Sabre (SABR) Thomas Klein on Q1 2016 Results - Earnings Call Transcript

| About: Sabre Corporation (SABR)

Sabre Corp. (NASDAQ:SABR)

Q1 2016 Earnings Call

April 28, 2016 9:00 am ET

Executives

Barry J. Sievert - Vice President-Investor Relations

Thomas Klein - President, Chief Executive Officer & Director

Richard A. Simonson - Chief Financial Officer & Executive Vice President

Analysts

Anthony Cyganovich - Evercore ISI

Ashish Sabadra - Deutsche Bank Securities, Inc.

James Schneider - Goldman Sachs & Co.

Brian L. Essex - Morgan Stanley & Co. LLC

Matthew Broome - Cowen & Co. LLC

John P. King - Bank of America Merrill Lynch

Abhey R. Lamba - Mizuho Securities USA, Inc.

Ryan Allen Cary - Jefferies LLC

Jed Kelly - Oppenheimer & Co., Inc. (Broker)

Brad Erickson - Pacific Crest Securities

Operator

Good morning and welcome to the Sabre First Quarter 2016 Earnings Conference Call. Please note that today's call is being recorded and is also being broadcast live over the Internet on the Sabre corporate website. This broadcast is the property of Sabre. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of the company is strictly prohibited.

I will now turn the call over to the Senior Vice President of Investor Relations, Mr. Barry Sievert. Please go ahead, sir.

Barry J. Sievert - Vice President-Investor Relations

Thank you, Kayla, and good morning, everyone. Thanks for joining us for our first quarter 2016 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 IR webpage. A replay of today's call along with the slide presentation will be available on our website beginning this afternoon.

Throughout today's call, we will be presenting certain non-GAAP financial measures, which have been adjusted to exclude expenses and other gains or losses related to restructurings, litigation and tax matters, and certain other items. All references during today's call to EBITDA, operating income, EPS, and net income have been adjusted for these items. The most directly comparable GAAP measures and reconciliations are available in the earnings release and other documents posted on our website at investors.sabre.com.

We would like to advise you that our comments contain forward-looking statements. These statements include, among others, disclosure of our outlook, including revenue, EBITDA, net income, cash flow, interest expense, tax rate, CapEx, and earnings guidance. Our expected segment results, the effects of acquisitions, implementations, agreements and products, our expectations of industry trends and various other forward-looking statements regarding our business. These statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today's conference call.

Information concerning the risks and uncertainties that could affect our financial results is contained in our SEC filings, including our Form 10-K for the year ended September 31, 2015.

Participating with me on today's call are Tom Klein, our President and Chief Executive Officer; Rick Simonson, Executive Vice President and Chief Financial Officer; and Chris Nester, our Treasurer and SVP of Finance.

Tom will start us off with a review of our strategic and commercial performance. And then Rick will offer a perspective on our financial results and forward outlook before turning the call back to Tom for closing remarks. We will then open the call for your questions.

With that, I'll turn the call over to Tom.

Thomas Klein - President, Chief Executive Officer & Director

Thanks, Barry, and good morning, everyone. With our first quarter results we're off to a good start in 2016. We've built a very resilient foundation for our business, we executed well across the board and it's showing up in our results.

Revenue, adjusted EBITDA and adjusted EPS, each increased materially. We posted strong financial results, while we continue to work and invest with a long-term view and focus on future growth.

In Airline Solutions, we saw good revenue growth from our SabreSonic reservations platform. Of course, we had to step up due to American Airlines, but we also had very solid underlying passenger growth from our customer base. AirCentre and AirVision operations and commercial solutions also grew nicely during the quarter. The flexibility of our solutions allows our teams to deliver for airlines of all types and geographies.

Air Seychelles went live during the quarter, with a successful cutover to SabreSonic. This is a part of their broad adoption of Sabre technology and what clearly not as meaningful to investors is larger deals. It's an indication of our ability to win and execute profitable business and rapidly diversify. Hospitality Solutions had continued strong growth, with momentum across our portfolio of SynXis central reservations, property management and digital marketing solutions. Organic growth was enhanced by the acquisition of Trust, which closed early in the quarter.

Progress continues on our implementation in Wyndham, with their TRYP brand going live on our SynXis CRS platform late in the fourth quarter. Our teams are actively preparing for the next go live later this quarter. Additional Wyndham brands will move to our platform throughout the year and into 2017. The rollout of the SynXis Property Management System continued this quarter with 500 properties live and the pace of the rollout accelerating, as we move through the remainder of 2016.

As Wyndham CEO, Steve Holmes said on their earnings call, revenue management tools embedded in our products are already improving results across the properties that had implemented. This implementation, at the largest hotelier in the world, demonstrates the breadth of our capabilities and scale.

In Travel Network, we saw strong bookings growth driven by the Abacus acquisition as well as an increase in our share of market with gains in every region. This includes continued growth in North America and EMEA and a return to share growth in Latin America and Asia-Pacific.

We continue to innovate to enable change in the industries we serve, while earning a greater share of technology spend in those growing sectors. We're seeing very positive customer response to our new product offerings and our ability to execute on our customers' behalf.

In fact, I just got back from our Annual Airlines Solutions Global Summit in Las Vegas. It was our biggest airline customer meeting ever. There was strong enthusiasm about our new products from over 500 executives representing hundreds of airlines. I left Las Vegas feeling great about our opportunities, our place to build our leadership position.

As the only provider that goes to market with our broad capabilities, we have unique advantage being able to see opportunities and needs across the very, very broad spectrum of the industries we serve. Our customers expect us to bring new innovations, and technologies that can have a big impact on their business.

