Even Construtora e Incorporadora S.A. (EVEN3.SA) Earnings Call Transcript & Summary

Welcome to Even's Earnings Call concerning the results of the Second Quarter of 2025. I would like to point out that for those who need simultaneous translation, the tool is available on the platform. To use it, you have to click on the button Interpretation, the globe icon at the bottom of the screen and choose your preferred language, Portuguese or English. For those who will listen to this teleconference in English, there is an option to mute the original audio in Portuguese, by clicking on the mute original audio button. We would like to inform you that this event is being recorded and will be made available on the Company's Investor Relations website, ir.even.com.br, where complete material concerning this earnings call will be available. It is also possible to download this presentation by via the chat icon on both Portuguese and English. [Operator Instructions] We would like to clarify that any statements that might be made during this teleconference regarding Even's business prospects as well as its operating and financial projections and goals are based on the beliefs and assumptions held by the company's management and on information currently available. Forward-looking considerations are not a guarantee of performance and involve risks, uncertainties and assumptions since they refer to future events and therefore, depend on circumstances that may or may not happen. Investors should understand that general economic conditions, industry conditions and other operating factors may affect Even's future outcomes, and may lead to results that materially differ from those expressed in these future considerations. Here with us today are the Chief Executives of the company; Mr. Marcelo Dzik, CFO; and Mr. Marcio Moraes, CEO. I will now give the floor to Mr. Marcelo Dzik.

Good morning, everyone. It is with great satisfaction that we present Even's earnings for the second quarter of 2025. Let's just start with the main indicators in the quarter. We launched BRL 1 billion and BRL 694 million of which is Even's share distributed between Casa Madalena, an exclusive project located in Vila Madalena; and the Hotel Faena, which is the last phase of Faena São Paulo project. Our net sales totaled BRL 688 million Even's share contributing to the realized net revenue in the quarter amounting to -- half year amounting to BRL 907 million. We reported gross profit in the period of BRL 189 million with adjusted gross margin of 25.9%. Our gross margin was affected by the sale of Hotel Faena. This result, as expected, has a lower operating margin than the residential units of the same project. Since this is an atypical event, by disregarding the effects of the sale of the hotel, the adjusted gross margin rises to 29.6%, which is consistent with previous quarters. REF and inventory margins remain at superior levels, reinforcing the trend of gross margin expansion for the coming quarters. We reported BRL 49 million of net income in the quarter, which when added to the comprehensive net income reported in the first quarter amounted to BRL 130 million, which means an annualized ROE of 13.7%. The operating cash generation in the quarter was BRL 67 million for an accumulated BRL 234 million in the year and BRL 563 million in the last 12 months. Our capital structure remains solid with BRL 923 million in cash and a net debt of 9% of shareholders' equity. In the next slide, we presented a track record for net income of Sao Paulo's operation in the last 10 quarters. You can see consistency in profit generation quarter-over-quarter and the increase in the levels of profitability, boosted mainly by the gradual recovery of margins and by gains in operating efficiency as well as in capital allocation. In the next slides, we break down the launches of the year. Beginning with Casa Madalena, a high-end project with apartments of approximately 250 square meters located in Vila Madalena and the PSV of BRL 515 million Even's share. We also launched and concluded the sale of the entirety of Hotel Faena São Paulo, a luxury hotel conceived to provide services and convenience to the complex, adding sophistication and value to the Residential project launched last year. The project has a PSV of BRL 178 million, considering Even's share. We are preparing special launches for the next quarters, such as São Paulo Bay, a project next to Sao Paulo Surf Club and through RFM, the project Plenitude Melo Alves, located in Jardins. Considering Even's share, these projects amount to over BRL 1.5 billion of PSV. We are now showing our sales performance. The net sales in the quarter were BRL 442 million with a consolidated SoS of 13%. Concerning cancellations, we ended the quarter at BRL 52 million, which is the same level as in previous quarters despite the significant increase in the volume of deliveries. It's worth noting that we continue to have a healthy receivable portfolio, which is increasingly concentrated on high-end projects. Moving on to the next slide. We delivered the projects Modo Butantã and Modo Pompeia, which account for a PSV of BRL 390 million and 870 units. For the next 12 months, we estimate a volume of deliveries amounting to approximately BRL 1.5 billion. Here, you can see some of the photos that are attached to the company's high quality of execution. At the end of the quarter, our inventory was BRL 2.9 billion, mostly comprised of projects in the high end and luxury segments, extremely well located and highly liquid. Our inventory is quite young with only 12% of the total volume corresponding to finished units. Out of the inventory under construction, 77% will be delivered from 2027 on. So the projects delivered this year were 77% sold as of June 30, as we can see in the graph in the bottom right-hand corner of this slide. Of the projects to be delivered next year, 73% are already sold. Our land bank consists of 19 lots or phases for a total PSV of BRL 3.2 billion. It is located mainly in prime neighborhoods in the south and west side of Sao Paulo City and is concentrated in segments ranging from middle income to luxury. And the next slide is a relevant part of our strategy. We present our solid capital structure. We ended the quarter with an important cash position of BRL 923 million. Our net debt amounted to BRL 202 million, which represents 9% of the company's equity. This means a decrease of 2 percentage points when compared with the last quarter. In this quarter, we generated BRL 67 million in operating cash, BRL 230 million in the first half of the year and BRL 563 million in the last 12 months. I would like now to give the floor to Marcio Moraes, Even's CEO.

