SIMPAR S.A. (SIMH3.SA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to SIMPAR's conference call to discuss the results for the third quarter 2025. This session is being recorded and a replay will be available on the company's website ri.simpar.com.br. The presentation is also available for download. [Operator Instructions]. Before we proceed, I would like to remind everyone that forward-looking statements are based on the beliefs and assumptions of SIMPAR's management and on information currently available to the company. These statements are subject to risks and uncertainties as they relate to future events and therefore, depend on circumstances that may or may not occur. Investors, analysts and journalists should be aware that macroeconomic conditions, industry trends and other factors may cause actual results to differ materially from those in such forward-looking statements. Joining us today are Fernando Simoes, Chief Executive Officer; and Denys Ferrez, Executive Vice President of Corporate Finance and Investor Relations Officer. I would now like to turn the floor over to Mr. Simoes, who will begin the presentation. Please go ahead, sir.

Good morning, everyone. We are starting the release of SIMPAR's third quarter 2025 results. On behalf of our more than 57,000 employees, I'd like to thank all of you for joining our call today. We'll begin on Page 3. I'd like to take this opportunity to reinforce our commitment to the continued execution of our strategic plan, extracting value from everything that's been built and everything that's been invested over the past years. On Page 3, highlights. We continue to see improvements in several indicators reflecting the execution of our strategic plan. Gross revenue from services grew 8% year-on-year reaching BRL 10.2 billion. While our service revenue grew 8%, asset sales grew 82%. Our EBITDA margin improved 2.1 percentage points year-on-year and EBITDA grew more than 14% while net CapEx decreased 40% year-on-year. This reflects our ability to extract value from everything that has been built. As we always say, we invest the CapEx first and then revenue and results come. We also executed several financial transactions that reinforce our broad access to diverse capital sources. As the consequences of these improvements in indicators, leverage decreased from 3.7x to 3.5x in 3Q '25. We recorded a net loss of BRL 119 million and productive ROIC reached 13.9%, an increase of 1.5 percentage points compared to the same period last year. In line with our strategic plan and our commitment to maximize value creation and disciplined capital allocation, we sold 100% of Ciclus, the Rio de Janeiro waste management concessionaire, for BRL 1.1 billion in asset level value. Cash hasn't been received yet as closing still depends on certain condition precedent. We sold it to Aegea. Let me remind you once again that Ciclus is the largest waste treatment center in Brazil, one of the largest in the world, producing 60% of Brazil's biomethane from waste. It's a company with high engineering and technological standards. We are very pleased with this divestment, which aligns with the consolidation trend among the players in each industry. Aegea is an excellent company recognized for the quality of its operations in sanitation. Now let's move on to Page 4. We've been emphasizing our focus on operational efficiency, pricing improvements, charging fair prices, reviewing contracts and revisiting processes. These actions are already reflected in our indicators and without creating expectations, we believe this improvement will continue over the next quarters. In 3Q '24, service EBITDA over net fixed assets was 23.8%; in 3Q '25, 25.2%. EBITDA last 12 months per employee in the same period, we had BRL 167,000; now we have BRL 207,000. This has been a constant program, improving efficiency whether through price adjustments, contract renegotiations, making sure that we are always charging fair prices. This requires attention to operations, pricing, billing and contract management. We've also worked intensely on reducing operating and administrative costs, renegotiating with suppliers and this has been a major difference. And again without creating expectations, we believe these improvements will continue in the coming quarters. On Page 5, we talk about JSL. The company continues to grow its revenue organically. While revenue grew 5.5%, EBITDA grew 12%. That demonstrates operational efficiency and strong organic contract generation. In 3Q '25, EBITDA reached BRL 854 million. Operational margins, cash generation, reduced investments, replacing CapEx with equipment leasing wherever appropriate. All this have supported the results and return on invested capital. Now the most important part about JSL that I would like to share with you is that under our strategy; we create business units, develop them, expand, transform, structure organizations, managing contracts, always strengthening customer relationships, reinforcing our strategic pillars, ensuring values and culture with agility, simplicity, work. This is how we built the business. And JSL has just created INTRALOG, a company fully controlled by JSL, but established by combining its intralogistics operations with TCP. Also dedicated warehouses, shared warehouses; these operations do not involve trucks. It is basically warehousing. So this is a company with more than BRL 2.2 billion in revenue last 12 months, over BRL 440 million in EBITDA and 23.1% EBITDA margin. I believe this is if not the largest, one of the largest intralogistic companies in Brazil. With this, the company will have more focus, more agilent, continuous development and major opportunities for organic growth. And JSL will have dedicated transportation with its own fleet. It's going to be asset-light with third parties and independent drivers and the digital business, 3 business. And INTRALOG with its own taxpayer numbers will be audited and consolidated starting in 1Q '26. The figures are pro forma. Congratulations to JSL and the entire team for creating this business and I hope this is going to be a cycle of happiness. Page 6, we have Movida, which has also released its results and has been doing an outstanding job. Continues to improve customer experience in line with