Sabre Corp 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements This Quarterly Report on Form 10-Q, including this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2, contains information that may constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts, such as statements regarding our future financial condition or results of operations, our prospects and strategies for future growth, the development and introduction of new products, and the implementation of our marketing and branding strategies. In many cases, you can identify forward-looking statements by terms such as “expects,” “outlook,” "intends," "will," "may," "believes," “plans,” “provisional,” “predicts,” “potential,” “anticipates,” “estimates,” “should,” “could,” “likely,” “commit,” “guidance,” “anticipate,” “incremental,” “preliminary,” “forecast,” “continue,” “strategy,” “confidence,” “momentum,” “estimate,” “objective,” “project,” or the negative of these terms or other comparable terminology. The forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions and are subject to risks, uncertainties and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Certain of these risks, uncertainties and changes in circumstances are described in the "Risk Factors" section of this Quarterly Report on Form 10-Q and in the “Risk Factors” and “Forward-Looking Statements” sections included in our Annual Report on Form 10-K filed with the SEC on February 18, 2022. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, outlook, guidance, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. Unless required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements to reflect circumstances or events after the date they are made. The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes contained elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed with the SEC on February 18, 2022. Overview We connect people and places with technology that reimagines the business of travel. 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. A significant portion of our revenue is generated through transaction-based fees that we charge to our customers. For Travel Solutions, we generate revenue from our distribution activities through transaction fees for bookings on our global distribution system ("GDS"), and from our IT solutions through recurring usage-based fees for the use of our Software-as-a-Service ("SaaS") and hosted systems, as well as upfront fees and professional services fees. For Hospitality Solutions, we generate revenue from recurring usage-based fees for the use of our SaaS and hosted systems, as well as upfront fees and professional services fees. Items that are not allocated to our business segments are identified as corporate and primarily include stock-based compensation expense, litigation costs, corporate headcount-related costs and other items that are not identifiable with either of our segments. Recent Developments Affecting our Results of Operations The travel industry continues to be adversely affected by the global health crisis due to the outbreak of the coronavirus ("COVID-19"), including variants, as well as by government directives that have been enacted to slow the spread of the virus. 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 and 2022. Despite the continued negative impacts of the COVID-19 pandemic on our business and global travel volumes, as COVID-19 vaccines have continued to be administered and some travel restrictions have been relaxed, we have seen some gradual improvement in our key volume metrics during 2021 and 2022. With the continued increase in volumes, our incentive consideration costs are also increasing significantly compared to 2021 and 2020. The inputs into our judgments and estimates consider the economic implications of COVID-19 on our critical and significant accounting estimates. Our air booking cancellation reserve totaled $15 million and $18 million as of March 31, 2022, and December 31, 2021, respectively. Additionally, the provision for credit losses for the three months ended March 31, 2022 was $2 million, and for the three months ended March 31, 2021 was a reversal of $2 million due to the recovery experienced in 2021. See Note 5. Credit Losses. Given the uncertainties surrounding the duration and effects of COVID-19, including any variants, on transaction volumes in the global travel industry, particularly air travel transaction volumes and future cancellation activity, including from airlines’ insolvency or suspension of service or aircraft groundings, we cannot provide assurance that the assumptions used in the estimates will be accurate and the impacts could be material on our cancellation reserves, credit loss provisions and results of operations. 23 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 since 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. On October 28, 2021, we announced that we 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. On February 28, 2022, we sold the AirCentre product portfolio, related technology and intellectual property for $392 million . We recorded a pre-tax gain on sale of approximately $192 million (after-tax $121 million ) in Other, net in our consolidated statements of operations for the three months ended March 31, 2022. In connection with the closing, we entered 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. See Note 3. Dispositions for further details. Subsequent to the initiation of the current military conflict in Ukraine, we terminated our distribution agreement with Aeroflot. In addition, air travel in and to Russia, Ukraine, and Belarus has substantially declined, including as a result of sanctions imposed on those countries. While none of Russia, Ukraine, and Belarus constituted a significant portion of our financial results in 2021, we have experienced significantly reduced GDS bookings and passengers boarded in Russia, Belarus, and Ukraine beginning in the middle of the first quarter of 2022, and these reductions are ongoing. For reference, our Travel Solutions revenue generated in Russia represented a low-single digit percentage of our total 2019 Travel Solutions revenue. An expansion in the scope of the current conflict or any economic disruption, or any expansion of sanctions or export controls, could have a material adverse effect on our results of operations. See “Risk Factors—Our business could be harmed by adverse global and regional economic and political conditions.” During the three months ended March 31, 2022, we recognized $24 million of previously deferred revenue due to a change in facts and circumstances associated with an IT Solutions customer located in Eastern Europe. It is no longer considered probable that this revenue will be reversed and this amount was fully paid by the customer. See Note 2. Revenue from Contracts with Customers for details regarding the impact on revenue. Our consolidated balance sheets include