LPS Brasil Consultoria de Imoveis SA

BOVESPA:LPSB3

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Thank you, ladies and gentlemen. Good afternoon, and thank you for holding. Welcome to the conference call of LPS Brasil, in which we'll present the results for the second quarter 2024. [Operator Instructions] The presentation link in English is available in the chat.

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 could 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 Mr. Cyro Naufel will talk about the financial results. After that, we'll start the Q&A session.

Therefore, I would like to turn the floor to Mr. Marcos Lopes. Please, Mr. Marcos, you may begin.

[Marcos Lopes, executive]

Good afternoon, everyone. I would like to thank you for participating in one more conference call of Lopes LPS Brasil, in which we present the results for the second quarter of 2024. Taking part in this presentation are our Vice President, Francisco Lopes Neto; our Investor Relations Officer, Institutional Officer, Cyro Naufel; and our CFO, Robson Paim.

The company achieved consistent results in the second quarter of 2024 despite the uncertain macroeconomic scenario resulting both from the influence at the external market and the domestic market, which is pressured by inflation. The expectation of interest rates for the end of the year has stabilized at double digits.

Savings deposits recorded positive results throughout May and June, which contributed to a savings balance close to that of December 2022. As a result, the real estate financing market began to show a higher level of origination of new contracts, which helped to boost the industry as a whole and had a positive impact on our operation of credits, CrediPronto.

Specifically regarding the operation in the city of Sao Paulo, since May, the approval of new real estate projects has taken longer than usual, which has resulted in a lower volume of launches in the quarter in this area.

Looking at the company's consolidated results, the efficiency in managing operating costs and expenses contributed greatly to our achieving the second highest EBITDA margin in the last 10 years, reaching a level close to 40%.

Finally, I would like to emphasize that we're always on the lookout for new business opportunities that bring in more revenue and always aim for the best return for shareholders. After these initial remarks, I would like to move on to the presentation, starting on Slide 4, with the highlights of the period.

In this -- on Slide 4. In the second quarter of 2024, the broker total transactions closed -- PSV totaled BRL 3.5 billion, an increase of 20% compared to the same period of the previous year. CrediPronto's volume followed the improvement in the real estate financing sector and originated BRL 852 million in contracts, which represents an increase of 9% compared to the second quarter of 2023.

Regarding financial results, we highlight recurring expenses that fell 8% in the second quarter of '24 compared to the same period of the previous year, totaling BRL 27.8 million in the period.

As I mentioned earlier, the second-best EBITDA margin in the last 10 years was reached in the second quarter of '24, whose indicator reached 38.6%, 3.2 percentage points above the second quarter of '23. The EBITDA recorded by the company was BRL [ 17.5 ] million in the period. Still regarding the company's results, net income before IFRS increased by 10%, totaling BRL 11.9 million in the second quarter of 2024.

Moving on to Slide #5, we will comment on the launches of Rede Lopes in the second quarter of 2024. It is worth mentioning that we refer to Rede Lopes as the entire group's real estate intermediation operations, whether they are in our own operations or franchises, since the ecosystem is fully interconnected.

Rede Lopes launches totaled BRL 5.7 billion in the second quarter of 2024, 7% lower than the same period in last year. As we can see at the map alongside, the launches in the year have a diverse geographic distribution, which despite a strong presence in Sao Paulo and Rio de Janeiro, also included Espírito Santo, Paraná, Goiás, Amazonas, Bahia, [ Serra ] and Paraíba states.

Continuing the presentation on Slide 6, we see the results of intermediations. In the second quarter of 2024, in the consolidated results of Rede Lopes, the company intermediated BRL 3.5 billion, 20% more than in the same period of the previous year. Rede Lopes ended the semester plant in 26 states and the federal district with a total of 201 stores.

On the next slide, #7, we present intermediation of Rede Lopes by geographic region of Brazil. The state of Sao Paulo accounted for 39% of the intermediated volume in the quarter, totaling BRL 1.3 billion, followed by Rio de Janeiro with 32% and BRL 1.1 billion. The other regions combined accounted for 30%, totaling BRL 1 billion, with emphasis on the Northeast region with BRL 486 million.

On the following slide, #8, we present the vision of Rede Lopes intermediation between primary, secondary markets. Both in terms of PSV and number of units, the primary market represented 77% of Rede Lopes intermediations in the quarter, a situation similar to that presented in the second quarter of 2023.

On Slide 9, we present the company's last 12 months vision, which totaled BRL 11.85 billion in the second quarter of 2024. Of this total, 58% came from franchises and 42% from company-owned operations. The number of franchises increased from 183 at the end of the first quarter 2024 to 186 at the end of the second quarter.

