Bill MacGregor Dev Nath Morris MacLeod · Bill MacGregor Dev Nath Morris MacLeod ... completely...

Introduction Financial ThesisEconomic Thesis Management Thesis Conclusion

Team C

Bill MacGregor Dev Nath Morris MacLeod

“Invest only if you would be comfortable owning a stock even if you had no way of knowing its daily share price.”

― Benjamin Graham, The Intelligent Investor

Recommendation: No Buy

Market Cap: $5.93B# Shares: 277.13MP/B: 9.41Yield: 2.64%P/E: 25.25EPS: $0.84

Introduction Financial ThesisEconomic Thesis Management Thesis Conclusion

Investment Thesis

Economics :In a rapidly changing industry,Sabre is threatened byIndustry Disruption.

Management :Board and Management donot act like long term owners.

Financial :Balance sheet and earningspotential do not represent agood investment.

$29.76

Current Price

$7.00 $21.18

Overview of Business

Recommendation Financial ThesisEconomic Thesis Management Thesis Conclusion

Company Description Inventory Aggregator of Fragmented Suppliers Intermediary in the Financial Transaction Provider of Software/Logistical Services

North America

54%

APAC19%

EMEA17%

Latin America

10%

GEOGRAPHIC DISTRIBUTION

Source – Sabre 10K

Global Economic Forces at Play

Airline travel has grown at 1.5x GDP for last forty years


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2014 (Actual) 2015 (Actual) 2016(Estimate)

2017(Projection)

2018(Projection)

2019(Projection)

Source: World Bank

GDP Growth Projection

World High-income countries Emerging countries BRICS

Industry Overview

Barrier to switching are significant but decreasing

Uber having a noticeable effect on package volumes


Source: seekingalpha.com

38% 33% 33% 33% 33% 34%

36%40% 41% 42% 44% 45%

26% 27% 27% 25% 23% 21%

2011 2012 2013 2014 2015 2016

% Revenue - Top 3

Sabre Amadeus TravelPort

1959 – IBM and AA introduced Sabre GDS

1960s – Delta, American, BOAC start using GDS

1970s – AA markets SABRE to Travel Agents &

Hotels. Pricing and routing deregulated.

1980s – SABRE in 10,000 travel agency offices. Air France, Lufthansa, Iberia and SAS found Amadeus

1990s–Tickets & hotel bought online, speeds

increase, costs decrease. Travelocity launched.

2000s – Further consolidation,

distribution shifted to internet.

2004 – Airlines committed to 100% e-

ticketing by 2007.

2007 - SABRE purchased by TPG and Silver Lake.

NDC 787 Regulations (Disintermediation)

Data communication standard allowing airlines to communicatedirectly with Travel Agents, Corporate and Individual Customerscompletely bypassing GDS and integrating higher margin ancillaryofferings (meals, upgrades, seat selection, etc.) that is difficult forSabre to accommodate!


Amadeus 3

Farelogix! 3

Travelport 1

Sabre 1

NDC Certification Level

Close Economic Thesis


In a rapidly changing industry, Sabre is threatened by Industry Disruption.

Positive Negative

Air Travel likely to continue Growing at 1.5x GDP.

Customer Switching costs are high. Barriers to Entry are currently high.

• GDS interruptions/failure severe. Solid hold in high RPK market.

SABR Relies on Mainframes and continuous middleware development. SABR can’t push higher margin ancillary offerings to customers. NDC 787 will increase number of travelers bypassing SABR.

• Significant increase in competition. Lufthansa charging 16 Euro fee for SABR ticketing. Inverse Economies of Scale for bigger airlines and hotels. SABR spending less on R&D absolutely and as percentage of revenue

compared to peers. SABR late to NDC 787 Certification. As Market Entry Barriers decrease, SABR must invest increasing capital to

maintain current hardware and evolve with technological advances.

Timeline – Post IPO


Did they do what they said they would do?


