Sabre(SABR) - 2022 Q4 - Annual Report

Documents Incorporated by Reference Documents Incorporated by Reference This section indicates that portions of Sabre Corporation's definitive proxy statement for its 2023 annual meeting of stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K - Portions of the registrant's definitive proxy statement for its 2023 annual meeting of stockholders are incorporated by reference in Part III of this Annual Report on Form 10-K[7] Forward-Looking Statements Forward-Looking Statements This section provides a cautionary statement on forward-looking statements, noting they are based on current expectations and subject to risks and uncertainties detailed in "Risk Factors" - Forward-looking statements relate to future financial conditions, operations, growth strategies, and product development, identifiable by terms like "expects," "intends," "believes," and "will"[11] - These statements are based on current expectations and assumptions but are subject to risks, uncertainties, and changes in circumstances that could cause actual results to differ materially[11] - The company undertakes no obligation to publicly update or revise any forward-looking statements unless required by law[11] Part I Part I of the Annual Report provides a comprehensive overview of Sabre Corporation's business, including its operational structure, strategic initiatives, and the significant risks and legal proceedings it faces Business Overview Sabre Corporation is a technology company powering the global travel industry, partnering with airlines, hoteliers, and travel agencies for retail, distribution, and fulfillment - Sabre Corporation is a technology company that powers the global travel industry, connecting travel suppliers with buyers and offering software solutions[15] - The COVID-19 pandemic has materially impacted consolidated financial results for 2021 and 2022, leading to significant decreases in transaction-based revenue, though gradual improvement in key volume metrics was observed[16] - In response to COVID-19, the company implemented cost-saving measures, including workforce reduction, and refinanced debt in 2021 and 2022 to manage liquidity[17][18] Company Overview Sabre Corporation, formed in Delaware in 2006, provides technology solutions to the global travel industry through its principal operating subsidiary, Sabre GLBL Inc - Sabre Corporation, a Delaware corporation formed in December 2006, acquired Sabre Holdings Corporation in 2007, with Sabre GLBL Inc. as its principal operating subsidiary[14] - The company provides technology solutions to the global travel industry, partnering with airlines, hoteliers, and travel agencies for retailing, distribution, and fulfillment[15] Impact of COVID-19 Pandemic The COVID-19 pandemic significantly decreased transaction-based revenue in 2020-2022, prompting liquidity measures and cost savings, despite gradual volume recovery - The COVID-19 pandemic caused significant decreases in transaction-based revenue in Travel Solutions and SynXis Software and Services revenue in Hospitality Solutions in 2020, with continued material impact in 2021 and 2022[16] - Despite negative impacts, gradual improvement in key volume metrics was observed in 2021 and 2022 as vaccines were administered and travel restrictions eased, leading to increased incentive consideration costs[16] - Measures taken to address liquidity included suspending common stock dividends and share repurchases, borrowing, and completing debt and equity offerings, along with cost savings[17] Business Segments and Product Offerings Sabre operates two segments: Travel Solutions, offering global distribution and airline software, and Hospitality Solutions, providing SaaS for hoteliers - Effective Q3 2020, Sabre operates through two segments: Travel Solutions (global travel solutions for suppliers and buyers, including airline software) and Hospitality Solutions (software for hoteliers)[19] - Travel Solutions includes a global distribution system (GDS) and SaaS/hosted software for airlines (reservations, commercial, operations), and completed the sale of its AirCentre airline operations portfolio in February 2022[20][21] - Hospitality Solutions provides SaaS/hosted software for hoteliers to manage pricing, reservations, and retail across distribution channels, serving over 42,000 properties in 177 countries[22] Growth Strategy Sabre's 2022 strategy focuses on enhancing customer relationships, adapting products, growing the customer base through innovation, and expanding into related travel areas - Sabre's 2022 strategic framework focuses on enhancing customer relationships, adapting products (e.g., NDC integration), growing the customer base through innovation and content, and expanding into related travel areas[23] Technology and Operations The technology strategy prioritizes operational stability, security, and performance, investing in a centralized PaaS architecture and cloud migration from mainframe systems - The technology strategy emphasizes operational stability, reliability, security, and performance at efficient costs, with significant investment in a centralized Platform as a Service (PaaS) architecture and cloud migration[24] - The architecture has evolved from mainframe-centric to a secure cloud-based processing platform, supporting high-volume air shopping, real-time data access, and customized applications[25] Customer Base Travel Solutions serves diverse customers including airlines, hotels, and travel agencies, while Hospitality Solutions serves over 42,000 hotel properties globally - Travel Solutions serves a diverse customer base including airlines, hotels, car rental brands, rail carriers, cruise lines, tour operators, travel agencies (OTAs, offline, TMCs), and corporate travel departments globally[26] - Hospitality Solutions serves a global customer base of over 42,000 hotel properties of all sizes[26] Revenue Streams Revenue is generated from GDS bookings, SaaS/hosted solutions, software licensing, professional services, and media advertising - Revenue is generated from transactions (GDS bookings, fees from suppliers and agencies), SaaS and hosted solutions (upfront and recurring usage-based fees), software licensing (installation and maintenance), professional service fees (consulting), and media (advertising on digital marketing channels)[27][28][29][30][31] Competitive Landscape Sabre operates in highly competitive markets, with Travel Solutions facing other GDSs and