Q3 2020 Avis Budget Group Inc Earnings Call
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Greetings and welcome to the Avis Budget Group third quarter 2020 conference call at this time. All participants are in a listen-only mode a question-and-answer session will follow the formal presentation. But once you 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 your host David Calabria club and SVP of corporate finance. Thank you. You may begin.
Good morning, everyone and thank you for joining us on the call with me or 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 that involves risks uncertainties and assumptions that could cause actual results to differ materially from such forward-looking statements and information such risks injections 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. 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 measures with that. I'd like to turn the call over to General.
Thank you, David and good morning everyone and thank you for joining us today. I also want to introduce and welcome Brian. Troy was recently joined our executive team as our new Chief Financial Officer who has been with us for quite some time as an investor in a longtime board member Brian and I have worked together for the last ten years and I'm excited to be able to leverage his experience and depth of knowledge as we grow this business profitably for the years to come.
We first started the feel the impact of this pandemic. It was impossible to guess how things might play out while the future Revenue environment remains uncertain what is becoming increasingly clear bulb is our company's ability to adapt react and Thrive through adversity and the second quarter. We mitigated the impact of an unprecedented decline in travel. And in the third quarter of weed be gone to show what our business is capable of as travel returns. I'm incredibly proud of our team not only for that heroic efforts to protect our customers, but also their ability to achieve financial performance with a lean cost structure enabling us to profit even with the monitoring Market in treatments.
This morning. I'll provide an update on the actions. We took in the third quarter removed costs and right-size our Fleet of improving our Revenue since the start of this pandemic then remind you of our commitments to cleanliness and safety through on the Avis safety pledge and the budget worry-free promised including our Innovative safety Partnerships and touchless rental experience. Finally, I discuss business Trends and our outlook for October and Beyond after that Brian will discuss our liquidity and cash position which illustrates the strength of our company.
in the
Quarter, I stayed in our last call we achieve both positive adjusted ebitda of $220 and generated a hundred million dollars in positive adjusted free cash flow monthly Revenue remain challenged do the pandemic subject on travel our cost removal efforts since March have enabled us to benefit from sequential Revenue improvements throughout the summer culminated with the Americas generating more adjusted ebitda this September and September of 2019 on more than 30% less Revenue during the quarter. We right size of Wheat and profitably sold seventy-five thousand cars in the United States most we ever sold in any quarter in this company's history. This included record quarterly sales.
Towards direct-to-consumer Channel, which we continue to expand with the recent opening of a largest retail location in Irving Texas through our increased use of data and analytics. We capitalize on a strong used car market to take advantage of used car prices throughout the summer with August being the single largest Fleet Sales month we've ever achieved to date as you can see in our presentation. We have a strong history of aligning our Fleet with the man which he demonstrated again this quarter to achieve Peak utilization rates close to 70% in the Americas.
A cost removal efforts will not limited to our Fleet globally. We reduced our total expenses in the quarter by approximately another $1 billion dollars bring our total cost removal of the year to more than a million. We expect to remove more than 2.5 billion before this year is over as we persistently evaluate every line item of expense and find creative ways to work with suppliers and partners to find efficiencies. We've been fortunate to have many great Partners who have worked with us along the way we've become a leaner and more efficient organization, which will continue to benefit our bottom line even after the impacts of this pandemic help Society.
The liberal travel demand remains down revenues in the third quarter continue to show sequential Improvement down 50% from prior year in July 43% in August and finished down 37% in September.
Airport travel has been recovering moderately and are on Airport volume is still performing better than passing a screening data released by the TSA similar to last quarter off one point customers are still coming to airports to rent vehicles and blind customers appear to be more comfortable running one of our vehicles than taking Alternative forms of transportation our office operations continue to provide stability driven by local market business, like commercial vehicles ride Hale package delivery Zipcar these areas performed especially well during the month, right? He'll business is up significantly year-over-year with active rentals back above prepend emack levels additionally revenue from a local market operations, exceeded prior-year levels and a quarter of particular note on package delivery business in the US has nearly doubled and we've increased our Fleet to match further demands as we head into the holiday and Peak package delivery season dead.
And the fourth quarter zip code also improved sequentially as Urban customers seek private transportation to run errands.
outside the city
pricing volume has improved dramatically as competitive Fleet levels have tightened in the Americas Revenue per day turned positive by the end of the quarter driven by strong Leisure pricing on the weekends off sitting drags from the mix ships to domestic want to learn physics.
