Movida Participações S.A. (MOVI3) Earnings Call Transcript & Summary

Good morning and welcome to Movida's conference call to discuss the earnings regarding the first quarter 2020. Today, with us, we have Renato Franklin, CEO; and Edmar Neto, CFO; and Investor Relations Officer. [Operator Instructions] Before moving on, we would like to let you know that any forward-looking statements made during this conference call relative to the company's business outlooks, projections, operating and financial goals are based on the beliefs assumptions of Movida management and rely on information currently available to the company. Forward-looking statements are not guarantee of performance. They involve risks, uncertainties and assumptions because they relate to future events and, therefore, depend on circumstances that may or may not occur in the future. General economic conditions, industry conditions and other operating factors could also affect the future results of the company and lead to results that will materially differ in those -- of those of such forward-looking statements. Now we are going to turn the conference to Mr. Renato Franklin. Please, Mr. Franklin, you can go on.

Good morning, everyone. Welcome to Movida's conference call to talk about the first quarter 2020. This is a different time we are going through, and I think that we were quite fortunate to have our campaign, A Vida e pra ser Movida, life is to be moved, but also with health, with safety, which is the moment we are going through. So we are a company that understands its social responsibility right now. And above all, as human beings, we believe that we have a privileged position. The company has a revenue mix that is quite privileged as well. So it is our duty as a group to do something to society. So I know everyone is anxious to go into numbers to have an idea of how we see the scenario moving on. But I would like to invite you to go to Slide 3 to show what we have been doing because the more we do, the better the impact to society. So this is not a marketing campaign, but rather to promote this moment of conscious capitalism that is going through companies. So we have all care with employees, with our clients. We were able to move everyone in home office, still keeping the company operational. But we also did things to the community. The first action, if you haven't taken part, there is still time, it is the donation of our first tranche to an NGO of the Movida Annual Subscription. This campaign is still on. It's going on during live streams of Brazilian artists. We also have 0 tariff on cars to health care professionals and retirement homes. The group also donated more than BRL 1 million in PPEs. We are supporting logistics operations. We have a food basket. And we also have the program called CoVida-20, vida meaning life, to fund small businesses that have an impact on society. So again, we are helping people to go through difficult times, understanding our responsibility. All that said, I invite you to go to Slide #4 so that we are going to start giving you the results per se. Before starting the results, what is the message here? Basically, our history of deliveries. So when we say proven capacity to deliver, and we still have very positive numbers and we're going to talk about that later on, but the main characteristic of the Movida team, and I use this opportunity to thank everyone, people in home office, the stores that are still in operation, we have a smile on our faces with the mask but we show the smile in our eyes, and we are providing good services, NPS going up. The idea is our focus to provide good services with agility and capacity of execution. If you think of the history of the company, we had difficult times, we made mistakes, but we were able to correct and deliver and execute things in a fast, agile way. And now we have a record of quarters delivering. You see since the first quarter of '15, an expansion of margin in all businesses, the delivery in Seminovos, a consecutive ROIC and ROE record. So of course, the moment does not make us happy because of what's going on, but we are happy that we are delivering everything that we promised with numbers that we are showing that are resilient and put us at a different level to be able to resume things when the time comes. So on the right, we reinforce what we have been saying and initiatives that will contribute to this new cycle of growth. So the idea is to keep focus on agility and execution. We have a reduced number of employees, but we do come to the office every day. We come in early, leave late, working more than ever to minimize impacts and adapt to the new scenario. New uses for the car came up. We have new customers, it's really impressive. It is what we always said, we are going to have different areas that are going to be greater segments, like cars on subscriptions. And these things, the transformation is now. It's not going to be more for 10 years' time. So we see new uses or the car, people just changing habits and, therefore, transforming the segment in which we have huge opportunities to work. All that with governance. Just remember, we kept our data to disclose our results, although CVM said that we could postpone, but it is our duty to share with you in a very transparent, responsible manner, keeping our conservative news and being quite comfortable and calm to go through the challenge and continue with our history of success. So now we are going on to Slide #5 where we talk about the results of the quarter. Here are the main highlights. Well, just as a reminder, those highlights, COVID started in the second half of March. So this quarter was slightly impacted by COVID. So we lost a bit of revenues in March, a bit of car sales, but still very positive results. Gross revenue, BRL 1 billion, 20% over first Q '19, and we grew by increasing margin with cost discipline, selective growth. And we increased our adjusted EBITDA by BRL 225 million, even with the cost of some adjustments we had in March and the COVID impact. Adjusted net income, BRL 55 million, we're going to talk about that later on, and a record spread between ROIC and the cost of debt, 5.6 percentage points vis-à-vis is 5.1 percentage points on the first Q '17. And with the cost of debt going down, this is going to be profitable to us. And also selected as a Great Place to Work, the GPTW certification. I can only thank the whole team that spares no effort for us to deliver the most we can, doing all the best of the company. Net income growing 31%, more than revenue, again, showing our commitment with profitability. Now we are going to the Rent-a-Car business. Now we are going to go through each one of the business in separate. The Rent-a-Car grew by 17.5% EBITDA, gaining margin. And what's the main point here? It is the work that we have been talking about for over a year now, to reduce costs, to have a cost discipline, a management model that is focused on optimizing processes and increase margins in the industry. Movida has 2 important levers: the best service level, customer satisfaction, and the lowest operation costs, which gives scale for later on. So we increased our EBITDA percentage, and we decreased our monthly costs by 11.3%. So a lot being done during this challenging period, which is certainly an opportunity for us to reduce company costs and deliver a leaner company in the end of the year, more prepared with new basis for a new cycle of growth. Now we go to Slide #7. We talk about Fleet Management. Revenue growing 21%, also keeping our business plan. Average ticket, stable, even with the CDI going down, which impacts our cost. And the cost per car also going down because we are able to use some tools that we use in the Rent-a-Car as well for Fleet Management. So you see our commitment to have, again, selective growth, quite diversified, which is very important in times like the ones that we are going through, and that gives us permission to talk about sustainability for the company in the long term. On Slide 8, we talked about our Seminovos, our Used Cars Sales. Positive results again. Remember that we had to close almost all our stores in the second half of March, but still we could sell 19% more than the first quarter '19 with an average ticket going up 12.9% with 6% on the sales of Seminovos over net revenues with the volume of cars, positive EBITDA, 14,000 cars sold. And obviously, with the impact in the second half of March, if it weren't for it, it would be even better. So we are working and everything continues in operation. We used the end of March to implement projects that we wanted for further on, and that helped us in April, and we are going to talk a bit about that. Now I'm going to turn the call to Edmar, that is going to talk a bit more about the financial results.

