Sabre(US:SABR)2023-11-02 20:39Financial Data and Key Metrics - Q3 revenue was $740 million, a 12% increase YoY, driven by strong performance across Distribution and Hospitality Solutions [74][97][98] - Adjusted EBITDA improved by $76 million YoY to $110 million, with nearly 100% flow-through of incremental revenue to adjusted EBITDA [77][99] - Free cash flow was $39 million in Q3, exceeding prior guidance of $20 million, marking the first positive Q3 free cash flow since 2019 [77] - Distribution bookings totaled 89 million, up 12% YoY, with an average booking fee of $5.87, a 9% increase YoY [97] - Hospitality Solutions revenue grew 16% YoY to $79 million, driven by transaction growth and higher rates per transaction [98] Business Line Performance - Distribution revenue increased 22% YoY to $525 million, supported by higher booking volumes and favorable regional and travel type mix [97] - Hospitality Solutions revenue grew 16% YoY to $79 million, with adjusted EBITDA on track for a $40 million improvement in 2023 versus 2022 [98] - IT Solutions revenue declined by $26 million YoY to $147 million, primarily due to demigrations, largely impacted by changes in Russian law [75] Market Performance - North America is fully recovered to 2019 levels, while Asia is at mid-60s and Europe at 70s recovery levels [65] - Latin America showed a slight recovery trend but has recently trended back [65] - Air India's domestic content agreement highlights Sabre's ability to penetrate one of the largest GDS markets globally [15][111] Strategic Direction and Industry Competition - The company is focused on four strategic priorities: generating positive free cash flow, deleveraging the balance sheet, achieving sustainable growth, and driving innovation [6][25] - Technology transformation to Google Cloud is on track, with a 10% YoY reduction in adjusted technology costs and expected annual cost savings of $200 million by 2024 [12][55] - Strategic partnerships with Google and Hopper have led to innovative solutions like Sabre Upgrade IQ and Lodging AI, enhancing personalized offerings for airlines and hotels [10][11][29] - The company is building a multisource travel ecosystem to integrate NDC and EDIFACT content seamlessly, positioning itself as a leader in next-generation travel technology [33][115] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver on its strategic priorities, citing strong Q3 performance and continued momentum in key financial metrics [6][23][36] - The company expects to achieve $900 million in adjusted EBITDA and $500 million in free cash flow by 2025, supported by cost reductions, technology transformation, and strategic growth initiatives [84][103] - Industry air volume growth assumptions for 2025 include 1-2% sequential quarterly growth, with each point of growth contributing approximately $12 million in adjusted EBITDA annually [103][121] Other Important Information - The company extended the majority of its 2025 debt maturities to 2027 and beyond, improving its financial flexibility [8][78] - Sabre's cash balance at the end of Q3 was $623 million, exceeding cumulative debt maturities through 2026 [78][100] - The company expects full-year 2023 revenue between $2.9 billion and $3 billion, with adjusted EBITDA guidance raised to $345 million [101][102] Q&A Session Summary Questions and Answers - Question on NDC impact: NDC represents about 1% of the GDS marketplace, with minimal impact on average booking fees [68][70] - Question on Air India contract: The agreement unlocks one of the largest GDS markets globally, previously exclusive to a competitor [111] - Question on corporate travel recovery: Corporate travel has recovered to 75% of 2019 levels on a unit basis, with higher dollar recovery due to increased yields [43][44] - Question on technology cost reductions: Tech costs decreased by 10% YoY, with further reductions expected as part of the $200 million annual cost savings target by 2024 [106] - Question on 2025 EBITDA target: The $900 million target includes $300 million from cost reductions, $150 million from strategic growth initiatives, and $450 million from volume growth [84][108]