its strategic plan over the past 2 years. It has delivered operational efficiency gains, improved the experience across reservation systems, customer services, pickup and return processes and more broadly throughout the customer journey. Its stores are now mature, modernized. Used car sales, as you can see, very consistent. Depreciation is stabilized. The average fleet age is at 10 months and sales per store being regular both in retail and wholesale. So excellent work and together with that, a consistent market plan so that clients can know and use its services. And that has brought hundreds of thousands of new customers, new taxpayer numbers and we believe this is just the beginning of a new cycle. And you have some results that have brought this maturity. What's important is that there is still room for further improvement. Higher sales per store, stronger pricing, more volume from installed infrastructure; some are already being completed. So we expect continuous improvement ahead and again without creating expectations, we see significant upside for Movida's numbers and indicators. Page 7, we move to VAMOS. Here we present the main indicators showing revenue growth, EBITDA growth and more importantly, the resilience in demand for trucks, machinery and equipment leasing under long-term contracts and the improvement of its main indicators. Now I'd like to share how we see this moment and the cycle ahead for VAMOS. VAMOS has been deploying its CapEx at a consistent pace that demonstrates resilience. Again without creating expectations, I suggest you model the numbers based on what has been happening. CapEx deployment around BRL 300 million per month; BRL 270 million, BRL 300 million consistently per month. A portion always of the Sempre Novo assets. And if this pace continues, which is what is happening, it is growth above 10%, 12% in lease revenue. So the company's a market leader with resilient revenue. And since the beginning, we've always said that VAMOS that we know that we are going to sell the assets, huge opportunities to sell and lease in the market. Repossessions and early returns made VAMOS sell more used assets and that has proven its capacity to sell assets, which gives us the comfort of resilient growth. Today, we have a larger inventory due to repossessions rather than weak sales capacity and selling too fast could destroy our asset value. So we prefer a pace that preserves margins growing more than 80% year-on-year. Two other factors matter. Placing used trucks back into lease contracts of 1 to 3 years. So there is a market for used trucks. And also extension, more than 40% of expiring 5-year contracts are extended to 1 to 2 years. So important pillars; used asset sellers, contract extensions and Sempre Novo leasing, which brings growth with lower CapEx needs. So when we look VAMOS ahead, this reinforces that we are leader in the segment with huge opportunity to growth in a resilient sustainable manner. Now on Page 8, we are going to talk about AUTOMOB. AUTOMOB is the company that concentrates all our automotive truck machinery, construction and heavy equipment and agricultural dealerships, Agromob. Page 8 presents its main indicators; revenue growth; but at some point, higher expenses. We recorded a one-off impairment related to new agricultural machinery inventory. This impairment was not done before because we all thought that the agricultural market was going to recover during the year. It didn't. Conditions worsened so that required the impairment. Once again it was a one-off event affecting only the agricultural business. AUTOMOB has just completed a 12 to 18 months of store renovations, retrofits, relocations, new store openings, hiring people. And I always say that our expectation is to see a mature AUTOMOB by 4Q '26 and to start '27 at a different pace, a different cycle. Even so, we already see higher sales per store of new cars and used cars. So we are gaining scale on the same store base with the same infrastructure. So what will drive further improvement? Well, the consolidation of our stores after retrofits, optimized systems, optimized inventory, better logistics, training and developing sales forces. All this will bring more sales per salesperson per store and more volume of new and used cars per store. And together with that, we have improvements in F&I, which is also materialized and some new products that are being introduced. That's what we believe that is quarterly improvements leading to its full maturity at the start of '27. On Page 9, we talk about CS Infra. We've been extremely disciplined in bidding, participating only when we have guaranteed revenue where we don't compromise the group's CapEx and where the business model is service-oriented. Our 2 ports will be fully operating next year. CS Graos has completed its first phase. The contract was extended. CS Cuiaba is moving forward. We won the Eastern side terminals in Sao Paulo with CS Mobi. So practically, all those projects are under deployment and will reach full revenue over time. But all of them with allocation for services, good returns and guaranteed revenues and those with the largest CapEx, ports and highways are largely completed. On Page 10, we show Ciclus Ambiental made up of Ciclus Rio, Ciclus Para and several waste treatment projects. As mentioned earlier, Ciclus Rio was sold to Aegea pending closing conditions to complete the business. Now Page 11 shows CS Brasil, our fleet outsourcing and mobility subsidiary with driver services. Remember, fleet outsourcing without drivers is Movita. The CS depends on licensing processes for new opportunities. But even so, revenues and EBITDA margins have been improving compared to net revenue and we see more bid opportunities ahead. Page 12 brings our BBC Bank. We have a high quality credit portfolio, solid guarantees and delinquency below market levels. What it means? We finance cars, trucks and equipment with large down payments typically 30% to 40%, finance high quality assets with good credit performance which leads to lower delinquency levels. The bank is now profitable and should generate consistent and growing profits as scale increases and fixed costs dilute. Now I will turn the call to Denys, who will go over the main financial indicators. Denys?

