JHSF Participacoes SA

BOVESPA:JHSF3

Earnings Call Transcript 2023-Q2

[Mara Dias, executive]

Good afternoon. Welcome to this webcast to discuss the results of Q2 2023 of JHSF. Today with us are Mr. Thiago de Oliveira, CEO; and myself, Mara Boaventura Dias, IRO. We also have today interpretation into the Brazilian sign language. His name is Alan. This is to allow information to be more inclusive. This presentation is being broadcast simultaneously on YouTube and Zoom from the company's website. [Operator Instructions]

Before proceeding, we would like to clarify that any forward-looking statements that may be made during this presentation relating to the company's business outlook are based on assumptions on the part of the company's management and on information currently available. As such, they involve risks and uncertainties since they are related to future events. Changes in macroeconomic policy or legislation may affect the projections is presented here. I'll now turn the floor over to Mr. Thiago de Oliveira.

[Thiago de Oliveira, executive]

Good afternoon, Mara. Good afternoon to all of you who are here today with us. I'm going to start our presentation with the main numbers, the main figures of the company for Q2 2023. First, we have the real estate development business. First of all, I would like to refer you to the right-hand side of the slide, where you can see an important change between Q2 2022 and Q2 2023. And I'm referring to the breakout -- to the breakdown between lots and real estate products, 60% lots due to 2022 and 13% in lots in 2023 in Q2. This is important, because the company has two ways of accounting revenue. One, when it sells lots when we post the revenue and costs to be incurred, so the gross revenue. And when we account for the real estate products, we appropriate sales that then become revenues and costs as well relating to that revenue throughout the execution of the work.

Therefore, the change in mix between last year to this year and the coming years requires an analysis of these different mix. As you can see here, we have BRL 585 million of unperformed revenue, which have to do with the sale of real estate products. whereas before in Q2 2022, this figure was BRL 453 million. And then last year, we have BRL 333 million relating to lots. And this year, in this quarter, BRL 184.2 million. This is important, because the basis of comparison of products that we are selling also changes the way we've recognized revenues and costs and also our income and loss. It's a major change also in terms of the macroeconomic scenario, the interest rate cycle, there have been lots of changes, and there has been an inversion in this cycle.

In Brazil now, interest rates are going down. And before moving on to the numbers themselves, when we compare sales in Q2 2023, with Q1 2023, that is a shorter range. The growth was by 35% in the total sales, which is a wonderful thing. Looking at the middle of the slide, you see that the company has BRL 1.8 billion -- nearly BRL 1.9 billion in performed and unperformed receivables. And this also has to do with the method that we adopted. It's the company provides funding, financing for clients who buy from us in the real estate business. On the right-hand side of the slide, you see that because there was a change in mix and the effect of the POCs, you see that there was a reduction by nearly 45% in revenue, and BRL 585 million still have to be recognized in terms of revenue.

And in terms of adjusted EBITDA, the reduction was 55%. If we compare gross revenue with the -- we grew nearly 15% in terms of adjusted EBITDA relative to Q1 2023. And then speaking about rental houses and clubs, this is something that we have been developing in the last few years, and we would like to highlight the opening of Boa Vista Village Surf Club. This is considered the best [indiscernible] for surfing in Brazil, and it's integrated with a very important development in Boa Vista Village. So this is a division where we build rental houses and clubs. The revenue has increased nearly 80% vis-a-vis Q2 2022. The gross margin is very healthy. And it contributed BRL 2.5 million in adjusted EBITDA in Q2 2022 -- in Q2 2023. And then in terms of the shopping malls, the total sales of retails grew 8.6% year-on-year, that is above inflation in the period.

Occupancy cost is 10.7 percentage points, which is very competitive and healthy. And the occupancy rate has remained flat at 96.4%, directly flat relative to Q2 2022. In terms of same-store sales, same stores, they remain practically stable, but the rent indicators grew by 12%. Rental indicators grew practically 12%, and these are the main elements that account for the cost of occupation, which grew 1.8 percentage points versus Q2 2022. In terms of gross revenue, 5.5% growth amounting to 70.3% -- BRL 70.3 million and in the adjusted EBITDA, nearly 14% growth relative to Q2 2022. In Hospitality and Gastronomy, we see stability in terms of average daily rates in terms of RevPAR, in terms of the average number of sold couverts, but the average couvert increased. And this has to do with the mix of restaurants that we opened in the last few months.

It drives prices up in terms of the average couvert. The gross revenue grew by 4.6% and reached nearly BRL 100 million in Q2 2023. And in terms of adjusted EBITDA, there was a 15% decrease and is in terms of EBITDA margin from 1 year to the next has to do with the ramp-up of these new operations which we opened recently. On Slide 7, we'll talk about the airport. The movements increased by nearly 45% relative to Q2 2022. And we also have many more planes, which are not using our hangar facilities, and we have increased our market share within this profile of spot flights. Also in terms of liter, provided the company provides this kind of service in the airport as well, and the growth was by nearly 14%, which is again very healthy.

We also inaugurated three new hangars within the Sao Paulo Catarina Executive Airport, which now has 12 hangers, 36,000 square meters of hangar and 52,000 square meters in [indiscernible] and yards. The gross revenue grew 3.5%, and the adjusted EBITDA grew nearly 150%. Then in terms of retail and digital membership, digital, we restructured the whole operation. We have changed the model, and we are now working more in terms of assisted services, concierge. And this is a decision that we communicated to you at the end of last year, and this has been giving us very good results. The service was very well received. Clients are very fond of it and also, the financial performance of this service is even better. We grew 4.3% vis-a-vis Q2 2022.

