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

Good morning, ladies and gentlemen. Welcome to SIMPAR's conference call to discuss the results for the first -- second quarter 2026. The session is being recorded, and a replay will be available on the company's website, ri.simpar.com.br. [Operator Instructions] Because the time of this event is limited, any questions and answers will be later addressed by the company's IR area. The company's release and the results of the second quarter '26 can also be reached at SIMPAR's IR website and also CVM's website. Before we proceed, I would like to remind everyone that any forward-looking statements made during this conference call relative to SIMPAR's business outlook are based on beliefs and assumptions of SIMPAR's management. These statements are subject to changes since there are macroeconomic conditions, market risks and other factors that may have a play. Today with us leading the event are Mr. Fernando Simoes, CEO; and Denys Ferrez, Executive Vice President of Corporate Finance and Investor Relations Officer. Now I'll turn the floor over to Mr. Simoes, who will begin the presentation. Mr. Simoes, please go ahead.

Good morning, everyone. We are starting to release our results for the second quarter '26 earnings presentation. On behalf of our more than 57,000 employees, I would like you to thank to join us today. I'd like to share with you a very special time for the SIMPAR Group. In July '26, we celebrated 70 years since we began our operations. It all started with a single small truck by my father and we are very proud of that. Over 70 years, we have gone through many transformations as a business and we take great pride in everything we have built and accomplished. Above all, we are deeply grateful, grateful to God, to everyone who has been part of this journey and contributed to the development of our companies, to everyone who is still today and contributes to our business every day and to the families of those who are part of our history. After all, without our families, none of this would be possible. I always say our families, those that stand with Thomas are the ones that really make us move. On behalf of all of us, I'd like to thank everyone who has followed our journey and who is here with us to celebrate this very special milestone. The development, all the transformations led to JSL's listing 16 years ago at the highest level of corporate governance and which brought a stronger foundation, a strategic plan defined by our Board and entrusted to us as executives. Both have been fundamental to our development and the transformation of our businesses over the past 16 years. All of this has been essential to our development. That throughout this journey, we have also preserved and strengthened our values and culture, focus on people, clients, simplicity, approaching every day as if it were the first, an ownership mindset and sustainability in every sense, not as a trend, but as a genuine commitment, social, environmental, but also from a financial standpoint and a focus on highly resilient businesses that are part of people's everyday lives and essential to the day operations of industries. Every day, we ask ourselves whether our services are contributing to and creating value to our clients, whether they are individuals using our services or companies. And we continually ask what we can do better every day. It is this focus, our values, our culture that has shaped what we call the SIMPAR way of doing things. Now our key figures when we compare '24 and the second quarter of '26, we can clearly see the transformation of our main indicators, gross revenue, EBITDA, fleet, number of employees. And more important, we have continued to grow while requiring less CapEx and expanding our EBITDA margin. So these are some of the key figures from the past 16 years that give us good for thought, an opportunity to reflect on the value that has been created and more important, the strength in which we enter our next phase and the potential we see for future growth. Now Page 4, where we highlight some of SIMPAR's key indicators for the second quarter '26. The sales is divided in 2 parts. On the left, we have our key figures. Gross revenue reached BRL 12.4 billion, up more than 10% compared to last year. Adjusted EBITDA more than 16% growth. Again, EBITDA growth more than revenue. We reported net income of BRL 52 million from continuing operations and return on invested capital of 14%. At the bottom left of the page, still some highlights of our key growth indicator. On the right-hand side, I'd like to draw your attention to some of our main value creation highlights. One of them was the divestment of our 2 ports, ATU-12 and 18, which were sold for BRL 1.8 billion. And just as important as the value realized was the capacity of our teams. Over the past years, they modernized, essentially rebuilt from the ground up a port's operation whose infrastructure was severely deteriorated. And this follows the divestment of Ciclus Rio, which announced previously. This shows the value creation of our unlisted infrastructure. We also carried out some debt repurchases. Denys is going to discuss that further on and some new funding transactions that demonstrates the breadth of access to different sources of capital. Page 5. I will briefly discuss each of the companies, focusing less on numbers and more on how we view the businesses and their opportunities. JSL, well, as you know, it has the broadest portfolio of logistics services, a highly diversified presence across services and sectors, food, mining, automotive does create significant cross-selling opportunities, which have historically been its strength. At this point, as you can see, JSL is growing at a slower pace than history. And why? Because every 3, 4, 5 years, whether because of inflation, cost increases, productivity gains, it's just natural that we revisit pricing, processes and contracts. And quite often, we have cost increases and inflation, which happened in logistics in the past years. And this pricing discipline throughout this period has meant winning contracts, but also terminating contracts that no longer met our return requirements. This is what we are doing, winning new contracts, terminating others. And this is exactly the phase the company is going through today, winding down and decommissioning certain contracts and at the same time, winning and deploying new ones. And I believe this will happen for 2, 3 quarters until operations normalize. But remember, we want to have the right price, which other competitors don't do and unfortunately, cannot develop, and this creates opportunity for organic growth. Tighter credit conditions, companies often face management and workforce challenges, and this gives opportunities for JSL to grow organically. And I believe you're going to see that evident over the coming quarters as growth from new contracts is no longer offset by contract decommissioning. And this creates a significant opportunity for JSL to grow again in the next 3 to 4 years. And in line with