Sabre Corporation

Good morning and welcome to the Sabre second quarter 2024 earnings conference call. My name is Rivka 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 Senior Vice President, Investor Relations and Treasurer, Brian Evans. Please go ahead, sir.

Thank you, and good morning, everyone. Welcome to Saber's second quarter 2024 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 the call on the Saber Investor Relations webpage. A replay of today's call will be available on our website later this morning. Thank you. We advise you that our comments contain forward-looking statements that represent our beliefs or expectations about future events, including the effects of growth strategies, distribution volumes, benefits from our technology transformation, commercial and strategic arrangements, and our financial guidance and targets, free cash flow, 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 Form 10-Q for the quarter ended June 30, 2024. Throughout today's call, we will also be presenting certain non-GAAP financial measures. References during today's call to adjusted EBITDA, Adjusted EBITDA margin and free cash flow have been adjusted to exclude certain items. The most directly comparable gap measures and reconciliations for non-gap measures are available in the earnings release and other documents posted on our website at investors.saver.com. Participating with me are Kurt Eckert, President and CEO, and Mike Randolphie, Chief Financial Officer. Scott Wilson, EVP and President of Hospitality Solutions and will be available for Q&A after the prepared remarks. With that, I'll turn the call over to Kurt. Thanks, Brian.

Hello, everyone, and thank you for joining today's presentation. I'm pleased to share that we delivered another quarter of strategic advancement and success for Sabre, driven by the focused execution, hard work, and dedication of our team members worldwide. Earlier today, we reported second quarter financial results that exceeded our guidance. We delivered steady revenue growth a meaningful increase in adjusted EBITDA, significant margin expansion, and we generated positive second quarter free cash flow for the first time in five years. This outperformance gives us the confidence once again to increase our full year 2024 revenue and adjusted EBITDA guidance. We remain on track to deliver our target to more than double adjusted EBITDA from 2023 to 2025. driven primarily by our growth strategies, as well as cost efficiencies, including our technology transformation. Turning to slide four, you can see an overview of the topics that Mike and I will cover this morning. First, I will review our second quarter business highlights, including our financial performance and recent commercial wins. Next, I will provide an overview of the progress we have made in our growth strategies. I will close with a snapshot of two of our new platform product offerings. Finally, Mike will take you through our second quarter financial results and provide an update to our 2024 guidance. Please turn to slide five. Sabre achieved solid year-on-year revenue growth in the second quarter, driven by a higher distribution booking fee from a richer customer mix, increased CRS transactions in hospitality solutions, and higher hotel distribution bookings driven by improved content and higher hotel attach rate. These top line metrics coupled with a strong cost management drove $129 million of adjusted EBITDA, which was $56 million or 76% above the prior year quarter. Importantly, our adjusted EBITDA margin increased by seven points year over year from 10% to 17%. On to slide six. As a reminder, our long-term strategy is guided by four priorities. Our first priority is to generate positive free cash flow and de-lever the balance sheet. Earlier this year, we refinanced debt maturities to better align our maturities with free cash flow generation over the next few years. Additionally, we expect the company will generate positive free cash flow in the third quarter, fourth quarter, and for full year 2024. On our second priority, achieving sustainable long-term growth, we continue to grow our share of air distribution bookings on a year-over-year basis for the sixth consecutive quarter. Additionally, our hospitality solutions business continues to gain momentum in the marketplace with another strong quarter of execution and growth. Our third strategic priority is to drive innovation and enhance our value proposition. we announced Sabre Mosaic, our next generation airline retailing platform. We also delivered exciting new products in hospitality solutions. I will touch on both of these shortly. Last, our team continued to execute on our technology transformation as greater operational efficiency drove significant cost savings. We remain on track to achieve our overall targeted cost savings of $250 million in 2025 as compared to 2023. Turning to slide seven, Travel Solutions delivered a solid second quarter. Revenue growth was driven by year-over-year increases in our average booking fee, air distribution industry share expansion, and meaningful growth in hotel distribution bookings. Sabre's air distribution bookings in the second quarter declined 1% year over year as compared to negative 2% for the industry. This was driven primarily by softness in Asia group bookings and Latin America bookings, as well as general softness with leisure intermediary bookings. Corporate travel volumes were positive for the industry and up between 2% and 3% for Sabre. Based on recent Sabre commercial wins, as well as easier year-over-year comparisons. We expect year-on-year air distribution bookings growth to resume in the second half of this year and continue to build momentum as we exit 2024. Early indicators in Q3 support this outlook. On to slide eight. As we highlighted throughout 2023 and again last quarter, we are consistently increasing our share of air distribution industry bookings. This chart highlights that our share expanded for the sixth consecutive quarter on a year-over-year basis. Based on signed but not yet implemented business, as well as a rich commercial pipeline, we believe we are on track to achieve further industry share gains. Turning to slide nine. Our hospitality solutions team delivered strong results in the second quarter, supported by