Despite all the red here, Incentives include:• Stock and Stock Option Awards Threshold - 90% of Revenues• Cash Bonus Incentives Threshold - 90% of Adj. EBITDA

2016 Management Compensation

Ind

ivid

ual

Posi

tio

n

Tota

l ($

M)

Ince

nti

ve

Simonson, R. EVP and CFO $6,590 90%

Gonzales, R. EVP and General Counsel $3,670 87%

Jones, H. EVP & Pres. Airline Sol'ns $2,518 80%

Menke, S. President & CEO $5,477 89%

Robinson, W. EVP & Chief HRO $3,647 87%

Fulfilled? Delta Fulfilled? DeltaBookings Growth Y N

Passengers Boarded Y 4.1% Y 3.8%

Travel Network Revenue Growth Y 9.0% N 0.5%

Airline & HS Revenue Growth Y 1.7% N 0.1%

Adjusted EBITDA Y 5.2% N 2.8%

Adjusted Net Income Y 12.0% N 6.1%

Adjusted EPS Y 10.0% N 6.4%

FCF > 60% approach $400 million N/A N 7.0%

2015 2016Forward Guidance

Litigation and TRA

TRA: Pre-IPO Shareholders may receive approximately 85% of $330-$380 MM from Pre-IPO Deferred Tax Assets (Total Now $395 MM)

$101 MM paid in Jan 2017, balance in Non-Current Liabilities


$18.5 $14.1

$16.7

$47.0

2013 2014 2015 2016

Litigation Exense

Trending High!

Legal Proceedings Loss till Date Potential Loss in Future

US Airways Antitrust Litigation $32 M $33 M +

Putative Class Action Lawsuit - Significant (Monetary)

Deartments of Justice Investigation - Significant (Monetary/Business Model)

Indian Income Tax Litigation - $43 M

Sabre SelloffTPG: Private Equity & VC Firm that invests across a wide-range of situations in all 10 Sectors.

Silver Lake: Achieve superior risk-adjusted returns through large-scale private investments in technology tech-enabled companies and related growth industries

Sovereign Co-Invest:

Managed by:

Peterson, K., (TPG)

Mondre, G., (Silver Lake)

Combined Share Ownership:

Post IPO: 83%

Current: 25%


Corporate Governance

TPG & Silver Lake have a lock on Compensation, Governance and Nomination.

All TPG and Silver Lake Board Members and their nominees are “Independent”.


IPO 2015 2016 2017 Audit CompensationGovernance and

NominatingTechnology Executive

TPG Peterson, K. Peterson, K. Peterson, K. Peterson, K. Member Chair Member

TPG Kusin, G. Kusin, G. Kusin, G. Kusin, G. Chair Member

TPG Bravnnte, G Bravnnte, G Bravnnte, G Member

Silver Lake Mondre, G. Mondre, G. Mondre, G. Mondre, G. Member Member Member

Silver Lake Osnoss, J. Osnoss, J. Osnoss, J. Osnoss, J. Chair

TPG / Silver Lake Joint James, R. James, R. Member Member

% TPG / Silver Lake 63% 63% 60% 60%

Pres & CEO Klein, Klein Klein Menke, S. Member Member

Chairman Kelllner, L.W. Kelllner, L.W. Kelllner, L.W. Kelllner, L.W. Chair

Odom, G Odom, G Odom, G. Odom, G. Chair

Rowe, Z Rowe, Z Member Member

% Other 38% 38% 40% 40%

Close Management Thesis


Board and Management do not act like long term owners.Positive Negative

Achieved profitability Successful IPO Acquisitions revenue accretive Successful acquisitions/negotiations Hospitality Solutions: positive coverage through investor

call Exceeded all 2015 Guidance Targets CEO Menke, airline experience with disintermediation and

pushing ancillaries.

Litigation costs are increasing Management’s Incentives tied exclusively to Revenue &

Adj. EBITDA Private Equity firms SL & TPG retain complete control of

Board SL & TPG have reduced ownership shares from 83% (Post-

IPO) to 25% 85% of TRA directed to pre-IPO shareholders Yield post TRA to decrease CEO Menke’s recent tenure track record.

