10-Q 1 sabr-20220630.htm 10-Q sabr-20220630
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Sabre Corporation
(Exact name of registrant as specified in its charter)
  
Delaware001-3642220-8647322
(State or other jurisdiction of
incorporation or organization)
(Commission File Number)(I.R.S. Employer
Identification No.)
3150 Sabre Drive
Southlake, TX 76092
(Address, including zip code, of principal executive offices)
(682)-605-1000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.01 par valueSABRThe NASDAQ Stock Market LLC
6.50% Series A Mandatory Convertible Preferred StockSABRPThe NASDAQ Stock Market LLC
(Title of each class)(Trading Symbol)(Name of each exchange on which registered)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes      No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    Yes     No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes    No 
As of July 28, 2022, 328,186,374 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.




SABRE CORPORATION
TABLE OF CONTENTS
 
  
Page No.
    Item 1. 
 
 
 
 
 
     Item 2.
     Item 3.
     Item 4.
 
 
     Item 1.
     Item 1A.
     Item 2.
     Item 6.
We may use our website, our Twitter account (@Sabre_Corp) and other social media channels as additional means of disclosing information to the public. The information disclosed through those channels may be considered to be material and may not be otherwise disseminated by us, so we encourage investors to review our website, Twitter account and other social media channels. The contents of our website or social media channels referenced herein are not incorporated by reference into this Quarterly Report on Form 10-Q.



PART I. FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS

SABRE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited) 
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Revenue $657,532 $419,668 $1,242,442 $747,152 
Cost of revenue, excluding technology costs274,245 179,821 497,279 326,582 
Technology costs277,172 261,217 550,902 513,880 
Selling, general and administrative176,308 159,000 343,986 289,613 
Operating loss(70,193)(180,370)(149,725)(382,923)
Other (expense) income:  
Interest expense, net(66,884)(64,272)(127,942)(128,373)
Loss on extinguishment of debt  (3,533) 
Equity method income (loss)186 630 16 (281)
Other, net(43,937)(3,199)147,304 8,432 
Total other (expense) income, net(110,635)(66,841)15,845 (120,222)
Loss from continuing operations before income taxes(180,828)(247,211)(133,880)(503,145)
Provision (benefit) for income taxes5,390 (1,897)4,794 2,100 
Loss from continuing operations(186,218)(245,314)(138,674)(505,245)
Loss from discontinued operations, net of tax(284)(81)(150)(344)
Net loss(186,502)(245,395)(138,824)(505,589)
Net income attributable to noncontrolling interests885 459 1,157 943 
Net loss attributable to Sabre Corporation(187,387)(245,854)(139,981)(506,532)
Preferred stock dividends5,347 5,428 10,693 10,856 
Net loss attributable to common stockholders$(192,734)$(251,282)$(150,674)$(517,388)
Basic net loss per share attributable to common stockholders:
Loss from continuing operations$(0.59)$(0.79)$(0.46)$(1.62)
Net loss per common share$(0.59)$(0.79)$(0.46)$(1.62)
Diluted net loss per share attributable to common stockholders:  
Loss from continuing operations$(0.59)$(0.79)$(0.46)$(1.62)
Net loss per common share$(0.59)$(0.79)$(0.46)$(1.62)
Weighted-average common shares outstanding:  
Basic326,573 319,755 325,124 318,700 
Diluted326,573 319,755 325,124 318,700 
See Notes to Consolidated Financial Statements
1


SABRE CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Net loss$(186,502)$(245,395)$(138,824)$(505,589)
Other comprehensive income (loss), net of tax:  
Foreign currency translation adjustments ("CTA") 1,110 (1,287)(3,730)
Retirement-related benefit plans:  
Net actuarial gain, net of taxes of $, $(6,153), $, $(6,153)
 21,347 1,671 21,347 
Pension settlement, net of taxes of $, $(973), $, $(973)
 3,374  3,374 
Amortization of prior service credits, net of taxes of $, $80, $, $160
(358)(278)(716)(556)
Amortization of actuarial losses, net of taxes of $, $(488), $, $(969)
2,210 1,688 3,993 3,363 
Net change in retirement-related benefit plans, net of tax1,852 26,131 4,948 27,528 
Derivatives:  
Unrealized losses, net of taxes of $, $29, $, $30
(18)(101)(18)(104)
Reclassification adjustment for realized losses, net of taxes of $, $(916), $, $(1,815)
244 3,189 244 6,316 
Net change in derivatives, net of tax226 3,088 226 6,212 
Share of other comprehensive income of equity method investments(200)(758)455 (224)
Other comprehensive income1,878 29,571 4,342 29,786 
Comprehensive loss(184,624)(215,824)(134,482)(475,803)
Less: Comprehensive income attributable to noncontrolling interests(885)(459)(1,157)(943)
Comprehensive loss attributable to Sabre Corporation$(185,509)$(216,283)$(135,639)$(476,746)
 
