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Executives

Jonathan Schaffer - Managing Director

Scott W. Griffith - Chairman and Chief Executive Officer

Edward G. Goldfinger - Chief Financial Officer, Principal Accounting Officer, Vice President, Assistant Secretary and Treasurer

Analysts

Steven E. Kent - Goldman Sachs Group Inc., Research Division

Jason S. Helfstein - Oppenheimer & Co. Inc., Research Division

Adam Jonas - Morgan Stanley, Research Division

Andrew Marok

Christopher Agnew - MKM Partners LLC, Research Division

John M. Healy - Northcoast Research

Zipcar (ZIP) Q3 2012 Earnings Call November 8, 2012 4:30 PM ET

Operator

Greetings, and welcome to the Zipcar 2012 Third Quarter Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jonathan Schaffer of The Blueshirt Group. Thank you, Mr. Schaffer. You may begin.

Jonathan Schaffer

Thank you, operator. I'd like to welcome everyone to this afternoon's call to discuss Zipcar's 2012 Third Quarter Financial Results. On today's call from management are Scott Griffith, Chairman and Chief Executive Officer; and Ed Goldfinger, Chief Financial Officer. After management's prepared remarks, we'll open the call up to questions.

Before we begin, I would like to remind everyone that during the course of this conference call, management may make forward-looking statements which are subject to various risks and uncertainties that could cause actual results to differ materially from our current expectations. A detailed discussion of such risks and uncertainties is contained in our filings with the Securities and Exchange Commission, which are available on the SEC's website.

Forward-looking statements made during this conference call speak only as of today's date, and the company undertakes no obligation to update them to reflect subsequent events or circumstances. Also, I would like to remind you that during the course of this conference call, we may discuss some non-GAAP measures in talking about the company's performance. We refer to adjusted EBITDA as a key bottom line measure of our performance.

There's a full reconciliation of the U.S. GAAP net loss to adjusted EBITDA on our press release, which can be found on the Investor Relations section of our website. Unless noted otherwise, all comparisons are versus the prior year period. This conference call is also being broadcast on the internet and is available through the Investor Relations section of Zipcar's website.

So with these formalities out of the way, I'd now like to turn the call over to Scott Griffith. Scott, you may begin.

Scott W. Griffith

Thanks, Jonathan. Good afternoon, and thanks to everyone for joining us on the call. I'd like to discuss our performance for the third quarter, recent achievements and the success we've been having with our newer initiatives before touching on longer-term priorities. First, turning to the highlights for the quarter. Reported results for the period exceeded the third quarter outlook we provided on our last call. Total members grew 18% from the prior year to 767,000. Revenue increased 15% year-on-year to $78.2 million with 16% growth in North America and 8% in Europe. Adjusted EBITDA grew 42% versus last year to $6.5 million. Net income was $4.3 million, which represents a significant improvement from the income of $651,000 in last year's third quarter. This brings our year-to-date net income to $0.9 million and keeps us on track to deliver our first profitable year on a U.S. GAAP basis.

Our top priority following the second quarter was to improve our marketing effectiveness with reenergized performance marketing programs. I'm pleased to report that we made solid progress in implementing several of the initiatives we discussed on last quarter's call.

Specifically, we shifted to a new technology and approach for tracking our online advertising performance. This is expected to lead to better attribution of online programs with more effective audience targeting and ultimately, smarter media buying decisions. While we are encouraged by the initial results in these actions, we expect the most meaningful impact to come in future quarters as we accumulate additional data and apply new analytical tools that enable us to optimize our messaging, media buying and targeting.

We generated meaningful uplift in overall referrals and a resulting increase in new members following the introduction of a referral tool embedded in our online member application process.

We're introducing a more robust affiliate network program that now involves our participation in the top affiliate networks. And we're enhancing our activities in social media to raise awareness, drive member acquisition to build community. For example, we launched a social campaign called, Get Out and Give, which rewards city residents for making a difference in their communities.

We also helped Get Out To Vote with the Zip To The Polls program, that offered members half off driving rates on election day in partnership with Rock the Vote. These marketing initiatives represent a collective step in the right direction. We believe that enhanced efforts around digital, mobile, social and grass roots campaigns represent the most effective channels for Zipcar to engage perspective members and educate them on Zipcar's compelling value proposition. We're also introducing new products and services in expanding our global reach.

Building on the success of our monthly damage waiver program, we launched a waiver product for our Zipcar for business members. And during Q4, we're further expanding the wayward product line with the launch of per trip waiver. Additionally, we've demonstrated our ability to introduce and scale new offerings in multiple markets with the rollout of our Zipvan service. Since piloting Zipvan in North America just 1 year ago, reception to this offering has been very positive with more than 34,000 Zipvan trips taken to date. This strong consumer reception speak to the power of the Zipcar brand and the network effects of our model. Zipvan enables us to further engage with existing members while broadening our appeal to individuals and small businesses requiring access to a cargo van. We intend to roll out the Zipvan service to our remaining metro markets in North America in 2013.

