Good morning and welcome to the Sabre Fourth Quarter and Full-Year 2019 Earnings Conference Call. Please note that today’s call is being recorded and is also being broadcast live over the Internet on the Sabre corporate website. This broadcast is the property of Sabre. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of the Company is strictly prohibited. I will now turn the call over to the Vice President of Investor Relations, Kevin Crissey. Please go ahead, sir.

Thank you, Sydney, and good morning everyone. Thanks for joining us for our fourth quarter and full-year 2019 earnings call. This morning we issued an earnings press release, which is available on our website at investors.sabre.com. A slide presentation, which accompanies today’s prepared remarks, is also available during this call on Sabre IR web page. A replay of today’s call will be available on our website later this morning. Throughout today’s call, we will be presenting certain non-GAAP financial measures, which have been adjusted to exclude certain items. All references during today’s call to EBITDA, Operating Income, EPS and Net Income have been adjusted for these items. The most directly comparable GAAP measures and reconciliations for non-GAAP measures are available in the earnings release and other documents posted on our website at investors.sabre.com. We would like to advise you that our comments contain forward-looking statements. These statements include, among others, disclosure of our guidance, including revenue, EBITDA, operating income, EPS, cash flow and margins; the amount and effects of our incremental technology investment; the effects of the Coronavirus; discussion and expected results of our strategic initiatives; our medium and longer-term outlook; our expected segment results; the amount and effects of changes in capitalization mix and depreciation and amortization; the effects of customer financial conditions, and new or renewed agreements, strategic partnerships, products and implementations; our expectations of industry trends; the financial and business results and effects of acquisitions; and various other forward-looking statements regarding our business. These statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today’s conference call. Information concerning the risks and uncertainties that could affect our financial results is contained in our earnings release issued this morning, and our SEC filings, including our third quarter 2019 Form 10-Q and 2018 Form 10-K. Participating with me on today’s call are Sean Menke, our President and Chief Executive Officer, and Doug Barnett, Executive Vice President and Chief Financial Officer. Dave Shirk, our Executive Vice President and President of Travel Solutions, is also with us today and will be available for Q&A after the prepared remarks. Sean will start us off and provide perspective on our strategic initiatives, including our incremental technology investment. Doug will review our financial results and forward outlook. We will then open the call to your questions. With that, I will turn the call over to Sean.

Thanks Kevin. Good morning, everyone, and thank you for joining us today. We have made significant progress in helping to ensure a bright future for our company with a transformative deal with Google, a new enterprise win with Accor, and continued market share growth within our Travel Network business. But the excitement associated with these successes is tempered by the impact of the Coronavirus and concerns throughout the world. In a few minutes, Doug will review our 2019 financial results and 2020 guidance excluding the Coronavirus. He will also provide color on what we have seen to date and the expected impact of the Coronavirus on our first quarter results. Before getting into the numbers, I would like to begin today’s call by taking you through three important items. This call may run a little long compared to other quarters because of the clarity I want to provide, but going forward, we will try to keep our prepared remarks shorter. First, I will briefly highlight the progress our business has made over the past three years. Second, I will discuss the $150 million incremental technology spend we expect in 2020 and why we believe committing transitory, surge spending over the next few years is a valuable decision expected to increase our addressable market and power a highly efficient technology platform for reduced long-term costs. Finally, I’ll explain how this transitory spending fits into our overall strategy, why we believe it is important to Sabre’s continued success and results in an expectation for a better margin structure by 2024. We are investing to move from a transaction-based model to a predictive, customer-centric model that is focused on the entire travel experience, not just the network airline side of the equation, and from mainframe infrastructure to the cloud. We strongly believe the…

Thanks Sean, and good morning, everyone. Despite the macro challenges we faced in 2019, Sabre closed the year with solid revenue growth, earnings growth in line with expectations, and free cash flow generation higher than our guidance. In the fourth quarter of 2019, revenue was up 2% driven by growth across each of our businesses, and recurring revenue totaled 93%. As a reminder, our income statement has been impacted by both the increased technology operating expenses due to a lower capitalization rate, as well as increased D&A from previous capitalization. The decline in operating income in the quarter is largely a result of these impacts. Excluding this increase in technology operating expenses, operating income increased 3% and EPS was down 3%. Sabre has continued to generate a healthy rate of free cash flow, which grew 21% in the quarter to $134 million. For the full-year, revenue was up 3%, backed by 93% recurring revenue. Consistent with all of 2019, the decline in full-year operating income is largely a result of the impact to our income statement from the increase in technology expenses. Full-year operating income and EPS grew 3% and 4%, respectively, excluding the increase in technology operating expenses. Free cash flow came in above expectations for the year at $466 million, representing growth of 6%. We returned $231 million to shareholders in 2019 via our quarterly dividends and stock repurchases. At Travel Network, revenue grew 1% in the quarter. As experienced in prior quarters, growth was limited by channel shift from certain European legacy carriers and the insolvency of Jet Airways, as well as political and economic pressures in Latin America and Asia-Pacific. Our bookings share growth remains strong, and the fourth quarter marks Sabre’s eighth consecutive quarter of GDS share gain. Our global booking share increased by 180…

