EZTEC Empreendimentos e Participacoes SA

BOVESPA:EZTC3

Earnings Call Transcript 2022-Q3

[Pedro Tadeu, executive]

Good morning, ladies and gentlemen. Welcome to our EZTEC's Third Quarter '22 Earnings Conference Call. We inform you that this event is being recorded. [Operator Instructions]

Also on our website, you can find the slides for this presentation in the download center. Information is available in [ BRL and in BRGAT ] and IFRS, applicable to real estate development entities in Brazil. Otherwise, it will be indicated as follows.

Before starting, we'd like to mention that any statements made during this conference call regarding EZTEC's business prospects, projections and operational and financial goals and figure beliefs and assumptions of the company's management as well as information that is currently available. Forward considerations are not guarantees of performance. They involve risks, uncertainties and assumptions, as they refer to future events and therefore, depend on circumstances that may or may not occur.

Investors should understand that general economic conditions, industry conditions and other operating factors could affect EZTEC's future performance and could lead to results that differ materially from those expressed in such forward-looking statements.

Now I would like to pass the floor to Mr. Emilio Fugazza, Financial and IR Director, who will start the presentation. Please, Mr. Emilio, you can begin.

[Antônio Clemente Fugazza, executive]

Thank you, Pedro. Good morning, everyone. It's a pleasure, as always, to start our earnings calls for this, our third quarter of 2022. I'm honored to be here, along with the President of the Board, Flavio Ernesto Zarzur; our Vice President of the Board, Silvio Zarzur; and Vice President of New Business, Silvio Ernesto as well. I will now begin the presentation.

I will now begin talking about launches during this quarter. We start with Unique Green. We had the second phase launched here in August. We have BRL 410 million. And that, when added to the BRL 367 million already launched in 2021, make up a total of over $800 million. This is our long-running pack to build up the west end of São Paulo.

You can also see down into the right some other launches in Vila Mariana and Vila Clementino, we have sold 55% of these launches. Also near Santo Amaro and Chácara Santo Antônio, we have sold 33% of our launches there. And so in total, that may talk BRL 1,314,000.

Now moving on to our next slide. We see our operational performance. On the top left, we see BRL 470 million in growth sales. That's the largest sale in the company's history. And now we have -- when we remove downgrades or transfers, we see that these results are absolutely in line with the last few quarters, nearing BRL 30 million. It also bears highlighting that the middle high-end sales were absolutely outstanding compared to the rest.

Our upcoming launches add up to a total of BRL 580 million. This is forecast for the fourth quarter of 2022. Starting with Park Avenue. This is a joint venture. We have 50% of that launch. This is in Avenida Republica do Libano. It's a very high-end construction which -- it is worth BRL 235 million in terms of construction, that our part.

We also have Jota Vila Mariana. This is the first launch to be implemented with our joint -- in our joint venture with Lindenberg. This includes the apartments with sizes up to 120 square meters. This is also very high-end construction.

Next, we have Chanés Street. This is one quarter -- one street block away from [ Avenida Dos Bandeirantes ], BRL 170 million of our part of our construction. We have a number of different unit sizes from small studios to 75 square meters.

And lastly, we have another joint venture in Osasco -- PIN Osasco. This is now the third joint venture that we have with that company. This is in the [indiscernible] region in the Osasco municipality. EZTEC has invested BRL 43 million, and it's already started being sold.

Moving now to the next slide. We are now on Slide 6 and talking about deliveries. You can see on the left, on image of our launch Fit Casa Alto do Ipiranga. There are a number of different units. We have sold 75% of them. Everything has been delivered strictly on time and on cost. And so we have completed practically everything that we promised to deliver in 2022, that leaves around [indiscernible] adding up to a total of BRL 768 million in delivery. It should also be highlighted that we have sold 82% of units. So we have practically sold out -- all but sold out that even it.

On our next slide, we see our land bank. This -- this adds up to BRL 11 billion, which means it has remained absolutely stable since the part of the year. Despite some acquisitions we've made, some properties that we've purchased with our incorporation partner and also some paving the way for some constructions in the south end of Sao Paulo.