And as we execute against our deep investments and platforms, process and tools, they increase our thought, speed and innovation, low capture, a greater share of an increasing pie as technology strengthens. Every time we introduce innovation, like Sabre Red Workspace 3.0 in Travel Network, and Revenue Optimizer in Airlines Solutions, two new products that we'll have on display at our upcoming Investor Day. We view it as an opportunity to not only increase our share of market, but to potentially increase the size of the overall spend in the market. We're selling into a very good environment that rewards innovators and is hard on those competitors that can't keep pace.

Looking at the first quarter financial performance, results were driven by solid base growth and the positive contributions from our acquisitions. Revenue increased 21%, EBITDA grew 18%, EPS increased 52%.

Our vertical enterprise SaaS business, Airline and Hospitality Solutions, delivered both revenue and EBITDA increases of 16%, with higher growth expected over the balance of the year. Airline Solutions revenue increased due to solid contributions from marquee product lines. Hospitality Solutions, strong revenue growth continued in the first quarter, and we expanded our geographic region customer base when we acquired the Trust Group in January.

Travel Network continued its streak of share increases and revenue growth. Travel Network revenue increased 23% and EBITDA increased 18%, while bookings were up 28% from the first quarter 2015. Global share of GDS distribution increased 1.7 points year-over-year to 37.4% for the quarter, driven by share growth in all regions. As we look forward to an upcoming launch of our Sabre Red Workspace 3.0, we anticipate that we'll continue to grow the Travel Network business, as we get both suppliers and agents the most effective tools in the industry to sell not only core elements of travel, but to sell into the aggressive trends and ancillary products and services. And backed by our data and analytics packages, we'll help airlines and hoteliers learn what works and what doesn't work quickly on selling ancillaries.

Overall, it was a very good quarter. We are however never satisfied with the pace of our growth or with our ability to take advantage of the many opportunities we see in the marketplace. You'll see us continue to aggressively pursue core growth and innovate to earn a greater share of customers spend. The first quarter was a continuation down that path.

And with that, I'll turn the call over to Rick for some additional commentary on the quarter and the forward outlook. Rick?

Richard A. Simonson - Chief Financial Officer & Executive Vice President

Thanks, Tom. Airline and Hospitality Solutions revenue grew 16% for the quarter to $238 million. Contributing to the rise in revenue was the increase in SabreSonic passengers boarded and growth across our AirVision commercial and AirCentre operational solutions. 183 million passengers boarded used the SabreSonic reservation system. That's a 45% increase year-over-year.

And while the addition of American Airlines to the SabreSonic installed base contributed the majority of this big increase, also noteworthy is our strong organic passengers boarded growth of 10% on a consistent carrier basis in the quarter.

Airline and Hospitality Solutions EBITDA increased 16% to $83 million, resulting in a Q1 EBITDA margin of 35% for the segment. It's consistent with normal seasonality. And we remain on track with our expectations for full year margin expansion of about a point in the solutions business.

Turning to Travel Network, revenue increased 23% to $625 million, driven by the impact of the Abacus acquisition and bookings growth across much of the world. EBITDA increased 18% to $273 million in the quarter, as we continue to work to fully integrate Abacus.

Excluding the impact of consolidating Abacus, Travel Network saw strong organic revenue growth of approximately 7% in the quarter. Travel Networks' revenue growth was supported by a bookings increase of 28% in the quarter. Again ex-Abacus, global booking growth was 5% in the quarter.

Europe, Middle East, Africa led Travel Network growth, where bookings driven by new agency conversions and solid share gains increased 12% in the quarter. That's more than five times the overall GDS market growth in the region. Growth across EMEA was of course tempered by the tragic events in Brussels in late March.

We saw solid growth in North America with bookings growth of 4% in the quarter, driven by growth in the leisure channels, while corporate travel remained more muted. Latin America bookings were down by 2% for the quarter, consistent with recent overall market trends and of course due to the continued weakness in Venezuela and Brazil.

Moving to Sabre's overall income statement, strong growth across the business resulted in a really nice rhythm to the quarterly numbers. Revenue of $860 million, an increase of 21% year-on-year. Gross profit of $388 million, also a 21% improvement from the same period in 2015. Total EBITDA increased 18% to $287 million. Operating income of $213 million was 30% higher than a year ago. Interest expense declined $5 million, as a result of reduced overall debt and the benefits of our recent refinancing activities. And our effective tax rate was lower at 33%, reflecting the favorable impact of the Abacus acquisition.

All this resulted in net income growth of 53% to $115 million and Sabre consolidated adjusted earnings per share of $0.41, up 52% year-over-year.

Moving to the balance sheet and cash flow. Quarter end total net debt was $3.2 billion, a modest increase from year end, reflecting the acquisition of Trust earlier in the quarter for $159 million. Leverage remained constant however, with net debt to trailing 12 months EBITDA of 3.3 times.

During the quarter we paid off the remaining $165 million of our 2016 8.35% coupon bonds with a mix of cash and revolver borrowings. We intend to pay down the revolver draw with cash over the balance of the year. With that last piece of high coupon debt extinguished, our blended cost of debt now sits at 4.42%. Swap adjusted, it's 4.53%. And with a 1% LIBOR floor under our term loans, our rates overall are effectively fixed for the foreseeable future.

For the quarter we generated $65 million of free cash flow. Q1 total adjusted CapEx, which is the sum of GAAP CapEx and capitalized implementation costs, was $95 million. Capitalized implementation costs were $20 million of this amount, driven primarily by the implementation work at Alitalia and airberlin. Sabre has a strong flexible capital structure, further improved with our latest higher cost debt payoff.

Combined with this and in recognition of our continuously improving operating results, our debt ratings were recently upgraded by Moody's Investor Services. Sabre's Corporate Family Rating and the ratings for our senior secured credit facility and notes were moved up one notch to Ba2 earlier this month.

