Sabre Corp Q1 FY2022 Earnings Call

Good morning and welcome to the Sabre First Quarter 2022 Earnings Conference Call. My name is Daniel, 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 President of Investor Relations, Kevin Crissey. Please go ahead, sir.

Thanks, Daniel. Good morning, everyone. Thank you for joining us for our first quarter 2022 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 recovery trends, benefits from our technology transformation, and commercial and strategic arrangements, our financial outlook and targets, expected revenue, costs and expenses, cost savings, margins, 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 in our SEC filings, including our 2021 Form 10-K. Throughout today's call, we will also be presenting certain non-GAAP financial measures. References during today's call to Adjusted Operating Income, adjusted net income, adjusted EBITDA, adjusted EBITDA margin, adjusted EPS, and Free Cash Flow have been adjusted to exclude certain items. The most directly comparable GAAP measures and reconciliations for non-GAAP measures are available in our earnings release and other documents posted on our website at investors.sabre.com. Participating with me are Sean Menke, Chair of the Board and Chief Executive Officer, Kurt Ekert, our President, and Doug Barnett, our Chief Financial Officer. Scott Wilson, our President of Hospitality Solutions, will be available for Q&A after the prepared remarks. And with that, I will turn the call over to Sean.

Thanks, Kevin. Good morning, everyone. And thank you for joining us today. It is no secret that the past two years have been a difficult period for the entire global travel ecosystem in which we reside. The beginning of the year was a continuation of those headwinds driven in large part by the rise in Omicron variant cases. Yet, as history has shown, when we see a decline in COVID-19 cases and restrictions are lifted, travel recovery can be robust. Since the decline in COVID-19 cases earlier this year, we have been increasingly encouraged by the trajectory of our business and have seen consistent sequential improvement in each of our key volume metrics week over week since January. Travel trends are improving globally, and our business mix is normalizing towards pre-pandemic levels, resulting in higher unit profitability. The recovery, which has historically been driven by domestic leisure travel, is being supported by strong improvements in both international and corporate travel. Accelerating activity in each of these sectors made April our best month compared to 2019 in terms of bookings since the onset of the COVID-19 pandemic. Recent forecasts by several airlines and travel agencies have been bullish regarding the outlook for travel recovery, supporting the trends we're seeing. Additionally, we're making solid progress towards our technology transformation, which remains on schedule to deliver expected significant savings by 2025. We believe our technology transformation will be one of the primary facilitators of higher margins and cash flow for Sabre when completed. Bottom line, we're more bullish about Sabre’s near-term recovery outlook than at any point since the pandemic started, and our medium-term outlook continues to suggest the opportunity to drive EBITDA, EBITDA margin, operating income, and Free Cash Flow higher than 2019 levels. Turning to Slide 5. You can see an overview of the topics Kurt, Doug, and I will cover on today's call. I'll start by providing a further update regarding the ongoing travel recovery, including specific booking, passengers boarded, and Hospitality CRS transaction trends. I'll dig a bit deeper into trends than in past quarters to help provide additional perspective regarding the breadth of the current recovery. Kurt will then provide an update regarding the solid progress we made in the first quarter on our technology transformation. Finally, Doug will walk you through the results of the quarter and he will close with our financial outlook for 2022 and 2025. Before I start, I do want to thank my Sabre teammates around the world. As we put the challenges of the past two years behind us, I want to again express my appreciation for all that they are doing to serve our customers, support each other, transform our business, and enable a new marketplace for personalized travel. Turning to Slide 6. In April, our key metrics, namely distribution, gross air bookings, IT Solutions, passengers boarded, and hospitality gross CRS transactions were all at the highest level of recovery versus 2019 since the COVID-19 pandemic started. March 2022 was the second-best month compared to 2019. Hotel CRS transactions continue to lead and, in April, were 112% compared to the same period in 2019. On the same-hotel basis, community CRS transaction volumes in April were about 82% of 2019. IT Solutions passengers boarded have recovered 80% in April versus the same period in 2019. Finally, distribution gross bookings recovery was 53% in April versus the same period in 2019. If we look at Sabre and the GDS industry recovery excluding Expedia in both periods, our distribution gross bookings recovery in April was 64%, slightly better than the industry for the month. Looking at the industry geographically, after a slow start in January due to the Omicron variant, the global travel recovery has been gaining substantial momentum. In particular, we're seeing strong recovery trends in parts of the Asia-Pacific region. I'll