Avis Budget 4Q16 Earnings Call Notes

Larry D. De Shon

Residual values are down in the 2-3 point range

“In terms of the market right now, I think it’s consistent with what we’re expecting for the year. Residual values are down in that 2 to 3 point range. We saw the Manheim off-rental index being down a little bit over 3 points year-over-year in January. So I think what we’re seeing is generally consistent with the market as a whole.”

We’re watching the border adjustment tax closely

“It’s a really interesting question, and we’re watching some of the proposals that are out there very carefully. I think there are just too many possibilities and too much uncertainty about what they might look like and how they would be implemented for us to speculate at this point in time. Clearly, one of the things we’re going to watch most closely is whether anything develops with respect to border adjustment taxes that could impact fleet that has the potential to have – to impact us. It’s just really hard to estimate what that could look like, when it might take effect, and what structures or alternatives would be available to help us in that situation. So that one is high up on our radar screen, but it’s really hard for us to speculate at this point in time.

Not seeing a huge impact of ride sharing on our business

“On the second part of your question, as we continue to update our analysis of car-hailing or ride-hailing impacts on our business, and I think what we found is that they’re fairly consistent with the analyses that we’ve been doing before. You can find certain markets that you could see maybe a larger impact than other markets, particularly on the one day or the multiday, but under 75-mile type of rentals. Overall, though, as you look at those rentals as a percent of your total rentals, they don’t really change that much across the country basis. It’s just not that big of a part of our business to begin with. As we’ve said, our average rental is four days and 450 miles, so those kind of short mileage and short length of rental type transactions are not a big part of our volume. So we continue to look at it and we continue to update our analysis, make sure we’re staying on top of it. But we’re not seeing much from the last time we looked at it and we spoke about it.”

David B. Wyshner

Elections had disruptive effect in 4Q

“Sure. Let me tackle the first part related to the fourth quarter. Clearly, we knew the way the calendar was shaping up and that the elections were taking place. I think both of them had a more significant impact than we had expected. For a lot of reasons, I think the elections had just a little bit more of a disruptive effect, and that would be true not only in the week or two leading up to the election. I think that continued for us in the week or two following that.”

Avis 3Q16 Earnings Call Notes

Avis Budget Group (CAR) Q3 2016 Results
Larry D. De Shon

Demand was weaker than anticipated

“And while we achieved record results and grew total adjusted EBITDA by 9%, the challenge we face is that we had targeted and expected even better numbers. Demand was a little weaker than we had originally anticipated; particularly in our International segment, where security issues and concerns impacted the summer peak.”

Volumes softened significantly in Europe as the summer progressed

” International inbound volumes in Europe softened significantly as the summer progressed. Industry fleet levels turned out to be loose relative to demand in August and September, and pricing was negatively impacted. Whether this was due to security concerns, Brexit, the Olympics, the economy or some combination of these items, it’s hard to tell.”

David B. Wyshner

Used car prices have been stable even as new car sales have slowed

” Used car prices have been stable over the last two quarters, even as new car sales have slowed, and we currently anticipate the residual values will remain soft next year by historical standards.”

Saw strong demand in US markets

“We saw some very strong demand in some key markets like Denver, Salt Lake, Chicago, Southern California, Northern California, Boston, for example, New York. Those were markets over the summer that performed pretty well.”

Avis 2Q16 Earnings Call Notes

Avis Budget Group (CAR) Q2 2016 Results

Larry D. De Shon – Director, Chief Executive & Operating Officer

Consumers are traveling

“At this point, the overall impact on summer travel patterns from the Brexit vote or other issues in Europe has been minimal. And we continue to be optimistic that the important summer holiday season will live up to our expectations. In fact, we are encouraged by the global trends we are seeing this summer. Consumers are traveling, and with industry fleet levels somewhat tighter than in quite some time, we are continuing to see positive year-over-year pricing in the Americas. Europeans still seem inclined to travel this summer, and while international pricing will probably continue to be challenged due to competitive dynamics, demand remains strong and growth in ancillary revenues is mitigating pricing pressures.”

Pleased with how July turned out

“In July, I think we’re pleased with how July has turned out, and I think it’s a continuation of how we saw the second quarter kind of develop. We don’t want to get into kind of a month-to-month analysis or talking about how pricing is going month-to-month. So, I’ll stay away from that, but we had a good second quarter and we’re expecting the rest of the year from a pricing perspective to be similar to what we experienced in the second quarter.”

