Localiza Rent a Car S.A. ($RENT3)

Good morning. Before we begin, I would like to remind you that this conference will be conducted in English. [Operator Instructions] Good morning, and welcome to Localiza & Co's webinar to discuss the results for the first quarter of 2026. Joining us today are Rodrigo Tavares, Chief Financial Officer; and Nora Lanari, Head of Investor Relations. Please note that this webinar is being recorded and will be available at ir.localiza.com where the full earnings release materials can also be found. The presentation is also available for download on the Investor Relations website. [Audio Gap] beliefs and assumptions as well as information currently available. Forward-looking statements are not guarantees of performance and involve risks, uncertainties and assumptions as they relate to future events and therefore, depend on circumstances that may or may not occur. I will now turn the call over to Rodrigo Tavares, the company's Chief Financial Officer, to begin the presentation. You may proceed.

Good morning, and welcome to Localiza webinar. We started 2026 with solid results, supported by consistent and disciplined planning and execution. We continue to make progress in restoring the ROIC spread and reaffirm our priority on pricing management and efficiency across both car rental and fleet rental. In first quarter of 2026, car rental demonstrated the strength of our brand and our commercial excellence, delivering year-over-year revenue growth. In Fleet Rental, we continue the process of reducing our exposure to severe use segment. At the same time, we maintain a disciplined capital allocation with residual value assumptions aligned with market conditions and reflecting the competitive dynamics of the automotive industry. The capital release from the ramp down of severe use contracts continues to be redeployed to our target segments, fleet rental and subscription, which delivered approximately 14% year-over-year revenue growth, with ROIC spread within the company's target range. In Seminovos, as previously anticipated, the start of the year was very strong. We closed the quarter with sales of 95,000 vehicles, placing the company on a consistent fleet renewal pace towards the returning of a 15-month cycle in car rental. Throughout the quarter, we observed healthy pricing dynamics in used cars and slightly increasing new car prices even in a highly competitive environment. As a result of this strong operational performance, we reported consolidated net revenue of BRL 12.3 billion, EBITDA of BRL 4.1 billion, EBIT of BRL 2.7 billion and a net income of BRL 1.2 billion, representing a 45% increase year-over-year. The result was positively impacted by the recognition of the gain of approximately BRL 177 million after tax related to the divestment of subsidiaries as previously disclosed to the market in the last quarter of 2025, in line with our portfolio optimization and simplification strategy. Excluding this effect, net income totaled BRL 1.045 billion, surpassing for the first time the BRL 1 billion mark in a single quarter. Leverage indicators continue to improve, reflecting the evolution of operating cash generation. We ended the quarter with net debt equivalent to 55% of the fleet value. Quarterly, ROIC reached 17.1% with a spread of 7.1 percentage points above after-tax cost of debt. Excluding the effects related to the divestment of subsidiaries, ROIC stood at 15.9% with a spread of 5.9 percentage points, reflecting company's focus and consistency in the process of restoring return levels to historical standards. With the objective of further strengthening our competitive and quality differentiators, we increased investments in brand and technology. This year, we complete the rebranding of our stores and branches, explain fleet equipped with digital pickup technology, enhancing customer experience while delivering additional cost and productivity efficiency gains. And advance the use of artificial intelligence to improve customer journeys, increase productivity and support decision-making. An important milestone of the quarter was the launch of our application integrated with ChatGPT positioning Localiza among the first companies in Latin America to transform generative AI into direct business channel, once again, reinforcing the company's leadership in innovation. Encouraged by the process and results delivered in the first quarter, we remain attentive to the macroeconomic environment in Brazil and abroad as well as to the dynamics of automotive industry. Accordingly, we will continue to maintain the discipline in capital allocation and focus on sustainable growth with value creation. We would like to thank our customers, shareholders, partners and employees for their committed trust. To present the details of the results, I will now turn the call to our Head of Investors, Nora.

