SIMPAR S A : Conference Call Transcription 3Q21

Conference Call Transcription

3Q21 Results

Simpar (SIMH3)

November 11, 2021

Operator:

Good morning, and welcome to the Simpar conference call to discuss the results for 3Q21. Today, these gentlemen are present with us: Fernando Simões, Chief Executive Offiecr; and Denys Ferrez, Executive Vice-President of Corporate Finance and Investor Relations Officer.

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.

This conference call is being recorded and simultaneously translated.

Before proceeding, we would like to point out that any forward-looking statements that may be made during this conference call about the Company's business outlook and operating and financial projections and targets are based on the beliefs and assumptions of Simpar's Executive Board, as well as on information currently available to the Company.

Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions, as 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 results and could lead to results that differ materially from those expressed in such future considerations.

I would now like to turn the floor over to Mr. Fernando Simões. Please, Mr. Fernando Simões, please proceed.

Fernando Simões:

Good morning, everyone. We are beginning the earnings release of Simpar's 3Q21, the best quarter in our history. I would like to thank you all for your participation. We thank our shareholders, our customers, and our people. We are over 35,000 employees.

We are over 65 years of solid background, values, and strong culture. We are aligned, and our employees are committed, with simplicity, focused on results, and a strong governance that has enabled us to grow in a sustainable way, with excellent results and numbers, according to the results and numbers you can see here beginning on page two.

We recorded a net income of R$399 million in 3Q21, which is nearly 4x more than in the same period of the previous year. Net service revenue reached R$3 billion, representing a growth of 67% over the same period.

EBITDA increased double compared to last year of R$1.2 billion in 3Q21, annualized to R$4.8 billion, and a 3Q21 EBITDA margin of 38% higher than last year.

Net CAPEX in the last 12 months reached R$6.7 billion, representing the development of revenue and future business. In other words, we are very proud of the numbers we are presenting to you,

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Conference Call Transcription

3Q21 Results

Simpar (SIMH3)

November 11, 2021

but the net CAPEX realized in the last 12 months ensures the contribution and the robustness of the growth and development of our revenue and results.

Even with such a large investment in the last 12 months, we ended 3Q with a leverage of 3.3X EBITDA, within our financial planning. Our ROIC was 14.8% annualized and with a ROI of 31.5% in 3Q21.

As we can see, these are extremely robust numbers, the result of hard work and dedication and the business reorganization that we have built together with you over the last four or five years.

When we talk about Simpar's strategic movement in 3Q21 on page three, as mentioned on the previous page, we have the construction of the future result through investments in our subsidiaries. Gross CAPEX of R$9.3 billion and net CAPEX of R$6.7 billion in the last 12 months, not including acquisition.

It is important to highlight that a small part of this CAPEX is reflected in our revenue and even less in the last 12 months, which shows the robustness with sustainability in our future result.

We concluded the acquisition of CS Frotas by Movida, which was extremely important in the transformation of Movida's size and we believe in the generation of value for Simpar's and Movida's shareholders.

That is what we have been seeking to do, to bring value generation and sustainability to all the companies we control. This was fundamental for the transformation of the size and even greater resilience in the case of Movida through fleet management and outsourcing.

Liability management to ensure the execution of the growth agenda for the coming years. We conducted the follow on from Vamos, raising and lengthening our debts and the redemption of our bond maturing in 2024, lengthening it even further, which shows the management of our liabilities with great responsibility, within our planning and creating bases and foundations for the new development cycle.

We are pleased to announce CS Infra and the proposed acquisition of Ciclus, one of the largest waste treatment companies in Brazil, with the highest standards of quality.

Given the fact that this might be a negotiation between a related party, within the highest governance, all procedures were carried out, submitted to the approval of our independent advisors, who approved the proposal and submitted it for the appreciation of the Annual Meeting on November 29.

And, in line with our principles and respect to the minority shareholders, we announced, and as it was done in the other three times, in this fourth time in a possible negotiation of a related party, we, the controlling shareholders, announced that we will follow the minority's decisions, i.e., the minority shareholders will decide with their vote if they want the operation or not in the Annual Meeting on 11/29/21.

BBC, our Leasing company, our digital account. We always say that our major advantage is People, it is our team. We have many people who have been with the company for a long time,

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3Q21 Results

Simpar (SIMH3)

November 11, 2021

and we have people who have been with us for less time, and this renewal is what makes the big difference in our business.

Within this context, we are very pleased with the entry of Paulo Caffarelli, who, in addition to heading our Leasing Company and the Digital Account, will also work in the entire ecosystem of the Simpar Group and its subsidiaries.

So, now turning to page four when we will present Simpar's moment. It is a moment of great happiness, we are celebrating Simpar's first year listed, a holding company with a unique positioning, focused on revenue resilience businesses, with growth potential, with respect to the capital structure and with return compatible with its business.

When I say to you a unique positioning, it means a holding company active in the development of its subsidiaries.

We have a very strong People area that contributes to the perpetuation of our culture, our values, and our way of doing things; a different management model; an M&A area; the focus of our Financial Vice-President on the management of all our liabilities with a lot of sustainability, with a focus on governance and on the profit of all our businesses.

This has granted us solid pillars that generate resilient results with several avenues for growth and development and business within the current economy of our Brazil and the main Brazilian industries, which assures us a generation of value in an extremely sustainable way.

Here, we have Simpar, which is still on the same page four, with its controls below, as you can see. Starting here with JSL, a company with the largest logistics company is the largest logistics service portfolio in Brazil.

Movida, the car rental company that has grown the most over the last 20 months. Its fleet of vehicles a transformation in its results and numbers, prepared for this new cycle of development.

