UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 9, 2016
SABRE CORPORATION
(Exact name of registrant as specified in its charter)
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| | | | |
Delaware | | 001-36422 | | 20-8647322 |
(State or other jurisdiction of incorporation or organization) | | (Commission File Number) | | (IRS Employer Identification No.) |
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| | |
3150 Sabre Drive Southlake, TX | | 76092 |
(Address of principal executive offices) | | (Zip Code) |
(682) 605-1000
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 2.02 | Results of Operations and Financial Condition. |
On February 9, 2016, Sabre Corporation (“Sabre”) issued a press release and will hold a conference call regarding its financial results for the quarter and year ended December 31, 2015. A copy of the press release is attached as Exhibit 99.1.
The information in this Item 2.02 of Form 8-K and the attached exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Sabre makes reference to non-GAAP financial measures in the press release. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in the attached press release.
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Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits
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Exhibit Number | | Description | |
99.1 | | Press Release dated February 9, 2016. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | Sabre Corporation |
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Dated: | February 9, 2016 | By: | /s/ Richard A. Simonson |
| | Name: | Richard A. Simonson |
| | Title: | Chief Financial Officer |
EXHIBIT INDEX
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| | | |
Exhibit Number | | Description | |
99.1 | | Press Release dated February 9, 2016. |
Sabre Reports Fourth Quarter and Full Year 2015 Results
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• | Full year 2015 revenue increased 12.5%, Adjusted EBITDA increased 12.1%, Adjusted EPS increased 17.0% and Free Cash Flow increased 51.2% |
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• | Fourth quarter 2015 revenue increased 17.4%, Adjusted EBITDA increased 15.1% and Adjusted EPS increased 22.7% |
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• | Seamlessly executed largest airline reservations technology integration in the history of the industry at American Airlines |
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• | Completed acquisition of Trust Group in January 2016, expanding Sabre Hospitality Solutions' customer base by more than 30% |
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• | Issued 2016 guidance including expected growth in the mid-teens for revenue and Adjusted EBITDA and growth of approximately 30% in Adjusted Net Income and Adjusted EPS. Free Cash Flow expected to approach $400 million |
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• | Announced increase in dividend payout ratio target to 35% to 40% of Adjusted Net Income. Quarterly dividend increased 44% from $0.09 to $0.13 per share |
SOUTHLAKE, Texas – February 9, 2016– Sabre Corporation ("Sabre") (NASDAQ: SABR) today announced financial results for the quarter and year ended December 31, 2015.
“In 2015, we increased investment in our core strengths, deepened our customer relationships by adding more critical capability to our platforms and continued to out-innovate our competitors,” said Tom Klein, Sabre president and CEO. “Our commitment to operational excellence and sales execution, along with our ability to bring innovative technology to market with speed and scale, drove our strong full year results. For the year, we delivered a double-digit increase in revenue and Adjusted EBITDA, a 17% increase in Adjusted EPS and growth of more than 50% in Free Cash Flow. Our strong momentum gives us confidence in our 2016 expectations for accelerated growth in revenue, Adjusted EBITDA, Adjusted EPS and importantly, Free Cash Flow.”
Q4 2015 Financial Summary
Fourth quarter results continued to demonstrate the strength of Sabre's vertical SaaS software and travel distribution businesses. Sabre consolidated fourth quarter revenue increased 17.4% to $758.5 million, compared to $646.1 million for the same period last year.
Consolidated income from continuing operations totaled $29.5 million, compared to $41.2 million in the fourth quarter of 2014. The decrease in income from continuing operations includes increased acquisition-related amortization, loss on extinguishment of debt and a reduction to our gain on the acquisition of the remaining interest in Abacus. Consolidated Adjusted EBITDA was $228.8 million, a 15.1% increase from $198.7 million in the fourth quarter of 2014. The increase in consolidated Adjusted EBITDA is primarily the result of a 20.9% increase in Adjusted EBITDA in Travel Network.
For the quarter, Sabre reported income from continuing operations of $0.10 per share, compared to $0.15 per share in the fourth quarter of 2014. Adjusted net income from continuing operations per share (Adjusted EPS) increased 22.7% to $0.27 from $0.22 per share in the fourth quarter of 2014.
Cash flow from operations totaled $139.5 million, an increase of 38.3% compared to $100.9 million in the fourth quarter of 2014. Fourth quarter Free Cash Flow was $55.9 million, compared to $27.8 million in the year ago period. Capital expenditures totaled $83.6 million, compared to $73.0 million in the year ago period. Adjusted Capital Expenditures, which include capitalized implementation costs, totaled $97.4 million compared to $83.2 million in the fourth quarter of 2014.
