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 third quarter 2021. Today, with us are Renato Franklin, CEO; and Edmar Neto, CFO and IR Officer. [Operator Instructions] Before moving on, we would like to let you know that any statements made during this conference call in relation to the company's business outlook, projections, operating and financial 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 refer to future events and therefore, depend on circumstances that may or may not occur. General economic conditions, industry conditions and other operating factors may affect the company's future results and lead to results that will materially differ from those in the forward-looking statements. Now we are going to turn the floor to Mr. Renato Franklin. Please, Mr. Franklin, you can go on.

Good morning, and good day, everyone. Welcome to our conference call to talk about the results of the third quarter '21. The results of the first quarter, you saw the number, really show the consolidation of a new base for the company. It is a new level, preparing us for a new cycle of growth with generational value. We are going to talk a bit about the numbers and the context that we are going through, the market scenario and how the company is reacting to the scenario to guarantee opportunities of growth. So let's start with the quarter highlights, Slide 3. So to the left, we see the sustainable evolution of our results in all our business lines. The first highlight is the company's scale, growth of 60,000 cars in 1 year. So quite material organic growth, you're talking about 25,000 cars from CS Frotas that was merged into Movida. Total net revenue reached BRL 1.6 billion. We are talking about 52% growth over the third quarter '20, with strong contribution of the Rent-a-Car units. Remember that we have a lower offer of cars, so we are growing our rental car, and we are selling less cars. Our EBITDA with commitment of operational efficiency is gaining margin and giving us room to evolve in operational efficiency, rental, BRL 613 million, up 187% larger than the third quarter '20. In Rent-a-Car alone, we are talking about an EBITDA of BRL 426 million, 111% growth, more than double than that of the third quarter '20. I'm going to talk about this trend of growing EBITDA in the Rent-a-Car business that is going more than offset the used car sales in the long term. Net income, BRL 279 million, 7x more than the third quarter '20. We are talking about a new level. We are talking of more than BRL 1 billion in profits when you annualize the third quarter. And returns, our main commitment, like of almost 14%; return on equity, 25%. We are showing LTM numbers, if you annualize the numbers even better. So very, very positive return. And record cash production, BRL 6 billion according to our last time raisings that will support company growth, the change in the market and everything that is still coming. On the right, we have the most important highlight in terms of recent events. First, the merger of CS Frotas. Just to make it clear, we have been accounting -- we are considering August and September, not July. As of the fourth quarter, you're going to see the full quarter. So the annualized quarter is slightly better than what we are showing here. And recognitions of -- that has to do with ESG, remember that the company was the first rental company with a B certification. So very important things in ESG, but also digital transformation. Movida has always focused on that on the individual clients by means of the digital platforms, and this is the recognition that shows the company journey that is being digitalized in the company. So these are the main highlights. So now I would like you to go to perhaps the most important slide, which is Slide #4, where we talk a bit about market context and the execution of the company that ensures value in the short, mid and long term. So what do we want to highlight here? To the left is the structural change that is going on. And what's that? Well, car prices, we know that they are going up. You see Movida's average purchase price, it went up 61% year-on-year. So that's quite relevant. And why do we have this increase? We are fairly -- showing you what we see just with -- compatible to our transparency. 21% are in the same models, but 40% is a changing mix of models and versions. What do you mean by that, model and versions? You have the percentage of the SUV that we buy today that is higher than in the past. It happened in developed countries that fleets got better, more equipment, giving more to the clients, and this is happening in Brazil. And that happens with versions, especially entry cars. In the past, we would buying a more basic version and now we are buying more equipped versions with more accessories that can deliver a better experience to clients, but they cost more, and so we have to charge more accordingly. And the link here is what you see on the right of the slide, before going down, which is the transformation of prices in Movida when you're talking about the rental car business. So we are going to talk more about that. But in the rental car, the average daily rate went from 70% to 96%, but that's the average of the quarter. The higher transformation gets to the end of the quarter. In the end of the quarter, we were at BRL 112 of average daily rate, which is the 60% price increase. We are going to give you a bit more color to explain the price increases and our strategy. But that more than offsets the increase in the purchase of costs. And the same goes Fleet Management and Outsourcing. We see the average ticket going up, but the new contracts are much higher than that. And we also have a 60% increase here in the prices for Fleet Management and Outsourcing in the amount of average prices of closed contracts year-on-year. Other structure points. We have a higher inflation, and we have the interest rates going on. We saw that yesterday, the interest rate went to 7.75% with an increase of 4.25 percentage points if you -- consider the third quarter '20. And the expectation is 9.5% for '22. And how do we fight that? Well, we will have 2 levers. First, the short term. In the short term, we have a positive factor in the market. The negative is the interest rate. The good thing is that Seminovos have more price. When you compare the FIPE price list and our assets, we have BRL 2.6 billion to be captured with the sale of these cars, which protects us in short term. How about the mid and long term? Then we are growing prices considering the interest rate curve in the Rent-a-Car gradually and in the Fleet Management and Outsourcing. We are already considering this interest rate curve for some time now. So the prices are already pricing -- the contracts are already pricing these increase. And the Fleet Management and Outsourcing is already growing, 53% of our fleet, giving us the predictability of our return rates, considering the interest rate of up to 10%, plus the spread. So we are protected. And that's why we are comfortable to say that we are going to keep the generation of value in the company. And finally, we have been conservative with regards to depreciation of new cars, perhaps too conservative. Investors are asking us that all the time, but we prefer to be conservative. If depreciation is better than expected, and today -- this month, we are having numbers better than what we expected a month ago, then we will probably will reap the fruit of higher benefits in the Seminovos than we expected. And we will adjust the rates, but always being a bit more conservative because we have less predictability here. And there is an additional point to mention, which is our people. Our people make the difference. And we had important reinforcement in our organization structure that we want to share with you. To summarize, we use this period with less growth because of the car supply, but that which we were able to grow, but we really built the basis for sustainable growth by increasing our rates, having more cars in Fleet Management and Outsourcing, gains of scale in Seminovos and everything so we are getting margin -- better margin in all our business segments. This is the key message that we are giving to you today. And now I'm having some slides just to give you a bit more color on the items I mentioned. So let's start with Slide #5. When we talk about rental prices, here, in the bottom part of the slide, we see how much the purchase amount went up. So we would buy at BRL 52,000 and we went to BRL 83,000 average car prices, 60% increase. Daily Rent-a-Car, already 6% at 112. So how are we increasing? Are you increasing prices? So, yes, we have an increase on price. We have the mix of cars. Again, I said, more equipped cars, SUVS, you have more individuals. Remember that Movida has leadership in digital platforms, and you're going to see that clearly. And you have those eventual clients. Last year, we had the strategy of protecting the company in the case