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,” “plans,” “provisional,” “will,” “predicts,” “potential,” “anticipates,” “estimates,” “should,” “could,” “likely,” “commit,” “guidance,” “anticipate,” “incremental,” “preliminary,” “forecast,” “continue,” “strategy,” “confidence,” “momentum,” “estimate,” “objective,” “project,” 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. 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 and third quarters 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 third 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 and some travel restrictions have been relaxed, we have seen some continued improvement in our key volume metrics during the third quarter of 2021. With the continued increase in volumes, our incentive consideration costs are also increasing significantly compared to the prior year. 25 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 $15 million and $18 million as of September 30, 2021 and December 31, 2020, respectively. Additionally, our provision for expected credit losses for the nine months ended September 30, 2021 decreased $62 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. We believe our cash position and the liquidity measures we have taken will provide additional flexibility as we manage through the global economic recovery from the COVID-19 pandemic. See “—Recent Events Impacting Our Liquidity and Capital Resources” and “—Senior Secured Credit Facilities.” As a result, 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. On October 28, 2021, we announced that we have entered into an agreement with a third party to sell our suite of flight and crew management and optimization solutions, which represents our AirCentre airline operations portfolio within Travel Solution’s IT Solutions. At closing, we will sell the AirCentre product portfolio, related technology and intellectual property for $392.5 million. Approximately 500 employees are also expected to have the opportunity to transition to the purchaser in connection with the sale. The sale is subject to customary closing conditions and regulatory approvals and is expected to close in the first quarter of 2022. In connection with the closing, we expect to enter into a transition services agreement with the purchaser, pursuant to which we will continue to provide certain services and conduct certain operations in connection with the transferred business while it transitions to the purchaser’s system, in return for compensation from the purchaser with respect to these costs. We cannot provide assurance that the sale will occur on these terms or at all. 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. Our distribution revenue in the current quarter and in future periods is expected to be impacted by a certain online travel agency ("OTA") notifying us of their intent to shift a significant portion of its North America volumes to a competitor. This shift began in the third quarter of 2021 and is expected to result in a decline in our volumes offset by an increase in our rate going forward. 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, excluding technology costs, 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 27 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 September 30, Nine Months Ended September 30, 2021 2020 % Change 2021 2020 % Change Travel Solutions Direct Billable Bookings - Air 46,752 16,539 182.7% 133,125 80,439 65.5% Direct Billable Bookings - LGS 6,762 3,381 100.0% 16,164 17,932 (9.9)% Distribution Total Direct Billable Bookings 53,514 19,920 168.6% 149,289 98,371 51.8% IT Solutions Passengers Boarded 115,576 56,970 102.9% 294,415 244,144 20.6% Hospitality Solutions Central Reservations System Transactions 26,735 19,268 38.8% 68,334 51,381 33.0% 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, loss on extinguishment of debt, 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, loss on extinguishment of debt, 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 September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net loss attributable to common stockholders $ (240,641) $ (309,664) $ (758,029) $ (964,914) (Income) loss from discontinued operations, net of tax (186) 533 158 3,331 Net income attributable to non-controlling interests (1) 714 125 1,657 837 Preferred stock dividends 5,400 2,231 16,256 2,231 Loss from continuing operations (234,713) (306,775) (739,958) (958,515) Adjustments: Acquisition-related amortization (2a) 15,939 16,465 48,296 49,775 Restructuring and other costs (4) 269 947 (5,722) 74,229 Loss on extinguishment of debt 13,070 10,333 13,070 10,333 Other, net (3) 5,993 18,431 (2,439) 72,015 Acquisition-related costs (5) 870 591 3,299 22,791 Litigation costs, net (6) 4,862 247 17,113 2,103 Stock-based compensation 32,218 18,566 86,122 44,905 Tax impact of adjustments (7) (180) 3,563 22,501 8,436 Adjusted Net Loss from continuing operations $ (161,672) $ (237,632) $ (557,718) $ (673,928) Adjusted Net Loss from continuing operations per share $ (0.50) $ (0.81) $ (1.74) $ (2.40) Diluted weighted-average common shares outstanding 322,720 292,392 320,055 280,750 Operating loss $ (156,688) $ (233,049) $ (539,611) $ (768,530) Add back: Equity method loss (114) (460) (395) (1,645) Acquisition-related amortization (2a) 15,939 16,465 48,296 49,775 Restructuring and other costs (4) 269 947 (5,722) 74,229 Acquisition-related costs (5) 870 591 3,299 22,791 Litigation costs, net (6) 4,862 247 17,113 2,103 Stock-based compensation 32,218 18,566 86,122 44,905 Adjusted Operating Loss $ (102,644) $ (196,693) $ (390,898) $ (576,372) Loss from continuing operations $ (234,713) $ (306,775) $ (739,958) $ (958,515) Adjustments: Depreciation and amortization of property and equipment (2b) 38,998 63,733 130,506 201,274 Amortization of capitalized implementation costs (2c) 8,718 9,146 25,506 28,110 Acquisition-related amortization (2a) 15,939 16,465 48,296 49,775 Restructuring and other costs (4) 269 947 (5,722) 74,229 Interest expense, net 65,461 64,376 193,834 157,749 Other, net (3) 5,993 18,431 (2,439) 72,015 Loss on extinguishment of debt 13,070 10,333 13,070 10,333 Acquisition-related costs (5) 870 591 3,299 22,791 Litigation costs, net (6) 4,862 247 17,113 2,103 Stock-based compensation 32,218 18,566 86,122 44,905 Benefit for income taxes (6,613) (19,874) (4,513) (51,757) Adjusted EBITDA $ (54,928) $ (123,814) $ (234,886) $ (346,988) 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 September 30, 2021 Travel Solutions Hospitality Solutions Corporate Total Adjusted Operating Loss $ (39,078) $ (8,868) $ (54,698) $ (102,644) Less: Equity method loss (114) — — (114) Acquisition-related amortization (2a) — — 15,939 15,939 Restructuring and other costs (4) — — 269 269 Acquisition-related costs (5) — — 870 870 Litigation costs, net (6) — — 4,862 4,862 Stock-based compensation — 32,218 32,218 Operating loss $ (38,964) $ (8,868) $ (108,856) $ (156,688) Adjusted EBITDA $ 2,421 $ (2,880) $ (54,469) $ (54,928) Less: Depreciation and amortization of property and equipment (2b) 33,866 4,903 229 38,998 Amortization of capitalized implementation costs (2c) 7,633 1,085 — 8,718 Acquisition-related amortization (2a) — — 15,939 15,939 Restructuring and other costs (4) — — 269 269 Acquisition-related costs (5) — — 870 870 Litigation costs, net (6) — — 4,862 4,862 Stock-based compensation — — 32,218 32,218 Equity method loss (114) — — (114) Operating loss $ (38,964) $ (8,868) $ (108,856) $ (156,688) Interest expense, net (65,461) Other, net (3) (5,993) Loss on extinguishment of debt (13,070) Equity method loss (114) Benefit for income taxes 6,613 Loss from continuing operations $ (234,713) 31 Three Months Ended September 30, 2020 Travel Solutions Hospitality Solutions Corporate Total Adjusted Operating Loss $ (146,337) $ (12,609) $ (37,747) $ (196,693) Less: Equity method loss (460) — — (460) Acquisition-related amortization (2a) — — 16,465 16,465 Restructuring and other costs (4) — — 947 947 Acquisition-related costs (5) — — 591 591 Litigation costs, net (6) — — 247 247 Stock-based compensation — — 18,566 18,566 Operating loss $ (145,877) $ (12,609) $ (74,563) $ (233,049) Adjusted EBITDA $ (84,994) $ (2,222) $ (36,598) $ (123,814) Less: Depreciation and amortization of property and equipment (2b) 53,291 9,293 1,149 63,733 Amortization of capitalized implementation costs (2c) 8,052 1,094 — 9,146 Acquisition-related amortization (2a) — — 16,465 16,465 Restructuring and other costs (4) — — 947 947 Acquisition-related costs (5) — — 591 591 Litigation costs, net (6) — — 247 247 Stock-based compensation — — 18,566 18,566 Equity method loss (460) — — (460) Operating loss $ (145,877) $ (12,609) $ (74,563) $ (233,049) Interest expense, net (64,376) Other, net (3) (18,431) Loss on extinguishment of debt (10,333) Equity method loss (460) Benefit for income taxes 19,874 Loss from continuing operations $ (306,775) 32 Nine Months Ended September 30, 2021 Travel Solutions Hospitality Solutions Corporate Total Adjusted Operating Loss $ (212,393) $ (30,976) $ (147,529) $ (390,898) Less: Equity method loss (395) — — (395) Acquisition-related amortization (2a) — — 48,296 48,296 Restructuring and other costs (4) — — (5,722) (5,722) Acquisition-related costs (5) — — 3,299 3,299 Litigation costs, net (6) — — 17,113 17,113 Stock-based compensation — 86,122 86,122 Operating loss $ (211,998) $ (30,976) $ (296,637) $ (539,611) Adjusted EBITDA $ (77,560) $ (10,571) $ (146,755) $ (234,886) Less: Depreciation and amortization of property and equipment (2b) 112,466 17,266 774 130,506 Amortization of capitalized implementation costs (2c) 22,367 3,139 — 25,506 Acquisition-related amortization (2a) — — 48,296 48,296 Restructuring and other costs (4) — — (5,722) (5,722) Acquisition-related costs (5) — — 3,299 3,299 Litigation costs, net (6) — — 17,113 17,113 Stock-based compensation — — 86,122 86,122 Equity method loss (395) — — (395) Operating loss $ (211,998) $ (30,976) $ (296,637) $ (539,611) Interest expense, net (193,834) Other, net (3) 2,439 Loss on extinguishment of debt (13,070) Equity method loss (395) Benefit for income taxes 4,513 Loss from continuing operations $ (739,958) 33 Nine Months Ended September 30, 2020 Travel Solutions Hospitality Solutions Corporate Total Adjusted Operating Loss $ (408,584) $ (48,475) $ (119,313) $ (576,372) Less: Equity method loss (1,645) — — (1,645) Acquisition-related amortization (2a) — — 49,775 49,775 Restructuring and other costs (4) — — 74,229 74,229 Acquisition-related costs (5) — — 22,791 22,791 Litigation costs, net (6) — — 2,103 2,103 Stock-based compensation — 44,905 44,905 Operating loss $ (406,939) $ (48,475) $ (313,116) $ (768,530) Adjusted EBITDA $ (216,500) $ (15,128) $ (115,360) $ (346,988) Less: Depreciation and amortization of property and equipment (2b) 167,291 30,030 3,953 201,274 Amortization of capitalized implementation costs (2c) 24,793 3,317 — 28,110 Acquisition-related amortization (2a) — — 49,775 49,775 Restructuring and other costs (4) — — 74,229 74,229 Acquisition-related costs (5) — — 22,791 22,791 Litigation costs, net (6) — — 2,103 2,103 Stock-based compensation — — 44,905 44,905 Equity method loss (1,645) — — (1,645) Operating loss $ (406,939) $ (48,475) $ (313,116) $ (768,530) Interest expense, net (157,749) Other, net (3) (72,015) Loss on extinguishment of