See Notes to Consolidated Financial Statements.
2



SABRE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 June 30, 2022December 31, 2021
Assets  
Current assets  
Cash and cash equivalents$992,180 $978,352 
Restricted cash21,039 21,039 
Accounts receivable, net of allowance for credit losses of $50,767 and $58,965
395,920 259,934 
Prepaid expenses and other current assets177,243 121,591 
Current assets held for sale 21,358 
Total current assets1,586,382 1,402,274 
Property and equipment, net of accumulated depreciation of $1,945,973 and $1,912,651
231,956 249,812 
Equity method investments22,498 22,671 
Goodwill2,481,067 2,470,206 
Acquired customer relationships, net of accumulated amortization of $790,870 and $771,479
245,147 257,362 
Other intangible assets, net of accumulated amortization of $763,776 and $751,917
166,955 183,321 
Deferred income taxes28,266 27,056 
Other assets, net414,465 475,424 
Long-term assets held for sale 203,204 
Total assets$5,176,736 $5,291,330 
Liabilities and stockholders’ deficit  
Current liabilities  
Accounts payable$145,619 $122,934 
Accrued compensation and related benefits103,048 135,974 
Accrued subscriber incentives205,396 137,448 
Deferred revenues89,686 81,061 
Other accrued liabilities185,011 188,706 
Current portion of debt16,730 29,290 
Current liabilities held for sale 21,092 
Total current liabilities745,489 716,505 
Deferred income taxes32,127 38,344 
Other noncurrent liabilities273,169 297,037 
Long-term debt4,732,532 4,723,685 
Long-term liabilities held for sale 15,476 
Commitments and contingencies (Note 12)
Stockholders’ deficit  
Preferred stock, $0.01 par value, 225,000 authorized, 3,290 issued and outstanding as of June 30, 2022 and December 31, 2021; aggregate liquidation value of $329,000 as of June 30, 2022 and December 31, 2021
33 33 
Common Stock: $0.01 par value; 1,000,000 authorized shares; 352,943 and 346,430 shares issued, 328,159 and 323,501 shares outstanding at June 30, 2022 and December 31, 2021, respectively
3,529 3,464 
Additional paid-in capital3,169,441 3,115,719 
Treasury Stock, at cost, 24,785 and 22,930 shares at June 30, 2022 and December 31, 2021, respectively
(513,462)(498,141)
Accumulated deficit(3,200,369)(3,049,695)
Accumulated other comprehensive loss(75,945)(80,287)
Noncontrolling interest10,191 9,190 
Total stockholders’ deficit(606,582)(499,717)
Total liabilities and stockholders’ deficit$5,176,736 $5,291,330 

