Localiza Rent A Car S/Adr

Good morning! Before we begin, I would like to remind you that this conference will be conducted in English. For those who require translation into Portuguese, please click on the Translation button with the globe icon and select your preferred language. You may mute or unmute the original audio by clicking the Mute Original Audio button. Good morning! And welcome to Localiza and 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 ri.localiza.com. where the full earnings release materials can also be found. The presentation is also available for download on the Investor Relations website. For the Q&A session for analysts and investors, we kindly ask that you sign all your interest in participating through the Q&A icon at the bottom of your screen, entering your name, institution, and language. When called upon, a prompt will appear on your screen asking you to activate your microphone. Questions may be asked in either Portuguese or English. To submit written questions, please use the Q&A icon at the bottom of your screen and fill in your name and institution before submitting your question. 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. 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 segments. 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 ride spread within the company's target range. In semi-novos, 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 toward the returning of a 15-month cycle in car rental. Throughout the quarter, we observed healthy pricing dynamics in used cars and a slight increase in new car prices, even in a highly competitive environment. As a result of this strong operational performance, we reported consolidated net revenue of $12.3 billion, EBITDA of $4.1 billion, EBIT of $2.7 billion, and a net income of $1.2 billion, representing a 45% increase year-over-year. The result was positively impacted by the recognition of the gain of approximately $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 these effects, net income totaled 1.045 billion, surpassing for the first time the 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 1%. after-tax cost of debt. Excluding the effects related to the divestment of subsidiaries, Reich stood at 15.9% with a spread of 5.9 percentage points, reflecting companies' 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 increase investments in brand and technology. This year, we will complete the rebranding of our stores and branches, explicitly 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 begin with the car rental division in Brazil. In the first quarter of 26, net revenue in the car rental division reached R$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 right 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 157 real. We also emphasize the 3.1 percentage points 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 five, we present the performance of the fleet rental division. In Q126, fleet rental reported net revenues of 2.3 billion reais, 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 15.5 thousand vehicles at the end of the quarter, compared to the 30.7 thousand vehicles in these segments at the beginning of 2025. The capital relief from the ramp-down of severe usage contracts continued 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 wide spread within the company's target levels. Moving to page 6, we present an average daily rate of R$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 Seminova's revenue. We achieved a new sales record in Seminovas with 95,384 vehicles sold in Brazil in the first quarter of 2016. Net revenue totaled 7.1 billion reais in the quarter, an increase of 34.5% compared to the first quarter, 25. The strong performance of Localiza Seminovas reflects the maturation of initiatives focused on commercial excellence, network expansion, and productivity gains, as well as other fronts aimed at accelerating the fleet renewal cycle. These initiatives contributed to reducing the average age of fleets 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 and occurred following the peak holiday period. Total investment in vehicle purchase amounted 7.6 billion reais, while proceeds from vehicle sales totaled 7.1 billion, resulting in a net investment of 465 million reais in the Brazilian operation. 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 86.5 thousand reais, reflecting a lower mix of entry-level vehicles compared to Q25, while the average selling price reached R73,400 in Q1, resulting in a renewal capex of R13,100 per vehicle. In fleet rental, the average purchase price reached R97,700, while the average selling price was R77,500, resulting in a renewal investment of R20,200 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 continue to grow at a double-digit pace this quarter. The company reported consolidated net revenue of 12.3 billion reais, an increase of 21.2% compared to the same period last year. Rental revenues grew 6.4%, totaling 5.1 billion reais, while semi-novice revenues reached 7.1 billion, up 34.6% year-over-year. On page 12, we present a strong growth in EBITDA, which reached 4.1 billion reais 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 218.7 million, while cost and expenses rose by only 16.7 million, reflecting the effect of the higher fee utilization improvements in maintenance and preparation costs per vehicle, partially offset by the higher volumes of vehicles prepared, and a higher level of fiscal fees tax credits. In the fleet rental, EBITDA margin reached 88%, representing an increase of 18 percentage points compared to Q125. The margin in the quarter was positively impacted by defects of the divestment of subsidiaries totaling R$282.4 million before taxes. Excluding these defects, the margin would have been 75.9%, an increase of 5.9 percentage points versus Q125, mainly driven by the higher average daily rates, lower maintenance costs and allowance for doubtful accounts, improved utilization rates, and a higher level of tax credits. On a year-over-year basis, net revenues increased 84 million, while costs and expenses in this division declined by 111.5 million reais. Seminovals 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 same period last year. On page 13, we present the evolution of the annualized average depreciation per vehicles. 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 will adjust depreciation, pricing, and capital allocation as needed. In the car rental, the annualized average depreciation per vehicle was R7,986 in Q1-26, maintaining the sequential upward trend observed over recent quarters. In fleet rental, the annualized average depreciation per vehicle was R9,081 in the first quarter, also maintaining the trend observed in recent quarters. Moving to page 14. We present consolidated EBIT of R$2.7 billion in Q126, representing a 32.4% increase compared to the same period of last year. In the current, the EBIT margin reached 47.3%, an increase of 4.9 percentage points year-over-year, while Fleet Rental 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 1.2 billion in the quarter, representing a 45% increase compared to Q125. Even excluding the positive effect after tax of 177 million related to the divestment of subsidiaries, our net income surpassed for the first time the 1 billion real mark. To present cash flow, debt ratios, and ROID spread, I will now turn the call back to Ruto.

