Release Details
Sabre Corporation Reports Second Quarter 2014 Results
"We made solid progress in the second quarter both financially and with our initiatives focused on leading the technology transformation of the travel industry," said
Q2 2014 Financial Summary
Sabre reported total consolidated revenue of
Sabre reported Airline and Hospitality Solutions revenue increased 4.9% to
On an adjusted basis, Sabre reported consolidated adjusted revenue of
Three Months Ended |
Six Months Ended |
||||||||||||||||||||
Financial Highlights (in thousands): |
2014 |
2013 |
% Change |
2014 |
2013 |
% Change |
|||||||||||||||
Total Company Excluding Travelocity: |
|||||||||||||||||||||
Revenue |
$ |
636,555 |
$ |
614,296 |
3.6 |
$ |
1,297,739 |
$ |
1,230,869 |
5.4 |
|||||||||||
Operating Income |
$ |
80,866 |
$ |
(55,544) |
245.6 |
$ |
176,216 |
$ |
38,097 |
362.5 |
|||||||||||
Adjusted EBITDA* |
$ |
212,582 |
$ |
181,041 |
17.4 |
$ |
421,493 |
$ |
382,490 |
10.2 |
|||||||||||
Total Company Including Travelocity: |
|||||||||||||||||||||
Revenue |
$ |
717,573 |
$ |
768,232 |
(6.6) |
$ |
1,472,983 |
$ |
1,527,576 |
(3.6) |
|||||||||||
Net Loss Attributable to |
(10,897) |
(116,862) |
90.7 |
(13,740) |
(132,626) |
89.6 |
|||||||||||||||
Adjusted Revenue* |
$ |
720,448 |
$ |
768,232 |
(6.2) |
$ |
1,477,733 |
$ |
1,527,576 |
(3.3) |
|||||||||||
Adjusted EBITDA* |
$ |
203,707 |
$ |
190,111 |
7.2 |
$ |
387,423 |
$ |
382,615 |
1.3 |
|||||||||||
|
$ |
5,310 |
$ |
78,673 |
(93.3) |
$ |
77,508 |
$ |
171,056 |
(54.7) |
|||||||||||
Capital Expenditures |
$ |
58,944 |
$ |
58,786 |
0.3 |
$ |
110,583 |
$ |
111,487 |
(0.8) |
|||||||||||
Adjusted Capital Expenditures* |
$ |
68,888 |
$ |
75,420 |
(8.7) |
$ |
128,180 |
$ |
150,150 |
(14.6) |
|||||||||||
Free |
$ |
(53,634) |
$ |
19,887 |
(369.7) |
$ |
(33,075) |
$ |
59,569 |
(155.5) |
|||||||||||
Adjusted Free Cash Flow* |
$ |
63,219 |
$ |
58,236 |
8.6 |
$ |
131,172 |
$ |
107,287 |
22.3 |
|||||||||||
Net Debt (total debt, less cash) |
$ |
2,855,412 |
$ |
3,257,052 |
|||||||||||||||||
Net Debt / LTM Adjusted EBITDA |
3.6x |
4.3x |
|||||||||||||||||||
Airline and Hospitality Solutions: |
|||||||||||||||||||||
Revenue |
$ |
186,573 |
$ |
177,841 |
4.9 |
$ |
363,290 |
$ |
340,288 |
6.8 |
|||||||||||
Passengers Boarded |
131,450 |
124,359 |
5.7 |
249,066 |
231,884 |
7.4 |
|||||||||||||||
Operating Income |
$ |
35,855 |
$ |
28,518 |
25.7 |
$ |
62,317 |
$ |
51,173 |
21.8 |
|||||||||||
Adjusted EBITDA* |
$ |
62,554 |
$ |
47,675 |
31.2 |
$ |
116,015 |
$ |
88,545 |
31.0 |
|||||||||||
Travel Network: |
|||||||||||||||||||||
Revenue |
$ |
462,337 |
$ |
456,238 |
1.3 |
$ |
954,064 |
$ |
931,544 |
2.4 |
|||||||||||
Air Bookings |
81,053 |
80,708 |
0.4 |
170,098 |
165,953 |
2.5 |
|||||||||||||||
Non-air Bookings |
13,861 |
13,986 |
(0.9) |
27,460 |
27,033 |
1.6 |
|||||||||||||||
Total Bookings |
94,914 |
94,694 |
0.2 |
197,558 |
192,986 |
2.4 |
|||||||||||||||
Bookings Share |
35.6 |
% |
35.8 |
% |
35.5 |
% |
35.5 |
% |
|||||||||||||
Operating Income |
$ |
165,597 |
$ |
162,071 |
2.2 |
$ |
350,114 |
$ |
346,970 |
0.9 |
|||||||||||
Adjusted EBITDA* |
$ |
197,971 |
$ |
188,237 |
5.2 |
$ |
412,814 |
$ |
398,540 |
3.6 |
|||||||||||
|
|||||||||||||||||||||
Revenue |
$ |
81,018 |
$ |
153,936 |
(47.4) |
$ |
175,244 |
$ |
296,707 |
(40.9) |
|||||||||||
Operating Income |
$ |
(12,721) |
$ |
8,449 |
(250.6) |
$ |
(41,283) |
$ |
(7,464) |
(453.1) |
|||||||||||
Adjusted Revenue* |
$ |
83,893 |
$ |
153,936 |
(45.5) |
$ |
179,994 |
$ |
296,707 |
(39.3) |
|||||||||||
Adjusted EBITDA* |
$ |
(8,875) |
$ |
9,070 |
(197.9) |
$ |
(34,070) |
$ |
125 |
(27356.0) |
|||||||||||
*indicates non-GAAP financial measure; see descriptions and reconciliations below |
Solid growth across its customer base led to a 4.9% increase in revenue in the second quarter of 2014. This revenue growth was driven in part by an increase in passengers boarded through the SabreSonic® airline reservation system. Total passengers boarded were 131 million, a 5.7% increase from 124 million in the second quarter of 2013. Revenue for the quarter was also bolstered by continued growth in Airline Solutions Commercial and Operations Solutions revenue and strong growth in Hospitality Solutions' SynXis Central Reservations System transactions and Digital Marketing Services.
