Q1 2025 Sabre Corp Earnings Call
Good morning, and welcome to the Sabre First Quarter 2025 Earnings Conference call. My name is Rivka and I'll be your operator. As a reminder, please note today's call is being recorded. I will now turn the call over to the Senior Vice President and Investor Relations and Treasurer, Brian Evans. Please go ahead, sir.
Brian Evans: Good morning and welcome to our first quarter 2025 earnings call.
Brian Evans: This morning we issued an earnings press release which is available on our website at investors.sabre.com. A slide presentation which accompanies today's prepared remarks is also available during this call on the Sabre Investor Relations webpage.
Brian Evans: A reply of today's call will be available on our website later this morning.
Brian Evans: We advise you that our comments contain forward-looking statements that rivers in our beliefs or expectations about future events.
Brian Evans: including the timing and effects of the agreement to sell or hospitality solutions business.
Brian Evans: including pro-forma financial information, results of our growth strategies, transactions and bookings growth, commercial and strategic arrangements, and our financial guidance, outlook, expectations, free cash flow, net leverage, and liquidity among others.
Brian Evans: 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.
Brian Evans: More information on these risks and uncertainties is contained in our earnings release issued this morning and our SEC filings including our form 10Q for the quarter-ended March 31st, 2025.
Brian Evans: Throughout today's call, we will also be presenting certain non-GAAP financial measures.
Brian Evans: References during today's call to adjusted EBITDA, adjusted EBITDA margin, and free cash flow have been adjusted to exclude certain items.
Brian Evans: We are also presenting a certain financial information on a pro forma basis to get effect to the sale of the hospitality solutions business and the application of the proceeds from the sale to pay down outstanding indebtedness as if the transaction and actions had occurred on January 1st, 2025.
Speaker Change: Participating with me are Kurt Ekert, President and CEO , and Mike Randolfi, Chief Financial Officer. Scott Wilson, EVP, and President of Hospitality Solutions, will be available for Q&A after the prepared remarks. With that, I'll turn the call over to Kurt.
Kurt Ekert: Thanks, Brian . Hello, everyone, and thank you for joining us today on our first quarter 2025 Earnings Call.
Kurt Ekert: In addition to discussing our quarterly financial results and outlook, we will also provide details on the agreement to sell our hospitality solutions business which we announced last week.
Kurt Ekert: Business performance was solid in the first quarter and I commend the team for outstanding execution in what was and continues to be a challenging macro environment.
Kurt Ekert: It's important to provide perspective on our resilient business model and why we believe we're a well-positioned even in times of economic uncertainty.
Kurt Ekert: Our revenues are largely tied to air distribution bookings rather than airline ticket prices.
Kurt Ekert: Destructural Characteristic is important for Sabre, generally enabling more stable and predictable revenue, even in periods of pricing volatility.
Kurt Ekert: That said, we are of course not immune from sector dynamics and as such we are adjusting our assumption for full year 2025 GDS industry growth from flat to nominal to down 1 to 2 percent.
Kurt Ekert: This update incorporates recent airline traffic softness and planned airline capacity adjustments.
Kurt Ekert: As a reminder, in February we provided full year 2025 guidance, which included expectations for double digit air and hotel B2B distribution bookings growth, driven largely by the realization of volumes from business we have already signed.
Kurt Ekert: Michael provide more details momentarily, and I am pleased to share that today we are reaffirming our expectations for a full-year double-digit distribution bookings growth, despite the market backdrop.
Kurt Ekert: Further, we expect the revenue impact from the softer market dynamics to be largely offset by outperformance from our growth strategies.
Kurt Ekert: Specifically, new airline content being distributed through our multi-source platform that is above our initial expectations.
Kurt Ekert: Expected momentum in our payments business and a more profitable customer mix.
Kurt Ekert: Turning to slide four, you'll see an overview of the topics Mike and I will cover today.
Speaker Change: First, I will discuss the agreement to sell hospitality solutions, followed by an overview of the quarter, then I will provide a brief update on the progress we've made against our growth strategies.
Speaker Change: Next, Michael walk you through the expected financial impacts of the sale of hospitality solutions, our first quarter financial results, and our outlook for the second quarter and full year 2025.
Turning to Slide 6
Speaker Change: We recently announced an agreement to sell the Hospitality Solutions business.
Speaker Change: This sale position, Sabre, to focus on our core airline IT and travel marketplace platforms, while giving us confidence that our CRS hotel-year customers will be positioned for ongoing success.
Speaker Change: The transaction value of $1.1 billion is testament to the incredible job the hospitality solutions team did in transforming this business over the last few years.
