Sabre Reports Second Quarter 2015 Results

- Revenue increased 9.4%, Adjusted EBITDA up 6.1%

- Airline and Hospitality Solutions revenue increased 16.1%

- Travel Network revenue increased 7.0%, bookings growth of 8.7%

- LATAM Airlines Group signed SabreSonic Suite deal

- Abacus acquisition completed July 1

- Raising full-year guidance: Revenue, Adjusted EBITDA and Adjusted EPS

Aug 04, 2015, 07:00 ET from Sabre Corporation


SOUTHLAKE, Texas, Aug. 4, 2015 /PRNewswire/ -- Sabre Corporation (NASDAQ: SABR) today announced financial results for the quarter ended June 30, 2015.

"In the second quarter, we continued to perform very well financially, operationally and in delivering new product innovation, capped off with the strategic Abacus acquisition in Asia-Pacific. We are well positioned as we look ahead to the coming years," said Tom Klein, Sabre President and CEO. "Travel Network revenue increased 7.0% year over year in the quarter, driven by growth in bookings across all regions, including an increase of 6.9% in North America and 19.7% growth in EMEA. In Airline and Hospitality Solutions, strong revenue growth and nearly four points of margin expansion drove a 29.5% increase in Adjusted EBITDA. Our performance has been fueled by our continued innovation for, and commitment to, our customers. Our momentum underpins our confidence to increase our full-year guidance."

Q2 2015 Financial Summary

Sabre consolidated second quarter revenue increased 9.4% to $707.1 million, compared to $646.4 million for the same period last year.

Income from continuing operations totaled $32.6 million, compared to $6.5 million in the second quarter of 2014. Consolidated Adjusted EBITDA was $227.6 million, a 6.1% increase from $214.5 million in the prior year second quarter. The increase in consolidated Adjusted EBITDA is the result of 29.5% growth in Airline and Hospitality Solutions Adjusted EBITDA and a 4.0% increase in Travel Network Adjusted EBITDA.

For the quarter, Sabre reported income from continuing operations of $0.12 per share and Adjusted Net Income from continuing operations (Adjusted EPS) of $0.27 per share.

Cash flow from operations totaled $136.2 million, compared to $110.1 million in the second quarter of 2014. Second quarter Free Cash Flow was $70.2 million, compared to $53.3 million in the year ago period. Capital expenditures totaled $66.1 million, compared to $56.8 million in the year ago period. Adjusted Capital Expenditures, which includes capitalized implementation costs, totaled $81.3 million, compared to $66.8 million in the second quarter of 2014.

Financial Highlights

(in thousands; unaudited):

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

% Change

2015

2014

% Change

Total Company (Continuing Operations):

Revenue

$

707,091

$

646,380

9.4

$

1,417,439

$

1,312,795

8.0

Income from continuing operations

$

32,589

$

6,455

404.9

$

81,919

$

28,414

188.3

Adjusted EBITDA*

$

227,573

$

214,548

6.1

$

471,159

$

425,811

10.6

Cash Flow from Operations

$

136,226

$

110,134

23.7

$

267,999

$

204,456

31.1

Capital Expenditures

$

66,051

$

56,812

16.3

$

127,963

$

106,470

20.2

Adjusted Capital Expenditures*

$

81,285

$

66,756

21.8

$

157,524

$

124,067

27.0

Free Cash Flow*

$

70,175

$

53,322

31.6

$

140,036

$

97,986

42.9

Adjusted Free Cash Flow*

$

81,669

$

89,886

(9.1)

$

165,759

$

150,855

9.9

Net Debt (total debt, less cash)

$

2,627,358

$

2,855,413

Net Debt / LTM Adjusted EBITDA

3.0x

3.5x

Airline and Hospitality Solutions:

Revenue

$

216,632

$

186,573

16.1

$

421,532

$

363,290

16.0

Passengers Boarded

139,265

131,450

5.9

265,439

249,066

6.6

Operating Income

$

49,075

$

35,855

36.9

$

77,566

$

62,317

24.5

Adjusted EBITDA*

$

80,985

$

62,555

29.5

$

152,473

$

116,015

31.4

Travel Network:

