Sabre Corporation
Sabre Corp (Form: 8-K, Received: 08/01/2017 07:41:48)






 
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): August 1, 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 August 1, 2017 , Sabre Corporation (“Sabre”) issued a press release and will hold a conference call regarding its financial results for the quarter ended June 30, 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 August 1, 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:
August 1, 2017
By:
/s/ Richard A. Simonson
 
 
Name:
Richard A. Simonson
 
 
Title:
Chief Financial Officer










EXHIBIT INDEX
Exhibit
Number
  
Description
 99.1
  
Press Release dated August 1, 2017.


 
SABRELOGOA18.JPG

Sabre reports second quarter 2017 results

Second quarter revenue increased 6.6%
Airline and Hospitality Solutions revenue grew 7.8%
Travel Network revenue rose 6.3% , with bookings growth of 2.4%
Net loss attributable to common stockholders declined 109.0% to $6.5 million and diluted net loss attributable to common stockholders per share (EPS) declined 108.0% to $0.02 primarily due to a non-cash impairment
Adjusted EBITDA decreased 3.7% to $261.4 million and Adjusted EPS declined 5.4% to $0.35
Company announced cost reduction and business alignment program expected to result in $110 million of per annum run-rate savings

SOUTHLAKE, Texas – August 1, 2017 – Sabre Corporation ("Sabre" or the "Company") (NASDAQ: SABR) today announced financial results for the quarter ended June 30, 2017 .

"Second quarter revenue growth was strong at 7% ,” said Sean Menke, Sabre president and CEO. “We continued to make good progress across a number of key initiatives, including strengthening the senior leadership team, insourcing our shopping complex and Global Network Operations Center, accelerating the development of our next-generation hospitality property management system and undertaking a thorough review of our Airline Solutions portfolio. Today we announced a program to reduce costs and drive greater alignment across the organization."



1



Q2 2017 Financial Summary

Sabre consolidated second quarter revenue increased 6.6 % to $900.7 million , compared to $845.2 million in the year ago period.

Net loss attributable to common stockholders totaled $6.5 million , compared to net income of $72.0 million in the second quarter of 2016 . The decrease in net income attributable to common stockholders is primarily the result of a $92.0 million impairment and related charges associated with the Airline Solutions Air Berlin contract and a $25.5 million charge related to the cost reduction and business alignment program.

Second quarter consolidated Adjusted EBITDA was $261.4 million , a 3.7% decrease from $271.5 million in the second quarter of 2016 . The decrease in consolidated Adjusted EBITDA is the result of an Adjusted EBITDA increase at Airline and Hospitality Solutions, a decrease at Travel Network and higher corporate product and technology costs.

For the quarter, Sabre reported diluted net loss attributable to common stockholders per share of $0.02 compared to $0.25 net income attributable to common shareholders per share in the second quarter of 2016 . Adjusted net income from continuing operations per share (Adjusted EPS) decreased 5.4% to $0.35 from $0.37 per share in the second quarter of 2016 .

Cash provided by operating activities totaled $154.8 million , compared to $123.6 million in the second quarter of 2016 . Cash used in investing activities totaled $79.1 million , compared to $95.4 million in the second quarter of 2016 . Cash used in financing activities totaled $54.5 million , compared to $63.4 million in the second quarter of 2016 . Second quarter Free Cash Flow was $75.7 million , compared to $34.5 million in the year-ago period. Capital expenditures totaled $79.1 million , compared to $89.1 million in the year-ago period. Adjusted Capital Expenditures, which include capitalized implementation costs, totaled $93.4 million , compared to $112.4 million in the second quarter of 2016 .

During the second quarter of 2017, Sabre returned $49.7 million to shareholders including $39.0 million through its regular quarterly dividend and the repurchase of 483,058 shares under its share repurchase authorization for approximately $10.7 million in aggregate.


2



Financial Highlights
(in thousands, except for EPS; unaudited):
Three Months Ended June 30,
 
Six Months Ended June 30,
2017
 
2016
 
% Change
 
2017
 
2016
 
% Change
Total Company:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
900,663

 
$
845,242

 
6.6
 
$1,816,016
 
$1,704,785
 
6.5
Operating Income
$
18,718

 
$
142,039

 
(86.8)
 
$182,044
 
$313,461
 
(41.9)
Net income attributable to common stockholders
$
(6,487
)
 
$
72,019

 
(109.0)
 
$69,452
 
$177,186
 
(60.8)
Diluted net income attributable to common stockholders per share (EPS)
$
(0.02
)
 
$
0.25

 
(108.0)
 
