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 2024. Today with us we have Gustavo Moscatelli, CEO; Pedro de Almeida CFO; and Carmila Francesca, IR officer. This event is being webcast on Zoom, and can be accessed on the company's website at ri.movida.com.br. [Operator Instructions] I would like to remind you that the conference presented will be in Portuguese with simultaneous translation into English. [Operator Instructions] Before moving on, we would like to let you know that any statements that may be made during this conference call regarding the Company's business prospects, projections, operating and financial goals, are beliefs and assumptions of Movida's management as well on information currently available to the company. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties, and assumptions as they refer to future events, and therefore depend on circumstances that may or may not occur. General economic conditions, interest conditions, and other operating factors may affect the Company's future results and lead to results that will be materially different from those in the forward-looking statements. The results discussed in this presentation are adjusted for non-recurring items, and the appropriate reconciliations can be found in the earnings release and in the spreadsheet available on the company's IR website. Now I'll turn the floor to Mr. Gustavo Moscatelli, please, Mr. Moscatelli.

Good morning, everyone. Welcome to the conference call for the second quarter 2024 of Movida. I'd like to start by thanking our people, more than 6,000 employees, for their dedication and commitment in delivering the results of the first half of this year, which marks a new phase of positive results for Movida. Now I'm going to continue with the presentation of results, starting with Slide 3. We are very excited to announce yet another result with great deliveries, such as record in revenue EBITDA and EBIT for the company. In the quarter we delivered net revenues of BRL 3.4 billion, EBITDA of BRL 1.49 billion, and EBIT of BRL 654 million. We exceeded our results, and in addition, attained an adjusted net profit of BRL 80 million in the quarter, an improvement of BRL 96 million compared to the second quarter 2023. With this, we've reversed last year's loss and attained an annualized return on invested capital for the quarter of 11.7%, expansion of 3.7 percentage points compared to the second quarter last year. It's important to note the composition of evolution of these indicators when we analyze the rental sector, which is our core business. We had an operating fleet addition of 14%, while net revenue grew by more than 30%, EBITDA by 42%, and EBIT by 54% in the same period. The current level of operational efficiency is reflected in the company's positive results, showing significant change in levels compared to the previous year, moving forward in the cycle of creating value for our shareholders. On Slide 4, we bring the priorities of the companies. As a demonstration of our commitment for creating value to shareholders, we formalized by means of guidance, the operational projections that are part of our focus on executing the strategic plans for '24. And we are already seeing important developments in all indicators, starting with the rental cars. We started to re-price our daily rates and yields and had significant progress during the year. We continue to re-price our occasional rates and recorded a 13% in the rates compared to the previous year, significantly better than the returns of the product before. On a month-on-month evolution, we had a 15% in June versus 2Q '23, collaborating our strategy to pass on the rates. It's impossible to remember that the seasonality of the first quarter is usually the strongest. And there is naturally less demand for the occasional product in the second quarter. Even so, we had significant pass-throughs in this comparison, established a new price level for the coming quarters, which are seasonally better. We also began the pass-through of prices on monthly rates, reaching 80% plus compared to the previous quarter and then comparing June to the second quarter '23, an increase of 11%. When analyzed the rental coverage on a consolidated base, we had a 9% increase in the average daily rate over the year, 12% increase compared to the last month of the quarter, sequential increases every month of the quarter, closing June with a rate of BRL 130 per day. Business level will be also driven by the share between occasional and monthly in the coming quarters, as well as the continuity of our pricing activities. As a result, we have seen significant improvement in profitability, shown by the growth of yield of 3.5% a month in the second quarter '23 to 4% a month in the second quarter '24. With the ongoing actions to reprice eventually end month, occasional, and monthly products, we are confident of achieving our guidance of 4.2% yield. Moving to Slide 5, we showed the breakdown of the improvements in used vehicles, where our priority is to increase productivity and efficiency of our stores to higher retail sales volume and less discounts against the FIPE table. As you can see in the first chart, we sold 41 cars per store in the second quarter, a growth of 46% compared to 23%, already exceeding the guidance for the year. This is a company record for sales per store, reinforcing a new level of efficiency and productivity. Another important indicator is the efficiency of car sales against the FIPE table. In retail, we had a discount of 5.1%, an improvement of 1.2 percentage points against 23%. Wholesale, 15.3%, an improvement of 2.2 percentage points in the same period. In both sales channels, we have already achieved the guidance for the year. During the half year, we had constant improvements in profitability, with increasingly smaller discounts over the course of the quarter. The significant improvement in productivity and efficiency in used cars is a consequence of the implementation of the pricing and distribution tools for cars, building retail, and wholesale. In addition, the change in the car inventory mix is also a differentiator for used car performance, and this comes from the change in fleet mix that we had last year. In the current mix, we have a profile with greater