EZTEC Empreendimentos e Participações S.A. (EZTC3) Earnings Call Transcript & Summary

We will now return to the teleconference. We apologize for the technical difficulties. Welcome, ladies and gentlemen, to EZTEC's Q3 2024 Earnings Call. Hello. I am Pedro Lourenco, I'm in charge of the company's Investor Relations department. And for this presentation, we have Mr. Silvio Ernesto Zarzur, Board member and CEO of the company; Flavio Ernesto Zarzur, Vice President and President of the Administration Board; Samir El Tayar, Vice President of the Administration Board; Marcos Ernesto Zarzur, Board member; and Marcelo Zarzur, Vice President and Director of the company; as well as Emilio Fugazza, Financial and IR Director at EZTEC. Please note that this event is being recorded and all participants will be in listen-only mode during the company's presentation. After that, we will begin the Q&A session. And at that point, we will provide more information. [Operator Instructions] If you disconnect from the call, please use the same link or the ID that's available on our website, ri.eztec.com.br. On our website, you will also find the slides that we will be presenting right now. They're available in the download center. Information is available in reals, BRL GAAP and in other currencies that are also available. Before we begin, we'd like to announce that any changes from the general conditions will involve projections and financial beliefs that are pertaining to the company's board as well as industry conditions and opinions of the company. They are projections and forward considerations are not performance guarantees. They involve risks and uncertainties, as they refer to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors could affect EZTEC's future performance and could lead to results that differ materially from those expressed in such forward-looking statements. Now I'd like to give the floor to Mr. Emilio Fugazza, Financial and IR Director, who will start the presentation.