In terms of network expansion, we've made significant progress in recent months by entering new markets and integrating acquired operations. This fall, we launched dozens of new schools and surpassed the 300 mark for colleges and universities participating in Zipcar's on-campus car sharing network throughout North America.

Many of the schools we partner with come to us through a competitive RFP bidding process and we're winning the large majority of these opportunities thanks to our leading brand, technology and operational know-how on campus.

Zipcar's University segment continues to thrive through our partnership with Ford. In addition to brand and product exposure, this 2-year partnership includes a Ford-funded initiatives called, Students with Drive program. Students with Drive is a competition that helps student groups achieve their missions by offering them an opportunity to win cash and Zipcar driving credit. To date, Students with Drive has distributed hundreds of thousands of dollars in driving credit and cash to 135 groups at over 75 universities. More broadly, this partnership highlights the strong impact Zipcar can bring to our partners in the auto manufacturing sector among a very important younger demographic. At a time when the auto sector is finding it increasingly difficult and expensive to increase share of mind and drive product trial among millennials, Zipcar is stepping in as a key marketing partner.

Last week, we announced the launch of Miami, as our 20th major metropolitan market. Similar to Baltimore, Los Angeles, Providence and Austin, where we leveraged our existing university presence, we're expanding our service reach in the Miami market to the local community. The Miami launch was announced in partnership with city officials, who recognize our role in reducing congestion, emissions and parking demands while fostering a more pedestrian-friendly environment and enhancing city livability.

Turning to Europe, we continue to build out our European network with the completion of the integration of Barcelona-based Avancar and the acquisition of CarSharing.at in Austria. As part of the integration, we've now completed the conversion of all vehicles from the legacy Avancar platform onto the Zipcar network. Avancar members now have access to Zipcar's global fleet of vehicles around the world, and Zipcar members may now access the fleet in Barcelona. The integration of Avancar coincided with the launch of Zipcar's new global technology platform, which is designed to support multi-language capabilities, enhanced scalability and improved speed to market the future international expansion. Our new technology platform, which is the result of our largest code release since 2008 has developed around a more flexible architecture that is more API-driven.

In addition to enabling international growth, this new technology was implemented to support planned future enhancements for our mobile applications. A majority of our reservation activity is already conducted on mobile devices and we see mobile playing an ever-increasing role in how our members interact with Zipcar. From a member acquisition perspective, mobile represents an opportunity to lower barriers to trial as it reduces the time to join and simplifies the process. We're continuing to invest in mobile and look forward to introducing new features and capabilities.

With the Avancar integration completed and our new technology platform launched and running, we turn our attention in 2013 to the integration of CarSharing.at.

We're excited by the potential of the Vienna market, which we believe will ultimately be a top 10 car sharing market in Europe, as well as the opportunity to continue to build out our broader European network. We're currently evaluating integration timing as part of our 2013 planning process.

In the U.K., our EU President is working with the a team charged to take aggressive steps to improve near-term operating performance. Also built the Zipcar brand and position the business for long-term growth and profitability. Zipcar brand awareness in the U.K. continues to trend up as we execute new marketing programs across social, online and traditional media channels. We're also in the process of implementing some of our recent North American online acquisition marketing initiatives, including new creative and our new media tracking and attribution technology. Going forward, we believe these changes will have a positive impact on U.K. membership growth trends and overall ROI on our U.K. marketing dollars.

Our Zipcar for Business program continues to outpace the growth of the business overall in the U.K. A recent growth driver of Zipcar for Business has been the early progress we're making with our Salary sacrifice program in Great Britain. Salary sacrifice allows employees of qualifying companies to use pretax salary to pay for time in a Zipcar. We're the first and only car sharing service to offer this employee benefit and we expect the program will serve as a new member acquisition channel for us. We've already partnered with 10 participating businesses, including major law firms, banks and media companies. For the balance of this year and into 2013, our primary focus in Europe will remain on improving marketing execution and overall operating performance in the U.K. and Spain. We believe these action steps will position us well to drive business performance, as the economy in the U.K. and across Europe improves.

Returning to North America, in our established markets, our operating margin based on income before tax was 29%, exceeding our target market margin of 27% and well above the 23% reported in Q3 of last year. The growth in margins in our established markets speaks to the inherent leverage in our model as we build scale over time.

I'd now like to come back to the 3 longer-term priorities discussed on last quarter's call. This includes specific focus on new offers, new services and technology enhancements.

