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

Good morning, and welcome to Movida's conference call to discuss the results regarding the second quarter 2023. Today with us, we have Mr. Gustavo Moscatelli, CEO; Pedro de Almeida, CFO; and Ms. Camila Silva, IR Director. [Operator Instructions] Before moving on, we would like to let you know that any statements made during this conference call relative to the company's business outlooks, 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 such forward-looking statements. We'll now turn the floor to Mr. Gustavo Moscatelli. Please Mr. Moscatelli, you may go on.

Good morning, everyone, and welcome to Movida's conference call to discuss the earnings of the second quarter this year. First, I'd like to thank all Movida's employees that are working with lots of discipline with our main objective, which is creating value to our shareholders, and dedicating daily to deliver all improvement points we mapped for this year. Thank you. Now I'm going to go on with the presentation of our results. Slide 3 shows the evolution in all our businesses, seeking to extract maximum value to operational efficiency in each business model. We are executing in detail the strategic plans to create value, which results even before expected. Our net revenue was BRL 2.2 billion in the quarter, a growth of 23% in the revenues from rental since last year, with continuous evolution in all business segments and focus on operating efficiency. Operating fleet increased 10% year-on-year with 204,000 cars total fleet; EBITA, BRL 890 million. And capital structure is more and more healthy and robust with reduction in leverage 2.9x EBITA net debt in the quarter. In the rental car segment, we had a transformation in the first quarter with a reduction of 8,000 cars in the second quarter, all together 21,000 cars compared to 4Q '22. Total fleet of 90,000 cars. I'd like to highlight the increase of total occupancy rate is 6 percentage points year-on-year, 70.7%, which shows a positive reflect in operating improvement and the use of capital invested. In fleet management and outsourcing, we continue with our plan to grow and close the second quarter '23 with 114,000 cars, increase of 16% in the operating fleet against the second quarter '22 and already 56% of the company's total fleet. Important to highlight is that the marginal growth is being done with diligence to ensure profitability of new investments. In used cars, we kept a high level of sales, about 19,000 cars sold in the quarter. We continued to sell cars with higher tickets, especially in the rental car segment, about BRL 70,000 per car, which led us to reach BRL 1.2 billion in the quarter. The highlight was the margin of used cars that has an extension of [ 7.7% ] versus 5.9% in the first quarter. This is very important that shows that the value of our [ assets ] is correct and that we are close to the turning point to reduce depreciation rates. Now I'm going to Slide 4, where I bring work from -- is the [ first ] priority for the company to generate value and discipline and execution in delivery so far. Starting with financial management, which is an important focus. We prepaid BRL 3.3 billion in the quarter —- in the half year, BRL 1.9 billion in the second quarter by buying back local debt and bonds issued abroad, significantly reducing the cost of debt and cash carry on. We also had a reduction of BRL 1.3 billion in the supplier line compared to December '22, with our equity balance sheet even more sustainable. It's important to highlight that we kept robust cash position of BRL 2.6 billion, which places us in an extremely comfortable position to continue executing our strategic plans. As a second point that is core for this strategy, we have an improved efficiency in our fleet, reducing more than 8,000 cars in the rental car operation this quarter compared to the first quarter, while net revenue and EBITDA grew compared to the previous year. This sailed through to a fast operating efficiency based on a detailed analysis of our fleet, releasing BRL 1.7 billion in capital invested. The third highlight is related to efficiency and productivity. We had a substantial gain of 6 percentage points in the rental car total occupancy compared to the second quarter '22, with 70.7% through operating improvements, focus on the asset turnover that I'm going to talk about later on. This is very important to maximize capital invested and create value. I believe there still has room to improve this indicator for the coming quarters. The fourth highlight is improvements in management. We have our teams focused on the delivery of priority products we listed in the beginning of the year. We had a quick advance and we already delivered 8 projects out of the 19 selected. In addition, we had some adjustments in our structure, reducing costs and making the company management even more objective. On Slide 5, I'll give you some details on the gains of efficiency in asset turnover. As you can see in the first chart, we had a reduction of 8,900 cars in total fleet and the operational fleet reduced by 3,800 cars, releasing capital investment that was not being compensated. The reduction is 100% related to the resizing of our RAC fleet with an acceleration in the volume of sales, reducing 8,000 cars in the total fleet. With that, we