Pedro, thank you. It's a pleasure and an honor as always, to be here celebrating with our shareholders, our analysts and our listeners the earnings call for Q3 2024. Thank you all for being here and for being patient with us today. I'll begin with the launches this quarter -- the third quarter of 2024, starting with Lindenberg Alto das Nações. This project is part of the Alto das Nações complex in the Pinheiros and San Antonio region. It's part of a group where we have shopping centers, commercial buildings, multi-use buildings, and our project, which is a residential building with units measuring between 110 square meters to 213 square meters. We sold 41% until the present day. That's BRL 570 million in total projected sales. We've already begun the construction given its complexity. And so we have already been allowed to recognize it in our accounting statements, totaling over BRL 500 million in net revenue. I should mention this is a project that is 90% controlled by EZTEC. Next -- our next project is Dot.230, this is also in the Pinheiros neighborhood, very close to Rebouças Avenue. This was initially going to be a commercial building, and it was very skillfully turned into a residential building with units measuring between 22 and 44 square meters. In less than 1 month between launch, it has sold over 46% of sales, contributing total projected sales at BRL 153 million. Next, we'll look at performance in our launches. This is a new slide in our presentations. Here on the left, we can see the launched volumes from 2020 to 2024. So in and of itself, we see here on the left that in the 9 months year-to-date, EZTEC has launched approximately BRL 1.3 billion, which is already 35% higher than the total volume launch in 2023, all year. In red, we also see the volumes that were launched in the third quarters of each year. And so here, we see that in 2024, we have the highest volume in Q3 launches over the past many years at the company. But what draws most attention is the graph on the right from 2020 to 2024, the sales speed -- the average sales speed, we've always had in the first 3 months of each launch in each year. So you'll see that in 2023, we already had, on average, 34% sales during the first 3 months of any given products launch. But in 2024, our growth was significant. We now have almost half of the total projected sales having been sold during the first 3 months of each given project. This shows the strength of the market and our power in putting our investments into sales over the course of the year 2024. Here, we see 3 projects that are upcoming launches for the company over the next 2 months. From right to left, first, we have Connect João Dias. This is My Home, My Life project that is being worked on in partnership with Conx, which is a real estate developer that is specialized in this field. EZTEC has invested BRL 72 million, and that's what our total projected sales are. And we expect to start selling in November 2024. In the middle, we see Alt Studios. This is another project that was initially developed by EZ Inc as a commercial project, and then it was changed into a residential one. This should be launched in Q4. It is very similar to Dot.230. This project is 100% controlled by EZTEC. And lastly, but not least, we have one more Lindenberg brand project, Lindenberg Reserva Paraíso. EZTEC's total projected sales participation is BRL 190 million. These are upscale apartment buildings, apartment units, located in the Alto Paraíso neighborhood, and we are going to start selling it in early November. Now looking at our landbank. We see that we closed Q3 2024 with BRL 10.355 billion. This is, of course, a result of the subtraction of the launches that we made during this quarter, but also as a result of the fact that the company ratified the São Caetano property, which is going to give approximately BRL 1.800 billion. This is over 200,000 square meters of private location, private units. This is a city in the state of São Paulo, which is one of the highest HDI ratings in the state and is one of the most desirable locations for middle class and upper middle class in São Paulo. This leaves us to another important aspect of our operations, which are the deliveries. In this quarter, we delivered almost BRL 800 million in total sales. This is focused on 2 towers, Signature and ID Paraíso. On the left, we see Signature, these are upscale apartment buildings, apartment units. It was developed by our architect, Carlos Ott. 77% of units have been sold so far. And we finished this project with cost savings, something that hadn't happened in the past 2 years for EZTEC. So we once again saw positive results from the engineering department, which contributed to EZTEC's final result. The year 2024 is, I would say, a more restrained year in terms of deliveries. However, 85% of units that are going to be delivered this year have already been sold. It's important to highlight that 2025 is an extremely important year for the company. And now in Q4 '25, this already accounts for 72% of units already sold. So this shows the power of delivering ventures without necessarily building up gross inventory, and this also does not require us to put cost pressure on remaining or unsold units. Now moving from operational to financial. Let's start with net revenue. Here, we have an important highlight during Q3 '24, significant growth. This can be