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

[Interpreted] Good morning and welcome to Movida's conference call to discuss the 4Q '23 results. Joining with us today are Gustavo Paganoto Moscatelli, CEO; Pedro de Almeida, the CFO; and Carmila Francesca, IR Officer. This event is being broadcast on soon and can be accessed on the company's website at ri.movida.com.br. We would like to inform you that all participants will be only watching the event during the presentation. Then they will be able to send their questions on the platform, and those will be answered by management during the conference call or by Movida's Investor Relations team after the conference call has ended. I would like to remind you that the content presented will be in Portuguese with simultaneous translation into English. [Operator Instructions] Before moving on, we would like to clarify that any statements made during this conference call relative 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. More forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions since they relate to future events and depend on circumstances that may or may not occur in our economic conditions, industry conditions and other operating factors may affect the company's future results that leads to results that will materially differ from the forward-looking stations. The results discussed in this presentation are adjusted for nonrecurring items and reconciliations can be found in the as release and in the table available at the company's Investor Relations website. Now I'm going to turn the call to Mr. Gustavo Moscatelli.

[Interpreted] Good morning, everyone, and welcome to our conference call for the earnings of the fourth quarter and year of 2023. I'd like to start by thanking our people, more than 6,000 employees for their commitment and determination in the purpose of the year and particularly for what we already see in the beginning of '24. Now I'm going to start presenting our results, starting on Slide 3. I'd like to highlight that we closed '23 with important advances in this new phase of our strategic plans, focused on creating value to our shareholders. We delivered the priority initiatives with discipline in execution and agility. Showing continuous evolution in all business segments, including gains in productivity, efficiency and a better cost of debt for the company. In '23, we had net revenue of BRL 10.3 billion, growth of 11% compared to '22 with an adjusted EBITDA of BRL 3.5 billion, a growth of 5% in the same period. Rental results grew even further with net revenue of BRL 5.1 billion, growth of 19% over 22% and adjusted EBITDA of BRL 33 billion, an expansion of approximately 21% in the period. We closed the year with a total fleet of 244,000 cars, mainly growing in the GTF segment that went from a share of 45% in capital invested in '22 to 56 in '23, the year in which we see a substantial increase in GTF margins. In fleet management and outsourcing, we continue our plan to grow and close the year with expressive growth of 32.7% in net revenue and 38.1% in adjusted EBITDA. Important to highlight that the marginal growth is being conducted with diligence to ensure the profitability of new contracts. We can see the growth of profitability in the adjusted EBITDA margin, reaching 72.1%, up more than 2.8 percentage points compared to '22. In the rental car, we had substantial improvement in the use of invested capital, which translates in an increase of 7 percentage points in overall occupancy rates reaching 70%. The segment's net revenue was BRL 2.8 billion in '23, up 10.1% over the previous year. The increase in revenue happens, thanks to the better utilization of our 113,000 assets, reinforcing our objective of maximizing capital invested. Thus, we expanded revenue per car and EBITDA per car by improving occupancy rates and the average tickets mix of marginal cars. In Seminovo's, we had a healthy volume of sales with more than 76,000 cars sold growth of 5% compared to 22%. The increase in the volume of sales shows our capacity to execute and the right fit of our stores throughout the country. On Slide 4, we bring the company's priority for '23 to create value with discipline and agility and execution and deliverables that we already achieved. Starting with the product of capital invested and free deficiency, we had expressive gain of 7 percentage points in overall occupancy rates for the rental car compared to '22 to 70%, as mentioned before. In addition, better negotiations and proactive negotiations in the use of assets. They showed expansion of 0.4 percentage points in the yield of the RAC, getting to 37% in '23. In addition, we continue to adapt our fleet to rental demand, reducing our average per seat check of cars in the rental car by 7%, reaching 75,000 in '23 versus 85,000 '22. As a central point of our strategy, we have operational improvements focused on asset turnover. In '23, we reduced implementation times by 58%, getting to an effort 18 days. In productive rates reduced by 1 percentage point, getting to 68%, average retirement time, 13 days, a reduction of 32%, also reaching the target for the year. With this, we gained 21 days in available assets to generate revenue during its lifetime. The third highlight is financial management. We prepaid more than BRL 4.4 billion in debt that were at a high cost and contracted new debts with suitable costs for the company and business. Thus, the average debt cost reduced from CDI plus 3.2% a year to CDI plus 2.2% 11%, more than BRL 120 million savings in interest over the net debt of 23%. In addition, we raised new money of BRL 3 billion with an average cost of CDI plus 1.9%. With this, we closed the year with a capital structure even more robust to support our development plan without the need of additional capital. Now on Slide 5, we show details of the fleet residual value by purchase cycle. We have a prevalence evolution in the fleet profile due to better purchase mix and better conditions with OEMs. The previous cycle with worse purchase conditions and were leverage ticket was reduced along the year from 75,000 to 33,000 cars. The cars were bought at a time were of less favorable purchase conditions, higher and resulted in higher depreciation paid during their lifetime. As you could see, they were at 12.5% and 13.5% a year purchases as of the third quarter of '22, the first 2 lines of the table, adding up to 62,000 cars had an average ticket that was more affordable due to the normalization of OEMs and better commercial conditions. Therefore, they have depreciation rates between 7.5% and 9.5% a year. At the end of the year, we had a detailed analysis of the residual value of our fleet due to an even