Revenue

$

494,515

$

462,337

7.0

$

1,002,445

$

954,064

5.1

Air Bookings

88,442

81,053

9.1

179,865

170,098

5.7

Non-air Bookings

14,687

13,862

6.0

28,698

27,460

4.5

Total Bookings

103,129

94,915

8.7

208,563

197,558

5.6

Bookings Share

36.8

%

35.6

%

36.3

%

35.5

%

Operating Income

$

173,691

$

165,597

4.9

$

370,942

$

350,114

5.9

Adjusted EBITDA*

$

205,957

$

197,971

4.0

$

438,044

$

412,814

6.1

*indicates non-GAAP financial measure; see descriptions and reconciliations below

 

Sabre Airline and Hospitality Solutions

Second quarter 2015 Airline and Hospitality Solutions revenue increased 16.1% to $216.6 million from $186.6 million in the prior year period. Contributing to the increase in revenue was a 5.9% increase in airline passengers boarded through SabreSonic, strong traction from new solutions across the portfolio and continued strong growth in Sabre Hospitality Solutions.

Sabre Airline and Hospitality Solutions Adjusted EBITDA increased 29.5% to $81.0 million from $62.6 million in the prior year period. The increase in Adjusted EBITDA is the result of strong revenue growth, excellent execution and technology platform scale benefits, resulting in an Adjusted EBITDA margin of 37.4%, compared to 33.5% for the prior year quarter.

In Airline Solutions, LATAM Airlines Group, the largest airline in Latin America, signed an agreement to use the SabreSonic Suite for all airlines in the group.

Sabre Travel Network

Second quarter Travel Network revenue increased 7.0% to $494.5 million, compared to $462.3 million for the same period in 2014. Total bookings increased 8.7% with growth in all regions. Bookings growth in North America was 6.9% in the quarter. Sabre's focus on expansion in EMEA resulted in bookings growth of 19.7%. Second quarter 2015 Travel Network Adjusted EBITDA increased 4.0% to $206.0 million.

On July 1, Sabre announced the completion of its acquisition of Abacus International, the leading global distribution system (GDS) in the Asia-Pacific region. Prior to the acquisition, Sabre owned 35% of Abacus. The Abacus acquisition brings fresh investment and growth opportunities in the travel industry's largest and fastest growing region. Concurrent with the completion of the Abacus acquisition, Sabre signed long-term distribution agreements with the 11 Asian airlines that had sold their 65% share of Abacus to Sabre.

Refinancing Activity

In the second quarter, Sabre redeemed $480 million of 8.5% 2019 maturity bonds. These bonds were redeemed through the issuance of $530 million, 5.375% senior secured notes due in 2023, which substantially covered the redeemed notes' principal, accrued interest and related fees, premiums and expenses.

Dividend

On July 28, 2015, Sabre's Board of Directors declared a quarterly dividend of $0.09 cents per share on Sabre's common stock. The dividend will be payable on September 30, 2015, to stockholders of record on September 21, 2015.

Business Outlook and Financial Guidance

Sabre is increasing its full-year guidance for 2015 based on year-to-date results, continued bookings momentum in Travel Network, and the earlier than previously forecast July 1 close of the Abacus acquisition.

Sabre expects full-year revenue of between $2.95 billion and $2.98 billion. 2015 Adjusted EBITDA is expected to be between $930 million and $945 million.

In Airline and Hospitality Solutions, Sabre continues to expect 2015 revenue growth of between 9% and 11%. Passengers boarded are expected to increase approximately 10% in 2015, including strong growth in the fourth quarter related to the American Airlines implementation.

In Travel Network, first half performance and continued share gains results in increased expectations for 2015 growth. This increase in expectations is augmented by the earlier than previously forecast close of the Abacus acquisition. Sabre now expects 2015 Travel Network revenue growth of 13% or more, driven by bookings growth of approximately 17%. Excluding Abacus, Sabre now expects Travel Network revenue growth of greater than 5% on bookings growth of approximately 6%.

Sabre increased 2015 Adjusted Net Income and Adjusted EPS guidance to $290 million to $305 million and $1.05 to $1.11, respectively. Free Cash Flow and Adjusted Free Cash Flow are expected to be $240 million and more than $290 million, respectively.

