Sabre Corporation — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing; it does not provide a separate standalone fourth-quarter summary. Sabre is a travel technology company operating Travel Solutions, which includes its global distribution system and airline technology products, and Hospitality Solutions, which provides software to hoteliers.
Financial performance and liquidity
| Metric | FY2021 | FY2020 | FY2019 |
|---|---|---|---|
| Revenue | $1.689 billion | $1.334 billion | $3.975 billion |
| Operating income (loss) | $(665) million | $(988) million | $363 million |
| Net income (loss) attributable to common stockholders | $(950) million | $(1.290) billion | $159 million |
| Adjusted EBITDA (non-GAAP) | $(261) million | $(448) million | $863 million |
| Cash from operating activities | $(415) million | $(770) million | $581 million |
| Free cash flow (non-GAAP) | $(469) million | $(836) million | $466 million |
- Revenue increased 27% from 2020 but remained about 58% below 2019. The filing attributes the recovery to higher travel volumes as COVID-19 restrictions eased; volumes remained substantially below pre-pandemic levels.
- Travel Solutions revenue rose 28% to $1.504 billion; direct billable bookings increased 66% to 207 million, versus 566 million in 2019. Hospitality Solutions revenue increased 16% to $203 million, with SynXis transactions up 37% to 92 million.
- Operating loss improved year over year, but the company remained deeply loss-making. Adjusted EBITDA also remained negative. No consolidated gross-margin figure is separately presented in the filing.
- Cash and cash equivalents were $978 million at year-end, down from $1.500 billion; an additional $21 million was restricted cash. Operating cash use improved by $356 million year over year. Capital expenditures were $54 million.
- Year-end debt had a $4.807 billion face value ($4.754 billion carrying value, net of discounts and issuance costs). Interest expense was $258 million, up 14%. About $2.8 billion of borrowings were variable-rate and LIBOR-indexed; all interest-rate swaps had matured by year-end.
- Management said available resources should fund liquidity requirements for at least 12 months, while noting substantial uncertainty. It expected FY2022 free cash flow to improve from 2021 and turn positive in the second half, depending on air-travel recovery.
Material changes and notable items
- Versus 2020, revenue recovery and a $74 million decrease in the provision for expected credit losses helped results. Higher booking volumes also increased travel-agency incentive costs by $131 million.
- Technology costs declined 9% to $1.053 billion, while selling, general and administrative expense increased 4% to $610 million. Interest expense rose, largely reflecting debt issued or refinanced in 2020.
- In July 2021, Sabre refinanced its revolving facility with term loans, extended the maturity of certain borrowings to 2027, and removed the minimum-liquidity and total-net-leverage maintenance requirements. The company reported compliance with its remaining debt covenants.
- Sabre agreed to sell its AirCentre flight and crew management portfolio for $392.5 million, subject to customary conditions and regulatory approvals, with closing expected in Q1 2022. The related assets and liabilities were classified as held for sale at year-end.
- Common-stock dividends and share repurchases remained suspended. Sabre paid $22 million in dividends on its 6.50% mandatory convertible preferred stock. Outstanding preferred shares are expected to convert in 2023; the stated conversion range implies approximately 39–47 million common shares before adjustments.
- The filing reported no material goodwill impairment in 2021. Goodwill was $2.470 billion; management’s qualitative assessment concluded fair value was more likely than not above carrying value.
Outlook, risks and contingencies
- COVID-19 and travel recovery: Results and liquidity remain highly dependent on travel volumes, particularly air bookings. New variants, restrictions, changes in travel patterns, supplier failures and cancellations could delay recovery or increase cash outflows and credit losses.
- Technology investment: Sabre expects significant ongoing re-platforming and cloud/open-source investment. Capital expenditures were projected at $50–$90 million for 2022; management expects higher margins beginning in 2025 from the transformation, but cautions that savings, timing and costs are uncertain.
- Commercial and competitive pressures: Airline pricing pressure, changing distribution practices and customer bargaining power may constrain revenue and margins. A major OTA began shifting a significant portion of North American volume to a competitor in Q3 2021; Sabre expected lower volumes, partly offset by higher rates.
- Debt and liquidity: High leverage, interest-rate exposure, debt service and large technology-provider commitments limit flexibility. LIBOR transition terms for the principal Term Loan B remained unresolved; management estimated a potential $25 million of incremental interest over that loan’s remaining life under its stated assumptions.
- Legal matters: American Airlines alleges that Sabre’s New Airline Storefront and value-based agency incentive model breach their contract. A temporary injunction was denied, but an adverse final outcome could constrain those initiatives or affect the distribution agreement. The US Airways antitrust case was scheduled for retrial beginning April 25, 2022; Sabre had no accrual for that matter and said a potential loss could not be reasonably estimated.
- Other exposures: Risks include cybersecurity and privacy incidents, dependence on third-party technology providers, customer and supplier credit risk, tax disputes, and possible impairments. The filing describes prior hospitality-system payment-data access and a 2021 Radixx malware event; it reported a $2 million state-attorney-general settlement payment in 2021 related to the earlier incident.
- The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting. Management also reported effective disclosure controls and internal control as of year-end.
Important facts for investors to verify
- Whether travel bookings, passenger volumes and hotel transactions recover sufficiently to support management’s FY2022 positive-free-cash-flow expectation.
- Current cash burn, cash availability, debt maturities and refinancing terms, including interest-rate exposure and the LIBOR transition.
- Actual completion and net proceeds of the AirCentre sale, and any effect on ongoing revenue and earnings.
- The pace and cost of technology transformation against the projected capital spending and longer-term margin benefits.
- Volume and contract impacts from the OTA shift and outcomes of the American Airlines and US Airways litigation.
- Potential dilution from preferred-stock conversion and exchangeable notes, alongside continued preferred dividends and suspended common dividends.