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Sabre reports third quarter 2018 results

Sabre third quarter revenue increased 7.7% to $970.3 million
Travel Network revenue rose 10.7%; bookings grew 7.7%
Airline Solutions revenue increased 1.1%
Hospitality Solutions revenue grew 3.1%
Cash provided by operating activities increased 9.2% to $194.4 million
Raised full-year 2018 revenue and earnings guidance

SOUTHLAKE, Texas – October 30, 2018 – Sabre Corporation ("Sabre" or the "Company") (NASDAQ: SABR) today announced financial results for the quarter ended September 30, 2018.

"Today, I am pleased to report solid third quarter results that provide continued evidence of growing momentum behind our strategic and commercial initiatives. We continue to build on our efforts of the past 18 months and are focused on growing our position as a global technology leader serving the large and growing travel industry. We benefit from a transaction-driven business model with recurring revenue driven by continued volume growth at our customers across the travel ecosystem," said Sean Menke, Sabre president and CEO. "The Sabre team is highly engaged, and I want to thank all of them for their continued effort. I'm seeing progress on all fronts, from platform development and cloud migration, to innovation and customer engagement. We are partnering closely with our customers and winning in the marketplace, as evidenced by our third quarter air booking share gain of over two points. With our third quarter outperformance and consistent expectations for the fourth quarter, we believe we are well positioned to deliver strong full-year financial results. Because of this, we are raising full-year 2018 guidance."

Q3 2018 Financial Summary

Sabre consolidated third quarter revenue increased 7.7% to $970.3 million, compared to $900.6 million in the year ago period.

Net income attributable to common stockholders totaled $73.0 million, a decrease of 19.8% from $91.0 million in the third quarter of 2017. Third quarter operating income was $136.8


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million, a decrease of 22.6% from $176.8 million in the third quarter of 2017. Diluted net income attributable to common stockholders per share decreased 21.2% to $0.26 from $0.33 in the third quarter of 2017. The decrease in net income attributable to common stockholders and operating income was the result of an unfavorable comparison to the year ago quarter that included a $27.5 million settlement with the company's insurance carriers, net of tax and accrued legal and related expenses, related to litigation that was settled in 2012.

Third quarter consolidated Adjusted Operating Income was $174.0 million, a 3.5% increase from $168.1 million in the third quarter of 2017. The increase in Sabre's consolidated Adjusted Operating Income was the result of solid revenue growth and the benefits of the cost reduction and business alignment program initiated in August of 2017, partially offset by incentive expense growth, increased technology operating expenses, and higher depreciation and amortization.

For the quarter, Sabre reported Adjusted Net Income from continuing operations per share (Adjusted EPS) of $0.39, an increase of 25.8% from $0.31 per share in the third quarter of 2017. The increase in Adjusted Net Income was driven by Adjusted Operating Income growth and a lower effective tax rate.

With regards to Sabre's third quarter 2018 cash flows (versus prior year):
Cash provided by operating activities totaled $194.4 million (vs. $178.0 million)
Cash used in investing activities totaled $73.8 million (vs. $75.5 million)
Cash used in financing activities totaled $50.9 million (vs. $138.6 million)
Free Cash Flow totaled $120.6 million (vs. $102.6 million)

During the third quarter of 2018, Sabre returned $38.5 million to shareholders through its regular quarterly dividend.





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Financial Highlights
(in thousands, except for EPS; unaudited):
Three Months Ended September 30,
 
Nine Months Ended September 30,
2018
 
2017
 
% Change
 
2018
 
2017
 
% Change
Total Company:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
970,283

 
$
900,606

 
7.7
 
$
2,943,028

 
$
2,716,622

 
8.3
Operating Income
$
136,763

 
$
176,796

 
(22.6)
 
$
440,997

 
$
358,840

 
22.9
Net income attributable to common stockholders
$
73,005

 
$
90,989

 
(19.8)
 
$
253,131

 
$
160,441

 
57.8
Diluted net income attributable to common stockholders per share (EPS)
$
0.26

 
$
0.33

 
(21.2)
 
$
0.91

 
$
0.57

 
59.6
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Gross Profit*
$
377,786

 
$
371,232

 
1.8
 
$
1,156,042

 
$
1,140,587

 
1.4
Adjusted EBITDA*
$
278,505

 
$
262,926

 
5.9
 
$
856,845

 
$
821,904

 
4.3
Adjusted Operating Income*
$
173,973

 
$
168,105

 
3.5
 
$
543,555

 
$
551,543

 
(1.4)
Adjusted Net Income*
$
108,972

 
$
86,921

 
25.4
 
$
332,525

 
$
302,157

 
10.1
Adjusted EPS*
$
0.39

 
$
0.31

 
25.8
 
$
1.20

 
$
1.08

 
11.1
 
 
 
 
 
 
 
 
 
 
 
 
Cash provided by operating activities
$
194,354

 
$
178,030

 
9.2
 
$
536,193

 
$
455,906

 
17.6
Cash used in investing activities
$
(73,778
)
 
$
(75,542
)
 
(2.3)
 
$
(205,664
)
 
$
(242,952
)
 
(15.3)
Cash used in financing activities
$
(50,884
)
 
$
(138,624
)
 
(63.3)
 
$
(252,409
)
 
$
(300,936
)
 
(16.1)
 