Thank you, Rodrigo, and good morning, everyone. Starting the presentation of the results on Page 3, we began with the Car Rental division in Brazil. In the first quarter '26, net revenue in the Car Rental division reached BRL 2.8 billion, representing an 8.5% increase compared to Q1 '25. Volumes grew 1% year-over-year, in line with our priority of restoring the ROIC spread and our focus on pricing adjustments and productivity, as shown on Page 4. On this slide, we highlight the 7% increase in the average daily rate for the quarter, which ended the period at BRL 157. We also emphasized a 3.1 percentage point increase in the utilization rate, which reached 82.1% in the first quarter '26, the highest level since 2021, reflecting efficient fleet, pricing and mix management. Moving on to Page 5. We present the performance of the Fleet Rental division. In Q1 '26, Fleet Rental reported net revenues of BRL 2.3 billion, representing a 3.8% increase compared to the same period of 2025. The year-over-year reduction in the number of rental days continues to reflect the portfolio optimization process in fleet rental with lower exposure to severe usage contracts, which totaled 15,500 vehicles at the end of the quarter compared to the [ 30,700 ] vehicles in this segment at the beginning of 2025. The capital release from the ramp down of severe usage contracts continue to be allocated to our targeted segments, which delivered approximately 14% revenue growth in the first quarter '26 compared to the first quarter '25 with a ROIC spread within the company's target levels. Moving to Page 6. We present an average daily rate of BRL 107, representing a 6.9% year-over-year increase. The utilization rate reached 96.8% in the quarter. Turning to Page 7. We present the evolution of Seminovos revenue. We achieved a new sales record in Seminovos with 95,384 vehicles sold in Brazil in the first quarter '26. Net revenue totaled BRL 7.1 billion in the quarter, an increase of 34.5% compared to the first quarter '25. The strong performance of Localiza Seminovos reflects the maturation of initiatives focused on commercial excellence, network expansion and productivity gains as well as other fronts and that accelerating the fleet renewal cycle. These initiatives contributed to reducing the average age of fleet sold in the Car Rental division segment to 19.7 months in the quarter. Moving to Page 8. We present the car purchase and sale balances. The strong pace of vehicle sales was accompanied by a higher level of purchases. During the quarter, 95,384 vehicles were sold and [ 82,080 ] vehicles were purchased. The reduction in the fleet size in Q1 is explained by seasonality in the curve following the peak holiday period. Total investment in vehicle purchase amounted BRL 7.6 billion, while proceeds from vehicle sales totaled BRL 7.1 billion, resulting in a net investment of BRL 465 million in the Brazilian operations. On Page 9, we present the evolution of the average purchase and sale price of vehicles. In the Car Rental division, the average purchase price was [ BRL 86,500 ] reflecting a lower mix of entry-level vehicles compared to 1Q '25, while the average selling price reached [indiscernible] in Q1, resulting in a renewal CapEx of BRL 13,100 per vehicle. In Fleet Rental, the average purchase price reached BRL 97,700 while the average selling price was BRL 77,500, resulting in a renewal investment of BRL 20,200 in the first quarter of the year. On Page 10, we show the end of period fleet. The company closed the quarter with a fleet of 642,111 vehicles, representing a 2.6% increase compared to Q1 2025. Moving on to Page 11. Consolidated net revenues continued to grow at a double-digit pace this quarter. The company reported consolidated net revenue of BRL 12.3 billion, an increase of 21.2% compared to the same period last year. Rental revenues grew 6.4%, totaling BRL 5.1 billion, while Seminovos revenues reached BRL 7.1 billion, up 34.6% year-over-year. On Page 12, we present a strong growth in EBITDA, which reached BRL 4.1 billion in the first quarter this year, representing a 23.7% increase compared to the same period last year. We highlight margin expansion across all business lines. In Car Rental, EBITDA margin reached 67.4%, an increase of 2.2 percentage points compared to Q1 '25, driven by rental prices recomposition, efficient cost management and productivity gains. Rental revenues increased by BRL 218.7 million, while costs and expenses rose by only BRL 16.7 million, reflecting the effect of the higher fleet utilization, improvements in maintenance and preparation costs per vehicle, partially offset by the higher volumes of vehicles prepared and a higher level of BISCOFINS tax credits. In the Fleet Rental, EBITDA margin reached 88%, representing an increase of 18 percentage points compared to Q1 '25. The margin in the quarter was positively impacted by the effect of the divestment of subsidiaries totaling BRL 282.4 million before taxes. Excluding this effect, the margin would have been 75.9%, an increase of 5.9 percentage points versus Q1 '25, mainly driven by the higher average daily rates, lower maintenance cost and allowance for doubtful accounts, improved utilization rates and a higher level of tax credits. On a year-over-year basis, net revenues increased BRL 84 million, while costs and expenses in this division declined by BRL 111.5 million. Seminovos reported an EBITDA margin of 3%, reflecting the strong increase in volumes as well as higher average selling price, which contributed to a gross margin of 7.9%, a 1 percentage point increase compared to the last year -- same period last year. On Page 13, we present the evolution of the annualized average depreciation per vehicle. The automotive market continues to operate in a highly competitive environment marked by new entrants and the launch of new models, alongside still elevated financing rates. As a result, while new and used car prices showed healthy dynamics during the quarter, we remain attentive to automotive market conditions and we'll adjust depreciation, pricing and capital allocation as needed. In the Car Rental, the annualized average depreciation per vehicle was BRL 7,986 in Q1 '26, maintaining the sequential upward trend observed over recent quarters. In Fleet Rental, the annualized average depreciation per vehicle was BRL 9,081 in the first quarter also maintained the trend observed in recent quarters. Moving to Page 14. We present consolidated EBITDA of BRL 2.7 billion in Q1 '26, representing a 32.4% increase compared to the same period of last year. In the current, our EBIT margin reached 47.3%, an increase of 4.9 percentage points year-over-year, while Fleet reported an EBIT margin of 63% in the quarter or 50.8% excluding the effect of the divestment of subsidiaries. Turning to Page 15. As a result of advances in pricing, cost management and productivity, the company reported net income of BRL 1.2 billion in the quarter, representing a 45% increase compared to Q1 '25, even excluding the positive effect after tax of BRL 177 million related to the divestment of subsidiaries, our net income surpassed for the first time the BRL 1 billion mark. To present cash flow, debt ratios and ROIC spread, I will now turn the call back to Rodrigo.