Well, good morning. Good morning, everyone. Renato, thank you very much. Good morning for those that are joining us today. As Renato mentioned, we are having this call in the regular time to give as much information to the market as possible, which we think is very important for the company. So on Slide 9, we talk about consolidated results. Net revenues, over BRL 1 billion, a growth of 20% year-on-year. EBITDA, BRL 220 million with growth of 55%. EBIT margin growing more than revenues, although we had a higher depreciation. And net income more than fleet and revenue shows that we have a huge focus on profitability. Going on Page 10, we talk about our history of profitability. Once again, we know that this is the past. This is before the pandemic, but it's very important to highlight 2 points here. First, the highest ROIC of 12% ever reported. When we take a look back to the first quarter '18, when we started our redemption, we have a double number from first Q '18 to today. Also, when we talk about the spread between what we are delivering and the cost of debt, we are going from -- we got to 5.6 percentage points in the first quarter '20. That is keeping the company's attractiveness as an investment in such a challenging scenario that we are going through. On Page 11, I'll talk about how we closed the quarter in terms of cash and indebtedness, and also, I'm going to talk about what has been done since the evidence that we were going through challenging times. So we closed the quarter with BRL 1.050 billion in cash. That, again, shows a leverage of 2.4x net debt to LTM EBITDA. So again, showing our financial discipline in the company. I have a chart here of debt movements totaling BRL 864 million. And then you have term extensions, new funding as of March. And of BRL 864 million, we have BRL 200 million that are included in the cash of March. So we continue active, and our investors recognize that we are being quite disciplined. Remember, in times of stress, we have no exchange rate exposure. And whatever we have is 100% hedged, so therefore, the company is protected. I think this is important. I'm going to talk a bit more about our results. The leadership of Renato has been paramount for us. And then thinking about our fiduciary obligation, we would say that our covenants are covered with the business. That is, right now, we have not -- no major concerns other than the regular concerns of being in a crisis. Let's go now to Page 12 just to show you a bit about what we have been doing to preserve the company's working capital. So first, as I mentioned, we strengthened our liquidity. We have been doing that. We started the second half of March, but we have also several ongoing actions still today. We promoted a very agile structure adjustment. We closed 15 stores, definitely 12 in RAC and 3 in Seminovos We also adapted our supplier contracts. So when it was in April, we had already done our homework. As Renato mentioned, we are renegotiating all supplier contracts. We started with the largest. But it's clear inside the company that from now on, we are going to work and readjust everything that is going on. A very important measure for working capital was a substantial reduction in the purchase of cars. Again, Renato is going to talk about that, but in quite a comfortable manner with our partners, with the OEMs. So this is an important factor for the continuity of our business model. And what I always say, we have 3 priorities in the companies: digital, digital and digital. And we promoted the transformation of the new Seminovos sales model in a very short period of time. Again, focus on digital. Now we are going on to Page #13 where I give you a bit more visibility on the foundations of the impairment that was recorded in the end of March. So if you think of short term, we see a mismatch between supply and demand in our market. We see numbers going down with a lower portion of brand-new cars. There is a redemption of OEMs, and we believe they are going to focus very much on retail. We also believe there will be a larger offer of Seminovos from financial institutions and also Rent-a-Car companies and also fleet owners that want to adjust their size to the lower demand because we know that in this pandemic scenario, we are going to have lower demand. All that together with more offer of Seminovos and a more competition with brand-new cars and lower demand, we have to adjust our assets, most of them in fixed assets. We are talking about 4% of our BRL 5 billion fixed assets. Another important item is receivables. We are being quite prudent and conservative right now. It's hard to say what company, what segment will do business the same 1 year from now. So again, we decided to anticipate a scenario that we see further on. All that said -- and also the tax impact made the company record losses of BRL 114 million in this quarter. Remember, 2 comments that are important here. First, noncash effects, and again, this is a scenario that we see today, the management's best judgment. And these projections can be reversed if the scenario is better than expected. I'm going to get back to Renato now, but I would like to make an important disclaimer today from the company investor relations area. We have been talking to the market. We have had several live meetings, and we have given indications about what business are like in the company in April and May. So we, together with the Board of Directors with our Audit Council, thought it made sense to give you a preview of operational data of April because if I'm saying things to one, we better say it to everyone. This is a point of governance, and it is a way to help the market understand what's going on with the company. It is indeed a new scenario. Everything that was written has to be rewritten, and we have to go on a new journey. All that said, I'll get back to Renato for him to say what we are doing in April.

