Sabre Corporation
Aug 4, 2015
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Sabre Reports Second Quarter 2015 Results

- Revenue increased 9.4%, Adjusted EBITDA up 6.1%
- Airline and Hospitality Solutions revenue increased 16.1%
- Travel Network revenue increased 7.0%, bookings growth of 8.7%
- LATAM Airlines Group signed SabreSonic Suite deal
- Abacus acquisition completed July 1
- Raising full-year guidance: Revenue, Adjusted EBITDA and Adjusted EPS


SOUTHLAKE, Texas, Aug. 4, 2015 /PRNewswire/ -- Sabre Corporation (NASDAQ: SABR) today announced financial results for the quarter ended June 30, 2015.

"In the second quarter, we continued to perform very well financially, operationally and in delivering new product innovation, capped off with the strategic Abacus acquisition in Asia-Pacific. We are well positioned as we look ahead to the coming years," said Tom Klein, Sabre President and CEO. "Travel Network revenue increased 7.0% year over year in the quarter, driven by growth in bookings across all regions, including an increase of 6.9% in North America and 19.7% growth in EMEA. In Airline and Hospitality Solutions, strong revenue growth and nearly four points of margin expansion drove a 29.5% increase in Adjusted EBITDA. Our performance has been fueled by our continued innovation for, and commitment to, our customers. Our momentum underpins our confidence to increase our full-year guidance."

Q2 2015 Financial Summary

Sabre consolidated second quarter revenue increased 9.4% to $707.1 million, compared to $646.4 million for the same period last year.

Income from continuing operations totaled $32.6 million, compared to $6.5 million in the second quarter of 2014. Consolidated Adjusted EBITDA was $227.6 million, a 6.1% increase from $214.5 million in the prior year second quarter. The increase in consolidated Adjusted EBITDA is the result of 29.5% growth in Airline and Hospitality Solutions Adjusted EBITDA and a 4.0% increase in Travel Network Adjusted EBITDA.

For the quarter, Sabre reported income from continuing operations of $0.12 per share and Adjusted Net Income from continuing operations (Adjusted EPS) of $0.27 per share.

Cash flow from operations totaled $136.2 million, compared to $110.1 million in the second quarter of 2014. Second quarter Free Cash Flow was $70.2 million, compared to $53.3 million in the year ago period. Capital expenditures totaled $66.1 million, compared to $56.8 million in the year ago period. Adjusted Capital Expenditures, which includes capitalized implementation costs, totaled $81.3 million, compared to $66.8 million in the second quarter of 2014.





















Financial Highlights

(in thousands; unaudited):

Three Months Ended June 30,


Six Months Ended June 30,

2015


2014

% Change


2015


2014

% Change

Total Company (Continuing Operations):



Revenue

$

707,091



$

646,380


9.4



$

1,417,439



$

1,312,795


8.0

Income from continuing operations

$

32,589



$

6,455


404.9



$

81,919



$

28,414


188.3











Adjusted EBITDA*

$

227,573



$

214,548


6.1



$

471,159



$

425,811


10.6











Cash Flow from Operations

$

136,226



$

110,134


23.7



$

267,999



$

204,456


31.1

Capital Expenditures

$

66,051



$

56,812


16.3



$

127,963



$

106,470


20.2

Adjusted Capital Expenditures*

$

81,285



$

66,756


21.8



$

157,524



$

124,067


27.0











Free Cash Flow*

$

70,175



$

53,322


31.6



$

140,036



$

97,986


42.9

Adjusted Free Cash Flow*

$

81,669



$

89,886


(9.1)



$

165,759



$

150,855


9.9











Net Debt (total debt, less cash)

$

2,627,358



$

2,855,413








Net Debt / LTM Adjusted EBITDA

3.0x



3.5x








Airline and Hospitality Solutions:



Revenue

$

216,632



$

186,573


16.1



$

421,532



$

363,290


16.0

Passengers Boarded

139,265



131,450


5.9



265,439



249,066


6.6

Operating Income

$

49,075



$

35,855


36.9



$

77,566



$

62,317


24.5

Adjusted EBITDA*

$

80,985



$

62,555


29.5



$

152,473



$

116,015


31.4

Travel Network:



Revenue

$

494,515



$

462,337


7.0



$

1,002,445



$

954,064


5.1

Air Bookings

88,442



81,053


9.1



179,865



170,098


5.7

Non-air Bookings

14,687



13,862


6.0



28,698



27,460


4.5

Total Bookings

103,129



94,915


8.7



208,563



197,558


5.6

Bookings Share

36.8

%


35.6

%



36.3

%


35.5

%


Operating Income

$

173,691



$

165,597


4.9



$

370,942



$

350,114


5.9

Adjusted EBITDA*

$

205,957



$

197,971


4.0



$

438,044



$

412,814


6.1

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

 

Sabre Airline and Hospitality Solutions

Second quarter 2015 Airline and Hospitality Solutions revenue increased 16.1% to $216.6 million from $186.6 million in the prior year period. Contributing to the increase in revenue was a 5.9% increase in airline passengers boarded through SabreSonic, strong traction from new solutions across the portfolio and continued strong growth in Sabre Hospitality Solutions.

Sabre Airline and Hospitality Solutions Adjusted EBITDA increased 29.5% to $81.0 million from $62.6 million in the prior year period. The increase in Adjusted EBITDA is the result of strong revenue growth, excellent execution and technology platform scale benefits, resulting in an Adjusted EBITDA margin of 37.4%, compared to 33.5% for the prior year quarter.

In Airline Solutions, LATAM Airlines Group, the largest airline in Latin America, signed an agreement to use the SabreSonic Suite for all airlines in the group.

Sabre Travel Network

Second quarter Travel Network revenue increased 7.0% to $494.5 million, compared to $462.3 million for the same period in 2014. Total bookings increased 8.7% with growth in all regions. Bookings growth in North America was 6.9% in the quarter. Sabre's focus on expansion in EMEA resulted in bookings growth of 19.7%. Second quarter 2015 Travel Network Adjusted EBITDA increased 4.0% to $206.0 million.

On July 1, Sabre announced the completion of its acquisition of Abacus International, the leading global distribution system (GDS) in the Asia-Pacific region. Prior to the acquisition, Sabre owned 35% of Abacus. The Abacus acquisition brings fresh investment and growth opportunities in the travel industry's largest and fastest growing region. Concurrent with the completion of the Abacus acquisition, Sabre signed long-term distribution agreements with the 11 Asian airlines that had sold their 65% share of Abacus to Sabre.

Refinancing Activity

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

On July 28, 2015, Sabre's Board of Directors declared a quarterly dividend of $0.09 cents per share on Sabre's common stock. The dividend will be payable on September 30, 2015, to stockholders of record on September 21, 2015.

Business Outlook and Financial Guidance

Sabre is increasing its full-year guidance for 2015 based on year-to-date results, continued bookings momentum in Travel Network, and the earlier than previously forecast July 1 close of the Abacus acquisition.

Sabre expects full-year revenue of between $2.95 billion and $2.98 billion. 2015 Adjusted EBITDA is expected to be between $930 million and $945 million.

In Airline and Hospitality Solutions, Sabre continues to expect 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 the American Airlines implementation.

In Travel Network, first half performance and continued share gains results in increased expectations for 2015 growth. This increase in expectations is augmented by the earlier than previously forecast close of the Abacus acquisition. Sabre now expects 2015 Travel Network revenue growth of 13% or more, driven by bookings growth of approximately 17%. Excluding Abacus, Sabre now expects Travel Network revenue growth of greater than 5% on bookings growth of approximately 6%.

Sabre increased 2015 Adjusted Net Income and Adjusted EPS guidance to $290 million to $305 million and $1.05 to $1.11, respectively. Free Cash Flow and Adjusted Free Cash Flow are expected to be $240 million and more than $290 million, respectively.