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| | | | | | | | | | | | | | | | | | |
Financial Highlights (in thousands; unaudited): | Three Months Ended December 31, | | Year Ended December 31, |
2015 | | 2014 | % Change | | 2015 | | 2014 | % Change |
Total Company (Continuing Operations): | | |
| | | | | | | | | |
Revenue | $ | 758,455 |
| | $ | 646,142 |
| 17.4 |
| | $ | 2,960,896 |
| | $ | 2,631,417 |
| 12.5 |
Income from continuing operations | $ | 29,512 |
| | $ | 41,230 |
| (28.4 | ) | | $ | 234,555 |
| | $ | 110,873 |
| 111.6 |
| | | | | | | | | |
Adjusted EBITDA* | $ | 228,762 |
| | $ | 198,674 |
| 15.1 |
| | $ | 941,587 |
| | $ | 840,028 |
| 12.1 |
| | | | | | | | | |
Adjusted Net Income* | $ | 76,190 |
| | $ | 59,921 |
| 27.2 |
| | $ | 308,072 |
| | $ | 232,477 |
| 32.5 |
| | | | | | | | | |
Income from continuing operations per share | $ | 0.10 |
| | $ | 0.15 |
| (33.3 | ) | | $ | 0.83 |
| | $ | 0.39 |
| 112.8 |
Adjusted EPS* | $ | 0.27 |
| | $ | 0.22 |
| 22.7 |
| | $ | 1.10 |
| | $ | 0.94 |
| 17.0 |
| | | | | | | | | |
Cash Flow from Operations | $ | 139,497 |
| | $ | 100,855 |
| 38.3 |
| | $ | 529,207 |
| | $ | 387,659 |
| 36.5 |
Capital Expenditures | $ | 83,626 |
| | $ | 73,015 |
| 14.5 |
| | $ | 286,697 |
| | $ | 227,227 |
| 26.2 |
Adjusted Capital Expenditures* | $ | 97,366 |
| | $ | 83,224 |
| 17.0 |
| | $ | 350,079 |
| | $ | 265,038 |
| 32.1 |
| | | | | | | | | |
Free Cash Flow* | $ | 55,871 |
| | $ | 27,840 |
| 100.7 |
| | $ | 242,510 |
| | $ | 160,432 |
| 51.2 |
Adjusted Free Cash Flow* | $ | 66,545 |
| | $ | 39,903 |
| 66.8 |
| | $ | 299,505 |
| | $ | 293,375 |
| 2.1 |
| | | | | | | | | |
Net Debt (total debt, less cash) | $ | 3,074,542 |
| | $ | 2,940,927 |
| | | | | | |
Net Debt / LTM Adjusted EBITDA | 3.3x |
| | 3.5x |
| | | | | | |
| | | | | | | | | |
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Airline and Hospitality Solutions: | | |
| | | | | | | | | |
Revenue | $ | 231,576 |
| | $ | 214,503 |
| 8.0 |
| | $ | 872,086 |
| | $ | 786,478 |
| 10.9 |
| | | | | | | | | |
Passengers Boarded | 177,443 |
| | 125,102 |
| 41.8 |
| | 584,876 |
| | 510,713 |
| 14.5 |
| | | | | | | | | |
Operating Income | $ | 49,970 |
| | $ | 58,773 |
| (15.0 | ) | | $ | 180,448 |
| | $ | 176,730 |
| 2.1 |
| | | | | | | | | |
Adjusted EBITDA* | $ | 85,713 |
| | $ | 84,961 |
| 0.9 |
| | $ | 323,461 |
| | $ | 282,648 |
| 14.4 |
| | | | | | | | | |
| | | | | | | | | |
Travel Network: | | |
| | | | | | | | | |
Revenue | $ | 531,157 |
| | $ | 434,444 |
| 22.3 |
| | $ | 2,102,792 |
| | $ | 1,854,785 |
| 13.4 |
| | | | | | | | | |
Air Bookings | 97,083 |
| | 70,817 |
| 37.1 |
| | 384,309 |
| | 321,962 |
| 19.4 |
Non-air Bookings | 14,217 |
| | 12,848 |
| 10.7 |
| | 58,414 |
| | 54,122 |
| 7.9 |
Total Bookings | 111,300 |
| | 83,665 |
| 33.0 |
| | 442,723 |
| | 376,084 |
| 17.7 |
| | | | | | | | | |
Bookings Share | 37.0 | % | | 35.5 | % | | | 36.6 | % | | 35.6 | % | |
| | | | | | | | | |
Operating Income | $ | 175,218 |
| | $ | 142,233 |
| 23.2 |
| | $ | 751,546 |
| | $ | 657,326 |
| 14.3 |
| | | | | | | | | |
Adjusted EBITDA* | $ | 208,002 |
| | $ | 172,040 |
| 20.9 |
| | $ | 877,276 |
| | $ | 778,677 |
| 12.7 |
*indicates non-GAAP financial measure; see descriptions and reconciliations below |
Q4 2015 Sabre Airline and Hospitality Solutions
Fourth quarter 2015 Airline and Hospitality Solutions revenue increased 8.0% to $231.6 million, compared to $214.5 million for the same period in 2014. Contributing to the rise in revenue was a 41.8% increase in airline passengers boarded through the SabreSonic reservation solution and continued momentum in Sabre Hospitality Solutions. Passenger boarded growth reflects solid underlying growth and the successful technology integration of American Airlines.
Fourth quarter Sabre Airline and Hospitality Solutions Adjusted EBITDA increased 0.9% to $85.7 million from $85.0 million in the prior year period. Adjusted EBITDA margin was 37.0%, compared to 39.6% for the prior year quarter.
On October 17, 2015, Sabre seamlessly executed the largest technology integration in the airline industry's history, making American Airlines the largest customer in the SabreSonic community.
Subsequent to the fourth quarter, Sabre completed the acquisition of the Trust Group expanding Sabre's hospitality customer base more than 30%, to approximately 32,000 properties worldwide.
Q4 2015 Sabre Travel Network
Fourth quarter 2015 Travel Network revenue increased 22.3% to $531.2 million, compared to $434.4 million for the same period in 2014. Fourth quarter 2015 Travel Network Adjusted EBITDA increased 20.9% to $208.0 million from $172.0 million in the fourth quarter of 2014. Total bookings increased 33.0% driven by the acquisition of Abacus and continued strong growth in North America and EMEA. Excluding the Abacus acquisition, global bookings increased 8.4% in the quarter. North American bookings increased 9.3% in the quarter. EMEA continued to be Sabre Travel Network's fastest growing region, with an increase in bookings of 14.3% year over year, while bookings in Latin America declined 3.8% reflecting economic weakness in Venezuela and Brazil.
