Form 8-K Sabre Corp For: Feb 12
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 8-K
_____________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 12, 2019
_____________________
SABRE CORPORATION
(Exact name of registrant as specified in its charter)
_____________________
Delaware | 001-36422 | 20-8647322 | ||
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (IRS Employer Identification No.) | ||
3150 Sabre Drive Southlake, TX | 76092 | |
(Address of principal executive offices) | (Zip Code) | |
(682) 605-1000
(Registrant’s telephone number, including area code)
____________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company | ¨ | |
If emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ¨ | |
Item 2.02 | Results of Operations and Financial Condition. |
On February 12, 2019, Sabre Corporation (“Sabre”) issued a press release and will hold a conference call regarding its financial results for the quarter and year ended December 31, 2018. A copy of the press release is attached as Exhibit 99.1.
The information in this Item 2.02 of Form 8-K and the attached exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Sabre makes reference to non-GAAP financial measures in the press release. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in the attached press release.
Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits
Exhibit Number | Description | ||
99.1 | |||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Sabre Corporation | |||
Dated: | February 12, 2019 | By: | /s/ Douglas E. Barnett |
Name: | Douglas E. Barnett | ||
Title: | Chief Financial Officer | ||
Sabre reports fourth quarter and full-year 2018 results
Fourth quarter 2018 highlights:
• | Revenue increased 4.8% |
• | Net income attributable to common stockholders increased 2.8% to $84.4 million |
• | Diluted net income attributable to common stockholders per share (EPS) was consistent with the year ago period at $0.30 |
• | Adjusted EPS grew 6.3% to $0.34 |
Full year 2018 highlights:
• | Revenue increased 7.5% |
• | Net income attributable to common stockholders increased 39.2% to $337.5 million |
• | Diluted net income attributable to common stockholders per share (EPS) increased 40.2% to $1.22 |
• | Adjusted EPS grew 10.0% to $1.54 |
• | Cash provided by operating activities increased 6.9% to $724.8 million |
SOUTHLAKE, Texas – February 12, 2019– Sabre Corporation ("Sabre" or the "Company") (NASDAQ: SABR) today announced financial results for the quarter and year ended December 31, 2018.
"2018 demonstrates continued progress on a strong foundation," said Sean Menke, Sabre president and CEO. "Our commitment to the strategy we laid out at the beginning of 2018 resulted in strong financial and operational performance, with high-single digit revenue growth, solid EPS growth and strong growth in Free Cash Flow. We augmented our leadership team with skilled technology executives, evolved our go-to-market strategy and accelerated our technology evolution. Continued evidence of momentum behind our strategic and commercial initiatives demonstrates we are delivering for our customers and stockholders. Our progress gives me confidence in our 2019 expectations, including driving continued growth in Free Cash Flow."
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Q4 2018 Financial Summary
Sabre consolidated fourth quarter revenue increased 4.8% to $923.9 million, compared to $881.9 million in the year-ago period.
Operating income was $121.0 million, a decrease of 10.1% from $134.6 million in the fourth quarter of 2017. The decline in operating income was driven by Travel Network incentive expense growth, higher depreciation and amortization and an unfavorable comparison to a $10.9 million credit in the prior year quarter related to an impairment reduction, partially offset by solid revenue growth.
Net income attributable to common stockholders totaled $84.4 million, an increase of 2.8% from net income of $82.1 million in the fourth quarter of 2017. Diluted net income attributable to common stockholders per share (EPS) was consistent with the year ago period at $0.30. The increase in net income attributable to common stockholders was partially driven by a U.S. statutory tax rate reduction and favorable comparison to $46.6 million of transition tax expense in the year-ago quarter related to the enactment of the Tax Cuts and Jobs Act ("TCJA"). This was partially offset by the items impacting operating income described above and an unfavorable comparison to a $59.6 million provisional Tax Receivable Agreement liability reduction included in other income in the year-ago quarter, also related to the enactment of the TCJA.
Fourth quarter consolidated Adjusted Operating Income was $157.9 million, a 2.1% increase from $154.6 million in the fourth quarter of 2017. The increase in consolidated Adjusted Operating Income was the result of solid revenue growth, partially offset by Travel Network incentive expense growth and higher depreciation and amortization.
For the quarter, Sabre reported Adjusted Net Income from continuing operations per share (Adjusted EPS) of $0.34, an increase of 6.3% from $0.32 per share in the fourth quarter of 2017.
During the fourth quarter of 2018, Sabre returned $38.5 million to shareholders through its regular quarterly dividend.
Full-Year 2018 Financial Summary
For the full-year 2018, Sabre total consolidated revenue increased 7.5% to $3.867 billion, compared to $3.598 billion for the prior year.
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Operating income was $562.0 million, an increase of 13.9% from $493.4 million in 2017. Solid revenue growth and the benefits of the cost reduction and business alignment program initiated in August 2017 were largely offset by Travel Network incentive expense growth, increased technology operating expenses and higher depreciation and amortization. The increase in operating income was primarily driven by favorable comparisons to an $81.1 million impairment charge and a $25.3 million restructuring charge related to the announcement of the cost reduction and business alignment program recorded in the prior year, partially offset by an unfavorable comparison against a $43.0 million settlement with the company's insurance carriers, net of accrued legal and related expenses, in 2017 related to litigation that was settled in 2012.
Net income attributable to common stockholders totaled $337.5 million, an increase of 39.2% from $242.5 million in 2017. Diluted net income attributable to common shareholders per share (EPS) totaled $1.22 compared to $0.87 in 2017, an increase of 40.2%. The increase in net income attributable to common stockholders was driven by the items impacting operating income described above, a U.S. statutory tax rate reduction, a favorable comparison to $46.6 million of transition tax expense in the prior year related to the enactment of the TCJA and a favorable comparison to $14.8 million in debt modification costs in the prior year. This was partially offset by an unfavorable comparison to a $59.6 million provisional Tax Receivable Agreement liability reduction in the prior year, also related to the enactment of the TCJA.
Consolidated Adjusted Operating Income totaled $701.4 million, a 0.7% decrease from $706.1 million in 2017. The decrease in consolidated Adjusted Operating Income was the result of Travel Network incentive expense growth, increased technology operating expenses and higher depreciation and amortization, partially offset by solid revenue growth and the benefits of the cost reduction and business alignment program initiated in August 2017.
For the full-year 2018, Adjusted EPS increased 10.0% to $1.54 from $1.40 per share in 2017.
With regards to Sabre's full year 2018 cash flows (versus prior year):
• | Cash provided by operating activities totaled $724.8 million (vs. $678.0 million) |
• | Cash used in investing activities totaled $275.3 million (vs. $317.5 million) |
• | Cash used in financing activities totaled $306.5 million (vs. $356.8 million) |
• | Free Cash Flow totaled $440.9 million (vs. $361.6 million) |
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For the full year 2018, Sabre returned $180.4 million to shareholders, including $154.1 million through its regular quarterly dividend and the repurchase of 1.1 million shares for approximately $26.3 million in aggregate under its share repurchase authorization.
