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    CAR
    Earnings call· Jun 2026(Q2 FY26)

    AVIS BUDGET GROUP Q2 FY26 earnings call CAR

    Jul 29, 2026 Source

    Executive summary

    Avis Budget Group Q2 FY26 — Strategic Fleet Reduction Drives Profitability Amidst Soft Demand

    Avis Budget Group strategically reduced its fleet in Q2 FY26 in response to softening demand, prioritizing profitability and asset utilization over volume. This disciplined approach, coupled with technology investments, led to record utilization and adjusted EBITDA growth in the Americas despite revenue declines. The company also secured a significant legal settlement and is focused on deleveraging and optimizing its asset management approach for future quarters.

    Highlights

    5

    • Adjusted EBITDA grew 7.7% year-over-year in Americas despite revenue decline.

    • Achieved highest second quarter utilization globally with 73.2% in Americas.

    • Delivered 2 consecutive quarters of positive global RPD growth for the first time in 12 quarters.

    • Reached a settlement agreement with Pentwater for $650 million in cash.

    • Expanded Avis First premium offering to additional major airport locations including Orlando, Washington Dulles, London Heathrow, and Paris Charles de Gaulle.

    Concerns

    4

    • Americas fleet finished the quarter down 5% year-over-year due to demand deceleration.

    • International segment revenue declined 2.5% year-over-year (excluding FX) and adjusted EBITDA declined 11% year-over-year.

    • Recall-related constraints impacted the business, grounding approximately 18,000 vehicles and costing over $50 million year-to-date.

    • Net corporate leverage ratio of 7.4x remains high, though down 100 bps since year-end 2025.

    Guidance & targets

    6
    CategoryTargetConfidence
    Adjusted EBITDA
    $850 million to $1 billion
    high materiality
    High
    Net corporate leverage ratio reduction
    at least a full turn of adjusted EBITDA
    high materiality
    High
    Use of Pentwater settlement proceeds
    retiring the remaining $350 million senior notes due in 2027
    high materiality
    High
    Americas fleet size
    down by a similar amount year-over-year
    medium materiality
    High
    RPD (Americas)
    roughly flat year-over-year
    medium materiality
    High
    Adjusted EBITDA growth
    year-over-year growth
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Americas
    Performance underscores that disciplined fleet execution can support profitability even in a softer demand environment. Decline in rental days was significantly less than fleet reduction due to utilization improvement.
    Rental days: -2.1% YoYFleet size: -5.4% YoYUtilization: 73.2%Utilization improvement: 250 bpsRPD (ex-FX): +0.2% YoYRPD (ex-mix shift): +3% YoY
    		declined 1.9%-1.9%—adjusted EBITDA grew 7.7% year-over-year
    International
    Faced a more challenging operating environment due to weakness in commercial segments, geopolitical developments impacting inbound travel, and elevated fleet supply in key markets.
    Rental days: -2.9% YoYRPD (ex-FX): +0.4% YoYRPD (ex-FX, ex-Zipcar U.K.): +2.2% YoYStrategic accounts decline: -10% YoYFlight capacity to Europe (April/May): -38%
    		declined 2.5% year-over-year (ex-FX)-2.5% (ex-FX)—adjusted EBITDA declined 11% year-over-year

    Operational metrics

    25
    Adjusted EBITDA
    $850M to $1Breiterated full year guidance
    FY26

    Reiterating full year guidance despite changed business environment.

    Adjusted EBITDA
    exceeded plan
    H1 2026

    Exceeded adjusted EBITDA plan for the first half of 2026.

    Adjusted EBITDA growth
    year-over-year growth
    Q3

    Confidence in year-over-year adjusted EBITDA growth in the third quarter.

    Adjusted EBITDA margin
    highest in last 3 years
    Q2

    Achieved highest second quarter adjusted EBITDA margin in the last 3 years.

    Vehicle utilization
    73.2%highest second quarter utilization level in company history
    Q2

    Improvement made possible by technology deployments, operating discipline and asset management mindset.

    Vehicle utilization
    recordimproved sequentially and year-over-year
    Q2

    Achieved record second quarter utilization globally.

    RPD growth
    positivefirst time in 12 quarters
    2 consecutive quarters

    Inflection even more pronounced in Americas, where consecutive quarterly RPD growth had not been achieved in 16 quarters.

    RPD (ex-mix shift)
    up nearly 3%year-over-year
    Q2

    If the same length of rental mix as 2Q '25 had been maintained.

    RPD (reported)
    essentially flatyear-over-year
    Q2

    Deliberate trade-off to optimize for revenue per transaction.

    Revenue per transaction
    up 6%year-over-year
    Q2

    Reflects the deliberate choice to optimize for longer duration, higher contribution transactions.

    Per unit depreciation
    $301unusually low
    Q2

    Due to elevated sales activity in the quarter. Under a more normalized sales pattern, estimated at $320.

    Available liquidity
    more than $1B
    as of June 30
    Fleet funding capacity
    $1.9B
    as of June 30
    Net corporate leverage ratio
    7.4xdown 100 bps since year-end 2025
    as of June 30

    Company remains focused on deleveraging towards normalized levels.

    Recall-related costs
    more than $50M
    year-to-date

    Directly attributable costs, before considering lost profit.

    Grounded vehicles due to recalls
    18,000exceeded 15,000 vehicles exited 2025 with
    Q2

    Notified in April 2026 of additional recalls from 3 different OEMs.

    TSA check-ins deceleration
    -1.3%from flat in April to -70 bps in May
    June

    Against backdrop of broader consumer uncertainty, higher travel costs and geopolitical volatility.

    Overseas visitors to U.S.
    down 8%
    Q2

    Based on CBP I-94 data.

    Flight capacity to Europe
    down as much as 38%
    April and May

    Pressured inbound travel to Europe due to geopolitical developments, particularly Middle East tensions.

    New vehicle registration growth
    more than 10%
    Q2

    Created additional industry capacity and placed pressure on pricing.

    Revolving credit facility extension
    $2Bfrom December 2028 to June 2031
    June 29

    Strengthened liquidity position.

    Senior notes issuance
    $300M
    May 29

    Reduced 2027 maturity from $650M to $350M.

    AESOP term ABS debt issuance
    $650M
    June

    Demonstrating continued capital markets confidence.

    Canadian term ABS debt issuance
    $200M
    June

    Demonstrating continued capital markets confidence.

    Canadian bank facility renewal
    CAD 580M
    June

    Product announcements

    2
    ProductTypeDetails
    Avis Firstexpansion
    Autonomous Ride-Hail Operationslaunch

    Deals & partnerships

    2
    PentwaterSettlement agreement related to short-swing profits$650M cash

    Pentwater agreed to pay Avis $650 million in cash.

    WaymoAutonomous ride-hail operations

    Launched autonomous ride-hail operations in Dallas, with Avis teams assuming operational responsibility in June.

    Risks & headwinds

    5
    Softer-than-expected demand environmentQ2, continuing into Q3

    TSA check-ins decelerated from flat in April to negative 70 basis points in May to negative 1.3% in June; Overseas visitors to the U.S. down 8% in Q2

    Mitigation: Accelerated vehicle dispositions, proactive fleet rightsizing, disciplined fleet execution, prioritizing profitability and returns over volume.

    Recall-related constraintsQ2, continuing into H2

    Approximately 18,000 grounded vehicles in Q2; more than $50 million of directly attributable costs year-to-date

    Mitigation: Utilization improvement despite constraints, operational execution.

    Elevated fleet supply in international marketsQ2, continuing into Q3

    Vehicle registration grew more than 10% in several largest European markets

    Mitigation: Commitment to mix shift strategy toward higher return leisure demand, reducing cost to acquire demand through digital channels.

    Geopolitical developmentsQ2

    Flight capacity down as much as 38% in April and May to Europe

    Mitigation: Focus on improving mix while reducing the cost to acquire demand.

    Higher interest rates and elevated vehicle costsOngoing, impacting future refinancing

    Refinancing cost likely 100-125 bps higher than existing fixed-rate debt

    Mitigation: Delaying refinancing of low-cost obligations, opportunistic approach, allocating excess cash flow to debt repayment.

    What to watch in Q3 FY26

    5

    Net corporate leverage ratio

    by the end of 2026
    Current7.4x
    Targetreduced by at least a full turn of adjusted EBITDA

    Why it matters

    Deleveraging is a key priority for the company to reach normalized levels and improve financial health.

    Our net corporate leverage ratio of 7.4x is down 100 basis points since year-end in 2025. We remain focused on deleveraging towards normalized levels during the balance of the year and expect to reduce leverage by at least a full turn of adjusted EBITDA by the end of 2026.

    Q&A highlights

    5

    Asked about further cost reductions given lower demand and if AV ownership decisions are accelerating.

    Management stated cost discipline is foundational and contributed to profitability, while continuing investments in future growth. Regarding AVs, they are not accelerating ownership decisions, keeping both managing fleets on others' balance sheets and purchasing vehicles as options, as the ecosystem is still evolving.

    “I don't think that anything is being accelerated right now in terms of having to make that decision. The environment in the ecosystem is still evolving currently.”

    asked by Chris Woronka · answered by Brian Choi

    2 min read7 chapters

    Detailed Narrative

    01

    Strategic Fleet Management & Utilization

    In response to softening demand signals, Avis Budget Group proactively accelerated vehicle dispositions in Q2 FY26, resulting in the Americas fleet being down 5% year-over-year. This strategic decision, driven by an asset management mindset, prioritized profitability and returns over rental days, leading to a record 73.2% utilization in the Americas, despite a 2.1% decline in rental days. The company deliberately optimized for revenue per transaction over revenue per day by fulfilling more weekly business, which creates better overall transaction economics when supply is tight.

    02

    Pentwater Settlement

    Avis reached a settlement agreement with Pentwater for $650 million in cash related to short-swing profits. This settlement, pending final court approval, is expected to be resolved by year-end and represents a meaningful recovery for shareholders. The company plans to use a portion of these proceeds to retire $350 million of senior notes due in 2027.

    03

    Waymo Partnership Expansion

    The partnership with Waymo achieved a significant milestone with the launch of autonomous ride-hail operations in Dallas, where Avis teams assumed operational responsibility in June. The company is applying early lessons from Dallas to develop a repeatable operating model focused on safety, customer experience, and operational excellence, with discussions ongoing for future market expansions.

    04

    Avis First Premium Offering

    Avis First, the premium first-class rental offering, continues to gain traction, expanding to additional major airport locations including Orlando, Washington Dulles, London Heathrow, and Paris Charles de Gaulle. The program also broadened its vehicle portfolio with high-demand models like Mercedes and BMW, maintaining strong customer satisfaction with an average rating of 4.9 out of 5 stars.

    05

    International Market Challenges

    The International segment faced a more challenging operating environment, with revenues declining 2.5% year-over-year (excluding FX) and adjusted EBITDA down 11%. This was attributed to pronounced weakness in commercial segments, geopolitical developments impacting inbound travel to Europe (flight capacity down 38% in April/May), and elevated fleet supply in several key markets, leading to a more competitive pricing environment.

    06

    Debt Refinancing & Liquidity

    Avis Budget Group strengthened its financial position by executing several refinancing transactions. This included issuing $300 million of senior notes due 2031, extending the $2 billion revolving credit facility to June 2031, and tactical refinancings across vehicle financing programs. The company maintains over $1 billion in available liquidity and $1.9 billion in fleet funding capacity, with a focus on deleveraging.

    07

    Recall-Related Constraints

    The company continued to manage significant recall-related constraints, with approximately 18,000 grounded vehicles in Q2 2026, exceeding the 15,000 at the end of 2025. These recalls have represented over $50 million in directly attributable costs year-to-date, posing a material headwind, though utilization improvements were achieved despite these challenges.

    AI-generated summary of the company’s earnings call. Not investment advice.