8-K






 
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): February 9, 2016
 
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))

 










Item 2.02
Results of Operations and Financial Condition.
On February 9, 2016, Sabre Corporation (“Sabre”) issued a press release and will hold a conference call regarding its financial results for the quarter and year ended December 31, 2015. 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 February 9, 2016.









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:
February 9, 2016
By:
/s/ Richard A. Simonson
 
 
Name:
Richard A. Simonson
 
 
Title:
Chief Financial Officer










EXHIBIT INDEX
Exhibit
Number
  
Description
 
 
99.1
  
Press Release dated February 9, 2016.


Exhibit



Sabre Reports Fourth Quarter and Full Year 2015 Results

Full year 2015 revenue increased 12.5%, Adjusted EBITDA increased 12.1%, Adjusted EPS increased 17.0% and Free Cash Flow increased 51.2%
Fourth quarter 2015 revenue increased 17.4%, Adjusted EBITDA increased 15.1% and Adjusted EPS increased 22.7%
Seamlessly executed largest airline reservations technology integration in the history of the industry at American Airlines
Completed acquisition of Trust Group in January 2016, expanding Sabre Hospitality Solutions' customer base by more than 30%
Issued 2016 guidance including expected growth in the mid-teens for revenue and Adjusted EBITDA and growth of approximately 30% in Adjusted Net Income and Adjusted EPS. Free Cash Flow expected to approach $400 million
Announced increase in dividend payout ratio target to 35% to 40% of Adjusted Net Income. Quarterly dividend increased 44% from $0.09 to $0.13 per share

SOUTHLAKE, Texas – February 9, 2016– Sabre Corporation ("Sabre") (NASDAQ: SABR) today announced financial results for the quarter and year ended December 31, 2015.

“In 2015, we increased investment in our core strengths, deepened our customer relationships by adding more critical capability to our platforms and continued to out-innovate our competitors,” said Tom Klein, Sabre president and CEO. “Our commitment to operational excellence and sales execution, along with our ability to bring innovative technology to market with speed and scale, drove our strong full year results. For the year, we delivered a double-digit increase in revenue and Adjusted EBITDA, a 17% increase in Adjusted EPS and growth of more than 50% in Free Cash Flow. Our strong momentum gives us confidence in our 2016 expectations for accelerated growth in revenue, Adjusted EBITDA, Adjusted EPS and importantly, Free Cash Flow.”

1



Q4 2015 Financial Summary

Fourth quarter results continued to demonstrate the strength of Sabre's vertical SaaS software and travel distribution businesses. Sabre consolidated fourth quarter revenue increased 17.4% to $758.5 million, compared to $646.1 million for the same period last year.

Consolidated income from continuing operations totaled $29.5 million, compared to $41.2 million in the fourth quarter of 2014. The decrease in income from continuing operations includes increased acquisition-related amortization, loss on extinguishment of debt and a reduction to our gain on the acquisition of the remaining interest in Abacus. Consolidated Adjusted EBITDA was $228.8 million, a 15.1% increase from $198.7 million in the fourth quarter of 2014. The increase in consolidated Adjusted EBITDA is primarily the result of a 20.9% increase in Adjusted EBITDA in Travel Network.

For the quarter, Sabre reported income from continuing operations of $0.10 per share, compared to $0.15 per share in the fourth quarter of 2014. Adjusted net income from continuing operations per share (Adjusted EPS) increased 22.7% to $0.27 from $0.22 per share in the fourth quarter of 2014.

Cash flow from operations totaled $139.5 million, an increase of 38.3% compared to $100.9 million in the fourth quarter of 2014. Fourth quarter Free Cash Flow was $55.9 million, compared to $27.8 million in the year ago period. Capital expenditures totaled $83.6 million, compared to $73.0 million in the year ago period. Adjusted Capital Expenditures, which include capitalized implementation costs, totaled $97.4 million compared to $83.2 million in the fourth quarter of 2014.

