Sabre Corp Q1 FY2021 Earnings Call

Good morning. And welcome to the Sabre First Quarter 2021 Earnings Conference Call. My name is Loshana, and I will be your operator. As a reminder, please note today’s call is being recorded. I will now turn the call over to the Vice President of Investor Relations, Kevin Crissey. Please go ahead, sir.

Thanks, and good morning, everyone. Thank you for joining us for our first quarter 2021 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, expected advancements, depreciation and amortization, capital expenditures, 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 2020 Form 10-K. Throughout today’s call, we will also 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 Chief Executive Officer; and Doug Barnett, our Chief Financial Officer. Dave Shirk, our President of Travel Solutions; and Scott Wilson, our President of Hospitality Solutions, will be available for Q&A after the prepared remarks. With that, I will turn the call over to Sean.

Thanks, Kevin. Good morning, everyone, and thank you for joining us today. Before we get into the details and trends from the first quarter, I’d like to take a moment, excuse me, to highlight a few items. First, I am very pleased to welcome Phyllis Newhouse and Wendi Sturgis as newly elected Independent Directors to our Board. Phyllis and Wendi bring significant technology and cybersecurity expertise and we look forward to their perspectives and support over the coming years. On behalf of Sabre’s Board and leadership team, I’d also like to thank Joe Osnoss, Judy Odom, Renee James and John Siciliano, who retired from our board last week. Their counsel and guidance over the years has been extremely valuable. Second, I’d like to personally congratulate four current Sabre team members, Traci Mercer, Senior Vice President, Product segment; Amy Green, Vice President, Global Business Systems; Emma Wilson, Vice President, Marketing; and Corrie DeCamp, Senior Vice President, Program Management, for being named among the Top 50 Women in Travel by the Global Business Travel Association. I’d also like our Sabre teammates in India to know our thoughts and prayers are with them as they navigate through the impact of the COVID-19 crisis. Finally, I’d like to thank all my Sabre teammates around the world for their service to our customers, shareholders and each other as we all navigate this pandemic. Turning to slide four. As we have done in prior quarters, on the next slides, I will walk you through specific booking, passengers boarded or PB and hospitality CRS transaction trends. But I will start with a bigger picture perspective. Global travel trends continue to be reflective of COVID-19 case counts, cumulative and daily vaccination rates and regional travel restrictions. In the United States, part of our largest region, we are encouraged by the accelerating pace of daily vaccine doses administered, as well as the recent bullish demand comments and capacity plans made by U.S. airline executives. We have seen this confidence reflected in our North American bookings recovery. As expected, international markets vary significantly and collectively have been slower to rebound than U.S. domestic travel, including in regions in which vaccine distribution remains slow and daily cases remain high. As Doug will discuss in more detail shortly, this has resulted in a more pronounced rotation in our bookings mix. To give further perspective on our largest region, North America represented 55% of our GDS bookings in 2019. As of April 30th, about 29% of the total U.S. population has been fully vaccinated and about 45% has received at least one dose of a COVID-19 vaccine. Since our Q4 earnings call, the daily vaccination rate has increased by a million vaccines daily, from about 1.7 million in February to 2.7 million per day in April. U.S. travel trends have picked up on this momentum. Our North American gross air bookings, which reflect new demand, have recovered to nearly 50% of 2019 levels over the last two weeks of April. On this chart you can better see the pronounced rotation in regional booking mix towards North America. In the first two months of the year, our North American gross bookings were down 72% versus the same timeframe in 2019, whereas the rest of the world was down about 84%. By April, the gap widened, with North American gross bookings recovery accelerating to down 53% and the rest of the world down 77% versus 2019 levels. Looking ahead, we expect the U.S. domestic travel to continue to lead the recovery as the vaccination rollout progresses and reported COVID-19 cases continue to decline. We have already seen an improvement in leisure bookings and have begun seeing