Good morning and welcome to the Sabre Fourth Quarter and Full Year 2018 Earnings Conference Call. Please note that today’s call is being recorded and is also being broadcast live over the Internet on the Sabre corporate website. This broadcast is the property of Sabre. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of the company is strictly prohibited. I will now turn the call over to the Senior Vice President of Investor Relations and Corporate Communications, Mr. Barry Sievert. Go ahead sir.

Thank you, Jewel, and good morning, everyone. Thanks for joining us for our fourth quarter and full year 2018 earnings call. This morning we issued an earnings press release, which is available on our website at investors.sabre.com. Our slide presentation and today’s prepared remarks are also available during this call on the Sabre IR web page. A replay of today’s call will be available on our website later this morning. Throughout today’s call, we will be presenting certain non-GAAP financial measures, which have been adjusted to exclude certain items. All references during today’s call to EBITDA, EBITDA Less Capitalized Software Development, operating income, EPS and net income have been adjusted for these items. The most directly 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. We would like to advise you that our comments contain forward-looking statements. These statements include, among others, disclosures of our guidance, including revenue, EBITDA, EBITDA Less Capitalized Software Development, operating income, net income, EPS, cash flow and CapEx; our medium term outlook; our expected segment results; the amount and effects of changes in capitalization mix and depreciation and amortization, the effects of new or renewed agreements, products and implementations; our expectations of industry trends; and various other forward-looking statements regarding our business. These statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today’s conference call. Information concerning the risks and uncertainties that could affect our financial results is contained in our SEC filings, including our 2017 Form 10-K and our third quarter 2018 Form 10-Q. Participating with me on today’s call are Sean Menke, our President and Chief Executive Officer; and Doug Barnett, Executive Vice President and Chief Financial Officer. Sean will start us off and provide a review of our strategic and commercial performance and outlook. Doug will offer additional perspective on our financial results and forward outlook. We will then open the call to your questions. With that, I will turn the call over to Sean.

Good morning everyone and thank you for joining us today. 2018 demonstrates steady continued progress on a strong foundation. Our commitment and execution to the strategy we laid out at the beginning of 2018 resulted in solid financial and operational performance, with high-single-digit revenue growth, a 10% increase in earnings per share and a 22% growth in free cash flow. We augmented our leadership team with skilled technology executives, evolved our go-to-market strategy and made strong progress on our technology evolution. This, along with continued evidence of momentum behind our strategic and commercial initiatives gives me confidence in our 2019 expectations, including driving a 10% increase in free cash flow, growth that is in line with our Investor Day guidance, but off a higher 2018 base. Before we get into the details, I would like to acknowledge my team members around the world with a sincere thank you. Their collective hard work and effort over the past year have been a major contributor to the progress we have made and make me feel confident about the future. Now, let’s look at our performance for 2018. In 2018, we delivered strong full year results well ahead of our original expectations coming into the year. Our solid full year revenue growth was driven by two main factors. Strong growth in Travel Network driven by a supportive bookings environment, the completion of the Flight Centre migration, increased share at global travel agencies and conversions, including CWT and other new agencies. The investments we have made in the new Sabre Red 360, the official name of our new Sabre Red Workspace, and the cloud-deployment of our shopping complex are clearly paying off. We gained 120 basis points of global booking share, leading to full year bookings growth of 6.4%, ahead of our expected 4%…

