Business Overview

Avis Budget Group, Inc. (CAR) is a leading global provider of mobility solutions, operating three of the most recognized brands in the industry - Avis, Budget, and Zipcar. With a presence in approximately 180 countries worldwide, the company has established itself as a dominant player in the car rental and car sharing markets, catering to both commercial and leisure customers.

Avis Budget Group traces its roots back to 1946 when Avis Rent A Car System was founded with a fleet of only seven cars. The company rapidly expanded its footprint across the United States in the following decades, becoming one of the largest car rental operators in the country. In 2006, Avis Budget Group was formed through the spin-offs of Realogy and Wyndham from Cendant Corporation, allowing the company to focus solely on its core car rental and mobility businesses.

During the 2008-2009 financial crisis, Avis Budget Group faced significant challenges due to reduced travel demand and depressed used car prices. However, the company successfully navigated this downturn by optimizing its fleet, reducing costs, and maintaining strong liquidity, which allowed it to emerge from the crisis in a stronger competitive position.

In the years following the financial crisis, Avis Budget Group continued to expand globally, acquiring licensees and integrating operations in key markets around the world. The company's acquisition of Zipcar in 2013 added a leading car sharing network to its portfolio of brands, further diversifying its mobility offerings. Additionally, Avis Budget Group has invested heavily in connected car technology, data analytics, and digital customer experiences to enhance its core car rental business and adapt to evolving consumer preferences and competitive dynamics in the mobility industry.

Today, Avis Budget Group operates a fleet of approximately 695,000 vehicles and completed over 38 million vehicle rental transactions worldwide in 2024, generating total revenues of approximately $11.8 billion.

Financials

Financial Performance

Avis Budget Group's financial performance has been marked by both successes and challenges in recent years. In 2024, the company reported total revenues of $11.8 billion, a slight decrease of 2% compared to the previous year. However, the company's net income attributable to Avis Budget Group, Inc. experienced a significant decline, swinging to a loss of $1.82 billion, or $51.23 per diluted share, compared to a profit of $1.63 billion, or $42.08 per diluted share, in 2023.

The primary driver behind this substantial loss was a non-cash impairment charge of $2.5 billion related to the company's decision to accelerate the rotation of its vehicle fleet in the Americas segment. This strategic move was aimed at aligning the company's fleet with more affordable and cost-effective model year 2025 vehicles, which are expected to provide greater stability and predictability in future fleet costs.

Despite the short-term financial impact, Avis Budget Group's management remains confident in the long-term benefits of this fleet optimization strategy. The company expects to generate no less than $1 billion in adjusted EBITDA in 2025 and beyond, as the newer, more cost-effective vehicles are integrated into the fleet and operational efficiencies are realized.

For the full year 2024, Avis Budget Group achieved $628 million in adjusted EBITDA. However, excluding the $2.5 billion non-cash asset impairment and other related charges in Q4 2024, their adjusted EBITDA would have been approximately $850 million for the full year 2024.

In the most recent quarter (Q4 2024), the company reported revenue of $2.66 billion, representing a 2% year-over-year decrease. The net loss for the quarter was $1.96 billion, primarily due to the aforementioned impairment charges.

Liquidity

As of December 31, 2024, Avis Budget Group had $534 million of available cash and cash equivalents. The company also had access to $503 million of available borrowing capacity under its revolving credit facility, providing total liquidity of approximately $1 billion. With additional uncommitted facilities, the company's total liquidity reached approximately $1.1 billion.

The company's vehicle rental fleet averaged approximately 695,000 vehicles in 2024, with the majority being "risk vehicles" acquired outside of manufacturer repurchase and guaranteed depreciation programs. Fleet costs, which include vehicle depreciation, lease charges, and gains/losses on vehicle sales, represented approximately 21% of the company's total expenses in 2024.

Operational Initiatives

Avis Budget Group has been proactive in adapting to the evolving mobility landscape, investing in various initiatives to enhance its customer experience, drive operational efficiencies, and position the company for long-term growth.

One of the key initiatives is the development and deployment of proprietary in-life fleet technologies, which the company has been piloting in select markets. These digital tools are designed to provide better visibility into vehicle dispositions, enable more timely repairs, and improve vehicle movements, ultimately leading to increased fleet availability and utilization.

Additionally, the company has continued to enhance its mobile application, offering customers a more dynamic and user-friendly experience. The latest version of the app, launched in October 2024, provides features such as a new rental dashboard, quick access to trip details, and seamless integration with the company's ancillary product offerings.

Avis Budget Group has also been expanding its partnerships and marketing initiatives to further strengthen its brand recognition and customer loyalty. In 2024, the company announced the launch of "Xander Embedded," an exclusive content series featuring professional golfer Xander Schauffele, who serves as an Avis ambassador. This initiative aligns with the company's "Avis Plan On Us" brand campaign, providing customers with unique behind-the-scenes access and content.

Competitive Landscape and Risks

The mobility industry in which Avis Budget Group operates is highly competitive, with price being a significant factor. The company faces competition from established players such as Enterprise Holdings, Hertz Global Holdings, and Europcar Mobility Group, as well as emerging players in the ride-hailing and car-sharing sectors.

Avis Budget Group's financial performance is also susceptible to various macroeconomic factors, including fluctuations in travel demand, changes in fuel prices, and currency exchange rate movements. The company's global operations expose it to risks related to political, economic, and commercial instability in the countries in which it operates.

Additionally, the company faces risks related to liability and insurance, as its global operations expose it to various claims, lawsuits, and other legal proceedings. Avis Budget Group also relies on third-party distribution channels, such as online travel agencies and global distribution systems, which can impact its financial condition and results of operations.

Segment Performance

Avis Budget Group operates three primary reportable business segments: Americas, International, and Corporate and other.

The Americas segment consists primarily of vehicle rental operations in North America, South America, Central America and the Caribbean, car sharing operations in certain of these markets, and licensees in the areas in which the company does not operate directly. In 2024, the Americas segment generated $9.11 billion in revenues, representing 77% of the company's total revenues. Adjusted EBITDA for the Americas segment was $551 million.

The International segment consists primarily of vehicle rental operations in Europe, the Middle East, Africa, Asia and Australasia, car sharing operations in certain of these markets, and licensees in the areas in which the company does not operate directly. In 2024, the International segment generated $2.68 billion in revenues, representing 23% of the company's total revenues. Adjusted EBITDA for the International segment was $161 million.

The Corporate and other segment includes unallocated corporate expenses which are not attributable to a particular reportable segment. In 2024, the Corporate and other segment had an Adjusted EBITDA of $84 million.

Outlook and Conclusion

Despite the challenges faced in 2024, Avis Budget Group remains focused on executing its strategic initiatives to drive long-term growth and profitability. The company's accelerated fleet rotation strategy, combined with investments in technology and customer experience enhancements, are expected to contribute to sustainable adjusted EBITDA growth in 2025 and beyond.

For Q1 2025, Avis Budget Group expects an adjusted EBITDA loss of around $100 million, largely due to elevated fleet costs and calendar shifts. However, the company anticipates fleet costs per unit per month to significantly drop, from around $400 in Q1 to under $350 in Q2, and around $300 by the end of 2025. For the full year 2025, the company expects to generate no less than $1 billion in adjusted EBITDA.

Furthermore, Avis Budget Group expects their free cash flow to be "really, really solid" in 2025 and anticipates their net corporate leverage ratio to be back closer to normalized levels by the end of 2025.

As the mobility industry continues to evolve, Avis Budget Group is well-positioned to capitalize on emerging trends, such as the growing demand for electric and autonomous vehicles, as well as the increasing preference for shared mobility solutions. By leveraging its strong brand recognition, diversified portfolio of offerings, and commitment to innovation, the company is poised to maintain its position as a leading player in the global mobility landscape.