Nexpe Participacoes SA

BOVESPA:NEXP3

Earnings Call Transcript 2020-Q1

[Operator]

Good morning, ladies and gentlemen, and thank you for waiting. Welcome to Brasil Brokers' First Quarter of 2020 Earnings Conference Call. We would like to inform you that this call and slides are being broadcasted simultaneously through the Internet on the company's website at www.brbrokers.com.br/ir, where the presentation is available for download. We would like to inform that this event is being recorded. [Operator Instructions] We would like to inform that questions can only be posed through the telephone. So if you are connected through our webcast, you should e-mail your questions directly to the IR team at [e-mail].

Before proceeding, we would like to clarify that forward-looking statements made during this conference call regarding beliefs and assumptions of the business, operating and financial targets are belief and assumptions of Brazil Brokers management and are based on information currently available to the company. Future events do -- are not a guarantee of fact. These are future events, and therefore, they depend on circumstances that may or may not occur. The general economic conditions, the industry conditions and other operating factors could also affect the future results of the company and cause results that differ materially from those expressed in such forward-looking statements.

First, Mr. Claudio Hermolin, the company's CEO, will present the operational results; and subsequently, Mr. Arthur Azevedo, Financial Director, will present the financial results.

Mr. Hermolin, you may proceed.

[Claudio Hermolin, executive]

Good morning to everyone. Thank you for participating in our conference call about the results of the first quarter of 2020.

Before we begin our presentation, we must mention the COVID-19 pandemic that is affecting the population and the economy at a global scale. In Brasil Brokers, we have always prioritized the safety and the health of our employees, our brokers, our partners and customers. This way, we have adopted all the necessary measures in order to maintain our operations ongoing of the remotely using channels and tools that allow our customers and partners to carry out the purchase, sale, rent or mortgage credit in a safe way and following the guidelines by health authorities. The real estate agents -- the real estate market was affected. And also, this prevented our brokers to carry out their activities face-to-face in terms of visiting available real estate, because of the rules by the condominium. The same way, our renting vertical, we realize there is a strong renegotiation of contracts. Especially in the commercial segment because of the situation, economic -- the economic situation that has been affected, we have adopted measures because we want this to be more agile, more productive, light. And at the same time, we have to maintain our liquidity. We have -- amongst our actions, we have the reduction of headcount at holding in our business vertical, the suspension of new hires scheduled in the budget of 2020. Also, we reduced the personnel costs, gradual reduction in salaries and benefit, suspension of new hires and anticipated vacations. We reallocated our team, and reviewed the occupancy cost, renegotiation of rental value and cancellation of facility contract. We interrupted marketing projects and IT investment. And based on the measures adopted by the government, we partially suspended tax payments, where applicable paid. We also are training our sales force because of the challenges that are presented by the pandemic. All the measures were focused on maintaining the team close, although with social distancing and [indiscernible]. We have live streaming with sales team to discuss product motivation and productivity and cross-selling. Online training modules were reinforced for our brokers using our online tools. We -- the sales of property through an online platform and preparation of a new business intelligence dashboard. Detailed monitoring of sales evolution in the secondary and rental segment seeking to understand and focus on products with the highest turnover during the crisis.

In summary, our leadership was quick in the execution of adjustments, and we have monitored the market continuously and the performance of our operations, correcting whatever is necessary. I believe that we are prepared to face the current and future challenges in our business environment.

Now when we go to Slide 3, I will talk about the highlights of this period. BR Brokers is strengthening the revenue diversification strategy to broaden the business opportunity and to explore our potential. This model was proved to be effective in a moment of crisis because it captures different economic cycles and gives our customers a unique experience, provides our customers a complete experience in real estate transactions. This pandemic and the unstable economic scenario strengthened the need to have a global view of our portfolio so that we can differentiate ourselves. We're always trying to strengthen our actions in order to provide a unique platform in the real estate market, and we can offer an array of products and service through one-stop shop.

Our gross revenue dropped 6% when we compare to the last quarter. This drop of revenue was strongly impacted by the month of March when we established quarantine in the main cities where we performed, determining the closing of stores.

