Sabre Corporation

Good morning, and welcome to the Sabre first quarter 2025 earnings conference call. My name is Rivka, and I'll 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.

Good morning, and welcome to our first quarter 2025 earnings call. This morning, we issued an earnings press release, which is available on our website at investors.sabre.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 advise you that our comments contain forward-looking statements that represent our beliefs or expectations about future events, including the timing and effects of the agreement to sell our Hospitality Solutions business, including pro forma financial information results of our growth strategies, transactions and bookings growth, commercial and strategic arrangements, and our financial guidance, outlook, expectations, free cash flow, net leverage, 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 March 31, 2025. 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.saber.com. We are also presenting certain financial information on a pro forma basis to give effect to the sale of the Hospitality Solutions business and the application of the proceeds from the sale to pay down outstanding indebtedness as if the transaction and actions had occurred on January 1st 2025. Participating with me are Kurt Eckert, President and CEO, and Mike Randolphie, Chief Financial Officer. Scott Wilson, EVP and President of Hospitality Solutions, 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 us today on our first quarter 2025 earnings call. In addition to discussing our quarterly earnings financial results, and outlook, we will also provide details on the agreement to sell our hospitality solutions business, which we announced last week. Business performance was solid in the first quarter, and I commend the team for outstanding execution in what was and continues to be a challenging macro environment. It's important to provide perspective on our resilient business model and why we believe we are well-positioned, even in times of economic uncertainty. Our revenues are largely tied to air distribution bookings rather than airline ticket prices. This structural characteristic is important for Sabre, generally enabling more stable and predictable revenue, even in periods of pricing volatility. That said, we are, of course, not immune from sector dynamics, and as such, we are adjusting our assumption for full-year 2025 GDS industry growth from flat to nominal to down 1% to 2%. This update incorporates recent airline traffic softness and planned airline capacity adjustments. As a reminder, in February, we provided full-year 2025 guidance, which included expectations for double-digit air and hotel B2B distribution bookings growth, driven largely by the realization of volumes from business we have already signed. Mike will provide more details momentarily, and I am pleased to share that today we are reaffirming our expectations for full-year, double-digit distribution bookings growth, despite the market backdrop. Further, we expect the revenue impact from the softer market dynamics to be largely offset by outperformance from our growth strategies. Specifically, new airline content being distributed through our multi-source platform that is above our initial expectations. expected momentum in our payments business, and a more profitable customer mix. Turning to slide four, you'll see an overview of the topics Mike and I will cover today. First, I will discuss the agreement to sell hospitality solutions, followed by an overview of the quarter. Then I will provide a brief update on the progress we've made against our growth strategies. Next, Mike will walk you through the expected financial impacts of the sale of hospitality solutions our first quarter financial results, and our outlook for the second quarter and full year 2025. Turning to slide six, we recently announced an agreement to sell the hospitality solutions business. This sale positioned Sabre to focus on our core airline IT and travel marketplace platforms while giving us confidence that our CRS hotelier customers will be positioned for ongoing success. The transaction value of $1.1 billion is testament to the incredible job the Hospitality Solutions team did in transforming this business over the last few years, with significant improvements in technology and product capabilities, revenue, and adjusted EBITDA from 2022 to today. Net of fees and taxes, we expect to use the approximate $960 million of proceeds primarily to pay down debt. This is an important step in Sabre's ongoing transformation, which I will touch on in a moment. For clarity, Hospitality Solutions is distinct from the company's fast-growing and large hotel B2B distribution business, which remains a key strategic focus for Sabre. Turning to slide seven. Our strategic priorities remain the same. First, generate free cash flow and de-lever the balance sheet. and second, continue investing to innovate and drive sustainable long-term growth. The decision to sell hospitality solutions is an important milestone in advancing these goals. It enables us to strengthen our balance sheet by reducing leverage nearly a full turn and sharpen our focus on core growth areas, which we expect will unlock greater shareholder value. In line with this strategy, The sale is the latest in a series of strategic financial moves by the company, including Q4 2024 debt refinancings and the recent repayment of April 2025 debt maturities. These actions further strengthen our capital structure. Looking ahead, we believe our improving credit profile should better position us to proactively manage upcoming maturities, reduce interest expense, enhance free cash flow generation, and support our growth initiatives. Turning to slide nine and our quarterly results. Revenue in the first quarter was roughly flat on a year-on-year basis, and adjusted EBITDA was in line with our