Thanks Doug. In conclusion, in 2019, we proved the progress we are making with solid financial results and recently announced major commercial wins and strategic partnerships. As we enter 2020, we announced our commitment to pursuing new opportunistic investments and additional funding of our technology transformation. At Sabre, we believe we are building a better positioned company to help evolve the model, transactions-centric to predictive and customer-centric, network airline-focused to trip-focused, and mainframe to cloud. This is all supported by bold moves we have already taken to help achieve our goals. We are building the Sabre of the future, a Sabre expected to have a significantly larger addressable market and new revenue growth opportunities, plus lower costs and better long-term margin profile, and I am very confident about this strategy. As we move into our Q&A, I would ask that you respect that we cannot address any questions regarding the Farelogix acquisition due to the ongoing litigation and pending decisions by the U.S. Federal Court and the United Kingdom’s Competition and Markets Authority. At this time, we would like to open up the call for your questions. Operator?

[Operator Instructions] And our first question comes from John King with Bank of America. Please proceed with your question.

Yes. Good morning. Thank you for taking the questions. Just two questions please. So on the technology investment, it seems like essentially $100 million of the $150 million is basically stranded costs because the project is obviously a little bit behind where you had initially hoped it to be. So the question I guess is, if that were to continue and there were to be further delays in decommissioning some of the mainframe infrastructure, is that a risk and what would be the potential impact to – as we look into 2021, if this does happen more slowly than you hope at the moment? And then the second one is just on the Coronavirus issue. If you can talk to the impacts of on home versus away bookings and what you're seeing there? Whether you've seen anything? I appreciate the mid-teens guidance for the market, but anything that – has that gotten worse since February? Or was January and February fairly consistent? Thank you.

Thanks, John. I'll kick it off and then Doug and Dave will also jump in. On the technology piece, I think it's important that you break it into three buckets and you’re talking about the $100 million. And when you look at it, the one thing that we talk about is some of the slowness in the transition off of the mainframe into the cloud, and this goes into all post-session management that Doug got into a little detail with. Things like that we're going to have to be cautious with. We see that cost increasing into 2020 because of what didn't get offloaded. I think the important thing is if you look at the other $50 million, this goes back to the cloud piece, and I cannot state how important our thought process was relative to where we were in 2019. The opportunity that presented itself as we looked at, do we actually go further with current cloud providers, AWS or with Microsoft Azure. And we were providing an opportunity to really look at all three players. And in doing that it was just not cloud. It was – are they capable of actually helping us with mainframe offload? Are they capable of helping us think about more innovation into the future? And we started negotiations with the three parties that really went through the back half of the year. And in doing that, what became abundantly clear is all three parties were willing to engage in a more strategic relationship with Sabre. They're very focused on the travel vertical. And this is one thing that I don't think people completely understand is how cloud providers are looking at specific verticals that are out there. And what we found specifically with Google is the focus of how do we…

And John, I'll just add a little color on your question around the tech spend. I would break the $100 million down and about $50 million of it relates to mainframe, $50 million relates to cloud. With regards to the cloud situation, remember, we could have optimized our cloud environments in 2019. But as I mentioned, chose not to because of the agreement that we're moving forward with Google. But where we will spend our time in 2020 is creating those landing zones to where we'll move our cloud environment to. So we could have some more bubble costs going in again into 2021. However, due to the long-term economics that we're achieving from this Google relationship, it makes sense to incur those costs near-term now to get the long-term benefit from that relationship.

Thank you. I appreciate the color.

Thank you. And our next question comes from Ashish Sabadra with Deutsche Bank. Please proceed with your question.

Hi. Maybe just a follow-up on the technology spend. And is there a way to think about, I know you've not quantified the impact in 2021, but just as you think about where we are right now and the pace of transitioning away from mainframe, how should we think about – any color on the 2021 impact and how we should think about it? Thanks.