 
 
 
 
 
 
 
 
 
 
 
Free Cash Flow*
$
120,576

 
$
102,629

 
17.5
 
$
330,529

 
$
213,095

 
55.1
 
 
 
 
 
 
 
 
 
 
 
 
Net Debt (total debt, less cash)
$
3,002,850

 
$
3,234,865

 
 
 
 
 
 
 
 
Net Debt / LTM Adjusted EBITDA*
2.7x

 
3.0x

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Travel Network:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
700,196

 
$
632,349

 
10.7
 
$
2,141,017

 
$
1,931,441

 
10.9
Transaction Revenue
$
655,354

 
$
588,991

 
11.3
 
$
2,012,016

 
$
1,799,785

 
11.8
Other Revenue
$
44,842

 
$
43,358

 
3.4
 
$
129,001

 
$
131,656

 
(2.0)
Operating Income
$
182,200

 
$
171,741

 
6.1
 
$
587,925

 
$
582,652

 
0.9
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Operating Income*
$
182,533

 
$
172,098

 
6.1
 
$
590,380

 
$
584,420

 
1.0
 
 
 
 
 
 
 
 
 
 
 
 
Total Bookings
139,851

 
129,799

 
7.7
 
431,500

 
403,412

 
7.0
Air Bookings
123,233

 
114,259

 
7.9
 
380,748

 
356,478

 
6.8
Lodging, Ground and Sea Bookings
16,618

 
15,540

 
6.9
 
50,752

 
46,934

 
8.1
 
 
 
 
 
 
 
 
 
 
 
 
Air Bookings Share
38.6
%
 
36.5
%
 
 
 
37.6
%
 
36.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Airline Solutions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
209,388

 
$
207,121

 
1.1
 
$
620,813

 
$
610,608

 
1.7
Operating Income
$
28,505

 
$
39,574

 
(28.0)
 
$
82,030

 
$
94,533

 
(13.2)
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Operating Income*
$
28,505

 
$
39,574

 
(28.0)
 
$
82,030

 
$
94,533

 
(13.2)
 
 
 
 
 
 
 
 
 
 
 
 
Passengers Boarded
198,063

 
186,887

 
6.0
 
568,405

 
599,097

 
(5.1)
 
 
 
 
 
 
 
 
 
 
 
 
Hospitality Solutions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
69,911

 
$
67,802

 
3.1
 
$
206,353

 
$
194,071

 
6.3
Operating Income
$
5,826

 
$
5,150

 
13.1
 
$
9,927

 
$
7,021

 
41.4
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Operating Income*
$
5,826

 
$
5,150

 
13.1
 
$
9,927

 
$
7,021

 
41.4
 
 
 
 
 
 
 
 
 
 
 
 
Central Reservation System Transactions
26,701

 
N/A

 
N/A
 
66,219

 
N/A

 
N/A
 
 
 
 
 
 
 
 
 
 
 
 
*Indicates non-GAAP financial measure; see descriptions and reconciliations below


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Travel Network

Third quarter 2018 highlights (versus prior year):
Travel Network revenue increased 10.7% to $700.2 million.
Global bookings increased 7.7% in the quarter, supported by an increase of 17.8% in Asia-Pacific, an 8.0% increase in North America and growth of 3.7% in EMEA. Latin American bookings declined 6.3%.
Global air bookings share was 38.6%, an increase of 2.1 points from the year-ago period.
Operating income increased 6.1% to $182.2 million, and operating income margin was 26.0%.
Adjusted Operating Income increased 6.1% to $182.5 million, and Adjusted Operating Income Margin was 26.1%.
Operating income and Adjusted Operating Income were supported by strong revenue growth and the benefits of the cost reduction and business alignment program initiated in August of 2017, partially offset by increased incentive and technology expenses, and higher depreciation and amortization.

Airline Solutions

Third quarter 2018 highlights (versus prior year):
Airline Solutions revenue increased 1.1% to $209.4 million. AirVision and AirCentre commercial and operations revenue increased mid-single digits. SabreSonic reservation revenue was consistent with the year-ago period, with the completion of the SabreSonic reservation system implementation at LATAM Airlines and passengers boarded growth on a consistent carrier basis substantially offset by reduction in SabreSonic services revenue. Discrete professional services revenue also declined modestly.
The net year-over-year impact of adopting ASC 606 drove a $2.4 million increase in revenue in the quarter. This includes $12.5 million of upfront revenue recognition from new license fee implementations and renewals.
Airline passengers boarded increased 6.0% in the quarter, driven by 1.4% growth on a consistent carrier basis and the completion of the SabreSonic reservation system implementation at LATAM.
Operating income and Adjusted Operating Income decreased 28.0% to $28.5 million. Operating income margin and Adjusted Operating Income Margin were 13.6%.
The decline in operating income and Adjusted Operating Income was driven by increased technology expense and higher depreciation and amortization, partially offset


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by revenue growth and the benefits of the cost reduction and business alignment program initiated in August of 2017.

