Sabre Corporation completed its first earnings call as a publicly traded company - and generally things are consistent with where the company was prior to re-entering public markets earlier this year.
Total revenue, exclusive of Travelocity, is up 7% - and total EBITDA (also excluding Travelocity) is up 4%. Sabre's Travel Network continues to be the revenue workhorse, bringing in $492 million in revenue and 3.5% increase in the quarter. The Airline/Hospitality Solutions group posted a healthy 9% growth, unlocking more value in the first quarter this year.
This brings the company to a "consolidated net loss attributable to Sabre Corporation for the first quarter of 2014 totaled $2.8 million, compared to a net loss of $15.8 million in the year ago period."
However, Travelocity is becoming a drag on overall earnings, with its EBITDA dropping 5% on flat revenues.
Travelocity was the most glaring weak spot in the results, with a whopping drop in revenue of 34%. Travelocity's adjusted EBITDA dropped to a negative $25,196,000 - which is even worse than the 2013 Q1 performance of a negative $8,945,000.
Certainly these numbers are going to put some outside pressures on the company to either complete the offload of Travelocity to Expedia or to speed up the process of proving that the Expedia partnership, as promised in the earnings presentation, is indeed going to lead to an "investment light" model that will increase EBITDA despite depressing revenues.
In the press release, the company says that the Travelocity results were to be expected in the first year of the business transition:
Travelocity Adjusted EBITDA declined as expected due to the timing of the transition to the new business model in the North American Travelocity business.Under the terms of the agreement, Expedia pays Sabre a performance-based marketing fee that varies based on the amount of travel booked through Travelocity-branded websites powered by Expedia, which essentially eliminates Travelocity North America costs associated with technology platform, content acquisition and customer service. The expected net result, once fully implemented, will be lower revenues at Travelocity, but significantly increased profitability.
The other key area of concern when it comes to Sabre is the debt held on the balance sheet. The company says it is poised to successfully re-enter the public market, with the 45.1 million share offering slicing $616 million of debt off the balance sheet. This drops proforma leverage to 3.6x net debt to Adjusted EBITDA.
Addressing this concern, the company presented this slide to investors and analysts:
Leverage is indeed moving in the right direction; however, the amount of leverage is still cause for concern as a legitimate drag on the company's overall health in the near-to-medium term. Even the target of 3.0-3.5x leverage seems to be a bit conservative, considering that the company is already sitting at 3.6x.
Another positive metric for the company is the number of passengers boarded through its reservation systems, which increased 9.4% year-over-year to 117,616.
Sabre is up over 2.5% after the news.
NB: Airplane image courtesy Shutterstock.