Sabre Corp Q1 FY2024 Earnings Call

Good morning, and welcome to the Sabre First Quarter 2024 Earnings Conference Call. My name is Gerald, 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 Senior Vice President of Investor Relations and Treasurer, Brian Evans. Please go ahead, sir.

Thank you, and good morning, everyone. Welcome to Sabre's First Quarter 2024 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 advise you that our comments contain forward-looking statements that represent our beliefs or expectations about future events, including the effects of cost efficiencies and growth strategies, distribution volumes, benefits from our technology transformation, commercial and strategic arrangements, our financial guidance and targets, free cash flow and liquidity, among others. All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today's conference call. More information on these risks and uncertainties is contained in our earnings release issued this morning and our SEC filings, including our Form 10-Q for the quarter ended March 31, 2024. Throughout today's call, we will also be presenting certain non-GAAP financial measures. References during today's call to 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 the earnings release and other documents posted on our website at investors.sabre.com. Participating with me are Kurt Ekert, President and CEO; and Mike Randolfi, Chief Financial Officer. Scott Wilson, EVP and President of Hospitality Solutions, will be available for Q&A after the prepared remarks. With that, I'll turn the call over to Kurt.

Thanks, Brian, and hello, everyone. We appreciate your interest in Sabre, and thank you for joining today's session. I'm pleased to discuss our first quarter, the success of which was a direct result of our team members' focus, unrelenting execution of our plan, and commitment to our customers. Earlier today, we reported Q1 financial results that exceeded our previous guidance and included solid revenue growth, a substantial increase in adjusted EBITDA, and significant margin expansion, which has been a continuing trend. We achieved commercial wins that drove additional distribution industry share gains, delivered next-generation products to meet our customers' needs and advanced our technology transformation to increase our speed and efficiency, all with a lower cost base. This progress leads us to increase our revenue and adjusted EBITDA guidance for full year 2024. Let me share the agenda for today's call. On Slide 4, you can see an overview of the topics that Mike and I will cover. First, I will review our Q1 business highlights and accomplishments. Next, I'll provide a brief update on our technology transformation and highlight some of the recent product and commercial wins that our global team has achieved. Finally, before handing off to Mike, I'll close with a snapshot of our growth strategies and the positive momentum they are driving. Mike will then take you through the financial results for the first quarter and provide an update to our 2024 guidance. Before I move on, my team and I extend enthusiastic congratulations to Gail Mandel on her election as Sabre's new Board chair. Gail's vast operating experience and depth of travel industry knowledge have proven invaluable to Sabre since she joined the Board in April 2020. We also extend deep gratitude to Sean Menke for his leadership as CEO and Board Chair during an unprecedented time in Sabre's history, and we wish him well. Now let's turn to Slide 5. We achieved solid revenue growth driven by traction in our growth strategies and a higher average booking fee, combined with our cost structure improvements to more than double Sabre's adjusted EBITDA margin versus the first quarter of 2023. These achievements drove better-than-expected adjusted EBITDA to be well above our guidance for the quarter. On to Slide 6. As a reminder, we have four key strategic priorities that drive our long-term growth and form the foundation of our resource allocation and decision-making. First, generating positive free cash flow and deleveraging the balance sheet remain important financial objectives. The significant improvement in our adjusted EBITDA in the first quarter keeps us on track to generate positive free cash flow in 2024. We also took important steps during the first quarter to further align our debt maturities over the next few years with our projected free cash flow expectations. We now plan to repay the remaining 2025 maturities using cash from our balance sheet. On our second priority, achieving sustainable long-term growth, we continue to grow our share of air distribution industry bookings in the first quarter, which I will touch on in greater detail in a moment. Turning to Hospitality Solutions. Our team delivered strong financial results in the first quarter and is executing on the interim milestones we have established with Hyatt to bring them on to our SynXis CRS platform. Implementation is