See Notes to Consolidated Financial Statements.    
3



SABRE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Six Months Ended June 30,
 20222021
Operating Activities
Net loss$(138,824)$(505,589)
Adjustments to reconcile net loss to cash used in operating activities:
Gain on sale of assets and investments(180,081)(14,532)
Depreciation and amortization99,334 140,653 
Stock-based compensation expense53,732 53,904 
Loss on fair value of investment29,520  
Amortization of upfront incentive consideration23,785 30,168 
Deferred income taxes(8,600)(7,292)
Amortization of debt discount and issuance costs7,003 6,060 
Loss on extinguishment of debt3,533  
Dividends received from equity method investments488 698 
Provision for expected credit losses263 (3,914)
Loss from discontinued operations150 344 
Pension settlement charge 4,347 
Other3,363 238 
Changes in operating assets and liabilities:
Accounts and other receivables(170,853)(82,477)
Prepaid expenses and other current assets(7,658)(7,301)
Capitalized implementation costs(7,059)(9,105)
Upfront incentive consideration(6,593)(2,453)
Other assets33,557 535 
Accrued compensation and related benefits(31,370)30,924 
Accounts payable and other accrued liabilities73,736 25,157 
Deferred revenue including upfront solution fees10,262 1,175 
Cash used in operating activities(212,312)(338,460)
Investing Activities
Net proceeds from dispositions392,268 24,874 
Purchase of investment in equity securities(80,000) 
Additions to property and equipment(33,384)(17,240)
Acquisitions, net of cash acquired(6,986) 
Cash provided by investing activities271,898 7,634 
Financing Activities
Payments on borrowings from lenders(629,479)(12,590)
Proceeds of borrowings from lenders625,000  
Net payment on the settlement of equity-based awards(15,330)(22,016)
Dividends paid on preferred stock(10,693)(10,856)
Debt prepayment fees and issuance costs(9,747) 
Other financing activities(159)842 
Cash used in financing activities(40,408)(44,620)
Cash Flows from Discontinued Operations
Cash used in operating activities(2,698)(1,158)
Cash used in discontinued operations(2,698)(1,158)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(2,652)(947)
Increase (decrease) in cash, cash equivalents and restricted cash13,828 (377,551)
Cash, cash equivalents and restricted cash at beginning of period999,391 1,499,665 
Cash, cash equivalents and restricted cash at end of period$1,013,219 $1,122,114 
See Notes to Consolidated Financial Statements.
4


SABRE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(In thousands, except share data)
 Stockholders’ Deficit
 Preferred StockCommon StockAdditional
Paid in
Capital
Treasury StockRetained DeficitAccumulated
Other
Comprehensive Loss
Noncontrolling
Interest
Total
Stockholders'
Deficit
 SharesAmountSharesAmountSharesAmount
Balance at December 31, 20213,290,000 $33 346,430,421 $3,464 $3,115,719 22,929,668 $(498,141)$(3,049,695)$(80,287)$9,190 (499,717)
Comprehensive income— — — — — — — 47,406 2,464 272 50,142 
Preferred stock dividends(1)
— — — — — — — (5,346)— — (5,346)
Settlement of stock-based awards— — 3,883,688 39 (9)1,077,178 (10,300)— — — (10,270)
Stock-based compensation expense— — — — 27,605 — — — — — 27,605 
Other— — — — — — — — — (119)(119)
Balance at March 31, 20223,290,000 $33 350,314,109 $3,503 $3,143,315 24,006,846 $(508,441)$(3,007,635)$(77,823)$9,343 $(437,705)
Comprehensive loss(187,387)1,878 885 (184,624)
Preferred stock dividends(1)
— — — — — — — (5,347)— — (5,347)
Settlement of stock-based awards— — 2,629,221 26 (1)777,678 (5,021)— — — (4,996)
Stock-based compensation expense— — — — 26,127 — — — — — 26,127 
Other— — — — — — — — — (37)(37)
Balance at June 30, 20223,290,000 $33 352,943,330 $3,529 $3,169,441 24,784,524 $(513,462)$(3,200,369)$(75,945)$10,191 $(606,582)

(1) Our mandatory convertible preferred stock accumulates cumulative dividends at an annual rate of 6.50%.

Stockholders’ Equity (Deficit)
 Preferred StockCommon StockAdditional
Paid in
Capital
Treasury StockRetained DeficitAccumulated
Other
Comprehensive
Loss
Noncontrolling
Interest
Total
Stockholders'
Equity (Deficit)
 SharesAmountSharesAmountSharesAmount
Balance at December 31, 20203,340,000 33 338,661,960 $3,387 $2,985,077 21,365,227 $(474,790)$(2,099,624)$(135,957)$7,028 $285,154 
Comprehensive loss— — — — — — — (260,678)215 484 (259,979)
Preferred stock dividends(1)
— — — — — — — (5,428)— — (5,428)
Settlement of stock-based awards— — 2,900,693 29 148 764,947 (12,611)— — — (12,434)
Stock-based compensation expense— — — — 24,426 — — — — — 24,426 
Balance at March 31, 20213,340,000 33 341,562,653 $3,416 $3,009,651 22,130,174 $(487,401)$(2,365,730)$(135,742)$7,512 $31,739 
Comprehensive loss— — — — — — — (245,854)29,571 459 (215,824)
Preferred stock dividends(1)
— — — — — — — (5,428)(5,428)
Settlement of stock-based awards— — 2,377,690 24 214 714,622 (9,820)— — (9,582)
Stock-based compensation expense— — — — 29,478 — — — — — 29,478 
Issuance of common stock upon conversion of exchangeable notes— — 1,269,497 12 9,813 — — — — — 9,825 
Balance at June 30, 20213,340,000 33 345,209,840 3,452 3,049,156 22,844,796 (497,221)(2,617,012)(106,171)7,971 (159,792)

(1) Our mandatory convertible preferred stock accumulates cumulative dividends at an annual rate of 6.50%.