Now let's turn for the outlook of 2016. With our strong start to the year we feel confident in meeting our full year objectives, and we are reiterating guidance for 2016. To recap, for 2016 we expect total company revenue growth to be in the mid-teens or between $3.39 billion and $3.43 billion. In total, we expect Airline and Hospitality Solutions full year revenue growth of more than 17%. Given Q1 growth was at 16.3%, we therefore expect growth rates to be a bit higher through the balance of the year.

We expect Airline and Hospitality Solutions 2016 EBITDA margins to increase nearly one full point to 38% in 2016, as we continue to benefit from increasing scale across our platforms.

We continue to expect full year Travel Network revenue to increase between 13.5% and 14.5% with anticipated growth of approximately 20% through the first half of the year and mid-single digit growth in the back half. This reflects the mid-year anniversary of the Abacus acquisition. As previously communicated margins will decline due to the full year impact of the Abacus acquisition. We expect Travel Network's 2016 EBITDA margins to be approximately 40%.

Turning back to consolidated Sabre. We expect total EBITDA of between $1.08 billion and $1.1 billion. Our capital markets work over the recent past reduces our interest expense run rate to approximately $40 million per quarter. We also continue to improve our tax structure, resulting in an expected full year effective tax rate of approximately 33% to 34%. We expect these below the line benefits will turn mid-teens EBITDA growth into full year net income growth of around 30%, ranging between $395 million and $415 million. We continue to expect EPS in a range of $1.40 to $1.47, with stronger year-over-year growth in the first half of the year, compared to the back half, again reflecting the anniversary of the Abacus acquisition and our previous interest savings activities. With this growth, we continue to expect 2016 free cash flow to approach $400 million.

Summary, the first quarter provided a good start to the year, with solid execution across our businesses. We continue to benefit from our business and financial model, a stable, profitable growth. We expect continued momentum over the balance of the year.

Tom, back to you.

Thomas Klein - President, Chief Executive Officer & Director

Thank you, Rick. We continue to build on our strength to drive value for our customers and results for our shareholders. Our talented team is executing to deliver against our commitments today while we continue to make investments to drive our future success.

We're looking forward to hosting many of you at our Investor Day in New York on May 17, where our team will elaborate on our longer-term strategy and vision for the company.

And with that, I'll turn the call back over to our operator, Kayla, to open the line for your questions. Kayla?

Question-and-Answer Session

Operator

Thank you. We'll take our first from David Togut with Evercore ISI.

Anthony Cyganovich - Evercore ISI

Good morning. This is Anthony Cyganovich on for David. I was hoping you could update us on market share gains by major geographies served in the Travel Network?

Richard A. Simonson - Chief Financial Officer & Executive Vice President

Yeah. So we had terrific gain in Europe, Middle East, Africa, again, as I mentioned. And that continues our string of how we've invested to improve, what we thought was a very underweight position in Europe, Middle East, Africa over the last years to get it up to a more representative rate that's closer to our 37%-ish rate globally, and we had great success there growing more than 5 times the market. So we see in the Europe, Middle East, Africa, again, we were right around that range of a 1.5% of market share increase.

In APAC, again, as I mentioned, Tom mentioned, I reiterated, the return to growth. There again, we see about the same level of increase in market share. And in Latin America, while the overall market was down in bookings and orders were down slightly as well, we actually saw very modest slight increase in market share gain by our calculations.

In North America, we continue to power along like we have recently with low-single digit market share gain in North America market. So hopefully, Anthony, that gives you a good color by the four regions.

Thomas Klein - President, Chief Executive Officer & Director

And Anthony, I think – this is Tom. The other thing that, I keep saying on these calls is, as we increase the pace of innovation and as this technology changes that are available to us to take advantage of and really we feel like we do that faster than anybody in the market, that just creates opportunities for us everywhere. So it's very much driven by our ability to bring things to market that are different from our competitors and we think we've been doing that consistently for a long time. But the current technology environment, we believe, gives us a chance to accelerate that.

Anthony Cyganovich - Evercore ISI

Great. I appreciate the color. Just as a follow-up, what is your outlook for airline traffic growth in each of your geographies this year?

Thomas Klein - President, Chief Executive Officer & Director

Yeah. I think we'll rely on the airline analyst on your side to decide where the forecasts are. We don't think it's whole lot different from where we started the year, but there is some movement in some of the numbers from the earnings calls that we've been hearing from the airlines, but we don't have enough insight to redo our whole forecast at this point.

Richard A. Simonson - Chief Financial Officer & Executive Vice President

Yeah. The fundamentals, important to remind that, as we set our plan and our expectations for 2016, have remained largely intact and you've seen that as we said, the first half capacities with airlines does lock in early and they don't change real quickly. You've seen that, that's been the case so far this year. We played well into that. And also the airlines are keeping their planes full by using price around the edge to do that. You've seen them report on that. Again, that's good for our business because we get paid on a transaction basis.

And the little bit of pullback that some of the North American carriers were talking about and capacity plans for the second half versus the beginning of the year, again, I think plays well into our model because we expect them to keep those planes full and therefore very consistent and allowing us to reiterate our full year guidance.

Anthony Cyganovich - Evercore ISI

Great. Thanks a lot.

Operator

We'll take our next question from Ashish Sabadra, Deutsche Bank.

Ashish Sabadra - Deutsche Bank Securities, Inc.

Solid quarter. Congrats. Very solid quarter across all segments. My questions are much broader, like when I look at the solutions segment, I was just wondering if you can talk about the prospect pipeline there. You had talked about potential opportunities not just in the pipeline but more about the prospect pipeline? Thanks.