continued product improvements and enhancements that are generating increased transactions, product expansion, and customer wins. For the second quarter, revenue was up 9%, and we delivered adjusted EBITDA of $10 million. Adjusted EBITDA margin improved by 6 points, from 6% to 12%. and recurring revenue during the quarter remains strong at 81%. Our implementation with Hyatt is going well, and we went live with the first Hyatt CRS transactions during Q2, just one year after signing this agreement. We believe the flexibility and efficiency of our industry-leading platform solution enables rapid IT implementations at scale. We are on track in hospitality solutions to achieve double-digit revenue growth and double-digit adjusted EBITDA margin for full year 2024. Please turn to slide 10. During the second quarter, we announced a number of significant commercial wins and important partnerships that we believe position us well to achieve both our financial goals and strategic objectives. Following are some examples. On the agency and distribution front, we had a number of wins this past quarter. First, we signed significant distribution contracts with two well-known North American travel agency customers that we expect will convert a significant number of distribution bookings to Sabre in 2024 and 2025. We expect to be able to share more specifics regarding these deals later this year. Second, we have a new long-term agreement with Interpark Triple. Korea's largest OTA to become their majority GDS provider. Finally, we are excited to have signed a large leisure agency in France, driven primarily by the value of our multi-source platform. Regarding New Distribution Capability, or NDC, we continue to offer more robust functionality to a growing number of carrier and agency partners. During the second quarter, we added NDC content for Etihad Airways and also recently announced the launch of NDC content for both Hawaiian Airlines and Air Canada. Additionally, Sabre will be the first GDS to offer NDC content from LATAM Airlines later this year. Further, we also announced an expansion of our partnership with Spotnana to integrate Sabre's NDC content within their platform, targeted at TMCs and corporate travelers. In Airline IT, Our team recently secured renewals for our Prism data analytics solution with American Airlines and Aeromexico, and for our network planning and optimization software with Singapore Airlines. In hospitality solutions, in addition to going live with Hyatt, we also earned a multi-year renewal with Wyndham, the world's largest hotel franchisor, for Synexis Property Hub. After successfully migrating more than 5,000 Wyndham hotels onto the platform, nearly one year ahead of schedule. And we just announced yesterday that Sabre signed a long-term renewal with Wyndham for our Synexis central reservation system. Under this agreement, Wyndham will continue to utilize our cloud-based Synexis CRS to manage its operations, reaffirming Sabre Hospitality as their exclusive global CRS provider for nearly two decades. I commend our teams for achieving a number of significant commercial wins and for expanding on critical partnerships that deliver added value to customers. On to slide 11. During the second quarter, we made further progress on each of our six growth strategies. On distribution expansion, as I mentioned, we successfully drove share gains in-air distribution. Agencies and other buyers are selecting Sabre as a preferred technology vendor of choice Noting our differentiated offerings such as multi-source platform, digital payments, and our hotel distribution offering, we believe we are well positioned to achieve approximately 100 basis points of share gains on an annualized basis by the end of 2024 and annually for the foreseeable future. Hotel distribution experienced strong growth in the second quarter with hotel bookings up 12% year over year. and the hotel attachment rate to air bookings up four points, from 29% to 33%. We believe our hotel distribution platform, which efficiently consolidates a diverse array of content sources globally and delivers them in an intelligent and personalized manner, will continue to drive strong growth. In payments during the second quarter, virtual card deployments increased 32% year over year, we remain excited about the pace of growth in our digital payments business. Last, we achieved a number of successes during the quarter in hospitality solutions. We launched Synexis Concierge AI, which is delivering compelling improvements in productivity and hotelier user experience, and the next generation of Synexis Retailing, which enables greater ancillary revenue opportunity beyond room reservations using our industry knowledge coupled with the power of artificial intelligence. Furthermore, the number of properties adopting our next generation Synexis retailing solution has expanded significantly year to date. Turning to slide 12. Another critical piece of our strategic growth plan is our multi-source platform. This platform dynamically consumes and seamlessly offers NDC, low-cost carrier, and traditional EDIFACT content. It provides global scale and dynamic pricing capability to our airline customers while providing industry-best choice, efficiency, and automation to buyers via a unified interface of personalized content choices. We believe this is the most seamless offering of its type to buyers in the world. On to slide 13. Our strategic focus on delivering innovation is personified by Sabre Mosaic, our fully modular and cloud native new technology platform. We believe this offering will revolutionize airline retailing by delivering flexible, open, and scalable offer and order architecture. Using Google's powerful AI capabilities, Sabre Mosaic enables airlines to dynamically create, sell, and deliver an array of personalized content to travelers worldwide. We are hearing strong enthusiasm from our customers and the marketplace and are in late-stage negotiations with several carriers for Sabre Mosaic. We look forward to providing additional implementation and commercial details in the coming months. Overall, we are consistently delivering on our strategy and operating plans and gaining strong momentum. I will now hand the call over to Mike to walk you through our financial performance and forward outlook.