LPS Brasil Consultoria de Imoveis SA

BOVESPA:LPSB3

Earnings Call Transcript 2022-Q1

[Operator]

Good afternoon, ladies and gentlemen. Thank you very much for standing by. Welcome to the conference call of LPS Brasil to announce the results of the first quarter of 2022. Today with us, we have Mr. Marcos Lopes, CEO; Francisco Lopes Neto, Vice President; Robson Paim, CFO; Matheus Fabricio, IRO. This conference call is being recorded. [Operator Instructions] This conference call is being simultaneously transmitted on the Internet through webcast, and you can access it at the address ri.lopes.com.br, where you can find the slide deck. Slide selection will be controlled by yourselves. A replay of this conference call will be available right after its end. [Operator Instructions]

Before continuing, we would like to clarify that statements made during this conference call relative to LPS' operational and financial projections and goals are beliefs and assumptions of the company's management. Forward-looking statements are not guarantee of future performance because they involve risks, uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not occur. Investors and analysts should understand that overall economic scenario, industry-specific conditions and other operational factors may affect the future performance of the company, and therefore, may lead to results that will be materially different from those expressed in such forward-looking statements.

First, Mr. Marcos Lopes is going to make an overall introduction and to present the operational results. Then Mr. Matheus Fabricio is going to present the results of CrediPronto and will talk about the financial performance. And then afterwards, we are going to open for questions and answers.

Now I would like to turn the conference over to Mr. Marcos Lopes. Please, Mr. Lopes, you may start.

[Marcos Lopes, executive]

Good afternoon to everyone. I would like to thank you very much for your participation in LPS Brasil conference call, and we are going to present the results of the first quarter of 2022. For this presentation, I have here with me our Investor Relations Officer, Mr. Fabricio; and then Robson Paim, CFO; and Institutional Officer, Francisco Neto.

In 2021, the company started recovering the profitability in the segment of its own operations. With a significant expansion in a segment of franchises of Lopes network and good financial and operational indicates in its real estate credit unit, CrediPronto. There were more than 34,000 transactions that were closed, including sales, financing contracts in an year that was important for the real estate market.

In 1922 sic [ 2022 ], the company is planning to deal with a more challenging real estate market. The high interest rates added to calendar issues as the World Cup and the elections in the fourth quarter in Brazil may impact demand. However, we think that we are very well positioned to keep the good results for our shareholders.

In terms of brokerage of our own operations, the company has presented a first quarter of 2020 to a significant growth both in launched volumes as well as in sold volumes in the same period as compared to the year before, which is an evidence of our greater capacity of delivering value to our customers. And in Rede Lopes, the company is still focusing on the expansion of new markets reaching 134 stores and expanding its presence to many new states such as Roraima, Mato Grosso do Sul and Pernambuco, thereby totaling 17 states in the country of Brazil plus the Federal District.

The number of stores at the end of the first quarter was 49% greater than a number in the year before. And lastly, CrediPronto continue presenting the performance that is greater than the market in spite of the drop in our volumes originated, which suffered a significant impact by the higher interest rate. While ABECIP data demonstrated a reduction of 36% in the quarter. CrediPronto reduced its origination by 27%, which meant an increase in market share, reaching unprecedented 7% of market share among private banks.

After my initial considerations, I would like to move to the presentation, starting on Slide 5 with the highlights of the first quarter of 2022. So the launched PSV adjusted to Lopes participation totaled BRL 947 million, 24% higher than the first quarter '21. The company participated in 23 launches in the quarter, totaling BRL 1.8 billion. The total PSV of the company reached BRL 2.2 billion in the quarter, 5% higher than the first quarter of '21.

Franchises brokered BRL 1.2 billion, a drop of 5% as compared to the same period in the same year, highlight of our own operations that have brokered BRL 1.0 billion, a volume that is 20% higher than the same period in 2021. Our national footprint is still in expansion through our network of franchisees. We closed the quarter, 134 franchisees, a volume that 49% higher than the same period last year, 8% superior than the last quarter that we published our numbers for. There were 10 new franchises added in the quarter, starting our presence in the states of Roraima, Mato Grosso do Sul and Pernambuco.

CrediPronto continues to present solid results above the market. And this quarter, it originated BRL 1 billion, 27% higher than the first quarter last year. Obviously, under the impact of higher interest rates. The good news is in a market share of CrediPronto that reached 7% among private banks, whereas the debt of ABECIP have indicated a 36% reduction in origination from private banks and CrediPronto had a drop of only 27%.

