Sabre Corp (SABR) 2016 Q1 法說會逐字稿

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 express 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.

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. The slide presentation, which accompanies today's prepared remarks, is also available during this call on the Sabre IR web page. A replay of today's call, along with 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. 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 December 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 will turn the call over to Tom.

Thanks, Barry, and good morning, everyone. With our first quarter results we are off to a good start in 2016. We built a very resilient foundation to our core business. We executed well across the board and it is 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. While clearly not as meaningful to investors as larger deals, it is an indication of our ability to win and execute profitable business and graphically diversify.

Hospitality Solutions continued strong growth with momentum across our portfolios 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 Wyndham with their trip brand going live on our SynXis GRS 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's CEO, Steve Holmes, said on the earnings call, the revenue management tools embedded in our product are already improving results across the properties that have 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 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 offering and our ability to execute on our customer's behalf.

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

As the only provider that goes to market with our broad capabilities, we have a unique advantage to be able to see opportunities and needs across a 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, processes, and tools that increase our [cost speed at innovation], we will capture a greater share of increasing pie of technology. Every time we introduce innovation, like Sabre Workspace 3.0 and Travel Network and Revenue Optimizer and Airline Solutions, two new products that we will 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 it's hard on those competitors that can't keep pace.

Looking of the first quarter financial performance, results were driven by a 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 deliver 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 and small key 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.

The Travel Network continued its streak of share increases in revenue growth. The 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 will continue to grow the Travel Network business as we give both suppliers and agents the most effective tools in the industry to sell not only core elements to travel but to sell into the aggressive trend of ancillary products and services. And backed by our data and analytics packages will help airlines and hoteliers learn what works and what doesn't work quickly when 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 will see us continue to aggressively pursue core growth and innovate during greater share of customers spend. The first quarter was a continuation down that path.

With that, I will turn the call over to Rick with some additional commentary on the quarter and the forward outlook. Rick?

Thanks, Tom. Airline and Hospitality Solutions revenue grew 16% for the quarter to $238 million. Contributing to the rise in revenue was 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 consisting 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, 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 Network's revenue growth was supported by a bookings increase of 28% in the quarter. Again, X 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.

Looking to Sabre's overall income statement. Strong growth across the business resulted 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 for 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 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 were $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 bonds. We intend to pay down the revolver draw with cash over the balance of the year.

With that last piece of coupon debt extinguished, our blended cost of debt now sits at 4.42%. Swap adjusted it's 4.53%. 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 Air Berlin.

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 Investors Services. Sabre's corporate family rating and the ratings for our seniors secured credit facility and notes were moved up one notch to BA2 earlier this month.

Now let's turn for the outlook for 2016. With our strong start to the year we feel confident in meeting are full-year objectives, and we are reiterating our 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.

In summary, the first quarter provided a good start too 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 too you.

Thank you, Rick. We continue to build on our strengths 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 are team will elaborate on our longer-term strategy and vision for the Company. With that, I will turn the call back over to our operator, Kayla, to open the line for your questions. Kayla?

(Operator Instructions)

David Togut with Evercore ISI.

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.

Yes, we have terrific gain in Europe, Middle East, Africa, again, as I mentioned. That continues our string of how we have 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 percentage rate globally. And we had great success there, growing more than five times the market. So we see in Europe, Middle East, Africa, again we were right around that range of a 1.5 point market share increase.

In APAC, again, as Tom mentioned, I reiterated 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 ours were down slightly as well, we actually saw a very modest slight increase in market share gain by our calculations. And in North America, we continue to power along like we have recently, with low single-digit market share gain in North America markets. Hopefully, Anthony, that gives you good color by the four regions.

Anthony, this is Tom.

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

Great. I appreciate the color.

This is a follow-up: what is your outlook for airline traffic growth in each of your geographies this year?

Yes, I think we will rely on the airline analysts on your side to decide where the forecasts are. We don't think it's a whole lot different from where we started the year, but there is some moving -- there's some movement inside of the numbers from the earnings calls that we have been hearing from the airlines. But we don't have enough insight to redo our whole forecast at this point.

