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

[Foreign Language] Welcome to Movida's conference call to discuss the results of the second quarter 2026. Today with us, we have Mr. Gustavo Moscatelli, CEO; Daniela Sabbag, CFO and IRO; and Camila Francischelli, Investor Relations Director. This event is being streamed on Zoom and also available on the company's website at ri.movida.com.br. [Operator Instructions] I would like to remind you that today's presentation will be conducted in Portuguese with simultaneous translation into English. If you want to listen to the presentation in English, you can click on the interpretation button on the bottom right corner of the platform and choosing the language properly. [Operator Instructions] Before we begin, we would like to let you know that any forward-looking statements made during this call regarding the company's business outlook, operational and financial projections and targets are based on Movida's management beliefs and assumptions as well as information currently available to the company. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions as they relate to future events and therefore, depend on circumstances that may or may not occur. General economic conditions, industry conditions and other operational factors may affect the future performance of the company and lead to results that will materially differ from those in the forward-looking statements. The results to be discussed in this call are presented in the earnings release and the financial highlights spreadsheet available on the company's IR website. Now I'll turn the floor over to Mr. Gustavo Moscatelli. Mr. Moscatelli, please go ahead.

Good morning, everyone. Welcome to Movida's conference call to discuss the results of the second quarter 2026. I'd like to start by thanking our people, more than 60,000 employees, for their dedication and quality of execution, which are reflected in our results. Slide 3, we present the key indicators that demonstrate the continued progress we made in the first half of the year consistently driven by gains in operational efficiency and an enhanced customer experience. In Rent-a-Car, average daily rates reached BRL 165 million in the second quarter, up 7% year-over-year, reflecting consistent price adjustments. This growth was accompanied by a utilization rate of 76%, an increase of 2 percentage points demonstrating improved efficiency of our invested capital. As a result, rental days reached 7.4 million, up 22% compared with the second quarter 2025. This is more than 1 million additional rental days and reflects our continued market share gains compared to the market. The foundation of this progress is customer experience. During the quarter, 88% of our customers were served within 10 minutes reflecting our commitment to providing a superior level of service to those who choose Movida. This operational improvement has a direct impact on perceived value and allow us to sustainably increase rates as demonstrated by Movida's ability to simultaneously deliver growth in rental days, utilization and pricing. In GTF, we continue to make progress with a focus on profitability and predictability. The monthly yield of the total portfolio of existing long-term contracts increased from 3% a month to 3.2% a month in the second quarter '26. New contracts signed during the quarter in turn have a monthly yield of 3.7%, supporting this upward trend as existing contracts gradually converge toward higher yield levels. As a result, revenue per car reached BRL 3,289, up 12% compared with the same quarter last year. Our revenue backlog reached BRL 9.8 billion, an increase of 40% year-over-year, further strengthening the visibility of our future results. Now used cars, we maintain stability and consistency. EBITDA margin remained at 1.1% reflecting healthy asset turnover and the continued maintenance of the fleet's average age at optimal levels. We continue to advance our strategy of focusing sales on the retail channel, expanding our network to 124 stores and increasing reach and operational efficiency. Inventory turnover increased 55% year-over-year reflecting lower fleet retirements due to the strong demand in rent-a-car as well as effective inventory management with a higher share of retail sales. Slide 4. As previously disclosed in our material fact, we exceeded the net income guidance we committed to in our last earnings release. Net income for the second quarter was BRL 136 million, more than double the amount reported in the second quarter last year. This improvement was achieved despite the high interest rate environment reflecting that our results are being driven by operational gains and the quality of execution of our strategic plan. Slide 5. We show another quarter of sequential records in net revenue, EBITDA, EBIT and ROIC. The operational improvements achieved throughout the year have resulted in consistent gains across our key profitability indicators. In the second quarter; net revenue reached BRL 3.8 billion, EBITDA BRL 1.7 billion, EBIT BRL 1 billion and net income of BRL 136 million, our highest quarterly net income in the past 4 years. As a result of these improvements combined with disciplined capital allocation, ROIC reached a record 16.7%, up 4 percentage points from the second quarter of last year. Looking rental operations only, the gains were even more significant. Movida's operating fleet grew 10% compared with the same period last year while rental net revenue increased 21% reaching another record. Over the same period, rental EBITDA and EBIT increased 23% and 30%, respectively, with both also reaching all-time highs. Now on to Slide 6, we provide some additional detail on the performance of our consolidated financial results. Net revenue reached BRL 3.8 billion in the second quarter with rental net revenue standing out with growth of 21%. Again, it's worth noting that our fleet grew only 10% year-over-year demonstrating that we continue to capture pricing and productivity gains. EBITDA reached BRL 1.7 billion in the quarter, up 22% from the second quarter last year with EBITDA margin expanding by 1 percentage point to 72.8%. EBIT reached BRL 1 billion for the first time in the second quarter, up 29% year-over-year while rental EBIT margin expanded by 2.9 percentage points to 44.4%. With these gains, we have raised the level of our results reaching net income of BRL 136 million in the quarter. Now on to Slide 7. Here, we show the performance of our rental EBITDA margin since 2017 showing that we have sustainably reached our strongest operating results since the company's IPO. These results demonstrate the structural improvement in the company's profitability supported by ongoing initiatives to optimize operations, increase efficiency and generate higher returns on invested capital. Rent-a-Car EBITDA margin reached 68.9% while GTF EBITDA margin reached 77.9%, both are record highs and benchmarks for the industry. Together, this indicator demonstrate Movida's ability to sustain high levels of profitability across different market cycles, strengthening cash generation and value creation for shareholders. Slide 8, we bring the results of the company's continuous improvement initiatives as reflected in our return on invested capital. ROIC reached 16.7% in the second quarter, up 4 percentage points from the second quarter of 2025 and 5.7 percentage points above our cost of debt. On the operational side, we continue to capture efficiency gains throughout the business. In addition to EBIT exceeding BRL 1 billion for the first time, total utilization reached 78.6%, up 2.6 percentage points year-over-year demonstrating more efficient fleet utilization and improved capital allocation. Slide 9, we show the stabilization of our depreciation rates. In Rent-a-Car, depreciation remained at approximately BRL 7,200 per car per year and in GTF, BRL 11,000 per car per year. On the right-hand side, we show the turnover of the fleet over the same period. By June '26, we had already renewed 99% of the total fleet we had in December '23 while used cars EBITDA margin remained stable at approximately 1.2%. This demonstrates the consistency and accuracy of the residual values of our fleet. Slide 10, we provide a detailed breakdown of our fleet profile showing the composition of vehicles across different price ranges and categories. We divide the fleet into 4 groups to provide greater clarity and information on this profile. The first group represents 84% of Movida's fleet. These are entry-level cars with an average residual value of BRL 73,000 per unit as of June '26. These cars will continue to depreciate until they are sold, at which point their average residual value will be BRL 66,000 considering the current depreciation rate. New Chinese cars currently available in the market in this category have an average price of BRL 130,000, approximately 97% higher than Movida's cars in this segment. Looking at the other 3 groups, we see the same favorable dynamic reflecting our disciplined vehicle purchasing mix strategy focused on lower average ticket costs. This clearly demonstrates the difference between our fleet and the addressable market, reinforcing our confidence in residual values of our cars based on the appropriate depreciation rate. Slide 11, we have our net income guidance for the third quarter of '26. Once again, this guidance reflects the consistent improvement in our operating indicators and the quality of our service levels, which continue to drive increasingly solid results. For the third quarter, we expect net income of between BRL 130 million to BRL 150 million. This reflects our confidence in the business and based on the midpoint of the guidance range represents growth of 100% compared with net income in the third quarter last year, doubling year-over-year just as we did in the second quarter. Looking at our expected results for the first 9 months '26, we expect net income to reach approximately BRL 400 million, 26% above our net income for the full year '25. Now I'll turn it over to the Investor Relations Director, Camila.

