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

Thank you and good morning, everyone. Welcome to Sabre’s second 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 webpage. 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 ongoing recovery from the effects of COVID-19, industry trends, benefits from our technology transformation, commercial and strategic arrangements, strategic priorities, 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 second 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, President and CEO and Mike Randolfi, Chief Financial Officer. Scott Wilson, EVP and President of Hospitality Solutions, will be available for Q&A after the prepared remarks. With that, I will turn the call over to Kurt.

Thank you, Brian. Good morning, everyone and thank you for joining us today. I am pleased this morning to be joining you to discuss our accomplishments for the second quarter and highlight the upward trend in the underlying fundamentals within our business. In the second quarter, we significantly exceeded our financial expectations and believe this performance is indicative of Sabre’s ability to compete and win in the dynamic global travel technology marketplace. We see positive momentum across our key business segments, that gives us the confidence today to raise our 2023 adjusted EBITDA guidance. We remain focused on the core strategic objectives that we outlined on our conference call last quarter and I am pleased that Sabre is delivering on our priorities. Furthermore, we are on a durable path towards Sabre’s 2025 financial targets of adjusted EBITDA of greater than $900 million and free cash flow of greater than $500 million. Before jumping into the detail of today’s call, let’s walk through the agenda. On Slide 4, you can see an overview of the topics Mike and I will cover. First, I will review our business highlights from the second quarter and then I will take a few moments to describe some of the underlying data that we are seeing, which supports our near-term revenue expectations. Next, I will provide detail on our customer successes during the second quarter and then update the progress of our technology transformation. Finally, Mike will take you through the financial results for the second quarter and provide an update to our 2023 outlook. Turning to Slide 5. As a reminder, these are our four key strategic priorities from the foundation of our long-term direction for the company. As I refer to each priority, I will provide proof points and recent accomplishments from the second…

Thanks Kurt and good morning, everyone. Please turn to Slide 12. The second quarter was a strong quarter for Sabre. We saw industry volume growth in line with our expectations and significantly higher average booking fees compared to Q1 2023 and prior year. As Kurt mentioned, Sabre continues to grow share on a year-over-year basis. Hospitality Solutions generated double-digit revenue growth with a higher revenue per transaction and contributed to adjusted EBITDA generation sooner than expected. In addition, we accelerated our cost reduction efforts, which helped drive strong bottom line results and better-than-expected adjusted EBITDA and free cash flow. Overall in the second quarter [Technical Difficulty] We gained significant momentum and are optimistic for the remainder of 2023 and beyond. Now referring to the slide. As you can see from the table, we exceeded our expectations for second quarter revenue, adjusted EBITDA and free cash flow. Turning to Slide 13. Q2 revenue was $738 million, an increase of $80 million or 12% versus last year. Distribution revenue totaled $530 million, a $99 million or 23% increase compared to $432 million in Q2 2022. Our distribution bookings totaled $90 million in the quarter, a 12% increase compared to $81 million in Q2 2022. Our average booking fee was $5.87 in the second quarter, up 10% from Q2 2022. We continue to realize favorable mix into more profitable regions and types of travel, resulting in higher booking fees, and we believe that further growth in international volumes should support our booking fee at this level for the foreseeable future. IT Solutions revenue totaled $140 million in the quarter, this was a $27 million decline versus revenue of $168 million in the comparable prior year period. Passengers border totaled $172 million, an 8% improvement from $160 million in Q2 2022. Second quarter revenue…

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

Great. Congrats on the upside and the EBITDA performance and improvement for the year. Question on the air bookings, the recovery versus 2019. If I’m looking at it right, it improved 90 basis points from Q1. Just wondering like any puts and takes in the quarter and how that compares to the 1.5% ramp that’s assumed going forward?

Josh, thank you. What we’re seeing in Q2 and frankly, in the early part of Q3 is consistent with the guidance we provided last quarter, which is 1 to 2 percentage points of sequential quarterly growth versus the prior quarter, that’s relatively consistent between leisure and corporate. We are seeing some improvement in Asia relative to where we were early in the year. And we do expect, as we articulated at the growth going forward, has a good chance to be better than that number, but we have planned or forecasted conservatively to be on the safe side.

Okay. Got it. And I know you spent some time reviewing some of the commercial wins across all businesses. I was hoping you could focus on PSS and just wondering if there were any notable PSS wins or losses to highlight?