$0.25
 
$0.63
 
(60.3)
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Gross Profit*
$
368,578

 
$
373,265

 
(1.3)
 
$769,355
 
$761,461
 
1.0
Adjusted EBITDA*
$
261,417

 
$
271,484

 
(3.7)
 
$558,978
 
$558,964
 
Adjusted Operating Income*
$
172,498

 
$
193,163

 
(10.7)
 
$383,438
 
$406,153
 
(5.6)
Adjusted Net Income*
$
97,132

 
$
104,047

 
(6.6)
 
$215,236
 
$218,695
 
(1.6)
Adjusted EPS*
$
0.35

 
$
0.37

 
(5.4)
 
$0.77
 
$0.77
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash provided by operating activities
$
154,841

 
$
123,619

 
25.3
 
$277,876
 
$263,784
 
5.3
Cash used in investing activities
$
(79,092
)
 
$
(95,430
)
 
(17.1)
 
$(167,410)
 
$(329,570)
 
(49.2)
Cash used in financing activities
$
(54,524
)
 
$
(63,432
)
 
(14.0)
 
$(162,312)
 
$(174,334)
 
(6.9)
Capital Expenditures
$
79,092

 
$
89,121

 
(11.3)
 
$167,410
 
$164,593
 
1.7
Adjusted Capital Expenditures*
$
93,440

 
$
112,432

 
(16.9)
 
$198,854
 
$207,861
 
(4.3)
 
 
 
 
 
 
 
 
 
 
 
 
Free Cash Flow*
$
75,749

 
$
34,498

 
119.6
 
$110,466
 
$99,191
 
11.4
 
 
 
 
 
 
 
 
 
 
 
 
Net Debt (total debt, less cash)
$
3,211,648

 
$
3,219,566

 
 
 
 
 
 
 
 
Net Debt / LTM Adjusted EBITDA*
3.1x

 
3.1x

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Airline and Hospitality Solutions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
271,780

 
$
252,169

 
7.8
 
$529,756
 
$490,549
 
8.0
Operating Income
$
61,868

 
$
55,390

 
11.7
 
$108,608
 
$102,535
 
5.9
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA*
$
101,725

 
$
91,945

 
10.6
 
$187,242
 
$174,883
 
7.1
 
 
 
 
 
 
 
 
 
 
 
 
Passengers Boarded
215,867

 
199,788

 
8.0
 
412,210
 
383,180
 
7.6
 
 
 
 
 
 
 
 
 
 
 
 
Travel Network:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
635,615

 
$
597,910

 
6.3
 
$1,299,092
 
$1,223,386
 
6.2
Transaction Revenue
$
591,211

 
$
552,101

 
7.1
 
$1,210,794
 
$1,133,783
 
6.8
Subscriber / Other Revenue
$
44,404

 
$
45,809

 
(3.1)
 
$88,298
 
$89,603
 
(1.5)
Operating Income
$
208,576

 
$
217,252

 
(4.0)
 
$461,300
 
$458,796
 
0.5
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA*
$
245,891

 
$
251,587

 
(2.3)
 
$536,113
 
$524,761
 
2.2
 
 
 
 
 
 
 
 
 
 
 
 
Total Bookings
130,911

 
127,794

 
2.4
 
273,613
 
262,681
 
4.2
Air Bookings
114,855

 
111,902

 
2.6
 
242,219
 
231,768
 
4.5
Non-air Bookings
16,056

 
15,892

 
1.0
 
31,394
 
30,913
 
1.6
 
 
 
 
 
 
 
 
 
 
 
 
Air Bookings Share
36.0
%
 
36.7
%
 
 
 
36.3%
 
37.1%
 
 
*Indicates non-GAAP financial measure; see descriptions and reconciliations below



3



Sabre Airline and Hospitality Solutions

Second quarter Airline and Hospitality Solutions revenue increased 7.8 % to $271.8 million compared to $252.2 million for the same period in 2016 . Contributing to the rise in revenue was an 8.0 % increase in airline passengers boarded through the SabreSonic reservation solution, high-single digit revenue growth in AirVision and AirCentre solutions and revenue growth of approximately 10% in Hospitality Solutions, offset by a decline in consulting revenue in the quarter.

Second quarter Airline and Hospitality Solutions operating income increased 11.7 % to $61.9 million from $55.4 million in the prior-year period. Operating income margin was 22.8% , compared to 22.0% for the prior-year quarter. Second quarter Airline and Hospitality Solutions Adjusted EBITDA increased 10.6 % to $101.7 million from $91.9 million in the prior-year period. Adjusted EBITDA margin was 37.4% , compared to 36.5% in the prior-year quarter.

