Sabre Corporation
Sabre Corp (Form: 8-K, Received: 05/02/2017 07:42:08)






 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 8-K
_____________________

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 2, 2017
_____________________
SABRE CORPORATION
(Exact name of registrant as specified in its charter)
 _____________________
Delaware
 
001-36422
 
20-8647322
(State or other jurisdiction of
incorporation or organization)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
3150 Sabre Drive
Southlake, TX
 
76092
(Address of principal executive offices)
 
(Zip Code)
(682) 605-1000
(Registrant’s telephone number, including area code)
____________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
 
¨
If emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
¨
 










Item 2.02
Results of Operations and Financial Condition.
On May 2, 2017 , Sabre Corporation (“Sabre”) issued a press release and will hold a conference call regarding its financial results for the quarter ended March 31, 2017 . A copy of the press release is attached as Exhibit 99.1.
The information in this Item 2.02 of Form 8-K and the attached exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Sabre makes reference to non-GAAP financial measures in the press release. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in the attached press release.
 
Item 9.01.
Financial Statements and Exhibits.
(d) Exhibits
 
Exhibit
Number
  
Description
 99.1
  
Press Release dated May 2, 2017.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
Sabre Corporation
 
 
 
 
Dated:
May 2, 2017
By:
/s/ Richard A. Simonson
 
 
Name:
Richard A. Simonson
 
 
Title:
Chief Financial Officer










EXHIBIT INDEX
Exhibit
Number
  
Description
 99.1
  
Press Release dated May 2, 2017.



 
SABRELOGOA13.JPG

Sabre reports first quarter 2017 results

First quarter revenue increased 6.5%
Airline and Hospitality Solutions revenue grew 8.2%
Travel Network revenue rose 6.1% , with bookings growth of 5.8%
Net income attributable to common stockholders of $75.9 million decreased 27.8% and diluted net income attributable to common stockholders per share (EPS) of $0.27 decreased 27.0%
Adjusted EBITDA and Adjusted EPS of $297.6 million and $0.42 , an increase of 3.5% and 2.4% , respectively
Full-year 2017 guidance reiterated

SOUTHLAKE, Texas – May 2, 2017 – Sabre Corporation ("Sabre" or the "Company") (NASDAQ: SABR) today announced financial results for the quarter ended March 31, 2017 .

“We are off to a solid start on the year with good revenue growth across the business. The macro global travel environment was supportive of growth in travel and helped drive strong bookings, passengers boarded and hotel transaction growth across our businesses in the quarter,” said Sean Menke, Sabre president and CEO. “For the first quarter, Airline and Hospitality Solutions revenue grew 8.2% , supported by 7.1 % growth in passengers boarded and a strong increase in hotel transactions. Travel Network revenue increased 6.1% supported by robust bookings in all major regions of the world."




1



Q1 2017 Financial Summary

Sabre consolidated first quarter revenue increased 6.5 % to $915.4 million , compared to $859.5 million in the year ago period.

Net income attributable to common stockholders totaled $75.9 million , compared to $105.2 million in the first quarter of 2016 , a decrease of 27.8% . The decrease in net income attributable to common stockholders is primarily the result of an $11.7 million debt modification expense associated with the Company's recent debt refinancing, as well as both a $5.9 million gain associated with the sale of a business and a $16.8 million release of a discontinued operations tax reserve in the year-ago period.

First quarter consolidated Adjusted EBITDA was $297.6 million , a 3.5% increase from $287.5 million in the first quarter of 2016 . The increase in consolidated Adjusted EBITDA is the result of Adjusted EBITDA increases in Airline and Hospitality Solutions and Travel Network, partially offset by increased corporate expenses in the quarter.

For the quarter, Sabre reported diluted net income attributable to common stockholders per share of $0.27 compared to $0.37 in the first quarter of 2016 , a decrease of 27.0% . Adjusted net income from continuing operations per share (Adjusted EPS) increased 2.4% to $0.42 from $0.41 per share in the first quarter of 2016 .

Cash provided by operating activities totaled $123.0 million , compared to $140.2 million in the first quarter of 2016 . Cash used in investing activities totaled $88.3 million , compared to $234.1 million in the first quarter of 2016 . Cash used in financing activities totaled $107.8 million , compared to $110.9 million in the first quarter of 2016 . First quarter Free Cash Flow was $34.7 million , compared to $64.7 million in the year-ago period. Capital expenditures totaled $88.3 million , compared to $75.5 million in the year-ago period. Adjusted Capital Expenditures, which include capitalized implementation costs, totaled $105.4 million , compared to $95.4 million in the first quarter of 2016 .