liquidity and sales attractiveness with cheaper cars. Percentage of rent-a-car cars in our inventory went from 45% in the second quarter '23 to 51% in the first quarter this year, and 55% at the end of the second quarter. As you can see, the average [ fixed ] price of our cars in inventory changed from BRL 79,000 per car to BRL 75,000 in the second quarter this year, contributing to improved turnover. The result is also a sequential improvement compared to the first quarter of this year, with the average price of the FIPE table of 77.2, reinforcing that this decrease in the FIPE table is a reflection of the change of the mix of cars, both on the rental car, with lower average ticket over the last 12 months. Slide 6, we show that we prioritized greater allocation of capital in GTF, that ensures greater profitability and predictability in cash flow, in addition to higher operating margins for the company's consolidated results. From '22 to the second quarter this year, we went from 45% to 61% of invested capital in gross fixed assets, reaching the guidance of 60% of the year. This shows greater discipline in capital allocation with priority to GTF. It's also important to highlight the contracted revenue expansion, not only due to fleet expansion, but also due to a sequential increase of revenue per car in the segment. As an exercise, when we analyze the net revenue for the second quarter '24, we've reached BRL 30.3 billion, an increase of 46.2% compared to the second quarter '23. It's worth noting the EBITDA margin delivered of 76% second quarter this year, an increase of more than 2 percentage points compared to the second quarter of the previous year. On Slide 7, we showed the evolution of our EBITDA margin in rental activities since 2016, showing that now we reached the best operating results ever since the IPO. This record level of margins reiterates how right the actions implemented to gain efficiencies were, and reflects significant improvement in the use of invested capital, and the cost of expense reductions that we had over the last year, positioning the company for a new phase of value creation. And the rent-a-car margin was 64.7%, showing a new level of profitability in the segment. In GTF, we reached EBITDA margin of 76%, consistency and margin gains with scale. On Slide 8, we show our fleet in relation to our revenue growth comparing the fourth quarter with the second quarter this year. The strategy we implemented at the end of last year of renewing our fleet at a more favorable purchase time was essential for us to achieve these operating results for the quarter, anticipating part of the renewal and expansion expected for '24. Maintaining the size of the fleet in the half year and record margins shown on the previous slide, evidence how right we were in the GTF, net revenue grew by 28.5%, while the number of cars grew by 5.3%. In the Rent-a-Car, the fleet was reduced by 3.9% in the period, and revenue in the same period grew by 12.4%. Consolidated basis, the number of cars in the fleet grew by 1%, while net revenue grew by 20%. The total fleet for the second quarter '24 ended at 246,000 cars, basically stable compared to the previous quarter. The results reinforce our focus on productivity and efficiency in the use of invested capital. And this discipline supports our commitment to create value to shareholders. On Slide 9, we show the evolution of the depreciation of our assets. Starting with the rental car, you can see that depreciation rates have remained stable over the last few quarters, between 8% and 9% a year. This means an average depreciation of BRL 6,400 per car in the second quarter, in line with the first quarter this year. At GTF, depreciation analyzed per car in the second quarter was BRL 8,900, the result of deployment of cars with a higher acquisition price and the retirement of cars with lower average ticket. The cars that left the fleet were running at a lower depreciation rate because they had gone through the cycle of high appreciation in previous year. The segment's current depreciation rates are between 8% and 10%, stable and healthy compared to the first quarter. On Slide 10, we show the company's consolidated financial results. Net revenue was BRL 3.4 billion, an increase of 38% versus the second quarter '23. Rental revenue grew by 30%. It's important to note that our fleet grew by 14% year-on-year, which demonstrates gains of productivity in our operation. EBITDA reached BRL 1.149 billion in the second quarter, an increase of 29% compared to the same period last year and 25% comparing the first half of '23 and the first half '24. Rental EBITDA showed an even greater growth, 41.8% compared to the same period last year. The growth in rental EBITDA is very important for profitability indicators as well as bringing greater stability and predictability to the company's future results. The rental EBITDA margin was 69.9%, an improvement of 5.6 percentage points compared to the same period last year and 5.1 percentage points when comparing the 6 months period, showing how right we were in the actions implemented throughout the quarter in all business lines. EBIT in the second quarter was BRL 654 million, an increase of 30.6% compared to the same period last year and 28% compared to the same 6-month period in 2023. Once again, I'd like to highlight the delivery of adjusted net profit, which reached BRL 80 million in the quarter and BRL 142 million in the first half '24, reversing the losses of previous quarters, and marking this new phase of positive results. On Slide 11, we show the results of our efforts and changes the company has been through since in terms of ROIC evolution. Our return on invested capital reached 11.7% in the second quarter, annualized, an important evolution compared to 23%, an expansion of 3.7 percentage points. This shows continuity in the expansion of value creation to shareholders, exceeding the cost of debt by 3.3 percentage points. The evolution, combined with ongoing actions to increase prices at the rental car, greater productivities in used vehicles, and greater allocation in GTF will lead us to growing sustainable levels of ROIC spread. Now I'm going to turn to Carmila, the company's IR Officer, to present results of our business units. Carmila

