SOUTHLAKE, Texas, Aug. 4, 2015 /PRNewswire/ -- Sabre
Corporation (NASDAQ: SABR) today announced financial results for
the quarter ended June 30, 2015.
"In the second quarter, we continued to perform very well
financially, operationally and in delivering new product
innovation, capped off with the strategic Abacus acquisition in
Asia-Pacific. We are well
positioned as we look ahead to the coming years," said Tom Klein, Sabre President and CEO. "Travel
Network revenue increased 7.0% year over year in the quarter,
driven by growth in bookings across all regions, including an
increase of 6.9% in North America
and 19.7% growth in EMEA. In Airline and Hospitality Solutions,
strong revenue growth and nearly four points of margin expansion
drove a 29.5% increase in Adjusted EBITDA. Our performance has been
fueled by our continued innovation for, and commitment to, our
customers. Our momentum underpins our confidence to increase our
full-year guidance."
Q2 2015 Financial Summary
Sabre consolidated second quarter revenue increased 9.4% to
$707.1 million, compared to
$646.4 million for the same period
last year.
Income from continuing operations totaled $32.6 million, compared to $6.5 million in the second quarter of 2014.
Consolidated Adjusted EBITDA was $227.6
million, a 6.1% increase from $214.5
million in the prior year second quarter. The increase in
consolidated Adjusted EBITDA is the result of 29.5% growth in
Airline and Hospitality Solutions Adjusted EBITDA and a 4.0%
increase in Travel Network Adjusted EBITDA.
For the quarter, Sabre reported income from continuing
operations of $0.12 per share and
Adjusted Net Income from continuing operations (Adjusted EPS) of
$0.27 per share.
Cash flow from operations totaled $136.2
million, compared to $110.1
million in the second quarter of 2014. Second quarter Free
Cash Flow was $70.2 million, compared
to $53.3 million in the year ago
period. Capital expenditures totaled $66.1
million, compared to $56.8
million in the year ago period. Adjusted Capital
Expenditures, which includes capitalized implementation costs,
totaled $81.3 million, compared to
$66.8 million in the second quarter
of 2014.
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Financial
Highlights
(in thousands;
unaudited):
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Three Months Ended
June 30,
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Six Months Ended
June 30,
|
2015
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2014
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%
Change
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2015
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2014
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%
Change
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Total Company
(Continuing Operations):
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Revenue
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$
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707,091
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$
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646,380
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9.4
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$
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1,417,439
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$
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1,312,795
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8.0
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Income from
continuing operations
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$
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32,589
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$
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6,455
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404.9
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$
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81,919
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$
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28,414
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188.3
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Adjusted
EBITDA*
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$
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227,573
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$
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214,548
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6.1
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$
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471,159
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$
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425,811
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10.6
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Cash Flow from
Operations
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$
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136,226
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$
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110,134
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23.7
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$
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267,999
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$
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204,456
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31.1
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Capital
Expenditures
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$
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66,051
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$
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56,812
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16.3
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$
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127,963
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$
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106,470
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20.2
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Adjusted Capital
Expenditures*
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$
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81,285
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$
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66,756
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21.8
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$
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157,524
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$
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124,067
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27.0
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Free Cash
Flow*
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$
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70,175
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$
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53,322
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31.6
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$
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140,036
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$
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97,986
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42.9
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Adjusted Free Cash
Flow*
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$
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81,669
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$
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89,886
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(9.1)
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$
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165,759
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$
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150,855
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9.9
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Net Debt (total
debt, less cash)
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$
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2,627,358
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$
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2,855,413
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Net Debt / LTM
Adjusted EBITDA
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3.0x
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3.5x
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Airline and
Hospitality Solutions:
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Revenue
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$
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216,632
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$
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186,573
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16.1
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$
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421,532
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$
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363,290
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16.0
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Passengers
Boarded
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139,265
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131,450
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5.9
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265,439
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249,066
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6.6
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Operating
Income
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$
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49,075
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$
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35,855
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36.9
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$
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77,566
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$
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62,317
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24.5
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Adjusted
EBITDA*
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$
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80,985
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$
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62,555
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29.5
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$
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152,473
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$
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116,015
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31.4
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Travel
Network:
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Revenue
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$
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494,515
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$
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462,337
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7.0
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$
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1,002,445
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$
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954,064
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5.1
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Air
Bookings
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88,442
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81,053
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9.1
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179,865
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170,098
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5.7
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Non-air
Bookings
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14,687
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13,862
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6.0
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28,698
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27,460
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4.5
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Total
Bookings
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103,129
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94,915
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8.7
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208,563
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197,558
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5.6
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Bookings
Share
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36.8
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%
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35.6
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%
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36.3
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%
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35.5
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%
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Operating
Income
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$
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173,691
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$
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165,597
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4.9
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$
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370,942
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$
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350,114
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5.9
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Adjusted
EBITDA*
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$
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205,957
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$
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197,971
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4.0
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$
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438,044
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$
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412,814
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6.1
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*indicates non-GAAP
financial measure; see descriptions and reconciliations
below
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Sabre Airline and Hospitality Solutions
Second quarter 2015 Airline and Hospitality Solutions revenue
increased 16.1% to $216.6 million
from $186.6 million in the prior year
period. Contributing to the increase in revenue was a 5.9% increase
in airline passengers boarded through SabreSonic, strong traction
from new solutions across the portfolio and continued strong
growth in Sabre Hospitality Solutions.
Sabre Airline and Hospitality Solutions Adjusted EBITDA
increased 29.5% to $81.0 million from
$62.6 million in the prior year
period. The increase in Adjusted EBITDA is the result of strong
revenue growth, excellent execution and technology platform scale
benefits, resulting in an Adjusted EBITDA margin of 37.4%, compared
to 33.5% for the prior year quarter.
In Airline Solutions, LATAM Airlines Group, the largest airline
in Latin America, signed an
agreement to use the SabreSonic Suite for all airlines in the
group.
