Q1 2025 Avis Budget Group Inc Earnings Call
The End
Speaker Change: Greetings. Welcome to the Avis Budget Group's first quarter, 2025 Earnings Conference Call. At the time, all participants will be in listen-only mode.
Speaker Change: If anyone should acquire Operator Systems during today's conference, please press star zero from your telephone keypad.
Speaker Change: Please note that today's conference is being recorded and a question and answer session will follow the formal presentation.
Speaker Change: I'll now turn the conference over to David Calabria, Treasurer and Senior Vice President Corporate Finance. Mr. Calabria, you may now begin.
Speaker Change: Good morning everyone, and thank you for joining us. On the call with me are Joe Ferraro, Archief Executive Officer, and Izzy Martins, Archief Financial Officer.
Speaker Change: Before we begin, I would like to remind everyone that we will be discussing forward-looking information, including potential future financial performance, which is subject to risks, uncertainties and assumptions that could cause actual results to differ materially from such forward-looking statements and information.
Speaker Change: Such risks and assumptions, uncertainties and other factors are identified in our earnings release and our periodic filings with the SEC, as well as the Investors Relations section of our website.
Speaker Change: Accordingly, forward-looking statements should not be relied upon as prediction of actual results and any or all of our forward-looking statements may prove to be inaccurate and we make no guarantees about our future performance. We undertake no obligation to update or revise our forward-looking statements.
Speaker Change: 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 reconciliation to the closest comparable GAAP measures . With that, I'd like to turn the call over to Joe.
Joe Ferraro: Thank you, David. Good morning, everyone, and thank you for joining us today.
Joe Ferraro: Yesterday, we reported our first quarter results, which delivered quarterly revenue of $2.4 billion, and adjusted EBITDA loss of $93 million.
Joe Ferraro: Overall, travel demand played out largely as we expected in the first quarter, taking it to account calendar shifts, demand remained solid, primarily due to leisure activity.
Joe Ferraro: Total company pricing, while down 2% year-over-year on a constant currency basis, showed improvement compared to the decline experience in the fourth quarter.
Joe Ferraro: In February , we discussed our accelerated fleet rotation strategy. During the first quarter, we will laser focus on executing our fleet refresh, laying the foundation for lower fleet costs and improved operating expenses through newer low mileage vehicles while also enhancing the customer experience.
Joe Ferraro: We aggressively dispose of higher cost hold of modelier vehicles. In fact, I'm proud to say that the number of risk vehicles we dispose of this quarter was a company record.
Joe Ferraro: This was not only a first quarter record, but a record for any quarter in our company's history. These disposals had made room for newer and more affordable vehicles in our fleet.
Joe Ferraro: As we mentioned on our last Ernie's call, we expect an additional non-tash charge in the first quarter related to the disposition of vehicles as part of our accelerated rotation strategy. Izilda will provide more details later on this call. [inaudible]
Joe Ferraro: Remain committed to a fleet discipline as a core part of our operating strategy. [inaudible]
Joe Ferraro: By carefully managing fleet just inside of demand, we've consistently achieved year-of-year improvements in utilization, and this trend has continued into the first quarter with total company utilization of nearly four points compared to the first quarter of 2024.
Joe Ferraro: We are continuing to invest meaningfully in technology to transform key parts of our business focusing on enhancing our customer experience, revenue generation and operational efficiencies.
Joe Ferraro: These investments are all aimed at driving incremental adjusted EBITDA. As a result of these actions and our close management of costs, our adjusted EBITDA
Joe Ferraro: Exceeded the first quarter adjusted EBITDA guidance we provided on our last call. With that, let's discuss our segment results, beginning as always with the Americas.
Joe Ferraro: The America is generated over 1.9 billion of revenue in the first quarter with an adjusted EBITDA loss of $67,000,000.
Joe Ferraro: As we mentioned on our last call, December's record Christmas season carried strong momentum into January with the robust MLK holiday weekend.
Joe Ferraro: However, as we move into February and March, there are a year-to-year comparisons to take into account with the loss of a day in February due to leap year and Easter shifting from March to April .
Joe Ferraro: With these calendar shifts in mind, revenues on a constant currency basis decrease 4% this quarter compared to the same period in 2024, driven by 3% low of pricing and 1% decline in volume.
Joe Ferraro: This wadzly drove the year old via the Klein and our first quarter revenue.
Joe Ferraro: If you adjust for these calendar shifts, our revenue this quarter would have been relatively flat to last year.
Joe Ferraro: Despite the countless shifts in the first quarter, we still saw a stable demand trend. Overall our rental days were in line with TSA activity year over year.
Joe Ferraro: We did, however, see a pullback in commercial demand as we transitioned through the quarter. This was mitigated by improved leisure demand and meaningful year-of-year volume growth with our valued partners, but trend that continued in April will remain an area of emphasis for us moving forward.
Joe Ferraro: We maintained our discipline to keep fleet inside of demand which allows for the most efficient use of our assets and optimal price outcomes in any environment.
Joe Ferraro: Vehicle Utilization improved both on a year-of-year basis and sequentially throughout the quarter. Utilization in the Americas reached nearly 70% for the quarter, representing a 4-point increase year-of-year.
Joe Ferraro: Looking forward, we believe the transformational enhancements we are making around fleet management will continue to put us in the best position to capitalize on supplying the man opportunities. We have touched on some of these enhancements on our previous calls and will provide an update on our efforts later.
