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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-36422
 
 
Sabre Corporation
(Exact name of registrant as specified in its charter)
 
  
Delaware
 
20-8647322
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
3150 Sabre Drive
Southlake, TX 76092
(Address, including zip code, of principal executive offices)
(682605-1000
(Registrant’s telephone number, including area code)
 
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: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes      No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    Yes     No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
  
Accelerated filer
 
Non-accelerated filer
 
  
Smaller reporting company
 
 
 
 
 
Emerging growth company
 
If an 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. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes    No 
As of October 25, 2019, 273,886,152 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.




SABRE CORPORATION
TABLE OF CONTENTS
 
 
 
 
Page No.
    Item 1.
 
 
 
 
 
 
 
     Item 2.
     Item 3.
     Item 4.
 
 
     Item 1.
     Item 1A.
     Item 2.
     Item 6.
 




PART I. FINANCIAL INFORMATION
 
ITEM 1.
FINANCIAL STATEMENTS

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

See Notes to Consolidated Financial Statements.

1



SABRE CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Net income
$
64,584

 
$
74,543

 
$
151,790

 
$
257,110

Other comprehensive income, net of tax:
 
 
 
 
 

 
 

Foreign currency translation adjustments ("CTA")
(4,344
)
 
(728
)
 
(5,432
)
 
(4,052
)
Retirement-related benefit plans:
 
 
 
 
 

 
 

Amortization of prior service credits, net of taxes of $80, $80, $241 and $240
(278
)
 
(278
)
 
(834
)
 
(865
)
Amortization of actuarial losses, net of taxes of $(329), $(406), $(1,035) and $(1,212)
1,713

 
1,516

 
4,157

 
4,311

Net change in retirement-related benefit plans, net of tax
1,435

 
1,238

 
3,323

 
3,446

Derivatives and securities:
 
 
 
 
 

 
 

Unrealized (losses) gains, net of taxes of $1,633, $(442), $5,875 and $(1,351)
(6,356
)
 
1,436

 
(20,939
)
 
3,621

Reclassification adjustment for realized gains, net of taxes of $(267), $(661), $(907) and $(441)
1,034

 
2,406

 
3,544

 
727

Net change in derivatives and securities, net of tax
(5,322
)
 
3,842

 
(17,395
)
 
4,348

Share of other comprehensive income (loss) of joint venture
21

 
(374
)
 
(398
)
 
(105
)
Other comprehensive (loss) income
(8,210
)
 
3,978

 
(19,902
)
 
3,637

Comprehensive income
56,374

 
78,521

 
131,888

 
260,747

Less: Comprehensive income attributable to noncontrolling interests
(771
)
 
(1,538
)
 
(3,289
)
 
(3,979
)
Comprehensive income attributable to Sabre Corporation
$
55,603

 
$
76,983

 
$
128,599

 
$
256,768

 
See Notes to Consolidated Financial Statements.

2





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

Commitments and contingencies (Note 10)


 


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


See Notes to Consolidated Financial Statements.

3





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

See Notes to Consolidated Financial Statements.


4



SABRE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
 
 
Stockholders’ Equity (Deficit)
 
 
Common Stock
 
Additional
Paid in
Capital
 
Treasury Stock
 
Retained
Earnings
(Deficit)
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interest
 
Total
Stockholders'
Equity
 
 
Shares
 
Amount
 
 
Shares
 
Amount
 
 
 
 
Balance at December 31, 2018
 
291,663,954

 
$
2,917

 
$
2,243,419

 
16,311,538

 
$
(377,980
)
 
$
(768,566
)
 
$
(132,724
)
 
$
7,205

 
$
974,271

Comprehensive income
 

 

 

 

 

 
56,850

 
(4,528
)
 
894

 
53,216

Common stock dividends(1)
 

 

 

 

 

 
(38,594
)
 

 

 
(38,594
)
Repurchase of common stock
 

 

 

 
1,491,521

 
(32,146
)
 

 

 

 
(32,146
)
Settlement of stock-based awards
 
2,245,107

 
22

 
3,311

 
477,357

 
(10,175
)
 

 

 

 
(6,842
)
Stock-based compensation expense
 

 

 
15,694

 

 

 

 

 

