Avis Budget (CAR) Q4 2025 Earnings Call Transcript

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DATE

Thursday, Feb. 19, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

Chief Executive Officer — Brian J. Choi
Chief Financial Officer — Daniel Cunha
Senior Vice President, Corporate Finance and Treasurer — David T. Calabria

TAKEAWAYS

Adjusted EBITDA -- $748 million for the full year, approximately $150 million below the previously guided figure, with underperformance entirely in the Americas segment.
EV Fleet Write-down -- A $500 million impairment at year-end, viewed by management as "a deliberate reset that strengthened our balance sheet and reduced future risk."
EV Tax Credits Monetization -- Monetized the majority of federal EV tax credits through a transaction generating $180 million in cash and reorganized depreciation structure for EVs.
Quarterly Fleet Depreciation per Unit (Americas) -- Actual came in at $338 vs. an October estimate of just under $300, attributed to accelerated de-fleeting amid weak demand.
Americas Rental Days -- Volume was flat instead of the expected 3% growth, with commercial rental days falling 11% in November before stabilizing in December.
RPD (Revenue per Day, Americas) -- Declined 3.7% in the quarter, a greater drop than management's guided 2% decrease, due to industry-wide pricing pressure.
Adjusted EBITDA Miss Bridge -- $40 million attributed to lower rental days and RPD, $60 million to higher depreciation and lower gains on sale, and $50 million to a year-end increase in PLPD insurance reserves.
Recall Impact -- Nearly $40 million in operational and financial headwinds from approximately 14,000 vehicles grounded in Q4; parts shortages remain an unresolved risk into 2026.
Fleet Strategy Shift -- Management is transitioning from prioritizing fleet size to higher utilization, targeting lower fleet size and improved utilization throughout 2026.
Cost Management Actions -- January saw a global reduction in force and strengthened performance management processes; additional portfolio reviews and segment exits, such as Zipcar UK, aim to rationalize costs and capital allocation.
Depreciation Guidance (2026) -- Elevated DPU expected in Q1 near $400, normalizing to the low-$300s by mid-year as elevated catch-up depreciation subsides.
OEM Partnership Rebalancing -- Management is shifting volume away from OEMs with recurring reliability or transparency issues, with purchasing decisions now increasingly weighted on execution quality and responsiveness.
Cash Flow Focus -- Actions are expected to "increase free cash flow generation" through lowered volatility and greater margin durability.

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RISKS

CEO Choi stated, "We fell significantly short of guidance. That is unacceptable, and I have no excuses to offer," signaling a material execution shortfall in the quarter.
Recall-related grounded vehicles resulted in "nearly $40 million" of direct expenses in Q4 and remain an ongoing operational headwind due to unresolved parts constraints.
Management noted, "rental days, depreciation, and RPD all move off plan at the same time, the financial impact compounds quickly," highlighting ongoing exposure to concurrent macro and operational shocks.
Management emphasized that "pricing has stabilized" but clearly stated that the 2026 plan "does not assume aggressive pricing recovery," implying risk if volume or utilization improvements underperform.

SUMMARY

Avis Budget Group (CAR +6.36%) delivered Q4 and full-year results substantially below guidance, driven by demand shocks, pricing deterioration, and elevated depreciation in the Americas segment, while international operations met expectations. Management executed a $500 million EV fleet write-down, monetized $180 million in EV tax credits, and restructured depreciation schedules to reduce residual risk and accelerate capital recycling. Structural actions—including a global headcount reduction, cost management refinements, and a pivot from fleet size expansion to utilization discipline—are in progress to restore earnings stability, with 2026 guidance premised on these measures rather than material RPD recovery.

Management plans to concentrate capital allocation on OEM partnerships that exhibit reliability and responsiveness, adjusting purchasing to avoid further recall-driven disruptions.
Full-year depreciation is forecasted to fall from Q1's elevated levels, normalizing by mid-year as the catch-up effect through Q1 subsides.
The cost base reset, via workforce reduction and select segment downsizing (including the exit from Zipcar UK), reflects a deliberate shift to capital efficiency over absolute growth.
"Avis First" and autonomous mobility partnerships (notably Waymo) remain priorities, funded by realized cost savings, and expansion is contingent on disciplined returns and market readiness.

INDUSTRY GLOSSARY

PLPD (Personal Liability and Property Damage): Insurance reserves covering liability and property claims on rental vehicles, periodically reassessed through actuarial reviews.
DPU (Depreciation per Unit): Average monthly depreciation expense per vehicle in the operating fleet; a key measure of fleet cost management.
OEM (Original Equipment Manufacturer): Companies that produce vehicles acquired for the rental fleet; strategic partner selection significantly impacts operational costs and risk.
RPD (Revenue per Day): Daily rental revenue per vehicle, used to track pricing trends and demand strength.

Full Conference Call Transcript

Brian J. Choi: Thanks, David, and thank you to everyone joining us today for our fourth quarter and full year 2025 earnings call. If you have reviewed our earnings release and financial supplement, you will have seen that this was a difficult quarter. I have said before that delivering on quarterly results is foundational, and when operational performance speaks for itself, we earn the right to focus on the bigger picture. This quarter, we did not earn that right. We fell significantly short of guidance. That is unacceptable, and I have no excuses to offer. What I will say is that the decisions we made were grounded in the information we had at the time.

The outcomes were not what we expected, but the process was disciplined, and I think that distinction matters as we look forward. What I owe you today is a clear, fact-based explanation of what happened, how we are now responding, and where this means we are headed as a company. I am going to structure my remarks around three horizons. Horizon one is a backward-looking view focused on what drove our fourth quarter miss. Horizon two is the present, the actions we are taking now to position the business for 2026. Horizon three looks briefly at how this all fits into our longer-term strategy.

I will get into a fair bit of detail on horizon one, because that is what this quarter demands. Let us start with what we are bridging. On our October earnings call, we guided to full year adjusted EBITDA of $900 million, implying roughly $157 million in the fourth quarter. Yesterday, we reported full year adjusted EBITDA of $748 million. That means we missed our fourth quarter forecast by approximately $150 million inside the span of three months. I will walk you through the specific drivers of how that happened, but first, it is important to note that this miss was entirely in our Americas segment.

Our international business executed a meaningful turnaround in 2025 and performed as expected in the fourth quarter. The issues we are discussing today are concentrated in the Americas.

Daniel Cunha: In October,

Brian J. Choi: we expected Americas rental days to grow about 3% in the fourth quarter. That was consistent with third quarter trends and supported by TSA passenger growth of roughly 3% year over year in the month of October. So while government travel immediately declined sharply following the shutdown, overall commercial demand initially held up. That changed abruptly in November. FAA flight reductions, air traffic control disruptions, and extended TSA wait times materially reduced discretionary travel, as it increased both uncertainty and inconvenience. Commercial rental days went from mildly down in October to down 11% in November. December stabilized, but by then, the damage to the quarter was done.

As a result, instead of growing rental days by 3%, we delivered flat volume for the quarter. That whipsaw of demand created our second challenge, fleet size. When demand weakens, the right response is to reduce fleet. The problem was timing. The fourth quarter is the most difficult period to sell used vehicles, as dealers focus on clearing new model year inventory. Aggressive new car incentives pressure used car pricing, which is why under normal circumstances, we defer meaningful de-fleeting until the first quarter of the following year. This year, we could not wait. Given the speed and magnitude of the demand decline, we chose to defleet in November despite unfavorable market conditions. Used vehicle prices reflected that reality.