Thank you, Moscatelli. Good morning, everyone. Over the next few slides, I will provide some additional color on our business lines. In Slide 13, Rent-a-Car, we highlight the 7.4 million rental days in 2Q '26, up 22% year-over-year with more than 1.3 million additional rental days during the period. We have consistently gained market share, which shows customer recognition of the superior level of service we provide. This is even more evident when combined with a 7% increase in Rent-a-Car average daily rate, which reached BRL 165 in 2Q '26 compared to the prior year. Utilization rate operational was 76.2% in the second quarter, up 2 percentage points year-over-year while the total utilization rate increased even further by 5 percentage points reaching 66%. The performance reinforces Movida's discipline and ability to create value through more efficient utilization of invested capital. Slide 14, we have the remaining Rent-a-Car results. The first chart shows net revenue totaling BRL 1.1 billion in 2Q '26, up 30.4% from 2Q '25. The average operating fleet grew at a slower pace increasing 19.6% over the same period to 108,000 cars in the quarter, reinforcing the efficiency message from the previous slide. As a result, revenue per car increased 9.1% in the quarter reaching an average of BRL 3,740 per month with yields stable at 4.3%. EBITDA reached BRL 758 million in the quarter, up 30.8% compared with the same period last year. EBITDA margin reached a record 68.9%, an increase of 0.2 percentage points from 2Q '25 despite the seasonality of the business, which tends to favor other quarters due to stronger demand during school vacation periods. As a consequence, EBITDA per car followed the same positive trend reaching an average of BRL 2,322 per month in the quarter, up 9.4% year-over-year. Slide 16, we have the main operating highlights for fleet management and outsourcing, our GTF. We ended the second quarter with an average operating fleet of more than 130,000 cars, up 3.6% from 2Q '25. Our revenue backlog, which represents future revenue from existing contracts, totaled BRL 9.8 billion in 2Q '26, an increase of more than 40% year-over-year reflecting longer contract terms in the backlog and further strengthening the predictability of the business. Average yield in the second quarter was 3.2% per month and continues to trend upward as the fleet is renewed. The yield on new contracts added during the quarter was 3.7% per month maintaining the high quality of the portfolio. Slide 17, we move to GTF's financial results. Net revenue reached BRL 1.2 billion in the quarter, up 15.5% from the second quarter of last year while the average operating fleet grew 3.6% over the same period. As a result, we reached a new record in monthly revenue per car at BRL 3,289 in the second quarter, up 11.5% year-over-year. EBITDA for the second quarter of '26 increased 18% compared with the same period last year reaching BRL 895 million and representing 53% of consolidated rental EBITDA for the period. EBITDA margin expanded by 1.8 percentage points to 77.9% reaching an all-time high in this quarter as was also the case in Rent-a-Car. As a consequence, EBITDA per car also increased to an average of BRL 2,281 per month, up 14.1% year-over-year. Slide 19, we have our used cars indicators. Net revenue in 2Q '26 was BRL 1.5 billion with 19,400 cars sold. The volume of cars sold this quarter also reflects the strong demand in rent- a-car as we kept part of the fleet that would otherwise have been sold in operation at high levels of profitability as we just discussed. This is reflected on the chart on the right, which shows that used cars inventory turnover was on average 55% more efficient this quarter than in 2Q '25. EBITDA margin was 1.1% this quarter demonstrating the same consistency we have seen over the past 8 quarters, also supported by the higher share of retail channels in '26. The used car market remained stable with the FIPE index value of our car inventory declining by an average 0.3% per month in the second quarter '26 compared with 0.4% in the same period last year. In July '26, this trend remained unchanged with an average monthly decline of 0.3%. With that, I'll turn the call over to Daniela, our CFO.

