Localiza Rent a Car S.A. (RENT3) Earnings Call Transcript & Summary

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 second 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 ri.localiza.com, while the full earnings release materials can also be found. The presentation is also available for download on the Investor Relations website. [Operator Instructions] Please note that all figures presented are in millions of reais and prepared in accordance with IFRS. We also emphasize that the information contained in this presentation as well as any statements that may be made during the conference regarding business outlook, projections and Localiza's operational and financial targets reflect management's 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.

Good morning, and welcome to Localiza webinar. The strong performance achieved at the beginning of the year was sustained in the second quarter of 2026 with accelerating year-over-year revenue growth across all business lines, supported by consistent execution, disciplined capital allocation and continued progress in the restoration of returns, reinforcing value creation of the company's shareholders. In Car Rental, we delivered double-digit net revenue growth, with revenue increasing 11.2% compared to the second quarter of 2025, reflecting the combination of volume growth and price expansion. In Fleet Rental, we returned to year-over-year growth in rental base, supported by positive origination in light fleet and car subscription contracts, along with a lower impact from the portfolio reduction of severe-use contracts, a process that has been underway since 2024. In Seminovos, we sold 92,000 vehicles during the quarter compared to 68,000 vehicles sold in 2025, driving a 38.9% increase in net revenue. As we maintain the pace required to optimize the car rental fleet life cycle, we directed investments toward expanding retail capacity through the growth of sales team, the strengthening of marketing activities. In addition, during the quarter, we completed the rebranding of our Seminovos stores. Although these investments impacted the quarter's margin, they are expected to support the increase of retail share in the sales mix towards the second half of 2026. The strong progress in fleet rejuvenation process contributed to a 24.1% reduction in the average age of the car rental operating fleet, which ended at -- the period at 8.2 months compared to 10.8 months in the same quarter of last year. Throughout the second quarter of 2026, we observed new and used price vehicles performing in line with our expectation. Nevertheless, as highlighted in our first quarter 2026 earnings release, we continue to adjust fleet depreciation rates to reflect the dynamics of the automotive industry, characterized by the entry of new competitors and the launch of increasingly technological and competitive vehicle models. In anticipation of this trend, the company has been adjusting rental prices and fleet depreciation rates to reflect residual value estimated aligned with the automotive industry outlook. As a result, in the second quarter of 2026, we delivered a net revenue of BRL 12.3 billion, representing a 24.5% year-over-year increase. EBIT totaled BRL 2.3 billion, up 15.1% compared to the same quarter of last year, and net income reached BRL 1 billion in the quarter, an increase of 30.6% year-over-year. Net income of BRL 1 billion and a ROIC spread of 6.1 percentage points within the company's target range even under more conservative depreciation assumptions reinforce the effectiveness and the adopted strategy of the continued progress of the restoration of returns. For the second half of 2026, we will pursue net revenue growth in both Rent a Car and Fleet Rental while sustaining the pace of Seminovos sales through the expansion of retail sales mix. In addition, we will remain relentless in our pursuit of operational efficiency across all business lines and expanding the use of technology to enhance our customers' experience. Encouraged by the progress achieved and the results delivered in the first half of 2026, we remain attentive to the macroeconomic environment and the dynamics of the automotive industry. We will continue to pursue disciplined capital allocation strategy, focus on sustainable growth and long-term value creation. We would like to thank our customers, shareholders, partners and employees for their continued trust and confidence. To present the details of the results, I'll now turn the call over to the Head of Investor Relations, Nora.

