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Edited Transcript of MOVI3.SA earnings conference call or presentation 23-Feb-21 2:00pm GMT

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Full Year 2020 Movida Participacoes SA Earnings Call SAO PAULO Feb 23, 2021 (Thomson StreetEvents) -- Edited Transcript of Movida Participacoes SA earnings conference call or presentation Tuesday, February 23, 2021 at 2:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Edmar Prado Lopes Neto Movida Participações S.A. - Chief Administrative, Finance & IR Officer and Member of Board of Executive Officers * Renato Horta Franklin Movida Participações S.A. - CEO & Member of Board of Executive Officers ================================================================================ Conference Call Participants ================================================================================ * Alexandre Kogake Eleven Financial Research - Analyst * Lucas Marquiori Banco BTG Pactual S.A., Research Division - Research Analyst * Regis Cardoso Crédit Suisse AG, Research Division - Research Analyst * Rodrigo Faria * Victor Mizusaki Banco Bradesco BBI S.A., Research Division - Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good morning and welcome to the conference call of Movida to discuss the earnings regarding the fourth quarter 2020. Today with us are Renato Franklin, CEO; and Edmar Neto, Administrative, Financial and IR Officer. (Operator Instructions) Before moving on, we would like to let you know that any statements made during this conference call relative to the company's business prospects, projections, operation and financial goals are based on the beliefs and assumptions of Movida management. And rely on information currently available for the company. Forward-looking statements are not a guarantee of performance. They involve risks uncertainties and assumptions since they refer to future events and therefore, depend on circumstances that may or may not occur. General economic conditions, industry conditions and other operating factors may affect the company's future results and lead to results that will materially differ from those in such forward-looking statements. We'll now turn the call to Mr. Renato Franklin. Please, Mr. Franklin, you may go on. -------------------------------------------------------------------------------- Renato Horta Franklin, Movida Participações S.A. - CEO & Member of Board of Executive Officers [2] -------------------------------------------------------------------------------- Well, thank you. Good day, everyone. Welcome to our conference call to talk about the results of the fourth quarter and also the year of 2020. The year of 2020, just to start with a remark, transformed mankind. Everybody sees that. And we have to see what's positive about that. And what's positive is that it transformed relations, be it putting people more in the center of attention and care. So I'll start this conference call thanking first, our people, the families of our people that captured the operations that were considered essential services with safety empathy, taking care of our people and our clients. All that said, for Movida, it was also a year of great transformation. A year that in addition of gaining maturity, having a more mature company, we also accelerated several initiatives as the pandemic accelerated change of habits digitation, it was no different in Movida. So the main message in today's conference call is the consolidation of a new level. This is the message that we are going to convey in our presentation. And I give you examples of some highlights on Page 3. First, even in a year of pandemic, a growth of 8,600 cars. We are going to talk about growth further on. But really a good recovery. The fourth quarter, the best quarter in the history of the company, consolidating a new level. Revenues, BRL 4.1 billion, growth over '19, even with -- the second quarter with lockdown and everything that happened. EBIT of almost BRL 900 million, again, reinforcing our discipline of costs, improvement of margins, 20% higher than that of '19. The EBITDA margin of Rent-a-Car went up 54%. And when we take a look at net income, almost 5x margin than the -- for the third quarter, more than double the same period last year, with a total of BRL 184 million. Edmar is going to give you more information when we get the recurrent net income, we see a new level to the company. On the right of the slide, we have 2 important landmarks that in the midterm are going to make a difference for the company. First, the issuance of a bond, the first fund raising and the capital -- external capital market with the bond connected to sustainability, $500 million in 10 years, with the commitment of reducing our carbon emissions by 30% up to 2030. The first sustainable bond in the industry. Once again, Movida just pulling new trends with new sources of funding to support the company's growth plan. All that said, I'm going to go to Slide #4 to talk a bit more about the growth. We always show the slide of the evolution of our fleet. Once again, we have strong history of growth even with the pandemic, we almost added 9,000 cars, which show the strong fundaments of the sector. And what is the most important. We have a CAGR of 16% since the IPO, even with the pandemic a strong CAGR, but this new level gives us even more possibility of growth. If you had the possibility of joining us in the Movida day last year, we showed the matrix talking about our potential growth and improvement of margin. Today, we can grow in our balance sheet, very mature process and even better execution. And we are going to talk about that further on, but we see a very positive year for Movida in 2021. Let's talk a bit about each business. Let's go to Slide #5. You start with our Rent-a-Car. With the record net revenues, BRL 359 million and a record occupancy rate, 5 percentage points higher and that reflects we have healthy competition, loads of demand, rational competition. We are focused on individuals. And as again, we had the record revenues per car, BRL 2,268 a month, 12% higher than the fourth quarter of '19, that was already very strong. Daily, we are growing 7.6%. And on the bottom of the page, we talk about our commitment of gaining efficiency, getting to BRL 500 in 2020. But going better since 2017. And quarter-on-quarter, remember that in the fourth quarter of '19, we had tax credit that did have