Avis Budget : Second Quarter 2020 Investor Presentation

Avis Investor Presentation

July 29, 2020

Forward-Looking Statements

Non-GAAP Financial Measures

Avis Budget Group ("Avis" or "the Company") emphasizes that 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.

Certain statements in this presentation 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 any impact from the coronavirus, 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 presentation include, but are not limited to, the severity and duration of the COVID-19 pandemic and related impact on travel and the economy, the high level of competition in the mobility industry, changes in our fleet costs 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, 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, 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, any changes to the cost or supply of fuel, risks related to acquisitions or integration of acquired businesses, 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, 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. 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 months ended March 31, 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.

This presentation includes certain non-GAAP financial measures as defined under SEC rules. See the appendix to this presentation for important information regarding such non-GAAP financial measures, including a discussion of the definitions of such measures and the reasons why the Company believes the presentation of such measures provides useful information to investors. Important information regarding reconciliation of such measures is contained within this presentation, included in the appendix.

2

Agenda

• Company Overview
• Financial Results & Update
• Liquidity and Leverage Summary
• Fleet Debt & ABS Tutorial
• Safety & Strategy

3

Overview and Brands

• We are a leading global provider of mobility solutions with a portfolio of premium and leisure car rental and sharingbrands:
• • More than 11,000 rental locations in ~180 countries around the world.
  • Zipcar is the world's leading car sharing network with more than onemillion members.
• We generated Revenues of $9.2 billion, Net income of $302 million and Adjusted EBITDA of $788 million for the twelve month period ended 12/31/19.
• Due to the pandemic and related declines in global travel volumes, we have reduced our fleet by 26% year-over-year, are targeting over $2.5 billion in annualized cost savings, and have liquidity of $1.5 billion as of June 30.

We operate directly in approximately 30 countries…

…and maintain a Global Brand Portfolio

Licensees operate our brands

in more than 150 additional countries

4

Diversified Revenue Stream

35%		36%
Budget		Off-Airport
Brand	57%		Airport
	Avis		64%
8%
		On-Airport
Other
40%
Commercial		30%
Customer		International	Segment
60%
		70%
	Leisure
			Americas

All numbers are approximate as of year ended December 31, 2019

Budget brand includes Budget Truck. Other brands include Zipcar, Payless, Apex, Maggiore, FranceCars, Amico Blu, Turiscar, and Morini

5

Attractive Financial Model

Five-Year Adjusted Free Cash Flow ($ in millions)

Powerful

AdjustedFree

Cash Flow

Data is cumulative for years 2015, 2016, 2017, 2018 and 2019 and adjusted for the adoption of ASU 2016-09 "Improvements to Employee Share-Based Payment

Accounting".

HighlyVariable Cost Structure

25%	100%	25%	75%
			Variable				Fixed	Variable
Fixed
Direct				Fleet				SG&A	Overall
Operating
			Costs				Costs	Costs
Costs
									25%
75%					75%	Fixed
Variable								Variable

All numbers are approximate based on the twelve month period ended December 31, 2019

6

Agenda

• Company Overview
• Financial Results & Update
• Liquidity and Leverage Summary
• Fleet Debt & ABS Tutorial
• Safety & Strategy

7

Q2 2020 Results

Revenue & Other Metrics

	$ Millions	Revenue		$ Millions	Adjusted EBITDA
• Revenue declined 67% to $760m in the quarter, Reported		$2,337	Reported	$175
but improved sequentially each month. April was
down 78%, May was down 68%, and June
finished down 59%.
-	Americas Revenue decreased 65% to	(67%)		($382)

$565m. Utilization ended the quarter at approximately 50%.

$760

• International Revenue declined 73% to $195m. Utilization ended the quarter at approximately 50%.

• Adjusted EBITDA loss was $(382)m, significantly
better than our expectations in April, and showed
strong sequential improvement each month.
-	Americas Adjusted EBITDA loss was
	$(233)m, highlighted by positive
	Adjusted EBITDA of $3m in June.

