Sabre Corporation
May 5, 2015
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Sabre Reports First Quarter 2015 Results

- Revenue increased 7%, Adjusted EBITDA up 15%
- Airline and Hospitality Solutions revenue increased 15.9%
- Travel Network revenue grew 3.3%
- Wyndham Hotel Group to migrate to the SynXis Central Reservations Solution

SOUTHLAKE, Texas, May 5, 2015 /PRNewswire/ -- Sabre Corporation (NASDAQ: SABR) today announced financial results for the quarter ended March 31, 2015.

"The first quarter marked a strong start to the year," said Tom Klein, Sabre President and CEO.  "Sabre's growth is being fueled by a strong pipeline of innovative, mission-critical solutions across all of our businesses, as demonstrated by our new long-term agreements with customers like Wyndham Hotel Group and LATAM Airlines Group, which we announced today.  This quarter's momentum increases our confidence that we will achieve our full-year objectives."

Q1 2015 Financial Summary

Sabre consolidated first quarter revenue increased 6.6% to $710 million, compared to $666 million for the same period last year.

Net income from continuing operations totaled $49 million, compared to $22 million in the first quarter of 2014. Consolidated Adjusted EBITDA was $244 million, a 15.3% increase from $211 million in the prior year first quarter. The increase in consolidated Adjusted EBITDA is the result of 33.7% growth in Airline and Hospitality Solutions Adjusted EBITDA and an 8.0% increase in Travel Network Adjusted EBITDA.

For the quarter, Sabre reported Income from continuing operations of $0.18 per share and Adjusted Net Income from continuing operations (Adjusted EPS) of $0.27 per share.

Cash flow from operations totaled $132 million, compared to $94 million in the first quarter of 2014. Free Cash Flow was $70 million, compared to $45 million in the year ago period. Adjusted Capital Expenditures, which includes capitalized implementation costs, totaled $76 million, compared to $57 million in the first quarter of 2014.


Three Months Ended March 31,



Financial Highlights (in thousands; unaudited):

2015



2014


% Change



Total Company (Continuing Operations):



Revenue

$

710,348



$

666,415



6.6



Income (loss) from continuing operations

$

49,330



$

21,959



124.6















Adjusted EBITDA*

$

243,586



$

211,263



15.3















Cash Flow from Operations

$

131,773



$

94,322



39.7



Capital Expenditures

$

61,912



$

49,658



24.7



Adjusted Capital Expenditures*

$

76,239



$

57,311



33.0















Free Cash Flow*

$

69,861



$

44,664



56.4



Adjusted Free Cash Flow*

$

84,090



$

60,969



37.9















Net Debt (total debt, less cash)

$

2,632,432



$

3,443,016






Net Debt / LTM Adjusted EBITDA


3.0

x



4.4

x





Airline and Hospitality Solutions:



Revenue

$

204,900



$

176,717



15.9



Passengers Boarded


126,092




117,616



7.2



Operating Income

$

28,491



$

26,462



7.7



Adjusted EBITDA*

$

71,488



$

53,460



33.7



Travel Network:



Revenue

$

507,930



$

491,726



3.3



Air Bookings


91,423




89,045



2.7



Non-air Bookings


14,011




13,598



3.0



Total Bookings


105,434




102,643



2.7



Bookings Share


35.7

%



35.4

%





Operating Income

$

197,251



$

184,517



6.9



Adjusted EBITDA*

$

232,087



$

214,843



8.0



*indicates non-GAAP financial measure; see descriptions and reconciliations below

 

Sabre Airline and Hospitality Solutions

First quarter 2015 Airline and Hospitality Solutions revenue increased 15.9% to $205 million from $177 million in the prior year period. The increase was driven by a 7.2% increase in passengers boarded through the SabreSonic® Customer Sales & Service (CSS) solution and strong growth in Sabre Hospitality Solutions.

Sabre Airline and Hospitality Solutions Adjusted EBITDA increased 33.7% to $71 million from $53 million in the prior year period. The increase in Adjusted EBITDA is the result of strong revenue growth and technology platform scale benefits, resulting in an Adjusted EBITDA margin of 34.9%, compared to 30.3% for the prior year quarter.

