Business News

Avis Budget Group Removes More than $2.5 billion of Costs Setting the Stage for Future Recovery

PARSIPPANY, N.J., February 16, 2021 – Avis Budget Group, Inc. (NASDAQ: CAR) today  announced financial results for fourth quarter and full year ended December 31, 2020. 

Despite revenue being down 37% for the fourth quarter compared to prior year, and a net loss  of $90 million, we generated positive Adjusted EBITDA of $74 million through disciplined cost  removal of more than $500 million. We have now had back-to-back quarters of positive  Adjusted EBITDA and continue to show our ability to adapt throughout the pandemic. We are  particularly encouraged by the fact that during this challenging travel environment, the  Americas generated their highest fourth quarter Adjusted EBITDA margins in the history of our  Company.  

Full year revenue was down 41% compared to prior year, net loss was $684 million and  Adjusted EBITDA was a loss of $175 million due to travel restrictions broadly implemented in  response to the COVID-19 pandemic.  

Our liquidity position at the end of the year was $1.3 billion after returning more than $600  million back into our vehicle programs. We continue to be in a strong position to fund the  purchase of our 2021 fleet appropriately. 

“I am incredibly proud of the performance of our Company during the most challenging year  in Avis Budget Group’s history. I want to thank our employees who helped deliver a safe  environment for our customers throughout the pandemic.” said Joe Ferraro, Avis Budget  Group Chief Executive Officer. “The fact that the Americas achieved its best fourth quarter  Adjusted EBITDA margin on the lowest fourth quarter revenue base in our Company’s history  serves as a proof point that our focus on cost savings will continue to deliver results.” 

Q4 and Full Year Highlights 

• As a response to the pandemic, we created our Avis Safety Pledge and Budget Worry Free Promise to keep our customers and employees safe. We have expanded our  partnerships to enhance the cleanliness and disinfection of our rental facilities and  vehicles. 

• We continue to expand contactless rentals for our Avis Preferred customers through  our app, which also enhances the rental experience. 

• We reduced our cost base to match current revenue trends, removing more than $500  million of costs for the quarter, and more than $2.5 billion of costs for 2020. • We profitably disposed of approximately 40,000 and approximately 250,000 vehicles  globally, including a record 18,000 and 127,000 vehicles sold through alternative  channels in the U.S., for the quarter and full year, respectively.

• In April, we obtained an amendment to our credit agreement, approved by 97% of our  lenders, which provided a covenant holiday and increased the amount of authorized  debt. 

• In May, we completed a senior secured notes offering of $500 million and subsequently  in August, a senior unsecured notes offering of $350 million, using the proceeds to pay  off $100 million of existing notes and provide additional liquidity.  

• In August, we completed an offering of $650 million of asset-backed securities with a  weighted average interest rate of 2.28%, our lowest rate since 2013 for our fleet  financing. In January, we also completed an offering of $700 million of asset-backed  securities with a weighted average interest rate of 2.42% 


While we will continually monitor the roll out of the vaccine and its impact on the demand for  the travel industry, we cannot predict when increases in the travel industry will occur. Due to  these macro uncertainties, we are not providing guidance at this time. However, we remain  optimistic about those factors we can control in 2021 and specifically around our ability to  minimize cost accretion as revenues return. We believe these actions will position us to be a  structurally more profitable company when travel demand normalizes. 

Investor Conference Call 

We will host a conference call to discuss fourth quarter and full year ended December 31,  2020 results on February 17, 2021, at 8:30 a.m. (ET). Investors may access the call at or by dialing (877) 407-2991 and a replay will available on our website  and at (877) 660-6853 using conference code 13715071. 

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 10,000 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 is headquartered in  Parsippany, N.J. More information is available at 

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 COVID-19 outbreak, 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 severity and  duration of the COVID-19 outbreak, which is expected to continue to have a significant impact on our operations,  and resulting economic conditions and related restrictions, the high level of competition in the mobility industry,  changes in our fleet costs, including 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, our ability to realize our estimated cost savings on a timely basis, or at all,  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, the significant  decline in travel demand as a result of COVID-19, including the current and any further disruptions in airline passenger traffic, the absence of an improvement in or any further deterioration in economic conditions  generally, particularly during our peak season and/or in key market segments, any occurrence or threat of  terrorism, the current and any future pandemic diseases or other natural disasters, 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 Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2020 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. 

Non-GAAP Financial Measures and Key Metrics 

This release, including the Outlook section, includes financial measures such as Adjusted EBITDA, Adjusted net  income, Adjusted Free Cash Flow, Adjusted pretax income and Adjusted diluted earnings per share, as well as  other financial measures that are not considered generally accepted accounting principles (“GAAP”) measures as  defined under SEC rules. Important information regarding such measures is contained in the financial tables to  this release and in Appendix I, including the definitions of these measures and reconciliations to the closest  comparable GAAP measures. The Company and its management believe that these non-GAAP measures are useful  to investors in measuring the comparable results of the Company period-over-period. The GAAP measures most  directly comparable to Adjusted EBITDA, Adjusted Free Cash Flow, Adjusted pretax income (loss), Adjusted net  income (loss) and Adjusted diluted earnings (loss) per share are net income (loss), net cash provided by operating  activities, income (loss) before income taxes, net income (loss) and diluted earnings (loss) per share, respectively.  The Company believes it is impracticable to provide a reconciliation to the most comparable GAAP measures for  2021 due to the degree of uncertainty associated with forecasting the reconciling items and amounts. Foreign  currency translation effects on the Company’s results are quantified by translating the current period’s non-U.S.  dollar-denominated results using the currency exchange rates of the prior period of comparison including any  related gains and losses on currency hedges. Per-unit fleet costs, which represent vehicle depreciation, lease  charges and gain or loss on vehicle sales, divided by average rental fleet, are calculated on a per-month basis. 

