LPS Brasil Consultoria de Imoveis SA

BOVESPA:LPSB3

Earnings Call Transcript 2022-Q3

[Operator]

Good afternoon, ladies and gentlemen, and thank you for waiting. Welcome to the webinar for the earnings of LPS Brasil to discuss the results referring to the third quarter of 2022. We inform you that this event is being recorded and all participants will be in listen-only mode during LPS Brasil presentation. After that, there will be a Q&A session in which participants will be able to share the questions through the Q&A platform using one of the buttons below according to the instructions shown on the screen. [Operator Instructions] Before proceeding, we would like to clarify that statements that may be made during this webinar regarding the business prospects of LPS, projections, operating goals and financial goals are based on assumptions and beliefs of the company's management.

Forward-looking statements are not a guarantee of performance as they involve risks, uncertainties and assumptions, and they refer to future events, and therefore, the fandom 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 a general introduction and will present the operational results, followed by Mr. Matheus Fabricio that will talk about CrediPronto results and the financial results. Finally, we'll open for the Q&A session. Now I would like to hand the floor over to Mr. Marcos Lopes. Mr. Lopes, you may start.

[Marcos Lopes, executive]

Good afternoon, everyone. I would like to thank you for attending one more teleconference for LPS Brasil, in which we present the earnings for the third quarter of 2022. Here with us in this presentation, we have our Director -- Investor Relations Director, Matheus Fabricio, our Financial Officer, Robson Paim and our institutional Director, Cyro Filho. The synery of the Brazilian real estate market remains quite challenging. Throughout the third quarter, the high level of interest rates and uncertainty because of the economic and elections -- economic scenario and elections, we noticed a slight deterioration in the demand and sales oversupply. In line with this scenario and with the commitment to seek profitability for shareholders, LPS continues to do its homework in all segments it operates in. In our own operations, we're able to maintain stability in sales, participating in a larger volume of launches in the regions in which we operate, especially Sao Paulo, which concentrated 84% of the volume launched by the company in this period.

In franchises, we capped on growing, inaugurating 18 new operations, which was an absolute record for the beginning -- since the beginning of hedges. This growth has been key to keep the level of sales in the secondary market since the segment is quite impacted by the drop in demand for real estate financing due to the higher interest rates CrediPronto that operates in this segment. Despite the drop in origination continues to present the best operating indicators in the market, the solid growth in the average balance of the portfolio and generating profit share.

We continue to look carefully to our costs and expenses, seeking to adapt it not only to the current challenging scenario as well as 2023, which also contributed to the resumption of generating operational cash in this quarter and allows for maintenance of investments in technology, marketing and hedge office. After these brief remarks, I would like to start the presentation on Slide #6 with the highlights of the third quarter of 2022.

The PSV launched in the quarter already adjusted by Lopes stake in the developments was BRL 2.5 billion, 14% higher than the same period of last year. The total PSV intermediated by the company reached BRL 2.6 billion in the quarter, 2% higher when compared to the third quarter of 2021. Franchises have sold BRL 1.32 billion, stable and compared to the same period of last year. Our own operations, in turn, have intermediated BRL 1.24 billion, an increase of 2% in the comparison with the same period of 2021.

We kept our focus on national growth of our franchises network in presenting the largest absolute growth in number of stores in this quarter. We ended the period with 165 stores, 18 more than the last quarter, starting the presence of the company in Acre and Mato Grosso States. CrediPronto originated BRL 1 billion in the third quarter, a drop of 38% when compared to the third quarter of last year. According to ABECIP data, the origination from private banks has dropped 39% in the same period. The market share of CrediPronto was 6.5% among private banks with an average balance portfolio of BRL 13.6 billion, 26% higher than the third quarter of 2021. Finally, I highlight the consolidated net income of the company before the IFRS, which reached BRL 9.5 million.

Let's now move on to Slide #8 to talk about the launches of our own operations in the third quarter of 2022. On the chart on the left, we can see that the total volume launched by the own operations of the company in the third quarter of 2022 amounted to BRL 4.5 billion, 18% increase when compared to the third quarter of '21. The total PSV launched 84% was concentrated in the state of Sao Paulo. On the right, we see the stake of Lopes in the developments launched, which reached BRL 2.5 billion, 14% higher than the same period of last year. On Slide #9, we see the results of brokerages, brokerage operations.

