Vamos Locação de Caminhões, Máquinas e Equipamentos S.A. (VAMO3) Earnings Call Transcript & Summary

Good morning, and welcome to the conference call of Group Vamos to discuss the Earnings of the First Quarter 2023. Today with us, we have Gustavo Couto, CEO of Vamos; and Adriano Ortega, CFO and IR Officer. [Operator Instructions] We would like to inform you that this conference call is being recorded and simultaneously translated into English. Before moving on, we would like to let you know that any statements made during this conference call relative to the company's business outlooks, projections, operating and financial goals are based on Vamos' management, beliefs and assumptions that rely on information currently available to the company. Forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions since they refer to future events, and therefore, depends on events that may or may not occur. General economic conditions, industry conditions and other operating factors may affect to the company's future results and lead to results that will materially differ from those in the forward-looking statements. We'll now turn the call to Mr. Gustavo Couto. Mr. Gustavo, you may go on.

Good morning, everyone, and thanks for attending our conference call on the earnings of the first quarter '23. In the first quarter, we had very important landmarks that confirm our trust in yet another year of continued development and profitability of that. We recorded growth in all our business segments, consolidating our unique ecosystem with a broad portfolio of customized solutions for different clients of different sizes and sectors. I'd like to thank our customers for their trust and our people for their commitment for us to beat our results, and everything that we had to do, and achieve in the coming quarters. Also, I'd like to thank the OEMs, the service providers and vendors that are extremely important to our business, so that we can continue growing and really serving our customers the way we wanted, and thanks to our investors, shareholders, financial institutions for the support in our path of growth that we believe is just starting. We are going to start on Slide #4. And there, I'd like to share with you the main highlights of the periods in all our business lines. Talking about consolidated results, it's important to mention our net revenue with growth of 78% in the quarter, when compared to the same period last year. EBITDA was BRL 659 million in the quarter, growth of 82.3% compared to the same period last year. And net profits grew approximately 38.8% in a total of BRL 169 million in the first quarter. Our return on invested capital added up to 19.4%. If we consider the last 12 months, this is an expansion of more than 5 percentage points, and return on equity reached 22% in the quarter, which also up 0.4%. In the Rental [ segment, ] we had very important results. We had growth in all our operating indicators, [ at the end ] repeating an increase in profitability of customer base and the digital sectors in which we operate with a nation-wide coverage in addition to new contracts. Net revenue reached BRL 805 million, an increase of 128.5% compared to the same period last year, considering the sale of assets in the project. EBITDA reached BRL 564 million, up 96.7% year-on-year. Our backlog that is future contracted revenue reached BRL 15.6 billion at the end of March, up 76.8% compared to the same period '22. That ensures a strong growth for the coming years with a customer portfolio that is increasingly diversified in different sectors of operation and with nation-wide coverage. Until the end of March '23, we had 1,250 customers, a growth of 66% against the previous year. At the end, we'll give you a bit more color on that. But we had an important growth in the CapEx deployed this quarter, reaching a bit more than BRL 1.3 billion, 50% above the first quarter of '22, reinforcing our capacity of execution and focus on offering services of excellence to our customers. This is a change in terms of -- we've raised the bar. Also to close rental, we reached a record volume in asset sales with gross margin of 31%. This considering the operation that we had in the company with JSL in the quarter, as released to the market previously. With regards to dealerships, it's important to highlight the continuous growth of the segment, considering the market dynamics that is very favorable, in addition to expansion to new stores, which reinforces the [ surge in this -- of our ] expansion plan and our capillarity, with gains of scale and commitment with the highest quality in providing services to our customers. Net revenue grew by 37.5%, reaching BRL 794.8 million in the quarter. EBITDA was up to BRL 86.8 million, an increase of 18.9% year-on-year. In this month, we had 2 important acquisitions that will further strengthen our strategic position in the segment. On April 16, we announced to the market acquisition of Tiete Veiculos with 3 more stores to Vamos dealership network, a strategic position in the cities of Sao Paulo, Campinas and Guarulhos, regions that together represent an important part of Brazilian GDP. Tiete was chosen by [ MAN ] Latin America for 7 years in a row as the best premium leadership -- dealership of Volkswagen and Trucks, that is proof of the high level of services. That consolidates Vamos with a large network of bus and trucks dealerships in the country. And yesterday, we announced the acquisition of DHL Tratores, which is a network of Valtra and Fendt dealer in Parana, Ponta Grossa, Araucaria, Ivaipora and Cornelio Procopio. With the acquisition, Vamos consolidated the largest Valtra dealership in South America with 6 important stores added to its portfolio in Parana, a state with the second highest farming activity in the country. Between Vamos and AGCO, we are also going to be an exclusive dealer of Fendt in the [ South ] of Parana. Both acquisitions are conditioned to the precedent obligations for this type of operation, including the Brazilian and concerned agencies' concern -- consent. I'm now going to turn the call to Adriano Ortega, our CFO, that will give more color on our performance, and in the end I'll come to my final remarks and open for your questions.