During the first quarter of 2017, Sabre returned $50.5 million to shareholders including $38.9 million through its regular quarterly dividend and the repurchase of 532,500 shares under its share repurchase authorization for approximately $11.5 million in aggregate.


2



Financial Highlights
(in thousands, except for EPS; unaudited):
Three Months Ended March 31,
2017
 
2016
 
% Change
Total Company:
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
915,353

 
$
859,543

 
6.5
Operating Income
$
163,326

 
$
171,422

 
(4.7)
Net income attributable to common stockholders
$
75,939

 
$
105,167

 
(27.8)
Diluted net income attributable to common stockholders per share (EPS)
$
0.27

 
$
0.37

 
(27.0)
 
 
 
 
 
 
Adjusted Gross Profit*
$
400,777

 
$
388,196

 
3.2
Adjusted EBITDA*
$
297,561

 
$
287,480

 
3.5
Adjusted Operating Income*
$
210,940

 
$
212,990

 
(1.0)
Adjusted Net Income*
$
118,104

 
$
114,648

 
3.0
Adjusted EPS*
$
0.42

 
$
0.41

 
2.4
 
 
 
 
 
 
Cash provided by operating activities
$
123,035

 
$
140,165

 
(12.2)
Cash used in investing activities
$
(88,318
)
 
$
(234,140
)
 
NM
Cash used in financing activities
$
(107,788
)
 
$
(110,902
)
 
NM
Capital Expenditures
$
88,318

 
$
75,472

 
17.0
Adjusted Capital Expenditures*
$
105,414

 
$
95,429

 
10.5
 
 
 
 
 
 
Free Cash Flow*
$
34,717

 
$
64,693

 
(46.3)
 
 
 
 
 
 
Net Debt (total debt, less cash)
$
3,245,084

 
$
3,212,678

 
 
Net Debt / LTM Adjusted EBITDA*
3.1x

 
3.3x

 
 
 
 
 
 
 
 
Airline and Hospitality Solutions:
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
257,976

 
$
238,380

 
8.2
Operating Income
$
46,740

 
$
47,145

 
(0.9)
 
 
 
 
 
 
Adjusted EBITDA*
$
85,517

 
$
82,938

 
3.1
 
 
 
 
 
 
Passengers Boarded
196,343

 
183,392

 
7.1
 
 
 
 
 
 
Travel Network:
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
663,477

 
$
625,476

 
6.1
Transaction Revenue
$
619,583

 
$
581,682

 
6.5
Subscriber / Other Revenue
$
43,894

 
$
43,794

 
0.2
Operating Income
$
252,724

 
$
241,544

 
4.6
 
 
 
 
 
 
Adjusted EBITDA*
$
290,222

 
$
273,174

 
6.2
 
 
 
 
 
 
Total Bookings
142,702

 
134,887

 
5.8
Air Bookings
127,364

 
119,866

 
6.3
Non-air Bookings
15,338

 
15,021

 
2.1
 
 
 
 
 
 
Air Bookings Share
36.7
%
 
37.4
%
 
 
*Indicates non-GAAP financial measure; see descriptions and reconciliations below



3



Sabre Airline and Hospitality Solutions

First quarter Airline and Hospitality Solutions revenue increased 8.2 % to $258.0 million compared to $238.4 million for the same period in 2016 . Contributing to the rise in revenue was a 7.1 % increase in airline passengers boarded through the SabreSonic reservation solution, mid-single digit revenue growth in AirVision and AirCentre solutions and revenue growth of nearly 25% in Hospitality Solutions.

First quarter Airline and Hospitality Solutions operating income decreased 0.9 % to $46.7 million from $47.1 million in the prior-year period. Operating income margin was 18.1% , compared to 19.8% for the prior-year quarter. First quarter Airline and Hospitality Solutions Adjusted EBITDA increased 3.1 % to $85.5 million from $82.9 million in the prior-year period. Adjusted EBITDA margin was 33.1% , compared to 34.8% for the prior-year quarter.

Sabre Travel Network

First quarter Travel Network revenue increased 6.1 % to $663.5 million , compared to $625.5 million for the same period in 2016 . Travel Network global bookings increased 5.8 % in the quarter, driven by 9.6% growth in Asia-Pacific, 8.6% growth in EMEA, 8.4% growth in Latin America and 3.2% growth in North America.

