What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-18 compared with 2021-02-25 · 602 added, 400 removed, 387 unchanged (72% of the section changed)

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We connect people and places with technology that reimagines the business of travel.

The COVID-19 pandemic has caused major shifts in the travel ecosystem resulting in the changing needs of our airline, hotel and agency customers.

As a result, in 2020 we accelerated the organizational changes we began in 2018 to address the changing travel landscape through the Strategic Realignment to respond to the impacts of the COVID-19 pandemic on our business and cost structure.

The organizational changes involve the creation of a functional-oriented structure to further enhance our long-term growth opportunities and help deliver new retailing, distribution and fulfillment solutions to the travel marketplace.

As a result of the Strategic Realignment, we now operate our business and present our results through two business segments 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.

The historical results of the Hospitality Solutions reporting segment have not changed.

Segment Information, to our consolidated financial statements for results for the years ended December 31, 2020, 2019 and 2018 by reportable segment.

There have been no changes to the historical Hospitality Solutions reporting segment.

A significant portion of our revenue is generated through transaction-based fees that we charge to our customers.

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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.

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.

Summary of Business and Significant Accounting Policies, to our consolidated financial statements for further information.

Recent Developments Affecting our Results of Operations

The travel industry continues to be adversely affected by the global health crisis due to COVID-19, as well as by government directives that have been enacted to slow the spread of the virus.

COVID-19 has had a material impact to our consolidated financial results in 2020, resulting in a material decrease in transaction-based revenue across both of our business units over the prior year.

Additionally, our mix of transactions has shifted such that domestic bookings now exceed international bookings, negatively impacting revenue.

Revenue during the year, particularly in the second quarter, was negatively impacted by increased cancellation activity.

We estimate future cancellations at the end of each reporting period based on the number of undeparted bookings, expected cancellations and an estimated rate.

The combination of actual cancellation activity and significantly fewer bookings resulted in a reduction in the cancellation reserve for the year ended December 31, 2020 when compared to 2019.

Lower GDS volumes resulted in a material decline in incentive consideration costs, which was partially offset by a higher provision for expected credit losses due to the impact of COVID-19 on the global economy and our customers and other general increases in bad debt from aging balances as applied under the newly adopted credit impairment standard.

Refer to Note 8.

Credit Losses for further information.

Given the impact of COVID-19, as previously disclosed, we have responded with measures to increase our cash position, including the suspension of common stock dividends 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.

Additionally, during the fourth quarter of 2020, we completed the sale of our two headquarters buildings for an aggregate purchase price, net of closing costs, of $69 million in conjunction with an assessment of our real estate footprint, as well as our work from anywhere initiatives.

Leases, to our consolidated financial statements for further information.

We also took the following actions with regard to our workforce and compensation programs as cost reduction efforts:

• A temporary reduction in base compensation pay for our US-based salaried workforce, including a 25% reduction for our CEO, from March 16, 2020 through July 5, 2020;

• A temporary reduction in the cash retainer for members of our Board of Directors from March 16, 2020 through June 30, 2020;

• The temporary suspension of our 401(k) match program for US-based employees through December 31, 2020;

• 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 in the first quarter of 2020;

• A temporary furlough of approximately one-third of our workforce during the second quarter of 2020;

• A right-sizing of our global organization through a reduction in force that impacted approximately 800 team members across 44 office locations.

This reduction is in addition to the separation of approximately 400 participants in voluntary severance and voluntary early retirement programs described above.

We substantially completed the Strategic Realignment during the year ended December 31, 2020.

In connection with these measures, we recorded a $72 million charge associated with these restructuring activities during the year ended December 31, 2020.

Restructuring Activities, to our consolidated financial statements for further details on the costs incurred related to restructuring.

Additionally, to retain key talent in this highly volatile macro environment, we have taken the following specific actions related to our compensation programs which have impacted our operating expenses:

• Replaced the revenue and adjusted earnings per share metrics in our 2020 annual incentive program with measures focused on expense management with payout capped at 50% of original targets, paid in December 2020;

• Amended the key strategic initiatives associated with the long-term performance-based cash incentive awards that are payable in March 2022;

• Amended the 2020 performance metrics associated with performance stock awards that vest in March 2021;

• Awarded time-based restricted stock unit awards to executive and certain key employees in June 2020, with 50% of the units vesting on the first and second anniversaries of the grant date;

• Awarded cash retention bonuses to certain key technology resources in June 2020 in conjunction with our technology transformation initiatives payable upon the completion of two and three years of service.

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 such negative impact may continue well beyond the containment of such outbreak.

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law, which provides over $2 trillion in economic relief in response to the COVID-19 pandemic.

The CARES Act also modifies sections of the Internal Revenue Code of 1986, as amended ("IRC").

Certain IRC modifications relax limitations on deductions, which were enacted as part of the Tax Cuts and Jobs Act.

We did not participate in the CARES Act loan program during 2020 but did benefit from certain payroll-tax related deferrals and credits.

The provisions of the CARES Act did not have a material impact on our consolidated financial statements for the year ended December 31, 2020.

In 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 2021.

Despite the continued negative impacts of the COVID-19 pandemic on our business and global travel volumes, we have seen some gradual improvement in our key volume metrics during 2021 as COVID-19 vaccines have continued to be administered and some travel restrictions have been relaxed.

With the 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 December 31, 2021 and 2020.

Additionally, our provision for expected credit losses for the year ended December 31, 2021 decreased $74 million from 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 gradual global recovery from the COVID-19 pandemic.

During the year ended December 31, 2020, several of our customers filed for bankruptcy protection in various jurisdictions.

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however, we continue to provide services and receive timely payment for post-bankruptcy balances due in most cases.

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 in 2021 and 2020 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, 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.

As of December 31, 2021, assets including goodwill of $225 million and liabilities of $37 million associated with the disposition are classified as held for sale on our consolidated balance sheet.

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

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We expect to further enable our technology transformation with incremental operational and capital expenditure investments in 2022 and continued investment over the next few years which will have a material impact on our financial results.

We expect to continue to make significant investments in our re-platforming efforts to open source and cloud-based solutions, as previously disclosed, with the goal of modernizing our architecture, driving efficiency in development and ongoing technology costs, further enhancing the stability and security of our network, and complying with data privacy regulations, and in next-generation retailing capabilities, including NDC and personalized offers, LCCs and full-service hotel PMS offerings.

In 2022, we expect total capital expenditures to range from $50 million to $90 million.

Technology costs include the cost of our technology transformation.

Through our technology transformation efforts, we expect to benefit from lower cloud infrastructure costs and higher margins, with material cost savings realized beginning in 2024.

We believe that continued investment in our technology will help to provide us the necessary framework and infrastructure for a secure and stable architecture for our customers, grow our

addressable market, provide new revenue opportunities, reduce costs and will help to improve sales of our software solutions.

Technology costs include the cost of our technology transformation and may be impacted by inflationary wage impacts in the future.

In addition, our selling, general and administrative costs are expected to remain elevated in the near term due to investments in our internal business systems and processes to allow us to better support our customers as modern retailing strategies advance and new commercial models emerge.

Development costs incurred for internal systems are capitalized and included in the expected total capital expenditures above.

We also expect elevated costs for risk and security in the near term to help enable us to mitigate cyber risks during the completion of our technology transformation efforts.

We expect to benefit from higher margins beginning in 2025 than would be realized had we not undertaken our technology transformation efforts as we believe the technology transformation will help enable us to avoid capital expenditures that would have otherwise been required and to yield lower cloud infrastructure costs.

We believe that continued investment in our technology will help to provide us the necessary framework and infrastructure for a secure and stable architecture for our customers, grow our addressable market, provide new revenue opportunities, reduce costs and will help to improve sales of our software solutions.

However, there are various risks associated with our technology transformation efforts, including not achieving the amount of anticipated cost savings, not completing the steps during their current projected time frame, or changing the approach leading to, among other things, additional changes in our mix of technology spend between operating expense and capitalization.

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The revenue recognized by our Travel Solutions business is affected by the mix between domestic and international travel reservation bookings and the related varying rates paid by airline suppliers.

As a result of the COVID-19 pandemic, our mix of transactions shifted during 2020 such that domestic bookings now exceed international bookings, negatively impacting our revenue.

As a result of the COVID-19 pandemic, our mix of transactions has shifted such that domestic bookings exceed international bookings, negatively impacting our revenue.

The increase in domestic bookings is also partly due to an increase in leisure bookings over business travel.

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Year Ended December 31,

2021 2020 2019

Direct Billable Bookings (1) :

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In 2020, several Travel Solutions customers filed for bankruptcy but continued to operate.

In April 2019, a customer of Travel Solutions, Jet Airways suspended flight operations and is now insolvent which negatively impacted our revenue in 2019 and 2020.

In April 2019, a customer of Travel Solutions, Jet Airways suspended flight operations and is now insolvent which negatively impacted our year-over-year revenue growth in 2019 and 2020.

Additionally, given the uncertainties surrounding the duration and effects of COVID-19 on transaction volumes in the global travel industry, particularly air travel and hotel transaction volumes, including from airlines’ insolvency or suspension of service or aircraft groundings, our provision for expected credit losses increased in 2020 partially due to fully reserving for aged balances related to certain customers and bankruptcy-related reserves.

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(i) on a periodic basis over the term of the contract and (ii) in some instances, up front at the inception or modification of contracts, which is capitalized and amortized over the expected life of the contract.

This consideration grew in the double digits on a per booking basis in 2018 due to higher incentives in certain geographical markets and from new customer conversions and reverted to single-digit growth in 2019.

Consideration on a per booking basis declined in 2020 as compared to the prior year due the COVID-19 pandemic;

however, we remain focused on managing incentive consideration and expect continued single-digit growth in the near term.

Although incentive rate increases may continue to impact margins, we expect these increases to be more than offset by growth in Travel Solutions revenue.

expectation is based in part on our continuing to offer value added services and content to travel buyers, such as the Sabre Red Workspace, a SaaS product that provides a simplified interface and enhanced travel agency workflow and productivity tools.

Consideration on a per booking basis declined in 2021 and 2020 as compared to the respective prior years, due to regional mix and increased leisure bookings over business travel.

We remain focused on managing incentive consideration and expect growth in the near term.

Although ince ntive rate increases may continue to impact margins, we expect these increases to be offset by growth in Travel Solutions revenue.

This expectation is based in part on anticipated increases in international travel, which would favorably impact our revenue rates, along with our continuing to offer value added services and content to travel buyers, such as the Sabre Red Workspace, a SaaS product that provides a simplified interface and enhanced travel agency workflow and productivity tools.

Travel buyers can shift their bookings to or from our Travel Solutions business

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Additionally, the impact of COVID-19 on travel buyers has caused them, and may continue to cause them, to select the GDS with the most favorable terms or contractual commitment.

Our distribution revenue in 2021 and in future periods has been, and is expected to be impacted by a certain OTA notifying us of their intent to shift a significant portion of its North America volumes to a competitor.

We began to see the impacts of this shift in the third quarter of 2021 and expect a decline in our volumes partially offset by an increase in our rate going forward.

Increasing importance of LCC/hybrids

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We expect these consolidations to adversely impact revenue growth for the Hospitality Solutions business.

Continued focus by travel suppliers on cost cutting and exerting influence over distribution

Travel suppliers continue to look for ways to decrease their costs and to increase their control over distribution.

Airline consolidations, pricing pressure during contract renegotiations and the use of direct distribution may continue to subject our business to challenges.

The shift from indirect distribution channels, such as our GDS, to direct distribution channels, may result from increased content availability on supplier operated websites or from increased participation of meta search engines, such as Kayak and Google, which direct consumers to supplier operated websites.

This trend may adversely affect our Travel Solutions contract renegotiations with suppliers that use alternative distribution channels.

For example, airlines may withhold part of their content for distribution exclusively through their own direct distribution channels or offer more attractive terms for content

available through those direct channels.

This occurred in 2018 when certain European carriers began to withhold part of their content from our GDS to make use of alternative distribution channels, which may adversely affect our future revenue growth.

In 2020, we reached an agreement with one such carrier to provide traditional content while enabling content via NDC.

However, in North America, which is our largest region, the rate at which bookings have shifted from indirect to direct distribution channels has been relatively consistent for a number of reasons, including the increased participation of LCC/hybrids in direct channels.

Over the last few years, notable carriers that previously only distributed directly, including Lion Air, Norwegian and Interjet, have signed agreements with our GDS.

In addition, we signed a number of smaller airlines to new participation agreements in 2020, such as Fly Gangwon, Jazeera Airways and Thai Smile Airways.

Other carriers such as Southwest Airlines and EVA Airways have further increased their participation in our GDS.

Conversely, Air India fully migrated from our GDS during 2019.

Continued focus by travel suppliers on cost cutting and distribution methods

Airline consolidations, pricing pressure during contract renegotiations and changes in how airlines choose to distribute their content may continue to subject our business to challenges.

These changes may adversely affect our Travel Solutions contract renegotiations with suppliers that use alternative distribution channels.

These trends have impacted the revenue of Travel Solutions, which recognizes revenue for airline ticket sales based on transaction volumes.

Simultaneously, this focus on cost cutting and direct distribution has also presented opportunities for Travel Solutions.

Simultaneously, this focus on cost cutting and alternative distribution has also presented opportunities for Travel Solutions.