In the quarter, Wyndham Hotel Group selected the SynXis® Central Reservations Solution to power distribution and reservations for its 7,500 global properties. In December 2014, Wyndham Hotel Group announced that it would transition its 4,500 North American properties to the SynXis Property Manager Solution. These combined agreements make Wyndham Hotel Group the first hotel company to fully leverage the cloud-based SaaS reservations, property management and enhanced security solutions of the SynXis Enterprise Platform. Also in the first quarter, Four Seasons Hotels & Resorts contracted to migrate its properties to the SynXis Central Reservations Solution.

Today, Sabre announced LATAM Airlines Group would extend their use of SabreSonic CSS reservations across its entire network including LAN Airlines, which is a current SabreSonic CSS customer, as well as TAM Airlines, which will migrate to SabreSonic CSS. TAM is Brazil's largest airline. Combined, LATAM Airlines Group is one of the top ten largest airlines in the world, with more than 67 million passengers boarded annually.

With the addition of the expanded LATAM agreement, Sabre Airline Solutions' implementation pipeline represents more than 290 million passengers boarded annually to be implemented in 2015 through 2017, up from 250 million at year end.  

Sabre Travel Network

First quarter Travel Network revenue increased 3.3% to $508 million, compared to $492 million for the same period in 2014. Bookings increased 2.7%, with increasing momentum as the quarter progressed. Continued sales success resulted in strong Sabre bookings growth of 10% in Europe, Middle East and Africa (EMEA), compared to less than one percent growth for the EMEA market overall.

First quarter 2015 Travel Network Adjusted EBITDA increased 8.0% to $232 million.

Refinancing Activity

Early in the second quarter, Sabre redeemed $480 million of 8.5% 2019 maturity bonds. These bonds were redeemed through the issuance of $530 million, 5.375% senior secured notes due in 2023, which substantially covered the redeemed notes' principal, accrued interest and related fees, premiums and expenses.

Dividend

Sabre's Board of Directors has declared a quarterly dividend of $0.09 cents per share on the Company's common stock. The dividend will be payable on June 30, 2015, to stockholders of record on June 19, 2015.

Business Outlook and Financial Guidance

Sabre reiterated full-year guidance for 2015.

  • In Airline and Hospitality Solutions, Sabre expects 2015 revenue growth of between 9% and 11%.  Passengers boarded are expected to increase approximately 10% in 2015, including strong growth in the fourth quarter related to scheduled SabreSonic CSS customer implementations.
  • In Travel Network, Sabre expects 2015 revenue growth of 4% or more, driven by bookings growth of approximately 3%.
  • 2015 Adjusted Net Income and Adjusted EPS guidance remain unchanged at $275 million to $290 million and $1.00 to $1.06, respectively.  Free Cash Flow and Adjusted Free Cash Flow guidance are unchanged at more than $250 million and more than $300 million, respectively.

In summary, for the full year 2015, Sabre continues to expect the following results from continuing operations:

Full Year 2015 Guidance

Sabre

($ millions, except for EPS)

Revenue

$2,770 - $2,800



Adjusted EBITDA

$895 - $910



Adjusted Net Income

$275 - $290



Adjusted EPS

$1.00 - $1.06

 

Conference Call

Sabre will conduct its first quarter 2015 investor conference call today at 9:00 a.m. Eastern Time.  The live webcast, including accompanying slide presentation, can be accessed via the Sabre Investor Relations website at investors.sabre.com.  A recording of the call will be archived for replay following the conference call. 

About the Company

Sabre® is a leading technology provider to the global travel and tourism industry. Sabre's software, data, mobile and distribution solutions are used by hundreds of airlines and thousands of hotels to manage vital operations, such as passenger and guest reservations, revenue management, and flight, network and crew management. Sabre also operates the world's leading travel marketplace, processing more than $110 billion of annual travel spend.  Headquartered in Southlake, Texas, USA, Sabre operates in approximately 60 countries around the world.

Website Information

We routinely post important information for investors on our website, www.sabre.com, in the Investor Relations section. We intend to use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.

Supplemental Financial Information

In conjunction with today's earnings report, a file of supplemental financial information will be available on the Investor Relations section of our website, www.sabre.com.