First quarter Travel Network operating income increased 4.6% to $252.7 million from $241.5 million in the prior-year period . Operating income margin was 38.1% , compared to 38.6% for the prior-year quarter. First quarter Travel Network Adjusted EBITDA increased 6.2% to $290.2 million from $273.2 million in the prior-year period. Adjusted EBITDA margin was 43.7% and consistent to the prior-year quarter.



4



Business Outlook and Financial Guidance

With respect to the guidance below, full-year Adjusted Net Income guidance consists of full-year expected net income attributable to common stockholders less the estimated impact of loss from discontinued operations, net of tax, of approximately $5 million; net income attributable to noncontrolling interests of approximately $5 million; acquisition-related amortization of approximately $100 million; stock-based compensation expense of approximately $50 million; other items (primarily consisting of litigation and other costs) of approximately $40 million; and the tax benefit of these adjustments of approximately $60 million. Full-year Adjusted EPS guidance consists of Adjusted Net Income divided by the projected weighted-average diluted common share count for the full year of approximately 283 million.

Full-year Adjusted EBITDA guidance consists of expected Adjusted Net Income guidance less the impact of depreciation and amortization of property and equipment, amortization of capitalized implementation costs and amortization of upfront incentive consideration of approximately $370 million; interest expense, net of approximately $160 million; and provision for income taxes less tax impact of net income adjustments of approximately $180 million.

Full-year Free Cash Flow guidance consists of expected full-year cash provided by operating activities of $710 million to $730 million less additions to property and equipment of $360 million to $380 million.



5



Full-Year 2017 Guidance

Sabre reiterated full-year 2017 guidance for revenue, Adjusted EBITDA, Adjusted Net Income, Adjusted EPS and Free Cash Flow. In summary, Sabre's full-year 2017 guidance is as follows:
 
Range
Growth Rate
($ millions, except for EPS)
Revenue
$3,540 - $3,620
5% - 7%
 
 
 
Adjusted EBITDA
$1,080 - $1,120
3% - 7%
 
 
 
Adjusted Net Income
$370 - $410
0% - 11%
 
 
 
Adjusted EPS
$1.31 - $1.45
0% - 11%
 
 
 
Free Cash Flow
Approximately $350M
 



6



Conference Call

Sabre will conduct its first quarter 2017 investor conference call today at 9:00 a.m. ET. The live webcast and accompanying slide presentation can be accessed via the Investor Relations section of our website, investors.sabre.com . A replay of the event will be available on the website for at least 90 days following the event.

About Sabre

Sabre Corporation is the leading technology provider to the global travel industry. Sabre’s software, data, mobile and distribution solutions are used by hundreds of airlines and thousands of hotel properties to manage critical operations, including passenger and guest reservations, revenue management, flight, network and crew management. Sabre also operates a leading global travel marketplace, which processes more than US$120 billion of global travel spend annually by connecting travel buyers and suppliers. 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 the Investor Relations section of our website,  investors.sabre.com. 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.



7



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, investors.sabre.com .

Industry Data

This release contains industry data, forecasts and other information that we obtained from industry publications and surveys, public filings and internal company sources, and there can be no assurance as to the accuracy or completeness of the included information. Statements as to our ranking, market position, bookings share and market estimates are based on independent industry publications, government publications, third-party forecasts and management’s estimates and assumptions about our markets and our internal research. We have not independently verified this third-party information nor have we ascertained the underlying economic assumptions relied upon in those sources, and we cannot assure you of the accuracy or completeness of this information.



8



Note on Non-GAAP Financial Measures

This press release includes unaudited non-GAAP financial measures, including Adjusted Gross Profit, Adjusted Operating Income, Adjusted Net Income, Adjusted EBITDA, Adjusted EPS, Adjusted Capital Expenditures, Free Cash Flow, and the ratios based on these financial measures. In addition, we provide certain forward guidance with respect to Adjusted EBITDA, Adjusted Net Income, Adjusted EPS and Free Cash Flow. We are unable to provide this forward guidance on a GAAP basis without unreasonable effort; however, see "Business Outlook and Financial Guidance" for additional information including estimates of certain components of the non-GAAP adjustments contained in the guidance.

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.