of lockdown and restrictions, we have more monthly contracts. And now we are doing the opposite. We are going to go back to be basically eventual rentals. That is contract of 3 to 7 days instead of 30, 60, 90, which increases the average ticket. So you're going to see this trend of our daily rates going up month after month. In addition, in the Rent-a-Car, revenue per car is higher than the average daily rate and why, because we have gained some operational efficiency, occupancy. We have a new digital evolution in algorithms for pricing and car combination. That has helped us, and that will bring us even further efficiency. And when you think of GTF, that's the same thing. Now, here, we are showing you the numbers to see something that you didn't see. Our average is BRL 1,408 but, for those new contracts, for you to know how many cars you're having, what's the average you're going to have? You're going to get to BRL 2,000. Just to make it clear for everyone that the new contract amount is very different, and why? Because we are focusing on 3 businesses: brand-new cars with high tickets, that's our advantage. We have a demand for old cars today. So if OEMs want to sell, I can work with SUVs. So we are going to adjust the company for whatever you have supplied and is profitable. Then you have CS Frotas that also helps us to have a higher ticket. And we are also working with small and medium businesses and new sales channels to be explored to further increase the share of this segment with even better margins. So the conclusion of the slide. First, our average ticket is going up in line with the prices that we are paying. Second, the average ticket is growing faster, it's going up faster than the average price of the assets, because I'm going to have additional value generation in the long term as we transform the company. And third, is that we continue to buy at a much better price than the average price of the Brazilian retail market. What I'm showing? Our average purchase price is BRL 83,000. And the 20 most sold cars in Brazil have an average price that is BRL 110,000, so I'm buying 24% below the average price, which is very similar to what we always had. So Movida, we buy a bit more of SUV and the difference is very close to the discount price that we always had, a bit smaller because of the mix that I have, but at a very good level. So another very important slide for us to reinforce our message. Now let's go to Slide #6 where we talk about the contribution by GTF. Okay. Here, I show the fleet. We went from 109,000 to 168,000 cars reinforcing that we are going way above the average above the market. But see GTF, we went from 41,000 to 88,000. Today, the GTF is 53% of our fleet, which will contribute to our result. And our backlog of contracted revenue is BRL 1.8 billion. This is 150% growth over the third quarter of '20. It is quite relevant and here, I'm not considering the extension of CS Frotas, 90% of which are extendable up to 5 years, so with that, it would be an even greater number, almost double. So we have much predictability and resilience for the future. And EBITDA, one showing the EBITDA of rental car because same used cars will have a much better EBITDA this year to next year, '23, '24, it's going to stabilize. But the Rent-a-Car will more than offset this settlement. We are continuing to grow, and we are continuing to grow margin that will offset the higher interest rates and the normalization of Seminovos in the future. Let's now go to Slide #7 to talk about the Seminovos, the used cars. And again, just to repeat what I said to-date, we had BRL 9.4 billion in our asset base. It was BRL 4.8 billion. We more than doubled. Now if you're talking about market value, you're talking about BRL 12 billion. So this increase of brand-new cars that also reflect used cars, it will come a time that inflations for brand-new cars is going back to 4% a year and then the used cars are not going to grow prices. But this is not going to be abrupt, only if you have incentives that nobody is expecting. So this is a given, and it should keep for more time than expected. And why am I saying that? Because some investor say, this is a one-off increase. Now just this additional valuation -- this BRL 2.6 billion. It's 8.3x the net expenses of the company. So even if the interest rates go up, I'm going to even have more benefits. Then why I'm saying that? Because people say, let's exclude the Seminovos, let's exclude the interest rates. They are not considering the short term gains of used cars and the long term gains of the interest rate. So I see a maintenance of the generation of value, which is our commitment to keep the spread at 5% minimum and to deliver the best return on equity and on capital investment. This is our target. And finally, I say that the transformation of daily rates will protect us in the midterm to guarantee this generation of value that I'm talking about. Now I'm going to Slide #8, and I'm going to talk about the structure that we have from now on. On the left, we showed you how we reinforce the company's executive structure in 2021. So first, we have a management area dedicated to the rental car. In the past, we had a commercial director to this area, but now we have a new management. And now we have a new management area of 2 brand-new cars, which we also did not have before, and it is growing exponentially. We have a new executive to the commercial management of GTF to focus on B2B, this is growing and this is also going to enable us to gain margins in GTF. Seminovos, we brought a new executive from the market, a quite senior person focus on retail that will again compensate or offset the normalization rates for the Seminovos, because we know the market will normalize, but I'm going to evolve in retail and partially offset that event. Now, remember, we already had that with an evolution of capital gains in Movida and also with better performance in the market. We have a new management with asset turnover, which is becoming more and more important, a new management area for treasury and IR and also performance and control for us to capture benefits and opportunities even better when we take a look at the KPIs. This is going to be [indiscernible] that is here in the call today, together with our team. We have a new expansion area. We talked about our plan of expanding stores. We are going to open lots of stores faster than expected. If we continue keeping cars as we are, we are going to open them faster. If not, we are going to take a bit longer. And a new digital structure. We have a new CIO for the company, a person that real insight the -- and has the culture -- the digital culture of the company. We have several programming -- training for people. We have more than 160 robots in the back-office alone in pricing. So we've evolved a lot with this structure. And, therefore, with improvements in revenue per car and safety that also enables us to continue our investments in digital. And I reinforce our efficiency in management. Movida has also -- always set apart because of its culture. We have a culture of low-cost and with the gain of productivity and growth of the company. This difference is even higher. Today, really, if you compare to our competitors, we are way apart. Growth way above the market and gains of in the rental car business that is going to be even better for the future of the company. So all that together explain why we are delivering such good results today and how these results will get even better in the future. So now I'm going to go to Slide #9 to show the history of the company. So net revenue, BRL 1.6 billion when you take a look at 12 months, it's BRL 4.5 billion. If you annualize numbers, BRL 6.5 billion. So growth of almost BRL 1 billion when you compare it to the third quarter '20. In EBITDA, even more than that, you are talking about BRL 600 million which is BRL 1.6 billion to the back. But if you look forward, you're talking about BRL 2.5 billion. And here it's very important to break down. Take a look. BRL 1.8 billion comes from the Rent-a-Car. Seminovos will go back to normal in '23, '24. But again, the growth in the Rent-a-Car more than offset the Seminovos. EBIT at the same proportion, BRL 2 billion of the EBIT, another level for the company. And net income, more than BRL 1 billion if we annualize the third quarter. A completely new level for the company that will enable us to have even more opportunities because of scale and performance. And finally, before I go to Edmar, on Slide 10, just to show you our organic growth plus the acquisition of CF. We have the largest growth in the market. It has been part of our history since 2014 and in the last year alone, we grew by 60,000 cars. And see, we are prepared for the new cycle with much more stability and comfort of what we are to deliver for the future. This is my key message. And now I'm going to turn to Edmar, that is going to give you more color about each business unit.

