Avis Budget Group, Inc. · NASDAQ:CAR
Avis Budget — Investor Day (November 2016)
130 slides from Avis Budget's investor day presentation, November 2016
Slide 1: Investor Day Presentation
Investor Day Presentation November 2016
Slide 2: Agenda
Agenda Larry De Shon Chief Executive Officer and Chief Operating Officer Scott Deaver Executive Vice President and Chief Marketing Officer Q&A Mark Servodidio President, International Joe Ferraro President, Americas Q&A David Wyshner President and Chief Financial Officer Q&A 2
Slide 3: Forward-Looking Statements
Forward-Looking Statements Statements about future results made in this presentation constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include projections. These statements are based on current expectatio
Slide 4: Larry De Shon
Larry De Shon Chief Executive Officer
Slide 5: Key Messages Today
Key Messages Today Solid track Consistent strategy record and execution Targeting 13% - 15% Well-positioned in Core strengths provide Adjusted changing landscape strong foundation EBITDA margin within five years Executing major Three key focus areas initiatives 5
Slide 6: Agenda
Agenda The Business Today Industry Fundamentals Five-Year Vision 6
Slide 7: A Global Leader in the Vehicle Services Industry
A Global Leader in the Vehicle Services Industry 11,000 33 147 560,000 Locations Vehicles million million Worldwide Transactions Rental Days $8.7 billion Annual Revenue Worldwide 7 Note: Last 12 months as of September 2016
Slide 8: We Expanded Our Global Footprint
We Expanded Our Global Footprint 2014 2016 Budget Southern Avis Poland California France Cars (a) Scandinavia Licensee Budget Edmonton Budget Portugal Maggiore (Italy) Brazil Licensee 2015 8 (a) Pending
Slide 9: Powerful Global Brands Serve Diverse Customer Base
Powerful Global Brands Serve Diverse Customer Base Premium brand harnessing technology to transform the rental experience Smart car rental choice for the value-conscious customer The #1 brand in car sharing 9
Slide 10: Agenda
Agenda The Business Today Industry Fundamentals Five-Year Vision 10
Slide 11: Market Share Across the Industry has Stabilized
Market Share Across the Industry has Stabilized U.S. Airport Market Share 96% 95% 28% 28% 36% 37% 32% 30% Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter (a) 2015 2016 11 (a) Data through August 2016
Slide 12: Industry Landscape is Evolving
Industry Landscape is Evolving Key Trends Consumer control over rental experience “Pay-to-use” growing market Significant Opportunities New vehicle technology Consolidation opportunities 12
Slide 13: Well-Positioned For Continued Growth
Well-Positioned For Continued Growth Fleet management is a key competitive advantage Investing in technology to streamline and change processes to drive higher margins Well-positioned to benefit from new vehicle innovations Economies of scale − 33 million rental transactions per year Zipcar is a lea
Slide 14: Agenda
Agenda The Business Today Industry Fundamentals Five-Year Vision 14
Slide 15: An Evolved Strategy for an Evolving Landscape
An Evolved Strategy for an Evolving Landscape Driving Sustained, Profitable Growth 1. Win Customers 2. Increase Margins 3. Succeed in Mobility – Through differentiated – Via revenue, fleet and – Position ourselves in brands and products cost optimization evolving landscape Enablers 15
Slide 16: Win Customers through Our Differentiated Brands
PRIORITY #1 Win Customers through Our Differentiated Brands 16
Slide 17: Grow Margins throughout the Organization
PRIORITY #2 Grow Margins throughout the Organization Operational Efficiencies Fleet Optimization Profitable Revenue Growth • Global process • Improved acquisition standardization • More profitable costs • Manpower planning customer and • Alternative channels, channel mix • Shuttling efficiency inclu
Slide 18: Well-Positioned to Succeed in the Evolving Mobility Landscape
PRIORITY #3 Well-Positioned to Succeed in the Evolving Mobility Landscape 18
Slide 19: Significant Opportunity for Margin Growth
OUR GOAL Significant Opportunity for Margin Growth 13% - 15% Enhanced ~10% Operational Mobility Fleet Efficiencies Profitable Optimization Revenue Growth 2016 2021 Substantial opportunity to expand profitability over the next five years 19
Slide 20: Avis Budget Group is Well-Positioned for the Future
IN SUMMARY Avis Budget Group is Well-Positioned for the Future Solid track Consistent strategy record and execution Driving margin expansion Well-positioned in Core strengths provide Targeting changing landscape strong foundation 13% - 15% Adjusted EBITDA margin within five Executing major years Thr
Slide 21: Scott Deaver
Scott Deaver Chief Marketing Officer
Slide 22: Agenda
Agenda The Evolving Mobility Landscape Well-Positioned for the Future Key Competitive Advantages Leveraging Our Leading Global Brands 22
Slide 23: What Do We Mean By Mobility?
