What changed in this filing

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Item 1A. Risk Factors

2020-08-10 compared with 2020-05-08 · 49 added, 48 removed, 591 unchanged (14% of the section changed)

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These government mandates have had a significant negative impact on the travel industry and many of the travel suppliers on whom our business relies, including airlines and hotels, and forced many of them, including airlines, to pursue cost reduction measures and seek financing, including government financing and support, in order to reduce financial distress and continue operating, and to curtail drastically their service offerings.

The pandemic may result in the restructuring or bankruptcy of certain of those travel suppliers, and they may seek to renegotiate the terms of our agreements with them.

The pandemic has resulted and may continue to result in the restructuring or bankruptcy of certain of those travel suppliers, and they may seek to renegotiate the terms of our agreements with them.

The pandemic and these measures have significantly adversely affected, and may further affect, consumer sentiment and discretionary spending patterns, economies and financial markets, and our workforce, operations and customers.

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Our financial results and prospects are largely dependent on these transaction volumes.

Although it is impossible to accurately predict the ultimate impact of these developments on our business, our financial results for the quarter ended March 31, 2020 have been significantly and negatively impacted, with a material decline in total revenues, net income, cash flow from operations and Adjusted EBITDA as compared to the corresponding period in 2019.

Although it is impossible to accurately predict the ultimate impact of these developments on our business, our financial results for the quarter ended June 30, 2020 have been significantly and negatively impacted, with a material decline in total revenues, net income, cash flow from operations and Adjusted EBITDA as compared to the corresponding period in 2019.

This downward trend could continue for an unpredictable period.

Due to the uncertain and rapidly evolving nature of current conditions around the world, we are unable to predict accurately the impact that COVID-19 will have on our business going forward.

We currently expect, however, that the COVID-19 outbreak will impact our financial performance for the quarter ended June 30, 2020 much more significantly than it impacted the quarter ended March 31, 2020, primarily because an increasing number of markets and locations will have been subject to the governmental measures and economic disruptions noted above during the entirety of the second quarter (as compared to the first quarter, when the effects of the outbreak were largely limited to China and certain other Asian markets during January 2020 and much of February 2020).

With the spread of COVID-19 to Europe, the United States and other regions, we expect the outbreak and its effects to continue to have a significant adverse impact on our business, financial condition and operating results for the duration of the pandemic and during the subsequent economic recovery, which could be an extensive period of time.

We expect the outbreak and its effects to continue to have a significant adverse impact on our business, financial condition and operating results for the duration of the pandemic and during the subsequent economic recovery, which could be an extended period of time.

The COVID-19 pandemic may result in potential impairments of goodwill, long-term investments and long-lived assets;

increasing provisions for bad debt including risks associated with travel agencies ability to repay us for bookings that have now cancelled;

increasing provisions for bad debt including risks associated with travel agencies ability to repay us for incentive fees associated with bookings that have now cancelled;

and increases in cash outlays to refund travel service providers for cancelled bookings.

We did not record any material impairments in the first quarter of 2020;

We did not record any material impairments in the first half of 2020;

however, future changes in our expected cash flows or other factors as a result of the COVID-19 pandemic may cause our goodwill or other assets to be impaired, resulting in a non-cash charge.

As we cannot predict the duration or scope of the COVID-19 pandemic, the negative financial impact to our consolidated financial statements cannot be reasonably estimated, but could be material.

In addition, given the volatility in global markets and the financial difficulties faced by many of our travel suppliers, we have increased our provisions for bad debt related to certain of our airline providers and, to a lesser extent, hoteliers.

We are closely monitoring positions with travel agencies, as with cancelled bookings exceeding new bookings, refunds could be due to us in the second quarter creating additional bad debt exposure.

As we cannot predict the duration or scope of the COVID-19 pandemic, the negative financial impact to our consolidated financial statements of potential future impairments cannot be reasonably estimated, but could be material.

We are continuing to closely monitor positions with travel agencies, to identify situations in which cancelled bookings exceed new bookings, resulting in refunds due to us and creating possible additional bad debt exposure.

Moreover, due to the high level of cancellations of existing bookings, we have incurred, and expect to continue to incur, higher than normal cash outlays to refund travel service providers for cancelled bookings.

