Localiza Rent a Car S A : Earnings Release 2Q23

Dear stakeholders,

In 2Q23, we continued to advance in the integration process and capture of synergies, with engaged teams, maintaining the focus on our customers and high NPS rates in all the Company's businesses. We continue to grow with value creation, maintaining discipline in the capital allocation and seeing a positive perspective for our businesses.

Despite this, we had a very challenging quarter, impacted by the Provisional Measure No. 1,175 (PM), initially intended for individuals, which reduced the price of new cars up to R$120,000 by R$2,000 to R$8,000. As a result of this Measure, we reduced the speed of cars' purchase for rentals, in addition to reducing the prices and sales volumes of Seminovos, with a temporary impact on the pace of growth and the process of fleet renewal.

In the Car Rental division, after the end of the high season and without the effects of the summer holidays, we noticed a reduction in the volume of rentals, offset by the higher average rental rate. In this context, net revenue remained in line with the previous quarter and increased 9.9% in the annual comparison, evidencing our effective price and mix management. In the Fleet Rental, we once again showed strong net revenue growth, 9.9% higher in the sequential comparison and 58.1% in the annual comparison, even with the impact of the Provisional Measure, which reflected in lower purchases and deployment of cars in this division between the months of May and June, resulting in a backlog of 21,000 cars.

With the extension of the discounts offered under the Provisional Measure to companies at the end of June, we accelerated the purchase of cars, acquiring around 23 thousand cars with discounts between the end of June and the beginning of July. In the quarter, 57,110 cars were purchased, being 32,242 in Car Rental and 24,868 in Fleet Rental. 52,711 cars were sold at Seminovos, also impacted by the Measure.

In the second quarter, we posted consolidated net revenue of R$6.8 billion and EBITDA of R$2.5 billion. As a result of the impacts of PM No. 1,175, we recognized R$631.4 million in the earnings before tax, referring to the expected reduction in the recoverable value of cars and in the depreciation.

On June 16, 2023, we announced a follow-on in the total amount of R$4.5 billion, with demand multiple times greater than the size of the offering, demonstrating the confidence deposited by our shareholders in our ability to allocate capital and create value. As a result, we ended the second quarter with R$11.1 billion in cash and net debt/EBITDA LTM and net debt/fleet value ratios at 2.78x and 0.58x, respectively.

The proceeds from the offering contribute to strengthening our competitive position to capture opportunities in a market with ample room for growth, especially in a context of reducing interest rates, which tends to boost the car rental sector.

Despite the quarter's challenges, we believe we have reached a turning point with the beginning of the interest rate reduction cycle; signs of improvement in car rental demand and process of increasing new car prices to pre-Provisional Measure levels. Finally, we expect an improvement in the cash generation cycle as a result of the reduction in renewal capex.

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Combined Results

Following the disclosure format of the last quarters, considering the completion of the business combination, the presentation of the 2Q23 results includes consolidated information from Localiza and Locamerica (LCAM). For comparison purposes, we will bring the proforma quarterly results, adding the values of the two companies, from 1Q21 until the business combination on July 1, 2022. Annual comparisons will be made based on the historical proforma numbers of the two companies.

The proforma results are based on available information directly attributable to the business combination and factually supportable. This presentation is intended exclusively to illustrate the business combination's impact on the Company's historical financial information, as if the transaction had taken place on January 1, 2021. There is no assurance on the part of the Company or the independent auditors that the result of the transaction, if taken place on January 1, 2021, would be as presented. We emphasize that the operational quantitative data were not reviewed by the independent auditors.

In 2Q23, in addition to the effects related to the write up of cars and the customer portfolio, which were already being highlighted in previous releases, we will also highlight the effects of the Car Rental Systems tax loss write- off and the impacts signaled via Material Fact of June 9, 2023, from the Provisional Measure No. 1,175, as follows:

R$ millions

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OPERATIONAL HIGHLIGHTS

Consolidated net revenue

R$ million

	42.9%	13,672.1
9,569.3			34.6%	6,846.3
64.2%
6,689.7	5,085.7
		43.4%	3,283.9
4,073.9			2,289.4
27.1%
	6,982.4
5,495.4		2,796.3	27.4%	3,562.4
1H22 Proforma	1H23	2Q22 Proforma	2Q23
		Rentals	Seminovos

Strong consolidated net revenue's growth in the semester +42.9% and in 2Q23 +34.6%

Consolidated EBITDA

R$ million

Operational improvement in RAC and Fleet

Rental, compensating the normalization of

Seminovos.

Debt profile (as of 06/30/2023)

R$ million

R$11.1 billion in cash, with coverage of 81.2% of the maturities up to 2025.

	Debt Ratios
	R$ millions
Net Debt/ Fleet value	Net Debt/ EBITDA LTM

The net debt/fleet value and net debt/EBITDA LTM ratios ended the quarter at 0.58x and 2.78x, respectively.

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1 - Car Rental

Net revenue

R$ million including royalties

Rental days

In thousands

In 2Q23, the net revenue from the Car Rental division was R$1,958.5 million, an increase of 9.9% compared to 2Q22 proforma, as a result of the 16.7% increase in the average daily rate, which reached R$119.3, partially offset by the reduction in volume, impacted by the carve-out (49.2 thousand cars sold in the context of the business combination, as part of the measures imposed by CADE). In 1H23, revenue grew 10.1% compared to the same period of the previous year.

Utilization Rate

%

	-1.5p.p.
80.4%	78.9%

Rental Rate

R$

23.6%	107.5
87.0
2021 Proforma	2022 Proforma

	-1.0p.p.		-1.8p.p.
78.7%	77.7%	79.2%	77.4%

14.1%	117.8	16.7%	119.3
103.2		102.2
1H22 Proforma	1H23	2Q22 Proforma	2Q23
Rental Rate - R$	Utilization

The utilization rate, despite remaining at a healthy level, decreased 1.8p.p. in the annual comparison, and reflects the accommodation of demand after the peak season.

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