Joe Ferraro: We expect to continue to show year-of-year improvements in vehicle utilization throughout the year, as we plan to continue to run a fleet size inside of demand.
Joe Ferraro: I'm beyond impressed with the progress we have made to date on our accelerated fleet rotation. In the Americas, the demand for our used cars was strong, and we sold a record number of risk vehicles. In fact, the number of risk vehicles we sold was the most in any quarter in our company's history.
Joe Ferraro: The used car residual market has performed well this quarter, partially due to the annual spring bounce, and both new and used vehicle inventories being down, but also due to early reactions following the announced automotive tariffs.
Joe Ferraro: Residual values improved throughout the quarter and this is still continuing today. I also want to give an update on new vehicles we have added to our fleet. To date, we have accepted the delivery of approximately 70% of our anticipated monelier 25 vehicles.
Joe Ferraro: We expect our accelerated fleet rotation to help the overall fleet health and reduce our average age, which is currently less than 12 months and overall mileage which would positively affect our in-life costs.
Joe Ferraro: In terms of both speed and scale, this has been the most impressive fleet refresh during my tenure. This progress has laid the groundwork for more normalized fleet cost as we transition through the remainder of the year and beyond.
Joe Ferraro: I now want to briefly touch on ongoing developments around automotive tariffs. This is a very fluid and eva changing environment, and there's still quite a bit of uncertainty regarding the impacts as it pertains to both our OEM partners and the rental car industry as a whole.
Joe Ferraro: As always, we focus on what we can control. First off, we are working closely with our OEM partners and have been in frequent discussions on how to best navigate this situation with the overarching objective to allow for maximum flexibility and our overall plea planning.
Joe Ferraro: As it stands now, new car deliveries from the most part are arriving as planned and have previously agreed upon prices
Joe Ferraro: The used car residual value index for cars of our type is currently well ahead of prior year highs and we plan to continue to capitalize on this favorable environment.
Joe Ferraro: It's so early to know when impacts these tariffs may or may not have on Amalia 26 buy will be in a better position to give an update as the year progresses.
From a volume standpoint, forward bookings are up.
Joe Ferraro: Over parier with continued growth in leisure and a pullback in commercial demand, similar to what we saw in the first quarter.
Joe Ferraro: As mentioned previously, our goal is to maintain fleet flexibility in order to ensure we have enough cars to handle the summer peak and beyond and to be ready to take advantage of any positive outcomes in the residual value markets.
David Calabria, David Calabria, David Calabria, David Calabria, David Calabria,
Joe Ferraro: over the longer term who remain disciplined in adjusting off-leach strategy, pivoting if the man improves or adjusting as necessary.
Joe Ferraro: We have a history of reacting quickly and decisively based on internal or external challenges to ensure we stay inside of the man while providing a strong return on invested capital in any environment.
Joe Ferraro: So to recap, the first quarter, the America segment delivered $1.9 billion of revenue and adjusted EBITDA loss of $67 million. These results reflect the expected soft-to-year of EBITDA performance driven by calendar shifts, including one less stage due to leap year in 2024 and east of moving into April .
Joe Ferraro: Despite these differences, fleet discipline remained a top priority, enabling year-over-year improvements in vehicle utilization.
Joe Ferraro: We made significant progress executing the accelerated fleet rotation strategy with a record number of this vehicle sales and successfully accepting the majority of our monolith 2025 vehicle deliveries at previously agreed upon prices.
Joe Ferraro: These accelerated actions have set the stage for improved EuroBF fleet cost, beginning in the second quarter with normalized levels stawning as early as the third quarter.
Joe Ferraro: We're optimistic that the use car residual values plan to support favorable outcomes on vehicle sales and we will take advantage of this as the opportunities present themselves.
Joe Ferraro: As always, our goal is to be disciplined in aligning our fleet size with the man driving higher utilization throughout the remaining part of the year.
Joe Ferraro: As a result of our strategic actions, the Americas is well positioned to capitalize on the upcoming peak travel season
Joe Ferraro: Let shift gears to international. International generated revenues of 523 million and adjusted EBITDA loss of 3 million. The first quarter adjusted EBITDA loss year over year improved by 12 million, which was largely due to improved pricing, low of fleet costs and strong cost discipline to keep operating expenses in line with volume.
Joe Ferraro: Excluding exchange rate effects, first quarter revenue was down 2% compared to prior year with volume down 3% and pricing up 1%
Joe Ferraro: Similar to the Americas, Brian was down in the quarter due to calendar shifts with growth and leisure travel helping to offset a strategic reduction in low margin business.
Joe Ferraro: We remain focused on building international inbound and into European travel, which grew nearly 7% in the first quarter compared to the same period in 2024.
Joe Ferraro: This segment mix generates higher margins and allows us to exit out of lower priced volume.
Joe Ferraro: Despite the countless shifts, there was still an overall year of year increase in our leisure business in the first quarter. The Manthly pricing system is now fully deployed across Europe and is currently being implemented in our Pacific region. Early results show benefits in price optimization, vehicle utilization, and margin contribution.
Speaker Change: David Calabria, David Calabria, John
Joe Ferraro: We remain disciplined in keeping fleet inside of demand to drive higher vehicle utilization. This quarter utilization was 69% up more than two points compared to the first quarter of 2024.
Joe Ferraro: Similar to the Americas, we are maintaining our flexibility and our fleet position as we've prepared for the summer peak.
Joe Ferraro: So far in the second quarter, we have seen benefits from Easter shifting into April . We will continue to prioritize firemodge and business to drive improved pricing outcomes throughout the remainder of the spring season and leading in for the summer peak.