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The extent of the effects of the COVID-19 outbreak on our business, results of operations, cash flows and growth prospects is highly uncertain and will ultimately depend on future developments.

These include, but are not limited to, the severity, extent and duration of the global pandemic and its impact on the travel industry and consumer spending more broadly;

These include, but are not limited to, the

severity, extent and duration of the global pandemic and its impact on the travel industry and consumer spending more broadly;

actions taken by national, state and local governments to contain the disease or treat its impact, including travel restrictions and bans, required closures of non-essential businesses and aid and economic stimulus efforts;

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the impact on our contracts with our partners, including force majeure provisions;

our ability to withstand increased cyberattacks that we and many businesses are experiencing;

our ability to withstand increased cyberattacks;

the speed and extent of the recovery across the broader travel ecosystem;

and the duration, timing and severity of the impact on customer spending, including any economic recession resulting from the pandemic.

The pandemic may continue to expand in regions that have not yet been affected by the COVID-19 outbreak after conditions begin to recover in currently affected regions, which could continue to affect our business.

and the duration, timing and severity of the impact on customer spending, including the economic recession resulting from the pandemic.

The pandemic may continue to expand in regions that have not yet been affected or have been minimally affected by the COVID-19 outbreak after conditions begin to recover in currently affected regions, which could continue to affect our business.

Also, existing restrictions in affected areas could be extended after the virus has been contained in order to avoid relapses, and regions that recover from the outbreak may suffer from a relapse and re-imposition of restrictions.

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Additionally, our business is also dependent on consumer sentiment and discretionary spending patterns.

Current economic forecasts predict significant increases in unemployment in the United States and other regions due to the adoption of social distancing and other policies to slow the spread of the virus, which are likely to have a negative impact on consumer discretionary spending, including for the travel industry.

Significant increases in levels of unemployment in the United States and other regions have occurred and are expected to continue due to the adoption of social distancing and other policies to slow the spread of the virus, which have had and are likely to continue to have a negative impact on consumer discretionary spending, including for the travel industry.

Even when economic and operating conditions for our business improve, we cannot predict the long-term effects of the pandemic on our business or the travel industry as a whole.

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• financial instability of travel suppliers and the impact of any fundamental corporate changes to such travel suppliers, such as airline bankruptcies, consolidations, or suspensions of service on the cost and availability of travel content;

• factors that affect demand for travel such as outbreaks of contagious diseases, including COVID-19, influenza, Zika, Ebola and the MERS virus, increases in fuel prices, government shutdowns, changing attitudes towards the environmental costs of travel and safety concerns;

• political events like acts or threats of terrorism, hostilities, and war;

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For example, one of our competitors, Travelport Worldwide Limited, was acquired by private-equity firms in 2019.

There could be uncertainty resulting from this acquisition, including possible changes to Travelport’s product and service offerings.

There could be uncertainty resulting from this acquisition, including

possible changes to Travelport’s product and service offerings.

As a result, we must continue to invest significant resources in research and development in order to continually improve the speed, accuracy and comprehensiveness of our services and we may be required to make changes to our technology platforms or increase our investment in technology, increase marketing, adjust prices or business models and take other actions, which could affect our financial performance and liquidity.

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Furthermore, changes in our employee population, including our executive team, could impact our results of operations and growth.

For example, Sean Menke was elected as President and Chief Executive Officer of Sabre on December 31, 2016.

Subsequent to his election, we have announced modifications to our business strategies and increased long-term investment in key areas, such as technology infrastructure, that may continue to have a negative impact in the short term due to expected increases in operating expenses and capital expenditures.

For example, we have announced modifications to our business strategies and increased long-term investment in key areas, such as technology infrastructure, that may continue to have a negative impact in the short term due to expected increases in operating expenses and capital expenditures.

If we fail to attract well-qualified employees or to retain or motivate existing employees, our business could be materially hindered by, for example, a delay in our ability to deliver products and services under contract, bring new products and services to market or respond swiftly to customer demands or new offerings from competitors.

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Adverse changes in any of these relationships or the inability to enter into new relationships could negatively impact the demand for and competitiveness of our travel products and services.