On our next slide, you see some details about our inventory. We spent in the third quarter with BRL 2,700 million, so BRL 2.8 billion. We have sold all but BRL 1.1 billion. So our inventory is very well controlled. We have approximately $338 million in residential and many -- and much more in commercial.

And now talking about our financial performance. On the top left, you see our net revenue, and we finished the third quarter at BRL 281 million. That's a gain of BRL 40 million compared to the second quarter. We have record sales for this quarter, one example of which is Unique Green. This means essentially we are improving our results, but we still have a lot of room to cover because construction on that -- has not yet progressed, but we've already sold many units.

You'll also see that we've recovered 5% of our margin compared to the second quarter.

[Technical Difficulty]

Apologies, we have some technical issues in our connection through the EZTEC office.

The past few months really tell us what we can expect for the quarters to come. Just to complete this slide, on the bottom left, when we see our equity income going, we have BRL 33 million. That's a result of our many partnerships, which have been increasing over time, not just in the city of Sao Paulo, but in the Metropolitan Sao Paulo area as well, which includes Osasco and Guarulhos. We have low-end and high-end construction ventures there. So we'll have a BRL 33 million result or almost 40% gross margin, 37.2%.

Moving on to the next slide. Here, we see our financial results. Our financial result is BRL 30 million, which is an important result for the company. This does seal the impact of the current inflationary situation that we have been seeing over the past few months. This movement doesn't end in the third quarter. It will persist into the fourth quarter. But I should remind everyone, we have a very comfortable cash flow status. And that is still resulting from our many partnerships.

On the top right, we see the development of our receivable portfolio, and we see that since the start of 2021, it has remained quite stable. We are now at BRL 367 million. This means that we do have a lot of expectations of course and that's also a result of many of the campaigns we've been running and our financing offers as well. And we expect to see a lot of good development over the next few months.

On the bottom left, we see our net profit of BRL 105 million, which is a great result and our margin is even better than in the past, where we are now at 37.6%. We'll talk more about those BRL 105 million in just a bit. And our quarterly outlook has also been approved by the Board. I'd like to remind you that these numbers are effectively linked to a stronger growth, stronger investments by the company in terms of share buyback, for instance, that adds up to over BRL 200 million that we have invested. We also have a considerable portion, over $700 million that were invested in property, real estate. So that puts us at BRL 412 million in net cash.

We will talk more about that in the next slide, and here, we see our capital structure. We have finished the quarter at just over BRL 4.5 billion. Our third-party capital is approximately BRL 969 million at the moment that includes some investment, financing and debentures, construction and land purchases. Those had up to just under BRL 500 million and land payable being BRL 139 million.

Our 2 greatest assets at the moment are land bank, BRL 1.194 billion. That is a historic level of land bank. And also one of the major highlights in this total are commercial investments that adds up to BRL 5.519 billion in assets owned by the company.

Here on Slide 12, we see the development of some of our commercial ventures. This is the most recent phase of Air Brooklin Corporate on the left and Esther Towers on the right. These 2 developments will bring EZTEC a great financial return over the years to come in terms of rent.

We have some other relevant topics to discuss as well. Dividend payment is valued at BRL 25 million, approximately BRL 0.11 per share. And so that puts us at BRL 172 million in dividends paid. So that is the highest number in the past 5 years. These dividends will be paid on November 11 -- sorry, November 30, 2022.

And now we will move on to the Q&A session.

I'd like to mention that we are thriving in a very challenging scenario. Our B2B last year was BRL 1.8 billion. This year, we are looking to reach BRL 1.9 billion. We will very soon have a new level of revenue that we will attain. Our revenue is going to increase considerably. So the company is growing and it is accelerating its growth as well. So this will bring us to a new level of revenue.

When we were at 2%, we were working in a certain manner. We are reacting to that to present interest. And now our interest is much higher. So we are launching new ventures more quickly, more aggressively. We're also controlling our costs. We have recently balanced our cost over the past 9 months. So we are no longer technically accelerating, but our investments are very well controlled, as this is our margin.