provide more details regarding this trend in a few minutes. Turning to Slide 7, domestic leisure travel continues to lead the recovery. In April, with the data through the 24th, the gap between the recovery in corporate travel management companies’ bookings and non-TMC bookings was largest in domestic markets at about seven percentage points. However, the overall recovery percentage versus 2019 was also greatest in the domestic market for both managed corporate at about 66% and leisure travel at about 73%. International travel has recovered to about 58% of 2019, with short-haul travel being the least recovered due to a slower recovery in Asia-Pacific. Turning to Slide 8, the chart on the left shows the bookings recovery of domestic travel since the beginning of 2021 booked through corporate TMCs and other domestic bookings, which largely represent leisure travel. As I've indicated earlier, domestic leisure travel has recovered more significantly than corporate. However, as the graph on the right details the difference in the recovery between corporate and leisure has narrowed significantly as corporate travel has accelerated. We are also happy about what we're seeing in terms of the breadth of the corporate recovery from a sector perspective. Though still below the total recovery of most other sectors, the financial, consulting, and IT sectors, which are historically heavy travelers, ended Q1 accelerating rapidly, faster than at any point since the pandemic started. These sectors also ended the quarter at their highest levels of overall recovery since the pandemic began. Turning to Slide 9. As you'd expect, airlines around the world have been trying to match their flight schedules with anticipated demand while factoring in potential global travel restrictions. This approach resulted in a capacity mix that was at least skewed towards domestic capacity, which is less profitable for Sabre, and away from international capacity, which is more profitable for Sabre. However, we are now beginning to see this reverse back towards the pre-COVID-19 pandemic capacity mix as borders reopen and testing requirements are loosened or removed. On Slide 10, we provide a heat map showing Sabre’s top 20 countries in 2019 based on point-of-sale bookings and how each has been recovering weekly since the beginning of the year. The first takeaway from the slide is that an increasing number of countries are moving out of the red and into the green, which is a good indicator of a geographically broadening recovery. With the exception of Russia, all of our top countries in North America, Latin America, and EMEA are more than 50% recovered. Countries in the Asia-Pacific region generally continue to be slower to recover than the rest of the world, but even there we're seeing improvements. The second takeaway is that as travel restrictions are reduced, bookings tend to accelerate very quickly. We noted this effect on prior earnings calls, but the data for Australia is another example. On February 7th, Australia announced it would reopen to tourists starting February 21st. Quickly, the bookings recovery in Australia went from 34% of 2019 on January 31st to 66% by mid-March to 82% by April 18th. I'll conclude where I started. Travel trends are improving globally, and our business mix is normalizing towards pre-pandemic levels, resulting in higher unit profitability. Based on the most recent trends, we are optimistic about the outlook for our business and continued recovery. And with that, I'd like to turn the call over to Kurt.

Thank you, Sean, and hello, everyone. Please turn to Slide 11. On last quarter's earnings call, we described how our technology transformation, including mainframe offload and migration to Google Cloud, is expected to drive a strong return on investment of over 30% in an NPV north of $300 million. We also detailed how the tech transformation is expected to prevent a 50% increase in hosting costs and avoid large capital expenditures to refresh our servers and data centers. Finally, and perhaps more importantly, we highlighted the many product enhancements the tech transformation is expected to unlock, including faster time-to-market, enhanced stability and security, a globally distributed cloud footprint, reduced latency, easier customer deployments, and lower costs of development. I am pleased with the progress we made in the first quarter toward our 2022 technology milestones. Our tech transformation remains on track to achieve stated goals by the end of 2024. As a reminder, our two key technology milestones for 2022 are to exit our Sabre-managed data centers and migrate to the Google Cloud, and to offload the Passenger Name Record, a customer reservations database from the mainframe to Google Cloud. Specifically, in the first quarter, we increased our travel agency shopping volumes in Google Cloud from about 5% at the start of 2022 to about 50% between Google Cloud and AWS by the end of the quarter. Additionally, all airline shopping is now on Google Cloud. In the first quarter, we also launched new Google Cloud regions in Australia and Singapore, enhancing our global footprint and allowing for faster response times. Finally, we increased our share of service on Google Cloud by 10 percentage points since the fourth quarter of 2021. As of March 31st, we had 28% of our total servers in Google Cloud Platform and expect to end the year with 65% of servers in Google Cloud and 90% of servers in a public Cloud.