Lastly, I would like to emphasize a significant increase in the number of leads originated by Lopes Portal. Just in the first quarter of 2022 that we added 59,000 leads of volume, 43% higher than the same period last year, which reinforces Lopes Labs capacity to transform its data intelligence into opportunities for brokers, franchisees and better perception of customers of a differentiated experience in the market.

Going to Slide 7, we are going to talk about the numbers of launches in the first quarter of 2021. On the chart on the left-hand side, you can see the total volume launched by the company in the first quarter of 2022, which was BRL 1.8 billion, with a growth of 45% as compared to the first quarter of '21. Of the total PSV launched, 89% of that number was concentrated in the state of São Paulo. On the right-hand side, you can see Lopes share in the launches, which reached BRL 947 million, 24% higher than the same period in the year before.

Now moving to Slide #8. Now continuing the presentation, you can see the results of our brokerage activities. On the left chart, you can see the company's consolidated results, meaning the PSV of our own operations added to the PCSV intermediated by franchises. Compared to the same period '21, we had a growth of 5%, totaling BRL 2.2 million sic [ billion ].

Our franchise operation contributed to most of our intermediate PSV totaling BRL 1.2 billion, a reduction of 5% as compared to the first quarter of 2021. In our own operations, we had a significant increase of 20% in the total PSV with BRL 1 billion.

On the chart, at the bottom on the left-hand side, you can see that SOS and SOL had presented a drop in the first quarter of 2022 when compared to the same period last year and with 6.3% for São Paulo and 6.9% for Brazil. VSL had a drop in São Paulo, reaching 9.7% improvement in the rest of Brazil, and one reaching 12.1%.

On the next slide, we have the curves of the total accumulated PSV for the last 12 months. Since 9 -- 2017 including our own operations and franchisees, the company has increasing its brokerage activities. As you can see, the intermediated PSV has, on the last 12 months exceeds BRL 10 billion, of which BRL 5.24 billion is relative to franchise operations and 4.89% related to our own operations.

Now on Slide #10, where you can see the result of our brokerage operations segmented by region and as well as our geographical footprint. We closed the quarter present in 17 different states in Brazil, plus the Federal District with 152 stores altogether including 18 owned stores and 134 franchised stores, which is an evidence of a strengthening of our network with higher efficiency and aggressiveness in our expansion process.

As the chart that you can see on the lower part of the slide, we had a consistent growth in our expansion plan, which has accumulated a 49% increase in annual basis and 8% as compared to the last quarter. At the top of the slide, you can see the state of São Paulo accounted for 55% of our PSV in our own operations in the quarter and still leads the market that has the highest share in the company's operations. The south has a share of 22% of our PSV with the highlights to Londrina and other markets accounted for 23% with a highlight to Fortaleza and Espirito Santo.

In terms of franchise, the state of São Paulo has also led our brokerage operations totaling 42% of our -- of the PSV of the quarter. Rio de Janeiro's the second most relevant market with 38% of the PSV of the period. The regions have totaled 19%.

Now continuing -- moving to Slide #11, where you can see the evolution of the company in terms of important indicators related to Lopes Labs along the quarter. On the left-hand side, you can see that the visits to our Portal Lopes, the block have grown 43% as compared to the first quarter of 2021, totaling the market, 3.6 million visitors.

On the chart, just below, you can see the evolution of 0.17 percentage points in the conversion of visitors into leads as compared to the first quarter of 2021, reaching the level of 1.84%. As a consequence of more visits and better conversion rates, we could see along the quarter a significant evolution in the volume of leads originated by Lopes Portal, which have set a new record and have exceeded the mark of 59,000 leads. This number represents an 83% growth as compared to the same period in the year before, and 44% as compared to the last quarter that we published.

Lastly, on the lower left-hand side, you can see the significant or consistent increase in the number of new properties that have been added by this quarter in Lopes platform. Just in January, February and March this year, 26,277 new properties have been placed in the market for sale or lease in our platform, a number that is 22% higher than in the first quarter of '21.

These were my considerations about our operational results, and now I give the conference over to Matheus Fabricio, who will be talking about CrediPronto and is going to present the financial results of the company. Thank you.

[Matheus de Souza Fabricio, executive]

Thank you, Marcos. Good morning, everyone. So first on Slide #13 with the main operational highlights of CrediPronto. I think that the highlight is in the origination of 1.046 million mortgage volume and with more than 3,000 new contracts, and we had a drop of 27% as compared to Q1 '21. But I think that you should note that the average rate in the first was 9.1% as compared to the first quarter of 21%, it would be 6.3%. So this is an indication of the higher interest rate affecting your volumes originated.