Full Year 2015 Financial Summary
The fourth quarter capped a year of strong financial performance at Sabre. For the full year 2015, Sabre reported total consolidated revenue of $2.961 billion compared to $2.631 billion for the prior year, a 12.5% increase.
2015 consolidated income from continuing operations totaled $234.6 million, compared to $110.9 million in 2014. The increase in consolidated income from continuing operations includes a $90 million gain primarily associated with the remeasurement of our previously-held equity interest in Abacus. Consolidated Adjusted EBITDA totaled $941.6 million, a 12.1% increase from $840.0 million in 2014. The increase in Adjusted EBITDA is the result of a 14.4% increase in Airline and Hospitality Solutions Adjusted EBITDA and a 12.7% increase in Travel Network Adjusted EBITDA.
For the full year 2015, Sabre reported income from continuing operations of $0.83 per share, compared to $0.39 for the full year 2014. Adjusted EPS increased 17.0% to $1.10 per share from $0.94 in 2014.
Cash flow from operations totaled $529.2 million for the full year of 2015, an increase of 36.5% from $387.7 million in 2014. Full year 2015 Free Cash Flow totaled $242.5 million, a 51.2% increase from $160.4 million in 2014. Capital Expenditures totaled $286.7 million in 2015, compared to $227.2 million in 2014. Adjusted Capital Expenditures, totaled $350.1 million in 2015, compared to $265.0 million in 2014.
Full year Airline and Hospitality Solutions revenue increased 10.9% to $872.1 million, compared to $786.5 million in 2014. Contributing to the increase in revenue was full year SabreSonic passenger boarded growth of 14.5%.
Sabre Airline and Hospitality Solutions Adjusted EBITDA increased 14.4% to $323.5 million, compared to $282.6 million in 2014. Full year Adjusted EBITDA margin for Airline and Hospitality Solutions increased to 37.1% compared to 35.9% in 2014. Adjusted EBITDA margin increased due to the strong revenue growth and the scale benefits of Airline and Hospitality Solutions SaaS software solutions.
Travel Network revenue increased 13.4% to $2.103 billion, compared to $1.855 billion in 2014. Full year revenue growth was driven by global bookings growth of 17.7%. Excluding the Abacus acquisition, full year global bookings increased 6.4%. North America and EMEA delivered
bookings growth of 5.7% and 14.6%, respectively, while Latin America bookings declined 1.3%. Overall bookings share increased one point to 36.6%.
Full year Travel Network Adjusted EBITDA increased 12.7% to $877.3 million, compared to $778.7 million in 2014. Travel Network Adjusted EBITDA margin was essentially flat at 41.7%, compared to 42.0% in 2014.
Dividend
Sabre has increased its targeted dividend payout ratio to 35-40% of Adjusted Net Income, up from 30-35% previously. In accordance with this, the amount of the quarterly dividend has increased 44.4% from $0.09 per share to $0.13 per share. Sabre's Board of Directors has declared a quarterly dividend of $0.13 per share, payable on March 30, 2016 to shareholders of record on March 21, 2016.
Business Outlook and Financial Guidance
Sabre has provided full year guidance for 2016 reflecting expectations for accelerated growth across the business. Sabre revenue and Adjusted EBITDA growth are expected to be in the mid-teens with strong contributions from all businesses, resulting in expected Adjusted Net Income and Adjusted EPS growth of approximately 30%. Free Cash Flow is expected to increase more than 60% and to approach $400 million for the full year 2016.
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• | In Airline and Hospitality Solutions, Sabre expects 2016 revenue growth of 17% or more. Contributing to the strong anticipated growth, SabreSonic passengers boarded are expected to increase more than 30% in 2016, including particularly strong growth in the first, second and third quarter related to the already completed technology integration at American Airlines. Sabre expects significant growth to continue in Hospitality Solutions with the integration of Trust Group, combined with anticipated strong sales and implementation momentum. |
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• | In Travel Network, Sabre expects 2016 revenue growth of between 13.5% and 14.5%, driven by bookings growth of approximately 15%, reflecting the positive impact of the Abacus acquisition and continued solid growth in North America and EMEA. Bookings growth is expected be stronger in the first half of the year versus the back half as Sabre anniversaries the acquisition of Abacus. |
In summary, Sabre's full year 2016 guidance is as follows:
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Full-Year 2016 Guidance | Range | Growth Rate |
($ millions, except for EPS) |
Revenue | $3,390 - $3,430 | 14.5% - 15.8% |
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Adjusted EBITDA | $1,080 - $1,100 | 14.7% - 16.8% |
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Adjusted Net Income | $395 - $415 | 28.2% - 34.7% |
| | |
Adjusted EPS | $1.40 - $1.47 | 27.3% - 33.6% |
| | |
Free Cash Flow | Approaching $400M | Over 60% |
Conference Call
Sabre will conduct its fourth quarter and full year 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.
Investor Day
Sabre plans to host an investor day at the NASDAQ MarketSite in New York City on Tuesday, May 17, 2016. A live audio webcast of the session can be accessed on 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
Sabre Corporation is the leading technology provider to the global travel industry. Sabre’s software, data, mobile and distribution solutions are used by hundreds of airlines and thousands of hotel properties to manage critical operations, including passenger and guest reservations, revenue management, flight, network and crew management. Sabre also operates a leading global travel marketplace, which processes more than $120 billion of estimated travel spend annually by connecting travel buyers and suppliers. 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 the Investor Relations section of our website, investors.sabre.com. 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, investors.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 "will," "guidance," "expect," "target," "momentum," "outlook," "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, economic conditions including those with traditionally high levels of exports to China or that have commodities-based economies, 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, risks arising from global operations, 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 “Cautionary Note Regarding Forward-Looking Statements” sections included in our Quarterly Reports on Form 10-Q and our Annual Report on Form 10-K. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, outlook, guidance, 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.