2



Financial Highlights
(in thousands; unaudited):
Three Months Ended December 31,
 
Year Ended December 31,
2015
 
2014
% Change
 
2015
 
2014
% Change
Total Company (Continuing Operations):
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
758,455

 
$
646,142

17.4

 
$
2,960,896

 
$
2,631,417

12.5
Income from continuing operations
$
29,512

 
$
41,230

(28.4
)
 
$
234,555

 
$
110,873

111.6
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA*
$
228,762

 
$
198,674

15.1

 
$
941,587

 
$
840,028

12.1
 
 
 
 
 
 
 
 
 
 
Adjusted Net Income*
$
76,190

 
$
59,921

27.2

 
$
308,072

 
$
232,477

32.5
 
 
 
 
 
 
 
 
 
 
Income from continuing operations per share
$
0.10

 
$
0.15

(33.3
)
 
$
0.83

 
$
0.39

112.8
Adjusted EPS*
$
0.27

 
$
0.22

22.7

 
$
1.10

 
$
0.94

17.0
 
 
 
 
 
 
 
 
 
 
Cash Flow from Operations
$
139,497

 
$
100,855

38.3

 
$
529,207

 
$
387,659

36.5
Capital Expenditures
$
83,626

 
$
73,015

14.5

 
$
286,697

 
$
227,227

26.2
Adjusted Capital Expenditures*
$
97,366

 
$
83,224

17.0

 
$
350,079

 
$
265,038

32.1
 
 
 
 
 
 
 
 
 
 
Free Cash Flow*
$
55,871

 
$
27,840

100.7

 
$
242,510

 
$
160,432

51.2
Adjusted Free Cash Flow*
$
66,545

 
$
39,903

66.8

 
$
299,505

 
$
293,375

2.1
 
 
 
 
 
 
 
 
 
 
Net Debt (total debt, less cash)
$
3,074,542

 
$
2,940,927

 
 
 
 
 
 
Net Debt / LTM Adjusted EBITDA
3.3x

 
3.5x

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Airline and Hospitality Solutions:
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
231,576

 
$
214,503

8.0

 
$
872,086

 
$
786,478

10.9
 
 
 
 
 
 
 
 
 
 
Passengers Boarded
177,443

 
125,102

41.8

 
584,876

 
510,713

14.5
 
 
 
 
 
 
 
 
 
 
Operating Income
$
49,970

 
$
58,773

(15.0
)
 
$
180,448

 
$
176,730

2.1
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA*
$
85,713

 
$
84,961

0.9

 
$
323,461

 
$
282,648

14.4
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Travel Network:
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
531,157

 
$
434,444

22.3

 
$
2,102,792

 
$
1,854,785

13.4
 
 
 
 
 
 
 
 
 
 
Air Bookings
97,083

 
70,817

37.1

 
384,309

 
321,962

19.4
Non-air Bookings
14,217

 
12,848

10.7

 
58,414

 
54,122

7.9
Total Bookings
111,300

 
83,665

33.0

 
442,723

 
376,084

17.7
 
 
 
 
 
 
 
 
 
 
Bookings Share
37.0
%
 
35.5
%
 
 
36.6
%
 
35.6
%
 
 
 
 
 
 
 
 
 
 
 
Operating Income
$
175,218

 
$
142,233

23.2

 
$
751,546

 
$
657,326

14.3
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA*
$
208,002

 
$
172,040

20.9

 
$
877,276

 
$
778,677

12.7
*indicates non-GAAP financial measure; see descriptions and reconciliations below



3



Q4 2015 Sabre Airline and Hospitality Solutions

Fourth quarter 2015 Airline and Hospitality Solutions revenue increased 8.0% to $231.6 million, compared to $214.5 million for the same period in 2014. Contributing to the rise in revenue was a 41.8% increase in airline passengers boarded through the SabreSonic reservation solution and continued momentum in Sabre Hospitality Solutions. Passenger boarded growth reflects solid underlying growth and the successful technology integration of American Airlines.

Fourth quarter Sabre Airline and Hospitality Solutions Adjusted EBITDA increased 0.9% to $85.7 million from $85.0 million in the prior year period. Adjusted EBITDA margin was 37.0%, compared to 39.6% for the prior year quarter.

On October 17, 2015, Sabre seamlessly executed the largest technology integration in the airline industry's history, making American Airlines the largest customer in the SabreSonic community.

Subsequent to the fourth quarter, Sabre completed the acquisition of the Trust Group expanding Sabre's hospitality customer base more than 30%, to approximately 32,000 properties worldwide.

Q4 2015 Sabre Travel Network

Fourth quarter 2015 Travel Network revenue increased 22.3% to $531.2 million, compared to $434.4 million for the same period in 2014. Fourth quarter 2015 Travel Network Adjusted EBITDA increased 20.9% to $208.0 million from $172.0 million in the fourth quarter of 2014. Total bookings increased 33.0% driven by the acquisition of Abacus and continued strong growth in North America and EMEA. Excluding the Abacus acquisition, global bookings increased 8.4% in the quarter. North American bookings increased 9.3% in the quarter. EMEA continued to be Sabre Travel Network's fastest growing region, with an increase in bookings of 14.3% year over year, while bookings in Latin America declined 3.8% reflecting economic weakness in Venezuela and Brazil.