Joe Ferraro: Our international regions continue to be popular destinations for cross-border travel, and I believe we are well positioned to capture this demand.
Joe Ferraro: Moving on to marketing and technology, our Ravis Brand launched the Plan on Us campaign in 2023 to reinforce on more than 75-year legacy of reliability and commitment to delivering seamless customer service.
Joe Ferraro: The campaign positions Avis as a trusted partner for travelers, message that continues to resonate strongly with those customers and employees.
Joe Ferraro: The link on its success, we relaunched the campaign in April ahead of the summer peak season.
Joe Ferraro: In a world of change and uncertainty, we want our customers to know that they can plan on us because for over 75 years, Avis has had only one plan to make sure you keep yours. This walking in pain is just one example of the targeted investments aimed at driving incremental adjusted EBITDA growth.
Joe Ferraro: Now let's discuss ongoing developments with technology, starting with an update to our customer mobile app.
Joe Ferraro: We launched our new app, Last Fall, which continues to build momentum as our fastest growing digital channel and enhance overall customer experience.
Joe Ferraro: We recently rolled out a new feature aimed at improving the online customer experience through real-time on-demand assistance.
Joe Ferraro: With just a few taps, customers can request assistance directly from the lot.
Joe Ferraro: and an associate will come to help them wherever they may be. You've launched the experience at 12 locations and early customer response has been positive. This is another example how we're leveraging technology to do a faster, more personalized service and drive greater customer satisfaction. Thanks.
We're also making meaningful improvements to our operational efficiencies [inaudible]
Joe Ferraro: by leveraging technology and machine learning across key areas of our business.
These activities will assist us in revenue generation.
Joe Ferraro: Productivity Enhancements and Utilization Efficiency System. These advancements support our protocol of enhancing overall margin contribution.
Joe Ferraro: As I mentioned on our last call, we remain laser focused on driving sustainably higher vehicle utilization performance by leveraging new digital in-life fleet tools to provide better understanding of the disposition of every vehicle within our control.
Joe Ferraro: We are continuing to optimize the digital fleet tools in our pilot locations.
Joe Ferraro: With the success of the pilots, we have begun rolling out these digital tools to several new key locations to further operationalize and scale this technology across the U.S.
Joe Ferraro: These tools are designed to improve vehicle movements, enable more timely repairs, and enhance visibility in our vehicle dispositions, all contributing to increase fleet availability.
Joe Ferraro: This and all the operational efficiency strategies have enabled us to maintain operating an S-TNA expenses on a parental day basis consistent with the first quarter of last year.
Joe Ferraro: So to conclude, with a terrific start to our accelerated fleet rotation strategy, with birth-quarter disposal well above historic norms, and we will aim to continue to optimize this strategy throughout the remainder of the year.
Joe Ferraro: Proved, EuroBF Fleet Cosses are expected to begin in the second quarter, with normalized levels starting as early as the third quarter.
Joe Ferraro: Utilization was up in the first quarter, and year of year improvements are expected to continue throughout the year.
Joe Ferraro: While tariffs have created some level of uncertainty, we feel we have developed a flexible fleet plan to take advantage of the summer peak and any positive outcomes in the use car market.
Joe Ferraro: But the man for our use cars is very strong and residual values are currently well above prior year.
Joe Ferraro: As previously mentioned, early summer bookings show increased growth with leisure of setting a pullback in commercial travel and as always we expect pricing to improve seasonally
Speaker Change: Before I close, I want to take a brief moment on a personal note. As you know, I will be transitioning out of my current role as CEO on June 30th and continuing as an advisor to the board. It has been my honor and privilege to lead Avis Budget Group, and I'm incredibly proud of everything our team has accomplished throughout my 45-year tenure.
Speaker Change: In both good times and challenging environments, we always found a way to enhance our company's performance. We have a tremendous culture of success, an incredible will to win, my full confidence in Brian and the entire leadership team to continue building on this foundation.
Speaker Change: Thank you to our employees who I've worked with throughout the years and whose dedication has inspired me to our partners who have shared our vision.
Izzy Martins: to our shareholders for their trust and support. And most importantly, to our customers is truly been an honor for me to serve you. I look forward to watching the company continue to thrive in the years ahead. With that, I'll turn it over to Izzy to discuss our earnings, liquidity, and outlook.
Izzy Martins: Thank you, Joe, and good morning everyone. My comments today will focus on our adjusted results which are reconciled from our gap numbers in our press release.
Izzy Martins: As always, let me begin with our first quarter results. We've reported an adjusted EBITDA loss of 93 million compared to a positive 12 million in Q124. I will now walk through the key factors behind this 105 million year-over-year change.
Izzy Martins: Total company revenue was $2.4 billion for the quarter, down from $2.5 billion in the first quarter of $24.
Izzy Martins: As Joe noted, the decline was expected, driven by calendarships, stronger leisure demand partially offset by softer commercial volume, and a 2% decrease in pricing, excluding exchange rate effects.
Izzy Martins: Altogether, these factors contributed to a 120 million year-over-year revenue decrease.
Now turning to flea costs.
Izzy Martins: As noted on our last call, we anticipated a non-cash charging Q1 related to vehicle dispositions as part of our accelerated rotation strategy.
Izzy Martins: We finalized our fleet-related charges and recorded a $390 million charge this quarter. This charge is excluded from our adjusted EBITDA and to be clear, we do not expect any further fleet-related charges from this change in strategy.
