sabre holdings sam gilliland chairman and ceo merrill lynch conference february 9, 2005
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Sabre Holdings
Sam GillilandChairman and CEO
Merrill Lynch ConferenceFebruary 9, 2005
2
Agenda
• Overview• 2004 Performance by Business• Key Trends and Current Industry Assessment• Company Strategy and Opportunity• 2005 Strategic Priorities• Financials
3
Sabre Holdings
A world leader in
travel commerce,
retailing travel products
and providing distribution and
technology solutions for the travel industry
4
Sabre at a Glance
• S&P 500 Company
• 6,800 employees in 45 countries
• Revenues of $2.13 billion in 2004
• 2004 earnings per share growth > 75%
• Three distinct businesses serving travelers, corporations, travel agents and
travel suppliers
5
2004 Performanceall about execution
Return of Capital•Returned ~ $270 million to shareholders•Dividends of $41 million;repurchased $228 million in stock
Reduce Costs for Competitive Advantage•Reduced company-wide costs by over $80 million•Lowered the rate of incentive growth
Accelerate Travel Retailing and Portfolio Initiatives•Travelocity content and capabilities expanded•GDS merchandising programs launched
Maximize Business Unit Performance•Travelocity profitability•Cross-portfolio technology investments
6
Travelocity : 2004 Accomplishments
Profitable for the full year on an adjusted basis• >$65 million turnaround in YOY operating income• Revenue growth of 30% (adjusted); 27% (GAAP)
Differentiated and enhanced consumer brand• Major redesign of web site and new logo• New advertising campaign launched: the Roaming Gnome
International expansion• Buy-in of European joint venture• Entered French online marketplace• Acquired travelchannel.de in Germany
Delivered best-in-class capabilities• Merchant hotel program; >17,000 properties• Flight Navigator – industry leading air shopping path• Travelocity Partner Network: Southwest Airlines Cruises,
AARP, American ExpressTravelocity Business
• Revamped user interface• Signed large customer accounts: Aetna, General Dynamics, AMA
7
Sabre Travel Network: 2004 Accomplishments
Met revenue and well exceeded earnings growth targets • Revenue growth ~2 percent (adjusted) and flat (GAAP)• Operating margin of 19% (adjusted) and 17% (GAAP)
Expanded Distribution and Marketing Services for Hoteliers• Launched Hotel Spotlight• Acquired SynXis Corporation
Rolled out numerous merchandising programs• Impressive gains for specific hotel properties• Last minute packaging through the GDS
Cost Reductions across the business• Consolidated customer call centers in Latin America• Assured Vantage Program launched to help slow growth of incentive costs
Channel shift slowed • Averaged under two points for the year
GetThere transactions increased >30%• Rolled out industry’s first fully-automated online ticket exchange
8
Airline Solutions: 2004 Accomplishments
Revenue and earnings growth dampened by tough year in software sales• Revenue growth of ~5%;operating margin ~6%• Fourth quarter revenue rebounded
Further developed and integrated products and services• Launched SabreSonic, a new generation of airline passenger solutions suite
Expanded presence in high-growth markets • Signed a multi-year, multi product agreement with low-cost carrier Frontier Airlines• Moved into Canada’s low-fare carrier market by signing a five-year agreement to
support WestJet
Continued international diversification• Signed Aeroflot and Air One for our SabreSonic suite of products
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Key Trendsand Current Industry Assessment
Deregulation• CRS deregulation in US• Now under review in Europe
Online Growth• Robust in North America• Accelerating globally
Low-Cost Carriers• Rapid growth, worldwide• Focus on direct distribution
Industry Consolidation• Intermediaries vertically
integrating
Emerging Trends• Travel Search Engines
Channel Shift• Supplier-direct movement
slowing
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Industry Growthglobal opportunity
$ 320
$ 419
$ 11$ 80
$ 378
$ 492
$ 175
$ 695
$ 282
$ 280
$ 51
$ 257
$ 40
$ 0
$ 100
$ 200
$ 300
$ 400
$ 500
$ 600
$ 700
$ 800
$ 900
$ 1,000
REGION SUPPLIER CHANNEL CHANNEL
Air
Car
Hotel
CruiseRail
Direct
Indirect19.1%
63.7%
3.9%
$ 520
$ 349
SEGMENT
Leisure
Corporate
US and Canada
EMEA
LA
APAC
Online
Offline
$ 870 B
$Bil
lio
n
2007 Global Gross Travel Spend
Data Source: PhoCusWright, Jupiter, EuroMonitor, Sabre Holdings Analysis
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Channel Trendsindirect and direct
ONLINE
OFFLINE
ONLINE
OFFLINE
2003 2004 2005 2006 20070
$100
$200
$300
$400
Global Air Spend MixLeisure + Corporate
$Bil
lio
n
Data Source: PhoCusWright, Jupiter, EuroMonitor, Sabre Holdings Analysis
57%
43%
Indirect
Direct
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SCALE and EFFICIENCY
AREAS of GROWTH