guidance. First quarter adjusted EBITDA margin improved 110 basis points year-on-year to 19.3%, building on our margin expansion in 2024. Turning to slide 10. For Travel Solutions first quarter 2025, air distribution bookings were down 3% year on year, below our assumption of flat to nominal growth. Of the three to four percentage points of air distribution booking softness versus our prior assumption, roughly three quarters was driven by lower group bookings in the APAC region and global travel weakness. The remainder was driven by a meaningful pullback in U.S. government and military travel. As discussed on our February earnings call, we expect to realize greater than 30 million incremental air distribution segments this year from business signed during 2024. And as expected, we generated strong bookings growth of 7% year-on-year in our hotel B2B distribution business. Moving to slide 11. Within our strategy, we have three core focus areas to drive innovation and growth. a modern technology stack, open marketplace, and intelligent retailing solutions. Our modern technology stack is strengthened by our strategic partnership with Google, which enables us to quickly deploy AI-powered solutions for our industry-leading multi-source content and airline IT platforms. These next-generation solutions improve retail intelligence and optimize revenue for our customers. and are built on top of Google's full Vertex AI platform, of which Gemini GenAI is one component. To date, we have deployed Gemini to improve productivity in three areas, engineering throughput, product quality, and customer service efficiency. On to slide 12. Now I will walk through the progress achieved in the first quarter and the sustained commercial momentum we're seeing across the business. Sabre continues to rapidly advance the transformation of our GDS platform into a modern, open marketplace. Our focus is on integrating content and capabilities from myriad sources into a unified platform that increases the efficiency and transparency of booking travel. The integration of new sources of content is important as it expands our total addressable market. We are accomplishing this transformation through four strategic priorities, multi-source content aggregation, distribution expansion, hotel B2B distribution, and the growth of our digital payments business. Our multi-source content aggregation platform continues to scale. We are rapidly establishing our position as a leading aggregator of fragmented content, spanning NDC, low-cost carrier, and traditional edifact. into a consolidated view offering a more seamless and comprehensive experience for travel buyers. Notably, we are leading the competitive set with 38 live NDC airline integrations as well as industry-leading functionality following the recent implementations of Air France and KLM, British Airways, Iberia, LATAM, and Saudia. Within our distribution expansion strategy, We are on track with the implementation ramp of the more than 30 million incremental air segments we discussed last quarter. We are making rapid progress and expect the implementations to meaningfully contribute to our air distribution bookings growth, beginning in Q2 and accelerating significantly in Q3. Building off the notable agency wins in 2024, we are pleased with the recent addition of gray DAWs, one of the industry's largest independent travel management companies, which selected Sabre as its sole global distribution platform partner. In hotel B2B distribution, we are building on our leadership position. Continued investments in product innovation and commercial partnerships drove an 11% increase in Q1 gross booking value transacted through the platform. This business generates over $20 billion in annual hotel gross booking value is a high yield and low cost channel for hoteliers and has very strong growth prospects. Our digital payments team continues to win new business and drove a 30% year on year increase in gross spending to $4 billion in the first quarter. We have a strong pipeline and customer adoptions are growing. The continued momentum in this business reinforces our confidence in the strategy as we streamline business with virtual payment solutions. Airline IT is a key area of focus for us. Sabre Mosaic, our next generation offer and order retailing platform, is a modular set of PSS agnostic solutions that enable airlines an easy to adopt way to modernize their retailing strategies. We are seeing strong traction with the AI powered offer management suite of IQ products. a cornerstone of Sabre Mosaic. These products are well-timed to help airlines optimize revenue as they navigate today's shifting demand. We have recently signed Aeromexico, Avelo, and Goal to this product suite following four foundational customer wins for the Sabre Mosaic platform in 2024. Alaska Airlines will be moving Hawaiian Airlines to the Sabre PSS as a part of their broader integration efforts. The migration is expected to be completed by mid-year 2026. In addition, the combined airline will be utilizing dynamic pricing, one of the offer components of our Sabre Mosaic platform. Overall, we are on track with our strategy and confident in our long-term growth potential. On to slide 13. Looking ahead, despite a challenging macro environment, we expect Sabre distribution bookings growth of low single digits for Q2 with accelerating momentum and double digit air and hotel B2B distribution bookings growth expected for the full year. In summary, we had a solid start to the year and we expect to have a strong 2025. The team is executing at a high level and we are delivering on the objectives we set out for ourselves. The recent agreement to sell hospitality solutions is an important step in the company's transformation as it accelerates our ability to further deliver the business and to continue to drive towards long-term sustainable growth. Thank you, and now over to Mike.