Thank you, Fernando. Good morning, everyone. On Slide 13, we start with consolidated net revenue on your top right. Net revenue reached BRL 11.3 billion for the group, up 6% compared to last year. And service revenue grew even higher, 8% and services here account for BRL 9.1 billion. Adjusted EBITDA reached BRL 3.1 billion in 3Q '25 with a 27.5% margin. That is 14% above the same quarter last year in nominal terms and also a very important improvement of our margin of 2 percentage points. EBIT reached BRL 1.9 billion in the quarter with a 17.2% margin in nominal terms, 8% higher year-on-year and 0.5 percentage points margin gain. The 3Q results recorded a net loss of BRL 119 million due to the high interest rate environment similar to what we saw in 2016 with a similar situation. Now as always, the work that is being done. When the conditions arise, what we do is that we adjust our contract portfolios, our services to the new economic environment while focusing on cost reduction and the specific adjustments and corrections needed in each business. For example, seeking maturity in CS Infra's investment, VAMOS' improved asset utilization rate, AUTOMOB's opportunity to increase sales and services at the same store base. And in the case of AUTOMOB, also completing the adjustment in agricultural dealerships, which led us to the impairment this quarter, which we normalize in the results presented. On Slide 14, the next slide, we show net CapEx on a quarterly base. So we continue to show a reduction of this total both in the 9 months comparison totaling BRL 3.8 billion, 45% below the first 9 months of 2024 or even in the quarter-on-quarter comparison. In 3Q '25 we had BRL 1.1 billion of net CapEx, which is lower both year-on-year and quarter-on-quarter and we have to understand that this is basically because 2Q is seasonally higher investments. On the right side of the slide we have as the largest share of net CapEx: Movida, then followed by VAMOS, CS Infra and JSL. And we continue to see a continuous expansion of EBITDA across most businesses reinforcing our commitment to extracting more value from investments already made. Next Page 15 continues the same topic showing the relationship between annualized EBITDA and annualized CapEx. So if you see, there was an inversion. When we analyze the first 9 months of '25, annualized CapEx vis-a-vis annualized EBITDA is less than half, around 40% meaning EBITDA is 2.4x CapEx. In previous years, CapEx was larger than EBITDA. So that shows again our commitment to generating returns from the existing asset base and this will continue to be our focus. On Page 16, we bring consolidated cash and debt position. Net debt reached BRL 41.4 billion at quarter end and cash BRL 14.5 billion. Important to mention is that in October, we completed BRL 4.1 billion in funding, 5 issues at CDI plus 2.3% and a 5.3-year average maturity. That is in terms of liability management, we remain at fully normal supported by our resilient business model, investments in real assets and long-term contracts. As a benefit of these issues, we can assume that pro forma liquidity will reach BRL 18.6 billion fully covering maturities for '25, '26 and '27. On the right side of the slide, we have the breakdown of our net debt reinforcing that each business has its own covenants, its governance and a different shareholder base. So even though all companies are controlled by SIMPAR, there is governance and risk assessment that is performed individually by each business. With that, I'm going to go to the next slide continuing the same topic now with the holding's debt. The holding reached net debt of BRL 3.2 billion, cash and financial investments of BRL 2.9 billion and maturities concentrated basically around 2031. Still talking about indebtedness, I would like to go to Page 18. Here we have a snapshot of our leverage. Remember that we measure our leverage under the bonds definition by net debt to EBITDA, which fell to 3.5x despite higher interest rates. This is lower than both the prior quarter and year-end 2024. When we adjust for assets held for sale, the ratio would be even lower approximately 3.3x. So we continue our journey to seek an ongoing deleveraging for the holding. Under the local debt definition that is net debt measured by adjusted EBITDA, leverage decreased to 2.2x, also lower quarter-on-quarter and year-on-year. And again if we normalize these numbers, the number would be 2.1x. Finally, I'm going to go to my last slide on Page 19 where we show the results of our efforts to adjust the portfolio across our companies and the group as a whole where productive ROIC increased to 13.9%, a very substantial increase up 1.5 percentage points year-on-year. With that, I would like to turn the call back to Fernando. Please, Fernando.

