Avis Budget Group Inc Q4 2024 Earnings Call Transcript

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

Question: John Babcock - BofA Global Research - Analyst : Good morning. And first, congratulations to Brian on his new role, and for Joe, best of luck in your next endeavors. Then in terms of my first question here, I guess what I wanted to talk about, I guess, is cash flow. You did share some guidance on DPU and EBITDA, but I wanted to get a sense for how we should think about cash flow from quarter to quarter as we go through the year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 12, 2025 / 1:30PM, CAR.OQ - Q4 2024 Avis Budget Group Inc Earnings Call

Question: John Babcock - BofA Global Research - Analyst : Okay, thank you. And then I guess just my follow-on question here. With the fleet rotation, have you had any change in mix? And then also, if you have, will this have any notable impact on our RPD earnings, or will this be more on the margin?

Question: John Babcock - BofA Global Research - Analyst : Thank you. Appreciate it.

Question: Chris Stathoulopoulos - Susquehanna Financial Group, LLLP - Analyst : Good morning, everyone. Izzy, I want to understand here -- so the firm guide for 1Q with, I guess, some residual or smaller impairments, the timing of Easter, so $100 million loss. We have a soft guide for the full year of no less than $1 billion. So I want to understand how you're thinking about the quarterly cadence of adjusted EBITDA. It would seem that the guide is perhaps more second-half weighted and want to better understand that versus what I've understood to be typically a shorter booking window for rentals normally 30 to 40 days. Thanks.

Question: Chris Stathoulopoulos - Susquehanna Financial Group, LLLP - Analyst : So if I put that all together, as I think about volumes, pricing, and DPU relief after we exit, 1Q, it would seem that it's more on the cost side and the pricing now is your better size in spite of demand. Are you baking in any sort of seasonal plus on volumes or the base case sort of seasonally in line as we work through the year?

Question: Chris Stathoulopoulos - Susquehanna Financial Group, LLLP - Analyst : Okay. Joe, if I could get one more in. How are you thinking about the tariff's potential impact? So there was a comment, I believe, from Ford or one of the OEMs yesterday that the tariffs are wreaking havoc on the industry. It would seem at first blush that higher new vehicle prices would stir demand or spur demand for used car markets, and typically that would be good as we think about residual values in DPU. I realize it's still early, but initially, how are you thinking about pluses and minuses around the tariffs should these move forward? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 12, 2025 / 1:30PM, CAR.OQ - Q4 2024 Avis Budget Group Inc Earnings Call

Question: Harold Antor - Jefferies - Analyst : Hello. This is Harold Antor on for Stephanie Moore. So I guess on DOE, I know you took on some charges in the quarter, but I guess could you provide us a sense in 2025 how we should expect that to improve? And is there anything that you could provide that would give us confidence that you could see material improvement in DOE in 2025? Thank you.

Question: Harold Antor - Jefferies - Analyst : Yes, thank you for the color there. And I guess, can you comment -- because the whole industry is going through this fleet refresh. So I wonder if you're seeing anything that you think is worth calling out from the competitive landscape in the industry. And I guess the last thing is, congrats on the transition, Brian. What will be your focus or agenda as the new CEO starting later this year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 12, 2025 / 1:30PM, CAR.OQ - Q4 2024 Avis Budget Group Inc Earnings Call

Question: Harold Antor - Jefferies - Analyst : Thank you for the color.

Question: Jash Patwa - JPMorgan - Analyst : Hi. Good morning. This is Jash Patwa on for Ryan Brinkman. Thanks for taking our questions. I just wanted to start with a question on your disposition mix and how that has changed over the past few years. As you accelerate fleet creation initiatives, is there potential to incrementally lean into direct-to-retail or direct-to-dealer channels? It would also be great if you could remind us on the difference in remarketing outcomes between the direct-to-retail and direct-to-dealer channels as opposed to the auction channels. Thanks, and I have a follow-up.

Question: Jash Patwa - JPMorgan - Analyst : Understood. That's helpful. And I think you alluded to this in your response to the prior question, but I would imagine that the certainty around fleet costs also yield incremental benefits with regards to revenue optimization, especially in terms of pricing management and volume optimization. Curious if you could speak to how this increased certainty around fleet costs could potentially drive efficiencies across the different operational aspects within your business model. Thank you.

Question: Jash Patwa - JPMorgan - Analyst : Very helpful. Thank you so much, and good luck.

Question: Dan Levy - Barclays Capital Inc. - Analyst : Hi. Good morning. Thank you for taking questions. And congratulations to both Joe and Brian. I wanted to first just follow up on the fleet rotation, and really, what I want to try to get to is the rationale because I think I'm hearing two things. You're talking about the opportunity to normalize your DPU and DOE. But you're also giving some comments about sort of ancillary benefits to RPD. So I'm trying to understand, is more of the rationale on this to normalize those expenses? Or was this really more a reaction to the competitive environment that we saw her refreshing their fleet and potentially enterprise going out there and refreshing fleet, or this is just what's required given the competitive environment to have a much fresher fleet? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 12, 2025 / 1:30PM, CAR.OQ - Q4 2024 Avis Budget Group Inc Earnings Call

Question: Dan Levy - Barclays Capital Inc. - Analyst : Great. Thank you. As a follow-up, I wanted to double-click on one of the earlier questions that was asked on cash flow. And maybe, Izzy, if you could just talk about the vehicle programs line in the cash flow bridge. In the last few years, it's been anywhere from $500 million to $800 million drag. Pre-COVID, it was actually more sort of neutral. So as you are doing this fleet transition, what should we expect on that piece of the cash flow bridge in '25, and at what point does it normalize to being more of a neutral?

Question: Dan Levy - Barclays Capital Inc. - Analyst : Okay. But the transition of the fleet -- sorry, go ahead.

Question: Dan Levy - Barclays Capital Inc. - Analyst : Okay. Thank you. That's helpful. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 12, 2025 / 1:30PM, CAR.OQ - Q4 2024 Avis Budget Group Inc Earnings Call

Question: Chris Woronka - Deutsche Bank - Analyst : Hey. Good morning, guys. And Joe, congratulations on the heck of a run at Avis, and congratulations also to Brian. We're happy to have you taking over mid-year. So I guess first question -- the gist of the question is going to be, what's the normalized hold period going forward? But if I can lengthen it out a little bit, if you get the fleet refresh mostly done by April, we know you fleet up into summer. We think we know where you're buying cars. Your exit rate DPU, I think you said, would be around 300. So if the hold period is at least 18 months still, is there any reason what would cause fleet costs to be above DPU to be above 300 next year, just at a high level? I mean, it just seems like that run rate would have to be in that range or lower. Is that a good way to think about it?

Question: Chris Woronka - Deutsche Bank - Analyst : Okay. Thanks, Joe. And then follow-up, this might be a little bit for Brian. Maybe, is the CTO role, is that something that's going to be refilled after Brian takes over as CEO? And then along those lines, Brian, I know you've worked on a lot of stuff in the role. Is there any high-level thoughts going forward? Any targets you guys are looking at on DOE, whether it's an index to inflation or just an absolute number you'd like to get below per transaction basis, or anything like that that we can think about?

Question: Chris Woronka - Deutsche Bank - Analyst : Okay. Thanks, Brian.