1. Daniel Lee, Aric Li, Muhamed Rahman, Yash Srivastav

2. Table of Contents Overview Company Overview Stock Performance
Investment Thesis
Risks
Valuation

3. I. Company Overview

4. I. Company Overview Company Overview What is Sabre, what do they do?
Sabre is a leading technology solutions provider to the nearly $8 trillion travel industry
Sabre has shaped and modernized the travel industry: it pioneered online travel agencies, corporate booking tools, revenue management, and web and mobile itinerary tools
What is Sabre, what do they do?

5. Airline-Hospitality Solutions
I. Company Overview
Airline-Hospitality Solutions
Segments
Sabre’s growth business
Market Share figure
Biggest product is Sabre’s reservation system
% of total revenue that is reservation
Earns revenue on a per-transaction basis
Protects Sabre from ticket price fluctuations
Main competitors include: Amadeus, Navitaire, Jeppesen, Lufthansa Systems and others.
Travel Network business information / details

6. I. Company Overview Travel Network Upcoming Movies
Global distribution systems (GDS) sit between travel suppliers such as airlines and travel buyers such as travel agencies.
Distributes from approximately 125,000 travel suppliers to approximately 400,000 online and offline travel buyers
Market Share figure
Main Competitors: Amadeus and Travelport
Star Wars the Force Awakens
December
The Jungle Book
April
Captain America: The Civil War
May
Finding Dory
June
Toy Story 4
June
Solutions business details

7. II. Stock Performance

8. II. Stock Performance Share Performance 52-week High: $30.23
Low: $23.18
Silver Lake Group (10% Owner) Sells Stake in SABR
Q EPS Beat
Strong Growth in Revenues in Both Segments
Q Miss on Revenues Expectations
Brexit
Market Down
52 week stock chart + what occurred at certain points (google news search)

9. III. Investment Thesis

10. Investment Thesis – Drivers
Reasons Sabre Stock Will Outperform
I. Margin Growth
II. Core GDS Business
III. Cross Segment Benefits
Growing SaaS Business:
Revenue growth is largely backed by Sabre’s Solutions segment, scaling with every new customer that outsources their internal operational systems.
New Pipelines:
Sabre currently has established several contracts with major airlines and hotels that will maintain and secure (business term).
Expanding GDS Market:
More low cost carriers are beginning to adopt GDS’s as a method of distribution, increasing the overall market for global distribution systems.
Gains in EMEA:
The recent acquisition of ABACUS International indicates development in the Asia-Pacific region and market share growth.
Complementary Business Model:
There is a natural relationship between the Solutions and Travel segments, which lets each core business build on each other with back and forth benefits.
Revenue growth is largely backed by Sabre’s Solutions segment, with their SabreSonic reservation system comprising around 55% of Airline Solutions revenue, due to more mid-level and budget airlines outsourcing their systems to companies like Sabre. The hospitality solutions side of the business especially has potential for growth with many hotels still using their own obsolete internal systems. Sabre is in a position to capitalize with the acquisition of Trust International, a leading global central reservation system provider for Asia, Europe, and Africa. These companies prefer the flexibility of a more variable cost base and don’t want to be tied down by fixed costs from managing large reservation systems. The business also scales well as more companies utilize Sabre’s services. Each company pays recurring usage-based fees based on contracts that last between 3 to 10 years and the cost of sales for Sabre remains relatively the same for each new contract while revenue continues to grow. In the long term, Sabre has landed several contracts currently being implemented and others that have yet to begin, some of their customers being Airberlin (2016), Four Seasons (2015), Azul Brazilian Airlines (2015). These contracts are going to promote steady revenue growth.
GDS are becoming more popular among travel suppliers and travel buyers because of the enormous network that opens up once a company joins. As mentioned before Sabre’s Travel Network consists of a huge number of suppliers and buyers already, which is an attractive incentive for any customers who currently don’t use GDS’s. The cost of sales through this channel is actually higher than if airlines were to sell direct to consumers, but the average fare purchased through the GDS’s are also higher and often covers the increased distribution costs. The increased exposure for travel suppliers and wider array of products for travel buyers boosts the number of bookings made significantly. For example, bookings through GDS’s typically offer average ticket yields 10% to 20% higher than direct bookings for airlines. This coincides with Sabre’s business model because revenue is based mainly on volume and not the actual price of the bookings. Sabre has also made moves to increase its presence in the Eastern hemisphere, recently acquiring ABACUS International, the leading global distribution system in the Asia Pacific region. Sabre recognizes that the overall market of GDS’s is growing rapidly and is ensuring that their share of that market is growing alongside. This could be seen as a potential risk because of certain geopolitical uncertainties, but as we mentioned before, Sabre’s main business is based in the Americas, providing a stable foundation for the company and allowing for more risky business ventures.

11. Investment Thesis - Drivers
Bottom Line Margin Growth
Using Sabre’s solutions allows for a more variable cost base for companies
The opportunity in hospitality solutions is in the earlier innings, potential for growth
New contracts and deals with major hotels and airlines
Revenue growth is largely backed by Sabre’s Solutions segment, with their SabreSonic reservation system comprising around 55% of Airline Solutions revenue, due to more mid-level and budget airlines outsourcing their systems to companies like Sabre. The hospitality solutions side of the business especially has potential for growth with many hotels still using their own obsolete internal systems, only 27% of hotel reservation volume is done through a GDS like the Travel Network, as opposed to 90% for airlines. Sabre is in a position to capitalize with the acquisition of Trust International, a leading global central reservation system provider for Asia, Europe, and Africa. These companies prefer the flexibility of a more variable cost base and don’t want to be tied down by fixed costs from managing large reservation systems. The business also scales well as more companies utilize Sabre’s services. Each company pays recurring usage-based fees based on contracts that last between 3 to 10 years and the cost of sales for Sabre remains relatively the same for each new contract while revenue continues to grow. In the long term, Sabre has landed several contracts currently being implemented and others that have yet to begin, some of their customers being Airberlin (2016), Four Seasons (2015), Azul Brazilian Airlines (2015). These contracts are going to promote steady revenue growth.