direct distribution, and Hospitality Solutions competing with global players and in-house technology - Sabre operates in highly competitive markets, with Travel Solutions competing against other GDSs, direct distribution by suppliers, metasearch providers, and IT solution providers[32] - Hospitality Solutions competes with large global players, new entrants, and hotels developing in-house technology[33] Intellectual Property The company protects its software and proprietary information through patents, copyrights, trade secrets, trademarks, and confidentiality, without dependence on any single IP item - The company relies on a combination of patent, copyright, trade secret, and trademark laws, confidentiality procedures, and contractual provisions to protect its software, business processes, and proprietary information[34] - While heavily relying on brands and trademarks, the business is not dependent on any single item of intellectual property[35] Government Regulation Sabre is subject to international, federal, state, and local laws, including GDS and data protection regulations, and trade sanctions impacting Russian services - Sabre is subject to international, federal, state, and local laws, including GDS regulations in the EU, Canada, and the US, and data protection/privacy regulations like GDPR[36][37] - The company is also subject to OFAC rules and other trade sanctions, with recent Russian legislation (effective Oct 30, 2022) prohibiting certain services in Russia, negatively impacting revenue[37][38] Seasonality of Business The travel industry exhibits seasonality, with strong bookings and revenue in Q1 and Q3, and a notable decline in Q4 due to holiday travel patterns - The travel industry is seasonal, with strong bookings and revenue typically in Q1 and Q3, and a significant decline in Q4, especially December, due to holiday leisure bookings occurring earlier and reduced business travel[39] Human Capital Management The company focuses on talent acquisition, development, and retention through competitive compensation, leadership programs, and promoting diversity, inclusion, and employee well-being Employee Distribution by Region (as of December 31, 2022) | | No of Employees | % of Total | | :--- | :--- | :--- | | United States | 2,365 | 32 % | | APAC | 1,921 | 26 % | | Europe | 1,864 | 24 % | | (1) All Other | 1,311 | 18 % | | Total | 7,461 | 100 % | - The company focuses on talent acquisition, development, and retention through competitive compensation, leadership programs (Lead the Way), and reward systems[42] - Sabre promotes diversity and inclusion through an Inclusion and Diversity Council and supports employee well-being with health benefits, parental leave, enhanced PTO, and a work-from-anywhere program[43][44] Available Information Sabre files SEC reports (10-K, 10-Q, 8-K) available on its investor relations website and may use social media for material disclosures - Sabre files reports with the SEC (10-K, 10-Q, 8-K) available free of charge on its investor relations website (investors.sabre.com)[46] - The company may use its website, Twitter (@Sabre_Corp), and other social media channels for material disclosures, which are not incorporated by reference into the 10-K[47] Risk Factors This section details significant risks that could materially affect Sabre Corporation's business, financial condition, and operating results - The COVID-19 pandemic has had and is expected to continue to have a significant adverse impact on Sabre's business, financial results, and the travel suppliers it relies on[49] - Sabre operates in highly competitive, evolving markets and must continuously innovate to respond to changing customer needs and technological advancements[56] - The company has a significant amount of indebtedness ($4.7 billion as of Dec 31, 2022), which could adversely affect cash flow and ability to operate[116] COVID-19 Pandemic Related Risks The COVID-19 pandemic has significantly impacted the travel industry, causing revenue decreases, potential asset impairments, and uncertain long-term changes to travel patterns - The COVID-19 pandemic has caused significant negative impacts on the travel industry, leading to material decreases in consumer spending and transaction volumes, adversely affecting Sabre's financial results (revenue, net income, cash flow, Adjusted EBITDA)[49] - The pandemic may lead to potential impairments of goodwill and other assets, increased provisions for bad debt, and higher cash outlays for cancelled bookings[50] - The long-term effects of the pandemic on travel patterns, including business travel, and potential industry consolidation remain highly uncertain and could fundamentally change the travel industry[51][53] Business and Industry Specific Risks Sabre faces risks related to talent retention, intense competition, dependence on global travel transaction volumes, and pricing pressure in its Travel Solutions business - Sabre's ability to recruit, train, and retain key employees, especially technical staff, is critical for operations and future growth, facing high demand and competition[55] - The company operates in highly competitive, rapidly evolving markets, requiring continuous innovation and substantial expenditures to adapt to new technologies and maintain competitiveness[56][57][58] - Revenue is highly dependent on global travel transaction volumes, particularly air travel, making it susceptible to declines or disruptions from economic conditions, contagious diseases, political events, and natural disasters[62][63] - Sabre's Travel Solutions business faces pricing pressure from travel suppliers and depends on maintaining and renewing contracts with both suppliers and travel buyers, with a meaningful portion of agreements up for renewal annually[61][69][71] Technology and Intellectual Property Risks Risks include reliance on third-party IT services, security incidents, intellectual property infringement, and challenges in protecting proprietary information and managing open-source software - Sabre relies on third-party IT services (DXC, cloud/SaaS providers) and its success depends on maintaining effective relationships and system integrity, which are vulnerable to failures, capacity constraints, and external damage[90][91][92][93] - Security incidents, including cyberattacks and data breaches (e.g., payment information, PII), expose Sabre to liability, reputational damage, and significant costs for investigation and remediation[97][98][99][100] - Intellectual