Contacts:
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Media | Investors |
Daniel Duarte | Barry Sievert |
214-236-9473 | sabre.investorrelations@sabre.com |
daniel.duarte@sabre.com | |
SABRE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited) |
| | | | | | | | | | | | | | | |
| Three Months Ended December 31, | | Year Ended December 31, |
| 2015 | | 2014 | | 2015 | | 2014 |
Revenue | $ | 758,455 |
| | $ | 646,142 |
| | $ | 2,960,896 |
| | $ | 2,631,417 |
|
Cost of revenue (1) (2) | 504,020 |
| | 426,809 |
| | 1,944,050 |
| | 1,742,478 |
|
Selling, general and administrative (2) | 145,035 |
| | 115,624 |
| | 557,077 |
| | 467,594 |
|
Operating income | 109,400 |
| | 103,709 |
| | 459,769 |
| | 421,345 |
|
Other income (expense): | | | | | | | |
Interest expense, net | (43,655 | ) | | (51,545 | ) | | (173,298 | ) | | (218,877 | ) |
Loss on extinguishment of debt | (5,548 | ) | | — |
| | (38,783 | ) | | (33,538 | ) |
Joint venture equity income | 644 |
| | 2,715 |
| | 14,842 |
| | 12,082 |
|
Other, net | 3,057 |
| | (63,021 | ) | | 91,377 |
| | (63,860 | ) |
Total other income (expense), net | (45,502 | ) | | (111,851 | ) | | (105,862 | ) | | (304,193 | ) |
Income from continuing operations before income taxes | 63,898 |
| | (8,142 | ) | | 353,907 |
| | 117,152 |
|
Provision for income taxes | 34,386 |
| | (49,372 | ) | | 119,352 |
| | 6,279 |
|
Income from continuing operations | 29,512 |
| | 41,230 |
| | 234,555 |
| | 110,873 |
|
Income (loss) from discontinued operations, net of tax | 100,909 |
| | 5,734 |
| | 314,408 |
| | (38,918 | ) |
Net income | 130,421 |
| | 46,964 |
| | 548,963 |
| | 71,955 |
|
Net income attributable to noncontrolling interests | 980 |
| | 564 |
| | 3,481 |
| | 2,732 |
|
Net income attributable to Sabre Corporation | 129,441 |
| | 46,400 |
| | 545,482 |
| | 69,223 |
|
Preferred stock dividends | — |
| | — |
| | — |
| | 11,381 |
|
Net income attributable to common stockholders | $ | 129,441 |
| | $ | 46,400 |
| | $ | 545,482 |
| | $ | 57,842 |
|
| | | | | | | |
Basic net income per share attributable to common stockholders: | |
| | |
| | | | |
Income from continuing operations | $ | 0.10 |
| | $ | 0.15 |
| | $ | 0.85 |
| | $ | 0.41 |
|
Income (loss) from discontinued operations | 0.37 |
| | 0.02 |
| | 1.15 |
| | (0.16 | ) |
Net income per common share | $ | 0.47 |
| | $ | 0.17 |
| | $ | 2.00 |
| | $ | 0.24 |
|
Diluted net income per share attributable to common stockholders: | |
| | |
| | | | |
Income from continuing operations | $ | 0.10 |
| | $ | 0.15 |
| | $ | 0.83 |
| | $ | 0.39 |
|
Income (loss) from discontinued operations | 0.36 |
| | 0.02 |
| | 1.12 |
| | (0.16 | ) |
Net income per common share | $ | 0.46 |
| | $ | 0.17 |
| | $ | 1.95 |
| | $ | 0.23 |
|
Weighted-average common shares outstanding: | |
| | |
| | | | |
Basic | 275,855 |
| | 266,014 |
| | 273,139 |
| | 238,633 |
|
Diluted | 281,150 |
| | 274,064 |
| | 280,067 |
| | 246,747 |
|
| | | | | | | |
Dividends per common share | $ | 0.09 |
| | $ | 0.09 |
| | $ | 0.36 |
| | $ | 0.18 |
|
| | | | | | | |
(1) Includes amortization of upfront incentive consideration | $ | 11,946 |
| | $ | 12,181 |
| | $ | 43,521 |
| | $ | 45,358 |
|
(2) Includes stock-based compensation as follows: | | | | | | | |
Cost of revenue | $ | 2,630 |
| | $ | 2,521 |
| | $ | 11,918 |
| | $ | 8,044 |
|
Selling, general and administrative | 4,013 |
| | 3,724 |
| | 18,053 |
| | 12,050 |
|
SABRE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
|
| | | | | | | |
| December 31, 2015 | | December 31, 2014 |
Assets | | | |
Current assets | | | |
Cash and cash equivalents | $ | 321,132 |
| | $ | 155,679 |
|
Accounts receivable, net | 375,789 |
| | 362,911 |
|
Prepaid expenses and other current assets | 81,167 |
| | 64,734 |
|
Assets held for sale | — |
| | 112,558 |
|
Total current assets | 778,088 |
| | 695,882 |
|
Property and equipment, net | 627,529 |
| | 551,276 |
|
Investments in joint ventures | 24,348 |
| | 145,320 |
|
Goodwill | 2,440,431 |
| | 2,153,499 |
|
Acquired customer relationships, net | 416,887 |
| | 170,629 |
|
Other intangible assets, net | 419,666 |
| | 309,357 |
|
Deferred income taxes | 44,464 |
| | 131,971 |
|
Other assets, net | 642,214 |
| | 485,139 |
|
Total assets | $ | 5,393,627 |
| | $ | 4,643,073 |
|
| | | |
Liabilities and stockholders’ equity | | | |
Current liabilities | | | |
Accounts payable | $ | 138,421 |
| | $ | 117,855 |
|
Accrued compensation and related benefits | 99,382 |
| | 83,828 |
|
Accrued subscriber incentives | 185,270 |
| | 145,581 |
|
Deferred revenues | 165,124 |
| | 167,827 |
|
Litigation settlement liability and related deferred revenue | 30,012 |
| | 73,252 |
|
Other accrued liabilities | 191,964 |
| | 189,612 |
|
Current portion of debt | 190,315 |
| | 22,435 |
