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Shares of Sabre Corp. (NASDAQ: SABR) declined 10.5% on Tuesday after the travel technology company announced reasonably solid second-quarter 2017 results, but followed with disappointing guidance.
Quarterly revenue climbed 6.6% year over year to $900.7 million, including 7.8% growth in revenue from the airline and hospitality solutions segment, to $271.8 million, and a 6.3% increase in travel network revenue, to $635.6 million. On the bottom line, that translated to a net loss attributable to common stockholders of $6.5 million, or $0.02 per share, compared to net income of $72 million, or $0.25 per share in the same year-ago period. On an adjusted basis -- which excludes items like asset impairment, acquisition, and restructuring costs -- net income per share declined 5.4% to $0.35. By comparison, analysts' consensus estimates predicted the same adjusted earnings per share on lower revenue of $895 million.
"We continued to make good progress across a number of key initiatives, including strengthening the senior leadership team, insourcing our shopping complex and Global Network Operations Center, accelerating the development of our next-generation hospitality property management system and undertaking a thorough review of our Airline Solutions portfolio," added Sabre CEO Sean Menke.
Sabre also announced a "cost reduction and business alignment program," with the goal of generating $110 million in annualized cost savings, primarily by reducing its global headcount by roughly 9%. Sabre incurred a $25 million charge this quarter related to the program, but should realize roughly $25 million in cost savings by the end of this year, before reaching its expected full run-rate in fiscal 2018.
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Looking forward to the full year of 2017, Sabre reiterated its previous guidance for revenue of $3.54 billion to $3.62 billion, as well as its expected ranges for both adjusted net income of $370 million to $410 million, and adjusted net income per share of $1.31 to $1.45. However, Sabre also stated that adjusted net income and adjusted EPS will likely arrive in the lower half of their respective ranges. Sabre reduced both ends of its adjusted EBITDA guidance for the year by $25 million, resuling in a new adjusted EBITDA range of $1.055 billion to $1.095 billion.
During the subsequent conference call, management explained that its reduced profitability expectations were largely driven by a combination of factors. These included: the company's decision in May to halt work on the implementation of its SabreSonic reservation system by airberlin; higher stability, security, and technology costs related to a security incident in its Sabre Hospitality central reservation system during the quarter; and accounting changes to revenue collected from customer Alitalia, as it goes through a "bankruptcy-like process."
All things considered, this certainly wasn't a bad quarter from Sabre. And there's a chance the company's conservatism may prove unnecessary if its cost-savings initiatives ease the pressure on its bottom line. But in the meantime, it's no surprise to see shares falling hard today.
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