Avis Budget Group(US:CAR)2024-05-02 15:57Financial Data and Key Metrics Changes - The company reported quarterly revenue of over $2.5 billion and adjusted EBITDA of $12 million, a significant decline from $535 million in adjusted EBITDA in Q1 2023 [7][24] - The adjusted EBITDA decline was primarily due to non-reoccurring fleet gains, higher vehicle interest, and fleet right-sizing decisions [7][24] - Interest costs increased by $106 million due to refinancing at higher rates and new financings totaling over $9 billion [26][27] Business Line Data and Key Metrics Changes - The Americas segment generated nearly $2 billion in revenue with $44 million in adjusted EBITDA, showing strong demand with a record number of transaction days [9][15] - International rental days increased by 4% compared to Q1 2023, with revenues of $558 million, a 3% increase year-over-year [15][16] - Fleet utilization improved to approximately 66%, with March utilization reaching about 70% [13][15] Market Data and Key Metrics Changes - TSA volumes were consistently higher than in Q1 2023, indicating robust demand in the Americas [9] - International inbound volume was up 17% compared to last year, with inter-European cross-border travel increasing by 11% [15][16] - Pricing in the Americas was down 6% year-over-year but up 25% compared to Q1 2019, with expectations for pricing to stabilize [10][15] Company Strategy and Development Direction - The company focused on right-sizing its fleet by selling a record number of vehicles to improve utilization and flexibility [8][12] - A proprietary demand fleet pricing system rollout in international markets is expected to enhance contribution margins [17][52] - The company is investing in technology to improve productivity and efficiency, including data analytics for better forecasting and scheduling [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a strong travel demand environment and anticipates a successful peak season [8][23] - The company expects rental demand to be strong in Q2, with pricing anticipated to improve sequentially [29][30] - Management acknowledged challenges from inflationary pressures and higher fleet costs but believes actions taken will position the company favorably for the remainder of the year [29][30] Other Important Information - The company disposed of the most vehicles in its history during Q1, aligning supply with demand [23] - Available liquidity was over $700 million, with additional borrowing capacity of approximately $3.8 billion [28] - The net corporate leverage ratio was 2.3 times, with no maturities until 2027 [28] Q&A Session Summary Question: Capital allocation attractiveness for the year - Management believes shares are undervalued but prioritizes fleet disposition and technological investments in the first half of the year, with flexibility to evaluate all options in the second half [32][33] Question: Normalized EBITDA expectations - Management maintains that nothing below $1 billion in EBITDA is acceptable, with no changes to this strategy [34][35] Question: Residual values trends - Residual values were stable but expected to decline as the year progresses, with some challenges in specific cohorts [37][38] Question: Depreciation guidance - The company expects depreciation to increase to approximately $350 per month by the end of Q2, with potential normalization in Q4 [40][41] Question: OEM pricing for 2025 model year - Management anticipates more affordable pricing for 2025 model year vehicles, with commitments made this year [42][43] Question: Technology initiatives and their benefits - Technology improvements are expected to enhance productivity and reduce costs, with early benefits already observed [48][50] Question: ABS coverage and funding requirements - The company has ample headroom in its ABS coverage, with no immediate funding issues [54][55] Question: DOE reduction outlook - Management expects continued improvements in DOE as technology initiatives scale up [56][57] Question: Fleet growth expectations - The company plans to continuously add and dispose of fleet, aiming for efficiencies during peak seasons [60][61] Question: Remarketing initiatives for higher residual values - The company is exploring direct-to-consumer sales to potentially achieve higher disposition prices [70][72]