What Do We Mean By Mobility? “The purposeful moving of people or things from one place to another by individual vehicle” 23
Slide 24: Our Addressable Market has Entered a Period of Accelerating Growth
Our Addressable Market has Entered a Period of Accelerating Growth Mobility Market Growth Mobility Market Today Drivers Tomorrow Customer Urbanization Use Cases Preferences Pay to Developing Technology Pay to Own Connected Use Millennials Car Economics We expect to remain a critical part of a substa
Slide 25: Car Rental and Ride-Hailing Serve Different Use Cases
Car Rental and Ride-Hailing Serve Different Use Cases Ride-Hailing Car Rental Time per transaction Minutes Days Miles per transaction Low High Cost per mile High Low Car rental is the most economical mode of transportation for business and leisure travelers 25
Slide 26: Agenda
Agenda The Evolving Mobility Landscape Well-Positioned for the Future Key Competitive Advantages Leveraging Our Leading Global Brands 26
Slide 27: Avis Now Has Taken the Lead in Technology-Enabled Car Rental Solutions
Avis Now Has Taken the Lead in Technology-Enabled Car Rental Solutions Avis Now Feedback Key Statistics % of users planning 300,000 app downloads to rent from Avis more 40% frequently Over 150,000 transactions % likely to use the Available at nearly 60 mobile app during 90% U.S. airports future Avis
Slide 28: Avis Now – Providing What our Customers have Asked for
Avis Now – Providing What our Customers have Asked for Avis Now Electronic confirmation “Skip-the-line” Real-time inventory selection Self-exchange / upgrade Self-checkout / check-in Mid-rental ancillary features Electronic rental receipts Avis Now is changing the customer experience 28
Slide 29: Avis Now – Leading the Way
Avis Now – Leading the Way Control the entire car rental experience… Select Upgrade Unlock Return Agreement …from the Avis mobile app 29
Slide 30: Zipcar is the Global Car Sharing Leader
Zipcar is the Global Car Sharing Leader Over 1 million members Broadest service offering − Round-trip − ONE>WAY − Floating Over 500 cities and towns − Further expansion to new markets planned Over 500 colleges campuses, changing the habits of tomorrow’s customers Extend leading-edge technology − Ins
Slide 31: Zipcar – Leading-Edge Technology
Zipcar – Leading-Edge Technology Find, reserve, book, unlock and drive… Sign in Locate Reserve Unlock Drive …all from the Zipcar app 31
Slide 32: Agenda
Agenda The Evolving Mobility Landscape Well-Positioned for the Future Key Competitive Advantages Leveraging Our Leading Global Brands 32
Slide 33: An Evolved Strategy for an Evolving Landscape
An Evolved Strategy for an Evolving Landscape Driving Sustained, Profitable Growth 1. Win Customers 2. Increase Margins 3. Succeed in Mobility – Through differentiated – Via revenue, fleet and – Position ourselves in brands and products cost optimization evolving landscape Enablers 33
Slide 34: We Expect to Lead and Succeed in the Mobility Landscape
We Expect to Lead and Succeed in the Mobility Landscape Two Key Competitive Advantages Superior Customer Service Reservation Pick-Up Rental Drop-Off Post-Rental Global Mega-Fleet Management Purchase In-Fleet Utilize Maintain De-Fleet 34
Slide 35: Providing a Superior Customer Experience is Crucial
Providing a Superior Customer Experience is Crucial The Customer Journey Reservation Pick-Up Rental Drop-Off Post-Rental Research journey Pre-rental In-journey Return vehicle Billing Reserve check-in services including: Inspect vehicle Damages transportation Confirmation − Navigation − Fuel Feedback
Slide 36: Our Fleet Capabilities Will be Even More Critical in the Evolving Mobility Landscape
Our Fleet Capabilities Will be Even More Critical in the Evolving Mobility Landscape Mobility Supply Chain Purchase In-Fleet Utilize Maintain De-Fleet Purchase vehicle Registration Connect vehicle Cleaning Update inventory Finance vehicle Create inventory with renter Scheduled Prepare vehicle Pre-de
Slide 37: Agenda
Agenda The Evolving Mobility Landscape Well-Positioned for the Future Key Competitive Advantages Leveraging Our Leading Global Brands 37
Slide 38: Leading Global Premium Brand
Leading Global Premium Brand Premium brand that is harnessing technology to transform the rental experience Complete control and flexibility Highly individual and personal experience Designed to excite and inspire the journey 38
