SOUTHLAKE, Texas, May 15, 2014 /PRNewswire/ -- Sabre
Corporation (NASDAQ: SABR) today announced financial results for
the quarter ended March 31, 2014.
"Global travel industry growth was very healthy in the first
quarter with our airline and hotel customers experiencing solid
demand. Against this backdrop, Sabre's portfolio of software and
technology solutions, which are the broadest and deepest in the
industry, continued to deliver value across the travel ecosystem,"
said Tom Klein, Sabre CEO and
President. "Our relentless focus on delivering value and
innovation to our customers delivered first quarter performance
ahead of our plan. Looking ahead, we expect to meet or exceed our
guidance for 2014 and are positioned well to grow our businesses in
the years to come."
Q1 2014 Financial Summary
Sabre reported Airline and Hospitality Solutions revenues that
increased 8.8% to $177 million from
$162 million in the first quarter of
2013. Travel Network revenues also increased, rising 3.5% to
$492 million from $475 million for the same period of 2013. Sabre,
excluding Travelocity, revenues increased 7.2% from the first
quarter of 2013.
Sabre reported total consolidated revenues of $755 million for the quarter ended March 31, 2014, compared to $759 million for the first quarter of 2013. On an
adjusted basis, which excludes the amortization of incentive
payments paid under the Expedia strategic marketing agreement
(Expedia SMA) related to the restructuring of Travelocity, Sabre
reported consolidated adjusted revenues of $757 million for the quarter ended March 31, 2014, compared to $759 million for the first quarter of
2013.
Travelocity revenues declined as planned due to the 2013
business model change at Travelocity North America (described
below), which is expected to result in a more stable and profitable
Travelocity business going forward. Results also were impacted, and
revenues reduced, by the sale during the quarter of the Travelocity
Partner Network (TPN) business. These changes resulted in
Travelocity revenues that totaled $94
million, compared to $143
million in the first quarter of 2013. On an adjusted basis,
Travelocity revenues totaled $96
million, a 32.7% decline from the $143 million in the year ago period.
Consolidated net loss attributable to Sabre Corporation for the
first quarter of 2014 totaled $2.8
million, compared to a net loss of $15.8 million in the year ago period.
Financial
Highlights (in thousands):
|
Q1
2014
|
Q1
2013
|
%
Change
|
Total Company
Excluding Travelocity:
|
|
|
|
Revenue
|
$661,183
|
$616,573
|
7.2
|
Operating
Income
|
$95,350
|
$93,641
|
1.8
|
Adjusted
EBITDA*
|
$208,912
|
$201,448
|
3.7
|
Total Company
Including Travelocity:
|
|
|
|
Revenue
|
$755,410
|
$759,344
|
(0.5)
|
Net Loss
Attributable to Sabre Corp.
|
($2,843)
|
($15,764)
|
N/A
|
|
|
|
|
Adjusted
Revenue*
|
$757,285
|
$759,344
|
(0.3)
|
Adjusted
EBITDA*
|
$183,717
|
$192,503
|
(4.6)
|
|
|
|
|
Cash Flow from
Operations
|
$72,198
|
$92,383
|
(21.8)
|
Capital
Expenditures
|
$51,639
|
$52,701
|
(2.0)
|
Adjusted Capital
Expenditures*
|
$59,292
|
$74,730
|
(20.7)
|
|
|
|
|
Free Cash
Flow
|
$20,559
|
$39,682
|
(48.2)
|
Adjusted Free Cash
Flow*
|
$67,953
|
$49,051
|
38.5
|
|
|
|
|
Net Debt
(total debt, less cash)
|
$3,443,016
|
$3,313,458
|
|
Net Debt / LTM
Adjusted EBITDA
|
4.4x
|
4.2x
|
|
Proforma Net
Debt**
|
$2,827,016
|
|
|
Proforma Net Debt
/LTM Adjusted EBITDA**
|
3.6x
|
|
|
Airline and
Hospitality Solutions:
|
|
|
|
Revenue
|
$176,717
|
$162,448
|
8.8
|
Passengers
Boarded
|
117,616
|
107,525
|
9.4
|
Operating
Income
|
$26,462
|
$22,655
|
16.8
|
Adjusted
EBITDA*
|
$53,460
|
$40,870
|
30.8
|
Travel
Network:
|
|
|
|
Revenue
|
$491,726
|
$475,305
|
3.5
|
Air
Bookings
|
89,045
|
85,246
|
4.5
|
Non-air
Bookings
|
13,569
|
13,047
|
4.0
|
Total
Bookings
|
102,614
|
98,293
|
4.4
|
Bookings
Share
|
35.4%
|
35.3%
|
|
Operating
Income
|
$184,517
|
$184,899
|
(0.2)
|
Adjusted
EBITDA*
|
$214,843
|
$210,303
|
2.2
|
Travelocity:
|
|
|
|
Revenue
|
$94,227
|
$142,771
|
(34.0)
|
Operating
Income
|
($28,563)
|
($15,913)
|
79.4
|
Adjusted
Revenue
|
$96,102
|
$142,771
|
(32.7)
|
Adjusted
EBITDA*
|
($25,196)
|
($8,945)
|
181.7
|
*indicates non-GAAP
financial measure; see descriptions and reconciliations
below
** see "Initial
Public Offering" below
|
Sabre Airline and Hospitality Solutions and Travel Network
Adjusted EBITDA increased 30.8% and 2.2%, respectively, while
Travelocity Adjusted EBITDA declined as expected due to the timing
of the transition to the new business model in the North American
Travelocity business. Total Company Adjusted EBITDA for the three
months ended March 31, 2014 was
$184 million, a 4.6% decline from
$193 million in the prior year
period. Excluding Travelocity, first quarter 2014 total Adjusted
EBITDA increased 3.7 % to $209
million from $201 million in
the year ago quarter.
