Document
falseQ320190001597033 0001597033 2019-10-31 2019-10-31






 
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): October 31, 2019
_____________________
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
 
76092
Southlake,
TX
 
(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))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, $.01 par value
SABR
The NASDAQ Stock Market LLC









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 October 31, 2019, Sabre Corporation (“Sabre”) issued a press release and will hold a conference call regarding its financial results for the quarter ended September 30, 2019. 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
 
104
 
Cover Page Interactive Data File - formatted as Inline XBRL.

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:
October 31, 2019
By:
/s/ Douglas E. Barnett
 
 
Name:
Douglas E. Barnett
 
 
Title:
Chief Financial Officer




Exhibit
 
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13172228&doc=8

Sabre reports third quarter 2019 results

Third quarter revenue increased 1.4%
Travel Network revenue rose 1.5%, with bookings growth of 0.8%
Airline Solutions revenue decreased 0.6%
Hospitality Solutions revenue grew 7.0%
Net income attributable to common stockholders totaled $63.8 million and diluted net income attributable to common stockholders per share (EPS) totaled $0.23
Adjusted EPS totaled $0.27
Cash provided by operating activities totaled $166.7 million
Narrowed full-year 2019 guidance

SOUTHLAKE, Texas – October 31, 2019– Sabre Corporation ("Sabre" or the "Company") (NASDAQ: SABR) today announced financial results for the quarter ended September 30, 2019.

"Sabre continues to be a global retailing, distribution and fulfillment technology leader within the $1.7 trillion global travel marketplace. We are at the forefront of the industry's digital transformation. Our new management team is driving changes that are resonating with customers, and our technology solutions are gaining commercial momentum, winning new customers and increasing share-of-wallet with existing customers. I'm pleased to announce our third quarter results that demonstrate our continued solid execution and the strength of our business model and geographic and customer footprint," said Sean Menke, President and CEO. "Travel Network, our largest business segment, continues to prove its resiliency despite uncertain macro and geopolitical conditions. The third quarter marked the seventh consecutive quarter of strong gains in our GDS position. Our global share increased 100 basis points year-over-year to 39.6% in the third quarter. We grew bookings 6% in our home region of North America, the fastest-growing region for the overall GDS industry. And, for the first time in three years, our booking contribution margin expanded. In Airline Solutions, our focus over the past two years on product health and stability and securing renewals has allowed us to shift attention to new innovations and sales, and we announced a number of customer wins during the quarter for our retailing and operations solutions. Hospitality Solutions revenue growth remains solid, up 7% year-over-year in the third quarter.



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"Additionally, we have entered into the low-cost carrier space with our recent acquisition of Radixx, a leader in low-cost carrier PSS solutions. This acquisition will allow Sabre to offer products to a marketplace that continues to see the fastest growth and expansion in the industry. We expect this expansion into the low-cost carrier PSS market, along with investments in our cloud migration and new innovations, will provide continued growth, innovation and industry leadership as we fulfill our commitment to providing best-in-class services to our customers in a dynamic and evolving marketplace."

Q3 2019 Financial Summary

Sabre consolidated third quarter revenue increased 1.4% to $984.2 million, compared to $970.3 million in the third quarter of 2018.

Third quarter operating income was $113.5 million, versus $136.8 million in the third quarter of 2018. The decline in operating income in the quarter was primarily due to increased technology expenses, partially offset by solid revenue growth and a $31.8 million benefit related to the reversal of a previously accrued loss related to the US Airways legal matter. Technology expenses increased by $58.3 million in the quarter, primarily due to a shift in technology cost recognition and corresponding decline in technology capitalized expenditures, which had no impact on the level of total technology spend or Free Cash Flow. This shift is driven by the execution of the Company's previously disclosed technology strategy, including its cloud migration, mainframe offload and utilization of agile development methods, that increases the expensed portion of its total technology spend.

Net income attributable to common stockholders totaled $63.8 million, versus $73.0 million in the third quarter of 2018. Diluted net income attributable to common stockholders per share totaled $0.23, versus $0.26 in the third quarter of 2018. The decrease in net income attributable to common stockholders was driven by the items impacting operating income described above, partially offset by a reduction in the tax rate.

Third quarter consolidated Adjusted EBITDA Less Capitalized Software Development, which reflects the Company's total capitalized and expensed technology spend, was $222.1 million, an increase of 3.8% from $213.9 million in the third quarter of 2018. This increase was driven by solid revenue growth and a reduction in benefits and other labor-related costs.

Adjusted Operating Income was $133.1 million, versus $174.0 million in the third quarter of 2018. The decline in Sabre's consolidated Adjusted Operating Income was primarily the result of increased technology operating expenses due to the increase in the expensed portion of total


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technology spend partially offset by solid revenue growth and a decline in headcount-related expenses.

For the quarter, Sabre reported Adjusted Net Income from continuing operations per share (Adjusted EPS) of $0.27, versus $0.39 per share in the third quarter of 2018.