Thank you, Nora. On Page 16, we present free cash flow before interest. The first quarter of 2026, cash generated from rental activities totaled BRL 2.4 billion and was partially consumed by the net car CapEx of BRL 534 million including Mexico as well as investment in other fixed assets intangibles totaling $104 million. These outflows were partially offset by the increase of BRL 109 million in accounts payables to vehicle suppliers. As a result, cash generation before interest and other effects totaled BRL 2.2 billion. On Page 17, we present the net debt movement, which ended the quarter at BRL 30.2 billion, representing 2.8% reduction compared to the year-end 2025. Turning to Page 18, we present the company's debt profile. We closed the quarter with BRL 10.9 billion in cash, sufficient to cover short-term debt and obligations with automakers. Considering the funding and repayments carrying out in April 2026, the cash position would be BRL 10.6 billion. On Page 19, we present debt ratios. We ended the quarter with leverage metrics at comfortable levels, primarily evidenced by the net to fleet ratio, which declined from 62% to 55% year-over-year. The net debt-to-EBITDA ratio also continued to improve, closing the period at 2.08x. Finally, on Page 20, we present the annualized ROIC for the first quarter of 2026, which reached 17.1% with a spread of 7.1 percentage points over the after-tax cost of debt. Excluding the effects related to the divestment of subsidiaries, ROIC would have been 15.9% with a spread of 5.9 percentage points highlighting the company's solid trajectory in restoring ROIC spreads even in a still high interest rate environment. We are now available to take your questions.

[Operator Instructions] Our first live question comes from Lucas Marquiori from BTG.

Two questions actually on Seminovos. First 1 on -- I mean, just wanted to get a color on the seasonality of these used cars -- selling you guys have on March because it was clearly stronger than the pace you guys were reporting for January and February and also selling at a better margins too, right? So it would be nice to hear what happened there if there was anything kind of specific to the month and if that's something that you guys envision to happen for April as well, if that continues on Q2, right, that will be interesting. And also, a second question is on EBITDA margins of Seminovos, right? I think we are now on -- I mean, third quarter in a row with margins above 2%, now above 3%. I mean, at some point in time, a few years ago, that was the planning which would start decreasing depreciation. And I'm assuming you guys are not doing that because you want to kind of carry that cushion for a while, right? So what's the risk management here, Rodrigo and Nora? I mean, should we continue to see that margin kind of pile up for longer before you guys start to decrease depreciation, is that the right assessment here? That would be nice.

