Sabre Stock

Good morning, and welcome to Sabre's Third Quarter 2026 Earnings Conference Call. My name is Marvin, and I'll be your operator. As a reminder, please note today's call is being recorded. I'll now turn the call over to Vice President of Investor Relations, Jim Mathias. Please go ahead, sir.

Good morning, and welcome to our third quarter 2026 earnings call. This morning, we issued an earnings press release, which is available on our website at investors.sabre.com. A slide presentation, which accompanies today's prepared remarks, is also available during this call on the Sabre Investor Relations web page. A replay of today's call will be available on our website later this morning.

We advise you that our comments contain forward-looking statements that represent our beliefs and expectations about future events, including results of our growth strategies, our AI offerings and AI-related developments in the industry, transactions and bookings growth, expectations regarding the Middle East conflict and recovery, including fuel prices as well as the impact of other geopolitical events, commercial and strategic arrangements, our financial guidance, outlook and expectations, pro forma financial information, free cash flow and liquidity, among others. All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today's conference call.

More information on these risks and uncertainties is contained in our earnings release issued this morning and our SEC filings, including our Form 10-Q for the quarter ended September 30, 2026. Throughout today's call, we will also be presenting certain non-GAAP financial measures. References during today's call to free cash flow, adjusted EBITDA, adjusted EBITDA margin, normalized adjusted EBITDA, normalized adjusted EBITDA margin and adjusted technology and adjusted SG&A expenses have been adjusted to exclude certain items. The most directly comparable GAAP measures and reconciliations for our non-GAAP measures are available in the earnings release and other documents posted on our website at investors.sabre.com.

Normalized amounts have been adjusted for estimated costs historically allocated to our Hospitality Solutions business, which was sold on July 3, 2025. We are also presenting certain financial information on a pro forma basis to give effect to the sale of the Hospitality Solutions business. Unless otherwise noted, results presented are based on continuing operations.

Participating with me today are Kurt Ekert, President and Chief Executive Officer; and Mike Randolfi, Chief Financial Officer.

With that, I will turn the call over to Kurt.

Thanks, Jim. Good morning, and thank you for joining us. We delivered strong third quarter results, favorable to our expectations and made progress against our financial and strategic objectives. Reflecting on our performance year-to-date and our outlook, for the second consecutive quarter, we are raising our full year 2026 guidance for both pro forma adjusted EBITDA and free cash flow, while reaffirming our outlook for full year revenue and air marketplace bookings growth. Third quarter revenue grew 3% year-on-year, while normalized adjusted EBITDA increased 13% year-on-year to $170 million, exceeding our expectations. Total marketplace bookings were flat year-on-year, demonstrating resilience amid a challenging external environment and continued disruption to global travel patterns.

Air marketplace bookings declined 1% in the quarter, reflecting continued impacts from the Middle East conflict and higher fuel prices, which have led to capacity reductions by airlines and higher airfares. While performance in the Americas remained strong and corporate travel remained resilient, we experienced softer leisure travel, particularly in EMEA and Asia Pacific. We estimate these factors created a combined 300 to 400 basis point headwind to air marketplace bookings growth in the third quarter. Absent these headwinds, we believe third quarter total marketplace bookings growth would have been in the mid-single-digit range.

Importantly, year-to-date through the third quarter, we believe that Sabre has outperformed airline industry volume broadly and our competitors by approximately 400 to 500 basis points, demonstrating the strength of our competitive position and the progress we are making against our growth strategies. Consistent with our expectations, both air marketplace and total marketplace bookings have improved sequentially in the fourth quarter to date, supporting our outlook for full year 2026 air marketplace bookings growth in the low to mid-single-digit range. While the external environment remains dynamic, our business is performing well. Our growth strategies are delivering results, and we continue to generate both revenue and adjusted EBITDA growth. I am pleased with our progress and increasingly confident in our ability to build on this momentum as we execute against the many opportunities ahead.

Now turning to Slide 5. Our momentum this year is reflected in our fourth consecutive quarter of year-on-year revenue growth and fifth consecutive quarter of double-digit year-on-year growth in normalized adjusted EBITDA. This performance marks an important shift at Sabre. Our growth strategies are gaining traction and driving consistent top line growth. Combined with disciplined cost management, this momentum is translating into stronger profitability, expanding margins and sustainable improvement in our financial performance. We believe we are well positioned to achieve our increased outlook for 2026 pro forma adjusted EBITDA and free cash flow, which Mike will discuss shortly. Importantly, Sabre is already generating significant unlevered free cash flow with approximately $395 million expected in 2026.

As we continue to grow revenue and expand profitability, we expect to build on this strong cash generation and transition to positive free cash flow in 2027, marking a meaningful inflection point in our financial performance. During the quarter, we executed a successful refinancing and as a result, have extended $1.35 billion of maturities out to 2032. Strong investor demand enabled us to secure a lower interest rate on this refinancing of 9 and 7/8s, while significantly extending our maturity profile and providing us with greater flexibility to execute on our strategic priorities. We believe we are well positioned from a debt maturity perspective with no large maturities until the third quarter 2029.

Revenue growth and expanding profitability are driving stronger cash generation, which in turn provides greater financial flexibility to invest in our business and create long-term shareholder value. We look forward to discussing this in greater detail at our Investor Day on November 17.

Turning to the right side of the slide. Innovation is key to our ongoing growth and success as well as our improving financial performance. Importantly, our growth is becoming increasingly broad-based with positive momentum across the business. In Airline Technology, commercial momentum continues to build, and I'm excited about our recent wins in this space. We currently have 4 customer implementations completed or underway, reflecting the progress we are making across the business. We grew revenue in the quarter and continue to expect revenue growth for the full year. Our recent Sabre Mosaic and offer and order win with Kenya Airways further reinforces the growing demand for our open modular technology solutions.

In air marketplace, we are executing against our growth priorities, focusing on expanding customer relationships and capturing additional share. We recently renewed our distribution agreement with United Airlines, including continued access to United's NDC content and related capabilities through Sabre. This agreement reinforces Sabre's position as the backbone of global travel commerce, connecting buyers and sellers of travel through our platform. NDC bookings also continue to grow, representing 5% of our total air marketplace bookings in the third quarter. Marketplace lodging and other bookings volumes grew 8% in the quarter with growth across hotel, car and rail.

Hotel-related revenue grew 14% in the quarter, reflecting our success in driving higher hotel attach rates as well as strong growth in media. Hotel attach rates are now greater than 35%, and we see meaningful opportunity to improve this metric as we continue to enhance our platform. Our payments business continues to deliver strong growth with more than $26 billion in annualized gross spend and quarterly gross spend increasing 27% year-on-year. Payments revenue grew at a double-digit rate in the quarter with an annualized run rate of approximately $60 million. Importantly, these are the businesses and growth strategies driving our performance today.

Turning to Slide 6. Our key financial and operational metrics demonstrate that we are delivering broad-based growth across our business. Our positive quarterly trends reflect the disciplined execution of our strategy and the progress we're making against our long-term priorities. This progress, together with our strong year-to-date financial performance, supports our second consecutive increase to 2026 pro forma adjusted EBITDA and free cash flow guidance. Looking ahead, we see multiple pathways to accelerate growth while maintaining cost discipline and driving continued operating leverage.

At our November 17 Investor Day, we'll share more about these opportunities and how we expect this to translate into meaningful revenue growth, adjusted EBITDA expansion and strong cash flow generation. We believe this combination positions Sabre to deliver sustainable growth and create a compelling opportunity to drive significant long-term shareholder value.

With that, I'll turn the call over to Mike to walk through our third quarter financial results and our outlook in more detail.

Thanks, Kurt, and good morning, everyone. Please turn to Slide 8. We delivered another strong quarter with third quarter normalized adjusted EBITDA exceeding our outlook. Based on year-to-date performance and our outlook for the remainder of the year, we are reaffirming our full year 2026 guidance for revenue and air marketplace bookings growth. For the second consecutive quarter, we are increasing our full year 2026 guidance for both pro forma adjusted EBITDA and free cash flow.

Turning to the financials. Total revenue was $738 million, an increase of 3% year-on-year, meeting our expectations of flat to low single-digit growth. Marketplace revenue grew $19 million, an increase of 3% due primarily to a 3% increase in average booking fee. Airline Technology revenue grew 3% year-on-year to $144 million, in line with growth in passengers boarded and in line with our expectations. We expect fourth quarter revenue to be in the range of $140 million to $150 million, supported by continued execution of our strategy.

We remain on track to deliver full year revenue growth. Gross margin of 57.7% exceeded our previous annual expected guidance of 56% to 57%, driven by favorable bookings mix and continued growth in our higher-margin payments and media businesses. Third quarter normalized adjusted EBITDA increased 13% year-on-year to $170 million and normalized adjusted EBITDA margin expanded 200 basis points to 23%. As Kurt highlighted, this is our fifth consecutive quarter of double-digit adjusted EBITDA growth. Operating income totaled $109 million, up 17% year-on-year.

Turning to third quarter free cash flow. We reported negative $48 million, which included approximately $15 million associated with transaction fees for our recent $1.35 billion financing maturing in 2032. This refinancing was treated as a debt modification. This resulted in transaction fees being recorded in operating cash flow rather than financing cash flow. Additionally, we paid $40 million of accrued interest associated with notes that were settled as part of the third quarter refinancing. Absent these payments, free cash flow would have been positive for the third quarter. We ended the quarter with a cash balance of $688 million. This includes $78 million of cash used to settle certain notes in October.

Moving to Slide 9. Air marketplace bookings declined 1% in the quarter, reflecting continued pressure on global travel from the conflict in the Middle East and higher fuel prices. We estimate these factors represented a combined 300 to 400 basis point headwind in the quarter. As Kurt mentioned, excluding these headwinds, third quarter air marketplace bookings growth would have been positive. Revenue grew 3% in the third quarter, primarily attributed to growth in marketplace revenue driven by higher average booking fee as well as growth in Airline Technology.

Our normalized adjusted EBITDA result of $170 million was favorable to our guide of $155 million by $15 million. Approximately $5 million of the outperformance was driven by higher gross profit, reflecting growth in average booking fee. The remaining $10 million of outperformance reflected lower adjusted technology expenses and a tax refund benefit. All in, we are pleased with this quarter's results.

Turning to Slide 10. During the third quarter, we successfully completed a refinancing and issued a $1.35 billion notes offering maturing in 2032. Our strong year-to-date performance helped drive significant investor demand, allowing us to secure a lower interest rate on the new debt. Importantly, we have no large debt maturities until the third quarter of 2029, providing us with significant flexibility as we execute on our growth strategies.

Moving to Slide 11 and our outlook for 2026. Based on our strong year-to-date performance and fourth quarter outlook, we are raising our full year 2026 guidance for pro forma adjusted EBITDA and free cash flow for the second consecutive quarter. We are increasing pro forma adjusted EBITDA guidance by $10 million to approximately $610 million, representing 14% year-on-year growth. We are also raising our free cash flow outlook to approximately negative $50 million, including approximately $60 million in restructuring costs associated with our inflation offset program. Excluding these costs, we would expect to generate positive free cash flow in 2026.

The primary driver of our adjusted EBITDA outlook is an increased expectation for 2026 gross margin of approximately 57% versus a prior range of 56% to 57%. Our outlook for full year air marketplace bookings, revenue growth and operating expenses remains unchanged.

Turning to adjusted technology expense and CapEx. We see opportunities to increase fourth quarter investments in areas that support our 2027 growth strategies. As a result, we continue to expect a low single-digit increase in adjusted technology expense for the full year, and we are slightly increasing our 2026 CapEx outlook by $5 million to approximately $95 million. We expect full year cash interest of approximately $445 million, reflecting the impact and timing of our third quarter refinancing. As a reminder, within the website financials available on our Investor Relations website, we provide a quarterly interest walk.

Our expectations for cash taxes and other increased to $60 million, primarily due to approximately $20 million of transaction fees impacting operating cash flow. We are pleased with our third quarter and year-to-date performance. Our increased outlook for both full year 2026 pro forma adjusted EBITDA and free cash flow reinforces our confidence in our ability to deliver sustained growth and positive free cash flow in 2027 and going forward.

Before we open the call for questions, I want to remind everyone that we plan to provide multiyear financial projections at our Investor Day on November 17. As a result, we will defer any questions about our outlook for 2027 and beyond until that event.

And with that, operator, please open the line for questions.

[Operator Instructions]

And our first question comes from the line of Victor Cheng of Bank of America.

Maybe can you comment on a bit on the current development with agentic AI? There are a number of personal AI agents out there making the bookings and some of them have signed deals with other aggregators. Where do you see opportunities for Sabre to be positioned within that ecosystem? And then a follow-up on that, what are your expectations on agentic bookings going forward in the next couple of years? Will it be a significant part of airline bookings?

Thank you, Victor. With respect to agentic, as we have spoken about previously, we believe that over time, conversational commerce and agentic AI will become an important vehicle for not only search, but also for booking and fulfillment of travel transactions. What you've seen from most of the large LLM platforms to date is testing as they try to figure out their commercial model, and most of them still remain more focused on enterprise and consumer opportunity. The feedback that we've gotten from them is they're seeking an end-to-end agent experience where the consumer or the corporate traveler would do a search, shopping, booking, fulfillment, full servicing and changes, et cetera. We believe Sabre is extremely well positioned. We sit on 50 petabytes of data. We do 20,000 air shops per second through Sabre.

We have the combination of the most comprehensive air and hotel content portfolio in the world with very sophisticated algorithms and caching capabilities on top of that in addition to workflow. We were first to market with our MCP server and our agentic API capabilities, and we're in conversation with all of the large agentic platforms. So we believe this is a significant potential growth accelerant to Sabre. That's not currently in the expectations that we've talked about for next year, which to reiterate what we spoke about previously was mid-single-digit both volume and revenue growth. And again, AI would be an upside to that. So Victor, we feel like we're very well positioned. It's in the very early innings of this game, but we're pursuing this aggressively.

And maybe a follow-up on that, on the look-to-book ratio, which obviously is increasing drastically with AI. Is there an opportunity for you to benefit from it in terms of providing more search capabilities? And just how should we think about the cost of compute? Are you going to be able to pass it on to agencies or airlines?

Yes. So very good question. So first of all, what's very important about Sabre is the data we already sit on. When a consumer in a conversational commerce interface does a search prospectively, they're unlikely to get pages of results. They might get 3 or 4 results back to say, which do you want me to book? And so the days of the consumer out there shopping through web pages, that's going to change fundamentally. In order to provide a relevant proper search response and to basically provide a good UI/UX, it is fundamental you have good data and then you cache the results that are there as well. So there's no question that you see exponential increases in look-to-book with conversational shopping versus traditional fixed-format shopping.

What we do, because we have a lot of information about that search and we have a lot of information about the individuals, and we can put caching in front of those searches, is we're able to cache between 80% and 90% of the queries that come into the Sabre system. We're able to rely on the data we have. And therefore, the efficiency from a compute standpoint for us is much better than it would be in the absence of having that data. How this will come to market commercially, meaning will you charge for compute or activity? Will you charge for bookings? I think it's still very early to say so. What we're seeking is to get our fair share of wallet. We think the commercial opportunity is going to be very compelling.

Our next question comes from the line of Jack Halpert of Cantor Fitzgerald.

First, just on sort of the travel demand outlook into 4Q and 2027, what are you hearing from airline agency customers about maybe corporate versus leisure, international versus domestic, Middle East conflict? It seems like commentary from the OTAs and airlines has been a little bit mixed for the near term. So curious what you guys are hearing. That's kind of my first question.

Yes, I'd say it's a very mixed bag, Jack. What you've seen to date through Q3 and what we've seen in terms of trading results early in Q4 is corporate demand globally is very strong. And it's basically exhibiting despite some of the price increases, we've seen both volume increases and obviously, the airlines and IATA report significant increases in their gross booking or turnover value. On the leisure side, there is no question that there has been impact to demand. That's most acute in EMEA and in Asia Pacific. You have a lot more low-cost carrier traction, for example, in Asia Pacific. And so the model doesn't hold up as well there. And that's baked into the results that we talked about here.

When you look prospectively, obviously, the war in the Middle East, that's going to be very important. And then there'll be a question of the timing of if and when that ends, and we do expect that to end at some point, but we don't know exactly when. Fuel prices should begin to adjust back toward normalcy. That will take some time. There's a difference between when you get the fuel out of the ground and you refine it, et cetera. So we think given the capacity reductions that have happened to date, you're going to see a little bit of chill on the growth versus what you would have in a normal environment.

But when you look forward and you look at what airlines have stated, they are projecting capacity growth into next year. And I think that capacity growth will accelerate and expand as the war and the fuel impact abates. So our expectation going forward, when we talk about mid-single-digit bookings growth for next year is we're not getting help necessarily by the external market, but we're not getting hindered, meaning we expect it to be a fixed walk, if not hopefully slightly better than it is today, but we're not expecting a robust recovery per se into next year. We'll speak about this a bit more at the Investor Day on November 17.

Great. That's very helpful. And then if I could ask one more just sort of on your lodging and hotels momentum. Obviously, that's been really healthy over the past couple of quarters and especially this quarter. Can you just talk about maybe a little bit more like under the hood what's driving the higher attach rates, maybe where you think that this can kind of get to over time as a kind of larger mix of the business?

Yes. Thank you, Jack. And so as I specified on the call, we're now at an attach rate of over 35%. This is overall the lodging, ground and hotel business is a $400 million top line business for us, performing very well. What we've seen and the reason that we're growing this business is twofold. Number one is we've added significant incremental content. So you have private or corporate negotiated fares, public fares. We have OTA inventory in there. We have bed bank inventory. In the future, we'll likely add property on a -- or content on a property level basis. And we've added significant functionality and product enhancement to -- from a buyer side standpoint. We're also upgrading to the most modern connectivity solutions that we can with all of our supplier partners. And so we think the opportunity here is very significant.

Today, our business provides yield to hoteliers that is premium to, number one, our competitive set; number two, to every other distribution channel that they have, all other third party as well as their direct distribution channels. We do that at a cost of sale of between 1% and 2% on average for our hotel customers. So premium revenue at a very efficient price point. We're very corporate-centric in that distribution today. There's a massive unlock opportunity for us with leisure that we're going to go after in the next couple of years.

[Operator Instructions] Our next question comes from the line of Alex Irving of Bernstein.

My question is on Mosaic. It's been a couple of quarters since you've had meaningful news flow on this. And I would like to understand better what's the appetite among airlines at the moment for these offer and order solutions. So looking at these, is this a priority? Or is it more kind of on hiatus when there's a fuel price crisis and other things that airlines are focused on in the short term? Any comments on pipeline would be great.

Alex, thank you. And I believe the question is Sabre Mosaic, our offer and order modular solution for Airline Technology. We're seeing very significant demand for the Sabre Mosaic solution. As we've talked about before, much of that demand is on the offer side, where airlines can implement revenue-enhancing or accretive models without operational disruption, and they can do that in modular fashion, whether it's on top of a Sabre platform or whether it's on top of a competitor or a homegrown platform. And so that's been the primary growth vehicle that we're seeing. The order side is a little bit slower going as airlines are really focused again on near-term revenue and margin optimization versus longer-term projects. So the IATA projection of full offer and order migration by 2030, it's unlikely to happen on the order side. It's going to take longer.

But on the offer side, we're seeing significant progress. We announced that we have either implemented or will be implementing 4 new carriers this calendar year. In a couple of cases, those are actually full conversions of both PSS and offer and order. But again, for the most part, most airlines don't want to do a PSS to PSS migration. If they're going to do a large platform migration, they want us to be on to offer and order from their legacy PSS.

The beauty of what we have built, which is modular, cloud-native and AI-infused, is they can implement those modules at a time and a speed of their choosing and make that a much easier change effort on their side. So we believe -- and the great thing is Airline Technology for us has now turned back into a growth business after being a challenged part of the business for many years. And we think this is going to be a key growth vector for us going forward.

Understood. One quick follow-up, if I may. Around the carriers that you're implementing this year, the 4 carriers onto the offer side of things, as that annualizes, should we expect to see that visible in the revenue per PB? Or is it may be less accretive that it will get sort of lost in the mix?

Yes. Other than the commentary we've already provided for 2027, we're not going to comment on that today. We'll do that at Investor Day. Alex we will talk about the financial projections as well there.

I'm showing no further questions at this time. I'll now turn it back to Kurt Ekert for closing remarks.

Well, thank you, everyone, for your interest and for your support. We look forward to a robust conversation on November 17, and I wish everybody well.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Good morning, and welcome to Sabre's Second Quarter 2026 Earnings Conference Call. My name is Rica, and I'll be your operator. As a reminder, please note, today's call is being recorded.

I will now turn the call over to the Vice President of Investor Relations, Jim Mathias. Please go ahead.

Good morning, and welcome to our second quarter 2026 earnings call. This morning, we issued an earnings press release, which is available on our website at investors.sabre.com. A slide presentation, which accompanies today's prepared remarks, is also available during this call on the Sabre Investor Relations web page. A replay of today's call will be available on our website later this morning.

We advise you that our comments contain forward-looking statements that represent our beliefs or expectations about future events, including results of our growth strategies, our AI offerings and AI-related developments in the industry, transactions and bookings growth, expectations regarding the Middle East conflict and recovery as well as the impact of other geopolitical events, commercial and strategic arrangements, our financial guidance, outlook and expectations, pro forma financial information, free cash flow and liquidity, among others.

All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today's conference call. More information on these risks and uncertainties is contained in our earnings release issued this morning and our SEC filings, including our Form 10-Q for the quarter ended June 30, 2026.

Throughout today's call, we will also be presenting certain non-GAAP financial measures. References during today's call to adjusted EBITDA, adjusted EBITDA margin, normalized adjusted EBITDA, normalized adjusted EBITDA margin and adjusted technology and adjusted SG&A expenses have been adjusted to exclude certain 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. Normalized amounts have been adjusted for estimated costs, historically allocated to our Hospitality Solutions business, which was sold on July 3, 2025. We are also presenting certain financial information on a pro forma basis to give effect to the sale of the Hospitality Solutions business. Unless otherwise noted, results presented are based on continuing operations.

As a reminder, effective last quarter we updated the terminology used to describe our revenue to better reflect our evolving brand identity and market positioning, historically referred to as distribution and IT solutions, these revenue streams have been renamed, Marketplace and Airline Technology, respectively. The specific revenue from products, services and underlying solutions offered within each category remain unchanged.

Participating with me today are Kurt Ekert, President and Chief Executive Officer; and Mike Randolfi, Chief Financial Officer.

With that, I will turn the call over to Kurt.

Thanks, Jim. Good morning, and thank you for joining us. In the second quarter, we delivered results ahead of our expectations and generated positive free cash flow. Importantly, with the strength we've seen in the first half of this year, and our outlook for the remainder of the year, we are increasing our full year 2026 guidance for both pro forma adjusted EBITDA and free cash flow, and we are reaffirming our outlook for revenue and air distribution bookings growth.

Revenue in Q2 grew 4% and normalized adjusted EBITDA grew 19% year-on-year to $151 million, exceeding our expectations. Air distribution bookings growth in the quarter came in ahead of our outlook, up 1% year-on-year. We are encouraged by the continued momentum we are seeing from our growth strategies. Since late 2025, Sabre's rate of bookings growth is outpacing the broader industry by approximately 600 basis points. Second quarter air distribution bookings trends were better than expected, driven by a modest recovery in the month of June. The trends we saw in June have continued through July and are reflected in our full year outlook.