Thank you, Nora. On page 16, we present free cash flow before interest. In the first quarter of 2026, cash generated from rental activities totaled $2.4 billion and was partially consumed by the net car capex of $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 109 million in accounts payables to vehicle suppliers. As a result, cash generation before interest and other effects totaled 2.2 billion. On page 17, we present the net debt movement, which ended the quarter at 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 close the quarter with 10.9 billion in cash, sufficient to cover short-term debt and obligations with automakers. Considering the funding and repayments carried out in April 2026, the cash position would be 10.6 billion. On page 19, we present the 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 2.08 times. Finally, on page 20, we present the annualized right 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.

As a reminder for the Q&A session, please signal your interest in participating via the Q&A icon at the bottom of your screen, indicating your name, institution, and language. When called upon, a prompt to activate your microphone will appear on your screen. To submit written questions, use the Q&A icon at the bottom of your screen and enter your name and institution before your question. Our first live question comes from Lucas Marchiori from BTG. We will open the audio so you can ask your question. Please, go ahead.

Thank you. Hey, guys. Morning. Yeah, two questions actually on semi-novas. First one, 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 price. 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 envisage to happen for April as well, if that continues on to 2, right, that would be interesting. And also, a second question is on EBITDA margins of seminars, 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 point in which we 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 Laura? 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. Thanks. Thanks, guys.

Thank you, Lucas. Let me start with the volumes, the semi-novas, 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 semi-novas will remain strong in the second quarter. So, we're 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 and rent a car, okay? There are some things that will probably change a little bit from first quarter and 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 tickets of the second quarter up significantly. 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 cars, 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 evolving dynamic. So, the depreciation should maintain the mild upward trend. 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, we are still targeting these low single digits going forward.

Great.

Thank you, Rodrigo. Thank you, Lucas.

The next question comes from Felipe Nielsen by Citi. We will open the audio so you can ask your question. Please go ahead.

Hello. Hey, guys. Good morning. Thanks for taking my question and congrats on the results. I wanted to follow up on two topics related to semi-novas. Regarding credit, we understood a little bit about the dynamics on first quarter and how you expect a stronger second quarter. but, uh, I wanted to, to understand a little bit more about how credit is playing out in those, uh, in those assumptions and what you're seeing in the, on the margin, uh, on sales. And, and also wanted to understand a little bit better the ramp up of, of stores. You, uh, you posted a very strong, uh, volume and I wanted to just, but you'd still, uh, just, you still like suggest that, uh, ramp up, stores 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, and thanks for taking my question.

Thank you, Felipe. I'll start with the overall environment and credits, and Noda 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 it 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 it important for us to open new stores, but the productivity per store is increasing with all those measures that I described. Please, Nora.

Yeah, thank you, Rodrigo and Filipe. As Rodrigo mentioned, and he covered fully the topic here, Filipe, the productivity is increasing on a per salesperson basis. We've been improving leads, conversions, lead generation. We're improving sales per sales team, and we'll continue to do that. So there is lots of the micro and the levers we pull over this last year. few quarters, but we've been transforming Seminovas over the course of the last three years. So, we do expect the stores to continue to ramp up. Usually, it takes six months to a year for the full ramp up of the store, 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 a second quarter like that, but on a very strong pace, this should remain.

