LPS Brasil Consultoria de Imoveis SA

BOVESPA:LPSB3

Earnings Call Transcript 2022-Q4

[Operator]

Good afternoon, ladies and gentlemen, thank you for holding. Welcome to the webinar of LPS Brasil to discuss the earnings referring to the year of 2022. We inform that this event is being recorded. [Operator Instructions] The link for the presentation in English is available in the chat.

Before proceeding, we would like to clarify that statements that may be made during this webinar regarding business prospects of LPS, projections, operating and financial goals based on assumptions and beliefs of the company's management. Future considerations are not a guarantee of performance as they involve risks, uncertainties and assumptions, and they refer to future events and depend on circumstances which may or may not occur.

Investors and analysts should understand that general economic conditions, industry conditions and other operating factors can affect the company's future results and lead to results that differ materially from those expressed in such business outlook.

First, I would like to say that Mr. Marcos Lopes will make the general introduction and present the operational results, followed by Francisco Lopes, who will present CrediPronto results; and then Matheus Fabricio who will talk about the financial results. Finally, we'll open for the Q&A session.

Now I would like to turn the floor over to Mr. Marcos Lopes. Mr. Lopes, you may continue.

[Marcos Lopes, executive]

Good afternoon, everyone. I would like to thank you for joining one more earnings conference call of LPS Brasil in which we'll present the results for the fourth quarter and the year of 2022. Here with us in the presentation are the Vice President, Francisco Lopes Neto, our Investor Relations Officer, Matheus Fabricio; our CFO, Robson Paim; and our Institutional Director, Cyro Filho.

During the year 2022, the macroeconomic scenario in Brazil marked by high interest rates has had a direct impact on the real estate market, increasing the price of home loans for end users. Such circumstances had a significant impact in the operations that operate in the secondary market in originating mortgages.

The primary market, the economic uncertainty caused by elections and other atypical events such as holidays following on weekends and the World Cup in the end of the year have influenced the calendar of launches. Despite the challenges mentioned above, the company presented a solid operational results, keeping its leadership in the primary market, the focus on growth in the franchise segment, an increase in market share in the mortgage segment through CrediPronto.

In 2022, the company intermediated an annual PSV BRL 4.6 billion in its own operations with 137 projects launched during the year. The number of franchises of hedge Lopes in turn, continue to strongly ending the year with 178 stores, a 44% increase when compared to 2021. The PSV of new franchises, annual franchises was [indiscernible] 53% of the total volume intermediated by Lopes. CrediPronto was affected by the high interest rates originating 2022, a financed volume of 29% lower than previous year with BRL 4.2 billion. However, the joint venture gained market share among private credit facilities consolidated as the fourth largest player among private mortgage companies.

And after this, I would like to start with Slide 6, the financial presentation. So on Slide 6, the launch PSV in 2022 adjusted by Lopes [indiscernible] was BRL 7.5 billion, 20% lower than '21. The total PSV intermediated by the company reached BRL 9.9 billion in 2022, a slight drop of 2% when compared to 2021. Franchises intermediated BRL 5.32 billion, stable when compared to the previous year, while our own operations intermediated BRL 4.6 billion, 3% less in comparison to '21.

We kept our focus on the national expansion of the franchise network with the largest growth -- absolute growth in number of stores in 2022. We ended the year with 178 franchises, 54 more than in the beginning of the year. Only in the franchise segment, the company ends 2022 present in 21 states and in the Federal District. CrediPronto originated BRL 4.3 billion in 2022, a drop of 29% when compared to '21. The market share of CrediPronto was 6.9% among private banks with an average balance of portfolio above BRL 14 billion, a growth of 20% when compared to the 2021 year.

Finally, I highlighted the net income consolidated for the company before IFRS effect has reached BRL 25.4 million of which BRL 10.5 million are -- can be attributed to controlling shareholders.

On Slide 8, will comment on the launches of our own operations of Lopes in the fourth quarter and the year 2022. The total volume launched by the company in the fourth quarter was BRL 5.8 billion, 6% less when compared to the fourth quarter of 2021.

