Sabre Corporation — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Sabre operates Travel Solutions (distribution and travel technology) and Hospitality Solutions (hotel software). Results remained affected by COVID-19, although travel volumes improved during the quarter.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $419.7 million | $83.0 million | $747.2 million | $742.0 million |
| Operating loss | $180.4 million | $384.1 million | $382.9 million | $535.5 million |
| Net loss | $245.4 million | $442.6 million | $505.6 million | $654.5 million |
| Net loss attributable to common stockholders | $251.3 million | $442.6 million | $517.4 million | $655.3 million |
| Adjusted EBITDA (non-GAAP) | $(70.5) million | $(229.4) million | $(180.0) million | $(223.2) million |
- Q2 diluted loss per share was $0.79; six-month diluted loss per share was $1.62.
- Q2 Travel Solutions revenue was $373.4 million and Hospitality Solutions revenue was $50.8 million. Segment adjusted operating losses were $67.2 million and $8.5 million, respectively; corporate adjusted operating loss was $46.0 million.
- Q2 air bookings rose sharply from the pandemic-depressed comparison period. Six-month total direct billable bookings increased 22% to 95.8 million, while passengers boarded declined 4% to 178.8 million; Hospitality Solutions transactions increased 30% to 41.6 million.
- For the six months, cash used in operating activities was $338.5 million and free cash flow (non-GAAP) was negative $355.7 million. Cash declined $377.6 million to $1.122 billion.
- At June 30, cash was $1.122 billion; reported debt was $4.728 billion (face value $4.785 billion), including $375 million drawn on the revolving facility. Available revolver capacity was approximately $14.5 million. Stockholders’ equity was negative $159.8 million.
Changes versus prior comparable periods
- Q2 revenue increased $336.6 million year over year, partly because Q2 2020 revenue had been reduced by about $100 million from unexpectedly high booking cancellations. Q2 2021 revenue also reflected recovering volumes, particularly in air distribution.
- First-half revenue was nearly flat, up $5.1 million (1%). Distribution revenue growth was offset by lower IT Solutions revenue and an unfavorable booking and passenger mix.
- Operating and net losses narrowed in both comparisons, reflecting recovering activity and lower technology and other costs. However, rising booking volumes also increased agency incentive costs substantially.
- First-half interest expense increased $35.0 million to $128.4 million, primarily due to debt issued or refinanced in 2020. Prior-year results included a $46 million Farelogix termination-related charge; 2021 included a $15 million gain on sale of an investment and a $4 million pension settlement charge.
Outlook, risks and unusual items
- No quantified revenue or earnings guidance is provided in the supplied filing text. Management expected COVID-19 to continue materially harming results and liquidity, despite gradual volume recovery, and said the effects could persist beyond containment. Domestic bookings exceeded international bookings, weighing on revenue mix.
- Management believed available resources would fund liquidity needs for at least the next 12 months, but emphasized uncertainty and continued monitoring. It reported roughly two-thirds of the cost structure was adjustable in the near term.
- On July 12, 2021, after quarter-end, Sabre refinanced the Other Term Loan B and revolving facility, terminated revolving commitments, and removed the $300 million minimum-liquidity and Total Net Leverage Ratio maintenance requirements. New facilities totaled $1.048 billion and mature in December 2027. The filing says the impact on results was still being estimated.
- COVID-related estimates remain sensitive to travel volumes, cancellations, customer insolvencies and credit losses. The air booking cancellation reserve was $18 million; the credit-loss allowance was approximately $86 million. No goodwill impairment was recorded, but future impairment was identified as a possibility.
- Material legal matters include American Airlines’ June 2021 contract suit seeking an injunction over Sabre’s New Airline Storefront and agency incentive model; US Airways antitrust litigation remanded for a new trial scheduled for April 2022; and a DOJ investigation that remained open. The European Commission closed its investigation in July 2021.
- Sabre reported cybersecurity risks, including an April 2021 malware event affecting its Radixx reservation system; the filing said its other named systems were not impacted and the Radixx customer database was not compromised based on the investigation to date. Potential incident-related costs remain uncertain.
- Preferred stock dividends were $10.9 million for the first half, at a 6.50% annual rate. Common dividends and share repurchases remained suspended.
Important facts for investors to verify
- Whether booking recovery, international mix and incentive costs support improving revenue and margins in subsequent quarters.
- Cash burn, cash reserves, refinancing terms and the implications of ending the revolving commitments for liquidity and debt service.
- Debt interest costs, floating-rate exposure and potential dilution from exchangeable notes and mandatory convertible preferred stock.
- Potential outcomes and financial exposure from the American Airlines and US Airways disputes, the DOJ investigation, and cybersecurity matters.
- How changes in travel volumes, cancellations, customer credit quality and future tax estimates affect reserves, cash flow and impairment risk.