seen all the way from Q1 when we had BRL 239 million, all the way through to BRL 479 million. This is over 100% growth in revenue from Q1 to Q3 '24. Notwithstanding on the top in the red line, we see that the revenue to date over the past 12 months year-to-date represents approximately 40% growth compared to the 12 previous months in '23, that is. I'd like to highlight that the growth of this revenue is an important contributor as importantly explained by Lindenberg, such as Lindenberg Vista Brooklin, and they have the Lindenberg projects such as Lindenberg Ibirapuera, has also been an important contributor to that. Over 50% of that venture has been sold. This contributes to revenue of over BRL 80 million, an increase in our margin during that period as well. This brings us to gross profit, which is also something else that grew importantly during this quarter from BRL 82 million to BRL 163 million. The highlight here is gross margin. We reached 34% in quarterly gross margin. However, as we mentioned in the release, and I invite all of you to look at that PDF for more details. The proxy for our growth margin in the future is firmly above 40%. And when combined with property equivalency, this is 48%. The overcoming of a suspensive clause as well as considering the NTN rates we have, it brings us to a position where recognizing this revenue with that discount is very significant when you adjust it to the present value. That means it's almost half when you bring it to the present value, but it's not to say that the margin goes away. It's just an accounting artifact. We gradually as we bring -- as we move closer to the conclusion of any given construction project, this numerical margin starts recovering. So this margin is what the company actually works with, and that is firmly within the 40% rate. This makes us very comfortable. Now looking at equity method gains and losses. Our equity grew by almost 200% since Q1 '24. Without a doubt, this growth in volume is also due to the presence of ventures that are controlled in partnership with EZCAL, our joint venture with Lindenberg. The total equity equivalency over the past 12 months is already BRL 84 million. But in this quarter, it was BRL 29 million. And that already includes the cost economy. This contributes to a direct result of practically BRL 3 million, which is to be celebrated. Now looking at financial results. Another significant result of the company's total results. This is BRL 37 million in results that came primarily from our fiduciary sale or trusteed portfolio. This is a growth of almost BRL 100 million compared to the beginning of the year, and approximately BRL 30 million in growth compared to the previous quarter. We should note during this quarter that EGP (sic) [ IGP ] varied by 2.22% and 2/3 of our portfolio is tied to IGP and 1/3 to IPCA. The mean rate for our portfolio today currently oscillates around 9.9%, so approximately 10%. So our portfolio is approximately 10 plus IGP as a proxy. Over the past 12 months, we've seen BRL 120 million in aggregate results in our net profit. And finally in terms of results, let's look at our net profit and ROE. Again, we've got growth of approximately 120% compared to Q1 '24, which was almost 50% growth from Q2 to Q3 '24. That's BRL 133 million that we obtained. It's one of the best net profit results in the past few years. And a reminder to all of you that in the past 12 months, we're already at BRL 360 million. And of course, if we annualize this result, it would give us an ROE of approximately 11.4%. So it is quite significant -- this improvement is quite significant. And a reminder that we also had good news at every single stage of our operations we had good news in our operations, the EZTEC consolidated operations. We also had good news in regard to jointly held properties, which comes in through the equity method, and also good results in the financial results, which contributed to approximately 25% of the total result. In terms of cash and debt, our net cash had a variance of approximately BRL 50 million. Part of this, I should remind you, is our traditional quarterly dividend payout policy. That is what is moving this number. But with regard to net debt, the major change is solely due, in this quarter, to the greater taking on of FSH (sic) [ SFH ] financing. And so you'll see that our gross cash is practically unchanged within the order itself, practically imperceptible. And here, I have a fourth item of good news for our company's results, which is the dividend payout. We gradually contributed. It is contributing to make the company's ROE more appropriate, a better fit to present conditions. So this quarter, we have the quarterly dividends. They already have increased up to BRL 31 million. So this is simply those 25% pertaining to the quarterly net profit. We're also celebrating extraordinary dividends with an additional BRL 150 million, so for a total BRL 180 million or BRL 0.83 per share. Remember that the base cutoff date is November 5, which includes November 5 itself. So the situation will truly be ex-dividend on November 6 and the payment date will be November 14, right before the holiday on the 15th. And so with that, the last 12 months of accumulated dividend payouts adds up to BRL 236 million. And so that being said, I now pass the floor to our CEO and Board member, Silvio Zarzur for his comments. Silvio?