4



Full Year 2015 Financial Summary

The fourth quarter capped a year of strong financial performance at Sabre. For the full year 2015, Sabre reported total consolidated revenue of $2.961 billion compared to $2.631 billion for the prior year, a 12.5% increase.

2015 consolidated income from continuing operations totaled $234.6 million, compared to $110.9 million in 2014. The increase in consolidated income from continuing operations includes a $90 million gain primarily associated with the remeasurement of our previously-held equity interest in Abacus. Consolidated Adjusted EBITDA totaled $941.6 million, a 12.1% increase from $840.0 million in 2014. The increase in Adjusted EBITDA is the result of a 14.4% increase in Airline and Hospitality Solutions Adjusted EBITDA and a 12.7% increase in Travel Network Adjusted EBITDA.

For the full year 2015, Sabre reported income from continuing operations of $0.83 per share, compared to $0.39 for the full year 2014. Adjusted EPS increased 17.0% to $1.10 per share from $0.94 in 2014.

Cash flow from operations totaled $529.2 million for the full year of 2015, an increase of 36.5% from $387.7 million in 2014. Full year 2015 Free Cash Flow totaled $242.5 million, a 51.2% increase from $160.4 million in 2014. Capital Expenditures totaled $286.7 million in 2015, compared to $227.2 million in 2014. Adjusted Capital Expenditures, totaled $350.1 million in 2015, compared to $265.0 million in 2014.

Full year Airline and Hospitality Solutions revenue increased 10.9% to $872.1 million, compared to $786.5 million in 2014. Contributing to the increase in revenue was full year SabreSonic passenger boarded growth of 14.5%.

Sabre Airline and Hospitality Solutions Adjusted EBITDA increased 14.4% to $323.5 million, compared to $282.6 million in 2014. Full year Adjusted EBITDA margin for Airline and Hospitality Solutions increased to 37.1% compared to 35.9% in 2014. Adjusted EBITDA margin increased due to the strong revenue growth and the scale benefits of Airline and Hospitality Solutions SaaS software solutions.

Travel Network revenue increased 13.4% to $2.103 billion, compared to $1.855 billion in 2014. Full year revenue growth was driven by global bookings growth of 17.7%. Excluding the Abacus acquisition, full year global bookings increased 6.4%. North America and EMEA delivered

5



bookings growth of 5.7% and 14.6%, respectively, while Latin America bookings declined 1.3%. Overall bookings share increased one point to 36.6%.

Full year Travel Network Adjusted EBITDA increased 12.7% to $877.3 million, compared to $778.7 million in 2014. Travel Network Adjusted EBITDA margin was essentially flat at 41.7%, compared to 42.0% in 2014.

Dividend

Sabre has increased its targeted dividend payout ratio to 35-40% of Adjusted Net Income, up from 30-35% previously. In accordance with this, the amount of the quarterly dividend has increased 44.4% from $0.09 per share to $0.13 per share. Sabre's Board of Directors has declared a quarterly dividend of $0.13 per share, payable on March 30, 2016 to shareholders of record on March 21, 2016.

6



Business Outlook and Financial Guidance

Sabre has provided full year guidance for 2016 reflecting expectations for accelerated growth across the business. Sabre revenue and Adjusted EBITDA growth are expected to be in the mid-teens with strong contributions from all businesses, resulting in expected Adjusted Net Income and Adjusted EPS growth of approximately 30%. Free Cash Flow is expected to increase more than 60% and to approach $400 million for the full year 2016.

In Airline and Hospitality Solutions, Sabre expects 2016 revenue growth of 17% or more. Contributing to the strong anticipated growth, SabreSonic passengers boarded are expected to increase more than 30% in 2016, including particularly strong growth in the first, second and third quarter related to the already completed technology integration at American Airlines. Sabre expects significant growth to continue in Hospitality Solutions with the integration of Trust Group, combined with anticipated strong sales and implementation momentum.

In Travel Network, Sabre expects 2016 revenue growth of between 13.5% and 14.5%, driven by bookings growth of approximately 15%, reflecting the positive impact of the Abacus acquisition and continued solid growth in North America and EMEA. Bookings growth is expected be stronger in the first half of the year versus the back half as Sabre anniversaries the acquisition of Abacus.