property infringement actions against Sabre can be costly and time-consuming, potentially disrupting business, diverting management attention, and requiring redesigns or licensing agreements[101][103] - The company may not effectively protect its intellectual property (patents, copyrights, trademarks, trade secrets), allowing competitors to duplicate products or services, and faces risks from using open-source software[104][105][106][108] Economic, Political, and Global Condition Risks Global and regional economic downturns, political instability, adverse regulatory changes, and foreign currency fluctuations pose risks to Sabre's international operations and demand - Travel expenditures are sensitive to global and regional economic and political conditions, including downturns, inflation, and geopolitical conflicts (e.g., Ukraine), which can adversely affect demand and business results[109][110][113] - International operations expose Sabre to risks such as political instability, adverse regulatory requirements (e.g., Russian legislation impacting services), foreign currency fluctuations, and difficulties in managing diverse workforces[114] - Brexit has created economic uncertainty in the U.K. and EMEA, potentially disrupting markets, changing tax benefits/liabilities, and leading to legal uncertainty[112] Indebtedness, Financial Condition, and Common Stock Risks Significant indebtedness, restrictive debt covenants, potential funding shortfalls, interest rate fluctuations, and stock price volatility pose financial risks to the company - Sabre has significant indebtedness ($4.7 billion as of Dec 31, 2022), increasing vulnerability to adverse economic conditions, higher interest expenses, and limiting cash flow for operations and growth[116] - Debt covenants restrict operational flexibility (e.g., incurring debt, paying dividends, making investments), and non-compliance could lead to default and acceleration of debt obligations[118] - The company may require more cash than generated by operations, and additional funding may not be available on reasonable terms, impacting growth strategies and increasing financing costs[119][120][121] - Exposure to interest rate fluctuations, particularly on variable debt, can increase interest expense, and hedging strategies may not fully mitigate these risks[122][123] - The market price of common stock could decline due to a large number of shares eligible for future sale, potential dilution from future equity issuances, or sales by officers/directors[125] - Sabre may recognize impairments on long-lived assets, including goodwill and other intangible assets, or equity method investments, leading to non-cash charges[126][127] - Maintaining financial controls and public company requirements strains resources, diverts management attention, and affects the ability to attract/retain qualified board members[128][129] - Higher than anticipated tax liabilities may arise from complex global tax laws, audits, and changes in regulations (e.g., Inflation Reduction Act, digital services taxes)[130][131][132][133] - Unfunded pension plan obligations ($83 million as of Dec 31, 2022) may require significant cash contributions, reducing available cash for business operations[134] - Insufficient insurance coverage for litigation or product liability claims could expose the company to significant liabilities and reputational damage[135][136] Unresolved Staff Comments This item indicates that there are no unresolved staff comments from the SEC regarding the company's previous filings - Not applicable, indicating no unresolved staff comments[137] Properties Sabre Corporation operates globally with approximately 700,000 square feet of leased office space across 59 locations in 42 countries, including corporate headquarters in Southlake, Texas, and regional headquarters in London (EMEA) and Singapore (APAC) - Sabre operates in 59 locations across 42 countries, with approximately 700,000 square feet of leased office space[138][140][141] - Corporate headquarters are in Southlake, Texas, with regional headquarters in London (EMEA) and Singapore (APAC)[139][140][141] Legal Proceedings Sabre Corporation is involved in routine legal proceedings incidental to its business, with material legal proceedings detailed in Note 16 to the consolidated financial statements - The company is engaged in routine legal proceedings, with material cases detailed in Note 16 of the consolidated financial statements[142] - The ultimate outcome of litigation is uncertain, and accruals are made for probable and reasonably estimable loss contingencies, which may change with new information[142] Mine Safety Disclosures This item states that mine safety disclosures are not applicable to Sabre Corporation's business operations - Not applicable, indicating no mine safety disclosures[143] Information About Our Executive Officers This section provides biographical information for Sabre Corporation's executive officers as of February 17, 2023, including their ages and positions, highlighting their extensive experience in the travel, technology, and finance industries Executive Officers as of February 17, 2023 | Name | Age | Position | | :--- | :--- | :--- | | Sean Menke | 54 | Chair of the Board and Chief Executive Officer | | Kurt Ekert | 52 | President | | Chadwick Ho | 50 | Executive Vice President and Chief Legal Officer | | Roshan Mendis | 50 | Executive Vice President and Chief Commercial Officer | | David Moore | 60 | Executive Vice President and Chief Technology Officer | | Michael Randolfi | 50 | Executive Vice President and Chief Financial Officer | | Shawn Williams | 50 | Executive Vice President and Chief People Officer | | Scott Wilson | 55 | Executive Vice President, Sabre and President, Hospitality Solutions | | Garry Wiseman | 46 | Executive Vice President and Chief Product Officer | - Executive officers bring diverse experience from leadership roles in airlines, travel technology, entertainment, and finance[145][146][147][148][149][150][151] Part II Part II of the report covers Sabre Corporation's financial performance, market information for its common equity, management's discussion and analysis of financial condition and results of operations, quantitative and qualitative disclosures about market risk, and the consolidated financial statements Market for Common Equity and Stockholder Matters Sabre's common stock is listed on NASDAQ under "SABR." As of February 13, 2023, there were 101 stockholders