2020	2019	2020	2019
		Americas		International		Corp Other

Monthly Revenue Improvement YoY%

-	International Adjusted EBITDA loss
	was $(140)m, and improved each
	month due to cost mitigation efforts.

(78%)

(68%)

(59%)

April

May

June

8

YTD 2020 Results

Revenue & Other Metrics

• Year-to-dateRevenue decreased 40% to $2.5b in constant currency.
• • Americas Revenue decreased 38% to $1.8b, with Rental Days down 34% and Revenue per Day down 6%.
  • International Revenue decreased 47% to $691m, with Rental Days down 37% and Revenue per Day down 15%.
• Adjusted EBITDA loss was $(469)m, troughing in April and recovering in May and June.
• • Americas Adjusted EBITDA loss was
    $(263)m, highlighted by a $3m profit in June.
  • International Adjusted EBITDA loss was $(180)m, and improved sequentially in Q2 due to cost mitigation efforts.

$ Millions	Revenue		$ Millions	Adjusted EBITDA
Reported			Reported	$174
		$4,257	($469)
	(41%)

$2,513

2020	2019	2020	2019
		Americas			International		Corp Other
Rental Days r YoY			Revenue per Day* r YoY

Americas International Total

Americas International Total

*Revenue per Day Data in chart in Constant Currency

9

Significant Cost Removal Efforts

• Second quarter expenses finished 47% lower than the prior year, as we removed over $1.0 billion of costs in the last three months.
• We have removed more than $2.5 billion in annualized costs and continue to look for additional savings.
• Major Actions:
• • People: We significantly reduced the size of our workforce and the costs associated with our remaining staff. We separated or furloughed over 60% of our pre-pandemic workforce. We reduced compensation for senior leadership, eliminated the 401(k) match for highly compensated employees, and suspended hiring.
  • Discretionary Spend: We evaluated every expense globally, eliminating all non-essential spend. Additionally, we partnered with our vendors, airports, landlords and service providers to reduce or defer spending.

10

Dramatic Fleet Actions

• We capitalized on a rapidly recovering used car market to shrink the fleet, selling nearly double the number of vehicles targeted in our second quarter operational plan at a significant gain on disposal per unit.
• Worldwide, we disposed of more than 100,000 vehicles and cancelled over 185,000 incoming orders. In the month of June, our US disposals were 30% higher than the same month last year. International reduced fleet size by 40% in the quarter.
• Ending fleet size at quarter end was down 26% year-over-year, exceeding the commitment we made on our last earnings call to be down 20% by June 30.
• Per-unitfleet costs were $221 per month, a 17% reduction year-over-year. We finished June with global utilization in the 50% range and maintain the ability to flex our fleet size up or down depending on demand.

11

Ability to Match Fleet to Demand

% Change YoY

• Unlike other travel-related industries, we have repeatedly demonstrated our ability to rapidly

scale fleet to match demand.

Total Company - Average Fleet vs. Rental Days

20%
10%
0%
(10%)
(20%)
(30%)
Dec-08	Dec-09	Dec-10	Dec-11	Dec-12	Dec-13	Dec-14	Dec-15	Dec-16	Dec-17	Dec-18	Dec-19

% Change YoY

Americas - Average Fleet vs. Rental Days

20%

10%

0%

(10%)

(20%)

(30%)

% Change YoY

International - Average Fleet vs. Rental Days

30%

20%

10%

0%

(10%)

(20%)

(30%)

Footnote:		Average Fleet		Rental Days

For the period October 2011 through September 2012, EMEA figures

have been removed due to the acquisition of Avis Europe, and the12 Americas and APAC growth rates have been used as a proxy.

Agenda

• Company Overview
• Financial Results & Update
• Liquidity and Leverage Summary
• Fleet Debt & ABS Tutorial
• Safety & Strategy

13

Liquidity and Cash Burn

• We had targeted a Q2 burn of $900 million, but burned $580 million for the quarter, an improvement of $320 million or 36%.
• We ended the quarter with $1.5 billion in liquidity.
• We anticipate both positive cash flow and Adjusted EBITDA for the remainder of 2020.

Illustrating How Fleet Management Drives Profitability

Illustrative Revenue w /

Seasonality Impact

Return to Profitability

Fleet Costs Reduced

as Fleet Downsized

Fixed Costs Base

(1) April cash burn excludes February 6, 2020 irrevocable notice for the partial redemption of Avis Senior Notes due 2023.

1414

Corporate Debt Overview

•

•

•

Covenant Relief and Financial Management

On April 27th, we amended our Credit Agreement providing for the suspension of their leverage maintenance covenant through June 2021 and allowing additional first lien indebtedness of $750 million.

On May 12th, we issued $500 million of Senior Secured Notes due in 2025.

Proactive management of duration and sizing provides significant runway to navigate the next three years with no required refinancing transactions.

Debt Maturities

			$1,800				$1,209
					$1,156
			$100	$687		$393	$400
2020	2021	2022	2023	2024	2025	2026	2027
		Senior Notes	Term Loan	Revolving Credit Facility
							15

Agenda

• Company Overview
• Financial Results & Update
• Liquidity and Leverage Summary
• Fleet Debt & ABS Tutorial
• Safety & Strategy

16

Fleet Debt Overview

Structural Highlights

• Our vehicle securitization debt is comprised of ABS term debt and bank conduit facilities around the world.
• We were in compliance with all requirements as of the end of the quarter, and did not require equity injections.

•

•

Our ABS maturities have a six month controlled amortization in lieu of bullet payments. We have no need to refinance any fleet debt this year.

AESOP Term Debt Maturities

	$1,250	$1,150		$1,250
			$925		$1,025
$667
2020	2021	2022	2023	2024	2025
2.8%	3.2%	2.4%	3.3%	3.7%	3.3%

Note: Maturity schedule amounts in millions. Data excludes Risk Retention	17
tranche, if any.

ABS Structure - One Vehicle Example

	110
		100
	100
dollars)
(in	90
Value																								82
Debt	80		80
Vehicle /
Illustrative	70
																						70
	60
	50																							50
	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	19
									Vehicle Holding Period (in months)
				Debt Balance				GAAP Vehicle Value				ABS Vehicle Value

• Assume a vehicle is purchased for $100 and financed through our ABS structure at 80%, or $80.
• GAAP depreciation is ~1% per month; over 18 months is ~18%, resulting in a residual value of $82.
• ABS depreciation is 1.67% per month per vehicle; over 18 months is ~30%, resulting in a residual value of $70.
  The conservative depreciation amortized into the structure creates an equity cushion of approximately 12% at time of disposal.
• ABS structure contemplates a straight line depreciation despite increase in vehicle equity.

18

ABS Depreciation vs Residual Decline

Month	ABS Minimum	ABS Compliance	ABS Monthly Effective	Our GAAP Net	1% Residual Value Drop from	Residual
Monthly Depreciation	NBV	Depreciation Rate	Book Value	our GAAP Net Book Value	Value
0	-	$25,000	1.67%	$25,000	-	$25,000
…
10	418	20,825	2.00%	22,500	225	22,275
11	418	20,408	2.05%	22,250	223	22,028
12	418	19,990	2.09%	22,000	220	21,780
13	418	19,573	2.13%	21,750	218	21,533
14	418	19,155	2.18%	21,500	215	21,285
15	418	18,738	2.23%	21,250	213	21,038
16	418	18,320	2.28%	21,000	210	20,790
17	418	17,903	2.33%	20,750	208	20,543
18	418	17,485	2.39%	20,500	205	20,295

• Our ABS minimum depreciation payment is 1.67% on each vehicle monthly, compared with a GAAP depreciation rate of ~1%. This equates to ~50% more cash depreciation per vehicle each month.
• As a result, by the tenth month in the ABS facility, the monthly rent paid into the ABS would cover a ~2% drop in vehicle value before it touches the increasing equity cushion.
• As a vehicle ages, residual values are more volatile. However, the longer a vehicle is in the ABS structure, the cushion in cash depreciation compared to market value increases. Therefore, the pool can sustain substantial

declines in vehicle values before jeopardizing the maintenance covenant.

19

Maintenance Covenant Performance

115.0%

110.0%

105.0%

100.0%

95.0%

Mark-to-Market Test		Disposition Test		AESOP Minimum Required Performance

1. • The required mark to market test for our AESOP program utilizes a three month weighted average of vehicle values in our fleet compared to NADA Black Book value1.
   • The required disposition test for our AESOP program utilizes our disposition proceeds compared to our compliance net book value on a three month weighted average.
   • We met the monthly mark-to-market test by more than 105% and we met the disposition test by more than 111% at the end of June. Our mark-to-market test improved sequentially each month through the quarter.
2. When NADA Black Book is unavailable Utilize GAAP NBV as a proxy.

20

Agenda

• Company Overview
• Financial Results & Update
• Liquidity and Leverage Summary
• Fleet Debt & ABS Tutorial
• Safety & Strategy

21

Our Unwavering Commitment to Safety

The Avis Safety Pledge is our commitment to keep you safe. We've built strategic partnerships with RB, the maker of Lysol, and health experts to provide the latest guidance and best practices for disinfecting vehicles, training our employees and helping to protect your health.

22

Longer Term: Six Areas of Strategic Focus

• Our strategic priorities remain unchanged despite the pandemic.

Customer Experience		Local Market, Ride-hail, and			Alternative Disposition
	Package delivery				Channels

Connected Cars and			International Integration		Organizational Efficiencies
Technology

23

Appendix

Definitions

This presentation includes certain non-GAAP (generally accepted accounting principles) financial measures as defined under SEC rules. We have provided below reasons why we present these non-GAAP financial measures and a description of what they represent. The GAAP measures most directly comparable to Adjusted EBITDA, Adjusted free cash flow, Adjusted pretax income (loss), and Adjusted diluted earnings (loss) per share are net income (loss), net cash provided by operating activities, income(loss) before income taxes, and diluted earnings (loss) per share, respectively. Because of the forward-looking nature of the Company's forecasted non-GAAP Adjusted EBITDA, Adjusted free cash flow, Adjusted pretax income (loss), and Adjusted diluted earnings (loss) per share, specific quantifications of the amounts that would be required to reconcile forecasted net income (loss), net cash provided by operating activities, pretax income (loss), and diluted earnings (loss) per share are not available. The Company believes that there is a degree of volatility with respect to certain of the Company's GAAP measures which preclude the Company from providing accurate forecasted GAAP to non-GAAP reconciliations. Based on the above, the Company believes that providing estimates of the amounts that would be required to reconcile the range of the non-GAAP measures to forecasted GAAP measures would imply a degree of precision that would be confusing or misleading to investors for the reasons identified above. Additional definitions and reconciliations of non-GAAP measures not included herein are provided in Appendix I and the tables of our press release furnished on Form 8-K on February 19, 2020.

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, incremental cleaning supplies to sanitize vehicles and facilities, and losses associated with vehicles damaged in overflow parking lots and are 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 revise 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 $12 million in second quarter 2020 and 2019, respectively and totaling $13 million and $23 million in the six months ended June 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 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.

Foreign Currency

We present currency exchange rate effects to provide a method of assessing how our business performed excluding the effects of foreign currency rate fluctuations. Local currency

results are calculated using functional currencies outside the United States. Foreign currency exchange rate effects are calculated by translating the current-year results at the prior-period average exchange rate plus or minus any related gains and losses on 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.

A-1

Reconciliation of Non-GAAP Measures

Reconciliation of net income (loss) to Adjusted EBITDA (in millions):		Three Months Ended June 30,
		2020			2019
Net income (loss)
$	(481)		$	62
Provision for (benefit from) income taxes		(128)			19
Income (loss) before income taxes
	(609)			81
Add certain items:
COVID-19 charges (A)		73			-
Restructuring and other related charges		28			23
Acquisition-related amortization expense		16			14
Early extinguishment of debt		3			-
Transaction-related costs, net		1			1
Gain on sale of equity method investment in China (B)		-			(44)
Adjusted pretax income (loss)		(488)			75
Add:
Non-vehicle related depreciation and amortization (excluding acquisition-related amortization expense)		55			52
Interest expense related to corporate debt, net (excluding early extinguishment of debt)		51			48
Adjusted EBITDA
$	(382)		$	175

1. For three months ended June 30, 2020 consists of $72 million within operating expenses and $1 million within selling, general and administrative expenses, net in our consolidated condensed results of operations. Primarily consisting of $30 million of minimum annual guaranteed rent in excess of concession fees, $28 million of losses associated with vehicles damaged in overflow parking lots and $15 million of incremental cleaning supplies to sanitize vehicles and facilities, and overflow parking for idle vehicles.
2. Reported within operating expenses in our Consolidated Statements of Operations.

A-2

Reconciliation of Non-GAAP Measures

Reconciliation of net income (loss) to adjusted net income (loss) (in millions, except per share data):		Three Months Ended June 30,
			2020		2019
Net income (loss)		$	(481)	$	62
Add certain items, net of tax:
COVID-19 charges			55		-
Restructuring and other related charges			22		18
Acquisition-related amortization expense			12		10
Early extinguishment of debt			3		-
Non-operational charges related to shareholder activist activity		-		1
Transaction-related costs, net			1		-
Gain on sale of equity method investment in China	(A)		-		(30)
Adjusted net income (loss)		$	(388)	$	61
Earnings (loss) per share - Diluted		$	(6.91)	$	0.81
Adjusted diluted earnings per share		$	(5.60)	$	0.79
Shares used to calculate Adjusted diluted earnings per share		69.6		76.4

1. Reported within operating expenses in our Consolidated Statements of Operations

A-3

Reconciliation of Non-GAAP Measures

Reconciliation of net income (loss) to Adjusted EBITDA (in millions):		Twelve Months Ended June 30,
					2020		2019
Net income (loss)				$	(308)	$	197
Provision for (benefit from) income taxes				(224)		106
Income (loss) before income taxes				(532)		303
Add certain items:
Restructuring and other related charges				108		56
COVID-19 charges	(A)				80		-
Acquisition-related amortization expense				54		60
Early extinguishment of debt				19		14
Transaction-related costs, net				7		19
Non-operational charges related to shareholder activist activity	(B)		6		-
Gain on sale of equity method investment in China	(C)			-		(44)
Adjusted pretax income (loss)				(258)		408
Add:
Non-vehicle related depreciation and amortization (excluding acquisition-related amortization expense)		216		201
Interest expense related to corporate debt, net (excluding early extinguishment of debt)		187		183
Adjusted EBITDA				$	145	$	792

1. For the twelve months ended June 30, 2020 consists of $79 million within operating expenses and $1 million within selling, general and administrative expenses, net in our consolidated results of operations. Primarily consisting of $33 million of losses associated with vehicles damaged in overflow parking lots, $30 million of minimum annual guaranteed rent in excess of concession fees and $17 million of incremental cleaning supplies to sanitize vehicles and facilities, and overflow parking for idle vehicles.
2. Reported within selling, general and administrative in our Consolidated Statements of Operations
3. Reported within operating expenses in our Consolidated Statements of Operations

A-4