With regards to Sabre's third quarter 2019 cash flows (versus prior year):
Cash provided by operating activities totaled $166.7 million (vs. $194.4 million)
Cash used in investing activities totaled $32.3 million (vs. $73.8 million)
Cash used in financing activities totaled $58.4 million (vs. $50.9 million)
Capitalized expenditures totaled $24.9 million (vs. $73.8 million)

Third quarter Free Cash Flow totaled $141.8 million, versus $120.6 million in the third quarter of 2018.

During the third quarter of 2019, Sabre returned $38.3 million to shareholders through its regular quarterly dividend. Year-to-date, the Company has returned $192.8 million to shareholders through its regular quarterly dividend and through the repurchase of 3.7 million shares for approximately $77.6 million.





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Financial Highlights
(in thousands, except for EPS; unaudited):
Three Months Ended September 30,
 
Nine Months Ended September 30,
2019
 
2018
 
% Change
 
2019
 
2018
 
% Change
Total Company:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
984,199

 
$
970,283

 
1.4
 
$
3,033,566

 
$
2,943,028

 
3.1
Operating income
$
113,460

 
$
136,763

 
(17.0)
 
$
305,780


$
440,997

 
(30.7)
Net income attributable to common stockholders
$
63,813

 
$
73,005

 
(12.6)
 
$
148,501

 
$
253,131

 
(41.3)
Diluted net income attributable to common stockholders per share (EPS)
$
0.23

 
$
0.26

 
(11.5)
 
$
0.54

 
$
0.91

 
(40.7)
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Gross Profit*
$
346,418

 
$
377,786

 
(8.3)
 
$
1,069,946

 
$
1,156,042

 
(7.4)
Adjusted EBITDA*
$
241,564

 
$
278,505

 
(13.3)
 
$
739,548

 
$
856,845

 
(13.7)
Adjusted EBITDA Less Capitalized Software Development*
$
222,075

 
$
213,881

 
3.8
 
$
668,730

 
$
672,062

 
(0.5)
Adjusted Operating Income*
$
133,074

 
$
173,973

 
(23.5)
 
$
415,789

 
$
543,555

 
(23.5)
Adjusted Net Income*
$
73,565

 
$
108,972

 
(32.5)
 
$
235,218

 
$
332,525

 
(29.3)
Adjusted EPS*
$
0.27

 
$
0.39

 
(30.8)
 
$
0.85

 
$
1.20

 
(29.2)
 
 
 
 
 
 
 
 
 
 
 
 
Cash provided by operating activities
$
166,704

 
$
194,354

 
(14.2)
 
$
424,365

 
$
536,193

 
(20.9)
Cash used in investing activities
$
(32,319
)
 
$
(73,778
)
 
(56.2)
 
$
(108,482
)
 
$
(205,664
)
 
(47.3)
Cash used in financing activities
$
(58,449
)
 
$
(50,884
)
 
14.9
 
$
(351,424
)
 
$
(252,409
)
 
39.2
Capitalized expenditures
$
(24,928
)
 
$
(73,778
)
 
(66.2)
 
$
(92,124
)
 
$
(205,664
)
 
(55.2)
 
 
 
 
 
 
 
 
 
 
 
 
Free Cash Flow*
$
141,776

 
$
120,576

 
17.6
 
$
332,241

 
$
330,529

 
0.5
 
 
 
 
 
 
 
 
 
 
 
 
Net Debt (total debt, less cash)
$
2,910,713

 
$
3,002,850

 
 
 
 
 
 
 
 
Net Debt / LTM Adjusted EBITDA*
2.9x

 
2.7x

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Travel Network:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
711,003

 
$
700,196

 
1.5
 
$
2,209,603

 
$
2,141,017

 
3.2
Transaction Revenue
$
667,710

 
$
655,354

 
1.9
 
$
2,079,869

 
$
2,012,016

 
3.4
Other Revenue
$
43,293

 
$
44,842

 
(3.5)
 
$
129,734

 
$
129,001

 
0.6
Operating Income
$
157,911

 
$
182,200

 
(13.3)
 
$
509,934

 
$
587,925

 
(13.3)
Adjusted Operating Income*
$
158,938

 
$
182,533

 
(12.9)
 
$
511,907

 
$
590,380

 
(13.3)
 
 
 
 
 
 
 
 
 
 
 
 
Total Bookings
140,913

 
139,851

 
0.8
 
437,975

 
431,500

 
1.5
Air Bookings
123,586

 
123,233

 
0.3
 
386,752

 
380,748

 
1.6
Lodging, Ground and Sea Bookings
17,327

 
16,618

 
4.3
 
51,223

 
50,752

 
0.9
Air Bookings Share
39.6
%
 
38.6
%
 
 
 
38.8
%
 
37.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Airline Solutions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
208,028

 
$
209,388

 
(0.6)
 
$
632,788

 
$
620,813

 
1.9
Operating Income
$
24,644

 
$
28,505

 
(13.5)
 
$
62,728

 
$
82,030

 
(23.5)
Adjusted Operating Income*
$
24,644

 
$
28,505

 
(13.5)
 
$
62,728

 
$
82,030

 
(23.5)
 
 
 
 
 
 
 
 
 
 
 
 
Passengers Boarded
187,373

 
198,063

 
(5.4)
 
553,936

 
568,405

 
(2.5)
 
 
 
 
 
 
 
 
 
 
 
 
Hospitality Solutions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
74,818

