Sabre Corporation reports Q2 2014 results

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Written by Linda Hohnholz

SOUTHLAKE, TX – Sabre Corporation today announced financial results for the quarter ended June 30, 2014.

SOUTHLAKE, TX – Sabre Corporation today announced financial results for the quarter ended June 30, 2014.

“We made solid progress in the second quarter both financially and with our initiatives focused on leading the technology transformation of the travel industry,” said Tom Klein, Sabre President and CEO. “We saw particularly strong earnings growth as our customers continue to use our technology to increase revenue, reduce costs, and deliver unique, personalized experiences to travelers. Our investments in innovations that allow customers to leverage data and take advantage of mobile services are setting new industry standards. The strong first half and continued positive trends give us confidence to raise Adjusted EBITDA and Adjusted EPS guidance for the year.”

Q2 2014 Financial Summary

Sabre reported total consolidated revenue of $718 million for the quarter ended June 30, 2014, compared to $768 million for the second quarter of 2013. Consolidated net loss for the second quarter of 2014 totaled $10.9 million, compared to a net loss of $116.9 million in the year-ago period. For the second quarter of 2014, Sabre reported a loss per share from continuing operations of $0.03 per share.

Sabre reported Airline and Hospitality Solutions revenue increased 4.9% to $187 million from $178 million in the second quarter of 2013. Travel Network revenue also increased, rising 1.3% to $462 million from $456 million for the same period of 2013. Sabre, excluding Travelocity, revenue increased 3.6% from $614 million in the second quarter of 2013 to $637 million in the second quarter of 2014.

On an adjusted basis, Sabre reported consolidated adjusted revenue of $720 million for the quarter ended June 30, 2014, compared to $768 million for the second quarter of 2013. Adjusted revenue excludes the amortization of incentive payments paid under the Expedia strategic marketing agreement related to the restructuring of Travelocity. Total Company Adjusted EBITDA for the three months ended June 30, 2014 was $204 million, a 7.2% increase from $190 million in the prior year period. Sabre reported second quarter 2014 Adjusted Net Income from Continuing Operations (Adjusted EPS) of $0.22 per share.

Three Months Ended June 30,

Six Months Ended June 30,

Financial Highlights (in thousands):
2014

2013

% Change

2014

2013

%

Change

Total Company Excluding Travelocity:

Revenue
$
636,555

$
614,296

3.6

$
1,297,739

$
1,230,869

5.4

Operating Income
$
80,866

$
(55,544)

245.6

$
176,216

$
38,097

362.5

Adjusted EBITDA*
$
212,582

$
181,041

17.4

$
421,493

$
382,490

10.2

Total Company Including Travelocity:

Revenue
$
717,573

$
768,232

(6.6)

$
1,472,983

$
1,527,576

(3.6)

Net Loss Attributable to Sabre Corp.

(10,897)

(116,862)

90.7

(13,740)

(132,626)

89.6

Adjusted Revenue*
$
720,448

$
768,232

(6.2)

$
1,477,733

$
1,527,576

(3.3)

Adjusted EBITDA*
$
203,707

$
190,111

7.2

$
387,423

$
382,615

1.3

Cash Flow from Operations
$
5,310

$
78,673

(93.3)

$
77,508

$
171,056

(54.7)

Capital Expenditures
$
58,944

$
58,786

0.3

$
110,583

$
111,487

(0.8)

Adjusted Capital Expenditures*
$
68,888

$
75,420

(8.7)

$
128,180

$
150,150

(14.6)

Free Cash Flow*
$
(53,634)

$
19,887

(369.7)

$
(33,075)

$
59,569

(155.5)

Adjusted Free Cash Flow*
$
63,219

$
58,236

8.6

$
131,172

$
107,287

22.3

Net Debt (total debt, less cash)
$
2,855,412

$
3,257,052

Net Debt / LTM Adjusted EBITDA

3.6x

4.3x

Airline and Hospitality Solutions:

Revenue
$
186,573

$
177,841

4.9

$
363,290

$
340,288

6.8

Passengers Boarded

131,450

124,359

5.7

249,066

231,884

7.4

Operating Income
$
35,855

$
28,518

25.7

$
62,317

$
51,173

21.8

Adjusted EBITDA*
$
62,554

$
47,675

31.2

$
116,015

$
88,545

31.0

Travel Network:

Revenue
$
462,337

$
456,238

1.3

$
954,064

$
931,544

2.4

Air Bookings

81,053

80,708

0.4

170,098

165,953

2.5

Non-air Bookings

13,861

13,986

(0.9)

27,460

27,033

1.6

Total Bookings

94,914

94,694

0.2

197,558

192,986

2.4

Bookings Share

35.6
%

35.8
%

35.5
%

35.5
%

Operating Income
$
165,597

$
162,071

2.2

$
350,114

$
346,970

0.9

Adjusted EBITDA*
$
197,971

$
188,237

5.2

$
412,814

$
398,540

3.6

Travelocity:

Revenue
$
81,018

$
153,936

(47.4)

$
175,244

$
296,707

(40.9)

Operating Income
$
(12,721)

$
8,449

(250.6)

$
(41,283)

$
(7,464)

(453.1)

Adjusted Revenue*
$
83,893

$
153,936

(45.5)

$
179,994

$
296,707

(39.3)

Adjusted EBITDA*
$
(8,875)

$
9,070

(197.9)

$
(34,070)

$
125

(27356.0)

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

Sabre Airline and Hospitality Solutions and Travel Network Adjusted EBITDA increased 31.2% and 5.2%, respectively. Excluding Travelocity, second quarter 2014 total Adjusted EBITDA increased 17.4% to $213 million from $181 million in the year-ago quarter.

Cash Flow from Operations totaled $5 million for the second quarter of 2014, compared to $79 million in the second quarter of 2013. Adjusted Free Cash flow, which adjusts for the decline in working capital and restructuring costs related to the change in the Travelocity business model and dispositions as well as litigation and other costs (see reconciliation below), totaled $63 million in the second quarter of 2014, an 8.6% increase from $58 million of Adjusted Free Cash Flow in the second quarter of 2013. Adjusted Capital Expenditures, which includes capitalized implementation costs, totaled $69 million for the second quarter of 2014, compared to $75 million in the year-ago period.

Sabre Airline and Hospitality Solutions

Sabre Airline and Hospitality Solutions leverage SaaS and hosted technologies to enable airlines and hoteliers to increase revenue, reduce costs, and provide better travel experiences for their customers. The business segment primarily drives revenue through flat-fees tied to usage events, such as passengers boarded and hotel rooms booked.

Solid growth across its customer base led to a 4.9% increase in revenue in the second quarter of 2014. This revenue growth was driven in part by an increase in passengers boarded through the SabreSonicยฎ airline reservation system. Total passengers boarded were 131 million, a 5.7% increase from 124 million in the second quarter of 2013. Revenue for the quarter was also bolstered by continued growth in Airline Solutions Commercial and Operations Solutions revenue and strong growth in Hospitality Solutions’ SynXis Central Reservations System transactions and Digital Marketing Services.

Strong revenue growth and operating leverage across its SaaS and hosted solutions resulted in a 31.2% increase in Airline and Hospitality Solutions Adjusted EBITDA to $63 million for the second quarter of 2014 versus $48 million for the prior year period.

Airline and Hospitality Solutions recently signed several significant new agreements. Examples include:

Spirit Airlines selected Sabre Airline Solutions’ leading Flight Plan Manager solution.
United Airlines selected Sabre Airline Solutions’ In-flight Catering solution.
Swiss regional carrier and current SabreSonic CSS customer, Darwin Airlines, became the latest airline to expand their Sabre footprint to include a full suite of solutions from Sabre Airline Solutions’ portfolio of commercial and operations solutions.
Morgans Hotel Group converted to Sabre Hospitality Solutions’ SynXis Central Reservations Solution across all of their properties.
Sabre Travel Network

Sabre Travel Network is one of the world’s largest travel marketplaces, handling more than $100 billion of 2013 travel services transactions with leading solutions for travel agents and travel suppliers. The business primarily recognizes revenue on a transaction-fee basis for travel booked through the Sabre Travel Network.