The state of São Paulo concentrated 86% of launches. On the right, we see that the total PSV launched by the company amounted to BRL 15.4 billion, a drop of 9% when compared to 2021. The fourth quarter concentrated 38% of the volume launched.

Continuing the presentation on Slide 9. We see the results of brokerage operations. On the left, we see the consolidated result of the company. The PSV of our own operations added PSV of brokerages of franchises. In the fourth quarter, the company intermediated BRL 2.5 billion, a drop of 12% compared to the same period in the previous year. On an annual basis, the company intermediated BRL 9.9 billion, 2% lower than 2021.

Franchises had an intermediated PSV of BRL 5.3 billion in 2022, in line with those recorded in 2021. The increase in the quantity of franchises in the year was essential for the results presented given the challenging scenario that the market -- secondary market is facing. In our own operations, had an intermediated PSV of BRL 4.6 billion, a decrease of 3% when compared to 2021.

On Slide #10, we present the total PSV accumulated curves in the last 12 months vision since 2017, including our own operations and franchises. As you can see, the brokerage PSV of the company in the last 12 months remained stable, close to BRL 10 billion.

Following on Slide 11, we'll present the results of intermediation segmented by region as well as our geographic presence. Considering their own stores and franchises, we closed the year present in 22 states and in the federal district with 194 stores altogether, 18 of our own and 178 franchises, which reinforces the strengthening of our network and higher efficiency and a more aggressive approach in the growth process.

In the last quarter of the year, we are now present in the State of Sergipe. According to the chart on the lower part of the slide, we see the consistency of our store growth plan, which accumulated 44% of increase on an annual basis, going from 124 to 178 stores. On the upper part of the slide, we can check that in the state of São Paulo. The state of São Paulo accounted for 58% of the PSV of brokerage of our own operations in 2022.

South region accounted for 21%. Well, Fortaleza and Espírito Santo had the 21% remaining. In the franchises, the state of Rio de Janeiro led brokerage operations accounting for 42% in the state of São Paulo, in which franchises operate mostly in the secondary market, contributed with 38% in the other states with 20% during the year of 2022.

Continuing on Slide 12, we present the development of the company in indicators related to Lopes Labs during the year. On the chart on the left, we can see that the visitation of the portal and blog of Lopes increased 5% when compared to 2021 with 12.4 million visitors.

On the chart below, we see that there has been an increase of 3% in the conversion of such visitors into leads when compared to 2021, reaching the level of 1.68%. With regards to the leads generated by Lopes portal, there was an increase of 19% in the volume originated. When compared to 2021, exceeding 185,000 needs. Finally, on the right lower side, we can see that the consistent increase in the number of new properties captured in 2022 at Lopes platform.

During the year, 108,000 new properties were placed for sale or rental in our platform, 16% more than in the year 2021. These were my remarks about the operational results. And now I turn the floor over to Francisco, who will speak about CrediPronto. After that, Matheus will present the financial results of the company. Thank you.

[Francisco Neto, executive]

Thank you. Good morning, everyone. It's a pleasure to be here and be able to talk about CrediPronto's results once more. We start by talking about the portfolio growth that shows the -- how solid our operations are. It's interesting to notice the repository of contracts that we see on a quarterly basis. And in the fourth quarter of 2022, we had 2.7 contracts originated for each contract settled. So [ ex-tax, ] the portfolio increases, and that's the most important factor in our opinion from December 2020 and until December '22, there has been a net increase of BRL 2.4 billion in the portfolio.

Another indicator that we always keep track of, and we're making all our efforts to continue to grow and do a good job at CrediPronto is our presence when compared to other private banks in -- measured in percentage of market share. So we see that the market share was 6.9% amongst private banks in the year in the fourth quarter, 6.7% and we came from a fourth quarter -- the third quarter market share of 6.5%, which shows our performance in the sector, which is very important.

We also had an average rate of 22 this year, which shows a development of the industry or the sector in terms of recovery of spread, especially if you compare to the last quarter of 3.9 and 9.5 for the year. So this collaborates to our efficiency in business lines at CrediPronto and its results.

Now commenting on the results, we had BRL 10.7 million in the fourth quarter of profits recognized in the period. That includes the months of September, October and November. So there is a delay in amounts received. So this is the amount that goes to the results of the fourth quarter.

