Sabre Corporation

Good morning and welcome to the Sabre first quarter 2022 earnings conference call. My name is Daniel 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 President of Investor Relations. Kevin Christie, please go ahead, sir.

Thanks, Daniel. Good morning, everyone. Thank you for joining us for our first quarter 2022 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 Saber 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 our technology transformation and commercial and strategic arrangements, our financial outlook and targets, 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 2021 Form 10-K. Throughout today's call, We will also be presenting certain non-GAAP financial measures. References during today's call to adjusted operating income, adjusted net income, adjusted EBITDA, adjusted EBITDA margin, adjusted EPS, and free cash flow have been adjusted to exclude certain items. The most directly comparable GAAP measures and reconciliations for non-GAAP measures are available in our earnings release and other documents posted on our website at investors.saber.com. Participating with me are Sean Minke, Chair of the Board and Chief Executive Officer, Kurt Eckert, our President, and Doug Barnett, our Chief Financial Officer. Scott Wilson, our President of Hospitality Solutions, will be available for Q&A after the prepared remarks. And with that, I'll turn the call over to Sean.

Thanks, Kevin. Good morning, everyone, and thank you for joining us today. It is no secret that the past two years have been a difficult period for the entire global travel ecosystem in which we reside. The beginning of the year was a continuation of those headwinds driven in large part by the rise in Omicron variant cases. Yet, as history has shown, when we see a decline in COVID-19 cases and restrictions are lifted, travel recovery can be robust. Since the decline in COVID-19 cases earlier this year, we have been increasingly encouraged by the trajectory of our business and have seen consistent sequential improvement in each of our key volume metrics week over week since January. Travel trends are improving globally, and our business mix is normalizing towards pre-pandemic levels, resulting in higher unit profitability. The recovery, which has historically been driven by domestic leisure travel, is being supported by strong improvements in both international and corporate travel. Accelerating activity in each of these sectors made April our best month compared to 2019 in terms of bookings recovery since the onset of the COVID-19 pandemic. Recent forecasts by several airlines and travel agencies have been bullish regarding the outlook for travel recovery, supporting the trends we are seeing. Additionally, we are making solid progress towards our technology transformation, which remains on schedule to deliver expected significant savings by 2025. We believe our technology transformation will be one of the primary facilitators of higher margins and cash flow for Sabre when completed. Bottom line, we are more bullish about Saver's near-term recovery outlook than at any point since the pandemic started, and our medium-term outlook continues to suggest the opportunity to drive EBITDA, EBITDA margin, operating income, and free cash flow higher than 2019 levels. Turning to slide five, you can see an overview of the topics Kurt, Doug, and I will cover on today's call. I'll start by providing a further update regarding the ongoing travel recovery, including specific booking, passengers boarded, and hospitality CRS transaction trends. I'll dig a bit deeper into trends than in past quarters to help provide additional perspective regarding the breadth of the current recovery. Curt will then provide an update regarding the solid progress we made in the first quarter on our technology transformation. Doug will walk you through the results of the quarter, and he will close with our financial outlook for 2022 and 2025. Before I start, I do want to thank my Sabre teammates around the world. As we put the challenges of the past two years behind us, I want to again express my appreciation for all that they are doing to serve our customers, support each other, transform our business, and enable a new marketplace for personalized travel. Turning to slide six, in April, Our key metrics, namely distribution gross air bookings, IT solutions passengers boarded, and hospitality gross CRS transactions were all at the highest level of recovery versus 2019 since the COVID-19 pandemic started. March 2022 was the second best month compared to 2019. Hotel CRS transactions continued to lead, and in April were 112% compared to the same period in 2019. On the same hotel basis, community CRS transaction volumes in April were about 82% of 2019. IT Solutions passengers boarded have recovered 80% in April versus the same period in 2019. Finally, distribution gross bookings recovery was 53% in April versus the same period in 2019. If we look at Sabre and the GDS industry recovery, excluding Expedia in both periods, Our distribution gross bookings recovery in April was 64 percent, slightly better than the industry for the month. Looking at the industry geographically, after a slow start in January due to the Omicron variant, the global travel recovery has been gaining substantial momentum. In particular, we are seeing strong recovery trends in parts of the Asia-Pacific region. I'll provide more details regarding this trend in a few minutes. Turning to slide seven. Domestic leisure travel continues to lead the recovery. In April, with the data through the 24th, the gap between the recovery in corporate travel management company bookings and non-TMC bookings was largest in domestic markets at about 7 percentage points. However, the overall recovery percentage versus 2019 was also greatest in domestic market for both managed corporate at about 66% and leisure travel at about 73%. International travel has recovered to about 58 percent of 2019, with short-haul travel the least recovered due to a slower recovery in Asia Pacific. Turning to slide eight, the chart on the left shows the bookings recovery of domestic travel since the beginning of 2021, booked through corporate TMCs and other domestic bookings, which largely represent leisure travel. As I have indicated earlier, domestic leisure travel has recovered more significantly than corporate, However, as the graph on the right details, the difference in the recovery between corporate and leisure has narrowed significantly as corporate travel has accelerated. We're also happy about what we are seeing in terms of the breadth of the corporate recovery from a sector perspective. Though still below the total recovery of most other sectors, the financial, consulting, and IT sectors, which are historically heavy travelers, ended Q1 accelerating rapidly. faster than at any point since the pandemic started. These sectors also ended the quarter at their highest levels of overall recovery since the pandemic began. Turning to slide nine, as you'd expect, airlines around the world have been trying to match their flight schedules with anticipated demand while factoring in potential global travel restrictions. This approach resulted in a capacity mix which was heavily skewed towards domestic capacity, which is less profitable for Sabre, and away from international capacity, which is more profitable for Sabre. However, we are now beginning to see this reverse back towards pre-COVID-19 pandemic capacity mix, as borders reopen and testing requirements are loosened or removed. On slide 10, we provide a heat map showing Sabre's top 20 countries in 2019 based on point-of-sale bookings and how each has been recovering weekly since the beginning of the year. The first takeaway from this slide is that an increasing number of countries are moving out of the red and into the green, which is a good indicator of a geographically broadening recovery. With the exception of Russia, all of our top countries in North America, Latin America, and EMEA are more than 50 percent recovered. Countries in the Asia Pacific region generally continue to be slower to recover than the rest of the world, but even there we are seeing improvements. The second takeaway is that as travel restrictions are reduced, bookings tend to accelerate very quickly. We've noted this effect on prior earnings calls, but the data for Australia is another example. On February 7th, Australia announced it would reopen to tourists starting February 21st. Quickly, the bookings recovery in Australia went from 34% of 2019 on January 31st to 66% by mid-March to 82% by April 18th. I'll conclude where I started. Travel trends are improving globally, and our business mix is normalizing towards pre-pandemic levels, resulting in higher unit profitability. Based on the most recent trends, we are optimistic about the outlook for our business and continued recovery. And with that, I'd like to turn the call over to Kurt.