had a relevant evolution of 6 percentage points in total occupancy rates measured by rented fleets over total fleets compared to the second quarter '22. That is, we are being more productive compared to the capital invested, which is crucial for us to get to a new level of profitability. As for fleet management and outsourcing, we continued growing with discipline and vigilance in the closing of contracts in the long term to ensure future profitability. You can see that we had growth in the operating fleet, and we closed with a record volume of cars in backlog for the purchase of OEMs. That happened because we helped the negotiation of purchase of cars until the end of the government incentive program to be sure of the prices and ensure marginal profitability. Now, I'm going to turn to Slide #6. It is very clear to us that our largest gap to ensure value in the rental car segment is related to the asset turnover. So here, we give you a breakdown of the 3 most important indicators and their evolution. We are able to improve in the quarter 13 days in asset turnover with the implementation from 31 to 23 and retirement from 19 to 14 days. We believe we are going to get to optimization between 25 and 30 days considering all initiatives we have ongoing, as you can see in the above charts. And this way, this pillar that is crucial to create value contributes to the business, transforming marginal profitability. Now on Slide 7. As in the first quarter, we brought an important analysis to change the level of profitability that -- the change of part of the rental car fleet mix. In the first chart, you can see we had a spread of 1,500 rides per car between purchase and sales price with a favorable dynamics for cash flow and for a new cycle of profitability. In fleet management, the dynamics is completely different since the asset cycle is based on long-term contracts. This new level of prices is beneficial because it will bring even higher growth in revenues and EBITDA. The bottom chart shows the difference between purchase and sales price consolidated, that was BRL 26,200 in the GTF segment. Still, when you take a look at liquid CapEx, once again, we had negative CapEx this quarter, more than BRL 700 million in the year, contributing to our commitment to generate value. On Slide 8, we bring you details on improvement of the fleet mix of the second half of the year and the reflect of that in marginal profitability. We closed '22 with an average ticket of BRL 85,000 per car and went down to BRL 83,000. We believe that until the end of the year, we are going to go down to BRL 78,000 to get to an ideal mix. And that will bring 3 major benefits. First, we are going to have positive cash generation, selling cars with a higher ticket and buying cars with a lower ticket. Second, reduction of 8% in the fleet's average ticket will bring an increase to the margin [indiscernible] because our fleet is going to be more aligned with the booking and more compatible to the revenue generated, and also reduction in depreciation and maintenance costs with cars with lower tickets. On Slide 9, we show the financial results consolidated. Net revenues in the quarter was BRL 2.5 billion, evolution of 11% compared to the second quarter '22 and 25% compared to the first quarter last year. EBITDA reached BRL 890 million in the quarter and BRL 1.7 billion in the first half of the year. I'd like to highlight the expansion of revenues and rental EBITDA that grew 23% and 13%, respectively. The expansion of the resulting services brings more profitability and resilience for the company's future results. EBIT was BRL 501 million in the quarter, BRL 986 million in the half year. Here, we can see the effect of the increase in depreciation rate from 5% to 10% a year that we've had in the end of last year, and the potential of better results with an eventual reduction in those rate. I'd like to draw your attention for the contribution of GTF, 64% of the rental we did in the quarter compared to 45% in the first half year of last year. This is very relevant for profitability indicators in addition to bringing more stability and predictability to future results. Finally, I'd like to mention that we have neutral profits in the quarter, but we are committed to delivering the necessary changes. Now I'm going to go on to Slide #10 with an analysis of depreciation. Here you can see the evolution of depreciation rates in the Rent-a-Car and GTF. As you can see, depreciation in the Rent-a-Car was stable, 10.3% compared to the previous 2 quarters. With that, we believe we probably got to the end of the increased cycle caused by the transition of the fleet. And certainly, we'll have a reduction soon because of better purchases in the marginal fleet. You can also see a slight improvement in the reduction of 4% in the depreciation rates, again, fruit of an improved mix. In the second chart, we see GTF with a slight increase because of new cars that do not have the gain that we had in the global industry in recent years. But I see no concern, quite the opposite, we are growing the fleet with even better returns. Consolidated we had 8.4% a year, an increase of 0.3 percentage points compared to the fourth quarter due to the largest share of GTF in our total mix. Now I'm going to turn to Camila, our IR Officer, to present our business units. Camila?