This is great and very clear. Thank you, guys.

The next question comes from Guilherme Mendes from JP. We will open the audio so you can ask your question. Please go ahead.

Yes. Yes. Good morning. Thanks, Rodrigo and Nora. 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 right 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 rental car and fleet management segments, thinking about this, let's say, slower than expected easing cycle in Brazil. Thank you.

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 rental 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. 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 to pass through, but if we have the opportunity, we'll take this additional growth opportunity.

That's very clear. Thank you, Rodrigo. Have a nice day.

Our next question comes from André Ferreira from Bradesco. We will open the audio so you can ask your question. Please, go ahead.

Hi, good morning. Thanks for taking my question. Congrats on the strong results. I have two questions. One, actually a follow-up, just to confirm a comment from Rodrigo in a previous question of the depreciation trend being up. Do you mean depreciation in reais 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 younger fleets? 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 impacts 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, I mean, I wanted to get your view on, like, from one hand, they could pressure residual values, but they also increase competition when rental companies purchase vehicles from automakers. So, how do you see the net impacts of these two dynamics, one, when you buy, and second, the residual value effect on future depreciation. Thank you.

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, acquiring the car, I think this year has been a very positive year. In terms of the depreciation trend, we have to remind that depreciation, you always have to look forward, right? And to look forward, you have to incorporate these new dynamics in the OEM markets, and that's what we're doing. That's why we expect, as I said, a mild upward trend Both in reais and a little bit less in percentage, but both will be a mild upward trend. 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 semi-novas and in the rental, we see the demand. And in the semi-novas 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. But 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 four months actually, was quite strong when you compare to the last four months, the first four 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.

Yeah, but one 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 we're already pricing the new contracts, expecting this new competitive dynamics as Nora described.

Okay, very clear. Thank you.

Our next question comes from Jens Spies from Morgan Stanley. We will now open the audio so you can ask your question. Please go ahead.

Yes, hello. Thank you for taking my question. 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 rented car division basically already implies like a 15-month cycle. So, congrats on that. So, just what do you 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? Thank you.

Thank you, James. I think you have to look at it in a holistic way. So it was not one or two initiatives. Of course, you have some help from the macro, as Nora described. The first quarter was very strong in terms of financing in general. But this does not explain the majority of what has been happening here with Localiza. So I think we are working in brand, productivity. We open new stores regularly. We are selecting – we improve 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 one or two 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 planting 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 to see very healthy volumes in terms of sales.

Yeah, one additional point here, if I may, Rodrigo, is the mileage of our car. We've been consistently reducing the mileage of the car sold, which puts us closer to an effective semi-novus, pre-owned car, okay? So that might be being helped by a bit of a trade-down. So very consistent results here.

And in spite of 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 semi-novels 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 will also become further down the road. Perfect. Thank you. Appreciate it, guys.

Our next question comes from João Frizo from GS. We will open the audio so you can ask your question. Please go ahead.

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

Thank you, João. 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.

Okay, thanks.

Our next question comes from Alberto Valerio from UBS. We will open the audio so you can speak. Please go ahead.

Morning, Rodrigo and Nora. Thanks for taking my question. Congrats for this market of 1 billion on the quarter. I have two. As we see, I think not just for localism, but also for the industry, it looked like the high season was better than expected. Is this true? We could have more cars on the fourth quarter and first quarter from that path and how you look this forward and which categories and which segments that you see that was pushing more. And my second one also on Seminobus, we see amazing results for the quarter. would have any impact from the impairment on the residual value of the cars, or was just by the mix, as you mentioned, of selling a higher entry level at this quarter? Thank you very much.

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 nothing, 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 behave quite well. If you see it 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 were 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 reais 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. Thank you very much, and congrats again.

Thank you. The next question comes from Alberto Valerio, Sorry, our next question comes from Daniel Gasparetti from IDBBA. We will open the audio so you can ask your question. Please go ahead.