Thanks, Kurt, and good morning, everyone. Please turn to slide 15. I'm pleased to report that Sabre delivered solid financial results in the first quarter, and our resilient business continues to perform well. Revenue of $777 million was roughly flat year-on-year. Adjusted EBITDA of $150 million increased 5% year-on-year and was also roughly in line with our guidance. Adjusted EBITDA margin of 19.3% increased 110 basis points year-on-year as lower technology costs and effective cost management offset lower than expected revenue. We ended the quarter with $672 million of cash on the balance sheet. Free cash flow reflects typical seasonality. Importantly, our full year free cash flow objective remains on track. Before I flip to the next slide, with the agreement to sell hospitality solutions, we believe presenting our key financial metrics on a pro forma basis provides the most representative view of Saber's anticipated future results when incorporating the impact of the sale. On today's call, when referring to pro forma expectations, the financial metrics are calculated assuming the transaction and associated debt pay down occurred on January 1st, 2025. For comparability, we have also provided on our website normalized financial metrics for the first quarter of 2024 through the first quarter of 2025. Moving to slide 16. The first quarter results came in generally as expected. Revenue in the quarter was nearly flat compared to our expectation of flat to low single-digit growth. Within revenue, IT Solutions was lower by $8 million year-on-year, primarily due to the impact of prior demigrations, which we have discussed on prior earnings calls. Consistent with our view on the February earnings call, we expect IT solutions revenue to resume year-on-year growth during the second half of 2025. Gross margin, as expected, decreased 190 basis points in the first quarter versus the prior year. Roughly half of this decline is due to upfront costs associated with new agency business where expenses are incurred ahead of expected accelerating air distribution volumes. The remaining half is due to lower revenue in IT solutions from carriers that demigrated prior to 2024. Notably, we expect this gross margin pressure to be transitory and anticipate gross margins for the remaining quarters of the year to be roughly in line with 2024 on a normalized basis. As mentioned, adjusted EBITDA of $150 million was in line with our outlook. Turning to slide 18 and details about the agreement to sell our hospitality solutions business. We expect this transaction will accelerate our deleveraging process as we plan to use the majority of the $960 million in net proceeds to pay down debt. Following the April repayment of approximately $200 million of maturing debt, we expect these actions will result in bringing 2025 pro forma leverage down nearly a full turn ending the year at approximately 5.4 times versus approximately 6.3 times pre-transaction. This, along with the successful refinancing we completed in the fourth quarter of 2024, is a significant step in our proactive approach to strengthening our balance sheet as we work towards our long-term net leverage target of 2.5 to 3.5 times. On to slide 19. Looking at the expected net proceeds, we plan to use the majority of the $960 million to pay down debt. Specifically, as we have shown on the slide here, we plan to use approximately $825 million to pay down four of the Term Loan B senior secured credit facilities as required within our credit agreement. We plan to retain the balance of proceeds, approximately $135 million, on our balance sheet for reinvestment in our business as permitted within our credit agreements. On the right side of the slide, we have provided a reconciliation of net leverage ratios both pre and post transaction. This shows how the sale and subsequent debt pay down drives nearly a full turn of deleveraging as I mentioned earlier. This is a significant step in our ongoing efforts to strengthen our balance sheet as we work to improve our credit profile. Turning to slide 20, we have updated our 2025 guidance to remove the revenue and adjusted EBITDA associated with the hospitality solutions business, which will be treated as discontinued operations for the full year and all prior periods beginning in the second quarter. For full year 2025, excluding the effects from the sale of hospitality solutions, our expectations remain the same. We continue to expect high single-digit year-on-year revenue growth, driven by expected double-digit air and hotel B2B distribution bookings growth. For the second quarter, we expect year-on-year revenue growth in the low single digits, driven by our expectation of low single-digit air distribution bookings growth. We expect pro forma adjusted EBITDA of approximately $140 million. We expect to generate positive free cash flow in the second quarter on a pro forma basis. As Kurt mentioned, we remain confident in our ability to achieve double digit distribution bookings growth for the year, despite lower than expected Q1 air distribution bookings. To provide more context, we expect the Q1 to Q2 sequential change in air distribution bookings growth rate to be driven by stronger APAC group booking trends in Q2. which we are currently experiencing, as well as ongoing agency implementations from contracts signed in 2024. In the second half of 2025, we anticipate further acceleration resulting in growth of at least 20% year-on-year in air distribution bookings. As mentioned on our February earnings call, we expect the majority of growth in air distribution bookings will come from a number of signed but not yet fully implemented agency agreements. More specifically, the three larger agency contracts highlighted last year are expected to drive nearly half of our anticipated year-in-year growth in Q3 and Q4. We expect the other half will be driven by mid-size agency implementations signed in 2024, in addition to growth from LCC bookings within our multi-source content platforms. Based on that outlook, we expect full year 2025 pro forma adjusted EBITDA of greater than $630 million, which reflects the full impact of the removal of hospitality solutions adjusted EBITDA from the full year. On to slide 21. On a pro forma basis, the only change to our financial outlook is the removal of the hospitality solutions contribution to adjusted EBITDA of approximately $15 million for the second quarter and approximately $70 million for the full year. We expect to generate pro forma free cash flow of greater than $200 million. The pro forma removal of hospitality solutions adjusted EBITDA of approximately $70 million is expected to be offset by $5 million of lower CapEx, and the implied pro forma cash interest savings of approximately $65 million. Please turn to slide 22. In closing, our strategic focus remains unchanged to generate free cash flow and deliver the balance sheet and drive sustainable growth and innovation. We believe the progress we have made so far this year positions us well to deliver shareholder value in 2025 and beyond. And with that, operator, please open the line for questions.

