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

Good morning, and welcome to Movida's conference call to discuss the earnings regarding the third quarter 2023. Today, with us, we have Gustavo Moscatelli, CEO; Pedro de Almeida, CFO; and Camila Silva, IR Officer. [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 be materially differ from those in the forward-looking statements. I will now turn the call to Mr. Gustavo Moscatelli. Please, Mr. Moscatelli, you may go on.

Good morning, everyone, and welcome to Movida's third quarter earnings call. I'd like to start by thanking all of Movida's employees who are working with discipline towards our remaining objective which is to create value for our shareholders. And to this end, they are dedicating themselves day in, day out to deliver all the improvement points we have mapped for this year. Thank you. Now I will continue with the earnings presentation, starting with Slide 3. I'd like to highlight the evolution in all our businesses, seeking to extract maximum value through operational excellence in each business model. We are thoroughly executing our strategic plans to create value with results being achieved even earlier than we had planned. Our net revenue reached BRL 2.7 billion in the quarter, up 15% in rental revenue compared to the second quarter 203 with continuous improvement in all of our business segments and focus on operational efficiency. Total fleet remained stable at 214,000 cars in a year, but with an important change in profile between the businesses with an increase in the penetration of the GTF fleet. EBITDA reached BRL 868 million, up 14% in rental EBITDA and the capital structure is increasingly strong and healthy, with leverage remaining at 2.9x net debt-to-EBITDA ratio at the end of the quarter. In Fleet Management and Outsourcing, we continue our plan to grow and ended the third quarter with significant growth, up 29% in net revenue and 38% in EBITDA with 120,000 cars in the fleet, which already represents 56% of the company's total fleet. It's important to note that the national growth is being done with diligence to ensure the profitability of new contracts. We can see the evolution in profitability in the EBITDA margin, which reached 74%, an expansion of more than 4 percentage points compared to the third quarter last year. In the Rent-a-Car segment, we reached a record of 72.2% total occupancy rate as a result of the continuous improvement of processes to optimize the capital invested. The segment's net revenue was BRL 76 million in the quarter, up 6.1% over the same quarter last year. This increase in revenue was achieved with a 10% reduction in the fleet, which meant that we ended the quarter with 94,000 cars and reinforces our objective of maximizing the use of invested capital. We're disabled to expand revenue per car and EBITDA per car by improving occupancy rates and the average marginal car average ticket mix. In used car sales, we kept a high level of sales, about 20,000 cars sold in the quarter and continue to sell cost with a higher average ticket, especially in the Rent-a-Car, which helped us achieve revenue of BRL 1.4 billion in the quarter. The EBITDA margin was 3% in the quarter and 5.5% year-to-date, showing that margins are going back to normal as a result of the accuracy of our depreciation policy. Moving on to Slide 4. We bring the company's priority work from to create value and discipline in execution and deliveries that we have achieved so far. Starting with financial management, which is an important focus of the new phase, we have prepaid BRL 4.4 billion up to September, BRL 1.1 billion in the third quarter alone through repurchases of local debt and bonds issued abroad at an average cost of approximately 140% of the CTI per year, therefore, reducing substantially the cost of debt and cash flow. Throughout '23, we raised a total of BRL 2.3 billion at an average cost of CDI plus 1.8% a year, of which BRL 1.7 billion was raised in October 23. The second central point of this new strategy is improving fleet efficiency, which involves both resizing and adjusting the mix of cars. We reduced our Rent-a-Car operation by more than 17,000 cars compared to December 22, freeing up BRL 1.3 billion in non-protected invested capital. To adjust the fleet mix, we bought 13,000 cars in the third quarter with an average ticket of BRL 77,000. And with this, we have already reduced the total average ticket from BRL 85,000 to ARL 81,000, therefore, significantly improving marginal profitability. The third highlight is related to efficiency and productivity. We had a significant gain of 10 percentage points in the total occupancy rate of the Rent-a-Car compared to the third quarter '22, reaching a record level of 72.2% and through operational improvements, focus on asset turnover, which you will see in the next slides. This is an important front for maximizing invested capital and creative value. I also believe that we have room to improve the indicator even further in the coming quarters. The fourth highlight is management improvements where we have teams focused on delivering the priority products we listed at the beginning of the year. We have had rapid progress and have already delivered 13 of mid-19 projects elected. In addition, we have made some adjustments to the organizational structure, reducing costs and making companies with management more effective. Moving on to Slide 5, we'll go into more granularity on efficiency gains we made in asset turnover this quarter. As you can see in the first chart, we had an increase of 8,500 cars in the total fleet, most of which in the GTF operation. As for the GTF fleet, we continue to grow with diligent and discipline in closing new long-term contracts to guarantee the company's future profitability. You can see that our fleet grew, and we closed with a record volume of vehicles on the backlog for purchase from the OEMs. The rental cooperation again saw a slight increase in its fleet of 2,600 cars in the third quarter. We bought around 13,000 cars with a focus on changing the fleet mix, which will bring a new level of profitability