Avis Budget Group: SEC Filing

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File No. 001-10308


Avis Budget Group, Inc.
(Exact name of registrant as specified in its charter)

Delaware

06-0918165

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)

6 Sylvan Way

Parsippany,

07054

(Address of principal executive offices)

(Zip Code)

(973)

496-4700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.01	CAR	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the issuer’s common stock was 38,738,944 shares as of July 31, 2023.

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		Page
PART I	Financial Information
Item 1.	Financial Statements
	Consolidated Condensed Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	4
	Consolidated Condensed Balance Sheets as of June 3 0 , 2023 and December 31, 2022 (Unaudited)	5
	Consolidated Condensed Statements of Cash Flows for the Six Months Ended June 3 0 , 2023 and 2022 (Unaudited)	6
	Consolidated Condensed Statements of Stockholders’ Equity for the Three and Six Months Ended June 3 0 , 2023 and 2022 (Unaudited)	8
	Notes to Consolidated Condensed Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37
Item 4.	Controls and Procedures	38
PART II	Other Information
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 5.	Other Information	39
Item 6.	Exhibits	39
	Signatures	40

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FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report on Form 10-Q may be considered “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. The forward-looking statements contained herein are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by any such forward-looking statements. Forward-looking statements include information concerning our future financial performance, business strategy, projected plans and objectives. These statements may be identified by the fact that they do not relate to historical or current facts and may use words such as “believes,” “expects,” “anticipates,” “will,” “should,” “could,” “may,” “would,” “intends,” “projects,” “estimates,” “plans,” “forecasts,” “guidance,” and similar words, expressions or phrases. The following important factors and assumptions could affect our future results and could cause actual results to differ materially from those expressed in such forward-looking statements. These factors include, but are not limited to:

•the high level of competition in the mobility industry, including from new companies or technology, and the impact such competition may have on pricing and rental volume;

•a change in our fleet costs, including as a result of a change in the cost of new vehicles, resulting from inflation or otherwise, manufacturer recalls, disruption in the supply of new vehicles, shortages in semiconductors used in new vehicle production, and/or a change in the price at which we dispose of used vehicles either in the used vehicle market or under repurchase or guaranteed depreciation programs;

•the results of operations or financial condition of the manufacturers of our vehicles, which could impact their ability to perform their payment obligations under our agreements with them, including repurchase and/or guaranteed depreciation arrangements, and/or their willingness or ability to make vehicles available to us or the mobility industry as a whole on commercially reasonable terms or at all;

•levels of and volatility in travel demand, including future volatility in airline passenger traffic;

•a deterioration in economic conditions, resulting in a recession or otherwise, particularly during our peak season or in key market segments;

•an occurrence or threat of terrorism, the current and any future pandemic diseases, natural disasters, military conflict, including the ongoing military conflict between Russia and Ukraine, or civil unrest in the locations in which we operate, and the potential effects of sanctions on the world economy and markets and/or international trade;

•any substantial changes in the cost or supply of fuel, vehicle parts, energy, labor or other resources on which we depend to operate our business, including as a result of COVID-19, inflation, the ongoing military conflict between Russia and Ukraine, and any embargos on oil sales imposed on or by the Russian government;

•our ability to continue to successfully implement or achieve our business plans and strategies, achieve and maintain cost savings and adapt our business to changes in mobility;

•political, economic or commercial instability in the countries in which we operate, and our ability to conform to multiple and conflicting laws or regulations in those countries;

•our ability to dispose of vehicles in the used-vehicle market on attractive terms;

•our dependence on third-party distribution channels, third-party suppliers of other services and co-marketing arrangements with third parties;

•risks related to completed or future acquisitions or investments that we may pursue, including the incurrence of incremental indebtedness to help fund such transactions and our ability to promptly and effectively integrate any acquired businesses or capitalize on joint ventures, partnerships and other investments;

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•our ability to utilize derivative instruments, and the impact of derivative instruments we utilize, which can be affected by fluctuations in interest rates, gasoline prices and exchange rates, changes in government regulations and other factors;

•our exposure to uninsured or unpaid claims in excess of historical levels and our ability to obtain insurance at desired levels and the cost of that insurance;

•risks associated with litigation or governmental or regulatory inquiries, or any failure or inability to comply with laws, regulations or contractual obligations or any changes in laws, regulations or contractual obligations, including with respect to personally identifiable information and consumer privacy, labor and employment, and tax;

•risks related to protecting the integrity of, and preventing unauthorized access to, our information technology systems or those of our third-party vendors, licensees, dealers, independent operators and independent contractors, and protecting the confidential information of our employees and customers against security breaches, including physical or cybersecurity breaches, attacks, or other disruptions, compliance with privacy and data protection regulation, and the effects of any potential increase in cyberattacks on the world economy and markets and/or international trade;

•any impact on us from the actions of our third-party vendors, licensees, dealers, independent operators and independent contractors and/or disputes that may arise out of our agreements with such parties;

•any major disruptions in our communication networks or information systems;

•risks related to tax obligations and the effect of future changes in tax laws and accounting standards;

•risks related to our indebtedness, including our substantial outstanding debt obligations, recent and future interest rate increases, which increase our financing costs, downgrades by rating agencies and our ability to incur substantially more debt;

•our ability to obtain financing for our global operations, including the funding of our vehicle fleet through the issuance of asset-backed securities and use of the global lending markets;

•our ability to meet the financial and other covenants contained in the agreements governing our indebtedness, or to obtain a waiver or amendment of such covenants should we be unable to meet such covenants;

•significant changes in the assumptions and estimates that are used in our impairment testing for goodwill or intangible assets, which could result in a significant impairment of our goodwill or intangible assets; and

•other business, economic, competitive, governmental, regulatory, political or technological factors affecting our operations, pricing or services.