Speaker Change: with significant improvements in technology and product capabilities, revenue and adjusted EBITDA from 2022 to today.
Speaker Change: Net of fees and taxes, we expect to use the approximate $960 million of proceeds, primarily to pay down debt. This is an important step in Sabre's ongoing transformation, which I will touch on in a moment.
Speaker Change: For clarity, hospitality solutions is distinct from the company's fast-growing and large hotel B2B distribution business, which remains a key strategic focus for Sabre, turning to slide 7.
Speaker Change: Our strategic priorities remain the same. First, generate free cash flow and deliver the balance sheet. Second, continue investing to innovate and drive sustainable long-term growth.
Speaker Change: The decision to sell hospitality solutions is an important milestone in advancing these goals
Speaker Change: It enables us to strengthen our balance sheet by reducing leverage nearly a full turn and sharpening our focus on core growth areas which we expect will unlock greater shareholder
Speaker Change: In line with this strategy, the sale is the latest in a series of strategic financial moves by the company, including Q4 2024 debt refinancings and the recent repayment of April 2025 debt maturities.
These actions further strengthen our capital structure.
Speaker Change: Looking ahead, we believe our improving credit profile should better position us to proactively manage upcoming maturities, reduce interest expense, enhance free cash flow generation, and support our growth initiatives.
Turning to slide nine, and our quarterly results.
Speaker Change: Revenue in the first quarter was roughly flat on a year on your basis, and adjusted Yvita was in line with our guidance.
Speaker Change: First quarter, adjusted EBITDA margin, improved 110 basis points year on year to 19.3% building on our margin expansion in 2024. Turning to slide 10.
Speaker Change: For travel solutions, first quarter 2025, air distribution bookings were down 3% year-on-year, below our assumption of flat to nominal growth.
Speaker Change: of the three to four percentage points of the air distribution booking softness versus our prior assumption. Roughly three quarters was driven by lower group bookings in the APAC region and global travel weakness.
Speaker Change: The remainder was driven by a meaningful pullback, a US government and military travel.
Speaker Change: As discussed in our February earnings call, we expect to realize greater than 30 million incremental air distribution segments this year from business signed during 2024.
Speaker Change: And as expected, we generated strong bookiness growth of 7% year on year in our hotel B2B distribution business.
Moving to Slide 11
Speaker Change: Within our strategy, we have three core focus areas to drive innovation and growth, a modern technology stack, open marketplace, and intelligent retail solutions.
Speaker Change: Our modern technology stack is strengthened by our strategic partnership with Google, which enables us to quickly deploy AI-powered solutions for our industry-leading, multi-source content and airline IT platforms.
Speaker Change: These next-generation solutions, improve retail intelligence and optimize revenue for our customers, and are built on top of Google's full Vertex AI platform, of which Gemini, Gen AI, is one component.
Speaker Change: Today, we have deployed Gemini to improve productivity in three areas, engineering throughput, product quality, and customer service efficiency.
Onto Slide 12 .
Speaker Change: Now I will walk through the progress achieved in the first quarter and the sustained commercial momentum we're seeing across the business.
Speaker Change: Sabre continues to rapidly advance the transformation of our GDS platform into a modern open marketplace.
Speaker Change: Our focus is on integrating content and capabilities from myriad sources into a unified platform that increases the efficiency and transparency of booking travel.
Speaker Change: The integration of new sources of content is important as it expands our total addressable market.
We are accomplishing this transformation through four strategic priorities.
Speaker Change: Multisourced Content Aggregation, Distribution Expansion, Hotel B2B Distribution, and the
Speaker Change: Our multi-source content aggregation platform continues to scale. We are rapidly establishing our position as a leading aggregator of fragmented content.
Speaker Change: Spending NDC, low cost carrier, and traditional ed effect into a consolidated view offering a more seamless and comprehensive experience for travel buyers.
Speaker Change: Notably, we are leading the competitive set with 38 live NDC airline integrations.
Speaker Change: as well as industry leading functionality following the recent implementations of Air France and KLM, British Airways, Iberia, Latam, and Saudi Arabia.
Speaker Change: Within our distribution expansion strategy, we are on track with the implementation ramp of the more than 30 million incremental air segments we discussed last quarter.
Speaker Change: We are making rapid progress and expect the implementations to meaningfully contribute to our air distribution bookings growth, beginning in Q2 and accelerating significantly in Q3.
Speaker Change: Building off the notable agency wins in 2024, we are pleased with the recent addition of Grey Dawes, one of the industry's largest independent trial management companies, which selected Sabre as its sole global distribution platform partner.
