LPS Brasil Consultoria de Imoveis SA

BOVESPA:LPSB3

Earnings Call Transcript 2021-Q4

[Operator]

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the conference call of LPS Brasil regarding the fourth quarter of 2021. Today with us, we have Mr. Marcos Lopes, CEO; Francisco Lopes Neto, Vice President; Robson Paim, CFO; Matheus Fabricio, IRO; and Cyro Naufel, Institutional Director. This conference call is being recorded, and all participants will be connected in listen-only mode during the presentation of LPS Brasil.

Then we are going to start a question-and-answer session when further instructions will be provided. [Operator Instructions]

This conference call is also being simultaneously transmitted on the Internet through webcast and may be accessed at the address ri.lopes.com.br, where you can find the respective presentation. You can control the selection of slides. A replay of this conference call will be available right after its end. As a reminder, the participants of webcast may ask questions to LPS, that will be answered after the end of the conference call. Before continuing, we would like to clarify that statements made during this conference call relative to LPS business prospects, operational and financial projections and goals are beliefs and assumptions of the company's management.

Forward-looking statements are not guarantee of performance because they 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 overall conditions -- industry conditions and other operational factors may affect the future performance of the company and therefore, lead to results that will be materially different from those expressed in such forward-looking statements.

First, Mr. Lopes will make an overall introduction and present the operational results. And then Mr. Francisco Lopes will present the results of CrediPronto. And then Mr. Matheus Fabricio will talk about the financial results. And then we are going to open for questions and answers.

Now I would like to turn the conference over to Mr. Marcos Lopes. Mr. Marcos Lopes, please the floor is yours.

[Marcos Lopes, executive]

Good morning, everyone. It's a pleasure to be here presenting the results of the fourth quarter and for the year of 2021. So here, as we said, we have Francisco Lopes Neto, our VP; and then Matheus Fabricio, IRO; Robson Paim, CFO; Cyro Naufel, our Institutional Director for the questions-and-answer session.

Overall, 2021 was a very positive year for the company. We had the best net income of the last 8 years. We consolidated the recovery of profitability in all segments of operations in addition to achieving significant marks in volumes of sales in terms of PSV and launches in addition to the growth in franchise with record performance in franchise and also very good results and relevant for CrediPronto.

I would like to highlight that for 2021, we have intermediated a total of BRL 10 billion in sales, thereby totaling 34,000 real estate transactions in terms of units that were sold and financed. When focused on units sold, this -- if we consider a building with 40 apartments, it means delivering per day, a high volume with a solid capacity of origination for the company in the marketplace.

In terms of distribution on origination of real estate financing. So we have consolidated our strategy, expanding all of our distribution channels for the attraction of new buyers and strategies. Both for finished units and also units under construction and also including our own operations and franchisees for the expansion of our capacity.

And as a consequence, we had BRL 10 billion sales and BRL 6 billion in terms of origination of financing through CrediPronto. It's important to highlight that the company exceeded a guidance operational in terms of what was announced earlier this year.

So this is related to what we had for these ventures for the funding and the initial was BRL 7.4 billion. So we exceeded the operational guidance by 27%, guidance which we announced earlier this year. So apart from Rio and Sao Paulo, the highlight is Londrina, Espírito Santo and Fortaleza. So as we said before, it's important to have the mark of BRL 10 billion in 2021. We have BRL 5.3 billion through the franchise network, which for the first time, exceeded the PSV (sic) GSV of our own operations, reaching the important landmark of BRL 4.7 billion.

This result is -- doesn't just show how positive the real estate market was in Brazil in 2021, but significant opportunities for growth at the company's winning through its franchisees, which may overcome fragmentation in the market -- in the Brazilian market, we can turn it to our benefit.

The company has invested strongly in a geographic expansion of franchise. And last year, we had an expansion in the number of stores going from 79 to 124, a growth of 57% in 12 months. Moreover, we opened presence in 5 states where we were not before, totaling 15 states where Lopes operates in addition to the Federal District. This is a trend that we have the intention of keeping as part of our growth strategy because we believe in the expansion.

And I make a point of emphasizing the excellent performance of CrediPronto, which had better origination of growth, thereby exceeding the landmark of BRL 6 billion, doubling the volume of 2020, thereby indicating a clear increase in market share. After all, CrediPronto grew 100% and this indicates that the market grew 76% in 2021.