For the second quarter, Travel Network revenue increased $6 million, or 1.3%, to $462 million. Direct billable bookings of 95 million increased slightly versus the prior year period, driven by strong growth in EMEA bookings offset by the unfavorable timing of Easter and a decline of approximately 40% in air travel in Venezuela.

Travel Network second quarter Adjusted EBITDA of $198 million increased 5.2% from $188 million for the second quarter of 2013.

Sabre Travel Network continued to increase the value of the marketplace for participants during the second quarter by increasing content and services. During the quarter, Sabre Travel Network:

Renewed content agreements with Scandinavian Airways and Lufthansa.
Signed an expanded agreement with International Airline Group (IAG). The agreement includes the addition of ancillary sales for British Airways, Iberia and Iberia Express. Also under the agreement, Vueling will enter the Travel Network for the first time.
Launched United’s Economy Plus seating offering in the Travel Network marketplace, as well as ancillary sales for seven additional airlines. Travel Network has launched ancillary sales for 20 airlines year to date.
Announced the addition of Expedia Affiliate Network hotel content, which will bring approximately 55,000 new properties into the Travel Network when implemented.
Travelocity

Travelocity includes travelocity.com, the #1 customer satisfaction leader in JD Power’s most recent survey, and lastminute.com, one of Europe’s strongest travel brands. In August 2013, Sabre entered into a strategic marketing agreement with Expedia that transformed the Travelocity North America business. Under the agreement, the U.S. and Canadian Travelocity websites are powered by the leading Expedia technology platform and content. Sabre maintains responsibility for marketing the world-class Travelocity brand. Under the terms of the agreement, Expedia pays Sabre a performance-based marketing fee that varies based on the amount of travel booked through Travelocity-branded websites powered by Expedia.

With the new agreement in place and the migration essentially completed, second quarter 2014 Travelocity adjusted revenue declined 45.5% to $84 million compared to $154 million in the second quarter of 2013. Costs declined through the quarter, but the timing of the transition led to a decline in segment Adjusted EBITDA to a loss of $9 million, compared to earnings of $9 million in the second quarter of 2013. The company expects stronger business performance and increasing profitability going forward.

Initial Public Offering

On April 17, 2014, Sabre successfully completed an initial public offering (IPO) of 39,200,000 primary shares of common stock. In addition, the underwriters exercised their option to purchase 5,880,000 additional shares, which closed on April 25, 2014. Sabre shares trade on the NASDAQ Stock Market under the symbol SABR. The net proceeds from the offering were used to reduce outstanding debt, including a $320 million reduction in 2019 8.5% bonds, and a $296 million reduction in Term Loan C borrowings.

Dividend

Sabre’s Board of Directors has declared a quarterly dividend of $0.09 cents per share on the Company’s common stock. The dividend will be payable on September 16, 2014, to stockholders of record on September 1, 2014.

Business Outlook and Financial Guidance

The following forward-looking statements, as well as those made above, reflect expectations as of August 7, 2014. Sabre assumes no obligation to update these statements. Results may be materially different and are affected by many factors detailed in this release and in Sabre’s IPO prospectus and quarterly SEC filings.

In conjunction with the second quarter earnings report, Sabre management reiterated expectations for full year Revenue, while increasing guidance for Adjusted EBITDA, Adjusted Net Income and Adjusted EPS. Adjusted EBITDA guidance was increased from a prior range of $843 – $858 million to a current range of $848 – $863 million, reflecting strength across Sabre excluding Travelocity. Adjusted Net Income guidance was increased from $215 – $230 million to $222 – $237 million. Adjusted EPS guidance was increased from a prior range of $0.86 – $0.92 to current guidance of $0.90 – $0.96.

Full Year 2014 Guidance

($ millions, except EPS)
Sabre Excluding

Travelocity
Travelocity
Sabre

Revenue
$2,575 – $2,595
$410 – $420
$2,985 – $3,015

Adjusted EBITDA
$833 – $843
$15 – $20
$848 – $863

Adjusted Net Income

$222 – $237

Adjusted EPS

$0.90 – $0.96

About the author

Avatar of Linda Hohnholz

Linda Hohnholz

Editor in chief for eTurboNews based in the eTN HQ.

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