Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q, including this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2, contains information that may constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts, such as statements regarding our future financial condition or results of operations, our prospects and strategies for future growth, the development and introduction of new products, and the implementation of our marketing and branding strategies. In many cases, you can identify forward-looking statements by terms such as “expects,” "outlook," “believes,” “may,” "intends," "provisional," "plans," “will,” “predicts,” “potential,” “anticipates,” “estimates,” "should,” “plans”, "could", "likely", "commit", "guidance", "anticipate", "incremental", "preliminary", "forecast", "continue", "strategy", "confidence", "momentum", "estimate", "objective", "project", "may", or the negative of these terms or other comparable terminology. The forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions and are subject to risks, uncertainties and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Certain of these risks, uncertainties and changes in circumstances are described in the "Risk Factors" section of this Quarterly Report on Form 10-Q and in the “Risk Factors” and “Forward-Looking Statements” sections included in our Annual Report on Form 10-K filed with the SEC on February 25, 2021. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, outlook, guidance, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. Unless required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements to reflect circumstances or events after the date they are made. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. You are cautioned not to place undue reliance on these forward-looking statements. Unless required by law, we undertake no obligation to publicly update or revise any forward-looking statements to reflect circumstances or events after the date they are made.
The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes contained elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed with the SEC on February 25, 2021.
Overview
We connect people and places with technology that reimagines the business of travel. Effective the third quarter of 2020, we operate our business and present our results through two business segments: (i) Travel Solutions, our global business-to-business travel marketplace for travel suppliers and travel buyers, including a broad portfolio of software technology products and solutions for airlines, and (ii) Hospitality Solutions, an extensive suite of leading software solutions for hoteliers. All revenue and expenses previously assigned to the Travel Network and Airline Solutions business segments have been consolidated into a unified revenue and expense structure now reported as the Travel Solutions business segment. There have been no changes to the historical Hospitality Solutions reporting segment.
Additionally, we have reclassified expenses on our statement of operations to provide additional clarification on our costs by separating technology costs from cost of revenue and realigning certain expenses previously classified as cost of revenue to selling, general and administrative classification, considering how we assess our results of operations in the current organizational structure. Certain historical amounts have been reclassified to align with the current presentation. See Note 1. General Information for further information.
A significant portion of our revenue is generated through transaction-based fees that we charge to our customers. For Travel Solutions, we generate revenue from our distribution activities through transaction fees for bookings on our global distribution system ("GDS"), and from our IT solutions through recurring usage-based fees for the use of our Software-as-a-Service ("SaaS") and hosted systems, as well as upfront fees and professional services fees. For Hospitality Solutions, we generate revenue from recurring usage-based fees for the use of our SaaS and hosted systems, as well as upfront fees and professional services fees. Items that are not allocated to our business segments are identified as corporate and primarily include stock-based compensation expense, litigation costs, corporate headcount-related costs and other items that are not identifiable with either of our segments.
Recent Developments Affecting our Results of Operations
The travel industry continues to be adversely affected by the global health crisis due to the outbreak of the coronavirus ("COVID-19"), as well as by government directives that have been enacted to slow the spread of the virus. As expected, this pandemic has continued to have a material impact to our consolidated financial results in the first quarter of 2021, resulting in a material decrease in transaction-based revenue across both of our business units compared to the prior year. Lower GDS volumes have continued to result in a material decline in incentive consideration costs, as expected. Despite the continued negative impacts of the COVID-19 pandemic on our business and global travel volumes, as COVID-19 vaccines have continued to be administered, we have seen some continued improvement in our key volume metrics during the first quarter of 2021, led by
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our Hospitality Solutions business. Domestic bookings continue to exceed international bookings, however, negatively impacting revenue.
The inputs into our judgments and estimates consider the economic implications of COVID-19 on our critical and significant accounting estimates. Our air booking cancellation reserve totaled $18 million as of March 31, 2021, which is consistent with the reserve as of December 31, 2020. Additionally, our provision for expected credit losses for the three months ended March 31, 2021 decreased $39 million from the same period in the prior year, primarily related to fully reserving for aged balances of certain customers in the prior year and an overall improvement in our forecasted credit losses in the current year given the slow global economic recovery from the COVID-19 pandemic. During the year ended December 31, 2020, several of our customers filed for bankruptcy protection in various jurisdictions. Due to our creditor position, we do not expect significant recovery for amounts due to us prior to the customer's filing for bankruptcy protection and have fully reserved for any amounts due; however, we continue to provide services and receive timely payment for post-bankruptcy balances due in most cases. See Note 5. Credit Losses. Given the uncertainties surrounding the duration and effects of COVID-19 on transaction volumes in the global travel industry, particularly air travel transaction volumes and future cancellation activity, including from airlines’ insolvency or suspension of service or aircraft groundings, we cannot provide assurance that the assumptions used in the estimates of our cancellation reserve and our allowance for expected credit losses will be accurate.
We believe the ongoing effects of COVID-19 on our operations and global bookings will continue to have a material negative impact on our financial results and liquidity, and this negative impact may continue well beyond the containment of the outbreak. Given the liquidity measures we enacted during 2020 and our ending cash balance of $1.3 billion as of March 31, 2021, we believe that we have resources to sufficiently fund our liquidity requirements over at least the next twelve months; however, given the magnitude of travel decline and the unknown duration of the COVID-19 impact, we will continue to monitor our liquidity levels and take additional steps should we determine they are necessary.
Factors Affecting our Results
In addition to the "—Recent Developments Affecting our Results of Operations" above, a discussion of trends that we believe are the most significant opportunities and challenges currently impacting our business and industry is included in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting our Results” in our Annual Report on Form 10-K filed with the SEC on February 25, 2021. The discussion also includes management’s assessment of the effects these trends have had and are expected to have on our results of continuing operations. This information is not an exhaustive list of all of the factors that could affect our results and should be read in conjunction with the factors referred to in the sections entitled “Risk Factors” and "Forward-Looking Statements" included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K filed with the SEC on February 25, 2021.