Want a rental Lanes tend to have lower rates. However are accompanied by higher margins due to fewer touchpoints. Wanda rentals mean you moved when shuttle a car less, you need to clean the car off your gas the car less and you have less transactions associated with the vehicle. Ultimately. This means you have less cost associated with these rentals due to this increase in tax revenue per transaction has been especially strong a 14% in the Americas at the pricing environment has improved while customers continue to hold our vehicles for longer lengths of RAM.
With improved market conditions. We were able to leverage our prior technology investments in demand Fleet pricing and maximize the profitability of our transactions. We also optimize our Fleet position so that our vehicles will well positioned to capitalize on the most promising demand opportunities.
We achieved similar improvements in the international business right-sizing the fleet for average utilization the corner near seventy percent while the lack of cross-border inbound business continues to create a dream on Revenue per day due to less counselor sales opportunities.
We are proud of the way we've been able to navigate through these uncertain times. But even prouder of our industry-leading efforts to protect our employees and our customers, we launched our medical advisory council with five well-established medical professionals from leading institutions charged with reviewing and Advising on our COVID-19 protocols while I won't get as much detail around the holistic safety efforts. As I did last quarter. We have further enhanced our protocols and training. We were also expanding our partnership with our be an apparently using their well-known Life Products across all locations to benefit from their proven Effectiveness against COVID-19.
We continue to expand our use of technology to deliver contact with mobile experiences. We've been a Pioneer four years across Our Brands. We have an award-winning app and through our mobile select or brain-dead Avis preferred customers upon arrival to select their specific car on their phone proceed directly to their vehicle. Then utilize the unique QR code to exit be our automated Express exit off for a completely contact with experience. All of our Avis and budget customers can also take advantage of a digital check in on our website reducing that transaction time at our counter to quickly and safely get off road.
Given to differentiate experience we provide we're not surprised that many of those currently traveling a choosing our vehicles over other Mobility options available. We continue to talk with our zip car brand. We have streamlined both our backend platform and front-end enrollment process with instant access enabling new members to access a car with a smartphone Drive within minutes of joining this allows anyone near a Zipcar Vehicles, especially in urban centres another completely contactless option to get on the road quickly.
Now we'll provide an update on our current business Trends and our outlook for the rest of the year.
Rental patterns continue to be driven by higher Leisure compared to corporate and skewed towards local versus out of town customers reservation demand remains closer to the date of travel pass rounding weekend, check out days while we have limited visibility into the future as customers are primarily booking close in we have more confidence in our current reservations. We no longer have suggests reservations and the scene cancellation and no show rates come back down to prepay endemic levels. We are also seeing positive Revenue per day on reservations recently booked a travel into the fourth quarter.
Our efforts protect both the Financial Health of our company and our customers have put us in a stronger competitive position and appear to be paying off. We have adequate vehicle serviced our customer base today and also a strong financial position to give the customers confidence in our ability to provide them with the vehicles and service. They deserve even into an uncertain future months. We've had great success with small business where along a link monthly rentals in the Americas rule of a 10% in the quarter compared to Prior year and nearly 30% in September.
Busy in the court of working with our oems on our Fleet by 2021 to refresh rough lead get back to a more normal sleep cycle and to ensure our customers have a new low miles vehicles that need their quality expectations as we further align Supply with the man.
You have it are now proven ability to still vehicles at scale. We are confident. They even have 2021 proves more challenging than anticipated. We have a flexibility to continue to match up wheat level wage demands.
Going into the fourth quarter while we see a traditional decrease on the seasonal Summit Pig. We still expect to see steady Improvement on our year-over-year Revenue declines from the lowest level travel demand in April given Market uncertainties beyond our control with customers booking reservations closer to the rental date remains difficult to see how Revenue will unfold hold on strong cost position. We continue to anticipate or positive adjusted ebitda and positive adjusted free cash flow from our operations.
In closing. I'm extremely proud of our team and their performance unless continue to express my sincere gratitude to our front-line employees, but they don't unrelenting hard work during these uncertain times their tireless efforts ensure our locations and vehicles are ready to allow customers around the world access safe and efficient transportation.
Travel demand recovered throughout the quarter and we met our objectives achieving positive adjusted ebitda of 220 million and positive adjusted free cash flow and earned war and adjusted ebitda off this September then the prior in the Americas remove more than two billion in cost this year. So far will remain diligent in keeping fish costs at a minimum while simultaneously finding ways be more efficient.
with that
I'll turn it over to Brian to discuss our liquidity in cash positions.
Thank you, Joe and good morning, everyone.
