Modeling Guide
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The following data refer to conceptual examples of Localiza’s main business divisions. The information provided is intended to guide the reader to understand the Company’s business platform and to be able to perform financial modeling of its results.
The information is presented in summary form and is not intended to be exhaustive. This page has been prepared for informational purposes only and should not be used as a recommendation, invitation or offer to buy or sell any securities and should not be treated as legal, tax, investment or other advice. No statement or warranty, direct or implied, is made as to the accuracy, completeness or reliability of the information, statements or opinions contained herein, including in relation to statistical data, forecasts or estimates contained herein. Past performance is not a reliable indicator of future results or performance.
We empashize that future considerations and estimates depend substantially on market conditions, applicable laws and regulations, the performance of the car rental industry and the Brazilian economy in general, among other factors beyong Localiza’s control. These aspects and the operating activity may affect the Company’s future performance and may lead to results that differ materially from the projections/modeling. Due to these uncertainties, investors should not make any investment decision based exclusively on this information. Any change in perception or in the aforementioned factors may cause actual results to differ from the projections made and disclosed. If you have any questions, please contact our Investor Relations team by email at ri@localiza.com.
The purchase and sale of vehicles is a practice that depends on the Company's strategic direction. Therefore, the main starting point for modeling is the estimate of the net addition of the fleet, calculated by the difference between the number of vehicles purchased and sold.
Net fleet adition = # purchased vehicles (P) – # sold vehicles (S)
Fleet available for rent: 530k vehicles
Average rented fleet: 480k vehicles
Disclosed utilization rate: 480k/530k = 90.6%
Average operational fleet: 560k vehicles
Average rented fleet: 480k vehicles
Utilization rate: 480k/560k = 85.7%
End of current period fleet: 650k
End of last period fleet: 600k
Average: (650k + 600k)/2 = 625k
Average rented fleet: 480k vehicles
Global utilization rate: 480k/625k = 76.8%
Number of rental days = average rented fleet x number of days in the period*
- Cars with an average useful life cycle of 15 to 18 months;
- Greater physical structure costs with branches and personnel;
- Higher fixed costs characterize lower margins when compared to the Fleet Rental division.
- Cars with an average useful life cycle of 36 months, with contracts from 12 to 84 months;
- The absence of a physical structure results in lower fixed costs;
- Lower fixed costs result in higher margins;
- Services are offered based on customer demand, thus reducing idleness.
Car Rental and Fleet Rental are the Company's core business and revenue from these segments refers to Rental services.
Rental gross revenues = rental rate (R$) x rental days
Rental net revenues = rental gross revenues x (1 – PIS/COFINS tax rate*)
Rental EBITDA = rental net revenues – rental costs – rental expenses
Rental EBITDA margin = rental EBITDA/rental net revenues
The EBITDA Margin is the metric used to assess the operational efficiency of the business. Rental EBIT = rental EBITDA – other assets depreciation and amortization
Seminovos is not a business unit of the Company, but rather an efficiency area responsible for selling decommissioned cars from the Car and Fleet Rental divisions. It is through the sale of vehicles that Localiza renews its fleet and maintains the quality of its assets over time. The number of vehicles sold for each of the divisions can be estimated based on the need to renew the fleet. Thus, considering an average cycle of 15 months in Car Rental and 36 months in Fleet Rental, in 12 months it would be necessary to sell 12/15 or 80% of the RAC fleet and 12/36 or 33% of the GF fleet.
Sales revenue = average sale price (R$) x number of vehicles sold
Sales gross profit = sales revenue – book value of cars sold
Book value of cars sold = purchase price – accumulated depreciation
Depreciation 
Book value
Gross profit
Depreciation
Book value
Gross profit The diagram above shows how car depreciation influences gross profit. As cars depreciate over their useful life, their book value decreases, resulting in a higher gross profit at the time of sale, depending on market prices.
Seminovos EBITDA = sales gross profit – SG&A Seminovos
To evaluate Seminovos efficiency, one used metric is SG&A/Seminovos net revenue. Seminovos EBIT = Seminovos EBITDA – cars depreciation – other assets depreciation and amortization
Consolidated EBIT = Rental EBIT + Seminovos EBIT
Localiza is part of a capital-intensive industry, which means that the business requires high investments to operate, such as cars, agencies and stores. These investments are financed through third-party or own capital:
Consolidated EBT = Consolidated EBIT – financial result
Over the EBT, Earnings Before Taxes, IRPJ and CSLL are levied at a total rate of 34%. The effective rate can be reduced in a number of ways, one of which is through the distribution of IoC (Interest on Capital), one of the alternatives that the company has to remunerate its shareholders.
EBT:
R$1000M
IoC:
R$0
Current tax:
34% * R$1000M = R$340M
EBT:
R$1000M
IoC:
R$200M
Taxable income:
R$1000 – R$200 = R$800M
Effective tax rate:
34% * 800M = 272/1000
27.2%
IoC is calculated by multiplying Total Equity by the Long-Term Interest Rate (brazilian TJLP), and cannot exceed 50% of the Company's profit reserve or 50% of the net profit of the previous fiscal year. Tax = EBT x (1 – tax rate)
Consolidated net income = EBT – taxes
(+) Seminovos net revenues – SG&A
(+) Rental EBITDA
(-) Capex cars
(-) Capex others
(-) Taxes
(-) Dividends
(+/-) Financial result
Cash flow = cash generation - cash consumption
(-) Net renewal capex (R$) = fleet investment – car sales revenue
Net Renewal Capex is the result of fleet investment minus sales revenue. We usually look at this number as the purchase price subtracted from the selling price per car. (+) Seminovos net revenues – SG&A: corresponds to the revenue from Seminovos net of expenses.
(+) Rental EBITDA: corresponds to the operating result of Rentals, that is, it is the revenue from the company’s core business, net of costs and expenses.
(-) Capex cars: corresponds to the investment in fleet for expansion, maintenance or reduction of operations.
(-) Capex others: Corresponds to expenses with telemetry hardware installed in new cars, as well as with the expansion of RAC agencies and used car stores.
(-) Taxes: Corresponds to income tax expenses.
(-) Dividends: refer to the distribution of dividends and IoC.
(-) Financial result: refer to revenues and expenses from the receipt or payment of interest.
Indicators help in the study of financial modeling. Below we will present the main ones used by the Company.
We use ROIC spread as a key indicator of value generation, demonstrating the Company's ability to generate consistent returns above the cost of debt, adding value to the shareholder.
(Return on invested capital)
Invested capital
NOPAT, Net Operating Profit After Taxes
NOPAT = EBIT * (1 – effective tax rate)
Capital allocated by the Company in its operating activities. For simplification purposes, we consider it as:
Invested capital = total equity* + net debt
*deducted from the business combination goodwill
The cost of debt, also called “KD”, is obtained using the average interest rates (brazilian CDI) for the period, plus the Company’s fundraising spread, minus taxes.
KD = cost of debt * (1 – 34%)
ROIC spread = ROIC – cost of debt after taxes
To assess the Company’s financial health, we use indicators such as Net debt/LTM EBITDA” and Net debt/fleet value. Net debt is comprised of short and long-term debt +/- results from swap operations, net of cash, cash equivalents and financial investments.