In summary, Sabre's full year 2016 guidance is as follows:
Full-Year 2016 Guidance
Range
Growth Rate
($ millions, except for EPS)
Revenue
$3,390 - $3,430
14.5% - 15.8%
 
 
 
Adjusted EBITDA
$1,080 - $1,100
14.7% - 16.8%
 
 
 
Adjusted Net Income
$395 - $415
28.2% - 34.7%
 
 
 
Adjusted EPS
$1.40 - $1.47
27.3% - 33.6%
 
 
 
Free Cash Flow
Approaching $400M
Over 60%


7



Conference Call

Sabre will conduct its fourth quarter and full year 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.

Investor Day

Sabre plans to host an investor day at the NASDAQ MarketSite in New York City on Tuesday, May 17, 2016. A live audio webcast of the session can be accessed on 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

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 $120 billion of estimated 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.

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.

8




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 "will," "guidance," "expect," "target," "momentum," "outlook," "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, economic conditions including those with traditionally high levels of exports to China or that have commodities-based economies, 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, risks arising from global operations, 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

9



operations is included in the “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” sections included in our Quarterly Reports on Form 10-Q and our Annual Report on Form 10-K. 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.

Contacts:

Media
Investors
Daniel Duarte
Barry Sievert
214-236-9473
sabre.investorrelations@sabre.com
daniel.duarte@sabre.com
 


10



SABRE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited) 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2015
 
2014
 
2015
 
2014
Revenue
$
758,455

 
$
646,142

 
$
2,960,896

 
$
2,631,417

Cost of revenue (1) (2)
504,020

 
426,809

 
1,944,050

 
1,742,478

Selling, general and administrative (2)
145,035

 
115,624

 
557,077

 
467,594

Operating income
109,400

 
103,709

 
459,769

 
421,345

Other income (expense):
 
 
 
 
 
 
 
Interest expense, net
(43,655
)
 
(51,545
)
 
(173,298
)
 
(218,877
)
Loss on extinguishment of debt
(5,548
)
 

 
(38,783
)
 
(33,538
)
Joint venture equity income
644

 
2,715

 
14,842

 
12,082

Other, net
3,057

 
(63,021
)
 
91,377

 
(63,860
)
Total other income (expense), net
(45,502
)
 
(111,851
)
 
(105,862
)
 
(304,193
)
Income from continuing operations before income taxes
63,898

 
(8,142
)
 
353,907

 
117,152

Provision for income taxes
34,386

 
(49,372
)
 
119,352

 
6,279

Income from continuing operations
29,512

 
41,230

 
234,555

 
110,873

Income (loss) from discontinued operations, net of tax
100,909

 
5,734

 
314,408

 
(38,918
)
Net income
130,421

 
46,964

 
548,963

 
71,955

Net income attributable to noncontrolling interests
980

 
564

 
3,481

 
2,732

Net income attributable to Sabre Corporation
129,441

 
46,400

 
545,482

 
69,223

Preferred stock dividends

 

 

 
11,381

Net income attributable to common stockholders
$
129,441

 
$
46,400

 
$
545,482

 
$
57,842

 
 
 
 
 
 
 
 
Basic net income per share attributable to common
stockholders:
 

 
 

 
 
 
 
Income from continuing operations
$
0.10

 
$
0.15

 
$
0.85

 
$
0.41

Income (loss) from discontinued operations
0.37

 
0.02

 
1.15

 
(0.16
)
Net income per common share
$
0.47

 
$
0.17

 
$
2.00

 
$
0.24

Diluted net income per share attributable to common
stockholders:
 

 
 

 
 
 
 
Income from continuing operations
$
0.10

 
$
0.15

 
$
0.83

 
$
0.39

Income (loss) from discontinued operations
0.36

 
0.02

 
1.12

 
(0.16
)
Net income per common share
$
0.46

 
$
0.17

 
$
1.95

 
$
0.23

Weighted-average common shares outstanding:
 

 
 

 
 
 
 
Basic
275,855

 
266,014

 
273,139

 
238,633

Diluted
281,150

 
274,064

 
280,067

 
246,747

 
 
 
 
 
 
 
 
Dividends per common share
$
0.09

 
$
0.09

 
$
0.36

 
$
0.18

 
 
 
 
 
 
 
 
(1) Includes amortization of upfront incentive consideration
$
11,946

 
$
12,181

 
$
43,521

 
$
45,358

(2) Includes stock-based compensation as follows:
 
 
 
 
 
 
 