more challenging used power market as we saw in the fourth quarter. In December '23, we had an additional depreciation of BRL 39 million in rental car costs, which is 2% of our total vehicle asset. This nonrecurring impact is a result of the more challenging scenario for used cars in the fourth quarter but also our strategy to anticipate the sale of the score to benefit from purchase times with better conditions from OEMs. As a result, we should continue with depreciation rates at the rate the car between 8% and 9% a year as of January 24, stabilizing margins, having a better read on the business and allowing for a new cycle of value creation to shareholders. On Slide 6, we show Movida's consolidated financial results. Net revenue was BRL 10.3 billion, 11% above the year of '22. Rental EBITDA revenue grew 19%. Adjusted EBITDA reached BRL 3.5 billion in the year, an expansion of adjusted rental EBITDA had a growth of 21% year-on-year. Growth in rental EBITDA is very relevant for profitability indicators in addition to bringing more stability and predictability to the company's future results. Adjusted EBIT was BRL 1.8 billion year-to-date. Here, we can observe the effect of the increase of the recurring depreciation rate in the period. I'd like to draw your attention for the contribution of GTF in the consolidated numbers, accounting for 66% of rental EBIT compared to 53% of the previous year. Adjusted rental EBITDA margin was 63.7%, an improvement compared to 22% on quarter-on-quarter comparison. It also showed an improvement of 1.7 percentage points, showing successful success in the actions implemented along '23 in all business lines. On Slide 7, we show no recurring effects that we had in 2023 results. We has adjusted the impact so as to favor comparability and to better reflect the year's net results. Impact number one, as we mentioned, is the additional depreciation of BRL 390 million in rental car cards. Important to mention that this has no cash impact and represents 2% of the total vehicle assets. Impact 2 is also noncash and it's related to the payment of the spread installment of acquisitions of the company in previous years. thinking of the asset up. It is BRL 139 million. In addition, the write-up of deferred income tax of this company is because of the mergers also generated an impact of BRL 52 million in results. Impact 3 are nonrecurring expenses related to business improvements, like the closing of 6 used car stores, downsizing and expenses with the strategic consulting projects. Finally, Impact 4 is related to the impact in the financial results of rates and losses due to the prepayment of debt, especially related to the bond overseas. These impacts will have a positive impact in '24 by the normalization of the rental car depreciation rates around 8% and since the first quarter '24, implications the corporate structure that we believe will generate a reduction of BRL 32 million and reduction of costs and expansions by the implementation of new pricing tools and asset turnover tools. On Slide 8, we bring our strategic plans for 2024. The priority is to increase value to shareholders and 3 actions were selected for that. The first has to do with the adjustments of the rental car price rates. This is our #1 priority for '24. The price adjustment that we estimate will lead to the rental car monthly yield from 3.7% a month to 4.2% a month With that, we are going to go to a new level of business profitability. It should bring approximately BRL 387 million of revenue a year with the same capital invested. We are confident that after all improvements in process, free operational efficiency. And systems which along the year will give us the basis to reach our objectives. Also, we would like to mention that the potential that can be captured can take us 2 levels close to 4.6% yield to month. In used cars, we want to improve productivity and efficiency of our stores by having a higher volume of retail sales and reducing discounts. The improvement in profitability for the Z is 21% per store, reaching 34 cars per location and improving the dilution of fixed costs and profitability. In addition, we are having a better mix of cars in our stores. And together with tools that we developed in terms of car distribution and management we are going to have better discounts compared to the fleet table. As for GTF, we continue to prioritize the greater allocation of capital in this segment, which is more predictable in terms of cash flow, profitability and has better operation margins for the company's consolidated results. We went from 45% to 56% of capital invested in '23. At this pace, we can get to 60% in '24. On Slide 9, we bring you a preview of the first 2 months of '24 non audited. The results bring us very encouraged because it shows all the work made along '23. In the first 2 months, as you can see, we had net profit of BRL 21 million, reversing the negative results of BRL 23 million. Net profit of BRL 21 million is 100% related to the operational evolution with gains in margin and a better financial cost. Our priorities in '23. Our net revenue grew 16.4%, reaching BRL 1.9 billion. EBITDA had a growth of 20%, with substantial gains in margin, as I mentioned before. In the rental segment, there was an expansion of 3.9 percentage points compared to the first 2 months of '23. I'd like to highlight the evolution of the rental car EBITDA margin, which is above 62% now compared to 54% in the fourth quarter '23. DTF profitability continues healthy in levels above 72%. And you cast the Seminovo's segment. We show that the performance of these 2 months was even higher than expected for '24, with sales of 35 cars per store and important evolutions in pricing, both at the retail and wholesale markets. We see stability between these 2 channels, keeping EBITDA margin at normalized levels, close to 2%. EBIT had even more substantial growth of 38.4%, reaching BRL 386 million in the first 2 months, which can be seen as a turning point in terms of value creation. On Slide 10, we bring the return on invested capital evolution in the company, showing an inflection point for the creation of value in the beginning of '24. The right initiatives conducted in '23 enable us to get to a ROIC of 10.2% in the first 2 months, reaching a positive spread compared to the cost of debt in 1.2 percentage points with a trend of growth for the return and reduction in the cost of debt. This evolution together with other actions mentioned before, will lead us to very healthy levels between 4 and 7 percentage points with a sustainable profitability to our shareholders. Now I'll turn the call to Carmila, the company's IR Officer, to present our business unit's results. Carmila?