Izzy Martins: We also guided 21 fleet costs to be around $400 per unit per month. Thanks to the successful execution of the rotation strategy in the first quarter and continuous strength in the
Izzy Martins: While better than expected, this was up from $318 last year, resulting in a 29 million year-over-year increase, driven by elevated vehicle depreciation on our prior model year vehicles, offset by aggressive fleet rotation and improved vehicle utilization.
Izzy Martins: This improved vehicle utilization also contributed to lower vehicle interest expense. In the first quarter vehicle interest was a $29 million benefit compared to the same period in 24 driven by a smaller fleet and reduced vehicle debt needs.
Izzy Martins: Lastly, we saw a 15 million year-over-year improvement in operating NSGNA expenses while maintaining consistency on a per rental day basis compared to Q1 last year.
Joe Ferraro: Although we encourage some additional costs as part of the accelerated fleet rotation, the transformational enhancements Joe outlined are already delivering savings. We will continue piloting and refining these operational initiatives and will optimize our investments accordingly.
Joe Ferraro: As a result of these factors, our year-over-year Adjusted EBITDA decreased by 105 million. However, the results were in line with expectations, with our 93 million Adjusted EBITDA loss coming in better than the 100 million loss we had previously guided to.
As expected, our capital allocation strategy remains unchanged.
Joe Ferraro: We expect a balanced approach to allocate capital in 25. We will focus on debt repayments and capital expenditures that will drive operational efficiencies, reduce costs and support margin expansion.
Joe Ferraro: As noted on our last call, in February , we issued 500 million of secured debt and used the proceeds to pay down fleet-related obligations.
Joe Ferraro: This is a temporary indebtedness structured to mature before your end. It provides us the flexibility to continue to rotate our fleet and pursue opportunistic spot-by.
Joe Ferraro: As of March 31st, we had approximately 1.1 billion in available liquidity, including both committed and uncommitted facilities, along with about 3 billion in additional borrowing capacity under our ABS facilities.
Joe Ferraro: Effective April 30th, we extended our asset-backed variable funding facilities, increasing borrowing capacity by $640 million.
Joe Ferraro: Given our accelerated fleet rotation strategy, we believe it is more meaningful to focus on our total net debt leverage, which includes both corporate and vehicle-related debt over a more traditional EBITDA definition that also adds back vehicle depreciation and interest.
Joe Ferraro: Our total net debt leverage ratio remains stable at around five times.
Joe Ferraro: As the proceeds from our 500 million, our recent 500 million cured corporate debt issuance were used to reduce fleet debt. As expected, we continue to remain in compliance with all our financing facilities.
Joe Ferraro: As we move through the second quarter, we are seeing clear year-over-year improvements in per unit fleet costs, driven by stronger residual values, discipline, fleet management, and the introduction of lower cost model year 25 vehicles.
Joe Ferraro: On our last call, we guided 22 fleet costs to be around $350 per unit per month. We exceeded that goal by the end of Q1, and now expect Q2 per unit to be approximately $325 per month.
Joe Ferraro: Looking ahead, we anticipate further improvement with total company per unit's lead cost to be approximately $300 per month by the start of Q4.
Joe Ferraro: These expected improvements reflect our ongoing focus on fleet optimization and utilization, along with continued strength in used vehicle demand and residual values.
Speaker Change: On the revenue side, momentum remains strong. As Joe noted, Leisure Demand grew year over year in 2001, and that strength has extended into April .
Speaker Change: Forward bookings are up and leisure bookings continue to trend above prior year levels. Our flexible fleet strategy enables us to scale up to meet rising demand or right size quickly as needed.
Speaker Change: Pricing is also showing positive sequential trends consistent with seasonal patterns. Rates are strengthening from Q1 into Q2, and current trends suggest continue pricing momentum heading into the peak summer season.
Speaker Change: As a result of these combined efforts, both on the cost and revenue side, we expect Adjusted David.inq2 to exceed 200 million.
Speaker Change: Our business is built to perform in dynamic environment. We have demonstrated that consistently with a track record of navigating uncertainty through operational agility and a highly variable cost structure, where the majority of our expenses flexed with fleet levels and revenue to perform it.
Speaker Change: We remain committed to the long-term target we have set for ourselves as a company to generate above a billion of adjustity but not annually. That has not changed.
Speaker Change: and while we continue to strive towards that goal today, we are mindful of the uncertain macroeconomic environment we are currently in.
Speaker Change: As of now, we are still working through the positive impacts of tariffs on use car prices against the negative impacts of a non-clear travel-demand environment in the back half of the year, and we will provide updates in the coming quarters.
In closing, we remain focused on executing our strategic priorities.
Speaker Change: Driving operational efficiency, optimizing fleet and revenue, and strengthening our overall financial position.
Speaker Change: The progress we have made in reducing flea costs, improving utilization, and growing leisure despite softer commercial demand, give us confidence as we move through the remainder of the year.
Speaker Change: With that, we will now open the line up for questions.
Speaker Change: Thank you. We'll now be conducting a question and answer session.
Speaker Change: If you'd like to ask a question at this time, you may press star one from your telephone keypad, and a confirmation tone to indicate your line is in the question queue.
Speaker Change: You may press star two if you'd like to withdraw your question from the queue
Speaker Change: For participants reading speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: So if you may address questions as many participants as possible, we ask you please email yourself to one question and one follow-up
One moment please, we'll be poll for questions. Thank you.
