Sabre Corp (SABR) 2017 Q4 法說會逐字稿

Good morning, and welcome to the Sabre Fourth Quarter and Full Year 2017 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 registration, 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. Go ahead, sir.

Thank you, Ann, and good morning, everyone. Thanks for joining us for our fourth quarter and full year 2017 earnings call.

This morning, we issued an earnings 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 website. 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 certain 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 for non-GAAP measures are available in the earnings release and other documents posted on our website at investors.sabre.com.

We'd like to advise you that our comments contain certain forward-looking statements. These statements include, among others, disclosures of our guidance, including revenue, EBITDA, operating income, net income, EPS, cash flow and CapEx, our expected segment results, the effects of changes in accounting standards and U.S. tax reform and the effects from new or renewed agreements, products and implementations, 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 call. Information concerning the risks and uncertainties that could affect our financial results is contained in our SEC filings, including our 2016 Form 10-K and our third quarter 2017 Form 10-Q.

Participating with me on today's call are Sean Menke, our President and Chief Executive Officer; Rick Simonson, Executive Vice President and Chief Financial Officer; and Chris Nester, our Treasurer and Senior Vice President of Finance. Sean will start us off and provide a review of our strategic and commercial performance and outlook. Rick will offer additional perspective on our financial results and forward outlook. And following that, Chris will walk you through some of the reporting changes we'll be making in 2018, update you on our estimate of the U.S. -- of the impact of U.S. tax reform and ASC 606, the new accounting standard on revenue recognition as well as provide additional detail on the forward outlook in light of these items. We will then open the call to your questions.

We have a lot to cover today, so we anticipate the call going a bit longer than normal. With that, I'll turn the call over to Sean.

Thanks, Barry. Good morning, everyone, and thank you for joining us today on our fourth quarter and full year earnings call. As Barry said, we do have a lot to cover today and actually have more to share with you at our upcoming Investor Day on March 6.

Before I get into my prepared remarks, just a couple of things I do want to touch upon. You're going to hear us talk a lot about what we've been doing over the last year as it relates to technology and products. You're going to hear us talk about really the engagement that we've had with our customers and very positive engagement with those customers and also thinking about the end traveler.

One thing that we have really focused on as we thought about our strategy going forward is how do we make sure that we are positioned at the [best] or at the front as it relates to retailing, distribution and fulfillment. And you're going understand how we really think about our travel ecosystem, the ecosystem that we are in. In that, we have a very strong strategy and focus on that as we roll into 2018, and there is focus on rigor and accountability. I think the last thing I'd like to say is really looking at the team and thanking the team in this organization. They have weathered a lot over the last year, and the amount that they have accomplished is quite significant. So like I said, I'm very proud of them.

As mentioned, 2017 was a transformational year for Sabre. We infused our leadership team with fresh ideas, evolved our technology, enhanced our customer engagement strategies and realized efficiencies in our SG&A and total technology investment. In the face of these significant undertakings, we delivered financial results consistent with our guidance communicated last February. Our successful close to the year reflects the hard work and commitment of the entire Sabre organization. Together, we have built a strong foundation that we expect will carry our positive momentum forward.

Let me also say that while I'm pleased with our progress in 2017, we have much to do before we reach our full potential. Thanks to the foundation we laid, we began this year from a better position as we work to complete our transformation into a stronger, more agile technology leader at the center of the business of travel. In 2018, our success will be defined by executing against our focused strategy, underpinned by a detailed set of prioritized initiatives that are measured, tracked and owned by our leaders. We look forward to discussing our sharpened technology, product and commercial strategies at our upcoming Investor Day on March 6. Throughout 2018, we'll continue to report updates on our progress with transparency and clarity.

Now let's take a look at our performance in 2017. We delivered the 2017 financial results we set out in February while substantially accomplishing our targeted initiatives to: one, moving our -- move our shopping complex to a private cloud environment that support shopping growth, dynamically distributes shopping workloads with continuous availability and increases cost efficiency to fund additional investments; second, we established a global network operations center for improved overall security of our commercial and internal systems; third, we focused our investments and drove efforts to improve our leading Airline Solutions product portfolio through an extensive review; and finally, we successfully launched the new Sabre Red Workspace, our travel agency booking tool, with several major customers.

Our solid full year revenue growth was driven by 2 main factors: strong growth in Travel Network as we continued to expand into higher-value markets and began ramping up a key travel agency customer in Asia Pacific; and more modest growth in Airline and Hospitality Solutions, with solid passengers boarded growth on a consistent carrier basis and Hospitality Solutions growth in the mid-teens, which offset the impact of the midyear loss of Southwest Airlines. We generated full year free cash flow ahead of our expectations.

These results were underpinned by a number of important milestones, perhaps none more important than the ongoing effort to strengthen, improve and evolve our technology backbone. You'll recall one of our 2017 initiatives was to build the next generation of hosting and infrastructure technology required to support the continuing annual growth in shopping activity. Our shopping complex is now deployed in a private cloud architecture at 3 distributed data centers, and we have implemented global traffic management to dynamically distribute shopping workloads across all 3. Not surprisingly, we are realizing significant performance benefits.

One aspect of this configuration is continuous availability at much lower cost than traditional disaster recovery solutions. By deploying 50% of our required capacity at each of the 3 sites, we expect to meet our peak shopping demands even if an entire data center is out of service. Because it doesn't require a complex and time-consuming failover process, we expect to be able to handle such an event without impact to our customers. And because it only requires 150% of peak capacity on hand versus the 200% required by traditional disaster recovery solutions, we can scale at significantly lower cost. So we've increased speed of stability and lowered unit processing cost to free up investment dollars that will fund other initiatives, all while delivering industry-leading connectivity, rich content and low-fare efficacy.

Our use of the public cloud is also accelerating. We have been working on moving capabilities onto open systems at the -- and the cloud for the past several years. So it's not something we are just starting. But today, we are clearly in a cloud-first mentality. We have a number of critical solutions that run on open systems architecture in the public cloud, including the new Sabre Red Workspace and Hospitality Solutions property management system, which we built from the ground up as a cloud native solution. We are currently migrating several Travel Network and Airline Solutions products as well as deploying new instance of our Hospitality Solutions central reservation system to the cloud.

This year, we are rationalizing our cloud vendor relationships and expect to finalize the selection of one or more vendors in the next couple of months while preserving future vendor flexibility. We are actively identifying our virtual private cloud landing zone around the world, which will allow us to move additional applications and services closer to our customers. You're going to hear a lot more about this from our leaders at Investor Day, but suffice it to say I'm excited about our transformation to a stronger, more agile technology partner to the travel industry. Because of these efficiencies we expect to realize along the way, we plan for much of the work we do to be self-funded through ongoing efficiency gains and more focused spend on products and services aligned with customers' most relevant needs, specifically surrounding retailing, description and fulfillment. Our goal is to make this transformation in a steady but expedient fashion with total technology expenses growing slower than revenue growth.