We operate in a continuously changing business environment and new risk factors emerge from time to time. New risk factors, factors beyond our control, or changes in the impact of identified risk factors may cause actual results to differ materially from those set forth in any forward-looking statements. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. Moreover, we do not assume responsibility if future results are materially different from those forecasted or anticipated. Other factors and assumptions not identified above, including those discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Item 2 and “Risk Factors” in Item 1A in this quarterly report and in similarly titled sections set forth in Item 7 and in Item 1A and in other portions of our 2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 16, 2023 (the “2022 Form 10-K”), may cause actual results to differ materially from those projected in any forward-looking statements.

Although we believe that our assumptions are reasonable, any or all of our forward-looking statements may prove to be inaccurate and we can make no guarantees about our future performance. Should unknown risks or uncertainties materialize or underlying assumptions prove inaccurate, actual results could differ materially from past results and/or those anticipated, estimated or projected. We undertake no obligation to release any revisions

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to any forward-looking statements, to report events or to report the occurrence of unanticipated events. For any forward-looking statements contained in any document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Avis Budget Group, Inc.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(In millions, except per share data)

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,
		2023		2022		2023		2022
Revenues		$	3,123	$	3,244	$	5,680	$	5,676

Expenses
	Operating	1,475		1,349		2,782		2,496
	Vehicle depreciation and lease charges, net	375		234		640		345
	Selling, general and administrative	378		359		702		642
	Vehicle interest, net	172		97		305		174
	Non-vehicle related depreciation and amortization	52		51		108		109
	Interest expense related to corporate debt, net:
	Interest expense	68		64		141		117

	Restructuring and other related charges	1		6		5		14
	Transaction-related costs, net	—		1		—		1
	Other (income) expense, net	4		—		2		—
Total expenses		2,525		2,161		4,685		3,898

Income before income taxes		598		1,083		995		1,778
Provision for income taxes		162		309		247		477
Net income		436		774		748		1,301
	Less: net income (loss) attributable to non-controlling interests	1		(4)		1		(6)
Net income attributable to Avis Budget Group, Inc.		$	435	$	778	$	747	$	1,307

Comprehensive income attributable to Avis Budget Group, Inc.		$	456	$	742	$	758	$	1,310

Earnings per share
	Basic	$	11.13	$	16.05	$	19.16	$	25.74
	Diluted	$	11.01	$	15.71	$	18.93	$	25.14

See Notes to Consolidated Condensed Financial Statements (Unaudited).

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Avis Budget Group, Inc.

CONSOLIDATED CONDENSED BALANCE SHEETS

(In millions, except par value)

(Unaudited)


		June 30, 2023		December 31, 2022
Assets
Current assets:
	Cash and cash equivalents	$	571	$	570
	Receivables, net	897		810
	Other current assets	765		506
Total current assets		2,233		1,886

Property and equipment, net		624		594
Operating lease right-of-use assets		2,547		2,405
Deferred income taxes		1,457		1,379
Goodwill		1,082		1,070
Other intangibles, net		669		666
Other non-current assets		480		499
Total assets exclusive of assets under vehicle programs		9,092		8,499

Assets under vehicle programs:
	Program cash	109		70
	Vehicles, net	20,625		15,961
	Receivables from vehicle manufacturers and other	421		421
	Investment in Avis Budget Rental Car Funding (AESOP) LLC—related party	1,148		976
		22,303		17,428
Total Assets		$	31,395	$	25,927

Liabilities and Stockholders’ Equity
Current liabilities:
	Accounts payable and other current liabilities	$	2,810	$	2,547
	Short-term debt and current portion of long-term debt	34		27
Total current liabilities		2,844		2,574

Long-term debt		4,668		4,644
Long-term operating lease liabilities		2,079		1,884
Other non-current liabilities		529		554
Total liabilities exclusive of liabilities under vehicle programs		10,120		9,656

Liabilities under vehicle programs:
	Debt	3,399		2,534
	Debt due to Avis Budget Rental Car Funding (AESOP) LLC—related party	14,375		11,275
	Deferred income taxes	2,997		2,754
	Other	629		408
		21,400		16,971
Commitments and contingencies (Note 13)

Stockholders’ equity:
	Preferred stock, $0.01 par value—authorized 10 shares; none issued and outstanding, respectively	—		—
	Common stock, $0.01 par value—authorized 250 shares; issued 137 shares, respectively	1		1
	Additional paid-in capital	6,625		6,666
	Retained earnings	3,326		2,579
	Accumulated other comprehensive loss	(90)		(101)
	Treasury stock, at cost— 97 and 98 shares, respectively	(9,991)		(9,848)
Stockholders’ equity attributable to Avis Budget Group, Inc.		(129)		(703)
	Non-controlling interests	4		3
Total stockholders’ equity		(125)		(700)
Total Liabilities and Stockholders’ Equity		$	31,395	$	25,927

See Notes to Consolidated Condensed Financial Statements (Unaudited).

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Avis Budget Group, Inc.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


			Six Months Ended June 30,
			2023		2022
Operating activities
Net income			$	748	$	1,301
Adjustments to reconcile net income to net cash provided by operating activities:
	Vehicle depreciation		1,017		777
	Amortization of right-of-use assets		503		414
	(Gain) loss on sale of vehicles, net		(455)		(497)
	Non-vehicle related depreciation and amortization		108		109

	Stock-based compensation		16		12
	Amortization of debt financing fees		19		16

	Net change in assets and liabilities:
		Receivables	(52)		(139)
		Income taxes and deferred income taxes	150		373
		Accounts payable and other current liabilities	108		434
	Operating lease liabilities		(500)		(415)
	Other, net		120		(14)
Net cash provided by operating activities			1,782		2,371

Investing activities
Property and equipment additions			(105)		(76)
Proceeds received on asset sales			—		2
Net assets acquired (net of cash acquired)			(33)		(1)

Other, net			—		23
Net cash used in investing activities exclusive of vehicle programs			(138)		(52)

Vehicle programs:
	Investment in vehicles		(8,881)		(6,269)
	Proceeds received on disposition of vehicles		3,977		2,594
	Investment in debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party		(329)		(210)
	Proceeds from debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party		157		67
			(5,076)		(3,818)
Net cash used in investing activities			(5,214)		(3,870)