Components of Revenues and Expenses
Revenues
Travel Solutions generates revenues from distribution activities through Direct Billable Bookings processed on our GDS, adjusted for estimated cancellations of those bookings. Travel Solutions also generates revenues from IT solutions activities from its product offerings including reservation systems for full-cost and low-cost carriers, commercial and operations products, agency solutions and booking data. Additionally, Travel Solutions generates revenue through software licensing and maintenance fees. Recognition of license fees upon delivery has previously resulted and will continue to result in periodic fluctuations in revenue recognized. Hospitality Solutions generates revenue through upfront solution fees and recurring usage-based fees for the use of our software solutions hosted on secure platforms or deployed through our SaaS and through other professional service fees including Digital Experience ("DX"). Certain professional service fees are discrete sales opportunities that may have a high degree of variability from period to period, and we cannot guarantee that we will have such fees in the future consistent with prior periods.
Cost of revenue, excluding technology costs
Cost of revenue incurred by Travel Solutions and Hospitality Solutions consists primarily of costs associated with the delivery and distribution of our products and services and includes employee-related costs for our delivery, customer operations and call center teams as well as allocated overhead such as facilities and other support costs. Cost of revenue for Travel Solutions also includes incentive consideration expense representing payments or other consideration to travel agencies for reservations made on our GDS which accrue on a monthly basis. Cost of revenue also includes amortization of upfront incentive consideration representing upfront payments or other consideration provided to travel agencies for reservations made on our GDS which are capitalized and amortized over the expected life of the contract. Cost of revenue excludes technology costs, which are presented separately below.
Corporate cost of revenue includes certain expenses such as stock-based compensation, restructuring charges and other items not identifiable with either of our segments.
Depreciation and amortization included in cost of revenue is associated with capitalized implementation costs and intangible assets associated with contracts, supplier and distributor agreements purchased through acquisitions or established with our take private transaction in 2007.
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Technology Costs
Technology costs incurred by Travel Solutions and Hospitality Solutions consist of expenses related to third-party providers and employee-related costs to operate technology operations including hosting, third-party software, and other costs associated with the maintenance and minor enhancement of our technology. Technology costs also include costs associated with our technology transformation efforts. Technology costs are less variable in nature and therefore may not correlate with related changes in revenue.
Depreciation and amortization included in technology costs is associated with software developed for internal use that supports our products, assets supporting our technology platform, businesses and systems and intangible assets for technology purchased through acquisitions or established through the take private transaction in 2007.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of professional service fees, certain settlement charges or reimbursements, costs to defend legal disputes, provision for expected credit losses, other overhead costs, and personnel-related expenses, including stock-based compensation, for employees engaged in sales, sales support, account management and who administratively support the business in finance, legal, human resources, information technology and communications.
Depreciation and amortization included in selling, general and administrative expenses is associated with property and equipment, acquired customer relationships, trademarks and brand names purchased through acquisitions or established through the take private transaction in 2007.
Intersegment Transactions
We account for significant intersegment transactions as if the transactions were with third parties, that is, at estimated current market prices. Hospitality Solutions pays fees to Travel Solutions for hotel stays booked through our GDS.
Key Metrics
“Direct Billable Bookings” and “Passengers Boarded” are the primary metrics utilized by Travel Solutions to measure operating performance. Travel Solutions generates distribution revenue for each Direct Billable Booking, which includes bookings made through our GDS (e.g., Air, and Lodging, Ground and Sea ("LGS")) and through our equity method investments in cases where we are paid directly by the travel supplier. Air Bookings are presented net of bookings cancelled within the period presented. Travel Solutions also recognizes IT solutions revenue from recurring usage-based fees for Passengers Boarded ("PBs"). The primary metric utilized by Hospitality Solutions is booking transactions processed through the Sabre Hospitality Solutions SynXis Central Reservation System (the "HS Central Reservation System"). These key metrics allow management to analyze customer volume over time for each of our product lines to monitor industry trends and analyze performance. We believe that these key metrics are useful for investors and other third parties as indicators of our financial performance and industry trends. While these metrics are based on what we believe to be reasonable estimates of our transaction counts for the applicable period of measurement, there are inherent challenges associated with their measurement. In addition, we are continually seeking to improve our estimates of these metrics, and these estimates may change due to improvements or changes in our methodology.
The following table sets forth these key metrics for the periods indicated (in thousands):
Three Months Ended March 31,
2021 2020 % Change
Travel Solutions
Direct Billable Bookings - Air 35,289 72,823 (51.5)%
Direct Billable Bookings - LGS 3,654 12,930 (71.7)%
Distribution Total Direct Billable Bookings 38,943 85,753 (54.6)%
IT Solutions Passengers Boarded 75,189 167,375 (55.1)%
Hospitality Solutions
Central Reservations System Transactions 17,560 21,019 (16.5)%
Definitions of Non-GAAP Financial Measures
We have included both financial measures compiled in accordance with GAAP and certain non-GAAP financial measures in this Quarterly Report on Form 10-Q, including Adjusted Operating Loss, Adjusted Net Loss from continuing operations ("Adjusted Net Loss"), Adjusted EBITDA, Free Cash Flow and ratios based on these financial measures. As a result of the strategic realignment in the third quarter of 2020, we have separated our technology costs from cost of revenue and moved certain expenses previously classified as cost of revenue to selling, general and administrative to provide increased visibility to
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our technology costs for analytical and decision-making purposes and to align costs with the current leadership and operational organizational structure.
We define Adjusted Operating Loss as operating loss adjusted for equity method (loss) income, acquisition-related amortization, restructuring and other costs, acquisition-related costs, litigation costs, net, and stock-based compensation.
We define Adjusted Net Loss as net loss attributable to common stockholders adjusted for loss (income) from discontinued operations, net of tax, net income attributable to noncontrolling interests, impairment and related charges, acquisition-related amortization, loss on extinguishment of debt, other, net, restructuring and other costs, acquisition-related costs, litigation costs, net, stock-based compensation, and the tax impact of adjustments.
We define Adjusted EBITDA as Loss from continuing operations adjusted for depreciation and amortization of property and equipment, amortization of capitalized implementation costs, acquisition-related amortization, restructuring and other costs, interest expense, net, other, net, acquisition-related costs, litigation costs, net, stock-based compensation and the remaining provision for income taxes. We have revised our calculation of Adjusted EBITDA to no longer exclude the amortization of upfront incentive consideration in all periods presented.
