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Avis Budget Conference Call Highlights

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Avis Budget (NASDAQ: CAR) reported its second quarter earnings on Tuesday. Shares of the company are up 4.4 percent.

Below are some key highlights from its conference call:

• Strategic initiatives allowed us to grow revenue by 10 percent and earnings per share by 36 percent.

Global:

• Both volume and pricing trends in North America, not only maintained the momentum from the first quarter, but actually accelerated throughout the second.
• Continued the exponential growth with the Budget brand in Europe
• The driving element of our performance [ph] are or was North American pricing.
• That also represented the second straight quarter of positive pricing in North America.
• As many of you know, we've been quite vocal about our need to drive improved pricing in order to strengthen our return on capital.
• To break it down a little bit, international inbound revenue, our single most profitable customer segment increased 17 percent.
• And finally revenue in our local market operations increased 11 percent with pricing up 4 percent.
• Europe continues on a somewhat uneven trajectory depending on the country.
• Demand in EMEA was okay in July, though softer than what we in the industry had anticipated, judging by the looseness of fleets across the region.
• Across the globe, we've grown ancillary revenues, enhanced our car class mix, reduced vehicle related and corporate interest expense, increased our use of alternative disposition channels to hold fleet cost increases to a minimum, and delivered on an array of productivity initiatives.
• Notwithstanding our strong results, not everything was great in the second quarter.
• We had an unprecedented number of vehicle recalls this year.
• Even though we achieved 7 percent volume growth throughout the first half of the year
• Our supply chain group was continuously shifting cars from one area to another
• Holding both program and risk cars instead of sending them to auction so as to minimize the impact on volume.
• In addition our maintenance teams were literally working around the clock to correct the issues necessitating the recall in order to return the cars to service.
• The toll that was exacted was a hefty utilization along with increased labor cost and the inability to take advantage of the peak used car selling season.
• The operational difficulties associated with this extra work are significant and have continued into the third quarter.

Guidance:

• The positive demand in the pricing environment we experienced in North America in the first half of the year is continued to end of the summer.
• Pricing was up 4 percent in July and with roughly 40 percent of our expected reservations for August already booked, all indications are that August will follow soon.
• However, expectations should be tempered due to recalls.
• Despite the fact that we are expecting a record third quarter, recalls have continued to affect labor costs and utilization and will impact overall fleet costs.

Posted-In: Earnings News Guidance

 

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