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Avis Budget Group, Inc.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued)

(In millions)

(Unaudited)


		Six Months Ended June 30,
		2023		2022
Financing activities
Proceeds from long-term borrowings		$	—	$	729
Payments on long-term borrowings		(15)		(11)
Net change in short-term borrowings		3		—

Repurchases of common stock		(200)		(1,748)
Debt financing fees		(2)		(6)


Net cash used in financing activities exclusive of vehicle programs		(214)		(1,036)

Vehicle programs:
	Proceeds from borrowings	11,866		8,921
	Payments on borrowings	(8,158)		(6,289)
	Debt financing fees	(28)		(14)
		3,680		2,618
Net cash provided by financing activities		3,466		1,582

Effect of changes in exchange rates on cash and cash equivalents, program and restricted cash		6		(25)

Net increase in cash and cash equivalents, program and restricted cash		40		58
Cash and cash equivalents, program and restricted cash, beginning of period		642		626
Cash and cash equivalents, program and restricted cash, end of period		$	682	$	684

See Notes to Consolidated Condensed Financial Statements (Unaudited).

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Avis Budget Group, Inc.

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions)

(Unaudited)


	Common Stock			Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)		Treasury Stock				Stockholders’ Equity Attributable to Avis Budget Group, Inc.		Non-controlling Interests		Total Stockholders’ Equity
	Shares	Amount								Shares		Amount
Balance at March 31, 2023	137.1	$	1	$	6,620	$	2,891	$	(111)	(97.3)		$	(9,845)	$	(444)	$	3	$	(441)


Comprehensive income:
Net income	—	—		—		435		—		—		—		435		1		436
Other comprehensive income	—	—		—		—		21		—		—		21		—		21
Total comprehensive income						435		21						456		1		457


Net activity related to restricted stock units	—	—		5		—		—		—		—		5		—		5
Repurchases of common stock	—	—		—		—		—		(0.7)		(146)		(146)		—		(146)
Balance at June 30, 2023	137.1	$	1	$	6,625	$	3,326	$	(90)	$	(98.0)	$	(9,991)	$	(129)	$	4	$	(125)

Balance at March 31, 2022	137.1	$	1	$	6,646	$	344	$	(94)	(87.4)		$	(7,889)	$	(992)	$	9	$	(983)

Comprehensive income:
Net income (loss)	—	—		—		778		—		—		—		778		(4)		774
Other comprehensive income (loss)	—	—		—		—		(36)		—		—		(36)		—		(36)
Total comprehensive income (loss)						778		(36)						742		(4)		738


Net activity related to restricted stock units	—	—		(3)		—		—		0.1		—		(3)		—		(3)
Repurchases of common stock	—	—		—		—		—		(1.5)		(401)		(401)		—		(401)
Balance at June 30, 2022	137.1	$	1	$	6,643	$	1,122	$	(130)	(88.8)		$	(8,290)	$	(654)	$	5	$	(649)


	Common Stock			Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)		Treasury Stock				Stockholders’ Equity Attributable to Avis Budget Group, Inc.		Non-controlling Interests		Total Stockholders’ Equity
	Shares	Amount								Shares		Amount
Balance at December 31, 2022	137.1	$	1	$	6,666	$	2,579	$	(101)	(97.6)		$	(9,848)	$	(703)	$	3	$	(700)


Comprehensive income:
Net income	—	—		—		747		—		—		—		747		1		748
Other comprehensive income	—	—		—		—		11		—		—		11		—		11
Total comprehensive income						747		11						758		1		759


Net activity related to restricted stock units	—	—		(41)		—		—		0.3		3		(38)		—		(38)
Repurchases of common stock	—	—		—		—		—		(0.7)		(146)		(146)		—		(146)
Balance at June 30, 2023	137.1	$	1	$	6,625	$	3,326	$	(90)	$	(98.0)	$	(9,991)	$	(129)	$	4	$	(125)

Balance at December 31, 2021	137.1	$	1	$	6,676	$	(185)	$	(133)	(81.2)		$	(6,579)	$	(220)	$	11	$	(209)

Comprehensive income:
Net income (loss)	—	—		—		1,307		—		—		—		1,307		(6)		1,301
Other comprehensive income	—	—		—		—		3		—		—		3		—		3
Total comprehensive income (loss)						1,307		3						1,310		(6)		1,304


Net activity related to restricted stock units	—	—		(33)		—		—		0.3		(3)		(36)		—		(36)
Repurchases of common stock	—	—		—		—		—		(7.9)		(1,708)		(1,708)		—		(1,708)
Balance at June 30, 2022	137.1	$	1	$	6,643	$	1,122	$	(130)	(88.8)		$	(8,290)	$	(654)	$	5	$	(649)

See Notes to Consolidated Condensed Financial Statements (Unaudited).

Avis Budget Group, Inc.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)

(Unless otherwise noted, all dollar amounts in tables are in millions, except per share amounts)

1. Basis of Presentation

Avis Budget Group, Inc. provides mobility solutions to businesses and consumers worldwide. The accompanying unaudited Consolidated Condensed Financial Statements include the accounts and transactions of Avis Budget Group, Inc. and its subsidiaries, as well as entities in which Avis Budget Group, Inc. directly or indirectly has a controlling financial interest (collectively, “we”, “our”, “us”, or the “Company”), and have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission for interim financial reporting.

We operate the following reportable business segments:

•Americas - consisting primarily of (i) vehicle rental operations in North America, South America, Central America and the Caribbean, (ii) car sharing operations in certain of these markets, and (iii) licensees in the areas in which we do not operate directly.

•International - consisting primarily of (i) vehicle rental operations in Europe, the Middle East, Africa, Asia and Australasia, (ii) car sharing operations in certain of these markets, and (iii) licensees in the areas in which we do not operate directly.