For example, a lack of liquidity in the capital markets or weak economic performance, including as a result of the impacts of COVID-19, may cause our travel suppliers to increase the time they take to pay or to default on their payment obligations, which could lead to a higher level of bad debt expense and negatively affect our results.

For example, a lack of liquidity in the capital markets or weak economic performance, including as a result of the impacts of COVID-19, may cause our travel suppliers to increase the time they take to pay or to default on their payment obligations, which could lead to a higher provision for expected credit losses and negatively affect our results.

Any large-scale bankruptcy or other insolvency proceeding of an airline or hospitality supplier could subject our agreements with that customer to rejection or early termination, and, if applicable, result in asset impairments which could be significant.

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depending on the amount of any such judgment, if we do not have sufficient cash on hand, we may be required to seek financing from private or public financing.

Other parties might likewise seek to benefit from any unfavorable outcome by threatening to bring or actually bringing their own claims against us on the same or similar grounds or utilizing the litigation to seek more favorable contract

In addition, the DOJ filed a lawsuit seeking a permanent injunction to prevent us from acquiring Farelogix.

Although the trial court did not grant the DOJ's request, the DOJ has filed its notice of appeal regarding the trial court's judgment.

In addition, the CMA has blocked our proposed acquisition of Farelogix, and we intend to appeal the CMA's decision to the U.K.

In addition, the CMA blocked our proposed acquisition of Farelogix, and we have appealed the CMA's decision to the U.K.

Competition Appeal Tribunal.

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On August 20, 2019, the DOJ filed a complaint in federal court in the District of Delaware, seeking a permanent injunction to prevent Sabre from acquiring Farelogix.

Although the trial court did not grant the DOJ's request, the DOJ has filed its notice of appeal regarding the trial court's judgment.

In addition, the CMA has blocked our proposed acquisition of Farelogix.

We intend to appeal the CMA's decision to the U.K.

Although the trial court did not grant the DOJ's request, the U.S.

Court of Appeals for the Third Circuit granted the DOJ's motion to vacate the judgment as moot, following the termination of the acquisition agreement as described below.

In addition, the CMA has blocked our acquisition of Farelogix.

We have appealed the CMA's decision to the U.K.

Competition Appeal Tribunal.

Sabre and Farelogix agreed to terminate the acquisition agreement on May 1, 2020 and we have paid Farelogix aggregate termination fees of $21 million in the second quarter of 2020 pursuant to the acquisition agreement.

Sabre and Farelogix agreed to terminate the acquisition agreement on May 1, 2020 and we paid Farelogix aggregate termination fees of $21 million in the second quarter of 2020 pursuant to the acquisition agreement.

Any acquisitions that we are able to identify and complete may also involve a number of risks, including our inability to successfully or profitably integrate, operate, maintain and manage our newly acquired operations or employees;

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These include data protection and privacy legislation and regulations, as well as legislation and regulations affecting issues such as:

trade sanctions, exports of technology, antitrust, anticorruption,

telecommunications and e-commerce.

trade sanctions, exports of technology, antitrust, anticorruption, telecommunications and e-commerce.

Our failure to comply with any of these requirements, interpretations, legislation or regulations could have a material adverse effect on our operations.

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Additionally, media coverage of data breaches has escalated, in part because of the increased number of enforcement actions, investigations and lawsuits.

As this focus and attention on privacy and data protection increases, we also risk exposure to potential liabilities and costs resulting from the compliance with, or any failure to comply with applicable legal requirements, conflicts among these legal requirements or differences in approaches to privacy and security of travel data.

As this focus and attention on privacy and data protection increases, we also risk exposure to potential liabilities and costs or face reputational risks resulting from the compliance with, or any failure to comply with applicable legal requirements, conflicts among these legal requirements or differences in approaches to privacy and security of travel data.

Furthermore, various countries, including Russia, have implemented legislation requiring the storage of travel or other personal data locally.

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The cost of compliance with PCI DSS is significant and may increase as the requirements change.

tested periodically for assurance and successfully completed our last annual assessment in December 2019.

