Sabre Corp 10-Q

ITEM 1. FINANCIAL STATEMENTS SABRE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) Three Months Ended March 31, 2023 2022 Revenue $ 742,695 $ 584,910 Cost of revenue, excluding technology costs 307,042 223,034 Technology costs 271,438 273,730 Selling, general and administrative 164,428 167,678 Operating loss ( 213 ) ( 79,532 ) Other (expense) income: Interest expense, net ( 99,784 ) ( 61,058 ) Loss on extinguishment of debt — ( 3,533 ) Equity method income (loss) 423 ( 170 ) Other, net 2,407 191,241 Total other (expense) income, net ( 96,954 ) 126,480 (Loss) income from continuing operations before income taxes ( 97,167 ) 46,948 Provision (benefit) for income taxes 2,199 ( 596 ) (Loss) income from continuing operations ( 99,366 ) 47,544 (Loss) income from discontinued operations, net of tax ( 403 ) 134 Net (loss) income ( 99,769 ) 47,678 Net (loss) income attributable to noncontrolling interests ( 835 ) 272 Net (loss) income attributable to Sabre Corporation ( 98,934 ) 47,406 Preferred stock dividends 5,346 5,346 Net (loss) income attributable to common stockholders $ ( 104,280 ) $ 42,060 Basic net (loss) income per share attributable to common stockholders: (Loss) income from continuing operations $ ( 0.32 ) $ 0.13 Net (loss) income per common share $ ( 0.32 ) $ 0.13 Diluted net (loss) income per share attributable to common stockholders: (Loss) income from continuing operations $ ( 0.32 ) $ 0.12 Net (loss) income per common share $ ( 0.32 ) $ 0.12 Weighted-average common shares outstanding: Basic 328,928 323,658 Diluted 328,928 409,378 See Notes to Consolidated Financial Statements. 1 SABRE CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (In thousands) (Unaudited) Three Months Ended March 31, 2023 2022 Net (loss) income $ ( 99,769 ) $ 47,678 Other comprehensive income, net of tax: Foreign currency translation adjustments ("CTA") 1,576 ( 1,287 ) Retirement-related benefit plans: Net actuarial gain, net of taxes of $ — , $ — — 1,671 Amortization of prior service credits, net of taxes of $ — , $ — ( 358 ) ( 358 ) Amortization of actuarial losses, net of taxes of $ — , $ — 1,621 1,783 Net change in retirement-related benefit plans, net of tax 1,263 3,096 Derivatives: Unrealized gains, net of taxes of $ — , $ — ( 296 ) — Reclassification adjustment for realized (gains) losses, net of taxes of $ — , $ — ( 989 ) — Net change in derivatives, net of tax ( 1,285 ) — Share of other comprehensive (loss) income of equity method investments ( 302 ) 655 Other comprehensive income 1,252 2,464 Comprehensive (loss) income ( 98,517 ) 50,142 Less: Comprehensive loss (income) attributable to noncontrolling interests 835 ( 272 ) Comprehensive (loss) income attributable to Sabre Corporation $ ( 97,682 ) $ 49,870 See Notes to Consolidated Financial Statements. 2 SABRE CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) March 31, 2023 December 31, 2022 Assets Current assets Cash and cash equivalents $ 817,075 $ 794,888 Restricted cash 21,035 21,035 Accounts receivable, net of allowance for credit losses of $ 47,632 and $ 38,815 414,458 353,587 Prepaid expenses and other current assets 189,811 191,979 Total current assets 1,442,379 1,361,489 Property and equipment, net of accumulated depreciation of $ 1,908,866 and $ 1,939,215 230,759 229,419 Equity method investments 22,524 22,401 Goodwill 2,543,251 2,542,087 Acquired customer relationships, net of accumulated amortization of $ 809,170 and $ 803,026 232,726 238,756 Other intangible assets, net of accumulated amortization of $ 775,426 and $ 771,611 167,927 171,498 Deferred income taxes 38,378 38,892 Other assets, net 348,064 358,333 Total assets $ 5,026,008 $ 4,962,875 Liabilities and stockholders’ deficit Current liabilities Accounts payable $ 192,306 $ 171,068 Accrued compensation and related benefits 88,575 122,022 Accrued subscriber incentives 235,970 218,761 Deferred revenues 67,983 66,503 Other accrued liabilities 255,342 213,737 Current portion of debt 23,480 23,480 Total current liabilities 863,656 815,571 Deferred income taxes 28,093 38,629 Other noncurrent liabilities 251,813 264,411 Long-term debt 4,831,430 4,717,091 Commitments and contingencies (Note 13) Redeemable noncontrolling interests 15,564 — Stockholders’ deficit Preferred stock, $ 0.01 par value, 225,000 authorized, 3,290 issued and outstanding as of March 31, 2023 and December 31, 2022; aggregate liquidation value of $ 329,000 as of March 31, 2023 and December 31, 2022 33 33 Common Stock: $ 0.01 par value; 1,000,000 authorized shares; 358,108 and 353,436 shares issued, 331,909 and 328,542 shares outstanding at March 31, 2023 and December 31, 2022, respectively 3,581 3,534 Additional paid-in capital 3,215,580 3,198,580 Treasury Stock, at cost, 26,199 and 24,895 shares at March 31, 2023 and December 31, 2022, respectively ( 519,504 ) ( 514,215 ) Accumulated deficit ( 3,610,808 ) ( 3,506,528 ) Accumulated other comprehensive loss ( 64,479 ) ( 65,731 ) Noncontrolling interest 11,049 11,500 Total stockholders’ deficit ( 964,548 ) ( 872,827 ) Total liabilities and stockholders’ deficit $ 5,026,008 $ 4,962,875 See Notes to Consolidated Financial Statements. 3 SABRE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended March 31, 2023 2022 Operating Activities Net (loss) income $ ( 99,769 ) $ 47,678 Adjustments to reconcile net (loss) income to cash used in operating activities: Depreciation and amortization 40,319 50,108 Deferred income taxes ( 19,219 ) ( 2,570 ) Stock-based compensation expense 17,005 27,605 Amortization of upfront incentive consideration 8,969 11,325 Provision for expected credit losses 8,937 1,997 Amortization of debt discount and issuance costs 5,216 3,438 Loss on investment fair value adjustment 960 — Other 419 ( 485 ) Income from discontinued operations 403 ( 134 ) Gain on sale of assets and investments — ( 192,151 ) Loss on extinguishment of debt — 3,533 Changes in operating assets and liabilities: Accounts and other receivables ( 73,769 ) ( 106,655 ) Prepaid expenses and other current assets 5,512 ( 20,631 ) Capitalized implementation costs ( 2,326 ) ( 4,481 ) Upfront incentive consideration ( 1,338 ) ( 700 ) Other assets 1,387 23,353 Accrued compensation and related benefits ( 31,563 ) ( 59,748 ) Accounts payable and other accrued liabilities 63,835 72,890 Deferred revenue including upfront solution fees 2,613 6,545 Cash used in operating activities ( 72,409 ) ( 139,083 ) Investing Activities Additions to property and equipment ( 18,110 ) ( 17,403 ) Net proceeds from dispositions — 392,268 Cash (used in) provided by investing activities ( 18,110 ) 374,865 Financing Activities Proceeds from borrowings under AR Facility 115,000 — Proceeds from sale of redeemable shares in subsidiary 16,000 — Payments on borrowings from lenders ( 5,870 ) ( 625,296 ) Dividends paid on preferred stock ( 5,346 ) ( 5,346 ) Net payment on the settlement of equity-based awards ( 5,294 ) ( 10,309 ) Debt prepayment fees and issuance costs ( 2,253 ) ( 10,185 ) Other financing activities ( 298 ) 301 Proceeds of borrowings from lenders — 625,000 Cash provided by (used in) financing activities 111,939 ( 25,835 ) Cash Flows from Discontinued Operations Cash provided by (used in) operating activities 52 ( 1,680 ) Cash provided by (used in) discontinued operations 52 ( 1,680 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash 715 ( 205 ) Increase in cash, cash equivalents and restricted cash 22,187 208,062 Cash, cash equivalents and restricted cash at beginning of period 815,923 999,391 Cash, cash equivalents and restricted cash at end of period $ 838,110 $ 1,207,453 Non-cash additions to property and equipment $ 5,999 $ 2,392 See Notes to Consolidated Financial Statements. 4 SABRE CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY (In thousands, except share data) Stockholders’ Deficit Preferred Stock Common Stock Additional Paid in Capital Treasury Stock Retained Deficit Accumulated Other Comprehensive Loss Noncontrolling Interest Total Stockholders' Equity (Deficit) Shares Amount Shares Amount Shares Amount Balance at December 31, 2022 3,290,000 $ 33 353,436,503 $ 3,534 $ 3,198,580 24,894,998 $ ( 514,215 ) $ ( 3,506,528 ) $ ( 65,731 ) $ 11,500 $ ( 872,827 ) Comprehensive loss — — — — — — — ( 98,934 ) 1,252 ( 451 ) ( 98,133 ) Preferred stock dividends (1) — — — — — — — ( 5,346 ) ( 5,346 ) Settlement of stock-based awards — — 4,671,781 47 ( 5 ) 1,304,145 ( 5,289 ) — — — ( 5,247 ) Stock-based compensation expense — — — — 17,005 — — — — — 17,005 Balance at March 31, 2023 3,290,000 $ 33 358,108,284 $ 3,581 $ 3,215,580 26,199,143 $ ( 519,504 ) $ ( 3,610,808 ) $ ( 64,479 ) $ 11,049 $ ( 964,548 ) (1) Our mandatory convertible preferred stock accumulates cumulative dividends at an annual rate of 6.50 %. Stockholders’ Equity (Deficit) Preferred Stock Common Stock Additional Paid in Capital Treasury Stock Retained Deficit Accumulated Other Comprehensive Loss Noncontrolling Interest Total Stockholders' Equity (Deficit) Shares Amount Shares Amount Shares Amount Balance at December 31, 2021 3,290,000 $ 33 346,430,421 $ 3,464 $ 3,115,719 22,929,668 $ ( 498,141 ) $ ( 3,049,695 ) $ ( 80,287 ) $ 9,190 $ ( 499,717 ) Comprehensive income — — — — — — — 47,406 2,464 272 50,142 Preferred stock dividends (1) — — — — — — — ( 5,346 ) — — ( 5,346 ) Settlement of stock-based awards — — 3,883,688 39 ( 9 ) 1,077,178 ( 10,300 ) — — — ( 10,270 ) Stock-based compensation expense — — — — 27,605 — — — — — 27,605 Other — — — — — — — — — ( 119 ) ( 119 ) Balance at March 31, 2022 3,290,000 $ 33 350,314,109 $ 3,503 $ 3,143,315 24,006,846 $ ( 508,441 ) $ ( 3,007,635 ) $ ( 77,823 ) $ 9,343 $ ( 437,705 ) (1) Our mandatory convertible preferred stock accumulates cumulative dividends at an annual rate of 6.50 %. See Notes to Consolidated Financial Statements. 