We define Free Cash Flow as cash (used in) provided by operating activities less cash used in additions to property and equipment.
We define Adjusted Net Loss from continuing operations per share as Adjusted Net Loss divided by diluted weighted-average common shares outstanding.
These non-GAAP financial measures are key metrics used by management and our board of directors to monitor our ongoing core operations because historical results have been significantly impacted by events that are unrelated to our core operations as a result of changes to our business and the regulatory environment. We believe that these non-GAAP financial measures are used by investors, analysts and other interested parties as measures of financial performance and to evaluate our ability to service debt obligations, fund capital expenditures, fund our investments in technology transformation, and meet working capital requirements. We also believe that Adjusted Operating Loss, Adjusted Net Loss and Adjusted EBITDA assist investors in company-to-company and period-to-period comparisons by excluding differences caused by variations in capital structures (affecting interest expense), tax positions and the impact of depreciation and amortization expense. In addition, amounts derived from Adjusted EBITDA are a primary component of certain covenants under our senior secured credit facilities.
Adjusted Operating Loss, Adjusted Net Loss, Adjusted EBITDA, Free Cash Flow and ratios based on these financial measures are not recognized terms under GAAP. These non-GAAP financial measures and ratios based on them are unaudited and have important limitations as analytical tools, and should not be viewed in isolation and do not purport to be alternatives to net income as indicators of operating performance or cash flows from operating activities as measures of liquidity. These non-GAAP financial measures and ratios based on them exclude some, but not all, items that affect net income or cash flows from operating activities and these measures may vary among companies. Our use of these measures has limitations as an analytical tool, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. Some of these limitations are:
• these non-GAAP financial measures exclude certain recurring, non-cash charges such as stock-based compensation expense and amortization of acquired intangible assets;
• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash requirements for such replacements;
• Adjusted EBITDA does not reflect amortization of capitalized implementation costs associated with our revenue contracts, which may require future working capital or cash needs in the future;
• Adjusted Operating Loss, Adjusted Net Loss and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
• Adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness;
• Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us;
• Free Cash Flow removes the impact of accrual-basis accounting on asset accounts and non-debt liability accounts, and does not reflect the cash requirements necessary to service the principal payments on our indebtedness; and
• other companies, including companies in our industry, may calculate Adjusted Operating Loss, Adjusted Net Loss, Adjusted EBITDA or Free Cash Flow differently, which reduces their usefulness as comparative measures.
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The following table sets forth the reconciliation of net loss attributable to common stockholders to Adjusted Net Loss from continuing operations, operating loss to Adjusted Operating Loss, and loss from continuing operations to Adjusted EBITDA (in thousands):
Three Months Ended March 31,
2021 2020
Net loss attributable to common stockholders $ (266,106) $ (212,680)
Loss from discontinued operations, net of tax 263 2,126
Net income attributable to non-controlling interests (1)
484 783
Preferred stock dividends 5,428 —
Loss from continuing operations (259,931) (209,771)
Adjustments:
Acquisition-related amortization (2a)
16,221 16,801
Restructuring and other costs (4)
(5,135) 25,281
Other, net (3)
(11,631) 47,486
Acquisition-related costs (5)
720 17,827
Litigation costs, net (6)
730 1,741
Stock-based compensation 24,426 17,577
Tax impact of adjustments (7)
6,326 3,082
Adjusted Net Loss from continuing operations $ (228,274) $ (79,976)
Adjusted Net Loss from continuing operations per share $ (0.72) $ (0.29)
Diluted weighted-average common shares outstanding 317,634 274,037
Operating loss $ (202,553) $ (151,411)
Add back:
Equity method loss (911) (686)
Acquisition-related amortization (2a)
16,221 16,801
Restructuring and other costs (4)
(5,135) 25,281
Acquisition-related costs (5)
720 17,827
Litigation costs, net (6)
730 1,741
Stock-based compensation 24,426 17,577
Adjusted Operating Loss $ (166,502) $ (72,870)
Loss from continuing operations $ (259,931) $ (209,771)
Adjustments:
Depreciation and amortization of property and equipment (2b)
48,592 69,513
Amortization of capitalized implementation costs (2c)
8,410 9,547
Acquisition-related amortization (2a)
16,221 16,801
Restructuring and other costs (4)
(5,135) 25,281
Interest expense, net 64,101 37,442
Other, net (3)
(11,631) 47,486
Acquisition-related costs (5)
720 17,827
Litigation costs, net (6)
730 1,741
Stock-based compensation 24,426 17,577
Provision for income taxes 3,997 (27,254)
Adjusted EBITDA $ (109,500) $ 6,190
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The following tables set forth the reconciliation of Adjusted Operating Loss to operating loss in our statement of operations and Adjusted EBITDA to loss from continuing operations in our statement of operations by business segment (in thousands):
Three Months Ended March 31, 2021
Travel Solutions Hospitality Solutions Corporate Total
Adjusted Operating Loss $ (106,133) $ (13,587) $ (46,782) $ (166,502)
Less:
Equity method loss (911) — — (911)
Acquisition-related amortization (2a)
— — 16,221 16,221
Restructuring and other costs (4)
— — (5,135) (5,135)
Acquisition-related costs (5)
— — 720 720
Litigation costs, net (6)
— — 730 730
Stock-based compensation — — 24,426 24,426
Operating loss $ (105,222) $ (13,587) $ (83,744) $ (202,553)
Adjusted EBITDA $ (57,363) $ (5,660) $ (46,477) $ (109,500)
Less:
Depreciation and amortization of property and equipment (2b)
41,372 6,915 305 48,592
Amortization of capitalized implementation costs (2c)
7,398 1,012 — 8,410
Acquisition-related amortization (2a)
— — 16,221 16,221
Restructuring and other costs (4)
— — (5,135) (5,135)
Acquisition-related costs (5)
— — 720 720
Litigation costs, net (6)
— — 730 730
Stock-based compensation — — 24,426 24,426
Equity method loss (911) — — (911)
Operating loss $ (105,222) $ (13,587) $ (83,744) $ (202,553)
Interest expense, net (64,101)