debt (10,333) Equity method loss (1,645) Benefit for income taxes 51,757 Loss from continuing operations $ (958,515) 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): Nine Months Ended September 30, 2021 2020 Cash used in operating activities $ (408,152) $ (587,069) Cash used in investing activities (5,535) (52,634) Cash (used in) provided by financing activities (37,013) 1,873,804 Nine Months Ended September 30, 2021 2020 Cash used in operating activities $ (408,152) $ (587,069) Additions to property and equipment (30,409) (48,259) Free Cash Flow $ (438,561) $ (635,328) ______________________________ (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 first quarter of 2021, a $4 million and $2 million pension settlement charge recorded in the second and third quarters of 2021, respectively, debt modification costs for financing fees of $2 million 34 recorded in the third quarter of 2021, 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") and a $14 million pension settlement charge recorded in the third quarter of 2020. 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. 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 and other acquisition and disposition related activities. (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 September 30, Nine Months Ended September 30, 2021 2020 2021 2020 (Amounts in thousands) (Amounts in thousands) Revenue $ 441,086 $ 278,365 $ 1,188,238 $ 1,020,386 Cost of revenue, excluding technology costs 171,429 115,426 498,011 458,068 Technology costs 269,111 276,362 782,991 883,837 Selling, general and administrative 157,234 119,626 446,847 447,011 Operating loss (156,688) (233,049) (539,611) (768,530) Interest expense, net (65,461) (64,376) (193,834) (157,749) Loss on extinguishment of debt (13,070) (10,333) (13,070) (10,333) Equity method loss (114) (460) (395) (1,645) Other, net (5,993) (18,431) 2,439 (72,015) Loss from continuing operations before income taxes (241,326) (326,649) (744,471) (1,010,272) Benefit for income taxes (6,613) (19,874) (4,513) (51,757) Loss from continuing operations $ (234,713) $ (306,775) $ (739,958) $ (958,515) Three Months Ended September 30, 2021 and 2020 Revenue Three Months Ended September 30, 2021 2020 Change (Amounts in thousands) Travel Solutions $ 390,353 $ 237,018 $ 153,335 65 % Hospitality Solutions 55,179 44,924 10,255 23 % Total segment revenue 445,532 281,942 163,590 58 % Eliminations (4,446) (3,577) (869) (24) % Total revenue $ 441,086 $ 278,365 $ 162,721 58 % Travel Solutions— Revenue increased $153 million, or 65%, for the three months ended September 30, 2021 compared to the same period in the prior year, primarily due to: • a $141 million, or 135%, increase in transaction-based distribution revenue primarily due to a 169% increase in Direct Billable Bookings to 54 million as a result of the continued recovery from the COVID-19 pandemic, partially offset by revenue recognized in the third quarter of 2020 of $18 million resulting from less cancellation activity on bookings scheduled to depart during the third quarter than was estimated. Additionally, our revenue in the current quarter was impacted by a certain OTA shifting a significant portion of its North America volumes to a competitor, as described above. This shift diluted our volume growth at a rate that is lower than our average rate due to the nature of these bookings as leisure; and • a $12 million increase in IT solutions revenue consisting of a $22 million, or 61% increase in reservation revenue primarily due to a 103% increase in Passengers Boarded to 116 million as a result of the continued recovery from 35 the COVID-19 pandemic, partially offset by a dilution in rate due to revenue that does not fluctuate with our volumes. This increase was partially offset by a decrease in commercial and operations revenue of $9 million primarily due to license fee revenue from new implementations recognized upon delivery to customers in the prior year and certain product divestitures. Recognition of license fees upon delivery has previously resulted and will continue to result in periodic fluctuations in revenue recognized. Hospitality Solutions— Revenue increased $10 million, or 23%, for the three months ended September 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 39% to 27 million, as a result of the continued recovery trends from the COVID-19 pandemic and an increase of $3 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 September 30, 2021 2020 Change (Amounts in thousands) Travel Solutions $ 136,676 $ 87,114 $ 49,562 57 % Hospitality Solutions 26,125 20,417 5,708 28 % Eliminations (4,446) (3,578) (868) (24) % Total segment cost of revenue, excluding technology costs 158,355 103,953 54,402 52 % Corporate 2,884 2,209 675 31 % Depreciation and amortization 10,190 9,264 926 10 % Total cost of revenue, excluding technology costs $ 171,429 $ 115,426 $ 56,003 49 % Travel Solutions— Cost of revenue, excluding technology costs, increased $50 million, or 57%, for the three months ended September 30, 2021 compared to the same period in the prior year. The increase was primarily the result of a $49 million increase in incentive consideration due to higher transaction volume given the continued recovery trends from the COVID-19 pandemic offset by a temporary reduction in rate due to certain travel agencies not meeting certain contractual volume commitments. Hospitality Solutions— Cost of revenue, excluding technology costs, increased $6 million, or 28%, for the three months ended September 30, 2021 compared to the same period in the prior year. The increase was primarily driven by a $3 million increase in transaction-related costs and