JSL SA

BOVESPA:JSLG3

Earnings Call Transcript

[Operator]

Good morning, ladies and gentlemen. Welcome to JSL's conference call to discuss the results for the third quarter 2024. This conference call will be recorded and a replay will be available on the company's website, ri.jsl.com.br. The presentation will also be available for download.

Please note that all participants will be only watching the conference call during the presentation. We'll then begin the Q&A session when further instructions will be provided.

Before moving on, I would like to emphasize that the forward-looking statements are based on the beliefs and assumptions of JSL's management and on information currently available to the company. These statements may involve risks and uncertainties because they relate to future events and therefore, depend on circumstances that may or may not occur. Investors, analysts and journalists are cautioned that events relating to the macroeconomic environment the segment and other factors could cause results to differ materially from those in the relevant forward-looking statements.

Present on this call are Mr. Ramon Alcaraz, JSL's CEO; and Guilherme Sampaio, the company's Chief Financial and IR Officer.

I would now like to hand over to Mr. Alcaraz that will start the presentation. Mr. Alcaraz, you can go ahead.

[Ramon Peres Martinez de Alcaraz, executive]

Ladies and gentlemen, good morning. It's a pleasure to be here to announce JSL's results for the third quarter 2024. As you can see, once again, we have demonstrated our ability to grow in a sustainable manner as our margins decrease and leverage decreases. I'll start by giving you the main highlights of the quarter.

Organic growth of 18% compared to the third quarter '23. Net profit reaching BRL 73 million, up 25%, an increase of 1.2 percentage points in the EBITDA margin when compared to the last quarter, the second of '24. New contracts signed in a single quarter, reaching BRL 2.2 billion. In the year, we have already reached BRL 4.5 billion in new contracts.

Cash flow after growth of BRL 395 million and reduced leverage.

We were awarded Best Company of the Year in the logistics sector by Semi Magazine in the well-known and consolidated annual award for the best companies.

I would like to point out that we competed against all logistic companies, the most diverse modes, road, air, rail and ship.

To close the slide, I would like to point out that we are the absolute leader in the sector and that we are growing by 18% a year.

Moving on to Page 3, we have the main figures for the quarter. Gross revenue of BRL 2.8 billion, up 17.7% from the same period last year. EBITDA of BRL 466 million, up 18.7% compared to the third quarter of the previous year. EBITDA margin of 20.4%, 0.2 percentage points than the same quarter last year. Net profit of BRL 73 million, up 25.3% compared to the same period of the previous year; and return on invested capital of 15.4%.

On Page 4, I'd like to give you a few more highlights in terms of scale and efficiency. Growth of 18% over the last 12 months, even including a reduction in IC of 11% over the same period. Remember that in this case, it was JSL's own strategy to cut back in less comfortable segments. AFJ, in turn, made major contribution, growth of 31% over the same period. That's the beauty of our ecosystem.

When we compare it to the second quarter of '24, we see growth of 10% in JSL as a whole, including IC with a growth of 17%. That demonstrates that the strategy is correct. The projects deployed in the second quarter '24 have already started operations and contributed to more BRL 251 million to revenues and BRL 68 million to EBITDA, an increase of 1.2 percentage points in EBITDA margin, returning to the right levels.

Here, we are comparing the third quarter '24 and the second quarter of '24.

Speaking of our management model, I would highlight the management of the acquired companies with independence for agility and growth combined with JSL's financial support and scale to transform size and results. People aligned with customers' values with discipline and execution, ensuring sustainable results; focus on [indiscernible] pricing of contracts.

In financial terms, I would like to highlight the quarter with the highest cash generation since the IPO with free cash flow after growth of BRL 395 million. Reduction in leverage began to be seen in the quarter, reinforcing the company's deleveraging direction.

Including the composition of debt at the end of the third quarter, the spread was reduced by 0.8 percentage points year-on-year. Guilherme will be able to go into more detail later.

Moving on to the next page, 5. We bring, like in other quarters, our management model, which ensures the quality of delivery and cross sales. We have individual management of each contract because projects are customized and developed for each customers. And with the appropriate pricing, cost control and operational efficiency, autonomy, agility in our managers' decision-making. And here, demand [indiscernible], excellence in delivery ensures customer loyalty and cross-selling, generating new contracts and, as a consequence, new customers.

I say this every day to our employees so that I never forget it. At the end of the day, our customers want to benefit from JSL's size when it comes to investment capacity and the certainty of continuity of their operations, but they wanted to be treated as the best as if they were our single cluster.

On Page 6, we show how our revenue has been distributed across the various segments and services in the logistics chains. Our contracts are long term with essential services in our customers' value chain and in sectors that have proven to be resilient. We have a well-balanced mix between asset-light and asset-heavy operations.