Other, net (3)
11,631
Equity method loss (911)
Provision for income taxes (3,997)
Loss from continuing operations $ (259,931)
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Three Months Ended March 31, 2020
Travel Solutions Hospitality Solutions Corporate Total
Adjusted Operating Loss $ (10,607) $ (16,457) $ (45,806) $ (72,870)
Less:
Equity method loss (686) — — (686)
Acquisition-related amortization (2a)
— — 16,801 16,801
Restructuring and other costs (4)
— — 25,281 25,281
Acquisition-related costs (5)
— — 17,827 17,827
Litigation costs, net (6)
— — 1,741 1,741
Stock-based compensation — — 17,577 17,577
Operating loss $ (9,921) $ (16,457) $ (125,033) $ (151,411)
Adjusted EBITDA $ 55,608 $ (4,855) $ (44,563) $ 6,190
Less:
Depreciation and amortization of property and equipment (2b)
57,760 10,510 1,243 69,513
Amortization of capitalized implementation costs (2c)
8,455 1,092 — 9,547
Acquisition-related amortization (2a)
— — 16,801 16,801
Restructuring and other costs (4)
— — 25,281 25,281
Acquisition-related costs (5)
— — 17,827 17,827
Litigation costs, net (6)
— — 1,741 1,741
Stock-based compensation — — 17,577 17,577
Equity method loss (686) — — (686)
Operating loss $ (9,921) $ (16,457) $ (125,033) $ (151,411)
Interest expense, net (37,442)
Other, net (3)
(47,486)
Equity method loss (686)
Provision for income taxes 27,254
Loss from continuing operations $ (209,771)
The following tables present information from our statements of cash flows and set forth the reconciliation of Free Cash Flow to cash (used in) provided by operating activities, the most directly comparable GAAP measure (in thousands):
Three Months Ended March 31,
2021 2020
Cash (used in) provided by operating activities $ (197,403) $ 40,431
Cash provided by (used in) investing activities 8,405 (32,850)
Cash (used in) provided by financing activities (24,221) 238,146
Three Months Ended March 31,
2021 2020
Cash (used in) provided by operating activities $ (197,403) $ 40,431
Additions to property and equipment (6,435) (28,437)
Free Cash Flow $ (203,838) $ 11,994
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(1) Net income attributable to non-controlling interests represents an adjustment to include earnings allocated to non-controlling interests held in (i) Sabre Travel Network Middle East of 40%, (ii) Sabre Seyahat Dagitim Sistemleri A.S. of 40%, (iii) Sabre Travel Network Lanka (Pte) Ltd of 40%, and (iv) Sabre Bulgaria of 40%.
(2) Depreciation and amortization expenses:
(a) Acquisition-related amortization represents amortization of intangible assets from the take-private transaction in 2007 as well as intangibles associated with acquisitions since that date.
(b) Depreciation and amortization of property and equipment includes software developed for internal use as well as amortization of contract acquisition costs.
(c) Amortization of capitalized implementation costs represents amortization of upfront costs to implement new customer contracts under our SaaS and hosted revenue model.
(3) Other, net includes a $15 million gain on sale of equity securities during the three months ended March 31, 2021 and a $46 million charge related to termination payments incurred in the first quarter of 2020 in connection with the now-terminated acquisition of Farelogix Inc.
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("Farelogix"). In addition, all periods presented include foreign exchange gains and losses related to the remeasurement of foreign currency denominated balances included in our consolidated balance sheets into the relevant functional currency.
(4) Restructuring and other costs represents charges, and adjustments to those charges, associated with business restructuring and associated changes as well as other measures to support the new organizational structure and to respond to the impacts of the COVID-19 pandemic on our business, facilities and cost structure. See 3. Restructuring Activities to our consolidated financial statements for further details.
(5) Acquisition-related costs represent fees and expenses incurred associated with the now-terminated agreement to acquire Farelogix.
(6) Litigation costs, net represent charges associated with antitrust litigation and other foreign non-income tax contingency matters. See Note 13. Contingencies, to our consolidated financial statements.
(7) The tax impact of adjustments includes the tax effect of each separate adjustment based on the statutory tax rate for the jurisdiction(s) in which the adjustment was taxable or deductible, the impact of the adjustments on valuation allowance assessments, and the tax effect of items that relate to tax specific financial transactions, tax law changes, uncertain tax positions, and other items.
Results of Operations
The following table sets forth our consolidated statement of operations data for each of the periods presented:
Three Months Ended March 31,
2021 2020
(Amounts in thousands)
Revenue $ 327,484 $ 658,977
Cost of revenue, excluding technology costs 146,761 281,415
Technology costs 252,663 325,372
Selling, general and administrative 130,613 203,601
Operating loss (202,553) (151,411)
Interest expense, net (64,101) (37,442)
Equity method loss (911) (686)
Other, net 11,631 (47,486)
Loss from continuing operations before income taxes (255,934) (237,025)
Provision for income taxes 3,997 (27,254)
Loss from continuing operations $ (259,931) $ (209,771)
Three Months Ended March 31, 2021 and 2020
Revenue
Three Months Ended March 31,
2021 2020 Change
(Amounts in thousands)
Travel Solutions $ 288,875 $ 607,588 $ (318,713) (52) %
Hospitality Solutions 42,215 59,237 (17,022) (29) %
Total segment revenue 331,090 666,825 (335,735) (50) %
Eliminations (3,606) (7,848) 4,242 54 %
Total revenue $ 327,484 $ 658,977 $ (331,493) (50) %
Travel Solutions— Revenue decreased $319 million, or 52%, for the three months ended March 31, 2021 compared to the same period in the prior year, primarily due to:
• a $243 million, or 62%, decrease in transaction-based distribution revenue due to a 55% decrease in Direct Billable Bookings to 39 million primarily as a result of reduced travel caused by the COVID-19 pandemic and unfavorable rate impacts as domestic bookings continue to exceed international bookings; and
• a $76 million decrease in IT solutions revenue consisting of a $37 million, or 48%, decrease in reservation revenue primarily due to a 55% decrease in Passengers Boarded to 75 million as a result of reduced travel caused by the COVID-19 pandemic, partially offset by a rate increase due to revenue that does not fluctuate with our volumes. Additionally, commercial and operations revenue decreased $39 million primarily due to the impact of the COVID-19 pandemic on our existing customer base.