Many airlines have turned to outside providers for key systems, process and industry expertise and other products that assist in their cost cutting initiatives in order to focus on their primary revenue generating activities.

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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.

Travel Solutions also generates revenues from IT solutions activities from its product offerings including reservation systems for full-service and low-cost carriers, commercial and operations products, professional services, agency solutions and booking data.

Additionally, Travel Solutions generates revenue through software licensing and maintenance fees.

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Cost of revenue, excluding technology costs

Cost of revenue incurred by Travel Solutions and Hospitality Solutions consists primarily of costs associated with the delivery and distribution of our products and services and includes employee-related costs for our delivery, customer operations and call center teams as well as allocated overhead such as facilities and other support costs.

Cost of revenue for Travel Solutions also includes incentive consideration expense representing payments or other consideration to travel agencies for reservations made on our GDS which accrue on a monthly basis.

Cost of revenue excludes technology costs, which are presented separately below.

Corporate cost of revenue includes certain expenses such as stock-based compensation, restructuring charges and other items not identifiable with either of our segments.

Depreciation and amortization included in cost of revenue is associated with capitalized implementation costs and intangible assets associated with contracts, supplier and distributor agreements purchased through acquisitions or established with our take private transaction in 2007.

Cost of revenue also includes amortization of upfront incentive consideration representing upfront payments or other consideration provided to travel agencies for reservations made on our GDS which are capitalized and amortized over the expected life of the contract.

We have reclassified expenses on our statement of operations to provide additional clarification on our costs and to reflect the Strategic Realignment.

For the years ended December 31, 2019 and 2018, we reclassified $1,179 million and $997 million, respectively, from cost of revenue to technology costs and $130 million and $140 million, respectively, from cost of revenue to selling, general, and administrative.

As a result, cost of revenue decreased by $1,309 million and $1,137 million for the years ended December 31, 2019 and 2018 respectively.

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

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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.

We have reclassified expenses on our statement of operations to provide additional clarification on our costs by separately reporting technology costs.

For the year ended December 31, 2019, we reclassified $1,179 million from cost of revenue and $106 million from selling, general and administrative to technology costs.

For the year ended December 31, 2018, we reclassified $997 million from cost of revenue and $102 million from selling, general and administrative to technology costs.

Selling, General and Administrative Expenses

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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.

We have reclassified expenses on our statement of operations to provide additional clarification on our costs and to reflect the Strategic Realignment.

For the years ended December 31, 2019 and 2018, we reclassified $130 million and $140 million, respectively, from cost of revenue to selling, general, and administrative and $106 million and $102 million, respectively, from selling, general and administrative to technology costs.

As a result, selling, general and administrative expenses increased by $24 million and $38 million for the years ended December 31, 2019 and 2018, respectively.

Intersegment Transactions

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Central Reservations System Transactions 91,802 67,046 108,482 36.9 % (38.2) %

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 Annual Report on Form 10-K, including Adjusted Operating (Loss) Income, Adjusted Net (Loss) Income from continuing operations ("Adjusted Net (Loss) Income"), Adjusted EBITDA, Free Cash Flow and ratios based on these financial measures.

As a result of the Strategic Realignment, 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) Income as Operating (loss) income adjusted for equity method (loss) income, impairment and related charges, acquisition-related amortization, restructuring and other costs, acquisition-related costs, litigation costs, net, and stock-based compensation.

We define Adjusted Net (Loss) Income as net (loss) income attributable to common stockholders adjusted for loss (income) from discontinued operations, net of tax, net income attributable to noncontrolling interests, preferred stock dividends, impairment and related charges, acquisition-related amortization, restructuring and other costs, loss on extinguishment of debt, other, net, acquisition-related costs, litigation costs, net, stock-based compensation, and the tax impact of adjustments.

We define Adjusted EBITDA as (Loss) Income from continuing operations adjusted for depreciation and amortization of property and equipment, amortization of capitalized implementation costs, acquisition-related amortization, impairment and related charges, 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) Income from continuing operations per share as Adjusted Net (Loss) Income 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) Income, Adjusted Net (Loss) Income and Adjusted EBITDA assist investors in company-to-company and period-to-period comparisons by excluding differences caused by variations in capital structures (affecting interest expense), tax positions and the impact of depreciation and amortization expense.

In addition, amounts derived from Adjusted EBITDA are a primary component of certain covenants under our senior secured credit facilities.

Adjusted Operating (Loss) Income, Adjusted Net (Loss) Income, 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) Income, Adjusted Net (Loss) Income 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;

• other companies, including companies in our industry, may calculate Adjusted Operating (Loss) Income, Adjusted Net (Loss) Income, Adjusted EBITDA or Free Cash Flow differently, which reduces their usefulness as comparative measures.

Non-GAAP Financial Measures

The following table sets forth the reconciliation of Net (Loss) Income attributable to common stockholders to Adjusted Net (Loss) Income from continuing operations, Operating (Loss) Income to Adjusted Operating (Loss) Income, and (Loss) Income from continuing operations to Adjusted EBITDA (in thousands):

Year Ended December 31,

2021 2020 2019

Net (loss) income attributable to common stockholders $ (950,071) $ (1,289,998) $ 158,592

Loss (income) from discontinued operations, net of tax 2,532 (2,788) 1,766

Net income attributable to non-controlling interests (1)

2,162 1,200 3,954

Preferred stock dividends

21,602 7,659 —

(Loss) Income from continuing operations (923,775) (1,283,927) 164,312

Impairment and related charges (2)

Acquisition-related amortization (3a)

64,144 65,998 64,604

Restructuring and other costs (5)

(7,608) 85,797 —

Loss on extinguishment of debt

13,070 21,626 —

Other, net (4)

1,748 66,961 9,432

Acquisition-related costs (6)

6,744 16,787 41,037

Litigation costs, net (7)

22,262 (1,919) (24,579)

Stock-based compensation

120,892 69,946 66,885

Tax impact of adjustments (8)

(6,867) 23,273 (42,476)

Adjusted Net (Loss) Income from continuing operations $ (709,390) $ (926,774) $ 279,215

Adjusted Net (Loss) Income from continuing operations per share $ (2.21) $ (3.20) $ 1.01

Diluted weighted-average common shares outstanding 320,922 289,855 276,217

Operating (loss) income $ (665,487) $ (988,039) $ 363,417

Equity method (loss) income (264) (2,528) 2,044

Impairment and related charges (2)

Acquisition-related amortization (3a)

64,144 65,998 64,604

Restructuring and other costs (5)

(7,608) 85,797 —

Acquisition-related costs (6)

6,744 16,787 41,037

Litigation costs, net (7)

22,262 (1,919) (24,579)

Stock-based compensation 120,892 69,946 66,885

Adjusted Operating (Loss) Income $ (459,317) $ (745,274) $ 513,408

(Loss) income from continuing operations $ (923,775) $ (1,283,927) $ 164,312

Depreciation and amortization of property and equipment (3b)

163,291 260,651 310,573

Amortization of capitalized implementation costs (3c)

34,750 37,094 39,444

Acquisition-related amortization (3a)

64,144 65,998 64,604

Impairment and related charges (2)

Restructuring and other costs (5)

(7,608) 85,797 —

Interest expense, net 257,818 225,785 156,391

Other, net (4)

1,748 66,961 9,432

Loss on extinguishment of debt 13,070 21,626 —

Acquisition-related costs (6)

6,744 16,787 41,037

Litigation costs, net (7)

22,262 (1,919) (24,579)

Stock-based compensation 120,892 69,946 66,885

(Benefit) provision for income taxes (14,612) (21,012) 35,326

Adjusted EBITDA $ (261,276) $ (447,529) $ 863,425

The following tables set forth the reconciliation of Adjusted Operating (Loss) Income to Operating (Loss) Income in our statement of operations and Adjusted EBITDA to (Loss) Income from Continuing Operations in our statement of operations by business segment (in thousands):

Year Ended December 31, 2021

Solutions Corporate Total

Adjusted Operating Loss $ (222,679) $ (39,806) $ (196,832) $ (459,317)

Equity method loss (264) — — (264)

Acquisition-related amortization (3a)

— — 64,144 64,144

Restructuring and other costs (5)

— — (7,608) (7,608)

Acquisition-related costs (6)

— — 6,744 6,744

Litigation costs, net (7)

— — 22,262 22,262

Stock-based compensation — — 120,892 120,892

Operating loss $ (222,415) $ (39,806) $ (403,266) $ (665,487)

Adjusted EBITDA $ (52,006) $ (13,452) $ (195,818) $ (261,276)

Depreciation and amortization of property and equipment (3b)

140,231 22,046 1,014 163,291

Amortization of capitalized implementation costs (3c)

30,442 4,308 — 34,750

Acquisition-related amortization (3a)

— — 64,144 64,144

Restructuring and other costs (5)

— — (7,608) (7,608)

Acquisition-related costs (6)

— — 6,744 6,744

Litigation costs, net (7)

— — 22,262 22,262

Stock-based compensation — — 120,892 120,892

Equity method loss (264) — — (264)

Operating loss $ (222,415) $ (39,806) $ (403,266) $ (665,487)

Interest expense, net (257,818)

Other, net (4)

Loss on extinguishment of debt (13,070)

Equity method loss (264)

Benefit for income taxes 14,612

Loss from continuing operations $ (923,775)

Year Ended December 31, 2020

Solutions Hospitality

Solutions Corporate Total

Adjusted Operating Loss $ (523,122) $ (63,915) $ (158,237) $ (745,274)

Equity method loss (2,528) — — (2,528)

Impairment and related charges (2)

— — 8,684 8,684

Acquisition-related amortization (3a)

— — 65,998 65,998

Restructuring and other costs (5)

— — 85,797 85,797

Acquisition-related costs (6)

— — 16,787 16,787

Litigation costs, net (7)

— — (1,919) (1,919)

Stock-based compensation — — 69,946 69,946

Operating loss $ (520,594) $ (63,915) $ (403,530) $ (988,039)

Adjusted EBITDA $ (272,582) $ (21,126) $ (153,821) $ (447,529)

Depreciation and amortization of property and equipment (3b)

217,808 38,427 4,416 260,651

Amortization of capitalized implementation costs (3c)

32,732 4,362 — 37,094

Acquisition-related amortization (3a)

— — 65,998 65,998

Impairment and related charges (2)

— — 8,684 8,684

Restructuring and other costs (5)

— — 85,797 85,797

Acquisition-related costs (6)

— — 16,787 16,787

Litigation costs, net (7)

— — (1,919) (1,919)

Stock-based compensation — — 69,946 69,946

Equity method loss (2,528) — — (2,528)

Operating loss $ (520,594) $ (63,915) $ (403,530) $ (988,039)

Interest expense, net (225,785)

Other, net (4)

Loss on extinguishment of debt (21,626)

Equity method loss (2,528)

Benefit for income taxes 21,012

Loss from continuing operations $ (1,283,927)

Year Ended December 31, 2019

Solutions Hospitality

Solutions Corporate Total

Adjusted Operating Income (Loss) $ 729,266 $ (21,632) $ (194,226) $ 513,408

Equity method income 2,044 — — 2,044

Acquisition-related amortization (3a)

— — 64,604 64,604

Acquisition-related costs (6)

— — 41,037 41,037

Litigation costs, net (7)

— — (24,579) (24,579)

Stock-based compensation — — 66,885 66,885

Operating income (loss) $ 727,222 $ (21,632) $ (342,173) $ 363,417

Adjusted EBITDA $ 1,021,363 $ 31,466 $ (189,404) $ 863,425

Depreciation and amortization of property and equipment (3b)

257,390 48,361 4,822 310,573

Amortization of capitalized implementation costs (3c)

34,707 4,737 — 39,444

Acquisition-related amortization (3a)

— — 64,604 64,604

Acquisition-related costs (6)

— — 41,037 41,037

Litigation costs, net (7)

— — (24,579) (24,579)

Stock-based compensation — — 66,885 66,885

Equity method income 2,044 — — 2,044

Operating income (loss) $ 727,222 $ (21,632) $ (342,173) $ 363,417

Interest expense, net (156,391)

Other, net (4)

Equity method income 2,044

Provision for income taxes (35,326)

Income from continuing operations $ 164,312

The following tables present information from our statements of cash flows and set forth the reconciliation of Free Cash Flow to cash provided by operating activities, the most directly comparable GAAP measure (in thousands):

Year Ended December 31,

2021 2020 2019

Cash (used in) provided by operating activities $ (414,654) $ (770,245) $ 581,260

Cash used in investing activities (29,428) (1,291) (243,026)

Cash (used in) provided by financing activities (50,558) 1,837,741 (409,721)

Year Ended December 31,

2021 2020 2019

Cash (used in) provided by operating activities $ (414,654) $ (770,245) $ 581,260

Additions to property and equipment (54,302) (65,420) (115,166)

Free Cash Flow $ (468,956) $ (835,665) $ 466,094

________________________________

(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) Impairment and related charges consists of $5 million associated with s oftware developed for internal use and $4 million associated with capitalized implementation costs related to a specific customer based on our analysis of the recoverability of such amounts.

(3) Depreciation and amortization expenses:

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.

Depreciation and amortization of property and equipment includes software developed for internal use as well as amortization of contract acquisition costs.

Amortization of capitalized implementation costs represents amortization of upfront costs to implement new customer contracts under our SaaS and hosted revenue model.