Sabre Travel Network
Second quarter Travel Network revenue increased 7.0% to
$494.5 million, compared to
$462.3 million for the same period in
2014. Total bookings increased 8.7% with growth in all regions.
Bookings growth in North America
was 6.9% in the quarter. Sabre's focus on expansion in EMEA
resulted in bookings growth of 19.7%. Second quarter 2015 Travel
Network Adjusted EBITDA increased 4.0% to $206.0 million.
On July 1, Sabre announced the
completion of its acquisition of Abacus International, the leading
global distribution system (GDS) in the Asia-Pacific region. Prior to the acquisition,
Sabre owned 35% of Abacus. The Abacus acquisition brings fresh
investment and growth opportunities in the travel industry's
largest and fastest growing region. Concurrent with the completion
of the Abacus acquisition, Sabre signed long-term distribution
agreements with the 11 Asian airlines that had sold their 65% share
of Abacus to Sabre.
Refinancing Activity
In the second quarter, Sabre redeemed $480 million of 8.5% 2019 maturity bonds. These
bonds were redeemed through the issuance of $530 million, 5.375% senior secured notes due in
2023, which substantially covered the redeemed notes' principal,
accrued interest and related fees, premiums and expenses.
Dividend
On July 28, 2015, Sabre's Board of
Directors declared a quarterly dividend of $0.09 cents per share on Sabre's common stock.
The dividend will be payable on September
30, 2015, to stockholders of record on September 21, 2015.
Business Outlook and Financial Guidance
Sabre is increasing its full-year guidance for 2015 based on
year-to-date results, continued bookings momentum in Travel
Network, and the earlier than previously forecast July 1 close of the Abacus acquisition.
Sabre expects full-year revenue of between $2.95 billion and $2.98 billion. 2015 Adjusted
EBITDA is expected to be between $930
million and $945 million.
In Airline and Hospitality Solutions, Sabre continues to expect
2015 revenue growth of between 9% and 11%. Passengers boarded are
expected to increase approximately 10% in 2015, including strong
growth in the fourth quarter related to the American Airlines
implementation.
In Travel Network, first half performance and continued share
gains results in increased expectations for 2015 growth. This
increase in expectations is augmented by the earlier than
previously forecast close of the Abacus acquisition. Sabre now
expects 2015 Travel Network revenue growth of 13% or more, driven
by bookings growth of approximately 17%. Excluding Abacus, Sabre
now expects Travel Network revenue growth of greater than 5% on
bookings growth of approximately 6%.
Sabre increased 2015 Adjusted Net Income and Adjusted EPS
guidance to $290 million to $305
million and $1.05 to $1.11,
respectively. Free Cash Flow and Adjusted Free Cash Flow are
expected to be $240 million and more
than $290 million, respectively.
In summary, for the full-year 2015, Sabre now expects the
following results from continuing operations:
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Full-Year 2015
Guidance
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($ millions,
except for EPS)
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Revenue
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$2,950 -
$2,980
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Adjusted
EBITDA
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$930 -
$945
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Adjusted Net
Income
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$290 -
$305
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Adjusted
EPS
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$1.05 -
$1.11
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Conference Call
Sabre will conduct its second quarter 2015 investor conference
call today at 9:00 a.m. ET. The live
webcast and accompanying slide presentation can be accessed via the
Sabre Investor Relations website at investors.sabre.com. A replay
of the event will be available on the website for at least 90 days
following the event.
About Sabre Corporation
Sabre Corporation is a leading technology provider to the global
travel and tourism industry. Sabre's software, data, mobile and
distribution solutions are used by hundreds of airlines and
thousands of hotels to manage vital operations, such as passenger
and guest reservations, revenue management, and flight, network and
crew management. Sabre also operates the world's leading travel
marketplace, processing more than $110
billion of annual travel spend. Headquartered in
Southlake, Texas, USA, Sabre
serves customers in more than 160 countries around the world.
Website Information
We routinely post important information for investors on our
website, www.sabre.com, in the Investor Relations section. We
intend to use this website as a means of disclosing material,
non-public information and for complying with our disclosure
obligations under Regulation FD. Accordingly, investors should
monitor the Investor Relations section of our website, in addition
to following our press releases, SEC filings, public conference
calls, presentations and webcasts. The information contained on, or
that may be accessed through, our website is not incorporated by
reference into, and is not a part of, this document.
Supplemental Financial Information
In conjunction with today's earnings report, a file of
supplemental financial information will be available on the
Investor Relations section of our website, www.sabre.com.
Note on Non-GAAP Financial Measures
This press release includes unaudited non-GAAP financial
measures, including Adjusted Net Income, Adjusted EBITDA, Adjusted
EPS, Adjusted Capital Expenditures, Free Cash Flow, Adjusted Free
Cash Flow and the ratios based on these financial measures. We
present non-GAAP measures when our management believes that the
additional information provides useful information about our
operating performance. Non-GAAP financial measures do not have any
standardized meaning and are therefore unlikely to be comparable to
similar measures presented by other companies. The presentation of
non-GAAP financial measures is not intended to be a substitute for,
and should not be considered in isolation from, the financial
measures reported in accordance with GAAP. See "Non-GAAP
Financial Measures" below for an explanation of the non-GAAP
measures and "Tabular Reconciliations for non-GAAP Measures" below
for a reconciliation of the non-GAAP financial measures to the
comparable GAAP measures.