Let's now discuss some of our recent commercial developments. At Travel Network, the new Sabre Red Workspace has been adopted by several large global customers, including American Express Travel & Lifestyle Services. And we have set the stage to continue the roll out to all customers worldwide through 2018. Because the desktop is so intuitive, training times for new agents are significantly reduced. Data we have from our customers show an agent with less than 1 year of experience becomes as productive in 2 to 4 months as an agent with 1 to 2 years of experience. And that increases in 6 to 8 months to the same productivity as an agent with 2 to 4 years of experience.

In the fourth quarter, we won a major long-term deal in North America with Connections, one of the fastest-growing agencies in the region. We further enhanced our leading travel supplier content as we signed 7 new airline carriers in the quarter and renewed several agreements with existing carriers, including IAG. In total, we signed over 40 airlines to full content agreements in 2017.

We recently announced the upcoming launch of our new lodging content service platform with several key partners that significantly bolster the lodging content in Travel Network, providing our customers over 900,000 hotel options. As demand is growing for more hotel content across properties, products, amenities and rates, this solution will bring together content from multiple sources -- the GDS, OTAs, aggregators and more -- to provide an environment for true comparison shopping with a consistent shopping experience.

Our NDC strategies and execution are also gaining steam. With our breadth of solutions across retailing, distribution and fulfillment, we believe we are uniquely positioned to deliver an end-to-end NDC-enabled solution that drives greater personalization, revenue optimization and, ultimately, revenue growth for the airline industry. We are also working with our agency partners who are looking to Sabre to ensure their essential functionalities and capabilities are supported in an NDC-enabled workflow. I'm also proud to announce that we have achieved NDC Level 3 capable as an IT provider several months ahead of schedule. We are well on our way to reaching our goal of NDC Level 3 as an aggregator in 2018.

At Airline Solutions, we refined both our product and customer engagement strategies, and customers are responding positively. We completed our review of the Airline Solutions product portfolio and, after taking a closer look, have found there's a strategic value associated with having a wide breadth of mission-critical solutions as well as significant opportunities to increase the return on invested capital on many of those solutions. Upgrading customers to the latest version of our products is something that's very important. In the past, we've continued to support too many versions of our product lines, which has increased support cost, led to instability issues and limited our ability to cross-sell and up-sell to customers. Related to this, we are working closely with our customers as we sunset old versions and local installations of our products. Also, as we shift towards becoming a product-led company, we are accelerating the migration already under way of our product suites to a microservices architecture, with a goal of driving reusability and flexibility across our solutions set.

Additionally, we'll be seeking to more closely manage and limit product customization and encourage the use of a new extensibility layer at the application interaction level, allowing us to provide the most current innovations to our customers. We expect these changes will increase flexibility and speed to the market, enhance our ability to cross-sell and up-sell while reducing maintenance costs and increasing stability of our systems.

In the fourth quarter, we successfully completed the implementation of our SabreSonic reservation system at Cobalt Air and signed SabreSonic renewals at Aeromexico and Comair. Additionally in the quarter, Aeromexico, Comair and Air Serbia signed deals for our flexible data insight tool, Intelligence Exchange, and we completed the implementation of Intelligence Exchange at Hawaiian Airlines and Crew Manager at Malindo Air and Garuda in Indonesia.

At Hospitality Solutions, we successfully migrated Wyndham brand Baymont and Days Inn to our SynXis central reservation system, the largest migration in industry history, adding an incremental 2,200 properties in the fourth quarter. We expect to continue to migrate additional Wyndham brands to our CRS as we move through 2018. In addition to our implementation progress with our CRS system, we also completed the final Wyndham migration to our SynXis property management system. This marks the completion of the industry's largest property management conversion project and is the largest single-instance property management system in operation. All of which is to say we're continuing to demonstrate our ability to serve our customers wherever their businesses are in the travel space and in multiple capacities.

We have good momentum heading into 2018, and I'm seeing great focus and collaboration across the business. Our teams around the world are engaged, aligned and engaged to execute on our strategy. That gives me great confidence in our ability to deliver against our expectations and drive strong results for our customers and shareholders.

With that, I'd like to turn the call over to Rick and Chris to get into more of the financial details. Rick?

Thanks, John. In Q4, total revenue growth of 6% was driven by strong growth in Travel Network and Hospitality Solutions, with a modest decline in Airline Solutions due to the impact of Southwest. Adjusted operating income declined due to the increased depreciation and amortization. However, with a more favorable tax rate, we saw double-digit growth in adjusted net income and 19% growth in adjusted EPS.

In Q4, strong Travel Network revenue growth of 9% was driven by solid bookings growth and above-average growth in booking fee, driven by favorable customer, pricing and positive mix, including the impact of double-digit bookings growth in Asia Pacific, a higher-value region for us. As expected, Travel Network EBITDA margin was impacted by higher incentive expense mainly due to the large agency renewals signed in 2016 as well as regional mix and ramping up a key travel agency in Asia Pacific. We expect the impact of large agency renewals on Travel Network EBITDA margin to moderate in 2018. The modest decline in operating income was driven primarily by increased depreciation and amortization. For the full year, Travel Network EBITDA eclipsed $1 billion for the first time. Travel Network full year EBITDA margin of 39.4% was at the high end of our expectations.

Bookings growth was solid in the fourth quarter, reflecting a strong macro environment. We saw particular strength in Asia Pacific due to continued progress on the implementation of a key travel customer. Solid full year bookings growth of 4% was driven by increases in every region. Fourth quarter bookings growth was strongest in Asia Pacific. EMEA bookings increased 4%. Latin America bookings improved significantly. And North American bookings growth was relatively flat in the quarter.

At Airline and Hospitality Solutions, Q4 Hospitality Solutions revenue growth in the mid-teens was offset somewhat by a modest decline in SabreSonic revenue due to the midyear 2017 roll-off of Southwest Airlines. Solutions EBITDA, which grew 15%, and operating income growth were supported by benefits from the cost reduction and business alignment program initiated in August 2017 as well as decreased technology expenses, including a favorable overlap of service-level agreement, or SLA, costs in the year-ago period. Full year Airline Solutions revenue increased 3% to reach $816 million, and Hospitality Solutions revenue increased 15% to reach $258 million. Full year solutions EBITDA margin expanded over 2 points versus the prior year.

Passengers boarded declined in the fourth quarter due to the midyear 2017 roll-off of Southwest. Passengers boarded on a consistent carrier basis increased 6% in the quarter. For the full year 2017, a modest passengers boarded decline was driven primarily by the impact of Southwest. Excluding Southwest, total passengers boarded increased 9%, which includes the benefit of the Alitalia migration in Q4 2017 and a solid macro environment and favorable customer mix that drove the consistent carrier growth of 6% for the full year.