Ashish, as I just mentioned, I mean, if you think about what the $150 million incremental spend that we're now going to have in technology, that kind of resets the total technology spend around $1.2 billion. I would expect that to grow a little bit as we move into 2021 after we get the landing zones from Google up and running and then begin to get the efficiencies resolve in 2021, I would expect to bend that curve going out to 2022 and 2023. And also, as I mentioned, in 2024, get to the EBITDA margins we've referenced.

Okay. That's helpful. And maybe just a quick question on the GDS industry challenges, right. Sean, you mentioned a couple of those related to European legacy carriers and JetBlue, but we've seen GDS industry being under pressure for the last seven, eight quarters now. So a couple of questions there. One is, is that driving some of the incremental spend, the $50 million opportunistic spend? That's one. And second is when do we expect the GDS industry to abate? And maybe a final question on that would be just, if GDS industry challenge persist, would you have to invest more going forward? Thanks.

Yes. It's a good question, Ashish. And it really gets into the heart of what I've outlined as it relates to the strategic initiatives. What we're doing, what's taking place, because we study this day-in and day-out. If you go back to what I have articulated since I've taken over the organization three years ago is the transformation in the marketplace. And what is happening is you have, be it on the airline side and the hotel side, people are wanting to move to what is modern day retailing, more customer-centric. And that taking place, you have seen that there has been pressure that has been put on the GDS because people are trying to find ways of generating more revenue. And where I look at it, we have seen the most impact actually happened in the European marketplace for reasons that we talked about in the past. But this is one that, if everybody is paying attention, there are changes that are happening. And in doing that, the investments that I just walked through are clearly aligned on actually making sure that when we look into the future, we are right in the middle of this transformation, that we're helping our customers be able to have modern day retailing that is customer-centric in nature. We have to think long and hard about how does that go into the distribution channels. And I'll be careful about talking about Farelogix, but when you look at Farelogix and the things that we're looking at, it's about how do we enable because it has to be done not only in the direct channel, but it has to be in the indirect channel. And what people often forget, it's just not on the airline or the hospitality side of the equation. It is our responsibility to look at our travel agency customers and partners and how do we make sure that what is being done on the airline side of the equation and wanting to sell these new products and services can actually be fulfilled on the agency side. And important to them, it's also how does it migrate into their mid and back office. So when I walk through where we are, what we're doing, it's with that in mind, understanding that the model is changing. It is being pressured, but we're not idly sitting here, watching it happen is how do we help our customers evolve and that's why we're investing in the technology because we know that the opportunity is there. It's just we have pieces that we have to essentially migrate, and there's new technologies that need to be brought to bear.

Thanks Sean. That's helpful.

Thank you. And our next question comes from Matthew Broome with Mizuho Securities. Please proceed with your question.

Thanks very much. I mean, it sounds like migrating off the mainframe systems is maybe, I guess a little more complex than had been initially thought. I mean is there any risk that you won't be able to exit your Tulsa data center in 2023? Or does the Google mainframe service providers sort of a relatively easy way to relocate those services until they're eventually sort of ready to be sort of properly sort of migrated to the public cloud?

Yes. Matthew, this is Dave. You've kind of answered your question with your last comment that's there to the points that Sean was making, having Google there as that strategic partner to help us work through that and kind of the extra added insurance of that partnership, certainly gives us the goal around 2023 that we're moving through. I think the bigger thing on this is to note that while we've had things that have moved from 2019 to 2020, we've also had some pretty good successes. We've continued to make good progress on the way our check-in systems work. We've made good progress in the way in, which – ultimately in which our gate agent-based search and schedule and change activities are working as well. And so there will be things that – as you can imagine, four years of code history, there are things that you discover as you go through it and because we run a 24/7/365 operation, we just would rather be abundantly cautious as we work our way through that, focus on our customers and making sure that we don't have any unexpected impacts associated with that. So again, with the Google relationship, there are methodologies that they are already talking to us about in terms of ways in which we can test, ways in which we can move that capability set, ways in which we can transfer some of that capability set in different models than we've traditionally been using. And I think that plus the Cornerstone acquisition that they've just done, we know for a fact that they were instrumental in some of the work that Amadeus has went through and they’re offload that knowledge will be brought to bear now in Google helping us in the partnership as we see it. So how that piece plays itself out and what we look like. We're actually pretty optimistic about what they're going to be able to do to assist us with the offload process and being very, very cautious and careful about the migration.

Okay. That's helpful. Thanks. And can you talk about any changes in the competitive environment for the travel distribution that you saw in the fourth quarter and what you're seeing on the pricing in terms of travel agencies?