In terms of gross revenue, this quarter, we had BRL 17.3 million in total revenue with BRL 6.4 million in profit share plus BRL 10.9 million for banking correspondents. As we said in the beginning, and we should highlight again, we have a reduction of 36% in origination in the first quarter. These are information about ABECIP and private banks. CrediPronto dropped -- fell only 27%. I think that we should also talk about the evolution of the portfolio that grew 46% in the last 12 months, reaching [ BRL ] 12.13 trillion at the end of March.

On the next slide, you can see the evolution of mortgage origination for CrediPronto. So our expansion is quite solid at about 16.5%. Since the beginning of the pandemic in 2020, reaching BRL 5.64 million in the last 12 months in terms of origination.

On the next slide, you can see the evolution of our the profit sharing. So we have the financial margin because of higher interest rates and then cost expenses of the company were practically in line if we consider that commissions paid went down from BRL 14.3 million to BRL 10.4 million. Obviously, this is due to origination that was BRL 1 billion in contrast with BRL 1.4 billion in the last quarter.

So capital cost has also increased because of high interest rates. The result was -- net result was BRL 12 million with Lopes profit sharing BRL 6 million. And then we had to book BRL 6.4 million in a period considering the accounting quarter and the payout of CrediPronto's profits.

On the right-hand side, you can see CrediPronto's profit sharing month after month. You can see its net profit, rather. So the March was better than January and February with BRL 2.9 million.

Now going to the next part of the presentation, talking about financial results. We have the reconciliation of the gross revenue of the company in the first quarter. So our own operations was BRL 1 billion, and the net brokerage fee was 0.10% [ points ] higher than the last quarter that we announced.

In terms of our own operations, with average, we have the gross revenue of brokerage at 21.7%. So this revenue, we should add other segments such as our franchise, CrediPronto and profit sharing and commissions. So these revenues are booked as other revenues totaling BRL 22.8 million. And the gross revenue of the quarter was BRL 48 million, and we have the effects of CrediPronto.

On the next slide, #18, you can see the net revenue and costs and expenses. In terms of the company's net revenue was BRL 43.7 million in the first quarter equivalent to -- which means a 12% reduction as compared to first quarter last year. At the bottom, you can see the contribution of each line to -- so CrediPronto contributed with all these shares with brokerage accounted for 53%, CrediPronto accounted for 36% and franchises by 11%. In terms of cost and -- so if we compare to the same period of last year, as in previous quarters, we had an impact in higher commissions in the origination of real estate credit. And you can see in the line of other operational expenses.

We should also highlight once again the positive impact of the actions that the company implemented to reduce its contingencies. So as the information is not on the slide, there was a reduction of 71% in contingency expenses as compared to Q1 last year from BRL 3.5 billion, it went down to BRL 1 billion.

Now going to Slide #19, we can see the EBITDA and net income of the controlling company. On the left, you can see the company's EBITDA totaling BRL 9.9 million in the quarter with a margin of 23% and a drop of 47% as compared to the same period last year. To the right, you can see the net income and net margin attributable to controlling shareholders, which was BRL 3.3 million, 8%, a drop of 68% as compared to the first quarter last year.

On Slide #20, we have net income before IFRS. Since Q1 2018, there's a slight drop in the curve in the last 2 quarters, totaling BRL 43.6 million in the first quarter of 2022.

On the next slide, #21, you have -- we can see results by segment. Looking at the quarter ex IFRS. So once again, all lines have a positive performance in terms of brokerage ex IFRS, we have BRL 1.5 million with a margin of 6.3% in franchise, a profit of BRL 2.2 million with a margin of 44.6%. And CrediPronto with a net income of BRL 3.1 million with a margin of 20%. So consolidated net income has a margin of 15.3% and we get to BRL 3.3 million for controlling shareholders with a margin of 7.5%.

Now going to Slide 22, you can see IFRS impacts and net income before nonconsolidating shareholders. You can see depreciation, amortization, noncash impacts and deferred income tax. So the total impact was down. They had a negative impact on the quarter that was BRL 971 million, considering the effect of IFRS.

So on Slide #23, you can see the cash flow generated in cash equivalents in the quarter. On the left, we can see cash flow generated by operating activities totaling BRL 169,000 in the period. And then we paid out dividends, and we have a buyback plan for the company that was launched this quarter. And at the end of the period, we have BRL 37 million, and the company also has BRL 9.3 million shares in treasury for the buyback program that we have launched recently.

These were my final considerations, and thank you very much for your participation. Thank you very much for your attendance. And now we are open for questions.