[Interpreted] Thanks, Moscatelli, good morning everyone. On Slide 12, we have the operating highlights in fleet management and outsourcing. We continue growing the contribution of long-term contracts in the company's consolidated results. We closed '23 with total fleet of more than 130,000 cars, growth of 16% over '22. The volume of daily rate was BRL 9.8 million, up 12% the previous year due to an addition of operational fleet. Our backlog of contracted revenue considering contracts or reading operations, BRL 4.5 billion, up 74% compared to the fourth quarter '22 and 18% over the third quarter. The amount of cars that we have to deploy of recently closed contracts also showed strong growth in '23, reaching to 18,700 cars, more than double the volume of December '22. That shows the contracted growth of this business line, ensuring more predictability and stability of results in the coming periods. On Slide 13, we have financial DTF indicators. Net revenue grew 33% versus 23% in a total of BRL 2.3 billion in '23 or 45% of the total rental revenue. In addition to growth in volumes, once again, we have an expansion of 18% in revenue per car, reaching BRL 2,275 in the fourth quarter, adjusted EBITDA for the quarter was BRL 464 million in the year, BRL 1.7 billion, up 38% compared to 2018. EBITDA adjusted EBITDA per car also had a new high in the fourth quarter with an average BRL 1,446 per month, evolving more than 23% compared to fourth quarter '22. The Slide 5 shows the highlights for rental car. Total fleet 113,000 cars at the end of '23, basically stable compared to the end of '22 average daily rate, BRL 126, while almost virtually the same than fourth quarter '22. Even more important than the rate itself is the yield. As Moscatelli mentioned, increased by 0.4 percentage point in '23 compared to 2.6% quarter-on-quarter, reaching 3.9% amount in the fourth quarter '23. In addition to the adjustment in the fleet mix, an important part for the evolution is specific year-on-year. Thinking of total fleet, the indicator grew by 7 percentage points, as we mentioned. Thinking of operating fleet, we closed '23 with an occupancy of 79.7%. In the quarter, we grew even further, reaching 82%, more than 5 percentage points above the fourth quarter '22. On Slide 16, we see the rental financial highlights. Net revenue, BRL 2.8 billion in '23, up more than 10% year-on-year. As a result of the expansions we just mentioned, the revenue per car had a new sequential increase, getting to a record of BRL 3,000 per component in the fourth quarter, 23%. Adjusted EBITDA was BRL 1.6 billion in 2013, growth of 6.6% compared to '22. EBITDA per car also grew testing to BRL 1,596 on the average of the year. On Slide 18, we show sustainable performance in the used car operations, with the sale of 7,000 to 6,200 cars in the year, up 5% compared to '22 with a healthy turnout of our fees. Net revenue was more than BRL 5.2 billion in '23, a growth of 4% compared to the previous year. EBITDA margin for the year was 5.1% in the fourth quarter, 3.5%, closer to normalized levels of this business line. Now I'm going to turn to Pedro, our CFO.