to the operation, as we have already mentioned, we continue to see progress in the total Rent-a-Car occupancy rates measured by rented fleet over total fleet, which reached 72.2% this quarter. The growth in the fleet of both GTS and Rent-a-car will lead to growth in revenue and EBITDA in the coming periods, which has not yet been reflected to last quarter. Now I would like to move on to Slide 6. We are very clear that one of the main gaps in achieving value creation in the Rent-a-Car segment is asset turnover. Therefore, the slide shows the breakdown of the 3 main indicators and their evolution. In '23, we managed to reduce deployment times by 42%, reaching 16 days in September. The average retirement time in the third quarter was 13 days. A 32% reduction also reaching our target for the year. As a result, we have gained 21 days of available assets to generate revenue over their useful life. We believe we will reach an optimization between 25 to 30 days, considering all the improvement initiatives underway, as you can see in the chart above. If we suppose on asset cycle of 18 months, this means that we are going to have 4% to 5% more revenue in the asset cycle with the same cost and depreciation base. That is a significant gain in returns and value creation. Now on to Slide 7 and we have detailed the improvement in the fleet mix that we made up to September and how close we are to the ideal fleet mix. As you can see, we ended '22 with an average fleet ticket of BRL 85,000 per car, and we reduced that to BRL 81,000 in September. In our mind, we must reduce up to the end of the year to BRL 78,000 per car to get to the age of fleet mix with the change of another 6,100 cars. This change will bring 4 major benefits. Firstly, the 8% reduction in the average fee tickets will bring an increase in the marginal yield since we will have the fleet more in line with the demand for bookings allocating the capital invested correctly and in line with the revenue generated. And you can already see this in the results of the third quarter, and Camila will present more color on that on Slide 17. Secondly, a reduction in depreciation per car, the main PLL cost line. Third, a reduction in the cost of maintenance because the cars have a lower risk ticket. And lastly, the better mix of cars for the sale of used cars. On Slide 8, we bring again a breakdown of the Rent-a-Car current fleet by purchase cycle. We had significant improvement in our fleet profile with a 43% reduction in the cost with the highest average ticket of the purchase cycle between the third quarter '21 and the second quarter '22. And today, they account for only 38% of the total fleet. Those cars were purchased at a more restricted time of manufacturing with a higher average ticket per car and less saleable purchasing conditions, resulting in higher depreciation rates during their useful life, as you can see, between 13% and 14% a year. Purchases from the third quarter or 52 onwards, which totaled 48,300 cars or 58% of the fleet have a lower average ticket, around BRL 77,000 per car due to the normalization of industry supply chains as well as better commercial conditions. The new cycle cars have lower depreciation rates between 7.5% and 9% a year, especially the purchases we are making now in the second half of '23 with an average depreciation rate of 8% a year, which shows significant reduction in depreciation in the coming periods and allows for a new cycle of value creation for shareholders. On Slide 9, we outlined the analysis of depreciation. On this slide, we show the evolution of depreciation rates with a breakdown between RAC and GTF. As you can see, the depreciation rate for Rent-a-Car was stable at 10.3% per year compared to the last 3 quarters. With this, we believe that we should have reached the end of the upward cycle caused by the fleet transition period and should soon see a reduction also generated by better purchase conditions in the margin of it. You can already see an improvement in the depreciation of euro per car of about 6.3%, around BRL 69 per color already the result of the improved mix I mentioned earlier. In the second chart, we see that the GTF rate had a slight increase due to the entry of new cars that do have the gains we've seen the globe increasing over the last 3 years. But I don't see any worries quite the opposite. We are growing the fleet with even better returns. On a consolidated basis, the rate was 8.2% a year, a reduction of 0.2 percentage points compared to the second quarter due to a better mix in the record Rent-a-Car fleet and the greater penetration of the GTF reach. Moving on to Slide 10, we show Movida's consolidated financial results. Net revenue for the quarter was BRL 2.2 billion. The increase was 5% compared to 322 and 18 compared to last year. EBITDA reached BRL 868 million in the quarter and BRL 2.6 billion in the year-to-date. I would like to highlight the expansion in rental revenue and EBITDA, which grew by 23% and 24%, respectively. The expansion in services results brings even more practicability and resilience to the company's future results. EBIT was BRL 455 million in the third quarter and BRL 1.4 billion in the year-to-date. Here, we can see the effect of the increase in the depreciation rate from to 8% per year that we made at the end of last year and the potential for improved results with an eventual reduction in these rates. I'd like to draw your attention to the contribution of the DT segment in the consolidated figures, which accounted for 65% of rental EBIT compared to 47% previous year. It is a significant increase for profitability indicators and brings greater stability margin backed by Brazilian sovereign bumps with a compensation of 8.5% per year prefixed, this way will have an important gain in the company's financial results as of November, which led up to a nominal savings of BRL 1.2 billion in the financial results and a positive NPV of the flows of BRL 350 million. This is yet another financial value in its investments. Now I'll turn to Camila, the company's IR Officer, to show you the results of each of our business units. Camila?