Thank you, Sean. Turning to the Q4 results. Revenue growth was solid, up 5% year-over-year. Over the period, recurring revenues represented 93% of total revenue, versus 95% in the prior year. EBITDA grew 4%, reflecting revenue growth and lower corporate costs, partially offset by increased Travel Network incentives. Operating income increased 2% year-over-year, which includes an $8 million increase in depreciation and amortization, Earnings per share increased 6%, driven by operating income growth and a lower tax rate due to the impact of US tax reform. And as expected, in the quarter, free cash flow declined 26% to $110 million due to working capital timing. Full year free cash flow of $441 million represents growth of 22%, and was more than $50 million above our initial expectations of approximately $390 million for the year. Looking a bit closer at Travel Network in Q4, total revenue growth of 7.5% supported an increase in operating income of 2% for the quarter. Bookings grew 4% in the quarter, and average booking fee increased 3% in the quarter. About half of the average booking fee growth was driven by the positive impact from customer pricing at specific carriers experimenting with different distribution strategies in Europe. Travel Network operating margin decline of 130 basis points in the quarter was driven by 3 points of margin decline from incentive fee growth, and approximately 150 basis points of negative impact from higher technology operating expenses, all due to lower third-party service credits, partially offset by a 2 point benefit from the increase in average booking fee and a 1 point benefit from headcount-related and other expense leverage from cost savings initiatives. Taking a closer look at incentive fee growth in the quarter. About half of the increase was from new commercial deals and agency conversions, and half…

Thanks, Doug. Strong full year results prove we’re progressing well against our strategy. Continued evidence of momentum behind our strategic and commercial initiatives gives me great confidence in our 2019 and medium term expectations. I look forward to continuing to share our progress over the quarters to come. I want to once again thank you for joining our call today and for your continued interest in Sabre. And with that, I will ask the operator to open up the call for your questions. Operator?

[Operator Instructions]. Our first question comes from Mark Moerdler with Bernstein Research. Your line is now open.

Thank you. I appreciate all the detail, given all the complexity what's going on. I have two questions that hopefully will help a little bit in clarity. The first is, just to confirm can you drill into the updated medium-term outlook where the adjusted operating income, margin EPS are now growing off of a lower 2019 base. If we compare it back to 2018, how should we think about these metrics? Obviously you're saying margins will improve, longer term. What happens to the other parts of the story? And then a follow-up.

Yes. Obviously the impact of a capitalization mix shift as well as the incremental amortization negatively impact all of the reported metrics for 2019. What will happen though, as we burn down through the amortization depreciation begins to decline by the $150 million that we've talked about, those metrics will get back to the same levels as what we talked about back in Investor Day a year ago.

Okay. That helps. When we -- the ASC 606 had a negative impact, can you give more information on when we lap that or when it reverses?

Yes. Obviously, we don't expect a need to talk about that in 2019. It did impact us negatively by about $12 million and mainly at the AS group in 2018.

So, it's completely out of the story by the end of this quarter?

That is correct. Yes, you won't see us reference ASC 606 anymore in 2019.

Okay. Thank you.

Thank you. And our next question comes from John King with Bank of America Merrill Lynch. Your line is now open.

Yes. Good morning, thanks for taking the questions. First one was going to be on the Airline Solutions side. Obviously, a great fit to JetBlue. I think in the press release that you referred some modernization of the platforms, so maybe you could give a bit of background as to how that ties up with I guess some of the modernization that's going on in Sabre. Is that essentially exact same thing? Or what have you signed up on there? And maybe generally on the renewals that you've signed, obviously it sounds like you've done a good job on that in general. What kind of pricing are you seeing? I know you're calling out slightly lower pricing on SabreSonic, but that may simply be mix. So, interested in what you're seeing on a like-for-like basis. And I also have a follow-up.

Okay. Perfect John and thanks for joining us today. First off, on the JetBlue piece is one that I think this is a testament to the organization, the transformation that we have been going through, as you look at the modernization of the technology, making sure that we're providing the capabilities not only JetBlue but also customers around the world. And as we announced on the back half of the year, the airline digital commercial platform and the evolution that's taking place there, it was very key as it related to us -- of renewing that relationship with JetBlue and the confidence that they have in this management team to be able to deliver. And it does go back to, really things that we have been doing over the last couple of years, focusing on stability and product health that really translates into this. So, that was a big driver in that renewal. But also, is at the forefront, essentially campaigns that we're involved in. And that actually transcends into the other renewals that we've had -- over the -- really last year, year and a half. If you look at your second question, relative to the renewals; if you -- read into the guidance that Doug provided, there has been a little pressure on the PB side of the equation. The other thing that we look at is the opportunity to expand the portfolio of products because there are certain products that are actually contracted with that. But, if you look beyond and what we're doing within Airline Solutions and looking at how the model is continuing to shift to retailing distribution and fulfillment, we do believe that there is a significant amount of opportunity and Intelligence Exchange is an example of that, that we can continue to grow share of wallet with those customers. So, very important for us to lock those deals up as you would imagine as we stated. That essentially locks up 75% of our revenue through 2023 and I'm pretty invigorated about our opportunity to go on and compete for more business.