Thanks, Gustavo. Good morning, everyone, who has joined us for this conference call. I'm very excited with the first conference call of Vamos and the numbers to be presented. I'd like to share our consolidated quarter performance and a bit more color on our results in the next Slide. I'm going to start with Slide 5, talk about consolidated 1Q '23 results. We continue to deliver sustainable results with consistent indicators in terms of profitability. Consolidated net revenue reached BRL 1,600 million in the quarter, growth of 78% compared to the first quarter '22. If we consider the last quarter '22 in the comparison, we had an increase of 21%. EBIT in the quarter also had strong development reaching BRL 541 million, up 83% year-on-year. And because of the organic growth in rental, gain in scale and productivity, EBIT in the first quarter '23 was also 16% higher than the fourth quarter '22. EBITDA consolidated had strong growth in the first quarter, reaching BRL 659 million, up 82% year-on-year, and 16% quarter-on-quarter. In the lower right side chart, we show our net income, we've reached in 1Q '23 BRL 169 million, 39% above 1Q '22, basically due to the growth of our EBIT in the quarter, given the strong organic growth in the main segments. Now, we are going to go to the next Slide, and I'm going to share the company's evolution of the return on invested capital along the last years'. Also considering the performance of this quarter, and with the lens of the last 12 months. We've reached 19.4% in the return on invested capital. You can see in the upper left part that this has been increasing along the years. That's why we think we are at a new level of return on invested capital, especially for the coming months. This profitability supports the company's plan to continue investing along with its strategic plan. As you can see in the bottom part of the slide, we also see the evolution of the net income of some of the years, and you can see it is resilient growth along the period, regardless of the economic cycle in which we were ascended, that supports our business model with disciplined management in capital allocation. Moving to Slide 8, as shown the main results for the Rental segment in the quarter, with strong evolution in all indicators, growth in net revenue of 128% year-on-year, reaching BRL 805 million. Net revenue from Services, BRL 584 million, an increase of 91% compared to the previous quarter. We also had a record revenue in assets sold. I'm going to talk about further on the presentation. With BRL 220 million in the quarter, compared to the fourth quarter, we had an increase in net revenues by 26%. In the upper right chart, we have contracts with and without Maintenance Services. As you can see, we have consistent growth. EBITDA in Rental reached BRL 564 -- EBIT, I'm sorry please, BRL 458 million, up 102% year-on-year. Relevant in accordance to our CapEx deployment, compared to 4Q '22 growth of 18%. EBITDA reached BRL 564 million, 97% above the results of the first quarter last year, and 18% above 4Q '22. On the next slide, I'm going to talk about the growth of contracted CapEx in the quarter, and why we are confident in the yields contracted this quarter to strengthen our stability for future periods. We added up to BRL 1.7 billion in contracted CapEx in the quarter, an increase of 10% compared to the 1Q '22 or 72% above that of 1Q -- 4Q '22. In the bottom part of the slide, just for you to compare periods there, we are having a breakdown of our use. The use of our contracts is increasing and positively contributing to our profitability in the first quarter of '23, recurring contracts had an average yield of 3% and farming contracts average yield of 2.1%. Additionally, in the first quarter '22, we had inter-logistic long-term contracts that really affected the yield of the first quarter '22 as compared to the first quarter '23. Except for this effect of the first quarter '22, the average yield of the first quarter '23, as you can see had growth of 22 basis points compared to the first quarter '22. Our backlog reached BRL 5.7 billion (sic) [ BRL 15.7 billion ] at the quarter, an increase of 77% compared to the same period '22. Now, we are going to go to the next Slide, where we show the evolution of our deployed CapEx. In the first quarter of the year, deployed CapEx has added up to BRL 1.3 billion approximately, with growth of approximately 56% compared to the first quarter last year. If we consider that in the last 12 months we implemented BRL 5.3 billion, and as shown in the chart, the volume tends to see with an upward trend for the future. We are optimistic about the opportunities that we see for the coming periods. As for our fleet, we closed the quarter with 45,055 assets, 52% above the size of the fleet we had in 1Q '22 and 2% -- 2.8% above that of December '22. The next Slide shows our strategic position in the market with inventory of new assets. We closed the quarter with almost BRL 3 billion new assets in inventory, of which BRL 496 million are already rented or under deployment. If we consider the market value estimated for this inventory, the appreciation is 48% above the acquisition price, reflecting directly in a better profitability of our contracts. Our new inventory is on demand for new contracts, and based the CapEx contracted for the first quarter of '23, it accounts from 4.3 months of sales in new contracts. As we mentioned in previous quarter, this strategic position has brought important operational performance with faster and better services to our customers, and really faster recognition of revenues on our base. Going to Slide 13, I'll talk about asset sales for the first quarter '23. Reinforcing our view that the market is quite favorable, net revenue reached BRL 221 million in used trucks and machinery, with consolidated gross margin of 19%. However, I'd like to give you some highlights for you to better understand the operations. As we released to the market in the first quarter, part of revenues had to do with intercompany transactions with specific assets. If we analyze the gross margin and exclude the transaction, the margin of other sales in the retail was 31%, and the volume of assets sold, we sold 1,128, 69% higher than asset sales in the same period '22. Now, going to Slide 15, I'm going to talk about our dealerships. In the first quarter, the net revenue had growth of 37% in the segment, reaching BRL 795 million, and 17% higher than the fourth quarter '22. This [ arrow ] indicator shows good conditions in the market and also the good acquisitions we had in last years. EBIT reached BRL 81 million in the quarter, up 19% year-on-year, and up 25% quarter-on-quarter. EBITDA reached BRL 87 million in the quarter, up 19% year-on-year and 23% quarter-on-quarter. These results contributes for our optimism with opportunities that we have in the segment in the coming years, in-line with what Gustavo mentioned in the beginning of the conference about the acquisitions in the month of April, that will generate very important synergy gains for the company. Going to Slide 17, I'm going to talk about our capital structure. In the end of the 1Q '23, net debt amounted to BRL 7 billion with a leverage of 3.2x net debt to EBITDA ratio, reinforcing the discipline of our financial management, the raising of capital, and a strong balance sheet. We closed the quarter with a solid cash position and investments and above BRL 2.7 billion - BRL 2.3 billion, that can cover our debt until mid '25. We have a comfortable position analyzing leverage indicators to the right, that enables us to continue our strategic plans to grow. Going to the next Slide, I'm going to talk about gross debt profile. In the first quarter, as I mentioned in the previous slide, we closed with a solid cash position in investments. The average term of debt was close to 6 years. The average cost after tax of about 10.9% a year. We continue management to ensure the profitability of our projects. In the close of the quarter, we have BRL 323 million in hedge of derivatives with an average cap of 8.99%, in addition to BRL 1.9 million (sic) [ BRL 1.9 billion ] of other operations with prefixed rates. In addition, we had the annual adjustment based on inflation triggers in most of our contracts, which contributes to reduce the increased interest rate, which is also mitigated by the appreciation of our assets. Now, I'm going to turn back to Gustavo for his final remarks.