Thank you, Moscatelli, and good morning, everyone. I'm going to go to each one of the business lines on Slide 13, GTF with the operational indicators for our long-term products. In the first chart, we see the total fleet of almost 120,000 cars in September 23, an increase of 11% year-on-year. This shows the strength of the addressable market, especially in small and mid-sized businesses, which are outsourcing their fleets for the first time. Daily volume was BRL 9.4 million in the third quarter, up 9% over the previous year due to the addition of the operational fleet. Our backlog of future contracted revenue from contracts that are already in operation is BRL 3.8 billion, up 52% on the third quarter over the third quarter '22 and 16% over the second quarter 2023. On Slide 14, we have the financial indicators for GDF. The growth of this business line continues apace with net revenue reaching BRL 581 million the third quarter of '23, an increase of 29% compared to the same period '22. Year-to-date, revenues amounted to BRL 1.7 billion, up 35% year-on-year. In addition to the increase in volume, we mentioned, we had already another sequential increase in average revenue per car, 21% in both the quarter and year-to-date, reaching the third quarter 3. As we mentioned, we had another sequential increase, also reaching a record of BRL 3,054 per car per month in the third quarter. An important highlight from this indicator comes from the segment's monthly yield, which expanded reaching 3.8% of the average acquisition rate. This is an exercise considering the average revenue per car and the average tickets of the fleet we want to reach. We would have a yield close to 4% in the Rent-a-Car, contributing to the improved profitability in the coming periods. EBITDA in the third quarter of '23 was BRL 396 million, slightly down on the third quarter of '22. While in the full year '23, EBITDA amounted to BRL 1.2 billion, an increase of 12% compared to '22. EBITDA per car expanded by 3.6% in the quarter compared to the same period '22, reaching a monthly average of BRL 1,667. In the year-to-date, the evolution was even greater, reaching an 8% growth. Moving on to Slide 19, we show sustainable performance in the used car sales operation with the sales of 20,000 cars in the quarter, basically in line with the third quarter, 22% and 10% above the amount sold in the 9 months of '23 versus 22%. Revenue amounted to BRL 1.4 billion in the third quarter, down 3% over the previous year due to the sale of cars with a higher average ticket in 3Q '22. In the 9 months, there was an expansion of 13%, surpassing the BRL 4 billion revenue mark. The EBITDA margin reached 3% in the third quarter '23, reaching normalized levels and showing the accuracy of our depreciation policy as we have mentioned before. Now I'm going to hand over to Pedro, our CFO.

