Sabre Corporation (NASDAQ:SABR) Q1 2024 Earnings Call Transcript

Sabre Corporation (NASDAQ:SABR) Q1 2024 Earnings Call Transcript May 2, 2024

Sabre Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning and welcome to the Sabre First Quarter 2024 Earnings Conference Call. My name is Gerald and I will be your operator. As a reminder, please note today’s call is being recorded. I will now turn the call over to the Senior Vice President of Investor Relations and Treasurer, Brian Evans. Please go ahead, sir.

Brian Evans: Thank you, and good morning everyone. Welcome to Sabre’s first quarter 2024 earnings call. This morning we issued an earnings press release, which is available on our website at investors.sabre.com. A slide presentation, which accompanies today’s prepared remarks, is also available during this call on the Sabre Investor Relations web page. A replay of today’s call will be available on our website later this morning. We advise you that our comments contain forward-looking statements that represent our beliefs or expectations about future events, including the effects of cost efficiencies and growth strategies, distribution volumes, benefits from our technology transformation, commercial and strategic arrangements, our financial guidance and targets, free cash flow, and liquidity, among others.

All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today’s conference call. More information on these risks and uncertainties is contained in our earnings release issued this morning and our SEC filings, including our Form 10-Q for the quarter ended March 31, 2024. Throughout today’s call, we will also be presenting certain non-GAAP financial measures. References during today’s call to adjusted EBITDA, adjusted EBITDA margin, adjusted EPS and free cash flow have been adjusted to exclude certain items. The most directly and comparable GAAP measures and reconciliations for non-GAAP measures are available in the earnings release and other documents posted on our website at investors.sabre.com.

Participating with me are Kurt Ekert, President and CEO, and Mike Randolfi, Chief Financial Officer. Scott Wilson, EVP and President of Hospitality Solutions, will be available for Q&A after the prepared remarks. With that, I will turn the call over to Kurt.

Kurt Ekert: Thanks, Brian, and hello everyone. We appreciate your interest in Sabre, and thank you for joining today’s session. I’m pleased to discuss our first quarter, the success of which was a direct result of our team members’ focus, unrelenting execution of our plan and commitment to our customers. Earlier today, we reported Q1 financial results that exceeded our previous guidance and included solid revenue growth, a substantial increase in adjusted EBITDA, and significant margin expansion, which has been a continuing trend. We achieved commercial wins that drove additional distribution industry share gains, delivered next-generation products to meet our customers’ needs, and advanced our technology transformation to increase our speed and efficiency, all with a lower cost base.

This progress leads us to increase our revenue and adjusted EBITDA guidance for full year 2024. Let me share the agenda for today’s call. On Slide 4, you can see an overview of the topics that Mike and I will cover. First, I will review our Q1 business highlights and accomplishments. Next, I’ll provide a brief update on our technology transformation and highlight some of the recent product and commercial wins that our global team has achieved. Finally, before handing off to Mike, I’ll close with a snapshot of our growth strategies and the positive momentum they are driving. Mike will then take you through the financial results for the first quarter and provide an update to our 2024 guidance. Before I move on, my team and I extend enthusiastic congratulations to Gail Mandel on her election as Sabre’s new Board Chair.

Gail’s vast operating experience and depth of travel industry knowledge have proven invaluable to Sabre since she joined the Board in April 2020. We also extend deep gratitude to Sean Menke for his leadership as CEO and Board Chair during an unprecedented time in Sabre’s history, and we wish him well. Now let’s turn to Slide 5. We achieved solid revenue growth driven by traction in our growth strategies and a higher average booking fee, combined with our cost structure improvements, to more than double Sabre’s Adjusted EBITDA margin versus the first quarter of 2023. These achievements drove better than expected Adjusted EBITDA to be well above our guidance for the quarter. On to Slide 6. As a reminder, we have four key strategic priorities that drive our long-term growth, and form the foundation of our resource allocation and decision making.