Let me Begin by saying how proud I am to join the Avis budget team. It's an uncertain time for the entire travel industry. But what I am certain of is that the actions taken by our employees over the past two quarters with positioned us to take full advantage of the opportunities that will arise as the world normalizes for that. I'm grateful and hope to contribute to their continued efforts. I'll now discuss our third quarter results with our cash flow liquidity and Outlook my comments today discussing changes in Revenue per day pricing and per unit free costs will all refer to changes in constant currency that is excluding exchange rate affects. My comments will also focus on our adjusted results, which are reconciled from our Gap numbers in both our press release and earnings call presentation.
Well, the team faced an unprecedented change and demand late in the first half of the year the third quarter showcased a remarkable stabilization of our company as we aligned Global Fleet levels to demand and continued our cost takeout took us all expense lines on our last call. We stated that we would be adjusted ebitda and adjusted free cash flow positive for the remainder of the year. We delivered on that with adjusted ebitda thousand two hundred twenty million dollars despite Revenue declines of 44% adjusted free cash flow for the quarter was positive one hundred million dollars driven by our record Fleet Sales and successful cost for mobile strategies.
As of September 30th we have available liquidity of two point four billion dollars comprised of approximately 1.6 billion dollars in cash and equivalents, and approximately eight hundred million dollars in availability on a revolving facility are ProActive Management of our corporate debt ensures that we have no meaningful corporate debt maturities until 2023 and no need to refinance any Fleet debt this year.
Next I'll provide an update on our vehicle securitization debt, which is comprised of term debt and Bank conduit facilities around the world.
We were in compliance with all facilities as of the end of the third quarter and did not require any additional Equity injections or larger structure a soft in the United States continues to have significant Headroom on page tests at the as of the end of September.
I would refer you to our investor presentation for historical view of our maintenance Covenant tests, which shows the strength of our structure.
Additionally in the quarter we completed one of the best Aesop transactions at the lowest rates since 2013 showing the strength of our relationships with lending partners and in the ABS structure and their confidence in our business office.
We believe our current operating environment and liquidity position are now robust enough to return the excess Equity that we access earlier in the year back into our ABS facilities to allow for growth in 20-25. Finally. I would like to share our latest thinking for the remainder of the Year while we cannot precisely predict the path of the virus scientific progress or governmental actions. We correct the demand proceeding with it's slow recovery, especially where new cases are low and quarantine restrictions are lifted are experienced throughout this initial recovery. Continues to show that as States or countries reopen vehicle rental activity accelerates. We believe there may be meaningful pent-up travel demand from those experience Cabin Fever. However, we believe a full recovery is contingent upon effective Therapeutics and a vaccine.
Keep in mind that we are a seasonal business and we anticipate the normal seasonal decline.
And as we move from the summer to the fall and winter and his business mix shifts from Leisure to commercial during this.
With the large portion of our fourth quarter Revenue typically earned during the holidays late in the quarter and rental reservations occurring closer to the rental day. There are still significant unknowns to to the development of the fourth quarter.
Given these uncertainties. We have focused our efforts on areas within our control and we would like to provide some guidance around costs.
Our cost removal efforts are not yet complete as we continue to look for efficiencies and renegotiate with Partners as we are now a sustainably leaner company as this pandemic effectively forced the organization in 2018.
We will keep fixed costs out with only focus strategic Investments throughout the remainder of the year and into the beginning of 2021.
Our Fleet levels are now back in line with the man and we fully expect to continue to improve our utilization levels as we believe are most difficult challenges are behind us. We do not plan to bring back overhead cam ahead of demand as we will keep fixed costs at minimum levels and keep variable costs in line with relevant pockets of demand.
What this all means is that despite travel demand remaining challenged and despite the headwinds of normal seasonal shifts. We are reiterating our goal of being adjusted ebitda and adjusted free cash flow positive, excluding the return a vehicle Equity as discussed previously in the fourth quarter.
Adjusted ebitda was down roughly 50% in the third quarter and we hope to narrow that year-over-year decline in the fourth quarter.
In conclusion, we remain focused on building a sustainably stronger organization while continuing to emphasize safety trust and empathy in all of our actions as we protect our team and our customers off, but that Joe and I are happy to take your questions.
Thank you. We will not be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad will indicate that your line is in the question queue you may start to if you would like to remove your question from the Q4 participants using speaker equipment and baby necessary to pick up your handset before pressing the start Keys as the note. We ask that you please send me yourself to one question and one follow-up. Our first question comes from the line of Billy Cavanaugh's for Morgan Stanley. Please proceed with your question.
