Good morning and welcome to the Sabre Third Quarter 2024 Earnings Conference Call. My name is Riska 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 Vice President, Investor Relations and Treasurer, Brian Evans. Please go ahead, sir.

Thank you and good morning everyone. Welcome to Sabre’s third quarter 2024 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 growth strategies, share growth and distribution volumes, results of our technology transformation, commercial and strategic arrangements, and our financial guidance and targets, free cash flow, 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 Form 10-Q for the quarter ended September 30, 2024. Throughout today’s call, we will also be presenting certain non-GAAP financial measures. References during today’s call to adjusted EBITDA, adjusted EBITDA margin, 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.

Thanks, Brian. Hello everyone, and thank you for joining today’s presentation. I am pleased to share that the Sabre team delivered significant commercial, operational, and financial achievements in the third quarter. Earlier today, we reported third quarter results that highlight the progress we are making toward our key strategic and financial priorities. We delivered steady year-on-year revenue growth, a significant increase in Adjusted EBITDA, continued margin expansion, and positive free cash flow. We are on track to more than double Adjusted EBITDA from 2023 to 2025, supported by the continued execution of our growth strategies, a strong focus on cost management, and the realization of cost-savings objectives tied to our technology transformation. I commend our team members around the world for their commitment to innovation and their dedication to our customers. Turning to slide 4, you can see an overview of the topics that Mike and I will cover this morning. First, I will review our third quarter business highlights including our financial performance. Then, I will provide an overview of the progress that we have made on our growth strategies. Finally, Mike will take you through our third quarter financial results and discuss our updated 2024 guidance. Please turn to slide 5. Sabre delivered solid improvement across key financial metrics in the third quarter. Revenue expansion was driven by an acceleration in the growth rate of air distribution bookings, high-single-digit growth in hotel distribution bookings, an increase in average booking fees, and continued Hospitality Solutions growth. Our top-line performance, combined with effective cost management, led to a 19% increase in Adjusted EBITDA compared to the same quarter last year. Turning to slide 6. During the quarter, we made significant progress on each of our key strategic priorities, which as a reminder are to generate positive free cash flow, deliver…

Thanks, Kurt and good morning, everyone. Please turn to slide 14. We achieved a number of important financial objectives in the third quarter. As you can see, we generated year-on-year revenue growth and delivered solid cost management that resulted in higher margins and strong flow-through to the bottom-line. Adjusted EBITDA in the third quarter was meaningfully higher year-on-year and we generated positive free cash flow which is a key strategic priority as we focus on improving our capital structure and deleveraging the balance sheet. We delivered these strong financial results while supporting investment in our six growth strategies which we believe will drive sustainable top-line and bottom-line growth. Please turn to slide 15. We achieved solid year-on-year improvement across our key financial metrics. And as you can see in the table these results are roughly in line with our expectations. The $10 million difference between our revenue guide of $775 million and actual revenue of $765 million is attributable to some small differences across various revenue streams versus our internal expectations. Based on early indicators we see these factors carrying into the fourth quarter that are reflected in our updated guidance. Turning to slide 16. Total third quarter revenue was $765 million, an increase of $24 million or 3% versus last year. Distribution revenue totaled $551 million a $26 million or a 5% increase compared to $525 million in Q3 2023. Our total distribution bookings were $93 million in the quarter a 4% increase compared to $89 million in Q3 2023. And our average booking fee was $5.94 in the third quarter up 1% from Q3 2023. Notably, our Air Distribution bookings year-on-year growth rate demonstrated meaningful acceleration this quarter as compared to prior quarters. IT Solutions revenue totaled $140 million in the quarter. This was a $7 million decline…

Thank you. [Operator Instructions] Our first question comes from the line of Josh Baer of Morgan Stanley. Your line is now open.

Great. Thank you for the question. I guess, I want to dig in maybe to the revenue and sort of talking about small differences across several lines. I mean, hoping to get a little more color for the revenue miss versus the guidance there. And then, I mean, what I'm looking at like IT Solutions growth down after growing last quarter. Just wondering, even though like passengers boarded was flat like last quarter you had passengers boarded down, but that segment still grew. So maybe we can start there with overall revenue and IT Solutions dynamics?