Hospitality Solutions— Revenue decreased $17 million, or 29%, for the three months ended March 31, 2021 compared to the same period in the prior year. The decrease was primarily driven by a reduction in SynXis Software and Services revenue due to a decrease in transaction volumes of 16% to 18 million, as a result of the COVID-19 pandemic and a decrease of $5 million in DX revenue.
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Cost of revenue, excluding technology costs
Three Months Ended March 31,
2021 2020 Change
(Amounts in thousands)
Travel Solutions $ 133,042 $ 257,237 $ (124,195) (48) %
Hospitality Solutions 19,877 35,204 (15,327) (44) %
Eliminations (3,606) (7,847) 4,241 54 %
Total segment cost of revenue, excluding technology costs 149,313 284,594 (135,281) (48) %
Corporate (12,685) (12,355) (330) 3 %
Depreciation and amortization 10,133 9,176 957 10 %
Total cost of revenue, excluding technology costs $ 146,761 $ 281,415 $ (134,654) (48) %
Travel Solutions— Cost of revenue decreased $124 million, or 48%, for the three months ended March 31, 2021 compared to the same period in the prior year. The decrease was primarily the result of a $118 million decline in incentive consideration in all regions due to lower transaction volume as a result of the COVID-19 pandemic, as well as a $4 million reduction in labor and professional services costs in connection with our cost reduction measures implemented in 2020.
Hospitality Solutions— Cost of revenue decreased $15 million, or 44%, for the three months ended March 31, 2021 compared to the same period in the prior year. The decrease was primarily driven by a $12 million reduction in transaction-related costs due to the decline in transaction volume as a result of the COVID-19 pandemic and a reduction in labor costs in connection with our cost reduction measures.
Depreciation and amortization —Depreciation and amortization increased $1 million, or 10%, for the three months ended March 31, 2021 compared to the same period in the prior year due to customer implementations.
Technology Costs
Three Months Ended March 31,
2021 2020 Change
(Amounts in thousands)
Travel Solutions $ 213,697 $ 268,395 $ (54,698) (20) %
Hospitality Solutions 22,420 26,503 (4,083) (15) %
Corporate 16,546 30,474 (13,928) (46) %
Total technology costs $ 252,663 $ 325,372 $ (72,709) (22) %
Travel Solutions— Technology costs decreased $55 million, or 20%, for the three months ended March 31, 2021 compared to the same period in the prior year. The decrease was primarily driven by a decrease in technology labor of $26 million in connection with our cost reduction measures, a decrease in depreciation and amortization of $21 million primarily due to a change in the mix of our technology spend in 2019 resulting in less capitalized internal use software, and a decline in technology costs of $16 million associated with lower transaction volumes resulting from the COVID-19 pandemic. This decrease was partially offset by a continued decline in the capitalization mix of our technology spend as we implement opensource and cloud-based solutions, resulting in an increase in labor costs of $9 million. We expect depreciation and amortization expense may be significantly lower in 2021 than in the prior year due to the lower capitalization rate on technology spend.
Hospitality Solutions— Technology costs decreased $4 million, or 15%, for the three months ended March 31, 2021 compared to the same period in the prior year due to a $4 million decline in depreciation and amortization primarily driven by a change in the mix of our technology spend in 2019 resulting in less capitalized internal use software.
Corporate— Technology costs decreased $14 million, or 46%, for the three months ended March 31, 2021 compared to the same period in the prior year primarily due a decline in severance costs of $14 million associated with the reduction of our workforce in 2020. See Note 3. Restructuring Activities, to our consolidated financial statements for further details on restructuring activities.
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Selling, General and Administrative Expenses
Three Months Ended March 31,
2021 2020 Change
(Amounts in thousands)
Travel Solutions $ 54,960 $ 102,948 $ (47,988) (47) %
Hospitality Solutions 12,477 12,819 (342) (3) %
Corporate 63,176 87,834 (24,658) (28) %
Total selling, general and administrative expenses $ 130,613 $ 203,601 $ (72,988) (36) %
Travel Solutions— Selling, general and administrative expenses decreased $48 million, or 47%, for the three months ended March 31, 2021 compared to the same period in the prior year. The decrease is driven by a $40 million decline in the provision for expected credit losses primarily related to fully reserving for aged balances of certain customers in the prior year and an overall improvement in our forecasted credit losses in the current year given the slow global economic recovery from the COVID-19 pandemic. Additionally, labor and professional services costs declined by $5 million in connection with our cost reduction measures.
Corporate— Selling, general and administrative expenses decreased $25 million, or 28%, due to a $17 million decrease in legal costs associated with the now-terminated acquisition of Farelogix and a $9 million decrease in severance costs associated with the reduction of our workforce in 2020. See 3. Restructuring Activities, to our consolidated financial statements for further details on restructuring activities.
Interest expense, net
Three Months Ended March 31,
2021 2020 Change
(Amounts in thousands)
Interest expense, net $ 64,101 $ 37,442 $ 26,659 71 %
Interest expense increased $27 million, or 71% during the three months ended March 31, 2021 compared to the same period in the prior year primarily due to additional borrowings under the 9.250% senior secured notes due 2025 and the 4.000% senior exchangeable notes due 2025 entered into during the second quarter of 2020, and the 7.375% senior secured notes due 2025 entered into in the third quarter of 2020. We expect interest expense may be significantly higher in 2021 than in the prior year due to these changes to our capital structure implemented during 2020.
Other, net
Three Months Ended March 31,
2021 2020 Change
(Amounts in thousands)
Other, net $ (11,631) $ 47,486 $ (59,117) **
** Not meaningful
Other, net decreased $59 million for the three months ended March 31, 2021 compared to the same period in the prior year primarily due to a $46 million charge related to the termination payments in connection with our proposed acquisition of Farelogix recorded in the first quarter of 2020 and a $15 million gain on sale in investment recorded in the first quarter of 2021 as well as realized and unrealized foreign currency exchange gains.
