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, expectations regarding cost reductions, 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 15, 2024. 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 15, 2024. Overview At Sabre, we make travel happen. We are a technology company that operates our business and presents 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 within our consolidated financial results for 2023 and through the first quarter of 2024. Recent industry air distribution volume growth has leveled off, which may continue into the future and could impact our rate of growth. Passengers boarded for IT solutions has been negatively impacted by recent customer de-migrations, which has been partially 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 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. We estimate that these actions will reduce our operating expense on an annual basis by approximately $200 million. Since the second quarter of 2023, we have incurred costs of $66 million in connection with this business plan, within our consolidated statement of operations. We expect to continue this cost reduction plan through the end of 2024 and may incur additional costs as we continue to implement plans to further reposition and structurally reduce our cost base. 24 We believe that we have resources to sufficiently fund our liquidity requirements over at least the next twelve months; however, given the uncertain economic environment and the leveling off of industry air distribution volume growth, 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 2023 and the first quarter of 2024, we refinanced portions of our debt which resulted in higher interest rates than prior years, increasing our current and future interest expense. Currently approximately 42% of our debt, net of cash and hedging impacts from interest rates swaps, is variable and impacted by changes in interest rates. Approximately 24% 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.” 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 15, 2024. 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 15, 2024. 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 corporate related items including labor and professional services that are 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. Corporate technology costs include certain expenses such as stock-based compensation, restructuring charges and other corporate related items including labor and professional services that are not identifiable with either of our segments. 25 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 March 31, 2024 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. 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 “Central Reservation System”). These key metrics allow management to analyze customer volume over time for each of our product lines to monitor industry trends and analyze performance. We believe that these key metrics are useful for investors and other third parties as indicators of our financial performance and industry trends. While these metrics are based on what we believe to be reasonable estimates of our transaction counts for the applicable period of measurement, there are inherent challenges associated with their measurement. In addition, we are continually seeking to improve our estimates of these metrics, and these estimates may change due to improvements or changes in our methodology. The following table sets forth these key metrics for the periods indicated (in thousands): Three Months Ended March 31, 2024 2023 % Change Travel Solutions Direct Billable Bookings - Air 85,170 84,348 1.0% Direct Billable Bookings - LGS 13,289 12,295 8.1% Distribution Total Direct Billable Bookings 98,459 96,643 1.9% IT Solutions Passengers Boarded 167,926 165,032 1.8% Hospitality Solutions Central Reservations System Transactions 29,051 27,746 4.7% 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 , 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 as operating income (loss) adjusted for equity method income, acquisition-related amortization, restructuring and other costs, acquisition-related costs, and stock-based compensation. We define Adjusted Net Loss as net loss attributable to common stockholders adjusted for loss from discontinued operations, net of tax, net income (loss) attributable to noncontrolling interests, preferred stock dividends, acquisition-related amortization, restructuring and other costs, loss on extinguishment of debt, other, net, acquisition-related costs, stock-based compensation, and the tax impact of adjustments. We define Adjusted EBITDA as loss from continuing operations adjusted for depreciation and amortization of property and equipment, amortization of capitalized implementation costs, acquisition-related amortization, restructuring and other costs, interest expense, net, other, net, loss on extinguishment of debt, acquisition-related costs, stock-based compensation and the remaining provision for income taxes. 