We have increased our sales volume considerably to really own those sales volumes. I also want to mention that our properties, we have very large properties, and they were bought almost 100% in cash. So there was no financial loss involved. The prices we paid were very competitive. We have everything needed to build up those properties.

So now looking forward, our inventory is very well located. So this is inventory that is perfectly ready to be sold. Each product within its own region of the city is very competitively priced. So our scenario that we're in is quite challenging, but the company's situation is very good. Our prognosis is very good.

[Unknown Executive]

This is Marcus now speaking. The EZTEC showroom sales, we now have 2 of them. They are going to be very important in helping us to sell off all of these products that we have.

[Pedro Tadeu, executive]

So ladies and gentlemen we now begin the Q&A session. [Operator Instructions] And so the first question is from Mr. [ Andre ] from Itau.

[Unknown Analyst]

Good morning, folks. Thanks for the presentation. Could you please talk a little bit about what you're seeing in terms of labor and materials cost? You mentioned that concrete and cement were pressures that you held, although other inputs have been dropping in price. Have you felt that impact? Or what can we expect looking forward in terms of costs?

[Unknown Executive]

I just want to mention that Marcelo will respond, but as a whole, during the past 9 months, we've been cost stable compared to the INCC. This cost has been growing, but there are some specific particulars that Marcelo will talk about.

[Marcelo Zarzur, executive]

Well, good morning. We are currently at a time in our economy and in the engineering and construction field, where materials have stabilized and some are actually seeing correction but cement is one of the few inputs whose price continued to rise.

We do have information [indiscernible] they're going to come into the Sao Paulo market very strongly. So we expect that prices, including cement prices, will be contained moving forward. Especially when [ CSN ] starts operating in strength here.

Other products have either dropped slightly in price or are stabilizing. When we look at the USD exchange rate, we also need to remember that whether there is a sudden high in USD to BRL exchange rate that affects all commodities. And labor prices, I think, have reached the limit. So I believe that now looking for the INCC will cover any potential high prices that we see.

[Pedro Tadeu, executive]

The next question comes from Mr. Bruno Mendonca from Bradesco.

[Bruno Mendonca, analyst]

I have 2 questions. The first is about the REF margin. You were very clear in the release showing that the REF margin is a little bit lower than the reported margin. So could you talk a little bit about the margin levels you're working in, especially with regard to future projects? And also on that topic, do you think sales of existing inventory and launch inventory, do you think you are working towards selling those at a higher margin than the REF margin?

And the question -- the second question specifically is about EZ Infinity. I've been hearing that there is a discussion going on with regard to zoning changes in that region. So could you update us about that situation, please? The zoning change? And would that have an impact on the project?

[Unknown Executive]

All right. Here's the thing. The older ventures that you asked about, they are being sold well above the margin. So some of these ventures are older ventures. They were built during a better time, let's say, and so that means that their margin is higher. That means that our [ mean ] margin is comfortable, let's say.

So when we look at a launch being sold right now a contemporary current launch, those margins are a little bit tighter. But when we look at the total net results for the company, we see some higher costs. We were able to raise prices slightly. We increased sales speed as well a little bit. We also have some costs linked directly to sales. So overall, we were able to keep our margin quite stable as a whole.

And as for your second question, the Infinity, which has been renamed to [indiscernible] we were very careful when working out the details of this launch. This is a partnership with Lindenberg. You know that this is the company we've been looking at for quite some time now. And we brought the Lindenberg brand into our fold, and we really updated that project. We improved it. We reduced costs, we inserted it into the market in a better way. And so honestly, I don't have any news about zoning changes because -- so that was about the Infinity.

Your question specifically is about zoning change. We have 500 different speculative questions about zoning changes but in practice, nothing has affectively happened. So I should mention that this launch is in the Paraiso district, and there are no properties there. So I don't know if any zoning change is there will have any impact at all because there are no green ground properties in that region.

And the thing about Infinity is it is a very large property in a location where you don't have any green ground properties. So that will not have an impact -- the zoning changes will not have an impact on existing properties. So if the zoning changes, okay, well, that doesn't mean anything for ventures that are already approved. And our venture has been approved. It has been recorded and archived at the notary office. So there are no changes applied to our venture.