Thank you, Rodrigo, and good morning, everyone. On Page 3, we begin with Car Rental division in Brazil. In the second quarter '26, net revenue in the Car Rental division reached BRL 2.8 billion, representing an 11.2% increase compared to the second quarter '25. This performance was driven by accelerating rental days growth, which increased 6.8% year-over-year and by higher average daily rates, which continue to reflect the repricing process. On Page 4, we present a 3.7% increase in the average daily rate for the quarter, along with a 3.3 percentage points increase in the utilization rate, which reached 81.9% in the second quarter '26 with a healthy combination of volume, pricing and productivity. Moving on to Page 5, we present the performance of the Fleet Rental division. In the second quarter '26, Fleet Rental reported net revenue of BRL 2.4 billion, representing a 5.8% increase compared to the same period of '25. Following the slight decline in volumes throughout '25, driven by the reduction in exposure to severe usage contracts, the Fleet Rental division returned to year-over-year growth in rental days, supported by the expansion of its targeted segments, including light fleet rental and car subscription solutions, which delivered approximately 13% revenue growth in the second quarter '26 compared to the second quarter '25. On Page 6, we present the average daily rate, which increased 5.6% year-over-year as well as the utilization rate of this division, which reached 96.7% in the quarter, evidencing greater operational efficiency and productivity. Turning to Page 7, we bring the evolution of Seminovos revenue. In the second quarter '26, we sold 89,043 vehicles in Brazil, sustaining a sales pace above 19,000 vehicles per quarter, which will allow the reduction of the Car Rental division cycles to approximately 15 months over the coming quarters. The average selling price also increased, reflecting a higher share of SUV in the sales mix, contributing to the net sales revenue in Brazil of BRL 7.1 billion, representing a strong increase of 39% compared to the same period of the previous year. The strong performance of Localiza Seminovos reflects the maturation of initiatives focused on commercial excellence, network expansion and productivity gains. As the pace of sales required to optimize the fleet cycle is maintained, the company's focus shifts towards increasing the share of retail sales within the sales mix. Moving on to Page 8, we present the car purchase and sales balances. The strong pace of vehicle sales was accompanied by a higher level of purchases. During the quarter, 92,043 vehicles were sold and 120,626 vehicles were purchased, contributing to the progress of the Car Rental fleet rejuvenation process, reflected in the reduction of the average age of the fleet sold to 19.4 months compared to 22.2 months in the second quarter '25. The average age of the operating fleet also showed significant improvement, ending the period at 8.2 months compared to 10.8 months in the second quarter '25, a year-over-year reduction of 24.1% and contributing to efficiency gains as well as lower maintenance and preparation cost per vehicle. We invested BRL 11.6 billion in vehicle purchases and generated BRL 7.1 billion from vehicle sales, resulting in a net investment of BRL 4.5 billion in the Brazilian operations. On Page 9, we present the evolution of the average purchase and sales prices of vehicles. In the Rent a Car division, the last 12 months average purchase price was BRL 86,100, while the last 12 months average selling price reached BRL 74,000, mainly reflecting fleet rejuvenation and the lower average age of cars sold. As a result, fleet renewal CapEx totaled BRL 12,100 per car. In the Fleet Rental, the last 12 months average purchase price reached BRL 99,700 per car, while the last 12 months average selling price was BRL 79,800, resulting in a replacement investment of BRL 19,900 per car. On Page 10, we present the end-of-period fleet. The company ended the quarter with a fleet of 670,446 vehicles, representing a 6.3% increase compared to the second quarter '25 in anticipation of the July holiday season demand. On Page 11, we present the consolidated net revenue for the quarter, which continues to grow at a double-digit pace. On a year-over-year basis, net revenue increased by 24.5%, totaling BRL 12.3 billion. Rental revenues grew 8.8%, totaling BRL 5.2 billion, while Seminovos revenue reached BRL 7.2 billion, up 38.9% compared to the same period of the previous year. On Page 12, we present the strong EBITDA growth, which reached BRL 3.8 billion in the second quarter '26, representing a 14.1% increase compared to the same period last year. We delivered year-over-year margin expansion across Rent a Car, Fleet Rental and Seminovos, reflecting the combination of higher rental rates and volumes, a younger fleet and lower exposure to severe usage contracts as well as the continued discipline in cost management and productivity initiatives. In Car Rental, EBITDA margin reached 67.6%, an increase of 1.1 percentage points compared to second quarter '25, reflecting the combined effect of the higher average daily rates and rental days, lower maintenance and vehicle preparation costs per car, partially offset by a higher volume of vehicles prepared for sales as well as higher level of tax credits. In Fleet Rental, EBITDA margin reached 75.6%, representing a 4.6 percentage points increase compared to second quarter '25 driven by higher average daily rates, greater efficiency in vehicle preparation costs, higher fleet utilization rates and a greater level of tax credits in addition to lower allowance for doubtful accounts, reflecting the improvement in the quality of the customer portfolio compared to second quarter '25. Seminovos reported an EBITDA margin of 1.9% in Brazil, slightly above the level reported in the same period of last year, reflecting stable gross margin and greater dilution of the SG&A relative to revenues. But compared to first quarter '26, the 1.2 percentage point decline in Seminovos' margin was driven by a higher mix of SUV in the second quarter sales, which carries a lower gross margin, combined with increased expenses related to store opening, rebranding, personnel and marketing initiatives. We are further strengthening Seminovos's commercial infrastructure. And while these investments pressure margins in the short term, they enhance our ability to capture value in retail sales and sustain a healthy inventory turnover pace. On Page 13, we present the evolution of the annualized average depreciation per car. Throughout the quarter, new and used vehicles prices evolved in line with the company's expectations. We will continue to closely monitor the dynamics of the Brazilian automotive industry, including the entry of new automakers and new models launches, adjusting depreciation, pricing and capital allocation whenever necessary. In the Car Rental, annualized depreciation per vehicle reached BRL 8,243 in the second quarter '26, maintaining the sequential increase observed over the past quarters. Considering the current dynamics of the Brazilian automotive industry and their impact on vehicle residual value expectations, we expect this trend to continue. In Fleet Rental, annualized depreciation per vehicle reached BRL 9,198 in the second quarter. The more pronounced sequential increase in the RAC depreciation reflects its shorter fleet aging cycle relative to Fleet Rental, 15 months versus around 33 months. As the difference between acquisition cost and the estimated net selling price is recognized over the depreciable life of the asset, any downward revision in residual values is spread over a shorter period in RAC, resulting in a greater impact on the depreciation expense. Moving to Page 14, we present consolidated EBIT of BRL 2.3 billion in the second quarter, representing a 15.1% increase compared to the second quarter '25, supported by margin expansion both in Car Rental and Fleet Rental. In the Car Rental, EBIT margin reached 44.5%, an increase of 2.5 percentage points, while Fleet Rental reported an EBIT margin of 49.2% in the quarter, up 3.4 percentage points year-over-year. Turning to Page 15. As a result of the acceleration in year-over-year revenue growth and continued discipline in efficient cost management and productivity even in the context of higher depreciation, we once again surpassed the BRL 1 billion net income mark, delivering a strong 30.6% increase compared to the second quarter '25. To present cash flow, debt ratios and ROIC spread, I will turn the floor back to Rodrigo.