The Manheim rental index price per vehicle declined nearly $1,000, or 4.3%, from October to November. That impacts us in two ways: lower gains on vehicles sold and a lower valuation mark on the fleet we retained. As a result, monthly net depreciation per unit in the Americas came in at $338 in the fourth quarter. Our initial estimate in October was slightly lower than $300. The silver lining is that used vehicle prices stabilized in December, recovering most of the November decline. We believe selling fleet aggressively was still the correct decision from an asset management standpoint, even though it came at a cost.

Not acting, and carrying excess fleet into a soft demand environment, would have created greater operational and financial issues. This was the right call, even though the timing made it painful. But despite us taking decisive action, industry capacity remained elevated relative to demand in the fourth quarter, which leads us to our third unforeseen factor, pricing. Through 2025, RPD on a two-year stack had been sequentially improving. Based on early fourth quarter trends, we expected that improvement to continue. Instead, November reversed that progress. Weakened demand and excess industry supply pressured pricing across the market. Length-of-rent restrictions were largely absent industry wide, and RPD deteriorated more than expected. In the Americas, RPD finished the quarter down 3.7%.

When we guided in October, we thought this would be closer to 2%. I do not believe this was an Avis-specific dynamic. Industry capacity remained elevated, and pricing pressure was evident across competitors as well throughout November and early December. For how this all impacted our results, let me pass it over to Daniel. Thanks, Brian.

Daniel Cunha: Financial results of our business are really driven by just a few key variables. As this quarter demonstrated, these variables are often interconnected and can be difficult to predict. When rental days, depreciation, and RPD all move off plan at the same time, the financial impact compounds quickly. Here is the bridge. Lower rental days and weaker RPD drove approximately $40 million of the adjusted EBITDA miss on the revenue side. Higher gross depreciation and lower gains on sale accounted for an additional $60 million. The remaining approximately $50 million relates to our insurance reserves for personal liability and property damage, or PLPD. As part of our actuarial review for year-end, we increased our PLPD reserve in December.

While new incident trends are improving, we chose to reset our reserve baseline conservatively as we enter 2026. This was a deliberate decision, as we do not want to carry additional risk. Taking this action now puts us in a stronger, more stable position for 2026. When you step back and consider all these factors together, I find it useful to evaluate the puts and takes across two dimensions: macro versus micro, and temporary versus structural. In my view, the majority of our underperformance this quarter falls into the macro and short-term category. Demand softness and pricing pressure were industry wide, and appear transitory based on recent trends and forward bookings.

Depreciation is clearly macro-driven, but the health of the used car market will not be fully known until the tax refund season later this spring. December and January trends suggest the market has stabilized, and we will keep you updated as the months progress. As far as the operations go, my key point is this. Recall challenges aside, we do not believe the specific conditions that caused rental days, depreciation, and RPD to move against us simultaneously are present today. We are operating the business to reduce the likelihood of that alignment recurring. Demand has stabilized, fleet is better aligned with volume, and pricing is slowly improving.

Brian J. Choi: Let us close out horizon one by addressing the approximately $500 million write-down we took on our EV fleets at year-end. A write-down is never something we welcome; we view this action as a deliberate reset that strengthened our balance sheet and reduced future risk. Following the passage of the Big Beautiful Bill in July, which made 100% bonus depreciation permanent, the outlook for our tax position became much clearer. That prompted us to reassess how to best monetize the federal EV tax credits we had limited ability to utilize internally.

Daniel Cunha: As a result,

Brian J. Choi: we completed a transaction that allowed us to monetize the majority of our EV tax credits and generate $180 million of cash today. Importantly, this also gave us the opportunity to reassess the economic life of our EV vehicles. Based on market conditions and our operating experience, we concluded it was prudent to shorten their remaining useful life from 36 months to approximately 18 months. We have been depreciating these vehicles at roughly $600 per month.

Daniel Cunha: So

Brian J. Choi: exiting them earlier meaningfully reduces our exposure to residual value risk and technology obsolescence, while accelerating capital recycling. More broadly, the automotive industry is recalibrating how it thinks about EV economics, and we are doing the same. The size of this action strengthens our balance sheet, pulls cash forward, and reduces future volatility in depreciation. I want to thank our tax and treasury teams for all the work they put in to allow us to take advantage of this opportunity. With that, let me turn it back to Daniel for horizon two to discuss what actions we are taking from the learnings of the fourth quarter and how we are planning for 2026.

Daniel Cunha: Thanks, Brian. 2026 will be the first year in which this management team has had the opportunity to build an annual plan from the ground up. As a result, you will see some clear philosophical differences in how we operate the business. The most important shift I want to highlight is how we define operational success when it comes to fleet availability. Coming out of the COVID recovery, the operational ambition in the Americas was to be the last provider with an available car on the lot. In a supply-constrained, high-demand environment, that strategy worked. Having the last car available meant you had pricing leverage on late rentals, and that was largely the reality in 2021 and 2022.

That approach does not work in a normalized environment. Carrying excess fleet requires holding more vehicles during shoulder periods, which pressures RPD. It also requires larger fleet purchases, often at less favorable economics. We have seen firsthand that prioritizing absolute availability over discipline introduces volatility into pricing, depreciation, and ultimately into earnings and balance sheet health as well. In 2026, we are prioritizing utilization over fleet growth in search of rental days. That shift is already underway. As I mentioned earlier, we sold a substantial number of vehicles in the fourth quarter into a thin buying market. Since then, buyers have returned, and in 2026, we are actively utilizing every disposition channel available to right-size our fleet.

In January, we sold a record number of vehicles. That momentum continued into February, and we expect elevated disposition activity through the peak tax refund season in March and April. The lesson from the fourth quarter is straightforward. While we do not control macro events like government shutdowns, we can control how nimble we choose to be as a company. Running a tighter fleet reduces the risk of being caught off-footed when demand unexpectedly softens. And in scenarios where demand is stronger than expected, we will deploy fleet to the most profitable segments of the business and rely on operational execution to capture those opportunities. We are asset managers, and our focus is on sweating our assets.

You should see this discipline reflected in lower fleet size and higher utilization as the year progresses. Our fleet right-sizing strategy also prompted us to take a hard look at how we structure our OEM partnerships. Avis Budget Group, Inc. is one of the largest vehicle purchasers in the world, and we place a high value on the long-standing, productive relationships we have built with our OEM partners. These relationships matter, especially in periods of stress. Our partners face challenges; we work through them constructively. And in most cases, that approach has served both sides well. In 2025, however, recalls became a more meaningful operational and financial headwind than we anticipated.

We exited Q4 with approximately 14,000 vehicles still grounded, as parts availability remained constrained. The impact of recalls in the fourth quarter alone, including only depreciation, interest, and parking expenses, even before factoring in lost profits and gains on sale, was nearly $40 million. We operate in an asset-intensive business, and returns depend on our ability to actively deploy and monetize those assets. When vehicles are sidelined for extended periods with no clear path to resolution, that directly undermines the economics of our business model. This experience has clarified something important for us going forward. Reliability and execution matter just as much as price and volume when we determine fleet purchasing decisions.

As part of our 2026 planning process, we are rebalancing our OEM exposure to reflect that principle. OEMs that demonstrate consistent execution, transparency, and responsiveness will continue to be core partners for us. Where those standards are not met, we will reduce exposure over time and reallocate volume accordingly. This is not about short-term pressure or one-off issues. It is about aligning our fleet strategy with dependable partners who enable us to run a more predictable, capital-efficient business. Given the scale of our fleet purchases, even modest reallocations can have meaningful economic impact.

As we look ahead, our OEM strategy will be guided by a simple objective: deploy capital with partners that allow us to reliably earn attractive returns across cycles. The final strategic change I want to address for 2026 is how we think about costs. At this new Avis Budget Group, Inc., cost is not something to be cut for its own sake or simply managed quarter to quarter.