Thank you. At this time, we will conduct the question and answer session. To ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment while we compile the Q&A roster. Our first question comes from the line of Jed Kelly of Oppenheimer & Company. Your line is now open.

Hey, great. Thanks for taking my questions. Just two, if I may, I might have missed some of your opening comments. Can you just expound more on sort of what you're seeing in the macro? And I guess my question is more related to, you know, I guess last summer, you know, some of the travel companies were calling out some softness that didn't materialize. And I guess I'm wondering if this time is different. And then, Can you just talk about post the hospitality solutions and congrats on getting that done? What that allows you to do to potentially accelerate some of the refinance conversations? Thanks.

Jed, good morning. This is Kurt. Thank you for the questions. I'll take the first and then give it to Mike. So with respect to the macro environment, as I indicated, Sabre certainly is not immune to what's happening around us. We indicated that for the full year, Whereas our prior assumption was flat to nominal GDS market growth. We expect that now to be down one to 2%. So about a 300 basis point change versus the expectation of a quarter ago. Importantly for our business, our revenue model is largely derived based on transaction volume, not based on the yield or the pricing environment that airlines and hoteliers enjoy. And so it's very likely that what is happening in the market is there's price pressure but there's still a need to put heads in beds or butts in seats. And so we believe the impact to our business should be relatively less than it is for many of our supplier customers. Secondly, I would just reiterate, with respect to both our hotel and air distribution business, we expect to be up double digits year on year, and that is despite that relatively soft environment. And so overall, what's very important is despite the macro, We have reiterated our guide for the full year. And of course, we're providing both that as well as a normalized pro forma result based on the HSL.

And with regard to hospitality solutions and the sale and what that means from a capital structure standpoint, first, we're very excited about the disposition. And while it's a great business, it definitely, we feel, is a significant credit enhancing event for Sabre. As we highlighted on the call, It improves our net debt to EBITDA by approximately one turn. It also reduces our interest expense by $65 million. But associated with that, by improving our credit profile, we believe that ultimately is going to allow for more efficient financings in the future. And so what you should look for, as you've seen in the past, is as the credit markets allow for, and our results get realized in the market, we will continue to be opportunistic to refinance our maturities in an efficient way.