Thank you, Edmar. Just to reinforce what Edmar mentioned, we have a conservative view in our best judgment today, and we discussed that it would be irresponsible not to do what we are doing because people see different scenarios. April and May are slightly better than expected, but we all go out in the streets, and we know what's going on. We don't know what's going to happen, and we have to be conservative. We made our best judgment. We saw the mix, we saw pricing, and we made projections. So today, we are comfortable with the numbers that we have here. And if things get better, we can reverse things. But it is our fiduciary duty as managers within responsibility and governance to show that very clearly to you in our balance sheet. So let's talk a bit about April and May, just for everyone to be on the same page. So indeed in Rent-a-Car, you see that we had a drop of 26% quarter-on-quarter. Remember, there is also seasonality. The first quarter is slightly higher, and we dropped by 26% because we worked very hard and we had agility. So you think of revenues, we grew a bit more than 26%. We are having a proxy revenue of services. Fleet Management is stable, it's more Rent-a-Car. But we are working with app cars with low mileage so that you can reduce the operating impact. And basically those drivers that were able to drive as much as they were doing, they paid the same. But those that preferred to stay home because they are in the risk group, they are not paying the same. So they kept the car, and I had a compensation that covers my fixed cost, depreciation and interest. So we were quite nimble with individuals. And again, this is very different. We see some market expectations. It's very different, our positioning compared to the rest of the market in Brazil, and the Brazilian market is very different from world's markets. In the world markets, you just have rent a car. We have Rent-a-Car, we have cars rented by the different app drivers, and then you have different revenues. You have subscription cars for individuals. We were the first company to do that. We scaled more and more the Movida brand-new cars. So we are minimizing the impact. But in a way, we had a drop of 26%. In Fleet Management, quite stable, minus 2.5%. But this is basically more due to the adjustment of new contracts. We are still signing new contracts, almost in the same level as before. Some are postponing a bit the implementation of the car, so there was a very low impact here. And in the Seminovos, Edmar talked about our focus on digital. We already had a concept proof for online sales of Seminovos car. This is something that we do believe and believed in the past. Further on, our strategy is to build the Seminovos brand to give trust to consumers to buy online. Obviously, with the scenario of stores closed, we had to put all our weapons there, and the strategy paid off in retail and wholesale. And online, we were able to sell more than 3,500 cars in April, an important contribution for company cash, the business turnover. And we are adjusting the company's size to this new scenario, a leaner company with an adjusted base when it's time to resume growth. In May, when we talk about price, you see our strategy was to keep maximum occupancy. Now we are being able to increase car prices slightly in Rent-a-Car and Seminovos. We sold what we wanted to sell, and we selected the cars we wanted to sell at the price we wanted. If it were to sell for any price, we would sell more. This is not our strategy. It's not we consider the best. It is something that keeps the value of our inventory. So we had reasonable pricing, some one-off discounts in some channels. When you sell online, you sell more with credit card. You have a bit more of sales expenses because you have to pay the card. All that has the impacts that we calculate. But again, we performed even better than the conservative view that we had. And May is better than April. The Rent-a-Car is improving prices. Probably, it's going to have marginal growth. And in Seminovos, we are performing better than April. We are going to sell more cars in May. We had some price adjustments controlling numbers that we want to sell. That's basically it with serendipity and keeping the company moving on, as we think it should. On Slide 15, we talk a bit about what we see in the future. It is a challenging time, but there are important levers for resumption. First, in order -- we did have some priorities to ensure our cash. As