Ladies and gentlemen, thank you for standing by. Welcome to Armac's video conference to discuss results regarding the second quarter of 2024. For those who need simultaneous translation, we have this tool available on the platform. To access, just click on the Interpretation button through the globe icon at the bottom of the screen and choose your preferred language, Portuguese or English. For those listening to the video conference in English, there is an option to mute the original audio in Portuguese by clicking on Mute Original Audio. We would like to inform you that this video conference is being recorded and will be made available on the company's IR website, ri.armac.com.br, where the complete material of our earnings release is available.
We would like to inform you that the participants attending the conference call will be in listen-only mode, and then we will open the Q&A session, when further instructions will then be provided. Before proceeding, we would like to clarify that any statements that may be made during this video conference regarding the company's business prospects, projections, operational, and financial goals, constitute beliefs and premises of Armac's management, as well as information currently available to the company. Forward-looking statements are no guarantee of performance, and they involve risks, uncertainties, and assumptions, and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions, and other operating factors could affect the company's future performance and could lead to results that differ materially from those expressed in such forward-looking statements. Here with us, we have Mr.
Fernando Aragão, Armac CEO, and Cássio Castardelli, Armac CFO. I would now like to give the floor to Mr. Fernando Aragão, Armac's CEO. Fernando, you may proceed.
Good morning, everyone. Thank you very much for participating in the conference. First of all, I would like to wish a happy Father's Day in advance to all the fathers who may be attending this conference, especially my own father. This quarter, Armac reaches the three-year milestone as a publicly traded company. It's been a very intense period when the company multiplied in size almost six times, with very accelerated growth, which proves the success of our business model, the high potential of the company, the strong culture, the quality of the teams that are on board with us.
During this period, especially in the last two years, we have worked hard to mature the structures, transforming everything that needs to be transformed from a company that, three years ago, was a business of BRL 300 million in revenue to a company that today has reached almost BRL 2 billion in annual revenue. This involves experienced people, the right people in the right place, capable of dealing with new levels of challenges, robust systems to ensure good control, first-class governance, and adequate incentives for a company that has really moved to higher levels during this period. We are very focused on this, and we feel very confident that we are preparing the company for long years of sustainable growth, since the most acute growth phase, when we were trying to stabilize the company with a competitive advantage of scale, is now behind us.
About this quarter, it's a significant milestone for the company, culminating a year of focused effort. We are honored to announce that over 70% of the company's revenue is now contracted for long periods. To provide some context, let's go back about 10 years, when my brother and I joined our father in the family business constructed by my mother and my father, that is Armac. Ten years ago, in 2014, when we joined him, we identified a company that had something very, very special in the way it provided maintenance services and took care of its equipment. The way the company would purchase from the parts, the way we related to the suppliers and manufacturers, and we understand that everything was very special, and we give all the credit to my father, who had developed all this at that time.
The way we monetize this maintenance advantage that was related to machine rental, especially for infrastructure constructions, it was... We understood that it would bring difficulties along the year if it were the only avenue for growth. So we understand now that our business is to offer maintenance services and purchase parts, and this is how we generate value to our clients. Since 2014, we have been looking for ways of how to serve our clients in a resilient way, and sometimes we have clients who are exporters that brings in stability for the company, allowing us to grow even in challenging times. And this is what the company has been doing since 2014. We have been developing a very extensive portfolio of specialized services, which are very resilient because those industries have used for the equipment, which is more related to OPEX, OPEX.
They need trucks and machines in order to run their productive processes. Since they use those machines for a long time, very new uses, and they used to purchase those equipment in the past because they consider the capital use, and sometimes they may have cash, but sometimes they opt to choose because they are going to be using the machines for a long time. This is something that we have been changing with some of our clients, not from just renting the fleet, but we understand what would be the need of the client, and we develop an adequate service depending on the needs of the client. When I say service, I'm talking about earthmoving services, transportation, because you are mitigating a very strong pain of our client, and we can convert those clients that come from forest areas, agribusiness, biomass clients.
So we can convert all those clients in a very easy way if you were just renting machines. Armac has been developing different services since 2014. There's no shortcut for that. We always improve our services. We developed our technical team. We learn with the client, we understand what is the client's operations, and we develop a special service according to the client's needs. And once you consolidate the service with the client, that would be the first partner for this specific needs, and then you open new avenues for growth. We've been in this process for nearly 10 years when we developed specialized services. What do they have in common? They need Yellow Line machines and equipment, and this is what they share in those industries to which we provide services.