green shoots in U.S. business travel with our large TMC customers. We expect European and APAC markets to recover more slowly due to greater fragmentation, tighter travel restrictions, slower vaccination rates and new variant strains. However, based on what we have seen in the U.S. and as these regions gain confidence from increasing vaccination rates, we expect bookings activity to follow. We remain confident there is pent-up demand for global travel and that global travel will recover. Turning to slide five, industry air net bookings showed sequential improvement over the first part of this year, with the strongest sequential improvement in March and April. As compared to 2019, in January, GDS industry net air bookings were down 82%, and February and March were down 77% and 71%, respectively. April was down 70%, slightly ahead of March. Our largest region, North America, improved the most, with a 7 percentage point quarter-over-quarter recovery, and the positive trend continued into April. Other regions were largely flat quarter-over-quarter and into April. On slide six, you can see this effect more clearly using weekly data by region. Positive trends continue to accelerate in North America. EMEA and APAC continue to lag behind the global average. Latin America, which had been showing a strong recovery over the winter, showed signs of improvement again in late April after a dip in the early spring. Slide seven shows Sabre’s volume metrics for air gross bookings, passengers boarded, and hotel gross CRS transactions. After a slowdown in January, all metrics have trended in a positive direction with U.S. domestic, leisure travel driving much of the improvement. Hotel CRS transactions continue to lead the recovery and reached over 70% of 2019 levels in April. Turning to slide eight. We continue to be very active commercially in all lines of business. In Distribution, we’ve added several airlines to our GDS, including SkyUp in the Ukraine and Ego Airways in Italy. We also renewed agreements with carriers, including WestJet and Frontier. On the agency side, we added several new agencies, including Cleartrip, the largest OTA in the Middle East, Kiwi.com, Europe’s fastest-growing OTA, and Omega, one of the largest business management companies in the US. We also renewed agencies, including Kanoo Travel, the largest travel company in the Middle East, and Travelgenio, one of Europe’s largest OTAs. Travelgenio is also implementing Sabre Virtual Payments. On the IT Solutions side, we’ve completed implementations of SabreSonic with ASKY and Zambia. We also added a couple of new Radixx customers, including U.S. startup Avelo Airlines. Air India Express and Evelop Airlines each renewed their Radixx agreements. Evelop is also adding Market Intelligence and other operations-related products. We also had some key renewals in our operations portfolio, including Flight Plan Manager with Spirit Airlines, Crew Control with Jet2.com, and Crew Manager went live with JAL. In Hospitality, in addition to the traction with enterprise hoteliers announced last quarter, we continue to be very active in the community segment with many new deals and renewals signed. Despite the effects of COVID-19, we have a healthy sales pipeline and are well-positioned to capture new opportunities. Turning to slide nine. We have talked about the importance of strategic initiatives to enable Sabre to capture opportunities created by evolving travel trends and to increase shareholder value. Let me now update you on the commercial activity that demonstrates our progress against these initiatives this quarter. First, personalized offers. We are moving aggressively to create new IT capabilities, methods, and intelligence to allow suppliers, such as airlines, to deliver more customer-centric personalized offers. Examples of momentum in this area in Q1 include LATAM Airlines going live with Dynamic Pricing in key markets. We successfully migrated Jet Blue, Binter, and ASKY to Revenue Optimizer, our revenue management tool that enables airlines to set optimal price-point availability and provides real-time data to better support decision-making and performance analysis. Additionally, Phase 1 of our Sabre Smart Retail Engine remains on track for rollout this spring. As a reminder, we expect the Sabre Smart Retail Engine to enable airlines to deliver personalized offers to their customers and better serve the needs of today’s traveler while unlocking more value per passenger boarded. The future of Distribution and NDC. Airlines have been investing to differentiate their brands in a number of ways, including notably with ancillary products. Although this practice has created more choices for