(4) Other, net includes a $15 million gain on sale of equity securities during the first quarter of 2021, an $8 million pension settlement charge recorded in 2021, debt modification costs for financing fees of $2 million recorded in the third quarter of 2021, a $46 million charge related to termination payments incurred in 2020 in connection with the now-terminated acquisition of Farelogix Inc.

("Farelogix") and an $18 million pension settlement charge recorded in 2020, partially offset by a $10 million gain on sale of our headquarters building in the fourth 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.

Acquisitions and Dispositions to our consolidated financial statements regarding the Farelogix termination and Note 16.

Pension and Other Postretirement Benefit Plans to our consolidated financial statements regarding the pension settlements.

(5) 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.

Restructuring Activities to our consolidated financial statements for further details.

(6) Acquisition-related costs represent fees and expenses incurred associated with the now-terminated agreement to acquire Farelogix, as well as costs related to the acquisition of Radixx in 2019 and other acquisition and disposition related activities.

Acquisitions and Dispositions to our consolidated financial statements.

(7) Litigation costs, net represent charges associated with antitrust litigation and other foreign non-income tax contingency matters.

In 2020, we reversed the previously accrued non-income tax expense of $4 million due to success in our claims.

In 2019, we recorded the reversal of our previously accrued loss related to the US Airways legal matter for $32 million.

Commitments and Contingencies to our consolidated financial statements.

(8) 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

12 unchanged sentences

(Loss) income from continuing operations before income taxes (938,387) (1,304,939) 199,638

Provision for income taxes (39,913) 35,326 57,492

(Benefit) provision for income taxes (14,612) (21,012) 35,326

(Loss) Income from continuing operations $ (923,775) $ (1,283,927) $ 164,312

8 unchanged sentences

Total revenue $ 1,688,875 $ 1,334,100 $ 354,775 27 %

Travel Solutions —Revenue decreased $2,546 million, or 68%, for the year ended December 31, 2020 compared to the prior year, primarily due to:

• a $2,149 million, or 79%, decrease in transaction-based distribution revenue due to a 78% decrease in Direct Billable Bookings to 125 million resulting from lower transaction volume primarily as a result of reduced travel caused by the COVID-19 pandemic;

• a $397 million decrease in IT solutions revenue consisting of a $265 million, or 52%, decrease in reservation revenue primarily due to the impact of the COVID-19 pandemic on our existing customer base and a $28 million decrease in revenue compared to the same period in the prior year due to the transition away from our services by certain customers and Jet Airways' insolvency in April 2019, partially offset by an increase of $12 million driven by the acquisition of Radixx in October 2019.

Passengers Boarded, inclusive of Radixx, decreased by 56% to 323 million for the year ended December 31, 2020.

Additionally, commercial and operations revenue decreased $132 million primarily due to the impact of the COVID-19 pandemic on our existing customer base.

Hospitality Solutions —Revenue decreased $118 million, or 40%, for the year ended December 31, 2020 compared to the prior year.

The decrease was primarily driven by a reduction in SynXis Software and Services revenue due to a decrease in transaction volumes of 38% to 67 million, as a result of the COVID-19 pandemic.

Travel Solutions —Revenue increased $327 million, or 28%, for the year ended December 31, 2021 compared to the prior year, primarily due to:

• a $319 million, or 55%, increase in distribution revenue, which was primarily due to a 66% increase in Direct Billable Bookings to 207 million.

This increase consists of a $243 million decrease in primarily transaction-based revenue during the first quarter of 2021, offset by a $562 million increase during the remainder of the year.

These year-over- year 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 gradual recovery in volumes, offset by an unfavorable regional rate mix driven by growth in North America bookings, resulting in the overall increase in revenue for the year ended December 31, 2021 compared to the prior year.

Additionally, our revenue and volumes in the last two quarters of 2021 were impacted by a certain OTA shifting a significant portion of its North America volumes to a competitor.

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;

• an $8 million, or 1%, increase in IT solutions revenue consisting of a $39 million, or 22% increase in reservation revenue primarily due to a 31% increase in Passengers Boarded to 424 million as a result of the gradual recovery from the COVID-19 pandemic, partially offset by an unfavorable rate mix due to revenue that does not fluctuate with our volumes.

Commercial and operations revenue decreased $32 million primarily due to the continued impact of the COVID-19 pandemic on our customer base of $20 million, certain product divestitures of $8 million, and lower license fee revenue from new implementations recognized upon delivery to the customer of $11 million, partly offset by improved professional services revenue of $7 million.

Recognition of license fees upon delivery has previously resulted and will continue to result in periodic fluctuations in revenue recognized.

Hospitality Solutions —Revenue increased $28 million, or 16%, for the year ended December 31, 2021 compared to 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 37% to 92 million, as a result of continued recovery from the COVID-19 pandemic, and an increase of $6 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 2020.

Cost of Revenue, excluding technology costs

8 unchanged sentences

Depreciation and amortization 39,756 38,916 840 2 %

Amortization of upfront incentive consideration 74,677 82,935 (8,258) (10) %

Total cost of revenue, excluding technology costs $ 691,451 $ 579,010 $ 112,441 19 %

Travel Solutions —Cost of revenue decreased $1,120 million, or 75%, for the year ended December 31, 2020 compared to the prior year.

The decrease was primarily the result of a $1,078 million decline in incentive consideration in all regions due to lower transaction volumes as a result of the COVID-19 pandemic, as well as a $37 million reduction in labor and professional services costs in connection with our cost reduction measures.

Hospitality Solutions —Cost of revenue decreased $62 million, or 40%, for the year ended December 31, 2020 compared to the prior year.

The decrease was primarily driven by $55 million reduction in transaction-related costs due to the decline in transaction volume as a result of the COVID-19 pandemic and a reduction in labor costs in connection with our cost reduction measures.

Corporate —Cost of revenue associated with corporate costs increased $20 million, or 244%, for the year ended December 31, 2020 compared to the prior year.

This increase was primarily due to a restructuring charge of $19 million for severance benefits.

The increase is partially offset by a reduction in labor costs in connection with our cost reduction measures.

Travel Solutions —Cost of revenue, excluding technology costs, increased $126 million, or 29%, for the year ended December 31, 2021 compared to the prior year.

The increase was primarily the result of a $131 million increase in incentive consideration due to higher overall transaction volume, compared to the prior year.

This increase is partially offset 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.

Restructuring Activities, to our consolidated financial statements for further details on restructuring activities.

Depreciation and amortization —Depreciation and amortization decreased $1 million, or 2%, for the year ended December 31, 2020 compared to the prior year.

The decrease is primarily due to customer implementations that became fully amortized during the year.

Amortization of upfront incentive consideration— Amortization of upfront incentive consideration decreased $8 million, or 10%, for the year ended December 31, 2020 compared to the prior year.

The decrease is primarily due to a reduction in upfront consideration provided to travel agencies.

Hospitality Solutions —Cost of revenue, excluding technology costs, increased $5 million, or 6%, for the year ended December 31, 2021 compared to the prior year primarily driven by an increase in transaction-related costs associated with higher volumes as well as costs related to growth in other products such as our call center and DX.

Corporate—Cost of revenue, excluding technology costs, decreased $20 million, or 70%, for the year ended December 31, 2021 compared to the prior year.

The decrease was primarily due to a decline in severance costs of $21 million associated with the reduction of our workforce in 2020 and a decline in impairment charges of $2 million related to an impairment recorded in the prior year associated with capitalized implementation costs related to a specific customer.

The decrease was partially offset by a $3 million increase in labor costs resulting from an increase in stock-based compensation, primarily associated with previously awarded performance-based units.

Restructuring Activities, to our consolidated financial statements for further details on restructuring activities.

Equity-Based Awards, to our consolidated financial statements for further details on stock-based compensation.

Depreciation and amortization —Depreciation and amortization increased $1 million, or 2%, for the year ended December 31, 2021 compared to the prior year due to assets placed in service.

Technology Costs

2 unchanged sentences

(Amounts in thousands)

Technology Costs $ 1,156,723 $ 1,285,204 $ (128,481) (10) %

Technology costs decreased by $128 million, or 10%, for the year ended December 31, 2020 compared to the prior year.

The decrease is primarily driven by reductions impacting our Travel Solutions and Hospitality Solutions businesses, including a decrease in technology labor of $91 million and $12 million, respectively, in connection with our cost reduction measures, a decrease in depreciation and amortization of $46 million and $10 million, respectively, primarily due to a change in the mix of our technology spend in 2019 resulting in less capitalized internal use software, and a decline in technology costs of $55 million in our Travel Solutions business associated with lower transaction volumes resulting from the COVID-19 pandemic.

This decrease is 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 $40 million and $6 million in our Travel Solutions and Hospitality Solutions businesses, respectively.

Corporate technology costs increased due to a restructuring charge of $32 million for severance benefits.

Travel Solutions $ 876,499 $ 946,080 $ (69,581) (7) %

Hospitality Solutions 96,059 96,928 (869) (1) %

Corporate 80,275 113,715 (33,440) (29) %

Total technology costs $ 1,052,833 $ 1,156,723 $ (103,890) (9) %

Travel Solutions— Technology costs decreased $70 million, or 7%, for the year ended December 31, 2021 compared to the prior year.

The decrease was primarily driven by a decrease in depreciation and amortization of $88 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 $10 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 $20 million associated with higher transaction volumes, and an increase in labor costs of $9 million resulting from the 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 2022 than in the prior year due to the lower capitalization rate on technology spend.

Hospitality Solutions— Technology costs decreased $1 million, or 1%, for the year ended December 31, 2021 compared to the prior year.

The decrease was primarily due to a $17 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 partially offset by an increase in labor and professional services costs of $10 million resulting from 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.

Additionally, technology hosting costs increased by $4 million resulting from higher transaction volumes and 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.

Corporate— Technology costs decreased $33 million, or 29%, for the year ended December 31, 2021 compared to the prior year primarily due to a decline in severance costs of $35 million associated with the reduction of our workforce in 2020, a decline in impairment charges of $6 million related to an impairment recorded in the prior year associated with software developed for internal use, and 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.

This decrease was partially offset by an increase in labor costs of $14 million resulting from an increase in stock-based compensation primarily associated with previously awarded performance-based units.

Restructuring Activities, to our consolidated financial statements for further details on restructuring activities.

Equity-Based Awards, to our consolidated financial statements for further details on stock-based compensation.

Selling, General and Administrative Expenses

2 unchanged sentences

(Amounts in thousands)

Selling, general and administrative $ 586,406 $ 600,210 $ (13,804) (2) %

Selling, general and administrative expenses decreased $14 million, or 2%, for the year ended December 31, 2020 compared to the prior year.

The decrease is primarily driven by a decrease in labor and professional services costs of $43 million and $3 million in our Travel Solutions and Hospitality Solutions businesses, respectively, and a $29 million decrease in Corporate labor and professional services, each in connection with our cost reduction measures.

In addition, other costs declined by approximately $25 million across the company from 2019 primarily in conjunction with our expense management initiatives.

Corporate selling, general and administrative costs also declined due to a $27 million decrease in legal costs associated with the now-terminated acquisition of Farelogix.

These decreases are substantially offset by an increase in the provision for expected credit losses of $38 million and $8 million in our Travel Solutions and Hospitality Solutions businesses, respectively, primarily related to fully reserving for aged balances related to certain customers, an increase in bankruptcy-related reserves, an increase in our forecasted credit losses due to the impact of the COVID-19 pandemic on the global economy and other general increases in bad debt from aging balances as applied under the newly adopted credit loss standard.

Corporate related selling, general and administrative expenses increased as a result of a $20 million charge for severance benefits recorded in the current year, a $14 million abandonment charge associated with the closure of certain office locations in connection with our restructuring activities in the current year, and an increase of $32 million due to the reversal of a previously accrued loss in the prior year related to the US Airways legal matter.

Restructuring Activities, to our consolidated financial statements for further details on restructuring activities.

Travel Solutions $ 253,438 $ 282,078 $ (28,640) (10) %

Hospitality Solutions 45,495 45,716 (221) — %

Corporate 311,145 258,612 52,533 20 %

Total selling, general and administrative expenses $ 610,078 $ 586,406 $ 23,672 4 %

Travel Solutions— Selling, general and administrative expenses decreased $29 million, or 10%, for the year ended December 31, 2021 compared to the prior year.

The decrease is driven by a $65 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 credit losses in the current year given the gradual global recovery from the COVID-19 pandemic.

This decrease was partially offset by an increase in legal costs due to litigation of $21 million, an increase in labor and professional services costs of $12 million associated with the reversal of certain third-party commissions in the prior year which did not reoccur in the current year, consulting related to our business strategy to support the long-term growth of the business, labor costs due to the expiration of the temporary cost reduction measures implemented in the second quarter of 2020 and increases in risk and security, and an increase in depreciation and amortization of $7 million.

Hospitality Solutions— Selling, general and administrative expenses remained flat for the year ended December 31, 2021 compared to the prior year.

A decrease of $9 million 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 is offset by increases in technology costs, labor and professional services costs, and depreciation and amortization.

Corporate— Selling, general and administrative expenses increased $53 million, or 20%, for the year ended December 31, 2021 compared to the prior year.

The increase is driven by an increase in labor costs of $37 million as a result of a $34 million increase in stock-based compensation primarily associated with previously awarded performance-based units, a $21 million increase in labor costs to support the business and increased costs associated with improving our internal business systems, 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 $23 million decrease in severance costs.