5 SABRE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. General Information Sabre Corporation is a Delaware corporation formed in December 2006. On March 30, 2007, Sabre Corporation acquired Sabre Holdings Corporation (“Sabre Holdings”). Sabre Holdings is the sole direct subsidiary of Sabre Corporation. Sabre GLBL Inc. ("Sabre GLBL") is the principal operating subsidiary and sole direct subsidiary of Sabre Holdings. Sabre GLBL or its direct or indirect subsidiaries conduct all of our businesses. In these consolidated financial statements, references to “Sabre,” the “Company,” “we,” “our,” “ours” and “us” refer to Sabre Corporation and its consolidated subsidiaries unless otherwise stated or the context otherwise requires. Recent Events— The travel industry continues to be adversely affected by the global health crisis due to the outbreak of the coronavirus, including variants ("COVID-19"). The travel ecosystem has shifted over the past few years, including through the COVID-19 pandemic, resulting in the changing needs of our airline, hotel and agency customers. This pandemic has resulted in continued material headwinds for our consolidated financial results in 2022 and through the first quarter of 2023. Despite the continued impacts of the COVID-19 pandemic on our business and global travel volumes, as travel restrictions have been relaxed and travel patterns return, we have seen gradual improvement in our key volume metrics during 2022 and through the first quarter of 2023. With the continued increase in volumes, our incentive consideration costs are also increasing significantly compared to previous periods. We believe our cash position and the liquidity measures we have taken will continue to provide flexibility as we manage through the global economic recovery from the COVID-19 pandemic. 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. Basis of Presentation— The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. Operating results for the three months ended March 31, 2023 are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2023. The accompanying interim financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K filed with the SEC on February 17, 2023 . We consolidate all majority-owned subsidiaries and companies over which we exercise control through majority voting rights. No entities are consolidated due to control through operating agreements, financing agreements or as the primary beneficiary of a variable interest entity. The consolidated financial statements include our accounts after elimination of all significant intercompany balances and transactions. All dollar amounts in the financial statements and the tables in the notes, except per share amounts, are stated in thousands of U.S. dollars unless otherwise indicated. All amounts in the notes reference results from continuing operations unless otherwise indicated. Use of Estimates —The preparation of these interim financial statements in conformity with GAAP requires that certain amounts be recorded based on estimates and assumptions made by management. Actual results could differ from these estimates and assumptions. Our accounting policies that utilize 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 and customer and subscriber advances, (v) judgments in capitalization of software developed for internal use, (vi) the evaluation of uncertainties surrounding the calculation of our tax assets and liabilities, (vii) estimation of the air booking cancellation reserve, and (viii) the evaluation of the allowance for credit losses. Our use of estimates and the related accounting policies are discussed in the consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K filed with the SEC on February 17, 2023. Given the uncertainties surrounding the duration and effects of COVID-19, including any variants, we cannot provide assurance that the assumptions used in our estimates will be accurate and the impacts could be material on our cancellation reserves, credit loss provisions and results of operations. 6 Adoption of New Accounting Standards In March 2022, the Financial Accounting Standards Board ("FASB") issued updated guidance on derivatives and hedging which allows entities to apply fair value hedging to closed portfolios of prepayable financial assets without having to consider prepayment risk or credit risk when measuring the assets. The amendments allow multiple hedged layers to be designated for a single closed portfolio for financial assets or one or more beneficial interests secured by a portfolio of financial instruments. As a result, an entity can achieve hedge accounting for hedges of a greater proportion of the interest rate risk inherent in the assets included in the closed portfolio, further aligning hedge accounting with risk management strategies. The standard is effective for public entities for fiscal years beginning after December 15, 2022, with early adoption permitted. We adopted this standard in the first quarter of 2022 , which did not have a material impact on our consolidated financial statements. 2. Revenue from Contracts with Customers Contract Balances Revenue recognition for a significant portion of our revenue coincides with normal billing terms, including our transactional revenues, Software-as-a-Service ("SaaS") revenues, and hosted revenues. Timing differences among revenue recognition, unconditional rights to bill, and receipt of contract consideration may result in contract assets or contract liabilities. The following table presents our assets and liabilities with customers as of March 31, 2023 and December 31, 2022 (in thousands). Account Consolidated Balance Sheet Location March 31, 2023 December 31, 2022 Contract assets and customer advances and discounts (1) Prepaid expenses and other current assets / other assets, net $ 52,869 $ 55,473 Trade and unbilled receivables, net Accounts receivable, net 412,349 352,214 Long-term trade unbilled receivables, net Other assets, net 16,624 16,129 Contract liabilities Deferred revenues / other noncurrent liabilities 117,764 115,151 ______________________ (1) Includes contract assets of $ 13 million and $ 12 million for March 31, 2023 and December 31, 2022, respectively. During the three months ended March 31, 2023, we recognized revenue of approximately $ 15 million from contract liabilities that existed as of January 1, 2023. Our long-term trade unbilled receivables, net relate to fixed license fees billed over the contractual period and recognized when the customer gains control of the software. We evaluate collectability of our accounts receivable based on a combination of factors and record reserves as described further in Note 6. Credit Losses. Revenue The following table presents our revenues disaggregated by business (in thousands): Three Months Ended March 31, 2023 2022 Distribution $ 525,886 $ 342,888 IT Solutions 151,555 191,110 Total Travel Solutions 677,441 533,998 SynXis Software and Services 66,514 49,734 Other 7,298 6,270 Total Hospitality Solutions 73,812 56,004 Eliminations ( 8,558 ) ( 5,092 ) Total Sabre Revenue $ 742,695 $ 584,910 We may occasionally recognize revenue in the current period for performance obligations partially or fully satisfied in the previous periods resulting from changes in estimates for the transaction price, including any changes to our assessment of whether an estimate of variable consideration is constrained. For the three months ended March 31, 2022, the impact on revenue recognized in the current period from performance obligations partially or fully satisfied in the previous period is $ 24 million, which is primarily due to the recognition of revenue that was previously deferred but became recognizable due to a change in facts and circumstances associated with an IT Solutions customer located in Russia. It is no longer considered probable that this revenue will be reversed and this amount was fully paid by the customer. Our air booking cancellation reserve totaled $ 13 million and $ 11 million as of March 31, 2023, and December 31, 2022, respectively. Unearned performance obligations primarily consist of deferred revenue for fixed implementation fees and future product implementations, which are included in deferred revenue and other noncurrent liabilities in our consolidated balance sheet. We have not disclosed the performance obligation related to contracts containing minimum transaction volume, as it represents a 7 subset of our business, and therefore would not be meaningful in understanding the total future revenues expected to be earned from our long-term contracts. 3. Acquisitions and Dispositions Conferma In August 2022, we completed the acquisition of Conferma Limited ("Conferma"), a virtual payments technology company, to expand our investment in technology for the payments ecosystem in the travel industry . We ac quired all of the outstanding stock and ownership interest of Conferma through the exercise of a call option, for net cash of $ 62 million and the conversion of a pre-existing loan receivable into share capital of $ 11 million. We recognized a gain of approximately $ 4 million upon conversion of the loan for the difference between the carrying value and fair value of the loan, which is recorded to Other, net within our results of operations. Conferma is part of our Travel Solutions segment. The accounting related to tax liabilities remains subject to finalization due to ongoing analysis as of March 31, 2023. In February 2023, we sold 19 % of the share capital of the direct parent company of Conferma to a third party for proceeds of $ 16 million resulting in a non-controlling interest from that date. See Note 4. Redeemable Noncontrolling Interest for further details. AirCentre Disposition 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. The assets and liabilities associated with the AirCentre portfolio are presented as held for sale on our consolidated balance sheets as of December 31, 2021. On February 28, 2022, we completed the sale of AirCentre to a third party for net cash proceeds of $ 392 million. The operating results of AirCentre are included within Travel Solutions for all periods presented through the date of sale. The net assets of AirCentre disposed of primarily included goodwill of $ 146 million, working capital of $ 34 million, and other assets, net of $ 25 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 , which was subsequently adjusted in the second quarter of 2022 by $ 12 million due to contingencies identified in connection with the sale. 4. Redeemable Noncontrolling Interest On February 1, 2023, Sabre sold common shares, representing a 19 % interest in Conferma’s direct parent (referred to as “Conferma”), to a third party for cash consideration of $ 16 million. In connection with the sale, we entered into a governing agreement which requires us under limited conditions to redeem the 19 % interest in Conferma, if requested, for the original purchase price of $ 16 million. We currently do not believe it is probable that the noncontrolling interest will become redeemable, given the remote likelihood of the applicable conditions being satisfied. As the common shares are redeemable upon the occurrence of conditions not solely within our control, we recorded the noncontrolling interest as redeemable and classified it as temporary equity within our consolidated balance sheet initially at fair value. The noncontrolling interest is adjusted each reporting period for loss or income attributable to the noncontrolling interest. As of March 31, 2023, the redeemable noncontrolling interest is $ 16 million. The following table shows the changes in redeemable noncontrolling interest in temporary equity of consolidated subsidiary during the period ended March 31, 2023 (in thousands): Three Months Ended March 31, 2023 Proceeds from sale of redeemable noncontrolling interest $ 16,000 Net loss attributable to redeemable noncontrolling interest ( 436 ) Redeemable noncontrolling interest, end of period $ 15,564 5. Income Taxes For the three months ended March 31, 2023, we recognized a $ 2 million income tax expense, representing an effective tax rate of less than 1 %, compared to an income tax benefit of $ 1 million, representing an effective tax rate of less than 1 % for the three months ended March 31, 2022. The effective tax rate remained relatively flat for the three months ended March 31, 2023 as compared to the same period in 2022 primarily due to an increase in valuation allowance recorded in the current period and various discrete items recorded in each of the respective three month periods. The difference between our effective tax rates and the U.S. federal statutory income tax rate primarily results from valuation allowances, our geographic mix of taxable income in various tax jurisdictions, tax permanent differences and tax credits. 8 In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax-planning strategies in making this assessment. We believe it is more likely than not that the results of future operations will not generate sufficient taxable income in the U.S. and in certain foreign jurisdictions to realize the full benefit of its deferred tax assets. On the basis of this evaluation, as of March 31, 2023, a cumulative valuation allowance of $ 499 million has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased. We recognize liabilities when we believe that an uncertain tax position may not be fully sustained upon examination by the tax authorities. This evaluation requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. When facts and circumstances change, we reassess these probabilities and record any changes in the consolidated financial statements as appropriate. Our net unrecognized tax benefits, excluding interest and penalties, included in our consolidated balance sheets, were $ 70 million and $ 76 million as of March 31, 2023 and December 31, 2022, respectively. 6. Credit Losses We are exposed to credit losses primarily through our sales of services provided to participants in the travel and transportation industry, which we consider to be our singular portfolio segment. 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, 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 evaluate the collectability of our receivables based on a combination of factors. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations to us, such as bankruptcy filings or failure to pay amounts due to us or others, we specifically reserve for bad debts against amounts due to reduce the recorded receivable to the amount we reasonably believe will be collected. 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. Our allowance for credit losses relates to all financial assets, primarily trade receivables due in less than one year recorded in Accounts Receivable, net on our consolidated balance sheets. Our allowance for credit losses for the three months ended March 31, 2023 for our portfolio segment is summarized as follows (in thousands): Three Months Ended March 31, 2023 Balance at December 31, 2022 $ 38,815 Provision for expected credit losses 8,937 Write-offs ( 242 ) Other 122 Balance at March 31, 2023 $ 47,632 Our provision for expected credit losses for the three months ended March 31, 2023 increased $ 7 million to a provision of $ 9 million from a provision of $ 2 million in the same period in the prior year. Given the uncertainties surrounding the duration and effects of COVID-19, including any variants, we cannot provide assurance that the assumptions used in our estimates will be accurate and actual write-offs may vary from our estimates. 9 7. Debt As of March 31, 2023 and December 31, 2022, our outstanding debt included in our consolidated balance sheets totaled $ 4,855 million and $ 4,741 million, respectively, which are net of debt issuance costs of $ 41 million and $ 44 million, respectively, and unamortized discounts of $ 52 million and $ 54 million, respectively. The following table sets forth the face values of our outstanding debt as of March 31, 2023 and December 31, 2022 (in thousands): Rate Maturity March 31, 2023 December 31, 2022 Senior secured credit facilities: 2021 Term Loan B-1 L + 3.50 % December 2027 $ 396,930 $ 397,940 2021 Term Loan B-2 L + 3.50 % December 2027 632,730 634,340 2022 Term Loan B-1 S (1) + 4.25 % June 2028 618,750 620,313 2022 Term Loan B-2 S (1) + 5.00 % June 2028 671,625 673,313 AR Facility (2) S (1) + 2.25 % January 2025 115,000 — 9.25 % senior secured notes due 2025 9.25 % April 2025 775,000 775,000 7.375 % senior secured notes due 2025 7.375 % September 2025 850,000 850,000 4.00 % senior exchangeable notes due 2025 4.00 % April 2025 333,220 333,220 11.25 % senior secured notes due 2027 11.25 % December 2027 555,000 555,000 Face value of total debt outstanding 4,948,255 4,839,126 Less current portion of debt outstanding ( 23,480 ) ( 23,480 ) Face value of long-term debt outstanding $ 4,924,775 $ 4,815,646 ______________________ (1) Represents the Secured Overnight Financing Rate ("SOFR"). (2) The AR Facility (as defined below) is subject to certain "springing" maturity conditions; the maturity may extend to February 2026 at the latest. We had outstanding letters of credit totaling $ 11 million and $ 12 million as of March 31, 2023 and December 31, 2022, respectively, which were secured by a $ 20 million cash collateral deposit account. Senior Secured Credit Facilities Refinancing Transactions On March 9, 2022, we entered into an amendment to refinance another portion of our then-outstanding Term Loan B facility (the "March 2022 Refinancing"). Our Senior Secured Credit Facility is governed by the Amended and Restated Credit Agreement including the Sixth Term A Loan Refinancing and Incremental Amendments entered into in December 2020 and all preceding amendments. We incurred no additional indebtedness as a result of the March 2022 Refinancing, other than amounts covering discounts and certain fees and expenses. The March 2022 Refinancing included the application of the proceeds of a new $ 625 million term loan “B” facility (the “2022 Term Loan B-1 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. The remaining proceeds, net of a discount of $ 1 million, were used to pay $ 1 million in other fees and expenses. We incurred an additional discount of $ 5 million and other fees of $ 3 million which were funded with cash on hand. We recognized a loss on extinguishment of debt in connection with the March 2022 Refinancing during the year ended December 31, 2022, of $ 4 million and debt modification costs for financing fees of $ 1 million recorded to Other, net. The 2022 Term Loan B-1 Facility matures on June 30, 2028 and offers us the ability to prepay or repay the 2022 Term Loan B-1 Facility after 12 months or to prepay or repay at a 101 premium before that date. The interest rates on the 2022 Term Loan B-1 Facility are based on Term SOFR, replacing LIBOR, plus an applicable margin. On August 15, 2022, we entered into an amendment to refinance a portion of the Term Loan B facility (the "August 2022 Refinancing"). We incurred no additional indebtedness as a result of the August 2022 Refinancing, other than amounts covering discounts and certain fees and expenses. The August 2022 Refinancing included the application of the proceeds of a new $ 675 million term loan “B” facility (the “2022 Term Loan B-2 Facility”), borrowed by Sabre GLBL under our Amended and Restated Credit Agreement, with the effect of extending the maturity of approximately $ 647 million of the existing Term Loan B credit facility under the Amended and Restated Credit Agreement. The remaining proceeds, net of a discount of $ 25 million, were used to pay $ 3 million in other fees and expenses. We incurred an additional discount of $ 9 million and other fees of $ 2 million which were funded with cash on hand. We recognized debt modification costs for financing fees in connection with the August 2022 Refinancing during the year ended December 31, 2022, of $ 5 million recorded to Other, net. No loss on extinguishment of debt was recorded as a result of the August 2022 Refinancing. The 2022 Term Loan B-2 Facility matures on June 30, 2028 and offers us the ability to prepay or repay the 2022 Term Loan B-2 Facility after 12 months or to prepay or repay at a 101 premium before that date. The interest rates on the 2022 Term Loan B-2 Facility are based on Term SOFR, replacing LIBOR, plus an applicable margin. 