And I can tell you that our sales for that venture are going to be spectacular. This is a very distinguished launch in that region. Lindenberg is also helping us in that regard. You know that pricing can be -- can become really premium if we so choose, and that is what we're doing. So rest assured.

[Pedro Tadeu, executive]

And now the next question goes to Mr. Gustavo from BTG Pactual.

[Gustavo Cambauva, analyst]

I have 2 questions. The first is about your forecast for the next year to come. You mentioned the fourth quarter of '22, and so the company is looking to round out the year with BRL 2 billion in launches. I'd like to know about next year, do you have a pipeline already in place? Do you expect to grow or shrink in the face of our challenging scenario? Do you have any idea what the company size is going to be next year?

And my next question is about inventory sales. We see some good results in the third quarter. I'd like to understand a little bit, could you explain the reasoning behind that perhaps? Were there any specific sales event? Was it the home store, some policies perhaps, more aggressive policies, discount or just statistic results from the market? I'd like to understand a little bit about what you found during the third quarter and your forecast looking forward?

[Unknown Executive]

Our inventory sales are linked to a change in the company's policies. So we respond to the scenarios. So we came from a 2% interest rate and it very quickly hit 3.75% and we keep searching for better prices and better liquidity. We have a good margin, as I mentioned, but we decided to speed up sales.

So we worked with an accelerator. We increased our marketing budget. We gave real estate brokers better incentives and so on, many such similar investments and incentives. We worked with clients more directly as well.

So all that added up to give us better results. So I should mention that the market scenario has not improved. So we actually ran some tests. I wanted to see results in practice. And at the end of the day, the discounts and marketing we ran were diluted among the sales volume. So even though the sales volume was sold with some discount, we did get better margins and better results.

So all of us, the Board, we decided to persist, let's call it, the more intensive sales, more aggressive. We know that we were going to have better results. I don't know what our scenario will be until the end of the year, every month something different happens. So it's all surprising. But our idea is that we are going to have sales similar to what we saw during the third quarter. So the fourth quarter is going to be similar to the third.

And let me put it to you like this. Sometimes people require answers from us because we change the company's heading. A company as large as ours needs to be compared to a ship, a transatlantic but we have been changing our heading and now I'm talking about next year's forecast. So we have pipeline that's very strategic. It's approximately BRL 3.5 billion has been approved. So if our pipeline for next year is BRL 3.5 billion this was meant for us to select some properties and launch something like BRL 2 billion or just over BRL 2 billion.

[Gustavo Cambauva, analyst]

Can I?

[Unknown Executive]

Yes. Go ahead.

[Gustavo Cambauva, analyst]

Okay. We have approved BRL 3.5 billion, and we are probably going to launch a little bit less in that, but how much lapse is yet to be decided depending on how the economy evolves?

[Unknown Executive]

So our pipeline is very large. When we have the conditions to have results even better than this year, but we will decide that as each launch develops. Emilio and everyone has an opinion and everyone gives their opinion. We were probably going to be quite stable, but we still need to see what lies before us.

[Pedro Tadeu, executive]

Our next question is from Mr. Jorel from Goldman Sachs.

[Wilfredo Jorel Guilloty, analyst]

Good morning, everyone. I have 2 questions. First, you said there was an increase in gross margin looking forward. I'd like to know what are the drivers? Is it a price increase? Is it the drop in inputs? Is it more about the change in the mix? Could you quantify a little bit what the drivers were for these forecasts? And also is your margin going to be sustained looking forward?

And the next question is what are the plans for marketing buildings? I know there's still a lot of -- a long road ahead of us before delivery, but I'd like to know if there's any news in that sense.

[Unknown Executive]

Thank you for your question. Let me talk first about margins, Jorel. What we have today in practice, in fact, is what we have shown on our results presentation. So what we have sold and what we are building is something like 37.2%. In our release, we actually have more openings.

But when we talk about finished inventory, ready inventory, we see a better margin because we have BRL 500 million that is ready. Our gross margin is very near to 50%. So that helps us a lot. Each percentage point helps us to get a better margin than our REF margin.