Additionally, legal and professional fees increased $19 million due to a $39 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, and other operating expenses increased due to higher insurance and other administrative costs.

These increases were offset by a $14 million abandonment charge associated with the closure of certain office locations in connection with the restructuring

activities in 2020.

Restructuring Activities, to our consolidated financial statements for further details on restructuring activities, and see Note 13.

Equity-Based Awards, to our consolidated financial statements for further details on stock-based compensation.

Interest expense, net

3 unchanged sentences

Interest expense, net $ 257,818 $ 225,785 $ 32,033 14 %

Interest expense increased $79 million, or 50%, for the year ended December 31, 2020 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.

Interest expense increased $32 million, or 14%, for the year ended December 31, 2021 compared to the same period in the prior year primarily due to additional borrowings under the 9.250% senior secured notes due 2025 and the 4.000% senior exchangeable notes due 2025 (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.

Debt for further details these debt transactions .

Loss on Extinguishment of Debt

Year Ended December 31,

2020 2019 Change

(Amounts in thousands)

Loss on extinguishment of debt $ 21,626 $ — $ 21,626 **

** not meaningful

As a result of the debt refinancing transactions during the year ended December 31, 2020, we recognized a loss on extinguishment of $22 million.

In connection with t he extinguishment in August 2020 of our 5.375% senior secured notes due April 2023 , we recognized a loss on extinguishment of debt of $10 million which consisted of a redemption premium of $7 million and the write-off of unamortized debt issuance costs of $3 million.

In connection with our extinguishment of our 5.25% senior secured notes due November 2023 and our Term Loan A in December 2020, we recognized a loss on extinguishment of debt of $11 million which consisted of a redemption premium of $6 million and the write-off of unamortized debt issuance costs of $5 million.

Debt, to our consolidated financial statements for further details regarding these debt transactions .

We recognized a loss on extinguishment of debt of $13 million during the year ended December 31, 2021 as a result of the refinancing that occurred in the third quarter of 2021 (the "2021 Refinancing") and a loss on extinguishment of debt of $22 million in 2020 as a result of the refinancing that occurred in the third quarter of 2020 (the "2020 Refinancing").

Debt for further details these debt transactions .

Other expense, net

3 unchanged sentences

Other expense, net $ 1,748 $ 66,961 $ (65,213) (97) %

** not meaningful

Other expense, net increased $58 million for the year ended December 31, 2020 compared to the same period in the prior year primarily due to a $46 million charge related to termination payments in connection with our proposed acquisition of Farelogix, a pension plan settlement charge of $18 million, and a benefit recognized in the prior year associated with a reduction to our TRA liability due to the settlement of an audit.

The increase is partially offset by a $10 million gain resulting from the sale of our headquarters buildings in the fourth quarter of 2020.

Acquisitions, to our consolidated financial statements for

further detail regarding the Farelogix acquisition and Note 12.

Leases, to our consolidated financial statements for further details regarding the sale and leaseback transaction.

Other expense, net decreased $65 million for the year ended December 31, 2021 compared to the same period in the prior year primarily due to a $46 million charge related to the termination payments in connection with 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 and a reduction of pension related expense of $17 million compared to the same period in 2020.

These decreases were partially offset by a $10 million gain resulting from the sale of our headquarters buildings in the fourth quarter of 2020, as well as realized and unrealized foreign currency exchange fluctuations during the year ended December 31, 2021.

Provision for Income Taxes

2 unchanged sentences

(Amounts in thousands)

Provision for income taxes $ (39,913) $ 35,326 $ (75,239) (213) %

Our effective tax rate for the year ended December 31, 2020 and 2019 was 3.0% and 17.7%, respectively.

The decrease in the effective tax rate for the year ended December 31, 2020 as compared to the same period in 2019 was primarily due to a $202 million valuation allowance recorded on tax losses generated in the current tax year related to the impact of COVID-19 on our results of operations and various discrete items recorded in each of the respective periods.

Benefit for income taxes $ (14,612) $ (21,012) $ 6,400 (30) %

Our effective tax rate for the year ended December 31, 2021 and 2020 was 1.6%.

The effective tax rate for the year ended December 31, 2021, as compared to the same period in 2020 remained flat primarily due to a lower valuation allowance recorded on current year net operating losses and other deferred balances.

Summary of Business and Significant Accounting Policies for details regarding the adoption of guidance applied retroactively, which adjusted our 2020 benefit for income taxes from previously reported amounts.

The differences between our effective tax rate and the U.S.

9 unchanged sentences

Total revenue $ 1,334,100 $ 3,974,988 $ (2,640,888) (66) %

Travel Solutions —Revenue increased $94 million, or 3%, for the year ended December 31, 2019 compared to the prior year, primarily due to:

• a $79 million, or 3% increase in transaction-based distribution revenue primarily due to a 1% increase in Direct Billable Bookings to 566 million and growth in the average booking fee rate during the year ended December 31, 2019 due to a discrete shift in the distribution pricing structure for specific European carriers and favorable mix primarily resulting from growth in hotel bookings which have a higher rate;

• a $15 million increase in IT solutions revenue primarily due to a $10 million increase in commercial and operations revenue driven by license fee revenue from new implementations recognized upon delivery to the customer as well as an increase in revenue related to services and new implementations.

Additionally, reservation revenue increased $5 million for the year ended December 31, 2019 compared to the prior year primarily driven by the acquisition of Radixx and organic growth in our existing customer base despite the decline in Passengers Boarded which was driven by the demigration of the certain customers as well as the impact of Jet Airways' insolvency and the impact of the 737 Max incident on a particular customer.

Hospitality Solutions —Revenue increased $20 million, or 7%, for the year ended December 31, 2019 compared to the prior year.

The increase was primarily driven by growth in SynXis Software and Services revenue of $17 million, or 7%, due to an increase in transaction volumes of 22% to 108 million, which includes the migration of certain brands of Wyndham Hotels over the first half of 2018 and early 2019.

The migration of these enterprise hotel brands reduced the average rate of our transaction revenue for the year ended December 31, 2019 versus the prior year.

Additionally, DX service revenue increased $3 million.

Travel Solutions —Revenue decreased $2,546 million, or 68%, for the year ended December 31, 2020 compared to the prior year, primarily due to:

Passengers Boarded, inclusive of Radixx, decreased by 56% to 323 million for the year ended December 31, 2020.

Additionally, commercial and operations revenue decreased $132 million primarily due to the impact of the COVID-19 pandemic on our existing customer base.

Hospitality Solutions —Revenue decreased $118 million, or 40%, for the year ended December 31, 2020 compared to the prior year.

The decrease was primarily driven by a reduction in SynXis Software and Services revenue due to a decrease in transaction volumes of 38% to 67 million, as a result of the COVID-19 pandemic.

Cost of Revenue, excluding technology costs

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Depreciation and amortization 38,916 39,691 (775) (2) %

Amortization of upfront incentive consideration 82,935 77,622 5,313 7 %

Total cost of revenue, excluding technology costs $ 579,010 $ 1,726,157 $ (1,147,147) (66) %

Travel Solutions —Cost of revenue increased $58 million, or 4%, for the year ended December 31, 2019 compared to the prior year, partially as a result of a $71 million increase in incentive consideration primarily due to volume growth in North America bookings as well as rate increases across all regions.

The increase is offset by a reduction in labor and professional services costs of $14 million.

Hospitality Solutions —Cost of revenue increased $15 million, or 11%, for the year ended December 31, 2019 compared to the prior year.

The increase was primarily driven by a $14 million increase in transaction-related costs to support the growth of our business.

Travel Solutions —Cost of revenue decreased $1,128 million, or 72%, for the year ended December 31, 2020 compared to the prior year.

The decrease was primarily the result of a $1,086 million decline in incentive consideration in all regions due to lower transaction volumes as a result of the COVID-19 pandemic, as well as a $37 million reduction in labor and professional services costs in connection with our cost reduction measures.

Hospitality Solutions —Cost of revenue decreased $62 million, or 40%, for the year ended December 31, 2020 compared to the prior year.

Corporate —Cost of revenue associated with corporate costs increased $20 million, or 244%, for the year ended December 31, 2020 compared to the prior year.

This increase was primarily driven by an increase in headcount-related expenses.

This increase was primarily due to a restructuring charge of $19 million for severance benefits.

The increase is partially offset by a reduction in labor costs in connection with our cost reduction measures.

Restructuring Activities, to our consolidated financial statements for further details on restructuring activities.

Depreciation and amortization —Depreciation and amortization decreased $1 million, or 2%, for the year ended December 31, 2020 compared to the prior year.

The decrease was primarily due to customer implementations that became fully amortized during the year.

Amortization of upfront incentive consideration— Amortization of upfront incentive consideration increased $5 million, or 7%, for the year ended December 31, 2019 compared to the prior year primarily due to an increase in upfront consideration provided to travel agencies.

The decrease is primarily due to customer implementations that became fully amortized during the year.

Technology Costs

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(Amounts in thousands)

Technology Costs $ 1,285,204 $ 1,098,641 $ 186,563 17 %

Technology costs increased $187 million, or 17%, for the year ended December 31, 2019 compared to the prior year.

The increase in both our Travel Solutions and Hospitality Solutions businesses is primarily driven by the 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 $124 million and $29 million, respectively.

Investments pertaining to the modernization, stability, and security of our technology platforms resulted in increased technology costs of $32 million and $4 million in our Travel Solutions and Hospitality Solutions businesses, respectively.

Depreciation and amortization increased $11 million compared to the prior year related to our Hospitality Solutions business, primarily due to the completion of software developed for internal use.

This increase was partially offset by a decrease in labor-related costs in both our Travel Solutions and Hospitality Solutions businesses of $9 million and $8 million, respectively.

Travel Solutions $ 946,080 $ 1,100,873 $ (154,793) (14) %

Hospitality Solutions 96,928 111,877 (14,949) (13) %

Corporate 113,715 72,454 41,261 57 %

Total technology costs $ 1,156,723 $ 1,285,204 $ (128,481) (10) %

Travel Solutions— Technology costs decreased $155 million, or 14%, for the twelve months ended December 31, 2020 compared to the prior year.

This decrease was due to a decrease in technology labor of $91 million in connection with our cost reduction measures, a decrease in depreciation and amortization of $46 million primarily due to a change in the mix of our technology spend in 2019 resulting in less capitalized internal use software, and a decrease in technology costs of $55 million associated with lower transaction volumes resulting from the COVID-19 pandemic.

This decrease is partially offset by an increase in labor costs of $40 million due to a continued decline in the capitalization mix of our technology spend as we implement open source and cloud-based solutions.

Hospitality Solutions— Technology costs decreased $15 million, or 13%, for the twelve months ended December 31, 2020 compared to the prior year.

This decrease is due to a decrease in technology labor of $12 million in connection with our cost reduction measures, and a decrease in depreciation and amortization of $10 million primarily due to a change in the mix of our technology spend in 2019 resulting in less capitalized internal use software.

This decrease is partially offset by an increase in labor costs of $6 million due to a continued decline in the capitalization mix of our technology spend as we implement open source and cloud-based solutions.

Corporate— Technology costs increased $41 million, or 57%, for the twelve months ended December 31, 2020 compared to the prior year.

This increase was primarily driven by a restructuring charge of $32 million for severance benefits.

Restructuring Activities, to our consolidated financial statements for further details on restructuring activities.

Selling, General and Administrative Expenses

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(Amounts in thousands)

Selling, general and administrative $ 600,210 $ 551,923 $ 48,287 9 %

Selling, general and administrative expenses increased by $48 million, or 9%, for the year ended December 31, 2019 compared to the prior year, primarily driven by an increase in labor costs of $13 million and $2 million in our Travel Solutions and Hospitality Solutions businesses, respectively, and an increase in the provision for expected credit losses of $13 million in our Travel Solutions business.

Corporate selling, general and administrative expenses increased due to an increase in legal costs associated with the now-terminated acquisition of Farelogix of $41 million, an increase in labor costs of $9 million, and an increase in other antitrust litigation expenses of $3 million.

The increase was partially offset by the reversal of our previously accrued loss related to the US Airways legal matter for $32 million.

Commitments and Contingencies, to our consolidated financial statements for further information.

Provision for Income Taxes

Travel Solutions $ 282,078 $ 298,623 $ (16,545) (6) %

Hospitality Solutions 45,716 43,454 2,262 5 %

Corporate 258,612 258,133 479 — %

Total selling, general and administrative expenses $ 586,406 $ 600,210 $ (13,804) (2) %

Travel Solutions— Selling, general and administrative expenses decreased $17 million, or 6% for the year ended December 31, 2020 compared to the prior year.

This decrease was primarily driven by a $43 million decrease in labor and professional services costs in connection with our cost reduction measures and a decline in other costs in conjunction with our expense management initiatives.

This decrease was offset by an increase in the provision for expected credit losses of $38 million.

Hospitality Solutions— Selling, general and administrative expenses increased $2 million, or 5%, for the twelve months ended December 31, 2020 compared to the prior year.

This increase was primarily due to an increase in the provision for expected credit losses of $8 million, partially offset by a decrease of $3 million in labor and professional services costs in connection with our cost reduction measures and a decline in other costs in conjunction with our expense management initiatives.

Corporate— Selling, general and administrative expenses remained flat for the twelve months ended December 31, 2020 compared to the prior year.