For the full year, we generated free cash flow of $362 million, again ahead of expectations. Our cash flow supported the continuing strength of our balance sheet, with leverage dipping to 2.9x at year-end. In 2017, we repurchased 5.8 million shares under our share repurchase authorization for approximately $109 million in the aggregate. Inclusive of our fourth quarter dividend, we returned $155 million to shareholders through our regular quarterly dividend in 2017.

Our leadership team continues to scrutinize aspects of the business, and we believe we're operating in a fully accountable way to ensure focus on commercial and financial success. Our 2018 guidance is fully consistent with what we have communicated since Q2 '17, i.e., solid mid-single-digit revenue growth before the impact of ASC 606 and similar growth in free cash flow. These expectations have been updated for the impact of U.S. tax reform and our refined view of the impact of adopting ASC 606. We've provided side-by-side comparisons so you can easily resolve our 2018 guidance growth rates before and after the impact of these items. Chris will fill you on the key operating dynamics we expect in 2018 and walk you through the detailed impacts of ASC 606, U.S. tax reform and important reporting enhancements that we're making this year.

Year 2018, we expect total company revenue growth of 2% to 5% to between $3.69 billion and $3.77 billion, or 4% to 6% growth excluding the impact of adopting ASC 606; adjusted EBITDA of $1.055 billion to $1.095 billion; adjusted operating income of $650 million to $690 million; and adjusted EPS of $1.34 to $1.48. We're progressing rapidly and remain fully committed to embracing the promise of NDC and next-generation retailing, distribution and fulfillment. Investments in 2018 will continue to accelerate our technology evolution, including making enhancements to our infrastructure for increased flexibility and agility and setting the stage to help take full advantage of a microservices-enabled platform. This will assure our technology stackables and continues to position us as an industry leader with optimal solutions that deliver value to our customers and to our shareholders.

To reemphasize Sean's comments, we expect total technology expenses to grow at a slower rate than revenue growth. This is the visibility and confidence we've been working to gain throughout 2017 in order to share the progress with you in the form of our 2018 guidance and our view for the medium term at our upcoming Investor Day. Accordingly, for the full year 2018, we expect capital expenditures of approximately $305 million to $325 million, roughly flat to prior year, and free cash flow of approximately $390 million, up about 8% versus prior year.

Chris, over to you.

Thanks, Rick. When you review our 2018 guidance, there are 2 new important items to consider. First, the impact of U.S. tax reform is expected to reduce our effective tax rate to approximately 24% versus previous expectations for approximately 30% in 2018. This tax rate reduction is expected to increase adjusted EPS by $0.12 in 2018 before incorporating the impact of ASC 606. Because we're not currently a material U.S. cash taxpayer due to our NOL balances, this will not have a material benefit to free cash flow in 2018.

Also in 2018, capital intensity is expected to begin to decline as a percent of revenue, and we expect roughly flat CapEx year-over-year. As we reallocate investment dollars into accelerating our use of private and public cloud environments and continue to invest in enhancements for stability, security and GDPR compliance, costs associated with these investments are expected to increasingly rotate to operating expense as opposed to CapEx. In 2018, we expect these investments to increase P&L technology operating expenses by approximately $30 million, which reduces adjusted EPS by $0.08. Over half of this expense is expected to be driven by our GDPR compliance efforts, which is the European Union's new General Data Protection Regulation.

Furthermore, we have an update to our previous preliminary ASC 606 guidance. The adoption of ASC 606 is expected to reduce Sabre revenue and operating income by approximately $40 million and reduce adjusted EPS by approximately $0.11 based on the midpoint of our current estimated range. This is at the bottom of our previously disclosed expected revenue reduction range of $40 million to $80 million.

Before I walk you through the impact of these items in more detail, let me walk you through 2 important changes we are making to reporting in 2018 that we believe will provide better clarity and visibility into the performance of our different businesses and aligns with how our leadership team is taking a fresh and more focused look at measuring our financial and operational performance.

First, with its growing size and relevance, we believe the time is right to split Hospitality Solutions into a separate reporting segment. From a startup to over $250 million in revenue in 2017, Sabre Hospitality Solutions has grown to be the #1 central reservations provider with 39,000 properties live on our leading SynXis Central Reservation System. From 2012 through 2017, Hospitality Solutions revenue grew at 21% CAGR, with organic growth in the mid to high teens. And the business is on track to nearly triple in size in '18 versus 2012. We believe we are uniquely positioned to win in this large addressable market as a trusted technology partner with our flexible, enterprise-grade, cloud-enabled platform and solutions. In Q1 '18 and going forward, we will report 3 separate business segments, and our quarterly reports will include revenue and profitability reporting for Airline Solutions and Hospitality Solutions separately so you can better assess the performance of each.

The second reporting changes we are making in 2018 is to allocate the majority of our platform and enterprise-level technology operating costs that have historically been reported on our Corporate line out to our business units. This change aligns with how we will be operating and measuring our segment performance internally and provide greater visibility for investors into each business segment's operating results.

Based on 2017 results, roughly $200 million in technology operating expenses formerly held at the Corporate level will be allocated to the business segments, with Travel Network absorbing approximately 50%, Airline Solutions at about 40% and Hospitality Solutions absorbing approximately 10% of the incremental allocation. The methodology we've developed for allocating these platform-level costs is based on a relative consumption of shared technology infrastructure and defined revenue metrics. Corporate IT, risk and security expenses and related overhead will continue to be reported in the Corporate expense line, along with typical Corporate functions like finance and HR. This change will increase reported segment costs with an offsetting decrease in costs reported at the Corporate expense line. When we report Q1 '18 results, Q1 '17 will be restated at the segment level to reflect this new corporate technology expense allocation. Again, there is no impact on consolidated Sabre results.

You can see the result of our reporting changes on this slide and provides a view of certain 2017 pro forma information and incorporates the split of Airline Solutions and Hospitality Solutions as well as the new corporate technology expense allocation methodology. For additional information, we have provided certain unaudited pro forma financial information for 2015 and 2017 on the Sabre Investor Relations website at investors.sabre.com that reflects these changes.

Now turning back to our 2018 outlook. At the segment level, full year revenue growth is expected to be driven by the following: Travel Network revenue growth expectations of between 4% and 6%, driven by a similar level of bookings growth; expectations for a mid-single-digit decline in Airline Solutions revenue or up low single digits excluding the impact of ASC 606 and the roll-off of Southwest Airlines; SabreSonic passengers boarded are expected to decline approximately 4.5% to 6.5% or up 4% to 6% excluding the impact of Southwest; and we'll see continued significant momentum in Hospitality Solutions to drive strong full year revenue growth in the mid-teens, with high single-digit growth in the first quarter and stronger growth expected over the balance of the year.