Compliance does not guarantee a completely secure environment and notwithstanding the results of this assessment there can be no assurance that payment card brands will not request further compliance assessments or set forth additional requirements to maintain access to credit card processing services.

We are tested periodically for assurance and successfully completed our last annual assessment in December 2019.

access to credit card processing services.

See “—Security breaches could expose us to liability and damage our reputation and our business.” Compliance is an ongoing effort and the requirements evolve as new threats are identified.

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As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and The NASDAQ Stock Market (“NASDAQ”) rules.

The requirements of these rules and regulations have increased and will continue to significantly increase our legal and financial compliance costs, including costs associated with the hiring of additional personnel, making some activities more difficult, time-consuming or costly, and may also place undue strain on our personnel,

systems and resources.

The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and financial condition.

The Sarbanes-Oxley Act requires, among other things, that we maintain disclosure controls and procedures and internal control over financial reporting.

Ensuring that we have adequate internal financial and accounting controls and procedures in place, as well as maintaining these controls and procedures, is a costly and time-consuming effort that needs to be re-evaluated frequently.

Section 404 of the Sarbanes-Oxley Act (“Section 404”) requires that we annually evaluate our internal control over financial reporting to enable management to report on, and our independent auditors to audit as of the end of each fiscal year the effectiveness of those controls.

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The interpretation of tax laws and the determination of any potential liability under those laws are complex, and the amount of our liability may exceed our established reserves.

We consider the undistributed capital investments in our foreign subsidiaries to be indefinitely reinvested as of March 31, 2020 and, accordingly, have not provided deferred taxes on any outside basis differences.

We consider the undistributed capital investments in our foreign subsidiaries to be indefinitely reinvested as of June 30, 2020 and, accordingly, have not provided deferred taxes on any outside basis differences.

New tax laws, statutes, rules, regulations or ordinances could be enacted at any time and existing tax laws, statutes, rules, regulations and ordinances could be interpreted, changed, modified or applied adversely to us.

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New, changed, modified or newly interpreted or applied laws could also increase our compliance, operating and other costs, as well as the costs of our products and services.

Several countries, primarily in Europe, and the European Commission have proposed or adopted taxes on revenue earned by multinational corporations in certain "digital economy" sectors from activities linked to the user-based activity of their residents.

Several countries, primarily in Europe, and the European Commission have proposed or adopted taxes on revenue earned by multinational corporations in certain

"digital economy" sectors from activities linked to the user-based activity of their residents.

These proposals have generally been labeled as "digital services taxes" ("DSTs").

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We may recognize impairments on long-lived assets, including goodwill and other intangible assets, or recognize impairments on our equity method investments.

Our consolidated balance sheet at March 31, 2020 contained goodwill and intangible assets, net totaling $3.2 billion.

Our consolidated balance sheet at June 30, 2020 contained goodwill and intangible assets, net totaling $3.2 billion.

Future acquisitions that result in the recognition of additional goodwill and intangible assets would cause an increase in these types of assets.

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The fair values used in our impairment evaluation are estimated using a combined approach based upon discounted future cash flow projections and observed market multiples for comparable businesses.

Changes in estimates based on changes in risk-adjusted discount rates, future booking and transaction volume levels, future price levels, rates of growth in our consumer and corporate direct booking businesses, rates of increase in operating expenses, cost of revenue and taxes could result in material impairment charges.

Changes in estimates based on changes in risk-adjusted discount rates, future booking and transaction volume levels, travel supplier capacity and load factors, future price levels, rates of growth including long-term growth rates, rates of increase in operating expenses, cost of revenue and taxes, and changes in realization of estimated cost-saving initiatives could result in material impairment charges.

Our pension plan obligations are currently unfunded, and we may have to make significant cash contributions to our plans, which could reduce the cash available for our business.

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With approximately 4,800 participants in our pension plans, we incur substantial costs relating to pension benefits, which can vary substantially as a result of changes in healthcare laws and costs, volatility in investment returns on pension plan assets and changes in discount rates used to calculate related liabilities.

Our estimates of liabilities and expenses for pension benefits

require the use of assumptions, including assumptions relating to the rate used to discount the future estimated liability, the rate of return on plan assets, inflation and several assumptions relating to the employee workforce (medical costs, retirement age and mortality).

