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

Good morning, ladies and gentlemen. Welcome to the Vamos conference call to discuss the results for the third quarter of 2025. Today with us at this conference call are Gustavo Couto, Chief Executive Officer of Vamos; and José Cezário, Chief Financial and Investor Relations Officer of Vamos. This conference call is being recorded, and the replay will be available on the company's website at ri.grupovamos.com.br. The presentation is already available for download in Portuguese and English. [Operator Instructions]. Before we proceed, we would like to caution you that any statements that may be made during this conference call regarding the company's business outlook, projections and operational and financial goals represent the beliefs and assumptions of Vamos management and are based on information currently available to the company. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore, depend on circumstances that may or may not occur. General economic conditions, industry conditions and other operating factors may affect the company's future results and could cause results to differ materially from those in such forward-looking statements. I would now like to hand over to Mr. Gustavo Couto, who will begin the presentation. Mr. Couto, you may go on, sir.

Good morning, everyone. Thank you for all joining us, analysts, investors and everyone else present at this meeting to discuss the results for the third quarter '25. We're very pleased with this quarter's performance, which was marked by significant operational achievements that reflect the strength and resilience of our business model. We advanced our fleet utilization rate reaching the highest level in recent quarters and hit a record number of leased assets. We also increased the return rate of our contracts with higher yields and important diversification across different sectors of the economy. Our used vehicles team once again delivered outstanding results, 85% growth in asset sales compared to the same period last year and 22% growth versus 2Q '25, which had already been our record quarter for sales. Combined with the performance of the leasing and used vehicles division, we had recorded positive operating cash flow, reducing the company's net debt even while we continue to make relevant investments in maintaining consistent growth in the leasing business. We've reached our leverage guidance for the year, 3.27x net debt to EBITDA. Following the quarter end in October '25, we further strengthened our cash position, repaid debt and extended the average maturity of our debt. Cezário will go into more detail on this point shortly. Moving on to the next slide, I'll outline the strategies that allowed us to achieve these results. Let's start with Slide 5. Our main focus this quarter was sustainable and profitable growth. We maintained strict diligence in credit approval and continue to pursue higher profitability in our contracts. This resulted in a nearly 38% year-on-year increase in contracted CapEx in 3Q '25, driven by more profitable contracts. The internal average rate of return for new contracts reached 21.72%, the highest level since '22. And the average yield came in at 2.83%. This diversified sector demand, combined with our strategy of extending contracts without the need for new capital reinforces the Vamos business model. Contract extensions are a key component of our operation. They benefit clients who are all paying the high prices of new assets and also benefit us as we extend future revenue without requiring additional capital. It's a win-win. Recurring extensions ensure consistent growth in net revenue from leases, which rose 12% year-on-year. Extending contracts with the same used assets, combined with price adjustments above inflation is important because it reduces the need for net CapEx, working capital and decommissioning, freeing up capital for other investments. More than BRL 700 million worth of assets had their contract extended with an average term of 22 months, all of them adjusted for appreciation over recent years. On the next slide, we show our ability to deploy new contracts. In a year marked by declining sales of new trucks in Brazil, Vamos maintained the same pace of new contract generation and execution capacity. During the year, we deployed BRL 3.3 billion in assets to serve new contracts. Contract extensions with the same assets and the Sempre Novo product combined, meaning assets that have been partially paid and adequately depreciated already accounted for more than BRL 1 billion of all deployed assets. In other words, 32% were redeployed in new leasing cycles and contracts. Even with shorter contract terms, our future backlog contracted revenue remains strong at BRL 13 billion. I will now turn the presentation over to Cezário, who will go over our operational and financial performance.