Based on 2017 pro forma that you see on this slide, which incorporates the new corporate technology expense allocation methodology, in 2018 we expect slight margin compression at Travel Network due to an unfavorable comparison versus an incentive contract reversal in 2017 and the ramp-up of a large agency customer in Asia Pacific; decreased Airline Solutions EBITDA margins due to the impact of ASC 606 and the roll-off of Southwest Airlines; expanding Hospitality Solutions margins as we continue to gain scale in the business. At the Sabre Corporate line, we expect a low single-digit increase in Corporate operating expenses on a pro forma basis.

In 2018, there are several known adjusted EBITDA headwinds, many of which we have been discussing with you since Q2 in '17, including the following: the impact of adopting ASC 606, which I will provide additional detail on later, is expected to reduce adjusted EBITDA by approximately $40 million, as I mentioned; an approximately $20 million adjusted EBITDA headwind for the roll-off of Southwest airlines; [another] headwind due to a Travel Network incentive contract reversal in Q1 '17; a $40 million headwind due to a significant decline in credits we receive from DXC, our primary technology vendor; and, as I mentioned earlier, $30 million in technology expenses rotating from CapEx to OpEx. These items are expected to be offset by mid-single-digit continued organic growth to the business and approximately $85 million of incremental year-over-year benefit from the cost reduction program put in place in August of 2017, all resulting in an expected full year consolidated Sabre adjusted EBITDA guidance of $1.055 billion to $1.095 billion.

Another change you will notice in our financial reporting beginning in Q1 '18 and going forward is an increased emphasis on operating income rather than EBITDA. Emphasis on operating income is aligned with how we are managing and measuring the business for both growth and an effective return on invested capital. In 2018, we expect full year depreciation and amortization growth of approximately 9% to $405 million, resulting in adjusted operating income guidance of $650 million to $690 million. With capital intensity expected to decline, we expect growth in depreciation and amortization to moderate in the coming years and expect our focused investments to increase ROIC over time. A significant item affecting most U.S. companies' financial results this year is the impact of U.S. tax reform. There are a lot of moving pieces, and we're continuing to work through the detailed provisions and are waiting on additional guidance from the IRS for a final assessment. We will continue to update you throughout the year as more specifics are provided.

With that said, here's what we know at this time. First, as a result of the reduction in U.S. corporate tax rate, we recorded provisional adjustment to our deferred tax assets and liabilities on our balance sheet in Q4 '17. This had no material impact on our P&L. More notably, in 2018, as part of the U.S. corporate tax rate reduction, we expect our effective tax rate will decrease to 24% versus pre-U. S. tax reform expectations for approximately 30%. This is expected to increase adjusted EPS by $0.12 in 2018. Because we are not currently a material cash taxpayer due to our NOLs in the U.S., there will not be any material benefit from the corporate tax reduction to free cash flow in 2018.

In addition, as part of the U.S. tax reform, we are impacted by a onetime transition tax based on foreign earnings. In Q4 '17, we recorded a provisional onetime transition tax liability to our balance sheet for previously untaxed earnings and profits of our foreign subs, resulting in $48 million of additional income tax expense on our GAAP P&L. This charge is excluded from our adjusted results. We currently expect that payments on the onetime transition tax will be paid out in cash through 2025. Importantly, the change in treatment of foreign earnings is expected to increase our flexibility to repatriate cash to the U.S. in 2018 and going forward.

Also, the reduction in U.S. corporate tax rate reduces the liability under our tax receivable agreement, or TRA, by approximately $58 million. As a reminder, the TRA is an agreement in which we pay pre-IPO shareholders 85% of future cash tax savings that are derived from certain pre-IPO tax assets. In Q4 '17, we recorded a $58 million provision reduction to the liability for future TRA payments on our balance sheet, which was reflected as a gain on our GAAP P&L but excluded from our adjusted results. After the 2018 TRA payment of $60 million that was made last month in January, our outstanding TRA liability now stands at approximately $170 million. And we now expect cash payments on the remaining TRA lability will be paid over 2019 through 2021, which will put the TRA behind us 2 years earlier than our pre-U. S. tax reform estimate. In 2018, after accounting for an expected effective tax rate of approximately 24% and interest expense of approximately $155 million, we are guiding to full year adjusted net income of $375 million to $415 million and adjusted EPS of $1.34 to $1.48.

From a year-over-year growth perspective, the reduction in the effective tax rate is expected to largely offset the negative impact expected from the adoption of ASC 606. Please keep in mind the evaluation of the impact of U.S. tax reform on our business is still ongoing, and our guidance is based on preliminary expectations. We will provide additional information on the longer-term impact of the U.S. tax reform at our Investor Day on March 6 and will continue to update you throughout the year.

As we've previously discussed, we'll have some impact driven by the shift from ASC 605 to ASC 606 revenue recognition guidance, which changes the timing of revenue recognition for certain contracts. As of January 1, 2018, we have adopted the standard using the Modified Retrospective Transition method. This means we are not restating prior years and will report 2018 under both the new and old revenue recognition guidance. The change in accounting methodology is expected to reduce revenue and earnings in Airline Solutions in 2018 but towards the bottom end of the range we provided at our last earnings call. We do not expect the adoption of ASC 606 to have any material impact on Travel Network and Hospitality Solutions.

For Airline Solutions, we now expect a gross revenue reduction of approximately $45 million based on the midpoint of our currently estimated range of $40 million to $50 million. We expect this to be partially offset by upside of approximately $5 million, driven by revenue timing of new sales and renewals, resulting in a net revenue reduction of approximately $40 million. As you can see from the figures at the bottom of this page, the reduction in expected revenue flows through the profitability and is expected to result in EPS headwind of approximately $0.11 in 2018. On our balance sheet, we expect the adoption of ASC 606 will result in a net increase to our opening retained earnings as of January 1, 2018, of approximately $100 million to $130 million, with a corresponding increase in current and long-term unbilled receivables, contract assets and other assets. Importantly, the accounting change has no impact on operating or free cash flow.

As you can see, there are a lot of ins and outs this year. We are striving to provide clarity and transparency to the impacts of these changes. I look forward to seeing many of you at our upcoming Investor Day where Barry, Jennifer and I will be available following the close of the program to answer any questions you may have related to these changes or other topics.

I'll now turn the call back to Sean for closing remarks.

Thanks, Chris, and we're going to let you take a break and take a breather, too.

Thank you.

There's probably never been a more dynamic and exciting time to be doing what we're doing here at Sabre. Since I took on the role as CEO a little over a year ago, everyone at Sabre has made the commitment to reimagine everything we are doing. We operate in a space where there's enormous potential for platform technology to be genuinely transformational. And if you ask any of our customers and partners, they would agree, across the business of travel, technology can touch and enhance every aspect of travelers' journey through optimization and personalization. But our customers will also tell you this. They're looking for a strong partner to take a leadership role and deliver on the promise that technology holds for travel. Our goal, one shared by everyone at Sabre, is to be that partner and leader. We'll have much more to say about this in significant detail at our upcoming Investor Day in Dallas on March 6. I hope you can join us because there is so much we're doing that will have a positive impact on our customers, both today and in the future.

