Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sabre Corp (SABR, Financial) exceeded its second quarter financial guidance, delivering steady revenue growth and a significant increase in adjusted EBITDA.
- The company generated positive second quarter free cash flow for the first time in five years.
- Sabre Corp (SABR) increased its full-year 2024 revenue and adjusted EBITDA guidance.
- The company achieved solid year-on-year revenue growth driven by higher distribution booking fees and increased CRS transactions in Hospitality Solutions.
- Sabre Corp (SABR) secured significant commercial wins and partnerships, including new agreements with major travel agencies and airlines.
Negative Points
- Air distribution bookings declined 1% year-over-year, driven by softness in Asia group bookings and Latin America bookings.
- There was general softness with leisure intermediary bookings, impacting overall performance.
- The company faces risks and uncertainties that may cause actual results to differ materially from forward-looking statements.
- The transition to offer and order systems in the airline industry is expected to be a long-term process, potentially taking several years.
- Despite positive trends, the company anticipates seasonally lower revenue and adjusted EBITDA in the fourth quarter.
Q & A Highlights
Highlights of Sabre Corp (SABR) Q2 2024 Earnings Call
Q: On the guidance, it seems that you're maintaining your revenue guidance despite some airlines cutting capacity. Can you frame that with the industry? And can you discuss the leisure softness mentioned?
A: (Michael Randolfi, CFO) Our baseline assumption for market growth is flat to nominal growth. We expect stronger air distribution bookings growth in the second half of the year, driven by recent commercial agreements. Despite capacity reductions, airlines are still flying about 5% more in the second half than last year, which is favorable for us. (Kurt Ekert, CEO) We saw leisure softness across both OTA and brick-and-mortar leisure agencies, possibly due to a slight share shift from intermediary channels to airline direct channels. However, Q3 trends are positive for both corporate and leisure GDS market growth.
Q: Can you talk about how the Hospitality Solutions segment fits into Sabre's strategic profile and its potential for higher shareholder value?
A: (Kurt Ekert, CEO) Our Hospitality Solutions business is performing exceptionally well, with products resonating in the market. We are focused on allowing this segment to realize its significant potential, as it is a very fragmented market. Hospitality Solutions is a crucial part of our business strategy.
Q: On the GDS side, can you explain the market share gain versus the decline in air bookings and your main competitor's expansion?
A: (Kurt Ekert, CEO) We gained air distribution industry share for the sixth consecutive quarter. Our share gains will accelerate in Q3 due to significant signed but not yet implemented business and a rich pipeline. There may be an apples-to-oranges comparison with competitors, as we do not include NDC IT bookings in our air distribution volumes, which might be included by others.
Q: Regarding SabreMosaic, where are you in terms of development? Can a carrier run your offer order system as a stand-alone today?
A: (Kurt Ekert, CEO) SabreMosaic is making great progress, especially on the offer side. Our Retail Intelligence suite is in production and can drive revenue accretion. The order component will take longer to develop and implement, likely a 3-5 year journey, but we are working with key carrier partners.
Q: What portion of cost of revenues are incentive fees, and how will they trend with increasing NDC volumes?
A: (Michael Randolfi, CFO) Virtually all cost of revenue is incentive fees. We expect gross margins to remain around 60%. NDC unit economics are similar to traditional bookings, with slightly lower average booking fees and incentive fees, except in EMEA where fees are higher.
Q: Can you unpack the top drivers allowing you to drive the EBITDA beat?
A: (Michael Randolfi, CFO) The beat was driven by a higher average booking fee and higher-than-expected hotel distribution bookings. Additionally, we realized benefits from our technology transformation sooner than expected, leading to lower technology expenses.
Q: How has American Airlines' modified distribution strategy impacted your conversations with travel agents?
A: (Kurt Ekert, CEO) We value our relationship with American Airlines and see NDC as here to stay. Our NDC connectivity and functionality are resonating well with large TMC customers, brick-and-mortar agencies, and OTAs, positioning us as a preferred technology provider.
Q: Can you discuss the split of corporate versus leisure bookings and how it has evolved compared to 2019 levels?
A: (Kurt Ekert, CEO) We have the highest TMC corporate mix among GDSs, which is a minority portion of our overall bookings but relatively higher than our competition. This positions us well for favorable corporate travel growth.
Q: Have you seen any positive effects from American Airlines moving content back on GDSs in July?
A: (Kurt Ekert, CEO) We are seeing improving trends in Q3 for both market and share growth for Sabre, and we appreciate our relationship with American Airlines.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