12. Investment Thesis - Drivers
Top Line Single-Digit Growth
GDS market growing as more travel suppliers and buyers move to distribute on such systems
Sabre Corporation market share is growing with recent acquisitions in the GDS business
GDS are becoming more popular among travel suppliers and travel buyers because of the enormous network that opens up once a company joins. As mentioned before Sabre’s Travel Network consists of a huge number of suppliers and buyers already, which is an attractive incentive for any customers who currently don’t use GDS’s. The cost of sales through this channel is actually higher than if airlines were to sell direct to consumers, but the average fare purchased through the GDS’s are also higher and often covers the increased distribution costs. The increased exposure for travel suppliers and wider array of products for travel buyers boosts the number of bookings made significantly. For example, bookings through GDS’s typically offer average ticket yields 10% to 20% higher than direct bookings for airlines. This coincides with Sabre’s business model because revenue is based mainly on volume and not the actual price of the bookings. Sabre has also made moves to increase its presence in the Eastern hemisphere, recently acquiring ABACUS International, the leading global distribution system in the Asia Pacific region. Sabre recognizes that the overall market of GDS’s is growing rapidly and is ensuring that their share of that market is growing alongside. This could be seen as a potential risk because of certain geopolitical uncertainties, but as we mentioned before, Sabre’s main business is based in the Americas, providing a stable foundation for the company and allowing for more risky business ventures.

13. Investment Thesis - Drivers
Cross Segment Benefits
Many of Sabre’s customers on its Solutions side are also potential clients on the Travel Network side of the business
Providing solutions for businesses allows for strategic relationships to be made (i.e. Wyndham)
So Sabre is split between its Solutions segment and its Travel Network segment. When Sabre provides SaaS solutions to airlines and hotels, they create a very open relationship by offering a wide variety of solutions aside from reservations such as revenue management, crew scheduling, and flight operations. Once Sabre is deeply integrated within their systems, it becomes only natural for the travel supplier to join the Travel Network. The process becomes infinitely easier because Sabre already handles all of their bookings. By absorbing more travel suppliers into the Travel Network, travel buyers have a much wider variety of bookings to choose from, allowing for more flights to be bought by individual customers. In terms of revenue, Sabre would receive money from the travel supplier for installing its various systems, along with recurring fees based on number of passengers boarded. After integrating the travel supplier into the Travel Network, we would also get revenue in fees from both travel suppliers and travel buyers for access to this network, which is also based on a per transaction basis. Finally, as more people buy flights through these intermediaries, money is received back on the solutions side because of the increase in number of passengers. Already a number of Sabre’s business partners have chosen this method of integration, most notably Wyndham, which currently owns the largest number of properties amongst all hotel companies globally. The increased exposure for Wyndham offsets any added expenses they incur, meaning the switch is profitable for both Sabre and its client. Jetblue is another example of a client that was initially part of Sabre’s Travel Network, and then expanded their relationship by integrating SabreSonic solutions into their own systems, showing how the cross segment benefits can go either way.

14. IV. Risks

15. Competitors in Technology
V. Risks
Economic Downturns
Environmental Risks
Sabre relies on travel volume and the health of the travel industry. Global air traffic volume grows at approximately 1.5x GDP growth.
If a virus such as Ebola or Zika were to outbreak, there would be negative sentiment towards flying, decreasing flights further. With Zika, many flights to more southern states were cancelled, and leisure saw a decrease because of scares in Florida.
Competitors in Technology
Metasearch engines aggregate data from different websites, which may lead to the use of alternate distribution channels. Nevertheless, this is not a big issue because there is a high chance that the reservation system is still managed via Sabre.
We should state some risks because someone is going to ask
Thank you Dan for the overview of our Thesis, now I would like to go over some potential risk to our thesis. One of our primary risks is Economic Downturns. Sabre’s revenues relies on travel volumes and the overall health of the travel industry. Given concern or uncertainty about economic health, one would expect travel volumes to decrease. Nevertheless, these are just concerns, and it would only reflect in lower revenue if travel volumes actually decreased.
The next risk I’d like to talk about is evironmental risk. Given health epidemics such as that of ebola, or most recently, zika. Such outbreaks would bring negative sentiment and travel warnings, lowering travel volumes. For example, in Florida, flight volumes decreased by 15 percent, 30 percent down in Miami, and 15 percent down in palm beach. Despite these decreases, Sabre is a global company, not a Florida company, and therefore would not see such a big hit given health concerns in certain regions.
Our Third Risk is emerging technology that may circumvent Sabre’s GDS services. Metasearch engines in particular are interesting because they aggregate all results through searching other websites, which may lead to use of alternate distribution channels. Because of this, Sabre may lose some GDS volumes. Yet, this is not too big of a concern because even if metasearch engines directly link consumers to airline websites, their reservations are most likely done via Sabre’s travel solutions.

16. V. Valuation

17. DCF