Sabre Corporation reports Q3 2014 results

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Avatar of Linda Hohnholz
Written by Linda Hohnholz

SOUTHLAKE, TX – Sabre Corporation today announced financial results for the quarter ended September 30, 2014.

SOUTHLAKE, TX – Sabre Corporation today announced financial results for the quarter ended September 30, 2014.

“Third quarter results demonstrate continued progress toward our financial and strategic objectives,” said Tom Klein, Sabre President and CEO. “Accelerated bookings growth, combined with sales, implementation, and innovation momentum drove solid revenue and Adjusted EBITDA growth in our Airline and Hospitality Solutions and Travel Network businesses. We reiterate our Adjusted EBITDA and EPS guidance and are well positioned as we approach 2015.”

Q3 2014 Financial Summary

Airline and Hospitality Solutions revenue increased 14.3% to $209 million from $183 million in the third quarter of 2013. The increase was driven by a combination of growth in passengers boarded through Sabre Airline Solutions SabreSonic CSS solution, which increased 7.9% in the quarter, and continued strong performance across the Airline Solutions’ Commercial and Operations portfolio and Sabre Hospitality Solutions. As a result of strengthened bookings growth of 3.1%, Travel Network revenue increased 3.7% to $466 million from $450 million for the same period of 2013.

Sabre reported total consolidated third quarter revenue of $756 million, compared to $776 million for the prior year quarter. Consolidated Adjusted revenue for the quarter ended September 30, 2014, was $759 million a decline of 2.1% from $776 million for the third quarter of 2013. Excluding Travelocity, revenue increased 9.0% from $615 million in the third quarter of 2013 to $670 million in the third quarter of 2014.

Consolidated net income for the third quarter 2014 totaled $37 million, compared to $5 million in the previous year quarter. Third quarter consolidated Adjusted EBITDA was $230 million, a 14.2% increase from $201 million in the prior year period. Sabre Airline and Hospitality Solutions Adjusted EBITDA increased 43.4% from the year ago quarter to $82 million for the third quarter of 2014. Third quarter 2014 Travel Network Adjusted EBITDA increased 5.5% to $194 million. Excluding Travelocity, Adjusted EBITDA increased 10.3% from $194 million in the third quarter of the prior year to $214 million for the third quarter of 2014.

For the third quarter of 2014, Sabre reported income from continuing operations of $0.14 per share. Sabre reported third quarter 2014 Adjusted Net Income from Continuing Operations (Adjusted EPS) of $0.26 per share.

Three Months Ended
September 30,

Nine Months Ended
September 30,

Financial Highlights (in thousands):
2014

2013
% Change

2014

2013
% Change

Total Company Excluding Travelocity:

Revenue
$670,325

$615,012
9.0

$1,968,063

$1,845,881
6.6

Operating Income
$104,739

$68,808
52.2

$280,955

$106,905
162.8

Adjusted EBITDA*
$213,972

$193,946
10.3

$635,466

$576,435
10.2

Total Company Including Travelocity:

Revenue
$756,303

$775,823
(2.5)

$2,229,286

$2,303,399
(3.2)

Net Income/(Loss) to Sabre Corp.
$36,563

$5,372
580.6

$22,823

($127,254)
117.9

Adjusted Revenue*
$759,178

$775,823
(2.1)

$2,236,911

$2,303,399
(2.9)

Adjusted EBITDA*
$229,926

$201,349
14.2

$617,350

$583,963
5.7

Cash Flow from Operations
$44,171

$81,006
(45.5)

$121,679

$252,062
(51.7)

Capital Expenditures
$49,802

$57,257
(13.0)

$160,385

$168,744
(5.0)

Adjusted Capital Expenditures*
$59,807

$67,280
(11.1)

$187,987

$217,430
(13.5)

Free Cash Flow*
($5,631)

$23,749
(123.7)

($38,706)

$83,318
(146.5)

Adjusted Free Cash Flow*
$72,929

$53,200
37.1

$204,101

$160,487
27.2

Net Debt (total debt, less cash)
$2,944,461

$3,280,846

Net Debt / LTM Adjusted EBITDA
3.6x

4.4x

Airline and Hospitality Solutions:

Revenue
$208,685

$182,505
14.3

$571,975

$522,794
9.4

Passengers Boarded
136,545

126,545
7.9

385,611

358,428
7.6

Operating Income
$55,640

$37,087
50.0

$117,957

$88,260
33.6

Adjusted EBITDA*
$81,671

$56,940
43.4

$197,686

$145,485
35.9

Travel Network:

Revenue
$466,278

$449,562
3.7

$1,420,341

$1,381,105
2.8

Air Bookings
81,047

78,314
3.5

251,145

244,267
2.8

Non-air Bookings
13,806

13,701
0.8

41,274

40,734
1.3

Total Bookings
94,853

92,015
3.1

292,419

285,001
2.6

Bookings Share
36.1%

36.4%

35.7%

35.8%

Operating Income
$164,979

$158,476
4.1

$515,093

$505,446
1.9

Adjusted EBITDA*
$193,823

$183,728
5.5

$606,637

$582,268
4.2

Travelocity:

Revenue
$85,978

$160,811
(46.5)

$261,223

$457,518
(42.9)

Operating Income
$11,957

$6,166
93.9

($29,326)

($1,298)
(2159.3)

Adjusted Revenue*
$88,853

$160,811
(44.7)

$268,848

$457,518
(41.2)

Adjusted EBITDA*
$15,954

$7,403
115.5

($18,116)

$7,528
(340.6)

*indicates non-GAAP financial measure; see descriptions and reconciliations below

Cash Flow from Operations totaled $44 million for the third quarter of 2014, compared to $81 million in the third quarter of 2013. Adjusted Free Cash Flow totaled $73 million in the third quarter of 2014, a 37.1% increase from $53 million in the third quarter of 2013. Adjusted Free Cash Flow excludes the effect of the change in the business model at Travelocity, including related restructuring costs and the effect on working capital, as well as the impacts of dispositions, litigation and other costs (see reconciliation below). Adjusted Capital Expenditures, which includes capitalized implementation costs, totaled $60 million for the third quarter of 2014, compared to $67 million in the year-ago period.