32.6%

45.6%

39.2%

21.5%

38.1%

17.2%

7.2%

18.5%

0.7%

(20.0%)

(10.0%)

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

2013 2014 2015 2016 2013 2014 2015 2016 2013 2014 2015 2016

Sabre Amadeus Travelport

MARGIN COMPARISON

Gross Margin EBITDA Margin Net Profit Margin

Financials and Peer Comparison


Margin Comparison

Source: Company Financials

OCF per Employee

Gross Margin lowest amongst peers Travel Network YOY EBIT per Booking -4.1% Air/Hos Solutions YOY EBIT/Pass -9.5% Operational efficiency low compared to peers

$80.60

$67.99

Peer Average Sabre

$2,042

$1,956

$1,877

2014 2015 2016

Travel Network – EBIT per Booking

-4.1%

$313 $281

$256

2014 2015 2016

Airline and Hospitality Solutions – EBIT per Passengers

Boarded/Booking-9.5%

Value Model• 1st Pass RoIC = 9.95%

• 2nd Pass RoIC = 1.97%

• WACC = 5.80%


• NAV = $6.05

• EPV = $11.06

• P(Sustainability) = 20%-30%

• IV = $7.05 - $7.55

Assumptions: Goodwill from Acquisitions, Customer Relationships and

Intangibles are key to revenues, thus taken at Book. Bulk of PP&E is rapidly depreciating software. Land,

Leaseholds & Buildings approximately 20% of Net PP&E, thus taken at Book.

Balance Sheet Adjustments: Debt: Book Value ($3,454 MM) reduced 11% to Market

Value ($3,085) due to marginally lower coupons on their Senior Secured Notes.

Product Portfolio = $842 MM. Constantly developing software and technology to support current & new customer initiatives.

Customer Relations = $69 MM. These last two items account for $3.29 of NAV

Income Statement Adjustments: Average Adjusted Operating Profit/ Sales = 6% ($204

MM) Adjustments every year, but fewer and less severe since IPO.

Discounted Cash Flow Analysis


DCF Summary Growth Rate assumed to be 6% and decreasing. Included WACC and terminal EBITDA multiple in

sensitivity analysis. Predicted a range: $5.56-$8.00 Current WACC and EBITDA Multiple price: $6.72

#### 11.0x 11.5x 12.0x 12.5x 13.0x 13.5x 14.0x 14.5x 15.0x

3.6% 6.24 6.46 6.68 6.90 7.12 7.34 7.56 7.78 8.00

4.0% 6.15 6.37 6.58 6.80 7.01 7.23 7.45 7.66 7.88

4.4% 6.06 6.27 6.49 6.70 6.91 7.13 7.34 7.55 7.76

4.8% 5.97 6.18 6.39 6.60 6.81 7.02 7.23 7.44 7.65

5.2% 5.89 6.10 6.30 6.51 6.72 6.92 7.13 7.33 7.54

5.6% 5.81 6.01 6.21 6.42 6.62 6.82 7.03 7.23 7.43

6.0% 5.72 5.92 6.12 6.32 6.53 6.73 6.93 7.13 7.33

6.4% 5.64 5.84 6.04 6.24 6.43 6.63 6.83 7.03 7.22

6.8% 5.56 5.76 5.95 6.15 6.34 6.54 6.73 6.93 7.12

Price Range $5.56 – $8.00 Target Price $6.72

Terminal EBITDA Multiple

WA

CC

Sensitivity Analysis

EBITDA MULTIPLE METHOD

Terminal Value UndiscountedDiscounted

EBITDA Multiple 12.0x $ 19,685 $ 16,047

14.0x $ 22,966 $ 18,722

DCF Range (Implied Enterprise Value) $ 20,067 $ 22,742

Equity Value $ 20,407 $ 23,081

Implied Price per Share $ 6.29 $ 7.12

–

–

–

––

Discounted Cash Flow Analysis

($ in millions, except per share data)

2017 2018 2019 2020 2021

EBITDA $ 1,140 $ 1,255 $ 1,375 $ 1,506 $ 1,640

EBIT 618 652 682 706 727

Less: Cash Taxes @ 26.4% (163) (172) (180) (186) (192)

Tax-effected EBIT $ 455 $ 480 $ 502 $ 519 $ 535

Plus: Depreciation & Amortization 521 602 693 801 914

Less: Capital expenditures (509) (527) (583) (645) (639)

Plus / (Less): Change in net working capital 190 287 312 403 433

Unlevered free cash flow $ 658 $ 842 $ 924 $ 1,078 $ 1,243

WACC @ 5.24%

NPV of Unlevered free cash flow @ 5.2% $ 4,020

Projected

Dividend Discounting Model


DDM Summary Assumed same growth rate as DCF (6%) Payout ratio to remain constant at 48.9% Monte Carlo instances: 1,000 We have 95% confidence the price will fall between $6.15 and

$7. 03.

