Sabre Corp 10-Q

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. In the second quarter of 2020, we experienced significant decreases in transaction-based revenue in our Travel Solutions segment, including increased cancellation activity beyond what was initially estimated, as well as a reduction in SynXis Software and Services revenue in our Hospitality Solutions segment due to a decrease in transaction volumes as a result of the COVID-19 pandemic. As expected, this pandemic has continued to have a material impact to our consolidated financial results in the second quarter of 2021. 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 25 during the second quarter of 2021. With the continued increase in volumes, our incentive consideration costs are also increasing significantly compared to the prior year. 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 June 30, 2021, which is consistent with the reserve as of December 31, 2020. Additionally, our provision for expected credit losses for the six months ended June 30, 2021 decreased $52 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, including any variants, 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 will be accurate and the impacts could be material on our cancellation reserves, credit loss provisions and results of operations. 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 $1.1 billion as of June 30, 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. During 2020, and particularly during the second quarter of 2020, we took several actions with regard to our workforce and compensation programs as both temporary and permanent cost reduction efforts which are impacting our year-over-year results of operations, including: a temporary reduction in base compensation pay for our US-based salaried workforce; a temporary reduction in the cash retainer for members of our Board of Directors; a temporary furlough of approximately one-third of our workforce; the temporary suspension of our 401(k) match program for US-based employees; reductions in third-party contracting, vendor costs and other discretionary spending; an offering of voluntary unpaid time off, voluntary severance and a voluntary early retirement program; and a right-sizing of our global organization through a reduction in force. 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. 26 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, excluding technology costs, 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, excluding technology costs, 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. The technology costs excluded from Cost of revenue, excluding technology costs, are presented separately below. Corporate cost of revenue, excluding technology costs, 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, excluding technology costs, 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. 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 27 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 June 30, Six Months Ended June 30, 2021 2020 % Change 2021 2020 % Change Travel Solutions Direct Billable Bookings - Air 51,084 (8,923) 672.5% 86,373 63,900 35.2% Direct Billable Bookings - LGS 5,748 1,621 254.6% 9,402 14,551 (35.4)% Distribution Total Direct Billable Bookings 56,832 (7,302) 878.3% 95,775 78,451 22.1% IT Solutions Passengers Boarded 103,651 19,799 423.5% 178,840 187,174 (4.5)% Hospitality Solutions Central Reservations System Transactions 24,039 11,094 116.7% 41,599 32,113 29.5% 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 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 income (loss), 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 from discontinued operations, net of tax, net income (loss) attributable to noncontrolling interests, preferred stock dividends, acquisition-related amortization, 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 (benefit) 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. 28 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. 29 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 June 30, Six Months Ended June 30, 2021 2020 2021 2020 Net loss attributable to common stockholders $ (251,282) $ (442,570) $ (517,388) $ (655,250) Loss from discontinued operations, net of tax 81 672 344 2,798 Net income (loss) attributable to non-controlling interests (1) 459 (71) 943 712 Preferred stock dividends 5,428 — 10,856 — Loss from continuing operations (245,314) (441,969) (505,245) (651,740) Adjustments: Acquisition-related amortization (2a) 16,136 16,509 32,357 33,310 Restructuring and other costs (4) (856) 48,001 (5,991) 73,282 Other, net (3) 3,199 6,098 (8,432) 53,584 Acquisition-related costs (5) 1,709 4,373 2,429 22,200 Litigation costs, net (6) 11,521 115 12,251 1,856 Stock-based compensation 29,478 8,762 53,904 26,339 Tax impact of adjustments (7) 16,355 1,791 22,681 4,873 Adjusted Net Loss from continuing operations $ (167,772) $ (356,320) $ (396,046) $ (436,296) Adjusted Net Loss from continuing operations per share $ (0.52) $ (1.29) $ (1.24) $ (1.59) Diluted weighted-average common shares outstanding 319,755 275,693 318,700 274,865 Operating loss $ (180,370) $ (384,070) $ (382,923) $ (535,481) Add back: Equity method income (loss) 630 (499) (281) (1,185) Acquisition-related