In addition to checking out some of our product demos and meeting the new faces on our management team, I hope you will take these things away: an understanding of how we believe we are positioned to lead in retailing, distribution and fulfillment; confidence in our technology, strategy and approach; clarity on how we believe we are come competitively well-positioned and focused on growth; visibility into how we engage with our customers as a partner and trusted adviser; alignment with how we will communicate our strategies, KPIs and progress going forward; and along with our medium-term outlook, comfort in how we believe we are responsible stewards of shareholder capital.

In closing, the short story is this: We finished the year strong, and we'll carry the momentum forward in 2018. Across our businesses, we have clearly defined objectives and making smart investment in both people and products and share a real sense of the optimism as we look ahead.

With that, I'd like to open up the call for questions.

(Operator Instructions) And we'll take our first question from Jed Kelly with Oppenheimer.

Can you talk to what's driving some of the slower growth in North America...

Can't hear.

Relationship with the OTAs? And further, do you – and then my second question is...

Jed? Jed, we're having trouble hearing you. Could you speak up just a little bit?

Oh, sorry. Yes, just on North America on the slower growth, can you talk to what's driving that and your current relationship with the OTAs? And then just on the reduction or just the slower CapEx growth in 2018, do you think you have -- you're invested well enough in technology to maintain share gains with some of your higher technology required partners?

Yes, let me kick off -- let me answer the first piece of that. This is Sean. And then I'll kick it to Chris and Rick on the second piece. If you look at it, and there's one reason I went through -- let me start on the technology side. The investment relative to really core capabilities, and you have to break it down relative to what we're doing on the brick-and-mortar side and what we're doing on the OTA side. If you look at Sabre Red Workspace and what I've walked through relative to what we're getting as it relates productivity gains and the workforce, the other thing that we're also seeing is conversion uplift for our customers, and that's important as we look at the future of how tickets are essentially going to be sold. We feel very well positioned there. The other piece of it going on to the -- what I would consider to be the shopping OTA side of the equation, we're seeing significant improvements, as I mentioned, and we'll get into greater detail with -- on that in Investor Day and walk people through. But in doing that, you have the competitive aspect as it relates to just having the systems to be able to process, have the bookability and complete that transaction. We feel very good about that. You then get into sort of the global makeup as it relates to just the competitive space in OTAs. Over the last several years, you can see that we had pretty significant gains within the EMEA marketplace. And as each of these OTAs begins to grow around the world, they're balancing, going from a single GDS to a multi-GDS. And in doing that, a lot of those contracts have minimums in place, so you have to -- they end up having a point throughout the year that they're managing those contracts. So all in all, relative to where we are from a technology perspective, I feel really good in what we've done. There's still a very competitive marketplace that sits out there in the OTA space. As you know, if you look from a TMC perspective, we have the largest global share. Those continue to grow. I feel very confident about the capabilities moving forward.

This is Rick. On the CapEx, in 2018 I think it's a reflection of what we talked about in 2017. First, we significantly moderated our CapEx in '17 against the expectations. That's a combination through what we were doing around the shopping complex that Sean mentioned and that movement to the cloud and having capacity on the floor, but that we buy the drink instead of having paid for servers that you only use at peak periods. So that's one. Remember also in Travel Network, Sabre Red Workspace and the platform underneath that was built and invested in, in the previous years. We've got that and we're rolling that out now, so you don't need to have additional lift. And continuing our movement and our ability now to move products and have them cloud deployed, this is the rotation that Chris and I were talking about of less CapEx intensity. Some of that moves to OpEx; but overall, it's contributing to a decline in our total technology costs that -- in terms of percentage of revenue. Now remember, our technology cost growing in the low single digits, total technology less than growth in revenue that's in the mid-plus single digits, still means our total technology spend is going to increase a bit. So we believe, yes, we are putting the right amount of technology cost and investment into the business. We're doing it more efficiently. And again, in '17 was the year of transition from where we've had to refocus and reset in Airline Solutions. We expected Airline Solutions to be hitting $1 billion in revenue by this time. We're at $816 million last year. And we've talked about the reasons for that -- the refocus on that. So we used '17 to make sure that we weren't putting investment in until we knew it could be put to the right focus. And that's across our reservation system; it's across our AirVision, the connected airline; and a refocus in the ops side. Dave Shirk's going to bring that to life on the Investor Day. So yes, we think we have the right amount going into our spend in 2018 while we moderate the overall capital intensity.

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

Can you discuss what you're seeing in your solutions pipeline, both from the airline side and the hospitality?

Yes, let -- this is Sean. Let me touch upon that. First -- and I'm going to focus on Airline Solutions. And I'm going to take a moment to just talk about Dave Shirk and what he's brought to the organization. When we hired Dave, we were very focused on finding somebody that was able to manage a multibillion dollar portfolio, really understood product management and life cycle and has a deep understanding of technology. What I will share with you is that the team here at Sabre has truly embracing him as he has broken down the business, understand some of the things that we needed to work through. The other important thing and the thing that I have witnessed firsthand in traveling around the world with Dave to meet with customers is they clearly like the direction that he's driving the business. And in doing that, it is pretty straight talk relative to where our products are, things that we're doing to improve those products. And we're probably -- since the time I've been here, our relationship with airlines around the world is probably the best it's been. And in doing that, when we look at it just from a pipeline perspective, and you can talk from a PSS or you can talk about all products and services, the world is changing out there. And what is clear is that as I continue to look at the organization, the team that we have built, one from -- really from helping sell products and services to fulfilling those products and services, there's a high level of confidence growing in what -- the way we're thinking about the business. That then drives into the pipeline and what people are looking at. And one of the things we continue to focus on is the PSS side of the equation. And we continue to have conversations around the world, but it's one that continues to be one that they don't happen fast. But it's also very important for them to understand where we're driving our business and the opportunities that we see out there. On the hospitality side and what's taking place with Clinton Anderson running that business, there's 2 components that I want -- really want to talk about. It's what happens on the CRS side of the equation, the CR business as we call it internally, and it continues to be the largest portion of our business. It's the best product that's out there in that space, continues to grow at a nice clip. We have what I would consider to be a lot of engagement taking place around the world on expanding that. On the property management system, as I mentioned, we have the full implementation at Wyndham right now. We have [B-4] in the marketplace, which really does -- when you look at the CR as well as the property management system, essentially they're built together. And this is something that is not in the marketplace. And what I mean by that you have syncing issues relative to rates that you have revenue leakage. One of the things that the rollout of this new product does is begin to close those leakage, which is really important for customers going forward. Still very focused on the limited service side of the equation. So again, as you can tell, I'm upbeat with the opportunities that are out there as we move into 2018.

