Q3 2022 Avis Budget Group Inc Earnings Call
Greetings and welcome to the Avis budget group third quarter 2022 conference call.
At this time, all participants are in listen only mode.
A brief question and answer session will follow the formal presentation.
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It's now my pleasure to introduce your host David kind of be our treasurer and senior Vice President of corporate finance. Thank you Sir 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 Choy, 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 are subject to risks uncertainties and assumptions that could cause actual.
<unk> to differ materially from such forward looking statements and information.
Such risks 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 into any or all of our forward looking statements may prove to be inaccurate and we can make no guarantees about our <unk>.
<unk> 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.
Everyone and thank you for joining us today.
Yesterday, we reported our best quarterly results in our company's history, making this our sixth consecutive earnings report will be delivered record high adjusted EBITDA for that given quarter.
For over a year and a half now our team has shown incredible dedication and drive by continuously setting new benchmarks quarter after quarter.
I want to start off this call as I, usually do by thanking the 25000 employees of Avis budget group, who helped make this possible.
Last quarter I said, we were in the busiest summer travel season, I've ever seen with demand materializing in both robust bookings and a healthy rate.
But we didn't just rely on strong demand to generate earnings we acted decisively by selling aged fleet to solid gains and maintaining our stringent cost discipline.
When you combine a favorable travel environment with operational excellence. This is the result, $1 5 billion and adjusted EBITDA for the third quarter.
That's over a 20% sequential growth from our second quarter of 2022, adjusted EBITDA, which was the previous record high adjusted EBITDA in any quarter in our company's history.
This puts us at $3 5 billion of adjusted EBITDA, Thus far for 2022, which is already over 1 billion more than a record full year adjusted EBITDA of $2 4 billion in 2021.
And we still have the fourth quarter to go.
But before we talk about before let's go through the highlights of the third quarter results and as usual, let's begin with the Americas segment.
The Americas continue to build off a strong second quarter and the results across all business metrics reflect an operation that is humming.
Travel demand was strong for both commercial and leisure segments with volume well over 2019 levels.
This is the second time that our Americas segment alone was able to generate over 1 billion and adjusted EBITDA in a given quarter.
We're able to meet the strong demand of our customers by servicing over 33 million rental days in the quarter a record for our company.
This wouldn't have been possible without the work of our supply chain team overcame parts shortages and OEM recalls to find a way to get our course safely back on the road.
This resulted in a sequential increase in utilization back to the low seventies, we'd been operating historically in the third quarter.
Our P. D of 81 O six was down year over year and slightly up from the second quarter.
But I don't believe this tells the whole story well.
Well, we don't typically get into the month to month results of our P. D. I do feel it's important to provide some color on this quarter.
On our last call I mentioned that we started to see a return to normal seasonality month to month and RPT trends.
That continued this quarter with August RPT coming in sequentially lower than July and September are P D coming in sequentially lower than August .
That's what happens in a normal summer and then imply stabilization in industry supply and demand dynamics. This new normal allows us to compete on operational efficiency, which is welcomed by us.
Commercial business was strong in the quarter, well above the 2019 levels and especially post labor day with new signings of accounts and partnerships powering robust midweek demand.
Even with more corporate travel in September versus the rest of the summer pricing in the month was up compared December timber of last year, allowing for good exit trends.
Moving onto fleet, we're executing on the strategy, we laid out on our last call back in August I said that given macroeconomic uncertainties and with the arrival of newer fleet, we would rotate out of our older fleet and trim a vehicle size in order to ensure a proper return on invested capital while continuing.
To align our fleet with customer demand.
And that's exactly what we did throughout the summer we were able to exit high mileage vehicles at healthy gains relative to the net book value.
Excluding the early part of Covid. This is the most number of vehicles, we sold in a normal quarter.
I'll get into more detail around this topic during the fleet section, but I wanted to quickly acknowledge our Americas fleet team for mobilizing quickly and working tirelessly throughout the summer to take advantage of favorable window when the used car market.
While allowing the business to have enough fleet to handle peak period volume.
Moving onto the income statement results of these metrics in the Americas revenue increased by $300 million year over year.