 
$
69,911

 
7.0
 
$
221,525

 
$
206,353

 
7.4
Operating (Loss) Income
$
(4,008
)
 
$
5,826

 
NM
 
$
(15,471
)
 
$
9,927

 
NM
Adjusted Operating (Loss) Income*
$
(4,008
)
 
$
5,826

 
NM
 
$
(15,471
)
 
$
9,927

 
NM
 
 
 
 
 
 
 
 
 
 
 
 
Central Reservation System Transactions
30,462

 
26,701

 
14.1
 
82,376

 
66,219

 
24.4
 
 
 
 
 
 
 
 
 
 
 
 
*Indicates non-GAAP financial measure; see descriptions and reconciliations below


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Travel Network

Third quarter 2019 highlights (versus prior year):
Travel Network revenue increased 1.5% to $711.0 million.
Global air bookings share increased 100 basis points to 39.6%.
Global bookings increased 0.8% in the quarter, stronger than the GDS industry. Global bookings growth was supported by an increase of 5.9% in North America, representing the company's largest global footprint. Strong North American bookings growth offset a decline in international bookings. The GDS industry declined in the quarter due to challenging macroeconomic and geopolitical factors, channel shift driven by the legacy European carrier families and the insolvency of a large Indian carrier.
Operating income totaled $157.9 million, versus $182.2 million in the third quarter of 2018, and operating income margin was 22.2%.
The decline in operating income was driven by increased technology operating expenses due to the increase in the expensed portion of total technology spend (with a corresponding decrease in capitalized expenditures) driven by the Company's technology strategy, partially offset by revenue growth. In the quarter, average booking fee growth exceeded incentive expense per booking growth.

Airline Solutions

Third quarter 2019 highlights (versus prior year):
Airline Solutions revenue decreased 0.6% to $208.0 million, due to the previously discussed impact of certain outside factors including the insolvency of Jet Airways and volume reductions at a certain carrier due to a 737 MAX incident, as well as the de-migrations of Pakistan International Airlines, Philippine Airlines and Bangkok Airlines. In the quarter, SabreSonic revenue increased 2.0% and AirVision and AirCentre commercial and operations revenue decreased 4.2%. Excluding the carriers referenced above, Airline Solutions revenue increased 4.9%.
Airline passengers boarded declined 5.4% in the quarter. Excluding the carriers referenced above, airline passengers boarded grew 4.0%.
Operating income totaled $24.6 million, versus $28.5 million in the third quarter of 2018, and operating income margin was 11.8%.
The decline in operating income was primarily driven by the increase in the expensed portion of total technology spend (with a corresponding decrease in capitalized expenditures) driven by the Company's technology strategy, partially offset by a reduction in benefits and other labor-related costs.



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Hospitality Solutions

Third quarter 2019 highlights (versus prior year):
Hospitality Solutions revenue increased 7.0% to $74.8 million, primarily driven by growth in central reservation system transactions.
Central reservation system transactions increased 14.1% to 30.5 million.
Operating loss was $4.0 million, versus income of $5.8 million in the third quarter of 2018.
The decline in operating income was driven by increased technology operating expenses due to the increase in the expensed portion of total technology spend (with a corresponding decrease in capitalized expenditures) driven by the Company's technology strategy and higher depreciation and amortization, partially offset by revenue growth.




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Business Outlook and Financial Guidance

With respect to the 2019 guidance below:
Full-year Adjusted EPS guidance consists of (1) full-year expected net income attributable to common stockholders adjusted for the estimated impact of loss from discontinued operations, net of tax, of approximately $5 million; net income attributable to noncontrolling interests of approximately $5 million; acquisition-related amortization of approximately $65 million; stock-based compensation expense of approximately $70 million; other costs including litigation, net, acquisition-related costs, other foreign non-income tax matters and foreign exchange gains and losses of $20 million; and the tax impact of the above adjustments of approximately $40 million, divided by (2) the projected weighted-average diluted common share count for the full year of approximately 277 million.
Full-year Free Cash Flow guidance consists of expected full-year cash provided by operating activities of $585 million to $605 million less additions to property and equipment of $135 million to $145 million.

Sabre narrowed its full-year 2019 guidance, summarized below:

($ millions, except EPS)
2019 Guidance
Revenue
$3,965M - $4,005M
 
 
Adjusted EPS
$0.95 - $1.02
 
 
Free Cash Flow
Approximately $455M

Additional guidance metrics are included in the slide presentation and prepared remarks regarding Sabre's third quarter 2019 earnings conference call, which have been posted on the Sabre Investor Relations website at investors.sabre.com.



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Conference Call

Sabre will conduct its third quarter 2019 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.

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


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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.

Note on Non-GAAP Financial Measures

This press release includes unaudited non-GAAP financial measures, including Adjusted Gross Profit, Adjusted Operating Income (Loss), Adjusted Net Income from continuing operations ("Adjusted Net Income"), Adjusted EBITDA, Adjusted EBITDA Less Capitalized Software Development, Adjusted Net Income from continuing operations per share ("Adjusted EPS"), Free Cash Flow, and the ratios based on these financial measures. In addition, we provide certain forward guidance with respect to 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.