Congrats on the strong result quick question on your cost profile. So in 3 Q. It looks like you're some artificially lower costs with respect to sg&a as we look forward. Can you please quantify the extent to which some of these costs will revert back? I'm thinking category like labor advertising Logistics Airport rent will have cost for adding again on the other hand. If you could also quantify how much of the 2.5 billion quoted annualized Savings in twenty-twenty you expect to be a permanent cost savings. That would be very helpful, and I have a follow-up. Thank you.
Yeah. Hi. Good morning. Billy is Joe.
As you as you know, we worked really hard on getting our cost basis in line with our revenues as the pandemic started. This was a primary objective of our money and our team and as we move through the second and third quarter, we've seen the fruits of that labor, right? So we we looked at all lines on our on our p&l whether they be direct operating Fleet or sg&a and our approach was fairly simple, you know, if we have Revenue demand that's going to be X and granted as as I said in my opening remarks and is Brian said as well. This is there's some uncertainty about what that Revenue line is going to be but with analytics and things of that nature we take our best our best estimate and we and we took all our teams looking at that and a diligent way throughout the world and because of that we were able to take out an unprecedented amount of cost right globally, um more costs than we've ever
Picking out in this company's history.
That's a very diligent effort and when I could say about going forward is Brian and I looked to you know forecast our next year's activity on fourth quarter and next year's activity Thursday. We're going to be diligent about what we went back in right? It's a it's a process. I'm not we're not totally the area I'd be kidding you if I said we were we are not dead but it was a lot of hard work to get these costs in line with our Revenue aspects and we will be detailed and and diligent about how we look about bringing some of that back. That's the best I could say right now. We probably give you more color on that on our next quarter earnings call Cuz we'd be more in into that as you know, we just met recently finished our Fleet by I mentioned that earlier and we have to take that into consideration as well. I hope that helps
You said sorry Billy just add to that. You know, I wouldn't categorize any of the cost takeout as artificially low like right now to Joe's Point both declined like we're moving with that. We all understand that as volume returns certain costs will return as well. We're in the process right now of evaluating every cost line item. We have as kind of fixed or variable and the goal and we'll provide more color on this is Jose that on the next earnings call, but the goal is to make sure the fixed costs are as low as possible and that's something that I do sustainable going forward and to me that's just cost should be as low as possible because that gives you kind of downside protection in terms of any shocks to the system. And that's that's something that we worked really hard on to get there this quarter off and in terms of the variable cost. We want to make sure that those stay as low as possible as well. So that as volume does return we're keeping as much kind of birth.
Incremental contribution margin as profitable and and the is profitable as possible. So this is something that we're
In the process of working through and we'll provide more color in the future. That makes sense. Yeah, that would be a Monumental effort to get rid of those fixed costs. They can grasp on that or four more color in fog and Beyond and just wanted to ask a question on the international segment seems like the segment seems to be firing all cylinders. You touched on pricing being a headwind in the National segment wage. You also just touch so on what are the other factors that have led to some of the on the performance in international and and what's different in that market versus the that you're that has led to some lower performance in adjusted either. Thank you. Yes. Okay. I am still you know, I think when you look at the international market it's operates a bit differently than the us. Obviously. I'm in the quarter while there was pent-up and Leisure Travel demand in the US a big portion of the of the European business is based on inbound travel, especially in the third quarter.
I think if you look at the three segments of business that we have in Europe domestic business then if it's central European business and then there's inbound. Let's say from North America off. Well inbound business has been depressed. Right? We all know that you know, I'm encouraged to see that some of our Airline Partners a Sonic to open up potentially a test out of out of location in the u.s. Going to the UK with a test prior and after you land, I think that'll that'll Aid in some in some rope there. But if you think about the pricing is that kind of what you've asked, you know, we the overall pricing of what you would sell to a customer is was okay. It's the mix shift that that caused the decline and if you think about that. Make sure an international customer coming from let's say North American in a land in Europe, they buy a lot of ancillary products a lot. They don't know the area they're unfamiliar with the road system.
And they tend to want to have that level of protection in this particular case that customer wasn't there right the mix changed. So I am particularly proud of the way. We took our sale or internationally, you know, they they there is just as diligent as as as a teams are in the Americas to align cost with Revenue country-by-country off and but it was the makeshift that that caused that Revenue decline.
Makes sense. Thank you.
Thank you. Our next question comes from Chris wrong with Deutsche Bank. Please speak with your question.
Hey, good morning. Everyone was hoping you guys could talk a little bit about the the fleet plan for next year. And I know you're making those decisions now and and you know, just kind of how to be under right given how challenging the visibility is. And then also along with that. Can you maybe give us a brief walk-through of you know, kind of the the financing aspect given that you're going to refill the ABS and the fourth quarter and just how the that will work given your presumably going to be selling fewer cars and twenty Twenty-One. Yeah. Okay. Hi Chris. This is Joel stood up and I'll turn it over to Brian for your question about the liquidity. So let me let me say this. We you know, we had to to Thursday the actions to better align our Fleet with our demand this year and you know, there were a lot of questions going into this quarter as to whether or not we would really be able to align our Fleet with demand dead.