Thomas Klein - President, Chief Executive Officer & Director

Yeah, Ashish, first of all thanks for the question. Look, we haven't changed our view of the robustness of the pipeline and we generally are talking about the SabreSonic pipeline and we've talked about this notion that there's about 650 million passengers boarded out there, that we think will be up for bid and hopefully making decisions here in a relatively kind of the mid-term over the next 24 months, 36 months. And we again continue to feel good about our ability to capture a fair share of that part of the market.

I think the more – the thing that we're looking at a lot more closely these days is again our – as we released the number of solutions, 21 new solutions specifically in the airline business over the last 24 months, watching the revenue pipeline still for those solutions. And a solution that we're very excited about, Intelligence Exchange, really has terrific traction in the market and it's a relatively high-ticket item, very versatile, we have airlines that have done over 100 different used cases on top of Intelligence Exchange across their commercial areas, their operational areas.

We're doing some, and I talked yesterday or earlier this week in Las Vegas about how we're using Intelligence Exchange to create a baggage tracking service that can be consumed by mobile devices by our customers. So, really flexible platform and we're seeing really good update from it and it was really the topic of the conference that I just came back from. So, we – good, strong pipeline as always in the SabreSonic side of the business, but as we look at the other solutions, and I mentioned we'll show off Revenue Optimizer at our upcoming investor conference.

We have a new crew solution rolling out, that we're selling into already. So just really a traction across the whole portfolio. And again, as I mentioned earlier, we don't view it as just an opportunity to capture current spend. As we release some of these solutions and bring innovations to the market, we think we will increase the size of the spend in the whole industry. So, again, increasing TAM and then capturing greater share of the TAM.

Ashish Sabadra - Deutsche Bank Securities, Inc.

So, thanks for the color. This was very helpful. And just maybe going to the Travel Network segment, the bookings growth there was pretty solid, but also positively, the booking fee was up, by my math, it was up like 1.6% year-on-year. So I was just wondering, if you can talk about what drove the increase in booking fee and how should we think about bookings – the sustainability of the increase in booking fee going forward?

Richard A. Simonson - Chief Financial Officer & Executive Vice President

Yeah. Ashish, this is Rick. Again, it varies quarter-to-quarter and Q1 is exactly as you said. So thanks for the good math there, but as we've said this year, we expect actually bookings to be up a bit more than revenue. So you shouldn't extrapolate that out. No change, no difference there, but don't extrapolate that out, quarters can be a little bit lumpy, depending on what comes in, in terms of deals. So, all to plan.

Ashish Sabadra - Deutsche Bank Securities, Inc.

Thanks for the color, Rick. And maybe, if I can sneak in one last question, this is regarding free cash flow. So you've reiterated your guidance for the free cash flow for the full year, but just as we think about the cadence, how should we think about it, because free cash flow can be lumpy quarter-to-quarter. So just at a very high level, how should we think about the cadence for the free cash flow?

Richard A. Simonson - Chief Financial Officer & Executive Vice President

Good, good thanks and we did have a modest decline in free cash flow in the quarter, but again per plan and it still allows us to reiterate approaching $400 million for the year. We increased CapEx and timing kind of associated with some of our working capital. Our GAAP capital expenditures increased about $14 million over the prior year. There is some incremental T&A spend (26:01), that's work we're finalizing for instance Sabre Red Workstation (sic) [Workspace] (26:06) 3.0. We had an increase in the capitalized implementation cost, as we're working on Alitalia, airberlin and others as I mentioned. And we had some of the Abacus stiff up spend that we talked about at the acquisition there.

So we expect then, obviously, to get to the approaching $400 million, that we really have the bulk of this coming in, in the back half, right? So, again, Q2, you're not going to see any acceleration, it will be down a bit and then we really power up in Q3 and Q4 to get there. So lumpy in the quarters, good on the year as we see it now.

Ashish Sabadra - Deutsche Bank Securities, Inc.

Congrats once again and thanks for the color.

Operator

We'll take our next question from James Schneider with Goldman Sachs.

Richard A. Simonson - Chief Financial Officer & Executive Vice President

Jim, you there?

James Schneider - Goldman Sachs & Co.

Yeah, I'm here, sorry. Excuse me. Thanks for taking my question. I just wanted to be maybe ask first of all, in terms of the quarter itself, good margin performance there. Can you maybe comment on your objectives and plans relative to incremental investments as we go throughout the year, and then maybe talk about what we should expect in terms of incremental OpEx versus letting that fall to the bottom line and specifically any initiatives you're working on, on the solutions side that will kind of push that OpEx up?

Thomas Klein - President, Chief Executive Officer & Director

Let's talk about, Jim, a few of the things that we think are important to invest in, and then, I want to make sure that we're – I'll let Rick talk to what you described as incremental, because I think it's incremental and how we think about our business, but it's not incremental to what we've laid out there in the full year guidance.

I think, a couple of big categories, as I mentioned, some of bigger new solutions in the Airline Solutions business are a crew system, which is a big need in the industry, we're talking virtually a big group of carriers in every region in the world, because this is an area where we believe this very big refresh coming and we're going to be – we're going to lead on that refresh with our new crew product. So big area of investment, and it's a very complex system for airlines and it involves their labor contracts, the local laws, the FAA rules, et cetera. And so, it's a great dynamic system and it needs an upgrade and we're going to be at the forefront of that upgrade.

The second one is Revenue Optimizer. Again, a refresh in revenue management area. That looks at total revenue management, not just core seat inventory revenue management, which is what most of the revenue management systems do today. The different approach, we think it's – we know it's going to be the best design, best user experience product in the industry, customers have been very favorably responding to it. Again, as we implement those types of new solutions that do new tricks for customers. And on the optimization side, we have to build also the talent to consult and to help our customers along. So those investments are not just in product, but they're in people around these products to get them penetrated into the market.