Brian J. Choi: Cost is capital.

Daniel Cunha: And like any capital allocator, our responsibility is to deploy that capital where it earns the highest possible return for our customers, our employees, and our shareholders. Our job is not to spend less. It is to be deliberate. When we treat costs as scarce capital, we rationalize in areas where returns are low so that we can invest with conviction in the areas that matter most. One action funds the other. We put this philosophy into practice at the start of the year. In January, we implemented a global reduction in force to reset our organizational structure to what we believe is appropriate for the business we plan to run in 2026 and beyond.

This was a deliberate, one-time action. Separately, we have strengthened our performance management processes, which led to exits this January. This will be an ongoing discipline going forward. The fourth quarter reinforced an important reality. This is a business with inherent volatility. Rental demand, used vehicle pricing, and RPD are variables we do not fully control. That makes it even more critical that we rigorously control what we can control. A lean, flexible cost base is essential to manage through uncertainty and improve earnings stability. This approach extends well beyond headcount. We are conducting a thorough review of our business portfolio to ensure each segment meets our capital return thresholds and strategic objectives.

In December, we made the difficult decision to exit Zipcar UK. In January, we restructured Zipcar’s U.S. operations to put that business on a more sustainable footing. Throughout 2026, we will continue to evaluate non-core and adjacent businesses, including package delivery, ride-hail, and certain franchise activities, to ensure capital and management attention are allocated where they create the most value. Let me be clear. This discipline does not mean we are pulling back from investment. It is not an either-or proposition. Cost rationalization is what enables investment. That capital comes from making tough, intentional choices elsewhere. That is exactly how we started 2026 and how we expect to manage the years going forward.

Taken together, these actions are designed to lower earnings volatility, improve margin durability, and sustainably increase free cash flow generation. Which brings me to horizon three. I will keep this brief because our long-term strategic direction remains consistent with what we have previously communicated. We remain intensely focused on the execution of several key initiatives. Our top priority is customer experience. Over the past several years, the rental car industry has seen quality standards drift. It is not acceptable to Avis, and it is something we are addressing head on. We are rearchitecting our customer experience organization from the ground up with clear ownership, defined metrics, and tight accountability. Our objective is straightforward.

Consistently deliver the best product in the industry. It begins with our fleet. The average age of our U.S. rental car fleet will be less than a year old by the end of the first quarter. We have not been able to say that since before the pandemic. We are also continuing to build out Avis First. What began as a leisure-focused offering will expand meaningfully into commercial accounts in 2026. Feedback from our early strategic accounts has been strong, and we see significant opportunity to deepen relationships by delivering a more differentiated, premium experience. Finally, our partnership with Waymo continues to progress as planned.

Our Dallas launch remains on schedule, with real estate development, hiring and training, and compliance certification all tracking to plan. Waymo is currently offering employees fully autonomous rides in Dallas, which is a final step ahead of welcoming public riders soon. As we announced last year, we do intend to explore additional cities with Waymo in the future, and are in active conversations with them. We believe our core competencies are mission-critical to operating autonomous mobility at scale. We are working alongside Waymo to prove that in practice as additional markets come online.

Daniel Cunha: To close,

Brian J. Choi: the fourth quarter was a setback, and we treated it as a catalyst for change. We have clearly diagnosed our challenges, we have been decisive about the actions we have taken, and disciplined in how we are repositioning the business. The focus now is execution. Running a tighter fleet, allocating capital deliberately, and raising the bar on customer experience. These actions better align the company with the operating environment and strengthen our ability to generate durable returns. With that, Daniel, David, and I are happy to take your questions. Thank you. We will now be conducting a question and answer session.

Operator: You may press 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset. We ask that you please limit yourself to one question and one follow-up question. One moment, please, while we poll for your questions. Our first questions come from the line of Andrew Percoco with Morgan Stanley. Please proceed with your questions.

Andrew Percoco: Great. Thanks so much for taking the question this morning.

Andrew Percoco: I want to start with your 2026 guidance. Obviously, a fairly wide range for adjusted EBITDA. And I am just hoping that you can kind of walk us through what some of your working assumptions are on some of the key inputs like RPD and DPU? I see that you guys are guiding for DPU to be up in the first quarter and then a moderation thereafter. So just hoping to get a better explanation for, you know, what is embedded in the guidance relative to kind of where you exited 2025? Thank you.

Brian J. Choi: It is pretty important saying that we are assuming that fleet size is going to decrease into 2026, something that has not been the case for the past few years.

David T. Calabria: We are going to focus instead

Brian J. Choi: on utilization and making sure that we get the right business in terms of a contribution margin perspective.

David T. Calabria: Daniel, anything you want to add?

Daniel Cunha: I would just highlight that if you look at the 2025 results, where we landed, and you make two adjustments only, right, and you ignore, you know, $100 million of recall impact and the one-off impact of PLPD, you are in the middle of the range. Right? And how we perform better than the range or, you know, slightly below is going to be a function of how the market in general on the RPD and on the fleet size, you know, perform. We believe we have a path for top of the range, but, coming out of Q4, we have some significant headwinds. We are being conservative.

Brian J. Choi: Andrew, maybe just to add over there. I realize it is a wide range. We expect to narrow that range as the year progresses. But just given what we saw in the fourth quarter, which was a large miss in itself, we want to make sure that we retain flexibility. So listen, the fourth quarter, it was not driven by a gradual deterioration in trends. Things happened very quickly. Short term, it was a shock. And we cannot eliminate volatility in the industry. But by materially tightening the fleet levels and adjusting our operating posture, I think we have reduced the probability of another compounding effect like that.

Andrew Percoco: Got it. Okay. That is super helpful. And maybe just to follow up on, I mean, there is continuing to be a pretty big dispersion, some of the metrics between the Americas and your international segment. So, just curious, as you talk about fleet sizing and some of the actions you are taking, is that more of an Americas comment, or is that global? Just trying to get a better understanding of what the differences you are seeing across geographies and maybe how you are tackling those challenges.

Brian J. Choi: Sure. I will start. Andy, the comments that we made around OEM repositioning and what were the actions we are taking around depreciation, it is entirely in the Americas segment. So the used car market in 2025 in the U.S., it was unusually volatile. So Manheim values, if you recall, they were roughly flat year over year in the first quarter, and then amid tariff uncertainty, it really spiked into the second and third quarter, and then it exited the year essentially flat again. So by year-end, pricing normalized completely relative to where it began. You know, given that environment, we are proactively adjusting depreciation in the fourth quarter to reflect current residual expectations rather than carrying forward prior assumptions.

That is why you see that $400 number in the quarter in the first quarter of this year. So we expect depreciation to be elevated in the near term as we normalize fleet economics, but we do see a path towards a low-$300s monthly run rate as we move throughout the year. So the market today appears orderly. In the U.S., seasonal strength is building into tax refund season. And our planning assumptions are not dependent on some sharp rebound in used car prices. So we are underwriting returns at levels that allow us to perform across a range of scenarios.

Daniel Cunha: I will add, Brian, a couple of things. In the Americas, we have made bigger strides in improving utilization. Right? In spite of the three-point impact of the recall in the quarter, we managed to grow utilization by about half a point, which is a meaningful improvement. And that is why, you know, we also have more flexibility in reducing the fleets and still serving customers with rental days. Right? On the international, if you think about the per-unit costs, there is less volatility. As Brian described, the Manheim situation is an Americas situation, but we also have a much higher share of program cars in international, which insulates them a little bit from this impact in the short term.

Andrew Percoco: Great. Thank you so much.

