Avis Budget Group Reports Positive Earnings and Removes an Additional $1 Billion of Expenses in Third Quarter

PARSIPPANY, N.J., Oct. 29, 2020 (GLOBE NEWSWIRE) -- Avis Budget Group, Inc. (NASDAQ: CAR) today announced third quarter 2020 financial results, with Net income of $45 million and Adjusted net income of $79 million.

Despite revenue being down 44% compared to the same period in the prior year, we achieved positive Adjusted EBITDA of $220 million in the third quarter through cost removal actions and sizing fleet to demand by selling over 100,000 vehicles globally. During the quarter we removed approximately $1 billion of costs, bringing the total to $2 billion year to date, and we are now on track to deliver more than $2.5 billion of cost removal for the full year. 

We generated positive cash flow from operations and from Adjusted Free Cash flow in the quarter by implementing aggressive cost saving actions, taking advantage of sequential improvement in rental demand, and right-sizing our vehicle fleet. This resulted in our liquidity position at the end of the quarter to be $2.4 billion. Given the current operating environment, we believe our liquidity position is now robust enough to return the excess equity that we accessed earlier in the year back into our ABS facilities. This will position us to fund the purchase of our 2021 fleet appropriately.

We took advantage of a strong used vehicle market globally exceeding the prior year's vehicle dispositions by 50%. Fleet for the quarter was down 29% year-over-year with global utilization peaking in the 70% range, further demonstrating our ability to flex our fleet size up or down even during disruptive market conditions.

“We remain focused on what we can control. We have removed more than $2 billion of cost globally throughout the year, with more expected to come in the fourth quarter,” said Joe Ferraro, Avis Budget Group Chief Executive Officer. “Those cost removals along with our demonstrated history of aligning our fleet with demand allowed us to achieve both strong positive Adjusted EBITDA and Adjusted Free Cash Flow, despite these difficult times.”

Q3 Highlights

  • We continued to reduce our cost base to match current revenue trends, removing another $1 billion of costs. We have removed more than $2 billion of costs since implementing our cost saving actions earlier this year.
  • We profitably disposed of 75,000 vehicles in the U.S., including a record 49,000 vehicles sold through alternative channels.
  • We completed a senior notes offering of $350 million, and used the proceeds to pay off $100 million of existing notes and provide additional liquidity. We also completed an offering of $650 million of asset-backed securities for a weighted average interest rate of 2.28%, our lowest rate since 2013 for our fleet financing.
  • We continued our Avis Safety Pledge and Budget Worry-Free Promise to keep our customers and employees safe. We have expanded our partnerships to enhance the cleanliness and disinfection of our rental facilities and vehicles.
  • We continue to expand contactless rentals for our Avis Preferred customers through the use of our app, which also enhances the rental experience.

Outlook

We are a seasonal business and anticipate normal fourth quarter seasonal declines in demand as we move from the peak summer period to the shoulder fall and winter period. Although we believe the travel environment will remain challenged, we still expect to be Adjusted EBITDA and Adjusted Free Cash Flow positive excluding the return of vehicle equity for the fourth quarter.

Investor Conference Call

We will host a conference call to discuss third quarter results on October 30, 2020, at 8:30 a.m. (ET). Investors may access the call at ir.avisbudgetgroup.com or by dialing (877) 407-2991 and a replay will available on our website and at (877) 660-6853 using conference code 13711168.

About Avis Budget Group

Avis Budget Group, Inc. is a leading global provider of mobility solutions, both through its Avis and Budget brands, which have more than 11,000 rental locations in approximately 180 countries around the world, and through its Zipcar brand, which is the world's leading car sharing network with more than one million members. Avis Budget Group operates most of its car rental offices in North America, Europe and Australasia directly, and operates primarily through licensees in other parts of the world. Avis Budget Group is headquartered in Parsippany, N.J. More information is available at avisbudgetgroup.com.