First, generating positive free cash flow and de-levering the balance sheet remain important financial objectives. The significant improvement in our adjusted EBITDA in the first quarter keeps us on track to generate positive free cash flow in 2024. We also took important steps during the first quarter to further align our debt maturities over the next few years with our projected free cash flow expectations. We now plan to repay the remaining 2025 maturities using cash from our balance sheet. On our second priority, achieving sustainable long-term growth, we continued to grow our share of air distribution industry bookings in the first quarter, which I will touch on in greater detail in a moment. Turning to Hospitality Solutions, our team delivered strong financial results in the first quarter and is executing on the interim milestones we have established with Hyatt to bring them onto our SynXis CRS platform.

Implementation is expected to begin this quarter, within just 12 months of our contract announcement. Our third strategic priority is to drive innovation and enhance our value proposition. We recently announced the development of Sabre Red Launchpad alongside our launch partner Internova Travel Group. This new booking solution supports NDC, low-cost carrier, and traditional edifact content options, while giving agencies more choice and flexibility in how they manage their workforces. Additionally, we continue to invest resources focused on each of our six growth strategies that are designed to provide intelligent retailing and next-gen distribution technology. I will provide proof points on how we are delivering results from these in just a moment.

Last, our team once again delivered on our technology transformation goals, and we expect to achieve our operational and cost savings objectives by year end 2024. Turning to Slide 7. Travel Solutions delivered a solid first quarter that helped drive financial results above our previous Q1 guidance. Distribution industry share expansion, strong growth in our lodging, ground and sea business, and continued improvement in the average fee from a richer booking mix helped drive a $74 million, or 64%, year-on-year increase in Travel Solutions’ adjusted EBITDA. On to Slide 8. As we highlighted throughout 2023, Sabre is growing its share of distribution industry bookings. As you can see, our share in Q1 2024 expanded for the fifth consecutive quarter on a year-over-year basis.

In addition, our share in Q1 2024 also increased on a sequential basis from Q4 2023 as corporate travel improved in the quarter especially relative to the trends we experienced late last year. Turning to Slide 9. We are proud of the consistently strong results our Hospitality Solutions team delivered in the first quarter. Total revenue was up 7% year-over-year on solid growth in CRS transactions during the quarter. In addition, adjusted EBITDA margins grew approximately 10% and overall adjusted EBITDA increased by $11 million versus Q1 2023. As we mentioned last quarter, the SaaS operating model inherent in our Hospitality Solutions business generates high recurring revenue. We believe consistent revenue growth, 81% recurring revenue, a steady margin expansion trend, and a strong value proposition for a growing customer base of hotel operators seeking enhanced IT capabilities support an improving value trajectory for this business.

Please turn to slide 10. Our technology transformation remains on course to achieve our cost savings targets and technology goals by year-end 2024. Further, we continue to expect an overall technology cost reduction of greater than $150 million in 2025 versus 2023 from these efforts. As the chart indicates, our migration to Google cloud continues to drive improved efficiency in our business. In the first quarter, our unit cost of compute again declined by nearly 20% from the first quarter 2023, and was down approximately 55% versus 2019. To enhance productivity, we introduced generative AI tools to approximately 800 of our software engineers during the first quarter. We expect this initiative to further accelerate our product development throughput and speed innovation.

Overall, we believe our partnership with Google and our commitment to investing in innovation will continue to deliver modern technology solutions that meet the changing needs of our customers. Please turn to slide 11. Once again, our sales and commercial teams delivered a number of significant business wins during Q1 that highlight how Sabre’s intelligent retailing and modern distribution solutions consistently help our customers solve the complexity of today’s travel marketplace. Following are some examples. In Distribution, our expanded relationship with Air India continues to support bookings growth and industry share gains. In addition, we signed important renewals with both Southwest Airlines and Alaska Airlines, two carriers posting above-market rates of growth in overall distribution bookings.

On new distribution capability, or NDC, we continue to accelerate investments to offer more robust functionality to a growing number of carrier and agency partners. Recently, SAP Concur has integrated Sabre’s Offer and Order APIs, making Sabre the first GDS provider to power NDC for SAP Concur and the corporate travelers that it serves. TMCs and corporations using Concur Travel are now able to shop, book, fulfill and service NDC content via the Sabre GDS. Additionally, earlier this week, we announced that Serko, a leader in online travel booking and expense management based in New Zealand, has launched Sabre’s NDC content in its online travel platform, making Sabre the first GDS to provide NDC content via Serko and its platform that serves the business travel market.

