Sabre Corporation

Good morning and welcome to this favor second quarter 2025 earnings conference call. My name is Sean 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.

Good morning and welcome to our second quarter 2025 earnings call. This morning we issued an earnings press release which is available on our website at .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 advise you that our comments contain forward-looking statements that represent our beliefs or expectations about future events, 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 and 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 10Q for the quarter end of June 30, 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, normalized adjusted EBITDA, and normalized adjusted EBITDA margin have been adjusted to exclude certain items. The most directly comparable GAAP measures and reconciliations for non-GAAP measures are available in the earnings release and other documents posted on our website at .saber.com. Normalized amounts have been adjusted for estimated costs historically allocated to our hospitality solutions business, which was sold on July 3, 2025. We are also presenting certain financial information on a pro forma basis to give effect to the sale of the hospitality solutions business and we have removed the impact of the $227 million payment in kind interest that was reported in conjunction with the refinancing activity in the second quarter of 2025 from pro forma free cash flow. Unless otherwise noted, results presented are based on continuing operations. Participating with me are Kurt Eckerd, president and CEO, and Mike Randolphi, chief financial officer. With that, I'll turn the call over to Kurt. Thanks, Brian.

Hello everyone and thanks for joining us. Earlier today, we reported second quarter results and provided an updated outlook for the remainder of the year. In what has been a dynamic and at times challenging first half of the year, we have remained focused on executing our strategic priorities. These are first, to generate free cash flow and deliver the balance sheet and second, to drive sustainable growth by delivering innovative technology solutions for our customers. Through the work of our team members, we believe Sabre is a stronger and better positioned company today versus a year ago. Over the past year, we have taken meaningful steps to strengthen our balance sheet. We have grown adjusted EBITDA, extended debt maturities, and paid down debt. Year to date, our normalized adjusted EBITDA has grown 4% year on year. We have significantly improved our debt maturity profile, extending nearly 60% of our debt to 2029 and beyond. And this year, we have reduced total debt by more than $1 billion, or nearly 20%, using a combination of cash from our balance sheet and proceeds from the sale of hospitality solutions. Taken together, we expect to reduce our year end 2025 net leverage by approximately 50% versus year end 2023. At the same time, our commitment to innovation is reshaping the travel landscape as we introduce new and enhanced solutions for our customers. We are making significant progress with the implementation of signed new business, which we expect to accelerate in the back half of 2025. Our solutions are resonating in the marketplace, as evidenced by continued commercial momentum. The operating environment remains challenging and is pressuring air distribution bookings. As a result, the second quarter came in below expectations, and we are updating our outlook for the remainder of the year. Despite this near term pressure, we are staying focused on executing and making steady progress against our strategy, which we believe best positions to make. We are working hard to make sure that we are able to make the most of this time and save our long-term growth. Moving to slide five, I will provide some additional details on the second quarter. Air distribution bookings declined 1% year on year, outperforming the broader GDS industry, but falling short of previous expectations for low single digit growth that we shared on our Q1 call. During the second quarter, our growth strategies added eight points of growth to air distribution bookings compared to the prior year. However, this growth was offset by a combined nine-point decline in our base business, four points from the GDS industry and five points from Sabermix, resulting in the 1% decrease in air distribution bookings for the quarter. Regarding the GDS industry, the weakness of corporate bookings relative to leisure and the pullback of government and military travel, which almost exclusively books through the GDS, caused GDS volumes to underperform airline passenger growth. Relative to other GDS competitors, Sabermix has a higher exposure to both of these factors. We also have more share than our competitors in certain countries that had a disproportionate decline and less share in certain countries that performed better, driving further pressure. While we expected some industry stabilization during the quarter, incremental industry weakness emerged in June and continued into July, which was the driver of our air distribution booking shortfall to expectations. Volumes from our growth strategies are scaling largely as expected. These growth strategies contributed over two million of air distribution bookings in June and approximately 2.5 million in July, which represents approximately 10 points of growth year on year. This momentum supports our path to greater than 30 million incremental air distribution bookings from our growth strategies for full year 2025. Hotel distribution bookings