Sabre Corporation

Good morning and welcome to the Sabre Second Quarter 2021 Earnings Conference Call. My name is Josh and I will be your operator. As a reminder, please note today's call is being recorded. I will now turn the call over to the Vice President of Investor Relations, Kevin Trissy. Please go ahead, sir.

Thanks, Josh, and good morning, everyone. Thank you for joining us for our Second Quarter 2021 Earnings Call. This morning, we issued an earnings press release, which is available on our website at investors.saber.com. A slide presentation which accompanies today's prepared remarks is also available during this call on the SABRE Investor Relations webpage. A replay of today's call will be available on our website later this morning. We would like to advise you that our comments contain forward-looking statements that represent our beliefs or expectations about future events, including the duration and effects of COVID-19, industry and recovery trends, benefits from commercial and strategic arrangements, expected revenue, costs, and expenses, cost savings, margins, and liquidity, among others. All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today's conference call. More information on these risks and uncertainties is contained in our earnings release issued this morning and our SEC filings, including our first quarter 2021 10-Q and 2020 Form 10-K. Throughout today's call, we will also be presenting certain non-GAAP financial measures. All references during today's call to EBITDA, operating loss, and EPS have been adjusted to exclude certain items. The most directly comparable GAAP measures and reconciliation for non-GAAP measures are available in the earnings release and other documents posted on our website at investors.saber.com. Participating with me are Sean Minke, our Chief Executive Officer, and Doug Barnett, our Chief Financial Officer. Dave Sherk, our President of Travel Solutions, and Scott Wilson, our President of Hospitality Solutions, will be available for Q&A after the prepared remarks. With that, I'll turn the call over to Sean.

Thanks, Kevin. Good morning, everyone, and thank you for joining us today. I'd like to start by thanking all my Sabre teammates around the world for their ongoing dedication to serving our customers, our shareholders, and one another. This has been a challenging period, and I couldn't be prouder of what they have been able to accomplish. Specifically, I'd like to acknowledge my colleagues across our offices in India and Singapore as they continue to work resiliently despite ongoing challenges from COVID-19. In fact, our Bangalore office was recently certified by the Great Place to Work Institute as an organization that builds a high-trust, high-performance culture. Congratulations to Sabre India on a job well done. As we have done in prior quarters, on the next slides, I will walk you through the impact of COVID-19 on specific bookings, passengers boarded, or PBs, and hospitality CRS transaction trends. The takeaway is that the travel environment is beginning to improve at a faster pace versus the winter and early spring, led by growth in our largest region. As we reach the pivotal turning point in the recovery, we also gain commercial momentum and announce major new passenger service systems, or PSS, wins. We feel competitively well-positioned as we progress on the important work related to our technology transformation and expect to benefit from the anticipated continued travel recovery. Turning to slide four, travel volume trends continue to improve across distribution, IT solutions, and hospitality solutions. In fact, the recovery accelerated significantly in the second quarter and showed the strongest sequential improvement since Q3 of 2020. As has been the case since the start of the recovery, Hotel CRS transactions are leading, down 22% in July versus 2019. IT solutions passengers boarded and distribution gross bookings are also stronger, down 38% and 59% respectively in July versus 2019. As you can see, some of the strong recovery trends in June regressed in July due to the impact of the Delta and other COVID-19 variants in some parts of the world. As we have learned, increases in COVID-19 case counts have correlated with a near-term impact on bookings. The promising news is that as case counts and travel restrictions subside, the underlying travel demand trends remain encouraging, and we believe the overall recovery arc remains positive. We are sometimes asked about the reason for the differences in the rate of recovery between passengers boarded and distribution bookings. The answer is that it is primarily reflective of the type of travel recovery fastest, and that's leisure travel. A higher percentage of leisure passengers book directly on airline.com websites than do corporate customers. Consequently, these leisure travelers are captured in our Saversonic and Radix PB data, but not in our distribution bookings. Importantly, this does not reflect a change in customer behavior. It is merely a reflection of the type of travel recovering faster. Turning to slide five, the chart on the left shows weekly GDS industry net air bookings by region. The