Strong revenue growth and operating leverage across its SaaS and hosted solutions resulted in a 31.2% increase in Airline and Hospitality Solutions Adjusted EBITDA to
Airline and Hospitality Solutions recently signed several significant new agreements. Examples include:
- Spirit Airlines selected
Sabre Airline Solutions' leading Flight Plan Manager solution. - United Airlines selected
Sabre Airline Solutions' In-flight Catering solution. - Swiss regional carrier and current SabreSonic CSS customer,
Darwin Airlines , became the latest airline to expand their Sabre footprint to include a full suite of solutions fromSabre Airline Solutions' portfolio of commercial and operations solutions. - Morgans Hotel Group converted to Sabre Hospitality Solutions' SynXis Central Reservations Solution across all of their properties.
Sabre Travel Network
Sabre Travel Network is one of the world's largest travel marketplaces, handling more than
For the second quarter, Travel Network revenue increased
Travel Network second quarter Adjusted EBITDA of
Sabre Travel Network continued to increase the value of the marketplace for participants during the second quarter by increasing content and services. During the quarter, Sabre Travel Network:
- Renewed content agreements with
Scandinavian Airways andLufthansa . - Signed an expanded agreement with
International Airline Group (IAG). The agreement includes the addition of ancillary sales for British Airways,Iberia and Iberia Express. Also under the agreement, Vueling will enter the Travel Network for the first time. - Launched United's Economy Plus seating offering in the Travel Network marketplace, as well as ancillary sales for seven additional airlines. Travel Network has launched ancillary sales for 20 airlines year to date.
- Announced the addition of Expedia Affiliate Network hotel content, which will bring approximately 55,000 new properties into the Travel Network when implemented.
With the new agreement in place and the migration essentially completed, second quarter 2014
Initial Public Offering
On
Dividend
Sabre's Board of Directors has declared a quarterly dividend of
Business Outlook and Financial Guidance
The following forward-looking statements, as well as those made above, reflect expectations as of
In conjunction with the second quarter earnings report, Sabre management reiterated expectations for full year Revenue, while increasing guidance for Adjusted EBITDA, Adjusted Net Income and Adjusted EPS. Adjusted EBITDA guidance was increased from a prior range of
Full Year 2014 Guidance ($ millions, except EPS) |
Sabre Excluding |
|
Sabre |
|
Revenue |
|
|
|
|
Adjusted EBITDA |
|
|
|
|
Adjusted Net Income |
|
|||
Adjusted EPS |
|
|||
Conference Call
The Company will conduct its second quarter 2014 investor conference call today at
About the Company
Sabre® is the leading technology provider to the global travel and tourism industry. Sabre's software, data, mobile and distribution solutions are used by hundreds of airlines and thousands of hotels to manage vital operations, such as passenger and guest reservations, revenue management, and flight, network and crew management. Sabre also operates the world's leading travel marketplace, processing more than
Website Information
We routinely post important information for investors on our website, www.sabre.com in the Investor Relations section. 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,
Supplemental Financial Information
In conjunction with today's earnings report, the Company expects to post a file of supplemental financial information on the Investor Relations section of our website, www.sabre.com.