a $2 million increase in professional services costs related to our call center due to the increase in transaction volume as a result of the continued recovery trends from the COVID-19 pandemic. Corporate— Cost of revenue, excluding technology costs, increased $1 million, or 31%, for the three months ended September 30, 2021 compared to the same period in the prior year. The increase was primarily due to a $1 million increase in labor costs resulting from an increase in stock-based compensation primarily associated with previously awarded performance-based units . Depreciation and amortization —Depreciation and amortization increased $1 million, or 10%, for the three months ended September 30, 2021 compared to the same period in the prior year due to assets placed in service. Technology Costs Three Months Ended September 30, 2021 2020 Change (Amounts in thousands) Travel Solutions $ 221,630 $ 232,666 $ (11,036) (5) % Hospitality Solutions 26,725 25,332 1,393 5 % Corporate 20,756 18,364 2,392 13 % Total technology costs $ 269,111 $ 276,362 $ (7,251) (3) % Travel Solutions— Technology costs decreased $11 million, or 5%, for the three months ended September 30, 2021 compared to the same period in the prior year. The decrease was driven by a decrease in depreciation and amortization of $23 million primarily due to a change in the mix of our technology spend beginning in 2019 resulting in less capitalized internal use software and a decrease in labor and professional services costs of $6 million resulting from cost reduction measures and attrition. This decrease was partially offset by an increase in technology hosting costs of $16 million associated with higher transaction volumes. 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. 36 Hospitality Solutions— Technology costs increased $1 million, or 5%, for the three months ended September 30, 2021 compared to the same period in the prior year. This increase was due to an increase of $4 million in labor and professional services costs to support our technology operations and a $2 million increase as the result of higher transaction volumes. This increase was partially offset by a $4 million decline in depreciation and amortization primarily driven by a change in the mix of our technology spend beginning in 2019 resulting in less capitalized internal use software. Corporate— Technology costs increased $2 million, or 13%, for the three months ended September 30, 2021 compared to the same period in the prior year primarily due to an increase in labor and professional services costs of $4 million resulting from an increase in stock-based compensation primarily associated with previously awarded performance-based units. This increase was partially offset by a $1 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. Selling, General and Administrative Expenses Three Months Ended September 30, 2021 2020 Change (Amounts in thousands) Travel Solutions $ 62,804 $ 55,870 $ 6,934 12 % Hospitality Solutions 10,081 10,501 (420) (4) % Corporate 84,349 53,255 31,094 58 % Total selling, general and administrative expenses $ 157,234 $ 119,626 $ 37,608 31 % Travel Solutions— Selling, general and administrative expenses increased $7 million, or 12%, for the three months ended September 30, 2021 compared to the same period in the prior year. The increase is driven by an increase in professional services costs of $11 million primarily resulting from the reversal of certain third-party commissions in the prior year which did not reoccur in the current year, and increases in professional services for risk and security and consulting related to our business strategy to support the long-term growth of the business . This increase was partially offset by a $6 million decline in the provision for expected credit losses primarily related to an overall improvement in our expected credit losses in the current year as a result of the continued recovery from the COVID-19 pandemic. Hospitality Solutions— Selling, general and administrative expenses remained flat for the three months ended September 30, 2021 compared to the same period in the prior year. The decrease in the provision for expected credit losses, which is related to an overall improvement in our expected credit losses in the current year as a result of the continued recovery from the COVID-19 pandemic, was offset by a slight increase in labor and professional services costs. Corporate— Selling, general and administrative expenses increased $31 million, or 58%, due to a $21 million increase in labor costs resulting from a $10 million increase in stock-based compensation primarily associated with previously awarded performance based units and an $11 million increase due to continued investments in business systems and other labor related expenses. Additionally, legal and professional services costs increased by $9 million, primarily due to ongoing litigation. Interest expense, net Three Months Ended September 30, 2021 2020 Change (Amounts in thousands) Interest expense, net $ 65,461 $ 64,376 $ 1,085 2 % Interest expense increased $1 million, or 2% during the three months ended September 30, 2021 compared to the same period in the prior year primarily due to additional borrowings under the 7.375% senior secured notes due 2025 entered into in the third quarter of 2020. Loss on Extinguishment of Debt We recognized a loss on extinguishment of debt of $13 million in 2021 as a result of the refinancing that occurred in the current quarter (the "2021 Refinancing") and a loss on extinguishment of debt of $10 million in 2020 as a result of the refinancing that occurred in the third quarter of 2020 (the "2020 Refinancing"). See Note 6. Debt for additional details. 