Yes. Thank you, Josh. I articulated in the prepared remarks, some of the wins or benefits that we have seen through the period. Overall, when you look at IT Solutions, we have stabilized the business. We are now investing in leading next-generation retailing solutions to drive long-term growth in this portfolio. And we feel very good about the future prospects for this business.

Got it. I guess just to ask directly, like investors definitely wondering about Amadeus mentioned 25 million passenger PSS win, does that represent a competitive replacement? Thank you.

Thanks Josh. We are – like our competitor bound by confidentiality, we do believe this references a current Sabre customer. I would note the revenue impact for this carrier is very small on an annual basis with a de minimis EBITDA impact. And I should note that as we have disclosed before, should JetBlue be successful in the transaction, they are pursuing with Spirit, that volume will begin to come on to Sabre next year.

Thank you. [Operator Instructions] And that will come from the line of Victor Cheng with Bank of America. Your line is open.

Great. Good morning, and thanks for taking my questions and congrats on a very solid quarter. Two, if I may. And just going back to the point on quarter-on-quarter improvements, obviously, roughly within your 1 to 2 percentage points improvement. But can you give us some color maybe by region as well, where you are seeing growth. Obviously, if we look at Amadeus, they improved 3.4 percentage points this quarter, which is quite a bit higher than you – I know you got Air India contracts well in this quarter, kind of what are some of the puts and takes for this quarter by region and some of the wins and losses you might have. Thank you. And I have one more follow-up.

Yes. Thanks Victor. It’s important to note that when we look at this, what we are not doing is we are not talking about the seasonality quarter-on-quarter. We are talking about sequential percentage improvement in the marketplace. That is compared on a year-on-year basis. And so we don’t talk about seasonality. We understand that you project that and understand that very well. What we are going to do is talk about quarterly progression and in our share performance. As we indicated during the prepared remarks, our share performance continues to outpace our competitive peers, and we are seeing sequential improvements quarter-on-quarter. The greatest improvement on a quarter-on-quarter basis, if you look at it versus Q1 was certainly in Asia Pacific that’s recovering at an elevated or better basis. And then we see relative improvements across the board. [Technical Difficulty]

Significant strength on a sequential basis on a year-over-year basis that was driven partly by strength in our national markets, as Kurt mentioned, both APAC and then also Europe. And in general, the booking fees tend to be a little higher in those regions. And so that provided a really good tailwind on our average booking fee. And we generally see that mix continuing as we move forward.

Thank you. That’s very good color. And follow-up on maybe the hospitality and think about Hyatt and the two other deals that you alluded to. Can you give us a bit more color on the economics, the contribution? Obviously, you said Hyatt as the main CRS and your implement ‘24, but I guess we should only see material contribution by ‘25 and how do you quantify it on revenue side and kind of how we think about implementation costs and margin contribution as well?

Yes. Thanks Victor. We are really excited about the Hyatt win. It augments the enterprise portfolio, and that will go on, as we said, on to the Sabre SynXis platform. You can expect to see Hyatt come on through 2024. When you step back and look at the HS business overall, what we have articulated before, this is another proof point to that, which is that you are going to see double-digit revenue growth in HS this year and beyond. You will see HS achieve double-digit margin production by the end of next year. And of the $150 million of growth initiatives that we articulated last quarter, that you will see benefit us ‘25 versus ‘23, we believe HS will be $50 million of that $150 million, meaning HS will deliver $50 million of EBITDA in 2025. So, we feel great about what this does. We don’t break out the economics of any individual customer deal. But Hyatt is clearly one of the leading brands of the world, and we think this is quite strategic and financially accretive to this business.

[Operator Instructions] And our next question will come from the line of Dan Wasiolek with Morningstar. Your line is open.

Hey. Good morning guys. Thanks for taking the call and nice execution this quarter. So, just kind of following up, you mentioned corporate travel. And just looking at some of the hotel operators, they talk about SME having already kind of fully recovered in developed markets, but corporate travel is still lagging. Is this – how should we think about this when it relates to the GDSs – do the GDSs tend to have more of that larger corporation mix? And as you talk about those budgets may be opening up and being a governor, how does that kind of play out between what the hotel operators are seeing versus the GDS?