Thank you, Camila. Good morning, everyone. Going to Slide 21, we show the evolution of our net debt and leverage after some of the financial management initiatives that Gustavo has already mentioned. The continuous reduction of gross debt continues to be the highlight in our balance sheet, closing the third quarter in '23 with a total position of BRL 13.5 billion, a drop of more than 10% compared to the first quarter of '23. The cash balance on September 30, 23 was BRL 2 billion, which keeps us in a comfortable position to continue executing our strategic plans. The better payment terms and conditions negotiated with OEMs also have helped the company's cash flow dynamics and working capital management this quarter. Leverage ended the quarter practically stable at 2.98x net debt-to-EBITDA ratio at levels we consider sustainable and healthy. On Slide 22, we can see that the current cash position of BRL 2 billion plus BRL 1.7 billion from new funding is sufficient to cover the payment of gross debt until the end of '25. On the financial management front, I would like to reinforce that in the first 9 months of '23, we made an early payment of our most expensive debt, amounting to BRL 4.4 billion with a cost of approximately 140% of the CDI. In July, we completed our first issue of real estate receivables certificates of BRL 580 million at an average cost of CDI plus 1.51% and average maturity of 4 years as well as a bilateral operation also at very attractive national cost. After the close of the quarter, in October, we concluded the issue of a second certificate of BRL 700 million with an average cost of CDI plus 1.63%, an average maturity of 7 years. In the same month, we announced a shop as a new debenture with a firm guarantee of BRL 1 billion and CDI costs plus 2.1% a year average maturity 3 years. This new debt issues totaled BRL 2.3 billion with an average cost of CGY plus 1.8% a year an optimized level in our funding cost. In short, we terminated a debt of BRL 4.4 billion at a cost of approximately 145% of the CDI and exchanges for new issues amounting to BRL 2.3 million with an average cost of 1.8% above the CDI. Also, it should be noted, the company continues to have the best credit risk rating, AAA from Fitch. On Slide 23, we show the results of these initiatives on the average cost of our total gross debt. You can see we went from a weighted average spread over a CTI of 3.2% in December 22 to 2.4% in September 23. This reduction of 0.8 percentage points per year in the average cost of debt contributes to annual savings of approximately BRL 108 million in financial expenses. And that, excluding the funding of October and November, I mentioned and the restructuring of the bonds approach, which Gustavo has already explained. Thus, we are establishing a new level of funding costs for the company, contributing to an increasing spread in relation to the return of our business. I'll hand the floor back to Gustavo Moscatelli his final remarks.

Thank you, Pedro. Finally, on Slide 24, we summarize some of our deliveries up to September and the actions underway. As we have already mentioned, we have made significant progress up to September and have also brought here the main items that we commented during the presentation. At the bottom of the slide, we list a series of initiatives underway to improve the company that will have a very positive result in our profitability. They include the continuous adjustment of the Rent-a-Car fleet mix, operational excellence in case management, optimization in all phases of the business cycle, selective in adding new long-term contracts, continuous evaluation of reduction in the average cost of debt and technology-intensive control and management tools for continuous improvement in companies' management and control. We were able to achieve significant operational improvements this quarter as a result of our strategic plans. Deliveries are being made with greater agility and discipline to maximize the creation of value on invested capital. Finally, I would just like to say that I am certain that we are on the right track and are very disciplined and agile execution of our planning. This will make us ready to enter a new phase of growth and creation of value. Now I'm going to open for your questions, and then I will close the conference. Thank you very much.

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

Two questions. The first is what you talked about in the end of sustainable growth. Could you give us a bit more color on growth for 2024 and thinking of a balance between growth and leverage? That is, how much do you think you're going to grow without pressuring your leverage around 3x that you're operating today? Secondly, your turnaround projects that you were delivering 13 out of '19, the 6 pending projects that are the ones that you mentioned on Slide 24, anything other than that. What are these projects? What kind of benefits you give, if you want to give me some color and quantification of what you want to achieve with them?