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Financial Highlights (in thousands, except for EPS; unaudited): | Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | ||||||||||||||
Total Company: | |||||||||||||||||||
Revenue | $ | 923,928 | $ | 881,862 | 4.8 | $ | 3,866,956 | $ | 3,598,484 | 7.5 | |||||||||
Operating Income | $ | 121,019 | $ | 134,600 | (10.1) | $ | 562,016 | $ | 493,440 | 13.9 | |||||||||
Net income attributable to common stockholders | $ | 84,400 | $ | 82,090 | 2.8 | $ | 337,531 | $ | 242,531 | 39.2 | |||||||||
Diluted net income attributable to common stockholders per share (EPS) | $ | 0.30 | $ | 0.30 | — | $ | 1.22 | $ | 0.87 | 40.2 | |||||||||
Adjusted Gross Profit* | $ | 365,366 | $ | 359,599 | 1.6 | $ | 1,521,408 | $ | 1,500,186 | 1.4 | |||||||||
Adjusted EBITDA* | $ | 267,545 | $ | 256,667 | 4.2 | $ | 1,124,390 | $ | 1,078,571 | 4.2 | |||||||||
Adjusted Operating Income* | $ | 157,877 | $ | 154,606 | 2.1 | $ | 701,432 | $ | 706,149 | (0.7) | |||||||||
Adjusted Net Income* | $ | 95,045 | $ | 87,961 | 8.1 | $ | 427,570 | $ | 390,118 | 9.6 | |||||||||
Adjusted EPS* | $ | 0.34 | $ | 0.32 | 6.3 | $ | 1.54 | $ | 1.40 | 10.0 | |||||||||
Cash provided by operating activities | $ | 188,604 | $ | 222,127 | (15.1) | $ | 724,797 | $ | 678,033 | 6.9 | |||||||||
Cash used in investing activities | $ | (69,595 | ) | $ | (74,573 | ) | (6.7) | $ | (275,259 | ) | $ | (317,525 | ) | (13.3) | |||||
Cash used in financing activities | $ | (54,097 | ) | $ | (55,844 | ) | (3.1) | $ | (306,506 | ) | $ | (356,780 | ) | (14.1) | |||||
Free Cash Flow* | $ | 110,328 | $ | 148,502 | (25.7) | $ | 440,857 | $ | 361,597 | 21.9 | |||||||||
Net Debt (total debt, less cash) | $ | 2,922,590 | $ | 3,126,652 | |||||||||||||||
Net Debt / LTM Adjusted EBITDA* | 2.6x | 2.9x | |||||||||||||||||
Travel Network: | |||||||||||||||||||
Revenue | $ | 665,177 | $ | 619,029 | 7.5 | $ | 2,806,194 | $ | 2,550,470 | 10.0 | |||||||||
Transaction Revenue | $ | 622,555 | $ | 577,031 | 7.9 | $ | 2,634,571 | $ | 2,376,816 | 10.8 | |||||||||
Subscriber / Other Revenue | $ | 42,621 | $ | 41,998 | 1.5 | $ | 171,622 | $ | 173,654 | (1.2) | |||||||||
Operating Income | $ | 165,330 | $ | 161,393 | 2.4 | $ | 753,255 | $ | 744,045 | 1.2 | |||||||||
Adjusted Operating Income* | $ | 165,431 | 162,205 | 2.0 | $ | 755,811 | $ | 746,625 | 1.2 | ||||||||||
Total Bookings | 126,774 | 121,412 | 4.4 | 558,274 | 524,824 | 6.4 | |||||||||||||
Air Bookings | 111,072 | 105,903 | 4.9 | 491,820 | 462,381 | 6.4 | |||||||||||||
Lodging, Ground and Sea Bookings | 15,702 | 15,509 | 1.2 | 66,454 | 62,443 | 6.4 | |||||||||||||
Bookings Share | 37.1 | % | 36.0 | % | 37.5 | % | 36.3 | % | |||||||||||
Airline Solutions: | |||||||||||||||||||
Revenue | $ | 201,934 | $ | 205,400 | (1.7) | $ | 822,747 | $ | 816,008 | 0.8 | |||||||||
Operating Income | $ | 29,116 | $ | 43,399 | (32.9) | $ | 111,146 | $ | 137,932 | (19.4) | |||||||||
Adjusted Operating Income* | $ | 29,116 | $ | 43,399 | (32.9) | $ | 111,146 | $ | 137,932 | (19.4) | |||||||||
Passengers Boarded | 184,143 | 173,052 | 6.4 | 752,548 | 772,149 | (2.5) | |||||||||||||
Hospitality Solutions: | |||||||||||||||||||
Revenue | $ | 66,726 | $ | 64,281 | 3.8 | $ | 273,079 | $ | 258,352 | 5.7 | |||||||||
Operating Income | $ | 2,954 | $ | 2,649 | 11.5 | 12,881 | 9,670 | 33.2 | |||||||||||
Adjusted Operating Income* | $ | 2,954 | $ | 2,649 | 11.5 | $ | 12,881 | $ | 9,670 | 33.2 | |||||||||
Central Reservation System Transactions | 22,436 | N/A | N/A | 88,655 | N/A | N/A | |||||||||||||
*Indicates non-GAAP financial measure; see descriptions and reconciliations below | |||||||||||||||||||
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Travel Network
Fourth quarter 2018 highlights (versus prior year):
• | Travel Network revenue increased 7.5% to $665.2 million. Revenue growth was driven by solid global bookings growth and an increase in average booking fee. |
• | Global bookings increased 4.4%, driven by 9.0% growth in Asia-Pacific, 6.0% growth in North America and 1.8% growth in EMEA. Latin American bookings declined 8.6%. |
• | Global air bookings share increased 110 basis points to 37.1%. |
• | Operating income increased 2.4% to $165.3 million, and operating income margin was 24.9%. |
• | Operating income was supported by strong revenue growth and a reduction in headcount-related and other costs, partially offset by incentive expense growth, increased technology operating expenses, and higher depreciation and amortization. |
Full year 2018 highlights (versus prior year):
• | Travel Network revenue increased 10.0% to $2.806 billion. Revenue growth was driven by a stable bookings environment, global share gain and growth in average booking fee. |
• | Global bookings increased 6.4%, driven by 17.4% growth in Asia-Pacific, 5.4% growth in North America and 3.1% growth in EMEA. Latin American bookings declined 3.9%. |
• | Global air bookings share increased 120 basis points to 37.5%. |
• | Operating income increased 1.2% to $753.3 million, and operating income margin was 26.8%. |
• | Operating income was supported by strong revenue growth and the benefits of the cost reduction and business alignment program initiated in August of 2017, partially offset by incentive expense growth, increased technology operating expenses, and higher depreciation and amortization. |
Airline Solutions
Fourth quarter 2018 highlights (versus prior year):
• | Airline Solutions revenue decreased 1.7% to $201.9 million. SabreSonic reservation revenue declined 1.0%, with passengers boarded growth offset by a modest decline in passengers boarded rate. AirVision and AirCentre commercial and operations solutions revenue declined 4.7% due to the impact of ASC 606 adoption. Discrete professional services revenue increased in the quarter. |
• | The net year-over-year impact of ASC 606 adoption drove a $6.9 million reduction in revenue in the quarter, net of upfront revenue recognition from new license fee implementations and renewals. Excluding this impact, revenue grew 1.7%. |
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• | Airline passengers boarded increased 6.4% in the quarter, driven by 2.9% growth on a consistent carrier basis and the SabreSonic reservation system implementation at LATAM Airlines that was completed in the second quarter of 2018. |
• | Operating income decreased 32.9% to $29.1 million, and operating income margin was 14.4%. |
• | The decline in operating income was driven by the impact of ASC 606, increased technology operating expenses and higher depreciation and amortization. |
Full year 2018 highlights (versus prior year):
• | Airline Solutions revenue increased 0.8% to $822.7 million. |
• | SabreSonic reservation revenue declined 0.6% as solid passengers boarded growth on a consistent carrier basis and new implementations largely offset the negative impact of ending legacy reservation system services to Southwest Airlines mid-2017. AirVision and AirCentre commercial and operations solutions revenue growth was 5.2%, driven by organic growth, new implementations and new license fee implementations and renewals that partially mitigated the negative impact of ASC 606 adoption. Discrete professional services revenue declined. |
• | The net year-over-year impact of adopting ASC 606 drove an $11.6 million reduction in revenue for the year, net of upfront revenue recognition from new license fee implementations and renewals. Excluding the impacts of the Southwest de-migration and ASC 606, Airline Solutions revenue grew 5.4%. |
• | Airline passengers boarded declined 2.5%, largely due to the impact of the Southwest Airlines de-migration, partially offset by 5.4% growth on a consistent carrier basis and the completion of the SabreSonic reservation system implementation at LATAM Airlines in the second quarter of 2018. |
• | Operating income decreased 19.4% to $111.1 million, and operating income margin was 13.5%. |
• | The decline in operating income was driven by a negative revenue mix shift, the impact of ASC 606 adoption, increased technology operating expenses and higher depreciation and amortization, partially offset by the benefits of the cost reduction and business alignment program initiated in August of 2017. |
Hospitality Solutions
Fourth quarter 2018 highlights (versus prior year):
• | Hospitality Solutions revenue increased 3.8% to $66.7 million. SynXis software and services revenue increased 8.3%, driven by growth in central reservations system |
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transactions. This growth was partially offset by a decline in project-based digital marketing services revenue.