 
15,694

Balance at March 31, 2019
 
293,909,061

 
$
2,939

 
$
2,262,424

 
18,280,416

 
$
(420,301
)

$
(750,310
)

$
(137,252
)

$
8,099


$
965,599

Comprehensive income
 

 

 

 

 

 
27,838

 
(7,164
)
 
1,606

 
22,280

Common stock dividends(1)
 

 

 

 

 

 
(38,281
)
 

 

 
(38,281
)
Repurchase of common stock
 

 

 

 
2,182,247

 
(45,490
)
 

 

 

 
(45,490
)
Settlement of stock-based awards
 
250,503

 
3

 
1,276

 
65,149

 
(1,441
)
 

 

 

 
(162
)
Stock-based compensation expense
 

 

 
18,295

 

 

 

 

 

 
18,295

Dividends paid to non-controlling interest on subsidiary common stock
 

 

 

 

 

 

 

 
(2,553
)
 
(2,553
)
Balance at June 30, 2019
 
294,159,564

 
$
2,942

 
$
2,281,995

 
20,527,812

 
$
(467,232
)

$
(760,753
)

$
(144,416
)

$
7,152


$
919,688

Comprehensive income
 

 

 

 

 

 
63,813

 
(8,210
)
 
771

 
56,374

Common stock dividends(1)
 

 

 

 

 

 
(38,310
)
 

 

 
(38,310
)
Settlement of stock-based awards
 
266,676

 
2

 
2,397

 
47,815

 
(1,134
)
 

 

 

 
1,265

Stock-based compensation expense
 

 

 
17,094

 

 

 

 

 

 
17,094

Balance at September 30, 2019
 
294,426,240

 
$
2,944

 
$
2,301,486

 
20,575,627

 
$
(468,366
)
 
$
(735,250
)
 
$
(152,626
)
 
$
7,923

 
$
956,111


(1) A quarterly cash dividend of $0.14 per share on our common stock.
 
 
Stockholders’ Equity (Deficit)
 
 
Common Stock
 
Additional
Paid in
Capital
 
Treasury Stock
 
Retained
Earnings
(Deficit)
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interest
 
Total
Stockholders'
Equity
 
 
Shares
 
Amount
 
 
Shares
 
Amount
 
 
 
 
Balance at December 31, 2017
 
289,137,901

 
$
2,891

 
$
2,174,187

 
14,795,726

 
$
(341,846
)
 
$
(1,053,446
)
 
$
(88,484
)
 
$
5,198

 
$
698,500

Comprehensive income
 

 

 

 

 

 
87,880

 
9,886

 
1,377

 
99,143

Common stock dividends(1)
 

 

 

 

 

 
(38,560
)
 

 

 
(38,560
)
Settlement of stock-based awards
 
1,774,147

 
18

 
3,609

 
384,599

 
(8,471
)
 

 

 

 
(4,844
)
Stock-based compensation expense
 

 

 
12,605

 

 

 

 

 

 
12,605

Adoption of New Accounting Standards
 

 

 

 

 

 
79,153

 

 

 
79,153

Balance at March 31, 2018
 
290,912,048

 
$
2,909


$
2,190,401

 
15,180,325

 
$
(350,317
)
 
$
(924,973
)
 
$
(78,598
)
 
$
6,575

 
$
845,997

Comprehensive income
 

 

 

 

 

 
92,245

 
(32,527
)
 
1,104

 
60,822

Common stock dividends(1)
 

 

 

 

 

 
(38,494
)
 

 

 
(38,494
)
Repurchase of common stock
 

 

 

 
1,075,255

 
(26,281
)
 

 

 

 
(26,281
)
Settlement of stock-based awards
 
484,468

 
5

 
6,824

 
16,021

 
(402
)
 

 

 

 
6,427

Stock-based compensation expense
 

 

 
13,595

 

 

 

 

 

 
13,595

Dividends paid to non-controlling interest on subsidiary common stock
 

 

 

 

 

 

 

 
(2,815
)
 
(2,815
)
Adoption of New Accounting Standards
 

 

 

 

 

 
22,274

 

 

 
22,274

Balance at June 30, 2018
 
291,396,516

 
$
2,914


$
2,210,820

 
16,271,601

 
$
(377,000
)
 
$
(848,948
)
 
$
(111,125
)
 