For the first quarter of 2014, Sabre reported a loss per share
from continuing operations of $0.06
per share. On an adjusted basis (Adjusted Net Income from
continuing operations per share), Sabre reported first quarter 2014
diluted earnings of $0.18 per
share.
Cash Flow from Operations was $72
million for the first quarter of 2014, compared to
$92 million in the first quarter of
2013. Adjusted Capital Expenditures, which includes capitalized
implementation costs, totaled $59
million for the first quarter of 2014, compared to
$75 million in the year ago period.
Adjusted Free Cash flow, which adjusts for the decline in working
capital and restructuring costs related to the change in the
Travelocity business model and dispositions as well as litigation
and other costs (see reconciliation below), totaled $68 million in the first quarter of 2014, a 38.5%
increase from $49 million of Adjusted
Free Cash Flow in the first quarter of 2013.
Sabre Airline and Hospitality Solutions
Sabre Airline and Hospitality Solutions leverage SaaS and hosted
technologies to enable airlines and hoteliers to increase revenues,
reduce costs, and provide better travel experiences for their
customers. The business segment primarily drives revenues through
flat-fees tied to usage events, such as passengers boarded and
hotel rooms booked.
Strong growth across its customer base and the anniversary of
customer implementations completed during the first quarter of 2013
led to an 8.8% increase in revenues in the first 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 118 million, a
9.4% increase from 108 million in the first quarter of 2013.
Revenues for the quarter also were bolstered by continued growth in
Airline Solutions Commercial and Operations Solutions revenue and
strong growth in Hospitality Solutions' SynXis Central Reservations
System transactions and Internet Marketing Services.
Strong revenue growth and operating leverage across its SaaS and
hosted solutions resulted in a 30.8% increase in Airline and
Hospitality Solutions Adjusted EBITDA to $53
million for the first quarter of 2014 versus $41 million for the prior year period.
Airline and Hospitality Solutions recently signed several
significant new agreements. A few examples include:
- The combined American Airlines and US Airways, the world's
largest airline, and airberlin, a leading carrier in Europe, both signed agreements to implement
the SabreSonic® airline reservation system. When
completed, we expect these implementations will result in more than
220 million passengers boarded annually;
- Vietnam Airlines, AirMalta, Cambodia Angkor Air, and WestJet
were among those that renewed or expanded their agreements for
Sabre Airline Solutions AirCentre, AirVision, or SabreSonic
reservations software solutions;
- HNA Hotels & Resorts in China signed an agreement with Sabre
Hospitality to become an important part of the hospitality
company's technology and connectivity strategy; and
- Vimana Franchise Systems, franchisor of the Centerstone Hotel
and Key West Inn brands, announced the selection of Sabre
Hospitality Solutions SynXis Central Reservations System,
continuing the strong momentum in the Hospitality sector.
Sabre Travel Network
Sabre Travel Network is one of the world's largest travel
marketplaces, transacting more than $100
billion of 2013 travel services with leading solutions for
travel agents and travel suppliers. The business primarily
recognizes revenue on a transaction-fee basis for travel booked
through the Sabre Travel Network.
For the first quarter, Travel Network revenue increased
$16 million, or 3.5%, to $492 million, primarily as a result of 4.4%
increase in direct billable bookings to 103 million in the quarter,
driven by strong mid-teens growth in Europe, the Middle
East and Africa (EMEA)
bookings and the favorable timing of the Easter holiday as compared
to prior period last year. Despite challenging weather, North
American bookings grew low-single digits. South and Central
American bookings increased mid-single digits, despite a material
slowdown in Venezuela due to that
country's current political and economic turmoil. Asia Pacific (APAC) bookings under the
Company's Abacus joint venture, which are processed through the
Sabre Travel Network, increased high-single digits.
Solid bookings and revenue growth resulted in Travel Network
first quarter Adjusted EBITDA of $215
million, an increase of 2.2% from $210 million for the first quarter of 2013.
Sabre's product leadership continued to expand versus core
competitors:
Sabre Red is the premier agency desktop in the industry.
In the first quarter, Sabre launched a mobile version to wide
acclaim. The Sabre Red App Centre, which allows Sabre, customers,
and third party developers to expand Sabre Red functionality with
value-added apps, continued to add new additions to the app store
and increased agency downloads. New apps from partners
like Trip Advisor (Seat Guru) and Evature Technologies
(Red Eva Free text travel search)
bring unique capabilities into a Sabre agents work flow.