• | Operating income increased 11.5% to $3.0 million, and operating income margin was 4.4%. |
• | The increase in operating income was driven by revenue growth, including a mix shift toward higher margin revenue, and a reduction in headcount-related and other costs. |
Full year 2018 highlights (versus prior year):
• | Hospitality Solutions revenue increased 5.7% to $273.1 million. SynXis software and services revenue growth of 11.0%, driven by growth in central reservation systems transactions. This growth was partially offset by a decline in project-based digital marketing services revenue. |
• | Operating income increased 33.2% to $12.9 million, and operating income margin was 4.7%. |
• | The increase in operating income was driven by revenue growth, including a mix shift toward higher margin revenue, and the benefits of the cost reduction and business alignment program initiated in August of 2017. |
Dividend
Sabre's Board of Directors declared a quarterly dividend of $0.14 per share, payable on March 29, 2019 to shareholders of record on March 21, 2019.
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Full-Year 2019 Financial Guidance
"In 2019, we expect solid revenue growth and even stronger growth in Free Cash Flow. We have made great progress on our technology evolution in 2018 and expect to take significant steps to further accelerate our efforts in 2019," said Doug Barnett, CFO. “We expect to build on the momentum of our cloud migration and mainframe offload and complete our transition to agile development methods to drive tangible benefits to our customers and shareholders. We believe our more modern and flexible technology platform will enable us to accelerate delivery of new innovation to the market and deliver significant cost savings.
"In 2019, we expect total technology costs to increase 3% to 4%, which is in line with our March 2018 Investor Day expectations. With the increased efficiencies we are achieving, over the medium term from 2019 to 2022, we now expect total technology spend to increase at only a 1% CAGR, a reduction from our previous expectations. We expect this lower rate of technology spend growth to help drive an acceleration in Free Cash Flow over the medium term, with faster growth than previous expectations.
"As we have stated previously, the costs associated with our cloud migration are not capitalized under GAAP. This, combined with the acceleration of our mainframe offload and our transition to full adoption and maturity of agile development methods, is expected to reduce the capitalized portion of our total technology spend in 2019 and over the medium term, with no impact on total technology spend levels. The important thing to remember is these changes are Free Cash Flow neutral."
With respect to the 2019 guidance below, full-year Free Cash Flow guidance consists of expected full-year cash provided by operating activities of $615 million to $635 million less additions to property and equipment of $130 million to $150 million.
($ millions) | 2019 Guidance | Growth Rate |
Revenue | $4,005M - $4,085M | 4% - 6% |
Free Cash Flow | Approximately $485M | Approximately 10% |
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Additional guidance metrics are included in the slide presentation and prepared remarks regarding Sabre's fourth quarter and full year 2018 earnings conference call, which have been posted on the Sabre Investor Relations website at investors.sabre.com. The slide presentation and prepared remarks includes further discussion of the change in capitalization mix discussed above.
Conference Call
Sabre will conduct its fourth quarter and full-year 2018 investor conference call today at 9:00 a.m. ET. The live webcast and accompanying slide presentation can be accessed via the Investor Relations section of its website, investors.sabre.com. A replay of the event will be available for at least 90 days following the event.
About Sabre
Sabre Corporation is the leading technology provider to the global travel industry. Sabre’s software, data, mobile and distribution solutions are used by hundreds of airlines and thousands of hotel properties to manage critical operations, including passenger and guest reservations, revenue management, flight, network and crew management. Sabre also operates a leading global travel marketplace, which processes more than US$130 billion of global travel spend annually by connecting travel buyers and suppliers. Headquartered in Southlake, Texas, USA, Sabre serves customers in more than 160 countries around the world.
Website Information
Sabre routinely posts important information for investors on its Investor Relations section of its website, investors.sabre.com. The company intends to use this website as a means of disclosing material, non-public information and for complying with disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of Sabre's website, in addition to following the company's press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, the Sabre website is not incorporated by reference into, and is not a part of, this document.
Supplemental Financial Information
In conjunction with today’s earnings report, a file of supplemental financial information will be available on the Investor Relations section of our website, investors.sabre.com.
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Industry Data
This release contains industry data, forecasts and other information that Sabre obtained from industry publications and surveys, public filings and internal company sources, and there can be no assurance as to the accuracy or completeness of the included information. Statements as to Sabre's ranking, market position, bookings share and market estimates are based on independent industry publications, government publications, third-party forecasts and management’s estimates and assumptions about our markets and our internal research. The company has not independently verified this third-party information nor has it ascertained the underlying economic assumptions relied upon in those sources, and cannot assure you of the accuracy or completeness of this information.
Note on Non-GAAP Financial Measures
This press release includes unaudited non-GAAP financial measures, including Adjusted Gross Profit, Adjusted Operating Income, Adjusted Net Income from continuing operations ("Adjusted Net Income"), Adjusted EBITDA, Adjusted Net Income from continuing operations per share ("Adjusted EPS"), Free Cash Flow and the ratios based on these financial measures. In addition, we provide certain forward guidance with respect to Free Cash Flow. We are unable to provide this forward guidance on a GAAP basis without unreasonable effort; however, see "Business Outlook and Financial Guidance" for additional information including estimates of certain components of the non-GAAP adjustments contained in the guidance.
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
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that are not historical or current facts are forward-looking statements. In many cases, you can identify forward-looking statements by terms such as "guidance," "outlook," "forecast," “expect,” "momentum," "progress," "confidence," "plan," "anticipate," "estimate," "preliminary," "objective," "will," "provisional," "project," "believe," “may,” “should,” “would,” “intend," “potential” or the negative of these terms or other comparable terminology. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Sabre’s actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. The potential risks and uncertainties include, among others, dependency on transaction volumes in the global travel industry, particularly air travel transaction volumes, the closing, integration and effects of the acquisition of Farelogix and the financial performance of that company, exposure to pricing pressure in the Travel Network business, maintenance of the stability and integrity of our systems and infrastructure and the effect of any security incidents, the implementation and effects of new or renewed agreements, the effects of the implementation of new accounting standards, the effects of tax law changes, travel suppliers' usage of alternative distribution models, competition in the travel distribution market and solutions markets, the implementation and results of our cost reduction and business alignment program, failure to adapt to technological developments, dependence on establishing, maintaining and renewing contracts with customers and other counterparties and collecting amounts due to us under these agreements, changes affecting travel supplier customers, use of third-party distributor partners, dependence on relationships with travel buyers, adverse global and regional economic and political conditions, including, but not limited to, economic conditions in countries or regions with traditionally high levels of exports to China or that have commodities-based economies and the effect of "Brexit" and uncertainty due to related negotiations, risks arising from global operations, reliance on third parties to provide information technology services, compliance with regulatory and other requirements, including data privacy, our ability to recruit, train and retain employees, including our key executive officers and technical employees, and the effects of litigation and regulatory investigations. More information about potential risks and uncertainties that could affect our business and results of operations is included in the "Risk Factors" and “Forward-Looking Statements” sections in our Quarterly Report on Form 10-Q filed with the SEC on October 30, 2018 and our Annual Report on Form 10-K filed with the SEC on February 16, 2018 and in our other filings with the SEC. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, outlook, guidance, 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.
