John Babcock: Okay. Thank you.
Operator: Thank you. Our next question is from the line of Chris Stathoulopoulos with Susquehanna. Please proceed with your question.
Chris Stathoulopoulos: Good morning. Izzy, I just want to go back to this, the per unit per fleet cost. So I think in February you had said full year around $325. 1Q is going to be a little higher than that, but you did better at $317. And we’re looking at, I think now you’re saying trail towards $350 for 2Q and 3Q. And depending on how these negotiations shake out, that could taper off in 4Q and perhaps move lower. So, I just for next year, I want to understand kind of the moving parts here and what’s changed since you last updated around that item. Thank you.
Izzy Martins: You certainly summarized exactly what I said. So I agree with that. I think the only thing that’s changed is as we continue — one is we accelerated the dispositions a little bit sooner than we anticipated. The next thing that maybe may have changed is the fact that as we do this on a monthly basis, we’re always evaluating what our residual values would be. And also, last but not least, there was always that hope that the interest rates would come down a bit. And as you know, yes, our cars are attractive in the used car market. We still believe that and we still see that. I think what’s a little bit different as for the consumer to purchase a used car is where interest rates are. So given that consumer interest rates are still very high, moving those sales proceeds on the cars is just becoming a little bit more challenging.
So I think there’s a combination of things that changed since I gave you the guidance of $325. I would say in the first quarter, it was well below it. And I think it’s prudent to anticipate that it would be going up in the second and the third.
Chris Stathoulopoulos: Okay. Thank you. And Joe, as a follow-up. So your prepared remarks, about a third of that was around technology. There’s the system rollout in Europe. You spoke to enhancing contribution margins. There sound like there’s some enterprise-level initiatives here, frictionless technology with these kiosks. Could you put a finer point or detail on how you ultimately see this benefiting revenue costs and margins? Are we in the early stages with respect to anticipated benefits? Thank you.
Joe Ferraro: Yeah. Thank you. I talked a lot about on the last call how we created this cost transformation group headed up by a previous CFO. And I would say, yeah, we’re probably in the early stages of it, but we have some things that have brought some meaningful benefit for us in the first quarter. I talked a little bit about them, but for review, we have technology improvements that enhance our scheduling for our frontline staff. And we’re seeing particularly good productivity improvements. So when I say productivity, you get more clean cars, you get more customers to get processed through with less staff. And we have technology that enables us to have a different level of full-time and part-time. There’s more people coming into the workforce, so that’s different than the last couple of years.
So that certainly helped deter wage inflation, which we had wage inflation in the first quarter of 3%, but we have productivity up 10%. So that’s a definite add-on to margin, for sure. In-life vehicle maintenance around technology and procurement to deal with rising costs of inventory. We have systems in place. I’ll give you an example. A tire went up from $50 to call it something closer to $100. We now have procurement involved to get us the best cost, but we also have systems to tell us which tire is the most optimal to put on, whether it be by manufacturer or by product, whether it’s to use an existing tire or repair tire. So there’s a whole lot of effort. I think when you think about our process, it’s to take a look at what we want to solve, create the energy around it through actions, provide technology to give us insights, and then differentiate the outcome.
It’s kind of the way I see it. We have damage detection that we’re deploying. If you think about, like, what does damage cost us? At one point, improvement in damage collections is like a $4 million benefit. You can do the math. That sounds small, but as you start multiplying it by cars utilization, to have an idea, not just on utilization of the overall fleet compared to rental volume, but utilization of a car at various stages of its life, its downtime, why it’s down, down to the bin level. If you improve utilization by a point, just a point of utilization, it’s between $30 million and $40 million. So those are things that I think are very attractive. We have others that are involving loss prevention. And then you get to the revenue side, which you started off with.
I believe our demand fleet pricing system, something we built in the United States many, many years ago, gives us a decided advantage on how we price vehicles based on demand and inventory levels and allows us to put the best optimal price out there. And we saw that when we rolled it out in the United States, the early indications were use went up and price went up as well. And we think we’re going to get that benefit in Europe. But as far as the U.S., we continue to iterate that price, that model of ours. Last year, we put segments of business on it that we hadn’t had in the past. We put airport versus off airport. And it all designed to drive a differentiated outcome.
Chris Stathoulopoulos: Okay. Thank you.
Operator: Thank you. Our next question is from the line of Chris Woronka with Deutsche Bank. Please proceed with your question.
Chris Woronka: Hey, good morning, everyone. Thanks for taking the questions. The first one, and this might be for Izzy, there’s been some noise in the market. Recently I think investors are just trying to gain a better understanding of kind of where you are in terms of your ABS coverage and things like that. Can you maybe give us a quick overview and talk about whether you see any funding requirements coming and things like that just to provide a little color to the market? Thanks. And then I have a follow-up.
Izzy Martins: I’m just going to — Chris, thanks for the question. I think I’m just going to answer right off the bat that we don’t have any issues on that front. I mean, if you look at, what we report on the first table of the earnings release, we have a cushion of about $2.8 billion. And actually, that cushion, that’s how we have to report it for GAAP purposes. The true cushion is $3.6 billion just because of the way ASAP is treated as a non-consolidated entity. So you really need to add back, about $840 million. So if you think about that, that makes our net advance rate in — call it the low 80s, and we can go into the high 80s. I mean, I hope that answers your question, but I mean, the simple answer is we have plenty of headroom there.
