Localiza Rent a Car S A : Earnings Release 4Q23

Dear stakeholders,

In 2023, we celebrate Localiza&Co's 50th anniversary, a year marked by notable advances and significant challenges.

We advanced in the integration process, improving our internal practices and procedures, with substantial productivity gains and we were efficient in managing costs and expenses. We expanded our Seminovos network, contributing to an increase in the volume of cars sold and a reduction in the average age of the cars sold, although not yet at historical levels. Furthermore, we expanded the capillarity of Car Rental, which showed revenue growth in all segments, more than offsetting the effects of the carve-out. We scaled Localiza FAST, offering a completely touchless experience, and expanded the differential in enchantment for our customers. We captured strong growth in Fleet Rental, highlighting the success of Localiza Meoo (car subscription). We also increased the Heavy Vehicles fleet and opened 2 stores dedicated to the sale of used trucks. We successfully started our operations in Mexico, with the opening of 10 branches in the main airports, around 1 thousand cars and an NPS at an excellence level. We have significantly advanced in technology, use of data and telemetry, resulting in a strong reduction in losses, theft, fraud and accidents. Furthermore, we continue to simplify and automate our processes and increase productivity throughout the car cycle. All of this progress were driven by a highly engaged team and a solid Management and Culture process.

Our continuous evolution was recognized by several rankings throughout 2023, of which we highlight: one of the 10 best companies to work for in Brazil by Great Place to Work; 1st place in the Reclame Aqui Awards in all categories in our sector, recognizing the excellence in service to our customers; winning the Company of the Year award by the Exame's magazine in the ranking of the Biggest and Best of the year; one of the 50 companies with the best corporate reputation and one of the 70 most responsible in terms of ESG in the general ranking, with 1st position in the mobility sector by the Corporate Reputation Business Monitor MERCO.

Even with all these advances, we face an environment characterized by high interest rates and credit restrictions. These factors negatively impacted our cost of debt and Seminovos sales, which were also harmed by the consumer's lower disposable income due to the increase in car prices. Furthermore, we suffered the effect of the Popular Car Provisional Measure, which negatively impacted the price and depreciation of cars.

Nevertheless, in 4Q23 we observed a relevant evolution in rental demand and revenue from the used car sales. The Car Rental Division recorded a 22.3% growth in net revenue, while the Fleet Rental Division's revenue grew 40.4%, and Seminovos revenue grew 39.4% compared to the same period in the previous year. As a result, we ended the quarter with consolidated revenue of R$7.9 billion and an adjusted EBITDA of R$2.9 billion, representing an increase of 36.3% and 33.0%, respectively, compared to 4Q22.

The strong operational results in Car Rental and Fleet Rental, both through revenue growth and greater cost efficiency, were partially offset by a challenging car sales environment. In 4Q23, after the end of the effects of the Provisional Measure, we observed a recovery in the prices of new cars, however, this recovery did not translate into a corresponding increase in the prices of used cars, negatively impacting the Seminovos EBITDA margin and depreciation of the fleet.

As a result, in the quarter, adjusted EBIT totaled R$1.8 billion and adjusted net profit reached R$750.9 million, an increase of 17.8% compared to 4Q22.

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In the year, we presented consolidated net revenue of R$28.9 billion, an adjusted EBIT of R$6.9 billion and an adjusted net profit of R$2.5 billion, with an ROIC spread of 4.1p.p. relative to the after-tax cost of debt.

From a balance sheet perspective, we continued to show improvements in our debt ratios, ending the year with the net debt/EBITDA ratio at 2.78x and net debt/fleet value at 0.56x.

For 2024, given the scenario of uncertainty regarding the residual value of cars, we will maintain the focus on: i) rental pricing to restore return levels; ii) optimization of the segment portfolio and discipline in capital allocation;

1. efficient management of fleet costs and productivity; iv) expansion of the sales capacity of Seminovos, to support the fleet rejuvenation process; and v) innovation with the aim of further expanding the enchantment differential for our customers.

Finally, even with the pandemic and all the challenges of recent years, Localiza&Co expanded its capital base from R$10 billion in 2019 to R$43 billion in 2023, a CAGR of 44% per year, with 22% growth per year in invested capital, since the business combination (as of July 1, 2022). Our current scale, combined with our robust balance sheet, expand our relative competitive advantages, and position us solidly to maintain our growth trajectory with value creation.

Bruno Lasansky - CEO of Localiza&Co

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Combined results

Following the format of the disclosure of the recent quarters, considering the completion of the business combination, the presentation of the 4Q23 results includes consolidated information from Localiza and Locamerica (LCAM). For comparability purposes, we will bring the proforma comparative results, adding the values of the two companies, from 2021 until the business combination on July 1, 2022. Annual comparisons will be made based on the proforma historical numbers of the two companies.

The proforma result are based on available information directly attributable to the business combination and factually supportable. This presentation is intended exclusively to illustrate the impact of this business combination on the Company's historical financial information, as if the transaction had occurred on January 1, 2021. There is no assurance from the Company or the independent auditors that the result of the transaction, had it been completed on January 1, 2021, it would be as presented. We highlight that the operational quantitative data were not reviewed by independent auditors. Finally, we will highlight in the quarter's results the effects relating to the write-up of cars and customer portfolio, in addition to the write-off of the tax loss related to the incorporation of Locamerica Rent a Car S.A, as shown in the table below.