Americas adjusted EBITDA during the same period increased by roughly $233 million for an incremental margin of 78%.
If you compare our most recent results to the third quarter of 2019 Americas revenue increased by roughly 835 million, while adjusted EBITDA increased by $864 million for an incremental margin of 103%.
Gains on disposal vehicles contributed approximately $360 million to our results were fucking a proactive decision to take advantage of a robust used car market, while we saw demand.
However, even excluding <unk> gains it's evident that the earnings power in our Americas segment is still objectively impressive.
Consistent with recent prior quarters, our focus around costs allowed all the benefits of our strong revenue and used car environment to fall to the bottom line.
This was a historic quarter for the Americas segment, and I believe the results showcase a business, that's nimble lean and focused.
Since exiting the Covid era, we've been saying, we're a transformed company.
This quarter reflects what the Americas team is capable of.
With that let's move on to our international segment, which had a historic quarter as well I've been consistent in our message that the stringent cost control our international segment.
That's up for an outside EBITDA recovery as revenue returns.
The international team built on a strong second quarter and took full advantage of our robust summer travel season in the third quarter.
Well, we believe rental days were hampered due to airport constraints and flight cancellations. Our international team was able to serve is 22% more rental days versus the third quarter of 2021 with significantly higher RP DS.
The return of inbound travelers almost profitable segment contributed to higher RP DS and with the strength of the U S. Dollar we believe that the segment will continue to grow.
The strong demand combined with tight cost control, resulting in over 290 million of international adjusted EBITDA.
This means that despite $39 million of headwinds from foreign currency exchange. The international team was almost able to generate as much adjusted EBITDA in one quarter than any prior full year in company's history.
Let me illustrate the magnitude of this transformation in another way.
And the first three quarters of 2020 to our international segment generated roughly $500 million of adjusted EBITDA and.
In the first three quarters of 2019, we generated roughly $500 million of adjusted EBITDA from our Americas segment.
We acquired Avis Europe in 2011, because we believe the true global reach would be a sustainable competitive advantage.
No other car rental company in the world matches, our footprint and the infrastructure investments we made in our global network ensures that our customers can rely on consistent quality and convenience no matter where they travel.
The results this quarter demonstrate how valuable asset we built over the past 10 years.
Moving onto fleet were consistent with last quarter, we will focus more on the Americas segment.
In the Americas, our average fleet size in the quarter was basically flat moving from 500000 vehicles in the second quarter to 507000 vehicles in the third.
As mentioned earlier in the call, we aggressively dispose of high mileage vehicles throughout the summer as we took on delivery of new vehicles.
I've always said that fleet management is at the heart of what we do.
This quarter demonstrates how our giant we can be quickly taken advantage of the strong used car market while demand was at its highest.
In the first quarter of 2022, our average fleet size was 50% higher than the first quarter of 2021.
The second quarter, our average fleet size was 32% higher than the second quarter of 2021.
In the third quarter, our average fleet size was 17% higher than the third quarter of 2021.
So the growth has slowed from 50% to 32% to 17% during the first three quarters this year.
Our objective is to optimize return on invested capital we match our fleet size to demand in order to achieve that objective.
The past five quarters, we have sequentially grown our fleet in the Americas to take advantage of pent up travel demand.
However, given the return of normal seasonality stabilizing industry supply.
And mounting macroeconomic uncertainties, we believe in order to optimize return on invested capital, we will need to manage a sequential decline in Americas fleet consistent with what we've historically done and pre pandemic years from the third to the fourth quarter.
We had roughly $360 million in gains from dispositions in the quarter by pulling forward sales that we typically would have spread across the third and the fourth quarter.
If you adjust the fleet gains you'll see that our straight line depreciation has increased from $210 in the second quarter of 2022, so over $230 in the third quarter of 2022.
As we the fleet older model year vehicles and in the current model year vehicles, you'll see the straight line depreciation continued to increase.
Also given that we've already harvested the leak gains we initially expected for the fourth quarter Gainesville decreased significantly next quarter.
The used car market is currently in flux, but given our remarketing strategy along with our conservative nature of how we account for our fleet assets. We believe the ceiling for monthly per unit fleet costs in the fourth quarter will be similar to where we straight line monthly depreciation in the third quarter.