JSL's strategic plan, we also see an opportunity to further develop different business units, our own fleet, third-party independent drivers to JSL Digital, INTRALOG that has been established as a fully independent company, which can happen to other areas. So this is a segment with huge opportunity to provide services to industries. Page 6, we have Movida. Movida is our car rental business. I have said that since we joined the segment in occasional short-term rentals. When we acquired Movida, I talked about the huge potential of this business in Brazil. It's still very underpenetrated. It's developed rapidly. And there are several avenues for growth, fleet outsourcing, car subscriptions, short-term rentals, used cars, the rental for customized vehicles for specific services. And if I may say so, Movida is uniquely positioned. It's no longer a small company. It has significant scale today, but it's not complex. It has the agility of a smaller company and the scale of a larger company. And more importantly, it has the people and management capability to execute. And proof of that is that the combination of service, innovation and agility, always with a strong focus on our clients has brought organic growth that is part of our strategy. I also think that shows the strong relationship we have with our suppliers. In the last 12 months, we have more than 700,000 new customers in a growing market with significant potential for development. We are very pleased with everything we achieved with Movida, the transformation led by its management team, but even more excited about what lies ahead, continued development of the business, improved returns, operating efficiency and fair prices. Page 7, we have some of the main highlights of Vamos for the second quarter '26. Christian has taken over as the company's CEO, Rodrigo as Interim CFO. Both know the company and the business extremely well, which provides for the continuity in the execution and mission of the company's new cycle. They have carried out both a commercial and operational reorganization, which I believe will also significantly contribute to greater focus, agility and simplicity in the news cycle. And I believe this will help reduce used asset inventory, whether by re-leasing those assets or selling them and also through a new product, which is short-term leasing in the same [ Sempre Novo ] product, that is 6 months, 1 year, 1.5 years. Christian probably already discussed that with you. And I believe this will support higher monthly deployment volumes in new used assets and also higher used asset sales contributed to the continued reduction of our inventory. What makes us particularly confident is the team's positioning and expertise combined with the significant leasing opportunities we see in the market for this profile of trucks that we have and with discipline in credit and execution and in selecting clients and operations where our equipment will be deployed. Once again, I would like to reinforce and share with you our long-standing conviction with the growth potential of the truck and equipment leasing, particularly now with tighter credit and high financing costs and also a different price range for new trucks, which has also increased quarter after quarter, which makes our scale and purchasing power even more competitive and enhances the attractiveness of our inventory, both of new and used assets, whether for sale lease or contract extension for another 1, 2 or even 3 years. This is a market that is significant potential in Brazil, just starting and Vamos is very well positioned in this segment. On Page 8, we have Automob. As you know, over the past years, we have built the largest automotive dealership network in Brazil, consolidating with truck, agriculture machinery and heavy equipment businesses. We are still capturing the synergies from the consolidation. We are increasing sales volumes per location and achieving significant cost reductions. But our results do not yet fully reflect either the synergies or cost reductions, but we are very confident in this business and the team is very much focused on accelerating value creation in the shortest possible time frame. I strongly believe that the business is beginning to mature and this will create significant opportunities beginning in '27. The team is working hard, is focused, is reducing costs, capturing synergies and increasing volumes per location. I believe this process will continue over the next 6 months and the benefits will be clear as of '27. On Page 9, we have CS Infra, our company that has been developing concessions and PPP projects. I'd like to reinforce the significant potential and opportunities in Brazil of services that require less CapEx and are strongly focused on service delivery, contributing to people's lives and the quality of life while also improving the quality of public services. In this strategy, our team's ability to execute and operate those businesses has resulted into value creation, both for the business themselves and through the increased value of the underlying assets. We strong believe what we have been building, but we also believe that the potential of this business in Brazil remains significant and CS Infra is well positioned to capture opportunities. This focus on value creation while remaining true to our commitment to serving clients has also contributed to value creation for the group and to a better understanding of the value embedded in our unlisted companies. For example, on Page 10, we show some assets divested over the past 12 months, Ciclus Rio, Ciclus Para and 2 port terminals, showing the value in assets that were not previously reflected in valuation. Asset monetization is not our core business. Our focus in developing operating businesses, creating value, contributing to society, generating returns for our shareholders. Whenever a divestment also serves this objective, it is certainly something our Board may consider. And the Board's decision to divest also helps demonstrate our team's ability to create value, not only through operations, but also by developing businesses and ultimately selling them. On Page 11, we have CS Brasil, which focuses on logistics services and vehicle rental with drivers. As you can see, key figures -- the business has been growing, developing in segments with significant opportunities. Although these contracts are awarded through public tenders, they are services that are similar to a concession, but with shorter contract terms, vehicles and drivers. I also strongly believe in the growth potential of this business, which contributes to improving the quality of public services. Now Page 12, BBC has been growing and developing sustainably with a focus on our core business. Financing used parts and trucks. More than 95% of its contracts have down payments of 30% to 40%, a 10% spread and low delinquency levels. This demonstrates the quality of the bank's portfolio as well as the strength of its team, governance and management. Page 13, we have our key financial indicators and then I'll turn over to Denys. Denys?