Good morning, everyone. Thanks, Couto. Moving on to Slide 7, I will start by discussing asset repossessions and returns during 3Q '25. This quarter, repossessions represented an annualized equivalent of 5.6% of our fleet, and BRL 251 million in assets and acquisition values that were repossessed or returned early, down 31% versus 2Q '25 on repossessions accounted for over 8% of the fleet. The improvement is mainly explained by lower exposure to the grain transportation sector, which now accounts only 1.2% of lease service revenue, as mentioned previously. We don't consider the current 5% to 6% repossession level, it's a long-term indicator. But given the challenges faced in the specific sectors, such as grain transportation, along with Brazil's challenging macroeconomic environments where credit conditions and delinquency have deteriorated importantly since interest rates began rising October '25, we believe this percentage accurately reflects current market conditions. And the company's response to these challenges has been a significant increase in used vehicle sales, where with consistent delivered strong quarterly growth. Finally, I'd like to highlight that our provision for doubtful accounts declined to just 1.7% of net lease revenue, thanks to successful collection of overdue receivables, lower repossession levels and continued revenue growth. It's important to highlight that we don't expect this to be the new level, we are confident that this indicator will continue improving compared to previous quarters. The company remains diligent in keeping delinquency levels healthy and gradually lower. Moving to Slide 8. We show our key efficiency indicator, fleet utilization. We reached a new record utilization rate, up 2 percentage points this quarter and 3 percentage points year-on-year, compared to the same period last quarter. The improvement was made possible by lower repossession levels and the acceleration of used vehicle sales, which grew more than 80% year-on-year. Another highlight is the 10% increase in our total fleet from BRL 16.4 billion in September '24 to BRL 18.1 billion this quarter, demonstrating our confidence in the business model with consistent demand and attractive pricing measured by IRR. Slide 9 shows the evolution of our inventory of assets available for lease or sale, which in September reached its lowest level of the year, down 11% versus June '25 and 6% compared to December '24. The reduction was driven by the volume of assets deployed, including used assets through the Sempre Novo product, company guidelines to purchase new assets, primarily on demand, strong used vehicle sales, significantly above the volume of decommissioned assets, fewer assets repossessions at contract maturity, thanks to extensions and -- of contracts with our customers and also lower repossession volumes. In total, the BRL 279 million down from new contract deployment and BRL 304 million from used assets reached BRL 583 million, BRL 132 million above total recoveries. As shown on the right-hand graph, the BRL 617 million inventory of new assets in September '25 represents an average inventory period of just 2.4 months, the lowest level since our IPO in 2021. Now we are going to move to Slide 10, where we show our diversified revenue base across sectors. This diversification allows us to mitigate potential negative effects in any given sector by upsetting them with strong performance in others. This quarter, we saw higher contributions from commerce and e-commerce, services, logistics, fuel, transportation, mining, general cargo transportation, beverage, food industry, passenger transportation and engineering. Many of these grew due to seasonal factors in their respective businesses. In addition, great diversification has also reduced revenue concentration among our largest clients as shown in the upper right graph. Finally, at the bottom right, we show that we now have nearly 4,000 active contracts and about 3.8 contracts per client, both record levels, demonstrating growth opportunities within our existing client base. Slide 11, I'm going to talk about financial lease results. Lease -- net lease revenue reached a record high, up 12% year-on-year, driven by resilient demand, higher fleet utilization, record lease fleet, higher marginal yields, contract price adjustments, especially extensions and broad sector diversification. EBITDA from lease services reached BRL 888 million, also a record, driven by higher revenue and lower delinquency rates. EBITDA margins in 3Q '25 stood at 86%, nearly flat versus 2Q '25, pressured by higher costs such as maintenance and asset preparation, personnel expenses at used vehicle stores and lower PIS/COFINS credits due to reduced purchase of new assets reflecting the company's focus on extending existing contracts and increasing utilization of idle assets. Depreciation remains in line with projections and benefited from reduced idle inventory. The annualized depreciation per vehicle and depreciation rate showing the lower left and center charts reflect the normalization process for truck depreciation as the company sells assets with lower rates due to price appreciation since 2020, and replaces them with new trucks assets typically depreciating 7% to 8% per year. For machine and equipment, this effect doesn't apply since these assets didn't appreciate the same way and continue to show around 10% depreciation rates. Finally, EBIT from leasing showed its first sequential increase since 2Q '24, driven by record EBITDA, but still impacted by higher costs and expenses, explaining the lower EBIT margin, which reflects the current phase of fleet utilization recovery. On Slide 12, we are going to talk about the results for used vehicles. The current truck and trailer market in Brazil continues to show lower sales volumes, while the used vehicle market has grown a double digits according to FENABRAVE. Within this scenario, Vamos has more than doubled its sales volume, setting new records, improving the quality and liquidity of our assets as well as the opportunities in up to 10-year-old used market, which remains fragmented and under supplied. Even with strong growth in used sales, Vamos still has a small share of Brazil's used market. When we analyze as we always do, the price correlation between new and used trucks, we see a strong alignment, which reinforces our confidence in depreciation rates. Now moving to the next slide, Slide 13, we bring the financial results for used vehicles. Revenue, it's a record BRL 394.9 million, up 87.4% year-on-year. The gross margin on asset sales was 0.3% with 1.6% per truck and minus 12.8% for other assets. The performance reflects the company's efforts to enhance asset liquidity, especially for those with long yard times and a tighter resale environment in those assets in '25. To do so, we made targeted price adjustments to accelerate sales while maintaining a positive consolidated margin focused on reducing idle inventory, depreciation and financial leverage. The company continues to strengthening its sales structure by hiring more sales people, opening new stores, forming partnerships with third-party dealers and expanding its digital presence in the used vehicles. These initiatives increased sales, but temporarily raise costs and expenses impacting short-term EBITDA margins. As shown at the bottom of the slide, the average used vehicles inventory period continues to decline, both for assets available solely available for sales and for those available for lease or sales. Total inventory of BRL 2.1 billion in assets available for sale or lease as a net book value of BRL 1.7 billion. Now moving to Slide 15. I'll discuss the company consolidated results and quarterly performance of key indicators. Net revenue reached BRL 1.5 billion in 3Q '25, up 25% year-on-year, driven by strong used vehicle sales and double-digit lease revenue growth. EBITDA was pressured by higher costs and expenses related to fleet maintenance and preparation for sale or lease in Sempre NOVO products, lower margins on used asset sales and weaker performance from the Industrial division. EBIT compared to the previous year was impacted by higher depreciation due to fleet growth, while net income for the project reached BRL 50 million affected not only by the previously mentioned factors, but also by higher interest rates as the SELIC rate since October '25. Average this quarter, 15% compared to 10.5% a year earlier, directly increasing the company's financial costs. On Slide 16, we show the evolution of our ROIC and ROI for continuing operations over the last 12 months, but a snapshot of the third quarter. Return on invested capital remains temporarily impacted by suboptimal fleet utilization. If normalized for a 91% utilization rate, a 70% EBIT margin and a 25% effective tax rate, normalized return on invested capital should be around 17%. This is not a projection, but a retrospective analysis, but that reinforces our strategy of pursuing growth through adequately priced contracts that balance return and credit risk. Regarding ROI, yes, the main effect stems from lower net income, as mentioned earlier. Now I'm going to move on to Slide 17, where we show the movement in net debt. As we can see, the company continues increasing operating cash, both from leases with higher utilization and EBTIDA and from used vehicle sales, accumulating BRL 1.34 billion in cash over 3 months only, enough to cover BRL 597 million in asset purchases and BRL 588 million in interest payments. Therefore, thereby reducing net debt organically. This was the first time in 8 quarters that we reduced net debt while maintaining consistent growth. In other words, it's possible to grow sustainably and self-sufficiently, increasing the fleet and reducing idle inventory. Slide 18, we are going to talk a bit about liquidity. Our leverage measured by net debt to EBITDA closed the quarter at 3.3x, slightly lower than in June '25. Another key indicator to mention is the coverage ratio of our debt and working capital by fleet value, which remains stable at 1.26x. We view these metrics as conservative as they don't account for the BRL 13 billion backlog of contracted revenue to be performed in the coming years nor for potential asset appreciation since values are recorded at book costs. At the end of September, we had about BRL 4.6 billion in cash and combined with undrawn committed credit lines, total liquidity reached BRL 4.9 billion enough to cover 100% of gross debt until September 27. In October, carried out 2 major debt issues, totaling BRL 2.2 billion, of which BRL 1.3 billion has already been used to prepay other debts. We have begun a liability management process, prepaying and improving our debt profile, already extending our average maturity from 4 to 4.8 years and reducing short-term maturity towers, that is '26 to '28. Finally, we don't expect a significant increase in our average cost of debt as a result of these liability management initiatives. Of course, there may be a temporary incremental cost due to the carry period between issuance and prepayments, but nothing that would materially affect our overall cost profile. That concludes my remarks. I'll now be available along with Couto for the Q&A session.