Note on Non-GAAP Financial Measures

This press release includes unaudited non-GAAP financial measures, including Adjusted Net Income, Adjusted EBITDA, Adjusted EPS, Adjusted Capital Expenditures, Free Cash Flow, Adjusted Free Cash Flow and the ratios based on these financial measures. We present non-GAAP measures when our management believes that the additional information provides useful information about our operating performance. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation of non-GAAP financial measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with GAAP.  See "Non-GAAP Financial Measures" below for an explanation of the non-GAAP measures and "Tabular Reconciliations for non-GAAP Measures" below for a reconciliation of the non-GAAP financial measures to the comparable GAAP measures.

Forward-looking statements

Certain statements herein are forward-looking statements about trends, future events, uncertainties and our plans and expectations of what may happen in the future. Any statements that are not historical or current facts are forward-looking statements. In many cases, you can identify forward-looking statements by terms such as "confidence," "expect," "anticipate," "assume," "may," "will," "should," "would," "intend," "believe," "potential" or the negative of these terms or other comparable terminology. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Sabre's actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. The potential risks and uncertainties include, among others, dependency on transaction volumes in the global travel industry, particularly air travel transaction volumes, adverse global and regional economic and political conditions, including, but not limited to, conditions in Venezuela and Russia, exposure to pricing pressure in the Travel Network business, the implementation and effects of new agreements, dependence on maintaining and renewing contracts with customers and other counterparties, dependence on relationships with travel buyers, changes affecting travel supplier customers, travel suppliers' usage of alternative distribution models, reliance on fourth-party distributor partners and joint ventures to extend our GDS services to certain regions and competition in the travel distribution market and solutions markets.  More information about potential risks and uncertainties that could affect our business and results of operations is included in the "Risk Factors" and "Forward-Looking Statements" sections included in our Annual Report on Form 10-K filed with the SEC on March 3, 2015. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. Unless required by law, Sabre undertakes no obligation to publicly update or revise any forward-looking statements to reflect circumstances or events after the date they are made.

Contacts


Media

Investors

Nancy St. Pierre

Barry Sievert

682-605-3864

682-605-0214

nancy.st.pierre@sabre.com

barry.sievert@sabre.com

 

 

SABRE CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands, except share amounts; unaudited)




Three Months Ended March 31,




2015



2014


Revenue


$

710,348



$

666,415


Cost of revenue (1) (2)



468,998




451,970


Selling, general and administrative (2)



122,358




110,738


Operating income



118,992




103,707


Other income (expense):









Interest expense, net



(46,453)




(63,944)


Loss on extinguishment of debt






(2,980)


Joint venture equity income



8,519




2,441


Other, net



(4,445)




(2,354)


Total other expense, net



(42,379)




(66,837)


Income from continuing operations before income taxes



76,613




36,870


Provision for income taxes



27,283




14,911


Income from continuing operations



49,330




21,959


Income (loss) from discontinued operations, net of tax



158,911




(24,056)


Net income (loss)



208,241




(2,097)


Net income attributable to noncontrolling interests



747




746


Net income (loss) attributable to Sabre Corporation



207,494




(2,843)


Preferred stock dividends






9,146


Net income (loss) attributable to common shareholders


$

207,494



$

(11,989)











Basic net income (loss) per share attributable to common shareholders:









Income from continuing operations


$

0.18



$

0.07


Income (loss) from discontinued operations



0.59




(0.13)


Net income (loss) per common share


$

0.77



$

(0.07)


Diluted net income (loss) per share attributable to common shareholders:









Income from continuing operations


$

0.18



$

0.06


Income (loss) from discontinued operations



0.57




(0.13)


Net income (loss) per common share


$

0.75



$

(0.06)


Weighted average common shares outstanding:









Basic



269,184




178,702


Diluted



276,688




187,727











Dividends per common share


$

0.09



$











(1) Includes amortization of upfront incentive consideration


$

11,172



$

11,047


(2) Includes stock-based compensation as follows:









Cost of revenue


$

3,533



$

1,386


Selling, general and administrative



5,261




2,213


 

SABRE CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts; unaudited)




