Good morning, ladies and gentlemen. Welcome to the Sabre First Quarter 2023 Earnings Conference Call. My name is Olivia, and I'll be your operator. As a reminder, please note today's call is being recorded. I will now turn the call over to the Senior Director of Investor Relations, Brian Roberts. Please go ahead, sir.

Thank you, Olivia, and good morning, everyone. Welcome to Sabre's First Quarter 2023 Earnings Call. This morning, we issued an earnings press release, which is available on our website at investors.sabre.com. A slide presentation which accompanies today's prepared remarks is also available during this call on the Sabre Investor Relations web page. A replay of today's call will be available on our website later this morning. We advise you that our comments contain forward-looking statements that represent our beliefs or expectations about future events, including the effects of COVID-19, industry and recovery trends, benefits from our technology transformation and commercial and strategic arrangements, financing and related transactions, our financial outlook and targets, expected revenue, adjusted EBITDA, free cash flow, costs and expenses, cost savings and reductions, margins and liquidity, among others. All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today's conference call. More information on these risks and uncertainties is contained in our earnings release issued this morning and our SEC filings, including our first quarter 2023 Form 10-Q. Throughout today's call, we will also be presenting certain non-GAAP financial measures. References during today's call to adjusted operating income, adjusted net income, adjusted EBITDA, adjusted EBITDA margin, adjusted EPS and free cash flow 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 Kurt Ekert, our President and CEO; and Mike Randolfi, our Chief Financial Officer. Scott Wilson, EVP and President of Hospitality Solutions, will be available for Q&A after the prepared remarks. With that, I will turn the call over to Kurt.

Thanks, Brian. Good morning, everyone, and thank you for joining us. I'm excited to be here today as Sabre's new CEO. I joined the company 16 months ago because I believe there are tremendous opportunities for Sabre to address the evolving demands of the travel marketplace. We operate in a dynamically changing and huge industry, where customers demand modern technologies that deliver innovation at pace and scale. With that comes a significant opportunity to grow our business. On today's call, Mike and I will be sharing strategic plans, designed to reposition Sabre's business for long-term profitable growth, to lean into new revenue opportunities while continuing to cultivate our core business and to structurally reduce our cost base. We believe these strategic priorities put us on a durable path to achieve our 2023 financial expectations and our 2025 targets. And we are committed to delivering growth and value to our customers and shareholders. Before jumping into the details of today's call, let's walk through the agenda. On Slide 4, you can see an overview of the topics that Mike and I will cover. I will start by outlining four key strategic priorities. Next, I'll explain the exciting growth opportunities that lie ahead for Sabre. And then I will discuss how we expect our technology transformation will create improved efficiency, enhance our value propositions and enable the development of differentiated product offerings. Finally, Mike will take you through the financial results for first quarter, outline in more detail our plans to reduce costs and realign resources to support Sabre's growth opportunities and provide our financial outlook for 2023 and 2025. Turning to Slide 5. To build on my opening remarks, let me take a moment to describe four key strategic priorities that form the foundation of our long-term direction for the company.…

Thanks, Kurt, and good morning, everyone. Please turn to Slide 12. Before I get into the first quarter results, I want to add additional context about how we're approaching 2023 and the path to our long-term targets. As Kurt noted, we're focused on driving innovation, enhancing Sabre's value to our customers and aligning resources toward our growth initiatives. We are optimistic about travel volume growth in the coming years, but we believe we have a durable path to achieve our financial objectives even under a more conservative industry growth scenario. We are proceeding with the path to our 2023 expectations and 2025 targets that is largely based on a set of actions that we have line-of-sight to and believe we can execute upon. Only a small portion of 2023's adjusted EBITDA improvement and the build toward 2025's adjusted EBITDA targets are driven by industry volume increases. If the industry recovery accelerates, which we believe is very possible, given the operating leverage we are building, this would drive meaningful upside to our 2023 and 2025 targets. While our emphasis is on growing revenue and our build to 2025, approximately half of the incremental adjusted EBITDA or approximately $300 million is driven by our focus on cost efficiency and benefits from our tech transformation. From our resource realignment and cost efficiency efforts, we expect to generate $100 million of expense savings in the second half of 2023 and $200 million of expense reduction annually in 2024. Now referring to the slide. As you can see from the table on the left, we exceeded our expectations for the first quarter revenue and adjusted EBITDA. Free cash flow was essentially in line with our expectations. The table on the right highlights the solid growth that we saw in the first quarter in overall bookings.…

