NASDAQ:SABR Sabre Q2 2023 Earnings Report $2.62 +0.43 (+19.73%) As of 10:03 AM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Sabre EPS ResultsActual EPS-$0.20Consensus EPS -$0.28Beat/MissBeat by +$0.08One Year Ago EPSN/ASabre Revenue ResultsActual Revenue$737.53 millionExpected Revenue$704.50 millionBeat/MissBeat by +$33.03 millionYoY Revenue GrowthN/ASabre Announcement DetailsQuarterQ2 2023Date8/3/2023TimeN/AConference Call DateThursday, August 3, 2023Conference Call Time9:00AM ETUpcoming EarningsSabre's Q1 2025 earnings is scheduled for Thursday, May 1, 2025, with a conference call scheduled at 9:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Sabre Q2 2023 Earnings Call TranscriptProvided by QuartrAugust 3, 2023 ShareLink copied to clipboard.There are 8 speakers on the call. Operator00:00:00Welcome to the Sabre Second Quarter 2023 Earnings Conference Call. My name is Sherry, and I will be your operator. As a reminder, please note today's call is being recorded. I will now turn the call over to the Senior Director of Investor Relations, Brian Roberts. Please go ahead, sir. Speaker 100:00:22Thank you, and good morning, everyone. Welcome to Sabre's Q2 2023 earnings call. 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. Speaker 100:00:41A 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 Our expectations about future events, including the ongoing recovery from the effects of COVID-nineteen, industry trends, benefits from our technology transformation, Commercial and strategic arrangements, strategic priorities, our financial outlook and targets, expected 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 This morning and our SEC filings, including our Q2 2023 Form 10 Q. Throughout today's call, we will I'll be presenting certain non GAAP financial measures. Speaker 100:01:38References during today's call to adjusted operating income, adjusted net income, Adjusted EBITDA, adjusted EBITDA margin, adjusted EPS and free cash flow have been adjusted to exclude certain items. 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. Dotsavre.com. Participating with me are Kurt Eckert, President and CEO and Mike Randolphi, Chief Financial Officer Scott Wilson, EVP and President of Hospitality Solutions will be available for Q and A after the prepared remarks. With that, I will turn the call over to Kurt. Speaker 200:02:20Thank 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 Q2 and highlight the upward trend in the underlying fundamentals within our business. In the Q2, we significantly exceeded our financial expectations And believe this performance is indicative of Sabre's 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 Adjusted EBITDA guidance. Speaker 200:02:59We remain focused on the core strategic objectives that we outlined on our conference call last quarter And I am pleased that Sabre is delivering on our priorities. Furthermore, we are on a durable path towards Sabre's 2025 financial targets of adjusted EBITDA of greater than $900,000,000 and free cash flow of greater than $500,000,000 Before jumping into the detail of today's call, let's walk through the agenda. On Slide 4, you can see an overview of the topics Mike and I will cover. First, I will review our business highlights from the Q2 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 Q2 and then update the progress of our technology transformation. Speaker 200:03:54Finally, Mike will take you through the financial results for the Q2 And provide an update to our 2023 outlook. Turning to Slide 5. As a reminder, these are our 4 key strategic priorities from the foundation of our long term direction for the company. As I refer to each priority, I will provide proof points and recent accomplishments from the Q2 that highlight our progress towards achieving each of these 1st, generating positive free cash flow and delevering the balance sheet remain our most important financial objectives. Solid operational execution and improving business fundamentals combined to deliver better Q2 results than we had anticipated. Speaker 200:04:42As I stated previously, we are pleased to be able to increase our 2023 adjusted EBITDA guidance year to date. 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, Sabre once again increased its share of industry air bookings on a year on year basis during the Q2. Speaker 200:05:40In addition, Excluding the impact of Expedia, our share of GDS industry volumes has improved versus both Q2 2022 And 2019 levels. Our efforts to expand our business with agencies and new airline partners continues And as the backbone of the distribution growth strategy that we outlined last quarter. We also achieved significant successes with customers across each of our business During the Q2 that we expect will support our growth in the coming years. Our 3rd strategic priority This 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. Speaker 200:06:35We achieved our technology migration milestones during the Q2 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 Techsembly To accelerate our development of key products within Hospitality Solutions, including speeding our ability to deliver And scale our retail studio product suite to our hotelier customers. Last, 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 $100,000,000 of reduced costs in the second half of twenty twenty three and an estimated annualized $200,000,000 of reduced costs in 2024. Speaker 200:07:36In summary, during the Q2, our team delivered on the priorities we outlined to you back in May and we are laser focused on achieving our 20 3 objectives and executing on our durable path towards our 2025 targets. Now let's turn to Slide 6. Underpinning our optimism for solid industry volume growth in the coming quarters is the expected increase in capacity That can be seen here in the chart. The latest global airline schedule suggests seat growth of 15% Year over year in the Q3 of 2023 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. Speaker 200:08:40Regarding 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 twenty three and in 2024. Despite a strong industry backdrop, we have, as we articulated last quarter, conservatively planned for 1 to 2 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 7. Speaker 200:09:24During our Q1 earnings call in May, We use this table to highlight the increasing share of GDS Industry bookings that we achieved in Q1. 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 air bookings in Q2 2023 Then in the Q2 of 2019 2022, if you compare Q2 share of industry air bookings Of 33.7 percent to the 34.0 percent from the Q1, the slight sequential change was impacted by seasonal shift In 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. Speaker 200:10:28Please turn to Slide 8. Our team is delivering many successful business wins across both Travel Solutions And Hospitality Solutions as you can see here on this slide. We continue to realize increased momentum in Hospitality Solutions. Most notably, we recently announced a global agreement with Hyatt under which our Sabre SynXis central reservation platform We'll become the main CRS for Hyatt beginning in 2024. Our platform will offer enhanced reservation capabilities and improve the overall guest experience. Speaker 200:11:06In addition to the Hyatt agreement, 2 well known hotelier brands based in Asia Pacific Selected our SynXis platform to help combine and streamline their IT infrastructure. In distribution, we were pleased to sign a new agreement with Air Canada in which Sabre will provide agencies with significantly expanded access to content and offers, including the airline's dynamically priced fares and new ancillary services. This agreement provides Sabre with long term access To all of Air Canada's content via NDC and represents another important example of a leading airline increasing its level of participation The Sabre marketplace is a highly efficient place to buy and sell travel content, Incorporating