Great. And then just one quick follow-up. Do you see fuel costs kind of stay where they are? We really haven't seen since COVID the airlines sort of lean into price to drive volume. Is there potential where you could see sort of the airlines take advantage of lower fuel costs to drive more volume and then therefore lean into more third-party channels? Thanks.

Yeah, Jed, the way I think about it from us, from our perspective at Sabre is ultimately passenger traffic aligns closely over time with capacity. And so we have pretty good visibility right now with capacity because the airlines have generally indicated what their capacity trends are going to be out there. Generally, what you see is once the capacity is out there, the airlines ultimately price one way or another to fill that capacity. So, you know, certainly if fuel price is lower, historically that sometimes has resulted in lower fares to fill the planes. But from our standpoint, ultimately airlines won't have lower load factors. Ultimately, they'll give a little on yield in order to fill the planes, and that will result in bookings. And that's what we based our forecast on.

Yeah, and the other thing I'd add, importantly, not on fuel per se, but on capacity, Because while capacity is going to grow slower than everybody anticipated three or four months ago, capacity is still growing this year based on what's projected by almost every key carrier. Thank you.

One moment for our next question. Our next question comes from the line of James Goodall of Redburn Atlantic. Your line is now open.

Hi, everyone. Thanks for taking my question. So I guess my first question is on the free cash flow guide. How quickly can you use the cash proceeds of the sale to pay down debt to realize the interest cost savings? And I guess what was the free cash flow conversion of the hospitality segment? I guess I'm just trying to get a steer on where actual free cash flow will land this year rather than pro forma. Thanks.

Yeah, in terms of how quickly you pay down debt, so what will happen is it'll ultimately, shortly after the close when we receive the proceeds, in accordance with our credit agreements, we basically pay down the notes as we've indicated in our earnings slides within five days of receiving those proceeds. So it's very, very quick. And what I would say is if you do the math, James, with regards to either free cash flow or

um as it would be reported or pro forma you get to roughly the same number um and we would have roughly the same expectation of greater than 200 million dollars uh free cash flow this year yeah very clear thank you and then i guess just the second one is on sort of some of the sabre mosaic wins it looks like you've had some good conversion of some of your larger airlines and i was just wondering how far reaching those agreements are um are any of them sort of full stack osd agreements or just sort of porsche portions of offer management as per sort of the Alaskan Airline deal? And then where are you with sort of some of your other airlines that you have contracts with, like sort of American or JetBlue? Cheers.

Yeah, James, thank you. With respect to Sabre Mosaic, we're winning and we're winning at a very good pace. A few of those are full stack. The majority are mainly offer components, and those airlines have not gone down the order path yet. The pipeline, both with existing clientele and then non-SABR customers is very rich. So there's a number of non-SABR conversations about full stack conversion or elements of the stack where we're in there in the final bake-off where we would never have been there in the past. So we're very optimistic about the medium to long-term growth prospects this provides for the airline IT business. Brilliant. Thank you very much, guys.

One moment for our next question. Our next question comes from the line of Victor Chang of Bank of America. Your line is now open.

Hi. Thanks for taking my questions, Kapo, if I may. I guess, first of all, can you give us some more color on Q1? I think there are a lot of maybe moving parts in Q1, thinking about government cutting travel and then maybe some corridors more impacted by the current macro, I think the Canada-U.S. corridor, And can you give us some color on the mix by region or corporate versus leisure? And obviously you gave us some color already on the Q2 progression on APAC group bookings, but the impact you saw in Q1, do you see that still happening in Q2 as well? Thank you.

Victor, thank you. Good morning. So the softness we saw in Q1 was a broad softness globally. It spanned corporate, leisure, pretty much all channels. The most acute softness was in two specific areas, inbound travel to the United States from certain European markets and from Canada. And then secondly, as we mentioned, group bookings out of North Asia. The last component is U.S. military and government was down in the range of 30% on a unit basis in Q1 versus last year. If you look at that and project into Q2, what I can tell you is we're seeing recent improvements in general market trends. And remember, we're looking at things largely on a unit basis, not on a yield basis.

Got it. And then if I think about the four-year guide where it's been reaffirmed on the double-digit bookings growth and the high single-digit revenue growth, is it a function of maybe previously you have a bit more headroom to when you provide that guide and you're still that's why confident on it given QM was a bit soft. Or is it some incremental wins that you have between when you previously guide to today?