Okay. And if I could just squeeze in one more. Given that you're planning to break out your Hospitality Solutions business going forward, where will you be providing a new metric associated with this business?

We will be talking about the transactions like we talk about transactions bookings in Travel Network and Airline Solutions. So you have bookings, so you have passengers boarded and you have transactions related to the hotel. That's what we're looking to do.

And our next question comes from Jim Schneider with Goldman Sachs.

I was wondering if you can maybe just kind of comment on the overall Travel Network business as you head into 2018 from a macro standpoint in terms of what you expect from an industry bookings perspective. And maybe can you share with us the benefit that you're seeing in terms of Travel Center in the year. And any other partners you're bringing on this year? And how much that had already ramped in Q4 of this year?

Yes, happy to dive into that. And it goes a number of different ways, so let me maybe start on the supplier side, specifically airlines. It's interesting as you watch everything that's taking place in the marketplace, and it is really different in geographic regions around the world. The one thing that I had mentioned in my prepared notes is that we had signed 40 full-service content deals in the year in 2017. What that tells you is that many carriers around the world like the model the way it is. Probably the area that is most noted for really thinking about the model differently is definitely in the European marketplace. And as public information is out there, we are in discussions with Air France and KLM as well as I'm sure the other GDSs on how they're thinking about their model going forward. In the U.S, it's relatively stable. If you look at how carriers are performing, the relationships as it relates to specifically on the TMC side of the equation and, importantly, corporate travel, it's, to my mind, stable. And we're having good discussions about future opportunities as we think about where does retailing and distribution go. As we look at the global marketplace and growth, if you look at our footprint, it is a little more centric to the North American -- to North America and North America growth. There are parts of the world that are growing faster. So as we look at comparisons, and this is one thing if you sort of reflect back on market share, where the bulk of our sort of business is, is in slower-growth regions. So we're seeing some impact on share as it relates to that. The other thing, and I did touch upon this earlier, and this gets into more the agency side of the equation, it really does get into what we're doing on the technology side. And again, we'll touch a lot on this on Investor Day, but it is one on the importance of what we are doing as it relates to shopping complex, what we've done with Sabre Red Workspace. All in all, when I look at 2018, I sort of put this in perspective of the hospitality business as well as Travel Network, feel really good about where we are. As we had mentioned, in 2017, the areas of focus for our Airline Solutions and our technology, and we've done a lot to address that, and we'll have a lot more to share on Investor Day.

This is Chris. I'll just add, pointing back to what I -- my remarks on the Travel Network guidance of 4% to 6% revenue growth driven by bookings growth of 4% to 6%. So again, that implies a very solid travel environment, I think consistent with what we saw in 2017, also reflects the benefit of the ramp-up of the large agency account in Asia Pacific we've been referring to.

Okay, that's helpful. And maybe just as a follow-up on the financial side. Appreciate all of the detail you gave around the investments and that it was very good to see. And obviously, there's a lot of moving parts for this year. But maybe from a normalized standpoint, maybe you can share with us your expectations or ambitions about what EBITDA margins or operating margins can expand at going forward.

Yes, what we're -- Jim, appreciate that is -- we're going to go through that in detail at Investor Day on the medium-term guidance. And what we wanted to do is frame '18 and make sure that with all the part changes, ASC 606, tax reform, all of that, that it was clear what we've been talking about coming into this day is clear and bridged to 2018. Now hopefully, we've accomplished that. And we're going to give a little bit more detail in terms of the margins with emphasis on operating income at Investor Day.

And we'll take our next question from Abhey Lamba with Mizuho Securities.

Rick, can you talk about what drove the pricing benefit in Travel Network this quarter? And it seems like based on your guidance, you're not assuming that pricing benefit to sustain in 2018. So what are the drivers behind pricing that you're assuming for 2018?

So the pricing benefit in '17 was driven by EMEA on the supplier side; Europe, Middle East, Africa, higher booking, fee growth as well as some of the dynamics with some of the big carriers there in terms of what they're experimenting in the marketplace. That was the primary driver there. We have the benefit of a normal kind of inflationary increase as you look across the rest of the world. So we don't expect that incremental impact in '17 continuing on to '18. So we would expect a rather flat growth in pricing in 2018. That's what we said that's incorporated into our guidance. So not similar booking fee growth as to '17.

Got it. And lastly, Sean, what is being NDC Level 3 certified mean? What are the other milestones in that process? And how should we kind of expect it to help your financials? That's it for me.

Yes. So it is -- if you look at it -- and we did this and we'll spend more time at Investor Day just because it's helpful. If you look at it, there -- the phases of NDC, you have 1, 2 and 3. And you have it -- really think of it on the PSS side of the equation, and that's what I had mentioned. And then you have it on the aggregator side, which is the GDS side. When you reach Level 3, you actually have the capability of working with an airline to allow them to build that offer. So today, when an offer is built, the offer is built by the GDS. It pulls essentially the – it pulls availability, it pulls the schedule and it pulls the -- pull -- brings that together. What it means is that we have worked with a specific partner out there to be able to show that we can actually have that built within their system. And that's really what Level 3 does on the, call it, the PSS side of the equation. The important thing is you have to have a similar capability as you move through it on the aggregator side, which is the GDS.

And our next question comes from Ashish Sabadra with Deutsche Bank.

And thanks for providing all the details excluding the Hospitality Solutions segment. I think that could provide a lot more clarity about the growth profile there. My question was on the technology initiatives. Sean, you highlighted a lot of the technology initiatives. My question specifically was, how does it help you on your competitive positioning, particularly on the Travel Network side? And then if you can just quickly comment on your response time with the move to a private cloud infrastructure. How is your response time, bookability, all of those things?