NDC offers alongside other content sources. We see NDC and GDS or EDIFACT content as complementary. With NDC expanding the breadth of product available in Sabre's multi source content platform and enhancing our value proposition to both buyers and sellers. Speaker 200:12:14Recently, SAP Concur, which has the largest share of corporate online booking volumes globally, Shared that Sabre will be its 1st NDC integration with a GDS provider. During the first half of twenty twenty three, We doubled the number of airlines distributing NDC 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 Q2, we signed a significant number of agreements. Examples include a deepening of our relationship with Lastminute And a new long term commitment with Internova, a top 10 agency in North America. Speaker 200:13:11In IT Solutions, We are pleased with the positive response we're getting from new and existing customers to our intelligent retailing solutions. Sky Airline, the low cost Chilean carrier, which is growing rapidly in South America, selected our SabreSonic passenger service system for its core IT needs. In addition, Air Servia recently renewed its PSS agreement and is utilizing some of the latest revenue generating solutions that we produce. We expanded our relationship with all Nippon Airways through our enhanced agreement to improve the carrier's network planning and optimization capabilities for its domestic routes. We also had additional network planning software renewals in the quarter with Air China and Delta among others. Speaker 200:13:58Last, we are also realizing very strong growth in our Confirma Payments business. However, we do not expect to break out these details for the foreseeable future. In summary, Sabre achieved a number of commercial wins during the Q2 that will help us deliver on our financial goals. I will now move on to our technology transformation. Please turn to Slide 9. Speaker 200:14:21Our technology transformation continues to move forward And we achieved several short term milestones in Q2. As of the end of the second quarter, We had successfully migrated 73 percent of our total compute capacity to Google Cloud, up from 69% 1 quarter earlier. Additionally, by the end of the second quarter, we had fully decommissioned all 15 Sabre managed data centers. We have now also decommissioned 68 percent of our DXC Tulsa mid range servers and are on track to complete the remainder on schedule by year end. The chart to the right hand side of this slide shows the significant improvements we are seeing in our unit cost of compute. Speaker 200:15:08Overall Sabre is on track to complete the tech transformation at the end of 2024 and deliver annual expense savings of at least $150,000,000 in 2025. Now to Slide 10. In May, we announced a resource realignment To improve our organizational structure, lower costs and achieve greater efficiency. We expect these actions to deliver $100,000,000 And cost savings in the second half of twenty twenty three and an additional $100,000,000 in savings in 2024 For a combined $200,000,000 in annualized cost reductions. We were able to complete these actions sooner than we had anticipated And began capturing savings in the 2nd quarter, which gives us high confidence in the overall size and timing of these actions. Speaker 200:16:00Now on to Slide 11. In closing, we delivered on our priorities in the Q2 and we'll continue to prioritize free cash flow and delevering, Sustainable growth opportunities, the consistent enhancement of the value propositions that we deliver to our customers and a more efficient organization with a lower cost structure. I will now hand the call over to Mike to walk you through our Q2 performance and our 2023 financial expectations. Speaker 300:16:29Thanks, Curt, and good morning, everyone. Please turn to Slide 12. The Q2 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 prior year. As Curt mentioned, Sabre continues to grow share on a year over year basis. Speaker 300:16:55Hospitality solutions generated double digit revenue growth With a higher revenue per transaction and contributed to adjusted EBITDA generation sooner than expected. 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. Overall, in the Q2, we gained significant momentum and are optimistic for the remainder of 2023 beyond. Now referring to the slide. As you can see from the table, We exceeded our expectations for 2nd quarter revenue, adjusted EBITDA and free cash flow. Speaker 300:17:40Turning to Slide 13. Q2 revenue was $738,000,000 An increase of $80,000,000 or 12% versus last year. Distribution revenue totaled $530,000,000 A $99,000,000 or 23 percent increase compared to $432,000,000 in Q2 2022. Our distribution bookings totaled $90,000,000 in the quarter, a 12% increase compared to $81,000,000 In Q2 2022, our average booking fee was $5.87 in the 2nd quarter, up 10% from Q2 2022. 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. Speaker 300:18:43IT Solutions revenue totaled $140,000,000 in the quarter. This was a $27,000,000 decline versus revenue of $168,000,000 in the Comparable prior year period. Passengers boarded totaled $172,000,000 an 8% improvement from $160,000,000 in Q2 2022. 2nd quarter revenue growth from passengers boarded and other IT solutions business was more than offset By the impact of $29,000,000 in lower revenue from demigrations, the vast majority of which was the result of the impact of changes in Russian law. Hospitality Solutions revenue totaled approximately $77,000,000 a $10,000,000 16% improvement versus revenue of $66,000,000 in Q2 2022. Speaker 300:19:39The 16 points of revenue growth was driven by 8 points of central reservation system transactions growth And 8 points of higher rate per transaction. Hospitality Solutions performed significantly better than our initial expectations And has generated $1,500,000 of adjusted EBITDA on a year to date basis. 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 73,000,000 dollars in Q2 2023 versus $24,000,000 in Q2 2022 represented a $49,000,000 improvement year over year. Free cash flow was negative $57,000,000 in the 2nd quarter, including the impact of restructuring charges, which was better Our prior guidance for a range of between negative $60,000,000 negative $80,000,000 including restructuring costs. Speaker 300:20:48During the Q2, we paid down approximately $48,000,000 of term loans from the proceeds of the Air Center sale. This amount was lower than our $80,000,000 expectation discussed on the last earnings call due to the acquisition of Techsembly And additional capital investments. We ended the 2nd quarter with a cash balance of $727,000,000 Before moving to guidance, let's discuss the actions we took during the Q2 to begin refinancing our 2025 debt maturities. 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. 