Sabre’s Q1 2024 exceeded guidance with solid revenue growth, significant adjusted EBITDA increase, and margin expansion.
Announced increased revenue and adjusted EBITDA guidance for the full year 2024.
Leadership and Board Updates
Gail Mandel elected as Sabre’s new Board chair, appreciating her vast experience and knowledge.
Acknowledged Sean Menke’s leadership as CEO and Board Chair during a pivotal time for Sabre.
Strategic Achievements and Priorities
Achieved key strategic priorities including positive free cash flow generation and deleveraging the balance sheet.
Hospitality Solutions showed strong Q1 results, with Hyatt implementation on SynXis CRS platform expected to begin within the quarter.
Launched Sabre Red LaunchPad with Internova Travel Group, supporting NDC, low-cost carrier, and traditional EDIFACT content.
Technology transformation goals on track, aiming for operational and cost savings objectives by year-end 2024.
Financial Performance and Guidance
Travel Solutions drove financial results above Q1 guidance with distribution industry share expansion and improved average booking fees.
Hospitality Solutions revenue up 7% year-over-year, with adjusted EBITDA margins growing approximately 10%.
Technology transformation expected to achieve cost savings targets and goals by year-end 2024, with over $150 million in technology cost reduction anticipated in 2025.
Significant business wins in Q1 across distribution, Airline IT, and agency segments.
Expect Hospitality Solutions to deliver double-digit revenue growth and substantial margin improvement in 2024.
Q1 Financial Metrics
Q1 revenue was $783 million, a 5% increase from the previous year.
Distribution revenue rose 9% to $572 million, with total distribution bookings increasing 2%.
IT Solutions revenue declined by $10 million due to demigrations, while Hospitality Solutions revenue improved by 7%.
Adjusted EBITDA for Q1 2024 was $142 million, an $84 million improvement year-over-year.
Ended Q1 with a cash balance of $650 million.
Balance Sheet and Future Outlook
Completed refinancing transactions reducing 2025 debt maturities by over $300 million and increasing liquidity.
Next significant maturity not due until June 2027.
Q2 2024 guidance expects revenue of approximately $750 million and adjusted EBITDA of around $115 million.
Full-year 2024 revenue expected to be about $3.04 billion with adjusted EBITDA around $520 million.
Capital expenditures for 2024 now expected to be around $85 million.
Question and Answer
GDS Market Share and Cost Structure
Question
Are GDS share trends stabilizing, allowing for a better understanding of the appropriate cost structure, and what is the outlook for the Airline Solutions business?
Answer
In the first quarter, GDS market growth was strong, with Sabre experiencing sequential share gains in the corporate travel segment.
The company believes its current cost structure is appropriate, with the benefits of technology transformation and cost actions taken in the previous year.
The Airline Solutions business has stabilized, and the company is optimistic about its long-term future, particularly with the success of its Retail Intelligence solutions and the upcoming launch of Offer and Order products.
Average Booking Fee Growth and AI Investment
Question
Can you discuss the factors influencing average booking fee growth in the Travel Solutions business, its durability, and the new use cases and applications of AI, including cost management?
Answer
Average booking fee growth has been driven by a favorable mix of travel types and airlines, with strength observed in the Asia Pacific region and the lodging, ground, and sea segment.
The company expects average booking fees to remain in a similar range throughout the year.
Sabre has partnered with Google to embed AI capabilities into its solutions, enhancing product development, client servicing, and data utilization.
Industry Growth and Corporate Travel Trends
Question
What are the assumptions regarding industry growth, global bookings, and average booking fees in the guidance, and how is corporate travel performance in the second quarter compared to the first quarter?
Answer
The baseline assumption for air distribution bookings is flat to normal growth, but there are positive indicators, such as IATA projections, airline capacity additions, and favorable corporate booking trends, that suggest potential for higher growth.
The company expects average booking fees to remain consistent.
Corporate travel trends in the second quarter are similar to those in the first quarter, with strong performance continuing.
Technology Transformation Impact and Expense Outlook
Question
How has the technology transformation impacted win rates and renewal levels, and how should we think about technology expenses in 2024 and 2025?
Answer
The technology transformation has led to a more competitive product offering, with cloud-built modularized technology that enables faster innovation and implementation.
The company expects approximately $45 million of cost efficiency benefits from the tech transformation in 2024, with a total of over $100 million incrementally between 2024 and 2025.
The Q1 run rate for technology expenses is not representative of the full year, as benefits are expected to be more backloaded due to the gradual optimization of the cloud environment and increased compute capacity.
Corporate Travel and Full Content Agreements
Question
Can you elaborate on the potential reasons for the gap between the growth rates of managed corporate travel capital and corporate bookings, and what is the share of air bookings coming from airlines with full content agreements?
Answer
The company believes that a significant portion of the reported growth in managed corporate travel capital by airlines is yield-driven, and it does not see evidence of disintermediation or channel shift in managed corporate travel.
Sabre has full content agreements with over 100 carriers, accounting for more than 90% of its air distribution bookings.
Technology Transformation Savings and Inflation Assumptions
Question
Is it accurate to assume that a 60% recovery level in technology transformation would result in approximately $200 million in savings, considering the initial $150 million target and the assumptions regarding inflation?
Answer
The company expects the technology transformation to result in more than the initially targeted $150 million in savings, likely exceeding $160 million.
The $160 million benefit already accounts for higher wage rates, particularly in the technology sector, compared to pre-pandemic levels.
The company’s long-term contract with Google has fixed commercial terms, providing stability in Google Cloud cost inflation.
Minimum Liquidity Requirements
Question
What is the minimum liquidity required for the company, considering the debt repayment and free cash flow generation expectations?
Answer
Pre-pandemic, the company operated with $300 million to $400 million in actual cash, although it had higher liquidity due to a revolver.
The company currently aims to maintain a higher liquidity balance for prudence and expects to end the year with a cash balance of approximately $750 million, which is sufficient to cover maturities off its balance sheet in 2025.
Hospitality Business Performance and Recent Deals
Question
Can you provide an update on the traction of the Hospitality Solutions business with enterprise and PMS, and comment on the recent announcements regarding deals with Wyndham and Hyatt?
Answer
The company has closed two enterprise deals in the past three years, with Louvre and Hyatt, and has commenced the implementation and migration of their properties onto the SynXis CRS platform, with expectations of completing the process within 12 months.
The recent announcement regarding Wyndham pertains to the renewal of the PMS product, which was specifically built for Wyndham’s hotel types and has been successful in supporting select service and limited service properties.
The company has a robust pipeline for PMS deals and is confident in its ability to win more enterprise opportunities in the future.
NDC Volumes and Outlook
Question
Can you provide an update on NDC volumes and expectations for the full year, considering the movements by major airlines towards NDC adoption?
Answer
NDC volumes in the GDS sector, including Sabre, currently represent only about 1% of total air distribution volumes, but the company expects this number to grow substantially in 2024 and beyond.
The company’s 2024 and 2025 forward-looking commentary and assumptions incorporate a significant uptake in NDC volumes.