And then, finally, I talked about Intelligence Exchange a lot. But that is a very broad, very flexible platform. Again, there's a lot of professional services that we can invest in and wrap around those products.

On the Hospitality side, we launched a Sabre Enterprise Platform in the fourth quarter of last year as a SynXis Enterprise Platform in the Hospitality space. We still have work to do to build out a very broad property management system up over time for multiple segments of hotels.

So today we're implementing at Wyndham and a number of other hotels, mostly in the select service portion of the market. It's the place where there's the most hotels. We think there's a lot of upside there for us to continue to sell into that part of the market. But we'll need to continue to invest in the Hospitality Solutions suite. I think the primary investments will be in the property management system.

And then in general across the enterprise, we're investing in platforms. So we're investing in things that we could leverage across all of our businesses. And the example that I think is easiest to use is customer profile.

So we have a customer profile that's very traveler specific. It's being used by airlines, travel agencies, and hospitality companies. And the suppliers can add the specific data elements that matter to their industries, because the data model is that flexible. But we get the leverage of a very broad platform across all of our customer sets.

And again when I said earlier that both the technology advancement and then getting the leverage of our scale and using things across multiple customers, there's certainly advantage for our customers from the standpoint of core capabilities in these big platforms, but also our ability to increase the cycle of positive innovation, because of the strength of the core platform increases. But it also is punishing the competitors who try to keep up. So with that, Rick, I'll turn it to you.

Richard A. Simonson - Chief Financial Officer & Executive Vice President

Yeah, good. And just a reminder to everybody. Our 2016 guidance around CapEx is approximately $300 million GAAP CapEx. That's our internal use software that we invest to develop these solutions that Tom just talked about.

And $95 million in capitalized implementation costs, those are the costs associated with doing the big implantations, like airberlin and now Alitalia, Air Seychelles, et cetera, and to a lesser extent in hospitality. That's a total of $395 million.

And again that $300 million on the GAAP CapEx is consistent with what we talked about the last couple of years. So while it's going up and it's going to go up above $300 million, it's being deployed well, as our return on invested capital is improving. And it's going up at a slower rate than what our revenues are going up. So we're well intact there.

In terms of – on the OpEx again for 2016, first to note, Q1, our year-on-year corporate expense was up a bit. The primary reason for that increase was due to expenses around Abacus that were corporate expenses. And then for year over year we expect the corporate expense line, which happens in our product and technology group primarily, that's the residual there. And then a little bit at the corporate, which is like, Tom and I's overhead. We expect that to be kind of year on year around flat. But there's some fluctuation, as I said in Q1. And specifically, we'd expect Q2 and Q4 will be a little bit higher than Q3 to get to that overall flattish on that line. So hopefully that helps you there.

James Schneider - Goldman Sachs & Co.

That's helpful. Thanks. And then maybe just to follow-up on hospitality, you talked about the Wyndham implementation progressing nicely. But can you give us a sense about how the conversations are going with any of your other hospitality potential prospects? And specifically as you get further on those implementation timelines, do you feel like there was any larger potential clients getting closer to the goal line in terms of signing up?

Thomas Klein - President, Chief Executive Officer & Director

Yeah. First, our conversations across the industry are excellent. I think we have an open door to any hotelier in the world right now. People are interested to hear what we have to say, different than our position was 24 months ago. And it's very much helped by the Wyndham implementation.

But it's also helped because in general, as we've talked about for a long time, there is a refresh cycle required at some companies. And then we've distanced ourselves from competitors, particularly in the central reservation system area, where we've continued to grab increasing number of brands that go out and talk about how our central reservation system has given them real revenue lift and better insight into how they manage their inventory.

So there is really clear product differentiation out there, Jim, and our conversations and dialog with hoteliers, big and small, are very strong. My expectation is that we will start to see, as we expand the portfolio on Hospitality Solutions, we will sell solutions into all size brands. Now whether it's a CRS deal or a property management system deal or a narrower deal, frankly at this stage of that enterprise market, doesn't matter. What matters is getting in and doing a great job for these customers, because they are going to need to spend money to refresh their technology. And they will spend an increasing share of their dollars on technology versus other things they spend on.

So we want to get in the door and do a great job for them. And again it's very – it's why we love the broad portfolio model. It gives us a chance to do a great job in a small area. And then go in and do something bigger right behind it. And we do that with smaller brands. I expect that will be some of what we'll do with bigger brand, and there, I also – I'm still bullish as of the big deals as well that we'll talk about those when we get there.

James Schneider - Goldman Sachs & Co.

Great. Thanks very much.

Operator

We'll go next to Brian Essex with Morgan Stanley.

Brian L. Essex - Morgan Stanley & Co. LLC

Good morning and thank you for taking the question. I was wondering, if you could talk on Abacus real quick. We know that deal is done and we see little bit of year-on-year pressure in the EBITDA margins for the Travel Network. I mean, any incremental cost saves there or should we just kind of extrapolate the difficult seasonality that you tend to see in the margins going forward to get to your kind of guidance of 40%-ish margins there?

Richard A. Simonson - Chief Financial Officer & Executive Vice President

Yeah, Jim (sic) [Brian] (35:48). This is Rick. Really nothing new from the day we announced the deal and said that we're spending in the areas that we said we'd spend that are kind of one time. It's more additional CapEx to tune the platform there, where we have direct control now, where we didn't as minority board member on that side.