|
Liabilities held for sale | — |
| | 96,544 |
|
Total current liabilities | 1,000,488 |
| | 896,934 |
|
Deferred income taxes | 83,562 |
| | 8,037 |
|
Other noncurrent liabilities | 656,093 |
| | 613,710 |
|
Long-term debt | 3,169,344 |
| | 3,040,009 |
|
Stockholders’ equity | | | |
Common stock | 2,790 |
| | 2,682 |
|
Additional paid-in capital | 2,016,325 |
| | 1,931,796 |
|
Treasury stock, at cost | (110,548 | ) | | (5,297 | ) |
Retained deficit | (1,328,730 | ) | | (1,775,616 | ) |
Accumulated other comprehensive loss | (97,135 | ) | | (69,803 | ) |
Noncontrolling interest | 1,438 |
| | 621 |
|
Total stockholders’ equity | 484,140 |
| | 84,383 |
|
Total liabilities and stockholders’ equity | $ | 5,393,627 |
| | $ | 4,643,073 |
|
SABRE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
| | | | | | | |
| Year Ended December 31, |
| 2015 | | 2014 |
Operating Activities | | | |
Net income | $ | 548,963 |
| | $ | 71,955 |
|
Adjustments to reconcile net income to cash provided by operating activities: | | | |
Depreciation and amortization | 351,480 |
| | 289,630 |
|
Amortization of upfront incentive consideration | 43,521 |
| | 45,358 |
|
Litigation-related credits | (60,998 | ) | | (41,672 | ) |
Stock-based compensation expense | 29,971 |
| | 20,094 |
|
Allowance for doubtful accounts | 8,558 |
| | 10,356 |
|
Deferred income taxes | 97,225 |
| | (3,829 | ) |
Joint venture equity income | (14,842 | ) | | (12,082 | ) |
Dividends received from joint venture investments | 28,700 |
| | 2,261 |
|
Amortization of debt issuance costs | 6,759 |
| | 6,316 |
|
Debt modification costs | — |
| | 3,290 |
|
Gain on remeasurement of previously-held joint venture interest | (78,082 | ) | | — |
|
Loss on extinguishment of debt | 38,783 |
| | 33,538 |
|
Other | 3,556 |
| | 6,023 |
|
(Income) loss from discontinued operations | (314,408 | ) | | 38,918 |
|
Changes in operating assets and liabilities: | | | |
Accounts and other receivables | 10,662 |
| | (7,295 | ) |
Prepaid expenses and other current assets | (13,255 | ) | | 6,948 |
|
Capitalized implementation costs | (63,382 | ) | | (37,811 | ) |
Upfront incentive consideration | (63,510 | ) | | (50,936 | ) |
Other assets | (66,873 | ) | | (78,873 | ) |
Accrued compensation and related benefits | 18,268 |
| | (5,301 | ) |
Accounts payable and other accrued liabilities | 8,721 |
| | 52,128 |
|
Deferred revenue including upfront solution fees | 9,390 |
| | 38,643 |
|
Cash provided by operating activities | 529,207 |
| | 387,659 |
|
Investing Activities | | | |
Additions to property and equipment | (286,697 | ) | | (227,227 | ) |
Acquisitions, net of cash acquired | (442,344 | ) | | (31,799 | ) |
Other investing activities | — |
| | 235 |
|
Cash used in investing activities | (729,041 | ) | | (258,791 | ) |
Financing Activities | | | |
Proceeds of borrowings from lenders | 1,252,000 |
| | 148,307 |
|
Payments on borrowings from lenders | (960,807 | ) | | (802,664 | ) |
Debt prepayment fees and issuance costs | (52,674 | ) | | (30,490 | ) |
Acquisition-related contingent consideration paid | — |
| | (27,000 | ) |
Proceeds from issuance of common stock in initial public offering, net | — |
| | 672,137 |
|
Net proceeds on the settlement of equity-based awards | 47,414 |
| | 13,809 |
|
Cash dividends paid to common stockholders | (98,596 | ) | | (47,904 | ) |
Repurchase of common stock | (98,770 | ) | | — |
|
Other financing activities | 4,577 |
| | 1,860 |
|
Cash provided by (used in) financing activities | 93,144 |
| | (71,945 | ) |
Cash Flows from Discontinued Operations | | | |
Cash provided by (used in) operating activities | 236 |
| | (205,988 | ) |
Cash provided by (used in) investing activities | 278,834 |
| | (1,965 | ) |
Cash provided by (used in) discontinued operations | 279,070 |
| | (207,953 | ) |
Effect of exchange rate changes on cash and cash equivalents | (6,927 | ) | | (1,527 | ) |
Increase (decrease) in cash and cash equivalents | 165,453 |
| | (152,557 | ) |
Cash and cash equivalents at beginning of period | 155,679 |
| | 308,236 |
|
Cash and cash equivalents at end of period | $ | 321,132 |
| | $ | 155,679 |
|
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 Net Income from continuing operations per share (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 include 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:
| |
• | these non-GAAP financial measures exclude certain recurring, non-cash charges such as stock-based compensation expense and amortization of acquired intangible assets; |
| |
• | 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; |
| |
• | Adjusted Free Cash Flow does not reflect payments related to restructuring activities, litigation, acquisition-related costs 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 to Adjusted Net Income from continuing operations and Adjusted EBITDA:
|
| | | | | | | | | | | | | | | |
| Three Months Ended December 31, | | Year Ended December 31, |
| 2015 | | 2014 | | 2015 | | 2014 |
Net income attributable to common stockholders | $ | 129,441 |
| | $ | 46,400 |
| | $ | 545,482 |
| | $ | 57,842 |
|
(Income) loss from discontinued operations, net of tax | (100,909 | ) | | (5,734 | ) | | (314,408 | ) | | 38,918 |
|
Net income attributable to noncontrolling interests(1) | 980 |
| | 564 |
| | 3,481 |
| | 2,732 |
|
Preferred stock dividends | — |
| | — |
| | — |
| | 11,381 |
|
Income from continuing operations | 29,512 |
| | 41,230 |
| | 234,555 |
| | 110,873 |
|
Adjustments: | |
| | |
| | |
| | |
|
Acquisition-related amortization(2a) | 31,851 |
| | 22,639 |
| | 108,121 |
| | 99,383 |
|
Loss on extinguishment of debt | 5,548 |
| | — |
| | 38,783 |
| | 33,538 |
|
Other, net(4) | (3,057 | ) | | 63,021 |
| | (91,377 | ) | | 63,860 |
|
Restructuring and other costs(5) | 368 |
| | 1,636 |
| | 9,256 |
| | 10,470 |
|
Acquisition-related costs(6) | 1,223 |
| | — |
| | 14,437 |
| | — |
|
Litigation costs(7) | 1,912 |
| | 2,775 |
| | 16,709 |
| | 14,144 |
|
Stock-based compensation | 6,643 |
| | 6,245 |
| | 29,971 |
| | 20,094 |
|
Management fees(8) | — |
| | — |
| | — |
| | 23,701 |
|
Tax impact of net income adjustments(9) | 2,190 |
| | (77,626 | ) | | (52,383 | ) | | (143,586 | ) |
Adjusted Net Income from continuing operations | $ | 76,190 |
| | $ | 59,920 |
| | $ | 308,072 |
| | $ | 232,477 |
|
Adjusted Net Income from continuing operations per share | $ | 0.27 |
| | $ | 0.22 |
| | $ | 1.10 |
| | $ | 0.94 |
|
Diluted weighted-average common shares outstanding | 281,150 |
| | 274,064 |
| | 280,067 |
| | 246,747 |
|
| | | | | | | |
Adjusted Net Income from continuing operations | $ | 76,190 |
| | $ | 59,920 |
| | $ | 308,072 |
| | $ | 232,477 |
|
Adjustments: | |
| | |
| | |
| | |
|
Depreciation and amortization of property and equipment(2b) | 56,366 |
| | 37,983 |
| | 213,520 |
| | 157,592 |
|
Amortization of capitalized implementation costs(2c) | 8,409 |
| | 8,790 |
| | 31,441 |
| | 35,859 |
|
Amortization of upfront incentive consideration(3) | 11,946 |
| | 12,181 |
| | 43,521 |
| | 45,358 |
|
Interest expense, net | 43,655 |
| | 51,545 |
| | 173,298 |
| | 218,877 |
|
Remaining provision for income taxes | 32,196 |
| | 28,255 |
| | 171,735 |
| | 149,865 |
|
Adjusted EBITDA | $ | 228,762 |
| | $ | 198,674 |
| | $ | 941,587 |
| | $ | 840,028 |
|
Reconciliation of Adjusted Capital Expenditures:
|
| | | | | | | | | | | | | | | |
| Three Months Ended December 31, | | Year Ended December 31, |
| 2015 | | 2014 | | 2015 | | 2014 |
Additions to property and equipment | $ | 83,626 |
| | $ | 73,015 |
| | $ | 286,697 |
| | $ | 227,227 |
|
Capitalized implementation costs | 13,740 |
| | 10,209 |
| | 63,382 |
| | 37,811 |
|
Adjusted Capital Expenditures | $ | 97,366 |
| | $ | 83,224 |
| | $ | 350,079 |
| | $ | 265,038 |
|
Reconciliation of Adjusted Free Cash Flow:
|
| | | | | | | | | | | | | | | |
| Three Months Ended December 31, | | Year Ended December 31, |
| 2015 | | 2014 | | 2015 | | 2014 |
Cash provided by operating activities | $ | 139,497 |
| | $ | 100,855 |
| | $ | 529,207 |
| | $ | 387,659 |
|
Cash used in investing activities | (84,536 | ) | | (73,015 | ) | | (729,041 | ) | | (258,791 | ) |
Cash provided by (used in) financing activities | 132,399 |
| | (12,656 | ) | | 93,144 |
| | (71,945 | ) |
|
| | | | | | | | | | | | | | | |
| Three Months Ended December 31, | | Year Ended December 31, |
| 2015 | | 2014 | | 2015 | | 2014 |
Cash provided by operating activities | $ | 139,497 |
| | $ | 100,855 |
| | $ | 529,207 |
| | $ | 387,659 |
|
Additions to property and equipment | (83,626 | ) | | (73,015 | ) | | (286,697 | ) | | (227,227 | ) |
Free Cash Flow | 55,871 |
| | 27,840 |
| | 242,510 |
| | 160,432 |
|
Adjustments: | | | | | |
| | |
|
Restructuring and other costs(5)(10) | 758 |
| | 1,727 |
| | 1,676 |
| | 18,353 |
|
Acquisition-related costs(6)(9) | 622 |
| | — |
| | 13,836 |
| | — |
|
Litigation settlement(11) | 7,478 |
| | 7,562 |
| | 30,770 |
| | 76,745 |
|
Other litigation costs(7)(10) | 1,816 |
| | 2,774 |
| | 10,713 |
| | 14,144 |
|
Management fees(8)(10) | — |
| | — |
| | — |
| | 23,701 |
|
Adjusted Free Cash Flow | $ | 66,545 |
| | $ | 39,903 |
| | $ | 299,505 |
| | $ | 293,375 |
|
Reconciliation of Operating Income (loss) to Adjusted Gross Margin and Adjusted EBITDA by segment:
|
| | | | | | | | | | | | | | | |
| Three Months Ended December 31, 2015 |
| Travel Network | | Airline and Hospitality Solutions | | Corporate | | Total |
Operating income (loss) | $ | 175,218 |
| | $ | 49,970 |
| | $ | (115,788 | ) | | $ | 109,400 |
|
Add back: | | | | | | | |