Hello, everyone. Good afternoon for those that are in Brazil. Good morning for those that are in the U.S. I'm going to start on Page 11, showing the Rent-a-Car results. These results reinforce what Renato mentioned in the beginning of the call. You see a company transformation. We are already talking about the rental car revenue of BRL 1.5 billion in the last 12 months. In this quarter alone, BRL 443 million in net revenue and a record EBITDA margin -- EBITDA margin record of more than 50%, EBITDA of BRL 233 million, showing that we are in the Rent-a-Car LTM close to our targets, and we are going up our prices rigorously. EBIT nominal amounts, also record in the quarter and year-to-date, more than BRL 500 million in the last 12 months, but again, the highlight is price. Daily ticket more than BRL 96, average ticket with Movida always higher than the competition and at BRL 2,453 and LTM, almost getting to BRL 20 million year-to-date. So we are talking about BRL 5 million daily rates a day. And then if you go to the next page, we talk here about the transformation in GTF, and here we talk about 2 things. We talk about scale. And here you can see that we went from BRL 517 million net revenue in 2020 to almost BRL 800 million LTM in the third quarter '21. So very important growth. In the quarter alone, we are getting close to BRL 300 million -- BRL 287 million, so another record. And EBIT of the record with margin of 67%. And here, I will recall that under our GTF business, we have Movida B2B Fleet Management and Outsourcing. We have brand new cars that is growing at relevant rates which is B2C and now CS Frotas to the public segment. And when we talk about prices, and Renato already mentioned that you see a record monthly ticket to BRL 1.4 million the number of daily rates more than BRL 6 million also a record and a record EBIT and monthly margin in the last months with everything that happens in the company with prices going up and down at 48%. On the next slide, I talk about used cars, our Seminovos segment. So we are certainly benefiting from the evolution of the prices, 14,500 cars being sold at BRL 59,000. That led us to revenues of BRL 845 million, also record EBITDA with 22% in the quarter. Gross margin, also record of 27%. And here, we see the benefit of scale with SG&A consistently at 6%. And as Renato mentioned, we are going to see this number even lower because there will be a dilution because of a new level of prices that we are going to have with cars. On Page 14. Well, here, I'm going to talk a bit about our cash position. In the quarter, we raised BRL 3 million, basically with the bond of BRL 300 million that was a recap of what we had and also an issue of debentures of BRL 1.75 billion. So in the past 18 months, we were able to relevantly extend our company's debt profile. The cash is conservative and it advances possible raising of funds for next year, and we have cash that's covering our debt for the next 5 years. It's important to say that our net debt today is at 5.7x. And with the increase of our EBITDA, we're able to keep the leverage below 3x. As our EBITDA, as you could see, who had very relevant advances. Once again, we take a look at our maturity schedule and the Brazilian electoral period is covered in our cash position, given everything that we did in the last 18 months. With that, I turn back to Renato.