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," "outlook," "will," "expects," "trend", "continue," "commit," "momentum," "estimate," "project," "believe," "accelerate," "preliminary," "anticipate," “may,” “should,” “would,” “intend," “potential,” "long-term," "growth," "results" 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


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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, including from airlines' insolvency, suspension of service or aircraft groundings, travel suppliers' usage of alternative distribution models, exposure to pricing pressure in the Travel Network business, changes affecting travel supplier customers, maintenance of the integrity of our systems and infrastructure and the effect of any security breaches, failure to adapt to technological advancements, competition in the travel distribution market and solutions markets, implementation of software solutions, reliance on third parties to provide information technology services, the implementation and effects of new or renewed agreements, dependence on establishing, maintaining and renewing contracts with customers and other counterparties and collecting amounts due to us under these agreements, dependence on relationships with travel buyers, our collection, processing, storage, use and transmission of personal data and risks associated with PCI compliance, our ability to recruit, train and retain employees, including our key executive officers and technical employees, the financial and business results and effects of the acquisition described in this release and other acquisitions, including related costs, and, as applicable, the closing and integration of these acquisitions, the effects of any litigation and regulatory reviews and investigations, including with respect to these acquisitions, 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 the value of our brands, failure to comply with regulations, use of third-party distributor partners, the effects of the implementation of new accounting standards, and tax-related matters, including the effect of the Tax Cuts and Jobs Act. More information about potential risks and uncertainties that could affect our business and results of operations is included in the "Risk Factors" section in our Quarterly Report on Form 10-Q filed with the SEC on August 1, 2019, in the "Risk Factors" and “Forward-Looking Statements” sections in our Annual Report on Form 10-K filed with the SEC on February 15, 2019 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.





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Contacts:
Media
 
Kristin Hays
 
kristin.hays@sabre.com
 
sabrenews@sabre.com
 
 
 
Investors
 
Jennifer Thorington
 
jennifer.spivack@sabre.com
 
sabre.investorrelations@sabre.com
 


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SABRE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Revenue
$
984,199

 
$
970,283

 
$
3,033,566

 
$
2,943,028

Cost of revenue
750,821

 
703,368

 
2,301,772

 
2,117,984

Selling, general and administrative
119,918

 
130,152

 
426,014

 
384,047

Operating income
113,460

 
136,763

 
305,780

 
440,997

Other income (expense):
 

 
 

 
 
 
 
Interest expense, net
(39,743
)
 
(39,291
)
 
(117,364
)
 
(116,809
)
Loss on extinguishment of debt

 

 

 
(633
)
Joint venture equity income
1,027

 
333

 
1,973

 
2,455

Other, net
(1,769
)
 
(1,905
)
 
(6,118
)
 
(10,746
)
Total other expense, net
(40,485
)
 
(40,863
)
 
(121,509
)
 
(125,733
)
Income from continuing operations before income taxes
72,975

 
95,900

 
184,271

 
315,264

Provision for income taxes
7,795

 
25,021

 
31,783

 
61,371

Income from continuing operations
65,180

 
70,879

 
152,488

 
253,893

(Loss) Income from discontinued operations, net of tax
(596
)
 
3,664

 
(698
)
 
3,217

Net income
64,584

 
74,543

 
151,790

 
257,110

Net income attributable to noncontrolling interests
771

 
1,538

 
3,289

 
3,979

Net income attributable to common stockholders
$
63,813

 
$
73,005

 
$
148,501

 
$
253,131

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

 
 

 
 
 
 
Income from continuing operations
$
0.24

 
$
0.25

 
$
0.54

 
$
0.91

(Loss) Income from discontinued operations

 
0.01

 

 
0.01

Net income per common share
$
0.24

 
$
0.26

 
$
0.54

 
$
0.92

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

 
 

 
 
 
 
Income from continuing operations
$
0.23

 
$
0.25

 
$
0.54

 
$
0.90

(Loss) Income from discontinued operations

 
0.01

 

 
0.01

Net income per common share
$
0.23

 
$
0.26

 
$
0.54

 
$
0.91

Weighted-average common shares outstanding:
 

 
 

 
 
 
 
Basic
273,763

 
275,175

 
274,524

 
275,205

Diluted
276,235

 
277,528

 
276,474

 
276,819

 
 
 
 
 
 
 
 
Dividends per common share
$
0.14

 
$
0.14

 
$
0.42

 
$
0.42


12


SABRE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
September 30, 2019
 
December 31, 2018
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
473,428

 
$
509,265

Accounts receivable, net
581,477

 
508,122

Prepaid expenses and other current assets
141,043

 
170,243

Total current assets
1,195,948

 
1,187,630

Property and equipment, net of accumulated depreciation of $1,743,531 and $1,524,795
658,105

 
790,372

Investments in joint ventures
27,993

 
27,769

Goodwill
2,549,004

 
2,552,369

Acquired customer relationships, net of accumulated amortization of $728,772 and $709,824
303,220

 
323,731

Other intangible assets, net of accumulated amortization of $664,043 and $634,995
260,469

 
289,517

Deferred income taxes
26,900

 
24,322

Other assets, net
699,095

 
610,671

Total assets
$
5,720,734

 
$
5,806,381

 
 