9



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 "guidance," “expect,” "outlook," "estimate," "project," "believe," "will," "anticipate," “may,” “should,” “would,” “intend," “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, exposure to pricing pressure in the Travel Network business, the implementation and effects of new or renewed agreements, travel suppliers' usage of alternative distribution models, maintenance of the integrity of our systems and infrastructure and the effect of any security breaches, competition in the travel distribution market and solutions markets, failure to adapt to technological developments, dependence on maintaining and renewing contracts with customers and other counterparties and collecting amounts due to us under these agreements changes affecting travel supplier customers, use of third-party distributor partners, dependence on relationships with travel buyers, adverse global and regional economic and political conditions, including, but not limited to, economic conditions in countries or regions with traditionally high levels of exports to China or that have commodities-based economies and the effect of "Brexit" and uncertainty due to related negotiations, risks arising from global operations, reliance on third parties to provide information technology services, the financial and business effects of acquisitions, including integration of these acquisitions, our ability to recruit, train and retain employees, including our key executive officers and technical employees and the effects of litigation. 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 February 17, 2017 and in our other filings with the SEC. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, outlook, guidance, 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.


10



Contacts:

Media
Investors
Tim Enstice
Barry Sievert
+1-682-605-6162
sabre.investorrelations@sabre.com
tim.enstice@sabre.com
 



11



SABRE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
 
Three Months Ended March 31,
 
2017
 
2016
Revenue
$
915,353

 
$
859,543

Cost of revenue
607,586

 
554,265

Selling, general and administrative
144,441

 
133,856

Operating income
163,326

 
171,422

Other income (expense):
 

 
 

Interest expense, net
(39,561
)
 
(41,202
)
Joint venture equity income
898

 
763

Other, net
(15,234
)
 
3,360

Total other expense, net
(53,897
)
 
(37,079
)
Income from continuing operations before income taxes
109,429

 
134,343

Provision for income taxes
31,707

 
41,424

Income from continuing operations
77,722

 
92,919

(Loss) income from discontinued operations, net of tax
(477
)
 
13,350

Net income
77,245

 
106,269

Net income attributable to noncontrolling interests
1,306

 
1,102

Net income attributable to common stockholders
$
75,939

 
$
105,167

 
 
 
 
Basic net income per share attributable to common
stockholders:
 

 
 

Income from continuing operations
$
0.28

 
$
0.33

Income from discontinued operations

 
0.05

Net income per common share
$
0.28

 
$
0.38

Diluted net income per share attributable to common stockholders:
 

 
 

Income from continuing operations
$
0.27

 
$
0.33

Income from discontinued operations

 
0.05

Net income per common share
$
0.27

 
$
0.37

Weighted-average common shares outstanding:
 

 
 

Basic
277,353

 
275,568

Diluted
279,559

 
281,963

 
 
 
 
Dividends per common share
$
0.14

 
$
0.13



12


SABRE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
 
March 31, 2017
 
December 31, 2016
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
287,639

 
$
364,114

Accounts receivable, net
512,340

 
400,667

Prepaid expenses and other current assets
110,449

 
88,600

Total current assets
910,428

 
853,381

Property and equipment, net of accumulated depreciation of $1,045,176 and $986,891
777,954

 
753,279

Investments in joint ventures
26,412

 
25,582

Goodwill
2,546,606

 
2,548,447

Acquired customer relationships, net of accumulated amortization of $668,091 and $646,850
365,398

 
387,632

Other intangible assets, net of accumulated amortization of $552,318 and $538,381
373,868

 
387,805

Deferred income taxes
81,216

 
95,285

Other assets, net
708,117

 
673,159

Total assets
$
5,789,999

 
$
5,724,570

 
 
 
 
Liabilities and stockholders’ equity
 

 
 

Current liabilities
 

 
 

Accounts payable
$
170,028

 
$
168,576

Accrued compensation and related benefits
66,565

 
102,037

Accrued subscriber incentives
266,944

 
216,011

Deferred revenues
225,058

 
187,108

Other accrued liabilities
241,073

 
222,879

Current portion of debt
60,246

 
169,246

Tax Receivable Agreement
74,977

 
100,501

Total current liabilities
1,104,891

 
1,166,358

Deferred income taxes
97,217

 
88,957

Other noncurrent liabilities
478,409

 
567,359

Long-term debt
3,438,758

 
3,276,281

 
 
 
 
Stockholders’ equity
 

 
 

Common Stock: $0.01 par value; 450,000,000 authorized shares; 287,946,603 and 285,461,125 shares issued, 278,445,924 and 276,949,802 shares outstanding at March 31, 2017 and December 31, 2016, respectively
2,879