Brian J. Choi: Thank you. Our next questions come from the line of John Michael Healy with Northcoast Research. Please proceed with your questions. Thanks for taking the question. I wanted to spend a couple of minutes on fleet cost. I think in the slides, you guys talked about $400 million in Q1, and a full year is, let us call it, $3,250 million or so at the midpoint. I am just trying to understand the confidence in the full year because that, to me, first quarter number is awfully high, which would imply that the rest of the year is probably sub-$300.

I do not know if I am looking at that in an incorrect way, but just trying to understand the confidence of why it steps down just so much when we have been in a period over the last two years where we have probably maybe under-depreciated more relative to the market rather than more. So just trying to understand that $3.25 number for the year. Hey, John. So, like I said earlier, in terms of the volatility that we saw in 2025, you will see that our models, which we are forecasting when we sell these cars into the future, they are built off of future forecasts primarily in Black Book and Moody’s.

Those forward-looking economic models assume the impact of tariffs to continue throughout the life of these vehicles. As we have seen in the fourth quarter, that is not the case anymore. So we have adjusted our internal models accordingly as well. So what you are seeing in the fourth quarter is kind of a catch-up to show that reality and then normalizes over time. What we are seeing is, listen, for six months of that elevated period where we saw tariff impacts, had we known it would evaporate, we probably would have been a little more conservative in our depreciation assumptions.

What we are doing right now is just rectifying that in the first quarter to make sure that we reset to where we need to be. Understood. And then just any commentary on just the pricing environment that you have seen kind of year to date and how you are seeing competitive pricing trends or your pricing trends into the spring season? Thanks.

Daniel Cunha: Sure.

Brian J. Choi: So, you know, January reflected many of the same pressures we saw exiting the fourth quarter. So industry pricing remained competitive. Commercial demand was slower to ramp given the calendar. But that said, the actions we have taken to reduce fleet are beginning to align supply more closely with demand, particularly as we move into February and March. So we are not providing month-to-month guidance, John. But pricing has stabilized relative to where we exited in January. And the rate of erosion that we saw post-COVID has clearly moderated. So importantly, our 2026 plan, it does not assume aggressive pricing recovery. It is built around disciplined fleet sizing, utilization improvement, and cost control.

Daniel Cunha: So we are working towards achieving better RPD,

Brian J. Choi: but we are not dependent on it to hit our 2026 guidance. Great. Thank you. Thank you. Our next questions come from the line of Christopher Nicholas Stathoulopoulos with SIG. Please proceed with your questions.

Christopher Nicholas Stathoulopoulos: So, David,

Daniel Cunha: you know, Avis has effectively

David T. Calabria: missed the full year guide for three years now. Now, I understand this is under a different leadership here, and you have only recently gotten into the practice of giving explicit guides. So some of these, to be fair, were more on the soft guide side. But I guess, how do we get comfortable with the full year guide here? And maybe if you could, I think this was the lead-off question, but the line dropped or something.

If there is an EBITDA bridge you could walk us through, anything on the KPIs, and then, you know, perhaps if you could quantify what could be described as lost revenue or embedded demand for last year’s—so impact of tariff shutdowns, FAA cancellations, weather. Zipcar, I do not think you give any impact on what that looks like from a non-cash or comparable issue. But just want to understand here your base case assumptions for the EBITDA bridge for this year, and how we should think about what, I guess, was out of your control for last year. There are a lot of items there. Maybe if you could put some numbers around that.

That would help us with the modeling. Thank you.

Brian J. Choi: Sure. Let me start, and I will pass it over to David and Daniel. But in our prepared remarks, we gave a bit of guidance in terms of what happened at least in the fourth quarter relative to what we were expecting. On the revenue side of things, roughly $100 million of impact, and, from a balance sheet perspective, we took another $50 million increase to our PLPD reserves. Chris, let us be honest. The market moves quickly over here. So anchoring on specific metrics to say this is how we are going to plan for the entire year just really is not feasible for us.

So the metrics we gave you are the metrics we feel comfortable guiding to right now, which is that depreciation will be in the range that we described. It is going to be elevated in the first quarter, and it is going to come down after we have that catch-up, in the low-$300 level. Utilization is going to be higher and fleet is going to be lower. I understand that the past two years have been pretty volatile. And consistency in delivering on guidance matters. This is the first outlook built entirely under the current leadership framework. It reflects more conservative assumptions and a structurally tighter operating model.

So our objective this year is to earn back confidence through consistent execution. Daniel?

Christopher Nicholas Stathoulopoulos: Okay. On Zipcar, is there any numbers you can give us for the UK segment?

Daniel Cunha: That has not impacted the results. Those actions were taken at the very end of the year, beginning of this year. Chris, that has had no material impact. No.

Christopher Nicholas Stathoulopoulos: Okay. And then as a follow-up, Brian, I did not hear any comments in your prepared on your premium efforts, or all the tech efforts. Is this on pause until you get the tactics around the fleet right, or are you continuing to move forward with that initiative?

Brian J. Choi: No. It is not taking a pause. In fact, a lot of the cost rationalization that is happening in the business is being used to fund those initiatives. So I think we said in our prepared remarks, Avis First is still a go. We are concentrating on making sure that the product is right and getting a lot more adoption in the airports it is in, before we expand meaningfully. But it is going live now in Europe. I think Munich just came online. And we are going to start offering the product to our commercial customers. So we think that the Avis First aligns tightly with our core philosophical tenet, which is tying Avis to a premium customer experience.

Christopher Nicholas Stathoulopoulos: Okay. If I could squeeze in one more. Does the base case EBITDA guide here for the full year assume Americas revenue up?

Daniel Cunha: It does. I think you are right. We have it.

Christopher Nicholas Stathoulopoulos: Okay.

Daniel Cunha: You know, because it has been down three years, so I am guessing if the base case, your EBITDA guide at the enterprise level, does that assume you are growing Americas revenue for the full year?

Brian J. Choi: Yes. We assume that we are modestly growing revenue. Chris, you are right. We have been declining for the past few years given a COVID boom. The question that has been on everyone’s mind is what does a normalized environment look like? I do think that we are entering into a normalized environment here.

Christopher Nicholas Stathoulopoulos: Okay. Okay. Thank you.

Brian J. Choi: Thank you. Our next question is from the line of Dan Meir Levy with Barclays. Please proceed with your questions.

Dan Meir Levy: Great. Thank you for taking my question. Josh Young on for Dan Levy.

Daniel Cunha: So I have one question and then a follow-up.

Dan Meir Levy: Could you walk us through the puts and takes on the EV impairment? And then just in terms of how we should think about sizing the potential benefit to DPU, I know you mentioned that it was previously around $600. So should we think about that into 2026?

Daniel Cunha: Yes. I will maybe start from first principles and our strategic priorities. Then, you know, we have shared in the past how we feel about the capital structure and how deleveraging has been a key priority for us. Right? And when the Big Bill came along and made the 100% bonus depreciation permanent, it really reduced our expected tax liability going forward. Right? And as a result of that, we had no clear path to using those tax credits, and we immediately started looking for ways of monetizing on those. They were a substantial amount on our balance sheet. So when we found a path here that allowed us to monetize $180 million of this, we jumped on it. Right?

So with that decision to execute the deal, and I will now ask David here to share a little bit on the structure—it was a complex deal—we essentially committed to that path. And along the way, we evaluated EV strategy. As you know, there is a lot going on in this market. Lots of OEMs rethinking how their own capital allocation, their own strategies are evolving in that space, and we thought it would be prudent, right, and reduce risk overall to shorten the economic life of those vehicles. Right? So operating them for a period of time, I think, will reduce the overall risk.

On the DPU front, it is essentially allowing us to also cut the depreciation in half. Right? So you go from about $600 to slightly north of $300 a month. That should help improve net depreciation as the year develops. But, David, do you want to share a bit on the structure? This was a somewhat complex one.