In summary, for the full-year 2015, Sabre now expects the following results from continuing operations:



Full-Year 2015 Guidance


($ millions, except for EPS)

Revenue

$2,950 - $2,980



Adjusted EBITDA

$930 - $945



Adjusted Net Income

$290 - $305



Adjusted EPS

$1.05 - $1.11

 

Conference Call

Sabre will conduct its second quarter 2015 investor conference call today at 9:00 a.m. ET. The live webcast and accompanying slide presentation can be accessed via the Sabre Investor Relations website at investors.sabre.com. A replay of the event will be available on the website for at least 90 days following the event.

About Sabre Corporation

Sabre Corporation 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 serves customers in more than 160 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 "expect," "guidance," "opportunity," "will," "anticipate," "may," "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, the financial and business effects of acquisitions, including integration of these acquisitions, 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 third-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 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.

 

SABRE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


















Three Months Ended June 30,


Six Months Ended June 30,


2015


2014


2015


2014

Revenue

$

707,091



$

646,380



$

1,417,439



$

1,312,795


Cost of revenue (1) (2)

461,126



422,647



930,124



874,617


Selling, general and administrative (2)

123,360



127,651



245,718



238,389


Operating income

122,605



96,082



241,597



199,789


Other income (expense):










Interest expense, net

(42,609)



(53,235)



(89,062)



(117,179)


Loss on extinguishment of debt

(33,235)



(30,558)



(33,235)



(33,538)


Joint venture equity income

5,307



4,059



13,826



6,500


Other, net

197



391



(4,248)



(1,963)


Total other expense, net

(70,340)



(79,343)



(112,719)



(146,180)


Income from continuing operations before income taxes

52,265



16,739



128,878



53,609


Provision for income taxes

19,676



10,284



46,959



25,195


Income from continuing operations

32,589



6,455



81,919



28,414


Income (loss) from discontinued operations, net of tax

696



(16,650)



159,607



(40,706)


Net income (loss)

33,285



(10,195)



241,526



(12,292)


Net income attributable to noncontrolling interests

1,078



702



1,825



1,448


Net income (loss) attributable to Sabre Corporation

32,207



(10,897)



239,701



(13,740)


Preferred stock dividends



2,235





11,381


Net income (loss) attributable to common shareholders

$

32,207



$

(13,132)



$

239,701



$

(25,121)










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










Income from continuing operations

$

0.12



$

0.01



$

0.30



$

0.07


Income (loss) from discontinued operations



(0.07)



0.59



(0.19)


Net income (loss) per common share

$

0.12



$

(0.05)



$

0.89



$

(0.12)


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










Income from continuing operations

$

0.11



$

0.01



$

0.29



$

0.07


Income (loss) from discontinued operations



(0.07)



0.57



(0.19)


Net income (loss) per common share

$

0.12



$

(0.05)



$

0.86



$

(0.11)


Weighted-average common shares outstanding:










Basic

271,948



243,801



270,574



211,431


Diluted

279,101



252,336



278,082



219,969










Dividends per common share

$

0.09



$



$

0.18



$










(1) Includes amortization of upfront incentive consideration

$

10,878



$

11,742



$

22,050



$

22,789


(2) Includes stock-based compensation as follows:








Cost of revenue

$

2,902



$

1,972



$

6,435



$

3,358


Selling, general and administrative

4,428



2,913



9,689



5,126


 

SABRE CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)










June 30, 2015


December 31, 2014

Assets




Current assets




Cash and cash equivalents

$

578,033



$

155,679


Accounts receivable, net

391,779



362,911


Prepaid expenses and other current assets

32,347



34,841


Current deferred income taxes

159,442



182,277


Other receivables, net

35,039



29,893


Assets held for sale



112,558


Total current assets

1,196,640



878,159


Property and equipment, net of accumulated depreciation of $895,351 and $792,161

560,440



551,276


Investments in joint ventures

130,288



145,320


Goodwill

2,153,214



2,153,499


Trademarks and brand names, net of accumulated amortization of $93,052 and $87,554

233,002



238,500


Other intangible assets, net of accumulated amortization of $1,013,513 and $975,701