Yes, the fundamentals important to remain 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 -- those lock in early and they don't change real quickly. You've seen that, that has been the case so far this year. We played well into that. Also, the airlines are keeping their planes full by using price around the edge to do that. You have seen them report on that. Again, that's good for our business, because we get paid on a transaction basis. The little bit of pullback that some of the North American carriers are talking about in 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. Therefore, very consistent in allowing us to reiterate our full-year guidance.

Great, thanks a lot.

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

Solid quarter. Congrats. Very solid quarter across all segments. My questions are much more broader.

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 [apportion dees] not just in the pipeline but more about the prospect pipeline? Thanks.

Ashish, first of all, thanks for the question.

We haven't changed our view of the robustness of the pipeline. We generally are talking about the SabreSonic pipeline when we have talked about this notion that there is about 650 million passengers boarded out there that we think will be up for bid, and hopefully making decisions here in the relatively mid term over the next 24, 36 months. And we, again, continue to feel good about our ability to capture our fair share of that part of the market.

I think the thing that we are looking at a lot more closely these days is, again, as we release the number of solutions, 21 new solutions specifically in the airline business over the last 24 months, watching revenue pipelines [still] for those solutions. And a solution that we're very excited about, Intelligence Exchange, really has terrific traction in the market. It's a relatively high-ticket item. It's very versatile. We have airlines that have done over 100 use cases on top of Intelligence Exchange across their commercial areas, their operational areas. We are doing -- I talked yesterday -- 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. Really a flexible platform and we're seeing really good uptake from it, and it was really the talk of the conference that I just came back from.

Good strong pipeline as always on the SabreSonic side of the business, but as we look at the other solutions I mentioned, we will show revenue optimizer at our upcoming investor conference. We have a new crew solution rolling out that we are selling into already. So just really good traction across the whole portfolio. 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 market, we think we will increase the size of the spend in the whole industry. Again, increasing [TAM] and then capturing a greater share of TAM.

Thanks for the color. This is very helpful.

And then, 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 1.6% year-on-year. I was wondering if you can talk about what drove the increase in booking fee and how we should think about the sustainability of the increase in booking fee going forward?

Yes, Ashish, this is Rick.

Again, it varies quarter to quarter and Q1 is as exactly as you said, so thanks for the good math there. As we 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. All to plan.

Thanks for the color, Rick. And maybe if I can sneak in one last question.

This is regarding free cash flow. You reiterated your guidance for the free cash flow for the full year, but as we think about the cadence, how should we think about it because free cash flow can be lumpy quarter to quarter? So at a very high level how should we think about the cadence for the free cash flow?

Thanks. We did have a modest decline in free cash flow in the quarter, But again, per plan, and still allows us to reiterate approaching $400 million for the year. We increased CapEx and timing associated with some of our working capital. Our GAAP capital expenditures increased about $14 million over the prior year. There is some incremental TN APAC spend that is work for finalizing -- for instance, Sabre Red Workstation 3.0. We had an increase in the capitalized implementation costs as we are working on Alitalia, Air Berlin, and others, as I mentioned. We had some of the Abacus [step]-up spend we talked about at the acquisition there. We expect then, obviously, to get to the approaching 400, 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.

Congrats once again and thanks for the color.

James Schneider with Goldman Sachs.

Jim, you there?

Yes, I am here. Sorry. Excuse me. Thanks for taking my question.

Just wanted to maybe ask, first of all, in terms of the 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? Specifically, any initiatives you are working on, on the solutions side, that would push that OpEx up?

Talk about, Jim, a few of the things that we think our important to invest in and then I want to make sure -- I will let Rick talk to what you described as incremental, because it is incremental in how we think about our business, but it is not incremental to what we have laid out there in the full-year guidance.