The environment didn't change much from what we've seen throughout 2019. As you see, we took share despite some of the GDS slowdown pieces that we referred to earlier in the call and the comments. But our technology continues to be very positively received in the travel space. We continue to make inroads and we're going to continue to operate in the same fashion. But we haven't seen any material shift or change in the competitive landscape than what we saw throughout 2019.

Okay. Thanks very much.

Yes. Matthew, the one thing I would add just in relation to that is, in the conversations today, and I can reflect where I was when I was running Travel Network four years ago. The amount of conversation is taking place as it relates to technology, technology capabilities going forward. It's amazing how that has actually changed and the focus that agencies are having in understanding and this is what's really important when I look at our strategy, it's just not essentially the GDS side. It does go back to essentially how offers are being created, how they are going to be pushed through the distribution channels. And that is really front and center to a number of agencies around the world.

Okay. Thank you.

Thank you. [Operator instructions] And our next question comes from Jed Kelly with Oppenheimer. Please proceed with your question.

Great. Thanks for taking my question, and appreciate the color on the Coronavirus. Just stepping back, can you sort of talk what – I guess, two years ago you laid out a pretty good technology strategy at your March Investor Day. And what's changed competitively in the market that that’s caused you to sort of change your strategic outlook? And how should we expect to see this incremental technology investment impact the Airline Solutions win rates?

Yes. Jed, I'll kick off. This is Sean. Then I'll hand it over to David. If you go back two years, we really did talk about the changes that were happening in the marketplace, and the strategy that we had and where we were driving. And that gets into the broader distribution side and much of that is what we have been acting upon and what's taking place. If you look at the things that we've look at it a little bit differently and I wouldn't say look at it differently, we just sort of increased the TAM size and that's really going after the low-cost carrier side of the equation. We didn't talk about that early back then. We were more focused on the full-service carriers. But when we look at the growth of low-cost carriers, what's happening in the marketplace, the influence that they just have on full-service carriers and how they act in the marketplace that is one that we felt that we really needed to get into. When I talk about the full-service property management system, and I alluded to this in my prepared comments is, in spending a lot of time with executives around the world, it was not just the limited service property management system and CR that they were looking for and we had those engagements, but it was truly, I need a complete stack of full-service and limited service property management system as well as the CRS system. And in doing that, they are also looking at how do they think about more modern day retailing and the capabilities of additional revenue moving forward. And that made a lot of sense for us to be able to do that. So when you look at it, much of what we're doing is in line with what we talked about two years ago. A big part of it is just our focus on the technology transformation, learning things over the past couple of years. But then the other important part of this is, and this is often what I tell the team and I walk the Board through this is, we absorb data all the time on what's happening in the marketplace. The question is how do we react in doing that? And it goes back to what I mentioned as it related to engaging with three large technology cloud providers and who could actually help us through this transformation. Dave, I don't know if you want to add anything?

Yes. I mean, Jed, just to comment on the strategy from a path perspective that we laid out two years ago in particular to our IT solutions stack, a lot of what we shared with you guys was to get healthy and the competitiveness of the investment that was there. I'm really, really pleased with what we've seen over the last two years with AirCentre and AirVision and ultimately the cross-sell and upsell that started to occur around that. I also think that from a PSS competitive perspective, you've seen us renew a very significant percentage of our accounts is that come through that as well, which bodes well. The renewal that we referred to with Southwest in our IX or Intelligence Exchange capability for data and analytics. Again, these are all really to us very positive signs of our competitive position in the marketplace. I think the other thing maybe just to keep in mind is that the PSS space is changing. It's not just about the reservation piece. It's the capability set that sits around that, whether that's pricing, revenue management some of the dynamic natures of the way in which offers get created and how that piece plays out with merchandising, retailing and commerce capabilities. We have continued to invest in these. We've continued to drive those to the cloud and continued to strengthen our competitive position. And so take that plus now the addition of Radixx, which we couldn't address the LCC space at all with that footprint. We now have full commercial and operational capabilities for both the full-service and the low-cost space. And so as I look at that, we've talked before about in that plan about 650 million of PBs that are up for renewal, mostly from our biggest competitor. We're pretty active in the market and I'm optimistic about what the next couple of years will look like for us. And the biggest thing was just to get that comfort and cross-sell, upsell happening within the portfolio so that our existing customers saw the value of the portfolios as a go-forward. So we'll try to build off of that. Again, we're very, very conscious of where we need to pursue and continue to evolve the portfolio.