Thanks, Gustavo. Good morning, everyone. Well, now I'm going to talk about the results per business line, start with Slide 12 in the rental car with our operating highlights. The priority of the segment for the quarter continues to be fleet optimization, increasing our marginal profitability. Therefore, we had, again, a decrease of fleet this quarter and getting at 90,000 cars, a drop of 10% year-on-year. In the same period, we had a 3% increase in the operating fleet, improving our gains in efficiency. Daily rates reached BRL 123, a 7% increase year-on-year and a slight decrease of 2% compared to the first quarter with high seasonality. In the bottom part of the slide, we have the evolution of our total occupancy indicators. We continue to see an important gain of productivity in total occupancy rate, our main indicator. The evolution was 6 percentage points compared to the second quarter '22, reaching 70.7% compared to the first quarter '23, expansion of 1.4 percentage points. Operating occupancy rate was stable in the period. Now on Slide 13, we show the financial highlights for the Rent-a-Car segment. Net revenue, BRL 676 million in the second quarter '23, growth of 15% of -- year-on-year. In the first half year, growth was 21%, reaching BRL 1.4 billion. Growth in those periods show the new operating scale of the company as a result of the transformation of our ticket and optimization of pricing in the different categories of the segment. As a result, revenue per car followed to the increase, showing growth of more than 10%, both in the quarter and in the half year. EBITDA in the second quarter was BRL 382 million, practically in line last year. In the half year, we had growth of 7%, reaching BRL 809 million. On Slide 15, we bring the operating indicators for fleet management and outsourcing, that is our long-term project. First chart, total fleet, 113,700 cars in June '23, 7% up in an year and a slight drop compared to the first quarter, as I mentioned before. It's important to highlight that as in the Rent-a-Car, there was even more expansion in operating fleet, 16% quarter-on-quarter, showing better use of capital invested and generating a volume of daily rate of BRL 9.1 billion in the quarter. Our revenue backlog is BRL 3.3 billion, 40% above last year and 26% quarter-on-quarter. On Slide 16, we have the financial indicators of GTF. We continue accelerating expansion, net revenue reaching BRL 558 million in the second quarter '23, an increase of 34% compared to the second quarter '22. In the half year, we had BRL 1.1 billion, 38% year-on-year growth. In addition to increasing volumes, we had substantial increase in revenue per car, 16% in the quarter and 21% in the half year, reaching the second quarter '23 an average of BRL 2,110 per month. EBITDA in the second quarter was BRL 412 million, expansion of 31% compared to the second quarter '22. In the half year, BRL 773 million, 28% year-on-year. Comparison of EBITDA per car in the final chart also show evolution. The strategy is to continue with accelerated growth in GTF in revenue and EBITDA with more resilience and predictability to consolidated results. Used car sales on Slide 18, we show the main highlights of operations. In the quarter, we had a 2% increase in the volume of cars sold, with stable sales at 19,000 cars. In the half year, growth was 14%. Net revenue in used car sales had light growth in the quarter, BRL 1.2 billion, expansion of 23% on the half year with a total of BRL 2.7 billion. The result of the half year was impacted by the sale of a mix with a higher impact -- with a higher ticket. The EBITDA margin of 7.7% in the quarter shows the conservative policy we have in depreciation rates. The drop compared in the half year is expected due to the normalization with -- of the market that was atypical in 2022. We opened 4 new points of sale in the second quarter that will contribute to better performance with now 94 stores in the end of June. Now I'm going to turn to Pedro to continue the presentation. Thank you.