Good morning to you all. I'd like to begin by thanking you, investors, analysts and everyone else for attending Even's earnings call concerning the second quarter of 2025. We launched two projects in this quarter, and we are preparing special launches for the second half of the year, such as Sao Paulo Bay, which offers exclusive views and access to Sao Paulo Surf Club and Plenitude Melo Alves, a 45-floor tower by way of RFM. It is a luxury project located in one of the most desired neighborhoods of Sao Paulo City. We had the first half year with consistent sales despite facing higher volatility on a monthly basis in an unstable global economic scenario. Our inventory is at a very healthy level, concentrated in the high end and luxury segments and with extended deadlines for delivery, which allows us to better plan our sales strategies aimed at increasing value. We are very aware of the moment we are going through concerning credit and funding for the real estate industry. We are cautiously monitoring inflation and interest rates. We believe that in this context of more restrictive availability of capital, well-structured companies can find great opportunities for the purchase of land and creation of partnerships for development. Our company has solid financial structure is liquid and has the lowest levels of leverage. In recent quarters, we have recognized significant cash generation that will allow us to commonly decide allocation and take advantage of new deals that we will make. We began 2025 with our company adjusted to our strategic position in the high-end segment and yielding consistent results from this strategy. Our margins are consolidated at high levels and give us growth potential, prospects for higher profitability in the future. I would like to thank you again for attending this call. We may now move on to Q&A.

[Operator Instructions] Let us now proceed to our first question. It comes from Juliana Vega, Itaú BBA.

I have two questions. First, I'd like to comment on what's the demand like what you can see in 2025, especially in the third quarter, how you see the demand in sales in July and now in the beginning of August? If you could comment on the performance. And second, I would like -- I would like to comment, if possible, regarding the cost for the increase in sales and administrative expenses.

Marcio here. And regarding demand for the third quarter, we noticed a very resilient third quarter. We saw a strong drop in the April -- in the month of April. It was not typical. So maybe some events that happened internationally, because of the war, but we still see some resilient market, especially high end. And sales are consistent with the demand and this is supporting our launches. We see in the second quarter, we are waiting two launches to that will be made, but we'll see if this will remain consistent. Regarding expenses, Dzik will answer the question.

Just complementing Marcio, our market numbers of the first quarter, we talked about Sao Paulo, specifically of launches. The market still has high levels of -- supporting high levels of launches, some record numbers and also great absorption. When we talk about sales expenses, what we saw is -- we prepared a very robust sales stand. We are doing all the work, and this is a very big project. It's BRL 1.3 billion of PSV. So we took a series of actions. We have a very good prospect for this launch, but there was a mismatch, because most of the sales expense happened before, in the results that we're going to see in the next quarter. Regarding administrative expenses, we had some oscillation, some fluctuations, which is normal, considering our dynamic of remuneration, bonuses, but these effects quarter-over-quarter are expected, and our planning is well adjusted, and we'll see something in the same base as last year, considering our administrative and sales expenses. So you didn't notice any difference in level in the company.

Our next question is from Herman Lee, Bradesco BBI.