37 Other, net Three Months Ended September 30, 2021 2020 Change (Amounts in thousands) Other, net $ 5,993 $ 18,431 $ (12,438) (67) % Other, net decreased $12 million, or 67% for the three months ended September 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 in pension related expense of $12 million. Benefit for income taxes Three Months Ended September 30, 2021 2020 Change (Amounts in thousands) Benefit for income taxes $ (6,613) $ (19,874) $ 13,261 (67) % For the three months ended September 30, 2021, we recognized $7 million income tax benefit, representing an effective tax rate of 2.7%, compared to an income tax benefit of $20 million, representing an effective tax rate of 6.1% for the three months ended September 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. Nine Months Ended September 30, 2021 and 2020 Revenue Nine Months Ended September 30, 2021 2020 Change (Amounts in thousands) Travel Solutions $ 1,052,613 $ 900,868 $ 151,745 17 % Hospitality Solutions 148,145 133,163 14,982 11 % Total segment revenue 1,200,758 1,034,031 166,727 16 % Eliminations (12,520) (13,645) 1,125 8 % Total revenue $ 1,188,238 $ 1,020,386 $ 167,852 16 % Travel Solutions— Revenue increased $152 million, or 17%, for the nine months ended September 30, 2021 compared to the same period in the prior year, primarily due to: • a $164 million, or 36%, increase in transaction-based distribution revenue, which consists of a $243 million decrease in transaction based revenue during the first quarter of 2021, a $266 million increase during the second quarter of 2021 and a $141 million increase in the third 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. Additionally, during the third quarter of 2020 we recognized $18 million resulting from less cancellation activity on bookings scheduled to depart during the third quarter than was estimated. We are currently experiencing a continued recovery in volumes, offset by an unfavorable rate mix due to higher domestic leisure bookings, resulting in the overall increase in revenue for the nine months ended September 30, 2021 compared to the prior period. Direct Billable Bookings increased 52% to 149 million due to these factors; and • a $13 million decrease in IT solutions revenue consisting of a $76 million decrease during the first quarter of 2021, a $51 million increase during the second quarter of 2021 and a $12 million increase in the third 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. Commercial and operations revenue decreased $28 million primarily due to the continued impact of the COVID-19 pandemic on our customer base and certain product divestitures, offset by license fee revenue 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. In addition, we are currently experiencing a continued recovery in Passengers Boarded volumes, offset by an unfavorable rate mix due to revenue that does not fluctuate with our volumes, resulting in an overall increase 38 in reservation revenue of $16 million for the nine months ended September 30, 2021 compared to the prior period. Passengers Boarded increased 21% to 294 million due to these factors. Hospitality Solutions— Revenue increased $15 million, or 11%, for the nine months ended September 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 33% to 68 million, as a result of the continued recovery from the COVID-19 pandemic, and an increase of $2 million in DX revenue. 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. Cost of revenue, excluding technology costs Nine Months Ended September 30, 2021 2020 Change (Amounts in thousands) Travel Solutions $ 403,933 $ 344,330 $ 59,603 17 % Hospitality Solutions 70,762 71,573 (811) (1) % Eliminations (12,518) (13,645) 1,127 8 % Total segment cost of revenue, excluding technology costs 462,177 402,258 59,919 15 % Corporate 5,646 27,964 (22,318) (80) % Depreciation and amortization 30,188 27,846 2,342 8 % Total cost of revenue, excluding technology costs $ 498,011 $ 458,068 $ 39,943 9 % Travel Solutions— Cost of revenue, excluding technology costs, increased $60 million, or 17%, for the nine months ended September 30, 2021 compared to the same period in the prior year. The increase was primarily the result of a $64 million increase in incentive consideration due to high er overall transaction volume consisting of a $115 million decline in the first quarter of 2021, a $130 million increase in the second quarter of 2021, and a $49 million increase in the third quarter of 2021, compared to the same periods in the prior year. This i ncrease is offset primarily by a $2 million decline in labor and professional services costs resulting from the reduction in workforce from our cost reduction measures implemented in the prior year. See Note 3. Restructuring Activities , to our consolidated financial statements for further details on restructuring activities. Hospitality Solutions— Cost of revenue, excluding technology costs, decreased $1 million, or 1%, for the nine months ended September 30, 2021 compared to the same period in the prior year. The decrease was primarily driven by a $ 6 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 recovery from the COVID-19 pandemic. This decrease is offset by a $5 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 and an increase in professional services costs related to our call center to support the increase in transaction volumes in the current year. Corporate— Cost of revenue, excluding technology costs, decreased $22 million, or 80%, for the nine months ended September 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 wi th the reduction of our workforce in 