On the other hand, the gross and REF margins are the margins you see on our consolidated results. So we also resell and transfer the margin and our equivalent margin as part of the product mix that we have, we see that margin slightly closer to 40%.

And a launch like this one, that we're going to undertake right now in Republica do Libano that has a margin that's better than our mean margin or average margin. So some specific components bring our margin closer to what we want to see.

[Wilfredo Jorel Guilloty, analyst]

I'd now like to ask you to please continue answering.

[Unknown Executive]

The thing is for Esther Towers, we are moving forward in construction. Construction is probably going to persist until '23. And we are currently in a waiting phase and we're open to new opportunities that show -- that appeared -- that makes themselves known to us. We are placing it in the market. We are identifying the best position on the market. So we are probably going to rent it. That's what we're looking at.

And our focus is on finishing just one tower just -- so that we can start renting out the unit. Yes. And the second tower will be on hold waiting for a more appropriate moment.

We are open to sales, yes. If we find a good proposal, a good offer, then we are open to selling a unit or 2.

[Pedro Tadeu, executive]

Our next question comes from Mr. Ygor Altero from XP Investments.

[Ygor Altero, analyst]

Congratulations on your results. Going back to the outlook for 2023, I'd like to know what you think about the mix and other segments? You're probably more predisposed to the high end of things especially when working with Lindenberg, but I'd like to know what you think about the low end? We've seen many updates from the [indiscernible] house program. And I think at the end of the day, that could improve the status of many constructions.

And on the sales side, I'd like to see -- I'd like to ask you if you see your inventory performing better than recent launches? Thank you.

[Unknown Executive]

All right. Our launch mix, it's what we mentioned, our pipeline is currently almost double with what we have before. So we're going to respond to that according to the market and according to our sales development. And that's the ideal solution because if you issue a forecast too far ahead of time, when it comes time to see the results, you might be caught off guard. So when it comes time to decide whether they or not to launch a given product, that allows us to be more assertive working like this.

We work very closely with Fit Casa, but as it turned out, in order for us to really come back strongly, we're going to need to take a little bit more time. So you're probably going to see something like 25%. I'm going to just call it My House, My Life, that's 25% or a little bit more, but our margin has always been very good. And I should manage to that in My house, My life, from EZTEC something like 38% of gross margin. So that's the type of venture we're looking at.

But if we want to really dive into this business, we probably need to wait another year. And just to remind you, we also have a partnership with BP8 and that works very well in that sales range. And we have partnerships with Lindenberg for the high end, but we also have important partnerships in the low end. BP8 has 4 ventures, very successful venture at the moment. And we also have 2 properties we purchased. There are going to be some important launches this year as well. That will add up to integrate our mix.

So it's difficult to maneuver what we have right now. But by the year 2024, we expect to have much more.

[Ygor Altero, analyst]

And what about discounts and sales?

[Unknown Executive]

All right. Well, for gross inventory, we are selling very well. The construction, launches, everything is selling quite well within their own lane. When we look at launch inventory, construction inventory and finished construction, there's another -- so each lane, so to speak, has their own development.

And our margins improved because once the venture is finished, it can obviously sell for higher cost. But our costs are the same for all types of properties. Our financing on finished ventures is very good. We have some very good options there, which we can't offer on properties that are currently under construction. We have easy access to credit approval. Actually very -- we can offer very good interest rates. We can also offer indirect financing for finished projects.

So when you see a giant construction project, a year from now, our inventory is going to be a little bit lower necessarily. And that happens for every venture and margins go up, as the portfolio is sold because you keep readjusting prices, of course, as your inventory goes down.

[Pedro Tadeu, executive]

Our next question comes from Antonio Castrucci from Santander.

[Antonio Castrucci, analyst]

Actually, I have 2 questions. What are the sales like for Arkadio? Especially because Estrela has a very, very large venture -- very close to that one. And I'd also like to understand, can you detect that the store launches have had a good impact on remaining inventory?