And our sales place, we have balanced the origin of our revenue. We have used assertive diversification strategy that started in 2017, when we changed our vertical and the infrastructure of the company, where 23% of revenue were from the primary market; 28% obtained through our finance services; 28% came from the performance of corporate business; 14% came from secondary market; and 7% came from our rental business.

Now talking about the primary market, we had a drop, 36% in sales during the first quarter of 2020 when we compare to the fourth quarter last year. This is a reflection of the slowdown in São Paulo where we were impacted causes by the postponement of launchings that we had expected to launch in March. We had a growth in the Rio de Janeiro market and [indiscernible] also of 14% vis-à-vis the first quarter of 2019. Another important relevant was the performance of the corporate segment for 1 additional quarter. We had an intermediation and consulting revenue. When we see our financial vertical, I would like to highlight that we expanded channels, products, especially online, that is very relevant in the revenue of this quarter.

Now when we go to Slide #4. We can see in details each one of the business verticals, starting by purchase and sales. Showing the dynamic of this market, the volume of launches dropped 39% during the first quarter of 2020 driven by the slowdown of the launches in São Paulo. We observed Rio de Janeiro, we had a result of 90% above when we compare it to the same period last year. And it's important to note that during this quarter, we had 34% of share, and the volume of launching and during the same period last year, this year was only 11%. As it was already mentioned, the primary segment was impacted by the closing of on-duty stores, but our team is close to us through the optimization of remote tools like live sales and online tools.

Now banks and the consequence reduction of interest rate. We can see -- also, we see a resumption of sales in the secondary market. The expansion of the average ticket has been maintained itself quarter after quarter, reflecting our strategy and the efforts on the segments of high income. During the first quarter of 2020, the general value of sales was 26% above the same period of 2019. Now when we compare it to the fourth quarter of 2019, the total amount of sales grew 6%. Despite the difficulties of physical visits that were suspended by the condominiums, we developed a tutorial to help the owners that want to sell their units to use their cell phones in order to carry out virtual visits to their units or to their property. So our renting operation, you can see on Slide 6, at the end of the quarter, we had an increase in rent and payment conditions, especially in the commercial sector and the residential sector due to the closing of establishments and the economic consequences on the family. In a proactive fashion, we have renegotiated part of these rentals in order to agilize all their contract renegotiations, meeting the needs of our customers.

On Slide [ 7 ], our sales on the corporate segment were BRL 357 million during the first quarter. Our revenue was BRL 10 million. This vertical continues showing how relevant our results are, and we have a significant financial volume.

This way, I would like to highlight the persistence during the first 9 quarters. In -- according to our pandemic, we can see that a number of our customers of this vertical have put their negotiations on hold. They want to see what is going to happen in the future.

On Slide 8, I would like to talk about our financial services. I would like to highlight the total volume of invoice contracts that had a result of BRL 473 million this month, 7% above the last quarter. Within our strategic plan, we are offering new products, and we are broadening the sales channels to leverage the performance in our online operations that already has had positive results this quarter.

Now I would like to give the floor to our Financial Director and Director of Relationship with investors that will show the main indicators of our results during this first quarter.

[Arthur de Aguiar Cançado Azevedo, executive]

Thank you very much, Claudio. Good morning to everyone.

Now we go to Slide number

[Audio Gap]

see the evolution of our results. Every semester, we have a comprehensive sales diagnose. The average -- we have -- since the beginning of the year, the company has dropped 9% the labor liabilities. And we have a Low number of lawsuits. And here, you can see the different scenarios. And we have an improvement of the -- we have -- we had 50% of success in the lawsuits.

When we go to Slide #10, the negotiation [indiscernible] -- we want to increase the legal lawsuit, the legal lawsuit negotiation. And this -- we want to support the expenses with law. We had 22 new agreements in 2020, and this is a drop of 22% of labor lawsuit, and we've been able to focus on agreements to reduce liabilities.

Here, we have the financial results. We had BRL 36 million in the first quarter. This is our gross revenue. This was due to the economic crisis in March. It's important to see until February our gross revenue would grow 40% when we compare it to the first quarter of 2019. And here, you can see the comparison of our revenue in March. And this -- in March, we had 7 launches postponed in São Paulo that was equivalent to BRL 700 million. The average ticket, the primary market grew approximately 22%. We have a more -- we have a company that is financially more balanced, and this shows how assertive we were in our diversification strategy.