Speaker Change: Thank you, and our first question comes in line of John Babcock with Bank of America. Please
Thanks more than thank you for taking my questions on.
Speaker Change: What you need to do operationally to continue running at higher utilization rates while still meeting demand and then also if you could talk about, you know, if there's a level of utilization work, it's incrementally more difficult to run the fleet [inaudible]
Yeah, hi. Good morning, John.
Speaker Change: Yeah, we ran at utilizations that we felt were optimal in the first quarter for us. We had a strategic initiative to rotate off lead aggressively because it paid, you know, certainly paid dividends for us going forward as far as as he talked about our pre-unifly cause, better in the first quarter. And the goal was to make sure that they got better sooner, and we certainly did that. Yeah. Um.
Speaker Change: In Italy last year we had a fleet situation where we maybe were a bit larger than we would have liked so we started off in a better place this year which was by design and we found that
Speaker Change: You know, our modeling that we look at to determine where the cars should be to have the best optimal outcome is, you know, works in our favor and as I said, many of the number of other calls
Speaker Change: We're piloting utilization strategies around our division with by allowing people to have better understanding of the cars and their control and how they can better operationalize to get them to be more rentable.
Speaker Change: So we were happy, and if you look at our overall utilization, you know, when I look back historically through the years
Speaker Change: A lot better than last year, kind of in line with where we were previously, so I didn't see that as a big challenge.
Speaker Change: As we go forward to answer the second part of your question, we see those same opportunities arriving for us.
Speaker Change: and we have we planning that we do daily and weekly by city, by station that enable us to get a better understanding of the supply of the demand side so we can acclimate the supply side.
Speaker Change: whereby we've been able to improve on our overall non-rentable fleet. And I talked about earlier and get them through our system.
Speaker Change: We've deleted a lot of cars in the first quarter and usually when you do stuff like that you come up with a challenge because cars stay idle before you sell them but due to lane efficiency we saw it the auctions and our relationship with our deals and bought our cars we were able to execute at a very high level and I do see that continuing.
Speaker Change: Thank you, and then just my follow on question here. You know, I know you talked about Tara still in evolving target, obviously. I take care of you, I'll say, though, I mean, you know, with some of the signs that vehicle prices are starting to move higher, you know, could you just talk about how that might impact your footing plans for model year 26 vehicles and also if you could just remind us when those negotiations start, that would be helpful.
Speaker Change: Yeah, I think the OEMs are kind of getting an understanding of how they want to proceed with negotiations, and it's certainly a very fluid environment.
Speaker Change: We're still involved getting our 25s and any available fleet that might come through that.
Speaker Change: We have gotten a good deal of our cars in so far. We still expect more to come in. The deliveries have been the most part have been on time. I think that's kind of one thing we need to look at when we talk about our fleet and how flexible can we be. You know, one of the areas that that is that...
Speaker Change: was apparent to us when we accelerated our fleet rotation, is that it gave us...
Speaker Change: Outside of a cost benefit that I talked about, it gave us optionality, and that optionality is we have flexibility in our fleet size that we can either increase the fleet size this year.
Speaker Change: or decrease it if there's some level of uncertainty. And we got younger, both in age and mileage, which will allow us to not be so dependent if 26s are some of the challenges.
Speaker Change: The last comment that I would make is that we have intensive modeling on how we look at how we buy our fleet.
Speaker Change: With the tariff situation cars are going to be built in the United States, others are going to be brought in from elsewhere We have the ability to pick and choose cars based on on our needs and we look pretty significantly at those opportunities as well as what residual values may be when we exit them
So...
Speaker Change: You know, we expect those incentives to be at levels that allow us to generate the activity that we need.
Okay. Thank you, John .
Speaker Change: Thank you. The next questions are in the line of Stephanie Moore with Jeffries. Please
Hi, good morning. Thank you
Speaker Change: I wanted to touch a little bit on what you're seeing from a competitive standpoint if you feel like there has been any major change in the competitive landscape across the Americas, in particularly. Thank you.
David Calabria, David Calabria,
Speaker Change: I haven't seen anything that would suggest there is any different level of of um...
Speaker Change: of intensity as it surrounds how we manage our business. I think the thing that I wanted to, that I always think about, we under one understand where our competitors are coming from and
Speaker Change: and any challenges that might be presented. But for the most part, I think if you look at the basics of our industry
Speaker Change: Everyone wanted to get 25s in because they were less expensive and everyone has probably done a good job trying to out.
Speaker Change: Augment Depp Fleet with the man. I think that principle is still in effect. And that gives all of us the clarity on industry-related fleet size and how it affects our volume and our price.
Speaker Change: I think I've learned over the years that we concentrate on what we do and how we do and execute at a very high level.
Speaker Change: You know, that's the thing I want to make sure that we we certainly concentrate on because that gives us a best possible outcome So to answer your question, no, I haven't seen anything that would suggest any difference but we're always mindful of how we operate and how we execute and get to the levels that we need to
Speaker Change: Got it appreciate the color and then maybe just one follow up to the prior question, you know, if you know maybe you could provide a little bit of insight Joe clearly you've been with Avis for some time and we will certainly miss miss you on these calls but if you go back and think about other periods or maybe we've seen rising new vehicle pricing or higher acquisition costs and what levers you're going to have a little bit of a little bit of insight in the future.
Speaker Change: You have at your disposal, too, to potentially offset those higher costs [inaudible]
Thank you.
Speaker Change: Well, you know, I talked a lot about the utilization lever. We believe that we have developed it.
