LPS Brasil Consultoria de Imoveis SA

BOVESPA:LPSB3

Earnings Call Transcript 2019-Q4

[Operator]

Good afternoon, ladies and gentlemen, and thank you for holding. Welcome to the earnings conference call for Lopes Brasil to release results for the fourth quarter 2019 and the full year. We have with us today, Mr. Marcos Lopes, the company's CEO; Beatriz Machert, the Investor Relations Officer; and Francisco Lopes Neto, the Vice President. We would like to inform you that this event is being recorded [Operator Instructions]

This event is also being broadcast simultaneously over Internet via webcast and can be accessed at the address, www.lopes.com.br\ri, where you will find the respective presentation. Once again, you can look at the presentation at your own convenience. The replay of this event will be available soon after its closing. And the webcast participants can record questions for Lopes via website, and they will be responded at the end of the conference call.

Before proceeding, we would like to clarify that the forward-looking statements made during this conference call referring to the Lopes business outlook, the projections, operating and financial goals are based on the beliefs and assumptions of the company's management. These forward-looking statements are not guarantee of performance as they involve risks, uncertainties on-premises as they refer to future events, and therefore, depend on circumstances that may or may not occur. Investors and analysts should understand the general conditions, sector conditions and other operating factors could affect the future results of the company and lead to results that differ materially from those expressed in these forward-looking statements.

Initially, Mr. Marcos Lopes will present the operating results, and Beatriz Machert will present the results for CrediPronto and the financial results. Finally, we will open for the question-and-answer session.

Therefore, we give the floor over to Mr. Marcos Lopes. You may begin, sir.

[Marcos Lopes, executive]

Good afternoon to all of you, and I would like to thank you for joining us at one more earnings conference call for Lopes Brasil, where we will present the results for the fourth quarter and full year 2019. We have with us today in this presentation, our Vice President, Francisco Lopes Neto; and our Investor Relations Officer, Beatriz Machert.

The year 2019 was marked by rather positive events for the company with an increase in the volume launched and brokered, especially in the capital of São Paulo, and increase in revenues of franchises and very good results coming from CrediPronto. From the viewpoint of originations as well as in terms of the receipt of profit sharing, that began to be paid at the beginning of last year. Also in 2019, we began a project for the digital transformation of the company. And after bringing together people, technology and innovation, we created the Lopes Labs, focused on offering a more complete journey for our in-house clients and external clients and to strengthen our positioning as a market leader.

The improvement in the operating indicators, along with a good management of costs and expenses for the company, besides our experience in situations such as this one, allows us to be quite confident that we will be able to face very challenging scenario we see ahead of us, considering the situation of the spread of coronavirus in Brazil and worldwide. We have created a crisis committee to cautiously plan the coming months, and we maintain a sound cash position. We're quite confident that we will be able to deal with this situation considering the soundness of the company. And based on our decision, we will not stop making the necessary investments for the digital transformation of the company. We are quite sure that we will get to this moment and have a sound company that will be able to seek businesses after this pandemic.

We will now go on to the presentation beginning on Slide #5 with the highlights for the fourth quarter 2019. In the first slide, we show you the operating highlights for the year. We participated in the launch of 155 developments throughout the last year, with a growth of 15% in the number of projects and 33% in the volume launch vis-à-vis 2018. If we analyze the brokering, we had a growth of 12% when compared to 2018. And we ended the period with BRL 4.7 billion of PSV, of which only the capital in São Polo intermediated BRL 2.4 billion, 51% of the total of our own operations.

Our franchise network posted a growth of 19% with a PSV of BRL 3.2 billion. Once again, CrediPronto has continued to present very sound results. We originated BRL 1.6 billion in financing with an increase of 51% when compared to the previous year.

We will now analyze the financial sectors, where we have a net revenue of BRL 147 million in 2019, with an increased proceeds in all of our business segments was a highlight for the receipt of the profit from CrediPronto that have become recurrent this year. We ended the year with BRL 107.7 million in cost and expenses, a reduction of 9% even with the significant increase in revenues. Therefore, the company EBITDA amounted to BRL 39.8 million with a 27% margin, reflecting our operating efficiency in all of the business segments.

Net revenue attributable to controlling shareholders before IFRS amounted to BRL 803 million (sic) [ BRL 803,000 ], and we reversed the losses of BRL 28 million in 2018.

We continue on to Slide #7, where we will remark on the operating results of the state of São Paulo segmented between the capital and the additional city. To the left of the screen, we have the results of the capital for the year 2019. We begin with the launches. And you can observe a growth of 45% in 2019 vis-à-vis 2018, totaling BRL 9.9 billion, representing approximately the entire volume launched by us in Brazil in 2018.