Sabre Airline and Hospitality Solutions

Sabre Airline and Hospitality Solutions leverage SaaS and hosted technologies to enable airlines and hoteliers to increase revenue, reduce costs, and provide better travel experiences for their customers. The business segment primarily drives revenue through flat-fees tied to usage events, such as passengers boarded and hotel rooms booked.

Growth across the customer base led to a 14.3% increase in revenue to $209 million in the third quarter of 2014, compared to $183 million in the prior year quarter. This revenue growth was driven in part by an increase in passengers boarded through the SabreSonicยฎ airline reservation system. Total passengers boarded were 137 million, a 7.9% increase from 127 million in the third quarter of 2013. Solid revenue contributions from our commercial and operations solutions and Hospitality Solutions also contributed to the revenue growth in the quarter.

Continued revenue growth and operating leverage across the SaaS and hosted solutions resulted in a 43.4% increase in Airline and Hospitality Solutions Adjusted EBITDA to $82 million for the third quarter of 2014 versus $57 million for the prior year period.

Sabre Hospitality Solutions launched the SynXis Enterprise Platform. This platform will deliver seamless integration that is designed to enable personalized and intuitive hotel guest experience as well as transform hotel operations, distribution and marketing systems. This exciting launch includes the introduction of the SynXis Property Manager, a hotel property management solution that seamlessly integrates with Sabre’s industry-leading central reservation system and has been successfully piloted with several leading hospitality brands.

Sabre Travel Network

Sabre Travel Network is one of the world’s largest travel marketplaces, handling more than $100 billion of 2013 travel services transactions with leading solutions for travel agents and travel suppliers. The business primarily recognizes revenue on a transaction-fee basis for travel booked through the Sabre Travel Network.

For the third quarter, Travel Network revenue increased $17 million, or 3.7%, to $466 million. Direct billable bookings of 95 million increased 3.1% versus the prior year quarter, driven by growth in all regions partially offset by the decline in air travel in Venezuela.

Travel Network third quarter Adjusted EBITDA of $194 million increased 5.5% from $184 million for the third quarter of 2013.

Travelocity

Travelocity includes travelocity.com, the #1 customer satisfaction leader in JD Power’s most recent survey, and lastminute.com, one of Europe’s strongest travel brands. In August 2013, Sabre entered into a strategic marketing agreement with Expedia that transformed the Travelocity North America business. Under the agreement, the U.S. and Canadian Travelocity websites are powered by the leading Expedia technology platform and content. Sabre maintains responsibility for marketing the world-class Travelocity brand. Under the terms of the agreement, Expedia pays Sabre a performance-based marketing fee that varies based on the amount of travel booked through Travelocity-branded websites powered by Expedia. By design, this business model change results in lower revenues to Sabre, but is expected to drive increased profitability as the business realizes the benefit of significantly lower operating expenses.

Third quarter 2014 Travelocity results reflect the effects of the full migration to the new business model. As a result, third quarter 2014 Travelocity Adjusted Revenue declined 44.7% to $89 million, compared to $161 million in the third quarter of 2013, while Adjusted EBITDA increased 116% to $16 million, compared to earnings of $7 million in the third quarter of 2013. The company expects continued solid profitability for Travelocity going forward.

Business Outlook and Financial Guidance

Reflecting strong year-to-date results and continued momentum, management reiterated revenue and Adjusted EBITDA guidance for Sabre excluding Travelocity. Management also reiterated guidance for Travelocity Adjusted EBITDA, consolidated Adjusted EBITDA, consolidated Adjusted Net Income, and Adjusted EPS.

Full Year 2014 Guidance
Sabre Excluding

Travelocity
Travelocity*
Sabre*

($ millions, except EPS)

Revenue
$2,575 – $2,595
$180 – $190
$2,755 – $2,785

Adjusted EBITDA
$833 – $843
$15 – $20
$848 – $863

Adjusted Net Income

$222 – $237

Adjusted EPS

$0.90 – $0.96

*Guidance excludes lastminute.com, not comparable to previous guidance

Sabre recently announced it is exploring strategic alternatives for lastminute.com, which is reported as part of the Travelocity business unit. With this consideration in mind, 2014 guidance has been updated to exclude lastminute.com financial results and expectations. There can be no assurance that a transaction will occur as announced or at all. These updates, which exclude the impact of intercompany eliminations, reduce Travelocity business unit 2014 revenue by approximately $33.4 million for the first quarter, $39.0 million for the second quarter and $46.6 million for the third quarter. On the same basis, Travelocity business unit 2014 Adjusted EBITDA guidance has been adjusted to reflect the removal of a loss of $7.3 million for the first quarter, a loss of $1.4 million for the second quarter, and positive Adjusted EBITDA of $1.6 million for third quarter related to lastminute.com operations. Management has updated Travelocity business unit guidance to reflect these changes, as well as to reflect lower than previously expected Travelocity North America revenues. As a result of these changes, guidance for full year 2014 Travelocity Adjusted Revenue is now $180 – $190 million and Adjusted EBITDA guidance of $15-$20 million remains unchanged.

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Avatar of Linda Hohnholz

Linda Hohnholz

Editor in chief for eTurboNews based in the eTN HQ.

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