Cost of revenue
$
2,630

 
$
2,521

 
$
11,918

 
$
8,044

Selling, general and administrative
4,013

 
3,724

 
18,053

 
12,050



11



SABRE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
December 31, 2015
 
December 31, 2014
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
321,132

 
$
155,679

Accounts receivable, net
375,789

 
362,911

Prepaid expenses and other current assets
81,167

 
64,734

Assets held for sale

 
112,558

Total current assets
778,088

 
695,882

Property and equipment, net
627,529

 
551,276

Investments in joint ventures
24,348

 
145,320

Goodwill
2,440,431

 
2,153,499

Acquired customer relationships, net
416,887

 
170,629

Other intangible assets, net
419,666

 
309,357

Deferred income taxes
44,464

 
131,971

Other assets, net
642,214

 
485,139

Total assets
$
5,393,627

 
$
4,643,073

 
 
 
 
Liabilities and stockholders’ equity
 
 
 
Current liabilities
 
 
 
Accounts payable
$
138,421

 
$
117,855

Accrued compensation and related benefits
99,382

 
83,828

Accrued subscriber incentives
185,270

 
145,581

Deferred revenues
165,124

 
167,827

Litigation settlement liability and related deferred revenue
30,012

 
73,252

Other accrued liabilities
191,964

 
189,612

Current portion of debt
190,315

 
22,435

Liabilities held for sale

 
96,544

Total current liabilities
1,000,488

 
896,934

Deferred income taxes
83,562

 
8,037

Other noncurrent liabilities
656,093

 
613,710

Long-term debt
3,169,344

 
3,040,009

Stockholders’ equity
 
 
 
Common stock
2,790

 
2,682

Additional paid-in capital
2,016,325

 
1,931,796

Treasury stock, at cost
(110,548
)
 
(5,297
)
Retained deficit
(1,328,730
)
 
(1,775,616
)
Accumulated other comprehensive loss
(97,135
)
 
(69,803
)
Noncontrolling interest
1,438

 
621

Total stockholders’ equity
484,140

 
84,383

Total liabilities and stockholders’ equity
$
5,393,627

 
$
4,643,073



12



SABRE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Year Ended December 31,
 
2015
 
2014
Operating Activities
 
 
 
Net income
$
548,963

 
$
71,955

Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
Depreciation and amortization
351,480

 
289,630

Amortization of upfront incentive consideration
43,521

 
45,358

Litigation-related credits
(60,998
)
 
(41,672
)
Stock-based compensation expense
29,971

 
20,094

Allowance for doubtful accounts
8,558

 
10,356

Deferred income taxes
97,225

 
(3,829
)
Joint venture equity income
(14,842
)
 
(12,082
)
Dividends received from joint venture investments
28,700

 
2,261

Amortization of debt issuance costs
6,759

 
6,316

Debt modification costs

 
3,290

Gain on remeasurement of previously-held joint venture interest
(78,082
)
 

Loss on extinguishment of debt
38,783

 
33,538

Other
3,556

 
6,023

(Income) loss from discontinued operations
(314,408
)
 
38,918

Changes in operating assets and liabilities:
 
 
 
Accounts and other receivables
10,662

 
(7,295
)
Prepaid expenses and other current assets
(13,255
)
 
6,948

Capitalized implementation costs
(63,382
)
 
(37,811
)
Upfront incentive consideration
(63,510
)
 
(50,936
)
Other assets
(66,873
)
 
(78,873
)
Accrued compensation and related benefits
18,268

 
(5,301
)
Accounts payable and other accrued liabilities
8,721

 
52,128

Deferred revenue including upfront solution fees
9,390

 
38,643

Cash provided by operating activities
529,207

 
387,659

Investing Activities
 
 
 
Additions to property and equipment
(286,697
)
 
(227,227
)
Acquisitions, net of cash acquired
(442,344
)
 
(31,799
)
Other investing activities

 
235

Cash used in investing activities
(729,041
)
 
(258,791
)
Financing Activities
 
 
 
Proceeds of borrowings from lenders
1,252,000

 
148,307

Payments on borrowings from lenders
(960,807
)
 
(802,664
)
Debt prepayment fees and issuance costs
(52,674
)
 
(30,490
)
Acquisition-related contingent consideration paid

 
(27,000
)
Proceeds from issuance of common stock in initial public offering, net

 
672,137

Net proceeds on the settlement of equity-based awards
47,414

 
13,809

Cash dividends paid to common stockholders
(98,596
)
 
(47,904
)
Repurchase of common stock
(98,770
)
 

Other financing activities
4,577

 
1,860

Cash provided by (used in) financing activities
93,144

 
(71,945
)
Cash Flows from Discontinued Operations
 
 
 
Cash provided by (used in) operating activities
236

 
(205,988
)
Cash provided by (used in) investing activities
278,834

 
(1,965
)
Cash provided by (used in) discontinued operations
279,070

 
(207,953
)
Effect of exchange rate changes on cash and cash equivalents
(6,927
)
 
(1,527
)
Increase (decrease) in cash and cash equivalents
165,453

 
(152,557
)
Cash and cash equivalents at beginning of period
155,679

 
308,236

Cash and cash equivalents at end of period
$
321,132

 
$
155,679




13



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 Net Income from continuing operations per share (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 include cash flows used in investing activities, for property and equipment, and cash flows used in operating activities,

14



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:
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 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;
Adjusted Free Cash Flow does not reflect payments related to restructuring activities, litigation, acquisition-related costs and management fees;

15



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.