 
 
Liabilities and stockholders’ equity
 

 
 

Current liabilities
 

 
 

Accounts payable
$
194,883

 
$
165,227

Accrued compensation and related benefits
83,078

 
112,866

Accrued subscriber incentives
333,673

 
301,530

Deferred revenues
93,197

 
80,902

Other accrued liabilities
204,604

 
185,178

Current portion of debt
82,167

 
68,435

Tax Receivable Agreement
71,666

 
104,257

Total current liabilities
1,063,268

 
1,018,395

Deferred income taxes
97,634

 
135,753

Other noncurrent liabilities
323,517

 
340,495

Long-term debt
3,280,204

 
3,337,467

 
 
 
 
Stockholders’ equity
 

 
 

Common Stock: $0.01 par value; 450,000 authorized shares; 294,426 and 291,664 shares issued, 273,851 and 275,352 shares outstanding at September 30, 2019 and December 31, 2018, respectively
2,944

 
2,917

Additional paid-in capital
2,301,486

 
2,243,419

Treasury Stock, at cost, 20,575 and 16,312 shares at September 30, 2019 and December 31, 2018, respectively
(468,366
)
 
(377,980
)
Retained deficit
(735,250
)
 
(768,566
)
Accumulated other comprehensive loss
(152,626
)
 
(132,724
)
Noncontrolling interest
7,923

 
7,205

Total stockholders’ equity
956,111

 
974,271

Total liabilities and stockholders’ equity
$
5,720,734

 
$
5,806,381


13


SABRE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Nine Months Ended September 30,
 
2019
 
2018
Operating Activities
 
 
 
Net income
$
151,790

 
$
257,110

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

 
 

Depreciation and amortization
311,905

 
307,551

Amortization of upfront incentive consideration
59,825

 
57,324

Stock-based compensation expense
51,083

 
41,445

Deferred income taxes
(26,622
)
 
74,263

Allowance for doubtful accounts
16,746

 
7,433

Amortization of debt issuance costs
2,979

 
2,988

Joint venture equity income
(1,973
)
 
(2,455
)
Dividends received from joint venture investments
1,352

 
1,193

Loss (income) from discontinued operations
698

 
(3,217
)
Loss on extinguishment of debt

 
633

Debt modification costs

 
1,558

Other
(699
)
 
5,146

Changes in operating assets and liabilities:
 

 
 

Accounts and other receivables
(66,875
)
 
(114,043
)
Prepaid expenses and other current assets
(9,191
)
 
3,417

Capitalized implementation costs
(20,297
)
 
(29,781
)
Upfront incentive consideration
(64,979
)
 
(67,697
)
Other assets
12,768

 
(18,989
)
Accrued compensation and related benefits
(25,873
)
 
(31,308
)
Accounts payable and other accrued liabilities
34,888

 
234

Deferred revenue including upfront solution fees
(3,160
)
 
43,388

Cash provided by operating activities
424,365

 
536,193

Investing Activities
 

 
 

Additions to property and equipment
(92,124
)
 
(205,664
)
Other investing activities
(16,358
)
 

Cash used in investing activities
(108,482
)
 
(205,664
)
Financing Activities
 

 
 

Cash dividends paid to common stockholders
(115,185
)
 
(115,557
)
Payments on Tax Receivable Agreement
(101,482
)
 
(58,908
)
Payments on borrowings from lenders
(87,608
)
 
(35,483
)
Repurchase of common stock
(77,636
)
 
(26,281
)
Proceeds of borrowings from lenders
45,000

 

Net (payments) receipts on the settlement of equity-based awards
(5,738
)
 
2,758

Debt issuance and modification costs

 
(1,567
)
Other financing activities
(8,775
)
 
(17,371
)
Cash used in financing activities
(351,424
)
 
(252,409
)
Cash Flows from Discontinued Operations
 

 
 

Cash (used in) provided by operating activities
(2,243
)
 
633

Cash (used in) provided by discontinued operations
(2,243
)
 
633

Effect of exchange rate changes on cash and cash equivalents
1,947

 
4,187

(Decrease) increase in cash and cash equivalents
(35,837
)
 
82,940

Cash and cash equivalents at beginning of period
509,265

 
361,381

Cash and cash equivalents at end of period
$
473,428

 
$
444,321


14


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

Reconciliation of net income (loss) attributable to common stockholders to Adjusted Net Income, Adjusted EBITDA and Adjusted Operating Income:

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Net income attributable to common stockholders
$
63,813

 
$
73,005

 
$
148,501

 
$
253,131

Loss (Income) from discontinued operations, net of tax
596

 
(3,664
)
 
698

 
(3,217
)
Net income attributable to noncontrolling interests(1)
771

 
1,538

 
3,289

 
3,979

Income from continuing operations
65,180

 
70,879

 
152,488

 
253,893

Adjustments:
 

 
 

 
 

 
 

Acquisition-related amortization(2a)
15,976

 
16,407

 
47,971

 
51,585

Loss on extinguishment of debt

 

 

 
633

Other, net(4)
1,769

 
1,905

 
6,118

 
10,746

Acquisition-related costs(6)
9,696

 

