Avis Budget Group, Inc.

Greetings. Welcome to Avis Budget Group second quarter 2024 earnings 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. Please note this conference is being recorded. I will now turn the conference over to 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 Izzy Martins, 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 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 of our 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 measure. We are unable to reconcile forward-looking adjusted EBITDA to net income without unreasonable efforts given uncertainty in calculating necessary adjustments, including the after-tax effect of such adjustments, which could be significant. 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. Yesterday we reported our second quarter results, which delivered quarterly revenue of more than $3 billion and adjusted EBITDA of $214 million. As we discussed on our last call, to accurately portray the business in this quarter and beyond, we need to bifurcate the impacts of non-recurring fleet gains, higher vehicle interest, and decisions made to right-size our fleet. In fact, we have taken the necessary steps to adjust our fleet in the first half of the year by selling a record amount of vehicles which allowed us to achieve utilization in the month of June in the Americas more than a point above prior year, setting us up to be in a strong position to drive additional utilization and pricing benefits through our transition into the summer peak. With the improved utilization, we focused on what we can control to strengthen pricing and reduce our overall holding cost. Our goal has been and always will be, to ensure that our fleet is kept inside of our demand. And while the quarter shows our fleet size to be up 2%, we started July with fleet down over prior year. The environment for our business remains robust with record-setting second quarter volume in the Americas. Pricing improved sequentially in May and June from April, with June exiting down 2% year over year, but still up significantly compared to 2019, with the Americas showing positive signs for summer pricing. Before I dive into the results in greater detail, I'd like to thank our employees for all their efforts. What we have accomplished over the last six months, especially as it pertains to fleet logistics, has set us up to take advantage of the strong summer and beyond. More importantly, through their hard work and efforts, we continue to generate record net promoter scores as it pertains to customer acceptance of our products and services. With that, let's begin as we normally do with details surrounding our Americas segment. The Americas generated nearly 2.4 billion of revenue in the second quarter with 186 million of adjusted EBITDA. Rental days in the Americas were up 1% compared to the second quarter of 2023, a second quarter record. As we continue to grow our company, there's a balance between pricing and demand. As we typically do, we took the measured approach to volume and focused on pricing. We are well aware that improvement to our pricing has a greater margin benefit than improvement to our rental days. Keeping this in mind, we will continue to monitor our industry and make calculated decisions to prioritize price over volume when it makes sense, utilizing our proprietary demand fleet pricing system. As we mentioned on our last call, we saw pricing strengthen throughout the first quarter. That momentum continued into the second, Pricing was down 3% compared to the second quarter of 2023 and still up significantly compared to the second quarter of 2019. However, when you look at the year-over-year change in pricing for each month within the second quarter, the strengthening clearly showed in June with the Americas down 2% and U.S. rental car exiting June inside of that. Sequentially, pricing improved 7% quarter-over-quarter this year compared to only 4% over the same period last year, denoting an accelerated improvement in price. With these trends and the benefit of a strong 4th of July holiday, which showed positive pricing for U.S. rental car, we believe pricing can remain up in the summer and around flat for the quarter. As we have said in the past, we will continue to prioritize price over volume, and we will do our part to keep our fleets tight to strengthen our pricing opportunities. As I mentioned on our last call, we made the conscious decision to accelerate our fleet dispositions so that we could begin to generate utilization better than historic norms. As a matter of fact, we have exited approximately 70% of our anticipated full-year fleet sales by May. This culminated in our utilization of 70.2%, which was mostly in line when compared to the second quarter of 2023. However, that doesn't tell the full story. Due to the aggressive defleeting we executed in the first half of the quarter, our utilization significantly improved each month, with June finishing more than a point better than June of 2023. We anticipate our third and fourth quarter utilizations to well surpass the third and fourth quarters of 2023. With this prudent approach, we can expect to start 2025 with significantly fewer cars than we started in 2024. I wanted to take a moment to talk about our ongoing model year 2025 fleet negotiations. While there is still more to do, as we are just about halfway through, I can say they are currently at prices well below what we have achieved in recent years, and I'm quite pleased with our progress to date. The OEMs continue to make more cost-effective vehicles for consumers, and as one of the largest purchasers of their fleet, we are beginning to benefit from that as well. The OEMs have been strong partners to our company for many years, and this year has been no different. Our collaborative approach and similar glows allow for both parties to achieve successful results. We appreciate them and the support they provide us. Before I summarize the Americas, I want to thank our marketing team for extending our multi-year partnership with the PGA Tour through 2028, keeping Avis as the official car rental car company of the PGA Tour. Through this partnership, we'll be highlighting our Plan on Us campaign with PGA Tour fans throughout the world. For more than 75 years, our only plan is to make sure you keep yours. I'm also thrilled at having nine-time PGA Tour winner Xander Schaaple as our AVIS ambassador. We congratulate him on his most recent win at the Open Championship and thank him for representing our country at the Olympics. So to recap, The Americas had revenue of nearly $2.4 billion and adjusted EBITDA