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Avis Budget Group Reports First Quarter Results

  • Revenue increased 2% in the first quarter to $1.9 billion and grew 3% in constant currency.
  • Adjusted EBITDA was $44 million.
  • Adjusted diluted loss per share was $0.28, and GAAP diluted loss per share was $0.53.
  • Company reaffirms its 2016 Adjusted EBITDA and earnings per share estimates.

Avis Budget Group, Inc. CAR, -4.43% today reported results for its first quarter ended March 31, 2016. For the quarter, the Company reported revenue of $1.9 billion and Adjusted EBITDA of $44 million. The Company reported an adjusted net loss of $27 million, or $0.28 per share, in the seasonally slower first quarter. The Company's GAAP net loss was $51 million, or $0.53 per share.

"Our first quarter results reflect modest demand growth and unusually soft pricing in the Americas," said Larry De Shon, Avis Budget Group Chief Executive Officer. "In this environment, we managed our costs and fleet levels carefully. Pricing has already started to turn the corner, and we expect to see progressive improvement in both our pricing metrics and our earnings comparisons over the course of the year."

Executive Summary
Revenue increased 2% in first quarter 2016 and grew 3% in constant currency, primarily due to an 8% increase in rental days (5% excluding the acquisition of Maggiore). First quarter Adjusted EBITDA was $44 million. Results benefited from increased rental volumes, offset by reduced pricing, higher per-unit fleet costs and a $33 million negative impact from currency movements, including losses on currency hedges.

Business Segment Discussion
The following discussion of first quarter operating results focuses on revenue and Adjusted EBITDA for each of our segments. Revenue and Adjusted EBITDA are expressed in millions.

Americas
2016 2015 % change
Revenue $ 1,364 $ 1,375 (1 %)
Adjusted EBITDA $ 63 $ 115 (45 %)

Revenue declined 1% primarily due to lower pricing, partially offset by a 3% increase in volume. Pricing declined 5% in constant currency and on a reported basis. Per-unit fleet costs increased 6% to $312 per month. Adjusted EBITDA decreased 45% in the first quarter to $63 million, driven by lower pricing and higher per-unit fleet costs, partially offset by higher volumes and higher fleet utilization.

International
2016 2015 % change
Revenue $ 517 $ 475 9 %
Adjusted EBITDA $ 1 $ 16 (94 %)

Revenue increased 9% despite a $25 million (5%) negative impact from movements in currency exchange rates compared to the prior year. Rental days increased 21% and pricing declined 5% in constant currency. Excluding the acquisition of Maggiore in April 2015, rental days increased 12%, and total revenue per rental day declined 3% in constant currency (comprised of a 3% decline in pricing and unchanged ancillary revenue per day). Per-unit fleet costs declined 9%, to $221 per month, and declined 5% in constant currency. Adjusted EBITDA decreased $15 million, but increased $14 million in constant currency, due to higher volumes and lower per-unit fleet costs.

Other Items

Share Repurchases- The Company repurchased approximately 3.0 million shares of its common stock, or 3% of its shares outstanding, at a cost of $80 million in the first quarter.

Debt Refinancing- In March, the Company completed a $350 million offering of senior notes due 2024 with an interest rate of 6.375%. The Company will use proceeds from the offering primarily to redeem $300 million of senior notes due 2017.

In March, the Company's Avis Budget Rental Car Funding subsidiary issued $450 million of five-year vehicle-backed notes with a weighted-average interest rate of 3.25%. The proceeds from the borrowing will be used to repay maturing vehicle-backed debt and to purchase cars in the United States.

Technology- In the first quarter, the Company completed the roll-out of new website and mobile-app reservations technologies to twelve countries in Europe, continued the development and implementation of its Demand-Fleet-Pricing yield-management tools worldwide, and launched a pilot of "self-service" vehicle rental capabilities at Avis locations in the United States.

Outlook
The Company today updated its estimated full-year 2016 results, with no change to its estimates of Adjusted EBITDA or adjusted diluted earnings per share. The Company expects:

  • Full-year 2016 revenue will increase 3% to 5% to $8.75 to $8.9 billion. Movements in currency exchange rates are now expected to have minimal impact on the Company's revenue growth. In the Company's Americas segment, rental days are expected to increase 2% to 4%, and pricing is now expected to decline approximately 1% in constant currency. In the Company's International segment, revenue is expected to increase 7% to 10% in constant currency.
  • Total Company per-unit fleet costs are expected to be $280 to $290 per month in 2016, compared to $277 in 2015. In the Company's Americas segment, per-unit fleet costs are expected to be $305 to $313 per month in 2016, an increase of 3% to 5% compared to $297 in 2015. In the Company's International segment, per-unit fleet costs are expected to be $225 to $235 per month in 2016, compared to $229 per month in 2015, which represents a decrease of 1% to an increase of 3% in constant currency.
  • Adjusted EBITDA is expected to be $820 million to $900 million, including an approximately $20 million negative year-over-year impact from movements in currency exchange rates and more than $50 million of incremental investments in our business.
  • Interest expense related to corporate debt will be approximately $205 million.
  • 2016 non-vehicle depreciation and amortization expense (excluding the amortization of intangible assets related to acquisitions) will be approximately $190 million.
  • Adjusted pretax income will be $425 million to $505 million.
  • The Company's effective tax rate applicable to adjusted pretax income in 2016 will be approximately 39%.
  • The Company's diluted share count will be 94 million to 96 million, including the effect of repurchasing $300 million of stock in 2016.

Based on these expectations, the Company estimates that its 2016 adjusted diluted earnings per share will be $2.70 to $3.30. Such estimate includes a negative impact from currency exchange rates of approximately 12 cents per share. The Company also expects that it will generate $450 to $500 million of free cash flow in 2016, and that it will repurchase $300 to $400 million of common stock in 2016.

Investor Conference Call
Avis Budget Group will host a conference call to discuss first quarter results and its outlook on May 4, 2016, at 8:30 a.m. (ET). Investors may access the call live and supporting presentation materials at ir.avisbudgetgroup.com or by dialing (630) 395-0021 and providing the participant passcode 2995545. Investors are encouraged to dial in approximately 10 minutes prior to the call. A web replay will be available at ir.avisbudgetgroup.com following the call. A telephone replay will be available from 11:00 a.m. (ET) on May 4 until 8:00 p.m. (ET) on May 18 at (402) 998-1136.

About Avis Budget Group
Avis Budget Group, Inc. is a leading global provider of vehicle rental services, both through its Avis and Budget brands, which have more than 11,000 rental locations in approximately 180 countries around the world, and through its Zipcar brand, which is the world's leading car sharing network, with nearly one million members. Avis Budget Group operates most of its car rental offices in North America, Europe and Australia directly, and operates primarily through licensees in other parts of the world. Avis Budget Group has approximately 30,000 employees and is headquartered in Parsippany, N.J. More information is available at www.avisbudgetgroup.com.

Forward-Looking Statements
Certain statements in this press release constitute "forward-looking statements" within the...


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