Thanks, Ed. So now we are going to go to Slide #15. Just for us to summarize what we are like today and what we see for the future. 2019, very well evolution of the company, we closed the gap of Seminovos, the difference was almost done, we were doing very well. 2020, we had the pandemic, but we did not stand still. We accelerated the company's digital transformation. The web check-in went up. We continued with our cars, 100% connected since 2018, preventing theft and fraud and also helping us with the stability of our results. We relaunched the Movida brand-new cars with 100% digital journey. That has really put us in the forefront to grow above the market. 2021, we had the merger of CS, which was very important with 25,000 cars that help us out and the transformation of prices, gaining occupancy rates, which is also very important. And so how can we have price transformation in the future? We're talking about expansion of stores and et cetera. Opening stores help us to have more sales channels that enable us to have greater demand. We can price our cars better. In addition to growing number of stores, we opened 27 stores, if you think at 277 stores, if you consider the rental car and Seminovos. But we also have additional footage and sometimes you don't open store, but you have stores that are with margin footage. So the plan is -- and you saw that on [indiscernible] we are going to open new stores in the midterm. And many stores can be transformed to the current reality, as we already did in 2021. And I think that you should come and visit our stores, just to take a look at the quality of our services. So for 2021 -- for 2022, we are going to continue transforming our prices as interests go up, we are going to increase our prices. We are conservative -- being conservative, but also with real prices, continue increasing our profitability, increasing predictability, our capital structure is very robust. Now we want to decrease our capital costs, but keep our liability management, so that is to continue replacing our debt for cheaper debt, but we don't want to run any risks at the electoral period. We advanced that not to have a problem there. A plan to extend the stores, as I mentioned, and focus on the growth of GTF, especially for the Movida brand new cars, in addition to B2B, as I mentioned small and medium businesses and the public segment that still has very appealing profitability. We are only going to grow where there is profitability. I'm just going to buy cars when I can rent them at a decent use. That's how we have been working so far, and that's what we are going to do for the future. Our commitment is to deliver results, generate value, and we believe we can do that by massively growing. This is what we see in the market. This is what our numbers show. Thank you very much. And now we are going to open for your questions. So that we might give you a bit more color or --and any questions that you might have. Thank you very much.