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. Speaker 300:21:57With regards to the remaining 2025 maturities, our intent is to refinance our obligations with a focus on efficiency and flexibility. Moving to Slide 14 to discuss our guidance. We expect Q3 2023 revenue Of approximately $725,000,000 adjusted EBITDA of approximately $100,000,000 and positive free cash flow Of approximately $20,000,000 inclusive of restructuring. If you exclude the restructuring impact, we would expect positive free cash flow of approximately 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 $100,000,000 from $73,000,000 in Q2 Is a near full quarter impact of our cost reduction efforts. Speaker 300:23:03And on free cash flow, we expect to generate Approximately $50,000,000 in Q3, excluding the impact of restructuring due to the sequential improvement And adjusted EBITDA and a typical favorable seasonality in working capital dynamics. As a reminder, our mandatory preferred shares will convert into common equity on September 1, 2023. Following this conversion, our share count will rise by approximately 47,000,000 shares and our $5,000,000 payment on September 1 will be our last quarterly dividend payment on these shares. We expect 4th quarter 2023 revenue of approximately $700,000,000 adjusted EBITDA of approximately $110,000,000 And positive free cash flow of approximately $70,000,000 inclusive of restructuring. Excluding restructuring, we expect positive free cash flow of approximately $85,000,000 With regard to sequential trends, as noted, we expect Q4 revenue at approximately $700,000,000 to be roughly $25,000,000 lower Then in Q3, driven by typical seasonality in air distribution bookings. Speaker 300:24:21As a reminder and as discussed on prior earnings calls, The Q4 typically generates approximately 10% fewer air distribution bookings than the quarterly average for a given year. Despite sequentially lower revenue in the 4th quarter versus the 3rd quarter, we expect a sequential improvement in adjusted EBITDA in Q4 To approximately $110,000,000 from $100,000,000 in Q3, driven by the full realization of our cost reduction efforts. And on free cash flow, we expect to generate approximately $85,000,000 in Q4, excluding the impact of restructuring Due to the sequential improvement in adjusted EBITDA and typical favorable seasonality in working capital dynamics, Sabre's 4th quarter has historically been a seasonally strong period for free cash flow driven by timing of when we receive partner Receipts in the 4th quarter versus when we make agency payments in the 1st 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 $2,900,000,000 $3,000,000,000 In addition, we now expect higher adjusted EBITDA for the full year 2023 of approximately $340,000,000 Above our prior guidance for adjusted EBITDA of between $300,000,000 $320,000,000 We believe the favorable revenue performance we have seen in the 2nd quarter and the cost actions we have already taken to support the higher adjusted EBITDA guidance. Speaker 300:26:11While we are very optimistic about the potential for air distribution Industry volume growth, we continue to conservatively base our projections on a 1 to 2 percentage point 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. Included in our assumption for free cash flow in 2023, Our restructuring costs of approximately $70,000,000 and capital expenditures of approximately $80,000,000 We increased a portion of our investment spending to support development of certain strategic growth initiatives Such as our multi source concept platform, including NDC and Hospitality Solutions. We will continue to focus on system improvement through product optimization and expect that it will allow us to proactively meet the needs of the evolving travel marketplace. We expect capital expenditures to be in a similar range as 2023 in future years based on this increased investment. Speaker 300:27:21We also now expect approximately $375,000,000 in cash interest costs for the full year 2023. Additionally, our working capital initiatives are on track and we expect to generate at least $125,000,000 and positive cash flow benefits this year from these actions. 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 $900,000,000 in Just EBITDA and greater than $500,000,000 in free cash flow in 2025. And with that operator, please open the line for questions. Operator00:28:07Thank you. Please standby while we compile the Q and A roster. And our first question will come from the line of Josh Bair with Morgan Stanley. Your line is open. Speaker 400:28:42Great. Congrats on the upside and the EBITDA performance and improvement for the year. Question on the air bookings, the recovery versus 2019. If I'm looking at it right, It improved 90 basis points from Q1. Just wondering like any puts and takes in the quarter And how that compares to the 1.5% ramp that's assumed going forward? Speaker 200:29:14Josh, 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 1 to 2 percentage points of sequential quarterly growth versus the prior quarter That's relatively consistent between leisure and corporate. 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 has a good chance to be higher than that number, But we have planned or forecasted conservatively to be on the safe side. Speaker 400:29:52Okay, got it. And I know you spent some time reviewing some of the commercial wins across all businesses. Was hoping you could focus on PSS and just wondering if there were any notable PSS wins or losses to highlight. Speaker 200:30:11Yes. Thank you, Josh. I articulated in the prepared remarks, some of the Wins or benefits that we've seen through the period. Overall, when you look at IT Solutions, we've stabilized the business. We're now investing in leading Next generation retailing solutions to drive long term growth in this portfolio, and we feel very good about the future prospects for this business. Speaker 400:30:39Got it. I guess, just to ask directly, like, investors Definitely wondering about, Amadeus mentioned 25,000,000 passenger PSS Does that represent a competitive replacement? Thank you. Speaker 200:30:56Thanks, Josh. We are like Our competitor bound by confidentiality. We do believe this references a current Sabre customer. I would note the revenue impact This carrier is very small on an annual basis with a de minimis EBITDA impact. And I should note And 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. Operator00:31:25Thank you. One moment for our next question. And that will come from the line of Victor Chang with Bank of America, your line is open. Great. Speaker 500:31:37Good morning and thanks for taking my questions and congrats on a very solid quarter. 2, if I may. And just going back to the point on quarter on quarter improvements, obviously, it's Roughly within your 1% to 2% improvement. But can you give us some color maybe about region as well, where you're seeing growth? Obviously, if we look at Amadeus, they improved 3.4 percentage points this quarter, which is quite a bit higher than you. Speaker 500:32:05I know you got Air India contract well in this quarter. What are some of the puts and takes for this quarter by region and some of the wins and losses you might have? Thank you. And I have one more follow-up. Speaker 200:32:19Yes. Thanks, Victor. It's important to note that When we look at this, what we're not doing is we're not talking about the seasonality quarter on quarter. We're talking about sequential percentage improvement in the marketplace. That is compared on a year on year basis. Speaker 200:32:35And so we don't talk about seasonality. We understand that you project that and understand that very well. What we're going to do is talk about quarterly progression and then 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 look at it versus Q1, We're certainly in Asia Pacific that's recovering at an elevated or better basis. Speaker 200:33:05And then we see relative improvements across the board. The corporate travel recovery is relatively slow. It's sort of in the upper 70s or so on a percentage basis. Interestingly, given much higher airline and hotel yields than 2019, we believe corporate travel spending may actually be in the range of what it was 3 or 4 years ago. But there's a governor on the pace of corporate travel recovery because the way corporate travel budgets are set within the corporate environment. Speaker 200:33:34That may serve as a governor for the balance this year also. Speaker 300:33:36Yes. And the one thing, Victor, I would add, you could 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 Kurt 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 on our average booking fee and we generally see that mix continuing as we move forward. Speaker 500:34:07Thank you. That's very good color. And follow-up on maybe hospitality and think about And the 2 other views that you alluded to, can you give us a bit more color on the economics, the contribution? Obviously, you said Yes, the main CRS and you're implementing 24, but I guess we should only see material Contribution by 25% and how do you quantify it on revenue side and kind of how we think about implementation costs and margin Speaker 200:34:42Yes, 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 Sabre SynXis platform. 