See, 27% of our revenues does not involve trucks, but rather people and technology, weathering the internal movement of factories, management of our own houses and within our customers in the most varied sectors of the economy, open paper, automotive, food, white appliances, electronic medicines and others. 64% in specialized dedicated operations involving trucks, including international transportation and refrigerated and frozen foods through Brazil and various South American countries; urban distribution of food, beverages and consumer goods; transport of wood and pulp; vehicles, machinery; supply of the entire production chain of the automotive industry in the milk renters in time system; transportation of chemical, liquid and gas products; fuel and others; 9% in what we call general cargo, then yes, 100% asset-light, taking advantage of the market trading.

In this segment, we are even launching a new product, which we will announce later. 91% of our revenues is concentrated in services with a high degree of specialization and essential in our customer supply and sales chains.

On Page 7, I'd like to point out that while it's important to celebrate what we have already achieved, even more important is to ensure the coming years. That's why every quarter, we disclose the value of our centers. And in the end of the day, this is the contracted future revenue that will ensure growth with low risk of execution, increase in market share without depending on the growth of specific sector.

In the 9 months, we have already added BRL 4.5 billion new contracts with an average term of 60 months with the addition of 27 new customers this year alone. In this quarter, the chemical sector stands out with 58% of new contracts, followed by retail with 19%; and automotive with 9%.

New closed contracts, if you think of the second quarter of '24, we had a concentration in the food and beverage sector with 70%, then consumer goods with 10%. In the first quarter of '24, pulp and paper with 41%, automotive 18% and retail 13%, which shows our capacity to grow in the most varied sectors of the economy.

Winning new customers generate, in addition to new contracts, the opportunity to grow through new services from design customers. A capacity already demonstrated by the high level of cross-selling in the current customer base, most of them leader in their industries.

On the next page, we talk about the transformation of the acquired companies, combining their know-how with JSL's scale. If you take the third quarter of the year of acquisition of each of them, we have a CAGR that is double digit in all of them with the exception of IC as already mentioned.

Net revenues growth over the last 12 months since the acquisition quarter is impressive. Fadel TPC is about 85%; transformation, 7%; Rodomeu, 150%; FSJ and the [ last ] acquired company flying at 35%.

While maintaining the independence of the acquired companies, they benefit from the JSL ecosystem, generating a reduction in the cost of purchasing assets and inputs and diluting administrative expenses due to the growth of companies.

Synergies have generated approximately 2% of group's revenues. Growth and results are driven by the quality of our management model, added to JSL scale and access to capital. This ecosystem generates the potential for cross-selling between the companies. And the addition of new customers between them.

Now I will call my friend and colleague, Guilherme Sampaio, to go into more details about figures and financial indicators. Guilherme?

[Guilherme de Andrade Fonseca Sampaio, executive]

Thanks, Ramon. First of all, good morning, everyone. Well, I think Ramon has already covered the main points for the quarter. But I'd like to highlight a few items that are worth revisiting and exploring.

First, when compared to the second quarter of this year, we added BRL 250 million in service revenues and BRL 70 million in EBITDA, already taking the benefit of the projects we talked about when we announced the second quarter results that were in the process of being implemented.

Second, BRL 2.2 billion in new contracts that demonstrate our ability to increase our execution capacity and the capacity of winning new contracts with our customers as well as bringing in new customers, as Ramon mentioned, [ 25 -- 27 ] since January this year.

The BRL 2.2 billion also have -- has 2 impacts on our results. This -- there is already a small benefit from what has already been implemented in the quarter, but most of it will contribute positively in the coming quarters when these new projects mature and are fully implemented.

In general, the figures show the consistency of our growth and of our execution. The figures themselves, revenue up by 17% year-on-year. If we remove the effects of FSJ, that grew 31% in the comparison -- between the third quarter this year and last year. And of IC, that reduced revenue in the strategy.

We have been talking about organic growth of JSL, together with the other companies that were consolidated at the time, would be 18%. It's a figure that demonstrates the strength of our business model, accelerated growth at a company level of BRL 11 billion in revenues when we look at the third quarter. 47% of revenues in cargo transportation, 33% dedicated operations within the customers' production process, 12% in warehousing and 7% in urban distribution.

Turning to operational results. We closed the quarter with [ EBIT ] of BRL 324 million, already reflecting the ramp-up of operations and deployments that are underway. EBITDA reached almost BRL 470 million with margin of 20.4%, and net profit of BRL 73 million in the quarter, an increase of 25% over the third quarter last year.

Profit specifically is already starting to benefit from the reduction of the spread of our debt, which was 0.8% compared to the previous year, but it's still not yet benefiting from the deleveraging process, which we have already started, as we have announced, but it's still not benefiting from the leveraging process, deleveraging process we started.

Return on invested capital remains at 15.4%, which demonstrates our discipline in pricing and allocating capital.

Moving on to the next slide. We break down revenues between asset light and asset heavy. Asset-light represented 53% of revenues and grew by 16%. This already includes the reduction of revenues in IC, which is all here because it's agribusiness related.