net assets of approximately $15 million as of March 31, 2022 related to customers located in Russia. If our performance under our IT Solutions agreements with such customers were terminated, or if we are unable to collect amounts due to us in the future, these net assets could be impaired. Factors Affecting our Results In addition to the "—Recent Developments Affecting our Results of Operations" above, a discussion of trends that we believe are the most significant opportunities and challenges currently impacting our business and industry is included in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting our Results” in our Annual Report on Form 10-K filed with the SEC on February 18, 2022. The discussion also includes management’s assessment of the effects these trends have had and are expected to have on our results of continuing operations. This information is not an exhaustive list of all of the factors that could affect our results and should be read in conjunction with the factors referred to in the sections entitled “Risk Factors” and "Forward-Looking Statements" included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K filed with the SEC on February 18, 2022. 24 Components of Revenues and Expenses Revenues Travel Solutions generates revenues from distribution activities through Direct Billable Bookings processed on our GDS, adjusted for estimated cancellations of those bookings. Travel Solutions also generates revenues from IT solutions activities from its product offerings including reservation systems for full-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. Recognition of license fees upon delivery has previously resulted and will continue to result in periodic fluctuations in revenue recognized. Hospitality Solutions generates revenue through upfront solution fees and recurring usage-based fees for the use of our software solutions hosted on secure platforms or deployed through our SaaS and through other professional service fees including Digital Experience ("DX"). Certain professional service fees are discrete sales opportunities that may have a high degree of variability from period to period, and we cannot guarantee that we will have such fees in the future consistent with prior periods. Cost of revenue, excluding technology costs Cost of revenue, excluding technology costs, incurred by Travel Solutions and Hospitality Solutions consists primarily of costs associated with the delivery and distribution of our products and services and includes employee-related costs for our delivery, customer operations and call center teams as well as allocated overhead such as facilities and other support costs. Cost of revenue, excluding technology costs, for Travel Solutions also includes incentive consideration expense representing payments or other consideration to travel agencies for reservations made on our GDS which accrue on a monthly basis. Cost of revenue, excluding technology costs, also includes amortization of upfront incentive consideration representing upfront payments or other consideration provided to travel agencies for reservations made on our GDS which are capitalized and amortized over the expected life of the contract. The technology costs excluded from Cost of revenue, excluding technology costs, are presented separately below. Corporate cost of revenue, excluding technology costs, includes certain expenses such as stock-based compensation, restructuring charges and other items not identifiable with either of our segments. Depreciation and amortization included in cost of revenue, excluding technology costs, is associated with capitalized implementation costs and intangible assets associated with contracts, supplier and distributor agreements purchased through acquisitions or established with our take private transaction in 2007. Technology Costs Technology costs incurred by Travel Solutions and Hospitality Solutions consist of expenses related to third-party providers and employee-related costs to operate technology operations including hosting, third-party software, and other costs associated with the maintenance and minor enhancement of our technology. Technology costs also include costs associated with our technology transformation efforts. Technology costs are less variable in nature and therefore may not correlate with related changes in revenue. Depreciation and amortization included in technology costs is associated with software developed for internal use that supports our products, assets supporting our technology platform, businesses and systems and intangible assets for technology purchased through acquisitions or established through the take private transaction in 2007. Selling, General and Administrative Expenses Selling, general and administrative expenses consist of professional service fees, certain settlement charges or reimbursements, costs to defend legal disputes, provision for expected credit losses, other overhead costs, and personnel-related expenses, including stock-based compensation, for employees engaged in sales, sales support, account management and who administratively support the business in finance, legal, human resources, information technology and communications. Depreciation and amortization included in selling, general and administrative expenses is associated with property and equipment, acquired customer relationships, trademarks and brand names purchased through acquisitions or established through the take private transaction in 2007. Intersegment Transactions We account for significant intersegment transactions as if the transactions were with third parties, that is, at estimated current market prices. Hospitality Solutions pays fees to Travel Solutions for hotel stays booked through our GDS. 25 Key Metrics “Direct Billable Bookings” and “Passengers Boarded” are the primary metrics utilized by Travel Solutions to measure operating performance. Travel Solutions generates distribution revenue for each Direct Billable Booking, which includes bookings made through our GDS (e.g., Air, and Lodging, Ground and Sea ("LGS")) and through our equity method investments in cases where we are paid directly by the travel supplier. Air Bookings are presented net of bookings cancelled within the period presented. Travel Solutions also recognizes IT solutions revenue from recurring usage-based fees for Passengers Boarded ("PBs"). The primary metric utilized by Hospitality Solutions is booking transactions processed through the Sabre Hospitality Solutions SynXis Central Reservation System (the "HS Central Reservation System"). These key metrics allow management to analyze customer volume over time for each of our product lines to monitor industry trends and analyze performance. We believe that these key metrics are useful for investors and other third parties as indicators of our financial performance and industry trends. While these metrics are based on what we believe to