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 “outlook,” “expects,” "intends," "will," "may," "believes," “plans,” “provisional,” “predicts,” “potential,” “estimates,” “should,” “could,” “anticipates,” “likely,” “commit,” “guidance,” “anticipate,” “incremental,” “preliminary,” “forecast,” “continue,” “strategy,” “confidence,” “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 17, 2023. 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 17, 2023. 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 ecosystem has shifted over the past few years, resulting in the changing needs of our airline, hotel and agency customers, for which we have established strategic priorities with the goal of achieving sustainable long-term growth. We have experienced continued material headwinds for our consolidated financial results in 2022 and through the third quarter of 2023. While growth on a year-over-year basis continues to result in improvement in our key volume metrics with the return of global travel volumes, recent industry air distribution volume growth has leveled-off. This may continue into the future and could impact our rate of growth. With the continued increase in booking volumes, our incentive consideration costs are also increasing significantly compared to previous periods. In the third quarter of 2023, the impact of Travel Solutions customer de-migrations on passengers boarded for IT solutions is being substantially offset by customer growth. During the second quarter of 2023, we announced and began to implement a cost reduction plan designed to reposition our business and to structurally reduce our cost base. As a result of this cost reduction plan, we incurred restructuring costs beginning in the second quarter of 2023 associated with our workforce. This cost reduction plan will continue to be implemented over the remainder of 2023 and may result in additional restructuring charges as we continue to evaluate third-party costs. We estimate that these actions will reduce our operating expense on an annual basis by approximately $200 million. During the nine months ended September 30, 2023, we incurred $56 million in connection with this business plan, within our consolidated statement of operations . Costs associated with our cost reduction plan are expected to be approximately $70 million for the year, with the majority of disbursements occurring in 2023. 24 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, including ongoing 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 recovery, we will continue to monitor our liquidity levels and take additional steps should we determine they are necessary. See “—Recent Events Impacting Our Liquidity and Capital Resources” and “—Senior Secured Credit Facilities.” During 2022 and the second and third quarters of 2023, we refinanced portions of our debt which resulted in higher interest rates than prior years, increasing our current and future interest expense. As a result of our recent refinancing activity, we believe our debt maturity profile better aligns with our future prospective free cash flow generation. Currently approximately 44% of our debt, net of cash and hedging impacts from interest rates swaps, is variable and impacted by changes in interest rates. Approximately 27% of our debt is variable, excluding the Senior Secured Term Loan due in 2028, where pricing is subject to the highest yield to maturity of Sabre GLBL secured debt as defined by the Reference Rate. See “Risk Factors—We are exposed to interest rate fluctuations.” 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 acquired all of the outstanding stock and ownership interest of Conferma, for net cash consideration of $62 million and conversion of a pre-existing loan into share capital. We have consolidated the results of Conferma from the date of acquisition into our Travel Solutions segment, which did not have a material impact on our results of operations. In February 2023, we sold 19% of the share capital of the direct parent of Conferma to a third party for proceeds of $16 million, resulting in a redeemable non-controlling interest. 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 $180 million (after-tax $112 million) in Other, net in our consolidated statements of operations for the nine months ended September 30, 2022. See Note 3. Acquisitions and Dispositions for further details. In March 2022, we terminated our distribution agreement with a Travel Solutions customer located in Russia which impacted our revenue in 2022. In August 2022, Russia adopted legislation and related regulations that, effective October 30, 2022, require activities related to the development, creation and operation of automated information systems for processing domestic air transportation within the Russian Federation to be owned and operated by Russian residents or legal entities with no updates from or connection with systems abroad. A Travel Solutions customer of these types of services located in Russia ceased using our systems on that date. This legislation and these regulations have prohibited our ability to provide these services in Russia, which has negatively impacted, and is expected to continue to negatively impact, our revenue and results. During the nine months ended September 30, 2022, we recognized $24 million of previously deferred revenue due to a change in facts and circumstances associated with a certain Travel Solutions customer located in Russia. This amount was fully paid by the customer and it was no longer considered probable that this revenue would be reversed. 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 17, 2023. 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 17, 2023. 25 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. 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. 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, which includes a remaining useful life of 13 years as of September 30, 2023 for trademarks and brand names. 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. 26 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. The primary metric utilized by Hospitality Solutions is booking transactions processed through the Sabre Hospitality Solutions SynXis Central Reservation System (the “HS Central Reservation System”). These key metrics allow management to analyze customer volume over time for each of our product lines to monitor industry trends and analyze performance. We believe that these key metrics are useful for investors and other third parties as indicators of our financial performance and industry trends. While these metrics are based on what we believe to be reasonable estimates of our transaction counts for the applicable period of measurement, there are inherent challenges associated with their measurement. In addition, we are continually seeking to improve our estimates of these metrics, and these estimates may change due to improvements or changes in our methodology. The following table sets forth these key metrics for the periods indicated (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 % Change 2023 2022 % Change Travel Solutions Direct Billable Bookings - Air 76,055 68,761 10.6% 237,347 196,078 21.0% Direct Billable Bookings - LGS 13,405 11,340 18.2% 39,185 29,730 31.8% Distribution Total Direct Billable Bookings 89,460 80,101 11.7% 276,532 225,808 22.5% IT Solutions Passengers Boarded 178,036 179,907 (1.0)% 517,500 469,274 10.3% Hospitality Solutions HS Central Reservations System Transactions 33,790 31,640 6.8% 93,452 84,200 11.0% Definitions of Non-GAAP Financial Measures We have included both financial measures compiled in accordance with GAAP and certain non-GAAP financial measures in this Quarterly Report on Form 10-Q, including Adjusted Operating Income (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 Income (Loss) as operating loss adjusted for equity method income, impairment and related charges, acquisition-related amortization, restructuring and other costs, acquisition-related costs, litigation costs, net, and stock-based compensation. We define Adjusted Net Loss as net loss attributable to common stockholders adjusted for (income) loss from discontinued operations, net of tax, net (loss) income attributable to noncontrolling interests, preferred stock dividends, impairment and related charges, acquisition-related amortization, restructuring and other costs, (gain) loss on extinguishment of debt, other, net, acquisition-related costs, litigation costs, net, stock-based compensation, and the tax impact of adjustments. We define Adjusted EBITDA as loss from continuing operations adjusted for depreciation and amortization of property and equipment, amortization of capitalized implementation costs, acquisition-related amortization, impairment and related charges, restructuring and other costs, interest expense, net, other, net, (gain) loss on extinguishment of debt, acquisition-related costs, litigation costs, net, stock-based compensation and the remaining 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. 