expected to begin this quarter within just 12 months of our contract announcement. Our third strategic priority is to drive innovation and enhance our value proposition. We recently announced the development of Sabre Red LaunchPad, alongside our launch partner, Internova Travel Group. This new booking solution supports NDC, low-cost carrier and traditional EDIFACT content options, while giving agencies more choice and flexibility in how they manage their workforces. Additionally, we continue to invest in resources focused on each of our six growth strategies that are designed to provide intelligent retailing and next-gen distribution technology. I will provide proof points on how we are delivering results from these in just a moment. Last, our team once again delivered on our technology transformation goals, and we expect to achieve our operational and cost savings objectives by year-end 2024. Turning to Slide 7. Travel Solutions delivered a solid first quarter that helped drive financial results above our previous Q1 guidance. Distribution industry share expansion, strong growth in our lodging, ground and sea business, and continued improvement in the average fee from a richer booking mix helped drive a $74 million or 64% year-on-year increase in Travel Solutions adjusted EBITDA. On to Slide 8. As we highlighted throughout 2023, Sabre is growing its share of distribution industry bookings. As you can see, our share in Q1 '24 expanded for the fifth consecutive quarter on a year-on-year basis. In addition, our share in Q1 '24 also increased on a sequential basis from Q4 '23 as corporate travel improved in the quarter, especially relative to the trends we experienced late last year. Turning to Slide 9. We are proud of the consistently strong results our Hospitality Solutions team delivered in the first quarter. Total revenue was up 7% year-over-year on solid growth in CRS transactions during the quarter. In addition, adjusted EBITDA margins grew approximately 10%, and overall adjusted EBITDA increased by $11 million versus Q1 '23. As we mentioned last quarter, the SaaS operating model inherent in our Hospitality Solutions business generates high recurring revenue. We believe consistent revenue growth, 81% recurring revenue, a steady margin expansion trend, and a strong value proposition for a growing customer base of hotel operators seeking enhanced IT capabilities support an improving value trajectory for this business. Please turn to Slide 10. Our technology transformation remains on course to achieve our cost savings targets and technology goals by year-end 2024. Further, we continue to expect an overall technology cost reduction of greater than $150 million in 2025 versus 2023 from these efforts. As the chart indicates, our migration to Google Cloud continues to drive improved efficiency in our business. In the first quarter, our unit cost of compute again declined by nearly 20% from the first quarter 2023 and was down approximately 55% versus 2019. To enhance productivity, we introduced generative AI tools to approximately 800 of our software engineers during the first quarter. We expect this initiative to further accelerate our product development throughput and speed innovation. Overall, we believe our partnership with Google and our commitment to investing in innovation will continue to deliver modern technology solutions that meet the changing needs of our customers. Please turn to Slide 11. Once again, our sales and commercial teams delivered a number of significant business wins during Q1 that highlight how Sabre's intelligent retailing and modern distribution solutions consistently help our customers solve the complexity of today's travel marketplace. Following are some examples. In distribution, our expanded relationship with Air India continues to support bookings growth and industry share gains. In addition, we signed important renewals with both Southwest Airlines and Alaska Airlines, two carriers posting above-market rates of growth in overall distribution bookings. On new distribution capability or NDC, we continue to accelerate investments to offer more robust functionality to a growing number of carrier and agency partners. Recently, SAP Concur integrated Sabre's Offer and Order APIs, making Sabre the first GDS provider to power NDC for SAP Concur and the corporate travelers that it serves. TMCs and corporations using Concur Travel are now able to shop, book, fulfill, and service NDC content via the Sabre GDS. Additionally, earlier this week, we announced that Serko, a leader in online travel booking and expense management based in New Zealand, has launched Sabre's NDC content in its online travel platform, making Sabre the first GDS to provide NDC content via Serko and its platform that serves the business travel market. In Airline IT, our team recently secured an agreement with Aegean Airlines, which operates on a competitor's PSS for our intelligent retailing product Dynamic Availability. This