be reasonable estimates of our transaction counts for the applicable period of measurement, there are inherent challenges associated with their measurement. In addition, we are continually seeking to improve our estimates of these metrics, and these estimates may change due to improvements or changes in our methodology. The following table sets forth these key metrics for the periods indicated (in thousands): Three Months Ended March 31, 2022 2021 % Change Travel Solutions Direct Billable Bookings - Air 57,550 35,289 63.1% Direct Billable Bookings - LGS 7,428 3,654 103.3% Distribution Total Direct Billable Bookings 64,978 38,943 66.9% IT Solutions Passengers Boarded 129,163 75,189 71.8% Hospitality Solutions Central Reservations System Transactions 23,028 17,560 31.1% Definitions of Non-GAAP Financial Measures We have included both financial measures compiled in accordance with GAAP and certain non-GAAP financial measures in this Quarterly Report on Form 10-Q, including Adjusted Operating Loss , Adjusted Net Loss from continuing operations ("Adjusted Net Loss"), Adjusted EBITDA, Free Cash Flow and ratios based on these financial measures. We define Adjusted Operating Loss as operating loss adjusted for equity method loss, acquisition-related amortization, restructuring and other costs, acquisition-related costs, litigation costs, net, and stock-based compensation. We define Adjusted Net Loss as net income (loss) attributable to common stockholders adjusted for loss from discontinued operations, net of tax, net income attributable to noncontrolling interests, preferred stock dividends, 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 income (loss) from continuing operations adjusted for depreciation and amortization of property and equipment, amortization of capitalized implementation costs, acquisition-related amortization, restructuring and other costs, interest expense, net, other, net, loss on extinguishment of debt, acquisition-related costs, litigation costs, net, stock-based compensation and the remaining (benefit) provision for income taxes. We define Free Cash Flow as cash used in operating activities less cash used in additions to property and equipment. We define Adjusted Net Loss from continuing operations per share as Adjusted Net Loss divided by adjusted diluted weighted-average common shares outstanding. These non-GAAP financial measures are key metrics used by management and our board of directors to monitor our ongoing core operations because historical results have been significantly impacted by events that are unrelated to our core operations as a result of changes to our business and the regulatory environment. We believe that these non-GAAP financial measures are used by investors, analysts and other interested parties as measures of financial performance and to evaluate our ability to service debt obligations, fund capital expenditures, fund our investments in technology transformation, and meet working capital requirements. We also believe that Adjusted Operating Loss, Adjusted Net Loss and Adjusted EBITDA assist investors in company-to-company and period-to-period comparisons by excluding differences caused by variations in capital structures (affecting interest expense), tax positions and the impact of depreciation and amortization expense. In addition, amounts derived from Adjusted EBITDA are a primary component of certain covenants under our senior secured credit facilities. 26 Adjusted Operating Loss, Adjusted Net Loss, Adjusted EBITDA, Free Cash Flow and ratios based on these financial measures are not recognized terms under GAAP. These non-GAAP financial measures and ratios based on them are unaudited and have important limitations as analytical tools, and should not be viewed in isolation and do not purport to be alternatives to net income as indicators of operating performance or cash flows from operating activities as measures of liquidity. These non-GAAP financial measures and ratios based on them exclude some, but not all, items that affect net income or cash flows from operating activities and these measures may vary among companies. Our use of these measures has limitations as an analytical tool, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. Some of these limitations are: • these non-GAAP financial measures exclude certain recurring, non-cash charges such as stock-based compensation expense and amortization of acquired intangible assets; • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash requirements for such replacements; • Adjusted EBITDA does not reflect amortization of capitalized implementation costs associated with our revenue contracts, which may require future working capital or cash needs in the future; • Adjusted Operating Loss, Adjusted Net Loss and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; • Adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness; • Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; • Free Cash Flow removes the impact of accrual-basis accounting on asset accounts and non-debt liability accounts, and does not reflect the cash requirements necessary to service the principal payments on our indebtedness; and • other companies, including companies in our industry, may calculate Adjusted Operating Loss, Adjusted Net Loss, Adjusted EBITDA or Free Cash Flow differently, which reduces their usefulness as comparative measures. 27 The following table sets forth the reconciliation of Net income (loss) attributable to common stockholders to Adjusted Net Loss from continuing operations, Operating loss to Adjusted Operating Loss, and Income (loss) from continuing operations to Adjusted EBITDA (in thousands): Three Months Ended March 31, 2022 2021 Net income (loss) attributable to common stockholders $ 42,060 $ (266,106) (Income) loss from discontinued operations, net of tax (134) 263 Net income attributable to noncontrolling interests (1) 272 484 Preferred stock dividends 5,346 5,428 Income (loss) from continuing operations 47,544 (259,931) Adjustments: Acquisition-related amortization (2a) 15,803 16,221 Restructuring and other costs (4) — (5,135) Loss on extinguishment of debt 3,533 — Other, net (3) (191,241) (11,631) Acquisition-related costs (5) 3,664 720 Litigation costs, net (6) 3,475 730 Stock-based compensation 27,605 24,426 Tax impact of adjustments (7) (3,552) 6,326 Adjusted Net Loss from continuing operations $ (93,169) $ (228,274) Adjusted Net Loss from continuing operations per share $ (0.29) $ (0.72) Adjusted diluted weighted-average common shares outstanding 323,658 317,634 Operating loss $ (79,532) $ (202,553) Add back: Equity method loss (170) (911) Acquisition-related amortization (2a) 15,803 16,221 Restructuring and other costs (4) — (5,135) Acquisition-related costs (5) 3,664 720 Litigation costs, net (6) 3,475 730 Stock-based compensation 27,605 24,426 Adjusted Operating Loss $ (29,155) $ (166,502) Income (loss) from continuing