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 first quarter '21. Today, with us, we have Renato Franklin, CEO; and Edmar Neto, CFO and IR Officer. [Operator Instructions] Before moving on, we would like to mention that any statements made during the conference call relative to Movida's business outlooks, projections, operating and financial goals are based on the beliefs and assumptions of Movida 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 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 may affect the future results of Movida and lead to results that will materially differ from those in such forward-looking statements. Now we'll turn the call to Mr. Renato Franklin. Please, Mr. Franklin, you may go on.

Thank you. Good morning, everyone. Most welcome to our conference call to talk about the first quarter of the year '21. We are going to start the quarter by highlighting the consolidation of a new level of results on Slide 3. What's the main message before talking about numbers per se is really to confirm and see the evolution the company has been showing in all business lines: evolution of margins, growth, more operational efficiency and more value to all our stakeholders. So you see that we have been on this journey for some quarters now. We had the second quarter for some impact in the pandemic, but the lessons learned in the company made us have even higher evolution. We are at a completely different level. So let's talk about our numbers. First, about fleet. You are following the news. The automotive industry is so complex in Brazil and in the world to resume production. Still, we are showing growth quarter-on-quarter. And the growth we show here with 124,000 cars, 5,300 plus the previous quarter, and if we take a look at July with the lowest fleet, we have 22,000 cars more. I'd like to reinforce our strategy in the past. We have agility to sell cars. We had sales record in the second quarter using our digital channel without we went shopping faster, and we should meet our business plan for 2020 and start '21 in line with our business plan again with positive increases to our sector, market and for Movida that is much more prepared than it was in the past. Revenues. We grew a fleet, but also revenues, and we grew net revenue in rental car by 17%, BRL 530 million. And this is the company decided that we know that cars -- rental is our revenues. Cars, we can sell now or after. Movida is a service company, a rental car company, and we sell cars when it's necessary. We did BRL 530 million, 17% plus last year. So even in an economic crisis, everything going on in Brazil, we grew 17%. That's why I reinforced the positive foundations of the market, high demand and future growth for the market in the short and midterm, almost assured. We are very confident of the growth of demand and the market that brings aggressive of competition in the market. We're improving margins, better prices and better indicators. And to evidence the gain of margin, we talk about our EBITDA, BRL 305 million, 35% growth over the first quarter '20. So revenues growing by 17% and EBITDA by 35%. We grew more revenues than fleet and more EBITDA than revenues, an expressive increase of profitability and margin, that is operational execution, cost discipline and really accurate management, especially after the pandemic, more granularity, discipline, really preparing the company for this new cycle of growth. And then we go to the main highlight in the quarter with net income of BRL 110 million. It is double the net income of the first quarter '20. Just for some food for thought, why I'm saying we are at a different level now. If you look at net income in the last 3 months, accounting profit, it's about BRL 290 million, BRL 300 million. You get to the fourth quarter and the first quarter 2021. If you take all the recurring -- nonrecurrent -- because of the issuance of bonds in the fourth quarter, we had a positive year. You are talking about BRL 250 million, BRL 260 million. It's more of the whole 2019. We are at a different level. So the Seminovos is helping? Yes, with better prices. But we are not in a rush to sell our cars. The most depreciated car has a market level that is lower, but we have results for the future, and they will continue to come. And that's why I'm saying we are at a different level. And the final highlight is important for us to look into the future of the company. We had the issuance of the bond, very successful, quality investors for Movida, BRL 500 million, almost BRL 3 billion with a period of 10 years. Our liquidity, completely different, BRL 2.9 billion in cash. We have money to pay for our debts until the end of next year. We are allocating our debt and preparing the company to follow our business plan with comfort and confidence that is selective growth, committed to profitability and generation of value. And the highlight is the acquisition of Vox Frotas. The number is not that material for 1,800 cars. Revenue, EBITDA, net income are not included in the number of the first quarter because the acquisition was in the end of March. So we'll see the numbers of Vox as of the second quarter, adding revenues, EBITDA, income and strengthens us in a niche of premium cars with services and potential of growth that is very important. A commercial strength that is important for us to show in the future. And these are the highlights of Movida, and that's why we are very confident. And now going to Slide #4, to talk more about fleet. Again, we had our IPO in the third quarter '16, 55,000 cars. We doubled the company by 2019, and we continue to grow. We have 15,000 cars plus in the end of '19, even with the pandemic, with our agility to be able to adapt, to depend. And that's it. Fleet is discretionary. We can choose to sell more cars if we need liquidity and less cars if we need less. I sold 5,000 cars in the third quarter, I can sell more later on. This is a decision of the company. If prices are not right, I wait and sell with better margin. Now Page 5. Let's talk about the Rent-a-Car business. Well, the Rent-a-Car business continues with very strong foundations. Here, we have a demand. Remember, the airport trips have not come back yet. But what's the positive? Without the airport, we have more demand than before, and we are even increasing the company. Let alone when the airports come back with the price of Rent-a-Car because there is no supply for everyone, we'll be able to increase prices. We grew by 12% even with the pandemic, BRL 365 million record revenues. And if you take up the daily occupation rate -- and this is very interesting, people were talking about the second wave. Look at what happened in March. After New Year's eve, it was -- we were even more careful about the drop of demand. So we are increasing occupancy rates and revenue by car--it is record. Again, the cost structure of the monthly rate is lower than the daily rate. That's why we are hitting records in margins. It's strengthening the Rent-a-Car business and protecting us with an eventual lockdown that did happen in the second half of March. We almost had no impact in company results without having to explain everything, delivering very good results. So operation-wise, I have to congratulate our team that is working hard and improving day-by-day. What is more important? We do better than we did yesterday, creating new sales and better. And again, BRL 5 million in daily rates, new clients increasing our customer base, focused on individuals. Corporate segment is also going up. We are gaining share in the corporate segment. If you compare year-on-year. We gained market share in the corporate segment and continuing our positioning. Services, premium, we do not have the best price. We have a fair price for what we deliver and the lowest cost in the market, and this is our positioning. You see we want to be simple with agility and opportunities. So we are delivering more, BRL 502 in this quarter, BRL 491 cost by car, being very competitive to continue growing in the rental car business. Now going to GTF, including the brand new cars in Movida. I really take -- invite you to take a look at our platform to see how good it is, but the business is growing a lot. Remember that last year, company postponed the renewal of fleet because of pandemic. But now if you have 10 cars to renew, you have BRL 600,000. For a small company, this is a lot. So when they do the math, renting a car makes it better for them in terms of cash and P&L, even 15% reduction. So our digital platform is working very well, and the numbers are here, 30% growth in net revenues. We are getting the average monthly net revenue per car about BRL 1,200. We still have discounts for the first 3 months. But as the business grows, the new cars have less weight, and this is improving. And we see the number of daily rentals with a hard -- a large increase and because we are building a new Movida. When we start to show the numbers in the future, you're going to see how relevant it is for the rental car market. So we are putting together the structure. Little by little, things are going to be diluted and fleet management and outsourcing margins will go back to normal with very good margins, low cost per car. So we are going to grow in fleet management, and the idea is even get better compared to the Rent-a-Car to be even more resilient with very strong EBITDA. It will help us to grow faster. The EBITDA generated comes faster, and we are going to be able to grow faster and continue our cycle with profitability and align to our business plans. All that said, I invite you to go to Slide #6 to talk about Used Car Sales. Again, we decide how many cars we want to sell. There is always a market. But if you take a look at the third quarter 2020, we decide what to sell. In the first quarter, we decided not to sell too many cars to provide service to our clients and to provide good services better than the competition, so that we have BRL 275 million. With gross margin, that is a record. We are focused on retail, and online sales growing a lot as well. So this is a business that is here to stay. I have been saying that since the third quarter last year, they are positive sales that are really surprising us, big physical stores open or not. Of course, it's best to have our stores -- physical stores open. But the digital transformation of our business in the Used Car Sales enables us to grow regardless of the physical stores. So we are now selling a bit more on the second quarter than in the first quarter, and the company growth is going to demand less structure, making our business even with better margins in the future. So we basically have the capacity to sell in the retail better than anyone in the market, as Edmar is going to talk now. Edmar, you have the floor.

Hello. Renato, thank you. Good morning, everyone. I'm going to start with Page 8, where we bring a slide about all our past releases showing depreciation in the last 12 months and also on an annual base. In the Rent-a-Car, the depreciation in 12 months BRL 2,700 in the first quarter last year, the number was close to BRL 3,000. And now we have a strong reduction, close to BRL 800 when you talk -- take a look at annualized numbers because of what Renato mentioned, the price demand in Used Car Sales enables the company to have a reduction of more than 70% in depreciation. In fleet management, the same direction and the same volume. So we are talking about 63% reduction and the value annualized number is about BRL 1,600, substantially lower than the BRL 4,000-something that we had last year in a scenario of uncertainty. I'd like to highlight the accumulated depreciation balance. If you take a look, we are on average above 5% in the last 12 months, which gives us the comfort, with regard that what is to come in the Used Car Sales market and the margins that we are about to show you. Now I'm going to Slide #9 to talk about EBITDA and EBIT results by business line. In the Rent-a-Car business, a record of 46% margin, BRL 169 million, evolution of BRL 34 million, almost 5 percentage points compared to the same period last year. EBIT, also in advance of 15 percentage points compared to last year. Fleet management, a nominal record, almost BRL 100 million EBITDA, a really changing levels. The brand-new cars really contributing to those results, adding EBIT 11.5% higher, 48.2%. Again, a record you're talking about BRL 79 million. Used Car Sales, the highlight recently, a result of all the work led by Renato for the transformation of our brand and with the market helping us with EBITDA margins of 13.2%, which is a record, BRL 30 million plus year-on-year. And in EBIT, for the first time, we reached a 2-digit number in used cars, almost BRL 30 million, completely different level. In consolidated results, BRL 305 million altogether, consolidated EBITDA, an increase of BRL 80 million. And here it's important to highlight something that Renato mentioned, the BRL 80 million plus, BRL 50 million comes from the Rent-a-Car business. So we are changing the profitability of the Rent-a-Car consolidated numbers to a new level. BRL 30 million from Used Car Sales that help us a lot. We know that we're still going to have a positive EBITDA for some time, but we don't know what the behavior is going to be in the long term. So what is positive is a record EBITDA of BRL 240 million with a margin of 46%. On Page 10, it's a bit of everything I said so far. So again, consolidated results revenue. We decided to sell less, but Rent-a-Car record revenues, BRL 530 million, almost BRL 1 billion in EBITDA. EBITDA changing levels, the second quarter in a whole above BRL 300 million. EBIT BRL 242 million, really breaking the barrier that we had in recent months. And net income, a margin of 21% in the rental car business, also very important number with double of what we showed last year. On Slide 11, we bring to you our cash position. And here, I would like to highlight something that is very important, which is the following. We are still in the process of changing our profile. As Renato mentioned in our release, we have a negative carryover and that is going to reduce a long time. But the most important today is that we have an average term of 6 years, and we have cash resources to pay all debts for the next 4, 5 -- almost 5 years. So we indeed are changing the company's capital structure. On Page 12, on the slide, we have the bond issuance and we have the recomposition of our leverage. Here, EBITDA and covenants, you see BRL 1.051 billion. In the last 12 months, we had BRL 17 million (sic) [ 17% ] in terms of consolidated EBITDA margin. And on the top, I bring again what is to happen in the future. Last quarter, we talked about annualization of our EBITDA in the first quarter, showing BRL 1.2 billion compared to our annualized EBITDA. Again, we have a new level of results. And right now, we are very confident that we are going to get to these numbers. Leverage, as Renato mentioned, temporarily because we decided for that above 3%. But as we increase to sell cars in the second quarter, it is coming back to close to 3. On Page 13, I bring cash generation, what the cash flow behavior was like, starting with EBITDA, an important advance, BRL 148 million in the last 12 months compared to the same period last year. When we see cash flow from operations, you're talking about an increase of 50%, BRL 1.3 billion compared to BRL 900 million. And again, cash flow before expansion more than doubled, as Renato mentioned. We are really advancing in company profitability, giving support to the whole of the company, and therefore, cash generation going up to BRL 566 million more, getting to BRL 647 million. With that, I'm going to turn back to Renato to talk about our ESG actions.

Thanks, Edmar. On Slide 14, we talk about our positioning in ESG. This is a summary of our institutional position. Movida has been recognized from several agencies in ESG and that just increases our responsibility. We are very much aware that we still have a lot more to do. But just to remind you, the first rental car company, as a company be, the second public company in Brazil versus Natura, the 12th public company in the world, that shows our commitment. The first rental car company that is part of the ISE B3, which is the Corporate Sustainability Index. We're also in the ICO2, which is the efficient carbon index, thinking of green gas effects. And also, we have the gold GHG Protocol seal that shows the transparency that we are working with the subject following the best international practices. And also the CDP product, Carbon Disclosure project, the first year with management levels with the whole supply chain to good sustainability practices. This is still little compared to what we want to you, but it shows that we are really leading the ESG agenda in several segments. On Page 15, we have some highlights. I would like to invite you to see our integrated reports available on our IR website to know what we have been doing in terms of ESG indicators and how we are managing our projects fronts and commitments. So focus on short-term commitments, although we have the ambition of being carbon free 2030, including Scope 3, which is different from several companies, I think 2030 is too far. So I'd like to see what we are doing now in terms of decrease of emissions and et cetera. So you have basically everything that we are committed with. We have the action back in 2030 -- 2020, We have value creation disclosure with the service-like cycle. We have an independent external auditor, and we have the connection of 5 different frameworks. We have GRI, CDP, we have all the recommendations of the CDP that is available in our integrated report and also value creation of all our agenda in the 5 capitals. With that, I'm going to Slide #16. On this slide, I show our strategy. So what is our strategy? Just as a reminder, first, the OEMs, to grow in line with our strategy, we have to negotiate with OEMs. Remember that up to November 2020, we had almost signed all the agreements, and the schedules have been met. Sometimes, some deliver a bit more, a bit less, but we are sticking to plan. The second quarter, we are going to have more costs than the first quarter. The second wave can impact a little, but we are going to see that we are as planned, and in the third quarter, we have a huge volume. And we are going to sell more -- renew our fleet. We still have the lowest fleet age in the market, so we will continue to generate value. We are getting better month by month, which helps us to sell cars with a better margin. The second pillar is cost management. You know that we create intelligence to improve our cost, and we have to be very strict in management to have better margins and better returns. And then the avenues of growth and there are many avenues of growth, each with their unique positioning. In the Rent-a-Car, the focus is individuals that value services, the digital services focusing on customer experience and corporate. The asset corporate wants to pay better. To have better services, we are also interested, and we believe there is a value to bring to this segment. With that, we had growth of 13% with an EBITDA margin that is very good, 46%, in the Rent-a-Car business, which is important to continue to grow. Second avenue of growth that stems of several avenues. In fleet management, you have several segments, you have telecommunications, you have agriculture. But we have the focus on Movida brand new cars for individuals with contracts of 30 months, now 36 months. Even increasing people are getting to know this possibility with better experience and lower costs. And for us, it's a very good tier in terms of value generation and low cost. So the brand new car is growing, platform is 100% digital and ready to deliver. Movida is the only company that has the car to deliver in a few days. So this is an important avenue of growth. And corporate, are we going to take part in bids? Yes, we will. But our focus is B2B, small and mid companies with a better margin, and we see we are getting better in terms of generation of value with lower competition. And to ensure the profitability of our business and assets, we are working with a completely different level with gross margin of 22%, a growth of 13 percentage points year-on-year. Part of it because of the market and part of it because of our execution. Today, we are at a new level of operations. And in Used Car Sales, more and more on the digital platforms increasing our fleet renewal so that we can keep our fleet always new with value for the company and the confidence for us to have apex and invest in the Rent-a-Car business in the fleet management and to grow with profitability. So all segments are important. They bring stability, they bring scale and enables us to negotiate in a different way with the whole stakeholders and bring the best experience to our clients. All that said, I reinforce our confidence in market foundations, a rational competition and the pandemic only accelerated things for us, anticipating a demand that was to come in coming years. So it was a bit faster than before in a way offsetting the drop in tourism and airport movement. But with the vaccination, this will come back as soon as possible, especially international trips. I would use the moment to thank our teams, employees sticking to all protocols of safety, security and for working very hard to deliver more and build a 2021 even better than expected and preparing the company for a new cycle of '22, even be better than '21. We thank our clients, suppliers, investors and creditors because they are all paramount for us to execute our business plan. Certainly, we all together have a pathway of growth with profitability, generation of values, and we are sure that the best results are yet to come. Now we are going to open for your questions. Thank you very much for attending our call.

[Operator Instructions] Our first question comes from Pedro Bruno from XP Investments.

I'd like to talk about the average price of sold cars. Just to have a bit more color, you had an increase 29% year-on-year, but we think there are 3 effects here. The price itself goes up of the model and the sales channel that Renato talked about that has been your focus, and it makes sense as you see that you sold half of what you had in the previous quarter. I suppose the focus was retail and that happens, but the gross margin was also high in the first quarter. It went from 19% to 22%. So it was already high in the previous quarter. So just to understand more, I think the main effect is the price, but could you comment on these impacts as a whole? And finally, if you think sales speeds will pick up in the second quarter or if your strategy of holding up sales discretionarily remains in the second quarter. I suppose it has to do with the speed of purchases as well and the movements of the industry. So could you please give us some color on that?

Certainly, Pedro. Thanks for your questions. It is what you said. It is 3 effects. First, the wholesale effect. When you say wholesale, the market is very strong. So the difference between retail and wholesale is lower than in the past. But a better retail also gives you a difference So there is a part that is because we are selling more in the retail, and therefore, we can negotiate better than wholesale. All that said, what I believe? I don't think we are going to sell 90% in retail. It's going to be 55% retail -- 57% retail in the future. For the second quarter, I don't know. But further on, yes. And that is going to bring us if wholesale is 6% lower, it is going to give us a margin of 3% lower because it's 50% in wholesale. So that's basically what we are thinking in terms of composition. And in terms of sales volume, we are going to sell more cars in the second quarter because we sold very little in the first quarter. In terms of, again, closer to retail, but still not normalized numbers because costs are not coming in, in the same speed, and we have to continue to provide services to our clients. And especially in fleet management, we have lots of cars to deliver in the next 6 months. We have agreed with clients that we can take a bit more. We can hold it a little, but we have to deliver. And that reduces my capacity to generate assets that I have to keep the cars a bit more, just to sell those that really need the turnover. So the growth is important for us to continue to move on. But I think the best point, again, is that it is a discretionary action. We decide when to sell, and for that, we can have better margins with our used cars. Then the market is helping with better prices. I think that, that's what we are going to see. Average prices slightly higher in '21 and still strong margins in the beginning of '22. And we are looking at the future every day to know what's going to happen because the Brazilian market is very unstable. We're always monitoring what's going on. And that's why because we are monitoring everything, we are seeing what the depreciation margins are like. Sometimes, they are a bit higher than expected. But in the end of the day, we want to have positive EBITDA margins in '21 and '22.

Our next question comes from Rogério Araújo from UBS BB.

Edmar, Renato, congratulations on your results. I have 2 questions on my side. The first, could you talk about the effects of the second wave of COVID on the Rent-a-Car business first? What was it like in January, February and March. March, probably you had a higher impact in terms of utilization and rates, perhaps even the mix and retail and also in the receiving cars? If I'm not mistaken, you were expecting going back to normal in the second quarter, and I would like to know how the second wave affected you. And even if you can break down what is second wave and what is normal difficulty of OEMs receiving parts? So what the Rent-a-Car business and the receiving of cars had in terms of being affected by COVID? That's the first question. I'll ask the second one later on.

Thanks for your question. We have also a question on webcast from Rodrigo in SulAmérica that is very similar, and we are going to answer them both. Well, COVID impact -- it did have an impact, not as much as last year. It was not as striking as last year. Last year, we didn't know what to do. Now we are adapted. People are on home office. They rent cars to travel on weekends. So things were a bit more normal than last year. Of course, there is a break for the Rent-a-Car business. Occupancy went down. We should have delivered in the quarter more than 81% if it weren't for the COVID with better profitability, better revenues. So when occupancy goes down, you reduce price to gain share and minimize impact, but not as much as before. And what is the advantage? It is that resumption is better. The first 15 days, not as good, but the second 15 days almost back to normal. So today, I see a very strong June. When I look forward to thinking of the curve of occupancy. Remember that we don't have much advance. So if you look at July, the confidence is not very high today, but we see very high for what we have in July, very similar to what we had in December. In terms of the cars from the automotive, I think that it solved together. The second wave had a slowdown of the OEMs, but not only during pandemic because they are lacking in parts, they are lacking chips, and this is not something in Brazil but worldwide. Some OEMs are being a bit more, others a bit less affected. And does it impact us in terms of the delivery of cars? Oh, yes, it does. I cannot lie to you. But is it highly material impact? No, it's not. Again, if I get a bit less cars, I sell a bit less cars and I move on, but there is an impact. If you go and see our normalized numbers, you have differences from quarter-on-quarter This is what I have to say.

Yes, it makes sense.

Sorry, Rogério.

No, I was saying, that's okay. And I would like to talk a bit about the growth of your daily rates and average fleet. It seems to me that utilization dropped by about 6% basically in fleet rental. Is it because, again, you are taking a bit longer to receive the cars and provide services to your clients? Or am I interpreting numbers wrong?

Yes, the brand new car, as you mentioned, I buy the car, I wait for it to arrive. It's already counted as the whole fleet. And as soon as I get it, it goes to the operational fleet. If it's not in the store and are not delivering to the client. This is something that is not considered because it is considered as the whole of the fleet. So after the car gets to the store, we still have 1, 2 days to get to the client, to schedule the delivery, to know if the client is ready to take it. So on average, I would say, 5 to 8 days after the car gets to the store, which means that we only bill the car for 25, 23 days, and that is what causes the difference. With some cars, with some models, we know that they take a bit longer, and they are considered in the operational fleet, but that should be normalized along time. I don't think the monthly sales are going to increase, but they are going to be normalized. The growth of brand-new cars is higher if you consider the fleet of brand-new cars, and therefore, you have this difference. But you do have the demand.

Okay. But do you think this is going to continue with time showing that the brand new car is the main driver of growth for you?

I think that you can say that. It is an important driver. You also have growth in the fleet, but it's certainly very important to us.

Our next question comes from [indiscernible] from XP Investments.

Renato, Edmar, I'd like to understand, again, opportunities in fleet management, increasing margins. I would like to know the levels that you have now. Are they more normalized levels, reflecting perhaps more maintenance expenses that you're having? Just to understand the dynamics in fleet management as a whole. And the second point is about your brand-new cars. If you can give a bit more color of what you mentioned for a drop of margin and also in the development of new products. So I would like to know you have such a good structure today. Are you thinking of breaking down the structure to address the different areas in fleet management? Or are you thinking of doing everything in-house?

Thanks for your question. Well, We have synergies. We have been sharing lots of things, and we are separating things more and more. As we gain scale, it makes sense to separate things by area because of the size that we are reaching. So when I say we are going to build a new Movida in terms of size, it's true. Back in the past, if you compare when we started and today, it's incredible. The potential market, you're talking about 500,000 cars a year. I'm sure that Movida is not going to get it all, but Movida is going to get a relevant share of that. Now what else do we have in terms of cost impact? When we have renewals, for instance, I have to change tires. There are things that I have to do. And then the cost of maintenance goes up. I have a huge pipeline of renewal and when we are to buy, we are going to do that. And when I focus on retail, I sell everything on retail. In the past, I had cars that I said, "It's best to selling in wholesale because it's faster." Now when I'm selling in retail, I have to prepare this car a bit better. So you have a bit of here, a bit of there, to consider for the whole sales mix. So these are things that, in a way, are offset by scale and the fleet renewal offsets the cost that we pay for maintenance. In the end of the day, we -- what we want is to have a more normalized EBITDA margin for the business and to have better share. And removing this more nonrecurrent movements that are happening because we changed the sales mix, we are going to go back to normal margins. And used cars can even deliver better margins for the future.

Our next question comes from Victor Mizusaki from Bradesco BBI.

Congratulations on your results. I have 2 questions. The first is about your hedge policy for fleet management and others. So if you could talk a bit about your hedging? And the second question is about your cash position of BRL 2.9 billion. I saw in the release that you had a negative carryover. And I would like you to talk about the utilization of cash. Renato did talk a bit about the orders from OEMs, and is it what explains this increase in cash? Are you thinking of other movements and also the CapEx in terms of purchase of cars? Could you talk about the negotiation of discounts with OEMs?

Victor, this is Edmar speaking. There are several questions. I'm going to use the opportunity to put together some questions that we had from the webcast. Cash position of almost BRL 3 billion. It is temporarily, and it is part of our strategy. The idea is to substantially enhance our capital structure, changing our amortization profile. With that, for the year of '21, we are still thinking of some prepayment of debt. We already did BRL 1.2 billion. And with that, we are going to be able to have a capital structure that is going to give us comfort to execute our strategy without having to go to market in electoral times. This is first. Second, there is no forecast for strategic movements. The money is going to be used in our operations. There was a question here on the webcast about net, talking about the transaction when it happens according to the minority shareholders. This is going to be 100% equity. So we are not going to be using cash other than in our operations, just to show you what is behind our strategy. As for hedging, we have a movement to make with regard to interest. We were very cautious in the past, and now we have to revisit our positioning. The market has been very volatile for interest. We prefer to be a bit more conservative and waiting for the volatility to pass. However, for our debt in dollars, we are already executed and we're already penalizing. We already had a hedge of BRL 425 million. This is -- we are at 150% of the CDI, and this is posted in our financial statements in our risk exposure contract by contract. So we are able to bring the money at a very interesting point looking into the alternatives that we had back then. So it is a bullet debt 10 years. And today, we are at 150% of the CDI, which is very, very competitive compared to what we see in the local market. So our position, again, is temporary. The money is going to be put to work in the business. There are some movements to be made, but nothing that is strategic whatsoever, other than buying cars and expanding our operations. So I think, with that, I was able to answer some questions from the webcast as well.

Okay. Just one point, Edmar, that you mentioned, that investing in the operation -- what is the conversation with OEMs. Renato did talk a bit about that. But commercially speaking with OEMs, what is the conversation like now?

Thanks, Victor. We don't have a structural change in the discount policy. We continue with good agreements. Sometimes one car make or another for the OEMs. It does not make sense. So they either reduce the discount and we change models. And generally, we change the makes, and we are there to what happens. Because for some makes and models, it makes no sense for them, even in the retail. So this is going to happen more and more. If you get the prices of cars -- sometimes, even SUV, they are with similar prices than regular cars. And this is something that has also helped the market to transform the fleet, especially because SUVs are being more efficient in terms of consumption. Because sometimes people are afraid of renting those cars, not because of the price of rent but because of the price of fuel. So this is going also to transform the industry. But we are discussing with some OEMs, the volumes for '22, one already with the agreement closed, but I think that things continue quite positive. And for the economic scenario that people project to the future, it is very challenging. It's good for the Rent-a-Car business, but not in the macro scenario. And so there is even a possibility that, that would make it easier for us to have even further discounts in the future.

Our next question comes from Regis Cardoso from Crédit Suisse.

I have some points to ask. One is that you want to sell more cars, but you have already a high utilization rate on the Rent-a-Car business and you have a limitation of buying cars. Can you continue to grow in the Rent-a-Car business even increasing the sales of cars? This is my first question. And second, if you could give us some color about penetration of the brand-new car today? And if this has helped you with the average rates for the fleet management business? And the final question, if you allow me, could you talk a bit about the dynamics of depreciation? I understand that a more valued car contributes to a better depreciation, but I would like to understand timing for that.