If we analyze the brokering during the same period, we have a result that is 38% higher. As we know, the city of São Paulo has presented the best results when compared to the other markets. When we analyze the results of operations in the other cities of the metropolitan region and in the hinterland of the state, we see that the level of launches in 2019 was 26% lower when compared to 2018. Despite this, we were able to present a stable result on the part of demand.

We will now go on to Slide #9, where we will present the launches of the first quarter and year of 2019. To the left, we can observe that the volume launched in the fourth quarter 2019 was BRL 5.8 billion, 17% higher than the previous year, surpassing the strong volume launched in the fourth quarter of 2018 in the post-election period. If we analyze the PSV launch per region, we observe that 81% concentrated in the state of São Paulo, 84% in the capital, 10% in the other cities of the metropolitan region and 5% in the interior. This data is deemed to be positive as São Paulo is the largest market in the country and the recovery initiated by São Paulo is perceived by the other states soon thereafter.

Now to the right, we present the total launch during the year that amounted to BRL 13.3 billion, a growth of 33% when compared to the total launch in 2018. This total represents the launches of 26,000 units distributed in a 155 projects throughout the year. Once again, we had a concentration of launches in the fourth quarter with the launch of 55 projects at the end of the year.

Now we continue on with the presentation on Slide #10, where we will look at in detail to the results of the brokering in the fourth quarter of 2019 and the year. In the first graph, we have the global results of the company, that is to say PSV of our own operations and the franchises. In the comparison of the fourth quarter '19 with the same period in 2018, we have a growth a 7% totaling BRL 2.3 billion for the period. In the vision of year-on-year, we had an increase of 15% ending 2019 with BRL 7.9 billion of PSV.

If we analyze only the franchise segment, we observe an improvement in the quarter as well as in the year. And with the volume brokered of BRL 926 million for the quarter, and BRL 3.1 billion for the year, an increase of 28% and 19%, respectively. These franchises have expanded the sales, thanks to the new network model implemented throughout the year. And this reflects a gain in maturity and the strengthening of this network, generating additional added value for the franchisees and consequently for the company.

In the last graph, we see the total PSV brokered by our own operations. We observe that the fourth quarter is flat when compared to the fourth quarter 2018, generating BRL 1.35 billion in the volume brokered. This slight reduction is attributed to the high-volume of launches observed in both quarters. However, there was an effect of repressed demand in the period post election, which meant that the last quarter of 2018 presented a rather relevant result.

If we take into account the annual results, the PSV for 2019 was 12% higher when compared to 2018, ending the year with BRL 4.7 billion.

In the following Slide #11, we will present the results of the segment brokering per region. The highlights for the contribution of brokerage coming from the state of São Paulo in its own operations as well as franchises, where we see a state that is higher than 50% in the quarter as well as in the year. In our own operations, the Southern region is the second most relevant followed by Rio de Janeiro and other markets. In addition of the franchise, the Rio de Janeiro market is the second most relevant as it also acts with the intermediation of real estate launches.

We will now go on to Slide #12, where we will present the results of the speed of sales and the speed of launches -- of sales for launches. We're going to begin by analyzing the indicators for the speed of sales in the capital. We observed in the first graph that there was a drop of 8.2 percentage point in the SOS when compared to the first quarter of 2018, ending the period at 12.9%. This result is due mainly to the concentration of launches at the end of the period.

In the second graph, we observe a reduction of 8.5 points -- percentage points in the speed of sales on launches in the capital, totaling 18.7%. This reduction reflects the fact that most of the brokering during this period encompass the marketing of developments launched in previous periods because of the high volume of launches observed in the previous quarters. We now analyze the results of the country, where we have a speed of sales of 9.4% for the fourth quarter 2019, 2.7 percentage points below the same period of the previous year. This negative variation continues with the same effect observed in São Paulo. Still on this slide, we can see the distribution of intermediation of losses between the product that are recently launched and products in inventory. The city of São Paulo in the graph to the left shows that 75% of the brokering referred to launches carried out in the third and fourth quarter of this year. This result was already expected as -- besides this being a market where we have the concentration of the company know-how, we also have a segment that has the higher consumption patterns for the middle and upper class segment and differentiated financing conditions.

If we observe the distribution of brokerage in Brazil, we see that 65% of the brokering carried out was with recent launches and 36% for projects launched more than 180 days ago. Because of this fact, we see that the fourth quarter recorded a lower surge for real estate in inventory as this had already been consumed in the previous quarters.

