LPS Brasil Consultoria de Imoveis SA

BOVESPA:LPSB3

Earnings Call Transcript 2024-Q1

[Operator]

Welcome to the earnings webinar of LPS Brasil to discuss the results of the first quarter of 2024. 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. Later, Mr. Matheus Fabricio will talk about the financial results. And after that, we'll start the Q&A session.

Now I would like to turn the floor over to Mr. Marcos Lopes. You may begin.

[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 of the first quarter of 2024. Taking part in this presentation are our Vice President, Francisco Lopes Neto; Investor Relations Officer, Matheus Fabricio; our CFO, Robson Paim; and our Institutional Officer, Cyro Naufel.

I would like to start with an overview of the economic scenario in which we started the year, marked by the expectation of a drop in interest rates. This trend is extremely beneficial for the Brazilian real estate market. However, it's important to note that the challenge of keeping interest rates low is intrinsically linked to macroeconomic conditions, which the Central Bank continues to monitor and analyze. If this trend is confirmed, it will be very advantageous. But we face the persistent challenges of inflation and other macroeconomic variables that need to stabilize for this forecast to materialize.

Furthermore, we face the challenge of attracting savings, which plays a crucial role in real estate financing through the housing finance system. This is a significant challenge that could impact CrediPronto's ability to originate financing and as well as the financing for the production of real estate developments. If there's a restriction for the financial production -- financing of production, the market needs to look for alternatives for funding to sustain the real estate market.

With specific reference to Sao Paulo market, a new master plan was approved, and that facilitates greater urban densification. This had a reflex in the short term because some projects that were in the pipeline had to be revised due to the changes. These changes have a short-term impact in the pipeline because some launches are removed. But in the medium and long run, they have a positive impact because there is a higher PSV in the City of Sao Paulo.

In terms of corporate performance, it is gratifying to report that our company started the year with a comfortable cash position. And I would like to highlight that we have no debt and we generated cash in 2023, ending with a positive cash flow last year. As a result, we entered the year of 2024 with a greater cash reserve and a favorable outlook for continued cash generation this year.

The investments we made in Lopes Labs are an important highlight because they prove to be fruitful, improving our portal's audience, the generation of more leads for brokers that are part of our platform as a whole, and also the company's overall operational efficiency.

Our own units have undergone adjustments with the aim of further increasing efficiency. And this will be an area of continued focus this year. Furthermore, we recently opened our own unit in the east zone of Sao Paulo, which began operating in the first quarter of 2024 in a soft opening phase, and it's focused on the primary market and launches.

With regard to franchises, we adopted a selective growth strategy, carefully choosing the franchises that join our network, and seeking to increase efficiency in those that are already part of it. Several integration events and participation in market events are planned for this year, with the aim of increasing the performance of each of the franchises -- of the new -- of the existing franchises and resuming expansion in the segment.

We also decided that this year will highlight our performance in the high-end market with the creation of a new brand named LPS, which is short for Lopes brand as well as Luxury Property Selection. That would be a statement for high-end brokers, high-end real estate. These properties go through a selection process and they are above BRL 5 million in value.

We plan to expand this range to include properties starting at BRL 3.5 million under a new label created within new LPS Luxury Properties website, and with exclusive social media channels. There will also be brokers starting exclusively -- operating exclusively in this segment. And the properties that are selected will have this LPS seal.

We have around 7,000 properties in our website. Although we started with Sao Paulo, we want to expand the brand to the country, increasing the number of high-end properties. These properties are managed by specially-selected brokers. We have around 5,000 -- or rather 4,000 brokers who have received LPS certification.

Finally, I would like to highlight that we are always attentive to all business opportunities that may arise, and ready to analyze them carefully, aiming for the best return for the company.

After these brief initial remarks, I would like to move on to the presentation, starting on Slide 4 with the highlights of the first quarter of 2024. In the first quarter of 2024, we have the total transactions closed which totaled BRL 2.5 billion, marking an increase of 10% compared to the same period of the previous year.

The expansion of Rede Lopes was resumed with the opening of 6 new stores, reaching a total of 200 stores in Lopes network present in all 26 states and the Federal District. CrediPronto's portfolio also saw a growth, reaching BRL 15.2 billion, which represents an increase of 3% compared to the first quarter of 2023.

In addition, recurring expenses were reduced to BRL 24 million, reflecting a substantial decrease of 17% compared to the corresponding period of the previous year. EBITDA totaled BRL 13.8 million, and the EBITDA margin showed a significant improvement, increasing 4.9 percentage points to 36.4% compared to the first quarter of 2023. On the other hand, net profit before IFRS recorded a slight decline of 3%, totaling BRL 7.5 million.

Moving on to Slide 5, we'll comment on the launches of Lopes in the first quarter of 2024. It's worth mentioning that from now on, we'll always refer to Rede Lopes as a set of all the Group's real estate intermediation operations whether they are our own operations or franchises since the ecosystem is fully interconnected.