[Operator Instructions] Our first question comes from Guilherme Mendes from JPMorgan.

My question is about OEMs. Renato you mentioned during the presentation that you think things are going to be back to normal more towards the end of the year. What's the level of confidence that you have for '22 in terms of growth and what risks do you think that you're going to have to execute the volume plan? And also discount levels. You said that the discount is not constant referred to last year and I would like to know if there is any change in the level of discounts from your purchases or purchase conditions?

We have closed agreements that support our growth plans. We are going to -- we don't know if all OEMs are going to keep their agreements. They say it's going to be like this. But what if things get worse? Well, there might be changes. Some people today is that '22 is still going to be a difficult year. What people say is that when the chip normalizes, other manufacturers are still adopting to the volumes. So that's why we are thinking that it's going to normalize more towards the end of '21, '22. So we are not disclosing numbers, but we think that we are going to execute our plans and in revenue, it is going to grow even more because we have gains of prices. When you talk about commercial terms, discounts, the agreements are more or less the same. Some cars lost 5 points, others not, but we are able to make very good agreements. The major advantage for this year is that because of the problem is still there, those cars, we are thinking that they would normalize faster and probably, they are going to have an appreciation as the cars we are selling now. So it's possible that we are being a bit more conservative, and we are going to adjust this. So we are pricing our Rent-a-Car, thinking that we can have more a higher price, but we can adjust that if that does not happen to the Seminovos. I think that the major advantage of Movida is that we work with a wider range of OEMs. If you take a look of our mix, we have agreements with all OEMs, except for Ford that left the country, we have agreements with everyone. We were the only company that really decides to sell all kinds of cars, and that really paid off because today, the OEMs consider us differently. And that's why we have more confidence in the sales of our cars.

Our next question comes from Rogerio Araujo, UBS BB.

I would just like to check one thing, and then I have 2 questions. So just to check. From what I understood, your new level of purchase should be BRL 80,000, BRL 85,000 from now on. And then we should expect that for the next cycle, the ticket should increase by about 60% in one year for the Rent-a-Car and 2 years for the fleet. Is that right? Is that what I could use in the models? Just to check.

That's a very good question. Well, if you get the agreements made, the average ticket would be lower than BRL 83,000. Now if you ask me what I believe, I think OEMs will offer more expensive costs. So it's possible we keep the ticket at this range of BRL 80,000. It can be a bit less it can be at this and the price will be proportional to the car that we buy. So yes, if it is at BRL 83,000 you're going to see the whole thing growing at 60%. If it is just the closed mix, then we could reduce it a little, and the price is not going to be as high. I believe in the projection that you're saying, 80-something with a price that is suitable to this amount.

And now my questions. One, hedge, how is it working, what do you have in terms of hedge instruments for future contracts? And at the time of sale, you project yourself at the curve or are you exposed to these fluctuations? I know that in the past you did not have that. And Rent-a-Car -- and that's the fleet -- in the Rent-a-Car you don't have hedge. So I would like to know your discipline in terms of supply, how are you monitoring this, are you going to decelerate and grow the fleet if the price goes down? So how are you going to work with the Rent-a-Car in terms of transferring prices to -- passing on prices to consumers. So in the 2 segments, how are you protecting yourselves, Fleet Management and Rent-a-Car? And the second question, OEM, I see you getting more cars than the industry as a whole. And why is that? Why are you getting more cars than the market itself? These are my questions.