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Contacts:
Media | Investors |
Heidi Castle | Barry Sievert |
+1-682-605-4290 | |
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SABRE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue | $ | 923,928 | $ | 881,862 | $ | 3,866,956 | $ | 3,598,484 | |||||||
Cost of revenue | 673,430 | 631,234 | 2,791,414 | 2,513,857 | |||||||||||
Selling, general and administrative | 129,479 | 126,938 | 513,526 | 510,075 | |||||||||||
Impairment and related charges | — | (10,910 | ) | — | 81,112 | ||||||||||
Operating income | 121,019 | 134,600 | 562,016 | 493,440 | |||||||||||
Other (expense) income: | |||||||||||||||
Interest expense, net | (40,208 | ) | (37,348 | ) | (157,017 | ) | (153,925 | ) | |||||||
Loss on extinguishment of debt | — | — | (633 | ) | (1,012 | ) | |||||||||
Joint venture equity income | 101 | 812 | 2,556 | 2,580 | |||||||||||
Other, net | 2,237 | 56,318 | (8,509 | ) | 36,530 | ||||||||||
Total other (expense) income, net | (37,870 | ) | 19,782 | (163,603 | ) | (115,827 | ) | ||||||||
Income from continuing operations before income taxes | 83,149 | 154,382 | 398,413 | 377,613 | |||||||||||
Provision for income taxes | (3,879 | ) | 71,201 | 57,492 | 128,037 | ||||||||||
Income from continuing operations | 87,028 | 83,181 | 340,921 | 249,576 | |||||||||||
Income (loss) from discontinued operations, net of tax | (1,478 | ) | 296 | 1,739 | (1,932 | ) | |||||||||
Net income | 85,550 | 83,477 | 342,660 | 247,644 | |||||||||||
Net income attributable to noncontrolling interests | 1,150 | 1,387 | 5,129 | 5,113 | |||||||||||
Net income attributable to common stockholders | $ | 84,400 | $ | 82,090 | $ | 337,531 | $ | 242,531 | |||||||
Basic net income per share attributable to common stockholders: | |||||||||||||||
Income from continuing operations | $ | 0.31 | $ | 0.30 | $ | 1.22 | $ | 0.88 | |||||||
Income (loss) from discontinued operations | (0.01 | ) | — | 0.01 | (0.01 | ) | |||||||||
Net income per common share | $ | 0.31 | $ | 0.30 | $ | 1.23 | $ | 0.87 | |||||||
Diluted net income per share attributable to common stockholders: | |||||||||||||||
Income from continuing operations | $ | 0.31 | $ | 0.30 | $ | 1.21 | $ | 0.88 | |||||||
Income (loss) from discontinued operations | (0.01 | ) | — | 0.01 | (0.01 | ) | |||||||||
Net income per common share | $ | 0.30 | $ | 0.30 | $ | 1.22 | $ | 0.87 | |||||||
Weighted-average common shares outstanding: | |||||||||||||||
Basic | 275,322 | 274,272 | 275,235 | 276,893 | |||||||||||
Diluted | 277,881 | 274,951 | 277,518 | 278,320 | |||||||||||
Dividends per common share | $ | 0.14 | $ | 0.14 | $ | 0.56 | $ | 0.56 | |||||||
14
SABRE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
December 31, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 509,265 | $ | 361,381 | |||
Accounts receivable, net | 508,122 | 490,558 | |||||
Prepaid expenses and other current assets | 170,243 | 108,753 | |||||
Total current assets | 1,187,630 | 960,692 | |||||
Property and equipment, net | 790,372 | 799,194 | |||||
Investments in joint ventures | 27,769 | 27,527 | |||||
Goodwill | 2,552,369 | 2,554,987 | |||||
Acquired customer relationships, net | 323,731 | 351,034 | |||||
Other intangible assets, net | 289,517 | 332,171 | |||||
Deferred income taxes | 24,322 | 31,817 | |||||
Other assets, net | 610,671 | 591,942 | |||||
Total assets | $ | 5,806,381 | $ | 5,649,364 | |||
Liabilities and stockholders’ equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | 165,227 | $ | 162,755 | |||
Accrued compensation and related benefits | 112,866 | 112,343 | |||||
Accrued subscriber incentives | 301,530 | 271,200 | |||||
Deferred revenues | 80,902 | 110,532 | |||||
Other accrued liabilities | 185,178 | 198,353 | |||||
Current portion of debt | 68,435 | 57,138 | |||||
Tax Receivable Agreement | 104,257 | 59,826 | |||||
Total current liabilities | 1,018,395 | 972,147 | |||||
Deferred income taxes | 135,753 | 99,801 | |||||
Other noncurrent liabilities | 340,495 | 480,185 | |||||
Long-term debt | 3,337,467 | 3,398,731 | |||||
Stockholders’ equity | |||||||
Common stock: $0.01 par value; 450,000 authorized shares; 291,664 and 289,138 shares issued, 275,352 and 274,342 shares outstanding at December 31, 2018 and 2017, respectively | 2,917 | 2,891 | |||||
Additional paid-in capital | 2,243,419 | 2,174,187 | |||||
Treasury stock, at cost, 16,312 and 14,796 shares at December 31, 2018 and 2017, respectively | (377,980 | ) | (341,846 | ) | |||
Retained deficit | (768,566 | ) | (1,053,446 | ) | |||
Accumulated other comprehensive loss | (132,724 | ) | (88,484 | ) | |||
Noncontrolling interest | 7,205 | 5,198 | |||||
Total stockholders’ equity | 974,271 | 698,500 | |||||
Total liabilities and stockholders’ equity | $ | 5,806,381 | $ | 5,649,364 | |||
15
SABRE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Year Ended December 31, | |||||||
2018 | 2017 | ||||||
Operating Activities | |||||||
Net income | $ | 342,660 | $ | 247,644 | |||
Adjustments to reconcile net income to cash provided by operating activities: | |||||||
Depreciation and amortization | 413,344 | 400,871 | |||||
Impairment and related charges | — | 81,112 | |||||
Amortization of upfront incentive consideration | 77,622 | 67,411 | |||||
Tax Receivable Agreement | 4,852 | (59,603 | ) | ||||
Deferred income taxes | 43,099 | 48,760 | |||||
Stock-based compensation expense | 57,263 | 44,689 | |||||
Debt modification costs | 1,558 | 14,758 | |||||
Allowance for doubtful accounts | 7,749 | 9,459 | |||||
Amortization of debt issuance costs | 3,981 | 5,923 | |||||
Joint venture equity income | (2,556 | ) | (2,580 | ) | |||
Loss (income) from discontinued operations | (1,739 | ) | 1,932 | ||||
Dividends received from joint venture investments | 1,411 | 1,088 | |||||
Loss on extinguishment of debt | 633 | 1,012 | |||||
Other | (2,349 | ) | 13,284 | ||||
Changes in operating assets and liabilities: | |||||||
Accounts and other receivables | (45,586 | ) | (108,596 | ) | |||
Upfront incentive consideration | (88,735 | ) | (94,296 | ) | |||
Capitalized implementation costs | (39,168 | ) | (60,766 | ) | |||
Prepaid expenses and other current assets | 14,362 | 109 | |||||
Other assets | (29,607 | ) | (21,111 | ) | |||
Accounts payable and other accrued liabilities | (27,080 | ) | 67,034 | ||||
Deferred revenue including upfront solution fees | 8,127 | 13,861 | |||||
Accrued compensation and related benefits | (15,044 | ) | 6,038 | ||||
Cash provided by operating activities | 724,797 | 678,033 | |||||
Investing Activities | |||||||
Additions to property and equipment | (283,940 | ) | (316,436 | ) | |||
