Avis Budget Group, Inc. (
NASDAQ: CAR) today
provided the following business update related to the coronavirus.
Joe Ferraro, Interim President and Chief Executive Officer,
said, “Consistent with other integral components of the global
travel industry, we are seeing significant impacts in our business
around the world as a result of the coronavirus. Our team is
united in facing the current unprecedented health crisis, and we
are committed to taking the necessary steps to protect the health
and safety of our customers, our employees, and to navigate through
this disruptive global event.”
Business Update
The positive momentum from fourth quarter 2019 continued into
January and February, and results for these two months
significantly exceeded both prior year and our expectations.
Revenue was up 9% as rental days increased by 8% and revenue per
day grew 1%, resulting in ~$60 million higher Adjusted EBITDA over
the prior year in this timeframe. However, in March
reservations and revenue began to be negatively affected as travel
restrictions were broadly implemented. The outlook for April and
beyond is challenged with reservations down approximately 60% and
with the potential for further declines. As a result of these
developments, we are withdrawing the financial outlook we provided
earlier this year.
Responsive Actions
We are taking numerous steps to proactively manage declining
reservations and revenue. We are reviewing our overall fleet
plan and aggressively reducing vehicles, matching staffing levels
to current demand, and reducing operational costs and pausing
capital spending among other actions. We are also evaluating
compensation expense and intend to make reductions, including to
base compensation for senior employees including the executive
leadership team. Overall, we are targeting more than $400 million
in annualized cost reduction and mitigation. These savings will
serve us well even after the emergency passes. We will be reporting
on our progress toward this target in future communications.
Balance Sheet and Liquidity
We have consistently maintained a strong balance sheet with no
meaningful corporate debt maturities until 2023. Earlier this year,
we extended our Term Loan B to 2027, added a year of maturity to
our AESOP variable funding facilities to 2022, and accessed the ABS
markets for term vehicle funding, leaving us with no material fleet
financing maturities in 2020.
In response to the current unprecedented circumstances, we have
accessed surplus equity in our vehicle fleet to provide us with
approximately $1.1 billion in cash, and we currently estimate the
available credit under our undrawn revolving credit facility to be
approximately $750 million. Given the actions we have taken to
reduce our fleet and right size our operations for the expected
downturn in reservations, we expect to have sufficient liquidity to
operate through the end of 2020 and beyond.
We are coordinating with the American Car Rental Association and
other U.S. car rental companies to ensure government leaders
understand the difficult circumstances our industry is
facing. As policy makers are aware, Avis Budget has served a
critical role in the U.S. travel industry for over 70 years and we
believe this will be considered as part of any broader travel
support package. We are also coordinating with car rental
associations internationally and working to secure access to the
various social plans being implemented in Europe.
Commenting on these actions, Mr. Ferraro said, “We have taken
aggressive steps to reduce our fleet, control costs, and maximize
liquidity in these unprecedented times. We are incredibly proud of
our people and the way they have responded to, and recovered from,
many challenges including 9/11 and the recession of 2008. Our
company has the experience, expertise and drive to respond to this
crisis. Our team will work to be stronger and more nimble to ensure
we emerge from this event with confidence and resilience.”
About Avis Budget Group
Avis Budget Group, Inc. is a leading global provider of mobility
solutions, both through its Avis and Budget brands, which have more
than 11,000 rental locations in approximately 180 countries around
the world, and through its Zipcar brand, which is the world's
leading car sharing network with more than one million members.
Avis Budget Group operates most of its car rental offices in North
America, Europe and Australasia directly, and operates primarily
through licensees in other parts of the world. Avis Budget Group
has approximately 30,000 employees and is headquartered in
Parsippany, N.J. More information is available at
avisbudgetgroup.com.