That's helpful. And then, the follow-up is actually one around the similar topic, around the -- some of the clients that you've lost. I mean, I guess as you took over Sean, the business has come out of quite a lot of disruption on the operating side. You had quite a few outages, zero, it sounds like in 2018 which is a great result relative to I think where you had been. So, I'm just wondering kind of was that a big driver for some the clients that potentially left you, were there economic considerations for some of them? And why were you losing those clients and what do you expect to be -- when do you expect to -- I suppose, to adjust your operating performance to flow through into these -- conversion of pipeline into deals?

Yes. So, a couple of things on that John and thanks for that question. When you look at the stability piece of this, and this goes back to, really what we were dealing within 2016 and 2017 and the things that we have worked as I went through in my prepared comments, where we are is just nine day right now. We are just running an amazing operation. Right now, I couldn't be prouder of the organization. When I look at the, three carriers that have treaded away from us, I wish I was in my seat a year before that, because there's no doubt in my mind, the efforts that we have taken over the last couple of years would have paid off there. And as I've mentioned to you and others as we've had these discussions is, if you're not healthy, customers are going to react to that. And two of those carriers, specifically, I think we made great headwinds with the executive management teams. But you also have to understand that they have front-line employees that they listen to. And it was the decision that they needed to make a transition and I'm respectful of that. And, as we look at the future, this is why I'm so confident in what's taking place right now. We have just tackled a number of these issues, that we were dealing within the past and we've set ourselves up for some great days ahead.

Got it. Thank you.

Thank you. And our next question comes from Matt Pfau with William Blair. Your line is now open.

Hey guys, thanks for taking my question. I just wanted to dig in a bit into the hospitality business. And acquisitions in that market are quite frequent. And so, I think when you would have given guidance would have anticipated some level of consolidation. So, was -- is the amount of consolidation you're seeing greater than you would have anticipated? And how do you sort of factor in some of the mid-and small-sized hoteliers that you deal with getting consolidated in the future? Thanks.

Yes, yes. Very good question. So, if you look at the normal attrition rate that we have, in 2019 it's actually higher. So, we're seeing this actually jump up specifically to transactions that we see taking place. If I look at sort of the broader context on hospitality and look at essentially where we were in 2017 and 2018 and it goes back to the question that John had more on the Airline Solutions side, but we did have stability issues and we had an issue related to a data breach. And the one thing that we focused on that has dampened the growth is our focus on what we're doing within the digital exchange business and deciding to pull back on that a little bit and focusing more on strategic customers on a broader portfolio. When you look at, just SynXis, CRS and the PMS there has been a lot of work within those and they're very health products in what's happening. So, the other things that the team has done in this period is, they've aggressively focused on just managing expense and you saw that in the margin improvement. Where I'd begin to gain more confidence, as we go into that cycle is what I outlined and Doug outlined as it related to sales, it's typically on the back half of the year. The team really did step up and we're seeing that momentum carry forward into the first quarter of this year. So, like I mentioned it's higher attrition than what we've historically seen, but the level of engagement that we have across the board at the enterprise level as well as large independents makes me feel comfortable where we are. And again, very similar to Airline Solutions I think the teams have done a good job to position us to continue to gain momentum into the midterm.

And Matt, I might add the attrition rate we have forecast in 2019 is double what we've seen historically to give you some perspective.

Yes. Great. Thanks for the detail, that's helpful. Thanks guys, that's it from me.

Thank you. And our next question comes from Jim Schneider with Goldman Sachs. Your line is now open.