Hospitality Solutions

Third quarter 2018 highlights (versus prior year):
Hospitality Solutions revenue increased 3.1% to $69.9 million. Contributing to the rise in revenue was high single digit growth in SynXis software and services revenue due to growth in central reservations system transactions, partially offset by a decline in project-based digital marketing services revenue.
Central reservation system transactions totaled 26.7 million.
Operating income and Adjusted Operating Income increased 13.1% to $5.8 million. Operating income margin and Adjusted Operating Income Margin were 8.3%.
The increase in operating income and Adjusted Operating Income was driven by revenue growth, including a mix shift toward higher margin revenue, and benefits of the cost reduction and business alignment program initiated in August of 2017.




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Business Outlook and Financial Guidance

With respect to the 2018 guidance below, full-year Adjusted EBITDA guidance consists of Adjusted Operating Income guidance adjusted for the impact of depreciation and amortization of property and equipment, amortization of capitalized implementation costs and amortization of upfront incentive consideration of approximately $420 million.

Full-year Adjusted Operating Income guidance consists of Adjusted Net Income guidance adjusted for the impact of interest expense, net of approximately $155 million and provision for income taxes less tax impact of net income adjustments of approximately $125 million.

Full-year Adjusted Net Income guidance consists of full-year expected net income attributable to common stockholders adjusted for the estimated impact of income from discontinued operations, net of tax, of approximately $5 million; net income attributable to noncontrolling interests of approximately $5 million; acquisition-related amortization of approximately $70 million; stock-based compensation expense of approximately $60 million; other costs including litigation, other foreign non-income tax matters and foreign exchange gains and losses of $20 million; and the tax benefit of the above adjustments of approximately $40 million. Full-year Adjusted EPS guidance consists of Adjusted Net Income divided by the projected weighted-average diluted common share count for the full year of approximately 278 million.

Full-year Free Cash Flow guidance consists of expected full-year cash provided by operating activities of $715 million to $735 million adjusted for additions to property and equipment of $290 million to $310 million.




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Full-Year 2018 Guidance

Sabre raised full-year 2018 guidance for revenue, Adjusted EBITDA, Adjusted Operating Income, Adjusted Net Income and Adjusted EPS. Sabre's full-year 2018 guidance is summarized as follows:

 
Range
Growth Rate
($ millions, except EPS)
Revenue
$3,850M - $3,880M
7% - 8%
 
 
 
Adjusted EBITDA
$1,110M - $1,130M
3% - 5%
 
 
 
Adjusted Operating Income
$695M - $705M
(2%) - 0%
 
 
 
Adjusted Net Income
$415M - $425M
6% - 9%
 
 
 
Adjusted EPS
$1.49 - $1.54
6% - 10%
 
 
 
Capital Expenditures (GAAP)
$290M - $310M
(8%) - (2%)
 
 
 
Free Cash Flow
Approximately $425M
Approximately 18%

The 2018 guidance above incorporates the expected impact of Sabre's adoption of the revenue recognition standard ASC 606, as well as the expected impact of U.S. tax reform. The estimated impact of U.S. tax reform is preliminary and subject to finalization, and consequently the actual impact may differ materially.



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Conference Call

Sabre will conduct its third quarter 2018 investor conference call today at 9:00 a.m. ET. The live webcast and accompanying slide presentation can be accessed via the Investor Relations section of our website, investors.sabre.com. A replay of the event will be available on the website for at least 90 days following the event.

About Sabre

Sabre Corporation is the leading technology provider to the global travel industry. Sabre’s software, data, mobile and distribution solutions are used by hundreds of airlines and thousands of hotel properties to manage critical operations, including passenger and guest reservations, revenue management, flight, network and crew management. Sabre also operates a leading global travel marketplace, which processes more than US$120 billion of global travel spend annually by connecting travel buyers and suppliers. 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 the Investor Relations section of our website, investors.sabre.com. 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, investors.sabre.com.

Industry Data

This release contains industry data, forecasts and other information that we obtained from industry publications and surveys, public filings and internal company sources, and there can be no assurance as to the accuracy or completeness of the included information. Statements as to our ranking, market position, bookings share and market estimates are based on independent


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industry publications, government publications, third-party forecasts and management’s estimates and assumptions about our markets and our internal research. We have not independently verified this third-party information nor have we ascertained the underlying economic assumptions relied upon in those sources, and we cannot assure you of the accuracy or completeness of this information.

Note on Non-GAAP Financial Measures

This press release includes unaudited non-GAAP financial measures, including Adjusted Gross Profit, Adjusted Operating Income (Loss), Adjusted Net Income from continuing operations ("Adjusted Net Income"), Adjusted EBITDA, Adjusted Net Income from continuing operations per share ("Adjusted EPS"), Free Cash Flow, and the ratios based on these financial measures. In addition, we provide certain forward guidance with respect to Adjusted EBITDA, Adjusted Operating Income, Adjusted Net Income, Adjusted EPS and Free Cash Flow. We are unable to provide this forward guidance on a GAAP basis without unreasonable effort; however, see "Business Outlook and Financial Guidance" for additional information including estimates of certain components of the non-GAAP adjustments contained in the guidance.