203,675



241,486


Other assets, net

574,319



509,764


Total assets

$

5,051,578



$

4,718,004






Liabilities and stockholders' equity






Current liabilities






Accounts payable

$

133,011



$

117,855


Accrued compensation and related benefits

57,486



83,828


Accrued subscriber incentives

179,162



145,581


Deferred revenues

176,554



167,827


Litigation settlement liability and related deferred revenue

55,099



73,252


Other accrued liabilities

178,178



189,612


Current portion of debt

488,930



22,435


Liabilities held for sale



96,544


Total current liabilities

1,268,420



896,934


Deferred income taxes

165,555



61,577


Other noncurrent liabilities

602,237



613,710


Long-term debt

2,706,273



3,061,400








Stockholders' equity






Common Stock: $0.01 par value; 450,000,000 authorized shares; 273,493,600 and 268,237,547 shares issued, 272,777,958 and 267,800,161 shares outstanding at June 30, 2015 and December 31, 2014, respectively

2,735



2,682


Additional paid-in capital

1,972,404



1,931,796


Treasury Stock, at cost, 715,642 and 437,386 shares at June 30, 2015 and December 31, 2014, respectively

(11,462)



(5,297)


Retained deficit

(1,584,834)



(1,775,616)


Accumulated other comprehensive loss

(69,532)



(69,803)


Noncontrolling interest

(218)



621


Total stockholders' equity

309,093



84,383


Total liabilities and stockholders' equity

$

5,051,578



$

4,718,004


 

SABRE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)










Six Months Ended June 30,


2015


2014

Operating Activities




Net income (loss)

$

241,526



$

(12,292)


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






Depreciation and amortization

166,617



152,337


Amortization of upfront incentive consideration

22,050



22,789


Litigation-related (credits) charges

(32,557)



(11,615)


Stock-based compensation expense

16,124



8,484


Allowance for doubtful accounts

5,329



3,142


Deferred income taxes

36,757



11,583


Joint venture equity income

(13,826)



(6,500)


Dividends received from joint venture investments

28,700




Amortization of debt issuance costs

3,181



3,243


Debt modification costs



3,290


Loss on extinguishment of debt

33,235



33,538


Other

7,505



8,046


(Income) loss from discontinued operations

(159,607)



40,706


Changes in operating assets and liabilities:






Accounts and other receivables

(47,647)



(25,510)


Prepaid expenses and other current assets

(631)



5,557


Capitalized implementation costs

(29,561)



(17,597)


Upfront incentive consideration

(22,994)



(25,936)


Other assets

(43,618)



(11,810)


Accrued compensation and related benefits

(22,802)



(32,495)


Accounts payable and other accrued liabilities

62,039



14,552


Deferred revenue including upfront solution fees

18,179



40,944


Cash provided by operating activities

267,999



204,456


Investing Activities






Additions to property and equipment

(127,963)



(106,470)


Other investing activities

148



235


Cash used in investing activities

(127,815)



(106,235)


Financing Activities






Proceeds of borrowings from lenders

600,000



148,307


Payments on borrowings from lenders

(491,215)



(791,426)


Debt prepayment fees and issuance costs

(40,215)



(30,490)


Proceeds from issuance of common stock in initial public offering, net



672,644


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

18,239



(650)


Cash dividends paid to common shareholders

(48,919)




Other financing activities

(3,657)



(1,964)


Cash provided by (used in) financing activities

34,233



(3,579)


Cash Flows from Discontinued Operations






Cash used in operating activities

(26,036)



(151,423)


Cash provided by (used in) investing activities

278,834



(240)


Cash provided by (used in) discontinued operations

252,798



(151,663)


Effect of exchange rate changes on cash and cash equivalents

(4,861)



1,165


Increase (decrease) in cash and cash equivalents

422,354



(55,856)


Cash and cash equivalents at beginning of period

155,679



308,236


Cash and cash equivalents at end of period

$

578,033



$

252,380


 

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 EPS, 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 June 30,


Six Months Ended June 30,


2015


2014


2015


2014

Net income (loss) attributable to common shareholders

$

32,207



$

(13,132)



$

239,701



$

(25,121)