Based on this common need, we created this service of maintenance and providing parts, and this is our focus. The percentage of the services we provide has varied along the years because when economic moments are favorable, when risks are low, we had more comfort in allocating more capital and wouldn't have so much equipment contracted. In more challenging times, we have this alternative, and if we consider to be adequate, we can reallocate the equipment to different industries, and we have been developing this service, specialized services, for 10 years now. So this quarter is special for us because we have exceeded 70% of this kind of service, and our portfolio surpassed BRL 4 billion, and we feel very confident, very optimistic, because we have a solid company that is able to grow even in challenging times.
So this can be seen reflected in the margins, as you could see in the releases, but we are very confident that this is the adequate strategy, considering the net value that we have and the way we have been able to reduce the idleness of the equipment. And of course, we have very strong credit quality with those clients. So after this introduction, which is the major highlight of our results of the second quarter of 2024, I'll turn the floor to Mr. Castardelli, who will give the presentation. Thank you very much for attending our call again.
Good morning, everyone. Let's start on page 3. We ended the second quarter of 2024 with solid growth in major, short, medium, and especially long-term health indicators. Our fleet exceeded BRL 2.9 billion. We had more than 10,600 machines.
The CapEx completed in second quarter was BRL 317.3 million, in line with the CapEx that had been announced as committed in the previous quarter. Gross rental service totaled BRL 434.8 million, 34.1% higher than the second quarter of 2023, and total gross revenue was BRL 454.8 million, 32.7% higher than the second quarter of 2023. Rental EBITDA was BRL 168.4 million, 11.7% higher than the second quarter of 2023, and total EBITDA was BRL 172.3 million, 10.8% higher than the same period of last year. Later on, we will go into details of the changes in EBITDA between the first and second quarters of 2024.
Finally, net income was BRL 50.4 million in the quarter, 16% higher than the income in the first quarter of 2023. Moving on to page four, we present the performance of the total fleet in units, starting from 10,226 machines in the first quarter of 2024 to 10,634 in the second quarter, already net of asset sales. On the right, the completed and executed CapEx of BRL 317.2 million. As anticipated in the first quarter, most of the contracted value was completed in the second quarter and is allocated to new projects. This CapEx, even though it's committed, hasn't brought a complete result for the quarter, which is estimated for the second quarter.... On page five, we presented the revenue performance.
Gross rental revenue grew 34.2% compared to the second quarter of 2023, and 5.8% compared to the previous quarter. I would like to point out that this growth is a direct result of our strategic focus on expanding rental services and specialized offerings over the past 18 years. These contracts, which we call long-term and continuous operations, are linked to resilient sectors of the economy, such as commodities and agribusiness, which have a long-term duration than the leases referred to as spot leases. This migration of contracts is evidence of the flexibility of our contracting model, the scope of the portfolio of specialized services, and how flexible our assets are regarding contract models, given that our productivity increased this quarter, remaining above 60%.
The allocation of assets to this type of contract provides greater confidence and certainty in the future EBITDA from 2-5 years, and has implications on short-term EBITDA, which we will address on the next page. On page 6, we present the EBITDA. We maintained robust leasing margin, but impacted by operating costs, resulting from the migration of assets to long-term operations, as well as the expected higher costs burden to operate this type of contract. As a result, the rental EBITDA margin was 43.4%. In the medium term, the company continues implementing actions to improve management, controls, and systems to increase the profitability of our operations. In addition to machines, maintenance, and people at the heart of our competitive advantages, we have employee training and incentive alignment as the company's priorities.
On page seven, we present the net income amounting to BRL 50.4 million, with 12.4% margin. This followed the change in EBITDA margin for the quarter, as well as reflect, the higher financial cost for the debenture issued at the end of the first quarter. Managerial operating cash flow was robust at BRL 111 million in the quarter, converting 66% of EBITDA into operating cash. On page eight, we present the ROIC, that remained at 20%, and the ROE at 15.8%, both at a high level and reflecting the high occupancy of the fleet. Again, the company's choice of long-term contracts and the quick response to reallocate assets that are interchangeable across contracting models, for the most part, guarantees a low risk of idleness in the fleet and increases the sustainability of the business.