an impact on our numbers. But we are very confident with Rent-a-Car, very positive fundamental, the market growing a very positive view for 2021 onwards. Let's go to Page 6, talking about fleet management and outsourcement. So you see you're talking about brand-new cars of individuals with almost GTF, which is already included here and contributes to the growth of 2020. We relaunched that with a digital platform. We are the only company that are really delivering cars in almost immediately, 2 days. So we have BRL 140 million of net revenues, revenues per car because of the impact of the brand-new car, it goes down. It's not that the ticket is lower. And you can go to our brand-new cars platform, and you're going to see cars that are very interesting for you. We have promotions that the first 3 months, we give a discount. Of course, this is priced. But for the client, it's a high appeal for them to make the transaction. And that's impact revenue per car. You see the number of daily rates, 16% higher, and we have again contracted revenues higher than what we have today. And here, we are replicating the improvements and -- that we have in other areas and reducing the cost to buy car year after year reduce -- generating a new level of margins to our business as well. On Page 7, we talked about used cars, what we call, the Seminovos. The highlight in 2020 was that we were able to confirm the maturity of this area. The area that sells our assets, basically, so to speak, with record net revenues in 2020. When we take a look at quarter against quarter, you have to remember our strategy to privilege Rent-a-Car. So when we say that we sold 9,800 cars in the fourth quarter, it's because we decided to keep more cars in the Rent-a-Car business to continue to provide services to our clients and keep the Rent-a-Car operations. You see a very positive margin, you see in the third quadrant, an average ticket of BRL 50,000, it's 19% of gross margin in Seminovos. So we have a result to be collected in the sales of the car. Prices are high, even an increase of prices of brand-new cars that will pass on to used cars. So throughout the years of 2021, we are going to see very heated sales because prices went up in the end of 2020. And you can see that our expectations even in the year of pandemic, we met our target again showing the maturity of Seminovos and seeing that we are much more prepared to support the company's growth. Now I'm going to turn to Edmar. That is going to give you a bit more color on our financials and talk about our capacity of growth and how we are a lot better positioned. -------------------------------------------------------------------------------- Edmar Prado Lopes Neto, Movida Participações S.A. - Chief Administrative, Finance & IR Officer and Member of Board of Executive Officers [3] -------------------------------------------------------------------------------- Good morning, everyone. Thanks, Renato. I will invite you to go to Slide #8. When we talk about the depreciation by car, as we have talked to you before, in fourth quarter, we reduced depreciation by car. Both for the Rent-a-Car business and the fleet management outsourcing, in the Rent-a-Car about 10% lower, in fleet management a bit higher. Basically because more and more, we are selling our fleet management cars in our stores, and therefore, obtaining better margins. When we take a bit of LTM, we are still at an amount of BRL 3,400 for the Rent-a-Car and BRL 3,800 for the fleet management cars. But we have really to be careful to take a look at the market, and we are going to talk about that further on. About our balance sheet, as we can see here as of 2020, we already have an accrued depreciation that is booked at a level that we believe is quite suitable for this moment where we are going through with high volatility in car prices. Going to Page 9. I'm going to talk about the results of the fourth quarter. The highlight here is our consolidated EBITDA and EBIT that were record. But if you see one another business line did have an evolution of margins in the fourth quarter, the positive highlight is for the Seminovos. In the Rent-a-Car, we are delivering an EBITDA margin that's quite expressive. Again, you have the difference of the tax credits of last years that favor the comparison for 2019. In fleet management and outsources, we got to 61%, which clearly has to do with our growth in brand-new cars, we still have an inventory in the operation. And in the Seminovos that we already talked about the good results. So consolidated almost 4 points of margins and BRL 43 million compared to the previous period. EBIT, you'll see the higher level of depreciation that can be felt. But -- felt -- but again, the highlight is Seminovos with an evolution of almost 11 percentage points. And a new record if you think of half year with BRL 72 million over last year 2019 and a margin of 44%, which is also very high. To talk about 2020, we go to Slide #10. You see Rent-a-Car margin EBITDA almost stable. Even with the pandemic, we had -- even having the second quarter much lower than our average fleet management outsourcing in the year an exponential growth of 3% in margins, more than BRL 343 million. And in the used cars, a positive EBITDA margin almost BRL 90 million EBITDA in Seminovos. So you see BRL 148 million compared over 2019 with growth of 20%. In EBIT, remember, we have a load of higher depreciation along the year but still, when you make the comparison in consolidated numbers, we do see an evolution of margin of 0.4 percentage points and also an evolution that led to a record EBIT of BRL 482 million and record EBITDA of BRL 895 million. Now when we go to Page 11, we bring you the consolidated results. As Renato mentioned, we are consolidating a new level of results for the company in the fourth quarter. And this is an important result to us. Higher revenues, BRL 4.1 billion in the quarter revenue is slightly lower because of the lower amount of cars sold, when we talked about the EBITDA, and I'm talking about the right side of the slide on the top, growth of 20% a record in the quarter, BRL 305 million in the fourth quarter plus BRL 43 million compared to the previous year. EBIT, to your left in the bottom part, the same new level, BRL 220 million margin of 44 percentage points, and net income also quite strong, showing a recovery as of the third quarter and consolidation in the fourth quarter, our