Executive Vice President and Chief Financial Officer Rick Simonson presented on the 34th Annual Growth Stock Conference, focusing on the company s leadership position in the

Executive Vice President and Chief Financial Officer Rick Simonson presented on the 34th Annual Growth Stock Conference, focusing on the company s leadership position in the technology solutions market for the global travel and tourism industry. Mr. Simonson talked about the steps the company is taking to continue the trend of healthy revenue growth (given the size of the company) while also driving leverage in the model to achieve strong adjusted EBITDA growth over the next few years, and we believe investors came away pleased with management s strategy.

Multiple Drivers for Adjusted EBITDA Growth. Mr. Simonson noted that the company has multiple levers to pull to drive healthy adjusted EBITDA growth for the near term. First, the company should benefit from the continuing transition as organizations shift from internally developed software to outsourced/hosted/cloudbased solutions, especially in the airline industry, where management estimates 30%-40% of solutions are still developed in-house. Second, Sabre can expand its travel marketplace content by adding new travel suppliers (especially low-cost airlines, where its solution is probably more appropriate than Amadeus s) and increasing participation from current travel suppliers. Lastly, the company has room to expand its international presence by aggressively targeting high-travel-growth geographies, such as EMEA (Europe, the Middle East, and Africa) where Sabre Travel Network has only about 13% share. We came away incrementally confident that these growth drivers will enable the company to sustain 7%-plus adjusted EBITDA growth for the next few years.

Market Penetration Remains Limited Despite Sabre s Dominant Position. Mr. Simonson indicated that the global travel industry generates around $7 trillion in annual spend, with travel technology making up around $60 billion of that amount. According to Gartner, the travel technology market is expected to expand to about $70 billion by 2017, representing a 4% compound annual growth rate. Based on fiscal 2013 revenue of $3.05 billion, the company was only about 5% penetrated in its available market opportunity.

Management outlined its strategy for driving greater market penetration, which entails targeting high-growth geographies for Travel Network (e.g., EMEA and Asia Pacific), attracting new travel marketplace content by targeting incremental bookings from low-cost/hybrid carriers, and investing to capture the rapidly growing hospitality solutions opportunity. We believe it is reasonable that Sabre, over the long term, could capture a 20% market share, giving the company a long runway for growth.