Localiza Rent a Car SA

BOVESPA:RENT3

Earnings Call Transcript 2019-Q1

[Operator]

Good afternoon, and welcome to Localiza Rent a Car's Conference Call for the First Quarter of 2019. Hosting the event today, we have Mr. Mauricio Teixeira, CFO; and Ms. Mariana Campolina, Investor Relations Manager. We would like to inform you that the numbers in this presentation are stated in millions of Brazilian reals and based on IFRS. [Operator Instructions]

And the conference call audio and the accompanying slide presentation are being broadcasted simultaneously over the web at www.ri.localiza.com/en/. The slide presentation can be downloaded at this same address by clicking on the banner 1Q '19 webcast. Before proceeding, we would like to clarify that any statements made in or during the conference call concerning the business outlook of the company, forecasts as well as operating and financial targets, represent the opinions and assumptions of the company management, which may or may not occur. Investors must comprehend that political and economic conditions and other operating factors may affect the company's future and may lead to materially different results from those stated in this call. To begin the first quarter of 2019 teleconference, I'd like to turn the floor over to the CFO, Mr. Mauricio Teixeira.

[Mauricio Teixeira, executive]

Good afternoon, and thank you all for your presence. In 1Q '19, we've once again presented impressive results, demonstrating local use of execution capacity. It is a quarter of strong growth, significant expansion of margins, expansion of the spread between ROIC and cost of debt. All these growth with profitability, leads us quite confident that we are on the right path. We are convinced of the growth of car and Fleet Rental markets. And as a great demonstration on our belief that we will continue to be the stars of this market, in February this year, we capitalized the company in BRL 1.8 billion through the issuance of new shares. The follow-on also brought positive impacts to the results, allowing the reduction of the effective rate through a higher level of interest on capital as well as increase in financial income. We started 2019 with increased motivation and focused on the objective of growth with profitability and quality, expanding on our market leadership. Another change in this quarter was the implementation of IFRS 16 as of January 1, 2019. The main impact for Localiza is related to real estate lease agreements of our locations and stores. The present value of these listed contracts were counted as assets and liabilities in the balance sheet. So before rental lease, before it took effect, now it's depreciating the created assets and financial expense of the interest on the new liability. The impact of IFRS 16 was slightly negative on net income initially and that reverts at the end of the contract as the financial expenses recognized on full liability, which now has the higher value, throughout the life of the lease contracts, the impacts on P&L is neutral. For comparability purposes representing the earnings release, all the numbers of exit values in these tenders would -- with impact of IFRS 16, so we can offer more transparency for our investors. The summary of the impacts by line under P&L, which is available on Page 18 of our -- during this call, we will make all the analysis of the figures without the IFRS, so we can have a fair comparison basis. Now on Page 2, we can see the operating highlights for the quarter. In the first quarter of 2019, once again showed strong growth with the 26.2% increase in the average rented fleet year-over-year. The fleet rental growth was also accelerating, with an increase of 22.6% in the rented fleet year-over-year. And we know this shows that we are prepared for the growing volumes that we will have throughout the year, closing the quarter with record sales of more than 36,000 cars, showing a growth of almost 45% compared to last year. Although the beginning of the year, after the peak of demand historically showed a decrease, in 1Q '19, we kept the fleet profitably stable compared to the end of last year at 247,623 cars showing a growth of 28.1% year-over-year. On Slide 3, you can see the financial highlights for the quarter. Compared to the same period last year, net revenues increased 34.3%, EBITDA increased 25.4%, the EBIT increased 12.2% and net income 22.9% higher. We've achieved the highest positive payment at quarter by Localiza, BRL 216 million.

To give further details of the results for this quarter, I'd like to hand over to our Investor Relations Manager, Mariana Campolina.

[Mariana Campolina, executive]

Good afternoon, everyone. To give you some more flavor on the results for the quarter, I'd like to start with the car rental division. As you can see on Page 4, in 1Q '19, the average rented fleet grew 26.2%. That's almost 115,000 rented cars every day this quarter. Net revenues increased 25.2% year-over-year.

On Slide 5, the pace of the average rental rate of BRL 74.10 dropped by less than 1% year-over-year, a slowdown in the decline observed in recent years. The fleet's efficient strategy out of the strong demand contributed to 1.1 percentage point increase in the operating fleet utilization rate when compared with 1Q '18, achieving 79.8%. On Page 6, we show that the branch network was expanded -- our own branch network was expanded by 1 unit during the quarter.