First, I'd like to welcome everyone. Good morning or good afternoon. Thank you for being here with us today. I want to mention that this was a great quarter for sales. We had very good results in our sales volume in every single segment. We sold high-income units at 10,000. We sold apartments at 30,000. We sold all sorts of different properties that the company develops. This is linked to the aggressive sales strategy that we implemented and also our marketing service. A really painstaking meticulous care with regard to approving credit, always approving credit correctly and without causing undue hurdles. We're also able to very successfully pass on units when we work with banks. We were able to do that with a lot of fluidity, very few challenges. We also never again saw any kind of discussion linked to going over budget. This is not part of our vocabulary anymore. We're now looking at cost savings and no longer any cost overruns. This was also a quarter where we concluded the nonoperational side of capitalizing the Lindenberg venture. Now we're at the stage of getting some approvals, Emilio, I don't know if I was supposed to say this...

No, it's just -- we haven't...

Yes, we're in the operational side. Yes, but the -- the rest has been requested. So I apologize if it hasn't been completed yet, it has already been requested. So I believe that it is a very positive situation. Something else that is important to highlight is that our land bank, the land bank that is at the company is the disposal. It's sufficient for the next 3 years. So this is a land bank that is very high quality, not just in terms of the price we paid and location, but also options for being liquidated for selling. So this is a land bank that can be affected in the short term, if needed so -- but also in the long term. So this gives us a peace of mind to not need to run around and acquire more land bank over the next year or 2, this is going to make us able to generate cash more effectively because we should spend less money purchasing property -- purchasing land bank. Thing is how we currently have a very well-distributed land bank. We used to think that we were overly focused on the south district of the city, but this is no longer the case. We were able to redistribute our land bank so we can now launch high volumes without competing against ourselves. We've also made a number of changes to the Board. We hired some people. We professionalized some upper management. This is another positive point. Our management is very lean right now. It's very efficient. And it really conveys to us the sense that the company is going to be permanent. It's going to be perennial. Since we've been able to professionalize our staff, that really gives us the feeling, the philosophy of being perennial of being permanent. I think our colleagues here are all focused on making the company permanent, and this dividend was an overrun on excess of capital that we had that really bagged to be distributed in order to improve our ROE a little bit. And I think over the next 3 years, we really are going to improve our ROE or ROI. Over the past 3 months, we closed with BRL 220 million in management. So sales remain strong. Let's say, this is still distributed -- well distributed throughout our portfolio overall. And of course, we've been managing this. We sell well, but I should mention we also sell at 5% less than the competition. So even with the margin we currently work at, we also have competitive advantages that allow us to sell at 5% under the competition. This dilutes the commercial and administrative costs, and this has also helped us. This has been a decisive factor for our success. We have units currently open for Signature, Lindenberg Paraíso, which we believe is going to be very successful. 75% of that building is ours. Even though it's managed by Lindenberg, we believe it's moving along very well. We also have Missionários and Conx, which they manage, which they operate. And we've got 2 more very successful sales centers also currently open. And this is likely to keep our sales speed up. In terms of points of attention, of course, we need to see what the market is going to look like next year, considering the interest rate that got in the way of many things, including bank mortgages. At the end of the day, there was an uptick in the mortgage rates, which did compromise client signatures a little bit. The fiduciary sale has been working with a lot of strength as well. It's a point of attention for us. We are now moving into a model where we want to turn that into something that's more parameterized for us to pass on. So it's no longer going to be a portfolio in the traditional sense. We're going to build it into something that is already predetermined, prepackaged, to give us more liquidity. And I think that's pretty much covers what I need to say. Emilio?

I certainly corroborate everything that Silvio mentioned. It took us a little while for us to adapt after the pandemic. We had a slight change in philosophy. We had some challenges that we needed to absorb, but all this has passed now, firmly in the past. We're now very comfortable and our focus is on the present on the here and now, and we're very satisfied with the results of Q3. We believe that in the medium and short term, we're also going to have great results. I'd like to thank everyone.

Good morning, everyone. Thank you all for being here. I'd also like to ratify what Silvio said. EZTEC's new management now with better defined and more permanent positions with Silvio running the operations. And now that everyone knows exactly what they're supposed to do, what their box they're in, this has brought us the results that everyone has been expecting. So from here on out, it's only going to improve. And if the market allows it, I'm confident that the results are going to remain very good. We're going to start '25 very strongly. We're going to have 3 to 4 different sales centers. Approvals are already going to be finished. It's really going to depend on the market for us to launch confidently and have good sales. And as Emilio mentioned, the changes we made to engineering have already started falling into place. So engineering and efficiency for the company overall are now going to return to the many years of distinguished profit that we've had in the past. Thank you.

Thank you, gentlemen, for your presentation. We'll now open for Q&A.

[Operator Instructions] The first question is from Pedro Lobato from Bradesco BBI.