2020. The decrease was partially offset by a slight increase in labor costs resulting from an increase in stock-based compensation primarily associated with previously awarded performance-based units. See Note 3. Restructuring Activities , to our consolidated financial statements for further details on restructuring activities. Depreciation and amortization —Depreciation and amortization increased $2 million, or 8%, for the nine months ended September 30, 2021 compared to the same period in the prior year due to assets placed in service . Technology Costs Nine Months Ended September 30, 2021 2020 Change (Amounts in thousands) Travel Solutions $ 653,147 $ 724,609 $ (71,462) (10) % Hospitality Solutions 71,324 74,954 (3,630) (5) % Corporate 58,520 84,274 (25,754) (31) % Total technology costs $ 782,991 $ 883,837 $ (100,846) (11) % Travel Solutions— Technology costs decreased $71 million, or 10%, for the nine months ended September 30, 2021 compared to the same period in the prior year. The decrease was primarily driven by a decrease in depreciation and amortization of $67 million primarily due to a change in the mix of our technology spend beginning in 2019 resulting in less capitalized internal 39 use software, and a decrease in labor and professional services costs of $24 million resulting from the reduction in workforce from our cost reduction measures implemented in the prior year and attrition and cost reduction measures in the current year. This decrease was partially offset by an increase in technology hosting costs of $10 million associated with higher transaction volumes and an increase in labor costs of $9 million resulting from continued decline in the capitalization mix of our technology spend as we implement open-source and cloud-based solutions. 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 $4 million, or 5%, for the nine months ended September 30, 2021 compared to the same period in the prior year. The decrease was primarily due to a $14 million decline in depreciation and amortization primarily driven by a change in the mix of our technology spend beginning in 2019 resulting in less capitalized internal use software. This decrease was partiall y offset by an increase in labor and professional services costs of $6 million resulting fro m the expiration of the temporary cost reduction measures implemented in the second quarter of 2020 and to support our technology operations in the current year. The continued decline in the capitalization mix of our technology spend as we implement open-source and cloud-based solutions also resulted in an increase in labor costs of $2 million. Additionally, technology hosting costs increased by $2 million resulting from higher transaction volumes. Corporate— Technology costs decreased $26 million, or 31%, for the nine months ended September 30, 2021 compared to the same period in the prior year primarily due to a decline in severance costs of $34 million associated with the reduction of our workforce in 2020, partially offset by an increase in labor costs of $10 million resulting from an increase in stock-based compensation primarily associated with previously awarded performance-based units. See Note 3. Restructuring Activities , to our consolidated financial statements for further details on restructuring activities. Selling, General and Administrative Expenses Nine Months Ended September 30, 2021 2020 Change (Amounts in thousands) Travel Solutions $ 183,165 $ 217,103 $ (33,938) (16) % Hospitality Solutions 33,830 31,498 2,332 7 % Corporate 229,852 198,410 31,442 16 % Total selling, general and administrative expenses $ 446,847 $ 447,011 $ (164) — % Travel Solutions— Selling, general and administrative expenses decreased $34 million, or 16%, for the nine months ended September 30, 2021 compared to the same period in the prior year. The decrease is driven by a $58 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 $24 million primarily resulting from the expiration of the temporary cost reduction measures implemented in the second quarter of 2020, the reversal of certain third-party commissions in the prior year which did not reoccur in the current year, and increases in professional services for risk and security and consulting related to our business strategy to support the long-term growth of the business . Hospitality Solutions— Selling, general and administrative expenses increased $2 million, or 7%, for the nine months ended September 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 increased $31 million, or 16%, for the nine months ended September 30, 2021 compared to the same period in the prior year. The increase is driven by an increase in labor costs of $23 million as a result of a $28 million increase in stock-based compensation primarily associated with previously awarded performance-based units, an $11 million increase due to continued investments in business systems in the current year and other labor related expenses, 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. Additionally, legal and professional fees increased $6 million due to a $26 million increase in costs primarily associated with ongoing legal matters in the current year, partially offset by a $20 million decrease in acquisition-related costs primarily associated with the now terminated Farelogix acquisition. See Note 3. Restructuring Activities , to our consolidated financial statements for further details on restructuring activities. 