Taking this effect, we are talking about growth of 27% year-on-year. Asset light closed the quarter at BRL 216 million and margin of 18%. Asset heavy, 47% of revenues, growing 19% year-on-year and closed the quarter with BRL 243 million EBITDA, margin of BRL 22.4 million, already showing the evolution versus the second quarter '24, which was weighed down by the cost of implementing of major products, which involved a significant amount of CapEx.

Speaking of CapEx and moving on to the next slide, we closed with net CapEx of BRL 87 million, already a lower average than previous quarters, but enough to deploy the volume of new contracts.

For the year, we reached BRL 902 million in gross CapEx, BRL 680 million in net CapEx.

Updating the numbers I show every quarter, our residual value of running assets, truck, tractors, trailers, trucks, et cetera, represents 1.3x our net debt at JSL.

Going to our capital structure, on the next page. We closed the quarter with BRL 2.3 billion in cash, BRL 770 million in committed credit; net debt, BRL 5.3 billion, already reducing versus the second quarter this year by the company's cash generation, which was a record of BRL 390 million after growth.

That brought net debt to EBITDA ratio to 29x and net debt to EBITDA added to 2.58x our covenants.

I'd like to stress that the company is currently in the process of deleverage due to strong cash generation and consistent execution, a comfortable cash position in relation to that and an elongated debt profile. In addition, a reduction of spread almost 1 percentage point in the last year, which will contribute to the results.

I've already said it, but I'll say it again. We are focused on translating all the operational were carried out by JSL and its subsidiaries in recent years into net margin.

With that, I thank you and turn the call back to Ramon. Ramon?

[Ramon Peres Martinez de Alcaraz, executive]

Thanks, Guilherme. Finally, to close, I would like to highlight the pillars of [indiscernible] for a new cycle. We have solid foundations, unique positioning. JSL stands out for its ability to meet demands with customized solutions. We have a proven track record, ample [ tail ] and the most comprehensive portfolio of logistics services in the country.

With diversification in service and some sectors, our managed model is based on appropriate pricing and excellence in delivery, resulting in customer loyalty. We have a high level of cross-selling and vast opportunities to win new customers and expand our business. Our consistency in results comes from discipline and execution with operational efficiency and cost controls, ensuring a strong balance sheet and the right profitability with the foundations prepared for the coming years.

Our strategic plans are based on the diversification of services and sectors, opening up multiple avenues for organic growth, which, together with the acquisition of good companies, complete our portfolio.

The consolidation of operating margins, combined with appropriate allocation of capital, provides consistency of margins and profitability. Completed implementations ensure contracted growth and a potential to decrease leverage.

Our greatest differential lies in our people who are dedicated and prepared to ensure quality and efficiency with individualized management of each contract. We even try to anticipate to our customer needs, always focusing on execution and delivering results. We believe that these are the pillars for continuous cycles of growth and development.

Thank you very much for your attention, ladies and gentlemen. And now myself and my colleague and friend, Guilherme, are available for your questions.

[Operator]

[Operator Instructions] Our first question comes from Fernanda Recchia from BTG Pactual. Ms. Recchia, you may go on.

[Fernanda Recchia, analyst]

I have 2 questions on my side. The first, I would like to understand that point about contracts that were implemented in the second quarter. As we mentioned, in the third quarter, we saw already an improvement in profitability, showing the effect of revenues, but also there is this effect of the maturity of contracts. So if you could give us a bit more color, if you can quantify the amount of benefits we could have from the maturity of contracts. And also if you already see an improvement in profitability in the fourth quarter due to that. That's the first question.

Second question is the restructuring of IC. As you mentioned, it's still contributing in a negative manner to your top line. So I'd like to know what you are expecting -- when you're expecting, I'm sorry, to complete the turnaround of IC? And what's your appetite for transportation of grants. So these are my 2 questions.

[Ramon Peres Martinez de Alcaraz, executive]

Fernanda, thanks for your questions. Okay. I'm going to start with the projects implemented in the second quarter. The largest is the Cerrado project, where we have the largest pulp and paper factory in the world. So there is a large contract with the hiring of many people and differently from other projects we deploy because this is an operation in a region in which you do not have skilled labor. We had to hire 1,200 people that were not ready. So we had to train them. So it was a slightly higher operational cost than usual. So that is what impacted, in a negative manner, the results in the second quarter, as we mentioned during the last call.

In the third quarter, this projects specifically started to perform. Still not in full, but we should have a benefit of that in the fourth quarter. But this is a project that is completely on track.

The other project, well, we had projects in chemicals dedicated services that have their natural cycles. That happens every quarter. But the difference of the second quarter, again, was the concentration of a large project with the characteristics that I mentioned. Other than that is just the regular cycle business as usual.

The fourth quarter is the third quarter generally has a very good volume of businesses. So we have high expectations in terms of results.