[Interpreted] Thanks, Carmila. Good morning, everyone. On Slide 20, we break down the profile of our balance sheet. The first chart shows the evolution of our net debt. In the fourth quarter, '23 amounted to BRL 12 billion, and it's covered by 1.5x, but the net value of our fleet, as we already saw in the fourth quarter '22. This chart shows an important rationale of our credit profile, coverage of our debt by a very liquid assets comprising basically low age and mileage car. We evidenced the strength in '23, particularly in the first half when we reduced the rental car total fleet and applied to the capital generated in the management of our liabilities, reducing our financial costs. Our leverage kept at 3x along the year, closing at 3.1x in December '23. I would like to highlight the strength of our capital structure that enables us to develop our development plans without a need for additional capital via equity. Our gross debt reduced by almost 15% compared to the fourth quarter '22, basically on the liability management that we conducted along the year. We closed '23 with total gross debt of around BRL 15 billion. better condition and payment terms negotiated with OEMs continue to help the company's cash flow dynamics and management of working capital in the last quarter of the year. On Slide 21, we have the cash and schedule of debt maturity. We can see our current cash position of approximately BRL 3 billion is enough to cover gross debt payment by mid '25. In addition, 100% of debt to mature in '24 were refinanced by new 2 new financings of the beginning of the year. Still in financial management. I'd like to mention that in '23, we prepaid our moistens debt in the amount of BRL 4.4 billion that had a cost of approximately 140% of the CTI. New funding along 23 adds to BRL 3 billion with an average cost of CDI plus 1.9% a year an average maturity of 4 years. That shows the diversification of our financing sources and the support to the credit market grips to our strategic plans. The result of these initiatives was reducing the weighted average spread of all our debt by 1 percentage point, going from CDI plus 3.2% in December '22 to CDI plus 2.2% in December '23. To close my presentation, I'd like to remind you that the company continues with better assessment of credit risk with a triple wave rating by Fitch. Now I turn the call back to Gustavo Moscatelli, to complete our presentation. Thank you very much and best regards.

[Interpreted] Thanks, Pedro. Finally, on Slide 22, we summarize the company's new phase for '24. As you could see along the presentation, the combination of evolution of operational efficiency and a solid balance sheet, enabled us to resume positive profit in the beginning of 24%. As with we deal with '23, in 24, we will continue to increase the contribution of GTF contracts to our hope because they bring profitability and stable results. Today, we have the suitable fleet mix to the rental demand, and we are very healthy for the sale of used assets. That enables us to improve our mute and reduce maintenance costs. We are also at a healthy level in the rental car depreciation rate with a better mix and better pungency conditions. We are prepared to have healthy profitability levels. In the beginning of the year, we can see the proven capacity of our used car stores with installed physical structure and no need to open new stores. In the first 2 months, we already saw an increase in the sales volumes reaching 35 cars per store, and we will keep our equity balance sheet with a healthy leverage. Today, we have a cost of debt that enables creating value to shareholders without the need for additional capital, as Pedro mentioned, to close. I'd like to reinforce that I am absolutely certain we are on the right path and have discipline and agility to execute our plan. We are ready to start a new phase of value creation. We will now open to your questions. Thank you very much.