40 Interest, net Nine Months Ended September 30, 2021 2020 Change (Amounts in thousands) Interest expense, net $ 193,834 $ 157,749 $ 36,085 23 % Interest expense increased $36 million, or 23% during the nine months ended September 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 (the "Exchangeable Notes") 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. Loss on Extinguishment of Debt We recognized a loss on extinguishment of debt of $13 million in 2021 as a result of the 2021 Refinancing and a loss on extinguishment of debt of $10 million in 2020 as a result of the 2020 Refinancing. Other expense, net Nine Months Ended September 30, 2021 2020 Change (Amounts in thousands) Other, net $ (2,439) $ 72,015 $ (74,454) ** ** Not meaningful Other, net decreased $74 million for the nine months ended September 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, a reduction of pension related expense of $9 million compared to the same period in 2020, as well as realized and unrealized foreign currency exchange gains during the nine months ended September 30, 2021. Benefit for income taxes Nine Months Ended September 30, 2021 2020 Change (Amounts in thousands) Benefit for income taxes $ (4,513) $ (51,757) $ 47,244 (91) % For the nine months ended September 30, 2021, we recognized $5 million income tax benefit, representing an effective tax rate of less than 1%, compared to an income tax benefit of $52 million, representing an effective tax rate of 5.1% for the nine months ended September 30, 2021. The decrease in the effective tax rate for the nine months ended September 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 nine 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. 41 Liquidity and Capital Resources Our current principal source of liquidity is our cash and cash equivalents on hand. As of September 30, 2021 and December 31, 2020, our cash and cash equivalents, Revolver, bilateral letter of credit facility and outstanding letters of credit were as follows (in thousands): September 30, 2021 December 31, 2020 Cash and cash equivalents $ 1,023,769 $ 1,499,665 Available balance under the Revolver — 15,326 Reductions to the Revolver: Revolver outstanding balance — 375,000 Outstanding letters of credit — 9,674 Available under the bilateral letter of credit facility 9,583 — Outstanding letters of credit under the bilateral letter of credit facility 10,417 — 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 September 30, 2021 and December 31, 2020. We had $21 million held as cash collateral for standby letters of credit in restricted cash on our consolidated balance sheets as of September 30, 2021. We had no restricted cash as of 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. In addition, in the third quarter of 2021, we refinanced and extended the maturity on a portion of our debt, and established the $300 million at-the-market equity distribution program (the "ATM Program"). We believe these actions will provide additional flexibility as we manage through the global economic recovery from the COVID-19 pandemic. 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 review opportunities to refinance our existing debt, as well as 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. On July 12, 2021 we refinanced the Revolver and terminated the commitments thereunder. See “— Senior Secured Credit Facilities below. We had outstanding letters of credit totaling $10 million as of September 30, 2021, which were secured by a $20 million cash collateral deposit account. We had $375 million outstanding under the Revolver on December 31, 2020, and had outstanding letters of credit totaling $10 million as of December 31, 2020, which reduced our overall credit capacity under the Revolver. 42 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 COVID-19 pandemic has had and is expected to continue to have a significant adverse impact on our business, including our financial results and prospects, and the travel suppliers on whom our business relies." 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% Exchangeable Notes 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 payments increased $79 million during the nine months ended September 30, 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 and $16 million of accrued preferred stock dividends in our consolidated results of operations for the three and nine months ended September 30, 2021, respectively. During the three and nine months ended September 30, 2021, we paid cash dividends on our preferred stock of $5 million and $16 million, respectively. On October 19, 2021, the Board of Directors declared a dividend of $1.625 per share on Preferred Stock payable on December 1, 2021 to holders of record of the Preferred Stock on November 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. At-the-Market (ATM) Program On August 19, 2021, we established the $300 million ATM Program by entering into a sales agreement (the “Sales Agreement”) with BofA Securities, Inc., Citigroup Global Markets Inc., and Mizuho Securities USA LLC, each acting as a sales agent for Sabre (each, a “Sales Agent” and, collectively, the “Sales Agents”), pursuant to which we may issue and sell, from time to time, shares of our common stock, par value $0.01 per share, in “at-the-market” offerings having an aggregate gross sales price of up to $300 million . We are not obligated to sell any shares under the Sales Agreement, and may at any time suspend offers under the Sales Agreement or terminate the Sales Agreement. Sales of the shares, if any, may be made by means that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, including block trades and sales made in ordinary brokers’ transactions on the Nasdaq Global Select Market or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices. Under the terms of the Sales Agreement, we may also sell shares to any Sales Agent as principal for our own account. If we sell shares to any Sales Agent as principal, we will enter into a separate terms agreement setting forth the terms of such transaction with the applicable Sales Agent. As of September 30, 2021 , we have no t sold any shares pursuant to the ATM Program. 