Nexpe Participacoes SA

BOVESPA:NEXP3

Earnings Call Transcript 2020-Q2

[Operator]

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the conference call of Brasil Brokers to release the results of the second quarter of 2020. [Operator Instructions] And the slides will be simultaneously broadcast through the Internet at the website, www.brbrokers.com.br/ri, where the slide deck is available for you to download. [Operator Instructions] We would like to inform that questions may only be asked through the telephone. If you are connected through the webcast, your question should be directly sent to the RI team at the e-mail [e-mail].

Before proceeding, we would like to clarify that statements made during this conference call relative to the company's business prospects, operational and financial projections and goals are beliefs and assumptions of Brazil Brokers' management and are based on information currently available. Forward-looking statements are not guarantee of performance. They involve risks, uncertainties and assumptions because they refer to future events and therefore, depend on circumstances that may or may not occur. General economic conditions, industry conditions and other operational factors may affect the future performance of the company and may lead to results that will be materially different from those expressed in such forward-looking statements.

First, Mr. Claudio Hermolin, the company's CEO, is going to present the operational results. Then Ms. [ Andrea Rizzo ], CFO, is going to present the financial results.

Mr. Hermolin, the floor is yours, please.

[Claudio Hermolin, executive]

Good morning, everyone. We are now going to start our conference call on the results of the second quarter of 2020. The economic and business scenario in Brazil at the end of the second quarter of 2020 show the slight recovery all over the world because of the new dynamics imposed by the fight against the COVID-19 pandemic. Brazil's economy was not different from June on. The real estate industry demonstrated indications of recovery in the main markets where we operate, encouraged by the reopening of stores and sales and on-site sales. We had limited work hours, reduced capacities and other measures imposed by health authorities. Our brokers went back partially to their activities even with on-site services to customers and visits to properties and decorative apartments.

In spite of the gradual opening of our stores and stands, in the second quarter, we kept the engagement of the sales force through virtual sales, integrating the primary and secondary real estate intermediation with financial services more than ever. Our digital platform has been fundamental to leverage business and make our sales force loyal. The initiatives of restructuring that we started in the first quarter generated significant effects in the second quarter when we were able to reduce expenses and costs, making the company more agile and productive, producing sustainable savings without making us fragile for the economic recovery.

As to the future, it's very uncertain. However, we clearly identify a recovery of our industry when we compare April, the first month of the pandemic to June.

Lastly, the diversification of our revenues between different business fronts has proven itself to be very important for our results, especially as the crisis period of the pandemic that has had global impact. Moreover, the restructuring of operations, seeking more speed and cost reduction has made it possible for us to leave the crisis stronger with greater growth capacity. We're trying to act with speed, anticipating market situations in order to preserve and expand the company's value.

On Slide 2, you can see the positive effect of the actions the company implemented to cut expenses with a result that is 39% lower in overall and admin expenses as compared to the first quarter, thus reinforcing our focus to seek efficiency gains within our operational structures. As a result of these efforts in the control of expenses and in renegotiations with customers, thereby reducing average payment times on Slide 3, you can see that we are once again with a positive cash -- operational cash generation as of April 2020.

Now on Slide 4, the diversification of revenues has proven effective at crisis moments. Our gross revenue has had a reduction of 36% when compared to the previous quarter. The reduction in revenue was severely impacted by the lack of launches by developers in April when access limitations or restrictive actions were intensified.

In this quarter, with the breakdown of our revenue, you can clearly see the relevance of financial services Credimorar, which has presented another quarter with significant growth and positive results. Driven by the reduction of interest rates and the maintenance of the appetite of banks to grant real estate credit. We also observed 58% of our total revenues in the quarter, coming from this business front. Another 16% came from our primary traditional market of purchase and sales, 14% of our purchase and sale in the ready-to-live market, 9% came from lease and 2% from corporate services. In the primary market, when we look at June, we had the growth of 73% in potential sales values as compared to May, thereby identifying a strong recovery in the sector.

Another quite relevant point was our operation in the corporate segment pretty much that has presenting constant growth and sales potential expansion for national, international investors.

Lastly, we should highlight Credimorar. Our financial services front that has had a quarter with the highest general credit value since its structure in 2017 with a 35% increase as compared to the first quarter of 2020.

Now on Slide #5, you can see the breakdown of each one of our business fronts, starting from purchase and sale, demonstrating the dynamic in the primary market. With the volume of launches with our share has gone down by 61% in Q2 '20 as a consequence of the delay of market launches, as we said before. As I said before, to -- in the primary segment was severely impacted, especially by the total closed -- closedown of on-site sales by developers, but we had seen a strong recovery as of June when there was an increase of 63% in the volume of units sold and 63% in a PSV as compared to May.