Thank you, Cezário, for leading the presentation up to this point. Now I'll briefly share some final remarks. Third quarter '25 reinforced our sustainable growth model. We reaffirm our focus on new lease contracts with adequate profitability and operational efficiency, particularly in inventory turnover and used vehicle sales. We have demonstrated our sales capacity and the liquidity of our assets. As shown, our '25 guidance has been reiterated and we are well positioned to achieve our goals. We have already met our leverage guidance for the year, maintaining a strong consistent pace of growth. We remain dedicated to continuously improving our debt profile, as shown by recent issues and the extension of average maturity to 4.8 years. Finally, I'd like to thank our employees, clients and investors for their trust. We are committed to converting all our operational achievements into profits and returns for the company and shareholders. Thank you very much for joining us, and we now invite you all to join us in the Q&A session.

[Operator Instructions]. Our first question comes from Lucas Esteves from Santander.

I have 2. Starting with leasing. We saw margins are a bit more pressured because of higher maintenance costs, preparation of assets for sale and also commercial expenses. In my mind, it makes sense that given the marginal aging of the fleet with more contracts extended with used assets due to the penetration of Sempre Novo, maintenance expenses should be kept high in the coming periods and the same preparation of assets for sale because the volume of sales continue to grow. In commercial expenses, you can reduce a bit, I believe. Does it make sense to think that leasing margin should be at the same level of the third quarter a bit below historical levels as we saw? And the second question, more the margin of asset sales. We saw a margin close to 0, which makes sense given the liquidity of assets you have now. The question is by the end of this less liquid assets, do you expect a rebound of this margins to levels closer to 5% or should we consider this margin as a new strategic direction of the company? Congratulations on your results.