I would also like to emphasize that we play the key role in the company's strategy. In 2021, we have had a few evolutions that are fundamental for higher efficiency for the growth of our platform in terms of attracting new customers and the total consolidated as one of the main portals of attraction of customers and to show properties to potential buyers. In our portal, we had about 12 million visits with more than 156,000 leads for associated brokers, both for our own operations or the brokers associated to Lopes franchisees. And so the growth of the portal with a growth strategy, an increase of segmentation of sales, both geographic, types of property.

And as a consequence, people are increasingly more interested in real estate properties. We have had 93,000 properties that were in additional volume that were sold, and this includes both franchise and our own operations. And this -- all of this is available in our portal directly or through our platform. And it's still a platform that is very much up-to-date -- that provides an up-to-date vision of the real estate market and buyers are increasingly more interested and it's very good in terms of attracting customers.

Our objective will be to provide intelligence and efficiency to improve our customers' experience through the data that we have that are very good. We create algorithms based on the data with the objective of driving a better relationship between customers, properties and real estate agencies. So real estate agencies also includes the associated brokers that use the platform.

Now we can start -- going to the presentation on Slide #5 with the highlights for 2021. I have mentioned quite a few of them in my introduction. On Slide 5, the PSV has increased by BRL 9.4 billion, 108% higher than 2020 and 21% higher than 2019. It's [ GSV ] has reached 37%, above 2020, a total of BRL 10 billion and 27% higher than it was in 2019. Our national footprint is still an expansion throughout our chain of franchisees. We have 124 franchisees, an increase of 57% as compared to 2020. And if we add to the -- our own operations, we have a total of 142 real estate companies in operation. CrediPronto, as I said before, had a growth of 102% as compared to 2020 with BRL 6 billion, closing the year with an average balance of BRL 11.7 billion.

The company has reached in terms of a net revenue of BRL 222.6 million in 2021, which is 33% higher than it was in 2020. The adjusted EBITDA was BRL 64.6 million and the net income attributed to the controllers was BRL 36.5 million, which represents a growth of 320% as compared to 2020.

Now moving to Slide #7. You can see that launches of the year of 2021. On the left-hand side, you can see the total volume launched by the company in Q4 '21 was BRL 6.2 million (sic) [ BRL 6.2 billion ] which represents a growth of 62% as compared to Q4 '20. The total PSV of the quarter, 97% of it is in the City of Sao Paulo.

And on the right-hand side, you can see the annual total launches and their quarterly distribution. In 2021, the company launched BRL 16.8 million (sic) [ BRL 16.8 billion ] 9.4 adjusted to Lopes share. The launches, which means an increase of 108%. Q4 concentrated 37% of the total launched in the year, which the short period of the fourth quarter in the lower speed of sales on a lower velocity of sales.

On Slide #8, you can see the results of PSV for the intermediations in 2021. On the left-hand side, you can see the consolidated PSV of our own operations added to the PSV of franchises. So if we compare here, we had a growth of 37% in the whole year, totaling BRL 10 billion, a number that is quite relevant in our franchises, contributed with BRL 3.4 billion, a 55% growth as compared to 2020.

And our own operation, we had a growth of 22%, totaling BRL 4.7 billion. On the left-hand side, the lower corner, you can see the PSV. So the velocity of sales. And here, you can see 10.4%, SOS and SOL. On Slide 9, you can see the curve of total PSV for the last 10 years or rather the last 3 years, so including both our own operations and franchises. So year after year, there is a consistent growth and at a very fast pace. So the company has been witnessing a growth in all of its operations added.

As you can see for 2021, we had an intermediation that was 37% higher than in 2020 and 27% higher than it was in 2019. And on the lower part of the slide, you can see quarter-on-quarter, evolution considering the last 12 months. We have numbers here since 2017. So here, you can see the quarter-on-quarter growth both in terms of franchise PSV going from BRL 0.38 billion and today is BRL 5.30 billion here in terms of franchises and also the PSV for our own operations.

On the next slide, #10, you can see the results of intermediation segmenting by regions as well as our geographical presence. We closed the year present in 15 states and in Federal District, 142 stores overall, 18 our own, and 124 franchises which is an evidence of strengthening of our network, of our capacity of origination in terms of attracting or capturing new properties and more efficiency having the relevance of the channels and also the aggressiveness of the expansion process.

On the top right, you can see the city of Sao Paulo accounted for 50% of the PSV of our own operations 2021, continuing as the largest market in terms of the -- with the largest share in the company's operations.