IC. Well, differently from other companies we acquired. This is a company that is going through a business transformation. Grains, as you mentioned, is an area in which freight costs are tighter, tighter margins, not to mention that we had a drop in volumes in agribusiness in Brazil as a whole. So the 2 things affected revenues.

Well, our process of transformation is at full speed. This is already going on. And we expect positive results as of the fourth quarter and the next year.

As a counterpart, we have FSJ on the country is growing even further than what we expected. As I said, it's flying even enjoying the wave of e-commerce with Black Friday and everything. So in a way, one company offsets the other. And this is the part of each company's normal cycle.

[Guilherme de Andrade Fonseca Sampaio, executive]

This is Guilherme speaking, Fernanda. Just to add to IC, just to be clear to everyone, the thing is, as for contracts, which were a large part of IC, we haven't closed or terminated any contracts with customers. The option to reduce revenues was in grain transportation because we thought the margin was not suitable to the amount of capital demanded for the operations. So the reduction from last year to this year is a reduction in volume that we decided to go forward to have this volume outside the company and focus on profitability, operations that have more suitable margins, just to add to the answer on IC. I hope that we have answered your questions. Otherwise, we are here for you.

[Fernanda Recchia, analyst]

No, very good.

[Operator]

Our next question comes from Victor Mizusaki from Bradesco BBI.

[Victor Mizusaki, analyst]

Congratulations on your results. I have 2 questions on my side as well. The first, going back to Fernanda's questions on new projects. I think you showed a slide showing revenues and EBITDA from these contracts that are being implemented. And then looking at numbers, the EBITDA margin of these contracts would be at about 27%, which is a level which is above that reported by JSL in terms of asset-heavy margins.

So the first question is does it make sense what I'm saying? Do these contracts indeed help JSL expanding its return on invested capital?

And the second question. CapEx was very much concentrated on the first quarter, a bit lower on the second quarter. But looking into '25, if you could please give us some color in terms of what we should expect in terms of CapEx volume?

[Ramon Peres Martinez de Alcaraz, executive]

Victor, thanks for your question. Well, projects are different, each one in their own, and that may affect EBITDA margin, whether they have more equipment, less equipment, more people, less people. So the EBITDA margin is very much influenced by the characteristics of each project. So this is number one.

These recent projects that were implemented have a higher EBITDA margin. Of course, we are always improving. We try in each negotiation to have a better project in terms of margins. Not necessarily a worse price to customers, but rather with higher efficiency. So we always seek to have new projects with margins better than previous projects. But anyhow, the characteristics of each project do have a relevance in the margin. As for CapEx, Guilherme, please.

[Guilherme de Andrade Fonseca Sampaio, executive]

Yes, you're right, because of the kind of businesses that we closed, these were projects that required more CapEx in the first half of the year. We did that. The profile of projects that we are closing now are requiring lower CapEx for implementation. So we reported BRL 85 million now. And we believe in the fourth quarter, it should be very much close to the CapEx profile.

[Victor Mizusaki, analyst]

For [ '25? ]

[Guilherme de Andrade Fonseca Sampaio, executive]

Well, we are still working on our budget and refining our numbers, but we should have a CapEx level close to [ '24 ]. We don't disclose the precise number, but I do not foresee any major changes from [ '24 to '25. ]

[Operator]

Our next question comes from Julia Arce from JPMorgan.

[Unknown Analyst]

I have 2 questions on my side. The first about asset sales. We have been talking about that in recent quarters that the line is underperforming is likely. And your view, how do you think asset sales will perform in the coming quarters?

And second, about going international. In the last quarter, you talked about extension to Ghana. Any updates on how the operation is performing? Any other projects in terms of going international on your pipeline?

[Ramon Peres Martinez de Alcaraz, executive]

Julia, thanks for your question. Asset sales. Well, we have a large volume of assets in our inventory for sale, and that's because of the very cycle of contracts that we have. We did expect to have a speed of sales that would be faster, but we are working on that. The last month was quite good to [indiscernible]. But its effect that new vehicles are increasing less from now on. We had a very high increase in the post pandemic, but prices tend to get more stable, which also will lead to more stable prices at used vehicle sales. We do put together a team to improve sales. So we want to have a higher speed than the average of last month.

As for going international, we are always saying that this is a company strategy to grow our revenues in other currencies, different countries, even to have a natural hedge within the country's economy vis-a-vis the economy of other countries. But we are not -- interest. We just don't put up a stand in a country and try to grow. We go abroad when we have guaranteed contracts. This is what happens in South Africa and in Ghana.

To answer your question, Ghana is doing well, performing well, an operation that tends to grow. The country is not that large, but it's not that small. So we believe that we can double or triple revenues in the country. And we are looking into the neighboring countries to know if it makes sense to grow.

And we have been contacted to growing other countries, specifically in Mexico. That became a hub of manufacturing of several products to the U.S. and that suggests a logistics demand. So we have been contacted by different customers. This is a country that is interesting to us, again, within the strategy of ours, and we hope to have growth going international. Would you like to add to anything, Guilherme?

