Sabre Corp (SABR)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 revenue was $776.6M, down 1% year over year, with adjusted EBITDA of $149.6M and diluted EPS of $0.09; management reaffirmed FY 2025 outlook for double‑digit distribution bookings, high single‑digit pro forma revenue growth, and >$200M pro forma FCF .
• Versus consensus, the quarter delivered a revenue miss (actual $776.6M vs $793.4M consensus) and a material EPS beat ($0.09 vs $0.007 consensus); adjusted EBITDA modestly missed consensus ($149.6M vs $154.2M) .
• Strategic divestiture: Sabre agreed to sell Hospitality Solutions to TPG for $1.1B (net proceeds ~$960M), planning to use ~$825M to repay Term Loan B tranches and retain ~$135M for reinvestment; expected to reduce net leverage by ~1 turn and cut annual interest expense by ~$55M .
• Near‑term macro softness weighed on air bookings (APAC group travel, inbound U.S. from Europe/Canada, U.S. government/military down ~30% units), but management guides to a sharp bookings ramp in H2 (mid‑high teens in Q3, >20% in Q4) on signed agency wins and multi‑source content momentum .

What Went Well and What Went Wrong

What Went Well

• Adjusted EBITDA increased 5% YoY to $149.6M and adjusted EBITDA margin expanded 110 bps to 19.3%, driven by lower technology costs and disciplined cost management .
• Strategic portfolio action: agreement to sell Hospitality Solutions for $1.1B (TPG) to strengthen balance sheet and focus on core airline IT and travel marketplace platforms; quote: “This sale… enables us to strengthen our balance sheet… and sharpen our focus on core growth areas” — CEO Kurt Ekert .
• Commercial momentum in distribution: 38 live NDC integrations and new agency wins (e.g., Gray Dawes), with hotel B2B distribution showing strong growth; quote: “We are reaffirming our full year 2025 expectations, including double digit… distribution bookings growth” — CEO Kurt Ekert .

What Went Wrong

• Consolidated revenue declined 1% YoY to $776.6M on lower Travel Solutions revenue (impact from previously de‑migrated carriers in IT Solutions and decreased air bookings) .
• Macro headwinds: broad global softness across corporate and leisure; most acute in APAC group bookings and inbound U.S. travel from certain European markets and Canada; U.S. government/military travel down ~30% YoY in Q1 units .
• Free cash flow was negative ($98.5M) due to typical Q1 seasonality (timing of agency incentives and annual comp payments) and working capital outflows; CFO reiterated FCF remains on track for full‑year positive on a pro forma basis .

Financial Results

Segment breakdown (Q1 2025):

KPIs and balance/cash:

• Period‑end cash, cash equivalents and restricted cash: $672.2M .
• Net debt: $4.614B .
• Capital expenditures: $17.9M .

Guidance Changes

Context on pro forma bridge:

• FY 2025 pro forma removal of HS EBITDA ($70M) offset by implied cash interest savings ($65M) and ~$5M capex reduction .
• Pro forma interest expense (inclusive of issuance costs and discounts) ~$456M; pro forma FCF defined as ≥$280M CFO less ~$80M capex .

Earnings Call Themes & Trends

Management Commentary

• “We have reaffirmed our full year 2025 expectations, including double digit year‑on‑year distribution bookings growth—despite a challenging macro environment.” — Kurt Ekert, President & CEO .
• “Our agreement to sell Hospitality Solutions… is an important step… to strengthen our balance sheet… and unlock greater shareholder value.” — Kurt Ekert .
• “We are adjusting our assumption for full year 2025 GDS industry growth from flat to nominal to down 1% to 2%.” — Kurt Ekert .
• “We plan to use approximately $825 million to pay down four of the Term Loan B facilities… retain approximately $135 million for reinvestment.” — CFO Michael Randolfi .
• “We expect mid‑ to high‑teens air distribution bookings growth in Q3 and above 20% in Q4.” — Kurt Ekert .