Thanks, Adriano for your presentation about our results. I'm going to go then to the next Slide, and I would like to invite you all to take a look at the third edition of our Integrated Annual Report to be published in the coming days, where reinforce the main commitments and actions of the year '22, and also goals, ambitions in EASG for the coming years. I'd like to close our presentation of the last slide, sharing important takeaway messages with you. We ended another quarter with strong operational growth in all our businesses, which also shows positive prospects for the coming quarters. We have a unique ecosystem with a resilient business model structured for profitable growth even in adverse macroeconomic scenarios. Our strategic rental inventory is starting to be rented, which confirms another yet growth cycle with investments already made. We are confident in our plans for '23, with efficient in use of our resources. In the current market context, we have to have discipline in execution and we are prepared for our growth plan. We had 2 strategic acquisitions for the company, Tiete Veiculos and DHL Tratores. With this transaction, Vamos is consolidated as the large -- largest Volkswagen truck and bus dealership network, and also the largest Valtra and Fendt dealer in Latin America, reinforcing our position in both segments. Finally, we raised funds and had the structured operation in the quarter, reinforcing our cash position in view of market opportunities. With that, we are closing our presentation. We thank you once again for joining us, and I'm going to turn back to the operator, so that we can start our Q&A session, and we are going to be here to answer your questions. Thank you very much.

[Operator Instructions] The first question comes from Pedro Bruno from XP Investments.

I have some questions. I'm going to ask one at a time. The first is about the margin of yield, that you reported in the consolidated number of 2.5%, which is something that is in-line with the year. But it would be expected for it to be higher, because of higher interest rates and also because you are now using Euro 5 trucks in an Euro 6 scenario. And then you show in your release that if you were to remove the mix effect, you will have a 3% yield, and it looked like if this is comparable to the 2.9% of the fourth quarter, it gives a good sign. And also if you can, I mean, share this breakdown that you had of the 3% ex-sugar ethanol and 2.1% for the segment. So, what was the number one year ago? Just for us to have a better idea of your development in each sector and understand the mix effect better. So that's my first question.

Pedro, this is Gustavo Couto speaking. Okay, Pedro, evolution you talked about the comparison to -- okay, to the fourth quarter '22 and the first quarter this year, is precisely what we have talked about. We are talking about 3% in the first quarter '23 against 2.9% in 4Q [ '22 ], and it just was straight forward. You do not have any non-recurring effect or any difference that will justify a distortion in the analysis. So, which is 3% against 2.9%. So, once again, we are expanding the yield in heavy assets. Remember, all seasonal volume is focused on the first quarter '23 as it was in the first quarter '22. So if you make the breakdown by sector, you are talking about 10% evolution in yield in the first quarter '22 to the first quarter of '23. I'm going to make a joke, Pedro. You know that in 2022, we are kind of obliged to do something for you to understand and it is a strategic confidential information. We are giving you colors of sectors that we should not give you the breakdown, but we are giving you the breakdown, just for you to understand the seasonality of quarters and to understand that the company indeed is evolving its yields in all segments. Showing our power of the pricing assets right.