And the highlight here is Londrina and other markets accounted for 21% of the total with the highlights to Fortaleza and Espírito Santo. In terms of franchise, the state of Sao Paulo has led the intermediations along with Rio de Janeiro totaling at 39% for each one of the states. Other regions also gained relevance totaling 22% with a highlight of Goiás, Bahia, Rio Grande do Sul and Federal District.

As the chart on the lower part of the slide, you can see the consistency of our franchise expansion plan, which has accumulated 57% growth going from 79 to 124 along the year of 2021.

Now on Slide #13, you can see Lopes Labs, Portal Lopes leads and new units. So here, you can see the total number that of the Portal Lopes visits growing 103%, exceeding the mark of 11,000. Here below, you can see the evolution of 14 basis points in conversion of the visitors into leases as compared to 2020, thereby reaching the level of 1.54% as a consequence of the increase in visits and better conversion rates.

You can see along the year, a significant evolution in the number of leads originated through Lopes Portal. That was quite significant, exceeding 156,000 leads. This number represents a growth of 215% as compared to the year of 2020. Last, on Slide below at the bottom on the right. So here, you can see the consistent growth in terms of new units added in Lopes platform.

In 2020, more than 93,000 new properties were offered for sale or to lease in our platform. And so a number which is 32% higher than 2020. So these indicators [indiscernible] the power that we have improvement in the digital process in terms of origination, increasing the number of franchises, increasing the number of brokers, increasing the number of customers and real estate and our models both for 2019 to sell and a better too for brokers to work with higher efficiency in an assertive pricing of the properties.

And also mobilizing our stores in the pursuit of associated brokers and homeowners to sell their units in our platforms, and this has become increasingly more efficient long time. So these were my initial considerations in terms of the presentation of our operational results and Lopes Labs.

Now I would like to turn the conference over to Francisco and then Matheus will talk about our financials.

[Francisco Neto, executive]

Good morning, everyone. It's a pleasure to be here once again presenting to you the results of CrediPronto. So we had record origination. So here on Slide 15, you can see the company originated more than BRL 6 billion in financing, which represents a growth of more than 100% as compared to the year before. The portfolio also had a quite interesting evolution. It went up from December '20 to December 2021, 61%, getting to BRL 11.6 billion. It's important to see the numbers of contracts that are originated for which contracts that is settled, considering that there is a prepayment which is something that is common in the industry. So this indicator is also very positive. We are originating 11 new contracts for each one we settle and the breakdown of the profit also that you can see on the screen shows quite significant results that CrediPronto has provided to the company.

In terms of growth, in terms of comparisons, we have market share of CrediPronto of 110, and the numbers have grown 76% while we doubled our origination. On the next slide, it's interesting to see that what we originated in the second half of last year was higher than CrediPronto originated throughout the whole year of 2020. So this is the main message on Slide 16.

So the pie of CrediPronto's channel in terms of origination, it was a very good year. And in fact, the loans have grown as a whole. And we had the chance of exploring the channel in an even more efficient way, showing the penetration that CrediPronto has.

On the next slide, you can see the virtual P&L. And as a reminder, we have -- there is a mismatch between revenue of about 40 days. So what we book in Q4 2021, it's September, October and November as we what we booked for the year of 2021. So it's from December '20 to November '21. So if we add that, this is what we are booking as the net income of the period, which is BRL 54.7 million.

So this is CrediPronto's message. We have the confidence and trust in the channel that we have an excellence of the services that we provide in the front end in terms of execution. We are part of a machinery that works in a very fast way and with very high quality.

Now I'm going to turn the conference over to Matheus for the financial results. Have a good day. Thank you.

[Matheus de Souza Fabricio, executive]

Thank you, Francisco. Good morning, everyone. We start the analysis of the financial results on Slide 19, where we see the gross revenue. It was BRL 1.3 billion and the net rate of intermediation was 2.09%. And so if we add our own operations plus commission, plus intermediations, the gross intermediation revenue was BRL 27.4 million.

So this revenue, we should add other segments, such as franchise and CrediPronto, specifically profit it's sharing and new financing, all of them booked in other revenues. To total gross revenue of BRL 16.4 million, we need to add value relative to CrediPronto with no cash effect.

Looking at the year, we have BRL 4.7 billion with a net intermediation rate of 2.05%, totaling BRL 96.6 million of net revenues of intermediation. Other revenues totaled BRL 6.33 (sic) [ RBL 133.7 million ] for the year and added to the deferred without cash effect. We have the gross revenue of the company of BRL 244.8 million for the year 2021.