Other investing activities | 8,681 | (1,089 | ) | ||||
Cash used in investing activities | (275,259 | ) | (317,525 | ) | |||
Financing Activities | |||||||
Proceeds of borrowings from lenders | — | 1,897,625 | |||||
Payments on borrowings from lenders | (47,310 | ) | (1,880,506 | ) | |||
Cash dividends paid to common stockholders | (154,080 | ) | (154,861 | ) | |||
Repurchase of common stock | (26,281 | ) | (109,100 | ) | |||
Payments on Tax Receivable Agreement | (58,908 | ) | (99,241 | ) | |||
Debt prepayment fees and issuance costs | (1,567 | ) | (19,052 | ) | |||
Net proceeds on the settlement of equity-based awards | 2,040 | 12,647 | |||||
Other financing activities | (20,400 | ) | (4,292 | ) | |||
Cash used in financing activities | (306,506 | ) | (356,780 | ) | |||
Cash Flows from Discontinued Operations | |||||||
Cash used in operating activities | (1,895 | ) | (4,848 | ) | |||
Cash used in discontinued operations | (1,895 | ) | (4,848 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 6,747 | (1,613 | ) | ||||
(Decrease) increase in cash and cash equivalents | 147,884 | (2,733 | ) | ||||
Cash and cash equivalents at beginning of period | 361,381 | 364,114 | |||||
Cash and cash equivalents at end of period | $ | 509,265 | $ | 361,381 | |||
16
Non-GAAP Financial Measures
We have included both financial measures compiled in accordance with GAAP and certain non-GAAP financial measures, including Adjusted Gross Profit, Adjusted Operating Income (Loss), Adjusted Net Income from continuing operations ("Adjusted Net Income"), Adjusted EBITDA, Adjusted EPS, Free Cash Flow and ratios based on these financial measures.
We define Adjusted Gross Profit as operating income (loss) adjusted for selling, general and administrative expenses, impairment and related charges, the cost of revenue portion of depreciation and amortization, restructuring and other costs, amortization of upfront incentive consideration, and stock-based compensation included in cost of revenue.
We define Adjusted Operating Income (Loss) as operating income (loss) adjusted for joint venture equity income, impairment and related charges, acquisition-related amortization, restructuring and other costs, acquisition-related costs, litigation costs (reimbursements), net, and stock-based compensation.
We define Adjusted Net Income as net income (loss) attributable to common stockholders adjusted for income (loss) from discontinued operations, net of tax, net income attributable to noncontrolling interests, impairment and related charges, acquisition-related amortization, loss on extinguishment of debt, other, net, restructuring and other costs, acquisition-related costs, litigation costs (reimbursements), net, stock-based compensation and the 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, net, and remaining provision for income taxes.
We define Adjusted EPS as Adjusted Net Income divided by diluted weighted-average common shares outstanding.
We define Free Cash Flow as cash provided by operating activities less cash used in additions to property and equipment.
These non-GAAP financial measures 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 these non-GAAP financial
17
measures are used by investors, analysts and other interested parties as measures of financial performance and to evaluate our ability to service debt obligations, fund capital expenditures and meet working capital requirements. We also believe that Adjusted Gross Profit, Adjusted Operating Income (Loss), Adjusted Net Income, Adjusted EBITDA and Adjusted EPS 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 Gross Profit, Adjusted Operating Income (Loss), Adjusted Net Income, Adjusted EBITDA, Adjusted EPS, Free Cash Flow and ratios based on these financial measures are not recognized terms under GAAP. These non-GAAP financial measures and ratios based on them have important limitations as analytical tools, and should not be viewed in isolation and do not purport to be alternatives to net income as indicators of operating performance or cash flows from operating activities as measures of liquidity. These non-GAAP financial measures and ratios based on them exclude some, but not all, items that affect net income or cash flows from operating activities and these measures may vary among companies. Our use of these measures has limitations as an analytical tool, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. Some of these limitations are:
• | these non-GAAP financial measures exclude certain recurring, non-cash charges such as stock-based compensation expense and amortization of acquired intangible assets; |
• | 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 Profit and Adjusted EBITDA do not reflect cash requirements for such replacements; |
• | Adjusted Operating Income (Loss), 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; |
18
• | Free Cash Flow removes the impact of accrual-basis accounting on asset accounts and non-debt liability accounts, and does not reflect the cash requirements necessary to service the principal payments on our indebtedness; and |
• | other companies, including companies in our industry, may calculate Adjusted Gross Profit, Adjusted Operating Income (Loss), Adjusted Net Income, Adjusted EBITDA, Adjusted EPS or Free Cash Flow differently, which reduces their usefulness as comparative measures. |
19
Tabular Reconciliations for Non-GAAP Measures
(In thousands, except per share amounts; unaudited)
Reconciliation of net income attributable to common stockholders to Adjusted Net Income, Adjusted EBITDA and Adjusted Operating Income:
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income attributable to common stockholders | $ | 84,400 | $ | 82,090 | $ | 337,531 | $ | 242,531 | |||||||
Loss (income) from discontinued operations, net of tax | 1,478 | (296 | ) | (1,739 | ) | 1,932 | |||||||||
Net income attributable to noncontrolling interests(1) | 1,150 | 1,387 | 5,129 | 5,113 | |||||||||||
Income from continuing operations | 87,028 | 83,181 | 340,921 | 249,576 | |||||||||||
Adjustments: | |||||||||||||||
Impairment and related charges(2) | — | (10,910 | ) | — | 81,112 | ||||||||||
Acquisition-related amortization(3a) | 16,423 | 20,194 | 68,008 | 95,860 | |||||||||||
Loss on extinguishment of debt | — | — | 633 | 1,012 | |||||||||||
Other, net(5) | (2,237 | ) | (56,318 | ) | 8,509 | (36,530 | ) | ||||||||
Restructuring and other costs(6) | — | (1,329 | ) | — | 23,975 | ||||||||||
Acquisition-related costs(7) | 3,266 | — | 3,266 | — | |||||||||||
Litigation costs (reimbursements)(8) | 1,250 | 963 | 8,323 | (35,507 | ) | ||||||||||
Stock-based compensation | 15,818 | 10,276 | 57,263 | 44,689 | |||||||||||