Forward-Looking Statements
Certain statements in this press release constitute
“forward-looking statements.” Any statements that refer to outlook,
expectations or other characterizations of future events,
circumstances or results, including all statements related to our
future results, impact from the coronavirus, cost-saving actions,
and cash flows are forward-looking statements. Various risks that
could cause future results to differ from those expressed by the
forward-looking statements included in this press release include,
but are not limited to, the high level of competition in the
mobility industry, changes in our fleet costs as a result of a
change in the cost of new vehicles, manufacturer recalls and/or the
value of used vehicles, disruption in the supply of new vehicles,
disposition of vehicles not covered by manufacturer repurchase
programs, the financial condition of the manufacturers that supply
our rental vehicles which could affect their ability to perform
their obligations under our repurchase and/or guaranteed
depreciation arrangements, any further deterioration in economic
conditions generally, particularly during our peak season and/or in
key market segments, any further deterioration in travel demand,
including airline passenger traffic, any occurrence or threat of
terrorism, any changes to the cost or supply of fuel, risks related
to acquisitions or integration of acquired businesses, risks
associated with litigation, governmental or regulatory inquiries or
investigations, risks related to the security of our information
technology systems, disruptions in our communication networks,
changes in tax or other regulations, a significant increase in
interest rates or borrowing costs, our ability to obtain financing
for our global operations, including the funding of our vehicle
fleet via asset-backed securities markets, any fluctuations related
to the mark-to-market of derivatives which hedge our exposure to
exchange rates, interest rates and fuel costs, our ability to meet
the covenants contained in the agreements governing our
indebtedness, and our ability to accurately estimate our future
results and implement our cost savings actions. Other unknown or
unpredictable factors could also have material adverse effects on
the Company’s performance or achievements. Important assumptions
and other important factors that could cause actual results to
differ materially from those in the forward-looking statements are
specified in Avis Budget Group’s Annual Report on Form 10-K for the
year ended December 31, 2019 and in other filings and furnishings
made by the Company with the Securities and Exchange Commission
(the "SEC") from time to time. The Company undertakes no obligation
to publicly update any forward-looking statements to reflect
subsequent events or circumstances.
This press release includes the Company's preliminary estimates
of certain financial information for January and February 2020,
based on currently available information, which accordingly are
forward-looking statements. The Company has not yet finalized its
results for the quarter ending March 31, 2020 or any portion
thereof. The Company's actual results remain subject to the
completion of the period-end closing process. While carrying out
such process, the Company may identify items that require it to
make adjustments to the preliminary estimates of its results set
forth herein. As a result, the Company's actual results could be
different from those set forth herein and the differences could be
material. Therefore, a reader should not place undue
reliance on these preliminary estimates of the Company's results.
The preliminary estimates of the Company's results included herein
have been prepared by, and are the responsibility of, the Company's
management. The preliminary estimates of certain financial
information presented herein should not be considered a substitute
for the information to be filed with the SEC in the Company's
Quarterly Report on Form 10-Q for the period ended March 31, 2020
once it becomes available.
Non-GAAP Financial Measures and Key Metrics
This release includes management's estimate of Adjusted EBITDA
for the two month period ended February 2020. Adjusted EBITDA is
not considered a generally accepted accounting principles ("GAAP")
measure as defined under SEC rules. Adjusted EBITDA represents
income (loss) from continuing operations before non-vehicle related
depreciation and amortization, any impairment charges,
restructuring and other related charges, early extinguishment of
debt costs, non-vehicle related interest, transaction-related
costs, net charges for unprecedented personal-injury legal matters,
non-operational charges related to shareholder activist activity,
gain on sale of equity method investment in China and income taxes.
Non-operational charges related to shareholder activist activity
include third party advisory, legal and other professional service.
The Company and its management believe that this non-GAAP measure
is useful to investors in measuring the comparable results of the
Company period-over-period. The GAAP measure most directly
comparable to Adjusted EBITDA is net income (loss). It is not
practical to provide an estimate of net income for this period as
we are unable to reasonably estimate or predict taxes and other
items for this period. Rental Days represents the total number of
days (or portion thereof) a vehicle was rented during a 24-hour
period. Revenue per Day represents revenues divided by Rental
Days.
Contact |
David Calabria |
IR@avisbudget.com |
PR@avisbudget.com |
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