Forward-looking statements
Certain statements herein are forward-looking statements about
trends, future events, uncertainties and our plans and expectations
of what may happen in the future. Any statements that are not
historical or current facts are forward-looking statements. In many
cases, you can identify forward-looking statements by terms such as
"expect," "guidance," "opportunity," "will," "anticipate," "may,"
"should," "would," "intend," "believe," "potential" or the negative
of these terms or other comparable terminology. Forward-looking
statements involve known and unknown risks, uncertainties and other
factors that may cause Sabre's actual results, performance or
achievements to be materially different from any future results,
performances or achievements expressed or implied by the
forward-looking statements. The potential risks and uncertainties
include, among others, dependency on transaction volumes in the
global travel industry, particularly air travel transaction
volumes, the financial and business effects of acquisitions,
including integration of these acquisitions, adverse global and
regional economic and political conditions, including, but not
limited to, conditions in Venezuela and Russia, exposure to pricing pressure in the
Travel Network business, the implementation and effects of new
agreements, dependence on maintaining and renewing contracts with
customers and other counterparties, dependence on relationships
with travel buyers, changes affecting travel supplier customers,
travel suppliers' usage of alternative distribution models,
reliance on third-party distributor partners and joint ventures to
extend our
GDS services to certain regions and competition in the travel
distribution market and solutions markets. More information about
potential risks and uncertainties that could affect our business
and results of operations is included in the "Risk Factors" and
"Forward-Looking Statements" sections in our Annual Report on Form
10-K filed with the SEC on March 3,
2015. Although we believe that the expectations reflected in
the forward-looking statements are reasonable, we cannot guarantee
future events, results, actions, levels of activity, performance or
achievements. Readers are cautioned not to place undue reliance on
these forward-looking statements. Unless required by law, Sabre
undertakes no obligation to publicly update or revise any
forward-looking statements to reflect circumstances or events after
the date they are made.
SABRE
CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands,
except per share amounts)
(Unaudited)
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|
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|
|
Three Months Ended
June 30,
|
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Six Months Ended
June 30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Revenue
|
$
|
707,091
|
|
|
$
|
646,380
|
|
|
$
|
1,417,439
|
|
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$
|
1,312,795
|
|
Cost of revenue
(1) (2)
|
461,126
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|
422,647
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930,124
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|
874,617
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Selling, general and
administrative (2)
|
123,360
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127,651
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245,718
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|
238,389
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Operating
income
|
122,605
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|
96,082
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|
241,597
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|
199,789
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Other income
(expense):
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Interest expense,
net
|
(42,609)
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(53,235)
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(89,062)
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(117,179)
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Loss on
extinguishment of debt
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(33,235)
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(30,558)
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(33,235)
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(33,538)
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Joint venture equity
income
|
5,307
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|
4,059
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|
13,826
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|
6,500
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Other, net
|
197
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|
|
391
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(4,248)
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(1,963)
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Total other expense,
net
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(70,340)
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(79,343)
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(112,719)
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|
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(146,180)
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Income from
continuing operations before income taxes
|
52,265
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|
|
16,739
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|
|
128,878
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|
|
53,609
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Provision for income
taxes
|
19,676
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|
|
10,284
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|
|
46,959
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|
|
25,195
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Income from
continuing operations
|
32,589
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|
|
6,455
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|
|
81,919
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|
|
28,414
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Income (loss) from
discontinued operations, net of tax
|
696
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(16,650)
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159,607
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(40,706)
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Net income
(loss)
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33,285
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(10,195)
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241,526
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(12,292)
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Net income
attributable to noncontrolling interests
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1,078
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|
702
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|
1,825
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|
1,448
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Net income (loss)
attributable to Sabre Corporation
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32,207
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(10,897)
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239,701
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(13,740)
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Preferred stock
dividends
|
—
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|
|
2,235
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|
|
—
|
|
|
11,381
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Net income (loss)
attributable to common shareholders
|
$
|
32,207
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|