In Airline IT, our team recently secured an agreement with Aegean Airlines, which operates on a competitor’s PSS, for our intelligent retailing product, Dynamic Availability. This important new partnership is testament that our modular, next-gen solutions are platform agnostic, and are gaining traction with customers regardless of a carrier’s PSS. Also within Airline IT, Air Serbia recently reaffirmed its partnership with Sabre by signing a multiyear early renewal for SabreSonic, and announced that it will also adopt Sabre’s pricing and revenue optimization suite to better manage its inventory and network. Additionally, just last month, LATAM Airlines Group announced that it will adopt Sabre Air Price IQ, our cloud-native, intelligent retailing solution designed to personalize travel offers and maximize customer revenue utilizing real-time data, revenue management strategies, and artificial intelligence models.

On the agency front, we signed a new multi-year agreement and converted Duluth Travel, a leader in U.S. government travel, to Sabre. In addition, we recently announced a technology initiative with InterparkTriple, the leading online travel agency in South Korea, where we will apply our cutting edge Travel AI technology to provide users with enhanced travel content and more personalized experiences. We also signed important deals with Etraveli Group, one of the five largest agencies globally by distribution bookings, and also with W2M, one of the largest agencies based in Spain. In summary, I commend our team for achieving a number of commercial wins during the first quarter with both new and existing customers. On to Slide 12. I am pleased to report that during the first quarter we made meaningful progress on each of our growth strategies, which are designed to deliver modern distribution and retailing technology to meet the evolving needs of the marketplace.

Our multi-source platform has expanded to include low-cost carrier content from 20 new airline partners. Sabre’s platform offers LCC, integrated NDC and edifact content in one place, coupled with our proprietary functionality, APIs and business logic that we believe are best-in-class. Our powerful platform enables carriers to dynamically sell through intermediaries while importantly providing buyers the choice, transparency, speed, efficiency and seamless user experience, across all channels, that best meets their needs. On distribution expansion, as I mentioned earlier, we again realized solid share gains in air distribution in the first quarter as buyers with complex IT demands continue to select Sabre as their preferred technology partner.

We believe our compelling distribution offering, especially our multi-source platform, recent wins with global carriers such as Air India, as well as signed but not yet announced or implemented business, and a rich pipeline of new business, position us well for continued distribution share expansion. Hotel distribution experienced strong growth in the first quarter with hotel bookings, the largest contributor to our lodging, ground, and sea business, up 11% year-over-year, and hotel attachment rate to air bookings up 2.5 points. We believe our content services lodging platform, which integrates numerous disparate content sources, provides intelligent and relevant shopping responses, and is consumable through our APIs and across myriad channels, will drive meaningful growth as it brings our customers a leading accommodation offering.

In payments, we are excited about the growth opportunity of this business and believe our leading products position us well to unlock substantial returns over the long-term. During the first quarter, we signed more than 80 new customer agreements, and our virtual card deployments jumped 31% year-over-year. Sabre made significant strides in delivering next-generation Airline IT products and solutions in the first quarter. In addition to Dynamic Availability and Air Price IQ commercial wins, we are excited about the progress on our offer/order technology, and expect to make significant product and commercial announcements on this suite of solutions in the coming months. Last, we continue to see strong momentum in Hospitality Solutions. As I mentioned previously, implementation work with Hyatt to provide our SynXis central reservation system technology is moving at pace, with implementation expected to begin this quarter.

We also announced an important multi-year renewal with Wyndham yesterday that highlights the successful migration of more than 5,000 Wyndham hotels to our SynXis Property Hub platform nearly one year ahead of schedule. In addition, the number of properties to adopt our next generation SynXis Retailing solution has expanded by 33% year-to-date. These achievements are just a few of the reasons why we continue to expect Hospitality Solutions to deliver double digit revenue growth and substantial margin improvement for 2024. In summary, we believe that our focus on these strategies will drive sustainable growth over the long-term. I will now hand the call over to Mike to walk you through our financial performance and forward outlook.