TripCase, Sabre's leading consumer mobile itinerary management
app, ramped to a pace that is expected to result in the app being
used to manage well over 20 million trips this calendar year.
The number of trips managed is the most important metric for
success in this category of mobile travel apps. TripCase is
expected to manage more trips than any other product in this
space.
Through Sabre, airlines are able to market and sell their
products the way they choose, generating new revenues and new
choices for travelers. Sabre is helping airlines sell seats,
bags, in-flight entertainment, and lounge access, among other types
of ancillaries. In addition, Sabre helps airlines sell their
branded fares, which supports an airline's ability to upsell during
the shopping and booking process. Thus far in 2014, Sabre
Travel Network has added 7 airlines to its list of customers using
Sabre's airline merchandising capabilities, bringing the total to
over 20 airlines.
Bolstering its efforts to increase share in EMEA, Travel Network
recently opened its first office in Turkey to provide Turkish travel agencies with
its leading Sabre Red agency solutions and connectivity to Sabre's
industry-leading Travel Network content. Turkey is the
eleventh new market Sabre Travel Network has entered in EMEA in the
past 18 months. Sabre's agency product is significantly
differentiated from competitor products and management expects to
continue to win new business with a product-led approach.
Travelocity
The Travelocity business segment includes travelocity.com, the
#1 customer satisfaction leader in JD Powers most recent survey,
and lastminute.com, one of Europe's strongest travel brands. In
August 2013, Sabre entered into a
strategic marketing agreement with Expedia that transformed the
Travelocity North America business. Under the agreement, the
U.S. and Canadian Travelocity websites are being powered by the
leading Expedia technology platform, content and customer service.
Sabre maintains responsibility for marketing its world-class
Travelocity brand. Under the terms of the agreement, Expedia pays
Sabre a performance-based marketing fee that varies based on the
amount of travel booked through Travelocity-branded websites
powered by Expedia, which essentially eliminates Travelocity North
America costs associated with technology platform, content
acquisition and customer service. The expected net result, once
fully implemented, will be lower revenues at Travelocity, but
significantly increased profitability.
With the new agreement in place and the migration moving ahead
as planned, first quarter 2014 Travelocity Adjusted Revenue
declined 32.7% to $96 million
compared to $143 million in the first
quarter of 2013. Costs declined through the quarter, but the timing
of the transition led to a decline in segment Adjusted EBITDA to a
loss of $25 million, compared to a
loss of $9 million in the year ago
period. Although it is early in the implementation, the transition
to the Expedia platform is meeting expectations and driving a
meaningful improvement compared to the legacy platform. With the
anticipated significant reduction in costs, the Company expects
stronger financial performance and profitability going forward.
Initial Public Offering
On April 17, 2014, Sabre
successfully completed an initial public offering (IPO) of
39,200,000 primary shares of common stock. In addition, the
underwriters exercised their option to purchase 5,880,000
additional shares, which closed on April 25,
2014. Sabre shares trade on the NASDAQ Stock Market under
the symbol SABR. The net proceeds from the offering were used to
reduce outstanding debt, including a $320
million reduction in 2019 8.5% bonds, and a $296 million reduction in Term Loan C borrowings.
Proforma for the debt reduction from the IPO proceeds, March 31, 2014 total net debt was $2.8 billion, and the Company's net debt to LTM
Adjusted EBITDA ratio was to 3.6x.
In conjunction with the IPO, Sabre announced the adoption of a
dividend policy with an initial targeted quarterly payout of
$0.09 per share, or $0.36 per share on an annualized basis. The
Company expects to pay its first dividend in the third quarter of
2014 in respect of the second quarter of 2014.
New Product Launches
Sabre recently launched three software and data analytics
solutions – Customer Experience Manager, Guest Connect Upsell and
TripCase Corporate – to help customers design and offer a more
personalized shopping and travel experience for travelers.
Customer Experience Manager is a data-rich software solution to
help airlines leverage traveler insights to deliver a highly
personalized experience. With Customer Experience Manager, airlines
can automate many manual customer service functions and stimulate
revenue – all while significantly enhancing the customer
experience.
Guest Connect Upsell is a new hotel booking capability that
allows guests to upgrade to a higher room class instantly after
their booking is confirmed via targeted offers based on the guest's
unique preferences. Guest Connect Upsell enables hoteliers to
generate incremental revenue by precisely targeting enhanced
services and options that are aligned specifically to a guest's
individual preferences.
TripCase Corporate is the business travel version of Sabre's
popular TripCase consumer mobile app, which was used to manage more
than 11 million trips in 2013, a number which is expected to
increase to more than 20 million trips in 2014. With TripCase
Corporate, travelers can make travel bookings and reservations from
their smartphone and identify which trips are for business reasons.
This enables our customers to better track travel spend, safety and
security. General Electric and Hogg Robinson Group are among the
first users of TripCase Corporate.
Business Outlook and Financial Guidance
The following forward-looking statements, as well as those made
above, reflect expectations as of May 15,
2014. Sabre assumes no obligation to update these
statements. Results may be materially different and are affected by
many factors detailed in this release and in Sabre's IPO prospectus
and quarterly SEC filings.