Note on Non-GAAP Financial Measures
This press release includes unaudited non-GAAP financial measures, including Adjusted Revenue, 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 "may," "will," "should," "expect," "intend," "plan," "goal," "anticipate," "believe," "estimate," "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, dependence on maintaining and renewing contracts with customers and other counterparties, exposure to pricing pressure in the Travel Networks business, dependence on relationships with travel buyers, changes affecting travel supplier customers, adverse global and regional economic and political conditions, including, but not limited to, conditions in
Contacts: |
|
Media |
Investors |
|
|
682-605-3864 |
682-605-0214 |
CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except share amounts) (Unaudited)
| |||||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||
Revenue |
$ |
717,573 |
$ |
768,232 |
$ |
1,472,983 |
$ |
1,527,576 |
|||||||
Cost of revenue (1) (2) |
444,276 |
467,365 |
934,021 |
949,152 |
|||||||||||
Selling, general and administrative (2) |
205,152 |
212,364 |
404,029 |
412,193 |
|||||||||||
Impairment |
— |
135,598 |
— |
135,598 |
|||||||||||
Operating income (loss) |
68,145 |
(47,095) |
134,933 |
30,633 |
|||||||||||
Other income (expense): |
|||||||||||||||
Interest expense, net |
(53,235) |
(63,669) |
(117,179) |
(146,199) |
|||||||||||
Loss on extinguishment of debt |
(30,558) |
— |
(33,538) |
(12,181) |
|||||||||||
Joint venture equity income |
4,059 |
3,286 |
6,500 |
6,032 |
|||||||||||
Other, net |
1,082 |
(3,796) |
195 |
1,330 |
|||||||||||
Total other expense, net |
(78,652) |
(64,179) |
(144,022) |
(151,018) |
|||||||||||
Loss from continuing operations before income taxes |
(10,507) |
(111,274) |
(9,089) |
(120,385) |
|||||||||||
Benefit for income taxes |
(5,495) |
(8,142) |
(3,078) |
(13,090) |
|||||||||||
Loss from continuing operations |
(5,012) |
(103,132) |
(6,011) |
(107,295) |
|||||||||||
Loss from discontinued operations, net of tax |
(5,183) |
(12,893) |
(6,281) |
(23,910) |
|||||||||||
Net loss |
(10,195) |
(116,025) |
(12,292) |
(131,205) |
|||||||||||
Net income attributable to noncontrolling interests |
702 |
837 |
1,448 |
1,421 |
|||||||||||
Net loss attributable to |
(10,897) |
(116,862) |
(13,740) |
(132,626) |
|||||||||||
Preferred stock dividends |
2,235 |
9,005 |
11,381 |
17,977 |
|||||||||||
Net loss attributable to common shareholders |
$ |
(13,132) |
$ |
(125,867) |
$ |
(25,121) |
$ |
(150,603) |
|||||||
Basic and diluted loss per share: |
|||||||||||||||
Continuing operations |
$ |
(0.03) |
$ |
(0.63) |
$ |
(0.09) |
$ |
(0.71) |
|||||||
Discontinued operations |
(0.02) |
(0.07) |
(0.03) |
(0.13) |
|||||||||||
Basic and diluted loss per share attributable to common shareholders |
(0.05) |
(0.71) |
(0.12) |
(0.85) |
|||||||||||
Basic and diluted weighted average common shares outstanding |
243,801 |
178,060 |
211,431 |
178,007 |
|||||||||||
(1) Includes amortization of upfront incentive consideration |
$ |
11,742 |
$ |
9,752 |
$ |
22,789 |
$ |
19,351 |
|||||||
(2) Includes stock-based compensation as follows: |
|||||||||||||||
Cost of revenue |
$ |
1,940 |
$ |
(186) |
$ |
3,446 |
$ |
272 |
|||||||
Selling, general and administrative |
9,443 |
222 |
13,516 |
2,488 |
CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts) (Unaudited)
| |||||||
|
|
||||||
Assets |
|||||||
Current assets |
|||||||
Cash and cash equivalents |
$ |
252,380 |
$ |
308,236 |
|||
Restricted cash |
1,052 |
2,359 |
|||||
Accounts receivable, net |
456,674 |
434,288 |
|||||
Prepaid expenses and other current assets |
46,435 |
53,378 |
|||||
Current deferred income taxes |
40,504 |
41,431 |
|||||
Other receivables, net |
31,202 |
29,511 |
|||||
Assets of discontinued operations |
10,953 |
13,624 |
|||||
Total current assets |
839,200 |
882,827 |
|||||
Property and equipment, net of accumulated depreciation of |
512,262 |
498,523 |
|||||
Investments in joint ventures |
142,003 |
132,082 |
|||||
Goodwill |
2,138,263 |
2,138,175 |
|||||
Trademarks and brandnames, net of accumulated amortization of |
312,066 |
323,035 |
|||||
Other intangible assets, net of accumulated amortization of |
263,204 |
311,523 |
|||||
Other assets, net |
508,707 |
469,543 |
|||||
Total assets |
$ |
4,715,705 |
$ |
4,755,708 |
|||
Liabilities, temporary equity and stockholders' equity (deficit) |
|||||||
Current liabilities |
|||||||
Accounts payable |
$ |
131,409 |
$ |
111,386 |
|||
Travel supplier liabilities and related deferred revenue |
141,803 |
213,504 |
|||||
Accrued compensation and related benefits |
72,537 |
117,689 |
|||||
Accrued subscriber incentives |
168,756 |
142,767 |
|||||
Deferred revenues |
169,756 |
136,380 |
|||||
Litigation settlement liability and related deferred revenue |