Consistent with what we shared during our first quarter earnings call regarding conflict-related headwinds in the month of March, air distribution bookings growth remained positive throughout the second quarter in both North and South America. That strength was partially offset by continued impacts from the Middle East conflict as well as higher fuel prices, which have driven airline fare increases. We estimate that the global impact of fuel and the Middle East conflict was 300 to 400 basis points in the second quarter and was relatively more acute in EMEA and Asia Pacific.

Importantly, corporate volumes, which represent nearly half of our Marketplace bookings demonstrated continued steady performance and resilience throughout the second quarter, which offset softness in leisure demand. Looking ahead, the underlying assumptions for our growth outlook have not changed. We expect third quarter air distribution bookings growth of flat to low single digits. For the fourth quarter, and consistent with our prior outlook as well as recent airline commentary, we expect bookings to grow at a low to mid-single-digit rate year-on-year.

Now turning to Slide 5. For the fourth consecutive quarter, we delivered double-digit year-on-year growth in normalized adjusted EBITDA. We believe these results and positive trends set us up well to continue to drive year-on-year top line and pro forma adjusted EBITDA growth for the remainder of the year and achieve our increased outlook. Our financial performance provides us with a foundation to continue investing in innovation and supporting our growth strategies.

Turning to the right side of the slide. We believe Sabre is positioned to be a winner in the rapidly emerging Agentic AI travel channel, and we are working with partners and leaning into our leadership position by increasing the level of investment in AI initiatives. Our Marketplace continues to deliver multisource travel content at an incredible scale.

Hotel related revenue growth accelerated in Q2 to 11% year-on-year, driven by higher attach rate and continued growth in media revenue. Our hotel attach rate has improved to approximately 35%. As we continue to enhance our hotel platform, we expect to drive higher conversion.

Payment Suite gross spend exceeded $6 billion in the second quarter, up more than 30% year-on-year and is now over $25 billion on an annualized basis.

NDC also continues to grow and we expect further acceleration during 2026.

Turning to Slide 6. Our key financial and operational metrics demonstrate that we are executing well and delivering broad-based growth. Across our business, we continue to see positive trends, reflecting the disciplined execution of our strategy and the progress we are making against our long-term priorities.

Moving to Slide 7. Our developer ecosystem continues to expand. Hundreds of developers are now working in our production environment, reinforcing Sabre's position as the critical infrastructure provider powering the next generation of travel commerce. Agentic AI is no longer just a future opportunity. It is transforming how travel is bought and serviced and Sabre is leading that evolution.

Our open platform enables AI agents to shop, book and service travel autonomously, securely and at scale. As the ecosystem develops and adoption accelerates across the industry, we believe Sabre is uniquely positioned to build on our leadership position as we enter this next chapter of travel technology.

We recently deployed our Model Context Protocol Server with a global enterprise loyalty and travel service company. MCP acts as a secure intelligent translation layer that lets AI agents handle complex servicing work on their own. Ticket reissues, exchanges, and itinerary changes. Driven by strong demand for our Agentic APIs and MCP Server, we doubled the number of active pilot and production partners from 30 to 60 in the second quarter.

We also partnered with Vocal Bridge and DeepLearning.AI, part of the broader AI Fund ecosystem and hosted a Hackathon in Silicon Valley. The response was positive and exceeded our expectations. More than 400 developers participated and submitted over 100 projects built on our Agentic APIs and MCP Server. The solutions they built from voice-enabled travel assistance to agents that can seamlessly coordinate flights, hotels, rideshares and dining, built into a single itinerary demonstrate the power and flexibility of our platform. Importantly, they serve as examples of the growing developer interest in building on Sabre's infrastructure and reinforce our foundational position in enabling the next generation of Agentic AI-powered travel.

We are making solid progress across our strategic priorities and believe we are well positioned to deliver sustainable, long-term growth.

Across air expansion, Airline Technology, Lodging Expansion and Payments, we are executing our strategy, delivering meaningful value for our customers and investing in innovation that further strengthens our competitive position. We are excited with the momentum in Airline Technology, and I'm pleased to share that a notable carrier in Africa has selected Sabre as its new technology platform provider. As part of this agreement, the airline will migrate its core passenger services to the Sabre platform and adopt our SabreMosaic and NDC IT capabilities. This transition will help modernize key areas of the airline's operations and implementation is expected to be completed by the end of this year.

Our progress together with our strong first half performance supports our updated 2026 guidance and increases our confidence in the significant opportunities ahead.

With that, I'll turn the call over to Mike to walk through our second quarter financial results and our outlook in more detail.

Thanks, Kurt, and good morning, everyone. Please turn to Slide 9.

Second quarter revenue, gross profit, normalized adjusted EBITDA and free cash flow all exceeded our expectations. As a result, and based on our current outlook, which is consistent with our prior view for the second half of 2026, we are reaffirming our full year guidance for revenue and air distribution bookings growth and increasing our full year guidance for both pro forma adjusted EBITDA and free cash flow.

Turning to the financials. Total revenue was $712 million, an increase of 4% year-on-year, exceeding our expectations of flat to nominal growth. Marketplace revenue grew $31 million, an increase of 6% due to a 1.5% increase in distribution bookings and a 4% increase in average booking fee, which includes growth from our payments and media offerings.

Airline Technology revenue was $135 million, broadly in line with our expectations. Second quarter revenue reflected the timing of certain items that can create normal quarter-to-quarter variability. We continue to expect growth in passengers boarded in future quarters. As a result, we expect Airline Technology revenue of $140 million to $150 million per quarter in Q3 and Q4 and continue to expect year-on-year revenue growth in 2026.

Gross margin of 57.1% came in at the high end of our 56% to 57% range due primarily to favorability in our average booking fee driven by bookings mix, and revenue growth in higher-margin payments and media products.

Second quarter normalized adjusted EBITDA was $151 million, a 19% increase year-on-year and adjusted EBITDA margin expanded 272 basis points to 21.2%.

Free cash flow was positive $10 million for the second quarter. Importantly, our expectation for full year free cash flow has improved to approximately negative $65 million from negative $70 million. As a reminder, the negative free cash flow this year is driven almost entirely by approximately $60 million of restructuring costs associated with our inflation offset program. Absent these restructuring costs, we would expect near breakeven free cash flow.

We ended the quarter with a cash balance of $697 million.

Moving to Slide 10. Air Distribution bookings grew 1% and exceeded expectations despite the impacts of the conflict in the Middle East and higher fuel prices on global travel demand. Revenue growth of 4% exceeded our guidance of flat to nominal. Our normalized adjusted EBITDA result of $151 million was favorable to our guide of approximately $130 million by $21 million. Approximately 2/3 of this outperformance is attributable to higher gross income, which was driven by a higher average booking fee and higher air distribution bookings. The remainder is driven by timing of technology investments, which will now occur in the second half of the year. All in, we are pleased with this quarter's results.

Turning to Slide 11. We have signed an agreement with our existing lenders to extend our AR securitization facility through September 2029. As a result of this agreement and our previous refinancing activities, we now have no maturities until 2029.

Moving to Slide 12 and our outlook for 2026. We are increasing our outlook for full year pro forma adjusted EBITDA to approximately $600 million and free cash flow to approximately negative $65 million. While our forecast for full year Air Distribution Bookings revenue growth, gross margin and operating expenses remain largely unchanged, we do expect to trend slightly more favorably than prior expectations on gross margin, driving the increased adjusted EBITDA guide.

We are increasing our outlook for CapEx by $10 million. Looking at adjusted technology expense, we continue to expect a low single-digit increase year-on-year. Adjusted technology expense is expected to be higher in the second half of the year as compared to the first half of the year due to a shift in timing of investments.

Taken together, our total investment in technology in the second half will be higher due to additional investment in product development, including AI, Sabre Mosaic and lodging. With our increased pro forma adjusted EBITDA guidance, updated CapEx outlook and approximately $5 million of higher cash interest due to the May 2026 refinancing of our exchangeable notes, our expectation for full year free cash flow has increased by $5 million to approximately negative $65 million.

On to Slide 13 and our expectation for the third and fourth quarters. As Kurt mentioned, the trends we saw in June continued through July. Based on our current outlook, we anticipate third quarter air distribution bookings and revenue to grow in the flat to low single-digit range and fourth quarter air distribution bookings and revenue to grow at a low to mid-single-digit pace year-on-year.

We expect our third and fourth quarter gross margin to be towards the higher end of our 56% to 57% range due to the continuation of favorable trends experienced in the first half of the year. As I discussed previously, we expect adjusted technology expense to be higher in the second half of this year as compared to the first half of this year. We expect adjusted SG&A expense to be roughly flat in the second half of the year when compared to the first half of the year.

For the third quarter, with guidance of flat to low single-digit growth in air distribution bookings, gross margin at the higher end of our range, the sequential increase in adjusted technology expense, and roughly flat SG&A expense sequentially, we expect normalized adjusted EBITDA to be approximately $155 million. For the fourth quarter, with guidance of low to mid-single-digit growth in air distribution bookings, and similar expectations for gross margin and operating expense versus the third quarter, we anticipate normalized adjusted EBITDA of approximately $125 million.

Touching on free cash flow. We expect similar trends in operating cash flow in the third quarter as compared to the second quarter, excluding the impact of interest payments. As a reminder, within the website financials available on our Investor Relations website, we provide a quarterly interest walk. The schedule provides our expected quarterly cash interest payments.

In the third quarter, we expect roughly $20 million of higher interest payments versus the second quarter. In total, for the second half of the year, we expect to generate approximately $80 million of free cash flow, primarily in the fourth quarter. We are pleased with our second quarter and the first half results. With our increased outlook for both full year pro forma adjusted EBITDA and free cash flow, we believe we are well positioned for sustained growth and free cash flow generation going forward.

And with that, operator, please open the line for questions.

[Operator Instructions] Our first question comes from the line of Jack Halpert of Cantor Fitzgerald.

First one, I wanted to double-click a little bit on the Airline Tech being down a little year-over-year. I know you mentioned some quarter-over-quarter variability, down kind of more one-off. One, can you just kind of explain a bit more about what this is? And then I know last quarter, you talked a little bit about Amadeus potentially acting anti-competitively here. I was wondering if maybe that could have something to do with it or what you're seeing there in terms of what they're doing?

And then just a second question on AI. We heard from Booking earlier this week that they're participating in some tests with Google and kind of potential agentic travel, checkout and AI mode on search. I was curious what you're hearing from partners about the potential for leading kind of AI labs to pursue this strategy, which maybe I think back in April, there was some news flow that they were stepping away and going more on commerce. I think you guys have said kind of the same thing. So just thoughts there.

Yes. Thanks for the question, Jack. On Airline Technology, first, I would just highlight that $135 million for the quarter was exactly in line with our expectations. The thing to keep in mind for that line item, about half of the revenue is driven by PBs. The other half is driven by other earnings constructs, primarily things like license fees and other performance deliverables. And so it can fluctuate a fair bit quarter-to-quarter. And it just happens that there's less of that license fee revenue and performance deliverables that were planned and scheduled in that quarter.

Our overall perspective on the business is very much the same. We expect that will be in the $140 million to $150 million range in Q3, Q4. We expect that we'll have year-over-year growth for Airline Technology overall. And we are very optimistic as we move into 2027.

With respect to Amadeus' behavior in the market, the concerns that we raised previously still exist. Specifically, we believe that Amadeus is leveraging a dominant position in Passenger Service System, or PSS, to exclude alternative providers in the separate emerging market for Offer, Order, Settlement and Delivery or OOSD. We have 4 specific concerns here that limit airline choice and also constrained information in the market for OOSD.

Number one is the restriction on airlines access to their own data. Number two is limitations on API access required for interoperability with Amadeus PSS. Number three is unfair or high integration costs. And number four is prolonged integration delays.

Now the victims in this situation are airlines and travelers. By comparison, our approach is centered on openness and modularity where we enable airlines to modernize and evolve their retailing capabilities without being locked into a single vertically integrated stack. And to summarize this, the industry is looking for the industry to modernize for airlines to deserve equal and unequivocal access to best-in-breed modular, open AI-first cloud solutions and Sabre is marching down this path.

Now the second question with respect to AI or agentic AI specifically, we've spoken previously, we believe that agentic will emerge as a distribution channel that's very material within the travel industry. What you're seeing near term is a focus by most of the large agentic platforms on enterprise following, for example, with Anthropic or OpenAI are doing, less of a focus near term on consumer. As they pivot to consumer, the first focus, we believe, will be retail e-commerce because it's the largest transaction category. But then they will go to travel thereafter.

When you look at travel specifically, what we've heard from the larger agentic players is that they're seeking a solution that is basically an end-to-end experience for the consumer where they stay captive to that platform for the entire experience.

With Sabre specifically, as we think about AI, we're investing aggressively to unlock what we believe will both be efficiency and revenue growth opportunities for the company. We believe we're going to win for the following reasons: We have a multisource platform and we have recent agentic AI investments where we're uniquely positioned to serve as the critical infrastructure layer for AI agents, powering the next generation of travel commerce. We were the first to market, and we have had significant engagement with developers with now over 60 active pilot production partners utilizing our agentic APIs and our MCP Server.

So we're really excited for the future of agentic AI. The timing on this because of the behavior of the large agentic players is uncertain, but the opportunity is large.

[Operator Instructions] Our next question comes from the line of Victor Cheng of Bank of America.

Maybe 2 from my side. Can you elaborate a bit more, give us a bit more color on the outperformance in Q2 bookings versus maybe some of your peers? How much of it is leisure versus corporate mix? And kind of when you look at your Q3, Q4 guide what assumptions are you making for both segments?

And then secondly, I think Amadeus talked about a 40 million PB Air IT win that they expect to be coming in 2027. Can you comment a bit about that, whether that's existing SabreSonic customer, please?

Yes. So let me take them in reverse, Victor. Thank you. First of all, with respect to our Airline Technology business, this is -- has emerged now as a growth business for Sabre. As you heard, we reiterated our full year revenue growth outlook today. We expect that momentum for the overall business as well as for Airline Technology to extend into 2027.

We're seeing very strong interest in the SabreMosaic offer and order platform, specifically for the offer management capabilities that we brought to market. As you know, we've recently won Hawaiian and Lao Airlines. And as we announced on the prepared remarks today, we have another undisclosed exciting win. We also expect to announce another significant win in the coming months. Otherwise, we don't comment on the details of individual customer agreements.

With respect to the outperformance versus the peers, as we indicated, starting in the fourth quarter of last year, up through today, we're outperforming our competitive peers by about 600 basis points or 6% on average. That existed before the conflict in the Middle East, that's prevailed since then as well.

Why is that happening? One is share takeaways, which continue. Two is growth with our low-cost carrier platform. And three is growth in NDC. So it's a matter of competing well with our existing marketplace and also growing the TAM for that travel.

The resilience and the strength in the corporate marketplace has certainly buoyed our performance because we have about 45% of our distribution volumes come from corporate or TMC versus for the industry, about 25% to 30%. And as we see, corporate is relatively outperforming leisure, which is a nice reversal on what we experienced last year.

When you look at the forward guide, what we have assumed is that the -- again, we saw about a 400 basis point impact from the conflict in the Middle East, coupled with fuel. Fuel being the much bigger portion of the impact. We assume that, that impact will persist but dissipate through the balance of this calendar year. It's clear that the yield increases by airlines are there to stay for some period of time. We're not certain how long. But we're assuming a modest improvement in the macro environment around us going forward.

And if I can have a follow-up on the NDC that you touched upon. Where are you with NDC volumes right now? And kind of -- it seems like your revenue per booking continues to grow very strong. I guess NDC is not having too much of an impact on that unit economics.

Thanks, Victor. With respect to NDC, NDC now represents about 5% of our distribution volumes. It's growing very steadily. Year-on-year, we see, one, that's a combination of adoption of NDC by existing clientele.

Two, there is a degree of NDC reintermediation or to say differently, NDC volumes that previously were direct connected that are now coming through our channel. With respect to unit economics, we've long talked about the fact that outside of Europe, the impact of NDC on a revenue basis is slightly dilutive, on a margin basis is also slightly dilutive.

Within Europe, where prevailing EDIFACT booking fees are nearly double what they are in the balance of the world, there's a more material degradation of both revenue and unit margin. I remind you that, that represents Europe, only about 16% of our point-of-sale bookings globally. So we have relatively less exposure to that impact than our competitive set.

But overall, what you see is that impact measured against our mix performance as well as the strong growth with hotel and with other non-transaction-based revenue, for example, media and payments. So we're very comfortable with the per unit revenue performance that we're seeing.

I am showing no further questions at this time. I would now like to turn it back to Kurt Ekert for closing remarks.

Thanks, everybody, for the interest and the support. We look forward to performing and to speaking to you in forward quarters. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Let's get started. So I'm Victor Cheng, working in Bank of America covering most of European software and focus a bit more on travel tech. And -- good morning, good afternoon, everyone. I'm very delighted today to have Kurt Ekert, CEO of Sabre; and Mike Randolfi, CFO of Sabre today with us. We have a lot of questions to go through. So I'll get started, but let's see if we have some time for Q&As either in person or on the call.

So let's get started. Maybe can you tell us a bit more -- can you give us some color on what you're seeing with the current travel capacity, supply and demand given ongoing Middle East disruption? I think IATA just recently lowered their forecast from 4.9% growth this year to 2.1%. Any view since, I guess, results?

Yes. Well, thanks for the question, Victor. And so I think it's important to start with what our base planning assumption was when we originally built our plans and our expectations for 2026. And as part of that, we had originally guided to air distribution bookings up in the mid-single digits. And what's important about that is that assumption is predicated -- has been predicated upon not that there's a point of view on the industry, but a planning assumption that the GDS industry from an air distribution bookings perspective would be relatively flat. Now that's -- in February, that was despite the expectation that airline capacity would be up roughly 5%, 6%. And we would expect that the industry from a GDS booking standpoint should largely correlate with that capacity growth.

Now coming through the back part of last year into this year, we saw very, very strong overall bookings growth to the tune of around 9%. A lot of strength in North America and in the Americas in general, North America and Latin America in the double digits. and solid growth in EMEA and in APAC. And then obviously, you had the Middle East conflict ensue starting in March. And since then, we had seen bookings roughly flat with North America and South America largely offsetting declines in the Middle East, EMEA and APAC driven by the Middle East. A matter of fact, to quantify that, for us, around 11% of our bookings go to through or from the Middle East. And with the decline as a result of the Middle East conflict, it created a roughly 7-point headwind, which is what drives us to the flat bookings. And that continued into April, which is the point we referenced on our earnings call.

Now when we updated our guide for this year, we updated our guide for the year from mid-single-digit bookings growth to low to mid-single-digit bookings growth. And we had stronger growth in the first quarter than we originally expected. And with that, the second quarter, based on how we exited the first quarter, we telegraphed roughly flat bookings growth. And then even in the third and fourth quarter, we tempered -- if you look what's implied, we tempered our underlying expectations. So I said, if you look at the third quarter and what's implied in our guide, it probably implies something like low single-digit growth and maybe a little bit better than that in the fourth quarter.

So what I would overall say is, if you look at that, you start -- we still have bookings growth up 3 -- I would call it, low to mid-single digits, all predicated upon our own growth trajectory. And overall, if you look at how -- if you look at why we didn't have a bigger impact, it really goes back to our original planning assumption of flat industry growth. So overall, we felt pretty good about our guide, where we see bookings and capacity. And we haven't updated anything since our earnings call. But overall, I'd say the environment overall is pretty still consistent with how we created our initial -- our current projections for our bookings growth and earnings.

And then just 2 quick adds to that. One is that corporate and TMC volumes have been fairly resilient. The question will be the elasticity of the consumer with respect to airlines passing on price increases to offset the impact of fuel, and there's some uncertainty there in terms of what the impact will be going forward. The second thing is, while our core assumption is that the war, and we could be wrong in this, abates in the near term, the impact of fuel from a logistics standpoint and the impact of fuel price and jet fuel is that that's going to persist through the calendar year. Our hope and expectation is that normalizes by the end of the year, but that doesn't basically turn around overnight. So that's going to have a resultant impact on airline pricing yield and perhaps demand impact as well.

What's buffering the impact to us is if you look leading -- coming out of last year into this year, in terms of our GDS bookings at Sabre, we've been outperforming the industry by about 500 to 600 basis points, and that has buffered us in this turbulent time.

Very clear and good color. And then maybe then if I jump into AI, well, first of all on the distribution space. We actually talked about this 6 months ago in the fireside chat about like what has happened, what you're doing at the time. Maybe can you give us an update on what has changed since then, what worked and what doesn't? How do you see kind of the distribution space in travel evolving with regards to AI?

Yes. I think the broad theme is that there's going to be an inherent mandate for consumer-grade conversational commerce interfaces, whether you're an OTA or a TMC or a supplier or your new Agentic platform. And so one of the cool things that's happened more recently is we launched a new relationship with Paypal and MindTrip. We are now live in production with MindTrip, where they're the LLM player. They're using Sabre for search book, servicing changes, full live production today. You can do all of that through talking to or typing in a freeform spirit into MindTrip. So go to mindtrip.ai. Hotel will go live with that very quickly. So that's built basically. We have new MCP server capabilities, new Agentic API capabilities. That's all built on the top of Sabre's normal data and infrastructure.

So the beauty of this is it's simply a distribution extension of what we are doing. One of the key things we've seen or one of the questions is, I believe that the Agentic platforms will emerge as a new distribution channel in the way the online travel agents emerged in the 1990s. And I think that's going to happen rapidly. Now one of the learnings will be in traditional e-commerce interface today, you enter defined parameters when you try to search for air or hotel travel. In a freeform text, when you say, I want to go to the South Pacific in summer, and we have 6 billion airfares stored plus we go source all the NDC stuff, how do you return relevant content?

So the great news is we have 17,000 shops per second against our system. We've got the data. We've got the caching to do that intelligently. But what the LLMs are going to have to figure out is how do you take this natural language search, how do you drive better parameters in order to have a more responsive query to the traveler because if it's too open-ended, you're not going to give them the response they're looking for. So I think that's something that as we speak to LLMs, there's no question about.

The other is most of the large agentic players are hyper focused on monetization. They're focused first on e-commerce retail because it's such a large category and sneakers are presumably easier to sell than air travel. I think they're going to turn their attention to travel starting in the second half of this year. What they all articulate they want, and this includes Google Gemini is a captive end-to-end user experience where the consumer never leaves their portal. That's very different, for example, than Google Flight Search. It's more common to an OTA. So the way I think about it is -- it will be the next generation of what an OTA looks like with a conversation on the front end of it. Clearly, the OTAs are going to do that. Suppliers are going to try to do that. But I think these agentic players are going to get big into that as well.

Right. And then you mentioned Google. If I think about Google, they have continued to push with more AI offerings on travel planning, travel booking. And while they are not looking to become an OTA themselves, does it not risk shifting the top of the funnel to direct bookings? How should we think about the funnel and the distribution mix changing in the context of AI?

Google is very interesting. So think about Google Hotel as very discrete from Google Flight Search. Google Hotel is an open marketplace. OTAs, metasearch and hoteliers compete for that inventory, highly profitable, high-margin channel for Google, but it's an ad model. Google Flight Search, since they bought ITA software in 2014, similar in that it's metasearch. If you choose to book, they'll take you to the supplier, but it's not a true open marketplace. They generally restrict the ability of metasearch or OTA to compete there, and they largely don't charge the airlines. I think that's for antitrust concerns. And so the airlines are getting a severe amount of what they consider direct traffic from Google Flight Search that they're largely not paying for, and that's transacting in the airline.com environment.

