Movida Participações S A : 4Q20 Conference Call Transcription

TELECONFERENCE OF THE 4Q20 RESULTS

Operator:

Good morning, and welcome to Movida's conference call to discuss the 4Q20 results. Today, these gentlemen are present with us: Renato Franklin, Chief Executive Officer, and Edmar Neto, Administrative and Financial Director and IR Director.

At this time, all participants are in a listen-only mode. Later, we will begin a Q&A session, when further instructions will be provided. If you need any assistance during the conference call, please ask an operator to help you by dialing *0.

Before proceeding, we would like to clarify that any statements that may be made during this conference call regarding the Company's business prospects, projections and operating and financial targets are based on the beliefs and assumptions of Movida's Management, as well as on information currently available to the Company.

Future considerations are not guarantees of performance, they involve risks, uncertainties and assumptions because they refer 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 earnings and could lead to earnings that differ materially from those expressed in such future considerations. I would now like to turn the floor over to Mr. Renato Franklin. Please, Mr. Renato, you may proceed.

Renato Franklin: Thank you very much. Good morning to everyone. Welcome to our conference call to talk about the 4Q results and also the year 2020.

Just to start by making an observation, the year 2020 was a year that transformed humanity. I think everybody understands that. I always like to look at what remains positive. And what remains positive was that it transformed relationships, putting people even more at the center of attention and care.

So I start this conference call by first thanking our people, our people and the family of these people who have maintained our operations, considered an essential service, safely, with empathy, taking care of our people and taking care of our customers.

Having said this, we talk about Movida. For Movida, this year was also a year of very strong transformation. A year in which, besides gaining maturity and maturing the company, we also had the acceleration of several initiatives.

Just as the pandemic accelerated the cultural transformation and the change of habits and digitalization, it was no different at Movida. That is why the main message of today's conference call is the consolidation of a new level. This is the message we will convey during our presentation.

I exemplify this new level with some highlights on page three. Let's get to them. First, even in a pandemic year, growth of 8,600 cars. We'll talk about growth a little further ahead, but the recovery was strong and a very good 4Q for the company, the best quarter in Movida's history, consolidating a new quarter.

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Revenue of BRL $4.1 billion, revenue growth over 2019, even with some quarters, like 2Q, with lockdown and everything that happened here. EBITDA of almost BRL 900 million, reinforcing our commitment to efficiency gains, cost discipline, margin improvement, 20% higher than 2019. Rental EBITDA margin hitting 54%.

And when we look at net income, it's almost 5x higher than 3Q. That's right, it's more than double 4Q19, a record level of BRL 184 million. If we take the recurring net income

• Edmar will give more details later - we reached BRL 139 million, which is already another bottom line level for the Company.

We highlight on the right side of the slide two important milestones, which, in the medium term, will make a lot of difference for the Company. The first one is the issuance of a bond, the Company's first capture in the foreign market, in the debt market, with a bond linked to sustainability.

So, US$500 million, 10 years, extremely supported by investors, with good demand, a rate of 5.25% per year and with a commitment to reduce our emissions by 30% in 10 years, the first sustainability-linked bond in the sector. Once again, Movida is ahead of the industry, driving new trends and opening new sources of funds to support the company's growth plan.

That said, I invite you to go to slide four, to talk a little bit more about growth. We always show this fleet growth slide, again, reinforcing that we have a strong track record of growth Even with the pandemic, we grew by 8,600 cars, very different from the market outside of Brazil, showing the potential for growth that the country has, the strong fundamentals of this sector, which I reinforce here again.

But the most important point is that we've had a CAGR of 16% since the IPO. Even with the pandemic, we have a strong CAGR. But this new level that we have reached gives us even more capacity for growth. Those who had the opportunity to see it, at our Movida Day, when we held the Investor Day with APIMEC at the end of last year, we showed the parent company, talking about our growth potential according to margin improvement.

Today, we have a strong balance sheet to grow, more mature processes, maturity of our operations, and an even better execution. So, we will talk a little further ahead, but we are seeing a very positive year for Movida in this year that starts in 2021.