travelers, it has also created a challenge. While it is easy for consumers to determine the cost of travel, it has become more difficult to understand what the related travel experience will be. This quarter we announced a new, industry-first airline storefront to help solve this problem. The new storefront provides digital shelves that organize airlines’ offerings to support product differentiation and provide more merchandising opportunities for airlines while allowing efficient comparison shopping for travel buyers based on the total value of the offer. Delta Air Lines is one of the carriers who helped collaborate on the development of our new airline storefront. Yesterday, we announced a new, value-based, multiyear distribution agreement with Delta. This represents an industry-first model that we believe will create value for the travel ecosystem. In terms of NDC progress, this quarter we achieved IATA Level 4 certification as an IT Provider after previously reaching that certification milestone as an NDC Aggregator. This certification confirms our technical ability to support a set of criteria related to full offer and order management capabilities. We also expanded access to NDC offers from Singapore Airlines to more than 25 agency locations. Eligible agencies can now not only shop and book Singapore’s NDC offers but also void, refund, and exchange NDC orders. Additionally, this quarter we announced the launch of NDC offers from Qantas to travel agencies in Australia and New Zealand with plans to expand to agencies in other regions over time. Finally, NDC content can now be booked through our corporate online booking tool, GetThere. Low-cost carrier growth. We’ve talked on previous earnings calls about the investments we are making in the low-cost carrier segment and how we are expanding the capabilities of Radixx to increase sales opportunities in this faster-growing, leisure segment of travel. This quarter we made important progress in this pursuit, including the integration of SabreSonic Inventory for Availability into Radixx. This improves Radixx’s ability to scale to larger airlines. We continue to view the LCC segment as an important growth avenue for Sabre. Hospitality Solutions growth. We continue to grow our Central Reservation System business. As a reminder, our CRS is industry-leading and serves more than 42,000 hotels, resorts, and chains across nearly 200 countries and territories. SynXis Central Reservations allows hoteliers to distribute rates and inventory to more than 400 online channels across the world, including all major GDS systems, as well as hundreds of online travel agencies. Last quarter, we signed two new enterprise wins representing over 1,600 hotel properties across 54 countries, with the majority coming from Louvre. This quarter, we made progress in support of these new enterprise CRS deployments and our Hospitality Solutions business generally, including setting up Google Cloud environments in two of our four global regions. We are optimistic about the growth outlook for our Hospitality Solutions business as hoteliers are increasingly turning to Sabre to broaden their distribution and reach and to drive incremental revenue opportunities. Finally, our technology transformation. I’m excited about the progress we are making in our tech transformation. This quarter we moved Travel Solutions Agency Air Shopping to Google Cloud. We believe running our future air shopping growth on GCP is important in a post-COVID-19 recovery because of its scalability and lower costs. This was one of our three major technology milestones for 2021, with the other two being moving at least 15% of our mid-range workloads and transitioning Hospitality Solutions’ CRS to the Google Cloud Platform. These milestones are on track. Additionally, in Q1, we created a GCP region only about 30 miles from our existing data center in Tulsa operated by DXC. This close proximity, combined with high-bandwidth linkage, is expected to create an extremely low latency connection to simplify migrations of capacity from DXC to GCP. Finally, we successfully offloaded some compute-heavy mainframe capabilities, including Display Inventory for most airlines and schedule changes for the majority of non-hosted airlines. As we continue to migrate compute from the mainframe, we expect to realize further savings. In conclusion, despite the challenges presented by the pandemic, we are making essential technology investments, developing innovative new products, advancing our strategic initiatives, and seeing commercial success. We believe Sabre is well-positioned competitively as the travel environment rebounds. And with that, I’d like to turn the call over to Doug.