Lucas. Let me start with the volumes, Seminovos and general trends, and then I can talk about the margins and depreciation, okay? So first quarter, in terms of seasonality, it is a strong quarter. But despite that, we believe that volumes in Seminovos will remain strong in the second quarter. So we are seeing, I think all the initiatives that we have been planting in the past are maturing now including the process, including productivity, including how we manage incentives and everything else. So we are seeing a very positive trend in terms of volumes, even though the second quarter is in terms of seasonality, a soft quarter, okay? So volumes are supposed to remain at a good level here. In line with what we need to come back to the life cycle of the car close to the 15 months that we aspire in rent a car, okay? There are some things that will probably change a little bit from first quarter in the next quarters. The first quarter is especially strong on entry-level vehicles. That's why you can see that the price of the first quarter was not as high as some anticipated. In the second quarter, you're going to see some higher ticket cars being sold in our portfolio. So that probably will drive the tickets, the average ticket of the second quarter up compared to the first quarter, okay? Another reason is that we are reaching the target life cycle in entry-level cars sooner than in the other cars. So as we do that, you're going to see a pickup in terms of our portfolio, in terms of this SUV executives and other types of course, increasing in terms of volume relative to entry-level cars. In terms of EBITDA margin and depreciation, we have been seeing, as I said, a healthy dynamic in both volumes and price in the used car market. But at the same time, we closely monitor the competitive environment among automakers, including new entrants and product launches. Our depreciation and pricing assumptions already incorporate this involving dynamic. So the depreciation should maintain the mild upward trend, okay? It's important to highlight also that this depreciation is prospective, so the impact on margin should materialize only when those vehicles are sold. So we should continue to see the same trend that we are experiencing recently, okay? And in terms of margin, it should -- we are still targeting this low single digits going forward.

The next question comes from Filipe Nielsen by Citi.

Congrats on the results. I wanted to follow up on 2 topics related to Seminovos. Regarding credit, like we understood a little bit about the dynamics on first quarter and how you expect a stronger second quarter. But I wanted to understand a little bit more about how credit is playing out in those assumptions and what you're seeing in the -- on the margin on sales. And also wanted to understand a little bit better the ramp-up of stores. You posted a very strong volume. And I wanted to just -- but you just -- you still like suggest that ramp-up -- starts are still ramping up. So I wanted to understand what is the level we should expect of sales volumes going forward for the year as those stores still ramp up foundations continue?

Filipe. I'll start with the overall environment and credit and Nora can comment more on the store ramp-up. In terms of credit, the first quarter was a strong quarter in terms of credit availability. Having said that, most of the improvements and most of the performance that we have seen is micro, not macro. So it is all the things that we have been doing over the past years here that, I think, now are maturing, and we can see this performance evolving. In the second quarter, I think that the credit availability is slightly lower when you compare to the first quarter, okay? And as I said, the second quarter is softer in terms of overall demand. Having said that, once again, we still believe that we can deliver the strong volumes that will help us to get back to the 15 months in rental car. Nora will comment on the ramp-up of the stores, but not only is important for us to open new stores, but the productivity per store is increasing with all those measures that I described.

Thank you, Rodrigo, and Filipe. We -- as Rodrigo mentioned, and you cover fully the topic here, Filipe. I mean, the productivity is increasing on a per sales person basis. We've been improving leads, conversions, lead generation. We're improving sales per sales team, and we will continue to do that. So there is lots of the micro and the levers we pull over this last few quarters, but we've been transforming Seminovos over the course of the last 2 years. So we do expect the stores to continue to ramp up. Usually, it takes 6 months to a year for the full ramp-up of the stores. So they will continue to contribute to the pace of sales. Credit-wise, we saw the first quarter of this year was the strongest one since 2008 for auto finance overall speaking. So it was a positive as well. And we saw fairly stable approval rates as well as rates, okay? So the volume we need to sell, again, seasonality of Q1 is strong. March was also a strong month as well. We are not anticipating any major decline. But again, Q1 is the strongest quarter. So we don't anticipate the second quarter like that, but on a very strong pace this should remain.

The next question comes from Guilherme Mendes from JP.

Congrats on the results. First, a follow-up on what Rodrigo mentioned in the opening remarks about having a sustainable growth base. How can we translate that into growth strategy looking to '27 once the ROIC spread is on the higher end of your goal? And what can we assume as a normalized level going forward? And the second point is if you can comment on the ability to keep increasing prices on both rent a car and Fleet Management segment, thinking about this, let's say, lower-than-expected easing cycle in Brazil?

Thank you, Guilherme. We are following our strategy here to restore the ROIC spread, and I think we have been successful in doing that. One pillar of that is to restore the life cycle of the car in rent a car, right? And once again, this is the first quarter that we reached the volume that we need to get there. And once we get to the ROIC spread, as we mentioned, we have no limitations to grow, right? We have a very strong balance sheet if the economic environment allows and with our measures here. We have appetite for growth as long as it generates value within our targets of ROIC spread. So in 2027, we believe that we're going to be in a good shape in terms of our fleet will be younger. We're going to have, as I said before, in a very good financial position. This year is very strong in terms of cash generation. And if we have the opportunity, we'll definitely go to grow more within our targets of profitability. In terms of price increases, the market has been improved quite robust and quite resilient, so you can see that both in rent a car and fleet rental, we're already pricing here a scenario of a competitive environment in the OEMs, and we have been able to grow. The economic activity, right, and the commercial activity in fleet rental has been robust. What is happening is that we're redeploying the capital of severe usage to fleet rental and subscription, which will be our target segments. Those target segments are already growing at a 14% pace year-over-year in revenue, okay? And now in rent a car, as we said, we still need a little bit of pricing pass-through, but if we have the opportunity, we'll take this additional growth opportunity.

