Good morning and welcome to the Sabre First Quarter 2020 Earnings Conference Call. Please note that today’s call is being recorded and is also being broadcast live over the internet on the Saber 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, Angie. And good morning, everyone. Thanks for joining us for our first quarter 2020 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 the Sabre Investor Relations web page. A replay of today’s call will be available on our website later this morning. We would like to advise you that our comments contain forward-looking statements that represent our beliefs or expectations about future events, including the duration and effects of COVID-19, industry trends, cost savings and liquidity, among others. All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today’s conference call. More information on these risks and uncertainties is contained in our earnings release issued this morning and our SEC filings, including our Form 8-K filed on April 13, 2020 and our 2019 Form 10-K. Throughout today’s call, we will be presenting certain non-GAAP financial measures. All references during today’s call to EBITDA, operating loss and EPS have been adjusted to exclude certain 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. Participating with me 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, will be available for Q&A after the prepared remarks. Today’s call will focus primarily on COVID-19. Sean will provide perspectives on its impact on global travel trends and our business. Doug will review the cost and liquidity actions we’ve taken in response. We’ll then open the call to your questions. With that, I’ll turn the call over to Sean.

Thanks, Kevin. Good morning, everyone, and thank you for joining us today. Before I start, I’d like to recognize that although today’s call will focus on the financial implications of the COVID-19 pandemic on our business, this is a human health crisis with severe impact to families and individuals around the world. We are all experiencing dramatic changes to our daily lives and regular routines. Nothing is more important to us than the health and safety of our employees, customers and the communities where we live and work. I’d like to sincerely thank my Sabre teammates who have made great sacrifices in this incredibly challenging environment. Our Sabre offices around the globe have been closed for a number of weeks now as we practice social distancing. Before Doug takes you through our financial results, I’ll begin by discussing the unprecedented impact of COVID-19 on the global travel industry and provide detail on the decline in bookings and travel trends since its outbreak. Next, I will describe the actions we have taken in response to this challenge. Then, I will describe the impact these actions will have on our technology investments. Finally, I’ll share why we believe Sabre is resilient and well-positioned for a post-crisis environment. The COVID-19 pandemic, as we all know, is an unprecedented challenge facing the entire travel industry. Since its initial onset in late 2019, the outbreak has caused a sharp decline in industry bookings. As we exited the quarter in March, effectively zero new bookings and the impact of cancellations resulted in a negative bookings environment on a net basis. Total GDS industry air bookings declined by 10%, 25% and 113% in January, February and March on a net basis, with the industry down 49% for the first quarter of 2020. All regions were impacted on…

Thanks, Sean, and hello everyone. Before I begin, I’d like to acknowledge this is a difficult time. Our thoughts are with those around the world impacted by the COVID-19 pandemic. We are in a time of unprecedented disruption to the travel industry. As Sean mentioned, the latest IATA projection is a 55% reduction in passenger revenue in 2020. Approximately 15% of our revenue is not tied to travel volumes, which partially mitigates the exposure we have to COVID-19’s impact on travel. However, our first quarter results were significantly impacted by the pandemic. In the first quarter, revenue was down 37%. Travel Network bookings were down 45%. Remember, we report bookings on a net basis, which means net of cancellations. In the quarter, new air bookings were down 32%, but there was significant cancellation activity as COVID-19 restrictions were put in place. As of quarter-end, we have recognized $105 million of revenue from bookings not yet departed and have a cancellation reserve of $44 million on our balance sheet. We believe we hit peak cancellation rates at the end of March and have flushed through most of the initial incremental COVID-19 cancellation activity as of mid-April. Remember that about half of our cancellation risk is offset by reductions in incentive payments. First quarter EBITDA was positive. It was down significantly year-over-year. Our cost savings initiatives were not announced until mid-March, so we expect most of the savings will be recognized over the balance of the year. After depreciation and amortization and interest expense, we had an operating loss and negative EPS in the quarter. Finally, we generated positive Free Cash Flow of $12 million in the quarter. Our normal-course earnings results slides are in the appendix of our earnings presentation, which is available on our IR web page. Let me provide…

Thanks, Doug. And thank you to our Sabre teammates around the world for their dedication to serving our customers, shareholders and each other during this difficult time. With that, operator, we’d be happy to take questions.

[Operator Instructions] Your first question is from the line of Ashish Sabadra.

Thanks for taking the questions. So, a quick question on what percentage of your bookings are corporates and international booking? And just, I think if you can provide any color because the concern is that those might take little longer to recover compared to the leisure bookings, so any color on those terms?

Ashish, can you -- state that question again? You’re breaking up quite a bit.

Sorry about that. Can you -- sorry about that. I was just wondering what percentage of your bookings are coming from corporate and international bookings, because the concern is those might take longer to recover compared to the leisure bookings?