Speaker Change: In hotel B2B distribution, we are building on our leadership position.
Speaker Change: continued investments in product innovation and commercial partnerships, drove an 11% increase in Q1, gross booking value transacted through the platform.
Speaker Change: This business generates over $20 billion in annual a hotel gross booking value is a high yield and low cost channel for hoteliers and has very strong growth prospects.
Speaker Change: Our digital payments team continues to win new business and drove a 30% year-on-year increase in growth spending to $4 billion in the first quarter. We have a strong pipeline and customer adoptions are growing.
Speaker Change: The continued momentum in this business reinforces our confidence in the strategy as we streamline business with virtual payment solutions.
Airlines T is a key area of focus for us.
Speaker Change: Sabre Mosaic, our next generation offer and order retelling platform is a modular set of PSS agnostic solutions that enable airlines an easy to adopt way to modernize their retelling strategies.
Speaker Change: We are seeing strong traction with the AI-powered offer management suite of IQ products, a cornerstone of Sabre Mosaic.
Speaker Change: These products are well-timed to help airlines optimize revenue as they navigate today's shifting demand.
Speaker Change: We have recently signed Arrow, Mexico, Avello, and Goal to this product suite following four foundational customer wins for the Sabre Mosaic platform in 2024.
Speaker Change: Alaskar Airlines will be moving Hawaiian Airlines to the Sabre PSS as a part of their broader integration efforts.
The migration is expected to be completed by mid-year 2020-SFs.
Speaker Change: In addition, the combined airline will be utilizing dynamic pricing, one of the all components of our Sabre Mosaic platform.
Speaker Change: Overall, we are on track with our strategy and confident in our long-term growth potential.
Onda Slide 13
Speaker Change: Looking ahead, despite a challenging macro environment, we expect Sabre distribution bookings growth of low single digits for Q2, with accelerating momentum and double digit air and hotel B2B distribution bookings growth expected for the full year.
Speaker Change: In summary, we had a solid start to the year and we expect to have a strong 2025. The team is executing at a high level and we are delivering on the objectives we set out for ourselves.
Speaker Change: The recent agreement to sell hospitality solutions is an important step in the company's transformation as it accelerates our ability to further deliver the business.
and to continue to drive towards long-term sustainable growth.
Thank you and now over to Mike [inaudible]
Mike Randolfi: Thanks, Kurt, and good morning everyone. Please turn to slide 15.
Mike Randolfi: I'm pleased to report that Sabre delivered solid financial results in the first quarter and our resilient business continues to perform well. Revenue of $777 million was roughly flat year on year.
Mike Randolfi: Adjusted a bidat of $150 million increased 5% year on year and was also roughly in line with our guidance.
Mike Randolfi: Adjusted to the Dom Margin of 19.3% increased 110 basis points year-on-year as lower technology costs and effective cost management offset lower than expected revenue.
Mike Randolfi: We end the Decorator with $672 million cash on the balance sheet.
Mike Randolfi: Free cash flow reflects typical seasonality. Importantly, our full year free cash flow objective remains on track.
Mike Randolfi: Before I flip to the next slide with the agreement to sell hospitality solutions, we believe presenting our key financial metrics on a pro-forma basis provides the most representative view of sabers anticipated future results when incorporating the impact of the sale.
Mike Randolfi: On today's call, when referring to pro forma expectations, the financial metrics are calculated assuming the transaction an associated debt paydown occurred on January 1st, 2025.
Mike Randolfi: For comparability, we have also provided on our website Normalize Financial Metrics for the first quarter of 2024 through the first quarter of 2025.
Moving to slide 16 [inaudible]
Mike Randolfi: The first quarter results came in generally as expected. Reving you in the quarter was nearly flat compared to our expectation of flat to low single-digit growth.
Mike Randolfi: Within Revenue, IT solutions was lower by $8 million a year on year, primarily due to the impact of prior demigrations.
which we have discussed on prior earnings calls.
Mike Randolfi: Consistent with our view on the February Ernie's call, we expect IT solutions revenue to resume year and year growth during the second half of 2025.
Mike Randolfi: Gross Margin, as expected, decreased 190 basis points in the first quarter versus the prior year.
Mike Randolfi: Roughly half of this decline is due to upfront costs associated with new agency business, where expenses are incurred ahead of expected accelerating air distribution volumes.
Mike Randolfi: The remaining half is due to lower revenue and IT solutions from carriers that demigrated prior to 2024.
Mike Randolfi: Notably, we expect this gross margin pressure to be transitory and anticipate gross margins for the remaining quarters of the year to be roughly in line with 2024 on a normalized basis.