10 On December 6, 2022, we used the proceeds of the December 2027 Notes issuance to redeem the remaining principal balance on the Term Loan B of $ 536 million, plus $ 1 million of accrued interest (the “December 2022 Refinancing”). We recognized a loss on extinguishment of debt of $ 1 million during the year ended December 31, 2022 in connection the December 2022 Refinancing, which consisted of the write-off of unamortized debt issuance costs and discount of $ 1 million. Under the Amended and Restated Credit Agreement, the loan parties are subject to certain customary non-financial covenants, including restrictions on incurring certain types of indebtedness, creation of liens on certain assets, making of certain investments, and payment of dividends. We are further required to pay down the term loans with proceeds from certain asset sales, if not reinvested into the business within 15 months, as defined in the Amended and Restated Credit Agreement. As of March 31, 2023, we are in compliance with all covenants under the terms of the Amended and Restated Credit Agreement. Senior Secured Notes On December 6, 2022, Sabre GLBL entered into a new debt agreement consisting of $ 555 million aggregate principal amount of 11.250 % senior secured notes due 2027 (the “December 2027 Notes”). The December 2027 Notes were issued at a discount of 1.866 %. The December 2027 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 December 2027 Notes bear interest at a rate of 11.250 % per annum and interest payments are due semi-annually in arrears on June 15 and December 15 of each year, beginning June 15, 2023. The December 2027 Notes mature on December 15, 2027. The net proceeds of $ 545 million received from the sale of the December 2027 Notes, net of a discount of $ 10 million, were used to repay approximately $ 536 million principal amount of debt under the Term Loan B, plus $ 1 million of accrued interest. The remaining proceeds of $ 8 million, plus cash on hand, were used to pay $ 10 million in underwriting fees and commissions, and other expenses. AR Facility On February 14, 2023, Sabre Securitization, LLC, our indirect, consolidated subsidiary and a special purpose entity (“Sabre Securitization”), entered into a three-year committed accounts receivable securitization facility (the “AR Facility”) of up to $ 200 million with PNC Bank, N.A. On March 30, 2023, we borrowed $ 115 million under the AR Facility. These proceeds are being used for general corporat e p urposes. The amount available for borrowings at any one time under the AR Facility is limited to a borrowing base calculated based on the outstanding balance of eligible receivables, subject to certain reserves. Borrowings under the AR Facility bear interest at a rate equal to SOFR, subject to a 0 % floor, plus a drawn fee, initially in the amount of 2.25 %. The drawn fee varies based on our leverage, and Sabre Securitization also pays a fee on the undrawn committed amount of the AR Facility. Interest and fees payable by Sabre Securitization under the AR Facility are due monthly. Net debt issuance costs related to our AR Facility are $ 2 million and are recorded in other assets, net in our consolidated financial statements. The AR Facility is scheduled to terminate on February 13, 2026, unless extended in accordance with its terms. The AR Facility is subject to a springing maturity date should certain events occur in relation to material indebtedness (as defined in the AR Facility) of ours, Sabre Securitization and certain other subsidiaries. In connection with the AR Facility, certain of our subsidiaries (the “Originators”) have sold and contributed, and will continue to sell or contribute, substantially all of their accounts receivable and certain related assets (collectively, the "Receivables") to Sabre Securitization to be held as collateral for borrowings under the AR Facility. Sabre Securitization’s assets are not available to satisfy the obligations of Sabre Corporation or any of its affiliates. Under the terms of the AR Facility, the lenders under the AR Facility would have a senior priority claim to the assets of Sabre Securitization, which will primarily consist of the Receivables of the Originators participating in the AR Facility. As of March 31, 2023, $ 415 million of Receivables are held as assets by Sabre Securitization, consisting of $ 401 million of accounts receivable, net of allowance for credit losses and $ 14 million of other as sets, net in our conso lidated balance sheet. The AR Facility is accounted for as a secured borrowing on a consolidated basis, rather than a sale of assets; as a result, (i) Receivables balances pledged as collateral are presented as assets and the borrowings are presented as liabilities on our consolidated balance sheets, (ii) our consolidated statements of operations reflect the associated charges for bad debt expense (a component of general and administrative expenses) related to the pledged Receivables and interest expense associated with the AR Facility and (iii) receipts from customers related to the underlying Receivables are reflected as operating cash flows and borrowings and repayments u nder the AR Facility are reflected as financing cash flows within our consolidated statements of cash flows. The receivables and other assets of Sabre Securitization are not available to satisfy creditors of any entity other than Sabre Securitization. The AR Facility contains certain customary representations, warranties, affirmative covenants, and negative covenants, subject to certain cure periods in some cases, including the eligibility of the Receivables being sold by the Originators and securing the loans made by the lenders, as well as customary reserve requirements, events of default, termination events, and servicer defaults. As of March 31, 2023, we were in compliance with and expect to be in compliance with the financial covenants of the AR Facility for at least the next twelve months. Exchangeable Notes On April 17, 2020, Sabre GLBL entered into a new debt agreement consisting of $ 345 million aggregate principal amount of 4.000 % senior exchangeable notes due 2025 (the “Exchangeable Notes”). The Exchangeable Notes are senior, unsecured 11 obligations of Sabre GLBL, accrue interest payable semi-annually in arrears and mature on April 15, 2025, unless earlier repurchased or exchanged in accordance with specified circumstances and terms of the indenture governing the Exchangeable Notes. During the year ended December 31, 2021, a certain holder elected to exchange $ 10 million of the Exchangeable Notes for 1,269,497 shares of common stock, which we elected to settle in shares of our common stock. Additionally, certain holders elected to exchange $ 2 million of the Exchangeable Notes for $ 3 million in cash, which we elected to settle in cash. As of March 31, 2023 , we have $ 333 million aggregate principal amount of Exchangeable Notes outstanding. Under the terms of indenture, the notes are exchangeable into common stock of Sabre Corporation (referred to as "our common stock" herein) at the following times or circumstances: • during any calendar quarter commencing after the calendar quarter ended June 30, 2020, if the last reported sale price per share of our common stock exceeds 130 % of the exchange price for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; • during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the "Measurement Period") if the trading price per $1,000 principal amount of Exchangeable Notes, as determined following a request by their holder in accordance with the procedures in the indenture, for each trading day of the Measurement Period was less than 98 % of the product of the last reported sale price per share of our common stock on such trading day and the exchange rate on such trading day; • upon the occurrence of certain corporate events or distributions on our common stock, including but not limited to a “Fundamental Change” (as defined in the indenture governing the notes); • upon the occurrence of specified corporate events; or • on or after October 15, 2024, until the close of business on the second scheduled trading day immediately preceding the maturity date, April 15, 2025. With certain exceptions, upon a Change of Control or other Fundamental Change (both as defined in the indenture governing the Exchangeable Notes), the holders of the Exchangeable Notes may require us to repurchase all or part of the principal amount of the Exchangeable Notes at a repurchase price equal to 100 % of the principal amount of the Exchangeable Notes, plus any accrued and unpaid interest to, but excluding, the repurchase date. As of March 31, 2023, none of the conditions allowing holders of the Exchangeable Notes to exchange have been met. The Exchangeable Notes are convertible at their holder’s election into shares of our common stock based on an initial conversion rate of 126.9499 shares of common stock per $1,000 principal amount of the Exchangeable Notes, which is equivalent to an initial conversion price of approximately $ 7.88 per share. The exchange rate is subject to anti-dilution and other adjustments. Upon conversion, Sabre GLBL will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of common stock, at our election. If a “Make-Whole Fundamental Change” (as defined in the Exchangeable Notes Indenture) occurs with respect to any Exchangeable Note and the exchange date for the exchange of such Exchangeable Note occurs during the related “Make-Whole Fundamental Change Exchange Period” (as defined in the Exchangeable Notes Indenture), then, subject to the provisions set forth in the Exchangeable Notes Indenture, the exchange rate applicable to such exchange will be increased by a number of shares set forth in the table contained in the Exchangeable Notes Indenture, based on a function of the time since origination and