Yes. If you look at -- I mean, if you go back just historically, the balance, the bookings we had were actually more on the, what I would consider to be the North American side or international side, making of a smaller percentage of that. If you look at the bookings themselves, I mean, historically, we have a decent amount of the corporate bookings that are in place because of our penetration with TMCs versus what I would consider to be more the OTA side of the equation. As you look at bookings now, as I mentioned, there really are no bookings, so in measurement, relative to what we’re seeing right now, Ashish. What I would share is, and this is very early on what we’re seeing take place, we are seeing OTA bookings picking up a little bit faster than the corporate booking side of the equation. And I’m talking very, very small numbers, as we track really where the trough was and what we’re seeing as it relates to last week’s bookings. And this is on a year-over-year workday-adjusted basis that we’re tracking that.

Yes. Ashish, just take a look historically, 70% of our bookings come through the TMCs, 30% comes from the OTAs. And obviously, most of the OTA stuff is going to be leisure and majority of the TMCs is going to be business-related travel.

Okay. That’s helpful. Just a question on -- there are concerns about potential bankruptcy risks for agencies or airlines just given the challenged travel environment. Can you just talk about, is there any potential risk to Sabre, because of any bankruptcies at the agencies or airlines?

Yes. I’m not going to speculate. We get the question a lot. I mean, everybody’s working through liquidity, managing how do they get additional liquidity and what’s out there, Ashish. It’s very early on, in what’s taking place, where I keep driving people back to the actions that we’ve taken, because we were very aggressive in what we did early on, went from a cost perspective and then going for liquidity. And in doing that, I am of the belief that there will be a travel ecosystem in the future. I do think, it’s going to be a smaller travel ecosystem for a period of time. But, we’re positioning ourselves to be able to operate in that environment. And that’s why Doug has been very adamant of talking about the zero booking environment and the same power that we have.

And maybe one final question if I can squeeze in, on the Google commercial partnership. So, congrats on that. I was wondering if you could provide any color on that front. How should we think about the revenue opportunity there? And is there opportunity for further expansion of that partnership?

Yes. I’ll kick off and then I’ll let Dave add a little bit to this. But, as we talked about, we felt that there were commercial opportunities that what I would consider to be the low-hanging fruit that we could begin to execute. The one thing that we’re doing is really providing availability data information to Google that -- and this is essentially reaching out to a number of airlines around the world that they’ll be able to use as it relates to Google flight search. So, it’s one step in what we hope will continue to be a number of other opportunities that are out there. And Dave, I don’t know if you’d add anything else to that.

Yes. No, I would just echo what Sean said. I mean, you got to start somewhere. We had a set of innovation projects that could have commercial benefit. This will kick off probably around the Q3 time period. It’s small in size, but it’s the first step of several that we’re trying to work through with Google. So, we’re pretty happy about the progress with them in the early stages of the relationship.

Your next question is from the line of Mark Moerdler.

Thank you very much. Let me first start by saying, I hope everyone on the call stays healthy and safe. And also, thank you for the detail you’ve been supplying in today’s earnings. Couple of quick questions, if you don’t mind, Sabre’s GDS air bookings decline was a bit better than the overall industry. Is this due to U.S. exposure, or is there some other factors?

It’s primarily going to be the U.S. exposure. Yes.

So, why not participate in the CARES Act?

Yes. So, obviously, we realized that we needed some additional liquidity. And quite honestly, the markets opened up. It was taken longer than expected to understand what the CARES Act was going to entail and what the terms would be that you’d be able to lend under. And quite honestly, once we got the public raise done, quite honestly, we weren’t even eligible then for the CARES Act. Because they’re primarily focused on trying to help people have liquidity through the balance of 2020. And obviously, now, we have liquidity almost all the way through 2021.

Yes. Mark, as you would imagine, we are working a number of different things. And we were heavily engaged in conversations. I was at the White House, at the Treasury, as well as congressional leaders as this was being drafted. But, in doing that we were looking at what that could potentially be for Sabre than as Doug has stated, we’re also looking at other ways of generating liquidity, based on how things were essentially progressing on the government side. As you know, there are just numerous balls that were in the air as they were working through it, we were focused. And I’ve learned this from my past, as you work aggressively to focus on your capital and your balance sheet and what you can do because you just don’t know. And we knew, that essentially the government at the end of the day was a lender of last resource. And we were going to have to prove -- we were still going to have to prove that the markets were closed to us. So, for us, like I said, in my comments is we were very focused on acting aggressively to right size the business, putting cash into -- on the balance sheet, and then being prepared to just manage through the situation as we see it right now.

Well done. One last question, if you don’t mind. How large was the negative impact of cancellations on revenue in Q1?

How large was it?

Yes.

Yes. I mean, you can tell, obviously, it was approximately $20 million bookings, and almost $60 million.

Beautiful, 60? Thank you.

60, in the month of March.

Perfect. Thank you I appreciate. And stay safe.

All right. Thanks, Mark. Take care.

Your next question is from the line of Josh Baer.

Hi. Thanks for taking the question. When we think about the future of the industry, is there anything you could share on how to think about changes to contracts, pricing, GDS fees, incentive fees, just in light of the current crisis, and expecting a smaller travel market in the medium term?