Thanks for giving me the time to ask this question. First, I want to ask about dividends. Please correct me if I'm wrong. But if we combine the dividends that are going to be paid out this year and thinking about the total dividends, not per share, this is probably the biggest volume in many recent years, if we disconsider 2017 with the sale of EZ Tower. It was clear for me during the introduction that this is about ROI. But with this new level of net debt, can we, therefore, continue to expect extraordinary payouts over the next few years at the same level? I'd like to understand the strategy now moving forward with regard to dividends. And my second question is with regard to the medium income segment. Over the quarter, at least looking at the consolidated image of the city of São Paulo, the medium income segment lost a lot of its strength. If we look at the total participation, we understand that there is a urbanization, a guiding plan created by City Hall. There's also My Home, My Life that has gained a lot of strength. But all that being said, I'd like to understand, what are the main aspects of medium income that in your positive view for the segment are still pending looking forward?

Pedro, thanks for your question. For dividend payouts, what is certain is the 25%. After that, we're not sure yet. We're going to study that quarter-by-quarter, term by term. We don't have any plans in that sense. So if in the future, we understand that there is a situation that needs to be handled, we'll handle it then. What we know now is 25%. As for the medium income, it really has a lot to do with the My Home, My Life program when you talk about reduced participation. I don't know what the My Home, My Life percentage was at in São Paulo. It may have been so high that the medium income volume dropped in comparison, but the fact is that having well-located ventures with the right products -- look at what we did in Villares, we sold, I don't know, 90% in 3 to 4 months. This is a good price with a good margin. At least for us, I can't talk on behalf of anyone else. I can speak for us. We have a number of different properties with these characteristics that are ready to be launched or being prepared for launch. We have them in Osasco, in São Caetano. We have in the South District in Fagundes Filho. We have properties well distributed all over São Paulo. These are very assertive products. And we know we are going to have very fast sales. This is a product line in a certain size range with certain cost and construction characteristics, which put us squarely within the desires of the buyers within their means as well. And based on the way in which they are distributed, we can launch them one right after another without any issues. So that's how I see it. Medium income has been something we've been working on well. I don't know if that's the case for our competition. But for us, it's going to work very well. It's really going to be the workhorse for EZTEC. Pedro, did we answer your question?

Yes, you did.

Our next question comes from Ruan Argenton from XP.

Congrats on the results. I have 2 questions. First, about launches, I'd like to understand a little bit about what you think in terms of volume? Are we going to have robust growth as we did for this year? We've seen that launch sales speeds are a bit higher. So does that make you more confident? I also want to understand in terms of product profile, we saw that Alto das Nações is a more concentrated product. And so do you think that in next year, we're going to have more concentrated total projected sales as well? And my next question in terms of launch margins. Emilio explained that these margins grow over time, but I'd like to look at the current launches within the total margin, would you say that this is above or aligned with the trend line? Should we continue to see growth looking forward?

Ruan, I'm going to answer part of your question. I think the other part is going to be Emilio. Well, we are prepared. So in January, we're going to start the year with 5 different offices with models that have been created, the miniatures have been created. It's going to be robust. What we're not going to have is based on the macroeconomic scenario. Based on the increasing interest rate, I think you can see this better than us. When I look at the company, if we didn't depend on the economy overall, I would say that, yes, we're going to have robust growth. However, we are strongly dependent on this continued purchase confidence in spite of the interest. So it's a bit -- it goes against the grain to look at purchase volume with interest in the order of 12.5% to 13%. But we have 5 offices open. So we're very confident. We are moving forward. Now if you're asking us whether in a second step, we're going to continue this move. Well, I can't answer that yet. What I can say is that we can sell 5% lower than the competition and keep our margin. So this is something that gives us a competitive advantage. Our brand is very strong in São Paulo. We have a very powerful sales company. We have a strong ability for self-financing, and we can sell at 5% less than the competition. So all of this adds up to a significant competitive advantage. So I understand that these components may allow us to navigate even in places where other companies cannot, and we're located, we're present in every segment. Oh, the BRL 8,000 apartment unit isn't selling? Well, let's sell the one that's BRL 30,000 or the one that's BRL 30,000 isn't selling? Well, let's sell the one that costs BRL 15,000. Oh, the South District isn't selling well? Well, then let's sell in the North district. So this diversity allows us to defend ourselves from many different situations as do our competitive advantage.