In summary, for the full-year 2015, Sabre now expects the following results from continuing operations:

Full-Year 2015 Guidance

($ millions, except for EPS)

Revenue

$2,950 - $2,980

Adjusted EBITDA

$930 - $945

Adjusted Net Income

$290 - $305

Adjusted EPS

$1.05 - $1.11

 

Conference Call

Sabre will conduct its second quarter 2015 investor conference call today at 9:00 a.m. ET. The live webcast and accompanying slide presentation can be accessed via the Sabre Investor Relations website at investors.sabre.com. A replay of the event will be available on the website for at least 90 days following the event.

About Sabre Corporation

Sabre Corporation is a leading technology provider to the global travel and tourism industry. Sabre's software, data, mobile and distribution solutions are used by hundreds of airlines and thousands of hotels to manage vital operations, such as passenger and guest reservations, revenue management, and flight, network and crew management. Sabre also operates the world's leading travel marketplace, processing more than $110 billion of annual travel spend. Headquartered in Southlake, Texas, USA, Sabre serves customers in more than 160 countries around the world.

Website Information

We routinely post important information for investors on our website, www.sabre.com, in the Investor Relations section. We intend to use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.

Supplemental Financial Information

In conjunction with today's earnings report, a file of supplemental financial information will be available on the Investor Relations section of our website, www.sabre.com.

Note on Non-GAAP Financial Measures

This press release includes unaudited non-GAAP financial measures, including Adjusted Net Income, Adjusted EBITDA, Adjusted EPS, Adjusted Capital Expenditures, Free Cash Flow, Adjusted Free Cash Flow and the ratios based on these financial measures. We present non-GAAP measures when our management believes that the additional information provides useful information about our operating performance. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation of non-GAAP financial measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with GAAP. See "Non-GAAP Financial Measures" below for an explanation of the non-GAAP measures and "Tabular Reconciliations for non-GAAP Measures" below for a reconciliation of the non-GAAP financial measures to the comparable GAAP measures.

Forward-looking statements

Certain statements herein are forward-looking statements about trends, future events, uncertainties and our plans and expectations of what may happen in the future. Any statements that are not historical or current facts are forward-looking statements. In many cases, you can identify forward-looking statements by terms such as "expect," "guidance," "opportunity," "will," "anticipate," "may," "should," "would," "intend," "believe," "potential" or the negative of these terms or other comparable terminology. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Sabre's actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. The potential risks and uncertainties include, among others, dependency on transaction volumes in the global travel industry, particularly air travel transaction volumes, the financial and business effects of acquisitions, including integration of these acquisitions, adverse global and regional economic and political conditions, including, but not limited to, conditions in Venezuela and Russia, exposure to pricing pressure in the Travel Network business, the implementation and effects of new agreements, dependence on maintaining and renewing contracts with customers and other counterparties, dependence on relationships with travel buyers, changes affecting travel supplier customers, travel suppliers' usage of alternative distribution models, reliance on third-party distributor partners and joint ventures to extend our

GDS services to certain regions and competition in the travel distribution market and solutions markets. More information about potential risks and uncertainties that could affect our business and results of operations is included in the "Risk Factors" and "Forward-Looking Statements" sections in our Annual Report on Form 10-K filed with the SEC on March 3, 2015. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. Unless required by law, Sabre undertakes no obligation to publicly update or revise any forward-looking statements to reflect circumstances or events after the date they are made.

 

SABRE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Revenue

$

707,091

$

646,380

$

1,417,439

$

1,312,795

Cost of revenue (1) (2)

461,126

422,647

930,124

874,617

Selling, general and administrative (2)

123,360

127,651

245,718

238,389

Operating income

122,605

96,082

241,597

199,789

Other income (expense):

Interest expense, net

(42,609)

(53,235)

(89,062)

(117,179)

Loss on extinguishment of debt

(33,235)

(30,558)

(33,235)

(33,538)

Joint venture equity income

5,307

4,059

13,826

6,500

Other, net

197

391

(4,248)

(1,963)

Total other expense, net

(70,340)

(79,343)

(112,719)

(146,180)

Income from continuing operations before income taxes

52,265

16,739

128,878

53,609

Provision for income taxes

19,676

10,284

46,959

25,195

Income from continuing operations

32,589

6,455

81,919

28,414

Income (loss) from discontinued operations, net of tax

696

(16,650)

159,607

(40,706)

Net income (loss)

33,285

(10,195)

