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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2024
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)
| | | | | | | | |
Delaware | 001-36422 | 20-8647322 |
(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 value | SABR | The 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.
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Large accelerated filer | | ☒ | | Accelerated filer | | ☐ |
Non-accelerated filer | | ☐ | | Smaller 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 October 25, 2024, 385,853,987 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.
SABRE CORPORATION
TABLE OF CONTENTS
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Item 1. | | |
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We may use our website, our LinkedIn account and our X account (@Sabre_Corp) 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, LinkedIn and X account. 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 September 30, | | Nine Months Ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Revenue | $ | 764,714 | | | $ | 740,461 | | | $ | 2,314,841 | | | $ | 2,220,685 | |
Cost of revenue, excluding technology costs | 322,257 | | | 294,120 | | | 964,832 | | | 917,532 | |
Technology costs | 211,284 | | | 243,404 | | | 652,843 | | | 799,121 | |
Selling, general and administrative | 161,046 | | | 150,736 | | | 468,099 | | | 494,227 | |
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Operating income | 70,127 | | | 52,201 | | | 229,067 | | | 9,805 | |
Other expense: | | | | | | | |
Interest expense, net | (127,669) | | | (119,372) | | | (381,710) | | | (325,290) | |
Loss on extinguishment of debt, net | — | | | (121,120) | | | (37,994) | | | (108,577) | |
Equity method income | 430 | | | 512 | | | 1,859 | | | 1,394 | |
Other, net | 879 | | | (11,548) | | | (347) | | | 8,084 | |
Total other expense, net | (126,360) | | | (251,528) | | | (418,192) | | | (424,389) | |
Loss from continuing operations before income taxes | (56,233) | | | (199,327) | | | (189,125) | | | (414,584) | |
Provision for income taxes | 6,900 | | | 8,462 | | | 14,598 | | | 16,570 | |
Loss from continuing operations | (63,133) | | | (207,789) | | | (203,723) | | | (431,154) | |
Loss from discontinued operations, net of tax | — | | | (116) | | | — | | | (517) | |
Net loss | (63,133) | | | (207,905) | | | (203,723) | | | (431,671) | |
Net (loss) income attributable to noncontrolling interests | (315) | | | 379 | | | 338 | | | (522) | |
Net loss attributable to Sabre Corporation | (62,818) | | | (208,284) | | | (204,061) | | | (431,149) | |
Preferred stock dividends | — | | | 3,564 | | | — | | | 14,257 | |
Net loss attributable to common stockholders | $ | (62,818) | | | $ | (211,848) | | | $ | (204,061) | | | $ | (445,406) | |
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Basic net loss per share attributable to common stockholders: | | | | | | | |
Loss from continuing operations | $ | (0.16) | | | $ | (0.61) | | | $ | (0.53) | | | $ | (1.33) | |
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Net loss per common share | $ | (0.16) | | | $ | (0.61) | | | $ | (0.53) | | | $ | (1.33) | |
Diluted net loss per share attributable to common stockholders: | | | | | | | |
Loss from continuing operations | $ | (0.16) | | | $ | (0.61) | | | $ | (0.53) | | | $ | (1.33) | |
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Net loss per common share | $ | (0.16) | | | $ | (0.61) | | | $ | (0.53) | | | $ | (1.33) | |
Weighted-average common shares outstanding: | | | | | | | |
Basic | 385,729 | | | 345,128 | | | 383,013 | | | 335,460 | |
Diluted | 385,729 | | | 345,128 | | | 383,013 | | | 335,460 | |
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See Notes to Consolidated Financial Statements.
SABRE CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
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| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Net loss | $ | (63,133) | | | $ | (207,905) | | | $ | (203,723) | | | $ | (431,671) | |
Other comprehensive income, net of tax: | | | | | | | |
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Foreign currency translation adjustments ("CTA") | 3,989 | | | (3,089) | | | 3,453 | | | 769 | |
Retirement-related benefit plans: | | | | | | | |
Net actuarial gain, net of taxes of nil in all periods | (24) | | | 90 | | | (24) | | | 90 | |
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Amortization of prior service credits, net of taxes of nil in all periods | (358) | | | (358) | | | (1,074) | | | (1,074) | |
Amortization of actuarial losses, net of taxes of nil in all periods | 703 | | | 575 | | | 2,109 | | | 1,726 | |
Net change in retirement-related benefit plans, net of tax | 321 | | | 307 | | | 1,011 | | | 742 | |
Derivatives: | | | | | | | |
Unrealized (losses) gains, net of taxes of nil in all periods | (6,733) | | | 3,703 | | | 2,600 | | | 4,588 | |
Reclassification adjustment for realized gains, net of taxes of nil in all periods | (2,133) | | | (2,057) | | | (6,178) | | | (4,473) | |
Net change in derivatives, net of tax | (8,866) | | | 1,646 | | | (3,578) | | | 115 | |
Share of other comprehensive loss of equity method investments | 108 | | | (45) | | | (297) | | | (382) | |
Other comprehensive income | (4,448) | | | (1,181) | | | 589 | | | 1,244 | |
Comprehensive loss | (67,581) | | | (209,086) | | | (203,134) | | | (430,427) | |
Less: Comprehensive (income) loss attributable to noncontrolling interests | 315 | | | (379) | | | (338) | | | 522 | |
Comprehensive loss attributable to Sabre Corporation | $ | (67,266) | | | $ | (209,465) | | | $ | (203,472) | | | $ | (429,905) | |
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See Notes to Consolidated Financial Statements.