If you think about a future state where Google says, I may shift the funnel from Google Flight Search or Google Hotel into Gemini. If they go with what we're hearing from everybody else, which is they want a captive end-to-end user experience. On the hotel world, that means they're taking this incredibly lucrative business and they're converting it to where they're effectively acting as the fulfillment arm. And the question is how would they monetize that versus what they do on Google Hotel? I think that's a big open question. On the air side, if they were, for example, to say, I'm going to take all that volume because they have massive volume coming into Google Flight Search and they shifted that to Gemini. What would happen is each airline may get their fair share of bookings. But instead of transacting in the airline.com environment, the transaction will now occur in Gemini. And presumably, they're going to look to monetize that from the supplier. So not only does the airline lose the control of the booking, but they would pay for it as well.

So I don't think that necessarily means a change in the top of the funnel. What it means is a change in where the transaction occurs and then the question of the economics. So the most impacted here presumably would be the airline or if the OTA or the hotelier are getting bookings from Google Flight and Google Hotel, that's now transacting in, let's say, Google Gemini, that could be very different as well. But I do think that there will be some level of channel shift toward the agentic players, whether it's Gemini or Anthropic, whoever wins at this, again, similar to way the OTA dynamic worked in the 1990s.

Very clear. If I then think -- I'm going to shift gears a bit to TMCs, corporate travel. I see a lot of movement in the corporate space, GBT, and GBT going private, partnership with SAP and then Navan very focused on AI efforts. How do you think PMC will adapt to AI? Does that mean they rely on you less for solutions? Or if we think about a long tail of TMCs as well, can they be competitive in that world? How -- can you kind of talk a bit about that space?

I think if you look at Navan and you look at GBT going private with one of the sponsors is an AI company, there's 3 applications for AI that are pretty inherent. One is productivity. So TMCs today have a, let's call it, a 60% gross margin. Part of that is because it's very labor-intensive, very manual. If you could theoretically AI half of that work, you could drive up the gross margin of the TMC dramatically where it looks much more like a SaaS company. I would assume that's job #1, for example, in the GBT pending acquisition. #2 is the TMC model is shifting and looking more like a retailer or an OTA, subject to the confines of their customer contracts to where -- if you look historically, maybe 10 or 15 years ago, 60% to 70% of the revenues for TMC were derived from their corporate customers. The inverse is true today, where the majority of revenue is derived from suppliers. And it's about product placement and the ability to move share, et cetera. And I would assume you're going to deploy AI there to drive meaningful share to merchandise better, just as OTAs and retailers do.

#3 is while I don't think TMCs are at risk of disintermediation from AI because the corporation, for example, BofA use TMCX, you're dictated by procurement or HR, you will book in this TMC or that online booking tool. the consumer, the traveler, the employee is going to mandate that they have a consumer-grade conversational experience like they would have in the next generation of OTA or the next generation of an AI agent. What that's going to do is accelerate the technology arms race and perhaps accelerate consolidation for TMCs. Now we have -- as we look at the TMC landscape, we've got dozens of TMCs and agencies using our Agentic APIs already, really to help them solve against all 3 of those challenges. I think the other part of your question, Victor, is, will the TMC try to disintermediate what we as the GDS deal. I would argue that what we do is highly complex. The sexy way I speak about the business is we're the technical plumbing of the travel industry. And that's just the data and the underlying complexity that we have is severe.

So we have 17,000 shop -- air shops against Sabre every single second. So when we extend into the agentic world and we provide a relevant search response and caching, we don't have the data just from MindTrip or the next LLM, but we combine that with everything else and the relevance of search response, the ability to do caching at scale is fundamental. For all the work we do, our take rate with a hotel or an airline is about 1.5% of their revenue. That's a very thin revenue for what we do in almost any industry, certainly in travel. And so for all the complexity we do to go after a 1.5% revenue stream when the profit pools around payments or merchant hotel are much larger, doesn't seem the best allocation of resource, especially when, by the way, with agencies, we share a portion of our gross revenue with them. They're capturing, call it, half that margin without having to do any other work.

So I think it's unlikely that they're going to go down that path. The other one I would mention is Navan, which [indiscernible] direct connect profile is a key customer of ours, and we're growing quite well with them. So we're going to be supportive of customers whatever they want to do. But we think that in an agentic world where look at books are going to explode, the utility provided by Sabre is only going to improve.

Very clear. And maybe -- I got a couple more questions on distribution, but maybe last one for now before we come back if we have more time. But if I were to put it this way, in the age of AI or Agentic AI, who will be the biggest winners, potential winners and losers in the shift in world of distribution?

Yes. So I think that there's 2 ways to look at it, which are technology companies that have engineering prowess, for example, the large OTAs are likely to become good as LLM players, folks that are infrastructure and data players like us and like our largest competitor in Spain are likely to be winners. But I think the key question in Agentic AI is, as the distribution landscape changes, how will the funnel of eyeballs change? And my thesis on this is fairly straightforward. When you look at supplier.com, you have loyal customers of the hotel of the airline, you have credit card customers, they're not going to modify their behavior. The itinerary shopper who goes to an airline.com once a year and is largely indifferent as to which airline they're flying, if they're getting a better user experience in the next generation of OTA or the next Agentic layer, they may shift share away from supplier.com.

The airline and the hotel may still get that booking, but it will not occur in their captive environment, and they may have to pay for it tomorrow or they don't pay for it yesterday. When you look at intermediary travel, I'll break it down into leisure and corporate. On the leisure side, you have metasearch, Google Flight Search, Trivago, Kayak and Skyscanner, et cetera. They provide a great utility and providing price arbitrage to the consumer. The user experience is a little bit achy in terms of being a link-off model, not great servicing if you have a change, et cetera. And again, to the extent that I used to buy books on Amazon, now I buy groceries, if tomorrow on Anthropic or Perplexity or whomever, you choose to buy your travel, it may be that, that user experience supersedes and takes some share away from metasearch.

When you look further at leisure travel, OTAs, I think the large OTAs at scale are going to continue to do very well. They're going to develop good conversational commerce layers. It's just an extension of what they do already. Scale will be important here to play this game. And when you look at sort of offline leisure or brick-and-mortar, the folks that are specialists around complex travel, I don't think they're a great risk. If you're selling a point-to-point easy solution, though, that probably is subject to disintermediation. When you go to corporate travel, again, as I mentioned earlier, I don't think managed corporate travel is subject to disintermediation, but perhaps a more of a technology arms race and consolidation. Unmanaged corporate travel, which is the Wild West, which accrues to supplier.com, to the OTA, to the TMC, I think that's going to continue to fragment. And certainly, there's going to be some channel leakage to the new agentic players.

The beauty for Sabre is that when you speak about the first categories of risk, which are supplier.com and metasearch, we derive little or no bookings from those channels. When you look at OTAs, that's about 25% of our turnover. We are the most heavily concentrated with TMC and corporate, it's 45% of our distribution. It's about 25% to 30% for the GDSs overall. And so there's a slight amount of disintermediation risk. But when we look at, for example, what we've done with MindTrip and the way we're leaning into potential partnership opportunities with the large agentic players, we think there is a step function growth opportunity for Sabre, not reflected in our current projections and numbers, and this could change the revenue trajectory for our company. So we're really excited about where this is going.

Very clear. And then maybe now let's jump to airline software, airline IT. Maybe [indiscernible] elephant in the room for a lot of investors in the last couple of weeks. I think you made some public comments about Amadeus maybe being a bit more monopolistic in the space. Can you elaborate a bit on that, what you're seeing in that and kind of how you can maybe break that mode?

Yes, sure. So a quick backdrop, airline IT, if you think about PSS or passenger service system, Amadeus with Altéa and Nabitarans 50% to 60% of the global market. Sabre is about 17% of the market. If you go back in time to 2015 to sort of the midst of COVID, Sabre was a net loser. Amadeus was a net winner in that we were selling an older platform against Altéa, and we were losing. And what has changed since then is in the middle of 2024, we introduced a new platform for offer and order called Sabre Mosaic. It's a cloud-native modular AI-infused platform. It is agnostic to underlying platform, meaning it can sit on top of SabreSonic, Altéa, it can sit on an airline's proprietary technology. And the beauty of it is we can sell individual modules. We don't require the monolithic binary change of an airline from one PSS to another. That's exactly in line with the -- with what the airlines are trying to achieve, which is modularity and not being reliant on a single vendor.

What we understand Amadeus has developed with Nevio, which is their equivalent, which, by the way, they have less in production than we do on offer in order, is it's modular on top of Amadeus Altéa. What we understand is if you're an airline that's not an Altéa, that is not available for you. You have to first migrate to Altéa, one legacy PSS to another, then upgrade to that. So that's not -- we think what we have is a truly modular solution. We understand that they do not. If you spoke to leading industry consultants, they would back that. My comments about Amadeus' anticompetitive behavior are as follows. We've had in the last year, 4 instances where Amadeus Altéa customers were ready to adopt one or more of our Sabre Mosaic modules on the offer side. Ultimately, Amadeus did 3 things to impede that.

#1 is despite asserting that they are an open platform, they said either we don't have APIs for that piece of technology, which we trace at or they said we will not make that API available to Sabre. #2 is they engaged in foot drag tactics to say things that should take weeks, would take 9 months to a year. #3 is they went back to the airlines and imposed dramatically high fees that made it commercially untenable for them to adopt the Sabre solutions. We've engaged with Amadeus, but we believe that what's going on here is Amadeus is using its position, its dominant monopoly position with PSS to block the ability of others like Sabre to compete for those airlines business for the new offer and order solutions. So they're using one dominant position to block the new technology. And what we want is a fair marketplace in which we can compete.

Very, very clear. But if I think about then challenging that status quo, do you think there's a chance that you can win share from that base in the maybe, let's say, medium term? And if so, how -- what needs to happen for that to play out?

We -- right now, we're growing in the Airline IT business in the mid-single digits. It's turned from a negative to a positive business for us. For the medium to long term, and I'll say 2 years out, we believe that inclusive of the Amadeus market position, this will be a double-digit CAGR business for Sabre. We're very confident about that. We need -- I would say what Amadeus is doing is logical. It's simply not legal. And we need them to -- we want to compete on the basis of the quality of our technology. But right now, the addressable market there is very challenging for us.

Understood. And then if I think about, obviously, in the Airline IT space moving to offer an order is a big topic. But if I hear that on top of AI as well, how do you see AI impacting the shift to offer order? Is it accelerating that trend? Or are airlines exploring other alternatives? Obviously, we have anecdotal examples of, for example, Air India working with Anthropic, Ryanair talking about Ryanair Labs, albeit they're not Sabre customers.

So there's 2 different things. One is airlines are looking at distribution, which is how do they sell. I think that's totally discrete from the airline technology or the base hosting conversation. On the hosting side, the -- one is modularity enables a more deliberate shift from legacy PSS world to the new offer and order world that you don't have to make a binary change. And otherwise, you basically need like-for-like on day 1 for everything. This way, you can say we're going to implement pricing first, then revenue management and then you see. Tomorrow, we'll do a inventory solution. Later, we'll do a new departure control. That's what modularity enables. And you can choose best-of-breed software, and that's where the market goes.

What AI does is a lot of the -- with an existing PSS and a network carrier, you'll typically have hundreds of applications or technologies that hang off of the PSS. So we can shop tomorrow and say, "hey, we've got the whole new offer and order bread basket take it all." For a large airline, that could be a $0.5 billion plus change effort and introduce a lot of operating risk to their business. Nobody wants that. If they can phase that over 3, 5, 7 years, they can do that in a more deliberate fashion. That's what they want to do.

And part of the challenge is a lot of their legacy technologies are still mainframe TPF-based. They may not have a lot of the -- all the code written. What AI can do is AI can reverse engineer the code and they can basically say, here's what you're moving off of, and this is what we're going to lose when we move. They can make that change effort much simpler than it was in the old world. And so the ability for airlines to make offer an order real and mitigate the operating risk to me is the best benefit that they're going to get from AI.

Very clear. Then if I think about the opportunities there, obviously, the Sabre Mosaic, there's opportunities to upsell many of those modules as well. How should we think about the potential uplift on revenue per PB? I think some industry consultants put it at 15%, although that number can kind of widely -- has a pretty wide range. So how should I think about it maybe like into next year and then there's a longer-term potential with it?

I'll be a bit esoteric in terms of how I answer this. So the first thing is the PB construct for software is a weird one, charging per passenger instead of charging a license fee, we're trying to move with Sabre Mosaic more to a gain share or a license fee model. Some airlines are going to be wed to the PB construct and that, therefore, is going to persist long term. What we've talked about is overall for our business, Victor, is our average booking fee, we expect over the -- this year and next year to stay relatively constant and our margin to be in the range of 57% overall for our combined business. We've not broken out margin or that sort of thing beyond those levels. So I'm not going to do that today. But I do think that is there an opportunity to -- for accretion in the unit revenue in Airline IT with new solutions? Absolutely.

Can you explain a bit -- sorry, on the gain share model, how does that work?

Yes, gain share model would say, let's say, we introduce something our Ancillary IQ product, which helps airlines better merchandise and sell ancillaries than they could do in the old world. And we think there's a 2% to 3% yield uplift, for example, when you do that. You take your baseline, however, we and the airline determine the baseline is measured. And we say any gains from that, we would take a component of that in pre-agreed methodology based on metrics, where if we don't deliver, we don't get paid. If we do deliver, we probably get paid more than we would in the license fee model. But we think we're confident in our technology. All of Sabre Mosaic is built on top of Google's Vertex AI are now Gemini. It is the smartest technology that's out there, but that's what the gain share looks like. Again, some airlines love that. Some airlines want to know exactly what their cost is regardless, and they don't like that structure.

Very clear. And then conscious of time, maybe last question on Air IT. I think you also mentioned on the call that you have more AI modules live or maybe rolled out to customers compared to Amadeus. Can you share some examples of where you see kind of most demand in terms of the AI solutions that you have?

The entire offer suite within Sabre Mosaic is all AI infused. So everything we're doing from pricing, revenue management, all our IQ products, those are all built on Gemini. So they all have that learning and that smarts in them. So it's -- I don't know what Amadeus' capabilities are. But these were built cloud-native, AI first, starting a couple of years ago, even before the big conversation about agentic. If -- and again, if you speak to the airlines, they love what we've done from a technology standpoint. Now if you're an Altéa customer, you're frustrated because it's not feasible for you to turn these on commercially yet, but we think that's going to change.

Very clear. And then if I change gears to talk a bit about maybe Constellation, has anything changed operationally or strategically since Constellation's involvement, have they contributed so far? And do they have more plans down the road to do more maybe?

Yes. So the Constellation now owns 12.7% of Sabre with our cooperation agreement, they can take that up to 15%. Beyond that, they would need the consent of the company. They have -- Damian McKay is one of their division leaders at Board, very engaged. They've been very supportive. The one thing I would say is this is only the second minority investment they've ever made. I think in the 20-year history, they've only sold one investment they've ever made. So they're long-term holders of the business. They believe the business is intrinsically dramatically undervalued. They do look at the balance sheet. They think that we have more debt. It's more expensive than we would like, and we agree with that. And they have a desire to put more capital to work with Sabre, finding the intersection point that works for Constellation and its shareholders and Sabre and its shareholders is something that we're talking about, and I'm hopeful that there'll be a solution over time where they can contribute and help. But so far, so good.

That's good to hear. And maybe a quick question on financials. Can you walk us through how you get to positive free cash flow in 2027? And how should we think about that evolution going into outer years as well?

Yes. No, thank you for the question. First, if you look at as a starting point, 2026, for this year, our last guide as of the last earnings call was $585 million of adjusted EBITDA and negative $70 million of free cash flow. Of that negative $70 million of free cash flow, about $60 million is attributable to restructuring costs associated with our inflation offset program. So excluding that, we're near breakeven free cash flow for 2026. Now as we move from 2026 to 2027, I would start with the P&L. So if you look at our top line, we expect air distribution bookings to be up somewhere in the mid-single digits. We've also indicated that we would expect the booking fee to be largely in the range of where it is today. So therefore, we would expect revenue to be up roughly in the mid-single digits as we go to next year.

We've also indicated that, as Kurt just mentioned, we would expect the gross margin to be roughly in the same range of where it is now at 57%. So I would expect gross income dollars to largely grow in kind with that mid-single-digit growth in revenue. At the same time, with the onset of our inflation offset program, we are intentionally targeting keeping our cost structure relatively flat, except for volume-related hosting costs. And so with that, as gross income dollars grow, we would expect a large contribution -- a large proportion of that to flow down to adjusted EBITDA. And similarly, we would expect a large portion of that adjusted EBITDA to translate to free cash flow, and that will get you to a substantially higher positive free cash flow in 2027.

Now as we look beyond that, what I'd point you to is as we look at our top line and our growth strategies, all of our growth strategies have significant legs to them. We continue to take share. We're continuing to take the long tail of LCC airlines where we generate more bookings. Hotel B2B over the long term, we would expect to grow at least at the rate of air distribution bookings. As Kurt has highlighted and mentioned, we see the Air IT business translating into kind of a mid single-digit revenue grower. At the same time, as we go forward beyond 2027, as we have been, you should expect us to be really strong cost managers. So the point is, as we grow revenue, the goal will be to have as much of that revenue translate into gross income, as much of that gross income to translate into higher EBITDA year-over-year and for that to translate into free cash flow.

Very clear. We don't have a lot of time left, but operator or if anyone have any questions on the web, maybe you can flag the operator, and I will check again shortly before the call ends. But maybe continuing on what you said and when I think about AI, now shifting gears a bit, can you elaborate kind of maybe how AI has been adopted internally -- are you using -- I would assume you're using a lot of Google tools. Do you see scope for maybe further cost optimization with the use of AI as well into this year and next?

Yes. So if you look this year, for example, we enacted our inflation offset program. There's really 3 components that really have driven that. Some is what I'd call continue to leverage best-in-class cost locations. The other is where third parties could do something more efficiently, we intentionally are taking advantage of that. But thirdly, AI is really being pushed through the organization as a productivity driver. So in our drive to keep our cost structure, I would say, roughly flat over the next couple of years, AI is a big component of that. And what I would say is if there's continued advancements in AI, you should expect that we will take advantage of those to increase the productivity of the team. And on things like product and development, you should look -- we should look for us to increase the throughput of technology advancement.

Very clear. Operator, are there any questions on the web? Maybe you can hear me. Whilst we wait maybe for that, I do have a couple more questions back to distribution. Obviously, you have launched the LCC multisource product earlier this year. Can you talk a bit about how meaningful it is right now? Are you taking share of Travelfusion? And how does the economics work there?

Yes. So we are preceding the launch of the new platform. We had 150-plus low-cost carriers in Sabre, accounting for about 9% of our total distribution bookings. We launched that platform in January, which is the inclusion of a long tail of LCCs that do not participate in the GDS otherwise and Travelfusion being the proxy for who was winning in that space. The difference versus Travelfusion is we've got the same content or better and full integration into all of our workflows and our shopping. And so from an aging perspective, drives much better productivity and user experience than Travelfusion. And we're seeing -- if we've added 50-plus new low-cost carriers with that. Overall, versus a year ago, LCCs represent about 150 basis points higher of our total air distribution versus what they did, again, at this point a year ago. So it's contributing to the air distribution growth.

One of the interesting parts about this is typically, an agency has one or potentially more than one GDS and they'll use one source for that long tail of LCC content, Travelfusion or there's some others. They're not going to put Sabre and say, well, I use Sabre for these carriers and Travelfusion for those. It's more of a binary decision to displace Travelfusion. So we are seeing agencies begin to do that, but they've built routines around Travelfusion or again, it's proxies. And over time, we think this is going to be a very strong growth vehicle for us over the next couple of years, but the quality of the offering is resonating very well.

Very clear. And I guess maybe last question from my end. I probably addressing the other elephant in the room that we haven't talked much about. We may not talk much about throughout the entire session is about NDC. How should we -- I guess, NDC is scaling a bit on your end. How should we expect revenue per booking to trend over time as you scale NDC? I think there are some debates about maybe lower revenue per booking, but on the EBITDA level is the same. Is it still the same? Has expectation changed there? Can you tell us a bit more?

So 2 sides of NDC. One is NDC IT, which is on the airline side of the API where we were late to the game. We're now winning and implementing customers in terms of their NDC IT solution. But Victor, you asked about NDC distribution, which is how do you pull from the API. We closed last year with about 4% of air distribution bookings being NDC. That's growing at about a 50% rate year-on-year. And so I think you'll see that trend continue. When you look at the economics of NDC, outside of Europe, the revenue per booking is basically a very nominal dilution versus an EDIFACT booking. The margin is a very nominal dilution versus EDIFACT booking, but de minimis. European point of sale is quite different. EDIFACT booking fees here are nearly double what they are in the rest of the world. Perhaps that's because of Amadeus' dominant position or something I don't know. But there wasn't a pricing reset here the way there was in the rest of the market over the last 25 years.

So with NDC, there is a more material both revenue and unit margin dilution for European point of sale. For Sabre, only about 16% of our air bookings derived in Europe. So we have relatively less exposure than our 2 GDS competitors there. When you look at that overall and you look at that globally, you would say revenue and unit margin are both dilutive for NDC versus EDIFACT, not in any sort of catastrophic sense. But when you look at that NDC growing at a 50% rate, and we've asserted and we've reaffirmed that we expect average booking fee to stay relatively constant through this year and next year, and we expect margin to stay relatively constant. You have the negative effect of NDC.

On LCC, you have lower unit revenue, but you're very high gross margin. And then you have the impact of non-air products that we're selling, hotels, payments, for example, which are high yield, high margin. And those basically offset the impact of NDC. So on the whole, again, we expect that both our average booking fee and our margin are going to stay relatively constant despite what we think is going to be strong growth in NDC.

Well, very clear. Unfortunately, we are running out of time. So thanks, Kurt and Mike, for joining us today. Thanks, everyone, for joining, and I hope everyone has a good day.

Good morning, and welcome to Sabre's First Quarter 2026 Earnings Conference Call. My name is Siobhan and I will be your operator. As a reminder, please note, today's call is being recorded.

I will now turn the call over to the Vice President of Investor Relations, Jim Mathias. Please go ahead, sir.

Good morning, and welcome to our first quarter 2026 earnings call. This morning, we issued an earnings press release, which is available on our website at investors.sabre.com. A slide presentation, which accompanies today's prepared remarks, is also available during this call on the Sabre Investor Relations web page. A replay of today's call will be available on our website later this morning.

We advise you that our comments contain forward-looking statements that represent our beliefs or expectations about future events, including results of our growth strategies, our AI offerings and AI-related developments in the industry, transactions and bookings growth, expectations regarding the Middle East conflict and recovery, commercial and strategic arrangements, the impact of geopolitical events, our financial guidance, outlook and expectations, pro forma financial information, free cash flow and liquidity, among others.

All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today's conference call. More information on these risks and uncertainties is contained in our earnings release issued this morning and our SEC filings, including our Form 10-Q for the quarter ended March 31, 2026.

Throughout today's call, we will also be presenting certain non-GAAP financial measures. References during today's call to adjusted EBITDA, adjusted EBITDA margin, normalized adjusted EBITDA, normalized adjusted EBITDA margin and adjusted technology and adjusted SG&A expenses have been adjusted to exclude certain 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.