important new partnership is testament that our modular next-gen solutions are platform-agnostic and are gaining traction with customers regardless of a carrier's PSS. Also within Airline IT, Air Serbia recently reaffirmed its partnership with Sabre by signing a multiyear early renewal for SabreSonic and announced that it will also adopt Sabre's pricing and revenue optimization suite to better manage its inventory and network. Additionally, just last month, LATAM Airlines Group announced that it will adopt Sabre Air Price IQ, our cloud-native intelligent retailing solution designed to personalize travel offers and maximize customer revenue, utilizing real-time data, revenue management strategies, and artificial intelligence models. On the agency front, we signed a new multiyear agreement and converted Duluth Travel, a leader in the U.S. government travel, to Sabre. In addition, we recently announced a technology initiative with Interpark Triple, the leading online travel agency in South Korea, where we will apply our cutting-edge travel AI technology to provide users with enhanced travel content and more personalized experiences. We also signed important deals with ETraveli Group, one of the five largest agencies globally by distribution bookings, and also with W2M, one of the largest agencies based in Spain. In summary, I commend our team for achieving a number of commercial wins during the first quarter with both new and existing customers. On to Slide 12. I am pleased to report that during the first quarter, we made meaningful progress on each of our growth strategies, which are designed to deliver modern distribution and retailing technology to meet the evolving needs of the marketplace. Our multisource platform has expanded to include low-cost carrier content from 20 new airline partners. Sabre's platform offers LCC, Integrated NDC, and EDIFACT content in one place, coupled with our proprietary functionality, APIs, and business logic that we believe are best-in-class. Our powerful platform enables carriers to dynamically sell through intermediaries while importantly providing buyers the choice, transparency, speed, efficiency, and seamless user experience across all channels that best meets their needs. On Distribution Expansion, as I mentioned earlier, we again realized solid share gains in air distribution in the first quarter, as buyers with complex IT demands continue to select Sabre as their preferred technology partner. We believe our compelling distribution offering, especially our multisource platform, recent wins with global carriers such as Air India, as well as signed but not yet announced or implemented business and a rich pipeline of new business position us well for continued distribution share expansion. Hotel Distribution experienced strong growth in the first quarter with hotel bookings. The largest contributor to our lodging, ground, and sea business, up 11% year-over-year and hotel attachment rates to air bookings up 2.5 points. We believe our content services lodging platform, which integrates numerous disparate content sources, provides intelligent and relevant shopping responses and is consumable through our APIs and across myriad channels, will drive meaningful growth as it brings our customers a leading accommodation offering. In payments, we are excited about the growth opportunity of this business and believe our leading products position us well to unlock substantial returns over the long term. During the first quarter, we signed more than 80 new customer agreements, and our virtual card deployments jumped 31% year-over-year. Sabre made significant strides in delivering next-generation Airline IT products and solutions in the first quarter. In addition to Dynamic Availability and Air Price IQ commercial wins, we are excited about the progress on our Offer and Order technology and expect to make significant product and commercial announcements on this suite of solutions in the coming months. Last, we continue to see strong momentum in Hospitality Solutions. As I mentioned previously, implementation work with Hyatt to provide our SynXis Central Reservation System technology is moving at pace, with implementation expected to begin this quarter. We also announced an important multiyear renewal with Wyndham yesterday that highlights the successful migration of more than 5,000 Wyndham hotels to our SynXis Property Hub platform, nearly 1 year ahead of schedule. In addition, the number of properties to adopt our next-generation SynXis Retailing Solution has expanded by 33% year-to-date. These achievements are just a few of the reasons why we continue to expect Hospitality Solutions to deliver double-digit revenue growth and substantial margin improvement for 2024. In summary, we believe that our focus on these strategies will drive sustainable growth over the long term. I will now hand the call over to Mike to walk you through our financial performance and forward outlook.