 
2,854

Additional paid-in capital
2,126,013

 
2,105,843

Treasury Stock, at cost, 9,500,679 and 8,511,323 shares at March 31, 2017 and December 31, 2016, respectively
(243,346
)
 
(221,746
)
Retained deficit
(1,104,117
)
 
(1,141,116
)
Accumulated other comprehensive loss
(114,638
)
 
(122,799
)
Noncontrolling interest
3,933

 
2,579

Total stockholders’ equity
670,724

 
625,615

Total liabilities and stockholders’ equity
$
5,789,999

 
$
5,724,570



13


SABRE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Three Months Ended March 31,
 
2017
 
2016
Operating Activities
 
 
 
Net income
$
77,245

 
$
106,269

Adjustments to reconcile net income to cash provided by operating activities:
 

 
 

Depreciation and amortization
105,670

 
96,283

Amortization of upfront incentive consideration
16,132

 
12,337

Litigation-related credits

 
(23,001
)
Stock-based compensation expense
8,034

 
10,289

Allowance for doubtful accounts
2,476

 
3,972

Deferred income taxes
20,296

 
30,756

Joint venture equity income
(898
)
 
(763
)
Amortization of debt issuance costs
2,475

 
1,946

Loss on modification of debt
11,730

 

Other
848

 
(213
)
Income from discontinued operations
477

 
(13,350
)
Changes in operating assets and liabilities:
 

 
 

Accounts and other receivables
(119,056
)
 
(74,362
)
Prepaid expenses and other current assets
(15,701
)
 
(9,039
)
Capitalized implementation costs
(17,096
)
 
(19,957
)
Upfront incentive consideration
(25,534
)
 
(23,028
)
Other assets
(15,967
)
 
(7,615
)
Accrued compensation and related benefits
(35,646
)
 
(31,810
)
Accounts payable and other accrued liabilities
69,188

 
55,835

Deferred revenue including upfront solution fees
38,362

 
25,616

Cash provided by operating activities
123,035

 
140,165

Investing Activities
 

 
 

Additions to property and equipment
(88,318
)
 
(75,472
)
Acquisition, net of cash acquired

 
(158,668
)
Cash used in investing activities
(88,318
)
 
(234,140
)
Financing Activities
 

 
 

Proceeds of borrowings from lenders
1,897,625

 
161,000

Payments on borrowings from lenders
(1,844,553
)
 
(232,296
)
Payments on Tax Receivable Agreement
(99,241
)
 

Debt issuance and modification costs
(10,055
)
 

Net proceeds (payments) on the settlement of equity-based awards
2,111

 
(2,003
)
Cash dividends paid to common stockholders
(38,939
)
 
(35,956
)
Repurchase of common stock
(11,540
)
 

Other financing activities
(3,196
)
 
(1,647
)
Cash used in financing activities
(107,788
)
 
(110,902
)
Cash Flows from Discontinued Operations
 

 
 

Cash used in operating activities
(1,846
)
 
(3,880
)
Cash provided by investing activities

 

Cash used in discontinued operations
(1,846
)
 
(3,880
)
Effect of exchange rate changes on cash and cash equivalents
(1,558
)
 
(673
)
(Decrease) increase in cash and cash equivalents
(76,475
)
 
(209,430
)
Cash and cash equivalents at beginning of period
364,114

 
321,132

Cash and cash equivalents at end of period
$
287,639

 
$
111,702




14


Tabular Reconciliations for Non-GAAP Measures
(In thousands, except per share amounts; unaudited)

Reconciliation of Net income to Adjusted Net Income from continuing operations and Adjusted EBITDA:

 
Three Months Ended March 31,
 
2017
 
2016
Net income attributable to common stockholders
$
75,939

 
$
105,167

Loss (income) from discontinued operations, net of tax
477

 
(13,350
)
Net income attributable to noncontrolling interests (1)
1,306

 
1,102

Income from continuing operations
77,722

 
92,919

Adjustments:
 

 
 

Acquisition-related amortization (2a)
35,181

 
34,130

Other, net (4)
15,234

 
(3,360
)
Restructuring and other costs (5)

 
124

Acquisition-related costs (6)

 
108

Litigation costs (reimbursements), net (7)
3,501

 
(3,846
)
Stock-based compensation
8,034

 
10,289

Tax impact of net income adjustments
(21,568
)
 
(15,716
)
Adjusted Net Income from continuing operations
$
118,104

 
$
114,648

Adjusted Net Income from continuing operations per share
$
0.42

 
$
0.41

Diluted weighted-average common shares outstanding
279,559

 
281,963

 
 