 
30,337

 

Litigation costs, net(5)
(24,179
)
 
5,225

 
(21,355
)
 
7,073

Stock-based compensation
17,094

 
15,245

 
51,083

 
41,445

Tax impact of net income adjustments(7)
(11,971
)
 
(689
)
 
(31,424
)
 
(32,850
)
Adjusted Net Income from continuing operations
$
73,565

 
$
108,972

 
$
235,218

 
$
332,525

Adjusted Net Income from continuing operations per share
$
0.27

 
$
0.39

 
$
0.85

 
$
1.20

Diluted weighted-average common shares outstanding
276,235

 
277,528

 
276,474

 
276,819

 
 
 
 
 
 
 
 
Adjusted Net Income from continuing operations
$
73,565

 
$
108,972

 
$
235,218

 
$
332,525

Adjustments:
 

 
 

 
 

 
 

Depreciation and amortization of property and equipment(2b)
78,060

 
76,226

 
232,617

 
225,649

Amortization of capitalized implementation costs(2c)
9,579

 
10,099

 
31,317

 
30,317

Amortization of upfront incentive consideration(3)
20,851

 
18,207

 
59,825

 
57,324

Interest expense, net
39,743

 
39,291

 
117,364

 
116,809

Remaining provision for income taxes
19,766

 
25,710

 
63,207

 
94,221

Adjusted EBITDA
$
241,564

 
$
278,505

 
$
739,548

 
$
856,845

Less:
 
 
 
 
 
 
 
Depreciation and amortization(2)
103,615

 
102,732

 
311,905

 
307,551

Amortization of upfront incentive consideration(3)
20,851

 
18,207

 
59,825

 
57,324

Acquisition-related amortization(2a)
(15,976
)
 
(16,407
)
 
(47,971
)
 
(51,585
)
Adjusted Operating Income
$
133,074

 
$
173,973

 
$
415,789

 
$
543,555












15



Reconciliation of net income (loss) attributable to common stockholders to Adjusted Net Income, Adjusted EBITDA and Adjusted EBITDA Less Capitalized Software Development:

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Net income attributable to common stockholders
$
63,813

 
$
73,005

 
$
148,501

 
$
253,131

Loss (Income) from discontinued operations, net of tax
596

 
(3,664
)
 
698

 
(3,217
)
Net income attributable to noncontrolling interests(1)
771

 
1,538

 
3,289

 
3,979

Income from continuing operations
65,180

 
70,879

 
152,488

 
253,893

Adjustments:
 

 
 

 
 

 
 

Acquisition-related amortization(2a)
15,976

 
16,407

 
47,971

 
51,585

Loss on extinguishment of debt

 

 

 
633

Other, net(4)
1,769

 
1,905

 
6,118

 
10,746

Acquisition-related costs(6)
9,696

 

 
30,337

 

Litigation costs, net(5)
(24,179
)
 
5,225

 
(21,355
)
 
7,073

Stock-based compensation
17,094

 
15,245

 
51,083

 
41,445

Tax impact of net income adjustments(7)
(11,971
)
 
(689
)
 
(31,424
)
 
(32,850
)
Adjusted Net Income from continuing operations
$
73,565

 
$
108,972

 
$
235,218

 
$
332,525

Adjusted Net Income from continuing operations per share
$
0.27

 
$
0.39

 
$
0.85

 
$
1.20

Diluted weighted-average common shares outstanding
276,235

 
277,528

 
276,474

 
276,819

 
 
 
 
 
 
 
 
Adjusted Net Income from continuing operations
$
73,565

 
$
108,972

 
$
235,218

 
$
332,525

Adjustments:
 

 
 

 
 

 
 

Depreciation and amortization of property and equipment(2b)
78,060

 
76,226

 
232,617

 
225,649

Amortization of capitalized implementation costs(2c)
9,579

 
10,099

 
31,317

 
30,317

Amortization of upfront incentive consideration(3)
20,851

 
18,207

 
59,825

 
57,324

Interest expense, net
39,743

 
39,291

 
117,364

 
116,809

Remaining provision for income taxes
19,766

 
25,710

 
63,207

 
94,221

Adjusted EBITDA
$
241,564

 
$
278,505

 
$
739,548

 
$
856,845

Less:
 
 
 
 
 
 
 
Capitalized Software Development
19,489

 
64,624

 
70,818

 
184,783

Adjusted EBITDA Less Capitalized Software Development
$
222,075

 
$
213,881

 
$
668,730

 
$
672,062
















16





Reconciliation of Free Cash Flow:

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Cash provided by operating activities
$
166,704

 
$
194,354

 
$
424,365

 
$
536,193

Cash used in investing activities
(32,319
)
 
(73,778
)
 
(108,482
)
 
(205,664
)
Cash used in financing activities
(58,449
)
 
(50,884
)
 
(351,424
)
 
(252,409
)


 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Cash provided by operating activities
$
166,704

 
$
194,354

 
$
424,365

 
$
536,193

Additions to property and equipment
(24,928
)
 
(73,778
)
 
(92,124
)
 
(205,664
)
Free Cash Flow
141,776

 
120,576

 
332,241

 
330,529


17


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

 
Three Months Ended
 
 
 