Finally, on page nine, the debt profile. We concluded the quarter with net debt of BRL 1.59 billion, which represents 2.27x EBITDA, in line with the desired level in the business plan, which enables growth combined with a comfortable debt and cash position. This position already reflects the execution of the quarter's CapEx. Below is the amortization schedule, which afford us a comfortable period between debt amortization and value generation through our assets. With this, I close the presentation and hand the floor back to the operator. Thank you. We'll start now the Q&A session. We'd like to remind you that if you wish to ask a question, click on Q&A in the lower part of your screen and write your question. When announced, one request to activate your microphone will appear on screen, so unmute, unmute your mic to ask questions.
Please ask all your questions at once. So let's move on to our first question, André Ferreira, sell-side analyst at Bradesco BBI. Your line is open, sir.
Hello, good morning. Thank you very much for taking my question. I have two topics on my side. First, on the term of the long term, that I understand is more relevant. In the release, you say that there are opportunities to improve margin and efficiency. So what do you see as opportunity in the short term, and what about the opportunities for the long term to gain margin? And the second point: In this quarter, you mentioned in the release that there was a high cost of transition from the spot to long term.
So I would like to confirm, in the line of other costs of BRL 90 million in the quarter, is this where the cost of transition remains, and what we can expect for the third and fourth quarters?
Thank you, André, for your question. I'm gonna answer the first question, then I'll turn the floor to Cássio for him to answer the second question. This service portfolio that the company has for multiple segments have different phases of maturity. What do I mean when I say maturity? When we developed this additional service to be included in our portfolio, we have to understand that there is a phase of learning, preparation of the technical group, so that we can offer the service to the client in such a way that it will meet the client's needs....
So this process is a sort of investment made when we open a new avenue for growth, because, of course, you have more costs involved, when you are preparing the technical teams, when you prepare the activities. The learning curve of each of those specialized services provided to the clients, they cost some results to the company. But in the long-term vision, and this is what we're here for, when we expand the specialized service portfolio, not only for the industries where the company already operates, but to new industries, all this effort makes a lot of sense. Yes, we look at the short-term margins and short-term results, and we see that there are improvement possibilities, typical of a company that is growing.
But part of it is related to the learning curve, related to new services that we have recently developed in order to grow into new avenues, or even to grow within the clients we already have. Yes, there are opportunities, but we can expect that the company will continue expanding this portfolio in the long term. And this is what happened with the acquisition of Terram, that added the unique capacity to prepare plateaus for the implementation of logistics, warehouse, data center, and other clients that require different level of reliability when doing the earthmoving services. I hope I answered your question about the future margin performance. And Cássio will answer about the transition and migration costs.
André, thank you very much for the question. For the viewpoint of other costs, you're right.
Other costs, all the costs which are not related to labor and not directly connected to maintenance will be in other costs. In other words, logistics, personnel, earth moving, and support. It's just natural that this line, other costs, evolved along the time, considering that the supporting expenses were required in order to provide support to the new contracts. So part of this higher level in other costs is a consequence of the migration, and a important part, I would say more than half of it, is related to the operation of this kind of contract, which requires a more intense labor. Okay?
Okay, thank you. Good morning.
Our next question comes from Lucas Esteves, sell-side analyst with Santander. Lucas, your line is open, you can ask your question.
Good morning, Fernando. Good morning, Cássio. Congratulations on the results.
I'm going to do a follow-up on the first question. If you could translate into numbers the potential of continuous operations, and how can you increase your operations margins? I would also like to understand that considering the mix of revenues that the company has been having, and the growth in continuous operations, how much do you believe will be the limit in terms of percentage of continuous operations, so that the company will keep being healthy? So, spot demand, is it not healthy anymore? And do you expect or to have 100% of continuous operations? And if you could also make some comments about the governance programs of the company. I understand that you had a replacement of internal system, and this can be... It can bring improved margins. If you could also say something about this. Thank you.
Thank you, Lucas, for your questions. Well, I'm going to start with the last one. It's simpler, and it's connected to the first question, that's why. So the company, as I said, multiplied sixfold its size as a listed company. It was a very quick process. It was a growth at rates that do not allow you to mature all the processes at the same speed. About 18 months ago, we have been growing in the development of our systems. We developed SAP, and it's much better than the ERP that we used to use in the past, which was also an SAP, but now we have a new version for the SAP system. The new SAP used a lot of our energy, and we turned the key in January, and we have been working hard on security.