First of all, we had sequential volume improvements right as I mentioned earlier. We had pretty significant growth in our rent all of them.
Order a local market segment of business and allowed us to fuel zoning utilization opportunities as they presented themselves. We also as I told you earlier we canceled a lot of cars right in the in the last call, We canceled a lot of our existing existing orders and and you know, start gave us a platform of success and then during this quarter, you know, we had a robust bought a used car market and how we attacked that market. I wouldn't say how we we moved cars in how we attacked that market through data analytics and the timeliness of our delicious gave us an opportunity to get our Fleet back to a normalized level. I mean if you think about it, we were up 15% in the month of February and had Fleet a line to meet that Target and Thursdays. So we proved in the past that we can get our Fleet up to get revenues that are available to us and we can also in a very short period of time downside this Fleet to get it in line with the with the dog.
Current demand, as I said, we you know, we've just finished our our our negotiations about three by I think the buy is I'm very pleased with it. Actually it's off of nature. It's vehicles that our customers will enjoy to rent the features that are aliens put in there that make it a benefit potential experience. And I also think that it's cars that you know at the end of the day whether it be says Advanced or trucks that we could sell profitably we've always had a history in this company to align our Fleet slightly below what we've got. Our our demands aspects are going to be now is Brian and I said earlier those are challenging right? But we are we looking at all the acne external damage that was available to us, whether they they both are lines that they are saying or thinking about doing what we see in our own individual markets and we're going to start, you know, uh getting newer model vehicles into our Fleet dead.
When you think about Fleet cost in general and how you prepare that there are obviously three aspects one is how you buy the cars which we talked a lot about one is how you sell the cars, but he really is important is the cycling end of new vehicles to create the rotation that allows you to have, you know, a mileage and a monthly holding. That aligns with future profitability. So, you know our fleets will be there. What what I can tell you is we're going to have new cars and we're going to line that with demand as we've done historically in this company if you've seen one of our slides since about 2008
It's just that add to that, you know, when we access the equity in our facilities in the second quarter that was never meant to be permanent like that was during a period of severe uncertainty making sure that we end up liquidity to weather the storm. Even where we sit right now and the the Outlook that we see for the business and given the fact that despite revenues being down 45% the fact that we're free cash flow positive like we believe that we don't need to be sitting on that excess liquidity at this point. So the thought is we're going to return that back into our ESOP facility that will allow us to fund Fleet purchases up to 2019 levels and provide kind of the cars and the quality of cars that are that are consumers are are accustomed to any credits if I could and you know, this is David we we issued that a soft deal that Brian talked about a 2013 levels. It was it was opportunistic and it was pre-funding, you know maturing debt from next year and globally all our facade.
These are in place the capacities.
You know that are sufficient to fund 2019 levels and Beyond so we feel really comfortable in the code about our ability to finance whatever Fleet we need to get going forward. Thanks.
Okay, appreciate all that all that all that color. Just a quick follow-up. Are you seeing length of rental? Yeah. I know you talked about how it was still elevated in the third quarter. Are you seeing that come down much? I'm heading into the fourth quarter or you know when you say it's still pretty pretty elevated. Yeah, I'd have to say it's it's pretty elevated off. Our our customers are keeping the cars longer. So when I say that people are checking out if weekends, it's not like a weekend rental, you know, it's like you think you take out Friday and come back Sunday. It's not that at all. They're using the car fax over these longer Alicia periods. And you know that bodes well for us in our utilization strategy blow goes well for us in our cost of execution strategy and that we think that's a value-add took us currently right. Now. What what what you're missing and that is like the you know, the like the one no to De Daily Business that came from a commercial Peak that obviously is is not as robust job.
Leisure as we currently speaking but we see that continuing and you know, this quarter is tricky as Brian said, you know with the holidays holidays are traditionally a longer length opportunity for us so I don't see that changing.
Okay, very good. Thanks guys.
Thank you. Our next question comes from Michael mellman with milman research Associates. Please proceed with your question. Thank you kind of following up on the last topic a couple of things used car prices as we all know records and not sure to what extent we can let the stimulus affected by the extent because the are are concerned about are affected that maybe talk about how you see used car prices in in near future and maybe
I'm sorry. Did you want to continue Michael we can start there? Okay, this is Joe.