Sabre Travel Network

Second quarter Travel Network revenue increased 6.3 % to $635.6 million , compared to $597.9 million for the same period in 2016 . Travel Network global bookings increased 2.4 % in the quarter, driven by 11.1% growth in EMEA and 2.2% growth in North America, while bookings declined 1.1% in Asia-Pacific and 3.9% in Latin America.

Second quarter Travel Network operating income decreased 4.0% to $208.6 million from $217.3 million in the prior-year period . Operating income margin was 32.8% , compared to 36.3% for the prior-year quarter. Second quarter Travel Network Adjusted EBITDA decreased 2.3% to $245.9 million from $251.6 million in the prior-year period. Adjusted EBITDA margin was 38.7% , compared to 42.1% in the prior-year quarter.


4



Cost Reduction and Business Alignment Program

Today, Sabre announced an initiative to streamline and focus the business through reorganizing certain functions, reducing layers of management, and lowering costs to enable a more nimble, faster moving and focused organization. The initiative is expected to reduce global headcount by approximately 9%. At full run-rate, the program is anticipated to result in approximately $110 million of annual savings. Sabre expects the program to be neutral to 2017 Free Cash Flow. The Company recognized a $25 million charge in the second quarter of 2017 related to the program and expects to realize approximately $25 million of cost savings in 2017. Cost savings under the initiative are expected to achieve full run-rate in 2018.


5



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 non-controlling interests of approximately $5 million; acquisition-related amortization of approximately $100 million; impairment and related charges of $92 million; stock-based compensation expense of approximately $50 million; restructuring and other costs of $25 million; other items (primarily consisting of litigation and other costs) of approximately $40 million; and the tax benefit of these adjustments of approximately $105 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 281.5 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 $365 million; interest expense, net of approximately $155 million; and provision for income taxes less tax impact of net income adjustments of approximately $170 million.

Full-year Free Cash Flow guidance consists of expected full-year cash provided by operating activities of $685 million to $705 million less additions to property and equipment of $335 million to $355 million.



6



Full-Year 2017 Guidance

Sabre reiterated full-year 2017 guidance ranges for all income statement metrics, with the exception of Adjusted EBITDA, which was lowered by $25 million at the top and bottom end of the range. While maintaining its full-year Adjusted Net Income and EPS guidance, Sabre expects that results will likely be in the lower half of their respective ranges. Strategic prioritization has led Sabre to reduce its expectations for 2017 capital expenditures and capitalized implementation costs by $50 million in aggregate. The Company continues to expect full-year Free Cash Flow to total approximately $350 million, which reflects the revised guidance for Adjusted EBITDA, the decrease in expected Adjusted Capital Expenditures and the cash impact of the charge taken in the second quarter of 2017 related to the cost reduction and business alignment program.

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
$1,055 - $1,095
1% - 5%
 
 
 
Adjusted Net Income
$370 - $410
0% - 11%
 
 
 
Adjusted EPS
$1.31 - $1.45
0% - 11%
 
 
 
Capitalized Expenditures
$335 - $355
 
 
 
 
Capitalized Implementation Costs
$60 - $70
 
 
 
 
Free Cash Flow
Approximately $350M
 



7



Conference Call

Sabre will conduct its second 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.



8



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.



9



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.



10



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,” "will," "anticipate," "outlook," "estimate," "project," "believe," “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, the implementation and results of cost reduction and business alignment program, 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 establishing, 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 Quarterly Report on Form 10-Q filed with the SEC on May 2, 2017 and 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.


11



Contacts:

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



12



SABRE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Revenue
$
900,663

 
$
845,242

 
$
1,816,016

 
$
1,704,785

Cost of revenue
643,067

 
556,317

 
1,250,653

 
1,110,582

Selling, general and administrative
146,856

 
146,886

 
291,297

 
280,742

Impairment and related charges
92,022

 

 
92,022

 

Operating income
18,718

 
142,039

 
182,044

 
313,461

Other income (expense):
 

 
 

 
 
 
 
Interest expense, net
(38,097
)
 
(37,210
)
 
(77,658
)
 
(78,412
)
Joint venture equity income
513

 
763

 
1,411

 
1,526

Other, net
(752
)
 
876

 
(15,986
)
 
4,236

Total other expense, net
(38,336
)
 
(35,571
)
 
(92,233
)
 
(72,650
)
(Loss) income from continuing operations before income taxes
(19,618
)
 
106,468

 
89,811

 
240,811

(Benefit) Provision for income taxes
(15,466
)
 
31,273

 
16,241

 
72,697

(Loss) income from continuing operations
(4,152
)
 
