Avis Budget Group, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Fleet Strategy: Accelerated fleet rotation due to auto industry price changes post-Covid. A $2.5 billion non-cash asset impairment was recorded related to holding higher-priced model years '23 and '24 vehicles. The company pivoted to refresh the Americas fleet with new model year '25 vehicles at normalized costs.
• Travel Demand: Strong leisure demand during holidays like Thanksgiving, Christmas, and the MLK weekend. The U.S. Christmas 2024 was a record. Easter shifting to April in 2025 is expected to boost the second quarter.
• Technology Initiatives: The new customer app enhances the user experience. Proprietary fleet technologies piloted in U.S. cities aim to improve vehicle utilization and operational efficiencies.

Segment Performance

• Americas: Fourth quarter revenue exceeded $2.1 billion with an adjusted EBITDA loss of $63 million (adjusted EBITDA of $156 million when excluding fleet cost variance). Rental days were consistent with Q4 2023. Utilization in the Americas was over 67% in Q4 2024, a more than 2-point increase from Q4 2023. The model year '25 buy is nearly complete.
• International: Fourth quarter revenue was over $590 million with an adjusted EBITDA loss of $11 million. Vehicle utilization was over 68%, up nearly 3 points year-over-year. Revenue decreased 1% year-over-year due to a 1% drop in rental days. The proprietary demand fleet pricing system is implemented in the European business and being rolled out in the Pacific region.
• Technology and Marketing: Launched a new customer app in October 2024, receiving positive feedback. Finished 2024 with record net promoter scores. Expanded the partnership with Xander Shopley with the Xander Embedded content series. Piloting digital tools in U.S. cities to drive operational efficiencies.

Guidance

• 2025 Adjusted EBITDA: Expect to generate no less than $1 billion in adjusted EBITDA.
• Fleet Costs: In Q1 2025, all-in fleet cost per unit per month is expected to be ~$400, dropping to under $350 in Q2 and ~$300 by year-end.
• Seasonality: The first quarter is impacted by one less day in the year and Easter shifting, but the second quarter is expected to improve due to Easter in April, with a strong summer season anticipated.

Risks

• Auto Industry Price Fluctuations: Uncertainty in new and used vehicle prices can impact fleet costs and residual values.
• Macro-Economic Factors: Tariffs and changes in new vehicle production can affect used car markets and fleet utilization.
• Seasonal Variability: The first quarter (winter) is traditionally not the biggest, with potential impacts from weather events and calendar shifts.

Question and Answer

• Q: Comment on cash flow and EBITDA quarterly cadence A: Izilda Martins mentioned free cash flow is expected to be solid in 2025 with positive working capital. Joseph Ferraro discussed seasonality, noting the first quarter is slower but the summer is the peak season.
• Q: Impact of fleet rotation on mix and RPD A: Joseph Ferraro stated there is no change in mix due to fleet rotation, which is purely removing higher-priced vehicles. There is no impact on RPD margin but affects fleet costs.
• Q: Tariffs potential impact A: Joseph Ferraro noted used car prices could benefit from higher new car prices, and OEM production changes may have near-term positive effects, with flexibility to adapt to macro-economic changes.
• Q: Disposition mix and fleet cost certainty benefits A: Joseph Ferraro discussed nonauction disposition channels, and fleet cost certainty improves utilization, revenue optimization, and operational efficiencies through better vehicle movements and repairs.
• Q: Normalized hold period and cash flow from vehicle programs A: Izilda Martins mentioned vehicle programs are discretionary, and free cash flow is expected to be at least $500 million by year-end.