Stock Story -
Travel technology company Sabre (NASDAQ:SABR) missed analysts' expectations in Q4 FY2023, with revenue up 8.9% year on year to $687.1 million. Next quarter's revenue guidance of $750 million also underwhelmed, coming in 4.8% below analysts' estimates. It made a non-GAAP loss of $0.12 per share, improving from its loss of $0.50 per share in the same quarter last year.
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Sabre (SABR) Q4 FY2023 Highlights:
- Revenue: $687.1 million vs analyst estimates of $691.3 million (0.6% miss)
- EPS (non-GAAP): -$0.12 vs analyst estimates of -$0.14
- Revenue Guidance for Q1 2024 is $750 million at the midpoint, below analyst estimates of $787.5 million (adjusted EBITDA guidance for the period also below expectations)
- Management's revenue guidance for the upcoming financial year 2024 is $3 billion at the midpoint, missing analyst estimates by 5.7% and implying 3.2% growth (vs 14.9% in FY2023) (adjusted EBITDA guidance for the period also below expectations)
- Free Cash Flow of $77.21 million, up 98% from the previous quarter
- Gross Margin (GAAP): 60.4%, up from 57.3% in the same quarter last year
- Airline Bookings: 65.31 million
- Market Capitalization: $1.67 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 GrowthReviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. Sabre's revenue declined over the last five years, dropping 5.5% annually. Within consumer discretionary, a long-term historical view may miss a company riding a successful new property or emerging trend. That's why we also follow short-term performance. Sabre's annualized revenue growth of 31.2% over the last two years is a reversal from its five-year trend, suggesting there are some bright spots.
We can dig even further into the company's revenue dynamics by analyzing its number of Airline Bookings, which reached 65.31 million in the latest quarter. Over the last two years, Sabre's Airline Bookings averaged 30.4% year-on-year growth. Because this number is in line with its revenue growth during the same period, we can see the company's average selling price was fairly consistent.
This quarter, Sabre's revenue grew 8.9% year on year to $687.1 million, missing Wall Street's estimates. For next quarter, the company is guiding for flat year on year revenue of $750 million, slowing from the 27% year-on-year increase it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 2.7% over the next 12 months, a deceleration 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.
While Sabre posted positive free cash flow this quarter, the broader story hasn't been so clean. Over the last two years, Sabre's demanding reinvestments to stay relevant with consumers have drained company resources. Its free cash flow margin has been among the worst in the consumer discretionary sector, averaging negative 6.9%.
Sabre's free cash flow came in at $77.21 million in Q4, equivalent to a 11.2% margin and up 246% year on year.
Key Takeaways from Sabre's Q4 ResultsRevenue in the quarter missed slightly. Guidance was even worse, with revenue and adjusted EBITDA outlook for next quarter and the full year all below Wall Street's estimates. Overall, the results could have been better. The company is down 10.5% on the results and currently trades at $3.93 per share.