On the left, we see the consolidated results of the company that is the PSV our own operations plus the PSV intermediated by franchises. In comparison with the same period of 2021, there was a growth of 2%, totaling BRL 2.6 billion. In the operation of franchises, there was a contribution that for the most part of the intermediated PSV, totaling BRL 1.3 billion, stable when compared to the third quarter '21. Our own operations had a slight growth of 2% in the volume intermediated totaling BRL 1.2 billion. On the lower left of the chart of the slide, we can see that the SOS of the company had a drop in Sao Paulo from 10% to 7.2% as well as in the rest of Brazil from 9.3% to 7.7%, which corroborates the moment that's most challenging in the market. In turn, the sales oversupply of the company had a better scenario. In Sao Paulo, we had a drop of 9.6% to 9%. And in the rest of Brazil, an improvement of 11% or 14% in comparison to the same period of last year.

Let's now move on to Slide #10. In this slide, we see the total PSV in the last 12 months since 2017, including our own operations and franchises, trying to show the consistent growth of the company, growth of the company in its brokerage operations. As we can see, the total transactions of the company in the last 12 months remained stable at BRL 10 billion, JPY 5.4 billion coming from franchises and BRL 4.8 billion in our own operations. Now on Slide 11, we show the results of transactions closed by region as well as our geographic presence. We ended the quarter present in 21 states and the Federal District, with 182 stores altogether, 17 of our own stores and 165 franchises, which contributes to prove the strengthening of our network, Hedge Lopies and a greater efficiency and aggressiveness in the growth process. As seen in the lower part of the slide, we see the consistency of our growth plans for stores, which accumulates 42% growth on an annual basis and 12% when compared to the last quarter.

In the third quarter of 2022 was the best quarter of the company ever in absolute figures with the addition of 18 new stores. On the top part of the slide, we can see that the state of Sao Paulo accounted for 56% of transactions closed in our own operations in the quarter. South, 25% as well as Fortaleza and Espirito Santo have contributed with 19%. In the franchises, the state of Rio de Janeiro kept its leadership in brokerage with brand lobbies in Patrimovel totaling 41% of transactions in the quarter. The market of Sao Paulo accounted for 39% and the other regions, 20%. Now continuing on Slide 12, we'll show the company's evolution in terms of Lopies Labs.

On the chart, you can see visiting -- number of visits to the portal and blogs of Lopies that grew 5% when compared to the third quarter of 2021 with 2.2 million visitors. On the other hand, it's important to notice that on the chart below, there was a 1% conversion of such visitors into leads when compared to the same period of 2021, reaching a level of 1.53%. We had an impact of the lower demand in the market. As for the leads generated by Lopies portal, there was an increase of 5% in the volume originated when compared to the same period of last year, but a drop of 3% when compared to the last quarter disclosed.

Finally, on the lower right side, we can see the consistent increase in the number of new units in edit at Lopies' platform. Only in July, August and September of this year, almost 31,000 -- 31.5 new -- 1,000 new units were added for sale or rental in our platform, 23% higher than the third quarter of '21. These were my remarks about the operational results of the company. And now I hand the floor over to Matheus Fabricio, who will talk about CrediPronto, and then he will present the financial results of the company. Thank you.

[Matheus de Souza Fabricio, executive]

Thank you, Marcos. Good morning, everyone. Starting on Slide 14 of CrediPronto. It's worth talking about the origination of 1.049 million of mortgage value, a drop of 38% when compared to the third quarter of '21, 2,870 new contracts, a drop of 43% compared to 3Q '21. Average LTV was stable at 66% and the average rate, 9.8%. The profit share of the company was BRL 9.4 million and the bank component, which is the commission of brokerage commission of new contracts was 11.2 was totaling BRL 20.6 million.

As we can see on the charts below, the drop of CrediPronto was slightly lower than private banks according to RBC, which dropped 39% when compared to 38% at CrediPronto. As mentioned in the introduction by Marcos, the -- our portfolio continues to grow 26% above when compared to the same period of last year BRL 13.6 billion. There was 12.4 new originated contracts for every terminated contract during the third quarter of '22, which explains the growth in the portfolio.

On the following slide, we have the mortgage origination from CrediPronto. The same trend of decrease continues since the fourth quarter of '21 due to the higher interest rates and the lower demand in the real estate financing market. Now in third Q '22, reaching BRL 4.46 million. On the next slide, we see the virtual P&L. And the highlight is the constant search for higher operational efficiency of the company in terms of costs and expenses, we can see a reduction in expenses with Itau allocated by Itau Bank in the joint venture as well as Olympia expenses that are directly related to CrediPronto operation. Commissions paid there was also a drop, which was led by the drop in origination, that's a 1% commission paid. So the profit sharing in the period was BRL 8.6 million and profit recognized by Lopies was 9.4% due to the timing mismatch between the book entry period, accounting period and the calendar period. The profit share of September has remained at 2.7, similar to August.