But only as of January 1st, the company started to use with one ERP with excellence. It allows us to make the budget of all the contracts of the company in a very detailed way. We can establish purchase limit for each line, and we can also input all those lines in the system in such a way that we are going to manage all the resources in a very efficient way. After all, the company belongs to the shareholders. So the system went live in the beginning of the year, and it will allow for different improvements, not only when we talk about specialized services, but also as G&A, and also spot operations, short-term rental services.
This tends to improve along with time as we move on to the next level of maturity in our discipline of budgeting, which we could only be there by having a more robust system. So there's a trend of having ever better margins along the time. And of course, there is a period for you to transform this project in, but now by using a more detailed budget, and this is what the company is focused on. In terms of the numbers, how we could improve the EBITDA margin in our portfolio in the short term, I wouldn't like to provide this guidance because the company is entrepreneurial.
We have the spirit, and since 2014, we have been looking for new lines of services that would allow the company to monetize this maintenance aspect in different ways, considering other geographies, other risks across Brazil. So this is a process that is part of our DNA. We are always in search of this, and we have done this so often that that became a routine for us. So when new opportunities come up, we start the development of a new service, and that is... That will affect the result in the short term, and that explains why it's so easy for us to grow. When we look at the multiplication of 6x in terms of our growth, and we see our competitors, we see that this is where the difference lies.
We are able to create new lines of services that would add real value to the client, and, and sometimes those services take 5 years to be developed, but these are services that are going to be used for 50 years. So in the next quarters, we'll have the commitment to bring more transparency without hurting the strategic dimension of the company. So it's a commitment I make. We are going to provide more information about the mix of specialized services, also the margins and the level of maturity of each of those services. Some of them were created this year, and they are in this learning curve yet.
Now talking about our service portfolio and the possibility of becoming 100% of the company, I would say that this is not a strategy of the company because our mission is to provide support to people who build Brazil, and our competitive for maintenance is unique. The way we relate to the manufacturers is unique. We have a mission to be accomplished. We have thousands of clients who execute their construction, their works, and they need the machines in order to move earth or to build. I would say that this is a critical way for the infrastructure that needs to be built in the country. We like this business, and it complements the specialized services that we created.
Every new service that we created comes from the assumption that it needs to complement the other services provided by the company, so the machines need to be in all those areas, they need to be synergetic, and they need to be fluid and connected. So that's why short-term rental services is fundamental. So there will be a higher or lower percentage, when we talk about long-term or short-term services. So depending on the risk environment, we might grow or decrease the services, but it will depend on the ecosystem needs that we created. Why do I say needs? Because older machines sometimes have a role to play in the infrastructure of the country, but and sometimes it's not adequate for a specific industry because the industries have different needs and demands. I hope I answered your question.
Perfectly, Fernando.
Thank you very much for the answers. Could I also have a follow-up? Because the idea was not to ask for guidance in terms of numbers. What I was trying to understand is the dynamics of how the profitability performance plays out, because you're reaching a level, a leverage, which is not critical, but it starts somehow to show some limitations when you look at new investments. Of course, I understand the ramp up of the long-term agreements will increase the EBITDA and will lower the leverage of the company in the long term. So what I'm concerned about is the relationship between long and short terms, so, and how this is going to affect the capacity for investments in the long term... and it might take a longer time for you to do the ramp up, and you might have a higher leverage in the short term.
I would like to understand the ratio of leverage and the growth potential, and what you, what's on your radar?
Okay, perfect. The company has a cycle of cash generation which is very efficient. We generate a lot of cash. So we have organic investment capacity. If we, we can pay the interest, and we can invest in new machines, new equipment, because we have reached an organic growth level without increasing the leverage of the company, and that would be enough to protect the company, and this is one of the competitive advantages of the company. We purchase more machines than any other in Brazil. So we have this approach to protect our company, and we reinvest the major generation of cash that we have year after year.
As to leverage, when we talk about 2.27x EBITDA, as you said, it's very far from being a critical level. But of course, when you consider the interest rates of today and considering the economic scenario, it's not level that we would like to increase. This is a fact. And for the company to increase the growth in addition to what the organic cash would allow, we have different alternatives. First, it's listed company, so if it's have interesting investment of net present value, the action is me, my family, we may want to accelerate the growth at a certain point in time. This is not what's happening now. But because we're a listed company, we have a lot of flexibility. We can accelerate when we consider to be adequate.