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

[Interpreted] I have 2 questions. The first concerning the rental car yield 4.7% please, if you could give us a bit of color on the pigs have an increase of the corporate line here? The second question, thinking for the budget of '24 and sources and use of resources, what are you thinking in terms of sources? My question has more to do with what you showed in the presentation. You're talking about debt amortization in '24. You already said that you already had 2 new funding in March, but you have a bit of working capital and the suppliers line, we should expect Movida selling a bit more cars in the first half of the year because thinking of this maps of December, you had a bit of a higher purchase at the end of the year. So you don't have to give us precise numbers, but catalyst percentages, x percentage in the sale of cars, x percentage form services. That will help us a lot.

[Interpreted] Victor, this is Moscatelli speaking. Thank I'll start with the rental car yields. '23 was a year that we were very much focused on increasing productivity on the capital invested for the rental car. And you all saw the substantial increase in occupancy rates for the segment. So that naturally led us to have a higher revenue per car, capital invested, generated value for longer. And therefore, we went from 3.3 to 3.7 in our operational yield. The next step is 4.2%. That's our target, something we believe we can reach this year, keeping a high occupancy rate as we closed last year, so above 80% and total occupancy rate above 70% but now with another sizing for this yield adjustment, which is the price adjustment of our daily rates. If you see the price of cars interest rates, all the inflation base really changed and evolved in the last 2 years. And the sector's daily rates did not have the same adjustment. So you will remember that we focus on new pricing tool developed last year. And together with the store and the timing market. We are very much focused on adjusting prices. And in the first half of the year, we are probably going to be able to show part of this increase from 12% to 14%, as we mentioned. Again, we focus on adjusting just one-off daily rates, and then we are going to start focusing on the monthly product rate. So the results of the fourth quarter show that. And when you see the yield is even going to be clearer. Your second question, use and sources for '24. This is very much based on the business cash generation. You saw the first 2 months that we showed a preview with EBITDA growing 20% compared to last year. And we don't see a reason for it to go down. So that will naturally bring a much stronger cash generation for the company. And I think that in terms of debt profile, we have a very positive positioning. As you mentioned, we basically do not have any debt maturing in the short term, whatever we had was already renegotiated. So all cash generation for this year. And as I mentioned, at least 20% higher than last year, will meet our needs for the purchase of cars and fleet renewal. Just one comment on suppliers, Victor. If you take a look, the supplier lines in '22 accounted for 13.8% of the company's fixed assets. In the end of '23, it doubled, it went to 26%. And that shows that we focused on all stages of the asset cycle to extract value, especially in the rental car, whose main source of profitability is more elastic time with OEMs, which is what you see in the supplier lines. That helps with profitability and cash flow. And that, I believe, is the strength of the company in more recent negotiations and has translated in value creation, as you can see with the ROIC that we disclosed for this earnings release.

[Interpreted] Our next question comes from Guilherme from JPMorgan.

[Interpreted] My first question is for the used car market. You did give us a preview on January in February. And it's clear that the market compared to expectations at the end of the year is worse. But if you could give us a bit more color on the market in recent weeks, weeks price level just for us to understand and think of depreciation from now onwards. And the second is a follow-up of the previous question with the liability management and balance sheet. How do you see the trade-off between growth and possible restrictions in leverage? In the beginning, equity seems not to be a priority as a growth lever. But with a leverage of 3x, how much do you think you can grow in terms of percentage, keeping the leverage content?