our stock price on the date of the occurrence of such Make-Whole Fundamental Change. The net proceeds received from the sale of the Exchangeable Notes of $ 336 million, net of underwriting fees and commissions, are being used for general corporate purposes. The following table sets forth the carrying value of the Exchangeable Notes as of March 31, 2023 and December 31, 2022, (in thousands): March 31, 2023 December 31, 2022 Principal $ 333,220 $ 333,220 Less: Unamortized debt issuance costs 5,056 5,642 Net carrying value $ 328,164 $ 327,578 The following table sets forth interest expense recognized related to the Exchangeable Notes for the three months ended March 31, 2023 and 2022 (in thousands): Three Months Ended March 31, 2023 2022 Contractual interest expense $ 3,332 $ 3,332 Amortization of issuance costs 586 559 12 8. Derivatives Hedging Objectives —We are exposed to certain risks relating to ongoing business operations. The primary risks managed by using derivative instruments are foreign currency exchange rate risk and interest rate risk. Forward contracts on various foreign currencies are entered into to manage the foreign currency exchange rate risk on operational expenditures' exposure denominated in foreign currencies. Interest rate swaps are entered into to manage interest rate risk associated with our floating-rate borrowings. In accordance with authoritative guidance on accounting for derivatives and hedging, we designate foreign currency forward contracts as cash flow hedges on operational exposure and interest rate swaps as cash flow hedges of floating-rate borrowings. Cash Flow Hedging Strategy —To protect against the reduction in value of forecasted foreign currency cash flows, we hedge portions of our revenues and expenses denominated in foreign currencies with forward contracts. For example, when the dollar strengthens significantly against the foreign currencies, the decline in present value of future foreign currency expense is offset by losses in the fair value of the forward contracts designated as hedges. Conversely, when the dollar weakens, the increase in the present value of future foreign currency expense is offset by gains in the fair value of the forward contracts. Due to the uncertainty driven by the COVID-19 pandemic on our foreign currency exposures, we have paused entering into new cash flow hedges of forecasted foreign currency cash flows until we have more clarity regarding the recovery trajectory and its impacts on net exposures. We enter into interest rate swap agreements to manage interest rate risk exposure. The interest rate swap agreements modify our exposure to interest rate risk by converting floating-rate debt to a fixed rate basis, thus reducing the impact of interest rate changes on future interest expense and net earnings. These agreements involve the receipt of floating rate amounts in exchange for fixed rate interest payments over the life of the agreements without an exchange of the underlying principal amount. For derivative instruments that are designated and qualify as cash flow hedges, the effective portions and ineffective portions of the gain or loss on the derivative instruments, and the hedge components excluded from the assessment of effectiveness, are reported as a component of other comprehensive income (loss) (“OCI”) and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. Cash flow hedges are classified in the same category in the consolidated statements of cash flows as the items being hedged and gains and losses on the derivative financial instruments are reported in cash provided by (used in) operating activities within the consolidated statements of cash flows. Derivatives not designated as hedging instruments are carried at fair value with changes in fair value reflected in Other, net in the consolidated statements of operations. Forward Contracts —In order to hedge our operational expenditures' exposure to foreign currency movements, we were a party to certain foreign currency forward contracts that extended until December 31, 2020. We designated these instruments as cash flow hedges. As of March 31, 2023 and December 31, 2022, we had no unsettled forward contracts. Interest Rate Swap Contracts —We had no interest rate swaps outstanding during the three months ended March 31, 2022. Interest rate swaps outstanding during the three months ended March 31, 2023, are as follows: Notional Amount Interest Rate Received Interest Rate Paid Effective Date Maturity Date Designated as Hedging Instrument $ 200 million 1 month SOFR (1) 1.71 % (2) April 30, 2022 December 31, 2023 $ 150 million 1 month SOFR (1) 2.79 % (3) June 30, 2022 December 31, 2023 ______________________ (1) Subject to a 0.5 % floor. (2) Fixed fee of 1.71 % effective April 30, 2022, and expiring December 30, 2022, and 3.09 % effective December 31, 2022, and expiring December 31, 2023. (3) Fixed fee of 2.79 % effective June 30, 2022, and expiring December 30, 2022, and 3.98 % effective December 31, 2022, and expiring December 31, 2023. In April 2022, we entered into an interest rate swap to hedge the interest payments associated with $ 200 million of the floating-rate 2022 Term Loan B-1 for the years 2022 and 2023. In June 2022, we entered into an interest rate swap to hedge the interest payments associated with $ 150 million of the floating-rate 2022 Term Loan B-1 for the years 2022 and 2023. We designated these swaps as cash flow hedges. 13 The estimated fair values of our derivatives designated as hedging instruments as of March 31, 2023 and December 31, 2022 are as follows (in thousands): Derivative Assets Fair Value as of Derivatives Designated as Hedging Instruments Consolidated Balance Sheet Location March 31, 2023 December 31, 2022 Interest rate swaps Prepaid expenses and other current assets $ 3,620 $ 4,905 Interest rate swaps Other noncurrent liabilities ( 173 ) ( 168 ) Total $ 3,447 $ 4,737 The effects of derivative instruments, net of taxes, on OCI for the three months ended March 31, 2023 are as follows (in thousands): Amount of Losses Recognized in OCI on Derivative, Effective Portion Derivatives in Cash Flow Hedging Relationships Three Months Ended March 31, 2023 Interest rate swaps $ ( 296 ) Total $ ( 296 ) Amount of Gains Reclassified from Accumulated OCI into Income, Effective Portion Three Months Ended March 31, 2023 Interest rate swaps Interest expense, net $ ( 989 ) Total $ ( 989 ) 9. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market for that asset or liability. Guidance on fair value measurements and disclosures establishes a valuation hierarchy for disclosure of inputs used in measuring fair value defined as follows: Level 1—Inputs are unadjusted quoted prices that are available in active markets for identical assets or liabilities. Level 2—Inputs include quoted prices for similar assets and liabilities in active markets and quoted prices in non-active markets, inputs other than quoted prices that are observable, and inputs that are not directly observable, but are corroborated by observable market data. Level 3—Inputs that are unobservable and are supported by little or no market activity and reflect the use of significant management judgment. The classification of a financial asset or liability within the hierarchy is determined based on the least reliable level of input that is significant to the fair value measurement. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. We also consider the counterparty and our own non-performance risk in our assessment of fair value. Assets and Liabilities that are Measured at Fair Value on a Recurring Basis Interest Rate Swaps —The fair value of our interest rate swaps is estimated using a combined income and market-based valuation methodology based upon Level 2 inputs, including credit ratings and forward interest rate yield curves obtained from independent pricing services. Money market funds —Our valuation technique used to measure the fair values of our money market funds was derived from quoted market prices and active markets for these instruments that exist. Time deposits —Our valuation technique used to measure the fair values of our time deposit instruments was derived from the following: non-binding market consensus prices that were corroborated by observable market data and quoted market prices for similar instruments. Investment in securities— In May 2022, we acquired 8 million shares of Class A Common Stock, par value of $ 0.0001 per share, of Global Business Travel Group, Inc. ("GBT") for an aggregate purchase price of $ 80 million, which is included in prepaid expenses and other current assets in our consolidated balance sheets. As of March 31, 2023, we continued to own these 14 8 million shares. The terms of these shares do not contain any restrictions that would impact our ability to sell the shares in the future. The fair value of our investment in GBT is based on its share price, a Level 1 input, as the stock is publicly traded on the New York Stock Exchange under the symbol GBTG. The following tables present our assets that are required to be measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 (in thousands): Fair Value at Reporting Date Using Assets: March 31, 2023 Level 1 Level 2 Level 3 Derivatives (1) Interest rate swap contracts $ 3,447 $ — $ 3,447 $ — Investment in securities 53,362 53,362 — — Money market funds 439,420 439,420 — — Time deposits 203,198 — 203,198 — Total $ 699,427 $ 492,782 $ 206,645 $ — Fair Value at Reporting Date Using Assets: December 31, 2022 Level 1 Level 2 Level 3 Derivatives (1) Interest rate swap contracts $ 4,737 $ — $ 4,737 $ — Investment in securities 54,303 54,303 — — Money market funds 153,252 153,252 — — Time deposits 444,835 — 444,835 — Total $ 657,127 $ 207,555 $ 449,572 $ — ______________________ (1) See Note 8. Derivatives for further detail. There were no transfers between Levels 1 and 2 within the fair value hierarchy for the three months ended March 31, 2023. Unrealized losses recognized during the three months ended