These were my comments regarding the operating highlights of the company. I would now like to give the floor to Beatriz, who will speak about CrediPronto and the financial results of the company. Thank you.

[Beatriz Lavieri, executive]

Thank you, Marcos, and good afternoon to all of you. We will now speak about CrediPronto, highlighting that we had a growth of 102% in the volume financed in the last quarter. Of course, the number of contracts also had an increase 50% with 100 new contracts every month. We observed during the year an increase that stood at 71% and a reduction of the average rate that was 58% year-on-year for the financing. In the graph below, in the third quarter, the total amount financed was BRL 1 billion. If we compare the growth of financing of CrediPronto with the market, the growth was 50% higher. And of course, this because our financing is differentiated.

In Slide #15, we see our P&L as the decrease had a positive impact on origination and it contributed to an increase in the P&L result. We have BRL 70.9 million and BRL 34 million as the company results. At the end of November, the value was at BRL 28.6 million. It is worthwhile highlighting that because of the delay in accounting, the amount accounted for was BRL 20 million because the month of December will be accounted for only in the first month of 2020. To the right, we see the growth in our portfolio of BRL 6 billion.

We now go on to the company's financial results on Slide #17. On this slide, you can see the first table, which is the multiplication of the average commission that is 2.5% for our owned properties, giving us net revenues of BRL 27.8 million. We also have the operation with Itaú, that increased our cash and it refers to the receipt of money coming from Itaú, and we also have another revenue of BRL 14 million with a commission of 1% in CrediPronto, and the part of profit sharing also from CrediPronto.

On Slide 19, we have the same presentation, where we speak about net commissions of our own operations. In the fourth quarter, we had 2.2% similar to previous quarters. And we've seen improvement in the margin of Rio de Janeiro with an average of 3.6%.

Turning to Slide #18, we see our stake in the businesses. Compared to the fourth quarter 2018, we had an increase in the contributions of CrediPronto, especially in profit sharing that began in 2019. Net revenue, therefore, had an impact of 30% and 39.8% for the year. And as we explained the previous year, this is something that will now be recurring. To the right, you see the net income and net margin attributable to controlling shareholders.

Quarter-on-quarter and year-on-year, we had a reduction despite our contingency. In the annual provision, we had a reduction of 13%, we went from BRL 93 million to BRL 81 million. And this shows our commitment with maintaining the operation at the highest standards.

On the following Slide #19, we show you the EBITDA and the EBITDA margin. To the left, we feel that we had a straightforward quarter-on-quarter. And annually, we went from BRL 9 million negative to BRL 39.8 million positive. That means BRL 50 million practically. Now this is due to an improvement in revenues and also because of the revenues of the controlling shareholders, which means that we had a positive and relative results for quarter and year-on-year. And here, we do not have the effect of IFRS.

In the next Slide #20, we have the results per segment. We observed that every quarter, we had a positive operation in terms of EBITDA in all of our business segments. CrediPronto had a positive margin, totaling BRL 3 million in EBITDA at the end of the year. The contribution of brokerage was positive with a very relevant impact on the payment of taxes because now the results of CrediPronto has been consolidated in the São Paulo operation.

In terms of each quarter, the profit of controlling shareholders was BRL 1.7 million. And we had the third consecutive quarter of the company with a profit. We see a trend towards improvement, and we are very confident that we will be able to overcome the impact of the coronavirus.

In the next Slide #21, we now see the annual vision. We can see that CrediPronto had a fundamental participation in our results. The EBITDA was approximately BRL 40 million with an EBITDA margin of 40%. Net margin attributable to controlling shareholders was BRL 803 million (sic) [ BRL 803,000 ].

In the next slide, Slide #22, we see the impact of IFRS on net income per quarter and annually. What we would like to highlight here is that most of this comes out of the company cash. And we always assess the results before this impact. As a highlight, we had an impact of impairment at the operation in Curitiba. And we also had some investments that we have made in Patrimóvel last year, the impact of this.

In the next slide, the last slide, we show you the cash flow and cash equivalents. Now if we look at this from the operating viewpoint, we had a positive cash flow for the period. I would like to highlight that only the revenues of CrediPronto amounted to BRL 10.7 million. In the annual table on the slide, we see our investments in financing operations. And we had a positive impact for the quarter.

