Armac Locação Logística e Serviços S A : Dados Econômico-Financeiros

E A R N I N G S R E L E A S E

1Q 2023

CONFERENCE CALL | May 10th, 2023 | 10:00 BRT | 9:00 NYC | 14:00 London

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Barueri, May 9, 2023. ARMAC (Armac Locação, Logística e Serviços S.A. - B3: ARML3) announces today its results for the 1st quarter of 2023 (1Q23). The Company's interim financial statements for the periods ended March 31, 2022 and 2021 have been prepared in accordance with the accounting practices adopted in Brazil, including the rules issued by the Brazilian Securities Commission (CVM) and the pronouncements issued by the Brazilian Accounting Pronouncements Committee (CPC), and are in conformity with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and provide all the significant information related solely to the interim financial statements, which is consistent with the information used by management. The financial statements were prepared in Reais.

HIGHLIGHTS

• FLEET: net addition of 15 machines and equipment, totaling 9,498 renting machines in 1Q23, 37.3% growth vs. 1Q22
• INVESTMENTS: CAPEX of R$ 126.8 million in 1Q23, -49.4% vs. 4Q22 and monthly organic CAPEX of R$ 42.3 million.
• GROSS REVENUE: R$ 318.7 million in 1Q23, 3.3% growth vs. 4Q22 and 47.7% vs. 1Q22.
• EBITDA: R$ 135.4 million in 1Q23, -0.6% vs. 4Q22 and +50,9% vs. 1Q22. Adjusted EBITDA was R$ 119.9 million, -5.0% vs. 4Q22 and 36.9% growth vss. 1Q22.
• ADJUSTED NET INCOME: R$ 26.2 million in 1Q23, -21.2% vs. 4Q22 and -6.2% vs. 1Q22.
• INDEBTEDNESS: Company's net debt ended 1Q23 at R$ 1,258.8 million, with a cash position of R$ 869.4 million and gross debt of R$ 2,182.2 million. Leverage (net debt/EBITDA LTM) was 2.50x.

	R$ million		1Q23		4Q22		QoQ		1Q22		YoY
	Rental Fleet Size (# Equipment)	9,498	9,483	0.2%	6,898	37.7%
	CAPEX	126.8	250.5	(49.4%)	228.3	(44.4%)
	Gross Revenue	318.7	308.5	3.3%	215.8	47.7%
	Gross Revenue from rental	283.2	289.9	(2.3%)	206.3	37.3%
	Adjusted EBITDA	119.9	126.1	(5.0%)	87.7	36.8%
	% net revenue from rental	46.8%	48.3%		-1.4 p.p.	47.2%		-0.3 p.p.
	Adjusted EBIT	78.2	83.1	(5.9%)	60.6	28.9%
	% net revenue	30.5%	31.8%		-1.3 p.p.	32.6%		-2.1 p.p.
	Cash tax earnings	55.4	64.9	(14.7%)	53.5	3.4%
	% net revenue	19.0%	23.2%		-4.2 p.p.	27.4%		-8.4 p.p.
	Adjusted net income	26.2	33.3	(21.2%)	28.0	(6.2%)
	% net revenue	9.0%	11.9%		-2.9 p.p.	14.3%		-5.3 p.p.
	Net Debt	1,258.8	1,126.3	11.8%	438.0	187.4%
	Net Debt / Adjusted EBITDA LTM		2.50x		2.46x	1.6%		1.69x	48.3%
	Adjusted ROIC	23.0%	27.2%		-4.2 p.p.	27.5%		-4.4 p.p.
	Adjusted ROE	17.9%	20.9%		-3.0 p.p.	17.8%		+0.1 p.p.

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1Q23 Results

MESSAGE FROM MANAGEMENT

Dear Investors,

We uphold our mission of supporting Brazil's development with our services, which are aligned with the interests of our customers and society, as we only charge for working machines and we recycle components that normally are discarded. Our focus remains in pursuing operational excellence and safety in our operations, which is an essential attribute for our sustainable growth. To achieve this, we continue heavily investing in Armac future, that includes our mechanics, operators, and drivers. In mechanics, only in the first months of 2023, we have already graduated more than 40 mechanics and 293 others are being instructed in our career progression programs. The commitment and creativity of these professionals are a central part to our success.