Mike Randolfi: Thanks Kurt, and good morning everyone. Please turn to Slide 13. The first quarter was a strong quarter for Sabre. We exceeded guidance in each of our key metrics as our continued focus on efficiency combined with solid revenue growth to drive significant margin expansion. Our technology transformation and commitment to containing expenses drove our cost structure meaningfully lower. Importantly, our improved cost base and greater efficiency enhances our ability to fund the research and product development initiatives that are critical to delivering on our long-term strategic priorities. In addition to the strong operating performance outlined here on this slide, our team also delivered several significant debt refinancing transactions earlier this year that extended approximately $300 million of debt maturities.

These transactions provide additional balance sheet flexibility and better align projected future free cash flow generation with our upcoming maturity timeline. We expect to achieve positive quarterly free cash flow moving forward in 2024 and for the full year, and plan to repay the remaining 2025 maturities with cash from our balance sheet. Please turn to Slide 14. As you can see from this table, we exceeded our guidance for revenue, adjusted EBITDA, and free cash flow in the first quarter. With regards to outperformance on revenue as compared to our prior Q1 guide, about one third is driven by a higher average bookings fee than expected, and about two thirds is driven by higher total distribution bookings. Revenue strength and continued cost efficiencies drove strong flow through to the bottom line, enabling our $27 million adjusted EBITDA beat.

Turning to Slide 15. Total Q1 revenue was $783 million, an increase of $40 million, or 5% versus last year. Distribution revenue totaled $572 million, a $46 million, or 9% increase compared to $526 million in Q1 2023. Our total Distribution bookings were 98 million in the quarter, a 2% increase compared to 97 million in Q1 2023. Our average booking fee was $5.81 in the first quarter, up 7% from Q1 2023, as we realized an increase in corporate travel volumes resulting in higher booking fees. IT Solutions revenue totaled $141 million in the quarter. This was a $10 million decline versus revenue of $152 million in the prior year, driven by previously disclosed de-migrations. Hospitality Solutions Q1 2024 revenue totaled $79 million, a $5 million, or 7% improvement versus revenue of $74 million in Q1 2023.

Adjusted EBITDA in the first quarter was $8 million, an improvement of $11 million versus Q1 2023. This represents the strongest first quarter adjusted EBITDA in six years. With the strong pipeline of new property growth, including additions from our Hyatt implementation, we are on track for double-digit revenue growth in 2024 with double-digit margins. Sabre’s adjusted EBITDA of $142 million in Q1 2024 versus $58 million in Q1 2023 represented an $84 million improvement year-over-year. As I mentioned earlier, the cost actions we implemented last year reduced our adjusted SG&A and technology expenses by 16% on a year-over-year basis in the first quarter, and helped drive our adjusted EBITDA margin from about 8% in Q1 2023, to over 18% in the first quarter of this year.

Free cash flow was negative $96 million, driven primarily by typical seasonal working capital trends. We ended the first quarter with a cash balance of $650 million. Turning to Slide 16. We completed a number of refinancing transactions during the first quarter to strengthen our balance sheet as we continue to focus on our long-term strategic and financial priorities. These refinancings reduced our 2025 debt maturities by over $300 million, increased our liquidity by over $70 million, and better aligned our maturities with projected free cash flow that we expect to generate in the coming years. As you can see on the slide, our next significant maturity will not come due until June 2027, providing a significant runway as we expect our business to continue to gain momentum and our financial performance to continue to improve.

As a result of these recent transactions, we now plan to repay our remaining 2025 debt maturities with cash from our balance sheet. Turning to slide 17. Regarding guidance for the second quarter of 2024, we expect revenue of approximately $750 million, adjusted EBITDA of approximately $115 million and positive free cash flow. As a reminder, with regard to typical seasonal sequential trends, second quarter air distribution bookings are typically lower by high single digits versus the first quarter. For the full year 2024, we expect revenue of approximately $3.04 billion, and adjusted EBITDA of approximately $520 million. As you can see in this updated outlook, we continue to expect strong operating leverage from our technology transformation and heightened focus on cost containment.