On Slide 7, the Fleet Rental division, the pace of growth accelerated in the quarter, with the average rental fleet increasing 22.6% and net revenues increasing 17% year-over-year. Here, the rental rate, our average rental rate is down 3.1%, mainly reflecting the pricing of new contracts and a context of lower interest rates. Now on Slide 8, we show the purchase and sales figures for the quarter. We bought 36,943 cars and sold 36,651 cars. The dynamic pricing strategy and the growth in car rental segment in the rent a car reduced the need for fleet adjustment after summer vacation. With that, unlike previous year, in this year, 1Q was a net buyer fleet. Compared to 1Q '18, the volume of cars bought grew 54.9%.

On Slide 9, we show the Seminovos network. In this quarter, we opened 1 store and sales surpassed the mark of 12,000 cars per month, achieving 36,651 cars, with 44% or almost 45% increase in 1Q '19 compared to 1Q '18 was supported by opening 9 stores in the past 12 months.

On Slide 10, we can see the end of period fleet reaching 247,623 cars compared to the end of 2018.

On Page 11, we see that the consolidated net revenues for the quarter increased 34.3% year-over-year. Net revenues from rent increased to 23.1% in the quarter, while Seminovos increased 43.1% as a result of 44.9% increase in sales volume and a drop of 1.2% in average prices. In the first quarter, average sales prices affected a mix more concentrated on compact cars and the recent reduction of new car prices by some automakers.

Now on Page 12, consolidated EBITDA increased 25.4% in 1Q '19 year-over-year as a result of growth in the company's business division and improvement in processes and productivity. The EBITDA margin of RAC had a significant increase of 6.2 percentage points and reached 41.9%. Fleet Rental also has spectacular results of earning a 20.6 percentage point margin ratio, achieving 66.9%. On the other hand, Seminovos had a margin of 1.7%, already showing a growth over the last quarter of 2018. This fact already reflects the higher depreciation of RAC cars in the second half of 2018, partially offset by the recent reduction in the prices of some new car models, which affected the prices of the Seminovos. Now on to Depreciation on Page 13, we can see that the annualized depreciation of the cars in the quarter was BRL 1,610, 39.1% higher year-over-year or compared to the year 2018. In the Fleet Rental division, the average depreciation per car in 1Q '19 also increased with BRL 4,326. The increase in depreciation was mainly result of the reduction of prices of new cars by some automakers, which reflects on the expected selling price of cars at the end of their useful life. With the maintenance of the sales charts by the automakers, depreciation should stabilize at a slightly lower level since the impact of the scenario was already reflected in 1Q '19. On Page 14, we can see that consolidated EBIT of 1Q '19 achieved BRL 370.2 million, representing a growth of 12.2% year-over-year, due to a 25.4% increase in the EBITDA, partially offset by the increase of 19.1% in the depreciation line. The EBIT margin of the Car Rental division was 34.1% in 1Q '19, representing a drop of 4.7 percentage points year-over-year.

In Fleet Rental division, EBIT margin was 47.6%, a reduction of 0.4 percentage points year-over-year. So lower EBIT margin on this slide showed the higher car depreciation and known as the EBITDA margin. On Page 15, net income for the first quarter grew 22.9% year-over-year. Although there was an increase of more than BRL 100 million in EBITDA, higher depreciation offset some of the operating gains and the result of the net profit was a increase of 40.3% per BRL 1 million.

On Slide 16, we show cash generation of BRL 897.4 million before growth, since the vast majority of purchases for renewal occurred by the end of the quarter and will be paid -- only be paid in the next quarter, while the sale of the renewed cars generated cash in the quarter itself. Such cash generated reflects a specific seasonality of -- for the quarter and should not be annualized for yearly projection. On the other hand, the investment for growth consumed BRL 875.6 million as we paid for the fleet growth of the 4Q '18. As you can see on Page 17, net debt decreased 29.4% in the quarter after the follow-on, achieving BRL 3.7 billion in 1Q '19.

Now I'd like to hand back over to Mauricio to talk about our capital structure.