March 31, 2015



December 31, 2014


Assets









Current assets









Cash and cash equivalents


$

458,557



$

155,679


Restricted cash



496




720


Accounts receivable, net



422,490




362,911


Prepaid expenses and other current assets



35,455




34,121


Current deferred income taxes



184,295




182,277


Other receivables, net



35,332




29,893


Assets held for sale






112,558


Total current assets



1,136,625




878,159


Property and equipment, net of accumulated depreciation of $845,790 and $792,161



545,493




551,276


Investments in joint ventures



154,805




145,320


Goodwill



2,153,152




2,153,499


Trademarks and brandnames, net of accumulated amortization of $90,268 and $87,554



235,786




238,500


Other intangible assets, net of accumulated amortization of $993,861 and $975,701



223,326




241,486


Other assets, net



518,293




509,764


Total assets


$

4,967,480



$

4,718,004











Liabilities and stockholders' equity









Current liabilities









Accounts payable


$

142,542



$

117,855


Accrued compensation and related benefits



54,889




83,828


Accrued subscriber incentives



170,841




145,581


Deferred revenues



184,886




167,827


Litigation settlement liability and related deferred revenue



69,194




73,252


Other accrued liabilities



191,978




189,612


Current portion of debt



417,232




22,435


Liabilities held for sale






96,544


Total current liabilities



1,231,562




896,934


Deferred income taxes



181,169




61,577


Other noncurrent liabilities



605,801




613,710


Long-term debt



2,662,166




3,061,400











Stockholders' equity









Common Stock: $0.01 par value;  450,000,000 authorized shares; 271,994,071 and 268,237,547 shares issued, 271,280,037 and 267,800,161 outstanding at March 31, 2015 and December 31, 2014, respectively



2,720




2,682


Additional paid-in capital



1,956,593




1,931,796


Treasury Stock, at cost, 714,034 and 437,386 shares at March 31, 2015 and December 31, 2014, respectively



(11,425)




(5,297)


Retained deficit



(1,592,513)




(1,775,616)


Accumulated other comprehensive loss



(70,162)




(69,803)


Noncontrolling interest



1,569




621


Total stockholders' equity



286,782




84,383


Total liabilities and stockholders' equity


$

4,967,480



$

4,718,004


 

 

SABRE CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands; unaudited)




Three Months Ended March 31,




2015



2014


Operating Activities









Net income (loss)


$

208,241



$

(2,097)


Adjustments to reconcile net income (loss) to cash provided by operating activities:









Depreciation and amortization



90,061




81,634


Amortization of upfront incentive consideration



11,172




11,047


Litigation-related credits



(16,786)




(5,156)


Stock-based compensation expense



8,794




3,599


Allowance for doubtful accounts



3,355




1,416


Deferred income taxes



27,388




6,967


Joint venture equity income



(8,519)




(2,441)


Amortization of debt issuance costs



1,536




1,682


Debt modification costs






3,290


Loss on extinguishment of debt






2,980


Other



4,952




8,133


(Income) loss from discontinued operations



(158,911)




24,056


Changes in operating assets and liabilities:









Accounts and other receivables



(70,827)




(41,012)


Prepaid expenses and other current assets



(3,388)




5,903


Capitalized implementation costs



(14,327)




(7,653)


Upfront incentive consideration



(6,523)




(17,250)


Other assets



(7,189)




(6,710)


Accrued compensation and related benefits



(27,317)




(30,528)


Accounts payable and other accrued liabilities



60,172




25,077


Deferred revenue including upfront solution fees



29,889




31,385


Cash provided by operating activities



131,773




94,322


Investing Activities









Additions to property and equipment



(61,912)




(49,658)


Other investing activities



148





Cash used in investing activities



(61,764)




(49,658)


Financing Activities









Proceeds of borrowings from lenders






148,307


Payments on borrowings from lenders



(5,614)




(169,847)


Debt modification and issuance costs






(3,290)


Net proceeds (payments) on the settlement of equity-based awards



9,781




(779)


Cash dividends paid to common shareholders



(24,391)





Other financing activities



(2,057)




(2,993)


Cash used in financing activities



(22,281)




(28,602)


Cash Flows from Discontinued Operations









Cash used in operating activities



(18,156)