Mike Randolfi: As mentioned, adjusted the beta of $150 million was in line with our outlook.
Mike Randolfi: Turning to slide 18 and details about the agreement to sell our Hospitality Solutions business.
Mike Randolfi: We expect this transaction will accelerate our de-leveraging process as we plan to use the majority of the $960 million in their proceeds to pay down debt.
Mike Randolfi: Following the April Repayment of approximately $200 million of maturing debt, we expect these actions will result in bringing 2025 pro-formal leverage down nearly a full turn.
Mike Randolfi: Ending the year at approximately 5.4 times versus approximately 6.3 times pre-transaction.
Mike Randolfi: This, along with the successful refinancing we completed in the fourth quarter of 2024, is a significant step in our proactive approach to strengthening our balance sheet as we work towards our long-term net leverage target of two and a half to three and a half times.
on the slide 19.
Mike Randolfi: Looking at the expected neprocies, we plan to use the majority of the $960 million to pay down that.
Mike Randolfi: Specifically, as we have shown in the slide here, we plan to use approximately $825 million to pay down four of the term loan fee senior secured credit facilities as required within our credit agreement.
Mike Randolfi: We plan to retain the balance of proceeds approximately $135 million on our balance sheet for reinvestment in our business as permitted within our credit agreements.
Mike Randolfi: On the right side of the slide, we have provided a reconciliation of net leverage ratios both pre and post-transaction.
Mike Randolfi: This shows how the sale and subsequent debt paydown drives nearly a full turn of de-leveraging as I mentioned earlier.
Mike Randolfi: This is a significant step in our ongoing efforts to strengthen our balance sheet as we work to improve our credit profile.
Turning to slide 20
Mike Randolfi: We have updated our 2025 guidance to remove the revenue and adjusted EBITDA associated with the hospitality solutions business.
Mike Randolfi: which will be treated as discontinued operations for the full year and all prior periods beginning in the second quarter.
Mike Randolfi: For full year 2025, excluding the effects from the sale of hospital solutions, our expectations remain the same.
Mike Randolfi: We continue to expect high single-digit year-and-year revenue growth driven by expected double-digit air and hotel B2B distribution bookings growth.
Mike Randolfi: For the second quarter, we expect year-on-year revenue growth in the low single digits, driven by our expectation of low single digit air distribution bookings growth.
Mike Randolfi: We expect pro forma of approximately $140 million.
Mike Randolfi: We expect to generate positive free cash flow in the second quarter on a pro-forma basis.
Kurt Ekert: As Kurt mentioned, we remain confident in our ability to achieve double-digit distribution bookings growth for the year, despite lower than expected Q1 air distribution bookings.
To provide more context, we expect the Q1 [inaudible]
Kurt Ekert: to Q2 sequential change and air distribution bookings growth rate to be driven by stronger APAC Group Booking Trends in Q2.
which we are currently experiencing.
Kurt Ekert: as well as ongoing agency implementations from contract signed in 2024.
Kurt Ekert: In the second half of 2025, we anticipate further acceleration resulting in growth of at least 20% year and year in air distribution bookings.
Kurt Ekert: As mentioned on our February Ernie's call, we expect the majority of growth in air distribution bookings will come from a number of signs, but not yet fully implemented agency agreements.
Kurt Ekert: More specifically, the three larger agency contracts highlighted last year are expected to drive nearly half of our anticipated year-and-year growth in Q3 and Q4.
Kurt Ekert: We expect the other half will be driven by mid-size agency implementations signed in 2024, in addition to growth from LCC bookings within our multi-source content platform.
Kurt Ekert: Based on that outlook, we expect full-year 2025 pro-forma adjusted divita of greater than $630 million, which reflects the full impact of the removal of hospitality solutions adjusted divita from the full year.
Kurt Ekert: on Dec. 21. On a pro-forma basis, the only change to our financial outlook is the removal of the Hospitality Solutions contribution to adjusted a bit of approximately $15 million for the second quarter and approximately $70 million for the full year.
Kurt Ekert: We expect to generate pro-form a free cash flow of greater than $200 million
Kurt Ekert: The pro-former removal of hospitality solutions adjusted a bit of approximately $70 million is expected to be offset by $5 million of lower cap-ex and the implied pro-former cash interest savings of approximately $65 million.
Please turn to slide 22.
Kurt Ekert: In closing, our strategic focus remains unchanged to generate free cash flow and deliver the balance sheet and drive sustainable growth and innovation.