Slide 39: Leading Global Value Brand
Leading Global Value Brand Smart car rental choice for the value-conscious customer Simple, efficient rental process Deliver high value to the savviest of frequent renters Carefree, confident experience to the casual renter every time 39
Slide 40: Global Leader in Mobility
Global Leader in Mobility The #1 brand in car sharing Enable simple and responsible urban living Wide variety of self-service vehicles available by the hour or day The most comprehensive, convenient and flexible car-sharing options available 40
Slide 41: Significant Opportunity for Margin Growth
Significant Opportunity for Margin Growth $ in millions 13% - 15% $50-$100+ ~10% Enhanced Operational Mobility Fleet Efficiencies Profitable Optimization Revenue Growth 2016 2021 Enhanced Mobility will contribute significantly to margin improvement 41
Slide 42: Avis Budget Group is Well-Positioned to Lead in the Evolving Mobility Landscape
K E Y TA K E AWAY S Avis Budget Group is Well-Positioned to Lead in the Evolving Mobility Landscape The mobility landscape has entered a period of accelerating growth Unparalleled capabilities in the mobility-as-a-service industry Portfolio of leading brands to address a wide range of consumer use c
Slide 43: Mark Servodidio
Mark Servodidio President, International
Slide 44: Agenda
Agenda The International Business Today Future International Opportunities Global Revenue Growth 44
Slide 45: A Leader in the International Vehicle Services Industry
A Leader in the International Vehicle Services Industry 4,300 9 46 175,000 International Vehicles million million Locations Transactions Rental Days $2.5 billion Annual International Revenue 45 Note: Last 12 months as of September 2016
Slide 46: Our Revenue is Well-Diversified Across Segments and Channels
Our Revenue is Well-Diversified Across Segments and Channels 40% Off-Airport 15% Brands 75% On-Airport vs. Budget Avis Off-Airport 60% 10% On-Airport Zipcar/Other 35% 40% Commercial Non-Direct Customers Channels 65% Leisure 60% Direct 46
Slide 47: Substantial and Diversified Licensee Revenue Stream
Substantial and Diversified Licensee Revenue Stream Locations in >180 Countries Licensee Revenue(a) Middle East Asia-Pacific $92 million Africa Europe Corporate Licensee Joint Venture 47 (a) Amount includes sublicensees within corporate countries but excludes Americas licensees and sublicensees
Slide 48: Strong International Volume Growth
Strong International Volume Growth International Rental Days Sources of Growth (in millions) Organic growth − Development of local markets 45.9 − Growing our loyalty base +26% Acquisitions 36.4 − Scandinavia, Poland and Portugal licensees − Maggiore Expansion of Budget brand − EMEA Budget revenue in
Slide 49: Revenue from Ancillaries has Grown Consistently
Revenue from Ancillaries has Grown Consistently Ancillary Revenue per Day Solid Growth Continues Introduced new products $12.50(a) and services Currency Impact − Wi-Fi +17% − Travel Partner concierge service $10.69 − Roadside assistance Improved training and sales culture − Trained over 5,000 operat
Slide 50: Fleet Costs have Declined Significantly
Fleet Costs have Declined Significantly Risk vs. Program Monthly Per-Unit Fleet Costs Risk 30% $289 70% Program (12%) $255 (a) Currency Impact Car Class Premium Small 15% 20% Van 14% 18% Mid-size 11% SUV 22% Full-size 2013 LTM 2016 Fleet diversity mitigates risk 50 (a) Excluding currency impacts
Slide 51: Increased Profitability Despite Currency Headwinds
Increased Profitability Despite Currency Headwinds Adjusted EBITDA Profitability Drivers ($ millions) Increased volumes $340 (a) − International volumes have increased over 25% Currency $71 Impact Controlled fleet costs +33% − Greater use of alternative $256 disposition channels Internal efficiencie
Slide 52: Agenda
Agenda The International Business Today Future International Opportunities Global Revenue Growth 52
Slide 53: Strong Execution Creates Opportunities
Strong Execution Creates Opportunities Brand Expansion Emerging Markets Growth Opportunities Internal Efficiencies 53
Slide 54: Expansion of Existing Brands Remains an Opportunity
BRAND EXPANSION Expansion of Existing Brands Remains an Opportunity Redesigned and expanded loyalty program Budget brand has strong penetration in Pacific region but remains under-represented in Europe Opportunity for Apex expansion in Asia-Pacific region Maggiore and France Cars offer complementary