(35,985)


Cash provided by (used in) investing activities



278,834




(2,177)


Cash provided by (used in) discontinued operations



260,678




(38,162)











Effect of exchange rate changes on cash and cash equivalents



(5,528)




220











Increase (decrease) in cash and cash equivalents



302,878




(21,880)


Cash and cash equivalents at beginning of period



155,679




308,236


Cash and cash equivalents at end of period


$

458,557



$

286,356


 

Non-GAAP Financial Measures

We have included both financial measures compiled in accordance with GAAP and certain non-GAAP financial measures in this earnings release, including Adjusted Gross Margin, Adjusted Net Income, Adjusted EBITDA, Adjusted Capital Expenditures, Free Cash Flow, Adjusted Free Cash Flow and ratios based on these financial measures.

We define Adjusted Gross Margin as operating income adjusted for selling, general and administrative expenses, amortization of upfront incentive consideration, and the cost of revenue portion of depreciation and amortization, restructuring and other costs, and stock-based compensation.

We define Adjusted Net Income as income from continuing operations adjusted for acquisition-related amortization, loss on extinguishment of debt, other, net, restructuring and other costs, acquisition-related costs, litigation costs, stock-based compensation, management fees and the tax impact of net income adjustments.

We define Adjusted EBITDA as Adjusted Net Income adjusted for depreciation and amortization of property and equipment, amortization of capitalized implementation costs, amortization of upfront incentive consideration, interest expense, net, and remaining provision for income taxes.

We define Adjusted EPS as Adjusted Net Income divided by the applicable share count.

We define Adjusted Capital Expenditures as additions to property and equipment and capitalized implementation costs during the periods presented.

We define Free Cash Flow as cash provided by operating activities less cash used in additions to property and equipment. We define Adjusted Free Cash Flow as Free Cash Flow plus the cash flow effect of restructuring and other costs, acquisition-related costs, litigation settlement, other litigation costs and management fees.

These non-GAAP financial measures are key metrics used by management and our board of directors to monitor our ongoing core operations because historical results have been significantly impacted by events that are unrelated to our core operations as a result of changes to our business and the regulatory environment. We believe that these non-GAAP financial measures are used by investors, analysts and other interested parties as measures of financial performance and to evaluate our ability to service debt obligations, fund capital expenditures and meet working capital requirements. Adjusted Capital Expenditures includes cash flows used in investing activities, for property and equipment, and cash flows used in operating activities, for capitalized implementation costs. Our management uses this combined metric in making product investment decisions and determining development resource requirements. We also believe that Adjusted Gross Margin, Adjusted Net Income, Adjusted EBITDA, Adjusted EPS and Adjusted Capital Expenditures assist investors in company-to-company and period-to-period comparisons by excluding differences caused by variations in capital structures (affecting interest expense), tax positions and the impact of depreciation and amortization expense. In addition, amounts derived from Adjusted EBITDA are a primary component of certain covenants under our senior secured credit facilities.

Adjusted Gross Margin, Adjusted Net Income, Adjusted EBITDA, Adjusted EPS, Adjusted Capital Expenditures, Free Cash Flow, Adjusted Free Cash Flow and ratios based on these financial measures are not recognized terms under GAAP. These non-GAAP financial measures and ratios based on them have important limitations as analytical tools, and should not be viewed in isolation and do not purport to be alternatives to net income as indicators of operating performance or cash flows from operating activities as measures of liquidity. These non-GAAP financial measures and ratios based on them exclude some, but not all, items that affect net income or cash flows from operating activities and these measures may vary among companies. Our use of these measures has limitations as an analytical tool, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. Some of these limitations are:

  • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted Gross Margin and Adjusted EBITDA do not reflect cash requirements for such replacements;
  • Adjusted Net Income and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
  • Adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness;
  • Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us;
  • Free Cash Flow and Adjusted Free Cash Flow do not reflect the cash requirements necessary to service the principal payments on our indebtedness;
  • Free Cash Flow and Adjusted Free Cash Flow do not reflect payments related to restructuring, litigation, acquisition-related and management fees;
  • Free Cash Flow and Adjusted Free Cash Flow remove the impact of accrual-basis accounting on asset accounts and non-debt liability accounts; and
  • other companies, including companies in our industry, may calculate Adjusted Gross Margin, Adjusted Net Income, Adjusted EBITDA, Adjusted EPS, Adjusted Capital Expenditures, Free Cash Flow or Adjusted Free Cash Flow differently, which reduces their usefulness as comparative measures.