Thanks, Camila. Now we are going to Slide 20, where I talk about our capital structure. I start highlighting the reduction of BRL 3.7 billion in net gross -- in gross debt this quarter going from BRL 17 billion to BRL 14 billion in the second quarter this year, mainly due to the prepayment of local debt and bonds abroad. In addition, we had a reduction in the purchase of cars, so we decreased the supplier line by BRL 1.3 billion. With that, we had a reduction of more than BRL 700 million when we add net debt and the supplier line compared to the fourth quarter last year. This effort was important to keep the leverage stable in a healthy level of 2.9x net debt to EBITDA ratio. Now on Slide 21, we have our cash and our debt maturities schedule. We have a very strong cash position, BRL 2.6 billion in June '23 enough to cover our debt until mid-2025. As you can see in this chart, the prepayment of debt we had of BRL 3.3 billion in the quarter was also taking into consideration the improvement of the debt maturity profile, eliminating the maturities of the next 2 years, leaving the company extremely well positioned. In addition, the lower level of cash also brings a reduction in carrying costs with the additional positive impact in the company net revenues. The initiative of prepaying debt is not only because we were prepaying more expensive debt, but also accessing new sources of funding at much better costs. Here, we show the new funding of the company in this new phase with extremely favorable conditions, which will enable us to increase our spread between the return and cost of capital and generate value to our shareholders. So far, we have already negotiated BRL 1.4 billion in new funding with an average cost of CDI plus 1.72%. Prepaid debt had an approximate cost of 140% of the CDI. Before turning back to Moscatelli, I'd like to close saying that it is a pleasure to be here with you for the first time in the presentation, and that I'm here for any questions that you might have in the future. So now I will turn back to Moscatelli to close the presentation.

Thanks, Pedro. Well, finally, on Slide 22, we summarize some of the deliveries in the first half year and ongoing initiatives. As I mentioned, we had substantial advantage until June. And here, we bring the main items commented in the presentation. In the bottom part, we have a series of ongoing initiatives to improve the company, which will have a positive impact in our profitability, including the continuous adjustment of Rent-a-Car fleet, operational efficiency, optimizing the use of assets in all cycles of the business, selectivity in new long-term contracts, continually reducing the average cost of debt and control and management tools using technology to continually improving our management. To close, I only would like to reinforce that I am confident we are on the right track. With discipline and agility in the execution of our plans, we'll be ready for a new cycle of growth and creation of value. Now I'm going to open your questions, and then I'll come back for my final remarks. Thank you very much.

[Operator Instructions] Our first question comes from Victor Mizusaki from Bradesco BBI.

Congratulations on your results. I have 2 questions. The first, if you could talk a bit when you take a look at the second quarter, if you think of the Rent-a-Car stores and fleet, we do see a reduction in the ratio. My first question is, if we should expect any change in the strategy of stores for Movida in the future? And second question. Particularly on Slide 6, we see a significant improvement in the 3 indicators, time, implementation, retirement and rates being better. What should we think in terms of implementation times? Are you talking about, I don't know, an improvement of almost a month in the improvement of revenues and then thinking of how long could --this is going to be kept in Movida's fleet? Are you going to get better or not? Perhaps in the end of the turnaround process Movida can sell even newer cars? What are your thoughts on that line?