Looking ahead, the Company expects the following:
Full Year 2014
Guidance
($ millions,
except EPS)
|
Sabre
Excluding
Travelocity
|
Travelocity
|
Sabre
|
Revenue
|
$2,575 -
$2,595
|
$410 -
$420
|
$2,985 -
$3,015
|
|
|
|
|
Adjusted
EBITDA
|
$828 -
$838
|
$15 - $20
|
$843 -
$858
|
|
|
|
|
Adjusted Net
Income
|
|
|
$215 -
$230
|
|
|
|
|
Adjusted Diluted
EPS
|
|
|
$0.86 -
$0.92
|
(Adjusted Net
Income from continuing operations per share; based on FY fully
diluted shares outstanding of 250M)
|
Conference Call
The Company will conduct its first quarter 2014 investor conference
call today at 9:00 a.m. Eastern
Time. The live webcast, including accompanying slide
presentation, can be accessed via Sabre's Investor Relations
website at investors.sabre.com. A recording of the call will
be archived for replay following the conference call.
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 $100
billion of annual travel spend. Headquartered in
Southlake, Texas, USA, Sabre
operates in approximately 60 countries around the world.
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, 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.
Note on Non-GAAP Financial Measures
This press release
includes unaudited non-GAAP financial measures, including Adjusted
Revenue, Adjusted Net Income, Adjusted EBITDA, 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. Certain of these risks and
uncertainties are described in the "Risk Factors" and "Cautionary
Note Regarding Forward-Looking Statements" sections included in our
prospectus filed with the SEC pursuant to Rule 424(b) under the
Securities Act of 1933, as amended, on April
17, 2014. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we
cannot guarantee future events, results, actions, levels of
activity, performance or achievements. Readers are cautioned not to
place undue reliance on these forward-looking statements. Unless
required by law, Sabre undertakes no obligation to publicly update
or revise any forward-looking statements to reflect circumstances
or events after the date they are made.
Contacts:
|
|
|
|
Media
|
Investors
|
Nancy St.
Pierre
|
Barry
Sievert
|
682-605-3864
|
682-605-0214
|
nancy.stpierre@sabre.com
|
barry.sievert@sabre.com
|
SABRE
CORPORATION
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(In thousands,
except per share amounts)
|
(Unaudited)
|
|
Three Months Ended
March 31,
|
|
2014
|
|
2013
|
|
|
Revenue
|
$ 755,410
|
|
$ 759,344
|
Cost of revenue
(1) (2)
|
489,745
|
|
481,787
|
Selling, general and
administrative(2)
|
198,877
|
|
199,829
|
Operating
income
|
66,788
|
|
77,728
|
Other income
(expense):
|
|
|
|
Interest expense,
net
|
(63,944)
|
|
(82,530)
|
Loss on
extinguishment of debt
|
(2,980)
|
|
(12,181)
|
Joint venture equity
income
|
2,441
|
|
2,746
|
Other, net
|
(887)
|
|
5,126
|
Total other expense,
net
|
(65,370)
|
|
(86,839)
|
Income (loss) from
continuing operations before income taxes
|
1,418
|
|
(9,111)
|
Provision (benefit)
for income taxes
|
2,417
|
|
(4,948)
|
Loss from continuing
operations
|
(999)
|
|
(4,163)
|
Loss from
discontinued operations, net of tax
|
(1,098)
|
|
(11,017)
|
Net loss
|
(2,097)
|
|
(15,180)
|
Net income
attributable to noncontrolling interests
|
746
|
|
584
|
Net loss attributable
to Sabre Corporation
|
(2,843)
|
|
(15,764)
|
Preferred stock
dividends
|
9,146
|
|
8,972
|
Net loss attributable
to common shareholders
|
$ (11,989)
|
|
$ (24,736)
|
|
|
|
|
Basic and diluted
loss per share:
|
|
|
|
Continuing
operations
|
$
(0.06)
|
|
$
(0.08)
|
Discontinued
operations
|
(0.01)
|
|
(0.06)
|
Basic and diluted
loss per share attributable to common shareholders
|
(0.07)
|
|
(0.14)
|
|
|
|
|
Basic and diluted
weighted average common shares outstanding
|
178,702
|
|
177,953
|
|
|
|
|
(1) Includes
amortization of upfront incentive consideration
|
$
11,047
|
|
$
9,599
|
(2) Includes
stock-based compensation as follows:
|
|
|
|
Cost of revenue
|
$
1,506
|
|
$
458
|
Selling, general and administrative
|
4,073
|
|
2,266
|
SABRE
CORPORATION
|
CONSOLIDATED
BALANCE SHEETS
|
(In
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
March 31,
2014
|
|
December 31,
2013
|
Assets
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
286,356
|
|
$
308,236
|
Restricted
cash
|
|
706
|
|
2,359
|
Accounts receivable,
net
|
|
459,962
|
|
434,288
|
Prepaid expenses and
other current assets
|
|
56,077
|
|
53,378
|
Current deferred
income taxes
|
|
49,873
|
|
41,431
|
Other receivables,
net
|
|
31,309
|
|
29,511
|
Assets of
discontinued operations
|
|
17,660
|
|
13,624
|
Total current