operations $ 47,544 $ (259,931) Adjustments: Depreciation and amortization of property and equipment (2b) 26,966 48,592 Amortization of capitalized implementation costs (2c) 7,339 8,410 Acquisition-related amortization (2a) 15,803 16,221 Restructuring and other costs (4) — (5,135) Interest expense, net 61,058 64,101 Other, net (3) (191,241) (11,631) Loss on extinguishment of debt 3,533 — Acquisition-related costs (5) 3,664 720 Litigation costs, net (6) 3,475 730 Stock-based compensation 27,605 24,426 (Benefit) provision for income taxes (596) 3,997 Adjusted EBITDA $ 5,150 $ (109,500) The following table sets forth the reconciliation of diluted weighted-average common shares outstanding, calculated in 28 accordance with GAAP, to the adjusted diluted weighted-average shares outstanding (in thousands): Three Months Ended March 31, 2022 2021 GAAP diluted weighted-average common shares outstanding 409,378 317,634 Less: Dilutive effect of stock options and restricted stock awards 4,251 — Less: Dilutive effect of exchangeable notes 42,302 — Less: Dilutive effect of preferred shares 39,167 — Adjusted diluted weighted-average common shares outstanding 323,658 317,634 The following tables set forth the reconciliation of Adjusted Operating Income (Loss) to Operating income (loss) in our statement of operations and Adjusted EBITDA to Income (loss) from continuing operations in our statement of operations by business segment (in thousands): Three Months Ended March 31, 2022 Travel Solutions Hospitality Solutions Corporate Total Adjusted Operating Income (Loss) $ 45,306 $ (15,117) $ (59,344) $ (29,155) Less: Equity method loss (170) — — (170) Acquisition-related amortization (2a) — — 15,803 15,803 Acquisition-related costs (5) — — 3,664 3,664 Litigation costs, net (6) — — 3,475 3,475 Stock-based compensation — — 27,605 27,605 Operating income (loss) $ 45,476 $ (15,117) $ (109,891) $ (79,532) Adjusted EBITDA $ 73,560 $ (9,317) $ (59,093) $ 5,150 Less: Depreciation and amortization of property and equipment (2b) 22,115 4,600 251 26,966 Amortization of capitalized implementation costs (2c) 6,139 1,200 — 7,339 Acquisition-related amortization (2a) — — 15,803 15,803 Acquisition-related costs (5) — — 3,664 3,664 Litigation costs, net (6) — — 3,475 3,475 Stock-based compensation — — 27,605 27,605 Equity method loss (170) — — (170) Operating income (loss) $ 45,476 $ (15,117) $ (109,891) $ (79,532) Interest expense, net (61,058) Other, net (3) 191,241 Loss on extinguishment of debt (3,533) Equity method loss (170) Benefit for income taxes 596 Income from continuing operations $ 47,544 29 Three Months Ended March 31, 2021 Travel Solutions Hospitality Solutions Corporate Total Adjusted Operating Loss $ (106,133) $ (13,587) $ (46,782) $ (166,502) Less: Equity method loss (911) — — (911) Acquisition-related amortization (2a) — — 16,221 16,221 Restructuring and other costs (4) — — (5,135) (5,135) Acquisition-related costs (5) — — 720 720 Litigation costs, net (6) — — 730 730 Stock-based compensation — 24,426 24,426 Operating loss $ (105,222) $ (13,587) $ (83,744) $ (202,553) Adjusted EBITDA $ (57,363) $ (5,660) $ (46,477) $ (109,500) Less: Depreciation and amortization of property and equipment (2b) 41,372 6,915 305 48,592 Amortization of capitalized implementation costs (2c) 7,398 1,012 — 8,410 Acquisition-related amortization (2a) — — 16,221 16,221 Restructuring and other costs (4) — — (5,135) (5,135) Acquisition-related costs (5) — — 720 720 Litigation costs, net (6) — — 730 730 Stock-based compensation — — 24,426 24,426 Equity method loss (911) — — (911) Operating loss $ (105,222) $ (13,587) $ (83,744) $ (202,553) Interest expense, net (64,101) Other, net (3) 11,631 Equity method loss (911) Provision for income taxes (3,997) Loss from continuing operations $ (259,931) The following tables present information from our statements of cash flows and set forth the reconciliation of Free Cash Flow to cash used in operating activities, the most directly comparable GAAP measure (in thousands): Three Months Ended March 31, 2022 2021 Cash used in operating activities $ (139,083) $ (197,403) Cash provided by investing activities 374,865 8,405 Cash used in financing activities (25,835) (24,221) Three Months Ended March 31, 2022 2021 Cash used in operating activities $ (139,083) $ (197,403) Additions to property and equipment (17,403) (6,435) Free Cash Flow $ (156,486) $ (203,838) ______________________________ (1) Net income attributable to noncontrolling interests represents an adjustment to include earnings allocated to noncontrolling interests held in (i) Sabre Travel Network Middle East of 40%, (ii) Sabre Seyahat Dagitim Sistemleri A.S. of 40%, (iii) Sabre Travel Network Lanka (Pte) Ltd of 40%, and (iv) Sabre Bulgaria of 40%. (2) Depreciation and amortization expenses: (a) Acquisition-related amortization represents amortization of intangible assets from the take-private transaction in 2007 as well as intangibles associated with acquisitions since that date. (b) Depreciation and amortization of property and equipment includes software developed for internal use as well as amortization of contract acquisition costs. (c) Amortization of capitalized implementation costs represents amortization of upfront costs to implement new customer contracts under our SaaS and hosted revenue model. (3) Other, net includes a $192 million gain on the sale of AirCentre during the three months ended March 31, 2022 and a $15 million gain on sale of equity securities during the three months ended March 31, 2021. 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. 30 (4) Restructuring and other costs represents charges, and adjustments to those charges, associated with business restructuring and associated changes as well as other measures to support the new organizational structure and to respond to the impacts of the COVID-19 pandemic on our business, facilities and cost structure. (5) Acquisition-related costs represent fees and expenses incurred associated with the AirCentre disposition and other potential transactions. (6) Litigation costs, net represent charges associated with antitrust litigation and other foreign non-income tax contingency matters. See Note 13. Contingencies, to our consolidated financial statements. (7) The tax impact of adjustments includes the tax effect of each separate adjustment based on the statutory tax rate for the jurisdiction(s) in which the adjustment was taxable or deductible, the impact of the adjustments on valuation allowance assessments, and the tax effect of items that relate to tax specific financial transactions, tax law changes, uncertain tax positions, and other items. Results of Operations The following table sets forth our consolidated statements of operations data for each of the periods presented: Three Months Ended March 31, 2022 2021 (Amounts in thousands) Revenue $ 584,910 $ 327,484 Cost of revenue, excluding technology costs 