27 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 Income (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. Adjusted Operating Income (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 Income (Loss), Adjusted Net Loss, Adjusted EBITDA or Free Cash Flow differently, which reduces their usefulness as comparative measures. 28 The following table sets forth the reconciliation of Net loss attributable to common stockholders to Adjusted Net Loss from continuing operations, Operating Income (Loss) to Adjusted Operating Income (Loss), and Loss from continuing operations to Adjusted EBITDA (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net loss attributable to common stockholders $ (211,848) $ (140,722) $ (445,406) $ (291,396) Loss from discontinued operations, net of tax 116 446 517 596 Net income (loss) attributable to noncontrolling interests (1) 379 776 (522) 1,933 Preferred stock dividends 3,564 5,346 14,257 16,039 Loss from continuing operations (207,789) (134,154) (431,154) (272,828) Adjustments: Impairment and related charges (2) — 5,146 — 5,146 Acquisition-related amortization (3a) 10,176 9,824 30,043 41,075 Restructuring and other costs (5) 3,909 9,944 62,962 14,279 Loss on extinguishment of debt, net 121,120 — 108,577 3,533 Other, net (4) 11,548 7,687 (8,084) (139,617) Acquisition-related costs (6) 270 424 1,658 6,333 Litigation costs, net (7) 3,519 15,365 12,752 31,380 Stock-based compensation 13,094 16,349 38,837 70,081 Tax impact of adjustments (8) 24,043 (11,005) 49,057 (13,801) Adjusted Net Loss from continuing operations $ (20,110) $ (80,420) $ (135,352) $ (254,419) Adjusted Net Loss from continuing operations per share $ (0.06) $ (0.25) $ (0.40) $ (0.78) Diluted weighted-average common shares outstanding 345,128 328,228 335,460 326,170 Operating income (loss) $ 52,201 $ (56,535) $ 9,805 $ (206,260) Add back: Equity method income 512 199 1,394 215 Impairment and related charges (2) — 5,146 — 5,146 Acquisition-related amortization (3a) 10,176 9,824 30,043 41,075 Restructuring and other costs (5) 3,909 9,944 62,962 14,279 Acquisition-related costs (6) 270 424 1,658 6,333 Litigation costs, net (7) 3,519 15,365 12,752 31,380 Stock-based compensation 13,094 16,349 38,837 70,081 Adjusted Operating Income (Loss) $ 83,681 $ 716 $ 157,451 $ (37,751) Loss from continuing operations (207,789) $ (134,154) (431,154) $ (272,828) Adjustments: Depreciation and amortization of property and equipment (3b) 21,999 22,722 65,376 74,289 Amortization of capitalized implementation costs (3c) 4,488 10,813 18,452 27,329 Acquisition-related amortization (3a) 10,176 9,824 30,043 41,075 Impairment and related charges (2) — 5,146 — 5,146 Restructuring and other costs (5) 3,909 9,944 62,962 14,279 Interest expense, net 119,372 77,120 325,290 205,062 Other, net (4) 11,548 7,687 (8,084) (139,617) Loss on extinguishment of debt, net 121,120 — 108,577 3,533 Acquisition-related costs (6) 270 424 1,658 6,333 Litigation costs, net (7) 3,519 15,365 12,752 31,380 Stock-based compensation 13,094 16,349 38,837 70,081 Provision (benefit) for income taxes 8,462 (6,989) 16,570 (2,195) Adjusted EBITDA $ 110,168 $ 34,251 $ 241,279 $ 63,867 29 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 Loss from continuing operations in our statement of operations by business segment (in thousands): Three Months Ended September 30, 2023 Travel Solutions Hospitality Solutions Corporate Total Adjusted Operating Income (Loss) $ 142,089 $ 107 $ (58,515) $ 83,681 Less: Equity method income 512 — — 512 Acquisition-related amortization (3a) — — 10,176 10,176 Restructuring and other costs (5) — — 3,909 3,909 Acquisition-related costs (6) — — 270 270 Litigation costs, net (7) — — 3,519 3,519 Stock-based compensation — — 13,094 13,094 Operating income (loss) $ 141,577 $ 107 $ (89,483) $ 52,201 Adjusted EBITDA $ 162,139 $ 6,363 $ (58,334) $ 110,168 Less: Depreciation and amortization of property and equipment (3b) 16,978 4,840 181 21,999 Amortization of capitalized implementation costs (3c) 3,072 1,416 — 4,488 Acquisition-related amortization (3a) — — 10,176 10,176 Restructuring and other costs (5) — — 3,909 3,909 Acquisition-related costs (6) — — 270 270 Litigation costs, net (7) — — 3,519 3,519 Stock-based compensation — — 13,094 13,094 Equity method income 512 — — 512 Operating income (loss) $ 141,577 $ 107 $ (89,483) $ 52,201 Interest expense, net (119,372) Other, net (4) (11,548) Loss on extinguishment of debt (121,120) Equity method income 512 Provision for income taxes (8,462) Loss from continuing operations $ (207,789) 30 Three Months Ended September 30, 2022 Travel Solutions Hospitality Solutions Corporate Total Adjusted Operating Income (Loss) $ 69,311 $ (11,312) $ (57,283) $ 716 Less: Equity method income 199 — — 199 Impairment and related charges (2) — — 5,146 5,146 Acquisition-related amortization (3a) — — 9,824 9,824 Restructuring and other costs (5) — — 9,944 9,944 Acquisition-related costs (6) — — 424 424 Litigation costs, net (7) — — 15,365 15,365 Stock-based compensation — — 16,349 16,349 Operating income (loss) $ 69,112 $ (11,312) $ (114,335) $ (56,535) Adjusted EBITDA $ 97,354 $ (6,096) $ (57,007) $ 34,251 Less: Depreciation and amortization of property and equipment (2b) 18,521 3,925 276 22,722 Amortization of capitalized implementation costs (3c) 9,522 1,291 — 10,813 Acquisition-related amortization (3a) — — 9,824 9,824 Impairment and related charges (2) — — 5,146 5,146 Restructuring and other costs (5) — — 9,944 9,944 Acquisition-related costs (6) — — 424 424 Litigation costs, net (7) — — 15,365 15,365 Stock-based compensation — — 16,349 16,349 Equity method income 199 — — 199 Operating income (loss) $ 69,112 $ (11,312) $ (114,335) $ (56,535) Interest expense, net (77,120) Other, net (4) (7,687) Equity method income 199 Benefit for income taxes 6,989 Loss from continuing operations $ (134,154) 31 Nine Months Ended September 30, 2023 Travel Solutions Hospitality Solutions Corporate Total Adjusted Operating Income (Loss) $ 348,560 $ (10,424) $ (180,685) $ 157,451 Less: Equity method income 1,394 — — 1,394 Acquisition-related amortization (3a) — — 30,043 30,043 Restructuring and other costs (5) — — 62,962 62,962 Acquisition-related costs (6) — — 1,658 1,658 Litigation costs, net (7) — — 12,752 12,752 Stock-based compensation — — 38,837 38,837 Operating income (loss) $ 347,166 $ (10,424) $ (326,937) $ 9,805 Adjusted EBITDA $ 413,489 $ 7,861 $ (180,071) $ 241,279 Less: Depreciation and amortization of property and equipment (3b) 50,677 14,085 614 65,376 Amortization of capitalized implementation costs (3c) 14,252 4,200 — 18,452 Acquisition-related amortization (3a) — — 30,043 30,043 Restructuring and other costs (5) — — 62,962 62,962 Acquisition-related costs (6) — — 1,658 1,658 Litigation costs, net (7) — — 12,752 12,752 Stock-based compensation — — 38,837 38,837 Equity method income 