Thank you, Nora. On Page 16, we present free cash flow before interest. The first half of 2026 cash generation from rental activities totals BRL 5.2 billion and was consumed by net car CapEx of BRL 5.2 billion as well as investments in other fixed assets and intangibles totaling BRL 161 million. These outflows were partially offset by BRL 2 billion increase in accounts payable to vehicle suppliers. As a result, free cash flow before interest and other items totaled BRL 1.8 billion. On Page 17, we present the movement of net debt, which ended the quarter at BRL 32.4 billion, representing an increase of 4.2% compared at the year-end of 2025. In July, we completed the largest exchange offer transaction ever executed in the Brazilian market, refinancing approximately BRL 7 billion in debt. The transaction also represented the largest debt issuance by aggregate volume in the company's history and reinforces the consistent liability management strategy adopted by the company over the past several years. In addition to proactively addressing the future debt maturities, the transaction contributed to extending the average debt maturity profile and reducing the average cost of debt, further strengthening Localiza's financial profile as shown in Page 18. We ended the quarter with BRL 11.4 billion in cash, an amount sufficient to cover debt maturities over this year and the following 2 years. On Page 19, we present the debt ratios at comfortable levels, showing improvement compared to the same period of last year. The net to fleet value ratio declined from 59% to 55% year-over-year, while the net debt-to-EBITDA ratio ended the period at 2.16x. Finally, on Page 20, we present the annualized ROIC for the first half of the year, which reached 16.1% with a spread of 6.1 percentage points over the after-tax cost of debt, in line with the company's expectations and evidencing the solid trajectory of spread recovery even in a higher depreciation and interest rate environment. We are now available to take your questions.

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

Two questions here. First one on depreciation and getting to the topic, right, just going to -- just wanted to understand and clarify some things, right? Because when we look at nominal depreciation, it was up, right, quarter-over-quarter. But when we look at depreciation as a percentage of the asset, it actually decreased quarter-over-quarter, right? And I know -- I mean, according to the speech, there's still some kind of a conservatism embedded in the forward-looking statements on the macro and automotive market dynamics, right? So just wanted to understand what's actually the plan and the trend there, right? Because I know you guys are not guiding for an inflection there, but at least looking at, in percentage terms, it was actually an inflection there. So I just wanted to kind of clarify that trend. And number two, on the Seminovos EBITDA margin, right, just also clarifying at least. I mean what's the implicit typical seasonal trend in mix that we have in Q3, Q4? Is it as concentrated in SUVs as it was in, for instance, Q2? And for how long should we continue to expect these investments in expansion capacity at least to last throughout the year, just so we can understand at least the trend for Seminovos margins in the second half, right? Those 2 questions, guys.