Thanks for the additional breakdown, because that really helps us understand the mix effect. I'll follow-up here Gustavo. We see a very timid, so to speak, a decrease of non-rented assets, which is one of the leverages for the whole of the year. Could we say that this also has a seasonal effect, because you have a high concentration of sugar ethanol? So the segment is still not really using that non-rented assets or inventory assets. And then as of next quarter, we should see an acceleration for this line, giving a positive effect on the margin on yield and on leverage. So, just to confirm if my understanding is correct?

Yes, you are right. In the first quarter we are strong in -- as you know, in sugar ethanol sector, which has no relation with the strategic inventory that we built along '22, so your interpretation is right. We expect to have a further acceleration of this deployment of assets as of now. And I would like to use your question, Pedro, to explain something that is very important. Because of our inventory, what is happening from now on with this BRL 3 billion that is already in our inventory was rented and was under deployment. When this equipment is in operation, that is generating revenue and EBITDA, we are going to start to see transformation of results and very strong growth in the coming quarters, based on investments already made. This is very important for us to understand. The growth for '23 is already given, because the investment have been made. So you should expect an acceleration of any rental reduction in the coming months, and therefore, an acceleration of growth that is already given. So this is something that we are very comfortable with given the market demand.

And this is already on our defense of the ramp up of results for the year and your expectations. If you have any more comments about that, thinking of the results of the first quarter vis-a-vis the whole of the year, that would be great. But that was my question. And then I have a final question and then I'll let others ask, which is, the margin of used assets. In the first quarter, the margin went down from 30% to 20%, and you have a message that, that was a one-off event because of some negotiations. And we should see at the beginning of the year, the margin growing close to 30%. And in the release, you even say that, if you exclude related parts transaction, you get to 31% if I'm not mistaken. But I would like to understand the dynamics of margins with related parties, and also I believe that this is very similar to what we see in asset-light sector, which is what we call wholesale sales. So I would like to know your mindset there, because you still sell relatively little in terms trucks, does it makes sense to make wholesale sales with related parties or with the market? That's my last point.

Okay, Pedro. I'm going to add then to the ramp up of growth, and I'd like to do an exercise with you. Please, this is not guidance or indication, it's just a mathematical exercise that you can do based on the inventory of BRL 3 billion that we are reporting to you. If you consider the current yield that we have today and you make a projection of this inventory being rented in the coming months, only with investments made, CapEx already competed, that would be a projection in 12 months in a very conservative yield. An additional annual EBITDA of approximately BRL 800 million to BRL 900 million, that is already an indication that, if we can rent at current levels and at the usual pace of the quarters, if we just carry on with what we are doing, we are going to have not only a very strong EBITDA generation, with growths on our EBITDA basis that is huge, just with investments already made so far without having to spend on any other [ penny ] there. So, this is just an exercise for you to be clear to you, for you to see the opportunity of growth, given investments already made, and purchases already concluded. Now going to your third question about used assets margins. Here, I'd like to provide a clarification and perhaps an apology, because perhaps it was not very clear. If you go to our financial statements, you are going to see the total operations with related parties. And historically, we have always disclosed that, and there is strong governance on that. These operations have to be approved by the independent members of the Board of Directors of companies. So, we have strong governance, again approved by independent members of the boards of administration of both related companies. It's also important to say that these are very immaterial operations, which should make sense within this entire ecosystem. Because we've always said that, if I need 30 light vehicles for rental, I'm going to buy together with Movida. If JSL needs x trucks, it comes along with our purchase, because of the miss-consolidate the highest bargaining power with trucks, and with that we leverage opportunities to the group. But keeping the independence of each business. Anyway related parties transactions were BRL 125 million, you are going to see that in our financial statement. Very clear, all well detailed. But then if you do the math, you'll see that the related party operation happened at market margin for a larger fleet owner above 10%. I always joke about, and I say, I would like to have a 10% of margin in operation like that with a large fleet owner like the JSL Group, which is the largest road logistics company in the country. So, we'll be needed as a natural operation. What we did in terms of material fact is that adds to the Brazilian side community, we have to declare to disclose our durations above x million. So, we published the material fact of BRL 82 million, because JSL expects there that this volume of sales in the period, as there were other smaller operations below BRL 50 million with other carriers, logistics operators entered the JSL Group, adding up to their BRL 125 million that went through the government process. So we had 31% margin, retail but it's through used asset stores, and 10% of BRL 125 million to related parties that were approved by everyone and had the consent of our Board of Directors and independent vendors, of those, Vamos and JSL, reflecting market conditions and just like an operations with any large fleet owners. In the case of JSL [ 166 ] trucks, which is again immaterial vis-a-vis the volume of investments that Vamos made. Just to make the matter very clear and if you have any comments, please go ahead.

Our next question comes from Guilherme Mendes from JPMorgan.

Couto, Adriano, I have 2 questions from my side. Perhaps even a follow-up on Pedro's questions. The first is the outlook of your yields, you talked a bit about evolution, you're talking about also purchases of Euro 6, how much you have accommodated already? And are you going to have a higher yield to the second half of the year, assuming these high prices? And second, I think that the related parties transaction is very clear. But just as a confirmation, you don't see any pressure on the used assets segment, the fact that your sale -- selling wholesale does not mean there is a risk in retail, is it?