Thanks, Gustavo, and good morning, everyone. On Slide 13, we have the operational indicators for fleet management and outsourcing. We ended 2Q '24 with a total fleet of 138,000 cars, an increase of 21% versus the second quarter '23. Backlog of future revenue, which takes into account contracts already in operation, was BRL 6.4 billion, an increase of 92% on last year. In the next chart, we showed the 15,618 cars that we have to deploy from contracts won over the second quarter '24, which grew 39% year-on-year. Of these, we have more than 3,000 cars and the renewal of existing contracts and 12 cars for the expansion of fleet contracted for the coming quarters. It's important to mention that this balance includes cars already bought that are in our balance sheet, and cars that we are still negotiating or waiting for automakers to deliver. The indicators show the potential GTF, which, as it gains share in the company's total, provides us greater predictability and stability to our consolidated results. On Slide 14, we go to the financial indicators of GTF. Net revenues amounted to BRL 816 million in the second quarter '24, up 46% the second quarter last year. We had an expansion of 17.7% of the operating fleet in the same period, increasing the return on invested capital. In addition, we had sequential increases in revenue per car, we've reached a BRL 2,582 in 2Q '24, up 22% year-on-year. In the half year comparison, it was up 20% compared to 23%. EBITDA this quarter was the highest ever, with growth of 50.6% compared to last year, reaching BRL 620 million in 2Q '24. As mentioned by Moscatelli before, the segment's EBITDA margin also reached the record mark of 76%, growth of more than 2 percentage points compared to the same period '23. Consequently, due to the evolution of our operation, EBITDA per car also reached a new high in the second quarter '24, with an average of BRL 1,744 per month, an increase of 28% compared to 2Q '23. On Slide 16, we show our operational highlights for the rental car business. The first chart shows operating occupancy rate, which was virtually stable compared to the second quarter last year, 78%. In the half year analysis, occupancy rose by 0.9 percentage points year-on-year, reaching 79.2% in the 24 months to date. The average daily rate this quarter was BRL 135, an increase of 9.1% compared to 2Q '23. Important to note is that we saw an increase in average rates, even with the change in the mix of rates with an increase in the participation of monthly products. Financial highlights. Revenue per car followed the upward trend and reached BRL 3,087 per month in 2Q '24. The evolution combined with the optimization of capital invested in the operation led to an increase of 0.5 percentage points per month in yield, compared to 2Q '23, reaching 4%. On Slide 17, we made progress in rental car indicators. The average operating fleet was 90,000 cars in 2Q '24, up 9.2% compared to the same period '23. Net revenue, BRL 749 million in the quarter, up 15.8% versus the first quarter last year. As we have already shown, revenue per car reached BRL 3,087 per month in the second quarter '24, 6.1% higher than the same period last year. EBITDA for the second quarter was BRL 404 million, up 31% on the second quarter of '23. EBITDA margin reached a new level of profitability with 64.7% in the quarter, the best margin ever reported by the company, with growth of 7.5 percentage points compared to the second quarter '23. We also demonstrate the effectiveness of our costs and expense reduction actions. As a result, EBITDA per car was 1,792 per month, an increase of 20% compared to 2Q '23. Next on Slide 19, we show used cards indicators. We maintained sustainable performance in the operation with significant increase in sales volumes totaling 28,000 cars in the quarter. The result represents growth of 48.6% compared to 2Q '23, proving the installed capacity of our structure. Net revenue was BRL 1.8 billion in the second quarter, up 46.7% compared to 2Q '23, also reflecting the evolution of our pricing, as we mentioned before. Worth highlighting is the improvement in productivity per retail store. As we have shown, we've reached a record of 41 cars sold per store per month, 41% higher than the same period last year. EBITDA margin maintained at normal levels for this line of business at 1.4% in the second quarter '24. Now I'll hand over to Pedro, our CFO.