[Mauricio Teixeira, executive]

Thank you, Mariana. As you can see on Page 18, that at the end of 1Q '19, we had a very comfortable debt profile, with a strong cash position of almost BRL 4 billion, strengthened after the follow-on. In addition, this week, we completed the issuance of a new debenture in the amount of BRL 1 billion, with a 10-year term and cost of 107.25% of the CDI. We've used these funds to pay the same amount in operations in advance, with the maturity between 2019 and 2021 at rates higher than the new issuance. In the chart at the bottom of the page, you can see how the debt profile is considering this operation is strong cash position with few maturities in the next 3 years.

On Slide 19, we can see that the indicator in this quarter was 1.9x, showing that we are ready to continue capturing opportunities for growth. To conclude, I would like to highlight the evolution of the ROIC versus the cost of debt that can be seen on Page 20. In this quarter, we have an increase of ROIC to 13.2% compared to the cost of debt, which was 4.9%, we have a fairly healthy spread of 8.3 percentage points. The results disclosed in this quarter demonstrate the excellence in the execution of our strategy. We will continue to endeavor all our efforts to maintain our clients, always improving operating excellence, and thus achieving growth with value generation.

We are now open to answer your questions.

[Operator]

[Operator Instructions] Our first question is from Lucas Barbosa from Morgan Stanley.

[Lucas Barbosa, analyst]

Congratulations on your results. My question is about the growth in the fleet segment. Can you give us more flavor about the type of clients where you're growing at? Is it the segment that has less competition or companies that are moving into fleet or if it's contract renewals? And also, if you can talk about the EBITDA margin for fleet, we know that is the moment of strong growth and the bigger mix of new cars contribute towards the margin because you have a lower maintenance cost. So I'd like to know if you think that your EBITDA margin at 77% for fleet in this quarter, if that's going to drop in the next quarter, is that something we should expect for the rest of the year. That's the question.

[Mauricio Teixeira, executive]

Lucas, thank you for your question. First of all, we know that the fleet market doesn't have much competition. We have a large share of corporate fleet in Brazil. There is a large share of corporate fleet in Brazil that's still their own fleet. So there is still a market to be addressed. We are always looking for profitable contracts that provides value to the business, where clients prefer good service and are really willing to work with the company that's going to provide a better service and willing to pay more for that as well.

So we've been working a lot in our business and with customer experience, with customer excellence, with very focused strategy, so we can address those clients that have -- that want to have that type of service and price. That's how we've been able to increase the growth of fleet in this last quarter. About the margin, if you look at the average age of fleet that we closed 4Q last year to this quarter, it increased a little, so there is the effect that you mentioned to bring in the margin, higher margin, when cars are newer. There's also a lot of operating efficiency, making that margin remain at that level. So obviously, if the fleet starts to age, the margin is going to increase -- decrease, but the operating leverage, where we had operating improvements that we brought into the business, are here to stay.

[Operator]

Next question is from Pedro Bruno from Santander.

[Pedro Bruno, analyst]

My question is about the increasing depreciation. Mariana mentioned in the beginning of presentation briefly about the fact that most of it has already been adjusted in the biggest figure that we saw in the first quarter, not only in RAC but also in fleet. So my question is about the fleet that we should see the depreciation drop in looking forward? Now will that be in the second quarter or will it take longer?

In my understanding, correct me if I'm wrong, you will make most of the adjustments in the first quarter as you have a part a cars that will be sell -- sold in the very short term to make that adjustment. And the other adjustment that would be in cars that are even newer, that would be sold in 8, 10, 11 months? So then you have more time for the adjustments. So based on that, I'd like to know the speed that it would drop and if you could also give us some idea about how far would be great?

[Mariana Campolina, executive]

Pedro, thank you for your question. In fact, as you know, we calculate and review depreciation every month according to the assumptions and market reality, so with the reflection of the discount that I have on the purchase, the cost to sell it and the car price that we will obtain when we actually sell the car.

And we've seen, if you look at the operating side in Seminovos and the cost, we see them dropping per quarter -- quarter-after-quarter, so it's very efficient. In discounts you don't really see a variation, but what really impacted was the market price for cars. You see a movement of some of the automakers lowering prices, market prices, and announcing that, even in the media. So that really reflected on the prices of our cars. And that's why we review the depreciation. And in fact, there was an adjustment in that level so that we don't run the risk to get in the near future a negative or close to 0 margin in Seminovos. So essentially, we're very conservative.