Our next question comes from Andre Ferreira from Bradesco.

Congrats on the strong results. I have 2 questions. One, actually a follow-up, just to confirm a comment from Rodrigo on a previous question of the depreciation trend being up. Do you mean depreciation in real terms or percentage terms. Also still on depreciation, I get the point that it will still go up. But would there be an effect of depreciation going down from a younger fleet. And my second question, basically on Chinese vehicles. So they're becoming -- having an increasing share of sales and are highly competitive. We are seeing more impact on SUVs, both because of the new models are SUVs, mostly and also because of the similar price ranges, but I'm open to your view on this. But our -- I mean, I wanted to get your view on like from one hand, they could pressure residual values, but they also increased competition when rental companies purchase vehicles from automakers. So how do you see the net impact of these 2 dynamics, 1 when you buy and second residual value effect on future depreciation?

Thank you, Andre. In terms of buying, I think we are in a very good shape here. I think the agreements that we've made were very successful this year, and very competitive if I look in the past few years or even pre-pandemic. So in terms of the way that we are buying and acquiring the car, I think this year has been very positive years. In terms of the depreciation trend, we have to remind the depreciation, you always have to look forward, right? And to look forward, you have to incorporate these new dynamics in the OEM market. And that's what we're doing. That's why we expect, as I said, a mild upward trend, both in real and a little bit less in percentage, but both will be a mild upward trend, okay? You're right in the sense that the Chinese are increasing their penetration here in Brazil, mostly in SUVs, that's probably the depreciation will go up faster in those cars in the SUVs rather than the entry-level cars. And in the mix, it will have, as I said, a mild effect in the depreciation. When I look at the performance of those cars, they are doing well, right, both in Seminovos and in the rental, we see the demand. And in the Seminovos so far, we also see that they're holding prices quite well, but still the volumes are timid here compared to the combustion engine cars. When you look at the whole market, not just the Chinese, the market in retail was up 14% year-over-year. So this quarter was quite strong -- this first 4 months actually was quite strong when you compare to the last 4 months to the first 4 months in 2025. So the whole market is actually behaving quite well. And this depreciation that we're talking is thinking about a prospective trend in this new competitive scenario. Sorry for the long answer.

Yes. But on last call here is that this higher depreciation is priced in the rental contract. So we wanted to make sure that it's already priced.

Perfect, Nora. So you're already pricing the new contracts expecting these new competitive dynamics, as Nora described.

Our next question comes from Jens Spiess from Morgan Stanley.

It's actually a follow-up to one of the earlier questions on the amount of cars sold and so on, obviously, like 66,000 cars sold at the rent a car division basically already implies like a 15-month cycle. So congrats on that. So I just want to understand like beyond any initiatives that you are making, like what are you seeing as the main drivers of this pickup and improved ability to sell more cars? Is it like credit institutions providing a bit more credit and approvals of credit in general? Or is it overall consumer demand? What do you assess is behind it, above and beyond the initiatives that you're making?

Jens, I think it is -- you have to look at that in a holistic way. So it was not 1 or 2 initiatives. Of course, that you have some help from the macro as Nora described. This was -- the first quarter was very strong in terms of financing in general. But it does not explain the majority of what has been happening here with Localiza. So I think we are working in brand productivity. We opened new stores. We are selecting -- we improved the incentives of the individuals. We now have much more sophisticated tools to deal with leads, to go with the target clients that will buy our products. So it is hard to describe as 1 or 2 things here. It is things that we have been working for more than a year now. And of course, as I said, there was some help from the macro, but most of it was the initiatives that we're planning in the past that are now maturing. So that's why I think that even if credit goes down a little bit in the second quarter, we should expect still very healthy volumes in terms of sales.

Yes. One additional point here, if I may, Rodrigo, is the mileage of our car. We've been consistently reducing the mileage of the cars sold, which puts us closer -- an effective Seminovos preowned car, okay? So that might be being helped by a bit of a trade down. So very consistent results here.

