Avis Budget Group Inc Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Chris Woronka - Deutsche Bank AG - Analyst : So Joe, I know -- I think as you just mentioned that you expect your fleet cost to begin trending back towards historical levels, knowing that won't happen all at once. But when we think about your comments on the '25 fleet buys and what you might do in the fourth quarter, I know in 2019, your Americas DPU is sub-300 per month, I think, closer to 280. I mean is that the benchmark to think about again, not for any one period, not fourth quarter or next year, but is that where it can trend back towards? Is that a fair way to look at it?

Question: Chris Woronka - Deutsche Bank AG - Analyst : Okay. Appreciate that. And then as a follow-up, there's obviously a lot of in the industry. We're hearing more about robo taxi and moving a little closer on autonomous. I was hoping that you could maybe comment on what you're monitoring going forward? And is Avis going to be in a position to possibly participate in that? And I guess I would also extend that to ride share. And as the industry landscape evolves a little bit, it's something you guys haven't done as much of, but is that possibly on the table as another avenue for growth?

Question: John Babcock - BofA Securities - Analyst : I guess just first of all, on the hurricanes. I know you didn't call it out, but -- and so I assume the impact -- well, actually, sorry, I guess it's going to be more of a 4Q thing. But could you just talk about how the impact of the Florida hurricanes is going to impact Avis, but also how it's also going to impact the dynamics for the broader rental car market, if at all?

Question: John Babcock - BofA Securities - Analyst : That's perfect. And then just last question. As you're thinking about some of the -- kind of moving forward, what gives you confidence that as DPU and other operating costs that you can control come down that ultimately pricing could hold up. And I know you talked about focusing on higher margin volume and so you'll get some mixed benefit from that. But generally, I mean, how would you have us think about pricing in a lower cost environment for the broader rental car space?

Question: Elizabeth Dove - Goldman Sachs Group, Inc. - Analyst : I just wanted to talk -- ask about competition in the industry. We've had a couple of quarters where Americas volumes have been lower than kind of what we've seen in terms of like TSA volumes. It feels like just higher competition from your big nonpublic competitor. Could you kind of share the latest of just kind of what you're seeing there and how that impacts how you think about volume trends, particularly in the Americas going forward?

Question: Elizabeth Dove - Goldman Sachs Group, Inc. - Analyst : That's helpful. I appreciate the color. You also gave a lot of helpful commentary around kind of the outlook for pricing, DPU, costs. I guess putting that all together, and I hope I'm not misremembering. I think you've said in the past that 1 billion -- $1.1 billion is kind of the floor of how you see normalized EBITDA going forward. Has anything changed about that outlook?

Question: Ryan Brinkman - JPMorgan Chase & Co - Analyst : I just thought to check in on capital allocation, including after -- during the pandemic and the chip shortage, you high inflation and low interest rates, you allocated a considerable amount of your record cash flow towards repurchases, including when your shares were higher. Subsequently, although your share price is lower, given that the interest rates were much higher, you pivoted more towards retaining those costliest detranches of your securitization saving on interest expense. I'm just curious now, things are changing a bit again, all right, with the share price even lower than when you made the pivot towards the fleet purchasing there. And the interest rates coming back down seemingly? Just curious if you're feeling any differently again about the options available to you, either as a result of your ongoing free cash flow or even the equity cushion that you've built up in those fleet facilities?

Question: Ryan Brinkman - JPMorgan Chase & Co - Analyst : Okay. And I know you mentioned the hurricane. Obviously, it was a big deal. Is there anything to think about in the fourth quarter with the election? What would impact has that had sort of historically and how might that rate to sort of disruption maybe that could occur in the fourth quarter versus what had occurred in the third?

Question: Christopher Stathoulopoulos - Susquehanna Financial Group - Analyst : So Joe, of course, correct me if I'm wrong here, but this fleet buy cycle feels different from those perhaps since 2019 for a lot of reasons. Obviously, we know about the supply chain here and with the OEMs. But at this point, are we at a point, I guess, where you go into these negotiations and outcomes are kind of more predictable or kind of more where you're able to realize better outcomes. And I realize this is a very general question. I'm just trying to understand sort of the dynamics of this buying cycle versus the prior, let's say, four and ultimately, read through for kind of how we should think about holding costs for the fleet in '25 and beyond.

Question: Christopher Stathoulopoulos - Susquehanna Financial Group - Analyst : Okay. And as my follow-up, so I think Brian has been in this role now for about a year or so. And so we've seen all this workaround demand and pricing analytics. You mentioned the app. Where are we in this journey of transformation? And what are some of the initiatives as we look at '25 and beyond that we should think about as it relates to things around revenue or fleet or perhaps apps locations. Just want to understand where we are and some of the highlights of sort of things to come? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 12:30PM, CAR.OQ - Q3 2024 Avis Budget Group Inc Earnings Call

Question: John Healy - Northcoast Research Partners - Analyst : I just wanted to ask you kind of a philosophical question, Joe. I think about what we're hearing on the call from you guys is optimism that the fleet cost number is going to come down next year, and that the buy is going to be better. The benefit of rate, you guys have sold off cars and it tightened up capacity. So I guess as I think about all of those things, I mean it's an encouraging backdrop going into next year. But would love to just kind of hear how much can that fleet buy rotation truly bring down holding costs in '25 because my thought is you're going to still have a sizable amount of cars that are higher DPU than you'd like in your fleet? And just hoping you could kind of give us some direction on how much the fleet cost number could come down maybe in the 6- to 12-month period just as you rotate out. So that would be helpful.

Question: John Healy - Northcoast Research Partners - Analyst : Sure. And I guess just a follow up kind of in the same kind of direction. When you think about the business, if your fleet costs next year are lower, your financing costs are lower, does that create a situation where maybe investors should be thinking about -- you thinking about the spread in the business on rental as opposed to a metric like pricing is being important next year. So if we're talking about inventory costs going lower, is it misguided for investors that have an expectation that RPD levels should be similar or going higher. It's flat RPD, the new up in a deflating inventory cost model for you guys.

Question: Dan Levy - Barclays Bank - Analyst : I wanted to start with a question on your fleet buy. I think we know that the backdrop in the auto industry right now is that there is a few automakers that are heavier on the inventory side, especially amongst the D3, and wondering to what extent there's maybe an extra willingness from some of the OEMs to be a bit more aggressive on the pricing side? And then just as a follow-up on that, is there any risk that -- you seem to be fairly disciplined on your fleet side, but that maybe some of your competitors are getting exceedingly good deals and could take on extra fleet because you have OEMs that are a little more keen on clearing inventory.

Question: Dan Levy - Barclays Bank - Analyst : And as a follow-up, somewhat related, you're clearly committed to having a tight fleet. Maybe you could just talk about what you're seeing from your competitors on fleet tightness. One is facing maybe some questions on liquidity. I don't know to what extent that's impacting the fleet tightness. The other one is just on that is maybe a little heavier on the fleet and it moved some cars from off-airport to on-airport. So just maybe the broader industry fleet tightness, and any color would be appreciated.