Normalized amounts have been adjusted for estimated costs historically allocated to our Hospitality Solutions business, which was sold on July 3, 2025. We are also presenting certain financial information on a pro forma basis to give effect to the sale of the Hospitality Solutions business. Unless otherwise noted, results presented are based on continuing operations. Effective this quarter, we have updated the terminology used to describe our revenue to better reflect our evolving brand identity and market positioning. Historically referred to as distribution and IT solutions, these revenue streams have been renamed to marketplace and airline technology, respectively. The specific revenue from products, services and underlying solutions offered within each category remain unchanged.

Participating with me today are Kurt Ekert, President and Chief Executive Officer; Mike Randolfi, Chief Financial Officer; Garry Wiseman, President, Product and Engineering, will be available for Q&A. With that, I will turn the call over to Kurt.

Thanks, Jim. Good morning, and thank you for joining us. We are pleased with our first quarter performance as we delivered strong operating and financial results. Revenue grew 8% and normalized adjusted EBITDA grew 21% year-on-year to $169 million, significantly exceeding our expectations. We also achieved our highest rate of air distribution bookings growth in more than 2 years of 6%. And our data shows that this growth materially outpaced the industry. We are encouraged by the continued momentum we are seeing from our growth strategies. Despite impacts from the conflict in the Middle East, and higher fuel prices affecting Sabre and the broader travel industry, we performed well in the first quarter and remain confident in our ability to produce sustained growth.

Looking more closely at the Middle East. Approximately 11% of Sabre's air distribution bookings either originate in or transit through the Middle East region. In March, these bookings declined by approximately 600 basis points. More specifically, flights that fly from to or through the region were down approximately 50%, while flights originating out of the Middle East declined approximately 70%. Additionally, we believe fuel supply and price dynamics, coupled with softening leisure travel demand, drove a roughly negative 100 basis point impact during the month. Taken together, we believe the combination of these impacts resulted in an approximate 7 percentage point headwind to total air distribution bookings in the month of March. Importantly, offsetting these headwinds and we saw strong performance in other regions.

In March, the Americas delivered approximately 7% growth and corporate volumes demonstrated steady performance and resilience throughout the first quarter. Overall, air distribution bookings in March were roughly flat, reflecting the combined headwinds of the Middle East conflict and higher fuel prices, largely offset by solid performance in the Americas and the growth in corporate travel. The trends we saw in March continued through April. Looking ahead, while the geopolitical and macroeconomic environment remains dynamic. Our base assumption is that the conflict in the Middle East subsides during the second quarter with fuel prices gradually normalizing through the summer and fall.

Based on these assumptions, we expect second quarter air distribution bookings to be near flat followed by a phased improvement with conditions returning to a more normalized environment by the fourth quarter. Accordingly, we anticipate positive air distribution bookings growth for the second half of 2026, though at a slightly more modest pace than we had previously expected. Consistent with this view and aligned with recent airline commentary around capacity reductions, we now anticipate full year 2026 air distribution bookings and revenue to grow in the low to mid-single-digit range.

Given our outperformance in the first quarter and our outlook for the remainder of the year, we are reaffirming our full year 2026 guidance for pro forma adjusted EBITDA and free cash flow. In summary, we are off to a strong start to the year, solid execution, continued share gains and our foundational role in enabling a genic AI-powered travel solutions should position us well to deliver sustained long-term growth.

Now turning to Slide 5 and our strategic priorities. We delivered strong quarterly revenue with growth in both marketplace or distribution and airline technology. Revenue growth, combined with strong cost performance, resulted in quarterly normalized adjusted EBITDA that exceeded our expectations. In addition to reaffirming our outlook for both full year pro forma adjusted EBITDA and free cash flow, we are confident in our ability to continue to drive solid top and bottom line growth and generate positive free cash flow in 2027. Our financial performance, combined with no large debt maturities for approximately 3 years, provides us with a foundation to continue investing in innovation, driving growth and capitalizing on our leadership position in the emerging Agentic-AI channel.

Turning to the right side of the slide. Our technology investments are driving positive results. Our marketplace delivers multisource travel content at incredible scale and we generated strong air distribution bookings growth in the quarter. AI has been a core systemic part of the Sabre technology stack for several years, and we continue to lean into that advantage, which I will discuss in more detail shortly. Both our payment suite and lodging expansion continue to grow, with lodging expansion recording the 13th consecutive quarter of year-on-year revenue growth. And finally, on NDC, we exited 2025 with NDC bookings representing 4% of total bookings. We saw growth during the first quarter and expect NDC bookings to continue to accelerate during 2026.

Moving to Slide 6 and a review of first quarter results, which were positive across the board. Revenue grew 8% year-on-year. Normalized adjusted EBITDA increased 21% year-on-year and margin improved 235 basis points to 22%. Driving these strong results, total marketplace bookings grew 5% year-on-year and air distribution bookings growth increased 6% year-on-year. Hotel distribution bookings increased by over 5% in the quarter to approximately $11 million. Our payment suite is one of the fastest-growing areas of Sabre. In the first quarter, revenue increased by over 25% year-on-year to $13 million. In Airline Technology, passengers boarded grew 3% year-on-year to $170 million. and we are pleased to have recently executed a seamless migration of bringing Hawaiian Airlines back onto our platform.

Moving to Slide 7. Sabre is a cloud-native platform and is a true super aggregator, providing the travel industry with a critical infrastructure necessary to shop, book and service travel, built on decades of industry technology leadership, and supported by sustained investment of approximately 10% of revenue in product development and R&D, we believe we are well positioned to extend that leadership position into the rapidly emerging Agentic AI travel channel. Our AI solutions help our customers compete and win in this emerging AI ecosystem. And with continued innovation, we intend to extend our leadership position. Sabre provides the foundational layer that is required for AI to transact in the complex environment of travel. Chatbots can generate itineraries, but to book and service travel at scale, requires access to sophisticated continuously evolving logic, and that is where Sabre plays a critical role.

Our modular platform enables partners to integrate seamlessly, wherever travel is sold. We aggregate and normalize real-time flight content across hundreds of sources in subsecond response times, solving a significant technical challenge. This capability is a key reason why partners are building on us not around us. We have recently gone live with our ChatGPT OpenAI plug-in for Virgin Australia. This all-in-one generative AI chat solution puts both search and flight shopping into a widely used AI interface and is available to all of our travel supply partners globally. We also recently launched the first phase of our mine trip and PayPal partnership with Sabre providing the core air booking layer.

Sabre is bringing conversational commerce for flights to market for the first time and we look forward to introducing additional enhancements over the next few quarters. Demand for our Agentic APIs and MCP server is strong with well over 30 potential partners in various stages of pilot or production. Additionally, we are working with airlines to deploy an AI assistant that will sit on top of our network planning and optimization product. Taken together, these are further proof points that the infrastructure for genetic travel is being built on Sabre.

Moving to Airline technology. We offer a growing suite of modular AI-driven solutions that meet customer demand and drive growth for Sabre. Building on the revenue growth we saw in the first quarter, we continue to expect positive airline technology revenue growth for 2026. Our marketplace provides a simple and single connection to industry-leading scaled content. Air expansion growth has been driven by execution of our growth strategies, including continued share gains and growth in NDC and LCC bookings. We saw meaningful year-on-year acceleration in our distribution bookings growth in Q1 and expect positive air distribution bookings growth for the full year. Lodging expansion continues to scale driven by a compelling value proposition in a large addressable market.

Total hotel-related revenue increased 10% to over $80 million in the quarter with annualized gross booking value of hotel bookings exceeding $20 billion. Our hotel attach rate is consistently above 30%. And with more modernized connectivity, we see additional opportunity for expansion. Media revenue also grew at a double-digit rate year-on-year. In Payment Suite, demand remains strong for solutions to simplify operations increased payment flexibility and automate risk and fraud management. First quarter gross spend on the platform reached nearly $6 billion, up more than 40%, while revenue grew over 25%. We are confident in our ability to continue to deliver strong performance in payments. We are executing well against our strategic priorities and delivering strong financial performance even in a dynamic operating environment.

With that, I'll now hand the call over to Mike, who will discuss our first quarter results and our outlook in greater detail.

Thanks, Kurt, good morning, everyone. Please turn to Slide 9. Our first quarter financial results were solid and came in ahead of the guidance we provided on our fourth quarter call. The momentum we saw exiting the fourth quarter carried through the first 2 months of the year. As Kurt referenced, beginning in March, the conflict in the Middle East and the increase in fuel prices impacted air distribution bookings, and those pressures continue in April. Overall, first quarter performance reflects strong commercial execution and continued progress on our growth initiatives. Importantly, we are reaffirming our full year guidance for pro forma adjusted EBITDA and free cash flow.

Turning to the financials. Total revenue was $760 million, an increase of 8% year-on-year, exceeding our expectations of mid-single-digit growth. Marketplace revenue grew $49 million, an increase of 9% and due to an approximate 5% increase in distribution bookings and an approximate 3% increase in average booking fee. Airline Technology revenue came in at $142 million, up 7% year-on-year and within the range of expectations we shared on our fourth quarter earnings call. We continue to expect full year 2026 airline technology revenue growth. Gross margin of 56.4% came in above our expectations due primarily to higher average booking fees attributable to a favorable mix of bookings.

First quarter 2026 operating income of $116 million increased 27% year-on-year with operating margin expanding 220 basis points to 15%. Normalized adjusted EBITDA was $169 million representing a 21% increase year-on-year with margin expanding 235 basis points to 22.2%. This growth was driven primarily by an increase in distribution bookings higher average booking fee and lower-than-expected operating expense. Free cash flow was negative $155 million for the first quarter. This lower free cash flow generation as compared to negative $81 million from the first quarter of 2025 was driven by $67 million of additional interest payments in the first quarter of 2026. $19 million in severance related to our inflation offset program, $4 million of additional CapEx and other items related to working capital timing.

Importantly, our expectation for full year free cash flow remains the same at approximately negative $70 million, which is driven almost entirely by restructuring costs associated with our inflation offset program. If not for those restructuring costs, we would expect near breakeven free cash flow this year. We ended the quarter with a cash balance of $665 million.

Moving to Slide 10. Comparing our first quarter results to the guidance we outlined on our fourth quarter earnings call air distribution bookings growth of 6% was in line with our expectations of mid-single-digit year-on-year growth. Revenue growth of 8% exceeded our guidance for mid-single-digit year-on-year growth. Our normalized adjusted EBITDA result of $169 million was favorable to our guide of approximately $130 million by $39 million. This outperformance was driven by $10 million of higher gross income attributable to higher gross margin from a favorable mix of bookings. Expenses were lower than expected by $29 million, split roughly evenly between adjusted technology and adjusted SG&A expense. Our expectation for the total benefit related to our inflation offset program has not changed for the full year. In the first quarter, we realized some expense favorability earlier than previously expected. We also had a $6 million favorable impact from the repeal of the Canadian digital service tax. All in, we are very pleased with this quarter's results.

Turning to Slide 11. Moving to our balance sheet. Last year, we successfully completed 2 refinancings. The result of these refinancings is that we now have no large debt maturities until the spring of 2029 and over 90% of our debt matures in 2029 or later. As a reminder, within the website financials available on our Investor Relations website, we provide a quarterly interest walk. This schedule provides our expected quarterly cash interest payments and shows we have higher cash interest payments in the first and third quarters of the year when compared to the second and fourth quarter.

Moving to Slide 12 and our outlook for 2026. We are reaffirming our full year 2026 guidance for both pro forma adjusted EBITDA and free cash flow. While we now expect slightly lower air distribution bookings and revenue growth for the year, we expect our 2026 gross margin to be towards the higher end of our previous guidance range of 56% to 57% and due to favorable mix trends. We expect this to result in similar expected gross income as compared to our February guidance. This gross income expectation, coupled with our operating expense outlook, which is consistent with our previous guidance, supports our expectation of approximately $585 million of pro forma adjusted EBITDA and approximately negative $70 million of free cash flow.

On to Slide 13 and our expectations for the second quarter. We anticipate second quarter year-on-year revenue growth to be flat to nominal. This revenue guidance assumes air distribution bookings growth to be near flat year-on-year, consistent with March trends that continued through April. We expect second quarter gross margin to be at the higher end of our expected annual range of 56% to 57%, primarily due to the favorable mix of bookings we mentioned previously. We anticipate adjusted technology and adjusted SG&A expenses to be roughly flat on a sequential basis throughout the remainder of the year.

Overall, we expect second quarter pro forma adjusted EBITDA to be approximately $130 million. We reported strong results this quarter, highlighted by pro forma adjusted EBITDA outperformance and the highest rate of air distribution bookings growth in over 2 years. We are encouraged by the momentum in the business and believe through continued execution of our growth strategies as the operating environment normalizes, Sabre is well positioned to achieve higher revenue growth going forward. And with that, operator, please open the line for questions.

[Operator Instructions] And our first question comes from the line of Josh Baer of Morgan Stanley.

Congrats on the strong results. Just want to kind of triangulate some of the assumptions in air distribution bookings for the rest of the year. You're highlighting record growth in Q1 and that came in a period where there's conflict in the Middle East and fuel prices, a pretty good result. And then full year, we're looking for low to mid-single-digit growth. So could you review some of the assumptions and why wouldn't growth be higher, coupled with all the market share wins as well.

Yes. No, thank you for the question. First, that I would highlight as you go through the first quarter, what you saw in general was that we generally exceeded the industry by around 500 to 600 basis points our overall viewpoint is that's going to likely continue. And what we've seen, though, in the short run is strength in the Americas offsetting lower distribution bookings, particularly driven by the Middle East conflict and higher fuel. As we've looked at the second quarter, we've essentially extrapolated the trends we've seen from March into April.

Our underlying assumption is that the geopolitical and macro environment start to smooth out at some point during the second quarter. And then with that, we see increased bookings growth in the third quarter, but more muted from our initial expectations, but still well above the industry. And then we see ourselves getting back to -- closer to our original assumption, closer to mid-single digits by the fourth quarter.

Okay. That's helpful. And then on free cash flow, I appreciate the details on what impacted the quarter's free cash flow versus last Q1. Just wondering like versus your own expectations, if there was any puts or takes in the quarter to call out?

No, it was very consistent with our expectations.

And our next question comes from the line of Jack Halpert of Cantor Fitzgerald.

Just 2, please. So just one follow-up on the macro. I know you guys mentioned your assumption is for sort of the disruption system side in 2Q. Are you seeing that happen already? Sort of what are the kind of underlying assumptions that you have behind that? And then secondly, on the payments, it's nice to see the revenue disclosure this quarter. Can you just talk about the key growth drivers of the payments business again? And where do you think it can go in the kind of medium to long term? And how much of a contributor to overall revenue growth it could be?

Thanks, Jack. With respect to macro, so we spoke about the March trend. Basically, we saw the first 2 months of the year up 9% from a booking standpoint. March was, as we indicated, near flat. In April, we saw similar trending to what we saw in March, although it was slightly positive. The Middle East pattern improved a bit. As we go forward, as we think about Q2, again, it's our expectation that the hostility is ceased by the end of the quarter and then you get back to our normalcy. Clearly, the fuel impact on price and supply is probably going to be a bit longer in duration.

It's our hope and our expectation that, that unwinds through the balance of this calendar year. What we did see is very strong leisure performance early in the year. Leisure has been more impacted relatively than other parts during March and April, but still holding up relatively well. Corporate has actually been very positive all year, very strong trends here in the last 2 months included. And so overall, we think there's a very good backdrop notwithstanding the challenge of what's happening in the Middle East and the result flows with that. With respect to payments, we're really excited about the business. As we've spoken about, there are 2 elements to this. One is the confirma virtual payments business that we own, which Mastercard is a minority shareholder of the second is what we call Sabre Direct Pay which is a fintech marketplace that we have within Sabre.

Think of what we do is mainly an orchestration layer for the payments industry with value-added services and products that we're beginning to put on top. As we've indicated, we are growing basically the volume of payments by -- in the neighborhood of 35% to 40% consistently. Now we grew revenue by 25% this past quarter. I would note that we pivoted away from providing professional services or consulting which was a minority portion of the revenue there. We're basically focused on those development resources, which we're doing that work, doing more platform-oriented stuff that will drive, we think, better benefit long term.

So it's our belief that we can continue to grow the payments business at a very aggressive rate for the long term. We think this can become a much more meaningful part of the business, and we're very well positioned, both with the agency and then our supplier customer community to drive much further penetration.

Our next question comes from the line of Jed Kelly from Oppenheimer.

Great. Just a quick question. We've been seeing some chatter, I guess, over in Europe, about like the potential impact of jet fuel supply shocks. Can you talk about that, how you kind of adjusted for it in your guidance, what we should be looking for just any help around that around potential supply shocks?

Yes. Thanks, Jed. We've watched very carefully airline commentary in the U.S. and Europe globally with respect to capacity. And so generally, what you've seen on a global level is capacity reductions from planned capacity growth of several hundred basis points, about 3%, 4% globally. So that's not generally a reduction from current capacity. It's a reduction from planned capacity growth. That's very important. So the global market, which 3 months ago, was expected to grow 6% on a capacity basis. I think now it's going to grow 2% to 3%.

Obviously, that has more acute impact in Europe because of a lot of the Middle East flying as well as some of the Asian markets. we have strong global penetration. So I think we're factoring in basically what we're seeing from an airline commentary standpoint and saying, what will the capacity reductions, what would the consequence be?

The second piece is obviously higher fuel prices to the extent that it's passed on the consumer, that may have a bit of a negative effect on demand from a leisure and a corporate perspective, we're probably more so leisure. We haven't seen that yet but we expect that, that will come in a bit. I think the airlines are factoring that into capacity. So again, we're iterating through this and looking at the market. There's a lot of uncertainty out there, but we feel like given the market commentary, we feel good about the guide that we provided today.

Yes. The only thing I would add in Herington, our distribution bookings guide for the second quarter, it does assume, if you look at the underlying trends in both Europe and APAC that those do have year-over-year impacts primarily from fuel and other impacts, and it's largely offset by strength in the Americas. So we've taken that into account in our air distribution bookings.

Got it. And then one of the large corporate travel agencies in a deal to go private, assuming they're trying to implement more AI around that. we've seen some other companies with decent AI capabilities, gain a lot of share. Can you just talk about how if you have more corporate travel agencies enhancing their AI capabilities how that impacts Sabre or what we should be looking for?

Yes, that's a great question. So what we've seen so far with the agencies we've been working with in terms of AI is that they're predominantly leveraging it for productivity. So in terms of their own age of productivity by providing agents with chatbots that can assist in terms of travel booking and servicing. And then on top of that also with automation. So a lot of the workflow automation that happens in their back-end systems. So really, they're focusing on making sure that their current workforce is as productive as possible. And of course, they're also starting to explore making sure that they provide Agentic experiences to their customers. So to their managed customers that they're currently dealing with through e-mail, phone and other methods to have chatbots that are also available to them.

Yes, it's very legit. One point to make on this is when we look at what we're doing from a genetic standpoint, we are not the B2C LLM layer that will face the consumer. We are that infrastructure and data layer that sits behind that enables search, bookings, servicing. We provide that for our airline and hotel supply customers. We offer that for all of our agency customers and as we talked about, we think that the new Agentic AI technology platforms will emerge as a large channel. We think we're very well positioned to grow with them as well.

Our next question comes from the line of Victor Cheng from Bank of America.

Congrats on the solid results. Maybe just one for me on -- can we think a bit deeper into the trends that you saw in March and April? I know you've talked quite a bit about it, but it sounds like overall bookings growth is similar but what are the puts and takes within that for each month? I would imagine there will be more cancellations in March, are we seeing cancellation in April as well? And then in March, I would imagine there will be some pull forward bookings as well in corporate and U.S. So I would imagine that might be a bit lower in April. So if you can expand a bit on that, please. And then I actually have a follow-up on Mindtrip.

Yes. So very briefly, yes, there was some level of cancellation activity in March. When you go forward to April, as I mentioned, April is slightly better on a macro level than March was for us. Corporate is very strong. To the extent that there was any pull forward that would have occurred more in March than April, we think that, that was transitory if it occurred. It's difficult to see that discretely. But we're very encouraged by the trends we see effectively we see an acute impact of things that touch or originate in the Middle East as we spoke about. That trend improved from March to April.

Second is the impact of fuel price and supply. Very difficult to get at exactly what that is. Again, we think that was about 100 basis points in March, similar impact in globally similar impact in April. So we're encouraged by what we're seeing despite the acuteness of the world.

Understood. And maybe on Mindtrip, obviously, you're enabling Agentic AI, a trouble booking now, a couple of PayPal as well. How should we think about unit economics for that or any kind of early interest and how that can scale going forward?

Yes. Thank you. We haven't broken out the commercials for that, Victor. We talked about that in detail. But if you think about from the standpoint of what is the cost of revenue to an airline or a hotelier for the services we provide in our Marketplace business. The cost average is about 1.5% of the value of the ticket or the hotels booked, which is by almost any measure in this industry and any other industry, a very, very efficient cost of sale within a genetic travel, obviously, there's the ability to provide both traditional as well as more modern NDC content. And so it enables strong merchandising and retailing by our supply partners.

So I think there's very strong interest from one of the airline and hotel community and how we're going to promulgate this. We're not intending to be an OTA. And then two, with respect to these large language models or the agentive players, I think they're very intrigued by our model, which is we can plug in our MCP server and Agentic APIs and literally from day 1, and this is proven with what we're doing with the Mindtrip application. They're live with search, booking and full servicing within their platform. We think that is a first for the industry, and it's a testament to where the industry is going to go.

Our next question comes from the line of Dan Wasiolek of Morningstar.

Just a clarification. I wanted to make sure I heard it right. The impact in March to total air bookings from the Middle East surrounding area. Did you say that, that was about 7 percentage points. And then kind of looking beyond this year, I know you had some initial revenue growth targets for 2027. Wondering if you have any color on the breakdown between the contribution of Marketplace and airline technology maybe on the airline technology like how conversations are going or the pipeline shaping up with carriers considering going from in-house solutions to outsourcing?

Yes. On the impacts of Middle East, it's approximately 6 points, as Kurt mentioned in his prepared remarks, directly attributable to the Middle East. That's flights that fly to, from, or through the Middle East and it's about another 100 basis points that's tied to fuel associated with the knock-on impacts, obviously, the Middle East conflict.

And then with respect to '27, while we haven't -- we're not here talking about the guidance any further. We feel good about the trajectory that we're on and the execution of our strategies. I say the pipeline is rich both within marketplace as well as for airline technology. The one thing I would mention with respect to airline technology is that as we look at the addressable market for the offer order settlement and delivery capabilities or OSD. We believe that our offering, which is cloud native, modular and AI infused is the best in the marketplace.

We have more modules in production than we believe than any other technology provider in the world. One of the questions will be our ability to penetrate the Amadeus Altea PSS base. We believe Amadeus is using PSS. And basically, they have a dominant monopoly position, and they're basically making it very difficult for airlines to choose anybody, but Amadeus for the new offer and order solutions. So we're working on approaches to that from a regulatory and a legal standpoint. We believe we crack that code that this can be a double-digit CAGR revenue business for the long term.

Our last question comes from Alex Irving at Bernstein.