|
$
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(13,132)
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|
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$
|
239,701
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|
|
$
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(25,121)
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|
|
|
|
|
|
|
|
|
Basic net income
(loss) per share attributable to common
shareholders:
|
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|
|
|
|
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Income from
continuing operations
|
$
|
0.12
|
|
|
$
|
0.01
|
|
|
$
|
0.30
|
|
|
$
|
0.07
|
|
Income (loss) from
discontinued operations
|
—
|
|
|
(0.07)
|
|
|
0.59
|
|
|
(0.19)
|
|
Net income (loss) per
common share
|
$
|
0.12
|
|
|
$
|
(0.05)
|
|
|
$
|
0.89
|
|
|
$
|
(0.12)
|
|
Diluted net income
(loss) per share attributable to common
shareholders:
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
$
|
0.11
|
|
|
$
|
0.01
|
|
|
$
|
0.29
|
|
|
$
|
0.07
|
|
Income (loss) from
discontinued operations
|
—
|
|
|
(0.07)
|
|
|
0.57
|
|
|
(0.19)
|
|
Net income (loss) per
common share
|
$
|
0.12
|
|
|
$
|
(0.05)
|
|
|
$
|
0.86
|
|
|
$
|
(0.11)
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
271,948
|
|
|
243,801
|
|
|
270,574
|
|
|
211,431
|
|
Diluted
|
279,101
|
|
|
252,336
|
|
|
278,082
|
|
|
219,969
|
|
|
|
|
|
|
|
|
|
Dividends per common
share
|
$
|
0.09
|
|
|
$
|
—
|
|
|
$
|
0.18
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
(1) Includes
amortization of upfront incentive consideration
|
$
|
10,878
|
|
|
$
|
11,742
|
|
|
$
|
22,050
|
|
|
$
|
22,789
|
|
(2) Includes
stock-based compensation as follows:
|
|
|
|
|
|
|
|
Cost of
revenue
|
$
|
2,902
|
|
|
$
|
1,972
|
|
|
$
|
6,435
|
|
|
$
|
3,358
|
|
Selling, general and
administrative
|
4,428
|
|
|
2,913
|
|
|
9,689
|
|
|
5,126
|
|
SABRE
CORPORATION
CONSOLIDATED
BALANCE SHEETS
(In thousands,
except share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
June 30,
2015
|
|
December 31,
2014
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
|
578,033
|
|
|
$
|
155,679
|
|
Accounts receivable,
net
|
391,779
|
|
|
362,911
|
|
Prepaid expenses and
other current assets
|
32,347
|
|
|
34,841
|
|
Current deferred
income taxes
|
159,442
|
|
|
182,277
|
|
Other receivables,
net
|
35,039
|
|
|
29,893
|
|
Assets held for
sale
|
—
|
|
|
112,558
|
|
Total current
assets
|
1,196,640
|
|
|
878,159
|
|
Property and
equipment, net of accumulated depreciation of $895,351 and
$792,161
|
560,440
|
|
|
551,276
|
|
Investments in joint
ventures
|
130,288
|
|
|
145,320
|
|
Goodwill
|
2,153,214
|
|
|
2,153,499
|
|
Trademarks and brand
names, net of accumulated amortization of $93,052 and
$87,554
|
233,002
|
|
|
238,500
|
|
Other intangible
assets, net of accumulated amortization of $1,013,513 and
$975,701
|
203,675
|
|
|
241,486
|
|
Other assets,
net
|
574,319
|
|
|
509,764
|
|
Total
assets
|
$
|
5,051,578
|
|
|
$
|
4,718,004
|
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
Accounts
payable
|
$
|
133,011
|
|
|
$
|
117,855
|
|
Accrued compensation
and related benefits
|
57,486
|
|
|
83,828
|
|
Accrued subscriber
incentives
|
179,162
|
|
|
145,581
|
|
Deferred
revenues
|
176,554
|
|
|
167,827
|
|
Litigation settlement
liability and related deferred revenue
|
55,099
|
|
|
73,252
|
|
Other accrued
liabilities
|
178,178
|
|
|
189,612
|
|
Current portion of
debt
|
488,930
|
|
|
22,435
|
|
Liabilities held for
sale
|
—
|
|
|
96,544
|
|
Total current
liabilities
|
1,268,420
|
|
|
896,934
|
|
Deferred income
taxes
|
165,555
|
|
|
61,577
|
|
Other noncurrent
liabilities
|
602,237
|
|
|
613,710
|
|
Long-term
debt
|
2,706,273
|
|
|
3,061,400
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
Common Stock: $0.01
par value; 450,000,000 authorized shares; 273,493,600 and
268,237,547 shares issued, 272,777,958 and 267,800,161 shares
outstanding at June 30, 2015 and December 31, 2014,
respectively
|
2,735
|
|
|
2,682
|
|
Additional paid-in
capital
|
1,972,404
|
|
|
1,931,796
|
|
Treasury Stock, at
cost, 715,642 and 437,386 shares at June 30, 2015 and December 31,
2014, respectively
|
(11,462)
|
|
|
(5,297)
|
|
Retained
deficit
|
(1,584,834)
|
|
|
(1,775,616)
|
|
Accumulated other
comprehensive loss
|
(69,532)
|
|
|
(69,803)
|
|
Noncontrolling
interest
|
(218)
|
|
|
621
|
|
Total stockholders'
equity
|
309,093
|
|
|
84,383
|
|
Total liabilities and
stockholders' equity
|
$
|
5,051,578
|
|
|
$
|
4,718,004
|
|
SABRE
CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In
thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
2015
|
|
2014
|
Operating
Activities
|
|
|
|
Net income
(loss)
|
$
|
241,526
|
|
|
$
|
(12,292)
|
|
Adjustments to
reconcile net income (loss) to cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
166,617
|
|
|
152,337
|
|
Amortization of
upfront incentive consideration
|
22,050
|
|
|
22,789
|
|
Litigation-related
(credits) charges
|
(32,557)
|
|
|
(11,615)
|
|
Stock-based
compensation expense
|
16,124
|
|
|
8,484
|
|
Allowance for
doubtful accounts
|
5,329
|
|
|
3,142
|
|
Deferred income
taxes
|
36,757
|
|
|
11,583
|
|
Joint venture equity
income
|
(13,826)
|
|
|
(6,500)
|
|
Dividends received
from joint venture investments
|
28,700
|
|
|
—
|
|
Amortization of debt
issuance costs
|
3,181
|
|
|
3,243
|
|
Debt modification
costs
|
—
|
|
|
3,290
|
|
Loss on
extinguishment of debt
|
33,235
|
|
|
33,538
|
|
Other
|
7,505
|
|
|
8,046
|
|
(Income) loss from
discontinued operations
|
(159,607)
|
|
|
40,706
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
Accounts and other
receivables
|
(47,647)
|
|
|
(25,510)
|
|
Prepaid expenses and
other current assets
|
(631)
|
|
|
5,557
|
|
Capitalized
implementation costs
|
(29,561)
|
|
|
(17,597)
|
|
Upfront incentive
consideration
|
(22,994)
|
|
|
(25,936)
|
|
Other
assets
|
(43,618)
|
|
|
(11,810)
|
|
Accrued compensation
and related benefits
|
(22,802)
|
|
|
(32,495)
|
|
Accounts payable and
other accrued liabilities
|
62,039
|
|
|
14,552
|
|
Deferred revenue
including upfront solution fees
|
18,179
|
|
|
40,944
|
|
Cash provided by
operating activities
|
267,999
|
|
|
204,456
|
|
Investing
Activities
|
|
|
|
|
|
Additions to property
and equipment
|
(127,963)
|
|
|
(106,470)
|
|
Other investing
activities
|
148
|
|
|
235
|
|
Cash used in
investing activities
|
(127,815)
|
|
|
(106,235)
|
|
Financing
Activities
|
|
|
|
|
|
Proceeds of
borrowings from lenders
|
600,000
|
|
|
148,307
|
|
Payments on
borrowings from lenders
|
(491,215)
|
|
|
(791,426)
|
|
Debt prepayment fees
and issuance costs
|
(40,215)
|
|
|
(30,490)
|
|
Proceeds from
issuance of common stock in initial public offering, net
|
—
|
|
|
672,644
|
|
Net proceeds
(payments) on the settlement of equity-based awards
|
18,239
|
|
|
(650)
|
|
Cash dividends paid
to common shareholders
|
(48,919)
|
|
|
—
|
|
Other financing
activities
|
(3,657)
|
|
|
(1,964)
|
|
Cash provided by
(used in) financing activities
|
34,233
|
|
|
(3,579)
|
|
Cash Flows from
Discontinued Operations
|
|
|
|
|
|
Cash used in
operating activities
|
(26,036)
|
|
|
(151,423)
|
|
Cash provided by
(used in) investing activities
|
278,834
|
|
|
(240)
|
|
Cash provided by
(used in) discontinued operations
|
252,798
|
|
|
(151,663)
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
(4,861)
|
|
|
1,165
|
|
Increase (decrease)
in cash and cash equivalents
|
422,354
|
|
|
(55,856)
|
|
Cash and cash
equivalents at beginning of period
|
155,679
|
|
|
308,236
|
|
Cash and cash
equivalents at end of period
|
$
|
578,033
|
|
|
$
|
252,380
|
|
Non-GAAP Financial Measures
We have included both financial measures compiled in accordance
with GAAP and certain non-GAAP financial measures in this earnings
release, including Adjusted Gross Margin, Adjusted Net Income,
Adjusted EBITDA, Adjusted EPS, Adjusted Capital Expenditures, Free
Cash Flow, Adjusted Free Cash Flow and ratios based on these
financial measures.
