Avis Budget Group, Inc.

Greetings and welcome to the AVIS Budget Group first quarter 2021 conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce David Calabria, Treasurer and Senior Vice President of Corporate Finance. Thank you. You may begin.

Good morning, everyone, and thank you for joining us. On the call with me are Joe Ferraro, our Chief Executive Officer, and Brian Choi, our Chief Financial Officer. Before we begin, I would like to remind everyone that we will be discussing forward-looking information, including potential future financial performance, which is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from such forward-looking statements and information. Such risks and assumptions, uncertainties, and other factors are identified in our earnings release and other periodic filings with the SEC, as well as the investor relations section of our website. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results, and any or all forward-looking statements may prove to be inaccurate, and we can make no guarantees about our future performance. We undertake no obligation to update or revise our forward-looking statements. On this call, we will discuss certain non-GAAP financial measures. Please refer to our earnings press release, which is available on our website, for how we define these measures and reconciliations to the closest comparable GAAP measures. With that, I'd like to turn the call over to Joe.

Thank you, David. Good morning, everyone, and thank you for joining us today. For the past two earnings calls, we've been consistent with our message that Avis Budget Group would not be content with simply surviving this crisis. Our entire organization rallied around a mission to do the hard things necessary during the adversity of 2020 to best position ourselves for a potential recovery in 2021. While a full recovery in rental days is still further off, with commercial and ad travel still not back to historic levels, our first quarter results illustrate what could be when that day occurs. In the Americas, rental days were down 23% year over year, and down 27% versus 2019. For context, this level of decline is still significantly higher than the disruption we faced during the Great Recession of 2009. Yet despite that headwind, due to the structural cost reductions we've implemented, all the benefits of a healthy pricing environment and improved vehicle costs through our fleet disposition strategy all fell directly to the bottom line. The results being that for the first time since this pandemic, I can tell you that the Americas segment achieved a higher adjusted EBITDA this quarter than in the first quarter of 2019, and their best first quarter adjusted EBITDA margin in our company's history. Today I'll review how we delivered those results and why I believe this is just the beginning of our recovery. Let's start with the Americas segment. As you recall, in the third quarter of 2020, we saw the green shoots of demand recovery and sequential revenue improvement during the summer travel season. Conversely, in the fourth quarter of 2020, we saw a sharp pullback in demand with the emergence of a second wave. Now, in the first quarter of 2021, we confronted both these demand scenarios in the span of just three months. When we last spoke in the middle of February, the Americas had just gone through one of the worst Januaries, which frankly was more like what we saw in November and December. Revenue was obviously down year over year, but with no major holiday like Thanksgiving or Christmas, revenue in January of 2021 was significantly lower than any month in the previous two quarters. Booking windows were incredibly short, and we had little visibility going forward. So that's the bad news. The good news is that our entire team was ready for this. We concentrated our efforts around what we could control, which was cost. We continued our game plan of offsetting revenue declines by staying as lean as possible, and the rallying cry throughout the organization was stringent cost control. It wasn't easy, and it definitely wasn't fun, but our teams fought tirelessly against the macro headwinds we faced. As an aside, I got on an internal call with some of our key leaders after the earnings call in February. I acknowledged how exhausting this has been and how difficult it is when you don't see an end in sight. But I said, hold the line, because things are going to change. Now, maybe not next month. Maybe not the month after. But one of these months, demand will come back, and you'll see what all this hard work was for. Starting at the end of February, now that's exactly what happened. Then March started to see the convergence of pent-up demand, tight fleet, and stronger pricing. It was sudden and with a velocity across the US. Seemingly overnight, we had a transition from defense to offense. We invested in our people and our fleet, and our organization reacted quickly to do what we do best, which is getting cars to consumers who need them. And I have to say, it feels good to be back to doing this. However, I want to be clear that despite this change in demand, we did not forget the hard-learned lessons around cost. That discipline around staying efficient is now etched into the foundation of our company, which is why Despite revenue in the first quarter being down nearly 20% versus 2019 in the Americas, the adjusted EBITDA of the first quarter of 2021 was triple that of the first quarter of 2019 and delivered that best first quarter adjusted EBITDA margin in our history. What an incredible way to close out what started an extremely challenging quarter. And while we're not getting into specific guidance on this call, I will tell you that the momentum we saw in the