Thank you, Mike. Before opening the line for your questions, I will provide a few closing remarks. First, we have shared a lot of information with you today about our 2023 expectations, 2025 targets and our durable path to these outcomes. I am confident we have the plans and the leadership in place to help us achieve our goals, and I look forward to keeping you updated on our progress. Second, I extend my deep appreciation to Sean Menke for his many years of service at Sabre. We are thankful for his steadfast leadership, especially during unprecedented times and look forward to continuing to partner with him in his capacity as Chair of our Board. I know I speak for the entire Sabre team when I say thank you, Sean. With that, operator, please open the line for questions.

[Operator Instructions] And our first question is coming from the line of Josh Baer with Morgan Stanley. Your line is open.

Great. Thanks for the question. And I appreciate all the detail on the slides. I was hoping you could talk a little bit more about the new or the strategic growth initiatives, and really wondering the confidence in the $150 million contribution to EBITDA in the 2025 targets. Just thinking through the three buckets that you mentioned, some rely on some competitive wins and growth initiatives. Like wondering the margin profile there, too, if that's kind of implying like an incremental $1 billion-plus revenue opportunity from that strategic growth.

Josh, thank you. This is Kurt. I appreciate the question. First of all, as we look at the strategic growth -- the growth strategies that we've articulated today, it's important to note that they're all relatively close to our core business. Payments is the most far field. We've hired a payments expert to lead that business. We have the relationship with Mastercard. And that strategy will leverage actually the existing relationships we have both in the TS and HS businesses. As you look at the growth strategies, GDS market expansion, to your point, is a very high-margin business. Obviously, there is a cost of revenue there as there is in that part of our business. But we expect great operating leverage with GDS expansion because it requires some additional feet on the street, some additional product investment. But once you win either greater share of wallet or you convert new customers, that business has a great flow-through. As you look at each of the other strategies, there is an investment required to initiate or drive that growth, but they all come with very high operating leverage and very high unit margin because we're not building anything from scratch. For example, if you look at hotel distribution as an opportunity or you look at payments as an opportunity, by extending them and selling them into existing clientele, we're effectively putting more product on the shelf. And we don't need to replicate a lot of the infrastructure that we already have. So our expectation is that overall, the growth strategies actually will come with a higher unit margin than our existing or incumbent business.

Thanks. That's really helpful. Second question on NDC. Just wondering, in your 2025 targets, is there any context for what assumption you're making as far as the mix of NDC? And as a follow-up, like what happens to your economics when you facilitate NDC bookings versus traditional? A – Kurt Ekert: Thanks, Josh. It's important to note that today, NDC as a percentage of intermediary airline distribution, is low single-digits overall for the industry as well as for Sabre. As we look forward to 2025, we certainly do expect that NDC will gain additional traction and we have NDC maturing as an expectation within our 2025 target profile. I can tell you that commercially, there is no one size fits all for NDC. We've negotiated now a number of different agreements. We're in negotiation for a number of others. And so what I can tell you is that looking at what we project as the adoption curve, coupled with the financial profile, inclusive of NDC as well as the growth strategies we've articulated, we are confident that you'll see Sabre realize unit margin accretion in the quarters and the years ahead.

Okay. Great. Thanks. I’ll hop back in the queue.