[Guilherme de Andrade Fonseca Sampaio, executive]

No, I think that's it.

[Operator]

Our next question comes from Pedro Tine from Itau BBA.

[Unknown Analyst]

Can you hear me?

[Unknown Executive]

Yes. Now we can.

[Unknown Analyst]

I have a question about the current interest policy in Brazil. Thinking about '25, with the scenario of higher interest rates. What is your view for the market and also for leverage and possible M&As? That's my question.

[Guilherme de Andrade Fonseca Sampaio, executive]

Pedro, thanks for your question. This is Guilherme. I'm going to answer more towards the business, and then Ramon is going to add to the answer.

I think the interest curve, well, that's part of life. We have already experienced ups and downs in interest rates. So the company already showed resilience with regards to that. So what we do is that we adjust the prices of new projects so that new projects are already in line with the interest curve. And we have to do what is up to us, an increasingly better operational results to absorb short cycles in terms of interest rates and work on the spread, which is what we have been doing in recent years.

When you think of higher interest rates as a company as a leader in the sector, for us, it is an opportunity because when you talk about higher interest rates, you separate the competition, good and bad companies. And the companies that have more access to credit have higher opportunities of being competitive.

So I think Ramon did say that in an interview yesterday that you know the rain is not just for us. The rain comes for everyone. And this becomes an entry barrier, especially for projects that involve CapEx.

So there are 2 things we are working on, and we have been talking about spreads. Well, you have seen that result and also deleveraging due to the company's cash flow. So the size of cash flow today enables us to continue growth and to decrease leverage. And this is something that we have been speaking openly, and this is what we want. So the company should reduce leverage in the coming quarters to get to a more to a lower level, and therefore, we'll see an impact on net margins. Ramon?

[Ramon Peres Martinez de Alcaraz, executive]

No, I think that's it. Financially speaking, that's what it is in business. Like it is what you said. I make a comparison to car races. You never race in the rain as on dry lanes, but you don't have to. You just have to race faster than the competition. And that's what we do. We enjoy our positioning, our financial strategy very well led by Guilherme and his team to be more competitive on the field. So that's it.

[Operator]

Our next question comes from Andre Mazini from Citi.

[André Mazini, analyst]

If you could talk about transportation of brand new vehicles. This grew in JSL by 29% and is doing very well. I think, the best level since 2014. So the transportation of new vehicles as a whole seems to be suboptimal. There is a lot to improve. Sometimes customers buy their cars, and they cannot track where they are. The market has a very concentrated market share, very little change. So this is perhaps a market for disruption. Do you want to grow more in this area? Do you -- can you grow organically? Would you have to grow through M&As? And do you think that you could disrupt the market?

[Ramon Peres Martinez de Alcaraz, executive]

Andre, you see, we want to grow in every market that poses good profitability. And the transportation of new vehicles is one of them. But some important comments to make. First, we grew with Transmoreno, which is one of the acquired companies that's exclusively for the transportation of new vehicles. JSL, itself, does a bit for GM, especially international transportation, and we have been growing recently. You have Chinese companies coming into Brazil. There is always an opportunity to grow in this market niche.

But one thing that is important is that JSL is present in the whole automotive sector chain. For example, you're right. In recent months, the volume grew a lot, which is great. Brazil is selling a lot. It should close at 2.6 million vehicles sold this year. Next year, people are talking about 2.7 million. So it is an ascending market.

And see the largest company to supply parts to OEMs is JSL. Large OEMS, we have an exclusive supply, and we are hitting records after records in the segment. So whenever the volume of the new vehicle sales grow, you increase transportation of new vehicles, but also the input chain as a whole, the supply chain as a whole. And we are very present there in Brazil, in Argentina, Argentina is a manufacturing hub for OEMs. So we are benefited from both ends, inbound and outbound. That is in the segments that I mentioned.

[Operator]

[Operator Instructions] We'll now move on to the questions in writing with Guilherme Sampaio. Guilherme?

[Guilherme de Andrade Fonseca Sampaio, executive]

Hi, everyone, I'm going to some questions that we got on the Q&A. First, from Alexandre Menzes asking from the buyback program.

Many companies announced both share buyback plans and then failed to follow through. Either they don't buy back anything or very little. JSL announced a buyback program of [ 30 ] million shares. Is there any intention of actually carrying out this program? Is there room on your balance sheet for this?

Well, I'm going to answer your question and see if Ramon has comments. We have the policy in the group of keeping buyback programs open. We do believe in the potential of valuation of our share. So initially, what we did was to open the program. What's going to happen from now on will depend on what actually is going to happen on the day-to-day of the market. If we believe there is room in our balance sheet, the [ 3 ] million share, if we are going to use the average price, the [ 30 ] million shares if we use the amount today, it would be an impact on the average of point zero point two. So [indiscernible] volume. So we have room. But again, the main intention is just to keep the program open. Okay? I hope I have answered your question.