See Notes to Consolidated Financial Statements.
5


SABRE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
1. General Information
Sabre Corporation is a Delaware corporation formed in December 2006. On March 30, 2007, Sabre Corporation acquired Sabre Holdings Corporation (“Sabre Holdings”). Sabre Holdings is the sole direct subsidiary of Sabre Corporation. Sabre GLBL Inc. ("Sabre GLBL") is the principal operating subsidiary and sole direct subsidiary of Sabre Holdings. Sabre GLBL or its direct or indirect subsidiaries conduct all of our businesses. In these consolidated financial statements, references to “Sabre,” the “Company,” “we,” “our,” “ours” and “us” refer to Sabre Corporation and its consolidated subsidiaries unless otherwise stated or the context otherwise requires.
Recent Events—The travel industry continues to be adversely affected by the global health crisis due to the outbreak of the coronavirus ("COVID-19"), including variants, as well as by government directives that have been enacted to slow the spread of the virus. In 2020, we experienced significant decreases in transaction-based revenue in our Travel Solutions segment, including increased cancellation activity beyond what was initially estimated, as well as a reduction in SynXis Software and Services revenue in our Hospitality Solutions segment due to a decrease in transaction volumes as a result of the COVID-19 pandemic. As expected, this pandemic has continued to have a material impact to our consolidated financial results in 2021 and 2022. Despite the continued negative impacts of the COVID-19 pandemic on our business and global travel volumes, as COVID-19 vaccines have continued to be administered and some travel restrictions have been relaxed, we have seen gradual improvement in our key volume metrics during 2021 and 2022. With the continued increase in volumes, our incentive consideration costs are also increasing significantly compared to 2021 and 2020.
The inputs into our judgments and estimates consider the economic implications of COVID-19 on our critical and significant accounting estimates. Our air booking cancellation reserve totaled $9 million and $18 million as of June 30, 2022, and December 31, 2021, respectively, as cancellation activity has continued to decline over the year.
We believe our cash position and the liquidity measures we have taken will provide additional flexibility as we manage through the global economic recovery from the COVID-19 pandemic. As a result, we believe that we have resources to sufficiently fund our liquidity requirements over at least the next twelve months; however, given the magnitude of travel decline and the unknown duration of the COVID-19 impact, we will continue to monitor our liquidity levels and take additional steps should we determine they are necessary.
Basis of Presentation—The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2022. The accompanying interim financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K filed with the SEC on February 18, 2022.
We consolidate all majority-owned subsidiaries and companies over which we exercise control through majority voting rights. No entities are consolidated due to control through operating agreements, financing agreements or as the primary beneficiary of a variable interest entity.
The consolidated financial statements include our accounts after elimination of all significant intercompany balances and transactions. All dollar amounts in the financial statements and the tables in the notes, except per share amounts, are stated in thousands of U.S. dollars unless otherwise indicated. All amounts in the notes reference results from continuing operations unless otherwise indicated.
Use of Estimates—The preparation of these interim financial statements in conformity with GAAP requires that certain amounts be recorded based on estimates and assumptions made by management. Actual results could differ from these estimates and assumptions. Our accounting policies that utilize significant estimates and assumptions include: (i) estimation for revenue recognition and multiple performance obligation arrangements, (ii) determination of the fair value of assets and liabilities acquired in a business combination, (iii) the evaluation of the recoverability of the carrying value of long-lived assets and goodwill, (iv) assumptions utilized to test recoverability of capitalized implementation costs and customer and subscriber advances, (v) judgments in capitalization of software developed for internal use, (vi) the evaluation of uncertainties surrounding the calculation of our tax assets and liabilities, (vii) estimation of the air booking cancellation reserve, and (viii) the evaluation of the allowance for credit losses. Our use of estimates and the related accounting policies are discussed in the consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K filed with the SEC on February 18, 2022. Given the uncertainties surrounding the duration and effects of COVID-19, including any variants, we cannot provide assurance that the assumptions used in our estimates will be accurate and the impacts could be material on our cancellation reserves, credit loss provisions and results of operations.
6