The operating results of acquired businesses are included in the accompanying Consolidated Condensed Financial Statements from the dates of acquisition. Differences between the preliminary allocation of purchase price and the final allocation for our 2022 acquisitions of various licensees were not material. We consolidate joint venture activities when we have a controlling interest and record non-controlling interests within stockholders’ equity and the statement of comprehensive income equal to the percentage of ownership interest retained in such entities by the respective non-controlling party.

In presenting the Consolidated Condensed Financial Statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”), management makes estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ from those estimates. In management’s opinion, the Consolidated Condensed Financial Statements contain all adjustments necessary for a fair presentation of interim results reported. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire year or any subsequent interim period. These financial statements should be read in conjunction with our 2022 Annual Report on Form 10-K (the “2022 Form 10-K”).

Summary of Significant Accounting Policies

Our significant accounting policies are fully described in Note 2 – Summary of Significant Accounting Policies in our 2022 Form 10-K.

Cash and cash equivalents, Program cash and Restricted cash. The following table provides a detail of cash and cash equivalents, program and restricted cash reported within the Consolidated Condensed Balance Sheets to the amounts shown in the Consolidated Condensed Statements of Cash Flows.


	As of June 30,
	2023		2022
Cash and cash equivalents	$	571	$	579
Program cash	109		103
Restricted cash (a)	2		2
Total cash and cash equivalents, program and restricted cash	$	682	$	684

________

(a)Included within other current assets.

Vehicle Programs. We present separately the financial data of our vehicle programs. These programs are distinct from our other activities since 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 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.

Transaction-related costs, net. Transaction-related costs, net are classified separately in the Consolidated Condensed Statements of Comprehensive Income. These costs are comprised of expenses primarily related to acquisition-related activities such as due diligence and other advisory costs, expenses related to the integration of the acquiree’s operations with those of our operations, including the implementation of best practices and process improvements, non-cash gains and losses related to re-acquired rights, expenses related to pre-acquisition contingencies and contingent consideration related to acquisitions.

Currency Transactions. We record the gain or loss on foreign currency transactions on certain intercompany loans and the gain or loss on intercompany loan hedges within interest expense related to corporate debt, net.

Divestitures. In February 2022, we completed the sale of our operations in the United States Virgin Islands for $13 million, for the right to operate the Avis brand. During the six months ended June 30, 2022, we recorded a gain of $2 million within restructuring and other related charges.

In March 2022, we completed the sale of our operations in the Netherlands for $15 million, subject to working capital adjustments, for the right to operate the Avis and Budget brands. During the six months ended June 30, 2022, we recorded a loss of $7 million, net of impact of foreign currency adjustments, within restructuring and other related charges. The Netherlands operations were reported within our International reporting segment.

Variable Interest Entity (“VIE”). We review our investments to determine if they are VIEs. A VIE is an entity in which either (i) the equity investors as a group lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. Entities that are determined to be VIEs are consolidated if we are the primary beneficiary of the entity. The primary beneficiary possesses the power to direct the activities of the VIE that most significantly impact its economic performance and has the obligation to absorb losses or the right to receive benefits from the VIE that are significant to it. We will reconsider our original assessment of a VIE upon the occurrence of certain events such as contributions and redemptions, either by us, or third parties, or amendments to an entity’s governing documents. On an ongoing basis, we reconsider whether we are deemed to be a VIE’s primary beneficiary. See Note 15 – Related Party Transactions for our VIE investment in our former subsidiary.

Investments. As of June 30, 2023 and December 31, 2022, we had equity method investments with a carrying value of $85 million and $77 million, respectively, which are included in other non-current assets. Earnings from our equity method investments are included within operating expenses. For the three months ended June 30, 2023 and 2022, we recorded $3 million and $2 million related to our equity method investments, respectively. For the six months ended June 30, 2023 and 2022, we recorded $4 million and $3 million related to our equity method investments, respectively. See Note 15 – Related Party Transactions for our equity method investment in our former subsidiary.

Revenues. Revenues are recognized under “Leases (Topic 842),” with the exception of royalty fee revenue derived from our licensees and revenue related to our customer loyalty program, which were approximately $42 million during the three months ended June 30, 2023 and 2022, in each period, and $86 million and $76 million during the six months ended June 30, 2023 and 2022, respectively.

The following table presents our revenues disaggregated by geography:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Americas	$	2,428	$	2,567	$	4,444	$	4,567
Europe, Middle East and Africa	543		525		910		849
Asia and Australasia	152		152		326		260
Total revenues	$	3,123	$	3,244	$	5,680	$	5,676

The following table presents our revenues disaggregated by brand:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Avis	$	1,748	$	1,753	$	3,163	$	3,034
Budget	1,180		1,284		2,157		2,266
Other	195		207		360		376
Total revenues	$	3,123	$	3,244	$	5,680	$	5,676

________

Other includes Zipcar and other operating brands.

Recently Issued Accounting Pronouncements

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” which amends Topic 805 to add contract assets and contract liabilities to the list of exceptions to the recognition and measurement principles that apply to business combinations and to require an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. ASU 2021-08 became effective for us on January 1, 2023. The adoption of this accounting pronouncement did not have a material impact on our Consolidated Condensed Financial Statements.

2. Leases

Lessor

The following table presents our lease revenues disaggregated by geography:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Americas	$	2,410	$	2,549	$	4,405	$	4,534
Europe, Middle East and Africa	523		505		872		814
Asia and Australasia	148		148		317		252
Total lease revenues	$	3,081	$	3,202	$	5,594	$	5,600

The following table presents our lease revenues disaggregated by brand:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Avis	$	1,721	$	1,728	$	3,109	$	2,989
Budget	1,168		1,270		2,132		2,242
Other	192		204		353		369
Total lease revenues	$	3,081	$	3,202	$	5,594	$	5,600

_______

Other includes Zipcar and other operating brands.

