Porto Seguro S A : Call Mobitech - JV Porto Cosan (Transcript)

Transcript

Mobitech Conference Call - JV between Porto Seguro and Cosan

11/09/2021

Presentation:

Emerson Faria:

Good afternoon everyone. Welcome to our call to talk about the Mobitech project, a joint venture between Cosan and Porto. Today we have with us Henrique Guimarães, CEO of Cosan, Roberto Santos, CEO and Investor Relations Officer of Porto Seguro; Marcos Loução, CEO of Financial Business and Services at Porto; Marcelo Martins, CFO and Investor Relations Officer at Cosan; Ana Luísa Perina, Investor Relations Manager at Cosan; and Emerson Faria, Head of Investor Relations at Porto Seguro.

The presentation is being recorded and translated into English simultaneously, and the slides are also available for download on the IR websites of the two companies. For English, please press the interpretation button on the bottom right side of your Zoom application and choose audio in English. Slides presented during the call are in Portuguese, but there is an English version available for download on the investor relations website of both companies.

After the presentation closes, we will start the Q&A session. To ask your question, just use Zoom's "raise your hand" feature and we'll free the participants to ask the questions in order of arrival.

When they start to speak, we just ask them to first say their name and the institution they represent. Then, just ask the question. Any statements made here in this call regarding the business prospects of Cosan, Porto and also the Mobitech joint venture, constitute the convictions and assumptions of the companies' managers and involve uncertainties and assumptions related to future events and depend on circumstances that may or not occur. General economic conditions, the sectors in which the companies operate and other operational factors that may also affect their future performance.

Now I would like to invite Luis and Roberto to start the presentation of Mobitech, a joint venture between Cosan and Porto Seguro.

Roberto Santos:

Good afternoon.

Luis Guimarães:

Good afternoon.

Roberto Santos:

First of all, I would like to thank everyone for their interest in our operation. Thank you for everyone's participation and for the contributions you may have. I would like to start by talking a little about the strategic rationale of our joint venture. The relationship between the two companies started around 2019, from an operation in which Porto Seguro, through its credit card, managed, in a four-way operation, to insert the Shell Box inside the credit card.

And, from there, we worked in record time, and there was an understanding, very close proximity of the culture of the two companies, two of the most important corporations in the country, both with excellent track records in customer relations. It is clear the complementarity between the two groups.

So, the intention arose to do, in the future, something more than what we had in that operation. Since the end of 2019 until now, Shell Box embedded within Porto Seguro's credit card application.

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Transcript

Mobitech Conference Call - JV between Porto Seguro and Cosan

11/09/2021

Porto Seguro, I imagine that everyone knows, has a wide portfolio of solutions, not only in the insurance area but also in the area of healthcare, healthcare solutions and also financial business, as well as services.

In fact, we have an ecosystem of protection solutions for people. And it is on this line that we intend to build, the opportunity arose to build something based on the operation that Porto Seguro already has, which is Carro Fácil, the first vehicle subscription in the country. Porto Seguro is a pioneer in this initiative.

And from there, we have the ambition to transform the relationship between people and their vehicles and, above all, to be a protagonist of the mobility system.

Luis Guimarães:

Roberto, adding here, I think another thing that caught a lot of attention, which we'll cover even further in the presentation, is the breadth of the ecosystems. I think that the two companies, the two groups, have within their companies and divisions, investee companies, a very strong characteristic of dealing with channels, with partners, in different ways of distributing. I think customer orientation, on the one hand, to solve the customer's pain, in an industry that, I think everyone agrees, will grow a lot due to the changing trends in consumer habits, but mainly, a way of distributing it in a different way. And we will, throughout the development of the project, grow and do it.

Roberto Santos:

Well, moving on to slide number five, we decided to join forces to transform the experience of consumers in terms of mobility. As Luis commented, we have complementary operations in mobility and this is a market that we see growing very, very fast. There is a high, a very high degree of possibility of innovation, disruption in the market. We understand that there is a lot of opportunities to improve the consumer journey.

There are many pains, many bottlenecks in a car rental operation today and we want to act very strongly in this journey and in a very simple way, using a lot of technology which, by the way, is something common between the two companies, which was very clear in the episode of the construction of the Shell Box operation with the Credit Card.