David T. Calabria: Yep. Sure, Daniel. I just want to stress, we really view this—this was not an issue. This was an opportunity, and we took it. And so what we were able to do is take tax credits that had little to no value, as Daniel said, monetize that, use that against the cap cost of our vehicles to reduce the depreciation, funded by a new securitization that we created. It is an incredibly complex transaction that I have to give my treasury team and the tax team a lot of credit for figuring that out and getting it done in such a short time.

Dan Meir Levy: Excellent. Thank you. And then, as a follow-up, just to circle back to the collaboration with Waymo,

Daniel Cunha: what are the key financial considerations there?

Dan Meir Levy: And how soon might you see a material benefit from the partnership?

Brian J. Choi: Yeah. Josh, we are not getting into the specifics of the economics here. Like I said, Dallas is gearing up to come online, and we think that we will be taking riders from the public pretty soon. But other than that, we are not really getting into much of the financial details. I think from our perspective, right now, near term, Waymo is about building operational capability and not deploying outsized capital. So I do want to mention that the vehicles in Dallas are on Waymo’s balance sheet today, and that structure reflects the current phase of the partnership.

So over time, if the economics justify it, we would consider owning vehicles ourselves, but only under the same return thresholds and balance sheet discipline that govern the rest of our fleet. And we are focused on scaling this thoughtfully. We are looking at other cities. We are going to expand our capital involvement only where returns are clearly aligned.

Dan Meir Levy: Great. Thank you.

Brian J. Choi: Thank you. Our next questions come from the line of Stephanie Moore with Jefferies. Please proceed with your questions. Hi, good morning. Thank you.

Stephanie Moore: I was hoping you could talk a bit about your expectations for the first quarter. Admittedly, there are a lot of moving pieces as it relates to the impairment charge, higher fleet costs. I am assuming probably weather will be an impact as well. Maybe if you could talk about the first quarter as well as some of the underlying trends you have seen. I think you noted that underlying trends from a volume and pricing standpoint did improve as 4Q progressed. So curious, obviously taking into account seasonality, how underlying trends have been January through February? Thanks.

David T. Calabria: So, you know, what I would just say is from our standpoint, you know, when you think about where we were last year from a Q1 standpoint, we are sitting here talking about having a higher depreciation. Brian talked about how things are looking a little more stable from a revenue standpoint in February and March, but January did have some weather-related incidents there too. Lot of flight cancellations. So, you know, we are looking at a lower number—lower EBITDA in the first quarter—but then easing back towards something that is more normalized in the second, third, and then fourth quarter. So I would expect this to be lower in Q1.

Brian J. Choi: Yes. Stephanie, that being lower is on an EBITDA basis. And the way that I would describe it is it is going to be kind of a tale of two cities situation. The actions that we are taking around the fleet rationalization, that is helping the revenue side of things. So I do think that you will see in the first quarter that revenue is stabilizing. It is becoming much more healthy. And yes, the January storms, that was a setback. But, you know, even though we could not predict it, because the fleet was already being reduced, we were able to absorb that demand disruption without creating the same economic imbalance we saw in November.

So from our perspective, the work that we are doing around the revenue side of things, I think you are going to see that materialize in the first quarter. But like we said earlier, there is a bit of a reset that we are trying to do on the fleet side of things. We are going to absorb it all in the first quarter with that $400 DPU. So what you will see is a healthier on the revenue side, a reset in the first quarter on the depreciation side, which will result in lower year-over-year EBITDA in the first quarter. But we think that puts things where it should be, and you will see things improve materially going forward.

Stephanie Moore: Understood. Very clear. So maybe once we get past the first quarter, maybe talk a little bit about your level of confidence in achieving the guide for the full year, specifically as it relates to actions that are within your control. And I think we all understand that this can be a very complex and dynamic industry. So maybe just speak to the actions specific related to Avis and some of your operational improvements, productivity initiatives, and the like that you think can help potentially provide an offset if, you know, what we keep seeing is general volatility in the overall industry. Thanks.

Daniel Cunha: Stephanie, I will keep the bridge relatively simple, but I think if we anchor ourselves on the 2025 results, right, if you add back the impact of the recalls of over $100 million, now conservatively, and the one-off nature of the PLPD, the insurance reserve adjustment we had in Q4, you are already at the middle of the range. Right? One, on the plan for 2026, you know, one of the pillars is a continued improvement in utilizations in the Americas, right? An improvement that the team has already been delivering on during 2025. And that is worth about $100 million for us next year.

So that, you know, with those two one-off unusuals, you are at the middle of the range, and just with one of the initiatives we could potentially make it all the way to the top of the range. And that is already assuming, like Brian mentioned, some conservatism on the rate side of the house in the Americas. So that is how we feel about it. We feel it is achievable. It is obviously a new high for the company on a non-COVID period.

Brian J. Choi: Stephanie, I think we operate in a business with inherent volatility, so that is why it is very important to control those things that we can control. And that is reflected in how we are planning for this year. So the structural actions that we are implementing, which is tighter fleet discipline, cost rigor, capital allocation focus, that is all designed to reduce volatility and strengthen the earnings base over time.

Daniel Cunha: So

Brian J. Choi: as we move through the year, our objective is to demonstrate that the business can sustainably generate EBITDA north of $1 billion annually and then grow from that base through disciplined execution. As I said earlier, this is the first time that we are coming up with a plan that this leadership team is under this new operating philosophy. We have every intention of hitting it.

Stephanie Moore: Understood. Thank you, guys.

Brian J. Choi: Thank you so much. Ladies and gentlemen, this does conclude today’s question and answer session. And with that, the call will come to a close. We appreciate your participation. You may disconnect your lines at this time and enjoy the rest of your day.

Operator: Greetings. Welcome to the Avis Budget Group, Inc. Q4 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to David Calabria, Senior Vice President, Corporate Finance and Treasurer. Thank you, David. You may begin.

David T. Calabria: Good morning, everyone. Thank you for joining us. On the call with me are Brian J. Choi, our Chief Executive Officer, and Daniel Cunha, our Chief Financial Officer.

Daniel Cunha: Before we begin,

David T. Calabria: I would like to remind everyone that we will be discussing forward-looking information, including potential future financial performance, which is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from such forward-looking statements and information. Such risks, assumptions, uncertainties, and other are identified in our earnings release and other periodic filings with the SEC, as well as the Investor Relations section of our website. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results, and any or all of our forward-looking statements may prove to be inaccurate. We can make no guarantees about our future performance. We undertake no obligation to update or revise our forward-looking statements.

On this call, we will discuss certain non-GAAP financial measures. Please refer to our earnings press release, which is available on our website, for how we define these measures and reconciliations to the closest comparable GAAP measures. With that, I would like to turn the call over to Brian.

Brian J. Choi: Thanks, David, and thank you to everyone joining us today for our fourth quarter and full year 2025 earnings call. If you have reviewed our earnings release and financial supplement, you will have seen that this was a difficult quarter. I have said before that delivering on quarterly results is foundational, and when operational performance speaks for itself, we earn the right to focus on the bigger picture. This quarter, we did not earn that right. We fell significantly short of guidance. It is unacceptable, and I have no excuses to offer. What I will say is that the decisions we made were grounded in the information we had at the time.

The outcomes were not what we expected, but the process was disciplined; I think that distinction matters as we look forward. What I owe you today is a clear fact-based explanation of what happened, how we are now responding, and where this means we are headed as a company. I am going to structure my remarks around three horizons. Horizon one is a backward-looking view focused on what drove our fourth quarter miss. Horizon two is the present, the actions we are taking now to position the business for 2026. Horizon three looks briefly at how this all fits into our longer-term strategy.