75,195

 
73,570

 
168,114

(Loss) income from discontinued operations, net of tax
(1,222
)
 
(2,098
)
 
(1,699
)
 
11,252

Net (loss) income
(5,374
)
 
73,097

 
71,871

 
179,366

Net income attributable to noncontrolling interests
1,113

 
1,078

 
2,419

 
2,180

Net (loss) income attributable to common stockholders
$
(6,487
)
 
$
72,019

 
$
69,452

 
$
177,186

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

 
 

 
 
 
 
(Loss) income from continuing operations
$
(0.02
)
 
$
0.27

 
$
0.26

 
$
0.60

(Loss) income from discontinued operations

 
(0.01
)
 
(0.01
)
 
0.04

Net (loss) income per common share
$
(0.02
)
 
$
0.26

 
$
0.25

 
$
0.64

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

 
 

 
 
 
 
(Loss) income from continuing operations
$
(0.02
)
 
$
0.26

 
$
0.25

 
$
0.59

(Loss) income from discontinued operations

 
(0.01
)
 
(0.01
)
 
0.04

Net (loss) income per common share
$
(0.02
)
 
$
0.25

 
$
0.25

 
$
0.63

Weighted-average common shares outstanding:
 

 
 

 
 
 
 
Basic
278,441

 
277,392

 
277,900

 
276,480

Diluted
278,441

 
283,001

 
279,919

 
282,648

 
 
 
 
 
 
 
 
Dividends per common share
$
0.14

 
$
0.13

 
$
0.28

 
$
0.26



13


SABRE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
 
June 30, 2017
 
December 31, 2016
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
306,696

 
$
364,114

Accounts receivable, net
512,167

 
400,667

Prepaid expenses and other current assets
108,215

 
88,600

Total current assets
927,078

 
853,381

Property and equipment, net of accumulated depreciation of $1,109,669 and $986,890
791,735

 
753,279

Investments in joint ventures
26,146

 
25,582

Goodwill
2,551,448

 
2,548,447

Acquired customer relationships, net of accumulated amortization of $674,440 and $646,850
362,152

 
387,632

Other intangible assets, net of accumulated amortization of $566,263 and $538,380
359,922

 
387,805

Deferred income taxes
111,902

 
95,285

Other assets, net
559,495

 
673,159

Total assets
$
5,689,878

 
$
5,724,570

 
 
 
 
Liabilities and stockholders’ equity
 

 
 

Current liabilities
 

 
 

Accounts payable
$
152,485

 
$
168,576

Accrued compensation and related benefits
109,420

 
102,037

Accrued subscriber incentives
266,438

 
216,011

Deferred revenues
176,335

 
187,108

Other accrued liabilities
237,583

 
222,879

Current portion of debt
60,050

 
169,246

Tax Receivable Agreement
74,977

 
100,501

Total current liabilities
1,077,288

 
1,166,358

Deferred income taxes
96,842

 
88,957

Other noncurrent liabilities
439,966

 
567,359

Long-term debt
3,425,949

 
3,276,281

 
 
 
 
Stockholders’ equity
 

 
 

Common Stock: $0.01 par value; 450,000,000 authorized shares; 288,618,730 and 285,461,125 shares issued, 278,628,948 and 276,949,802 shares outstanding at June 30, 2017 and December 31, 2016, respectively
2,886

 
2,854

Additional paid-in capital
2,148,148

 
2,105,843

Treasury Stock, at cost, 9,989,782 and 8,511,323 shares at June 30, 2017 and December 31, 2016, respectively
(254,156
)
 
(221,746
)
Retained deficit
(1,149,598
)
 
(1,141,116
)
Accumulated other comprehensive loss
(102,465
)
 
(122,799
)
Noncontrolling interest
5,018

 
2,579

Total stockholders’ equity
649,833

 
625,615

Total liabilities and stockholders’ equity
$
5,689,878

 
$
5,724,570



14


SABRE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Six Months Ended June 30,
 
2017
 
2016
Operating Activities
 
 
 
Net income
$
71,871

 
$
179,366

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

 
 

Depreciation and amortization
198,687

 
194,726

Amortization of upfront incentive consideration
32,293

 
26,233

Litigation-related credits

 
(25,527
)
Stock-based compensation expense
22,758

 
23,099

Allowance for doubtful accounts
5,356

 
6,131

Impairment and related charges
92,022

 

Deferred income taxes
(16,121
)
 
59,315

Joint venture equity income
(1,411
)
 
(1,526
)
Dividends received from joint venture investments
896

 

Amortization of debt issuance costs
3,640

 
3,892

Loss on modification of debt
11,730

 