48,263 |
38,920 |
|||||
Other accrued liabilities |
238,589 |
267,867 |
|||||
Current portion of debt |
22,401 |
86,117 |
|||||
Liabilities of discontinued operations |
24,797 |
41,788 |
|||||
Total current liabilities |
1,018,311 |
1,156,418 |
|||||
Deferred income taxes |
10,090 |
10,253 |
|||||
Other noncurrent liabilities |
567,327 |
263,182 |
|||||
Long-term debt |
3,069,502 |
3,643,548 |
|||||
Commitments and contingencies (Note 13) |
|||||||
Temporary equity |
|||||||
Series A Redeemable Preferred Stock: |
— |
634,843 |
|||||
Stockholders' equity (deficit) |
|||||||
Common Stock: |
2,652 |
1,786 |
|||||
Additional paid-in capital |
1,906,031 |
880,619 |
|||||
Treasury Stock, at cost, 437,386 shares at |
(5,297) |
— |
|||||
Retained deficit |
(1,810,675) |
(1,785,554) |
|||||
Accumulated other comprehensive loss |
(41,573) |
(49,895) |
|||||
Noncontrolling interest |
(663) |
508 |
|||||
Total stockholders' equity (deficit) |
50,475 |
(952,536) |
|||||
Total liabilities, temporary equity and stockholders' equity (deficit) |
$ |
4,715,705 |
$ |
4,755,708 |
CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands, except share amounts) (Unaudited) | |||||||
Six Months Ended |
|||||||
2014 |
2013 |
||||||
Operating Activities |
|||||||
Net loss |
$ |
(12,292) |
$ |
(131,205) |
|||
Adjustments to reconcile net loss to cash provided by operating activities: |
|||||||
Depreciation and amortization |
158,748 |
153,910 |
|||||
Impairment |
— |
135,598 |
|||||
Amortization of upfront incentive consideration |
22,789 |
19,351 |
|||||
Litigation related charges, net |
33 |
4,078 |
|||||
Stock-based compensation expense |
16,962 |
2,760 |
|||||
Allowance for doubtful accounts |
3,652 |
6,531 |
|||||
Deferred income taxes |
(17,508) |
(19,550) |
|||||
Joint venture equity income |
(6,500) |
(6,032) |
|||||
Amortization of debt issuance costs |
3,243 |
3,637 |
|||||
Debt modification costs |
3,290 |
14,003 |
|||||
Loss on extinguishment of debt |
33,538 |
12,181 |
|||||
Other |
8,583 |
(4,243) |
|||||
Loss from discontinued operations |
6,281 |
23,910 |
|||||
Changes in operating assets and liabilities: |
|||||||
Accounts and other receivables |
(35,593) |
(76,995) |
|||||
Prepaid expenses and other current assets |
1,300 |
6,529 |
|||||
Capitalized implementation costs |
(17,597) |
(38,663) |
|||||
Upfront incentive consideration |
(25,936) |
(18,686) |
|||||
Other assets |
(13,050) |
(19,621) |
|||||
Accrued compensation and related benefits |
(45,436) |
(28,126) |
|||||
Accounts payable and other accrued liabilities |
(4,899) |
131,689 |
|||||
Pension and other postretirement benefits |
(2,100) |
— |
|||||
Cash provided by operating activities |
77,508 |
171,056 |
|||||
Investing Activities |
|||||||
Additions to property and equipment |
(110,583) |
(111,487) |
|||||
Proceeds from sale of business |
— |
10,000 |
|||||
Other investing activities |
235 |
(3,475) |
|||||
Cash used in investing activities |
(110,348) |
(104,962) |
|||||
Financing Activities |
|||||||
Proceeds of borrowings from lenders |
148,307 |
2,190,063 |
|||||
Payments on borrowings from lenders |
(791,427) |
(2,218,908) |
|||||
Proceeds from issuance of common stock in initial public offering, net |
672,645 |
— |
|||||
Prepayment fee and debt modification and issuance costs |
(30,490) |
(17,199) |
|||||
Other financing activities |
(2,616) |
(4,123) |
|||||
Cash used in financing activities |
(3,581) |
(50,167) |
|||||
Cash Flows from Discontinued Operations |
|||||||
Net cash (used in) provided by operating activities |
(24,360) |
24,295 |
|||||
Net cash provided by investing activities |
3,760 |
20,502 |
|||||
Net cash (used in) provided by discontinued operations |
(20,600) |
44,797 |
|||||
Effect of exchange rate changes on cash and cash equivalents |
1,165 |
(1,407) |
|||||
(Decrease) increase in cash and cash equivalents |
(55,856) |
59,317 |
|||||
Cash and cash equivalents at beginning of period |
308,236 |
126,695 |
|||||
Cash and cash equivalents at end of period |
$ |
252,380 |
$ |
186,012 |
Non-GAAP Financial Measures
We have included both financial measures compiled in accordance with GAAP and certain non-GAAP financial measures in this press release, including Adjusted Revenue, Adjusted Net Income, Adjusted EBITDA, Adjusted EPS, Adjusted Capital Expenditures, Free Cash Flow, Adjusted Free Cash Flow and ratios based on these financial measures.
We define Adjusted Revenue as revenue adjusted for the amortization of Expedia Strategic Marketing Agreement (Expedia SMA) incentive payments, which are recorded as a reduction to revenue and are being amortized over the non-cancellable term of the Expedia SMA contract (see Note 3, Restructuring Charges, to our consolidated financial statements included in Part I, Item 1 of our Quarterly Report on Form 10-Q).