In addition, in 2024, we expect to generate positive free cash flow in the second, third, and fourth quarters, and for the full-year. With the recent refinancings and changes in the forward interest rate curve, we now expect cash interest to be approximately $375 million. As we look at the pace of capital expenditures through April, we now expect to spend approximately $85 million this year. Furthermore, we believe we are on track to achieve our 2025 targets of greater than $700 million in adjusted EBITDA and greater than $200 million in free cash flow that we outlined during our Q4 earnings call in February. In conclusion, our team members delivered strong first quarter financial results and achieved a number of important operational and commercial accomplishments to support our strategic priorities, which are to generate free cash flow and de-lever the balance sheet, deliver sustainable growth, drive innovation, and to reduce our cost structure.

We firmly believe that the outlook we have communicated today will enable us to accomplish those objectives. And with that operator, please open the line for questions.

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Q&A Session

Operator: Thank you. At this time we will now conduct the question-and-answer session. [Operator Instructions] Our first question comes from the line of Jed Kelly from Oppenheimer. The floor is yours.

Jed Kelly: Hi, great. Thanks for taking my questions. Just two if I may. One, are you seeing sort of the GDS share stabilizing to a level where you kind of get a better sense on how to right size your cost structure? And then appreciate the commentary around some of the SabreSonic wins. Can you just talk about the outlook for the airline solutions business? Thank you.

Kurt Ekert: Jed, thank you. This is Kurt. Good morning. First of all, when you look at the GDS industry, what we saw in the first quarter was GDS market growth, basically very strong with corporate, a bit offset by leisure as I talked about in the prior quarter. And more specifically, what we saw is the TMC or corporate business was up 1.9% for the GDS sector on a volume basis. For Sabre, that number was between 4.5% and 5%. So we’re seeing sequential share gains specifically there. For the industry, the sector overall, that is somewhat offset by the trends on the leisure side that I discussed last quarter. We do believe that with technology transformation taking hold and the full effect of those benefits coming next year, and then the actions that we took last year on our cost structure generally, and just the focus on cost that we have overall that our cost structure is the right cost structure for the business today with the right investment profile for what we need to do going forward.

When you look at airline solutions specifically a few points, one is that that business has stabilized. The revenue you saw in the first quarter of this year is roughly the revenue that you should expect to see for future quarters through the balance of 2024. We’re winning very well with our retail intelligence set of solutions. And as I mentioned in our prepared remarks, we will in the coming months discuss in robust fashion what we’re doing from both a product and a customer standpoint on offer and order. And the market seems to be very encouraged by what we have built, which is a modular, cloud-based future solution. So we’re actually very optimistic for the long term future of the airline solutions business.

Jed Kelly: Thank you.

Operator: Thank you for that question. One moment please, as I prepare the queue. Our next question comes from James Lee of Mizuho. The floor is yours.

James Lee: Great. Thanks for taking my questions and congrats on the good quarter here. My question is, on average booking fee growth for your travel solution business, that metric has been doing pretty well over the last few quarters. Maybe can you talk about the puts and take of that metric? Which region are you seeing strength? And can you talk about maybe the durability of that growth rate going forward? And second question is more about AI investment. Obviously you guys touched upon a little bit on the main, on the prior commentary. Can you talk about some of the new use cases that’s enhancing your product? Maybe help us understand, like which frontier models you’re building your applications on. And help us also understand how you manage and inferencing costs, which often headwind to a lot of enterprises out there. Thank you.

Mike Randolfi: Yes, I’ll start off and I’ll take the average booking fee question. As you look at the average booking fee, we’ve seen over the last several quarters of favorable mix in terms of types of travel and the mix of airlines that have just been very favorable to us. And that continued in the first quarter of this year. And specifically, what we saw, where we saw strength is we saw significant strength out of the Asia Pacific region. And unlike the fourth quarter, which is primarily group bookings, it was strength, but it wasn’t necessarily in the form of group bookings. It was actually higher average booking fee strength out of the Asia Pacific region. Secondly, what also goes into our average booking fee is the benefit of the lodging ground and sea.

And as you see, we’ve had significant strength there. And the average booking fee there is slightly above average. So that was also accretive to our average booking fee. You know, as we look forward and we look at the average booking fee that we produced in the first quarter, I would say we would expect to generally be in a similar range as we move through this year.

