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

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

Well, good afternoon. Welcome, everyone, and most welcome to our conference call to talk about the second quarter 2020. Well, everyone is still very much touched about the COVID situation, pandemic, social isolation, everything that is going on, but the main message is that our company is prepared to face unique challenges as the ones that we faced in the second quarter 2020 with all impacts of the pandemic being counterattacked by our team. So starting on Slide #3, let's talk about the main highlights of the period. Gross revenue with growth of 5% over 2Q '19, especially with the record sales in the Seminovos performing very well, even in closed stores and isolation. The digitalization of Movida and the agility of our team making the difference for gross revenue to be at the level of over BRL 1 billion. Consolidated EBITDA reached BRL 151 million, stable compared to the same period '19, 10 percentage points in margin with a lower denominator and a net income of BRL 3 million, of course, a drop compared to 2019, but the result that was quite minimized by the cost of costs that we're able to perform. We had a reduction of BRL 42 million over the same period '19 but also BRL 67 million reduction in costs and expenses compared to the first quarter 2020. So that shows governance and agility to adjust the company to any scenario we will experience. Another highlight, record cash, BRL 1.7 billion. So people were talking about the company's resilience, our capacity of CapEx to keep stable cash. Even in times like this, we can increase our cash, reduce company leverage, and we are very comfortable in terms of balance and cash to pick up growth. And the sustainability continues to be a highlight in the company. In periods like this, even more relevant, making everyone aware of the need of us that a privilege of working in a business with return and a space to grow, having the duty of contributing to a better country and a reduction of inequalities. Movida and to the former JSL and Simpar has contributed to -- with several actions, donations, cars. And Movida basically is working its parking lot in [ Assuence Unidos ], taking over more commitments. And I'm going to talk about other sustainability initiatives that support our sustainability. So now we are going to go to Slide #4 to talk about the strategy that was adopted in the second quarter 2020. Just to remind you in the second part, 9 of March, the pandemic came to Brazil. Social isolation was increased. We closed some rent car stores and Seminovos stores at first. We had a drop in demand, low visibility of economic activity, very little visibility of what the resumption of activity would be like and our capital structure quite challenged. Edmar is going to talk about what we did. But we looked at Brazil, and we decided to take the following strategy. First, taking care of our people. We spared no efforts to implement all protocols. The Rent-a-Car stores would -- because it's essential, will be kept open, and we took care of our people. Whenever we could, we would put people in home office. We moved away people in the risk groups to take care of our teams and customers, and that reflected in the way we dealt with our customers and their level of satisfaction. We were surprised that NPS levels even with all the stress in the moment. We also reduced our supply. Because we have the possibility, we knew we would be ready to accelerate whenever ready. But we were very agile and decided to accelerate digital process that insured both in retail and wholesale sales 100% digital with a record volume of sales and creating a new sales channel that will give us more capacity to grow resilience and detachment from Seminovos. We also worked with the company's structure [indiscernible], closing stores, changing stores. We're able to use opportunities with properties that have competitive costs, so moving from one store to the other at a larger square feet. Maintenance contracts, services contracts are negotiated and again with the reduction I mentioned of BRL 67 million. So these are reductions that we want to keep. And therefore, our businesses will deliver more margin with a leaner cost policy. We are a low-cost company today, but certainly, we'll be even more so in the future. We also preserve liquidity and leverage. Edmar led actions that got us more BRL 1 billion in fund raising, very important for us to be comfortable to grow again. We kept operations 100% active, that is transactional