EZTEC Empreendimentos e Participacoes SA

BOVESPA:EZTC3

Earnings Call Transcript 2022-Q2

[Unknown Executive]

Good morning well, and welcome to EZTEC result presentation for the second quarter of '22. Please note that this call is being recorded. [Operator Instructions]

Before we start, we'd like to mention that any statements during this call pertaining to EZTEC's business projections, operational and financial targets are based on management's beliefs and premises as well as currently available information. Future considerations do not constitute an assurance of performance. They involve risks, uncertainties and premises. Investors may take into account that general economic condition, industry operational circumstances may ultimately affect EZTEC's future performance. They may cause the company's results to differ materially from those expressed in those forward statements.

Now I would like to introduce myself. I am [ Pedro Lorenzo ], the IR Coordinator for EZTEC. And along with me for this presentation, I have Emilio Fugazza, our CFO and IR Officer of EZTEC.

I'd like to introduce you in the third slide. We are starting talking about the launches of the second quarter of 2022, when -- something close to BRL 230 million in house [indiscernible] and BRL 180 million in [indiscernible] group. Those projects are directed for the high income clients. They are segmented by [indiscernible] on the high end and it's more leading type of product that the company is launching recently. It's something close to BRL 400 million that we launched in the second quarter, a close number that is very similar to what we have done in the first quarter of this year.

In talking about those launches that we have made in the first quarter, I would like to highlight that both Expression Ibirapuera and Exalt Ibirapuera, they are more than 51% at this time.

So moving to the next slide on Page #4. We're going to start to talk about the operational performance. And you'd be able to see that our gross margin -- our gross sales was up to BRL 666 million in this quarter, and net sales standing at BRL 231 million. Despite the [ falling ] of the sales performance, we'd like to point out the major of our sales came from our recent launches, more than 60% of it. And also, I would like to highlight that the constellations are evolving very well for the company since it came back to the same amount that was reported in the year before. So it's now at BRL 335 million.

Now moving to the Slide #5. We would like to talk about the future launch, the next launches for the company. And we'd like to share with you that BRL 670 million in potential sales value is ahead but also talking about the second phase of unique green is a picture, I'm proud you can look at the border at your left -- to your right. You will see that it came with a potential sales value share is at BRL 410 million. That is the same project, the second phase of the same project that we have launched in the last month -- in the last quarter of 2021 in which it was already 50% sold in that first phase.

And now by launching these products, we have opened those -- their sales stands in the last weekend, and we already performed something close to 25% in sales, something close to BRL 120 million for this project only. Those numbers, I would like to remember that this project is already in our accountability. So all of these sales will be affecting directly our revenues for the third quarter of 2022.

So moving for the next slide, I would like to talk about what the company is going to deliver up today and not this year. And you can see that it's something close to BRL 800 million, EPS, the valued share is that -- in which in the charts below, you can see that something close to 82% of it, talking about PSV terms is already sold. So our future deliveries are being done or will be done. Not -- they will not increase too much the inventory levels for the company since they are very well sold. So up to today, we have already launched something close to BRL 300 million with the deliveries from first quarter and the second quarter together.

Moving to the slide at the next page. I would like to talk about our land bank formation since the company is not acquiring new land lots. We are just launching our units and correcting the value by the INCC, the inflation index here for construction industry in Brazil. We can see that despite having launched something close to BRL 900 million, we have a projection variation at the same amount, maintaining the same level that we have reported before at BRL 11 billion in our land bank.

But another thing that is really important to highlight is the product that we are carrying with resulting causes that are not inside at the moment -- at our land bank, but it will be soon being considered since majority that has a single project only that is [ extra marginal ] that increases something close to BRL 2.5 billion for future land bank formation, going something close to BRL 13.5 billion or BRL 14 billion.

I'd like to remember also that we have a very diversified land bank that you can see in the chart below that is almost well distributed in our company, Fit Casa, is a brand very well distributed, so making us available to launch whatever is necessary in the future scenario. And also in the chart -- in the map at your right, you can see that these lands are very well located, most of it, BRL 6.5 billion are located in the South Zone of Sao Paulo where we can make more aggressive sales and do very well projects for the neighborhood.

On to the slide in the next page, Slide #8, talk about our inventory evolution. We'd like to point that we -- despite all of the launches and the gross sales that we are carrying now, the project that we launched in the last year is now considered a no sales inventory. So you can't buy inventory that you can't see, no evolution on the chart. Because of that, we are reporting our inventory for sale that is close to BRL 2.7 billion, what is currently something close to 2 years of sales performance for the company.

But I'd like to highlight that only BRL 367 million of this inventory is residential real inventory. If you look at the chart that you're -- below your right. That major -- the major part of this inventory is under construction at the moment. So we're looking very carefully for future launches, looking shortly for those projects that would also provide us a good sales fee and also a less -- a good gross margin and less inventory formation.

Moving forward, the next part, we are going to start to talk about our financial performance, and I would like to pass the word to our CFO, Emilio Fugazza so he can go ahead with the presentation. Mr. Emilio?

[Antônio Clemente Fugazza, executive]

Thank you very much, Pedro. I would like to start talking about financial performance on Page #9, starting with net revenues at the top left of this slide. Second Q 2022 came at BRL 243 million compared to BRL 287 million in the first Q 2022. It's important to mention that in this Q, there was recognizing of revenues about the project Unique Green, the first phase. We have launched so far something around 50% sold of this first phase.

But the cost of the land is so cheap. All the cost is the minor part of the whole cost of this project. That's why the amount of recognized is so low. But as we see the construction improvement, we are going to see the major volume of revenues coming up.