Now on Slide #6, we can see an evolution in the number of sales in the city of São Paulo as a result of the unification of our operations under the brand Nova Bamberg, generating synergies and operational improvements. So the potential sales value of used properties in the month of June was 67% greater and the number of units sold was 47% greater when compared to May, once again demonstrating that we are seeing a market recovery.

Talking about our lease operations, you can see on Slide 7 that in spite of the dynamics of rental or lease contracts, renegotiations and payment terms that took place at the end of the first quarter as a result of the pandemic. In the second quarter, we can already see an 11% increase in the number of properties intermediated as compared to the first quarter of 2020 and a 6% increase in the portfolio of properties under administration when we compare to the same period in the previous year.

On Slide 8, our vertical on the corporate segment pretty much has been showing a positive performance many times, with sales for the 10th quarter in a row, which means a total amount of almost BRL 1 billion in the last 12 months.

On Slide 9, you can see in the results of our financial services, Credimorar. In this operation, we have had an exponential growth because of the expansion of our online channel, diversification of revenues and sales reinforcement in home equity. These actions, along with a low interest rate, making real estate credit very attractive, has been demonstrating the resilience of this operation in the pandemic.

We should also highlight the total volume of production of new contracts that has had a general credit value of BRL 595 million this quarter, 35% above the previous quarter. In the second quarter, we had more than 300 productive partners in Brazil, thereby increasing our geographical footprint in terms of credit concession.

Now I would like to give the floor to our CFO and IRO, [ Andrea Rizzo ], who is going to give you more details about the main indicators along the year of 2020.

[Unknown Executive]

Thanks, Claudio. Good morning to everyone. I'm going to continue our presentation. Now on Slide #10, we are going to detail the evolution of labor liabilities. The new lawsuits filed by autonomous brokers has been going down significantly in the first this quarter. Only 1 new lawsuit was filed when the average was 4 new lawsuits.

Since the beginning of the year, the company has already been able to reduce by 13% its book of lawsuits or labor lawsuits. And now they are strongly concentrated in the phase of appeals. This reaffirmed that the company has been able to address consistently and effectively this challenge.

Now on Slide 11 continuing the actions implemented by the company for pre-cash preservation so that we continue in the spirit of economic instability. We have slowed down the agenda of negotiation and anticipation of agreements for the lawsuits that we were executing intensively in the last quarter. We decided to go for settlements with payments in installments. We closed 24 new settlements in the first quarter of 2020, leading to a 21% reduction in the amount under dispute and thereby, generating a saving for the company worth BRL 2.3 million.

On Slide #12, I would like to indicate them in advances in our results. Our gross revenue in the quarter has reached approximately BRL 23 million, a reduction of 36% as compared to the previous quarter, influenced by the economic slowdown, access restrictions, suspension and postponement of launches by developers. It's important to note that if we consider the month of June, we had a growth of 16% in our gross revenue as compared to the month of May, thereby demonstrating how positive was the recovery of operations and the flexible circulation authorized by the dual authorities.

In spite of all the challenges that Claudio mentioned, it's worth mentioning that today with -- our company has a better financial balance with many growth levers, which reflects the success of our diversification strategy.

In the scenario of expense reduction, we have executed the strategy that started in late March, seeking the reduction of structural costs and resizing the organization. The consumption of admin expenses this quarter have totaled about BRL 16 million, a number that is 33% lower than the previous quarter. If we analyze individually the main expense lines, such as personnel, occupancy and contracted services, our reduction combining those lines were 37%, better than the numbers of the previous quarter and 35% better as compared to the same period in the previous year. Although we had a negative EBITDA of BRL 7.2 million, very much impacted by the reduction of BRL 13.3 million in revenue as compared to the first quarter 2020, we were able to minimize its impact in cost actions which generated a saving of BRL 8.2 million.

These cost reduction strategies have had a consequence in the preservation of operating cash and other core points for the company's sustainability.

In summary, as most companies in Brazil and our industry, we had a quarter that was strongly affected by COVID-19 pandemic. Even so the diversification of our businesses and adjustments in our cost structure has helped us to minimize the impact in our results. We believe that our strategy is right, and we are confident that the current structure is able to capture the effects in the business recovery and in our results in an immediate manner.

I thank you all for your participation and we may start our Q&A session.

[Operator]

[Operator Instructions] We now end our questions-and-answer session. I would like to give the floor back to Mr. Claudio Hermolin for his closing remarks. Please, Mr. Hermolin.

[Claudio Hermolin, executive]

I thank you once again for your participation in our conference call and I would like to emphasize that our Investor Relations team is fully available to answer any questions you may have. Please do not hesitate to get in touch with us. Stay healthy and safe.

[Operator]

The conference of Brasil Brokers has now ended. Thank you all very much for your participation. Have a good day.

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