In terms of new membership offers, we're looking at ways to lower barriers to trial and provide more than just one option for perspective Zipcar members to consider. In June, we began tests of monthly membership options in Chicago and Toronto. In the fourth quarter, we intend to launch a pilot program in Canada that offers a new membership plan with no annual fee but with fewer features than our current standard plan.

The pilot program incorporates extensive research, including focus groups and surveys by pursuing a thoughtful and data-driven design approach we believe this new plan will mostly attract members who would not have otherwise joined without the new offer. We're accomplishing this in the design of a new plan by permitting access to our fleet only during weekdays, and reducing the mileage included from the level offered in our annual fee plan. For this reason, we believe the design of the new plan will minimize the conversion of existing members to the new plan.

This plan is part of a broader initiative to cast a wider net with prospective new members while giving us a path to drive up-sell, cross-sell and loyalty. We also intend to use this new plan to improve retention among less active members at the time of an annual renewal. We're excited to launch the test of this innovative new membership offer in the weeks ahead. The introduction of new services for our members also remains a key focal point for us as we've demonstrated most recently with the success of our Zipvan program. We're aggressively assessing and evaluating additional services, technologies and partnerships that will leverage Zipcar's brand and first-to-scale network to enhance the member experience and serve a broader array of trip types.

Lastly, we continue to make investments in our technology, which is really at the core of everything we do. Our new global technology platform sets the stage for additional international growth, testing of an expanded membership framework, rolling out enhanced mobile features and the launch of new complementary services in the future. In summary, we're pleased with our financial performance and progress against our strategic objectives in the quarter.

Before I turn it over to Ed, I'd like to comment on Hurricane Sandy. It's been over a week and I know many of the Northeast have personally been impacted by this terrible storm. With yet another storm hitting in the last 24 hours, residents of the impacted areas are continuing to face challenges that were unimaginable just 2 weeks ago.

Our thoughts are with all of those who have been impacted. In the days since the storm, we've been working very hard to restore full Zipcar service to the entire Metro New York region. We've assessed the business impact of the storm and factored that into our guidance. Ed will offer a few more details on this during his comments.

Our team and our partners have been simply incredible before and after the storm. On behalf of our members and all of our stakeholders, I'd like to offer a sincere thank you to all the folks working to restore operations. You've done a great job. Let me now turn it over to Ed, to cover the financials. Ed?

Edward G. Goldfinger

Thanks, Scott. And thanks, everyone, for joining us on the call today. I'll go through our third quarter financial performance in greater depth, and then we'll provide guidance about our fourth quarter and full year 2012 expectations. As Scott mentioned, we're pleased with our results from the top and bottom line. Revenue for the third quarter increased by 15% over the same period last year to $78.2 million consistent with the growth rate we reported in the second quarter. For Established Markets, our revenue growth for the quarter was 15% and for all of North America, revenue growth was 16%. In Europe, revenue growth was 8% with revenues in the U.K. continuing to be challenged in the face of economic headwinds.

We're focused on operational execution there. And as Scott mentioned, were taking specific initiatives to reenergize our growth in this market, which we expect to occur by early next year.

We remain excited by the long-term potential of the U.K. and European markets. Fleet operations costs improved by 500 basis points to 59% of revenue for the quarter versus 64% in the prior year period.

The key reasons for this significant reduction are lower fleet financing costs due to the shift of vehicles onto our asset-backed loan facility, lower accidents expense on a per mile basis and higher gains on the disposal of vehicles.

Member services and fulfillment costs improved by over 100 basis points to 7% of revenue versus 8.1% in the same period last year due to volume-based improvements in merchant processing fees and leverage from our member services center. Selling, general and administrative expenses increased to 26.3% of revenue from 23.2% in the same period last year. The increase was due in part to general higher administrative expenses, including public company costs and investment in our European headquarters to support further expansion activities such as the recent integration of our Barcelona operation and our Vienna acquisition.

Additionally, sales and marketing were higher as a percentage of revenue versus the prior year as we've invested behind new member growth including some of the initiatives Scott mentioned earlier. CPAs for the quarter were $70, up from $55 last year but down from $89 we recorded in the second quarter.

For our Established Markets, CPAs for the quarter were at $53, up from $46 in the same period last year.

Interest expense increased to $1.2 million from $800,000 last year due to our higher debt balance related to the AVS financing. Other income for the quarter included $1.7 million from the sale of Zero Emission Vehicle or Zev credits which are included in U.S. GAAP net income but excluded from adjusted EBITDA. We had originally forecasted this gain in the fourth quarter. Our adjusted EBITDA for the quarter was $6.5 million, an increase of 42% compared to the 46 -- $4.6 million in the prior year period.