Provision for Income Taxes
Three Months Ended March 31,
2021 2020 Change
(Amounts in thousands)
Provision for income taxes $ 3,997 $ (27,254) $ 31,251 **
** Not meaningful
For the three months ended March 31, 2021, we recognized $4 million income tax expense, representing a negative effective tax rate of 2%, compared to an income tax benefit of $27 million, representing an effective tax rate of 11% for the three months ended March 31, 2020. The decrease in the effective tax rate for the three months ended March 31, 2021 as compared to the same period in 2020 was primarily due to a $43 million valuation allowance generated in the current quarter related to the impact of COVID-19 on our results of operations and various discrete items recorded in each of the respective three month periods. The difference between our effective tax rates and the U.S. federal statutory income tax rate primarily results from valuation allowances, our geographic mix of taxable income in various tax jurisdictions, tax permanent differences and tax credits.
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Liquidity and Capital Resources
Our current principal source of liquidity is our cash and cash equivalents on hand. As of March 31, 2021 and December 31, 2020, our cash and cash equivalents, Revolver and outstanding letters of credit were as follows (in thousands):
March 31, 2021 December 31, 2020
Cash and cash equivalents $ 1,284,918 $ 1,499,665
Available balance under the Revolver 14,713 15,326
Reductions to the Revolver:
Revolver outstanding balance 375,000 375,000
Outstanding letters of credit 10,287 9,674
We consider cash equivalents to be highly liquid investments that are readily convertible into cash. Securities with contractual maturities of three months or less, when purchased, are considered cash equivalents. We record changes in a book overdraft position, in which our bank account is not overdrawn but recently issued and outstanding checks result in a negative general ledger balance, as cash flows from financing activities. We invest in a money market fund which is classified as cash and cash equivalents in our consolidated balance sheets and statements of cash flows. We held no short-term investments as of March 31, 2021 and December 31, 2020.
As of December 31, 2020, we have significant U.S. federal NOLs and U.S. federal tax credits. Because of the continued adverse impact of the COVID-19 pandemic on our business we expect to have significant NOLs related to the current year and we do not expect to be a U.S. federal cash tax payer for 2021.
Liquidity Outlook
The reduction in revenues as the result of COVID-19 has significantly adversely affected our liquidity. We believe that approximately two-thirds of our cost structure is adjustable in the near-term, comprised largely of incentive expenses that decline proportionally with bookings and including other variable expenses that are subject to cost savings measures. Given the uncertainties surrounding the duration and effects of COVID-19 on transaction volumes in the global travel industry, particularly air travel transaction volumes, including from airlines’ insolvency or suspension of service or aircraft groundings, we cannot provide assurance that the assumptions used to estimate our liquidity requirements will be accurate. However, based on our assumptions and estimates with respect to our financial condition, we believe that we have resources to sufficiently fund our liquidity requirements over at least the next twelve months. As previously disclosed, we responded with measures to increase our cash position during 2020, including the suspension of quarterly cash dividends on our common stock, effective with respect to the dividends occurring after the March 30, 2020 payment and share repurchases under our $500 million share repurchase program (the "Share Repurchase Program"), borrowing under our Revolver, implementing cost savings measures, and completing debt and equity offerings. Given the magnitude of travel decline and the unknown duration of the COVID-19 impact, we will continue to monitor travel activity and take additional steps should we determine they are necessary. Additionally, we may conduct debt or equity offerings to support future strategic investments, provide additional liquidity, or pay down debt.
We utilize cash and cash equivalents, supplemented by our Revolver, primarily to pay our operating expenses, make capital expenditures, invest in our information technology infrastructure, products and offerings, pay taxes, and service our debt and other long-term liabilities. We had $375 million outstanding under the Revolver as of March 31, 2021 and December 31, 2020. We had outstanding letters of credit totaling $10 million as of March 31, 2021 and December 31, 2020 which reduced our overall credit capacity under the Revolver. The current interest rate for borrowings under the Revolver is LIBOR plus an adjusted spread based on leverage as reflected in the Revolver.
Our ability to generate cash depends on many factors beyond our control, and any failure to meet our debt service obligations could harm our business, financial condition and results of operations. Our ability to make payments on and to refinance our indebtedness, and to fund working capital needs and planned capital expenditures will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, business, legislative, regulatory and other factors that are beyond our control, including the impacts of COVID-19. See “Risk Factors—The ongoing impact of the COVID-19 outbreak on our business and results of operations is highly uncertain" and "—We may require more cash than we generate in our operating activities, and additional funding on reasonable terms or at all may not be available.”
We believe the ongoing effects of COVID-19 on our operations and global bookings have had, and will continue to have, a material negative impact on our financial results and liquidity, and this negative impact may continue well beyond the containment of the outbreak. On an ongoing basis, we will evaluate and consider strategic acquisitions, divestitures, joint ventures, equity method investments, repurchasing shares of our common stock (including pursuant to our multi-year $500 million Share Repurchase Program) or our outstanding debt obligations in open market or in privately negotiated transactions, as well as other transactions we believe may create stockholder value or enhance financial performance. These transactions may require cash expenditures or generate proceeds and, to the extent they require cash expenditures, may be funded through a combination of cash on hand, debt or equity offerings, or utilization of our Revolver.
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Recent Events Impacting Our Liquidity and Capital Resources
Interest Payments
As a result of the 9.250% senior secured notes due 2025 and the 4.000% senior exchangeable notes due 2025 entered into during the second quarter of 2020, and the 7.375% senior secured notes due 2025 entered into in the third quarter of 2020, interest expense increased $27 million during the three months ended March 31, 2021 compared to the same period in the prior year and will continue to remain a significant use of cash during 2021.
Dividends
The Preferred Stock accumulates cumulative dividends at a rate per annum equal to 6.50% and dividends are payable when, as and if declared by our board of directors, out of funds legally available for their payment to the extent paid in cash, quarterly in arrears on March 1, June 1, September 1 and December 1 of each year, beginning on December 1, 2020 and ending on, and including, September 1, 2023. Declared dividends on the Preferred Stock will be payable, at our election, in cash, shares of our common stock or a combination of cash and shares of our common stock. We recorded $5 million of accrued preferred stock dividends in our consolidated results of operations for the three months ended March 31, 2021. During the three months ended March 31, 2021, we paid cash dividends on our preferred stock of $5 million. On April 28, 2021, the Board of Directors declared a dividend of $1.625 per share on Preferred Stock payable on June 1, 2021 to holders of record of the Preferred Stock on May 15, 2021.