And in terms of investments, we had an investment of approximately BRL 30 million that you will see at the bottom of the table. And we had the relevant contribution of the follow-on, representing BRL 47 million as well as the payment of dividends for some of the operations that contribute to the company, at the end of 2019, therefore, a result was BRL 121 million. Now if we consider the additional BRL 30 million and trade accounts receivable of BRL 27.5 million, we will have a very large amount available to the company.

As Marcos mentioned, the situation of coronavirus is very important, but the main objective of the follow-on continues on.

With this, I would like to end my remarks, and I would like to thank all of you for your presentation.

[Operator]

[Operator Instructions] Our first question comes from Mr. Alex Ferraz from Itaú BBA.

[Alex Ferraz, analyst]

Marcos and Beatriz, I have several questions, and indirectly related to your results. I wanted to understand what is your mindset when you think about the second quarter. The launches were concentrated at the end of March, at the end of the second quarter. Now with the COVID-19 crisis, what we hear is that there will be a postponement by several of the companies. What are you thinking in terms of the launches, will they be postponed? In terms of the developers, do you think they will wait longer or simply wait for the second semester to see what happens with the market confidence?

Speaking about the same topic, what has happened with your pipeline? You carried out a follow-on public offering in March, and then you had some marketing activities, a development of some tools. Are you going to continue on with your schedule? Are you going to speed up your investments? What is it that your planning?

[Marcos Lopes, executive]

This is Marcos Lopes. Not to mention that because of coronavirus, all of the launches have been put on hold. It's very difficult to make a forecast. But of course, we will not have any launches as long as we continue to have this social isolation. All of this has been postponed. As time crosses our expectation, we do know that these launches will take place few time. When it comes to the investments, we continue making investments in the company. We're going to continue with everything that was being done. We will perhaps postpone the M&A, which is something we prefer to leave for further ahead. Now in terms of the consultancy teams that have been contracted, none of this will be put on hold. We're still working arduously on this.

[Operator]

Our next question is from Banco Pactual made by Mr. Elvis.

[Elvis Credendio, analyst]

Marcos and Beatriz, I also have 2 questions, very similar to Alex. First, regarding your sales, what has been the evolution of sales at the end of the quarter, quarter-on-quarter and in the last few weeks? I would like to understand this as the impact of coronavirus has been very fast.

And secondly, a question about the close of your sales stand. Has there been an impact? Is there a suppressed demand? And will you return to this when this entire crisis is over? And do you think there will be a greater demand eventually?

The second question is about CrediPronto. If you can speak about the financing at the end of March for this repressed demand, and if you were able to conclude the contracting of financing 100% online?

[Unknown Executive]

You know we don't offer data regarding sales. Once again, this is something that is very quantitative. For the time being, all of the launches has been put on hold. Some had already begun their work. We held them back because, as you mentioned, our sales stands were closed in São Paulo. And this, of course, has happened in all of the other markets because of the social isolation. And of course, activities have been deeply impacted by this. But without a doubt, the launches will be resumed sometime in the future, and when we return to normalcy. I'm highly confident that this will happen. And this is a very good scenario because of the low interest rate that we have, especially for the real estate market. This greatly favors the appetite of buyers who will see what is happening with the financial assets. And they're going to perhaps look for real assets and the interest rate is a very real indicator that also contributes to my confidence. And this will be done by CrediPronto and other financing that will come coupled with this. My expectation, therefore, is quite optimistic when it comes to the market because of the conditions we will have subsequently. And there will be macroeconomic help, aid from the government. And of course, all of this may offer incentives to the economy and this should contribute and favor our market.

As I mentioned, we have set up a crisis committee to make our decisions. Everybody is working remotely, and we're incentivizing investments in situations such as this and we have to learn how to work efficiently and remotely, and this tends to work quite well. And we have been able even with people at home office to continue on with our operations.

Do you have an additional question?

[Elvis Credendio, analyst]

My question was about CrediPronto. If you can count upon 100% online financing, if this is fully operational?

[Unknown Executive]

Yes. It is possible. And it is also possible to ask about apartments online, and some of this has been operational during this period.

[Operator]

[Operator Instructions] With this, we would like to end the question-and-answer session, and we turn the floor over to Mr. Marcos Lopes, the company's CEO, for his closing remarks.

[Marcos Lopes, executive]

Once again, thank you very much for participating in our earnings call for the fourth quarter '19 and for the full year. I would like to reinforce that we're quiet calm, serene and aware of the present day situation. And once again, we hope that the very best will happen. Thank you very much to all, and have a good day.

[Operator]

The Lopes conference call ends here. We would like to thank all of you for your participation. Have a good day.