I'm going to start with the stores that you asked. We made adjustments in the Rent-a-Car fleet that had already been expected. We had an advancement of purchases in the end of last year, so we had a bigger fleet than our store structure. We just wanted to size the fleet right. But that does not mean we are not considering the profitability of each store, just to make sure that they all have to be there. This is ongoing work, not only for now, but it's a new business model to take a look at things in granularity. So we are looking into that, and we will continue to try to extract the most value in each operation. The second point that you mentioned, which is the turnover of our assets, this is something we have been talking a lot, and it's certainly the higher leverage that we have in the Rent-a-Car profitability today. And as you see, we are very much focused. And by the end of the year, we are going to complete all improvements we have mapped to get close to 25 to 30 days, as I mentioned in the presentation. Now, this is not the single factor that will tell us whether we are going to extend the life of our assets or not. Together with the purchase of assets, we are going to make decisions whether we are going to keep cars that are younger or older in the fleet. It's a combo of those. To give you a bit more color, in addition to these operating efficiencies that are very clear, purchase conditions are much better with the OEM in the last 6 months. And that make us believe that fleets are not going to be at 14 months old. Probably they are going to be more back to normal between 12 and 13 months.

Our next question comes from Lucas Esteves from Santander.

I have 2. First I'd like to understand a bit more the variation of cost, 32% in the Rent-a-Car and a drop in GTF in the period. And another thing I would like to understand is this drop of SG&A in used car sales. We see more stores and expenses going down in the period. So could you give me a bit more color on that?

Okay. We have been talking a while now about our focus on growing fleet management and outsourcing and the benefits that we believe this will bring to the company. So we already expected and continue to expect that the GTF profitability will grow marginally. One, because of the marginal growth and we are having a lot more diligence in contract profitability, but also because of dilution of fixed costs and expenses. So I think that these are the main factors for the margin of GTF to go up. And I believe it should be behave between 76% and 75% in the coming quarters. And from now on, this is the margin I think you're going to be seeing in the segment. In the used car sales or seminovos, we had a lower average ticket and that influences in the variable expenses. And that's perhaps why you saw expenses in the segment going up. In the seminovos, Luke, I think what's most important is the margin in the sale of asset, which grew in the quarter more than 7% compared to 5.9% in the previous quarter, showing that we have a correct store structure with this volume that we have of almost 20,000 cars in the quarter, and the depreciation of assets that are coherent with market prices, which makes us believe that we've reached an inflection point in depreciation rates. We were at more than 10% for 3 consecutive quarters, which is very high. I don't know if I could answer your questions. If not, please just ask.

No, it's very clear.

Our next question comes from Lucas Marquiori from BTG.

Two questions as well. First, Moscatelli, it's almost a follow-up of the previous question. I'd like to understand the improvement of margin in the used car sales. Is it more related to the mix? You did explain that on the slide. Then the depreciation policy of previous quarters. And should we expect this level of 6%, 7% for the coming quarters? So if you could just give us a bit more color on this topic, that would be helpful. Second, I was curious about Slide 4 in the management initiatives. I understood fleet profitability. But what differences do you have in terms of management, because you said 8 of the 19 projects were delivered? What is still to be expected? What kind of initiatives on that, just for us to understand what's to come?

Starting with the used car margins. The margin in the quarter went up, as I mentioned, from 5.9% to 7.7%. Given the depreciation level we have in assets today, especially in the Rent-a-Car, I see it in the short period, perhaps in the next 2 quarters between 5.5% and 7%, very close to the first and second quarter this year. And why is that? Because we've been with 10.3% depreciation rates for almost a year, much higher than historical numbers for the segment. So we created that difference that translates in the margins. But that's what I expect for the next 2 quarters. As for management actions, as you mentioned, we listed in the beginning of the year 19 projects. We already delivered 8 of them. These are projects that go from business granularity, billing that is more automated, reduced headcount. So very operating things, but also structural things. As for example, our project for GTF pricing that we closed this quarter that will bring more confidence in marginal investment, but also scalability and speed in the closing of deals. So these are the main projects that we delivered in the first half year. In the second half year, we have 2 major projects. One, it is Rent-a-Car pricing. It's a huge project that will last until the end of the year. And another project that we call Optimal Asset Cycle, which is to have profitability step-by-step per car to know the right moment to retire the car and its track to maximum value. Granularity of management is huge and demands technology for us to make it a management tool. So I think this was a bit of color that you needed for the 2 main projects.