I want to come back on the capacity question, please, and the phasing of that through the course of the year, what you're assuming gets put into the sky by the airlines. Clear how you're thinking about Q2. The schedules are there. You're following airlines comments you see probably some visibility, but what assumptions are you making about the winter? But airlines being less money than usual, jet forward curve is still up a lot versus mid-February. Are you still baking on air travel growth in Q4? Or are you baking in some conservatism for the possibility of airlines cutting capacity into the winter to support their own margins?

Thanks, Alex. As we indicated, we've seen projections for 2026, airline capacity growth reduced globally from about 6% to between 2% and 3%. And so there's still capacity growth -- in Q4 of this year, there's still positive capacity growth that is projected in the system. That underlies the assumptions that we have. Again, most of the capacity reductions are from planned capacity increases. So airlines are basically going to hold the line more than they expected to early in the year, but that's what's factored into our guidance.

Yes. One thing I would just add on that, when we originally set our expectations for air distribution bookings, our baseline assumption for industry air distribution bookings growth was flat year-over-year. That's still below the current expectation for capacity growth for the industry. The industry is still expected to grow even with capacity reductions, somewhere around 2.5%. So overall, we feel pretty good about our forecast pending obviously, macroeconomics and geopolitical.

I'm showing no further questions at this time. I would now like to turn it back to Kurt Ekert for any closing remarks.

Thank you, Siobhan. Thank you, everybody, for the participation and the great questions today, and we look forward to continuing to update you in future quarters and executing against our strategy. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Good morning. Thank you for being with us today. And welcome to the Sabre Corporation's 2026 Annual Meeting of Stockholders. I'm Gail Mandel, Sabre's Chair of the Board and Chair of today's meeting. With me are Kurt Ekert, Sabre's Chief Executive Officer and President; and Steve Milton, Sabre's Corporate Secretary and Secretary of today's meeting. Also attending today's meeting are the members of our Board of Directors. In addition to Kurt and myself, these directors are George Bravante, Hervé Couturier, Eric Kelly, Damian McKay, Phyllis Newhouse, Elaine Paul, John Scott and Ashan Willy.

You should have found on your chairs a copy of today's agenda and a few rules for this meeting. As you will see from the agenda, we will first cover the legal requirements for the meeting, and then we will address the proposals included in the proxy statement. After that, Kurt will provide a brief business review. Finally, we will have a report on the results of the voting on the proxy statement proposals.

The items properly submitted for consideration at this meeting are the proposal for the election of the 10 directors named in Sabre's proxy, ratification of the appointment of our independent auditors, approval of our 2026 Omnibus Incentive Compensation Plan, approval of our 2026 Director Equity Compensation Plan and approval of our advisory, non-binding vote on the compensation of our executive named officers.

Now Steve, please give us your report as to the call of the meeting, the inspector's report as to the presence of the quorum and the rules of the meeting.

We provided the following materials to each stockholder of record as of the record date, which was March 2, 2026. Proper notice of this meeting and access to the copies of the 2026 proxy statement and 2025 annual report. More than 79% of the company's common stock is represented at this meeting, either in-person or by proxy. As a result, this meeting is properly convened and a quorum is present. Affidavits confirming these matters as well as a certified list of stockholders are available for examination. The materials will also be filed with the records of this meeting. The following inspector of election has been appointed: Rex Morgana of BetaNXT.

As Gail mentioned, the ground rules for today's meetings are included with the agenda placed on your chairs. In order to provide a fair and informative meeting, we have established these rules and procedures, and we appreciate your cooperation. We'll introduce each of the 5 proposals set forth in the proxy statement and identified on the agenda. After all the proposals have been presented, we will open the floor for discussion and general comments and questions. We will then vote on all proposals at the same time.

If you are a stockholder and you wish to speak on a matter on the agenda, please raise your hand once the floor has been opened for discussion and wait to be recognized. When you are recognized, a microphone will be brought to you. And please identify yourself, the number of shares that you represent and the proposal on which you wish to speak.

As described in the rules, individuals recognized to speak on any matter will be limited to 3 minutes. If you gave us your proxy or voted by telephone or the Internet, your shares will be voted by the proxy committee as you have directed. If you have not voted your shares yet or if you wish to change your vote on any matter, please raise your hand and a ballot will be brought to you. We will collect the ballots later during the meeting when the polls are declared open.

Finally, during today's meeting, we will make forward-looking statements based on management's expectations of future events, and actual results may differ materially from the forward-looking statements. For more information about the risks that could cause this to happen, please refer to the risk factors and the cautionary note regarding forward-looking statements sections in our 2025 Form 10-K as well as our other filings with the SEC. In addition, we will be presenting certain non-GAAP financial measures. The most directly comparable GAAP measures and reconciliations are available in the presentation appendix as well as in our earnings releases and other documents that are posted on our website at investors.sabre.com.

And now I'll turn it over to Kurt.

Thank you. We will first consider and vote on the proposals in our proxy statement. I will then provide a few comments on our 2025 business performance. And finally, Steve will report on the results of today's vote.

Each of the 5 proposals on the ballot today has been described in detail in our 2026 proxy statement. The first proposal in the proxy statement is the election of George Bravante, Hervé Couturier, Kurt Ekert, Eric Kelly, Gail Mandel, Damian McKay, Phyllis Newhouse, Elaine Paul, John Scott and Ashan Willy. I thank each of our incumbent directors for their significant contributions to the Board, including collectively attending 28 Board and committee meetings in 2025 with an average attendance of 99%.

In addition, please note that Wendi Sturgis is not standing for reelection today. On behalf of the Board and the management team, a deep thanks to Wendi for her service, and we wish her well. On behalf of the Board and its Nominating and Governance Committee, I declare that each of these 10 individuals has been properly nominated for a 1-year term expiring at the 2027 Annual Meeting of Stockholders.

The next order of business is proposal 2, ratification of the Audit Committee selection of Ernst & Young as the company's independent registered public accounting firm to audit the company's 2026 financial statements. Gabe Stagner and Neil Rabroker from Ernst & Young are with us today.

The next order of business is proposal 3, approval of the company's 2026 Omnibus Incentive Compensation Plan.

The next order of business is proposal 4, approval of the company's 2026 Director Equity Compensation Plan.

The next order of business is proposal 5, approval of the advisory, non-binding vote on the compensation of our named executive officers.

We will now open the floor for general discussion. If you wish to ask a question, please raise your hand and wait to be recognized. Once recognized, please wait for a microphone, then state your name, the number of shares you own or represent and the proposal on which you will comment. Also, please remember to limit your comments to 3 minutes each to ensure others have an opportunity to speak. Is there any discussion on any of the proposals or any other questions or comments?

There being no other questions, I declare that the polls are now open. Please raise your hand if you would like to cast a ballot from the floor and someone will come and collect it from you.

[Voting]

I now declare that the polls are closed.

While the Inspector of Election completes the vote tabulations, I will comment briefly on our business performance for 2025.

For 2025, we recorded double-digit year-on-year growth in normalized adjusted EBITDA and generated positive pro forma free cash flow. A key focus for us has been further strengthening our balance sheet, and we made significant progress in 2025 by paying off over $1 billion in debt, which when combined with growth in pro forma adjusted EBITDA, reduced our pro forma net leverage by approximately 25% compared to year-end 2024. We continue to be proactive in managing our long-term capital structure. Through two successful refinancings in 2025, we have no large maturities until 2029 and over 90% of our debt now matures in 2029 or later. We also ended 2025 with a strong cash balance of $910 million, which includes $98 million of restricted cash for debt repayments in the first quarter of 2026.

In 2025, we seized the first mover position in our industry with our introduction of agentic APIs and a proprietary MCP server designed for the travel industry. These agentic solutions help AI agents better understand and operate within the complexity of travel content and workflows. We also launched several industry-first AI solutions and partnerships.

Sabre Payments was one of our fastest-growing businesses in 2025, with gross spend on the platform increasing more than 35% year-on-year and producing strong revenue growth. Our Travel Marketplace continued to deliver multisource travel content on an unprecedented scale and drove agency wins and expansions during 2025. Finally, we extended our leadership position in NDC by adding 15 live integrations during 2025, bringing our total to 42 at the end of the year.

In closing, our strategy remains focused on generating free cash flow and delevering our balance sheet and driving sustainable growth through innovation. We made significant progress against these priorities in 2025 and are excited for 2026. Thank you so much for your participation today.

I'll now turn it over to Steve to report on the voting results.

Thank you, Kurt. First, let me say that the results I'm about to announce are preliminary. We will file the final results with the SEC on a Form 8-K within 4 business days. The Inspector of Election has advised me that each of the 10 nominees for director was elected for a 1-year term. The selection of Ernst & Young as the company's independent registered public accounting firm was ratified. The company's 2026 Omnibus Incentive Compensation Plan was approved. The company's 2026 Director Equity Compensation Plan was approved and the advisory, non-binding vote on the compensation of our named executive officers was approved.

With that, I'll turn it over to Gail to adjourn the meeting.

On behalf of the Board of Directors and the entire management team, I'd like to thank you for your attendance today and the continued support of Sabre. The meeting is adjourned.

Ladies and gentlemen, this concludes the program. Thank you for participating. You may now disconnect.

All right. Before we begin, for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your Morgan Stanley sales representatives. My name is Josh Baer, software analyst at Morgan Stanley. Thrilled to have the Sabre leadership team here with us today, Kurt Ekert, CEO; and Mike Randolfi, CFO. Thank you so much for joining us.

Thanks, Josh. Our pleasure.

Great to see you. Maybe let's kick it off with the exciting news around shareholder rights before we get into AI in the business. Can you give some background on the recent shareholder rights plan with regard to Constellation? What does it entail? What is it in response to?

Yes. So you saw the press release we issued on Sunday evening, and there were other disclosures we issued as well. That was in response to a significant accumulation of shares by Constellation, a Sabre shareholder. And we took this action to protect the company as well as the shareholders. So beyond that, we're not going to comment publicly today. But we believe this -- we have spoken to a number of investors and analysts and generally, we received a favorable response and folks understand why we've done this.

Okay. We saw the market response as well. So Kurt, from your perspective, to kick it off, what were some of the most important Sabre accomplishments over the last year? And what are your priorities as we head into 2026?

Yes. We articulate our strategy with 2 key elements. One is delevering. Last year, we paid down $1 billion of debt, dramatically improved our leverage ratio. And so we're dramatically improving the balance sheet quality of the business. And then two is its growth through innovation. So last year, some of the key accomplishments were the introduction of MCP server and agentic AI. As you saw earlier this year, we've announced a number of key partnerships with agentic, great innovation with respect to the SabreMosaic Airline IT platform, and we're seeing great traction, especially on the offer side of the portfolio there.

And then within distribution, significant conversion of one new business, the expansion of our air distribution marketplace and then very strong growth with both with hotel distribution as well as our payments portfolio. So a really good year, both from a balance sheet and an innovation perspective.

Excellent. And you've put out 2026 and 2027 kind of growth commentary, looking for mid-single-digit volume and revenue growth in each of those years. So I'm wondering with the transactional business model, some volatility that we have seen historically in this end market, what gives you the line of sight to put out that growth target for '27?

Sure. So a few things. First, as we looked at 2026, let me just start by saying our underlying baseline assumption, which we think is hopefully conservative is a flat industry. It's not our assessment of the industry, that's a planning assumption. So when we talk mid-single digits, that's based on our internal growth strategies. And it's comprised of a few things.

One is we've talked about our push into the LCC part of our multisource platform and really extending the tail of those carriers. We see that we launched a lot of our new tools that we expected to launch in the summer of last year that was launched this year. That's going to be very additive to our growth. As we've articulated, we expect to continue to take share as we've done in the last year, we continue to expect to take that this year. And we expect to continue to grow NDC.

Now with that, what I would say is leading into this year, up to our call, if I look at the 10, 12 weeks leading up to our call, what I would say is we saw consistent with our guide for the quarter and the year, what I would describe as the most consistent bookings, both geographically and across customer mix leading up to the call. So when we look at it, we think the guidance of mid-single digits for this year we feel really good about that. And as we look at 2027 and we see the continued growth in our growth strategies, we feel really good about that as well.

And then the second piece is, obviously, with the inflation offset program, our gross profit improvement should fall to the bottom line and accrete both at the EBITDA and the free cash flow level. So we feel like we're doing the right thing from a growth and a balance sheet standpoint. But as Mike said, the market backdrop that we're experiencing, Middle East war notwithstanding, is frankly the best that we've seen in a number of years.

Excellent. And we'll dig into a lot of those growth areas. But first, I want to start with what's maybe most topical front of mind, key debate, agentic AI. Is it an opportunity or a threat? I mean, you've positioned it as a huge opportunity. So I want to unpack that. And directly, does agentic travel shopping increase or decrease Sabre's relevance? And how does your data and your content breadth? Does it help support and enhance the moat?

So let me just speak about it from an ecosystem standpoint. If you think about -- it's all about where the funnel of eyeballs and traffic will derive. And so if you think about our business today with managed corporate travel, where procurement or HR are directing employees where to go to shop for and book their travel, I don't see that changing with AI. You saw the safety and security of the traveler, corporate negotiated rates, company policy. There is going to be an inherent mandate for the TMC or the booking layer to have a consumer-grade conversational commerce capability. And that may drive a technology arms race or consolidation there, but we think we're very well positioned in that part of the market. That's about 45% of our air distribution portfolio.

On the leisure side, very different story. Obviously, where you have the Airline or Hotel.coms and you have the loyal traveler or the credit card customer of those platforms, they're going to continue to be very sticky. Likewise, I think you're going to see online travel agents or build very good conversational commerce layers. And you're going to see traditional travel agents, let's say, brick-and-mortar who have niche offerings like cruise or tour, they're going to continue to do what they do.

I think there's 3 areas where you're going to see behavior change. One is for the nonloyal customer of the supplier.com, the customer that goes there once a year, if they're offered a better user experience by some other intermediary or a player, it's likely that, that transaction is going to happen not in the airline or hotel.coms, but let's say, in this new agentic commerce intermediary place. Number two is metasearch. Metasearch basically has had such success because they price arbitrage on behalf of the consumer. But the user experience is not good post decision because you get launched into a different ecosystem for the fulfillment and the servicing of your travel. And so a good end-to-end agentic experience may supersede that. And then the third is for the OTAs who derive significant traffic from metasearch, they may see that traffic at risk.

And so the key is think about for all the existing players is how do you build a consumer-grade conversational commerce layer because customers will go where there's a better UX or they have better confidence. And so I think some of the new platforms, the new emerging platforms are going to succeed there, and they're going to take share away from the other channels. If you're one of these new players, for example, we just announced a partnership with PayPal and Mindtrip, Mindtrip being the LLM, PayPal bringing its payment network or its consumer base to the flow, we're the back end. We're the search, booking, servicing, fulfillment layer behind there.

Why didn't Mindtrip just say we're going to go direct connect with everybody? Because there's -- doing a direct connect is fairly simplistic technology. All you're doing is you're writing to a supplier's API. But now the -- all the data that sits there and all the complexity of handling that traffic and doing that at scale, it scales exponentially or logarithmically from a complexity standpoint. And so unless you want to build a GDS or you want to build like the next version of the OTA, it doesn't make sense when you can plug into us -- and you can -- on day 1, for example, Mindtrip will go live in Q2 with a full end-to-end offering with servicing, et cetera. And that's going to be pretty compelling. What we hear from the large agentic players is they want to do likewise. They don't want a metasearch model. They want to own the customer from front to back, and we can provide that to all of them.

Now what's the -- is there -- will they try to disintermediate us because of margin? Well, we charge airlines and hoteliers on average about 1.5% of the value of what's booked with them, that's not a large profit pool opportunity for them. And we provide a lot of infrastructure and capability, and it's quite capital intensive to do that. Now on the other hand, if you're looking at the hotel world, where you might be paying a 15% cost of sale to an intermediary, that might be something that's attractive for an LLM to try to disintermediate because that's a significant profit pool.

So we think, one, the economic opportunity for somebody to disintermediate us is not that attractive. Number two is what we do is very complex, and we have massive data. And that data is very important because in a world where you're searching and you have to provide millisecond response time to provide a good user experience, you want to avoid all those hits to the supplier because otherwise, it's very difficult from a physics and a cost standpoint. We can do intelligent caching in front of that search for speed and for efficiency and the relevance of search is very important. You're not going to -- as a consumer and an LLM, you're not going to scroll through pages of response times. You're going to look, you're going to say, okay, there's 3 choices, what do I want to book, and it's going to be a very rapid, easy experience. The relevance of that response has to be right the first time.

So we think we're actually really well positioned. And again, we think that much of what we do, there's a pretty strong defensive moat. There's a little bit of risk, but the offensive opportunity here for us to become the rails for the agentic AI industry. We think we are in the leading position, and it's going to be a huge accelerant to Sabre.

I think that's really clear. What are you seeing then from the incumbents from a competitive perspective just around what they're doing around also trying to position as the back end or the rail.

Do you mean our competitors when you say that?

Yes.

I think that we and Amadeus have a distinct advantage over the other super aggregators in this marketplace in terms of the quality of our content, our data and our technology solutions. With what we've done with our agentic API specifically, the reason you've seen large announcements from us and not Amadeus, we believe, is that we have a distinct advantage, and we're told by large technology platforms that, that is the case. So no question, they'll lean into this space very aggressively, but we believe we have the lead position right now. We're going to try to lean into that very hard.

Great. And what's the update on the Google partnership? Are you still co-developing solutions? Is it...

So Google has been terrific. We are now -- 99-plus percent of our compute is in the Google Cloud environment. So from a resiliency, a scale, a security standpoint and an efficiency standpoint, it's the best place in the world to be, and they've been a fabulous partner there for Sabre. Separately, there's a development partnership, and so we do co-develop. And in fact, if you look at the SabreMosaic Airline Solutions, for example, that's all built on Google's Vertex and Gemini AI capabilities. So that remains very strong.

One of the key questions is when you look at Google Flight Search, which is a metasearch offering versus Gemini, if they want to replicate and do what other agentic players are saying they want to do, which is they want to host an end-to-end experience, what Google does not do is fulfillment and servicing. And so there's a key question about what that model will be going forward. But I would just say that we've got a great strategic partnership with Google. They've been a fabulous partner, and we would love to grow that partnership over time, and we'll see what happens.

Excellent. Let's shift gears and talk about air bookings and market share. Your air bookings has accelerated going from negative 3% growth, I believe, in Q1 to positive 4% by the end of the year. December was even higher at positive 7%. So can you unpack some of the drivers of that improvement throughout the year and also touch on what prevented you from reaching the original double-digit growth?

Yes. So last year was very turbulent and challenging as anyone who follows us knows. We realized 30 million air segments last year that came from converted business or won new business. The challenge for us, if we had a very bullish outlook at the start of last year because we knew that was coming online. Where we were wrong is that the underlying market was quite negative and challenging. So from the start of the year, basically, you start off with DOGE and tariffs basically hitting last February and March pretty aggressively. You go through the year, a lot of recession risk. Later in the year, the government shutdown. And those things dramatically hit us.

The other thing is corporate travel, which is about only between 20% and 30% of the GDS industry, but it's 45% for Sabre. Corporate travel on a unit basis was down 6% to 7% last year, 600 to 700 basis points. So while the GDS market was a bit negative last year, the impact of Sabre was much more severe. What you saw as the year -- as we went into December was that on a geographic and a line of business standpoint that normalizing, getting to 7% growth, as we articulated, as Mike said on the call, we saw that pattern persist through the first 6 weeks of the quarter. And I think what you're seeing is a much more stable backdrop. As Mike said, when you look at it geographically and you look at it by the type of customer, whether it's TMC or brick-and-mortar, OTA, basically consistent performance through all the different channels that we serve. And again, we believe the backdrop is very favorable.

So as Mike said, you're going to see 3 key drivers of air distribution growth this year. One is acceleration of NDC and the reintermediation of NDC volumes that were previously direct connected by OTAs. Number two is the realization of market share gains that we continue to take. Number three is we have 50-plus new low-cost carriers in the system today versus a year ago. We launched our new LCC platform that we've talked about previously. We think that will add a couple of points of growth as well. So we think it sets up very well. And that assumes a flattish GDS market. If in fact, you go back to normalcy and you have -- and the market is 2%, 3%, 4% positive, that would be additive or accretive to the expectations we've set.

Perfect. And to clarify, when you talk about 45% corporate travel, is government and military in that bucket?

No, government military is separate from that. Government -- the U.S. military and government, if you go back to 2024, was about 4% of our air distribution bookings. Overall last year, that was down about 25% through most of the year. It was down, for example, in November, down 90%. So we've assumed that will be more stable going forward.

Okay. Great. NDC was 4%, I believe, of total air distribution bookings exiting the year. You've got over 40 live integrations with NDC. What's the assumption for NDC looking ahead? And is that coming from like a small subset of carriers, different regions? What's driving that adoption and growth?

So we've got 42 carriers now where we have live implemented NDC connections. I think that's the leading intermediary position of any aggregator in the world. Number two is we've built significant capabilities for buyers or agencies to normalize workflows between EDIFACT or NDC. Otherwise, it's very inefficient, and it's degrading from a user experience standpoint. So the solution now is sort of primed for market.

The one important piece is those 42 carriers, while that's less than 10% of the carriers to whom we're connected, it accounts for nearly 80% of the total volumes we do. So it's most of the big guys now we have NDC in place. And you typically have both NDC and EDIFACT for the same carrier. I think you're going to see NDC continue to grow at a pretty rapid rate. Certain carriers do it. It's very important to them. Certain it's less strategically important. But it will -- let's say, it grew at between 50% and 100% last year in terms of its adoption. You'll see it continue to grow at that sort of rate going forward. So it will still be the minority portion of our bookings for the foreseeable future, but it's very important to the buyer or the agency, they should be relatively indifferent as to how we source that content. It doesn't matter -- it should not matter to them whether it was an EDIFACT API or an NDC API. We normalize all that on their behalf. The economics are relatively consistent. And so for them, it's about how do they run an efficient business, and we worry about that on the back end.

But I think it's going to become an increasingly important part. The other thing which I mentioned earlier is in COVID and especially Sabre was late to the game on NDC, as we've talked about previously, we've now caught up and surpassed most folks, but certain OTAs direct connected to large airlines. You saw Amadeus have some level of reintermediation of those segments over the last 2 years. You're going to see us begin to do the same with OTAs as well as OTAs realize that managing direct connects is quite complex and cost inefficient and not necessarily what drives traffic and margin for them, and they realize that we can do it better. So you're going to see that as part of the growth as well.

Great. You mentioned NDC economics are relatively similar. Were you talking about one travel buyers, suppliers? Is that for you as well? How does that impact your economics?

Yes. I mean the way I would think about NDC is through most of the globe, what I'd say is the incentive might be -- the booking fee might be slightly lower, the incentive slightly lower. Maybe the margin through most of the globe is flat to slightly lower. The exception is going to be in the EMEA region where average booking fees tend to be higher. But for us, that represents only 16% of our bookings. And so overall, as we look at it, we don't see significant impact on economics from NDC and actually view NDC more as an opportunity. And that's included in our guide that we provided is the expectation that NDC from where we are from the 4% we ended last year, will be growing more significantly now going forward than it has in the past.

And so connecting that, Mike, to revenue per booking, your average booking fee was over $6 for the year and finished the year at $6.31. How much of that increase is driven by mix versus other revenue streams when you do the calculation, think about payments? And is that level of booking fee sustainable? Or because of NDC, we should expect it to move lower?