assets
|
|
901,943
|
|
882,827
|
Property and
equipment, net of accumulated depreciation of $749,014 and
$722,916
|
|
502,543
|
|
498,523
|
Investments in joint
ventures
|
|
134,523
|
|
132,082
|
Goodwill
|
|
2,138,223
|
|
2,138,175
|
Trademarks and brand
names, net of accumulated amortization of $544,845 and
$545,597
|
|
316,786
|
|
323,035
|
Other intangible
assets, net of accumulated amortization of $919,783 and
$889,904
|
|
281,644
|
|
311,523
|
Other assets,
net
|
|
474,746
|
|
469,543
|
Total
assets
|
|
$
4,750,408
|
|
$
4,755,708
|
|
|
|
|
|
Liabilities,
temporary equity and stockholders' deficit
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Accounts
payable
|
|
$
123,047
|
|
$
111,386
|
Travel supplier
liabilities and related deferred revenue
|
|
184,086
|
|
213,504
|
Accrued compensation
and related benefits
|
|
81,097
|
|
117,689
|
Accrued subscriber
incentives
|
|
166,287
|
|
142,767
|
Deferred
revenues
|
|
156,067
|
|
136,380
|
Litigation settlement
liability and related deferred revenue
|
|
60,038
|
|
38,920
|
Other accrued
liabilities
|
|
289,313
|
|
267,867
|
Current portion of
debt
|
|
88,790
|
|
86,117
|
Liabilities of
discontinued operations
|
|
32,864
|
|
41,788
|
Total current
liabilities
|
|
1,181,589
|
|
1,156,418
|
Deferred income
taxes
|
|
12,310
|
|
10,253
|
Other noncurrent
liabilities
|
|
247,758
|
|
263,182
|
Long-term
debt
|
|
3,621,680
|
|
3,643,548
|
|
|
|
|
|
Commitments and
contingencies (Note 13)
|
|
|
|
|
|
|
|
|
|
Temporary
equity
|
|
|
|
|
Series A Redeemable
Preferred Stock: $0.01 par value; 225,000,000 authorized shares;
87,229,703 shares issued; 87,103,210 and 87,184,179
outstanding at March 31, 2014 and December 31, 2013,
respectively
|
|
643,262
|
|
634,843
|
|
|
|
|
|
Stockholders'
deficit
|
|
|
|
|
Common Stock: $0.01
par value; 450,000,000 authorized shares; 179,395,390 and
178,633,409 shares issued, 179,013,221 and 178,491,568
outstanding at March 31, 2014 and December 31, 2013,
respectively
|
|
1,794
|
|
1,786
|
Additional paid-in
capital
|
|
890,309
|
|
880,619
|
Treasury Stock, at
cost, 382,169 shares at March 31, 2014
|
|
(4,377)
|
|
-
|
Retained
deficit
|
|
(1,797,543)
|
|
(1,785,554)
|
Accumulated other
comprehensive loss
|
|
(47,628)
|
|
(49,895)
|
Noncontrolling
interest
|
|
1,254
|
|
508
|
Total stockholders'
deficit
|
|
(956,191)
|
|
(952,536)
|
Total liabilities,
temporary equity and stockholders' deficit
|
|
$
4,750,408
|
|
$
4,755,708
|
SABRE
CORPORATION
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(In thousands, except share
amounts)
|
(Unaudited)
|
|
Three Months Ended
March 31,
|
|
2014
|
|
2013
|
|
|
Operating
Activities
|
|
|
|
Net loss
|
$
(2,097)
|
|
$
(15,180)
|
Adjustments to
reconcile net loss to cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
85,394
|
|
79,379
|
Amortization of
upfront incentive consideration
|
11,047
|
|
9,599
|
Litigation related
(gains) charges, net
|
(519)
|
|
2,040
|
Stock-based
compensation for employees
|
5,579
|
|
2,724
|
Allowance for
doubtful accounts
|
1,664
|
|
2,713
|
Deferred income
taxes
|
(5,641)
|
|
(15,312)
|
Joint venture equity
income
|
(2,441)
|
|
(2,746)
|
Amortization of debt
issuance costs
|
1,682
|
|
1,671
|
Third-party fees
expensed in connection with the debt modification
|
3,290
|
|
14,003
|
Loss on
extinguishment of debt
|
2,980
|
|
12,181
|
Other
|
7,779
|
|
1,518
|
Loss from
discontinued operations
|
1,098
|
|
11,017
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts and other
receivables
|
(30,315)
|
|
(94,391)
|
Prepaid expenses and
other current assets
|
(1,844)
|
|
1,016
|
Capitalized
implementation costs
|
(7,653)
|
|
(22,029)
|
Upfront incentive
consideration
|
(17,250)
|
|
(11,977)
|
Other
assets
|
(7,826)
|
|
(6,333)
|
Accrued compensation
and related benefits
|
(36,916)
|
|
(30,074)
|
Accounts payable and
other accrued liabilities
|
64,187
|
|
152,564
|
Cash provided
by operating activities
|
72,198
|
|
92,383
|
|
|
|
|
Investing
Activities
|
|
|
|
Additions to property
and equipment
|
(51,639)
|
|
(52,701)
|
Other investing
activities
|
-
|
|
(179)
|
Cash used in
investing activities
|
(51,639)
|
|
(52,880)
|
|
|
|
|
Financing
Activities
|
|
|
|
Proceeds of
borrowings from lenders
|
148,307
|
|
2,190,063
|
Payments on
borrowings from lenders
|
(169,847)
|
|
(2,198,204)
|
Debt issuance
costs
|
(3,290)
|
|
(16,365)
|
Proceeds from
exercise of stock options
|
1,152
|
|
381
|
Decrease in
restricted cash
|
1,653
|
|
473
|
Other financing
activities
|
(6,577)
|
|
(2,415)
|
Cash used in
financing activities
|