Moving on, on Slide 10, we present the company's evolution in indicators related to Lopes Labs. In the chart at the top, we can see that organic visits to Lopes portal continue to increase and exceed historical marks, reaching 11 million in the last 12 months, a volume 21% higher than in the second quarter of 2023.

Leads from organic search generated by portal Lopes totaled 186,000 in the last 12 months, also an all-time high for the company and 48% above the second quarter of 2023.

These were my remarks regarding the operating results and now I turn the floor over to Francisco, who will speak about CrediPronto, and then to Cyro, who will present the company's financial results.

[Francisco Neto, executive]

Thank you, Marcos. It's a pleasure to be here once again to present the results of CrediPronto and talk to you. We've seen a very interesting recovery of credit especially because the year started with a very restrictive policy in terms of credit analysis made by the banks as well as credit in terms of funding restriction due to the withdrawals from savings accounts in previous years.

We have noticed that this has been normalized. We had months in which the [ pass ] has exceeded withdrawals from savings, especially May and June. So this normalization of credit and funding is very positive for the future.

On Slide 11, we can see that in the second quarter of 2024, as compared to the second quarter of '23, there was a growth of 9%. In the first half of the year, we see a decrease, if we look -- compared to the previous year, but the trend of the portfolio is positive, is an upward trend. So the year-to-date portfolio is growing. And with this normalization of savings, we see a -- would envisage a second half of the year that's more positive in terms of originating contracts.

On Slide 12, I'll also talk about that. On Slide 12, we have the highlights of the second quarter. And it's important to say that if we compare the volume originated from the first quarter and the third -- in the first quarter, we originated BRL 482 million, and this volume of originations shows this resumptions.

The average LTV is within the range -- average rate, 10.9% constant. And the average months is 358 months. We see that people are not paying for the loans as they used to, so default is increasing a little bit. And in profit, if we look on the following slide, we can see that profit is growing.

As of funding, it's interesting to talk more about that. In the months of May and June, we had -- there was a positive balance of more than BRL 13 billion year-to-date. In July, negative by BRL 2 million. But if we look at the total balance and the [ added ] of savings, which is the volume available for funding comparing December of 2023 with the end of July of 2024, we can see that it went from BRL 740 billion to BRL 760 billion.

So this additional positive volume that is in savings accounts shows that the resumption of this funding source is very important to look at future originations.

You see the CAGR in this first half of the year that the company reported results, there was a growth of 20%. We went from origination in January, BRL 126 million, reaching BRL [ 316 ] million in June. So we are 2.5x higher comparing to the figures originated in January. So this resumption is a very positive indicator, this upward trend, in terms of origination for the second half of the year.

Now, we continue with the presentation with the financial results. And now I turn the floor over to Cyro, and we are available for any questions you may have. Thank you very much, and have a good day.

[Cyro Filho, executive]

Thank you for Francisco. I'll continue with our presentation of the earnings. Let's talk about the financial results. On Slide 14, we can see the analysis of gross revenue by segment. On the left, of Slide 14, we have the gross revenue of second quarter 2024 broken down. We can see that own operations had a GSV of BRL 1.9 million (sic) [ BRL 1,479.7 million ] with a net commission of 1.97%, with a gross revenue of BRL 30.1 million.

Franchises had a GSV of BRL 1.9 million (sic) [ BRL 1,979.5 million ] and gross revenue of BRL 7.8 million; CrediPronto with origination of BRL 852 million, commissioning of BRL 7.2 million and a profit sharing of BRL 4.75 million, performing a gross total revenue of BRL 12 million.

On the right side of the slide, you can see that the net revenue in the second half of third -- second quarter 2024 remain constant with a decrease of only 3% when compared to the second quarter of '23, reaching a total of BRL 45.3 million.

If you break down net revenue by segment, in Brokerage, we see stable figures with a slight drop of 3%, while the net revenue from Franchises increased by 9%. CrediPronto by itself decreased by 8%, explained by the reasons that Francisco mentioned. If we look at the net revenue by segment comparing the first half of '24 with the first half of '23, we see a light drop of 6% reaching BRL 83 million, also explained by the drop in CrediPronto, as Francisco mentioned.

Now on Slide 15, we've showed the operational expenses of the company. There has been a reduction in the second quarter of '24 as compared to the second quarter '23 with less 8% in the total amount of expenses, reaching BRL 27.8 million.

Now breaking down by segment, own operations presented a decrease in expenses of 11%, going from 11 -- 18 -- now reaching 18.3% (sic) [ BRL 18.3 million ], CrediPronto decreased by 19%, dropping to BRL 5.7 million, while franchises improved -- increased 56%, reached BRL 3.8 million.