David Calabria 

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Tables Follow 

Appendix I 

Avis Budget Group, Inc. 

Adjusted EBITDA 

The accompanying press release presents Adjusted EBITDA, which 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 and other legal matters, non-operational charges related to  shareholder activist activity, gain on sale of equity method investment in China, COVID-19 charges and income taxes. Net charges for unprecedented  personal-injury and other legal matters, which include legal charges of a nature not previously incurred by the company and gain on sale of equity  method investment in China are recorded within operating expenses in our consolidated condensed statement of operations. Non-operational charges  related to shareholder activist activity include third party advisory, legal and other professional service fees and are recorded within selling, general  and administrative expenses in our consolidated results of operations. COVID-19 charges include unusual, direct and incremental costs due to the  COVID-19 pandemic, such as minimum annual guaranteed rent in excess of concession fees for the period, overflow parking for idle vehicles and  related shuttling costs, incremental cleaning supplies to sanitize vehicles and facilities and other charges, and losses associated with vehicles damaged  in overflow parking lots, net of insurance proceeds, and are primarily recorded within operating expenses in our consolidated condensed statement of  operations. We have revised our definition of Adjusted EBITDA to exclude COVID-19 and other unprecedented legal matters. We did not revise prior  years’ Adjusted EBITDA amounts because there were no other charges similar in nature to these. Adjusted EBITDA includes stock-based compensation  expense and deferred financing fee amortization totaling $9 million and $10 million in fourth quarter 2020 and 2019, respectively and totaling $31  million and $44 million in the year ended December 31, 2020 and 2019, respectively.  

We believe that Adjusted EBITDA is useful to investors as a supplemental measure in evaluating the aggregate performance of our operating businesses  and in comparing our results from period to period. Adjusted EBITDA is the measure that is used by our management, including our chief operating  decision maker, to perform such evaluation. Adjusted EBITDA is also a component in the determination of management’s compensation. Adjusted  EBITDA should not be considered in isolation or as a substitute for net income or other income statement data prepared in accordance with GAAP and  our presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies. A reconciliation of Adjusted EBITDA  from net income (loss) recognized under GAAP is provided on Table 5. 

Adjusted Earnings Non-GAAP Measures 

The accompanying press release and tables present Adjusted pretax income (loss), Adjusted net income (loss) and Adjusted diluted earnings (loss) per  share, which exclude certain items. We believe that these measures referred to above are useful to investors as supplemental measures in evaluating  the aggregate performance of the Company. We exclude restructuring and other related charges, transaction-related costs, costs related to early  extinguishment of debt and certain other items as such items are not representative of the results of operations of our business less a provision for  income taxes derived utilizing applicable statutory tax rates for each item. A reconciliation of our Adjusted earnings Non-GAAP measures from the  appropriate measures recognized under GAAP is provided on Table 5. 

Adjusted Free Cash Flow 

Represents Net Cash Provided by Operating Activities adjusted to reflect the cash inflows and outflows relating to capital expenditures, the investing  and financing activities of our vehicle programs, asset sales, if any, and to exclude debt extinguishment costs, transaction-related costs, restructuring  and other related charges, COVID-19 charges and non-operational charges related to shareholder activist activity. We have revised our definition of  Adjusted Free Cash Flow to exclude COVID-19 charges and have not revised prior years’ Adjusted Free Cash Flow amounts as there were no other  charges similar in nature to these. We believe this change is meaningful to investors as it brings the measurement in line with our other non-GAAP  measures. We believe that Adjusted Free Cash Flow is useful to management and investors in measuring the cash generated that is available to be used  to repay debt obligations, repurchase stock, pay dividends and invest in future growth through new business development activities or acquisitions.  Adjusted Free Cash Flow should not be construed as a substitute in measuring operating results or liquidity, and our presentation of Adjusted Free Cash  Flow may not be comparable to similarly-titled measures used by other companies. A reconciliation of Adjusted Free Cash Flow to the appropriate  measure recognized under GAAP is provided on Table 4. 

Adjusted EBITDA Margin 

Represents Adjusted EBITDA as a percentage of revenues. 

Available Rental Days 

Defined as Average Rental Fleet times the numbers of days in a given period. 

Average Rental Fleet 

Represents the average number of vehicles in our fleet during a given period of time. 

Currency Exchange Rate Effects 

Represents the difference between current-period results as reported and current-period results translated at the prior-period average exchange rates  plus any related currency hedges. 

Net Corporate Debt 

Represents corporate debt minus cash and cash equivalents. 

Net Corporate Leverage 

Represents Net Corporate Debt divided by Adjusted EBITDA for the twelve months prior to the date of calculation. 

Per-Unit Fleet Costs 

Represents vehicle depreciation, lease charges and gain or loss on vehicles sales, divided by Average Rental Fleet. 

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. 

Vehicle Utilization 

Represents Rental Days divided by Available Rental Days.