Rogerio, this is Edmar speaking. Thanks for your question. Well, basically, in terms of hedging, we have our debt hedged. And with regard to contracts and prices in the Fleet Management and Rent-a-Car, we are pricing with a little cushion. So since interest rates went up, we changed our cost of capital for pricing purposes, and that protects us. With regards with derivative instruments, we are looking into them, but we haven't taken a position because we believe there's lots of volatility with premiums and curves in the short term. So we are looking into it, and we prefer to operate on prices. That's what we are doing. And just to reinforce, the price always advances the curve. When the interest rates were even going down, we were still projecting at 2 digits. And the OEMs, long term relationship, alliances with OEMs is a long-term relationship. You have to have a differentiated relationship with each OEM, that helps you in a unique positioning. And I'm suspected to say but I think Movida's better positioned to explore the individual client market, the digital markets and working with OEMs and this is what we have been doing. We were the first to close deals for '21, for '22. And with that, we can keep better commercial terms and preferences in volumes. This is what we have been doing. Movida's premium positioning the value of our used cars. These are all appealing to OEMs and we are honored by the relationship and everything that we have built with each of the OEMs that support us. And I think that's it.

Our next question comes from Victor Mizusaki from Bradesco BBI.

Congratulations on your results. I have 2 questions. The first is a follow-up on the daily rate prices. Your prices at BRL 2,000, fleet management as well and as Renato mentioned, you have a scale effect and dilution of fixed costs. Do you think it makes sense if you keep this daily rate at BRL 112 in the fourth quarter, you're going to see a sequential increase of margins. Is that correct? And about CS Frotas that you are now consolidating in the third quarter. What's the process like? And when would we start to see the capture of synergies between the 2 companies?

This is Edmar speaking. Well, first, I'm going to talk about margins. And you were correct with regards to trends. So if you take a look at the slides that we showed, it showed an evolution of 14 points in our margin since the IPO, because of the thing that is going on in the Rent-a-Car segment. So if you look forward, I agree with you. The idea is to continue to renew our fleet, and that will bring us margin gains for the next quarters. As Renato mentioned in his management methods we are very confident about the fourth quarter, which is not going to be very different from the fourth quarter last year. As for the merger of CS Frotas, I have 2 comments. First, the merger has already taken place. So when we incorporated the results of September and August, July was out. All the processes, everything, I already entered the concept that we are done. That is CS Frotas has its way to operate, and it is going to continue to do so, and we are going to capture synergy if the operation lets us. And the greatest synergy and Renato is going to talk about that is in car sales. And we are going to address that in the coming months. And as of 12 months, we are going to have a fully integrated scenario. Yes. In the sale of cars, we start with a large fleet sales team supporting one another. But still, we have different corporate taxpayer numbers. So we are not exploring some levels immediately. That has a time, and it's going on along next year, we are going to capture more and more synergies and in the end of the year, we are going to get 2 synergies fully integrated and captured.

Our next question comes from [indiscernible].

Good morning, everyone. Congratulations on your results. I have 2 questions. The first, I would like to know how you see the value generation to shareholders through the buyback program since this is an option for the company. And second, I would like to understand this increase of new cars. Do you think will affect the end consumer?

I'm going to start with your second question. The increase of new prices for new cars really encourage rentals because the first bank is cash disbursement. If the car, a brand-new car is, I don't know, at BRL 60,000, that's one thing. It is BRL 110,000, it's another thing. It's a lot more difficult to buy. Also, when you have a higher price, the people who are buying understand the value of money even more because they see the value. And when they take into consideration the depreciation and the cost of opportunity, the rental is even more advantageous than buying. So that probably is going to increase rentals.

And this is Edmar, about the buyback program. As other buyback programs that we had in the company since the IPO they are being used for the compensation of our officers, myself included. So we don't have any resolution different from that, and we have to wait for the next development. And that's it.

Our next question comes from Citibank, [ Felipe ].

I have one question. With regards, not only Movida, but the market as a whole and also considering the merger of Localiza and Unidas. We saw that they agreed on this merger, by means of a series of actions, including sales of operations and cars in some areas of the country. I would like to know, if you see an appetite by the market to absorb these cars and demand the sale that they will have to make and how you see this movement affecting your business.

Hi, [ Felipe ], thank you for your question. Well, this is a very complex transaction, the opinion of the agency makes it clear, and this is to be judged in court. They have a period to come to a final sentence. So we are only going to say something in the proceedings. What we can say is that we are focusing on growing our company continue to generate value, having long-term relationship with the OEMs, which is going to be more and more important and really treat all our stakeholders in an agenda that is directed to our business and generating value to the company. That's what we can say. I think for the market as a whole, having less competition, perhaps can accelerate an increase of prices. Perhaps it can help us to have even higher prices for the fourth quarter. As we talked about the Rent-a-Car, the daily rate is going to be even higher, more demand than supply, higher prices.

