain roughly in this range for the foreseeable future.

Okay, Great and last question for me, just I think solutions, you've talked about new business coming on.

<unk>.

Lapping some losses.

How do we how do you see the revenue trajectory.

Going forward in that business now.

Yeah as you look at the $140 million this quarter.

As Curt mentioned, we have stabilized that business with that being said I would expect us to very small ticked down sequentially going from Q2 to Q3.

But generally in the range that we're in right now.

And thank you I'm showing no further questions in the queue. At this time I would now like to turn the call back over to Mr. Eckert for any closing remarks.

Thank you and thank you again for joining us. This morning, we appreciate your interest in Sabre.

And look forward to speaking with all of you again very soon.

Thank you operator that concludes today's call. Thank you. Thank you all for participating. This concludes today's program you may now disconnect.

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Q2 2023 Sabre Corp Earnings Call

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