So it's a business model, our JV, which was born from the car subscription operation, in which we already have 9,200 vehicles, within Porto Seguro's Carro Fácil operation, but I would like to highlight that we were born by building a company that's why we're calling it Mobitech, the idea behind the Mobitech project, which is mobility with technology.

We want to be, in a way, a digital native company. It's a little easier to build this solution since we don't have legacies from the big rental companies. So this combination of DNA from Porto Seguro and Cosan, as Luis highlighted here, a huge expertise in different distribution channels, in both companies.

We have this a lot, we understand a lot about it, but I think that more important than anything, we take care of people, always putting the customer at the center of our decisions and taking care of vehicle mobility.

Moving on to the next slide, continuing here, as I briefly mentioned, the Mobitech business model was born from the Carro Fácil operation, whose operation started in 2016. It was created from a need, a concern that Porto Seguro had with the question of the future of the automobile, of the relationship of

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Transcript

Mobitech Conference Call - JV between Porto Seguro and Cosan

11/09/2021

the consumer with the automobile. I already perceived, at that time, a change in this relationship, from possession to use. That's why we created the Carro Fácil.

And we were, as I said before, pioneers in the vehicle subscription business. There are no data today, in this segment, of rent operation, but we have the idea that we are leaders in this market today.

From there, we created a JV, shared control, with a strong governance structure of its own, where Porto Seguro supports the entire Carro Fácil operation, the business and the structure of employees, the operation of Mobitech, and Cosan makes a contribution to the company of R$ 300 million.

It is important to highlight here that this operation, from the beginning, was born with the configuration of having totally independent management. Again, with a strong governance structure, and our idea is that in the coming weeks, we will even strengthen the management of this structure, which obviously still depends on CADE's authorization.

Luis Guimarães:

Roberto, if I can continue here, I think it's important to understand where we come from and where we want to go. Roberto brought the rationale of two companies that act in the same way, have capillarity capacity of their ecosystems, are involved in the DNA and their businesses, mobility and vehicles.

I'll go ahead, Roberto, to show a little more details about this ecosystem, but our vision is to scale up this operation, obviously with an initial focus on subscription. It is an extremely profitable segment, which allows us to have greater knowledge of customers, a longer-term relationship between the vehicle and the customer, but then incorporating the second phase, with light and heavy vehicle fleet management, and then moving on to other forms of mobility.

The concept, as Roberto said very well, is focused on the customer's experience and the capillarity, potential interiorization, more cities where there is potential to be explored, a lot of technology and the use of data.

Again, the set of operations that our customers carry out, fuels, whether gas, biofuels, whether fuels in their normal way, whether in insurance, are the two most important components today in anyone's relationship with vehicles and we intend to capitalize on top of that.

And based on that, if we can go to the next slide, please, this integration of ecosystems, which is part of the contribution that each company, makes it possible to create operations and exploit the ecosystem and consequently generates a thousand options, in our view.

Just to give some numbers, within all the companies of the Cosan group, today, there are 13 thousand vehicles, somehow leased or operated on the properties. Porto Seguro makes millions of daily rentals per year within its operation. Capillarity with automotive centers and gas stations. Also, millions of customers today are Comgás residential customers, and businesses have commercial B2B relationships in the various segments.

So it is a group that today not only has a strong B2C relationship, but also B2B, so we will be leveraging our knowledge and our scale, always with a lower cost of customer acquisition and expansion.

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Transcript

Mobitech Conference Call - JV between Porto Seguro and Cosan

11/09/2021

Roberto Santos:

I would also like to add Luis, as is very important to mention, that the two operations together are present in approximately 2 thousand cities in our country. It's really something with incredible capillarity, which we're going to explore well.

Luis Guimarães:

Exactly, taking the service to cities where either there is a local competitor with a low capacity to provide the service or where there is no one offering the service. And we have discussed and thought about and have already developed several options for channels, also alternatives, which we think will be very important in our services.

Coming here at the end, before opening to questions, I think it is important to be very clear which are the strategic drivers that we have defined for this business. First, everything will be focused on the digital and different experience for the customer. We really want to make a customer-oriented company and not what I call an asset-pushed company because the asset is driving this process.

