Sabre Corporation (SABR) Bundle
Understanding Sabre Corporation (SABR) Revenue Streams
Understanding Sabre Corporation’s Revenue Streams
Sabre Corporation generates revenue primarily from two segments: Travel Solutions and Hospitality Solutions. These segments offer a range of products and services tailored to the travel and hospitality industries.
Breakdown of Primary Revenue Sources
The following table summarizes the revenue generated by each segment for the three and nine months ended September 30, 2024 and 2023:
| Segment | Three Months Ended September 30, 2024 (in thousands) | Three Months Ended September 30, 2023 (in thousands) | Nine Months Ended September 30, 2024 (in thousands) | Nine Months Ended September 30, 2023 (in thousands) |
|---|---|---|---|---|
| Travel Solutions | $691,300 | $671,929 | $2,099,983 | $2,020,131 |
| 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 Revenue | $764,714 | $740,461 | $2,314,841 | $2,220,685 |
Year-over-Year Revenue Growth Rate
For the three months ended September 30, 2024, total revenue increased by 3% compared to the same period in 2023, rising from $740,461 thousand to $764,714 thousand. For the nine months ended September 30, 2024, total revenue also grew by 4%, from $2,220,685 thousand to $2,314,841 thousand.
Contribution of Different Business Segments to Overall Revenue
In the third quarter of 2024, Travel Solutions contributed approximately 90.5% of total revenue, while Hospitality Solutions accounted for about 11%. For the nine-month period, the contributions were similar, with Travel Solutions at around 89.8% and Hospitality Solutions at 10.6%.
Analysis of Significant Changes in Revenue Streams
In the third quarter of 2024, Travel Solutions revenue increased by $19,371 thousand, or 3%, primarily due to a 5% increase in transaction-based distribution revenue, which was driven by a 4% increase in direct billable bookings. However, IT solutions revenue decreased by $7 million, or 5%, due to the negative impacts of customer de-migrations.
Hospitality Solutions saw a revenue increase of $5,416 thousand, or 7%, attributed to a rise in SynXis Software and Services revenue, driven by higher transaction volumes and new customer deployments.
For the nine months ended September 30, 2024, Travel Solutions revenue rose by $79,852 thousand, or 4%, mainly due to a 6% increase in transaction-based distribution revenue. Hospitality Solutions revenue increased by $16,990 thousand, or 7%, reflecting similar trends as in the third quarter.
Overall, the company’s revenue trends indicate a steady growth trajectory in both primary segments, despite challenges in certain areas such as IT solutions.
A Deep Dive into Sabre Corporation (SABR) Profitability
Profitability Metrics
Examining the profitability metrics of the company reveals critical insights into its financial health. The key profitability indicators include gross profit, operating profit, and net profit margins.
Gross Profit Margin
The gross profit margin for the nine months ended September 30, 2024, was 58.3%, compared to 58.9% for the same period in 2023. The total revenue reported was $2,314,841,000, with the cost of revenue at $964,832,000 for 2024, resulting in a gross profit of $1,350,009,000.
Operating Profit Margin
The operating profit for the nine months ended September 30, 2024, was $229,067,000, leading to an operating profit margin of 9.9%. This marks a significant increase from the previous year, where the operating profit was $9,805,000, reflecting an operating profit margin of just 0.4%.
Net Profit Margin
The net loss attributable to common stockholders for the nine months ended September 30, 2024, was $204,061,000, resulting in a net profit margin of -8.8%. In comparison, the net loss for the same period in 2023 was $445,406,000, which also reflected a negative margin of -20.0%.
Trends in Profitability Over Time
Over the past year, there has been a notable improvement in operating profit and gross margins. The gross profit margin has slightly declined, while the operating profit margin has significantly improved, demonstrating enhanced operational efficiency.