Yes. Yes, thanks for asking the question. And I'll take a moment and get into a little detail here. And this is going to be off the top of my head, so I might be off a little bit. But let me just walk you through how this is done. So as you know -- and this is really focused on the shopping complex and what we've done. So there's 3 primary components, right, is when you look at it, it's one that we have that pulling the airline schedules. We have to be able to pull in the pricing, and then we have the pull in the availability. Now remember, and this gets into the complexity, people often ask me about, can you be disrupted? Can you be displaced? I mean, you start thinking about the volumes by which we go, and we do these things as we probably have 7 million to 8 million schedules that are stored on a daily basis. We probably have over 100 million fares that are out there. And when you look at 100 million fares, you're probably talking close to 0.5 billion fare rules that sit on top of it. So it's a level of complexity that's there. And then we have to go and get the seat availability. So our shopping complex is really -- and it's run by a system called Bargain Finder Max, and we call it BFM for short. So what it really does is it's the shopping engine for OTA customers that we have: our airline customers, our websites, Sabre Red Workspace. And this is a technology that was -- and it's open technology that we launched in 2006. And now as I walk through in a great level of detail, it's hosted in a private cloud across the 3 data centers. And with that, you have 2 components of shopping. And I think as I continue to read a lot of things out in the marketplace, you have to understand the components of shopping. And there's life shopping and then there's pre-calculate shopping, which is caching. And if you look at our caching, for example, caching for us is right now on a response time basis, probably about 200 to 600 milliseconds. So that is extremely fast. And because it's there, it's a prepopulated information that you're able to the systems and pull. And with that, it drives probably closer to -- probably drives close to 85% to 90% lower processing cost versus live shopping. So that's one of the balances that not only us but our competitors do, is how do you continue to improve your cache capability because, one, it's really fast; and two, the processing is much lower. As we've looked at shopping, there's 3 primary components that our customers are focused on when they're doing evaluation: it's the response time, it's low fare efficacy and it's bookability. Those are 3 things we face every time we're competing. The other thing that we've all been talking about, and this is important before I drill in a little bit further, is on the shopping volume, we have seen significant shopping volume growth over the last couple of years. If you look in 2016, I think we were approaching 90% shopping growth. Last year, it did come down a little bit. It was over 70%, but the shopping growth continues to be out there. And as I continue to engage with the teams, we're seeing the primary drivers are really the meta-search engines that are out there, and it's happening and EMEA and APAC are the largest drivers. The other thing that we're seeing is just the growth of ancillary fares. More specifically, branded fares is driving some of that volume as well. The things that we're focused on doing to stay ahead of this, and you'll have a better understanding when I get into some stats because I think the stats are the most important thing, is how are we looking at our hardware optimization. And that's one thing that we just addressed. The other thing is how do we continue to look at our algorithms, the optimization and our algorithms, and then what are we doing on that caching side of the equation. So those are the 3 things that we are doing internally to manage this. In 2017, and this is something that everybody doesn't always see, we actually had significant benefits to these taking place. And it really was yielding close to 50% reduction in our cost per shop. Now remember, volumes are way up, so you're getting the increase in expenses because of where the volumes are going. But on a per-shop basis, you're actually finding -- we are able to find 50% reduction. Breaking that down, we have about 15% of that is really being driven by efficiency improvements in the hardware; 25% of that is really the algorithms, the teams that we have internally that continue to work on that; and then you look at what is taking place really to -- what we're doing on the caching side was probably about 10%. That all drives in a world that we're dealing with much higher volumes that in 2017, we saw the average response time fall by over 25% to below 2 seconds. So we went from 2.3 seconds to 1.7 seconds. If you look at all of our shopping or if you look at 85% of all the searches that we have out there, it was less than 3 seconds last year. So when you do that, it walks through what we have done, the importance of that shopping complex and why we invested in it, why we keep talking about what's happening on the caching side, what's happening on the algorithm site, because it then -- with the response times, you're focused on the low fare efficacy. And we put studies out there, other people have put studies out there. But what I continue to share with individuals is that when you look at our OTA market share around the world, we're slightly right around 50%, I think slightly below 50% right now. This is something that's important. As we get into competitive set with other providers out there, we are always looked at upon the top of where the low fare efficacy is, and there's a lot of work that gets into how do you make sure that all these pieces are syncing properly. And finally, the last piece that is out there is the bookability, and we continue to have bookability in that 90%-plus range. And I think our competitors sit out there as well. But that's a lot of things that we have been doing internally, the amount of work. And hopefully, that starts to bring the bigger picture together on the importance of what we've been doing, the cost savings that it actually drives for us and, at the same time, continues to drive transaction times down lower.

I'll add some -- Ashish, I think the takeaway for everybody is, is look, our shopping complex, it's running and built on the most open, modern architecture, is deployed in the cloud. It's got all the redundancy. It delivers, on average, our shops well below 3 seconds. We have the Bargain Max -- Bargain Finder Max feature, as Sean talked about. And the caching, we call it Instant Flight, it returns in milliseconds. That's for the ones that don't need live. All of that results in being absolutely at or the leader in terms of what the customers value in terms of return in their shop, and we've gotten the lower cost out of that. In addition to the 3 areas that we prioritize, the hardware, the software algorithms, the use of precalculated search result, important thing as well, we have real-time visibility to see, are there metas or other sites out there that are shopping but not buying? And there are. And we're able to then throttle them or move them to a very low or no-cost system. Or even, in some cases, they're not customers out at the edge that drive any value. So I would add that last one as well.

This is very helpful. Maybe just a quick question on the solution side. LATAM Airlines, do you have a tentative time line when that goes live?

As we've stated before, it's midyear. What I can share is we did what is called C1, and that happened in -- a couple of weeks ago. And there's 2 phases of a cutover. One is really the selling of future products, which means there's a date in the future that everything is being sold on the SabreSonic platform or goes to the SabreSonic platform. That has been completed. And then as it relates to the cutover date, I want to be respectful of LATAM and allow them to be talking about that. But based on where I sit right now, feel comfortable with what the team has accomplished. And as you can imagine, there continues to be a significant amount of work to get ready for the actual cutover on operations.

And we'll take our next question from Brian Essex with Morgan Stanley.

I guess, Sean, you mentioned you'd signed 40 full-service content deals. Can you comment about pricing in those deals? And maybe on IAG in particular, what's happening there in terms of was -- are they still -- do they still have a GDS fee attached to their bookings? And how those conversations -- how those conversations went during the process.

So let me just start with the deals that were signed throughout the year. They're in line with every deal that if you go back in history, deals that we had signed relative to where we've been or what I would consider to be end pricing. And this happens just on an annualized basis relative to these deals being open. We have probably -- I think it's about 400 to 450 total contracts with airlines around the world. So it's approximately 10% of our business, and that's something normally we do. On the IAG side of the equation, the way that it really broke down is that you have this private channel that in doing that, the agreement that we signed is that if agencies -- or, excuse me, if IAG elects to have an agency go to the private channel, there is no incentive that we actually pay to that agency. In return, there is a lower rate that is paid to us. And it allows them to manage the agencies. Then there is a group that sits out there that is not in the private channel, and they actually operate under the PCA agreement. And it's the content that IAG would like to provide. And with that, they pay us higher rates, and we continue to pay the agencies the incentive agreements that we've agreed upon historically.

And how does that shake out on a net pricing basis given the volume that you have you may or may not have visibility into?

Yes. I mean, it's happening right now, right. Just as you look at it, it's a very -- I got to be very careful in what I say here. And what I mean by that is that it's all plain now from the perspective of there's agencies that have signed up for the agreement, there's agencies that haven't signed up for the agreement. There's a whole cycle period associated with that. Often, as we saw in previous changes that are out there, are how do agencies respond relative to what carriers are they booking with. So there are so many multiple factors that I think it's just too early to provide a clear level of commentary.

Brian, and earlier, as I said, I mean, the -- right now, we get to the same or better economics. But we're early in the development of that, as Sean mentioned.

