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.