$
4,864

 
$
881,525

Comprehensive income
 

 

 

 

 

 
73,004

 
3,979

 
1,406

 
78,389

Common stock dividends(1)
 

 

 

 

 

 
(38,502
)
 

 

 
(38,502
)
Settlement of stock-based awards
 
182,430

 
2

 
1,616

 
13,147

 
(341
)
 

 

 

 
1,277

Stock-based compensation expense
 

 

 
15,246

 

 

 

 

 

 
15,246

Balance at September 30, 2018
 
291,578,946

 
$
2,916

 
$
2,227,682

 
16,284,748

 
$
(377,341
)
 
$
(814,446
)
 
$
(107,146
)
 
$
6,270

 
$
937,935



(1) A quarterly cash dividend of $0.14 per share on our common stock.


See Notes to Consolidated Financial Statements.




5



SABRE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 

1. General Information
Sabre Corporation is a Delaware corporation formed in December 2006. On March 30, 2007, Sabre Corporation acquired Sabre Holdings Corporation (“Sabre Holdings”). Sabre Holdings is the sole subsidiary of Sabre Corporation. Sabre GLBL Inc. ("Sabre GLBL") is the principal operating subsidiary and sole direct subsidiary of Sabre Holdings. Sabre GLBL or its direct or indirect subsidiaries conduct all of our businesses. In these consolidated financial statements, references to “Sabre,” the “Company,” “we,” “our,” “ours” and “us” refer to Sabre Corporation and its consolidated subsidiaries unless otherwise stated or the context otherwise requires.
We connect people and places with technology that reimagines the business of travel. We operate our business and present our results through three business segments: (i) Travel Network, our global travel marketplace for travel suppliers and travel buyers, (ii) Airline Solutions, a broad portfolio of software technology products and solutions primarily for airlines, and (iii) Hospitality Solutions, an extensive suite of leading software solutions for hoteliers.
Basis of Presentation—The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. Operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2019. The accompanying interim financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K filed with the SEC on February 15, 2019.
We consolidate all majority-owned subsidiaries and companies over which we exercise control through majority voting rights. No entities are consolidated due to control through operating agreements, financing agreements or as the primary beneficiary of a variable interest entity.
The consolidated financial statements include our accounts after elimination of all significant intercompany balances and transactions. All dollar amounts in the financial statements and the tables in the notes, except per share amounts, are stated in thousands of U.S. dollars unless otherwise indicated. All amounts in the notes reference results from continuing operations unless otherwise indicated.
Use of Estimates—The preparation of these interim financial statements in conformity with GAAP requires that certain amounts be recorded based on estimates and assumptions made by management. Actual results could differ from these estimates and assumptions. Our accounting policies that utilize significant estimates and assumptions include: (i) estimation for revenue recognition and multiple performance obligation arrangements, (ii) determination of the fair value of assets and liabilities acquired in a business combination, (iii) the evaluation of the recoverability of the carrying value of long-lived assets and goodwill, (iv) assumptions utilized to test recoverability of capitalized implementation costs, (v) judgments in capitalization of software developed for internal use and (vi) the evaluation of uncertainties surrounding the calculation of our tax assets and liabilities. Our use of estimates and the related accounting policies are discussed in the consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K filed with the SEC on February 15, 2019. Additionally, see Note 2. Revenue from Contracts with Customers for additional information on the use of significant estimates and assumptions in recognizing revenue.
Share Repurchase Program—In February 2017, we announced the approval of a multi-year share repurchase program (the "Share Repurchase Program") to purchase up to $500 million of Sabre's common stock outstanding. Repurchases under the Share Repurchase Program may take place in the open market or privately negotiated transactions. For the nine months ended September 30, 2019, we repurchased 3,673,768 shares totaling $78 million pursuant to the Share Repurchase Program. Approximately $287 million remains authorized for repurchases under the Share Repurchase Program as of September 30, 2019.