Thanks, Kurt, and good morning, everyone. Turning to Slide 12, our financial results in the first quarter of 2022 came in better than expected as travel recovery accelerated after a slow start in January. As I'll describe shortly, we also benefited from $24 million in previously deferred IT Solutions revenue recognized in the first quarter related to an IT Solutions customer located in Eastern Europe. Total revenue was $585 million, a significant improvement versus revenue of $327 million in Q1 last year, primarily due to continued recovery in global air, hotel, and other travel bookings. Distribution revenue totaled $343 million, an improvement versus revenue of $152 million in Q1 2021. Our distribution bookings totaled $65 million in the quarter, compared to 2019; net air bookings recovered to 29%, 45%, and 52% in January, February, and March, and 42% in the quarter as a whole. Our average booking fee in the first quarter was $5.28 versus $4.96 last quarter, $4.59 in the third quarter of 2021, and $3.84 in the second quarter last year. The sequential improvement from the fourth quarter is consistent with a broadening of the recovery into more profitable regions and types of travel. Our average booking fee was also aided by reduced cancellation activity in the quarter. There are a couple of puts and takes in IT Solutions this quarter. Overall, IT Solutions revenue totaled $191 million in the quarter, an improvement versus revenue of $137 million last year. This result includes $24 million in revenue recognized in Q1 2022 related to a customer located in Eastern Europe for services provided and fully paid for. The revenue had previously been deferred but became fully recognizable when a change in circumstances assured it was no longer probable that the revenue would be reversed. Additionally, the first quarter of 2022 includes only two months of revenue from AirCentre, as we sold this airline operations portfolio to CAE for $392 million at the end of February. Passengers boarded totaled $129 million, representing a 69% recovery versus the first quarter of 2019. Hospitality Solutions revenue totaled $56 million, an improvement versus revenue of $42 million in Q1 of 2021. Central reservation system transactions were at 100% level of 2019 and totaled $23 million in the quarter. Adjusted EBITDA showed meaningful year-over-year improvement and was slightly positive in the quarter, reflecting the $24 million revenue recognition item just discussed but, more importantly, the continued recovery from the COVID-19 pandemic. This significant year-over-year improvement in revenue in the quarter was partially offset by increased Travel Solutions incentives expense and Hospitality Solutions transaction fees due to higher volumes. As expected, our technology costs, selling, general, and administrative expenses increased due to volume recovery trends and increased labor and professional service expenses primarily related to the technology transformation. Operating income, net income, and EPS all improved versus the prior-year quarter. Free Cash Flow was negative $156 million in the first quarter. As we noted on our Q4 earnings call, the cash flow impact of the Omicron variant largely affected Q1 2022 rather than Q4 of 2021. Additionally, annual incentive compensation was paid in Q1 2022 and contributes to the seasonality in our Free Cash Flow. We continue to expect revenue, earnings, and Free Cash Flow to follow a pattern similar to what we experienced in 2021, with the back half of the year stronger than the front. We also continue to expect Free Cash Flow to turn positive during the second half of 2022. During the first quarter, we refinanced $625 million or about one-third of our term loan B facility maturing in early 2024, which extended the maturity to 2028. Subsequently, we also entered interest rate swaps related to about $200 million of this debt, converting floating rate to a fixed rate basis. In total, our debt is now about 60% fixed rate and 40% floating on a net basis. We ended the first quarter with a cash balance of about $1.2 billion. Turning to Slide 13. Although cosmetically, the slide looks different than the last quarter, our 2022 financial outlook remains the same. We removed the AirCentre scenarios as the sale of AirCentre officially closed in Q1. We also included the incremental technology transformation and SG&A investments detailed last quarter. Looking ahead to Q2, we do not expect a repeat of the $24 million revenue recognition benefit from our Eastern Europe IT Solutions customer. And of course, AirCentre's result will not be included in our financial results. We also expect our average booking fee in the second quarter to be between the $4.96 result in Q4 2021 and Q1 2022's $5.28, but generally trending higher over time as our mix continues to improve. For perspective, excluding Expedia bookings, our 2019 average booking fee would have been 10% to 15% higher than our reported $4.82. Finally, subject to closing, we expect to make an $80 million investment in American Express Global Business Travel during the second quarter. For clarity, this payment is an investing cash flow and therefore is not considered part of Free Cash Flow. Turning to Slide 14. Although unchanged from last quarter, we've included our 2025 financial targets in this presentation again as a reminder of our financial objectives. We expect our revenue, profitability, and Free Cash Flow to grow in the short term as travel recovers globally. In the medium term, the investments we're making in technology are expected to create the opportunity for unit cost savings and higher margins than pre-pandemic levels by 2025. We continue to believe this opportunity is not fully reflected in the market today.