Yes. So our guidance for this year for 2026 was for booking -- for air distribution bookings growth in the mid-single digits and revenue in the mid-single digits. So that kind of implies that booking fee is expected to be roughly flat year-over-year. So we do expect it to be roughly flat. So there's a combination of puts and takes. One is we have seen favorable mix trends. which do seem to be holding. NDC is slightly lower there. But then after that, certain of the products we sell, particularly hotel B2B through our GDS, that comes at a higher average booking fee and a higher average margin and then also payments. So all of that adds to our booking fee, coupled with a favorable mix. And so that's more than offsetting the impact on booking fee in NDC.

Yes. And 2 things just to cite within distribution, we disclosed in the last call that our land ground and CRO non-air distribution bookings, we did more than $20 billion of turnover and about $350 million of revenue last year. And then payments, we haven't broken out the revenue there, but we do $20-plus billion of turnover now on our payment solutions, and we'll likely begin to break that out from a revenue standpoint at some point this year. But those are becoming more meaningful contributors, too, to our business.

Great. Let's shift gears a little bit and talk about some IT solutions. Maybe how you think about IT solutions versus distribution. I mean distribution now is like 80% of revenue and has been growing consistently. IT solutions, 20% and has been declining in the last few years. And so what's the strategic importance of each of these businesses?

Both are very important to us, and we think both have good long-term prospects. So -- in distribution, think about it this way, which is it's a fairly mature market for air distribution. It's, one, how do you take as much share as you can? How do you grow the addressable market, which we're doing through NDC and LCC? And then how do you attach other high-value items such as hotel and payments. And so that's really what underlies the strategy there.

On Airline IT, that's a very sticky business when you're in with the customer. Now Sabre until a couple of years ago was selling pretty old technology in its SabreSonic solution. That's a monolithic PSS. And as a consequence of that, we were competing against Amadeus Altéa, which was a legacy solution, but less legacy than SabreSonic. And so there was a consistent pattern pre-COVID and the early stages of COVID where we were losing head-to-head. We haven't lost a customer in 2.5 years. We're now -- what you saw in the P&L was still the effect of certain folks that have demigrated. We've built a new platform called SabreMosaic, which is a modular AI-infused sort of best-in-class platform for offer and order. We're getting tremendous feedback. We're selling the offer component of that very aggressively in the market. Not a lot of folks are going down the order route yet. That's more like an ERP. So you're displacing that. But we expect over time that, that's going to sell very well.

One of the key differences here is there's not going to be a lot of PSS migrations happening in the market. We're migrating Hawaiian back to Sabre's PSS starting in Q2, but I think that's going to be an anomaly. Folks now, if they transition, are going to transition on to the newer offer and order platforms. We have more modules in production than any other technology provider in the world, including Amadeus. The other benefit is -- it's very difficult to get somebody to say, I'm going to replace my entire monolithic ERP system. But when you say you can just implement the modules you want and our system is an OPI system, it's very easy for them to pick and choose that.

Now one of the key challenges we have is that our largest competitor in this space has a monopolistic position, and they behave in certain ways that we believe are anticompetitive. And so we've got to crack the code on that, which we're aiming to do. We think when we do that, we're going to unlock a significant amount of airline demand for the SabreMosaic solutions. We've indicated that, that business will grow at a mid-single-digit revenue growth this year. We think over time, that can become a high-growth part of the business, subject to unlocking that piece.

And then the last thing I'll say is for both pieces, agentic AI is a significant opportunity. In the airline IT world, you've seen us go to market with, for example, Virgin Australia embed capabilities within ChatGPT, that's Sabre technology that is available to every carrier in the world now. In the distribution business, I think what we've announced, for example, with PayPal and Mindtrip is a proxy for what you're going to see us do in the market with lots of other agentic technology platforms. We think that will be a significant growth opportunity for the company.

Does SabreMosaic make you more competitive for new -- potential new customers? Or is there also a motion to go back into your base and transition your existing customers onto the new platform?

It is very interesting. About 2.5 years ago, we made the decision that we were going to focus our development of SabreMosaic, first and foremost, on improving the relationships with our existing customers and taking them on that journey. So most of the sales and the engagement activity has been around our existing customer base. We've had pretty good success there. Now we're seeing a lot of inbound interest from non-Sabre IT customers, and the aim is to begin to grow that. But we needed a referenceable customer base in order to take this beyond the confines of Sabre, and that was really the approach.

And is there a financial impact when your existing customers move over from your legacy over to SabreMosaic? What's the economics?

Yes, the old model is largely a PB model. You're paying per booking or per passenger. It's a weird construct for a technology relationship. You're typically paying license fees or something different. We'd like to move that to more of a value-added or value sharing agreement. Some airlines are going to be wedded to the PB model. Some are going to be more open in terms of what that looks like. But on the offer side, especially, the solutions that we are building and that we have in market, which are, again, all infused with Google's Vertex and Gemini AI capabilities allow significant revenue uplift for the carriers. We'd like to be able to share in that. So we think there is the opportunity over time to improve the revenue per transaction or the revenue quality that we have with customers.

The other thing is how do we sell the broader spectrum of things that they're looking for versus an all-in approach is you sell componentized technology. So we do think on both a unit basis and a volume basis, there's a revenue uplift opportunity.

Yes. And as we talked about on our earnings call, as you look this year, we expect revenue per quarter for Air IT to be between the range of $140 million to $150 million. And as you get to the back part of the year for a couple of reasons, we expect to see that exhibiting nice trends of growth. One is in the second quarter, we do expect the transition of a lot of the Hawaiian PBs back onto the Alaska platform, but also the sell-through of the SabreMosaic AI offer products, which is incremental to our existing product offerings will be additive to our revenue base, particularly as we get through the back part of this year. And we've actually talked about for Air IT this year, which I think is the first year since Kurt and I know it is, we expect revenue growth in the mid-single digits for Air IT this year, which is a definitive turnaround from where we've been.

Excellent. I want to spend a minute talking about gross margins and some of the various pressures on gross margin, which I think guided to 56%, 57% for this year. Any way to break out how much is NDC? How much is FX? And then going back to agentic, how much is this higher look to book?

So a couple of things. The higher look to book, first of all, any of that is going to show up in your hosting line, and that's going to show up in the technology line. As I look at what's impacted margin, there's really a few things that have impacted margin. One is we have won significant enterprise business on the agency side. That's come with significant volumes, but some of it does come with a slightly lower margin. Second, the currency impact has had a very negative impact of the dollar depreciation from an FX standpoint.

And then the NDC component has actually been relatively small to date because it hasn't grown that significantly. It only ended this year at 4%, but we do expect it to grow more significantly. We don't break out the piece parts of it, but those are the contributors.

I think Mike has said that we expect to be able to hold that level of gross margin going forward -- for the foreseeable future.

Yes.

Let's talk about the inflation offset program that you mentioned, Kurt, earlier in your opening remarks. You've got this program basically to keep technology and SG&A flat over the next 2 to 3 years. And so what are the -- like how do you accomplish that? What are the sources of savings?

Sure. So a couple of things. Yes, as you mentioned, our goal is to keep it roughly flat with the obviously exception of volume-related hosting costs. And so the way we think about it, first and foremost, important to support our growth strategies and our push into our AI -- our agentic AI-related products and offerings. And so with that, as I think about -- think about what's the best way to answer this.

Well, there's -- the simple answer is we've said this publicly, we're doing 3 primary things. One is we're going to take advantage of best-in-class geographies from a cost standpoint. Two is we're leaning into development partnerships that we have. Three is we're dramatically leveraging AI capabilities to improve productivity and throughput of our employee base. One anecdote I will offer in doing this is there are certain places where we're reducing headcount is we've actually increased our engineering resources overall in the last year, and we're adding 400 to 500 engineers this year. You'll have more engineers a year from now than you do today for the enterprise because we have R&D relatively sacrosanct in terms of the impact of the business over time. Innovation is fundamental to our ability to grow. But we're reshaping this company for not the company we're proud of that we were, but the company we want to be going forward and making sure that we have a cost profile that enables us to invest at pace.

And so the consequence is we're going to get more throughput going forward from an engineering and tech standpoint tomorrow than we did yesterday. And then we basically, as we've said, while we're holding costs constant, you'll see SG&A basically go down a bit this year, but be flattish over the next couple of years. Technology will rise slightly, but that's all on account of our expectation of volume increases. Otherwise, technology can be relatively constant. And that allows our gross profit growth to flow right down, which we think is very important given our balance sheet.

Excellent. Let's talk about free cash flow, which you've guided to negative $70 million, but that includes $60 million of restructuring costs. And so sort of putting the pieces together, your top line is growing -- should expect it to grow mid-single digits over multiple years. Your costs we just talked about are going to be relatively flat, maybe some growth around hosting, but you put those pieces together, and so we should expect free cash flow to inflect in 2027. Like what's the message, particularly to investors that are looking at across your capital structure?

Yes. So that's exactly right. Our expectations based on our internal growth strategy is that bookings similar to this year is likely to grow mid-single digits in 2027. With that, we'd see revenue generally growing in concert with that. As we've articulated, we're targeting to keep our technology, except for hosting costs and SG&A roughly flat. So we expect really good flow-through from gross profit to adjusted EBITDA. And then we don't have the repeat of the restructuring costs this year. And so with a growing EBITDA, we would expect to generate more free cash flow, and we would expect it to be positive next year.

And then obviously, for us, that's very critical because the most important use of free cash flow for us is to ultimately delever our balance sheet. So we think this creates a really strong path to free cash flow generation in the future and further delevering on our balance sheet.

You've accomplished a lot from a liability management perspective. Your maturities are pushed out. What's left to do? Or is there anything left to do on your near-term to-do list?

Yes. So thank you for the question. I think we're actually fairly well positioned right now. So if we look at how we ended the year, we had $910 million of cash on our balance sheet. Of that $910 million, $98 million is basically to pay off some debt in the first quarter as a result of the last financing. So we really have $812 million of usable cash on our balance sheet. At the same time, as you just articulated, we have a clear path to positive free cash flow generation.

Our next large maturity is until June of 2029. So we think that the best focus right now for us as a company is really focus internally on our growth strategy, support our growth initiatives, focus on execution. And we think we're in a really good place right now at the moment and aren't compelled to do anything from a capital structure standpoint.

That's great. Any questions from the audience? Do we have a mic?

Yes, a couple of questions. First one is just around the dynamics on a potential bid for the company. Number one, are you guys going to sort of run a process now that you have this interest from Constellation other bidders. Number two, do you think antitrust prevents Travelport or [indiscernible] from getting involved here? And then number three, with respect to the capital structure, can roll over do...

Yes. I would -- as I said at the outset, I'm not going to comment on rumors or speculation. We're very focused on running the business. I think we articulated in the press release that we remain open to appointing Constellation to a seat on the Board, subject to reaching agreement with them. And I would just say, generally, we invite intelligent capital that makes sense for the company and for its shareholders. But that's something we'll consider only if we receive it. We're not running an active process today.

All right. We're just about out of time. So I want to thank you, Kurt. Thank you, Mike, for the conversation. Really appreciate it.

Good morning, and welcome to Sabre's Full Year and Fourth Quarter 2025 Earnings Conference Call. My name is Olivia and I will be your operator. As a reminder, please note today's call is being recorded. I will now turn the call over to the Senior Vice President, Finance, Roushan Zenooz. Please go ahead, sir.

Good morning, and welcome to our Full Year and Fourth Quarter 2025 Earnings Call. This morning, we issued an earnings press release, which is available on our website at investors.sabre.com. A slide presentation, which accompanies today's prepared remarks, is also available during this call on the Sabre Investor Relations web page. A replay of today's call will be available on our website later this morning.

We advise you that our comments contain forward-looking statements that represent our beliefs or expectations about future events, including results of our growth strategies, our AI offerings and AI-related developments in the industry, transactions and bookings growth, commercial and strategic arrangements, our financial guidance, outlook and expectations, pro forma financial information, free cash flow, net leverage and liquidity, among others.

All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today's conference call. More information on these risks and uncertainties is contained in our earnings release issued this morning, and our SEC filings, including our Form 10-K for the year ended December 31, 2025.

Throughout today's call, we will also be presenting certain non-GAAP financial measures. References during today's call to adjusted EBITDA, adjusted EBITDA margin, normalized adjusted EBITDA and normalized adjusted EBITDA margin have been adjusted to exclude certain 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.

Normalized amounts have been adjusted for estimated costs historically allocated to our Hospitality Solutions business, which was sold on July 3, 2025. We are also presenting certain financial information on a pro forma basis to give effect to the sale of the Hospitality Solutions business, and we have removed the impact of the $227 million payment-in-kind interest that was recorded in conjunction with the refinancing activity in the second quarter of 2025 from pro forma free cash flow. Unless otherwise noted, results presented are based on continuing operations.

Participating with me are Kurt Ekert, President and CEO; Mike Randolfi, CFO; and Garry Wiseman, President, Product and Engineering. With that, I will turn the call over to Kurt.

Thanks, Roushan. Hello, everyone, and thank you for joining us. 2025 was a challenging and dynamic year in which exogenous events impacted our operational results. Despite these challenges, we remain focused on execution and met or exceeded our financial guidance in the fourth quarter and ended the year with positive momentum. Moving forward, I believe we are well positioned for strong, sustained performance.

Our growth outlook today is driven by several key catalysts: continued distribution share gains, the expansion of our multisource content platform, solid growth in both hotel distribution and our payments business as well as improving performance in our airline technology business. As I've discussed previously, our industry is evolving rapidly, and Sabre is evolving with it. We are in the midst of a fundamental transition, moving Sabre from a GDS-focused company to an AI-native technology leader.

Before reviewing 2025 performance, I have some thoughts on recent market sentiment around AI disintermediation risk, the concern that AI bots could bypass our marketplace and connect directly to suppliers. We strongly disagree. AI needs what Sabre has already built: vast, constantly evolving data, integrated content, and complex logic purpose-built to solve travel's uniquely challenging workflows. We provide the foundational transaction layer AI uses to shop, price, book and service travel. We expect this shift makes us more essential, not less. We believe agentic AI will reshape the technology landscape, and we are positioning Sabre to lead in this next phase. As AI-native companies enter the travel ecosystem, they need Sabre's strong foundation, which provides breadth of content, modern cloud-native platform, and AI-native APIs, which we believe positions us as the platform of choice.

While we are in the early stages of sizing the AI opportunity and have not included any of the potential significant upside in our forward outlook, we are taking deliberate actions to align our talent and investments with the strategy and position Sabre for long-term growth and value creation. As part of these actions, today, we announced a series of executive leadership changes effective tomorrow. Garry Wiseman is promoted to President, Product and Engineering, with his remit expanded to include leadership of innovation and agentic AI; Shawn Williams is appointed Chief Operating Officer, and will lead Sabre's revenue and commercial operations functions; Andy Finkelstein steps into the role of Chief Commercial Officer, Travel Marketplace; and Dave Medrano was promoted to Chief People Officer. Separately, Roshan Mendis, who has been a superb leader during his many years with Sabre, most recently as Chief Commercial Officer, has decided to pursue another opportunity. Roshan will transition to Senior Adviser before departing the company in May. We deeply appreciate his contributions and wish him continued success.

On today's call, I've invited Garry to share our progress on delivering agentic AI solutions to drive long-term growth and why that makes us a critical part of the evolving AI ecosystem.

Now turning to Slide 4. For the year, we recorded double-digit year-on-year growth in normalized adjusted EBITDA, and generated positive pro forma free cash flow. A key focus for us is further strengthening our balance sheet, and we made significant progress this year by paying off over $1 billion in debt, which, when combined with growth in pro forma adjusted EBITDA, reduced our pro forma net leverage by approximately 25% compared to year-end 2024.

We continue to be proactive in managing our long-term capital structure. Through 2 successful refinancings in 2025, we have no large maturities until 2029, and over 90% of our debt now matures in 2029 or later.

We also ended the year with a strong cash balance of $910 million, which includes $98 million of restricted cash for debt repayments in the first quarter of 2026. While we have more work to do to reach our long-term leverage goals, these actions provide us with significant room to continue to invest and further grow our business.

On the right side of the slide, our technology investments are driving positive measurable results. AI has been a core systemic part of the Sabre technology stack for years, and we continue to lean into that advantage. In 2025, we seized the first-mover position in our industry with our introduction of agentic APIs and a proprietary MCP server designed for the travel industry. These agentic solutions help AI agents better understand and operate within the complexity of travel content and workflows.

We also launched several industry-first AI solutions and partnerships, which Garry will touch on shortly.

Sabre Payments was one of our fastest-growing businesses in 2025, with gross spend on the platform increasing more than 35% year-on-year and producing strong revenue growth. Our travel marketplace continues to deliver multisource travel content on an unprecedented scale and drove agency wins and expansions during the year. In the fourth quarter, air distribution bookings grew 4%, which included the direct and indirect impacts from the U.S. government shutdown, and we ended the year with air bookings growth of 7% in December.

Finally, we extended our leadership position in NDC by adding 15 live integrations during the year, bringing our total to 42, and we are seeing adoption ramp. We exited 2025 with NDC representing approximately 4% of total air distribution bookings, and we expect our rate of NDC bookings to accelerate throughout 2026.

Moving to Slide 5 and details on full year 2025 results. Overall results were positive across the board. Total distribution bookings grew 1% year-on-year and full year air distribution bookings were also positive. Within the airline technology, passengers boarded grew 2% year-on-year. Hotel distribution bookings increased 5% year-on-year to $42 million the attachment rate to air bookings increased over 130 basis points year-on-year. Gross hotel booking value transacted through the platform now exceeds $20 billion annually.

These positive results drove full year revenue growth, and combined with ongoing expense management, normalized adjusted EBITDA grew 10%. Normalized adjusted EBITDA margin improved over 160 basis points to 19%.

Moving to Slide 6. Our cloud-native technology foundation is driving growth across our portfolio. Within airline technology, we are delivering a growing suite of modular AI-driven solutions, ranging from new tools that optimize revenue in real time to a growing suite of gen AI chat and servicing capabilities. As airlines transition to modular offer order-based systems, we believe Sabre is well positioned to be the vendor of choice for their transformation.

With our SabreMosaic airline technology gaining momentum, we expect to drive positive IT Solutions revenue growth for 2026. Our travel marketplace provides a single connection to what we believe is the widest breadth of travel content in the industry. Air expansion is the combination of our distribution expansion and multisource platform growth strategies.

Despite a challenging 2025, we ended the year with strong momentum, driven by continued share gains. Growth in NDC bookings and our new LCC solution, which is now fully launched as well as continued growth from the SabreMosaic marketplace, we expect to see a meaningful year-on-year acceleration in air bookings growth.

Overall, we expect annual volume growth for both 2026 and 2027 to be in the mid-single digits. Importantly, now 6 weeks into the quarter, the strength we saw in December has continued and is broad-based across all regions and also within corporate travel.

Lodging expansion continues to scale, delivering over $350 million in annual LGS revenue in 2025, and we expect continued solid revenue growth in 2026.

Finally, we believe that Payment Suite, our integrated fintech hub, is well positioned for sustained growth. It remains one of the fastest growing areas within Sabre, with strong demand for our solutions that simplify operations, increase payment flexibility and automate risk and fraud management.

I'll now hand the call over to Garry, who will discuss AI and Sabre's AI strategy in greater detail.

Thank you, Kurt. Moving to Slide 7. AI needs us to power results, and we believe it is a huge opportunity for us. Let me explain why from a technology perspective. We sit on over 50 petabytes of curated travel data, and we have the greatest depth and breadth of content in the travel space. We process 14,000 transactions per second and 11 billion shopping signals per month. These unparalleled demand signals don't exist anywhere in the public domain. However, we enable pure-play AI companies to participate in a complex space with a simple connection to these insights.

We believe we are also critical in an AI-first world because of our proprietary and constantly evolving logic. Travel is extraordinary complex. We house over 50 years of servicing workflows, travel policies and compliance logic across 200-plus countries and thousands of supplier-specific fare rules and partner network agreements, all built through billions of real transactions. In short, we believe we have solved for almost every single edge case that has ever existed in travel anywhere in the world. This logic is proprietary and cannot be scraped from the web or reverse engineered. AI engines cannot independently obtain and orchestrate this logic.

While chatbots can generate itineraries, they can't book or service them reliably at scale. For example, we aggregate and normalize real-time flight results in sub-seconds across hundreds of sources. This is a huge technical hurdle for most AI players today. And this is why Virgin Australia, PayPal and a growing pipeline are building on us, not around us.

And finally, we have a first-mover advantage in the industry. We launched the first agentic APIs and MCP server for travel almost 6 months ago. This was purpose-built for LLM consumption at enterprise scale. It is in production now while competitors have yet to unveil their agentic APIs. Our open modular platform plugs into wherever travel gets sold and wherever consumers go next, which we believe is conversational commerce.

In summary, we own the foundational layer AI needs to transact travel. We believe the shift to agentic makes us more essential than ever.

Moving to Slide 8, I'll discuss our 3 recent strategic partnerships, which serve to demonstrate our leadership position within AI infrastructure. We believe Sabre is becoming the essential AI infrastructure for travel, serving both established companies modernizing their stack, and AI native start-ups building next-generation experiences. Our 3 recent partnerships confirm this. PayPal and MindTrip are building with us a next-generation agentic experience, unifying discovery, planning, booking, payment and servicing in one conversational interface. MindTrip brings the consumer platform, PayPal brings flexible payments and agentic commerce and Sabre brings an enterprise travel platform and agentic AI expertise. The product launch is targeted for the second quarter of 2026.

BizTrip, a Silicon Valley-based AI-native TMC, is combining our agentic capabilities with their AI assistants to build corporate travel functionality, handling complex bookings, real-time itinerary management and intelligent policy automation through natural language interfaces. They're leveraging our travel marketplace, agentic APIs and global network. Virgin Australia is the first airline deploying our Concierge IQ solution. It handles layered questions, delivers accurate bookable results and goes beyond booking to managing rebooking, miles redemption, refunds and backtracking. Virgin Australia is seeing improved experience and higher satisfaction with Concierge IQ. Additionally, we're exposing this functionality via our new ChatGPT plug-in for Virgin Australia. This ChatGPT plug-in solution is available for all of our travel supply partners.

Our AI solutions help our customers compete and win in the emerging AI ecosystem. Further, we believe we are well positioned to win in the new channel of conversational travel commerce by providing comprehensive shopping, booking and servicing capabilities to any company that is developing an agentic travel experience. Thank you.

Now over to you, Mike.

Thanks, Garry, and good morning, everyone. Please turn to Slide 10. Fourth quarter financial results were solid and generally met the expectations we shared on our third quarter call. These results reflect the continued improvement in operating trends we saw at the end of the third quarter, partially offset by impacts related to the government shutdown during the quarter.

In the fourth quarter, total revenue grew by 3% year-on-year, consistent with our guidance of low single-digit year-on-year growth.

Distribution revenue grew $27 million, an increase of 5%, primarily due to an increase in air and hotel distribution bookings, favorable rate impacts and an increase in other revenue.

Air distribution bookings grew 4% year-on-year, below the guidance of 6% to 8% we provided on our third quarter earnings call. While our previous outlook accounted for the government and military travel reductions known at the time, the impacts were broader than expected due to lower inbound U.S. traffic and an increase in flight cancellations.

As Kurt mentioned, we ended the year with strong momentum, achieving 7% air distribution bookings growth in December, and we anticipate mid-single-digit air distribution bookings growth in the first quarter.