Thanks, Kurt, and good morning, everyone. Please turn to Slide 13. The first quarter was a strong quarter for Sabre. We exceeded guidance in each of our key metrics as our continued focus on efficiency combined with solid revenue growth to drive significant margin expansion. Our technology transformation and commitment to containing expenses drove our cost structure meaningfully lower. Importantly, our improved cost base and greater efficiency enhance our ability to fund the research and product development initiatives that are critical to delivering on our long-term strategic priorities. In addition to the strong operating performance outlined here on the slide, our team also delivered several significant debt refinancing transactions earlier this year that extended approximately $300 million of debt maturities. These transactions provide additional balance sheet flexibility and better align projected future free cash flow generation with our upcoming maturity timeline. We expect to achieve positive quarterly free cash flow moving forward in 2024 and for the full year, and plan to repay the remaining 2025 maturities with cash from our balance sheet. Please turn to Slide 14. As you can see from this table, we exceeded our guidance for revenue, adjusted EBITDA, and free cash flow in the first quarter. With regards to outperformance on revenue as compared to our prior Q1 guide, about one-third is driven by a higher average booking fee than expected and about two-thirds is driven by higher total distribution bookings. Revenue strength and continued cost efficiencies drove strong flow-through to the bottom line, enabling our $27 million adjusted EBITDA beat. Turning to Slide 15. Total Q1 revenue was $783 million, an increase of $40 million or 5% versus last year. Distribution revenue totaled $572 million, a $46 million or 9% increase compared to $526 million in Q1 2023. Our total distribution bookings were $98 million in the quarter, a 2% increase compared to $97 million in Q1 2023. Our average booking fee was $5.81 in the first quarter, up 7% from Q1 2023 as we realized an increase in corporate travel volumes, resulting in higher booking fees. IT Solutions revenue totaled $141 million in the quarter. This was a $10 million decline versus revenue of $152 million in the prior year, driven by previously disclosed demigrations. Hospitality Solutions Q1 2024 revenue totaled $79 million, a $5 million or 7% improvement versus revenue of $74 million in Q1 2023. Adjusted EBITDA in the first quarter was $8 million, an improvement of $11 million versus Q1 2023. This represents the strongest first quarter adjusted EBITDA in 6 years. With the strong pipeline of new property growth, including additions from our Hyatt implementation, we are on track for double-digit revenue growth in 2024 with double-digit margins. Sabre's adjusted EBITDA of $142 million in Q1 2024 versus $58 million in Q1 2023 represented an $84 million improvement year-over-year. As I mentioned earlier, the cost actions we implemented last year reduced our adjusted SG&A and technology expenses by 16% on a year-over-year basis in the first quarter and helped drive our adjusted EBITDA margin from about 8% in Q1 2023 to over 18% in the first quarter of this year. Free cash flow was negative $96 million, driven primarily by typical seasonal working capital trends. We ended the first quarter with a cash balance of $650 million. Turning to Slide 16. We completed a number of refinancing transactions during the first quarter to strengthen our balance sheet as we continue to focus on our long-term strategic and financial priorities. These refinancings reduced our 2025 debt maturities by over $300 million, increased our liquidity by over $70 million, and better aligned our maturities with projected free cash flow that we expect to generate in the coming years. As you can see on the slide, our next significant maturity will not come due until June 2027, providing a significant runway as we expect our business to continue to gain momentum and our financial performance to continue to improve. As a result of these recent transactions, we now plan to repay our remaining 2025 debt maturities with cash from our balance sheet. Turning to Slide 17. Regarding guidance for the second quarter of 2024, we expect revenue of approximately $750 million, adjusted EBITDA of approximately $115 million, and positive free cash flow. As a reminder, with regard to typical seasonal sequential trends, second quarter air distribution bookings are typically lower by high single digits versus the first quarter. For the full year 2024, we expect revenue of approximately $3.04 billion and adjusted EBITDA of approximately $520 million. As you can see in this updated outlook, we continue to expect strong operating leverage from our technology transformation and heightened focus on cost containment. In addition, in 2024, we expect to generate positive free cash flow in the second, third, and fourth quarters and for the full year. With respect to refinancings and changes in the forward interest rate curve, we now expect cash interest to be approximately $375 million. As we look at the pace of capital expenditures through April, we now expect to spend approximately $85 million this year. Furthermore, we believe we are on track to achieve our 2025 targets of greater than $700 million in adjusted EBITDA and greater than $200 million in free cash flow that we outlined during our Q4 earnings call in February. In conclusion, our team members delivered strong first quarter financial results and achieved a number of important operational and commercial accomplishments to support our strategic priorities, which are to generate free cash flow and deleverage the balance sheet, deliver sustainable growth, drive innovation, and reduce our cost structure. We firmly believe that the outlook we have communicated today will enable us to accomplish those objectives. And with that, operator, please open the line for questions.