Please stand by while we compile the Q&A roster. Our first question comes from Matthew Broome with Mizuho.

Your line is now open. Thanks and hi, Sean, Kurt, and Doug. So definitely appreciate the insight in terms of the corporate narrowing the gap with leisure. Going forward, do you expect the corporate and leisure recovery to sort of move in lockstep with each other now, or is there any challenges that could cause them to diverge again? And otherwise, do you expect corporate volume to sort of complete its recovery in the same timeframe as leisure travel?

Matthew, I'll kick this off and thanks for joining us. I think the encouraging thing that we're seeing right now is we talked about really over the last year and a half what we've seen on the leisure side of the equation. As we look at corporate travel right now, yes, we're encouraged, but I think the underlying piece of this is that corporations are happy to have their employees back on the road, and that's a very important step. So as long as we do not see any other cases of COVID outbreaks, we believe that the momentum is there. The discussions we have with the travel management companies, as well as some of the details that we're providing relative to specific sectors within the business marketplace, it's all moving towards getting back on the road more, unless there's a hiccup relative to COVID cases. I think we're moving towards recovery. It's one thing that we talked about as it relates to a short-term investment opportunity for Sabre: it's playing the recovery side.

Okay. And then can I also ask about hiring? What are the areas that you're looking to sort of point out to? To what extent might the technology transformation be reliant on your hiring plans? And how are you finding the recruiting environment right now?

Let me start at a high level, then I am going to pass it off to Kurt to talk about it. There are a couple of components that are there. One, we outlined in the call in February that, as it relates to just inflationary pressure on wages, we had baked in additional expenses. So as we look at the balance of the year, we don't see anything there as it relates to just hiring in general. I would actually see not only the tech side but even if you look at some of the corporate functions, be it finance, HR, there continues to be a competitive marketplace out there. The team has done a really good job managing the tech side of the equation, but that doesn't mean that there's no pressure out there, and I'll let Kurt provide a little color on that.

Thanks, Sean. As Sean indicated, we are fully staffed, so we're meeting all of the needs we have today in terms of business as usual as well as the tech transformation and other investments we're making. What's happened globally is the regional or domestic differences because of work-from-anywhere have diminished. And we certainly have to fight to attract and retain people. We are doing that with respect to compensation, ensuring that we have the right culture, and making sure that we have investments in innovation that are exciting and impactful for the folks we're hiring and retaining. So we're managing it well to date. There is some risk going forward for us and for everybody in the marketplace, but we feel good about where we are.

Our eyes are wide open is what it boils down to. It’s out there. The team is doing a good job of managing it, and we'll continue to do it throughout the year.

Alright. Thanks very much, guys.

Thank you. Our next question comes from Mark Moerdler with Bernstein Research. Your line is now open.

Thank you. That's Moerdler, but that's right. I'm going to ask you a high-level question. And obviously, barring any macro issues, macro issues can come and blow everything up here and change everything, with 42% of 2019 distribution numbers, 69% of 2019 IT Solutions, and 100% of hospitality, triangulating that, are we on track in the directionality of the 60% recovery scenario on Page 13? Or might it be too over or under in terms of the directionality there? And then I've got a follow-up.