This is Cezário. Thanks for your question. First question, the impact on our margin due to higher cost to prepare assets and costs with stores and the used vehicle operation. I think this has a huge influence due to the higher inventory levels that we have had since last year. What we expect and believe that this is going to follow a path of normalization by the end of next year. So I would say that the trend for this level of cost that has been affecting our margin negatively, will improve and will reduce as we have less pressure on used vehicles inventory coming from repossessions. So that also has to do with higher maintenance cost. If you think maintenance costs today have been a major detractor. And this is basically because the cost of maintenance and preparation of assets for sale or lease are very much connected to repossessed vehicles. So as we go back to normal, we still will have this flow, but at a lower level than what we have faced today. So that would be the answer to your first question. Second question, as for the margin in asset sales. I think Couto and myself mentioned that we are engaging our best efforts to increase the pace of sales in used assets, quite often reducing prices. And consequently, we do have some impact on margins, not at the point that we are going to reverse a positive trend. But this quarter, as you very well mentioned, we were close to 0. I think the trend is along the next quarters to continue having margins close to 0. But the normal level would be to have some quarters with positively some positive margin because we still have inventory, particularly of trucks with an important appreciation that has not yet been captured. We do not consider that when we are purchasing new assets. But if you consider the inventory of assets that we have, many still being used by our clients. We believe there is a huge opportunity to capture margins that will benefit to some extent, the results of our future quarters. Couto would you like to mention something?

Yes, Just a bit more color with regards to the sales mix, which is what Cezário is mentioned. When you see the truck tractors, you see the sale of truck tractors had a huge depreciation compared to last year at Fenabrave data. Truck tractors are the most expensive assets, the heavier assets. When we go to the point of sale, this reduces a bit our margin, but trucks for urban distribution, service provisions have had better margins. So this type of mix makes us to see in the short term, shorter margins, and that should continue because the mix effect will continue until we end our inventory with truck tractors. But individually, for instance, your 5 trucks continue with double-digit margins. So as the inventory of tractors decrease, we are going to see better margins at the levels that you mentioned, Lucas, I would be between 5% to 6% as a mix effect to the future. But for now close to 0.

Our next question comes from Andre Ferreira from Bradesco BBI.

Congratulations on your efforts to reverse your inventory situation. Two questions. The first, I'm trying to understand what can be a risk or a surprise for your results in 4Q '25. You could -- if you could remind us seasonality. We are used to the seasonality of services. But repossessions, for instance, in the fourth quarter, customers start stopping operations. So perhaps you have a lower repossession because when customers stop operations, it is harder to know if the idle assets should be repossessed or not. So what do you expect in terms of seasonality for asset sales? And how can that impact your inventory level? Second question. Agriculture sector has 1.2% points exposure in revenues. We don't know if they are leased or not because we don't know the yield of grain transportation, but we believe lease fixes. So you have BRL 190 million worth of assets to be repossessed in this sector. Is that the rationale? Or is these contracts that Vamos should carry on? And then if you think of ex grains, we had a repossession of around BRL 200 million. Do you see a deceleration in the sectors at the front end or does it make sense to consider this BRL 200 million per quarter in the short term? Short term, I mean, fourth quarter and beginning of next year? These are my 2 questions.

Andre, thanks for your question. First, risks to the fourth quarter, repossession levels and seasonality. Just as a reminder, the fourth quarter generally is a quarter in which we had some clients that have payments by [ crop ]. So we do have seasonality for some clients. Nothing significant, but we don't invoice these clients for some months between November and February, March next year. We have done that before, so that's no surprise. But it might show a decrease in revenues, specifically for this segment of agricultural clients. We do not see anything that is going to substantially change our expectations in terms of repossessions. So far, I do not see anything out of the ordinary. What we have been telling you for some time now and what we do expect is that this process will show improvements along the next quarters. Obviously, on the one hand, we have an obvious improvement due to the substantial reduction in the exposure to the grain transportation sector. But on the other hand, we have a very complex macroeconomic scenario in Brazil. So this is not only the agricultural segment. Every now and then, you see a client that is facing difficulties with regards to credit, and that may require an early repossession or early return that in practical terms are the same. So we are not super optimistic with regards to reducing the levels that we are showing you substantially. But we do have some optimism when we do see the macroeconomic scenario, improving delinquency rates improvement -- improving. So I think the trend for the future is that we are going to be in a more positive scenario. Level of repossessions, I did talk about expectations. I don't know if Couto would like to complement.

We are not expecting large repossession levels given the decreased exposure to the agricultural sector. But we do see Brazil with a delinquency level that is higher than historical levels. If you see our matured accounts receivable, it is going down. We had a good volume of cash generation, reversal of good negotiations that gave us a good cash effect with reduction of provision for doubtful accounts. So we are working hard. We should see less repossessions, but Brazil is going through a challenging scenario. And if the macroeconomic scenario gets worse, we can see clients from different segments with difficulties. But internally speaking, we are really clearing our portfolio. We raised our credit bar. So we think in the long term reduction of delinquency and therefore, reductions in repossessions. As for your first question, Andre, just one comment on seasonality. In December, we do sell a bit less of used assets because December is a shorter month, we have the holidays. So we do expect that, but that's not a surprise. We do expect a strong quarter. And with regards to leasing, we do expect growth, although we do have some clients that because of seasonality, we do not invoice. But remember in the intra-crop market, more than 80% of our revenue is recurring. So it is not a surprise. And again, it's not significant, okay. So we do not expect major surprises, just the seasonal effect of December because it is traditionally a weaker month.