SABRE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited) | | | | | | | | | | | |
| September 30, 2024 | | December 31, 2023 |
Assets | | | |
Current assets | | | |
Cash and cash equivalents | $ | 668,763 | | | $ | 648,207 | |
Restricted cash | 21,038 | | | 21,037 | |
Accounts receivable, net of allowance for credit losses of $28,425 and $34,343 | 408,724 | | | 343,436 | |
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Prepaid expenses and other current assets | 97,491 | | | 145,911 | |
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Total current assets | 1,196,016 | | | 1,158,591 | |
Property and equipment, net of accumulated depreciation of $1,881,284 and $1,851,191 | 249,577 | | | 233,677 | |
Equity method investments | 21,996 | | | 22,343 | |
Goodwill | 2,557,259 | | | 2,554,039 | |
Acquired customer relationships, net of accumulated amortization of $806,399 and $827,529 | 197,796 | | | 214,190 | |
Other intangible assets, net of accumulated amortization of $592,829 and $787,511 | 150,071 | | | 161,913 | |
Deferred income taxes | 11,468 | | | 10,201 | |
Other assets, net | 308,975 | | | 317,240 | |
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Total assets | $ | 4,693,158 | | | $ | 4,672,194 | |
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Liabilities and stockholders’ deficit | | | |
Current liabilities | | | |
Accounts payable | $ | 243,678 | | | $ | 231,767 | |
Accrued compensation and related benefits | 112,032 | | | 135,620 | |
Accrued subscriber incentives | 271,036 | | | 237,421 | |
Deferred revenues | 78,839 | | | 108,256 | |
Other accrued liabilities | 222,574 | | | 197,609 | |
Current portion of debt | 244,978 | | | 4,040 | |
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Total current liabilities | 1,173,137 | | | 914,713 | |
Deferred income taxes | 30,552 | | | 30,745 | |
Other noncurrent liabilities | 229,206 | | | 258,719 | |
Long-term debt | 4,790,313 | | | 4,829,461 | |
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Commitments and contingencies (Note 13) | | | |
Redeemable noncontrolling interests | 13,277 | | | 14,375 | |
Stockholders’ deficit | | | |
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Common Stock: $0.01 par value; 1,000,000 authorized shares; 414,637 and 405,915 shares issued, 385,831 and 379,569 shares outstanding at September 30, 2024 and December 31, 2023, respectively | 4,146 | | | 4,059 | |
Additional paid-in capital | 3,290,673 | | | 3,249,901 | |
Treasury Stock, at cost, 28,806 and 26,346 shares at September 30, 2024 and December 31, 2023, respectively | (526,725) | | | (520,124) | |
Accumulated deficit | (4,252,454) | | | (4,048,393) | |
Accumulated other comprehensive loss | (73,333) | | | (73,922) | |
Noncontrolling interest | 14,366 | | | 12,660 | |
Total stockholders’ deficit | (1,543,327) | | | (1,375,819) | |
Total liabilities and stockholders’ deficit | $ | 4,693,158 | | | $ | 4,672,194 | |
See Notes to Consolidated Financial Statements.
SABRE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited) | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2024 | | 2023 |
Operating Activities | | | |
Net loss | $ | (203,723) | | | $ | (431,671) | |
Adjustments to reconcile net loss to cash used in operating activities: | | | |
Depreciation and amortization | 98,215 | | | 113,871 | |
Paid-in-kind interest | 89,877 | | | 26,386 | |
Stock-based compensation expense | 40,776 | | | 38,837 | |
Loss on extinguishment of debt, net | 37,994 | | | 108,577 | |
Amortization of upfront incentive consideration | 25,744 | | | 26,300 | |
Amortization of debt discount and issuance costs | 21,131 | | | 16,531 | |
Deferred income taxes | (5,417) | | | (2,402) | |
(Gain) loss on investment fair value adjustment | (3,234) | | | 10,000 | |
Provision for expected credit losses | 2,801 | | | 7,421 | |
Dividends received from equity method investments | 1,833 | | | 1,514 | |
Other | 631 | | | (4,714) | |
Loss from discontinued operations | — | | | 517 | |
Changes in operating assets and liabilities: | | | |
Accounts and other receivables | (67,964) | | | (64,072) | |
Prepaid expenses and other current assets | (3,490) | | | 20,480 | |
Capitalized implementation costs | (13,813) | | | (6,576) | |
Upfront incentive consideration | (9,027) | | | (13,313) | |
Other assets | (13,401) | | | (1,902) | |
Accrued compensation and related benefits | (33,855) | | | (12,950) | |
Accounts payable and other accrued liabilities | 54,696 | | | 93,728 | |
Deferred revenue including upfront solution fees | (31,924) | | | 33,657 | |
Cash used in operating activities | (12,150) | | | (39,781) | |
Investing Activities | | | |
Additions to property and equipment | (68,052) | | | (68,610) | |
Proceeds from sale of investment in securities | 54,834 | | | — | |
Other investing activities | (300) | | | — | |
Acquisitions, net of cash acquired | — | | | (12,021) | |
Cash used in investing activities | (13,518) | | | (80,631) | |
Financing Activities | | | |
Proceeds on borrowings from lenders | 200,090 | | | 1,530,473 | |
Payments on borrowings from lenders | (194,716) | | | (1,572,719) | |
Proceeds from borrowings under Securitization Facility | 155,600 | | | 208,600 | |
Payments on borrowings under Securitization Facility | (58,300) | | | (78,600) | |
Debt prepayment fees and issuance costs | (50,020) | | | (158,982) | |
Net payment on the settlement of equity-based awards | (6,605) | | | (5,451) | |
Proceeds from sale of redeemable shares in subsidiary | — | | | 16,000 | |
Dividends paid on preferred stock | — | | | (16,039) | |
Other financing activities | — | | | 4,200 | |
Cash provided by (used in) financing activities | 46,049 | | | (72,518) | |
Cash Flows from Discontinued Operations | | | |
Cash used in operating activities | — | | | (148) | |
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Cash used in discontinued operations | — | | | (148) | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 176 | | | (205) | |
Increase (decrease) in cash, cash equivalents and restricted cash | 20,557 | | | (193,283) | |
Cash, cash equivalents and restricted cash at beginning of period | 669,244 | | | 815,923 | |
Cash, cash equivalents and restricted cash at end of period | $ | 689,801 | | | $ | 622,640 | |
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See Notes to Consolidated Financial Statements.
