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

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 8-K

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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

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SABRE CORPORATION

(Exact name of registrant as specified in its charter)

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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

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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		Press Release dated October 31, 2019.
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

•	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

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•	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)

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•	Travel Network revenue increased 1.5% to $711.0 million.

•	Global air bookings share increased 100 basis points to 39.6%.

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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 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 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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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.

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

•	although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted Gross Profit, Adjusted EBITDA and Adjusted EBITDA Less Capitalized Software Development do not reflect cash requirements for such replacements;

•	Adjusted Operating Income (Loss), Adjusted Net Income, Adjusted EBITDA and Adjusted EBITDA Less Capitalized Software Development do not reflect changes in, or cash requirements for, our working capital needs;

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•	Adjusted EBITDA and Adjusted EBITDA Less Capitalized Software Development do not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness;

•	Adjusted EBITDA and Adjusted EBITDA Less Capitalized Software Development do not reflect tax payments that may represent a reduction in cash available to us;

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

•	other companies, including companies in our industry, may calculate Adjusted Gross Profit, Adjusted Operating Income (Loss), Adjusted Net Income, Adjusted EBITDA, Adjusted EBITDA Less Capitalized Software Development, Adjusted EPS or Free Cash Flow differently, which reduces their usefulness as comparative measures.

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(1)	Net income attributable to noncontrolling interests represents an adjustment to include earnings allocated to noncontrolling interests held in (i) Sabre Travel Network Middle East of 40%, (ii) Sabre Seyahat Dagitim Sistemleri A.S. of 40%, (iii) Sabre Travel Network Lanka (Pte) Ltd of 40%, and (iv) Sabre Bulgaria of 40%.

(2)	Depreciation and amortization expenses:

a.	Acquisition-related amortization represents amortization of intangible assets resulting from purchase accounting.

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, as well as amortization of contract acquisition costs.

(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 ten years. This consideration is made with the objective of increasing the number of clients or to ensure or improve customer loyalty. These 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 up front. These service contracts with travel agency subscribers require that the customer commit to achieving certain economic objectives and generally have terms requiring repayment of the upfront incentive consideration if those objectives are not met.

(4)	Other, net primarily includes foreign exchange gains and losses related to the remeasurement of foreign currency denominated balances included in our consolidated balance sheets into the relevant functional currency.

(5)	Litigation costs, net represent charges associated with antitrust litigation and for the three months ended September 30, 2019 include the reversal of our previously accrued loss related to the US Airways legal matter for $32 million.

(6)	Acquisition-related costs represent fees and expenses incurred associated with the 2018 agreement to acquire Farelogix, Inc.

(7)	The tax impact on net income adjustments includes the tax effect of each separate adjustment based on the statutory tax rate for the jurisdiction(s) in which the adjustment was taxable or deductible, and the tax effect of items that relate to tax specific financial transactions, tax law changes, uncertain tax positions and other items.