Selling, general and administrative | 33,769 |
| | 14,945 |
| | 96,321 |
| | 145,035 |
|
Cost of revenue adjustments: | | | | | | | |
Depreciation and amortization(2) | 19,204 |
| | 35,535 |
| | 12,716 |
| | 67,455 |
|
Amortization of upfront incentive consideration(3) | 11,946 |
| | — |
| | — |
| | 11,946 |
|
Stock-based compensation | — |
| | — |
| | 2,630 |
| | 2,630 |
|
Adjusted Gross Margin | 240,137 |
| | 100,450 |
| | (4,121 | ) | | 336,466 |
|
Selling, general and administrative | (33,769 | ) | | (14,945 | ) | | (96,321 | ) | | (145,035 | ) |
Joint venture equity income | 644 |
| | — |
| | — |
| | 644 |
|
Selling, general and administrative adjustments: | | | | | | | |
Depreciation and amortization(2) | 990 |
| | 208 |
| | 27,973 |
| | 29,171 |
|
Restructuring and other costs(5) | — |
| | — |
| | 368 |
| | 368 |
|
Acquisition-related costs(6) | — |
| | — |
| | 1,223 |
| | 1,223 |
|
Litigation costs(7) | — |
| | — |
| | 1,912 |
| | 1,912 |
|
Stock-based compensation | — |
| | — |
| | 4,013 |
| | 4,013 |
|
Adjusted EBITDA | $ | 208,002 |
| | $ | 85,713 |
| | $ | (64,953 | ) | | $ | 228,762 |
|
|
| | | | | | | | | | | | | | | |
| Three Months Ended December 31, 2014 |
| Travel Network | | Airline and Hospitality Solutions | | Corporate | | Total |
Operating income (loss) | $ | 142,233 |
| | $ | 58,773 |
| | $ | (97,298 | ) | | $ | 103,708 |
|
Add back: | | | | | | | |
Selling, general and administrative | 25,249 |
| | 17,640 |
| | 72,736 |
| | 115,625 |
|
Cost of revenue adjustments: | | | | | | | |
Depreciation and amortization(2) | 13,590 |
| | 25,892 |
| | 5,873 |
| | 45,355 |
|
Amortization of upfront incentive consideration(3) | 12,181 |
| | — |
| | — |
| | 12,181 |
|
Restructuring and other costs(5) | — |
| | — |
| | 769 |
| | 769 |
|
Stock-based compensation | — |
| | — |
| | 2,521 |
| | 2,521 |
|
Adjusted Gross Margin | 193,253 |
| | 102,305 |
| | (15,399 | ) | | 280,159 |
|
Selling, general and administrative | (25,249 | ) | | (17,640 | ) | | (72,736 | ) | | (115,625 | ) |
Joint venture equity income | 2,715 |
| | — |
| | — |
| | 2,715 |
|
Joint venture intangible amortization(2a) | 801 |
| | — |
| | — |
| | 801 |
|
Selling, general and administrative adjustments: | | | | | | | |
Depreciation and amortization(2) | 520 |
| | 296 |
| | 22,442 |
| | 23,258 |
|
Restructuring and other costs(5) | — |
| | — |
| | 867 |
| | 867 |
|
Litigation costs(7) | — |
| | — |
| | 2,775 |
| | 2,775 |
|
Stock-based compensation | — |
| | — |
| | 3,724 |
| | 3,724 |
|
Adjusted EBITDA | $ | 172,040 |
| | $ | 84,961 |
| | $ | (58,327 | ) | | $ | 198,674 |
|
|
| | | | | | | | | | | | | | | |
| Year Ended December 31, 2015 |
| Travel Network | | Airline and Hospitality Solutions | | Corporate | | Total |
Operating income (loss) | $ | 751,546 |
| | $ | 180,448 |
| | $ | (472,225 | ) | | $ | 459,769 |
|
Add back: | | | | | | | |
Selling, general and administrative | 116,511 |
| | 62,247 |
| | 378,319 |
| | 557,077 |
|
Cost of revenue adjustments: | | | | | | | |
Depreciation and amortization(2) | 62,337 |
| | 142,109 |
| | 40,089 |
| | 244,535 |
|
Amortization of upfront incentive consideration(3) | 43,521 |
| | — |
| | — |
| | 43,521 |
|
Stock-based compensation | — |
| | — |
| | 11,918 |
| | 11,918 |
|
Adjusted Gross Margin | 973,915 |
| | 384,804 |
| | (41,899 | ) | | 1,316,820 |
|
Selling, general and administrative | (116,511 | ) | | (62,247 | ) | | (378,319 | ) | | (557,077 | ) |
Joint venture equity income | 14,842 |
| | — |
| | — |
| | 14,842 |
|
Joint venture intangible amortization(2a) | 1,602 |
| | — |
| | — |
| | 1,602 |
|
Selling, general and administrative adjustments: | | | | | | | |
Depreciation and amortization(2) | 3,428 |
| | 904 |
| | 102,613 |
| | 106,945 |
|
Restructuring and other costs(5) | — |
| | — |
| | 9,256 |
| | 9,256 |
|
Acquisition-related costs(6) | — |
| | — |
| | 14,437 |
| | 14,437 |
|
Litigation costs(7) | — |
| | — |
| | 16,709 |
| | 16,709 |
|
Stock-based compensation | — |
| | — |
| | 18,053 |
| | 18,053 |
|
Adjusted EBITDA | $ | 877,276 |
| | $ | 323,461 |
| | $ | (259,150 | ) | | $ | 941,587 |
|
|
| | | | | | | | | | | | | | | |
| Year Ended December 31, 2014 |
| Travel Network | | Airline and Hospitality Solutions | | Corporate | | Total |
Operating income (loss) | $ | 657,326 |
| | $ | 176,730 |
| | $ | (412,711 | ) | | $ | 421,345 |
|
Add back: | | | | | | | |
Selling, general and administrative | 102,059 |
| | 56,195 |
| | 309,340 |
| | 467,594 |
|
Cost of revenue adjustments: | | | | | | | |
Depreciation and amortization(2) | 58,533 |
| | 104,926 |
| | 34,950 |
| | 198,409 |
|
Amortization of upfront incentive consideration(3) | 45,358 |
| | — |
| | — |
| | 45,358 |
|
Restructuring and other costs(5) | — |
| | — |
| | 6,042 |
| | 6,042 |
|