Our next question comes from Guilherme Mendes from JPMorgan.

Two. One is just an exercise of futurology. Short-term strategy is very clear, reducing inventory, better utilization rate. Going to mid-'26, '27, how do you think the company with this trade-off of balance and growth? And what is the level of leverage you want to have? And how much would that enable the company to grow in terms of fleet size? Second question, Cezário, liability management. You did mention that you already started a process that is still going on. What should we expect in terms of new issuances? How do we see Vamos as access to the local and foreign capital market?

Guilherme, this is Gustavo to answer your first question. While reducing inventory levels and increasing operational efficiency, leading our utilization to above 90%, that is lower inventory of new assets and normalized inventory of used assets. That will make us reduce leverage ratio and enable us to grow consistently. If you think of the current pace of contract renewals, BRL 4 billion to BRL 5 billion a year, we see that, that has enabled us to grow consistently above 10% in revenue and EBITDA. So naturally, that places the company at a very interesting pace of growth, where we can combine good growth with deleveraging when we work in a more efficient manner, that is having inventory levels is central. Inventory has to be reduced and when we normalize that, the company can grow quite sustainably and always seeking opportunities because the market is still under explored. Leverage will always depend on the scenario of interest rates. If interest rates go down, we can be a bit more leverage. If not, we are going to try to be at the 3x level, which is the level that we consider healthy for the company. But, Guilherme, that will depend highly on interest rates and the macroeconomic scenario. But I would say 3x is a good benchmark. Cezário?

Yes. Just to add, Guilherme, we have 3.3x in the current scenario. If you consider the normalization of used vehicles inventory that we have today, that is not considering the excess inventory and using the money to improve liquidity and liabilities, we would already have today a leverage ratio of 3x approximately. Given the context and the capital-intensive characteristic of our company, we believe that this is the right level for a company that wants to continue growing. Of course, if we stop growing, we significantly decrease that, but we don't want to miss out opportunities that we see to continue growing the company, gaining market share and scale. So with regards to liability management initiatives, it is what we disclosed after the funding that we had in the beginning of October. We had some prepayments. We are negotiating with some banks, other operations to prepay debt and decrease the carryover costs in our cash. We believe our cash level is slightly above what we need, and we want to use this cash not to pay things that mature in a long term, but those more in the short term, '26, '27 and 2028. So I am very optimistic that until the end of the year, we are going to have a debt profile that's quite comfortable for the company and better than what we had in September. Although what we presented in September was quite reasonable within expected in terms of a suitable number for the company leverage. So we have several discussions in the market with banks. The idea is to improve. But in terms of capital market, more specifically, we do not have any specific opportunity. It may happen. We are always open to that, but we are generally moving on with banks to improve our credit profile -- our debt profile. I'm sorry.

Our next question comes from Pedro Bruno from XP.

I want to go back to the very first question to somehow have a follow-up. With regards to leasing margins and the impacts we have seen as a consequence of this strategy being implemented. We do see a positive effect of this strategy on the top line, used vehicles, recovery of growth in leasing, but you also have effects on leasing margin and used vehicles margins. So going back to the first question. With regards to leasing margin, what I wanted to understand is with the decision made a while a back to accelerate the sale of assets. Don't you have a part of prep and maintenance costs that come in advance, so to speak, almost nonrecurring. And if so, how much of this has already happened? In the end of the day, the question is similar to the first question of our call. But I'm just trying to understand the progress of this margin for the future, but thinking under the lens of shouldn't this cost be already happened or have them -- they already happened and how much should we expect for the future? And in terms of used vehicles margin, Cezário or Couto did mentioned that you still have appreciated tucks in your inventory. And at the same time, I suppose that machinery and assets connected to the agricultural sector should be a bit more depreciated, so to speak. Automobile reported today, and they had an impairment of similar assets that were inherited by Vamos. Do you have this kind of discussions? Are you considering the possibility of adjusting negative margins through some kind of impairments? These are my questions.