In addition to investing in our team of employees, we have started an important transformation in 2023 to make our operations the safest in our industry. Protecting who operates and does maintenance on machines is part of our reason to exist. As one of the biggest yellow line fleet owners in the world, we are seeking tools and methods that make safer the lives of those who work with our equipment. An important achievement already obtained was a 60% reduction in time-loss accidents in the first 4 months of 2023. Part of this process involved the evolution of our values, detailed below:

Regarding our financial results, we are not satisfied with first quarter's. A stronger than expected rainy season affected infrastructure, mining, and agribusiness customers. We had volume reduction, interruptions in port terminals in the state of PR and in some rail tracks in MG state. Due to raining, we postponed deployments expected to occur in this period. In the worst moment of the quarter, fleet occupation reached 60%, and average occupation was 65%. Even so, Armac grew 47.7% in Gross Revenue and 50.9% in EBITDA over 1Q22.

This one-off delay in the budgeted revenue for this quarter penalized us because of the anticipation of costs and expenses to sustain the growth of the following quarters and our structure of fixed costs. Even with operational deleveraging, we maintained EBITDA Margin around 47%, but below our goal. The trajectory of cost dilution and gains in EBITDA Margin is a compromise of Armac.

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1Q23 Results

Despite the delay in deployments, we were successful in our commercial efforts through the first quarter. We signed contracts that will be deployed in the second and third quarters for most of the inventory, that once in full operation will generate a quarterly additional recurrence of more than R$ 80 million in revenues. Validating economically our investments of the second half of 2022.

About capital allocation, we remain focused on concluding the mobilization of our inventory so then we can reaccelerate CAPEX and fleet expansion. The sectors we serve, notably agribusiness, mining, bioenergy and pulp and paper, remain with strong demand despite a challenging economic environment, what keeps us optimistic. Commercial projects pipeline remains robust and with great share of the inventory waiting for deployment, what should happen through second and third quarters of 2023. The R$ 126 million CAPEX of the first quarter was made in assets that we didn't have in stock, demanded by long-term projects (+4 years). Operating Cash Flow generation allowed us to maintain leverage around 2.5x, same level as 4Q22. We remain with discipline seeking even lower levels of Net Debt/EBITDA LTM. We comprehend this is efficient and prudent in the current scenario of elevated interest rate.

Finally, we would like to thank our collaborators, suppliers, and shareholders for another quarter of full of work and partnership. We still have a lot to do together.

Fernando Aragão

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1Q23 Results

RENTAL FLEET AND INVESTMENTS

We ended the first quarter of 20233 with a rental fleet of 9,498 assets, consisting of yellow line machines, lifting platforms, forklifts, trucks, power generators and other equipment, with a net addition of 15 equipment, representing a 0.2% growth against 4Q22 and 37.7% against 1Q22.

				8,823	9,483
				YoY
			7,522
		6,898		+37.7%
	6,225
Number of
Machines and					QoQ
Equipment					+0.2%
for Rental
	4Q21	1Q22	2Q22	3Q22	4Q22

Organic CAPEX totalled R$ 126.8 million in 1Q23, with a 49.4% reduction against 4Q22 due to the large equipment inventory accumulated after acquisitions done in the second half of 2022. This investment represented a monthly average organic CAPEX of R$ 42.3 million vs. R$ 83.5 million in 4Q22.

R$ million	1Q23	4Q22	QoQ	1Q22	YoY
Acquistion of fixed assets	46.6	151.6		215.7
Non-cash ops for the acquisition of Fixed Assets	75.7	95.8		12.0
Purchase of intangible assets	4.6	3.1		0.6
Organic Capex	126.8	250.5	(49.4%)	228.3	(44.4%)
Monthly CAPEX	42.3	83.5	(49.4%)	76.1	(44.4%)
Enterprise acquisition	-	-		-
Total CAPEX	126.8	250.5	(49.4%)	228.3	(44.4%)

GROSS REVENUE

In 1Q23, gross revenue reached R$ 318.7 million, with a 3.3% expansion compared to 4Q22 and 47.7% against 1Q22. Gross revenue from rental and services reached R$ 283.2 million, 2.3% decrease against 4Q22 and a 37.3% growth compared to 1Q22.

					275.6	308.5	318.7	YoY
		250.5	18.6
	215.8		35.5
	12.1	20.4	+47.7%
Gross
9.5
Revenue					289.9	283.2
206.3	238.4	255.2	QoQ
(R$mn)
								+3.3%
	1Q22	2Q22	3Q22		4Q22	1Q23
				Rental and Services		Asset Sales

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