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, Which is that you're going to see double digit revenue growth in HS this year and beyond. Speaker 200:35:09You'll see HS achieve double digit margin production by the end of next year. And And if the $150,000,000 of growth initiatives that we articulated last quarter that you'll see benefit us 25 versus 23, We believe HS will be $50,000,000 of that $150,000,000 meaning HS will deliver $50,000,000 of EBITDA in 2025. So we feel great about what this does. We don't break out the economics of any individual customer deal, but Hyatt is clearly one of the leading brands in the world and we think this is quite strategic and financially accretive to this business. Operator00:35:45Thank you. And our next question will come from the line of Dan Wazialek with Morningstar. Your line is open. Speaker 600:36:02Hey, 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 already 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 GDSs? Do the GDSs tend to have more of that larger corporation mix? Speaker 600:36:28And As you talk about those budgets maybe opening up and being a governor, how does that kind of play out between what the hotel operators Arceen versus the GDS. Speaker 200:36:40Yes, Dan, thank you. So I suggest you look at this a couple of ways. Number 1 is manage corporate travel And that change is based on geography, but figure corporations that spend more than $2,000,000 $3,000,000 a year Where typically procurement is running travel as a category, you're right that has recovered relatively more slowly we believe That SME or unmanaged corporate travel has recovered. Unmanaged travel tends to go predominantly through travel agencies, but there's a portion of that that goes supplier direct Versus managed corporate travel tends to go almost entirely through intermediaries, through TMCs, through corporate booking tools effectively through the GDS providers. So as corporate travel continues to recover in the future, that should accrue predominantly to our business. Speaker 200:37:30The other thing to look at interestingly is I think everybody puts a 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 that originates ex U. S. And that has recovered relatively more slowly And Travel in North America has, so we believe there's significant upside in the non U. S. Speaker 200:37:52Points of sale as well. Speaker 300:37:54And 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. Speaker 600:38:23Okay. No, that 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 how should we think about the revenue per passenger boarding? I I think, obviously, there was the Russia call out, but that looked like it was maybe down a little bit sequentially. Speaker 600:38:47Just Any thoughts there or anything to call out on how we should think about that moving forward? Speaker 300:38:52Sure. Obviously, the driver of the year over year decline that we talked about was Attributable to the demigrations, the vast majority of which was associated with changes in Russian law. The way you should think about our revenue, our Airline IT Solutions revenue per BB is roughly half of that is fixed based on products we sell, roughly half of it is variable and correlates directly with PBs. With that mix, given roughly half of your revenue per PP is variable as PBs grow as they've done this quarter, You're going to see that result in a lower average revenue per BB just because the PBs are growing and it only represents about half of the revenue per BB. Speaker 600:39:39Okay, great. Thank you. Thanks guys. Operator00:39:43Thank 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 Harlib with Barclays. One moment. Speaker 700:40:00Yes. Following your successful refinancing of a portion of 25s, How are you looking at addressing the remaining 25 maturities with respect to timing and options? Obviously, if you perform better, you'll Better economics, but how are you looking at the 7.38 and the converts? Speaker 300:40:20Yes, thanks for the question. First, let me just recap a little bit around our thoughts of the Refinancing that occurred this quarter. As we pursued that financing and achieved and completed that financing, there were a few objectives That had helped achieve. 1, obviously, it took out about a third of the 2025 maturities. It also was intentionally focused on the April maturities within 2025. Speaker 300:40:44So really extended by a couple of quarters Our required refinancing window to the back part now of 2025 and also the optionality with the pick option, we believe gave us Really good flexibility. What I would expect is and we're not going to answer specifics with regards to refinancing obviously given the sensitivity around that. So what I would say is, you're going to see us continue to focus on 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, In the not too distant future, be focused on addressing the remainder of the 2025 maturities. Speaker 700:41:29Okay. And just on the revenue per booking, is the improvement you saw in the current quarter, is that sustainable or should that move around Well, do you think it's going to be a steady or an uptick from here? Speaker 300:41:44Yes. So, no, thanks for the question. A couple of things to unpack the 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. One is we have seen a favorable regional mix as we've talked about, And we've seen international both in APAC and Europe continue to perform better than they've had and that's been very supportive 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 Bookings, it's a more favorable mix. Speaker 300:42:21And when we're looking at the underlying trends, we really see both of those trends continuing. And so we'd expect the average booking fee To remain roughly in this range for the foreseeable future. Speaker 700:42:33Okay, great. And last question for me, just IT Solutions, you've talked about New business coming on and you were lapping some losses. I mean, how do we how do you see the revenue trajectory Going forward in that business now? Speaker 300:42:51Yes. As you look at the $140,000,000 this quarter, As Kurt had mentioned, we have stabilized that business. With that being said, I would expect just a very small tick down sequentially going from Q2 to Q3, But generally, in the range that we're in right now. Operator00:43:11And 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. Speaker 200:43:22Thank 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. Operator00:43:31Thank you. Speaker 200:43:31Operator, that concludes today's call. Operator00:43:33Thank you. Thank you all for participating. This concludes today's program. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallSabre Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Sabre Earnings HeadlinesUnveiling the F-100 Super SabreApril 28 at 9:23 AM | msn.comSabre shares rise on $1.1 billion deal to sell Hospitality Solutions business to TPGApril 28 at 9:23 AM | msn.comTrump’s Secret Social Security Plan?In less than a decade, Social Security could be out of money. But a surprising plan from Trump’s inner circle may not just save the system — it could unlock a major opportunity for savvy investors. Financial insider Jim Rickards calls it “Social Prosperity,” and says those who act now could see the biggest gains.April 28, 2025 | Paradigm Press (Ad)Sabre enters into definitive agreement to sell its Hospitality Solutions business unit to TPG for $1.1 billionApril 28 at 8:55 AM | prnewswire.comDCS World: F-86 Sabre vs MiG-15. First Kill for the Sabre, Korea, December 1950April 25 at 12:14 PM | msn.comPRNigeria Young Communication Fellowship shortlisted for 2025 Africa SABRE AwardsApril 25 at 7:01 AM | msn.comSee More Sabre Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Sabre? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Sabre and other key companies, straight to your email. Email Address About SabreSabre (NASDAQ:SABR), together with its subsidiaries, operates as software and technology company for travel industry in the United States, Europe, Asia-Pacific, and internationally. It operates through two segments: Travel Solutions and Hospitality Solutions. The Travel Solutions segment operates a business-to-business travel marketplace that offers travel content, such as inventory, prices, and availability from a range of travel suppliers, including airlines, hotels, car rental brands, rail carriers, cruise lines, and tour operators with a network of travel buyers comprising online and offline travel agencies, travel management companies, and corporate travel departments. This segment provides a portfolio of software technology products and solutions through software-as-a-service (SaaS) and hosted delivery models to airlines and other travel suppliers. Its products include reservation systems for carriers, commercial and operations products, agency solutions, and data-driven intelligence solutions. Its Hospitality Solutions segment provides software and solutions to hoteliers through SaaS and hosted delivery models. Sabre Corporation was incorporated in 2006 and is headquartered in Southlake, Texas.View Sabre ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Markets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Texas Instruments: Earnings Beat, Upbeat Guidance Fuel RecoveryMarket Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of Earnings Upcoming Earnings AstraZeneca (4/29/2025)Booking (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Regeneron Pharmaceuticals (4/29/2025)Starbucks (4/29/2025)American Tower (4/29/2025)América Móvil (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 8 speakers on the call. Operator00:00:00Welcome to the Sabre Second Quarter 2023 Earnings Conference Call. My name is Sherry, and I will be your operator. As a reminder, please note today's call is being recorded. I will now turn the call over to the Senior Director of Investor Relations, Brian Roberts. Please go ahead, sir. Speaker 100:00:22Thank you, and good morning, everyone. Welcome to Sabre's Q2 2023 earnings call. 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. Speaker 100:00:41A 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 Our expectations about future events, including the ongoing recovery from the effects of COVID-nineteen, industry trends, benefits from our technology transformation, Commercial and strategic arrangements, strategic priorities, our financial outlook and targets, expected 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 This morning and our SEC filings, including our Q2 2023 Form 10 Q. Throughout today's call, we will I'll be presenting certain non GAAP financial measures. Speaker 100:01:38References during today's call to adjusted operating income, adjusted net income, Adjusted EBITDA, adjusted EBITDA margin, adjusted EPS and free cash flow have been adjusted to exclude certain items. 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. Dotsavre.com. Participating with me are Kurt Eckert, President and CEO and Mike Randolphi, Chief Financial Officer Scott Wilson, EVP and President of Hospitality Solutions will be available for Q and A after the prepared remarks. With that, I will turn the call over to Kurt. Speaker 200:02:20Thank 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 Q2 and highlight the upward trend in the underlying fundamentals within our business. In the Q2, we significantly exceeded our financial expectations And believe this performance is indicative of Sabre's 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 Adjusted EBITDA guidance. Speaker 200:02:59We remain focused on the core strategic objectives that we outlined on our conference call last quarter And I am pleased that Sabre is delivering on our priorities. Furthermore, we are on a durable path towards Sabre's 2025 financial targets of adjusted EBITDA of greater than $900,000,000 and free cash flow of greater than $500,000,000 Before jumping into the detail of today's call, let's walk through the agenda. On Slide 4, you can see an overview of the topics Mike and I will cover. First, I will review our business highlights from the Q2 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 Q2 and then update the progress of our technology transformation. Speaker 200:03:54Finally, Mike will take you through the financial results for the Q2 And provide an update to our 2023 outlook. Turning to Slide 5. As a reminder, these are our 4 key strategic priorities from the foundation of our long term direction for the company. As I refer to each priority, I will provide proof points and recent accomplishments from the Q2 that highlight our progress towards achieving each of these 1st, generating positive free cash flow and delevering the balance sheet remain our most important financial objectives. Solid operational execution and improving business fundamentals combined to deliver better Q2 results than we had anticipated. Speaker 200:04:42As I stated previously, we are pleased to be able to increase our 2023 adjusted EBITDA guidance year to date. 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, Sabre once again increased its share of industry air bookings on a year on year basis during the Q2. Speaker 200:05:40In addition, Excluding the impact of Expedia, our share of GDS industry volumes has improved versus both Q2 2022 And 2019 levels. Our efforts to expand our business with agencies and new airline partners continues And as the backbone of the distribution growth strategy that we outlined last quarter. We also achieved significant successes with customers across each of our business During the Q2 that we expect will support our growth in the coming years. Our 3rd strategic priority This 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. Speaker 200:06:35We achieved our technology migration milestones during the Q2 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 Techsembly To accelerate our development of key products within Hospitality Solutions, including speeding our ability to deliver And scale our retail studio product suite to our hotelier customers. Last, 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 $100,000,000 of reduced costs in the second half of twenty twenty three and an estimated annualized $200,000,000 of reduced costs in 2024. Speaker 200:07:36In summary, during the Q2, our team delivered on the priorities we outlined to you back in May and we are laser focused on achieving our 20 3 objectives and executing on our durable path towards our 2025 targets. Now let's turn to Slide 6. Underpinning our optimism for solid industry volume growth in the coming quarters is the expected increase in capacity That can be seen here in the chart. The latest global airline schedule suggests seat growth of 15% Year over year in the Q3 of 2023 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. Speaker 200:08:40Regarding 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 twenty three and in 2024. Despite a strong industry backdrop, we have, as we articulated last quarter, conservatively planned for 1 to 2 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 7. Speaker 200:09:24During our Q1 earnings call in May, We use this table to highlight the increasing share of GDS Industry bookings that we achieved in Q1. 