Thank you, Camila. Good morning, everyone. I will start now on Slide 21. The financial management initiatives we have implemented over the past several quarters have resulted in the debt maturity schedule shown in the first chart. Cash at the end of the second quarter '26 totaled BRL 3.4 billion. Net debt was BRL 17.2 billion with an average cost of CDI plus 1.8% per year and average maturity of 3.9 years. Over the past 2 weeks, we completed funding transactions totaling BRL 1.6 billion, reinforcing our liability management strategy and further extending our debt maturity profile. We completed the bilateral refinancing of BRL 1.14 billion in debentures, extending maturities from '28 to 2033 and increasing the term of this debt by 3 years. The debt originally carried a higher cost. We also completed the bilateral refinancing of 4131 loans totaling BRL 500 million with a term of up to 3 years. These transactions contributed to extending our debt maturity profile while maintaining competitive financial terms. As a result, our debt amortization schedule is now even more balanced and spread over the coming years, reducing maturity concentrations. With the transactions already completed, the company has fully addressed its 2026 refinancing needs and approximately 65% of its 2027 maturities. The remaining 2027 balance is in advanced stages of negotiation with completion expected over the next few months. Slide 22, we bring our leverage, coverage ratio and dynamics of our payables to OEMs. On the left-hand side of the slide, we highlight the reduction in leverage measured by net debt-to-EBITDA ratio from 2.9x to 2.66x over the period. Based on the quarter's results alone, leverage would be 2.46x. On the right-hand side, we show the coverage of net debt over net fixed assets, which increased to 1.42x in the second quarter '26 with the value of our vehicles exceeding net debt by more than BRL 7 billion. The chart below shows our outstanding payables to OEMs, which decreased by nearly BRL 500 million during the quarter to BRL 5 billion. With that, I turn the call back to Gustavo.