amortization (2a) 16,136 16,509 32,357 33,310 Restructuring and other costs (4) (856) 48,001 (5,991) 73,282 Acquisition-related costs (5) 1,709 4,373 2,429 22,200 Litigation costs, net (6) 11,521 115 12,251 1,856 Stock-based compensation 29,478 8,762 53,904 26,339 Adjusted Operating Loss $ (121,752) $ (306,809) $ (288,254) $ (379,679) Loss from continuing operations $ (245,314) $ (441,969) $ (505,245) $ (651,740) Adjustments: Depreciation and amortization of property and equipment (2b) 42,916 68,028 91,508 137,541 Amortization of capitalized implementation costs (2c) 8,378 9,417 16,788 18,964 Acquisition-related amortization (2a) 16,136 16,509 32,357 33,310 Restructuring and other costs (4) (856) 48,001 (5,991) 73,282 Interest expense, net 64,272 55,931 128,373 93,373 Other, net (3) 3,199 6,098 (8,432) 53,584 Acquisition-related costs (5) 1,709 4,373 2,429 22,200 Litigation costs, net (6) 11,521 115 12,251 1,856 Stock-based compensation 29,478 8,762 53,904 26,339 (Benefit) provision for income taxes (1,897) (4,629) 2,100 (31,883) Adjusted EBITDA $ (70,458) $ (229,364) $ (179,958) $ (223,174) 30 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 June 30, 2021 Travel Solutions Hospitality Solutions Corporate Total Adjusted Operating Loss $ (67,182) $ (8,521) $ (46,049) $ (121,752) Less: Equity method income 630 — — 630 Acquisition-related amortization (2a) — — 16,136 16,136 Restructuring and other costs (4) — — (856) (856) Acquisition-related costs (5) — — 1,709 1,709 Litigation costs, net (6) — — 11,521 11,521 Stock-based compensation — — 29,478 29,478 Operating loss $ (67,812) $ (8,521) $ (104,037) $ (180,370) Adjusted EBITDA $ (22,618) $ (2,031) $ (45,809) $ (70,458) Less: Depreciation and amortization of property and equipment (2b) 37,228 5,448 240 42,916 Amortization of capitalized implementation costs (2c) 7,336 1,042 — 8,378 Acquisition-related amortization (2a) — — 16,136 16,136 Restructuring and other costs (4) — — (856) (856) Acquisition-related costs (5) — — 1,709 1,709 Litigation costs, net (6) — — 11,521 11,521 Stock-based compensation — — 29,478 29,478 Equity method income 630 — — 630 Operating loss $ (67,812) $ (8,521) $ (104,037) $ (180,370) Interest expense, net (64,272) Other, net (3) (3,199) Equity method income 630 Benefit for income taxes 1,897 Loss from continuing operations $ (245,314) 31 Three Months Ended June 30, 2020 Travel Solutions Hospitality Solutions Corporate Total Adjusted Operating Loss $ (251,640) $ (19,409) $ (35,760) $ (306,809) Less: Equity method loss (499) — — (499) Acquisition-related amortization (2a) — — 16,509 16,509 Restructuring and other costs (4) — — 48,001 48,001 Acquisition-related costs (5) — — 4,373 4,373 Litigation costs, net (6) — — 115 115 Stock-based compensation — — 8,762 8,762 Operating loss $ (251,141) $ (19,409) $ (113,520) $ (384,070) Adjusted EBITDA $ (187,114) $ (8,051) $ (34,199) $ (229,364) Less: Depreciation and amortization of property and equipment (2b) 56,241 10,226 1,561 68,028 Amortization of capitalized implementation costs (2c) 8,285 1,132 — 9,417 Acquisition-related amortization (2a) — — 16,509 16,509 Restructuring and other costs (4) — — 48,001 48,001 Acquisition-related costs (5) — — 4,373 4,373 Litigation costs, net (6) — — 115 115 Stock-based compensation — — 8,762 8,762 Equity method loss (499) — — (499) Operating loss $ (251,141) $ (19,409) $ (113,520) $ (384,070) Interest expense, net (55,931) Other, net (3) (6,098) Equity method loss (499) Benefit for income taxes 4,629 Loss from continuing operations $ (441,969) 32 Six Months Ended June 30, 2021 Travel Solutions Hospitality Solutions Corporate Total Adjusted Operating Loss $ (173,315) $ (22,108) $ (92,831) $ (288,254) Less: Equity method loss (281) — — (281) Acquisition-related amortization (2a) — — 32,357 32,357 Restructuring and other costs (4) — — (5,991) (5,991) Acquisition-related costs (5) — — 2,429 2,429 Litigation costs, net (6) — — 12,251 12,251 Stock-based compensation — — 53,904 53,904 Operating loss $ (173,034) $ (22,108) $ (187,781) $ (382,923) Adjusted EBITDA $ (79,981) $ (7,691) $ (92,286) $ (179,958) Less: Depreciation and amortization of property and equipment (2b) 78,600 12,363 545 91,508 Amortization of capitalized implementation costs (2c) 14,734 2,054 — 16,788 Acquisition-related amortization (2a) — — 32,357 32,357 Restructuring and other costs (4) — — (5,991) (5,991) Acquisition-related costs (5) — — 2,429 2,429 Litigation costs, net (6) — — 12,251 12,251 Stock-based compensation — — 53,904 53,904 Equity method loss (281) — — (281) Operating loss $ (173,034) $ (22,108) $ (187,781) $ (382,923) Interest expense, net (128,373) Other, net (3) 8,432 Equity method loss (281) Provision for income taxes (2,100) Loss from continuing operations $ (505,245) 33 Six Months Ended June 30, 2020 Travel Solutions Hospitality Solutions Corporate Total Adjusted Operating Loss $ (262,247) $ (35,866) $ (81,566) $ (379,679) Less: Equity method loss (1,185) — — (1,185) Acquisition-related amortization (2a) — — 33,310 33,310 Restructuring and other costs (4) — — 73,282 73,282 Acquisition-related costs (5) — — 22,200 22,200 Litigation costs, net (6) — — 1,856 1,856 Stock-based compensation — — 26,339 26,339 Operating loss $ (261,062) $ (35,866) $ (238,553) $ (535,481) Adjusted EBITDA $ (131,506) $ (12,906) $ (78,762) $ (223,174) Less: Depreciation and amortization of property and equipment (2b) 114,001 20,736 2,804 137,541 Amortization of capitalized implementation costs (2c) 16,740 2,224 — 18,964 Acquisition-related amortization (2a) — — 33,310 33,310 Restructuring and other costs (4) — — 73,282 73,282 Acquisition-related costs (5) — — 22,200 22,200 Litigation costs, net (6) — — 1,856 1,856 Stock-based compensation — — 26,339 26,339 Equity method loss (1,185) — — (1,185) Operating loss $ (261,062) $ (35,866) $ (238,553) $ (535,481) Interest expense, net (93,373) Other, net (3) (53,584) Equity method loss (1,185) Benefit for income taxes 31,883 Loss from continuing operations $ (651,740) 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): Six Months Ended June 30, 2021 2020 Cash used in operating activities $ (338,460) $ (395,036) Cash provided by (used in) investing activities 7,634 (43,746) Cash (used in) provided by financing activities (44,620) 1,308,193 Six Months Ended June 30, 2021 2020 Cash used in operating activities $ (338,460) $ (395,036) Additions to property and equipment (17,240) (39,333) Free Cash Flow $ (355,700) $ (434,369) ______________________________ (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 $4 million pension settlement charge recorded in the second quarter of 2021, a $15 million gain on sale of equity securities during the first quarter of 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. ("Farelogix"). In addition, all periods presented include foreign exchange 34 gains and losses related to the remeasurement of foreign currency denominated balances included in our consolidated balance sheets into the relevant functional currency. See Note 9. Accumulated Other Comprehensive Loss for discussion of the pension settlement. (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 Note 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 June 30, Six Months Ended June 30, 2021 2020 2021 2020 (Amounts in thousands) (Amounts in thousands) Revenue $ 419,668 $ 83,044 $ 747,152 $ 742,021 Cost of revenue, excluding technology costs 179,821 61,227 326,582 342,642 Technology costs 261,217 282,103 513,880 607,475 Selling, general and administrative 159,000 123,784 289,613 327,385 Operating loss (180,370) (384,070) (382,923) (535,481) Interest expense, net (64,272) (55,931) (128,373) (93,373) Equity method income (loss) 630 (499) (281) (1,185) Other, net (3,199) (6,098) 8,432 (53,584) Loss from continuing operations before income taxes (247,211) (446,598) (503,145) (683,623) (Benefit) provision for income taxes (1,897) (4,629) 2,100 (31,883) Loss from continuing operations $ (245,314) $ (441,969) $ (505,245) $ (651,740) Three Months Ended June 30, 2021 and 2020 Revenue Three Months Ended June 30, 2021 2020 Change (Amounts in thousands) Travel Solutions $ 373,385 $ 56,262 $ 317,123 564 % Hospitality Solutions 50,751 29,002 21,749 75 % Total segment revenue 424,136 85,264 338,872 397 % Eliminations (4,468) (2,220) (2,248) (101) % Total revenue $ 419,668 $ 83,044 $ 336,624 405 % Travel Solutions— Revenue increased $317 million, or 564%, for the three months ended June 30, 2021 compared to the same period in the prior year, primarily due to: • a $266 million, or 555%, increase in transaction-based distribution revenue due to a 878% increase in Direct Billable Bookings to 57 million primarily as a result of the continued gradual recovery from the COVID-19 pandemic and a favorable comparison to significant cancellations in the prior year period. Revenue for the three months ended June 30, 2020 was negatively impacted by approximately $100 million resulting from increased cancellation activity beyond what was initially estimated. Additionally, we further increased our reserve for future cancellations to $60 million as of June 30, 2020 to account for the significant effect that COVID-19 had on the travel industry and the resulting volume of airline travel cancellations in that period and the impacts on booking fee rate due to the mix in bookings and cancellations; and • a $51 million increase in IT solutions revenue consisting of a $32 million, or 186%, increase in reservation revenue primarily due to a 424% increase in Passengers Boarded to 104 million as a result of the continued gradual recovery from the COVID-19 pandemic, partially offset by a dilution in rate due to revenue that does not fluctuate with our volumes. Additionally, commercial and operations revenue increased $19 million primarily due to the continued gradual recovery from the COVID-19 pandemic on our existing customer base and license fee revenue 35 from new implementations recognized upon delivery to the customer. Recognition of license fees upon delivery has previously resulted and will continue to result in periodic fluctuations in revenue recognized. Hospitality Solutions— Revenue increased $22 million, or 75%, for the three months ended June 30, 2021 compared to the same period in the prior year. The increase was primarily driven by an increase in SynXis Software and Services revenue due to an increase in transaction volumes of 117% to 24 million, as a result of the continued gradual recovery from the COVID-19 pandemic and an increase of $4 million in DX revenue. This