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 "guidance," "evidence," "momentum," "progress," "expect," "believe," "position," "outlook," "estimate," "preliminary," "anticipate," "will," "project," “may,” “should,” “would,” “intend," “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


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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 recurring nature of revenue streams, maintenance of the integrity of our systems and infrastructure and the effect of any security breaches, reliance on third parties to provide information technology services, implementation of software solutions, exposure to pricing pressure in the Travel Network business, the implementation and effects of new or renewed agreements, the effects of the implementation of new accounting standards, travel suppliers' usage of alternative distribution models, failure to adapt to technological advancements, competition in the travel distribution market and solutions market, the implementation and results of our cost reduction and business alignment program, dependence on establishing, maintaining and renewing contracts with customers and other counterparties and collecting amounts due to us under these agreements, dependence on relationships with travel buyers, changes affecting travel supplier customers, our ability to recruit, train and retain employees, including our key executive officers and technical employees, our collection, processing, storage, use and transmission of personal data and risks associated with PCI compliance, adverse global and regional economic and political conditions, including, but not limited to, economic conditions in countries or regions with traditionally high levels of exports to China or that have commodities-based economies and the effect of "Brexit" and uncertainty due to related negotiations, risks arising from global operations, reliance on the value of our brands, the effects of litigation, failure to comply with regulations, use of third-party distributor partners, the financial and business effects of acquisitions, including integration of these acquisitions, and tax-related matters, including the effect of the Tax Cuts and Jobs Act. More information about potential risks and uncertainties that could affect our business and results of operations is included in the "Risk Factors" section in our Quarterly Report on Form 10-Q filed with the SEC on July 31, 2018, in the "Risk Factors" and “Forward-Looking Statements” sections in our Annual Report on Form 10-K filed with the SEC on February 16, 2018 and in our other filings with the SEC. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, outlook, guidance, 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.

Contacts:


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Media
Investors
Tim Enstice
Barry Sievert
+1-682-605-6162
sabre.investorrelations@sabre.com
tim.enstice@sabre.com
 


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SABRE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Revenue
$
970,283

 
$
900,606

 
$
2,943,028

 
$
2,716,622

Cost of revenue
703,368

 
631,970

 
2,117,984

 
1,882,623

Selling, general and administrative
130,152

 
91,840

 
384,047

 
383,137

Impairment and related charges

 

 

 
92,022

Operating income
136,763

 
176,796

 
440,997

 
358,840

Other income (expense):
 

 
 

 
 
 
 
Interest expense, net
(39,291
)
 
(38,919
)
 
(116,809
)
 
(116,577
)
Loss on extinguishment of debt

 
(1,012
)
 
(633
)
 
(1,012
)
Joint venture equity income
333

 
357

 
2,455

 
1,768

Other, net
(1,905
)
 
(3,802
)
 
(10,746
)
 
(19,788
)
Total other expense, net
(40,863
)
 
(43,376
)
 
(125,733
)
 
(135,609
)
Income from continuing operations before income taxes
95,900

 
133,420

 
315,264

 
223,231

Provision for income taxes
25,021

 
40,595

 
61,371

 
56,836

Income from continuing operations
70,879

 
92,825

 
253,893

 
166,395

Income (loss) from discontinued operations, net of tax
3,664

 
(529
)
 
3,217

 
(2,228
)
Net income
74,543

 
92,296

 
257,110

 
164,167

Net income attributable to noncontrolling interests
1,538

 
1,307

 
3,979

 
3,726

Net income attributable to common stockholders
$
73,005

 
$
90,989

 
$
253,131

 
$
160,441

 
 
 
 
 
 
 
 
Basic net income per share attributable to common stockholders:
 

 
 

 
 
 
 
Income from continuing operations
$
0.25

 
$
0.33

 
$
0.91

 
$
0.59

Income (loss) from discontinued operations
0.01

 

 
0.01

 
(0.01
)
Net income per common share
$
0.26

 
$
0.33

 
$
0.92

 
$
0.58

Diluted net income per share attributable to common stockholders:
 

 
 

 
 
 
 
Income from continuing operations
$
0.25

 
$
0.33

 
$
0.90

 
$
0.58

Income (loss) from discontinued operations
0.01

 

 
0.01

 
(0.01
)
Net income per common share
$
0.26

 
$
0.33

 
$
0.91

 
$
0.57

Weighted-average common shares outstanding:
 

 
 

 
 
 
 
Basic
275,175

 
277,477

 
275,205

 
277,754

Diluted
277,528

 
278,369

 
276,819

 
279,648

 
 
 
 
 
 
 
 
Dividends per common share
$
0.14

 
$
0.14

 
$
0.42

 
$
0.42


12


SABRE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
September 30, 2018
 
December 31, 2017
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
444,321

 
$
361,381

Accounts receivable, net
589,858

 
490,558

Prepaid expenses and other current assets
170,110

 
108,753

Total current assets
1,204,289

 
960,692

Property and equipment, net of accumulated depreciation of $1,452,558 and $1,236,523
788,030

 
799,194

Investments in joint ventures
28,683

 
27,527

Goodwill
2,552,572

 
2,554,987

Acquired customer relationships, net of accumulated amortization of $706,049 and $687,072
330,528

 
351,034

Other intangible assets, net of accumulated amortization of $626,713 and $594,015
299,611

 
332,171

Deferred income taxes
30,347

 
31,817

Other assets, net
634,422

 
591,942

Total assets
$
5,868,482

 
$
5,649,364

 
 
 
 
Liabilities and stockholders’ equity
 

 
 

Current liabilities
 

 
 