We define Adjusted Net Income as income (loss) from continuing operations adjusted for impairment, acquisition related amortization expense, loss (gain) on sale of business and assets, loss on extinguishment of debt, other, net, restructuring and other costs, litigation and taxes, including penalties, stock-based compensation, management fees, amortization of Expedia SMA incentive payments and 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, and remaining (benefit) provision for income taxes. This Adjusted EBITDA metric differs from (i) the EBITDA metric referenced in the section entitled "—Liquidity and Capital Resources—Senior Secured Credit Facilities" in Part I, Item 2 of our Quarterly Report on Form 10-Q, which is calculated for the purposes of compliance with our debt covenants, and (ii) the Pre-VCP EBITDA and EBITDA metrics referenced in the section entitled "Compensation Discussion and Analysis" in our prospectus filed with the
We define Adjusted EPS as Adjusted Net Income (Loss) divided by the applicable share count.
We define Adjusted Capital Expenditures as additions to property and equipment and capitalized implementation costs during the period 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, litigation settlement and tax payments for certain items, other litigation costs, management fees and the working capital impact from the Expedia SMA and the sale of TPN (see "Factors Affecting our Results and Comparability -Travelocity Restructuring" in Part I, Item 2 of our Quarterly Report on Form 10-Q).
Adjusted EBITDA is a key metric 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 Adjusted Revenue, Adjusted EPS, Adjusted Net Income, Adjusted EBITDA, Adjusted Capital Expenditures and Adjusted Free Cash Flow and ratios based on these 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 includes cash flows used in investing activities, for property and equipment, and cash flows used in operating activities, for capitalized implementation costs. Our management uses this combined metric in making product investment decisions and determining development resource requirements. We also believe that these measures 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 Revenue, Adjusted EPS, Adjusted Net Income, Adjusted EBITDA, 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:
- Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does 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; - Free
Cash Flow and Adjusted Free Cash Flow do not reflect payments related to restructuring, litigation, management fees andTravelocity working capital which reduced the cash available to us; - 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 these non-GAAP financial measures differently, which reduces their usefulness as comparative measures.
Tabular Reconciliations for Non-GAAP Measures (In thousands, except share amounts; Unaudited) Reconciliation of net income (loss) to Adjusted Net Income, Adjusted Net Income from Continuing Operations per Share, and to Adjusted EBITDA | |||||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||
Net loss attributable to common shareholders |
$ |
(13,132) |
$ |
(125,867) |
$ |
(25,121) |
$ |
(150,603) |
|||||||
Net loss from discontinued operations, net of tax |
5,183 |
12,893 |
6,281 |
23,910 |
|||||||||||
Net income attributable to noncontrolling interests(1) |
702 |
837 |
1,448 |
1,421 |
|||||||||||
Preferred stock dividends |
2,235 |
9,005 |
11,381 |
17,977 |
|||||||||||
Loss from continuing operations |
(5,012) |
(103,132) |
(6,011) |
(107,295) |
|||||||||||
Adjustments: |
|||||||||||||||
Impairment |
— |
135,598 |
— |
135,598 |
|||||||||||
Acquisition related amortization(2a) |
23,961 |
36,209 |
59,439 |
72,160 |
|||||||||||
Loss on extinguishment of debt |
30,558 |
— |
33,538 |
12,181 |
|||||||||||
Other, net (4) |
(1,082) |
3,796 |
(195) |
(1,330) |
|||||||||||
Restructuring and other costs (5) |
6,867 |
2,376 |
9,574 |
4,542 |
|||||||||||
Litigation and taxes, including penalties(6) |
2,904 |
8,326 |
8,057 |
22,966 |
|||||||||||
Stock-based compensation |
11,383 |
36 |
16,962 |
2,760 |
|||||||||||
Management fees(7) |
21,576 |
2,499 |
23,508 |
5,221 |
|||||||||||
Amortization of Expedia SMA incentive payments |
2,875 |
— |
4,750 |
— |
|||||||||||
Tax impact of net income adjustments |
(38,649) |
(33,703) |
(60,720) |