And in fact, there is correct accounting practice that we believe is that we advance and anticipate that depreciation. We don't wait for that to happen when we sell the car. So as the new car market prices drop, the pressure, the price on Seminovos, we adjusted that and that's applied to all our assets and gives us the effect of unloading so to speak the depreciation a little more. So if car prices are constant or move with inflation, plus what you're going to see, you're going to see the depreciation coming back to a more normal level or similar to the historical level. So in the first quarter, we had an adjustment of that level and then we're going to see depreciation coming back to the normal levels and more defined levels in the next quarters. I believe if nothing else happens in the other variables, I believe in the second quarter, we'll already start to see lower level.

[Operator]

[Operator Instructions] Now we have Murilo Freiberger from Bank of America Merrill Lynch.

[Murilo Freiberger, analyst]

Just to follow up on Pedro's question about depreciation, I think that at first we see the negative side that's mark-to-market of your fleet. But on the other hand, when you see that to ROIC, I'd like to know if you see an environment that's capable to negotiate with automakers, at least in price or if the price increase that we expected to see in your CapEx, if that would benefit for that environment of better car prices?

And my second question is about your margin expansion. That's something that we are asking for a lot in the market for a while now and the gains in operating leverage. So in this quarter, we've seen that major gains in operating leverage. Obviously, there's a seasonal effect on that, but I'd like to know what you believe about future profitability, it we can continue to expect that type performance and operating leverage and having higher margins compared to the ones we've seen in the past year?

[Mariana Campolina, executive]

Thank you, Murilo, for your question. The purchase price is negotiated with our automakers, where we have a discount compared to their list price. So as that price changes, that also is reflected on our purchase in a way that we have a guaranteed spread. So you can see that the economy and the sale of cars in retail to consumers hasn't recovered as they expected. We have a great relationship with automakers. So in the long term, yes.

And in the short term impact, when there is a price drop, that reflects in depreciation. But in the long term, for ROIC it's always good to have a cheaper asset to be compensated through results, so the trend is good if the car prices don't go up. So the effect is exactly what you mentioned. We see that, that feeds back into the model. So the cars are renovated 12, 14 months, we're always buying and selling without having too much of the time between the price -- the purchase price and the sale price. And we see that that's going to remain. Of course, if we look at the figures, and we have that in the attachments, the price of sale and purchase there's mix and we have more sales in compact that make average price drop a little and then the purchase wasn't so focused on compact cars. That also makes a difference, but that has to do with seasonality. And then we sell it, you come back with that effect. And you see that in the dynamic of this industry, we don't see an issue with that because comparing to Seminovos too. So the margins started to show in the first quarter last year and we see that normalizing.

So in that environment, where we no longer have to be reduce price, in a competitive environment, we would start to dilute the fixed costs and capture the margin from increment from the businesses. There are 2 effects there. First of all, we've invested a lot in the past 2 years in innovation, in internal processes, in best practices, so that we can always thinking of a long run, so we can have a better return in the future. And that has jeopardized the short-term margin, but since we're always looking at the long term, we know that we will reap the fruits and now the fruits are coming in 2 ways. First by moving the fixed cost and then by capturing the internal processes. The synergies from internal processes are becoming more efficient, and we can improve the margin.

[Operator]

Next question is from Rogério Araújo from UBS.

[Rogério Araújo, analyst]

Congratulation on your results. I have 2 questions. The first one is about the cars sold. We've seen an increase in cars sold in Localiza much higher compared to the number of Seminovos stores opened. If we take a look at the last year, you sold 45% more cars, but only opened in 9 stores. And in the past 2 years, 81%, and the number of stores increased by 23%.

So I'd like to understand the reason for that. Why is it not balanced? So are you selling more cars per store? Are you using other sales channels? I'd like to understand, and know what to expect for the future, since you're still growing more? What is the strategy for that if you can share with us? That's my first question.

[Mariana Campolina, executive]

Rogério, thank you for your question. In 4Q '18, we opened 6 stores that was mainly focused in the fourth quarter. And in this quarter, we opened one more store. We always work with a store framework in a certain way idle, because they can't be a bottleneck for our operations. So the stores that we're opening, we're already thinking about the future. So RAC grew in the last 2 years, and cars are going to have to be deactivated towards preparing the terrain for the scenario because we're going to have to sell more cars.

So for this year, we still have a pipeline as a number of stores to be opened, but we also work with commercial and operating efficiency so that these stores are more and more productive. Therefore, we expect to continue selling the amount of cars that RAC and fleet deactivate, without any concerns and work on things to pursue more efficiency and be able to bring in the sales volume that we need. Because after all, Seminovos is very important. We always have to have the good infrastructure, but also the SG&A per car sold is a very important metric to us. So we're always going to pursue more efficiency in that to be able to sell the cars in the most efficient manner possible.