On a U.S. GAAP basis, net income for the quarter was $4.3 million, compared to $700,000 in the prior year period.

Income before tax for our Established Markets is 29% of revenue compared to 23% in the prior year due to the strides we've made in pricing optimization and vehicle financing, as well as operating efficiencies and the impact of higher gains on sale of vehicles.

Our net income per share was $0.10 for the third quarter in 2012 on a fully diluted basis, compared to $0.02 in the prior year period.

With respect to the balance sheet, we ended the quarter with $82 million of cash and marketable securities on hand, up from $81 million at the end of the second quarter, despite the $3.4 million acquisition we made in Austria, and an increase in our investment in owned vehicles under the ABS program.

Our vehicle related debt and capital lease obligations totaled $133 million, up from $121 million at the end of the second quarter. We have nearly completed our cycle of refinancing our U.S. fleet onto asset-backed loans with 95% of vehicles now on this program. We expect our debt balance to reduce in the fourth quarter as the defleet vehicles seasonally and repay loans with the proceeds from sale.

I'll now spend a minute on forward-looking guidance before turning it back to Scott. First a quick note on Hurricane Sandy. We will experience a negative impact from the storm on our financials for the quarter, as a combination of lost revenue, vehicle damage and increased operating expenses. To date, the impact on revenue has been between $600,000 and $700,000 and the combined impact from vehicle damage and increased operational costs, which we will exclude from adjusted EBITDA is between $0.5 million and $1 million. We are exploring channels to help mitigate these losses but have not assume more than basic salvage value in our estimates at this time. The full estimated impact of the storm has been included in our guidance for the fourth quarter and full year. For the fourth quarter, we expect revenues in the range of $67 million to $71 million. Adjusted EBITDA of between $4.5 million and $7.5 million, and U.S. GAAP net income between breakeven and $3 million. Keep in mind that the shift in timing on ZEV credits from Q4 to Q3 while neutral for the full year had an effect of increasing our Q3 earnings and decreasing our earnings expectations for Q4 by $1.7 million.

For the full year, we expect revenue of approximately $275 million to $279 million. We expect adjusted EBITDA of approximately $14.5 million to $17.5 million and U.S. GAAP net income of approximately $1 million to $4 million. So despite the estimated impact from Hurricane Sandy, we've raised our full year guidance ranges on revenue adjusted EBITDA and net income due to improved trends and results in the business over the past quarter.

The following additional points should help in more detailed modeling. Stock-based compensation is expected to be about $1.5 million for the fourth quarter. Acquisition and integration costs for the fourth quarter including both our Barcelona operation and the recent Vienna acquisition will be roughly $600,000. We expect to have about $1.2 million of vehicle-related interest expense for the fourth quarter. Our Q4 guidance does not include any gain in the sale of Zev credits as the plant sale occurred in the third quarter. Loss of equity-method investee is expected to be approximately $0.5 milllion for the fourth quarter. Our net income range does not include the impact of any reversal of our deferred tax valuation allowance which could occur if we meet the appropriate accounting thresholds. Expect the average number of shares outstanding to be about 40 million shares, common stock equivalents under the treasury stock method would add about another 1.5 million shares.

That covers the financial details. In summary, we're pleased with the results we reported for the period which allows to raise our full year guidance ranges on a top and bottom line from our previous estimates.

And with that, I'll turn it back to Scott.

Scott W. Griffith

Thanks, Ed. Just to conclude, let me recap the recent highlights. We've made substantial progress on reengineering our performance marketing programs, we've funded the growth of our global network with the integration of Avancar in our entry into new markets including Miami, along with expanding our University presence to more than 300 participating campuses.

Additionally, we look forward to integrating the acquired CarSharing.at operations in Austria in 2013. We're also rolling out new products and services to enhance the member experience and have a proven track record that reinforces our ability to develop, introduce and grow new offerings to scale. We continue the expansion of Zipvan to all of our major North American markets as a prime example. As a branded consumer company with technology and data as a key differentiator, we continue to invest in our technology assets, highlighted by the launch of our new platform and planned enhancements to our mobile capabilities. With business fundamentals improving in North America, we're pleased to be in a position to increase our full year guidance and we expect 2012 to be our first year as a profitable company on a U.S. GAAP basis.

We're particularly excited to reach this milestone as we work to balance growth with profitability. Zipcar's unique combination of brand, value, experience, locations, technology, scale and services has firmly established us as the category leader. I'd like to thank the Zipcar team for their work in getting us to where we are today and laying the foundation for a very exciting future.

Now, let's open up the call to your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Steve Kent of Goldman Sachs.