Other
7,135

 
3,030

Loss (income) from discontinued operations
1,699

 
(11,252
)
Changes in operating assets and liabilities:
 

 
 

Accounts and other receivables
(125,913
)
 
(83,551
)
Prepaid expenses and other current assets
(1,434
)
 
(15,354
)
Capitalized implementation costs
(31,444
)
 
(43,268
)
Upfront incentive consideration
(37,260
)
 
(47,228
)
Other assets
(31,207
)
 
(13,639
)
Accrued compensation and related benefits
7,170

 
(25,663
)
Accounts payable and other accrued liabilities
41,702

 
12,963

Deferred revenue including upfront solution fees
25,707

 
22,037

Cash provided by operating activities
277,876

 
263,784

Investing Activities
 

 
 

Additions to property and equipment
(167,410
)
 
(164,593
)
Acquisition, net of cash acquired

 
(164,977
)
Cash used in investing activities
(167,410
)
 
(329,570
)
Financing Activities
 

 
 

Proceeds of borrowings from lenders
1,897,625

 
378,000

Payments on borrowings from lenders
(1,856,803
)
 
(485,796
)
Payments on Tax Receivable Agreement
(99,241
)
 

Debt issuance and modification costs
(12,380
)
 

Net proceeds on the settlement of equity-based awards
9,383

 
4,808

Cash dividends paid to common stockholders
(77,934
)
 
(72,060
)
Repurchase of common stock
(22,213
)
 

Other financing activities
(749
)
 
714

Cash used in financing activities
(162,312
)
 
(174,334
)
Cash Flows from Discontinued Operations
 

 
 

Cash used in operating activities
(2,780
)
 
(12,407
)
Cash provided by investing activities

 

Cash used in discontinued operations
(2,780
)
 
(12,407
)
Effect of exchange rate changes on cash and cash equivalents
(2,792
)
 
(293
)
Decrease in cash and cash equivalents
(57,418
)
 
(252,820
)
Cash and cash equivalents at beginning of period
364,114

 
321,132

Cash and cash equivalents at end of period
$
306,696

 
$
68,312



15


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 June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Net (loss) income attributable to common stockholders
$
(6,487
)
 
$
72,019

 
$
69,452

 
$
177,186

Loss (income) from discontinued operations, net of tax
1,222

 
2,098

 
1,699

 
(11,252
)
Net income attributable to noncontrolling interests (1)
1,113

 
1,078

 
2,419

 
2,180

(Loss) Income from continuing operations
(4,152
)
 
75,195

 
73,570

 
168,114

Adjustments:
 

 
 

 
 

 
 

Acquisition-related amortization (2a)
20,259

 
34,018

 
55,440

 
68,148

Impairment and related charges (8)
92,022

 

 
92,022

 

Other, net (4)
752

 
(876
)
 
15,986

 
(4,236
)
Restructuring and other costs (5)
25,304

 
1,116

 
25,304

 
1,240

Acquisition-related costs (6)

 
516

 

 
624

Litigation costs (reimbursements), net (7)
958

 
1,901

 
4,459

 
(1,945
)
Stock-based compensation
14,724

 
12,810

 
22,758

 
23,099

Tax impact of net income adjustments
(52,735
)
 
(20,633
)
 
(74,303
)
 
(36,349
)
Adjusted Net Income from continuing operations
$
97,132

 
$
104,047

 
$
215,236

 
$
218,695

Adjusted Net Income from continuing operations per share
$
0.35

 
$
0.37

 
$
0.77

 
$
0.77

Diluted weighted-average common shares outstanding (9)
279,833

 
283,001

 
279,919

 
282,648

 
 
 
 
 
 
 
 
Adjusted Net Income from continuing operations
$
97,132

 
$
104,047

 
$
215,236

 
$
218,695

Adjustments:
 

 
 

 
 

 
 

Depreciation and amortization of property and equipment (2b)
63,810

 
56,214

 
125,110

 
109,879

Amortization of capitalized implementation costs (2c)
8,948

 
8,211

 
18,137

 
16,699

Amortization of upfront incentive consideration (3)
16,161

 
13,896

 
32,293

 
26,233

Interest expense, net
38,097

 
37,210

 
77,658

 
78,412

Remaining provision for income taxes
37,269

 
51,906

 
90,544

 
109,046

Adjusted EBITDA
$
261,417

 
$
271,484

 
$
558,978

 
$
558,964


Reconciliation of Operating Income to Adjusted Operating Income:

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Operating income
$
18,718

 
$
142,039

 
$
182,044

 
$
313,461

Adjustments:
 

 
 