And just as a follow-up, just with the current operating environment, do you see this pushing out the renewal cycle further out past 2020 now?

I don't think it pushes the renewal cycle out. It certainly causes conversations to continue and go on. But at the end of the day, contracts are up and people have to make decisions and they have to work their way through that. And the technology, as we've alluded to, continues to change at a pretty significant pace. And I think all of the carriers, hoteliers et cetera are very, very conscious of the fact that they need to take a close look at the technology.

Thank you.

Thank you. And our next question comes from Neil Steer with Redburn. Please proceed with your question.

Hi. Thanks very much for taking my questions. Just to clarify on the guidance for Coronavirus. The wording that you've used in the press release obviously suggests it's based on the impact you've seen in the first quarter so far. One presumes that that's going to continue right the way through March. And obviously, an article last week published paper in which they suggested this could be a six to a seven months effect. So what you've expressed today is just what you've seen in January and February and that will be the impact on the full-year. Is that correct?

No, the guidance that I gave was just a first quarter impact and it was based on what we've seen on quarter to date that Sean talked about. So that's just the Q1 impact.

Okay.

Yes. Neil, I mean we have not provided full-year because we don't know what full-year is like. I mean everybody is sort of in that, that does include March. So it's a full first quarter impact based on the impact that we have seen. If you go back and everybody is doing a comparison back to SARs in 2003, the timing of the two issues really does sort of fit the same relative to early in the year. What we saw was essentially double-digit booking decline – mid-teens booking decline in the first two quarters. And then we saw on the back half of the year in 2003 bookings increase. I think on a full-year basis, it was right around 9% booking impact, but we're like everybody else. We're monitoring, we're seeing. What I can share is over the past couple of days, we've seen increased cancellations in the European marketplace or booking slowdown in the European marketplace. So this is very fluid on what we're seeing.

Okay, I understand that. But just in percentage term, obviously looking back to Q1 last, those are quite dramatic percentages, essentially writing off two-thirds of the earnings and around about a third of EBITDA in the quarter.

Yes.

Okay. And just one unrelated question, which is – with regards to, I know obviously you have to be careful on Farelogix and what you kind of can't say, but is it fair to assume that the technology spend guidance that you've made for 2020 and looking – in the commentary looking into 2021, is based on an assumption that Farelogix proceeds, in other words, those technology spends could end up being considerably higher Farelogix does not proceed? Is that fair?

Neil, again, if I go back relative to Farelogix and the plans that we have on Farelogix, I'm going to hold off until we get to a conclusion with the trial here in the U.S. as well as the CMA in the UK and we can provide more color thereafter.

Okay. Thanks very much.

Thank you. [Operator instructions] And our next question comes from Josh Baer with Morgan Stanley. Please proceed with your question.

Thanks for the question. I think the highlighted partnerships and acquisitions are clearly strategic and the increased investments around those priorities of the personalized offers, NDC, LCC and full-service makes a lot of sense. My question is, with this in mind, how are you thinking about the return on these investments? You mentioned like the increasing TAM goals, but I'm wondering how you're thinking about the return on the investments as far as revenue growth or long-term growth prospects?

Yes. Clearly the spend will do two things. One, lower our cost structure because, obviously we're going to get to a much more efficient and cheaper footprint to have our technology. And obviously you're absolutely correct. While most of the investments that we're talking about now begun to generate revenue probably out in the 2023 and 2024 range. Quite candidly, they won't do it much more near-term, except or you will get some of the core revenue beginning to kick in, in 2021 more in 2022. So absolutely we have looked at this as expanding our marketplace and also creating an ability to generate a higher topline.

And if I could just follow-up on the kind of the 2024 picture and the 26% EBITDA margin target. How should we think about that compared to over 30% EBITDA margins that we've seen just a couple of years ago? Is there kind of like a path for continued expansion beyond that? Thanks.

Yes. I think, you have to remember that the 30 plus EBITDA margins that you had in the past or when we were capitalizing almost $250 million worth of technology, we're now down to – by the time we get out to 2020 and 2021, we're capitalizing less than $50 million. So probably on an apples-to-apples basis, if you were to go back, those would have been much lower than the 30% that you're talking about.

Thank you. And with that, I’d like to turn the call back to Mr. Menke for closing remarks. Mr. Menke?

Great. Once again, I want to thank everybody for their time this morning to – for us to walk through the number of things that are happening at Sabre. As you can see, a lot of things that are going on. But as I mentioned, I am very confident in the things that are taking place, and I look forward to updating you at the end of the first quarter. Thank you very much.

Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.