Kurt Ekert: We believe the progress we have made so far this year positions us well to deliver shareholder value in 2025 and beyond and with that operator, please open the line for questions.
Kurt Ekert: Thank you. At this time, we will conduct a question-and-answer session. To ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. So, withdraw your question. Please press star 11 again. One moment while we compile the Q&A roster.
Speaker Change: Can you just expound more on sort of what you're seeing in the macro? And I guess my question is more related to
Speaker Change: You know, I guess last summer, you know, some of the travel companies were calling out some softness that didn't materialize [inaudible]
Speaker Change: and I guess I'm wondering if this time is different. And then can you just talk about posts on the hospitality solutions and progress I'm getting that done? What that allows you to do to potentially, you know, accelerate some of the refinance conversations. Thanks.
Kurt Ekert: Jed, good morning. This is Kurt. Thank you for the questions. I'll take the first and then give it to Mike. So.
Speaker Change: With respect to the macro environment as I indicated, Sabre certainly is not immune to what's happening around us.
Speaker Change: We indicated that for the full year, whereas our prior assumption was flat to nominal GDS market growth, we expect that now to be down one to two percent. So about a 300 basis point change verses.
the expectation of a quarter ago. Importantly for our business.
R. Revenue Model is largely derived based on transaction volume.
Speaker Change: Not based on the yield or the pricing environment that airlines and hoteliers enjoy, and so it's very likely that what is happening in the market is there's price pressure, but there's still no need to put heads and beds.
Speaker Change: or Bunsen Seats. And so we believe the impact to our business should be relatively less than it is for many of our supplier customers.
Um...
Speaker Change: Secondly, I would just reiterate with respect to both our hotel and air distribution business.
Speaker Change: We expect to be a double digit year on year, and that is despite that relatively soft environment.
Speaker Change: and so overall, which is very important is despite the macro, we have reiterated our guide for the full year, and of course we're providing both that as well as a normalized performer result based on the HSL.
Speaker Change: And with regard to hospitality solutions and the sale and what that means from a capital structure standpoint, you know first we're very excited about the disposition and you know while it's a great business that definitely we feel is a significant credit enhancing event for Sabre you know as we highlighted on the call. Thank you very much.
Speaker Change: It improves our net debt to EBITDA by approximately one turn. It also reduces our interest expense by $55 million, but associated with that by improving our credit profile, we believe that ultimately is going to allow for more efficient financings in the future. And so what you should look for, as you've seen in the past, is as the credit market allow and our results get realized in the market, we will continue to be opportunistic to
and Steve, financial maturities, and in an efficient way.
Speaker Change: Great, and then just one quick follow-up. If you see fuel costs kind of stay where they are, we really haven't seen since COVID the airline sort of lean into price to drive volume.
Speaker Change: Is there potential where you could see sort of the airlines take advantage of lower fuel costs that the drive more volume of that therefore lean into more third party channels? Thanks.
Speaker Change: Yeah, Jed, the way I think about it from us, from our perspective at Sabre is ultimately passage your traffic aligned closely over time with capacity.
Speaker Change: And so we have pretty good visibility right now with capacity, because the airlines have generally indicated what their capacity trends are going to be out there.
Speaker Change: Generally what you see is once the capacities out there, the airlines ultimately price one way or another to fill that capacity. So, you know, certainly if fuel price is lower, historically that sometimes is resulted in lower fares to fill the planes. But from our standpoint, ultimately airlines [inaudible]
Speaker Change: We won't have lower load factors, ultimately they'll give a little on yield in order to fill the plenty, and that will result in bookings, and that's what we based off forecast on. Yeah, and the other thing I'd add, importantly not on fuel per se, but on capacity.
Speaker Change: His wall capacity is going to grow slower than everybody anticipated three or four months ago. Capacity is still growing this year based on what's projected by almost every key carrier.
Thank you.
One moment for our next question.
Speaker Change: Our next question comes from the line of James Goodall, of Red Burn Atlantic. Your line is now open.
James Goodall: Hi everyone, thanks for taking my question. So I guess my first question is on the three cash flow guide.
James Goodall: How quickly can you use the cash proceeds of the sale to pay down debt to realise the interest cost savings, and I guess what was the free cash flow conversion of the hospitality segment? I guess I'm just trying to get a steer on where actual free cash flow will be, will land this year rather than pro forma. Thanks.
Speaker Change: Yeah, in terms of how quickly you pay down that. So what will happen is it'll ultimately be as soon as it's done.