Core Global Distribution System (GDS)• Comprehensive content, pricing aggregation, and global reach• High availability and real-time information• Accurate pricing and inventory • Leading technology and scalable platforms• Process automation and data integration
Retailer DIRECT & INDIRECT• Brand building and management• Customer Insight• Customer loyalty• Wholesale product creation and distribution across channels• Comprehensive product availability• Partner point of sale technology
Extending From Reseller to Retailerleveraging scale and growth
POWERFUL GLOBAL
NETWORK
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Optimize the Core GDS Business
Global Scale• Cost advantage through leading transaction scale• Content advantage through leading demand aggregation
Technology Investment• World-class shopping and pricing • Improved transaction efficiency• Leverage TSG portfolio investment ― packaging
Business Model Evolution• Agents ― choice, efficiency, high margin content,
and Marketing Services ― Jurni Network / Nexion• Suppliers ― flexibility, value-based options, merchandising
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Cap
abil
itie
sGrowth through Retailing
Travel Retailing
HotelGlobal
ExpansionPackaging
Data and Customer Insight
Differentiated, High-Margin Content
Marketing Services
Leading Technology
Direct / Indirect
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Travel Retailingacross the network
PRIVATE LABEL
DIRECT
PASSIVE
INDIRECT
Supplier Traveler
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Economic Opportunityincreasing revenue per trip
Degree of influence overtravel product sold
TODAY
LOW
HIGH
RevenuePer Trip
~ 7X
~ 4X
~ 2X
$ X
Data Source: Internal
Retailing HEAVY
RetailingLITE
Booking Fee
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2005 Strategic Priorities
Grow Retail Revenue Across the Global Network• Direct and indirect• Hotel and packages
Expansion in Asia and Europe• Large and growing segments• Increase our presence
Leverage the Scale and Efficiency of the Distribution Business• Grow scale, reduce cost
Deliver Leading Scaled Technology• Innovate and differentiate• Shopping and pricing, corporate, leisure
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2005 Financial EstimatesTotal Company
• Total company revenue growth approaching 10%
• Total company earnings per share growth in the range of 2% to 9%
Solid financial results while making well placed investments for future growth
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2005 Growth Projections
Earnings Per Share, Adjusted $1.47 $1.50 - $1.60
Total Revenue (net elims) $2,131 Approach 10%
Eliminations ($168)
Earnings Per Share, GAAP $1.38 $1.41 - $1.51
2004 Revenue(in millions)
2005 Growth Projections
Sabre Travel Network $1,553 Low Single Digits
Travelocity $503 25% - 30%
Sabre Airline Solutions $243 ~ 10%
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Other Financial Projections and Capital Structure
Full year Adjusted EBITDA expected to be ~ $400 million• GAAP Net income of ~ $190 million
Free cash flow expected to be ~ $200 million• Cash flow from operations ~ $300 million
Enhance shareholder return through dividends and share
repurchases• Increased quarterly dividend 20 percent, to $0.09 per share
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• Superior Execution
• Pursue Growth Opportunities
• Manage Costs for the Long Term
• Invest for the Future
In Summary
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Cautionary Statement
Statements in this presentation which are not purely historical facts or which necessarily depend upon future events, including statements about forecasted financial performance or other statements about anticipations, beliefs, expectations, hopes, intentions or strategies for the future, may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned not to place undue reliance on forward-looking statements. All forward-looking statements are based upon information available to Sabre Holdings Corporation on the date of this presentation. Sabre Holdings Corporation undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Any forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements, including risks or uncertainties related to the Company's revenues being highly dependent on the travel and transportation industries. Sabre Holdings Corporation may not succeed in addressing these and other risks. Further information regarding factors that could affect our financial and other results can be found in the risk factors section of Sabre Holdings Corporation's most recent filing on Form 10-Q with the Securities and Exchange Commission.
References to non-GAAP financial statements and the reconciliation to GAAP can be found on the Sabre Holdings' website http://www.sabre-holdings.com/investor/highlights/index.html in the investor relations section.