Avis Budget Group (CAR) Q4 2017 earnings summary

Executive summary

• FY17 revenue grew for the eighth consecutive year to $8.848B, while Adjusted EBITDA fell to $735M as higher Americas fleet costs and lower daily rental pricing offset volume growth.

• FY17 net income was $361M, including a $213M provisional net tax benefit from U.S. tax reform; Q4 revenue was $2.019B and net income was $220M.

• Strategic focus included cost reduction, fleet optimization, direct digital bookings, and partnerships positioning the business for shared, connected and autonomous mobility.

Financial highlights

• Revenue was $8.848B, up 2% YoY, with rental volume up 5% and time-and-mileage revenue per day down 1%; currency movements added $58M to revenue.

• Net income was $361M vs. $163M in 2016; diluted EPS was $4.25, including a $2.51-per-share net Tax Act benefit and restructuring, transaction, debt-extinguishment and impairment charges.

• Adjusted EBITDA was $735M vs. $838M in 2016; a $103M decline reflected higher Americas per-unit fleet costs, partly offset by higher revenue, utilization and $25M of favorable currency impact.

• Operating cash flow was $2.648B; adjusted free cash flow exceeded $350M, and year-end cash, program and restricted cash totaled $901M.

• Q4 revenue was $2.019B, net income $220M and diluted EPS $2.65; the quarter included provisional Tax Act benefits and transition-tax expense.

Outlook and guidance

• 2018 expectations called for continued worldwide rental and mobility demand growth amid modest, potentially uneven global economic growth; pricing increases were a potential lever to improve profitability and returns on invested capital.

• 2018 non-vehicle property and equipment additions were expected at approximately $225M; management anticipated using most of the roughly $100M remaining share-repurchase authorization.

• Plans included further increasing alternative channels for U.S. risk-car sales and doubling connected vehicles in the U.S. Avis fleet to more than 100,000 by year-end 2018.

• The 2018 tax provision was expected to reflect the lower U.S. corporate rate, inclusion of certain foreign earnings and limits on deductions; the Tax Act impact remained under evaluation.