increase was partially offset by dilution in rate from the prior year due to revenue that does not fluctuate with volumes. Cost of revenue, excluding technology costs Three Months Ended June 30, 2021 2020 Change (Amounts in thousands) Travel Solutions $ 150,039 $ 18,192 $ 131,847 725 % Hospitality Solutions 24,760 15,951 8,809 55 % Eliminations (4,466) (2,219) (2,247) (101) % Total segment cost of revenue, excluding technology costs 170,333 31,924 138,409 434 % Corporate (377) 19,897 (20,274) (102) % Depreciation and amortization 9,865 9,406 459 5 % Total cost of revenue, excluding technology costs $ 179,821 $ 61,227 $ 118,594 194 % Travel Solutions— Cost of revenue, excluding technology costs, increased $132 million, or 725%, for the three months ended June 30, 2021 compared to the same period in the prior year. The increase was primarily the result of a $131 million increase in incentive consideration in all regions due to higher transaction volume given the continued gradual recovery trends from the COVID-19 pandemic, as well as a $2 million increase in labor and professional services costs resulting from the expiration of the temporary cost reduction measures implemented in the second quarter of 2020. Hospitality Solutions— Cost of revenue, excluding technology costs, increased $9 million, or 55%, for the three months ended June 30, 2021 compared to the same period in the prior year. The increase was primarily driven by a $6 million increase in transaction-related costs due to the increase in transaction volume as a result of the continued gradual recovery trends from the COVID-19 pandemic, as well as a $3 million increase in labor and professional services costs resulting from the expiration of the temporary cost reduction measures implemented in the second quarter of 2020. Corporate— Cost of revenue, excluding technology costs, decreased $20 million, or 102%, for the three months ended June 30, 2021 compared to the same period in the prior year. The decrease was primarily due to a $17 million decrease in severance costs associated with the reduction of our workforce in 2020 and continued expense management in the current year. See Note 3. Restructuring Activities, to our consolidated financial statements for further details on restructuring activities. Technology Costs Three Months Ended June 30, 2021 2020 Change (Amounts in thousands) Travel Solutions $ 217,821 $ 223,548 $ (5,727) (3) % Hospitality Solutions 22,180 23,119 (939) (4) % Corporate 21,216 35,436 (14,220) (40) % Total technology costs $ 261,217 $ 282,103 $ (20,886) (7) % Travel Solutions— Technology costs decreased $6 million, or 3%, for the three months ended June 30, 2021 compared to the same period in the prior year. The decrease was primarily driven by a decrease in depreciation and amortization of $23 million primarily due to a change in the mix of our technology spend in 2019 resulting in less capitalized internal use software. This decrease was partially offset by an increase in technology costs of $9 million associated with higher transaction volumes and an increase in labor and professional services costs of $8 million resulting from the expiration of the temporary cost reduction measures implemented in the second quarter of 2020. We expect depreciation and amortization expense to be significantly lower in 2021 than in the prior year due to the lower capitalization rate on technology spend. Hospitality Solutions— Technology costs decreased $1 million, or 4%, for the three months ended June 30, 2021 compared to the same period in the prior year due to a $6 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. This decrease was partially offset by an increase of $3 million in labor and professional services costs resulting from the expiration of the temporary cost reduction measures implemented in the second quarter of 2020, as well as 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. Corporate— Technology costs decreased $14 million, or 40%, for the three months ended June 30, 2021 compared to the same period in the prior year primarily due to a decline in severance costs of $19 million associated with the reduction of our 36 workforce in 2020. This decrease was partially offset by an increase in labor and professional services costs of $5 million resulting from the expiration of the temporary cost reduction measures implemented in the second quarter of 2020. See Note 3. Restructuring Activities, to our consolidated financial statements for further details on restructuring activities. Selling, General and Administrative Expenses Three Months Ended June 30, 2021 2020 Change (Amounts in thousands) Travel Solutions $ 65,401 $ 58,285 $ 7,116 12 % Hospitality Solutions 11,271 8,179 3,092 38 % Corporate 82,328 57,320 25,008 44 % Total selling, general and administrative expenses $ 159,000 $ 123,784 $ 35,216 28 % Travel Solutions— Selling, general and administrative expenses increased $7 million, or 12%, for the three months ended June 30, 2021 compared to the same period in the prior year. The increase is driven by an increase in labor and professional services costs of $19 million primarily resulting from the expiration of the temporary cost reduction measures implemented in the second quarter of 2020. This increase