Speaker Change: A game plan and good insight on how to create more rentable vehicles.
Speaker Change: And if you do that, the dependency to buy vehicles becomes a lot less. And I'm not saying utilization to deter volume. I'm saying utilization that will allow us to be more efficient and have more cars available to drive more rental-based. And I'm not saying that will allow us to be more efficient and have more cars available to drive more rental-based.
Speaker Change: I think that's the benefit we have today, that we're utilizing, that we didn't have, probably.
Speaker Change: in the past. The other thing is, the rotation that we did set us up in a really good spot that
Speaker Change: We have flexibility to grow our fleet, which would put a dependency on new cars maybe a little bit less than what we've had in the past.
Speaker Change: You know, I think overall the way we have executed, you know, from, you know, not just as reliant on, on, you know, auctions give us the ability to leverage our ability to deeply to a greater level than we had, you know, probably in the past.
Speaker Change: We look at our buy very differently than we've had. We deal with all the all-only M partners, we have terrific relationships with all of them, and we...
Speaker Change: We have modeling that with allow us to look at cars.
Speaker Change: Maybe like cars from different manufacturers in a way and have an understanding of what residual values are better than we've had in the past, which gives us insight and informed decisions to make our buy as beneficial to us as possible.
Thank you, I really appreciate the time.
Speaker Change: To make questions from the line of Chris Dathopoulos with Susquehanna, please proceed with your question.
Speaker Change: Good morning, everyone. Joe, a lot of the companies are actually most of the companies here within
Speaker Change: Airlines lodging cruise lines have had a bit of a bit more cautious view on the year. You sound a little bit more optimistic, so...
Speaker Change: The soft guide of no less than a billion dollars that you're still holding to, you know, what gives you the confidence that you can hit that? Is it the work that you've done?
Speaker Change: on the Fleet Renewal Procurement Technology. And then, you know, what are you seeing? Just
Speaker Change: What have you seen with respect to demand and, you know, could you remind us of your booking window? I think typically the way I think about it is, you know, 30 days or in, I just want to understand how you're looking at demand into the second quarter in summer travel season. Thanks.
Speaker Change: Yeah, first of all, I'll start off that we were certainly mindful of the economic.
Uncertainty that's out there. We're not, we're not.
Speaker Change: You know, I'm not going to sit here and say that we're saying that that is something that potentially wouldn't cause a problem. I think for us we have to be ready for both. And what I've seen compared to, you know, maybe in the past.
and I look at leading indicators for travel.
You know, our advanced reservations are up.
Right, and that's with us like pullback in commercials.
Speaker Change: So our dance reservations are up and getting to what you thought about Booking Curve.
Speaker Change: And when we look at, you know, is there confidence in people going to go on a vacation or take a trip?
We look further out and when you look further out
Speaker Change: 22 days, 30 days. You know, the reservation demand and those are up. And if you look back at the pandemic, or even during the recessionary periods of 0809, those with them.
Speaker Change: So, that's kind of one reason why I see some level of confidence in, you know, consumer travel, as far as, you know, how we execute.
Speaker Change: The use call market is operating at a very high level right now.
Speaker Change: All right, residual values are a lot higher. If you look historically, you know, we're in a last year, the spring bounce ended, you know, residual values of cars of our type started to go down. You know, that hasn't changed.
So, yes, that gives us...
Speaker Change: you know, give us a different, you know, level of opportunity as it pertains to our fleet.
Speaker Change: with less expensive cars, and so it gives us fleets certainty going out as well. So, you know, like I said, for those reasons, we got off to the first quarter, got off to the place that we thought we guided you last time and we came in on that.
Speaker Change: You know, the second quarter, seemingly, you know, Lisa Neade term looks okay and the summer, you know, reservations are seemingly up right now. And I have confidence in the way we execute.
Speaker Change: We execute at a very high level in our organization, both Inter, you know, people here in the world, and that's why, you know, I may be saying, yeah, you know what, the, you know,
Speaker Change: You know, we're still on track. That being said, we're not blind to the fact that, you know, the Fed just came out yesterday and talked about maybe unemployment issues or maybe inflation. And I think we're from where we sit. We have to be ready for both and we are.
Speaker Change: Okay, and then along those lines on free cash flow, do you think that you can realize positive free cash flow for the year? First quarter you were at a loss of just around half a...
Speaker Change: Around 500 million I realized there was about 400 of that in the financing side for the vehicles given all the work that you've done with respect to the fleet and the the turn in the residual values.
Speaker Change: Your thoughts are on free cash flow for the year. Thank you.
Speaker Change: Good morning, Chris you hit the highlight right. Thank you for acknowledging the fact that if you really look at starting from the top the free cash flow in the first quarter is really equivalent to where adjusted EBITDA landed given that you have to add back that that 400.
Joe Ferraro: Yeah, I would say going forward and and piggybacking off of what a Joe said, obviously if things go as we see them today, we do expect you know positive free cash flow in the later quarters.
Speaker Change: Okay. Thank you.
Speaker Change: Our next question is from the line of Ryan Brinkman with Jpmorgan Chase. Please proceed with your questions.
Speaker Change: Hi, Good morning. This is Josh Budwell on Tarin Banksman. Thanks for taking your questions Joe Congratulations on an exceptional career and best wishes for the next I just wanted to start off you know on tariff could you maybe give us a sense.
Speaker Change: Sure. The the fleet, obviously is the biggest one but I have there's an expectation that there's going to be other related costs due to tariffs that have to deal with you know vehicle parts and and things of that nature. You know I think that's why it was important.