Thank you, Carmila. Good morning, everyone. I'm going to go to Slide 21, where we show the profile of our balance sheet. Starting with leverage, it was maintained at 3.2x in 2Q '24. However, if we annualize the EBITDA of the second quarter '24, leverage would be 2.8x. And as we've shown in previous slides, we have much of this potential in-house, especially with new GTF contracts. The table below shows the composition of the evolution of our net debt, which was BRL 13.4 billion at the end of the second quarter '24, having grown by 6.3% compared to the end of March '24. However, part of this growth was offset by a 10.6% reduction in the supplier's line, up 10.6% in the period. So total net debt plus suppliers rose from BRL 16.7 billion to BRL 17.1 billion at the end of June '24. That is, it is an increase in the quarter of only 2.2%. On the left-hand side, we have the debt maturity schedule, also considering operations that have been conducted so far. Our current cash position is BRL 3.7 billion, in an effort to cover the payment of gross debt until mid-'26. In addition, practically, all debts maturing in '24 and '25 have already been re-negotiated through our financing during the year -- financing raised during the year. 100% of our debts remain free of any real guarantees and new fundraising in addition to extending our financial liabilities that now have an average maturity of 4.2 years, reduced our average cost to CDI plus 2.1%. All the initiatives that have been carried out so far in '24, a total of more than BRL 5 billion, prove our broad access to various sources of financing and the support that the credit market, both local and international, gives to our strategic plans. Now I'm going to turn the call back to Gustavo Moscatelli, to complete the presentation. Best regards.

Thanks, Pedro. Finally, on Slide 22, I'd like to reinforce a few takeaway messages for this new phase of Movida. As you saw throughout the presentation, we show consistency in the evolution of our results. We had the right management in all pillars of the asset cycle, building foundations for sustainable value creation. Our strategic priorities for '24 are being pursued with great discipline, both in the rental car and in GTF and used vehicles. In addition to these indicators, which are our formal guidance by business line, we also have important guidelines for consolidated results in '24. They include the strengths of our balance sheet, with healthy leverage, and the lowest level of debt cost spread we've ever had, about CDI plus 2.1% a year. As a result of all the above, we had sequential growth in net profit, reaching BRL 142 million in the first half of this year and return on invested capital of 11.7% in the second quarter annualized. Finally, I'd just like to say that I'm very excited about the company's deliveries in yet another quarter of this new phase. The indicators give us confidence to continue working with great discipline in the execution of our strategic plans and focus to continuous evolving operational excellence while at the same time extracting the maximum value from our assets. Thus it will enable us to create the adequate value for shareholders while satisfying our customers in an equation that guarantees the sustainable perennial development of our business. I am positive, we are on the right track and confident about the next deliveries. I would like to thank our employees for their deliveries and for everything we are yet to build together. Thanks to our shareholders, suppliers, and customers for your trust. Now we are going to open the floor to your questions. Thank you very much.

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

I have a question about Movida's fleet. When we do the math, which is operating fleet divided by the fleet at the end of the period. In the fourth quarter, we were close to 76%, in the first quarter 86%, now 87%. And one of the initiatives that Movida had in the past was to try and reduce the time of deployment of cars, and the time of preparation of these cars. And now in the second quarter, we see a good volume of purchases and sales of cars. So my question is what else were you able to do in these 2 fronts? What kind of development? And do you think we are going to see Movida getting to the 90%?

I think that last year, we were very vocal and transparent in its initiatives talking about assets turnover. We talked about asset turnover in the rental car, but we also had important initiatives in GTF. And at the end of the year, we showed the evolution of last year, getting to the levels that we consider appropriate for value creation and restructuring our rental car. You saw that in the return of invested capital, we really had a breakdown of numbers. So this is a focus for the company, especially in the rental car segment, where asset turnover is even more important for value creation because it's a shorter cycle in terms of useful life. So this is a focus of the company, but it's a process that is more stable. -- giving all the initiatives that we implemented last year. I think that we might get to 90% in the short term, given that we had a very substantial growth of contracts of GTF in the first quarter. And then obviously, you pressure the indicator that you mentioned. But when you go to a more stable level of growth, which is how I see the second half of the year, you are going to see our consolidated getting to 90% and even a bit higher given the level of efficiency that we have in the operation today. So to answer your question objectively, yes, and in the short term.

Our next question comes from Guilherme Mendes from JPMorgan.

My first question is the rental car demand. You had very strong pass-through of prices, both in the rental car and GTF, GTF more by the renewal contracts, but REC was a positive surprising. I understand the guidance of re-structuring your yield, you probably will have a bit more pass-through. Objectively, how elastic do you think you are? That is how much more prices can you pass through without affecting demand? And second, Moscatelli, last quarter, we talked a bit about the pace of growth. You had mentioned that you would probably grow about 15% in TTF a year with the rental car basically stable without pressure on balance sheet and equity. Is this something that is maintained?

