Avis Budget Group, Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Fleet Rotation: Aggressively disposed of higher cost older model year vehicles, with a record number of risk vehicles sold in the first quarter. Accepted delivery of approximately 70% of anticipated model year '25 vehicles.
• Utilization: Americas utilization nearly 70% in the first quarter, up four points year-over-year. International utilization at 69%, up over two points year-over-year.
• Technology and Marketing: Upgraded customer mobile app with real-time assistance, launched the Plan On Us campaign to reinforce brand reliability, and leveraging technology and machine learning for operational efficiencies.

Segment Performance

• Americas: Generated over $1.9 billion in revenue in the first quarter with an adjusted EBITDA loss of $67 million. Revenue on a constant currency basis decreased 4% due to calendar shifts, but vehicle utilization in the Americas reached nearly 70% for the quarter, a four-point increase year-over-year. The Americas also saw a record number of risk vehicles sold.
• International: Generated revenues of $523 million and an adjusted EBITDA loss of $3 million. Excluding exchange rate effects, first quarter revenue was down 2% compared to prior year, but leisure travel growth helped, with utilization at 69%, up more than two points compared to the first quarter of 2024.
• Marketing and Technology: Launched and relaunched the Plan On Us campaign, and updated the customer mobile app with real-time on-demand assistance, leveraging technology for operational efficiencies.

Guidance

• First quarter adjusted EBITDA loss of $93 million was better than the guided $100 million loss.
• Q2 adjusted EBITDA expected to exceed $200 million.
• Total net debt leverage ratio remains stable at around 5x.
• Focus on debt repayments and capital expenditures to drive operational efficiencies and support margin expansion.

Risks

• Uncertainty around automotive tariffs impacting fleet planning, residual values, and model year '26 buy.
• Macro-economic uncertainties affecting travel demand, including potential impacts on commercial and leisure travel.

Q: On utilization and fleet management, how to continue running at higher utilization rates while meeting demand?

A: Joe Ferraro discusses fleet rotation strategy, modeling for optimal outcomes, and daily/weekly fleet planning by city and station to align supply and demand.

Q: On tariffs and model year '26 vehicles, thoughts on fleet planning?

A: Joe Ferraro mentions flexibility in fleet planning, ongoing negotiations with OEMs, and ability to pick and choose cars based on needs and residual values.

Q: On balancing buybacks versus deleveraging in capital allocation?

A: Izzy Martins states a balanced approach, prioritizing de-levering, but also opportunistically returning capital to shareholders.

Q: On DPU guidance and summer peak playbook?

A: Izzy Martins discusses DPU improvement due to accelerated fleet rotation, and Joe Ferraro highlights flexibility in fleet to flex up or down based on demand and residual market conditions.