Steven E. Kent - Goldman Sachs Group Inc., Research Division

So big difference this quarter versus last one so congratulations. And I'll just ask a more fundamental question though on your expense side. Are you -- how are you thinking about the expense of cars for 2013? Do you use car values? And how much of a big swing could that be, either direction in 2013?

Scott W. Griffith

Thanks, Steve. Well, we're not giving guidance at this point on 2013. As you know, the used car market has been favorable over the last really 2 years but we'll certainly be taking that into consideration as we put our plan together for 2013.

Steven E. Kent - Goldman Sachs Group Inc., Research Division

And have you started negotiations I mean, I'm assuming you're in negotiations with the manufacturers all the time. Is there any change in sort of their posturing towards you?

Scott W. Griffith

Well, if anything, we've made great strides as we've taken more volumes year-on-year from the auto manufacturers. So if anything, we would hope that we'd see an improvement looking forward.

Operator

Our next question comes from the line of Jason Helfstein with Oppenheimer.

Jason S. Helfstein - Oppenheimer & Co. Inc., Research Division

Two questions. So it's pretty exciting what you're talking about Canada. I mean, the whole [indiscernible] to make business decisions would always -- really the opportunity of the model. You -- when you think about that, and then you -- what you think you can kind of do there and then you think about the Established Markets -- where Established Market revenues up 15%. I mean, do you think you can use those types of capabilities to drive Established Markets revenue faster? Or do think that 15% is kind of the new run rate of the Established Market business? And then my second question, just thinking maybe out 6 months a year from now. There's obviously a lot of automobiles destroyed that, in part of why they were destroyed is part of Sandy. And particularly in certain cities there are cars that may have not been driven a lot. So to the extent that people get money from the insurance company. Is there any data suggest that people won't actually purchase new cars and those are potential customers for you?

Scott W. Griffith

Ed, why don't you want to take the second one. Now let me go with the first one though. So what we announced is the launch of this new plan into Canada. And you asked the question where I guess I'd phrase it as would that or could that have the potential to increase growth in the Established Markets in other parts of North America here including the U.S. I think yes, medium long-term, the answer is yes. That's exactly why we're doing this. We've done a lot of survey and research work now to understand what buying behavior is driven by when someone decides to first join the service. And we think that through improved trial and then up-sell and cross-sell and to improve loyalty programs, starting with this basic plan that we talked about, we think we're going to be in a good position and we do not think that 15%, given the full potential of the Established Markets is a baseline that we should stand for. We think that there is a potential with some of these programs to get back to some of the old growth rates absolutely.

Edward G. Goldfinger

And with respect to your second question, I mean, time will tell. It certainly will be a call to action I think with so many cars being lost. So -- but I certainly don't think it argues against the idea that CarSharing and other mobility options might play a bigger role going forward. I think it does support that, but time will tell.

Jason S. Helfstein - Oppenheimer & Co. Inc., Research Division

And then maybe just a follow up. I mean, in the last call we talked about some of the issues on the marketing. Can you give a little more color on where you are, have you hired a new Chief Marketing Officer and kind of just where are you in this kind of remarketing plan?

Scott W. Griffith

We haven't made a hire yet. We have a well-known search firm that's been on the case for a bit. And one of the things I found very interesting about that is we meet experts in the field that are candidates for the job. They absolutely are reinforcing the specific steps that we've already been taking. That some of the actions we've already taken are exactly what the field of experts would say we should be doing so that's been a helpful part of the progress that we've made so far. We have an interim executive in place. We do have a deep bench both here and over in the U.K. for Europe so it's -- we have lots of activity going on in new initiatives and marketing. And so while we haven't hired a new head of marketing just yet, we've been taking a lot of activity with the deep bench that we have and expect to make announcements on the head of marketing in the near future.

Operator

[Operator Instructions] Our next question comes from the line of Adam Jonas with Morgan Stanley.

Adam Jonas - Morgan Stanley, Research Division

I want to add that my -- to commend you guys on having a business model so focused on the area hit by this terrible storm. And it seems like you're navigating it very well on -- that's certainly a lot better than I think a lot of people feared so definitely well done on that. Question on the revenue uptick. How much of the increase in your revenue guidance would you say is attributed to Europe versus North America? Established versus non-Established Markets? And even if I could ask on fee versus non-fee just in terms of the delta.

Scott W. Griffith

Sure. So the uptick we saw was principally North America as we said on earlier on, the U.K. has continued to struggle although I think we're doing all the right things to get that back on track as well. Fee and driving revenue I think will be about the same in terms of their impact and if not for the storm, obviously, could've been higher. But pleased that we were able to raise the guidance for the year.

