Good morning, and welcome to the Sabre Third Quarter 2020 Earnings Conference Call. My name is Victor, 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 Vice President of Investor Relations, Kevin Crissey. Please go ahead, sir.

Thanks, Victor, and good morning everyone. Thanks for joining us for our third quarter 2020 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 would like to advise you that our comments contain forward-looking statements that represent our beliefs or expectations about future events, including the duration and effects of COVID-19, industry trends, expected advancements, cost savings and liquidity, among others. All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those 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 filed on August 10, 2020 and our 2019 Form 10-K. Throughout today’s call, we will also be presenting certain non-GAAP financial measures. All references during today’s call to EBITDA, operating loss and EPS have been adjusted to exclude certain 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. Participating with me are Sean Menke, our Chief Executive Officer, and Doug Barnett, our Chief Financial Officer. Dave Shirk, our President of Travel Solutions, and Scott Wilson, our President of Hospitality Solutions, will be available for Q&A after the prepared remarks. And with that, I will turn the call over to Sean.

Thanks, Kevin. Good morning everyone, and thank you for joining us today. Before we get into the details of the quarter, I would like to first thank my team members around the world for their sacrifices and ongoing endless effort. I am humbled and very proud of what they have done for our customers and our company. During today’s call, we will focus on a few specific areas, including comments on the ongoing response to the COVID-19 pandemic and customer engagement, the continued progress with our technology transformation and product enhancements, and finally, an update on our financial and balance sheet focus. Early on in the course of the pandemic, we took swift and decisive actions to protect our people, our company, and our balance sheet to give us additional runway to help weather this pandemic. Those actions have allowed our team to focus on controlling what we can and using this unprecedented time to challenge traditional thinking, advance innovations and position Sabre for the future. The COVID-19 pandemic continues to suppress travel demand and impact our customers, partners, and, of course, our financial results. Importantly, Q3 booking trends showed signs of improvement from the second quarter, and we have cautious optimism for ongoing improvements. Even in these tough times, we continue to win new business and lock in long-term commitments with some of our largest customers. Our value in the travel industry continues to be well known, as evidenced by the 1,400 airline and agency deals we have signed year-to-date. Our customers trust us to be there for them, now and on the other side of this pandemic. We took decisive actions to reduce our cost structure, manage cash burn, extend our debt maturities and add to our liquidity position. We've also continued to invest in our technology transformation…

Thanks, Sean. The impact of the pandemic hurt our results significantly again in Q3, though certainly less than in the second quarter. Revenue was down 72% in the quarter, totaling $278 million versus $984 million last year. We've described how 15% of our revenue, or approximately $150 million per quarter, is not tied to travel volumes. This remains the case. Because our net bookings are now positive, our revenue surpassed this figure. Our Distribution bookings were down 86% in the quarter. Gross bookings were down 84%, 83%, and 81% in July, August and September, respectively. We report bookings on a net basis, meaning net of cancellations. Net bookings were down 91%, 87% and 81% in those same months. Consequently, our Distribution revenue in the quarter was down 84%, to $105 million. In terms of future cancellations exposure, we have recognized $30 million in revenue from bookings not yet departed and have a $33 million cancellation reserve. Our IT Solutions revenue fared better, down 46% year-over-year, due to a higher percentage of revenue not tied to travel volumes. Hospitality revenue was down 40%, with a 37% decline in CRS transactions. EBITDA, operating income and net income were all negative in Q3, reflecting the impact of the COVID-19 pandemic. The year-over-year decline in revenue was partially offset by a decline in incentives expense, headcount expenses due to cost savings initiatives we have already executed, and technology expenses due to the lower transaction volume environment. In addition, free cash flow was negative $201 million in the quarter. As expected, our Free Cash Flow was reduced by $20 million in severance payments and $13 million net cash outflows to carriers resulting from previous booking cancellations. Please note when we previously gave our monthly cash burn guidance, these two items were addressed as reductions to…

Thanks Doug. In summary, we remain focused on the future, are confident travel will rebound and feel competitively well-positioned post-COVID-19. I want to once again thank my Sabre teammates around the world for their dedication to serving our customers, shareholders and each other during this difficult time. And with that Victor, I'd like to go ahead and open up the call for questions.

