LPS Brasil Consultoria de Imoveis SA

BOVESPA:LPSB3

Earnings Call Transcript 2023-Q1

[Operator]

Good afternoon, ladies and gentlemen, and thank you for waiting. Welcome to the earnings webinar LPS Brasil to discuss the results for the first quarter of 2023. We inform that this event is being recorded. [Operator Instructions]

Before proceeding, we would like to clarify that any statements that may be made during this webinar regarding the business prospects of LPS, projections, operating and financial goals constitute the beliefs and assumptions of the company's management. Forward-looking statements are not a guarantee of performance and 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 general conditions, industry conditions and other operating factors may affect the future results of the company and lead to results that differ materially from those expressed in such forward-looking statements. First, Mr. Marcos Lopes will make the introduction and present the operating results. Followed by Mr. Francisco Lopes, who will present the results of CrediPronto. And then Matheus Fabricio will talk about the financial results. After that, we'll start the Q&A session.

Now I would like to turn the floor to Mr. Marcos Lopes. Mr. Marcos Lopes, you may proceed.

[Marcos Lopes, executive]

Good afternoon, everyone. I would like to thank you for participating in another LPS Brasil conference call in which we'll present the results for the first quarter of '23. Taking part in this presentation are Vice President, Francisco Lopes Neto, our Investor Relations after Matthias Fabricio, our CFO, Robson Paim; and our Institutional Officer, Cyro Naufel. In our last earnings conference call, we discussed the sector's challenges in 2022, especially related to the Brazilian macroeconomic scenario. The interest rate at higher levels impacted the real estate market, increasing the cost of financing for the end consumer.

In the beginning of 2023, the situation has not changed, and therefore, challenges remain the same. As a result, the company focused on doing its homework seeking operational efficiency in all segments in which it operates, preserving the company's cash and strengthening its competitive advantages. We'll see below that the company presented solid operating results, supporting this increasingly responsible strategy and the certainty that we are on the right path.

After these brief remarks, I would like to move on to the presentation, starting on Slide 6 with the highlights of the first quarter of 2023. The large PSV already adjusted by low stake in the project was BRL 4.7 billion, 51% higher than in the first quarter of 2022. It's important to point out that for the first time, we also started disclosing the pipeline launched by the franchises that operate in this segment. The transactions closed reached BRL 2.3 billion in the quarter, 3% higher than the same period in 2022.

Franchises intermediated BRL 1.3 billion, 12% more compared to the same quarter of 2022, while our own operations intermediated BRL 965 million, 6% less than in the first quarter of 2022. In our own operations, Sao Paulo was responsible for a PSV of BRL 612 million, accounting for 63% of the total. This means a growth of 8% when compared to the first quarter of 2022 in the State of Sao Paulo.

If we consider the capital of the state, this increase was of 13% when compared to the first quarter of 2022. We ended the first quarter with 183 franchises a number 37% higher than the same period in 2022. In the franchise segment alone, the company is present in 23 states and the federal district.

CrediPronto originated BRL 867 million in the quarter, a 17% decrease compared to the first quarter of '22. The average portfolio balance reached BRL 14.7 billion, an increase of 19% compared to the first quarter of 2022. The company's EBITDA amounted to BRL 13.3 million, 35% above the amount recorded in the first quarter of '22. The company had an increase of 9 percentage points in the EBITDA margin, reaching 32% in the first quarter of '23. Such indicator shows greater operational efficiency, resulting from budget efforts to reduce costs and expenses.

Finally, I highlight the company's consolidated net income before the effects of IFRS, which reached BRL 7.7 million, 14% higher than in the first quarter of 2022, of which BRL 5 million is attributable to the controlling shareholders. Now moving on to Slide #8. We'll comment on the launches of lobbies own operations and franchises in the first quarter of 2023. The total volume launched by the company in the first quarter of 2023 was BRL 4.7 billion, 51% higher than in the first quarter of 2022. Lopes, owned operations launched BRL 2.8 billion, of which 70% were concentrated in the State of Sao Paulo and the rest in Fortaleza.

The franchises in turn, launched BRL 1.95 billion with 69% concentrated in the State of Rio de Janeiro, 27% in Guyana and 4% in Manaus.

Now continuing on Slide 9, we see the results of transactions closed. The chart on the left shows the company's consolidated results that is the PSV from our own operations plus the PSV intermediated by the franchises. In the first quarter of 2023, the company intermediated BRL 2.3 billion, 3% more than in the same period of the previous year. The franchises reached an intermediated PSV of BRL 1.3 billion, 12% more than in the first quarter of 2022. Our own operations, which operate primarily in the primary market launches, totaled an intermediated PSV of BRL 965 million in the quarter, a decrease of 6% compared to the same period of 2022.