And then operating side, again, as we said from the time of the acquisition, we expected that all else equal to put about 2 points of pressure on the Travel Network margins and we're seeing that come to bear as we said, as we roll out that year and that's why we step down from 42% to 40%. So nothing different there and we are recognizing and on track to get the run rate savings that are about $10 million per year by the end of this year. That's one we expect to have achieved the full run rate, so that next year we would see that at the 10%, can't identify anything above that. But, obviously, we'll continue to work there.

I think we got the balance of investing in the people, the solutions, the sustainability there, the expertise in the market right with also then quickly acting on obvious cost savings of when you had a fairly inefficient go-to-market organization and where you can take out duplications. So right on track.

Brian L. Essex - Morgan Stanley & Co. LLC

Great. And maybe if I could follow-up, now that you have hopefully a better presence there, I mean, are you seeing a difference in conversations that you're having with the airlines, maybe the relationship that you're having with airlines in that market and your potential, perhaps it will take a little bit better share on the airline hospitality, I mean the Airline Solutions side?

Thomas Klein - President, Chief Executive Officer & Director

I think, yeah, that we've had a couple very good deals recently. Again, I mentioned the crew system, Singapore Airlines and some of their subsidiary launch customers in Asia for the crew system. So they're pioneering the Asian entry there. And as I mentioned, crew systems are driven by things like government rules and how airlines manage crews. So there's – there are significant regional differences. So we really wanted to have launch customers in each region, where there are major differences, couldn't have a better partner in Singapore Airlines on that. Garuda in Indonesia, just, was our really our biggest deal of the quarter, last quarter, with the purchase in our operations area. We expect that to be a very broad deal. And again, Air Seychelles was – is out in that region. Small carrier, but a very big footprint of our technology. So I think – feel like we're starting well into Asia and again the opportunities are building around these broader pipelines of new products, in particular.

Brian L. Essex - Morgan Stanley & Co. LLC

Great. Thank you very much.

Richard A. Simonson - Chief Financial Officer & Executive Vice President

Thanks, Brian.

Operator

We'll take our next question from Matthew Broome with Cowen and Company.

Matthew Broome - Cowen & Co. LLC

Hi. Thanks for taking my call, great quarter. Earlier this month, you made some enhancements to your virtual payment solutions. Could you discuss changes and more broadly describe how your payment solution is differentiated from other offerings?

Richard A. Simonson - Chief Financial Officer & Executive Vice President

Yes, on the payment solution, again, we offer what people call a virtual account number, right? Or in other words, you enable travel, purchasers of travel to when they have employees out on the road, not issue a credit card but actually have a virtual account number. And we integrate that into our offering so that the travel agents and the corporations can work that into their flow and it's important so it's not kind of a standalone offering. And it does a number of things, it obviously is convenient for the corporations because sometimes, you want people to have access to spend but not without, with issuing a credit card that kind of goes on forever.

It also helps with fraud prevention, both for the corporations and for the agencies and the clearing there. And we've continued to build out our presence and the offering there for the customers. So, again, it's not a standalone payments business, we don't view it that way, we do it as a solution integrated into our offering through our GDS offering to the purchasers of travel, whether it be corporations or – and then the benefits also the agencies and the providers of travel, whether it be the hotels and now increasingly we announced ability to do that for air ticketing as well. We primarily started with this, was around hotel and T&E spend for people that were on the road, employees on the road, but now working that, and you saw a recent announcement, where we're working that into the airflow as well.

Matthew Broome - Cowen & Co. LLC

Okay. Great. And have you seen any recent changes to the GDS competitive environment?

Thomas Klein - President, Chief Executive Officer & Director

I don't think there has been any major changes, I mean we feel like we've continued to take share across the globe and we did this quarter, and feel like we can continue to do that.

Matthew Broome - Cowen & Co. LLC

Okay. And just one last question. Is Sabre Red Workspace, is that still on track for, I think it was Q3?

Thomas Klein - President, Chief Executive Officer & Director

Yes. And again, we'll be showing it at our Investor Day in New York, hope that you could join us.

Matthew Broome - Cowen & Co. LLC

Definitely. Thanks very much.

Thomas Klein - President, Chief Executive Officer & Director

All right.

Richard A. Simonson - Chief Financial Officer & Executive Vice President

Thanks, Matthew.

Operator

We'll go next to John King with Bank of America.

John P. King - Bank of America Merrill Lynch

Yeah. Thanks. Good morning guys. Just a couple on the Travel Network side.

Thomas Klein - President, Chief Executive Officer & Director

Hey, John.

John P. King - Bank of America Merrill Lynch

Hey, just a couple on the Travel Network side for me. If you look at the bookings growth, I mean, it's still pretty solid. But I guess, you did slow a little bit in North America from Q4 to Q1. I think Q4, you were more in the high-single digit range. So, I appreciate that comps sort of deferred as well. But was there anything specific there, that held you back in North America? Or, I guess, you should have benefited from the leap year as well. So just a bit of context around that. And maybe kind of how did that growth phased through the course of the quarter and perhaps what you've early, you've seen early in Q2, in terms of the bookings growth? And maybe kind of just round it off, what are you eventually baking in implicitly for the like-for-like bookings growth for the year?

Thomas Klein - President, Chief Executive Officer & Director

Let me start with a little color on North America and we can talk about how we think about the rest of the year. But I think what we've seen John is, it picked up a little bit this year. But as Rick said in his comments, the corporate market has been generally flat. Leisure market is definitely stronger than corporate, airlines are pricing into that leisure demand and they've been talking about that and we see it with their PRASM results. So I think the biggest issue in North America, that's all then is back is this slow to no growth in corporate travel. And we haven't forecasted that – we're not economists, we haven't forecasted when that – when corporate travel is going to return to growth. But I do – I did feel like we saw a little bit of a pull back early in the first quarter, that sentiment. And if you read sentiment pulls across corporations, CEOs and CFOs there was some conservatism around spend. And maybe that's what happened in the first quarter with bookings.