223,034 146,761 Technology costs 273,730 252,663 Selling, general and administrative 167,678 130,613 Operating loss (79,532) (202,553) Interest expense, net (61,058) (64,101) Loss on debt extinguishment (3,533) — Equity method loss (170) (911) Other, net 191,241 11,631 Income (loss) from continuing operations before income taxes 46,948 (255,934) (Benefit) provision for income taxes (596) 3,997 Income (loss) from continuing operations $ 47,544 $ (259,931) Three Months Ended March 31, 2022 and 2021 Revenue Three Months Ended March 31, 2022 2021 Change (Amounts in thousands) Travel Solutions $ 533,998 $ 288,875 $ 245,123 85 % Hospitality Solutions 56,004 42,215 13,789 33 % Total segment revenue 590,002 331,090 258,912 78 % Eliminations (5,092) (3,606) (1,486) (41) % Total revenue $ 584,910 $ 327,484 $ 257,426 79 % Travel Solutions— Revenue increased $245 million, or 85%, for the three months ended March 31, 2022 compared to the same period in the prior year, primarily due to: • a $191 million, or 126%, increase in transaction-based distribution revenue due to a 67% increase in Direct Billable Bookings to 65 million primarily as a result of continued recovery trends from the COVID-19 pandemic and favorable rate impacts as international and corporate bookings have improved at an accelerating rate since January 2022; and • a $54 million increase in IT solutions revenue consisting of a $42 million, or 102%, increase in reservation revenue primarily due to a 72% increase in Passengers Boarded to 129 million as a result of continued recovery trends from the COVID-19 pandemic and $24 million of previously deferred revenue recognized during the three months ended March 31, 2022 due to a change in facts and circumstances associated with an Eastern European customer. See Note 2. Revenue from Contracts with Customers . This increase was pa rtially offset by an unfavorable rate mix due to revenue that does not fluctuate with our volumes. Additionally, commercial and operations revenue increased $12 million primarily due to license fee revenue related to AirCentre recognized upon delivery to the customer and increased volumes from the existing cust omer base, partially offset by reduced revenue due to the sale of our AirCentre portfolio on February 28, 2022. Recognition of license fees upon delivery has previously resulted and will continue to result in periodic fluctuations in revenue recognized. 31 Hospitality Solutions— Revenue increased $14 million, or 33%, for the three months ended March 31, 2022 compared to the same period in the prior year. The increase was primarily driven by an $11 million increase in SynXis Software and Services revenue due to an increase in transaction volumes of 31% to 23 million, as a result of continued recovery from the COVID-19 pandemic and an increase of $3 million in DX revenue. Cost of revenue, excluding technology costs Three Months Ended March 31, 2022 2021 (1) Change (Amounts in thousands) Travel Solutions $ 189,754 $ 117,217 $ 72,537 62 % Hospitality Solutions 27,725 19,877 7,848 39 % Eliminations (5,092) (3,606) (1,486) (41) % Total segment cost of revenue, excluding technology costs 212,387 133,488 78,899 59 % Corporate 1,978 3,140 (1,162) (37) % Depreciation and amortization 8,669 10,133 (1,464) (14) % Total cost of revenue, excluding technology costs $ 223,034 $ 146,761 $ 76,273 52 % ______________________ (1) Certain amounts previously presented for the three months ended March 31, 2021 have been reclassified between Travel Solutions and Corporate; total cost of revenue, excluding technology costs, was not impacted by this reclassification. Travel Solutions— Cost of revenue, excluding technology costs, increased $73 million, or 62%, for the three months ended March 31, 2022 compared to the same period in the prior year. The increase was primarily driven by a $78 million increase in incentive consideration due to higher transaction volume given continued recovery from the COVID-19 pandemic. This increase was slightly offset by a decrease in labor and professional services costs resulting from the sale of AirCentre and other labor related expenses. Hospitality Solutions— Cost of revenue, excluding technology costs, increased $8 million, or 39%, for the three months ended March 31, 2022 compared to the same period in the prior year primarily due to costs associated with increased transaction volumes. Depreciation and amortization —Depreciation and amortization decreased $1 million, or 14%, for the three months ended March 31, 2022 compared to the same period in the prior year primarily due to the sale of previously held for sale assets within our AirCentre portfolio that incurred no depreciation charges for the current quarter. Technology Costs Three Months Ended March 31, 2022 2021 Change (Amounts in thousands) Travel Solutions $ 225,144 $ 213,697 $ 11,447 5 % Hospitality Solutions 28,560 22,420 6,140 27 % Corporate 20,026 16,546 3,480 21 % Total technology costs $ 273,730 $ 252,663 $ 21,067 8 % Travel Solutions— Technology costs increased $11 million, or 5%, for the three months ended March 31, 2022 compared to the same period in the prior year. The increase was primarily driven by a $25 million increase in technology costs due to higher transaction volumes given continued recovery from the COVID-19 pandemic and expected temporary costs resulting from our cloud migration efforts. Additionally, labor and professional services increased $5 million to support our technology transformation initiatives. We expect to incur a significant amount of incremental technology costs in 2022 over the prior year as a result of our technology transformation. These increases were partially offset by a decrease in depreciation and amortization of $18 million primarily due to a change in the mix of our technology spend beginning in 2019 resulting in less capitalized internal use software as well as a reduction due to the sale of our AirCentre portfolio as these assets were classified as held for sale as of December 31, 2021 and incurred no depreciation for the three months ended March 31, 2022. 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 beginning in 2019 and due to the sale of our AirCentre portfolio. Hospitality Solutions— Technology costs increased $6 million, or 27%, for the three months ended March 31, 2022 compared to the same period in the prior year due to a $6 million increase in labor and professional services costs and a $2 million increase in technology costs to support our technology transformation initiatives. This increase was partially offset by a $2 million decrease 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. 