Comparison of Profitability Ratios with Industry Averages
| Metric | Company 2024 | Industry Average |
|---|---|---|
| Gross Profit Margin | 58.3% | 60.0% |
| Operating Profit Margin | 9.9% | 10.5% |
| Net Profit Margin | -8.8% | -5.0% |
Analysis of Operational Efficiency
The operational efficiency can be assessed through cost management and gross margin trends. The total selling, general, and administrative expenses for the nine months ended September 30, 2024, were $468,099,000, a reduction from $494,227,000 in 2023. This indicates a 5.3% decrease in operating costs, contributing positively to the operating profit margin.
Additionally, technology costs decreased significantly to $652,843,000 in 2024 from $799,121,000 in 2023, marking an 18% reduction. This reduction reflects effective cost management strategies, particularly in labor and professional services due to a company-wide cost reduction plan.
Debt vs. Equity: How Sabre Corporation (SABR) Finances Its Growth
Debt vs. Equity: How Sabre Corporation Finances Its Growth
Long-term Debt: As of September 30, 2024, the company reported long-term debt totaling $4.79 billion, down from $4.83 billion at the end of 2023.
Short-term Debt: The current portion of debt as of September 30, 2024, is $245 million, compared to $4 million at the end of 2023.
Debt-to-Equity Ratio: The debt-to-equity ratio stands at approximately 3.73, calculated from total liabilities of $4.69 billion and stockholders' deficit of $1.54 billion as of September 30, 2024.
Industry Comparison: The average debt-to-equity ratio in the technology sector is around 1.5, indicating that the company is significantly more leveraged than its peers.
Recent Debt Issuances: In March 2024, the company exchanged $150 million of its 2025 Exchangeable Notes for newly issued 7.32% senior exchangeable notes due in 2026, along with approximately $30 million in cash.
Credit Ratings: The company has a credit rating of B2 from Moody's and B+ from S&P, reflecting higher risk due to its significant debt levels.
Refinancing Activity: The September 2023 exchange transaction resulted in a loss on extinguishment of debt of $121 million, involving the exchange of approximately $787 million of senior secured notes for new notes due in 2027.
Balance Between Debt Financing and Equity Funding: The company has utilized a mix of debt and equity to finance its operations, with a focus on maintaining liquidity while managing interest expenses. The total stockholders' deficit indicates a reliance on debt financing to support growth amidst operational challenges.
| Type of Debt | Amount (in millions) | Interest Rate | Maturity Date |
|---|---|---|---|
| Long-term Debt | $4,790 | 8.625% | June 1, 2027 |
| Short-term Debt | $245 | Varies | 2024 |
| Exchangeable Notes (2026) | $150 | 7.32% | August 1, 2026 |
Strategic Focus: The company is focusing on optimizing its capital structure by managing its debt levels while pursuing operational efficiencies to improve its financial health.
Assessing Sabre Corporation (SABR) Liquidity
Assessing Sabre Corporation's Liquidity
Current Ratio: As of September 30, 2024, the current ratio is approximately 0.54, calculated from current assets of $640 million and current liabilities of $1.18 billion.
Quick Ratio: The quick ratio stands at about 0.38, considering cash and cash equivalents of $689.8 million and excluding inventories.
Working Capital Trends
Working capital has shown fluctuations, with a reported working capital of $(539 million) at the end of Q3 2024. This reflects a decrease from $(264 million) at the end of 2023, indicating increased short-term financial pressures.
| Period | Current Assets (in $ millions) | Current Liabilities (in $ millions) | Working Capital (in $ millions) |
|---|---|---|---|
| September 30, 2024 | 640 | 1,180 | (539) |
| December 31, 2023 | 855 | 1,119 | (264) |
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, cash used in operating activities totaled $(12.15 million), an improvement compared to $(39.78 million) in the same period of 2023.
Investing Cash Flow: Cash used in investing activities was $(13.52 million) in 2024, compared to $(80.63 million) in 2023, indicating reduced capital expenditures.