teams were in home office, but the key executives were in the office, taking care of ourselves and the others but also innovating, creating new channels, innovating every day. Meetings that were weekly turned into daily testing products every day to minimize impact. All that said, what do we see? Basically, thank God that the economy is picking up even more than we expect. We work at different operation measures, some of them growing even more, especially as individuals renting cars monthly and even the over the RAC business going up, and we're going to talk about a further one. The decisions of selling cars and selling our fleet will bring results in the mid and long term. Today, our fleet is much newer. We always wanted to have the newer fleet in the market. And in Seminovos, you're going to see that we have the newest Seminovos, which brings us advantages in terms of maintenance and customer satisfaction. So the idea is really to give incentives to the market and launch new channels, the digital channel, for the sale of used car, 100% online. That was an incentive for older cars. And today, we have a better inventory. And today, we have more than 5 new sales channels, several new products. That is when we get to the end of the year, we are going to get to even more robust than we were in 2019, and we are going to talk about that further. Well, on Slide 5, we talk about fleet. What is more important here is that more important than going from 119,000 to 103,000, as we are showing, is what happened with our idle fleet. That was almost 30,000, 29,000 in April. And we sell -- sold cars fast. In July, we are at 9,000 cars. That has normalized our inventory of Seminovos where we are selling at a very good pace to go back to normal levels. So now we are running at record occupancy with occupancy rates quite positive with record occupancy on weekends, which will certainly help us resume our profitability. Again, our leverage is one of the lowest with the company, margins going back to normal in the Rent-a-Car and occupancy rates above 80%, and levers are going to be even higher, but we bought almost 6,000 cars in the second quarter and are normalizing our pace of purchases, as of August, growing our fleet every month. On Slide 6, we talk a bit about the Rent-a-Car business. Now I'm going to talk about each business unit. The Rent-a-Car was the unit that was most impacted with a drop of 34% in net revenues in the quarter also month-by-month, just for you to understand how we are resuming operations and also about each segment. The highlight is that, basically, we had the mix and the occupancy that were impacted. And we know that the mix is going to be a bit different from now on, but we were able to reduce cost per car. It was already very competitive compared to the competition. But now we have about BRL 500 per car, just 20% reduction over to 2Q '19, again efficiency and productivity at every quarter, every month, every day. If you go to Slide 7, we see our numbers every month. This is not usual. We are doing that because of the pandemic, and I think it's fair with you to show our numbers of July to just ensure full transparency. Remember that governance is a very strong pillar in sustainability, so we're breaking down July to show how we are doing. So you'll see the daily volume of rentals in the Rent-a-Car is doing very well. We were about 1.980 billion pre-pandemic. It went down to 1 million, a huge drop. And we are going at 9%; in July, 1.4%; and in August, we are going back to the pre-pandemic levels. Of course, the mix is different. So when you think about the average daily rate, it -- we are running at about BRL 60. So what happened to price? In the beginning, we granted lots of discounts in April. But with discounts, it takes a little time for us to pass on revenues because if you're negotiating with clients, it takes time. Discounts were fast. But going back to our price, it depends. Some clients have another month. You tell them that you're going to go back to prices the next month, so the impact of price reductions is stronger in August and September. But new contracts in August, if you go online, you're going to see that every product, we are about 5% above August last year. So there is a mix effect. But also, the profitability of each product will be recovered with room for optimization. Again, occupancy, more than 80%, and we reached to BRL 81 million in July in revenues, and we believe we are going to keep up like this. We are really recovering the system in Rent-a-Car. Segment by segment, I'm going to give you more color later on. But of course, the airports were the most affected. And in corporate, you see small and medium businesses evolving faster and having more car trips. We are having lots of intercity car trips, so we believe that we will even have greater demand, at least in the mid and short terms for weekend domestic trips with the family renting the car and helping demand. The next page, on Slide 8, we break down of our monthly and one-off businesses. Monthly went down in April and continued to drop because customers started to return their cars, and then we started pickup in the beginning of May. We are already at pre-pandemic levels, especially because of the individual monthly product. Remember that the individual flex product, Movida was the first product added, but we also have Movida wallet with a 12-month contract of the used cars that of getting to a future of a better car. The market of Seminovos is huge to date, but we are just prepared if customers want to extend rental. And the brand-new cars, also long-term rental, we had a digital platform. We launched the 100% digital platform nationwide, and demand is growing a lot every week, better than the previous week. And for me, it's going to be the greatest business for the Rent-a-Car segment. I've been talking about that for more than a year. When we have that, we can realize a potential. And remember, post recovery and peaks on weekends are very positive. Each peak is a demand. You see July, August, even stronger. Now we are even running out of cars on weekends, so we are buying cars to increase our profitability and to have cars to offer for weekend trips. Going to Slide #9. Let's talk about our fleet management program. This is a more stable business, so we had growth of 15% year-on-year. There was postponement in terms of mobilization, but now we have already new contracts signed. We have a pipeline of customers that is very strong. Many customers are looking into fleet outsourcing, and we have a channel to operating new segments in fleet management. Remember, many customers will have less cars in the new scenario, but the retraction of outsourced fleet is very little. Lots of opportunities in the sector should continue to grow in fleet management and outsourcing in short, mid and long term as a whole. And here, we also reduced costs, which contributed to the increase of margin. Edmar is going to talk about that and giving us a significant profitability. On Slide 10, we once again say that the Seminovos was the highlight of the period. Well, more important than our capacity to sell, I would like to say since we structured the company every year, every quarter, we delivered good results at Seminovos. And in the midst of pandemic, the numbers are -- we are showing show that we are here to stay. We have depth. We have structure. We have process to ensure resilience and visibility for the mid and long terms. We are not in this business just for prompt results. We want to have the right features. We want to have gains in the short term, but the solutions have to be built in agile methodology, bringing news to the customers, giving us capacity of growth and scale for the whole of the business of Seminovos in the future. We had record revenues of BRL 750 million, 21% over the second quarter '19. That's incredible, 20% over. In volume, you were talking about thousands of cars. That reduces our G&A and our gross margin as well because of impairment. And the average sales ticket is going up. If you view last year, the average ticket was going up. This is a natural trend of the company. We are investing on prices but cautiously, just to ensure this is our inventory turnover because a newer fleet brings a very positive perception to customers and ensures our growth. On Slide 11, we get the day-by-day of the Seminovos. In April, the lowest ticket in April, sorry, the lowest ticket, and then we evolved with more expensive cost. We got BRL 43,000 of average ticket in July. The volume, again, records in May and June. And we started to adjust our prices now because we no longer need to be concerned about turnovers, just regular turnovers. Inventory levels are normalized, and we are just going to continuously growing the company naturally. And remember, online sales are doing very well with lots of hits, a very good conversion rate. The brand Seminovos Movida is very strong for the client. So what we had to gain relevance in the market is something that the pandemic somehow accelerated, and that will enable us to even master this market. Now I'm going to turn to Edmar for the financial numbers.

Thank you, Renato. Good morning, everyone. Well, before I start talking specifics about the numbers, I'd like to have a special thanks for our individual shareholders. They were a very important support in this scenario, and they have helped us do different. I always say that we are learning a lot during this period, and it's important to pay tribute to the many are our clients. And you're talking about 85,000 different taxpayer numbers in our base, and we are very proud of that. And because of that, we are having new channels just to provide good services to everyone to ensure that information will get to everyone. We have a Twitter channel. We have a results podcast. And as of this quarter, we also make a video available with our earnings online on our website. We believe this is all very important. And once again, remember, we had the material fact with data from July to help the market understand what's going on and also to be more comfortable to talk to you on this call but also with future interactions. So moving on and going back to depreciation. The amount of BRL 2,600 per car on the RAC in the last 12 months and 4,200 in fleet management reflects our conservative standing with regard to this -- to the pandemic. As Renato mentioned, low visibility continued, although all indicators are positive and on our side with a clear recovery. But again, the end of 2020 and the first quarter of 2021 are still a bit blurred to us, so we are going to continue with the depreciation. And we believe that, further on, this will turn into even more positive margins in Seminovos. Going to Slide 13. I would just like to invite you to briefly address each one of the business lines. The Rent-a-Car business, there was a reduction of 10 percentage points in EBITDA margin. That mainly because of drop of revenues, in a way, offset, once again, by the reductions that we had in costs and expenses. Our EBIT, you see the increase of depreciation that had an impact on EBIT. That's the first time we see a negative EBIT in the Rent-a-Car business. And again, the difference quarter-on-quarter was BRL 78 million. EBITDA in the quarter was BRL 151 million. The monthly pace is different, and it follows revenues. So when you look at the average quarter, you see that we are running at a much higher level. Fleet Management and Outsourcing, what happens? Better EBITDA margins by 8 points and BRL 20 million in nominal amounts with increased consumption and increased profitability because of the cost debt that we had. EBIT, margin was a bit affected. But again, we improved by BRL 50 million in the Fleet Management and Outsourcing and again depreciation that will turn to positive results in the future. In the Seminovos business, and here, I'm talking about the right portion of the slide, the evolution is clear. We are going from 1.8% to 2.1%, BRL 20 million in the amount and the EBIT of Seminovos is positive, and we believe that it's going to continue quite strong further on. Go into the next page, Page 14. We are going -- we take an overall look about the company's consolidated results. Net revenues, about BRL 1 billion, the last 12 months above with growth of more than 6% year-on-year, so a very important indicator in pandemic times. EBITDA, as I mentioned, BRL 151 million is stable compared to last year, which ensures that the last 12 months showed a constant EBITDA above BRL 800 million. So again, when we look at everything that is going on and we show the numbers of our performance in the Rent-a-Car business in the quarter, we understand that our EBITDA, the lowest value is the one that we are showing now. That is, as of now, we are going to see a progressive improvement. We are already seeing that, and we are going to go to a new level for the third quarter. The same for EBIT. Remember, just that we have the increased depreciation, so we had a drop of BRL 46 million quarter-on-quarter, just because this increased depreciation that was attributed to our profit. Net income from BRL 41 million to BRL 3 million, following the same rationale, everything the same. Here is an increase of depreciation. Let me talk about cash and indebtedness on the next slide. This is always an important point, especially in times of crisis when eventually the capital structure or the capacity to reach the market is challenged. So we show cash in the end of the quarter, BRL 1.7 billion. Our capacity to sell, Seminovos alone, the quarter shows. You see our numbers for net sales. And also fund raising, more than BRL 1 billion, BRL 500 million of which in confirming suppliers. And then debentures, BRL 200 million. And credit lines of BRL 200 million, in this case, with 2.5 years at CDI of 3.66. Additionally, we had the support of our investors, postponing payments of about BRL 130 million. And on the right of the slide, you see that we closed the quarter with quite positive indicators in terms of balance sheet. Net debt-to-EBITDA ratio, leverage 2.6; EBITDA over a net interest of 4x, a very interesting structure. And here, with suppliers, we go from 6 to a bit below 4, showing the efforts of readjustments that we had with the company. And here, additionally, I bring our accounts receivable to show that, even in credit cards, we have an increase compared to the position that we showed you in the end of the first half of the year. Well, with all that, the company did whatever it had to do and what it could do. Results, we know, are getting better, and we know they were just temporary, and now it's time to resume growth. Our cash and our size give us the comfort to move forward. With that, I go back to Renato to talk about the digital transformation journey. Renato?

Thank you, Ed. On Slide 16, you have this digital transformation or the digital journey. Because, in a way, this company was always very digital. We have our apps. And remember, we were quite pioneer in solutions for individuals. I'm not going to talk about them now. We just have a few here, but remember what we did this quarter in terms of highlights. Our online sales, 100% for used cars. And it's not just something that we did a week, and that was that. No. When we had our financing approved 100% for online sales, everybody underestimated us. They said it's going to take a long time, and we believe that, too. We wanted that for the future. We wanted to go online in the future. So there was a lot that was ready for us to accelerate other features, WhatsApp, videos to show the cars. And we were able to move very fast in March, and we started to sell online in April because the stores were closed. So we are implementing lots of things, AI, pricing tools that optimize profitability for the Seminovos business. Rent-a-Car, the digital journey, new apps, always mediating transaction and bringing more profitability. Web check-in, a huge transformation, possibility of customers checking in, managing quotes, no paper. This is growing a lot in some regions more than others, but we expect for the end of the year to be working paperless for individuals, very, very cool, and that makes the process a lot smoother. And long-term solutions. What we have done, the brand-new car, our new platforms, apps, you can go online and you can even see a valuation of your car. So it's a lot more comforting. It's cheaper, and we have this intelligence that is really moving up. On Slide 17, we believe that there is something to happen in terms of digital transformation for the rent-a-car sector in Brazil. We mentioned that in the IPO, and we still have a very low percentage of sales online, 9% on average, 48% for Movida, again, very strong and in line with the customer base that we have and our individual shareholders. And that brings us gains in cost. That's why our cost per car is low. It gives an advantage in the midterm and the long term, rational competition. Now we have to know who can make the business more profitable. It will come a time when we are going to have fierce competition, and those that have the lower costs are going to the market. We work in multichannel, several channels, and now we are launching new channels. We launched 5 new channels that we believe are going to be quite representative for next year and for the Rent-a-Car business. And you're going to see that, further on, we are going to have very exciting launches, several tools that we are going to launch. On Slide 18, we bring Fleet Management and Outsourcing telemetrics, which is something that we have been using the Rent-a-Car since 2018. Basically, we were awarded for that in 2018. But the industry has evolved, and that will bring lots of gains. And in Fleet Management and Outsourcing, what's new? It's the B2B digital cell we put together in the Rent-a-Car business 2 years ago. And for Fleet Management and Outsourcing, now our consultants work with larger fleet. And so we have now a cell to work in SMGs up to 10 cars, and it's going to be a significant market and will help us grow with this business with higher profitability because those are clients that pay a bit higher for the Rent-a-Car. Seminovos, again, 100% online sales are growing. And even in July, where most stores were open, online sales went up. That's very nice. This channel is here to stay to work together with brick-and-mortar stores. I don't see these stores leaving. But perhaps, we won't need to open stores at the same pace. Each store will sell more with more capillarity with online. And an important launch is an online app that helps those small retailers, even in a period where we have social isolation of pandemics. And that will bring customers that will buy 1 and 2 cars. And the work led by [ Dario ] has brought lots of new customers. This is what we all want: to bring new clients to our base every month. That helps us create resilience for the future. On Slide 20, we talk about what we are doing. Again, the base of execution are our values, and that has guaranteed our different performance during crises, be it the truck driver strike or the COVID pandemic. Our people are different. I thank you for your passion, for the respect towards our customers and commitment to result capacity of innovation, simply fast. It's not throwing away money, being simple but meeting customer needs. And sustainability, I'll talk a bit about our initiatives. And in addition to signing a global pact, we are going to start with the partnerships and in addition to working with one of our suppliers also to join more sustainable practices, working with KPIs, and that will help us all. Also, we have an education trail on our Movida distance education platform that is even working better than before. It was already online, and again, the relation of diversity, sustainability, all our programs that we have with Movida. Also the -- our fighting greenhouse gases, so now we have external auditors seeing if what we are doing is right, human rights, just to control that all our processes are following the commitments that we took over. All that shows that the combination of governance, execution, values and culture gives us comfort to do better and the confidence that we are going to recover growth with sustainability and profitability. On Slide 21, what is ahead of us. So what is ahead of us? The digital journey, growing levers of growth. So digital will help us. When you reduce attrition in check-in, for example, we are going to have a lot smart people, so more market to grow faster. Delivery in São Paulo, Rio, we deliver the car at people's homes. We pick them up, very cool. Mediation that gives us more capillarity to get to the end consumer. Monthly products, this is going to be the largest market for all rent-a-car businesses. And I believe we are going to have new players, and we can also partner with new players. This is going to be very relevant, is relevant for recovery. New channels channel, again, more and more tailor-made. Tailor-made businesses are getting more important. We changed our marketing initiatives. We basically cut down all institutional marketing, and we are doing much more direct marketing, which is really enable us to invest more online with performance. We are selling and creating a mesh of consumers, which reinforces our trust in the future. Now I would like to thank everyone, our employees, customers, shareholders, creditors and suppliers. We are sure that we have the foundations to grow, and we are really, again, in this culture of using rather than owing cars. So the future is as bright as we saw before. We have plans of profitability with the will to grow. We close 2020. It doesn't matter what it was like. 2021 will be even better than expected before pandemic, and we'll continue to do our best to generate value with simplicity, agility, thinking about our customers and our community and our shareholders. After all, life is to be moved with health and safety for everyone. We are going to now open for your questions. Thank you very much for attending.

[Operator Instructions]

If you are -- could you talk about the fleet management and how do you see it in the future?

Thank you, Victor. First, talking about August. This is similar to what we saw every month. We believe that the levels of occupancy are going to be higher because of the mix. We could do more. Yes, we can. But what is our effort here? We are readjusting monthly contract to be able to grow the company in the future. Although we see the demand, we have to be very careful about what is going to be the macro scenario for the future. I'm very comfortable with the micro scenario. But the macro scenario, we have to know. We are going back to pandemic levels in terms of volume and margins for the business. Seminovos, the same, doing well and with a better price. When we talk about buying cars, we have 2,000 cars. But for the Rent-a-Car business, we are going back to pre-pandemic levels. So we are going to see our RAC fleet going up. For you to have an idea, almost every month, the fleet on the Rent-a-Car is growing. Although we reduced the total fleet, we have increased efficiency. So the operating fleet is going up. There was a change of structure. We have a team that is dedicated to our asset turnover. This is the game for us to bring efficiency. So basically, the company wants to deliver more profitability. Rent-a-Car is going to be normalized from August onwards, and that's what we see.

The next question comes from Mr. Lucas Barbosa from Morgan Stanley.

And congratulations for the quarter. The question in relation to the monthly cash, more specifically for the Rent-a-Car segment. You had an impressive result in the first quarter, and I believe that this is a result of the fact that you reduced the amount of employees. You reduced your expenses with brands. So what level do you foresee for the future? That's my question.

Thank you very much for your question. Well, we don't -- we're not going to -- we cannot give a guidance for the future, but I believe that we can increase our demand progressive. So if we think about what generated the economy, taking into account the reduction in costs and the expenses, we can see a drop. After the expenses, we have a drop in the sale. Nowadays, we had a low demand in tourist agency sales. So we are going to implement the disintermediation and direct sale, being in the middle of the way of the situation we had before the pandemic and right now. And also, it's important to take a look at the whole scenario. We haven't neglected anything, so we kept on with our plan. So the cars that was supposed to be resold, they were resold. So when you take a look at the scenario and the cost per car and the maintenance cost, it all goes down. But the recovery is a soft one because, once again, we kept on with our plans. So we had kept the operational plans. And this is, I think, an important piece of information given that any recovery will have a light impact.

So just to speak in comparison to the second quarter?

Yes, yes. Exactly.

The second question. You mentioned July and the Rent-a-Car average sales ticket, so can you please break down per segment and tell me if you think that the segments are now normalized when it comes to price, and the effect that we can see now is just a mix effect? So can you please give us the Rent-a-Car segment breakdown price?

Yes. I think that it will happen as of August and September. In August, some segments are actually beyond the average. Whereas in July, we had some price impact, especially when it comes to the monthly product that were somehow incurred during the pandemic. And in August, we had a price impact, one monthly product. It started to become more normalized in July, but it was not the high season, so we didn't have the result of a high-season period. But in August, we had better than what we expected which is not average in our segment. But as August, things will become normalized with higher prices as well in comparison to the background.

Next question comes from Mr. [indiscernible] from Crédit Suisse.

Congratulations for the results. I'm sorry if you've mentioned this information before. I wasn't present at the very beginning. But I want to know if you intend to have a debt reparation for the next quarter and for the first quarter of 2021? Or if you feel comfortable with the current situation and you don't think you should go any further.

Thank you very much for the question. So first, yes, we are comfortable with the situation we achieved during the second quarter. Secondly, it's important to say that our Seminovos sale capacity that generates working capital for the company is within a positive cycle, which is a very important thing. And thirdly, our activity comprises assessing the market in a recurring manner. In other words, our operation at the peak of the crisis will translate into a more selective operation. Very likely in the upcoming weeks and months, we're going to approach the market. So you have generalized the flow within the entire scenario.

Next question comes from [ Ricardo Thagos ], webcast.

It was mentioned that the Seminovos result was the result of more sales in the volume channel. And what is this volume channel? Also, you mentioned a change in the car mix. Can you please detail this information?

Thank you, [ Ricardo ], for your questions. So the volume channel is the wholesale channel. What we call wholesale and retail. We had very few sales for large-sized groups. Most of our retail is concentrated in a few cars for smaller-sized customers in the wholesale market, so we have a large network of cars that are also buying through wholesale. So in a way, we have a core mix that allowed us to sell the oldest cars which were replaced. We gave greater discount to these cars, and our strategy was to have [indiscernible] costs running and operating that are, in a way, easier to sell, so we can ensure the replacement of the fleet. So now we have a much better margin perspective from now when compared to what we had in the previous months.

Next question comes from [ Mr. Pedro ] from Bogari Capital.

Edmar, can you please tell us about depreciation level because it had to increase due to the higher volume in the third quarter and favorable perspective in the second quarter of 2020?

Thank you very much for your question. Well, I'll go back to what I said during the depreciation slide. As our fleet will include cars that we sold in 2021, we had no guarantee that the recovery we are foreseeing will be actually kept in the upcoming 2 or 3 quarters. Our strategy is to be conservative for now to consolidate the change in price and margins that are likely to happen. But in order to change our strategy in relation to depreciation, we need more visibility, rate visibility. So right now, we are kind of in a defense mode, waiting to see what's about to happen. And what I'm trying to say is that if the scenario is better than what we are counting on, it will translate in better replacement of Seminovos vehicles. So we've been assessing the scenario permanently, analyzing the price and the depreciation rates. We are doing a weekly assessment of the scenario. Now we decided that we should wait for the consolidation of the positive outlook.

Next question comes from Mrs. Gabriela Carvalho from Trígono Capital.

Congratulations for the results. I have a question in relation to M&A. Do you foresee any consolidation opportunity or in the area of technology, taking into account the company's strategy?

Thank you, Gabriela. Our strategy goes through an organic growth, in addition to the development of our own solutions instead of M&A. As to M&A, of course, that we pay attention to all opportunities because there are lots of opportunities on the table. So we are aware, and we are attentive. But in practice, the basis of our strategy is Movida's organic growth with the development of our own digital solutions or by means of partnerships with technology companies, and that's the basis of our strategy, to be fairly straightforward.

Next question comes from webcast, [ Mr. Pedro ] from Bogari Capital.

Edmar, could you please talk about the sale of Seminovos in 2020 with a higher average sales ticket had a greater gross margin or the cost of the car was also higher in the third quarter of 2020?

Yes, [ Pedro ]. It is an effect. And taking into account that the average price of the car goes up, this dilutes SG&A. So when you look at 2021 and you take into account the fleets that we had and the higher average sales ticket, the cost will be higher in the future. And as Renato said, it puts us in high competitiveness in relation to our competitors.

Next question comes from Mr. Fernando, JPMorgan.

Renato and Ed, you mentioned volumes. I believe that the volume recovery we've seen in the Rent-a-Car segment is surprising everybody. We are almost back to the precrisis level, so this is very challenging. You've talked about it, but I wanted to understand a bit better. When we analyze the corporate, what is the surprise? We have different segments. You mentioned leisure, which is relatively slow. As for replacement, please correct me if I'm wrong, I don't see it very strongly due to the lower circulation and lower number of [indiscernible]. When it comes to corporate, the figures are relatively under the historical standards. Renato mentioned about the individuals, the increase for individuals, so this should be a robust product. But can you please tell us a little bit of who are renting cars? So where is the demand coming from? A demand which is [ relatively low ] taking into account the challenging scenario.

Thank you for your question, so we will explain that. Airports, the movement is lower, but you have people who are taking planes. Now you would say, 30%, 40% of the pre-pandemic volume, depending on the company, we are at about 40% when it comes to tourism, people who come to a city and rent a car. We have more weekend trips at a higher level, if compared to before the pandemic. We have a lot of new clients. So if you take our stores, such as the one at the Congonhas Airport, we have much more clients than we had before. And the thing is you don't have more people traveling now, but you have people who didn't use the service before and now are getting used to it. So we have the possibility of attracting these new customers. As to monthly individual clients, it's growing as well. And the positive surprise is the corporate segment. When it comes to large-sized companies, it is 13% below pre-pandemic level. So these do not consist of people who take the plane and get to a network. It's people who are traveling by car. So we have a very intense recovery in São Paulo, in Rio Janeiro, mainly in São Paulo, São Paulo, Minas Gerais as well. But you also have lots of car trips in the northeastern area, and this is increasing the activity in the high corporate level. As to the small-sized corporate, it's already at the levels before the pandemic, and I think it will exceed pre-pandemic levels next years. We are having new corporate clients at the Rent-a-Car segment, and we have more individuals renting than before. So we are also investing in our app, and it allows us to have an idea and to better control. We -- after we implemented [indiscernible], we have a more controlled flow and with prices that are much more interesting than the pre-pandemic level. So we have some room to correct these -- the rates that became dysfunctional due to the pandemics. So this will allow us to have more profitability via the app. I hope you could better understand.

Next question comes from webcast, Mr. Marcos Rodrigo, CL4 Capital.

Congratulations for your results. Can you comment on the new car level price and the competitive level in Seminovos segment?

Marcos, thank you for your question, which is a very important one. We have partnerships and alliances, and our position has always been in the long term. So we bought new cars in the third quarter, which gave us the maintenance of commercial relationships, the same way we had before the pandemics. We had the increase in the public price, whereas the inflation is a little bit above what we had before, but it's not extraordinary as well. You have some products with greater inflation. So we are keeping the contracts the way we can, keeping the agreements the way you can. The areas that are subject to more loading are not the areas where we operate more strongly, which is very beneficial to us. So thank you for your questions, but it's all within the control, long-term contracts, volume. We have a challenge ahead, of course, but I believe it's all under control. In relation to competitiveness, it's very rational. Everybody with high demand, everybody fighting to grow end up -- when we increase our prices, others also increase their prices. So we've been able to adjust agreements in accordance with the current reality, so we can recover our profitability. So I can say that after the situation we've made through in April and May, we are coming back to a normal situation with a regular competition when we are able to operate and to recover in the short term. That's how we see the future. Thank you.

[Operator Instructions] Next question comes from webcast, [ Mr. Josette Elias ] from [indiscernible].

And congratulations for the results. What about the Supreme Court's decision on the VAT levy on prices impacted your operation?

[ Josette ], thank you for your question. This is Edmar. So the Supreme Court's decision did not change our operations because, actually, it somehow reaffirmed the idea that we had through which if the car is sold within 12 months, you have to collect VAT. Taking into account our cars are sold after 1 year of use, we do not have to pay the VAT tax. So everything remains as normal to us.

Next question is from [ Mr. Lucas Acajias ].

Congratulations for your results. I would like to know to have new plans for the company's ESG, in addition to what has been already commented on?

Thank you for your question. We have a lot to do. Our journey will go through a lot of learning, and we've been learning every day. We've been undertaking mid-, long- and short-term commitments, and we are always setting new challenges and commitments. So we have a lot of plan to improve our environmental area. Environmental trade is growing even during the pandemic, so you have more and more people who value the carbon-free segment. We are investing in clean energy and toward certification in our stores. So we are in a process through which everything we do becomes progressively sustainable. In addition, the collection of garbage, consumption of water, consumption of energy is reduced. Consumption of paper has been reduced. The use of water has been rethought as well. So we had over 15 projects. We have 15 working groups with specific projects having very precise targets and goals, so we are constantly evolving and learning and integrating new challenges in our agenda. So if we think about the Rent-a-Car stores, you also have very few stores with level 3 certification for greenhouse gases emissions. So we are all working on it because, currently, you have no electric vehicles in scale. But we are, in a way, triggering the suppliers and the chain, so we can start implementing in this product, too. Let's say, we could spend an entire day talking about this agenda environmental issues. Thank you.

If there are no further questions, I'd like to give the floor to the company, so you can make your final considerations. You can please go forward.

Once again, I would like to thank you all for attending the conference for the company's report. It is in difficult times and challenging times that we acknowledge the work of each team, of each person, each stakeholder. So we end the quarter with a lot of enthusiasm and with confidence in relation to the future. So I'd like to reinforce the vision that we have in relation to our market, the positive outlook and outlook of growth and with a share gain, taking into account Movida has a very good positioning in relation to individuals, in relation to the digital segment, so very much aligned with the midterm trends. So once again, thank you very much for your support. Do count on us. We remain at your disposal, Camila as well, the Investor Relations segment as well. We are always at your disposal. We can ensure transparency. Thank you very much again. Have a great day, and remember to rent a car at our services, so we have to be pro-life and pro-health. Thank you. Bye-bye.

Movida's teleconference is ended. Thank you very much for your attendance, and have a lovely day. Bye. [Statements in English on this transcript were spoken by an interpreter present on the live call.]