I will get into a fair bit of detail on horizon one, because that is what this quarter demands.

Daniel Cunha: Let us start with what we are bridging.

Brian J. Choi: On our October earnings call, we guided to full year adjusted EBITDA of $900 million, implying roughly $157 million in the fourth quarter. Yesterday, we reported full year adjusted EBITDA of $748 million. That means we missed our fourth quarter forecast by approximately $150 million inside the span of three months. I will walk you through the specific drivers of how that happened, but first, it is important to note that this miss was entirely in our Americas segment. Our international business executed a meaningful turnaround in 2025 and performed as expected in the fourth quarter. The issues we are discussing today are concentrated in the Americas.

Daniel Cunha: In October,

The Manheim rental index price per vehicle declined nearly $1,000, or 4.3%, from October to November. That impacts us in two ways: lower gains on vehicles sold and a lower valuation mark on the fleet we retained. As a result, monthly net depreciation per unit in the Americas came in at $338 in the fourth quarter. The initial estimate in October was slightly lower than $300. The silver lining is that used vehicle prices stabilized in December, recovering most of the November decline. We believe selling fleet aggressively was still the correct decision from an asset management standpoint, even though it came at a cost.

Not acting, and carrying excess fleet into a soft demand environment, would have created greater operational and financial issues. This is the right call, even though the timing made it painful. But despite us taking decisive action, industry capacity remained elevated relative to demand in the fourth quarter, which leads us to our third unforeseen factor, pricing. Through 2025, RPD on a two-year stack had been sequentially improving. Based on early fourth quarter trends, we expected that improvement to continue. Instead, November reversed that progress. Weakened demand and excess industry supply pressured pricing across the market. Length-of-rent restrictions were largely absent industry wide, and RPD deteriorated more than expected. In the Americas, RPD finished the quarter down 3.7%.

While new incident trends are improving, we chose to reset our reserve baseline conservatively as we enter 2026. This was a deliberate decision, as we do not want to carry additional risk. Taking this action now puts us in a stronger position, more stable, for 2026. When you step back and consider all these factors together, I find it useful to evaluate the puts and takes across two dimensions: macro versus micro, and temporary versus structural. In my view, the majority of our underperformance this quarter falls into the macro and short-term category. Demand softness and pricing pressure were industry wide, and appear transitory based on recent trends and forward bookings.

Let us close out horizon one addressing the approximately $500 million write-down we took on our EV fleets at year-end. A write-down is never something we welcome; we view this action as a deliberate reset that strengthened our balance sheet and reduced future risk. Following the passage of the Big Beautiful Bill in July, which made 100% bonus depreciation permanent, the outlook for tax position became much clearer. That prompted us to reassess how to best monetize the federal EV tax credits that we had limited ability to utilize internally. As a result, we completed a transaction that allowed us to monetize the majority of our EV tax credits and generate $180 million of cash today.

Importantly, this also gave us the opportunity to reassess the economic life of our EV vehicles. Based on market conditions and our operating experience, we concluded it was prudent to shorten their remaining useful life from 36 months to approximately 18 months. We have been depreciating these vehicles at roughly $600 per month.

Andrew Percoco: So

Daniel Cunha: exiting them earlier meaningfully reduces our exposure to residual value risk, and technology obsolescence, while accelerating capital recycling. More broadly, the automotive industry is recalibrating how it thinks about EV economics, and we are doing the same. This size of action strengthens our balance sheet, pulls cash forward, and reduces future volatility in depreciation. I want to thank our tax and treasury teams for all the work they put in to allow us to take advantage of this opportunity. With that, let me turn it back to Brian for horizon two to discuss what actions we are taking from the learnings of the fourth quarter and how we are planning for 2026.

Brian J. Choi: Thanks, Daniel. 2026 will be the first year in which this management team has had the opportunity to build an annual plan from the ground up. As a result, you will see some clear philosophical differences in how we operate the business. The most important shift I want to highlight is how we define operational success when it comes to fleet availability. Coming out of the COVID recovery, the operational ambition in the Americas was to be the last provider with an available car on the lot. In a supply-constrained, high-demand environment, that strategy worked. Having the last car available meant you had pricing leverage on late rentals. And that was largely the reality in 2021 and 2022.

Daniel Cunha: cycles.

Brian J. Choi: The final strategic change I want to address for 2026 is how we think about costs. At this new Avis Budget Group, Inc., cost is not something to be cut for its own sake or simply managed quarter to quarter. Cost is capital. And like any capital allocator, our responsibility is to deploy that capital where it earns the highest possible return for our customers, our employees, our shareholders. Our job is not to spend less, it is to be deliberate. When we treat costs as scarce capital, we rationalize in areas where returns are low so that we can invest with conviction in the areas that matter most. One action funds the other.

We put this philosophy into practice at the start of the year. In January, we implemented a global reduction in force to reset our organizational structure to what we believe is appropriate for the business we plan to run in 2026 and beyond. This was a deliberate one-time action. Separately, we have strengthened our performance management processes, which led to exits this January. This will be an ongoing discipline going forward.

Daniel Cunha: The fourth quarter reinforced an important reality.

Brian J. Choi: This is a business with inherent volatility. Rental demand, used vehicle pricing, and RPD are variables we do not fully control. That makes it even more critical that we rigorously control what we can control. A lean, flexible cost base is essential to manage through uncertainty and improve earnings stability. This approach extends well beyond headcount. We are conducting a thorough review of our business portfolio to ensure each segment meets our capital return thresholds and strategic objectives. In December, we made the difficult decision to exit Zipcar UK. In January, we restructured Zipcar’s U.S. operations to put that business on a more sustainable footing.

Throughout 2026, we will continue to evaluate non-core and adjacent businesses, including package delivery, ride-hail, and certain franchise activities, to ensure capital and management attention are allocated where they create the most value. Let me be clear. This discipline does not mean we are pulling back from investment. It is not an either-or proposition. Cost rationalization is what enables investment. That capital comes from making tough, intentional choices elsewhere. That is exactly how we started 2026 and how we expect to manage the years going forward. Taken together, these actions are designed to lower earnings volatility, improve margin durability, and sustainably increase free cash flow generation. Which brings me to Horizon three.

I will keep this brief because our long-term strategic direction remains consistent with what we have previously communicated. We remain intensely focused on the execution of several key initiatives. Our top priority is customer experience. Over the past several years, the rental car industry has seen quality standards drift. It is not acceptable to Avis, it is something we are addressing head on.

David T. Calabria: We

Brian J. Choi: are rearchitecting our customer experience organization from the ground up with clear ownership, defined metrics, and tight accountability.

Stephanie Moore: Our objective is straightforward.

Brian J. Choi: Consistently deliver the best product in the industry. It begins with our fleet,

Dan Meir Levy: The average age of our U.S. rental car fleet will be less than a year old by the end of the first quarter.

Brian J. Choi: We have not been able to say that since before the pandemic. We are also continuing to build out Avis First. What began as a leisure-focused offering will expand meaningfully into commercial accounts in 2026. Feedback from our early strategic accounts has been strong. And we see significant opportunity to deepen relationships by delivering a more differentiated premium experience. Finally, our partnership with Waymo continues to progress as planned. Our Dallas launch remains on schedule, real estate development, hiring and training, and compliance certification all tracking to plan. Waymo is currently offering employees fully autonomous rides in Dallas, which is a final step ahead of welcoming public riders soon.

As we announced last year, we do intend to explore additional cities with Waymo in the future, and are in active conversations with them. We believe our core competencies are mission critical to operating autonomous mobility at scale. We are working alongside Waymo to prove that in practice as additional markets come online.