On Slide -- next slide, you can see the net revenue and expenses of the net revenue reached BRL 54.6 million in the second quarter -- fourth quarter 2021, an increase of 1% as compared to the same period in the same year. For the year, it was BRL 222.6 million, 33% higher than it was in 2020.

Also, we can see the contribution of each segment. CrediPronto contributed with 47% brokerage with 44% and franchise with 9%. On the chart next to it, you can see IFRS. You can see 36% in expenses -- a growth of 36% as compared to the year before, explained to higher brokerage fees for real estate credit for Lopes, which can be seen in other operational expenses.

As in last call, this increase is part of a strategic movement because of increasing the higher competitiveness of other banks. And this is about long-term return for CrediPronto. And to avoid the negative impact of the actions that the company took to manage contingencies, as you can see on the slide, there was a reduction of 65% in contingency expenses if we compare to Q4 2021 to Q4 2020.

Now going to the next slide, you can see EBITDA and net income before IFRS. On the left, we have the EBITDA that totaled BRL 60.1 million for 2021, a margin of 27%, a drop of 8 percentage points as compared to 2020. Here, we have the net income of controllers before IFRS totaling BRL 36.5 million in 2021, 320% higher than it was in 2020.

And this net income has been the highest in the company in the last 8 years. On the next slide, we have net income before IFRS in the last 12 months vision. As you can see in spite of the evolution of the results of the company, although it's very consistent, there was a slight drop in Q4, reaching BRL 36.5 million, as mentioned before.

Here on the next slide, we have results by segment. Looking at the quarter, ex IFRS. So there was a slight loss with a negative margin of 3.8%. Franchise had a net income of BRL 2.6 million with a margin of 36% and CrediPronto had BRL 2.1 million with a 10% (sic) [ 1% ] margin.

After discount of depreciation and other nonrecurring events, we got to a loss of BRL 1.2 million in the quarter. The minority participation, you get to a negative of BRL 5.4 million for the controllers.

On the next slide, you can see the results by segment for the year ex IFRS. So in terms of brokerage, we had a net income of BRL 9 million with 9.2% margin. In franchise, we also had million with 44.7% margin. And CrediPronto had a net income of BRL 37 million with a margin that is 35.3%.

After discounts, depreciations and everything else and on we get to a net income of BRL 50.2 million in 2021. So taking out noncontrolling shareholders, we get to BRL 36.5 million.

Now on slide -- on the next slide, you can see IFRS impact in our results. The main impacts are related to depreciation and amortization and we have a deferred income tax. So the total impacts added a positive number of BRL 7.3 million in 2021; however, without any cash effect. And as we emphasize recommend the analysis of our numbers without these impacts to understand better, the company's numbers.

And on our last slide, you can see the cash flow and cash equivalents. On the left, we can say the cash flow generated by operating activities added BRL 1.3 million in the quarter. In the -- for the year, the cash is taken by investment activities is especially due to a payout of dividend for minority shareholders and other items.

The cash balance at the end of the period considering investments was BRL 111.9 million. The company also has 6.6% of shares in Treasury as part of the buyback program launched in the second half of 2020. These are the financial results.

And once again, we thank you for your participation, and now we are open for questions.

[Operator]

[Operator Instructions] Our first question comes from Andre Dibe from Itau BBA.

[Andre Dibe, analyst]

Number one, are these one-off events in terms of write-down of assets in terms of shared effects in the segment of brokerage, could you give us some more detail. And then I would just like to hear how you're seeing SOS in the year and in terms of launches for the year, too.

[Operator]

Well, apparently, the speakers couldn't hear the question. So there are one-off effects in terms of write-down of assets more details. And then the second question regards SOS for the beginning of the year and also the pipeline for 2022.

[Marcos Lopes, executive]

A few questions have been asked on a chat over the Internet asking about the beginning of the year, and we are focusing on presenting the results of 2021. But I can say a few things about 2022. The year started better than we had expected. We thought that it was going to be slightly worse. The market is more challenging, but it's higher than it was in 2020 and 2019.

So we are focusing on the opportunities that we are seeing this year and focusing on our strategy, especially for 2022. So of course, there is the effect of interest rates and it has an effect. And they are compliance with demand, which supports quite good levels for 2022.

So the question is about the write-down of [ assets ]. This is related to the write-down of assets and initial expenses. So there is an accounting write-off and we may get these amounts in the future. But because of liquidity, you prefer to write them down, and there were credits related to former franchisees, and we will continue to try to collect them.

[Operator]

[Operator Instructions]

Now we are going to start answering the questions that were asked on the webcast.