Well, thanks for your questions, Regis. I'm going to start with the Rent-a-Car business. Yes, we are thinking of a growth in operational fleet in the second quarter, a bit more challenging. But we think that, on average, we are going to grow a bit, but probably it's going to be a bit further, especially June to prepare for July that is going to be a stronger month. But in the year, with growth of our operational fleet in the Rent-a-Car. And that's why we are balancing the idea of the turnover, again, considering the cost that come from the OEM. In your question about the brand-new cars, we don't disclose number. We think it is a strategic business, but we keep our penetration informations still in-house. But in the medium term, it does help us with the average ticket and hedges. Let me talk about depreciation and timing. Well, the comment I have about this quarter and this was a reference in this call, we have an expectation of the company to regularize the delivery of cars in the second quarter, and in the third quarter, everything would be back to normal. And therefore, we could expect a bit more in terms of depreciation. What happens is that we are seeing that OEMs are having difficulties to stick to times in the second quarter, which has a reflect on prices. You see the used car margin continues to grow. Even if we discount the idea of retail price-on-price, they were higher. So we have the comfort of decreasing depreciation, especially those costs that are going to be sold in '21, as I had mentioned in the previous call. So we still have a bit of caution with regard to sales as of the half second year -- half next year that are the cars that are coming into our fleet now. And hedges, remember, I always say the difference in the price of cars, if you compare '22 to '20, you are comparing 60,000-plus to 40,000 less. So the price of cars went up. And with that, the dilution is going to be more effective. So the need for depreciation with price if we keep the commercial terms also reduces depreciation. And I don't think people are doing the math. Here, we should have already some additional points in depreciation. And another point that Renato always talks about and that we see in the frontline is the reduction of sales costs on digital platforms. We perhaps not need the amount of stores that we thought we needed in the past. This is a change of habits and re-forces again the idea for depreciation not going to previous levels. Just for you to understand, timing has to do with what the company sees in the market today.

But again -- this is Renato. We continue to be conservative. We see the scenario in a conservative manner, and we project our depreciation always with cushion, to avoid any noises in the future and operate in a comfortable manner, delivering positive results in used cars as well.

Our next question will come in English from [indiscernible] from Santander.

My questions have already been answered.

Our next question comes from Fernanda Recchia from BTG Pactual.

Renato, Edmar, congratulations on results. I would just like to explore the second wave that you mentioned. You said the second half of April already starts to show growth and signs of recovery. I would like to understand in the Rent-a-Car, where does growth come from? Is it monthly rentals? Is it the daily rental? So if you could give us more color on the Rent-a-Car business I would thank you?

Well, thanks for the question. Well, there are some segments Again, the pandemic brought some habits that we did not expect. Just to give you an example, in corporate, the rental of 2, 3, 4 days for short-term trips started last year and continues to grow every day. It is an important business, a change of habits. It's funny. You talk to clients, and they say it's even better than expected. They travel to the São Paulo inland. They go to one city, they drop by another. Some clients are going to the midwest up to Goiania by car. So people are moving more around, and that contributes to our numbers and helps us in the business to make it more profitable and to create a new demand. Some people are saying that even when the pandemic ends, they are going to use more cars for the short-term trips. This is getting more and more normal. So being a nationwide player and giving clients the possibility of renting in one store and delivering in the other is very important. App drivers, more or less is stable. Delivery cars are also growing. I think this has continued to grow, and this is a new business that also started last year. It did not exist, and it is as big as Uber. So I think that there is time for it to evolve, but it is services to us. It is what I always say, large avenues of growth, each company focusing on what it does best, but with that the whole of the market growing more. So giving you a bit more color, and we see that it's really growing. And the rental car business as of April are growing more and more. The idea is focused on gaining market share and using more cars to increase our occupancy rate. But if I rented, I don't know, to increase 20,000 cars for the Rent-a-Car business, I would have the demand. So the problem is not the demand, it is a balance between demand and price. Today, we have to focus on that to prioritize our profitability, thinking of the return of each segment. And just in terms of amounts, last year, we lost 20, 25 percentage points in occupancy in the beginning of the pandemic, and it was hard to recover. Today, with the whole strategy that Renato put together with the Rent-a-Car business, we lost 4% occupancy, and we are already seeing a positive sign for the future. So again, the lessons learned last year helped us to go through tougher times. And now that things are opening up, we'll certainly deliver better results for the future.

Ladies and gentlemen, since there are no further questions, we are going to turn the call to the company management for the final considerations.

Well, once again, thank you very much for attending. I'd like to reinforce how the company evolved, how much we are in a completely different level. Please take a look at all the information we make available, financial statements, our IR team are always available for you to answer your questions; our integrated report and the evolution of ESG, and also, we are a lot more mature today. And now we are going to enjoy this new cycle of growth, generation of value that has started but will be even stronger. I close with the highlights in the beginning of this presentation, the results to come will still be greater than what we delivered so far. Thanks for your trust. Have a wonderful day, and that's it. Best regards.

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