Adoption of New Accounting Standards
In March 2022, the Financial Accounting Standards Board ("FASB") issued updated guidance on derivatives and hedging which allows entities to apply fair value hedging to closed portfolios of prepayable financial assets without having to consider prepayment risk or credit risk when measuring the assets. The amendments allow multiple hedged layers to be designated for a single closed portfolio for financial assets or one or more beneficial interests secured by a portfolio of financial instruments. As a result, an entity can achieve hedge accounting for hedges of a greater proportion of the interest rate risk inherent in the assets included in the closed portfolio, further aligning hedge accounting with risk management strategies. The standard is effective for public entities for fiscal years beginning after December 15, 2022, with early adoption permitted. We adopted this standard in the first quarter of 2022 and there was no impact to our consolidated financial statements for the six months ended June 30, 2022 as a result of the adoption.
2. Revenue from Contracts with Customers
Contract Balances
Revenue recognition for a significant portion of our revenue coincides with normal billing terms, including our transactional revenues, Software-as-a-Service ("SaaS") revenues, and hosted revenues. Timing differences among revenue recognition, unconditional rights to bill, and receipt of contract consideration may result in contract assets or contract liabilities.
The following table presents our assets and liabilities with customers as of June 30, 2022 and December 31, 2021 (in thousands).
AccountConsolidated Balance Sheet LocationJune 30, 2022December 31, 2021
Contract assets and customer advances and discounts(1)
Prepaid expenses and other current assets / other assets, net$71,737 $79,682 
Trade and unbilled receivables, netAccounts receivable, net395,576 258,800 
Long-term trade unbilled receivables, netOther assets, net11,967 23,709 
Contract liabilitiesDeferred revenues / other noncurrent liabilities139,580 135,273 
______________________
(1) Includes contract assets of $11 million for June 30, 2022 and December 31, 2021.
During the six months ended June 30, 2022, we recognized revenue of approximately $17 million from contract liabilities that existed as of January 1, 2022. Our long-term trade unbilled receivables, net relate to fixed license fees billed over the contractual period and recognized when the customer gains control of the software. We evaluate collectability of our accounts receivable based on a combination of factors and record reserves as described further in Note 5. Credit Losses.
Revenue
The following table presents our revenues disaggregated by business (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Distribution$431,538 $218,245 $774,426 $370,026 
IT Solutions167,611 155,140 358,721 292,234 
Total Travel Solutions599,149 373,385 1,133,147 662,260 
SynXis Software and Services58,625 44,530 108,359 83,260 
Other7,579 6,221 13,849 9,706 
Total Hospitality Solutions66,204 50,751 122,208 92,966 
Eliminations(7,821)(4,468)(12,913)(8,074)
Total Sabre Revenue$657,532 $419,668 $1,242,442 $747,152 
We may occasionally recognize revenue in the current period for performance obligations partially or fully satisfied in the previous periods resulting from changes in estimates for the transaction price, including any changes to our assessment of whether an estimate of variable consideration is constrained. For the six months ended June 30, 2022, the impact on revenue recognized in the current period from performance obligations partially or fully satisfied in the previous period is $25 million, which is primarily due to the recognition of revenue that was previously deferred but became recognizable due to a change in facts and circumstances associated with an IT Solutions customer located in Russia. It is no longer considered probable that this revenue will be reversed and this amount was fully paid by the customer.
Unearned performance obligations primarily consist of deferred revenue for fixed implementation fees and future product implementations, which are included in deferred revenue and other noncurrent liabilities in our consolidated balance sheet. We have not disclosed the performance obligation related to contracts containing minimum transaction volume, as it represents a
7


