# Avis Budget Group, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Avis Budget Group, Inc.](/companies/car.md) (CIK 723612)
- Form: 10-Q
- Filed: 2023-11-02
- Accepted by EDGAR: Nov 2, 2023, 09:26 ET
- Period: 2023-09-30
- Accession: 0000723612-23-000054
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/723612/000072361223000054/car-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/723612/000072361223000054/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $3.56bn | us-gaap:Revenues |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $9.24bn | us-gaap:Revenues |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $397.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $1.10bn | us-gaap:SellingGeneralAndAdministrativeExpense |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $80.0m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $221.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $130.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $377.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $626.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $1.37bn | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $16.78 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $34.71 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $16.96 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $35.11 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 37,300,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 39,500,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $3.04bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $690.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $572.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $2.23bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $32.30bn | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $2.76bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2023-09-30 | $4.74bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-09-30 | $30.0m | us-gaap:LongTermDebtCurrent |
| Short-term borrowings | at 2023-09-30 | $30.0m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2023-09-30 | −$33.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 34,370 characters.

*The following discussion should be read in conjunction with our Consolidated Condensed Financial Statements and accompanying Notes included in this Quarterly Report on Form 10-Q, and with our 2022 Form 10-K. Our actual results of operations may differ materially from those discussed in forward-looking statements as a result of various factors, including those discussed in “Forward-Looking Statements”. See “Forward-Looking Statements” and “Risk Factors” for additional information. Unless otherwise noted, all dollar amounts in tables are in millions.*

### OVERVIEW

### Our Company

We operate three of the most globally recognized brands in mobility solutions, Avis, Budget and Zipcar, together with several other brands well recognized in their respective markets. We are a leading vehicle rental operator in North America, Europe, Australasia and certain other regions we serve, with an average rental fleet of approximately 754,000 vehicles in third quarter 2023. We also license the use of our trademarks to licensees in the areas in which we do not operate directly. We and our licensees operate our brands in approximately 180 countries throughout the world.

### Our Segments

We categorize our operations into two reportable business segments: *Americas*, consisting primarily of our vehicle rental operations in North America, South America, Central America and the Caribbean, car sharing operations in certain of these markets, and licensees in certain areas in which we do not operate directly; and *International*, consisting primarily of our vehicle rental operations in Europe, the Middle East, Africa, Asia and Australasia, car sharing operations in certain of these markets, and licensees in certain areas in which we do not operate directly.

### Business and Trends

Our strategy continues to primarily focus on costs and customer experience to strengthen our company, enable resilience, and deliver stakeholder value. During the three months ended September 30, 2023, we generated revenues of $3.6 billion, net income of $627 million and Adjusted EBITDA of $907 million. These results were driven by increased volume, offset by increased fleet costs and sustained inflationary pressures on costs.

We continue to be susceptible to a number of industry-specific and global macroeconomic factors that may cause our actual results of operations to differ from our historical results of operations or current expectations. The factors and trends that we currently believe are or will be most impactful to our results of operations and financial condition include the following: interest rates, inflationary impact on items such as commodity prices and wages, disruption in the supply of new vehicles, used car values, and an economic downturn that may impact travel demand, all of which may be exacerbated by the ongoing military conflicts in the Middle East and Eastern Europe. We continue to monitor the potential favorable or unfavorable impacts of these and other factors on our business, operations, financial condition, and future results of operations.

### RESULTS OF OPERATIONS

We measure performance principally using the following key metrics: (i) rental days, which represent the total number of days (or portion thereof) a vehicle was rented, (ii) revenue per day, which represents revenues divided by rental days, (iii) vehicle utilization, which represents rental days divided by available rental days, with available rental days being defined as average rental fleet times the number of days in the period, and (iv) per-unit fleet costs, which represent vehicle depreciation, lease charges and gain or loss on vehicle sales, divided by average rental fleet. Our rental days, revenue per day and vehicle utilization metrics are all calculated based on the actual rental of the vehicle during a 24-hour period. We believe that this methodology provides management with the most relevant metrics in order to effectively manage the performance of the business. Our calculation may not be comparable to the calculation of similarly titled metrics by other companies. We present currency exchange rate effects to provide a method of assessing how our business performed excluding the effects of foreign currency rate fluctuations. Currency exchange rate effects are calculated by translating the current period results at the prior period average exchange rate plus any related gains and losses on currency hedges.