Thank you, Denys. Now moving on to Page 20, our last slide. We talk about the last 5 years since the reorganization that led to the creation of SIMPAR Holding that controls all the companies. Page 20 is divided into 2 parts. On the left, we show SIMPAR's transformation since 2Q '20. So we have the second quarter of 2020 when the reorganization was executed and the main numbers of 3Q '25 completing the 5 years. This shows a profound transformation in governance, number of Boards, number of companies, all major financial indicators; revenue, EBITDA, margins. But more important than that is how we ended 3Q '25. We are fully prepared in infrastructure, in people, in logistics, in retail, in concessions with diversified revenue across highly resilient segments. As I always say, our businesses offer essential services. They are highly liquid because people can live without our company, but they cannot live without the types of services we provide. And we have highly capable people delivering the services, which make us believe that the cycle we started in '25. Again without creating expectations, but by executing our strategic plan, we are going to continue extracting value from everything we built and this will continue to bring recurring improvements in the coming quarters. And this is not only about numbers or infrastructure. Our greatest asset is our people and it's also about strategy. For example, the sale of Ciclus Rio, which we believe creates value for our entire ecosystem or what we see at JSL where our business unit becomes a stand-alone company, INTRALOG, now probably one of the largest intralogistics company in Brazil already born with BRL 2.2 billion in revenue, BRL 400 million in EBITDA without transportation, just logistics operations and warehousing. We have improved our results because we have strict pricing efficiency from the start of each contract and through disciplined monitoring. We always want to have fair pricing. We intensify cost controls especially in periods of slower growth so you have to manage your costs better. You grow, occupy space and then you adjust and once you have occupied space, then you work intensely on reducing administrative and operating costs. We have improved our asset turnover, still a lot to be done where most of our CapEx sits. And better turnover, higher utilization and proper pricing directly support improved results and a new level of efficiency across all our financial indicators and as a consequence, deleveraging. This is where we are focused and working hard; stronger cash generation, lower investment needs and greater more efficient use of all assets and investments already made. We are very pleased with our progress and even happier knowing that there is still enormous potential to extract value from everything that has been built and is now prepared for value extraction. Once again I would thank you for joining us. And now we are going to open the Q&A session to answer any of your questions. Thank you very much.