Thanks, Daniela. Moving to the final slide of the presentation, we highlight that the record results we delivered this quarter are firmly grounded in the continuous improvement in customer satisfaction and operational efficiency. Starting with Rent-a-Car, we continue to invest in anticipating our customer needs and in pricing management. One example is our project with Meta, which we launched in the second quarter of this year. We are the first company in the industry worldwide to have an agent on the Meta business agent platform, which will transform the car rental experience. We developed an AI engine that acts as a true Movida representative on WhatsApp offering maximum convenience to our customers. In GTF, we continue to strengthen the quality of our service with NPS increasing by 9 percentage points in '26 compared to '25. At the same time, we continue to see the yield of our existing contract portfolio increase as it gradually converts towards the 3.7% monthly yield on new contracts representing an important driver of future earnings growth. To close out and in used cars, we continue to expand our reach with the opening of 12 stores in the first half of the year. The expansion strengthens our strategy to gradually increase retail in vehicle sales, contributing for the evolution of the operations profitability and an increasing efficient process in selling our fleet. In operational efficiency, we continue to verticalize maintenance by means of expanding our pit stop stores. In addition to increasing the quality of service to our customers, the initiative is generating relevant productivity gains with a reduction of 25% in maintenance costs compared to external providers and the potential of adding 1.1% in EBITDA margins over the period. These initiatives have contributed to consistently expand our customer base. In the last 12 months, we added more than 730,000 customers in Rent-a-Car, growth of 16% with a record 2.7 million customers in our loyalty program. This recognition also reflects in customer satisfaction. In June, we reached a record NPS of 88% reinforcing the quality of our services and the accuracy of our strategy. To close, I would like to emphasize that we are very pleased with what we have delivered so far. But what really excites us is the number of opportunities we still have ahead of us to continue on this path of value creation. Once again, I'd like to thank our team who work every day with dedication and commitment to further improve our service levels and operational efficiency. To our customers, shareholders and suppliers; my sincere thanks for their continued trust and partnership. We can now open the call for questions and answers. Thank you very much.

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

The first question is a follow-up on the results. You're talking about the competition of Movida and the comparison to Chinese cars. Looking ahead, thinking of new Chinese launches that are being announced, are you somehow concerned with this launching and does depreciation somehow reflect future expectations? And then about the net debt of the quarter. Could you talk about that was it to support a stronger vacation period demand? Should we see a reduction as of the third quarter?

This is Gustavo Moscatelli speaking. Thanks for your questions. I'll start with Slide 10 talking about fleet composition and the new Chinese entrants more specifically. We decided to give you a breakdown with lots of granularity to show you our perception of risk and our positioning in terms of fleet mix in the market. You will remember as well, you have been following us from close. We had a significant change in the mix of our fleet throughout the last 2 years very much focused on entry-level cars that is more affordable cars that today have an average price of BRL 73,000 in our balance sheet, which are very different from the cars that we have in the Brazilian market coming from China as you mentioned. So here we show the prices that we have to show that the addressable market for our consumer is quite different. And that, in our view, does not generate any pressure on residual factors, which we are seeing in margins in the past quarters. Looking ahead, without a shadow of a doubt, new models are coming. I think that more in the short term those models are going to be more premium, that is cars over BRL 140,000, which we call premium, which accounts for less than 4% of our fleet. So we are quite comfortable following the movement of OEMs from close, but the decretion that we have today gives me the comfort that we are right for the sales at the end of assets with margins close to 1%, which is what we have been reporting for the past quarters. And we also show the amount of cars that we sold in the last 3 years. We sold the entire fleet we had in '23 without any kind of impairment. And that shows I think how granular and how accurate we are being in the purchase mix and depreciation rate that we follow on a monthly basis for our entire fleet. This is one of the activities that I see from very close. So depreciation rate does consider new entrants. We made a point of giving more color granularity to you because it is a recurring question in the past months. About fleet increase, you did see a surprising volume of daily rentals 22% growth this quarter, last quarter 18% and in the fourth quarter also a growth of double digit I think 15%. So indeed, the company is gaining market share if you compare to the competition that is either not having growth or having low growth. So we are gaining market share and, as a consequence, we are replanning our fleet. In July, as you did mention, we have high seasonality. So in addition to having the growth that we had in the second quarter, we decided to add 18,000 cars for the month of July. But in the end of July, we already made large sales. Sales in July were well above the average monthly rate of the second quarter because of the sales we saw in July and August. So it is a strategy to provide services to customers that are coming to Movida. We see a growing amount of rental days. We are gaining market share. And naturally, we have to replan our fleet to have the best utilization of invested capital where we can extract the most value. This is what we are doing quarter-over-quarter. It would be even irresponsible on our side to sell more than the demand that we have on rental. So the allocation of invested capital is being the best possible and that's why we see growing returns every quarter.

Our next question comes from Lucas Barbosa from Santander.