Thank you. [Operator Instructions] And our first question will come from the line of Mark Moerdler from Bernstein Research. You may begin.

Thank you so much and nice to see the steady improvement. Obviously, it's been a slow slog forward. I apologize, but I got two questions if you don't mind. Doug, you had one-time items impacting cash in Q3. And now there's another $90 million in items impact in Q4. Can you give us any sense of what you now currently see obviously in terms of other one-time items or timing changes in terms of cash impacts for 2021 and beyond? And then I have a follow-up.

Yes, Mark. Once we've burned through the severance payments, which we'll do primarily by the end of 2020, and obviously we're seeing a lot less impact from cancellations than we saw earlier in the year, so I don't expect those two items to continue. And the only reason why you had a variability of the interest costs in the fourth quarter versus the prior quarters is because of the financings that took place in April, so they will commonize and be normal throughout all of 2021 and beyond.

So we shouldn't expect any specific specialty one-time items at this point, right.

That's correct.

Okay. And then can you give us any color on travel agency failure rates?

Yes, Mark, I mean, what we've seen so far, I'm going to go around the globe, we haven't seen what I would consider a lot of failure rates, many of them have gotten a lot of expense out. There have been a number of furloughs that have taken place. What we have seen is some level of consolidation M&A taken place. With CTM, the large TMC out of Australia acquired travel and transport here in the U.S. But for the most part, we have not seen a lot of failure at this point.

Perfect. I really do appreciate. I'm sure, there's lots of other questions. Thank you.

Yes, thank you, Mark.

Thank you. Our next question will come from the line of Ashish Sabadra from Deutsche Bank. You may begin.

Thanks for taking my question. And let me echo the strong – sorry the improvement that we're seeing in the bookings here. One of the key debates that we've heard from investors is around the corporate bookings, specifically around the disintermediation from Zoom or video conferencing, but also on the positive side, the increased managed care. So, Sean, maybe if you can take your crystal ball and give your thoughts on what do you think about the corporate travel, particularly in the disintermediation front. But also if you've done any research in the past, talking about what percentage of the corporate bookings was managed and how the duty of care emphasis post the pandemic could potentially shift more volume to the GDS? Thanks.

Yes. Thanks, Ashish, for that question. So let me just touch upon the way that we look at this. And again, I go back in history a little bit just at my number of years in the business and go back to 9/11 go during the period relative to the economic essentially a recession that took place 2008 through 2010 roughly. There was a call for corporate travel really slowing down and not rebounding the way that it did. Now, if you look at it, it did. There was a rebound that took place. No doubt that we're seeing in more of a significant impact in what's taking place. If you do a breakdown of what we're looking and we look at the data very closely. We do see that leisure bookings are recovering faster than corporate bookings. But when you look at the trough, it was down essentially 100%, I think at the peak down, it was probably 98%, 99%. We're actually seeing corporate bookings in the range down about 80% or so give or take a couple of points. And with that Ashish, the one thing that's clear is we don't see really corporate bookings starting to recover until 2021. The other thing that is very important and we are an organization that I have thousands of employees that travel around the world, and you mentioned this and it's the duty of care and the importance of duty of care. And there are things that are being worked on relative to additional technology that is going to allow corporations to make sure that they are doing the best thing and the safest thing for their employees around the world. So I look at it that we have to be patient, recovery is taking place. And again, living through this a couple of different times, there's no doubt in my mind that we have seen essentially Zoom calls as well as Teams calls have allowed us to be efficient. But I do believe we will see corporate travel recover over a period of time. I don't think it's just going to snap back, but I think we just have to be patient. It goes back to everything that we have done as it relates to one, raising liquidity focusing on the balance sheet, continuing to improve our technology, products in the marketplace, that position us well for the future.