We assess performance and allocate resources based upon the separate financial information of our operating segments. In identifying our reportable segments, we also consider the nature of services provided by our operating segments, the geographical areas in which our segments operate and other relevant factors. Management evaluates the operating results of each of our reportable segments based upon revenues and “Adjusted EBITDA,” which we define as income (loss) from continuing operations before non-vehicle related depreciation and amortization; any impairment charges; restructuring and other related charges; early extinguishment of debt costs; non-vehicle related interest; transaction-related costs, net; charges for legal matters, net, which includes amounts recorded in excess of $5 million related to class action lawsuits and personal injury matters; non-operational charges related to shareholder activist activity, which include third party advisory, legal and other professional fees; COVID-19 charges, net; cloud computing costs; other (income) expense, net, and income taxes.

We believe Adjusted EBITDA is useful as a supplemental measure in evaluating the performance of our operating businesses and in comparing our results from period to period. We also believe that Adjusted EBITDA is useful to investors because it allows them to assess our results of operations and financial condition on the same basis that management uses internally. Adjusted EBITDA is a non-GAAP measure and should not be considered in isolation or as a substitute for net income or other income statement data prepared in accordance with U.S. GAAP. Our presentation of Adjusted EBITDA may not be comparable to similarly titled measures used by other companies.

During the nine months ended September 30, 2023:

- Our revenues totaled $9.2 billion, consistent with the similar period in 2022.
- Our net income was $1.4 billion, representing a decrease of $968 million year-over-year, primarily due to increased fleet costs and sustained inflationary pressures on costs.
- Our Adjusted EBITDA was $2.2 billion, representing a decrease of $1.3 billion year-over-year.

### Three Months Ended September 30, 2023 vs. Three Months Ended September 30, 2022

Our consolidated condensed results of operations comprised of the following:

|  | Three Months Ended September 30, 2023 | 2022 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| **Revenues** | $3,564 | $3,547 | $17 | 0% |
| **Expenses** |  |  |  |  |
| Operating | 1,543 | 1,464 | 79 | 5% |
| Vehicle depreciation and lease charges, net | 517 | 134 | 383 | 286% |
| Selling, general and administrative | 397 | 384 | 13 | 3% |
| Vehicle interest, net | 208 | 107 | 101 | 94% |
| Non-vehicle related depreciation and amortization | 55 | 59 | (4) | (7%) |
| Interest expense related to corporate debt, net: |  |  |  |  |
| Interest expense | 80 | 64 | 16 | 25% |
| Early extinguishment of debt | 1 | — | 1 | n/m |
| Restructuring and other related charges | 2 | 2 | — | 0% |
| Transaction-related costs, net | 3 | — | 3 | n/m |
| Other (income) expense, net | 1 | (9) | 10 | n/m |
| Total expenses | 2,807 | 2,205 | 602 | 27% |
| **Income before income taxes** | 757 | 1,342 | (585) | (44%) |
| Provision for income taxes | 130 | 311 | (181) | (58%) |
| **Net income** | 627 | 1,031 | (404) | (39%) |
| Less: net income (loss) attributable to non-controlling interests | 1 | (3) | 4 | n/m |
| **Net income attributable to Avis Budget Group, Inc.** | $626 | $1,034 | $(408) | (39%) |

n/m - Not Meaningful

Revenues were consistent with the similar period in 2022, primarily due to a 5% increase in volume, offset by a 5% decrease in revenue per day, excluding exchange rate effects. Total expenses increased 27% during the three months ended September 30, 2023 compared to the similar period in 2022, primarily due to increased fleet and interest costs. Our effective tax rates were a provision of 17.2% and 23.2% for the three months ended September 30, 2023 and 2022, respectively. As a result of these items, our net income decreased by $408 million compared to the similar period in 2022. For the three months ended September 30, 2023 and 2022, we reported earnings per diluted share of $16.78 and $21.67, respectively.

Operating expenses increased to 43.3% of revenue during the three months ended September 30, 2023 compared to 41.3% during the similar period in 2022, primarily due to an increase in volume, a decrease in revenue per day, excluding exchange rate effects, and cost inflation. Vehicle depreciation and lease charges increased to 14.5% of revenue during the three months ended September 30, 2023 compared to 3.8% during the similar period in 2022, primarily due to increased per unit fleet costs, excluding exchange rate effects, driven by increased fleet levels, increased depreciation rates, and a decrease in the gain on sale of vehicles. Selling, general and administrative costs were 11.1% of revenue, consistent with the similar period in 2022, primarily due to increased marketing costs, offset by a decrease in other selling, general and administrative costs. Vehicle interest costs increased to 5.8% of revenue during the three months ended September 30, 2023, compared to 3.0% during the similar period in 2022, primarily due to rising interest rates and additional funding for vehicles.

Following is a more detailed discussion of the results of each of our reportable segments and reconciliation of net income to Adjusted EBITDA:

*Three Months Ended September 30,*

| 2023 Revenues Adjusted EBITDA | 2022 Revenues | Adjusted EBITDA |
| --- | ---: | ---: |
| Americas $2,736 $740 | $2,703 | $1,185 |
| International 828 196 | 844 | 291 |
| Corporate and Other (a) — (29) | — | (16) |
| Total Company $3,564 $907 | $3,547 | $1,460 |
| **Reconciliation to Adjusted EBITDA** |  |  |
|  | **2023** | **2022** |
| Net income | $627 | $1,031 |
| Provision for income taxes | 130 | 311 |
| Income before income taxes | 757 | 1,342 |
| Add: Non-vehicle related depreciation and amortization | 55 | 59 |
| Interest expense related to corporate debt, net |  |  |
| Interest expense | 80 | 64 |
| Early extinguishment of debt | 1 | — |
| Restructuring and other related charges | 2 | 2 |
| Transaction-related costs, net | 3 | — |
| Other (income) expense, net (b) | 1 | (9) |
| Reported within operating expenses: |  |  |
| Cloud computing costs | 8 | 2 |
| Adjusted EBITDA | $907 | $1,460 |

(a) Includes unallocated corporate overhead which is not attributable to a particular segment.

(b) Primarily consists of gains or losses related to our equity investment in a former subsidiary, offset by fleet related and certain administrative services provided to the same former subsidiary.

### Americas

|  | Three Months Ended September 30, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: |
| Revenues | $2,736 | $2,703 | 1% |
| Adjusted EBITDA | 740 | 1,185 | (38%) |

Revenues increased 1% during the three months ended September 30, 2023 compared to the similar period in 2022, primarily due to a 7% increase in volume, partially offset by a 5% decrease in revenue per day.

Operating expenses increased to 44.1% of revenue during the three months ended September 30, 2023 compared to 42.7% during the similar period in 2022, primarily due to an increase in volume, a decrease in revenue per day, and cost inflation. Vehicle depreciation and lease charges increased to 13.2% of revenue during the three months ended September 30, 2023 compared to 0.5% during the similar period in 2022, primarily due to increased per-unit fleet costs, driven by increased fleet levels, increased depreciation rates, and a decrease in the gain on sale of vehicles. Selling, general and administrative costs were 9.3% of revenue, consistent with the similar period in 2022, primarily due to increased marketing costs, offset by a decrease in other selling, general and administrative costs. Vehicle interest costs increased to 6.4% of revenue during the three months ended September 30, 2023 compared to 3.5% during the similar period in 2022, primarily due to rising interest rates and additional funding for vehicles.

Adjusted EBITDA decreased 38% during the three months ended September 30, 2023 compared to the similar period in 2022, primarily due to higher per-unit fleet costs and inflationary pressures.

### International

|  | Three Months Ended September 30, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: |
| Revenues | $828 | $844 | (2%) |
| Adjusted EBITDA | 196 | 291 | (33%) |

Revenues decreased 2% during the three months ended September 30, 2023, compared to the similar period in 2022, primarily due to a 7% decrease in revenue per day, excluding exchange rate effects, partially offset by a 1% increase in volume and a $40 million positive impact from currency exchange rate movements.

Operating expenses increased to 39.4% of revenue during the three months ended September 30, 2023 compared to 36.4% during the similar period in 2022, primarily due to a decrease in revenue per day, excluding exchange rate effects, and cost inflation. Vehicle depreciation and lease charges increased to 18.7% of revenue during the three months ended September 30, 2023 compared to 14.2% during the similar period in 2022, primarily due to increased per-unit fleet costs, excluding exchange rate effects, driven by a decrease in the gain on sale of vehicles. Selling, general and administrative costs increased to 14.2% of revenue during the three months ended September 30, 2023 compared to 13.2% during the similar period in 2022, primarily due to cost inflation. Vehicle interest costs increased to 4.1% of revenue during the three months ended September 30, 2023 compared to 1.6% during the similar period in 2022, primarily due to rising interest rates and additional funding for vehicles.

Adjusted EBITDA decreased 33% during the three months ended September 30, 2023 compared to the similar period in 2022, primarily due to a decrease in revenue per day, excluding exchange rate effects, and higher per-unit fleet costs, partially offset by a $4 million positive impact from currency exchange rate movements.

### Nine Months Ended September 30, 2023 vs. Nine Months Ended September 30, 2022

Our consolidated condensed results of operations comprised the following:

|  | Nine Months Ended September 30, 2023 | 2022 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| **Revenues** | $9,244 | $9,223 | $21 | 0% |
| **Expenses** |  |  |  |  |
| Operating | 4,325 | 3,960 | 365 | 9% |
| Vehicle depreciation and lease charges, net | 1,157 | 479 | 678 | 142% |
| Selling, general and administrative | 1,099 | 1,026 | 73 | 7% |
| Vehicle interest, net | 513 | 281 | 232 | 83% |
| Non-vehicle related depreciation and amortization | 163 | 168 | (5) | (3%) |
| Interest expense related to corporate debt, net: |  |  |  |  |
| Interest expense | 221 | 181 | 40 | 22% |
| Early extinguishment of debt | 1 | — | 1 | n/m |
| Restructuring and other related charges | 7 | 16 | (9) | n/m |
| Transaction-related costs, net | 3 | 1 | 2 | n/m |
| Other (income) expense, net | 3 | (9) | 12 | n/m |
| Total expenses | 7,492 | 6,103 | 1,389 | 23% |
| **Income before income taxes** | 1,752 | 3,120 | (1,368) | (44%) |
| Provision for income taxes | 377 | 788 | (411) | (52%) |
| **Net income** | 1,375 | 2,332 | (957) | (41%) |
| Less: net income (loss) attributable to non-controlling interests | 2 | (9) | 11 | n/m |
| **Net income attributable to Avis Budget Group, Inc.** | $1,373 | $2,341 | $(968) | (41%) |

n/m - Not Meaningful

Revenues during the nine months ended September 30, 2023 were consistent with the similar period in 2022, primarily due to a 5% increase in volume, partially offset by a 4% decrease in revenue per day, excluding exchange rate effects. Total expenses increased 23% during the nine months ended September 30, 2023, compared to the similar period in 2022, primarily due to increased fleet costs, interest costs, and the impact of inflation. Our effective tax rates were a provision of 21.5% and 25.3% for the nine months ended September 30, 2023 and 2022, respectively. As a result of these items, our net income decreased by $968 million compared to the similar period in 2022. For the nine months ended September 30, 2023 and 2022, we reported earnings per diluted share of $34.71 and $46.32, respectively.

Operating expenses increased to 46.8% of revenue during the nine months ended September 30, 2023 compared to 42.9% during the similar period in 2022, primarily due to an increase in volume, a decrease in revenue per day, excluding exchange rate effects, and cost inflation. Vehicle depreciation and lease charges increased to 12.5% of revenue during the nine months ended September 30, 2023 compared to 5.2% during the similar period in 2022, primarily due to increased per unit fleet costs, excluding exchange rate effects, driven by increased fleet levels, increased depreciation rates, and a decrease in the gain on sale of vehicles. Selling, general and administrative costs increased to 11.9% of revenue during the nine months ended September 30, 2023 compared to 11.1% during the similar period in 2022, primarily due to increased marketing costs and inflation. Vehicle interest costs increased to 5.5% of revenue during the nine months ended September 30, 2023 compared to 3.0% during the similar period in 2022, primarily due to rising interest rates and additional funding for vehicles.

Following is a more detailed discussion of the results of each of our reportable segments and reconciliation of net income to Adjusted EBITDA:

*Nine Months Ended September 30,*

| 2023 Revenues Adjusted EBITDA | 2022 Revenues | Adjusted EBITDA |
| --- | ---: | ---: |
| Americas $7,180 $1,887 | $7,270 | $3,036 |
| International 2,064 372 | 1,953 | 497 |
| Corporate and Other (a) — (80) | — | (58) |
| Total Company $9,244 $2,179 | $9,223 | $3,475 |
| **Reconciliation to Adjusted EBITDA** |  |  |
|  | **2023** | **2022** |
| Net income | $1,375 | $2,332 |
| Provision for income taxes | 377 | 788 |
| Income before income taxes | 1,752 | 3,120 |
| Add: Non-vehicle related depreciation and amortization | 163 | 168 |
| Interest expense related to corporate debt, net |  |  |
| Interest expense | 221 | 181 |
| Early extinguishment of debt | 1 | — |
| Restructuring and other related charges | 7 | 16 |
| Transaction-related costs, net | 3 | 1 |
| Other (income) expense, net (b) | 3 | (9) |
| Reported within operating expenses: |  |  |
| Cloud computing costs | 24 | 6 |
| COVID-19 charges | — | (9) |
| Legal matters, net | 5 | 1 |
| Adjusted EBITDA | $2,179 | $3,475 |

(a) Includes unallocated corporate overhead which is not attributable to a particular segment.

(b) Primarily consists of gains or losses related to our equity investment in a former subsidiary, offset by fleet related and certain administrative services provided to the same former subsidiary.

### Americas

|  | Nine Months Ended September 30, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: |
| Revenues | $7,180 | $7,270 | (1%) |
| Adjusted EBITDA | 1,887 | 3,036 | (38%) |

Revenues decreased 1% during the nine months ended September 30, 2023 compared to the similar period in 2022, primarily due to a 5% decrease in revenue per day, partially offset by a 4% increase in volume.

Operating expenses increased to 47.1% of revenue during the nine months ended September 30, 2023 compared to 42.9% during the similar period in 2022, primarily due to an increase in volume, a decrease in revenue per day, and cost inflation. Vehicle depreciation and lease charges increased to 11.0% of revenue during the nine months ended September 30, 2023 compared to 2.3% during the similar period in 2022, primarily due to increased per-unit fleet costs, driven by increased fleet levels, increased depreciation rates, and a decrease in the gain on sale of vehicles. Selling, general and administrative costs were 9.7% of revenue, consistent with the similar period in 2022, primarily due to increased marketing costs, offset by a decrease in other selling, general and administrative costs. Vehicle interest costs increased to 6.0% of revenue during the nine months ended September 30, 2023 compared to 3.4% during the similar period in 2022, primarily due to rising interest rates and additional funding for vehicles.

Adjusted EBITDA decreased 38% during the nine months ended September 30, 2023 compared to the similar period in 2022, primarily due to higher per-unit fleet costs and inflationary pressures.

### International

|  | Nine Months Ended September 30, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: |
| Revenues | $2,064 | $1,953 | 6% |
| Adjusted EBITDA | 372 | 497 | (25%) |

Revenues increased 6% during the nine months ended September 30, 2023 compared to the similar period in 2022, primarily due to a 7% increase in volume and a $5 million positive impact from currency exchange rate movements, partially offset by a 1% decrease in revenue per day, excluding exchange rate effects.

Operating expenses increased to 44.8% of revenue during the nine months ended September 30, 2023 compared to 42.5% during the similar period in 2022, primarily due to a decrease in revenue per day, excluding exchange rate effects, and cost inflation. Vehicle depreciation and lease charges increased to 17.7% of revenue during the nine months ended September 30, 2023 compared to 15.9% during the similar period in 2022, primarily due to increased per-unit fleet costs, excluding exchange rate effects, driven by increased depreciation rates and a decrease in the gain on sale of vehicles. Selling, general and administrative costs increased to 15.6% of revenue during the nine months ended September 30, 2023 compared to 14.4% during the similar period in 2022, primarily due to increased marketing costs and inflation. Vehicle interest costs increased to 3.9% of revenue during the nine months ended September 30, 2023 compared to 1.9% during the similar period in 2022, primarily due to rising interest rates and additional funding for vehicles.

Adjusted EBITDA decreased 25% during the nine months ended September 30, 2023 compared to the similar period in 2022, primarily due to higher per-unit fleet costs, inflationary pressures, and a $4 million negative impact from currency exchange rate movements.

### FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

We present separately the financial data of our vehicle programs. These programs are distinct from our other activities as the assets under vehicle programs are generally funded through the issuance of debt that is collateralized by such assets. The income generated by these assets is used, in part, to repay the principal and interest associated with the debt. Cash inflows and outflows relating to the generation or acquisition of such assets and the principal debt repayment or financing of such assets are classified as activities of our vehicle programs. We believe it is appropriate to segregate the financial data of our vehicle programs because, ultimately, the source of repayment of such debt is the realization of such assets.

### FINANCIAL CONDITION

|  | September 30, 2023 | December 31, 2022 | Change |
| --- | ---: | ---: | ---: |
| Total assets exclusive of assets under vehicle programs | $9,220 | $8,499 | $721 |
| Total liabilities exclusive of liabilities under vehicle programs | 10,197 | 9,656 | 541 |
| Assets under vehicle programs | 23,084 | 17,428 | 5,656 |
| Liabilities under vehicle programs | 22,135 | 16,971 | 5,164 |
| Total stockholders’ equity | (28) | (700) | 672 |

The increases in assets and liabilities under vehicle programs are principally related to the increase in the size and cost of our vehicle rental fleet.

### LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity are cash on hand and our ability to generate cash through operations and financing activities, as well as available funding arrangements and committed credit facilities, each of which is discussed below.

In January 2023, our Avis Budget Rental Car Funding (AESOP) LLC subsidiary issued $500 million and $350 million of asset-backed notes to investors with an expected final payment date of April 2028 and October 2026, respectively, and a weighted average interest rate of 5.36% and 5.31%, respectively. The proceeds from these borrowings were used to repay maturing vehicle-backed debt and the acquisition of rental cars in the United States.

In April 2023, our Avis Budget Rental Car Funding (AESOP) LLC subsidiary issued $450 million and $550 million of asset-backed notes to investors with an expected final payment date of February 2027 and June 2028, respectively, and a weighted average interest rate of 5.67% and 5.76%, respectively. The proceeds from these borrowings were used to repay maturing vehicle-backed debt and the acquisition of rental cars in the United States.

In June 2023, our Avis Budget Rental Car Funding (AESOP) LLC subsidiary issued $476 million and $526 million of asset-backed notes to investors with an expected final payment date of April 2027 and December 2028, respectively, and a weighted average interest rate of 5.91% and 5.98%, respectively. The proceeds from these borrowings were used to repay maturing vehicle-backed debt and the acquisition of rental cars in the United States.

In July 2023, we issued €400 million of 7.25% euro-denominated Senior Notes due July 2030, at par, with interest payable semi-annually. In September 2023, we used net proceeds from the offering primarily to redeem €300 million of our outstanding 4.125% euro-denominated Senior Notes due November 2024 plus accrued interest.

In September 2023, our Avis Budget Rental Car Funding (AESOP) LLC subsidiary issued $300 million and $700 million of asset-backed notes to investors with an expected final payment date of August 2027 and February 2029, respectively, and a weighted average interest rate of 6.09% and 6.21%, respectively. The proceeds from these borrowings were used to repay maturing vehicle-backed debt and the acquisition of rental cars in the United States.

Our Board of Directors has authorized the repurchase of up to $8.1 billion of our common stock under a plan originally approved in 2013 and subsequently expanded, most recently in February 2023. Our stock repurchases may occur through open market purchases, privately negotiated transactions or trading plans pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements, restricted payment capacity under our debt instruments and other factors. The repurchase program may be suspended, modified or discontinued at any time without prior notice. The repurchase program has no set expiration or termination date. During the nine months ended September 30, 2023, we repurchased approximately 2.9 million shares of common stock at a cost of approximately $633 million (excluding excise taxes due under the Inflation Reduction Act of 2022) under the program. As of September 30, 2023, approximately $1.1 billion of authorization remained available to repurchase common stock under the program.

### CASH FLOWS

The following table summarizes our cash flows:

| Cash provided by (used in): | Nine Months Ended September 30, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: |
| Operating activities | $3,035 | $3,862 | $(827) |
| Investing activities | (6,930) | (3,576) | (3,354) |
| Financing activities | 3,978 | (138) | 4,116 |
| Effect of changes in exchange rates on cash and cash equivalents, program and restricted cash | (4) | (53) | 49 |
| Net increase in cash and cash equivalents, program and restricted cash | 79 | 95 | (16) |
| Cash and cash equivalents, program and restricted cash, beginning of period | 642 | 626 | 16 |
| Cash and cash equivalents, program and restricted cash, end of period | $721 | $721 | $— |

The decrease in cash provided by operating activities during the nine months ended September 30, 2023 compared with the similar period in 2022 is primarily due to the decrease in our net income.

The increase in cash used in investing activities during the nine months ended September 30, 2023 compared with the similar period in 2022 is primarily due to the increase in our net investment in vehicles.

The increase in cash provided by financing activities during the nine months ended September 30, 2023 compared with the similar period in 2022 is primarily due to the increase in our net borrowings under vehicle programs, offset by decreases in our repurchases of common stock and our net corporate borrowings.

### DEBT AND FINANCING ARRANGEMENTS

At September 30, 2023, we had approximately $23.4 billion of indebtedness, including corporate indebtedness of approximately $4.8 billion and debt under vehicle programs of approximately $18.7 billion. For information regarding our debt and borrowing arrangements, see Notes 1, 11 and 12 to our Consolidated Condensed Financial Statements.

### LIQUIDITY RISK

Our primary liquidity needs include the procurement of rental vehicles to be used in our operations, servicing of corporate and vehicle-related debt and the payment of operating expenses. The present intention of management is to reinvest the undistributed earnings of our foreign subsidiaries indefinitely into our foreign operations. Our primary sources of funding are operating revenue, cash received upon the sale of vehicles, borrowings under our vehicle-backed borrowing arrangements and our senior revolving credit facility, and other financing activities.

Our liquidity has in the past been, and could in the future be, negatively affected by any financial market disruptions or the absence of a recovery or worsening of the U.S. and worldwide economies, which may result in unfavorable conditions in the mobility industry, in the asset-backed financing market and in the credit markets generally. We believe these factors have affected and could further affect the debt ratings assigned to us by credit rating agencies and the cost of our borrowings. Additionally, a worsening or prolonged downturn in the worldwide economy or a disruption in the credit markets could further impact our liquidity due to (i) decreased demand and pricing for vehicles in the used-vehicle market, (ii) increased costs associated with, and/or reduced capacity or increased collateral needs under, our financings, (iii) the adverse impact of vehicle manufacturers being unable or unwilling to honor their obligations to repurchase or guarantee the depreciation on the related program vehicles and (iv) disruption in our ability to obtain financing due to negative credit events specific to us or affecting the overall debt market.

As of September 30, 2023, we had $572 million of available cash and cash equivalents and access to available borrowings under our revolving credit facility of approximately $464 million, providing us with access to an approximate $1.0 billion of total liquidity.

Our liquidity position could also be negatively impacted if we are unable to remain in compliance with the consolidated first lien leverage ratio requirement and other covenants associated with our senior credit facilities and other borrowings. As of September 30, 2023, we were in compliance with the financial covenants governing our indebtedness. For additional information regarding our liquidity risks, see Part I, Item 1A, “Risk Factors” of our 2022 Form 10-K.

### CONTRACTUAL OBLIGATIONS

Our future contractual obligations have not changed significantly from the amounts reported within our 2022 Form 10-K with the exception of our commitment to purchase vehicles, which decreased by approximately $0.4 billion from December 31, 2022, to approximately $6.3 billion as of September 30, 2023 due to seasonality. Changes to our obligations related to corporate indebtedness and debt under vehicle programs are presented above within the section titled “Liquidity and Capital Resources—Debt and Financing Arrangements” and also within Notes 11 and 12 to our Consolidated Condensed Financial Statements.

### CRITICAL ACCOUNTING ESTIMATES

### Accounting Policies

The results of the majority of our recurring operations are recorded in our financial statements using accounting policies that are not particularly subjective, nor complex. However, in presenting our financial statements in conformity with generally accepted accounting principles (GAAP), we are required to make estimates and assumptions that affect the amounts reported therein. Several of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they relate to future events and/or events that are outside of our control. If there is a significant unfavorable change to current conditions, it could result in a material adverse impact to our consolidated results of operations, financial position and liquidity. We believe that the estimates and assumptions we used when preparing our financial statements were the most appropriate at that time. Presented within the section titled “Critical Accounting Estimates” of our 2022 Form 10-K are the accounting policies (related to goodwill and other indefinite-lived intangible assets, vehicles, income taxes and public liability, property damage and other insurance liabilities) that we believe require subjective and complex judgments that could potentially affect reported results. There have been no significant changes to those accounting policies or our assessment of which accounting policies we would consider to be critical accounting policies.

### New Accounting Standards

For detailed information regarding new accounting standards and their impact on our business, see Note 1 to our Consolidated Condensed Financial Statements.

## Market risk

As filed, 1,277 characters.

We are exposed to a variety of market risks, including changes in currency exchange rates, interest rates and gasoline prices. We assess our market risks based on changes in interest and currency exchange rates utilizing a sensitivity analysis that measures the potential impact on earnings, fair values and cash flows based on a hypothetical 10% change (increase and decrease) in interest and foreign currency exchange rates. We used September 30, 2023 market rates to perform a sensitivity analysis separately for each of these market risk exposures. We have determined, through such analyses, that the impact of a 10% change in interest or currency exchange rates on our results of operations, balance sheet and cash flows would not be material. Additionally, we have commodity price exposure related to fluctuations in the price of unleaded gasoline. We anticipate that such commodity risk will remain a market risk exposure for the foreseeable future. We determined that a 10% change in the price of unleaded gasoline would not have a material impact on our earnings for the period ended September 30, 2023. For additional information regarding our long-term borrowings and financial instruments, see Notes 11, 12 and 17 to our Consolidated Condensed Financial Statements.

## Controls and procedures

As filed, 938 characters.

(a) *Disclosure Controls and Procedures.* Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2023.

(b) *Changes in Internal Control Over Financial Reporting.* During the third quarter of 2023, there was no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 215 characters.

During the nine months ended September 30, 2023, we had no material developments to report with respect to our risk factors. For additional information regarding our risk factors, please refer to our 2022 Form 10-K.

Filed Nov 2, 2023.
Source: SEC EDGAR, the filing index for accession 0000723612-23-000054. Last ingested by Listed: Nov 6, 2026, 17:18 ET. No prices; not investment advice.