Skift Take
CEO Sean Menke has gained breathing room to provide positive surprises. Getting cloud-based distribution and operations software right is hard. So the company is relying on concepts from top-tier management consulting firms as guidance.
May marks the 17th month since Sean Menke became CEO of Sabre, the travel technology company based in Southlake, Texas.
Menke inherited a company that may not have been in as good a shape as had been suggested by its stock valuation — which had nearly doubled from its 2014 initial public offering.
So the CEO has been reorganizing the business. One of his moves was to cut the workforce by 10 percent, to about 9,000.
On Tuesday, Sabre reported first quarter 2018 earnings. Revenue growth was up 8 percent, year-over-year, to $988.4 million. Its profit rose about 2 percent, year over year, to $121.2 million.
Sabre's free cash flow — a metric investors use to track if a business has a solid financial position — is forecast to rise 18 percent this year to about $425 million.
Investors liked the news, bidding shares up about 8 percent in early trading.
But stock market investors tend to have a short-term view. In the past few years, Sabre has helped to boost its share price via $700 million of dividends and share buybacks.
The cost of doing that is that it failed to invest in research and development at the same pace as its arch-rival Amadeus. The cost of doing that is that it failed to invest in research and development at the same pace as its arch-rival Amadeus. Sabre has spent about $456 million less on research and development since 2013 than Amadeus, per financial statements.
Instead of making up for lost time, while matching Amadeus’ present pace, Sabre has continued to do share buybacks in the past year and said on a conference call Tuesday it would continue to do so for years.
Sabre generated $3.6 billion in revenue in 2017. It serves as a technology middleman for the travel industry. It distributes inventory from suppliers like airlines to buyers like corporate travel departments, more than 425,000 travel agents, and online travel agency Expedia, for example.
Sabre's prime competitors are Amadeus, Travelport, and TravelSky. It has sidelines in selling operations software to airlines and hotels.
Menke's Mission
After the company elevated him to CEO, Menke struck a more diplomatic tone than Tom Klein, his immediate predecessor. Klein's style was edgy. It was notoriously captured in emails that were dismissive of customers and that were shared as testimony during a lawsuit that US Airways (acquired by American Airlines) won in December 2016 against the technology company for abuse of market power.
At first, new CEO