Rede Lopes launches totaled BRL 3.3 billion in the first quarter, 30% lower than the same period of 2023. As we can see on the map, these launches have shown a diverse geographic distribution, which despite the strong presence in Sao Paulo-Rio de Janeiro, also included Parana, Espirito Santo, Amazonas, Ceara and Paraiba states.

Now on Slide 6. On Slide 6, we see the result of intermediations. In the graph on the left, we have the consolidated results of Rede Lopes, therefore, adding own operations and franchises, as I mentioned already. In the first quarter of 2024, the company intermediated BRL 2.5 billion, 10% more than in the same period of the previous year. As we can see on the map, Rede Lopes ended the quarter present in 26 states and the Federal District, with a total of 200 stores.

On Slide 7, we present the intermediation of Rede Lopes by geographic region of Brazil. The State of Sao Paulo accounted for 51% of the intermediated volume, totaling BRL 1.3 billion; followed by Rio Janeiro at 25%, BRL 642 million. And the other regions combined accounted for 23%, totaling BRL 592 million, with emphasis on the Northeast Region which accounted for BRL 199 million.

On Slide 8, we present the vision of Rede Lopes intermediation between primary and secondary markets. Both in terms of PSV and number of units, the primary market represented the majority of Rede Lopes intermediations in the quarter, with around 70%, a situation that is similar to that shown in the first quarter of 2023. The average ticket in the primary market was BRL 686,000, and in the secondary market, BRL 784,000.

Continuing on Slide 9, we present the company's last 12 months' view, which totaled BRL 11 billion -- BRL 11.04 billion in the first quarter 2024. Of this total, 58% came from franchises and 42% from company-owned operations. The number of franchises increased to 183 at the end of the first quarter of 2024, 6 more than the last quarter reported, and stable compared to the first quarter of 2023.

On Slide 10, we present the company's evolution in indicators related to Lopes Labs. In the chart in the upper left, we see that organic visits to Lopes portal exceeded, for the first time, 10.7 million in the last 12 months' view, a volume 32% higher than at the first quarter 2023. Leads from organic search generated by Lopes portal totaled 179,000 in the view last 12 months, also a historic record for the company and 65% higher than in the first quarter of 2023.

These were my remarks regarding the operating results for the first quarter 2024. And now I'll turn the floor over to Francisco who will speak about CrediPronto, and then Matheus will present the company's financial results. Thank you.

[Francisco Neto, executive]

Thank you. Good morning, everyone. It's a pleasure to be here again presenting the results of CrediPronto and also being able to talk to the market. We highlight in this first quarter the operating results of CrediPronto where we see that the LTV and the average rate is maintained as we did in the last quarter.

In the first part of the -- on the right side of the slide, we see the drop in origination when compared to private banks, in terms of financed volume. The first quarter, BRL 128 million, February BRL 133 million, and March BRL 212 million. What we've seen is that the credit analysis that we have, given the funding that was dropping last year, was very strict in order to preserve this funding, because we have a partner that is Itau at CrediPronto, largest bank in the country in credit -- in real estate facilities. And we want to maintain this -- continue with this funding for longer.

Now with recent figures from ABECIP, we can compare the first 4 months of 2024 in which we've seen a redemption from savings accounts, half of the first 4 months of 2023, we see that the stabilization in the inventory of SBPE funds is becoming stable. So recent data shows that in the last 4 months, the inventory of SBPE is around BRL 634 million and growing, BRL 734 million in January, BRL 735 million, BRL 739 million and BRL 740 million.

So this stabilization shows that we will resume having origination results higher than in this first quarter of '24. This is an expectation of the company to resume higher levels. And the drop when compared to the first quarter will not be the same. If we compare the second quarter '24 to second quarter '23, it won't be the same level of drop in origination. This is my comment about the drop in origination.

Now on the second part -- page, we show the portfolio that reached an outstanding level of BRL 15 billion. With this lower origination, it dropped slightly, somewhat stable when you compare 2023, the full year, to the first quarter of 2024. But we believe that with this improvement in the overall market as well as with measures that are being discussed by the Central Bank, we believe that this portfolio will go back to going up and origination will resume its dynamic levels.

We see in the P&L that income recognition is BRL 7.8 million, almost stable. And the recognition of our revenues in the first quarter, we see a behavior from higher in December, which is natural, because it's a seasonal effect, and January and February were lower due to the seasonal effect.

But we are very confident in CrediPronto. Our market share is preserved. We've been growing. And looking towards the future, we have a very positive view and expectation. The company has been praised by our partners, by the stores that are operating in our own network. And origination terms are very good, and we are a benchmark in the market in terms of efficiency. And data has been very consistent. So we remain optimistic for an operation that's becoming more and more recognized in the industry for real estate supply chain.

This is my comments about CrediPronto. I'll now turn the floor over to Matheus Fabricio, who will present the financial data of the company.

[Matheus de Souza Fabricio, executive]

Thank you, Francisco, and good afternoon, everyone. We begin the analysis of financial results on Slide 14, where we present the breakdown of revenue by segment of the company. In the left corner of the slide, we see a table that summarizes the main indicators by segment.