Okay.
Let me wrap up the police section with a few comments on our 2023, we bought it.
Well, we have many contracts in place at this time a portion of our fleet by is still pending.
Conversations have been productive with our OEM partners.
And while we do have more visibility in terms of availability and allocations of supply chip and part shortages along with vehicle delays are still very evident and we believe the 2023 industry fleet buy will be tight.
We purchases all the largest use of our capital in our business and we realize that optimizing for return on that capital is our responsibility as stewards of this business.
Therefore, we are taking a measured approach to our 2023 fleet by both in terms of number of vehicles and purchase price of those vehicles.
We're taking on a broader mix of makes and models with our OEM partners in order to showcase an exciting new lineup of vehicles to our rental customers around the world.
And while we won't get into specific figures, new electric vehicles will make up a growing portion of up to 2023.
Next I want to discuss our progress on our electric vehicle implementation strategies when I talked about this last year I said it was very important to make sure. We follow consumer demand maintain targeted utilization and ensure the stability of the economics throughout the lifecycle of the vehicle.
<unk> the vehicle use and maintenance end of life residual lives.
We've been working hard with our partners to build out the infrastructure required and many of our locations and I am pleased with our progress to date and our plans going forward.
We have done extensive modeling of anticipated fleet size and rental demand by location by day of the week to determine the exact number of charging units and laid out an execution plan to get to the levels needed from both airports and city municipalities along with public utilities.
We are confident in our ability to operate service and maintain the evs and we've been working hard with our OEM partners and I'm pleased with our ability to purchase a diversified portfolio of vehicles this year and the years to follow.
It's an exciting time, and we would be ready to take on this change in consumer preference.
Moving on to technology.
We increased our Avis quick pass offering at a majority of our airports for those unfamiliar with this product and enables our customers to select from a choice of vehicles on their phone proceed directly to their car or even exchange that car because they like and drive to the exit gate utilizing a QR code for an automated exit.
Upon return customers can close out their rental on their own utilizing our connected car technologies.
Our customers are responding favorably to this contactless and stress free experience those that utilize avis Footpaths score is 10 points higher on our net promoter scores.
As I mentioned last time, we were early adopters of vehicle telematics into our core operating systems gas readings and our vehicles are registered before and after each rental and calculated down to the 10th of a gallon, allowing us to neutralize the rising cost of gas.
D S P. Our demand fleet pricing system now several years in use is continually getting more intuitive or forecasting supply and demand down to the lowest location levels, allowing for both demand and price optimization.
Productivity notification systems are being used.
Reduced labor and wage pressures and we've seen good results driving significant improvements in our operating performance.
We will continue to integrate both customer and operational systems with our existing processes to further enhance our ability to drive results and exceed our customer expectations.
So I'll pause here and wrap up my prepared remarks by once again, saying how proud I am of our team and the results we have been able to achieve.
We had a terrific summer season.
September was the strongest September on record with the man that double digit increases over last year.
Paul is off to a great start with both our commercial and leisure bookings trending to be greater than last year in 2019, and we remain optimistic around the holiday season.
In conclusion, we reported $3 5 billion of adjusted EBITDA.
Over nine months in 2022, and our entire organization is operating with intensity to make sure we run through the tape in the fourth quarter.
With that I'll turn it over to Brian to discuss our liquidity and our outlook.
Yeah.
Thank you Joe and good morning, everyone I will now discuss our liquidity and near term outlook. My comments today will focus on our adjusted results, which are reconciled from our GAAP numbers in our press release.
I'd like to start off by addressing capital allocation as Youll recall, our pace of share repurchases slowed significantly in the second quarter net continued into the third quarter as well.
Only 590000 shares were retired in the months of May June July and August , reflecting a wait and see approach to both summer cash flow dynamics and the trading levels of our stock.
We pivoted quickly from this strategy towards the end of summer and deployed over $1 billion over 45 days to repurchased six 3 million shares at an average price of $164.
That means since we last reported we've retired an additional 14% of our shares bringing our current outstanding share count to $41 5 million.