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 nine months ended September 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 September 30, 2021. 43 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 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, we completed the 2021 Refinancing, which included entering into agreements to refinance the Other Term Loan B facility and the Revolver, and terminated the revolving commitments thereunder. We incurred no additional indebtedness as a result of the 2021 Refinancing above the refinanced amount, other than amounts covering certain interest, fees and expenses. Among other things, the 2021 Refinancing amended the financial performance covenant to remove the minimum liquidity requirement of $300 million, the Total Net Leverage Ratio maintenance requirement, and certain other limitations. The 2021 Refinancing included the application of the proceeds of (i) a new $404 million term loan “B-1” facility (the “New Term B-1 Facility”) and (ii) a new $644 million term loan “B-2” facility (the "New Term B-2 Facility" and together with the New Term B-1 Facility, the “New Facilities”), borrowed by Sabre GLBL under our Amended and Restated Credit Agreement, to pay down in full approximately $634 million of Other Term B Loans and the outstanding $400 million revolver balance, and to terminate the revolving commitments thereunder. The remaining proceeds, net of a $3 million discount, were used to pay a $6 million redemption premium and $6 million in other fees associated with the refinancing. We recognized a loss on extinguishment of debt in connection with these transactions during the three months ended September 30, 2021 of $13 million and debt modification costs for financing fees of $2 million recorded to Other, net. The New Facilities mature on December 17, 2027, and we have the ability to prepay the New Facilities after December 17, 2021 without a premium or to prepay at a 101 premium before that date. In addition, on July 2, 2021, in anticipation of the Revolver repayment and termination of the revolving commitments (and related letter of credit subfacility), Sabre GLBL entered into a new $20 million bilateral letter of credit facility, which is secured by a cash collateral deposit account and included as Restricted cash on our consolidated balance sheets as of September 30, 2021. 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 of September 30, 2021, we are in compliance with all covenants under the terms of the Amended and Restated Credit Agreement. 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. 44 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 Nine Months Ended September 30, 2021 2020 (Amounts in thousands) Cash used in operating activities $ (408,152) $ (587,069) Cash used in investing activities (5,535) (52,634) Cash (used in) provided by financing activities (37,013) 1,873,804 Cash used in discontinued operations (2,376) (3,739) Effect of exchange rate changes on cash and cash equivalents (1,781) 1,814 (Decrease) increase in cash, cash equivalents and restricted cash $ (454,857) $ 1,232,176 Operating Activities Cash used in operating activities totaled $408 million for the nine months ended September 30, 2021. The $179 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, a reduction in severance payments of $21 million related to restructuring activities initiated in 2020 and a $23 million reduction in upfront incentive consideration payments. This increase in operating cash flow was partially offset by additional interest payments of $79 million re sulting from debt refinancing activities during 2020. Investing Activities For the nine months ended September 30, 2021, we received proceeds of $25 million from the sale of certain investments and assets, offset by $30 million of cash used on capital expenditures primarily related to software developed for internal use. For the nine months ended September 30, 2020, we used cash of $48 million on capital expenditures, including $32 million related to software developed for internal use. Financing Activities For the nine months ended September 30, 2021, financing activities used $37 million. Significant highlights of our financing activities include: • proceeds of $403 million and $642 million from the issuance of New Term B-1 Facility and New Term B-2 Facility, respectively; • proceeds of $25 million from the Revolver; • ne t payments of $22 million from the settlement of employee stock-option awards; • payment of $16 million in dividends on our preferred stock; • payment of $12 million in debt prepayment fees and issuance costs; • payments of $400 million for the Revolver; and • payment of $654 million on Term Loan B and Other Term Loan B; 45 For the nine months ended September 30, 2020, financing activities provided $1,874 million. Significant highlights of our financing activities include: • proceeds from borrowings under the Notes of $1,970 million; • proceeds from issuance of stock of $598 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 $530 million on 5.375% senior secured notes due 2023; • payment of $365 million on Term Loan A and Term Loan B; • payment of $54 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 $5 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 nine months ended September 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.