of $186 million. We have taken the necessary actions and sold more cars in the first six months in the history of our company to ensure our fleet continues to drive higher utilizations and positions us for improved revenue per day performance this summer. We saw a sequential improvement in price in the second quarter, and we believe pricing can remain positive in the summer and remain about flat for the third quarter. The demand in the Americas was up 1% in the second quarter, and we expect this to continue into the third. Let's shift gears to international. International generated nearly $700 million of revenue and $48 million of adjusted EBITDA in the second quarter. Revenue was down 1% compared to prior year. On a constant currency basis, it is flat year over year, driven by rental days of up 5%. On our last call, we talked about returning travel from country to country. Once again, we are seeing improvements with inter-European cross-border travel, which is up in mid-double digits compared to last year. Additionally, our international inbound volume showed significant strength compared to last year. We continue to focus on leveraging our global brands and strategic partnerships with a particular focus on inbound volume from North America and targeted growth in inter-European cross-border leisure business. We expect this strategy will generate higher margin volume as these types of customers tend to keep the cars longer and have a tendency to take additional ancillary products. As we transition to our peak quarter, summer reservations are strong and trending positively with demand stemming from inter-European cross-border and international inbound travelers, as I just mentioned. Pricing for the quarter was down 5%, excluding currency impacts compared to last year, and still up significantly compared to the second quarter of 2019. As it did in the Americas, pricing throughout the quarter sequentially improved month to month. The pricing trends in international are expected to improve throughout the third quarter as well. And as mentioned on our previous call, we took the proprietary demand fleet pricing system, which has been successfully implemented in the Americas for many years now, into our international region and is now fully deployed. This machine learning system forecasts demand by segment and prices our vehicles down to the location level while optimizing utilization and overall contribution margin. We are seeing early signs of improved utilization, rental day growth, and price optimization as the system prioritizes higher margin over lower margin businesses. Fleet utilization continues to be a strong point as the last three quarters have been higher year over year. This quarter's utilization of 70.2% was up 1.2 points compared to the second quarter of 2023. We continue to believe that our fleet is adequately positioned and ready to meet the increasing sum of demand and what we believe will be a strong fall. Europe continues to be a popular destination for cross-border travel, and our reservations show this strength. Turning to technology, where we believe our industry leaders are constantly looking for and executing ways to enhance our productivity and efficiency, I want to take the time to give an update on our progress on improvements to our operating expenses. We continue to enhance our process through the continued leverage of our data analytics and on-the-ground systems to increase throughput and enhance productivity. As a refresher, These systems and processes allow for better forecasting and scheduling needs down to the location and by day to optimize labor mix, such as full-time, part-time, and outsourced opportunities for jobs like shuttling our vehicles to and from our locations. We continue to face wage inflation, and our focus on labor initiatives more than offset these pressures, and we expect these savings to flow through the remainder of the year. Our analytics around in-life vehicle costs decreased these related expenses by over 10% this quarter. We're using analytics to identify operational efficiencies and procurement opportunities when looking at vehicle costs, such as tires, glass, and other vehicle parts. We have more visibility to leverage purchase power with our vendors, enabling us to use the most cost-effective part for each service. This better insight on purchasing of parts enables us to better manage these variable cost lines. We expect these savings to continue in the back half of the year as well. And while in the early stages, we have set ambitious goals targeting sustainable utilization performance through better understanding of the state of each and every vehicle within our control. Task-based analytics delivered to our operations and maintenance teams will allow for the enhanced vehicle movements and more timely repairs. We are excited to pilot these digital tools in key cities throughout the country. These and other operational efficiency strategies enabled us to generate improvement in operating and SG&A expenses by 1% on a rental day basis compared to the second quarter of last year, a sizable achievement given inflationary pressures. On our last call, I discussed how our international team has rolled out to more than 60 European locations self-service kiosks allowing a customer to bypass the counter in an unsecured lot environment and obtain their keys by using biometrics to identify who they are. The deployment of this system has improved productivity throughout Europe and is very well positioned to assist with the summer peak. The net promoter scores of customers who use this feature are much higher. We look to continue to drive even more customer satisfaction through further distribution and enhancements of these self-service kiosks. So to conclude, we generated $214 million of adjusted EBITDA for the second quarter with record-setting volume. We have completed approximately 70% of our expected full-year disposition to date in the Americas, and as a result, expect to be at higher utilizations in the third quarter. Pricing improved sequentially in the second quarter in the Americas, with the U.S. rental business being close to flat in June. The July 4th holiday showed price improvement over prior year, and we expect to see this continue throughout the summer and about flat for the quarter. Overall, our cost efficiencies improved our operating and SG&A expenses on a per rental day basis over prior year. The Americas and international teams are well positioned and prepared to deliver another strong summer season. With that, I'll turn it over to Izzy to discuss our earnings, liquidity, and outlook.