Increases in costs included a $20 million charge for severance benefits recorded in the current year, a $14 million abandonment charge associated with the closure of certain office locations in connection with our restructuring activities in the current year, and an increase of $32 million due to the reversal of a previously accrued loss in the prior year related to the US Airways legal matter.

These costs were offset by a decrease of $29 million in labor and professional services costs in connection with our cost reduction measures, a decrease of $27 million in legal costs associated with the now-terminated acquisition of Farelogix and a decline in other costs in conjunction with our expense management initiatives.

Interest expense, net

Year Ended December 31,

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(Amounts in thousands)

Interest expense, net $ 225,785 $ 156,391 $ 69,394 44 %

Interest expense increased $69 million, or 44%, for the year ended December 31, 2020 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.

Debt for further details these debt transactions .

Loss on Extinguishment of Debt

As a result of the debt refinancing transactions during the year ended December 31, 2020, we recognized a loss on extinguishment of $22 million.

Debt, to our consolidated financial statements for further details regarding these debt transactions .

Other expense, net

Year Ended December 31,

2020 2019 Change

(Amounts in thousands)

Other expense, net $ 66,961 $ 9,432 $ 57,529 610 %

The increase is partially offset by a $10 million gain resulting from the sale of our headquarters buildings in the fourth quarter of 2020.

Acquisitions, to our consolidated financial statements for further details regarding the Farelogix acquisition, Note 12.

Leases, to our consolidated financial statements for further details regarding the sale and leaseback transaction, and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" for additional information regarding the TRA.

Provision for Income Taxes

Year Ended December 31,

2020 2019 Change

(Amounts in thousands)

(Benefit) provision for income taxes $ (21,012) $ 35,326 $ (56,338) (159) %

Our effective tax rate for the year ended December 31, 2020 and 2019 was 1.6% and 17.7%, respectively.

The increase in the effective tax rate for the year ended December 31, 2019 as compared to the same period in 2018 was primarily due to the impact of 2018 adjustments related to the enactment of the TCJA for deferred taxes and foreign tax effects of $27 million and, in 2019, an unfavorable impact of our geographic mix of taxable income, partially offset by an increase in net favorable U.S.

tax permanent differences and certain tax credits and incentives.

The decrease in the effective tax rate for the year ended December 31, 2020 as compared to the same period in 2019 was primarily due to a $268 million valuation allowance recorded on tax losses generated in the current tax year related to the impact of COVID-19 on our results of operations and various discrete items recorded in each of the respective periods.

The differences between our effective tax rate and the U.S.

federal statutory income tax rate primarily resulted from our geographic mix of taxable income in various tax jurisdictions, tax permanent differences and tax credits.

federal statutory income tax rate primarily resulted from our geographic mix of taxable income in various tax jurisdictions, tax permanent differences, valuation allowances, and tax credits.

Liquidity and Capital Resources

In the current environment, our current principal sources of liquidity is our cash and cash equivalents on hand.

As a result of the significant adverse impact of the COVID-19 pandemic on our financial results and liquidity, we took the following actions in 2020:

• Raised $1.1 billion from the issuance of senior secured and exchangeable notes;

• Raised $598 million in net proceeds from our common stock and mandatory convertible preferred offerings;

• Drew down on our Revolver in the amount of $375 million;

• Reduced our real estate footprint with the sale and leaseback of our headquarters buildings, resulting in net proceeds of $69 million;

• Implemented cost-savings actions as described in "—Recent Developments Affecting our Results of Operations";

• Refinanced over $2 billion of debt;

• Extended our debt maturities to 2023 for the Revolver and 2024 and beyond for our remaining debt maturities;

• Suspended common stock dividends and share repurchases under our Share Repurchase Program.

Our ending cash balance as of December 31, 2020 was $1.5 billion.

See "—Recent Events Impacting Our Liquidity and Capital Resources” for further information.

As of December 31, 2020 and 2019, our cash and cash equivalents, Revolver and outstanding letters of credit were as follows (in thousands):

Our current principal source of liquidity is our cash and cash equivalents on hand.

As of December 31, 2021 and 2020, our cash and cash equivalents, Revolver, bilateral letter of credit facility, and outstanding letters of credit were as follows (in thousands):

As of December 31,

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Outstanding letters of credit — 9,674

On March 17, 2020, we drew $375 million under the Revolver to supplement our liquidity needs.

We had $375 million outstanding under the Revolver as of December 31, 2020 and no balance outstanding as of December 31, 2019.

Borrowing availability under our Revolver is reduced by our outstanding letters of credit and restricted cash collateral.

We had outstanding letters of credit totaling $10 million and $12 million as of December 31, 2020 and 2019, respectively, which reduced our overall credit capacity under the Revolver.

Our Revolver matures on November 23, 2023 at the earliest and February 22, 2024 at the latest, depending on certain "springing" maturity conditions.

See “—Senior Secured Credit Facilities .”

Available under the bilateral letter of credit facility 10,018 —

Outstanding letters of credit under the bilateral letter of credit facility 9,982 —

We consider cash equivalents to be highly liquid investments that are readily convertible into cash.

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We held no short-term investments as of December 31, 2021 and 2020.

We do not consider the undistributed earnings to be indefinitely reinvested as of December 31, 2020, with certain limited exceptions.

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

We had $21 million held as cash collateral for standby letters of credit in restricted cash on our consolidated balance sheets as of December 31, 2021.

We had no restricted cash as of December 31, 2020.

We do not consider undistributed foreign earnings to be indefinitely reinvested as of December 31, 2021, with certain limited exceptions and have, in those cases, recorded corresponding deferred taxes.

We consider the undistributed capital investments in most of our foreign subsidiaries to be indefinitely reinvested as of December 31, 2021 and have not provided deferred taxes on any outside basis differences, with the exception of balances associated with the AirCentre disposition.

With respect to the held for sale nature of our AirCentre portfolio of products, we have established deferred taxes, where applicable, for the outside basis of the capital investment of subsidiaries to be sold.

Our cash, cash equivalents and marketable securities held by our foreign subsidiaries are available to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.

While the COVID-19 pandemic has had an adverse impact on our business, we expect to recognize federal taxable income in 2022 based on our operating and non-operating results, the annual limitation on the use of NOL carryforwards and a provision of the Tax Cuts and Jobs Act set to take effect.

As a result, while we expect to be a U.S.

federal cash taxpayer in 2022, we expect to also benefit from the usage of NOLs in 2022 to the extent available.

We expect to continue to benefit from our NOLs in the near-term beyond 2022.

Liquidity Outlook

Given the magnitude of travel decline and the uncertain duration of the COVID-19 impact, we continue to monitor travel activity and take additional steps should we determine they are necessary to support our liquidity position.

During the fourth quarter of 2020, in conjunction with a refinancing transaction, we reduced the minimum liquidity requirement under our Senior Secured Credit Facilities from $450 million to $300 million, which remains in place as long as the covenant suspension resulting from a "Material Travel Event Disruption" (See "—Senior Secured Credit Facilities " below) remains in effect.

Through our refinancing efforts, with the exception of the Revolver as described above, we also extended our debt maturity profile to 2024 such that we have no significant near-term debt maturities.

We believe that approximately two-thirds of our cost structure is adjustable in the near-term, comprised largely of incentive expenses that decline generally in line with bookings and including other variable expenses that are subject to our cost savings measures.

A significant amount of variable expense has declined in line with the overall reduction in travel volumes resulting from the COVID-19 pandemic.

Our technology costs are less variable in nature than other transaction-based costs and include costs associated with our technology transformation.

Technology costs represent a significant portion of our cost base that is not considered adjustable in the near term.

As noted above, we implemented cost-savings actions, to manage our ongoing cost structure.

See "—Recent Developments Affecting our Results of Operations" for further information.

We utilize cash and cash equivalents, supplemented by our Revolver, primarily to pay our operating expenses, make capital expenditures, invest in our information technology infrastructure, products and offerings, pay taxes, pay quarterly dividends on our Preferred Stock (as defined below) when declared, and service our debt and other long-term liabilities.

We have suspended share repurchases under our Share Repurchase Program as well as the payment of quarterly cash dividends on our common stock, effective with respect to the dividends occurring after the March 30, 2020 payment.

Due to the significant adverse impact of the COVID-19 pandemic on our business, we have generated significant net operating losses in the current year.

As a result, we do not expect to be a U.S.

federal cash taxpayer in 2021.

Given the near-term risks around 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 and expected transaction volumes, we believe that we have resources to sufficiently fund our liquidity requirements over at least the next twelve months.

We may conduct additional debt or equity offerings to provide additional liquidity, pay down debt or support future strategic investments.

See “—Recent Events Impacting Our Liquidity and Capital Resources.”

The ongoing effects of COVID-19 on our operations and global bookings have had, and we believe they 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, or outstanding debt obligations in open market or in privately negotiated transactions, as well as other transactions we believe may create stockholder value, improve our liquidity position, enhance financial performance, or support future strategic investments.

These transactions may require cash expenditures or generate proceeds and, to the extent they require cash expenditures, may be funded through a combination of cash on hand, debt or equity offerings, or utilization of our Revolver.

The reduction in revenues as the result of COVID-19 has significantly adversely affected our liquidity.

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 amended the financial performance covenant to remove minimum liquidity and leverage ratio requirements.

We believe these actions will provide additional flexibility as we manage through the global economic recovery from the COVID-19 pandemic.

During 2021, our free cash flow has improved on a sequential quarter-over-quarter basis.

Free cash flow is calculated as cash flow from operations reduced by additions to property and equipment.

For 2022, we expect our free cash flow to improve on an annual basis from 2021, turning positive within the second half of 2022.

This expectation is based on industry projections regarding anticipated recovery levels in air travel and could change.

See “—Risk Factors" for further details.

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, pay quarterly dividends on our Preferred Stock (as defined below) when declared, and service our debt and other long-term liabilities.

On July 12, 2021, we refinanced the Revolver and terminated the commitments thereunder, replacing it with term loans.

See “— Senior Secured Credit Facilities below.

We had outstanding letters of credit totaling $10 million as of December 31, 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.

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 the impact on our 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.”

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.”

On an ongoing basis, we will evaluate and consider strategic acquisitions, divestitures, joint ventures, equity method investments, or repurchasing 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.

Contractual Obligations

Our material cash requirements consist of the following contractual obligations, excluding pension obligations.

Pension and Other Postretirement Benefit Plans, to our consolidated financial statements.

We do not have any off balance sheet arrangements as of December 31, 2021.

Our debt obligation includes all interest and principal of borrowings under our senior secured credit facilities, senior secured notes due 2025, senior exchangeable notes due 2025 and finance lease obligations.

Under certain circumstances, we are required to pay a percentage of the excess cash flow, if any, generated each year to our lenders which is not reflected in the amount disclosed below.

Interest on the term loan is based on the LIBOR rate plus a base margin and includes the effect of interest rate swaps.

Debt, to our consolidated financial statements.

As of December 31, 2021, we had a total debt obligation of $5.6 billion, with $256 million due within the next 12 months.

For purposes of this disclosure, we have used projected LIBOR rates for all future periods.

Operating lease obligations

We lease approximately 1.3 million square feet of office space in 65 locations in 38 countries.

Lease payment escalations are based on fixed annual increases, local consumer price index changes or market rental reviews.

We have renewal options of various term lengths in approximately 33 leases.

We have 3 purchase options and no restrictions imposed by our leases concerning dividends or additional debt.

Leases, to our consolidated financial statements.

As of December 31, 2021, we had total lease obligation of $137 million, with $26 million due within the next 12 months.

IT agreements

Certain agreements with technology providers, including for the provision of outsourcing services for our IT infrastructure and applications and the provision of certain cloud-based services, include minimum amounts due for the provision of those services.

Contractual minimums are annual in some instances and span multiple years in other contracts.

As of December 31, 2021, we had total IT agreement obligations of $2.4 billion, with $240 million due within the next 12 months.

Actual payments may vary significantly from the minimum amounts calculated and include our estimated spend for those contracts with committed spend covering multiple years.

Purchase obligations

Purchase obligations represent an estimate of open purchase orders and contractual obligations in the ordinary course of business for which we have not received the goods or services as of December 31, 2021.

Although open purchase orders are considered enforceable and legally binding, the terms generally allow us the option to cancel, reschedule and adjust our requirements based on our business needs prior to the delivery of goods or performance of services.

As of December 31, 2021, we had a total purchase obligation of $428 million, with $295 million due within the next 12 months.

Letters of credit

Our letters of credit consist of stand-by letters of credit, underwritten by a group of lenders and backed by cash collateral, which we primarily issue in the normal course of business.

There were no claims made against any standby letters of credit during the years ended December 31, 2021, 2020 and 2019.

As of December 31, 2021, we had a total obligation of $10 million, with $7 million due within the next 12 months.

Unrecognized tax benefits

Unrecognized tax benefits include associated interest and penalties.

The timing of related cash payments for substantially all of these liabilities is inherently uncertain because the ultimate amount and timing of such liabilities is affected by factors which

are variable and outside our control.

As of December 31, 2021, we had a total obligation of $110 million , with $6 million due within the next 12 months.

Subscription agreement

In December 2021, we entered into a subscription agreement with Apollo Strategic Growth Capital, a special purpose acquisition company, that has entered into a business combination agreement with GBT JerseyCo Limited (“GBT”).