subset of our business, and therefore would not be meaningful in understanding the total future revenues expected to be earned from our long-term contracts.
3. Acquisitions and Dispositions
Exercise of option to acquire
In July 2022, we exercised a contractually binding option to acquire the outstanding shares of an entity in the payments industry for a price determined pursuant to an independent valuation process. Our obligation under the agreement is expected to result in a payment of approximately $70 million in August 2022 to the current shareholders. We will consolidate the results of this entity from the date of acquisition, which are not expected to have a material impact on our results of operations in the current year.
AirCentre Disposition
On October 28, 2021, we announced that we entered into an agreement with a third party to sell our suite of flight and crew management and optimization solutions, which represents our AirCentre airline operations portfolio. The assets and liabilities associated with the AirCentre portfolio are presented as held for sale on our consolidated balance sheets as of December 31, 2021. On February 28, 2022, we completed the sale of AirCentre to a third party for cash proceeds of $392 million. The operating results of AirCentre are included within Travel Solutions for all periods presented through the date of sale. The net assets of AirCentre disposed of primarily included goodwill of $146 million, working capital of $17 million, and other assets, net of $25 million. We recorded a pre-tax gain on sale of approximately $180 million, which includes an adjustment recorded in the second quarter of 2022 related to $12 million in contingencies identified in connection with the sale (after-tax $112 million) in Other, net in our consolidated statements of operations for the six months ended June 30, 2022.
In connection with the closing of the transaction, we entered into a Transition Services Agreement ("TSA") with the acquirer, under which we will provide transition services consisting of technology, administrative and other services for up to a twenty-four month period to provide for an orderly transition and facilitate the ongoing operations of the AirCentre business. Consideration received under the TSA is primarily based on a fixed fee for each service provided. To the extent a contract was unable to be assigned by the time of close, we will continue to invoice and collect any relevant consideration and transfer the economic benefit to the acquirer.
4. Income Taxes

    For the six months ended June 30, 2022, we recognized $5 million of income tax expense, representing a negative effective tax rate of 4%, compared to an income tax expense of $2 million, representing a negative effective tax rate of less than 1% for the six months ended June 30, 2021 . The decrease in the effective tax rate for the six months ended June 30, 2022 as compared to the same period in 2021 was primarily due to a increase in valuation allowance recorded in the current period and various discrete items recorded in each of the respective six 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.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax-planning strategies in making this assessment. We believe it is more likely than not that the results of future operations will not generate sufficient taxable income in the U.S. and in certain foreign jurisdictions to realize the full benefit of its deferred tax assets. On the basis of this evaluation, as of June 30, 2022, a cumulative valuation allowance of $443 million has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased.
We recognize liabilities when we believe that an uncertain tax position may not be fully sustained upon examination by the tax authorities. This evaluation requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. When facts and circumstances change, we reassess these probabilities and record any changes in the consolidated financial statements as appropriate. Our net unrecognized tax benefits, excluding interest and penalties, included in our consolidated balance sheets, were $81 million and $85 million as of June 30, 2022 and December 31, 2021, respectively.
5. Credit Losses
We are exposed to credit losses primarily through our sales of services provided to participants in the travel and transportation industry, which we consider to be our singular portfolio segment. We develop and document our methodology used in determining the allowance for credit losses at the portfolio segment level. Within the travel portfolio segment, we identify airlines, hoteliers and travel agencies as each presenting unique risk characteristics associated with historical credit loss patterns, and we determine the adequacy of our allowance for credit loss by assessing the risks and losses inherent in our receivables related to each.
We evaluate the collectability of our receivables based on a combination of factors. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations to us, such as bankruptcy filings or failure to pay amounts due to
8


us or others, we specifically reserve for bad debts against amounts due to reduce the recorded receivable to the amount we reasonably believe will be collected. For all other customers, we record reserves for receivables, including unbilled receivables and contract assets, based on historical experience and the length of time the receivables are past due. The estimate of credit losses is developed by analyzing historical twelve-month collection rates and adjusting for current customer-specific factors indicating financial instability and other macroeconomic factors that correlate with the expected collectability of our receivables.
Our allowance for credit losses relates to all financial assets, primarily trade receivables due in less than one year recorded in Accounts Receivable, net on our consolidated balance sheets. Our allowance for credit losses for the six months ended June 30, 2022 for our portfolio segment is summarized as follows (in thousands):
Six Months Ended
June 30, 2022
Balance at December 31, 2021$59,646 
Provision for expected credit losses263 
Write-offs(7,175)
Other(749)
Balance at June 30, 2022$51,985 
In the prior year quarter and throughout the year of 2021, we experienced the reversal of certain provisions recorded during 2020, as the economy began to recover and payment experience began to improve. Given the uncertainties surrounding the duration and effects of COVID-19, including any variants, we cannot provide assurance that the assumptions used in our estimates will be accurate and actual write-offs may vary from our estimates.