Adam Jonas - Morgan Stanley, Research Division

Okay. Just another question on the European M&A kind of bolt-on strategy. Should we, just in terms of magnitude, is the strategy one where you can kind of picking off these new cities or smaller fleets to integrate in technology and grow at like -- in order of magnitude similar to a kind of a $3 million type Austrian acquisition or do you kind of think there are a couple much bigger ones in scope that could be had?

Scott W. Griffith

I mean the way we think about these -- great question, we certainly look at opportunities from time to time and in fact this time we passed on because I think price matters obviously.

We understand the investment of what the make cost is and the trajectory what the make trajectory looks like. So if we get the right mix and I'd -- so I'd say it's more opportunistic that if we get the right mix of size and scale and momentum and price all working in our favor, and culture also matters and in the case of Spain and Austria, we feel like there's a good cultural fit and we do have to make those changes. I'd say it's more opportunistic than strategic were still considering a mix of green field starts along with those opportunistic acquisitions over time.

Adam Jonas - Morgan Stanley, Research Division

Okay. And just -- and just a final question just in terms of defleeting and depreciation kind of shorter-term. This would normally be the time of the year where I think you'd be shrinking the fleet kind of into year-end. So I guess from that perspective, the storm isn't -- the timing could've been worse in terms of the fleet contraction, right? But can you give us an idea going into the storm, how was defleeting occurring versus your expectations? And then specifically on the depreciation of -- the vehicle depreciation backing out non-vehicle D&A and amortization from the total number, I'm getting a number just over $10 million for the third quarter, that was $8.2 million in the second quarter. Last year obviously was much lower at $6.5 million. But just is that proceeding kind of what you -- in line with your plan or as a $10 million type number something that we're going to start hitting a little more often?

Scott W. Griffith

I think what you're seeing there in part is the shift from operating leases to the asset back line. Keep in mind operating pieces don't count as depreciation. They're [indiscernible] to the cost of sales line. So that's the scaling up to 10 million you saw. And the defleet that we're doing is exactly in line with what we've done in past years. Following the summer season after Labor Day and then again after October. We defleet so that by December, we're really a the fleet level we want to be through to March. So yes, in terms of when some catastrophe like this should happen to hit, it means fewer cars that we otherwise would have had defleet but obviously it's not a big part equation for us.

Operator

[Operator Instructions] [indiscernible] with Needham & Company.

Unknown Analyst

[indiscernible] I think about the recent acquisition of Avancar in CarSharing.at. How -- can you break out how much that contributed in the quarter to kind of an apples-to-apples comparison? And then can you again highlight when you started the kind of a new membership programs, I know you highlighted in Q4 you were going to launch a non-fee in a few markets but I think you had -- did a lower cost fee program earlier maybe in Q3? And then could you also talk a little bit about progress on maybe Zipcar for Government because that has been a nice growth area in the past?

Edward G. Goldfinger

So I think on the first one and then I'll turn it over to Scott for your other 2 questions. I mean these are very small acquisitions, 100 to 200 cars. So they did not have a meaningful impact on our revenue in the third quarter. And Scott do you want to take the other 2?

Scott W. Griffith

Yes, so I think your other -- sort of this membership program tests that we've been doing I think it was in July, we started a monthly program in both Toronto and Chicago. And so that was in the midst of the quarter. We will launch very soon in Canada in 2 markets. This new program where there's no annual fee and keep in mind that that's been defeatured. You don't -- you're not going to get access to vehicles on a weekend for example and you'll get fewer miles per day if you join under that no fee plan.

And that's intentionally to help drive trial. And so I think the -- and you also won't be able to get access to cars on holidays for example, regardless of when they fall. So we're trying to drive some trial in early interest but you will get access to Zipvan so for example. So people that might need a van you might, you may have otherwise have gotten them. So we're going to keep testing these things and as they work, we'll roll them out across the entire network. We're actually -- because of the extensive amount of testing and data and analysis we've used for the Canadian launch, we're pretty excited about where that might go. But we also launched the monthly plan over in London about 6 weeks ago so we're testing that in London. So a lot of these are the new philosophy we have in marketing across-the-board. We're testing, we're learning fast, if it works, we keep going, if it doesn't, we shut it off and one of the reasons that works with Zipcar is we've got a whole network of cities. We can test in one city and learn and keep rolling or stop it and it doesn't affect the whole network and we really isolate if something is not working, or we get ready to roll fast if it is. With this sort of learn fast, stop quickly or move fast in terms of upscale in the network is the way we're thinking about everything in marketing now from membership to new acquisition, tools online and new technologies we're using.

Unknown Analyst

And related to the monthly programs, is there anything you can -- is it too early, can you glean anything from the Toronto, Chicago or London kind of pilots where you did you see kind of an uptick, a quick uptick because of the kind of the monthly program? Or did you see existing members shift down to that? Or any data you can provide us?