[Unknown Executive]

Well, the sales percentage is something around 30%, but our home store sells all sorts of products. Our home store is actually near this Estrela venture, but we have roughly 5 products in 1 kilometer radius from the home store. So we have all the different models there, all of our ventures. So we sell all sorts of products.

I have a large breadth of products you can offer there. And we are located on [indiscernible] which is a very large avenue. It's a huge [indiscernible]. So we have 1 or 2 years of that home store, but this was a very important location for [ BGB ] and for EZTEC as a whole. So we have very good results in that region.

So look, Arkadio is doing well in terms of sales within the forecast. We have Arkadio, we have [indiscernible]. We have the Brooklin venture. We have [ PDC ]. We have Sky. So we have a number of different products there.

So to answer your first question, yes, the home store, yes, we have seen a broad uptick in sales, thanks to the home store. So the home store is operating very well. And we are learning very quickly how to receive customers, how to sell products. So we're actually at a very good sales position at that store. So the results there are quite positive.

In terms of competition, in Sao Paulo, yes, it exists as it does anywhere. And I'm not worried. It's just one more competitor. We have competitors all around Sao Paulo, in Moema and the East zone. We are not -- we're no strangers to working with competitors. It -- and it doesn't just have a negative impact. There's a positive impact, too, because when you release, when you launch a venture in a region, you start moving that region around so you can sell more customers become more aware of that region.

We have many regions where we have competitors close by, and our ventures are spectacular. So [indiscernible] does not worry me at all. And our sales results are very good. The results were good before the [indiscernible] venture, and they are good now.

We are positioned at a location where we have a giant B2B and we understand that, that B2B is over BRL 1 million -- sorry, BRL 1 billion. So there's a lot going on and -- there is still going to happen in that region.

[Pedro Tadeu, executive]

Our next question comes from Mr. [ Hugo Grassi ] from Citibank.

[Unknown Analyst]

Congratulations for your results. I have 2 questions. The first is to do with the land bank and I noticed that you actually acquired some properties, which you haven't done in a long time. And that seems to me to be a patent profile, you purchased the first property in [indiscernible] and sold some old properties, one in Praia Grande and another in Guarulhos. So my question about the land bank is what is the rotation like in your land bank? Have you been adapting it? Are you going to launch anything in particular, maybe out of those BRL 3.5 billion?

And the next question perhaps is more specifically for Emilio in terms of credit. This week, we saw some quite uncomfortable news, especially from Bradesco with regard to defaults. I'd like to know what the bank's appetite is like? And have you felt anything like that in your portfolio perhaps in the [ ANF ] portfolio? So land bank rotation and defaults and appetite for credit.

[Unknown Executive]

Thank you. Let's start with the land bank. I think the land bank rotation is a strategy that the company has been adopting. And when we replace, when we exchange something that's not very good or something that's better, while that's only -- it's always going to be good. We are strongly linked to certain sectors.

When we sell a property, these properties they went -- they didn't go to other construction company; one went to a church, the other one went to a retail store and money is money. You do the math and you see what gives you the best result.

Now as for purchases, these purchases are the fruits of our increase in speed. We've been improving our inventory. We've been increasing property -- we've been seeing that property prices have been rising. It's quite surprising, but when we find a great opportunity and it fits our pockets and so on and so forth, and we see that it fits our time line as well. It's all very dynamic. So we can make different decisions as long as they are in the company's best interest and they give us financial profit and good returns, ROI, cash flow and so on.

So if it's worth it for the company, then we'll follow through. So we are looking into all possible options. Everything is inspected many times.

When we talk about nonoperational results, there's a lot going on that we need to follow through on to improve the company's results. So there are -- there are specific crucial event going on that we need to capitalize on. And it's also possible that it could be a risk mitigation in certain locations, which is also part of the business and part of our strategy.

[Antônio Clemente Fugazza, executive]

Now Hugo, moving on to the second question you asked about credit. Over the year 2022, with regard to customer financing, we see that credit for our customers, credit is becoming more expensive. So we see the growth in credit prices. So that does have an impact on the company. And we see the decrease in [indiscernible] savings as well.