[Rogério Araújo, analyst]

Perfect. Can you talk about the share of cars sold in owned stores and in wholesale? How is that evolving in the past 2 years?

[Mariana Campolina, executive]

It runs at 50-50, eventually, there are some changes in one channel or the other, depending on the scenario that we have at that time, but it's approximately 50%, 50-50.

[Rogério Araújo, analyst]

My second question is about ROIC. It would have been higher if you didn't have the mark-to-market adjustment in car prices. So I'd like to know the -- any expected change, expectations of the ROIC increases, and not just that, but the scale that this company has presented, right, or not if Localiza will keep that ROIC close to the historical level of 8%, or if we see any rate recession in the next quarters?

[Mauricio Teixeira, executive]

Rogério, we're always monitoring the market. RAC is very dynamic and the competitive scenario changes really fast. We're comfortable with that level at 8 percentage point, we can see that we can grow with that spread without having to sacrifice anything. We've been growing the most. In addition to being the leader, we're the ones that grow the most in rent a car. So we don't see a need to give up on profitability at this time. But we do have that [ annual ] of the spread of 8 percentage points. If necessary, as we've done in the past, we could work on price, but we don't see any need for that in this competitive -- current competitive scenario.

[Rogério Araújo, analyst]

Could it increase though? Or would you not like to do that? Or it's up to you to continue to gain scale and competency?

[Mauricio Teixeira, executive]

We see that we have a different spread level. And considering our efficiency and competitive levels, and if that differential comes through our operating efficiency that is different, we can capture a bigger spread. We don't necessarily have to reduce it.

[Rogério Araújo, analyst]

Okay, perfect. Can I understand on depreciations. Just to understand the car that you're going to sell in 3Q '19, do you have -- did you lower the residual value to date are not, just what are you going to sell in the next quarter? How does that work?

[Mauricio Teixeira, executive]

We lowered the entire assets. All of it is adjusted to market really.

[Operator]

Next question is from Alexandre Falcao from HSBC.

[Alexandre Falcao, analyst]

I have two questions. The first one is about, specifically, Uber, I know that you don't give data on that, but I'd like to understand, if after the pilot, the new project that's in ongoing with Uber, if that, the percentage increased, then you can conclude that it made most of the growth came from that? The second one is about price perspective of the new car market and that impacts used cars. Do you have any data on that, not as consistent in relating to the past in the market. Can we get statistics about what's going to happen in the second half of the year in relation to prices?

[Mauricio Teixeira, executive]

Falcao, thank you for your questions. About Uber, we rolled out the new products, locally, the driver. We have most of already 2 drivers in the new product path. It's a success, not only for the client, but also returns for us, but the first quarter was more about migrating the old drivers than growth. There was growth, but it wasn't that relevant. So the growth that we saw in the first quarter, the app drivers, ride sharing, that wasn't the major reason why. It has -- that market has a huge potential. But first, we wanted to migrate the old ones and then grow on that. About new car prices, it's really hard to estimate.

In the beginning of the year, we thought the prices would go up and then the automakers lowered prices, there is that dynamic of competition between them and the market share. So it gives us a forecast. We always work with the forecast scenario that's going to grow close to inflation. But this year, we've already had ups and downs. Even the same automaker, they raise the prices and then lower, similar to last year. So it's very hard, based on the market and the economy, the confidence about the economy is going up and down because of politics and macroeconomy. So it's really hard to give a forecast or an estimate of what's going to happen to new car prices.

[Operator]

[Operator Instructions] Next question is from Victor Mizusaki from Bradesco BBI.

[Victor Mizusaki, analyst]

Congratulations on the results. I have a question about RAC fleet. In the first quarter, we saw small increase quarter-over-quarter, so I would like to know what we should expect for the next quarters about the average?

[Mauricio Teixeira, executive]

Victor, thank you for your question. To answer your question, I would go back a little. In 3Q '17, we bought over 50,000 cars. We grew 35,000 cars in that quarter. So obviously, those cars, the idea is that they are deactivated as in the third quarter 2018. But we don't have the ability to sell 50,000 cars in the quarter. We sold 36,000 in this one and that was already expected. We already knew that, that would happen, because there is a natural movement of deactivating the fleet. So it's an average age. That's pretty reasonable. We have 15, almost 16 months, when we're selling the car. We can still sell the car at the same price level that we can sell at 12, 14 months, the old car, which is our average.