Lessee

We have operating and finance leases for rental locations, corporate offices, vehicle rental fleet and equipment. Many of our operating leases for rental locations contain concession agreements with various airport authorities that allow us to conduct our vehicle rental operations on site. In general, concession fees for airport locations are based on a percentage of total commissionable revenue as defined by each airport authority, some of which are subject to minimum annual guaranteed amounts. Concession fees other than minimum annual guaranteed amounts are not included in the measurement of operating lease Right of Use (“ROU”) assets and operating lease liabilities, and are recorded as variable lease expense as incurred. Our operating leases for rental locations often also require us to pay or reimburse operating expenses.

The components of lease expense are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Property leases (a)
Operating lease expense	$	214	$	168	$	419	$	329
Variable lease expense	108		152		191		254
Total property lease expense	$	322	$	320	$	610	$	583

__________

(a) Primarily within operating expenses.

Supplemental balance sheet information related to leases is as follows:


	As of June 30, 2023			As of December 31, 2022
Property leases
Operating lease ROU assets	$	2,547		$	2,405

Short-term operating lease liabilities (a)	$	506		$	555
Long-term operating lease liabilities	2,079			1,884
Operating lease liabilities	$	2,585		$	2,439

Weighted average remaining lease term	8.6 years			8.2 years
Weighted average discount rate	4.54		%	4.30		%

_________

(a) Included in accounts payable and other current liabilities.

Supplemental cash flow information related to leases is as follows:


	Six Months Ended June 30,
	2023		2022
Cash payments for lease liabilities within operating activities:
Property operating leases	$	431	$	354
Non-cash activities - increase (decrease) in ROU assets in exchange for lease liabilities:
Property operating leases	$	572	$	311

3. Restructuring and Other Related Charges

During second quarter 2022, we initiated a restructuring plan to focus on consolidating our global operations by designing new processes and implementing new systems (“Cost Optimization”). As of June 30, 2023, we formally communicated the termination of employment to approximately 270 employees as part of this process, and terminated approximately 255 of these employees. We expect further restructuring expense of approximately $2 million related to this initiative to be incurred this year.

The following table presents our restructuring liabilities and related activities by reportable segment as it relates to our Cost Optimization plan, which are all personnel related in nature:


		Americas		International		Total
Balance as of January 1, 2023		$	1	$	3	$	4
	Restructuring expense	3		2		5
	Restructuring payments and utilization	(3)		(3)		(6)
Balance as of June 30, 2023		$	1	$	2	$	3

4. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (“EPS”) (shares in millions):


		Three Months Ended June 30,				Six Months Ended June 30,
		2023		2022		2023		2022
Net income attributable to Avis Budget Group, Inc. for basic and diluted EPS		$	435	$	778	$	747	$	1,307

Basic weighted average shares outstanding		39.1		48.5		39.0		50.8
Non-vested stock (a)		0.4		1.0		0.5		1.2
Diluted weighted average shares outstanding		39.5		49.5		39.5		52.0

Earnings per share:
	Basic	$	11.13	$	16.05	$	19.16	$	25.74
	Diluted	$	11.01	$	15.71	$	18.93	$	25.14

________

(a) For the three and six months ended June 30, 2023, 0.1 million non-vested stock awards, in each period, have an anti-dilutive effect and therefore are excluded from the computation of diluted weighted average shares outstanding. For the six months ended June 30, 2022, 0.1 million non-vested stock awards have an anti-dilutive effect and therefore are excluded from the computation of diluted weighted average shares outstanding.

5. Other Current Assets

Other current assets consisted of:


	As of June 30, 2023		As of December 31, 2022
Prepaid expenses	$	294	$	252
Sales and use taxes	312		142
Other	159		112
Other current assets	$	765	$	506

6. Acquisitions

During the six months ended June 30, 2023, we completed the acquisition of a licensee in North America for approximately $14 million, plus approximately $20 million for acquired fleet. This investment is in-line with our strategy to re-acquire licensees when advantageous to expand our footprint of Company-operated locations. The acquired fleet was financed under our existing financing arrangements. In connection with this acquisition, approximately $14 million was recorded to other intangibles related to franchise agreements. The license agreements are being amortized over a weighted average useful life of approximately five years. The fair value of the assets acquired and liabilities assumed has not yet been finalized and is therefore subject to change.

7. Intangible Assets

Intangible assets consisted of:


	As of June 30, 2023						As of December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortized Intangible Assets
License agreements	$	305	$	225	$	80	$	290	$	217	$	73
Customer relationships	250		214		36		247		207		40
Other	51		43		8		48		39		9
Total	$	606	$	482	$	124	$	585	$	463	$	122
Unamortized Intangible Assets
Goodwill	$	1,082					$	1,070
Trademarks	$	545					$	544

For the three months ended June 30, 2023 and 2022, amortization expense related to amortizable intangible assets was approximately $6 million and $10 million, respectively. For the six months ended June 30, 2023 and 2022, amortization expense related to amortizable intangible assets was approximately $14 million and $26 million, respectively. Based on our amortizable intangible assets at June 30, 2023, we expect amortization expense of approximately $14 million for the remainder of 2023, $25 million for 2024, $19 million for 2025, $18 million for 2026, $14 million for 2027 and $10 million for 2028, excluding effects of currency exchange rates.

8. Vehicle Rental Activities

The components of vehicles, net within assets under vehicle programs are as follows:


	As of		As of
	June 30,		December 31,
	2023		2022
Rental vehicles	$	22,725	$	17,819
Less: Accumulated depreciation	(2,407)		(2,211)
	20,318		15,608
Vehicles held for sale	276		317
Vehicles, net investment in lease (a)	31		36
Vehicles, net	$	20,625	$	15,961

________

(a) See Note 15 – Related Party Transactions.