was partially offset by a $12 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 as a result of the continued gradual recovery from the COVID-19 pandemic. Hospitality Solutions — Selling, general and administrative expenses increased $3 million, or 38%, for the three months ended June 30, 2021 compared to the same period in the prior year. The increase is primarily driven by an increase in labor and professional services costs resulting from the expiration of the temporary cost reduction measures implemented in the second quarter of 2020. Corporate— Selling, general and administrative expenses increased $25 million, or 44%, due to a $20 million increase in labor costs resulting from an increase in stock based compensation associated with performance based units, a $13 million increase in legal and other professional services costs and $3 million in security costs. This increase was partially offset by a $12 million decrease in severance costs 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. 37 Interest expense, net Three Months Ended June 30, 2021 2020 Change (Amounts in thousands) Interest expense, net $ 64,272 $ 55,931 $ 8,341 15 % Interest expense increased $8 million, or 15% during the three months ended June 30, 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 will be significantly higher in 2021 as compared to the prior year due to these changes to our capital structure, implemented during 2020. Other, net Three Months Ended June 30, 2021 2020 Change (Amounts in thousands) Other, net $ 3,199 $ 6,098 $ (2,899) ** ** Not meaningful Other, net decreased $3 million for the three months ended June 30, 2021 compared to the same period in the prior year primarily due to realized and unrealized foreign currency exchange gains in the current period as well as a reduction of pension related expense of $2 million. (Benefit) provision for income taxes Three Months Ended June 30, 2021 2020 Change (Amounts in thousands) Benefit for income taxes $ (1,897) $ (4,629) $ 2,732 ** ** Not meaningful For the three months ended June 30, 2021, we recognized $2 million income tax benefit, representing an effective tax rate of 0.8%, compared to an income tax benefit of $5 million, representing an effective tax rate of 1% for the three months ended June 30, 2020. 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. 38 Six Months Ended June 30, 2021 and 2020 Revenue Six Months Ended June 30, 2021 2020 Change (Amounts in thousands) Travel Solutions $ 662,260 $ 663,850 $ (1,590) — % Hospitality Solutions 92,966 88,239 4,727 5 % Total segment revenue 755,226 752,089 3,137 — % Eliminations (8,074) (10,068) 1,994 20 % Total revenue $ 747,152 $ 742,021 $ 5,131 1 % Travel Solutions— Revenue decreased $2 million, for the six months ended June 30, 2021 compared to the same period in the prior year, primarily due to: • a $23 million, or 7%, increase in transaction-based distribution revenue, which consists of a $243 million decrease in transaction based revenue during the first quarter of 2021 and a $266 million increase during the second quarter of 2021. These quarterly changes are due to the significant impact of the COVID-19 pandemic on our revenue beginning in the latter portion of the first quarter of 2020, which included significant cancellations beyond original estimates of approximately $100 million in the second quarter of 2020. We are currently experiencing a continued gradual recovery in volumes, offset by an unfavorable rate mix due to higher domestic leisure bookings, resulting in the overall increase in revenue for the six months ended June 30, 2021 compared to the prior period. Direct Billable Bookings increased 22% to 96 million due to these factors; and • a $25 million decrease in IT solutions revenue consisting of a $76 million decrease during the first quarter of 2021 and a $51 million increase during the second quarter of 2021. These quarterly changes are due to the significant impact of the COVID-19 pandemic on our revenue beginning in the latter portion of the first quarter of 2020. We are currently experiencing a continued gradual recovery in Passengers Boarded volumes, more than offset by an unfavorable rate mix due to revenue that does not fluctuate with our volumes, resulting in the overall decrease in reservation revenue of $5 million for the six months ended June 30, 2021 compared to the prior period. Passengers Boarded decreased 4% to 179 million due to these factors. Additionally, commercial and operations revenue decreased $21 million primarily due to the impact of the COVID-19 pandemic on our customer base, consisting of a $39 million decrease in the first quarter of 2021, offset by a $19 million increase in the second of 2021 when compared to the prior period. Hospitality Solutions— Revenue increased $5 million, or 5%, for the six months ended June 30, 2021 compared to the same period in the prior year. The increase was primarily driven by an increase in SynXis Software and Services revenue due to an increase in transaction volumes of 30% to 42 million, as a result of the continued gradual recovery from the COVID-19 pandemic. This increase is partially offset by dilution in rate from the prior year due to revenue that does not fluctuate with volumes and a change in transaction mix