Yes. At this point in time, I’m not going to speculate. I mean, there’s -- we’re working with our customers. The one thing that you look at what takes place as it relates to the relationships that we have, they’re PB-based, passenger-boarded-based, the booking volume. So, when you look at it specifically on the airline and even on the hospitality side, it’s transaction-oriented. So, there’s some forgiveness that’s taking place there. On the agency side, it’s the incentive piece of it. But, I think we’re just way too early to even speculate on something like that.

Got it. And I appreciate all the detail on the cost structure and liquidity. I think, it’s very, very helpful and clear. And obviously, you just raised over $1 billion in capital. Wondering, one question on that net leverage covenant and I realize you might have a pass for several quarters given the year-over-year travel declines. But, should investors think about that that eventually, whether it’s three, six, nine months, you’ll be able to amend or replace that loan or the credit agreement there? Like is it -- is that a concern to you or should it be a concern to equity investors?

Yes. I think you’re probably asking a combination of two questions. One, let me address the leverage issue. More likely than not, with the kind of the capacity outlook that Sean was alluding to, the leverage suspension will probably go all the way through 2021, more likely than not, based on what we think is going to happen. So, I don’t think, between now and the end of ‘21, and maybe even going to ‘22. Remember, the maturities of those -- of the term loan is July of 2022. Obviously, now with the rates behind us and the real good relationship we have with those lending institutions, once get into the fall and early beginnings 2021, we’ll turn our attention to refinancing the term loan A.

Very helpful. Thanks.

The final question is from the line of Jed Kelly.

Hey. Great, thanks for taking my question. Can you hear me okay?

Yes, we can Jed. How are you?

I’m doing well. How are you?

Fine.

So, yes, just my first question has to do with, as you sort of look at realigning your cost structure over the next two to three years, is there a path to where your medium-term cash flow can get to pre-19 -- to 2019 levels, quicker under a lower revenue base?

Yes. Obviously, the actions that we’ve taken now obviously will help us as we move into 2021. A lot would depend on how fast the market returns, Jed, to be honest with you, because obviously some of the variable costs will kick back in. The incentive payments will kick back in. Some of the variable hosting costs will come back. But, I do think that as we enter a kind of a quote, a normal recovery, we will be in a better cost position than we were coming into -- out of 2019.

And then, as everybody in travel seems to be guiding for a multiyear recovery, is that going to be more dependent on a vaccine science breakthrough, or do you see that hopefully coming relatively quickly, but it’s just going to be more of an economic drag? I mean, how do you kind of look at the pace of the travel recovery?

Yes. I mean, I think, everybody’s got a different opinion on this, Jed. Here’s what I tell my team, this is what I talk to my family about. Tell me when you’re ready to go out to a restaurant. Tell me when you’re ready to go to a movie. Tell me when you’re ready to go to a ballpark. Tell me when you’re ready to get on an airplane. And I think you just got to be somewhat basic at this point in time. Listen, I think, everybody believes that there’s a vaccination that would help. But, we’re taking just one step at a time right now. And I go back to the actions that we’ve taken that we put ourselves in what I consider to be an enviable position to manage through the crisis.

All right. And then, before this, there was sort of -- some of the airlines I guess were being confrontational trying to drive direct bookings. Does this provide an opportunity for, I guess, more constructive partnerships going forward? And, how do you see partnering with airlines evolving in the next three years?

Yes. Well, I’ll probably just look backwards and just talk about, since I’ve really taken over the organization that’s been very-focused on constructive relationship with airlines, making sure that, as they think about modern day retailing and being able to do what they want to do that we continue to move forward. And as I look into the future, our strategy and focus and working with our airline customers, our hotel customers as well as our agency customers has not changed at all.

[Operator Instruction] We do have a follow-up question from the line of Josh Baer.

Hi. I just wanted to pop back in on the 15% of revenue, not tied to travel volumes. See, in the prepared remarks that -- in the cash burn you assume $50 million in revenue from that bucket, which would be on a monthly basis. So, that’s 600 for the year. And looking at FY19, now it’s about 15% of revenue. So, is the assumption that that is very-durable, or could you -- I guess, could you talk a little bit about the different types of revenue that’s in that 15%? Is any of that at-risk, even though it’s not tied to passenger volume?

Yes. Josh, we did take a look at that, and we didn’t really think much of it was at risk. It’s certain things that some of our customers are on a subscription basis, some of it’s back office products that we provide to agencies, some of it’s some of the work we do on hospitality on the DX side. So, we really didn’t think when we took a look at it, we didn’t slim it down a little bit. I think the other thing I want to mention, when we talk about the $50 million, just to give you a sense of how conservative it has been, obviously in some of -- particularly in the Airline Solutions contracts, there are minimums, we’ve assumed in that $50 million that all the minimums are waived. So, the airlines don’t even have to comply with the minimum requirements. So, I think we’ve taken a conservative approach to that $50 million.

Got it. Great. Thanks.

I am showing no further questions at this time. I would now like to turn the conference back to Sean Menke.

Great. As always, guys, I want to thank you for taking the time to hear the update on what’s taking place at Sabre. Once again, I want to thank my Sabre team members around the world for everything they’re doing. I really do appreciate it. With that, everybody please stay safe. Thank you very much.

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation, and have a wonderful day. You may all disconnect.