In terms of expenses, we have a strong reduction in expenses that started in March. The combination between the balance of new products, new channels and -- allows us to pursue new margins in new businesses. In this way, we can have better leverage of our business. We have -- we adopted actions in March in order to reduce the administrative expenses in order to have a better market in a post-COVID situation. You can see this in the results of the quarter. And we have an exit rate that is sounder, so the company can capture the gains attained to the real estate market.

On Slide 12, cash flow is minus BRL 2.7 million [ bad ] as a result of the postponement of operation. The company presents a good scenario of liquidity, closing a cash balance with BRL 64 million. With these economic challenges, we haven't seen major effects in our cash balance. Most of the companies in Brazil in our sector had the first quarter strongly impacted by COVID-19 pandemic. Nonetheless, the diversification of our business allowed us to be -- to lower the effects. And now we're seeing sales adjustment, and we can see that we are ready to face the new situation.

I would like to thank all of you for your participation, and we may begin our Q&A session.

[Operator]

[Operator Instructions] Our first question from [ Mr. Leandro Piva from Condor Insider ].

[Unknown Analyst]

Can you hear me?

[Unknown Executive]

Yes, we can. Yes, we can hear you, [ Leandro ].

[Unknown Analyst]

,

Congratulations. I would like to know that now that the second quarter has come to an end, could you give us an idea what the drop of revenues was like if you were be able to control the drop of the OpEx, if you will be able to do this?

[Unknown Executive]

Thank you for participating in our conference call, and thank you for your question. We still have not closed the quarter. Nonetheless, as mentioned during the presentation, we had different behaviors in our business verticals throughout the last month. These behaviors resulted in very different results regarding each one of the operations when we compare it to the pre-pandemic period.

As we mentioned in the call, we acted greatly adopting measures in order to preserve our cash. So with this, there was a relevant reduction in our -- in the control of our expenses. And this way, we were in a stronger condition to resume our activities in the sector. And we believe that this will happen in the mid run.

[Unknown Analyst]

Could I ask another question here?

[Unknown Executive]

Yes, of course.

[Unknown Analyst]

Could you give us details -- here, you have BRL 52 million in the quarter. Do you believe that we will have something similar during the second semester?

[Unknown Executive]

We have to see -- we have to wait for the future perspective. Because of the pandemic, we have to reassess what the situation is going to be like. We saw that growth wasn't possible during this period. And now there is a need to make an additional adjustment. Currently, our first assessment is that this would allow us to carry out these adjustments. Currently, we still don't -- we haven't seen many other points where we have -- where we could adjust.

[Operator]

[Operator Instructions] We will bring our Q&A session to an end right now. I would like to give the floor to Mr. Arthur Azevedo for his final remarks. Mr. Arthur?

[Arthur de Aguiar Cançado Azevedo, executive]

Well, I must mention that I'm leaving Brasil Brokers. This is a surprise. In April, I created a long-term plan, but due to personal reason, I will have to leave. I would like to say that my moments in Brasil Brokers were very fruitful. So I would like to thank my excellent financial team that has given us -- has given me great support, and they have been very competent in the beginning of the pandemic. I found people that knew how to adopt measures quickly and always looking for the best for the company. This is why I strongly believe in the potential of Brasil Brokers as a leader to maintain the position that it has and it deserves in the market. I would like to thank Claudio for the partnership, for his support in all the matters. And I also wish all the best to this winning team.

So Claudio, you have the floor now.

[Claudio Hermolin, executive]

Thank you very much, Arthur. Thank you for your words. And I have to thank you for your performance, for your dedication, your [ willing ] and how you helped Brazil Brokers as a Financial Director. And as a Director of Investor Relations, I would like to thank the participation of all of you in our conference call. I would like to reiterate that our team with Investor Relations is totally at your available to clarify any additional questions. Please do not hesitate to contact us. Please stay healthy, and have an excellent day.

[Operator]

Brasil Brokers conference call has come to an end. We would like to thank all of you for your participation, and have a good day.

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