IT Solutions revenue of $140 million was within the range of expectations we shared on our third quarter call.

Gross margin of 58% was also in line with our expectations. The year-on-year decrease in gross margin was primarily due to revenue mix and FX impacts of a weaker U.S. dollar.

Fourth quarter 2025 normalized adjusted EBITDA of $119 million increased 10% year-on-year, with normalized adjusted EBITDA margin expanding by 107 basis points to 18%. Normalized adjusted EBITDA growth was driven by higher revenue and continued expense management.

Pro forma free cash flow was $116 million for the fourth quarter, a year-on-year increase of $45 million. And recall, our quarterly pro forma free cash flow includes the negative impact of $19 million of disbursements related to refinancing fees and interest paid earlier than previously expected.

Moving to Slide 11 and full year 2025 results. For the full year, Sabre reported revenue of $2.8 billion, up 1% year-on-year, driven primarily by growth in distribution revenue. Gross margin for the year was 57.2%, within our expectations.

Full year 2025 normalized adjusted EBITDA of $536 million increased 10% year-on-year, with normalized adjusted EBITDA margin expanding by 166 basis points to 19%. Pro forma free cash flow was $57 million. We ended the year with a strong cash balance of $910 million, which includes $98 million of restricted cash for debt payments in the first quarter of 2026.

Moving to Slide 12. Full year results were largely in line with the expectations we outlined on our third quarter earnings call. Revenue growth of 1% met our guidance for flat year-on-year growth. Normalized adjusted EBITDA of $536 million was above our guidance of approximately $530 million, driven by continued cost management.

Pro forma free cash flow of $57 million includes $19 million of disbursements related to refinancing fees and interest paid earlier than previously expected due to the refinancing activity in 2025.

Turning to Slide 13. In 2025, we made significant progress on our capital structure, lowering overall debt and extending our maturities. We paid off over $1 billion of debt using cash on the balance sheet and proceeds from the sale of Hospitality Solutions. Importantly, we have also extended our debt maturity profile. Following 2 successful refinancings in 2025, we have no large debt maturities until the spring of 2029, and over 90% of our debt matures in 2029 or later.

Through growth in pro forma adjusted EBITDA and the reduction of debt, combined with our strong year-end cash balance, we have reduced our pro forma net leverage ratio by approximately 25% versus year-end 2024. We remain focused on further delevering, and I'm proud of the work we have done this year.

Moving to Slide 14, and our outlook for 2026, including a walk from 2026 pro forma adjusted EBITDA to free cash flow. Consistent with our strategy, we are providing 2026 guidance as well as commentary on 2027 to demonstrate that we believe we are well positioned to generate sustainable, positive free cash flow over the long term.

Our outlook excludes the potential upside from agentic AI initiatives, which we believe could be meaningful, but it's too early to quantify.

For full year 2026, we expect mid-single-digit volume growth, driven by continued share gains, growth of NDC bookings and our recently launched LCC solution. We expect the growth in volumes will lead to year-on-year revenue growth of mid-single digits. We also expect IT Solutions revenue to grow in the mid-single digits for the year and to be in the range of $140 million to $150 million per quarter, with growth coming primarily in the back half of the year.

As mentioned, we do expect that a portion of 2026 revenue growth will be driven by increasing NDC and LCC volumes, which drive incremental gross profit at a slightly lower margin. In addition to the impact of these accelerating volumes, some additional expected changes in mix as well as FX pressure, we anticipate 2026 pro forma gross margin to be in the range of 56% to 57%.

We are targeting to keep pro forma adjusted technology and pro forma adjusted SG&A lines relatively flat over the next 2 to 3 years through an inflation offset program. The goal of this program is to offset normal inflationary pressures over the next 2 to 3 years. We anticipate the pro forma adjusted technology line will reflect a low single-digit percent increase due to increased technology costs from higher volumes. We expect pro forma adjusted SG&A will decrease by a low single-digit amount for the full year 2026.

Through keeping costs relatively flat, we expect strong flow-through from revenue growth to pro forma adjusted EBITDA, which is expected to be approximately $585 million in 2026. We do not expect any significant change to our annual CapEx spend of approximately $80 million.

Annual cash interest in 2026 is expected to be approximately $470 million. This represents a year-on-year increase of approximately $140 million. The increase is primarily due to Sabre no longer receiving the cash benefit from the paid-in-kind instrument Sabre had in place from June 2023 through May of 2025, which provided us with the option to defer cash interest.

As part of our inflation offset program, we estimate total restructuring cost will be around $65 million. In the fourth quarter of 2025, we recorded a $51 million restructuring charge related to this program. We expect approximately $60 million of cash outflows related to the program in 2026.

One item to note before discussing our free cash flow guidance, going forward, we will not be utilizing the pro forma free cash flow metric as there are no further adjustments to be made to free cash flow for the sale of Hospitality Solutions. We expect 2026 free cash flow to be negative $70 million, driven primarily by the impact of the $60 million in restructuring costs associated with our previously discussed inflation offset program.

Excluding the restructuring charge, free cash flow for 2026 would be near breakeven. Looking beyond 2026, with the continued execution of our growth strategies, we anticipate the positive growth trends we have guided to in 2026 will extend into 2027. Our current expectation is also for mid-single-digit revenue growth in 2027, driven by continued revenue growth and ongoing cost discipline. We expect sustained year-on-year adjusted EBITDA growth and importantly, positive free cash flow in 2027.

Looking at Slide 15, and our expectations for the first quarter. We expect solid growth in the first quarter, with volume and revenue growth in the mid-single digits. We anticipate our first quarter revenue growth will result in higher year-on-year gross income. We expect first quarter pro forma gross margin to be at the lower end of our expected annual range of 56% to 57%, primarily due to revenue mix and FX impacts of a weaker dollar. We expect gross margins for the remaining 3 quarters of 2026 to be higher versus the first quarter due to the impact of higher margin sales, including media as well as payments.

Additionally, in the first quarter, we expect pro forma adjusted technology expense will be higher on a year-on-year basis, primarily due to volume growth and typical wage inflation.

Moving to pro forma adjusted SG&A. We expect a year-on-year increase due to a combination of typical wage inflation and the impact of a sales tax refund benefit of $7 million in the prior year that is not expected to recur. For the remainder of '26, we expect that costs will generally trend down due to the impacts of our inflation offset program. Overall, we expect first quarter pro forma adjusted EBITDA to be approximately $130 million.

We expect quarterly free cash flow to follow historical seasonality, and expect the first and third quarters to reflect the majority of the full year increase to cash interest expense. For additional details, we've included a schedule of expected quarterly cash interest within our website financials available on our Investor Relations website.

Our strategy remains focused on generating free cash flow and delevering our balance sheet and driving sustainable growth through innovation. We made significant progress against these priorities in 2025. Building on the momentum we exited 2025 with, we are excited for the year ahead, and we are optimistic that Sabre is positioned to transition to a period of higher revenue growth going forward.

And with that, operator, please open the line for questions.

[Operator Instructions] And our first question coming from the line of Dan Wasiolek with Morningstar.

Probably a question here for Garry. So guys have obviously been hard at work with your AI tool development. I can see how that strengthens your network ecosystem. Just wondering kind of what still needs to be done in your view on the AI front? What should we be looking for? And then in the prepared comments, it was mentioned upside opportunities from AI. Just wondering if maybe you could provide some more color on what those might be?

Thank you for the question.

Go ahead, Garry, just jump right in.

Yes. So I think on the AI front and relative towards the travel use cases, for me, really what is going to be the next stage here is to generally show the end-to-end experience of conversational commerce in travel. And so that's what we're doing with the partnerships that you've seen with MindTrip and with PayPal, where, through the MindTrip app itself, you can have a great experience in terms of building an itinerary that's personalized, that's highly relevant towards your needs as you try and plan your next trip. We then come in, in terms of making sure that we provide you the greatest offers in terms of how to get there, where to stay? And then obviously, with PayPal, they then are able to help in terms of the payment, whether it's a single payment or actually payment over time through installments to make sure that you can actually afford that particular trip. So that's been one of the things for me that's been missing when it came to AI and a travel experience is that no one has really done that end-to-end yet from really the discovery, the planning, the booking, the payments and the servicing. So that's what I'm super excited to see as we go into the second quarter of 2026. Go ahead, Kurt.

Yes. I was just going to add, one of the interesting things that is unique about Sabre, as Garry alluded to in the prepared remarks is we already have the full breadth of data, content, intelligent shopping, servicing capabilities. Putting the front-end agentic layer on there, as Garry would articulate, is actually not that technically complex. It's just a matter of extending our capabilities into it as a new ecosystem of agentic travel.

And then anything, I guess, to -- that you're willing to remark on like upside opportunities that might evolve from AI in the years to come?

Yes. I think the best way to think about this in my eyes is, if you think back, if you're as old as I am, 30 years ago, you saw the emergence of online travel agents as a fundamentally new channel. And that had the impact of taking share away from both supplier direct and indirect channels at the time. I think what you're going to see with agentic travel, these are the agentic players as well as tech platforms, is that is going to emerge similar to the way OTAs emerged as a fundamentally new channel, probably happen even more rapidly than what you saw with the emergence of OTAs.

When you think about which channels are at risk, I think it's those that are subject to an Internet or electronic experience today. So less impacted should be corporate travel and brick-and-mortar travel agencies, more impacted would be supplier direct where you have nonloyal travelers, Metasearch, which is not an end-to-end experience because you're being linked off. And then third would be OTAs, obviously, OTAs are going to play in this very differently. So we think the offensive opportunity for Sabre is very substantial. Again, very hard to articulate how large that agentic sector is going to be and the pace at which it is going to play. But we believe we have a distinct market advantage in terms of speed to market today. So we're looking to plant flags very aggressively.

And our next question coming from the line of Josh Baer with Morgan Stanley.

I think you did a great job addressing the topic of agentic and AI bots. I was hoping you'd do the same with just direct connects generally. One of the challenges of airlines or -- and OTAs, other travel buyers just building direct connects is the huge cost burden in establishing and also maintaining and supporting those connections from an R&D and a developer and infrastructure perspective. Does the introduction of gen AI change that economic equation at all? Just thinking about lower cost of coding, increasing productivity of a developer, yes, if you could weigh in there on that topic?

Yes, this is Kurt. Let me have Garry jump in first on the, what I'll call the physics of direct connect, and how that will emerge in an agentic world. And then I'll comment on the industry structure a bit.

Yes. Thank you, Kurt. So really, this comes down to what makes us a great partner for an AI company or only company to work with rather than attempt to really replicate what we do. So we have a highly scalable marketplace obviously, with that vast selection of travel content that we both have the contractual rights to aggregate, normalize and display at a speed that an AI agent could not do in a real-time fashion, which is due to our volumes, which means that we can predictably cash content in such a way that individual suppliers cannot. And hence, we can cope with that look-to-book ratio that is a severe tax on suppliers' infrastructure costs. So this is something, again, that whether it's in a general web search or any type of shopping scenario that could be AI or not is something that we excel at in terms of responding in sub-second times compared to what is today taking 8 to 9 seconds if you connect directly to supplier and shopping on their APIs independently? Kurt?

Yes. Thank you, Garry. And so think about direct connects generally, for folks who enable a direct connect, and Sabre is an amalgam of 500 airline direct connects and thousands of hotel direct connect, for example. When you have look-to-book coming inbound and you have massive complexity, that creates challenges, both for the supplier who's dealing with this inbound traffic, Number 2 is for the person doing the direct connect, very difficult to manage that environment. We've spoken previously about the opportunity for reintermediation of some of the direct connect traffic. I think you'll see that in some of our results going forward.

With agentic AI, that problem is going to be exacerbated for both the suppliers with inbound traffic and response times; and two, for folks who may have those direct connects in place like OTAs. So I actually think the utility that we provide tomorrow in an agentic world is actually going to be even more important than it was yesterday.

Okay. That's helpful. And then I was just hoping you could unpack this inflation offset program a little bit further. What exactly is inflating? Is that just wages? Is it other costs? And what exactly is offsetting?

Yes. As part of any cost to cost, you over time have some inflation, primarily wage inflation, but then you also have some contractual inflation, technology costs tend to go up. One of our goals is to keep our key line items of technology cost and SG&A roughly flat, except for some volume-related hosting costs. So we've embarked on a program basically to drive efficiency and effectiveness through our organization with the goal of over the next 2 to 3 years, keeping those cost items relatively flat such that as we grow bookings and revenue, we see strong flow-through to EBITDA and EBITDA margin accretion and ultimately greater free cash flow.

Okay. So that's layoffs and future restructurings?

The way I would think about it is I put it in 3 categories. One is leveraging best-in-class geographical location. Second, working with third parties who have certain expertise and efficiencies to a greater degree and then further embedding AI into our workforce and greater enabling our teams to be as productive as possible, and that's the focus.

And I would just say, in doing this, we hold 2 things relatively sacrosanct. One is operational delivery for our customers; and then two is research and development. And just anecdotally, we'll have more engineers working on Sabre a year from now than we do today. We're going to be ramping engineers through the year and doing that effectively through this program.

And our next question coming from the line of Jack Halpert with Cantor Fitzgerald.

Just another on the agentic AI stuff. So you have a relationship with Google for other parts of the business. Do you see any opportunity to deepen your relationship with Gemini on the agentic AI front? And are you having any conversations with other leading AI labs, OpenAI, et cetera?

And then just secondly, on capital allocation. I know you made a lot of progress in the debt paydown this year. Moving forward, can you talk about how you're thinking about capital allocation for 2026 and beyond? Is the debt profile still the #1 priority? Or do you feel like you're at a good level to start shifting investment more towards growth initiatives?

Thanks, Jack. I'll take the first question and then ask Mike to speak about capital allocation. So we've got a great relationship with Google. Our AI infrastructure is effectively built on Google's Vertex and now Gemini AI capabilities. I'd say what you've seen is the tip of the iceberg in terms of relationships and partnerships that are going to come in the market. We're in conversations with effectively all the meaningful large players out there, which is why we believe this is such a significant opportunity for Sabre. And let me turn it to Mike to speak about capital allocation.

Yes. First, I'll start with the back part of your question first. And I would say, we prioritize our investment in our growth initiatives, our growth strategies and our agentic AI push forward. So that's a priority, that's always been a priority. With regards to capital structure, we've been thoughtful and proactive with regards to our capital structure. We'll continue to do so. But I think we're actually in a pretty good place today. We ended the year with $910 million of cash in the balance sheet. Now $98 million of that's in escrow for some debt paydowns in March of 2026. So really, the usable cash is $812 million. We expect to ultimately be generating positive free cash flow over the long run. And if you look at our maturity ladder, I think we put ourselves in a pretty good place. We have no large maturities up until June of 2029, and we've done that pretty efficiently in terms of costs. So we think we're in a pretty good place at the moment.

[Operator Instructions] And our next question in queue coming from the line of Victor Cheng with Bank of America.

Good slides on the agentic AI initiatives. Maybe on the volume growth for this year, can you walk us through maybe the cadence of it? Obviously, you're guiding mid-single-digit for Q1 and full year. I think earlier this year, you're still analyzing some of the share gains that you have. So what is sustainable growth in H2? Is that related to the multisource low-cost carrier initiative? How is that working?

And then secondly, on NDC, you talked about that going up 4%. Can you talk a bit about where you're seeing that growth coming from? Are TMCs finally getting on board and maybe by region as well? And I will have a quick follow-up.

Victor, thank you, a multipart question as usual. Number 1 is with respect to distribution volume growth for this calendar year. As we indicated, we expect to see mid-single-digit distribution volume growth for 2026 and again for 2027. As we indicated in December, we saw 7% air distribution volume growth. We've seen a similar trend year-to-date so far. That's broad-based across all regions. It includes corporate travel, which we indicated was actually negative last year, so a much healthier market environment today.

When we look at this in a componentized fashion, first of all, we expect -- our assumption is that GDS market, which we said is largely flat from '25 to '26, so the growth that we're indicating is largely organic performance by Sabre. Number 1, we expect to continue to take share. That will be the realization of share takeaways that we implemented last year. We have other things that are being implemented, and we expect to continue to win at pace. Two is NDC, which reached 4% adoption at the end of last year. We expect that to continue to scale, and I'll speak about that further in a second. And then 3 is, we spoke last year about the integration of additional low-cost carrier inventory and the launch of our multisource platform and new low-cost carrier. That is all fully in production today. It's one of the key reasons we're winning, and we expect to pick up incremental bookings from those carriers as well.

With NDC more specifically, we're seeing it pretty broad-based in terms of adoption by OTA and TMC. And I'd say it varies by region, but it's very specific to carrier. So for example, you might have a large carrier in South America, which has broad NDC adoption. And if that's a top 2 or 3 carrier, that will drive adoption for the region in total. But I would say, generally, you're at a point now where, as we indicated, we have 42 carriers live within our NDC solution. We've done a significant amount of work on functionality to basically normalize workflow differences between EDIFACT and NDC for the travel agent, and that's mitigating any productivity or user experience impacts that they may have had previously. So again, we expect that to scale at pace as we go forward.

That makes sense. And maybe a quick follow-up on the restructuring. Should we expect the inflation offset program to continue? And kind of any cash flow impact for '27 as well potentially?

Sure. So we believe the total quantum of the restructuring will be around $65 million. As we talked about, we had a $51 million charge in the fourth quarter of 2025. The bulk of the cash flow impact will be during this year in 2026, and that's the $60 million you see in our guidance slide. So in 2027, any cash flow impacts we expect would be de minimis. Could be some, but I would expect it to be de minimis.

Our last question will come from the line of Jed Kelly with Oppenheimer.

Great. Just on the free cash flow guidance, can you give us an update on how your discussion is going with sort of your debt holders and free cash flow being flat? Would love to hear an update there.

Yes. I mean, well, Jed, we just -- as you know, we just completed a significant refinancing of $1.8 billion. That refinancing went very, very well. We did that at an interest cost of [ 11.8% ]. And the free cash flow profile today is the same as when we conducted that refinancing. So overall, we are focused on generating positive free cash flow. We expect to generate positive free cash flow in 2027, and we have a strong cash balance.

Yes. And Jed, just keep in mind, as Mike indicated during the prepared remarks, free cash flow projection for this year includes the $60 million of impact from restructuring and about $130 million year-on-year difference from the PIK moving to cash. So there's no more PIK that we hold today.

And then I would love to hear your -- I guess I'm last, I will ask a couple. You said corporate travel is holding up pretty well. That's good to hear. Is that kind of a comp issue? Or what's going on there? And where are you seeing the strength? Is it coming more from the traditional travel agencies? Or is it coming from some of these new self-service players that we hear about?

I'd say corporate travel and TMC traffic, which was trailing the market last year. We're seeing positive signs in the first part of this year. That's fairly broad both with traditional or existing players as well as some of the new entrants, and we have good exposure to both parties.

Got it. And then I guess just my final one. I appreciate all the commentary around AI. Just -- and you've been in the travel industry for a while. When you hear all these direct connections and you can see the market is pretty excited about it, if you just look at the relative outperformance between Marriott, like a booking or any third-party travel agent, I guess just wondering, as we kind of see this evolve, how does this differ than search where I assume these direct connections were available for a while, but the suppliers never took advantage of search. And I guess, what makes this difference? Because I got to assume Google is not going to give away their search advertising business and OpenAI is going to need a pretty big auction advertising business to pay for all their compute requirements. So just wondering how you kind of see this evolving?

Yes. So what's interesting -- what's very different about -- let me compare this to Metasearch, which is Google Flight Search or Kayak, for example, where you get to compare, as a consumer, many different price points. And then you can launch into a different ecosystem to consummate your booking, into the supplier direct or into the OTA, for example. What we've heard from effectively every agentic player in the large tech platform that we've spoken to in recent months is they want to have an integrated end-to-end experience to include changes, servicing, et cetera, which doesn't sound like a Metasearch experience whatsoever. It sounds more like an agency experience. And so as Garry indicated, we think we're very well positioned to enable that. But when you think about this on a channel basis, and I talked earlier about supplier direct, let's say, nonloyal customers and Metasearch, we have a de minimis or almost no share impact from either of those 2 channels today.

So as an intermediary, to the extent that those channels are impacted, that will have no adverse effect on Sabre. If OTAs are adversely impacted, that's between 20% and 25% of our intermediary trading volumes. But we think the OTAs especially, folks like Priceline or Expedia are very well positioned to compete there. So we look at this and say, agentic and us backing the agentics is an offensive new opportunity to the extent there's downside risk, the downside risk to us given our ecosystem is relatively small.

Got it. And then nice announcement with MindTrip and PayPal, [indiscernible] MineTrop people, pretty interesting platform they're building. Can you just expound on that? And just -- I know you said it in your prepared remarks, but any additional color we can add for people on the call?

Yes. Garry has been the architect of that, so I'll ask him to separate in.

Yes. So as I mentioned earlier, in terms of the way we're working together here is that MindTrip is that front-end experience where they're using agentic capabilities in order to really allow discovery and trip planning. So let's say you want to go to Japan. You've got 2 teenagers, one's into Manga, you can tell it that, and it will start to suggest an [indiscernible] places to go, things to go and see. And then combined with that, it will start calling us for hotel information as it's planning the itinerary to map out what a good hotel would be near a particular attraction that might interest you. And eventually, it will start to call us for flights as it builds the full itinerary. And then from that point onwards, as you decide, okay, this is the trip I actually want to go for, that's where PayPal comes into mix. So PayPal, as I said earlier, they have the instant payment option, of course, but then also they provide installment payments as travel, these days, particularly international travel, can get quite expensive. So the ability to pay in, in installments is also, I think, a very critical part of this particular experience.

And then after that, we provide the booking and the servicing capabilities. So if during the trip you're running to issues, you need to reschedule things, rebook, et cetera, you can come back to the MindTrip app and simply tell it that you'd like to change your flight. So it's really -- it's an end-to-end experience for consumers as they look to discover, plan, book and then be serviced throughout the travel experience.

This ends the Q&A portion of the call. I will now turn the call back over to Mr. Ekert, CEO, for any closing remarks.

Thank you, everybody, for the interest today. We are extremely optimistic and excited for the year and the years ahead, and look forward to sharing results with you in the next quarter and quarters ahead. Take care.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Good morning, and welcome to the Sabre Third Quarter 2025 Earnings Conference Call. My name is Olivia, and I'll be your operator. As a reminder, please note today's call is being recorded. I will now turn the call over to the Senior Vice President of Finance, Roushan Zenooz. Please go ahead, sir.

Good morning, and welcome to our third quarter 2025 earnings call. This morning, we issued an earnings press release, which is available on our website at investors.sabre.com. A slide presentation, which accompanies today's prepared remarks, is also available during this call on the Sabre Investor Relations web page.

A replay of today's call will be available on our website later this morning. We advise you that our comments contain forward-looking statements that represent our beliefs or expectations about future events, including results of our growth strategies, transactions and bookings growth, commercial and strategic arrangements, the effects of the sale of our Hospitality Solutions business and our financial guidance, outlook and expectations, pro forma financial information, free cash flow, net leverage and liquidity, among others.