positive standout regions are North America, led by the United States, and Latin America. Asia Pacific bookings remain significantly depressed. As we have discussed in past calls, we believe there is pent-up demand to travel, but conditions need to be met from this demand to be realized as bookings, notably safety and convenience. Passengers need to feel safe onboard planes and at their destinations. Vaccination levels moving higher have had a direct correlation with traveler confidence, as evidenced by the booking and vaccination trends in the United States. This is shown on the chart on the right. Today, we believe the greatest inhibitor to global travel recovery are the ongoing and changing travel restrictions throughout the world. As travel restrictions have relaxed or been removed, we have begun to see significant improvements. For example, following the recent announcement by the Canadian government to loosen travel restrictions, total GDS booking recovery in Canada improved by 29 percentage points from down 90% in April to down 61% in July versus the same period in 2019. Similar to last quarter, U.S. domestic leisure travel leading recovery had a negative impact on our distribution revenue per booking. We expect increasing global vaccination rates and the removal of or reduction in travel restrictions as illustrated by the recent changes by the Canadian government, will be a catalyst for improvement in corporate and international travel, which we believe would move our distribution revenue per booking back towards 2019 levels. We have already begun seeing green shoots in corporate travel, particularly in the United States. In July, North American bookings recovery at our top TMCs improved by 20 percentage points versus April and is now nearly 50% of 2019 levels. Globally, we have seen the most meaningful improvements in the materials, government, utilities, and real estate sectors. Industries that have been slower to recover but are starting to gain momentum are consulting, IT, and financials. These are all encouraging signs. As it relates to international travel, we are beginning to see some additional international markets open. We outlined the positive trends we are seeing in Canada, which is opening for non-essential travel for fully vaccinated travelers from the United States on August 9th and other countries starting September 7th. However, we are also seeing some travel restrictions put in place in Europe and APAC in response to the Delta and other COVID-19 variants. Because of these puts and takes, we think volatility and recovery trends across EMEA and APAC are likely over the next several months. The faster recovery in the U.S. domestic leisure travel has also impacted advanced purchase trends. The North American average advance purchase window has actually lengthened three to four days over recent months compared to 2019, exiting June at about 37 days. This change relates to leisure bookings, and we believe it is a healthy sign reflecting traveler confidence. We have yet to see advance purchase trends return to normal in the APAC region, where the average advance purchase exiting June was 20 days versus 29 days in 2019. Turning to slide six, in June, Saver's net air bookings were down 49 percent versus 2019, a sequential improvement of 17 percentage points versus March. Our bookings recovery outpaced the overall GDS industry in the quarter by five percentage points because North America, which has shown the strongest recovery, is our largest region. In July, total industry bookings were down 61 percent versus 2019 levels. a bit weaker than the June results due to the impact of the COVID-19 variant. Turning to slide seven, we remain very active commercially in each of our business lines. We signed or renewed nearly 650 agreements in the quarter across distribution and IT solutions, and many more in hospitality solutions. Some of the notable logos are depicted on this slide. In distribution, we added several airlines to our GDS, including Bamboo in Vietnam, wind rose in the Ukraine. We also renewed agreements with several carriers, including Virgin Australia, Aegean Airlines, and Iceland Air. In July, we announced that we launched the full integration of Southwest Airlines air content within the Sabre system, making it easier for travel management companies and corporations to shop, book, and service Southwest flights on behalf of their business travelers. This milestone not only greatly expands Southwest's reach into the business travel segment, Sabre's travel agency and corporate customers will experience the increased efficiency, productivity, and cost savings that come from Booking Southwest through our agency point of sale. Sabre Red 360 and our corporate booking solution get there. On the agency side, we expanded our footprint with Pilani Travel Group, one of the leading travel companies in the UK. We also renewed many other agency agreements across both the corporate and leisure segments. with notable renewals at online travel agencies eTravelEye in Sweden and MrFly in France and U.S.