Outgoing Avis Budget Group CEO Joe Ferraro on a Wednesday earnings call defended and gave color to the company's decision to significantly accelerate its fleet rotation strategy, which resulted in a fourth-quarter non-cash asset impairment and other related charges that nearly totaled $2.5 billion.
In conjunction with the company's fourth-quarter and full-year results released Tuesday evening, Avis Budget also announced Ferraro would step down on June 30 and be succeeded by former CFO and current chief transformation officer Brian Choi, effective July 1.
Ferrero explained that a strong retail market for model years 2023 and 2024 coming out of the pandemic forced the company to purchase those vehicles at higher prices than historic norms. Initially, the strategy was to hold onto those vehicles longer than usual to allow ABG to depreciate the vehicles across a flatter portion of the residual value curve. "However, when we saw prices for model year '25 vehicles return to normalized levels, we had a new decision to make." he said.
One option was to hold onto the older vehicles but miss the opportunity to acquire new ones at a lower cost base. Or, the company could choose to refresh its Americas fleet by aggressively exiting model years 2023 and 2024 and replace "them with new cars purchased at sustainably better prices," Ferraro explained. "We believe accelerating our fleet rotation is the right strategy for our company. … None of us took this situation lightly."
Avis Budget expects an additional non-cash charge in the first quarter related to the disposition of vehicles as part of its accelerated rotation strategy, but "let me be clear, we expect no further fleet charges beyond the first quarter of 2025," ABG CFO Izzy Martins said. "We feel confident that with the actions we have taken and the impacts that occurred this quarter, that we are set up for a much stronger 2025."
Avis Budget Q4, FY 2024 Metrics
ABG reported fourth-quarter revenue of $2.71 billion, a decrease of 2 percent year over year. Full-year revenue also was down 2 percent, to $11.79 billion. The company's net loss was $2.84 billion for the quarter and $2.63 billion for full-year 2024 compared with net income of $162 million for Q4 2023 and $1.91 billion for full-year 2023.
The Americas segment reported fourth-quarter revenue of $2.12 billion, down 2 percent year over year. Full-year revenue was down 3 percent to $9.11 billion. Americas rental days for the quarter were flat year over year at nearly 31 million and up 1 percent for the full year to nearly 128.5 million. Quarterly revenue per day declined 2 percent year over year to $68.57, while full-year RPD declined 3 percent to $70.94.
The Americas fourth-quarter average rental fleet declined 4 percent year over year to about 497,700, yet for the year was up 1 percent to 510,500. Vehicle utilization for the Americas was up 2.4 percentage points year over year for the quarter to 67.4 percent and decreased 0.2 percentage points to 68.7 percent for the full year.
International segment fourth-quarter revenue was $593 million, down 1 percent year over year. Full-year revenue was up 1 percent to $2.68 billion. International rental days for the fourth quarter were nearly 11 million, down about 1 percent year over year. Full-year international rental days increased 4 percent to nearly 47.3 million. Quarterly RPD for the segment declined 2 percent to $54.15 and was down 3 percent to $56.65 for the full year.
International fourth-quarter average rental fleet declined 4 percent year over year to about 174,300 and was flat for the full year at 184,500. Quarterly RPD for the international segment was flat compared with Q4 2023 at $54.32. For the full year, RPD declined 3 percent to $67.10.
RELATED: Avis Budget Q3 performance