Thanks for your questions. Elasticity of prices and demand in the rental car, as you saw, demand showed resilience to price adjustments that we made in the whole of the first half of the year. We talk about the rental car, but we have 2 very different segments, and with very different ambitions as well. We have occasional and monthly products, and we were able to adjust prices with both products, so it was a relevant price adjustment. But I think this is something that did not start in the last 6 months, but rather in the last 12 months of the company. If you remember the initiatives that we worked with last year, and one of them is still ongoing was the creation of systems, not only controls, but systems that were intelligent to price our businesses. So all price adjustments were not you know abrupt for all segments, for all customers. We use intelligent tools that we developed internally, some with the help of consultants, but that are proprietary to extract the maximum car from each car from each store at this level of granularity. So we are very confident. And we think we still have room in the second half year. I'm not going to give you a number because that would be guidance. But the relative increase of prices for us to reach our yield guidance from 4% to 4.2% is at least what I see in the short term. So this increasing price for this change is very visible for me and the company. Now as for GTF, I don't think we can know – back flash the efforts made. We are working very hard with the operation to adjust marginal prices of contracts, but also to readjust ongoing contracts and contracts in which we won the bid, but have not implemented contracts. And this has to do with responsibility with the money of shareholders, which is a priority, but also a need for minimum profitability. So we are working very hard with tough negotiations, but for the good of the company and respecting our customers. So price initiatives that we are talking about in the rent accounts are also ongoing in GTF and that will generate results for the coming quarters and years that are much better than what we are reporting now, because GTF as you know are long-term contracts. So this is also initiative that started in the second quarter, and that will last until the end of the year.

As for your second question, I'm just going to confirm, but we understand the pace of growth for GTF at about 15%, with stability in the rental car. At this level of operational efficiency, at this level of cash generation EBITDA, it is sustainable for the company without any need for a follow-on to inject capital for the company. So this is not today, a conversation they are having the focus of the company and management and board of directors is operational efficiency and no capital injection. This is not a need that we see right now.

Our next question comes from Alberto Valerio from UBS.

I would like to ask about the used cars market. What is going on quarter-on-quarter, rental car sales had a drop of the prices from 71% to 68%. If you take a look at the fifth table, it's close to 22 months of the previous quarter. So I would like to know used car sales and how much is going through your own stores, and how much in wholesale, if you can break down the information? Thank you.

Used cars dynamics in the first half year proved to be very strong to us with the specificities of the business. The point that you mentioned about the average ticket is an important lever, and once again, that was not creating the last 3 to 6 months. It was a change made in terms of company strategy, last year of changing the rental car fleet mix, with cars with an average ticket of BRL 90,000, 2 cars with an average ticket of BRL 75,000. Now it is the end of the cycle, we are starting to have cars in used car stores of this new cars with lower tickets. And this is a profile of cars with lower tickets that bring more liquidity, because you have a much larger addressable market, and with less pressure on depreciation. These cars have a marginal depreciation that is lower when you compare to cars that cost BRL 150,000, BRL 200,000. So they are market entry cars with higher liquidity. So I think this is the consequence of a decision in allocating capital, and that was right. So that was the decision made last year, buying cars with lower tickets. And I think that we are reaping the fruit now in the sale of these cars. The other point that you mentioned is the mix between retail and wholesale -- this is part of everything that I mentioned, we are operating at about 50-50, 50% retail, 50% wholesale, which I consider very healthy for the company's mix.

So I can assume that the mix is slightly different. So you're not talking about more expensive cars of 2 years ago. You have a mix of these cars, but also newer cars with an average lower ticket. Is that correct?

Yes, especially in the rental car. In GTF, we still have cars of previous years, 3, 4 years ago that are sold to now, but in the rental car, you are very right. And from now on, we should see more and more a greater share of these newer cars with a lower ticket.

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

Congratulations on your results. I have 2 questions. The first, we are very impressed with the increase of rates in your fleet quarter-on-quarter, and we had estimated an average daily rate of BRL 120, BRL 140 per year, which is way above the average that you had, which was BRL 86. Now you're talking about adjustment of existing contracts. So perhaps this is more clear, it is not just the effect of marginal increases. So if you could talk about the implied yield in the contracts that you're closing in terms of margin, just for us to use as a reference. And if that can be considered as of now in your vision -- this is my first question. And the second question, if you allow me, there was a relevant decrease in SG&A, especially in the rental car. And when you take a look at the nature of cost expenses, you have a line of other operating expenses that was positive at BRL 2 million this quarter. It was about a negative BRL 30 million in previous quarters. So give you a bit -- give us a bit more color about this change and what you're considering for the future, if you have any note to make on that?