The components of vehicle depreciation and lease charges, net are summarized below:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Depreciation expense	$	540	$	396	$	1,017	$	777
Lease charges	40		32		78		65
(Gain) loss on sale of vehicles, net	(205)		(194)		(455)		(497)
Vehicle depreciation and lease charges, net	$	375	$	234	$	640	$	345

At June 30, 2023 and 2022, we had payables related to vehicle purchases included in liabilities under vehicle programs - other of $443 million and $249 million, respectively, and receivables related to vehicle sales included in assets under vehicle programs - receivables from vehicle manufacturers and other of $140 million and $74 million, respectively.

9. Income Taxes

Our effective tax rate for the six months ended June 30, 2023 was a provision of 24.8%. Such rate differed from the Federal Statutory rate of 21.0% primarily due to foreign taxes on our International operations and state taxes.

Our effective tax rate for the six months ended June 30, 2022 was a provision of 26.8%. Such rate differed from the Federal Statutory rate of 21.0% primarily due to foreign taxes on our International operations and state taxes.

10. Accounts Payable and Other Current Liabilities

Accounts payable and other current liabilities consisted of:


	As of		As of
	June 30,		December 31,
	2023		2022
Accounts payable	$	573	$	466
Short-term operating lease liabilities	506		555
Deferred lease revenues - current	362		188
Accrued advertising and marketing	298		268
Accrued sales and use taxes	271		246
Accrued payroll and related	171		205
Public liability and property damage insurance liabilities – current	178		174
Other	451		445
Accounts payable and other current liabilities	$	2,810	$	2,547

11. Long-term Corporate Debt and Borrowing Arrangements

Long-term corporate debt and borrowing arrangements consisted of:


		As of		As of
	Maturity Date	June 30,		December 31,
		2023		2022
4.125% euro-denominated Senior Notes	November 2024	$	327	$	321
4.500% euro-denominated Senior Notes	May 2025	273		268
4.750% euro-denominated Senior Notes	January 2026	382		375
5.750% Senior Notes	July 2027	734		732
4.750% Senior Notes	April 2028	500		500
5.375% Senior Notes	March 2029	600		600
Floating Rate Term Loan (a)	August 2027	1,170		1,176
Floating Rate Term Loan (b)	March 2029	723		725
Other (c)		33		18
Deferred financing fees		(40)		(44)
Total		4,702		4,671
Less: Short-term debt and current portion of long-term debt		34		27
Long-term debt		$	4,668	$	4,644

__________

(a)The floating rate term loan is part of our senior revolving credit facility, which is secured by pledges of capital stock of certain of our subsidiaries, and liens on substantially all of our intellectual property and certain other real and personal property. As of June 30, 2023, the floating rate term loan due 2027 bears interest at one-month Secured Overnight Financing Rate (“SOFR”) plus 175 basis points, for an aggregate rate of 6.97%. We have entered into a swap to hedge $700 million of interest rate exposure related to the floating rate term loan at an aggregate rate of 4.72%.

(b)The floating rate term loan is part of our senior revolving credit facility, which is secured by pledges of capital stock of certain of our subsidiaries, and liens on substantially all of our intellectual property and certain other real and personal property. As of June 30, 2023, the floating rate term loan due 2029 bears interest at one-month SOFR plus 350 basis points for an aggregate rate of 8.70%.

(c)Primarily includes finance leases, which are secured by liens on the related assets.

Committed Credit Facilities and Available Funding Arrangements

As of June 30, 2023, the committed corporate credit facilities available to us and/or our subsidiaries were as follows:


	Total Capacity		Outstanding Borrowings		Letters of Credit Issued		Available Capacity
Senior revolving credit facility maturing 2026 (a)	$	2,000	$	—	$	1,493	$	507

__________

(a)The senior revolving credit facility bears interest at one-month SOFR plus 175 basis points and is part of our senior credit facilities, which include the floating rate term loan and the senior revolving credit facility, and which are secured by pledges of capital stock of certain of our subsidiaries, liens on substantially all of our intellectual property and certain other real and personal property.

Debt Covenants

The agreements governing our indebtedness contain restrictive covenants, including restrictions on dividends paid to us by certain of our subsidiaries, the incurrence of additional indebtedness and/or liens by us and certain of our subsidiaries, acquisitions, mergers, liquidations, and sale and leaseback transactions. Our senior credit facility also contains a maximum leverage ratio requirement. As of June 30, 2023, we were in compliance with the financial covenants governing our indebtedness.

12. Debt Under Vehicle Programs and Borrowing Arrangements

Debt under vehicle programs, including related party debt due to Avis Budget Rental Car Funding (AESOP) LLC (“Avis Budget Rental Car Funding”), consisted of:


	As of		As of
	June 30,		December 31,
	2023		2022
Americas - Debt due to Avis Budget Rental Car Funding	$	14,440	$	11,322
Americas - Debt borrowings	885		598
International - Debt borrowings	2,231		1,700
International - Finance leases	202		176
Other	85		65
Deferred financing fees (a)	(69)		(52)
Total	$	17,774	$	13,809

__________

(a)Deferred financing fees related to Debt due to Avis Budget Rental Car Funding as of June 30, 2023 and December 31, 2022 were $65 million and $47 million, respectively.

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.

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.

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.

Debt Maturities

The following table provides the contractual maturities of our debt under vehicle programs, including related party debt due to Avis Budget Rental Car Funding, at June 30, 2023:


	Debt under Vehicle Programs (a)
Within 1 year (b)	$	2,995
Between 1 and 2 years (c)	6,723
Between 2 and 3 years (d)	2,811
Between 3 and 4 years	2,816
Between 4 and 5 years	1,783
Thereafter	715
Total	$	17,843

__________

(a) Vehicle-backed debt primarily represents asset-backed securities.

(b) Includes $1.5 billion of bank and bank-sponsored facilities.

(d) Includes $0.1 billion of bank and bank-sponsored facilities.