SABRE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(In thousands, except share data)
(Unaudited)
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| | Stockholders’ Deficit |
| | Preferred Stock | | Common Stock | | Additional Paid in Capital | | Treasury Stock | | Retained Deficit | | Accumulated Other Comprehensive Loss | | Noncontrolling Interest | | Total Stockholders'Deficit |
| | Shares | | Amount | | Shares | | Amount | | | Shares | | Amount | | | | |
Balance at December 31, 2023 | | — | | | $ | — | | | 405,914,663 | | | $ | 4,059 | | | $ | 3,249,901 | | | 26,345,684 | | | $ | (520,124) | | | $ | (4,048,393) | | | $ | (73,922) | | | $ | 12,660 | | | $ | (1,375,819) | |
Comprehensive loss | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (71,483) | | | 4,206 | | | 923 | | | (66,354) | |
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Settlement of stock-based awards | | — | | | — | | | 3,062,998 | | | 31 | | | (1) | | | 1,021,755 | | | (2,078) | | | — | | | — | | | — | | | (2,048) | |
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Stock-based compensation expense | | — | | | — | | | — | | | — | | | 13,905 | | | — | | | — | | | — | | | — | | | — | | | 13,905 | |
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Balance at March 31, 2024 | | — | | | $ | — | | | 408,977,661 | | | $ | 4,090 | | | $ | 3,263,805 | | | 27,367,439 | | | $ | (522,202) | | | $ | (4,119,876) | | | $ | (69,716) | | | $ | 13,583 | | | $ | (1,430,316) | |
Comprehensive loss | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (69,760) | | | 833 | | | 691 | | | (68,236) | |
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Settlement of stock-based awards | | — | | | — | | | 5,427,133 | | | 54 | | | (3) | | | 1,374,482 | | | (4,322) | | | — | | | — | | | — | | | (4,271) | |
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Stock-based compensation expense | | — | | | — | | | — | | | — | | | 12,230 | | | — | | | — | | | — | | | — | | | — | | | 12,230 | |
Other | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (2) | | | — | | | (2) | |
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Balance at June 30, 2024 | | — | | | $ | — | | | 414,404,794 | | | $ | 4,144 | | | $ | 3,276,032 | | | 28,741,921 | | | $ | (526,524) | | | $ | (4,189,636) | | | $ | (68,885) | | | $ | 14,274 | | | $ | (1,490,595) | |
Comprehensive loss | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (62,818) | | | (4,448) | | | 92 | | | (67,174) | |
Settlement of stock-based awards | | — | | | — | | | 232,390 | | | 2 | | | — | | | 63,959 | | | (201) | | | — | | | — | | | — | | | (199) | |
Stock-based compensation expense | | — | | | — | | | — | | | — | | | 14,641 | | | — | | | — | | | — | | | — | | | — | | | 14,641 | |
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Balance at September 30, 2024 | | — | | | $ | — | | | 414,637,184 | | | $ | 4,146 | | | $ | 3,290,673 | | | 28,805,880 | | | $ | (526,725) | | | $ | (4,252,454) | | | $ | (73,333) | | | $ | 14,366 | | | $ | (1,543,327) | |
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| | | | | Stockholders’ Deficit |
| | | Preferred Stock | | Common Stock | | Additional Paid in Capital | | Treasury Stock | | Retained Deficit | | Accumulated Other Comprehensive Loss | | Noncontrolling Interest | | Total Stockholders' Deficit |
| | | | | Shares | | Amount | | Shares | | Amount | | | Shares | | Amount | | | | |
Balance at December 31, 2022 | | | | | 3,290,000 | | | $ | 33 | | | 353,436,503 | | | $ | 3,534 | | | $ | 3,198,580 | | | 24,894,998 | | | $ | (514,215) | | | $ | (3,506,528) | | | $ | (65,731) | | | $ | 11,500 | | | $ | (872,827) | |
Comprehensive income | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (98,934) | | | 1,252 | | | (451) | | | (98,133) | |
Preferred stock dividends(1) | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (5,346) | | | — | | | — | | | (5,346) | |
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Settlement of stock-based awards | | | | | — | | | — | | | 4,671,781 | | | 47 | | | (5) | | | 1,304,145 | | | (5,289) | | | — | | | — | | | — | | | (5,247) | |
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Stock-based compensation expense | | | | | — | | | — | | | — | | | — | | | 17,005 | | | — | | | — | | | — | | | — | | | — | | | 17,005 | |
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Balance at March 31, 2023 | | | | | 3,290,000 | | | $ | 33 | | | 358,108,284 | | | $ | 3,581 | | | $ | 3,215,580 | | | 26,199,143 | | | $ | (519,504) | | | $ | (3,610,808) | | | $ | (64,479) | | | $ | 11,049 | | | $ | (964,548) | |
Comprehensive loss | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (123,931) | | | 1,172 | | | 516 | | | (122,243) | |
Preferred stock dividends(1) | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (5,347) | | | — | | | — | | | (5,347) | |
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Settlement of stock-based awards | | | | | — | | | — | | | 455,208 | | | 5 | | | — | | | 67,470 | | | (261) | | | | | — | | | — | | | (256) | |
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Stock-based compensation expense | | | | | — | | | — | | | — | | | — | | | 8,738 | | | — | | | — | | | — | | | — | | | — | | | 8,738 | |
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Balance at June 30, 2023 | | | | | 3,290,000 | | | $ | 33 | | | 358,563,492 | | | $ | 3,586 | | | $ | 3,224,318 | | | 26,266,613 | | | $ | (519,765) | | | $ | (3,740,086) | | | $ | (63,307) | | | $ | 11,565 | | | $ | (1,083,656) | |
Comprehensive loss | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (208,284) | | | (1,180) | | | 654 | | | (208,810) | |
