To our stakeholders

In 2022, we took big steps towards our purpose of building the future of sustainable mobility. The results achieved in the year, result of our long-term vision and efficient capital allocation, reinforce our DNA of growth with the creation of value and the delight of our customers.

Continuing our transformation journey, we became even more prepared to soar higher, with the conclusion of the business combination with Locamerica. We carried out a divestment (carve-out) in just three months - which consisted of creating a company, with trained professionals, functional systems, 49 thousand cars, and 200 branches - and we completed the sale of this company with the creation of value for our shareholders. Following robust planning led by our Integration Office, we concluded with agility and excellence the integration of teams, Car Rental agencies, Seminovos stores, sales, and administrative teams and we continued to advance in the integration of systems, synergies capturing and initiatives of organizational culture and engagement. In addition, we equalized the accounting practices and made the necessary reclassifications. We are still moving forward with the integration, but we understand that the business combination places Localiza&Co in an admirable competitive position, with greater scale and even better positioned to capture profitable growth opportunities.

Still in the context of the combination, it was essential to reassess our business portfolio in order to rationalize and optimize the allocation of capital and the use of resources, focusing only on initiatives aligned with our strategy of growth with value creation. In this sense, we launched Localiza+, with solutions aimed at those who own a car, such as overhaul and maintenance, which already has more than 15 thousand customers. We also prioritized the rental of Heavy Vehicles, a new avenue with high growth potential, leveraging the Company's skills, know-how, and customers. On the other hand, we decided to discontinue the initiatives for buying and selling used cars, Acelero and Willz, taking advantage of technology and learning, but reducing investments and increasing our focus.

We have a world-class leadership team prepared for the challenges of our business, as well as an operational structure, technology stack, and portfolio of solutions built so that we continue to surprise our customers, with a lot of innovation and leadership. The engagement of our team is reflected by the 4th place in the GPTW (Great Place to Work) and in the organizational climate which reached P90, a select group of companies evaluated by the consultancy Korn Ferry with high favorability. We were also recognized for our passion for the customer with the NPS and Reclame Aqui awards, in the Car Rental, Seminovos, and Subscription Car categories.

From an operational point of view, we had a 1H22 with low levels of production and direct sales of new cars. As of 2H22, there was an important reversal in the context of the supply, which allowed us to accelerate car purchases again, enabling the start of the fleet renewal process and the resumption of growth in car rental and car sales volumes. With a favorable scenario for car purchases, we negotiated volumes for 2023 under conditions and mix with estimated ROIC spread within our profitability targets. A part of those cars was brought forward to 4Q22, with the purchase of 97 thousand vehicles, preserving the long-term partnership with automakers.

In 2022, the Car Rental division delivered a proforma net revenue of R$7.4 billion, a growth of 28.2% year over year, even with the impact of the sale of 49 thousand cars as part of the carve-out in 4Q22. The Fleet Rental

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division accelerated the pace of growth in the rented fleet, generating a proforma net revenue of R$4.4 billion, 48% higher than in 2021. With a greater addition of cars from the second half, Seminovos accelerated the sales volume, reaching 141.2 thousand cars and net revenue of R$ 9.7 billion, 14.1% higher compared to 2021. With the strong purchase of cars in 2H22, the net debt/EBITDA ratio reached 3.2x and should reduce as these investments begin to mature. Finally, the ROIC-spread reached 6.7%, reflecting the Company's ability to generate value.

Perspective of the future

We are building our future supported by very clear strategic directions: 1) accelerated growth with value creation in the main business (core); 2) transforming the customer experience; 3) and selective investments in adjacent businesses. We will achieve these goals with a high-performance team and a solid culture, investing even more in innovation and technology, expanding our competitive edge. We also have our brand as fuel, which underwent a recent rebranding to communicate in a clearer and more modern way the portfolio of solutions we offer to our customers. We also launched our corporate brand, Localiza&Co, to improve our communication with our stakeholders, such as employees, investors, and partners.

We are on our way to completing the integration process and capturing synergies from the business combination. Our team remains focused on leveraging market opportunities, in an environment that we believe to be, although challenging, very favorable for the Company's growth. We are supported by a strong culture, with values practiced by all our employees on a daily basis, which gives us the strength to build an increasingly cohesive and efficient Company.

In 2023, we have several value-creation levers to offset the effects of the normalization of Seminovos margins, higher depreciation, and the high interest rate environment with lower economic growth.

The first refers to investment in the fleet: for 2023, we managed to close the purchase volumes of cars in better commercial and mix conditions, which will allow the renewal of the fleet and consequent reduction in maintenance costs. In addition, we will start to capture synergies resulting from the combination of businesses in costs and expenses, as well as several efficiency and productivity initiatives, including advances in processes associated with telemetry. Finally, we have the opportunity to generate additional revenues from mix and segment management, in addition to the new solutions developed by the Company such as subscription car, rent for application drivers (Zarp Localiza), and Localiza+, among others.