Our next question comes from the English room, [indiscernible] from the Asset Management Company.

I just had a couple of follow-ups. Regarding your hedging strategy, correct me if I'm wrong, but I believe you've hedged the dollar bond not only to reals, but also from fixed to floating. So I was wondering the rationale for converting the debt to floating rates in the context of rising rates and if you would consider unwinding those hedges.

This is Edmar speaking. I'm going to translate the question in English, it's basically the hedge strategy that we have in our bonds. Basically, it is for floating rates in Brazilian reals. And what's the possibility of having it for fixed rates? That's the first question. And the second, [indiscernible] back to the company has any appetite of instead of having this positions. It is a complex matter. So I'm going to try and answer it cautiously. First, our debt in dollars is at -- compared to the CDI, which is our local benchmarking. And at the time of the issue, what the market was more liquid, and it made more sense for the company to have a percentage of the CDI. The option was CDI plus something. But anyhow, we would be exposed to some kind of floating rate. At the time, we are talking about 150% of the CDI. Second, if the company has any interest in changing its hedge position of its debt. No. A part of the corporate policy and Movida's policy is to have its liabilities fully hedged without any exchange exposure. So the hedge, which is principal and interest of 10 years is to be maintained.

And just one other question. Regarding the increase in the rental car prices or the tickets that you're trying to pass-through given the increase in interest rates, it seems the market is quite strong right now, and you've been able to do that. But what gives you the confidence that next year, you'll be able to continue to pass-through the interest rates and higher ticket given GDP growth is expected to be very minimal next year.

Okay. The question is, first of all, about the evolution of prices that we have in the rental car. In the short term, we are being able to pass through prices, but the question is in the future, in '22, with the interest rate and a lower GDP growth are we going to have the possibility of increasing our rates as we have okay.

This is Renato answering. We have several products that have an over demand and several sales channel and that gives us the comfort that we are going to be able to pass-through prices. What is going to change is the size of each business unit. So we might have segments of the Rent-a-Car that will not be able to absorb new prices. And therefore, we are going to have less cars in the segment because we want to have cars that generate value. On the other hand, I'm sure that other segments are going to grow even if prices are passed through. To give you an example, rent new cars, which is our subscription product long term, we have a demand that is 5x higher than what we are having today. So clients want it, but I don't have cars for everyone, so I increase prices. If there is no demand in some unit I move cars to the other unit. So today, all markets are underpenetrated in Brazil. Leisure rental car, urban mobility rental car, tourist rental car that is coming back now, corporate tourism rental car that will come back, app drivers that are lower because fuel prices are very high and also the short and long-term subscription cost, fleet management for the private segment, for the public segment. So we have several avenues of growth. We'll pass through prices in all of them, and we will fix the demand according to our supply. But I'm sure that we are going to have very different prices for next year.

Our next question comes from Pedro Bruno from XP Investments.

I'd like to explore with you this strategy or dynamics that you are thinking about depreciation by car by segment, Rent-a-Car and Fleet Management for the coming quarters and the evolution of those market dynamics that we are witnessing. I understand that to the limit, you could depreciate, you talked about being conservative. You could depreciate 0, perhaps in your P&L, and you would still report Seminovos margins above the normalized value, given the market timing. But I would like to know how you are addressing that internally, thinking about the dynamics for the future. We see that little by little car depreciation is going down in Fleet Management and Rent-a-Car. In Fleet Management, not as much compared to the previous quarter, but it is going down. So thinking about the normalization of this market, what are your thoughts on that? Because we know that you're taking a conservative standing, but we would like to understand conceptually speaking, how you see that.