Perfect. Perfect. The other question is about our margin.

Sure. Thank you for your question. Let me shed some light on the margin. When we look at the 40% REF, it would be prudent to consider that this REF does not include the PIS/COFINS rate and it also does not include the cost of financing. And naturally, this is different for each different product. On average, I would say 1.5% to 2%. So PIS and COFINS and financing, all in all, that's approximately 4%. So when REF reaches the gross margin, it will be approximately 36% and 36% is what we have been seeing, in fact, in our launches. However, adjusting to the present volume has been very difficult because the NTN-B is very high. So when I look at Lindenberg Alto das Nações, it's very well sold already. So let me do some envelope math. If I say that the margin is close to 40%, we see adjustment to the present value for something I'll deliver in 3 years whose value 70% of which will be financed, 30% of which will be paid. I will adjust to the present value, 70% of the revenue for that client and keep the same cost. With NTN between 6 and 7, that accounts for almost half of the gross margin. So when the gross margin is close to 40%, it moves to close to 20%. This is just back of the envelope math, but it gives you a little bit of light on how perverse this adjustment is. However, as we move closer to term, I give back that revenue. And as I do that, there's a huge offset. So at a given point in time, the revenue for that venture will reach a margin that is significantly higher than 40%, maybe 45% or even 50% because the effect in our present moment, in our economy today, is so strong. Does that make sense? Was I able to explain?

Yes, it was very clear.

Our next question comes from Fanny Oreng from Santander.

I have 2 questions. First, regarding the delivery of the 2025 units. The LTV is very significant. We're talking about -- sorry, the total projected sales. I'd like to understand what percentage of that has been paid? That's my first question. And next, how is the demand for final customers evolving?

Good morning, Fanny. Thanks for your question. We have a good structure for delivering the operational deliveries for our ventures. We've been delivering our properties to our clients' satisfaction. And in terms of the operational side of these data, Emilio is going to show you that an important percentage in terms of the cost of financing comes to the fiduciary sale side of things. So in this last quarter, the fiduciary rate grew by BRL 30 million in last quarter, almost BRL 100 million in the year. So we are prepared for that. We're also, nevertheless, putting together a vehicle so that if this number goes up too much, we'll be able to pass it on to CRIs or to banks.

I think Flavio answered the demand for our self-financing. We're prepared to absorb it as Silvio mentioned. We're preparing this portfolio so that it's a portfolio that can be passed on when we find it convenient. And then when that person fits back into the bank credit once again, we're ready to serve that client base.

I'm going to add to what they said. First, it's important to mention that this harvest -- this upcoming harvest is very healthy. The paid-up percentage for these clients is approximately 30%. However, it's important to mention that EZTEC through Flavio and our legal department has been following up with clients and billing them. So when you look at the invoices quarter-by-quarter in spite of any change that people may have in their lifestyle, Flavio always is very alert to the topic of defaults, and these defaults are never allowed to rest in our portfolio. So what we do have here are the clients that are staying with the company are all healthy. Self-financing has grown, especially considering new sales. But this growth, which was BRL 30 million in the quarter, when I look at the total of delivered ventures, it has not been higher than 5% of delivered ventures. But of course, in our opinion, given the future and what Silvio said about the interest rates and the increase of real estate credit through taxes, we know that this portfolio is going to be an important vehicle -- an important instrument for many of our clients. The company has a robust ability to create this, and we are at a very healthy and very controlled situation. Did that answer your question?

Yes, you did. Just a follow-up. We know that the demand for real estate funds and receivables portfolios, there's a lot of demand. And the EZTEC portfolio is very attractive including because of the rate of return. Have you received many proposals to purchase your portfolio?

Yes. Yes, we do. I would say that every couple of weeks, we have financial agents making us different proposals. They each have different structures. Some have mezzanine, some have co-participation. Yes, we do field a lot of proposals.