(28,602)
|
|
(26,067)
|
|
|
|
|
Cash Flows from
Discontinued Operations
|
|
|
|
Net cash (used in)
provided by operating activities
|
(14,057)
|
|
1,769
|
Net cash provided by
investing activities
|
-
|
|
8,801
|
Net cash (used
in) provided by discontinued operations
|
(14,057)
|
|
10,570
|
|
|
|
|
Effect of
exchange rate changes on cash and cash equivalents
|
220
|
|
(468)
|
|
|
|
|
(Decrease) increase
in cash and cash equivalents
|
(21,880)
|
|
23,538
|
Cash and cash
equivalents at beginning of period
|
308,236
|
|
126,695
|
Cash and cash
equivalents at end of period
|
$
286,356
|
|
$
150,233
|
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 Gross Margin,
Adjusted Net Income, Adjusted EBITDA, 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 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 Gross Margin as operating income (loss)
adjusted for selling, general and administrative expenses,
impairments, restructuring and other costs, litigation and taxes,
including penalties, stock-based compensation, amortization of
Expedia SMA incentive payments, amortization of upfront incentive
consideration and depreciation and amortization. The definition of
Adjusted Gross Margin has been revised in the current period to
adjust for restructuring and other costs, litigation and taxes,
including penalties and stock-based compensation included in cost
of revenue which differs from Adjusted Gross Margin presented in
our prospectus filed with the SEC pursuant to Rule 424(b) under the
Securities Act on April 17, 2014.
Adjusted Gross Margin for the prior year period has been recast to
conform to our revised definition.
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 SEC pursuant to Rule
424(b) under the Securities Act on April 17,
2014, which are calculated for the purposes of our annual
incentive compensation program and performance-based awards,
respectively.
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 Gross Margin and Adjusted EBITDA are key metrics used
by management and our board of directors to monitor our ongoing
core operations because historical results have been significantly
impacted by events that are unrelated to our core operations as a
result of changes to our business and the regulatory environment.
We believe that Adjusted Gross Margin, Adjusted Net Income,
Adjusted EBITDA, Adjusted Capital Expenditures and Adjusted Free
Cash Flow 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 Adjusted
Gross Margin, Adjusted Net Income, Adjusted EBITDA and Adjusted
Capital Expenditures assist investors in company-to-company and
period-to-period comparisons by excluding differences caused by
variations in capital structures (affecting interest expense), tax
positions and the impact of depreciation and amortization expense.
In addition, amounts derived from Adjusted EBITDA are a primary
component of certain covenants under our senior secured credit
facilities.
Adjusted Revenue, Adjusted Gross Margin, 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. Adjusted Gross
Margin, Adjusted Net Income, Adjusted EBITDA, Adjusted Capital
Expenditures, Adjusted Free Cash Flow and ratios based on these
financial measures 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.
Adjusted Gross Margin, Adjusted Net Income, Adjusted EBITDA,
Adjusted Free Cash Flow and ratios based on these financial
measures 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 Adjusted Gross Margin, Adjusted Net
Income, Adjusted EBITDA, and Adjusted Free Cash Flow 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 Gross Margin and Adjusted EBITDA do not
reflect cash requirements for such replacements;
- Adjusted Net Income and Adjusted EBITDA do not reflect changes
in, or cash requirements for, our working capital needs;
- Adjusted EBITDA does not reflect the interest expense or the
cash requirements necessary to service interest or principal
payments on our indebtedness;
- Adjusted EBITDA does not reflect tax payments that may
represent a reduction in cash available to us;
- Free Cash Flow and Adjusted Free Cash Flow do not reflect the
cash requirements necessary to service the principal payments on
our indebtedness;
- Free Cash Flow and Adjusted Free Cash Flow do not reflect
payments related to restructuring, litigation, management fees and
Travelocity 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 Adjusted Revenue, Adjusted Net Income, Adjusted EBITDA,
Free Cash Flow or Adjusted Free Cash Flow differently, which
reduces its usefulness as a comparative
measure.