versus 2021, as well as a $1 million decrease in DX revenue. Cost of revenue, excluding technology costs Six Months Ended June 30, 2021 2020 Change (Amounts in thousands) Travel Solutions $ 267,257 $ 257,216 $ 10,041 4 % Hospitality Solutions 44,637 51,155 (6,518) (13) % Eliminations (8,072) (10,066) 1,994 20 % Total segment cost of revenue, excluding technology costs 303,822 298,305 5,517 2 % Corporate 2,762 25,755 (22,993) (89) % Depreciation and amortization 19,998 18,582 1,416 8 % Total cost of revenue, excluding technology costs $ 326,582 $ 342,642 $ (16,060) (5) % Travel Solutions— Cost of revenue, excluding technology costs, increased $10 million, or 4%, for the six months ended June 30, 2021 compared to the same period in the prior year. The increase was primarily the result of a $15 million increase in incentive consideration due to higher overall transaction volume consisting of a $115 million decline in the first quarter of 2021 and a $130 million increase in the second quarter of 2021, compared to the same periods in the prior year. This increase is offset 39 primarily by a $3 million decline in labor and professional services costs resulting from the reduction in workforce from our cost reduction measures implemented in the prior year. Hospitality Solutions— Cost of revenue, excluding technology costs, decreased $7 million, or 13%, for the six months ended June 30, 2021 compared to the same period in the prior year. The decrease was primarily driven by a $9 million reduction in transaction-related costs due to the change in mix of bookings offset by an increase in transaction volumes as a result of the continued gradual recovery from the COVID-19 pandemic. This decrease is offset by a $2 million increase in labor and professional services costs resulting from the expiration of the temporary cost reduction measures implemented in the second quarter of 2020. Corporate— Cost of revenue, excluding technology costs, decreased $23 million, or 89%, for the six months ended June 30, 2021 compared to the same period in the prior year. The decrease was due to a decline in severance costs of $23 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. Depreciation and amortization —Depreciation and amortization increased $1 million, or 8%, for the six months ended June 30, 2021 compared to the same period in the prior year due to customer implementations. Technology Costs Six Months Ended June 30, 2021 2020 Change (Amounts in thousands) Travel Solutions $ 431,518 $ 491,943 $ (60,425) (12) % Hospitality Solutions 44,600 49,622 (5,022) (10) % Corporate 37,762 65,910 (28,148) (43) % Total technology costs $ 513,880 $ 607,475 $ (93,595) (15) % Travel Solutions— Technology costs decreased $60 million, or 12%, for the six months ended June 30, 2021 compared to the same period in the prior year. The decrease was primarily driven by a decrease in depreciation and amortization of $44 million primarily due to a change in the mix of our technology spend in 2019 resulting in less capitalized internal use software, a decrease in labor and professional services costs of $18 million resulting from the reduction in workforce from our cost reduction measures implemented in the prior year, and a decline in technology costs of $7 million associated with lower mainframe transaction volumes. 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 $8 million. We expect depreciation and amortization expense to be significantly lower in 2021 than in the prior year due to the lower capitalization rate on technology spend. Hospitality Solutions— Technology costs decreased $5 million, or 10%, for the six months ended June 30, 2021 compared to the same period in the prior year. The decrease was primarily due to a $10 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. This decrease was partially offset by an increase in labor and professional services costs of $3 million resulting from the expiration of the temporary cost reduction measures implemented in the second quarter of 2020, as well as 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. Corporate— Technology costs decreased $28 million, or 43%, for the six months ended June 30, 2021 compared to the same period in the prior year primarily due a decline in severance costs of $33 million associated with the reduction of our workforce in 2020. This decrease was partially offset by an increase in labor and professional services costs of $7 million resulting from the expiration of the temporary cost reduction measures implemented in the second quarter of 2020. See Note 3. Restructuring Activities, to our consolidated financial statements for further details on restructuring activities. 