I'm going to start with growth. With the current scenario in terms of macroeconomics, visibility and the market in which we operate and also take into consideration the balance sheet that is a must for us to consider further on. I do not see a problem for the company to grow from 10% to 15% next year with the strategy that we have mentioned that is allocating more capital on GTF that have better margins and generates better returns. In the Rent-a-Car we are still with an ongoing process of continuous improvements. I'm going to talk a bit more of the project as U.S. So the operation is not yet stable. But it is moving on to a very healthy level, not only in terms of operational maturity, but profitability, but there is still work to be done. And in GTF, you already see very strong margins and operations generating good value, margin of 74% EBITDA and growth of more than 100%, almost 20% a year. So next year, we have no guidance to disclose for next year. But according to our balance sheet, we would grow the company from 10% to 15% without a need for equity, which is interesting growth that generates value for shareholders, considering that the return on invested capital be at a suitable level with a leverage close to what we have today. Projects. The 6 projects that are still pending from the initial list are more focused on the Rent-a-Car business. I'm going to talk about the 3 main ones of these projects that are still underway. One is the pricing tool for the Rent-a-Car, a new tool we are developing with a consulting company that should be ready in the next 30 days. The other project looks into the entire life cycle of assets to try to maximize value for each vehicle. So for each vehicle, we have the right time of retirement to extract maximum value. And the third is something that I already heard from investors is a project related to cost and expenses, especially Rent-a-Car costs. You saw a bit more of a compressed margin this quarter. And I understand that we should have a margin of 60% in 1 or 2 quarters. So I think this is going to be fast. Maintenance costs were a detractor or Rent-a-Car margins this quarter. But in September, October, they are back to what we had in the second quarter. So we are back to a healthy level but with potential for improvement. So these are the main projects. I don't know if I left anything just let me know.

Our next question comes from Victor Mizusaki from Bradesco BBI.

I have 2 questions. The first, you mentioned margins for the Rent-a-Car business around 60% in 1 or 2 quarters. My first question is, can we consider that this is connected to the pace of Rent-a-Car fleet renovation process and as you accelerate the process, you should reduce maintenance costs and therefore, your EBITDA margin will recover at an accelerated pace? And the second question is a bit about the GTF backlog. You showed in the presentation around 18,000 cars in the third quarter in the second quarter around 11,000. And so what are you doing to deploy this a bit faster? And if on the side of OEMs in the fourth quarter, the backlog can go down a bit faster, perhaps because of more appealing purchases from the OEMs.

I will start with the Rent-a-Car margin. Undoubtedly, one of the reasons for maintenance costs to go up in the third quarter is because the fleet reached the peak of average age, 4.3 months in the Rent-a-Car. And now we are back to buying cars in the third quarter substantially. And with that, the average fleet age is going to roll down. And obviously, this will help maintenance costs. But together with this, it's not only the average age going down. The average ticket is going up, which also is going to help on maintenance because cheaper cars have cheaper maintenance. Just to give you some numbers. The average maintenance ticket of the Rent-a-Car was BRL 199 per car per month in the second quarter. In the third quarter, BRL 223. In September, we are back to BRL 195. And in October, close to BRL 180. So we are going to go back to normal quite fast. But it is this, we reached peaks in terms of average age, and we are renewing our fleet mix. DTF, the growth of backlog is because of an acceleration of sales. We closed deals with OEMs in the second half of this year. We are basically done for next year, negotiations are very advanced and agreements are going to help us with the deployment of worth cars. So we accelerated the sales in GTF. You saw the growth of the business quarter-on-quarter. And together with this, we have an improvement in terms of protectability with the agreements that we closed with OEMs. So it is basically due to the growth of the business per se.

Our next question comes from Lucas Marquiori from BTG Pactual.

Two questions. First, the Rent-a-Car daily rate grew a bit third quarter compared to second quarter, perhaps due to the seasonality of July, I would like you to comment on seasonality in the quarter because I think this is going to go down. You are talking a bit about the Rent-a-Car business. If you can give us a bit of the dynamics of fees in a more normal levels for 3Q and 4Q? And second question, perhaps related to what Victor asked, suppliers, you had a substantial increase in the supplier's line. Could you give us a bit more color in terms of payment terms, payment conditions, if we should expect the same level for the coming quarters? Just for us to have an idea of how this will impact the leverage and cash needs for the future.