 
 
Adjusted Net Income from continuing operations
$
118,104

 
$
114,648

Adjustments:
 

 
 

Depreciation and amortization of property and equipment (2b)
61,300

 
53,665

Amortization of capitalized implementation costs (2c)
9,189

 
8,488

Amortization of upfront incentive consideration (3)
16,132

 
12,337

Interest expense, net
39,561

 
41,202

Remaining provision for income taxes
53,275

 
57,140

Adjusted EBITDA
$
297,561

 
$
287,480


Reconciliation of Operating Income to Adjusted Operating Income:

 
Three Months Ended March 31,
 
2017
 
2016
Operating income
$
163,326

 
$
171,422

Adjustments:
 

 
 

Joint venture equity income
898

 
763

Acquisition-related amortization (2a)
35,181

 
34,130

Restructuring and other costs (5)

 
124

Acquisition-related costs (6)

 
108

Litigation costs (reimbursements), net (7)
3,501

 
(3,846
)
Stock-based compensation
8,034

 
10,289

Adjusted Operating Income
$
210,940

 
$
212,990



15



Reconciliation of Adjusted Capital Expenditures:
 
Three Months Ended March 31,
 
2017
 
2016
Additions to property and equipment
$
88,318

 
$
75,472

Capitalized implementation costs
17,096

 
19,957

Adjusted Capital Expenditures
$
105,414

 
$
95,429


Reconciliation of Free Cash Flow:
 
Three Months Ended March 31,
 
2017
 
2016
Cash provided by operating activities
$
123,035

 
$
140,165

Cash used in investing activities
(88,318
)
 
(234,140
)
Cash used in financing activities
(107,788
)
 
(110,902
)


 
Three Months Ended March 31,
 
2017
 
2016
Cash provided by operating activities
$
123,035

 
$
140,165

Additions to property and equipment
(88,318
)
 
(75,472
)
Free Cash Flow
$
34,717

 
$
64,693


16


Reconciliation of Net Income to LTM Adjusted EBITDA (for Net Debt Ratio):

 
Three Months Ended
 
 
 
Jun 30, 2016
 
Sep 30, 2016
 
Dec 31, 2016
 
Mar 31, 2017
 
LTM
Net income attributable to common stockholders
$
72,019

 
$
40,815

 
$
24,561

 
$
75,939

 
$
213,334

(Income) loss from discontinued operations, net of tax
2,098

 
394

 
5,309

 
477

 
8,278

Net income attributable to noncontrolling interests (1)
1,078

 
1,047

 
1,150

 
1,306

 
4,581

Income from continuing operations
75,195

 
42,256

 
31,020

 
77,722

 
226,193

Adjustments:
 
 
 
 
 
 
 
 
 
Acquisition-related amortization (2a)
34,018

 
39,430

 
35,847

 
35,181

 
144,476

Loss on extinguishment of debt

 
3,683

 

 

 
3,683

Other, net (4)
(876
)
 
(281
)
 
(23,100
)
 
15,234

 
(9,023
)
Restructuring and other costs (5)
1,116

 
583

 
16,463

 

 
18,162

Acquisition-related costs (6)
516

 
90

 
65

 

 
671

Litigation costs, net (7)
1,901

 
7,034

 
41,906

 
3,501

 
54,342

Stock-based compensation
12,810

 
12,913

 
12,512

 
8,034

 
46,269

Depreciation and amortization of property and equipment (2b)
56,214

 
58,271

 
65,153

 
61,300

 
240,938

Amortization of capitalized implementation costs (2c)
8,211

 
11,529

 
9,030

 
9,189

 
37,959

Amortization of upfront incentive consideration (3)
13,896

 
17,139

 
12,352

 
16,132

 
59,519

Interest expense, net
37,210

 
38,002

 
41,837

 
39,561

 
156,610

Provision for income taxes
31,273

 
7,208

 
6,740

 
31,707

 
76,928

Adjusted EBITDA
$
271,484

 
$
237,857

 
$
249,825

 
$
297,561

 
$
1,056,727

 
 
 
 
 
 
 
 
 
 
Net Debt (total debt, less cash)
 
 
 
 
 
 
 
 
$
3,245,084

Net Debt / LTM Adjusted EBITDA
 
 
 
 
 
 
 
 
3.1x



 
Three Months Ended
 
 
 