Our estimates of liabilities and expenses for pension benefits require the use of assumptions, including assumptions relating to the rate used to discount the future estimated liability, the rate of return on plan assets, inflation and several assumptions relating to the employee workforce (medical costs, retirement age and mortality).

Actual results may differ, which may have a material adverse effect on our business, prospects, financial condition or results of operations.

Future volatility and disruption in the stock markets could cause a decline in the asset values of our pension plans.

In addition, a decrease in the discount rate used to determine minimum funding requirements could result in increased future contributions.

In addition, a decrease in the discount rate used to determine minimum funding requirements could result in

increased future contributions.

If either occurs, we may need to make additional pension contributions above what is currently estimated, which could reduce the cash available for our businesses.

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We have a significant amount of indebtedness.

As of March 31, 2020, we had $3.7 billion of indebtedness outstanding.

As of June 30, 2020, we had $4.7 billion of indebtedness outstanding.

Our substantial level of indebtedness increases the possibility that we may not generate enough cash flow from operations to pay, when due, the principal of, interest on or other amounts due in respect of, these obligations.

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The derivative agreements that we use to manage the risk associated with fluctuations in interest rates may not be able to eliminate the exposure to these changes.

Interest rates are sensitive to numerous factors outside of our control, such as government and central bank monetary policy in the jurisdictions in which we operate.

Interest rates are sensitive to numerous factors outside of our control, such as

government and central bank monetary policy in the jurisdictions in which we operate.

Depending on the size of the exposures and the relative movements of interest rates, if we choose not to hedge or fail to effectively hedge our exposure, we could experience a material adverse effect on our results of operations and financial condition.

As of March 31, 2020, we had outstanding approximately $2.3 billion of variable debt that is indexed to the London Interbank Offered Rate ("LIBOR").

As of June 30, 2020, we had outstanding approximately $2.7 billion of variable debt that is indexed to the London Interbank Offered Rate ("LIBOR").

In July 2017, the Financial Conduct Authority announced its intention to phase out LIBOR by the end of 2021.

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We conduct various operations outside the United States, primarily in APAC, Europe and Latin America.

During the three months ended March 31, 2020, foreign currency operations included $24 million of revenue and $139 million of operating expenses, representing approximately 4% and 17% of our total revenue and operating expenses, respectively.

During the six months ended June 30, 2020, foreign currency operations included $52 million of revenue and $168 million of operating expenses, representing approximately 7% and 13% of our total revenue and operating expenses, respectively.

During the year ended December 31, 2019, foreign currency operations included $246 million of revenue and $572 million of operating expenses, representing approximately 6% and 16% of our total revenue and operating expenses, respectively.

Our most significant foreign currency operating expenses are in the Euro, representing approximately 6% and 7% of our operating expenses for the three months ended March 31, 2020 and the year ended December 31, 2019, respectively.

Our most significant foreign currency operating expenses has historically been in the Euro, representing approximately 1% and 7% of our operating expenses for the six months ended June 30, 2020 and the year ended December 31, 2019, respectively.

As a result, we face exposure to movements in currency exchange rates.

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Moreover, we make a number of estimates in conducting hedging activities, including in some cases the level of future bookings, cancellations, refunds, customer stay patterns and payments in foreign currencies, and the effect of the COVID-19 outbreak on our business has significantly increased the difficulty presented in estimating these items.

See "—The COVID-19 pandemic has had and is expected to continue to have a significant adverse impact on our business and the travel suppliers on whom our business relies." In the event those estimates differ significantly from actual results, we could experience greater volatility as a result of our hedging activities.

See "—The COVID-19 pandemic has had and is expected to continue to have a significant adverse impact on our business and the travel suppliers on whom our business relies." This is especially true now due to the impact of COVID-19 on our operations and the difficulty presented in estimating our future bookings, cancellations, and other relevant performance metrics.

In the event those estimates differ significantly from actual results, we could experience greater volatility as a result of our hedging activities.

The terms of our debt covenants could limit our discretion in operating our business and any failure to comply with such covenants could result in the default of all of our debt .

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors