Good morning and welcome to the Avis Budget Group Third Quarter Earnings Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the meeting over to Mr. Neal Goldner, Vice President of Investor Relations. Please go ahead, sir.

Thank you. Good morning, everyone, and thank you for joining us. On the call with me are Larry De Shon, our Chief Executive Officer; and David Wyshner, our President and Chief Financial Officer. Before we begin, I would like to remind everyone that the company will be discussing forward-looking information that involves risks, uncertainties, and assumptions that could cause actual results to differ materially from the forward-looking information. Important risks, assumptions, and other factors that could cause future results to differ materially from those expressed in the forward-looking statements are specified in the Company's earnings release and other periodic filings with the SEC, which are available on the Investor Relations' section of our website at avisbudgetgroup.com. We have provided slides to accompany this morning's conference call, which can be accessed on our website as well. Our comments will focus on our adjusted results and other non-GAAP financial measures that are reconciled to our GAAP numbers in our press release and in the earnings call presentation on our website. Now, I'd like to turn the call over to our Avis Budget Group's Chief Executive Officer, Larry De Shon.

Thank you, Neal, and good morning. It's always nice to start a call with a phrase record results and that is exactly what we achieved in the third quarter. In fact, not only did we achieve record revenue this quarter, we also delivered record adjusted EBITDA and margins. In the Americas we kept our fleet tight throughout the quarter, which contributed to both higher realized pricing and higher utilization, which in turn contributed to double-digit EBITDA growth in our largest segment. And while we achieved record results and grew total adjusted EBITDA by 9%, the challenge we face is that we had targeted and expected even better numbers. Demand was a little weaker than we had originally anticipated; particularly in our International segment, where security issues and concerns impacted the summer peak. In this context, we took immediate steps to adjust our European fleet size and to respond to the competitive pressures that emerged and negatively impacted our realized pricing in Europe. As a result, as you saw on last night's release, we've reduced our full year earnings estimate to be at approximately the low end of our previous estimate of $850 million to $900 million of EBITDA. In a year that has seen significantly negative first quarter pricing, fleet cost pressures, and an unstable geopolitical climate, this will be a meaningful accomplishment. To get here we made significant progress on several key initiatives to drive higher margins. We achieved a substantial turnaround in pricing in the Americas. We have made progress in our manpower planning and shuttling initiative where we continue to see results in our productivity metrics. We have aggressively mitigated the effects of weaker vehicle residual values through the work of our fleet optimization and fleet management teams. And we have rigorously controlled cost while still investing…

Thanks, Larry, and good morning, everyone. Today I'd like to discuss our third quarter results, our fleet, Zipcar, our balance sheet, and our outlook. My comments will focus on our adjusted results, which are reconciled to our GAAP numbers in our press release and in the earnings call presentation on our website. Total revenue grew 3% in the quarter to a record $2.7 billion, driven by higher pricing in the Americas and volume growth throughout the world. Adjusted EBITDA increased 9% to a record $469 million in the quarter, primarily due to higher pricing in the Americas and increased volumes. Adjusted earnings per share increased 25% year-over-year. Revenue in our Americas segment grew 3% in the third quarter. As Larry mentioned, volume was up 2%, driven by 2% growth in leisure rental days, while commercial volumes increased slightly year-over-year. We achieved this volume growth while aggressively managing our fleet, driving more than 70 basis points of utilization improvement. Pricing in the Americas increased 2%, continuing the positive trends we saw in the second quarter. Leisure pricing was up 4 points while commercial pricing was down 1%. Adjusted EBITDA in the Americas increased 10% to a record $306 million and margins expanded by more than 100 basis points. Based on our results and current booking trends, we remain optimistic – knock wood – that pricing will remain positive for the balance of the year. This means that we expect to enter next year with three consecutive quarters of positive pricing behind us and an easy first quarter comparison ahead of us. Our International segment also had record revenue, earnings and margins in the quarter. Revenue grew 5% in constant currency, driven by a 4% increase in volume and 12% growth in higher margin ancillary revenues. The slowdown in demand that began…

Our first question comes from Christopher Agnew of MKM Partners. You may ask your question.

Thank you very much. Good morning. First question I want to ask, could you share some light on the strength of international inbound, which I think, did you say was up 12% in the third quarter? What are your assumptions going forward, and particularly what you saw last year in the, I think, first quarter – sorry – at the beginning of this year in the first quarter, what are the risks to international inbound, particularly from UK visitors with the collapse in the British pound? Thanks.

Hi, Chris. It was up 11% in the quarter. As we go into this quarter, fourth quarter and first quarter, international inbound is less of a mix of our total volume. But I think it will continue to be strong as it – it may not be up 11%, but I think it will continue to be strong as it goes into the U.S. and also into Canada. Canada has enjoyed very strong inbound business pretty much all year long. I think it's a little early yet to think about the first quarter of next year, but I would expect it to continue to be a good segment for us as we go through the balance of this year in both the U.S. and Canada.

And I guess maybe just a last question, a follow-up to that. Given what you experienced in the first quarter last year and given you're seeing softening demand in corporate transient (26:52), and you're increasing your risk mix, has your ability to flex your fleet diminished in any way with increased risk mix? And how are you thinking about fleeting into the holiday period and into next year? Thanks.

I'll answer the second part of the question first. We're going to continue to try to keep our fleet under our projected demand. We've been trying to do that all year long which you see in the improvement in utilization in the quarter. And we've been seeing utilization improvement all year long. So we'll continue to keep fleet in demand. I think when we take a look at the risk mix versus the risk and program mix, it doesn't do us any good to do that if we don't have the right flexibility to make sure that we keep our fleet in line. So the optimization team that we have in our fleet department works really hard to take a look at those opportunities, increase the mix but also make sure that we keep our options open for making sure that we can keep our fleet in line with demand. So that's always going to be the first priority. And then as we look at that, then we'll take a look at how the risk and program mix works through that. But we're not going to take an overly aggressive risk on making sure that we can't keep our fleet where we need it.

Great. Thank you.

Thank you. Our next question comes from John Healy of Northcoast Research. You may ask your question.

Thank you. Larry and David, I wanted to ask a little bit about the international business. When you look at the shortfall in the results there, is there a way to quantify what the EBITDA shortfall was in 3Q relative to your expectations? And additionally, is there a way to talk to how things healed up there? It seems like the issues were a little bit more shorter term and the industry has gotten the fleet issues ironed out. Can you talk to how that happened so quickly?

Sure, John. As I look at our numbers, the midpoint of our prior guidance was $875 million, and our guidance now is approximately $850 million of EBITDA. So there is a $25 million reduction there. I would say that slightly more than half of that or roughly half of that is tied to our international business and that split between the third and to an extent between the third and the fourth quarters. So certainly the softness in demand that we saw impacted the third quarter a bit. We offset it by getting our fleet in line as quickly as possible. But I would break the impacts down in that way. In terms of our fleet and how we how it lines up in the industry, I think what we've seen in international, particularly in Europe, the adjustment process across the industry tends to be longer and slower than what we often will see here in the United States. And as a result, as volume softened in the third quarter, we saw industry fleets were out of line with demand and it really expressed itself in terms of pricing. I think it's taking a little while in Europe for fleets to get in line with demand and that continues to impact pricing there. So there is a little bit of a delay mechanism in Europe compared to what we would see in the United States.

Got you. And then I wanted to ask just about the 4% price increase that you saw in the Americas on leisure. Just going through my history with you guys, it seems like that's probably the highest number that you've had probably on the leisure side in a number of years. Could you let someone – the last time leisure pricing was that high? And then secondly, I wanted to ask just if you look at your 4% performance, do you view that as in line with the market, do you view that as better than the market, or I can't imagine underperforming the market with a 4% number, but just how you'd rate your performance in 3Q?

In terms of the leisure performance, certainly it was strong. We will get for you the last time we were at that level. I don't remember that number off-hand. But the issue of how we're doing in the market, we feel that we're holding our share in the marketplace and we're doing so by holding our fleet relatively tight compared to demand. And what that does is probably means we give up a little bit, not much but a little bit on the volume side and are getting a bit more on the price side as a result of that. That strategy has worked well for us, and I think you could see it play out in our leisure pricing. The slide I have here indicates that the second quarter of 2014, so a little over a couple of years ago, was the last time we were at this level for leisure pricing, and if that's not right, we'll double check and get back to you.

I would just add to that, with inbound being up 11%, that's going to help drive a higher rate per day on leisure. So with that mix being higher on inbound business, that's helping the rate per day as well.

Okay. David, just one clarification. When you talked about the bridging of the $875 million midpoint of your prior guidance to the $850 million today, $850 million is not the midpoint of your current guidance. That's just where you're expecting the business to be for the year, right?

Yeah. Our guidance for the full year is at approximately the low end of our prior guidance of $850 million to $900 million of EBITDA. I would think of that as being right around $850 million.

Great. Thank you.

Thank you. Our next question comes from Chris Woronka of Deutsche Bank. You may ask your question.

Hey. Good morning, guys. Could you remind us in fourth quarter of 2015 when the pricing began to go downhill, so we can think about how the quarter might unfold this year?

Sure. Last year the pricing softened really, I would say, in the middle of the quarter, and was particularly tough in December. You may remember that December, where Florida and Southern California are particularly important, are where we started to see some of the challenges, both with inbound business and general levels of demand. And really what happened is that as we moved into December, including the holiday period, things got progressively softer and that really continued into January and February. We got our fleet in line and we were able to use program car dispositions to keep our fleet in line, but it really took until March or even April before we feel industry fleets came into line with demand. And so there was certainly a four-month period there where we feel industry fleet levels were out of line with demand, and that's what gives rise to what we hope will be a relatively easy comp for that period in time as we move into this winter.

Okay, great. And then you mentioned a delay in receiving some of the benefits of outsourcing the damage claims process. Is that still going to be a headwind next year or do you think that gets resolved by the beginning of 2017?

Our hope is certainly that it gets resolved and then ideally becomes a tailwind positive for us at some point in 2017. We're seeing in our maintenance and damage costs some increased expenses this year driven in part by a really tough weather year for us, the worst we've had in several years. And the challenge we have is that that compares to a forecast we had of doing a little bit better in maintenance and damage costs as a result of outsourcing this function. And as a result, we sort of have the gap there is between what we had expected in terms of a positive and then weather damage as a negative is impacting us, and the difference between those two is north of $10 million this year.

Okay. Very good. Thank you.

Thank you. Our next question comes from of Michael Millman of Millman Research Associates. You may ask your question.

Thank you. Regarding your leisure pricing in the U.S., could you break that down by different markets? And particularly that part of the market which is market price as opposed to some of the more sticky leisure markets?

We don't really break it down by market, really, Michael. But overall I would say that the quarter was strong. It was strong really each month of the quarter. And once again, I think a big part of it relates to the very strong inbound leisure business that came in, in the quarter and particularly in Canada as well. And I would suspect that really those gateway markets – if I were to go back and look at, I would expect the gateway markets are probably very strong on the inbound business and driving some of the leisure pricing up. We saw some very strong demand in some key markets like Denver, Salt Lake, Chicago, Southern California, Northern California, Boston, for example, New York. Those were markets over the summer that performed pretty well.

Thank you. Could you also talk about what you're seeing from competition? Usually if competition is not going along, it's very difficult for one company to go in a different direction. So what differences have you seen? And can you talk about whether you think that's going to continue or if it was some short-term effect?

Sure Mike. What I think we're seeing across the industry is fleets in line with the demand that's there. And that more than anything else I think is the driver of what we had in the third quarter in terms of a reasonably healthy environment for pricing, despite demand that was a little bit softer than we had anticipated. And I think that is the principal driver of what we're seeing in the marketplace and certainly positively impacted our ability to get positive pricing in the quarter. I think the way pricing is playing out on a day-to-day basis is working well for us. It's not really about, oh, there's a price increase of $5 a day, $25 a week, and some people are matching that or not matching that or reacting to it. Rather it's the day-to-day, week-to-week pricing activity where we feel industry fleets are in line, it's giving us some opportunity, and we're taking advantage of our fleet being in line and our demand fleet pricing yield management system, including our pricing robotic to be able to realize price increases in that environment. And that's sort of the way I would think about the pricing and fleet dynamics that you asked about.

Very good. Thank you. Appreciate it.

Thank you. Our next question comes from Anj Singh of Credit Suisse. You may ask your question. Anjaneya K. Singh - Credit Suisse Securities (USA) LLC (Broker): Hi, good morning. Thanks for taking my questions. First off, I was hoping you could touch a little bit on your utilization improvements in the Americas. Could you give us a sense of how much more room for improvement there may be or how far we may be from peak utilization? Clearly, your fleets ran tight, but trying to understand how much more contribution could your demand fleet pricing system yield along with other factors?

I think it's probably a little difficult to put an actual number to it. I know that the team continues to work, getting more sophisticated, using more data analytics to get more specific and with more science on how they're placing the fleet to go after the demand opportunities. And I think that's what you saw in this quarter, where we ran the fleet tight, we put our fleet where we thought the highest revenue per day opportunities were. We probably rejected some demand in some other markets where we pulled fleet from. Trying to balance that with our shuttling initiatives. And then we look back over the quarter and take a look at how well did we do. What really worked in that and what didn't work in that and make the adjustments as we go into the next quarter, with the goal is, reducing our shuttling costs by continuing to improve our utilization. So that's always an important balance that you have to strike, and it's not easy. So I think through better data analytics, more resources on it, I think our fleet optimization guys are doing a really good job. And they learn every month on how to do that a little bit better and a little bit better as we go. So I would continue to hope that we can grow our utilization, while we're bringing our shuttling costs down and maximizing the revenue per day.

And I would just add to that that I'd highlight the fact that we improved or increased our pricing and our utilization at the same time. We're not out there solely trying to maximize utilization. We're doing so in the context of trying to take business that's profitable for us and getting price along the way. And I think that dynamic is really important. So it's not solely about maximizing utilization. We do want to move it up, but it's in the context of getting price and taking business on which we can generate a healthy margin. Anjaneya K. Singh - Credit Suisse Securities (USA) LLC (Broker): Okay. Okay. Got it. That's helpful. And then for a follow-up, I was wondering, how do we think about the opportunity that there may be on the mix of vehicles deleted through alternative disposition channels? I realize you guys have considerably improved your percentage of vehicle deletes through such channels. But you're mentioning that you're developing some additional capabilities there, and I know your mix is south of where some of your peers are. So perhaps some thoughts on those points. Thanks.

Yeah. Thank you. I think we're pretty much in early innings there. We had the best quarter this past quarter than we've had in the alternative disposition channels. We continue to take a look at all the different channels among that group of alternative to see how we can continue to maximize and grow that. As part of our plan as we grow our risk fleet for next year is to make sure that we can maximize that. So we've got a team of people taking a look at that. We've been running some tests with partners out there. We're looking at increasing the number of our own retail lots that we're opening. We're increasing our Ultimate Test Drive product. So we will continue to work on that every quarter to continue to drive the percentage that we sell through the alternative channels up. So I think we're a long ways from where we can be. I think we've got a lot of upside potential here. And as I said, I think we're pretty much in the early innings at this point. Anjaneya K. Singh - Credit Suisse Securities (USA) LLC (Broker): Okay. I appreciate it. Thanks so much.

Thank you. Our last question comes from Brian Johnson of Barclays. You may ask your question.

Hi, this is Dan Levy on. Thanks for taking the question. I wanted to ask, on the strength of margins in Americas, I think 16.8% is a quarterly record in the segments. And I know that you had obviously the big items, better pricing, better utilization and increase in fleet cost was contained. But, were there any other items driving that results, any one time benefits on costs or otherwise, just trying to get a sense of sustainability on that result.

No. There's really no one-time benefit. You know I think what you also see playing through there is the work we've been doing on driving efficiencies in areas like manpower and shuttling, which has been two big initiatives we've been working on all year. And that's really what we've got to continue to do. We're going to look for every pricing opportunity that we can on our revenue management. And our fleet teams working together, are getting better and better how they optimize those opportunities. But what we also have to do is making sure that we're driving efficiencies everywhere that we possibly can. That also plays into the innovations that we are doing like Avis Now, which will hopefully give us more productivity opportunities and lower our cost over time, and that's been a big homerun for us as we've launched that this year, and we're seeing the uptake of customers and rolling into Avis Now increasing significantly and their acceptance of it and how much they really enjoy and like it has been really terrific for us. So you'll see us just continue to work on those parts of the company where we can drive efficiencies, bring our cost down, drive our productivity, reduce our shuttling cost, reduce maintenance cost. And I think that is some of what you're seeing play through there.

Okay. And one other follow-up just on the Americas margin or within that, I think what was unique in the quarter was that you had pricing up solidly, but fleet costs came up lower than expected, admittedly they were up and so admittedly, implying there was probably a net benefit between the two as it relates to your margins. Usually you have – it seems the two move in the same direction. You have higher pricing coincide with higher fleet costs, so there's an offset on the impact on margin. Just comment on that dynamic in the quarter. Was there a timing issue or fleet level is just much tighter than usual?

Sure. I think the dynamic in terms of pricing moving with fleet costs is one that plays out over – it tends to play out over a longer period of time and is not as clean or as perfect where the two will move in sync in a given quarter. And we sort of saw pricing up too, fleet costs up too, so the pricing has a greater impact there, but there's also a similarity in terms of that percentage increase. And as we think about this on a broader basis, I still think there is opportunity, right? When we look at 2016 as a whole, we're looking at pricing that for us going to be relatively flat, unchanged year-over-year while fleet costs are up 5%. And to me, that creates an opportunity for us to continue to catch up there to the fleet cost pressures that we've seen this year. And I hope that we'll play out in our favor over time. So while the third quarter saw fleet costs and pricing in line with one another, over a longer period of time, I hope we can get a bit more pricing to offset the 5% increase in fleet cost pressure that we're seeing over the course of the year.

Understood. Thank you.

Thank you. For closing remarks the call is being turned back to Mr. Larry De Shon. Please go ahead sir.

Thank you. Before we close, I think it's important to reiterate the key takeaways from today's call. The third quarter was the most profitable quarter in our company's history. Pricing continues to be a positive in the Americas as we deal with softer than expected demand environment in the fourth quarter. And our investment in the business including Avis Now and our efficiency initiatives are already providing benefits. We'll be hosting an Investor Day to discuss our plans for the future on November 15 in New York City. The day will include presentations by each of our regional presidents, our chief marketing officer, as well as David and me. If you haven't registered for the event, you can do so at our Investor Relations website ir.avisbudgetgroup.com. I hope to see many of you there. With that, I want to thank you for your time and your interest in our company.

This concludes today's conference call. You may disconnect at this time.