We've been consistent in saying that we'll be opportunistic in repurchasing our shares. This quarter was an example of that.
We continue to find ourselves in the privileged position of being in the strongest financial standing in the history of our company.
In the past four quarters, our LTM adjusted EBITDA has grown from $2 4 billion in <unk> 'twenty, one to $3 2 billion in <unk> 'twenty two to $3 8 billion in <unk> 'twenty, two and now as of the third quarter of 2022, we sit at $4 2 billion in L. T.
<unk> adjusted EBITDA.
Which means that since the pandemic began 11 quarters ago in the first quarter of 2020, we've repurchased $4 $4 billion of shares invested $1 $6 billion back into our vehicle programs and brought our net leverage ratio to less than one times the lowest in company.
History.
As of September 30th we had available liquidity of approximately $1 $7 billion with additional borrowing capacity of $2 $6 billion in our ABS facilities.
Our corporate debt is well lathered with approximately 88% of our corporate debt maturities in 2026 or beyond and we are in compliance with all of our secured financing facilities around the world with significant headroom on our maintenance Covenant test as of the end of September .
Let's move on to outlook as you know we've made the decision as a management team to forego, giving formal annual guidance to allow ourselves the flexibility to make agile decisions as the business environment changes right.
But I do want to provide a bit of color on what we're currently seeing for the fourth quarter.
As Joe mentioned earlier on the call, we're continuing to see normal seasonality in both the Americas and international segments. The travel demand for the fall is robust and we are optimistic this will continue through the holiday season.
In the Americas, we believe sequential RPT decline from <unk> 22 to <unk> 22 will be similar to the sequential RPT decline, we saw in <unk> 21 to <unk> 21.
We've pulled forward fleet gains so the benefit will be normalizing with per unit fleet costs in the Americas expected to be closer to $200 per month on a reported basis.
In our international segment due to business mix, returning and leisure travel slowing we believe both our P D and per unit fleet costs in <unk> 'twenty, two will be relatively flat with fourth to 'twenty one.
One notable change from prior year I'd like to point out will be in our vehicle interest expense line.
As you know our vehicle debt is made up of roughly two thirds fixed term debt and one third variable floating rate notes.
We'll be absorbing the full impact of fed rate hikes on our variable floating notes in the fourth quarter, which should sequentially increase our vehicle interest expense by $20 million to $30 million versus where we were in the third quarter.
We will give further guidance on full year 'twenty three interest when we next report.
So as we refinanced tranches of our fixed a vehicle term debt the vehicle interest burden will continue to be a headwind going forward.
In this rising interest rate environment, we will have to optimize for what advance rates. We use how deep we go on tranches for our term debt and how much equity we fund into vehicle programs.
But the internal operational adjustments alone cannot offset the magnitude of these exogenous interest rate increases.
We believe there are only two responsible ways to address this macro headwind.
One we have to factor in this additional cost when evaluating the appropriate return we require for the capital we deploy.
Two if we can't control interest rate hikes from the Federal reserve, we have to remain hypervigilant around all the costs that are in our control.
Fortunately that's exactly what we've been doing day in and day out since the pandemic began over two years ago. So we're ready.
I have full confidence that our team will continue to demonstrate discipline and excellence across both these dimensions. That's what we mean when we say we're a transformed company.
I think this gives you a sense of where we see most of the major variables of our business for the fourth quarter.
But what does that all mean for adjusted EBITDA.
We've mentioned several times on this call that we're seeing normal seasonality return and we all know that car rental is a seasonal business with the peak being in the third quarter.
In a normal pre COVID-19 year as reflected in fiscal years, 2017, 2018, and 2019 it dropped off in adjusted EBITDA from <unk> to <unk> is fairly consistent.
In each of those years, the fourth quarter was 70% down from the previous third quarter.
That is the floor, we set for ourselves for the upcoming fourth quarter of 2022.
So despite the difficult sequential comp in monthly vehicle depreciation, we're targeting still live in more than $450 million and adjusted EBITDA next quarter, which means that at this point, we believe it will generate approximately $4 billion in adjusted EBITDA for full year 2020.
With that let's open it up for questions.
Thank you Sir.