16



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 December 31,
 
Year Ended December 31,
 
2015
 
2014
 
2015
 
2014
Net income attributable to common stockholders
$
129,441

 
$
46,400

 
$
545,482

 
$
57,842

(Income) loss from discontinued operations, net of tax
(100,909
)
 
(5,734
)
 
(314,408
)
 
38,918

Net income attributable to noncontrolling interests(1)
980

 
564

 
3,481

 
2,732

Preferred stock dividends

 

 

 
11,381

Income from continuing operations
29,512

 
41,230

 
234,555

 
110,873

Adjustments:
 

 
 

 
 

 
 

Acquisition-related amortization(2a)
31,851

 
22,639

 
108,121

 
99,383

Loss on extinguishment of debt
5,548

 

 
38,783

 
33,538

Other, net(4)
(3,057
)
 
63,021

 
(91,377
)
 
63,860

Restructuring and other costs(5)
368

 
1,636

 
9,256

 
10,470

Acquisition-related costs(6)
1,223

 

 
14,437

 

Litigation costs(7)
1,912

 
2,775

 
16,709

 
14,144

Stock-based compensation
6,643

 
6,245

 
29,971

 
20,094

Management fees(8)

 

 

 
23,701

Tax impact of net income adjustments(9)
2,190

 
(77,626
)
 
(52,383
)
 
(143,586
)
Adjusted Net Income from continuing operations
$
76,190

 
$
59,920

 
$
308,072

 
$
232,477

Adjusted Net Income from continuing operations
per share
$
0.27

 
$
0.22

 
$
1.10

 
$
0.94

Diluted weighted-average common shares outstanding
281,150

 
274,064

 
280,067

 
246,747

 
 
 
 
 
 
 
 
Adjusted Net Income from continuing operations
$
76,190

 
$
59,920

 
$
308,072

 
$
232,477

Adjustments:
 

 
 

 
 

 
 

Depreciation and amortization of property
and equipment
(2b)
56,366

 
37,983

 
213,520

 
157,592

Amortization of capitalized implementation costs(2c)
8,409

 
8,790

 
31,441

 
35,859

Amortization of upfront incentive consideration(3)
11,946

 
12,181

 
43,521

 
45,358

Interest expense, net
43,655

 
51,545

 
173,298

 
218,877

Remaining provision for income taxes
32,196

 
28,255

 
171,735

 
149,865

Adjusted EBITDA
$
228,762

 
$
198,674

 
$
941,587

 
$
840,028



17




Reconciliation of Adjusted Capital Expenditures:
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2015
 
2014
 
2015
 
2014
Additions to property and equipment
$
83,626

 
$
73,015

 
$
286,697

 
$
227,227

Capitalized implementation costs
13,740

 
10,209

 
63,382

 
37,811

Adjusted Capital Expenditures
$
97,366

 
$
83,224

 
$
350,079

 
$
265,038


Reconciliation of Adjusted Free Cash Flow:
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2015
 
2014
 
2015
 
2014
Cash provided by operating activities
$
139,497

 
$
100,855

 
$
529,207

 
$
387,659

Cash used in investing activities
(84,536
)
 
(73,015
)
 
(729,041
)
 
(258,791
)
Cash provided by (used in) financing activities
132,399

 
(12,656
)
 
93,144

 
(71,945
)

 
Three Months Ended December 31,
 
Year Ended December 31,
 
2015
 
2014
 
2015
 
2014
Cash provided by operating activities
$
139,497

 
$
100,855

 
$
529,207

 
$
387,659

Additions to property and equipment
(83,626
)
 
(73,015
)
 
(286,697
)
 
(227,227
)
Free Cash Flow
55,871

 
27,840

 
242,510

 
160,432

Adjustments:
 
 
 
 
 

 
 

Restructuring and other costs(5)(10)
758

 
1,727

 
1,676

 
18,353

Acquisition-related costs(6)(9)
622

 

 
13,836

 