-0.2

0

0.2

0.4

0.6

0.8

1

1.2

$5.40 $5.60 $5.80 $6.00 $6.20 $6.40 $6.60 $6.80 $7.00 $7.20 $7.40 $7.60 $7.80

DDM Price Plot – Monte Carlo Simulation

CI Min Max

Average 6.60$ 68% 6.38$ 6.82$

Stdev 0.22$ 95% 6.16$ 7.04$

Year EPS G EPS Payout Ratio DPS Beta Cost of Equity Present Value

2016(Base) 0.87 0.489 0.426 0.882 0.1066

2017 6.00% 0.92 0.489 0.451 0.882 0.1066 $0.408

2018 5.50% 0.97 0.489 0.476 0.882 0.1066 $0.389

2019 4.50% 1.02 0.489 0.497 0.882 0.1066 $0.367

2020 3.50% 1.05 0.489 0.515 0.882 0.1066 $0.343

Stable

Growth2021 3.00% 1.08 0.489 0.530 0.882 0.1066 $4.62

Terminal

Value

Stock Price $6.12

Sabre Dividend Discount Model

Transition

$ 6.15 $ 7.03

Close Financial Thesis


Balance sheet and earnings potential do not represent a good investment.

Positive Negative

Growing Free Cash Flow• With Adjustments

Owner Earnings Reasonably Close to Net Income Ex Items

SABR highly leveraged in a cyclical, service business that constantly requires significant, annual capital infusion.

Highly reliant on Goodwill and Customer Relationships for revenue. Pre-IPO impairments of $898 MM to Goodwill & Customer Relationships Acquisitions Accretive to Revenue, no effect on Gross Margins Gross Margins lowest in Peer Group. 2nd Pass RoIC < WACC Decreasing EBIT per transaction. Operational efficiency lower than peer group. Price > All Valuations

Concluding Recommendation: No Buy


Thesis SummationEconomic:

Management:

Financial:

In a rapidly changing industry, Sabre is threatened by Industry Disruption.

Board and Management do not act like long term owners.

Balance sheet and earnings potential do not represent a good investment.

Board / Governance Board 2Board 1

Industry Growth Geographic GDPAmericas EuropeAPACAfrica & ME Spending

OasisPass/Reg RPK RegionVol & RPKMap

Revenue Direct Bill Bill/SegPer Billing Cost of RevCost/Billing

Process Map

Rev/Seg

Competition R&D Porter’sAirline Differentiation MarginsBrandsTechnology

Risks Inflation CreditCurrency

Geography

Risk/ImpactPolitical

RatioComp

Technology CTO 1 CTO 2Migration QuotesNDC/AssociGDS Future Tech Evolv

Main Slides Management ConclusionFinancialEconomic

Thank-YouReferences and Extra Material

Market Influences Liquid RatSolven Rat

TRA Dispurs

Profit RatioSabre/nasdaqCyclicality

Valuation Growth Tar Earning/NIProb of Sust CriteriaEPVNAV Acquisition

Industry Growth

Currency RiskReferences

Political Risk References

Credit Risk References

Inflation Risk References

Process Map References

Africa and Middle East - Market Growth References

Americas - Market Growth References

Asia Pacific - Market Growth References

Europe - Market Growth References

Board Independence and Voting References

Board Independence and Voting References

Passenger Volume and RPK References

Geographical Growth and RPK Growth References

Air Passenger by Region References

GDP Growth References

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2014

(Actual)

2015

(Actual)

2016

(Estimate)

2017

(Projection)

2018

(Projection)

2019

(Projection)

Source: World Bank

GDP Growth Projection

World High-income countries Emerging countries BRICS

Tourism Spending Growth References

Tourism Spending Growth References

RPK by Region References

Opinion of Airline DifferentiationReferences

Risk VS. Impact References

Opinion of GDS Future References

Migration to NDC References

Airlines Associated NDCs References

Quotes References

CTO - SABRE’S AND AMADEUS’ TECHNOLOGY

• Sabre originally operated on Mainframe computers. As business evolved, Sabre maintained those mainframes and built middleware to emulate terminals.