1,394 — — 1,394 Operating income (loss) $ 347,166 $ (10,424) $ (326,937) $ 9,805 Interest expense, net (325,290) Other, net (4) 8,084 Loss on extinguishment of debt, net (108,577) Equity method income 1,394 Provision for income taxes (16,570) Loss from continuing operations $ (431,154) 32 Nine Months Ended September 30, 2022 Travel Solutions Hospitality Solutions Corporate Total Adjusted Operating Income (Loss) $ 172,501 $ (38,469) $ (171,783) $ (37,751) Less: Equity method income 215 — — 215 Impairment and related charges (2) — — 5,146 5,146 Acquisition-related amortization (3a) — — 41,075 41,075 Restructuring and other costs (5) — — 14,279 14,279 Acquisition-related costs (6) — — 6,333 6,333 Litigation costs, net (7) — — 31,380 31,380 Stock-based compensation — — 70,081 70,081 Operating income (loss) $ 172,286 $ (38,469) $ (340,077) $ (206,260) Adjusted EBITDA $ 256,830 $ (21,967) $ (170,996) $ 63,867 Less: Depreciation and amortization of property and equipment (3b) 60,735 12,767 787 74,289 Amortization of capitalized implementation costs (3c) 23,594 3,735 — 27,329 Acquisition-related amortization (3a) — — 41,075 41,075 Impairment and related charges (2) — — 5,146 5,146 Restructuring and other costs (5) — — 14,279 14,279 Acquisition-related costs (6) — — 6,333 6,333 Litigation costs, net (7) — — 31,380 31,380 Stock-based compensation — — 70,081 70,081 Equity method income 215 — — 215 Operating income (loss) $ 172,286 $ (38,469) $ (340,077) $ (206,260) Interest expense, net (205,062) Other, net (4) 139,617 Loss on extinguishment of debt (3,533) Equity method income 215 Benefit for income taxes 2,195 Loss from continuing operations $ (272,828) 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): Nine Months Ended September 30, 2023 2022 Cash used in operating activities $ (39,781) $ (314,770) Cash (used in) provided by investing activities (80,631) 186,251 Cash used in financing activities (72,518) (61,646) Nine Months Ended September 30, 2023 2022 Cash used in operating activities $ (39,781) $ (314,770) Additions to property and equipment (68,610) (53,474) Free Cash Flow $ (108,391) $ (368,244) ______________________________ (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%, (iv) Sabre Bulgaria of 4 0%, and (v) FERMR Holdings Limited (the direct parent of Conferma) of 19%. (2) Impairment and related charges in the prior year represents a $5 million impairment charge associated with the impact of regulatory changes in Russia on the future recoverability of certain assets. (3) 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. 33 (c) Amortization of capitalized implementation costs represents amortization of upfront costs to implement new customer contracts under our SaaS and hosted revenue model. (4) Other, net includes the impacts of fair value adjustments of our GBT investment and a $180 million gain on the sale of AirCentre during the nine months ended September 30, 2022. 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. (5) Restructuring and other costs in the current year primarily represents charges associated with our cost reduction plan implemented in the second quarter of 2023. See Note 5. Restructuring Activities to our consolidated financial statements. During 2022, charges, and adjustments to those charges, were recorded associated with planning and implementing business restructuring activities, including costs associated with third party consultants advising on our business structure and strategy. (6) Acquisition-related costs represent fees and expenses incurred associated with acquisition and disposition-related activities. (7) Litigation costs, net represent charges associated with antitrust litigation and other foreign non-income tax contingency matters. See Note 14. Contingencies, to our consolidated financial statements. (8) The tax impact of adjustments includes the tax effect of each separate adjustment based on the statutory tax rate for the jurisdiction(s) in which the adjustment was taxable or deductible, 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 September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (Amounts in thousands) (Amounts in thousands) Revenue $ 740,461 $ 663,394 $ 2,220,685 $ 1,905,836 Cost of revenue, excluding technology costs 294,120 274,330 917,532 771,609 Technology costs 243,404 273,240 799,121 824,142 Selling, general and administrative 150,736 172,359 494,227 516,345 Operating income (loss) 52,201 (56,535) 9,805 (206,260) Interest expense, net (119,372) (77,120) (325,290) (205,062) Loss on debt extinguishment, net (121,120) — (108,577) (3,533) Equity method income 512 199 1,394 215 Other, net (11,548) (7,687) 8,084 139,617 Loss from continuing operations before income taxes (199,327) (141,143) (414,584) (275,023) Provision (benefit) for income taxes 8,462 (6,989) 16,570 (2,195) Loss from continuing operations $ (207,789) $ (134,154) $ (431,154) $ (272,828) Three Months Ended September 30, 2023 and 2022 Revenue Three Months Ended September 30, 2023 2022 Change (Amounts in thousands) Travel Solutions $ 671,929 $ 603,647 $ 68,282 11 % Hospitality Solutions 78,581 67,497 11,084 16 % Total segment revenue 750,510 671,144 79,366 12 % Eliminations (10,049) (7,750) (2,299) 30 % Total revenue $ 740,461 $ 663,394 $ 77,067 12 % Travel Solutions— Revenue increased $68 million, or 11%, for the three months ended September 30, 2023 compared to the same period in the prior year, primarily due to: • a $94 million, or 22%, increase in transaction-based distribution revenue primarily due to a 12% increase in direct billable bookings to 89 million and favorable rate impacts from improved international and corporate bookings; and • a $26 million, or 15%, decrease in IT solutions revenue driven by a $33 million decline in revenue from de-migrations, primarily due to changes in Russian law and impacts of termination fees from such carriers, which resulted in a decrease in passengers boarded for the period. These decreases were partially offset by an increase of $9 million due to an increase in passengers boarded from growth by our customer base (excluding the impact of de-migrations noted above). Hospitality Solutions— Revenue increased $11 million, or 16%, for the three months ended September 30, 2023 compared to the same period in the prior year. The increase was primarily driven by an $10 million increase in SynXis Software and 34 Services revenue due to an increase in transaction volumes of 7% to 34 million driven by new customer deployments, and a favorable mix within our distribution channels. Additionally, DX revenue increased by $1 million. Cost of revenue, excluding technology costs Three Months Ended September 30, 2023 2022 Change (Amounts in thousands) Travel Solutions $ 260,387 $ 235,240 $ 25,147 11 % Hospitality Solutions 37,616 33,767 3,849 11 % Eliminations (10,048) (7,750) (2,298) 30 % Total segment cost of revenue, excluding technology costs 287,955 261,257 26,698 10 % Corporate 1,306 1,868 (562) (30) % Depreciation and amortization 4,859 11,205 (6,346) (57) % Total cost of revenue, excluding technology costs $ 294,120 $ 274,330 $ 19,790 7 % Travel Solutions— Cost of revenue, excluding technology costs, increased $25 million, or 11%, for the three months ended September 30, 2023 compared to the same period in the prior year. The increase was primarily driven by a $39 million increase in incentive consideration due to higher transaction volume as well as an increase in rates. This increase was partially offset by a $14 million decrease in labor and professional services costs driven by our cost reduction plan. Hospitality Solutions— C ost of revenue, excluding technology costs, increased $4 million, or 11%, for the three months ended September 30, 2023 compared to the same period in the prior year primarily due to a $5 million increase in costs associated with increased transaction volumes and the mix of our transactions across our distribution channels, partially offset by a $1 million decrease in labor and professional services costs driven by our cost reduction plan. Depreciation and Amortization— Cost of revenue, excluding technology costs, decreased $6 million, or 57%, for the three months ended September 30, 2023 primarily due to the completion of amortization associated with certain customer implementations. Technology Costs Three Months Ended September 30, 2023 2022 Change (Amounts in thousands) Travel Solutions $ 208,696 $ 229,789 $ (21,093) (9) % Hospitality Solutions 27,346 31,237 (3,891) (12) % Corporate 7,362 12,214 (4,852) (40) % Total technology costs $ 243,404 $ 273,240 $ (29,836) (11) % Travel Solutions— Technology cos ts decreased $21 million, or 9% for the three months ended September 30, 2023 compared to the same period in the prior year. The decrease was primarily driven by a $9 million decrease in technology costs due to cost savings related to our mainframe offloads and data migrations, an $8 million decrease in labor and professional services driven by our cost reduction plan, and a decrease in depreciation and amortization of $2 million pr imarily due to the completion of amortization of certain capitalized internal use software. Hospitality Solutions— Technology cost s decreased $4 million, or 12%, for the three months ended September 30, 2023 compared to the same period in the prior year due to a $5 million decrease in labor and professional services driven by our cost reduction plan. This decrease was p artially offset by a $1 million increase in technology costs associated with our technology transformation initiatives. Corporate— Technology costs decreased $5 million, or 40%, for the three months ended September 30, 2023 compared to the same period in the prior year due to a $2 million decrease in stock-based compensation primarily due to forfeitures of unvested shares, and a $2 million decrease in labor and professional services driven by our cost reduction plan. 35 Selling, General and Administrative Expenses Three Months Ended September 30, 2023 2022 Change (Amounts in thousands) Travel Solutions $ 58,100 $ 59,585 $ (1,485) (2) % Hospitality Solutions 12,085 12,521 (436) (3) % Corporate 80,551 100,253 (19,702) (20) % Total selling, general and administrative expenses $ 150,736 $ 172,359 $ (21,623) (13) % Travel Solutions— Selling, general and administrative expenses decreased $1 million, or 2%, for the three months ended September 30, 2023 compared to the same period in the prior year primarily due to a $3 million decrease in legal costs , a $2 million decrease in the provision for credit losses and a $1 million decrease in labor and professional services driven by our cost reduction plan. These decreases were partially offset by a $3 million increase in other business expenses. Corporate— Selling, general and administrative expenses decreased $20 million, or 20%, for the three months ended September 30, 2023 compared to the same period in the prior year. The decrease was primarily driven by a $15 million decrease due to a litigation reserve recorded in the prior year, a $2 million decrease in stock-based compensation primarily due to forfeitures of unvested shares, a $2 million decrease in labor and professional services driven by our cost reduction plan, a $1 million decrease in risk and security costs, and a decrease in other ongoing business expenses. These decreases were partially offset by a $2 million increase associated with a tax litigation matter. Interest expense, net Three Months Ended September 30, 2023 2022 Change (Amounts in thousands) Interest expense, net $ 119,372 $ 77,120 $ 42,252 55 % Interest expense increased $42 million, or 55%, during the three months ended September 30, 2023 compared to the same period in the prior year primarily due to higher interest rates on our term loans and additional interest incurred in connection with the financing activities that have occurred since the prior year period. See Note 8. Debt for further details regarding these debt transactions. Loss on extinguishment of debt, net We recognized a loss on extinguishment of debt of $121 million for the three months ended September 30, 2023 as a result of the financing activity that occurred in the current quarter. See Note 8. Debt for further details. Other, net Three Months Ended September 30, 2023 2022 Change (Amounts in thousands) Other, net $ 11,548 $ 7,687 $ 3,861 50 % Other, n et increased $4 million for the three months ended September 30, 2023 compared to the same period in the prior year primarily due to a change in fair value of our GBT investment from a loss of $5 million in the prior year period to a loss of $14 million in the current year period as well as an increase due to a $4 million gain recognized in conjunction with the acquisition of Conferma in the prior year, partially offset by a $5 million decrease due to debt modification costs in connection with the refinancing that occurred in August 2022, as well as higher realized and unrealized foreign currency exchange gains. See Note 10. Fair Value Measurements for further details regarding the GBT investment and Note 3. Acquisitions and Dispositions for further details regarding the Conferma aquisition. Provision (Benefit) for Income Taxes Three Months Ended September 30, 2023 2022 Change (Amounts in thousands) Provision (benefit) for income taxes $ 8,462 $ (6,989) $ 15,451 (221) % 36 For the three months ended September 30, 2023, we recognized $8 million of income tax expense, representing an effective tax rate of less than 1%, compared to an income tax benefit of $7 million, representing an effective tax rate of 5% for the three months ended September 30, 2022. The effective tax rate decreased for the three months ended September 30, 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. Nine Months Ended September 30, 2023 and 2022 Revenue Nine Months Ended September 30, 2023 2022 Change (Amounts in thousands) Travel Solutions $ 2,020,131 $ 1,736,794 $ 283,337 16 % Hospitality Solutions 229,064 189,704 39,360 21 % Total segment revenue 2,249,195 1,926,498 322,697 17 % Eliminations (28,510) (20,662) (7,848) 38 % Total revenue $ 2,220,685 $ 1,905,836 $ 314,849 17 % Travel Solutions— Revenue increased $283 million, or 16%, for the nine months ended September 30, 2023 compared to the same period in the prior year, primarily due to: • a $376 million, or 31%, increase in transaction-based distribution revenue due to a 23% increase in direct billable bookings to 277 million and favorable rate impacts from improved international and corporate bookings; and • a $93 million or 17%, decrease in IT solutions revenue consisting of a $83 million decrease as a result of de-migrations, primarily due to changes in Russian law and impacts of termination fees in both periods from such carriers and $16 million decline in the recognition of previously deferred revenue in each period presented, partially due to a change in facts and circumstances associated with a Russian carrier in the prior year. In addition, we incurred a $36 million decrease due to the sale of our AirCentre portfolio on February 28, 2022. These decreases were partially offset by an increase in revenue due to a 10% increase in passengers boarded to 518 million. Hospitality Solutions— Revenue increased $39 million, or 21%, for the nine months ended September 30, 2023 compared to the same period in the prior year. The increase was primarily driven by a $38 million increase in SynXis Software and Services revenue due to an increase in transaction volumes of 11% to 93 million driven by new customer deployments, and a favorable mix within our distribution channels. Additionally, DX revenue increased by $1 million. Cost of revenue, excluding technology costs Nine Months Ended September 30, 2023 2022 Change (Amounts in thousands) Travel Solutions $ 798,404 $ 661,282 $ 137,122 21 % Hospitality Solutions 111,809 95,158 16,651 17 % Eliminations (28,509) (20,662) (7,847) 38 % Total segment