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 air bookings in Q2 2023 Then in the Q2 of 2019 2022, if you compare Q2 share of industry air bookings Of 33.7 percent to the 34.0 percent from the Q1, the slight sequential change was impacted by seasonal shift In 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. Speaker 200:10:28Please turn to Slide 8. Our team is delivering many successful business wins across both Travel Solutions And Hospitality Solutions as you can see here on this slide. We continue to realize increased momentum in Hospitality Solutions. Most notably, we recently announced a global agreement with Hyatt under which our Sabre SynXis central reservation platform We'll become the main CRS for Hyatt beginning in 2024. Our platform will offer enhanced reservation capabilities and improve the overall guest experience. Speaker 200:11:06In addition to the Hyatt agreement, 2 well known hotelier brands based in Asia Pacific Selected our SynXis platform to help combine and streamline their IT infrastructure. In distribution, we were pleased to sign a new agreement with Air Canada in which Sabre will provide agencies with significantly expanded access to content and offers, including the airline's dynamically priced fares and new ancillary services. This agreement provides Sabre with long term access To all of Air Canada's content via NDC and represents another important example of a leading airline increasing its level of participation The Sabre marketplace is a highly efficient place to buy and sell travel content, Incorporating NDC offers alongside other content sources. We see NDC and GDS or EDIFACT content as complementary. With NDC expanding the breadth of product available in Sabre's multi source content platform and enhancing our value proposition to both buyers and sellers. Speaker 200:12:14Recently, SAP Concur, which has the largest share of corporate online booking volumes globally, Shared that Sabre will be its 1st NDC integration with a GDS provider. During the first half of twenty twenty three, We doubled the number of airlines distributing NDC 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 Q2, we signed a significant number of agreements. Examples include a deepening of our relationship with Lastminute And a new long term commitment with Internova, a top 10 agency in North America. Speaker 200:13:11In IT Solutions, We are pleased with the positive response we're getting from new and existing customers to our intelligent retailing solutions. Sky Airline, the low cost Chilean carrier, which is growing rapidly in South America, selected our SabreSonic passenger service system for its core IT needs. In addition, Air Servia recently renewed its PSS agreement and is utilizing some of the latest revenue generating solutions that we produce. We expanded our relationship with all Nippon Airways through our enhanced agreement to improve the carrier's network planning and optimization capabilities for its domestic routes. We also had additional network planning software renewals in the quarter with Air China and Delta among others. Speaker 200:13:58Last, we are also realizing very strong growth in our Confirma Payments business. However, we do not expect to break out these details for the foreseeable future. In summary, Sabre achieved a number of commercial wins during the Q2 that will help us deliver on our financial goals. I will now move on to our technology transformation. Please turn to Slide 9. Speaker 200:14:21Our technology transformation continues to move forward And we achieved several short term milestones in Q2. As of the end of the second quarter, We had successfully migrated 73 percent of our total compute capacity to Google Cloud, up from 69% 1 quarter earlier. Additionally, by the end of the second quarter, we had fully decommissioned all 15 Sabre managed data centers. We have now also decommissioned 68 percent of our DXC Tulsa mid range servers and are on track to complete the remainder on schedule by year end. The chart to the right hand side of this slide shows the significant improvements we are seeing in our unit cost of compute. Speaker 200:15:08Overall Sabre is on track to complete the tech transformation at the end of 2024 and deliver annual expense savings of at least $150,000,000 in 2025. Now to Slide 10. In May, we announced a resource realignment To improve our organizational structure, lower costs and achieve greater efficiency. We expect these actions to deliver $100,000,000 And cost savings in the second half of twenty twenty three and an additional $100,000,000 in savings in 2024 For a combined $200,000,000 in annualized cost reductions. We were able to complete these actions sooner than we had anticipated And began capturing savings in the 2nd quarter, which gives us high confidence in the overall size and timing of these actions. Speaker 200:16:00Now on to Slide 11. In closing, we delivered on our priorities in the Q2 and we'll continue to prioritize free cash flow and delevering, Sustainable growth opportunities, the consistent enhancement of the value propositions that we deliver to our customers and a more efficient organization with a lower cost structure. I will now hand the call over to Mike to walk you through our Q2 performance and our 2023 financial expectations. Speaker 300:16:29Thanks, Curt, and good morning, everyone. Please turn to Slide 12. The Q2 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 prior year. As Curt mentioned, Sabre continues to grow share on a year over year basis. Speaker 300:16:55Hospitality solutions generated double digit revenue growth With a higher revenue per transaction and contributed to adjusted EBITDA generation sooner than expected. 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. Overall, in the Q2, we gained significant momentum and are optimistic for the remainder of 2023 beyond. Now referring to the slide. As you can see from the table, We exceeded our expectations for 2nd quarter revenue, adjusted EBITDA and free cash flow. Speaker 300:17:40Turning to Slide 13. Q2 revenue was $738,000,000 An increase of $80,000,000 or 12% versus last year. Distribution revenue totaled $530,000,000 A $99,000,000 or 23 percent increase compared to $432,000,000 in Q2 2022. Our distribution bookings totaled $90,000,000 in the quarter, a 12% increase compared to $81,000,000 In Q2 2022, our average booking fee was $5.87 in the 2nd quarter, up 10% from Q2 2022. 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. Speaker 300:18:43IT Solutions revenue totaled $140,000,000 in the quarter. This was a $27,000,000 decline versus revenue of $168,000,000 in the Comparable prior year period. Passengers boarded totaled $172,000,000 an 8% improvement from $160,000,000 in Q2 2022. 2nd quarter revenue growth from passengers boarded and other IT solutions business was more than offset By the impact of $29,000,000 in lower revenue from demigrations, the vast majority of which was the result of the impact of changes in Russian law. Hospitality Solutions revenue totaled approximately $77,000,000 a $10,000,000 16% improvement versus revenue of $66,000,000 in Q2 2022. Speaker 300:19:39The 16 points of revenue growth was driven by 8 points of central reservation system transactions growth And 8 points of higher rate per transaction. Hospitality Solutions performed significantly better than our initial expectations And has generated $1,500,000 of adjusted EBITDA on a year to date basis. 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 73,000,000 dollars in Q2 2023 versus $24,000,000 in Q2 2022 represented a $49,000,000 improvement year over year. Free cash flow was negative $57,000,000 in the 2nd quarter, including the impact of restructuring charges, which was better Our prior guidance for a range of between negative $60,000,000 negative $80,000,000 including restructuring costs. Speaker 300:20:48During the Q2, we paid down approximately $48,000,000 of term loans from the proceeds of the Air Center sale. This amount was lower than our $80,000,000 expectation discussed on the last earnings call due to the acquisition of Techsembly And additional capital investments. We ended the 2nd quarter with a cash balance of $727,000,000 Before moving to guidance, let's discuss the actions we took during the Q2 to begin refinancing our 2025 debt maturities. 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. 