Shortly after the close, when we received the proceeds...
in accordance with our credit agreements. [inaudible]
Speaker Change: We basically pay down the notes as we've indicated in our earning slides within five days of receiving those proceeds. So it's very, very quick. And what I would say is if you do the math, James, with regards to either free cash flow as it would be reported or pro forma, you get to roughly the same number. And we would have roughly the same expectation of greater than $200 million free cash flow this year. [inaudible]
Speaker Change: Thank you. And then I guess just the second one is on some of the Sabre mosaic, when it looks like you've had some good conversion of some of your larger airlines. And I was just wondering how far reaching.
Speaker Change: those agreements are, are any of them sort of full stack OSD agreements or just sort of portions of offer management as per sort of the Alaskan airline deal, and then where are you with sort of some of your other airlines that you have contracts with like sort of American or JetBlue, cheers.
James Goodall: Yeah, James, thank you. With respect to Sabre Mosaic, we're winning and we're winning at a very good pace.
Speaker Change: A few of those are full stack. The majority are mainly offer components.
Speaker Change: and those airlines have not gone down the order path yet. The pipeline, both with the existing clientele and the non-saber customers, is very rich. So, there's a number of non-saber conversations about full-stack inversion or elements of the stack.
Speaker Change: We're in there in the final bake-off where we would never have been there in the past, so we're very optimistic about the medium to long-term growth prospects this provides for the airline IT business.
Pradim, thank you very much guys.
One moment for our next question.
Speaker Change: Our next question comes from the line of Victor Cheng, Think of America, your line is now open.
Speaker Change: Hi, thanks for taking my questions couple if I may. I guess, first of all, can you give us some more color on Q1? I think there are a lot of maybe moving plus in Q1, thinking about
Speaker Change: in a government cutting travel, and then maybe some cordles more impacted by the current macro, I think the Canada U.S. cord door, and give us some color on the mix by region
Speaker Change: and obviously you gave us some color already on the Q2 progression on 8-Pant group bookings but the impact you saw in Kill 1, do you see that still happening in Q2 as well? Thank you.
Victor, thank you. Good morning. Thank you.
Speaker Change: The softness we saw in Q1 was a broad softness globally. It's fan corporate.
Leisure Pretty Much All Channels [inaudible]
Speaker Change: The most acute softness was in two specific areas, inbound travel to the United States from certain European markets and from Canada.
Speaker Change: and then secondly, as we mentioned, a group bookings set of North Asia. The last component is US military government was down in the range of 30% on a unit basis in Q1 versus last year.
Speaker Change: If you look at that project into Q2, what I can tell you is we're seeing recent improvements in general market trends and remember we're looking at things largely on a unit basis, not on a yield basis.
Thank you. Thank you. Thank you.
Speaker Change: Got it. And then, if I think about the four-year guide, where it's been reaffirmed on the double digit buckings grove and the high-fin digit revenue grove,
Speaker Change: Kill and what's a bit soft? Or is it some incremental wins that you have between when you previously died to today?
Speaker Change: Yeah, I mean, look at the end of the day, you know, I would just say our team is performing amazingly well, and Kudos to our Sabre team members.
Speaker Change: You know, what I would say is we're seeing out performance in certain elements of our business. We're seeing a greater degree of content come on our platform than we originally expected.
Speaker Change: Our Payments Business, which outperform this quarter, and we see that continuing to outperform is certainly added to both from revenue and leaving now to a little bit more from an even dust standpoint.
Speaker Change: And then we're also seeing a more profitable customer mix than we originally contemplated. So, you know, while there's definitely some macro weakness there, and you know, maybe within distribution bookings or distribution bookings may be.
Speaker Change: You know, still double-digit, but maybe slightly lower-sluggled double-digit, and we originally anticipated. We see that from a revenue standpoint being offset by the three things that I just mentioned.
Speaker Change: Got it. Thank you. And if I can squeeze one in the GDS Outlook, he said it's down one to two percent. Is that
Speaker Change: Yeah, that's for the industry. My question is, is that definition including the MDC, the low cost carrier multi-source, the kind of stuff, or that's a print?
Speaker Change: We expect to be down 1% to 2% for GDS industry for the year. That's really an edifact measurement, which as you know is...
Speaker Change: Over time, a relatively smaller piece of the addressable market that we're going after.
Speaker Change: So, when you look at NDC, there's not full transparency on NDC, shared across the industry. And then two of the, we're launching in Q3, which is a Sabre Air Connect platform, which is part of multi-source, which is the addition of long tail LCC volumes that we have not played in traditional eight.