Preferred stock dividends(1) | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (3,564) | | | — | | | — | | | (3,564) | |
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Conversion of preferred stock to common stock | | | | | (3,290,000) | | | (33) | | | 46,999,367 | | | 470 | | | (437) | | | — | | | — | | | — | | | — | | | — | | | — | |
Settlement of stock-based awards | | | | | — | | | — | | | 218,153 | | | 2 | | | 380 | | | 56,251 | | | (276) | | | — | | | — | | | — | | | 106 | |
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Stock-based compensation expense | | | | | — | | | — | | | — | | | — | | | 13,094 | | | — | | | — | | | — | | | — | | | — | | | 13,094 | |
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Other | | | | | — | | | — | | | — | | | — | | | 174 | | | — | | | — | | | — | | | — | | | — | | | 174 | |
Balance at September 30, 2023 | | | | | — | | | $ | — | | | 405,781,012 | | | $ | 4,058 | | | $ | 3,237,529 | | | 26,322,864 | | | $ | (520,041) | | | $ | (3,951,934) | | | $ | (64,487) | | | $ | 12,219 | | | $ | (1,282,656) | |
(1) Our mandatory convertible preferred stock accumulated cumulative dividends at an annual rate of 6.50%.
See Notes to Consolidated Financial Statements.
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.
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 nine months ended September 30, 2024 are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2024. 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 15, 2024.
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) the evaluation of the recoverability of the carrying value of intangible assets and goodwill, (iii) the evaluation of uncertainties surrounding the calculation of our tax assets and liabilities, and (iv) estimation of loss contingencies. 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 15, 2024.
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board ("FASB") issued updated guidance to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The updated standard is effective for public companies for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of this standard on our consolidated financial statement disclosures.
In December 2023, the FASB issued updated guidance to enhance the transparency and decision usefulness of income tax disclosures through improvements primarily related to the rate reconciliation and income taxes paid information. The updated standard is effective for public companies for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of this standard on our consolidated financial statement disclosures.
In March 2024, the SEC adopted final rules requiring public entities to provide certain climate-related information in their registration statements and annual reports. As part of the disclosures, entities will be required to quantify certain effects of severe weather events and other natural conditions in a note to their audited financial statements. The rules were originally effective beginning with annual reports for the year ending December 31, 2025; however, on April 4, 2024, the SEC voluntarily stayed these rules, pending judicial review. We are currently evaluating the impact of the rules, if they were to go into effect, on our consolidated financial statement disclosures.
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 September 30, 2024 and December 31, 2023 (in thousands).
| | | | | | | | | | | | | | | | | | | | |
Account | | Consolidated Balance Sheet Location | | September 30, 2024 | | December 31, 2023 |
Contract assets and customer advances and discounts(1) | | Prepaid expenses and other current assets / other assets, net | | $ | 31,648 | | | $ | 42,029 | |
Trade and unbilled receivables, net | | Accounts receivable, net | | 406,241 | | | 341,362 | |
Long-term trade unbilled receivables, net | | Other assets, net | | 20,489 | | | 20,265 | |
Contract liabilities | | Deferred revenues / other noncurrent liabilities | | 135,001 | | | 166,911 | |
______________________(1) Includes contract assets of $8 million and $11 million for September 30, 2024 and December 31, 2023, respectively.
During the nine months ended September 30, 2024, we recognized revenue of approximately $52 million from contract liabilities that existed as of January 1, 2024. Our long-term trade unbilled receivables, net relate to fixed license fees billed over the contractual period and recognized when the customer gains control of the software. We evaluate collectability of our accounts receivable based on a combination of factors and record reserves as described further in Note 6. Credit Losses.
Revenue
The following table presents our revenues disaggregated by business (in thousands): | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Distribution | $ | 550,996 | | | $ | 524,801 | | | $ | 1,673,848 | | | $ | 1,581,092 | |
IT Solutions | 140,304 | | | 147,128 | | | 426,135 | | | 439,039 | |
Total Travel Solutions | 691,300 | | | 671,929 | | | 2,099,983 | | | 2,020,131 | |
SynXis Software and Services | 76,953 | | | 70,795 | | | 225,662 | | | 206,828 | |
Other | 7,044 | | | 7,786 | | | 20,392 | | | 22,236 | |
Total Hospitality Solutions | 83,997 | | | 78,581 | | | 246,054 | | | 229,064 | |
Total Segment Revenue | 775,297 | | | 750,510 | | | 2,346,037 | | | 2,249,195 | |
Eliminations | (10,583) | | | (10,049) | | | (31,196) | | | (28,510) | |
Total Sabre Revenue | $ | 764,714 | | | $ | 740,461 | | | $ | 2,314,841 | | | $ | 2,220,685 | |
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 nine months ended September 30, 2024, the impact on revenue recognized in the current period from performance obligations partially or fully satisfied in the previous period is $6 million.