Accounts payable
$
158,788

 
$
162,755

Accrued compensation and related benefits
95,625

 
112,343

Accrued subscriber incentives
327,371

 
271,200

Deferred revenues
104,366

 
110,532

Other accrued liabilities
207,694

 
198,353

Current portion of debt
64,225

 
57,138

Tax Receivable Agreement
94,113

 
59,826

Total current liabilities
1,052,182

 
972,147

Deferred income taxes
200,767

 
99,801

Other noncurrent liabilities
322,002

 
480,185

Long-term debt
3,355,596

 
3,398,731

 
 
 
 
Stockholders’ equity
 

 
 

Common Stock: $0.01 par value; 450,000 authorized shares; 291,579 and 289,138 shares issued, 275,294 and 274,342 shares outstanding at September 30, 2018 and December 31, 2017, respectively
2,916

 
2,891

Additional paid-in capital
2,227,682

 
2,174,187

Treasury Stock, at cost, 16,285 and 14,796 shares at September 30, 2018 and December 31, 2017, respectively
(377,341
)
 
(341,846
)
Retained deficit
(814,446
)
 
(1,053,446
)
Accumulated other comprehensive loss
(107,146
)
 
(88,484
)
Noncontrolling interest
6,270

 
5,198

Total stockholders’ equity
937,935

 
698,500

Total liabilities and stockholders’ equity
$
5,868,482

 
$
5,649,364


13


SABRE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Nine Months Ended September 30,
 
2018
 
2017
Operating Activities
 
 
 
Net income
$
257,110

 
$
164,167

Adjustments to reconcile net income to cash provided by operating activities:
 

 
 

Depreciation and amortization
307,551

 
295,729

Deferred income taxes
74,263

 
8,340

Amortization of upfront incentive consideration
57,324

 
50,298

Stock-based compensation expense
41,445

 
34,413

Allowance for doubtful accounts
7,433

 
7,879

(Income) loss from discontinued operations
(3,217
)
 
2,228

Amortization of debt issuance costs
2,988

 
4,916

Joint venture equity income
(2,455
)
 
(1,768
)
Dividends received from joint venture investments
1,193

 
1,088

Loss on extinguishment of debt
633

 
1,012

Debt modification costs
1,558

 
14,758

Impairment and related charges

 
92,022

Other
5,146

 
10,680

Changes in operating assets and liabilities:
 

 
 

Accounts and other receivables
(114,043
)
 
(188,021
)
Prepaid expenses and other current assets
3,417

 
518

Capitalized implementation costs
(29,781
)
 
(47,968
)
Upfront incentive consideration
(67,697
)
 
(61,087
)
Other assets
(18,989
)
 
(20,957
)
Accrued compensation and related benefits
(31,308
)
 
2,161

Accounts payable and other accrued liabilities
234

 
53,444

Deferred revenue including upfront solution fees
43,388

 
32,054

Cash provided by operating activities
536,193

 
455,906

Investing Activities
 

 
 

Additions to property and equipment
(205,664
)
 
(242,811
)
Other investing activities

 
(141
)
Cash used in investing activities
(205,664
)
 
(242,952
)
Financing Activities
 

 
 

Cash dividends paid to common stockholders
(115,557
)
 
(116,474
)
Payments on Tax Receivable Agreement
(58,908
)
 
(99,241
)
Payments on borrowings from lenders
(35,483
)
 
(1,868,655
)
Repurchase of common stock
(26,281
)
 
(97,671
)
Net receipts on the settlement of equity-based awards
2,758

 
11,466

Debt issuance and modification costs
(1,567
)
 
(19,052
)
Proceeds of borrowings from lenders

 
1,897,625

Other financing activities
(17,371
)
 
(8,934
)
Cash used in financing activities
(252,409
)
 
(300,936
)
Cash Flows from Discontinued Operations
 

 
 

Cash provided by (used in) operating activities
633

 
(3,636
)
Cash provided by (used in) discontinued operations
633

 
(3,636
)
Effect of exchange rate changes on cash and cash equivalents
4,187

 
(4,228
)
Increase (decrease) in cash and cash equivalents
82,940

 
(95,846
)
Cash and cash equivalents at beginning of period
361,381

 
364,114

Cash and cash equivalents at end of period
$
444,321

 
$
268,268


14


Tabular Reconciliations for Non-GAAP Measures
(In thousands, except per share amounts; unaudited)

Reconciliation of net income attributable to common stockholders to Adjusted Net Income, Adjusted EBITDA and Adjusted Operating Income:

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Net income attributable to common stockholders
$
73,005

 
$
90,989

 
$
253,131

 
$
160,441

(Income) loss from discontinued operations, net of tax
(3,664
)
 
529

 
(3,217
)
 
2,228

Net income attributable to noncontrolling interests(1)
1,538

 
1,307

 
3,979

 
3,726

Income from continuing operations
70,879

 
92,825

 
253,893

 
166,395

Adjustments:
 

 
 

 
 

 
 

Acquisition-related amortization(2a)
16,407

 
20,226

 
51,585

 
75,666

Impairment and related charges(6)

 

 

 
92,022

Loss on extinguishment of debt

 
1,012

 
633

 
1,012

Other, net(4)
1,905

 
3,802

 
10,746

 
19,788

Restructuring and other costs(7)

 

 

 
25,304

Litigation costs (reimbursements), net(5)
5,225

 
(40,929
)
 