net income in the quarter. And I'm here, I'm in the bottom-right corner, BRL 139 million of recurring income and an accounting income of BRL 184 million with a margin of 28% in the Rent-a-Car business. Again, new levels for the company. I would like to talk a bit of cash and our debt schedule. This was a very important topic during 2020. We closed the year with more than BRL 1.7 billion in cash and that's really a profile that we believed would be able to navigate throughout the year as we did in the past. However, in January and February, there was the bond, which is really transformational for Movida with regard to duration of debt, access to new markets with a debt that is very important to us. And once more Movida is first being the first Rent-a-Car company to issue this kind of bonds. The first Rent-a-Car company in the world issuing this bond that is connected to sustainability. So you see here, we somehow address the next 7 years of maturity with the funds from this bond. On Page 13. I just give you some important aspects of this new scenario. So first, our indebtedness, we continue with very strong discipline with very positive indicators. The highlight is our leverage with the growth that we showed in the fourth quarter, we have 2.7x, slightly higher than fourth quarter '19, but way far from our covenants. The highlight is the coverage of interest, both for EBITDA and EBIT, which are indicators that are getting better quarter-on-quarter, again, hitting new records. On the right of the slide, which is very important. When we look further on, we have a highlight about what we can grow in Movida, keeping all the financial discipline that we have in place so far. So when you take a look at the EBITDA of a bit more than BRL 300 million that we delivered in the fourth quarter with the growth that we expect for '21, it is very easy to expect have an addition of at least 36% going to BRL 1.2 billion EBITDA, which is really quite apart from anything we have seen so far. Additionally, the numbers also show when we compare 2020 and 2019, that we had an advance of margins of 3 percentage points. That is more room for the company to grow. Both talking about nominal values with growth of EBITDA and the improvement of margins, so that makes a difference and gives us flexibility. And remember, we talked about that in November. And the new table that we have the new price list already shows that if you take a look at our consolidated margins or an EBITDA of BRL 1.2 billion, we can already picture the company growing by 30,000, 35,000 cars without stressing our balance sheet. In the bottom part of this slide, this is in slide that we are going to keep because of our bond investors, and we show how the bond and it is described in the bond description. So here, we eliminate all effects, and we get to BRL 970 million. This is the EBITDA that accounts for the measurement of covenants for Movida. It's important to mention that we addressed profit as accounting profit. And our recurring profit, we are extracting 2 positive adjustments that we had in the quarter, which were the reversals of accounting receivable of BRL 17 million and also assets that was about BRL 51 million. That's so net of taxes, that is the difference that we have of the result of BRL 1.2 billion and BRL 900 million. Going to cash flow and once again, this was a topic that was quite important during the year of 2020. Well, clearly, here, we see the evolution that took place in 2020. So we went from the EBITDA of BRL 895 million. Then here, we have the conciliation with the activities of purchasing and selling cars. You see that we are generating cash in fee to renew, about BRL 400 million which is what you see here. And that leads the company for a cash generation of BRL 1.5 billion. When we talk about cash generated before growth, and here, we are already taking into account financial results, we are talking about BRL 1.2 billion in cash generated, an evolution of BRL 1 billion compared to 2019, which is very important, again, in such adverse scenario. With that, we are able to fund our growth, and we show that our cash flow is much better than it was compared to 2019, misc -- basically because of our evolution in operations. All that said, I'm going to turn the call back to Renato for his final considerations. -------------------------------------------------------------------------------- Renato Horta Franklin, Movida Participações S.A. - CEO & Member of Board of Executive Officers [4] -------------------------------------------------------------------------------- Well, thank you very much, Edmar. Now we are going to Slide #15. Where we talk a bit about the recognitions of 2020, a challenging year, but with several recognitions. We highlight one in each area. The first Rent-a-Car company according to IstoÉ Dinheiro magazine. In terms of clients, 2 important awards, first leader in social responsibility, and second leader in internal call center operation, valuing our operations, our customer services, congratulations, everyone. And in terms of Investor Relations, basically also first place among small camps. And the best CEO and the best CFO. So we thank everyone for the assessment. I also had the honor of being recognized as the Valor executive from Valor Econômico newspaper and also the Great Place to Work award that recognizes our people, our work environment, which is sustainability and talking about sustainability on Page 16. These are the recognitions that we had with regard to ESG. Just to remind our strategy, where in our 3 pillars. We have better company with lots of empowerment diversity but with commitment of profit and generation of value to all stakeholders. We have inclusion by better mobility going to lower economic classes, trying to have solutions to everyone. And the minority is becoming a minority and the commitment of a better planet of lower carbon emissions up to 2030 and then positive carbon emissions as of 2040. And remember our commitments, just for you to remember. We were the first public rental company to be certified as B company. The second public company in Brazil to get this certificate, and we have the second recognition when you talk about the United Nations. We had the meeting in the United Nations in the end of the year. And Movida was the only Brazilian company. It was the only Brazilian that was part of this meeting. Remember the Paris agreement with half of states