And I want to add we are much more efficient than any fund or any bank to manage this portfolio because repossessing or reclaiming that property, this is all part of the company's day-to-day and we do this at a profit, in fact. So what Emilio said is true, and we're also, from here on out, this portfolio is going to be prepared within a model that's going to make it even more liquid and valuable. We're going to set it with parameters that are going to give us a lot more liquidity and value at the end of the day.

Would you be able to share with us what the rate is that anyone has been offering you?

I'm not really, Fanny. But in essence, this is a portfolio that can be securitized at par easily. The offers we've been receiving, of course, offer some kind of an upside for us, while keeping some kind of a risk. But the value it is currently rated at is the value that we can bring it to the different vehicles that the different banks offer. So our IGP, or IPCA plus 10 is firmly within expectation. And the risk he mentions is also the risk of gains because when Emilio talks about risk, it is -- there are 2 directions managing this portfolio with our experience and our structure. This will convert risk into profit.

Our next question comes from Tainan Costa from UBS Bank.

My first question is a follow-up from the last one, in line with the deliveries you've got for '25, what percentage -- sorry, we had some audio issues -- what percentage operates at higher rates as well? That's the first part of the question. I also wanted to ask about sales expenses -- cost of sales that you mentioned. You said that it was BRL 300 million or BRL 400 million per quarter in the past and recently, this jumped to BRL 500 million...

I'm sorry to interrupt, Tainan. There's a problem with your audio. And unfortunately, we weren't able to hear your first question. Could you please ask your questions again?

Sure. Can you hear me?

Yes. Yes, we can.

All right. My first question is a follow-up for the previous one. What percentage of the delivery volume for next year? What percentage is it going to be for the banks and what percentage is going to involve higher rates and also cash generation for '25 considering the dividend payout for the upcoming year?

Tainan, your second question is about commercial expenses, right?

Yes. Something else that drew our attention in the quarter. We were impressed by is cost of sales. In the recent past, your sales ran at BRL 300 million to BRL 400 million. And in these 2 past quarters, you jumped to closer to BRL 500 million, so there's some growth, but cost of sales also had a few outliers in terms of nonrecurring marketing. But even with sales at this level, you were able to keep expenses a little bit lower, which diluted the percentage of cost of sales.

Right.

And was there any specific strategy can we expect to see the company continue to operate at this level moving forward?

Well, what we prefer is a bank transfer. So if the client has the means and their credit is approved, then we will work with a bank transfer. Now we are prepared to have a slight increase. We can increase our fiduciary sale portfolio next year, yes. But it doesn't depend on what we want, it depends on the client being rejected by the bank, being denied and then coming to us. So it really depends considerably on how the banks behave. And on to what extent the bank facilitate or put obstacles in the way of financing or mortgaging. So we have plans, but it doesn't depend on -- it's not up to us to reach those plans. And in terms of cost of sales -- the fixed cost of sales, as they go up, we also dilute cost of sales, but we monitor it week by week, product by product so that we can use the best maths, the best formulas and numbers for the company. Sometimes we need to be a little bit more aggressive and the percentage goes up a little bit, and we'll see that reflected in the coming weeks. So this is part of why the result improved. We diluted sales expenses -- commercial expenses. What was the third question?

Just a technical comment. Tainan asked what can generate cash for the next year in our delivery volume?

Now Tainan, of course, we have uncertainties about what's going to be done in the fiduciary sales and what's going to be passed on. I think you can do direct math using the BRL 2.5 billion we're going to deliver. I mentioned to Fanny that it's 40% of paid. So that means we have 60% receivable. So let's see I get there with 80% of that having been sold, I need to subtract financing -- real estate financing, which I would say is 1/3. So cash generation is very positive, but remember that it starts -- it really kicks in during the second quarter. Without any doubt, it is an important year for generation, but starting in Q2.