Litigation settlement(11)
7,478

 
7,562

 
30,770

 
76,745

Other litigation costs(7)(10)
1,816

 
2,774

 
10,713

 
14,144

Management fees(8)(10)

 

 

 
23,701

Adjusted Free Cash Flow
$
66,545

 
$
39,903

 
$
299,505

 
$
293,375




18




Reconciliation of Operating Income (loss) to Adjusted Gross Margin and Adjusted EBITDA by segment:
 
Three Months Ended December 31, 2015
 
Travel
Network
 
Airline and
Hospitality
Solutions
 
Corporate
 
Total
Operating income (loss)
$
175,218

 
$
49,970

 
$
(115,788
)
 
$
109,400

Add back:
 
 
 
 
 
 
 
Selling, general and administrative
33,769

 
14,945

 
96,321

 
145,035

Cost of revenue adjustments:
 
 
 
 
 
 
 
Depreciation and amortization(2)
19,204

 
35,535

 
12,716

 
67,455

Amortization of upfront incentive consideration(3)
11,946

 

 

 
11,946

Stock-based compensation

 

 
2,630

 
2,630

Adjusted Gross Margin
240,137

 
100,450

 
(4,121
)
 
336,466

Selling, general and administrative
(33,769
)
 
(14,945
)
 
(96,321
)
 
(145,035
)
Joint venture equity income
644

 

 

 
644

Selling, general and administrative adjustments:
 
 
 
 
 
 
 
Depreciation and amortization(2)
990

 
208

 
27,973

 
29,171

Restructuring and other costs(5)

 

 
368

 
368

Acquisition-related costs(6)

 

 
1,223

 
1,223

Litigation costs(7)

 

 
1,912

 
1,912

Stock-based compensation

 

 
4,013

 
4,013

Adjusted EBITDA
$
208,002

 
$
85,713

 
$
(64,953
)
 
$
228,762

  
 
Three Months Ended December 31, 2014
 
Travel
Network
 
Airline and
Hospitality
Solutions
 
Corporate
 
Total
Operating income (loss)
$
142,233

 
$
58,773

 
$
(97,298
)
 
$
103,708

Add back:
 
 
 
 
 
 
 
Selling, general and administrative
25,249

 
17,640

 
72,736

 
115,625

Cost of revenue adjustments:
 
 
 
 
 
 
 
Depreciation and amortization(2)
13,590

 
25,892

 
5,873

 
45,355

Amortization of upfront incentive consideration(3)
12,181

 

 

 
12,181

Restructuring and other costs(5)

 

 
769

 
769

Stock-based compensation

 

 
2,521

 
2,521

Adjusted Gross Margin
193,253

 
102,305

 
(15,399
)
 
280,159

Selling, general and administrative
(25,249
)
 
(17,640
)
 
(72,736
)
 
(115,625
)
Joint venture equity income
2,715

 

 

 
2,715

Joint venture intangible amortization(2a)
801

 

 

 
801

Selling, general and administrative adjustments:
 
 
 
 
 
 
 
Depreciation and amortization(2)
520

 
296

 
22,442

 
23,258

Restructuring and other costs(5)

 

 
867

 
867

Litigation costs(7)

 

 
2,775

 
2,775

Stock-based compensation

 

 
3,724

 
3,724

Adjusted EBITDA
$
172,040

 
$
84,961

 
$
(58,327
)
 
$
198,674

 

19



 
Year Ended December 31, 2015
 
Travel
Network
 
Airline and
Hospitality
Solutions
 
Corporate
 
Total
Operating income (loss)
$
751,546

 
$
180,448

 
$
(472,225
)
 
$
459,769

Add back:
 
 
 
 
 
 
 
Selling, general and administrative
116,511

 
62,247

 
378,319

 
557,077

Cost of revenue adjustments:
 
 
 
 
 
 
 
Depreciation and amortization(2)
62,337

 
142,109

 
40,089

 
244,535

Amortization of upfront incentive consideration(3)
43,521

 

 

 
43,521

Stock-based compensation

 

 
11,918

 
11,918

Adjusted Gross Margin
973,915

 
384,804

 
(41,899
)
 
1,316,820

Selling, general and administrative
(116,511
)
 
(62,247
)
 
(378,319
)
 
(557,077
)
Joint venture equity income
14,842

 

 

 
14,842

Joint venture intangible amortization(2a)
1,602

 

 

 
1,602

Selling, general and administrative adjustments:
 
 
 
 
 
 
 
Depreciation and amortization(2)
3,428

 
904

 
102,613

 
106,945

Restructuring and other costs(5)