 

Tabular Reconciliations for Non-GAAP Measures

(In thousands, except per share amounts; unaudited)


Reconciliation of Net Income (Loss) to Adjusted Net Income from Continuing Operations and Adjusted EBITDA




Three Months Ended March 31,




2015



2014


Net income (loss) attributable to common shareholders


$

207,494



$

(11,989)


(Income) loss from discontinued operations, net of tax



(158,911)




24,056


Net income attributable to noncontrolling interests(1)



747




746


Preferred stock dividends






9,146


Income from continuing operations



49,330




21,959


Adjustments:









Acquisition related amortization(2a)



21,675




32,889


Loss on extinguishment of debt






2,980


Other, net (4)



4,445




2,354


Restructuring and other costs (5)






1,556


Acquisition-related costs(6)



1,811





Litigation costs(7)



3,436




4,546


Stock-based compensation



8,794




3,599


Management fees(8)






1,932


Tax impact of net income adjustments



(14,557)




(19,443)


Adjusted Net Income from continuing operations


$

74,934



$

52,372


Adjusted Net Income from continuing operations per share


$

0.27



$

0.28


Diluted weighted-average common shares outstanding



276,688




187,727











Adjusted Net Income from continuing operations


$

74,934



$

52,372


Adjustments:









Depreciation and amortization of property and equipment(2b)



61,663




40,449


Amortization of capitalized implementation costs(2c)



7,524




9,097


Amortization of upfront incentive consideration(3)



11,172




11,047


Interest expense, net



46,453




63,944


Remaining provision for income taxes



41,840




34,354


Adjusted EBITDA


$

243,586



$

211,263


 

Reconciliation of Adjusted Capital Expenditures:




Three Months Ended March 31,




2015



2014


Additions to property and equipment


$

61,912



$

49,658


Capitalized implementation costs



14,327




7,653


Adjusted Capital Expenditures


$

76,239



$

57,311


 

Reconciliation of Adjusted Free Cash Flow:




Three Months Ended March 31,




2015



2014


Cash provided by operating activities


$

131,773



$

94,322


Cash used in investing activities



(61,764)




(49,658)


Cash used in financing activities



(22,281)




(28,602)






















Three Months Ended March 31,




2015



2014


Cash provided by operating activities


$

131,773



$

94,322


Additions to property and equipment



(61,912)




(49,658)


Free Cash Flow



69,861




44,664


Adjustments:









Restructuring and other costs(5) (9)



280




5,190


Acquisition-related costs(6) (9)



1,811





Litigation settlement(7) (10)



8,702




4,637


Other litigation costs(7) (9)



3,436




4,546


Management fees(8) (9)






1,932


Adjusted Free Cash Flow


$

84,090



$

60,969


 

Reconciliation of Operating Income (Loss) to Adjusted Gross Margin and Adjusted EBITDA by Segment:



Three Months Ended March 31, 2015



Travel

Network



Airline and

Hospitality

Solutions



Corporate



Total


Operating income (loss)

$

197,251



$

28,491



$

(106,750)



$

118,992


Add back:
















Selling, general and administrative


21,884




17,979




82,495




122,358


Cost of revenue adjustments:
















Depreciation and amortization(2)


13,812




42,729




8,126




64,667


Amortization of upfront incentive consideration(3)


11,172










11,172


Stock-based compensation








3,533




3,533


Adjusted Gross Margin


244,119




89,199




(12,596)




320,722


Selling, general and administrative


(21,884)




(17,979)




(82,495)




(122,358)


Joint venture equity income


8,519










8,519


Joint venture intangible amortization(2a)


801










801


Selling, general and administrative adjustments:
















Depreciation and amortization(2)


532




268




24,594




25,394


Acquisition-related costs(6)








1,811




1,811


Litigation costs(7)








3,436




3,436


Stock-based compensation








5,261




5,261


Adjusted EBITDA

$

232,087



$

71,488



$

(59,989)