Stock-based compensation | — |
| | — |
| | 8,044 |
| | 8,044 |
|
Adjusted Gross Margin | 863,276 |
| | 337,851 |
| | (54,335 | ) | | 1,146,792 |
|
Selling, general and administrative | (102,059 | ) | | (56,195 | ) | | (309,340 | ) | | (467,594 | ) |
Joint venture equity income | 12,082 |
| | — |
| | — |
| | 12,082 |
|
Joint venture intangible amortization(2a) | 3204 |
| | — |
| | — |
| | 3204 |
|
Selling, general and administrative adjustments: | | | | | | | |
Depreciation and amortization(2) | 2,174 |
| | 992 |
| | 88,055 |
| | 91,221 |
|
Restructuring and other costs(5) | — |
| | — |
| | 4,428 |
| | 4,428 |
|
Litigation costs(7) | — |
| | — |
| | 14,144 |
| | 14,144 |
|
Stock-based compensation | — |
| | — |
| | 12,050 |
| | 12,050 |
|
Management fees(8) | — |
| | — |
| | 23,701 |
| | 23,701 |
|
Adjusted EBITDA | $ | 778,677 |
| | $ | 282,648 |
| | $ | (221,297 | ) | | $ | 840,028 |
|
Non-GAAP Footnotes
| |
(1) | Net income attributable to non-controlling interests represents an adjustment to include earnings allocated to non-controlling interest held in (i) Sabre Travel Network Middle East of 40% for all periods presented, (ii) Sabre Seyahat Dagitim Sistemleri A.S. of 40% beginning in April 2014, and (ii) Abacus International Lanka Pte Ltd of 40% beginning in July 2015. |
| |
(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. Also includes amortization of the excess basis in our underlying equity interest in Abacus International Pte Ltd's ("AIPL") net assets prior to our acquisition of AIPL on July 1, 2015. |
| |
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. |
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(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. |
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(4) | In 2015, we recognized a gain of $78 million associated with the remeasurement of our previously-held 35% investment in AIPL to its fair value and a gain of $12 million related to the settlement of pre-existing agreements between us and AIPL. In 2014, other, net primarily includes a fourth quarter charge of $66 million as a result of an increase to our tax receivable agreement (“TRA”) liability. The increase in our TRA liability is due to a reduction in a valuation allowance maintained against our deferred tax assets. This charge is fully offset by an income tax benefit recognized in the fourth quarter of 2014 from the reduction in the valuation allowance which is included in tax impacts of net income adjustments. In addition, all periods presented include 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.
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(5) | Restructuring and other costs represent 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. |
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(6) | Acquisition-related costs represent fees and expenses incurred associated with the acquisition of Abacus and the Trust Group. |
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(7) | Litigation costs represent charges associated with antitrust litigation. |
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(8) | We paid an annual management fee to TPG Global, LLC (“TPG”) and Silver Lake Management Company (“Silver Lake”) in an amount between (i) $5 million and (ii) $7 million, plus reimbursement of certain costs incurred by TPG and Silver Lake, pursuant to the management services agreement (the “MSA”). In addition, we paid a $21 million fee, in the aggregate, to TPG and Silver Lake in connection with our initial public offering in 2014. The MSA was terminated in conjunction with our initial public offering. |
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(9) | In 2014, the tax impact on net income adjustments includes a $66 million benefit recognized in the fourth quarter of 2014 from the reduction in a valuation allowance maintained against our deferred tax assets. |
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(10) | 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. |
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(11) | 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. The year 2014 also includes a $50 million payment to American Airlines in conjunction with the new Airline Solutions contract, which is being amortized as a reduction to revenue over the contract term. This payment reduced payment credits originally offered to American Airlines as a part of the litigation settlement in 2012, contingent upon the signature of a new reservation agreement, which were extended to include the combined American Airlines and US Airways reservation contract. The payment credits would have been utilized for future billings under the new agreement. |
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