On the next slide, #10, we present the total transaction curves in the last 12 months. Since 2018, including our own operations and franchises. As we can see, the PSV intermediated by the company in the last 12 months remained stable, close to BRL 10 billion.

On the next slide, #11, we will present the transactions closed, broken down by region as well as our geographic presence in the franchises and our own stores, considering our own stores and franchises we ended the year present in 24 states and the Federal District with 199 stores in all 16 of which are owned by Lopes, and 183 brand by franchises, which confirms the strengthening of our network and greater efficiency and assertiveness in the growth process.

In the last quarter of the year, we introduced Lopes presence in the States of Rondonia and Marine. As shown in the chart at the bottom of the slide, we can see the consistency of our store expansion plan, which had a 37% increase year-on-year, going from 134 to 183 stores. On the upper part of the slide, we can see that the State of Sao Paulo accounted for 63% of transactions closed of our own operations in the first quarter. Londrina accounted for 15% of transactions closed, while Fortaleza and Espírito Santo accounted for the remaining 22%. In franchises, the State of Rio de Janeiro once again led transactions in the period, accounting for 41%. The State of Sao Paulo, whose franchises operate mostly in the secondary market, contributed with 33% and the other states with 26%.

Moving on, on Slide 12, we present the company's evolution and indicators related to Lopes labs throughout the quarter. In the chart on the left, we can see that visits to Lapes portal and Lapes blog reached 3.5 million, 5% lower than in the first quarter of 2022, but 28% higher than the last quarter. In the chart immediately below, we see that there was a 10% drop in the conversion of these visitors into lease compared to the same period in 2022, reaching a level of 1.66%. That reflects a more challenging period in the market at the beginning of this year. Leads generated by portal Lopes consequently decreased 11% compared to the first quarter 2022, totaling approximately 53,000 in the quarter.

Finally, on the lower right chart, we can see the significant increase in the number of key words where Lopes appears among the top 10 of Google's search results, evidencing our sustainable SEO strategy. We closed the first quarter of 2023 with 73,700 key words in which portal Lopes appears among the top 10, 64% higher than the first quarter of 2022. Those were my remarks regarding the operating results.

I now turn the floor over to Francisco, who will speak about CrediPronto and then to Matheius Fabricio, who will present the company's financial results. Thank you.

[Francisco Neto, executive]

Thank you. Good morning, everyone. It's a pleasure to be able to present the results of CrediPronto. And starting I would like to go to Slide 14 on the lower right part that shows the development of the net portfolio with an average balance and highlight the importance that it has showing the resilience of our business and how much it has grown. And the highlight of this slide and this chart is that if we analyze the last 12 months of what has been added in net additions to the portfolio, it has grown by BRL 2.2 billion in the last 12 months.

In the last quarter, BRL 500 million. So this is the main fact, and it shows the growth of the portfolio, the new agreements. The number of new agreements originated for each set agreement continues to be high, 11:1 ratio in this first quarter of 2023. And in the additional information of this page, we see that the 7.8 profit related generated and bank correspondent totaling BRL 17.1 million. The LTV is around 67%. The average rate in this quarter is 10.5%, slightly above the last quarters. And when you see the profit on Page 16 on the right side, we have in this quarter, months of January, February, March grouped.

Now for the profit data of March, we see a recovery at the level of BRL 2.4 million. Now going back to the point that CrediPronto has been quite efficient in its origination strategy. We always emphasize our coverage in the market in which we're able to operate with the real estate brokers and the stakeholders of these originations showing that this will be an efficient year with the good resilience of our business, as shown in the results presented in this quarter.

Despite the fact that this is a more difficult year in terms of origination due to credit analysis, credit facilities and also the sales volume that's slightly lower than those of 2021 and 2022. These are my comments and remarks about CrediPronto.

I now turn the floor over to Matheus Fabrico to present the financial results of the company. Thank you.

[Matheus de Souza Fabricio, executive]

Thank you, Francesco, and good afternoon, everyone. We begin the analysis of the financial results on Slide 18, where we present the breakdown of net revenue by segment of the company and the total of recurring costs and expenses. The company's total net revenue reached BRL 42.3 million in the first quarter 2023. The intermediation segment had a net revenue of BRL 21.4 million, 8% lower than the first quarter of '22, accounting for 51% of the company's total net revenue.