[Operator Instructions] The first question comes from Andre Ferreira from Bradesco BBI.

I have 2. The group today has different businesses that started inside, gained scale and became independent. Fernando in his presentation did talk about that, the constant evolution and mentioning examples. So as the group and subsidiaries gain size, do you see other strategic movements as opportunities? The second question asking about CS Infra specifically. What are the expectations for the company now that projects are closer to being fully operational? Do you think you're going to have a higher cycle to seek new assets? I understand the profile is adding services. But now looking at the different pipeline of infrastructure services that you have, which segments do you see with more opportunities and with this profile of adding services?

This is Fernando, Andre. So I would like to tell you the following. If we go back even before we went public, it's been 5 years that we created SIMPAR and then SIMPAR became a purely holding company with its subsidiaries. Movida as well, although we bought Movida, it already existed. So we already have a rental car company that we joined to Movida. So yes, Andre, this is part of our strategy. As our businesses gain size, we continue with our culture with agility and simplicity with people focused and we are always anticipating customer needs. And for that, sometimes you need a unit to be an independent company to focus on that. This is what happened with JSL creating INTRALOG. Within JSL, we have INTRALOG that is a company 100% logistics inside the customers; warehousing, internal handling, even preassembly we have for some industries. And this business was inside JSL and it is a business with no transportation and it's a company that starts with BRL 2.2 billion in revenues. And more important than that; the management level, the executive officers are in the company for an average 10 years. So this was a company that was inside JSL as a business unit and now we can give more focus to customers organic growth. It has already organic growth of 19% a year in the last years. So that's why we develop completely independent businesses to have focus. That's the objective and that can happen and it is part of our strategy to keep our culture, our way of operating and based on our customer needs. And with that, we have more opportunity to generate value to both clients, shareholders and develop faster. This is part of our strategy to have this kind of movement and we are very happy now with the movement of JSL. INTRALOG with BRL 2.2 billion, but JSL is still with revenue close to BRL 9 billion. We dedicated fleet in operations like forestry and others, asset-light services with independent drivers and the digital transportation company that is still inside JSL. Now when we talk about CS Infra, indeed the ports are about to be ready this month up to the end of the year with a high volume already contracted. CS Graos do Piaui also completed. There was an extension that almost doubled the size of the operation. So these are movements that we are making, but we've been extremely conservative in pricing respecting the returns of the company. So we have been very selective. So what we have won are good projects focused on services that will not hurt the group CapEx and that's how we are looking into opportunities. And there are loads of them, but we are always extremely conservative to ensure returns and the development of all our businesses and lots of opportunities to come. Andre, for example, you have an auction of the sea transportation in the whole of the state of Sao Paulo. So you have already revenue in that. So you have the electrification of the transportation ferries. So we do believe in opportunities in logistics, in safety, in health. So these are the things that we believe that services with long-term contracts for the government to offer better services to the population. So we are looking into new opportunities for the future in health, in safety, in leisure or in services like these ferry services that I mentioned.

The next question comes from Pedro Bruno from XP.