Kurt Ekert: Thanks. And on the AI front, so for the last several years, we’ve been partnered with Google. We have embedded Google’s AI and ML capabilities into a host of our supplier facing, meaning airline and hotelier solutions such as retail intelligence and those have resonated very well. When you think about the horizon of sort of next gen AI, we’re looking at three primary applications. One is with respect to our product development throughput. Our engineers now are using both the Google and a Microsoft solution that effectively enables them to produce new code at a much better rate or much faster rate than they did historically. So we look at this as faster innovation in terms of the opportunity. Number two is in terms of how we service our clients.

We have a very large infrastructure to do that. There is the opportunity to automate, a lot of which was manual traditionally, to improve both user experience and productivity. And then last and probably most importantly, as we look at generative AI, embedding generative AI, we have one of the leading and largest data sets in the world. And AI is only as good as the quantum of data that informs the AI and the learning. So as we embed that in our agency facing tools, airline facing, hotel facing, we think there is an opportunity to differentiate from the pack.

James Lee: Thanks so much.

Operator: Thank you for your question. One moment as I prepare the queue. Our next question comes from the line of Brett Knoblauch from Cantor Fitzgerald. The floor is yours.

Brett Knoblauch: Thank you. Thank you guys for taking my question. Maybe just on how you see industry growth playing out for rest of the year. I guess what’s implied in your guidance in terms of the billable bookings and the price, I guess — or on the average booking fee? I guess, you just said you expect average booking fees to stay steady throughout the year, but if you look at the fourth quarter that would imply a decline of 4%, 5% year-over-year. I know it’s a bit far away, but just any color on the mix between bookings and booking fee?

Mike Randolfi: Sure, I’ll start. This is Mike, and thanks for the question, Brett. As we think about air distribution bookings or bookings just in general, our baseline assumption is flat to nominal growth in terms of the guidance we gave with the $520 million of EBITDA. Now, what I would say is we continue to be optimistic. There is a lot of dynamics that are supportive of distribution bookings coming in higher than that. We’ve seen IATA projections that indicate that basically passenger traffic and volumes would be up, the mid to high single — mid single digits and international travel would be better than that. Similarly from airlines, even though they’ve tempered back capacity, most of that temporary capacity is still positive and that’s in North America, but internationally they’re adding a lot of capacity.

And then we’ve seen favorable corporate booking trends. So our baseline assumption is flat phenomenal growth on air distribution bookings, but that’s a baseline assumption. We think there’s really good reason to be positive there on the booking fee as we articulated. We expect that to be roughly in the range we’ve been in call it $5.80 as we move to the subsequent quarters.

Kurt Ekert: Yes, let me just add very quickly on. When you look at distribution bookings, the corporate piece, we do believe that a lot of the airlines are reporting very strong year-on-year growth in corporate derived revenue. We have not seen airlines break that out on a volume versus rate basis, but we believe that is largely yield driven from an airline perspective as the traditional differential in corporate versus leisure yields is returning to the marketplace. We see very strong trends, as I indicated, with corporate travel and that accruing to the GDS sector and Sabre specifically. And some of the dynamics we spoke about last quarter with OTA specifically from a lapping perspective are the most challenging in the first and second quarter of this year. The year-on-year compare should be a little bit easier for us in the second half of 2024.

Brett Knoblauch: Got it. Now, that’s very helpful. And then just on corporate, I know you guys got a little scared at the end of the year and then it bounced back in the beginning of the year and was very strong in January. Just curious as we’re now a month into the second quarter, how are you thinking about corporate? Is it still back with the vengeance?

Kurt Ekert: Yes, we’re seeing — in the second quarter we’re seeing the trends that we saw in the first quarter continue at relatively the same pace.

Brett Knoblauch: Perfect. Thank you guys. Really appreciate it.

Operator: Thank you for the question. One moment please. Our next question comes from the line of Dan Wasiolek from Morningstar. The floor is yours.

Dan Wasiolek: Good morning, guys. Thanks for taking my questions and congrats on a nice quarter here. Just the commentary on your technology revitalization and transformation and what you’ve been seeing with that is very helpful. Just kind of wondering with your offering currently, how would you say versus before going on this transformation how is the win rate and renewal levels kind of progressed relative to where they were maybe before you started the transformation and how you kind of see your product offering versus the competition? And then the second question would just be on the technology expense. How should we think about that for 2024 and 2025? Is it fair to use the Q1 runway for that? Thank you.