The franchise segment had a net revenue of BRL 5.4 million, 10% higher than the first quarter of '22, accounting for 13% of the company's total net revenue. Finally, CrediPronto had a net revenue of BRL 15.5 million, stable compared to the first quarter of 2022, accounting for 37% of the company's total net revenue. In the chart on the right-hand side of the slide, we see a 14% drop in the company's total recurring costs and expenses compared to the same period of last year, totaling $28.9 million showing the effort that has been made by the company, as mentioned by Marcos in the introduction.

On the next slide, #19, we present the results by segment. Intermediation segment presented gross revenue of BRL 23.6 million and net income of $968,000 before IFRS with a margin of 4.5%. The franchise segment posted gross revenue of BRL 5.7 million and net income before IFRS of BRL 1.9 million with a margin of 35.7%. CrediPronto have gross revenue of BRL 17 million and net income before IFRS of BRL 4.8 million with a margin of 31.3%.

After discounting depreciation, financial results, taxes from our segments in addition to nonrecurring effects, we reached total gross revenue of BRL 46.3 million and net income before IFRS of BRL 7.7 million in the quarter with a margin of 18.3%. After payments to minority shareholders, we reached net income of BRL 5 million for controlling shareholders with a margin of 11.7%. Moving on to Slide 10, we see the impact of IFRS on our results. The main impacts are related to depreciation and amortization of intangible assets, noncash impacts of [indiscernible] options of subsidiaries and deferred income tax on intangible assets, call and puts of LPS Brazil. The total impact arising from these revaluations amounted to 290,000 in the quarter without any cash effect. Therefore, we recommend analyzing our numbers with these impacts for -- without this impact for a better understanding of the company's results.

On Slide 21, we see the cash variation in the period. The company's total cash at the end of the first quarter of '23. The chart on the left shows that the cash generated from operations, which remained positive and amounted to BRL 7.9 million in the quarter. The cash balance in the end of the period, considering financial investments was BRL 54.5 million, virtually stable compared to the last quarter. The company also has approximately 10.2 million treasury stock. These were my remarks on the company's financial results. And once again, we thank you all for your participation, and we open for questions.

[Operator]

[Operator Instructions]

[Matheus de Souza Fabricio, executive]

Good afternoon. We analyze the questions. Let's try to concentrate the main topics in 3 questions. Some of them are repeated. As for the improvement in intermediation margins of franchises when compared to the last quarter, that is basically due to the effort to reduce expenses that we mentioned. So these segments had the contribution, especially intermediations was where there was a greater reduction of expenses. In franchises, that is due to the increase of PSV when compared to last year, that the average fee of franchises continues to grow. As for the questions about CrediPronto, I'll turn to Francisco.

[Francisco Neto, executive]

Thank you, Matheus. The question is about the variation in this quarter. Regarding CrediPronto when compared to other private banks that had a decrease of 7% and CrediPronto dropped more than that in the same period. There is a certain seasonality regarding the cut the banks make when there is an increase in the mortgage rates. Sometimes the customer makes a proposal and then the customer has a deadline to use the rates that before the new rates that are higher. Some banks adopt a cutoff date and others choose different dates.

So when the mortgage rates increase or the interest rates increase from bank to bank that could cause some changes, for example, Banesco funded BRL 900 million and BRL 1.8 billion in March. So it doubled from 1 month to the other. So usually because that the cutoff date was different from that of Itau, which reflects our cutoff date.

So in terms of market share, there was a variation in the first quarter of '22, market share of 6.9% when compared to 6.3% in the first quarter of '23, it's a small variation. And we believe that this share of 6.9% is something we'll go back to. It's not a guidance, but we expect to resume that figure. And within Itau, we remain with a constant share in a snapshot of first quarter 2022 and first quarter 2023. This is the answer about CrediPronto. Other questions made about the partnership with King Tanda.

Basically, we are in the integration phase with real estate databases. The teams have great synergy, and we don't have significant results about the financial side about this partnership yet. That could improve the SEO of the portal with the inclusion of new properties in the platform.

[Operator]

This ends the Q&A session. Now I would like to turn the floor over to the CEO of the company, Marcos Lopes, for his final remarks.

[Marcos Lopes, executive]

Thank you all very much for attending our earnings conference call to present the results of the first quarter of 2023. The company remains confident about its market positioning as well as its search for efficiency, we can see the results in our EBITDA margin that had a major increase due to the efficiency, operational efficiency efforts endeavored in the beginning of this year that is reflected in the first quarter already as well as due to all sales initiatives we have mapped for this year. We are aware that this will be a challenging year, but we are confident on our brand positioning and strength of our market positioning and two, that we will have a good year in 2023. Thank you all very much, and have a good day.

[Operator]

The webinar from LPS Brasil earnings webinar has ended. Thank you for attending, and have a good afternoon.