Good morning, thanks for taking my question. I was wondering if you could maybe talk a little bit and I apologize if I missed it about the progression in airline capacity, you see as you get to the back half of this year and beginning of 2020, even based on what you see now. How much trimming are you expecting? And how does it kind of vary across regions?

Yes. So, let me give you sort of how we've assessed the year. So, we're seeing some moderation in capacity across all regions in 2019 and we've modeled about a 4% growth on a year-over-year basis. We continue to see APAC growing at a significant rate. That's more on the low-cost carrier side, there's definitely delineation between low-cost carrier growth and full-service carrier growth. I think in our modeling, we have full-service carriers growing in the range of about 3% or so. And with that, taking place that does dampen sort of the GDS booking side of the equation. When we look into 2020 right now, it's just really based on, Jim, just historical sort of growth rate and then what we're seeing sort of in the marketplace and just trying to continue to monitor what's happening. But, the primary focus right now is what we see in 2019.

Thanks. And then maybe just as a quick follow-up. Related to the Hospitality Solutions, understanding fully the consolidation headwinds you're seeing this year, when would you expect that to sort of get -- lap that and get back to a more normalized growth rate and what would you kind of [indiscernible] normalized rate might be?

We would expect to get back to normal in 2020 and beyond.

And at what rate?

Similar. About half the attrition rate, we would expect to get back to normal attrition rates in 2020. Remember it's doubling in 2020 and 2019.

Helpful. Thank you.

Thank you. And our next question comes from Brian Essex with Morgan Stanley. Your line is now open.

Hi, good morning and thank you for taking the question. Sean, I was maybe wondering if you could, one, offer an update on Farelogix, where does that stand in the process? And then kind of as a follow-up, related to that, just looking at the pipeline of deals coming up for renewal, you guys as you've mentioned seem pretty well solidified over the next two to three years. But there are about a dozen-or-so Amadeus and deals coming up for renewal. There are probably 15-plus Navitaire deals coming up for renewal. How might that position you to be more competitive in some of those competitor deals coming up for renewal over the next two to three years?

Thanks for the question Brian and thanks for joining us this morning. So, let me start with Farelogix. So, as expected we did receive a second request from the Department of Justice and we're working with them to go through that process. We're estimating that the deal will actually close in the mid-part of the year, and as we continue to articulate and we've had really good engagement really across the board with airlines and agencies that as we continue to look at the model evolving and this is a big part of what I've really spoken with airline executives as well as agency executives is, as we see what's taking place there has been a model that has worked over a number of years, but there's this desire, as I often say, behind door number two of how do you continue to evolve. And the Farelogix acquisition allows us to really put our money where our mouth is, relative to making sure that we're continuing to evolve in the marketplace. And so that really leads into your second question on how does that position us to compete in the marketplace and this is again, when I look at where we're positioned and what we've done over the last two years, Brian, I'm extremely excited because this is one that -- when we think about our strategy of retailing, distribution and fulfillment, you have to think about it from the supply side -- our customers on the supply side; not only on the airlines, but the hotels, and how are we allowing them through our technology and this really does get into the Airline Solutions piece of the business. It also leans on what we're doing -- would like to do with Farelogix with getting that deal closed, is it…

That makes a lot of sense. Thank you.

Thank you. And our next question comes from with Giorgios Tristos, Berenberg. Your line is now open.

Yes, hi. Thank you for taking my question. I have, I guess a bit of a high-level question. You mentioned in the -- essentially some cost savings -- compute cost power savings from the shift to cloud. I was just curious to ask what you're actually seeing in the market. Are those costs essentially captured internally or are we also looking at the part of those costs being transferred to clients in terms of more competitive pricing?

So, right now those costs are being captured internally and they enable us to self-fund the whole technology transformation that we're going through. So, they're critical for us to be able to effectuate our technology evolution. So, captured internally right now.