Mike Randolfi: Yes, I’ll start out on the expense side, and then Kurt will take it from there. This is Mike. So, a couple things. If you go back technology expense, you go back to what we had articulated in February, we had highlighted that in our build from 2023 to 2025, we would have about $250 million of cost efficiency benefit. Of that cost efficiency benefit about $90 million of that was attributable to actions we took in 2023 and about $160 million of that was attributable to our tech transformation. Of the $160 million of tech transformation benefit, about $45 million of that we would expect to be in this year and then a little bit over $100 million incrementally between 20 — between 2024 and 2025. As you think of the cadence of expenses and how it flows through our P&L, there is some benefit you’re seeing in the first quarter.

But what I would say is, of the $45 million benefit that we expect to see in the P&L this year, it is definitely backward loaded, because we’re slowly working down the bubble costs. We’re continuing to optimize the cloud environment, and then we continue to have more and more compute capacity in the cloud environment as the year progresses. So the way to think about it is that we expect $45 million this year. That’s somewhat backward loaded, not entirely. And then we’ll have at least another $100 million incrementally over that between 2024 and 2025. Yes.

Kurt Ekert: Thanks. Let me take the first question, and neither Mike nor I were here before 2022, so I don’t have great benefit of hindsight. But if you look at what we have today, what we’re going to have going forward, we have a cloud built modularized set of technology, which is fundamentally different than the monolithic mainframe of the past. So any thoughts that this is a dinosaur technology business are historical artifacts. This is a modern platform business. If you look across the different businesses and distribution, first of all, some of the things that we’ve been able to build that we believe are best in class are the multisource air content platform, our hotel content services lodging platform, our booking solutions, such as Sabre Red.

In airline IT, when you look at everything we’ve built that’s really gaining traction in the marketplace. That is our offer order modularized cloud based platform, our retail intelligence tools. Those are fully cloud-based. And in our hospitality solutions business, our CRS, our PMS, and our SynXis’ retailing capabilities are fully cloud-based. So what I can say today is when you look across the businesses we have, we’ve been able to move at a very different pace in terms of innovation, in terms of the implementation of new solutions with clients. And we believe we’re being chosen as a best in breed technology partner by agencies and corporations, by airlines, by hoteliers. And so the moves that Sabre has made that we’re continuing to complete are very important in terms of our competitive position.

Dan Wasiolek: Okay, great. Very helpful. Thank you.

Operator: Thank you for that question. One moment please, as I prepare the queue. Our next question comes from Alex Irving of Bernstein. The floor is yours.

Alex Irving: Hi, good morning, gentlemen. Hope all is well with you. Two for me, please. First is again around bookings in corporate travel. So you’ve seen a couple of the U.S. network airlines discussing about a 14% increase in managed corporate travel year-on-year, you said your corporate bookings were up 4% to 5% if I have that right. You mentioned the yield differential, but I’d expect that if you can explain the whole gap. Would it be right to conclude the rest would be channel shift to NDC aggregators and airline agent direct connections? And if not, we would extend that gap please. And then second, just if you think about the cadence of booking fees going forward, could you please tell me what share of your air bookings comes from airlines with which you currently have full content agreements? Thank you.

Kurt Ekert: Yes. Thank you. On corporate travel, first of all, we don’t know what — when the airlines are citing 14%, for example, year-on-year improvement in corporate, I think that was cited by Delta and United, for example. We don’t believe that they broke that out in terms of volume versus rate. We believe a very significant, perhaps majority portion of that is rate. With managed corporate travel, as I indicated, the GDS sector is up 1.9%. We were up 4.8% in the quarter on a unit basis. We believe substantially all of the growth in corporate travel is accruing to the GDS sector and a very significant portion to Sabre. We do not believe there is any evidence of disintermediation or channel shift occurring with managed corporate travel. The second question in terms of full content agreements, we have full content agreements with well over 100 carriers in the world. And that would account for, call it, 90 plus percent of our air distribution bookings.

Alex Irving: Thank you. Very clear.

Operator: Thank you for that question. One moment, please. Our next question comes from the line of Victor Cheng of Bank of America. The floor is yours.