Mark, thanks for joining. Again, as we look at the trajectory of what's taking place, we're very positive about those trends that are there. We provide an enormous amount of information relative to those trends. And it's why we put out the goalposts at different levels out there that you're capable of understanding where it goes. But where I sit right now, I'm comfortable relative to the trends that are taking place, allowing us to continue to see continued improvement in our financials and the recovery in the near term.

Okay. This is as close as I can get. I appreciate I know there's a lot of moving parts. Next question. How does inflation and rising fuel costs theoretically affect volume recovery, or does it not?

One thing to note regarding Sabre is the importance of bookings and what is happening with them. It's essential to remember that the price of tickets does not affect Sabre; rather, it's the number of transactions that matter. My focus remains on capacity and bookings. If you consider the fourth quarter of 2021 and the first quarter of this year, the total global market recovery was only 50%. I believe there is significant potential for further recovery. We need to monitor inflation and fuel prices, as airlines may attempt to pass those costs along. If they are unable to do so, they may resort to discounts due to still limited capacity, which is favorable for Sabre at this time. There are many aspects to unpack here, but the trends we observe are positive. It's worth noting that, although there are frequent inquiries about the U.S. market, we operate globally. For instance, there has been considerable improvement in the Asia-Pacific region, which we consider when analyzing the overall situation.

Because of the way you get paid, you should be reasonably protected as long as the volumes keep coming back in, regardless of rising pricing, fuel, etc. right?

That's correct, Mark. And then the balance of it is what we continue to point to is, I must look at that you're filling up the capacity of where it was historically, and what you're finding is you're at that 50%, 60% on the international. You're seeing what's happening in Asia-Pacific. So there are other regions of the world where we actually get higher rates that are still recovering. Again, it goes back to what Doug was talking about as you look at where we were in the fourth quarter and the first quarter and rate. We gave you a number as it relates to 2019 Expedia, so people can begin to understand where rates can go as you normalize.

Perfect. One more question, if you don't mind. Pivoting to technology because the technology transformation is really going to become, I would argue, the next leg of the conversation as the world starts to return to normal. Given the fact you've been investing in transforming, not just simply lifting and shifting to the Cloud, but transforming the product itself to be true modern Cloud technology, etc., that should give you benefits from a development point of view, the client point of view, and the competitive point of view. Could you touch quickly on how big an advantage that should give you as this track technology transformation starts to kick in?

Yes. Thank you, Mark. Number one, we've talked about being fully in the cloud will reduce our cost to compute, which is pretty substantive for Sabre and for our clients. The most important thing probably is our ability to drive throughput and velocity of our product development dollars will be better than it's ever been. That means we'll be able to bring our products to market faster. We will be able to better serve the needs of the marketplace and our customers, and we will be the first of our competition fully in the cloud. So we do believe going forward, this will put us on the front foot in terms of being a leading innovation platform in the industry.

I'd like to add a few thoughts on what we're currently experiencing. We've been working on this for a couple of years, and we've highlighted that this year and next year are crucial for our progress. I'm really impressed with the achievements of our team. As they provide their updates, we see incremental improvements, and they are achieving greater savings than expected, which is encouraging for us. They are effectively managing this process. Additionally, Kurt mentioned that we are experiencing a shift in our development approach, which is becoming more rapid. This change will greatly benefit us in the future.

Perfect. That's what I was looking for. Thank you very much.

Thank you. Our next question comes from Jed Kelly with Oppenheimer. Your line is now open.

It's actually Simon for Jed. Thank you for taking my questions. Regarding the guidance and in relation to Mark's previous question, you have maintained your guidance changes while observing an improved international mix. Some of your struggling countries are recovering, and corporate performance is also improving, which is encouraging to see. Given this context, could you help us understand the factors or scenarios that might lead to a recovery in FY 22 that falls within the lower 50% range?

Look, we were not going to provide the specific financial results directly, but instead, we offered a different perspective through the benchmarks that show what the financial outcomes could be at various recovery levels. It's important to note that these benchmarks relate to air bookings recovery numbers; they do not pertain to PBs or Hospitality Solutions transactions. We certainly incorporated the guidance reflecting an improvement in the mix that we expected and is indeed happening. The best information I can provide is to refer to the benchmarks we shared, and I cannot offer any additional details beyond that.