Thank you very much, Lucas. First, the depreciation, indeed it increased in nominal terms. But when you look at the percentage, there was a large volume of cars that have been purchased at the end of the period for us to prepare for the high season of July. For that fact, when they are activating the cars, you don't depreciate them in that period, right? So in percentage terms, you may have some short-term effects because of that activation period. But when we look at the trend of the depreciation, the trend is continuing as it was. So we expect depreciation to continue mildly trending up, especially in Rent a Car, okay? So this is what we expect. But it's important to highlight that despite the fact that we are increasing depreciation, we are able to do that at the same time that we're increasing profit and return, which shows that we are embedding all these assumptions correctly in our prices. So the depreciation is forward-looking. So when we estimated the residual values, we have to anticipate what's going to be 1 or 2 years from now, and then we have to factor things as the new market dynamics as well. But once again, these are all embedded in our pricing assumptions. And that's why despite the fact that we are increasing depreciation, you see returns up and you also see profits at record levels, okay? In terms of Seminovos margin, let me take a step back. The first mission was to reach the pace to renew the fleet and to get to the optimal life cycle. We did that in the first quarter. So we reached 90,000 to 95,000 cars per quarter. The second mission was to get to the same level in SUVs. So we were able to get to the optimal life cycle in the entry-level vehicles, and now we had to do that for the other categories. In the second quarter, we were able to prove that we are indeed capable of selling SUVs and optimize the life cycles of SUVs as well. So this will probably continue in the following quarters. When we look what is the next step for Seminovos? We have to increase our sales mix of retail. To do that, we need to invest in advance basically in people, opening stores, in marketing, and this quarter, particularly, we had a rebranding of our stores as well. So in the next quarters, these investments will likely continue as the mix of SUVs as well.

The next question comes from Andre Ferreira.

I have 2 topics here. So first, I want to get your expectations for used car sales per quarter going forward. What are the key drivers of demand? And what do you see as the biggest risk to volumes? Also a quick comment on how July fared in Seminovos' volumes, if you could. And the second point was, I mean, net car purchase was high, like higher than the past many quarters. So it would suggest optimism with demand. Is that a good assumption? Or was there like an opportunistic window to buy cars? And also, where are those cars being allocated the most?

Thank you very much, Andre. First, we expected the sales level of Seminovos to remain at this current level, right? So around the 90,000, which is the optimal level for us to reach the life cycle that we expect. And in July, it follows the same trend. So the same type of pace that we saw in the first quarter and the second quarter, we're expecting to continue in the third quarter as well here. In terms of the risks, we saw a slight reduction in approval of financing, but that was offset by our commercial efficiency. So we saw that banks had a lower appetite for issuing new finance, but we did not suffer that effect because we were able to more than compensate that with internal efficiencies here. But looking forward, I think that it will depend more on the macro than anything else. And of course, we keep improving our operations, and we are confident that we can reach the current sales level in the third quarter as well, okay? In terms of net car purchase, indeed, we purchased almost 125,000 cars in the second quarter, which is a higher level than typically we do. This was a combination of a higher demand as we -- you could see, we resumed growth in Rent a Car. In this quarter, we grew revenues by 11.2% year-over-year. So this trend in July was a very strong high season as well. But on top of that, of course, that we have some particular procurement opportunities that we thought it would make sense for us to take advantage in the end of the quarter.

Just to add to that, Andre, after July, of course, we will adjust a bit the fleet. We are still living in an environment of higher interest rates and higher depreciation. So we, therefore, will prioritize price over volumes to maintain the consistent trajectory of ROIC spread restoration.

Our next question comes from Guilherme Mendes.

I have a follow-up on depreciation, if I may. A few quarters ago, we were discussing that if Seminovos margins remain at healthy levels, we could see an inflection on depreciation. And we have been -- have seen Seminovos have a pretty strong performance in terms of sales and also in terms of margins. And still you are still discussing increasing depreciation going forward and arguably at a faster pace. So my 2-part question is, first is, what has changed on what we are seeing today versus your expectations a year ago? And looking forward on this comment about depreciation continue to increase. So what other variables are you monitoring to give you some comfort on the level of depreciation that you are including on the contracts going forward?