• Advantages: Lower Capital costs, bridges to new technology are programming heavy and capital equipment light.

• Disadvantages: Mainframe Technology not friendly with Customer Reservation Systems (CRS), inefficient data exchange. Late 1950s COBOL programming (and programmers) becoming obsolete. Sabre command language must be learned. Like MS-DOS! Changing from Sabre in highly-unionized airline environment will be costly due to retraining. Potential switching failures will impact revenues and brand. Doesn’t interface well with integrated services.

References

CTO - SABRE’S AND AMADEUS’ TECHNOLOGY

• Amadeus’ new software & technology, uses 4GL & open-source software.

• Advantages: Intuitive (drop down menus, check boxes, icons, etc.) easy to learn and use, performs well with CRS and integrated services.

• Disadvantages: Much higher CapEx than Sabre

References

TECHNOLOGY EVOLUTION

• Airlines and cruise lines make higher margins on ancillary services

• Amadeus better positioned for pushing services to enhance the travel experience and increase top & bottom line with higher margin items:• Seat upgrades on that long-haul flight?

• Hot meal in your hotel room on check-in after that long haul flight?

• Drink-of-the-day, spa-treatment or shore excursion on your cruise?

• Swag at the Springsteen concert?

• Uber at the airport or pier when you disembark?

References

Oasis -Technology’s Effect on Travel Agents

• Growth of North American Association of Travel Agents Affiliates

Source: Oasis of the Seas: Case B11A006, Richard Ivey School of Business. University of Western Ontario

Cruise Line Travel Agent Affiliates

Year Members CAGR1972 7,9001980 10,900 4.1%1985 14,887 6.4%1990 20,128 6.2%1995 22,722 2.5%2000 19,895 -2.6%2005 16,629 -3.5%2008 14,953 -3.5%

References

SABRE vs NASDAQ ReturnsReferences

GDS Developed byUsed by

Airlines OTAs Others

(1960)

American Airlines

American Airlines (1) Etihad Airways Gulf Air Jet Airways Virgin America Westjet

Priceline Lastminute.com

88,000 hotels 50 rail carriers 180 tour operators 13 cruise lines 55,000 TAs

Sabre All Nippon Airways (10) Malaysia Airlines Air India

Over 25 Countries in Asia Pacific

(1987)

Air France Iberia Airlines Lufthansa (4) Scandinavian Airlines

System

Air France (5) British Airways (6) Cathay Pacific China Airlines (8) Qatar Airways Southwest Airlines (7) Thai Airways

Expedia CheapOair MakeMyTrip

Over 100,000 hotels 103 rail carriers 203 tour operators 21 cruise lines 90,000 TAs

Apollo (1971) Galileo (1987) Worldspan (1990)

United Airlines (3) Delta Airlines (2) Northwest Airlines Swissair

Expedia Flight Centre Priceline CheapOair Orbitz Source: Company Websites

References


32.6%

45.6%

39.2%

21.5%

38.1%

17.2%

7.2%

18.5%

0.7%

(20.0%)

(10.0%)