We define Adjusted Gross Margin as operating income adjusted for
selling, general and administrative expenses, amortization of
upfront incentive consideration, and the cost of revenue portion of
depreciation and amortization, restructuring and other costs, and
stock-based compensation.
We define Adjusted Net Income as income from continuing
operations adjusted for acquisition-related amortization, loss on
extinguishment of debt, other, net, restructuring and other costs,
acquisition-related costs, litigation costs, stock-based
compensation, management fees and the tax impact of net income
adjustments.
We define Adjusted EBITDA as Adjusted Net Income adjusted for
depreciation and amortization of property and equipment,
amortization of capitalized implementation costs, amortization of
upfront incentive consideration, interest expense, net, and
remaining provision for income taxes.
We define Adjusted EPS as Adjusted Net Income divided by the
applicable share count.
We define Adjusted Capital Expenditures as additions to property
and equipment and capitalized implementation costs during the
periods presented.
We define Free Cash Flow as cash provided by operating
activities less cash used in additions to property and equipment.
We define Adjusted Free Cash Flow as free cash flow plus the cash
flow effect of restructuring and other costs, acquisition-related
costs, litigation settlement, other litigation costs and management
fees.
These non-GAAP financial measures are key metrics used by
management and our board of directors to monitor our ongoing core
operations because historical results have been significantly
impacted by events that are unrelated to our core operations as a
result of changes to our business and the regulatory environment.
We believe that these non-GAAP financial measures are used by
investors, analysts and other interested parties as measures of
financial performance and to evaluate our ability to service debt
obligations, fund capital expenditures and meet working capital
requirements. Adjusted Capital Expenditures includes cash flows
used in investing activities, for property and equipment, and cash
flows used in operating activities, for capitalized implementation
costs. Our management uses this combined metric in making product
investment decisions and determining development resource
requirements. We also believe that Adjusted Gross Margin, Adjusted
Net Income, Adjusted EBITDA, Adjusted EPS and Adjusted Capital
Expenditures assist investors in company-to-company and
period-to-period comparisons by excluding differences caused by
variations in capital structures (affecting interest expense), tax
positions and the impact of depreciation and amortization expense.
In addition, amounts derived from Adjusted EBITDA are a primary
component of certain covenants under our senior secured credit
facilities.
Adjusted Gross Margin, Adjusted Net Income, Adjusted EBITDA,
Adjusted EPS, Adjusted Capital Expenditures, Free Cash Flow,
Adjusted Free Cash Flow and ratios based on these financial
measures are not recognized terms under GAAP. These non-GAAP
financial measures and ratios based on them have important
limitations as analytical tools, and should not be viewed in
isolation and do not purport to be alternatives to net income as
indicators of operating performance or cash flows from operating
activities as measures of liquidity. These non-GAAP financial
measures and ratios based on them exclude some, but not all, items
that affect net income or cash flows from operating activities and
these measures may vary among companies. Our use of these measures
has limitations as an analytical tool, and you should not consider
them in isolation or as substitutes for analysis of our results as
reported under GAAP. Some of these limitations are:
- although depreciation and amortization are non-cash
charges, the assets being depreciated and amortized may have to be
replaced in the future, and Adjusted Gross Margin and Adjusted
EBITDA do not reflect cash requirements for such
replacements;
- Adjusted Net Income and Adjusted EBITDA do not reflect
changes in, or cash requirements for, our working capital
needs;
- Adjusted EBITDA does not reflect the interest expense or
the cash requirements necessary to service interest or principal
payments on our indebtedness;
- Adjusted EBITDA does not reflect tax payments that may
represent a reduction in cash available to us;
- Free Cash Flow and Adjusted Free Cash Flow do not reflect
the cash requirements necessary to service the principal payments
on our indebtedness;
- Free Cash Flow and Adjusted Free Cash Flow do not reflect
payments related to restructuring, litigation, acquisition-related
and management fees;
- Free Cash Flow and Adjusted Free Cash Flow remove the
impact of accrual-basis accounting on asset accounts and non-debt
liability accounts; and
- other companies, including companies in our industry, may
calculate Adjusted Gross Margin, Adjusted Net Income, Adjusted
EBITDA, Adjusted EPS, Adjusted Capital Expenditures, Free Cash Flow
or Adjusted Free Cash Flow differently, which reduces their
usefulness as comparative measures.