Thank you. And our next question coming from the line of Jed Kelly with Oppenheimer. Your line is open. Q – Jed Kelly: Hey, great. Thanks for taking my question. Just looking at the updated longer-term targets, the right way to think about it is it's $900 million of EBITDA with bookings at 75% recovered versus, I guess, the prior guidance that was $900 million of EBITDA at the low-end with 80% bookings. Is that correct? A – Mike Randolfi: Yeah. That's the right way to think about it. Q – Jed Kelly: Okay, great. And then just two questions. I mean, I know you might not be prude. Can you kind of give us a path to what 2024 looks like? Are we going to have to assume a pretty material step-up in 2024 to get to 2025? And then historically, I know it was under previous management, but I think this is a company that, I count 3x since like 2015, has given medium-term guidance, and it's never hit its profitability guidance on something that came up. So is there any contracts or potential issues that could come up that we should be thinking about that would cause you not to hit this guidance? A – Kurt Ekert: Jed, this is Kurt. Thank you. Let me start and I'll hand it over to Mike to go into more detail. With respect to the confidence that we have and the targets that we have provided today, the way we want you to think about this is not that we have a pessimistic view on the rate of market growth that we're going to see going forward. We felt that there was some skepticism about our ability to achieve those targets. What we have provided you is a path where the 2023 number we've articulated and the 2025 number we've articulated, the vast majority of the step from here to there is within our control. It's the cost actions we're taking, it's the benefits of technology transformation. It's the assumption of a modest market growth of only 1.5 points per quarter sequentially, which given that the industry is still much, much smaller than it was in 2019, we think, is a very conservative assumption and then a realistic view on the opportunity to capitalize on the growth strategies ahead of us. So we have a very high degree of confidence in our ability to deliver these numbers. What we also showed you is that should the market grow at a faster rate of growth, which we actually believe is a probable outcome, there's upside to the targets we provided today, but we wanted you to -- we wanted the targets that we provide to be as hardwired as possible, as durable as possible as Mike articulated. So we feel very good about the path forward and our ability to achieve the numbers we've articulated today.

Yeah. And so as I think about what are some of the pieces that will bridge from 2023 to 2024, and we're not providing specific 2024 guidance on this call today, but I'll walk you through some pieces that hopefully help. So as you think through the cost actions that we are taking and announcing here today, that we expect to generate $100 million in year in 2023. The annualization of that will generate another $100 million next year, so that would drive a step-up in EBITDA improvement. The other piece that I would think about is on our tech transformation. We continue to make meaningful progress. As we've talked about, our bubble costs at the inception, we had indicated that it would -- the total cost -- a bubble cost would be, give or take $400 million. As you look from 2023 to 2024, we do expect some decline in bubble costs to the tune of going from about $100 million to closer to $75 million in 2024. And at the same time, we're going to have a much -- a substantial portion of our hosting volume on Google Cloud. And when you look at the cost of the hosting volume on Google Cloud, it's running about 35% of what it costs to support those volumes pre-tech transformation. So we expect to continue to get benefit there. At the same time, we are continuing to see industry volumes increase separate from our own actions. And so we would expect a benefit from industry volume growth. But more importantly, as Kurt has mentioned and emphasized, within our strategic growth initiatives, we would expect those to continue to be meaningful contributors from 2023 to 2024. And that comes from things such as Hospitality Solutions, growth in our GDS business, continued growth in payments. So we would see a meaning -- we would see and expect to see a meaningful step-up from 2023 to 2024, but we're not providing specifics at this time.

Got it. And then just overall on the industry, I think capacity this year is probably down, call it, like mid-single digits versus where it was 2019. And there's obviously the distribution bookings are lagging. Is that being entirely driven by just business travel, or I guess, is there anything that could happen in terms of capacity or business travel that could cause the third-party distribution bookings to accelerate or get closer back to 2019 levels, or is there something structural that's allowing the airlines just to control a lot more of that direct traffic? Thank you.