Tabular
Reconciliations for Non-GAAP Measures
|
Reconciliation of net
income (loss) to Adjusted Net Income, Adjusted Net Income from
Continuing Operations per Share, and to Adjusted EBITDA
|
|
(Amounts in
thousands)
|
Three Months Ended
March 31,
|
Reconciliation of
net income (loss) to Adjusted
|
2014
|
|
2013
|
Net Income and to
Adjusted EBITDA:
|
|
|
|
Net loss attributable
to Sabre Corporation
|
$
(2,843)
|
|
$ (15,764)
|
Net loss from
discontinued operations, net of tax
|
1,098
|
|
11,017
|
Net income
attributable to noncontrolling interests(1)
|
746
|
|
584
|
Loss from continuing
operations
|
(999)
|
|
(4,163)
|
Adjustments:
|
|
|
|
Acquisition related
amortization expense(2a)
|
35,478
|
|
35,952
|
Loss on
extinguishment of debt
|
2,980
|
|
12,181
|
Other, net
(3)
|
887
|
|
(5,126)
|
Restructuring and
other costs(4)
|
2,708
|
|
2,166
|
Litigation and taxes,
including penalties(5)
|
5,152
|
|
14,638
|
Stock-based
compensation
|
5,579
|
|
2,724
|
Management
fees(6)
|
1,932
|
|
2,722
|
Amortization of
Expedia SMA incentive payments
|
1,875
|
|
-
|
Tax impact of net
income adjustments
|
(22,071)
|
|
(17,139)
|
Adjusted Net Income
from continuing operations
|
$
33,521
|
|
$
43,955
|
Adjusted Net Income
from continuing operations per share
|
$
0.18
|
|
$
0.24
|
Adjusted
weighted-average shares outstanding for assumed inclusion of common
stock equivalents
|
187,727
|
|
184,400
|
|
|
|
|
Adjusted Net Income
from continuing operations
|
$
33,521
|
|
$
43,955
|
Adjustments:
|
|
|
|
Depreciation and
amortization of property and equipment(2b)
|
41,581
|
|
33,347
|
Amortization of
capitalized implementation costs(2c)
|
9,136
|
|
10,881
|
Amortization of
upfront incentive consideration(7)
|
11,047
|
|
9,599
|
Interest expense,
net
|
63,944
|
|
82,530
|
Remaining provision
(benefit) for income taxes
|
24,488
|
|
12,191
|
Adjusted
EBITDA
|
$ 183,717
|
|
$ 192,503
|
Reconciliation of
Adjusted Revenue:
|
|
|
Three Months Ended
March 31,
|
(Amounts in
thousands)
|
2014
|
|
2013
|
Revenue
|
$ 755,410
|
|
$ 759,344
|
Amortization of
Expedia SMA incentive payments
|
1,875
|
|
-
|
Adjusted
Revenue
|
$ 757,285
|
|
$ 759,344
|
Reconciliation of
Adjusted Capital Expenditures:
|
|
|
Three Months Ended
March 31,
|
(Amounts in
thousands)
|
2014
|
|
2013
|
Additions to property
and equipment
|
$
51,639
|
|
$
52,701
|
Capitalized
implementation costs
|
7,653
|
|
22,029
|
Adjusted capital
expenditures
|
$
59,292
|
|
$
74,730
|
Reconciliation of
Adjusted Free Cash Flow:
|
|
|
Three Months Ended
March 31,
|
(Amounts in
thousands)
|
2014
|
|
2013
|
Cash provided by
operating activities
|
$
72,198
|
|
$
92,383
|
Cash used in
investing activities
|
(51,639)
|
|
(52,880)
|
Cash provided by
(used in) financing activities
|
(28,602)
|
|
(26,067)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2014
|
|
2013
|
Cash provided by
operating activities
|
$
72,198
|
|
$
92,383
|
Additions to property
and equipment
|
(51,639)
|
|
(52,701)
|
Free Cash
Flow
|
20,559
|
|
39,682
|
Adjustments:
|
|
|
|
Restructuring and
other costs(4) (9)
|
11,862
|
|
2,166
|
Litigation settlement
and tax payments for certain unusual items(5)
(10)
|
4,706
|
|
3,869
|
Other litigation
costs(5) (9)
|
4,428
|
|
612
|
Management
fees(6) (9)
|
1,932
|
|
2,722
|
Travelocity working
capital as impacted by the Expedia SMA and
TPN(8)
|
24,466
|
|
|
Adjusted Free Cash
Flow
|
$
67,953
|
|
$
49,051
|
Reconciliation of
Adjusted Gross Margin and Adjusted EBITDA by
Segment:
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2014
|
|
Travel
Network
|
Airline and
Hospitality Solutions
|
Travelocity
|
Eliminations
|
Corporate
|
Total
|
|
|
Operating income
(loss)
|
$ 184,517
|
$
26,462
|
$
(28,563)
|
$
-
|
$
(115,628)
|
$
66,788
|
Add back:
|
|
|
|
|
|
|
Selling, general and
administrative
|
25,672
|
12,395
|
80,712
|
(109)
|
80,207
|
198,877
|
Cost of revenue
adjustments:
|
|
|
|
|
|
|
Depreciation and
amortization(2)
|
15,412
|
26,683
|
1,492
|
|
17,220
|
60,807
|
Restructuring and
other costs(4)
|
|
|
|
|
1,216
|
1,216
|
Stock-based
compensation
|
|
|
|
|
1,506
|
1,506
|
Litigation and taxes,
including penalties(5)
|
|
|
|
|
606
|
606
|
Amortization of
upfront incentive consideration(7)
|
11,047
|
|
|
|