This is Gustavo speaking. Thanks for joining us. Just to make it clear with regards to leasing margins, if you consider the nonrecurring, that is while we have higher inventory levels. And again, it will take us some quarters to get back to normal, as you can see, projections are easy to make. We are improving our turnover, but it's still high as you saw in the presentation. So this nonrecurring expenses will continue while we have higher inventory levels. As we come closer to levels of close to 90% utilization rates and inventory turnover, it goes to 4, 5 months, which is what we would like to see for the future of the company. And naturally, these expenses will no longer happen and then the nonrecurring would no longer happen. So you can connect that directly to higher inventory levels. Likewise, we have some nonrecurrent expenses with regards to sales efforts, that is we are either holding promotions to sell faster or paying more premium to incentivize or to foster gross sales. So it make sales -- makes sense for us to stand a bit more, but we should decrease this as we sell those inventory. So this is something to be monitored along the coming quarters. And Pedro, for your second question, we haven't identified so far a need for impairment. We do see a mix effect, which is natural. It has always happened. So if you sell -- if in a certain period of time, you have a higher mix of a certain asset, you might have lower or higher margins. But so far, we don't see the need for impairment. We do have a constant depreciation exercises to calculate market value of our assets. And if we do identify something out of the ordinary, then we can have the conversation. But for now, we haven't seen the need to consider impairments. With regards to our assets, they are appreciated. They are showing positive margins, no relevance for us to discuss impairment for now. I hope I have answered the questions.

Just to add to that, Couto mentioned that we are always revisiting depreciation rate. And I think this is a major difference in our business because we don't buy to resell, we buy to lease and our average time 5 years is sufficient for us to calibrate depreciation in such a way that we are going to avoid important changes in the price of assets, then even if we do have something like that, that if I buy an asset to lease and then the asset has some kind of loss of value due to market conditions. I would still have 5 years to adjust that, not to have losses in sales through depreciation, different from a dealership that is buying and selling all the time. We have a different business model. And it's not comparable to the expectation of impairment in a buy and sell business vis-a-vis a business that leases for 5 years.

Our next question comes from Filipe Nielsen from Citi.

I have 2. The first is related to new contracts, trying to think how this impacts your expectations to buy new assets. This year, we talked about the guidance already but I would like to think about the next year. I remember recent conversations with the company saying that the demand for new assets was very strong, but you were prioritizing prices and some holding up purchases to hold leverage and focus on reducing inventory levels. Does the demand continues strong? What is your appetite to buy new assets considering next year? And the second question is still thinking of deployed CapEx, you see Sempre Novo a bit weaker in the 9 months, an extension of contracts that is very strong. So also considering 2026 to expect Sempre Novo to continue to be a product with a slightly lower share in deployed CapEx? And what do you consider the extension environment is going to be for next year?

Filipe, this is Gustavo. Thanks for your question. We do see a very consistent demand for new assets, new contracts. We have just restructured our sales team for us to have more presence in some sectors that are very resilient and very solid, especially in more depressive times of our economy. So we are going to focus on large accounts. We have a new executive to focus on major accounts that naturally have less credit risks. We also divided the company in more geographic managers. So we do have the demand, and we are structuring our results for that. So you should expect focus on growth of new assets for next year. What we did and it was part of our strategy was to adjust our new vehicle inventory. We have the lowest inventory of the last 3 years. This is part of our strategy because the cost of money is very high. So we see that the automotive industry has inventory to serve us. So there is no need for us to have major purchases in advance. We are going to continue to buy and plan inventory, but in a more efficient manner, just to guarantee a lesser working capital in inventory. And this is going to continue for '26, although we are going to see growth in new assets, because we do have a pipeline we are working with, and we prepared a new commercial structure for this to happen. As for deployed CapEx for '25, I would like to draw your attention to one thing. If you consider the volume of Sempre Novo so far, which is below expected. But together with the extension of the same assets, we have BRL 1.50 billion in these 2 lines with deployed CapEx of BRL 3.3 billion. So we are talking about 32%. So our strategy of promoting a second cycle of leasing with the net liquid asset is being executed more in the extension line, because this is a product the customer knows and then they extend the contract with the same asset. And you see that we are doing very well. Sempre Novo, we have to increase sales efforts. There are opportunities. I think there is the mix to be considered, the time for the customer to make the decision is a bit longer because they don't know the asset. They don't know where it comes from because it was at a different client. So this is a process that has not yet matured. So we do see growth for next year and the need to increase our commercial efforts to lease more through the Sempre Novo product. We see it as an opportunity. For the fourth quarter, we said that in October, we had a record in Sempre Novo leases. So we are already doing well in October, and we said that in the release, and we do see an improvement for 2026. But still, it is work to be done. We are not yet where we want to be. But as a whole, the second cycle of our assets, which is our strategy in the combination of contract extension and Sempre Novo has already reached this year, 1/3 of the whole deployed CapEx, which means that the opportunity is there. I hope I have answered your question.

Our next question comes from Rafael Simonetti from UBS.

I think my main questions were already answered. But I would like to understand your mindset in terms of truck depreciation for the future. And also how are you considering or what do you think of the pace of the sale of used assets?