Richard A. Simonson - Chief Financial Officer & Executive Vice President

Yeah. And then specifically, John, it's Rick, on the bookings for 2016, what do we see, reminder 15% growth was what our guidance was. That's obviously improved by one time for Abacus. And remember, bookings, we didn't consolidate Abacus before. For market share, we brought it in because we power that, so that's why you see big step ups in bookings growth for the year, but you don't see change in market share other than the actual change that we're getting through increased market share gain. So I wanted point that out first.

And then secondly, ex-Abacus, as we said before, growth within that 15% bookings increase, ex-Abacus would be approximately 5%. So kind of spot on. And that gives you the color there. And in terms of Q1 North America, I mean we saw good market share growth there. And the book and on them obviously industry bookings that were more weighted leisure versus corporate because, energy and financials, corporate travel and spend was significantly down in the quarter and you heard that talked about by the airlines as a factor related to their PRASM as you and Tom were debating before.

John P. King - Bank of America Merrill Lynch

That's very helpful. And just as a follow-up on that topic. Obviously, I guess to some extent that's a negative mix for you in terms of the profitability and the commission rates that you're going to see I guess on the average ledger booking, maybe somewhat higher than what you'd see in corporate. So what are you seeing perhaps like-for-like on the commission side of things and how are you offsetting that? Is there some level of – some of the synergies coming through from Abacus to offset that mix for you?

Richard A. Simonson - Chief Financial Officer & Executive Vice President

Actually, the mix was pretty good, as I mentioned earlier on, and it was overall globally turned out for a positive mix for us, even though as I said don't extrapolate that out for the year. So, all the ins and outs, it really – you can't interpret anything and extrapolate anything different than what we've guided for, for the full year.

John P. King - Bank of America Merrill Lynch

Got it. Thank you, guys.

Richard A. Simonson - Chief Financial Officer & Executive Vice President

John, did you have another question we didn't answer, you had kind of like a three-part?

John P. King - Bank of America Merrill Lynch

Yeah, right, yeah. Well, I guess the question was more kind of what the – on the incentive side rather than the actual absolute booking fee side, kind of what the trends were there and how that trended, because again, I guess, the ledger bookings would have had on average higher (46:32) fees than the corporate?

Thomas Klein - President, Chief Executive Officer & Director

Yeah, I think, John, not much different than our forecast in aggregate that assumption isn't necessarily true on the effects of mix. So you're talking about the mix, not much different than we thought coming into the year on the incentive side

Richard A. Simonson - Chief Financial Officer & Executive Vice President

Yeah, and over your all and year again, we expect bookings to grow greater than revenue. So don't extrapolate the Q1 mix out for the rest of the year in that regard.

John P. King - Bank of America Merrill Lynch

Got it, very helpful.

Richard A. Simonson - Chief Financial Officer & Executive Vice President

Thanks.

Operator

We'll go next to Abhey Lamba with Mizuho Securities.

Abhey R. Lamba - Mizuho Securities USA, Inc.

Yeah, thank you. Tom, can you please discuss specific items that drove share gains in EMEA? Was it adding more airlines to the menu or more travel agents using your product? Or was it something on the pricing front here that you've been doing? It would be helpful to get some more color on that.

Thomas Klein - President, Chief Executive Officer & Director

Yes, it's all – I mean share growth in EMEA has been driven by acquiring travel agency customers. So it's we're selling well into travel agents. We've said before that we've done a combination of things. One is we've invested in products very aggressively across the board, really globally with the product. And as the technology landscape rapidly changes, we just think that they create opportunities for us.

We put the new products like Sabre Red Workspace 3.0 and the prospect of that has gotten customers' attention, gives us confidence that we'll continue to grow share in the market, as we lever changes like that.

And then finally, we've invested in new markets, and that's starting to payoff. So there were number of markets that we've talked about before, places like Turkey and South Africa, some of the CIS countries, where we didn't have much of a presence at all. And we've opened sales offices in some of those places. And we're starting to see some benefit with that.

So it's really across the board and it's – but it is agency – travel agency share acquisitions. So we're taking share away from our two competitors in both the online and offline business in EMEA.

Richard A. Simonson - Chief Financial Officer & Executive Vice President

Abhey, I know we sound like a broken record, but it's a pretty good sound actually if you continue to take market share in a sustainable way that way. And we think the ingredients are set for it.

But in the couple years forward, it's important to note what Tom's talking about, couple times here, of how this continuing investment in our technology, and it evidenced by Sabre Red Workstation (sic) [Workspace] (49:07) 3.0 and other things, will continue to allow us to have that discussion with agencies of why they ought to consider Sabre where they haven't before or bring us higher up in the mix. So we don't see anything but a continuation of this.

Thomas Klein - President, Chief Executive Officer & Director

Yeah. And just to be clear, I mean as Rick said, a little bit of broken record, but the way we think about it is, as a mid-teens player and a global leader, we should be growing share. And it should be matter of fact that we're growing share in EMEA. And we plan to continue to do so.

Abhey R. Lamba - Mizuho Securities USA, Inc.

Got it. Very helpful. Thank you, guys.

Operator

We'll go next to Jason Kupferberg with Jefferies.

Ryan Allen Cary - Jefferies LLC

Good morning. This is Ryan Cary on for Jason. Nice job on the quarter. Building a little bit on an earlier question. Can you speak to maybe what drove the share gains in Asia-Pac? We've been thinking it might take a little bit longer to ramp. But it seems like you're seeing some great growth there already. Do you expect this to be sustainable going forward? Or was there some one time benefits in the quarter?

