Sabre Corporation 2026 Q2 Earnings Call

Please go ahead. Good morning, and welcome to our second quarter 2026 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 webpage. 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 results of our growth strategies, our AI offerings and AI-related developments in the industry, transactions and bookings growth, expectations regarding the Middle East conflict and recovery, as well as the impact of other geopolitical events, commercial and strategic arrangements, our financial guidance, outlook and expectations, pro forma financial information, 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 June 30, 2026. 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, normalized adjusted EBITDA, normalized adjusted EBITDA margin and adjusted technology and adjusted SG&A expenses 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. Normalized amounts have been adjusted for estimated costs historically allocated to our Hospitality Solutions business, which was sold on July 3rd, 2025.

We are also presenting certain financial information on a pro forma basis to give effect to the sale of the Hospitality Solutions business. Unless otherwise noted, results presented are based on continuing operations. As a reminder, effective last quarter, we updated the terminology used to describe our revenue to better reflect our evolving brand identity and market positioning. Historically referred to as Distribution and IT Solutions, these revenue streams have been renamed Marketplace and Airline Technology respectively. The specific revenue from products, services, and underlying solutions offered within each category remain unchanged. Participating with me today are Kurt Ekert, President and Chief Executive Officer, and Mike Randolfi, Chief Financial Officer. With that, I will turn the call over to Kurt.

Thanks, Jim. In the second quarter, we delivered results ahead of our expectations and generated positive free cash flow. Importantly, with the strength we've seen in the first half of this year and our outlook for the remainder of the year, we are increasing our full year 2026 guidance for both pro forma adjusted EBITDA and free cash flow, and we are reaffirming our outlook for revenue and air distribution bookings growth. Revenue in Q2 grew 4% and normalized adjusted EBITDA grew 19% year-on-year to $151 million, exceeding our expectations. Air distribution bookings growth in the quarter came in ahead of our outlook, up 1% year-on-year. We are encouraged by the continued momentum we are seeing from our growth strategies. Since late 2025, Sabre's rate of bookings growth is outpacing the broader industry by approximately 600 basis points.

Second quarter air distribution bookings trends were better than expected, driven by a modest recovery in the month of June. The trends we saw in June have continued through July and are reflected in our full-year outlook. Consistent with what we shared during our first quarter earnings call regarding conflict-related headwinds in the month of March, air distribution bookings growth remained positive throughout the second quarter in both North and South America. That strength was partially offset by continued impacts from the Middle East conflict as well as higher fuel prices, which have driven airline fare increases. We estimate that the global impact of fuel and the Middle East conflict was three to 400 basis points in the second quarter and was relatively more acute in EMEA and Asia Pacific.

Importantly, corporate volumes, which represent nearly half of our Marketplace bookings, demonstrated continued steady performance and resilience throughout the second quarter, which offset softness in leisure demand. Looking ahead, the underlying assumptions for our growth outlook have not changed. We expect third quarter air distribution bookings growth of flat to low single digits. For the fourth quarter, and consistent with our prior outlook as well as recent airline commentary, we expect bookings to grow at a low to mid-single-digit rate year-on-year. Now, turning to slide five. For the fourth consecutive quarter, we delivered double-digit year-on-year growth in normalized adjusted EBITDA. We believe these results and positive trends set us up well to continue to drive year-on-year top line and pro forma adjusted EBITDA growth for the remainder of the year and achieve our increased outlook.

Our financial performance provides us with a foundation to continue investing in innovation and supporting our growth strategies. Turning to the right side of the slide, we believe Sabre is positioned to be a winner in the rapidly emerging agentic AI travel channel, and we are working with partners and leaning into our leadership position by increasing the level of investment in AI initiatives. Our Marketplace continues to deliver multi-source travel content at an incredible scale. Hotel-related revenue growth accelerated in Q2 to 11% year-on-year, driven by higher attach rate and continued growth in media revenue. Our hotel attach rate has improved to approximately 35%. As we continue to enhance our hotel platform, we expect to drive higher conversion. Payments Suite gross spend exceeded $6 billion in the second quarter, up more than 30% year-on-year, and is now over $25 billion on an annualized basis.

NDC also continues to grow, and we expect further acceleration during 2026. Turning to slide six, our key financial and operational metrics demonstrate that we are executing well and delivering broad-based growth. Across our business, we continue to see positive trends, reflecting the disciplined execution of our strategy and the progress we are making against our long-term priorities. Moving to slide seven. Our developer ecosystem continues to expand. Hundreds of developers are now working in our production environment, reinforcing Sabre's position as the critical infrastructure provider powering the next generation of travel commerce. Agentic AI is no longer just a future opportunity. It is transforming how travel is bought and serviced, Sabre is leading that evolution. Our open platform enables AI agents to shop, book, and service travel autonomously, securely, and at scale.

As the ecosystem develops and adoption accelerates across the industry, we believe Sabre is uniquely positioned to build on our leadership position as we enter this next chapter of travel technology. We recently deployed our Model Context Protocol server with a global enterprise loyalty and travel service company. MCP acts as a secure, intelligent translation layer that lets AI agents handle complex servicing work on their own, ticket reissues, exchanges, and itinerary changes. Driven by strong demand for our agentic APIs and MCP server, we doubled the number of active pilot and production partners from 30 to 60 in the second quarter. We also partnered with VocalBridge and DeepLearning.AI, part of the broader AI Fund ecosystem, and hosted a hackathon in Silicon Valley. The response was positive and exceeded our expectations.

More than 400 developers participated and submitted over 100 projects built on our agentic APIs and MCP server. The solutions they built, from voice-enabled travel assistants to agents that can seamlessly coordinate flights, hotels, rideshares, and dining built into a single itinerary, demonstrate the power and flexibility of our platform. Importantly, they serve as examples of the growing developer interest in building on Sabre's infrastructure and reinforce our foundational position in enabling the next generation of agentic AI-powered travel. We are making solid progress across our strategic priorities and believe we are well positioned to deliver sustainable long-term growth. Across air expansion, Airline Technology, lodging expansion, and Payments, we are executing our strategy, delivering meaningful value for our customers, and investing in innovation that further strengthens our competitive position.

We are excited with the momentum in Airline Technology, and I'm pleased to share that a notable carrier in Africa has selected Sabre as its new technology platform provider. As part of this agreement, the airline will migrate its core passenger services to the Sabre platform and adopt our Sabre Mosaic NDC IT capabilities. This transition will help modernize key areas of the airline's operations, and implementation is expected to be completed by the end of this year. Our progress together with our strong first half performance supports our updated 2026 guidance and increases our confidence in the significant opportunities ahead. With that, I'll turn the call over to Mike to walk through our second quarter financial results and our outlook in more detail.

Thanks, Kurt, and good morning, everyone. Please turn to slide nine. Second quarter revenue, gross profit, normalized adjusted EBITDA, and free cash flow all exceeded our expectations. As a result, based on our current outlook, which is consistent with our prior view for the second half of 2026, we are reaffirming our full year guidance for revenue and air distribution bookings growth and increasing our full year guidance for both pro forma adjusted EBITDA and free cash flow. Turning to the financials, total revenue was $712 million, an increase of 4% year-on-year, exceeding our expectations of flat to nominal growth. Marketplace revenue grew $31 million, an increase of 6% due to a 1.5% increase in distribution bookings and a 4% increase in average booking fee, which includes growth from our payments and media offerings. Airline Technology revenue was $135 million, broadly in line with our expectations.