The question is similar to the previous question, but perhaps having a broader view. You've been very structured in consistently speaking about deleveraging both for the holding and the subsidiaries and we have understood this communication in terms of operations, cost reductions, price increases, more efficiency in operations. That's very clear. And then there is the sale of assets and that includes both business assets, subsidiaries and we did see the example of Ciclus recently and also the sale of operating assets, which would be within the scope of efficiency perhaps. So I would like you to give us a bit more color of how do you see as a group the challenge? And again a broader view. But just I would like to see more color both in what you see in terms of opportunities to divest as it was in the case of Ciclus so you could give us an update on that. But also how the group sees the challenge of sales. Fernando mentioned to sell assets at a slow pace not to hurt its markets. So I would like to hear more about how the group is facing this challenge. That's it.

Pedro, this is Fernando speaking. Thanks for your question. Transparency in communication is an obligation of ours and I do thank you for the comment. We've tried to have a relationship with the market since we went public as we relate to our clients so that the market can know what we are doing. So we've always tried to be as transparent as possible in our communication. On the other hand, we do have the responsibility in our communication not to create expectations and also not to share company strategies with the market because these strategies sometimes can be hurt in communication, in sales of assets or funding raising debt. So strategies have to be set by the Board and communicated sometimes post execution to the benefit of everyone, including the market and shareholders. So we are trying to have the best communication possible considering all that. So what we say is that we wake up early every day, we go to sleep late and our greatest asset is our people. We have to reduce costs, but we have to have better turnover of assets. We have to have more productivity in operations. We have to bring more customers to our business with a stronger relationship more long term and we have to have people to control that. The sale of assets we are always looking into that, but that depends on the time, on the opportunity. Sometimes it happens, sometimes it doesn't. It can be one asset, it can be the other. You are not in a company that is just selling assets for the sake of being. This is a company that has been generating value in whatever it does and we are doing our obligation. We are working for that. So every now and then we might have movements. I think the greatest sale with Ciclus is just to show the market a value that was not perceived. It was built in-house. It was executed with excellence. It is a wonderful asset. You might have an asset like this in Brazil, but not better. Technically speaking, it's engineering safety, an asset that contributed to put an end to one of the largest dumpsters in the world and now generating 60% of biomethane from waste in Brazil. So it is the greatest asset. I don't think there is anyone with better quality in the world. And why did we divest? Because we consolidated, because we are going to generate value to Aegea that is focused on sanitation and we'll generate value to us as a group. So we might have other movements; nothing right now, but very soon. As we say, the group is mature to generate value on what was built. And at some point, we believe that the generation of better value will come from the divestment. We are open to that, but nothing that we have for sure now. It sometimes does not depend on us. It depends on the opportunity. So thanks for your question and we are working very hard and as a consequence of our work, we want to decrease our debt and improve our leverage. Okay?

And just to add to the answer, Fernando did talk about the strategic part. But remember, we went through a similar period of what we are having now with this spike in interest rates in 2016. And what we can do to address that is to adjust our portfolio in terms of revenue to have a balance with your relationship with your customers and this has been done. And we believe in the quality of execution and at the same time, there are specific situations of each business to be addressed. So that we can improve our results not only because of economic environment of high interest rates, but because of the normal challenges in the development of a business. So we are doing that and together with other initiatives, it will certainly contribute for us to go to the right levels that we had in '16 to '17. Thank you for your questions.

Our next question comes from Pedro Tineo from Itau BBA.

I think most of my questions were answered, but if I could go back to the ports. We are seeing several recent transactions with listed companies, acquired companies. Could you give us a bit more color about opportunities for CS Infra that we could see in the short midterm? As you mentioned about Ciclus how you could unlock value and there are other assets in the group that sometimes we do not account for. So if you could talk specifically about ports, that would be really helpful. Second question, the efforts you have mentioned in terms of CapEx to deleverage. I would like to have an update about that and your mindset from now on.