So we have been offering our customers a number of different options to help them with financing and we try to avoid passing those customers on to the bank. We try to do the best we can to ensure the best rate that we see in the real estate industry, something around 8.9% to 9%, 9.5% at the highest.

So we have published that on our release. We're at 3.5% default rates. This is actually quite a lot lower. You know that these numbers have developed over the past few years. We see a lot of credit customers being transferred to the bank and default rates are still quite relevant. So they're quite low as a whole.

And that is what has led us to offer credit at the 7.99% rate. For instance, for our finished ventures in Guarulhos because we know that this is a long-term financing, we know that these rates in the long term are very logical for the company. So for the time being, it doesn't bother us, but we are observing it. We have our eye on it.

[Pedro Tadeu, executive]

We have a question from [ Andre Bayer ] from [indiscernible].

[Unknown Analyst]

It's always good to see such good results in a country so uncertain and seeing your results is certainly spectacular. My question is also about lines of credit. Looking at the year 2020, 2021, EZTEC's gross cash was approximately BRL 1 billion, and that was almost zero, it was something like BRL 30 million, BRL 50 million. It was very low compared to growth at. And I understand that that was only possible because you were probably selling great numbers on the blueprint page. You had up to 40% by the delivery -- the property was ready. Now I'm not stating all of this. I'm just hypothesized, but when we look at 2022, EZTEC's growth path was approximately stable but debt was up to something like BRL 400 million.

So my question is, why did this phenomenon occur? I'm just thinking here -- since the SELIC rate was very low, instead of leaving the money in the bank, they've started paying. But now the phenomenon we see is inflationary but the INCC was higher than the [indiscernible]. So if that's the reason, it would be better for someone to withdraw money from [indiscernible] and pay their debt, but I'm just conjecturing here.

My question really is, why did that ratios go up when the construction volume is nearing BRL 1 billion? Preparing 2020, 2021 and 2022, my question is, if SELIC is 3.75% and you had even lower debt, wouldn't the profits be representative of that? I hope you understand my question and my hypothesis.

[Unknown Executive]

I'm going to start answering, and then Emilio will continue. But you see an increase in sales, launch volumes, it represents an increase in the company's size with the same level of capital. So if you want to grow the company, as we've mentioned, we're going to reach BRL 2 billion in operations per year. When you look at our net revenue, that's going to be something like BRL 1 billion a year, and we're going to move it up to BRL 2 billion. But when you start investing more heavily, you start using your capital more. And that is the greatest reason for reducing your cash flow, is when you use it to grow the company.

In the past, we did business more slowly. And now we understand that we need to do business. We need to work with our cash flow, our working cash flow more intensely. So at the end of the day, our goal is to improve our results, improve our ROI. We have good liquidity. We have a giant assets. The company has a gigantic asset base. And so we are now working to improve ROI. And I will let Emilio explain the technical aspects, but I wanted to mention the increase in volume because that eats up cash.

[Antônio Clemente Fugazza, executive]

Andre, when you compare all this, there's one thing you need to consider. When you look at the end of 2019 into 2020, I had just finished a follow-on. So we raised BRL 800 million from the market, specifically to invest into increasing the company's operations. So at that moment, I had money from shareholders here and that was used to conduct those investments. And that was 150% higher land bank.

And the second answer, Andre, differently from traditional work with the Brazilian CEF. Let's say, we launched BRL 2 billion per year, the return time for that capital is at least 4 years, but let's say it's 3. So we have BRL 6 billion that we launched and out of BRL 6 billion, we had to invest at least 25%. So 25% of BRL 6 billion is already BRL 1.5 billion. So I had to consume that. So to bring the company to this point, I had to consume BRL 1.5 billion.

So Andre, of course, what you mentioned was an effect it did happen. Many customers did anticipate the results. But now that I no longer have those reasons for our customers to anticipate, I need to consume that cash and actually, that eats up a little bit. We have BRL 600 million in cash that had to be used for the land bank, and this will bring us results in the years to come.

[Unknown Executive]

And Emilio, just to mention 2 more things. Part of the financing we use for Infinity, this is representative and there was also purchase of BRL 200 million in share purchases, BRL 200 million in Infinity and BRL 200 million in share buyback and the Air Brooklin and another venture as well.