[Matheus de Souza Fabricio, executive]

Good morning, everyone. This is Matheus. We have received some questions from the webcast. And some of them were similar, well we have combined them. One of them is about the growth of franchise in 2020. Well, basically, the company's focus for the expansion is going to focus on this pathway for 2021. 2021 was our best year of expansion over the last 6 years in terms of number of franchises, but we want even more.

So we have increased our expansion team. We are making more institutional marketing. We're investing in that to generate more -- to increase our franchise. We want to capture the inorganic PSV, which is not in the company today, considering the fragmentation of the real estate market. We have more than 40,000 real estate agencies Brazil. There are states where we can still go to where are not present. We are not going to give you guidance in terms of number of franchises, but the number is going to be higher than what we had in 2021 because we are going to be even more focused than we were in previous years.

[Operator]

From Antonio. In Q4 2021, there was a slowdown in PSV and SOS. So does it indicate that 2022 can be more challenging than 2020?

[Robson Paim, executive]

Well, thank you for the question. Good afternoon, or rather good morning to everyone. So there is a unique feature because usually, this quarter, has a shorter period of time because of the holidays. On the other hand, the number of loans towards the end of the year is usually related to higher percentage of launches along the year.

So there are many launches in a much shorter period for the completion of those launches. So the SOS is smaller because we have less time to sell. It's not related to a forecast of 2022. I think that Marcos Lopes gave you an overview of 2022. There is inflation and interest rate, and this is a challenge for us. But the company is well prepared to deal with that and well positioned to work in 2022.

[Operator]

We have another question from Anna. So what do you expect in 2022?

[Robson Paim, executive]

Hi Anna. What we expect 2022 and we have been working towards that and in terms of adjusting expenses. So we hope to keep expenses under control. We have another question related to the drop in Q4 comparing to '21 to '20, and this is a consequence of a slowdown in the market in Q4 without any other operational indicator justifying that as the generation of leads is at the same level in terms of geography and operations. So the volume of leads is a reflex of Q4, which was slightly more challenging as an overall scenario, not something specific.

[Francisco Neto, executive]

More than 1 person has asked, the company's prospects regarding CrediPronto considering the scenario with higher interest rates. So overall, what we can say about that is that, in fact, as the interest rates are higher on 1 end, we have an impact in origination because credit is more expensive for consumers. And we also have an impact in the outstanding portfolio.

So what we sold at lower interest rates, and there is a pressure there. So there is a period there because new seasons already have a new kind of spread. So there is a contraction of spread for CrediPronto in the first month in terms of rethinking it for '21, 2022 that were sold at lower rates.

But along the year, there is a recovery of spreads as the new season has the spread that is already rebuilt. As interest rates go back down again in Brazil, maybe next year. But once they go down, the ones that had a tight spread, this has recovered. So it's a cyclic thing in terms of the spread shrinking and becoming larger and smaller, and there is seasonality. There is another question here about the payout of dividends for 2021.

[Matheus de Souza Fabricio, executive]

So as the company has generating profit again, we are going to pay out a dividend within the mandatory limits of 20%.

[Robson Paim, executive]

We have another question about the buyback plan. What we can say is what you saw in the presentation, then until Q4, we had bought 6.6 million shares. And so soon as we have more information to announce to the market, we will.

[Operator]

Ladies and gentlemen, we are now ending our questions-and-answer session. I would like to give the floor back to the company's CEO, Mr. Marcos Lopes for his closing remarks.

[Marcos Lopes, executive]

Hello, everyone, thank you very much for your attendance. And there are 2 final things that I would like to say, saying that the year of 2022 is very important for us to look at the snapshot of the year. An increase in the company's capacity and how much it's improved its capacity of origination of [ fares ] and capture of new customers and new businesses and everything.

This has led to a gain in market share that is significant in the company's positioning and its purpose of being a very efficient marketplace, enabling cross-selling of real estate loans. And facilitating or making it easier for people to find a property, whether for lease or to buy. So in 2022, we are much better in terms of market share, in terms of geographical footprint, another entrants through the model of franchise and the model of stores, and therefore, we are going to attract more customers.

Of course, if we take to account the macroeconomic scenario, which is challenging for Brazil. But on the hand, we have more opportunities than any other company in the real estate market. So we can capture the opportunities and turn them into competitive advantage for all stakeholders that are part of our platform.

Thank you all very much. Have a good day, and see you on our next conference call.

[Operator]

The conference call at LPS Brasil has now ended. We thank you for your attendance, and we wish you a good day. Thank you.

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