-
|
11,047
|
Amortization of
Expedia SMA incentive payments
|
|
|
1,875
|
|
-
|
1,875
|
Adjusted gross
margin
|
236,648
|
65,540
|
55,517
|
(109)
|
(14,873)
|
342,722
|
Selling, general and
administrative
|
(25,672)
|
(12,395)
|
(80,712)
|
109
|
(80,207)
|
(198,877)
|
Joint venture equity
income
|
2,441
|
|
|
|
-
|
2,441
|
Joint venture
intangible amortization(2a)
|
801
|
|
|
|
-
|
801
|
Selling, general and
administrative adjustments:
|
|
|
|
|
|
|
Depreciation and
amortization(2)
|
625
|
315
|
|
|
23,647
|
24,587
|
Restructuring and
other costs(4)
|
|
|
|
|
1,492
|
1,492
|
Stock-based
compensation
|
|
|
|
|
4,073
|
4,073
|
Litigation and taxes,
including penalties(5)
|
|
|
|
|
4,546
|
4,546
|
Management
fees(6)
|
|
|
|
|
1,932
|
1,932
|
Adjusted
EBITDA
|
$ 214,843
|
$
53,460
|
$
(25,196)
|
$
-
|
$
(59,390)
|
$ 183,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2013
|
|
Travel
Network
|
Airline and
Hospitality Solutions
|
Travelocity
|
Eliminations
|
Corporate
|
Total
|
|
|
Operating income
(loss)
|
$ 184,899
|
$
22,655
|
$
(15,913)
|
$
-
|
$
(113,913)
|
$
77,728
|
Add back:
|
|
|
|
|
|
|
Selling, general and
administrative
|
24,350
|
14,329
|
88,148
|
(213)
|
73,215
|
199,829
|
Cost of revenue
adjustments:
|
|
|
|
|
|
|
Depreciation and
amortization(2)
|
11,809
|
17,969
|
5,657
|
|
17,077
|
52,512
|
Restructuring and
other costs(4)
|
|
|
|
|
591
|
591
|
Stock-based
compensation
|
|
|
|
|
458
|
458
|
Litigation and taxes,
including penalties(5)
|
|
|
|
|
11,848
|
11,848
|
Amortization of
upfront incentive consideration(7)
|
9,599
|
|
|
|
-
|
9,599
|
Adjusted gross
margin
|
230,657
|
54,953
|
77,892
|
(213)
|
(10,724)
|
352,565
|
Selling, general and
administrative
|
(24,350)
|
(14,329)
|
(88,148)
|
213
|
(73,215)
|
(199,829)
|
Joint venture equity
income
|
2,746
|
|
|
|
-
|
2,746
|
Joint venture
intangible amortization(2a)
|
801
|
|
|
|
-
|
801
|
Selling, general and
administrative adjustments:
|
|
|
|
|
|
|
Depreciation and
amortization(2)
|
449
|
246
|
1,311
|
|
24,861
|
26,867
|
Restructuring and
other costs(4)
|
|
|
|
|
1,575
|
1,575
|
Stock-based
compensation
|
|
|
|
|
2,266
|
2,266
|
Litigation and taxes,
including penalties(5)
|
|
|
|
|
2,790
|
2,790
|
Management
fees(6)
|
|
|
|
|
2,722
|
2,722
|
Adjusted
EBITDA
|
$ 210,303
|
$
40,870
|
$
(8,945)
|
$
-
|
$
(49,725)
|
$ 192,503
|
Non-GAAP
Footnotes:
|
(1)
|
Net income
attributable to non-controlling interests represents an adjustment
to include earnings allocated to non-controlling interest held in
Sabre Travel Network Middle East of 40% for all periods
presented.
|
(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 represents depreciation of
property and equipment, including 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)
|
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.
|
(4)
|
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.
|
(5)
|
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.
|
(6)
|
We have been paying
an annual management fee to TPG Global, LLC ("TPG") and Silver Lake
Management Company ("Silver Lake") in an amount between (i) $5
million and (ii) $7 million, the actual amount of which is
calculated based upon 1% of Adjusted EBITDA, as defined in the MSA,
earned by the company in such fiscal year up to a maximum of $7
million. In addition, the MSA provides for the reimbursement of
certain costs incurred by TPG and Silver Lake, which are included
in this line item. The MSA was terminated in connection with our
initial public offering.
|
(7)
|
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.
|
(8)
|
Represents the impact
of the Expedia SMA and TPN on working capital for the three months
ended March 31, 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"
included in Part I, Item 2 of our Quarterly Report on Form
10-Q).
|
(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 totaling $5 million and $4 million used by American
Airlines to pay for purchases of our technology services during the
three months ended March 31, 2014 and 2013, respectively. The
payment credits were provided by us as part of our litigation
settlement with American Airlines.
|
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SOURCE Sabre Corporation