Ladies and gentlemen, we will now be conducting a question and answer session.
Like I said been trying to make it to one question and one follow up question at a time.
He would like to ask a question. Please press star and then one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue.
In the pit stop and then two if you would like to move your question from the queue.
All participants using speaker equipment, it may be necessary to pick up your handset before pressing the stockings.
The first question, we have is from Ryan Brinkman from JP Morgan.
Great. Thanks for my question, Thanks for taking my questions with.
Now with regard to the equity investment in the vehicle portfolio decrease decreasing the fleet leverage should we regard this as more of an earnings efficient place to park liquidity, reducing vehicle interest expense or do you maybe intend to operate with a different level of fleet equity going forward such as for example, I think enterprise has.
Yeah, Ryan this is Brian here.
We're gonna be fairly nimble about this it is definitely efficient place to park cash because we have a double benefit won it.
Reduces our leverage on the vehicle.
Graham side and it also reduces our vehicle interest expense.
Which is which we factor into EBITDA. So we've been parking excess cash flow in vehicle programs versus putting it in cash cash on the balance sheet, but as we've proven in the <unk>.
During the pandemic that we can pull cash quickly in and out of them.
Of the vehicle program so.
We are not setting.
What levels, we want to keep over there we're going to be very nimble with with how we.
How we fund that.
Okay. Thanks, I think one of the key questions investors are attempting to get their arms around is you know what the new normal level of EBITDA may be at the company as we cycled past the.
Current imbalance of supply and demand are for.
For rental cars and as our used vehicle prices are you know potentially normalized lower et cetera, I remember it was just last year I think it when you said that you know that with.
The board of directors wouldn't accept our plan for the year ahead that would include you know less than a $1 billion of EBITDA here Youre doing 4 billion do you think the fact that Youre doing 4 billion. Instead of the 2 billion that was expected by analysts at the start of the year with $2 2 billion I think that was expected.
Is that reason to believe that out your earnings in 'twenty, and 'twenty five or 'twenty 'twenty six maybe higher than was I estimated a year ago or so and how do you go about thinking what that normalized earnings potential of the business might be or when might you think you may be in it.
Positioned to to comment on that.
Sure Ryan why don't I start and Joe can add his thoughts.
We've made a decision as a management team to forego, giving formal guidance for one year out. So we're definitely not giving long term guidance on this call, but I'll reiterate what we said in our prepared remarks, we're seeing normalization in key variables that drive our business like you said our P. D rental days used car values.
But the question is what is normalization mean, and what does it glide path towards normalization look like is it a hard reset back to 2019 levels or is it a gentle slope with a longer runway that settles at a level materially higher than 2019.
I'll have to make a call.
Yes, no listen Brian you that Brian now that we are we're a different company than we were in 2019 as you can see by some of the actions we've taken some of the growth that we've seen and so we will be prudent on how we manage our costs and video.
B.
Certainly in.
In line with our vehicle demand when it comes to what our fleet size it should be.
We've taken a lot of action on our cost control over the past couple of years some.
Due to the pandemic and things of that nature, but we managed to operate our business in a different level of capacity you've used a lot of technology.
To help us administer the.
The volume revenue side of our business as well.
Great. Thanks, and then just lastly, I'm curious if you have a view on when do you think supply and demand of rental cars may return to a more normal balance in the United States I think I heard you say that you expect fleets to remain tight going forward I don't know if it was accounting for all of 2023, just given the the lingering impact of chip shortages in <unk>.
Recalls on the other hand, I think you know.
It does seem like you were able to buy more vehicles during the third quarter.
And how should we think about revenue per day tracking I mean, I would think as you rent you know any app that then and if that asset which decline in price, whether we're talking about houses or cars.
The amount, which you.
Rent it or you know may track in line with the hospitality, but of course, not so simple right.
Supply and demand for the asset itself. So it should we think about revenue per day tracking more in line with the trend.
Used vehicles are more in line with the trend of you know consumer prices are going forward or the supply and demand for rental cars or I don't know if I could get you know RPT guidance for 'twenty three but you know what are the most important factors do you think will enter into where it does shake out.
Okay I'll start off with the let me start off with the fleet side.