Our next question comes from Daniel Gasparete from Itau Corretora de Valores.

My question is more related to fleet management and outsourcing. We are very well interested with the backlog evolution that you showed. So I would like to understand how you see the evolution for the coming quarters, competitive environments [indiscernible]?

Gasparete, this is Moscatelli. Well, we are very much excited because we see strong demand in the segment. Our strategy has been very much focused on midsized customers, not only large customers, because we see marginal profitability is not as good. So we are thinking of midsized customers, and I think this is the right strategy. You talked about revenue backlog, but I would also like to reinforce the backlog of cars. In the end of the quarter, we had already closed, but because of the government plan, we delayed the purchase. It's 11,000 cars, a significant volume. And what I can share with you is that July was one of the best months of the year in fleet management. So it is a growing curve with profitability between 73%, 75% and margin of ROIC also going up. So this is a segment that is going to have a higher share in consolidated. Today, it's more than 64% of the operating income. And it tends to keep or grow in the coming quarters.

If you allow me Moscatelli, in liability management, anything else that you can see, any benefits you can extract in the short term?

Yes, Gasparete. In July, we bought back a debt of CDI in BRL 300,000. We announced the second tender, and we also renegotiated 3 swaps that we had that were tagged in CDI, and we went back to IPCA, which was the original index of this operation, which should bring significant gains in the third quarter. But these are things that are already public that are already completed that I'm just sharing with you.

our next question comes from Pedro Bruno from XP Investments.

Well, first, congratulations for the consistency and transparency in the recovery of results. I have 2 questions. One, a follow-up of 2 questions that were asked about depreciation and Seminovos margin. I'd just like to take a step further for me to understand, thinking as of 2024, Moscatelli you mentioned that you're close to a turning point in the reduction of depreciation after 3 quarters above 10% and with a recent increase in the fleet. And I understand that we will gradually see and correct me if I'm wrong, the depreciation rates going up, perhaps as of the third quarter. I would like to know what level do you see for the Rent-a-car and fleet management as a percentage of the assets in terms of depreciation, looking at '24 onwards or -- so whatever period of time you consider it to be stable. And how does it compare to used-car margins that you already talked about what you expect for the second half year. But what would it be like in terms of depreciation for the future this is my first question. I'll ask my second question next.

Okay. Depreciation rates. As you mentioned, we are at 10.3% in the Rent-a-Car for 3 consecutive quarters. I'm very confident. And to me it's very clear that now we are in a descending curve. That doesn't mean that we are going to get there to the third quarter, but I think this is the trend. And we are going to take a look, and we think it is the point in time we are going to act. In the midterm, the depreciation rate should be between 7% to 8% a year; a margin in our model up 2% in the sale of assets. So this is what I see for perhaps 2025. The pace of depreciation in the Seminovos margin. In fleet management, the depreciation rate should be between 6% and 7%, more towards 6% than 7%. But again, between 6% and 7% with a sale with a 2% margin in the end of the cycle. This is how we see depreciation rates for the 2 business when normalized.

Okay. Perfect. And about the initiatives, you did talk about 3 of the major initiatives, finance, fleet, reduction and management. But in fleet, just I would like to understand or confirm my understanding that the reduction of fleet that you had in the first half of the year in the Rent-a-Car segment is ended so we should expect a more stable fleet until the end of the year. And perhaps, I don't know, resume growth as of next year. So is this a correct understanding when you think of your fleet sizing strategy? And also one more point, when do you think the process of sizing demand vis-a-vis the fleet mix? Where are you in this process? And when will this have a structural impact in the results? Is it for this year and '24? Everything is already stabilized or not?