[Interpreted] Moscatelli again. Thanks for your questions. I'll start with the used comps. As I mentioned in the presentation, the scenario for the fourth quarter was quite challenging. We saw deterioration in car prices. But in the first quarter '24, that was very clear for the results that we believe. We saw an improvement in the credit environment so more flexibility and speed from banks in approving credits that helped with car liquidity. And also in the last 6 months, Guilherme, we saw used car prices at least in our mix, quite stable, which is very different from what we saw in the fourth quarter '23. So for used cars, we have been positively surprised. Sales volume for the first 2 months was a record. So productivity is also quite good, and that has a very important dilution in fixed costs, as we mentioned. So better scenario. Of course, it's still not pre-pandemic numbers, but a lot better than what we saw in the second half of last year and fourth quarter. And that makes us naturally think of a stable depreciation rate between 8% and 9%, which we showed in the presentation. So given the scenario, I do not see any challenges with regards to that. As for growth and leverage, we have a plan to sign for the next 5 years. That is very clear objective, allocating capital in GTF that has a much better EBITDA margin than the rental car almost 73% so far. Recurrent cash flow that is a lot stronger and that make us to have planned growth for GTF of approximately 15% a year in the next 3 years. And with the rental car with stable fleet with this growth that I mentioned GTF. And the rental car fleet is practically stable, we are able to manage the company in the coming years with no need for additional capital and keeping leverage of around 3x, which obviously considering declining interest rates in the company makes an even healthier balance sheet for the company. So these are the plans and what we agreed with the Board of Directors.

[Interpreted] Our next question comes from Lucas Marquiori from BTG Pactual.

[Interpreted] I have 2 questions on my side as well. So first, just to understand the impacts of the fourth quarter. I understood the adjustment and additional depreciation. If you could just explain you know the adjustments related to your acquisitions because I don't think that has an effect on the cost. It's just for us to understand this adjustment and also consulting costs, it's a specific project, digitalization. So what is it exactly? And also the rental car margin, it seems that the beginning of the year was better than the end of year, what do you think happened in January for this to be better? And I would like to understand also what are you expecting for the year in terms of the rental car margins.

[Interpreted] Lucas, thanks for your questions. I'm going to start with nonrecurring items that you mentioned. We bought some companies in the last year. And part of the spread paid for this company was included as added value of assets of the companies that we bought. In the end of the year, we incorporated all the taxpayer numbers and recognize the settled value in results. It is a noncash effect. And if you think of '24 onwards, that generates a benefit of less BRL 32 million in taxes a year. So that was the reason for the restructuring of companies inside of Movida. So basically, we incorporated all acquired companies recognized the added value attributed to this company's noncash effect and from now on, we are going to have a benefit of BRL 32 million in avoided taxes for the year. Second question you asked one of them, the consulting. The 2 main projects for the consulting that we hired last year were, first, to develop a new pricing tool for the rental car, a dynamic tool that enables us to extract more value in a smarter way in the rental car segment. And the second is a tool that will give us the optimal time to retire a car from the rental car. So thinking of the whole asset turnover to be as precise as possible in the retirement of costs and extract the best value from each part. In this slide, BRL 22 million, we are not talking only about consulting costs. It's also the closing of use car stores, 6 altogether, downsizing and that leads to a nonrecurring cost and the consulting. Now for the rental car margin, I think the 6.3% margin of the first quarter is very clear. And basically, what's happening is that we are enjoying all the initiatives and actions that were our priority last year. So asset productivity, cost reductions, better SG&A. All that translated and is translating in the first quarter a better rental car margins. We bet have an increase of prices in this margin, but it is not the bulk of the difference compared to the fourth quarter. So most of it is enjoying the initiatives that were planted last year.

[Interpreted] Our next question comes from Rogério Araújo from Bank of America.

[Interpreted] I have 2 questions on my side as well. The first is perhaps just to understand, I got it right. Based on the last call, one of the main drivers to recover profit along '24 would be reducing depreciation rates since the company was selling cars that were paid at worst purchase conditions. Now with the mark-to-market, we should expect an adjusted stable depreciation rate as of January of this year. Is my understanding correct? And with that, what is the trend of your profit for the year? And what are the main drivers for this trend? So this is my first question. The second question, a bit more specific. We saw gross revenues of car rental defined by the number of daily rates dropping by 9.5% year-on-year. But the reported rate is decreasing by 1%. I would like to understand what you're expecting? Because we always think of gross revenue over volume or we think of the reported daily rate?