The Subscription Agreement provides that, concurrently with the closing of the business combination, we will purchase shares in the combined company for an aggregate purchase price of $80 million.

The transaction is expected to be completed in the first half of 2022.

The Subscription Agreement provides that it will terminate upon the earliest to occur of:

(a) the termination of the business combination agreement in accordance with its terms;

(b) the mutual written agreement of the parties to the Subscription Agreement and GBT or (c) if the transactions contemplated by the Subscription Agreement have not been consummated within 10 months after the date of the Subscription Agreement, other than as a result of breach by the terminating party.

Recent Events Impacting Our Liquidity and Capital Resources

Debt Agreements

On December 17, 2020, Sabre GLBL entered into a Sixth Term A Loan Refinancing and Incremental Amendment extending debt maturities to 2027.

Refer to "— Senior Secured Credit Facilities" below for further information.

On August 27, 2020, Sabre GLBL entered into a new debt agreement consisting of $850 million aggregate principal amount of the 7.375% senior secured notes due 2025 (the "September 2025 Notes").

The September 2025 Notes are jointly and severally, irrevocably and unconditionally guaranteed by Sabre Holdings and all of Sabre GLBL’s restricted subsidiaries that guarantee Sabre GLBL’s credit facility.

The September 2025 Notes bear interest at a rate of 7.375% per annum and interest payments are due semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2021.

The September 2025 Notes mature on September 1, 2025.

The net proceeds received from the sale of the September 2025 Notes, net of underwriting fees and commissions, plus cash on hand, were used to:

(1) repay approximately $319 million principal amount of debt under the Term Loan A;

(2) redeem all of the $530 million outstanding 5.375% senior secured notes due 2023;

and (3) repay approximately $3 million principal amount of debt under the Term Loan B.

Debt, to our consolidated financial statements for further information.

On April 17, 2020, Sabre GLBL entered into two new debt agreements consisting of the following:

(1) $775 million aggregate principal amount of 9.25% senior secured notes due 2025 (the "Secured Notes") and (2) $345 million aggregate principal amount of 4.000% senior exchangeable notes due 2025 (the "Exchangeable Notes," and together with the Secured Notes, the "Notes").

Debt, to our consolidated financial statements for further information.

The Secured Notes are jointly and severally, irrevocably and unconditionally guaranteed by Sabre Holdings and all of Sabre GLBL’s restricted subsidiaries that guarantee the Issuer’s credit facility.

The Secured Notes bear interest at a rate of 9.250% per annum and interest payments are due semi-annually on April 15 and October 15 of each year, beginning with October 15, 2020.

The Secured Notes mature on April 15, 2025.

The Exchangeable Notes are senior, unsecured obligations of Sabre GLBL, accrue interest payable semi-annually in arrears and mature on April 15, 2025, unless earlier repurchased or exchanged.

The Exchangeable Notes are exchangeable at their holders’ election, under specified circumstances, into consideration based on Sabre common stock.

This consideration consists of shares of Sabre common stock, cash, or a mixture of the two at Sabre GLBL’s election.

Upon any future occurrence of a “fundamental change” (as defined in the indenture governing the Exchangeable Notes), holders may require Sabre GLBL to repurchase their Exchangeable Notes at a price equal to principal amount plus accrued and unpaid interest.

The Exchangeable Notes bear interest at a rate of 4.00% per annum and interest payments are due semi-annually on April 15 and October 15 of each year, beginning with October 15, 2020.

The Exchangeable Notes are guaranteed on a senior unsecured basis by Sabre and Sabre Holdings.

The net proceeds from the sales of the Notes are being used for general corporate purposes.

On July 12, 2021, we refinanced the Revolver and terminated the commitments thereunder, replacing it with term loans.

Among other things, the 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.

See “— Senior Secured Credit Facilities" below.

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 $61 million during the year ended December 31, 2021, compared to the prior year.

Equity Offerings

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In addition, the conversion rate applicable to such an early conversion may in certain circumstances be increased to compensate holders of the Preferred Stock for certain unpaid accumulated dividends.

make-whole fundamental change occurs, then holders of the Preferred Stock will, in certain circumstances, be entitled to convert their Preferred Stock at an increased conversion rate for a specified period of time and receive an amount to compensate them for certain unpaid accumulated dividends and any remaining future scheduled dividend payments.

If a make-whole fundamental change occurs, then holders of the Preferred Stock will, in certain circumstances, be entitled to convert their Preferred Stock at an increased conversion rate for a specified period of time and receive an amount to compensate them for certain unpaid accumulated dividends and any remaining future scheduled dividend payments.

The Preferred Stock is not subject to redemption at the Company’s option.

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and (2) all unpaid dividends that will have accumulated on such share to, but excluding, the date of such payment.

In the fourth quarter of 2021, a certain holder elected to convert 50,000 shares of preferred stock to 595,240 shares of common stock.

Dividends on Preferred Stock

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 $8 million of preferred stock dividends in our consolidated results of operations for the year ended December 31, 2020.

Declared dividends on the Preferred Stock are payable, at our election, in cash, shares of our common stock or a combination of cash and shares of our common stock.

We recorded $22 million of accrued preferred stock dividends in our consolidated results of operations for the year ended December 31, 2021.

During the year ended December 31, 2021, we paid cash dividends on our preferred stock of $22 million.

In February 2021, the Board of Directors declared a dividend of $1.625 per share on Preferred Stock payable on March 1, 2021 to holders of record of the Preferred Stock on February 15, 2021.

Subject to certain exceptions, so long as any share of Preferred Stock remains outstanding, no dividends or distributions will be declared or paid on shares of the Company’s common stock or any other class or series of stock ranking junior to the Preferred Stock, and no common stock or any other class or series stock ranking junior to the Preferred Stock will be purchased, redeemed or otherwise acquired for value by the Company or any of its subsidiaries unless, in each case, all accumulated and unpaid dividends for all prior completed dividend periods, if any, have been paid in full.

On February 2, 2022, the Board of Directors declared a dividend of $1.625 per share on Preferred Stock payable on March 1, 2022 to holders of record of the Preferred Stock on February 15, 2022.

purchased, redeemed or otherwise acquired for value by the Company or any of its subsidiaries unless, in each case, all accumulated and unpaid dividends for all prior completed dividend periods, if any, have been paid in full.

In addition, if (i) less than all accumulated and unpaid dividends on the outstanding Preferred Stock have been declared and paid as of any dividend payment date or (ii) the board of directors declares a dividend on the Preferred Stock that is less than the total amount of unpaid dividends on the outstanding preferred stock that would accumulate to, but excluding, any dividend payment date, no dividends may be declared or paid on any parity stock, unless dividends are declared on the shares of Preferred Stock on a pro rata basis.

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Dividends on Common Stock

During the year ended December 31, 2020, we paid a quarterly cash dividend of $0.14 per share of our common stock totaling $39 million.

During the year ended December 31, 2021, we did not pay cash dividends on our common stock.

As a result of the significant adverse impact of the COVID-19 pandemic on our financial results and liquidity, 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.

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Repurchases under the Share Repurchase Program may take place in the open market or privately negotiated transactions.

For the year ended December 31, 2020, 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 certain cash management measures we are undertaking as a result of the market conditions caused by COVID-19.

During the year ended December 31, 2021, we did not repurchase any shares pursuant to the Share Repurchase Program.

On March 16, 2020, we announced the suspension of share repurchases under the Share Repurchase Program in conjunction with the cash management measures we are undertaking as a result of the market conditions caused by COVID-19.

Approximately $287 million remains authorized for repurchase under the Share Repurchase Program as of December 31, 2021.

Senior Secured Credit Facilities

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 is 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 bate, respectively.

The net proceeds from the issuance were used to fully redeem both the $500 million outstanding 5.25% senior secured notes due November 2023 and the $134 million outstanding Term Loan A.

Additionally, on December 17, 2020, Sabre GLBL entered into "an Amendment No.

3 to the Amended and Restated Credit Agreement (the "Pro Rata Amendment and the Refinancing Amendment")" which reduced the minimum liquidity requirement in the financial performance described outlined

below from $450 million to $300 million.

We incurred no material additional indebtedness as a result of these transactions, other than amounts covering certain interest, fees and expenses.

On August 23, 2017, Sabre GLBL entered into a Fourth Incremental Term Facility Amendment to our Amended and Restated Credit Agreement, Term Loan A Refinancing Amendment to our Amended and Restated Credit Agreement, and Second Revolving Facility Refinancing Amendment to our Amended and Restated Credit Agreement (the “2017 Refinancing”).

The 2017 Refinancing included a $400 million revolving credit facility ("Revolver") as well as the application of the proceeds of the approximately $1,891 million incremental Term Loan B facility (“Term Loan B”) and $570 million Term Loan A facility (“Term Loan A”).

On August 27, 2020, Sabre GLBL entered into a Third Revolving Facility Refinancing Amendment to the Amended and Restated Credit Agreement (the "Third Revolving Refinancing Amendment") and the First Term A Loan Extension Amendment to the Amended and Restated Credit Agreement (the "Term A Loan Extension Amendment" and, together with the Third Revolving Refinancing Amendment, the "2020 Refinancing"), which extended the maturity of the Revolver from July 1, 2022 to November 23, 2023 at the earliest and February 22, 2024 at the latest, depending on certain "springing" maturity conditions as described in the Third Revolving Refinancing Amendment.

In the event that, as of November 23, 2023, the maturity date of the Term Loan B has not been extended or refinanced to a date after August 20, 2024, the extension is subject to an earlier "springing" maturity date of November 23, 2023.

In addition to extending the maturity date of the Revolver, the 2020 Refinancing also provides that, during any covenant suspension resulting from a "Material Travel Event Disruption" (as defined in the Amended and Restated Credit Agreement and discussed further below), including during the current covenant suspension period, we must maintain liquidity of at least $450 million on a monthly basis (reduced to $300 million pursuant to the refinancing in December 2020 as discussed above).

In addition, during this covenant suspension, the 2020 Refinancing limits certain payments to equity holders, certain investments, certain prepayments of unsecured debt and the ability of certain subsidiaries to incur additional debt.

The applicable margins for the Revolver are between 2.50% and 1.75% per annum for Eurocurrency rate loans and between 1.50% and 0.75% per annum for base rate loans, with the applicable margin for any quarter reduced by 25 basis points (up to 75 basis points total) if the Senior Secured First-Lien Net Leverage Ratio (as defined in the Amended and Restated Credit Agreement) is less than 3.75 to 1.0, 3.00 to 1.0, or 2.25 to 1.0, respectively.

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.

The applicable margins for the Term Loan B are 2.00% per annum for Eurocurrency rate loans and 1.00% per annum for base rate loans.

The maturity date of Term Loan B is February 22, 2024.

Under the Amended and Restated Credit Agreement, the loan parties are subject to certain customary non-financial covenants, including certain restrictions on incurring certain types of indebtedness, creation of liens on certain assets, making of certain investments, and payment of dividends, as well as a maximum leverage ratio.

Pursuant to Credit Agreement Amendments, effective July 18, 2016, the maximum leverage ratio has been adjusted to be based on the Total Net Leverage Ratio (as defined in the Amended and Restated Credit Agreement) and we are required, at all times (no longer solely when a threshold amount of revolving loans or letters of credit were outstanding), to maintain a Total Net Leverage Ratio of less than 4.5 to 1.0.

Under the terms of the Amended and Restated Credit Agreement, the financial covenant related to our leverage ratio is suspended for a limited time if a “Material Travel Event Disruption” has occurred.

As defined in the Amended and Restated Credit Agreement, a “Material Travel Event Disruption” means, in any given calendar month, a decrease of 10% or more in the number of “domestic revenue passenger enplanements” (determined by reference to the monthly “Air Traffic Statistics” published by the Bureau of Transportation Statistics) has occurred as a result of or in connection with a Travel Event (as defined in the Amended and Restated Credit Agreement) as compared to the number of “domestic revenue passenger enplanements” (determined by reference to the monthly “Air Traffic Statistics” published by the Bureau of Transportation Statistics) occurring in the corresponding month during the prior year or, if a Material Travel Event Disruption existed during such month, the most recent corresponding month in which no Material Travel Event Disruption occurred/existed.

As of December 31, 2020, 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, has led to a finding that a Material Travel Event Disruption has occurred.

As such, the leverage ratio covenant has been suspended for at least the fourth quarter of 2020 and first quarter of 2021.

We are also required to pay down the Term Loan B by an amount equal to 50% of annual excess cash flow, as defined in the Amended and Restated Credit Agreement.

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 entered into agreements to refinance the Other Term Loan B facility and the Revolver, and terminated the revolving commitments thereunder (the "2021 Refinancing").

We incurred no additional indebtedness as a result of the 2021 Refinancing, 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 year ended December 31, 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.

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 December 31, 2021.

As of December 31, 2021, we are in compliance with all covenants under the terms of the Amended and Restated Credit Agreement.

Applicable margins for the Term Loan B are 2.00% per annum for Eurocurrency rate loans and 1.00% per annum for base rate loans over the life of the loan, with a floor of 0.00%.

Applicable margins for the Term Loan B-1 and Term Loan B-2 are 3.50% per annum for Eurocurrency rate loans and 2.50% per annum for base rate loans over the life of the loan, with a floor of 0.50% for the Eurocurrency rate, and 1.50% for the base rate, respectively.