R$ million

Furthermore, we had a negative effect of R$63.3 million, of which: i) R$28.7 million referring to the adjustment to present value (APV), due to the early settlement of derivatives linked to the financing operation of Locamerica shareholders in the context of the business combination, and ii) R$34.6 million of negative EBIT from operations in Mexico. These effects have not been adjusted for presentation purposes in this release.

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HIGHLIGHTS OF THE YEAR

After a year and a half of a robust integration process, we have already captured important advances in our productivity, processes, and practices. In 2023 we presented significant gains in operational efficiency, which were reflected in the evolution of rental margins. Net rental revenue increased by 26.0% in the year, with costs increasing by 7.5% and SG&A just by 1.2%, resulting in an increase of 6.3p.p. in the rental EBITDA margin, as follows:

R$ millions

On the other hand, the effects of the cycle increase in the depreciation and still high interest rates offset the operating gains:

R$ millions

Depreciation and Financial Result	2021 proforma	2022 proforma	2023	Var. R$	Var. %
Adjusted	Adjusted	Adjusted	2023 x 2022	2023 x 2022
Depreciation of cars and others	(978.4)	(2,097.1)	(3,813.1)	(1,716.0)	81.8%
Net financial result	(785.0)	(2,726.0)	(4,024.3)	(1,298.3)	47.6%
Total	(1,763.4)	(4,823.1)	(7,837.4)	(3,014.3)	62.5%
Depreciation and Income Fin. % Rental Revenue	-20.1%	-40.7%	-52.4%		-11.8 p.p.

We still see room for operational improvement as we move forward with fleet rejuvenation and complete the integration process. Furthermore, any reduction in interest rates should contribute to the advancement of the level of return.

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QUARTERLY HIGHLIGHTS

Car Rental Net Revenue - Brazil

R$ million, including royalties

Seminovos Net Revenue - Brazil

R$ million

	39.4%	3,740.6
2,683.0

4Q22	4Q23
	Seminovos

Consolidated Net Income

R$ million

Fleet Rental Net Revenue - Brazil

R$ million, including new initiatives' revenues

1,341.1	40.4%	1,883.0
4Q22		4Q23
Fleet Rental

Consolidated EBIT

R$ million

Debt Ratios

R$ million

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1 - Car Rental

Net Revenue - Brazil (Including royalties from franchisees)

R$ million

Rental Days - Brazil

In thousands

In 4Q23, net revenue from the Car Rental division reached R$2,276.2 million, growth of 22.3% compared to 4Q22, as a result of the 10.4% growth in the number of daily rentals and the increase in the average daily rate. We remind that in 4Q22 we carried out the carve-out of around 49 thousand Car Rental cars, 180 branches and 20 Seminovos stores, sold in the context of the restrictions imposed by CADE to approve the merger, with 4Q23 being the first quarter since the merger on a comparable basis. In just one year, the Company recovered the carve-out in revenue and volume, a result of commercial excellence and brand strength.

In 2023, the net revenue totaled R$8,255.5 million, an increase of 11.2% compared to 2022 proforma.

Utilization Rate - Brazil

%

Rental Rate - Brazil

R$

In the 4Q23, the average daily rate increased by 9.6% in the annual comparison, reaching R$126.75 and the utilization rate increased by 1.8p.p., reaching 79.7%, even in a quarter of strong car purchases.

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1.1 - Rental Locations

Number of branches - Brazil and Latin America

Quantity

883
202	694	712
	172	165
		10
681	522	537

2021 proforma	2022	2023
Own locations - Brazil	Own locations - Mexico	Franchisee's locations

In the graph above we see the evolution of the Car Rental network. From 2021 to 2022, we had the carve-out effect, with the sale of 180 branches in the context of the restrictions imposed by CADE. In 2023, we opened 15 owned branches in Brazil and 10 branches in Mexico, ending 2023 with 712 branches, of which 616 in Brazil, 10 in Mexico and 86 in 5 other countries in South America.

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2 - Fleet Rental

Net Revenue

R$ million including new initiatives' revenues

Rental Days

In thousands

In 4Q23, the Fleet Rental division presented net revenue of R$1,883.0 million, 40.4% higher than in the same period of the previous year, due to the 19.1% increase in volumes and the increase in the average daily rate.

In 2023, revenue grew by 50.5%, with an increase of 25.4% in the volume of this division.

Utilization Rate

%

Rental Rate

R$

In the quarter, the average daily rate increased 17.6%, reaching R$87.81, reflecting the pricing of new contracts in a context of higher interest rates, car prices and depreciation. The fleet utilization rate decreased by 1.4p.p. when compared to 4Q22.

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3 - Fleet

3.1 - Net investment in the fleet

Car purchase and sales - Brazil

Quantity*

*Does not consider theft / crashed cars written of

Net investment in fleet - Brazil

R$ million

In 4Q23, 107,532 cars were purchased for our own operations in Brazil, 70,375 in the Car Rental division and 37,157 in the Fleet Rental division, and 56,514 were sold, resulting in the addition of 51,018 cars.

In Car Rental, the strong addition of the fleet in 4Q23 aims to support the greater end-of-year demand. In the first quarter of 2024, the Company tends to reduce the pace of purchases in Car Rental, aiming to adjust the fleet after the high season.

Number of stores - Seminovos

Quantity

We ended the year with 215 Seminovos stores, distributed across 107 Brazilian cities. In 2023, 29 stores were opened, being 20 in the second half of the year. The new openings aim to support the increase in the sales for fleet renewal, a movement that should continue throughout 2024.

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