Thank you very much. Thank you for the opportunity. Good morning. Two questions, please. The first one I would like to explore a little bit more about this depreciation rate that you mentioned, Rodrigo. First of all, I want to understand a little bit more with you. You mentioned that, sorry, if you could comment on the share purchase spread of the cars being sold with the 15 months. I imagine that those cars are being reported, that this share purchase spread 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 this selling pace over the next few quarters? I mean, it shouldn't converge down to this level of zero purchase credit with a 15-month car cycle. That would be the question number one. And secondly, it 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 for the SELIC. Could we start thinking about more than 250,000 cars being sold this year, perhaps annualized this first quarter? How do you see that, please?

I'm sorry. Thank you, Gasparet. First, of course, the day spread between the car that you buy and the car that you sell is better on the 15 months. 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 mid-term and long-term perspective here. And as I said, we incorporated some of this 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 fleets, it should be positive in the depreciation, let's say, in apples to apples. But when we consider the bigger picture, that's why we already see this mild upward trend. In terms of semi-novus, 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 350 or 360 that we need to get back to the optimum life cycle here of the car, you start to get some of the benefit not only in 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 leak actually in terms of the curve, worse than it was pre-war. So in the beginning of the year, if you saw the yield curve, it was much better than what we're seeing 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 results to understand it properly, but I understand that the depreciation rate is a function of three variables, right? Semenov's margin, the surplus share spreads, and also the SG&A margin that you have. In that sense, should we see depreciation rate falling? Which kind of variable are you guys assuming for it not to go up? I mean, you're assuming that the surplus share spreads increase?

No, let me... What I said is that if I look at the spread of the 15 months right now and compare 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're 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 launchings in the auto industry that could create some deflationary pressure going forward. So we want to anticipate this movement. 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.

Perfect. Thank you very much. Thank you for the clarifications. Have a nice day.

Our next question comes from Pedro Bruno from XP. We will open the audio so you can speak. Please go ahead.

Good morning, everyone. Thanks for the space for the question. 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 would have helped this margin in the first quarter. But if you could give us a bit more color in 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 are 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, and maintenance and preparation costs. But 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.

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 here. 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. 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 piece of in-stax credit. When we look on a sequential basis, margin remained broadly stable, excluding the one-offs, as I mentioned. Costs increased, driven by licensing and IPVA 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 rental 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 rental car that increased 2% at 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 right spread is in the right place, we can adjust pricing accordingly, okay?

Great. Thank you very much.

Our next question comes from Rogério Araújo from Bank of America. We will open the audio so you can speak.

Hi, Rodrigo and Laura. Congrats on the results, and thanks for the opportunity. I have some follow-ups here. First, on Seminovas, 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 these new these new measures that you have worked in the past year. So what should we expect with volumes remaining up with this SG&E dilution? Also, a follow-up on that provisions that Nora mentioned that you had this quarter. Can you be more specific on how much was that? And that's basically it. Thank you.

Thank you, Rogério. First about the SG&A, of course, that we had some dilution because of volume, but the fact that we are opening new stores, you'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 semi-novice. 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're much more strict in terms of how we're 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, I see a very, very healthy portfolio. So this quarter was particularly good because we had some reversions of provisional accounts that the clients end up paying. So in that regard, the level was very low. But if you look at the coverage of doubtful accounts, in relation to the clients that still localize it, 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 a work here that improves the way that we're giving credit to the clients, and our portfolio is very, very healthy as we see it right now.

Yeah, thank you. So, should we expect this level of bad debt costs similar to the first Q in the upcoming quarters? Is that what you're saying?

No, the first Q is particularly low because if you look at the bad debt over revenue, it was almost zero, 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 provision over here.

Okay. Thank you very much. Yeah, very clear. Thank you. Thank you for that.

Our next question comes from Marco Kraljevic from Laurent Vielle. Please, you may go ahead.

Hi everybody, thanks for taking my question. It's a follow-up regarding the depreciation and the assumptions embedded in it. Shouldn't we expect a 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 increasing 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. 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 markets. 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're 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. Thank you very much. Thank you, Marco.

There is one final question here from the chat. It came from Daniel Spielberg 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 semi-notes is stabilized, How do you see the prospects for volume growth in the rental divisions?

Thank you, Danielle. As I said, the first goal was really to restore profitability. We still think that there is an opportunity in rental 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 Uber drivers or ride-hailing drivers here. So, once again, once we reached our profitability here, when 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-car, 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.