Yeah, you know used car prices for strong there was obviously reasons for that in the quarter, you know, there was you know was no secret that you know the oems down for a period of time which created, you know, inventory challenges on their retail Lots, uh, which you know, what we do business as far as used cars used cars. We've there was stimulus as you suggest we think that had you know, uh, given us a good Advantage as well. And I think there's some that we do internally right like data analytics and we have changed our change on selling strategy since 2017, you know, we we were more risk than we ever were as far as a, you know, risk to program Fleet and we figured out ways along, you know to to sell more direct-to-consumer which increases your your prices and more directed dealer which reduces costs that you would normally pay at auctions and things of that nature. So while the while there was a robustness in the market dead.
We think we've we've been.
Chance that but some of the strategies that we put in slime many years ago that being said, you know, as we see that there is still demand for one year old used cars now sequentially that off the clients from from the summer season to the winter. I mean, that's a seasonal Decline and we see that every year and that's no different than this year. But if you ask me the demand is still solid the price in the marketplace is is uh is while maybe Challenge from was in the third quarter still up quite a bit as compared to Prior year and we anticipate that that that's a very big positive for us on our company.
See I need for another stimulus or a bigger stimulus package going forward to keep I used car prices at levels that they've been these record levels. You know, now that would be tough for me to to answer. I would say that a stimulus package always would be a help page someone on a previous call, you know, ask me about cash bunkers or something a couple of calls ago and the stimulus package we think was was just as big as that. Uh, so if there is one I think that helps I think if you know, whatever the inventory levels off or or retail or would probably you know, trigger something about that. But as of right now there's still demand
Right. Thank you.
Thank you. Our next question comes from Hamza with Jeffries. Please proceed with your question.
Hey, good morning. My my first question is just on utilization. If you could maybe talk about you know, how utilization played out during the quarter. And and the reason I ask is, you know, you had this big benefit from monthly Fleet costs being down 37% You sold cars really well. And so I you know, just trying to assess how clean the ebitda number is in in the quarter and whether the lower utilization initially in the quarter kind of offset any of those games, you saw just trying to see how going forward as utilization ramps. Does that offset kind of flip cost coming back to a more, you know normal level? Yeah. I think you're right on about that.
So our utilization at the start of the quarter was lower than it was towards the end and there were a couple of things that you know that happened with that right? We canceled orders upfront to get us in the office possible position to the start off at a lower base which helped but if you if the sort of the quarter our utilization was not as robust as it was at the end and you think about the summer season what transpired there's a lot of leisure travel is a lot of longer length, which we spoke about earlier which helps in the overall utilization process and then the robustness of the demand for selling cars in our ability to sell them in the fleet them with the velocity that we did also helped but you're absolutely right the utilization at the start of the quarter was was not where it was when we finished for all those reasons. I think it's it's probably right to say that as all utilization gets gets more and more in line.
You know that will help.
For setting the big the big, you know games that we saw in the used car market and just add to that in terms of how clean the quarter was off. The monthly rate for the company was $163. That's completely abnormal. Right but, you know, even though those per unit Fleet costs were so low. We were paying for a lot of cars just weren't being used. Right. So I would say you're going to see in the queue what the total games on sale Worth to see what that what that benefit was. But I'd say that nearly two-thirds of that was eaten away just by the fact we were completed and there's only so many cars that you can sell through in a month, uh-uh kind of responsibly and and keep the market where it should be.
So in terms of in terms of how clean the quarter was, I think that gas, of course the the lower depreciation costs were a benefit but offset nearly like two-thirds of them from the from the lower utilization as Joe said because we're exiting now right sized in terms of the fleet. We think those the quarters of just a lot more cleaner going forward with guarded that's very helpful. And then my follow-up question. I just wanted to ask the cost question a bit differently, you know, if it's his prior big margins were you know, 11% you know Avis in 2016 talked about thirteen to fifteen percent aspiration, you know, given given the cost would have taken out of the system and and they're going to come back very slowly. Is it fair to say that the company can surpass prior Peak margins on just a structurally smaller Revenue? Yep.
Bass given, you know corporate travel may take a while to come back is is that sort of a fair thesis?
