Sabre Corporation — FY2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022; comparisons are primarily with FY2021. Sabre provides travel distribution and technology services through Travel Solutions and Hospitality Solutions. FY2022 results reflected a continuing recovery in travel activity, while COVID-19 effects and liquidity pressures remained material.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $2.537 billion | $1.689 billion |
| Operating loss | $261 million | $665 million |
| Net loss attributable to common stockholders | $457 million | $950 million |
| Adjusted EBITDA, non-GAAP | $65 million | $(261) million |
| Cash used in operating activities | $276 million | $415 million |
| Free cash flow, non-GAAP | $(346) million | $(469) million |
| Cash and cash equivalents at year-end | $795 million | $978 million |
| Debt carrying value at year-end | $4.741 billion | $4.753 billion |
FY2022 operating margin was approximately negative 10.3%, compared with negative 39.4% in FY2021. Net loss per common share was $1.40, versus $2.96. Interest expense, net increased 15% to $295 million, mainly due to higher rates on term loans. The filing reports $4.7 billion of debt outstanding net of issuance costs and discounts; contractual debt obligations, including interest, totaled $6.5 billion, with $450 million due within 12 months.
Performance and changes versus FY2021
- Revenue increased 50%. Travel Solutions revenue rose 54% to $2.311 billion; Hospitality Solutions revenue rose 26% to $255 million.
- Travel Solutions Direct Billable Bookings increased 46% to 302 million, and Passengers Boarded increased 50% to 637 million. Hospitality central reservation transactions increased 21% to 111 million.
- Recovery-driven growth improved segment economics: Travel Solutions adjusted operating income was $213 million, versus a $223 million loss in FY2021. Hospitality Solutions recorded an adjusted operating loss of $52 million, compared with $40 million.
- Higher volumes also increased Travel Solutions incentive consideration costs by $337 million. Total technology costs rose 4% to $1.096 billion, reflecting transformation, cloud-migration and volume-related costs.
- Operating cash outflow improved by $138 million, but remained negative. Management attributed the improvement mainly to the travel recovery, partly offset by $67 million in performance bonuses and $39 million more in interest payments.
Liquidity, debt and capital actions
- Cash and cash equivalents were $795 million at year-end, down from $978 million. Restricted cash was $21 million.
- Debt refinancing extended maturities but increased borrowing costs. In December 2022, Sabre issued $555 million of 11.25% secured notes due 2027 to repay term-loan debt. Approximately 29% of debt, net of cash and hedging effects, was variable-rate.
- Management said it believed available resources were sufficient to fund liquidity needs for at least 12 months, while noting uncertainty around travel recovery and continuing to monitor liquidity.
- Management expected positive FY2023 free cash flow, dependent in part on projected air-travel recovery, and forecast FY2023 capital expenditures of $50 million to $60 million.
- Common-stock dividends and repurchases remained suspended. Sabre paid $21 million of preferred-stock dividends in FY2022; the 6.5% mandatory convertible preferred stock is expected to convert in September 2023.
- In February 2023, Sabre entered a committed accounts-receivable facility of up to $200 million; no borrowings had been made at closing. Management expected it to provide at least approximately $100 million in additional funding.
Outlook, risks and unusual items
- Technology transformation: Sabre expects elevated operating and capital spending in 2023 and continued investment over the next few years. It expects higher margins beginning in 2025 than without the transformation, but cautions that savings, timing and execution are uncertain.
- Travel recovery and concentration: Revenue depends heavily on transaction volumes, especially air travel, and on a relatively small number of airlines and travel buyers. A major OTA shifted significant North American volumes to a competitor, affecting bookings from 2021 onward.
- COVID-19 and credit: Management said pandemic effects could continue to materially affect results and liquidity. The air-booking cancellation reserve was $11 million, down from $18 million. Airline or agency distress could increase credit losses and cancellations.
- Russia and sanctions: Russian regulatory changes restricted Sabre’s ability to provide certain domestic air-processing services from October 2022. Sabre reported approximately $85 million of FY2022 revenue from Russian customers, including $24 million of previously deferred revenue. It also disclosed issues identified in its sanctions compliance program and voluntary disclosure to U.K. authorities regarding payments received from a Russian carrier; any penalty was uncertain.
- Unusual items: The AirCentre sale generated $392 million in net proceeds and an approximately $180 million pretax gain. The year also included a $26 million unrealized loss on the GBT investment, a $5 million Russia-related impairment, and $32 million of net litigation costs. The AirCentre gain materially benefited reported results.
- Contingencies: Following the US Airways antitrust retrial, the jury awarded $1 in single damages on a monopolization claim and the court entered a $3 judgment, which Sabre paid. US Airways may also receive attorneys’ fees and costs; Sabre accrued an estimate but could not provide a range of additional reasonably possible loss. Indian tax litigation could result in approximately $49 million of taxes, interest and penalties if authorities prevailed on all claims; Sabre recorded no liability for that matter.
- Other exposures: Risks include substantial indebtedness, rising interest costs, refinancing access, cyber and system outages, privacy regulation, contract renewals and supplier pricing pressure. The company reported effective internal control over financial reporting, and the auditor issued unqualified opinions on the financial statements and controls.
Important facts for investors to verify
- Whether travel-volume recovery and international booking mix support the FY2023 positive free-cash-flow expectation.
- Cash generation, debt maturities and refinancing costs, especially the 11.25% notes and variable-rate exposure.
- Actual technology-transformation spending, migration progress, realized savings and service reliability.
- Customer and supplier retention, incentive costs, and the continuing effect of the North American OTA volume shift.
- Outcomes of the US Airways attorneys’ fee proceeding, Indian tax cases and sanctions-compliance remediation.
- The timing and dilution effects of the preferred-stock conversion expected in September 2023.