6



Adoption of New Accounting Standards
In July 2019, the Financial Accounting Standards Board ("FASB") issued updated guidance that clarifies or improves the disclosure and presentation requirements of a variety of codification topics by aligning them with the SEC’s regulations, thereby eliminating certain redundancies and allowing for easier application of the codification. This standard is effective upon issuance and did not have a material impact on our consolidated financial statements.
In October 2018, the FASB issued updated guidance that permits use of the Overnight Index Swap ("OIS") rate based on the Secured Overnight Financing Rate ("SOFR") as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815 in addition to the Direct Treasury obligations of the U.S. government, the London Interbank Offered Rate ("LIBOR") swap rate, the OIS rate based on the Fed Funds Effective Rate, and the Securities Industry and Financial Markets Association Municipal Swap Rate. We adopted this standard in the first quarter of 2019, which did not have a material impact on our consolidated financial statements.
In February 2016, the FASB issued updated guidance requiring organizations that lease assets—referred to as "lessees"—to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases, when the lease has a term of more than 12 months. The updated standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. In the first quarter of 2019, we adopted the new standard using the modified retrospective approach and elected the package of practical expedients and the hindsight practical expedient. See Note 9. Leases for more information on the impacts from adoption and ongoing considerations.
Recent Accounting Pronouncements
In October 2018, the FASB issued updated guidance that eliminates the requirement that entities consider indirect interests held through related parties under common control in their entirety when assessing whether a decision-making fee is a variable interest and instead requires entities to consider these indirect interests on a proportional basis. The updated standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. We do not expect the adoption of this standard will have a material impact to our consolidated financial statements.
In August 2018, the FASB issued updated guidance on customer's accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. Under this updated standard, a customer in a cloud-computing arrangement that is a service contract is required to follow guidance on software developed for internal use to determine which implementation costs to capitalize as assets or expense as incurred. This standard aligns the accounting for implementation costs for hosting arrangements, regardless of whether they convey a license to the hosted software. The standard requires that capitalized implementation costs related to a hosting arrangement that is a service contract be amortized over the term of the hosting arrangement, beginning when the component of the hosting arrangement is ready for its intended use, similar to requirements in guidance on software developed for internal use. In addition, costs incurred during the preliminary project and post-implementation phases are expensed as they are incurred. The updated standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. We do not expect the adoption of this standard will have a material impact to our consolidated financial statements.
In June 2016, the FASB issued updated guidance for the measurement of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. Under this updated standard, the current "incurred loss" approach is replaced with an "expected loss" model for instruments measured at amortized cost. For available-for-sale debt securities, allowances for losses will now be required rather than reducing the instruments carrying value. This standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the impact of this standard on our consolidated financial statements.




7



2. Revenue from Contracts with Customers
Contract Balances
Revenue recognition for a significant portion of our revenue coincides with normal billing terms, including Travel Network's transactional revenues, and Airline Solutions' and Hospitality Solutions' Software-as-a-Service ("SaaS") and hosted revenues. Timing differences among revenue recognition, unconditional rights to bill, and receipt of contract consideration may result in contract assets or contract liabilities.
The following table presents our assets and liabilities with customers as of September 30, 2019 and December 31, 2018 (in thousands):
Account
 
Consolidated Balance Sheet Location
 
September 30, 2019
 
December 31, 2018
Contract assets and customer advances and discounts(1)
 
Prepaid expenses and other current assets / other assets, net
 
$
108,370

 
$
79,268

Trade and unbilled receivables, net
 
Accounts receivable, net
 
577,023

 
501,467

Long-term trade unbilled receivables, net
 
Other assets, net
 
49,810

 
50,467

Contract liabilities
 
Deferred revenues / other noncurrent liabilities
 
179,237

 
165,858

________________________________
(1) Includes contract assets of $4 million at each of September 30, 2019 and December 31, 2018.
During the nine months ended September 30, 2019, we recognized revenue of approximately $44 million from contract liabilities that existed as of January 1, 2019. Our long-term trade unbilled receivables, net relate to license fees billed ratably over the contractual period and recognized when the customer gains control of the software. We evaluate collectability of our accounts receivable based on a combination of factors and record reserves as reflected in Note 1. Summary of Business and Significant Accounting Policies in our consolidated financial statements in our Annual Report on Form 10-K filed with the SEC on February 15, 2019.
Revenue
The following table presents our revenues disaggregated by business (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2019
 
September 30, 2018
 
September 30, 2019
 
September 30, 2018
 
 
 
 
 
 
 
 
Air
$
572,774

 
$
566,887

 
$
1,797,676