241,526

(12,292)

Net income attributable to noncontrolling interests

1,078

702

1,825

1,448

Net income (loss) attributable to Sabre Corporation

32,207

(10,897)

239,701

(13,740)

Preferred stock dividends

2,235

11,381

Net income (loss) attributable to common shareholders

$

32,207

$

(13,132)

$

239,701

$

(25,121)

Basic net income (loss) per share attributable to common shareholders:

Income from continuing operations

$

0.12

$

0.01

$

0.30

$

0.07

Income (loss) from discontinued operations

(0.07)

0.59

(0.19)

Net income (loss) per common share

$

0.12

$

(0.05)

$

0.89

$

(0.12)

Diluted net income (loss) per share attributable to common shareholders:

Income from continuing operations

$

0.11

$

0.01

$

0.29

$

0.07

Income (loss) from discontinued operations

(0.07)

0.57

(0.19)

Net income (loss) per common share

$

0.12

$

(0.05)

$

0.86

$

(0.11)

Weighted-average common shares outstanding:

Basic

271,948

243,801

270,574

211,431

Diluted

279,101

252,336

278,082

219,969

Dividends per common share

$

0.09

$

$

0.18

$

(1) Includes amortization of upfront incentive consideration

$

10,878

$

11,742

$

22,050

$

22,789

(2) Includes stock-based compensation as follows:

Cost of revenue

$

2,902

$

1,972

$

6,435

$

3,358

Selling, general and administrative

4,428

2,913

9,689

5,126

 

SABRE CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)

June 30, 2015

December 31, 2014

Assets

Current assets

Cash and cash equivalents

$

578,033

$

155,679

Accounts receivable, net

391,779

362,911

Prepaid expenses and other current assets

32,347

34,841

Current deferred income taxes

159,442

182,277

Other receivables, net

35,039

29,893

Assets held for sale

112,558

Total current assets

1,196,640

878,159

Property and equipment, net of accumulated depreciation of $895,351 and $792,161

560,440

551,276

Investments in joint ventures

130,288

145,320

Goodwill

2,153,214

2,153,499

Trademarks and brand names, net of accumulated amortization of $93,052 and $87,554

233,002

238,500

Other intangible assets, net of accumulated amortization of $1,013,513 and $975,701

203,675

241,486

Other assets, net

574,319

509,764

Total assets

$

5,051,578

$

4,718,004

Liabilities and stockholders' equity

Current liabilities

Accounts payable

$

133,011

$

117,855

Accrued compensation and related benefits

57,486

83,828

Accrued subscriber incentives

179,162

145,581

Deferred revenues

176,554

167,827

Litigation settlement liability and related deferred revenue

55,099

73,252

Other accrued liabilities

178,178

189,612

Current portion of debt

488,930

22,435

Liabilities held for sale

96,544

Total current liabilities

1,268,420

896,934

Deferred income taxes

165,555

61,577

Other noncurrent liabilities

602,237

613,710

Long-term debt

2,706,273

3,061,400

Stockholders' equity

Common Stock: $0.01 par value; 450,000,000 authorized shares; 273,493,600 and 268,237,547 shares issued, 272,777,958 and 267,800,161 shares outstanding at June 30, 2015 and December 31, 2014, respectively

2,735

2,682

Additional paid-in capital

1,972,404

1,931,796

Treasury Stock, at cost, 715,642 and 437,386 shares at June 30, 2015 and December 31, 2014, respectively

(11,462)

(5,297)

Retained deficit

(1,584,834)

(1,775,616)

Accumulated other comprehensive loss

(69,532)

(69,803)

Noncontrolling interest

(218)

621

Total stockholders' equity

309,093

84,383

Total liabilities and stockholders' equity

$

5,051,578

$

4,718,004

 

SABRE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended June 30,

2015

2014

Operating Activities

Net income (loss)

$

241,526

$

(12,292)

Adjustments to reconcile net income (loss) to cash provided by operating activities:

Depreciation and amortization

166,617

152,337

Amortization of upfront incentive consideration

22,050

22,789

Litigation-related (credits) charges

(32,557)

(11,615)

Stock-based compensation expense

16,124

8,484

Allowance for doubtful accounts

5,329

3,142

Deferred income taxes

36,757

11,583

Joint venture equity income

(13,826)