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

The second one is revenue optimizer -- again a refresh in the 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. It's a different approach. We know it's going to be the best design, best user experience product in the industry. Customers have been favorably responding to it. Again, as we implement those types of new solutions that do have new tricks for customers, and on the optimization side we have to build also the talent to consult and to help our customers along. Those investments are not just in product, but they are in people around these products to get them penetrated into the market. Finally, talk about intelligence exchange a lot, but that is a very broad, very flexible platform. Again, there's a lot of special services that we can invest in and wrap around those products.

On the hospitality side, we launched the Sabre Enterprise platform in the fourth quarter of last year. It's an (inaudible) enterprise platform in the hospitality space. We still have work to do to build out a very broad property management system over time for multiple segments of hotels. Today, we are implementing at Wyndham and a number of other hotels, mostly in the select service portion of the market. It is the place where there are the most hotels. We think there's a lot of upside there for us to continue selling in that part of the market, but we will need to continue to invest in the hospitality suite. I think the primary investments will be in property management system.

And then, in general, across the enterprise we are investing in platforms. We are investing in things that we could leverage across all of our businesses, and the example that I think is the easiest to use is customer profile. 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. We get the leverage of a very broad platform across all of our customer set. 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 is a certain advantage for our customers from a standpoint of core capabilities and these big platforms, but also our ability to increase the cycle time of innovation because of the strength of the core platform increases. But it also is punishing to competitors who try to keep up.

With that, Rick, I will turn it to you.

Just a reminder to everybody, our 2016 guidance around CapEx is approximately $300 million GAAP CapEx. That's our internally used 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 implementations like Air Berlin, Alitalia, Air Seychelles, et cetera; and to a lesser extent in hospitality. That's a total of $395 million. 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 the OpEx, again for 2016, first to note Q1 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 -- it's the residual there -- and then a little bit of the corporate, which is like Tom and I's overhead -- we expect that to be cutting year on year around flat, but there is some fluctuation as I said in Q1. And specifically we expect Q2 and Q4 will be a little bit higher than Q3 to get to that overall flattish on that line. Hopefully, that helps you there.

That's helpful. Thanks. And then maybe just a followup on hospitality.

You talked about the Wyndham implementation progressing nicely. 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 the implementation timelines, do you feel like there are any larger potential clients getting close to the goal line in terms of signing up?

First, our conversations across the industry are excellent. 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 what 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 distance ourselves from competitors, particularly in the central reservation system area where we have continued to grab an 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.

There's really clear product differentiation out there, Jim, and our conversation dialogues 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're going to need to spend money to refresh their technology. They will spend an increasing share of their dollars on technology versus other things they spend on.

We want to get in the door to do a great job for them, and 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. We do that with smaller brands. I expect that will be some of what we will do with the bigger brands. I also am still bullish that there will be big deals as well, but we will talk about those when we get there.

Great. Thanks very much.

Brian Essex with Morgan Stanley.

Good morning and thank you for taking the question.

I was wondering if I could touch on Abacus real quick. So now that, that deal is done and we see a little bit of year-on-year pressure in the EBITDA margins for the Travel Network, any incremental cost saves there? Or should we just extrapolate the typical seasonality that you tend to see in the margins going forward to get to your guidance of 40%-ish margin there?

Jim, this is Rick.

Really nothing new from the day we announced the deal and set that. We are spending in the areas that we said we would spend that are kind of one-time, more additional CapEx to tune the platform there where we have direct control now where we didn't as a 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 two points of pressure on the Travel Network margins. And we are seeing that come to bear, as we said, as we roll out that year and that's why we stepped 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 when we expect to achieve the full run rate so that next year we would see that at the $10 million. Can't identify anything above that, but obviously we will continue to work there. I think we've 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 we had a fairly inefficient go-to-market organization and where you can take out duplication. So right on track.

Great. Maybe if I could follow up.

Now that you have hopefully a better presence there, are you seeing a difference in the conversations that you're having with the airlines, maybe the relationship that you are having with the airlines in that market? And your potential perhaps to take a little bit better share on the Airline Solutions side?