Operator Instructions] Our first question comes from the line of Jed Kelly from Oppenheimer.

Just two, if I may. One, are you seeing sort of the GDS shares stabilizing to a level where you kind of get a better sense on how to rightsize your cost structure? And then I appreciate the commentary around some of the SabreSonic wins. Can you just talk about the outlook for the Airline Solutions business?

Jed, thank you. This is Kurt. First of all, when you look at the GDS industry, what we saw in the first quarter was GDS market growth basically very strong with corporate, a bit offset by leisure, as I talked about in the prior quarter. And more specifically, what we saw is the TMC or corporate business was up 1.9% for the GDS sector on a volume basis. For Sabre, that number was between 4.5% and 5%. So we're seeing sequential share gains specifically there. For the industry and the sector overall, that is somewhat offset by the trends on the leisure side that I discussed last quarter. We do believe that with technology transformation taking hold and the full effect of those benefits coming next year, and then the actions that we took last year on our cost structure generally and just the focus on costs that we have overall, our cost structure is the right cost structure for the business today with the right investment profile for what we need to do going forward. When you look at Airline Solutions specifically, a few points. One is that, that business has stabilized. The revenue you saw in the first quarter of this year is roughly the revenue that you should expect to see for future quarters through the balance of 2024. We're winning very well with our Retail Intelligence set of solutions. And as I mentioned in our prepared remarks, we will, in the coming months, discuss in robust fashion what we're doing from both a product and a customer standpoint on Offer and Order, and the market seems to be very encouraged by what we have built, which is a modular cloud-based future solution. So we're actually very optimistic for the long-term future of the Airline Solutions business.

Our next question comes from James Lee of Mizuho.

Great job on the solid quarter. I have a question about the growth in average booking fees for your Travel Solutions business, which has shown positive performance in recent quarters. Can you discuss the factors influencing that metric? In which regions are you observing strength? Additionally, can you provide insights into the sustainability of this growth rate moving forward? My second question relates to your investments in AI. You've briefly mentioned this in earlier commentary, but could you elaborate on some new use cases that are improving your product? It would also be helpful to understand which foundational models you're using for your applications and how you're handling the variations in costs that pose challenges for many enterprises.

I’ll begin by addressing the question about the average booking fee. Over the past several quarters, we have experienced a favorable mix regarding the types of travel and the airlines that have contributed positively to us, a trend that continued in the first quarter of this year. Specifically, we observed strong performance from the Asia Pacific region. Unlike the fourth quarter, which mainly saw group bookings, the strength we experienced this quarter was not primarily in group bookings but came from higher average booking fees in the Asia Pacific region. Additionally, our average booking fee benefited from the lodging, ground, and sea sectors, where we have seen significant strength, and the average booking fee in these areas is slightly above average. Looking ahead, we expect our average booking fee for the remainder of the year to remain in a similar range to what we produced in the first quarter.

And on the AI front. So for the last several years, we've been partnered with Google. We have embedded Google's AI into all capabilities into a host of our supplier-facing, meaning, airline and hotelier solutions, such as Retail Intelligence, and those have resonated very well. When you think about the horizon of certain next-gen AI, we're looking at three primary applications. One is with respect to our product development throughput. Our engineers now are using both the Google and Microsoft solutions that effectively enable them to produce new code at a much better rate or much faster rate than they did historically. So we look at this as faster innovation in terms of the opportunity. Number two is in terms of how we service our clients. We have a very large infrastructure to do that. There is the opportunity to automate a lot of which was manual traditionally to improve both user experience and productivity. And then last and probably most importantly, as we look at generative AI, embedding generative AI, we have one of the leading and largest data sets in the world, and AI is only as good as the quantum of data that forms the AI into learning. So as we embed that in our agency-facing tools, airline-facing, hotel-facing, we think there is an opportunity to differentiate from the pack.