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.

Based on our results for the year ended December 31, 2020, we were not required to make an excess cash flow payment in 2021, and no excess cash flow payment is expected to be required in 2022 with respect to our results for the year ended December 31, 2021.

We are further required to pay down the term loans with proceeds from certain asset sales or borrowings, that are not otherwise reinvested in the business, as defined in the Amended and Restated Credit Agreement.

As of December 31, 2021, we had outstanding approximately $2.8 billion of variable debt that is indexed to the London Interbank Offered Rate ("LIBOR") consisting of Term Loan B for $1.8 billion, Term Loan B-1 for $401 million and Term Loan B-2 for $635 million.

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.

In July 2021, we entered into the 2021 Refinancing which, among other things, allows for the LIBOR rate to be phased out and replaced with SOFR plus a credit spread adjustment factor for Term Loan B-1 and Term Loan B-2, and we therefore do not anticipate a material impact from the anticipated phase out of LIBOR with respect to these loans.

Term Loan B allows for a transition to the Prime rate plus a margin, and assuming the discontinuation of LIBOR in June 2023 and assuming no change in Prime rates in effect as of December 31, 2021, we estimate the impact of transitioning to the Prime rate in June 2023 would result in an aggregate of approximately $25 million of incremental interest expense over the remaining life of Term Loan B.

We intend to seek an amendment with our lenders of Term Loan B prior to June 2023 to provide for a transition to SOFR or another alternative to LIBOR in anticipation of its discontinuation, but there can be no assurance that we will be able to reach an agreement with our lenders for any such amendment or that the incremental amount of any interest pursuant to such amendment would be significantly less than current requirements.

See “Risk Factors—We are exposed to interest rate fluctuations.”

Tax Receivable Agreement

Immediately prior to the closing of our initial public offering in April 2014, we entered into the Tax Receivable Agreement (the "TRA"), which provides the right to receive future payments from us to stockholders and equity award holders that were our stockholders and equity award holders, respectively, immediately prior to the closing of our initial public offering (collectively, the

"Pre-IPO Existing Stockholders").

In connection with the TRA, we made payments, including interest, of $72 million in January 2020, $105 million in 2019, and $60 million in 2018, respectively.

In connection with the TRA, we made payments, including interest, of $72 million in January 2020 and $105 million in 2019, respectively.

In December 2019, we exercised our right under the terms of the TRA to accelerate our remaining payments under the TRA and make an early termination payment of $1 million, to the Pre-IPO Existing Shareholders, which was included in the January 2020 payment of $72 million described above.

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Cash used in operating activities totaled $415 million for the year ended December 31, 2021.

The $356 million decrease in cash used for operating activities from 2020 was primarily due to an improvement in our results of operations as a result of the gradual global recovery from the COVID-19 pandemic during 2021, 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 $34 million related to restructuring activities initiated in 2020, and a $21 million reduction in upfront incentive consideration payments.

This increase in operating cash flow was partially offset by additional interest payments of $61 million resulting from debt refinancing activities during 2020.

Cash used in operating activities totaled $770 million for the year ended December 31, 2020.

The $1.4 billion decrease in operating cash flow from 2019 is primarily due to the impact of COVID-19 on the travel industry and on our results of operations during 2020, severance payments of $48 million related to restructuring activities during 2020, additional interest payments of $29 million resulting from debt refinancing activities during 2020, acquisition termination fees paid in 2020 of $21 million, and net cash outflows to carriers resulting from the cancellations of previous bookings.

This decrease in operating cash flow was partially offset by a $44 million decrease in upfront incentive consideration payments and a $31 million decrease in tax payments.

We expect our cash burn rate to improve sequentially during 2021.

We expect the first quarter of 2021 to be negatively impacted by the timing of significant working capital items relative to other quarters in 2021, including the payment of a significant portion of our remaining $23 million severance liability.

Cash provided by operating activities totaled $581 million for the year ended December 31, 2019.

The $144 million decrease in cash flow provided by operating activities from 2018 is primarily due to the increase in technology expenditures, driven by the execution of our technology strategy, including cloud migration, mainframe offload and utilization of agile development methods, which increases the expensed portion of our total technology spend and reduces net income.

Investing Activities

For the year ended December 31, 2021, we received proceeds of $25 million from the sale of certain investments and assets, offset by $54 million of cash used on capital expenditures primarily related to software developed for internal use.

For the year ended December 31, 2020, we had $69 million provided by proceeds from the sale of our two headquarter buildings.

Cash provided from the sale was offset by cash used of $65 million on capital expenditures, including $41 million related to software developed for internal use.

For the year ended December 31, 2019, we used cash of $243 million in investing activities, including $107 million used in the acquisition of Radixx, net of cash acquired, and $89 million related to software developed for internal use.

Additionally, we used cash of $20 million as an advance of purchase price to Farelogix for certain attorneys' fees.

Refer to Note 3.

Acquisitions for additional information on the now-terminated Farelogix acquisition agreement.

Financing Activities

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Significant highlights of our financing activities included:

• proceeds from borrowings under the Notes of $1,970 million;

• proceeds of $403 million and $642 million from the issuance of New Term B-1 Facility and New Term B-2 Facility, respectively;

• proceeds from borrowings under the Revolver of $25 million;

• payment of $661 million on Term Loan B and Other Term Loan B;

• payments of $400 million for the Revolver;

• net payments of $23 million from the settlement of employee stock-option awards;

• payment of $22 million in dividends on our preferred stock;

• payment of $12 million in debt prepayment fees and issuance costs;

• payment of $3 million for the settlement of exchangeable notes.

For the year ended December 31, 2020, proceeds from financing activities were $1,838 million.

Significant highlights of our financing activities included:

• proceeds from borrowings under the senior secured and exchangeable notes of $1,970 million;

• proceeds from issuance of stock of $598 million;

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• payment of $5 million on our capital leases.

For the year ended December 31, 2019, we used $410 million for financing activities.

Significant highlights of our financing activities included:

• payment of $154 million in dividends on our common stock;

• payment of $45 million on our revolving credit facility and $62 million ion our Term Loan A and Term Loan B, offset by proceeds of $45 million from borrowings on our revolving credit facility;

• annual payment on the TRA liability for $101 million, excluding interest;

• repurchase of 3,673,768 shares of our common stock outstanding totaling $78 million;

• net payments of $6 million from the settlement of employee stock-option awards, including $7 million in proceeds from the exercise of employee stock options, net of payments for $13 million in income tax withholdings associated with the settlement of employee stock-based awards.

Discontinued Travelocity Business

Cash flows used in discontinued operating activities were $3 million and $2 million for the years ended December 31, 2020 and 2019, respectively.

The cash flows used by discontinued operations for the year ended December 31, 2020 and 2019 primarily resulted from expenses associated with legal contingencies related to hotel occupancy taxes.

Contractual Obligations

As of December 31, 2020, our contractual obligations were as follows (in thousands):

Payments Due by Period

2021 2022 2023 2024 2025 Thereafter Total

Total debt (1)

$ 296,081 $ 278,424 $ 645,639 $ 1,959,950 $ 2,071,939 $ 664,817 $ 5,916,850

Operating lease obligations (2)

40,426 22,746 17,591 15,862 11,115 60,670 168,410

IT outsourcing agreement (3)

216,200 251,350 254,246 285,120 290,073 1,348,982 2,645,971

Purchase obligations (4)

134,074 41,257 22,577 12,001 12,000 24,000 245,909

Letters of credit (5)

5,656 3,536 — 135 347 — 9,674

Unrecognized tax benefits (6)

— — — — — 95,716 95,716

Total contractual cash obligations (7)

$ 692,437 $ 597,313 $ 940,053 $ 2,273,068 $ 2,385,474 $ 2,194,185 $ 9,082,530

_______________________

(1) Includes all interest and principal of borrowings under our senior secured credit facilities, senior secured notes due 2025, senior exchangeable notes due 2025 and finance lease obligations.

Under certain circumstances, we are required to pay a percentage of the excess cash flow, if any, generated each year to our lenders which obligation is not reflected in the table above.

Interest on the term loan is based on the LIBOR rate plus a base margin and includes the effect of interest rate swaps.

For purposes of this table, we have used projected LIBOR rates for all future periods.

Debt, to our consolidated financial statements.

(2) We lease approximately 1.3 million square feet of office space in 70 locations in 38 countries.

Lease payment escalations are based on fixed annual increases, local consumer price index changes or market rental reviews.

We have renewal options of various term lengths in approximately 50 leases.

We have no purchase options and no restrictions imposed by our leases concerning dividends or additional debt.

Leases, to our consolidated financial statements.

(3) Represents minimum amounts due to DXC under the terms of an outsourcing agreement through which DXC manages a significant portion of our information technology systems.

Also reflects minimum amounts due under other information technology agreements that contain minimum committed spend.

Actual payments may vary significantly from the minimum amounts presented.

(4) Purchase obligations represent an estimate of all open purchase orders and contractual obligations in the ordinary course of business for which we have not received the goods or services as of December 31, 2020.

(5) Our letters of credit consist of stand-by letters of credit, underwritten by a group of lenders, which we primarily issue in the normal course of business.

The contractual expiration dates of these letters of credit are shown in the table above.

There were no claims made against any standby letters of credit during the years ended December 31, 2020, 2019 and 2018.

(6) Unrecognized tax benefits include associated interest and penalties.

The timing of related cash payments for substantially all of these liabilities is inherently uncertain because the ultimate amount and timing of such liabilities is affected by factors which are variable and outside our control.

(7) Excludes pension obligations, see Note 16.

Pension and Other Postretirement Benefit Plans, to our consolidated financial statements.

Off Balance Sheet Arrangements

We had no off balance sheet arrangements during the years ended December 31, 2020, 2019 and 2018.

Recent Accounting Pronouncements

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Our accounting policies that include significant estimates and assumptions include:

(i) estimation for revenue recognition and multiple performance obligation arrangements, (ii) determination of the fair value of assets and liabilities acquired in a business combination, (iii) the evaluation of the recoverability of the carrying value of long-lived assets and goodwill, (iv) assumptions utilized to test recoverability of capitalized implementation costs, (v) judgments in capitalization of software developed for internal use, and (vi) the evaluation of uncertainties surrounding the calculation of our tax assets and liabilities.

(i) estimation for revenue recognition and multiple performance obligation arrangements, (ii) judgments used in our air booking cancellation reserve, (iii) estimation for our allowance for credit losses (iv) the evaluation of the recoverability of the carrying value of long-lived assets and goodwill, (v) assumptions utilized to test recoverability of capitalized implementation costs, (vi) the evaluation of uncertainties surrounding the calculation of our tax assets and liabilities, and (vii) estimation of loss contingencies.

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.

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In addition, from time to time, we enter into agreements with customers to provide access to Travel Solutions' GDS and, at or near the same time, enter into a separate agreement to provide IT solutions through SaaS and hosted delivery.

These multiple performance obligation arrangements involve judgments, including estimates of the selling prices of goods and services, attribution of variable consideration, assessments of the likelihood of nonpayment and estimates of total costs and costs to complete a project.

These multiple performance obligation arrangements involve judgments, including estimating the selling prices of goods and services, estimating the total contract consideration and allocating amounts to each distinct performance obligation, forecasting future volumes and estimating total costs and costs to complete a project.

Revenue recognition from our IT Solutions products requires significant judgments such as identifying distinct performance obligations including material rights within an agreement, estimating the total contract consideration and allocating amounts to each distinct performance obligation, determining whether variable pricing within a contract meets the allocation objective, and forecasting future volumes.

For a small subset of our contracts, we are required to forecast volumes as a result of pricing variability within the contract in order to calculate the rate for revenue recognition.

For a small number of our contracts, we are required to forecast volumes as a result of pricing variability within the contract in order to calculate the rate for revenue recognition.

Any changes in these judgments and estimates could have an impact on the revenue recognized in future periods.

Our forecasted volumes were significantly impacted in 2020 due to the impacts of COVID-19 on our customers which had, and will continue to have, a significant impact on our current and future revenues.

Our forecasted volumes were significantly impacted in 2020 and 2021 due to the impacts of COVID-19 on our customers which had, and will continue to have, a significant impact on our current and future revenues.

We evaluate revenue recognition for agreements with customers which generally are represented by individual contracts but could include groups of contracts if the contracts are executed at or near the same time.

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Deferred customer advances and discounts are reviewed for recoverability based on future contracted revenues and estimated direct costs of the contract when a significant event occurs that could impact the recoverability of the assets, such as a significant contract modification or early renewal of contract terms.

These assets are directly supported by estimates of Passengers Boarded and booking volumes for specific customers over their remaining contractual terms.

Due to the long-term nature of the relevant contracts, recovery of these assets is not sensitive to near-term declines in volumes such as those that have occurred in 2021.

For the year ended December 31, 2021, we did not impair any of these assets as a result of the related contracts becoming uncollectable, modified or canceled.

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Transaction revenue for airline travel reservations is recognized by Travel Solutions at the time of the booking of the reservation, net of estimated future cancellations.

Cancellations prior to the day of departure are estimated based on the historical level of cancellation rates, adjusted to take into account any recent factors which could cause a change in those rates.

Cancellations prior to the day of departure are estimated based on the historical and expected level of cancellation rates, adjusted to take into account any recent factors which could cause a change in those rates.