And as for JHSF Capital, we started operations in October last year. And now at the closing of Q2, we closed the first operation, a real estate fund for BRL 1,800 million of equity value. And the JHSF, once it established this fund, generated gross revenues in the region of BRL 11 million. These are structuring fees and the M&A fees, and this division in the first quarter was left with BRL 7.1 million in adjusted EBITDA. And to end the presentation, gross revenue was 23% lower than Q2 2022. And the main factor is related to the loss of gross revenue in the real estate business relating to the POC, the percentage of completion, which is the way we recognize revenues from real estate products. And this effect then goes into the gross profit as well.

So we lost BRL 125 million in gross revenue. We lost BRL 100 million in terms of EBITDA. And in terms of net income, we lost BRL 112 million. So there is a small difference there in terms of a slightly more negative result in the financial area. Before I open to the Q&A session, when we compare this to the first quarter of 2023, gross revenue grew 10%. Gross income grew 10%, adjusted EBITDA 16% and net income grew 25% relative to Q1 2023. With this, I end my presentation, and Mara and I will remain available to take any questions you might have.

[Mara Dias, executive]

Thank you, Thiago. We will now begin the Q&A session. [Operator Instructions] First question is from Mr. Malone from Santander.

[Unknown Analyst]

First, I would like to understand what you think in terms of growing assets within JHSF Capital and then, understand your thinking behind the divestment of shopping malls and also if there could be an operation with capital, what is your thinking in relation to these aspects?

[Thiago de Oliveira, executive]

I'll take the first question. We -- when we thought about setting up capital, we didn't want to have only a fund. We wanted to have a manager of different assets, different funds. We see a market opportunity here between the most traditional profile and the more specific profile, which is what we, JHSF, as a company can provide. So what are we thinking in terms of funds? We want to grow the number of funds. We are inspired by a model that is well known in the U.S. and Canada, whereby companies who have the skill for real estate development, get together with financial capital to develop projects. So this is a way for us as a company to grow without necessarily having to use our balance sheet. We can put a little bit of our balance sheet, a lot of our execution capacity and then top it up, so to speak, with funds who will provide capital.

The company operates in a very niche segment, the high income segment. And we have long-standing relationships with our clients. So we can take this way of investing in real estate to our clients through an investment fund, not necessarily through buying property. Relative to your second question, and this has to do with the noncore divestment of shopping malls, this is on our agenda. We don't have a problem about talking about it in a very open way, but we see with good eyes, the movement on part of real estate funds to raise money. When we think about growing operations in shopping malls, some of the sources for us to do -- to make this future investment should come from this divestment in shoppings that we have in our portfolio or even in excess of shares that we hold in one or another shopping mall. We have done it before, and I think we should go down that path.

[Mara Dias, executive]

The next question is from Herman Lee from Bradesco BBI.

[Herman Lee, analyst]

It's a very simple question, something that drew our attention was the positive performance of the airport. What do you see -- how do you see the outlook of growth going ahead in 2023 or 2024? What is your view on that specific sector?

[Thiago de Oliveira, executive]

Thank you, Herman. This is a very good question, especially coming from Bradesco. Bradesco has a huge operation with aircraft leasing. And I think we are making an important contribution to the executive aviation sector in Brazil. Brazil has many airports scattered around the country, but the commercial flight grid is very restricted. So in terms of business aviation, executive aviation, which is where we operate, this sector has been increasingly important as it connects different cities in Brazil, especially in Sao Paulo, the main financial and economic hub in Brazil. We offer executive aviation users a structure that is safe, secure and very efficient in terms of flexibility, times.

It's an international airport as well. So it's easier for foreign guests to land there or for Brazilian executives to depart from there to go abroad and promote their companies. We believe that Brazil will continue to be the second largest country in the world in terms of executive aviation, and this is partly due to the fact that the flight grid is not that developed. And the businesses are huge. So it's easier to travel on plane. We opened the airport less than 4 years ago. The capacity of our hangars has increased 6x, and we are looking now at three drivers of growth.

One, the manufacturers of aircraft who have been asking for space within the airport, so that they can maintain the planes that are kept in our hangars, then family groups or friends who want to have exclusive hangars to keep the aircraft. And then we also see a sector of executive aviation, which is growing a lot by sharing aircraft. This has become more cost-effective. And around the world because of this strategy, there is a great demand for executive aircraft. The backlog is now 2 years for delivery of this type of aircraft. So we have been providing reliability, good services to our clients. We are close to the main city of the second largest market in the world. So the outlook is positive in the years ahead of us.

[Mara Dias, executive]

We now have some questions on the chat. All around the timing when we are going to launch the two projects, one in Bragança and the other one in Sao Paulo. So the Projeto Bragança and the Sao Paulo Surf Club.

[Thiago de Oliveira, executive]

Thank you for your questions. Looking at the end of 2023 for the launch of these two projects. They are on track. In terms of the timeline we established, if we look also at the factors such as the decrease of the interest rate in Brazil, the cycle now should become more favorable to launch projects such as these two.

[Mara Dias, executive]

Thank you, Thiago. I think we have addressed all the questions made on the Q&A. I'd like to reiterate that our IR team remains available by e-mail or by phone. And I now turn the floor over to Thiago Oliveira to make final remarks.

[Thiago de Oliveira, executive]

Thank you, Mara. Thank you to all the 4,000 people who work with us, who work so hard for us to deliver quality and excellence to our very special clients. Good afternoon to all and thank you to all of you who attended our video conference. Again, we remain available to take any questions you might have. Good afternoon to all.