of record and 328,585,965 shares outstanding - Sabre's common stock (SABR) is listed on the NASDAQ Global Select Market[153] - As of February 13, 2023, there were 101 stockholders of record and 328,585,965 shares of common stock outstanding[5][153] - Quarterly cash dividends on common stock were suspended after March 30, 2020, and no shares were repurchased in 2022 under the $500 million Share Repurchase Program, which has $287 million remaining authorized[153][280] Reserved This item is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides a detailed analysis of Sabre Corporation's financial condition and results of operations, highlighting the ongoing impact of the COVID-19 pandemic, recent acquisitions and dispositions, and the effects of the military conflict in Ukraine - The COVID-19 pandemic continued to materially impact financial results in 2021 and 2022, though gradual improvements in key volume metrics were observed[160] - Sabre completed the acquisition of Conferma in August 2022 and sold its AirCentre portfolio in February 2022 for $392 million, recognizing a pre-tax gain of $180 million[164][166] - The military conflict in Ukraine and related Russian legislation negatively impacted revenue in 2022, prohibiting certain services in Russia and leading to a $5 million asset impairment[167][168] Overview Sabre connects people and places through travel technology, operating Travel Solutions (global B2B marketplace, airline software) and Hospitality Solutions (hotel software) - Sabre connects people and places with technology for travel, operating through Travel Solutions (global B2B travel marketplace and airline software) and Hospitality Solutions (hotel software)[158] - Revenue is primarily generated from transaction-based fees, recurring usage-based fees for SaaS/hosted systems, and upfront/professional service fees[159] Recent Developments Recent developments include the continued impact of COVID-19, the acquisition of Conferma, the sale of AirCentre, and negative revenue impacts from the Ukraine conflict - The COVID-19 pandemic continued to materially impact consolidated financial results in 2021 and 2022, with significant decreases in transaction-based revenue and increased cancellation activity[160] - Sabre acquired Conferma Limited in August 2022 for $62 million cash and converted an $11 million loan, consolidating results into Travel Solutions[164][440] - The company sold its AirCentre airline operations portfolio on February 28, 2022, for $392 million, recording a pre-tax gain of approximately $180 million[166][444] - Military conflict in Ukraine led to termination of a distribution agreement and Russian legislation prohibiting services, negatively impacting 2022 revenue by approximately $85 million and resulting in a $5 million asset impairment[167][168] Key Factors Affecting Results Key factors include technology transformation investments, geographic mix of travel bookings, increasing interest rates, rising travel agency incentive consideration, and industry shifts to SaaS solutions - Sabre is undergoing a technology transformation with incremental operational and capital expenditure investments in 2023 and beyond, focusing on open source, cloud-based solutions, and next-generation retailing capabilities[170] - Revenue is affected by the geographic mix of travel bookings; domestic bookings increased post-COVID-19, but international bookings showed positive recovery in 2022, particularly in APAC[173] Direct Billable Bookings by Geographic Mix (2019-2022) | | Year Ended December 31, | | | | :--- | :--- | :--- | :--- | | | 2022 | 2021 | 2020 | | North America | 56 % | 68 % | 64 % | | EMEA | 18 % | 16 % | 17 % | | APAC | 15 % | 10 % | 10 % | | Latin America | 11 % | 6 % | 9 % | | Total | 100 % | 100 % | 100 % | - Increasing interest rates due to global capital market volatility and inflation led to higher interest expense in 2022, with further refinancing expected in 2023-2024[177] - Travel agency incentive consideration, a large portion of Travel Solutions expenses, increased in 2022 due to higher transaction volumes and rates, expected to continue in 2023[179][180] - The increasing importance of LCC/hybrids and the industry shift to SaaS and hosted solutions by airlines and hotels present growth opportunities, despite potential delays from COVID-19 impacts[182][183][184][185] Revenue and Expense Components Revenues are derived from Travel Solutions and Hospitality Solutions, while expenses include delivery costs, technology investments, and selling, general, and administrative overhead - Revenues are generated from Travel Solutions (GDS distribution, IT solutions, software licensing) and Hospitality Solutions (upfront and recurring SaaS/hosted fees, professional services)[188] - Cost of revenue (excluding technology) includes delivery/distribution costs, employee-related costs, and travel agency incentive consideration[189] - Technology costs cover third-party providers, employee-related costs for operations, maintenance, minor enhancements, and technology transformation efforts[191] - Selling, general, and administrative expenses include credit loss provisions, overhead, personnel costs (including stock-based compensation), professional fees, and legal dispute costs[193] Key Operating Metrics Key operating metrics include Direct Billable Bookings and Passengers Boarded for Travel Solutions, and Central Reservations System Transactions for Hospitality Solutions - Key metrics for Travel Solutions are "Direct Billable Bookings" (GDS bookings) and "Passengers Boarded" (IT solutions revenue), while Hospitality Solutions uses "Central Reservations System Transactions"[197] Key Operating Metrics (2020-2022) | | Year Ended December 31, | | Year-over-Year % Change | | | :--- | :--- | :--- | :--- | :--- | | | 2022 | 2021 | 2022 | 2021 | | Travel Solutions | | | | | | Direct Billable Bookings - Air | 260,804 | 183,629 | 42.0 % | 77.7 % | | Direct Billable Bookings - LGS | 41,038 | 23,384 | 75.5 % | 9.5 % | | Distribution Total Direct Billable Bookings | 301,842 | 207,013 | 45.8 % | 66.0 % | | IT Solutions Passengers Boarded | 637,438 | 423,838 | 50.4 % | 31.3 % | | Hospitality Solutions | | | | | | Central Reservations System Transactions | 111,459 | 91,802 | 21.4 % | 36.9 % | Non-GAAP Financial Measures Definitions Sabre uses non-GAAP measures like Adjusted Operating Income, Adjusted Net Loss, Adjusted EBITDA, and Free Cash Flow to evaluate core operations, acknowledging their analytical