32 Corporate— Technology costs increased $3 million, or 21%, for the three months ended March 31, 2022 compared to the same period in the prior year primarily due to a $2 million increase in stock-based compensation associated with previously awarded performance-based units and a reversal of severance costs in the prior year associated with the reduction of our workforce in 2020. Selling, General and Administrative Expenses Three Months Ended March 31, 2022 2021 Change (Amounts in thousands) Travel Solutions $ 67,031 $ 54,960 $ 12,071 22 % Hospitality Solutions 13,626 12,477 1,149 9 % Corporate 87,021 63,176 23,845 38 % Total selling, general and administrative expenses $ 167,678 $ 130,613 $ 37,065 28 % Travel Solutions— Selling, general and administrative expenses increased $12 million, or 22%, for the three months ended March 31, 2022 compared to the same period in the prior year. The increase was driven by a $5 million increase in legal costs incurred due to ongoing litigation and a $7 million increase in the provision for expected credit losses due to the unfavorable comparison to a provision reversal in the prior year as the economy began to recover and payment experience began to improve. Hospitality Solutions— Selling, general and administrative expenses increased $1 million, or 9%, for the three months ended March 31, 2022 compared to the same period in the prior year. An increase in consulting related to our business strategy to support the long-term growth of the business was partially offset by a decrease in the provision for expected credit losses due to an improvement in our expected credit losses in the current year as a result of continued recovery from the COVID-19 pandemic, and lower depreciation and amortization. Corporate— Selling, general and administrative expenses increased $24 million, or 38%, for the three months ended March 31, 2022 compared to the same period in the pri or year. This increase was driven by a $6 million increase in professional services for consulting related to our business strategy to support the long-term growth of the business, a $5 million increase in risk and security costs, a $2 million increase as a result of increased compensation to attract and retain talent, a $3 million increase due to continued investments in our inter nal business systems, a $2 million increase in legal costs resulting from ongoing litigation, a $2 million increase in stock-based compensation associated with previously awarded performance-based units, a $2 million increase due to the reversal of severance costs in the prior year associated with the reduction of our workforce in 2020, and other ongoing business expenses. Interest expense, net Three Months Ended March 31, 2022 2021 Change (Amounts in thousands) Interest expense, net $ 61,058 $ 64,101 $ (3,043) (5) % Interest expense decreased $3 million, or 5% during the three months ended March 31, 2022 compared to the same period in the prior year primarily due to the maturation of our interest rate swaps in the fourth quarter of 2021. Loss on extinguishment of debt We recognized a loss on extinguishment of debt of $4 million during the three months ended March 31, 2022 as a result of the refinancing that occurred in the first quarter of 2022. See Note 6. Debt for further details. Other, net Three Months Ended March 31, 2022 2021 Change (Amounts in thousands) Other, net $ (191,241) $ (11,631) $ (179,610) 1,544 % Other, net decreased $180 million for the three months ended March 31, 2022 compared to the same period in the prior year primarily due to the gain on the sale of AirCentre. See Note 3. Dispositions for further details regarding the AirCentre sale. 33 (Benefit) provision for Income Taxes Three Months Ended March 31, 2022 2021 Change (Amounts in thousands) (Benefit) provision for income taxes $ (596) $ 3,997 $ (4,593) (115) % For the three months ended March 31, 2022, we recognized $1 million income tax benefit, representing a negative effective tax rate of 1%, compared to an income tax expense of $4 million, representing a negative effective tax rate of 2% for the three months ended March 31, 2021. The effective tax rate remained relatively flat for the three months ended March 31, 2022 as compared to the same period in 2021. The difference between our effective tax rates and the U.S. federal statutory income tax rate primarily results from valuation allowances, our geographic mix of taxable income in various tax jurisdictions, tax permanent differences and tax credits. Liquidity and Capital Resources Our current principal source of liquidity is our cash and cash equivalents on hand. As of March 31, 2022 and December 31, 2021, our cash and cash equivalents and outstanding letters of credit were as follows (in thousands): March 31, 2022 December 31, 2021 Cash and cash equivalents $ 1,186,414 $ 978,352 Available under the bilateral letter of credit facility 6,921 10,018 Outstanding letters of credit under the bilateral letter of credit facility 13,079 9,982 We consider cash equivalents to be highly liquid investments that are readily convertible into cash. Securities with contractual maturities of three months or less, when purchased, are considered cash equivalents. We record changes in a book overdraft position, in which our bank account is not overdrawn but recently issued and outstanding checks result in a negative general ledger balance, as cash flows from financing activities. We invest in a money market fund which is classified as cash and cash equivalents in our consolidated balance sheets and statements of cash flows. We held no short-term investments as of March 31, 2022 and December 31, 2021. We had $21 million held as cash collateral for standby letters of credit in restricted cash on our consolidated balance sheets as of March 31, 2022 and December 31, 2021. 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 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 and in the first quarter of 2022, we refinanced and extended the maturity on another portion of our debt. We believe these actions will provide additional flexibility as we manage through the global economic recovery from the COVID-19 pandemic. 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, support operational requirements, 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 34 and terminated the commitments thereunder, replacing it with term loans. See “— Senior Secured Credit Facilities below. We had outstanding letters of credit totaling $13 million and $10 million as of March 31, 2022 and December 31, 2021, respectively, which were secured by a $20 million cash collateral deposit account. Our ability to generate cash depends on many factors beyond our control, and any failure to meet our debt service obligations could harm our business, financial condition and results of operations. Our ability to make payments on and to refinance our indebtedness, and to fund working capital needs and planned capital expenditures will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, business, legislative, regulatory and other factors that are beyond our control, including the impacts of COVID-19. See “Risk Factors—The COVID-19 pandemic has had and is expected to continue to have a significant adverse impact on our business, including our financial results and prospects, and the travel suppliers on whom our business relies." and "—We may require more cash than we generate in our operating activities, and additional funding on reasonable terms or at all may not be available.” 