Avis Budget Group, Inc. Q2 2010 Earnings Call Transcript

Avis Budget Group, Inc. Q2 2010 Earnings Call Transcript
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Avis Budget Group, Inc. (CAR)

Q2 2010 Earnings Call

August 05, 2010 09:00 am ET

Executives

Neal Goldner - VP, IR

Ron Nelson - Chairman and CEO

David Wyshner - EVP and CFO

Analysts

Chris Agnew - MKM Partners

John Healy - North Coast Research

Steven Kent - Goldman Sachs

Brian Johnson - Barclays Capital

Steve O'Hara - Sidoti & Company

Derrick Wenger - Jefferies & Company

Emily Shanks - Barclays Capital

Jordan Hymowitz - Philadelphia Financial

Presentation

Operator

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Welcome to the Avis Budget Group Second Quarter Earnings Conference Call. Today's call is being recorded. At this time for opening remarks and introductions, I would like to turn the conference over to Mr. Neal Goldner, Vice President of Investor Relations. Please go ahead sir.

Neal Goldner

Good morning everyone and thank you for joining us. On the call with me are Ron Nelson, our Chairman and Chief Executive Officer and David Wyshner, our Executive Vice President and Chief Financial Officer.

Before we discuss our results of the second quarter I would like to remind everyone that the company will be making statements about its future results and expectations which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Such statements are based on current expectations and the current economic environment and are inherently subject to economic, competitive, and other uncertainties and contingencies beyond the control of management.

You should be cautioned that these statements are not guaranteed of future performance. Actual results may differ materially from those expressed or implied in the forward looking statements. Important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements are specified in our earnings release which was issued night and our form 10K and.

If you did not receive a copy of our press release, it is available on our website at avisbudgetgroup.com. Also, certain Non-GAAP financial measures will be discussed on this call and these numbers are reconciled to the GAAP number in our press release.

Now I would like to turn the call over to Avis Budget Groups Chairman and Chief Executive Officer, Ron Nelson.

Ron

Nelson

Thanks Neal and good morning to all of you. Let me say a word about Dollar Thrifty and then move on to the business of the quarter. As you know, last week we submitted a bid to acquire Dollar Thrifty Automotive Group for $46.50 per share in cash and stock.

We believe strongly that our bid constitutes the superior proposal to acquire the company, and would note the Dollar Thrifty has not said otherwise. We want to reiterate our continued strong, but responsible interest in acquiring Dollar Thrifty as a representative substantial growth opportunity for our company.

Other than that, we don't and won't have anything else to say on this topic during today's call, and I will ask you to refrain from any questions or comments on the Dollar Thrifty situation during Q&A.

Turning to our business, as I look at how far we have come and where we are going, I am very enthusiastic. Our first half results highlight that we have come through the worst period, our industry has ever experienced, and emerged stronger, more nimble competitor.

We permanently lowered our fixed cost infrastructure, diversified our fleet and improved our liquidity. We related the market share gain and manage the business through profitability, and in the process reset the business at a revenue level, from which we now expect to grow profitably and restore margins too, and beyond historic levels.

Most importantly, we have heightened our focus on the customer experience we offer, which has already produced significant improvements in our customer satisfaction metrics. Under the banner of Customer Led Service Driven, we are undertaking this initiative across both brands on a global basis that allocated resources with the same commitment and energy, we have so successfully devoted to our performance excellence initiative.

Over the longer term, we believe Customer Led Service Driven may have an even greater impact on our business and tax by allowing us to translate positive customer experiences first in to royalty, then into advocacy and turn into profitable share growth.

For the second quarter, we are pleased to once again report results to the reflecting the improvement in travel channel as well as our efforts to control cost to expand margins and increase earnings. In many ways we had a typical spring quarter seen seasonally soft demand in the months of April and May, adding fleet for the summer and experiencing normal pricing seasonality.

We delivered our best second quarter bottom line performance since 2006 with adjusted EBITDA of $98 million, excluding certain items, up over 45% in all segments domestic, international and truck showed significant year-over-year improvement. Comparison second quarter revenues in 2006 were $1.45 billion from $150 million higher than this year's comparable quarter.

Domestically, we saw some price erosion as we entered the quarter, but year-over-year pricing from does the quarter progressed with May better than April and June better than May. Similarly domestic volume trends also improved during the quarter.

In total, domestic rental day volume was down 6% in the quarter with commercial volume down 3% and leisure volume down 8%. Leisure volume trends improved over the course of the quarter, which June down 4%.

Our pronounced volume declines continue to be in transient leisure channels, where market clearing prices often have not provided an inadequate return for us. As this reflected in our metrics reducing participation in these channels has cost us some volume. This quarter we estimate the stepping away from these transactions reduced our rental volume by at least five points year-over-year accounting for substantially all the reported decline.

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