Thanks Sean, and good morning, everyone. As expected, the COVID-19 pandemic continued to weigh heavily on our results in Q1. Revenue was down 50% in the quarter, totaling $327 million versus $659 million in Q1 of last year. Versus last year, Distribution revenue in the quarter was down 62% to $152 million. Our Distribution bookings were down 55% year-over-year in the quarter, with air bookings down 52% and lodging, ground and sea bookings down 72%. Gross air bookings were down 80% and 73% year-over-year in January and February, respectively, and up 4% year-over-year in March. We report bookings on a net basis, meaning net of cancellations. Net air bookings were down 79% and 69% year-over-year in January and February and up 409% year-over-year in March as cancellations were exceptionally high in March last year. We believe comparisons to 2019 may provide more useful information. Compared to 2019, gross air bookings were down 82%, 77%, and 69% in January, February, and March, and net air bookings were down 81%, 76%, and 66% in those same months. As expected, domestic leisure bookings have recovered faster than both international leisure and corporate bookings and represented 50% of our total bookings this quarter. Domestic leisure bookings are our lowest booking fee segment. Now that cancellation activity has normalized, the impact of this mix shift on our average booking fee can be more easily seen. We expect a negative mix impact on our average booking fee to persist until international and corporate bookings make a more meaningful recovery. Our IT Solutions revenue was down 36% year-over-year with passengers boarded down 55% in the quarter. As a reminder, IT solutions has a higher percentage of revenue not tied to travel volumes than Distribution and Hospitality Solutions. Hospitality Solutions revenue was down 29%, with a 16% decline in CRS transactions. Because our property mix, particularly in the enterprise segment, is less dependent on city centers and conference venues, we continue to see relative outperformance in our Central Reservation System Transactions versus Distribution bookings and passengers boarded. EBITDA and operating income were negative in Q1, reflecting the impact of the COVID-19 pandemic. The year-over-year decline in revenue was partially offset by declines in Travel Solutions incentives expense and Hospitality Solutions transaction fees due to lower volumes, headcount expenses due to the ongoing benefit from cost savings initiatives we previously implemented, and technology expenses due to the lower transaction volume environment. Additionally, our provision for expected credit losses, which impacts SG&A decreased by $39 million versus the prior year quarter. Net income and EPS were also negative in the quarter. Year-over-year, the declines were driven by the factors impacting operating results, as well as increased interest and a lower tax benefit. In addition, free cash flow was negative $204 million in Q1. As we mentioned on our last quarterly call, we expect Q1 free cash flow to be the lowest of any quarter in 2021. This is primarily due to the timing of large working capital items that will have offsetting benefits over the rest of the year, as well as $8 million in severance. We ended the quarter with a cash balance of $1.3 billion and have no significant near-term uses of cash. Turning to slide 11. In response to a routine comment letter from the SEC regarding our calculation of adjusted EBITDA, we are no longer excluding amortization of upfront incentive consideration from our adjusted EBITDA calculation. We believe this change will provide enhanced transparency and facilitate analysis of our company. This change has no impact on revenue, adjusted operating income, adjusted EPS or free cash flow. We will continue to break out amortization of upfront incentives in the operating section of our cash flow statement. As a reminder, in the GDS industry, travel agency incentives are typically paid over time with bookings, as well as upfront at contract inception or renewal. In the latter case, typically there is a related customer volume commitment. From an accounting perspective, these upfront cash incentive payments are amortized over the life of the contract. Amortization of upfront incentive consideration was $78 million in 2018, $83 million in 2019, and $75 million in 2020. Over the medium-term, we expect annual amortization of upfront incentive consideration to be between $50 million and $70 million. Turning to slide 12. As we have previously discussed, we began migrating our systems to the cloud and transitioned to full adoption and maturity of agile development methods, resulting in a decrease in the percentage of our technology spend eligible for capitalization under U.S. GAAP. In 2018, we capitalized 24% of our total technology spend. In 2019, we capitalized 9%, and in 2020, just 5%. This shift in capitalization mix temporarily burdened our P&L with both the increased portion of technology spend that is expensed in current periods, plus the depreciation and amortization from previous capitalization. Going forward, we expect our capitalization rate to remain at 5% or below. Therefore, we expect our CapEx to remain low or to range between $50 million and $90 million annually over the next five years. Because of this, we are also seeing our depreciation & amortization expense fall. We expect annual D&A to fall from about $200 million in 2021 to $110 million by 2025, which would provide earnings leverage over the medium-term. With that, I will turn it back to Sean.