Financing Cash Flow: Cash provided by financing activities increased to $46.05 million in 2024 from $(72.52 million) in 2023, highlighting improved access to financing.
| Cash Flow Activity | 2024 (in $ millions) | 2023 (in $ millions) |
|---|---|---|
| Operating Activities | (12.15) | (39.78) |
| Investing Activities | (13.52) | (80.63) |
| Financing Activities | 46.05 | (72.52) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, total cash and cash equivalents stood at $689.8 million, with outstanding letters of credit of $8.91 million. The company also has an available undrawn balance under the AR Facility of $400,000.
However, the substantial current liabilities compared to current assets, indicated by a current ratio below 1, raises potential liquidity concerns. The negative working capital trend and reliance on financing activities to cover operational shortfalls further emphasize the need for careful liquidity management.
| Liquidity Metrics | Value (in $ millions) |
|---|---|
| Cash and Cash Equivalents | 689.8 |
| Outstanding Letters of Credit | 8.91 |
| Available Undrawn Balance (AR Facility) | 0.4 |
Is Sabre Corporation (SABR) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will analyze key valuation metrics including the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratios, along with stock price trends, dividend yield, and analyst consensus.
Valuation Ratios
The following table summarizes the valuation ratios as of September 30, 2024:
| Metric | Value |
|---|---|
| Price-to-Earnings (P/E) Ratio | N/A (Net loss reported) |
| Price-to-Book (P/B) Ratio | -1.03 (Total stockholders’ deficit of $1,543,327,000 on total equity of $1,490,595,000) |
| Enterprise Value-to-EBITDA (EV/EBITDA) | 34.09 (Enterprise Value of $4,793,000,000 and EBITDA of $140,000,000) |
Stock Price Trends
The stock price performance over the last 12 months has shown a significant decline. As of September 30, 2024, the stock price was approximately $6.00, down from a high of $9.50 a year prior, reflecting a decrease of approximately 36%.
Dividend Yield and Payout Ratios
The company does not currently pay a dividend, resulting in a dividend yield of 0%. The payout ratio is also N/A due to the absence of dividend payments.
Analyst Consensus
Analysts have mixed views on the stock valuation. The consensus rating as of the latest reports is as follows:
| Recommendation | Count |
|---|---|
| Buy | 2 |
| Hold | 5 |
| Sell | 3 |
Overall, the consensus indicates a cautious approach, with more analysts recommending to hold than to buy or sell.
Summary of Financial Performance
For the nine months ending September 30, 2024, the company reported:
- Total revenue: $2,314,841,000
- Net loss: ($203,723,000)
- Operating income: $229,067,000
- Adjusted EBITDA: $401,619,000
These figures highlight the ongoing challenges faced by the company amid fluctuating market conditions and operational restructuring efforts.
Key Risks Facing Sabre Corporation (SABR)
Key Risks Facing Sabre Corporation
Sabre Corporation faces a range of internal and external risks that impact its financial health. These risks include competitive pressures within the travel technology industry, regulatory changes, and fluctuating market conditions.
Industry Competition
The travel technology sector is highly competitive, with numerous players vying for market share. In the third quarter of 2024, the company reported a revenue of $764.7 million, a modest increase from $740.5 million in the same period of 2023 . This growth reflects ongoing competition, particularly in transaction-based distribution services.
Regulatory Changes
Changes in regulations can significantly affect operational costs and compliance requirements. For instance, litigation costs related to regulatory compliance amounted to $1.068 million in Q3 2024 . The company must remain agile to respond to new legislation affecting the travel industry.
Market Conditions
Market conditions, including economic downturns and changes in consumer behavior, pose risks to revenue generation. For the nine months ended September 30, 2024, the company reported a net loss of $203.7 million, compared to a loss of $431.7 million in the same period of 2023 . This indicates ongoing challenges in maintaining profitability amid shifting market dynamics.
Operational Risks
Operational risks include potential disruptions in service delivery and technology failures. As of September 30, 2024, the company had total liabilities of $4.7 billion against assets of $4.7 billion, indicating a highly leveraged position .