Thanks for your questions and for following us from close. I'm going to start with GTF. All the results you saw in GTF have very little impact of the work I mentioned in terms of re-negotiating existing contracts. This started in the second quarter for GTF. And obviously, these are tough and longer negotiations than price adjustments in the rental car. So what you saw in terms of prices per car are regarding marginal contracts of the company. And that is explained by contracts with dedicated operations, which is a difference. We have dedicated operations with dedicated shops for customers for 8 years now. It is an entry barrier for the sub-segment that we operate. We have contracts of 36 to up to 60 months, and on average they have an average car tickets that is way above the base. In GTF, almost BRL 100,000, and our base is BRL 57,000, BRL 58,000. So naturally, that brought a value per car that was way above -- so all the benefit of the work being done in terms of re-negotiating the existing contracts will be seen as of the third quarter. As for the implied yield of marginal contracts that you mentioned, we are at about 3.3%, 3.4%. But I would not like you to stick to this number because, once again, we are being very strict in the pricing of all our businesses. And if you get a car that runs 1,500 kilometers, 5 months in the city of Sao Paulo, it can have a yield compared to the 3.4% to 3.3% way below. But the cost of maintenance is lower, depreciation is slowing. So this is the level of detail that we are using for the management of the company, but just to give you a reference for you not to have another 3.3% to 3.4% -- your second question, reductions of SG&A. Here, we have 2 important things, the first is that at the same time, we have been talking about re-pricing our rates, which has to do with the profitability and survival of our business. We are not letting go relevant efforts in restructuring the company's costs and expenses. So if you took a look at our notes, you saw a reduction in all lines. Personnel fixed costs of store rentals. -- all lines showed reductions, and this is going to continue -- a priority for the second half of the year. We might have some kind of re-classification between lines. I'm going to ask the IR team to contact you for the reconciliation. But I think that the results of our business margins, so you saw revenue per car grew a lot in the 2 business, SG&A cost components going down per car, and therefore the margin is proving to be very healthy, and at the highest level ever experienced by the company. So it is a set of things, and thanks for your question.

So we should expect the level of SG&A to continue. We are not going to have -- you did not have a specific reversal for this quarter?

Yes, you should expect this level of efficiency for the coming quarters.

Our next question comes from Lucas Marquiori from BTG Pactual.

My question is more for the management of liabilities. What is still left to do when you're managing the different liquidity sources of the company, so I'm talking about bank debt but also relationship with OEMs, supplier's line was very well controlled this line assignment, which is also a liquidity for the company. So what is there to be done Moscatelli, rate reductions, extension of maturity, re-negotiation of contracts. So I would like to hear a bit about that.

Thanks for your questions, debt management, when Pedro and I take a look at the company's profitability for the future. In addition to huge focus on operational initiatives, -- we have a dedicated team of us included to work on capital structure for the company and debt management is relevant for our business as you know very well. We did an excellent work in the second quarter with the issue of a foreign Bund, fantastic timing, cost of CDI plus 2.30 probably something that we wouldn't get in Brazil, so a relevant amount of money. But at the same time, we were very quick to use this money to restructure our financial debt. So we pre-paid some more expensive debt that we had in our balance sheet, and did beautiful work to extend maturities that we had for this year and last year -- next year. So as you could see in the presentation, in '25, maturity we have BRL 1.5 billion for an EBITDA of the company annualized of almost BRL 4 billion. So today, the company is at a position, that I think it's unprecedented in terms of cost of debt and maturity, the maturity schedule. But undoubtedly, as operating costs, this is something that we are always looking into. So I do think we still have some opportunity to improve the cost of debt, perhaps 20 basis points, but most of the work has been done. I think that from now on, the focus is going to be improving operating structure and use the company, to use our efforts to de-leverage the company, which is also a focus that is more under Pedro in finance. But it's also our focus to have the capital structure with a lighter balance sheet that is reducing from 3.2 to a lower level as soon as possible.

Our next question comes from Pedro Bruno from XP.

I have 2. The first, going back to used cars. I would just like to confirm the message and understand what is behind. I think the message is clear. When you say that at this current level of depreciation between 8% to 10% in a rent-a-car or GTF, you have more stable margins to the future. We saw gross margin going down quarter-on-quarter with a slight increase of depreciation. As you mentioned, I would like to understand -- if -- when you talk about margin stabilities for the future -- does that refer to gross margin in used cars should be close to the 5% where you got to this quarter? Or is that more related to the EBITDA margin. So you're talking about efficiency, more sales, more SG&A dilution and et cetera? And how do you include in the expected depreciation between 8% to 10%, the drop in the prices of brand-new cars that we see happening. It's very hard to map that in the market, but how do you include that in future expectations. Just for me to have a bit more granularity on your message. This is the first question. I'm going to ask the second question next.

