Sabre Corporation — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Sabre provides travel distribution and technology services through Travel Solutions and Hospitality Solutions. Dollar amounts below are in millions unless otherwise noted.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $742.7 | $584.9 |
| Operating loss | $(0.2) | $(79.5) |
| Net loss attributable to Sabre | $(98.9) | Net income $47.4 |
| Net loss attributable to common stockholders | $(104.3); $(0.32) per share | Net income $42.1; $0.13 per share |
| Adjusted EBITDA | $58.1 | $5.2 |
| Adjusted operating income (loss) | $27.7 | $(29.2) |
| Cash used in operating activities | $(72.4) | $(139.1) |
| Free cash flow | $(90.5) | $(156.5) |
Revenue increased 27%. Travel Solutions revenue rose 27% to $677.4 million; Hospitality Solutions increased 32% to $73.8 million. Air and LGS direct billable bookings rose 48.7% combined, passengers boarded increased 27.8%, and Hospitality central reservation transactions increased 20.5%. The filing does not present GAAP operating margin as a headline metric; based on reported figures, operating margin was approximately breakeven versus about negative 13.6% a year earlier.
Cash and cash equivalents were $817.1 million at quarter-end, plus $21.0 million of restricted cash. Sabre had $4.855 billion of debt on a carrying-value basis ($4.948 billion face value), including $115 million drawn on its new accounts receivable facility. That facility had only $3.7 million of remaining availability at quarter-end. Total debt obligations were reported as $6.4 billion, including $345 million due for the remainder of 2023. Stockholders’ deficit was $964.5 million.
Changes versus the prior comparable period
- Distribution revenue increased $183 million, or 53%, mainly from higher booking volumes and improved international and corporate mix. Higher transaction volumes also drove an $85 million increase in Travel Solutions incentive consideration costs.
- Travel Solutions IT revenue fell $40 million, or 21%, primarily reflecting the AirCentre sale, lower Russian-carrier revenue, and the prior-year recognition of $24 million of previously deferred Russian-customer revenue. Higher passenger volumes and a termination fee partly offset the decline.
- Hospitality Solutions growth reflected higher SynXis transaction volume and favorable customer mix.
- Interest expense rose $38.7 million, or 63%, to $99.8 million, principally because of higher rates on term loans; swaps partly offset the increase.
- Q1 2022 results included a $192 million pretax gain on the AirCentre sale in other income. Its absence, alongside higher interest expense, makes the year-over-year net-income comparison less representative of underlying operating progress.
- Credit-loss provision increased to $8.9 million from $2.0 million. Cash used in operations improved by $66.7 million year over year, but remained negative.
Outlook, risks and unusual items
- Management expects available resources to fund liquidity requirements for at least the next 12 months, while cautioning that travel recovery and the effects of COVID-19 remain uncertain. No quantitative revenue or earnings guidance is provided in the supplied filing text.
- On May 4, 2023, after quarter-end, Sabre announced workforce actions expected to reduce annual operating expenses by approximately $200 million, with estimated restructuring and other costs of about $70 million. The filing separately estimates approximately $50 million of restructuring-related cash payments in 2023.
- Management cited increasing travel volumes but also significantly higher incentive consideration costs. Key risks include travel-volume weakness, airline or customer financial distress, pricing and contract-renewal pressure, technology transformation and service interruptions, cybersecurity, foreign-exchange exposure, and rising borrowing costs.
- The US Airways antitrust matter resulted in a $3 judgment, which Sabre paid. A magistrate recommended that US Airways receive reasonable attorneys’ fees, subject to reduction for its nominal recovery; the court must still approve the recommendation, and Sabre could not estimate any additional reasonably possible or probable amount beyond its recorded accrual.
- Sabre reported compliance with its credit and AR facility covenants. It had approximately 28% of debt, net of cash and swap effects, exposed to variable rates. The $333 million exchangeable notes and $329 million liquidation value of preferred stock are also relevant to capital structure; preferred shares were expected to convert in September 2023 into approximately 39–47 million common shares.
- The Indian Supreme Court ruled for Sabre on April 19, 2023 in the tax dispute covering earlier assessment years. Other Indian tax proceedings remain; the company estimated potential taxes, interest and penalties of approximately $18 million if authorities prevailed on all claims.
- Management said disclosure controls were effective. A new billing-system implementation phase affected controls over a considerable portion of revenue, and further migration is expected over the coming years.
Key facts investors should verify
- Whether travel-volume growth continues to outpace incentive costs and supports sustainable operating cash flow.
- Current cash burn, AR facility availability, upcoming debt maturities, refinancing terms, and sensitivity to interest rates.
- Progress and realized savings from the workforce actions, including the timing and cash cost of restructuring.
- The final US Airways attorneys’ fee award and any resulting cash requirement.
- The timing and dilution effects of the preferred-stock conversion, and the status of remaining Indian tax and sanctions matters.