Victor Cheng: Good morning. Thanks for taking my questions, have two if I may. I guess first on tech transformation, obviously, you have talked a bit about just now, but if I look at the slides a couple quarters ago, the tech transformation of $150 million is based on 80% recovery. And I believe at that point in time it was said that every 20% recovery equates to maybe $40 million or $50 million of additional savings. And so assuming we’re kept roughly at 60% that would expect closer to $200 million savings. Is that the right way to think about it? And then on this tech transformation as well, are there any assumptions on inflation, both on salaries and Google cloud cost inflation baked in as well? And then I have a follow up.

Mike Randolfi: Yes. So, on tech transformation, as you indicated, we originally expected about $150 million. We do expect it to be a little more than that, and that’s partly because — that’s partly because lower recovery levels. So we do think it’s, call it, $160 plus million of benefit that hits our P&L. That’s what we articulated in our most recent guide. And with regard to what it assumes in terms of salaries and inflation, obviously today, wage rates, particularly in technology, are substantially higher than what they were pre-pandemic. And that’s reflected in the $160 million benefit that we called out in February. That’s a component of the $250 million of our cost efficiency.

Kurt Ekert: I would also note that our relationship with Google is a long term contract with the commercials fixed for a long period of time.

Victor Cheng: Understood. And maybe just one follow up is how do we think about the minimum liquidity for the company? I know, obviously you are paying down 2025 debt in cash, but generally speaking, for Sabre, what’s the minimum liquidity required?

Mike Randolfi: Yes, so if you look at pre-pandemic, we had operated Sabre with in terms of actual cash, $300 million to $400 million. Now, we had more liquidity than that because we had a revolver at the time. So for the most part, at this stage, our desire is to maintain a higher liquidity balance out of prudence. As we — the things to think about is we ended this quarter with $600 million to — $650 million of cash. We expect to be free cash flow positive in Q2, Q3, Q4 for the full year combined. So if you simply do the math with what we consumed in cash in Q1, we’re going to add at least $100 million of cash in the remaining three quarters. So we’ll end the year with the cash balance, call it, of approximately $750 million. And we think that, well, positions us to cover maturities off our balance sheet in 2025, especially taking into account that we expect to generate greater than $200 million of free cash flow in 2025.

Victor Cheng: Very clear. Thank you.

Operator: Thank you for that question. One moment, please. [Operator Instructions] Our next question comes from the line of Josh Baer of Morgan Stanley. The floor is yours.

Ryan Bressner: Hi. I am Ryan Bressner on for Josh. Thanks for taking my questions. So I am going to dig a little more into the hospitality business with respect to your traction with enterprise and PMS. What is the progress and update on this front? And can you give any comments to us on the recent announcement around Wyndham and Hyatt?

Kurt Ekert: Yes, we actually have Scott Wilson on the line. And Scott, I’ll ask you to answer that.

Scott Wilson: Great, thanks and great to hear from you, Josh. Yes, a couple of things that we’re pretty excited about. Let’s reflect. We actually have closed two enterprise deals in the last three years in Louvre and Hyatt. And as we mentioned in the prepared remarks, we’ve actually started the implementation and migration of their properties onto the SynXis’ CR platform in twelve months. And our expectation is that we will continue to execute in the timeline we’ve set with them over the course of this year and into next. So a lot of really positive momentum on that front and we believe that Hyatt is going to be an excellent partner with us for quite some time. On the Wyndham renewal front, keep in mind we have a two part deal with them.

We actually have a CR deal and a PMS deal. Yesterday’s announcement was about the renewal of our PMS product. This is a product that was really built with Wyndham and their hotel type in mind. It’s an incredibly strong cloud native product that supports select service and limited service properties. And we believe that this is just one of a number of successes we continue to have in the PMS space. We do actually have a very robust pipeline on the PMS side and we look forward to announcing additional deals this year with SynXis Property management hub. So a lot of good news on that front. We think the enterprise is a place that we can continue to show well and win. These are not frequent occurrences, but as hoteliers go through strategic assessment of their technology needs, we are very confident that we will be participating in and winning our — more than our fair share of enterprise opportunities going forward.