-based travel consolidator GTT. In IT solutions, we had a number of important customer wins and renewals. This includes new wins for Saversonic, our full-service airline reservation system, with a certain unnamed large carrier and also SCAT Airlines in Kazakhstan. We are excited that these wins are expected to bring nearly 40 million incremental passengers boarded based on 2019 levels to the Sabre Sonic platform. This is on the basis of over 740 million passengers boarded in 2019. The signed multi-year agreement we have for our full-service passenger service system for the unnamed carrier is expected to help our new customer advance its strategic growth plans. This large airline will also leverage other key Sabre products, including next-generation offer management, revenue optimization, digital workspace, intelligence exchange, and others. We are really excited to expand our partnership with the airline and proud to be its trusted technology partner. We will have additional detail to share with you soon. Clearly, Sabre is winning in a marketplace that is very active right now. We believe these competitive takeaways are proof points that our technology solutions and strategy are resonating with airlines around the world. we are also gaining commercial momentum across other areas of our IT solutions portfolio. For example, dynamic availability continues to gain traction, including with new revenue share pricing agreements with Alaska and Air Serbia. At both Alaska and Lion Air, some of our largest Sabersonic customers, we signed long-term PSS renewals and expanded our footprint of solutions. In hospitality, I'm pleased to highlight new Synexa Central Reservation Systems Agreement with Curator Hotels and Resort Collection, Onoma Hotels, the largest African hotel provider in the mid-range segment. We signed a number of renewals, including with Mandarin Oriental, Noble House, and others. The outlook in hospitality remains strong, and as I noted, reservation growth has led to recovery. Our incoming project work is now above 2019 levels, driven primarily by North America and Latin America. This implementation work sets the foundation for higher transaction volumes in the future. Turning to technology, we've previously identified three key technology milestones for 2021. As a reminder, the milestones are to deploy travel solutions, air shopping, and Google Cloud Platform. The second is to transition hospitality solutions, CRS, into GCP with a global footprint. And finally, migrate 15% of our mid-range workloads to Google Cloud Platform. I'm pleased to say these milestones are all on schedule. Let me take a moment and briefly provide more details. We previously announced that air shopping for agencies is running in GCP production. We now have 100% of shopping for airlines in GCP production and are in the process of decommissioning the hardware previously used for this service in our Texas data centers. At this point, all Sabre Air shopping is running in public cloud environments. In hospitality, Synexis CRS is running in production for Lou, one of our new enterprise hotel wins in our European GCP regions. We have further Synexis cutovers to GCP planned for the fall. Finally, we are continuing to make progress building Google Cloud Foundation in support of our mid-range workload migration. We have several GCP regions with full availability in North America and already have regions with limited availability in Europe. We have also completed the integration of many Google platform services, including Google Kubernetes Engine and Spanner Database. We remain excited about our strategic partnership with Google and believe it provides us with an important competitive advantage. We're continuing to develop Sabre Travel AI in partnership with Google and other initiatives under our innovation framework. With respect to Sabre Travel AI specifically, we are already seeing promising results across early customer-like simulations. Some initial proof points we have seen include accuracy improvements with market intelligence to improve forecast of future travel demand, conversion increases with Sabre Smart Retail Engine, which enables personalized offer to be generated at the right price, and significant runtime reduction with crew management, which enables us to produce better results while reducing compute cost and footprint. Finally, there is one other topic I would like to address before turning it over to Doug. In June, American Airlines filed a breach of contract lawsuit against Sabre related to the release of our new airline storefront and our new value-based incentive model with agencies. We believe this lawsuit is without merit and designed with one purpose, to stifle innovation in the travel marketplace. And we plan to vigorously defend ourselves in the lawsuit. we remain on a path to create a new marketplace for personalized travel, which includes a shift in the way we view the future of travel and how we operate. To fulfill our vision and to deliver the innovation and solutions that customers want, we remain committed to our strategic initiatives to evolve our business and create a next-generation marketplace that will better align with the future needs of our travel partners. And with that, I'd like to hand the call over to Doug at this point.