7,073

 
(36,470
)
Stock-based compensation
15,245

 
11,655

 
41,445

 
34,413

Tax impact of net income adjustments
(689
)
 
(1,670
)
 
(32,850
)
 
(75,973
)
Adjusted Net Income from continuing operations
$
108,972

 
$
86,921

 
$
332,525

 
$
302,157

Adjusted Net Income from continuing operations per share
$
0.39

 
$
0.31

 
$
1.20

 
$
1.08

Diluted weighted-average common shares outstanding
277,528

 
278,369

 
276,819

 
279,648

 
 
 
 
 
 
 
 
Adjusted Net Income from continuing operations
$
108,972

 
$
86,921

 
$
332,525

 
$
302,157

Adjustments:
 

 
 

 
 

 
 

Depreciation and amortization of property and equipment(2b)
76,226

 
66,332

 
225,649

 
191,442

Amortization of capitalized implementation costs(2c)
10,099

 
10,484

 
30,317

 
28,621

Amortization of upfront incentive consideration(3)
18,207

 
18,005

 
57,324

 
50,298

Interest expense, net
39,291

 
38,919

 
116,809

 
116,577

Remaining provision for income taxes
25,710

 
42,265

 
94,221

 
132,809

Adjusted EBITDA
$
278,505

 
$
262,926

 
$
856,845

 
$
821,904

Less:
 
 
 
 
 
 
 
Depreciation and amortization(2)
102,732

 
97,042

 
$
307,551

 
$
295,729

Amortization of upfront incentive consideration(3)
18,207

 
18,005

 
$
57,324

 
$
50,298

Acquisition-related amortization(2a)
(16,407
)
 
(20,226
)
 
$
(51,585
)
 
$
(75,666
)
Adjusted Operating Income
$
173,973

 
$
168,105

 
$
543,555

 
$
551,543













15



Reconciliation of Free Cash Flow:

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Cash provided by operating activities
$
194,354

 
$
178,030

 
$
536,193

 
$
455,906

Cash used in investing activities
(73,778
)
 
(75,542
)
 
(205,664
)
 
(242,952
)
Cash used in financing activities
(50,884
)
 
(138,624
)
 
(252,409
)
 
(300,936
)


 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Cash provided by operating activities
$
194,354

 
$
178,030

 
$
536,193

 
$
455,906

Additions to property and equipment
(73,778
)
 
(75,401
)
 
(205,664
)
 
(242,811
)
Free Cash Flow
$
120,576

 
$
102,629

 
330,529

 
213,095


16


Reconciliation of Net Income to LTM Adjusted EBITDA (for Net Debt Ratio):

 
Three Months Ended
 
 
 
Dec 31, 2017
 
Mar 31, 2018
 
Jun 30, 2018
 
Sep 30, 2018
 
LTM
Net income attributable to common stockholders
$
82,090

 
$
87,880

 
$
92,246

 
$
73,005

 
$
335,221

(Income) loss from discontinued operations, net of tax
(296
)
 
1,207

 
(760
)
 
(3,664
)
 
(3,513
)
Net income attributable to noncontrolling interests(1)
1,387

 
1,362

 
1,079

 
1,538

 
5,366

Income from continuing operations
83,181

 
90,449

 
92,565

 
70,879

 
337,074

Adjustments:
 
 
 
 
 
 
 
 
 
Acquisition-related amortization(2a)
20,194

 
17,590

 
17,588

 
16,407

 
71,779

Impairment and related charges(6)
(10,910
)
 

 

 

 
(10,910
)
Loss on extinguishment of debt

 
633

 

 

 
633

Other, net(4)
(56,318
)
 
1,106

 
7,735

 
1,905

 
(45,572
)
Restructuring and other costs(7)
(1,329
)
 

 

 

 
(1,329
)
Litigation costs, net(5)
963

 
828

 
1,020

 
5,225

 
8,036

Stock-based compensation
10,276

 
12,606

 
13,594

 
15,245

 
51,721

Depreciation and amortization of property and equipment(2b)
73,438

 
74,463

 
74,960

 
76,226

 
299,087

Amortization of capitalized implementation costs(2c)
11,510

 
9,823

 
10,395

 
10,099

 
41,827

Amortization of upfront incentive consideration(3)
17,113

 
19,456

 
19,661

 
18,207

 
74,437

Interest expense, net
37,348

 
38,109

 
39,409

 
39,291

 
154,157

Provision for income taxes
71,201

 
36,275

 
75

 
25,021

 
132,572

Adjusted EBITDA
$
256,667

 
$
301,338

 
$
277,002

 
$
278,505

 
$
1,113,512

 
 
 
 
 
 
 
 
 
 
Net Debt (total debt, less cash)
 
 
 
 
 
 
 
 
$
3,002,850

Net Debt / LTM Adjusted EBITDA
 
 
 
 
 
 
 
 
2.7x



 
Three Months Ended
 
 
 
Dec 31, 2016
 
Mar 31, 2017
 
Jun 30, 2017
 
Sep 30, 2017
 
LTM
Net income (loss) attributable to common stockholders
$
24,561

 
$
75,939

 
$
(6,487
)
 
$
90,989

 
$
185,002

Loss from discontinued operations, net of tax
5,309

 
477

 
1,222

 
529

 
7,537

Net income attributable to noncontrolling interests(1)
1,150

 
1,306

 
1,113

 
1,307

 
4,876

Income (loss) from continuing operations
31,020

 
77,722

 
(4,152
)
 