26 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 diluted weighted-average common shares outstanding. These non-GAAP financial measures are key metrics used by management and our board of directors to monitor our ongoing core operations because historical results have been significantly impacted by events that are unrelated to our core operations as a result of changes to our business and the regulatory environment. We believe that these non-GAAP financial measures are used by investors, analysts and other interested parties as measures of financial performance and to evaluate our ability to service debt obligations, fund capital expenditures, fund our investments in technology transformation, and meet working capital requirements. We also believe that Adjusted Operating Income, 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, 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 Income, 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, Adjusted Net Loss, Adjusted EBITDA or Free Cash Flow differently, which reduces their usefulness as comparative measures. 27 The following table sets forth the reconciliation of Net loss attributable to common stockholders to Adjusted Net Loss from continuing operations, Operating Income (Loss) to Adjusted Operating Income, and Loss from continuing operations to Adjusted EBITDA (in thousands): Three Months Ended March 31, 2024 2023 Net loss attributable to common stockholders $ (71,483) $ (104,280) Loss from discontinued operations, net of tax — 403 Net income (loss) attributable to noncontrolling interests (1) 378 (835) Preferred stock dividends — 5,346 Loss from continuing operations (71,105) (99,366) Adjustments: Acquisition-related amortization (2a) 9,622 9,934 Restructuring and other costs (4) (5,053) (319) Loss on extinguishment of debt 37,994 — Other, net (3) 4,477 (2,407) Acquisition-related costs (5) 250 847 Stock-based compensation 13,905 17,005 Tax impact of adjustments (6) 4,171 16,005 Adjusted Net Loss from continuing operations $ (5,739) $ (58,301) Adjusted Net Loss from continuing operations per share $ (0.02) $ (0.18) Diluted weighted-average common shares outstanding 379,774 328,928 Operating income (loss) $ 98,085 $ (213) Add back: Equity method income 960 423 Acquisition-related amortization (2a) 9,622 9,934 Restructuring and other costs (4) (5,053) (319) Acquisition-related costs (5) 250 847 Stock-based compensation 13,905 17,005 Adjusted Operating Income $ 117,769 $ 27,677 Loss from continuing operations (71,105) $ (99,366) Adjustments: Depreciation and amortization of property and equipment (2b) 19,713 21,029 Amortization of capitalized implementation costs (2c) 4,824 9,356 Acquisition-related amortization (2a) 9,622 9,934 Restructuring and other costs (4) (5,053) (319) Interest expense, net 124,747 99,784 Other, net (3) 4,477 (2,407) Loss on extinguishment of debt 37,994 — Acquisition-related costs (5) 250 847 Stock-based compensation 13,905 17,005 Provision for income taxes 2,932 2,199 Adjusted EBITDA $ 142,306 $ 58,062 28 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 March 31, 2024 Travel Solutions Hospitality Solutions Corporate Total Adjusted Operating Income (Loss) $ 169,782 $ 2,472 $ (54,485) $ 117,769 Less: Equity method income 960 — — 960 Acquisition-related amortization (2a) — — 9,622 9,622 Restructuring and other costs (4) — — (5,053) (5,053) Acquisition-related costs (5) — — 250 250 Stock-based compensation — — 13,905 13,905 Operating income (loss) $ 168,822 $ 2,472 $ (73,209) $ 98,085 Adjusted EBITDA $ 188,309 $ 8,271 $ (54,274) $ 142,306 Less: Depreciation and amortization of property and equipment (2b) 15,171 4,331 211 19,713 Amortization of capitalized implementation costs (2c) 3,356 1,468 — 4,824 Acquisition-related amortization (2a) — — 9,622 9,622 Restructuring and other costs (4) — — (5,053) (5,053) Acquisition-related costs (5) — — 250 250 Stock-based compensation — — 13,905 13,905 Equity method income 960 — — 960 Operating income (loss) $ 168,822 $ 2,472 $ (73,209) $ 98,085 Interest expense, net (124,747) Other, net (3) (4,477) Loss on extinguishment of debt (37,994) Equity method income 960 Provision for income taxes (2,932) Loss from continuing operations $ (71,105) 29 Three Months Ended March 31, 2023 Travel Solutions Hospitality Solutions Corporate Total Adjusted Operating Income (Loss) $ 90,102 $ (8,495) $ (53,930) $ 27,677 Less: Equity method income 423 — — 423 Acquisition-related amortization (2a) — — 9,934 9,934 Restructuring and other costs (4) — — (319) (319) Acquisition-related costs (5) — — 847 847 Stock-based compensation — 17,005 17,005 Operating income (loss) $ 89,679 $ (8,495) $ (81,397) $ (213) Adjusted EBITDA $ 114,708 $ (2,811) $ (53,835) $ 58,062 Less: Depreciation and amortization of property and equipment (2b) 16,628 4,306 95 21,029 Amortization of capitalized implementation costs (2c) 7,978 1,378 — 9,356 Acquisition-related amortization (2a) — — 9,934 9,934 Restructuring and other costs (4) — — (319) (319) Acquisition-related costs (5) — — 847 847 Stock-based compensation — — 17,005 17,005 Equity method income 423 — — 423 Operating income (loss) $ 89,679 $ (8,495) $ (81,397) $ (213) Interest expense, net (99,784) Other, net (3) 2,407 Equity method income 423 Provision for income taxes (2,199) Loss from continuing operations $ (99,366) The following tables present information from our statements of cash flows and set forth the reconciliation of Free Cash Flow to cash used in operating activities, the most directly comparable GAAP measure (in thousands): Three Months Ended March 31, 2024 2023 Cash used in operating activities $ (68,090) $ (72,409) Cash used in investing activities (27,676) (18,110) Cash provided by financing activities 77,908 111,939 Three Months Ended March 31, 2024 2023 Cash used in operating activities $ (68,090) $ (72,409) Additions to property and equipment (27,676) (18,110) Free Cash Flow $ (95,766) $ (90,519) ______________________________ (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 Limited) of 19%. (2) Depreciation and amortization expenses: (a) Acquisition-related amortization represents amortization of intangible assets from the take-private transaction in 2007 as well as intangibles associated with acquisitions since that date. (b) Depreciation and amortization of property and equipment includes software developed for internal use as well as amortization of contract acquisition costs. (c) Amortization of capitalized implementation costs represents amortization of upfront costs to implement new customer contracts under our SaaS and hosted revenue model. (3) Other, net includes non-operating gains of $3 million recognized in the first quarter of 2023 and the impacts of fair value adjustments of our GBT investment in all periods presented. In addition, all periods presented include foreign exchange gains and losses related to the remeasurement of foreign currency denominated balances included in our consolidated balance sheets into the relevant functional currency. 30 (4) Restructuring and other costs in 2024 primarily represents adjustments to charges associated with our cost reduction plan we began implementing in the second quarter of 2023. See Note 4. Restructuring Activities to our consolidated financial statements. (5) Acquisition-related costs represent fees and expenses incurred associated with acquisition and disposition-related activities. (6) 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, valuation allowances and other items. Results of Operations The following table sets forth our consolidated statements of operations data for each of the periods presented: Three Months Ended March 31, 2024 2023 (Amounts in thousands) Revenue $ 782,886 $ 742,695 Cost of revenue, excluding technology costs 321,094 307,042 Technology costs 222,291 271,438 Selling, general and administrative 141,416 164,428 Operating income (loss) 98,085 (213) Interest expense, net (124,747) (99,784) Loss on extinguishment of debt (37,994) — Equity method income 960 423 Other, net (4,477) 2,407 Loss from continuing operations before income taxes (68,173) (97,167) Provision for income taxes 2,932 2,199 Loss from continuing operations $ (71,105) $ (99,366) Three Months Ended March 31, 2024 and 2023 Revenue Three Months Ended March 31, 2024 2023 Change (Amounts in thousands) Travel Solutions $ 713,633 $ 677,441 $ 36,192 5 % Hospitality Solutions 78,819 73,812 5,007 7 % Total segment revenue 792,452 751,253 41,199 5 % Eliminations (9,566) (8,558) (1,008) 12 % Total revenue $ 782,886 $ 742,695 $ 40,191 5 % Travel Solutions— Revenue increased $36 million, or 5%, for the three months ended March 31, 2024 compared to the same period in the prior year, primarily due to: • a $46 million, or 9% increase in transaction-based distribution revenue primarily due to favorable rate impacts from travel supplier mix and a 2% increase in direct billable bookings to 98 million; and • a $10 million, or 7% decrease in IT solutions revenue driven by a $22 million decline in revenue from customers that have de-migrated from our systems, including the impact of termination fees from a certain carrier in the prior year. These decreases were partially offset by a $5 million increase in license fee revenue, an increase of $3 million due to a 2% increase in passengers boarded to 168 million and a $3 million increase in other revenue. Hospitality Solutions — Revenue increased $5 million, or 7%, for the three months ended March 31, 2024 compared to the same period in the prior year. The increase was primarily driven by a $6 million increase in SynXis Software and Services revenue due to an increase in transaction volumes of 5% to 29 million driven by new customer deployments, and a favorable mix within our customer base. This increase was partially offset by a $1 million decrease in DX revenue. 31 Cost of revenue, excluding technology costs Three Months Ended March 31, 2024 2023 Change (Amounts in thousands) Travel Solutions $ 288,850 $ 267,427 $ 21,423 8 % Hospitality Solutions 36,559 37,057 (498) (1) % Eliminations (9,566) (8,558) (1,008) 12 % Corporate 47 1,552 (1,505) (97) % Depreciation and amortization 5,204 9,564 (4,360) (46) % Total cost of revenue, excluding technology costs $ 321,094 $ 307,042 $ 14,052 5 % Travel Solutions— Cost of revenue, excluding technology costs, increased $21 million, or 8%, for the three months ended March 31, 2024 compared to the same period in the prior year. The increase was primarily driven by a $23 million increase in incentive consideration due to an increase in rates and higher transaction volume. This increase was partially offset by a $2 million decrease in labor and professional services costs driven by our cost reduction plan. Hospitality Solutions— Cost of revenue, excluding technology costs, declined slightly for the three months ended March 31, 2024 compared to the same period in the prior year. A $2 million decrease in labor and professional services costs driven by our cost reduction plan was partially offset by a $1 million increase in costs associated with increased transaction volumes and the mix of our transactions across our distribution channels. Corporate— Cost of revenue, excluding technology costs, decreased $2 million, or 97%, for