[Interpreted] Thanks for your questions. The first item, the expectation in terms of improving profit is not only because of a drop in depreciation rates. This is a highlight because it is the main line of cost of a rental company. So that will certainly improve our profit. But we cannot fail to mention all the operational improvements that we have implemented in the company. We increased occupancy rates by 7 percentage points, together with the reduced depreciation rate, I would say, are the 2 main factors that contribute to a better profit for the company as a whole. And in addition, you have growth in GTF that already has a very good operational maturity, good margins and a better cost of debt. we reduced our average cost of debt by more than 100 basis points. And that brings BRL 100 million of benefits to our results. So it's a set of things and not the depreciation rate alone, although it is the most important point. As for rental car revenue, perhaps this is a misunderstanding when you look at '22, '22 is when we bought the operation in Portugal. And the fourth quarter '22 has 5 months of revenue of the Portugal operation because that happened in the fourth quarter between sign and close. So the IR team can sit down with you and really give you the breakdowns and to everyone who wants just for you to have the comfort of these numbers. The 1% in terms of daily rates is more than plus 7% because if you think you reduce the pre-average ticket by almost 8%, and we kept the same rates. This means that we increase price. This has to do with the product mix that is available for rental. And that's why we have been very focused on looking at yield and not only daily rates because the fleet mix changed substantially. Anyway, thanks for your question. And if you want to just a follow-up, just let us know.

[Interpreted] Our next question comes from Alberto Valerio from UBS.

[Interpreted] Material do as well. First, I'd like to understand after I hear in the company, Moscatelli, what made you change the strategy for the last quarter? I think since you took over the position at Movida, you have the strategy of a lower volume, more focused on the GTF rental car. And in the fourth quarter, you had more purchases directly to rental cars. That's my first question. Second question, the competitive environment for this year. Movida seem a more challenging scenario than previous year. But so are the competitors, localized with results that are not at the level of profitability that is historical for the company. And also, we had a meeting with a small and medium-sized rental car companies that shows that probably when they start winning the fleet, we are going to have an even lesser supply. So what's the competitive environment? Is it more directed to daily rates? Is it more about growth and also the strategy changes you had a long '23?

[Interpreted] Thanks for your questions. So I'm going to start with your first question. Well, very clearly, there was not a change in strategy. What you saw in the fourth quarter was the company's capacity to move fast and seize opportunities to improve profitability. As I mentioned, we saw commercial conditions with OEMs much better in the fourth quarter. And because of our need still to renew part of the rental car fleet, we just accelerated the process. So it was a one-off event. The company's strategy continues the same of basically allocating more capital in GTF. So the fourth quarter was just an opportunity for us to advance replacements in our car fleet with better conditions. That's it. The competitive environment, I think it's healthy. You all follow the industry and all companies, I think, have the same mindset of really readjusting prices for daily rates. But GTF is 60% of our business. So we talked a lot about the rent-a-car business, but fleet management and outsourcing continues to be our priority. In the rental price adjustment is a reality for the whole of the industry, and it's no different at Movida. So as I mentioned, we did have some adjustment in the first 2 months, demand did not go down, which showed us that we have much room to continue with the objective of getting to 4.2% operational yield. But I think it's very healthy.

[Interpreted] Our next question comes from Filipe Nielsen from Citigroup.

[Interpreted] Thanks for taking my questions. First, I would like to understand the restructuring of used car sales. If it is part of your strategy, you still see a need for adjustments in store geography, volume of stores, workforce, if you see the strategy continuing for this year or if you have done everything you have that you had to and now you're just [ referred ]. As for purchases of costs, you're talking about better conditions I would like to know if you still see an impact of longer terms with slightly lower discounts or if the discount rate is closer to pre-pandemic rates and the term is a bit reduced. So just for me to understand what these conditions are all about.

[Interpreted] This is Moscatelli, thanks for your questions. I'm going to start with used cars. I mentioned in the presentation that in the fourth quarter, we had a major restructuring in the used car business. Just for you to have some numbers we changed 36% of our workforce, 50% of regional managers and last week, we changed one Executive Director that led the business. Together with that, we changed the other things like variable compensation arises to sales force training, and we closed 6 stores. All that said, the performance of rental car in the first 2 months was way beyond what we expected for the beginning of the year. Of course, the market also improved, but all these changes that we made reflected in the reported numbers. And I think the major benefit that we have for this year is that we have no need Filipe, to increase the number of stores or the volume of sales we planned for the year. So indeed, is to have the maximum productivity possible at each store, extracting the maximum value from prices to increase profitability of the company as a whole. And I think the first 2 months showed that we are on the right path. As for car purchases, naturally, we think of discount and payment terms as well. The company is very capital intensive, as you know. So I see the whole thing of the whole asset cycle to think of the value for shareholders as a whole. But you can consider that now we are at pre-pandemic levels considering the home.