Own operations had a PSV of BRL 1.1 billion in the quarter, with a net commission of 2.07%, totaling gross revenue of BRL 24.6 million. Franchises intermediated PSV of BRL 1.4 billion with an average royalty fee of 0.41%, gross revenue of BRL 5.8 million. CrediPronto generated BRL 472 million in the quarter, with gross revenue including commission and profit sharing of BRL 11.3 million.

On the right of the slide, we see the company's total net revenue reached BRL 37.8 million in the first quarter of 2024, down 11% compared to the same period of 2023.

The intermediation segment had net revenues -- both intermediation and franchises grew slightly in the first quarter when compared to the first quarter of 2023, with net revenue BRL 22.3 million, 4% higher, and franchises BRL 5. 5 million, 2% higher than in first quarter '23. CrediPronto had a net revenue of BRL 10 million, 35% lower than the first quarter '23, as explained by Francisco.

On Slide 15, we can see that operating expenses fell 17%, totaling BRL 24 million. When we analyze expenses by segment, we see stability in the operating expenses of our own operations and franchises, which together totaled 82% of company's expenses. CrediPronto's expenses in turn fell by approximately BRL 5 million, partially explained by the drop in volume originated.

On the bottom of the slide, we see that the company continues the downward trend in cost per transaction, which presented the lowest historical rate in this quarter, equivalent to BRL 8,500 per transaction.

On Slide 16, we present the evolution of the net revenue by segment in the last 12 months' view over the last 5 years. As we can see, 56% of the company's net revenue comes from the intermediation segment, 29% from CrediPronto, and 16% from franchises.

On Slide 17, we highlight the progress of EBITDA margin over the last 10 years, always in the last 12 months' view. This analysis shows that from 2019 onwards, the company observed a stabilization of the EBITDA margin, always at levels close to 30%. Specifically, in the first quarter of 2024, EBITDA margin for the last 12 months is at 34.1%.

On Slide 18, we show the performance by segment for the first quarter of 2024. The intermediation segment had a gross revenue of BRL 24.6 million and net income before IFRS of BRL 1.4 million, resulting in a margin of 6.2%. Franchise segment posted gross revenue of BRL 5.8 million and net income before IFRS of BRL 1.8 million, a positive margin of 33.1%. CrediPronto posted gross revenue of BRL 11.3 million and net income before IFRS of BRL 4.3 million, with a margin of 43.2%.

Consolidated gross revenue was BRL 41.7 million. And after considering depreciation, financial results and taxes, we obtained a net income before IFRS of BRL 7.5 million in the quarter, a 20% margin. After adjustments for minority interests, net income attributed to controlling shareholders was BRL 3.3 million, corresponding to a margin of 8.7%.

On Slide 19, we analyze the effects of IFRS on our financial results. These are associated with depreciation, amortization of intangible assets, noncash effects of call and put options in subsidiaries, and deferred income tax related to intangible assets in LPS Brasil call and put options. The total of these valuation adjustments reached BRL 645,000 the first quarter '24, but it's important to note that these impacts have no cash effect. Therefore, we suggest an evaluation of our result excluding these impacts for a clear understanding of the company's performance.

On Slide 20, we have the cash variation of the period and the company's total cash at the end of the first quarter '24. The chart on the left, notice that the cash generated from operations remained positive and amounted to BRL 11.7 million. The company's cash position at the end of the quarter was BRL 30.5 million.

Considering financial investments, we totaled BRL 70.3 million, 4% higher than the last quarter. We always committed to improve the cash availability. The company has 10.3 million treasury stock.

And these are the financial results of the company. Once again, we thank you all for participation. And now we open for the Q&A session. Thank you.

[Operator]

[Operator Instructions]

[Matheus de Souza Fabricio, executive]

We have a compilation of most questions related to CrediPronto, and a question about the plan of the company regarding government actions regarding compulsory deposits and other policies.

[Francisco Neto, executive]

So I'll answer all the questions. Thank you, Matheus. Thank you for the questions. This gives me an opportunity to comment that the compulsory deposit, if it is approved, it will provide an important volume, to be discussed, between 5% and 10% of reduction of compulsory, that is 20% to 15% or 10%. So that brings funds that will be immediately available to be used by the industry. So it's very positive.

As for the [ credit ] program, it's always also healthy. We see that the interest rate should be closer to loan levels to attract capital that could be used for long term, since mortgage is 35, 30 -- 30 years, but having these instruments ready is positive because it's an advancement.

For higher funding, the results will be good if the compulsory deposit is approved, that's -- and also this improvement in the presentation of CrediPronto, given the stabilization of SBPE funds and the strictness of credit analysis has been somewhat relieved, so that we can have a higher credit amount. The mortgage customers are good payers, the default rate is very low. So these are customers that, if there's -- there are funds available for credit, this is an industry that tends to grow a lot in Brazil.

[Matheus de Souza Fabricio, executive]

Thank you very much. After Francisco's answer, we thank you all again for your presence, and now end the conference call for the earnings of Lopes in the first quarter of 2024.

[Operator]

The webinar of LPS Brasil has ended. Thank you all for attending. Have a good afternoon.

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