 

 
9,256

 
9,256

Acquisition-related costs(6)

 

 
14,437

 
14,437

Litigation costs(7)

 

 
16,709

 
16,709

Stock-based compensation

 

 
18,053

 
18,053

Adjusted EBITDA
$
877,276

 
$
323,461

 
$
(259,150
)
 
$
941,587



 
Year Ended December 31, 2014
 
Travel
Network
 
Airline and
Hospitality
Solutions
 
Corporate
 
Total
Operating income (loss)
$
657,326

 
$
176,730

 
$
(412,711
)
 
$
421,345

Add back:
 
 
 
 
 
 
 
Selling, general and administrative
102,059

 
56,195

 
309,340

 
467,594

Cost of revenue adjustments:
 
 
 
 
 
 
 
Depreciation and amortization(2)
58,533

 
104,926

 
34,950

 
198,409

Amortization of upfront incentive consideration(3)
45,358

 

 

 
45,358

Restructuring and other costs(5)

 

 
6,042

 
6,042

 Stock-based compensation

 

 
8,044

 
8,044

Adjusted Gross Margin
863,276

 
337,851

 
(54,335
)
 
1,146,792

Selling, general and administrative
(102,059
)
 
(56,195
)
 
(309,340
)
 
(467,594
)
Joint venture equity income
12,082

 

 

 
12,082

Joint venture intangible amortization(2a)
3204

 

 

 
3204

Selling, general and administrative adjustments:
 
 
 
 
 
 
 
Depreciation and amortization(2)
2,174

 
992

 
88,055

 
91,221

Restructuring and other costs(5)

 

 
4,428

 
4,428

Litigation costs(7)

 

 
14,144

 
14,144

Stock-based compensation

 

 
12,050

 
12,050

Management fees(8)

 

 
23,701

 
23,701

Adjusted EBITDA
$
778,677

 
$
282,648

 
$
(221,297
)
 
$
840,028







20



Non-GAAP Footnotes

(1)
Net income attributable to non-controlling interests represents an adjustment to include earnings allocated to non-controlling interest held in (i) Sabre Travel Network Middle East of 40% for all periods presented, (ii) Sabre Seyahat Dagitim Sistemleri A.S. of 40% beginning in April 2014, and (ii) Abacus International Lanka Pte Ltd of 40% beginning in July 2015.
(2)
Depreciation and amortization expenses:
a.
Acquisition-related amortization represents amortization of intangible assets from the take-private transaction in 2007 as well as intangibles associated with acquisitions since that date. Also includes amortization of the excess basis in our underlying equity interest in Abacus International Pte Ltd's ("AIPL") net assets prior to our acquisition of AIPL on July 1, 2015.
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 2015, we recognized a gain of $78 million associated with the remeasurement of our previously-held 35% investment in AIPL to its fair value and a gain of $12 million related to the settlement of pre-existing agreements between us and AIPL. In 2014, other, net primarily includes a fourth quarter charge of $66 million as a result of an increase to our tax receivable agreement (“TRA”) liability. The increase in our TRA liability is due to a reduction in a valuation allowance maintained against our deferred tax assets. This charge is fully offset by an income tax benefit recognized in the fourth quarter of 2014 from the reduction in the valuation allowance which is included in tax impacts of net income adjustments. In addition, all periods presented include foreign exchange gains and losses related to the remeasurement of foreign

21



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 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 and the Trust Group.
(7)
Litigation costs represent charges associated with antitrust litigation.
(8)
We paid an annual management fee to TPG Global, LLC (“TPG”) and Silver Lake Management Company (“Silver Lake”) in an amount between (i) $5 million and (ii) $7 million, plus reimbursement of certain costs incurred by TPG and Silver Lake, pursuant to the management services agreement (the “MSA”). In addition, we paid a $21 million fee, in the aggregate, to TPG and Silver Lake in connection with our initial public offering in 2014. The MSA was terminated in conjunction with our initial public offering.
(9)
In 2014, the tax impact on net income adjustments includes a $66 million benefit recognized in the fourth quarter of 2014 from the reduction in a valuation allowance maintained against our deferred tax assets.
(10)
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.
(11)
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. The year 2014 also includes a $50 million payment to American Airlines in conjunction with the new Airline Solutions contract, which is being amortized as a reduction to revenue over the contract term. This payment reduced payment credits originally offered to American Airlines as a part of the litigation settlement in 2012, contingent upon the signature of a new reservation agreement, which were extended to include the combined American Airlines and US Airways reservation contract. The payment credits would have been utilized for future billings under the new agreement.

22