cost of revenue, excluding technology costs 881,704 735,778 145,926 20 % Corporate 16,670 5,880 10,790 184 % Depreciation and amortization 19,158 29,951 (10,793) (36) % Total cost of revenue, excluding technology costs $ 917,532 $ 771,609 $ 145,923 19 % Travel Solutions— Cost of revenue, excluding technology costs, increased $137 million, or 21%, for the nine months ended September 30, 2023 compared to the same period in the prior year. The increase was primarily driven by a $164 million increase in incentive consideration due to higher transaction volume as well as an increase in rates. This increase was partially offset by a decrease in labor and professional services costs partially due to the sale of AirCe ntre and our cost reduction plan. Hospitality Solutions— Cost of revenue, excluding technology costs, increased $17 million, or 17%, for the nine months ended September 30, 2023 compared to the same period in the prior year primarily due to costs associated with increased transaction volume s and the mix of our transactions across our distribution channels. Corporate— Cost of revenue, excluding technology costs, increased $11 million, or 184%, for the nine months ended September 30, 2023 primarily due to a $12 million restructuring charge associated with the reduction of our workforce in the 37 current period. This increase was partially offset by a $1 million decrease in labor and professional services costs due to our cost reduction plan. Depreciation and Amortization— Cost of revenue, excluding technology costs, decreased $11 million, or 36%, for the nine months ended September 30, 2023 primarily due to the completion of amortization associated with certain customer implementations. Technology Costs Nine Months Ended September 30, 2023 2022 Change (Amounts in thousands) Travel Solutions $ 667,742 $ 681,623 $ (13,881) (2) % Hospitality Solutions 85,323 91,145 (5,822) (6) % Corporate 46,056 51,374 (5,318) (10) % Total technology costs $ 799,121 $ 824,142 $ (25,021) (3) % Travel Solutions— Technology costs decreased $14 million, or 2%, for the nine months ended September 30, 2023 compared to the same period in the prior year primarily due to a $16 million decrease in technology costs due to cost savings related to our mainframe offloads and data migrations. A dditionally, depreciation and amortization decreased by $9 million pr imarily due to the sale of our AirCentre portfolio and the completion of amortization of capitalized internal use software. These decreases were partially offset by an $11 million increase in labor and professional services costs to support our technology transformation and strategic growth initiatives, offset by reductions in the third quarter of 2023 driven by our cost reduction plan. Hospitality Solutions— Technology costs decreased $6 million, or 6%, for the nine months ended September 30, 2023 compared to the same period in the prior year primarily due to a $12 million decrease in labor and professional services driven by our cost reduction plan. This decrease was partially offset by a $6 million increase in technology costs associated with our technology transformation initiatives, including the migration of SynXis to the cloud. Corporate— Technology costs decreased $5 million, or 10%, for the nine months ended September 30, 2023 compared to the same period in the prior year primarily due to a $10 million decrease in depreciation and amortization due to the completion of amortization of technology assets from prior acquisitions, an $8 million decrease in labor and professional services driven by our cost reduction plan, and an $8 million decrease in stock-based compensation primarily due to forfeitures of unvested shares. These decreases were partially offset by a $21 million restructuring charge associated with the reduction of our workforce in the current period. Selling, General and Administrative Expenses Nine Months Ended September 30, 2023 2022 Change (Amounts in thousands) Travel Solutions $ 192,128 $ 196,722 $ (4,594) (2) % Hospitality Solutions 38,155 38,133 22 — % Corporate 263,944 281,490 (17,546) (6) % Total selling, general and administrative expenses $ 494,227 $ 516,345 $ (22,118) (4) % Travel Solutions— Selling, general and administrative expenses decreased $5 million, or 2%, for the nine months ended September 30, 2023 compared to the same period in the prior year primarily due to a $13 million decrease in labor and professional services driven by our cost reduction plan. This decrease was partially offset by a $4 million increase in the provision for credit losses and a $3 million increase due to investment in our internal business systems. Hospitality Solutions— Selling, general and administrative expenses remained flat for the nine months ended September 30, 2023 compared to the same period in the prior year. A $2 million increase in the provision for credit losses, primarily due to an unfavorable fluctuation to provision reductions in the prior year, was offset with a $2 million decrease in labor and professional services driven by our cost reduction plan. Corporate— Selling, general and administrative expenses decreased $18 million, or 6%, for the nine months ended September 30, 2023 compared to the same period in the prior year. This decrease was partially driven by a decrease of $22 million in stock-based compensation primarily due to forfeitures of unvested shares, a $16 million decrease in legal costs resulting from ongoing litigation, a $15 million decrease due to a litigation reserve recorded in the prior year, and a decrease in other ongoing business expenses. These decreases were partially offset by a $23 million restructuring charge associated with the reduction of our workforce in the second quarter of 2023, an $11 million charge associated with a tax litigation matter, and a $5 million increase in labor and professional services costs. 38 Interest expense, net Nine Months Ended September 30, 2023 2022 Change (Amounts in thousands) Interest expense, net $ 325,290 $ 205,062 $ 120,228 59 % Interest expense increased $120 million, or 59% during the nine months ended September 30, 2023 compared to the same period in the prior year primarily due to higher interest rates on our term loans and additional interest incurred in connection with the financing activities that have occurred since the prior year period. These increases were partially offset by the impact of our interest rate swaps. See Note 8. Debt for further details regarding these debt transactions. Loss on extinguishment of debt, net We recognized a loss on extinguishment of debt of $109 million du ring the nine months ended September 30, 2023, including a loss on extinguishment of debt of $121 million as a result of the financing activity that occurred in the third quarter of 2023, partially offset by a gain on extinguishment of debt of $13 million as a result of the financing activity that occurred in the second quarter of 2023. We recognized a loss on extinguishment of debt of $4 million during the nine months ended September 30, 2022 as a result of the refinancing that occurred in the first quarter of 2022. See Note 8. Debt for further details. Other, net Nine Months Ended September 30, 2023 2022 Change (Amounts in thousands) Other, net $ (8,084) $ (139,617) $ 131,533 (94) % Other, net increased $132 million for the nine months ended September 30, 2023 compared to the same period in the prior year primarily due to the gain on the sale of AirCentre of $180 million in the prior year, partially offset by a change in fair value of our GBT investment from a loss of $35 million in the prior year to a loss of $10 million in the current year, as well as other non-operating gains of $14 million in the second quarter of 2023 and realized and unrealized foreign currency exchange gains . See Note 10. Fair Value Measurements for further details regarding the GBT investment and Note 3. Acquisitions and Dispositions for further details regarding