In terms of gross margin and gross profit on the top right, you can see BRL 4 million and a gross margin of 35% came down from 39% from the first Q 2022. Here, it's important to mention the technical effect we faced this quarter. The whole amount of budgets -- of projects and the construction. We're adjusted by inflation of the sector, INCC, which was something around 5.5%, something close to 5.5%.

However, the receivables of our -- our receivables from those units and the construction were not adjusted by the same INCC because like a contract, the clients, they have to pay this INCC with a delay of almost 2 months from the month. We have, I would say, to recognize this in the construction and the construction time.

So meaning that in the third quarter, you were going to see this amount of receivables being adjusted by the same index we saw in the construction in the second Q. So in the third Q, you're going to see an amount very close to BRL 2 billion, adjusted by 5.5% of INCC without the counterpart of the construction costs, carrying the gross margin for the same level we saw in the past, very close to 44%, 43%. That is our expectation.

In terms of equity income, in the bottom left of this slide, BRL 24 million, meaning that all the projects we have been doing with our partnerships under construction right now and coming with the same standards of the results and gross margin, the projects we have been consolidating. So something close to 35%.

It's important to mention that those projects are very well sold, projects like the design, the neighborhood of [ Marqa ] region of Sao Paulo or even low income projects like PIN International in Guarulhos, one of the region of Sao Paulo [indiscernible], the same region. So we are very excited to improve this line of our balance sheet in the next coming quarters with new launches like the information before, the very first project of EZ Co, project located in [indiscernible] in the very high-end project.

In the bottom right, finally, margin -- backlog margin and backlog results BRL 361 million and a backlog margin of 30%, coming down from 40% from the first Q 2022. The same effect of the gross margin, we're going to see a rebound of this margin to another 40% or a little bit more because of the adjustment of our receivables at a base of 5.5% INCC.

Moving on, Page #10, on top left, financial result. Net revenues, BRL 48 million. This is one of the most -- or higher financial results ever for this company. BRL 48 million, meaning that 1/3 of this value is coming from the cash and equivalents. Here in Brazil, we are facing something close to 14% based interest rates. And obviously, 14% acquired at almost BRL 1 billion cash is 1/3 of the results you can see.

And the 2/3 -- the remaining 2/3 are coming from the portfolio of direct receivables we are financing to our clients. Nowadays, on the top right, you can see BRL 378 million, a little bit more than 1,000 clients we have been providing this financing. And on average, adjusted by IGP, the regular inflation -- the IGP plus 10%. Apart from that, we have something around BRL 200 million of receivables in a time of being transferred to the banks and even though adjusted by IGP plus 12%.

On the bottom left to net income. Net income coming at a pace of BRL 83 million. Together with the first Q 2022, BRL 105 million, meaning the first half close ended up at BRL 188 million of net income, meaning net margin very close to the gross margin for this company at 35% first half.

Moving on to Slide 11, capital structure. You can see on the left side of this slide, the third-party capital has a little improvement this quarter, specifically because we raised the first venture of the company, BRL 304 million, together with BRL 91 million of loans in project -- and BRL 164 million of payments to be done with the land we have acquired so far, meaning that the whole capture -- of this point.

On the right side of this slide, BRL 5.4 billion of assets, meaning that the majority of the growth of this line was land bank. You can see the first line in second Q 2022, BRL 1.7 billion land bank, meaning that something close to BRL 500 million is the land and construction of cell towers. Cell towers is our project -- corporate project, 2 commercial towers, [ triple way ] towers located in the south of Sao Paulo. 40% is [indiscernible] and a project -- that the price, the potential sales value is close to BRL 1.8 billion.

Cash and equivalents, BRL 1 billion. Inventory under construction, something close to BRL 600 million. And another important mention is that finished units receivables, BRL 457 million, meaning that something close to 75% of this whole bank. On the management of EZTEC, we are providing financing for over 20 years for our clients.

It's important to mention that, nowadays, we have been open. We haven been open to our clients another, I would say, line of financing, close to 35 years, and IPC or IGP plus 8% in order to improve sales, in order to take advantage of this branch of our company providing so much income, so much good results for this company in the last 4 to 5 years.

Finally, it's important to mention that the book value of this company is very close to BRL 20 compared to the current price of our shares close to BRL 18 per share.

On the slide on Page #12, finally coming to an end this presentation 2 important facts to mention. First of all, share buyback program. Share buyback program has consolidated. So far, we have acquired almost 9 million shares, meaning that from 227 million shares at the beginning of the last year, nowadays it's something close to 280 million shares, a dilution of almost 5%, investing a total value of BRL 177 million in an average price of BRL 20 per share. In this third program nowadays is about 2.8 million shares already -- a total value of BRL 45 billion, average price of almost BRL 16 per share.

In terms of dividends, coming to a regular pace to pay dividends quarterly. The Board of Directors have approved the payment of BRL 0.09 per share at 31st of August, the next -- 31st of August, meaning as something goes to BRL 19.7 million to be paid, which means close to 25% of the total amount net profit to release at this moment.

So with that , I would like to open for questions and considerations that myself and Pedro are completely available to answer.

[Unknown Executive]

[Operator Instructions] Since there was no manifestation, we would like to please all of you that have heard this presentation, result presentation. And I'd like to point out that EZTEC Brazil's conference call is now closed. And also, as IR coordinator, I would like to mention -- we would like to inform that we are out developing new tools and revising our layouts for our materials in order to try to bring you more transparency, a correct information and more engagement to our readers regarding the company business and strategies.

So therefore, be sure to check out our materials on our Investor Relations website, and the new earnings release, this webcast presentation and take part in our opinion, too. We thank you a lot for your participation, and we wish you a great day. Have a nice weekend.