I do not believe that the company has reached its limit for acceleration, because the maturation of those portfolio will bring the growth in EBITDA by growing the margins. So EBITDA will go together with the margin, the leverage level will drop, and this will allow us for accelerated growth. So this is the plan we have, and this is what we have been seeing materializing.
Thank you very much, and congratulations again on the results.
Next question from Lucas Marquiori, sell-side analyst, BTG Pactual. Lucas, you may proceed. You may proceed.
Thank you. Thank you for the call. Good morning, everyone. I have some topics that I would like to hear from you. I really liked the message from the management for this quarter. It's very interesting to discuss some long-term topics.
I believe that when you disposal of those divisions and when you said how the two businesses are operating so positive. So I would like to know the return on capital, considering the two businesses. So could you provide more information about their dynamics? I understand that you might not be able to disclose the ROIC or... But if you could tell me what would be the relationship between those indexes. And the second topic: in the final part of your message, you made in big letters, participation in consortium in the private area. So I would like to have more information. I would like to understand the risk-return ratio of this segment. Are you going to take the risk of the contractor? Are you going to add more services in the construction services?
So could I, could we understand, construction? And you also mentioned that this is exposed to commodities, so I would like to understand those two points, if you could provide some clarifications, please.
Okay, Lucas, thank you very much for the questions. A simple comparison of considering the variables that would influence the return of the two specialized services that execute agreements that would last 5 years, versus a branch of Armac in a region in the country that will make, will have, spot rentals. If we can ensure a high occupancy of the fleet at all times for spot rentals, it will bring NPL in the long term, higher than those contracts will bring us. However, this assumption, we have to remind you that our investment cycle is very long. We are talking about a period of 10 years.
So we have to be very responsible, considering the assumptions we are going to rely on when we do our strategic planning in the short, medium, and long terms. So this estimate of related to risk of idleness, those NPL, all these items are taken into consideration. Are we going to invest in a service, or are we going to invest in basic service in order to expand the spot results. The accounting ROE and EBITDA margin are not good ways of comparing the businesses, because the ROE would be a snapshot, just what would be the result that was generated in the short term, you know, in that quarterly result, and we are talking about longer cycles. In the long term, we feel very comfortable considering the decisions we have been making.
The decision may be wrong, it's a fact, but when we consider the risks involved, we have a lot of confidence in our strategic plan, and our focus is to go for the NPL that we consider when we execute long-term contracts with those clients. So we are always on the watch out for the economic situation, infrastructure, and when we use our fleet and our capital, we understand that there are things that can be affected. Nowadays, the NPL expected for specialized services is higher. This is what I can disclose to you. I would not make any comparisons of ROIC or margins because they are just snapshots. I hope I answered your question. In relation to the consortiums, the company noticed that it's a very important agent for the execution of different infrastructure project.
We have the largest fleet in Brazil by far, and the fleet is critical for the projects, especially those that involve large amounts of earthmoving services. But we know that the company has to have a very strong human resources area that can recruit personnel, train personnel, operators. Remember, oftentimes, those projects are carried out in distant places, and we have also developed a safety culture, which is very strong, a culture of respect to life. So we noticed that those in those projects, we already have a very important role to perform, but we could go beyond and to offer to the final contractor, be it railways or roads. We noticed that we could offer this structure to them, but we do not want... or we do not want to be contractors.
We do not want to take risks of engineering, engineering aspects. We do not want to be contractors. So our focus is on private services when we provide those services. So we participate as in a minority fashion. We have a minor share in those consortiums, and this can account for 20%-30%, and in addition to some capital that can be demanded by a capital, because there is an investment curve in every project. So it can also be used as a protection of return. It's a very limited capital. We are not making any large investments, and we add to that project all the competencies we have, and we can generate additional value. And it's clear that it will be very clear to the client.
It's another line of services that was created by the company, and we are very confident that this is gonna grow. It may or may not. We're still, we're still experimenting, baby steps yet. I hope I explained.
Okay, Fernando, thank you very much. Have a good day.
Our next question comes from Rogério Araújo, sell-side analyst, Bank of America. Rogério, your line is open. You may ask your question. You may proceed, sir.