Slide 55: Significant Opportunity for Zipcar Expansion
BRAND EXPANSION Significant Opportunity for Zipcar Expansion Zipcar now available in six international markets − Future expansions planned across EMEA and Asia-Pacific − Licensee model New Zipcar product offerings will open access to more potential expansion − Pilot of driver offering with Uber Mark
Slide 56: New Routes to Participate in the Asia Mobility Market
EMERGING MARKETS New Routes to Participate in the Asia Mobility Market Strategic partnership agreement signed with Didi Chuxing for outbound car rental Didi Chuxing is the world’s largest ride-hailing service in China with ~300 million registered users Complements Avis Budget Group’s domestic presen
Slide 57: Emerging Markets Can Accelerate Growth
EMERGING MARKETS Emerging Markets Can Accelerate Growth China India Expected to become the second Only global car rental company largest outbound car rental market directly operating in India Joint venture offers domestic International inbound leverages self-drive and chauffeur-drive global corporat
Slide 58: Continuous Drive for Efficiency and Standardization
INTERNAL EFFICIENCIES Continuous Drive for Efficiency and Standardization Internal Efficiencies Generating significant savings from Global Shared Service Centers in Budapest, Barcelona and Auckland Realizing Synergies Integration of tuck-in acquisitions (Maggiore, Scandinavia and Poland) is on track
Slide 59: Innovation and Digitalization of the Rental Experience
INTERNAL EFFICIENCIES Innovation and Digitalization of the Rental Experience Launched industry-first maintenance and damage mobile app Delivers complete transparency of maintenance and repair processes − Eliminate paperwork − Reduce out-of-service time − Optimize supply chain Designed to integrate w
Slide 60: Leveraging Technology to Drive Efficiencies
INTERNAL EFFICIENCIES Leveraging Technology to Drive Efficiencies 60
Slide 61: Agenda
Agenda The International Business Today Future International Opportunities Global Revenue Growth 61
Slide 62: An Evolved Strategy for an Evolving Landscape
An Evolved Strategy for an Evolving Landscape Driving Sustained, Profitable Growth 1. Win Customers 2. Increase Margins 3. Succeed in Mobility – Through differentiated – Via revenue, fleet and – Position ourselves in brands and products cost optimization evolving landscape Enablers 62
Slide 63: Several Areas of Focus to Increase Revenue and Margins
Several Areas of Focus to Increase Revenue and Margins Driving Profitable Revenue Growth 63
Slide 64: Global Expansion of our Demand-Fleet-Pricing System
D E M A N D - F L E E T- P R I C I N G Global Expansion of our Demand-Fleet-Pricing System Consistent, replicable strategy decisions Pricing Manager Focus on pricing strategy Fleet Longer demand visibility Optimizer Science-based pricing decisions Demand Faster speed-to-market Forecaster Better alig
Slide 65: Focus on Higher-Profit Channels and Segments
CHANNEL / SEGMENT MIX Focus on Higher-Profit Channels and Segments Dedicated revenue optimization team focused on highest margin opportunities − Upgraded analytics for measuring peak period performance International inbound Commercial vehicles Higher-Profit − Under-penetrated in EMEA, recent Channel
Slide 66: Digital Optimization Drives Higher Conversion Rates
D I G I TA L O P T I M I Z AT I O N Digital Optimization Drives Higher Conversion Rates Digital Capabilities We have invested significantly in our digital capability − Re-platformed UK and US websites >70 basis point increase in conversions − U.S. Avis mobile site pre-pay exceeding expectations Cust
Slide 67: Driving Higher Total Revenue per Day
TOTA L R E V E N U E P E R D AY Driving Higher Total Revenue per Day Sources of Growth Strategic Partnerships Increase Ancillary Revenue Portfolio Continued strategic Driving Higher partnership Pricing Variable insurance development pricing Inelastic customer Bundling demand Driving higher Brand tak
Slide 68: Putting the Customer First Drives Higher Share of Wallet
SHARE OF WALLET Putting the Customer First Drives Higher Share of Wallet Net Promoter Scores Putting the Customer First Utilizing technology to redefine the rental experience − Avis Now − E-Signature − Tablets to reduce wait times Investing in our people − Customer-led training, communication and re
Slide 69: Significant Opportunity for Margin Improvement