Dec 31, 2018
 
Mar 31, 2019
 
Jun 30, 2019
 
Sep 30, 2019
 
LTM
Net income attributable to common stockholders
$
84,400

 
$
56,850

 
$
27,838

 
$
63,813

 
$
232,901

Loss (Income) from discontinued operations, net of tax
1,478

 
1,452

 
(1,350
)
 
596

 
2,176

Net income attributable to noncontrolling interests(1)
1,150

 
912

 
1,606

 
771

 
4,439

Income from continuing operations
87,028

 
59,214

 
28,094

 
65,180

 
239,516

Adjustments:
 
 
 
 
 
 
 
 
 
Acquisition-related amortization(2a)
16,423

 
15,984

 
16,011

 
15,976

 
64,394

Other, net(4)
(2,237
)
 
1,870

 
2,479

 
1,769

 
3,881

Acquisition-related costs(6)
3,266

 
11,706

 
8,935

 
9,696

 
33,603

Litigation costs, net(5)
1,250

 
1,438

 
1,386

 
(24,179
)
 
(20,105
)
Stock-based compensation
15,818

 
15,694

 
18,295

 
17,094

 
66,901

Depreciation and amortization of property and equipment(2b)
77,963

 
75,348

 
79,209

 
78,060

 
310,580

Amortization of capitalized implementation costs(2c)
11,407

 
12,111

 
9,627

 
9,579

 
42,724

Amortization of upfront incentive consideration(3)
20,298

 
19,128

 
19,846

 
20,851

 
80,123

Interest expense, net
40,208

 
38,013

 
39,608

 
39,743

 
157,572

Provision for income taxes
(3,879
)
 
11,843

 
12,145

 
7,795

 
27,904

Adjusted EBITDA
$
267,545

 
$
262,349

 
$
235,635

 
$
241,564

 
$
1,007,093

 
 
 
 
 
 
 
 
 
 
Net Debt (total debt, less cash)
 
 
 
 
 
 


 
$
2,910,713

Net Debt / LTM Adjusted EBITDA
 
 
 
 
 
 
 
 
2.9x




18


 
Three Months Ended
 
 
 
Dec 31, 2017
 
Mar 31, 2018
 
Jun 30, 2018
 
Sep 30, 2018
 
LTM
Net income attributable to common stockholders
$
82,090

 
$
87,880

 
$
92,246

 
$
73,005

 
$
335,221

(Income) loss from discontinued operations, net of tax
(296
)
 
1,207

 
(760
)
 
(3,664
)
 
(3,513
)
Net income attributable to noncontrolling interests(1)
1,387

 
1,362

 
1,079

 
1,538

 
5,366

Income from continuing operations
83,181

 
90,449

 
92,565

 
70,879

 
337,074

Adjustments:
 
 
 
 
 
 
 
 
 
Acquisition-related amortization(2a)
20,194

 
17,590

 
17,588

 
16,407

 
71,779

Impairment and related charges
(10,910
)
 

 

 

 
(10,910
)
Loss on extinguishment of debt

 
633

 

 

 
633

Other, net(4)
(56,318
)
 
1,106

 
7,735

 
1,905

 
(45,572
)
Restructuring and other costs
(1,329
)
 

 

 

 
(1,329
)
Litigation costs, net(5)
963

 
828

 
1,020

 
5,225

 
8,036

Stock-based compensation
10,276

 
12,606

 
13,594

 
15,245

 
51,721

Depreciation and amortization of property and equipment(2b)
73,438

 
74,463

 
74,960

 
76,226

 
299,087

Amortization of capitalized implementation costs(2c)
11,510

 
9,823

 
10,395

 
10,099

 
41,827

Amortization of upfront incentive consideration(3)
17,113

 
19,456

 
19,661

 
18,207

 
74,437

Interest expense, net
37,348

 
38,109

 
39,409

 
39,291

 
154,157

Provision for income taxes
71,201

 
36,275

 
75

 
25,021

 
132,572

Adjusted EBITDA
$
256,667

 
$
301,338

 
$
277,002

 
$
278,505

 
$
1,113,512

 
 
 
 
 
 
 
 
 
 
Net Debt (total debt, less cash)
 
 
 
 
 
 
 
 
$
3,002,850

Net Debt / LTM Adjusted EBITDA
 
 
 
 
 
 
 
 
2.7x


19


Reconciliation of operating income (loss) to Adjusted Gross Profit, Adjusted EBITDA and Adjusted Operating Income (Loss) by business segment:
 
Three Months Ended September 30, 2019
 
Travel
Network
 
Airline
Solutions
 

Hospitality
Solutions
 
Corporate
 
Total
Operating income (loss)
$
157,911

 
$
24,644

 
$
(4,008
)
 
$
(65,087
)
 
$
113,460

Add back:
 
 
 
 
 
 
 
 
 
Selling, general and administrative
43,037

 
18,747

 
8,872

 
49,262

 
119,918

Cost of revenue adjustments:
 
 
 
 
 
 
 
 
 
Depreciation and amortization(2)
27,200

 
39,812

 
12,287

 
5,963

 
85,262

Amortization of upfront incentive consideration(3)
20,851

 

 