March 31, 2023 from our investments in securities totaled $ 1 million which is recorded to Other, net within our results of operations. Other Financial Instruments The carrying value of our financial instruments including cash and cash equivalents, restricted cash and accounts receivable approximates their fair values due to the short term nature of these instruments. The fair values of our Exchangeable Notes, senior secured notes due 2025 and term loans under our Amended and Restated Credit Agreement are determined based on quoted market prices for a similar liability when traded as an asset in an active market, a Level 2 input. The outstanding principal balance of our AR Facility approximated its fair value as of March 31, 2023. The following table presents the fair value and carrying value of our senior notes and borrowings under our senior secured credit facilities as of March 31, 2023 and December 31, 2022 (in thousands): Fair Value at Carrying Value at (1) Financial Instrument March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022 2021 Term Loan B-1 $ 355,252 $ 362,872 $ 396,174 $ 397,147 2021 Term Loan B-2 536,239 578,042 628,432 629,832 2022 Term Loan B-1 536,379 567,974 612,831 614,139 2022 Term Loan B-2 578,437 623,235 640,425 640,899 9.25 % senior secured notes due 2025 722,397 774,128 775,000 775,000 7.375 % senior secured notes due 2025 759,658 813,539 850,000 850,000 4.00 % senior exchangeable notes due 2025 302,121 358,440 333,220 333,220 11.25 % senior secured notes due 2027 513,109 572,058 545,156 544,770 ______________________ (1) Excludes net unamortized debt issuance costs. 15 Assets that are Measured at Fair Value on a Nonrecurring Basis We assess goodwill and other intangible assets with indefinite lives for impairment annually or more frequently if indicators arise. We continually monitor events and changes in circumstances such as changes in market conditions, near and long-term demand and other relevant factors, that could indicate that the fair value of any one of our reporting units may more likely than not have fallen below its respective carrying amount. We have not identified any triggering events or changes in circumstances since the performance of our annual goodwill impairment test that would require us to perform another goodwill impairment test and we did no t record any goodwill impairment charges for the three months ended March 31, 2023. As we cannot predict the duration or scope of the COVID-19 pandemic, future impairments may occur and the negative financial impact to our consolidated financial statements and results of operations of potential future impairments cannot be reasonably estimated but could be material. 10. Accumulated Other Comprehensive Loss As of March 31, 2023 and December 31, 2022, the components of accumulated other comprehensive loss, net of related deferred income taxes, are as follows (in thousands): March 31, 2023 December 31, 2022 Defined benefit pension and other postretirement benefit plans $ ( 72,483 ) $ ( 73,746 ) Unrealized foreign currency translation gain 6,833 5,257 Unrealized gain on interest rate swaps 3,292 4,577 Share of other comprehensive loss of equity method investments ( 2,121 ) ( 1,819 ) Total accumulated other comprehensive loss, net of tax $ ( 64,479 ) $ ( 65,731 ) The amortization of actuarial losses and periodic service credits associated with our retirement-related benefit plans is primarily included in Other, net in the consolidated statements of operations. On March 11, 2021, the American Rescue Plan Act ("ARPA") of 2021 was signed into law, which modified funding requirements for single-employer defined benefit pension plans by restarting and extending the amortization of funding shortfalls and extending and enhancing interest rate stabilization percentages. We have elected to use excess contributions resulting from a reduction to past contribution requirements allowed by ARPA to offset remaining required contributions. As of March 31, 2023, we have not contributed to our defined benefit pension plan in 2023. Based on current assumptions, we expect to make a contribution of up to $ 10 million in 2023 to our defined benefit pension plan. See Note 8. Derivatives, for information on the income statement line items affected as the result of reclassification adjustments associated with derivatives. 11. Stock and Stockholders' Equity Preferred Stock On August 24, 2020, we completed an offering of 3,340,000 shares of our 6.50 % Series A Mandatory Convertible Preferred Stock (the "Preferred Stock"), which generated net proceeds of approximately $ 323 million for use as general corporate purposes. During the year ended December 31, 2021, a certain holder elected to convert 50,000 shares of preferred stock to 595,240 shares of common stock, leaving 3,290,000 shares outstanding. The Preferred Stock accumulates cumulative dividends at a rate per annum equal to 6.50 % of the liquidation preference of $ 100 per share (equivalent to $ 6.50 annually per share) payable in cash or, subject to certain limitations, by delivery of shares of our common stock or any combination of cash and shares of our common stock, at our election; provided, however, that any undeclared and unpaid dividends will continue to accumulate. 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. Subject to limited exceptions, no dividends may be declared or paid on shares of our common stock, unless all accumulated dividends have been paid or set aside for payment on all outstanding shares of our Preferred Stock for all past completed dividend periods. In the event of our voluntary or involuntary liquidation, dissolution or winding-up, no distribution of our assets may be made to holders of our common stock until we have paid to holders of our Preferred Stock a liquidation preference equal to $ 100 per share plus accumulated and unpaid dividends. We recorded $ 5 million of accrued preferred stock dividends in our consolidated results of operations for the three months ended March 31, 2023 and 2022. During the three months ended March 31, 2023 and 2022, we paid cash dividends on our preferred stock of $ 5 million. On April 26, 2023, the Board of Directors declared a dividend of $ 1.625 per share on Preferred Stock payable on June 1, 2023 to holders of record of the Preferred Stock on May 15, 2023. Unless earlier converted, each outstanding share of Preferred Stock will automatically convert, on the mandatory conversion date, which is expected to be September 1, 2023, into shares of our common stock at a rate between 11.9048 and 14.2857 , subject to customary anti-dilution adjustments. The number of shares of our common stock issuable upon conversion will be determined based on the average volume-weighted average price per share of our common stock over the 20 16 consecutive trading day period beginning on, and including, the 21st scheduled trading day immediately before September 1, 2023. The number of shares issued at conversion based on the unadjusted conversion rates will be between 39 million and 47 million shares. Holders of the Preferred Stock have the right to convert all or any portion of their shares at any time until the close of business on the mandatory conversion date. Early conversions that are not in connection with a “Make-Whole Fundamental Change” (as defined in the Certificate of Designations governing the Preferred Stock) will be settled at the minimum conversion rate of 11.9048 . If a Make-Whole Fundamental Change occurs, holders of the Preferred Stock will, in certain circumstances, be entitled to convert their shares 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 redeemable at our election before the mandatory conversion date. The holders of the Preferred Stock will not have any voting rights, with limited exceptions. In the event that Preferred Stock dividends have not been declared and paid in an aggregate amount corresponding to six or more dividend periods, whether or not consecutive, the holders of the Preferred Stock will have the right to elect two new directors until all accumulated and unpaid Preferred Stock dividends have been paid in full, at which time that right will terminate. Share Repurchase Program In February 2017, we announced the approval of a multi-year share repurchase program (the "Share Repurchase Program") to purchase up to $ 500 million of Sabre's common stock outstanding. Repurchases under the Share Repurchase Program may take place in the open market or privately negotiated transactions. During the three months ended March 31, 2023, 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 undertook 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, 2023. Exchangeable Notes On April 17, 2020, we issued $ 345 million aggregate principal amount of Exchangeable Notes. Under the terms of indenture, the Exchangeable Notes are exchangeable into our common stock under specified circumstances. As of March 31, 2023, we have $ 333 million aggregate principal amount of Exchangeable Notes outstanding. See Note 7. Debt for further details. We expect to settle the principal amount of the outstanding Exchangeable Notes in shares of our common stock. 