Speaker Change: To mitigate and minimize those that level of activity because we'll have younger fleet and if you know younger fleet will allow us to have in life costs that are a little bit more controllable so that would be a mitigating factor the things that we do in productivity as far as.
Speaker Change: Wage and labor inflation, especially as it pertains to you know any level of Insource or outsourcing you know we have we have technology now that we utilize to look at how you know our productivity levels down to the individuals that will give us the opportunity to know where we should put.
Speaker Change: Certain amount of.
Speaker Change: Power versus versus not so I think that has been we've always been trying to keep productivity to out you know outperform wage inflation. So that's one I talked a lot about vehicle utilization and how we look at that to minimize the.
Speaker Change: Some of some of the other direct operating expense lines, we have a lot of initiatives that have to deal with.
Speaker Change: Bad dead and stolen vehicles and registered and Alitany of things that we look at to ensure that we are in compliance with whatever our targeting is so pantsy. A question. Yeah. We do expect there's going to be some level of.
Speaker Change: But that's very helpful. Thank you for that and just as a follow on I'd like to explore how your balancing buybacks versus deleveraging on one hand, there's the opportunity to capitalize on the current share price and acquire shares ahead of any potential rally in use car prices which might occur.
Speaker Change: Can you heal on the other hand, there's the potential to secure favorable pricing on debt refinancing expected by 2026, which could be facilitated by debt leveraging and might deviate pressure on your ownings multiple as well just just curious how.
Speaker Change: Good morning, Judge you know I would kind of echo what I said in my prepared remarks as always we always take a balanced approach, which obviously involves some you know opportunity an opportunistic approach you know through this year.
Speaker Change: So our focus I would say I wouldn't say it shifted a bit but maybe there's a a different focus in the fact that we do want to prioritize delevering. Our company, that's very important to us but also as important we don't we don't want to sacrifice our capital investments that we.
Speaker Change: Or as you see or driving the efficiencies in the near term, but plus they're gonna drive even you know greater multiples in the the long term and lastly kind of going in hand in hand, with what you were asking about you know we always will opportunity.
Speaker Change: Got it thank you and good luck.
Speaker Change: Thank you. Our next question is from the line of Dan Levy with Barclays. Please proceed with your questions Hi, Good morning. Thanks for taking the questions want to start first with a question on on the D. P. U maybe you could give us a sense of you.
Speaker Change: D P U in the first quarter benefited from the the one time charge of just under $400 million and then maybe you can give a sense the assumptions you've laid out for 325 in the second quarter and 300 by the start of the fourth quarter. What you are.
Speaker Change: Four residuals, how much of that is residuals versus how much of that is just getting the better economics on your new vehicles.
Speaker Change: Good morning, Dan. Thanks for the question I think it was the way we look at it is you have to start with the fact that our strategy was really to accelerate this rotation as Joe mentioned in the prepared remarks, we kind of.
Speaker Change: So that part that we even went we knew our team could execute as Joe said that they even executed beyond our expectations and that actually drove the fact that given the fact that we were able to take more cars out you took out more.
Speaker Change: So that the refreshed fleet or the new fleet. The model. Your 25 came in at a different price point. So that would to me would really be the main reason as to why the D. P. U is actually better than what we expected right now clearly there are residual there is.
Speaker Change: Car market that we see in the residual values, but I still would say that the main reason for the improvement is the fact that we executed even beyond what we thought in our rotation strategy.
Speaker Change: Any expectations on on residuals within the the 325 and 300.
Speaker Change: That that assumes some strength continuing I mean, the way. We we you have to think of D. P. U right, we're always anticipating or trying to anticipate what the sales proceeds will be at the at the date of disposition, so that really goes into.
Speaker Change: The future will be so yes, we're still obviously deep leading as we and infleeting for the summer peak, but those will come through as to how the market reacts but really what we see in the 325, we're not really we're.
Speaker Change: An excessive improvement in residual values in the coming quarter. Okay. Thank you and then has it has a follow up.
Speaker Change: Playbook for the summer peak, given some of the macro uncertainty and you know maybe seeming lack of visibility. It is is the plan that given if it's assuming residuals continue that if the strength just isn't there in.
Speaker Change: Market that you will quickly deeply given you can take advantage of good residuals and so in a way it's almost like a natural hedge.
Speaker Change: Yeah, Let me just start off by.
Speaker Change: A environment, we we are positioned to keep fleet in line with demand. We were mindful of the fact of some level of uncertainty. So we accelerated our rotation strategy to put us in a position to give us options I think going into.
Speaker Change: Aspect when you think about fleet management, and so demand goes up and summer is bigger than maybe any of us anticipated where you can handle it and if there's a challenge we're at a point with our fleet size that we can execute quickly and reduce the dependen.
Speaker Change:
Speaker Change: As I said earlier the used car market. It hasn't if you look at it where it was last year. It reached a high and right around the Easter April area and then it went down and we haven't seen that yet and you know as time goes on will determine how.
Speaker Change: Is but you know there's indicators that that we look at that we determine like used car use car demand and use car prices. One of them is key is that new cars went from 90 day supply on the ground in January to like something in the 60.
Speaker Change: Unknown, what the what the Oems are gonna do and how they repopulate you know inventories from ours, but there's certainly a benefit use car prices are $25000 versus 48000 dollar new car and there has been some some improved demand and.