Well, as we have mentioned, we did benefit a lot from the assets that we bought before that turn from Euro 5 to Euro 6. Those assets appreciated very much. And as a consequence, we have an average depreciation rate of trucks and this is on Slide 11 that has been increasing along quarters. But still, this quarter, we reported 4.3% which is below depreciation rates that we consider reasonable and that we consider in new projects that is whenever we are going to have a new negotiation to lease a new assets we don't consider 4% as a reasonable depreciation rate. Depreciation rate has to do with the type of assets, but also the use that this asset is going to have. So you can have different depreciation rates for the same assets, if it's used more severely than others. So what do we see for the future is the depreciation rate that continues to grow to what we call a normalization process that is it should be closer to the 7% that we mentioned. But obviously, that can change as you have a continued appreciation of new assets. What I mean? If OEMs continue to pass through prices based on inflation rates and et cetera, and if inflation continues to be high that will also influence the price of used vehicles. And therefore, will favor us because we can have a lower depreciation rate. So that's why the depreciation process is so complex in our business. And that's why every year, we have to revisit the depreciation rates of all our assets, not to run any risks. Not to have surprises that can hit us adversely in a certain quarter.

Rafael, this is Gustavo. As for the sale of assets, along the last 2 years, and I call your attention to the last year, '25, we have been reaching expressive growth in a challenging macroeconomic environment, high interest rates, most of our assets sold are paid on-site or funded by third-party commercial banks. And that has not been a detractor in our sales. Of course, it's a barrier and it's a difficulty, but we have been able to have substantial growth quarter-on-quarter and we were able to do that without maturing some new structures that we just put into practice. We have new sales channels that are maturing are already yielding results, but that are still maturing. We have a sales team that was hired with a much larger number of sales personnel. So you see this affecting our balance sheet, but we haven't still matured with an average sales per salesperson. And more and more, we are using digital tools. We are really varied our sales dynamics a lot. We have very strong retail sales strategies. I know that is generating important cash for the company because that's immediate cash. As I said, sales are on-site. So this is going to continue for 2026 and we expect these new channels to mature. We even increased some used vehicles stores. So we expect that to improve. And along with that, an improve in our utilization rates. So you should expect us to do more in used vehicles and growth is going to continue quarter-on-quarter.

Our next question comes from Gabriel Rezende from Itau BBA.

Sorry to stress the used assets. But I have some questions. Commercial strategy, could you tell a bit more about that? Do you think the company would offer more time for customers to pay instead of discount since you reached the leverage that you wanted in the third quarter? And could that decrease your concern with higher depreciation rates? So better payment terms than discounts per se. So have you considered that? And the second point is still with the used assets. What is your asset profile you did talk about BRL 2 billion in inventory to be sold. Could you break down the profile of these assets, trucks, road equipment, other assets? And in trucks, is it trucks or truck tractors, any specific mix that is a bit more difficult to be sold. Just for us to have a bit more color in terms of performance for the coming quarters.

Gabriel, this is Gustavo speaking. Well, we never sell used assets installments. That's not our business. We are -- this is -- the profile of our customer is a customer that even -- either have credit from banks, we work with banks that work with used assets, BBC inclusively and other banks that really pay attention to the clients that we have for used vehicles, fleet owners, independent drivers that have 2, 3 trucks that are connected to some transportation companies. So a large share of these customers already have credit approved by the bank and we get paid on site. So we do not want to sell installments, and we are not considering that now because we are being able with our commercial strategies with our retail tools, we are being able to reach important volumes. Always, we want more. But at this time, to take the credit risk for the sale is not part of our commercial strategy. As for inventory levels, we are always going to have some inventory that we would like to be between 4 to 5 months. We are still at a higher level, we said that very clearly to you and it will never be 0. But there is room for us to reduce more than BRL 1 billion when you consider the slide on Page 9 in used assets that today are carried in our inventory. And yes, given the fact that we had a higher volume of repossessions in grain transportation, we do have a volume of the truck tractors that is slightly high, which really bring our margin down because we are engaging more sales efforts to sell these assets faster. So we are being able to sell a lot decommission, a lot of assets, but I would say that naturally, it is the truck tractors that really detract a bit of our margin, and we are very much engaged in either releasing them or sell them.

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

I have 2 follow-ups on my side. The first is the margin of used assets. If you could talk a bit about the factors that led the company to consider the situation more as a nonrecurring situation and not a reassessment of your depreciation rates. I'll ask my second question after you answer.

Rogerio, this is Gustavo speaking. They used assets margin, just to make it very clear, our -- what we have just answered. The margin we have been mentioning to the market will along the coming quarters to go down, and it should be between 0% to 5%. And we saw that a bit more accelerated, and that's perhaps what you're considering nonrecurrent, because we are having a higher sales efforts for these assets that were repossessed and are a bender in our inventory. This is what we call nonrecurrent. Now as Cezário mentioned, we are going to have a normal level of margins between 0% to 5% along the coming quarters. It is just faster because of the mix effect. So if that's what you mean by nonrecurrent, this is what we say. But as we knew the margins were very high 2, 3 years ago, when we had a huge appreciation because of the change from Euro 5 to Euro 6, as expected, that margin was going to go down along the years as Euro 5 assets were to be sold. However, this reduction was a bit faster on a nonrecurring basis because we accelerated the sale of new products. That's what we meant. Is that clear?