These levers, added to our diligence and discipline in the allocation of capital, will help us to keep the ROIC- spread in line with the objectives of value creation outlined by Management. Consistently reestablishing and sustaining a level of return that generates EVA in an environment of high interest rates and in which other players will face greater challenges will not only allow for the continuation of the Company's transformation process, but will also enable investments in skills to the expansion of our competitive advantages.

However, our generation of value exceeds our operating and financial results. We have influenced and carried out several sustainability initiatives to contribute to the transformation of society and the environment. On our decarbonization journey, we published our greenhouse gas (GHG) inventory for the fourth time, covering scope 3, being recognized with the Gold seal of the GHG Protocol. We also fuel 100% of our flex-fuel cars with

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ethanol and have changed internal policies encouraging our employees to do the same. In order to mitigate emissions from vehicles used by our customers, in 2022 we launched Neutraliza, an initiative that allows them to neutralize the emissions derived from their rental. We also surpassed by 53% the renewable energy coverage index across the Company in 2022, advancing more than 12p.p. compared to 2021.

We joined the "Abasteça Consciente" program, which motivates society to use ethanol in its vehicles, in partnership with other companies such as Volkswagen and Bosch. We sealed another very important partnership with Mobilize, Raízen, Uber, and other companies in a program that made more than 100 electric vehicles available to our customers who drive Zarp Localiza apps.

In addition to the great impact of Instituto Localiza on the lives of thousands of young people, we had other considerable gains in the social dimension. The Diversity and Inclusion Program achieved the highest score in the Equidade BR survey, conducted by the Human Rights Campaign, attesting that Localiza&Co is a great place for the LGBTI+ public to work. We also made significant progress on other fronts of the initiative, such as the launch of career acceleration programs for women, eLLas; and of black and brown people, Pluraliza. These advances were recognized by Exame as Best of ESG; by Institutional Investor as Best Company in ESG; and by Sustainalytics on the "Top-Rated ESG Companies List".

We believe that 2022 was a historic year for Localiza&Co. We completed a business combination that positions us as one of the largest and most complete mobility platforms in the world; we continued to grow with value generation at high levels of return to our shareholders, even in a challenging market context; and moving forward with our ESG agenda to leave a legacy for future generations. In the coming years, we will reap the rewards of last year's investments and continue our journey of transformation, supported by our vision of the future, with great care, discipline in the allocation of capital, and passion for customers.

Bruno Lasansky - CEO

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Combined Results

Considering the completion of the business combination and following the last quarter's disclosure format, the presentation of the 4Q22 results includes consolidated information from Localiza and Locamerica (LCAM). However, we will bring the quarterly pro forma results, adding the two companies, since 1Q21. In this release, annual comparisons will be made based on historical proforma figures for the two companies.

The proforma results are based on available information directly attributable to the business combination and are 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 1st, 2021. There is no assurance by the Company or the auditors that the result of the transaction if taken place on January 1st, 2021, would have been as presented. We emphasize that the operational quantitative data were not reviewed by the independent auditors.

In this quarter, we will highlight the effects related to the business combination, as shown below:

Description

EBITDA Impact

Net Income Impact

Integration expenses (One-Off)

(77.1)

(50.9)

Discontinued operation (Acelero and Willz) (One-Off)

(32.0)

(21.1)

Fleet write-up amortization - No cash effect (Temporary)

-

(91.6)

Customer relationship amortization - No cash effect (Temporary)

-

(6.2)

Depreciation of other assets (Acelero and Willz) (One-Off)

(0.7)

Tax loss write-off - No cash effect (One-Off)

-

(23.8)

Total

(109.1)

(194.3)

  1. Integration expenses, including costs with advisors, third-party services, systems integration, among others.
  2. As of the allocation of the purchase price, recognized and disclosed in 3Q22, some assets and liabilities associated with the business combination began to impact the operating result, with no cash effect, following the criteria below:
    • Customer relationship (booking of the fair value of customer relationships)
    • Fleet value write-up (booking of the difference between the fair value net of the cost of sales and the book value of the fleet acquired): amortization according to the criterion used for the depreciation of fleet vehicles, being calculated individually per car and recognized on a straight-line basis when the expected net sales value is less than the sum of the book value and the write-up value of that car, an impairment loss is recognized. When a car is sold and has a write-up balance, this balance is written off together with the book value.
  3. Write-offof tax loss at Locamerica and Localiza, with no cash effect, mainly related to the discontinuation of car

sales initiatives (Acelero and Willz, respectively).

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Localiza Rent a Car SA published this content on 15 March 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 March 2023 03:19:10 UTC.