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. Speaker 300:21:57With regards to the remaining 2025 maturities, our intent is to refinance our obligations with a focus on efficiency and flexibility. Moving to Slide 14 to discuss our guidance. We expect Q3 2023 revenue Of approximately $725,000,000 adjusted EBITDA of approximately $100,000,000 and positive free cash flow Of approximately $20,000,000 inclusive of restructuring. If you exclude the restructuring impact, we would expect positive free cash flow of approximately 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 $100,000,000 from $73,000,000 in Q2 Is a near full quarter impact of our cost reduction efforts. Speaker 300:23:03And on free cash flow, we expect to generate Approximately $50,000,000 in Q3, excluding the impact of restructuring due to the sequential improvement And adjusted EBITDA and a typical favorable seasonality in working capital dynamics. As a reminder, our mandatory preferred shares will convert into common equity on September 1, 2023. Following this conversion, our share count will rise by approximately 47,000,000 shares and our $5,000,000 payment on September 1 will be our last quarterly dividend payment on these shares. We expect 4th quarter 2023 revenue of approximately $700,000,000 adjusted EBITDA of approximately $110,000,000 And positive free cash flow of approximately $70,000,000 inclusive of restructuring. Excluding restructuring, we expect positive free cash flow of approximately $85,000,000 With regard to sequential trends, as noted, we expect Q4 revenue at approximately $700,000,000 to be roughly $25,000,000 lower Then in Q3, driven by typical seasonality in air distribution bookings. Speaker 300:24:21As a reminder and as discussed on prior earnings calls, The Q4 typically generates approximately 10% fewer air distribution bookings than the quarterly average for a given year. Despite sequentially lower revenue in the 4th quarter versus the 3rd quarter, we expect a sequential improvement in adjusted EBITDA in Q4 To approximately $110,000,000 from $100,000,000 in Q3, driven by the full realization of our cost reduction efforts. And on free cash flow, we expect to generate approximately $85,000,000 in Q4, excluding the impact of restructuring Due to the sequential improvement in adjusted EBITDA and typical favorable seasonality in working capital dynamics, Sabre's 4th quarter has historically been a seasonally strong period for free cash flow driven by timing of when we receive partner Receipts in the 4th quarter versus when we make agency payments in the 1st 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 $2,900,000,000 $3,000,000,000 In addition, we now expect higher adjusted EBITDA for the full year 2023 of approximately $340,000,000 Above our prior guidance for adjusted EBITDA of between $300,000,000 $320,000,000 We believe the favorable revenue performance we have seen in the 2nd quarter and the cost actions we have already taken to support the higher adjusted EBITDA guidance. Speaker 300:26:11While we are very optimistic about the potential for air distribution Industry volume growth, we continue to conservatively base our projections on a 1 to 2 percentage point 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. Included in our assumption for free cash flow in 2023, Our restructuring costs of approximately $70,000,000 and capital expenditures of approximately $80,000,000 We increased a portion of our investment spending to support development of certain strategic growth initiatives Such as our multi source concept platform, including NDC and Hospitality Solutions. We will continue to focus on system improvement through product optimization and expect that it will allow us to proactively meet the needs of the evolving travel marketplace. We expect capital expenditures to be in a similar range as 2023 in future years based on this increased investment. Speaker 300:27:21We also now expect approximately $375,000,000 in cash interest costs for the full year 2023. Additionally, our working capital initiatives are on track and we expect to generate at least $125,000,000 and positive cash flow benefits this year from these actions. 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 $900,000,000 in Just EBITDA and greater than $500,000,000 in free cash flow in 2025. And with that operator, please open the line for questions. Operator00:28:07Thank you. Please standby while we compile the Q and A roster. And our first question will come from the line of Josh Bair with Morgan Stanley. Your line is open. Speaker 400:28:42Great. Congrats on the upside and the EBITDA performance and improvement for the year. Question on the air bookings, the recovery versus 2019. If I'm looking at it right, It improved 90 basis points from Q1. Just wondering like any puts and takes in the quarter And how that compares to the 1.5% ramp that's assumed going forward? Speaker 200:29:14Josh, 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 1 to 2 percentage points of sequential quarterly growth versus the prior quarter That's relatively consistent between leisure and corporate. 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 has a good chance to be higher than that number, But we have planned or forecasted conservatively to be on the safe side. Speaker 400:29:52Okay, got it. And I know you spent some time reviewing some of the commercial wins across all businesses. Was hoping you could focus on PSS and just wondering if there were any notable PSS wins or losses to highlight. Speaker 200:30:11Yes. Thank you, Josh. I articulated in the prepared remarks, some of the Wins or benefits that we've seen through the period. Overall, when you look at IT Solutions, we've stabilized the business. We're now investing in leading Next generation retailing solutions to drive long term growth in this portfolio, and we feel very good about the future prospects for this business. Speaker 400:30:39Got it. I guess, just to ask directly, like, investors Definitely wondering about, Amadeus mentioned 25,000,000 passenger PSS Does that represent a competitive replacement? Thank you. Speaker 200:30:56Thanks, Josh. We are like Our competitor bound by confidentiality. We do believe this references a current Sabre customer. I would note the revenue impact This carrier is very small on an annual basis with a de minimis EBITDA impact. And I should note And 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. Operator00:31:25Thank you. One moment for our next question. And that will come from the line of Victor Chang with Bank of America, your line is open. Great. Speaker 500:31:37Good morning and thanks for taking my questions and congrats on a very solid quarter. 2, if I may. And just going back to the point on quarter on quarter improvements, obviously, it's Roughly within your 1% to 2% improvement. But can you give us some color maybe about region as well, where you're seeing growth? Obviously, if we look at Amadeus, they improved 3.4 percentage points this quarter, which is quite a bit higher than you. Speaker 500:32:05I know you got Air India contract well in this quarter. What are some of the puts and takes for this quarter by region and some of the wins and losses you might have? Thank you. And I have one more follow-up. Speaker 200:32:19Yes. Thanks, Victor. It's important to note that When we look at this, what we're not doing is we're not talking about the seasonality quarter on quarter. We're talking about sequential percentage improvement in the marketplace. That is compared on a year on year basis. Speaker 200:32:35And so we don't talk about seasonality. We understand that you project that and understand that very well. What we're going to do is talk about quarterly progression and then 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 look at it versus Q1, We're certainly in Asia Pacific that's recovering at an elevated or better basis. Speaker 200:33:05And then we see relative improvements across the board. The corporate travel recovery is