 

 
20,851

Stock-based compensation

 

 

 
6,927

 
6,927

Adjusted Gross Profit
248,999

 
83,203

 
17,151

 
(2,935
)
 
346,418

Selling, general and administrative
(43,037
)
 
(18,747
)
 
(8,872
)
 
(49,262
)
 
(119,918
)
Joint venture equity income
1,027

 

 

 

 
1,027

Selling, general and administrative adjustments:
 
 
 
 
 
 
 
 
 
Depreciation and amortization(2)
3,317

 
2,489

 
1,339

 
11,208

 
18,353

Acquisition-related costs(6)

 

 

 
9,696

 
9,696

Litigation costs, net(5)

 

 

 
(24,179
)
 
(24,179
)
Stock-based compensation

 

 

 
10,167

 
10,167

Adjusted EBITDA
210,306

 
66,945

 
9,618

 
(45,305
)
 
241,564

Less:
 
 
 
 
 
 
 
 
 
Depreciation and amortization(2)
30,517

 
42,301

 
13,626

 
17,171

 
103,615

Amortization of upfront incentive consideration(3)
20,851

 

 

 

 
20,851

Acquisition-related amortization(2a)

 

 

 
(15,976
)
 
(15,976
)
Adjusted Operating Income (Loss)
$
158,938

 
$
24,644

 
$
(4,008
)
 
$
(46,500
)
 
$
133,074

 
 
 
 
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
Operating income margin
22.2
%
 
11.8
%
 
NM

 
NM

 
11.5
%
Adjusted Operating Income Margin
22.4
%
 
11.8
%
 
NM

 
NM

 
13.5
%

20


  
 
Three Months Ended September 30, 2018
 
Travel
Network
 
Airline
Solutions
 

Hospitality
Solutions
 
Corporate
 
Total
Operating income (loss)
$
182,200

 
$
28,505

 
$
5,826

 
$
(79,768
)
 
$
136,763

Add back:
 
 
 
 
 
 
 
 
 
Selling, general and administrative
41,633

 
18,710

 
7,844

 
61,965

 
130,152

Cost of revenue adjustments:
 
 
 
 
 
 
 
 
 
Depreciation and amortization(2)
26,564

 
43,213

 
9,399

 
6,376

 
85,552

Amortization of upfront incentive consideration(3)
18,207

 

 

 

 
18,207

Stock-based compensation

 

 

 
7,112

 
7,112

Adjusted Gross Profit
268,604

 
90,428

 
23,069

 
(4,315
)
 
377,786

Selling, general and administrative
(41,633
)
 
(18,710
)
 
(7,844
)
 
(61,965
)
 
(130,152
)
Joint venture equity income
333

 

 

 

 
333

Selling, general and administrative adjustments:
 
 
 
 
 
 
 
 
 
 Depreciation and amortization(2)
2,679

 
2,376

 
891

 
11,234

 
17,180

 Litigation costs, net(5)

 

 

 
5,225

 
5,225

Stock-based compensation

 

 

 
8,133

 
8,133

Adjusted EBITDA
229,983

 
74,094

 
16,116

 
(41,688
)
 
278,505

Less:
 
 
 
 
 
 
 
 
 
Depreciation and amortization(2)
29,243

 
45,589

 
10,290

 
17,610

 
102,732

Amortization of upfront incentive consideration(3)
18,207

 

 

 

 
18,207

Acquisition-related amortization(2a)

 

 

 
(16,407
)
 
(16,407
)
Adjusted Operating Income (Loss)
$
182,533

 
$
28,505

 
$
5,826

 
$
(42,891
)
 
$
173,973

 
 
 
 
 
 
 
 
 
 
Operating income margin
26.0
%
 
13.6
%
 
8.3
%
 
NM

 
14.1
%
Adjusted Operating Income Margin
26.1
%
 
13.6
%
 
8.3
%
 
NM

 
17.9
%

21


 
Nine Months Ended September 30, 2019
 
Travel
Network
 
Airline
Solutions
 

Hospitality
Solutions
 
Corporate
 
Total
Operating income (loss)
$
509,934

 
$
62,728

 
$
(15,471
)
 
$
(251,411
)
 
$
305,780

Add back:
 
 
 
 
 
 
 
 
 
Selling, general and administrative
131,979

 
63,866

 
29,003

 
201,166

 
426,014

Cost of revenue adjustments:
 
 
 
 
 
 
 
 
 
Depreciation and amortization(2)
82,234

 
120,541

 
36,096

 
17,904

 
256,775

Amortization of upfront incentive consideration(3)
59,825

 

 

 

 
59,825

Stock-based compensation

 

 

 
21,552

 
21,552

Adjusted Gross Profit
783,972

 
247,135

 
49,628

 
(10,789
)
 
1,069,946

Selling, general and administrative
(131,979
)
 
(63,866
)
 
(29,003
)
 
(201,166
)
 
(426,014
)
Joint venture equity income
1,973

 

 

 

 
1,973

Selling, general and administrative adjustments:
 
 
 
 
 
 
 
 
 
Depreciation and amortization(2)
9,559

 
8,015

 
3,872

 
33,684

 
55,130

Acquisition-related costs(6)

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