Giuliano, this is Gustavo once again. I'm going to start with the second, and then I'll go back to the first. No pressure with the volume of used assets, we are having record sales. You should come and visit our stores, you are going to see that they are refurbished excellent products, full of customers. We had record sales and we are really growing in a very strong sustainable manner in the sale of used assets. So, no pressure whatsoever. So much -- so that margins and prices continues to be very positive confirming the trend that we have told you a long time ago. So, no changes. Very positive outlook there. As for the yield outlook, what I'm going to do is the following. I'm going to invite you to do an exercise backwards, because people ask questions about, well, when you are going to purchase Euro 6? What will happen to the yield? Well, obviously, we showed to you what's going on, considering our strategic plans and the movements that we have in the purchase of equipment. And we analyzed that 100% of the time. We have a team that is 100% of the time taking a look at the best moment and models to buy in trucks and equipment as a whole. And then we bought Euro 6, I'm sorry, Euro 5, that naturally bring us opportunities, and we are working on that. This is a competitive advantage that only Vamos quite modestly can do. So that positions us in a very competitive position. Now, if you to go back to the period where we did not have, this transition to Euro 6, that was that close. Have you went back to our yields in '19, '20, you're going to see that our yields were already very healthy, with a bright spirit Tier that was quite suitable and even quite positive compared to the cost of that, for example. And so, yields and this is something that we see it as a [ cancer, ] like unique opportunity that is going to end. But this is part of our history and we are very comfortable with that. And not only with Vamos in the last 3, 4 years, but if you think of JSL, when we were a rental part of JSL, we already did that, of course, at a lesser scale. But our discounts, commercial terms, competitiveness is independent of this [ one off ] transition from Euro 5 to Euro 6. It happened in the past, it will happen in the future. And it's just another move. In the pandemic, there were other moves that ensured very good purchase conditions. And in the future, all these things will come, now the opportunities, we are going to buy Euro 6, when we need them in-line with OEMs, adding favorable conditions to us. Before that, we don't have to. I have an inventory of Euro 5, I'm happy, I'm going to rent it in the first half of the year. And we are going to enjoy very positive yields on margin. And for the future we are going to have the right strategic moves at the right time at the right conditions for a suitable yield and profitability, and that you're going to see that is going to continue quite healthy.

Our next question comes from Victor Mizusaki from Bradesco BBI.

Congratulations on your results. So I have 2 questions, Couto. You talked about the advancing of Euro 5 in the first half of the year. Could you talk a bit about your commercial departments, amount of leads, if you are seeing an increase, decrease? Just a bit more color on that, on your commercial front? And the second question is going back to the related parties operation. The material factors says that you can go up to BRL 300 million a year. My question is, is there anything in the horizon that you have already closed or intend to close soon? And if the merging that you said that is equivalent to the margin of large fleet owners, does it make sense to compare to the dealership margins, because you have more or less the same level? Does it make sense?

Okay. Let's start with the second question first, again, related parties. I think that comparing the dealerships perhaps is not the best comparison. Of course, this will be done, but I would like to talk about governance and why? Because imagine you have 2 companies listed controlled by another listed companies, then we have to have very clear solid governance, that's how we manage the company. We have minority shareholders on each side that have interest in each one of the operations. And we also have the independent members that have the future [indiscernible] duty of taking a look at the operations and ensuring that they happen at market prices, and we do that on a constant basis. If JSL company is awarded a contract and I have the inventory and they have to deploy the equipment quickly, why not buy from us. Why should they go shopping in the market if we have the assets. They are seen as a large customer, but buys from us. And again, this observation is submitted to the Independent Members Committee, so that they can vouch that these operations follows market conditions for the seller and for the buyer. So, this is very important. So I prefer not to compare to dealerships margins, because that depends on bargaining power. In our case, it was JSL, and that happens. What we generally do, and that's why we have our stores in the country, is to sell retail, not if a major customer comes to us and wants to buy wholesale, I'm not going to fail to sell. About the BRL 300 million, this was just to show that, first, it's immaterial in the size of the fleet. There is nothing going on, but it's natural, it is inherent of the operations of acute logistic operators, as they win contracts, they seek for assets in the market. We are one of the largest sellers, we are going to sell to them, that's as simple as that [ affecting. ] So this is really business as usual transaction. The visibility is because it was above the cap of the Brazilian CEC, and we have to disclose that to you, and obviously, we are going to follow that. We said BRL 300 million, we don't have anything outside, but it's natural that these kinds of transactions happen, but nothing specific that we came close to this number. We just brought you more clarity, and even saying that if it happens until the end of the year, it's normal. I'm sorry, Victor. I forgot your first question.

First question is with regards to demand on the second half of the year. In second quarter, you talked about the Euro 5 inventory. What do you see demand like for the second quarter?

The demand is just high, Victor. We clearly see that we have a commercial team that is quite content to lots of operations going on in turn, so we have unique opportunities for our customers. It's natural when we have uncertainty in the market that some negotiations are adjusted, that's natural because at the end of the day, our customers are paying higher interest rates. They also have various uncertainties, it happens, but it has not changed the scenario. Quite the opposite, if you compare to the same period last year, we had important growth also compared to the first quarter '22. We had growth of [ 70% ] compared to 4Q '22. And this is a quarter with sales that was better than the average of any other quarter last year. That shows that, indeed, the demand is growing stronger, and there is so much room to grow. So we are quite confident and comfortable with that. We truly believe that the investments made will bring good opportunities for us and our customers and fast. Thank you for very much.