All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today's conference call. More information on these risks and uncertainties is contained in our earnings release issued this morning and our SEC filings, including our Form 10-Q for the quarter ended September 30, 2025. Throughout today's call, we will also be presenting certain non-GAAP financial measures. References during today's call to adjusted EBITDA, adjusted EBITDA margin, normalized adjusted EBITDA and normalized adjusted EBITDA margin have been adjusted to exclude certain 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. Normalized amounts have been adjusted for estimated costs historically allocated to our Hospitality Solutions business, which was sold on July 3, 2025. We are also presenting certain financial information on a pro forma basis to give effect to the sale of the Hospitality Solutions business and we have removed the impact of the $227 million payment in kind interest that was recorded in conjunction with the refinancing activity in the second quarter of 2025 from pro forma free cash flow.

Unless otherwise noted, results presented are based on continuing operations. Participating with me are Kurt Ekert, President and CEO; and Mike Randolfi, CFO. With that, I will turn the call over to Kurt.

Thanks, Roushan. Hello, everyone, and thank you for joining us. Earlier today, we reported third quarter results and provided an updated outlook for the remainder of the year. 2025 has been a dynamic year, and I'm encouraged by recent positive commentary from airlines and believe the broader travel environment is stabilizing compared to what we saw earlier this year. Third quarter operational results met our expectations as we focused on controlling what is within our control. I commend our team members for their continued progress against our strategic priorities, generating free cash flow and delevering the balance sheet and driving sustainable growth through innovation.

We delivered positive air distribution bookings growth in the third quarter, driven primarily by strong performance in September. Based on our progress around the implementation of new business and our outlook for the remainder of the year, we remain confident in our ability to continue to drive air distribution bookings growth going forward.

We have strengthened our balance sheet by growing adjusted EBITDA, generating free cash flow, extending debt maturities and proactively using cash to reduce debt. We have made significant progress over the last 2 years on our strategy for delevering, and we anticipate reducing our net leverage by approximately 50% by year-end 2025 compared to year-end 2023. While there is more work ahead to achieve our long-term leverage goal, we are proud of the progress we have made.

Innovation is key to Sabre strategy, and we have been leveraging AI to transform travel. This quarter, we announced two industry firsts, agentic APIs for travel, enabling a new era of AI-driven retailing and Continuous Revenue Optimizer, an offering within our modular AI-native SabreMosaic platform. Further, our payments business continues to see strong customer demand and is growing at a very healthy rate. We have extended our industry-leading position with 41 live NDC integrations.

New agency wins and renewals, first-mover product launches and continued innovation increase our confidence that we are well positioned competitively. Moving to Slide 5. I will provide some detail on our third quarter results. Overall, operational and financial results were positive. Total distribution bookings grew 3% year-on-year and air distribution bookings increased more than 2%. Consistent with broader airline commentary, we experienced softness in July air bookings and then saw improvement through the balance of the quarter. September finished strong, up 7% year-on-year. The acceleration in air bookings was primarily driven by contributions from newly converted business as a result of our growth strategies. In July, air distribution bookings from our growth strategies totaled $2.5 million. And in September, that grew to over $3 million. For the third quarter, air bookings from our growth strategies contributed 10 percentage points to total air bookings growth.

This growth was partially offset by two notable headwinds. First, GDS industry air distribution bookings declined approximately 1 percentage point year-on-year. Second, Sabre's air booking mix was a headwind in the third quarter. This reflected Sabre's higher exposure to U.S. government and military and corporate business as well as the impact of regional mix.

We continue to believe these headwinds are transitory, and we are encouraged with the improved performance of certain regions as we move into the fourth quarter. Hotel distribution bookings growth increased 6% in the quarter, and the attachment rate to air bookings increased over 100 basis points year-on-year. Within IT Solutions, passengers boarded grew 3% year-on-year. Solid operational execution resulted in third quarter revenue growth of 3%. Top line growth, combined with ongoing expense management resulted in normalized adjusted EBITDA growth of 23%.

Normalized adjusted EBITDA margin improved over 300 basis points to 21%. Moving to Slide 6. We are transforming our broader platform into a modern open travel marketplace that seamlessly integrates and normalizes content and capabilities from a wide range of sources. In multisource content, Sabre continues to demonstrate industry leadership. We are leading the industry with 41 live NDC connections, providing seamless shopping, booking and workflow integration.

We are also on track to launch our new low-cost carrier solution in the first quarter of 2026. Our distribution expansion strategy is progressing well. In addition to adding new agencies and significant conversion volumes, we recently announced that World Travel Inc. has expanded its strategic partnership with Sabre and is converting substantially all of their volumes onto the Sabre platform. This momentum further advances Sabre's position as a strategic technology partner to leading agencies around the world.

Hotel B2B distribution gross booking value transacted through the platform continues with an annualized turnover of over $20 billion, a 7% increase year-on-year. Our digital payments business also continues to scale rapidly, and I will provide a deeper look into this business on the next slide. We are also making considerable advances related to AI, which I will touch on shortly. Overall, we are making significant progress against our strategy and transforming the business to capture long-term value in the dynamic and evolving travel marketplace.

Moving to Slide 7. Sabre Payments is an integrated fintech hub. It is one of our fastest-growing businesses, processing over $20 billion in annual transactions and quarterly gross spend grew over 40% year-on-year. Payments provides travel-focused solutions that simplify operations, enable global payment flexibility and automate risk and fraud management for our customers. The fintech hub is comprised of two key components: Sabre Direct Pay and Conferma.

Sabre Direct Pay is our travel payment service that streamlines financial operations across the travel industry. Travel payments and automated chargeback management services run through a single integrated interface. This interface provides customers with greater efficiency, faster dispute resolution and improved win rates. Conferma is a virtual card and payment platform providing issuers, corporate buyers and suppliers with real-time control, enriched data and automated reconciliation.

This enables faster, safer, broader business payments. We are scaling this business quickly and seeing strong growth in digital wallets and virtual cards. By the end of this year, we expect to have approximately 100,000 connected hotels. Conferma is developing new API integrations that we expect could accelerate additional virtual card deployments and further adoption. We believe strong ongoing customer demand positions our payments business for continued robust growth.

On to Slide 8. AI represents an incredible opportunity for the travel industry and for Sabre provides a road map for future growth. We have leveraged our deep partnership with Google to embed AI within our platform in three ways: First, optimization AI, which delivers value today. Sabre IQ already powers live AI-driven products, which generate measurable ROI for airlines and agencies today. These include Lodging cross-sell, which intelligently recommends hotels with air bookings and e-mail parser, which automates traveler requests and agent actions and dynamic pricing, which optimizes fares and ancillaries in real time.

Next, generative AI, the current phase of acceleration. We have built digital assistants and chatbots to make travel planning and servicing more intuitive. As a trusted content provider, Sabre's Gen AI solutions help ensure accurate and contextual information across customer touch points. And finally, Agentic AI and consumer LLMs. This is our innovation horizon. Agentic AI anticipates traveler needs and takes actions on their behalf.

We believe this new conversational commerce will be how consumers search, shop and experience travel servicing in the near future. That is why we have taken a first-mover position with Agentic-ready APIs and a proprietary MCP server. These Agentic solutions make the language of travel understandable to any AI agent.

Google has spotlighted Sabre's latest AI innovations at its global events, drawing strong industry acclaim. On to Slide 9. Moving to our outlook for air distribution bookings for the fourth quarter and full year. The chart on the right shows reported quarterly air distribution bookings growth for the first 3 quarters of the year and our outlook for the fourth quarter. Our view for the fourth quarter is largely consistent with what we have said previously, excluding the anticipated impacts from the government shutdown.

We exited September with strength that carried into early October. However, the government shutdown impacted October air distribution bookings by approximately 3 percentage points, and we expect this impact to carry through the fourth quarter. As a result, we now anticipate fourth quarter year-on-year air distribution bookings growth of between 6% and 8%. The commentary around the broader travel industry is encouraging and could signal a normalization of trends going forward.

We continue to believe the challenges we have navigated during 2025 are largely transitory and as volumes from our growth strategies accelerate through the end of the year, we are well positioned for growth. Additionally, we are optimistic that our positive momentum as well as the launch of our LCC solution in early 2026, positions Sabre for mid-single-digit air bookings growth in 2026.

In summary, we are focused on controlling what we can control, namely delevering the balance sheet and driving sustainable growth through innovation. With continued execution, the development of our AI solutions and opportunities in adjacent spaces such as payments and hotels, we believe Sabre is well positioned for long-term growth. Thank you. And now over to Mike.

Thanks, Kurt, and good morning, everyone. Please turn to Slide 11. For the third quarter, Sabre reported revenue of $715 million, up 3% year-on-year, consistent with our guidance range of low to mid-single-digit growth. Distribution revenue grew $24 million, driven primarily by an increase in air and hotel distribution bookings as well as an increase in product revenue. IT Solutions revenue of $140 million was flat year-on-year as growth from passengers boarded was offset by a decrease in license fee revenue.

We continue to expect fourth quarter IT Solutions revenue to remain in a similar range of $140 million to $145 million. On a normalized basis, gross margin decreased 130 basis points in the third quarter versus the prior year. The decrease in gross margin is due primarily to two items: lower-than-expected revenue from certain higher-margin product sales and continued FX impacts of the weaker U.S. dollar, where Sabre generates revenue in dollars but pays some agency incentives in local currencies.

Looking forward, we expect these gross margin pressures to continue into the fourth quarter. Third quarter 2025 normalized adjusted EBITDA of $150 million increased 23% year-on-year with normalized adjusted EBITDA margin expanding by 340 basis points to 21%. Pro forma free cash flow was $13 million, and we ended the quarter with $683 million of cash on the balance sheet. Moving to Slide 12. As Kurt outlined, third quarter results were largely in line with the expectations we outlined on our second quarter earnings call.

Revenue growth of 3% met our guidance for low to mid-single-digit year-on-year growth. Normalized adjusted EBITDA of $150 million was at the high end of our expectations. Pro forma free cash flow of $13 million was below our expectations. The variance was driven approximately 1/3 by lower receipts and 2/3 by higher disbursements. Receipts were lower due to the cadence of the quarter. There is roughly a 30-day lag between bookings and receipts. July and August air distribution bookings were relatively flat year-on-year, which was lower than our forecast and virtually all bookings growth in the third quarter occurred in September, which did not benefit third quarter receipts.

Regarding higher disbursements, certain payments that were forecasted to be paid in the fourth quarter of 2025 and in 2026 were paid in September. Based on our updated working capital forecast, we now expect free cash flow for the full year 2025 to be approximately $70 million. Turning to Slide 13. Over the past 2 years, we have made significant progress on our capital structure, lowering overall debt and extending our maturities. This year, we have paid off over $1 billion of debt. As part of that, in the third quarter, we repaid approximately $825 million of debt from the proceeds of the Hospitality Solutions sale.

We have pushed out maturities as well with over 60% of our debt maturing in 2029 or later. With our current outlook, by the end of 2025, we expect our pro forma net leverage will be approximately 50% lower versus year-end 2023. We regularly look for opportunities to efficiently refinance our debt and extend our maturities. As we look to 2026 cash interest, we expect 2026 to reflect our projected 2025 full year interest expense of $441 million that is included in our GAAP to non-GAAP reconciliation, plus the impact of any potential refinancings as well as any changes in the forward curve.

On to Slide 14 and our outlook for the rest of this year. We anticipate fourth quarter air distribution bookings growth of between 6% and 8% with a midpoint of 7%. This compares to our prior fourth quarter guide of 6% to 14% with a midpoint of 10%. The 3 percentage point reduction in the midpoint of our guide is driven primarily by the impact of the government shutdown. We expect low single-digit fourth quarter year-on-year revenue growth, and we expect pro forma adjusted EBITDA of approximately $110 million. Our fourth quarter adjusted EBITDA guidance incorporates a $10 million to $12 million impact from the government shutdown.

We expect to generate pro forma free cash flow in the fourth quarter of approximately $130 million. As a reminder, the fourth quarter is typically our highest free cash flow quarter due to the seasonality of working capital. Our full year outlook for air distribution bookings growth is positive and is within the guidance range we shared on our second quarter call.

With our updated outlook for the fourth quarter, we expect full year air distribution bookings growth to be near the low end of our previously provided range of 0.5% to 3.5% -- we expect full year 2025 pro forma adjusted EBITDA to be approximately $530 million, representing year-on-year growth of 9%. We have not made any changes to our assumptions for either CapEx or cash interest.

We expect full year 2025 pro forma free cash flow of approximately $70 million and to end the year with a strong cash position of approximately $800 million. In closing, we are making progress on our strategy to generate free cash flow and delever the balance sheet and drive sustainable growth through innovation. We expect the anticipated acceleration of volumes in the fourth quarter will provide solid momentum into 2026.

And with that, operator, please open the line for questions.

[Operator Instructions]

Our first question coming from the line of Josh Baer with Morgan Stanley.

I was hoping we could just run through the updated FY '25 guidance again and help bridge from what it was last quarter to this quarter. And really focusing on EBITDA and free cash flow. I know you called out some of the headwinds from government shutdown, but really just wondering why EBITDA is now $20 million lower from the midpoint and free cash flow $50 million. And I know you were talking through some of the receipts and disbursements. I would think some of that would sort of normalize or those September receipts come in, in Q4. And so why the bigger move in free cash flow versus EBITDA?

Yes. So I'll take that question. So if you go from the midpoint of our guide last time at $550 million to $530 million, the biggest component of that is going to be the $10 million to $12 million impact from the government shutdown. The other difference is, as you look from Q3 to Q4, as we highlighted in our prepared remarks, we did have lower margin from FX and lower high-margin product sales. We do expect that to continue into the fourth quarter.

And so that's essentially your difference between your $550 million and $530 million. If you recall, your -- what correlated in terms of free cash flow to $530 million of EBITDA was $100 million of free cash flow last quarter. And as I articulated this quarter, there was a difference between our expectations of around $27 million. We expected to come in around $40 million of free cash flow. Instead, we came in around $13 million.

And to be clear, about 1/3 of that was due to receipts, 2/3 was due to disbursements. On the receipts, the way to think about that is as we came through the third quarter, as we articulated, receipts are essentially determined by the prior couple of months in the quarter. And August, in particular, fell short. And we had a strong September, which would bode well for receipts in October. However, we had a step down in bookings that wasn't in our original projection because of the government shutdown.

So that gets offset in the fourth quarter. So when you get into early next year, because we would expect this quarter to be back-end loaded, we would expect to have slightly higher receipts than we would have otherwise, but it won't necessarily show up in the fourth quarter. On disbursements, essentially, there were elements there that were timing. So of the disbursements, the way I would think about it, is there's a portion of our disbursements that were made in September that we either contemplated in forecasted for Q4 or early 2025.

However, because of timing of work, because of timing of combination of invoices, commercial negotiations, disbursements were slightly different. For example, we had a $7.5 million disbursement in the September month that we originally had forecasted for Q1 of 2026, and it was tied to an agency commercial agreement. But because of what was best for the commercial agreement overall, the payment was made in September. So you don't necessarily get that back this year, and that's what drives you from the $100 million to the $70 million.

Okay. That's really helpful. And just to clarify on the government shutdown impacts, maybe everyone else knows this, but is this because of like staffing, airport and safety? Is it actual government travel spend that's impacted? Or is it more related to the impacts to the consumer and the macro when you quantify that?

Yes. Thanks, Josh. To date, the impact is almost entirely travel by government employees and/or U.S. military. We have a high concentration of the U.S. military and government as a component of our business. Just for clarity, for example, in 2024, U.S. military government represent about 4% of our global air distribution volumes.

That number is quite de minimis in terms of current trading volumes. To date, we've not seen a material impact in terms of the overall industry. But obviously, if you look at operating issues in airports with air traffic control, that is a risk going forward, but not something that's, again, material to date.

Our next question coming from the line of Victor Cheng with Bank of America.

This is Carla for Victor Cheng at Bank of America. Two questions from my side. The first one is what's the mix of your air bookings that is tied to the U.S. government travel? And how can we think about the impact of bookings in Q4 if the shutdown continues? And second question, do you have any updates on your current NDC mix? Is it still in the low single digits?

Yes. Thank you, Carla. For clarity, when you say what is the mix of U.S. military and government, can you clarify what you're asking there?

Yes. So just the mix of your air bookings that is tied to the U.S. government? And how can we kind of forecast our bookings estimates based on the shutdown?

Okay. We don't break out the details of our military and government if you're asking domestic versus long haul, for example. Again, if you go back to last year, that was about 4% of our air trading volume in the distribution business. That number is quite de minimis in terms of current trading right now.

NDC remains a low single-digit number for us. That's between 2% and 3% of our air distribution volumes. It is growing at a rapid rate. We do expect it to scale as we go forward. And I will emphasize, as we noted during our prepared remarks, we now have 41 live NDC connections. These are the same API connections that you would get if you were a direct connect or any other provider. We have leading functionality that is facing buyers and travel agencies. We feel we are very well positioned in this two-sided market as NDC scales to be a grower.

Our next question coming from the line of Jack Halpert with Cantor Fitzgerald.

Just two quick ones, please. So kind of coming back to the government travel piece of this. I think you're pretty clear about the headwinds for 4Q. But I guess, historically, when there's been government shutdowns and they kind of come to an end, like do you typically see like an immediate payback in demand? Or is there sort of a bit of a lagged recovery? That's kind of the first one.

And then second one, just quickly on payments. Obviously, growth there has been pretty solid the past couple of quarters, and you had the slide about it in the deck. But can you talk a little bit more about the strategy here and how incremental you think you can -- this can be to your business going forward? And then maybe talk about sort of the margin profile of the business as well.

Thanks, Jack. On the government, -- we don't know obviously when the shutdown will be resolved. We imagine it will happen in the fourth quarter, but who knows. We anticipate being back to normalcy in the first quarter, but it will probably phase its way between here and there. With respect to payments, the payments business, again, which is comprised of Sabre Direct Pay, which is a set of product capabilities that we have both in our distribution and our IT business as well as our Conferma Virtual Payments business.

That business is scaling at a 40% top line rate. Really, it's very compelling what we have there. We have not, at this point, broken out the revenue or the margin details of that business. That may be something that we do prospectively. But we think the value opportunity and the scale opportunity there is tremendous versus our current position.

[Operator Instructions] Our next question coming from the line of Alex Irving with Bernstein.

Two for me, please. First, on Agentic API. Could you please help us to understand how you intend to monetize this? Specifically, are airlines unable to do their own Agentic API to do the same thing essentially for free. So who's going to pay you and for what specifically?

Second, on booking growth for 2026, I think you mentioned earlier about being positioned for mid-single-digit bookings growth. What assumptions underpin that? If you could please break that down between, say, known new business migrations, specific headwinds lapping and your expectations for underlying industry growth?

Thank you, Alex. Let me deal first with the booking growth for 2026. As we indicated, we expect mid-single-digit bookings growth in 2026. That assumes a flattish GDS or distribution marketplace and then strong organic performance by Sabre with continued converted business as well as the implementation of our incremental low-cost carrier solution. With respect to Agentic AI, it is very early. I think you're going to see, number one, Agentic AI emerge as a new channel in and of itself, maybe similar to the way online travel agents emerged starting about 30 years ago.

And I think that will take share away from both intermediary and supplier direct channels. What we have developed in terms of our API solution is, we think, the leading intermediary API solution for the marketplace. This can sit directly behind an API, Agentic API agent and/or a large tech platform. And it's also fit for purpose that it can be used by our travel agency and our airline or hotel customers to help them power their Agentic AI profile going forward. In terms of what is the commercial model, obviously, we think the largest opportunity is for us to be an intermediary distribution player, but there may be an IT element to this as well. That will become more apparent in the quarters as we go forward.

And our next question coming from the line of Dan Wasiolek with Morningstar.

So two, if I may. The first, your booking fee looks like it was pretty strong and stable this quarter at -- I think, around $6.06. Just wondering how we should think about that as we look into 2026. And then wondering if you could maybe provide some more detail in your prepared comments, you kind of talked about a stabilization in the overall industry and industry demand, just the conversations maybe you're having with your partners and customers to kind of arrive at that?

I'll take the booking fee. If you look at the strength in our booking fee year-over-year, it was driven by significant nontransactional revenue that's benefiting us. So it's not necessarily tied to a specific booking. And we expect that to continue to be additive over time. With regards to 2026 booking fee, at this stage, we're not going to provide any other commentary beyond what was in our prepared remarks with 2026, but we'll give you a lot more context on that in the February call.

Thanks, Dan. With respect to industry demand, it's a bit of a mixed bag. What you're hearing and seeing from commentary from many different intermediaries and then supplier customers, and this is underpinned by a lot of private conversations that we've had with our clientele is leisure demand is positive year-on-year, fairly robust. Our corporate demand, what you're seeing is prices elevate or strong yield, and you've seen some improvement on a sequential basis in corporate demand, but it is still negative year-on-year on a unit basis. And so a lot of the commentary you hear from suppliers is around yield accretion or yield improvement relative to where we were 6 months. The volume environment has improved, but it's still -- when you look at the mix of corporate plus leisure is mixed.

It's not that positive. As we go forward, our expectation is typically, what you see in this industry is GDP growth and airline volumes tend to approximate one another. If that is the assumption next year, you're at low single-digit passenger growth in the United States and globally. The question will be what the mix is, and we're going to learn our way into that. But again, our expectation for our volume assumptions next year in distribution are that the intermediary industry is relatively flat and that we're growing share against that metric.

Our next question coming from the line of James Goodall with Ruschild. Rothschild & Co Redburn.

So firstly, just coming back to Slide 9 and focusing on the Q3 air booking growth of 2%. I think your original guide was 2% to 6%, which was based on a negative 9-point impact from mix in industry and plus 13 from growth strategies.

Just given that the industry improved to down 1% from down 4% through Q3, what caused Q3 to be at the bottom of the range despite the fact that industry got better through the quarter? Was it that plus 13% of new wins coming on more slowly?

And then -- in terms of my second question, just coming to the low-cost carrier launch for next year. Can you give us a flavor of how many incremental bookings you're expecting that to drive on an annual basis? And how many LTCs you currently have signed up or in the pipes to be signed up?

Yes. Thank you, James. When you look at Q3 volumes, what we saw was that both July and August were relatively flat in terms of our intermediary bookings. September was actually up 7%. The very good news there is that when you look at the quarter, there was positive 10 points of volume performance tied to the implementation of new business that was converted this calendar year. And in fact, that number was 12% in September, so that continues to ramp and accelerate. We indicated that was 3 million bookings during the month.

Why was that below the prior estimate? Despite the GDS, the improvement in the GDS number, it comes down to the mix of our business. Number one is we are adversely impacted as compared to the industry by our exposure to both the U.S. military and government. We have nearly a full share there. And two is a vast majority of corporate and TMC business globally goes through Sabre. And that was still down several percent year-on-year in the quarter and then the impact of regional mix as well.

With the launch of the low-cost carrier platform, there's two important components here. One is similar to if you're familiar with Travelfusion, which is a non-GDS aggregated solution in the market, and there are a number of these kind of solutions. What we are launching is a new platform that integrates 50-plus new low-cost carriers. That is with a bit of a different technical and commercial model. We will be in full production launch in the first quarter of next year. Separately, we've also signed up a significant number of new low-cost carriers that we did not have in our system previously that are participating in more traditional means, either [ EDIFACT ] or Direct Connect versus this new low-cost carrier solution. Long term, we expect this could contribute multiple tens of millions of transactions to our business. It will be a subset of that for next year as we ramp this up. We're not going to go into detail on the specific number.

And there are no further questions in the queue at this time. I will now turn the call back over to Mr. Ekert, CEO, for any closing remarks.

Thank you so much, everyone, for the continued interest. We look forward to sharing additional progress next quarter and in the years ahead. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.