Talking a little bit about each business, I invite you to turn to page five, so that we start with the rent-a-car, RAC. RAC had a record net revenue of BRL 359 million, mainly with a record occupancy rate, 5 p.p. more of occupancy rate. This is also reflected in the healthy competition. Again, a lot of demand makes the competition rational.

We are focused on the individual and we had a record revenue per car again, BRL 2,268 monthly revenue per car, 12.5% higher than T419, which had already been a strong quarter. From a daily rate standpoint, we are also growing, by 7.6%.

And on the right-hand side at the bottom of the page, we reinforced our commitment to cost efficiency gains, reaching BRL 500 in 2020, a cost reduction since 2017. On the quarter-on-quarter comparison, I would just like to remind you that in 4Q19 we had a PIS and COFINS credit that impacted this cost per car.

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But we are very confident with rent-a-car, fundamentals are still very positive, the market continues to grow, so our view is very positive for the RAC from 2021 on.

Let's turn to page six to talk a little about GTF, fleet management and outsourcing, reinforcing here the brand new of individuals, which is the same as GTF, only with individuals. It's in here and has already contributed to the growth in 4Q20.

Remembering that we relaunched it in July, today with the fully digital platform, being the only company that is delivering the car in a practically ready delivery period, with an average delivery time of two days, very different from the other products in the market, having another scale of growth.

We are here with BRL 141 million in net revenue. The revenue per car, due to the impact of the brand new car, drops a little. It's not that the ticket is smaller. If you enter in the ads - I invite you to enter our brand new car site and take the chance to look at a car, because there will be interesting cars for all of you - we have promotions that, in the first three months, we give a 50% discount on the monthly car note.

Of course this is not priced, but for the client, it is an important attraction for him to make the transition, and this impacts the revenue per car in the beginning. You can see that the number of daily rates had a 16% growth, but we have a higher contracted revenue ahead than the one we are incurring today.

And here, we also have cost discipline. We are replicating all the trading improvements we are making from a cost and operating expense standpoint and reducing cost per car year after year, generating a new level of margin for our business and GTF as well.

Let's turn to page seven to talk about semi-new cars. Semi-new cars had a very positive highlight. We were able, during 2020, to confirm the maturity gain in this business area, the area that resells our assets, with a record net revenue in 2020.

When we look at quarter against quarter, we have to remember our strategy of prioritizing RAC. When we say that we sold 9,869 cars in 4Q, it was because our decision was to keep more cars in the rent-a-car operation and serve our customers, maintain the growth of the RAC and hold the cars in the operation.

Remembering that it does have a very positive margin. We see, in the third quadrant, an average ticket of BRL 50,000 and 19% of gross margin in semi-new cars, that is, we have an earning saved in the sale of the car.

Our decision was coming later, the prices are still strong, even with a price increase, due to the inflation of the brand new car, which passes on to the semi-new car. And we are going to see very strong margins in the sale of semi-new cars during the whole year of 2020, given the increase of the brand new car at the end of 2020, which passes on to the semi-new car.

In terms of dilution, the SG&A for 2020 was 6%, in line with our expectations, even with the pandemic year, again, reinforcing the maturity of the semi-new car, which has evolved a lot, now has a different sales capacity and is much more prepared to support the Company's growth.

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I will now hand it over to Edmar, to give a little more color on the financial numbers and also talk about our capacity for growth, showing how we are better positioned. Edmar.

Edmar Neto: Good morning to everyone. Thank you, Renato.I invite you to turn to page number eight, where we talk about depreciation. As we had already announced, in 4Q, we reduced the depreciation per car in both RAC and GTF. In the RAC, this decrease was approximately 10%.In GTF, it was higher, at 36%, mainly due to the fact that we are increasingly selling our GTF cars in the store and therefore getting better margins.

When we talk about LTM, we are still at BRL 3,400 for the RAC and BRL 3,800 for the GTF, but they are already starting to give way. Our goal here is to be cautious when making this landing, looking at the market the way we are seeing it today. Renato will talk a bit about this later.

About our balance sheet, we have shown here that, starting in 2020, we are already running with accumulated depreciation of around 5%, which seems to us a very adequate level for a moment of high volatility in car prices.