Speaker Change: That's separate as well. So when we speak about the double digit air distribution volume growth, the vast majority of that is business that we've signed and will be implementing, but the addition of new content will drive that as well. So the negative 1 to 2% is apples to apples comparison largely of at effect traffic. [inaudible]
Got it. Very clear. Thank you.
One moment for our next question.
Speaker Change: Our next question comes from the line of Josh Baer of Morgan's family. Your line is now open.
Josh Baer: Thanks for the question, congrats on the hospitality. So just thinking about the shape of the air looking through the air down in Q1, we have a low single-digit growth in Q2, getting to double digits for the year.
Josh Baer: and Ramping. I mean, that seems like that could mean high teens in Q3 and as much as 30% year of year growth in Q4.
First question is, does that make sense?
Yes, and then I have a follow-up.
Josh Baer: Yeah, so you are directly correct. We expect to be in the high teams in Q3 at about 20% in Q4 and at about 20% for the back of the year.
Josh Baer: Great, and so the incremental 30 million bookings is from 24, that's what you'll actually realize in 25, but if we just zoom in on Q4, bookings could be up.
Speaker Change: 20 million, potentially, year over year. So, I guess, is that the right takeaway and that type of market share gain carrying over to 26? I mean, could we be looking at teen's growth in 26 as well.
Speaker Change: Yeah, we have not provided guidance for 2026, but if you look at the acceleration in air and hotel distribution bookings grow through the year and how strong we expect to be in the second half of this year, that applies very strong carryover into 2026 and very strong growth rates for next year.
Good, right, so the 30 million is not annualized [inaudible]
Bye.
30 million is a realised number this year, right?
Speaker Change: Correct, perfect. Thanks, but most of that will be realized. Most of that, of course, will be realized in the second half.
Yep.
Thank you.
One moment for our next question.
Speaker Change: Our next question comes in the line of Jeff Harlow of Barclays. Your line is now open.
Jeff Harlib: Hi, good morning. Most of my questions are answered, but can you say how the implementation is going of the new business you've won and do you see much risk of slippage giving in the, you know, everything is pretty weighted to three kids working.
Speaker Change: Yeah, thanks Jeff. We are right on track with where we thought we'd be at the beginning of the year and what we talked about last quarter. And so we've got good line of sight fidelity into being able to realize that. We don't see a lot of execution risk there. Obviously we're assuming. We're going to be able to find out what we're doing.
Speaker Change: What we know today about current rating environment and what we've heard from carriers in terms of capacity for the balance of the year, we've not assumed that that environment either improves nor deteriorates any further.
Speaker Change: Okay, and just for one cue, both the technology cars and the GNA.
Speaker Change: We're down at least easily below what we were looking for.
Speaker Change: I know you mentioned tech cost part of that is the lower bookings, but are there other cost savings actions that you're implementing? Anything else you can point to and what can you say about the cost that will look for the rest of the year, below one?
Speaker Change: Yes, so thank you for the question. You know, as we articulated on our February call, if you think about the technology expense line
Speaker Change: We would expect to have realized in that line about $100 million from our Tech Transformation initiative.
Speaker Change: Now, that's not a net number. There is some offset both for investment as well as bookings grow, the hosting costs that are associated with that. So, as you look at the technology line, consistent with what we are articulated in the February call, I would expect that line to be down meaningfully. However, I still would expect the largest driver of our EBITDA growth to be gross profit dollar growth.
Speaker Change: and actually the tech savings while being significant, probably still a distance second to that. On SGNA, our original assumption when we went into February was a slight growth, since, you know, obviously given what's happened in the last, you know, over the last, um...
Speaker Change: You call it two, three months, we have tightened it up a little bit, and I would say we'd expect SGNA for the year to be roughly flat given our current outlook right now.
Thank you very much.
One moment for our next question.
Speaker Change: Our next question comes from the line of D-PAC, Massive Anon at Kendra Fitzgerald. Your line is now open.
Speaker Change: Hey guys, thanks for taking our questions. This is Jack on for Deepok, just two for you here.
Speaker Change: So first, just understanding that the primary use of the proceeds from the hospitality sale will be used to pay down debt. What areas and initiatives do you plan to use in remaining proceeds? I think you highlighted in a deck about 135 million to invest behind sort of the rest of the business.
Speaker Change: and then secondly, I think in some previous disclosure you've given.
Speaker Change: Basically, air bookings, industry share. Can you update on how that penetration is trended in one queue? I think last quarter, you said you might not be disclosing that, but just kind of any qualitative color. Thank you.
Speaker Change: Thank you, Jack, and I'll answer them in reverse order. On the share number, as we indicated last quarter, you have edifact, you have NDC, and now we have Longtail LCC growth as well, and so reporting market share on what is one subcomponent, we don't think makes sense.