Yeah, you know, this is Joe again. It would be unfair for me to comment on on where we think that's going to be but cuz I Brian and I have to have to you know use this Thursday the next couple of weeks kind of get a hands around that but I will say this the amount of cost that we took out of this company was unprecedented, right? We've never done that in the history and I've been around for for a period of months never saw that and we did it and our teams did it and we've learned to operate in a cleaner environment. It taught us something as as as as as long as this pandemic has been it taught us how to operate in a differentiated way and it's maybe that's something that you would get if you wanted to you know, Z budgeting and things of that nature but may be radically is very different than operating and we were able to operate in a much leaner environment. So we are going to be diligent about that because you're right. The first quarter is under
You know, what? Is it going to be therapeutic for a vaccine? You know, I heard people talk about I you know in the state that that we operate in that they want the you know population ugh vaccinated of July. No one knows if any of that is true or is going to happen. I mean, those are Theses we have to be ready for what if it does and what if it doesn't and I think that's where you'd see our cost base line of what we believe our revenues projection will be Brian alternative you for any other color? Yeah. I don't think we're in a position yet to keep kind of a range of what we think March a mortgage profile will look like you know, once we reach steady-state again, but so you're kind of specific question on whether we would be higher than that 11% Even the cost take outs that we've gone through this year. And a lot of those are just structural cost take outs that we don't ever see coming back. Like I would be embarrassed if we got two prior Revenue levels and we weren't significantly higher in terms of birth.
sustainable
Fortune Garden very helpful congrats Brian on your role as well. Thank you. Thank you.
Thank you. Our next question comes from Brian Johnson with Barclays. Please proceed with your question. Yes to questions. So first with regard to price thing, you know, I'm sure you look at data for kind of like for like transaction. So if you were to look at transfer example for a kind of mid-week single day large airport rental versus a week-long airport rental or a week-long off airport rental. You know, what what is the pricing Trend you're seeing within kind of similar wage they use if you will.
Okay, Ian Joe.
If we see that we see that you know, obviously you guys have pulled the public data and and and those are those are you know directionally, correct? We saw our exit Trends in the month of September wire Tire pricing, you know on the Leisure side with dominated by more Leisure business. I think the thing that might throw some of that pricing those pricing stats all however is is dead in a while. There's price out there for a single-digit rentals that are high the customer base for that that activity is not right. So it's all the pricing is is is performed as we exited the quarter, you know similar to the way it was in September and I could tell you Columbus Day was was pretty good as well. The the you gotta take into consideration the mix right? So it makes the fact is we've seen, you know, considerably longer length of rental and I I I just don't think that's a bad thing right when you have
Longer length of rental you have less transactional costs and allows them to operate much much more efficiently and I sent on an earlier question. You know, we see that length of rental continuing But to answer the question directly. The pricing environment has improved the police are are are much more aligned than they were previously so and and so that was kind of getting my question if you take a one-week off airport rental, what's the pricing on that versus say a year ago one week rental as it stands right now. Is that okay? Can you say how much or roughly I mean it's hard to say cuz you know you're saying well someone keep the car five days out a week 7 days. Is that a week or plus that so I'm like I said, there is there is a mix change, right? There's people have kept the cars not just for weeks, but we have an incredible amount of people whether it be commercial Alicia that have kept the club.
Just a moment. If you think about what the is pandemic has done is great uncertainty and people want certainty and and and vehicle Solutions allowing them to have that.
Brian and I don't think you want to get into that kind of thing is doing but generally speaking across kind of all the different segments. We have we are seeing a positive pricing. Oh, yeah. Thanks. That's all I was just trying to do because the headline of course very mixed driven second question on the balance sheet and AVS structures. Just you know, roughly. What is the amount of liquidity that you have in mind to put back into the structures? That's one and the follow-on to that is that in anticipation of expanding a fleet or just going maybe not expanding but going back into the market and having the flexibility to buy new cars what and if you need them. I think that's the right way to think about it Branan Vestige more with the flexibility. So we are going to put in in excess of seven hundred million dollars back into the facility which gives us the option to Fleet up to what we need to it doesn't mean to see we're going to use every last dollar of is to log
to Joe's point the the industry is
Self just kind of gotten right pleated right now. It's like we want to go and buy more cars than we need but we do want the option to as we see demand recover and given that it's kind of Uncertain how things will shake out. We just want the ability to to buy that Fleet when we do need it. Okay? Okay. Thank you and congratulations again, Brian.
Thank you. The next question comes from Ryan Brinkman with JPMorgan. Please proceed with your question. All right, thanks for taking my questions. You know, there have been a number of developments recently with regard to the Hertz bankruptcy. What is the Leo terms of your thinking relative to how that firms, you know current execution or future capitalization Fleet capacity or brand reputation etcetera might impact your operations going forward.
Yeah, hi. This is Joe.