Significant Opportunity for Margin Improvement ($ millions) 13% - 15% $100-$150 Enhanced ~10% Operational Mobility Fleet Efficiencies Profitable Optimization Revenue Growth 2016 2021 Profitable revenue growth will contribute approximately a point of margin improvement 69
Slide 70: International – A Powerful Growth Driver
K E Y TA K E AWAY S International – A Powerful Growth Driver Proven track record of driving transformational change Global revenue growth provides significant opportunity for margin improvement Driving international growth through brand expansion, enhanced mobility and growing emerging markets 70
Slide 71: Joe Ferraro
Joe Ferraro President, Americas
Slide 72: Agenda
Agenda The Americas Business Today Optimizing Fleet Costs Driving Operational Efficiencies 72
Slide 73: A Leader in the Americas Vehicle Services Industry
A Leader in the Americas Vehicle Services Industry 6,700 24 101 385,000 Americas Vehicles million million Locations Transactions Rental Days $6.1 billion Annual Revenue 73 Note: Last 12 months as of September 2016
Slide 74: Diversified Revenue Sources
Diversified Revenue Sources 40% 25% Budget Off-Airport On-Airport vs. Brands Off-Airport 50% 75% Avis On-Airport 10% Zipcar/Other 45% 50% Commercial Direct Customers Channels 55% 50% Leisure Non-Direct 74
Slide 75: Steady Revenue Growth
Steady Revenue Growth Revenue Growth Drivers ($ billions) Increased volumes $6.1 − 7% organic growth +12% $5.5 Increased ancillary revenue − Greater training of sales staff − Expanded product portfolio Acquisitions − Payless − Budget Southern California 2013 LTM 2016 75
Slide 76: Fleet Costs have Remained Manageable
Fleet Costs have Remained Manageable Risk vs. Program Monthly Per-Unit Fleet Costs 33% Program $308 $297 4% 67% Risk (a) Car Class Premium Small 14% 14% Van 7% 18% Mid-size 28% 19% Full-size SUV 2013 LTM 2016 Our high-margin specialty and premium fleet has grown more than 15% since 2013 (a) 76 (a) U
Slide 77: Operational Efficiencies have Increased Profitability
Operational Efficiencies have Increased Profitability Adjusted EBITDA Profitability Drivers ($ millions) Increased revenue $642 − Americas volumes have grown significantly +15% $560 Controlled fleet costs − Greater use of alternative disposition channels − Increased utilization 60 bps Internal effic
Slide 78: Agenda
Agenda The Americas Business Today Optimizing Fleet Costs Driving Operational Efficiencies 78
Slide 79: An Evolved Strategy for an Evolving Landscape
An Evolved Strategy for an Evolving Landscape Driving Sustained, Profitable Growth 1. Win Customers 2. Increase Margins 3. Succeed in Mobility – Through differentiated – Via revenue, fleet and – Position ourselves in brands and products cost optimization evolving landscape Enablers 79
Slide 80: Optimizing Fleet Costs Will Drive Higher Margins
Optimizing Fleet Costs Will Drive Higher Margins Optimize Fleet Costs Dispose Utilize Acquire 80
Slide 81: Applying Sophisticated Decision Analysis to Fleet Acquisition
ACQUIRE Applying Sophisticated Decision Analysis to Fleet Acquisition Balance risk and program mix Optimize make, model and delivery-date decisions Buy vehicles with optimal trim levels that yield higher residual values Modeling expected lifecycle costs into acquisition decisions − Maintenance and d
Slide 82: Demand-Fleet-Pricing Will Drive Utilization Benefits
UTILIZE Demand-Fleet-Pricing Will Drive Utilization Benefits Demand-Fleet-Pricing Yield-Management System Pricing Manager Fleet Optimizer Demand Forecaster Expect to introduce the fleet optimizer into the Demand-Fleet-Pricing System next year 82
Slide 83: Leverage Technology to Optimize Utilization
UTILIZE Leverage Technology to Optimize Utilization Optimize Utilization Fleet sharing / cascading On- vs. off-airport Holding periods $ Seasonality trends Minimize high-mileage rentals 83
Slide 84: Expertise in Vehicle Life Cycle Management
UTILIZE Expertise in Vehicle Life Cycle Management Vehicle Life Cycle Purchase vehicle Registration Inspection Delivery Utilize Cleaning Maintenance Repairs Prepare for sale Dispose Maintenance and damages are the second-largest fleet related expense 84
Slide 85: Expanding Use of Alternative Disposition Channels
DISPOSE Expanding Use of Alternative Disposition Channels Alternative Disposition Channels Opportunities (% of risk vehicle sales) Grow direct-to-consumer sales − Opened first retail lot in Florida >50% − Expand Ultimate Test Drive Continue to expand 37% direct-to-dealer network Alternative Channel