Speaker Change: But in a market where we see the GDS ed effect market being down projected one to two percent for full year, and what we're going to be growing at double digits with their distribution for the full year.
Speaker Change: I think it's fair to infer from there that we are growing market share very considerably through 2025. With respect to the remaining proceeds, you have to pay down debt from the sale of H.S.
Speaker Change: Those will be applied mainly to our strategic investment areas, which are the strategic growth initiatives that we are beginning to see some real traction with, and then just continue modernization of our technology. This is what, for clarity, our CAPEX, we would expect our CAPEX expenditures this year to be approximately $80 million.
Great. Thank you.
Speaker Change: As a reminder to ask a question, please press star 11 on your phone. One moment for our next question.
Speaker Change: When next question comes from a line of Alex Irving of Bernstein, your line is now open.
Alex Irving: Hi, good morning. Two from me, please. First of all, the new wins with agencies, you'll be implementing over the course of the year. If you please describe how the gross margin of that volume differs from the gross margin to the existing between volume, if at all, is any new ones to call out here.
Alex Irving: The second question is on co-forge, the same as partitions we last spoke.
Alex Irving: Presley, as I've seen, talks about that that's been worth $1.56 billion per year. I was about $220 million per year over the life of that contract. How is the timing look, is it a place in other costs, whether you're getting an exchange and how else should we think about that agreement in the context of your earnings, please?
Alex Irving: Yeah, with regards to gross margin, you know, what I would say is if you look at the new business, we articulated this on the February earnings call. You know, I don't know, I don't know.
Alex Irving: with regards to the new air distribution bookings that were anticipating getting. There's a couple of elements on that. One, we did indicate that we would expect average booking fee to be slightly lower than where we were about a year ago, and marginally be slightly lower, and I'd say it's very slightly lower. And that's driven by a few reasons. One is, as we articulated.
Alex Irving: Two of the agencies we won were some of the largest North American agencies.
Alex Irving: And so there's a geographical mix component there where US domestic air bookings have a slightly lower average
Alex Irving: slightly lower average booking fee. And then after that, it also incorporates additional NDC volumes and LCC volumes. So there is some...
Alex Irving: I would say very slight, slightly lower margins, but overall when you look at our margins and aggregate, for the remaining quarters of the year, for Q2, Q3 and Q4, I would expect gross margin to be roughly in line in this year, where it was last year.
Alex Irving: With respect to co-forge, just a reminder, this is a 13 year deal
It is focused on helping us accelerate proct delivery.
and also launching additional innovative AI embedded solutions.
Alex Irving: This is all incorporated within our ongoing technology costs and our investments in our growth strategies.
Alex Irving: Commercially, the new agreement with co-forge has both a fixed fee component and a Gail Chair component that is subject to certain commercial outcomes. We've not provided additional commercial details beyond that.
Thank you very much.
Thank you.
Alex Irving: I'm showing no further questions at this time. I would now like to turn it back to Kurt Ekert for closing remarks.
Kurt Ekert: Thank you everybody. We're despite a challenging market backdrop. We're pleased with the execution and the traction that we're gaining in the business. We're confident in our ability to deliver against the expectations and the guy that we provided today. And we look forward to talking again next quarter. Thank you.
Kurt Ekert: Thank you for your participation in today's conference. This concludes the program. You may now disconnect.
Michael Randolfi, David
Michael Randolfi, Michael Randolfi, Brian Evans, Kurt Ekert, Alexander Irving
Michael Randolfi, Brian Evans, Kurt Ekert, Alexander Irving
Michael Randolfi, Brian Evans, Kurt Ekert, Alexander Irving
Michael Randolfi, Brian Evans, Kurt Ekert, Alexander Irving, Kurt Ekert
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Michael Randolfi, Brian Evans, Kurt Ekert, Alexander Irving
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Speaker Change: This is a story about a man named Kurt Ekert, who died in a car accident in the United States in 1993. He was a young man who was in his thirties when he was hit by a car. He was a young man who was in his thirties when he was hit by a car. He was a young man who was in his thirties when he was hit by a car.
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Speaker Change: Michael Randolfi, Brian Evans, Kurt Ekert, Alexander Irving
Michael Randolfi, Brian Evans, Kurt Ekert, Alexander Irving
Michael Randolfi, Brian Evans, Kurt Ekert, Alexander Irving,
Speaker Change: Michael Randolfi, Brian Evans, Kurt Ekert, Alexander Irving, Jed Kelly, James Goodall,