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

2013 2014 2015 2016 2013 2014 2015 2016 2013 2014 2015 2016


MARGIN COMPARISON

Gross Margin EBITDA Margin Net Profit Margin

References


USD 176.00

USD 309.41

USD 434.60

0.00%

4.00%

8.00%

12.00%

16.00%

20.00%

2013 2014 2015 2016

R&D EXPENSE % OF REVENUE


References

Current AssetsTypes within

category

Reproduction

Value Book Adjustment Value

Cash and MS Book Value $364 $0 $364

A/R

Book Value +

Allowance for bad

debts (5% if not

given) $401 $20 $421

Prepaid Expenses $62 $62

Other receiveables Book Value $26 $26

Other receivables $1 $1

Deferred Tax AssetsDCF if long term,

BV if current $0 $0

Total Current Assets $873

Non-current Assets Types within Reproduction Book Adjustment Value

PV Operating LeasesPV using Kd $128 $128

PP&E Book Value $753 $753

Goodwill from

MergersOnly applicable

post 2001 Book Value $2,548 $2,548

Customer

Relationships $388 $388

Other Intangibles $388 $388

Capitalized Incentive $531 $531

Deferred Tax $95 -$10 $86

Long Term Inestment $26 $26

Product Portfolio $842

Customer Relations $69

Total Asset Value $5,711 $11 $6,632

Current LiabilitiesTypes within

category

Reproduction


Accounts Payable Book Value $169 $0 $169

Accrued Exp. Book Value $520 $0 $520

Curr. Port. of LT

Debt Book Value $178 $0 $178

Unearned Revenue $187 $187

Other Current

Liabilities Book Value $113 $0 $113

Total Current Liabilities $1,166

Non-current LiabilitiesTypes within

category

Reproduction


Operating Leases $128

Long-Term Debt Market Value $3,085

Pension & Other

Benefits Current

Book Value *(1-

Tax Rate) $123 -$32 $91

Def. Tax LiabilityLong Term

Discount (90%

post 2000, 80% pre $89 -$18 $71

Stock Options$47 $47

Other Non-Current Market Value $367 $367

NAV Liabililties $4,956

Bulk of PP&E is rapidly depreciating software. Land, building and leaseholds only 20%

Current LiabilitiesTypes within

category

Reproduction


Accounts Payable Book Value $169 $0 $169

Accrued Exp. Book Value $520 $0 $520

Curr. Port. of LT

Debt Book Value $178 $0 $178

Unearned Revenue $187 $187

Other Current

Liabilities Book Value $113 $0 $113

Total Current Liabilities $1,166

Non-current LiabilitiesTypes within

category

Reproduction


Operating Leases $128

Long-Term Debt Market Value $3,085

Pension & Other

Benefits Current

Book Value *(1-

Tax Rate) $123 -$32 $91

Def. Tax LiabilityLong Term

Discount (90%

post 2000, 80% pre $89 -$18 $71

Stock Options$47 $47

Other Non-Current Market Value $367 $367

NAV Liabililties $4,956

George’s NAV Equity Value Per ShareReferences

Equity Value $1,676

Shares outstanding - adjust this to correct for (000s) 277.13

Net Asset Value per share $6.05

NAV EQUITY VALUE

George’s Model

ReferencesEPV per Share NAV Equity Value Per Share

Normalized Operating Profit $228

-One Time Adjustments -$204

+Adjustment for Operating Leases $8

+Growth R&D Expenses $103

+Growth Marketing Expenses $8

EBIT $144

-Taxes on EBIT -$38

NOPLAT $106

+Amort of Goodwill from Mergers

(prior to 2002)

NOPLATPA $106

Depreciation of fixed assets $479

-CAPEX current year -$492

+Growth Capex $529

Zero Growth CAPEX -$224

Zero Growth Free Cash Flows $362

Zero Growth Free Cash Flows $362

WACC 5.8%

PV (ZG FCF) discounted by WACC $6,232

+ECMS $364

-BV STD (inc current portion LTD) $178

-MV LTD $3,085

-Prefered Stock

-Minority Interest $3

-Underfunded (Overfunded)

pension plan $91

-Operating Leases $128

-Executive Stock options $47

Equity Value through EPV method $3,065

# of Shares 277.13

Equity Value per Share $11.06

Intrinsic value vs Probability of SustainabilityReferences

EPV per Share NAV Equity Value Per Share

2014 Future TRA DisbursementsReferences


Cyclicality References


Revenue by Geography References


Billable and Boardable by SegmentReferences


Revenue per Billing/BookingReferences


Cost of Revenue per Billing/BookingReferences


Cost of RevenueReferences


2015-2016 2014-2015

Travel Network - Increase 150,353.00$ 137,369.00$

Airline and Hospitality Solutions - Increase 89,504.00$ 38,655.00$

Direct BillablesReferences


Revenue by SegmentReferences


TechnologyReferences


Value Investment CriteriaReferences


-2.2

Growth GuidanceReferences


Owner’s Earnings VS Net Income Ex ItemsReferences


For the Fiscal Period Ending 12 monthsDec-31-2016

12 monthsDec-31-2015


Restated12 monthsDec-31-2013

Restated12 monthsDec-31-2012

Reclassified12 monthsDec-31-2011


Net Income 242.6 545.5 69.2 (100.5) (611.4) (66.1) (268.9)