(50,842) |
|||||||||||
Adjusted Net Income from continuing operations |
$ |
55,381 |
$ |
52,005 |
$ |
88,902 |
$ |
95,961 |
|||||||
Adjusted Net Income from continuing operations per share |
$ |
0.22 |
$ |
0.28 |
$ |
0.40 |
$ |
0.52 |
|||||||
Weighted-average shares outstanding adjusted for assumed inclusion of common stock equivalents |
252,336 |
184,849 |
219,969 |
184,298 |
|||||||||||
Adjusted Net Income from continuing operations |
$ |
55,381 |
$ |
52,005 |
$ |
88,902 |
$ |
95,961 |
|||||||
Adjustments: |
|||||||||||||||
Depreciation and amortization of property and equipment(2b) |
41,304 |
31,404 |
82,884 |
64,751 |
|||||||||||
Amortization of capitalized implementation costs(2c) |
8,891 |
7,720 |
18,027 |
18,601 |
|||||||||||
Amortization of upfront incentive consideration(3) |
11,742 |
9,752 |
22,789 |
19,351 |
|||||||||||
Interest expense, net |
53,235 |
63,669 |
117,179 |
146,199 |
|||||||||||
Remaining provision (benefit) for income taxes |
33,154 |
25,561 |
57,642 |
37,752 |
|||||||||||
Adjusted EBITDA |
$ |
203,707 |
$ |
190,111 |
$ |
387,423 |
$ |
382,615 |
|||||||
Reconciliation of Adjusted Revenue: | |||||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||
Revenue |
$ |
717,573 |
$ |
768,232 |
$ |
1,472,983 |
$ |
1,527,576 |
|||||||
Amortization of Expedia SMA incentive payments |
2,875 |
— |
4,750 |
— |
|||||||||||
Adjusted Revenue |
$ |
720,448 |
$ |
768,232 |
$ |
1,477,733 |
$ |
1,527,576 |
|||||||
Reconciliation of Adjusted Capital Expenditures: | |||||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||
Additions to property and equipment |
$ |
58,944 |
$ |
58,786 |
$ |
110,583 |
$ |
111,487 |
|||||||
Capitalized implementation costs |
9,944 |
16,634 |
17,597 |
38,663 |
|||||||||||
Adjusted Capital Expenditures |
$ |
68,888 |
$ |
75,420 |
$ |
128,180 |
$ |
150,150 |
|||||||
Reconciliation of Adjusted Free Cash Flow: | |||||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||
Cash provided by operating activities |
$ |
5,310 |
$ |
78,673 |
$ |
77,508 |
$ |
171,056 |
|||||||
Cash used in investing activities |
(58,709) |
(52,082) |
(110,348) |
(104,962) |
|||||||||||
Cash used in financing activities |
25,021 |
(24,100) |
(3,581) |
(50,167) |
|||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||
Cash provided by operating activities |
$ |
5,310 |
$ |
78,673 |
$ |
77,508 |
$ |
171,056 |
|||||||
Additions to property and equipment |
(58,944) |
(58,786) |
(110,583) |
(111,487) |
|||||||||||
Free |
(53,634) |
19,887 |
(33,075) |
59,569 |
|||||||||||
Adjustments: |
|||||||||||||||
Restructuring and other costs(5) (9) |
14,564 |
2,376 |
26,426 |
4,542 |
|||||||||||
Litigation settlement and tax payments for certain items(6) (10) |
7,038 |
26,346 |
11,744 |
30,215 |
|||||||||||
Other litigation costs(6) (9) |
2,506 |
7,128 |
6,934 |
7,740 |
|||||||||||
Management fees(7) (9) |
21,576 |
2,499 |
23,508 |
5,221 |
|||||||||||
|
71,169 |
- |
95,635 |
- |
|||||||||||
Adjusted Free Cash Flow |
$ |
63,219 |
$ |
58,236 |
$ |
131,172 |
$ |
107,287 |
Reconciliation of Adjusted Gross Margin and Adjusted EBITDA by Segment: | |||||||||||||||||||||||
Three Months Ended |
|||||||||||||||||||||||
Travel Network |
Airline and Hospitality Solutions |
|
Eliminations |
Corporate |
Total |
||||||||||||||||||
Operating income (loss) |
$ |
165,597 |
$ |
35,855 |
$ |
(12,721) |
$ |
— |
$ |
(120,586) |
$ |
68,145 |
|||||||||||
Add back: |
|||||||||||||||||||||||
Selling, general and administrative |
24,555 |
12,924 |
71,796 |
(7,348) |
103,225 |
205,152 |
|||||||||||||||||
Cost of revenue adjustments: |
|||||||||||||||||||||||
Depreciation and amortization(2) |
15,267 |
26,480 |
971 |
— |
6,369 |
49,087 |
|||||||||||||||||
Amortization of upfront incentive consideration(3) |
11,742 |
— |
— |
— |
— |
11,742 |
|||||||||||||||||
Restructuring and other costs (5) |
— |
— |
— |
— |
3,726 |
3,726 |
|||||||||||||||||
Litigation and taxes, including penalties(6) |
— |
— |
— |
— |
333 |
333 |
|||||||||||||||||
Stock-based compensation |
— |
— |
— |
— |
1,940 |
1,940 |
|||||||||||||||||
Amortization of Expedia SMA incentive payments |
— |
— |
2,875 |
— |
— |
2,875 |
|||||||||||||||||
Adjusted Gross Margin |
217,161 |
75,259 |
62,921 |
(7,348) |
(4,993) |
343,000 |
|||||||||||||||||
Selling, general and administrative |
(24,555) |
(12,924) |
(71,796) |
7,348 |
(103,225) |
(205,152) |