My question is about the average Rent-a-Car fleet age. It did expand even with the growth in fleet. What is the average fleet age you should stabilize? And does this increase have an impact on car services and availability for the coming quarters?

Lucas, thanks for your question. The rent of our fleet, 12.5 months because of our strategy and high demand. Our average fleet age as we are pursuing is what we show. In July, we are already below 12 so the idea is to keep the optimal fleet age, which ensures us good service costs. So we do not see a pressure on costs, quite the opposite. You did see a gain in margin not only because of the revenue top line, but also a reduction of costs especially with card servicing due to the initiatives that we mentioned throughout the presentation. So we do not see a pressure on that. Of course we are always looking into it to get to an optimal point. But so far, the 12 months is something that makes me very comfortable in terms of the age for the rent-a-car.

Our next question comes from Filipe Nielsen from Citi.

Congratulations on your results. I have one question about rental and demand. I would like to understand how you're trying to have this balance between utilization, pricing and volumes given the fact that you have expanded utilization a lot this quarter. We see huge expansion in utilization, pricing continues to do well, but we are in a tough macroeconomic environment that does require some caution. So I would like to understand since you expanded for high seasonality, how you see the price environment and utilization? Do you think that utilization should stabilize along the coming quarters or do you still see room for growth?

Filipe, Moscatelli speaking. Thanks for your question. Without a shadow of a doubt, the gain in market share through the number of daily rentals way above the other market players is something that draws our attention. But to us, this is the objective. It has always been the objective to increase customer base with profitability and those 2 points that you mentioned are really key. We did not grow by buying the market, quite the opposite. We grew 22% in the number of rental days with also increasing our prices across the competition and utilization rate growing 2.2 percentage points quarter-over-quarter, but it's still at 76.2%. And why do I want to emphasize that, utilization rate should be in an upside of 3 to 4 percentage points. That is with the same fleet we have today without increasing fleet, we should generate a lot more revenue per car and increase profitability. We still have room for that. So there's a lot of upside in my view with the fleet that we have without having to increase the number of cars. Again, without a shadow of a doubt. In terms of risk, this is something that we monitor as carefully as possible. The macroeconomic scenario, we still have very high interest rates, high volatility. So we do not want to increase the risk of the company and this is not what we are doing. Quite the opposite. The leverage is very stable at the best level ever I think since the IPO. So we are operating with a lower leverage and operational rates way above what we presented in the past. So the operation is very healthy. All the deleveraging was based on operations and that shows that indeed, the strategy is right. Return on invested capital reaching 16.7%. So we are generating lots of value. And consequently, the company's risk management is very much mitigated by these results. So we do look into the macroeconomic environment, obviously we are very cautious. We do not have to have in the year an average fleet greater than last year, but we have to cater to seasonalities to enjoy these periods. July is exceptional, a wonderful result for us. We did anticipate a bit of the guidance for the third quarter and you're going to have the ups and downs in the fleet due to the seasonal periods.

Our next question comes from Jens Spiess from Morgan Stanley.

Sorry, I was muted. Yes, I just have a question on the mix going forward. Do you plan to have a similar mix as you currently have in terms of entry level versus premium SUVs and so on? Just to get a sense of how your fleet might evolve over time.

The question was about our mix moving forward. If we expect to have the same mix between entry level premium and SUVs that we have in the fleet. Moscatelli?

Here is Moscatelli speaking. I will speak in Portuguese, but you have a real-time translation. So with regard to the fleet mix, Jens, I think it's very clear that our strategic position in the last 2 years placed us in a very differentiated position with 84% of our fleet strength with an average price in our balance sheet of BRL 73,000. That brings us comfort not only for us on the day-to-day, but also to you in the market because it shows a completely different price from the new entrants, that is no pressure on residual values. Our strategy further on is to continue with at least 84% of our fleet with the mix of more entry-level cars. We understand that with this mix, we have a much lower exposure to any volatility in new entrants not only because average price, but also the makes and models that we have and also the addressable market in selling these cars. These are customers that buy cars at BRL 66,000, very different from what we have in the market, the lowest price of BRL 120,000, BRL 130,000. So this is our position today and we'll continue to do so perhaps even prioritizing more entry-level costs.

Our next question comes from Gabriel Rezende from Itau BBA.

I'd like just to have a follow-up on the fleet. To understand the proceeds that you gained from the BNDS was not turned to the purchase of cars. So try to see what the company sees for the coming quarters and how this could impact your financials? And a second question, just exploring the assumptions behind the guidance for the third quarter. You did say that the fleet should not be growing year-over-year. Does that imply on accelerated sales for the coming quarters? Just to understand the optimum fleet age.