[Operator]

[Operator Instructions] Our first question comes from Mr. Elvis Credendio from BTG.

[Elvis Credendio, analyst]

Marcos. Matheus. Francisco. There are 2 things I would like to explore. First about CrediPronto. So there was a slowdown in the quarter, and you highlighted the market share in origination. Number one, about CrediPronto. What is the financing origination strategy? Do you think you can gain any more market share and also the slightly more aggressive commissioning strategy that you have been adopting. And in terms of origination, what is your internal goal? And what is origination going to be like in 2022? And also about CrediPronto, is there anything in terms of costs that you could do to improve profitability and profit sharing to deal with a lower margin?

The other thing is about franchise. I know that you are very much focused on that with lots of franchisees. And in terms of expanding your network, how do you -- how fast do you think your network is going to grow? Can you accelerate it? They're going to keep the same pace? And is there any region that is going to be a priority in the growth? Do you want to concentrate it even further in São Paulo? Or is it going to be a more generalized expansion?

And about franchise, is the complementarity between Lopes Labs in it. It's a tool that can be used by partner real estate agencies. But how do you see this complementation? And what can you do to make it even better in terms of services of Lopes Labs and partners? How can you explore better the network so that it can contribute to Lopes Labs?

[Matheus de Souza Fabricio, executive]

This is Matheus answering your question. About CrediPronto and origination. Of course, we know that the market is king with that regard, and that is beyond our control. And what we are doing inside is to think more and more of efficiency improvement to become increasingly more digital, to reinforce our origination channels, trainings for the team, to focus very much on processes and strategies, to continue ahead of the market in terms of origination.

And in terms of -- to get better and better in terms of releasing amounts, and this is our differential as compared to other banks. So we want to keep our significant market share, preferably increasing it even for the next quarter.

As to the call this year, we're not giving any guidance. So we cannot disclose that. But we think it's going to depend on the market curve. Origination, we are going to keep a stable market share in terms of what we have today with a slight upwards trend.

As to the network, as Marcos said in introduction, this is the core focus of the company this year. And we understand that our speed of expansion should remain at least at the same level as we had last quarter. So we want to increasing speed. As the base becomes bigger and bigger, it's more challenging to expand, but we think that this is a very fragmented and pulverized market and our franchise product is increasingly better to add the conversion of potential targets. So it could be existing real estate agencies that would change their label to Lopes or new ones.

So we are focusing on these 2 groups. 2021 was the best year for the expansion of franchise in our history. And we think this is going to be increasingly better.

As to geographies of interest. As we mentioned last conference call, we want to be present in all states and all capitals in the country, and this is for sure. In 1 year, we went from 10 to 17 states. So we still have another 9 states to go to, to set foot and to have presence, but all cities with more than 150,000 inhabitants that have significant real estate agencies so that we can have one or more Lopes stores.

As the share of Lopes in the franchises, this is very important for our expansion. As I said, our franchise product is getting better and better. And part of that is related to what we can deliver. So the improvement of that is related to 2 aspects: number one is that we can add businesses to franchise. So increasing origination of leads, increasing the quality of our portal with better user experience, as we mentioned in our presentation. And if they are leased that franchisees received from Lopes, this is a point of attraction.

Added to that, in terms of business origination is the network effect. In São Paulo, where our network is more consolidated, more than 30% of our businesses is due through sharing and our businesses that are generated because the franchise is in that environment. If they were outside that they would not benefit from the portal and would not have access. So our colleagues from other real estate agencies, we can originate businesses fast. This is about business origination.

We also have other tools. So we have opened a pricing tool in our portal generating higher quality leads to our franchisees. So consumers understand better how much their properties worth before putting it on the market. And then we have many other tools that help our brokers to be more efficient in providing services to customers in a faster way. So if we add intelligence, speed and information, we can increase the conversion of leads into sales. And this improves the results of real estate agencies. So if we add new businesses and better conversion, this is how Lopes can improve the results of our franchisees.

[Operator]

[Operator Instructions] Ladies and gentlemen, we are now ending our questions-and-answer session. I would like to give the conference back over to Mr. Marcos Lopes for his closing remarks.

[Marcos Lopes, executive]

Thank you all very much for your participation in our conference call for the presentation of the results of the first quarter of 2022. And we would like to reinforce that we are optimistic as to the company's future because we have a strategic planning that demonstrates that with our platform, our execution capacity and will help us to meet our goals and to do what we have planned. Thank you all very much, and see you next quarter.

[Operator]

LPS Brasil conference call has now ended. We would like to thank you for your participation, and we wish you a good day. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]