the three months ended March 31, 2024 compared to the same period in the prior year primarily due to a decrease in labor and professional services. Depreciation and Amortization— Cost of revenue, excluding technology costs, decreased $4 million, or 46%, for the three months ended March 31, 2024 primarily due to the acceleration of amortization of certain customer implementation costs in the prior year, in connection with a customer de-migrating from our systems. Technology Costs Three Months Ended March 31, 2024 2023 Change (Amounts in thousands) Travel Solutions $ 188,559 $ 233,020 $ (44,461) (19) % Hospitality Solutions 25,822 29,889 (4,067) (14) % Corporate 7,910 8,529 (619) (7) % Total technology costs $ 222,291 $ 271,438 $ (49,147) (18) % Travel Solutions— Technology costs decreased $44 million, or 19% for the three months ended March 31, 2024 compared to the same period in the prior year. The decrease was primarily driven by a $29 million decrease in labor and professional services driven by our cost reduction plan, a $14 million decrease in technology costs due to cost savings related to our mainframe offloads and data migrations, and a decrease in depreciation and amortization of $2 million primarily due to the completion of amortization of certain capitalized internal use software. Hospitality Solutions— Technology costs decreased $4 million, or 14%, for the three months ended March 31, 2024 compared to the same period in the prior year primarily due to a $5 million decrease in labor and professional services driven by our cost reduction plan. This decrease was partially offset by a $1 million increase in technology costs to support growth in the business. Corporate— Technology costs decreased $1 million, or 7%, for the three months ended March 31, 2024 compared to the same period in the prior year due to $1 million decrease in stock-based compensation primarily due to forfeitures of unvested shares. 32 Selling, General and Administrative Expenses Three Months Ended March 31, 2024 2023 Change (Amounts in thousands) Travel Solutions $ 63,945 $ 79,123 $ (15,178) (19) % Hospitality Solutions 12,484 13,989 (1,505) (11) % Corporate 64,987 71,316 (6,329) (9) % Total selling, general and administrative expenses $ 141,416 $ 164,428 $ (23,012) (14) % Travel Solutions— Selling, general and administrative expenses decreased $15 million, or 19%, for the three months ended March 31, 2024 compared to the same period in the prior year due to a $10 million decrease in labor and professional services primarily driven by our cost reduction plan, a $3 million decrease in legal costs, and a $2 million decrease in the provision for credit losses. Hospitality Solutions— Selling, general and administrative expenses decreased $2 million, or 11%, for the three months ended March 31, 2024 compared to the prior year primarily due to 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. Corporate— Selling, general and administrative expenses decreased $6 million, or 9%, for the three months ended March 31, 2024 compared to the same period in the prior year. The decrease was primarily driven by a $5 million decrease in labor and professional services driven by our cost reduction plan, a $4 million decrease due to the reversal of severance cost accruals associated with our cost reduction plan and a $2 million decrease in stock-based compensation primarily due to forfeitures of unvested shares. These decreases were partially offset by a $2 million increase in technology costs and a $2 million increase associated with other ongoing business expenses. Interest expense, net Three Months Ended March 31, 2024 2023 Change (Amounts in thousands) Interest expense, net $ 124,747 $ 99,784 $ 24,963 25 % Interest expense increased $25 million, or 25%, during the three months ended March 31, 2024 compared to the same period in the prior year primarily due to additional interest incurred in connection with the financing activities that have occurred since the prior year period. See Note 7. Debt for further details regarding these debt transactions. Loss on extinguishment of debt We recognized a loss on extinguishment of debt of $38 million for the three months ended March 31, 2024 as a result of the refinancing activity that occurred in the current quarter. See Note 7. Debt for further details. Other, net Three Months Ended March 31, 2024 2023 Change (Amounts in thousands) Other, net $ 4,477 $ (2,407) $ 6,884 (286) % Other, net increased $7 million for the three months ended March 31, 2024 compared to the same period in the prior year primarily due to a change in fair value of our investments in securities from a loss of $1 million in the prior year period to a loss of $3 million in the current year period and a $3 million increase due to other non-operating gains recognized in the first quarter of 2023. See Note 9. Fair Value Measurements for further details regarding our investments in securities. Provision for Income Taxes Three Months Ended March 31, 2024 2023 Change (Amounts in thousands) Provision for income taxes $ 2,932 $ 2,199 $ 733 33 % 33 For the three months ended March 31, 2024, we recognized $3 million of income tax expense, representing an effective tax rate of less than 1%, compared to an income tax expense of $2 million, representing an effective tax rate of less than 1% for the three months ended March 31, 2023. While the total tax provision increased slightly, the