[Unknown Analyst]

Yes, I understand. I'm curious to see what happens as time passes to see whether Air Brooklin and Esther Towers and Infinity are good bets. I'm very curious. I know you are giants in the capital allocation business. I did understand your reasoning quite well. And I'm curious.

[Unknown Executive]

Andre, we're going to stage your curiosity with good results. So rest assured, Andre, we are going to see good results very quickly.

If something else that's important to mention. In the case of Infinity, the capital allocation that we did was basically to pay for the property. So it's not that the business is -- it's part of the property, I understand. And in the corporate side of things, you understand that we do have our eye on it, and we're going to have great results.

[Pedro Tadeu, executive]

We now move on to our last question, Mr. [ Joan Bosco ].

[Unknown Analyst]

Congratulations for your results. I'd like to understand where you would -- what you think about sales over the next quarters?

[Unknown Executive]

I'm going to tell you what I think, and please tell me if you agree, interest rates were quite high at 3.75% so that leaves a lower population of potential customers. But the predictability of the interest rate could increase the appetite for sales and a more political stability, customers can now do the numbers and they will see better sales.

[Unknown Analyst]

Even in regard to sales speeds, if we look at the capital even in spite of lower margins, perhaps, some ventures that are less able to be repeated and cannot be replenished. I know that you're going to improve margins at -- perhaps at the cost of a lower sales speed, do I read things correctly?

[Unknown Executive]

Wow, that's a complicated question. Look, when we talk about discounts, discounts were lower than cost [indiscernible]. So it's important to mention that the discounts we offered increased our margin. Our results were better, thanks to the discounts. We were able to dilute fixed costs and increase our margins.

Now curiously, with the 3.5% interest rates, we thought the sales scenario was going to work, but it did not, it remains stable. So now looking forward, it's quite difficult to make forecasts about the future. I can't see the whole yet. We need to follow day every day. We have weekly meetings. We're trying to make sure we move in the right direction all of time.

So I did mention that we haven't had significant impact yet from the interest rate. I don't know, I need an economist or a psychologist, but things -- we expect things to continue stable to remain stable. So we expect that everything will remain as is.

And it's important for me to mention that we are used to doing the business. We have been on the market for 44 years. We've had many different types of capital structures and all were very solid. We are extremely committed to our business. So if we have a difficult sales moment or something like that, we know how to respond to that in the best possible way.

So we are optimistic about the future, but if things don't pan out as we expect them to, we will know how to respond.

[Unknown Executive]

And [indiscernible], if you'll allow me just a comment -- your question was also important because the margin we work at -- the margin we want to remain at it was thoroughly compensated by our expenses. So when we look at gross margin, we have increases in net margin. So that's what we saw in this quarter, and that's what pleases us, and that's what we're going to continue to do in the fourth quarter.

[Unknown Analyst]

Thank you very much and congratulations once again on your results.

[Pedro Tadeu, executive]

And if we don't have any more questions and also since we have run out of time, I'd like to give the mic to our directors for final consideration.

[Silvio Zarzur, executive]

I'd like to thank all of you for being here. And also to make it clear to everyone that everything we mentioned as forecast and expectations, they all depend on everything beating as normal. We know we're in a transition phase. We're all on the lookout. And we expect that the transition will be handled responsibly. But whatever happens, whatever scenario may occur, we will very quickly adapt to the scenario.

So everyone else can comment as well.

[Unknown Executive]

As we mentioned, we are in a very challenging scenario. We have our eye on all possible stages of the process and all the market opportunities as well as challenges. As Silvio mentioned, we intended to make BRL 2 billion next year. And if we can earn more then, we're going to earn more. But if we need to earn less, then we're going to do the best we can market permitting to always keep the company healthy.

Well, thank you so much, everyone, and we are excited to get to work.

[Pedro Tadeu, executive]

Gentlemen, thank you -- thank you for being here with us in this videoconference -- this conference call. And so the EZTEC conference call -- earnings conference call is now complete. I wish you all a great day and a great holiday.