Slide 86: Agenda
Agenda The Americas Business Today Optimizing Fleet Costs Driving Operational Efficiencies 86
Slide 87: Driving Operational Efficiencies to Spur Margin Growth
Driving Operational Efficiencies to Spur Margin Growth Driving Operational Efficiencies Procurement Global Shared Supply Services Manpower Shuttling Chain Planning Performance Excellence 87
Slide 88: Utilize Technology to Reduce Manpower Costs
MANPOWER PLANNING Utilize Technology to Reduce Manpower Costs Labor Process Forecasting Scheduling Labor Mix Management Minimize non- Optimize key drivers Align to demand Optimize part-time Increase productivity customer-facing time of labor hours peaks and valleys labor through Automate and Reduce
Slide 89: Utilize Rule-Based Shuttling Decision Matrix to Maximize Revenue per Transaction
SHUTTLING Utilize Rule-Based Shuttling Decision Matrix to Maximize Revenue per Transaction Revenue per Revenue per Transaction Transaction ($) ($) High High SHUTTLE Low Low DO NOT SHUTTLE Low Close Utilization Distance (%) (Miles) Far High Utilize technology to optimize fleet movement decisions 89
Slide 90: Utilize Connected Car Technology to Maximize Asset Efficiency
S U P P LY C H A I N Utilize Connected Car Technology to Maximize Asset Efficiency Leverage connected car technology and organizational experience to… Benefits Include Near term Supply chain process Improve asset controls Vehicle recovery process Long term Service automation Improved predictive anal
Slide 91: Substantial Opportunity to Leverage Global Scale to Drive Savings
GLOBAL SHARED SERVICES Substantial Opportunity to Leverage Global Scale to Drive Savings Customer experience Yield-management Fleet optimization Supply chain Fleet purchases Procurement Marketing General and administrative functions 91
Slide 92: Optimize Procurement Process to Realize Savings
PROCUREMENT Optimize Procurement Process to Realize Savings 1. Focused 2. Utilization of expertise technology Savings 5. Create sustainability 3. Strategic and continued sourcing improvement 4. Vendor management 92
Slide 93: Performance Excellence Underpins and Enhances Operational Efficiencies
PERFORMANCE EXCELLENCE Performance Excellence Underpins and Enhances Operational Efficiencies Keys to Success Idea Generation Data Analytics Strong business partnership − Works closely with in-house business leaders Data analytics Strategic Business Alignment Partnership Model − Lean Six Sigma Black
Slide 94: Significant Opportunity for Margin Growth
Significant Opportunity for Margin Growth ($ millions) 13% - 15% $125-$175 $75-$125 Enhanced ~10% Operational Mobility Fleet Efficiencies Profitable Optimization Revenue Growth 2016 2021 Improved fleet and operational efficiencies will contribute significantly to margin improvement 94
Slide 95: Laser-Focused on Reducing Costs and Driving Margin Improvement
K E Y TA K E AWAY S Laser-Focused on Reducing Costs and Driving Margin Improvement Industry leader in the car rental and car sharing markets Fleet optimization provides significant margin opportunity Operational efficiencies will drive significant cost savings Enablers to execution are innovation, t
Slide 96: David Wyshner
David Wyshner President and Chief Financial Officer
Slide 97: Agenda
Agenda The Business Today Free Cash Flow and Balance Sheet Margin Growth Opportunity Going Forward 97
Slide 98: A Global Leader in the Vehicle Services Industry
A Global Leader in the Vehicle Services Industry 11,000 33 147 560,000 Locations Vehicles million million Worldwide Transactions Rental Days $8.7 billion Annual Revenue 98 Note: Last 12 months as of September 2016
Slide 99: Attractive Financial Model Drives Powerful Cash Flow
Attractive Financial Model Drives Powerful Cash Flow 1. Diversified 2. Highly variable revenue sources cost structure $2 billion free cash flow over the 5. Investing for last four years 3. Focused growth and on margin profitability expansion 4. Delivering powerful free cash flow 99
Slide 100: 1. Diversified Revenue Sources
1. Diversified Revenue Sources 30% 30% Off-Airport Budget On-Airport vs. Brands Off-Airport 60% 70% 10% Avis On-Airport Zipcar/Other 30% International 40% Commercial Customers Regions 60% 70% Leisure Americas 100
Slide 101: 2. Highly Variable Cost Structure