Okay, Pedro. Let's start with the fleet resizing. We do not expect to downsize the fleet further except for a specific move. But you should not expect any downsizing because we believe we got to the right side vis-a-vis our demand. So that's the first point. As for the changing mix, in the first half of the year, we started, but most of it is going to be for the second half, which will enable us to reduce average ticket by almost 8% at end of the year. So together with the other improvements, we expect to complete everything by the end of the second half and start '24 with the right mix with operations ready to seize any potential growth and with a capital structure and funding cost that is compatible to the company. So we are very much disciplined and focused in the year to solve these problems in value creation, improve ROIC with all the operating changes and reduced cost of capital by reducing our debt. With that, we are going to have a satisfactory spread and will create value to shareholders. That's how I see things until the end of the year.

Our next question comes from Guilherme Mendes from JPMorgan.

I have 2 questions. First is the Rent-a-Car business. I'd like to understand the demand by segment where you see more potential to grow. And we talked a lot about fleet margin is car margins, but I would like you to talk about the Rent-a-Car margin, which perhaps was the most negative surprise in the quarter, if there was anything in cost allocation and also OEMs, Gustavo, you talked about better purchase conditions now. What do you mean? Is it payment terms? Is it discount, mix? I would like to understand a bit the purchase dynamics?

I'm going to start with the Rent-a-Car business. We see a change that is important in the buildup of revenues and results. Today, in our revenue portfolio, we have 64% connected to monthly rental, which brings more stability even to the Rent-a-Car business, which is more volatile. We see more stability, more reliability in the segment. Now individuals are still very much pressured by the macroeconomics of the country. So I think we might have a better macroeconomic scenario in the next quarter and half year, and things are going to be better, so in a nutshell, this is how we see the Rent-a-Car business. In terms of margins, we are making structural adjustments in the segment in terms of management, capital allocation, and it's just natural that we have a volatility in the margin of the segment. Now, if you take a look at the marginal margin that we expect for the Rent-a-Car is between 60% and 62%. We reported 56%. But I clearly see, with everything that we are doing, to go back to close to 60% or a bit above that. This is what I see for the Rent-a-Car segment. As for OEMs I mentioned in the beginning that things changed dramatically from the end of last year to today. They are a lot better, not only in terms of discounts, but also in terms of payment terms. I think that we are already reaching pre-pandemic levels. And with all the improvements that we reported and that we are working on until the end of the year, together with better terms from OEMs, I think the company is today and as of 2024 is going to be very different with the correct mix, lower depreciation and terms that will bring us a higher return on invested capital. This is how I see commercial conditions also for the future.

Our next question comes from Rogerio Araujo from Bank of America.

I have 2 questions. First, with regards to expenses and maintenance with vehicles. This is a cost that was about 28%, 29% of revenue, and now it is BRL 20 million to BRL 21 million. So you had a relevant gains in margin in the Rent-a-Car business because of this line. I would like to understand the breakdown of this. Is it most services, maintenance, what explains this drop compared to previous year? Is it sustainable? What is the driver for that? And what should we expect from now on. And my second question is the bonds that you were buying back. I just would like to understand if your expectation is that you are going to complete the process by the end of the year and also by closing all swaps.

Okay. Service maintenance repair costs, especially in the Rent-a-Car segment, we will continue to see the cost per car going down as we are moving from cars with higher tickets that have higher service rates to cars with lower tickets. But as a counterpart, the cost is higher because we went from a fleet that was 10 months old to a fleet that is 14 months old, so we expected this cost to go up in the rental car. But once again, I think this is a transient status, and we are going to see some volatility in some lines of the segment. But as of the beginning of next year, I think we are going to go back to normal. And probably, we are going to have a one-off effect in the quarter. The bond we have BRL 460 million outstanding. We also announced the sale. We are successful. The bond is going to be irrelevant compared to the total cost of the debt of the company. And if we can buy back everything, we will. Now, knowing the market, as I know, I think it's very difficult to be able to buy back 100%. But we are watching out for opportunities of buyback, and that's what we are going to do, as I mentioned. Now, it's important to remember that the bond was $800 million, and it is already reduced by half. And from now onwards, I think we are going to have marginal gains on this line. Although, all benefit of the buyback is just started to be seeing the financial results. And just to close Rogerio, as important as buying back accounts and other debt is marginal raising of credit with good cost. So we are now at a cost of 1.7% spread over the CDI. So a completely new level of debt, and that will give us a good stress for our return-on-invested capital and will create value.