Financial Risks
Financial risks are compounded by high interest expenses, which reached $381.7 million for the nine months ended September 30, 2024, up from $325.3 million in the prior year . The cost of servicing debt can strain cash flows, particularly if revenues do not grow sufficiently to offset these costs.
Strategic Risks
Strategic risks arise from the company's decisions regarding acquisitions and investments. In 2024, acquisition-related costs were noted at $2.576 million . The effectiveness of these investments will be critical for future growth and market positioning.
Mitigation Strategies
The company has initiated a cost reduction plan to manage expenses effectively, with restructuring costs reported at $62.9 million . This strategy aims to enhance operational efficiency and improve financial stability.
| Risk Category | Details | Financial Impact |
|---|---|---|
| Industry Competition | Highly competitive travel technology sector | Q3 2024 Revenue: $764.7 million |
| Regulatory Changes | Litigation costs related to compliance | Q3 2024 Litigation Costs: $1.068 million |
| Market Conditions | Economic downturns affect consumer spending | Net Loss (9M 2024): $203.7 million |
| Operational Risks | Potential service disruptions | Total Liabilities: $4.7 billion |
| Financial Risks | High interest expenses | Interest Expense (9M 2024): $381.7 million |
| Strategic Risks | Costs associated with acquisitions | Acquisition-Related Costs: $2.576 million |
Future Growth Prospects for Sabre Corporation (SABR)
Future Growth Prospects for Sabre Corporation
Sabre Corporation is positioned for growth through various key drivers that may enhance its market presence and financial performance in the coming years.
Analysis of Key Growth Drivers
- Product Innovations: The company has focused on enhancing its technology offerings, particularly in its Travel Solutions segment, which reported a revenue increase of $19 million, or 3%, year-over-year for Q3 2024, driven by a 5% increase in transaction-based distribution revenue.
- Market Expansions: The Hospitality Solutions segment also saw growth, with revenue rising 7% to $84 million in Q3 2024, bolstered by new customer deployments.
- Acquisitions: The company continues to evaluate strategic acquisitions to enhance its service offerings and market reach, as evidenced by its recent interest in consolidating its position within the industry.
Future Revenue Growth Projections and Earnings Estimates
For the full year 2024, Sabre Corporation anticipates revenue growth of approximately 4%, driven by increases in both Travel and Hospitality Solutions segments. The nine-month revenue figures for 2024 indicate a total revenue of $2.31 billion, compared to $2.22 billion in 2023, reflecting a growth of $94 million.
Strategic Initiatives or Partnerships
The company is actively pursuing partnerships aimed at enhancing its technological capabilities and expanding its market footprint. Recent initiatives include the launch of new software solutions designed to improve customer engagement and operational efficiency, which are expected to contribute to revenue growth.
Competitive Advantages
- Established Brand Presence: Sabre has a strong reputation within the travel technology sector, which positions it favorably against competitors.
- Comprehensive Product Suite: The company offers a wide range of services across travel and hospitality, allowing it to cater to diverse customer needs.
- Robust Technology Infrastructure: Ongoing investments in technology have improved operational efficiency and customer satisfaction, fostering long-term customer loyalty.
Growth Metrics Table
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Total Revenue | $764,714,000 | $740,461,000 | $24,253,000 (3%) |
| Travel Solutions Revenue | $691,300,000 | $671,929,000 | $19,371,000 (3%) |
| Hospitality Solutions Revenue | $83,997,000 | $78,581,000 | $5,416,000 (7%) |
| Operating Income | $70,127,000 | $52,201,000 | $17,926,000 (34%) |
| Net Loss | $(63,133,000) | $(207,905,000) | $144,772,000 (69%) |
These growth opportunities reflect Sabre Corporation's commitment to enhancing its market position and financial performance through strategic initiatives and operational efficiencies.
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Article updated on 8 Nov 2024
Resources:
- Sabre Corporation (SABR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Sabre Corporation (SABR)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Sabre Corporation (SABR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.