2. Highly Variable Cost Structure... 25% 75% 100% 25% Fixed Variable Variable Variable Direct Fleet SG&A Operating Costs Costs Costs 75% Fixed 25% Overall 75% Fixed Costs Variable 101
Slide 102: Where Core Drivers have Significant Effects on Results
... Where Core Drivers have Significant Effects on Results Adjusted EBITDA Impact of a 1% Change in Driver ($ millions) Average Daily Per-Unit Rate Rental Days Utilization Fleet Costs $37 $16 $16 $13 $14 $8 $5 $5 Americas International 102
Slide 103: 3. Focused on Margin Expansion
3. Focused on Margin Expansion Key Drivers of Recent Adjusted EBITDA Margin Margin Improvement Revenue initiatives 9.7% − Car-class mix 180 − Ancillary revenues bps 7.9% Fleet optimization − Timing of purchases and sales − Alternative disposition channels Internal efficiencies − Performance excellen
Slide 104: 4. Delivering Powerful Free Cash Flow
4. Delivering Powerful Free Cash Flow Free Cash Flow ($ millions) $518 $525 (a) $460 $456 $450-$500 2012 2013 2014 2015 2016E Cash flow has been stable and recurring Note: Free Cash Flow is after non-fleet capital expenditures (re-investing in our business) 104 (a) Absent any significant timing diff
Slide 105: 5. Investing for Growth and Profitability
5. Investing for Growth and Profitability IT Capital Expenditures Key Examples ($ millions) $145 New websites and mobile apps Demand-Fleet-Pricing yield management +215% Wizard modernization Fleet optimization $46 Zipcar 2012 2016E 105
Slide 106: Strategic P&L Investments in 2016
Strategic P&L Investments in 2016 Brand Avis Zipcar Shuttling Emerging marketing Now expansion efficiency markets $50 million of incremental investment 106
Slide 107: Agenda
Agenda The Business Today Free Cash Flow and Balance Sheet Margin Growth Opportunity Going Forward 107
Slide 108: A Powerful Free Cash Flow Engine
A Powerful Free Cash Flow Engine Free Cash Flow $2.4 Billion since 2012 Share Repurchases Tuck-In Acquisitions $1.4 billion of cash $1.3 billion of acquisitions (a) distributed since 2012 since 2012 LICENSEES LICENSEES Mix will depend on available opportunities (a) Including $348 million of converti
Slide 109: Principled Allocation of Capital
Principled Allocation of Capital Maintain • Preserve liquidity and manage leverage Healthy, Efficient • Maintain flexibility to invest in growth Balance Sheet • Organic opportunities Invest for • Investing in technology and innovation Growth • Tuck-in acquisitions Return Capital • Repurchase shares
Slide 110: Corporate Leverage in Line with Our Target
M A I N T A I N H E A L T H Y, E F F I C I E N T B A L A N C E S H E E T Corporate Leverage in Line with Our Target Net Leverage(a) 4.0x 3.5x 3.4x Target Range 3.0x 2.0x 1.0x December September 2013 2016 110 (a) Net corporate debt divided by LTM Adjusted EBITDA
Slide 111: Minimal Corporate Debt Maturities until 2022
M A I N T A I N H E A L T H Y, E F F I C I E N T B A L A N C E S H E E T Minimal Corporate Debt Maturities until 2022 Corporate Debt Maturities ($ millions) $1,225 $400 $675 $685 €300 $825 $375 $250 €175 $145 $350 2017 2018 2019 2020 2021 2022 2023 2024 2025 Senior Notes Term Loans 111 As of October
Slide 112: Investing in our Business through the P&L Beyond 2016
INVEST FOR GROWTH Investing in our Business through the P&L Beyond 2016 Driving Emerging Connected Brand Zipcar internal market car marketing expansion efficiencies expansion Investment 2017 and beyond 112
Slide 113: Investing in Technology and Innovation
INVEST FOR GROWTH Investing in Technology and Innovation New Digital Customer Pronto Rental New Mobile Pricing Infrastructure Platform Data Hub Agent Tablet App Apps Modernization Rationalization EMEA Digital Graphical Maintenance Demand- Enhanced Business Telecom Platform Licensee User Interface &
Slide 114: Significantly Reducing Share Count through Repurchases
R E T U R N C A P I TA L TO S H A R E H O L D E R S Significantly Reducing Share Count through Repurchases Diluted Shares Outstanding (a) (in millions) 128.9 (29%) Diluted share count at 91.8 year-end expected to be around 89 million Third Quarter Third Quarter 2011 2016 114 (a) Assumes $370 million
Slide 115: Agenda
Agenda The Business Today Free Cash Flow and Balance Sheet Margin Growth Opportunity Going Forward 115
Slide 116: An Evolved Strategy for an Evolving Landscape
