Sabre Corp ((SABR)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Sabre Corp’s recent earnings call painted a mixed picture, with strong growth in distribution bookings and significant progress in deleveraging efforts. The company also showcased robust innovation in its payments business. However, these positives were tempered by challenges such as the impact of a government shutdown, lower-than-expected free cash flow, and ongoing gross margin pressure.
Strong Distribution Bookings Growth
Sabre Corp reported a 3% year-on-year increase in total distribution bookings, with air distribution bookings rising by more than 2%. The company saw a particularly strong performance in September, with a 7% year-on-year increase, primarily driven by newly converted business from growth strategies.
Significant Progress in Deleveraging
The company has made noteworthy strides in deleveraging, with plans to reduce net leverage by 50% by the end of 2025 compared to the end of 2023. This marks a significant step in strengthening the company’s financial position.
Innovation and AI Developments
Sabre announced two industry firsts: agentic APIs for travel and the Continuous Revenue Optimizer within the SabreMosaic platform. These innovations are part of the company’s strategy to drive sustainable growth, alongside a healthy expansion in its payments business, which boasts 41 live NDC integrations.
Payments Business Growth
The payments business is thriving, processing over $20 billion in annual transactions. The quarterly gross spend has grown over 40% year-on-year, highlighting the robust expansion in this segment.
Positive EBITDA Growth
Sabre’s normalized adjusted EBITDA grew 23% year-on-year, with margins improving over 300 basis points to reach 21%. This reflects the company’s effective cost management and operational efficiency.
Government Shutdown Impact
The U.S. government shutdown had a noticeable impact, reducing October air distribution bookings by approximately 3 percentage points. This impact is expected to persist through the fourth quarter.
Pro Forma Free Cash Flow Below Expectations
The third quarter pro forma free cash flow was $13 million, falling short of expectations due to lower receipts and higher disbursements. This shortfall highlights the challenges Sabre faces in managing its cash flow.
Continued Gross Margin Pressure
Sabre experienced a 130 basis point decrease in normalized gross margin, attributed to lower-than-expected revenue from certain higher-margin product sales and foreign exchange impacts.
IT Solutions Revenue Flat
The IT Solutions segment reported flat revenue of $140 million year-on-year. Growth from passengers boarded was offset by a decrease in license fee revenue, indicating a need for strategic adjustments.
Forward-Looking Guidance
Looking ahead, Sabre anticipates a 3% year-on-year increase in total distribution bookings, with air distribution bookings expected to grow between 6% and 8% in the fourth quarter. The company projects a full-year pro forma adjusted EBITDA of approximately $530 million, reflecting a 9% year-on-year growth, and a pro forma free cash flow of about $70 million. Despite challenges, Sabre remains optimistic about ending the year with $800 million in cash.
In conclusion, Sabre Corp’s earnings call highlighted a balanced outlook with strong growth in key areas tempered by ongoing challenges. The company’s focus on innovation and deleveraging, alongside its strategic guidance, positions it for potential growth, despite external pressures.