Okay, clear. And just a quick follow-up then if I may. On the -- can you just give a little bit more color if you can on the incentive fee dynamics? I mean, are there any clear trends by geography perhaps or anything along those lines? How are you expecting that to sort of evolve in the next couple of years?

So, as we mentioned in our prepared comments what we saw in 2018 and this is an important note too. We talked about -- I'd be remiss, if I didn't mention this. I talked about the amount of business that we locked upon Airline Solutions. What we saw, if you go back to really 2016 and 2017, we went through a cycle of a number of renewals -- of major OTAs as well as TMCs and then we ended up winning Flight Centre as well. And what we saw throughout really 2018 is that yes we had higher incentive rates, but it actually began to reduce throughout the year. And as we look into 2019, as Doug had mentioned, we get back to normalized rates -- historic normalized rates in the second quarter. When we look into the future, here's the balance and what I have focused on with the team, and this is the important piece. Technology is an important driver today. It's unbelievably important. And what I find taking place, specifically with conversations with agencies today, they're wanting to understand the technology evolution. This is why Farelogix is important. It's why that we're going down this path of how do we make sure that we look at the model that has been around for a long period of time, and a model that's evolving, and in doing that, it's our responsibility to work with the suppliers, as well as the agencies to make sure that the content is there and there's an understanding of that taking place. And with that, I think you're going to find that there's some more balanced conversation that has not incentive-led, it's going to be very technology-led as well.

Okay. Very clear. Thank you very much.

Thank you. [Operator Instructions] Our next question comes from Jed Kelly with Oppenheimer. Your line is now open.

Great. Thanks for taking my question. Just a question on the guidance. How much of a factor did you build in a cushion for the current macro environment versus prior years? And then on hospitality, how much of this -- some of the attrition coming from competition? And then, can you give us update on the Booking.com integration?

Sure. Let me talk about first the macro cushion that you talked about. We've actually factored in a similar level of cushion of what we would have had coming into 2018, similar to what we're doing in 2019. So no real material changes year-over-year.

And Jed, on that, if you go back just relative to the way we modeled sort of the capacity growth that does flow through into expected booking growth as well. The other thing that we had the tailwind last year was really the conversion -- the Flight Centre conversion still happening as well as CWT in the marketplace. On the hospitality side, the acquisitions have been more in -- hasn't really been a loss. It's gone into -- it's just gone into the platforms of the acquiring hotelier. So, it hasn't been -- that has gone from off to another -- it's just based on the acquirer putting them on their platform. And then, on your last question on the Booking.com so up to this point within the Sabre Red Workspace there is what's called a Red App. And where we are right now is the bookings are taking place through that Red App. So, it's sort of an add-on. The important piece -- and this is really being rolled out through 2019, is when you look at the content services for lodging and the platform that we have been developing. It's a more -- it flows into that essentially display that does not only booking, but it does other rates that are out there -- that gets into -- the booking flow are much better. So we should see some more ramp-up taking place in 2019. The one thing that if we looked at the hospitality booking growth in 2018, it was actually up 11%. If you looked at the non-air components, there wasn't significant amount of growth and that was actually due to these lower-margin rail that was coming off. But, we actually saw some really good booking growth. As you know, those are higher margin and the focus that we have and this gets into just the broader picture is that the ability to get the attachment rate higher to air also helps us out.

And Jed, I just wanted to add one other thing to you with regards to the cushion coming into the year. Obviously, with all the renewals that we now have at AS and particularly JetBlue today, we're in a significantly different risk profile today with regards to the Airline Solutions business than we were coming into 2018.

And then just one more question. When you called out modest slowing in the global travel economy, is that more business or more leisure-weighted?

I mean, the business has -- if I look at business, business has trended relatively the same. I think it's just a mix. It's a mix up that we're seeing right now.

Thank you.

Thank you. With that I would like to turn the call back to Mr. Menke for closing remarks. Mr. Menke?

Great. Thank you. And once again, thank you again for joining us for the call this morning. We appreciate the interest and support and look forward to continuing to share our progress and results as we look ahead. Thanks again guys.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone have a wonderful day.