Next question. We have a question from our international investor, Karen. I'm going to read it in English, and I'm going to add -- in Portuguese, and I will ask for simultaneous translation.

Congrats on the great quarter. Two questions. Provide an update on current expectations for '25 and the implementation of the backlog of contracts; and how we are thinking the evolution of the run rate return on invested capital and the drivers to increase it.

Karen, Ramon is going to answer, and then I'm going to talk on the return on invested capital.

[Ramon Peres Martinez de Alcaraz, executive]

Karen, thanks for your questions. It's always hard to predict the future. It's increasingly harder to tell the truth. But what we can say is that the year of '24 started a bit more lukewarm than expected. But the second half really started to pick up. The third quarter, you saw the numbers was very good. Fourth quarter is starting more or less at the same pace. And we believe that '25 is going to continue. So I see no reasons for us to have a change in prospects. So we are very optimistic about 2025 thinking about the economy as a whole.

JSL, these complementation of contracts, this addition of contracts, as we say, is really important for growth. Remember that we closed 2023 with 4 billion contracts. In 2024, we are already at 4.5 billion in 9 months. So it's still 3 months to go in the last quarter, very important backlog, and this guarantees our future revenues.

Again, dedicated operations, take-and-pay contracts. So it gives us growth that is almost assured. So it's the 2 things together in economy that is driving in the segments in which we are present, plus the contracts signed show that 2025 should be very good to us, okay?

[Guilherme de Andrade Fonseca Sampaio, executive]

And this is Guilherme speaking, Karen. I'm going to talk a bit about what we are expecting in terms of return on invested capital.

Two very important points. Perhaps one of the things Ramon and myself must focus on which is pricing discipline. So to make sure that we are bringing in good revenues with the right profitability and the right capital required for each project.

Also, we have some internal initiatives to improve our working capital, which somehow has to do with working with suppliers receiving to really target at an optimal working capital to have levers to improve our balance sheet structure. Certainly, the exposure of operating margins, we are always trying to correct projects that are off track faster to ensure that we'll always seek margins or even improve margins constantly.

And also dilution due to our scale. This is very important. A company that grows at the space, we have to take efficiency from our SG&A. And that helps us to bring better returns to the company and capital invested. That is to have assets deployed faster, retire assets faster from our balance sheet because this flow will help us to have a better balance sheet structure and, therefore, better return on invested capital.

So 5 levers. And for each one of them, we have a set of initiatives to address. Okay?

Next question. Next question comes from Pedro Matos from HSI.

Some questions. BRL 2.2 billion in contracts added for 64 months corresponds to a monthly additional revenues of BRL 34 million. Considering the average invested capital flow 11% to 13% of monthly revenues, should we expect an expansion of CapEx between BRL 206 million and BRL 310 million to make those contracts feasible? Or is there a difference in the need or timing of CapEx for this contract?

Second, any target in terms of indebtedness for JSL for you to reach the intended leverage?

And third, if you can talk a bit more inorganic growth opportunities for the new cycle of increased interest rates. And if you intend to have a JSL Day in 2024.

Okay. I'm going to start with new contracts vis-a-vis our CapEx. Pedro, the answer is no. We do not expect a CapEx level of BRL 300 million in the fourth quarter. Your calculation is correct, historically speaking, but the profile of contracts closed in recent months will not require that because there are lots of contracts that are asset light. So they will not demand this amount of CapEx. So the CapEx expectation is much closer to the numbers of the third quarter than the second quarter.

Second question, target in terms of indebtedness level. Well, we are very much focused on leverage ratio. We do not have a number to give you. We do not provide any guidance, but we expect to deleverage the company continuously over the coming quarters.

The other question, third question. Just a comment about deleveraging. If you can break down how you can reach the objective. Well, cash generation is our main [indiscernible] Someone made a comment the other day. This is the first quarter that we are reducing net debt since the IPO. So this is important and show the strength of our cash generation. And undoubtedly, cash generation will be the leading driver. Ramon is going to talk about inorganic growth, and then I'm going to talk about the JSL debt.

[Ramon Peres Martinez de Alcaraz, executive]

Inorganic growth. One important thing is that we do not have a specific strategy for the acquisition of companies. As a fund, for example, we run our business as if there were no acquisitions. Our budget for '25, we are negotiating with the Board of Directors. It does not take into consideration acquisitions. And our objective, as we have been saying since the IPO, is accelerated growth, enjoying opportunities that the market brings in a scenario we already talked about, high interest rates and et cetera.

Inorganic growth, sometimes it's a short cut for us to get to our objective of growth. Why do I say short cut? Because in parallel to that, we have a Board of Directors within [indiscernible] analyzing a large pipeline of companies that come up, and they start negotiations. If they find the company in the profile that we like, average revenues, great potential growth within a segment that makes sense to our business, good management at a fair price, well, then it is a short cut, a shortcut for us to reach growth and results. But it is something that runs on a parallel route. We can have a match or not. The doors are always open. We continue with our pipeline that is completely active. As for JSL Day, Guilherme?