$

243,586





Three Months Ended March 31, 2014



Travel

Network



Airline and

Hospitality

Solutions



Corporate



Total


Operating income (loss)

$

184,517



$

26,462



$

(107,272)



$

103,707


Add back:
















Selling, general and administrative


25,672




12,395




72,671




110,738


Cost of revenue adjustments:
















Depreciation and amortization(2)


15,412




26,683




16,714




58,809


Amortization of upfront incentive consideration(3)


11,047










11,047


Restructuring and other costs (5)








1,178




1,178


Stock-based compensation








1,386




1,386


Adjusted Gross Margin


236,648




65,540




(15,323)




286,865


Selling, general and administrative


(25,672)




(12,395)




(72,671)




(110,738)


Joint venture equity income


2,441










2,441


Joint venture intangible amortization(2a)


801










801


Selling, general and administrative adjustments:
















Depreciation and amortization(2)


625




315




21,885




22,825


Restructuring and other costs (5)








378




378


Litigation costs(7)








4,546




4,546


Stock-based compensation








2,213




2,213


Management fees(8)








1,932




1,932


Adjusted EBITDA

$

214,843



$

53,460



$

(57,040)



$

211,263


 

Non-GAAP Footnotes



(1)

Net income attributable to noncontrolling interests represents an adjustment to include earnings allocated to noncontrolling interests held in Sabre Travel Network Middle East of 40% for all periods presented and in Sabre Seyahat Dagitim Sistemleri A.S. of 40% beginning in April 2014 for the three months ended March 31, 2015.

(2)

Depreciation and amortization expenses:


a.

Acquisition-related amortization represents amortization of intangible assets from the take-private transaction in 2007 as well as intangibles associated with acquisitions since that date and amortization of the excess basis in our underlying equity in joint ventures.


b.

Depreciation and amortization of property and equipment includes software developed for internal use.


c.

Amortization of capitalized implementation costs represents amortization of upfront costs to implement new customer contracts under our SaaS and hosted revenue model.

(3)

Our Travel Network business at times provides upfront incentive consideration to travel agency subscribers at the inception or modification of a service contract, which are capitalized and amortized to cost of revenue over an average expected life of the service contract, generally over three to five years. Such consideration is made with the objective of increasing the number of clients or to ensure or improve customer loyalty. Such service contract terms are established such that the supplier and other fees generated over the life of the contract will exceed the cost of the incentive consideration provided upfront. Such service contracts with travel agency subscribers require that the customer commit to achieving certain economic objectives and generally have terms requiring repayment of the upfront incentive consideration if those objectives are not met.

(4)

Other, net primarily represents foreign exchange gains and losses related to the remeasurement of foreign currency denominated balances included in our consolidated balance sheets into the relevant functional currency.

(5)

Restructuring and other costs represents charges associated with business restructuring and associated changes implemented which resulted in severance benefits related to employee terminations, integration and facility opening or closing costs and other business reorganization costs.

(6)

Acquisition-related costs represent fees and expenses incurred associated with a possible acquisition, as previously disclosed, within our Travel Network segment.

(7)

Litigation settlement and other litigation costs represent settlements or charges associated with airline antitrust litigation.

(8)

We paid an annual management fee, pursuant to a Management Services Agreement ("MSA"), to TPG Global, LLC ("TPG") and Silver Lake Management Company ("Silver Lake") in an amount between (i) $5 million and (ii) $7 million, the actual amount of which is calculated based upon 1% of Adjusted EBITDA, earned by the company in such fiscal year up to a maximum of $7 million.  In addition, the MSA provided for reimbursement of certain costs incurred by TPG and Silver Lake, which are included in this line item. The MSA was terminated in April 2014 in connection with our initial public offering.

(9)

The adjustments to reconcile cash provided by operating activities to Adjusted Free Cash Flow reflect the amounts expensed in our statements of operations in the respective periods adjusted for cash and non-cash portions in instances where material.

(10)

Includes payment credits used by American Airlines to pay for purchases of our technology services. The payment credits were provided by us as part of our litigation settlement with American Airlines.

 

 

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SOURCE Sabre Corporation

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