Inviting you to turn to page nine, I will talk about the 4Q results. The highlight here is the consolidated EBITDA and EBIT that were records. Even though one or another line of business has had a margin involution, in the case of 4Q, the positive highlight is semi- new cars for sure.

Speaking of RAC, we delivered a margin of 45%. Again, the effect of the PIS and COFINS credit, which Renato mentioned, last year favors the comparison in the case of 2019. In GTF, we have 61%, which has to do certainly and clearly with our zero km growth, as we still have some inventory and some additional expenses in this beginning of the operation.

And the part of semi-new cars, where there was an evolution of BRL 51 million in EBITDA from one quarter to the next. In other words, in our consolidated, we captured almost 4 p.p. of margin and BRL 43 million in the quarterly comparison.

Speaking of EBIT, the difference is that the additional burden of depreciation is felt, but, once again, the highlight is semi-new cars, with an EBIT margin evolution of approximately 11 p.p., an evolution, in the case of EBIT, quarterly. A new record of BRL 220 million, with BRL 62 million over 4Q19, and a margin of 44% as well, a very strong margin.

To talk about 2020, we present the numbers on page 10. RAC margin and EBITDA practically stable, even with the pandemic and having a 2Q that was well below the average that we delivered.

In the case of GTF, in the year, we had an important growth of 3 p.p. of margin and more than BRL 50 million of EBITDA growth. In the semi-new car segment, we delivered a full year, with a positive EBITDA margin, practically BRL 90 million of EBITDA in the case of semi-new cars. So, BRL 895 million of annualized EBITDA, BRL 148 million over 2019, a 20% growth.

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On the EBIT part, I want to remind you that we brought a load of higher depreciation over the year and the EBIT points this out for each line of business, but when you go to the consolidated, we show a margin evolution of 0.4 p.p. and an evolution in absolute numbers, leading to a record EBIT also of BRL 482 million, and a record EBITDA of BRL 895 million.

On page 11, we present the consolidated results. As Renato said, we have consolidated the new level of earnings in the company in this 4Q, and this result is important for us. So, the revenue grows to BRL 4.1 billion, the revenue in the quarter is a little lower, due to the lower number of cars sold.

When we talk about EBITDA, on the right side of the slide at the top, as I had already mentioned, we had a 20% growth, to BRL 895 million, a quarterly record of BRL 305 million EBITDA in 4Q, BRL 43 million more than in 2019.

EBIT, which is on the left side of the page, at the bottom, showed the same thing, a new high of BRL 220 million in our recurring result, a 44% margin.

And net income also had a very important force in the recovery starting from the middle of 3Q, consolidating in 4Q. So, our profit for the quarter - on the bottom right side of the page - was BRL 139 million in recurring profit, for a record quarterly accounting profit of BRL 184 million, with a 28% rental margin, again, representing new heights for the Company.

I wanted to talk a little bit about cash and debt schedule, because that was a very important theme for us during 2020. We ended the year with more than BRL 1.7 billion in cash and with a profile that, if not ideal, was one that we could align and handle, as we had been doing in times past.

However, in January, with liquidation in February, there was an issuance of bonds. The bond is transformational for Movida in terms of the duration of its debt, access to new markets and markets with a very important depth and, once again, Movida came out ahead, being the first rent-a-car company in Brazil to issue a bond and the first rent-a- car company in the world to issue a bond with this sustainability aspect, the so-calledsustainability-linked bond.

So you see that, in this way, we address the next seven years of maturity with bond resources.

Turning to page 13, I would like to bring up some important aspects in this new scenario. The first one is indebtedness.We continue with a very strong discipline and very positive indicators. A highlight for leverage, which already comes with the growth we showed in the 4Q and has the number of 2.7x, a little more than 4Q19 and still a long way from our covenant.

The highlight here is the interest coverage, both in terms of EBITDA and yield, which are indicators that have been growing every quarter, once again breaking new records.

On the right side, and this is an important point when we look ahead, we highlight what we can grow in Movida, maintaining all the financial discipline we have had so far.

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