Our next question comes from Renata Cabral from Citibank.

Hello, everyone. I'd like to ask about your capital structure of what you see for the whole of the year. Leverage closed the quarter at 3.2x, and you announced the operation of BRL 250 million and also the sales operation of BRL 690 million. So I would like to know, with the new CapEx investments and as the year matures, how do you see your leverage level and capital structure?

Renata, I am going to let Adriano answer this question.

It's good to talk to you. Well, just to add to the funding list that we had, we had almost BRL 1 billion in a biomaterial line with the development bank. And from now onwards, we have another $1 billion that is committed to be executed in this quarter and even up to BRL 2 billion with the development bank that we are under negotiation. All that said, and considering the use of our inventory and the ramp up of the growth of our revenue for contracts signed last year, but that we have been deploying CapEx this year. We see leverage close to what we have today. So even with growth, as we are using the strategic inventory, our leverage should behave here in a very stable manner. Perhaps 0.1% above or below 1 quarter. Another quarter, very much in line.

Renata, this is Gustavo. Just to add, I have 2 exercises here. One, the 3.23 and going back to my point, in which we have an inventory investments made, we can generate BRL 800 million to BRL 900 million in EBITDA. If you consider that we have 5% of new contracts, you can refer that, but we can generate growth with what we have in EBITDA that is huge. And that will naturally reduce our leverage, if for instance, we decide not to continue growing. But we want to continue growing, because the market is driving, and that's what we want. Remember, as we went to 100,000 assets for '25, which is our guidance. And to get there with additional investments, we are going to keep the leverage at the level that Adriano mentioned. So we continue to have contracts with strong cash generation and leverage is not going down because we continue investing, and we continue to see opportunities of growing with profitability. When we see there is a change there, which is not the case, obvious leverage would go down just by the performance of contracts and the cash generation that we have in each contract. And that's why we are very comfortable with our capital structure, and we want to reach the 100,000 assets for 2025. And if you think at the close of the quarter, if you consider that BRL 1.5 billion of our inventory was a strategic negotiation, and new discounts that from our current net debt, you're talking 1.0 cent of EBITDA. So you're talking about leverage, that would be close to 2.5, taking the snapshot of the quarter. I think this is a very nice exercise. Thank you, Renata.

Our next question comes from [ Gabriel Blacher ] from Itau BBA.

Congratulations on your result. I have 1 question, which is the demand for Euro 6. We received some impacts from healthy OEMs that perhaps the price of Euro 6 was a bit too high. And now OEMs are making adjustments considering again, sales and the production of trucks into consideration. And we have even hidden downtime [ on this ] program for the coming weeks. Do you have this perception that Euro 6 prices are going to go down? And then it bring an impact for your short-term yield of Euro V. We understand that the economics of rental are extremely appealing. But if you think you can have a short-term impact. On the other hand, the long-term CapEx would also go down because we will have a lesser inflation on Euro 6 when you have to buy. So if you could give us a bit more color on the topic, I would appreciate it.

Gabriel, this is Gustavo Couto. Gabriel, I think it's early to go about any lower prices for Euro 6. To tell the truth, I don't think that we have the prices for Euro 6 yet, and precisely because of that, let's do the exercise that is. Certain inventory that OEMs or dealerships have started to be sold in the first quarter. And it wasn't much. We saw 1, 2 months worth inventory, but the inventory is almost coming to nil. So practically, we haven't sold Euro 6 yet, or just very, very small volumes. All license plates that were issued, and this is published data from all associations. We are at the same, if not identical levels that we had last year in the first quarter. So we were licensing Euro 5 inventory -- so Euro 5 license plates were being issued in the first quarter. So we do not yet have a price consolidation. We don't have a sales price for Euro 6. I think, OEMs are still adjusting that. This can go up by 3%, 4%, go down by 3%, 4% considering the price list, but that won't change on it want raise or lower the volume. The thing is Euro 6 is going to be higher because there was a higher cost to build it. So it's not a matter of demand. Because we don't have a strong demand for Euro 6 products, OEMs at this point, reduce production, they have had downtime, as you said, because they are not going to have the trucks in inventory. But on the other side, they cannot reduce prices by 10% because their costs increased by 20%. So again, there can be adjustments 2% up or down, but the new level of prices for Euro 6 is a given, because there was an increase of cost. So any changes tend to be marginal in my opinion. But I'm not an OEM, I cannot say that for sure. But we understand the market, and this is our true opinion.

Okay. Great Couto. And just a follow-up. How can we think about accelerating purchases of Euro 6. Is it going to be more towards the end of the year?