+ Depreciation 57.3 43.5 35.6 33.4 96.7 122.6 113.4

+ Amortization Goodwill and Intangibles 143.4 106.5 96.2 129.5 126.7 162.3 163.2

+ Other Amortization 278.6 251.7 209.5 167.9 79.2 23.9 20.7

-CapEx (327.6) (286.7) (227.2) (209.5) (167.0) (164.6) (130.5)

- Acquisitions (164.1) (442.3) (31.8) (30.2) (72.4) (11.3) (51.9)

Owner Earnings 230.2 218.2 151.5 (9.4) (548.2) 66.9 (153.9)

Net Income 242.6 545.5 57.8 (137.2) (645.9) (98.7) (299.6)

Net Income Ex Items 237.0 231.1 96.8 12.5 (251.5) (75.2) (282.3)

5.5 314.4 (38.9) (149.7) (394.4) (23.5) (17.3)

Owner Earnings/ Share $0.83 $0.78 $0.61 -$0.05 -$3.09 $0.38 -$0.88

EPS Continuing Operations $0.87 $0.86 $0.46 $0.29 -$1.22 -$0.45 -$1.80

Reported EPS $0.86 $1.95 $0.23 -$0.74 -$3.65 -$0.56 -$1.71

Margin RatiosReferences


Ratios

For the Fiscal Period Ending 12 months

Dec-31-2010

12 months

Dec-31-2011

12 months

Dec-31-2012

12 months

Dec-31-2013

12 months

Dec-31-2014

12 months

Dec-31-2015

12 months

Dec-31-2016

Profitability

Return on Assets % NA NA 4.6% 5.6% 5.9% 6.2% 5.9%

Return on Capital % NA NA 6.5% 8.1% 8.5% 8.9% 8.3%

Return on Equity % NA NA (490.2%) NM NM 82.5% 43.5%

Return on Common Equity % NA NA NM NM NM 81.6% 42.9%

Margin Analysis

Gross Margin % 47.1% 39.3% 34.1% 32.9% 34.0% 34.3% 32.6%

SG&A Margin % 25.2% 27.8% 18.7% 16.0% 17.1% 17.4% 17.0%

EBITDA Margin % 21.7% 21.4% 24.7% 23.4% 22.0% 22.0% 21.5%

EBITA Margin % 17.7% 17.1% 20.7% 22.1% 20.6% 20.5% 19.8%

EBIT Margin % 12.0% 11.4% 15.4% 16.9% 16.9% 16.9% 15.6%

Earnings from Cont. Ops Margin % (11.2%) (2.8%) (9.0%) 2.1% 4.2% 7.9% 7.2%

Net Income Margin % (9.5%) (2.3%) (25.7%) (4.0%) 2.6% 18.4% 7.2%

Net Income Avail. for Common Margin % (10.0%) (2.6%) (10.6%) 0.5% 3.7% 7.8% 7.0%

Normalized Net Income Margin % 5.8% 5.2% 3.5% 4.0% 4.1% 7.1% 6.9%

Levered Free Cash Flow Margin % NA NA 15.5% 7.2% 5.0% 12.3% 17.2%

Unlevered Free Cash Flow Margin % NA NA 20.3% 13.7% 10.0% 15.7% 19.8%

Liquidity RatiosReferences


Ratios


Dec-31-2010

12 months

Dec-31-2011

12 months

Dec-31-2012

12 months

Dec-31-2013

12 months

Dec-31-2014

12 months

Dec-31-2015

12 months

Dec-31-2016

Asset Turnover

Total Asset Turnover NA NA 0.5x 0.5x 0.6x 0.6x 0.6x

Fixed Asset Turnover NA NA 5.7x 5.6x 5.0x 5.0x 4.9x

Accounts Receivable Turnover NA NA 5.8x 6.2x 6.9x 8.0x 8.7x