And in spite the fact that this quarter was particularly strong, if you look at a long-term trend, you're going to see that we have been increasing the sales of Seminovos year over year over year over year. So that has to be something that once again, I think this quarter actually crowned everything that we did, but this is a longer-term trend that we are experiencing.

Perfect. Fair enough. Great. So the younger the fleet, the easier it would also become further down the road, right? Perfect.

Our next question comes from Joao Frizo from GS.

I just have a quick follow-up on the depreciation trends, right? You mentioned that as a percentage of the fleet value, you were also increasing expecting further increase sequentially, which implies on a deterioration of the depreciation trends, right? Just wanted to hear your thoughts on what you believe should be the new normalized level? Pre first quarter, you were running at around 9.1%, 9.3% of the fleet's value. First quarter was 9.7%, depreciation as a percentage of the fleet value. Just wanted to hear your thoughts on the forward?

Thank you, Joao. We actually don't think about depreciation as a percentage of a particular car, right? We project the residual value of every individual car here and depending on the mix, but I understand your question here. Once again, this is what we understand due to the new competitive dynamics, new entrants, new investments, which in the long term are very positive, right, as the largest buyer in the industry here, every time that you have oversupply, every time that you have companies with intense competition environment, this is a positive trend in the long term. Having said that, as a repercussion of that, we're incorporating these assumptions in our depreciation trends. So I cannot pinpoint exactly percentage that we expect. But as we monitor as we see this evolving, we are going to adjust the depreciation parameters. In the very short term, as I'm going to say, the short-term trend here, we expect that these levels of depreciation to go mildly up.

Our next question comes from Alberto Valerio from UBS.

Congrats for this [indiscernible] on the quarter. I have 2, as we see, I think not just for Localiza, but also for the industry, look like the high season was better than expected. Is this true? We could have more cars on fourth quarter and first quarter from that past and how you look this forward? And which categories and which segments that we see that was pushing more? And my second 1 also on Seminovos. We see amazing results for the quarter. Will have any impact from the impairment on the residual value of the cars? Or was just by the mix that you mentioned of selling a higher entry level at this quarter?

Thank you, Alberto. The season was good. Both the new year and in the beginning of the year, I think we had a good demand. Probably we could have rented a few more cars here, but it's not something that we think it is, let's say, much, much stronger than what we anticipated, okay? It was a good season, but nothing far above of what we anticipated here. In terms of the margins, I think -- no, I think this is an impact of, first, the volumes you end up diluting a little bit of the cost that helps you a little bit, right? So -- and the price in the first quarter in general, they behaved quite well. If you see the evolution of the price, let's say, apples-to-apples here, it's difficult for you to see that outside in, but inside out, we saw a very positive behavior in the first quarter. You are right in one point. The percentage margin in the entry-level cars are slightly higher than the SUV and the other high-ticket cars, okay? So as you reduce a little bit the entry-level cars and increase the high-ticket cars, you're not necessarily going to see a reduction in the dollar margin or the real margin, but you can see a slightly lower percentage margin. So there is a small effect of the portfolio here, but it's nothing major, okay?

Fantastic. Congrats again.

The next question comes from -- sorry, our next question comes from Daniel Gasparete from IBBA.

Two questions, please. The first one, I would like to explore a little bit more about this depreciation rate that you mentioned. First of all, I wanted to understand a little bit more with you. You mentioned that -- sorry, if you could comment on the sale purchase spread of the cars being sold with the 15 months. I imagine that those cars are being reported that this prepurchased is better than what is being reported right now. So I want to confirm that with you, if you could give us a sense. And if so, if it's better, shouldn't depreciation rate fall, if you expect to keep the selling pace over the next 2 quarters, I mean it shouldn't converge down to this level of [indiscernible] spread with a 15-month car cycle. That'll be the question number one. And secondly, would be regarding the potential volumes of cars being sold this year. You mentioned that so far, everything that you guys reported, which were amazing -- which was amazing was micro-related. So I want to get your view if there's upside coming from potential falling Selic, could we start thinking about more than 350,000 cars being sold this year, perhaps annualized this first quarter? How do you see that, please?