Jun 30, 2015
 
Sept. 30, 2015
 
Dec 31, 2015
 
Mar 31, 2016
 
LTM
Net income attributable to common stockholders
$
32,207

 
$
176,340

 
$
129,441

 
$
105,167

 
$
443,155

(Income) loss from discontinued operations, net of tax
(696
)
 
(53,892
)
 
(100,909
)
 
(13,350
)
 
(168,847
)
Net income attributable to noncontrolling interests (1)
1,078

 
676

 
980

 
1,102

 
3,836

Income from continuing operations
32,589

 
123,124

 
29,512

 
92,919

 
278,144

Adjustments:
 
 
 
 
 
 
 
 
 
Acquisition-related amortization (2a)
23,211

 
31,384

 
31,851

 
34,130

 
120,576

Loss on extinguishment of debt
33,235

 

 
5,548

 

 
38,783

Other, net  (4)
(197
)
 
(92,568
)
 
(3,057
)
 
(3,360
)
 
(99,182
)
Restructuring and other costs  (5)

 
8,888

 
368

 
124

 
9,380

Acquisition-related costs (6)
2,053

 
9,350

 
1,223

 
108

 
12,734

Litigation costs, net (7)
2,043

 
9,318

 
1,912

 
(3,846
)
 
9,427

Stock-based compensation
7,330

 
7,204

 
6,643

 
10,289

 
31,466

Depreciation and amortization of property and equipment (2b)
46,244

 
49,247

 
56,366

 
53,665

 
205,522

Amortization of capitalized implementation costs (2c)
7,902

 
7,606

 
8,409

 
8,488

 
32,405

Amortization of upfront incentive consideration (3)
10,878

 
9,525

 
11,946

 
12,337

 
44,686

Interest expense, net
42,609

 
40,581

 
43,655

 
41,202

 
168,047

Provision for income taxes
19,676

 
38,007

 
34,386

 
41,424

 
133,493

Adjusted EBITDA
$
227,573

 
$
241,666

 
$
228,762

 
$
287,480

 
$
985,481

 
 
 
 
 
 
 
 
 
 
Net Debt (total debt, less cash)
 
 
 
 
 
 
 
 
$
3,212,678

Net Debt / LTM Adjusted EBITDA
 
 
 
 
 
 
 
 
3.3x


17


Reconciliation of Operating Income (loss) to Adjusted Gross Profit and Adjusted EBITDA by segment:
 
Three Months Ended March 31, 2017
 
Travel
Network
 
Airline and
Hospitality
Solutions
 
Corporate
 
Total
Operating income (loss)
$
252,724

 
$
46,740

 
$
(136,138
)
 
$
163,326

Add back:
 
 
 
 
 
 
 
Selling, general and administrative
31,083

 
20,584

 
92,774

 
144,441

Cost of revenue adjustments:
 
 
 
 
 
 
 
Depreciation and amortization (2)
19,079

 
38,024

 
16,594

 
73,697

Amortization of upfront incentive consideration (3)
16,132

 

 

 
16,132

Stock-based compensation

 

 
3,181

 
3,181

Adjusted Gross Profit
319,018

 
105,348

 
(23,589
)
 
400,777

Selling, general and administrative
(31,083
)
 
(20,584
)
 
(92,774
)
 
(144,441
)
Joint venture equity income
898

 

 

 
898

Selling, general and administrative adjustments:
 
 
 
 
 
 
 
Depreciation and amortization (2)
1,389

 
753

 
29,831

 
31,973

Litigation costs (7)

 

 
3,501

 
3,501

Stock-based compensation

 

 
4,853

 
4,853

Adjusted EBITDA
$
290,222

 
$
85,517

 
$
(78,178
)
 
$
297,561

 
 
 
 
 
 
 
 
Operating income margin
38.1
%
 
18.1
%
 
NM

 
17.8
%
Adjusted EBITDA margin
43.7
%
 
33.1
%
 
NM

 
32.5
%
  
 
Three Months Ended March 31, 2016
 
Travel
Network
 
Airline and
Hospitality
Solutions
 
Corporate
 
Total
Operating income (loss)
$
241,544

 
$
47,145

 
$
(117,267
)
 
$
171,422

Add back:
 
 
 
 
 
 
 
Selling, general and administrative
33,373

 
18,241

 
82,242

 
133,856

Cost of revenue adjustments:
 
 
 
 
 
 
 
Depreciation and amortization (2)
17,660

 
35,490

 
13,357

 
66,507

Amortization of upfront incentive consideration (3)
12,337

 

 