Our air booking cancellation reserve totaled $12 million and $10 million as of September 30, 2024, and December 31, 2023, respectively.
Unearned performance obligations primarily consist of deferred revenue for fixed implementation fees and future product implementations, which are included in deferred revenue and other noncurrent liabilities in our consolidated balance sheet. We have not disclosed the performance obligation related to contracts containing minimum transaction volume, as it represents a 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. Redeemable Noncontrolling Interest
On February 1, 2023, we sold common shares of a subsidiary, representing a 19% interest in Conferma Limited's (“Conferma”) direct parent, to a third party for cash consideration of $16 million. In connection with the sale, we entered into a governing agreement which requires us under limited conditions to redeem the 19% interest, if requested, for the original purchase price of $16 million. We currently do not believe it is probable that the noncontrolling interest will become redeemable, given the remote likelihood of the applicable conditions being satisfied.
As the common shares are redeemable upon the occurrence of conditions not solely within our control, we recorded the noncontrolling interest as redeemable and classified it as temporary equity within our consolidated balance sheet initially at fair value. The noncontrolling interest is adjusted each reporting period for loss or income attributable to the noncontrolling interest. As of September 30, 2024 and 2023, the redeemable noncontrolling interest was $13 million and $15 million, respectively.
The following table presents the changes in redeemable noncontrolling interest of a consolidated subsidiary in temporary equity during the period ended September 30, 2024 and 2023 (in thousands):
| | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2024 | | 2023 | | |
Redeemable noncontrolling interest, beginning of period | $ | 14,375 | | | $ | — | | | |
Proceeds from sale of redeemable noncontrolling interest | — | | | 16,000 | | | |
Net loss attributable to redeemable noncontrolling interest | (1,098) | | | (1,278) | | | |
Redeemable noncontrolling interest, end of period | $ | 13,277 | | | $ | 14,722 | | | |
4. Restructuring Activities
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 do not expect additional restructuring charges associated with these activities to be significant and we expect to be substantially complete with all activities associated with this plan by the end of 2024.
Since the second quarter of 2023, we have incurred costs of $81 million in connection with this business plan. These restructuring costs are comprised of $75 million that has been or will be paid in cash for severance and related benefits costs and $6 million paid related to other restructuring costs. During the nine months ended September 30, 2024, we recorded $18 million in additional severance and related benefits costs, of which $1 million is recorded within cost of revenue, excluding technology costs, $13 million is recorded within technology costs and $4 million is recorded within selling, general and administrative costs within our consolidated statement of operations. The majority of these additional costs is expected to be paid by the end of the first quarter of 2025. We also recorded a $10 million adjustment to the accrued liability for estimated amounts that are no longer expected to be paid.
The following table summarizes the accrued liability for severance and related benefits costs as recorded within accrued compensation and related benefits within our consolidated balance sheets, related to this cost reduction plan (in thousands):
| | | | | |
| Nine Months Ended September 30, 2024 |
Balance as of December 31, 2023 | $ | 17,288 | |
Charges | 18,285 | |
Cash Payments | (10,764) | |
Non-Cash Adjustments | (9,765) | |
Balance as of September 30, 2024 | $ | 15,044 | |
5. Income Taxes
For the nine months ended September 30, 2024, we recognized $15 million of income tax expense, representing an effective tax rate of less than 1%, compared to an income tax expense of $17 million, also representing an effective tax rate of less than 1% for the nine months ended September 30, 2023. The effective tax rate decreased for the nine months ended September 30, 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 nine month periods. The difference between our effective tax rates and the U.S. federal statutory income tax rate primarily results from valuation allowances, our geographic mix of taxable income in various tax jurisdictions, tax permanent differences and tax credits.
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. We have determined that a portion of the deferred tax assets related to certain federal, state, and foreign net operating losses, interest limitation and other assets are not more likely than not to be realized and have recorded a valuation allowance against such assets. 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.
6. Credit Losses
We are exposed to credit losses primarily through our sales of services provided to participants in the travel and transportation industry, which we consider to be our singular portfolio segment. We develop and document our methodology used in determining the allowance for credit losses at the portfolio segment level. Within the travel portfolio segment, we identify airlines, hoteliers and travel agencies as each presenting unique risk characteristics associated with historical credit loss patterns, and we determine the adequacy of our allowance for credit loss by assessing the risks and losses inherent in our receivables related to each.
We evaluate the collectability of our receivables based on a combination of factors. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations to us, such as bankruptcy filings or failure to pay amounts due to us or others, we specifically reserve for bad debts against amounts due to reduce the recorded receivable to the amount we reasonably believe will be collected. For all other customers, we record reserves for receivables, including unbilled receivables
and contract assets, based on historical experience and the length of time the receivables are past due. The estimate of credit losses is developed by analyzing historical twelve-month collection rates and adjusting for current customer-specific factors indicating financial instability and other macroeconomic factors that correlate with the expected collectability of our receivables.