Our next question comes from the line of Brett Knoblauch from Cantor Fitzgerald.

Maybe just on how you see industry growth playing out for the rest of the year. I guess what's implied in your guidance in terms of the global bookings and the price, I guess, or on the average booking fee. I guess you just said you expect average booking fee to stay steady throughout the year. But if you look at the fourth quarter, that would imply a decline of 4%, 5% year-over-year. I know it's a bit far away, but just any color on the mix between bookings and booking fee?

Sure. I'll start. This is Mike, and thanks for the question, Brett. When we consider air distribution bookings or bookings in general, we assume flat to normal growth based on the guidance we provided with the $520 million of EBITDA. However, we remain optimistic. There are many factors that suggest bookings may exceed this expectation. IATA projections indicate that passenger traffic and volumes are expected to increase in the mid- to high single digits, with international travel performing even better. Although airlines have reduced capacity, this adjustment is still positive in North America, while internationally, they are adding a significant amount of capacity. We have also noticed favorable trends in corporate bookings. Therefore, while our baseline assumption for air distribution bookings is flat to normal growth, we believe there are strong reasons for a positive outlook. Regarding the booking fee, we anticipate it will remain around $5.80 as we progress into the following quarters.

Yes. Let me quickly add that in looking at distribution bookings, particularly in the corporate segment, we believe many airlines are experiencing significant year-on-year growth in revenue generated from corporate clients. While airlines have not separated this data into volume versus rate, we think it is primarily driven by yields as the traditional differences between corporate and leisure yields are re-emerging in the market. We are seeing robust trends, noting that corporate travel is not benefiting the GDS sector or Sabre specifically. Additionally, some of the challenges we mentioned last quarter, particularly regarding OTAs, are most pronounced in the first and second quarters of this year, but we believe the year-on-year comparisons will be more favorable for us in the latter half of 2024.

Got it. No, that's very helpful. And then just on corporate, I know you guys got a little scare at the end of the year, and then it bounced back in the beginning of the year and was very strong in January. Just curious as we're now a month into the second quarter, how are you thinking about corporate? Is it still back with a vengeance?

Yes, we are observing that the trends we experienced in the first quarter are continuing at a similar pace in the second quarter.

Our next question comes from the line of Dan Wasiolek from Morningstar.

Congrats on a nice quarter here. Just the commentary on your technology revitalization and transformation and what you've been seeing with that, very helpful. Just kind of wondering, with your offering currently, how would you say, versus before going on this transformation? How is the win rate and renewal levels kind of progressed relative to where they were maybe before you started the transformation, how you kind of see your product offering versus the competition? And then the second question would just be on the technology expense. How should we think about that for '24 and '25? Is it fair to use the Q1 run rate for that?

I'll start out on the expense side, and then Kurt will take it from there. This is Mike. So a couple of things. If you go back on technology expense, you go back to what we had articulated in February, we had highlighted that in our build from 2023 to 2025, we would have about $250 million of cost efficiency benefit. Of that cost efficiency benefit, about $90 million of that was attributable to actions we took in 2023, and about $160 million of that was attributable to our tech transformation. Of the $160 million of tech transformation benefit, about $45 million of that we would expect to be in this year. and then a little bit over $100 million incrementally between 2024 and 2025. As you think of the cadence of expenses and how it flows through our P&L, there's some benefit you're seeing in the first quarter. But what I would say is of the $45 million benefit that we expect to see in the P&L this year, it is definitely backward-loaded because we're slowly working down the bubble costs. We're continuing to optimize the cloud environment. And then we continue to have more and more compute capacity in the cloud environment as the year progresses. So the way to think about it is that we expect $45 million this year. That's somewhat backward-loaded, not entirely. And then we'll have at least another $100 million incrementally over that between 2024 and 2025.