Thanks Doug. Despite the pandemic, we have continued to make critical investments, including in our products and our technology migration. With the $200 million annual cost reductions we’ve already made, if revenue returns to 2019 levels, we’d expect to have 5 percentage point higher EBITDA margins all else equal. We continue to expect our annual cost savings to increase to $275 million by 2024, which would further increase our margins again assuming all else equal. As travel demand returns, we expect to be positioned with larger addressable opportunities, more advanced, innovative products, and faster sales cycles and product deployments. I’ll end by once again thanking my Sabre teammates around the world for their dedication and hard work. And with that, Operator, I’d like to open up the call for questions.

You have a question from Jed Kelly with Oppenheimer.

Hey. Great and thanks for taking my questions and appreciate all the prepared remarks and the slides. I guess a couple ones, but I guess, the first one for you Sean, Sabre Delta announcement yesterday. So can you just help us understand like how it’s announcement, like Delta? How will actually see that translate into the financials sort of like on the revenue line?

That's a great question, Jed. It relates to our efforts in the marketplace regarding technology improvements and product offerings. We're focused on helping airlines sell their products and services in their preferred manner, whether it's through branded fares or ancillary sales. The storefront enables us to facilitate this for airlines like Delta and American Airlines, similar to what you see on their websites. Economically, we've discussed aligning interests, particularly between airlines and our technology. As we enhance our technological capabilities, our support in helping them sell higher yielding tickets translates into increased revenue for us. Ultimately, we aim to demonstrate the value of our technology to drive future revenue growth.

We are seeing Expedia significantly enhance its marketing and advertising efforts. Will this benefit the online travel agencies, which I believe will generate a substantial amount of volume over the next 18 months? How will this be integrated?

Hey, Jed, this is Dave Shirk. Yes, we can. The technology is primarily based on the airlines' storefront capability that we discussed, which is essentially a digital shelf technology that includes a set of APIs. All of our customers and agencies will have access to this as part of the process. Therefore, if they choose to utilize the technology and continue exploring some of the retailing aspects that Sean mentioned, they can definitely take advantage of this opportunity.

All right. Okay. And just one more for me, can you talk about the pipeline for solution contracts over the next 18 months and how your Google Cloud contract is going to help you get some wins?

Yeah. Jed, again, it’s Dave. Regarding the pipeline, we continue to be engaged in discussions and have ongoing activities. I'm proud to say our LCC efforts are very strong, and you may have seen a recent Wall Street Journal article stating that over 90 LCCs are being launched worldwide. We aim to capitalize on that. Additionally, in the full-service sector, activity tends to fluctuate due to the pandemic and resource availability. However, we are actively involved, as evidenced by our recent successes with ASKY and Pacific Airlines, which demonstrate our progress in that pipeline.

And Jed, this is Sean. I’ll address the question about Google. To give you some context, when we discussed the deal, we covered aspects like cloud economics, technology transformation, deep integration of data analytics, AI/ML capabilities, and the innovation framework. Regarding the financial impact, expanding margins primarily relies on reducing infrastructure costs, which includes lowering compute expenses. This is crucial because it leads to the cost savings we aim to achieve. Additionally, we are reducing infrastructure requirements, further enabling us to save money. Internally, we also focus on improving efficiency in technology transformation and product development, particularly in relation to labor costs, as it allows us to operate more effectively. On the revenue side, we can integrate Google technologies with our existing revenue streams. For example, our smart retailing engine lets us enhance what we already have, making us more competitive for future business, both with full-service carriers and low-cost carriers. We can apply travel AI similarly by leveraging data analytics capabilities for our operational and commercial activities. Furthermore, we are collaborating with Google to combine our technologies, aiming to unlock new revenue streams. Currently, we have several initiatives underway that we’ll discuss in the future. Additionally, we are focused on co-developing new products that could be game-changing in the market. Rather than simply launching a major new product, we are enhancing our capabilities, which will position us competitively and ahead of our rivals.

Thank you.

You have a question from the line of Matthew Broome with Mizuho.

Thanks very much. Hi, Sean and Doug. Just a relative sort of geographic strength in the U.S., does that affect your sort of tactical investment allocation decisions, particularly in terms of your go-to-market assets?

It hasn’t changed significantly. We are currently in the recovery phase and experiencing some fluctuations. In the long term, it connects back to the initiatives I mentioned earlier, which are global. Similar to what we discussed regarding Delta Airlines, airlines worldwide are making similar efforts. Delta is achieving this through ATPCO, while others are using NDC. However, our perspective remains unchanged, focusing on long-term expectations as we move past COVID-19 and continue with the recovery.

Got it. And Hospitality Solutions continues to lead the recovery. Do you have any update on your plans to implement a full-service PMS system?

Yeah. I’ll let Scott answer that question for you.

Hey. Good morning. Yeah. This is Scott. One of the things that we could do to believe is that a fully integrated Hospitality Solutions set built on a public cloud is going to be a winning proposition. Hoteliers are looking for a seamless and efficient way to drive more business in the market, that has to include a full-service PMS and we’re very much committed to doing that. Keep in mind we do have a very robust property management system in place today. We continue to invest in that and we continue to drive that product further into the market and upmarket. So very much that’s continues to be a strategic focus for us. We think this can be a key part of our strategy.

Perfect. And maybe if I could just squeeze one last one and just curious if you have any updates in terms of your internal realignment and how that’s progressing?