Used cars. Indeed we had the structural changes in the management of used cars. In the last 6 months we changed almost 50% of the team, the way of compensation for sellers, we closed stores. So lots of changes in used cars. But together with that, we have a better decision in terms of capital allocation, which is what I mentioned before. That is buying cars with lower tickets and higher liquidity. In our opinion, this brings more efficiency in selling cars, more cars in retail, less discount against the FIPE table, which is what we saw in both the first and second quarters and a higher sales volume with the same structure. So to have more productivity with the structure that we have created along the years. So you saw we grew more than 30% sales per store. That dilutes fixed costs. You don't have the marginal costs, except for the salespeople. So you have a much higher dilution than what we had before, and that makes us believe that we are going to have a more stable EBITDA margins to answer your question in used cars, because for us used cars have to make ends meet. So we have to pay the structure and expenses to sell the car. So that to us is what we see in terms of used car sales. So we do see this margin between 1% and 2% at a normalized level from now on – you're already seeing us operating in used cars with the cars bought last year. This is already getting to stores with a lower average ticket, higher liquidity, and that brings the dynamics that we see today.

Yes. And any assumption, just a follow-up quickly, assumption in terms of evolution of prices for new cars, and therefore, the impact of that in used cars, although subjectively because this is a complicated topic.

Yes, we do, Pedro. And this is at a level of granularity of car by car. Again, we cannot think of a depreciation rate that is common to all cars, and estimate additional depreciation or appreciation to all cars. Each car is a car with their specificities. Even when you're talking about the same group of car profiles, depending on the brand, location, you have differences. So we do -- but our tools and our management model has this level of granularity and frequency of revisiting numbers on a monthly basis. Now Pedro and myself do that. We monitor all businesses. We have a meeting that lasts all morning, just checking on the depreciation of assets in our fleet. So I'm very confident that the depreciation rates are right, and I do not see any sign of warning or concern about that. Quite the opposite, I think we are with the right depreciation levels in all businesses.

And my second question then, perhaps it's a simpler question. In terms of leverage, you did mention before about the -- your debt dynamics. But we did see an important reduction in the first half of the year with suppliers and leverage was stable, as you indicated in the beginning of the year and you had an expectation that leverage should go down as of the second half of the -- results of all the efforts that you made. So what is the level of leverage that you see for the company, thinking of the end of the year in '25?

Well, leverage, we continue with the same expectations, not only us, but you can see also that very clearly because of the operational improvements of the company. And it is this improvement that perhaps surprised most of the people, as we capped the same leverage throughout the first half of the year, no increase because operational results were way above expectations, and this is what we expect for the second quarter. We have no guidance of leverage for the second quarter, but we see it going down, especially in the fourth quarter. So we should see in the third quarter leverage still flat, perhaps slightly down. But in the fourth quarter, we clearly see a reduction. I can't give you a number because we don't have a public guidance, we couldn't do this year.

Our next question comes from Filipe Nielsen from Citi.

Congratulations on your results. I have 2 follow-ups. Several points were very well explained. Operational improvement, you had the guidance and you have been hitting your guidance since the first quarter. And now you are even exceeding the guidance for the future. Let me see if my interpretation is correct. Most of these indicators came to a level of stability now possibly used cars in terms of allocation of capital, GTF. And when we look at yield, which is the guidance that you continue to pursue, do you think this guidance of yield is coming mostly from daily rates? Is that a correct interpretation? Or do you expect it from elsewhere? And also a follow-up on EBITDA margin, you talked a bit about SG&A and improvement in operational efficiency. And on the other hand, we are seeing increase in rates. For the future, how much do you expect in terms of expansion of EBITDA margin, because of these effects. And if we could separate the effect of operational efficiency and higher rates, what would be this breakdown? And what could we see for the future?