the AirCentre sale. Provision (Benefit) for Income Taxes Nine Months Ended September 30, 2023 2022 Change (Amounts in thousands) Provision (benefit) for income taxes $ 16,570 $ (2,195) $ 18,765 (855) % For the nine months ended September 30, 2023, we recognized $17 million of income tax expense, representing an effective tax rate of less than 1%, compared to an income tax benefit of $2 million, also representing an effective tax rate of less than 1% for the nine months ended September 30, 2022. The effective tax rate decreased for the nine months ended September 30, 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 nine month periods. The difference between our effective tax rates and the U.S. federal statutory income tax rate primarily results from valuation allowances, our geographic mix of taxable income in various tax jurisdictions, tax permanent differences and tax credits. Liquidity and Capital Resources Our current principal source of liquidity is our cash and cash equivalents on hand. As of September 30, 2023 and December 31, 2022, our cash and cash equivalents and outstanding letters of credit were as follows (in thousands): September 30, 2023 December 31, 2022 Cash and cash equivalents $ 601,604 $ 794,888 Available undrawn balance under the AR Facility 8,800 — AR Facility outstanding balance 130,000 — Available under the bilateral letter of credit facility 7,569 8,473 Outstanding letters of credit under the bilateral letter of credit facility 12,431 11,527 As of September 30, 2023, we had $130 million outstanding under the AR Facility with a borrowing base of $139 million, of which Sabre had availability of $9 million. Our AR Facility matures on January 14, 2025 at the earliest and February 13, 2026 39 at the latest, depending on certain “springing” maturity conditions. The AR Facility allows us the ability to prepay the principal amount prior to the maturity date without penalty. See Note 8. Debt. We consider cash equivalents to be highly liquid investments that are readily convertible into cash. Securities with contractual maturities of three months or less, when purchased, are considered cash equivalents. We record changes in a book overdraft position, in which our bank account is not overdrawn but recently issued and outstanding checks result in a negative general ledger balance, as cash flows from financing activities. We invest in a money market fund which is classified as cash and cash equivalents in our consolidated balance sheets and statements of cash flows. We held no short-term investments as of September 30, 2023 and December 31, 2022. We had $21 million held as cash collateral for standby letters of credit in restricted cash on our consolidated balance sheets as of September 30, 2023 and December 31, 2022. Liquidity Outlook The travel ecosystem has shifted over the past few years, resulting in the changing needs of our airline, hotel and agency customers, for which we have established strategic priorities with the goal of achieving sustainable long-term growth. We have experienced continued material headwinds for our consolidated financial results in 2022 and through the third quarter of 2023. These changes 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. Given the uncertainties surrounding the global economic recovery and ongoing recovery from COVID-19 on transaction volumes in the global travel industry, particularly air travel transaction volumes, 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. Given the magnitude of travel decline, the uncertain economic environment and the unknown trajectory of travel recovery, we will continue to monitor travel activity and take additional steps should we determine they are necessary. In 2022 and during the second and third quarters of 2023, we refinanced and extended the maturity on portions of our debt, which also negatively impacted our results due to increasing interest rates and included utilizing $130 million in cash from our balance sheet. In the second quarter of 2023, we implemented a cost reduction plan designed to reposition our business to the current environment and to structurally reduce our cost base. We believe the ongoing effects of the global economic recovery 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 notwithstanding any ongoing recovery from COVID-19. We believe our cash position and the liquidity measures we have taken will provide additional flexibility as we manage through the industry's recovery. We will continue to monitor our liquidity levels and take additional steps should we determine they are necessary. We utilize cash and cash equivalents primarily to pay our operating expenses, make capital expenditures, invest in our information technology infrastructure, products and offerings, pay taxes and service our debt and other long-term liabilities. Free cash flow is calculated as cash flow from operations reduced by additions to property and equipment. In 2023, we expect total capital expenditures to be approximately $80 million. Costs associated with our cost reduction plan are expected to be approximately $70 million for the year, with the majority of disbursements occurring in 2023. See “—Risk Factors" for further details. 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 recovery from the impacts of COVID-19. See “Risk Factors—The ongoing recovery from the effects of the COVID-19 outbreak on our business and the impact on our results of operations is highly uncertain.” and “—We may require more cash than we generate in our operating activities, and additional funding on reasonable terms or at all may not be available.” On an ongoing basis, we will evaluate and consider strategic acquisitions, divestitures, joint ventures, equity method investments, refinancing our existing debt 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. While our business has incurred net losses on a GAAP basis, we recognized federal taxable income in 2022 based on our operating and non-operating results along with provisions of the Tax Cuts and Jobs Act that limit interest expense deduction and the annual use of Net Operating Loss (“NO”) carryforwards, and requires companies to capitalize and amortize research and development costs. As a result, we expect to be a U.S. federal cash taxpayer in 2023, and we also expect to benefit from the usage of NOLs in 2023 to the extent available. We expect to continue to benefit from our NOLs and certain tax credits in the near-term beyond 2023. Capital Resources As of September 30, 2023, our outstanding debt totaled $4.8 billion, which is net of debt issuance costs and unamortized discounts of $134 million. Currently approximately 44% of our debt, net of cash and hedging impacts from interest rates swaps, is variable and impacted by changes in interest rates. Approximately 27% of our debt is variable, excluding the Senior Secured Term Loan due in 2028, where pricing is subject to the highest yield to maturity of Sabre GLBL secured debt as defined by the 40 Reference Rate. See “Risk Factors—We are exposed to interest rate fluctuations." In the future, 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. The global capital markets experienced periods of volatility throughout 2022 and through the third quarter of 2023, in response to the conflicts in Ukraine and the Middle East, increases in the rate of inflation, and uncertainty regarding the path of U.S. monetary policy. During 2022 and the second and third quarters of 2023, we refinanced portions of our debt which resulted in higher interest rates than prior years, increasing our current and future interest expense. However, the June 2023 Refinancing (as defined below) provides the ability for interest to be payable-in-kind, such that amounts due are capitalized into the note balance at the payment date rather than paid in cash, reducing our near-term cash payments for interest on this debt. Additionally, the issuance of the June 2027 Notes (as defined