Tabular
Reconciliations for Non-GAAP Measures
(In thousands,
except per share amounts; unaudited)
Reconciliation of
Net income (Loss) to Adjusted Net Income from continuing operations
and Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Net income (loss)
attributable to common shareholders
|
$
|
32,207
|
|
|
$
|
(13,132)
|
|
|
$
|
239,701
|
|
|
$
|
(25,121)
|
|
(Income) loss from
discontinued operations, net of tax
|
(696)
|
|
|
16,650
|
|
|
(159,607)
|
|
|
40,706
|
|
Net income
attributable to noncontrolling interests(1)
|
1,078
|
|
|
702
|
|
|
1,825
|
|
|
1,448
|
|
Preferred stock
dividends
|
—
|
|
|
2,235
|
|
|
—
|
|
|
11,381
|
|
Income from
continuing operations
|
32,589
|
|
|
6,455
|
|
|
81,919
|
|
|
28,414
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related
amortization(2a)
|
23,211
|
|
|
21,953
|
|
|
44,886
|
|
|
54,842
|
|
Loss on
extinguishment of debt
|
33,235
|
|
|
30,558
|
|
|
33,235
|
|
|
33,538
|
|
Other,
net(4)
|
(197)
|
|
|
(391)
|
|
|
4,248
|
|
|
1,963
|
|
Restructuring and
other costs(5)
|
—
|
|
|
2,128
|
|
|
—
|
|
|
3,684
|
|
Acquisition-related
costs(6)
|
2,053
|
|
|
—
|
|
|
3,864
|
|
|
—
|
|
Litigation
costs(7)
|
2,043
|
|
|
2,572
|
|
|
5,479
|
|
|
7,118
|
|
Stock-based
compensation
|
7,330
|
|
|
4,885
|
|
|
16,124
|
|
|
8,484
|
|
Management
fees(8)
|
—
|
|
|
21,576
|
|
|
—
|
|
|
23,508
|
|
Tax impact of net
income adjustments
|
(24,210)
|
|
|
(32,481)
|
|
|
(38,767)
|
|
|
(51,924)
|
|
Adjusted Net Income
from continuing operations
|
$
|
76,054
|
|
|
$
|
57,255
|
|
|
$
|
150,988
|
|
|
$
|
109,627
|
|
Adjusted Net Income
from continuing operations
per share
|
$
|
0.27
|
|
|
$
|
0.23
|
|
|
$
|
0.54
|
|
|
$
|
0.50
|
|
Diluted
weighted-average common shares outstanding
|
279,101
|
|
|
252,336
|
|
|
278,082
|
|
|
219,969
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income
from continuing operations
|
$
|
76,054
|
|
|
$
|
57,255
|
|
|
$
|
150,988
|
|
|
$
|
109,627
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization of property
and equipment(2b)
|
46,244
|
|
|
40,661
|
|
|
107,907
|
|
|
81,110
|
|
Amortization of
capitalized implementation costs(2c)
|
7,902
|
|
|
8,890
|
|
|
15,426
|
|
|
17,987
|
|
Amortization of
upfront incentive consideration(3)
|
10,878
|
|
|
11,742
|
|
|
22,050
|
|
|
22,789
|
|
Interest expense,
net
|
42,609
|
|
|
53,235
|
|
|
89,062
|
|
|
117,179
|
|
Remaining provision
for income taxes
|
43,886
|
|
|
42,765
|
|
|
85,726
|
|
|
77,119
|
|
Adjusted
EBITDA
|
$
|
227,573
|
|
|
$
|
214,548
|
|
|
$
|
471,159
|
|
|
$
|
425,811
|
|
Reconciliation of
Adjusted Capital Expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Additions to property
and equipment
|
$
|
66,051
|
|
|
$
|
56,812
|
|
|
$
|
127,963
|
|
|
$
|
106,470
|
|
Capitalized
implementation costs
|
15,234
|
|
|
9,944
|
|
|
29,561
|
|
|
17,597
|
|
Adjusted Capital
Expenditures
|
$
|
81,285
|
|
|
$
|
66,756
|
|
|
$
|
157,524
|
|
|
$
|
124,067
|
|
Reconciliation of
Adjusted Free Cash Flow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Cash provided by
operating activities
|
$
|
136,226
|
|
|
$
|
110,134
|
|
|
$
|
267,999
|
|
|
$
|
204,456
|
|
Cash used in
investing activities
|
(66,051)
|
|
|
(56,577)
|
|
|
(127,815)
|
|
|
(106,235)
|
|
Cash used in
financing activities
|
56,514
|
|
|
25,023
|
|
|
34,233
|
|
|
(3,579)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Cash provided by
operating activities
|
$
|
136,226
|
|
|
$
|
110,134
|
|
|
$
|
267,999
|
|
|
$
|
204,456
|
|
Additions to property
and equipment
|
(66,051)
|
|
|
(56,812)
|
|
|
(127,963)
|
|
|
(106,470)
|
|
Free Cash
Flow
|
70,175
|
|
|
53,322
|
|
|
140,036
|
|
|
97,986
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Restructuring and
other costs(5)(9)
|
—
|
|
|
5,405
|
|
|
280
|
|
|
10,595
|
|
Acquisition-related
costs(6)(9)
|
2,053
|
|
|
—
|
|
|
3,864
|
|
|
—
|
|
Litigation
settlement(7)(10)
|
7,398
|
|
|
7,011
|
|
|
16,100
|
|
|
11,648
|
|
Other litigation
costs(7)(9)
|
2,043
|
|
|
2,572
|
|
|
5,479
|
|
|
7,118
|
|
Management
fees(8)(9)
|
—
|
|
|
21,576
|
|
|
—
|
|
|
23,508
|
|
Adjusted Free Cash
Flow
|
$
|
81,669
|
|
|
$
|
89,886
|
|
|
$
|
165,759
|
|
|
$
|
150,855
|
|
Reconciliation of
Operating Income (loss) to Adjusted Gross Margin and Adjusted
EBITDA by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2015
|
|
Travel
Network
|
|
Airline and
Hospitality
Solutions
|
|
Corporate
|
|
Total
|
Operating income
(loss)
|
$
|
173,691
|
|
|
$
|
49,075
|
|
|
$
|
(100,161)
|
|
|
$
|
122,605
|
|
Add back:
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
26,600
|
|
|
15,036
|
|
|
81,724
|
|
|
123,360
|
|
Cost of revenue
adjustments:
|
|
|
|
|
|
|
|
Depreciation and