back half of the first quarter in the Americas has carried over to the start of the second in both rental day demand and RPD. Now let's shift gears now to our international segment. While the narrative abroad is certainly different from the Americas, my opinion on the results they delivered are just the same. I am incredibly proud of what our international team has been able to accomplish in the face of unrelenting headwinds. I'll get into more detail, but let me start with the high-level takeaway. Our international segment has not yet seen the pickup in demand that our America segment has. The lockdowns of the fourth quarter continued throughout the first quarter, and cross-border travel is effectively nonexistent. Due to COVID and country restrictions, there is still very much living in a COVID world. International first quarter revenues in 2021 are down over 40% year over year. Yet despite a revenue decline of over $200 million, adjusted EBITDA for the international segment was down less than $10 million versus the first quarter of 2020 on a reported basis and essentially flat on a constant currency basis. Tremendous cost discipline was required to deliver those results. It's still only to predict when that uptick will occur, but we will be ready. Moving on to a topic relevant to both our operating segments, leads. Fleet management is at the heart of what we do. How we acquire, maintain, and dispose of our vehicles is critical to the success of our business in any given quarter. However, due to recent macroeconomic events, we realize that optimizing fleet will have an outsized impact on our business over the coming months. On our last call, we mentioned that semiconductor shortages would affect our company and our industry. And while those challenges have not yet been resolved, and are having an impact on fleet deliveries and the availability of fleet throughout our entire industry, we've been working hard to make sure our fleet is properly maintained and effectively utilized. So what are we doing about it? First off, we are working hand in hand with our OEM partners and have daily conversations around how to manage this situation. We have deep relationships with our key manufacturers that have been built over decades through both highs and lows. We haven't forgotten how helpful they were when we faced challenges last year, and we will do everything we can to be as helpful as ever as they faced the semiconductor challenge this year, because that's what a real partnership is about. It's not about optimizing this year or that year. It's about making each other better year after year. We have full confidence that our OEM partners will be able to navigate these disruptions, and we'll work with them to maximize our deliveries while being flexible with their production schedules. Availability of new fleet is clearly something we're laser-focused on, but I want to assure you that we at Avis have a long history of being able to navigate through tight fleets. We are getting in new cars daily, and we've seen our current expected schedule being satisfied. As we saw demand pick up in the Americas, we became surgical with our fleet dispositions. Additionally, one of the silver linings of this pandemic is that our vehicles just didn't have as many miles put on them, allowing us the flexibility to hold them slightly longer. We're also taking proactive measures to invest heavily in preventive maintenance to ensure we get the most out of our usable fleet. Lastly, our connected fleet is paying dividends by alerting us to potential issues real-time so they can be addressed, and we keep our out-of-service vehicles to our minimum. I know you all have questions about fleet. I wish I had all the answers, but it's a very fluid situation we're dealing with right now. What I can guarantee you is that we are doing everything with our power to ensure we have the available fleet to meet both current and future demand. Finally, I'd like to close with Avis commitment to safety. Even prior to the pandemic, our customers wanted a contactless experience, but what was nice to have pre-pandemic has become a real differentiating factor in this post-pandemic world with our mobile select product. Our Avis Preferred customers, upon arrival, can select their specific car on their phone, proceed directly to their vehicle, and then utilize a unique QR code to exit via our automated express exit for a completely contactless experience. Adaption of this customer journey spiked during the pandemic and has been extremely well received. It's a process that's not only safer but more convenient as well. I would strongly encourage all of our members to sign up for Avis Preferred. But if you're not an Avis Preferred member, you can still take advantage of our digital check-in on our websites, reducing transaction times to quickly and safely get you on the road. In addition to our mobile select product, our exclusive partnership with RB enables our industry-leading efforts to protect our employees and our customers through the Avis Safety Pledge and the budget worry-free promise. We'll continue to invest in these safety measures, even as the world normalizes. So where do we go from here? Our strategy around cost discipline worked during the pandemic and will continue to work during a recovery. We're not done here, not by a long shot. Every day our organization challenges itself to find ways to increase productivity, drive efficiency, and capture opportunities. The grit and determination we demonstrated in 2020 proved how resilient this team is. Throughout 2021, we'll now prove what this team is capable of. As this recovery continues, with that, I'll turn it over to Brian to discuss our liquidity and our outlook.