Thanks, Sean. That was very helpful color. And then just moving on to the Google partnership, congrats on those new product launches there. I was just wondering if you can talk about or remind us how Google is helping you in developing those products? Do they have people of engineers on their front actively helping you with the development? So that's one part of the question. And then the second question would be just how does it change your competitive positioning going forward with these new products out in the market? And then third, I know it's still very early days, but have you had any conversations with any of your customers on these modules or any initial feedback? Thanks. Sorry for so many questions.

Yes, no, thanks, Ashish. I mean, first and foremost, I think, we're already doing great things with our products, so I think this is just going to pull all of us even further into opportunities to continue to accelerate wins in the future because it's really aligning to what the marketplace needs to do. As a reminder, there's sort of four aspects of the Google relationship. One is the cloud deal that Doug talked about and the savings that we get. The second is really the technology transformation, part of that is with Google and then also the new DXC agreement that really gives us a lot of flexibility and how we think about the transformation. With that there are a number of Google engineers that are helping on that tech transformation. The third part of it is really the machine learning, the AI side of the equation and we talked about this and how this is going to be integrated and it's taking place now. The other piece of it is the innovation framework. And again, this really does get into what we're doing on the merchandising side. We'll be able to share more with this, but this is essentially a Farelogix replacement and what was taking place there. And we believe it is what we consider to be Gen 3, which is really not in the marketplace because it really does get into dynamic offers. So when you look at it Ashish, it's really all the components of the relationship are beginning to come together. That's allowing us to continue to position ourselves to be able to transform the industry that we're in.

Thanks again.

Yes, Ashish, just to add to your question on customer interaction. We've already had multiple customer sessions, joint sessions, ourselves, Google, and the customer. And we have a backlog of folks that with these announcements are very interested in continuing that. So we've got our teams pretty busy over the course of the next several months on the topics.

That's great. Good results once again. Thank you.

Thanks, Ashish.

[Operator Instructions] Our next question will come from the line of Jed Kelly from Oppenheimer. You may begin.

Great. Thanks for taking my question. Just getting an update on the booking mix and when you can become free cash flow neutral. Is it still needed to be 70% of 2019 levels? Or is there a way you could reach cash flow neutral before then?

Yes. Jed, as you recall last time at the end of – in the last conference call, we gave kind of two goalposts, I would tell you. The unfavorable mix we're seeing right now between corporate and leisure and international and domestic, if that were to stay the same as what we're seeing right now in today's environment then we would need to have a 70% recovery. We got back to the more historical mix of what we had for those categories. It would be 60%. So they have a goalpost somewhere between 60% and 70%.

Got it. And then just on your partnership with Google, how does that impact your relationship with the OTAs? I mean is that going to be competing with them or how should we view that?

Yes, Jed, I think the best way of thinking about this, and it goes back to really just what I walked through on the technology and what that is providing. And we sit in a position that we have to look at airlines, we have to look at hoteliers and how are we helping them create new products that they can sell. And at the same time, we also have to be thinking about OTA's as well as TMC's brick and mortar on the other side of the equation. And a big part of what we continue to hear and what we're facilitating because we have a vast majority – a lot of focus on this is how do we make sure that those new offers are essentially pushed through to the agencies that want to sell them. So I look at it that as I've said all along, we're a technology company and we're focused on providing the technology to our customers and we're capable of seeing sort of the end to end capabilities that are required to facilitate the change and the number of people are looking for.

Got it. And then, it's pretty well understood that leisure domestic accommodation is leading and going to lead the recovery into the first half of next year. Just how do you kind of look at your strategy in your hotel business, hospitality business, around alternative accommodations in those single unit inventory types that are probably going to be in high demand even into next summer?