Yes. Let me take the first question. And neither Mike nor I were here before 2022, so I don't have great benefit of hindsight. But if you look at what we have today, what we're going to have going forward, we have a cloud-built modularized set of technology, which is fundamentally different than the monolithic mainframe of the past. So any thoughts that this is a dinosaur technology business are historical artifacts. This is a modern platform business. If you look across the different businesses, in distribution, first of all, some of the things that we've been able to build that we believe are best-in-class are the multisource air content platform, our hotel content services lodging platform, our booking solutions such as Sabre Red, in Airline IT. When you look at everything we've built that's really gaining traction in the marketplace, that is our Offer and Order modularized cloud-based platform, our retail intelligence tools. Those are fully cloud-based. And in our Hospitality Solutions business, our CRS, our PMS and our SynXis retailing capabilities are fully cloud-based. So what I can say today is when you look across the businesses we have, we've been able to move at a very different pace in terms of innovation, in terms of the implementation of new solutions with clients. And we believe we're being chosen as a best-in-breed technology partner by agencies and corporations, by airlines, by hoteliers. And so the moves that Sabre has made that we're continuing to complete are very important in terms of our competitive position.

Our next question comes from Alex Irving of Bernstein.

Two from me, please. First is going to be around bookings in corporate travel. So you've seen a couple of the U.S. network airlines discussing about a 14% increase in managed corporate capital year-on-year, either your corporate bookings are up 4% to 5%, if I have that right. You mentioned a yield differential, but I'd expect that as we can explain the whole gap, whether you're right to conclude the rest would be channel shift, NDC, aggregators, and airline agents, direct connections. And if not, would you explain that gap, please? And then second, just if we think about the cadence of a few things going forward, could you please tell me what share of your air bookings comes from airlines with which you currently have full content agreements?

Thank you. Regarding corporate travel, we are uncertain about the airlines' report of a 14% year-on-year improvement in corporate travel, as mentioned by Delta and United. They haven't specified the breakdown between volume and rate, but we believe that a considerable part, possibly the majority, is attributed to rate increases. In the GDS sector of managed corporate travel, there has been a 1.9% increase, and we experienced a 4.8% growth on a unit basis in the quarter. We think nearly all the growth in corporate travel is benefiting the GDS sector, with a significant share going to Sabre. We see no evidence of disintermediation or channel shift in managed corporate travel. Additionally, we have full content agreements with over 100 carriers worldwide, which constitutes over 90% of our air distribution bookings.

Our next question comes from the line of Victor Cheng of Bank of America.

Two, if I may. I guess, first on tech transformation. Obviously, you've talked a bit about it just now. But if I look at the slides a couple of quarters ago, the tech transformation of $150 million is based on 80% recovery. And I believe at that point in time, it was that every 20% recovery equates to maybe $40 million or $50 million of additional savings. And so assuming we're roughly at 60%, that we'd expect closer to $200 million savings. Is that the right way to think about it? And then on this tech transformation as well, are there any assumptions on inflation, both on salaries and Google Cloud cost inflation, baked in as well? And then I have a follow-up.

Yes. So on tech transformation, as you indicated, we originally expected about $150 million. We do expect it to be a little more than that, and that's partly because that's partly because of lower recovery level. We do think it's, call it, $160-plus million of benefit that hits our P&L. That's what we articulated in our most recent guide. And with regard to what it assumes in terms of salaries and inflation, obviously, today, wage rates, particularly in technology, are substantially higher than what they were pre-pandemic, and that's reflected in the $160 million benefit that we called out in February, that's a component of the $250 million of our cost efficiency.

I would also note that our relationship with Google is a long-term contract, with the commercials fixed for a long period of time.

Understood. As a follow-up, how do we assess the minimum liquidity needed for the company? I realize you are currently using cash to pay down debt. Generally speaking, what is the minimum liquidity requirement for Sabre?