Our allowance for credit losses relates to all financial assets, primarily trade receivables due in less than one year recorded in Accounts Receivable, net on our consolidated balance sheets. Our allowance for credit losses for the nine months ended September 30, 2024 for our portfolio segment is summarized as follows (in thousands):
| | | | | | | |
| Nine Months Ended September 30, 2024 |
Balance at December 31, 2023 | $ | 34,343 | | | |
Provision for expected credit losses | 2,801 | | | |
Write-offs | (8,671) | | | |
Other | (48) | | | |
Balance at September 30, 2024 | $ | 28,425 | | | |
7. Debt
As of September 30, 2024 and December 31, 2023, our outstanding debt included in our consolidated balance sheets totaled $5,035 million and $4,834 million, respectively, which are net of debt issuance costs of $60 million and $63 million, respectively, and unamortized discounts of $59 million and $65 million, respectively. The following table sets forth the face values of our outstanding debt as of September 30, 2024 and December 31, 2023 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Rate | | Maturity | | September 30, 2024 | | December 31, 2023 |
Senior secured credit facilities: | | | | | | | |
2021 Term Loan B-1 | S(1) + 3.50% | | December 2027 | | $ | 390,870 | | | $ | 392,015 | |
2021 Term Loan B-2 | S(1) + 3.50% | | December 2027 | | 614,151 | | | 614,151 | |
2022 Term Loan B-1 | S(1) + 4.25% | | June 2028 | | 603,447 | | | 603,447 | |
2022 Term Loan B-2 | S(1) + 5.00% | | June 2028 | | 645,310 | | | 645,310 | |
Senior Secured Term Loan Due 2028 | RR(2) + 1.75%(3) | | December 2028 | | 843,735 | | | 753,859 | |
Securitization facility: | | | | | | | |
AR Facility | S(1) + 4.00%(4) | | March 2027 | | 87,300 | | | 110,000 | |
FILO Facility | S(1) + 8.00% | | March 2027 | | 120,000 | | | — | |
9.25% senior secured notes due 2025 | 9.25% | | April 2025 | | 31,547 | | | 38,895 | |
7.375% senior secured notes due 2025 | 7.375% | | September 2025 | | 26,796 | | | 63,019 | |
4.00% senior exchangeable notes due 2025 | 4.00% | | April 2025 | | 183,220 | | | 333,220 | |
7.32% senior exchangeable notes due 2026 | 7.32% | | August 2026 | | 150,000 | | | — | |
8.625% senior secured notes due 2027 | 8.625% | | June 2027 | | 903,077 | | | 852,987 | |
11.25% senior secured notes due 2027 | 11.25% | | December 2027 | | 555,000 | | | 555,000 | |
Face value of total debt outstanding | | | | | 5,154,453 | | | 4,961,903 | |
Less current portion of debt outstanding | | | | | (245,925) | | | (4,040) | |
Face value of long-term debt outstanding | | | | | $ | 4,908,528 | | | $ | 4,957,863 | |
______________________
(1) Represents the Secured Overnight Financing Rate ("SOFR").
(2) Represents the Reference Rate as defined below.
(3) At our election, if interest is paid in cash the spread is 0.25% per annum, and in the case of interest paid-in-kind the spread is 1.75%.
(4) In connection with the issuance of the FILO Facility (as defined below), the initial drawn fee rate was increased from 2.25% to 4.00%.
We had outstanding letters of credit totaling $9 million and $12 million as of September 30, 2024 and December 31, 2023, respectively, which were secured by a $21 million cash collateral deposit account.
The weighted average interest rate on our short-term borrowings, which include our 9.25% Senior Secured Notes due 2025, 4.00% Senior Exchangeable Notes due 2025, 7.375% Senior Secured Notes due 2025 and the current portions of the 2021 Term Loan B-1 and 2022 Term Loan B-1, is 5.13% as of September 30, 2024.
Senior Secured Credit Facilities
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 the London Interbank Offering Rate ("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.
Under the Amended and Restated Credit Agreement, the loan parties are subject to certain customary non-financial covenants, including restrictions on incurring certain types of indebtedness, creation of liens on certain assets, making of certain investments, and payment of dividends. We are further required to pay down the term loans with proceeds from certain asset sales, if not reinvested into the business within 15 months, as defined in the Amended and Restated Credit Agreement. As of September 30, 2024, we are in compliance with all covenants under the terms of the Amended and Restated Credit Agreement.
Senior Secured Term Loan Due 2028
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 nine months ended September 30, 2023 of $13 million.
The Senior Secured Term Loan Due 2028 matures on December 15, 2028 and offers us the ability to prepay subject to prepayment premiums as follows: (i) with respect to any prepayment occurring on or prior to the second anniversary of the 2023 Term Loan Agreement, a customary make-whole amount, and (ii) with respect to any prepayment occurring after the second anniversary of the 2023 Term Loan Agreement and on or prior the third anniversary of the 2023 Term Loan Agreement, 25% of the applicable interest margin assuming all interest is payable-in-kind. After the third anniversary of the 2023 Term Loan Agreement, all prepayments can be made at par plus accrued interest.
The interest on the Senior Secured Term Loan Due 2028 is payable in cash; provided that, at our election, from the date of the agreement, until the last interest payment date occurring on or prior to December 31, 2025, the interest may be payable-in-kind. The Senior Secured Term Loan Due 2028 bears interest at a floating rate, with interest periods ending on each successive three month anniversary of the closing date and set in arrears based on the average of the highest yield to maturity of any tranche of Sabre GLBL’s or any of its affiliates’ outstanding secured indebtedness (as defined within the 2023 Term Loan Agreement) on each of the 20 prior trading days (the “Reference Rate”), plus (i) 25 basis points for cash interest or (ii) 175 basis points for payable-in-kind interest. As of September 30, 2024, the Reference Rate was 13.07%. The all-in interest rate floor is 11.50% for cash interest and 13.00% for payable-in-kind interest and the all-in interest rate ceiling is 17.50% for cash interest and 19.00% for payable-in-kind interest. We have currently elected interest to be payable-in-kind. Interest on the Senior Secured Term Loan Due 2028 is accrued and payable or capitalized to principal if not elected to be paid in cash, commencing on June 13, 2023, and ending on the date three months thereafter and each successive three-month anniversary thereof on September 13, December 13, March 13, and June 13 of each year. We capitalized interest for the Senior Secured Term Loan Due 2028 totaling $29 million during the three months ended September 30, 2024 and $90 million during the nine months ended September 30, 2024.