Yes. I think it's – and I think you know this well, Jed, as you cover that sector, I mean, a big part of the growth that has taken place now are especially a number of people that, because people are working from home. People wanted to move out of the urban areas and have been looking for places. So that's been a big driver as you look at that. The other thing that is important is, we've had conversations specifically as it relates to distribution. And how does that get pushed through our distribution channel? It goes back to some of the things that we've done with our lodging content services capabilities, and being able to do that. So I think there's a balance associated with it, but I have Dave or we have Scott who is remote right now. Who's our new President of Hospitality, if you guys have a comment?

Yes. I think, I mean, one comment I would make, Jed is just some of the initiatives that Sean was pointing to with our content services on the lodging side. We've been pretty active within the hospitality space, from a distribution perspective, with the stay safe initiative and other things which, the question that was asked a little bit earlier about duty of care. It's not just on the air side, but it's also on the hospitality side and we're doing everything we can to help bring that piece along to make sure that certain requirements and certain measurements are met. So I think that will also add to it and help and assist in both the leisure to corporate balance. And then Scott, you want to add anything on the CRS side?

Yes. Actually, I think the way Sean broke it down makes a lot of sense, if there's distribution then of course there's IT solutions. We look at that as another market for us to go with our set of IT capabilities both on the commercial capability side, like CRS as Dave just mentioned, but in addition for operations and execution as well. So we think it's a great new market for us to – to have some conversations with about extending our IP capability reach.

Thank you.

Thank you. Our next question comes the line of Josh Baer from Morgan Stanley. You may begin.

Great. Thanks for the question. I was hoping you could talk a little bit about the kind of conversations that you're having with customers and maybe touch on how they've shifted over the course of COVID. Are you able to start talking about Sabre Travel AI and smart retail and adoption of these new innovations? Is it partly still survival mode? Any context would will be interesting?

Yes. I'll kick this off and then have Dave just get into, maybe some more of the details of the conversation. So, I mean, listen, there are some carriers around the world, and I think we're seeing the – as time goes, there are certain carriers that are definitely pivoting to more of how they're looking at the future. Those that have done a lot of good work relative to their balance sheet, their liquidity, and what's taking place. If I look at the North American marketplace, even though that we have seen increased cases of COVID, we've actually seen in the data that we shared with you, we continue to see the bookings are still continuing to improve slowly, but they're continuing to improve. In the European marketplace, there's definitely been a fall-off. So what, the reason I bring that up is we're seeing different carriers thinking about different things. In what I would say are the carriers have to think about really the options or opportunities in the future. There's a lot of focus on what we're doing as it relates to the technology, a lot of interests really well for what we're doing Google. So Dave, you want to provide maybe some color on that.

Yes. Maybe I'll break it down to LCC and full-service carrier probably it's a little bit easier to follow Josh. On the LCC side, the conversation is not changed, is aligned and frankly the activity has been very positive in terms of interest in interaction. So not much change there. And again, we continue to knock down wins and continue to see steady progress from that. The data continues to say the LCCs are recovering faster than full service in each of the regions around the globe. So we'll continue to take advantage of that, not only with our Radixx portfolio, but with the rest of our capability set. On the full service side, there's a range of discussions. It depends on the region and the carrier. There are some carriers we're spending a lot of time helping them with planning and scheduling because they're having to re-look at routes and what makes sense and what's profitable. Other places where our operations portfolio, we had a number of go lives and milestones this quarter in Asia with our recovery systems and movement systems and cruise systems. Those are becoming important. And then to your point when you start to think about the retailing side, we had big rollout of dynamic pricing with Etihad and then the announcement of our production engine with Southwest that got delivered, again first of its kind, innovative answer for them to help understand and take a part segments from it. So it just depends on where they're at in the maturity curve and what types of things. As far as our new, Sabre Travel AI and the Sabre retailing engine, a lot of interest to learn more and understand more about how those dynamic offers will come together, what and how the patterns and machine learning and the data hours, and the carriers will come together to help them drive higher revenue yields, even in a recovery based environment. So we feel good competitively in terms of where the portfolio is at and some of the moves that we're making and taking advantage of the Google situation.