The second is the great degree of customer enchantment. I think both companies have this tradition, with high NPSs and a high degree of customer delight. Huge focus on operational excellence, a low- cost, simple and, above all, customer-friendly operation.

We bet a lot on the capillarity and internalization thesis. Capillarity is saturating the biggest cities, but also internalizing the opportunity to have a different relationship with the vehicle.

And obviously exploring this ecosystem, which has an enormous capacity to generate leads, to generate differentiated products, to integrate products.

It is important to note, as Roberto said, that our mind here as shareholders is, in fact, to have a team, which is already born with a very competent Carro Fácil team, but expanding with other skills, which really has the freedom and head to try, taking advantage of this entire ecosystem that is created.

I think it's important, from Cosan's point of view, to also emphasize, I know it's clear to you, but reinforcing that this investment is within Cosan Investimento. I know that in recent months there have been three important announcements, from JV Mining, Radar and now Mobitech and, obviously, there is an important period now for us to digest these businesses and focus, together with our partners, on all this operation, documentation and execution, which is critical.

We are extremely excited. This is a business that started, as Roberto said, a few years ago, which has been maturing, so it wasn't something we've invented in the last few weeks or months, but it's been created through a lot of teams working, research and understanding of the sector and opportunities.

And now we are very excited to build this journey together starting from a product that is already champion, Carro Fácil, and with the ability to scale as we bring new services, new products and, above all, making the journey, for the customer is easier.

Roberto, any more points?

Roberto Santos:

I think that's it. I think it's worth mentioning that we could be here doing the MOU, but no, we started from a conversation back there. We made the business plan and we already announced something,

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Transcript

Mobitech Conference Call - JV between Porto Seguro and Cosan

11/09/2021

already in action, of course, again, needing the approval of CADE. We are already quite advanced, already operating from Carro Fácil, as Luis explained, it will also go to other segments within the leasing operation.

And also to say that we are also extremely excited about this partnership.

Questions & Answers:

1. Regis Cardoso, Credit Suisse:

Thank you, Luis, Roberto and everyone here for the presentation and for the questions. I would like to ask, if possible, for the financial information and, in addition, two more strategic questions.

The first part of the financial information, if you can share, is either the EV of the transaction or the net debt, whether pre-money or post-money, which will come with these assets. Any one of these three here would help as well.

A second piece of information, if possible, is revenue and EBITDA, which you can share and also, perhaps, the updated value of this fleet of 9.2 thousand vehicles. I mean, from this set of financial information, whatever you can share, I think it helps to understand the transaction.

In addition, if you'll allow me two more questions that are a little more strategic, I would like to understand if you see entry into the RAC segment. There are a series of possible gains of scale, for example, in the net depreciation of the fact of buying the cheapest car or selling a better car.

So if this entry into the daily, retail segment, it would make sense for this new JV, for Mobitech. And a second question, also strategic, this is a segment that is capital intensive, which in the past had very good returns, but which now faces a series of difficulties, such as the escalation of the cost of capital, with the increase in the cost of debt, the reduction of commercial discounts, due to this dynamics of a limited supply of cars, and cost inflation in the chain.

How do you envision this moment of market entry precisely at this turning point in several of these past trends? Thanks.

Luis Guimarães:

Regis, let me just mention a few points, then I'll let Loução talk about the financial part. I think it's important, first, this is a transaction that companies are actually contributing. In the ecosystems there are businesses and financial resources.

It is not a direct account that you will be able to do this way because it has a whole development. We've done a lot more for the future. A small business today, but important with great potential.

So I think this is the first premise, which we spent a lot of time aligning with here, it wasn't a financial transaction, in practice. Of course, we had to do some math, but the most important thing is where we want to go and achieve. Let's give you some data about the operation of Carro Fácil today.

The second point, in relation to entering other segments, it is the goal, but again, we always do, both Porto and Cosan, things very aggressively, but at the same time, very aware of the way to go.

However, there is a large opportunity in the subscription. We believe that there is still a great deal of space in fleet management and, obviously, the issue of capillarity can be a new way of making shorter- term rentals without having to have all the investments in such expensive commercial points, such as

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