Sabre Corporation

We are encouraged by the continued momentum we are seeing from our growth strategies. Since late 2025, Sabre's rate of bookings growth is outpacing the broader industry by approximately 600 basis points. Second quarter air distribution bookings trends were better than expected, driven by a modest recovery in the month of June. The trends we saw in June have continued through July and are reflected in our full year outlook. Consistent with what we shared during our first quarter earnings call regarding conflict-related headwinds in the month of March, air distribution bookings growth remained positive throughout the second quarter in both North and South America. That strength was partially offset by continued impacts from the Middle East conflict as well as higher fuel prices, which have driven airline fare increases. We estimate that the global impact of fuel in the Middle East conflict was 300 to 400 basis points in the second quarter and was relatively more acute in EMEA and Asia Pacific. Importantly, corporate volumes, which represent nearly half of our marketplace bookings, demonstrated continued steady performance and resilience throughout the second quarter, which offset softness in leisure demand. Looking ahead, the underlying assumptions for our growth outlook have not changed. We expect third quarter air distribution bookings growth of flat to low single digits. For the fourth quarter, and consistent with our prior outlook, as well as recent airline commentary, we expect bookings to grow at a low to mid single digit rate year on year. Now turning to slide five. For the fourth consecutive quarter, we delivered double digit year on year growth in normalized adjusted EBITDA. We believe these results and positive trends set us up well to continue to drive year on year top line and proform adjusted EBITDA growth for the remainder of the year and achieve our increased outlook. Our financial performance provides us with a foundation to continue investing in innovation and supporting our growth strategies. Turning to the right side of the slide, we believe Sabre is positioned to be a winner in the rapidly emerging agentic AI travel channel. And we are working with partners and leaning into our leadership position by increasing the level of investment in AI initiatives. Our marketplace continues to deliver multi-source travel content at an incredible scale. Hotel-related revenue growth accelerated in Q2 to 11% year-on-year, driven by higher attach rate and continued growth in media revenue. Our hotel attach rate has improved to approximately 35%. As we continue to enhance our hotel platform, we expect to drive higher conversion. Payment suite gross spend exceeded $6 billion in the second quarter, up more than 30% year-on-year, and is now over $25 billion on an annualized basis. NDC also continues to grow, and we expect further acceleration during 2026. Turning to slide six, our key financial and operational metrics demonstrate that we are executing well and delivering broad-based growth. Across our business, we continue to see positive trends, reflecting the disciplined execution of our strategy and the progress we are making against our long-term priorities. Moving to slide seven. Our developer ecosystem continues to expand. Hundreds of developers are now working in our production environment, reinforcing Sabre's position as the critical infrastructure provider powering the next generation of travel commerce. Agentic AI is no longer just a future opportunity. It is transforming how travel is bought and serviced, and Sabre is leading that evolution. Our open platform enables AI agents to shop, book, and service travel autonomously, securely and at scale. As the ecosystem develops and adoption accelerates across the industry, we believe Sabre is uniquely positioned to build on our leadership position as we enter this next chapter of travel technology. We recently deployed our model context protocol server with a global enterprise loyalty and travel service company. MCP acts as a secure, intelligent translation layer that lets AI agents handle complex servicing work on their own. Ticket reissues, exchanges, and itinerary changes. Driven by strong demand for our agentic APIs and MCP server, we doubled the number of active pilot and production partners from 30 to 60 in the second quarter. We also partnered with VocalBridge and Deep Learning AI part of the broader AI fund ecosystem and hosted a hackathon in Silicon Valley. The response was positive and exceeded our expectations. More than 400 developers participated and submitted over 100 projects built on our agentic APIs and MCP server. The solutions they built from voice enabled travel assistance to agents that can seamlessly coordinate flights, hotels, ride shares and dining built into a single itinerary demonstrate the power and flexibility of our platform. Importantly, they serve as examples of the growing developer interest in building on Sabre's infrastructure and reinforce our foundational position in enabling the next generation of agentic AI power travel. We are making solid progress across our strategic priorities and believe we are well positioned to deliver sustainable long-term growth across air expansion, airline technology, Lodging Expansion and Payments, we are executing our strategy, delivering meaningful value for our customers and investing in innovation that further strengthens our competitive position. We are excited with the momentum in airline technology and I'm pleased to share that a notable carrier in Africa has selected Sabre as its new technology platform provider. As part of this agreement, the airline will migrate its core passenger services to the Sabre platform and adopt our Sabre Mosaic NDC IT capabilities. This transition will help modernize key areas of the airline's operations and implementation is expected to be completed by the end of this year. Our progress together with our strong first half performance supports our updated 2026 guidance and increases our confidence in the significant opportunities ahead. With that, I'll turn the call over to Mike to walk through our second quarter financial results and our outlook in more detail.