of all the countries in the world and Movida was presented as a case of a company that has a commitment with a better, more sustainable planet, and with governance practices recognized worldwide. In addition on the bright side, we had the certification of ISE and ICO2, again, showing that we are on the right path, although we are sure there is a lot to -- yet to do with regard to ESG. Finally, on Slide 17, let's say what we have for the future. What are our avenues of growth. We see growth. Let's think about different pillars. First, OEMs, people are always talking about that. Well, first, we have very good agreements for '21. Today, we already have commitments with OEM signed to deliver good growth in '21. We already are discussing '22 with them with a very positive view. We do see that there is a bottleneck of supply, especially in OEM supply chain that do impact production. Some OEMs are a bit more optimistic. I think that things are going to be settled in April, others say June, it can be the first half of the year, second half of the year. But we have our plan in place. We just have to know if we are going to step up our accelerator now or a bit later on. But you know also the discipline of costs is our very austere management. We are a low-cost company. That's our difference. We have always said that. This gives us speed, agility and better margins. We focus on digital to provide the best experience to the client with best efficiency. In the Rent-a-Car business, as I said, we have a very high demand. The market is growing by 15%, 20% a year, depending on the capacity of players' growth in the market, but a good demand pressure or prices up and Movida very well-positioned on individuals and clients. Each player has a different niche. It focus on the segment, we focus on individuals with a better average ticket. We have online sales to individuals, and this is a market that will continue to grow and will deliver effort, better margins. Fleet management outsourcing. We said that we have room to grow in the corporate segment. And our focus in fleet management outsourcing is to grow on 2 avenues: brand-new cars with individuals we are very well-positioned in the market. To me, it's going to be the largest market for our kind of company in the future. And also those that sell to small- and medium-sized company that also have good margin, and we have much room to work. Great credit, good margin, contracted profitability, visibility for the company in terms of cash generation. And on the right of the page, you have Seminovos. Seminovos is going through a new cycle. We now do not have to prove ourselves to anyone. We are mature. And this new cycle is going to be more and more digital. We want to improve the capacity of retail, enhancing our digital tools that will give us scale to sell at a new level, enabling the company to grow without built on in the sale of Seminovos. A very important positive experience that we had during the pandemic. Today, we have a very good level of Seminovos, NPS above 30%, which is very good and reinforcing our digital tools as a major difference of Movida in the market for the sale of saving models. All that said, what do we see further on, a new position. It is what Edmar said, a strong balance sheet, reinforced cash, long duration. If you see what we have in cash today, we are quite comfortable in terms of duration in addition to several sources of capital to fund us, if necessary. And then we see an EBITDA of 22%, that gives our 30,000, 35,000 cars without changing our leverage EBITDA of BRL 1.2 billion. And remember, each car bringing EBITDA 1, 2 months later, brand-new cars that you have a very high margin, the contribution is even better. So the growth is exponential. You grow. And then because you grow, you can grow more. We have no bottlenecks in terms of processes, our structure is a lot stronger, mature and prepared to grow. And with market fundaments that enable us to have the right price, capturing better margin, having gains of scale and the first quarter is already doing well. We are almost ending the second month of the first quarter. So we already have visibility of the first quarter. I can say there is nothing different on fourth quarter. We have still very high prices with Seminovos. We have a conservative view because we don't know what is going to happen after we go back to the new normal. So we are conservative but what we see based on numbers and sales is that we are going to have a very high-margin with Seminovos that will contribute to positive results. Depreciation is a timely issue, we are being more conservative now, and the profit will come further. This is a standing that we decided to have. But the industry is going to have a strong year. And Movida is in a more and more differentiated position in terms of digital relation which shift with our clients, avenues of growth to generate value to our stakeholders. This is what we had to tell you. And now we are going to open for your questions, and we can go in detail to any of your questions. Thank you very much. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from Lucas Marquiori from BTG Pactual. -------------------------------------------------------------------------------- Lucas Marquiori, Banco BTG Pactual S.A., Research Division - Research Analyst [2] -------------------------------------------------------------------------------- Congratulations for the quarter. I have 2 questions on my side. First, Renato, you already mentioned in the end of the presentation about the industry. And this is something that we want to understand better. What do you think the new normal is going to be like and when? We talked about second quarter, third quarter, but do you think that it can go to the second half of the year? We see that several OEMs are talking about that. And also, what are the conditions that OEMs are asking to negotiate? What do you think is going to be the price increase year-on-year? Just for us to -- when we go back to normal in terms of car supply? And my second questions. When we think about the consolidation that you had, and I say, to Vox, what is it going like? Because I think you have already completed Vox. And CS Frotas the second movement, what kind of integration you're going to have? What payment mode are you going to do? Is it going to be the issuance of equity? What is it going to be like? -------------------------------------------------------------------------------- Renato