Yeah. Thanks for the question. What I would say, in terms of our revenue differences versus the $775, there's no discernible trend or anything really notable, specifically to call out versus our internal expectations. It really was an aggregation of what I'd call some very small differences. For example, our Air Distribution bookings fell short of our internal expectations by 200,000 bookings on a $79 million base. And so that's $1.2 million of the $10 million difference. And there's an aggregation, I'd say, of small differences like that that's sum to $10 million. Now, with regards to IT Solutions, we've talked about in prior quarters IT Solutions was generally in line with where we expected. We expected it to be as we've talked about in prior quarters roughly in the $140 million to $145 million range this year and that's about where we're landing. And with regard to year-over-year, there was some in-period revenue last year associated with demigrated carriers, not attributable to PBs that didn't necessarily repeat this year. Now, as we look forward, a couple of things that I would say, with regards to airline IT specifically As we've talked about, we believe we've stabilized that business. We think the baseline at this stage is in that $140 million to $145 million range on a quarterly basis. But what I would say is, as we are now getting past the impact of demigrated -- the demigrations two things will happen. You'll start to see the benefit of PB growth come through. But the other thing is, as we've noted, we've had significant commercial wins over the last several quarters and as far as it goes with airline IT that goes to Mosaic. You saw Virgin Australia announced the full offer order suite and working with us on that. You see Riyadh on the offer side. And so what I'd say is as you look at the next few quarters going forward, we're probably in the $140 million to $145 million range. But at some point during 2025, I expect it to start to inflect up meaningfully and start to see more growth in that revenue stream.

Great. That is helpful. And then, the other topic I just wanted to ask about is, free cash flow. You have EBITDA up considerably year-over-year. CapEx is about the same I think. Just hoping you could talk about some of the moving pieces in working capital and the delta between, the trajectory of EBITDA that we've seen this quarter and so far this year and free cash flow? And what gives you confidence in getting to the positive mark for the full year like basically the big Q4? Thanks.

Yeah. First, I would just highlight, Q4 is typically our seasonally strongest free cash flow.

Okay.

And so what we see in terms of Q4 is aligned with our EBITDA our working capital and the trends that we're seeing. So it does give us a high degree of confidence. Now I'd remind you, if you go back and you replayed the earnings calls from last year, last year we had generated about $150 million one-time benefit from our working capital initiatives off the balance sheet. So now we are lapping that. And so you don't get that same benefit this year. So those are the big differences year-over-year. But as we move forward I would say and we go into 2025 like I said, for 2024 we expect to be breakeven. We expect to generate greater than $80 million in the Q4 of this year. And next year we feel very, very much on track with our target of greater than $200 million next year.

Great. Thanks.

One moment for our next question. Our next question comes from the line of Jed Kelly of Oppenheimer & Company. Your line is now open.

Hey, great. Thanks for taking my question. You said in your prepared remarks that Air Distribution is building momentum into 2025. Should we expect like a slight reacceleration in that segment going into next year in order to hit that guidance? And the, can you just talk about the overall travel environment where we are where you think we stand going into the next year? Thanks.

Yeah. With regard to Air Distribution booking -- first thanks, Jed. And with regards to Air Distribution bookings, what I would remind you is, over the last few months you've heard Sabre announce significant commercial wins. World Travel, we announced another one of the largest domestic agencies that hasn't been announced. InterparkTriple a new agency win last quarter in Spain and France. We've had significant progress on NDC. So my point on all that is those are recently agreed to agreements. We do not yet have the benefit of most of that in our Air Distribution bookings. So with that what I would say and I'm not going to go too much into 2025 on this call. I'm going to save that for February. But what I would say is, we feel very confident very, very confident that as we move into 2025, you're going to see the benefit of those agreements that we've reached. And you're going to see a meaningful acceleration from share gains in our Air Distribution bookings.

Yeah. And with respect to the environment, Jed, obviously there's been sort of mixed macroeconomic news globally. Demand both in corporate and leisure remains pretty strong across all geographies. We're not seeing any real meaningful downward pressure. There obviously are some supply constraints on air. That's not meaningfully impacting our business just a very small impact.

Got it. And then just as a follow-up, just with the new wins it kind of looks like if we look at it, cost of revenue is about, call it, 57.5% of distribution revenue? Are these new wins? Are they more high volume where they might put a little bit of pressure on the gross margins? Can you just talk about that dynamic? Thank you.

Yes. Thanks for that, Jed. As I mentioned, the new wins that we've seen are largely not yet in our Air Distribution bookings and largely not yet in our results. What I would say is you look at gross margin over time or look at cost of revenue, give or take, around the 40% range. What I would say as we move forward, I would expect that gross margin would likely remain around 60% and cost of revenue would likely remain around 40%. Now if you look at quarter-by-quarter, it gets lumpy because there's different types of incentives that get paid from time to time and different thresholds that get hit. If I look at the prior two quarters, we had revenue growing faster than cost of revenue. And so I think you have to look at this over an extended period of time. But what I would say is if you -- if I were to foreshadow, I would expect us to still have a cost of revenue of roughly around 40% as we move forward over the longer-term.