Daniel Cunha: To close,

Brian J. Choi: the fourth quarter was a setback, and we have treated it as a catalyst for change. We have clearly diagnosed our challenges, we have been decisive about the actions we have taken, and disciplined in how we are repositioning the business. The focus now is execution. Running a tighter fleet, allocating capital deliberately, and raising the bar on customer experience. These actions better align the company with the operating environment and strengthen our ability to generate durable returns. With that, Daniel, David, and I are happy to take your questions. Thank you. We will now be conducting a question and answer. You may press 2 to remove your question from the queue.

We ask that you please limit yourself to one question and one follow-up question. One moment, please, while we poll for your questions. Our first questions come from the line of Andrew Percoco with Morgan Stanley. Please proceed with your questions.

Andrew Percoco: Great. Thanks so much for taking the question this morning. I want to start with your 2026 guidance. Obviously, a fairly wide range for adjusted EBITDA. And I am just hoping that you can kind of walk us through what some of your working assumptions are on some of the key inputs like RPD and DPU? I see that you guys are guiding for DPU to be up in the first quarter and then a moderation thereafter. So just hoping to get a better explanation for what is embedded in the guidance to kind of where you exited 2025? Thank you.

Brian J. Choi: It is pretty important saying that we are assuming that fleet size is going to decrease into 2026, something that has not been the case for the past few years. We are going to focus instead on utilization and making sure that we get the right business in terms of a contribution margin perspective.

David T. Calabria: Daniel, anything you want

Daniel Cunha: I would just highlight that if you look at the 2025 results where we landed and you make two adjustments only, right, and you ignore, you know, $100 million of recall impact and the one-off impact of PLPD, you are in the middle of the range. Right? And how we perform better than the range or, you know, slightly below is going to be a function of how the market in general on the RPD and on the fleet size, you know, perform. We believe we have a path for top of the range, but, coming out of Q4, we have some significant headwinds. We are being conservative.

Brian J. Choi: Andrew? Maybe just to add over there. I realize it is a wide range, we expect to narrow that range as the year progresses. But just given what we saw in the fourth quarter, which was a large miss in itself, we want to make sure that we retain flexibility.

Andrew Percoco: So

Brian J. Choi: listen, the fourth quarter, it was not driven by a gradual deterioration in trends. Things happened very quickly. Short term, it was a shock. And we cannot eliminate volatility in the industry. But by materially tightening the fleet levels and adjusting our operating posture, I think we have reduced the probability of another compounding effect like that.

Andrew Percoco: Got it. Okay. That is super helpful. And maybe just to follow up on, I mean, there is continuing to be a pretty big dispersion, some of the metrics between the Americas and your international segment. So just curious as you talk about fleet resizing and some of the actions you are taking, is that more of an Americas comment, or is that global? Just trying to get a better understanding of what the differences you are seeing across geographies and maybe how you are tackling those challenges.

Brian J. Choi: Sure. I will start. Andy, the comments that we made around OEM repositioning and what were the actions we are taking around depreciation, that is entirely in the Americas segment. So the used car market in 2025 in the U.S., it was unusually volatile. So Manheim values, if you recall, they were roughly flat year over year in the first quarter, and then amid tariff uncertainty, it really spiked into the second and third quarter, and then it exited the year essentially flat again. So by year-end, pricing normalized completely relative to where it began. Given that environment, we are proactively adjusting depreciation in the fourth quarter to reflect current residual expectations rather than carrying forward prior assumptions.

Daniel Cunha: I will add, Brian, a couple of things. In the Americas, we have made bigger strides in improving utilization, right? In spite of the three-point impact of the recall in the quarter, we managed to grow utilization by about half a point, which is a meaningful improvement. And that is why, you know, we also have the more flexibility in reducing the fleets and still serving customers with rental days. Right? On the international, think about the per-unit costs, there is less volatility, as Brian described. The Manheim situation is an Americas situation, but we also have a much higher share of program cars in international, which insulates them a little bit from this impact in the short term.

Andrew Percoco: Great. Thank you so much.

Brian J. Choi: Thank you. Our next questions come from the line of John Michael Healy with Northcoast Research. Please proceed with your questions. Thanks for taking the question. I wanted to spend a couple of minutes on fleet cost. I think in the slides, you guys talked about $400 million in Q1, and a full year of, let us call it, $3,250 million or so at the midpoint. I am just trying to understand the confidence in the full year because that, to me, that first quarter number is awfully high, which would imply that the rest of the year is probably sub-$300.

Andrew Percoco: John,

Brian J. Choi: like I said earlier, in terms of the volatility that we saw in 2025, you will see that our models, which we are forecasting when we sell these cars into the future, they are built off of future forecasts primarily in Black Book and Moody’s. Those forward-looking economic models assume the impact of tariffs to continue throughout the life of these vehicles. As we have seen in the fourth quarter, that is not the case anymore. So we have adjusted our internal models accordingly as well. So what you are seeing in the fourth quarter is kind of a catch-up to show that reality and then normalizes over time.

What we are seeing is, listen, for six months of that elevated period where we saw tariff impacts, had we known it would evaporate, we probably would have been a little more conservative in our depreciation assumptions. What we are doing right now is just we are just rectifying that in the first quarter to make sure that we reset to where we need to be. Understood. And then just any commentary on just the pricing environment that you have seen kind of year to date and how you are seeing competitive pricing trends or your pricing trends into the spring season? Thanks.

Andrew Percoco: Sure.

Dan Meir Levy: But that said,

Brian J. Choi: the actions we have taken to reduce fleet are beginning to align supply more closely with demand, particularly as we move into February and March. So we are not providing month-to-month guidance, John, but pricing has stabilized relative to where we exited in January. And the rate of erosion that we saw post-COVID has clearly moderated. So importantly, our 2026 plan, it does not assume aggressive pricing recovery. It is built around disciplined fleet sizing, utilization improvement, and cost control. So we are working towards achieving better RPD, but we are not dependent on it to hit our 2026 guidance. Great. Thank you. Thank you. Our next questions come from the line of Christopher Nicholas Stathoulopoulos with SIG.

Please proceed with your questions.

Stephanie Moore: So, David,

Brian J. Choi: you know,

Daniel Cunha: Avis has effectively

David T. Calabria: missed the full year guide for three years now. Now I understand this is under a different leadership here, and you have only recently gotten into the practice of giving explicit guides. So some of these, to be fair, were more on the soft guide side. But I guess, how do we get comfortable with the full year guide here? And maybe if you could, I think this was the lead-off question, but the line dropped or something.

If there is an EBITDA bridge you could walk us through, anything on the KPIs, and then, you know, perhaps if you could quantify what could be described as lost revenue or embedded demand for last year’s—so impact of tariff shutdowns, FAA cancellations, weather. Zipcar, I do not think you give any impact on what that looks like from a non-cash or comparable issue. But just want to understand here, your base case assumptions for the EBITDA bridge for this year, and we how we should think about what, I guess, was out of your control for last year. There are a lot of items there, and maybe if you could put some numbers around that.

That would help us with the modeling.

Andrew Percoco: Thank you.

Brian J. Choi: Sure. Let me start, and I will pass it over to David and Daniel. But in our prepared remarks, we gave a bit of guidance in terms of what happened at least in the fourth quarter relative to what we were expecting. So on the revenue side of things, roughly $100 million of impact. And, from a balance sheet perspective, we took another $50 million increase to our PLPD reserves. Chris, let us be honest. The market moves quickly over here. So anchoring on specific metrics to say this is how we are going to plan for the entire year just really is not feasible for us.

So our objective this year is to earn back confidence through consistent execution. Daniel?