growth continued up 2% in the quarter and the attachment rate to air bookings improved 100 basis points to 34%. Within IT solutions, passengers boarded increased by 1% year on year. Importantly, we continue to stay focused on what is within our control, executing our growth strategies, realizing the benefits of our technology transformation, and continued cost management. These actions helped drive Q2 2025 normalized adjusted EBITDA growth of 6% versus prior year and normalized adjusted EBITDA margin improvement of approximately 120 basis points to approximately 19%. Moving to slide 6. We are accelerating the transformation of our platform into a modern open travel marketplace that seamlessly integrates content and capabilities from a wide range of sources. In multi-source content, Sabre continues to demonstrate industry leadership with 38 live NDC connections now operational among the most in the industry and seamless shopping, booking, and workflow integration. Our distribution expansion strategy is progressing well. For example, Christopherson Business Travel recently selected Sabre as its primary distribution technology partner, building upon numerous wins in 2024 and 2025 and demonstrating continued commercial momentum. Hotel B2B distribution gross booking value transacted through the platform continues with an annualized turnover of $20 billion, a 4% increase year on year. Our digital payments business also continues to scale rapidly with Q2 gross spend of $5 billion, up 44% year on year. We continue to see 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 as they navigate today's shifting demand. During the quarter, we signed an agreement with Velo Airlines, who will become the first low-cost carrier to adopt ancillary IQ. We now have nine airlines that will be utilizing our Sabre Mosaic offer management products. Overall, we are making significant progress against our strategy and transforming the business to capture long-term value in a dynamic and evolving travel marketplace. On to slide seven. With weakness we previously discussed in the first half of the year and uncertainty around GDS industry growth for the remainder of 2025, we have revised our outlook for the second half to range from 4% to 10% air distribution bookings growth. Similar to the first half, the drivers of this updated outlook are the GDS industry and SabreMix, as well as timing of growth strategy initiatives. I'll touch briefly on each of these. First, with regard to our updated view of the GDS industry, we do not believe these trends are structural and expect them to stabilize over time. However, we anticipate the lower mix of corporate bookings versus leisure to continue through the remainder of 2025. Second, looking at bookings mix in the second half of 2025, we expect to continue to be adversely impacted by our greater exposure to corporate travel, military and government travel, and our higher share in certain countries that are seeing a disproportionate travel decline. However, we are encouraged by recent commentary from the U.S. airlines indicating their expectations for improving second half trends. Finally, the remainder is related to growth strategy timing due primarily to a temporary delay from technology and connectivity development. In the launch of our new multi-source low-cost carrier solution, this solution is designed to expand access to even more LCC content beyond the 150 plus low-cost carriers already available on our platform today. Our early adopter program is progressing well, connecting content from over 50 additional LCCs to approximately 500 agencies. We had previously expected this new product offering to be in full production launch this summer, driving approximately five points of air distribution bookings growth in the second half of 2025, but now anticipate a six-month delay and early 2026 full launch. Moving to the chart on the right, which represents our air distribution bookings guidance for the third and fourth quarter as well as the full year, we have broken out the growth for both actual results in the first half of the year and the expected acceleration in the second half. The black sections show the positive impacts of our growth strategies driven primarily by the implementation of bookings from signed new business. This growth is being offset by the weakness previously discussed in the overall GDS industry and SabreMix as displayed by the gray boxes shown in both the first and second quarter actuals. For the third quarter, we expect 13 points of growth in air distribution bookings from growth strategies, namely the realization of implemented new business. We expect our July exit rate for new business to be greater than 10 points of growth and we have clear line of sight to the new business realization projections for the remainder of the year. We expect this growth will exceed the headwinds I discussed previously, resulting in quarterly air distribution bookings growth of 2% to 6%. In the fourth quarter, we expect the benefit from our growth strategies to accelerate and result in 19 points of growth, resulting in total air distribution bookings growth of 6% to 14%. In summary, we are navigating some near-term challenges that we believe are largely transitory and we are encouraged with the continued scaling of our new business volumes. We remain focused on executing our two strategic priorities, generating free cash flow and delivering the balance sheet and driving sustainable growth through innovation. Through the team's continued hard work, Sabre is a stronger, better positioned company today than it was a year ago. Thank you