Yeah. What you've seen -- great question, Jed. What you see to date is the portion of the industry that has recovered or grown most quickly is domestic point-to-point leisure type travel. And that's effectively fully recovered in North America, for example, a little bit slower in some other parts of the world. Where there has been a lag and what constitutes such a significant portion of the GDS part of the industry, is, number one, corporate travel; number two is long-haul international. Corporate travel is recovered. If you look at TMC and corporate, about 80% of where it was in 2019. International long haul is south of that number. And so Asia Pacific still has not fully recovered based on the slowness in China, et cetera. And so what we expect going forward is as the industry grows, capacity continues to come back. We believe the opportunity for corporate travel and international long haul to grow at a faster rate than direct distribution should support above-market growth in the GDS sector. We do not believe that there's been anything structural that has changed, with the exception of those portions I articulated, have recovered relatively more slowly, again, than leisure domestic point-to-point.

Yeah. And I think it's important, as we look at what prospective volumes could be, to really look at our airline partners because ultimately, they provide really good signals as to what the direction can and may be. And so for example, if we look at the airline industry today, what we're seeing is historically high airfares that are generally running 20% to 30% above pre-pandemic levels. And at the same time, despite those high airfares, we're seeing record high load factors on planes. And you're hearing the airlines talk about record revenue quarters, and you're hearing our airline partners talk about their desire to significantly add capacity. Now in the short run, capacity has been constrained in the airline space. One, there's been difficulty on the labor side, primarily simply by training pilots quickly enough and identifying and hiring pilots. There were a good wave of retirements during the pandemic. And with the resumption of growth, airlines have been working through that. That's probably going to take them time. At the same time, on the aircraft side, Boeing and Airbus had slowed production during the pandemic and airlines have set down a lot of planes. Now, they're working to both bring those planes back and working with their airline manufacturers to bring on and accelerate deliveries as best they can. But capacity has been constrained on the airline side in a significant way and airlines are working through those capacity constraints. And they're signaling that they're going to be able to add strong capacity in coming quarters. And so that gives us optimism in terms of overall volume growth as we would expect a good portion of that to accrue to the GDSs.

Yeah. And I'll just say, I hope and expect that the rate of GDS marketplace growth is on the higher end of what we provided today, so it's within that dotted line additional opportunity. We believe the hard line we have provided is the very low or conservative end of what may happen.

Thank you.

Thank you. And our next question coming from the line of Dan Wasiolek with Morningstar. Your line is open.

Good morning, guys. Thanks for taking my question. I guess just one here. What are you guys hearing from corporations on their travel budgets and plans for the second quarter and I guess the rest of 2023 in the current macro environment? And has there been any shift, I guess, to those budgets and plans versus maybe three months ago? Thanks.

Thank you. Again, we've seen corporate travel overall is trading at about 80% of where it was pre-pandemic today. We're seeing corporate travel grow on a quarterly basis, similar to the other trend lines I've indicated, which is 1% to 2% quarter-on-quarter seasonally adjusted, and that's been the trend for the past few quarters. We did see that pick up a bit in January and then the growth rate leveled off a bit. So what we're hearing in this is a series of anecdotes rather than hard data is that people are getting back on the road. External travel is happening en masse. Meetings and events are back to normal. And actually, the amount of internal corporate travel is probably greater, given the work-from-anywhere dynamic in many corporations. I know there was a question last quarter, and there's a theme of well, there are layoffs in certain sectors, for example, tech. Will that impinge travel? If you use employment as a proxy and you look at the size of the tech firms, most of them actually grew their employment dramatically from 2019 to 2022. And even with the reductions that they've put in, they still have many more employees today than they did back in 2019, presuming that they still are engaged in commerce and seeing each other. We're actually quite bullish on the long-term trends for the corporate travel sector. So, overall, I think we hear good signs. Again, we're not going to prognosticate whether the rate of growth is going to continue to be 1% to 2% or accelerate to be 4% per quarter, for example. But we believe there's a lot of growth upside in corporate travel for the long term.

Okay. Thanks for that added color.

Thank you. [Operator Instructions] And our next question coming from the line of Victor Cheng with Bank of America. Your line is open.