If I could, just a follow-up. In the bonds, whatever you're going to keep with the bond. Are you going to keep with the swap as well, first? And second, in terms of service costs, maintenance costs, you talked about volatility that should go back to normal. Should we expect the normal between 21 and 29 -- or is it close to what -- 28, 29. Or is it close to what you're having now?

Okay, bonds. The assumption and the policy that we have is not to be exposed to foreign currency. So whatever we can do in terms of raising funds in dollars, we are going to have 100% hedge in reias as we update the buybacks. So if we have an opportunity to reduce the swap capturing the gains that we have in the buyback, we will. But the policy is to keep 100% hedged in any currency other than the real. As for service costs, the percentage depends on several things. We are going through a new cycle, a new mix. The fleet is tractive all new. So I think the best way is perhaps to meet with their team, and we are going to give you more details of how we see the behavior by groups of cars. So that you can have a better idea of what we expect for the future.

Our next question comes from Pedro Pimenta from Eleven Financial Research.

I have 2 questions that you already mentioned during the presentation, but I would like to explore the better conditions, the better terms with OEMs and also talk a bit about your capital expenditure. We see that OEMs are not going back to the pre-incentive -- government incentive prices. They are keeping lower prices. Is that the reality? Do you think this is to be kept until the end of the year? And how does that reflect on your capital expenditure? Do you see a possibility to increase that? You kind of break down acceleration. Do you think that with the discounts to be kept in the market, can you change your projections for CapEx for the future? And second question, we saw a drop in the Rent-a-Car depreciation rate. You reduced the size of fleets, which releases a debts of your capital invested. Since the last quarter, we saw a decrease in expenses with interest rates. But when we take a look at the spread of the return on invested capital, this is not captured yet. When do you think this is going to increase? Is it still in '23? And do you think 6, 7 percentage points is doable?

I'll try to answer them all, and if I forget something, just let me know. Okay. Mix, as you mentioned, most of the effort of the first half year was about trying to release capital invested, taking a look at the whole of the fleet that is resizing the total number of cars. From now onwards until the end of the second half of the year, the idea is to capture the ideal mix vis-a-vis the demand that we have group by group in the Rent-a-Car segment. So you're going to see that we are continue releasing capital invested by the changing mix selling more expensive cars, buying cheaper cars, more than the government plan per se. This is the first. As for spread, I see the company working between 4 and 5 percentage points. And I think you should see this trend as of the first quarter next year. I'm not saying that we are going to have the stress, but you're going to see the company towards those directions when all the improvements have been implemented in the company.

If there are no further questions, I'm going to turn the call back to Gustavo Moscatelli, the company's CEO, for his final remarks. Please, Mr. Moscatelli.

Hello, everyone, thanks for joining us today in another conference call to release our earnings. Once again, I'd like to thank Movida's team, almost 6,000 employees that are fully dedicated with discipline and commitment with this new agenda of value creation. So thank you, all Movida employees. And now also, I'd like to thank the market as a whole, shareholders, Board of Directors, people on the sell side that have supported us and sometimes bring us an outside view that we don't have from these sides, so thank you. And as CEO of the company, I am extremely pleased and motivated because I see the company going to a completely different level as we started last year. This is a company that is much more controlled than it was in the past. Management is much stricter, much more detailed in the making of the season. Financial indicators always there for us to be certain of the marginal investment. So personally, I'm very pleased and very motivated with what is to come. So thank you, and see you next quarter.

Movida's conference call is now closed. We thank you very much for joining now, and please disconnect your lines. Have a good day.