Hello, good morning, Fernando, Cássio. Thank you very much for the opportunity, for the breakdowns, and all the transparency when you described the change in the strategy. I have two questions on my side. First, you mentioned the challenging environment for the spot. I would like to go deeper into that. Since when this environment has been more challenging?
Is this associated with the demand or, oversupply, maybe new players operating in the segment? Is there any sign of improvement, and what can we expect as major milestones for the future, so that we can understand how the spot sector is performing? This is my first question. My second question is related to costs, quarterly costs. First, depreciation of equipment, it had a drop of 23%, even considering that there was an increase of 4% in the fleet. Was there an increase in the useful life of the equipment? And what are the estimates? And you also mentioned long-term agreements that wouldn't explain this lower depreciation, or maybe, in the new sectors, we see less intensive, service or, items.
In relation to costs, labor costs increased a lot because of the increase in the mix, and expenses with personnel. What was this? Was it a reversal? Why do we see this drop?
Thank you, Rogério. I'm gonna answer the first question, and I'll turn the floor to Cássio for him to answer the second and third questions. In relation to the challenging environment, as I answered before, the company prepares a short, long, medium, long-term strategic plan, and the decisions we make today will have impacts on the company, not only in the next one or two, three years, but in eight years. So we have to decide which segment we have to be more aggressive when we are looking for growth. When we talk about environment, which is challenging, we're talking about visibility for the future.
We see a level of investment in the economy that keeps the spot demand very healthy. There is a spot demand; there is a major project being executed. But when we allocate our fleet, it's a long-term decision. So we are not looking at what is happening today, but we have to understand how big is your visibility in terms of the occupancy rate that you can maintain in the future, so that the decisions to reallocate the machines can be favorable. So this long-term visibility is what we mean when we say that. So I'll turn to Cássio to talk about depreciation and expenses. Rogério, thank you for the questions. From the viewpoint of depreciation, the policy of the company is to follow the linear depreciation of the assets, and no changes were made in the useful life of the assets.
The useful life of the assets, the machines, is the same since we made the review in 2021. The reason you see this drop in depreciation was driven by the supporting assets, implements, and other supporting items, not the machines, yellow lines or forklifts. Our policy is to review this from time to time. As to expenses, the company, since the beginning of last year, has been reducing the weight of SG&A in the net revenue, not only considering the growth and the scale, but, we are after a nominal reduction in expenses. In this quarter, there was only one factor that impacted. That was the reorganization of a compensation plan that will bring a non-recurring effect of three... around BRL 3 million.
In addition to that, the weight of SG&A of 10%, okay, we'd like to remind you that it has once been 16% when we started this process of improving the efficiency. So this dilution tends to continue, except for the effect that I just mentioned. And, so this is likely to remain at 10% with a continuous gain from time to time. Okay, we are available for any other clarifications, and thank you very much for the question.
Okay, that was very clear. Thank you.
Our next question comes from João Pedro Franco dos Santos, sell-side analyst, Morgan Stanley. João, we're going to open your line so that you can ask your question. You may proceed.
Good morning, everyone. Thank you very much for taking my question.
Most of my questions have already been answered, but I would like to have a follow-up on the consortium topic. Could you provide more details on the economics of this business? What can we expect in terms of margin and ROIC? And could you provide more details on the timeframe of the backlog that you opened of $4.1 billion? In other words, if you could mention which would be the duration of the contracts that you're executing now. I would like to understand for how long we can see those impacts on the revenues. Thank you.
João, thank you. Would not disclose so many items. As I said, we have a minority share, so what I can say is that we have rental revenues for this project that is being implemented.
It follows the normal economics of a spot rental, although setup is very similar. The difference is that now we are going to take a small share in the success of the project, you know, the profit that the client will have. So this share is happens in a non-intensive capital. All the machines are rented, most of them from Armac. It's not an intensive capital project, and the net income will come from the execution, and the margins in the segment are low margins, reflecting the business which doesn't have a very relevant capital implemented, only the beginning of the project. So it's a small project, and we want to wait it for it to develop as a product line, and I hope I answered your question. Any other question? Oh, the duration of BRL 4 billion. Oh, I nearly forgot this question, but okay.
So the agreements on average are four-year contracts, typically. The contract will be performed until you get to zero in the fourth year. I do not have a calculation of the duration related to this backlog, but I would say that four-year is the life of this agreement on average, if you consider the beginning.