17 12. Earnings Per Share The following table reconciles the numerators and denominators used in the computations of basic and diluted earnings per share from continuing operations (in thousands, except per share data): Three Months Ended March 31, 2023 2022 Numerator: (Loss) income from continuing operations $ ( 99,366 ) $ 47,544 Less: Net income attributable to noncontrolling interests ( 835 ) 272 Less: Preferred stock dividends 5,346 5,346 Net (loss) income from continuing operations available to common stockholders, basic ( 103,877 ) 41,926 Add: Interest expense, net of tax for exchangeable notes — 3,074 Add: Preferred stock dividends — 5,346 Net (loss) income from continuing operations available to common stockholders, diluted $ ( 103,877 ) $ 50,346 Denominator: Basic weighted-average common shares outstanding 328,928 323,658 Add: Dilutive effect of stock options and restricted stock awards — 4,251 Add: Dilutive effect of exchangeable notes — 42,302 Add: Dilutive effect of preferred shares — 39,167 Diluted weighted-average common shares outstanding 328,928 409,378 Earnings per share from continuing operations: Basic $ ( 0.32 ) $ 0.13 Diluted $ ( 0.32 ) $ 0.12 Basic earnings per share is computed by dividing net income from continuing operations available to common stockholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share is computed by dividing net income from continuing operations available to common stockholders by the weighted-average number of common shares outstanding plus the effect of all dilutive common stock equivalents during each period. The diluted weighted-average common shares outstanding calculation excludes 1 million of dilutive stock options and restricted stock awards for the three months ended March 31, 2023 as their effect would be anti-dilutive given the net loss incurred in the period. The calculation of diluted weighted-average shares excludes the impact of 3 million and 2 million of anti-dilutive common stock equivalents for the three months ended March 31, 2023 and 2022, respectively. We have used the if-converted method for calculating any potential dilutive effect of the Exchangeable Notes on our diluted net income per share. Under the if-converted method, the Exchangeable Notes are assumed to be converted at the beginning of the period and the resulting common shares are included in the denominator of the diluted earnings per share calculation for the entire period being presented and interest expense, net of tax, recorded in connection with the Exchangeable Notes is added back to the numerator, only in the periods in which such effect is dilutive. The approximately 42 million resulting common shares related to the Exchangeable Notes for the three months ended March 31, 2023 are not included in the dilutive weighted-average common shares outstanding calculation as their effect would be anti-dilutive given the net loss incurred in the period. Likewise, the potential dilutive effect of our Preferred Stock outstanding during the period was calculated using the if-converted method assuming the conversion as of the earliest period reported or at the date of issuance, if later. The resulting common shares are included in the denominator of the diluted earnings per share calculation for the entire period being presented and preferred stock dividends are added back to the numerator, only in the periods in which such effect is dilutive. The approximately 47 million resulting common shares related to the Preferred Stock for the three months ended March 31, 2023 are not included in the dilutive weighted-average common shares outstanding calculation as their effect would be anti-dilutive given the net loss incurred in the period. 13. Contingencies Legal Proceedings While certain legal proceedings and related indemnification obligations to which we are a party specify the amounts claimed, these claims may not represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, nor can the amount of possible loss or range of loss, if any, be reasonably estimated, except in circumstances where an aggregate litigation accrual has been recorded for probable and reasonably estimable loss contingencies. A determination of the amount of accrual required, if any, for these contingencies is 18 made after careful analysis of each matter. The required accrual may change in the future due to new information or developments in each matter or changes in approach such as a change in settlement strategy in dealing with these matters. Antitrust Litigation and Investigations US Airways Antitrust Litigation In April 2011, US Airways filed suit against us in federal court in the Southern District of New York, alleging violations of the Sherman Act Section 1 (anticompetitive agreements) and Section 2 (monopolization). The complaint was filed fewer than two months after we entered into a new distribution agreement with US Airways. In September 2011, the court dismissed all claims relating to Section 2. The claims that were not dismissed were claims brought under Section 1 of the Sherman Act, relating to our contracts with US Airways, which US Airways claimed contain anticompetitive provisions, and an alleged conspiracy with the other GDSs, allegedly to maintain the industry structure and not to compete for content. We strongly deny all of the allegations made by US Airways. Sabre filed summary judgment motions in April 2014. In January 2015, the court issued an order granting Sabre's summary judgment motions in part, eliminating a majority of US Airways' alleged damages and rejecting its request for injunctive relief by which US Airways sought to bar Sabre from enforcing certain provisions in our contracts. In September 2015, the court also dismissed US Airways' claim for declaratory relief. In February 2017, US Airways sought reconsideration of the court's opinion dismissing the claim for declaratory relief, which the court denied in March 2017. US Airways estimated its damages in a range of $ 317 million to $ 482 million (before trebling), depending on certain assumptions; this quantification was substantially reduced following the court’s summary judgment ruling described above. The trial on the remaining claims commenced in October 2016. In December 2016, the jury issued a verdict in favor of US Airways with respect to its claim under Section 1 of the Sherman Act regarding Sabre's contract with US Airways and awarded it $ 5 million in single damages. The jury rejected US Airways' claim alleging a conspiracy with the other GDSs. Based on the jury’s verdict, in March 2017 the court entered final judgment in favor of US Airways in the amount of $ 15 million, which is three times the jury’s award of $ 5 million as required by the Sherman Act. As a result of the jury's verdict, US Airways was also entitled to receive reasonable attorneys’ fees and costs under the Sherman Act. As such, it filed a motion seeking approximately $ 125 million in attorneys’ fees and costs, the amount of which we strongly disputed. In January 2018, the court denied US Airways' motion seeking attorneys' fees and costs, without prejudice. In the fourth quarter of 2016, we accrued a loss of $ 32 million, which represented the court's final judgment of $ 15 million, plus our estimate of $ 17 million for US Airways' reasonable attorneys’ fees, expenses and costs. In April 2017, we filed an appeal with the United States Court of Appeals for the Second Circuit seeking a reversal of the judgment. US Airways also filed a counter-appeal challenging earlier court orders, including the above-referenced orders dismissing and/or issuing summary judgment as to portions of its claims and damages. In connection with this appeal, we posted an appellate bond equal to the aggregate amount of the $ 15 million judgment entered plus interest, which stayed the judgment pending the appeal. The Second Circuit heard oral arguments on this matter in December 2018. In September 2019, the Second Circuit issued its Order and Opinion. The Second Circuit vacated the judgment with respect to US Airways’ claim under Section 1, reversed the trial court’s dismissal of US Airways’ claims relating to Section 2, and remanded the case to district court for a new trial. In addition, the Second Circuit affirmed the trial court’s ruling limiting US Airways’ damages. The judgment in our favor on US Airways' conspiracy claim remained intact. The lawsuit was remanded to federal court in the Southern District of New York for further proceedings. The retrial began in April 2022. US Airways quantified its damages for the retrial in a range of $ 204 million to $ 299 million (before trebling), based on its payments of GDS booking fees to Sabre, alleged lost profits, and certain other assumptions. In May 2022, the jury rejected US Airways’ claim under Section 1 of the Sherman Act, finding that Sabre’s contractual terms were not anticompetitive, and found in favor of US Airways with respect to its monopolization claim for the period from 2007 to 2012 under Section 2 of the Sherman Act. The jury, however, only awarded US Airways $ 1.00 in single damages. Based on the jury’s verdict, in June 2022 the court entered final judgment in favor of US Airways in the amount of $ 3.00 , which is three times the jury’s award of $ 1.00 as required by the Sherman Act. We have paid US Airways $ 3.05 to satisfy this portion of the judgment. Neither party has filed an appeal, and the period to file a timely appeal has passed. In addition, the court’s entry of judgment regarding the monopolization claim under Section 2 of the Sherman Act entitles US Airways to receive reasonable attorneys’ fees and costs under the Sherman Act. The court has referred the issue of the attorneys' fees and costs to a magistrate judge. On April 10, 2023, the magistrate issued a recommendation that US Airways is entitled to a reasonable attorneys' fees award, but that the award is subject to a reduction to reflect their nominal recovery. The magistrate's recommendation is subject to the approval of the court. To date, US Airways has not yet filed any papers with the court seeking a particular amount for its attorneys’ fees and costs. During the quarter ended September 30, 2022, we accrued an estimated loss in selling, general and administrative expenses for these attorneys' fees and costs, which did not have a significant effect on our results of operations for 2022. At this time, we do not have sufficient information to estimate a range of reasonably possible or probable attorneys' fees and costs in excess of the amount recorded. The amount of attorneys’ fees and costs to be awarded is subject to the final decision by the trial court, which may be appealed. The ultimate resolution of this matter may be greater or less than the amount recorded and, if greater, could adversely affect our results of operations. We have incurred and will incur significant fees, costs and expenses for as long as the lawsuit is ongoing. 