 
 
 
 
Impairment and related charges (8)
92,022

 

 
92,022

 

Joint venture equity income
513

 
763

 
1,411

 
1,526

Acquisition-related amortization (2a)
20,259

 
34,018

 
55,440

 
68,148

Restructuring and other costs (5)
25,304

 
1,116

 
25,304

 
1,240

Acquisition-related costs (6)

 
516

 

 
624

Litigation costs (reimbursements), net (7)
958

 
1,901

 
4,459

 
(1,945
)
Stock-based compensation
14,724

 
12,810

 
22,758

 
23,099

Adjusted Operating Income
$
172,498

 
$
193,163

 
$
383,438

 
$
406,153



16



Reconciliation of Adjusted Capital Expenditures:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Additions to property and equipment
$
79,092

 
$
89,121

 
$
167,410

 
$
164,593

Capitalized implementation costs
14,348

 
23,311

 
31,444

 
43,268

Adjusted Capital Expenditures
$
93,440

 
$
112,432

 
$
198,854

 
$
207,861


Reconciliation of Free Cash Flow:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Cash provided by operating activities
$
154,841

 
$
123,619

 
$
277,876

 
$
263,784

Cash used in investing activities
(79,092
)
 
(95,430
)
 
(167,410
)
 
(329,570
)
Cash used in financing activities
(54,524
)
 
(63,432
)
 
(162,312
)
 
(174,334
)


 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Cash provided by operating activities
$
154,841

 
$
123,619

 
$
277,876

 
$
263,784

Additions to property and equipment
(79,092
)
 
(89,121
)
 
(167,410
)
 
(164,593
)
Free Cash Flow
$
75,749

 
$
34,498

 
110,466

 
99,191


17


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

 
Three Months Ended
 
 
 
Sep 30, 2016
 
Dec 31, 2016
 
Mar 31, 2017
 
Jun 30, 2017
 
LTM
Net (loss) income attributable to common stockholders
$
40,815

 
$
24,561

 
$
75,939

 
$
(6,487
)
 
$
134,828

(Income) loss from discontinued operations, net of tax
394

 
5,309

 
477

 
1,222

 
7,402

Net income attributable to noncontrolling interests (1)
1,047

 
1,150

 
1,306

 
1,113

 
4,616

(Loss) Income from continuing operations
42,256

 
31,020

 
77,722

 
(4,152
)
 
146,846

Adjustments:
 
 
 
 
 
 
 
 
 
Acquisition-related amortization (2a)
39,430

 
35,847

 
35,181

 
20,259

 
130,717

Impairment and related charges (8)

 

 

 
92,022

 
92,022

Loss on extinguishment of debt
3,683

 

 

 

 
3,683

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

 
752

 
(7,395
)
Restructuring and other costs (5)
583

 
16,463

 

 
25,304

 
42,350

Acquisition-related costs (6)
90

 
65

 

 

 
155

Litigation costs (reimbursements), net (7)
7,034

 
41,906

 
3,501

 
958

 
53,399

Stock-based compensation
12,913

 
12,512

 
8,034

 
14,724

 
48,183

Depreciation and amortization of property and equipment (2b)
58,271

 
65,153

 
61,300

 
63,810

 
248,534

Amortization of capitalized implementation costs (2c)
11,529

 
9,030

 
9,189

 
8,948

 
38,696

Amortization of upfront incentive consideration (3)
17,139

 
12,352

 
16,132

 
16,161

 
61,784

Interest expense, net
38,002

 
41,837

 
39,561

 
38,097

 
157,497

Provision for income taxes
7,208

 
6,740

 
31,707

 
(15,466
)
 
30,189

Adjusted EBITDA
$
237,857

 
$
249,825

 
$
297,561

 
$
261,417

 
$
1,046,660

 
 
 
 
 
 
 
 
 
 
Net Debt (total debt, less cash)
 
 
 
 
 
 
 
 
$
3,211,648

Net Debt / LTM Adjusted EBITDA
 
 
 
 
 
 
 
 
3.1x



 
Three Months Ended
 
 
 
Sept. 30, 2015
 
Dec 31, 2015
 
Mar 31, 2016
 
Jun 30, 2016
 
LTM
Net income attributable to common stockholders
$
176,340

 
$
129,441

 
$
105,167

 
$
72,019

 
$
482,967

(Income) loss from discontinued operations, net of tax
(53,892
)
 
(100,909
)
 
(13,350
)
 
2,098

 
(166,053
)
Net income attributable to noncontrolling interests (1)
676

 
980

 
1,102

 
1,078

 
3,836

Income from continuing operations
123,124

 
29,512

 
92,919

 
75,195

 
320,750

Adjustments:
 
