Avis Budget Group's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Avis Budget Group (CAR)

Q4 2011 Earnings Call

February 16, 2012 9:00 am ET


Neal Goldner -

Ronald L. Nelson - Chairman, Chief Executive Officer, President, Chief Operating Officer and Chairman of Executive Committee

David B. Wyshner - Global Chief Financial Officer and Senior Executive Vice President


John M. Healy - Northcoast Research

Afua Ahwoi - Goldman Sachs Group Inc., Research Division

Michael Millman - Millman Research Associates

Christopher Agnew - MKM Partners LLC, Research Division

Brian Arthur Johnson - Barclays Capital, Research Division

Yilma Abebe - JP Morgan Chase & Co, Research Division

Stephen O'Hara - Sidoti & Company, LLC



Good morning, and welcome to the Avis Budget Group's Fourth 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

Thank you, Tanya. 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 Senior Vice President and Chief Financial Officer.

Before we discuss our results for the fourth quarter, I would like to remind everyone that the company will be making statements about its future results and expectations which constitutes 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, 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 guarantees 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 last night, our Form 10-K, the other SEC filings. If you did not receive a copy of our press release, it is available on our website at ir.avisbudgetgroup.com.

Also, certain non-GAAP financial measures will be discussed in this call, and these measures are reconciled to the GAAP numbers in our press release.

Now, I'd like to turn the call over to Avis Budget Group's Chairman and Chief Executive Officer, Ron Nelson.

Ronald L. Nelson

Thanks, Neal, and good morning to all of you on the call. As we sit here today, not only is Avis did group a bigger company than it was a year ago, it's a stronger one. That position to compete in the global vehicle rental industry.

We strengthened our company throughout 2011 by focusing our efforts to grow disproportionately in the most attractive segments of the market, while completing a transformational acquisition that's a global leader in the vehicle rental market.

In our existing businesses, we implemented a multifaceted strategic plan last year, designed to profitably accelerate our growth, improve our customer experience and strengthen our brands and competitive position. I'm delighted to report that we achieved measurable success against everyone of those objectives. We saw top line revenue growth in all of our operating segments without the benefit of price and against the backdrop [indiscernible] and payment growth. We expanded our margins and delivered strong year-over-year increases in adjusted EBITDA, excluding certain items, which is our primary measurement of profitability. We enhanced the vehicle rental experience we offer to our customers in numerous ways, as evidenced by increased in ways that the customer scores and then win 8 world travel awards, including World's Best Business Car Hire.

And we invested in our world-class brands with a national ad campaign for Avis and a highly successful direct response advertising campaign for Budget among other things.

Looking beyond the walls of our preexisting businesses, we also had a productive year end 2011 with the acquisition of Avis Europe, which has long been a strategic objective for us. This transaction reunites our brands globally under the Avis Budget Group umbrella, better positioning us to compete in the global vehicle rental industry.

With virtually all of our investor feedback over the past quarter being laser-focused on Europe, let's begin there. The strategic rationale for the acquisition of Avis Europe is as we discussed: It allows us to achieve brand consistency for Avis and Budget around the globe, while effectively managing multinational accounts; it allows us to drive volume with our travel partners on a truly global scale; it unifies the incentives to drive very profitable cross-border traffic in all geographies; and it allows us to attain leading market positions across Europe, Asia, the Middle East and Africa, including 2 of the markets that will be growth engines for us over the long run: India and China.

We also expect the acquisition to provide significant financial benefits as a result of both its pre-acquisition earnings power and integration-related synergies. In that regards, there are 3 headlines: Avis Europe grew at adjusted EBITDA by over 20% in 2011 on a pro-forma basis, excluding certain items; Avis China increased its footprint by nearly 40% year-over-year, while maintaining profitable operation; and based on the extensive integrations done since the acquisition, we are comfortable projecting that we will achieve run rate synergies of at least $35 million this year, up from our initial estimate of $30 million.

Nonetheless, the macroeconomic climate in Europe is predominant in our investor dialogue, we were obviously paying very close attention to it, but here is just a few point to consider that should alleviate some of those concerns. First, amid the persistent concerns in daily news reports, our fourth quarter rental revenue in Europe declined 1% year-over-year, and in fact, increased 1% excluding insurance replacement. In other words, business travel remain relatively stable. Other travel companies have reported similar trends.

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