Good morning. Thanks for taking my question. A couple, if I may. Maybe, first of all, on slide eight where you show share gains with the top 25 agencies. How much of that is driven by faster recovery from -- due to Sabre's mix, maybe be it by region or by corporate versus leisure? And maybe if you can provide us some more color on what you're seeing in Q2 bookings year-to-date? And then, I have some more follow-ups.

Victor, thank you. This is Kurt. On share gains, what we're seeing is a combination of improved share of wallet with our existing clientele, as well as the conversion of new wins. And so, there's a good degree of that, which is the improvement in same-store sales. What I can tell you is that we're seeing that performance pretty universally, both geographically and by market segment. In Q2, what we've seen is a similar trend to what we saw in the first quarter, which is GDS market growth up between 1% and 2% over Q1, which is a similar trend to what we've seen in the past two quarters.

Thank you. That's very clear. And maybe two more on NDC. I know you've talked about NDC unit economics earlier. But overall, what we're hearing is, I know, it doesn't one -- there is no one size fits all, but overall, what we're hearing is NDC booking fees are generally lower when we compare to the EDIFACT channels. I'm not sure if you can provide some more color on that. And then, can you talk a bit specifically about maybe the American move to NDC in Q2? Should we expect some impact from there?

Thanks, Victor. First of all, on economics for NDC, as I've stated here and previously, the economics are discrete carrier by carrier. There is no one size fits all. We have agreements where the economics are neutral between EDIFACT and NDC and where they're different between EDIFACT and NDC. As I indicated earlier, with the increased adoption, we do expect in forward years of NDC, coupled with the growth strategies we've articulated, we expect to be unit margin positive in the future. With respect to American, we successfully launched NDC with American in early April. It was a big accomplishment for the both of us. And I would tell you that, American views it as a very successful launch, just driven by their public and their private comments. And the relationship between American and Sabre has never been in a better place.

Thank you. And our next question coming from the line of Alex Irving with Bernstein. Your line is open.

Hi, good morning gentlemen. Two if I may, please. First, on the cost restructuring. Could you please provide some detail on which functions you're planning to reduce spending on and how we can gain confidence that, that won't impair the ability of the business to compete? My second question is a follow-up on the last question regarding the booking flow following the partial content withdrawal from EDIFACT by American in Q2. How do your own bookings look with American sort of quarter to date, please, if you can share that? Thanks.

Yes. Let me take a bit of this and then give it to Mike. On the restructuring question, first of all, I want to share, we're very proud of the history of Sabre and who we've been and what we've done in the marketplace. What we did is as we sat down as a management team is, we look forward at where the business is today, the state of the marketplace and what we believe the opportunities are to bring value to our customers and new customers around the world. And so what we've done is design the organization and the resource pool against that set of opportunities that we see in front of us. So with that, let me let Mike talk in a bit more detail about what we're doing there.

Sure. So as we approached our resource realignment, there's a couple of things that we prioritized within that to really drive our business going forward. So first, ensuring that we are resourcing in the very best way possible, our tech transformation; second, ensuring and supporting the growth initiatives that we've outlined today; and third, supporting our customer commitments. Now with that, as we looked at the rest of the organization, with those areas really being areas of focus, we went through our org and looked at what is the right org design for what we want as we move forward? We evaluated things like spans and layers and how much resources we're applying to various aspects of our business. We evaluated our real estate footprint. And so, all of those were targeted to really develop a lower fixed cost structure that is more efficient, but at the same time, focusing the resources we have on that, which is going to drive revenue, that which is going to drive EBITDA and ultimately growth for our business.

And with respect to American NDC, let me reiterate, without speaking about the details of any specific customer, NDC remains a low single-digit percentage of airline intermediary bookings. That's true for the industry as well as for Sabre. We've had a very successful launch with American, and we've seen nothing structural change in the nature of the marketplace with that or other NDC launches.

Thank you. I'm seeing no further questions in queue at this time. I will now turn the call back over to Mr. Ekert for any closing remarks.

Thank you, again for joining us this morning. We appreciate all of your interest in Sabre and look forward to speaking with you again soon. That completes today's call.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.