92,825

 
197,415

Adjustments:
 
 
 
 
 
 
 
 
 
Acquisition-related amortization(2a)
35,847

 
35,181

 
20,259

 
20,226

 
111,513

Impairment and related charges(6)

 

 
92,022

 

 
92,022

Loss on extinguishment of debt

 

 

 
1,012

 
1,012

Other, net(4)
(23,100
)
 
15,234

 
752

 
3,802

 
(3,312
)
Restructuring and other costs(7)
16,463

 

 
25,304

 

 
41,767

Acquisition-related costs(8)
65

 

 

 

 
65

Litigation costs (reimbursements), net(5)
41,906

 
3,501

 
958

 
(40,929
)
 
5,436

Stock-based compensation
12,512

 
8,034

 
14,724

 
11,655

 
46,925

Depreciation and amortization of property and equipment(2b)
65,153

 
61,300

 
63,810

 
66,332

 
256,595

Amortization of capitalized implementation costs(2c)
9,030

 
9,189

 
8,948

 
10,484

 
37,651

Amortization of upfront incentive consideration(3)
12,352

 
16,132

 
16,161

 
18,005

 
62,650

Interest expense, net
41,837

 
39,561

 
38,097

 
38,919

 
158,414

Provision (benefit) for income taxes
6,740

 
31,707

 
(15,466
)
 
40,595

 
63,576

Adjusted EBITDA
$
249,825

 
$
297,561

 
$
261,417

 
$
262,926

 
$
1,071,729

 
 
 
 
 
 
 
 
 
 
Net Debt (total debt, less cash)
 
 
 
 
 
 
 
 
$
3,234,865

Net Debt / LTM Adjusted EBITDA
 
 
 
 
 
 
 
 
3.0x


17


Reconciliation of operating income (loss) to Adjusted Gross Profit, Adjusted EBITDA and Adjusted Operating Income (Loss) by business segment:
 
Three Months Ended September 30, 2018
 
Travel
Network
 
Airline
Solutions
 
Hospitality
Solutions
 
Corporate
 
Total
Operating income (loss)
$
182,200

 
$
28,505

 
$
5,826

 
$
(79,768
)
 
$
136,763

Add back:
 
 
 
 
 
 
 
 
 
Selling, general and administrative
41,633

 
18,710

 
7,844

 
61,965

 
130,152

Cost of revenue adjustments:
 
 
 
 
 
 
 
 
 
Depreciation and amortization(2)
26,564

 
43,213

 
9,399

 
6,376

 
85,552

Amortization of upfront incentive consideration(3)
18,207

 

 

 

 
18,207

Stock-based compensation

 

 

 
7,112

 
7,112

Adjusted Gross Profit
268,604

 
90,428

 
23,069

 
(4,315
)
 
377,786

Selling, general and administrative
(41,633
)
 
(18,710
)
 
(7,844
)
 
(61,965
)
 
(130,152
)
Joint venture equity income
333

 

 

 

 
333

Selling, general and administrative adjustments:
 
 
 
 
 
 
 
 
 
Depreciation and amortization(2)
2,679

 
2,376

 
891

 
11,234

 
17,180

Litigation costs(5)

 

 

 
5,225

 
5,225

Stock-based compensation

 

 

 
8,133

 
8,133

Adjusted EBITDA
229,983

 
74,094

 
16,116

 
(41,688
)
 
278,505

Less:
 
 
 
 
 
 
 
 
 
Depreciation and amortization(2)
29,243

 
45,589

 
10,290

 
17,610

 
102,732

Amortization of upfront incentive consideration(3)
18,207

 

 

 

 
18,207

Acquisition-related amortization(2a)

 

 

 
(16,407
)
 
(16,407
)
Adjusted Operating Income (Loss)
$
182,533

 
$
28,505

 
$
5,826

 
$
(42,891
)
 
$
173,973

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income margin
26.0
%
 
13.6
%
 
8.3
%
 
NM

 
14.1
%
Adjusted Operating Income Margin
26.1
%
 
13.6
%
 
8.3
%
 
NM

 
17.9
%
  
 
Three Months Ended September 30, 2017
 
Travel
Network
 
Airline
Solutions
 
Hospitality
Solutions
 
Corporate
 
Total
Operating income (loss)
$
171,741

 
$
39,574

 
$
5,150

 
$
(39,669
)
 
$
176,796

Add back:
 
 
 
 
 
 
 
 
 
Selling, general and administrative
42,460

 
20,151

 
12,596

 
16,633

 
91,840

Cost of revenue adjustments:
 
 
 
 
 
 
 
 
 
Depreciation and amortization(2)
23,223

 
38,588

 
7,709

 
10,456

 
79,976

Amortization of upfront incentive consideration(3)
18,005

 

 

 

 
18,005

Stock-based compensation

 

 

 
4,615

 
4,615

Adjusted Gross Profit
255,429

 
98,313

 
25,455

 
(7,965
)
 
371,232

Selling, general and administrative
(42,460
)
 
(20,151
)
 
(12,596
)
 
(16,633
)
 
(91,840
)
Joint venture equity income
357

 

 

 

 
357

Selling, general and administrative adjustments:
 