Thanks, Kurt, and good morning, everyone. Please turn to slide nine. Second quarter revenue, gross profit, normalized adjusted EBITDA and free cash flow all exceeded our expectations. As a result, and based on our current outlook, which is consistent with our prior view for the second half of 2026, we are reaffirming our full year guidance for revenue and air distribution bookings growth and increasing our full year guidance for both pro forma adjusted EBITDA and free cash flow. Turning to the financials, total revenue was $712 million, an increase of 4% year on year, exceeding our expectations of flat to nominal growth. Marketplace revenue grew $31 million, an increase of 6% due to a 1.5% increase in distribution bookings and a 4% increase in average booking fee. Thank you for joining us. of $140 million to $150 million per quarter in Q3 and Q4 and continue to expect year-on-year revenue growth in 2026. Gross margin of 57.1% came in at the high end of our 56% to 57% range due primarily to favorability in our average booking fee driven by bookings mix and revenue growth in higher margin payments and media products. Second quarter normalized adjusted EBITDA was $151 million, a 19% increase year on year, and adjusted EBITDA margin expanded 272 basis points to 21.2%. Free cash flow is positive $10 million for the second quarter. Importantly, our expectation for full year free cash flow has improved to approximately negative $65 million from negative $70 million. As a reminder, The negative free cash flow this year is driven almost entirely by approximately $60 million of restructuring costs associated with our inflation offset program. Absent these restructuring costs, we would expect near break-even free cash flow. We ended the quarter with a cash balance of $697 million. Moving to slide 10. Air distribution bookings grew 1% and exceeded expectations despite the impacts of the conflict in the Middle East and higher fuel prices on global travel demand. Revenue growth of 4% exceeded our guidance of flat to nominal. Our normalized adjusted EBITDA result of $151 million was favorable to our guide of approximately $130 million by $21 million. Approximately two-thirds of this outperformance is attributable to higher gross income, which was driven by a higher average booking fee and higher air distribution bookings. The remainder is driven by timing of technology investments, which will now occur in the second half of the year. All in, we are pleased with this quarter's results. Turning to slide 11, we have signed an agreement with our existing lenders to extend our AR securitization facility through September 2029. As a result of this agreement and our previous refinancing activities, we now have no maturities until 2029. Moving to slide 12 and our outlook for 2026. We are increasing our outlook for full-year pro forma adjusted EBITDA to approximately $600 million and free cash flow to approximately negative $65 million, while our forecast for full-year air distribution bookings, revenue growth, Thank you for joining us today. As compared to the first half of the year due to a shift in timing of investments. Taken together, our total investment in technology in the second half will be higher due to additional investment in product development, including AI, Sabre Mosaic, and lodging. With our increased pro forma Just Eat Eat But Die guidance, updated CapEx Outlook, and approximately $5 million of higher cash interest due to the May 2026 refinancing of our exchangeable notes. Our expectation for a full year free cash flow has increased by $5 million to approximately negative $65 million. On to slide 13 and our expectation for the third and fourth quarters. As Kurt mentioned, the trends we saw in June continued through July. Based on our current outlook, we anticipate third quarter air distribution bookings and revenue to grow in the flat to low single digit range and fourth quarter air distribution bookings and revenue to grow at a low to mid single digit pace year on year. We expect our third and fourth quarter gross margin to be towards the higher end of our 56 to 57% range due to the continuation of favorable trends experienced in the first half of the year. As I discussed previously, we expect adjusted technology expense to be higher in the second half of this year as compared to the first half of this year. We expect adjusted SG&A expense to be roughly flat in the second half of the year when compared to the first half of the year. For the third quarter, with guidance of flat to low single-digit growth in air distribution bookings, gross margin at the higher end of our range, The sequential increase in adjusted technology expense and roughly flat SG&A expense sequentially, we expect normalized adjusted EBITDA to be approximately $155 million. For the fourth quarter, with guidance of low to mid single-digit growth in air distribution bookings and similar expectations for gross margin and operating expense versus the third quarter, We anticipate normalized adjusted EBITDA of approximately $125 million. Touching on free cash flow, we expect similar trends in operating cash flow in the third quarter as compared to the second quarter, excluding the impact of interest payments. As a reminder, within the website financials available on our investor relations website, we provide a quarterly interest walk. The schedule provides our expected quarterly cash interest payments. In the third quarter, we expect roughly $20 million of higher interest payments versus the second quarter. In total, for the second half of the year, we expect to generate approximately $80 million of free cash flow, primarily in the fourth quarter. We are pleased with our second quarter and the first half results. With our increased outlook for both full-year pro forma adjusted EBITDA and free cash flow, we believe we are well positioned for sustained growth and Free Cash Flow Generation going forward. And with that, operator, please open the line for questions.

Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will 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. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jack Halpert of Kendra Fitzgerald. Your line is now open.