below) resulted in cash payments totaling $130 million primarily to holders of prior notes but allowed us to better manage our ongoing interest expense and payments and extend our debt maturities. As a result of our recent refinancing activity, we believe our debt maturity profile better aligns with our future prospective free cash flow generation. Current cash on the balance sheet ending September 30, 2023 exceeds cumulative debt maturities through the end of 2026. Subject to market conditions, we may opportunistically refinance portions of our debt in 2023 and 2024 which, at current interest rates and market conditions, may negatively impact our interest expense or result in higher dilution. In addition, as a result of the judgment in our antitrust litigation with US Airways, we may be required as early as 2024 to pay US Airways' reasonable attorneys' fees and costs. See Note 14. Contingencies, to our consolidated financial statements. Depending on the amount of attorneys' fees and costs, if any, that might be awarded to US Airways, if we do not have sufficient cash on hand, we may be required to seek financing from private or public financing sources, which may not be assured. Our continued access to capital resources depends on multiple factors, including global economic conditions, the condition of global financial markets, the availability of sufficient amounts of financing, our ability to meet debt covenant requirements, our operating performance, and our credit ratings. These external events could lead to further market disruption and potential increases to our funding costs. While the terms of our outstanding indebtedness allow us to incur additional debt, subject to limitations, our ability to incur additional secured indebtedness is significantly limited. As a result, we expect that any such incremental indebtedness, if available and to the extent issued in the future, would likely be unsecured. If our credit ratings were to be downgraded, or financing sources were to become more limited or to ascribe higher risk to our rating levels or our industry, our access to capital and the cost of any financing would be negatively impacted. There is no guarantee that additional debt financing will be available in the future to fund our obligations, or that it will be available on commercially reasonable terms, in which case we may need to seek other sources of funding. In addition, the terms of future debt agreements could include more restrictive covenants than those we are currently subject to, which could restrict our business operations. For more information, see "Risk Factors—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." 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. In the first quarter of 2023, we entered into a securitization transaction on our accounts receivable balances pursuant to the AR facility which provided a maximum of $200 million in additional funding. In June 2023, we entered into the 2023 Term Loan Agreement, which provides for a senior secured term loan of up to $700 million in aggregate principal amount and requires that we maintain cash balances of at least $100 million in certain foreign subsidiaries and other covenants to ensure collateral of the applicable foreign guarantors meet certain minimum levels. The 2023 Term Loan Agreement also includes various non-financial covenants, including restrictions on making certain investments, disposition activities and affiliate transactions. In addition, the 2023 Term Loan Agreement contains customary prepayment events and financial and negative covenants and other representations, covenants and events of default based on, but in certain instances more restrictive than, the Amended and Restated Credit Agreement. As of September 30, 2023, we were in compliance with all covenants under the terms of the Amended and Restated Credit Agreement, the AR Facility and the 2023 Term Loan Agreement. We are required to pay down our 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, 2021, we were not required to make an excess cash flow payment in 2022, and no excess cash flow payment is required in 2023 with respect to our results for the year ended December 31, 2022. We are further required to pay down the term loans with proceeds from certain asset sales, net of taxes, or borrowings, that are not otherwise reinvested in the business, as provided in the Amended and Restated Credit Agreement. As of September 30, 2023, we had reinvested, or are bound by contractual terms to reinvest, $277 million of the proceeds from the disposition of AirCentre. If we ultimately do not reinvest these proceeds that are subject to such contractual terms within a 180-day period, we are required to apply those proceeds to pay down additional debt. On May 24, 2023, we prepaid $48 million in principal and unaccrued interest on 2021 Term Loan B-2, 2022 Term Loan B-1 and 2022 Term Loan B-2, using the remaining net cash proceeds from the sale of AirCentre, in accordance with the contractual terms of the Amended and Restated Credit Agreement dated February 19, 2023. 41 Recent Events Impacting Our Liquidity and Capital Resources Debt Agreements On May 16, 2023, Sabre GLBL entered into Amendment No. 5 to the Credit Agreement (the “SOFR Amendment”). The SOFR Amendment was entered into pursuant to the Amended and Restated Credit Agreement, dated as of February 19, 2013. The SOFR Amendment provides for the replacement of LIBOR-based rates with a SOFR-based rate for the 2021 Term Loan B-1 and 2021 Term Loan B-2 and amends certain provisions of the Credit Agreement. The change from LIBOR to SOFR is due to the reference rate reform and the phasing out of LIBOR as a loan benchmark. The SOFR Amendment did not have a material impact on our financial position or results of operations. On June 13, 2023, Sabre Financial Borrower, LLC (“Sabre FB”), our indirect, consolidated subsidiary entered into a series of transactions including a new term loan credit agreement with certain lenders (the "2023 Term Loan Agreement") and an intercompany secured term loan agreement (the “Pari Passu Loan Agreement“”). The 2023 Term Loan Agreement provides for a senior secured term loan (the “Senior Secured Term Loan Due 2028”) of up to $700 million in aggregate principal amount, subject to Sabre FB using the proceeds from the Senior Secured Term Loan Due 2028 for an intercompany loan to Sabre GLBL. On June 13, 2023, Sabre FB borrowed the full $700 million amount under the 2023 Term Loan Agreement and lent the funds to Sabre GLBL under the Pari Passu Loan Agreement. Borrowings under 2023 Term Loan Agreement are secured by the assets of Sabre FB, including Sabre FB's claims under the Pari Passu Loan Agreement, and assets of certain of our foreign subsidiaries. Borrowings under the Pari Passu Loan Agreement are secured by first-priority liens on the same collateral securing the indebtedness owing under the Senior Secured Credit Facilities and Sabre GLBL's outstanding Senior Secured Notes. Sabre GLBL used the proceeds borrowed under the Pari Passu Loan Agreement to repurchase $650 million of its outstanding 9.25% Senior Secured Notes due 2025 (the “June 2023 Refinancing”) and $15 million of its outstanding 2021 Term Loan B-1, 2021 Term Loan B-2 and 2022 Term Loan B-2. The remaining proceeds, net of a discount of $23 million, were used to pay $13 million in other fees and expenses. We incurred additional fees of $15 million, plus $10 million of accrued and unpaid interest on the 9.25% Senior Secured Notes, which were funded with cash on hand. We recognized a net gain on extinguishment of debt in connection with the June 2023 Refinancing during the nine months ended September 30, 2023 of $13 million. As of September 30, 2023, we are in compliance with the covenants under the 2023 Term Loan Agreement and the Pari Passu Loan Agreement. On September 7, 2023, Sabre GLBL completed exchange offers in which approximately $787 million of our 7.375% senior