The team has performed exceptionally well. Reflecting on the actions we took in 2020, most of that was led by Dave Shirk in the Travel Solutions organization. We are now fully integrated into that new structure. Later in the year, we focused on filling new positions and achieving alignment. I can say that the teams are currently doing well, and we have achieved the savings we aimed for. Great job by the team.

Yeah. Good to hear. Thanks. Thank you very much.

Thank you.

You have a question from the line of Josh Baer with Morgan Stanley.

Thanks for the question. I have two, one on the Hospitality side, just wondering with, thinking back to all the enterprise wins and announcements over the last year. Just wondering like where we are on implementations and timing of when we see some of that momentum impact revenue?

Josh, let me start by just mentioning the Louvre deal that we announced last quarter, we actually worked with them for a few months before we announced a deal to talk about how quickly we wanted to get that implemented. In fact, we don’t talk as much about tech transformation on the Hospitality side. But do keep in mind, we’re going through the same transformation. Our first version or instance of our CRS platform on the Google Cloud will be a Europe instance and it goes live this quarter. And we’re doing that so we actually can start to migrate their properties onto our Google instance of CRS this summer and into the fall to be complete next year. So you take that and a number of the other things that we have in the pipeline, we think we’re going to start having a pretty steady stream of growth in the enterprise space over the next six months to 24 months.

I want to mention that our partnership with Google, particularly regarding the cloud, is crucial. Our ability to establish landing zones and regions globally, which enhances both latency reduction and redundancy, is vital for our customers. Louvre exemplifies how significant this partnership is and allows us to approach things from a fresh perspective.

Great. And I did have a few on free cash flow and breakeven. I am wondering if you have an update to the demand threshold to breakeven versus 2019 travel demand that we’ve got in the last couple of quarters?

Nothing has changed regarding those thresholds; it still ranges between 56% and 67% of 2019 levels. Obviously, those targets depend on the mix.

Right. In this quarter, can you provide any additional context on the large working capital items that are impacting free cash flow? I'm curious about the extent of their impact and if there are any insights on the seasonality and its effect on free cash flow as we progress through the year.

We haven’t given any guide from the value of it. But I can tell you that there’ll be a meaningful reduction in the use of free cash flow as we move through the balance of the year.

You have a question from Neil Steer with Redburn.

Hi. Thanks very much and thanks for taking the question. It seems from the data that you’ve given us that the sort of the blended reservation fee was probably down around about 25% on your VAT order. Can you firstly comment on that? And is that totally a mix effects or has there been any underlying sort of price pressure that’s crept through as deals been renegotiated thing? Thanks.

No. All the mix effects? That’s what it is.

Okay. And then, in response to one of the earlier questions, you mentioned that obviously, with the Delta contract that you announced the other day, that the reservation fee you get is actually tied in some way to the upsell of the ancillaries, which is clearly moving towards, obviously, aligning the reservation fees to I suppose the value of the ticket? Is this a meaningful change in the strategy and how do you underpin and made sure that we don’t move sort of the more significantly to a pricing structure that’s related to the value of the tickets that’s being sold or indeed, is that how you want to take the pricing structure?

Yeah. I mean, if you go back now, this is one thing that we have talked about for a long period of time is you have to look at it from a value-based perspective. And this is a clear step in the direction where we’ve wanted to go, because when you’re investing in technology, you’re trying to differentiate your capabilities versus your competition and we do believe this is what’s taking place in drives to the agreement that we have with Delta Airlines. I would also say the same thing as it relates to the Lufthansa agreement that there are incentives associated with technology advancements that allow them to get to higher yield traffic. So, again, this is very much in line with what we want to do, because we do believe that aligns the parties across the ecosystem.

Okay. Thanks. And just one final one on Radixx, obviously, the compromise that you announced to the system last week, can you give us an update on that please?

Sure. Neil, this is Dave. So we had the incident that we talked about, this is our Radixx subsidiary. That particular piece was, as we noted in our public statement, was a malware incident and it affected roughly 20 airlines, everyone is back live and that was a progression through that particular process. And we are in active contact with them working through continued movement forward in the environments that we’ve now reestablished around that piece of it and some of the changes that we’ve made to that environment.