Yes. This is what I was mentioning because car prices highly appreciated in the last 5 years, more than 100%. We would expect something close to 20% of margin if there was no discount and mix effects. So from what I understand, you do believe that this is more related to mix and sales efforts. My second question, asset repossessions. We saw 75% of contracts reprocessed this year. We're relatively recent signed between '23 and '25 when I believe that the company was a bit more mature in terms of analyzing credit. What are the additional measures to be adopted to reduce the level of repossessions? Wouldn't it be premature to say, to resume growth why do you still have this indicator high? Shouldn't you perhaps gear your exposure to sectors that have low repossessions? Could you talk about this trade-off and what are you considering in terms of changes in sectors, repossessions and growth?

Rogerio, this is Cezário speaking. Well, first, the efforts with regards to being very strict in terms of credit have not changed, quite the opposite. What we have that is new is that now we have a macroeconomic scenario that is not happening. High interest rates, high delinquency rates that brings to the company some kind of pressure with regards on not expected repossessions in segments that should not have that, which can be related to the macroeconomic scenario or to a specific situation of a client that lost a contract that is having some kind of difficulty that was not expected 2 years ago. So I think the worst in terms of repossessions, is related to grain transportation. I think that passed. Although this year, we still had the physical repossession of assets, the problem has been stopped. So we do not expect any surprises coming from grain transportation. But all other sectors of the economy have to some extension exposure to the macroeconomic scenario. So we have to be quick to act. And this perhaps is another reason that won't let us look forward as optimistic as we were in the past, because we believed some sectors were able to recover and they didn't. So we are a bit -- being a bit more strict with regards to repossessions, when we do see a client in difficulties being delinquent or because they are losing productivity. So repossessions will never come to 0 in our business. I don't think there is a lease company in the road with 0 repossessions. We did have some nonrecurring repossessions. And we believe that now we are working towards normal levels. However, the macroeconomic scenario is very adverse. And here, I'm thinking about the whole of the market, not a specific segment.

And this is, Couto, just as a complement. On Page 7 of our release, you did talk about repossessions and you talked about '23 to '25, I think the best for you to consider the period is the following: '22 and '23 together, we had approximately BRL 2 billion of assets in the Midwest for grain transportation when the crop was very high, everybody had very positive expectation for grain transportation in Brazil. The asset was basically all repossessed. So -- and the contracts to be repossessed '22, '23 the 1.2 was originated in '22 and 700 in '23, 1.9 altogether, grain transportation completely cleaned, '24 and '25, together is BRL 200 million from other sectors, which we believe is a much more normal scenario with a higher credit bar. Of course, we are still facing adverse -- an adverse macroeconomic scenario in Brazil, but we are on a clear downturn. So you would say that most of the portfolio was cleaned, it was grain transportation. Unfortunately, it was a situation where we frustrated our investment but '24, '25, you see a portfolio that's a lot more robust and a much lower amount. I think this is the way I think we should interpret the information of Slide #7.

Due to the larger amount of questions received in writing and the time, the questions will be later answered by the IR team by email. We now turn the call to Gustavo Couto for his final remarks.

Once again, I would like to thank our team, our clients, our investors for their trust and I would like to call your attention to 5 points, very quickly. Record used asset sales once again, a very strong quarter, fruit of the work, all the transformation that we are going through our used vehicles operations, thanks to our teams and clients. Second, our consistent pace of growth. Leasing revenue grew 12% year-on-year, and we see that we are expanding our internal return rates and yields and raising our credit bars. So demands for new contracts is sustainable. Another important thing is that growth has been accelerated by the use of used assets, particularly in contract extension. This is the strategy of the company to give us second life to liquid appreciated assets with a very young age, a 5-year truck in Brazil is still very new and can perfectly be extended at current clients or released to a new client. This is part of our strategy and enables us to grow revenue with less fixed assets. Remember, we grew leasing net revenue by 12% and in the same period, we grew fixed assets by 10%. And that shows a long time that we are going to have better yield and profitability once you are using revenues -- your growing revenue more than your growing fixed assets. Even considering that our fixed assets have inefficient rate assets that we have to lease or sell, and we are engaging our best efforts on that. Of course, we want to have operational efficiency and we'll continue to pursue utilization above 90%. Our lease fleet has to be above 90%. This is our main driver in the short term in a sustainable manner. And finally, I'd like to call your attention to the generation of operating cash in the quarter, we reduced net debt, as Cezário mentioned, we had operational cash, and we are able to keep our growth. So it is the business foundations that are put to proof and are delivering good results. Naturally, as we see inventory levels normal, the bottom line results are going to show. Once again, I'd like to thank you for joining us and for your trust and we are now concluding our conference call. Thank you very much.

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