40 Selling, General and Administrative Expenses Six Months Ended June 30, 2021 2020 Change (Amounts in thousands) Travel Solutions $ 120,361 $ 161,232 $ (40,871) (25) % Hospitality Solutions 23,748 20,997 2,751 13 % Corporate 145,504 145,156 348 — % Total selling, general and administrative expenses $ 289,613 $ 327,385 $ (37,772) (12) % Travel Solutions— Selling, general and administrative expenses decreased $41 million, or 25%, for the six months ended June 30, 2021 compared to the same period in the prior year. The decrease is driven by a $52 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. This decrease was partially offset by an increase in labor and professional services costs of $14 million primarily resulting from the expiration of the temporary cost reduction measures implemented in the second quarter of 2020. Hospitality Solutions— Selling, general and administrative expenses increased $3 million, or 13%, for the six months ended June 30, 2021 compared to the same period in the prior year. The increase is primarily driven by higher depreciation and amortization. Corporate— Selling, general and administrative expenses were flat for the six months ended June 30, 2021 compared to the same period in the prior year. Labor costs increased $3 million as a result of a $19 million increase in stock based compensation associated with performance based units and a $5 million increase resulting from the expiration of the temporary cost reduction measures implemented in the second quarter of 2020, partially offset by a $21 million decrease in severance costs associated with the reduction of our workforce in 2020. This increase in labor costs was offset by a $3 million decrease in legal and professional fees primarily due to a $20 million decrease in acquisition-related costs primarily associated with the now terminated Farelogix acquisition, partially offset by $17 million in legal and professional expenses incurred in the current year. See Note 3. Restructuring Activities, to our consolidated financial statements for further details on restructuring activities. 41 Interest, net Six Months Ended June 30, 2021 2020 Change (Amounts in thousands) Interest expense, net $ 128,373 $ 93,373 $ 35,000 37 % Interest expense increased $35 million, or 37% during the six months ended June 30, 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 will be significantly higher in 2021 as compared to the prior year due to these changes to our capital structure, implemented during 2020. Other expense, net Six Months Ended June 30, 2021 2020 Change (Amounts in thousands) Other, net $ (8,432) $ 53,584 $ (62,016) ** ** Not meaningful Other, net decreased $62 million for the six months ended June 30, 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 the now-terminated acquisition of Farelogix recorded in the first quarter of 2020, 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, partially offset by a pension settlement expense of $4 million during the six months ended June 30, 2021. (Benefit) provision for income taxes Six Months Ended June 30, 2021 2020 Change (Amounts in thousands) Provision (benefit) for income taxes $ 2,100 $ (31,883) $ 33,983 ** ** Not meaningful For the six months ended June 30, 2021, we recognized $2 million income tax expense, representing a negative effective tax rate of 0.42%, compared to an income tax benefit of $32 million, representing an effective tax rate of 4.7% for the six months ended June 30, 2021. The decrease in the effective tax rate for the six months ended June 30, 2021 as compared to the same period in 2020 was primarily due to a higher percent of valuation allowance generated in the current period on earnings related to the impact of COVID-19 on our results of operations and various discrete items recorded in each of the respective six 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. Liquidity and Capital Resources Our current principal source of liquidity is our cash and cash equivalents on hand. As of June 30, 2021 and December 31, 2020, our cash and cash equivalents, Revolver and outstanding letters of credit were as follows (in thousands): June 30, 2021 December 31, 2020 Cash and cash equivalents $ 1,122,114 $ 1,499,665 Available balance under the Revolver 14,521 15,326 Reductions to the Revolver: Revolver outstanding balance 375,000 375,000 Outstanding letters of credit 10,479 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 42 cash equivalents in our consolidated balance sheets and statements of cash flows. We held no short-term investments as of June 30, 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, including any variants, 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 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 June 30, 2021 and December 31, 2020. We had outstanding letters of credit totaling $10 million as of June 30, 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. On July 12, 2021 we refinanced the Revolver and terminated the commitments thereunder. See “— Senior Secured Credit Facilities below. 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. 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 $8 million and $35 million during the three and six months ended June 30, 2021, respectively, compared to the same period in the prior year and will continue to remain a significant use of cash during 2021. 