I think we've had a couple of very good deals recently. Again, I mentioned the crew system, Singapore Airlines and their subsidiary are to launch customers in Asia for the crew system, so they are pioneering the Asian entry there. And as I mentioned, crew systems are driven by things like government rules and how airlines manage crews. 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 than Singapore Airlines on that.

Garuda in Indonesia just was 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 is out in that region, small carrier but a very big footprint in technology. So we feel like we're selling well into Asia and, again, the opportunities are building around these broader pipelines of new products in particular.

Great. Thank you very much.

Thanks, Brian.

Matthew Broome with Cowen and Company.

Thanks for taking my call. Great quarter.

Earlier this month you made some enhancements to your virtual payment solution. Could you discuss changes and more broadly describe how your payment solution differentiates it from other offerings?

On the payment solution, we offer what people call a virtual account number, right. In other words, you enable purchasers to travel 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 a stand-alone offering. It does a number of things. It obviously is convenient for the corporations because sometimes you want people to have access to spend, but with issuing a credit card that goes on forever. It also helps with fraud prevention, both for the corporations and for the agencies in the clearing there. We've continued to build out our presence in the offering there for the customers.

So, again, it's not a stand-alone payments business. We don't view it that way. We view it as a solution integrated into our offering through our GDS offering to the purchasers of travel, whether it be corporations or -- and then that 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 around hotel and T&E spend for people that were on the road, employees on the road, but now working that in -- you saw a recent announcement where we are working that into the air flow as well.

Okay, great. Have you seen any recent changes to the GDS competitive environment?

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

Okay. Just one last question.

Is Sabre Red Workspace -- is that still on track for Q3?

Yes. And again, we will be showing it at Investor Day in New York. Hope that you can join us.

Definitely. Thanks very much.

John King with Bank of America.

Thanks. Good morning, guys. Just a couple on the Travel Network side for me.

If you look at the bookings growth, still pretty solid. But you did slow a little bit in North America from Q4 to Q1, and in Q4 you were more in high single-digit range. I appreciate the comps [were difficult] as well, but was there anything specific there that held you back in North America? I guess you should have benefited from the leap year as well. So just a bit of context. Maybe how did that growth phase through the course of the quarter? And perhaps what you have seen earlier in Q2 in terms of the bookings growth? Maybe just round that off -- what are you baking in implicitly for the like-for-like bookings growth for the year?

Let me start with a little color on North America and we can talk about how we think about the rest of the year. I think what we have seen, John, is, we picked up a little bit of share, 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 have been talking about that and you see it with surprising results.

So, I think that the biggest issue in North America that is holding us back is the slow to no growth in corporate travel. And we haven't forecasted -- we're not economists. We haven't forecasted when corporate travel is going to return to growth. But I did feel like we saw a little bit of a pullback early in the first quarter. That sentiment, if you read sentiment polls across corporations, CEOs and CFOs, there was some conservatism around spend and maybe that's what happened in the first quarter with bookings.

And, specifically, John -- this is 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. Remember, bookings, we didn't consolidate Abacus before. For market share we brought it in because we powered 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 gains. So I wanted too point that out first.

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

That's very helpful. And just as a follow up on that topic.

Obviously, to some extent that is a negative mix for you in terms of the profitability, and the commission rates that you are going to see on the average ledger booking may be somewhat higher than what you'd see in corporate. 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?

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

Go ahead. Thank you, guys.

John, did you have another question we did not answer? You had kind of like a three-part.

Yes, well, I guess the question was more on the incentive side rather than the actual absolute booking fee side -- what the trends were there, and how that -- I guess the ledger bookings would have had on average higher incentive fees than the corporate.

Yes, it's not much different than our forecast in aggregate. That assumption isn't necessarily true on the mix. We feel good about the mix. Not much different than we thought coming into the year on the incentive side.

Yes, and all on the 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.

Got it. Very helpful.

Thanks.

Abhey Lamba with Mizuho Securities.

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 that you have been doing? It would be helpful to get some more color on that?