limitations - Sabre uses non-GAAP measures like Adjusted Operating Income (Loss), Adjusted Net Loss, Adjusted EBITDA, and Free Cash Flow to monitor core operations and evaluate financial performance[199][204] - These non-GAAP measures have limitations as analytical tools, excluding certain recurring non-cash charges, cash requirements for replacements, and working capital needs[206][207] Non-GAAP Financial Measures Reconciliation This section provides reconciliations of GAAP financial measures to non-GAAP measures, including Adjusted Net Loss, Adjusted Operating Loss, Adjusted EBITDA, and Free Cash Flow Net Loss to Adjusted Net Loss from Continuing Operations (2020-2022) (in thousands) | | Year Ended December 31, | | | | :--- | :--- | :--- | :--- | | | 2022 | 2021 | 2020 | | Net loss attributable to common stockholders | $ (456,833) | $ (950,071) | $ (1,289,998) | | Loss from continuing operations | $ (432,099) | $ (923,775) | $ (1,283,927) | | Adjusted Net Loss from continuing operations | $ (371,092) | $ (709,390) | $ (926,774) | | Adjusted Net Loss from continuing operations per share | $ (1.14) | $ (2.21) | $ (3.20) | Operating Loss to Adjusted Operating Loss (2020-2022) (in thousands) | | Year Ended December 31, | | | | :--- | :--- | :--- | :--- | | | 2022 | 2021 | 2020 | | Operating loss | $ (261,060) | $ (665,487) | $ (988,039) | | Adjusted Operating Loss | $ (68,042) | $ (459,317) | $ (745,274) | Loss from Continuing Operations to Adjusted EBITDA (2020-2022) (in thousands) | | Year Ended December 31, | | | | :--- | :--- | :--- | :--- | | | 2022 | 2021 | 2020 | | Loss from continuing operations | $ (432,099) | $ (923,775) | $ (1,283,927) | | Adjusted EBITDA | $ 65,337 | $ (261,276) | $ (447,529) | Cash Flow from Operating Activities to Free Cash Flow (2020-2022) (in thousands) | | Year Ended December 31, | | | | :--- | :--- | :--- | :--- | | | 2022 | 2021 | 2020 | | Cash used in operating activities | $ (276,458) | $ (414,654) | $ (770,245) | | Additions to property and equipment | (69,494) | (54,302) | (65,420) | | Free Cash Flow | $ (345,952) | $ (468,956) | $ (835,665) | Results of Operations This section presents the consolidated statements of operations, detailing revenue, cost of revenue, operating loss, interest expense, and net loss for the past three fiscal years Consolidated Statements of Operations (2020-2022) (in thousands) | | Year Ended December 31, | | | | :--- | :--- | :--- | :--- | | | 2022 | 2021 | 2020 | | Revenue | $ 2,537,015 | $ 1,688,875 | $ 1,334,100 | | Cost of revenue, excluding technology costs | 1,040,819 | 691,451 | 579,010 | | Technology costs | 1,096,097 | 1,052,833 | 1,156,723 | | Selling, general and administrative | 661,159 | 610,078 | 586,406 | | Operating loss | (261,060) | (665,487) | (988,039) | | Interest expense, net | (295,231) | (257,818) | (225,785) | | Loss on extinguishment of debt | (4,473) | (13,070) | (21,626) | | Equity method income (loss) | 686 | (264) | (2,528) | | Other, net | 136,645 | (1,748) | (66,961) | | Total other expense, net | (162,373) | (272,900) | (316,900) | | Loss from continuing operations before income taxes | (423,433) | (938,387) | (1,304,939) | | Provision (benefit) for income taxes | 8,666 | (14,612) | (21,012) | | Loss from continuing operations | $ (432,099) | $ (923,775) | $ (1,283,927) | | (Loss) income from discontinued operations, net of tax | (679) | (2,532) | 2,788 | | Net loss | (432,778) | (926,307) | (1,281,139) | | Net income attributable to noncontrolling interests | 2,670 | 2,162 | 1,200 | | Net (loss) income attributable to Sabre Corporation | (435,448) | (928,469) | (1,282,339) | | Preferred stock dividends | 21,385 | 21,602 | 7,659 | | Net loss attributable to common stockholders | $ (456,833) | $ (950,071) | $ (1,289,998) | | Basic net loss per share attributable to common stockholders: | | | | | Loss from continuing operations | $ (1.40) | $ (2.95) | $ (4.46) | | (Loss) income from discontinued operations | — | (0.01) | 0.01 | | Net loss per common share | $ (1.40) | $ (2.96) | $ (4.45) | | Diluted net loss per share attributable to common stockholders: | | | | | Loss from continuing operations | $ (1.40) | $ (2.95) | $ (4.46) | | (Loss) income from discontinued operations | — | (0.01) | 0.01 | | Net loss per common share | $ (1.40) | $ (2.96) | $ (4.45) | | Weighted-average common shares outstanding: | | | | | Basic | 326,742 | 320,922 | 289,855 | | Diluted | 326,742 | 320,922 | 289,855 | | Dividend per common share | $ — | $ — | $ 0.14 | - Total revenue increased by $848 million (50%) in 2022 to $2.54 billion, driven by a 54% increase in Travel Solutions revenue and a 26% increase in Hospitality Solutions revenue, reflecting continued recovery from COVID-19[215][216] - Cost of revenue (excluding technology) increased by $349 million (51%) in 2022, primarily due to a $337 million increase in incentive consideration from higher transaction volumes in Travel Solutions[217] - Technology costs increased by $43 million (4%) in 2022, driven by higher transaction volumes and cloud migration efforts, partially offset by a $57 million decrease in depreciation and amortization[219][220] - Selling, general and administrative expenses increased by $51 million (8%) in 2022, mainly due to increased litigation reserves, risk and security costs, and business strategy investments, partially offset by decreased stock-based compensation[223][225][227] - Interest expense, net, increased by $37 million (15%) in 2022 due to higher interest rates on term loans, partially offset by interest rate swaps[228] - Other, net, increased by $138 million in 2022, primarily due to a $180 million gain on the sale of AirCentre, partially offset by a $26 million fair value loss on the GBT investment[230] Liquidity and Capital Resources Sabre's liquidity and capital resources are discussed, including cash and cash equivalents, expected free cash flow, material cash requirements, outstanding debt, and cash flow activities Cash and Cash Equivalents (2021-2022) (in thousands) | | As of December 31, | | | :--- | :--- | :--- | | | 2022 | 2021 | | Cash and cash equivalents | $ 794,888 | $ 978,352 | | Restricted cash | 21,035 | 21,039 | | Available under the bilateral letter of credit facility | 8,473 | 10,018 | | Outstanding letters of credit under the bilateral letter of credit facility | 11,527 | 9,982 | - Sabre expects positive free cash flow for the full year 2023, based on anticipated recovery in air travel[255] - Material cash requirements