(6,500)

Dividends received from joint venture investments

28,700

Amortization of debt issuance costs

3,181

3,243

Debt modification costs

3,290

Loss on extinguishment of debt

33,235

33,538

Other

7,505

8,046

(Income) loss from discontinued operations

(159,607)

40,706

Changes in operating assets and liabilities:

Accounts and other receivables

(47,647)

(25,510)

Prepaid expenses and other current assets

(631)

5,557

Capitalized implementation costs

(29,561)

(17,597)

Upfront incentive consideration

(22,994)

(25,936)

Other assets

(43,618)

(11,810)

Accrued compensation and related benefits

(22,802)

(32,495)

Accounts payable and other accrued liabilities

62,039

14,552

Deferred revenue including upfront solution fees

18,179

40,944

Cash provided by operating activities

267,999

204,456

Investing Activities

Additions to property and equipment

(127,963)

(106,470)

Other investing activities

148

235

Cash used in investing activities

(127,815)

(106,235)

Financing Activities

Proceeds of borrowings from lenders

600,000

148,307

Payments on borrowings from lenders

(491,215)

(791,426)

Debt prepayment fees and issuance costs

(40,215)

(30,490)

Proceeds from issuance of common stock in initial public offering, net

672,644

Net proceeds (payments) on the settlement of equity-based awards

18,239

(650)

Cash dividends paid to common shareholders

(48,919)

Other financing activities

(3,657)

(1,964)

Cash provided by (used in) financing activities

34,233

(3,579)

Cash Flows from Discontinued Operations

Cash used in operating activities

(26,036)

(151,423)

Cash provided by (used in) investing activities

278,834

(240)

Cash provided by (used in) discontinued operations

252,798

(151,663)

Effect of exchange rate changes on cash and cash equivalents

(4,861)

1,165

Increase (decrease) in cash and cash equivalents

422,354

(55,856)

Cash and cash equivalents at beginning of period

155,679

308,236

Cash and cash equivalents at end of period

$

578,033

$

252,380

 

Non-GAAP Financial Measures

We have included both financial measures compiled in accordance with GAAP and certain non-GAAP financial measures in this earnings release, including Adjusted Gross Margin, Adjusted Net Income, Adjusted EBITDA, Adjusted EPS, Adjusted Capital Expenditures, Free Cash Flow, Adjusted Free Cash Flow and ratios based on these financial measures.

We define Adjusted Gross Margin as operating income adjusted for selling, general and administrative expenses, amortization of upfront incentive consideration, and the cost of revenue portion of depreciation and amortization, restructuring and other costs, and stock-based compensation.

We define Adjusted Net Income as income from continuing operations adjusted for acquisition-related amortization, loss on extinguishment of debt, other, net, restructuring and other costs, acquisition-related costs, litigation costs, stock-based compensation, management fees and the tax impact of net income adjustments.

We define Adjusted EBITDA as Adjusted Net Income adjusted for depreciation and amortization of property and equipment, amortization of capitalized implementation costs, amortization of upfront incentive consideration, interest expense, net, and remaining provision for income taxes.

We define Adjusted EPS as Adjusted Net Income divided by the applicable share count.

We define Adjusted Capital Expenditures as additions to property and equipment and capitalized implementation costs during the periods presented.

We define Free Cash Flow as cash provided by operating activities less cash used in additions to property and equipment. We define Adjusted Free Cash Flow as free cash flow plus the cash flow effect of restructuring and other costs, acquisition-related costs, litigation settlement, other litigation costs and management fees.

These non-GAAP financial measures are key metrics used by management and our board of directors to monitor our ongoing core operations because historical results have been significantly impacted by events that are unrelated to our core operations as a result of changes to our business and the regulatory environment. We believe that these non-GAAP financial measures are used by investors, analysts and other interested parties as measures of financial performance and to evaluate our ability to service debt obligations, fund capital expenditures and meet working capital requirements. Adjusted Capital Expenditures includes cash flows used in investing activities, for property and equipment, and cash flows used in operating activities, for capitalized implementation costs. Our management uses this combined metric in making product investment decisions and determining development resource requirements. We also believe that Adjusted Gross Margin, Adjusted Net Income, Adjusted EBITDA, Adjusted EPS and Adjusted Capital Expenditures assist investors in company-to-company and period-to-period comparisons by excluding differences caused by variations in capital structures (affecting interest expense), tax positions and the impact of depreciation and amortization expense. In addition, amounts derived from Adjusted EBITDA are a primary component of certain covenants under our senior secured credit facilities.