Scott W. Griffith

Yes, I'd say obviously we're watching it. We have a test plan for all these things with metrics that we want to drive and watch closely. In that case, we saw good interest and good uptake so that metric looked good. I'd say it's too early to really tell you if these members act and behave exactly like somebody that would've come into our more traditional annual fee plan. So that's what we want to watch next to and see how they behave over the first 6 or 12 months of membership. So that's what we're up to right now. And we're watching across markets. We actually launched 2 different kinds of monthly plans. I think we might have spoke to this on the last call. One did not have a -- any commitment at all and you can just join for the first month and then unjoin if you will after the month. And that was in Chicago, in Toronto you have to make at least a 6-month commitment, but you could pay for it for the month. So we're kind of testing all these and watching and seeing how uptick looks versus our other offer. And also how members behave once they join, are they as frequent and are they as good as you if you will on economics. So all of those things are being factored in. And I'd say overall, it's a little bit early to talk about economics but the interest was solid.

Unknown Analyst

Great. And then Zipcar for Government?

Scott W. Griffith

Z4G. It's going well. This has primarily been a FastFleet technology implementation, where we put our technology on government-owned and operated vehicles. So we don't own those assets, they do. And then In addition, in places like Chicago, Boston, DC, they're starting to use Zipcard, it really hit peak demand. They've been reducing the size of their fleets, I think we're now at least at 10 different Zipcar for government relationships. Candidly, some of those aren't announced fully yet because we're not prepared to do that today but we're at 10 now and growing and with the pipeline that continues to build. So we think SAS fleet in Zipcar for government continues to be a long-term avenue of growth for us with leverage from the technology investment in the know-how and the business model.

Operator

The next question comes from the line of Kevin Kopelman with Cowen and Company.

Andrew Marok

This is Andrew Marok on for Kevin. I just have a couple of quick questions. So how many ending members are you expecting for Q4 if you have any estimates around that? And regarding the Miami launch, how many cars were new cars? And how many cars were related to your previous university programs?

Scott W. Griffith

On the first question, we don't provide forward-looking guidance on metrics so...

Edward G. Goldfinger

Membership you mean?

Scott W. Griffith

Yes, membership metrics. On the second question, I have to say I don't know exactly. I think we at least doubled the size of the fleet [indiscernible]

Edward G. Goldfinger

Yes, I don't know off the top of our head. We can follow up on that, Kevin.

Operator

The next question comes from the line of Christopher Agnew with MKM partners.

Christopher Agnew - MKM Partners LLC, Research Division

First question, just on usage revenue per vehicle. And I've seen that that's flat for this year-over-year second quarter in a row. I'm just wondering has that plateaued? And if you think you can drive it higher, what are the sort of main factors to drive that growth going forward?

Scott W. Griffith

Yes, it's actually pretty simple. Our utilization was actually lower this year than it was last year. We've made a choice as we went into the third quarter to not move as much off of our car count as we could have based on hours used, because we wanted to make sure there was adequate supply and that we're meeting demand and capturing as much market share as we could. So we knew that we had some cost savings and we put that back in terms of availability. And so the utilization was lower and to the extent we pushed back to the same levels of utilization, we see that number increase.

Christopher Agnew - MKM Partners LLC, Research Division

Got you. And then on Canada, on the no fee program, I mean, I think I heard you right saying that one of the reasons help improve retention. But from what I can see your retention is very, very high. And so I was just wondering is there something that I'm missing in there? And then also on -- with respect to Toronto, I see the car2go launched with in -- claiming within a month to have driven 9,000 registrations. So I'm wondering is the no fee policy up there potentially being driven by increased competition?

Scott W. Griffith

It's not related to increased competition. In fact, the reason we're -- frankly, the reason we're picking Canada is we can isolate it in that geography. If we would try to launch it in a single city in North America it would be a little hard to argue to a member in New York that they can't join the plan that somebody in Portland can get access to. So we'd rather isolate it, in this previous answer I gave, where we want to test and learn quickly in only just a part of our network. We found Canada, and we've done this before with like new waiver programs we'd launch them in Canada first, and we watch the metrics and learn some of the trade-offs that add some feedback from the market. So that's the real reason we're in Canada. It's to isolate it to a couple of cities as opposed to the whole network. And what was your other question relating to that plan? The new plan?

Christopher Agnew - MKM Partners LLC, Research Division

Just whether the retention, yes. Because it looks to be really high. So I was surprised ...

