Sabre Corporation has released its 10-K report today. The company operates in two segments, Travel Solutions and Hospitality Solutions, providing software and technology solutions for the travel industry worldwide. Sabre's shares have moved -28.5% on the market, and are now trading at a price of $3.15.
In its annual report, Sabre reported a challenging period marked by continued material headwinds within its consolidated financial results for 2022 and 2023. The company experienced a shift in the travel ecosystem, resulting in changing needs of its airline, hotel, and agency customers. This led to strategic priorities aimed at achieving sustainable long-term growth. Despite the return of global travel volumes, recent industry air distribution volume growth has leveled off, impacting the company's rate of growth.
To address these challenges, Sabre announced and began implementing a cost reduction plan in the second quarter of 2023, incurring restructuring costs associated with its workforce. The company estimated that these actions would reduce its operating expense on an annual basis by approximately $200 million. Additionally, Sabre refinanced portions of its debt, resulting in higher interest rates and increased interest expense. The company also terminated its distribution agreement with a Travel Solutions customer located in Russia, impacting its revenue in 2022.
Amid these challenges, Sabre made strategic moves, including the acquisition of Conferma Limited, a virtual payments technology company, and the sale of its suite of flight and crew management and optimization solutions. The company also recognized the increasing importance of low-cost carriers (LCC) and hybrids in the air travel market and highlighted the shift to Software-as-a-Service (SaaS) and hosted solutions by airlines.
Sabre's technology transformation and investments in modernizing its architecture have begun to yield benefits, with the company expecting continued investment in 2024. The geographic mix of travel bookings also played a significant role in the company's results, with its revenue being affected by the mix between domestic and international travel reservation bookings.
For more detailed information, you can access the company's full 10-K submission here.
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $3,867 | $3,975 | $1,334 | $1,689 | $2,537 | $2,852 |
| Operating Margins | 15% | 9% | -74% | -39% | -10% | -2% |
| Net Margins | 9% | 4% | -96% | -55% | -17% | -21% |
| Net Income (M) | $338 | $159 | -$1,282 | -$928 | -$435 | -$591 |
| Net Interest Expense (M) | $157 | $156 | $226 | $258 | $295 | $415 |
| Depreciation & Amort. (M) | $413 | $415 | $364 | $262 | $185 | $156 |
| Diluted Shares (M) | 278 | 276 | 290 | 321 | 327 | 345 |
| Earnings Per Share | $1.22 | $0.57 | -$4.45 | -$2.96 | -$1.4 | -$1.82 |
| EPS Growth | n/a | -53.28% | -880.7% | 33.48% | 52.7% | -30.0% |
| Avg. Price | $21.94 | $21.24 | $9.94 | $12.11 | $8.98 | $4.41 |
| P/E Ratio | 17.84 | 37.26 | -2.23 | -4.09 | -6.41 | -2.41 |
| Free Cash Flow (M) | $441 | $466 | -$836 | -$469 | -$346 | -$86 |
| EV / EBITDA | 9.21 | 11.36 | -9.6 | -18.96 | -89.95 | 51.19 |
| Total Debt (M) | $3,474 | $3,425 | $4,770 | $4,782 | $4,764 | $4,825 |
| Net Debt / EBITDA | 3.04 | 3.84 | -5.24 | -9.43 | -51.94 | 38.11 |
| Current Ratio | 1.17 | 1.09 | 3.04 | 1.96 | 1.67 | 1.32 |
Based on the current price of $3.15 per share, the stock of this company is likely overvalued due to declining revenues at a rate of -6.2%, decreasing capital expenditures at a rate of -15.8%, a negative earnings per share growth rate, and a negative PEG ratio.
In terms of growth factors, the company's declining revenues, decreasing capital expenditures, negative earnings per share growth rate, and negative PEG ratio are key concerns. However, the company's current ratio of 1.32 indicates that it has just enough current assets to cover its current liabilities, and it exhibits a poor record of retained earnings with a value of $-3.95 Billion. Additionally, Sabre has a highly leveraged balance sheet owing to its current Net Debt / EBITDA ratio of 38.11 and consistently negative free cash flows, averaging $-138.29 Million over the last 5 years with a compounded average growth rate of -32.7%.
It's important to note that this analysis is for informational purposes only and should not be considered as personalized financial advice.