On March 16, 2020, we announced the suspension of the payment of quarterly cash dividends on our common stock, effective with respect to the dividends occurring after the March 30, 2020 payment.
Share Repurchase Program
In February 2017, we announced the approval of the Share Repurchase Program to purchase up to $500 million of Sabre's common stock outstanding. Repurchases under the Share Repurchase Program may take place in the open market or privately negotiated transactions. For the three months ended March 31, 2021, we did not repurchase any shares pursuant to the Share Repurchase Program. On March 16, 2020, we announced the suspension of share repurchases under the Share Repurchase Program in conjunction with the cash management measures we are undertaking as a result of the market conditions caused by COVID-19. Approximately $287 million remains authorized for repurchases under the Share Repurchase Program as of March 31, 2021.
Senior Secured Credit Facilities
On August 23, 2017, Sabre GLBL entered into a Fourth Incremental Term Facility Amendment to our Amended and Restated Credit Agreement, Term Loan A Refinancing Amendment to our Amended and Restated Credit Agreement, and Second Revolving Facility Refinancing Amendment to our Amended and Restated Credit Agreement (the “2017 Refinancing”). The 2017 Refinancing included a $400 million revolving credit facility ("Revolver") as well as the application of the proceeds of the approximately $1,891 million incremental Term Loan B facility (“Term Loan B”) and $570 million Term Loan A facility (“Term Loan A”).
On August 27, 2020, Sabre GLBL entered into a Third Revolving Facility Refinancing Amendment to the Amended and Restated Credit Agreement (the "Third Revolving Refinancing Amendment") and the First Term A Loan Extension Amendment to the Amended and Restated Credit Agreement (the "Term A Loan Extension Amendment" and, together with the Third Revolving Refinancing Amendment, the "2020 Refinancing"), which extended the maturity of the Revolver from July 1, 2022 to November 23, 2023 at the earliest and February 22, 2024 at the latest, depending on certain "springing" maturity conditions as described in the Third Revolving Refinancing Amendment. In the event that, as of November 23, 2023, the maturity date of the Term Loan B has not been extended or refinanced to a date after August 20, 2024, the extension is subject to an earlier "springing" maturity date of November 23, 2023. In addition to extending the maturity date of the Revolver, the 2020 Refinancing also provides that, during any covenant suspension resulting from a "Material Travel Event Disruption" (as defined in the Amended and Restated Credit Agreement and discussed further below), including during the current covenant suspension period, we must maintain liquidity of at least $300 million on a monthly basis, which was lowered in December 2020 from $450 million. In addition, during this covenant suspension, the 2020 Refinancing limits certain payments to equity holders, certain investments, certain prepayments of unsecured debt and the ability of certain subsidiaries to incur additional debt. The applicable margins for the Revolver are between 2.50% and 1.75% per annum for Eurocurrency rate loans and between 1.50% and 0.75% per annum for base rate loans, with the applicable margin for any quarter reduced by 25 basis points (up to 75 basis points total) if the Senior Secured First-Lien Net Leverage Ratio (as defined in the Amended and Restated Credit Agreement) is less than 3.75 to 1.0, 3.00 to 1.0, or 2.25 to 1.0, respectively. These interest rate spreads for the Revolver were increased by 0.25%, during covenant suspension, in connection with the 2020 Refinancing.
On December 17, 2020, Sabre GLBL entered into a Sixth Term A Loan Refinancing and Incremental Amendment to our Amended and Restated Credit Agreement, resulting in additional Term Loan B borrowings of $637 million ("Other Term B Loans") due December 17, 2027. The applicable interest rate margins for the Other Term B Loans are 4.00% per annum for Eurocurrency rate loans and 3.00% per annum for base rate loans, with a floor of 0.75% for the Eurocurrency rate, and 1.75% for the base rate, respectively. The net proceeds of $623 million from the issuance, net of underwriting fees and commissions, were used to fully redeem both the $500 million outstanding 5.25% senior secured notes due November 2023 and the $134 million outstanding Term Loan A. Additionally, on December 17, 2020, Sabre GLBL entered into a Pro Rata Amendment and the
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Refinancing Amendment which reduced the minimum liquidity requirement to $300 million. We incurred no material additional indebtedness as a result of these transactions, other than amounts for certain interest, fees and expenses. We recognized a loss on extinguishment of debt of $11 million during the year ended December 31, 2020 in connection with these transactions, which consisted of a redemption premium of $6 million and the write-off of unamortized debt issuance costs of $5 million.
Under the Amended and Restated Credit Agreement, the loan parties are subject to certain customary non-financial covenants, including certain restrictions on incurring certain types of indebtedness, creation of liens on certain assets, making of certain investments, and payment of dividends, as well as a maximum leverage ratio. Pursuant to Credit Agreement Amendments, effective July 18, 2016, the maximum leverage ratio has been adjusted to be based on the Total Net Leverage Ratio (as defined in the Amended and Restated Credit Agreement) and we are required, at all times (no longer solely when a threshold amount of revolving loans or letters of credit were outstanding), to maintain a Total Net Leverage Ratio of less than 4.5 to 1.0. However, under the terms of the Amended and Restated Credit Agreement, our Total Net Leverage Ratio requirement may be suspended for a limited time if a “Material Travel Event Disruption” has occurred.
“Material Travel Event Disruption,” as defined in the Amended and Restated Credit Agreement, means a decrease of 10% or more has occurred in any given calendar month in the number of “domestic revenue passenger enplanements” as a result of, or in connection with, a Travel Event (as defined in the Amended and Restated Credit Agreement) when compared to the number of “domestic revenue passenger enplanements” occurring in the corresponding month during the prior year, or if a Material Travel Event Disruption existed during such month, the most recent corresponding month in which no Material Travel Event Disruption occurred/existed. The number of “domestic revenue passenger enplanements” is determined by reference to the monthly “Air Traffic Statistics,” which terms are published by the Bureau of Transportation Statistics.