Yeah, I mean, look, at the end of the day, you know, I would just say our team's performing amazingly well and kudos to our Sabre team members. You know, what I would say is we're seeing outperformance in certain elements of our business. We're seeing a greater degree of content come on our platform than we originally expected. Our payments business, which outperformed this quarter, and we see that continuing to outperform, is certainly additive both from revenue and even now to a little bit more from an EBITDA standpoint. And then we're also seeing a more profitable customer mix than we expected. originally contemplated. So, you know, while there's definitely some macro weakness there, and, you know, maybe within distribution bookings, our distribution bookings may be, you know, still double digit, but maybe slightly lower double digit than we originally anticipated. We see that from a revenue standpoint being offset by the three things that I just mentioned.

Got it. Thank you. And if I can squeeze one in. The GDS outlook, you said it's down 1% to 2%. Is that included? Yeah, that's for the industry. My question is, is that definition including the NDC, the low-cost carrier, multi-source, that kind of stuff, or that separate?

Yeah, thanks, Victor. For clarity... We expect to be down 1% to 2% for GDS industry for the year. That's really an ed-a-fact measurement, which, as you know, is over time a relatively smaller piece of the addressable market that we're going after. So when you look at NDC, there's not full transparency on NDC shared across the industry. And then two, what we're launching in Q3, which is the Sabre AirConnect platform, which is part of multi-source, which is the addition of long-tail LCC volumes that we have not played in traditionally, That's separate as well. So when we speak about the double-digit air distribution volume growth, the vast majority of that is business that we've signed and will be implementing. But the addition of new content will drive that as well. So the negative 1% to 2% is an apples-to-apples comparison largely of EDIFACT traffic.

Got it. Very clear. Thank you.

One moment for our next question. Our next question comes from the line of Josh Baer of Morgan Stanley. Your line is now open.

Thanks for the question. Congrats on the hospitality sale. Just thinking about the shape of the air bookings through the year, you know, it was down in Q1. We have low single-digit growth in Q2, getting to double digits for the year and ramping. So, I mean, it seems like that could mean high teens in Q3 and as much as 30% year-over-year growth

in q4 and first question is does that make sense um yeah and then i have a follow-up yeah so you're you are directionally correct we expect to be in the high teens uh mid to high teens in q3 at above 20 in q4 and at or above 20 for the back half of the year yeah great and and so the

Incremental 30 million bookings is from 24. That's what you'll actually realize in 25. But if if we just zoom in on Q4, bookings could be up 20 million potentially year over year. So I guess is that the right takeaway? And, you know, that type of market share gain carrying over to 26. I mean, could we be looking at, you know, teens growth in 26 as well?

Yeah, we have not provided guidance for 2026, but if you look at the acceleration in air and hotel distribution bookings growth through the year and how strong we expect it to be in the second half of this year, that implies very strong carryover into 2026 and very strong growth rates for next year. Got it. Right. So the 30 million is not annualized. 30 million is a realized number this year. Right. That's correct. Perfect.

Most of that, of course, will be realized in the second half.

Thank you.

One moment for our next question. Our next question comes from the line of Jeff Harlib of Barclays. Your line is now open.

Hi, good morning. Most of my questions are answered, but can you say how the implementation is going of the new business you've won and Do you see much risk of slippage given everything is pretty weighted to 3K42?

Yeah, thanks, Jeff. We are right on track with where we thought we'd be at the beginning of the year and what we talked about last quarter. And so we've got good line of sight and fidelity into being able to realize that. We don't see a lot of execution risk there. Obviously, we're assuming what we know today about the current trading environment, and what we've heard from carriers in terms of capacity for the balance of the year, we've not assumed that that environment either improves nor deteriorates any further.

Okay. And just for one cue, both the technology costs and G&A were down at least decently below what we were looking for. I know you mentioned tech costs. Part of that is the lower bookings, but are there other cost savings actions that you're implementing? Anything else you can point to and what can you say about the cost outlook for the rest of the year? Hello, Blaine.

Yeah, so thank you for the question. You know, as we articulated on our February call, if you think about the technology expense line, we would expect to have realized in that line about $100 million from our tech transformation initiative. Now, that's not a net number. There is some offset both for investment as well as as bookings grow, the hosting costs that are associated with that. So, as you look at the technology line, consistent with what we articulated in the February call, I would expect that line to be down meaningfully. However, I still would expect the largest driver of our EBITDA growth to be gross profit dollar growth, and actually the tech savings, while being significant, probably still a distant second to that. On SG&A, our original assumption when we went into February was slight growth. Since, you know, obviously given what's happened over the last year, you call it two, three months, we have tightened that up a little bit, and I would say we'd expect SG&A for the year to be roughly flat given our current outlook right now.

Got it. Thanks very much.

One moment for our next question. Our next question comes from the line of Deepak Mathivanan at Cantor Fitzgerald. Your line is now open.

Hey, guys. Thanks for taking our questions. This is Jack on for Deepak. Just two for you here. So first, just understanding that the primary use of the proceeds from the hospitality sale will be used to pay down debt. What areas and initiatives do you plan to use the remaining proceeds? I think you highlighted in the deck about $135 million to invest behind sort of the rest of the business. And then secondly, I think in some previous disclosure you've given, basically air bookings industry share. Can you update us on how that penetration is trended in 1Q? I think last quarter you said you might not be disclosing that, but just kind of any qualitative color. Thank you.

Thank you, Jack, and I'll answer them in reverse order. On the share number, as we indicated last quarter, you have EDIFACT, you have NDC, and now we have long-tail LCC growth as well. And so reporting market share on what is one subcomponent we don't think makes sense. But in a market where we see the GDS EDIFACT market being down and projected 1% to 2% for full year, and where we're going to be growing at double digits with our distribution for the full year, I think it's fair to infer from there that we are growing market share very considerably through 2025. With respect to the remaining proceeds after the pay down in debt from the sale of HS, those will be applied mainly to our strategic investment areas. which are the strategic growth initiatives that we are beginning to see some real traction with, and then just continued modernization of our technology.

For clarity, our CapEx, we would expect our CapEx expenditures this year to be approximately $80 million.

Great. Thank you.

As a reminder, to ask a question, please press star 11 on your phone. One moment for our next question. Our next question comes from the line of Alex Irving of Bernstein. Your line is now open.

Hi, good morning. Two from me, please. First of all, the new wins with agencies you'll be implementing over the course of the year, can you please describe how the gross margin of that volume differs from the gross margin of existing booking volume, if at all? Is there any nuance to call out here? Second question is on Coforge. We signed this partnership since we last spoke. Presley, as I've seen, talks about that as being worth $1.56 billion over 13 years, which averages out to $120 million per year over the life of that contract. How does the timing look? Is it replacing other costs? What are you getting in exchange? And how well should we think about that agreement in the context of your earnings, please?

Yeah. With regards to gross margin, you know, what I would say is if you look at the new business, we articulated this on the February earnings call. With regards to the new air distribution bookings that we're anticipating getting, there's a couple of elements on that. One, we did indicate that we would expect average booking fee to be slightly lower than where we were about a year ago and margin to be slightly lower. And I'd say it's very slightly lower. And that's driven by a few reasons. One is, as we articulated, two of the agencies we won were some of the largest North American agencies. And so there is a geographical mix component there where U.S. domestic air bookings have a slightly lower average booking fee. And then after that, it also incorporates additional NDC volumes and LCC volumes. So there is some, I would say, very slight, slightly lower margins. But overall, when you look at our margins in aggregate, for the remaining quarters of the year for Q2, Q3, and Q4. I would expect gross margin to be roughly in line for this year where it was last year.

With respect to CoForge, just a reminder, this is a 13-year deal. It is focused on helping us accelerate product delivery and also launching additional innovative AI-embedded solutions. This is all incorporated within our ongoing technology costs and our investments in our growth strategies. Commercially, the new agreement with CoForge has both a fixed fee component and a gain share component that is subject to certain commercial outcomes. We've not provided additional commercial details beyond that. Thank you.

I'm showing no further questions at this time. I would now like to turn it back to Kurt Eckert for closing remarks.

Thank you, everybody. Despite a challenging market backdrop, we're pleased with the execution and the traction that we're gaining in the business. We're confident in our ability to deliver against the expectations in the guide that we provided today, and we look forward to talking again next quarter. Thank you.

Thank you for your participation in today's conference. This concludes the program. You may now disconnect.