effective tax rate decreased for the three months ended March 31, 2024 as compared to the same period in 2023 primarily due to the change in the geographic mix of taxable income 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. Liquidity and Capital Resources Our current principal source of liquidity is our cash and cash equivalents on hand. As of March 31, 2024 and December 31, 2023, our cash and cash equivalents and outstanding letters of credit were as follows (in thousands): March 31, 2024 December 31, 2023 Cash and cash equivalents $ 629,137 $ 648,207 Available undrawn balance under the AR Facility (1) — 400 AR Facility outstanding balance (1) 112,200 110,000 Available under the bilateral letter of credit facility 11,893 8,486 Outstanding letters of credit under the bilateral letter of credit facility 8,107 11,514 ______________________ (1) AR Facility (as defined below) does not include the FILO Facility (as defined below). As of March 31, 2024, we had $112 million outstanding under the AR Facility. The AR Facility matures on March 29, 2027 and allows us the ability to prepay the principal amount prior to the maturity date without penalty. See Note 7. 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 March 31, 2024 and December 31, 2023. We had $21 million held as cash collateral for standby letters of credit in restricted cash on our consolidated balance sheets as of March 31, 2024 and December 31, 2023. 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 within our consolidated financial results for 2023 and through the first quarter of 2024. 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 uncertain economic environment, 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. During the first quarter of 2024, we refinanced and extended the maturity on approximately $300 million of our debt, which negatively impacted our results due to increasing interest rates, but increased our overall liquidity by approximately $70 million. We expect to repay our remaining 2025 debt maturities with cash from our balance sheet. In the second quarter of 2023, we began implementing a cost reduction plan designed to reposition our business to the current environment and to structurally reduce our cost base. We believe our cash position and the liquidity measures we have taken will provide additional flexibility as we manage through continued headwinds. 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. We expect the full year 2024 free cash flow to be positive. 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. 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.” 34 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 2023 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 (“NOL”) 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 2024, and we also expect to benefit from the usage of NOLs in 2024 to the extent available. We expect to continue to benefit from our NOLs and certain tax credits in the near-term beyond 2024. Capital Resources As of March 31, 2024, our outstanding debt totaled $5.0 billion, which is net of debt issuance costs and unamortized discounts of $133 million. Currently approximately 42% of our debt, net of cash and hedging impacts from interest rates swaps, is variable and impacted by changes in interest rates. Approximately 24% of our debt is variable, excluding the Senior Secured Term Loan due in 2028, where interest rate 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 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 2023 and through the first quarter of 2024, in response to the geopolitical conflict, increases in the rate of inflation, and uncertainty regarding the path of U.S. monetary policy. During 2023 and the first quarter of 2024, we refinanced portions of our debt which resulted in interest rates higher than prior years, increasing 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. Subject to market conditions, we may opportunistically refinance portions of our debt in the near term which, at current interest rates and market conditions, may negatively impact our interest expense or result in higher dilution. In addition, from time to time, we may decide to repurchase or otherwise retire portions of our existing indebtedness through transactions in the open market, privately negotiated transactions, tender offers, exchange offers or otherwise, or we may redeem or prepay portions of our existing indebtedness. Any such action will depend on market conditions and various other factors existing at that time. Furthermore, we may be required to pay US Airways' reasonable attorneys' fees and costs related to that antitrust litigation. See Note 13. Contingencies, to our consolidated financial statements. 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 factors 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 material increases in total indebtedness, if available and to the extent issued in the future, may 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 the AR Facility of up to $200 million, and in the first quarter of 2024, we increased the overall size of the AR Facility through the FILO Facility, resulting in a Securitization Facility of $235 million (as each of such terms is defined below) . 