Thank you for your question. I would not say that changed our expectations. We -- in the last quarter, despite the questions, we never pointed that there will be an inflection in depreciation. It was exactly the opposite. We're signaling that the depreciation trend was up, and that's what happened in this quarter here as well. And we are in the phase here of a new automotive market dynamics. And as I said, this is forward-looking. We have to anticipate that by taking into consideration what may happen, and we are going to embed those assumptions in the residual prices. When you are thinking about allocating your capital, you have to be even more conservative. And that's what we have been proving here because our pricing is able to cope with this higher depreciation environment and increase the return. When we look, there are forces that may help car prices as well. For example, the tax for import cars went up from 28% to 35%. That may create some upward pressure in prices. On top of that, the kits in terms of -- the imports of the kits will cease the quotas and the taxes on the end of this year. So this all can contribute to improving prices. Having said that, we're talking about a lot of new entrants, a lot of new models and companies that are competing to gain market share that can lead to greater competitiveness pressures. Having said that, it is important to remind that this is a positive in the midterm. Because as you have more supply locally, as you have more competition locally, that can lead to better deals, to better opportunities for the largest buyer as Localiza. But looking forward, especially in the short term here, the depreciation trend will continue as it was from the first quarter to the second quarter.

Very clear. And if I may also follow up on Andre's questions on the fleet expansion. Also a few quarters ago, we were discussing about '27 potentially being a year in which Localiza would resume the pace of growth. Given the higher rates and the increase in depreciation, is this something that we should still expect or not likely at this point?

I think we were able to prove in the second quarter that despite the fact that depreciation is up, the pricing is up, growth went up as well, okay? Having said that, our goal is to keep increasing our ROIC spread. Our main target here is to get the ROIC spread to the upper level of our band here, okay? But the demand has been proven very resilient and robust. The best proof of that was the second quarter and the very strong July that we had here. But once again, because of the high depreciation and high interest expenses, the -- we were going to need to keep increasing tariffs. That may have some effect on the demand. But so far, we've seen the demand quite resilient. So in 2027, if that persists, we can continue to grow. But once again, our focus is to return the profitability as it was.

The next question comes from Filipe Nielsen.

I also have 2 here. The first one is related to demand and pricing. And just curious to hear about -- you expanded the fleet significantly in the quarter. We were discussing this in previous questions. But I wanted to understand a little bit more about how you're expecting pricing elasticity? And what are the factors that drive you to be confident that you will keep increasing prices even with this level of purchases and increase in the fleet? This is my first one. And the second one, I just wanted to follow up on the depreciation. We discussed a lot about the car market conditions and et cetera, and your conservatism. Just wanted to understand how you factor in the reduction in the fleet age and in the sale age. How should we expect -- when should we expect this to positively impact the depreciation trend and how you're balancing this factor with all other ones?

Thank you, Filipe. First, there is a seasonality here. So third quarter in terms of demand is usually stronger than second quarter. So that's why usually you rent more. You have the elections as well that creates an additional demand for at least in the months of September and October, and we expect that. But you have to realize that the elasticity, you have to look at that not just at the nominal elasticity, but the cross elasticity. Our main competitor is ownership. So when you see, for example, Fleet Rental activity, we see a very, very strong generation of new contracts, commercial activities. We are living in a very high interest rate environment. And that actually leads most companies to outsource their fleet. So we're experiencing a demand despite the fact that we're increasing prices because the alternative, which is financing at a very high cost, your own fleet is increasing even faster than renting a car with Localiza, okay? So that's why we saw in the second quarter, the strong demand. We saw a strong demand in July, and we think that this trend, at least in the short, midterm is likely to continue, okay? In terms of the reduction of the fleet age, we're already reaping the benefits. You mentioned about the residual value, but it's far -- the benefits are far beyond that. If you look at our variable costs, this is already happening. Our variable costs are much lower than it was last year. Actually, in some senses, we are back to the 2019 levels in nominal terms. So this shows you how is the impact of renewing the fleet. And we are feeling the effects first on the Rent a Car rather than in the Seminovos because we are decommissioning the cars with the high mileage. So what happens is that you renew the fleet much more in kilometers in Rent a Car than in age in Seminovos. We pick up the pace in Seminovos in the first quarter. So it still takes some time for us to get to the optimal level in Seminovos. We expect that to happen in the first half of next year that we're probably going to reach the equilibrium in the life cycle here. But another benefit that we're already seeing is the utilization. So because the cars are newer, you don't spend much time fixing the cars, and that's why you have more fleet available in Rent a Car as well. So I would like to narrow the benefit to just the residual value despite the fact that depreciation is the topic, but it's a combination of operational utilization and the depreciation itself.