Horta Franklin, Movida Participações S.A. - CEO & Member of Board of Executive Officers [3] -------------------------------------------------------------------------------- Thank you for your question. First, OEMs, giving you a bit more color. Well, we closed the agreements in the end of 2020. So normalized numbers for the whole of the year. Our OEMs have met the commitment or even delivered a bit more. We do have a bottleneck. There are some inputs, some parts that do affect some versions. And we can change the mix to have a bit more flexibility in having the cars. But yesterday, Fernando Simoes had a meeting with an OEM. And they say that March, maximum April, everything is going to be back to normal. We have our ramp-up in OEMs that is not that fast. So what we see is that production is going to be truly resumed along the second quarter. And then people ask, "Are you going to be able to buy what you want in April? Or is it going to be May or June?" Well, it can be one or the other, but quite transparent. I don't think it's going to be much later than that. We have had the opportunity of closing very good alliances with OEMs. We are recognized as a company that is more present on the individual segment, and that has enabled us to negotiate better, with capacity to choose better models, different cars as we did with other OEMs seeing very different actions. So we see things going quite smoothly. I do not see higher risks. But of course, we don't know what the pandemic is going to grow from now on. But if things continue as is, vaccines are advancing perhaps a bit slower than we expected. But I think gradually, things are going to get better. I don't see the problem with OEMs really extending too long. About the 2 cast, Vox integrated, this is a player. Small acquisitions in this time make more sense. Vox integrates our fleet management operation. They have a more premium niche. They have the recognition of the market. And they complement to us. Can we have more? Oh, yes, we are always looking into that. In our basic growth plan, we have organic growth, with 35,000 cars, gains of scale, but we are always looking to the market. And if opportunities make sense, if we really can have a good market positioning, we are going to take a look at that. About CS, Edmar is going to give you a bit more color. We don't have much definition on that, but anyway. Edmar? -------------------------------------------------------------------------------- Edmar Prado Lopes Neto, Movida Participações S.A. - Chief Administrative, Finance & IR Officer and Member of Board of Executive Officers [4] -------------------------------------------------------------------------------- Well, thank you and on the web, there are several questions about that, but let me try and answer that. Well, remember that as preliminary information that should leave Simpar, but we have to wait for Simpar to make the move. Probably this is going to be a 100% equity operation, but we have to wait. We don't have anything detailed about CS so far. Right now, we are just heating up, so to speak, to start moving in a more effective way to put together a proposal. What is important to mention, and this is based on Simpar's notice. The structure of the decision basically is that the company is going to listen to their independent shareholders, and the vote is going to be of minority shareholders, specifically about this transaction. So we are going to follow the highest levels of governance of the market for this type of transaction between related parties. -------------------------------------------------------------------------------- Operator [5] -------------------------------------------------------------------------------- Our next question comes from Victor Mizusaki from Bradesco BBI. -------------------------------------------------------------------------------- Victor Mizusaki, Banco Bradesco BBI S.A., Research Division - Research Analyst [6] -------------------------------------------------------------------------------- Congratulations on your results. I have 2 questions. The first you talked about a new level of results for Movida. Looking to the future, does it make sense for us to consider that this new level talks about a net income of a specific amount? And the second question, it hit the media that -- asked some companies to give their opinions about the operation of Localiza. Could you talk a bit about that? -------------------------------------------------------------------------------- Renato Horta Franklin, Movida Participações S.A. - CEO & Member of Board of Executive Officers [7] -------------------------------------------------------------------------------- Thank you, Victor, for your question. Well, the first question, we see a very strong first quarter. So as you mentioned, we are going to keep the same level, the fourth quarter already had BRL 139 million of recurring profit. And the first quarter is doing well with the same margin. So I don't think going to be very different. Of course, February has 28 days with a slight impact. But other than that, everything continues as is. Good prices, Seminovos with good margin, fleet management growing. So we see a strong year for the future with growing margins, and we're expecting all business lines with growth and marginal gains of margin. As for the second question, what is our view? I would like to reinforce. Of course, there are gains of scale but there is a positive side to us because it reduces competition. And when there is less competition, prices go up and if prices go up, we have better margins. All markets with less competition are higher in price, which is good for us. That's basically it. But yes, I don't have anything to add about that. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- Our next question comes from Regis Cardoso from Crédit Suisse. -------------------------------------------------------------------------------- Regis Cardoso, Crédit Suisse AG, Research Division - Research Analyst [9] -------------------------------------------------------------------------------- Congratulations on your results. One of the topics I would like to approach is the brand-new car penetration. It drew my attention in the beginning of your presentation, when you said that this is already representative in fleet management and outsourcing representative of growth of fleet management. So I would like you, if possible, to share how representative it is in terms of share of your whole fleet? What can that mean in terms of future growth and what kind of demand you have for this product? And then with regard to the OEMs going back to normal production or the new normal, you gave some guidance of growth for your fleet along the year. What I would like to understand between today and what you expect for the end of the year? How do you think the breakout of cars is going to be a long time? Is it going to be lower in the first quarter? Normal in the second and then keeping the same pace in the third and fourth quarters? Or do you expect a ramp-up acceleration throughout the year? And finally, the last point that you mentioned in the end of your presentation, which is the relative comparison of depreciation to your peers. You said that you have a more conservative standing with regard to depreciation. What I would like to understand is why do you think this conservative standing is necessary vis-à-vis the prices of used cars already going up? So would you think -- why would you think it would have a lower depreciation? -------------------------------------------------------------------------------- Renato Horta Franklin, Movida Participações S.A. - CEO & Member of Board of Executive Officers [10] -------------------------------------------------------------------------------- Thanks for your question. Okay. Just to give you a bit more color. We are not talking about the volumes that we are selling monthly. But basically, it's the whole of our inventory, whatever we put to sell, we are selling. So today, we have a much greater sale capacity than what we are selling today. So when supply is back to normal, we are going to see even greater growth. What do I see that I can tell you, a huge market. So when you take a look of 1 million to 1.2 million cars sold to individuals in brand-new cars. If you get the penetration of leasing outside in the United States, it's 40%. Other more developed markets, 60%. In Brazil, it would have a potential market of 480,000 cars a year. It's a lot of cars to say. Today, you have very few players working with a scale that is already making a difference in our market, but still very small in the market. So we are going to see a lot more operational capacity to buy cars for all markets and everything. It's more debt than marketing limitation. I think it's going to be strong growth for everyone, and it's going to be the largest market for our sector in the future. I think that in the next 5 years, we can have more than 1 million cars. It's difficult to predict in such a long term. But just for you to have an idea in terms of magnitude. For this market that has very good return and with the scale that we have in the rental car, we can be very competitive, and we have the capillarity to provide after service -- after-sales services everywhere in Brazil. When players do not have this capillarity, this is a lot more complicated. This is a business that is also abroad OEMs are exploring this initiative but several decided not to do that because after sales is very important. And in Brazil, in addition to after sales, maintenance and services, you have theft and fraud prevention, card recovery. So these are things that we developed as know-how. And international OEMs will not have a success in scale in Brazil. So it is a very healthy market for us to explore for some time. Second question, fleet size quarter-on-quarter. It is what I told you. If you get our plan, we have 2 scenarios. One, when we already have something back to normal in the second quarter. And then we break out in second, third quarter that are strong. But it can be not as high in the second quarter and higher in the third and fourth. It will depend on supply. The point is we can deliver results, and we have a discretionary decision of the company. You can buy more or less. If we think it's important, we are going to go. And we have support OEMs for them to go back faster, and this is what we are going to do, and we can have even positive surprises there. And talking about the third topic in terms of depreciation, Edmar can give you a bit more color, but I would like to give you my view. In the past, we are thinking about what this is -- what the moment is. So we decided to have a safety margin. First of all, and then prices are strong. We are selling better compared to brand-new cars. But I want to be prepared if things go down. No one today is certain about the future. So we wanted to have a very robust balance sheet, very strong and if I -- I don't know, I can't decrease the depreciation a bit in the fourth quarter and move it to another quarter. Our cycles are short. It doesn't really make too much of a difference. So very soon, we are going to see stronger results in the Seminovos, and we decreased depreciation, but we have to be cautious. And that's what I call conservative. Because it avoids us to a few oscillations from the market. And this will just bring to better results in the future. -------------------------------------------------------------------------------- Edmar Prado Lopes Neto, Movida Participações S.A. - Chief Administrative, Finance & IR Officer and Member of Board of Executive Officers [11] -------------------------------------------------------------------------------- Yes, there are 2 important points here. This is Edmar speaking. Clearly, in our assessment, we are in a Seminovos bubble. And that has to do with supply and demand. We have reduced supply, you have prices up as OEMs go back to normal. But the prices of Seminovos can go down. So this is structural. And in terms of the company, we are not concerned about the cars that are going to be sold in the next coming months. The cars already depreciated and the price scenario is already given. What concerns us and makes us being a bit more cautious right now are the cars for us to sell in '22. That joined our fleet as mid-last year, and we don't know what's going to happen. And the volatility of prices that we had in 2020 was huge, and that has consequences in terms of gross margin of Seminovos results for all the companies. And that is why right now, that we prefer to be a bit more cautious and perhaps sacrifice short-term results to ensure that the company is going to be prepared for any kind of scenario for 2022 in terms of depreciation. -------------------------------------------------------------------------------- Operator [12] -------------------------------------------------------------------------------- Our next question comes from the webcast from [Ricardo Beijine] from [Tagus Investments] -------------------------------------------------------------------------------- Unidentified Analyst, [13] -------------------------------------------------------------------------------- At the end of 2020, the automotive market was unbalanced in terms of supply and demand because of the lack of inputs. Brand-new cars should be normalized in terms of production in the end of March, beginning of April. What is it like today? Are OEMs delivering cars as ordered? -------------------------------------------------------------------------------- Renato Horta Franklin, Movida Participações S.A. - CEO & Member of Board of Executive Officers [14] -------------------------------------------------------------------------------- Thanks for your question. As we mentioned, they are. Everything that was delivered is according to a schedule. And we believe that we are going to go back to normal more towards the second quarter. -------------------------------------------------------------------------------- Operator [15] -------------------------------------------------------------------------------- The next question comes from [Hemato Ramos] from Banco Do Brasil. -------------------------------------------------------------------------------- Unidentified Analyst, [16] -------------------------------------------------------------------------------- Can you talk about the acquisition of the fleet management fleet of CS Brazil? What's the amount? And what sources of funding would you have? -------------------------------------------------------------------------------- Edmar Prado Lopes Neto, Movida Participações S.A. - Chief Administrative, Finance & IR Officer and Member of Board of Executive Officers [17] -------------------------------------------------------------------------------- This is Edmar. Well, at preliminary, we are expecting a 100% equity operation. We do not have enough information to talk about value timing or other prices right now. -------------------------------------------------------------------------------- Operator [18] -------------------------------------------------------------------------------- Our next question comes from Rodrigo Faria from SulAmérica Investments. -------------------------------------------------------------------------------- Rodrigo Faria, [19] -------------------------------------------------------------------------------- Congratulations on good results. I have 2 questions. First, could you talk about the evolution of SG&A and fleet management and its share in net revenues? And second, given the difficult scenario for the delivery of OEMs, are you having bottlenecks of brand-new cars as you accelerated investments in advertising? -------------------------------------------------------------------------------- Renato Horta Franklin, Movida Participações S.A. - CEO & Member of Board of Executive Officers [20] -------------------------------------------------------------------------------- Well, thanks for your question. Well, basically, this increase is for the structure of brand-new cars and reinforcement of our fleet management structure because we are going to grow more. So we increased our sales force, have our digital platform. Premium cars. So this is what you see in the G&A. The results are showing already in the short term, but you have a period of mobilization, implementation pipeline, but this is the structural change. Yes. In the press release, we highlight that in the year of 2020, we had this provisioning for bonus, just in the fourth quarter. And we highlight the comparison of results. Just for you to understand better the evolution of one quarter against the other. So when you take in 2020, you brand-new cars just starting very lean, now a bit more robust, and you have also the bonus. And this is what I had to comment. -------------------------------------------------------------------------------- Operator [21] -------------------------------------------------------------------------------- Our next question on audio from Morgan Stanley. -------------------------------------------------------------------------------- Unidentified Analyst, [22] -------------------------------------------------------------------------------- Congratulations for your result. My question is specifically about your Rent-a-Car growth strategy. Already in a scenario that you would have a normalized supply from OEMs, we see that this level of growth can even be higher than what we expected in the Rent-a-Car business. So I would like to comment how would that converse with the premium part of the Rent-a-Car? And also Uber, an increase in the segment compared to the other players in terms of your top line? -------------------------------------------------------------------------------- Renato Horta Franklin, Movida Participações S.A. - CEO & Member of Board of Executive Officers [23] -------------------------------------------------------------------------------- Thanks for your question, Jorge. I will give you some detail about our strategy. Just starting with the end. We do not want to increase our share in Uber. It's an important market. It's a pocket of growth and occupation, but we want to grow in other segments. We prioritize individuals, as I mentioned, with daily rentals. Then here, tourism, traveling is reduced. But the short trips increased a lot with home office. And also weekends, not only 2 days, but 3, 4 days, sometimes a whole week, which is another avenue of growth. So compared to pre-pandemic decreased traveling, but other avenues growing. In corporate, in the past, we didn't have corporate traveling with cars. And now we have more cars rented on a daily basis with corporate than we had pre-pandemic, and some people prefer just to go by car than by plane, especially for short trips. So this is going to stay and grow. And we also have shared risks. Prepaid packages that are growing. All these new products of ours are growing a lot and will continue to grow. So we are gaining a bit of share in corporate. If you take a look at our platform, there is still much room to grow. But we start it in bids and post-vaccination going back to full traveling, we are going to have the niche that was important and lost competitiveness coming