Adjusted Gross Margin, Adjusted Net Income, Adjusted EBITDA, Adjusted EPS, Adjusted Capital Expenditures, Free Cash Flow, Adjusted Free Cash Flow and ratios based on these financial measures are not recognized terms under GAAP. These non-GAAP financial measures and ratios based on them have important limitations as analytical tools, and should not be viewed in isolation and do not purport to be alternatives to net income as indicators of operating performance or cash flows from operating activities as measures of liquidity. These non-GAAP financial measures and ratios based on them exclude some, but not all, items that affect net income or cash flows from operating activities and these measures may vary among companies. Our use of these measures has limitations as an analytical tool, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. Some of these limitations are:

  • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted Gross Margin and Adjusted EBITDA do not reflect cash requirements for such replacements;
  • Adjusted Net Income and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
  • Adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness;
  • Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us;
  • Free Cash Flow and Adjusted Free Cash Flow do not reflect the cash requirements necessary to service the principal payments on our indebtedness;
  • Free Cash Flow and Adjusted Free Cash Flow do not reflect payments related to restructuring, litigation, acquisition-related and management fees;
  • Free Cash Flow and Adjusted Free Cash Flow remove the impact of accrual-basis accounting on asset accounts and non-debt liability accounts; and
  • other companies, including companies in our industry, may calculate Adjusted Gross Margin, Adjusted Net Income, Adjusted EBITDA, Adjusted EPS, Adjusted Capital Expenditures, Free Cash Flow or Adjusted Free Cash Flow differently, which reduces their usefulness as comparative measures.

 

Tabular Reconciliations for Non-GAAP Measures

(In thousands, except per share amounts; unaudited)

 

Reconciliation of Net income (Loss) to Adjusted Net Income from continuing operations and Adjusted EBITDA:

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Net income (loss) attributable to common shareholders

$

32,207

$

(13,132)

$

239,701

$

(25,121)

(Income) loss from discontinued operations, net of tax

(696)

16,650

(159,607)

40,706

Net income attributable to noncontrolling interests(1)

1,078

702

1,825

1,448

Preferred stock dividends

2,235

11,381

Income from continuing operations

32,589

6,455

81,919

28,414

Adjustments:

Acquisition-related amortization(2a)

23,211

21,953

44,886

54,842

Loss on extinguishment of debt

33,235

30,558

33,235

33,538

Other, net(4)

(197)

(391)

4,248

1,963

Restructuring and other costs(5)

2,128

3,684

Acquisition-related costs(6)

2,053

3,864

Litigation costs(7)

2,043

2,572

5,479

7,118

Stock-based compensation

7,330

4,885

16,124

8,484

Management fees(8)

21,576

23,508

Tax impact of net income adjustments

(24,210)

(32,481)

(38,767)

(51,924)

Adjusted Net Income from continuing operations

$

76,054

$

57,255

$

150,988

$

109,627

Adjusted Net Income from continuing operations per share

$

0.27

$

0.23

$

0.54

$

0.50

Diluted weighted-average common shares outstanding

279,101

252,336

278,082

219,969

Adjusted Net Income from continuing operations

$

76,054

$

57,255

$

150,988

$

109,627

Adjustments:

Depreciation and amortization of property and equipment(2b)

46,244

40,661

107,907

81,110

Amortization of capitalized implementation costs(2c)

7,902

8,890

15,426

17,987

Amortization of upfront incentive consideration(3)

10,878

11,742

22,050

22,789

Interest expense, net

42,609

53,235

89,062

117,179

Remaining provision for income taxes

43,886

42,765

85,726

77,119

Adjusted EBITDA

$

227,573

$

214,548

$

471,159

$

425,811

 

Reconciliation of Adjusted Capital Expenditures:

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Additions to property and equipment

$

66,051

$

56,812

$

127,963

$

106,470

Capitalized implementation costs

15,234

9,944

29,561

17,597

Adjusted Capital Expenditures

$

81,285

$

66,756

$

157,524

$

124,067

 