Gabriel, given that we have an inventory, and I projected that for mid-year, this is what I can tell you now. But with regards to new purchases, as I mentioned, we are constantly taking a look at that. We have constant conversation with OEMS to get to terms that are good for them and for us, because at the end of the day, we need them and they need us, and that's how we build a relationship. And that's why we have long-term relationship with almost all OEMs in the country. But I cannot give you a -- give now, it will happen when the time comes and when the time comes, you'll know. But today, I have no pressure to buy, because as you mentioned, I have a well-sized inventory with high-quality products, products that have an excellent turnover. And so we are quite comfortable that we can take this decision to further on without any pressures on time.

Our next question comes from Alberto Valerio from UBS.

Gustavo Couto and Adriano, I'm a bit concerned talking to clients about future demand. I understand there are some nonrecurring occupation in [ very huge ]. But if you compare to last year together the first quarter last year, if I'm not mistaken, Gustavo Moscatelli also said that the Q-on-Q was 3.1, excluding sugar, ethanol contracts. So I'd like to try and understand this better, where you see this non-recurrent of 10%, the 2.78, if you exclude the intercompany operation. So I hadn't considered the intercompany. If I had just considering the funding, it would have 58% of funding with contracts. So how much was there of funding last year? That's the first question. The second question is that if you had any other [ to sale of ] receivables, what is the recurring number? And how much should we expect in terms of swaps or fixed interest, and hedge of interest rates for the future and what kind of impact you're going to have in your financial expenses?

Alberto, I'm going to answer the first with regards to yield. And then I'm going to answer -- or then to answer your second question with regards to debt. Okay. First point, Alberto, I think as I mentioned that we had about roughly a 10% gain in the first quarter '22 vis-a-vis first quarter '23 in heavy segments and [ further ] segments, you ready have a ballpark of the number for the first quarter. I am sorry, the de-evolution of [ the other ]. When to talk about the 3.1, that includes another sector that was very strong in the first quarter last year, which is a huge contract that involves maintenance services, in logistics, and that has a yield. And because it is 100% services, maintenance, dedicated teams, technical teams, it has a much higher yield. So that leads us to see a radical 3.1. But I'm telling you that asset -- heavy assets yield had an evolution of 10%. And the strong message is that I'm already providing information that is extremely strategic about the environment, especially because we are talking about competition joining the market. And I -- i've already given you too much information and being very transparent. I always say that, quite honestly, if it were for me, I wouldn't break down the 3% to [ 2.1% ]. I did that upon respect of our shareholders and investors that believe us. But again, not being held hostage of the observation that is important market information that has to do with our market performance. So I think we already have given you lots of information on this number. The yield of heavy assets is quite comparable. I had 2.9 in 4Q, '22 and 3 in the first quarter of this year. If I go back 1 year ago, it was 10% below -- 10% below of the 3, and same today and the same for every business. The rest is mix and I'm not good to break down my mix for strategic [Technical Difficulty] conditions. They involve information, and I don't want to disclose to the competition. I'm going to turn to Adriano for the second question.

Alberto, you asked about the activation, the transaction, we have another tranche, and we always saw it assessing the cost of operations, the cost of the market for us to make the right decisions. And as for the balance that we have in terms of options to be used in the next quarter. We have a concentration in July 23. January 24, together about BRL 12 million that will show as revenue in the market continues with the same provisions.

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

Hello Couto and Adriano. I have 2 questions. The first, I would like to understand with the [ best IFRS standards ] that were recognized just in rental. And it's positive. We see an increase of 12.1% in gross revenue of rental, against an average of 8.3% in the last 2 years. So I'd like to understand the level that we should expect for the coming quarters. And if there is anything nonrecurring in this recognition. And also, I'd like to hear a bit from you on inventory. After you can rent all oyour 5 inventory, what should we expect? I honestly thought that the company was not going to work with on-demand products. But perhaps I misunderstood and you are going to have not only deployment inventory, but also additional inventory in a recurrent manner from now on. So I would like to understand your strategy and what should we expect in terms of recurring inventory levels after you end with your Euro 5 inventory?

Rogerio, let me try again to start with the second question. We naturally went to work with the availability of assets to our customers because we believe that this is a competitive edge, so much so that we got to a scale that is quite different from any other fleet owner in the country, 8x, 10x bigger. That enables us to make movements to advance things with very low [ rest ] of this investment backfire, so to speak, in our inventory. And why is that? Because I have a diversity of sectors, of fleet, capillarity throughout Brazil. So I can advance renewals, I can sell. I can make several moves with the scale and capillarity that I have, and I might have inventory of demand. What you saw and I said that through '22 is that we would increase our inventory levels because of the transition of Euro 5 to Euro 6. So we raised our inventory levels. I said that I was going to do that until mid this year, and then we would go back to normal. And I think what more is going to be 2 months inventory, 3 months inventory, but that can vary because if there is a good opportunity in terms of purchasing, if it pays off, the carrying costs of this segment, given the cost of money and interest rates, I may increase it or not. But again, let's think of a completely normal situation, which is what we saw in our history before. 2, 3 months, I think it's okay. We have the period of time to pay for the OEMs. We don't need working capital to keep this inventory, but I also guarantee delivery conditions that are [ age operation to ] market. We quite commonly can we bids because we have assets on demand. So it is quite frequent and we are going to continue to invest, but not with the levels of the end of the yearm because that levels are going to go down, naturally. But everybody saw the value of this movement because these were purchases that made sense, and the move really gave us the conditions of working with a very, very good number of contracts. A follow up, the 2, 3 months that just -- that just include contracts under deployment or new contracts? Including deployment. I don't think that we have [ Euro ] to be fixed. If there is an opportunity on that eventually justifies with the carrying costs, we can do that every monday. But right now, until about we see any reason for that, quite the opposite. Now it's a natural effort of really putting those inventory to work. And I'm carrying the inventory now in my balance sheet. When it is already in operation, we are going to have a fantastic generation of value and that creation of value and that will happen in the coming months.