amortization(2)
|
14,758
|
|
|
31,671
|
|
|
6,650
|
|
|
53,079
|
|
Amortization of
upfront incentive consideration(3)
|
10,878
|
|
|
—
|
|
|
—
|
|
|
10,878
|
|
Stock-based
compensation
|
—
|
|
|
—
|
|
|
2,902
|
|
|
2,902
|
|
Adjusted Gross
Margin
|
225,927
|
|
|
95,782
|
|
|
(8,885)
|
|
|
312,824
|
|
Selling, general and
administrative
|
(26,600)
|
|
|
(15,036)
|
|
|
(81,724)
|
|
|
(123,360)
|
|
Joint venture equity
income
|
5,307
|
|
|
—
|
|
|
—
|
|
|
5,307
|
|
Joint venture
intangible amortization(2a)
|
801
|
|
|
—
|
|
|
—
|
|
|
801
|
|
Selling, general and
administrative adjustments:
|
|
|
|
|
|
|
|
Depreciation and
amortization(2)
|
522
|
|
|
239
|
|
|
22,716
|
|
|
23,477
|
|
Acquisition-related
costs(6)
|
—
|
|
|
—
|
|
|
2,053
|
|
|
2,053
|
|
Litigation
costs(7)
|
—
|
|
|
—
|
|
|
2,043
|
|
|
2,043
|
|
Stock-based
compensation
|
—
|
|
|
—
|
|
|
4,428
|
|
|
4,428
|
|
Adjusted
EBITDA
|
$
|
205,957
|
|
|
$
|
80,985
|
|
|
$
|
(59,369)
|
|
|
$
|
227,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2014
|
|
Travel
Network
|
|
Airline and
Hospitality
Solutions
|
|
Corporate
|
|
Total
|
Operating income
(loss)
|
$
|
165,597
|
|
|
$
|
35,855
|
|
|
$
|
(105,370)
|
|
|
$
|
96,082
|
|
Add back:
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
24,555
|
|
|
12,924
|
|
|
90,172
|
|
|
127,651
|
|
Cost of revenue
adjustments:
|
|
|
|
|
|
|
|
Depreciation and
amortization(2)
|
15,267
|
|
|
26,480
|
|
|
6,368
|
|
|
48,115
|
|
Amortization of
upfront incentive consideration(3)
|
11,742
|
|
|
—
|
|
|
—
|
|
|
11,742
|
|
Restructuring and
other costs(5)
|
—
|
|
|
—
|
|
|
1,401
|
|
|
1,401
|
|
Stock-based
compensation
|
—
|
|
|
—
|
|
|
1,972
|
|
|
1,972
|
|
Adjusted Gross
Margin
|
217,161
|
|
|
75,259
|
|
|
(5,457)
|
|
|
286,963
|
|
Selling, general and
administrative
|
(24,555)
|
|
|
(12,924)
|
|
|
(90,172)
|
|
|
(127,651)
|
|
Joint venture equity
income
|
4,059
|
|
|
—
|
|
|
—
|
|
|
4,059
|
|
Joint venture
intangible amortization(2a)
|
801
|
|
|
—
|
|
|
—
|
|
|
801
|
|
Selling, general and
administrative adjustments:
|
|
|
|
|
|
|
|
Depreciation and
amortization(2)
|
505
|
|
|
220
|
|
|
21,863
|
|
|
22,588
|
|
Restructuring and
other costs(5)
|
—
|
|
|
—
|
|
|
727
|
|
|
727
|
|
Litigation
costs(7)
|
—
|
|
|
—
|
|
|
2,572
|
|
|
2,572
|
|
Stock-based
compensation
|
—
|
|
|
—
|
|
|
2,913
|
|
|
2,913
|
|
Management
fees(8)
|
—
|
|
|
—
|
|
|
21,576
|
|
|
21,576
|
|
Adjusted
EBITDA
|
$
|
197,971
|
|
|
$
|
62,555
|
|
|
$
|
(45,978)
|
|
|
$
|
214,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2015
|
|
Travel
Network
|
|
Airline and
Hospitality
Solutions
|
|
Corporate
|
|
Total
|
Operating income
(loss)
|
$
|
370,942
|
|
|
$
|
77,566
|
|
|
$
|
(206,911)
|
|
|
$
|
241,597
|
|
Add back:
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
48,484
|
|
|
33,015
|
|
|
164,219
|
|
|
245,718
|
|
Cost of revenue
adjustments:
|
|
|
|
|
|
|
|
Depreciation and
amortization(2)
|
28,570
|
|
|
74,400
|
|
|
14,776
|
|
|
117,746
|
|
Amortization of
upfront incentive consideration(3)
|
22,050
|
|
|
—
|
|
|
—
|
|
|
22,050
|
|
Stock-based
compensation
|
—
|
|
|
—
|
|
|
6,435
|
|
|
6,435
|
|
Adjusted Gross
Margin
|
470,046
|
|
|
184,981
|
|
|
(21,481)
|
|
|
633,546
|
|
Selling, general and
administrative
|
(48,484)
|
|
|
(33,015)
|
|
|
(164,219)
|
|
|
(245,718)
|
|
Joint venture equity
income
|
13,826
|
|
|
—
|
|
|
—
|
|
|
13,826
|
|
Joint venture
intangible amortization(2a)
|
1,602
|
|
|
—
|
|
|
—
|
|
|
1,602
|
|
Selling, general and
administrative adjustments:
|
|
|
|
|
|
|
|
Depreciation and
amortization(2)
|
1,054
|
|
|
507
|
|
|
47,310
|
|
|
48,871
|
|
Acquisition-related
costs(6)
|
—
|
|
|
—
|
|
|
3,864
|
|
|
3,864
|
|
Litigation
costs(7)
|
—
|
|
|
—
|
|
|
5,479
|
|
|
5,479
|
|
Stock-based
compensation
|
—
|
|
|
—
|
|
|
9,689
|
|
|
9,689
|
|
Adjusted
EBITDA
|
$
|
438,044
|
|
|
$
|
152,473
|
|
|
$
|
(119,358)
|
|
|
$
|
471,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2014
|
|
Travel
Network
|
|
Airline and
Hospitality
Solutions
|
|
Corporate
|
|
Total
|
Operating income
(loss)
|
$
|
350,114
|
|
|
$
|
62,317
|
|
|
$
|
(212,642)
|
|
|
$
|
199,789
|
|
Add back:
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
50,227
|
|
|
25,319
|
|
|
162,843
|
|
|
238,389
|
|
Cost of revenue
adjustments:
|
|
|
|
|
|
|
|
Depreciation and
amortization(2)
|
30,679
|
|
|
53,163
|
|
|
23,082
|
|
|
106,924
|
|
Amortization of
upfront incentive consideration(3)
|
22,789
|
|
|
—
|
|
|
—
|
|
|
22,789
|
|
Restructuring and
other costs(5)
|
—
|
|
|
—
|
|
|
2,579
|
|
|
2,579
|
|
Stock-based
compensation
|
—
|
|
|
—
|
|
|
3,358
|
|
|
3,358
|
|
Adjusted Gross
Margin
|
453,809
|
|
|
140,799
|
|
|
(20,780)
|