include debt obligations ($6.5 billion total, $450 million due in 12 months), lease obligations ($114 million total, $19 million due in 12 months), IT agreements ($2.4 billion total, $267 million due in 12 months), and purchase obligations ($443 million total, $343 million due in 12 months)[260][261][262][263] - As of December 31, 2022, outstanding debt totaled $4.7 billion, with approximately 29% variable rate debt, and the company is in compliance with all debt covenants[266][269] - Cash used in operating activities improved by $138 million in 2022 to $(276) million, primarily due to improved results from COVID-19 recovery, partially offset by increased bonus and interest payments[290] - Investing activities in 2022 included $392 million from the AirCentre sale, offset by $69 million in capital expenditures, $80 million for GBT investment, and $69 million for Conferma and other acquisitions[292] - Financing activities in 2022 included $1.8 billion in proceeds from new debt issuances (2022 Term Loan B-1, B-2, December 2027 Notes), offset by $1.8 billion in debt payments, $33 million in debt costs, and $21 million in preferred stock dividends[294] Recent Accounting Pronouncements Sabre adopted updated FASB guidance on derivatives, hedging, contract assets/liabilities, income tax accounting, and credit losses, with no material impact from most adoptions - Sabre adopted updated FASB guidance on derivatives and hedging in Q1 2022 with no material impact, and guidance on contract assets/liabilities in business combinations in Q4 2021 with no material impact[427][428] - The company adopted simplified income tax accounting guidance in Q1 2021 with no material impact and the "expected loss" model for credit losses in Q1 2020, increasing the allowance for credit losses by $10 million[429][430] Critical Accounting Estimates Critical accounting estimates involve revenue recognition, air booking cancellation reserves, allowance for credit losses, asset recoverability, capitalized costs, tax assets, and loss contingencies - Critical accounting estimates include revenue recognition for multiple performance obligations, air booking cancellation reserves, allowance for credit losses, recoverability of long-lived assets and goodwill, capitalized implementation costs, tax assets/liabilities, and loss contingencies[297] - Revenue recognition for IT Solutions involves significant judgments in identifying distinct performance obligations, estimating total contract consideration, and forecasting future volumes, which can impact recognized revenue[300] - The air booking cancellation reserve ($11 million as of Dec 31, 2022) is sensitive to historical and expected cancellation rates, influenced by global events like epidemics and economic conditions[304] - The allowance for credit losses ($39 million as of Dec 31, 2022) is determined by assessing risks in receivables, historical loss data, and current economic conditions, with collectability mitigated by clearing houses like ACH for air carriers[305][306][402][466] - Goodwill and definite-lived intangible assets are evaluated for impairment annually or when indicators exist, using cash flow projections and market multiples, with no goodwill impairment recorded in 2020-2022[310][311][312] - Capitalized implementation costs are amortized over contract terms (3-10 years) and reviewed for recoverability based on future estimated revenue and direct costs, with immaterial impairments in 2021-2022[313] - Deferred tax assets are reviewed for recoverability, with a valuation allowance established ($367 million U.S. federal, $26 million state, $91 million non-U.S. as of Dec 31, 2022) when realization is not more likely than not, influenced by projected future taxable income and cumulative losses[314][316] - Loss contingencies for legal and tax matters are accrued when probable and estimable, with inherent uncertainties in litigation and tax claims[318] Quantitative and Qualitative Disclosures About Market Risk Sabre Corporation manages market risks related to interest rates, foreign currency exchange rates, credit risk, and inflation through established policies and derivative instruments - Sabre manages market risks (interest rates, foreign exchange, credit, inflation) through policies and derivative instruments, avoiding speculative activities[319] - Interest rate risk on floating-rate debt is partially hedged by interest rate swaps, with $1.0 billion of variable debt indexed to LIBOR/SOFR as of Dec 31, 2022[320][321][324] - Foreign currency risk, primarily on operating expenses, is managed through forward contracts (paused new contracts due to COVID-19 uncertainty) and natural hedging, with significant operations in APAC, Europe, and Latin America[325][326][327] - Credit risk, concentrated in the travel industry (especially commercial air travel), is mitigated by collecting a significant portion of receivables through clearing houses like ACH (82% of air transaction revenue in 2022)[329][330][331] - Inflation's impact on operating results has been minimized by competitive market conditions, but increased interest rates in 2022 due to inflation have raised current and future interest expense[332][333] Financial Statements and Supplementary Data This section presents Sabre Corporation's audited consolidated financial statements, including the statements of operations, comprehensive loss, balance sheets, cash flows, and stockholders' equity for the years ended December 31, 2022, 2021, and 2020 - The section includes the Reports of Independent Registered Public Accounting Firm, Consolidated Statements of Operations, Comprehensive Loss, Balance Sheets, Cash Flows, Stockholders' Equity (Deficit), and Notes to Consolidated Financial Statements[336] - Ernst & Young LLP provided an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2022[338][339][349] Reports of Independent Registered Public Accounting Firm Ernst & Young LLP issued an unqualified opinion on Sabre Corporation's consolidated financial statements and internal control over financial reporting, highlighting critical audit matters for IT Solutions Revenue and Uncertain Tax Positions - Ernst & Young LLP issued an unqualified opinion on Sabre Corporation's consolidated financial statements for the period ended December 31, 2022, and on the effectiveness of internal control over financial reporting[338][339][349] - Critical audit matters included the measurement of IT Solutions Revenue due to significant management judgments in