Sabre FB’s obligations under the Senior Secured Term Loan Due 2028 are required to be guaranteed by certain of our existing and future foreign subsidiaries (the “Foreign Guarantors”). The 2023 Term Loan Agreement requires that we maintain cash balances of at least $100 million in certain foreign subsidiaries and other covenants to ensure collateral of the applicable Foreign Guarantors meet certain minimum levels. The 2023 Term Loan Agreement also includes various non-financial covenants, including restrictions on making certain investments, disposition activities and affiliate transactions. In addition, the 2023 Term Loan Agreement contains customary prepayment events and financial and negative covenants and other representations, covenants and events of default based on, but in certain instances more restrictive than, the Amended and Restated Credit Agreement. As of September 30, 2024, we were in compliance with all covenants under the terms of the 2023 Term Loan Agreement and the Pari Passu Loan Agreement.
Senior Secured Notes
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 nine months ended September 30, 2024 of approximately $7 million, primarily consisting of exchange fees related to the June 2027 Notes.
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 September 30, 2024, we had $207 million outstanding under the Securitization Facility, consisting of $87 million under the AR Facility and $120 million outstanding under the FILO Facility.
The FILO Facility bears interest at SOFR plus a drawn fee of 8.00% per annum. Interest and fees payable by Sabre Securitization under the FILO Facility are due monthly.
Borrowings under the AR Facility bear interest at a rate equal to SOFR, subject to a 0% floor, plus a drawn fee, initially in the amount of 2.25%, plus a 0.10% SOFR adjustment. In connection with the issuance of the FILO Facility, the initial drawn fee was increased from 2.25% to 4.00%. The drawn fee, which was 3.75% as of September 30, 2024, varies based on our leverage ratio. Sabre Securitization also pays a fee on the undrawn committed amount of the AR Facility. Interest and fees payable by Sabre Securitization under the AR Facility are due monthly. Net debt issuance costs related to our AR Facility are $1 million for the nine months ended September 30, 2024 and $2 million for the year ended December 31, 2023, which are recorded in other assets, net in our consolidated financial statements.
In connection with the Securitization Facility, certain of our subsidiaries (the “Originators”) have sold and contributed, and will continue to sell or contribute, substantially all of their accounts receivable and certain related assets (collectively, the “Receivables”) to Sabre Securitization to be held as collateral for borrowings under the Securitization Facility. Sabre Securitization’s assets are not available to satisfy the obligations of Sabre Corporation or any of its affiliates. Under the terms of the Securitization Facility, the lenders under the AR Facility and FILO Facility would have a senior priority claim to the assets of Sabre Securitization, which will primarily consist of the Receivables of the Originators participating in the Securitization Facility. As of September 30, 2024, $378 million of Receivables are held as assets by Sabre Securitization, consisting of $369 million of accounts receivable and $9 million of other assets, net in our consolidated balance sheet.
The Securitization Facility is accounted for as a secured borrowing on a consolidated basis, rather than a sale of assets; as a result, (i) Receivables balances pledged as collateral are presented as assets and the borrowings are presented as liabilities on our consolidated balance sheets, (ii) our consolidated statements of operations reflect the associated charges for bad debt expense (a component of general and administrative expenses) related to the pledged Receivables and interest expense associated with the Securitization Facility and (iii) receipts from customers related to the underlying Receivables are reflected as operating cash flows and borrowings and repayments under the Securitization Facility are reflected as financing cash flows within our consolidated statements of cash flows. The receivables and other assets of Sabre Securitization are not available to satisfy creditors of any entity other than Sabre Securitization.
The Securitization Facility contains certain customary representations, warranties, affirmative covenants, and negative covenants, subject to certain cure periods in some cases, including the eligibility of the Receivables being sold by the Originators and securing the loans made by the lenders, as well as customary reserve requirements, events of default, termination events, and servicer defaults. As of September 30, 2024, we were in compliance with and expect to be in compliance with the financial covenants of the Securitization Facility for at least the next twelve months.
Exchangeable Notes
On April 17, 2020, Sabre GLBL entered into a debt agreement (the "2025 Exchangeable Notes Indenture") consisting of $345 million aggregate principal amount of 4.000% senior exchangeable notes due 2025 (the “2025 Exchangeable Notes”). The 2025 Exchangeable Notes are senior, unsecured obligations of Sabre GLBL, accrue interest payable semi-annually in arrears
and mature on April 15, 2025, unless earlier repurchased or exchanged in accordance with specified circumstances and terms of the 2025 Exchangeable Notes Indenture. As of September 30, 2024, we have $183 million aggregate principal amount of 2025 Exchangeable Notes outstanding.
Under the terms of the 2025 Exchangeable Notes Indenture, the notes are exchangeable into common stock of Sabre Corporation (referred to as “our common stock” herein) at the following times or circumstances:
•during any calendar quarter commencing after the calendar quarter ended June 30, 2020, if the last reported sale price per share of our common stock exceeds 130% of the exchange price for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;
•during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “Measurement Period”) if the trading price per $1,000 principal amount of 2025 Exchangeable Notes, as determined following a request by their holder in accordance with the procedures in the 2025 Exchangeable Notes Indenture, for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the exchange rate on such trading day;
•upon the occurrence of certain corporate events or distributions on our common stock, including but not limited to a “Fundamental Change” (as defined in the 2025 Exchangeable Notes Indenture);
•upon the occurrence of specified corporate events; or
•on or after October 15, 2024, until the close of business on the second scheduled trading day immediately preceding the maturity date, April 15, 2025. We plan to use the "default settlement method", which is to settle up to the principal amount of any exchange of 2025 Exchangeable Notes with cash, and any excess value with shares of our common stock. Any settlement requests received during this 6-month period between October 15, 2024 and the maturity date of April 15, 2025 would be settled upon maturity on April 15, 2025.