 
12,337

Stock-based compensation

 

 
4,074

 
4,074

Adjusted Gross Profit
304,914

 
100,876

 
(17,594
)
 
388,196

Selling, general and administrative
(33,373
)
 
(18,241
)
 
(82,242
)
 
(133,856
)
Joint venture equity income
763

 

 

 
763

Selling, general and administrative adjustments:
 
 
 
 
 
 
 
Depreciation and amortization (2)
870

 
303

 
28,603

 
29,776

Restructuring and other costs (5)

 

 
124

 
124

Acquisition-related costs (6)

 

 
108

 
108

Litigation reimbursements, net (7)

 

 
(3,846
)
 
(3,846
)
Stock-based compensation

 

 
6,215

 
6,215

Adjusted EBITDA
$
273,174

 
$
82,938

 
$
(68,632
)
 
$
287,480

 
 
 
 
 
 
 
 
Operating income margin
38.6
%
 
19.8
%
 
NM

 
19.9
%
Adjusted EBITDA margin
43.7
%
 
34.8
%
 
NM

 
33.4
%





18


Non-GAAP Financial Measures

We have included both financial measures compiled in accordance with GAAP and certain non-GAAP financial measures, including Adjusted Gross Profit, Adjusted Operating Income, Adjusted Net Income, Adjusted EBITDA, Adjusted Net Income from continuing operations per share (Adjusted EPS), Adjusted Capital Expenditures, Free Cash Flow and ratios based on these financial measures.

We define Adjusted Gross Profit as operating income (loss) adjusted for selling, general and administrative expenses, amortization of upfront incentive consideration, and the cost of revenue portion of depreciation and amortization and stock-based compensation.

We define Adjusted Operating Income as operating income adjusted for joint venture equity income, acquisition-related amortization, restructuring and other costs, acquisition-related costs, litigation (reimbursements) costs, net, and stock-based compensation.

We define Adjusted Net Income as net income attributable to common stockholders adjusted for income (loss) from discontinued operations, net of tax, net income attributable to noncontrolling interests, acquisition-related amortization, loss on extinguishment of debt, other, net, restructuring and other costs, acquisition-related costs, litigation costs (reimbursements), net, stock-based compensation 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.

We define Free Cash Flow as cash provided by operating activities less cash used in additions to property and equipment.

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 include 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 Profit, Adjusted Operating Income, 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

19


amortization expense. In addition, amounts derived from Adjusted EBITDA are a primary component of certain covenants under our senior secured credit facilities.

Adjusted Gross Profit, Adjusted Operating Income, Adjusted Net Income, Adjusted EBITDA, Adjusted EPS, Adjusted Capital Expenditures, 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:

these non-GAAP financial measures exclude certain recurring, non-cash charges such as stock-based compensation expense and amortization of acquired intangible assets;

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 Profit and Adjusted EBITDA do not reflect cash requirements for such replacements;

Adjusted Operating Income, 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 removes the impact of accrual-basis accounting on asset accounts and non-debt liability accounts, and does not reflect the cash requirements necessary to service the principal payments on our indebtedness; and

Other companies, including companies in our industry, may calculate Adjusted Gross Profit, Adjusted Operating Income, Adjusted Net Income, Adjusted EBITDA, Adjusted Capital Expenditures, Adjusted EPS or Free Cash Flow differently, which reduces their usefulness as comparative measures.


20


Non-GAAP Footnotes

(1)
Net Income attributable to noncontrolling interests represents an adjustment to include earnings allocated to noncontrolling interests held in (i) Sabre Travel Network Middle East of 40%, (ii) Sabre Seyahat Dagitim Sistemleri A.S. of 40%, and (iii) Abacus International Lanka Pte Ltd of 40%.
(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)
In the first quarter of 2017, we recognized a $12 million loss related to the debt modification costs associated with our debt refinancing. In the first quarter of 2016, we recognized a gain of $6 million associated with the receipt of an earn-out payment from the sale of a business in 2013. In the third quarter of 2015, we recognized a gain of $86 million associated with the remeasurement of our previously-held 35% investment in Abacus International Pte Ltd and a gain of $12 million related to the settlement of pre-existing agreements between us and AIPL. In addition, other, net includes 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 represent charges associated with business restructuring and associated changes implemented which resulted in severance benefits related to employee

21


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 the Trust Group and Airpas Aviation.
(7)
Litigation costs (reimbursements), net represent charges and legal fee reimbursements associated with antitrust litigation.

22