What is the threshold for legal matters, net, included in Budget's Adjusted EBITDA calculation?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
ing segments into our reportable segments. In identifying our reportable segments, we also consider the management structure of the organization, the nature of services provided by our operating segments, the geographical areas and economic characteristics in which the segments operate, and other relevant factors.
Our CODM evaluates the operating results of each of our reportable segments based upon revenues and Adjusted EBITDA, which we define as income (loss) from continuing operations before non-vehicle related depreciation and amortization; long-lived asset impairment and other related charges; restructuring and other related charges; early extinguishment of debt costs; non-vehicle related interest; transaction-related costs, net; legal matters, net, which includes amounts recorded in excess of $5 million, related primarily to unprecedented self-insurance reserves for allocated loss adjustment expense, class action lawsuits and personal injury matter
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, the company's Adjusted EBITDA calculation includes legal matters, net, specifically amounts recorded in excess of $5 million. These legal matters primarily relate to self-insurance reserves for allocated loss adjustment expense, class action lawsuits, and personal injury matters.
For a prospective Budget franchisee, this means that when Budget calculates its Adjusted EBITDA, it only factors in legal expenses that surpass the $5 million threshold. This adjustment provides a view of the company's financial performance without the influence of significant legal costs, which can fluctuate and may not accurately reflect the underlying operational efficiency.
It's important to note that this adjustment is specific to legal matters exceeding $5 million. Franchisees should be aware that smaller legal expenses below this threshold are not separately identified in the Adjusted EBITDA calculation and would be included within other operational expenses. This approach to calculating Adjusted EBITDA is intended to give investors and management a clearer picture of Budget's core business performance, excluding the impact of unusually large legal settlements or reserves.