|||||||||||||||||
Joint venture equity income |
4,059 |
— |
— |
— |
— |
4,059 |
|||||||||||||||||
Joint venture intangible amortization(2a) |
801 |
— |
— |
— |
— |
801 |
|||||||||||||||||
Selling, general and administrative adjustments: |
|||||||||||||||||||||||
Depreciation and amortization(2) |
505 |
219 |
— |
— |
23,544 |
24,268 |
|||||||||||||||||
Restructuring and other costs (5) |
— |
— |
— |
— |
3,141 |
3,141 |
|||||||||||||||||
Litigation and taxes, including penalties(6) |
— |
— |
— |
— |
2,571 |
2,571 |
|||||||||||||||||
Stock-based compensation |
— |
— |
— |
— |
9,443 |
9,443 |
|||||||||||||||||
Management fees(7) |
— |
— |
— |
— |
21,576 |
21,576 |
|||||||||||||||||
Adjusted EBITDA |
$ |
197,971 |
$ |
62,554 |
$ |
(8,875) |
$ |
— |
$ |
(47,943) |
$ |
203,707 |
|||||||||||
Three Months Ended |
|||||||||||||||||||||||
Travel Network |
Airline and Hospitality Solutions |
|
Eliminations |
Corporate |
Total |
||||||||||||||||||
Operating income (loss) |
$ |
162,071 |
$ |
28,518 |
8,449 |
$ |
— |
$ |
(246,133) |
$ |
(47,095) |
||||||||||||
Add back: |
|||||||||||||||||||||||
Selling, general and administrative |
30,830 |
16,301 |
88,335 |
(178) |
77,076 |
212,364 |
|||||||||||||||||
Impairment |
— |
— |
— |
— |
135,598 |
135,598 |
|||||||||||||||||
Cost of revenue adjustments: |
|||||||||||||||||||||||
Depreciation and amortization(2) |
11,752 |
18,925 |
565 |
— |
17,270 |
48,512 |
|||||||||||||||||
Amortization of upfront incentive consideration(3) |
9,752 |
— |
— |
— |
— |
9,752 |
|||||||||||||||||
Restructuring and other costs (5) |
— |
— |
— |
— |
1,348 |
1,348 |
|||||||||||||||||
Litigation and taxes, including penalties(6) |
— |
— |
— |
— |
2,627 |
2,627 |
|||||||||||||||||
Stock-based compensation |
— |
— |
— |
— |
(186) |
(186) |
|||||||||||||||||
Adjusted gross margin |
214,405 |
63,744 |
97,349 |
(178) |
(12,400) |
362,920 |
|||||||||||||||||
Selling, general and administrative |
(30,830) |
(16,301) |
(88,335) |
178 |
(77,076) |
(212,364) |
|||||||||||||||||
Joint venture equity income |
3,286 |
— |
— |
— |
— |
3,286 |
|||||||||||||||||
Joint venture intangible amortization(2a) |
801 |
— |
— |
— |
— |
801 |
|||||||||||||||||
Selling, general and administrative adjustments: |
|||||||||||||||||||||||
Depreciation and amortization(2) |
575 |
232 |
56 |
— |
25,157 |
26,020 |
|||||||||||||||||
Restructuring and other costs (5) |
— |
— |
— |
— |
1,028 |
1,028 |
|||||||||||||||||
Litigation and taxes, including penalties(6) |
— |
— |
— |
— |
5,699 |
5,699 |
|||||||||||||||||
Stock-based compensation |
— |
— |
— |
— |
222 |
222 |
|||||||||||||||||
Management fees(7) |
— |
— |
— |
— |
2,499 |
2,499 |
|||||||||||||||||
Adjusted EBITDA |
$ |
188,237 |
$ |
47,675 |
$ |
9,070 |
$ |
— |
$ |
(54,871) |
$ |
190,111 |
|||||||||||
Six Months Ended |
|||||||||||||||||||||||
Travel Network |
Airline and Hospitality Solutions |
|
Eliminations |
Corporate |
Total |
||||||||||||||||||
Operating income (loss) |
$ |
350,114 |
$ |
62,317 |
$ |
(41,283) |
$ |
— |
$ |
(236,215) |
$ |
134,933 |
|||||||||||
Add back: |
|||||||||||||||||||||||
Selling, general and administrative |
50,227 |
25,319 |
152,181 |
(7,457) |
183,759 |
404,029 |
|||||||||||||||||
Cost of revenue adjustments: |
|||||||||||||||||||||||
Depreciation and amortization(2) |
30,679 |
53,163 |
2,463 |
— |
23,589 |
109,894 |
|||||||||||||||||
Amortization of upfront incentive consideration(3) |
22,789 |
— |
— |
— |
— |
22,789 |
|||||||||||||||||
Restructuring and other costs (5) |
— |
— |
— |
— |
4,942 |
4,942 |
|||||||||||||||||
Litigation and taxes, including penalties(6) |
— |
— |
— |
— |
939 |
939 |
|||||||||||||||||
Stock-based compensation |
— |
— |
— |
— |
3,446 |
3,446 |
|||||||||||||||||
Amortization of Expedia SMA incentive payments |
— |
— |
4,750 |
— |
— |
4,750 |
|||||||||||||||||
Adjusted Gross Margin |
453,809 |
140,799 |
118,111 |
(7,457) |
(19,540) |
685,722 |
|||||||||||||||||
Selling, general and administrative |
(50,227) |
(25,319) |
(152,181) |
7,457 |
(183,759) |
(404,029) |
|||||||||||||||||
Joint venture equity income |
6,500 |
— |
— |
— |
— |
6,500 |
|||||||||||||||||
Joint venture intangible amortization(2a) |
1,602 |
— |
— |
— |
— |
1,602 |
|||||||||||||||||
Selling, general and administrative adjustments: |
|||||||||||||||||||||||
Depreciation and amortization(2) |
1,130 |
535 |
— |
— |
47,189 |
48,854 |