(Income) loss from discontinued operations, net of tax

(696)



16,650



(159,607)



40,706


Net income attributable to noncontrolling interests(1)

1,078



702



1,825



1,448


Preferred stock dividends



2,235





11,381


Income from continuing operations

32,589



6,455



81,919



28,414


Adjustments:












Acquisition-related amortization(2a)

23,211



21,953



44,886



54,842


Loss on extinguishment of debt

33,235



30,558



33,235



33,538


Other, net(4)

(197)



(391)



4,248



1,963


Restructuring and other costs(5)



2,128





3,684


Acquisition-related costs(6)

2,053





3,864




Litigation costs(7)

2,043



2,572



5,479



7,118


Stock-based compensation

7,330



4,885



16,124



8,484


Management fees(8)



21,576





23,508


Tax impact of net income adjustments

(24,210)



(32,481)



(38,767)



(51,924)


Adjusted Net Income from continuing operations

$

76,054



$

57,255



$

150,988



$

109,627


Adjusted Net Income from continuing operations
per share

$

0.27



$

0.23



$

0.54



$

0.50


Diluted weighted-average common shares outstanding

279,101



252,336



278,082



219,969










Adjusted Net Income from continuing operations

$

76,054



$

57,255



$

150,988



$

109,627


Adjustments:












Depreciation and amortization of property
and equipment(2b)

46,244



40,661



107,907



81,110


Amortization of capitalized implementation costs(2c)

7,902



8,890



15,426



17,987


Amortization of upfront incentive consideration(3)

10,878



11,742



22,050



22,789


Interest expense, net

42,609



53,235



89,062



117,179


Remaining provision for income taxes

43,886



42,765



85,726



77,119


Adjusted EBITDA

$

227,573



$

214,548



$

471,159



$

425,811


 

Reconciliation of Adjusted Capital Expenditures:


















Three Months Ended June 30,


Six Months Ended June 30,


2015


2014


2015


2014

Additions to property and equipment

$

66,051



$

56,812



$

127,963



$

106,470


Capitalized implementation costs

15,234



9,944



29,561



17,597


Adjusted Capital Expenditures

$

81,285



$

66,756



$

157,524



$

124,067


 

Reconciliation of Adjusted Free Cash Flow:


















Three Months Ended June 30,


Six Months Ended June 30,


2015


2014


2015


2014

Cash provided by operating activities

$

136,226



$

110,134



$

267,999



$

204,456


Cash used in investing activities

(66,051)



(56,577)



(127,815)



(106,235)


Cash used in financing activities

56,514



25,023



34,233



(3,579)


 



















Three Months Ended June 30,


Six Months Ended June 30,


2015


2014


2015


2014

Cash provided by operating activities

$

136,226



$

110,134



$

267,999



$

204,456


Additions to property and equipment

(66,051)



(56,812)



(127,963)



(106,470)


Free Cash Flow

70,175



53,322



140,036



97,986


Adjustments:










Restructuring and other costs(5)(9)



5,405



280



10,595


Acquisition-related costs(6)(9)

2,053





3,864




Litigation settlement(7)(10)

7,398



7,011



16,100



11,648


Other litigation costs(7)(9)

2,043



2,572



5,479



7,118


Management fees(8)(9)



21,576





23,508


Adjusted Free Cash Flow

$

81,669



$

89,886



$

165,759



$

150,855


 

Reconciliation of Operating Income (loss) to Adjusted Gross Margin and Adjusted EBITDA by segment:


















Three Months Ended June 30, 2015


Travel
Network


Airline and
Hospitality
Solutions


Corporate


Total

Operating income (loss)

$

173,691



$

49,075



$

(100,161)



$

122,605


Add back:








Selling, general and administrative

26,600



15,036



81,724



123,360


Cost of revenue adjustments:








Depreciation and amortization(2)

14,758



31,671



6,650



53,079


Amortization of upfront incentive consideration(3)

10,878







10,878


Stock-based compensation





2,902



2,902


Adjusted Gross Margin

225,927



95,782



(8,885)



312,824


Selling, general and administrative

(26,600)