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 March 31, 2024, we were in compliance with all covenants under the terms of the Amended and Restated Credit Agreement, the Securitization 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, 2022, we were not required to make an excess cash flow 35 payment in 2023, and no excess cash flow payment is required in 2024 with respect to our results for the year ended December 31, 2023. 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. 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 the 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 year ended December 31, 2023 of $13 million. As of March 31, 2024, 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 (the “September 2025 Notes”) and approximately $66 million of our 9.25% senior secured notes due 2025 (the “April 2025 Notes”) 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 the April 2025 Notes and the September 2025 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 September 2023 Exchange Transaction, including the impact of the exchange fees, represents a debt extinguishment and therefore recognized a loss on extinguishment of debt during the year ended December 31, 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 April 2025 Notes and the September 2025 Notes. On March 7, 2024, Sabre GLBL exchanged approximately $36 million of our September 2025 Notes and approximately $7 million of our April 2025 Notes for approximately $50 million aggregate principal amount of additional June 2027 Notes (the "March 2024 Exchange Transaction"). No additional indebtedness was incurred as a result of the transaction, other than amounts covering exchange fees of approximately $7 million. Other than the issuance date and issue price, these additional June 2027 notes have the same terms, form a single series with, and are fungible with the June 2027 Notes described above. We incurred additional fees of approximately $1 million, which were funded with cash on hand. We determined that the March 2024 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 months ended March 31, 2024 of approximately $7 million, primarily consisting of exchange fees related to the June 2027 Notes. Exchangeable Notes On March 19, 2024, Sabre GLBL exchanged $150 million aggregate principal amount of its outstanding 2025 Exchangeable Notes for $150 million aggregate principal amount of Sabre GLBL's newly-issued 7.32% senior exchangeable notes due 2026 (the "2026 Exchangeable Notes" and together with the 2025 Exchangeable Notes, the "Exchangeable Notes") and approximately $30 million of cash. We incurred additional fees of approximately $5 million in 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 of $31 million. We did not receive any cash proceeds from the exchange and did not incur additional 36 indebtedness in excess of the aggregate principal amount of existing notes that were exchanged. The 2026 Exchangeable Notes are senior, unsecured obligations of Sabre GLBL, accrue interest payable semi-annually in arrears on February 1 and August 1 of each year, beginning on August 1 2024, and mature on August 1, 2026, unless earlier repurchased or exchanged in accordance with specified circumstances and terms of the indenture governing the 2026 Exchangeable Notes (the "2026 Exchangeable Notes Indenture" and together with the 2025 Exchangeable Notes Indenture, the "Exchangeable Indentures" ). As of March 31, 2024, we have $150 million aggregate principal amount of 2026 Exchangeable Notes outstanding. Securitization 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 (as amended from time to time the “Securitization Facility”) of up to $200 million with PNC Bank, N.A. On March 29, 2024, Sabre Securitization increased the overall size of its existing Securitization Facility from $200 million to $235 million by issuing a $120 million "first-in, last-out" term loan tranche under the Securitization Facility (such tranche, the "FILO Facility") and reducing the revolving tranche under the Securitization Facility to $115 million (such tranche, the "AR Facility"). In connection with the issuance of the FILO Facility, the maturity date of the Securitization Facility was extended to March 29, 2027 and the springing maturity date thereunder was terminated. The FILO Facility provides the ability to prepay or repay at certain redemption premiums as set forth in the agreement. The net proceeds received from the FILO Facility of $117 million, net of $3 million in fees paid to creditors, will be used for general corporate purposes. We incurred additional fees of $4 million, which were funded with cash on hand. The amount available for borrowings at any one time under the Securitization Facility is limited to a borrowing base calculated based on the outstanding balance of eligible receivables, subject to certain reserves. As of March 31, 2024, we had $232 million outstanding under the Securitization Facility, consisting of $112 million under the AR Facility and $120 million outstanding under the FILO Facility. 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 accrued $5 million of preferred stock dividends in our consolidated results of operations for the three months ended March 31, 2023. During the three months ended March 31, 2023, we paid cash dividends on our preferred stock of $5 million. 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 11. 