|
|
573,828
|
|
Selling, general and
administrative
|
(50,227)
|
|
|
(25,319)
|
|
|
(162,843)
|
|
|
(238,389)
|
|
Joint venture equity
income
|
6,500
|
|
|
—
|
|
|
—
|
|
|
6,500
|
|
Joint venture
intangible amortization(2a)
|
1,602
|
|
|
—
|
|
|
—
|
|
|
1,602
|
|
Selling, general and
administrative adjustments:
|
|
|
|
|
|
|
|
Depreciation and
amortization(2)
|
1,130
|
|
|
535
|
|
|
43,748
|
|
|
45,413
|
|
Restructuring and
other costs(5)
|
—
|
|
|
—
|
|
|
1,105
|
|
|
1,105
|
|
Litigation
costs(7)
|
—
|
|
|
—
|
|
|
7,118
|
|
|
7,118
|
|
Stock-based
compensation
|
—
|
|
|
—
|
|
|
5,126
|
|
|
5,126
|
|
Management
fees(8)
|
—
|
|
|
—
|
|
|
23,508
|
|
|
23,508
|
|
Adjusted
EBITDA
|
$
|
412,814
|
|
|
$
|
116,015
|
|
|
$
|
(103,018)
|
|
|
$
|
425,811
|
|
Non-GAAP
Footnotes
|
|
|
(1)
|
Net Income
attributable to noncontrolling interests represents an adjustment
to include earnings allocated to noncontrolling interests held in
Sabre Travel Network Middle East of 40% for all periods presented
and in Sabre Seyahat Dagitim Sistemleri A.S. of 40% beginning in
April 2014 for the three and six months ended June 30, 2015 and
2014.
|
|
|
(2)
|
Depreciation and
amortization expenses:
|
|
|
|
a.
|
Acquisition-related
amortization represents amortization of intangible assets from the
take-private transaction in 2007 as well as intangibles associated
with acquisitions since that date and amortization of the excess
basis in our underlying equity in joint ventures.
|
|
|
|
b.
|
Depreciation and
amortization of property and equipment includes software developed
for internal use.
|
|
|
|
c.
|
Amortization of
capitalized implementation costs represents amortization of upfront
costs to implement new customer contracts under our SaaS and hosted
revenue model.
|
|
|
(3)
|
Our Travel Network
business at times provides upfront incentive consideration to
travel agency subscribers at the inception or modification of a
service contract, which are capitalized and amortized to cost of
revenue over an average expected life of the service contract,
generally over three to five years. Such consideration is made with
the objective of increasing the number of clients or to ensure or
improve customer loyalty. Such service contract terms are
established such that the supplier and other fees generated over
the life of the contract will exceed the cost of the incentive
consideration provided upfront. Such service contracts with travel
agency subscribers require that the customer commit to achieving
certain economic objectives and generally have terms requiring
repayment of the upfront incentive consideration if those
objectives are not met.
|
|
|
(4)
|
Other, net primarily
represents foreign exchange gains and losses related to the
remeasurement of foreign currency denominated balances included in
our consolidated balance sheets into the relevant functional
currency.
|
|
|
(5)
|
Restructuring and
other costs represents charges associated with business
restructuring and associated changes implemented which resulted in
severance benefits related to employee terminations, integration
and facility opening or closing costs and other business
reorganization costs.
|
|
|
(6)
|
Acquisition-related
costs represent fees and expenses incurred associated with the
acquisition of Abacus.
|
|
|
(7)
|
Litigation settlement
and other litigation costs represent settlements or charges
associated with airline antitrust litigation.
|
|
|
(8)
|
We paid an annual
management fee, pursuant to a Management Services Agreement
("MSA"), to TPG Global, LLC ("TPG") and Silver Lake Management
Company ("Silver Lake") in an amount between (i) $5 million and
(ii) $7 million, the actual amount of which is calculated based
upon 1% of Adjusted EBITDA, earned by the company in such fiscal
year up to a maximum of $7 million. In addition, the MSA provided
for reimbursement of certain costs incurred by TPG and Silver Lake,
which are included in this line item. The MSA was terminated in
April 2014 in connection with our initial public
offering.
|
|
|
(9)
|
The adjustments to
reconcile cash provided by operating activities to Adjusted Free
Cash Flow reflect the amounts expensed in our statements of
operations in the respective periods adjusted for cash and non-cash
portions in instances where material.
|
|
|
(10)
|
Includes payment
credits used by American Airlines to pay for purchases of our
technology services. The payment credits were provided by us as
part of our litigation settlement with American
Airlines.
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/sabre-reports-second-quarter-2015-results-300122921.html
SOURCE Sabre Corporation