Thomas Klein - President, Chief Executive Officer & Director

Thanks for the question, Ryan. Look, we grew share in Asia-Pac. It wasn't leaps and bounds. We feel good about stabilizing the business there. We knew that, as Rick said, we had go-to-market inefficiencies that we had a clear line of sight to as board members. We've gotten underneath those.

And again, I just think we have a great team out there. We're increasing our capability on the go-to-market side. And again, we expect it to be an upward trend over time, not a – not big grabs of share in short periods of time. So...

Richard A. Simonson - Chief Financial Officer & Executive Vice President

It's important just to remember the absolute math, when Europe, Middle East, Africa, we started closer to 10% a number of years ago. And therefore, with what we've been doing, this point, point and a half a year, we've proved to be quite sustainable. And we feel good about that.

In the Asia-Pacific region, remember we're up around 40% market share. So you can't add-on math at a point and a half every quarter for multiple years there.

Ryan Allen Cary - Jefferies LLC

Great. And then just going back to the passengers boarded backlog and the solutions business. I believe there was generally an 18- to 24-month timeline at the end of last year for that 650 million PBs. But now it seems like it's moved more to 24 months to 36 months. Anything changed? Or is this just a difficult number to predict?

Thomas Klein - President, Chief Executive Officer & Director

I think it's a difficult number to predict. I mean we can certainly – as in most businesses, we can make sales calls to people outside. This is a big decision. On the airline reservation side, it's a big decision.

The short story is that airlines have to decide it's one of a couple priorities that they have for a year sometimes or a couple years. So it's not just a matter of wanting to do it, it's a matter of being able to slot it in as a priority. And then being able to assess your other business needs and deciding if it makes sense.

So timelines move around. I think 36 months is on the outside. But I do think that the timeline on some of these deals has elongated. Not unusual. We haven't changed our forecast because of it. But it's a big decision for airlines. And they don't take it lightly and nor should they.

Ryan Allen Cary - Jefferies LLC

Great.

Richard A. Simonson - Chief Financial Officer & Executive Vice President

We've got the balance of our other solution set as well. So that we don't – we aren't a slave to undue lumpiness.

Thomas Klein - President, Chief Executive Officer & Director

That's right.

Richard A. Simonson - Chief Financial Officer & Executive Vice President

Although there is some lumpiness in the rev side.

Thomas Klein - President, Chief Executive Officer & Director

Thanks, Jason.

Ryan Allen Cary - Jefferies LLC

Great. Thanks for taking my question.

Thomas Klein - President, Chief Executive Officer & Director

Or Ryan. Sorry, Ryan.

Operator

We'll go next to Jed Kelly with Oppenheimer.

Jed Kelly - Oppenheimer & Co., Inc. (Broker)

Great. Thanks for taking my question. What's been driving the stronger trends you're seeing with leisure travel given some of the recent events in Europe. Is it any geographies you can specifically call out in terms of domestic versus transcontinental flights or is it higher volumes from the OTAs?

Thomas Klein - President, Chief Executive Officer & Director

Yeah. I mean, where we see it Jed is more North America. We just see more of a balance and again I think the overall traffic is okay. I think it's a – it is a mix issue and I wouldn't say it's necessarily significantly stronger leisure and just as I said the corporate market is flattish, and Rick said it in the two segments energy and financials, it's particularly impacted. So I think it's more an issue of corporate recovery would be a good boost for everybody, for our airline and hospitality customers as well as for us. It wouldn't be at the expense of leisure travel, I don't think. So it's really just a mix issue here in North America that's what we – at least for us in our business, I think that's what we're able to do.

Jed Kelly - Oppenheimer & Co., Inc. (Broker)

Thank you.

Operator

We'll take our next question from Brad Erickson with Pacific Crest Securities.

Brad Erickson - Pacific Crest Securities

Great. Thanks for taking my questions. First on the ramp of the American business, I wanted to ask around the XML-based product you've introduced there and how it's going thus far and then how you think – how you kind of think about NDC and the XML-based products in the future is driving future opportunities?

Thomas Klein - President, Chief Executive Officer & Director

Yes, Brad, thanks for the question. I think at American, the seats, basically, it's further paid seat product and that's gone quite well. I think they are pleased with the product and its uptake in the market. From a standpoint of that – XML is a decade old technology that we've been using for over a decade. So there is nothing new there. It's just an issue of how airlines want to connect and how they want to feed us content. And as far as the NDC standard, I've said before, we view it as a non-issue. It's a white paper, it's a suggestion, and innovators are going to innovate, and we're going to be leading that. If we need to write to that standard, that's fine, but I think these standards will evolve and emerge and will come out in innovative technologies that actually – innovative technology companies that actually deliver product to the airlines and we're at the forefront of that.

Brad Erickson - Pacific Crest Securities

Got it. That's great. And then, regarding your pipeline in the solutions business, I guess, historically, have you ever talked about kind of close rates for that business, and how has that been trending lately? Thanks.

Thomas Klein - President, Chief Executive Officer & Director

We haven't – we do track it. We've talked about being the number one or number two product in every area. And I'd say that, my guess is versus most software businesses, our close rates are very, very higher. Again, we have a couple competitors in each product set. We have the number one and number two product. They ought to be high.

Kayla, any more questions?

Operator

With no further questions, I'd like to turn it back to Mr. Tom Klein for closing remarks. Mr. Klein?

Thomas Klein - President, Chief Executive Officer & Director

Well, thanks again for joining us this morning. We, as always, we appreciate your interest in Sabre, and we very much look forward to seeing many of you in New York on May 17 and to speaking with you all again soon. Thanks a lot. Have a great day.

Operator

That concludes today's conference. We thank you for your participation. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!