Yes. Before the pandemic, we operated Sabre with around $300 million to $400 million in actual cash. We had more liquidity then due to a revolver we had at the time. Currently, our intention is to maintain a higher liquidity balance for caution. At the end of this quarter, we had $650 million in cash. We anticipate being free cash flow positive in the second, third, and fourth quarters, cumulatively for the entire year. If you do the math based on our cash consumption in the first quarter, we expect to add at least $100 million in cash over the remaining three quarters. Therefore, we will likely close the year with a cash balance of about $750 million, which should put us in a solid position to manage our balance sheet maturities in 2025, especially since we expect to generate over $200 million in free cash flow this year.

Our next question comes from the line of Josh Baer of Morgan Stanley. The floor is yours.

You have Ryan Bressner on for Josh. So hoping to dig a little more into the hospitality business with respect to your traction with enterprise and PMS. What is the progress and update on this front? And can you give any comments on the recent announcement around Wyndham and Hyatt?

Thanks for the question, Josh. We're excited about a few developments. We recently closed two enterprise deals with Louvre and Hyatt over the past three years and have begun implementing and migrating their properties to the SynXis CR platform within 12 months. We expect to maintain the timeline we've established for them throughout this year and into next. There's positive momentum, and we believe Hyatt will be a great partner for us moving forward. Regarding the Wyndham renewal, we have a two-part deal that includes both a CR and a PMS agreement. The recent announcement pertains to the renewal of our PMS product, which was specifically designed with Wyndham's hotel type in mind. It's a robust cloud-native product tailored for select and limited service properties, and we see it as a success in the PMS space. We have a strong pipeline on the PMS side and look forward to announcing more deals this year with SynXis Property Management Hub. Overall, we feel confident about our opportunities in the enterprise market and believe we will secure a significant share of future enterprise deals as hoteliers reassess their technology needs.

Yes, and let me chime in there. I would just say the team is knocking it out of the park here. If you think about the first quarter last year, this was a business that burned $2.8 million of EBITDA. We had an $11 million year-over-year improvement and generated $8 million of EBITDA this year. If you look at our forward-looking commentary and what we articulated about the proportion of our growth strategies attributable to Hospitality Solutions, we expect year-on-year in 2024 to generate approximately $30 million more in EBITDA this year than last year, which would put us at approximately $40 million EBITDA. Also, if you look at the forward-looking guidance and commentary we provided in February, about half of our strategic growth initiatives between 2023 and 2025 are attributable to hospitality solutions. That would bring our expected EBITDA to about $70 million in 2025. We think we're firmly on the path to double-digit revenue growth, with double-digit margins in that business, and the team is just doing an awesome job.

Our next question comes from the line of Victor Cheng of Bank of America.

And just one quick follow-up question on any updates on NDC volumes. I know last time we talked about it, it's still minimal for Sabre. But as Delta start moving to NDC, and American and United both ramping up their NDCs. Where are we in terms of NDC volumes and kind of the expectation on NDC volumes for the full year, please?

Yes. For the GDS sector, and this includes Sabre, we still see NDC volumes at only about 1% of total air distribution volumes. We do believe that number will grow substantially through 2024 and in the future. Victor, based on the dynamics that you talked about, we think we're very well positioned in terms of both content connectivity, all the business logic and functionality we've built for buyers. There is work that buyers such as TMCs need to do from a downstream perspective on their end beyond what we or any other intermediary technology provider do, but there is certainly a big focus on that from all of those buyers. So we think that number will burn substantially, albeit off a low base.

Yes. And the one thing I would add on there, Victor, is, as we're talking about our 2024 forward-looking commentary and our 2025 forward-looking commentary, it does assume a significant uptake in NDC, and that's incorporated in any of the commentary that we're providing.

I'm showing no further questions at this time. I would now like to turn it back to Mr. Ekert for closing remarks. The floor is yours.

Thank you again for joining us today. We deeply appreciate your interest in Sabre and look forward to speaking with all of you again very soon. That concludes today's call.

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