In circumstances where expected cancellation rates or booking behavior changes, our estimates are revised, and in these circumstances, future cancellation rates could vary materially, with a corresponding variation in revenue net of estimated future cancellations.

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Allowance for Credit Losses

We develop and document our methodology used in determining the allowance for credit losses at the portfolio segment level.

Within the travel portfolio segment, we identify airlines, hoteliers and travel agencies as each presenting unique risk characteristics associated with historical credit loss patterns unique to each and we determine the adequacy of our allowance for credit loss by assessing the risks and losses inherent in our receivables related to each.

We determine the allowance for credit losses at the portfolio segment level by assessing the risks and losses inherent in our receivables related to each segment.

Historical loss data provides the basis for estimating expected credit losses.

This data is then adjusted for asset-specific considerations, current economic conditions and reasonable and supportable forecasts.

Additionally, we utilize global GDP growth rates as the primary metric in forecasting the current expected credit loss ("CECL") forecast reserve on a quarterly basis.

As of December 31, 2021 , the five-year forward-looking growth rate approximates the data over the past 30 years and therefore no CECL forecast reserve was recorded.

We evaluate the collectability of our receivables based on a combination of factors.

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For all other customers, we record reserves for receivables, including unbilled receivables and contract assets, based on historical experience and the length of time the receivables are past due.

The estimate of credit losses is developed by analyzing historical twelve-month collection rates and adjusting for current customer-specific factors indicating financial instability and other macroeconomic factors that correlate with the expected collectability of our receivables.

All receivables aged over twelve months are fully reserved.

Macro economic factors, including the economic downtown, lack of liquidity in the capital markets resulting from the COVID-19 pandemic and lack of additional government funding, can have a significant effect on additions to the allowance as the pandemic may result in the restructuring or bankruptcy of additional customers.

Given the uncertainties surrounding the duration and effects of COVID-19, we cannot provide assurance that the assumptions used in our estimates will be accurate and actual write-offs may vary from our estimates, resulting in a material impact to our results of operations.

Given the uncertainties surrounding the duration and effects of COVID-19, we cannot provide assurance that the assumptions used in our estimates will be accurate and actual collections may vary from our estimates, resulting in a material impact to our results of operations.

Credit Losses, to our consolidated financial statements for further considerations involved in the development of this estimate.

Business Combinations

Authoritative guidance for business combinations requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values.

Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed.

While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, our estimates are inherently uncertain and, as a result, actual results may differ from estimates.

Accounting for business combinations requires our management to make significant estimates and assumptions, especially at the acquisition date including our estimates for intangible assets, contractual obligations assumed, pre-acquisition contingencies, contingent consideration, where applicable, and previously-held investment interests.

Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.

Examples of critical estimates in valuing certain of the intangible assets we have acquired include, but are not limited to:

future expected cash flows, support agreements, consulting contracts, other customer contracts, acquired developed technologies and patents;

the acquired company’s brand and competitive position, as well as assumptions about the period of time the acquired brand will continue to be used in the combined company’s product portfolio;

and discount rates.

Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.

For a given acquisition, we may identify certain pre-acquisition contingencies as of the acquisition date and may extend our review and evaluation of these pre-acquisition contingencies throughout the measurement period in order to obtain sufficient information to assess whether we include these contingencies as a part of the fair value estimates of assets acquired and liabilities assumed and, if so, to determine their estimated amounts.

If we cannot reasonably determine the fair value of a pre-acquisition contingency (non-income tax related) by the end of the measurement period, which is generally the case given the nature of such matters, we will recognize an asset or a liability for such pre-acquisition contingency if:

(i) it is probable that an asset existed or a liability had been incurred at the acquisition date and (ii) the amount of the asset or liability can be reasonably

Subsequent to the measurement period, changes in our estimates of such contingencies will affect earnings and could have a material effect on our results of operations and financial position.

Depending on the circumstances, the fair value of contingent consideration is determined based on management’s best estimate of fair value given the specific facts and circumstances of the contractual arrangement, considering the likelihood of payment, payment terms and management’s best estimates of future performance results on the acquisition date, if applicable.

In addition, uncertain tax positions and tax related valuation allowances assumed in connection with a business combination are initially estimated as of the acquisition date.

We reevaluate these items quarterly based upon facts and circumstances that existed as of the acquisition date with any adjustments to our preliminary estimates being recorded to goodwill if identified within the measurement period.

Subsequent to the measurement period or our final determination of the tax allowance’s or contingency’s estimated value, whichever comes first, changes to these uncertain tax positions and tax-related valuation allowances will affect our provision for income taxes in our consolidated statement of operations and could have a material impact on our results of operations and financial position.

Goodwill and Long-Lived Assets

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Goodwill related to our reporting units totaled $2.5 billion as of December 31, 2021.

Due to triggering events related to the COVID-19 pandemic, we performed a quantitative assessment, as of March 31, 2020.

This assessment was based on our current projections and was subject to various risks, uncertainties and estimates including:

(1) forecasted revenues, expenses and cash flows, including future travel supplier capacity and load factors on those estimates and technology costs, (2) the duration and extent of the impact of the COVID-19 pandemic on our business and our customers, (3) current discount and long-term growth rates, (4) the reduction in our market capitalization, (5) current market transaction trends and (6) changes to the regulatory environment impacting our industry.

Fair Value Measurements, to our consolidated financial statements.

In estimating fair value, we considered current estimates of recovery in global passenger traffic volume to pre-COVID-19 levels.

Should a significant change in the estimated recovery period elongate further than our expectations, it could have a material impact on our estimates of fair value.

Additionally, we increased discount rates to account for increased risk within our business and estimates.

Our interim quantitative impairment assessment as of March 31, 2020 determined that our goodwill was not impaired.

We updated our goodwill assessment quarterly on a qualitative basis during 2020 and determined that our goodwill was not impaired at any reporting date in 2020.

Our qualitative assessments considered recent information available regarding the anticipated duration of the recovery period which we believe to be a key assumption, including information as of November 2020 from the International Air Transport Association (IATA) that forecast in its base-case scenario that global passenger traffic is not expected to return to pre-COVID-19 levels until 2024.

As of December 31, 2020, based on a qualitative analysis, the fair value exceeded the carrying value for each of our two reporting units by more than 20%.

Additionally, we did not record any goodwill impairment charges for the years ended December 31, 2019 and 2018.

We evaluate goodwill for impairment on an annual basis or when impairment indicators exist.

We begin our evaluation with a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying value before applying a quantitative assessm ent.

Our qualitative assessments considered recent information available regarding the anticipated duration of the recovery period which we believe to be a key assumption, including information as of April 2021 from the International Air Transport Association ("IATA") that forecast in its base-case scenario that global passenger traffic is not expected to return to pre-COVID-19 levels until 2024.

If it is determined through the evaluation of events or circumstances that the carrying value may not be recoverable, we perform a comparison of the estimated fair value of the reporting unit to which the goodwill has been assigned to the sum of the carrying value of the assets and liabilities of that unit.

If the sum of the carrying value of the assets and liabilities of a reporting unit exceeds the estimated fair value of that reporting unit, the carrying value of the reporting unit’s goodwill is reduced to its fair value through an adjustment to the goodwill balance, resulting in an impairment charge.

The determination of fair value requires us to make significant judgments and estimates including cash flow projections and assumptions related to market participants, the principal markets, and the highest and best use of the reporting units.

Changes in the assumptions used in our impairment testing may result in future impairment losses which could have a material impact on our results of ope rations.

As of December 31, 2021, based on a qualitative review of Goodwill, it is more likely than not that fair value exceeds carrying value;

therefore, we deemed it reasonable not to perform a quantitative impairment analysis.

W e did not record any goodwill impairment charges for the years ended December 31, 2021, 2020 and 2019.

As part of this disposition, we allocated goodwill of $153 million from the Travel Solutions reporting unit to assets held for sale as of December 31, 2021 based on relative fair value.

The determination of fair value of both the Travel Solutions reporting unit and the AirCentre business requires us to make judgements and estimates including cash flow projections and assumptions related to the value of this portfolio in the principal market.

We evaluated goodwill for impairment both prior and subsequent to allocation to the held for sale assets.

We did not record any goodwill impairment charges as a result of this evaluation for the year ended December 31, 2021.

Definite-lived intangible assets are assigned depreciable lives of two to thirty years, depending on classification, and are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of definite-lived intangible assets used in combination to generate cash flows largely independent of other assets may not be recoverable.

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Recoverability is measured based on the future estimated revenue and direct costs of the contract compared to the capitalized implementation costs.

During 2020, we considered current estimates of recovery from the COVID-19 pandemic to 2019 levels, which we believe to be a key assumption in our assessment of recoverability.

During 2021 and 2020, we considered current estimates of recovery from the COVID-19 pandemic to 2019 levels, which we believe to be a key assumption in our assessment of recoverability.

We record an impairment charge for the portion of the asset considered unrecoverable in the period identified, while considering the uncertainties associated with these types of contracts and judgments made in estimating revenue and direct costs.

For the year ended December 31, 2020, we recorded $10 million in impairments associated with unrecoverable amounts in capitalized

implementation costs.

These assets are directly supported by estimates of Passengers Boarded and booking volumes for specific customers over their remaining contractual terms.

Due to the long-term nature of the relevant contracts, recovery of these assets is not sensitive to near-term declines in volumes such as those that have occurred in 2021 and 2020.

For the year ended December 31, 2021, we recorded $1 million in impairments associated with unrecoverable amounts in capitalized implementation costs.

During the year ended December 31, 2020, we recorded $10 million in impairments associated with unrecoverable amounts in capitalized implementation costs.

Capitalized Software Developed for Internal Use

We capitalize certain costs related to our infrastructure, software applications and reservation systems under authoritative guidance on software developed for internal use during the application development stage.

Costs related to preliminary and post project development activities are expensed as incurred.

When determining whether applicable costs qualify for capitalization, we use judgment in distinguishing between the preliminary project and application development stages of the project and in determining whether these costs result in additional functionality for existing internal use software.

In 2019, our development teams substantially completed the transition to utilizing the agile development methodology, which is characterized by a more dynamic development process with iterative activities that involve planning, design, coding and testing.

This methodology requires additional review of the stages to ensure the applicable criteria are met for capitalization and may be less likely to meet the criteria for capitalization.

As we expected, this transition towards implementing this methodology reduced our capitalization of certain costs with a corresponding increase in our product and technology operating expenses.

Costs that cannot be separated between maintenance of, and relatively minor upgrades and enhancements to, internal use software are also expensed as incurred.

During the years ended December 31, 2020, 2019 and 2018, we capitalized $41 million, $89 million, and $252 million, respectively, related to software developed for internal use.

During the year ended December 31, 2020, we recorded an impairment charge of $5 million associated with software developed for internal use based on our analysis of the recoverability of such amounts.

Income and Non-Income Taxes

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A change in these assumptions could cause an increase or decrease to the valuation allowance resulting in an increase or decrease in the effective tax rate, which could materially impact our results of operations.

The COVID-19 pandemic has caused increased uncertainty in determining certain key assumptions within the assessment of our future taxable income upon which recognition of deferred tax assets is assessed.

The COVID-19 pandemic has caused increased uncertainty in determining certain key assumptions within the assessment of our future taxable income upon which recognition of deferred tax

assets is assessed.

At year end, we had a valuation allowance on a portion of our deferred tax assets based on our assessment that it is more likely than not that the deferred tax asset will not be realized.

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Significant losses related to COVID-19 resulted in a three-year cumulative loss in certain jurisdictions, which represents significant negative evidence regarding the ability to realize deferred tax assets.

As a result, we established a valuation allowance on a portion of our U.S.

deferred tax assets of $165 million as of December 31, 2020.

We also established and maintained a U.S.

state valuation allowance on current year losses and other deferred tax assets of $15 million and $5 million as of December 31, 2020 and 2019, respectively.

deferred tax assets of certain subsidiaries, we established and maintained a valuation allowance on current year losses and other deferred tax assets of $71 million and $33 million as of December 31, 2020 and 2019, respectively.

As a result, we maintain a cumulative valuation allowance on our U.S.

federal and state deferred tax assets of $322 million and $22 million, respectively as of December 31, 2021.

deferred tax assets of certain subsidiaries, we maintained a cumulative valuation allowance on current year losses and other deferred tax assets of $86 million as of December 31, 2021 .

We reassess these assumptions regularly, which could cause an increase or decrease to the valuation allowance resulting in an increase or decrease in the effective tax rate, and could materially impact our results of operations.

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Because we operate globally, the nature of the uncertain tax positions is often very complex and subject to change, and the amounts at issue can be substantial.

It is inherently difficult and subjective to estimate such amounts, as we have to determine the probability of various possible outcomes.

It is inherently difficult and subjective to estimate such amounts, as we must determine the probability of various possible outcomes.

We re-evaluate uncertain tax positions on a quarterly basis.

This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit and new audit activity.

At December 31, 2020 and 2019, we had a liability, including interest and penalty, of $96 million and $81 million, respectively, for unrecognized tax benefits, of which $77 million and $63 million, respectively, would affect our effective tax rate if recognized.

At December 31, 2021 and 2020, we had a liability, including interest and penalty, of $110 million and $96 million, respectively, for unrecognized tax benefits, of whic h $98 million and $77 million , respectively, would affect our effective tax rate if recognized.

Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the provision for income taxes from continuing operations.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis