Avis Budget Group, Inc.

Avis Budget Group (Nasdaq: CAR) rents vehicles through Avis, Budget, Zipcar and other brands. It operates locations directly and licenses its brands to other operators. Its two reporting segments are the Americas and International.

Rental volume, prices, fleet size and the cost of owning or leasing each vehicle shape profit. Utilization measures how much of the available fleet is rented out. Selling a vehicle also affects the depreciation cost recognized while it was in service.

A smaller fleet, higher utilization

The average rental fleet fell to 706,717 vehicles from 746,161. Rental days declined less, lifting utilization to 74% from 72%. Monthly fleet costs rose to $315 per vehicle from $303. At unchanged exchange rates, the current cost was $316, which management said was within expectations.

July's report had already described fleet resizing in response to booking trends and reported record second-quarter utilization of 72.6%. It also reported lower year-over-year fleet costs at unchanged exchange rates. The latest quarter continues the utilization improvement but reverses that year-over-year unit-cost direction.

Adjusted EBITDA retains vehicle depreciation, lease charges and vehicle interest. It removes corporate interest, income taxes, nonvehicle depreciation and amortization, legal items and selected other charges. A $109 million legal benefit lifted the prior-year GAAP comparison; the adjusted measure removes legal items in both periods.

Cash from operations and vehicle funding

Nine-month operating cash flow was $2.259 billion, versus $2.859 billion a year earlier. Adjusted free cash flow improved to $198 million from a $517 million outflow. Net vehicle-program investing used $2.837 billion less cash, partly offset by $1.637 billion less net vehicle-program financing. Other adjustments complete the $715 million improvement.

This adjusted cash measure includes vehicle-backed borrowing and repayment alongside vehicle investment. It is broader than operating cash less ordinary capital spending.

September cash was $561 million, with another $86 million of program and restricted cash. Reported liquidity of $866 million included borrowing availability; the company also reported $2.5 billion of fleet funding capacity.

Corporate debt was $6.011 billion. Vehicle-program debt was reported separately at $18.920 billion, including $740 million of Class R notes held by Avis. The vehicle programs fund the fleet and have a different asset and financing scope from corporate borrowing.

October cash and the next debt payment

Avis received $650 million on October 5 under the Pentwater settlement announced in June. It disclosed the receipt and its intended use in October; the cash belongs to the fourth quarter.

On November 2, Avis issued notice to redeem the remaining $350 million of its 5.75% notes due in 2027. Redemption is scheduled for December 30 at par plus accrued interest.

The next operating results can test whether higher utilization supports profit as fleet costs change, and whether vehicle investment and funding continue to support cash generation.