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Travel technology company Sabre (NASDAQ:SABR) announced better-than-expected results in Q2 CY2024, with revenue up 4% year on year to $767.2 million. The company expects next quarter's revenue to be around $775 million, in line with analysts' estimates. It made a non-GAAP loss of $0.05 per share, improving from its loss of $0.39 per share in the same quarter last year.
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Sabre (SABR) Q2 CY2024 Highlights:
- Revenue: $767.2 million vs analyst estimates of $755.8 million (1.5% beat)
- EPS (non-GAAP): -$0.05 vs analyst estimates of -$0.08 (beat)
- Revenue Guidance for Q3 CY2024 is $775 million at the midpoint, roughly in line with what analysts were expecting
- The company slightly lifted its revenue guidance for the full year from $3.04 billion to $3.05 billion at the midpoint
- Gross Margin (GAAP): 58.1%, down from 58.7% in the same quarter last year
- Free Cash Flow was -$87.75 million compared to -$95.77 million in the previous quarter
- Airline Bookings: 76,225 at quarter end
- Market Capitalization: $1.31 billion
Hotels, Resorts and Cruise LinesHotels, resorts, and cruise line companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted from buying "things" (wasteful) to buying "experiences" (memorable). In addition, the internet has introduced new ways of approaching leisure and lodging such as booking homes and longer-term accommodations. Traditional hotel, resorts, and cruise line companies must innovate to stay relevant in a market rife with innovation.
Sales GrowthExamining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Sabre's revenue declined by 5.5% per year. This shows demand was weak, a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new property or emerging trend. Sabre's annualized revenue growth of 16.8% over the last two years is above its five-year trend, suggesting some bright spots.
This quarter, Sabre reported reasonable year-on-year revenue growth of 4%, and its $767.2 million of revenue topped Wall Street's estimates by 1.5%. The company is guiding for revenue to rise 4.7% year on year to $775 million next quarter, slowing from the 11.6% year-on-year increase it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 5.1% over the next 12 months, an acceleration from this quarter.
Cash Is KingIf you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
Over the last two years, Sabre's demanding reinvestments to stay relevant have drained its resources. Its free cash flow margin was among the worst in the consumer discretionary sector, averaging negative 5.5%.
Sabre burned through $87.75 million of cash in Q2, equivalent to a negative 11.4% margin. The company's cash burn increased meaningfully year on year while its cash conversion fell 3.7 percentage points. This relationship shows Sabre's management team spent more cash this quarter but was less efficient at generating sales with that cash.
Looking forward, analysts predict Sabre will generate cash on a full-year basis. Their consensus estimates imply its free cash flow margin of negative 2.3% for the last 12 months will increase to positive 4.6%, giving it more optionality.
Key Takeaways from Sabre's Q2 ResultsWe were impressed by how significantly Sabre blew past analysts' EPS expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street's estimates. Overall, this quarter seemed fairly positive and shareholders should feel optimistic. The stock traded up 7.3% to $3.69 immediately following the results.