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 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. Recent Events Impacting Our Liquidity and Capital Resources Debt Agreements On March 9, 2022, we refinanced and extended the maturity on a portion of the Term Loan B facility. See “— Senior Secured Credit Facilities" below. Dividends The Preferred Stock accumulates cumulative dividends at a rate per annum equal to 6.50% and dividends are payable when, as and if declared by our board of directors, out of funds legally available for their payment to the extent paid in cash, quarterly in arrears on March 1, June 1, September 1 and December 1 of each year, beginning on December 1, 2020 and ending on, and including, September 1, 2023. Declared dividends on the Preferred Stock 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 $5 million of accrued preferred stock dividends in our consolidated results of operations for the three months ended March 31, 2022. During the three months ended March 31, 2022, we paid cash dividends on our preferred stock of $5 million. On March 16, 2020, we announced the suspension of the payment of quarterly cash dividends on our common stock, effective with respect to the dividends occurring after the March 30, 2020 payment. Share Repurchase Program In February 2017, we announced the approval of the Share Repurchase Program to purchase up to $500 million of Sabre's common stock outstanding. Repurchases under the Share Repurchase Program may take place in the open market or privately negotiated transactions. For the three months ended March 31, 2022, we did not repurchase any shares pursuant to the Share Repurchase Program. On March 16, 2020, we announced the suspension of share repurchases under the Share Repurchase Program in conjunction with the cash management measures we are undertaking as a result of the market conditions caused by COVID-19. Approximately $287 million remains authorized for repurchases under the Share Repurchase Program as of March 31, 2022. Senior Secured Credit Facilities On August 23, 2017, Sabre GLBL entered into a Fourth Incremental Term Facility Amendment to our Amended and Restated Credit Agreement, Term Loan A Refinancing Amendment to our Amended and Restated Credit Agreement, and Second Revolving Facility Refinancing Amendment to our Amended and Restated Credit Agreement (the “2017 Refinancing”). The 2017 Refinancing included a $400 million revolving credit facility ("Revolver") as well as the application of the proceeds of the approximately $1,891 million incremental Term Loan B facility (“Term Loan B”) and $570 million Term Loan A facility (“Term Loan A”). On August 27, 2020, Sabre GLBL entered into a Third Revolving Facility Refinancing Amendment to the Amended and Restated Credit Agreement (the "Third Revolving Refinancing Amendment") and the First Term A Loan Extension Amendment to the Amended and Restated Credit Agreement (the "Term A Loan Extension Amendment" and, together with the Third Revolving Refinancing Amendment, the "2020 Refinancing"), which extended the maturity of the Revolver from July 1, 2022 to November 23, 2023 at the earliest and February 22, 2024 at the latest, depending on certain "springing" maturity conditions as described in the Third Revolving Refinancing Amendment. In addition to extending the maturity date of the Revolver, the 2020 Refinancing also provided that, during any covenant suspension resulting from a "Material Travel Event Disruption" (as defined in the Amended and Restated Credit Agreement), including during the current covenant suspension period, we were required to maintain liquidity of at least $300 million on a monthly basis, which was lowered in December 2020 from $450 million. In addition, during this covenant suspension, the 2020 Refinancing limited certain payments to equity holders, certain investments, certain 35 prepayments of unsecured debt and the ability of certain subsidiaries to incur additional debt. The applicable margins for the Revolver were between 2.50% and 1.75% per annum for Eurocurrency rate loans and between 1.50% and 0.75% per annum for base rate loans, with the applicable margin for any quarter reduced by 25 basis points (up to 75 basis points total) if the Senior Secured First-Lien Net Leverage Ratio (as defined in the Amended and Restated Credit Agreement) was less than 3.75 to 1.0, 3.00 to 1.0, or 2.25 to 1.0, respectively. These interest rate spreads for the Revolver were increased by 0.25%, during covenant suspension, in connection with the 2020 Refinancing. On December 17, 2020, Sabre GLBL entered into a Sixth Term A Loan Refinancing and Incremental Amendment to our Amended and Restated Credit Agreement, resulting in additional Term Loan B borrowings of $637 million ("Other Term B Loans") due December 17, 2027. The applicable interest rate margins for the Other Term B Loans are 4.00% per annum for Eurocurrency rate loans and 3.00% per annum for base rate loans, with a floor of 0.75% for the Eurocurrency rate, and 1.75% for the base rate, respectively. The net proceeds of $623 million from the issuance, net of underwriting fees and commissions, were used to fully redeem both the $500 million outstanding 5.25% senior secured notes due November 2023 and the $134 million outstanding Term Loan A. We incurred no material additional indebtedness as a result of these transactions, other than amounts for certain interest, fees and expenses. We recognized a loss on extinguishment of debt of $11 million during the year ended December 31, 2020 in connection with these transactions, which consisted of a redemption premium of $6 million and the write-off of unamortized debt issuance costs of $5 million. On July 12, 2021, we 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. On March 9, 2022, we entered into an amendment to refinance a portion of the Term Loan B facility (the "2022 Refinancing"). We incurred no additional indebtedness as a result of the 2022 Refinancing, other than amounts covering certain fees and expenses. The 2022 Refinancing included the application of the proceeds of a new $625 million term loan “B” facility (the “New Other Term B Facility”), borrowed by Sabre GLBL under our Amended and Restated Credit Agreement, with the effect of extending the maturity of approximately $623 million of the existing Term Loan B credit facility under the Amended and Restated Credit Agreement. We recognized a loss on extinguishment of debt in connection with these transactions during the three months ended March 31, 2022 of $4 million and debt modification costs for financing fees of $1 