So.
As I mentioned on the last call and earlier in my prepared remarks, we've seen a normalization as it pertains to our business trends and seasonality and that's very different that we had leading up to our to the sheer frankly.
We aggressively deep.
Deep weighted cars in 2020 due to the nature of demand and we spent all of 2021, increasing our fleet size. Its not just us I think the majority of the industry and some through the early part of 'twenty two but we still are very quickly that things are starting to normalize it a bit at a higher level I'm happy to say that at a much higher level than 2000.
19, but.
The seasonality that we saw.
In the in the second quarter existed into the third and if you think about how we manage our fleet and the fleet dynamics. You know July is the month that we have the most business. The most rental days and thus the most fleet and then the fleet size and start to taper down as you get through the roof.
Remainder of the year you add one other interesting aspect to this year and that is the fact that we.
We rotated our fleet quite regularly with the arrival of new cars. This allowed us to take advantage of the of the really strong dynamics in the used car.
Just this past quarter and we are we certainly exited a good number of vehicles this quarter most of them.
Probably one year and the pandemic here and we see that trend continuing but I have to say demand going out is still very strong and we see that continuing continuing into <unk>.
The early part of next year, when we have some pretty seemingly good visibility. So as I said the month of September was the busiest September on record and some of the airlines talked about that as well.
Having seen a differentiator in September for a number of factors to that.
Our increase in commercial business was pretty significant and as you know Lisa business associated with maybe people from working hold for a couple of days. It may be remotely from others helped contribute to that to that level of growth we've seen a strong.
Influx of leisure business I don't see those trends kind of disappearing.
And that's what we see going forward.
A TUI ties them I do believe based on the insights that I get from what we do with our OEM partners and our buy that lead allocations will be tight going into next year now what happens during the course of the year and you know as you know the 24 model year buy spots mid next year is anyone's guess.
But right now we see that those dynamics on those allocations being tight.
With that comes you know what happens to price price was elevated in September .
Compared to prior year and month that we had some pretty significant commercial improvement.
It looks like price on the rest of the way is certainly going to be.
Elevated for our company on a go forward basis and demand seems pretty high so where we are with things.
Good deal with demand coming through our doors that floor was great October I thought was really a good precursor to our to our winter season and.
We see those dynamics continue.
Ryan just to add to that they used car prices is just one factor that we consider.
Assets all across our cost structure are getting more expensive I mentioned vehicle interest in our prepared remarks, our labor costs are going up and we're in just the highest inflationary environment that we've seen so all assets are getting more expensive and that's true for us across our entire industry. So we believe that we're going to require a higher price.
Timna team to maintain an appropriate return on invested capital.
Okay.
Thank you so.
Ladies and gentlemen, just a reminder, participants are limited to one question and one follow up question each time.
The next question, we have is from Adam Jonas from Morgan Stanley .
Thanks, everybody can you hear me.
Yep.
Sure very impressive very impressive work you guys are doing my first question is on the T.
T V's I know, you're not going to elaborate on targets, but can you tell us actually right now roughly what percentage of your fleet is D D.
I'll take that Brian so here's what I'll say.
I will say that we have Tvs on our fleet currently.
We have E. D's that we are scheduled to receive in the fourth quarter and I'm quite pleased with our EV purchases for next year.
Can you go into exact number of course, we do that.
Various cars, we have in our fleet.
But we.
We've had conversations with all of you know what.
All of our OEM partners, we're going to get different makes and models and cars from you know as we normally do all our all of our OEM partners, which gives us a good variation of fleet to offer the general public.
Thanks.
Yes.
Okay.
But that's okay.
Okay, I'll keep going.
No I believe that it's important for us to to execute on our EV strategy at the most challenging environment, which is our airports. We believe we get the.
The best return on our investment the best rent revenue per day the.
The best expense control and as you know we've.
You know we run we run on a system that we gas up a car. It takes 20 minutes. So we have that would be pretty.
Pretty knowledgeable how long it would take to do a an EV car. So we spent a lot of time investing in our airport businesses and we have did some incredibly modeling to generate the thought process to say at any given time in any given week in any different day, what would our inventory be and when will that car be rented and.