 
 
 
 
 
 
 
 
Acquisition-related amortization (2a)
31,384

 
31,851

 
34,130

 
34,018

 
131,383

Loss on extinguishment of debt

 
5,548

 

 

 
5,548

Other, net  (4)
(92,568
)
 
(3,057
)
 
(3,360
)
 
(876
)
 
(99,861
)
Restructuring and other costs  (5)
8,888

 
368

 
124

 
1,116

 
10,496

Acquisition-related costs (6)
9,350

 
1,223

 
108

 
516

 
11,197

Litigation costs, net (7)
9,318

 
1,912

 
(3,846
)
 
1,901

 
9,285

Stock-based compensation
7,204

 
6,643

 
10,289

 
12,810

 
36,946

Depreciation and amortization of property and equipment (2b)
49,247

 
56,366

 
53,665

 
56,214

 
215,492

Amortization of capitalized implementation costs (2c)
7,606

 
8,409

 
8,488

 
8,211

 
32,714

Amortization of upfront incentive consideration (3)
9,525

 
11,946

 
12,337

 
13,896

 
47,704

Interest expense, net
40,581

 
43,655

 
41,202

 
37,210

 
162,648

Provision for income taxes
38,007

 
34,386

 
41,424

 
31,273

 
145,090

Adjusted EBITDA
$
241,666

 
$
228,762

 
$
287,480

 
$
271,484

 
$
1,029,392

 
 
 
 
 
 
 
 
 
 
Net Debt (total debt, less cash)
 
 
 
 
 
 
 
 
$
3,219,566

Net Debt / LTM Adjusted EBITDA
 
 
 
 
 
 
 
 
3.1x


18


Reconciliation of Operating Income (loss) to Adjusted Gross Profit and Adjusted EBITDA by segment:
 
Three Months Ended June 30, 2017
 
Travel
Network
 
Airline and
Hospitality
Solutions
 
Corporate
 
Total
Operating income (loss)
$
208,576

 
$
61,868

 
$
(251,726
)
 
$
18,718

Add back:
 
 
 
 
 
 
 
Selling, general and administrative
30,099

 
21,995

 
94,762

 
146,856

Impairment and related charges (8)

 

 
92,022

 
92,022

Cost of revenue adjustments:
 
 
 
 
 
 
 
Depreciation and amortization (2)
19,313

 
38,979

 
17,723

 
76,015

Restructuring and other costs  (5)

 

 
12,976

 
12,976

Amortization of upfront incentive consideration (3)
16,161

 

 

 
16,161

Stock-based compensation

 

 
5,830

 
5,830

Adjusted Gross Profit
274,149

 
122,842

 
(28,413
)
 
368,578

Selling, general and administrative
(30,099
)
 
(21,995
)
 
(94,762
)
 
(146,856
)
Joint venture equity income
513

 

 

 
513

Selling, general and administrative adjustments:
 
 
 
 
 
 
 
Depreciation and amortization (2)
1,328

 
878

 
14,796

 
17,002

Restructuring and other costs  (5)

 

 
12,328

 
12,328

Acquisition-related costs (6)

 

 

 

Litigation costs, net (7)

 

 
958

 
958

Stock-based compensation

 

 
8,894

 
8,894

Adjusted EBITDA
$
245,891

 
$
101,725

 
$
(86,199
)
 
$
261,417

 
 
 
 
 
 
 
 
Operating income margin
32.8
%
 
22.8
%
 
NM

 
2.1
%
Adjusted EBITDA margin
38.7
%
 
37.4
%
 
NM

 
29.0
%
  
 
Three Months Ended June 30, 2016
 
Travel
Network
 
Airline and
Hospitality
Solutions
 
Corporate
 
Total
Operating income (loss)
$
217,252

 
$
55,390

 
$
(130,603
)
 
$
142,039

Add back:
 
 
 
 
 
 
 
Selling, general and administrative
32,745

 
16,762

 
97,379

 
146,886

Cost of revenue adjustments:
 
 
 
 
 
 
 
Depreciation and amortization (2)
18,093

 
36,317

 
10,962

 
65,372

Amortization of upfront incentive consideration (3)
13,896

 

 

 
13,896

Stock-based compensation

 

 
5,072

 
5,072

Adjusted Gross Profit
281,986

 
108,469

 
(17,190
)
 
373,265

Selling, general and administrative
(32,745
)
 
(16,762
)
 
(97,379
)
 
(146,886
)
Joint venture equity income
763

 

 

 
763

Selling, general and administrative adjustments:
 
 
 