The capacity reductions by domestic airlines in response to the COVID-19 outbreak and related decreases in domestic passenger enplanements, and the sharp decline in GDS bookings, has led to a finding that a Material Travel Event Disruption occurred in the first quarter of 2021. As such, the leverage ratio covenant has been suspended for the first and second quarters of 2021. Based on industry forecasts for COVID-19 recovery, we would expect to remain under covenant suspension through the remainder of 2021 and until such time that domestic passenger enplanements reach at least 90% of pre-COVID-19 levels. As of March 31, 2021, we are in compliance with all covenants not suspended under the terms of the Amended and Restated Credit Agreement and with the additional covenants of the 2020 Refinancing.
We are also required to pay down the term loans by an amount equal to 50% of annual excess cash flow, as defined in the Amended and Restated Credit Agreement. This percentage requirement may decrease or be eliminated if certain leverage ratios are achieved. Based on our results for the year ended December 31, 2019, we were not required to make an excess cash flow payment in 2020, and no excess cash flow payment is required in 2021 with respect to our results for the year ended December 31, 2020. We are further required to pay down the term loan with proceeds from certain asset sales or borrowings as defined in the Amended and Restated Credit Agreement.
The Eurocurrency rate is based on LIBOR. In July 2017, the Financial Conduct Authority announced its intention to phase out LIBOR by the end of 2021, and subsequently extended the phase-out date to June 30, 2023. If a published U.S. dollar LIBOR rate is unavailable, the interest rates on our debt indexed to LIBOR will be determined using various alternative methods set forth in our Amended and Restated Credit Agreement, any of which could result in interest obligations that are more than or that do not otherwise correlate over time with the payments that would have been made on this debt if U.S. dollar LIBOR were available in its current form. See “Risk Factors—We are exposed to interest rate fluctuations.” We anticipate amending our Amended and Restated Credit Agreement prior to the phaseout of LIBOR to provide for a Eurocurrency rate alternative to LIBOR.
Cash Flows
Three Months Ended March 31,
2021 2020
(Amounts in thousands)
Cash (used in) provided by operating activities $ (197,403) $ 40,431
Cash provided by (used in) investing activities 8,405 (32,850)
Cash (used in) provided by financing activities (24,221) 238,146
Cash used in discontinued operations (281) (997)
Effect of exchange rate changes on cash and cash equivalents (1,247) 3,566
(Decrease) increase in cash and cash equivalents $ (214,747) $ 248,296
Operating Activities
Cash used in operating activities totaled $197 million for the three months ended March 31, 2021. The $238 million decrease in operating cash flow from the same period in the prior year was primarily due to the impact of COVID-19 on the travel industry and on our results of operations, additional interest payments of $16 million resulting from debt refinancing activities during 2020, and severance payments of $8 million during the three months ended March 31, 2021 related to restructuring activities initiated in 2020. This decrease in operating cash flow was partially offset by acquisition termination fees of $21 million paid in the first quarter of 2020 in connection with the now-terminated agreement to acquire Farelogix and a $20 million decrease in upfront incentive consideration payments.
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Cash provided by operating activities totaled $40 million for the three months ended March 31, 2020. The $112 million decrease in cash flow provided by operating activities from the same period in the prior year was primarily due to the impact of COVID-19 on the travel industry and on our results of operations and acquisition termination fees of $21 million paid in the first quarter of 2020 in connection with the now-terminated agreement to acquire Farelogix.
Investing Activities
For the three months ended March 31, 2021, we received proceeds of $15 million from the sale of an investment, partially offset by $6 million of cash used on capital expenditures related to software developed for internal use.
For the three months ended March 31, 2020, we used cash of $28 million on capital expenditures, including $15 million related to software developed for internal use.
Financing Activities
For the three months ended March 31, 2021, financing activities used $24 million. Significant highlights of our financing activities include:
• net payments of $12 million from the settlement of employee stock-option awards;
• payment of $6 million on Term Loan B and Other Term Loan B; and
• payment of $5 million in dividends on our preferred stock.
For the three months ended March 31, 2020, financing activities provided $238 million. Significant highlights of our financing activities include:
• proceeds from borrowings under the Revolver of $375 million;
• fourth and final annual payment on the TRA liability for $72 million, excluding interest;
• payment of $39 million in dividends on our common stock;
• payment of $19 million on our Term Loan A and Term Loan B;
• net payments of $5 million from the settlement of employee stock-option awards, including payments of $5 million in income tax withholdings associated with the settlement of employee restricted-stock awards; and
• payment of $2 million on our capital leases.
Contractual Obligations
There were no material changes to our future minimum contractual obligations since December 31, 2020 as previously disclosed in our Annual Report on Form 10-K filed with the SEC on February 25, 2021.
Off Balance Sheet Arrangements
We had no off balance sheet arrangements during the three months ended March 31, 2021 and year ended December 31, 2020.
Recent Accounting Pronouncements
Information related to Recent Accounting Pronouncements is included in Note 1. General Information, to our consolidated financial statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
Critical Accounting Estimates
This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect our reported assets and liabilities, revenues and expenses and other financial information. Actual results may differ significantly from these estimates, and our reported financial condition and results of operations could vary under different assumptions and conditions. In addition, our reported financial condition and results of operations could vary due to a change in the application of a particular accounting standard.
We regard an accounting estimate underlying our financial statements as a “critical accounting estimate” if the accounting estimate requires us to make assumptions about matters that are uncertain at the time of estimation and if changes in the estimate are reasonably likely to occur and could have a material effect on the presentation of financial condition, changes in financial condition, or results of operations. For a discussion of the accounting policies involving material estimates and assumptions that we believe are most critical to the preparation of our financial statements, how we apply such policies and how results differing from our estimates and assumptions would affect the amounts presented in our financial statements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” included in our Annual Report on Form 10-K filed with the SEC on February 25, 2021. Since the date of the annual report on Form 10-K filed with the SEC on February 25, 2021, there have been no material changes to our critical accounting estimates.
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