Okay. And then I guess just a follow-up moving on a different subject, but just wondering your thoughts on how you're getting some of the consolidation among the low-cost carriers that we are beginning to see and how it could impact your business moving forward?

Well, I think the only consolidation that we're seeing in low-cost carriers is the proposed Frontier, Spirit, or I guess it was changed yesterday, the Spirit JetBlue. Again, if we look at it relative to what's taking place, I don't see a large impact whatsoever. Some of them use our technology, others seldom use competitor technology. I think this is a unique thing here in the United States. And again, it's here in the United States, but we think very globally.

Hi, thanks for taking my questions. A couple, if I may. So first of all, can you provide some color on the deferred revenue? Is it related to, you talked about Eastern Europe? As everybody to get to Ukraine and Russia, and what impact from Russia have you picked in for the rest of the year? And then second question regarding booking fee, can you help us understand the quarter-on-quarter improvement from Q4 to Q1? Presumably, there is no further improvement from Expedia. So is it largely due to better international mix? And then finally on top of that question, you talked about, you alluded to the effect that Expedia could be 10% to 15% higher booking fee for 2019. So with that, I get $5.30 to $5.50 average booking fee. Is that some kind of fee something that we can expect once the mix has normalized, or are there other moving parts that we should consider?

Let me begin from the end and then move back to your points. Regarding the NEF rate, there will likely be fluctuations until we reach a normal recovery because it varies based on the strength of suppliers, regions, and other factors. The improvement from Q4 to Q1 largely stemmed from better international business travel. We also benefited from lower cancellation reserves, but we do not anticipate this benefit continuing into Q2, which is why I provided a wide guidance range for that quarter. Looking at the long-term outlook, you are correct. The guidance I provided regarding Expedia and the NEF, excluding it, aims to indicate that as we move towards the more typical trends of 2019 in both domestic leisure and international business travel, we expect the NEF rate to increase by 10% to 15%. As we achieve a more standard business mix, we anticipate the NEF will continue to rise to the level you mentioned. Concerning your first question about deferred revenue, it relates to air flights. During the pandemic, many carriers sought relief on minimums due to reduced operations. We negotiated reductions in these minimums, allowing for an extension of the PSS contract terms in exchange. In 2021, we continued billing at the previous higher minimums while negotiating a contract extension at the lower minimums, meaning we received cash at the higher level but recognized revenue at the lower level, deferring the difference. Given the current situation in that region, we are no longer negotiating the PSS contract extension, so we must now recognize that revenue.

I see. That's clear. Thank you.

Thank you.

Thank you. Our next question comes from Josh Baer with Morgan Stanley. Your line is now open.

Great, thanks for the question. Wanted to revisit some of the 2025 targets. I think last quarter we actually talked about the underlying assumption for 90% recovery of corporate embedded in those targets. And the rest spilling over to leisure. Just wanted to confirm that was the right level and the right level for all three of the 2025 scenarios.

As we analyze the situation, Josh, we are relying on our best forecasts about the future and our current observations. We are noticing that corporate recovery is likely stronger than we initially anticipated. These assumptions will guide our forecasts for 2025 as we gather additional information. We are committed to providing relevant updates and can adjust as necessary, but we are confident in our current estimates and expected volumes for the future.

So is your assumption that there is a 90% corporate recovery across all three scenarios?

Yes.

That's helpful. It seems to suggest that there will be significantly different recoveries in leisure depending on the scenario, with the 120% scenario indicating substantial growth, particularly when considering the lost Expedia business. How can analysts and investors feel confident that the 100% or 120% scenarios are realistic? Given that removing $75 million in Expedia bookings from 2019 suggests a strong recovery, does this include anticipated market share gains? Any additional insights into the leisure recovery in those scenarios would be appreciated.

I think it's important to revisit something we mentioned earlier regarding our performance in April. If you exclude Expedia, our bookings recovery is exceeding the average from all GDSs. Additionally, I want to highlight the initiatives we've been working on, such as our recent partnership with Amex GBT, where the team is focused on areas of growth. We've also mentioned our collaboration with Hopper, which is rapidly growing and is one of the leading leisure-focused brokers at the moment. They are likely among our top 10 or 15 partners right now. It's easy to focus on one customer, but there is much happening overall, and Kurt, feel free to add anything.

