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Avis Budget Group Reports Second Quarter 2014 Results

August 6, 2014 Financial No Comments Email Email

Avis Budget Group, Inc. today reported results for its second quarter ended June 30, 2014.

morefuninthephilippinesFor the quarter, the Company reported revenue of $2.2 billion, a 10% increase compared with the prior-year second quarter. Adjusted EBITDA increased 19% to $213 million. The Company reported net income of $74 million, or $0.68 per share, an increase of 36%, excluding certain items, and GAAP net income of $26 million, or $0.24 per share.

“Our strong second quarter results were driven by our continued growth in both volume and pricing in North America and our relentless focus on accelerating growth in our most profitable channels,” said Ronald L. Nelson, Avis Budget Group Chairman and Chief Executive Officer. “Summer volume and pricing have continued the trends we saw in the first half of the year, and we expect to post record results in our third quarter.”

Executive Summary

Revenue increased 10% in second quarter 2014 compared to second quarter 2013 primarily due to an 8% increase in rental days and increased pricing in North America. Excluding the acquisition of Payless and the effect of currency movements, revenue grew 10% and pricing in North America increased 5% year-over-year. Second quarter Adjusted EBITDA increased 19% to $213 million, primarily due to higher rental volumes and increased year-over-year pricing in North America.

Payless Car Rental, acquired by the Company in July 2013, contributed $31 million to revenue and $5 million to Adjusted EBITDA in the second quarter.

Business Segment Discussion

The following discussion of second quarter operating results focuses on revenue and Adjusted EBITDA for each of our operating segments. Revenue and Adjusted EBITDA are expressed in millions.

North America

(Consisting of the Company’s U.S. car rental operations, Canadian vehicle rental operations and North American car sharing operations)

2014 2013 % change
Revenue  $ 1,427  $ 1,279 12%
Adjusted EBITDA  $ 157  $ 115 37%

Revenue increased 12% primarily due to a 5% increase in volume and 4% higher pricing, excluding Payless, as well as the acquisition of Payless. Adjusted EBITDA increased 37% primarily due to higher volume and pricing, partially offset by a 1% increase in per-unit fleet costs. Excluding the acquisition of Payless, revenue grew 9% and Adjusted EBITDA increased 32%.

International

(Consisting of the Company’s international vehicle rental and car sharing operations)

2014 2013 % change
Revenue  $ 667  $ 621 7%
Adjusted EBITDA  $ 57  $ 58 (2%)

Revenue increased 7% primarily due to a 2% increase in rental days, a 6% increase in total revenue per rental day (which excludes licensee revenues and was comprised of a 15% increase in ancillary revenue per day and no change in reported pricing). Adjusted EBITDA decreased 2% due to a $5 million negative impact from currency exchange movements, partially offset by revenue growth and synergies from the integration of our European operations.

Truck Rental

(Consisting of the Company’s U.S. truck rental operations)

2014 2013 % change
Revenue  $ 100  $ 102 (2%)
Adjusted EBITDA  $ 13  $ 17 (24%)

Truck Rental revenue declined 2% due to a 6% decrease in volume, as our truck rental fleet was 12% smaller in 2014. Adjusted EBITDA declined by $4 million in the second quarter due to lower volume and higher per-unit fleet costs associated with newly acquired rental fleet.

Other Items

  • Share Repurchases  The Company repurchased more than 1.3 million shares of its common stock at a cost of $75 million in the second quarter. As of June 30, 2014, the Company has repurchased a total of 4.6 million shares at a cost of approximately $200 million since August 2013.
  • Debt Refinancing  In May, the Company completed an offering of $400 million of senior notes due 2022 with a yield-to-maturity of 5.125%. The Company used the proceeds from the offering to redeem the remaining $395 million of its outstanding 8.25% senior notes due 2019.
  • “Tuck-in” Acquisitions  In June, the Company acquired eleven airport concession agreements from Advantage for approximately $6 million.

Outlook

The Company today increased its full-year 2014 projections of revenue, Adjusted EBITDA and earnings per share. The Company now expects:

  • Full-year 2014 revenue will be approximately $8.6 billion to $8.7 billion, an 8% to 10% increase compared to 2013. In the Company’s North America segment, rental days are expected to increase 5% to 7%, and pricing is expected to increase approximately 2% in 2014.
  • Adjusted EBITDA will increase 12% to 18%, to approximately $860 million to $910 million.
  • Per-unit fleet costs in its North America segment will be approximately $300 to $310 per month in 2014, compared to $299 per month in 2013. Total Company fleet costs are expected to be $295 to $305 per unit per month in 2014, an increase of approximately 2% to 5% compared to 2013.
  • Interest expense related to corporate debt will be approximately $210 million, a reduction of $18 million compared to 2013.
  • 2014 non-vehicle depreciation and amortization expense (excluding the amortization of intangible assets related to acquisitions) will be approximately $150 million.
  • Pretax income will be approximately $500 million to $550 million, excluding certain items.
  • Its effective tax rate in 2014 will be approximately 38%, excluding certain items, and its diluted share count will be approximately 111 to 112 million, including the effect of repurchasing $225 million to $300 million of outstanding shares in 2014.

Based on these expectations, the Company estimates that its 2014 diluted earnings per share, excluding certain items, will increase 25% to 39% compared to 2013, to $2.75 to $3.05.

The Company also continues to target $1 billion or more of Adjusted EBITDA in 2015.

Investor Conference Call

Avis Budget Group will host a conference call to discuss second quarter results on August 5, 2014, at 8:30 a.m. (ET). Investors may access the call live at ir.avisbudgetgroup.com or by dialing (630) 395-0021 and providing the access code “Avis Budget.” Investors are encouraged to dial in approximately 10 minutes prior to the call. A web replay will be available at ir.avisbudgetgroup.com following the call. A telephone replay will be available from 11:00 a.m. (ET) on August 5 until 8:00 p.m. (ET) on August 23 at (402) 220-9757, access code: “Avis Budget.”

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