Nexpe Participacoes SA

BOVESPA:NEXP3

Earnings Call Analysis

Nexpe Q3 Results: Growth Amidst Cost Cuts

Nexpe sustained its gross revenue above BRL 30 million but observed a 3% dip from the previous quarter, settling at BRL 31.2 million. Production grew modestly by 4%, continuing at BRL 1.1 billion. SG&A expenses were reduced by BRL 1.8 million compared to Q2, and admin expenses dropped by BRL 4.4 million year-over-year, leading to an EBITDA at negative BRL 3.9 million. Cost over gross revenue hit a 12-month low at 39%, with productivity reaching BRL 35,000 per employee. Operating cash flow was negative BRL 6.3 million, with BRL 7.9 million in cash at quarter's end. Legal proceedings stand at 141. Digital sales accounted for 83% of gross revenue. Credit portfolio remains strong at BRL 17.5 billion, with 84% of volume from Rio de Janeiro.

Growth Amidst Adjustments

Nexpe, a comprehensive real estate platform, has exhibited resilience in the third quarter of 2023 by producing BRL 1.1 billion in revenue, marking a 4% growth over the previous quarter. Even as gross revenue dipped slightly by 3% to BRL 31.2 million, the company persisted in its operational enhancements, maintaining top-line growth.

Cost Efficiency Improvements

Efficiency emerged as a theme for Nexpe, with a focus on reducing general expenses. The company successfully trimmed its administrative spending by BRL 4.4 million year over year, reaching BRL 17.6 million, and BRL 1.8 million compared to the previous quarter. This level of discipline resulted in a 9% reduction in gross results, underscoring a strategic cost restructuring aimed at optimizing resources.

Profitability Challenges Reflected in EBITDA

Despite strict expense management, the company faced profitability challenges, reflected in a negative EBITDA of BRL 3.9 million. This indicator, although disconcerting, helps investors gauge the company's core operational effectiveness, especially when devoid of any legal liabilities.

Operational Metrics Showing Positive Indicators

The company reported that their cost over gross revenue was at 39%, which is the lowest it has been in the past 12 months. Additionally, productivity per employee stood at BRL 35,000 on average, signifying a focus on high-return operations and the phasing out of underperforming sectors.

Operating Cash Flow and Liquidity Concerns

Nexpe ended the quarter with operating cash flow at a negative BRL 6.3 million and a cash reserve of BRL 7.9 million. Liquidity concerns may arise for investors as the negative cash flow could signal potential issues in day-to-day operations and funding future growth.

Legal Liabilities Under Scrutiny

The company is currently managing 141 legal proceedings, a factor that investors must consider as it potentially poses financial and reputational risks.

Strong Digital Revenue Stream

Nexpe's commitment to digital transformation appears to be paying off as 83% of gross revenue stemmed from digital sources. This impressive figure emphasizes the company's adeptness in catering to today's digital-savvy customers while balancing online and offline customer interactions.

Diverse Credit Portfolio with Stable Production

The company's financings remain robust, with a credit portfolio reaching BRL 17.5 billion and the production of various financial products, including real estate, credit, and consortium, remaining stable at BRL 1.1 billion.

Regional Performance and Market Retraction

The majority of Nexpe's operations are concentrated in Rio de Janeiro, making up 84% of its volume, alongside a strong presence in São Paulo at 15%. The company noted a significant retraction of inflation, which could have rippling effects on the real estate vertical.

Earnings Call Transcript 2023-Q3

[Operator]

Good afternoon, ladies and gentlemen. Welcome to the call for the results of Q3. This is being recorded and the replay may be accessed on www.nexpe.co. The presentation is also available for download. We inform that all the participants will be the audience for this presentation. [Operator Instructions]

Before moving any further, we would like to make it clear that for any prospective statements are based on beliefs and estimations of Nexpe and the information, which is currently available for the company. Those statements might involve risks and uncertainties considering the fact that they are pertaining to future facts and events, so they depend on circumstances that may or may not occur.

Investors and journalists should consider that events related to a macroeconomic environment to the sector and to other factors may cause the results to be materially different than the ones that are expressed in the following prospective statements.

In this video conference, we have Mr. Daniel Guerbatin, CEO, CFO and DRE from the company. I would like to hand it over to Mr. Guerbatin, who is going to start the presentation.

[Daniel Guerbatin, executive]

Good afternoon. Welcome, everyone, to the results call of the third quarter 2023 for Nexpe. Nexpe is a platform that offers the best and most complete real estate by using technology. Our purpose is to make sure that each real estate experience will be a unique experience.

We are on Slide #3. As a summary, we had -- we maintained our gross revenue above BRL 30 million in this quarter. We also maintained the production of BRL 1.1 billion with a growth of 4% compared to the previous quarter. In our constant cost adjustment, we were able to get a reduction to the tune of BRL 1.8 million of SG&A compared to BRL 2 million to the second quarter.

On Slide #4, we have our results from the third quarter 2023. The gross revenue on the third quarter was to the tune of BRL 31.2 million, 3% lower than the previous quarter. When it comes to the gross results, we have -- we had a reduction of 9% compared to the second quarter.

On Slide #5, you see that admin expenses or general expenses are at BRL 17.6 million in the third quarter of 2023, a reduction to the tune of BRL 4.4 million compared to the same period in the previous year and BRL 1.8 million lower than the previous quarter. Our EBITDA, without any legal liabilities, is BRL 3.9 million negative in this quarter.

Slide #6. When we look at the performance indicators, we have the cost over the gross revenue at 39%, the lowest levels in the last 12 months. And we were able to produce BRL 35,000 on average per employee. These indicators are the result of our focus on the operations that add the most results, and we also discontinued the ones that are underperforming.

On Slide #7, we see that the operating cash flow generation in the third quarter of 2023 is to the tune of BRL 6.3 million negative, and we concluded the quarter at BRL 7.9 million in our cash.

So on Slide #8, we see the development of the legal liabilities, the labor liabilities. We have 141 legal proceedings ongoing.

On Slide #9, this is a digital company where the customer journey happens digital and offline. The real estate journey has these dynamics where even if the customers look for us digitally, they have to do an in-person visit with a proper realtor. And there is a trust relationship involved, and this is also paramount. So 83% of our gross revenue came from digital sources.

On Slide 10, as we can see, our credit is still looking good, and we reached BRL 17.5 billion. Our production was stabilized at BRL 1.1 billion. The generation is comprised by many products such as real estate, credit and consortium.

On Slide #11, we see the performance. And on this vertical, we had a very strong retraction of the inflation compared to the previous period. 84% of our volume came from Rio de Janeiro, 15% came from São Paulo and 1% in others. Thank you all, and we'll open up for questions.

[Operator]

[Operator Instructions] The Q&A session is hereby concluded. We would like to hand it over to Mr. Guerbatin.

[Daniel Guerbatin, executive]

Thank you, everyone. Thank you for participating in our call. Good afternoon. The Nexpe video conference is concluded. Thank you for your participation, and have a great afternoon.

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