(15,036)



(81,724)



(123,360)


Joint venture equity income

5,307







5,307


Joint venture intangible amortization(2a)

801







801


Selling, general and administrative adjustments:








Depreciation and amortization(2)

522



239



22,716



23,477


Acquisition-related costs(6)





2,053



2,053


Litigation costs(7)





2,043



2,043


Stock-based compensation





4,428



4,428


Adjusted EBITDA

$

205,957



$

80,985



$

(59,369)



$

227,573




















Three Months Ended June 30, 2014


Travel
Network


Airline and
Hospitality
Solutions


Corporate


Total

Operating income (loss)

$

165,597



$

35,855



$

(105,370)



$

96,082


Add back:








Selling, general and administrative

24,555



12,924



90,172



127,651


Cost of revenue adjustments:








Depreciation and amortization(2)

15,267



26,480



6,368



48,115


Amortization of upfront incentive consideration(3)

11,742







11,742


Restructuring and other costs(5)





1,401



1,401


Stock-based compensation





1,972



1,972


Adjusted Gross Margin

217,161



75,259



(5,457)



286,963


Selling, general and administrative

(24,555)



(12,924)



(90,172)



(127,651)


Joint venture equity income

4,059







4,059


Joint venture intangible amortization(2a)

801







801


Selling, general and administrative adjustments:








Depreciation and amortization(2)

505



220



21,863



22,588


Restructuring and other costs(5)





727



727


Litigation costs(7)





2,572



2,572


Stock-based compensation





2,913



2,913


Management fees(8)





21,576



21,576


Adjusted EBITDA

$

197,971



$

62,555



$

(45,978)



$

214,548


 



















Six Months Ended June 30, 2015


Travel
Network


Airline and
Hospitality
Solutions


Corporate


Total

Operating income (loss)

$

370,942



$

77,566



$

(206,911)



$

241,597


Add back:








Selling, general and administrative

48,484



33,015



164,219



245,718


Cost of revenue adjustments:








Depreciation and amortization(2)

28,570



74,400



14,776



117,746


Amortization of upfront incentive consideration(3)

22,050







22,050


Stock-based compensation





6,435



6,435


Adjusted Gross Margin

470,046



184,981



(21,481)



633,546


Selling, general and administrative

(48,484)



(33,015)



(164,219)



(245,718)


Joint venture equity income

13,826







13,826


Joint venture intangible amortization(2a)

1,602







1,602


Selling, general and administrative adjustments:








Depreciation and amortization(2)

1,054



507



47,310



48,871


Acquisition-related costs(6)





3,864



3,864


Litigation costs(7)





5,479



5,479


Stock-based compensation





9,689



9,689


Adjusted EBITDA

$

438,044



$

152,473



$

(119,358)



$

471,159


 



















Six Months Ended June 30, 2014


Travel
Network


Airline and
Hospitality
Solutions


Corporate


Total

Operating income (loss)

$

350,114



$

62,317



$

(212,642)



$

199,789


Add back:








Selling, general and administrative

50,227



25,319



162,843



238,389


Cost of revenue adjustments:








Depreciation and amortization(2)

30,679



53,163



23,082



106,924


Amortization of upfront incentive consideration(3)

22,789







22,789


Restructuring and other costs(5)





2,579



2,579


Stock-based compensation





3,358



3,358


Adjusted Gross Margin

453,809



140,799



(20,780)



573,828


Selling, general and administrative

(50,227)



(25,319)



(162,843)



(238,389)


Joint venture equity income

6,500







6,500


Joint venture intangible amortization(2a)

1,602







1,602


Selling, general and administrative adjustments:








Depreciation and amortization(2)

1,130



535



43,748



45,413


Restructuring and other costs(5)





1,105



1,105


Litigation costs(7)





7,118



7,118


Stock-based compensation





5,126



5,126


Management fees(8)





23,508



23,508


Adjusted EBITDA

$

412,814



$

116,015



$

(103,018)



$

425,811


 


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 and six months ended June 30, 2015 and 2014.



(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 the acquisition of Abacus.



(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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