 
 
 
 
 
 
 
 
Depreciation and amortization(2)
3,161

 
2,199

 
383

 
11,323

 
17,066

Litigation reimbursements(5)

 

 

 
(40,929
)
 
(40,929
)
Stock-based compensation

 

 

 
7,040

 
7,040

Adjusted EBITDA
216,487

 
80,361

 
13,242

 
(47,164
)
 
262,926

Less:
 
 
 
 
 
 
 
 
 
Depreciation and amortization(2)
26,384

 
40,787

 
8,092

 
21,779

 
97,042

Amortization of upfront incentive consideration(3)
18,005

 

 

 

 
18,005

Acquisition-related amortization(2a)

 

 

 
(20,226
)
 
(20,226
)
Adjusted Operating Income (Loss)
$
172,098

 
$
39,574

 
$
5,150

 
$
(48,717
)
 
$
168,105

 
 
 
 
 
 
 
 
 
 
Operating income margin
27.2
%
 
19.1
%
 
7.6
%
 
NM

 
19.6
%
Adjusted Operating Income Margin
27.2
%
 
19.1
%
 
7.6
%
 
NM

 
18.7
%

18


 
Nine Months Ended September 30, 2018
 
Travel
Network
 
Airline
Solutions
 

Hospitality
Solutions
 
Corporate
 
Total
Operating income (loss)
$
587,925

 
$
82,030

 
$
9,927

 
$
(238,885
)
 
$
440,997

Add back:
 
 
 
 
 
 
 
 
 
Selling, general and administrative
117,604

 
55,494

 
25,303

 
185,646

 
384,047

Cost of revenue adjustments:
 
 
 
 
 
 
 
 
 
Depreciation and amortization(2)
79,506

 
126,926

 
26,735

 
21,323

 
254,490

Amortization of upfront incentive consideration(3)
57,324

 

 

 

 
57,324

Stock-based compensation

 

 

 
19,184

 
19,184

Adjusted Gross Profit
842,359

 
264,450

 
61,965

 
(12,732
)
 
1,156,042

Selling, general and administrative
(117,604
)
 
(55,494
)
 
(25,303
)
 
(185,646
)
 
(384,047
)
Joint venture equity income
2,455

 

 

 

 
2,455

Selling, general and administrative adjustments:
 
 
 
 
 
 
 
 
 
Depreciation and amortization(2)
8,459

 
8,673

 
2,168

 
33,761

 
53,061

Litigation costs(5)

 

 

 
7,073

 
7,073

Stock-based compensation

 



 
22,261

 
22,261

Adjusted EBITDA
735,669

 
217,629

 
38,830

 
(135,283
)
 
856,845

Less:
 
 
 
 
 
 
 
 
 
Depreciation and amortization(2)
87,965

 
135,599

 
28,903

 
55,084

 
307,551

Amortization of upfront incentive consideration(3)
57,324

 

 

 

 
57,324

Acquisition-related amortization(2a)

 

 

 
(51,585
)
 
(51,585
)
Adjusted Operating Income (Loss)
$
590,380

 
$
82,030

 
$
9,927

 
$
(138,782
)
 
$
543,555

 
 
 
 
 
 
 
 
 
 
Operating income margin
27.5
%
 
13.2
%
 
4.8
%
 
NM

 
15.0
%
Adjusted Operating Income Margin
27.6
%
 
13.2
%
 
4.8
%
 
NM

 
18.5
%

 
Nine Months Ended September 30, 2017
 
Travel
Network
 
Airline
Solutions
 

Hospitality
Solutions
 
Corporate
 
Total
Operating income (loss)
$
582,652

 
$
94,533

 
$
7,021

 
$
(325,366
)
 
$
358,840

Add back:
 
 
 
 
 
 
 
 
 
Selling, general and administrative
120,297

 
61,266

 
37,003

 
164,571

 
383,137

Impairment and related charges(6)

 

 

 
92,022

 
92,022

Cost of revenue adjustments:
 
 
 
 
 
 
 
 
 
Depreciation and amortization(2)
69,642

 
109,210

 
22,028

 
28,808

 
229,688

Amortization of upfront incentive consideration(3)
50,298

 

 

 

 
50,298

Restructuring and other costs(7)

 

 

 
12,976

 
12,976

Stock-based compensation

 

 

 
13,626

 
13,626

Adjusted Gross Profit
822,889

 
265,009

 
66,052

 
(13,363
)
 
1,140,587

Selling, general and administrative
(120,297
)
 
(61,266
)
 
(37,003
)
 
(164,571
)
 
(383,137
)
Joint venture equity income
1,768

 

 

 

 
1,768

Selling, general and administrative adjustments:
 
 
 
 
 
 
 
 
 
Depreciation and amortization(2)
9,617

 
6,586

 
1,038

 
48,800

 
66,041

Restructuring and other costs(7)

 

 

 
12,328

 
12,328

Litigation reimbursements(5)

 

 

 
(36,470
)
 
(36,470
)
Stock-based compensation

 

 

 
20,787

 
20,787

Adjusted EBITDA
713,977

 
210,329

 
30,087

 
(132,489
)
 
821,904

Less:
 
 
 
 
 
 
 
 
 
Depreciation and amortization(2)
79,259

 
115,796

 
23,066

 
77,608

 
295,729