Thank you, Fernando. Good morning, everyone. Slide 13, we have consolidated financial highlights. I'll start with net revenue, which totaled in the second quarter '26, BRL 11.16 billion, of which BRL 9.5 billion came specifically from services provided. This represents an increase in this revenue of approximately 14% when compared to the same quarter last year. Adjusted EBITDA and EBITDA margin totaled in 2Q '26, BRL 3.361 billion and margin of 30%, again, 16% above the same quarter last year and 2 percentage points higher for the margin in the same period. This reflects our continuous focus on extracting more value from the operating base we have already built. Adjusted operating income measured by EBIT and shown on the left-hand corner, it totaled BRL 2.1 billion, an increase of 18%, margin of 19%, which is about 1.5 percentage points higher than the same quarter last year. Adjusted net income totaled BRL 52 million in 2Q '26, reversing the loss recorded in the same period last year. Compared with the first quarter of this year, adjusted net income was 6x higher. Just a brief comment on our consolidated EBITDA margin, which has been improving consistently. When we break it down into service margins, asset sales margin and dealership margin, which has different business profiles, we see margin improvement across all 3, as you can see on the right-hand side of the slide. Slide 14, as we have done in previous quarters, we show the relationship between cash generation and net investment in each period. The net investment here represents contracted CapEx less asset sales completed during the period. As you can see in previous years where we were building scale across our businesses, net CapEx significantly exceeded cash generation of each year. Since '25 to today, with the completion of that scale building phase and our increased focus on extracting greater values, greater returns from the operating base, the relationship has reversed. So cash generation now exceeds net investment. And over the last 12 months ended in the second quarter of '26, the ratio was 1.9x. In other words, EBITDA was almost twice the CapEx invested. Again, net CapEx here includes in-vehicle rental businesses, the preparation for the month of July, which is seasonally the busiest month for the year in the sector. Now moving on to the next slide. We bring to you the group's consolidated debt and cash positions and also the key characteristics of our debt profile. We continue with a strong liquidity position, consisting primarily of cash, but also including the undrawn committed lines and available floor plan lines at our dealerships. We have an average maturity of our debt of 3.8 years, liquid position covers short-term gross debt by more than 2x. And as an additional update, during the second quarter '26, we raised approximately BRL 2.7 billion in new debt, average maturity of 6.3 years. And looking at the third quarter through today, the date of this conference call, we have already raised approximately BRL 2 billion with average maturity of 3.4 years. Another important event during the quarter was the private capital increases totaling BRL 3 billion across the group, divided between SIMPAR, Vamos and Movida supported by SIMPAR's controlling shareholder, JSP Participações and BNDESPAR. On the next slide, I would just like to highlight a few additional points regarding our debt structure. Well, the group's organizational structure was designed to provide the greatest possible degree of independence, particularly to our publicly traded companies. So here, we show by company, the cash position and debt amortization schedule for Movida, Vamos, JSL and Automob, our listed companies, followed by SIMPAR as a purely holding company. And remember, CS Brasil and CS Infra are privately held and receive greater support from SIMPAR as they continue to develop. The key point is that each publicly traded company has its own credit rating, capital structure, shareholder base, governance designed to protect the specific interest of the debt company. These publicly traded companies are not affected by events at other subsidiaries of the SIMPAR Group. They can always rely on the support from SIMPAR because any event at the SIMPAR subsidiary has a direct impact on SIMPAR's debt covenants. However, events at SIMPAR do not have an impact on the debt of its publicly listed subsidiaries, therefore, presenting the independence of each company and their respective shareholder base. This is the key message here. Although we present consolidated figures because SIMPAR's covenant metrics are assessed on a consolidated basis, that does not mean that the companies are interconnected from a debt perspective. I think that's the main point of this slide that I would like to emphasize. The next Slide 17, we focus specifically on SIMPAR Holding on a stand-alone basis. At the end of second quarter, SIMPAR had an extremely strong cash position, BRL 4.6 billion, average maturity of 5.1 years at BRL 1.4 billion. As you may recall, last quarter, we committed to repurchasing up to BRL 1 billion during '26 in debt. We can now report that we have already repurchased BRL 350 million. It's important to note that between last quarter and this quarter, there were several periods in which we were restricted from trading, specifically because we were working on the port divestment as previously disclosed. And the port divestment is not yet reflected in SIMPAR's net debt. Obviously, as we approach the release of our results, we also enter a blackout period. Nevertheless, we will continue working hard with our firm objective of repurchasing gross debt and reaching at least BRL 1 billion in debt repurchases by December '26. Specifically, regarding the net debt balance at the end of the second quarter, I would like to emphasize that it was down 56% compared with the net debt we had at the third quarter '25. In other words, between 3Q '25 and 2Q '26, SIMPAR's net debt fell to less than half its previous level. And again, it does not yet include the benefit from the port divestment announced in July. Had that transaction being reflected at quarter end, SIMPAR's net debt would have been below BRL 1 billion on a pro forma basis. Slide 18, we have our financial leverage. In the second quarter of 2026, net debt to EBITDA stood at 2.8x as measured under our bond covenants. This is our lowest leverage since our IPO in 2010. In other words, the lowest in the past 15 years, even with average CDI of 14.8% over the last 12 months. That demonstrates our ability to adapt our business portfolio to the prevailing macroeconomic environment and the flexibility provided by the breadth of our portfolio. It's the combination of both. In net debt to EBITDA, which is what we use for our local debt portfolio, leverage stood at 2x at the end of 2Q '26. This is my final slide. Now we have a metric that we closely monitor as part of our management performance assessment. It is the productive ROIC, which stood at 14% at the end of 2Q '26, 1.9 percentage points above the average after-tax cost of gross debt. With that, I'll turn it back to Fernando. Fernando?