Reconciliation of Adjusted Free Cash Flow:

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Cash provided by operating activities

$

136,226

$

110,134

$

267,999

$

204,456

Cash used in investing activities

(66,051)

(56,577)

(127,815)

(106,235)

Cash used in financing activities

56,514

25,023

34,233

(3,579)

 

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Cash provided by operating activities

$

136,226

$

110,134

$

267,999

$

204,456

Additions to property and equipment

(66,051)

(56,812)

(127,963)

(106,470)

Free Cash Flow

70,175

53,322

140,036

97,986

Adjustments:

Restructuring and other costs(5)(9)

5,405

280

10,595

Acquisition-related costs(6)(9)

2,053

3,864

Litigation settlement(7)(10)

7,398

7,011

16,100

11,648

Other litigation costs(7)(9)

2,043

2,572

5,479

7,118

Management fees(8)(9)

21,576

23,508

Adjusted Free Cash Flow

$

81,669

$

89,886

$

165,759

$

150,855

 

Reconciliation of Operating Income (loss) to Adjusted Gross Margin and Adjusted EBITDA by segment:

Three Months Ended June 30, 2015

Travel Network

Airline and Hospitality Solutions

Corporate

Total

Operating income (loss)

$

173,691

$

49,075

$

(100,161)

$

122,605

Add back:

Selling, general and administrative

26,600

15,036

81,724

123,360

Cost of revenue adjustments:

Depreciation and amortization(2)

14,758

31,671

6,650

53,079

Amortization of upfront incentive consideration(3)

10,878

10,878

Stock-based compensation

2,902

2,902

Adjusted Gross Margin

225,927

95,782

(8,885)

312,824

Selling, general and administrative

(26,600)

(15,036)

(81,724)

(123,360)

Joint venture equity income

5,307

5,307

Joint venture intangible amortization(2a)

801

801

Selling, general and administrative adjustments:

Depreciation and amortization(2)

522

239

22,716

23,477

Acquisition-related costs(6)

2,053

2,053

Litigation costs(7)

2,043

2,043

Stock-based compensation

4,428

4,428

Adjusted EBITDA

$

205,957

$

80,985

$

(59,369)

$

227,573

Three Months Ended June 30, 2014

Travel Network

Airline and Hospitality Solutions

Corporate

Total

Operating income (loss)

$

165,597

$

35,855

$

(105,370)

$

96,082

Add back:

Selling, general and administrative

24,555

12,924

90,172

127,651

Cost of revenue adjustments:

Depreciation and amortization(2)

15,267

26,480

6,368

48,115

Amortization of upfront incentive consideration(3)

11,742

11,742

Restructuring and other costs(5)

1,401

1,401

Stock-based compensation

1,972

1,972

Adjusted Gross Margin

217,161

75,259

(5,457)

286,963

Selling, general and administrative

(24,555)

(12,924)

(90,172)

(127,651)

Joint venture equity income

4,059

4,059

Joint venture intangible amortization(2a)

801

801

Selling, general and administrative adjustments:

Depreciation and amortization(2)

505

220

21,863

22,588

Restructuring and other costs(5)

727

727

Litigation costs(7)

2,572

2,572

Stock-based compensation

2,913

2,913

Management fees(8)

21,576

21,576

Adjusted EBITDA

$

197,971

$

62,555

$

(45,978)

$

214,548

 

Six Months Ended June 30, 2015

Travel Network

Airline and Hospitality Solutions

Corporate

Total

Operating income (loss)

$

370,942

$

77,566

$

(206,911)

$

241,597

Add back:

Selling, general and administrative

48,484

33,015

164,219

245,718

Cost of revenue adjustments:

Depreciation and amortization(2)

28,570

74,400

14,776

117,746

Amortization of upfront incentive consideration(3)

22,050

22,050

Stock-based compensation

6,435

6,435

Adjusted Gross Margin

470,046

184,981

(21,481)

633,546

Selling, general and administrative

(48,484)

(33,015)

(164,219)

(245,718)

Joint venture equity income

13,826

13,826

Joint venture intangible amortization(2a)

1,602

1,602

Selling, general and administrative adjustments:

Depreciation and amortization(2)

1,054

507

47,310

48,871

Acquisition-related costs(6)

3,864

3,864

Litigation costs(7)