Tax impact of net income adjustments(9) | (26,503 | ) | 41,904 | (59,353 | ) | (34,069 | ) | ||||||||
Adjusted Net Income from continuing operations | $ | 95,045 | $ | 87,961 | $ | 427,570 | $ | 390,118 | |||||||
Adjusted Net Income from continuing operations per share | $ | 0.34 | $ | 0.32 | $ | 1.54 | $ | 1.40 | |||||||
Diluted weighted-average common shares outstanding | 277,881 | 274,951 | 277,518 | 278,320 | |||||||||||
Adjusted Net Income from continuing operations | $ | 95,045 | $ | 87,961 | $ | 427,570 | $ | 390,118 | |||||||
Adjustments: | |||||||||||||||
Depreciation and amortization of property and equipment(3b) | 77,963 | 73,438 | 303,612 | 264,880 | |||||||||||
Amortization of capitalized implementation costs(3c) | 11,407 | 11,510 | 41,724 | 40,131 | |||||||||||
Amortization of upfront incentive consideration(4) | 20,298 | 17,113 | 77,622 | 67,411 | |||||||||||
Interest expense, net | 40,208 | 37,348 | 157,017 | 153,925 | |||||||||||
Remaining provision for income taxes | 22,624 | 29,297 | 116,845 | 162,106 | |||||||||||
Adjusted EBITDA | 267,545 | 256,667 | 1,124,390 | 1,078,571 | |||||||||||
Less: | |||||||||||||||
Depreciation and amortization(3) | 105,793 | 105,142 | 413,344 | 400,871 | |||||||||||
Amortization of upfront incentive consideration(4) | 20,298 | 17,113 | 77,622 | 67,411 | |||||||||||
Acquisition-related amortization(3a) | (16,423 | ) | (20,194 | ) | (68,008 | ) | (95,860 | ) | |||||||
Adjusted Operating Income | $ | 157,877 | $ | 154,606 | $ | 701,432 | $ | 706,149 | |||||||
20
Reconciliation of Free Cash Flow:
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Cash provided by operating activities | $ | 188,604 | $ | 222,127 | $ | 724,797 | $ | 678,033 | |||||||
Cash used in investing activities | (69,595 | ) | (74,573 | ) | (275,259 | ) | (317,525 | ) | |||||||
Cash used in financing activities | (54,097 | ) | (55,844 | ) | (306,506 | ) | (356,780 | ) | |||||||
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Cash provided by operating activities | $ | 188,604 | $ | 222,127 | $ | 724,797 | $ | 678,033 | |||||||
Additions to property and equipment | (78,276 | ) | (73,625 | ) | (283,940 | ) | (316,436 | ) | |||||||
Free Cash Flow | $ | 110,328 | $ | 148,502 | $ | 440,857 | $ | 361,597 | |||||||
21
Reconciliation of net income (loss) attributable to common stockholders to LTM Adjusted EBITDA (for Net Debt Ratio):
Three Months Ended | |||||||||||||||||||
Mar 31, 2018 | Jun 30, 2018 | Sep 30, 2018 | Dec 31, 2018 | LTM | |||||||||||||||
Net income attributable to common stockholders | $ | 87,880 | $ | 92,246 | $ | 73,005 | $ | 84,400 | $ | 337,531 | |||||||||
Loss (income) from discontinued operations, net of tax | 1,207 | (760 | ) | (3,664 | ) | 1,478 | (1,739 | ) | |||||||||||
Net income attributable to noncontrolling interests(1) | 1,362 | 1,079 | 1,538 | 1,150 | 5,129 | ||||||||||||||
Income from continuing operations | 90,449 | 92,565 | 70,879 | 87,028 | 340,921 | ||||||||||||||
Adjustments: | |||||||||||||||||||
Acquisition-related amortization(3a) | 17,590 | 17,588 | 16,407 | 16,423 | 68,008 | ||||||||||||||
Loss on extinguishment of debt | 633 | — | — | — | 633 | ||||||||||||||
Other, net(5) | 1,106 | 7,735 | 1,905 | (2,237 | ) | 8,509 | |||||||||||||
Acquisition-related costs(8) | — | — | — | 3,266 | 3,266 | ||||||||||||||
Litigation costs(8) | 828 | 1,020 | 5,225 | 1,250 | 8,323 | ||||||||||||||
Stock-based compensation | 12,606 | 13,594 | 15,245 | 15,818 | 57,263 | ||||||||||||||
Depreciation and amortization of property and equipment(3b) | 74,463 | 74,960 | 76,226 | 77,963 | 303,612 | ||||||||||||||
Amortization of capitalized implementation costs(3c) | 9,823 | 10,395 | 10,099 | 11,407 | 41,724 | ||||||||||||||
Amortization of upfront incentive consideration(4) | 19,456 | 19,661 | 18,207 | 20,298 | 77,622 | ||||||||||||||
Interest expense, net | 38,109 | 39,409 | 39,291 | 40,208 | 157,017 | ||||||||||||||
Provision for income taxes | 36,275 | 75 | 25,021 | (3,879 | ) | 57,492 | |||||||||||||
Adjusted EBITDA | $ | 301,338 | $ | 277,002 | $ | 278,505 | $ | 267,545 | $ | 1,124,390 | |||||||||
Net Debt (total debt, less cash) | $ | 2,922,590 | |||||||||||||||||
Net Debt / LTM Adjusted EBITDA | 2.6x | ||||||||||||||||||
22
Three Months Ended | |||||||||||||||||||
Mar 31, 2017 | Jun 30, 2017 | Sep 30, 2017 | Dec 31, 2017 | LTM | |||||||||||||||
Net income (loss) attributable to common stockholders | $ | 75,939 | $ | (6,487 | ) | $ | 90,989 | $ | 82,090 | $ | 242,531 | ||||||||
Loss (income) from discontinued operations, net of tax | 477 | 1,222 | 529 | (296 | ) | $ | 1,932 | ||||||||||||
Net income attributable to noncontrolling interests(1) | 1,306 | 1,113 | 1,307 | 1,387 | 5,113 | ||||||||||||||
Income (loss) from continuing operations | 77,722 | (4,152 | ) | 92,825 | 83,181 | 249,576 | |||||||||||||
Adjustments: | |||||||||||||||||||
Impairment and related charges(2) | — | 92,022 | — | (10,910 | ) | 81,112 | |||||||||||||
Acquisition-related amortization(3a) | 35,181 | 20,259 | 20,226 | 20,194 | 95,860 | ||||||||||||||
Loss on extinguishment of debt | — | — | 1,012 | — | 1,012 | ||||||||||||||
Other, net(5) | 15,234 | 752 | 3,802 | (56,318 | ) | (36,530 | ) | ||||||||||||
Restructuring and other costs(6) | — | 25,304 | — | (1,329 | ) | 23,975 | |||||||||||||
Litigation costs (reimbursements), net (8) | 3,501 | 958 | (40,929 | ) | 963 | (35,507 | ) | ||||||||||||
Stock-based compensation | 8,034 | 14,724 | 11,655 | 10,276 | 44,689 | ||||||||||||||
Depreciation and amortization of property and equipment (3b) | 61,300 | 63,810 | 66,332 | 73,438 | 264,880 | ||||||||||||||
Amortization of capitalized implementation costs (3c) | 9,189 | 8,948 | 10,484 | 11,510 | 40,131 | ||||||||||||||
Amortization of upfront incentive consideration(4) | 16,132 | 16,161 | 18,005 | 17,113 | 67,411 | ||||||||||||||
Interest expense, net | 39,561 | 38,097 | 38,919 | 37,348 | 153,925 | ||||||||||||||
Provision (benefit) for income taxes | 31,707 | (15,466 | ) | 40,595 | 71,201 | 128,037 | |||||||||||||
Adjusted EBITDA | $ | 297,561 | $ | 261,417 | $ | 262,926 | $ | 256,667 | $ | 1,078,571 | |||||||||
Net Debt (total debt, less cash) | $ | 3,126,652 | |||||||||||||||||
Net Debt / LTM Adjusted EBITDA | 2.9x | ||||||||||||||||||
23
Reconciliation of operating income (loss) to Adjusted Gross Profit, Adjusted EBITDA and Adjusted Operating Income (Loss) by business segment:
Three Months Ended December 31, 2018 | |||||||||||||||||||
Travel Network | Airline Solutions | Hospitality Solutions | Corporate | Total | |||||||||||||||
Operating income (loss) | $ | 165,330 | $ | 29,116 | $ | 2,954 | $ | (76,381 | ) | $ | 121,019 | ||||||||