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. During the three months ended March 31, 2024, 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 March 31, 2024, the Share Repurchase Program remains suspended and approximately $287 million remains authorized for repurchases. In addition, the terms of certain of the agreements governing our indebtedness contain covenants that, among other things, limit our ability to repurchase our common stock. See “Risk Factors—The terms of our debt covenants could limit our discretion in operating our business and any failure to comply with such covenants could result in the default of all of our debt.” Senior Secured Credit Facilities 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 March 31, 2024, we are in compliance with all covenants under the terms of the Amended and Restated Credit Agreement. 37 Cash Flows Three Months Ended March 31, 2024 2023 (Amounts in thousands) Cash used in operating activities $ (68,090) $ (72,409) Cash used in investing activities (27,676) (18,110) Cash provided by financing activities 77,908 111,939 Cash provided by discontinued operations — 52 Effect of exchange rate changes on cash, cash equivalents and restricted cash (1,212) 715 (Decrease) increase in cash, cash equivalents and restricted cash $ (19,070) $ 22,187 Operating Activities Cash used in operating activities totaled $68 million for the three months ended March 31, 2024. The $4 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 $13 million increase in interest payments related to our debt and $5 million of severance payments made in connection with our cost reduction plan. Investing Activities For the three months ended March 31, 2024, we used $28 million of cash for capital expenditures primarily related to software developed for internal use and acquired software licenses associated with our internal billing systems. For the three months ended March 31, 2023, we used $18 million of cash for capital expenditures primarily related to software developed for internal use. Financing Activities For the three months ended March 31, 2024, financing activities provided $78 million. Significant highlights of our financing activities include: • proceeds of $150 million from the issuance of the 2026 Exchangeable Notes ; • payment of $150 million on our 2025 Exchangeable Notes ; • proceeds of $120 million from the issuance of the FILO Facility; • proceeds of $50 million from the issuance of our June 2027 Notes; • payment of $49 million for debt discount and issuance costs; • payment of $36 million on our September 2025 Notes and $7 million on our April 2025 Notes; • net proceeds of $2 million from borrowings on our AR Facility; and • net payments of $2 million from the settlement of employee stock-option awards. For the three months ended March 31, 2023, financing activities provide d $112 million. Sig nificant highlights of our financing activities include: • proceeds of $115 million from borrowings on our AR Facility; • proceeds of $16 million from the sale of common shares of a subsidiary; • payment o f $6 million o n our term loans; • payment of $2 million f or debt discount and issuance costs; • net payme nts of $5 million fro m the settlement of employee stock-option awards; and • payment o f $5 million in dividends on our then-outstanding preferred stock. Contractual Obligations There were no material changes to our future minimum contractual obligations since December 31, 2023 as previously disclosed in our Annual Report on Form 10-K filed with the SEC on February 15, 2024, other than impacts of the March 2024 Exchange Transaction, 2026 Exchangeable Notes, and the Securitization Facility. We had no off balance sheet arrangements during the three months ended March 31, 2024 and year ended December 31, 2023. Recent Accounting Pronouncements 38 Information related to Recent Accounting Pronouncements is included in Note 1. General Information, to our consolidated financial statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q, which is incorporated herein by reference. Critical Accounting Estimates This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect our reported assets and liabilities, revenues and expenses and other financial information. Actual results may differ significantly from these estimates, and our reported financial condition and results of operations could vary under different assumptions and conditions. In addition, our reported financial condition and results of operations could vary due to a change in the application of a particular accounting standard. We regard an accounting estimate underlying our financial statements as a “critical accounting estimate” if the accounting estimate requires us to make assumptions about matters that are uncertain at the time of estimation and if changes in the estimate are reasonably likely to occur and could have a material effect on the presentation of financial condition, changes in financial condition, or results of operations. For a discussion of the accounting policies involving material estimates and assumptions that we believe are most critical to the preparation of our financial statements, how we apply such policies and how results differing from our estimates and assumptions would affect the amounts presented in our financial statements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” included in our Annual Report on Form 10-K filed with the SEC on February 15, 2024. Since the date of the annual report on Form 10-K filed with the SEC on February 15, 2024, there have been no material changes to our critical accounting estimates.