Sabre Corporation — Q1 2022 Form 10-Q
Business context and reporting period
Sabre provides travel distribution and technology through Travel Solutions and Hospitality Solutions. This unaudited filing covers the three months ended March 31, 2022, compared with Q1 2021.
Financial performance
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $584.9 million | $327.5 million |
| Operating loss | $79.5 million | $202.6 million |
| Net income (loss) attributable to common stockholders | $42.1 million | $(266.1) million |
| Diluted EPS | $0.12 | $(0.84) |
| Adjusted EBITDA | $5.2 million | $(109.5) million |
| Cash used in operating activities | $139.1 million | $197.4 million |
| Free cash flow | $(156.5) million | $(203.8) million |
Revenue increased 79% year over year, reflecting improving travel activity. Travel Solutions revenue rose 85% to $534.0 million; Hospitality Solutions revenue rose 33% to $56.0 million. Direct billable bookings increased 67%, passengers boarded 72%, and hospitality reservation transactions 31%.
Reported profitability includes the AirCentre sale: Sabre received $392 million in February and recorded a $192 million pretax gain ($121 million after tax). Excluding that gain and other specified adjustments, Sabre reported an Adjusted Net Loss of $93.2 million, versus $228.3 million in Q1 2021. Higher booking volumes also increased travel-agency incentive costs.
Liquidity, debt and capital
At March 31, cash and cash equivalents were $1.186 billion, with a further $21 million in restricted cash. Total debt on the balance sheet was approximately $4.75 billion; the filing also reports $6.1 billion of total debt obligations, including $286 million due during the remainder of 2022. Long-term debt was $4.733 billion. Sabre reported compliance with its credit agreement covenants.
Investing cash inflow was $374.9 million, principally reflecting AirCentre sale proceeds. Financing cash outflow was $25.8 million. In March, Sabre refinanced approximately $623 million of Term Loan B debt with a $625 million facility maturing in June 2028. Interest expense was $61.1 million, down 5% year over year. The company paid $5.3 million in preferred dividends; common-stock dividends and repurchases remained suspended.
Changes, outlook and risks
- Management said travel volumes continued to recover, including improving international bookings, while warning that COVID-19 effects remained material and uncertain. The company believes available resources can fund liquidity needs for at least 12 months.
- Management expects 2022 free cash flow to improve from 2021 and turn positive in the second half of 2022, contingent on projected air-travel recovery. It also expects significant incremental technology costs in 2022; technology transformation and cloud migration may raise costs and create execution risks.
- Russia, Ukraine and Belarus activity declined following the Ukraine conflict and sanctions; Sabre terminated its Aeroflot distribution agreement. Further escalation or sanctions could adversely affect results. Sabre reported approximately $15 million of net assets related to Russian customers that could be impaired.
- Key litigation includes the US Airways antitrust retrial, which began April 22, 2022. The plaintiff claims $204–$299 million in damages before potential trebling; Sabre has no accrual and disputes the claims. American Airlines’ contract trial was scheduled for January 2023. Potential Indian tax assessments, including for an affiliate, could total approximately $45 million if authorities prevail; no provision was recorded.
- Other exposures include airline and customer credit risk, booking cancellations, floating-rate debt and the LIBOR transition. Sabre estimated that transition of remaining Term Loan B debt to Prime could add approximately $15 million of interest over that loan’s remaining life, and intended to seek an alternative-rate amendment.
Important facts for investors to verify
- How much of the reported profit and cash increase depended on the one-time AirCentre disposition gain and proceeds.
- Whether travel-volume recovery supports management’s second-half 2022 positive free-cash-flow expectation, given negative Q1 free cash flow and rising incentive and technology costs.
- Debt maturities, floating-rate exposure, refinancing terms and the company’s capacity to service debt from operating cash flow.
- Developments and potential financial consequences in the US Airways and American Airlines litigation, and in Indian tax matters.
- Impacts of the Ukraine conflict, sanctions, COVID-19-related cancellations and customer credit conditions on revenue, receivables and liquidity.