Add back: | |||||||||||||||||||
Selling, general and administrative | 42,694 | 18,181 | 8,323 | 60,281 | 129,479 | ||||||||||||||
Cost of revenue adjustments: | |||||||||||||||||||
Depreciation and amortization(3) | 27,371 | 43,332 | 10,091 | 6,369 | 87,163 | ||||||||||||||
Amortization of upfront incentive consideration(4) | 20,298 | — | — | — | 20,298 | ||||||||||||||
Stock-based compensation | — | — | — | 7,407 | 7,407 | ||||||||||||||
Adjusted Gross Profit | 255,693 | 90,629 | 21,368 | (2,324 | ) | 365,366 | |||||||||||||
Selling, general and administrative | (42,694 | ) | (18,181 | ) | (8,323 | ) | (60,281 | ) | (129,479 | ) | |||||||||
Joint venture equity income | 101 | — | — | — | 101 | ||||||||||||||
Selling, general and administrative adjustments: | |||||||||||||||||||
Depreciation and amortization(3) | 2,940 | 3,500 | 949 | 11,241 | 18,630 | ||||||||||||||
Acquisition-related costs(7) | — | — | — | 3,266 | 3,266 | ||||||||||||||
Litigation costs(8) | — | — | — | 1,250 | 1,250 | ||||||||||||||
Stock-based compensation | — | — | — | 8,411 | 8,411 | ||||||||||||||
Adjusted EBITDA | 216,040 | 75,948 | 13,994 | (38,437 | ) | 267,545 | |||||||||||||
Less: | |||||||||||||||||||
Depreciation and amortization(3) | 30,311 | 46,832 | 11,040 | 17,610 | 105,793 | ||||||||||||||
Amortization of upfront incentive consideration(4) | 20,298 | — | — | — | 20,298 | ||||||||||||||
Acquisition-related amortization(3a) | — | — | — | (16,423 | ) | (16,423 | ) | ||||||||||||
Adjusted Operating Income (Loss) | $ | 165,431 | $ | 29,116 | $ | 2,954 | $ | (39,624 | ) | $ | 157,877 | ||||||||
Operating income margin | 24.9 | % | 14.4 | % | 4.4 | % | NM | 13.1 | % | ||||||||||
Adjusted Operating Income Margin | 24.9 | % | 14.4 | % | 4.4 | % | NM | 17.1 | % | ||||||||||
24
Three Months Ended December 31, 2017 | ||||||||||||||||||||
Travel Network | Airline Solutions | Hospitality Solutions | Corporate | Total | ||||||||||||||||
Operating income (loss) | $ | 161,393 | 43,499,000 | $ | 43,399 | $ | 2,649 | $ | (72,841 | ) | $ | 134,600 | ||||||||
Add back: | ||||||||||||||||||||
Selling, general and administrative | 42,700 | 17,372 | 10,118 | 56,748 | 126,938 | |||||||||||||||
Impairment and related charges(2) | — | — | — | (10,910 | ) | (10,910 | ) | |||||||||||||
Cost of revenue adjustments: | ||||||||||||||||||||
Depreciation and amortization(3) | 27,154 | 40,475 | 9,658 | 10,837 | 88,124 | |||||||||||||||
Restructuring and other costs(6) | — | — | — | (372 | ) | (372 | ) | |||||||||||||
Amortization of upfront incentive consideration(4) | 17,113 | — | — | — | 17,113 | |||||||||||||||
Stock-based compensation | — | — | — | 4,106 | 4,106 | |||||||||||||||
Adjusted Gross Profit | 248,360 | 101,246 | 22,425 | (12,432 | ) | 359,599 | ||||||||||||||
Selling, general and administrative | (42,700 | ) | (17,372 | ) | (10,118 | ) | (56,748 | ) | (126,938 | ) | ||||||||||
Joint venture equity income | 812 | — | — | — | 812 | |||||||||||||||
Selling, general and administrative adjustments: | ||||||||||||||||||||
Depreciation and amortization(3) | 3,166 | 2,234 | 390 | 11,228 | 17,018 | |||||||||||||||
Restructuring and other costs(6) | — | — | — | (957 | ) | (957 | ) | |||||||||||||
Litigation costs(8) | — | — | — | 963 | 963 | |||||||||||||||
Stock-based compensation | — | — | — | 6,170 | 6,170 | |||||||||||||||
Adjusted EBITDA | 209,638 | 86,108 | 12,697 | (51,776 | ) | 256,667 | ||||||||||||||
Less: | ||||||||||||||||||||
Depreciation and amortization(3) | 30,320 | 42,709 | 10,048 | 22,065 | 105,142 | |||||||||||||||
Amortization of upfront incentive consideration(4) | 17,113 | — | — | — | 17,113 | |||||||||||||||
Acquisition-related amortization(3a) | — | — | — | (20,194 | ) | (20,194 | ) | |||||||||||||
Adjusted Operating Income (Loss) | $ | 162,205 | $ | 43,399 | $ | 2,649 | $ | (53,647 | ) | $ | 154,606 | |||||||||
Operating income margin | 26.1 | % | 21.1 | % | 4.1 | % | NM | 15.3 | % | |||||||||||
Adjusted Operating Income Margin | 26.2 | % | 21.1 | % | 4.1 | % | NM | 17.5 | % | |||||||||||
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Year Ended December 31, 2018 | |||||||||||||||||||
Travel Network | Airline Solutions | Hospitality Solutions | Corporate | Total | |||||||||||||||
Operating income (loss) | $ | 753,255 | $ | 111,146 | $ | 12,881 | $ | (315,266 | ) | $ | 562,016 | ||||||||
Add back: | |||||||||||||||||||
Selling, general and administrative | 160,298 | 73,675 | 33,626 | 245,927 | 513,526 | ||||||||||||||
Cost of revenue adjustments: | |||||||||||||||||||
Depreciation and amortization(3) | 106,877 | 170,258 | 36,826 | 27,692 | 341,653 | ||||||||||||||
Amortization of upfront incentive consideration(4) | 77,622 | — | — | — | 77,622 | ||||||||||||||
Stock-based compensation | — | — | — | 26,591 | 26,591 | ||||||||||||||
Adjusted Gross Profit | 1,098,052 | 355,079 | 83,333 | (15,056 | ) | 1,521,408 | |||||||||||||
Selling, general and administrative | (160,298 | ) | (73,675 | ) | (33,626 | ) | (245,927 | ) | (513,526 | ) | |||||||||
Joint venture equity income | 2,556 | — | — | — | 2,556 | ||||||||||||||
Selling, general and administrative adjustments: | |||||||||||||||||||
Depreciation and amortization(3) | 11,399 | 12,173 | 3,117 | 45,002 | 71,691 | ||||||||||||||
Acquisition-related costs(7) | — | — | — | 3,266 | 3,266 | ||||||||||||||
Litigation reimbursements(8) | — | — | — | 8,323 | 8,323 | ||||||||||||||
Stock-based compensation | — | — | — | 30,672 | 30,672 | ||||||||||||||
Adjusted EBITDA | 951,709 | 293,577 | 52,824 | (173,720 | ) | 1,124,390 | |||||||||||||
Less: | |||||||||||||||||||
Depreciation and amortization(3) | 118,276 | 182,431 | 39,943 | 72,694 | 413,344 | ||||||||||||||
Amortization of upfront incentive consideration(4) | 77,622 | — | — | — | 77,622 | ||||||||||||||
Acquisition-related amortization(3a) | — | — | — | (68,008 | ) | (68,008 | ) | ||||||||||||
Adjusted Operating Income (Loss) | $ | 755,811 | $ | 111,146 | $ | 12,881 | $ | (178,406 | ) | $ | 701,432 | ||||||||
Operating income margin | 26.8 | % | 13.5 | % | 4.7 | % | NM | 14.5 | % | ||||||||||
Adjusted Operating Income Margin | 26.9 | % | 13.5 | % | 4.7 | % | NM | 18.1 | % | ||||||||||
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Year Ended December 31, 2017 | |||||||||||||||||||
Travel Network | Airline Solutions | Hospitality Solutions | Corporate | Total | |||||||||||||||
Operating income (loss) | $ | 744,045 | $ | 137,932 | $ | 9,670 | $ | (398,207 | ) | $ | 493,440 | ||||||||
Add back: | |||||||||||||||||||
Selling, general and administrative | 162,997 | 78,638 | 47,121 | 221,319 | 510,075 | ||||||||||||||