million recorded to Other, net. The New Other Term B Facility matures on June 30, 2028 and offers us the ability to prepay or repay the New Other Term B Facility after 12 months or to prepay or repay at a 101 premium before that date. The interest rates on the New Other Term B Facility are based on Term SOFR, replacing LIBOR, plus an applicable margin. Under the Amended and Restated Credit Agreement, the loan parties are subject to certain customary non-financial covenants, including certain restrictions on incurring certain types of indebtedness, creation of liens on certain assets, making of certain investments, and payment of dividends. As of March 31, 2022, we are in compliance with all covenants under the terms of the Amended and Restated Credit Agreement. We are also required to pay down the term loans by an amount equal to 50% of annual excess cash flow, as defined in the Amended and Restated Credit Agreement. This percentage requirement may decrease or be eliminated if certain leverage ratios are achieved. Based on our results for the year ended December 31, 2020, we were not required to make an excess cash flow payment in 2021, and no excess cash flow payment is 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 March 31, 2022, we had outstanding approximately $2.2 billion of variable debt that is indexed to the London Interbank Offered Rate ("LIBOR") consisting of Term Loan B for $1.2 billion, Term Loan B-1 for $400 million and Term Loan B-2 for $634 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. 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. In March 2022, we entered into the 2022 Refinancing, which extended the maturity and replaced LIBOR with Term SOFR on a portion of our Term Loan B facility. The remaining Term Loan B allows for a transition to the Prime rate plus a margin, and assuming the discontinuation of LIBOR in June 2023, we estimate the impact of transitioning to 36 the Prime rate in June 2023, assuming changes in Prime rates aligned with expected changes in the federal funds rate, which are based on market data and analysts’ forecasts, would result in an aggregate of approximately $15 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.” Cash Flows Three Months Ended March 31, 2022 2021 (Amounts in thousands) Cash used in operating activities $ (139,083) $ (197,403) Cash provided by investing activities 374,865 8,405 Cash used in financing activities (25,835) (24,221) Cash used in discontinued operations (1,680) (281) Effect of exchange rate changes on cash, cash equivalents and restricted cash (205) (1,247) Increase (decrease) in cash, cash equivalents and restricted cash $ 208,062 $ (214,747) Operating Activities Cash used in operating activities totaled $139 million for the three months ended March 31, 2022. The $58 million increase in operating cash flow from the same period in the prior year was primarily due to the impact of COVID-19 on the travel industry and on our results of operations and a $5 million decline in interest payments as our interest rate swaps have matured, offset by an increase of $67 million associated with payments to our employees under performance-based bonus plans that did not occur in the prior year. Investing Activities For the three months ended March 31, 2022, we received proceeds of $392 million from the sale of AirCentre, partially offset by $17 million of cash used on capital expenditures related to software developed for internal use. For the three months ended March 31, 2021, we received proceeds of $15 million from the sale of an investment, partially offset by $6 million of cash used on capital expenditures related to software developed for internal use. Financing Activities For the three months ended March 31, 2022, financing activities used $26 million. Significant highlights of our financing activities include: • proceeds of $625 million from the issuance of New Other Term B Facility; • payment of $623 million on Term Loan B; • payment of $3 million on Term B-1 Facility and Term B-2 Facility; • payment of $10 million for debt prepayment fees and issuance costs; • net payments of $10 million from the settlement of employee stock-option awards; and • payment of $5 million in dividends on our preferred stock. For the three months ended March 31, 2021, financing activities used $24 million. Significant highlights of our financing activities include: • net payments of $12 million from the settlement of employee stock-option awards; • payment of $6 million on Term Loan B and Other Term Loan B; and • payment of $5 million in dividends on our preferred stock. Contractual Obligations There were no material changes to our future minimum contractual obligations since December 31, 2021 as previously disclosed in our Annual Report on Form 10-K filed with the SEC on February 18, 2022, other than the impact of interest rates on our debt. As of March 31, 2022, we had a total debt obligation of $6.1 billion, with $286 million due for the remainder of 2022. We had no off balance sheet arrangements during the three months ended March 31, 2022 and year ended December 31, 2021. 37 Recent Accounting Pronouncements Information related to Recent Accounting Pronouncements is included in Note 1. General Information, to our consolidated financial statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q, which is incorporated herein by reference. Critical Accounting Estimates This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect our reported assets and liabilities, revenues and expenses and other financial information. Actual results may differ significantly from these estimates, and our reported financial condition and results of operations could vary under different assumptions and conditions. In addition, our reported financial condition and results of operations could vary due to a change in the application of a particular accounting standard. We regard an accounting estimate underlying our financial statements as a “critical accounting estimate” if the accounting estimate requires us to make assumptions about matters that are uncertain at the time of estimation and if changes in the estimate are reasonably likely to occur and could have a material effect on the presentation of financial condition, changes in financial condition, or results of operations. For a discussion of the accounting policies involving material estimates and assumptions that we believe are most critical to the preparation of our financial statements, how we apply such policies and how results differing from our estimates and assumptions would affect the amounts presented in our financial statements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” included in our Annual Report on Form 10-K filed with the SEC on February 18, 2022. Since the date of the annual report on Form 10-K filed with the SEC on February 18, 2022, there have been no material changes to our critical accounting estimates.