I'm starting with the Rent-a-Car daily rates. We had a slight improvement in the third quarter over the second quarter. Part of that because of the July seasonality, 5% above the average of the quarter. And we see daily tickets for the fourth quarter in line or even better than the third quarter because you have the decanter seasonality, and it's very strong. So I do not see a lower ticket than we saw in the third quarter. Even because you know the practice of the competition is very close to ours. So in terms of competition, the environment is very healthy. Supplier line. In the first half, we basically did not buy cars. So the line was down in the balance sheet. In the third quarter, we resumed a substantial purchase of car, but with much better payment terms and conditions than we had in the first half, one of them being at time. Just for you to have more color in the first half was 60 days for payment. Now it is 120 to 180 days for payment. So a significant improvement in the company's working capital, and this reflects what you see in the supplier's line. Okay.

Our next question comes from Daniel Gasparete from Itaú.

I would like to congratulate you not only on the work done but also the level of disclosure of your release and presentation. A very nice for us to know in terms of cycles of purchase, very interesting. 2 questions. First, GTF rates at the front 8. I like what you mentioned about yield, but I would like to know the ticket in Brazilian reals. Just first to know how to project it for the future. And second, I would like to hear a bit about used vehicle sales. We see data from the Central Bank and even Santander banks saying that the market for car financing is a bit better. In terms of prices, delinquency are you already experiencing that in October? And what are your expectations for the coming months?

DTF rates at the front end, we have an average rate of 2,600 per car, but I have to admit. I focus more on you than daily rates because the fleet is very heterogeneous, and it can distort analysis. So for the yield, we have about 2.9% amount in a period of 36 months. So that's about the profitability that we are including in the company's balance sheet for this year's contracts. Used car sales. The market is still tough. I cannot say that October is already seeing the improvement with the reduction of interest rates and everything. But undoubtedly, we expect to experience that and have a better market than we had in the first 9 months, but not yet. Not yet in our operation. It's still a very tough market and very restrictive in terms of demand because of the high interest rates in financing.

Our next question comes from Pedro Bruno from XP Investments.

I would like to have a follow-up on Luca's questions on suppliers. Moscatelli, could you give us a bit more color on the negotiation dynamics. I think you already talked about that. We saw the acceleration of fleet, which explains this cash generation in the quarter, better times in the release, you talked about better conditions, but I would like to expand it a bit more. You talked also about advanced negotiations for next year. So I would like to understand a bit more about negotiations and how you see the current time vis-a-vis what you consider as structural. Since we are closing a very atypical phase in terms of car supply and et cetera. And in better terms translates into better discounts. So I'm thinking of full conditions that is times discounts and what you see at current vis-a-vis what you think would be optimal for the future. So just to expand a bit on what you already mentioned.

Negotiations with OEMs. I think what I can disclose is that commercial conditions are very similar in some OEMs to pre-pandemic times. So as you mentioned, post a typical times, we are going back to conditions that are very similar to what we had before the pandemic which will certainly reflect on company's results for the future when we start enjoying a lower depreciation rate and ideal mix and better commercial conditions. For next year, we have very advanced conversations, 60% to 70% of our purchases. And compared to what we closed in the second half of this year are very appealing and can improve even further, not in terms of time, but in terms of discounts. So that makes me very encouraged because when we do the math, at this level of commercial conditions, the creation of value for new cars is very, very clear. I don't know if I could give you all the color you wanted. At least you have directionally where we are going to in terms of fleet and commercial conditions.

Our next question comes from Lucas Barbosa from Santander.

A follow-up on funding. Do you have any visibility in terms of credit approval? Are you seeing any difference in the front end in the approval of new financing? Or any signs that banks are going to be a bit easier on that for the future?

I talked a lot about the interest rate level that is still very high. But we also have credit restriction. And in the first 9 months, in addition to high interest rates, credit was more restricted than usual. And we do see an improvement in the approval of credit for our customers in the last 30 to 45 days. It's still not normal. There are some news coming out that banks are decreasing rates and improving access to credit that we can observe in the last 30 to 40 days, 45 days. But it's not a structural change that will make the business change overnight. It's a process that is positive, but that has just started.

Our next question comes from Citibank from Nielsen.

Congratulations on your results. I have one question on management and outsourcing. Given the potential growth and the backlog that you have been observing, I would like you to comment on the competition. And as the market is heating, do you see the competition too aggressive? Is it quite reasonable? I would like you to talk a bit about competition behavior.