Q&A Highlights

• Macro/volume: Weakness broad‑based; most acute in APAC groups and inbound U.S.; U.S. military/government down ~30% units; management anticipates sequential improvement in Q2 and acceleration in H2 .
• HS sale and refinancing: Proceeds applied quickly to debt repayment (within 5 days of closing); expected interest savings ($55M) and improved credit profile to facilitate future refinancing .
• Gross margin outlook: Slight pressure near term from mix (North America agencies, NDC/LCC volumes) and upfront costs for new agency business; margins expected roughly in line with 2024 for remaining quarters .
• SabreMosaic traction: Mix of full‑stack and offer‑component wins; strong pipeline including non‑Sabre PSS customers; Alaska/Hawaiian migration to Sabre PSS by mid‑2026, with dynamic pricing adoption .
• Share and industry definition: Focus shifting from EDIFACT share to total distribution bookings (including NDC/LCC); industry GDS measure (EDIFACT) expected down 1–2% but Sabre still guiding double‑digit bookings growth .

Estimates Context

Values retrieved from S&P Global.

Highlights:

• Q1 2025: EPS beat and revenue miss; adjusted EBITDA slightly below consensus .
• Q4 2024: In line/slight misses on revenue/EPS; EBITDA slightly above consensus .
• Q3 2024: modest revenue and EPS misses; EBITDA near consensus .

Key Takeaways for Investors

• H2 acceleration set‑up: Signed agency wins and multi‑source content underpin an expected bookings ramp (mid‑high teens Q3, >20% Q4), positioning for potential estimate revisions higher into H2 and 2026 carryover .
• Balance sheet de‑risking: HS divestiture proceeds drive deleveraging (1 turn) and interest savings ($55M), improving credit profile and refinancing optionality; monitor execution/timing of closing and subsequent debt actions .
• Mix dynamics matter: Near‑term gross margin pressure from North America agencies and NDC/LCC mix is transitory; EBITDA margin expanded YoY and management expects margins roughly in line with 2024 for remaining quarters .
• Payments and hotel B2B distribution: Both are growing and high‑yield channels (digital payments gross spend +30% YoY to $4B; hotel B2B distribution momentum); supports diversified growth beyond air .
• Guidance filter: FY 2025 pro forma EBITDA >$630M reflects HS removal; revenue growth outlook maintained (high single digit) and pro forma FCF >$200M maintained—watch Q2 pro forma EBITDA (~$140M) and bookings growth as catalysts .
• Trading lens: The EPS beat alongside reaffirmed bookings growth and strategic deleveraging could support sentiment despite revenue softness; stock likely keyed to evidence of Q2/Q3 bookings ramp and deal closing milestones .
• Risk monitors: Macro/traffic softness (APAC groups, inbound U.S.), execution timing of agency migrations, and competitive incentive dynamics; management indicates low execution risk and improving trends .

Other Relevant Press Releases

• HS sale to TPG: $1.1B cash; net proceeds ~$960M; transition services and closing expected by end of Q3 2025 .
• Capital structure actions: Announced and priced upsized $1.325B 11.125% Senior Secured Notes due 2030 and commenced tender offers for existing secured notes up to ~$336.4M aggregate purchase price .

Appendix: Additional Q1 2025 Detail

• Travel Solutions: Total bookings 96M (-2% YoY), average booking fee $5.91 (+2% YoY), distribution revenue -1% YoY, IT Solutions revenue -6% YoY (de‑migrations) .
• Hospitality Solutions: Revenue +8% YoY to $85.2M; CRS transactions +6% YoY to 30.8M; segment adjusted EBITDA $11.5M .
• Tax: Q1 tax benefit ($57M) due to high expected tax rate for the year and limitations on interest deductibility; management expects tax expense through remainder of 2025 as earnings increase .
• Cash flow: CFO usage reflects seasonality; capitalized expenditures $17.9M; free cash flow -$98.5M .