Forward-Looking Statements

Certain statements in this press release constitute “forward-looking statements.” Any statements that refer to outlook, expectations or other characterizations of future events, circumstances or results, including all statements related to our future results, impact from the COVID-19 outbreak, cost-saving actions, and cash flows are forward-looking statements. Various risks that could cause future results to differ from those expressed by the forward-looking statements included in this press release include, but are not limited to, the severity and duration of the COVID-19 outbreak and resulting economic conditions and related restrictions, the high level of competition in the mobility industry, changes in our fleet costs, including as a result of a change in the cost of new vehicles, manufacturer recalls and/or the value of used vehicles, disruption in the supply of new vehicles, disposition of vehicles not covered by manufacturer repurchase programs, our ability to realize our estimated cost savings on a timely basis, or at all, the financial condition of the manufacturers that supply our rental vehicles which could affect their ability to perform their obligations under our repurchase and/or guaranteed depreciation arrangements, any further deterioration in economic conditions generally, particularly during our peak season and/or in key market segments, any further deterioration in travel demand, including airline passenger traffic, any occurrence or threat of terrorism, the current and any future pandemic diseases or other natural disasters, any changes to the cost or supply of fuel, risks related to acquisitions or integration of acquired businesses, risks associated with litigation, governmental or regulatory inquiries or investigations, risks related to the security of our information technology systems, disruptions in our communication networks, changes in tax or other regulations, a significant increase in interest rates or borrowing costs, our ability to obtain financing for our global operations, including the funding of our vehicle fleet via asset-backed securities markets, any fluctuations related to the mark-to-market of derivatives which hedge our exposure to exchange rates, interest rates and fuel costs, our ability to meet the covenants contained in the agreements governing our indebtedness, and our ability to accurately estimate our future results and implement our cost savings actions. Other unknown or unpredictable factors could also have material adverse effects on the Company’s performance or achievements. Important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements are specified in Avis Budget Group’s Annual Report on Form 10-K for the year ended December 31, 2019 and Quarterly Report on Form 10-Q for the three and six months ended June 30, 2020 and in other filings and furnishings made by the Company with the Securities and Exchange Commission (the "SEC") from time to time. The Company undertakes no obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances.

Non-GAAP Financial Measures and Key Metrics

This release, including the Outlook section, includes financial measures such as Adjusted EBITDA, Adjusted Net Income and Adjusted Free Cash Flow, as well as other financial measures that are not considered generally accepted accounting principles (“GAAP”) measures as defined under SEC rules. Important information regarding such measures is contained in the financial tables to this release and in Appendix I, including the definitions of these measures and reconciliations to the closest comparable GAAP measures. The Company and its management believe that these non-GAAP measures are useful to investors in measuring the comparable results of the Company period-over-period. The GAAP measures most directly comparable to Adjusted EBITDA, Adjusted Free Cash Flow, Adjusted pretax income (loss), Adjusted net income (loss) and Adjusted diluted earnings (loss) per share are net income (loss), net cash provided by operating activities, income (loss) before income taxes, net income (loss) and diluted earnings (loss) per share, respectively. The Company believes it is impracticable to provide a reconciliation to the most comparable GAAP measures for the fourth quarter due to the degree of uncertainty associated with forecasting the reconciling items and amounts. Foreign currency translation effects on the Company’s results are quantified by translating the current period’s non-U.S. dollar-denominated results using the currency exchange rates of the prior period of comparison including any related gains and losses on currency hedges. Per-unit fleet costs, which represent vehicle depreciation, lease charges and gain or loss on vehicle sales, divided by average rental fleet, are calculated on a per-month basis.

Contact
David Calabria
IR@avisbudget.com
PR@avisbudget.com

 


Tables Follow


Table 1

Avis Budget Group, Inc.
SUMMARY DATA SHEET
(In millions, except per share data)

                      
 Three Months Ended September 30,  Nine Months Ended September 30,
 2020 2019 % Change 2020 2019 % Change
Income Statement and Other Items            
Revenues$1,534  $2,753  (44)% $4,047  $7,010  (42)%
Income (loss) before income taxes53  328  (84)% (821) 273  n/m
Net income (loss)45  189  (76)% (594) 160  n/m
Earnings (loss) per share - diluted0.63  2.50  (75)% (8.40) 2.10  n/m
              
Adjusted Earnings Measures (non-GAAP) (A)             
Adjusted EBITDA220  471  (53)% (249) 645  n/m
Adjusted pretax income (loss)99  373  (73)% (580) 355  n/m
Adjusted net income (loss)79  223  (65)% (412) 225  n/m
Adjusted earnings (loss) per share - diluted1.13  2.96  (62)% (5.83) 2.95  n/m
             
 As of         
 September 30, 2020 December 31, 2019         
Balance Sheet Items            
Cash and cash equivalents$1,564  $686          
Vehicles, net8,780  12,177          
Debt under vehicle programs8,339  11,068          
Corporate debt4,164  3,435          
Stockholders' equity(76) 656          
               


Segment Results                     
 Three Months Ended September 30,  Nine Months Ended September 30, 
 2020 2019 % Change 2020 2019 % Change
Revenues             
Americas$1,114  $1,868  (40)% $2,936  $4,822  (39)%
International420  885  (53)% 1,111  2,188  (49)%
Corporate and Other    n/m     n/m
Total Company$1,534  $2,753  (44)% $4,047  $7,010  (42)%
              
Adjusted EBITDA             
Americas$222  $321  (31)% $(41) $508  n/m
International6  169  (96)% (174) 187  n/m
Corporate and Other(8) (19) n/m (34) (50) n/m
Total Company$220  $471  (53)% $(249) $645  n/m


  
n/mNot meaningful.
(A)See Table 5 for reconciliations of non-GAAP measures and Appendix I for definitions.
  

Table 2

Avis Budget Group, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)

 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2020 2019 2020 2019
Revenues$1,534  $2,753  $4,047  $7,010 
        
Expenses       
Operating825  1,291  2,505  3,534 
Vehicle depreciation and lease charges, net256  551  1,089  1,579 
Selling, general and administrative166  350  549  947 
Vehicle interest, net77  90  247  261 
Non-vehicle related depreciation and amortization74  62  214  195 
Interest expense related to corporate debt, net:       
Interest expense64  49  163  139 
Early extinguishment of debt2  10  9  10 
Restructuring and other related charges17  22  89  66 
Transaction-related costs, net    3  6 
Total expenses1,481  2,425  4,868  6,737 
        
Income (loss) before income taxes53  328  (821) 273 
Provision for (benefit from) income taxes8  139  (227) 113 
Net income (loss)$45  $189  $(594) $160 
        
Earnings (loss) per share - diluted       
Basic$0.64  $2.52  $(8.40) $2.12 
Diluted$0.63  $2.50  $(8.40) $2.10 
        
Weighted average shares outstanding       
Basic69.7  75.2  70.8  75.6 
Diluted70.2  75.7  70.8  76.2 
            

Table 3

Avis Budget Group, Inc.
KEY METRICS SUMMARY

 Three Months Ended September 30,
 Nine Months Ended September 30,
 2020 2019 % Change 2020 2019 % Change
              
Americas             
              
Rental Days (000’s)19,289  31,374  (39)% 54,715  85,249  (36)%
Revenue per Day, excluding exchange rate effects (A)$57.82  $59.56  (3)% $53.70  $56.57  (5)%
Average Rental Fleet362,192  469,863  (23)% 392,737  440,493  (11)%
Vehicle Utilization57.9% 72.6% (14.7) pps 50.8% 70.9% (20.1) pps
Per-Unit Fleet Costs per Month, excluding exchange rate effects (A)$152  $267  (43)% $217  $283  (23)%
              
International             
              
Rental Days (000’s)9,542  18,056  (47)% 26,633  45,389  (41)%
Revenue per Day, excluding exchange rate effects (A)$42.22  $49.04  (14)% $42.11  $48.20  (13)%
Average Rental Fleet154,781  263,420  (41)% 170,632  229,892  (26)%
Vehicle Utilization67.0% 74.5% (7.5) pps 57.0% 72.3% (15.3) pps
Per-Unit Fleet Costs per Month, excluding exchange rate effects (A)$187  $222  (16)% $213  $221  (4)%
              
Total             
              
Rental Days (000’s)28,831  49,430  (42)% 81,348  130,638  (38)%
Revenue per Day, excluding exchange rate effects (A)$52.66  $55.71  (5)% $49.90  $53.66  (7)%
Average Rental Fleet516,973  733,283  (29)% 563,369  670,385  (16)%
Vehicle Utilization60.6% 73.3% (12.7) pps 52.7% 71.4% (18.7) pps
Per-Unit Fleet Costs per Month, excluding exchange rate effects (A)$163  $251  (35)% $216  $262  (18)%
_________                 
                  
Refer to Table 6 for key metrics calculations and Appendix I for key metrics definitions.
(A) The following metrics include changes in currency exchange rates:
              
 Three Months Ended September 30,
 Nine Months Ended September 30,
 2020 2019 % Change 2020 2019 % Change
              
Americas             
              
Revenue per Day$57.79  $59.56  (3)% $53.67  $56.57  (5)%
Per-Unit Fleet Costs per Month$152  $267  (43)% $217  $283  (23)%
              
International             
              
Revenue per Day$43.98  $49.04  (10)% $41.70  $48.20  (13)%
Per-Unit Fleet Costs per Month$195  $222  (12)% $210  $221  (5)%
              
Total             
              
Revenue per Day$53.22  $55.71  (4)% $49.75  $53.66  (7)%
Per-Unit Fleet Costs per Month$165  $251  (34)% $215  $262  (18)%
                      

Table 4 (page 1 of 2)

Avis Budget Group, Inc.
CONSOLIDATED CONDENSED SCHEDULES OF CASH FLOWS AND ADJUSTED FREE CASH FLOWS
(In millions)

CONSOLIDATED CONDENSED SCHEDULE OF CASH FLOWS

 Nine Months Ended
September 30, 2020
Operating Activities 
Net cash provided by operating activities$632 
  
Investing Activities 
Net cash used in investing activities exclusive of vehicle programs$(133)
Net cash provided by investing activities of vehicle programs2,616 
Net cash provided by investing activities$2,483 
  
Financing Activities 
Net cash provided by financing activities exclusive of vehicle programs$560 
Net cash used in financing activities of vehicle programs(2,943)
Net cash used in financing activities$(2,383)
  
Effect of changes in exchange rates on cash and cash equivalents, program and restricted cash28 
Net change in cash and cash equivalents, program and restricted cash760 
Cash and cash equivalents, program and restricted cash, beginning of period (A)900 
Cash and cash equivalents, program and restricted cash, end of period (B)$1,660 
    

CONSOLIDATED SCHEDULE OF ADJUSTED FREE CASH FLOWS (C)

 Nine Months Ended
September 30, 2020
Loss before income taxes$(821)
Add-back of non-vehicle related depreciation and amortization214 
Add-back of debt extinguishment costs9 
Add-back of restructuring and other related costs89 
Add-back of non-operational charges related to shareholder activist activity4 
Add-back of transaction-related costs3 
Add-back of COVID-19 charges90 
Working capital and other111 
Capital expenditures (D)(99)
Tax payments, net of refunds(12)
Vehicle programs and related (E)838 
Adjusted free cash flow$426 
  
Acquisition and related payments, net of acquired cash (F)$(42)
Borrowings, net of debt repayments688 
Restructuring and other related payments(86)
Transaction-related payments(3)
Non-operational payments related to shareholder activist activity(5)
Issuance of common stock15 
Repurchases of common stock(119)
Change in program cash(116)
Change in restricted cash(2)
Foreign exchange effects, financing costs and other4 
Net change in cash and cash equivalents, program and restricted cash (per above)$760 
    

Table 4 (page 2 of 2)

RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO ADJUSTED FREE CASH FLOW

 Nine Months Ended
September 30, 2020
Net cash provided by operating activities (per above)$632 
Investing activities of vehicle programs2,616 
Financing activities of vehicle programs(2,943)
Capital expenditures(75)
Proceeds received on sale of assets and nonmarketable equity securities5 
Change in program cash116 
Change in restricted cash2 
Acquisition and disposition-related payments(21)
Non-operational payments related to shareholder activist activity5 
Restructuring and other related payments86 
Transaction-related payments3 
Adjusted free cash flow (per above)$426 
    


   
   
(A)Consists of cash and cash equivalents of $686 million, program cash of $211 million and restricted cash of $3 million.
(B)Consists of cash and cash equivalents of $1,564 million, program cash of $94 million and restricted cash of $2 million.
(C)See Appendix I for the definition of Adjusted free cash flow.
(D)Includes $24 million of cloud computing implementation costs.
(E)Includes vehicle-backed borrowings (repayments) that are incremental to amounts required to fund incremental (reduced) vehicle and vehicle-related assets.
(F)Excludes $21 million of vehicles purchased as a part of North America licensee acquisitions, which were financed through incremental vehicle-backed borrowings.
  

Table 5 (page 1 of 2)

Avis Budget Group, Inc.
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP MEASURES
(In millions, except per share data)

The accompanying press release includes certain non-GAAP (generally accepted accounting principles) financial measures as defined under SEC rules. To the extent not provided in the press release or accompanying tables, we have provided the reasons we present these non-GAAP financial measures and a description of what they represent in Appendix I. For each non-GAAP financial measure a reconciliation to the most comparable GAAP financial measure is calculated and presented below with reconciliations of net income (loss), income (loss) before income taxes and diluted earnings (loss) per share to Adjusted EBITDA and our Adjusted earnings measures.

  Three Months Ended September 30,
Reconciliation of net income to Adjusted EBITDA:2020 2019
    
Net income$45  $189 
Provision for income taxes8  139 
Income before income taxes53  328 
     
Add certain items:   
 Restructuring and other related charges17  22 
 Acquisition-related amortization expense17  13 
 COVID-19 charges (A)10   
 Early extinguishment of debt2  10 
Adjusted pretax income99  373 
    
Add:Non-vehicle related depreciation and amortization (excluding acquisition-related amortization expense)57  49 
Interest expense related to corporate debt, net (excluding early extinguishment of debt)64  49 
Adjusted EBITDA$220  $471 
     
Reconciliation of net income to adjusted net income:   
     
Net income$45  $189 
Add certain items, net of tax:   
 Restructuring and other related charges14  17 
 Acquisition-related amortization expense12  10 
 COVID-19 charges7   
 Early extinguishment of debt1  7 
Adjusted net income$79  $223 
     
Earnings per share - diluted$0.63  $2.50 
     
Adjusted diluted earnings per share$1.13  $2.96 
     
Shares used to calculate Adjusted diluted earnings per share70.2  75.7 


_______ 
(A)For three months ended September 30, 2020 consists of $8 million within operating expenses, $1 million within selling, general and administrative expenses and $1 million within vehicle depreciation and lease charges, net in our Consolidated Statements of Operations. Primarily consisting of $18 million of incremental cleaning supplies to sanitize vehicles and facilities, and overflow parking for idle vehicles and related shuttling costs, $11 million of minimum annual guaranteed rent in excess of concession fees and $(19) million associated with vehicles damaged in overflow parking lots, net of insurance proceeds.
  

Table 5 (page 2 of 2)

  Nine Months Ended September 30,
Reconciliation of net income (loss) to Adjusted EBITDA:2020 2019
    
Net income (loss)$(594) $160 
Provision for (benefit from) income taxes(227) 113 
Income (loss) before income taxes(821) 273 
     
Add certain items:   
 COVID-19 charges (A)90   
 Restructuring and other related charges89  66 
 Acquisition-related amortization expense46  44 
 Early extinguishment of debt9  10 
 Non-operational charges related to shareholder activist activity (B)4   
 Transaction-related costs, net3  6 
 Gain on sale of equity method investment in China (C)  (44)
Adjusted pretax income (loss)(580) 355 
    
Add:Non-vehicle related depreciation and amortization (excluding acquisition-related amortization expense)168  151 
Interest expense related to corporate debt, net (excluding early extinguishment of debt)163  139 
Adjusted EBITDA$(249) $645 
     
Reconciliation of net income (loss) to adjusted net income (loss):   
     
Net income (loss)$(594) $160 
Add certain items, net of tax:   
 COVID-19 charges67   
 Restructuring and other related charges69  51 
 Acquisition-related amortization expense34  32 
 Early extinguishment of debt7  7 
 Non-operational charges related to shareholder activist activity3   
 Transaction-related costs, net2  5 
 Gain on sale of equity method investment in China  (30)
Adjusted net income (loss)$(412) $225 
     
Earnings (loss) per share - diluted$(8.40) $2.10 
     
Adjusted diluted earnings (loss) per share$(5.83) $2.95 
     
Shares used to calculate Adjusted diluted earnings (loss) per share70.8  76.2 


_______ 
(A)For nine months ended September 30, 2020 consists of $87 million within operating expenses, $2 million within selling, general and administrative expenses and $1 million within vehicle depreciation and lease charges, net in our Consolidated Statements of Operations. Primarily consisting of $41 million of minimum annual guaranteed rent in excess of concession fees, $35 million of incremental cleaning supplies to sanitize vehicles and facilities, and overflow parking for idle vehicles and related shuttling costs and $14 million of losses associated with vehicles damaged in overflow parking lots, net of insurance proceeds.
(B)Reported within selling, general and administrative expenses in our Consolidated Statements of Operations.
(C)Reported within operating expenses in our Consolidated Statements of Operations.
  

Table 6

Avis Budget Group, Inc.
KEY METRICS CALCULATIONS
($ in millions, except as noted)

 Three Months Ended September 30, 2020
 Three Months Ended September 30, 2019
 Americas International Total Americas International Total
Revenue per Day (RPD)                 
Revenue$1,114  $420  $1,534  $1,868  $885  $2,753 
Currency exchange rate effects2  (17) (15)      
Revenue excluding exchange rate effects1,116  403  1,519  1,868  885  2,753 
Rental days (000's)19,289  9,542  28,831  31,374  18,056  49,430 
RPD excluding exchange rate effects (in $'s)$57.82  $42.22  $52.66  $59.56  $49.04  $55.71 
                  
Vehicle Utilization                 
Rental days (000's)19,289  9,542  28,831  31,374  18,056  49,430 
Average rental fleet362,192  154,781  516,973  469,863  263,420  733,283 
Number of days in period92  92  92  92  92  92 
Available rental days (000's)33,322  14,240  47,562  43,227  24,235  67,462 
Vehicle utilization57.9% 67.0% 60.6% 72.6% 74.5% 73.3%
                  
Per-Unit Fleet Costs                 
Vehicle depreciation and lease charges, net$166  $90  $256  $376  $175  $551 
Currency exchange rate effects(1) (3) (4)      
 $165  $87  $252  $376  $175  $551 
Average rental fleet362,192  154,781  516,973  469,863  263,420  733,283 
Per-unit fleet costs (in $'s)$456  $562  $488  $801  $666  $752 
Number of months in period3  3  3  3  3  3 
Per-unit fleet costs per month excluding exchange rate effects (in $'s)$152  $187  $163  $267  $222  $251 
                  


 Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019
 Americas International Total Americas International Total
Revenue per Day (RPD)           
Revenue$2,936  $1,111  $4,047  $4,822  $2,188  $7,010 
Currency exchange rate effects2  11  13       
Revenue excluding exchange rate effects2,938  1,122  4,060  4,822  2,188  7,010 
Rental days (000's)54,715  26,633  81,348  85,249  45,389  130,638 
RPD excluding exchange rate effects (in $'s)$53.70  $42.11  $49.90  $56.57  $48.20  $53.66 
            
Vehicle Utilization           
Rental days (000's)54,715  26,633  81,348  85,249  45,389  130,638 
Average rental fleet392,737  170,632  563,369  440,493  229,892  670,385 
Number of days in period274  274  274  273  273  273 
Available rental days (000's)107,610  46,753  154,363  120,255  62,760  183,015 
Vehicle utilization50.8% 57.0% 52.7% 70.9% 72.3% 71.4%
            
Per-Unit Fleet Costs           
Vehicle depreciation and lease charges, net$767  $322  $1,089  $1,123  $456  $1,579 
Currency exchange rate effects  5  5       
 $767  $327  $1,094  $1,123  $456  $1,579 
Average rental fleet392,737  170,632  563,369  440,493  229,892  670,385 
Per-unit fleet costs (in $'s)$1,954  $1,917  $1,943  $2,550  $1,985  $2,356 
Number of months in period9  9  9  9  9  9 
Per-unit fleet costs per month excluding exchange rate effects (in $'s)$217  $213  $216  $283  $221  $262 
                        


Our calculation of rental days and revenue per day may not be comparable to the calculation of similarly-titled metrics by other companies. Currency exchange rate effects are calculated by translating the current-year results at the prior-period average exchange rates plus any related gains and losses on currency hedges.
 

Appendix I

Avis Budget Group, Inc.
DEFINITIONS OF NON-GAAP MEASURES AND KEY METRICS

Adjusted EBITDA
The accompanying press release presents Adjusted EBITDA, which represents income (loss) from continuing operations before non-vehicle related depreciation and amortization, any impairment charges, restructuring and other related charges, early extinguishment of debt costs, non-vehicle related interest, transaction-related costs, net charges for unprecedented personal-injury legal matters, non-operational charges related to shareholder activist activity, gain on sale of equity method investment in China, COVID-19 charges and income taxes. Net charges for unprecedented personal-injury legal matters and gain on sale of equity method investment in China are recorded within operating expenses in our consolidated condensed statement of operations. Non-operational charges related to shareholder activist activity include third party advisory, legal and other professional service fees and are recorded within selling, general and administrative expenses in our consolidated results of operations. COVID-19 charges include unusual, direct and incremental costs due to the COVID-19 global pandemic such as minimum annual guaranteed rent in excess of concession fees for the period, overflow parking for idle vehicles and related shuttling costs, incremental cleaning supplies to sanitize vehicles and facilities, and losses associated with vehicles damaged in overflow parking lots, net of insurance proceeds and are primarily recorded within operating expenses in our consolidated condensed statement of operations. We have revised our definition of Adjusted EBITDA to exclude COVID-19. We did not revised prior years' Adjusted EBITDA amounts because there were no other charges similar in nature to these. Adjusted EBITDA includes stock-based compensation expense and deferred financing fee amortization totaling $9 million and $11 million in third quarter 2020 and 2019, respectively and totaling $22 million and $34 million in the nine months ended September 30, 2020 and 2019, respectively.

We believe that Adjusted EBITDA is useful to investors as a supplemental measure in evaluating the aggregate performance of our operating businesses and in comparing our results from period to period. Adjusted EBITDA is the measure that is used by our management, including our chief operating decision maker, to perform such evaluation. Adjusted EBITDA is also a component in the determination of management's compensation. Adjusted EBITDA should not be considered in isolation or as a substitute for net income or other income statement data prepared in accordance with GAAP and our presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies. A reconciliation of Adjusted EBITDA from net income (loss) recognized under GAAP is provided on Table 5.

Adjusted Earnings Non-GAAP Measures
The accompanying press release and tables present Adjusted pretax income (loss), Adjusted net income (loss) and Adjusted diluted earnings (loss) per share, which exclude certain items. We believe that these measures referred to above are useful to investors as supplemental measures in evaluating the aggregate performance of the Company. We exclude restructuring and other related charges, transaction-related costs, costs related to early extinguishment of debt and certain other items as such items are not representative of the results of operations of our business less a provision for income taxes derived utilizing applicable statutory tax rates for each item. A reconciliation of our Adjusted earnings Non-GAAP measures from the appropriate measures recognized under GAAP is provided on Table 5.

Adjusted Free Cash Flow
Represents Net Cash Provided by Operating Activities adjusted to reflect the cash inflows and outflows relating to capital expenditures, the investing and financing activities of our vehicle programs, asset sales, if any, and to exclude debt extinguishment costs, transaction-related costs, restructuring and other related charges, COVID-19 charges and non-operational charges related to shareholder activist activity. We have revised our definition of Adjusted Free Cash Flow to exclude COVID-19 charges and have not revised prior years' Adjusted Free Cash Flow amounts as there were no other charges similar in nature to these. We believe this change is meaningful to investors as it brings the measurement in line with our other non-GAAP measures. We believe that Adjusted Free Cash Flow is useful to management and investors in measuring the cash generated that is available to be used to repay debt obligations, repurchase stock, pay dividends and invest in future growth through new business development activities or acquisitions. Adjusted Free Cash Flow should not be construed as a substitute in measuring operating results or liquidity, and our presentation of Adjusted Free Cash Flow may not be comparable to similarly-titled measures used by other companies. A reconciliation of Adjusted Free Cash Flow to the appropriate measure recognized under GAAP is provided on Table 4.

Available Rental Days
Defined as Average Rental Fleet times the numbers of days in a given period.

Average Rental Fleet
Represents the average number of vehicles in our fleet during a given period of time.

Currency Exchange Rate Effects
Represents the difference between current-period results as reported and current-period results translated at the prior-period average exchange rates plus any related currency hedges.

Net Corporate Debt
Represents corporate debt minus cash and cash equivalents.

Net Corporate Leverage
Represents Net Corporate Debt divided by Adjusted EBITDA for the twelve months prior to the date of calculation.

Per-Unit Fleet Costs
Represents vehicle depreciation, lease charges and gain or loss on vehicles sales, divided by Average Rental Fleet.

Rental Days
Represents the total number of days (or portion thereof) a vehicle was rented during a 24-hour period.

Revenue per Day
Represents revenues divided by Rental Days.

Vehicle Utilization
Represents Rental Days divided by Available Rental Days.

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