Impairment and related charges(2) | — | — | — | 81,112 | 81,112 | ||||||||||||||
Cost of revenue adjustments: | |||||||||||||||||||
Depreciation and amortization(3) | 96,796 | 149,685 | 31,686 | 39,645 | 317,812 | ||||||||||||||
Restructuring and other costs(6) | — | — | — | 12,604 | 12,604 | ||||||||||||||
Amortization of upfront incentive consideration(4) | 67,411 | — | — | — | 67,411 | ||||||||||||||
Stock-based compensation | — | — | — | 17,732 | 17,732 | ||||||||||||||
Adjusted Gross Profit | 1,071,249 | 366,255 | 88,477 | (25,795 | ) | 1,500,186 | |||||||||||||
Selling, general and administrative | (162,997 | ) | (78,638 | ) | (47,121 | ) | (221,319 | ) | (510,075 | ) | |||||||||
Joint venture equity income | 2,580 | — | — | — | 2,580 | ||||||||||||||
Selling, general and administrative adjustments: | |||||||||||||||||||
Depreciation and amortization(3) | 12,783 | 8,820 | 1,428 | 60,028 | 83,059 | ||||||||||||||
Restructuring and other costs(6) | — | — | — | 11,371 | 11,371 | ||||||||||||||
Litigation reimbursements(8) | — | — | — | (35,507 | ) | (35,507 | ) | ||||||||||||
Stock-based compensation | — | — | — | 26,957 | 26,957 | ||||||||||||||
Adjusted EBITDA | 923,615 | 296,437 | 42,784 | (184,265 | ) | 1,078,571 | |||||||||||||
Less: | |||||||||||||||||||
Depreciation and amortization(3) | 109,579 | 158,505 | 33,114 | 99,673 | 400,871 | ||||||||||||||
Amortization of upfront incentive consideration(4) | 67,411 | — | — | — | 67,411 | ||||||||||||||
Acquisition-related amortization(3a) | — | — | — | (95,860 | ) | (95,860 | ) | ||||||||||||
Adjusted Operating Income (Loss) | $ | 746,625 | $ | 137,932 | $ | 9,670 | $ | (188,078 | ) | $ | 706,149 | ||||||||
Operating income margin | 29.2 | % | 16.9 | % | 3.7 | % | NM | 13.7 | % | ||||||||||
Adjusted Operating Income Margin | 29.3 | % | 16.9 | % | 3.7 | % | NM | 19.6 | % | ||||||||||
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Non-GAAP Footnotes
(1) | Net income attributable to non-controlling interests represents an adjustment to include earnings allocated to non-controlling interest held in (i) Sabre Travel Network Middle East of 40%, (ii) Sabre Seyahat Dagitim Sistemleri A.S. of 40%, (iii) Abacus International Lanka Pte Ltd of 40%, and (iv) Sabre Bulgaria of 40% beginning in November 2017. |
(2) | Impairment and related charges represents an $81 million charge in 2017 associated with net capitalized contract costs related to an Airline Solutions' customer based on our analysis of the recoverability of such amounts. |
(3) | 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. |
b. | Depreciation and amortization of property and equipment includes software developed for internal use. |
c. | Amortization of capitalized implementation costs represents amortization of upfront costs to implement new customer contracts under our SaaS and hosted revenue model. |
(4) | 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. This consideration is made with the objective of increasing the number of clients or to ensure or improve customer loyalty. These 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 up front. These 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. |
(5) | In 2018, Other, net, includes an expense of $5 million related to our liability under the Tax Receivable Agreement ("TRA") offset by a gain of $8 million on the sale of an investment. In 2017, we recognized a benefit of $60 million due to a reduction to our liability under the TRA primarily due to a provisional adjustment resulting from the enactment of TCJA which reduced the U.S. corporate income tax rate, offset by a loss of $15 million related to debt modification costs associated with a debt refinancing. In 2016, we recognized a gain of $15 million from the sale of our available-for-sale marketable securities, and a $6 million gain associated with the receipt of an earn-out payment from the sale of a business in 2013. In addition, all periods presented include foreign exchange gains and losses related to the remeasurement of foreign |
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currency denominated balances included in our consolidated balance sheets into the relevant functional currency.
(6) | 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. We recorded $25 million and $20 million in charges associated with an announced action to reduce our workforce in 2017 and 2016, respectively. These reductions aligned our operations with business needs and implemented an ongoing cost and organizational structure consistent with our expected growth needs and opportunities. In 2015, we recognized a restructuring charge of $9 million associated with the integration of Abacus, and reduced that estimate by $4 million in 2016, as a result of the reevaluation of our plan derived from a shift in timing and strategy of originally contemplated actions. As of December 31, 2018, our actions under this plan have been substantially completed and payments under the plan have been made. |
(7) | Acquisition-related costs represent fees and expenses incurred associated with the 2018 agreement to acquire Farelogix, which is anticipated to close in 2019, and in 2016, the acquisition of the Trust Group and Airpas Aviation. |
(8) | Litigation costs (reimbursements), net represent charges associated with antitrust and other foreign non-income tax contingency matters. In 2018, we recorded non-income tax expense of $5 million for tax, penalties and interest associated with certain non-income tax claims for historical periods regarding permanent establishment in a foreign jurisdiction. In 2017, we recorded a $43 million reimbursement, net of accrued legal and related expenses, from a settlement with our insurance carriers with respect to the American Airlines litigation. In 2016, we recorded an accrual of $32 million representing the trebling of the jury award plus our estimate of attorneys’ fees, expenses and costs in the US Airways litigation. |
(9) | The tax impact on net income adjustments includes the tax effect of each separate Adjustment based on the statutory tax rate for the jurisdiction(s) in which the Adjustment was taxable or deductible, and the tax effect of items that relate to tax specific financial transactions, tax law changes, uncertain tax positions and other items. In 2018, the provision for income taxes includes a benefit of $27 million related to the enactment of the TCJA for deferred taxes and foreign tax effects. In 2017, provision for income taxes includes a provisional impact of $47 million recognized as a result of the enactment of the TCJA in December 2017. |
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