Perfect. That was very clear.
Oh, there's just something I would like to add. We do not lose contracts when we come to the renewal period, so as they come to the end of their useful life, considering the nature of the service, which is very specialized, and considering also our scale and maintenance capacity, it allows us to have a renewal rate close to 100%.
Okay, thank you.
Our next question comes from André Mazzini with Citi.
It was a written question: Could you talk about how you see the strategic positioning in the long term of Armac? Simple spot rental, or long-term with aggregated services. If you could mention the trade-off, considering the two business lines, and you said that service segment has a lower margin, but ROIC, which is higher. Would there be other trade-offs, for example, would competitors change from simple to continuous rental services? Is there any chance of Armac becoming a logistics company if continuous operation proceeds?
Hi, André. Thank you very much for the question. What's our strategic positioning? We are a maintenance-related company and also a parts supplier company, and this is what we do, and this is what adds differential values to our clients. The way we monetize this expertise is by means of spot rentals that will make this machine run.
The machine will break down, and will need to be serviced, and we are very good at that. Or to monetize this... In order to monetize this, we have been developing an extensive portfolio of the specialized services, and this is what you need to have if you want long-term contract with resilient industries, long-term services. So specialized services, along the time, mature, and we create a larger expertise, and we accumulate a lot of knowledge from the mistakes we made in the past. And this is so great that the specialized services also become a competitive advantage, and we can serve different industries. And we already have, in some industries, this second layer of the services and competence. There's no other company that does the service so well. So a portfolio will depend on the kind of service.
So the company is maintenance company, parts supplier company, and we do that in different ways, different avenues, and the different what we have in common what they have in common is that we use Yellow Line machines, and this is where we have the maintenance advantage over the others. I don't see our company as a logistics company for in the future. Even if we continue to have a large share of specialized services, it's still a maintenance service that monetizes from the services provided. I made some comments about the trade-offs. I think André was not here. If I'm not mistaken, he was not here when I gave the answers. So and this is what I said, the company is always on the lookout of NPV, NPL for the companies, and NPV, sorry.
And, the biggest visibility that you have will make that expected net value, depending on the economic environment, the value will be better. But this is something that can change, depending on the level of visibility that you have when we refer to short-term contracts. I hope I answered your question. Thank you.
Our next question comes from Luis Capistrano, sell-side analyst with Itaú BBA. We will open your line so that you can ask a question. You may proceed, sir.
Good morning, Fernando Aragão. I would like to talk about growth. This has already been approached, but could you provide more details in relation to the CapEx rate expected for the future? We saw that there was a major acceleration in the second quarter when we compare to the previous quarters.
So would you have anything to share, anything that has been approved by the board, that could provide us a direction on how we can expect the pace of growth? Is it likely to go up or down, in a sense?
Thank you. Okay, Luis, thank you very much for your question. Previously, we provided a direction, not a guidance, saying that the CapEx would be close to the previous year. At least similar to the previous year. So what is the visibility that I can give you in the short term? Those BRL 3 million invested in this quarter were allocated in those services that demanded machines and equipment that had been recently implemented. A large portion of those items have not been implemented yet and are not maturing yet.
I would say, I would like to understand that more than 70% of the revenue are related to specialized services, and in this share, there is a maturation curve. We understand that there is growth enough for us to handle this. What we are going to do is to mature what we have already implemented. We see growth coming from this area. We do not have any plans to make any quick acceleration to this plan. So we are waiting for the seed of growth to be implemented. And for the future, we are a growth company. We multiplied by six times the size of the company, so it's part of the DNA to be a growth company. And the company operates in a very large market.
So we have a fleet of more than 10,000 machines and equipment, so we have a great potential ahead of us. We can continuously grow in the future. So we want to grow sustainably so that the company can absorb what it has already planted, so that we can maintain the reputation in all business lines and everything under control. I'm not going to provide any CapEx guidance, because there are services that require less CapEx. But for the long term, it's gonna continue to be a growth company at sustainable levels, levels we can sustain for a long time, and this is going to determine how much CapEx we are going to need for the future.
Very clear, Fernando. Thank you.
Thank you, Luis. Thanks everyone for attending the call.
The conference call related to the second quarter of 2024 of Armac has come to an end. The IR department is available to take any other questions you might have. Thank you very much, all participants, and have a good afternoon.