[Interpreted] Our next question comes from [ Igor Araosu ] from [indiscernible].

[Interpreted] I just have a follow-up of a question asked in the beginning by Victor, if I'm not mistaken, talking about payment terms and in terms of cash needs for the first half of the year. We saw in the third and fourth quarter a volume of at least BRL 7 billion CapEx for the purchase of cars, given a more challenging used car markets, I would like to understand their mindset with regards to, are you going to have to pressure margins a bit more going to wholesale given that you have the need to have the fleet turnover in the first half of the year thinking that the supplier line is going to mature. So this is the first question. Second question, I'd like to understand your mindset as for the car mix, not the purchase until the second quarter '22. Because I know you had the worst mix then. After the readjustment, you talk about 8% to 9%, but I think that in the BRL 360 million of impact you have 60% because of worst purchase condition, 40% because of more intense devaluation in the used car markets. I would like you to tell me what you see in this first quarter in the used car market, thinking that we still have some pressure from OEMs in terms of new car prices. So I just would like to know your mindset for the behavior of the used car gross margins for '24.

[Interpreted] Thanks, Igor for your questions. I'm going to start with funding needs, as you mentioned. I'd like to reinforce that I do not consider whatsoever, distracting value for the sales of car due to growth. But the opposite, if we have to stable the company size is to create value, we will, as we showed in the first half of last year when we downsized our fleet. So the main objective of company management is to create value and delight customers, and that is not done by distraction value in the sale of cars I think what's clear is that gaining productivity in used cars, increasing cars per store decrease in discounts is something that we are going to pursue throughout the year. And I think the numbers from the first 2 months show that we don't have a challenge in terms of sales volumes, probably the same of last year. And that gives us the options of having all the improvements for the macroeconomic environment for the company profitability and shareholder value. This is our objective with regards to used car sales. And as I mentioned, in terms of cash flow, we are very well balanced. Depreciation, as I also mentioned, we saw the first 2 months with used car prices that are quite stable, at least for our fleet mix. And that for now gives us a very favorable environment in terms of depreciation. So I do not see the challenge between 8%, 9%, which is what we see today because it has more liquidity and more favorable credit market and prices more stable in the last 60 days. I don't know if you have any other questions, but I think I could answer both questions.

[Interpreted] No, very clear. Moscatelli, that's it. If you could just perhaps comment on the new players in the market, if they have changed prices of used cars? I know the mix is different, but the average price swaps cars, especially electric are in the market, perhaps with a different mix. But do you think it has affected the used car market. Is it more about demand?

[Interpreted] I think it's more about demand. So far, we haven't seen a real impact on the used car market. Perhaps for our fleet mix, I think this is a relevant point. We have to consider that most of our fleet are very sellable cars, and this is not a reality for electric cars. So far, we don't see a deterioration in the market.

[Interpreted] Thank you very much and once again, congratulations for the results of the first 2 months of '24.

[Interpreted] That completes our Q&A session today. We are going to invite Mr. Moscatelli for his final remarks. Mr. Moscatelli.

[Interpreted] Well, I'd like to close this conference call with the initial message banking, the dedication of Movida's team, which undoubtedly was what made the difference for the company to deliver all the improvements we mentioned and start 24 with positive growing results. So thank you for the more than 6,000 employees. And also, I could not fail to thank that the other stakeholders, investors, sell side by sites that have contributed with the day-to-day of the company in new insights because indeed, this is something that we don't change overnight. It is something that happens quarter-on-quarter, as you have been following. So thank you all. And finally, the positive takeaway message is that we are very encouraged with what we signed in the first 2 months of the year and very confident of what we have to deliver this year given everything that was developed in the last 12 months, which was a lot, as you saw. So the company is strategically well positioned in terms of operations and capital structure, and that makes us quite excited about the developments of '24. So once again, thank you very much, and see you in the next earnings release.

[Interpreted] Movida's conference call is now closed. We thank you very much for joining us and wish you a good day. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]