Thank you, Denys. Now on Page 20, we have some of our final takeaway messages before we open for your questions. In keeping with our commitment to transparency and in line with the strategic plan defined by our Board over the past 2 years, we have reinforced the key priorities and objectives of our strategic plan. This means focusing on operating efficiency, discipline, fair pricing, extracting value from everything we have built and continue to develop business sustainability, anticipating clients' needs, valuing our people, contributing to their development and operating in resilient segments where we know our services contribute to the development of our clients or their clients. Here on Page 20, we highlight some of the key indicators that already begin to demonstrate the results of the work we have been carrying over the past 2 years. With that, I will open for your questions so that we can answer anything that you wish to know about the presentation. Thank you very much.

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

Congratulations on the work of the group. I have 2 questions. In addition to repurchasing debt, do you think you should also buy back shares, both at the holding and at the subsidiary level? And second, when you think of net debt of the holding, BRL 1.4 billion, how much cash do you still have to come in considering the divestment and dividends declared and not paid? And what is the level of net debt for the holding that is ideal for you to target in the medium term?

Thanks for attending your question. This is Denys speaking. Indeed, our priority, as we have already said that in previous quarter was to repurchase of our gross debt. But certainly, we have been observing the market. And when you see the price of our shares and the behavior that they are showing, obviously, there is something that deserves our attention, at least an internal discussion. This is a decision that has not been made. Our focus is not a share buyback. But for example, you have Movida, as you have seen, showing continuous improvement in net income along several quarters with an interest environment that is very high. So if we see a projection in the future market of stable interest or this is slightly above, this is a company that is creating value. However, when you take a look at the valuation of the company vis-a-vis its equity value, we have a 30% discount. So even if you go back to the discussion of the fleet mix and all the transparency it provided to the market in this conference call, the quality of its mix and the accuracy of its management, the effectiveness of the linear depreciation, it has applied different from other players that had lots of impairment. I think this is a value creation, and we have a 30% discount. So it's not up to me to make the decision. It's up to the Board of Directors. But we are being demanded to look into that and to bring the discussion to the Board. In terms of cash from the divestments made, on a consolidated base, we have from the declared dividends to be paid this year, and that's about BRL 1.3 billion, and specifically for SIMPAR, BRL 900 million. Now debt net, the target, as Fernando has mentioned before, is really to 0 the net debt of SIMPAR as a holding company. Of course, this is a reflect of all developments made throughout the year, the group's transformation. We kept this debt at the SIMPAR level. And now it's time to address that. So we are continuing to pursue reduction of this net debt at the holding level to 0.