With certain exceptions, upon a Change of Control or other Fundamental Change (both as defined in the 2025 Exchangeable Notes Indenture), the holders of the 2025 Exchangeable Notes may require us to repurchase all or part of the principal amount of the 2025 Exchangeable Notes at a repurchase price equal to 100% of the principal amount of the 2025 Exchangeable Notes, plus any accrued and unpaid interest to, but excluding, the repurchase date. As of September 30, 2024, none of the conditions allowing holders of the 2025 Exchangeable Notes to exchange have been met.
The 2025 Exchangeable Notes are convertible at their holder’s election into shares of our common stock based on an initial exchange rate of 126.9499 shares of common stock per $1,000 principal amount of the 2025 Exchangeable Notes, which is equivalent to an initial exchange price of approximately $7.88 per share. The exchange rate is subject to anti-dilution and other adjustments. Upon conversion, Sabre GLBL will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of common stock, at our election. If a “Make-Whole Fundamental Change” (as defined in the 2025 Exchangeable Notes Indenture) occurs with respect to any 2025 Exchangeable Note and the exchange date for the exchange of such 2025 Exchangeable Note occurs during the related “Make-Whole Fundamental Change Exchange Period” (as defined in the 2025 Exchangeable Notes Indenture), then, subject to the provisions set forth in the 2025 Exchangeable Notes Indenture, the exchange rate applicable to such exchange will be increased by a number of shares set forth in the table contained in the 2025 Exchangeable Notes Indenture, based on a function of the time since origination and our stock price on the date of the occurrence of such Make-Whole Fundamental Change. The net proceeds received from the sale of the 2025 Exchangeable Notes of $336 million, net of underwriting fees and commissions, are being used for general corporate purposes.
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 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 September 30, 2024, we have $150 million aggregate principal amount of 2026 Exchangeable Notes outstanding.
Under the terms of the 2026 Exchangeable Notes Indenture, the 2026 Exchangeable Notes are exchangeable into our common stock under substantively the same circumstances as those set forth in the 2025 Exchangeable Notes other than:
•during any calendar quarter commencing after the calendar quarter ended June 30, 2024, if the last reported sale price per share of our common stock exceeds 130% of the exchange price for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; and
•on or after February 1, 2026, until the close of business on the second scheduled trading day immediately preceding the maturity date, August 1, 2026.
As of September 30, 2024, none of the conditions allowing holders of the 2026 Exchangeable Notes to exchange have been met.
The 2026 Exchangeable Notes are convertible at their holder’s election into shares of our common stock based on an initial exchange rate of 222.2222 shares of common stock per $1,000 principal amount of the 2026 Exchangeable Notes, which is equivalent to an initial exchange price of approximately $4.50 per share. The exchange rate is subject to anti-dilution and other adjustments. Upon exchange, Sabre GLBL will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of common stock, at our election. “Make-Whole Fundamental Change” provisions in the 2026 Exchangeable Notes Indenture are substantially similar to those described above for the 2025 Exchangeable Notes Indenture.
Debt issuance costs are amortized over the contractual life of the Exchangeable Notes through interest expense, within our results of operations. The effective interest rates at September 30, 2024 were 4.78% and 8.82% for the 2025 Exchangeable Notes and the 2026 Exchangeable Notes, respectively. The effective interest rate at September 30, 2023 was 4.78% for the 2025 Exchangeable Notes.
The following table sets forth the carrying value of the Exchangeable Notes as of September 30, 2024 and December 31, 2023 (in thousands):
| | | | | | | | | | | | | | | | | |
| September 30, 2024 | | December 31, 2023 |
| 2025 Exchangeable Notes | 2026 Exchangeable Notes | | 2025 Exchangeable Notes | 2026 Exchangeable Notes |
Principal | $ | 183,220 | | $ | 150,000 | | | $ | 333,220 | | $ | — | |
| | | | | |
Less: Unamortized debt issuance costs | 764 | | 3,792 | | | 3,256 | | — | |
Net carrying value | $ | 182,456 | | $ | 146,208 | | | $ | 329,964 | | $ | — | |
The following table sets forth interest expense recognized related to the Exchangeable Notes for the three and nine months ended September 30, 2024 and 2023 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| 2025 Exchangeable Notes | 2026 Exchangeable Notes | | 2025 Exchangeable Notes | 2026 Exchangeable Notes | | 2025 Exchangeable Notes | 2026 Exchangeable Notes | | 2025 Exchangeable Notes | 2026 Exchangeable Notes |
Contractual interest expense | $ | 1,832 | | $ | 2,745 | | | $ | 3,332 | | $ | — | | | $ | 6,797 | | $ | 5,856 | | | $ | 9,997 | | $ | — | |
Amortization of issuance costs | 346 | | 471 | | | 600 | | — | | | 1,266 | | 993 | | | 1,779 | | — | |
8. Derivatives
Hedging Objectives—We are exposed to certain risks relating to ongoing business operations. The primary risk managed by using derivative instruments is interest rate risk. Interest rate swaps are entered into to manage interest rate risk associated with our floating-rate borrowings.
In accordance with authoritative guidance on accounting for derivatives and hedging, we designate interest rate swaps as cash flow hedges of floating-rate borrowings.
Cash Flow Hedging Strategy—We enter into interest rate swap agreements to manage interest rate risk exposure. The interest rate swap agreements modify our exposure to interest rate risk by conver