relatively slow. It's sort of in the upper 70s or so on a percentage basis. Interestingly, given much higher airline and hotel yields than 2019, we believe corporate travel spending may actually be in the range of what it was 3 or 4 years ago. But there's a governor on the pace of corporate travel recovery because the way corporate travel budgets are set within the corporate environment. Speaker 200:33:34That may serve as a governor for the balance this year also. Speaker 300:33:36Yes. And the one thing, Victor, I would add, you could 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 Kurt 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 on our average booking fee and we generally see that mix continuing as we move forward. Speaker 500:34:07Thank you. That's very good color. And follow-up on maybe hospitality and think about And the 2 other views that you alluded to, can you give us a bit more color on the economics, the contribution? Obviously, you said Yes, the main CRS and you're implementing 24, but I guess we should only see material Contribution by 25% and how do you quantify it on revenue side and kind of how we think about implementation costs and margin Speaker 200:34:42Yes, 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 Sabre SynXis platform. 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, Which is that you're going to see double digit revenue growth in HS this year and beyond. Speaker 200:35:09You'll see HS achieve double digit margin production by the end of next year. And And if the $150,000,000 of growth initiatives that we articulated last quarter that you'll see benefit us 25 versus 23, We believe HS will be $50,000,000 of that $150,000,000 meaning HS will deliver $50,000,000 of EBITDA in 2025. So we feel great about what this does. We don't break out the economics of any individual customer deal, but Hyatt is clearly one of the leading brands in the world and we think this is quite strategic and financially accretive to this business. Operator00:35:45Thank you. And our next question will come from the line of Dan Wazialek with Morningstar. Your line is open. Speaker 600:36:02Hey, 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 already 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 GDSs? Do the GDSs tend to have more of that larger corporation mix? Speaker 600:36:28And As you talk about those budgets maybe opening up and being a governor, how does that kind of play out between what the hotel operators Arceen versus the GDS. Speaker 200:36:40Yes, Dan, thank you. So I suggest you look at this a couple of ways. Number 1 is manage corporate travel And that change is based on geography, but figure corporations that spend more than $2,000,000 $3,000,000 a year Where typically procurement is running travel as a category, you're right that has recovered relatively more slowly we believe That SME or unmanaged corporate travel has recovered. Unmanaged travel tends to go predominantly through travel agencies, but there's a portion of that that goes supplier direct Versus managed corporate travel tends to go almost entirely through intermediaries, through TMCs, through corporate booking tools effectively through the GDS providers. So as corporate travel continues to recover in the future, that should accrue predominantly to our business. Speaker 200:37:30The other thing to look at interestingly is I think everybody puts a 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 that originates ex U. S. And that has recovered relatively more slowly And Travel in North America has, so we believe there's significant upside in the non U. S. Speaker 200:37:52Points of sale as well. Speaker 300:37:54And 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. Speaker 600:38:23Okay. No, that 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 how should we think about the revenue per passenger boarding? I I think, obviously, there was the Russia call out, but that looked like it was maybe down a little bit sequentially. Speaker 600:38:47Just Any thoughts there or anything to call out on how we should think about that moving forward? Speaker 300:38:52Sure. Obviously, the driver of the year over year decline that we talked about was Attributable to the demigrations, the vast majority of which was associated with changes in Russian law. The way you should think about our revenue, our Airline IT Solutions revenue per BB is roughly half of that is fixed based on products we sell, roughly half of it is variable and correlates directly with PBs. With that mix, given roughly half of your revenue per PP is variable as PBs grow as they've done this quarter, You're going to see that result in a lower average revenue per BB just because the PBs are growing and it only represents about half of the revenue per BB. Speaker 600:39:39Okay, great. Thank you. Thanks guys. Operator00:39:43Thank 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 Harlib with Barclays. One moment. Speaker 700:40:00Yes. Following your successful refinancing of a portion of 25s, How are you looking at addressing the remaining 25 maturities with respect to timing and options? Obviously, if you perform better, you'll Better economics, but how are you looking at the 7.38 and the converts? Speaker 300:40:20Yes, thanks for the question. First, let me just recap a little bit around our thoughts of the Refinancing that occurred this quarter. As we pursued that financing and achieved and completed that financing, there were a few objectives That had helped achieve. 1, obviously, it took out about a third of the 2025 maturities. It also was intentionally focused on the April maturities within 2025. Speaker 300:40:44So really extended by a couple of quarters Our required refinancing window to the back part now of 2025 and also the optionality with the pick option, we believe gave us Really good flexibility. What I would expect is and we're not going to answer specifics with regards to refinancing obviously given the sensitivity around that. So what I would say is, you're going to see us continue to focus on 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, In the not too distant future, be focused on addressing the remainder of the 2025 maturities. Speaker 700:41:29Okay. And just on the revenue per booking, is the improvement you saw in the current quarter, is that sustainable or should that move around Well, do you think it's going to be a steady or an uptick from here? Speaker 300:41:44Yes. So, no, thanks for the question. A couple of things to unpack the 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. One is we have seen a favorable regional mix as we've talked about, And we've seen international both in APAC and Europe continue to perform better than they've had and that's been very supportive 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 Bookings, it's a more favorable mix. Speaker 300:42:21And when we're looking at the underlying trends, we really see both of those trends continuing. And so we'd expect the average booking fee To remain roughly in this range for the foreseeable future. Speaker 700:42:33Okay, great. And last question for me, just IT Solutions, you've talked about New business coming on and you were lapping some losses. I mean, how do we how do you see the revenue trajectory Going forward in that business now? Speaker 300:42:51Yes. As you look at the $140,000,000 this quarter, As Kurt had mentioned, we have stabilized that business. With that being said, I would expect just a very small tick down sequentially going from Q2 to Q3, But generally, in the range that we're in right now. Operator00:43:11And 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. Speaker 200:43:22Thank 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. Operator00:43:31Thank you. Speaker 200:43:31Operator, that concludes today's call. Operator00:43:33Thank you. Thank you all for participating. This concludes today's program. You may now disconnect.Read morePowered by