But now what's happening is that as these cars that were bought in 3Q are deactivating, we start to have a comeback of that average age to something more normalized. I don't know if you remember, in the -- compared to last year, our first quarter last year, we had a small fleet in Seminovos. So these older fleet were changing every 15 days in Seminovos. There was a problem we had. We needed more cars in Seminovos, because we didn't have deactivations. So now based on the scenario we have, we're getting back to normal that we sold them out that we have in Seminovos. So we expect that to stabilize, and the cars that are Seminovos, so that we don't have the ups and downs where some stores -- sometimes the stores are full of cars and sometimes they don't have any. So we want that to stabilize.

[Operator]

Next question from Bruno Amorim from Goldman Sachs.

[Bruno Amorim, analyst]

I have two questions. The first one is about the Seminovos market. So there is a concern in the market about the Seminovos operations. So last year, we saw decrease in the margin of used cars, Localiza under 2%. And there has been a decrease since 2017 of the number of cars from 0 to 3 years in Brazil that can be explained by a lower supply of used cars, as there was a peak in 5 or 6 years ago in new cars the country. So when you look around at the competition in Seminovos, does your competitor has a less concentrated mix of cars from 0 to 3 years, meaning you have less competition in the cars that you sell at 1 year, a little over 1 year, compared to what you saw 4, 5 years ago?

And the second question is about the competitive dynamics in RAC, where you said that you don't see the need to lower price as much as you did in the past, at least for now? Do you think that's explained because of the price in actual terms have dropped so much since 2014, that you no longer have to lower price to gain market share over the smaller ones? Maybe most of them aren't profitable anymore with current prices, that's the question? And if it that's not the point, why, in your opinion, do you have a strong growth, even without a need to lower prices even more?

[Mauricio Teixeira, executive]

Thank you for your question, Bruno. About Seminovos, the margin that we saw in the previous quarter in 4Q is 1.3%. We started to work on that, and we signaled that in depreciation, growing third and fourth quarter last year to go back to the levels of 2 and 3 in 1Q. So we did all the math of the depreciation to get there. But on the other hand, the market in 1Q '19 has some instability in terms of price, as I mentioned. So we're able to move from 1.3% to 1.7%, but we haven't reached the 2% or 3% range that we think it's great because it gives us a safety margin to be very other away from 0, which we don't accept. So if there hadn't been a price drop, we would have passed the 2%. So it's 1.7%, but we're working on that. Now we have to adjust the depreciation against the next quarter, we can get there.

[Bruno Amorim, analyst]

So we anticipated the depreciation according to the target margin we want to achieve?

[Mauricio Teixeira, executive]

That's right. There's less cars from 0 to 3 years in the market because there were less cars sold in the last past year. Since 2014/'15, we see a drop in new car levels. But the products are very specific. It's very unique. It's a Seminovos used car with all maintenance done, well cared for. So we can't compare to what we sell at a local dealer that sells cars that you don't really know where the car is coming from, right. And you know how the person cared for that car. So our challenge is opening new stores in new places and new city or same cities, different neighborhoods, to service customers that want Localiza cars, but they don't have access to them because they're far away from the stores. About competition in RAC, we saw a drop in -- less prices drop.

We saw that dropping and now it's dropping at 1% and stabilizing. But that's mainly a result of the fact that interest rates stopped dropping as well. So we couldn't transfer that back to consumers in price reduction, otherwise, we were pressure our spread. But at that price level, the competition is still price. They don't have the spread like ours. So everybody is at the same price level. And we've been able to maintain a healthy spread. So we still have the spread, a healthy spread and growing higher than the market, growing more than the market. So while we have that kind of spread, we don't need to see any lower prices. So we're going to monitor that and see how the market is going, as we want to be the star play in Car Rental, we already are, and we want to continue to expand that in Car Rental and Fleet management.

[Operator]

[Operator Instructions] We have no further questions. To close the conference call, I'll hand it over to Mr. Mauricio Teixeira.

[Mauricio Teixeira, executive]

Thank you for your presence. Our IR team is at your delivery to clarify any further doubts. Have a great day.

[Mariana Campolina, executive]

Bye-bye.