Pricing has improved dramatically

“I think it’s important to reiterate the key takeaways from today’s call. Pricing has improved dramatically, as fleet levels in the industry are better aligned than I’ve seen in quite some time. We have launched our new self-service initiative, Avis Now, and are investing in other technologies and innovation to drive our business forward. And we have raised the midpoint of our full-year adjusted EBITDA and adjusted earnings per share estimates.”

Avis 1Q16 Earnings Call Notes

Avis Budget Group (CAR) Larry D. De Shon on Q1 2016 Results

Q1 was full of challenges

“The first quarter was full of challenges. Some of which we expected and others that wound up being more difficult than we anticipated. Softness in commercial volume continued, while in-bound travel to major leisure destinations in the United States was lower than normal. The lack of a major winter storms also meant that rental cars that would normally be utilized to meet insurance replacement needs, found themselves at airports instead.”

An unusually weak spring break

“pricing in the first quarter was tougher than we thought it would be. We now know that our soft President’s week, particularly in markets like Florida and Arizona was the start of what turned out to be an unusually weak spring break. Coupled with the soft commercial demand, weak inbound volume and a mild winter, fleet was abundant across the industry and pricing finished down 5% year-over-year in the quarter.”

We don’t think it’s a trend though

“our view is that this unusually soft pricing event we experienced in the first quarter is an anomaly, not a trend or a new normal. Our year-over-year comparisons have been improving fairly significantly over the last few months. March was better than February, April was better than March, and May bookings are indicating a continuation of the favorable pricing trend.”

Not changing guidance, expecting improvement for rest of year

” as I mentioned in my opening remarks, our full-year EBITDA guidance remains unchanged. We have reduced our full-year pricing outlook in the Americas to reflect our first quarter results and more gradual improvement over the remainder of the year.”

Summer is looking significantly better

“the way I would characterize it is, you start with February ended worse than what we had thought. And then as we went into March, although March improved over February, March was still not what we had planned for it to be. Then as you go from March into April, April improved again over March. And then as we’re looking at May bookings, May is also improving over April. So, we haven’t turned positive as of yet, but we’re getting very close to it at this point. And we’re very optimistic about what we’re seeing for June and summer bookings are looking strong and rate is looking significantly better.”

15% of summer bookings are taken

“When you take a look at over summer, at this point probably 15%, I’m going to estimate, of our bookings are probably taken at this point. And once again, the indications from those bookings are that both volume is coming in strong as well as rate continues to improve. So, there’s nothing in what we’re seeing at this point for May or for summer, although summer is still pretty early, that gives us any cause for concern.”

Avis Budget 2Q15 Earnings Call Notes

Pricing trends were down

“I’m sure the topic on everyone’s mind this morning is pricing, so let’s start there. As we reported last night, overall pricing in the Americas declined 2% in the second quarter with 80 basis points of the decline attributable to currency effects, an additional 30 basis points of the decline due to the growth of our Payless brand.”

Optimistic about the second half though

“based on the length of rental restrictions we’re seeing across the U.S. this summer, it appears that overall industry fleet levels are more aligned with rental demand than they were in the first half. And finally, our year-over-year pricing comps are easier in the second half of the year than they were in the first.”

I’m encouraged by what we’re seeing so far in 3Q

“I’m encouraged by what we’re seeing thus far in the third quarter, and we remain confident that 2015 will be another record year of record earnings for us. Demand in the U.S. is growing, the industry fleeting situation should normalize, airline capacity is up, used-vehicle residual values remain strong, Europe is positioned to have a strong summer, and we are investing in yield management, self-service, and other technologies to drive longer term success.”

Analyst pricing surveys pick up some noise that we don’t see. That’s one reason why we think July is stronger than analysts are seeing

“I think a lot of what happens in pricing surveys is that you miss the impact of the upgrades, ancillary sales, and things of that nature that allow us to get higher pricing. I think when you guys do your pricing surveys, you don’t take into account – you don’t get pricing for International inbound, and that drives a fair amount of incremental pricing. So, I mean, I don’t know why the July pricing is showing up less, but I do think that there’s always a fair amount of noise between the surveys that analysts do on their own and what our results are.”

THere seems to be a little more pessimism about the economy in commercial circles

“I don’t get a sense, Chris, that you’re going to see significant changes in commercial volume over the course of this year. I think there seems to be a little more pessimism about the economy in terms of the forward-looking momentum but I hope I’m wrong. But we’re going to continue to manage our business for profitability and we’re going to continue to keep our fleet sized with demand, and those things are important.”