And with that knowledge, we've started to contract with our suppliers and software providers to determine that best course of action and as I said, we thought we could implement that a good number this quarter and we have a good number going into the next quarter and in the months to follow.
Thank you Joe and just as a follow up can you confirm your competitor Hertz said that Opex for you guys is something like 50% our maintenance costs are have an internal combustion car I'm not I don't know if that's something you have your detailed analysis, leading up to the C. V strategy could also broadly.
Agree with and just remind me your program versus risk mix right now thanks guys.
Great job okay. Thank.
Thank you program versus missed on Evs is entirely entitled risk as a matter of fact program versus risk for our total fleet as majority risk if that helps as far as the the you know the.
The net benefits, we're seeing higher higher rate per day than we put a normal gas car, but I'm going to tell you. Adam. It is very early but we are seeing a higher rate per day than the normal gas car and it's really early to determine.
The overall maintenance trends would be so.
I'll talk more about that as time goes on.
Okay.
Yeah.
Thank you, Sir ladies and gentlemen, just a reminder, if you would like to ask a question. Please press star and then one no.
The next question we have.
Chris well knockoff from Deutsche Bank.
Hey, good morning, guys and congratulations on another great quarter.
So my question does kind of really fleet not to not to beat a dead horse and maybe going a little bit of a different direction, but how.
How quickly we know you guys can pivot very quickly if you need to if the economic conditions, you'll change and that's especially true on the on the sales side right, but on the purchase commitments or you know can you give us a little bit of commentary maybe on your macro view for for the next year or so and how quickly can you pivot on the.
On the purchase decisions if you need to.
Well I think if you if you're talking about what happens if volume goes up we've we certainly prove that this past year as we were able to take advantage of pretty significant demand and have enough cars to do that so.
So I was quite pleased with our ability with our ability to to fleet up.
As far as insights about what we see from the from manufacturers and deliveries.
I think it's still spotty.
There are certainly we put orders in for certain months in those orders get delayed or pushed out to other months. So we have to be you know.
Certainly nimble on how we manage our day to day fleet assets, we've proven in the pandemic and probably even during the recession avoided nine that should things turn the other way. We are very quick to deeply as we did in this quarter like I said, we've taken out more cars this quarter as far as fleet sales than we did.
Any any time in the third quarter, if you take out the pandemic years. So.
And in this quarter, we had high rental demand. So when you combine high rental demand and thats the logistic challenges associated with deep leading horse we were able to do both so I feel that we've proven over the years, our ability to exercise that we have a strong leadership team and our field organization certainly strong supply chain team is able to draw.
Multiple initiatives, so that being said I do think the fleet dynamics on a go forward basis. The allocations that we would be getting for the industry will be tight.
Okay. That's that's helpful. Thanks, Joe and then my follow up is I think Brian mentioned, the current share count being down around $41 5 million.
Obviously, you know I think we do the match with your big shareholder floats getting.
Getting smaller in and I try to triangulate your comments around.
Fourth quarter might look like in the opportunistic approach to share repurchase but my question would be why is there a level is there a point at which it just becomes more difficult to buy stock mechanically you from a flow perspective, even if it's at a level you think is attractive.
Yeah, Chris It's Brian here I am I don't think so that's been true for many quarters now and we've proven that when we want to we can go get the shares we want.
So we've not seen.
Any issue on that front.
And we've been consistent saying, we're not going to be formulaic in terms of share repurchases.
Given rising interest rates like I said and just general macroeconomic uncertainties. We're also focused on corporate debt pay down and free equity contribution as you've seen in this quarter.
As well.
That wasn't when we see an opportunity to create permanent shareholder values through repurchases, we're not shy about it. So we're going to continue to be nimble with both the timing and the magnitude when it comes to repurchases.
Okay.
Thank you Sir.
The next question, we have is from Stephanie <unk> from Jefferies.
Hi, good morning.
I will definitely have a color on that.
Good morning, I appreciate the color on four key execution I wanted to dig in a little bit further you know about the the kind of rebound in business travel in line, what you're seeing on the commercial side is there a potential that.
A return to more to more business travel could cause normal seasonality from <unk> are different.