identifying distinct performance obligations and estimating variable consideration, and Uncertain Tax Positions due to complex tax laws across multiple jurisdictions[344][345][346] Consolidated Statements of Operations This table presents the consolidated statements of operations for 2020-2022, detailing revenue, expenses, operating loss, and net loss attributable to common stockholders Consolidated Statements of Operations (2020-2022) (in thousands) | | Year Ended December 31, | | | | :--- | :--- | :--- | :--- | | | 2022 | 2021 | 2020 | | Revenue | $ 2,537,015 | $ 1,688,875 | $ 1,334,100 | | Cost of revenue, excluding technology costs | 1,040,819 | 691,451 | 579,010 | | Technology costs | 1,096,097 | 1,052,833 | 1,156,723 | | Selling, general and administrative | 661,159 | 610,078 | 586,406 | | Operating loss | (261,060) | (665,487) | (988,039) | | Interest expense, net | (295,231) | (257,818) | (225,785) | | Loss on extinguishment of debt | (4,473) | (13,070) | (21,626) | | Equity method income (loss) | 686 | (264) | (2,528) | | Other, net | 136,645 | (1,748) | (66,961) | | Total other expense, net | (162,373) | (272,900) | (316,900) | | Loss from continuing operations before income taxes | (423,433) | (938,387) | (1,304,939) | | Provision (benefit) for income taxes | 8,666 | (14,612) | (21,012) | | Loss from continuing operations | $ (432,099) | $ (923,775) | $ (1,283,927) | | (Loss) income from discontinued operations, net of tax | (679) | (2,532) | 2,788 | | Net loss | (432,778) | (926,307) | (1,281,139) | | Net income attributable to noncontrolling interests | 2,670 | 2,162 | 1,200 | | Net (loss) income attributable to Sabre Corporation | (435,448) | (928,469) | (1,282,339) | | Preferred stock dividends | 21,385 | 21,602 | 7,659 | | Net loss attributable to common stockholders | $ (456,833) | $ (950,071) | $ (1,289,998) | | Basic net loss per share attributable to common stockholders: | | | | | Loss from continuing operations | $ (1.40) | $ (2.95) | $ (4.46) | | (Loss) income from discontinued operations | — | (0.01) | 0.01 | | Net loss per common share | $ (1.40) | $ (2.96) | $ (4.45) | | Diluted net loss per share attributable to common stockholders: | | | | | Loss from continuing operations | $ (1.40) | $ (2.95) | $ (4.46) | | (Loss) income from discontinued operations | — | (0.01) | 0.01 | | Net loss per common share | $ (1.40) | $ (2.96) | $ (4.45) | | Weighted-average common shares outstanding: | | | | | Basic | 326,742 | 320,922 | 289,855 | | Diluted | 326,742 | 320,922 | 289,855 | | Dividend per common share | $ — | $ — | $ 0.14 | Consolidated Statements of Other Comprehensive Loss This table presents the consolidated statements of other comprehensive loss for 2020-2022, detailing net loss and various components of other comprehensive income, net of tax Consolidated Statements of Other Comprehensive Loss (2020-2022) (in thousands) | | Year Ended December 31, | | | | :--- | :--- | :--- | :--- | | | 2022 | 2021 | 2020 | | Net loss | $ (432,778) | $ (926,307) | $ (1,281,139) | | Other comprehensive income, net of tax: | | | | | Foreign currency translation adjustments ("CTA") | (1,024) | (7,223) | 7,698 | | Retirement-related benefit plans: | | | | | Net actuarial (loss) gain, net of taxes | (136) | 36,742 | (11,778) | | Pension settlement, net of taxes | 6,016 | 7,529 | 14,005 | | Amortization of prior service credits, net of taxes | (1,337) | (1,432) | (1,111) | | Amortization of actuarial losses, net of taxes | 6,484 | 7,985 | 6,677 | | Net change in retirement-related benefit plans, net of tax | 11,027 | 50,824 | 7,793 | | Derivatives: | | | | | Unrealized gains (losses), net of taxes | 5,658 | (134) | (20,521) | | Reclassification adjustment for realized (gains) losses, net of taxes | (1,082) | 12,805 | 17,890 | | Net change in derivatives, net of tax | 4,576 | 12,671 | (2,631) | | Share of other comprehensive (loss) income of equity method investments | (23) | (602) | 489 | | Other comprehensive income | 14,556 | 55,670 | 13,349 | | Comprehensive loss | (418,222) | (870,637) | (1,267,790) | | Less: Comprehensive income attributable to noncontrolling interests | (2,670) | (2,162) | (1,200) | | Comprehensive loss attributable to Sabre Corporation | $ (420,892) | $ (872,799) | $ (1,268,990) | Consolidated Balance Sheets This table presents the consolidated balance sheets as of December 31, 2022 and 2021, detailing assets, liabilities, and stockholders' equity (deficit) Consolidated Balance Sheets (2021-2022) (in thousands) | | December 31, | | | :--- | :--- | :--- | | | 2022 | 2021 | | Assets | | | | Cash and cash equivalents | $ 794,888 | $ 978,352 | | Total current assets | 1,361,489 | 1,402,274 | | Property and equipment, net | 229,419 | 249,812 | | Goodwill | 2,542,087 | 2,470,206 | | Total assets | $ 4,962,875 | $ 5,291,330 | | Liabilities and stockholders' equity | | | | Total current liabilities | 815,571 | 716,505 | | Long-term debt | 4,717,091 | 4,723,685 | | Total liabilities and stockholders' deficit | $ 4,962,875 | $ 5,291,330 | Consolidated Statements of Cash Flows This table presents the consolidated statements of cash flows for 2020-2022, detailing cash used in operating, investing, and financing activities Consolidated Statements of Cash Flows (2020-2022) (in thousands) | | Year Ended December 31, | | | | :--- | :--- | :--- | :--- | | | 2022 | 2021 | 2020 | | Cash used in operating activities | $ (276,458) | $ (414,654) | $ (770,245) | | Cash provided by (used in) investing activities | 173,977 | (29,428) | (1,291) | | Cash (used in) provided by financing activities | (75,370) | (50,558) | 1,837,741 | | (Decrease) increase in cash, cash equivalents and restricted cash | (183,468) | (500,274) | 1,063,489 | | Cash, cash equivalents and restricted cash at end of period | $ 815,923 | $ 999,391 | $ 1,499,665 | Consolidated Statements of Stockholders' Equity (Deficit) This table presents the consolidated statements of stockholders' equity (deficit) from 2019 to 2022, showing total equity (deficit) at each year-end Consolidated Statements of Stockholders' Equity (Deficit) (2019-2022) (in thousands) | | December 31, 2022 | December 31, 2021 | December 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | :--- | :--- | | Total Stockholders' Equity (Deficit) | $ (872,827) | $ (499,717) | $ 285,154 | $ 947,669 | Notes to Consolidated Financial Statements The notes provide detailed information on business segments, accounting policies, recent events, revenue