At the lower part of Slide 15, you can see the expenses curve, the amount of expenses per transaction performed when we see that company continues to reduce expenses with higher efficiency in processes, attaining the lowest level of BRL 8,000 per transaction in the second quarter '24, last 12 months view.

On the next slide, we show the net revenue by segment. In the second quarter '24, 55% of net revenue came from Brokerage, 16% from Franchises and 28% from CrediPronto.

Moving on to Slide 17. There is a historical chart of EBITDA and EBITDA margin. And the company maintains its focus on operational efficiency. Since 2013 -- '23 with the recovery of the net margin in the last 12 months vision and in the second quarter of '24 in the last 12 months, we reached almost 35% of EBITDA margin.

Now showing the results by segment on Slide 18. We can see that Brokerage has a gross revenue of BRL 30 million with the net income before IFRS of BRL 5 million, a net margin of 2.2% (sic) [ 18.2% ]. Franchises shows gross revenue of BRL 7.8 million, with the net income before IFRS of 2.7 million and a net margin of 37%. CrediPronto shows a gross revenue of 12% -- BRL 12 million, I'm sorry, with a net income of BRL 4 million and the net margin of 39%.

Looking at the consolidated results of the company, gross revenue reached BRL [ 91 ] million, EBITDA of BRL 17.5 million, EBITDA margin of 38.6% after depreciation financial results and income tax and [ social ] contribution, net income before IFRS of BRL 11.8 million and a net margin of 26.2%. After noncontrolling shareholders payments, [ BRL 6.915 million ] margin is the funds, the net income distributed to -- the second quarter.

On Slide 20, we show the impact of IFRS because that's related to intangible assets, losses and gains in calls and put options. And these are noncash effects, and that had a positive result of BRL 679 million in the second quarter of '24. And since these are noncash amounts, we always suggest analyzing the figures of the company without considering IFRS effects for a better analysis of our performance.

On Slide 21, we show cash and cash equivalents. In the second quarter of '24, we had a cash generation positive at BRL 7.1 million and final cash of BRL 22 million, with 28% of a negative variation as compared to the first quarter of '24. If you add the financial investments, we have a total balance of BRL 61.3 million, 13% lower when compared to the first quarter of '24. I highlight that the company has 10.3 million shares available in treasury.

Thank you very much. These were our remarks and the presentation of the financial results, and let's open for the Q&A session.

[Operator]

Thank you. Ladies and gentlemen, we will now start the Q&A session. [Operator Instructions]

[Cyro Filho, executive]

Starting the Q&A session, we have received some questions about the same topic of CrediPronto. How do we believe that the origination of funding will be throughout the year? So I'll ask Francisco to answer that question. Go ahead, Francisco.

[Francisco Neto, executive]

Thank you, Cyro. I believe that we have a positive scenario of regularization of funding. As the market -- you can see in the market, ABECIP figures are examined according to deposits and withdrawals from savings accounts. And as I mentioned in my presentation, there were very important months in this first half of the year, in which we saw figures we had never seen before in 2 months of consecutive positive balance above BRL 5 million.

In 2023, the families were indebted. They were paying other loans, they had made -- and that caused the withdrawals from savings accounts to increase. If we look at May and if you analyze the inventory of savings account since 2019 before the pandemic and how that savings balance behaves, the news is very good.

During 2019, it used to amount, at the end, BRL 650 billion. And now, at the end of the second, third -- second quarter, I'm sorry, of 2024, with a total balance of BRL 760 billion. So there was a major withdrawing of BRL 80 billion in 2023 with the negative balance and banks become more restrict -- became more restrictive in their credit analysis, resulting impact -- having a negative impact on our results.

But now we noticed that our origination started to climb steeply in the last 3 months. So in the results reported in June, we're making 2.5x more than we used to make in the beginning of the year. Despite the seasonality, it's a very large recovery, it's a good average CAGR for these first 2 quarters. And we believe this trend will remain positive.

So the second half of the year, without giving guidance, but we should have a positive second half of the year in terms of origination. Because funding is growing, the end balance has been positive.

And during the second half of this year, we'll likely have situation that's close to the growth we've seen in the second quarter growth as compared to the first quarter of this year. So we have a positive view of the recovery of the financial level. So the recovery of funding is the main driver for origination. And this driver has been positive, according to our analysis. This is my answer.

[Cyro Filho, executive]

Thank you, Francisco. We have received a few more questions regarding franchises, specifically about the increase in franchises expenses. I can answer that. This amount presented in the second quarter of '24 is planned in the company's budget. It reflects our strategy to increase and -- increasing the profitability of franchises within the company's strategy.

With that, we're able to close the Q&A session. We thank you all for participating and wish you all a good day.

[Operator]

This ends the webinar of LPS Brasil. Thank you very much for attending, and have a good afternoon.

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