Speaker Change: Street manager for you know in our as far as our company is concerned it always prudent to to take advantage of that when the when the opportunity presents itself.
Speaker Change: Great. Thank you.
Speaker Change: Our next question is from the line of Lizzie Duff with Goldman Sachs. Please proceed with your questions to start off I think you said positive sequential trends consistent with seasonal patterns I think usually it's somewhere in the like four five.
Speaker Change: Actually which would put R. P D down 4% year on year in the Americas is that the right way to think about things or yeah. The two Q.
Speaker Change: Yeah, I'll take price so.
Speaker Change: Let me start by Unpacking, the first quarter. So this way we can we can understand what happened you know when you think about you know down three in the Americas, which you're looking for the go forward. So when you're down three in the Americas. The way I looked at it January and February what kind of below that so January.
Speaker Change: Worse off than maybe any of US you know expect it early on it what happened in March is you lose the east holiday had that.
Speaker Change: Saying that happened last year that was a high performance you know R. P D generated for us and that kind of moved a little bit.
Speaker Change: What I believe happens in these quarters is the fleet the the fleet the fleeting up that occurs in our industry that happens in these transitional months starts to weigh as you get towards the back end of.
Speaker Change: Of the spring season. So the back end of June and I think what I would say about the second quarter is the exit trend in June should be better than normalized run rate rate, which sets us up for a seasonally improved price point in the summer.
Speaker Change: Got it and then just a couple of clarifying points on the guidance. So I might have just missed it I didn't hear you reiterate the at least 500 million of cash flow for this year is just want to make sure. If that's still the case and then on the at least.
Speaker Change: Did reiterate for this year on EBITDA I know this kind of question has been kind of asked but just to put a finer point on it I know, it's hard to look at tariffs in a vacuum because there's obviously a lot of you know secondary impacts there, but just what exactly you can affecting in there from like gains on sale.
Speaker Change: The kind of consumer environment that gives you confidence in that billion or like I guess like how to think about a normalized EBITDA run rate if without the kind of tariff piece of things.
Speaker Change: Hi, Lizzie. Thank you for the question I think maybe I'll clarify a little bit how we we started with with the billion dollars first and foremost the billion dollars is our target. It always was our target still remains our target.
Speaker Change: Is saying Abbre.
Speaker Change: As I'm, stating that if I'm not I also can't be in call. It at the same position to say what the adjusted free cash flow would be because yes. If we hit the billion I would say, it's probably less than 500, but if we hit the billion, it's probably in the in.
Speaker Change: Three's to fours. So I just want to be clear about that is terms of your second part of your question. You know if this if that it cetera, I think as you've seen us navigate.
Speaker Change: Different scenarios in the past, we never really move off of that target, how we get to that target may differ right. If if fleet costs are going our way and something isn't or vice versa. We have a very very valuable.
Christoronka: Thank you. Our final question is from the line of Christoronka with Deutsche Bank. Please receive with your questions Hey, good morning, everyone.
Christoronka: You all the best and you know appreciate all the insights over the years.
Christoronka: You know I I guess my first question I I know you've covered a lot of ground about kind of scenarios for 2026 fleet and I know, it's very early but yeah, I would want drill down a little bit on your thoughts is if if there would be opportunities to lock in model 26.
Christoronka: At a price it's let's just stay comparable to 25, how how hard how hard would you looking leaning to that from a you know just from a commitment and capital standpoint, again, I I know, it's hypothetical scenario, but any thoughts would be great. Thanks.
Christoronka: As it stands right now as I said earlier, we're still talking about 25 since in certain cases, and I don't believe you know that that the Oems have formalized their individual plans yet I do believe that's coming and it probably will come soon.
Christoronka: But as it stands right now they haven't and you know we'd be ready and willing to to get involved in negotiate on any any potential 26 deals that's available to us that makes sense.
Christoronka: Okay Fair enough and then just as follow up I, obviously, a lot of questions about RPD and you know direction of demand and all that but I was hoping we could drill down maybe a little bit of mix and you know I know, there's historically been a spread between leisure and commercial pricing.
Christoronka: Not a big impact for you either in Q1 or whether you expect it to in Q2, and then you know kind of secondarily to that are you doing anything differently with respect to you know channels of demand and might include ride shared party et cetera. Thanks.
Christoronka: Yeah, I think when you think about it Chris we always try to optimize on the on the best segment mix available to us and I as you go forward into the year that dependency on commercial obviously gets reduced and it becomes more about leisure leisure customers tend to buy more.
Christoronka: Certainly look at that and we will capitalize on that going forward airports versus off airports you know.
Christoronka: Leisure leisure demand versus Rine hills, etc, things of that nature, and you know, that's how we optimize and and and have the best outcome that we could potentially have for our company.
Speaker Change: Okay very good thanks, Joe.
Speaker Change: Thank you at this time I'll turn the floor back over to Joe Ferraro CEO for closing remarks.
Speaker Change: Thank you so to recap we made tremendous progress today on our accelerated fleet rotation strategy with a record number of vicks risk vehicle sales and accepted delivery on a good portion of our 25 money year vehicles use car residual market continues to improve and our flexible fleet strategy enables us to capitalize on.
Speaker Change: And as I said earlier advanced reservations for for US are ahead of where we were prior year largely due to leisure I want to thank all of our employees for our ongoing commitment and performance and I look forward to watching our company thrive throughout the rest throughout the years and as always thank you for.
Speaker Change: Thank you. This will conclude today's conference may disconnect. Your lines at this time, we thank you for your participation.