An Evolved Strategy for an Evolving Landscape Driving Sustained, Profitable Growth 1. Win Customers 2. Increase Margins 3. Succeed in Mobility – Through differentiated – Via revenue, fleet and – Position ourselves in brands and products cost optimization evolving landscape Enablers 116
Slide 117: Focused on Delivering Margin Growth Opportunities of $350 to $550 Million
Focused on Delivering Margin Growth Opportunities of $350 to $550 Million Enhanced Operational Mobility Profitable Fleet Efficiencies Revenue Optimization Growth $50 - $100+ $125 - $175 million $75 - $125 million $100 - $150 million million $350 to $550 million opportunity over the next five years 1
Slide 118: Profitable Revenue Growth
Profitable Revenue Growth Key Initiatives Demand-Fleet-Pricing yield management More direct bookings, fewer intermediaries − Pre-paid rentals Digital revenue optimization Ancillary revenue growth Profitable Revenue Growth Cross-border volume growth $100 - $150 Customer relationship management millio
Slide 119: Fleet Optimization
Fleet Optimization Key Initiatives Fleet optimization − Manufacturer − Model − Trim level − Delivery date − Program vs. risk Fleet − Car class mix Optimization − Diversity vs. concentration $75 - $125 − Hold period million Fleet disposition − Timing − Location − Reconditioning − Disposition channel
Slide 120: Operational Efficiencies
Operational Efficiencies Key Initiatives Manpower planning and rationalization Shuttling efficiency “Supply chain” (maintenance and repair optimization) Damage recoveries and liability reductions Operational Efficiencies Process improvement $125 - $175 − Performance excellence million − Shared servi
Slide 121: Enhanced Mobility
Enhanced Mobility Key Initiatives Avis Now − Current version − Enhancements Zipcar − Continued member growth Enhanced − Geographic expansion Mobility − New services • ONE>WAY $50 - $100+ million • “Floating” Potential partnerships Connected car Emerging markets 121
Slide 122: Laser-Focused on Delivering Results
Laser-Focused on Delivering Results Customer-centric Capable, devoted resources Clearly articulated deliverables Results “Don’t bet the farm” – pilot aggressively Willingness to course-correct and adjust Relentless focus on execution 122
Slide 123: Significant Opportunity for Margin Growth
Significant Opportunity for Margin Growth ($ millions) 13% - 15% $50-$100+ $125-$175 $75-$125 $100-$150 ~10% Enhanced Operational Mobility Fleet Efficiencies Profitable Optimization Revenue Growth 2016E 2021 Targeting $350 to $550 million of increased profitability over the next five years 123
Slide 124: Agenda
Agenda The Business Today Free Cash Flow and Balance Sheet Margin Growth Opportunity Going Forward 124
Slide 125: Providing a Superior Customer Experience
Providing a Superior Customer Experience Reservation Pick-up Rental Drop-off Post-Rental Research journey Pre-rental In-journey services Return vehicle Billing Reserve check-in including: Inspect vehicle Damages transportation Confirmation • Navigation Feedback and Exchange • Fuel resolution Upgrade
Slide 126: Leveraging Unparalleled Capabilities in Managing Global Fleets
Leveraging Unparalleled Capabilities in Managing Global Fleets Purchase In-Fleet Utilize Maintain De-Fleet Purchase vehicle Registration Connect vehicle Cleaning Update inventory Finance vehicle Create inventory with renter Scheduled Prepare vehicle Pre-delivery Optimize usage maintenance for sale i
Slide 127: Avis Budget Group is Driving Aggressively for Future Success
Avis Budget Group is Driving Aggressively for Future Success Global leader in vehicle Leadership rental services Targeting 13% - 15% Focused on brands, Strategy margins margins and mobility within five years Significant free cash flow Cash Flow funding substantial share repurchases 127
Slide 128: Avis Budget Group 2016 Investor Day
Avis Budget Group 2016 Investor Day
Slide 129: Glossary
Glossary Adjusted EBITDA Adjusted EBITDA represents income from continuing operations before non-vehicle related depreciation and amortization, any impairment charge, restructuring expense, early extinguishment of debt costs, non-vehicle related interest, transaction-related costs and income taxes.
Slide 130: Glossary
Glossary Reconciliation of Net Corporate Debt (in millions): December 31, September 30, 2013 2016 Corporate debt $ 3,394 $ 3,866 Less: Cash and cash equivalents 693 985 Net corporate debt $ 2,701 $ 2,881 Free Cash Flow Represents Net Cash Provided by Operating Activities adjusted to reflect the cash