And the nice thing about it too, is there's a good collaboration between ourselves and Google and the airlines that we're talking to, because this is not just Sabre going and talking to these airlines, but it's the request to also have the discussion with Google understanding what these technology capabilities can do. So again, this is part of the innovation framework that we talked about. There's been a lot of questions about it, and we're really happy to be able to really talk about some of the things are really coming into fruition.

Thank you.

Thank you. Our next question will come from a line of Matthew Broome from Mizuho Securities. You may begin.

Thanks, very much. Could you maybe comment on the pricing environment in terms of your negotiations with travel agencies and airlines as you renewed contracts?

Yes. If you – you look at it, I mean, we, we mentioned a lot of the GDS agreements. A lot of them have been just renewed the agreements that are in place. So in essence the economics are status quote, what they have been, and it does go back to what we said all along is the desire to have essentially their products and services in the GDS, selling through that distribution channel. When you look at it relative to the agency of the equation, a big part of it is the renewals that are taking place there as well. So I would not say there has been a significant amount of cost pressure in any of the discussions that we're having, anything that – that we try to help carriers with has been baked into, what Doug has share.

Okay. Thanks. And I guess just in terms of your internal realignment sort of how's that process going, that'd be in any sort of meaningful sort of challenges or benefits that, that hadn't originally been anticipated, just any kind of an update that would be great? Thanks.

Yes. I think the first thing, I would state, and then I'd ask Dave to comment on this is what I have believed all along relative to aligning what were the former travel network and airline solutions organizations and understanding essentially the cross-pollination of how they actually come together and not siloed really does allow us to be better educated and doing things in marketplace that allow us to look at the full spectrum of what we offer. And Dave is really been managing this, and I think he could probably give you a couple of examples.

Yes. I think maybe from an outside in perspective, it's been interesting the customer feedback we've had continued positive interaction and responses from our customer base, which is good to see. The level of servicing has actually gone up. Our employee satisfaction levels from surveys and pulse checks and various different means that we use to interact with our employee sets has have been some of the highest that we've seen in some time. So despite the difficulty of a COVID environment, I think the entire, I'm really, really proud of the employee population and how well they've responded. And again, I get calls I'm in contact constantly with CEOs and Chief Commercial Officers of our various customer sets or even heads of – member of our agency partners. And the feedback continues to come in and the responsiveness, that the teams are seeing. So I think we're broke, breaking down a lot of legacy silos and the innovations speak for themselves of the things that we're putting out into the marketplace, while we're in the middle of this. So very resilient and very happy with the progress that we've made today.

Okay. Thanks. Thanks, Dave and Sean.

Thank you.

Thank you. And actually not showing any further questions at this time. I'd like to turn it back over to Mr. Menke for any closing months.

Great. First I want to thank my team members around the world; they have done an enormous amount of work over the past several months in what's taking place. And if you actually look at it, it's been going on over the past couple of years. If you look at sort of where we are right now, we have done an enormous amount of work and really stepped into another gear relative to managing the crisis. We've done a lot as it relates our financial strength. We make really quick decisive decisions that, it was really based on information that we're capable of, just because of the seat that we sit in. And so we've been able to do that really and thinking of balancing the decisions of employees, customers, and shareholders. I think the important thing is really we're looking sort of post COVID. We're dealing with it right now. But because of what we've done, there are true underlying cost savings that Doug has outlined as it relates to Google GCP, DXE other costs that have come out. As you can also tell by our comments, we are laser focused on our technology transformation and the products that we're rolling out in the marketplace. And when we believe that when you really do look at beyond recovery here, that the market opportunities and what we have done to position this organization is going to be very successful. So with that I would like to thank everybody for joining us today and look forward to talking to you in the future.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.