secured notes due 2025 and approximately $66 million of our 9.25% senior secured notes due 2025 were exchanged for a combination of cash and approximately $853 million aggregate principal amount of 8.625% senior secured notes due 2027 (the “June 2027 Notes”), issued at par (the “September 2023 Exchange Transaction”). The June 2027 Notes are jointly and severally, irrevocably and unconditionally guaranteed by Sabre Holdings and all of Sabre GLBL’s restricted subsidiaries that guarantee the Senior Secured Credit Facilities and the Secured Term Loan Due 2028. The June 2027 Notes bear interest at a rate of 8.625% per annum and interest payments are due semi-annually in arrears on March 1 and September 1 of each year, beginning March 1, 2024. The June 2027 Notes mature on June 1, 2027. Sabre GLBL did not receive any cash proceeds from the exchange and did not incur additional indebtedness in excess of the aggregate principal amount of existing notes that were exchanged. We incurred additional fees of approximately $133 million, primarily consisting of approximately $115 million in exchange fees, $15 million in underwriting and associated fees and expenses plus $3 million of accrued and unpaid interest, all of which were funded with cash on hand. We determined that the exchange transaction, including the impact of the exchange fees, represents a debt extinguishment and therefore recognized a loss on extinguishment of debt during the three and nine months ended September 30, 2023, of $121 million, consisting of $115 million in exchange fees related to the June 2027 Notes and $6 million related to the write-off of unamortized debt issuance costs on the 9.25% senior secured notes and 7.375% senior secured notes. AR Facility On February 14, 2023, Sabre Securitization, LLC, an indirect, consolidated subsidiary of Sabre Corporation 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. As of September 30, 2023, we had $130 million outstanding under the AR Facility. These proceeds are being used for general corporate purposes. Dividends The Preferred Stock accumulated cumulative dividends at a rate per annum equal to 6.50% payable, at our election, in cash, shares of our common stock or a combination of cash and shares of our common stock. We recorded $4 million and $14 million of accrued preferred stock dividends in our consolidated results of operations for the three and nine months ended September 30, 2023, and $5 million and $16 million for the three and nine months ended September 30, 2022, respectively. During the three and nine months ended September 30, 2023 and 2022, we paid cash dividends on our preferred stock of $5 million and $16 million, respectively. On September 1, 2023, the mandatory conversion date, each outstanding share of Preferred Stock was automatically converted into shares of our common stock. See Note 12. Stock and Stockholders' Equity for further details. 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. For the nine months ended September 30, 42 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 the cash management measures we are undertaking as a result of the market conditions caused by COVID-19. As of September 30, 2023, the Share Repurchase Program remains suspended and approximately $287 million remains authorized for repurchases.. Senior Secured Credit Facilities 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 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 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.   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. As of September 30, 2023, we are in compliance with all covenants under the terms of the Amended and Restated Credit Agreement. Cash Flows Nine Months Ended September 30, 2023 2022 (Amounts in thousands) Cash used in operating activities $ (39,781) $ (314,770) Cash (used in) provided by investing activities (80,631) 186,251 Cash used in financing activities (72,518) (61,646) Cash used in discontinued operations (148) (3,231) Effect of exchange rate changes on cash, cash equivalents and restricted cash (205) (2,197) Decrease in cash, cash equivalents and restricted cash $ (193,283) $ (195,593) Operating Activities Cash used in operating activities totaled $40 million for the nine months ended September 30, 2023. The $275 million increase in operating cash flow from the same period in the prior year was primarily due to increased transaction volumes, partially offset by a $73 million increase in interest payments related to our debt and $41 million of severance payments made in connection with our cost reduction plan. Investing Activities For the nine months ended September 30, 2023, we used $69 million of cash for capital expenditures primarily related to software developed for internal use and $12 million for acquisition-related activity. 43 For the nine months ended September 30, 2022, we received proceeds of $392 million from the sale of AirCentre, partially offset by $53 million of cash used on capital expenditures primarily related to software developed for internal use, $80 million of cash for the investment in GBT, and $73 million for Conferma and other acquisitions. Financing Activities For the nine months ended September 30, 2023, we used $73 million of cash for financing activities. Significant highlights of our financing activities include: • proceeds of $853 million from the issuance of the 8.625% senior secured notes due 2027; • payment of $787 million on our 7.375% senior secured notes due 2025 and $66 million on our 9.25% senior secured notes due 2025; • proceeds of $677 million from the issuance of the Senior Secured Term Loan Due 2028; • payment of $665 million on our 9.25% senior secured notes due 2025, 2021 Term Loan B-1, 2021 Term Loan B-2 and 2022 Term Loan B-2; • payment of $159 million for debt discount and issuance costs; • net proceeds of $130 million from borrowings on our AR Facility; • payment of $55 million on our term loans under the Amended and Restated Credit Agreement, $48 million of which is a prepayment from the AirCentre disposition; • proceeds of $16 million from the sale of our common shares of the direct parent of Conferma; • payment of $16 million in dividends on our preferred stock; and • net payments of $5 million from the settlement of employee stock-option awards. For the nine months ended September 30, 2022, financing activities used $62 million. Significant highlights of our financing activities include: • proceeds of $624 million and $650 million from the issuance of 2022 Term Loan B-1 and 2022 Term Loan B-2, respectively; • payment of $1.3 billion on previous term loans under the Amended and Restated Credit Agreement; • payment of $11 million on 2021 Term Loan B-1, 2021 Term Loan B-2 and 2022 Term Loan B-1; • payment of $24 million for debt discount and issuance costs; • net payments of $16 million from the settlement of employee stock-option awards; and • payment of $16 million in dividends on our preferred stock. Contractual Obligations There were no material changes to our future minimum contractual obligations since December 31, 2022 as previously disclosed in our Annual Report on Form 10-K filed with the SEC on February 17, 2023, other than the impact of interest rates on our debt and additional borrowings under the three-year committed accounts receivable securitization facility of $130 million and impacts of the June 2023 Refinancing and the September 2023 Exchange Transaction . As of September 30, 2023, we had a total debt obligation of $7.3 billion, with $97 million due for the remainder of 2023. We had no off balance sheet arrangements during the nine months ended September 30, 2023 and year ended December 31, 2022. 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 44 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 17, 2023. Since the date of the annual report on Form 10-K filed with the SEC on February 17, 2023, there have been no material changes to our critical accounting estimates.