Yes. Dan, thank you. So, I suggest you look at it a couple of ways. Number one is managed corporate travel and that change is based on geography. But figure corporations that spend more than $2 million, $3 million a year, where typically procurement is running travel as a category. You are right, that has recovered relatively more slowly, we believe that SME or unmanaged corporate travel has recovered. Unmanaged travel tends to go predominantly through travel agencies, but there is a portion of that goes in supplier direct versus managed corporate travel tends to go almost entirely through intermediaries, through TMCs, through corporate booking tools effectively through the GDS providers. So, as corporate travel continues to recover in the future, that truly accrue predominantly to our business. The other thing to look at interestingly is I think everybody puts the North American lens on this. China, for example, is a larger corporate travel market domestically than the United States, meaning there is a tremendous amount of corporate travel that originates ex-U.S. And that has recovered relatively more slowly than travel in North America has. So, we believe there is significant upside in the non-U.S. points of sale as well.

And the only other thing I would add is if you look at the yield environment at airlines, which has been very, very strong over the last year, 18 months, you have seen some moderation in yield more recently. And as you think about that from a corporate travel perspective, if corporate budgets on travel are relatively fixed, what that allows for is more segments and more bookings for that same amount of dollars. And we think that has the potential of benefiting us in a moderating yield environment.

Okay. Makes sense. And if I could just ask one more kind of on a different topic here. But you kind of gave some information how to think about the revenue per booking. But what about – how should we think about the revenue per passenger boarding. And I think, obviously there was the Russia call out, but that looked like it was maybe down a little bit sequentially. Just any thoughts there or anything to call out, and how we should think about that moving forward?

Sure. Obviously, the driver of the year-over-year decline that we talked about was attributable to the demigrations, the vast majority of which was associated with changes in Russian law. The way you should think about our revenue – our Airline IT Solutions revenue per PB is roughly half of that is fixed based on products we sell. Roughly half of it is variable and correlates directly with PBs. So with that mix, given roughly half of your revenue per PB is variable, as PBs grow as they have done this quarter, you are going to see that result in a lower average revenue per PB just because the PBs are growing, and it only represents about half of the revenue per PB.

Okay. Great. Thank you.

Thank you. I am showing no further questions in the queue at this time. I would now like to turn the call back over to – actually, we do have a question from Jeff Harlib with Barclays. One moment.

Yes. Following your successful refinancing of a portion of ‘25, how are you looking at addressing the remaining ‘25 maturities with respect to timing and options. Obviously, if you perform better, you will have better economics, but how are you looking to 703 [ph] is in the converts?

Yes. Thanks for the question. First, let me just recap a little bit around our thoughts to the refinancing that occurred this quarter. As we pursue that financing and achieved and completed that financing, there were a few objectives that it helped to achieve. One, obviously, it took out about a third of the 2025 maturities. It also was intentionally focused on the April maturities within 2025, so really extended by a couple of quarters. Our required refinancing window to the back part now of 2025, and also the optionality with the PIK option, we believe gave us really good flexibility. What I would expect is – and we are not going to answer specifics with regards to refinancing, obviously, given the sensitivity around that. But what I would say is you are going to see us continue to focus on taking advantage of market opportunities with a focus on efficiency and flexibility and keeping in mind the perspective of our stakeholders, and that’s how we are going to pursue it going forward. But you should expect us to, in the not-too-distant future, be focused on addressing the remainder of the 2025 maturities.

Okay. And just on the revenue per booking, is the improvement you saw in the current quarter, is that sustainable, or should that move around, or do you think it’s going to be a steadier uptick from here?

Yes. So no, thanks for the question. A couple of things to unpack the average booking fee. As you look at the sequential improvement, there were really two drivers, and these have been the trends over the last 12 months. One is we have seen a favorable regional mix, as we have talked about, and we have seen international, both in APAC and Europe continue to perform better than they have had, and that’s been very supportive of average booking fee. The other thing is as we drill down and we look at the mix of carriers and we look at the mix of bookings, it’s a more favorable mix. And when we are looking at the underlying trends, we really see both of those trends continuing. And so we would expect the average booking fee to remain roughly in this range for the foreseeable future.

Okay. Great. And last question for me, just IT Solutions. You have talked about new business coming on and you were lapping some losses. I mean how do we – how do you see the revenue trajectory going forward in that business now?

Yes. As you look at the $140 million this quarter, as Kurt had mentioned, we have stabilized that business. With that being said, I would expect just a very small tick down sequentially going from Q2 to Q3, but generally in the range that we are in right now.

And thank you. I am showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Ekert for any closing remarks.

Thank you and thank you again for joining us this morning. We appreciate your interest in Sabre, and look forward to speaking with all of you again very soon. Operator, that concludes today’s call.

Thank you. Thank you all for participating. This concludes today’s program. You may now disconnect.