 
 
 
 
Depreciation and amortization (2)
1,583

 
238

 
31,250

 
33,071

Restructuring and other costs  (5)

 

 
1,116

 
1,116

Acquisition-related costs (6)

 

 
516

 
516

Litigation costs, net (7)

 

 
1,901

 
1,901

Stock-based compensation

 

 
7,738

 
7,738

Adjusted EBITDA
$
251,587

 
$
91,945

 
$
(72,048
)
 
$
271,484

 
 
 
 
 
 
 
 
Operating income margin
36.3
%
 
22.0
%
 
NM

 
16.8
%
Adjusted EBITDA margin
42.1
%
 
36.5
%
 
NM

 
32.1
%


19


 
Six Months Ended June 30, 2017
 
Travel
Network
 
Airline and
Hospitality
Solutions
 
Corporate
 
Total
Operating income (loss)
$
461,300

 
$
108,608

 
$
(387,864
)
 
$
182,044

Add back:
 
 
 
 
 
 
 
Selling, general and administrative
61,182

 
42,579

 
187,536

 
291,297

Impairment and related charges (8)

 

 
92,022

 
92,022

Cost of revenue adjustments:
 
 
 
 
 
 
 
Depreciation and amortization (2)
38,392

 
77,003

 
34,317

 
149,712

Restructuring and other costs (5)

 

 
12,976

 
12,976

Amortization of upfront incentive consideration (3)
32,293

 

 

 
32,293

 Stock-based compensation

 

 
9,011

 
9,011

Adjusted Gross Profit
593,167

 
228,190

 
(52,002
)
 
769,355

Selling, general and administrative
(61,182
)
 
(42,579
)
 
(187,536
)
 
(291,297
)
Joint venture intangible amortization (2a)
1,411

 

 

 
1,411

Selling, general and administrative adjustments:

 

 

 

Depreciation and amortization (2)
2,717

 
1,631

 
44,627

 
48,975

Restructuring and other costs (5)

 

 
12,328

 
12,328

Litigation costs, net (7)

 

 
4,459

 
4,459

Stock-based compensation

 

 
13,747

 
13,747

Adjusted EBITDA
$
536,113

 
$
187,242

 
$
(164,377
)
 
$
558,978

 
 
 
 
 
 
 
 
Operating income margin
35.5
%
 
20.5
%
 
NM

 
10.0
%
Adjusted EBITDA margin
41.3
%
 
35.3
%
 
NM

 
30.8
%

 
Six Months Ended June 30, 2016
 
Travel
Network
 
Airline and
Hospitality
Solutions
 
Corporate
 
Total

 
 
 
 
 
 
 
Operating income (loss)
$
458,796

 
$
102,535

 
$
(247,870
)
 
$
313,461

Add back:
 
 
 
 
 
 
 
Selling, general and administrative
66,118

 
35,003

 
179,621

 
280,742

Cost of revenue adjustments:
 
 
 
 
 
 
 
Depreciation and amortization (2)
35,753

 
71,807

 
24,319

 
131,879

Amortization of upfront incentive consideration (3)
26,233

 

 

 
26,233

 Stock-based compensation

 

 
9,146

 
9,146

Adjusted Gross Profit
586,900

 
209,345

 
(34,784
)
 
761,461

Selling, general and administrative
(66,118
)
 
(35,003
)
 
(179,621
)
 
(280,742
)
Joint venture equity income
1,526

 

 

 
1,526

Selling, general and administrative adjustments:
 
 
 
 
 
 
 
Depreciation and amortization (2)
2,453

 
541

 
59,853

 
62,847

Restructuring and other costs (5)

 

 
1,240

 
1,240

Acquisition-related costs (6)

 

 
624

 
624

Litigation reimbursements, net (7)

 

 
(1,945
)
 
(1,945
)
Stock-based compensation

 

 
13,953

 
13,953

Adjusted EBITDA
$
524,761

 
$
174,883

 
$
(140,680
)
 
$
558,964

 
 
 
 
 
 
 
 
Operating income margin
37.5
%
 
20.9
%
 
NM

 
18.4
%
Adjusted EBITDA margin
42.9
%
 
35.7
%
 
NM

 
32.8
%




20


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, impairment and related charges, amortization of upfront incentive consideration, and the cost of revenue portion of depreciation and amortization, restructuring and other costs, litigation costs, net, and stock-based compensation included in cost of revenue.

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 (loss) income attributable to common stockholders adjusted for income (loss) from discontinued operations, net of tax, net income attributable to noncontrolling interests, acquisition-related amortization, impairment and related charges, 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 (benefit) 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 requireme