Scott W. Griffith

Retention. Yes, yes. We agree. It is high. And -- but we think we can even do better, is a short answer. For members who are not really very frequent users of the service, we always ask members when they're leaving. Why are you not renewing your membership? Most of the time it's a life event something changed, they're going to move up in the city or they got a new family member and then decided to buy a car, something else happen. All cases they say I don't -- I'm just not using it enough I think maybe I'm going to hold off. I'll just rejoin some time when I need it again. For those members, we're going to test the idea of offering them dropping into the new plan where they don't have to pay an annual fee. They'll have limited access as we talked about earlier on the previous question to sort of weekday access, non-holiday access, they could still get Zipvans. And we're also looking at some of these new services that I mentioned on this call and on the previous calls, we've added some new services and new features like Zipvan. We'd like to retain members and we maybe offering something for them next year that we don't have today that might be quite interesting. So we don't want to let them go at that point. So it's not that we're worried about a metric today. It's really we think we can just do better. And with new services coming, probably improve the overall economics of a member who would've otherwise left the service without this sort of fallback plan with no annual fee.

Christopher Agnew - MKM Partners LLC, Research Division

Got you. And then maybe one more question if I may. On obviously Enterprise car share have sort of relaunched and rebranded the 3 companies that put together. And I know, before that focus more on university campuses. It might be too early to tell but any change in your view on the competitive landscape? And how do you plan to meet it?

Scott W. Griffith

Well, I think no change in our view. Specifically, on Enterprise, we have -- and I think it's very early. They just barely got that in a market. And we've competed against both Enterprise and Hertz primarily in the University networks and often through in our fee processing, I think I mentioned in my comments. We win the large majority of those because of our experience and scale and they like the brand. So -- but we take these new things seriously and we're watching it closely. I think the -- it's a very large market. We talked about a $3 billion market in North America and $3 billion in Europe. I think with our position on brand and technology, some of these new membership programs and new services that we're launching now. Even Zipvan, I mean, we're playing offense. We're putting Zipvan into the exact category where the rental car companies play now, and frankly, getting net promoter scores that are very, very high from that addition. So right in their backyard, we're going straight at it. With better technology and nicer placement of vans by the hour instead of forcing them to go out by the day. I think we're going to see some interesting dynamics in the market. And I think with our brand and our technology and some of these new services and offers we have, we'll continue to lead as we have and welcome Enterprise and others to come on in, because there's a large market here.

Operator

Our last question comes from the line of John Healy, Northcoast Research.

John M. Healy - Northcoast Research

I apologize if this question has been asked, I've been jumping on and off the call. But when you guys think about the business, in the last quarter, you talked about the monthly memberships and now you're talking about the initiative in Canada, I'm just curious to get your perspective on how long these types of decisions have been on the table? Were these initiatives, you're looking at last year, beginning of this year? And I guess it's interesting to get your thought process on how fast these items have come to a head and how proactive you've been with these types of initiatives? And then additionally, is the free membership something that you would think potentially could come to the U.S. market in 2013?

Edward G. Goldfinger

So I think the sort of meta answer is on any of these plans and whiteboarding and brainstorming new things all the time, we try to take a thoughtful approach but move pretty quickly. The one real big competitive advantage we have when it comes to this plans is we've got a lot of data. Every membership and every transaction over 10 years is reams and reams and as you can imagine of data, and we're able to mine that and make decisions using that data. That said, we want to be thoughtful and move as quickly as we can but also be deliberate when the time comes. So some of these have been on the table for months, I wouldn't say any of them have been around for years. And some of them took some of the new technology that we just launched, more flexibility on the technology platform that we launched as part of the Avancar program. So we're going to add more flexibility into our systems as well as using data to keep testing these things and spinning them up or shutting them back down if we feel like they're not working. And then your other question was could the no fee limited access plan come to the U.S.? Absolutely. If we feel success on the metrics that we see up in Canada as quickly as we feel comfortable, we would bring that down to the U.S. as we think it has real horsepower in terms of a marketing message for people that might not otherwise join and just want to try the program out or get access to a Zipvan and then we can get some up-sell and cross-sell to those numbers as they come in.

John M. Healy - Northcoast Research

Okay that's helpful. And then I just want to add that I know you mentioned a couple of items that help the vehicle holding cost -- vehicle [indiscernible] to be down substantially year-over-year. Would you be able to let us know how much the gain was in terms of the vehicle sales in the quarter?

Edward G. Goldfinger

We don't want to disclose that. But I can tell you of the reasons I gave, which also included the financing -- lower financing cost, lower accidents expense that was actually the third not the first cost. So it was not the majority for example of the decrease that we saw.

Operator

There are no further questions at this time. I'd like to turn the floor back over to management for closing comments.

Jonathan Schaffer

I just want to say thank you all for joining us on today's call. We look forward to updating you on our progress when we report the fourth quarter results in February. Thank you. Back to you, operator.

Operator

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.

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