Yield, I'll start with this question, your first question. The yield of 4% to 4.2% is going to be built by increasing rates. It's not the use of capital invested, this is going to be built with rates. If there is an opportunity to increase occupancy, then you're going to have an addition to this matter. But the base scenario is that this is going to be built with rates, and that's why I was very clear in the beginning of the presentation that that continues to be our focus. As for operational improvements and the guidance that we provided, you're right. We exceeded our expectations, and we already see that is stable back 3 months ago. So that's why we discontinued the guidance, that's no longer a target, the target is the level of operational efficiency we have today. Sales of cars was 34, we are above 40, so there is no sense in targeting the 34. So we have to mature our structure and continue to operate at 40, 41 cars per store. So you're right. As for EBITDA margin, I think it's very difficult to break down between rates and operational efficiency. I think that's possibly the secret of the business to be able to balance all these things, all these KPIs to have the best value per car possible and deliver the best profitability. So we cannot say that margin is just based on rates, it has transformed the profitability of the business, but that has been done in an intelligent way, by store, by customer, by type of car together with cost efficiencies that are being developed very, very hard in all our balance sheet lines. And I think that's the secret, if you can call it a secret. But I think it is key for us to continue keeping the EBITDA margin of our business at this level of operation. At GTF specifically, the work of adjusting prices for existing contracts might be a driver, because that you're talking about pure revenue in the balance sheet with the same expense level. So that can drive profitability and better margins, but I'm not committing to that. As you saw, we are being very transparent, but also [indiscernible] and objective about all KPIs that we are committing to, not only before the market, but considering the money of our shareholders. So we are not talking about subjective ITS, very clear objective, number of cars per store, yield, percentage of GTF. And we are communicating that very clearly and delivering because it's not only making commitments but also making deliveries, because that is the part of how we create value to shareholders. This is what I believe, and I think it's the belief of the whole team.

Our next question comes from Daniel Gasparete from Itau BBA.

Congratulations on your result. Most of my questions have been answered. I would like just to visit 2 points. First, your understanding about the market for new car prices. We are not very sure about the level of margin. So we are running affordability, pressure for bonuses. You also have the pressure of the exchange rate. On your side, how are you seeing this movement? And for the future, how do you see the behavior of new car prices and bonuses? And second question, if it's possible, go back to the suppliers. You had a reduction of this line, both in nominal values, but also days of CapEx from BRL 190 million to BRL 210 million. So where do you see this line going? Are we going back to previous levels in terms of CapEx? Or is this a 110 to 150 days is a new level -- thanks again for your call, and these are my 2 questions.

Your question about brand new car prices is perhaps what we most look into on the day to day, Pedro and myself, to make decisions for the allocation of capital and the purchase of new cars, and also to determine the depreciation rate of each car, because used car prices are a reflex of new car prices. So your question is very timely. What we see is stability in terms of prices, thinking of our fleet mix, I think this is a very important statement. I'm not talking about all cars. I'm talking about the fleet mix that we are operating. We see stable prices for new cars, some even appreciated slightly in the first half of the year. But as a whole, in our mix, we see stability. Some specific makes, specific niches did have deterioration, especially SUVs, but that's a very small portion of our fleet mix, and that's why we talk about depreciation ranks. We don't have one depreciation rate. But for the split mix stability, you know the dynamics of previous years, and that is what it is today. As for suppliers, I think you should consider what we have about 120 days as the marginal dynamics of our suppliers' line. Of course, if there is an opportunity, we are going to go further. I think this is our obligation. But the 120 days, I don't think we are going to reduce that. We can even have a bit more.

If you allow me a follow-up, you talked about price stability. Are you talking about list prices or market prices? Just for me to understand.

I'm talking about market prices, list prices, you know the dynamics but I'm talking about market prices, which is our day to day.

Thank you. We are now closing our Q&A session for today. I will invite Gustavo Moscatelli for his closing remarks. Mr. Moscatelli.

Well, once again, I'd like to thank you all for attending, for following the company from close. I'd like to emphasize some points in my closing, when that the company continues very much focused on adjusting prices to the appropriate levels in our business, not only in the rental car. As I mentioned, we started in the second quarter to address all the segments. This is going to be our priority #1 for the second half year, and we are doing that in a responsible manner with tools that bring price dynamics for us to be as efficient as possible. Second, -- when we talk about operational efficiency, this seems to be a broad topic -- but for us on the day to day, it's not only about the P&L top line, but all lines of cost and expenses. So we are focused not only on reducing costs but improving the turnover of our assets, which is an important component to profitability. And there is something that is very relevant, and I'd like to reinforce how confident we are with the depreciation rates of our assets. As you saw, there was volatility in the price of cars, but our margin continues consistent, profitability continues to be appropriate, and I reinforce that we have our depreciation rates for all our businesses at the granularity never seen before. And that has brought us confidence. Finally, I'd like to say that all that together, there is something very important when we talk about corporate management. Managers and myself, are confident we have the company in our hands. And that means not only the right people in the right places, but with the right processes and controls. That brings us confidence to continue to deliver positive results and growing results from now on, also being very responsible about our capital structure with a trend, as I mentioned, to reduce our leverage. So I'd like to close this conference call by once again thanking you all for attending and particularly more than 6,000 employees that make our deliveries on the day to day. Thank you very much, and see you next time. [Statements in English on this transcript were spoken by an interpreter present on the live call.]