Our next question comes from Daniel Gasparete.

I apologize, but I would like to stress some of the questions that were already answered here. First of all, it would be regarding the growth. Just to better understand if you are seeing the position that you guys are having pretty much as a response to the demand that is coming or if you guys are actively seeing growth opportunities and placing cars there. For example, these 28,000 cars that you added in this quarter. Do you see it as, "We are seeing additional growth in the future, and we would like to pursue it?" Or "We are seeing seasonal demand here, and we are addressing that?" Just to see -- just to better understand if you are actively or passively responding to that. That will be the question number one. And also, if you could touch on which segments are you seeing most of the demand? Is it leisure, lease, replacement, just to better understand where it comes from? And secondly, I would like just to stress a little bit more about the Seminovos margin. You mentioned, if I understood correctly, please apologize me if I'm wrong, that we should continue seeing this level of mix in the next few quarters and perhaps the same level of efforts for improving the retail sales in the short term. Just to better understand if the underlying conclusion on that would be that perhaps we are likely to see Seminovos likely to be on this 2% level before rebounding back to 3%. So again, I apologize for stressing those questions again.

Thank you, Daniel. I'll start here, and Rodrigo may complement if necessary. But on the growth front, I would say the following. We had a very strong sales pace, and we maintained that in the second quarter. So considering that we will maintain those pace -- this level of pace, we'll have to accelerate purchase. But also we were preparing the company for July peak season. We have holidays, school vacation, and we have some selective opportunistic purchases and discounts. So it resulted in a strong addition of 28,000 cars. Part of this will adjust in the second -- in the third quarter after the peak season of July, but Rodrigo mentioned in the previous question that we also have the elections coming in. So we are seeing a good level of demand, a resilient demand, both in daily rentals to individual, but also corporate segments grew, app drivers segments grew on a quarter-over-quarter basis and replacement segment also grew, okay? In spite of that, as Rodrigo said, in an environment of higher interest rates and higher depreciation rates, the focus is going to be less on the volumes and more on the pricing to maintain the trajectory of recovery of ROIC spread. On the Seminovos side, I think margin was impacted twofold here. The first one was the mix of SUVs. SUVs generate more reais per car when we sell. So we usually operate them with slightly lower gross margins. So you saw on a quarter-over-quarter reduction of around 0.5 percentage points in terms of gross margin there, but also the fact that we invested more on expanding capacity, 6 new stores plus personnel plus marketing, okay? We don't anticipate a big reduction on those expenses. On the contrary, the goal of those expenses is to increase the mix of retail sales that will gradually increase over the course of the next quarter towards next year. So we are not, as of now, anticipating a major difference in the trend of the EBITDA margin.

Our next question comes from Rogério Araújo.

I have a couple here. First one on a higher PIS/COFINS credit this quarter. We understand that now with Brazil's tax reform, there is predictability of usage of those credits above the 9.25% rate. Does it make sense? And in this case, what's Localiza's expectations for PIS/COFINS credit in upcoming quarters, a similar level versus second Q makes sense, at least by year-end? And my second question regarding cost expansion. We noticed, especially the salaries and profit sharing were the highlights this quarter. Is it tied somehow to the early share delivery to management under the company's long-term retention program that took place this quarter? And if not, what drove the increase besides Seminovos that you already mentioned and the run rate going forward?

Thank you, Rogério. Thank you for both questions. Yes, when we think about the tax credit, PIS/COFINS related credit, we have a few variables here that I would like to mention. The first one is the number of cars in our fleet and the value of the fleet. If you look first quarter this year, we have a BRL 54 billion fleet value. Now we have a BRL 58 billion fleet value. We bought 120,000 cars. So of course, this impacts the credit levels. Also, the appraisal reports had a shorter useful life, so it accelerates the pace of credits that we take. But if you look on a quarter-over-quarter basis, the PIS/COFINS credit increased by around BRL 80 million, okay? When we look to the cost expansion, it's mostly impacted by the anticipation of the long-term incentive plans, but those were payroll -- refer exclusively to payroll taxes and the anticipation of those taxes, okay? The level of around BRL 80 million as well. So more or less one is offsetting the other here. But, as I said, it is related to the long-term incentive plan, but refers exclusively to the payroll taxes and social contribution here anticipation, okay?