Share growth in EMEA has been driven by acquiring travel agent customers, so we're selling well into travel agents. We said before that it's been a combination of things. One is we have invested in products very aggressively across the board -- really globally with product -- and as the technology landscape rapidly changes, we just think that, that creates opportunities for us. We put new products like Sabre Red Workspace 3.0 and the prospect of that has gotten customers' attention. It gives us confidence that we will continue to grow share in the market as we leverage changes like that.

Finally, we've invested in new markets and that is starting to pay off. There were a number of markets that we 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 are starting to see some benefit from that. So it's really across the board, but it is travel agency share acquisition. So we're taking share away from our two competitors in both the online and offline business in EMEA.

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. We think the ingredients are set for it. But in the couple of years forward it's important to note what Tom is talking about. A couple times here of how this continuing investment in our technology and evidenced by Sabre Red Workstation 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.

And just to be clear -- as Rick said, a little bit of a 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 are growing share in EMEA and we plan to continue to do so.

Got it. Very helpful. Thank you, guys.

Jason Kupferberg with Jefferies.

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 are seeing some great growth there already. Do you expect this to be sustainable going forward? Or were there some one-time benefits in the quarter?

Thanks for the question, Ryan.

We grew share in Asia-Pac. It wasn't leaps and bounds. We feel good about stabilizing 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 are increasing our capability on the go-to-market side, and again we expect it to be an upward trend over time, not big revs of share in short periods of time.

It's important to remember the absolute math. In Europe, Middle East, Africa we started closer to 10% a number of years ago. Therefore, with what we've been doing this 1-point, 1.5-point a year, we proved to be quite sustainable and we feel good about that. In Asia-Pacific region, remember we are up around 40% market share. So you can't add on math at 1.5 point every quarter for multiple years there.

Great. And then just going back to the passenger boarded backlog in 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 to 36 months. Anything changed? Or is this just a difficult number to predict?

I think it's a difficult number to predict. We can certainly, as in most of businesses, we can make sales calls to people [on the side]. This is a big decision. On the airline reservations side, it's a big decision. The short story is, the airlines have to decide if it is one of a couple of priorities that they have for a year, sometimes for a couple of years. So it's not just a matter of wanting to do it; it's a matter of being able to slide it in as a priority and 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. It's not unusual. We haven't changed our forecast because of it, but it is a big decision for airlines. They don't take it lightly, nor should they.

We've got the balance of our solution set as well so that we are not slave to undue lumpiness, although there is some lumpiness in the rev side.

Thanks for taking my question.

Jed Kelly with Oppenheimer.

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 volume from the OTAs?

Where we see it, Jed, is more North America. We just see more of a balance. Again, I think the overall traffic is okay. I think it is a mix issue and I wouldn't say it's necessarily significantly stronger leisure, it's just, as I said, the corporate market is flattish, and as Rick said in a few segments, energy and financials is particularly impacted. I think it's more an issue of corporate recovery would be a good boost for everybody, for 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, at least for us, our business, that is what we are able to see.

Thank you.

Brad Erickson with 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 introduced there, and how it's going thus far? And then how you think about NDC and the XML-based products in the future as driving future opportunities?

Yes, Brad, thanks for the question.

I think in America the (inaudible) [basically their type C] product, and that's done quite well. I think they are pleased with the product and it's uptick in the market. From the standpoint of XML is a decades-old technology that we have 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 [fee] this content. And as far as the NDC standard, I said before, I view it as a non-issue. It's a white paper, It's a suggestion. Innovators are going to innovate and we are going to be able to lead that. If we need to write to that standard, that's fine, but I think new standards will evolve and emerge and will come out innovative technology companies that actually deliver products to the airlines and we're at the forefront of that.

Got it. That's great.

Regarding your pipeline in the solutions business, historically have you ever talked about close rates for that business? And how has that been trending lately? Thanks.

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

Kayla, any more questions?

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

Thanks again for joining us this morning. 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 speaking with you all again soon. Thanks a lot. Have a great day.

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