Inventory Turnover NA NA NA NA NA NA NA

Short Term Liquidity

Current Ratio NA 0.6x 0.6x 0.8x 0.8x 0.8x 0.7x

Quick Ratio NA 0.5x 0.5x 0.6x 0.6x 0.7x 0.7x

Cash from Ops. to Curr. Liab. NA 0.3x 0.3x 0.1x 0.2x 0.5x 0.6x

Avg. Days Sales Out. NA NA 62.9 59.2 53.0 45.5 42.1

Avg. Days Inventory Out. NA NA NA NA NA NA NA

Avg. Days Payable Out. NA NA 34.3 25.1 23.7 24.1 24.7

Avg. Cash Conversion Cycle NA NA NA NA NA NA NA

Solvency RatiosReferences


Ratios


Dec-31-2010

12 months

Dec-31-2011

12 months

Dec-31-2012

12 months

Dec-31-2013

12 months

Dec-31-2014

12 months

Dec-31-2015

12 months

Dec-31-2016

Long Term Solvency

Total Debt/Equity NA 944.9% NM NM 3,629.2% 694.8% 552.1%

Total Debt/Capital NA 90.4% 108.7% 109.3% 97.3% 87.4% 84.7%

LT Debt/Equity NA 906.6% NM NM 3,602.6% 654.6% 523.7%

LT Debt/Capital NA 86.8% 107.5% 106.4% 96.6% 82.4% 80.3%

Total Liabilities/Total Assets NA 93.0% 105.9% 106.7% 98.2% 91.0% 89.1%

EBIT / Interest Exp. 1.7x 1.9x 1.6x 1.6x 2.0x 2.9x 3.3x

EBITDA / Interest Exp. 3.0x 3.5x 2.6x 2.1x 2.6x 3.8x 4.6x

(EBITDA-CAPEX) / Interest Exp. 2.4x 2.6x 1.9x 1.4x 1.6x 2.1x 2.5x

Total Debt/EBITDA NA 5.7x 5.9x 6.3x 5.3x 5.2x 4.8x

Net Debt/EBITDA NA 5.6x 5.7x 5.8x 5.0x 4.7x 4.3x

Total Debt/(EBITDA-CAPEX) NA 7.8x 8.2x 9.8x 8.7x 9.3x 8.7x

Net Debt/(EBITDA-CAPEX) NA 7.6x 7.9x 9.0x 8.3x 8.4x 7.7x

Altman Z Score NA 0.38 0.16 0.23 0.93 1.31 1.43

Ratio ComparisonRatios Sabre Amadeus Travelport

P/E Multiple 25.25 24.78 87.12

Beta 0.88 0.43 -

P/B 9.41 7.49 -

Div Yield 2.64% 1.78% 2.54%

Payout Ratio 60.89% 49.97% 226.56%

Sales (5 yrs CAGR) 3.39% 10.15% 2.93%

EPS 0.94% 20.64% 5.26%

Capital Spending (5 yrs CAGR)14.76% 13.74% 6.89%

Current Ratio 0.7x 0.5x 0.7x

Debt/Capital 84.66% 46.45% 116.71%

Altman Z Score 1.4x 3.4x -0.1x

Rev/Employee 337,339 322,232 587,839

Asset Turnover 0.61 0.61 0.82

RoA 4.34% 10.50% 5.06%

RoA (5 yrs avg.) 5.70% 10.49% 4.24%

RoI 5.40% 15.86% 7.05%

RoI (5 yrs avg.) 8.06% 16.10% 5.86%

Efficiency

Returns

Growth

Valuation

Dividends

Credit Strength

References

Acquisitions

Detail FY 2016 FY 2015

Direct Bookable Billings Growth due to Abacus 10.8% 14.3%

Revenue Growth due to Abacus 10.2% 9.3%

References

Porter’s Five Forces

References

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