Now continuing with the presentation, talking about the financial numbers, I would like to ask you to go to Slide #18, where we shall see the compilation of the gross revenue, starting we had transactions closed of 1.24 in the net revenue and net intermediation of 2.14. Multiplying transactions by net commissions, we have the gross brokerage revenue of BRL 26.6 million. This revenue, we should add the revenues of other segments, such as loyalty from franchises, revenues from CrediPronto, profit-sharing commission on new financings that are recognized in other revenues totaling BRL 27.4 million.

To total, the gross revenue in the quarter of $57.6 million, we have to add the amount for the deferred revenue -- upfront revenue of CrediPronto that doesn't have a cash effect. On Slide #19 we see the net revenue and costs and expenses in the period. Net revenue was BRL 52.5 million in the third quarter, 11% lower when compared to the same period of last year, explained by the reductions in CrediPronto revenues, especially in the origination of new financing. The bar chart also shows the contribution of each segment for the net revenue.

Brokerage accounted for 51% of the net revenues of the company, CrediPronto 36% and franchise is 13%. In absolute values, when compared to the same period of last year, the revenue in the Brokerage segment was 5% higher. CrediPronto had a drop of 3% and franchises strongly increased by 33%. On the chart on the right, we see the operating expenses of the company before IFRS, totaling BRL 36.8 million with an important reduction of 13% when compared to the same period of last year. Now moving on to Slide 20, we see the comparison of EBITDA and net income of controlling shareholders without IFRS. On the left, the company's EBITDA totaled BRL 15.7 million in the quarter, 4% lower than the same period of last year with a margin of 30%. On the right, we see the net income of controlling shareholders before IFRS, totaling BRL 5.1 million with a net margin of 10%. On Slide 21, we see the development of net income before IFRS last 12 months. Since 2018, which totaled TMR 22.3 million in the vision of the third quarter.

On Slide 22, we see the analysis of results by segment on a quarterly vision without the IFRS effect. Brokerage had a slight decrease of BRL 418 million before IFRS franchises and net income before IFRS of BRL 3.4 million with a margin of 50% and CrediPronto EUR 6.5 million with a margin of 35%. The consolidated net income reached EUR 9.5 million in the quarter, a margin of 18.1% and BRL 5 million after minority shareholders' payments. in controlling interest payments with a margin of 9.7%. On Slide 23, we see the impact of IFRS in our results. The main impacts are related to depreciation and amortization of intangible assets, noncash effects on call and put options of the company's control and deferred on -- income tax deferred on intangible assets, calls and puts of LPS Brazil. The total impact of this added to BRL 4.7 million.

And finally, on Slide 24, we see the cash variation in the period in total cash of the company. On the chart, we see the resumption of cash generation from operational activities totaling BRL 11.8 million. The cash burn by activities, investments was BRL 11 million, resulting from technology investments and financial applications and the cash used in financing was BRL 3.9 million, mainly due to payment of dividends for noncontrolling shareholders. The available balance at the end of the period is BRL 27.9 million. Remember that the company also have 10.3 million in treasury shares due to the 2 buyback programs last year. These were my remarks about the company's results. We thank you again for attending this call, and we can open for the Q&A session.

[Operator]

Ladies and gentlemen, we'll now start the Q&A session.[Operator Instructions]

[Matheus de Souza Fabricio, executive]

There's a question about the average fee of priorities of franchises expected for the next quarters because there has been a growth of 1.56 in this quarter. So I could expect maintenance, but the growth of this in the last quarter is a result of the royaty itself, but other initiatives of a franchisor among commercial actions that involve franchisees that could add to capturing revenues. And we'll continue with that to try to increase the profitability Lopies solosoins. There's a question about the size of the available units in our platform. That figure changes, but we are over 300,000 units. So quarter-on-quarter, the volume of new units added to the platform is growing, which shows the potential of the network, and we'll let you know about increases in the next quarters.

There's another question about the number of agents of the company. Why has this number remained stable when there was an increase in the number of stores or franchises. It's important to understand that the new franchises have a period in order to implement the store from 90 to 120 days to create their team and turnover of agents is considerable because they are independent workers. And there's -- that's also impacted by the demand for launches in the primary market. So that figure varies usually, and it's not something that the company considers significant in terms of the reason why doesn't the number of agents grow when the number of stores grow. Oftentimes, the turnover in 1 month or 2 months in a large operation, sometimes offset a growth of new franchises with 5 or 10 agents in each one.

[Operator]

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

[Marcos Lopes, executive]

Thank you all very much for attending the earnings release webinar of the third quarter of 2022. In this challenging scenario that we experienced, we continue optimistic, given the solid fact that we have a solid company, a real estate credit and franchises. We are very well positioned and keep doing our homework to remain competitive and ready to serve any possibility of growth and an improvement in the macroeconomic scenario as a whole. Thank you very much, and have a good day.

[Operator]

The webinar of the results of LPS Brasil has now ended. We thank you all for attending, and have a good afternoon.