David T. Calabria: Okay. On Zipcar, if there are any numbers you can give us. For UK, the UK segment?

Daniel Cunha: That has not impacted the results. Those actions were taken at the very end of the year, beginning of this year. Chris, that has had no material impact. No.

David T. Calabria: Okay. And then as a follow-up, Brian, I did not hear any comments in your prepared on your premium efforts.

Andrew Percoco: All the tech efforts. Is this on pause until you get the tactics around the fleet right, or are you continuing to move forward with that initiative?

Brian J. Choi: No. It is not taking a pause. In fact, a lot of the cost rationalization that is happening in the business is being used to fund those initiatives. So I think we said in our prepared remarks, Avis First is still a go. We are concentrating on making sure that the product is right and getting a lot more adoption in the airports it is in before we expand, meaningfully. But it is going live now in Europe. I think Munich just came online. And we are going to start offering the product to our commercial customers. So we think that the Avis First aligns tightly with our core philosophical tenet, which is tying Avis to a premium customer experience.

Andrew Percoco: Okay. If I could squeeze in one more. Does the base EBITDA guide here for the full year assume Americas revenue up

Daniel Cunha: It does. I think I am right.

Andrew Percoco: Okay. I am sorry.

Daniel Cunha: You know, because it has been down for three years, so I am guessing if the base case, your EBITDA guide at the enterprise level, does that assume you are growing Americas revenue for the full year?

Brian J. Choi: Yes. We assume that we are modestly growing revenue. Chris. You are right. We have been declining for the past few years given a COVID boom. The question that has been on everyone’s mind is what is normalized—what does a normalized environment look like? I do think that we are entering into a normalized environment here.

Andrew Percoco: Okay. Okay. Thank you.

Brian J. Choi: Thank you. Our next questions come from the line of Dan Meir Levy with Barclays. Please proceed with your questions.

Andrew Percoco: Great. Thank you for taking my question. Josh Young on for Dan Levy. So I have one question and then a follow-up. Could you walk us through the puts and takes on the EV impairment? And then just in terms of how we should think about sizing potential benefit to DPU, I know you mentioned that it was previously around $600. So how should we think about that into 2026?

Daniel Cunha: Yes. I will maybe start from first principles and our strategic priorities. Then, you know, we have shared in the past how we feel about the capital structure and how deleveraging has been a key priority for us. Right? And when the Big Bill came along and made the 100% bonus depreciation permanent, it really reduced our expected tax liability as we go forward. Right? And as a result of that, we had, you know, no clear path to using those tax credits, and we immediately started looking for ways of monetizing on those. They were a substantial amount on our balance sheet.

So when we found a task here that allowed us to monetize $880 million of this, we jumped on it. Right? So with that decision to the deal, and I will, you know, ask David here to share a little bit on the structure—it was a complex deal. We essentially committed to that path. And along the way, we evaluated EV strategy. As you know, there is a lot going on in this market. Lots of OEMs rethinking how their own capital allocation, their own strategies are evolving in that space. And we thought it would be prudent, right, and reduce risk overall to shorten the economic life of those vehicles. Right?

So operating them for a short period of time, I think, will reduce the overall risk. On the DPU front, it is essentially allowing us to also cut the depreciation in half. Right? So you go from about $600 to slightly north of $300 a month. That should help improve net depreciation as the year develops. But, David, do you want to share a bit on the structure? This was a somewhat complex one.

David T. Calabria: Yep. Sure, Daniel. I just want to stress. We really view this—this was not an issue. This was an opportunity. And we took it. And so what we were able to do is take tax credits that had little to no value, as Daniel said, monetize that, use that against the cap cost of our vehicles to reduce the depreciation, funded by a new securitization that we created. It is an incredibly complex transaction that I have to give my treasury team and the tax team a lot of credit for figuring that out and getting it done in such a short time.

Dan Meir Levy: Excellent. Thank you. And then, as a follow-up,

Daniel Cunha: just to circle back to the collaboration with Waymo.

Dan Meir Levy: What are the key financial considerations there? And how soon might you see a material benefit from the partnership?

Brian J. Choi: Yeah. Josh, we are not getting into the specifics of the economics here. Like I said, Dallas is gearing up to come online. And we think that we will be taking riders from the public pretty soon. But other than that, we are not really getting into much of the financial details. I think from our perspective, right now, near term, Waymo is about building operational capability and not deploying outsized capital. So I do want to mention that the vehicles in Dallas are on Waymo’s balance sheet today. And that structure reflects the current phase of the partnership.

So over time, if the economics justify it, we would consider owning vehicles ourselves but only under the same return thresholds and balance sheet discipline that govern the rest of our fleet. And we are focused on scaling this thoughtfully. We are looking at other cities. We are going to expand our capital involvement only where returns are clearly aligned.

Dan Meir Levy: Great. Thank you.

Brian J. Choi: Thank you. Our next questions come from the line of Stephanie Moore with Jefferies. Please proceed with your questions.

Stephanie Moore: Hi, good morning. Thank you. I was hoping you could talk a bit about your expectations for the first quarter. Admittedly, there is a lot of moving pieces as it relates to the impairment charge, higher fleet costs. I am assuming probably weather is still—it is—weather will be an impact as Well, so maybe if you could talk about the first quarter as well as some of the underlying trends you are seeing. I think you noted that underlying trends from a volume and pricing standpoint did improve as 4Q progressed. So curious, obviously, taking into account seasonality, how underlying trends have been January through February.

Brian J. Choi: Thanks.

Brian J. Choi: Yes. Stephanie, that being lower is on an EBITDA basis. And the way that I would describe it is it is going to be kind of a tale of two cities situation. The actions that we are taking around the fleet rationalization, that is helping the revenue side of things. So I do think that you will see in the first quarter that revenue is stabilizing. It is becoming much more healthy. And yes, the January storms, that was a setback. But, you know, even though we could not predict it because the fleet was already being reduced, we were able to absorb that demand disruption without creating the same economic imbalance we saw in November.

David T. Calabria: A

Brian J. Choi: reset in the first quarter on the depreciation side, which will result in lower year-over-year EBITDA in the first quarter. But we think that puts things where it should be. And you will see things improve materially going forward.

Stephanie Moore: Understood. Very clear. So maybe once we get past the first quarter, maybe talk a little bit about your level of confidence in achieving the guide for the full year, specifically as it relates to actions that are within your control. I mean, I think we all understand that this can be a very complex and dynamic industry. So maybe just speak to the actions specifically related to Avis and some of your operational improvements, productivity and the like that you think can help potentially provide an offset if, you know, what we keep seeing is general volatility in the overall industry.

Dan Meir Levy: Thanks.

Daniel Cunha: Stephanie, I will keep the bridging relatively simple, but I think if we anchor ourselves on the 2025 results, right, to add back the impact of the recalls of over $100 million—and conservatively—and the one-off nature of the PLPD, the insurance reserve adjustment we had in Q4, you are already at the middle of the range. Right? One, on the outlook for 2026, you know, one of the pillars of our plan is a continued improvement in utilizations in the Americas, right? An improvement that the team has already been delivering on during 2025. And that is worth about $100 million for us next year.

Brian J. Choi: Stephanie, I think we operate in a business with inherent volatility. So that is why it is very important to control those things that we can control. And that is reflected in how we are planning for this year. So the structural actions that we are implementing, which is tighter fleet discipline, cost rigor, capital allocation focus, that is all designed to reduce volatility and strengthen the earnings base over time. So as we move through the year, our objective is to demonstrate that the business can sustainably generate EBITDA north of $1 billion annually and then grow from that base through disciplined execution.

As I said earlier, this is the first time that we are coming up with a plan that this leadership team is under this new operating philosophy. We have every intention of getting it.