I would simply say there are two dynamics there. One is what will be the long-term pace of market recovery? Will we recover leisure and corporate for that matter back to 2018 levels? Or in fact, will there be growth above those numbers? We don't know the answer and that's why we provide different goalposts. Second is, you mentioned here, and Sean mentioned, if you normalize out Expedia, we are seeing share improvement in the GDS business and our pipeline is quite robust.

And Josh, the other thing don't forget with regards to Expedia, you had the bookings numbers right, but remember the contribution to profitability was quite low from Expedia business.

This is all really helpful context. Appreciate it. And then last question just on the expense side of the 2025 targets, that's kind of embedded in the margin targets there. Just wondering if, like in those targets, you're leaving room to revisit some of the initiatives that were put on pause in 2020, like just thinking about the full-service property management solution or some of those other growth initiatives. If the demand comes back and the environment is really positive, and you are looking to advance, just wondering like if we're going to hear about incremental investments that might cause a revision to those margin targets or if there's projects and growth initiatives that are already factored into those scenarios. Thank you.

Thank you, Josh. Our long-term goal is to be the leading platform in this industry. The outlook we shared in the MYO includes several ongoing or prospective investments, which we believe will contribute to the growth of our business. We are confident that these areas will play a significant role as we move forward. Additionally, we are exploring other growth opportunities that are not currently included in the MYO. For instance, we see substantial growth potential in hotel distribution, an area where we previously had a solid presence in 2018. We plan to make further investments in this space, both in product development and commercial activities. Overall, the MYO outlines investments we haven't fully disclosed yet because we are not ready to share them with the market and our customers.

The important thing is to go back to just the MYO. I mean, we have a lot of heavy lifting that we need to do in the tech transformation; that's the primary focus as you look at the recovery. It really takes where we are in growing that out. As Kurt has joined the organization, we believe that he's identified some areas of opportunity, but that's going to be balanced relative to what the return will be on those types of investments. But right now, this organization is very focused on executing the plan that it has and hitting those targets that we have put out there in 2025 relative to the savings that are there because it's very much tech-driven.

Great. Thank you.

Our next question comes from Neil Steer with Redburn. Your line is now open.

Alright. Thanks very much. A couple of follow-on questions. If I may, you mentioned obviously the average reservation fee, $5.28 from $4.96, and you called out the fact that the impact of cancellations was a clear factor in the sequential improvement. Was that the major factor? Was that very much a minor factor in that sequential improvement?

I would say, looking into too much detail, the sequential improvement you see from Q4 to Q1 if you exclude the cancellation, there is a step-up, and I think that's where you were driving to understand. Is there a sequential step-up? To answer your question is yes. If you look at what Doug had stated as it relates to the fee going back to pre-COVID 2019 as the mix continues to improve, we do believe that there will be sequential improvement taking place.

Okay. Thanks. And then just thinking down into the detail, you're very kind. You gave us some flavor for the sectors where you're seeing recovery come through. You called out, I think, financial consulting and IT as two remaining below trends. Could you give us some guidance as to where those sectors are relative to 2019 levels? There are obviously the sectors that we have the most affinity to in this role, and just wondering how far lagging the market we are in terms of back to travel.

Yeah, Neil. I don't want to go into the level of detail, but again, I think the momentum we've seen is very positive, and that's why we called it out.

Thank you. I'm showing no further questions at this time. I would now like to turn the conference back over to Sean Menke for closing remarks.

Great. I'd like to thank everybody for joining us for our first quarter earnings call. I think the two things that are important to call out that we've been stating for a while is really the short-term investment opportunity for Sabre. We definitely are seeing the recovery and what's taking place with those organizations. As I continue to see what's happening here, I do get excited about the recovery. I think the other thing and it's why we keep talking about the technology and the work that's getting done is the long-term investment opportunity for this organization. So you couple those relative to what we're seeing as it relates to the recovery, the capability this organization has to continue to execute on this technology transformation. The past couple of years have been really tough, as everybody knows. But I'm definitely seeing the opportunity for a bright future. So again, thank you for joining us today.

This concludes today's conference call. Thank you for participating. You may now disconnect.