On Slide 16, on the right side, we have the profit. And on the following slide, we see the origination behavior quarter -- every quarter, there is a decrease in this sector that is known -- we -- as I said, we are working to offsetting that, trying to increase our market share. These are my remarks for this morning, and I thank you for the opportunity and your presence.

And now I'll turn the floor over to our Investor Relations Officer, Matheus Fabricio.

[Matheus de Souza Fabricio, executive]

Thank you, Francisco. Good afternoon, everyone.

We'll start the financial results analysis on Slide 18 where we see the [ conciliation ] of gross revenue of the company. In the fourth quarter, the invoiced PSV of our own operations amounted to BRL 1.1 billion and the net brokerage rate of 2.08%. When we multiply these 2 factors, we have the gross brokerage revenue of BRL 22.5 million. To that revenue, we had the revenues from other segments such as royalties from franchises. And CrediPronto revenues, profit sharing and the commission on new mortgages that are recognized in the revenue -- other revenue line. To total, the gross revenue obtained in the quarter of BRL 54 million, we need to add the relative amount to the deferred revenue round of CrediPronto that doesn't have a cash effect.

In the annual view, the invoice PSV of gross of our own operations was BRL 4.6 billion with a net commission of 2.11%, totaling BRL 96.4 million of gross brokerage revenue. The other revenues totaled BRL 117.4 million when added to the deferment of no cash effect of CrediPronto upfront. We have a total gross revenue in the company of BRL 213.8 million.

In the next slide of #19, we have the net revenue and costs and expenses in the period. The net revenue of the company reached BRL 49.4 million in the fourth quarter of '22, 9% lower when compared to the same period of last year. The annual net revenue of the company reached BRL 195 million, 12% lower than the year of 2021.

The bar chart always presents the contribution of each segment for the net revenue. CrediPronto contributed with 38% brokerage with 49% and franchises with 13%. On the chart on the side, we see operational expenses of the company before IFRS effects. There was a reduction of 11% in the quarter and 6% in the total volume of expenses when compared to 2021.

Now moving on to Slide #20, there we have a comparison of EBITDA and net income of controlling shareholders without the effects of IFRS. On the left, we see the EBITDA of the company totaling BRL 45.8 million for 2022 with a margin of 24%, 3 percentage points lower than 2021. On the right, we see the net income of controlling shareholders before the IFRS effects totaling BRL 10.5 million in 2022, 71% lower than 2021.

On Slide 21, we see the evolution of the net income before IFRS in the last 12 months, starting in 2018. As you can see, after a drop in the curve started in the end of 2021, the company presented a slight improvement in this quarter, totaling BRL 25 million in the consolidated view and BRL 10.5 million in the vision of controlling shareholders.

In the following Slide #22, we analyzed the results by segment on a quarterly vision without the effects of IFRS. The brokerage segment had a loss of BRL 7.2 million with a negative margin of 36.4%. Franchises had a net income of BRL 1.7 million with a margin of 25% and CrediPronto had a net income of BRL 7.3 million and a margin of 32.2%. After discounting, depreciation, financial results, nonrecurring effects, we have a net income before IFRS of BRL 1.8 million in the quarter. And after minority payments to minority shareholders a loss of BRL 379,000 for controlling shareholders.

On Slide 23, we see the analysis of results by segment on an annual view without IFRS effects. Brokerage had a loss before IFRS of BRL 8.1 million, franchises and net income of BRL 10.6 million and the margin of 41.3% and CrediPronto had a net income of BRL 22.9 million and a margin of 31.3%. After all, discounts, depreciation, financial results and taxes, we arrived at the net income before IFRS of BRL 25.4 million in 2022. After payments to minority shareholders, we have a net income of BRL 10.5 million for controlling shareholders.

On Slide 24, we see the impacts of IFRS effects on our income. As mentioned before, they refer to depreciation and amortization of intangible assets and noncash effects on call and put options of controlled companies and deferred income tax over intangible assets, calls and puts of LPS Brasil. The total impact added BRL 1.5 million in 2022 without any cash effect. So we recommend the analysis of the figures without this impact for a better understanding of the company's results.