I'm sorry. Thank you, Gasparete. First, of course, the spread between the [indiscernible] is better on the 15 months, right, than the average that we're seeing right now. This is a fact, right? Of course, that once again, when you think about the depreciation, you have to think about the short term and you think about the midterm and long-term perspective here. And as I said, we incorporated some of these competitive dynamics in the OEMs into our assumptions, okay? So this is the effect that we see. But in terms of the effect that we have in rejuvenating the fleet, it should be positive in the depreciation, let's say, apples-to-apples. But when we consider the whole, the bigger picture, that's why we already see this mild upward trend. In terms of Seminovos, we can see volumes going up. But if we have a very positive macro, probably what is going to happen is that the price that we're going to sell will also be benefited. So once we reached the [ BRL 350 million to BRL 360 million ] that we need to get back to the optimal life cycle, here of the car, you start to get some of the benefit, not only volumes but in price. So you can see the prices going up in a scenario that you described. Having said that, we are seeing a SELIC actually in terms of the curve worse than it was [indiscernible]. So in the beginning of the year, if you saw the yield curve, it was much better than what we've seen right now. So -- but in a hypothetical scenario that the macro improves, most likely you're going to see some of that turn into more volumes, but another part in higher prices as well.

Thank you very much, Rodrigo. But if you allow me to stress a little bit more, perhaps we are a little bit too exhausted with so many resorts to understand it properly. But I understand that the depreciation rate is a function of 3 variables, right? Seminovos margin, the [indiscernible] spreads, and also the SG&A margin that you have. In that sense, shouldn't we see depreciation rate falling in which kind of variable are you guys assuming for it not to go up. I mean you're assuming that the [indiscernible] spreads increase?

No. Let me -- what I said is that if I look at the spread of the 15 months right now and compared to the average, it is lower, okay? But when I think about depreciation, I think about this price 15 months from now, and if you believe that the competitive dynamic is such that you have more competition, you have assumptions that can lead to depreciation to continue to increase mildly as I described. So once again, this is not something of the very short term, but this is what we are embedding in our assumptions looking forward.

Just to add to that, if I may, Daniel, we have a scenario where we have a huge number of new launches in the auto industry that could create some deflationary pressure going forward. So we want to anticipate this movement. If it's -- if this deflationary pressure don't materialize, you are going to see that in higher EBITDA margin in the future, okay? But we want to be attentive to the competitive dynamic in the auto industry. And therefore, we are not anticipating the depreciation to decline even in spite of the reduction of the age of the car sold.

Our next question comes from Pedro Bruno from XP.

My question is regarding margins at the rental level. We were quite positively surprised by -- specifically by the fleet rental EBITDA margin. You do describe some potential -- or some of the variables that could have helped this margin in the first quarter. But if you could give us a bit more color and your thoughts on whether this level is sustainable for the rest of the year in terms of the fleet rental margin. And in general, in terms of rental margins, I would also like to understand the potential impact from maintenance costs and preparation costs in the environment that you were selling a lot more cars now. What should be the delay if there is one for that to actually increase also -- I'm speaking, of course, nominally, right? You have been improving with the lower average age of the vehicles. You've been, of course, improving the efficiency of those lines of costs, right, maintenance and preparation costs. But in terms of -- in absolute terms, what we should consider for, let's say, second quarter onwards, given the much larger amount of cars being sold right now and if that has a relevant or not impact on your rental margins overall?

Thank you, Pedro. Thanks for the question. Let me start with the fleet rental margin here. I think Q1 was a very strong quarter in regards to the margin, even excluding the effect of the selling of the subsidiary here, but broadly in line with Q4 margins. Let me compare year-over-year and then on a sequential basis. Year-over-year, we have the benefit of lower bad debt provision. You remember that the first quarter of last year, we had provision for bad debt related to trucks. So now we have a better quality of the portfolio. We have some reversion on the provision for bad debt this quarter as well, but a very robust portfolio that was -- a capital that was allocated this year helped on the lower PDD. Also, we have tax credit BISCOFINS. You remember that last year, the appraisal reports were not being made in the full fleet, and we started doing that in the second half. So on a year-over-year comparison, we also have the benefit of the appraisal reports and therefore, the higher PIS/COFINS tax credits. When we look on a sequential basis, margin remained broadly stable, excluding the one-offs, as I mentioned, costs increased driven by licensing and IPA of the cars in the first quarter. We licensed more cars, and we sold a bit more cars as well. But we also saw slightly higher revenues on a quarter-over-quarter basis, so pretty consistent. Let me just make a point here that we don't use EBITDA margin as a key metric for the company. The key metric, as you know, is the ROIC spread, okay? Having said that, we still see very consistent levels of EBITDA margin in the fleet rent going forward. On the second portion of your question, maintenance and preparation costs, we've been already seeing some benefits of the rejuvenation process on our fleet in the margin of the rent a car that increased 2 percentage points year-over-year. And the trend continues to be positive as we accelerate the fleet renewal process, okay? But we are also preparing more cars due to the sales. So I mean margin levels are at a good level. We don't need much further expansion. So at some point, if the ROIC spread is in the right place, we can adjust pricing accordingly, okay?