back. So this is even further growth for the market. So we believe that top line will have important growth with an even healthier mix than what we had pre-pandemic. And the average ticket in monthly rental, than you have also better margins. -------------------------------------------------------------------------------- Operator [24] -------------------------------------------------------------------------------- Our next question comes from Alexandre Kogake from Eleven. -------------------------------------------------------------------------------- Alexandre Kogake, Eleven Financial Research - Analyst [25] -------------------------------------------------------------------------------- I have a question about the bond. Well, first, congratulations on being pioneer on this bond. And I have 2 questions. First, what percentage that you would use for the settlement of debt? And second, if you have any strategy for exchange rate hedging -- if you have a specific strategy because of the exchange rate exposure? -------------------------------------------------------------------------------- Edmar Prado Lopes Neto, Movida Participações S.A. - Chief Administrative, Finance & IR Officer and Member of Board of Executive Officers [26] -------------------------------------------------------------------------------- Alexandre, this is Edmar. Thanks for your question. Well, first bond resources, approximately 40% should be allocated to our expansion CapEx at the base of 25,000 cars, and the other 70 would be for the payment of debt. We are now discussing internally, and we already contacted third parties to know what is most interesting for the company to prepay or to settle thinking of cost carryover, prepayment and impact on our amortization profile. So we are already in execution and in the coming weeks, we believe that we are going to have very positive results there. To your second question in terms of hedging, we want to protect the interest in pool. We are still discussing what kind of types of hedge we are going to have, but this is going to go on as of March. The message we are going to hedge at all. We are still looking at what instrument is going to be used, but always thinking of bond duration and additionally, trying to capture something right now in terms -- because you know that the exchange rate is quite volatile. I think this is what it is. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- I would like just to use the opportunity to get questions that came from the web. I'm going to talk about, again, fleet management and outsourcing. What is the guidance of growth in terms of fleet? Renato? -------------------------------------------------------------------------------- Renato Horta Franklin, Movida Participações S.A. - CEO & Member of Board of Executive Officers [28] -------------------------------------------------------------------------------- Well, the main driver of growth. Well, we are focused on fleet management and outsourcing. But the Rent-a-Car business still accounts for 60% almost of our EBITDA. So we want to bring more stability for the company, and we see brand-new cars as an avenue of growth. So we will see fleet outsourcing, gaining share in terms of EBITDA. In terms of investment, about 50-50 because the rental car business can also grow in the short term. In the mid-term, then the potential market is there for the brand-new cars for us to have more predictability in the growth of fleet management outsourcing. But Rent-a-Car is growing. -------------------------------------------------------------------------------- Edmar Prado Lopes Neto, Movida Participações S.A. - Chief Administrative, Finance & IR Officer and Member of Board of Executive Officers [29] -------------------------------------------------------------------------------- I have -- this is Edmar. I have a question from [Giovani]. Cost of capital for this year. Well, Giovani, clearly, if you look back in the peak of the price, there was an important increase in spreads then more towards the end of the year. We saw spreads already trending down even the issuances that we had in the end of the year compared to the period in the beginning of the pandemic, quite different but have been initial conversations, we clearly see that the effect we have access to this new market represented by the bond will really help the company not in the very short term, but in the short term to improve its profile and evolve a lot in terms of capital flow. So it marginally improved compared to 1 year ago. But my personal perception is that this is going to get even better in the coming months, basically, an improvement in the capital structure as a whole. There is a question from [Mattios]. Talking about apps, just to make it clear and to reinforce what Renato mentioned. We do not want to increase our share among Uber apps. It is a seasonal tool and in terms of competition, basically, we talk about the market where you have 3 large players, Localiza, Unidas and ourselves and this is a business that somehow restricts smaller players because of representativity. -------------------------------------------------------------------------------- Operator [30] -------------------------------------------------------------------------------- (Operator Instructions) Since there are no further questions, I'm going to turn the call to the company management for their final considerations. -------------------------------------------------------------------------------- Renato Horta Franklin, Movida Participações S.A. - CEO & Member of Board of Executive Officers [31] -------------------------------------------------------------------------------- Well, thank you all for attending another record -- a quarter full of records, a record of participation as well. Again, consolidating a new level. We started the first quarter very well. We are very excited about 2021. Thanks, everyone, for letting Movida getting here. We have already a very positive future. And if you haven't rented a car yet, come and rent with us, try our products. We have several types of products to meet all your needs. Have an excellent afternoon and all the best. -------------------------------------------------------------------------------- Operator [32] -------------------------------------------------------------------------------- Movida's conference call is now closed. We thank you very much for attending and wish you a good afternoon.