43 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 and $11 million of accrued preferred stock dividends in our consolidated results of operations for the three and six months ended June 30, 2021, respectively. During the three and six months ended June 30, 2021, we paid cash dividends on our preferred stock of $5 million and $11 million, respectively. On July 28, 2021, the Board of Directors declared a dividend of $1.625 per share on Preferred Stock payable on September 1, 2021 to holders of record of the Preferred Stock on August 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. During the six months ended June 30, 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 June 30, 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 addition to extending the maturity date of the Revolver, the 2020 Refinancing also provided that, during any covenant suspension resulting from a "Material Travel Event Disruption" (as defined in the Amended and Restated Credit Agreement), including during the current covenant suspension period, we were required to 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 limited 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 were 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) was 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 July 12, 2021, Sabre GLBL entered into agreements to refinance the Other Term Loan B facility and the Revolver, and terminated the revolving commitments thereunder. Among other things, the refinancing amended the financial performance covenant to remove the $300 million minimum liquidity requirement, and certain other limitations, including the items listed above. See Note 15. Subsequent Events for further detail. 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. 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. On July 12, 2021, Sabre GLBL entered into agreements to refinance the Other Term Loan B facility and the Revolver, and terminated the revolving commitments thereunder. See Note 15. Subsequent Events for further detail. 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 44 certain investments, and payment of dividends. As of June 30, 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. In addition, the Amended and Restated Credit Agreement provided for a maximum leverage ratio for the loan parties, based on the Total Net Leverage Ratio (as defined in the Amended and Restated Credit Agreement). We were 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” (as defined in the Amended and Restated Credit Agreement) has occurred. The capacity reductions by domestic airlines in response to the COVID-19 outbreak and related decreases in domestic passenger enplanements, and a recent sharp decline in GDS bookings, led to a finding that a Material Travel Event Disruption occurred in the first quarter of 2021. As such, the leverage ratio covenant was suspended through at least the second quarter of 2021. As noted above, on July 12, 2021, we entered into agreements to refinance the Other Term Loan B facility and the Revolver, and terminated the revolving commitments thereunder. Among other things, the refinancing amended the financial performance covenant to remove the Total Net Leverage Ratio maintenance requirement. See Note 15. Subsequent Events for further detail. 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 Six Months Ended June 30, 2021 2020 (Amounts in thousands) Cash used in operating activities $ (338,460) $ (395,036) Cash provided by (used in) investing activities 7,634 (43,746) Cash (used in) provided by financing activities (44,620) 1,308,193 Cash used in discontinued operations (1,158) (1,802) Effect of exchange rate changes on cash and cash equivalents (947) 2,503 (Decrease) increase in cash and cash equivalents $ (377,551) $ 870,112 Operating Activities Cash used in operating activities totaled $338 million for the six months ended June 30, 2021. The $57 million increase 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, 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 $23 million reduction in upfront incentive consideration payments. This increase in operating cash flow was partially offset by additional interest payments of $31 million resulting from debt refinancing activities during 2020, and severance payments of $11 million during the six months ended June 30, 2021 related to restructuring activities initiated in 2020. Investing Activities For the six months ended June 30, 2021, we received proceeds of $25 million from the sale of certain investments and assets, partially offset by $17 million of cash used on capital expenditures primarily related to software developed for internal use. For the six months ended June 30, 2020, we used cash of $39 million on capital expenditures, including $24 million related to software developed for internal use. 45 Financing Activities For the six months ended June 30, 2021, financing activities used $45 million. Significant highlights of our financing activities include: • net payments of $22 million from the settlement of employee stock-option awards; • payment of $13 million on Term Loan B and Other Term Loan B; and • payment of $11 million in dividends on our preferred stock. For the six months ended June 30, 2020, financing activities provided $1,308 million. Significant highlights of our financing activities include: • proceeds from borrowings under the Notes of $1,120 million; • 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 $38 million on our Term Loan A and Term Loan B; • payment of $29 million on debt issuance costs; • 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 $4 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 six months ended June 30, 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. 46