Our next question comes from Rogerio Araujo from Bank of America.

I have some follow-ups here. First on Seminovos, we haven't seen SG&A dilution, even though there has been a large increase in volumes and revenue. Is this related to more commissions and this new -- these new measures that you have worked in the past year. So what should we expect with volumes remaining up with this SG&A dilution. Also a follow-up on bad debt provisions that Nora mentioned that you had this quarter. Can you be more specific on how much was that? And that's basically.

Thank you, Rogerio. First, about the SG&A, of course, that we have some dilution because of volume. But the fact that we are opening new stores, we're hiring more people, you're anticipating for the higher volume, you also anticipate a little bit of these expenses, okay? But in general, I think we have some potential here to further reduce the SG&A over sales in Seminovos. In terms of the bad debt. Last year, we had some challenges regarding the provision of doubtful accounts. So we reshaped, we really transformed here our credit analysis. We increased the team. We look at that, and we were much more strict in terms of how we are giving credits to our clients. And in terms of the trucks, for example, we're much more strict about the sectors that we would serve and so on. And what we're experiencing is a very, very healthy portfolio. This is, once again, it's not just a one quarter of a short-term trend despite the fact that when you look in Brazil, we see the deterioration of the credit. When I look at our portfolio here and the curves, as a very, very healthy portfolio. So this quarter was particularly good because we had some reversions of provisional accounts that declines end up paying. So in that regard, the level was very low. But if you look at the coverage of doubtful accounts, in related to the clients that still Localiza, you're going to see that our coverage are still very high -- if you compare across industries and if you compare inside our industry, you see that we are very conservative in how we cover for the risk of doubtful accounts. But this is, once again, the result of work here that improved the way that we're giving credit to the clients and our portfolio is very, very healthy as we see it right now.

So should we expect this level of bad debt costs similar to the first Q in the upcoming quarters, is that to understand?

No. The first Q is particularly low because if you look at the bad debt over revenue, it was almost 0, right? So we should not expect as low as the first quarter, but you still should expect when you look at an average of the last quarters, you should still see a very, very good cost in terms of doubtful provisional here.

Our next question comes from [indiscernible].

It's a follow-up regarding the depreciation and the assumptions embedded in it. Shouldn't we expect decrease in the fears of the competitive environment there coming from the Chinese considering that the tariffs will increase by the second half of the year. What's the main risk? What's the main source of the increase in competition in the second half that you have embedded by the second half of the year?

Marco, thank you for your question. And you're correct, right? We're going to see the tax going up from 25% to 35%. They have a very, very large inventory, but nevertheless, this will happen. Having said that, we're seeing a greater competition and a greater, let's say, look for market share here in the local market. And a lot of new companies are entering the market as we speak. So, so far, we have close to 18 or even more brands that already are operating in Brazil and more to come. So in one hand, you are correct that we're probably going to see this tax increase, right, putting an upward pressure on prices, but we still believe that the fight for market share here, the competitive environment will keep this market very competitive and price pressure will stay on. And we would like to be ready for that scenario, and that's the scenario that are embedding in our assumptions.

There is one final question here from the chat. It came [indiscernible] from BTG. Good morning, due to the discipline in pricing and execution, the company is finally restoring profitability towards historical levels. In this scenario, once you gain confidence that the depreciation volumes and margin of Seminovos stabilized, how do you see the prospect for volume growth in the rental divisions?

Thank you, Daniel. As I said, the first goal was really to restore profitability. We still think that there is an opportunity in rent a car in most of the segments here, right, not just in the daily rentals, but especially in the corporate side. We still have a very low penetration when you look at other drivers or right railing drivers here. So once again, once we reached our profitability here, we are comfortable with all the levels of depreciation, as you described, we're going to actually go and try to deploy more capital and increase the pace of growth. But once again, the first target is still to deploy -- we still have a portfolio. For example, in fleet, we still have a portfolio fixed to do. In trucks, we still have a portfolio redeployment that is in progress here. And in rent a cars, we still need some prices to pass through. So as we do that, as we reach this level, we're probably going to have better opportunities here to resume growth.

This concludes our question-and-answer session. To close, I will now hand the floor over to Rodrigo Tavares for his final remarks.

Thank you all for joining us. Our Investor Relations team remains available for any further questions. Thank you very much.