Our next question comes from Gabriel Rezende from Itau BBA.

Congratulations on your results. I wish you all success. I would like to have a follow-up on the debt profile and capital allocation. We saw your proceeds for the short-term the control of your debt. But I would like to understand now that the group is in a more comfortable position and we start to see for some time now a stabilization in terms of growth, how does the group see capital allocation for the next steps? Now that you have a more balanced balance sheet, both for the holding and the subsidiaries, does the group eventually think of resuming growth? Any specific niche that you can address with less capital allocation, synergies, contracts that demand less CapEx. We are seeing JSL moving more to asset-light. So just to try and understand the next steps in terms of capital allocation in addition to buying back debt.

Gabriel, this is Fernando speaking. Thanks for your question. Thank you for the congratulations. We are very happy about turning 70, and especially of how we got here with excitement and people to enjoy the next sector. So Gabriel, what your question addressed, which is very important, is that we have made lots of investments. We built our foundation, put together stores and everything. And the focus on operational efficiency has the strategy to create value, but we are not missing out opportunities because we have less CapEx. And proof of that is Movida with 700,000 new clients in the past 12 months. So our companies are growing revenue with less CapEx. So opportunities continue. You talked about JSL, and it's correct. We closed BRL 2 billion of new contracts with JSL. So leasing assets instead of having our own assets is part of JSL's strategic plan for the better allocation and return on capital. And together with that, JSL discontinued about BRL 800 million contracts a year because of our discipline in pricing. So focus is operational efficiency, disciplined pricing, optimization of assets. This is our focus. And the consequence has been deleveraging, which is going to continue, but without missing out any business opportunity. We always joke around, we can go into any business. If it's a good business with a good return, we are going to go for that. But our focus is to do that leverage, continue developing and extracting value from what was built. That's our focus. Denys would like to say something. I'm going to ask him to add.

This is Denys speaking. And within what Fernando mentioned, what we were able to develop the expertise in infrastructure, our proven value creation with everything that was presented, so many examples of divestments. So we have been approached and we are open to have capital partners because with the track record of execution that we have, there is capital interested in infrastructure in being part of a business with us in a way that we can have a specific profit for a future participation of third parties. So many people see opportunities in this area. So we will also seek the development of the structure to have a balance there. We know that Brazil has huge opportunities, and we are going to do that in a disciplined manner, considering each of the approaches and trying to find a common denominator that will allow us to move on with that.

[Operator Instructions] Joao Ramiro, you can ask your question. Joao Ramiro from XP has a question.

My question is more towards the CS Rodovias. This quarter, we saw the ramp-up of Graos do Piaui with two new toll plazas and the expectation of getting to 10 at some point. So I would like to know the next milestones for this concession, the level of EBITDA that we can expect by the end of year '26, '27 and also Lot 6 of Mato Grosso. We saw a potential litigation in the concession with the awardee possibly being ruled out and you taking over. So I would like to know if you have any update, any timing when the decision is going to come out.

This is Fernando speaking, Joao. Thanks for attending. I would say the following. It's important to highlight that we are reaching almost 1,000 kilometers being managed by CS Infra without considering Lot 6. We are sure even with the guidance of our legal department that we have the right to that. And so we have the opportunity of Lot 6. But without considering that, we already reached 1,000 kilometers of highway. And Graos do Piaui has almost the whole CapEx already executed. And now it is in deployment as expected. And remember that, that highway is almost like a take-or-pay because there is a guaranteed revenue. So Denys is searching the numbers. He can give you the numbers. And maturity is going to reach in '27. And Lot 5 of Mato Grosso already starts this year, if I'm not mistaken, because the first phase of CapEx and the improvements of the highway have already been completed. So we are very pleased with these businesses. We talked about the port. We talked about the quality of our assets within CS Infra and the highway assets under the management of CS Infra is impressive. The synergy of Block 6 because it is in Mato Grosso, the quality of this asset if we get to be awarded is huge. So in CS Infra, we have been very selective in what we go for, quality of CapEx, quality of return, very, very high-quality assets. I'll turn to Denys.