Edmar very well put it, it is done. We have the cash to go through the worst-case scenario in a very comfort manner. Operation austerity, what Edmar mentioned, we have done things and there are still things to do, adapting to the new scenario with differentiated positioning. Movida has always focused on clients, working with individuals, lowest share of corporate trips. We are less impacted by that, and this differentiated revenue mix. And with this different Brazilian market focus on individuals, people coming to subscription cars, new habits, new demands, all that leaves us quite confident about the resumption that is to come. Remember, in recent calls, and if you listen to them again, you will see, I say, subscription cars will be the best market for rent a car company in the future. And we said, "Oh, it will take perhaps 10 years from now." We are seeing an acceleration of culture. Loads of people that would take the bus are experimenting with cars now with Ubers. They don't want mass transportation any longer. In our companies, in major companies, we are talking about essential providers, and we offer them cars instead of buses. You were spending BRL 250 per employee. If you have 3 employees, you have BRL 750, and you can rent a car. And those that are experimenting with cars want to stay. And we are fostering news, shared cars on subscription. All that is working, is still in depressed demand, but we see things changing, the pointer. So when the business comes back, it's going to be a wonderful business. And on Slide 16, I talk about these new clients with new needs. So more and more people now in Brazil are getting to know what renting a car is like. So we have the trips and the holiday surprised us. Of course, at a lower level, but there is volume. These are short trips by car on vacation periods, and it's going to be a business in the short and long periods. Remember that in Brazil, we have a higher penetration of bus trips than abroad, so it can be very interesting. New people, new modality, and if the dollar continues to go up, in the shorter term, we have, of course, a market with more competition in the short term. But in the long term, with dollar up, the brand-new car is also going to go up. And then the Seminovos is going to go up, but people are going to start, well, questioning, should I buy or rent a car? If I do have a car, should I sell it and use the cash to my business or to whatever I need? So these are needs and desires that enable us to explore new channels. And this is what Movida has to be -- has been doing. It's part of our DNA to meet customer needs. Remember, it's DNA to serve, but we have a product in the Seminovos that is making a more fluid journey in the Fleet Management and in digital for us to be better positioned by the end of the year, recovering our margins fast and going through a different cycle of growth. All that said, now we are going to go to Slide 17 to tell you what we believe. We believe we are transforming our business model to have the foundations to resume growth and profitability. And remember, why -- what do we have to go through? Well, we have to go through our pillars, our operational excellence with sustainability; value generation; certify the B Corporation, a much more mature company. You see that our releases, everything shows our maturity. Financial management led by Edmar and funding capacity, we are comfortable in terms of cash position of going through any scenario. And inside home, we have resources to cope with a worse scenario, which we don't believe, but most important to resume growth. I think it's going to be an even better period than we expect, and we have to have the resources to grow the company with profitability. That is selective, nimble growth, adjusting for a new scenario. A lean company growing with margin and showing differentiated services for our customers to be more and more satisfied. All that, together with our acceleration cultural transformation, gives us a very positive long-term view. We are going to pick up faster than everyone else, and at the other side of the tunnel, we are going to have a leaner company and more and more recognized by its capacity of execution and delivery. Well, this was our presentation to have everyone on the same page, and now let's go to the more interesting part of this call, which is to open to your questions. And I thank you very much for attending. There are lots of people attending. So let's go to the Q&A.

[Operator Instructions] Our first question comes from Rogério Araújo from UBS.

My first question is with regard to impairment, the 1.7% adjustment in the residual value. Is that something that you already see as price in May, and in the last weeks, this drop of price of approximately 4%? And also with regard to the dilution of fixed costs and Seminovos, are we also going to have an impact perhaps in depreciation for the coming months? This is my first question.

Thank you for your question. What do we see? Well, price by price in the channel in the same period, of course, has not dropped that much. It has dropped a lot less. But when you get the mix of cars that we decided to sell, a higher sales expense because of the card and the mix of the sales channels because retail sells more than wholesale and less volume of sales, then we see something close to that. We are performing better than we expected, but we believe there are still things to happen that we don't know what are going to be like. So we are comfortable with the best judgment today. Again, it is a conservative view. If you ask me how long it will take, we don't exactly know. So we made conservative adjustments. If we recover fast or if there is a vaccine, we can have a more positive reversal than planned. But this is a bit of the scenario we see. I'm going to let Edmar talk about depreciation.

Yes. Rogério, you're right. When you sell a bit less in the short term, you have the dilution of fixed cost that is lower because you have a lower quantity of cars. And our view today, as Renato mentioned, is that the final number is not much different than what is being enforced in the market. This is our view today. We are acting in a very proactive manner, paying very much attention to prices. But as Renato mentioned, indeed, this is the situation for today.

Okay. My other question is twofold. When we try to do the math about what is the drop in tariffs of car rental, given the guidance of drop of revenue and volumes, we see a drop of approximately 15% in the Rent-a-Car for you to get a 26% drop in revenues. Does it make sense, a drop in the Rent-a-Car tariff of 15% year-on-year? And how much is due to mix? And how much is due to tariff discount?

Okay. We do have tariff discounts, especially for app drivers that are not running. And then the thing is the volume is huge. Remember, our highest ticket were in airports. It's not the highest margin because airport stores are also more expensive. But when you remove the segment, the daily rental goes down more than the price. So when you do the math of daily rentals, you have higher percentage, but price is a lower percentage. So there is an impact because you change product. You have a product, I don't know, to run 5,000 cars, and now it's running 500 kilometers, it's completely different. But we are running different things, but there is a price impact to being objective. But the daily rental went down because of a mix.

And is that the right math? Is it 15% year-on-year?

A bit more.

Okay. And the last point, 78,000 cars in the Rent-a-Car business. And you said you're going to sell more, but you're not buying. What's your expectation in terms of fleet number in the coming months? What's the minimum number we should expect before you resume purchases?

Well, we are still discussing and assessing things. We don't know what's going to happen. Based on the scenario today, we have room to have 3 months of sales just reducing fleet in the Rent-a-Car business. But the advantage of our business is this, our assets are here and we sell whenever we want it and we stop buying to adjust company size. But we believe 3 to 4 months of sales. But we do see a gradual recovery, especially in some niches, not trips. Again, subscription car, new product niches, niches for companies that are working. We have been discussing new alliances with OEMs, new products. This moment will even bring us closer to OEMs to have better partnerships, exploring different niches. So the exact number of our fleet is too soon to say, but we are thinking about 3 months of sale.

Our next question comes from Pedro Bruno from Santander.

Thanks for giving us the numbers of April. It helps us a lot to see what's going on in the second quarter, per se. My second question is a follow-up, Rogério already mentioned, just to see if I understand it correct. The impairment fee, BRL 193 million, when you talk about fleet. In the release, you put it as a recognition of losses for cars that are not being activated. When we think of the total fleet, as you mentioned, you're talking about 4% of the total. But eventually, of the deactivated fleet, it could be even a higher percentage. We don't have much information of what is deactivated fee or disabled fees. So just to understand this a bit. And then related to the previous question, to what extent do you see price reductions in April? It seems that price reductions were quite small. But what do you have in mind thinking of the new normal in terms of sold cars and bought cars? So it's a bit of a $1 million question, but I think you understand, just for me to try and understand your rationale.

Pedro, this is Edmar. No this is not a BRL 1 million question, it's a BRL 193 million question. So 4%, yes, over the total fleet. And you are right, there is a higher load on the cars that are to be sold more in the short term. Now when Renato mentioned price on price is not 2%. Why is that? Because the company has not stopped. We are renting cars. We are renewing fleet management contracts and we are selling cars. So it is the market that sets the price. So we see 2% price, 1% mix. Remember, we had 50% retails in Seminovos, now we are running about 40%. So the mix, additional sales expenses that Renato mentioned, and with that, we have an impact of 3%, 3-something in the total aggregate number. So 4% reflects our understanding right now. I do not have a crystal ball to know what's going to happen in August. We are making decisions on a daily basis. As Renato mentioned, we have a group of officers meeting every day since March, not failing, including weekends, when necessary. So it is our best judgment today in view of everything that is going on and understanding that, in our operation, the worst in terms of price has already been through. This is an unprecedented crisis, but we are quite comfortable with regard to everything that we already did, and thanks for your question. And remember, the retail wholesale mix has a huge impact. So if we can have the online retail and our stores opening faster than expected, that changes. But it closes more, if we have more lockdown, there is an impact on retail. So we have to sell more on wholesale. So again, that's why we are protecting ourselves. We don't know what's going to happen. So we want to keep the company balanced, and we are going to make the adjustments as we move on. This is what we see what it's going to be like in the future.

Our next question comes from Victor Mizusaki from Bradesco BBI.

Congratulations on your results. I have two questions. So first, as you mentioned, thinking about the Rent-a-Car for app drivers and subscription cars, my question is thinking of Fleet Management vis-à-vis its product. If it makes sense, given the scenario, reduce the fleet and be a bit more aggressive in fleet movements, especially that fleet that is a bit more idle. Having more appealing flex prices. And my second question, in line with what Pedro asked before, you talked about a discount of approximately 2%, then you have a bit more expenses. And then you get to a number of 3.5% and impairment was 4%. So does it make sense to consider that impairment covers 100% of fleet renewal? That is, if the scenario gets better, probably in the second half, we are going to have a reversal of impairment?

Victor. I'm going to start with your second question just to connect to Pedro, which is impairment reversal. Well, what is our guide here when we realized we were going to go through difficult times? And that has to do with cash provision and impairments. We have been conservative and prudent. So we made decisions with the information we had at the time. So I agree with you in terms of direction. If the scenario gets better, there will be room for us to make adjustments further on. But again, this is still a very uncertain scenario, and I have to admit that I'm incapable of seeing what is going to happen. But objectively speaking, and we have been operational 100% in all business lines every day, so what we see in terms of prices and trends as of the third week of April is that things are getting better. And that I'm talking about customer, Rent-a-Car bookings, sales of Seminovos. We just closed the sale of 2,200 cars, and the last week of April was spectacular, and that's why we got to the number of 3,500. So this is our best judgment today. In terms of apps, if we are going to use the fleet that is being idle, I'm going to turn to Renato to talk a bit about strategy.

We believe in subscriptions cars a lot. App drivers are an important niche, and we believe they are going to continue to be important, and there are new products for app drivers. I'm not going to disclose what they are, I'm just going to talk about the concept of paying by use different mileage rates. 99% of our agreements were 5,000 kilometers. And now we found that our new niches, part time, new products that can be launched that I don't want to mention today, but we do have an important strategy to follow. But remember, our focus is the individual. When we talk about the most flexible subscription program in the market, it's very important for us. We also have the -- a brand-new monthly rental, which was very successful. And also the Year Movida is a rental car product that you rent for 1 year. We created also platform subscription cars where you can compare prices, you see 3 different products. And we believe that this will be the largest rent a car business. If you think in developed countries, you have 50% to 70% penetration in operating leasing. This is what subscription cars are, even better because you have the gain in the purchase of cars, the gained scale. So all that said, I think this is an important pathway for our growth in the future, ours and the industry as a whole.

And if you allow me, just to ask a final question, and Edmar mentioned about the sales of cars that at the end of April, you increased the volume of sales. If you can mention a bit of what May is like.

May is better than April. I'm going to restrict myself to say May is better than April. We thought about breaking down more. But anyway, the scenario is better in terms of prices and volumes. So I think we've been through the worst. Again, we projected a more conservative scenario. If things do not change, we believe the worst has gone through. If you get prices, Seminovos on-site comparing to the fleet, some analysts are doing that, you see prices are going up, rental cars, Seminovos' prices. So I think the worst has gone through, and the trend is to improve gradually until the end of the year. This is what we believe in.

[Operator Instructions] Our next question comes from Renato Hallgren from Banco do Brasil.

Could you talk a bit about the impairment and accounts receivable? If you could talk a bit about Fleet Management? What you are seeing in terms of customer movement, if they are asking for reductions in tariffs? If they are giving back cars? So could you talk a bit more about the impairment, if it's 100% of Fleet Management? Or if there are other segments that you see any possibility of delinquency?

Well, thanks for your question. Once again, best judgment, okay? If we get the amount, it is quite significant. In the beginning, we had many requests, not for return. In return, we didn't have much. But we did have questions to -- request for discounts, more installments. So we projected a poor scenario. When you think of delinquency, we always project poor scenarios as well as everyone else. You see what the banks are doing. In practice, we do have some delay but we are having payments. So it is worse than before but better than expected. But it's still soon to know if it's going to be like this. So if we see that things are changing, we are going to make changes. But we decided to see the level that we were foreseeing when things have started. Again, I think it's going to be better, but it is what we use for our best judgment before.

Yes. Renato, I'm going to add to what you're saying. We looked into all our business lines segment by segment. You asked about Fleet Management, but there is another segment that you have lower exposure, which are travel agencies. That was a highly affected segment. We believe there will be travel agencies that are going to go through the crisis with difficulties, but we don't know. Once again, that's why we are giving you numbers of April for you to understand where we are today. Some visibility of what we have been doing is to change our policies in terms of collections, credit granting, but again, looking at all business altogether. It's not only Fleet Management. It's Fleet Management, it's Rent-a-Car, a small portion of Seminovos. So we tried to cover it all again in our best judgment today. As specialists in delinquency of all sectors, the banks are increasing their provisions. We believe that we did the right thing. And just as a reminder, we have been operating with the lowest delinquency rate in the industry. And again, we are quite diligent in this issue.

[Operator Instructions]

I'm going to read two questions that we got on the webcast. First, from [ Brooks ]. Do you see possibility for new impairments in the coming quarters? And how the slowdown of OEMs impact Movida during the quarantine? Starting with the second, well, basically, it helped us. With the reduction of purchases, it helped us adjust the company. And obviously, in reduction, of course, they have a focus in short-term retail, but also a longer-term alliance partners. People will want more cars, so we are going to have important partnerships with them. So in the medium term, it is positive to Movida. And in the short term, it was very much positive to Movida. And basically, we are comfortable now, unless there are other surprises, unless COVID-20 comes in.

No it's our best judgment. So this is Edmar speaking. We have no expectations of reducing depreciation in the short term, which is another message that complements your question, and I thank you for that.

There's a question from [ Lucas Barbosa ], and he asks, in the case of Seminovos, how do you see the other retailers? Is there a risk of having very high inventory levels and affect sales? I think, [ Lucas ], there is something very important to reinforce what Renato mentioned, we are accessing a customer base that is much larger than the pre-COVID period, and this is very important. Pushed, motivated, out of need, you end up seeking different things. And in terms of inventory, because sales are speeding up and we have expectations of having more coverage in terms of customer base, we believe we are going to be able to manage any differences in inventories. We believe there is going to be a higher inventory. We have to remember that there is a recession coming, fleet owners, other companies adjusting signs, banks, financial companies in delinquency. But we considered all that when doing our best. But again, what we are considering is that we are going to have a positive move from now on. We have been working very, very hard. We are very, very agile. We are going -- we are handling things very fast. You call, there's always someone to provide services. So working right, we don't believe that we are going to have problems with execution. But of course, the market may be affected in the short term, and there for the reason for the impairment for us to continue operating with comfort. There is a question here from Maria Isabel from Banco Alfa. The trend of a drop in EBIT for the second half is a fact. Can you change covenants? Well, thank you, Maria Isabel. As I mentioned, we are not going to have a drop in covenants. We are performing better than planned. So just to make it quite clear, the dropping bit is already being accounted for. And as you can see the operating numbers, we are very much encouraged that we are going to be able to face this new cycle we are going through. Pedro from Capital would like talk a bit more about digitalization and your learning in online sales. Well, we have a more detailed slide, but we decided not to explain too much to everyone. But we are working with things that really make a change in online sales. Basically, you need trust for sales. Our brand helps a lot. The brand is recognized by its quality and we have to use that in the Seminovos market. We have a very adjusted script for people that are talking to us to explain what Movida is like, what kind of guarantee, what kind of quality they will have, and that has helped in the conversion of sales. And because there are many people that want to talk to us online and everything, I think you should all buy a car and explain -- experiment with our online process. It's very nice. You're going to get the cars at home all cleaned up with all protections. You're going to like it a lot. People in the call, go online and buy cars that are premium cars, that are low-end cars that are Fleet Management cars. The mix is also very diverse, and it has helped us a lot, more than we expected, really. So it's worth it. Buy a car and understand our digitization strategy. Thanks Pedro.

[Operator Instructions]

There was one more question about the São Paulo taking turns on card license plates. At first, we thought it was a problem. But in fact, people are renting more cars, people that do have to work every day and their license plates will only allow them to drive in the city every other day. And also we had slightly better utilization of delivery cars for individuals. So people pick up the car during the day, deliver -- return it in the afternoon. We have customers that are registered with us, and this is also going up.

[Operator Instructions] Since there are no further questions, we are going to turn the call back to Renato Franklin for his final remarks. Please, Mr. Franklin, you may go on.

Well, thank you very much. Well, everyone, first, I would like to thank. You are very important and have contributed for Movida to be where it is. I thank also my team very much that has been working a lot, taking care of themselves and our customers, which are our greatest asset, taking care of our people. The company has always had an important point in execution, but I was very well impressed by the agility of the management team, company team of really getting lean when expected, adapt to the new scenario, perform sales, have financial management, I can only thank everyone in our company and also investors, banks, financers, that gave us the due support. We have our doors open and are confident about what is to come. Just to reinforce what we are doing for the future, in our long-term view, we see new customers, new demands that will create new channels, I think, that is going to diversify even better. Movida is much healthier in terms of diversification in Brazil or in the world, and we are going to be even more so, reducing important costs to recover our brand. So we are going to see a company with a slightly different sales mix further on but recovering margins, returns and with the huge potential growth in the industry. So we are going to continue growing despite the GDP. The macro scenario is a bit more challenging. We'll see recession. We'll see challenges in unemployment. Lots of things that's happening in the society will affect the world. But for the car rental business, it's positive despite the country's growth. We will grow, and we'll use sustainability to have a better society, a better country and the economy that the Brazilian population deserves. Also thank you more than 730,000 shareholders. We have more than 2 million clients. We still have a huge potential of investors. If we look at our base, customers that have become shareholders. We are very happy about what we did so far. We are going through difficult times, but we are happy because of the adjustments the company was able to go through. And in a disciplined, centered manner, we are certainly going to have a more mature company with better disciplined execution, delivering what we promise. Our greatest challenge is to deliver what we promise, or even more. This is what we have been doing in recent quarters, and we'll continue to do so. Thank you so much. Have a wonderful day. Stay home. And if you need to come out, count on us. We can rent cars, and it always happens. We have good prices, it's worth it. A bit advertising in the end just to use the opportunity. Thank you very much, and all my best regards.

Movida's conference call is now closed. We thank you very much for joining and wish you a good afternoon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]