Finally, on Slide 25, we have the cash variation in the period and total cash and banks of the company at the end of 2022. On the left, we see cash from operations on a positive note, adding BRL 8.4 million in the quarter. The final cash balance in the period considering financial investments amounted to BRL 55.4 million, impacted by the lower generation of cash through profit sharing from CrediPronto when compared to 2021, the continuity to investments of Lopes Labs, the share buyback program during the year and payment of dividends to minority shareholders also in 2022.

The company has 10.2 million shares, treasury stocks. These were my considerations about the company's financial results. And again, we thank you all for your attendance, and we open for a Q&A session. Thank you.

[Operator]

[Operator Instructions] Our first question comes from Elvis Credendio from BTG Pactual.

[Elvis Credendio, analyst]

I have 2 questions. First, about the market. I would like to understand your perception about the plans that you see from development companies. Do you feel that the real estate development companies are more cautious? Do they intend to decrease the number of launches for 2023 and also their strategies. Now are they more aggressive in terms of pricing?

And the second question is about the partnership you announced with [indiscernible]. Do you believe that this partnership will add value to Lopes? Do you believe it will leverage sales? And do you believe that -- how could Lopes contribute to [indiscernible]? And related to that, I would like to understand whether Lopes Labs strategy changes because of that.

[Cyro Filho, executive]

This is Cyro speaking. Thank you for the question, Elvis. This year, we have, on one hand, continuing with a strong demand and observing the real estate developers with a robust pipeline, even here robust at Lopes, we have a robust pipeline for this year. On the other hand, we have a more challenging environment because of high interest rates, home loans rates are high and the construction costs that also caused an increase in prices.

So the launches -- the first launches of this half of the year will give the trend in terms of sales of supply for the year. So let's wait and see how customers will behave given the macroeconomic conditions and the market conditions for the year.

[Matheus de Souza Fabricio, executive]

This is Matheus speaking. Let me talk about the partnership with [indiscernible] Company as we announced in the media, and it's a partnership that is about sharing the listings in the 2 platforms in the city of São Paulo, Rio de Janeiro, [indiscernible]. We identified that the main benefit or potential benefit thinking about Lopes is an improvement in the volume of transactions in the secondary market, especially in São Paulo, because of potential partnerships. Of course, that will depend on the situation of the market as a whole.

We know that the secondary market has faced many challenges since last year because of increase in interest rates. So we believe that this partnership can contribute to our franchises, especially in São Paulo that we have a more structured network in the secondary market.

So we could then get some transactions that are not currently in the network. That's the main idea to provide benefits for franchisees. I think this is the most important point from the technology point of view and the strategy of Lopes Labs, we believe that for now, this partnership will not cause any major change in our action plan. It's a commercial partnership in terms of sharing inventory of properties. So technology is not part of the partnership.

[Elvis Credendio, analyst]

It was very clear. Just a follow-up, please. I would like to understand how do you see franchises in terms -- given this partnership with [indiscernible], would that -- could it help to add new franchisees during 2023? And if you have a goal for new additions for this year, could you share that?

[Matheus de Souza Fabricio, executive]

Elvis, from the strategic point of view of franchises, as Marcos said in his initial talks, we'll continue to focus on growth, on expansion based on the results we disclosed now, despite the challenging market, especially in the secondary market in 2022, we were able to maintain the level of sales and franchises compared to 2021, which is explained by this growth effort.

So we have a PSV that's organic. That was not in the network when we add this PSV that was outside our ecosystem now starts to contribute. So given the challenging scenario for 2023 as well as our aggressive approach in growth will continue for this year. This is our main strategy.

As for the partners, the impact of the partnership with [indiscernible] on this topic, I think we'll only add to it because it improves the products because our franchisees have special conditions under this partnership. So it's an additional benefit that could contribute to growth.

[Operator]

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

[Marcos Lopes, executive]

Thank you all very much for attending this conference for the earnings release of Lopes. I thank you all for attending. And we remain confident for the year of 2023. Thank you all very much, and have a good afternoon.

[Operator]

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

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