Yeah. And you should imagine, Neil, we were very apologetic for what took place. An important thing to note is, they operated throughout the impacted timeframe. What really was happening was the ability to sell tickets into the future. So, again, the team said, work with the customers to work through what we needed to address.

You have a question from the line of Victor Cheng with Bank of America.

Thank you for taking my question. I have three inquiries. Sean, regarding the smart retail engine you mentioned, do you have any customers ready prior to its launch? Moving on to NDC, you’ve indicated ongoing progress in certifications and the number of deals signed. What percentage of bookings are you anticipating in the upcoming year? Should we expect economics to be similar to traditional GDS distribution channels, especially considering your earlier point that technology and NDC will demonstrate their value over time rather than merely representing a change in the distribution model? Lastly, on the topic of recovery, you shared insights about regional mix and pointed out a stronger domestic leisure recovery, but could you provide more details about the corporate recovery you’re observing, especially in April? Thank you.

So let me start the process, Victor, here. On the smart retail engine, all of our focus on this has been to rollout the set of products in the spring timeframe that continues to move along and is on track. As we noted last quarter, first pieces of some of the alpha and beta pilot work were already taken live in testing at Etihad Airlines and this quarter we took further capability sets for pilots that are live and being tested at LATAM in several markets. And so we are optimistic that this particular piece will help in the retailing elements as part of the recovery with airlines. So we are already engaged in pipeline discussions with folks that are interested in the technology and we’ll give you guys more updates on that piece as we get further into the spring and the fall cycle of that. So that I think addresses your first question. On your NDC question…

Yeah.

You covered a lot of ground there. Let me attempt to address some of those points, and then I’ll ask Sean and Doug to comment on the regional and domestic aspects. Regarding NDC, in response to your question about the percentage of bookings in the shift and potential changes, NDC transactions are currently very minimal. This is tied to the pandemic, as you can imagine. We’ve recently gone live with Qantas in Singapore, showcasing some of our efforts, but the transaction volume remains extremely low at this time. Moreover, most airlines engaged in NDC were already advanced in their initiatives before COVID. The majority have paused or completely halted their NDC activities due to the pandemic and related resource and cost pressures. We are continuing to progress on our roadmap, but it will take time to fully understand and respond to your question. This is why Delta's announcement is so significant, as it's a leading retailing effort that will encourage other airlines and agencies to start their retailing journeys and consider alternative approaches in the current environment. We’re creating several pathways for them to explore. Now, regarding the regional and domestic element.

Yeah. This is Sean. I'll take that question. I want to address your business specifically, but let me provide some context first. Right now, everything hinges on confidence. This is clearly evident in the U.S. domestic market. As vaccine rates improve and testing is robust, we are starting to see demand pick up, particularly in the leisure market. As I noted in my prepared comments, there are early signs of recovery in corporate travel. At the start of the year, corporate travel was down by approximately 90%, but we have observed about a 15 to 20 percentage point recovery since then. This reflects the growing confidence and things beginning to move forward. We analyze specific sectors to understand the variations in recovery rates, and we’ve observed positive movement from the beginning of the year. As a result, airlines are adding more seats, which is a key trend in the U.S. market. To expand on this, we consider the balance of recovery, especially regarding international travel, which, as Doug mentioned, is where we generate more profit and have higher margins. International standards play a critical role in bilateral discussions between countries. At Sabre, along with other travel CEOs, we are collaborating with the Biden administration to establish standards and open travel corridors. We've seen developments like the Hong Kong-Singapore arrangement, the Trans-Tasmanian corridor, and recent announcements from Greece and the U.K. as they outline their travel reopening plans. As we monitor shopping trends, we observe a rise in bookings. We are confident that demand exists, and this cycle of adding capacity will continue. It’s a gradual process, step by step, day by day. This should provide you with some insights into the recovery we’re witnessing, particularly on the business side, which is essential.

Got you. Thanks. Thank you. That’s very clear.

And there are no additional questions at this time. I will turn the call back over to Mr. Menke for closing remarks.

Great. Thank you very much. Once again, I would like to thank my Sabre employees for everything that they continue to do day in and day out and for the people on the call, investors that are focused on Sabre. Thank you for your focus on the company and look forward to talking to you again.

Thank you again for joining us this morning. We appreciate your interest in Sabre and look forward to speaking with you again soon.