5,479

5,479

Stock-based compensation

9,689

9,689

Adjusted EBITDA

$

438,044

$

152,473

$

(119,358)

$

471,159

 

Six Months Ended June 30, 2014

Travel Network

Airline and Hospitality Solutions

Corporate

Total

Operating income (loss)

$

350,114

$

62,317

$

(212,642)

$

199,789

Add back:

Selling, general and administrative

50,227

25,319

162,843

238,389

Cost of revenue adjustments:

Depreciation and amortization(2)

30,679

53,163

23,082

106,924

Amortization of upfront incentive consideration(3)

22,789

22,789

Restructuring and other costs(5)

2,579

2,579

Stock-based compensation

3,358

3,358

Adjusted Gross Margin

453,809

140,799

(20,780)

573,828

Selling, general and administrative

(50,227)

(25,319)

(162,843)

(238,389)

Joint venture equity income

6,500

6,500

Joint venture intangible amortization(2a)

1,602

1,602

Selling, general and administrative adjustments:

Depreciation and amortization(2)

1,130

535

43,748

45,413

Restructuring and other costs(5)

1,105

1,105

Litigation costs(7)

7,118

7,118

Stock-based compensation

5,126

5,126

Management fees(8)

23,508

23,508

Adjusted EBITDA

$

412,814

$

116,015

$

(103,018)

$

425,811

 

Non-GAAP Footnotes

(1)

Net Income attributable to noncontrolling interests represents an adjustment to include earnings allocated to noncontrolling interests held in Sabre Travel Network Middle East of 40% for all periods presented and in Sabre Seyahat Dagitim Sistemleri A.S. of 40% beginning in April 2014 for the three and six months ended June 30, 2015 and 2014.

(2)

Depreciation and amortization expenses:

a.

Acquisition-related amortization represents amortization of intangible assets from the take-private transaction in 2007 as well as intangibles associated with acquisitions since that date and amortization of the excess basis in our underlying equity in joint ventures.

b.

Depreciation and amortization of property and equipment includes software developed for internal use.

c.

Amortization of capitalized implementation costs represents amortization of upfront costs to implement new customer contracts under our SaaS and hosted revenue model.

(3)

Our Travel Network business at times provides upfront incentive consideration to travel agency subscribers at the inception or modification of a service contract, which are capitalized and amortized to cost of revenue over an average expected life of the service contract, generally over three to five years. Such consideration is made with the objective of increasing the number of clients or to ensure or improve customer loyalty. Such service contract terms are established such that the supplier and other fees generated over the life of the contract will exceed the cost of the incentive consideration provided upfront. Such service contracts with travel agency subscribers require that the customer commit to achieving certain economic objectives and generally have terms requiring repayment of the upfront incentive consideration if those objectives are not met.

(4)

Other, net primarily represents foreign exchange gains and losses related to the remeasurement of foreign currency denominated balances included in our consolidated balance sheets into the relevant functional currency.

(5)

Restructuring and other costs represents charges associated with business restructuring and associated changes implemented which resulted in severance benefits related to employee terminations, integration and facility opening or closing costs and other business reorganization costs.

(6)

Acquisition-related costs represent fees and expenses incurred associated with the acquisition of Abacus.

(7)

Litigation settlement and other litigation costs represent settlements or charges associated with airline antitrust litigation.

(8)

We paid an annual management fee, pursuant to a Management Services Agreement ("MSA"), to TPG Global, LLC ("TPG") and Silver Lake Management Company ("Silver Lake") in an amount between (i) $5 million and (ii) $7 million, the actual amount of which is calculated based upon 1% of Adjusted EBITDA, earned by the company in such fiscal year up to a maximum of $7 million. In addition, the MSA provided for reimbursement of certain costs incurred by TPG and Silver Lake, which are included in this line item. The MSA was terminated in April 2014 in connection with our initial public offering.

(9)

The adjustments to reconcile cash provided by operating activities to Adjusted Free Cash Flow reflect the amounts expensed in our statements of operations in the respective periods adjusted for cash and non-cash portions in instances where material.

(10)

Includes payment credits used by American Airlines to pay for purchases of our technology services. The payment credits were provided by us as part of our litigation settlement with American Airlines.

 

 

SOURCE Sabre Corporation



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