I have to say, because I did know I was Adriano talking to right now, that we did not see any variation in the physical things model for you to change your model.

Let's talk after the call to try and see where you saw the variation, and then we try to work together and answer your questions. And if other people have the same questions, we are going to provide the answers from IR. But, we have not identified any valuation with [ fixed income ] credit or tax brackets that will require any specific clarification, okay? But after the call, we can talk and we will see where you identify the variation. Okay?

Our next question comes from [ Jose Eduardo from Sumo ]

Congratulations on your results. I have 2 quick questions. The first is about the receivables operation you had in the quarter. What was the rate you used? And should we see another advance for the coming quarters? And the second question is about the recent acquisitions and dealers. How long does it take you to integrate the acquired companies to your own dealerships?

Jose, this is Adriano. I'm going to start to with the receivables. I cannot disclose the cost of the operation. But what I can say is that it was a very competitive price, especially when we compared to the last operation and the market credit dynamics today. And as I mentioned before, this is a source of funding that the company will always consider when making a decision, whether to access the capital markets or this kind of transaction. So this is on the table for us to assess whenever we believe that we have a need to raise funding.

And this is Gustavo. With regards to your second question, First of all, we are very happy with these acquisitions. Of course, we have to wait for the Brazilian antitrust agency to give the approval. These were very important moves that took place in April. And as soon as we have the approvals, we believe we won't have problems, but we have to wait. We are going to integrate the operations. I'd just like to highlight that they are going to keep part of their independence, because these are dealerships step work with brands that we work with, so can figure there is some kind of comfort of working together with them, but keeping the autonomy at the front end, the independence of these companies, but naturally supporting and helping them to grow and to achieve their full potential, both Tiete and DHL in our point of view, have huge opportunities to grow and develop in their own regions with their teams that are extremely competent. They are referenced within the brands, AGCO, Volkswagen Trucks, they are referenced as dealers of excellence. So we are very happy with the acquisitions and then the integration is fast. But it's important to say that the operations will continue autonomous and independent. This is 1 of our main pillars to whenever we have an M&A movement and we will carry on. What we are going to offer to these 2 companies is synergy by selling, exchanging, renting, and our ecosystem so that they can further improve efficiency and therefore, bring important increases in their results that can be consolidated within 1. So we are very happy. It is something fast. It is simple, but it's just going to be like what we did with HM, for [indiscernible], Truckvan, B&D another as you saw that it was a very seamless process that we've repeated over and over again in the market. Well, I hope I have answered your questions, Jose?

[Operator Instructions] No further questions, I'd like to turn the call to Gustavo Couto for his final remarks. Please, Mr. Couto, you may go on.

Well, I think we had to get another quarter that reinforces our capacity of growing with resilience with synergies in our ecosystem. And once again, we're able to show strong operating and financial indicators and evolution. More than 80% growth in EBIT, EBITDA, net income with growth of 39%, because of some interest rate effect that hurts net income a bit, but showing our capacity to grow in a business model that proves to be right in each quarter, regardless of the macroeconomic scenario, quite adapted to different movements of the economy. I would like in my final considerations to make 2 exercises. First, showing the capacity to generate cash in our inventory when we start to deploy investments made in the next quarters. What it means in terms of even growth to the company that naturally decreases our leverage if we are discretionary terms of growth, and also gives us a strong pace of growth with a growth upscale. The second thing I would like to mention, which is very important. And I thought that you're going to ask about that is the appreciation of our assets, deployed assets, the 31%, 32%, 34% of sales in the [ way ] show how much our current fixed asset base that is about BRL 2 billion is appreciating. And the amount of value that this will generate in the coming 5 years. We are talking about almost BRL 4 billion in the appreciation of our assets. And this was not projected in the past. And naturally, you are going to see that contributing positively to our results in the coming years. And this is very important for us to understand the resilience and the strength of a 5-year cycle to our business. With that, we can add opportunities to really contribute positively to our results. And third and last point, the acquisition of new dealers. We are very excited. Among the used stores and dealers, we have 74 stores. Fantastic capillarity, completely different than when I started in the beginning of 2019, we had a bit more than 20 stores, not more than 30 stores. That shows our capacity, the synergies in the business that has just started. So we are happy with what we accomplished so far, but much like excited of what is yet to come. Thanks for your trust for following our journey. We are very happy. And all I can do is thank you. Thank you very much and all the best.

Vamos conference call is now closed. We thank you very much for joining us, and wish you a good afternoon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]