I really cannot I can't comment on on one of our competitors. We are obviously aware of what's going on publicly. And we monitor that I think when you think about the environment in our industry, it's a very competitive industry. Uh, we all try to differentiate ourselves based on products or services or Technologies in that regard and our teams on the ground dead throughout the world compete with each other every day. I think if we best to say, you know, I've always tried to do is you know, make sure that we understand what's important for our company and what we can do to our company forward profitably and that's kind of the way I would leave it. Okay. Thanks and I'm curious what the latest is that you're seeing with regard to demand in Europe, which seems to be you know, several weeks ahead of us here in the fourth quarter in terms of virus re-emergence. We're starting to see the beginnings of some government lockdowns and various markets would be interesting and instructive to know how demand for rental cars is tracking and markets were there.
Has been virus re-emergence but not government-mandated lockdowns, you know just consumers reacting on their own virus risk versus what is the trend then more recently in those places where governments are, you know, reinstituting some some more restrictions off? Yeah. I think the answer to your question is that you know, government lockdowns and restrictions, you know, cause people to stay put now what we saw in the US was prior to a lockdown people rented a good number of our cars to you know, shelter in a different spot, you know, and I and we see some of that, you know when Europe as well but you know to inject government lockdowns or or you know that of that magnitude generally, you know, don't bode well quite frankly and then you know, what I think about also is quarantining right if you if you go somewhere and you have to quarantine 14 days, I think that's the single biggest deterrent but you know people people tend to do, you know, like we saw in the Dead
Does tend to want to get out you know this pent-up demand and they do tend to want to get out after a period of time and show them. I'm sure we'll see similar that but the usual initial is Dead Escape with a vehicle to go somewhere else. Then there's a lockdown situation which kind of slows it down and then, you know after a period of time this won't end up the map.
I appreciate it. Thank you. So I just one more thing to add to that in terms of in terms of the international segment. Like I think the way that they've been positioning themselves as been for something like this to happen. If you look at what the international team has done in terms of cost a cat. It's pretty incredible. Like the Americas was down 40% in rental Days International was down 50% in rental days in the quarter. So definitely tougher on terms of days perspective. But if you look at their RPD that was down 15% the fact that they could take that kind of Revenue hit and generate a positive ebitda without nearly the same the benefit in terms of per unit free costs that we've seen in the Americas is I think astonishing like it's it's amazing work by the international team and for them like they were always focused on that cost take up to be able to weather a storm like this that we're seeing right now.
very helpful
Thank you. Thank you. Our next question comes from John. I want to ask a big picture question for Bryant dead kind of wanted to ask two parts to that. He's been around the company for a long time and kind of want to know where you're spending your time right now, obviously cost or a focus, but I was hoping you could kind of dive into you know aspects of the business where you know, you you think that the the costs, you know construction really be different or or approached in a different Manner and then secondly a longer-term how you view the capital structure of this business, you know, your predecessors have been largely focused on show repurchase. Obviously, the leverage needs probably to be managed a little bit in the next month or so, but was curious your thoughts on Capital allocation over the long term.
Sure, I'll start with the first question John. I would say the vast majority of my time right now is 10 to on kind of what the sustainable margin profile name is business looks like as we return to normal travel Trends now, I don't know when those travel Trends are going to return to normal in terms of next year. Is it the year after but I want to make sure that all the good work the the team here is done. I kind of before I joined in terms of the cost take out one just stay out and that we capture as much of that incremental that kind of contribution. Margin as volume as volume does return that is an exercise going line-by-line understanding what's in our control. What's out of our control? How do we keep things out? How do we provide visibility throughout the organization throughout the team to make sure that everyone is marching towards that same that same end goal and this is something we're still working through right. Now what I can say, is that correct?
He encouraged about about you know, the long-term Prospect of where of where we will be in a normal basis. Um just a lot of opportunity in kind of seeing it at this level has just given me a lot more confidence, uh, in terms of your second question. You're right. I think the leverage does need to be managed. I think some of them are naturally just by virtue of ebitda expansion and and leveraging returning normals to leverage returning to normal levels. That way there are certain tranches of dead going to be opportunistic with in terms of retiring as well. So we're keeping kind of all options open on that front.
Great. Thank you.
Thank you. We have reached the end of our question-and-answer session. So I would like to pass the floor back over to mr. Ferraro for an additional closing come in great. So thanks for joining us all today, you know to summarize I'm incredibly proud of our team's resiliency and ability to navigate our company through these truly unprecedented times remain flexible and adjust our actions to respond to Future market conditions a financial position remains strong will continue to capitalize on any level of recovery as travel demand returns. I really want to thank you for your interest in our company and I look forward to speaking to you again soon. Please and gentlemen, this concludes today's teleconference. We thank you for your participation and you may disconnect your lines at this time.