Vamos which has shown its numbers and its transformation every quarter in a wonderful potential segment in which it operates, but with the transformation also in its network of dealers that contributes extremely to its ecosystem.

We have CS Brasil, now without CS Frotas, which has already been passed to Movida. Here we have the dealership network for cars and light vehicles, Original Veículos; we have BBC Leasing.

According to what you can see here that is announced, which is still subject to the approval of our Annual Meeting on 11/29, when we controllers, as we have already said, will follow the decision of the minority shareholders, but we aim within our planning, for CS Infra, we would be transferring from CS Brasil the port terminals that we won, the highway, our participation in the BRT in Sorocaba.

And, if approved we also bring Ciclus into the CS Infra structure, becoming a holding company focused on service concessions that has revenue resilience, with great growth potential, but also with a diversification and a unique positioning as a holding company in the infrastructure segment.

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Conference Call Transcription

3Q21 Results

Simpar (SIMH3)

November 11, 2021

Remembering then, before moving on to the next page, we talked about the main figures of the 3Q, our strategic planning and next steps and how we are positioned at this moment with our holding company, with Simpar.

On page five, we now show some of the value transformation and value creation for our shareholders that undoubtedly reflects in greater security for our staff, our customers, and our future development.

We do not work for value transformation, but certainly the work of our team, our dedication, and our management model as a result has the value transformation of our business, which is evidenced in this page five.

When we started Simpar's IPO, remembering that it was JSL, we never had a follow on at Simpar. The IPO was valued at R$1.1 billion, and this company, on the mentioned date, here was valued at R$9.3 billion. From 2010 to 2021, we had a nominal increase in valuation of 16% per year.

When we talk about Movida, from 2017 to October 2021, we had a nominal growth of 18% per year, and JSL, a still new listed company, had a decrease of 23% because it does not yet reflect its acquisitions, the synergies and the results it has had in the last quarters and will have in the next ones.

Vamos, a company that has grown 97% since its IPO 10 months ago. This shows and highlights the recognition of the management model that has been achieving significant deliveries and structural changes that, without a doubt, will contribute to future development.

When we then turn to page six, we have here some details of the companies' numbers. Starting with JSL, a listed company, I'm not going to detail the major figures, but just to remind you that it has made occasional acquisitions that will contribute a lot in different segments, with teams, it has acquired good people in important segments that have contributed to the transformation of its values.

Just a thought, when it was listed, it had revenues a year ago of R$3.2 billion 16 months ago. Today, if we annualize the revenue of this company, it is already close to R$6 billion in gross revenue. This demonstrates the transformation of JS's values and potential.

When we talk about Movida, it also had record profits a transformation of the size of its positioning. And now with a larger fleet management and outsourcing contributed by CS Frotas will undoubtedly contribute to the basis of its development in an extremely sustainable way.

We then turn to page seven. Since we have detailed Vamos's main figures here, to a company already listed and with its results disclosed, but it has a great potential for growth. Showing in detail in its figures, how its dealership network has been transformed that will contribute even more to the leasing of machinery, trucks, and equipment.

Remembering in all of them, but Vamos mainly as well, that its net CAPEX execution does not yet reflect in its numbers, but rather ensures the robustness of the Company's future numbers.

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Conference Call Transcription

3Q21 Results

Simpar (SIMH3)

November 11, 2021

Original, a smaller company, but extremely important in our ecosystem and aligned with our planning, we strongly believe in transforming the size through acquisitions and being a platform to become the largest trading company for new and used in Brazil.

We now move to page eight. Here we have BBC, an extremely strategic company for us within the ecosystem, a financial arm of ours today through Leasing and Digital Account and within our strategic planning always focused on differentiated people.

With Paulo Caffarelli joining us and contributing to our ecosystem as a whole, a new cycle of transformation in the size of our BBC, our financial service company, has begun.

We have CS Brasil here, already without CS Frotas, with some companies here. Remembering that within our planning with a focus on long-term concessions, CS Infra is also being born here.

Speaking of which, let's move on to page nine, where we highlight the main figures of Ciclus, one of the largest waste treatment companies in Brazil, which within our planning and our governance, if approved by the minority shareholders, will come to be controlled by CS Infra, giving much more robustness to CS Infra and a revenue diversification.

We must remember that both roads, ports, passenger transportation through BRT, and sanitation with waste treatment are revenue diversification, but all with a focus on service and resilience in their revenue.

Now then, I will hand over to Denys who will give more details about the Company's financial figures. Denys, please go ahead.

Denys Ferrez:

Thank you, Fernando. Good morning, everyone. Moving on to the consolidated financial highlights on page ten. Well, all the numbers are records, but I would like to highlight not only the quarterly evolution, but also the evolution of the last 12 months.

So, for example, beginning with net revenue here we have a total of R$12.3 billion over the last 12 months, which is a 26% increase over 2020. More precisely, net service revenue grew by 41%.

For the quarter, the figures are even stronger. The quarter reported almost R$4 billion in net revenues, of which R$3 billion were net revenues from services and R$923 million in net revenues from asset sales. Services grew 67% in terms of revenue and total revenue 52% compared to 3Q20.

When we move to the right here, to the EBITDA, the last 12 months EBITDA already totals R$3.6 billion is 57% higher than the full year 2020 with a margin of 37%. When we look at the quarterly comparison, the quarter delivered R$1.2 billion with a 38.4% margin. There were an expansion of 6 p.p. of margin.

In nominal terms this is an increase of 98%, i.e., almost double. It is worth mentioning that 3Q EBITDA is almost half of what was reported for the full year in 2020. So, in fact, we have a material change in the Group's level.

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