recognition, acquisitions, goodwill, debt, derivatives, and legal proceedings - Notes provide detailed information on business segments, significant accounting policies, recent events (COVID-19, strategic realignment), revenue recognition, contract balances, acquisitions (Conferma) and dispositions (AirCentre), goodwill and intangible assets, and debt[371][372][373][376][379][380][431][433][440][444][447][467] - Key accounting estimates include revenue recognition, air booking cancellation reserves, allowance for credit losses, and impairment evaluations for long-lived assets and goodwill[378] - The company's debt structure includes senior secured credit facilities, senior secured notes, and exchangeable notes, with various refinancing activities in 2020-2022[469][470][471][472][473][474][475][476][485][486][487][488] - Sabre uses derivative instruments (interest rate swaps, foreign currency forward contracts) to manage market risks, primarily interest rate and foreign currency exchange rate risks[494][495][496][497] - Legal proceedings include antitrust litigation with US Airways and Indian income/service tax litigation, with the ultimate outcome uncertain[557][563][564][566][567][568][569] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure This item states that there are no changes in or disagreements with accountants on accounting and financial disclosure - Not applicable, indicating no changes in or disagreements with accountants[585] Controls and Procedures Sabre's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of December 31, 2022 - Disclosure controls and procedures were evaluated and deemed effective as of December 31, 2022[586] - Management maintained effective internal control over financial reporting as of December 31, 2022, based on the COSO framework[587] - The implementation of Workday (cloud-based HR system) in October 2022 and a new billing system in Q4 2021 are reasonably likely to materially affect internal control over financial reporting[590] Other Information This item states that there is no other information to report - Not applicable, indicating no other information[591] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item states that there are no disclosures regarding foreign jurisdictions that prevent inspections - Not applicable, indicating no disclosures regarding foreign jurisdictions that prevent inspections[592] Part III Part III of the report incorporates by reference information from Sabre Corporation's 2023 Proxy Statement regarding directors, executive officers, corporate governance, executive compensation, security ownership, related party transactions, and principal accountant fees and services Directors, Executive Officers and Corporate Governance This section incorporates by reference information from the 2023 Proxy Statement regarding directors, executive officers, and corporate governance practices, including the Code of Business Ethics and procedures for stockholder nominations - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 Proxy Statement[595] - This includes details on director nominees, Section 16(a) reports, Code of Business Ethics, stockholder nomination procedures, and Audit Committee members[603] Executive Compensation This section incorporates by reference information from the 2023 Proxy Statement concerning executive compensation, including the Compensation Discussion and Analysis, Executive Compensation details, Director Compensation Program, and Compensation Committee Interlocks and Insider Participation - Information on executive compensation, including Compensation Discussion and Analysis, Director Compensation Program, and Compensation Committee Interlocks, is incorporated by reference from the 2023 Proxy Statement[596] Security Ownership and Related Stockholder Matters This section incorporates by reference information from the 2023 Proxy Statement regarding security ownership of certain beneficial owners and management - Information on security ownership of beneficial owners and management is incorporated by reference from the 2023 Proxy Statement[597] Equity Compensation Plan Information as of December 31, 2022 | | Number of securities to be issued upon exercise of outstanding options (a) | Weighted average exercise price of outstanding options (b) | Number of securities remaining available for future issuance under equity compensation plans (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by stockholders | 17,207,035 | $ 13.64 | 12,262,319 | - The company operates several equity compensation plans (e.g., 2022 Director Plan, 2021 Omnibus Plan) which serve as successors to prior plans, providing for the issuance of RSUs, DSUs, and stock options[599][600][601][604][606][607][608][609] Certain Relationships and Related Transactions, and Director Independence This section incorporates by reference information from the 2023 Proxy Statement regarding certain relationships and related party transactions, as well as details on Board composition and director independence - Information on related party transactions and director independence is incorporated by reference from the 2023 Proxy Statement[610] Principal Accountant Fees and Services This section incorporates by reference information from the 2023 Proxy Statement regarding principal accounting firm fees and the Audit Committee's approval process for audit and non-audit services - Information on principal accounting firm fees and Audit Committee approval of audit and non-audit services is incorporated by reference from the 2023 Proxy Statement[611] Part IV Part IV of the report lists the financial statements, financial statement schedules, and exhibits filed as part of the Annual Report on Form 10-K Exhibits and Financial Statement Schedules This item lists the financial statements, financial statement schedules (Schedule II – Valuation and Qualifying Accounts), and a comprehensive list of exhibits filed with the 10-K, including various agreements, plans, and certifications - The report includes financial statements, Schedule II – Valuation and Qualifying Accounts, and a list of exhibits[615] - Exhibits include asset purchase agreements, corporate governance documents, debt indentures, equity incentive plans, and employment agreements[616][617][619][620][621][622][623][624] - Certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are filed as exhibits[627] Form 10-K Summary This item states that the Form 10-K Summary is not applicable - Not applicable, indicating no Form 10-K Summary[626]