[Guilherme de Andrade Fonseca Sampaio, executive]

Well, the idea is to have a JSL Day. I don't think that we are going to hold an event this year, but we are considering some things. There are some subjects that when we are ready to announce as the digital JSL, which is an evolution of the work that we are developing with truck and other issues that we are working internally, then we are going to schedule a meeting with investors to be able to give you more details on our projects and the specificities of each one of them. So it is in our radar. I don't know if it's going to be for 2024.

Our next question comes from Alexandre. I'm going to read your question, but I think I answered that.

The question is, could you please comment on the pace of deleveraging expected by the company despite the increase of interest rates in Brazil?

I think that we have already answered the questions. If not, just let us know, okay? We are always here available for you.

Next question comes from Lucas from Investments.

Could you talk about the speed of deleveraging of the company, even looking into recent M&As and the buyback program. In addition, driving the -- segment, is it a strategy that can drive deleveraging for 2025?

Well, I'm going to start and perhaps Ramon can add to that. When we're looking to M&As, and we had 8 M&As in the last 3 years, none put our leverage into check based on the M&A itself, given the cash flow of the company structure, the growth of these companies after acquisitions, they did benefit our leverage ratio and not pressured it.

When we think of acquisitions today, we are talking of a company that is much lighter acquisition of BRL 100 million EBITDA. If you think about EBITDA in the quarter, you're talking about 5% to 7% of JSL's consolidated EBITDA. So the impact of an acquisition in our leverage ratio today is even lower because it is diluted by the size of the company.

The buyback program, I already talked about that. So today, the buyback program is not something that I see as a pressure to our leverage ratio. And Ramon can talk about growth in asset light.

[Ramon Peres Martinez de Alcaraz, executive]

Lucas, our strategy for growth in asset light and asset heavy operations has nothing to do with leverage ratio. It has to do with operational results if it makes sense for the company. We like both asset-light and asset-heavy operations. These are just different. In asset-heavy, I have more investments, pressure and leverage ratios, but I have long-term contracts. I have certainty of revenues. I have a resilience in economic fluctuations. The entry barrier is much higher. So there is a series of things that are appealing to us if you can close the project with the right margins.

Asset-light, the advantage is that you do not pressure leverage ratio. But it is a much lower entry barrier. So we have to pay attention to where we want to go, which segments. And this is then in a thorough analysis. You cannot just think about the leverage ratios.

[Guilherme de Andrade Fonseca Sampaio, executive]

Lucas, I hope we have answered your questions. Otherwise, we are always here for a follow-up.

A final question from Pedro Ferrera that I'm going to ask about the objective of the JSL Day can perhaps bring more light to that. But this is the question on innovation. What innovation is JSL adopting that can be shared?

I'm going to mention some. Ramon, you can do. Do we face innovation? You have technology-based innovation of new tools, new technologies to improve the business. But one thing that we are always concerned about is improving processes, use innovation to do different and to address critical issues. And I'll give you some examples. Ramon can give you others. And certainly, this is a topic that we could explore in a meeting such as the JSL Day.

So today, we have a large warehousing operation. 13% of revenues come from warehouses. When you talk about intralogistics in dedicated operations, also a high volume. So bring tools that will enable us to use less labor and more efficiency to our customers is paramount.

So how can I put it? We have a large work front to improve WMS, which is our warehousing system. We have been using and testing AI tools in specific topics that is communication with truckers, freight analysis, freight price analysis, comparing prices in a supply based on the dynamics of the months, maintenance services, how we can tune up trucks more preventive and corrective way, how do we plan maintenance services. So we are always using things in a pragmatic manner. This is part of our culture.

We don't like technology per se. We want to use technology to address a business issue. That's important and another size of innovation that perhaps Ramon can mention, which is a program that he sponsors, which is very nice.

[Ramon Peres Martinez de Alcaraz, executive]

We have a challenge of increasingly bringing people, professionals to work in some positions in our company. We have to be differentiating and attract talents. We already have 35,000 direct employees, but we created a program called Women Own the Wheel, which was unthinkable a few years ago, but today is a hit.

In terms of technology, it seems that it's not something that is innovation, but it is a different way of attracting and retaining talent and also increase the base of people that can be hired.

[Guilherme de Andrade Fonseca Sampaio, executive]

Ramon, I think, you did very well. But I would like to add 3 points to technology that I think are very important. This is a topic that we evolved a lot through technology, which is safety. We reduced accidents or severe accidents by 80%. We run almost 1 billion kilometers a year. So it is clear to see the number of JSL trucks on the road, and we reduced accidents. How? Through safety tools. We have fatigue systems. I can control if it's an aggressive driver or not. With risk breaks, if the vehicle is coming out of the curve. We use technology to verify if the driver is apt to drive the truck. So that, to me, is perhaps the greatest advantage of technology. We are saving lives, not only of our own people, but also third parties involved in excess.