Committed Credit Facilities and Available Funding Arrangements

As of June 30, 2023, available funding under our debt arrangements related to our vehicle programs, including related party debt due to Avis Budget Rental Car Funding, consisted of:


	Total Capacity (a)		Outstanding Borrowings (b)		Available Capacity
Americas - Debt due to Avis Budget Rental Car Funding	$	14,969	$	14,440	$	529
Americas - Debt borrowings	1,006		885		121
International - Debt borrowings	2,677		2,231		446
International - Finance leases	228		202		26
Other	85		85		—
Total	$	18,965	$	17,843	$	1,122

__________

(a) Capacity is subject to maintaining sufficient assets to collateralize debt. The total capacity for Americas - Debt due to Avis Budget Rental Car Funding includes increases from an amendment and renewal of our asset-backed variable-funding financing facilities during March 2023 and subsequently amended during April 2023.

(b) The outstanding debt is collateralized by vehicles and related assets of $16.8 billion for Americas - Debt due to Avis Budget Rental Car Funding; $1.3 billion for Americas - Debt borrowings; $3.1 billion for International - Debt borrowings; and $0.2 billion for International - Finance leases.

Debt Covenants

The agreements under our vehicle-backed funding programs contain restrictive covenants, including restrictions on dividends paid to us by certain of our subsidiaries and restrictions on indebtedness, mergers, liens, liquidations, and sale and leaseback transactions and in some cases also require compliance with certain financial requirements. As of June 30, 2023, we are not aware of any instances of non-compliance with any of the financial or restrictive covenants contained in the debt agreements under our vehicle-backed funding programs.

13. Commitments and Contingencies

Contingencies

In 2006, we completed the spin-offs of our Realogy and Wyndham subsidiaries (now known as Anywhere Real Estate, Inc., and Wyndham Hotels and Resorts, Inc. and Travel + Leisure Co., respectively). We do not believe that the impact of any resolution of pre-existing contingent liabilities in connection with the spin-offs should result in a material liability to us in relation to our consolidated financial position or liquidity, as Anywhere Real Estate, Inc., Wyndham Hotels and Resorts, Inc. and Travel + Leisure Co. have agreed to

assume responsibility for these liabilities.

In March 2023, the California Office of Tax Appeals (“OTA”) issued an opinion in a case involving notices of proposed assessment of California corporation franchise tax for tax year 1999 issued to us. The case involves whether (i) the notices of proposed assessment were barred by the statute of limitations; and (ii) a transaction undertaken by us in tax year 1999 constituted a tax-free reorganization under the Internal Revenue Code (“IRC”). The OTA concluded that the notices of proposed assessment were not barred by the statute of limitations and that the 1999 transaction was not a tax-free reorganization under the IRC. Anywhere Real Estate, Inc. has assumed 62.5%, and Wyndham Hotels and Resorts, Inc. and Travel + Leisure Co. have assumed 37.5% of the potential tax liability in this matter, respectively. We have filed a petition for rehearing and intend to vigorously pursue this matter.

We are also named in litigation that is primarily related to the businesses of our former subsidiaries, including Realogy and Wyndham. We are entitled to indemnification from such entities for any liability resulting from such litigation.

We have been named as a defendant in purported consumer class action lawsuits, including three purported class action suits filed against us in New Jersey, one related to fines and fees charged to car renters by us for violations incurred during the course of their rental, one seeking damages in connection with a claim relating to an alleged breach of contract and another related to ancillary charges at our Payless subsidiary.

We are currently involved, and in the future may be involved, in claims and/or legal proceedings, including class actions, and governmental inquiries that are incidental to our vehicle rental and car sharing operations, including, among others, contract and licensee disputes, competition matters, employment and wage-and-hour claims, insurance and liability claims, intellectual property claims, business practice disputes and other regulatory, environmental, commercial and tax matters. Litigation is inherently unpredictable and, although we believe that our accruals are adequate and/or that we have valid defenses in these matters, unfavorable resolutions could occur. We estimate that the potential exposure resulting from adverse outcomes of current legal proceedings in which it is reasonably possible that a loss may be incurred could, in the aggregate, be up to approximately $35 million in excess of amounts accrued as of June 30, 2023. We do not believe that the impact should result in a material liability to us in relation to our consolidated financial condition or results of operations.

Commitments to Purchase Vehicles

We maintain agreements with vehicle manufacturers under which we have agreed to purchase approximately $5.6 billion of vehicles from manufacturers over the next 12 months, a $1.1 billion decrease compared to December 31, 2022, financed primarily through the issuance of vehicle-backed debt and cash received upon the disposition of vehicles. Certain of these commitments are subject to the vehicle manufacturers satisfying their obligations under their respective repurchase and guaranteed depreciation agreements.

Concentrations

Concentrations of credit risk as of June 30, 2023 include (i) risks related to our repurchase and guaranteed depreciation agreements with domestic and foreign car manufacturers and primarily with respect to receivables for program cars that have been disposed but for which we have not yet received payment from the manufacturers and (ii) risks related to Realogy and Wyndham, including receivables of $36 million and $22 million, respectively, related to certain contingent, income tax and other corporate liabilities assumed by Realogy and Wyndham in connection with their disposition.

14. Stockholders' Equity

Share Repurchases

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 (the “Stock Repurchase Program”). During the six months ended June 30, 2023, we repurchased approximately 723 thousand shares of common stock at a cost of approximately $146.1 million under the program. As of June 30, 2023, approximately $1.5 billion of authorization remains available to repurchase common stock under the program.

Total Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income and other gains and losses affecting stockholders’ equity that, under GAAP, are excluded from net income.

The components of other comprehensive income (loss) were as follows:


		Three Months Ended June 30,				Six Months Ended June 30,
		2023		2022		2023		2022
Net income		$	436	$	774	$	748	$	1,301
	Less: net income (loss) attributable to non-controlling interests	1		(4)		1		(6)
Net income attributable to Avis Budget Group, Inc.		435		778		747		1,307
Other comprehensive income (loss):
	Currency translation adjustments (net of tax of $2, $(14), $5 and $(17), respectively)	6		(50)		2		(43)
	Net unrealized gain (loss) on cash flow hedges (net of tax of $(4), $(4), $(2) and $(15), respectively)	14		13		7		43
	Minimum pension liability adjustment (net of tax of $0, in each period)	1		1		2		3
		21		(36)		11		3
Comprehensive income attributable to Avis Budget Group, Inc.		$	456	$	742	$	758	$	1,310

__________

Currency translation adjustments exclude income taxes related to indefinite investments in foreign subsidiaries.

Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss) were as follows:


		Currency Translation Adjustments		Net Unrealized Gains (Losses) on Cash Flow Hedges(a)		Minimum Pension Liability Adjustment(b)		Accumulated Other Comprehensive Income (Loss)
Balance, January 1, 2023		$	(30)	$	45	$	(116)	$	(101)
	Other comprehensive income (loss) before reclassifications	2		13		—		15
	Amounts reclassified from accumulated other comprehensive income	—		(6)		2		(4)
Net current-period other comprehensive income (loss)		2		7		2		11
Balance, June 30, 2023		$	(28)	$	52	$	(114)	$	(90)

Balance, January 1, 2022		$	16	$	(19)	$	(130)	$	(133)
	Other comprehensive income (loss) before reclassifications	(43)		36		1		(6)
	Amounts reclassified from accumulated other comprehensive income	—		7		2		9
Net current-period other comprehensive income (loss)		(43)		43		3		3
Balance, June 30, 2022		$	(27)	$	24	$	(127)	$	(130)

__________

All components of accumulated other comprehensive income (loss) are net of tax, except currency translation adjustments, which exclude income taxes related to indefinite investments in foreign subsidiaries and include $100 million gain, net of tax, as of June 30, 2023 related to our hedge of our investment in euro-denominated foreign operations (see Note 17 – Financial Instruments).

(a)For the three months ended June 30, 2023 and 2022, the amounts reclassified from accumulated other comprehensive income (loss) into corporate interest expense were $5 million ($4 million, net of tax) and $4 million ($3 million, net of tax), respectively. For the six months ended June 30, 2023 and 2022, the amounts reclassified from accumulated other comprehensive income (loss) into corporate interest expense were $8 million ($6 million, net of tax) and $9 million ($7 million, net of tax), respectively.

(b)For the three months ended June 30, 2023, amounts reclassified from accumulated other comprehensive income (loss) into selling, general and administrative expenses were $2 million ($1 million, net of tax.) For the six months ended June 30, 2023 and 2022, amounts reclassified from accumulated other comprehensive income (loss) into selling, general and administrative expenses were $3 million ($2 million, net of tax) and $3 million ($2 million, net of tax), respectively.

15. Related Party Transactions

SRS Mobility Ventures, LLC

In 2021, SRS Mobility Ventures, LLC acquired a 33 1/3% Class A Membership Interest in one of our subsidiaries at fair value of $37.5 million. SRS Mobility Ventures, LLC is an affiliate of our largest shareholder, SRS Investment Management, LLC.

On September 1, 2022, through the issuance of Class B Preferred Voting Membership Interests, SRS Mobility Ventures, LLC increased their ownership in this subsidiary to 51% at a fair value of $62 million. As a result, we deconsolidated our former subsidiary, Avis Mobility Ventures LLC (“AMV”), from our financial statements and began reporting our proportional share of the former subsidiary’s income or loss within other (income) expense, net in our Consolidated Condensed Statements of Comprehensive Income as we no longer have the ability to direct the significant activities of the former subsidiary and are therefore no longer primary beneficiary of the VIE.

In accordance with ASC Topic 810-10-40, we must deconsolidate a subsidiary as of the date we cease to have a controlling interest in that subsidiary and recognize the gain or loss in net income at that time. The fair value of our retained investment was determined utilizing a discounted cash flow methodology based on various assumptions, including projections of future cash flows, which include forecast of future revenue and EBITDA. Upon deconsolidation, our former subsidiary had a net asset carrying amount of $49 million resulting in a gain of $10 million.

We continue to provide vehicles, related fleet services and certain administrative services to AMV to support their operations. For the three and six months ended June 30, 2023, we recorded $6 million and $14 million, respectively, of related income within other (income) expense, net. As of June 30, 2023 and December 31, 2022, receivables from AMV related to these services were $6 million, in each period, and our net investment in vehicle finance lease with AMV, which is included in vehicles, net, was $31 million and $36 million, respectively. The carrying value of our equity investment in AMV as of June 30, 2023 and December 31, 2022 was approximately $32 million and $49 million, respectively, which is included in other non-current assets. For the three and six months ended June 30, 2023, we recorded losses of $10 million and $16 million, respectively, within other (income) expense, net, related to our equity investment.

16. Stock-Based Compensation

We recorded stock-based compensation expense of $8 million and $6 million ($5 million in each period, net of tax) during the three months ended June 30, 2023 and 2022, respectively, and $16 million and $12 million ($11 million and $9 million, net of tax) during the six months ended June 30, 2023 and 2022, respectively.

In 2020, we granted market-based restricted stock units (“RSUs”) that vest based on absolute stock price attainment. The grant date fair value of this award is estimated using a Monte Carlo simulation model.

The weighted average assumptions used in the model are as follows:


Expected volatility of stock price						91%
Risk-free interest rate						0.18%
Valuation period						3 years
Dividend yield						—%

The activity related to RSUs consisted of (in thousands of shares):


			Number of Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in millions)
Time-based RSUs
	Outstanding at January 1, 2023		451	$	92.06
		Granted (a)	72	208.55
		Vested (b)	(218)	54.55
		Forfeited	(5)	158.70
	Outstanding and expected to vest at June 30, 2023 (c)		300	$	146.24	1.5	$	68
Performance-based and market-based RSUs
	Outstanding at January 1, 2023		691	$	57.56
		Granted (a)	89	208.49
		Vested (b)	(344)	21.09
		Forfeited	(6)	129.91
	Outstanding at June 30, 2023		430	$	116.90	1.2	$	98
	Outstanding and expected to vest at June 30, 2023 (c)		384	$	106.80