What Avis Budget Group (CAR) Said on Its Q3 Earnings Call

Key Points

• Weaker-than-expected travel demand, especially in August, pushed Q3 adjusted EBITDA down 8% year over year to $513 million—about $50 million below expectations. Revenue declined 2%, as expenses did not adjust quickly enough to softer demand.
• Avis reduced fleet size while improving utilization: Americas utilization rose 2.8 percentage points to 74.1%, a 20-year Q3 high. However, vehicle recalls lowered Americas utilization by 2.1 percentage points and grounded vehicles incurred $23 million in quarterly costs.
• The company expects 2026 adjusted EBITDA of about $850 million, at the low end of its prior range, and anticipates low-single-digit revenue growth in Q4. It also expects to reduce corporate debt to approximately $5.7 billion by year-end after redeeming its remaining 2027 notes.

Avis Budget Group NASDAQ: CAR reported third-quarter adjusted EBITDA of $513 million, down 8% from a year earlier and about $50 million below the company’s prior expectations, as weaker travel demand in August pressured rental volume, revenue mix and operating leverage.

Chief Executive Officer Brian Choi said the company’s operating metrics generally aligned with its July forecast. Americas fleet declined 6.5% year over year, while utilization improved 2.8 percentage points, limiting the decline in rental days to less than 3%. Consolidated per-unit fleet costs were $315 per month, the midpoint of Avis Budget’s expected range.

However, Choi said demand weakness was more pronounced than anticipated, particularly during August. TSA check-ins declined 4.4% that month, compared with declines of 2.1% in July and 2% in September. Combined August and September TSA volumes fell 3.3% year over year, even after accounting for the Labor Day calendar shift, according to Choi. International inbound travel to the U.S., measured by CBP I-94 data, declined 8% in the quarter.

Revenue and EBITDA decline amid softer travel demand

Total revenue declined 2% year over year, while adjusted EBITDA fell to $513 million. Chief Financial Officer Daniel Cunha said the revenue shortfall and operating expenses that did not adjust quickly enough to August demand trends drove the EBITDA miss.

In the Americas segment, revenue fell 3% to $2.55 billion and adjusted EBITDA decreased 8% to $365 million. The segment’s EBITDA was approximately $33 million below the company’s internal expectations, including about $19 million related to lower rental days and roughly $14 million from weaker operating leverage.

Americas revenue per day, excluding exchange-rate effects, rose 30 basis points year over year. Choi and Cunha said the company continued to prioritize longer-duration rentals and contractual commercial business while managing a constrained fleet. That mix reduced reported RPD, with longer-duration rentals lowering the metric by about 100 basis points and a heavier commercial weighting reducing it by another 40 basis points, Cunha said.

Despite those pressures, the company exited September with Americas RPD up nearly 4% year over year. Cunha said October and November bookings were tracking at similar mid-single-digit pricing levels.

• Americas utilization reached 74.1% in the third quarter, up 280 basis points year over year.
• Global utilization increased 200 basis points to 74%.
• International revenue, excluding exchange-rate effects, declined 1%, while adjusted EBITDA fell 5% to $180 million.
• International RPD increased 2.5%, supported by ancillary sales, while rental days declined 1.7% after adjusting for the closure of Zipcar U.K.

Choi said Americas recorded its highest third-quarter utilization in 20 years, supported by the company’s Compass operating system, which has been deployed across its Americas fleet. The platform is intended to guide field operations on vehicle deployment, shuttling and supply-chain decisions.

Fleet management and recall costs

Avis Budget continued to reduce fleet levels as travel demand softened, aiming to keep supply below demand rather than retain excess vehicles. Choi said the company’s fleet-management systems have enabled it to adjust vehicle supply in real time and improve utilization with fewer vehicles.

Still, vehicle recalls remained a material cost. Cunha said no-fix recalls reduced Americas utilization by 210 basis points in the third quarter. The company entered the quarter with about 18,000 vehicles grounded and ended it with approximately 14,000 grounded vehicles. Those vehicles carried roughly $23 million in depreciation, interest and related costs during the quarter, bringing the year-to-date total to $79 million before lost profits.

Americas per-unit fleet costs increased 7% year over year to $330 per month, reflecting lower residual values in the used-vehicle market and timing effects. Cunha said accelerated vehicle dispositions during the second quarter generated $24 million of gains and avoided what would have been $84 million in residual-value losses had the company retained those vehicles.

International fleet costs moved in the opposite direction. Per-unit fleet costs, excluding exchange-rate effects, declined 2% to $279 per month as the company rotated out older, higher-cost vehicles.

Revenue management investment and cost initiatives

Choi said Avis Budget has begun a significant modernization of its revenue-management capabilities. Its existing Demand Fleet Pricing system was developed more than 15 years ago and was not designed to optimize pricing, rental length, vehicle availability and transaction profitability together, he said.

The company expects to begin demonstrating tangible financial benefits from the modernization by the summer of 2027. Choi said Avis Budget is increasingly focused on contribution and return on assets rather than rental days or headline RPD alone.

Cunha also outlined cost initiatives involving vehicle damage, third-party claims, procurement, maintenance technology and the company’s technology stack. He said some savings would be reinvested to support future growth and operational improvements.

The company also redesigned its tolling program during the quarter, moving from a fully outsourced approach to a model with dedicated accounts with toll authorities, enhanced visibility and a single customer contact point.

Liquidity, debt reduction and outlook

As of Sept. 30, Avis Budget had $866 million of available liquidity and about $2.5 billion of fleet funding capacity. The company received $650 million on Oct. 5 from the Pentwater short-swing profit settlement. It said the proceeds allowed a temporary $200 million revolving credit facility to terminate as designed.

On Nov. 2, the company issued a redemption notice for the remaining $250 million of its 5.750% senior notes due in 2027. Avis Budget expects the repayment to reduce corporate debt to approximately $5.7 billion by year-end.

The company now expects full-year 2026 adjusted EBITDA of approximately $850 million, at the low end of its July range. That outlook implies fourth-quarter adjusted EBITDA of about $165 million, compared with $5 million in the prior-year fourth quarter.

For the fourth quarter, Avis Budget expects per-unit fleet costs of $310 to $320 per month and said it anticipates low-single-digit consolidated revenue growth. Choi said October’s roughly 7% decline in Americas fleet was offset partly by higher utilization, limiting rental-day declines to about 3%, while a 4% increase in RPD supported positive revenue growth.

Choi said the company views $1 billion of sustainable long-term EBITDA as a “must-have” level for the business, though Avis Budget said it will provide formal 2027 guidance with its fourth-quarter results.

About Avis Budget Group (NASDAQ:CAR)

Avis Budget Group, Inc is a provider of mobility and vehicle-rental services. Through its Avis and Budget brands, the company offers car and truck rentals to business and leisure customers, serving travelers through airport and neighborhood locations as well as digital booking channels.

The company also operates Zipcar, a car-sharing service that provides members with access to vehicles for short-term use. Its brand portfolio has also included Payless, which serves value-oriented rental customers.

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