|||||||||||||||||
Restructuring and other costs (5) |
— |
— |
— |
— |
4,632 |
4,632 |
|||||||||||||||||
Litigation and taxes, including penalties(6) |
— |
— |
— |
— |
7,118 |
7,118 |
|||||||||||||||||
Stock-based compensation |
— |
— |
— |
— |
13,516 |
13,516 |
|||||||||||||||||
Management fees(7) |
— |
— |
— |
— |
23,508 |
23,508 |
|||||||||||||||||
Adjusted EBITDA |
$ |
412,814 |
$ |
116,015 |
$ |
(34,070) |
$ |
— |
$ |
(107,336) |
$ |
387,423 |
|||||||||||
Six Months Ended |
|||||||||||||||||||||||
Travel Network |
Airline and Hospitality Solutions |
|
Eliminations |
Corporate |
Total |
||||||||||||||||||
Operating income (loss) |
$ |
346,970 |
$ |
51,173 |
$ |
(7,464) |
$ |
— |
$ |
(360,046) |
$ |
30,633 |
|||||||||||
Add back: |
|||||||||||||||||||||||
Selling, general and administrative |
55,180 |
30,631 |
176,427 |
(391) |
150,346 |
412,193 |
|||||||||||||||||
Impairment |
— |
— |
— |
— |
135,598 |
135,598 |
|||||||||||||||||
Cost of revenue adjustments: |
|||||||||||||||||||||||
Depreciation and amortization(2) |
23,561 |
36,894 |
6,222 |
— |
34,343 |
101,020 |
|||||||||||||||||
Amortization of upfront incentive consideration(3) |
19,351 |
— |
— |
— |
— |
19,351 |
|||||||||||||||||
Restructuring and other costs (5) |
— |
— |
— |
— |
1,939 |
1,939 |
|||||||||||||||||
Litigation and taxes, including penalties(6) |
— |
— |
— |
— |
14,475 |
14,475 |
|||||||||||||||||
Stock-based compensation |
— |
— |
— |
— |
272 |
272 |
|||||||||||||||||
Adjusted gross margin |
445,062 |
118,698 |
175,185 |
(391) |
(23,073) |
715,481 |
|||||||||||||||||
Selling, general and administrative |
(55,180) |
(30,631) |
(176,427) |
391 |
(150,346) |
(412,193) |
|||||||||||||||||
Joint venture equity income |
6,032 |
— |
— |
— |
— |
6,032 |
|||||||||||||||||
Joint venture intangible amortization(2a) |
1,602 |
— |
— |
— |
— |
1,602 |
|||||||||||||||||
Selling, general and administrative adjustments: |
|||||||||||||||||||||||
Depreciation and amortization(2) |
1,024 |
478 |
1,367 |
50,021 |
52,890 |
||||||||||||||||||
Restructuring and other costs (5) |
— |
— |
— |
— |
2,603 |
2,603 |
|||||||||||||||||
Litigation and taxes, including penalties(6) |
— |
— |
— |
— |
8,491 |
8,491 |
|||||||||||||||||
Stock-based compensation |
— |
— |
— |
— |
2,488 |
2,488 |
|||||||||||||||||
Management fees(7) |
— |
— |
— |
— |
5,221 |
5,221 |
|||||||||||||||||
Adjusted EBITDA |
$ |
398,540 |
$ |
88,545 |
$ |
125 |
$ |
— |
$ |
(104,595) |
$ |
382,615 |
Non-GAAP Footnotes: | |||||||||||||||||||
(1) |
Net income attributable to non-controlling interests represents an adjustment to include earnings allocated to non-controlling interests held in Sabre Travel Network Middle East of 40% for all periods presented and in Sabre Seyahat Dagitim Sistemleri A.S. of 40% beginning in April 2014 for the three and six months ended | ||||||||||||||||||
(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 and amortization of the excess basis in our underlying equity in joint ventures. | ||||||||||||||||||
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) |
Other, net primarily represents 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) |
Restructuring and other costs represents 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) |
Represents charges or settlements associated with airline antitrust litigation as well as payments or reserves taken in relation to certain retroactive hotel occupancy and excise tax disputes. | ||||||||||||||||||
(7) |
We have been paying an annual management fee to | ||||||||||||||||||
(8) |
Represents the impact of the Expedia SMA and TPN on working capital for the six months ended June 30, 2014, which is primarily attributable to the migration of bookings from our technology platform to Expedia's platform and wind down activities associated with TPN (see "Factors Affecting our Results and Comparability—Travelocity Restructuring"). | ||||||||||||||||||
(9) |
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. | ||||||||||||||||||
(10) |
Includes payment credits used by American Airlines to pay for purchases of our technology services during the six months ended June 30, 2014 and 2013. The payment credits were provided by us as part of our litigation settlement with American Airlines. |
Logo - http://photos.prnewswire.com/prnh/20131216/DA33636LOGO-b
SOURCE
News Provided by Acquire Media