19 Indian Income Tax Litigation We were a defendant in income tax litigation brought by the Indian Director of Income Tax (“DIT”) in the Supreme Court of India. The dispute arose in 1999 when the DIT asserted that we have a permanent establishment within the meaning of the Income Tax Treaty between the United States and the Republic of India and accordingly issued tax assessments for assessment years ending March 1998 and March 1999, and later issued further tax assessments for assessment years ending March 2000 through March 2006. The DIT has continued to issue further tax assessments on a similar basis for subsequent years; however, the tax assessments for assessment years ending March 2007 and later are no longer material. We appealed the tax assessments for assessment years ending March 1998 through March 2006 and the Indian Commissioner of Income Tax Appeals returned a mixed verdict. We filed further appeals with the Income Tax Appellate Tribunal (“ITAT”). The ITAT ruled in our favor on June 19, 2009 and July 10, 2009, stating that no income would be chargeable to tax for assessment years ending March 1998 and March 1999, and from March 2000 through March 2006. The DIT appealed those decisions to the Delhi High Court, which found in our favor on July 19, 2010. The DIT has appealed the decision to the Supreme Court of India which upheld the Delhi High Court ruling on April 19, 2023. We have appealed the tax assessments for the assessment years ended March 2013 to March 2018 with the ITAT and no trial date has been set for these subsequent years. In addition, Sabre Asia Pacific Pte Ltd ("SAPPL") is currently a defendant in similar income tax litigation brought by the DIT. The dispute arose when the DIT asserted that SAPPL has a permanent establishment within the meaning of the Income Tax Treaty between Singapore and India and accordingly issued tax assessments for assessment years ending March 2000 through March 2005. SAPPL appealed the tax assessments, and the Indian Commissioner of Income Tax (Appeals) returned a mixed verdict. SAPPL filed further appeals with the ITAT. The ITAT ruled in SAPPL’s favor, finding that no income would be chargeable to tax for assessment years ending March 2000 through March 2005. The DIT appealed those decisions to the Bombay High Court and our case is pending before that court; the High Court dismissed the case for assessment years ending March 2001 through March 2004. The DIT also assessed taxes on a similar basis plus some additional issues for assessment years ending March 2006 through March 2018 and appeals for assessment years ending March 2006 through March 2016 and March 2018 through March 2020 are pending before the ITAT or the High Court depending on the year. If the DIT were to fully prevail on every claim against us, including SAPPL and other group companies, we could be subject to taxes, interest and penalties of approximately $ 18 million as of March 31, 2023. We intend to continue to aggressively defend against each of the foregoing claims. Although we do not believe that the outcome of the proceedings will result in a material impact on our business or financial condition, litigation is by its nature uncertain. We do not believe this outcome is more likely than not and therefore have not made any provisions or recorded any liability for the potential resolution of any of these claims. Indian Service Tax Litigation SAPPL's Indian subsidiary is also subject to litigation by the India Director General (Service Tax) ("DGST"), which has assessed the subsidiary for multiple years related to its alleged failure to pay service tax on marketing fees and reimbursements of expenses. Indian courts have returned verdicts favorable to the Indian subsidiary. The DGST has appealed the verdict to the Indian Supreme Court. We do not believe that an adverse outcome is probable and therefore have not made any provisions or recorded any liability for the potential resolution of any of these claims. Litigation Relating to Routine Proceedings We are also engaged from time to time in other routine legal and tax proceedings incidental to our business. We do not believe that any of these routine proceedings will have a material impact on the business or our financial condition. Other Other Tax Matters We operate in numerous jurisdictions in which taxing authorities may challenge our position with respect to income and non-income based taxes. We routinely receive inquiries and may also from time to time receive challenges or assessments from these taxing authorities. With respect to non-income based taxes, we recognize liabilities when we determine it is probable that amounts will be owed to the taxing authorities and such amounts are estimable. For example, in most countries we pay and collect Value Added Tax (“VAT”) when procuring goods and services, or providing services, within the normal course of business. VAT receivables are established in jurisdictions where VAT paid exceeds VAT collected and are recoverable through the filing of refund claims. These receivables have inherent audit and collection risks unique to the specific jurisdictions that evaluate our refund claims. We intend to vigorously defend our positions against any claims that are not insignificant, including through litigation when necessary. As of March 31, 2023, we have not determined that an adverse outcome is probable with respect to current outstanding claims; as a result, we have not accrued any material amounts for exposure related to such contingencies or adverse decisions. Nevertheless, we may incur expenses in future periods related to such matters, including litigation costs and possible pre-payment of a portion of any assessed tax amount to defend our position, and if our positions are ultimately rejected, it could have a material impact to our results of operations. 20 14. Segment Information Our reportable segments are based upon our internal organizational structure; the manner in which our operations are managed; the criteria used by our President, who is our Chief Operating Decision Maker ("CODM"), to evaluate segment performance; the availability of separate financial information; and overall materiality considerations. We operate our business and present our results through two business segments, (i) Travel Solutions, our global travel solutions 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 software solutions for hoteliers. Our CODM utilizes Adjusted Operating Income (Loss), which is not a recognized term under GAAP, as the measure of profitability to evaluate performance of our segments and allocate resources. Our use of Adjusted Operating Income (Loss) has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. We define Adjusted Operating Income (Loss) as operating loss adjusted for equity method income (loss), acquisition-related amortization, restructuring and other costs, acquisition-related costs, litigation costs, net, and stock-based compensation. Our CODM does not review total assets by segment as operating evaluations and resource allocation decisions are not made on the basis of total assets by segment. Certain costs associated with our technology organization are allocated to the segments based on the segments' usage of resources. Benefit expenses, facility and lease costs and associated depreciation expense are allo cated to the segments based on headcount. Unallocated corporate costs include certain shared expenses such as accounting, finance, human resources, legal, corporate systems, amortization of acquired intangible assets, impairment and related charges, stock-based compensation, restructuring charges, legal reserves and other items not identifiable with one of our segments. We account for significant intersegment transactions as if the transactions were with third parties, that is, at estimated current market prices. The majority of the intersegment revenues and cost of revenues are fees charged by Travel Solutions to Hospitality Solutions for hotel stays booked through our GDS. Segment information for the three months ended March 31, 2023 and 2022 is as follows (in thousands): Three Months Ended March 31, 2023 2022 Revenue Travel Solutions $ 677,441 $ 533,998 Hospitality Solutions 73,812 56,004 Eliminations ( 8,558 ) ( 5,092 ) Total revenue $ 742,695 $ 584,910 Adjusted Operating Income (Loss) (a) Travel Solutions $ 90,102 $ 45,306 Hospitality Solutions ( 8,495 ) ( 15,117 ) Corporate ( 53,930 ) ( 59,344 ) Total $ 27,677 $ ( 29,155 ) Depreciation and amortization Travel Solutions $ 24,606 $ 28,254 Hospitality Solutions 5,684 5,800 Total segments 30,290 34,054 Corporate 10,029 16,054 Total $ 40,319 $ 50,108 Capital Expenditures Travel Solutions $ 13,051 $ 7,397 Hospitality Solutions 1,928 3,529 Total segments 14,979 10,926 Corporate 3,131 6,477 Total $ 18,110 $ 17,403 ______________________ (a) The following table sets forth the reconciliation of operating loss in our consolidated statements of operations to Adjusted Operating Income (Loss) (in thousands): 21 Three Months Ended March 31, 2023 2022 Operating loss $ ( 213 ) $ ( 79,532 ) Add back: Equity method income (loss) 423 ( 170 ) Acquisition-related amortization (1) 9,934 15,803 Restructuring and other costs (2) ( 319 ) — Acquisition-related costs (3) 847 3,664 Litigation costs, net (4) — 3,475 Stock-based compensation 17,005 27,605 Adjusted Operating Income (Loss) $ 27,677 $ ( 29,155 ) ______________________ (1) 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. (2) Restructuring and other costs represents adjustments to charges recorded in previous periods associated with severance benefits related to employee terminations. (3) Acquisition-related costs represent fees and expenses incurred associated with acquisition and disposition-related activities. (4) Litigation costs, net represent charges associated with antitrust litigation and other foreign non-income tax contingency matters. See Note 13. Contingencies. 22