Yeah. That's a great question this is Joe.
Most most travel organizations are reporting declines in commercial travel compared to 19, we have not seen that we've.
We've seen terrific growth in <unk>.
Government defense contracting aerospace.
Tech companies logistic companies and.
It's actually was very robust in the in the quarter, especially in the month of September .
Companies are getting together now more frequently than they had probably you know in the pandemic it maybe and maybe prior.
Trade organizations are having meetings associations are are having meetings if you.
Do you think.
Pandemic everything.
Centered around features and leisure activities and those states that were involved in that did very well well now this is a resurgent more into the cities. We've seen it in a lot of our city of operations that you have in those places are are doing quite well in the middle of the week. It used to be like everything was centered around the weekend I don't see that trend.
<unk> in the fourth quarter, even though there are significant holidays, Thanksgiving and Christmas which tend to dominate.
Water and that gives us confidence that in the shoulder periods, which are equally as important the peaks that we just came out that we have enough.
Asset utilization and revenue generation to support the business, so I'm quite bullish on our commercial trends look like.
Great No I appreciate that and then you know maybe what kind of what you just walked through on more of the.
And the thing a little bit more of a balanced demand throughout the week and the shoulder season, how did how did how did that kind of play into your decisions in the third quarter, maybe take more cars out of N D fleet, a little bit more aggressively than you have in the last couple of quarters I'm, just trying to kind of reconcile that kind of a strategy between the two.
Yeah.
Let's think about it we wanted to do both and both drive drive our rental volume we have thought.
That we had certainly that we saw in the quarter and also trim up fleet size now I think the thing that we have to take into consideration as you know our lead asset.
Do you think about fleet fleet costs over a long period of time, it's not just about the buy or to sell its how you actually use the car during the course of time and it's important to rotate that fleet asset out and we saw a tremendous opportunity to do that in the third quarter, we probably didn't do that in previous on normalized years, but.
The demand for used cars was at an all time high the rates were significantly higher than we probably ever seen and it made a lot of sense to insulate ourselves and our fleet costs over the long haul to do that and exit some higher mileage vehicles, we will always.
We will always do that to ensure that we have the right fleet size take advantage of what opportunities that we see in the marketplace and put pressure on the infrastructure to drive the same day rental business as well.
Thank you, Sir ladies and gentlemen, just to remind that if you would like.
<unk>.
And then one no.
The next question is from John Healy from Northcoast.
Hi, Good morning, everyone. This is drew may on for John Healy.
We got some Andrew.
Yes go ahead.
Good morning.
Apologies I joined a little late so I'm not sure. If you touched on this but did you guys kind of look at the outlook for residuals can.
Can you help us understand like how much equity you have in your ABS facility at what time or what decline in the market would cause you to reallocate or meaningful levels of cash into the ABS structure to serve as collateral.
Okay.
We're actually in the best position, we've ever been in the vehicle programs.
Since you've gone public theres more equity in there than ever before I think the easiest way to do it is look at the press release Youll see that asset.
Assets under.
Vehicle programs and you'll see that against the vehicle programs to see what that.
What that ratio is and we did mention early on the call that we've been funding excess free cash flow that we havent deployed in other areas of capital allocation back into that vehicle programs, because it's just a more efficient place to park cash on the balance sheet.
Great Super helpful. Thank you guys.
Thank you Sir.
At this time there are no further questions I would like to turn the floor back over to Joe for closing comments. Please go ahead Sir.
Yes. Thank you so to recap we reported our best quarter earnings in our company history. Our team delivered in every business metric, including enhanced revenue generation.
In fleet management and stringent cost control. These efforts will highlighted by the Americas reporting over $1 billion of adjusted EBITDA in a quarter in the international team, achieving our highest ever third quarter. Adjusted EBITDA. Most importantly, I want to acknowledge and thank all the employees for their continuous tireless efforts in helping us achieve these results and we're not done.
We continue to be on track to go over the highest full year adjusted EBITDA in our company's history and I want to thank everyone for your time and interest in our company.
Okay.
Thank you Sir.
This concludes today's conference.
You for joining US you may now disconnect your lines.
Okay.
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