Thank you.

[Operator Instructions] Our next question comes from the line of Victor Cheng of Bank of America. Your line is now open.

Hi. Good morning. Thanks for taking my questions. A couple, if I may. Can you maybe give us some color as well on how you guide to Q4 with a bit of a lower revenue growth and the bookings performance Q4 to-date, I think, there seems to be a Turkish and Frontier loss. And with regards to that, is there any specific reason -- is it down to unfavorable economic terms and some of the rationale around that? And then I have more follow-ups.

Yes. Thank you, Victor. With respect to Q4 and booking trends so far, I would say what we're seeing are trends that are relatively consistent with what we reported for Q3, nothing substantially different. As we look at Turkish and content generally, we obviously did not reach agreement on mutually beneficial terms with Turkish. And therefore, as you indicated, we don't have the content of Turkish currently. As we have said previously, we went to great lengths in our discussion with Turkish to reach a new agreement for both Traditional and NDC content. We're disappointed that they were unwilling to consider terms that would allow us to meet the needs of the ecosystem, travel agencies, et cetera, to compete fairly for their business. And so, we regret the challenges that this brings to the ecosystem. That said, we believe that the fully integrated breadth and depth of travel content that we have brings immense value to all parties in the ecosystem. And we hope to reach agreement with Turkish in the near future. I would mention that Turkish is a carrier with a relatively smaller home market. So the value of the distribution we bring, we feel, is tremendous. But we feel very good about our competitive position overall.

Very clear. And maybe if we talk about revenue per booking, it seems to be -- they're still growing, but a bit slower than previously. Should we expect a normalized kind of revenue per booking going forward? Any kind of implications or impact from pricing and mix or NDC going forward? And maybe last question is with regards to 2025 outlook. Obviously, you talked about -- confident on over $700 million EBITDA in 2025. But I guess, if I look at the bridge that you had in kind of last year, and now we're experiencing some GDS volume growth, I guess that will bring you maybe closer to $750 million or $800 million depending on the share gains you have. With that bridge, is that still a realistic goal?

So, yes, on the average booking fee, I'll start with that. So if you look at -- if you move forward just sequentially, you look at the fourth quarter, I would expect in the fourth quarter for your average booking fee to tick back over $6. And there's a couple of things there. First, there's a small portion of revenue and distribution that's actually somewhat fixed. And seasonally, you generate less bookings in the fourth quarter. So that obviously helps create a little bit of an upward trend seasonally. The second thing is, which is also tends to be a seasonal impact you have a lot fewer Asia group bookings that tend to have lower booking fees. So, as I look to Q4, I would expect that the average booking fee would be comfortably over $6. As I look forward beyond that, I would say that I'd expect our average booking fee without getting into too much detail on 2025 to be in that $6 range. Now with that being said with regard to our 2025 outlook, I would remind you on our February earnings call, we broke out our bridge for 2025. And we highlighted from 2023 to 2025, we would generate around $250 million of cost efficiency partly from our tech transformation as well as other cost initiatives and $115 million of strategic -- from our growth strategies. As we look at 2025, as I've articulated, we feel very confident that we're on track for greater than $700 million of adjusted EBITDA and greater than $200 million on free cash flow. I would highlight that the commercial wins we have are part of our six growth strategies that Kurt has articulated and that's included in that $115 million of strategic growth initiatives that we've outlined. Now, I would also highlight that our baseline assumption separate from our growth initiatives is for flat to moderate industry air bookings growth. Should that prove to be more favorable? As we've articulated each point is worth about $13 million to adjusted EBITDA. So we think there's certainly potential to do better than $700 million. But at this stage I would say we're very much on track toward our $700 million goal.

[Operator Instructions] This concludes the question-and-answer session. I would now like to turn it back over to Mr. Kurt Ekert for closing remarks.

Thank you very much operator. First of all, I'd like to have a moment of silence on behalf of my New York Yankees, a tough game last night. Seriously, we're happy with the progress we're making. As Mike indicated we feel very much on track for the strategic transformation of Sabre and we look forward to continuing to talk to you in future quarters about this. So thank you and Happy Halloween. Operator: Thank you for your participation in today's conference. This concludes the program. You may now disconnect.