[Ramon Peres Martinez de Alcaraz, executive]

Another variant of technology that Guilherme did mention, we are now implementing a software technology in our large warehouse, we work with lots of people, and the idea is to reduce the need for basic labor. And with that, the technology is paid up into 2.5 years. So it's what Guilherme said. It's not technology per se, but technology that brings benefits to the business.

And another variable on this is something that we are really bent on and it has to do with Lucas' question on asset light. If asset-light has less entry barriers and less margins and more players, how can I set apart?

Technology is the answer. We are very close to launch our digital JSL system, which will connect customers and JSL digitally with the need of less people, less processes and therefore, less costs in trades that are possible, especially commodities. And with that, we are going to be able to work with lower margins at a lower cost with benefits to my customer increasing revenues in asset-light through technology with the right profitability.

So I think these are the lines we are working with. But Pedro undoubtedly, this is one of the major topics that we want to explore in an interaction with investors in person. That is our next JSL Day.

Just to close the topic, technology is huge. But one topic that is very important, it's not only for us but for everyone. The world in recent years invested in technology. Perhaps we have even an excess of technology, but it's focused on a loop. JSL has technology, customers have technology and customers have technology, but not really connected. That is technologies are not necessarily talking to one another. Because that's not simple to connecting systems. With AI, that becomes more and more possible. So I think that perhaps the next lead for the coming years is to put together things.

To give you a simple example, in logistics, you have Uber. What has Uber done differently? It puts together the cellphone technology to demand, and it changed the way that society behaves in the world. This is disruption.

So bringing the small example to our world, this is what I believe in. When we can connect, of course, it is more difficult than Uber. Uber is a B2C. But when we can do that on B2B, we'll really transform the business.

[Guilherme de Andrade Fonseca Sampaio, executive]

Well, that said, everyone, thanks very much for attending. I will turn back to the operation so that we can see if we have any final questions before we close.

[Operator]

The Q&A question is now closed. We will now turn to Mr. Ramon Alcaraz to make the company's closing remarks.

[Ramon Peres Martinez de Alcaraz, executive]

Well, ladies and gentlemen, first of all, thank you for your attention and your questions. It's always an opportunity for us to talk about topics that we missed in our summary. Technology is one of them. So it's always good to talk about our strategy.

I'd like to highlight the point that we talked about. That is our capacity to grow. Even already being the largest in the market, we are growing at 2 digits. We are -- I mentioned 18%. In services, this is so important to say in services executed in the most various segments and sectors of the economy. It's the only company that can do that. We have competition in several sectors, but we do not have competition in all sectors. So I think that is the greatest differentiator. And together with our people, our capacity to make people do things in several segments with excellence. This is what I believe in, and this is what we back up.

We are very pleased with the results of the third quarter. We believe that the coming quarters will follow the same trend. So not so only Guilherme and myself, but all this wonderful team is really engaged in improving all the opportunities, enjoying all the opportunities that the market does.

We are decreasing our leverage ratios. These are questions that you always ask. And we have been showing indication that this is actually happening. We are going into new segments. This is another important thing to say. E-commerce, for instance, which is an important channel of economy and is growing, and we have that, not only with FSJ, which is an acquired company that was more specialized in the segment, but we have contracts closed with JSL itself, Fadel that just started last mile in the last month, already taking part in Black Friday with dedicated services.

So tons of opportunities. And we are going into the most diverse segment. We closed a very important contract with chemicals, already expanding the segment. So we are always looking into opportunities, not to miss them, always managing us and focusing on efficiency because this is how we believe we are going to be more and more competitive with the right margins and lower leverage.

And that's it. We believe that this is what is going on, we have been saying that since the IPO, and we have been delivering what you're saying.

And I would like to draw the attention of those who did not see that EBITDA, BRL 160 million is higher than the whole of the year of the IPO. So at the time of IPO, we had EBITDA of BRL 400 million in the year. In this quarter, we had BRL 466 million, which proves we are on the right path.

[Guilherme de Andrade Fonseca Sampaio, executive]

I think that's it, Ramon.

[Ramon Peres Martinez de Alcaraz, executive]

One thing that is always worth noting, given the macroeconomic scenario, especially with interest rates is that our focus is to keep the company return on invested capital healthy. We already have a very interesting spread today. We want to keep it. And remember, this is a company that is growing. This is also a company that continues at accelerated growth, and undoubtedly, you should all pay attention to our pace of growth and capacity to keep profitability even beyond whatever interest curve is coming.

That would be my final comment. Thank you very much, and have a good day. And if you have any further questions, just contact us. Thank you, everyone.

[Operator]

JSL's conference call is now closed. We thank you very much for joining us and wish you a good day.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]