Got it. And then maybe, Rick or Sean, for you guys, on the CFO transition, any update on that? I understand it's still early stages, but catalysts for that and then what the profile of the optimal candidate might look like.

Yes, let me keep this rather simple. So we are in market, as you assume. We have a list of candidates that we are reviewing right now, beginning to meet with some of those. I'm actually sitting next to a very viable candidate internally, Chris Nester, right here. But the important thing for me as I look at where we are and I look into the future is being a responsible steward of the organization. I want to make sure that we're looking at really a number of candidates, understanding what Chris' capabilities are but also the marketplace. And we get -- when we get to the appropriate time to announce our new CFO, we'll do that.

And our next question comes from Neil Steer with Redburn.

Just 2 quick questions, if I could. Firstly, you gave some metrics on the call with regards to SabreSonic volumes, I think, in '18 pre and including and excluding the impact of Southwest. Sorry I missed it. Could you give them again?

Yes. So including Southwest, down 4.5% to 5.5%. And without the impact of Southwest, up 4% to 6%.

Okay. And is there any price -- presumably, there's a little bit of price inflation that we can assume on the airline IT side this year, is that correct?

Well, we haven't broken that out specifically, and the revenue guidance ex Southwest and ASC 606 is up low single digits. So that's as far as we've gone on pricing on Airline Solutions.

Okay, thanks. And just on the Travel Network side, obviously you're guiding for flat prices this year. But you mentioned, in response to a question earlier on, that in many markets, there is in any case an inflation readjustment. I appreciate that that's small, but presumably there was a small price increase that we can assume this year.

Again, Neil, this is Rick. As I said, we're assuming our guidance, based on -- is flat for 2018. And kind of hit the ins and outs, we had higher than normal in '17 for the reasons that we talked about.

Yes, it's in a range from 4% to 6%. So there's some movement there between bookings and rate within that 4% to 6%. And part of it will be what is the regional mix of bookings that comes throughout the year. But yes, so there might be some pricing uplift, but as well as in that 4% to 6% range for total revenue.

And our next question comes from Matt Pfau with William Blair.

Just wanted to touch a bit on the 2018 guidance. So for the solutions and the Travel Network businesses, are there any significant renewals that we should be aware of? And then specifically on the solution side of the business, are there sort of important implementations that you're reliant upon for that 2018 guidance?

Yes, in Airline Solutions, it's the cutover of LATAM Airlines is the significant one. Absent that, it's a run rate in our normal business across the broader portfolio. And hospitality, again we're continuing the conversion of all the Wyndham properties on the central reservation. We just completed substantially all the property management. And then again, it's the underlying run rate of the global good growth rate of hotels on to our CRS system. So those are the [damage] there.

I would add on the specific question about renewals. When we are constantly renewing contracts, again, with agencies, hotels and airlines in 2018, there's no difference as far as how that pace of renewals was playing out.

And we'll take our next question from Dan Wasiolek with Morningstar.

So you guys have touched upon the critical mass scale and aggregation scale that your Travel Network has. Just wondering how that competitive set plays against a Google Flights search that's starting to create some additional tools, if that's a apical competitor?

So this is Sean. Let me touch upon that. So as we travel around, meet with a lot of customers, this is a major question that comes up. The important thing as we look at it and we continue to look at what's taking place is more on what Google, meaning ITA, formerly ITA, now Google, is more on the search side of the equation, not the transaction side of the equation. As we continue to think about it, they continue to stay focused more on the search side versus the actual transaction side. The transaction side does drive a lot of investment that as we look at it, are they willing to go down that path. I think part of the complexity that I keep talking about is one thing that's important to us as we continue to manage through on how do we actually help build products and services but also the fulfillment side of the equation. And that's one thing that you're definitely going hear at Investor Day, that I think people need to make sure that they completely understand not only the front end retailing, the distribution side of it but also the fulfillment side. There's really only 2 companies in the world that can do that. And when I look at it and what we're trying to get accomplished is, yes, I look at everybody, every competitor out there is somebody we need to be aware of. But I also am very focused on our capabilities and how do we continue to enhance those capabilities and have that interaction throughout the complete sort of chain of events that take place. And that's something our customers are definitely looking towards.

Okay, great. And just real quickly, if I could. On Copa, is that still an implementation that's maybe targeted for next year?

No, we're -- remember, they delayed the cutover on the reservations product. They've taken up other important products of ours over the years. So that's still in discussion. No update there.

And we have time for one more question. Our next question comes from Brad Erickson with KeyBanc Capital Markets.

Just one follow-up, I guess. There's a lot of normalizing, obviously, to be evaluated in the guidance here that you called out. But kind of cutting through a lot of that, seems like you're guiding kind of both of the business to be sort of in the mid-single-digit range. And I guess if you include some margin expansion there, looking a little further out, like obviously you get to they, say, high single-digit earnings growth on a normalized basis. Is that kind of the right magnitude of earnings growth you're targeting longer term? And maybe if you just could hit any additional levers that would put you on a path to, say, double-digit earnings growth longer term. Or is it just -- I wonder if that's, I guess, too ambitious at this point?

Brad, you got it right for 2018, but I'm not giving midterm guidance here today.

I guess just relative to the guidance and in the comments today, what would be some potential upside drivers to the kind of numbers you've laid out today? Just the possible levers, if you could give us any help there.

So yes. And no, that's fine, helpful. What have we been talking about all of 2017 as we've done our refocus is look, we really feel like we've got good, steady, strong revenue growth in Travel Network and Hospitality Solutions. We had issues to deal with in Airline Solutions. We lost the revenue growth there. But as Sean talked a lot, and you'll hear more about it from Dave Shirk, is we've really reestablished the focus and the credibility with our customers there and really delivered on the initiatives that we needed to say, okay, here's how we can continue to deliver value to you and get them to recognize that and pay for it. So the bigger driver is when we return back to kind of the organic-plus-level growth in Airline Solutions, that's really the swing factor.

And with that, I would like to turn the call back over to Mr. Menke for closing remarks. Mr. Menke?

Great. Thank you very much. I think the important thing I'd really like to close with is steady progress. It's been a year, a little over a year that I've been in this seat. I know the state of where the organization was last year. We came out and provided a refresh of what we thought was going to happen in the business. We've delivered that. But what I also have seen is the amount of work that's taking place internally across all aspects of our business, be it within the business units, be it within our technology organization. And there is real positive momentum and focus that is there. And it's very clear relative to as I travel around the road, meet with the team members but probably just as importantly, the feedback that we're getting from our customers. And it's really strong feedback. And it is important to understand that many of our customers clearly understand that they need help in technology evolving. And I definitely believe we're the right company to do that.

So with that, we look forward to seeing you on March 6 at Investor Day. Thank you.

And that does conclude today's conference. Thank you for your participation. You may now disconnect.