Okay. Pedro, this is Edmar here. Thanks for your question. As a reminder, last year, we were the company that carried more depreciation for longer, waiting for the market to accommodate, and it did accommodate to our favor. About what we are doing today, what happens is that there will be an increase of depreciation quarter-on-quarter and this increase is going to be tightly connected to the fleet renewal rate. And why is that? Because the cars that leave our fleet and are sold, typically already have enough depreciation. And the new cars will have higher depreciation because of a lack of visibility that we have as of that time. So we prefer to be conservative and carry more depreciation now in the short term, to have more comfort further along, knowing that the market is quite volatile as a result of that and Renato mentioned this in the presentation. In the past 3 quarters, we have been delivering margins that are precisely in line with the remainder of the market, although we had higher depreciation rates. For the future, I have 2 messages. First, as of '23, we should start to see some accommodation in used cars. It's going to be slow, but it will happen. And then depreciation should go up and also, nominally speaking, it should increase, reflecting the new car prices, which we talked about in this call. Prices increasing by 60%, will translate in higher depreciation levels for the future. But -- and Renato is going to talk a bit about the market, as a whole, we have preferred to be conservative and carrying the cars that join the fleet at a higher depreciation rate. What we think? Today, the FIPE, the price list goes up 1% a month. It should go down 0.8% a month. So when you buy a new car, it goes to the Rent-a-Car, it has 14 months. So we are sure that in the next 3 months, we are not going to see a drop. But then we don't know what is going to happen. We have expectations. We have to expect depreciation. So we prefer to be conservative. Okay, in this month, if the market goes back, what would be the rate? This is it. When I buy a Fleet Management car, it's 36 months. It's a car that has more exposure. If it's a car that has 6 months to be sold, then we are okay. We don't have to be conservative. We already are excess conservative. But for brand new cars, we are going to continue to be conservative. I think when the market goes back to normal, and FIPE starts to go down, we are going to see whatever we have, and we are going to adjust things to deliver a strong margin in Seminovos way after normalization takes place. So when things change, then we can project okay within X quarters, we are going to have a less aggressive depreciation.

[Operator Instructions] Our next question comes from the webcast, [ Natalia ] from [indiscernible] Capital.

The question is, when do you expect to have electric cars as brand-new cars and what are the margins that you expect for the segment in a world in which fuel prices are going up and people are more and more concerned with ESG issues.

We are working to really justify the use of electric cars and help Brazil in adopting the fleet. We think it's an important agenda that it's going to happen and Movida because of its position, has an important role in that. We were the first, Rent-a-Car company to offer electric cars. We have the largest fleet. We have a very nice partnership with Nissan [ Beat ] that is most sold in the world, but we have others, Mini Cooper and which are cars that we have in retail, but that's in subscription. The volume is still low. Materially speaking, the volume is low. The price considers a conservative depreciation of this cost, they have lower maintenance costs, no change of oil. But we are still conservative in depreciation because the technology tends to evolve significantly in the coming years, reducing the cost of conversion into electric cars and also battery costs, improving the autonomy, which is the major challenge of electric cars today. Today, clients that have electric cars use them for daily use. We developed a solution together with [ Estapar ] to have electric chargers in companies. So if you want to buy an electric car, we have excellent models to rent at competitive prices and the convenience of having chargers being installed in buildings and households has helped us to really rent cars well. There are still challenges. We are going to have a major launch on November 21 in our store at [indiscernible] that has drivers from [indiscernible] car and the cost of fuel has helped us carbon credit is something that we also can work with, and we are going to have 11 fast charge stations and 1 ultra-fast charge station to try and really encourage the increase of the use of electric car with drivers because that is the more the car is shared, the more it runs, the better the carbon emission. So we really want to grow a little by little. We believe that in Brazil, we are going to have 15% to 20% of electric cars production in the market by 2030, very different from European numbers. Ethanol, remember is Brazilian technology, which is very good in terms of carbon emissions. And it is our focus to work in this area. Value fuels, ethanol so there are lots of things that we are discussing with the automotive industry that will help transform the Brazilian matrix in a different way that is happening in Europe.

Since there are no further questions, we are going to turn the call back to the company's management for their final considerations.

Well, I thank you all, everyone. Thank you for attending, for your support, undoubtedly, your support has been paramount for us to consolidate this new level of results, create new scales and profitability that will ensure performance and results for the company in the short, mid and long term. We have a very positive outlook for the future. We are going to be able to continue raising prices, stabilizing the business and generating value. This is just the start of what we are doing and I cannot fail to mention that our ESG has been evolving a lot. We talked about our recognition. I thank you. Last year, I was the only Brazilian to be invited to the UN Preparatory Meeting. And now I'm going to be part of a panel on transportation, talking about global transportation and carbon credit and also, I will attend the last round of Delta Leadership, representing Movida with Movida case and a case from our transport industry that is recognized worldwide, which makes me honored, but also gives me the responsibility to continue evolving and delivering our commitments in the long term. Thank you very much. I wish you a great day, and let's go.

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