Avis Budget Group Q2 Earnings Call Highlights

Key Points

• Avis Budget reduced its Americas fleet by 5% year over year as travel demand softened, prioritizing utilization, transaction profitability and returns over rental-day growth. Utilization reached a record second-quarter 73.2%, limiting the decline in rental days to 2%.
• Americas adjusted EBITDA rose 7.7% despite a 1.9% revenue decline, but recalls remained a major headwind, costing more than $50 million year to date. International operations weakened, with adjusted EBITDA down 11% amid lower inbound travel and increased European fleet supply.
• Avis Budget reiterated full-year adjusted EBITDA guidance of $850 million to $1 billion and expects to reduce leverage by at least one full turn by year-end. The company also anticipates receiving $650 million from its Pentwater settlement, subject to court approval, to help retire debt due in 2027.

Avis Budget Group NASDAQ: CAR said it adjusted its fleet strategy during the second quarter of 2026 as travel demand softened from earlier expectations, reducing vehicle supply and emphasizing utilization, transaction profitability and returns over rental-day growth.

Chief Executive Officer Brian Choi said summer bookings had been showing mid-single-digit growth entering April, but forward-booking momentum weakened by early May. The company accelerated vehicle dispositions during April and early May, when the used-vehicle market was still seasonally strong, rather than wait for weaker demand trends to become more pronounced.

The Americas fleet ended the quarter down 5% year over year, marking the company’s lowest second-quarter fleet size since the second quarter of 2021. The original plan had contemplated fleet growth tied to expected travel activity around the World Cup, America 250 and a stronger summer travel market, Choi said.

Choi cited broader consumer uncertainty, higher travel costs and geopolitical volatility. TSA check-ins moved from flat year-over-year in April to down 0.7% in May and down 1.3% in June, while overseas visitors to the U.S., based on CBP I-94 data, declined 8% during the quarter.

Utilization Offset Smaller Fleet

Despite the smaller Americas fleet, rental days declined only 2%, aided by improved utilization. Americas vehicle utilization reached 73.2%, the company’s highest second-quarter level on record, according to Choi. He attributed the improvement to technology deployments, operating discipline and a greater focus on fleet as capital at risk.

Chief Financial Officer Daniel Cunha said Americas adjusted EBITDA increased 7.7% year over year while revenue declined 1.9%, producing roughly 100 basis points of margin expansion. Rental days fell 2.1%, reflecting a fleet that was 5.4% smaller year over year, while inbound rental days declined 5%.

Americas utilization improved 250 basis points year over year. Cunha said the company’s operating performance came despite continued recall-related constraints.

The company chose to prioritize longer-duration rentals over some one-day transactions, which tend to generate higher revenue per day, or RPD. Choi said the approach reduced handling costs and operational complexity while improving overall transaction economics. Revenue per transaction rose 6% year over year, while Americas RPD was essentially flat. Excluding changes in rental-length mix and other mix shifts, the company said Americas RPD would have increased about 3%.

Cunha said RPD excluding foreign-exchange effects rose 0.2% in the Americas. The company recorded two consecutive quarters of positive global RPD growth for the first time in 12 quarters, and consecutive quarterly RPD growth in the Americas for the first time in 16 quarters.

Recalls and International Pressures

Recall campaigns remained a material cost and utilization headwind. Cunha said recalls in July 2025 had grounded about 4.6% of the fleet at their peak, and new recalls announced by three original equipment manufacturers in April 2026 resulted in approximately 18,000 grounded vehicles. That exceeded the roughly 15,000 grounded vehicles at the end of 2025.

Year-to-date recall costs exceeded $50 million before lost profit, Cunha said. The company expects recall costs during the remainder of 2026 to be slightly more than half of the first-half impact, assuming parts become available at the rates promised by manufacturers.

The company’s accelerated vehicle dispositions also affected depreciation. Per-unit depreciation was $301 in the quarter, which Cunha said was unusually low because of elevated sales activity. Under a more normalized sales pattern, the company estimated per-unit depreciation would have been approximately $320.

International operations faced a more difficult environment. Revenue excluding exchange-rate effects declined 2.5% year over year, while adjusted EBITDA fell 11%. Rental days declined 2.9%, including a 10% drop in strategic accounts.

Cunha said geopolitical tensions in the Middle East pressured inbound European travel, with flight capacity down as much as 38% in April and May. International RPD rose 0.4% excluding exchange rates, or 2.2% excluding the suspended Zipcar UK operations. Increased fleet supply in several major European markets also pressured pricing, with vehicle registrations rising more than 10% in several of the company’s largest markets.

Liquidity, Debt and Pentwater Settlement

As of June 30, Avis Budget had more than $1 billion of available liquidity and about $1.9 billion of fleet funding capacity. Its net corporate leverage ratio was 7.4 times, down 100 basis points from year-end 2025. The company expects to reduce leverage by at least one full turn of adjusted EBITDA by the end of 2026.

During the quarter, the company issued $300 million of senior notes due in 2031 and used proceeds to partially redeem notes due in 2027, reducing that maturity from $650 million to $350 million. It also extended the maturity of its $2 billion revolving credit facility from December 2028 to June 2031 and added a temporary $200 million facility.

The company expects to receive $650 million in cash under its short-swing profit settlement with Pentwater, subject to final court approval. Choi said the company expects the matter to be resolved by year-end. Avis Budget plans to use part of the proceeds to retire the remaining $350 million of senior notes due in 2027.

Third-Quarter Outlook and Strategic Initiatives

Avis Budget reiterated its full-year adjusted EBITDA guidance of $850 million to $1 billion. Choi said the Americas fleet is expected to remain down by a similar mid-single-digit percentage in the third quarter, with utilization improvements offsetting some of the impact on rental days. The company expects RPD to be roughly flat year over year as it continues to favor longer-duration, higher-value transactions.

The company also reported progress in autonomous vehicle operations and premium rentals. Choi corrected an earlier statement during the call, saying Avis Budget assumed operational responsibility for Waymo’s Dallas ride-hail operations in June, rather than July. The company is responsible for vehicle maintenance, uptime, charging and real-estate infrastructure, while Waymo handles the technology and customer acquisition.

In addition, Avis First, the company’s premium rental offering, expanded to Orlando, Washington Dulles, London Heathrow and Paris Charles de Gaulle. Choi said the program added select Mercedes and BMW models and has maintained an average customer rating of 4.9 out of five stars.

About Avis Budget Group (NASDAQ:CAR)

Avis Budget Group, Inc operates as a leading global provider of vehicle rental and mobility solutions. Through its two core brands, Avis® and Budget®, the company offers a broad range of rental options including daily, weekly and monthly car rentals for leisure and business travelers. In addition to traditional airport and off-airport car rental services, Avis Budget Group delivers innovative mobility platforms such as car-sharing programs and connected fleet solutions designed to meet the evolving needs of corporate, government and individual customers.

The company's roots trace back to Avis Rent a Car, founded in 1946, and Budget Rent a Car, established in 1958.

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