I do not see a problem in terms of competition in the market. I think one of the positive surprises that I had after 6 months, I joined the company is the size of the addressable market in GTF? It's just to a market with huge potential, especially at small and medium-sized customers, which is where we are locating mills of our marginal capital. Smaller contracts, naturally, it's a lot more work than closing a contract of 3,000 cars, but with a much better profitability. So in terms of addressable market, again, it is a positive surprise, which make us not going to a price war with the competition. So a very favorable dynamics for us and also for the other player to operate the market.

Next question comes from Gabriel Frazao from Bank of America.

I have one question about the level of leverage that the company expects for the 4Q with the payment of the swap operation and eventual payment of suppliers.

As I mentioned before, we intend to operate the company at the level of interest rates we have in the market at about 3x. We closed at 2.9% in the 3 last quarters that is more or less stable. But for the coming quarters, 3.1, but not more than that, given the cash generation of the business. So we should operate at around 3x, okay?

Our next question comes from Luiz Peçanha from Banco Safra.

I have 3 questions, but they are quick ones. First, about the Rent-a-Car market. In the restructuring you had reduction of fleet, could you give us a bit more color on what kind of overlapping you have with the main competitors, Localiza and Unidas, because I suppose this is not a market that is growing too much. So perhaps you may have more one-off competition friction in specific regions. Also the impact of the results of drive holidays on Rent-a-Car. And finally, if you could talk about when we are to expect an improvement in financial results which pressures -- continues to pressure the bottom line this quarter, if we should expect a substantial improvement with the debt restructuring you have.

Rent-a-Car. Obviously, we have a competitive demand in the Rent-a-Car market, quite differently from GCF. But the main indicator that shows we have room to grow is the occupancy rate that we reported. So that made us obviously grow the fleet this quarter. In the fourth quarter, we are probably going to go up slightly higher. If we continue with high occupancy rates, generating good marginal value for the budget cards. So there is more competition than the GTF, but it is a market with a large demand naturally the size of our operations. So I do not see a problem in demand given the size of our operation with growth between 5% to 7% next year, as I mentioned. Driven holiday. The third quarter is the best of the operation because of the European summer. So obviously, we grew the fleet by 4,000 cars. Revenue more than doubled quarter-on-quarter given the strengths of the seasonality of European summers. Fourth quarter, probably it's going to go back to the level of the second quarter. So it is the best quarter of the year. And finally, financial results, you should expect significant improvements from now on because of some things. First, this operation that we mentioned to restructure our bump swaps, which has a relevant weight on the financial expenses months-after. So as of November, we are going to see the benefit on the Slide 11 of BRL 150 million a year. Second, as Pedro mentioned, we reduced the debt spread. That also brings BRL 100 million a year of financial expenses. And finally, in the third quarter, there is something that's slightly atypical, which is the number of workdays, 2 more than the second quarter, which brings BRL 20 million extra expenses compared to the second quarter. So you're right, in the fourth quarter, we are going to decrease net financial expenses.

Since there are no further questions, we are going to turn back to Gustavo Moscatelli, the company's CEO, for his final remarks. Mr. Moscatelli?

Well, I'd like to thank you all for attending yet another earnings call for Movida. And I give special thanks to the almost 6,000 employees we have with the company. I'm very happy to see the whole team focus in case in this near time focusing to create value to our shareholders. Naturally, the changes we are making are structural. They take some time and a lot of work. But I see everyone very much motivated, engaged, committed to deliver the changes as soon as possible. We already see substantial changes in the company's operations. Our operating indicators are much better than the beginning of the year. Naturally, there are still some initiatives, as I mentioned, to be delivered by the end of the year but we already see growth for next year and a much more mature company with operational maturity. And I, as the company's CEO, with much more control over the company. I'm very happy that the initiatives made will reflect on our results. So I consider that we are going to see significant improvements in company's results, and I'm very happy with the work developed by our team. And finally, thank the Board of Directors, analysts, investors that have supported us a lot in this period of change with a very intensive agenda, and we have received support and cooperation from those who are on site and which is most welcome. So thank you very much, and see you in our next earnings call.

This conference is now closed. We thank you very much for attending and wish you a good afternoon.