Yes, and our launch pipeline consumes significant cash. It's important to mention in this equation, the positive point at the end of the day, I'm talking about cash generation, is not needing to purchase property. So when I look at the company, there's cash generation that Emilio mentioned, there's usage in the launches. So we need to get to a percentage -- a certain percentage where construction has begun in order to make our numbers. So the most important aspect is not needing to purchase property. Tainan, did we answer your question?

Yes, you did.

Our next question comes from Mr. Kiepher Kennedy from Citibank.

I have 2 questions here. The company delivered a strong, healthy, resilient gross margin, but I want to ask about costs. We saw a development of INCC running at almost 6%. I think labor and materials really draws our attention. I'd like to ask you what you've been seeing in the day-to-day in terms of transfers for next year? Any kind of light you can shed would be great. And my next question is a little bit more delicate, but I would love to hear what you can say on this topic. You mentioned that paying up of shares by CAL should happen through EZCAL to CAL. And if needed, any amounts that would be pending -- that might be pending would be converted by selling those -- that equity, those shares. And I think the debt between the different companies is approximately BRL 75 million. I'd like to get your take. Can we use these numbers as a starting point between the 2 companies? And in terms of strategy for this operation, what would motivate anticipating that event, which was the target of the announcement the company made? Should we consider that perhaps this event has been motivated by CAL's properties being more high income and so may be better for this -- the segment? So for CAL and for INCC, basically.

Sure. I was there too. So let me answer. We expect that INCC will keep up with our construction costs. We've been investing in smarter projects in construction that is faster, and we've been signing partnerships to guarantee that. We've always had partnerships. Of course, labor is the biggest challenge. As far as materials, I'm not too concerned. But with the standardization and industrialization processes that we've been working on with engineering and products, I expect that INCC will cover our construction costs. I'm going to talk about CAL, C-A-L, but first, construction. Since we've been working on projects that are better suited to each given property, when it comes to INCC, we've been more efficient in how we project and how we develop. This has led to savings. When we can use columns and structural or concrete, we use -- to put it shortly, we use the best engineering instruments and technologies, structural masonary or not as the case may be, we always use the best technology for the job. So for Lindenberg, CAL that is, it has been reaping good results for itself. When we invested into CAL, the results have also been very positive for us as well. So this is a company whose equity was -- it currently is at approximately 30. So this is a company that does not have the condition to self-finance just to grow really. And when we look at what we intend to achieve in our venture with them, it's very positive for us to work with them, to give them a capital structure that allows them to grow more quickly. So let's remember that we have, I think, 40% at the end. And this upcoming market term -- this market period, is going to be positive for them. And the market is not always favorable. Here in Brazil, if you say, "Oh, let me do this 3 years from now." It could be that everything has changed, and you can no longer do anything you planned. So overall, the moment is positive. Our investment allows and will allow them to continue to invest. This ability, if we push it forward 3 years, we may not find the conditions that exist today. So that's our motivation to make that investment now, to move more strongly here. We have a positive scenario. I don't know what's going to happen in 3 years. It could be a positive scenario we expect, we hope that they will be positive and so that we can stay with them both at Lindenberg and when Lindenberg moves in and does business with EZTEC. So these are 2 important scenarios for us.

Thank you, Silvio. I just also want to ratify because what you mentioned is important. In this operation, where we announced the anticipation, the moving forward, we're going to do that through our share of EZCAL, and we will do the additional everything that needs to be done with our funds at CAL. We still have a significant share of debt that are owned by EZTEC. So this will give us some kind of profit for EZTEC until it comes to fruition that CAL in its own structure can do this on its own. Kiepher, were we able to answer your questions?

Yes, you did. Do you have some kind of a time line for your work with CAL? What kind of timing?

Kiepher, from now on, we are no longer in discussions with CAL. The discussion was done through the request to move it forward. It's now a legal step that needs to be done. There are 2 assemblies that need to be held. There's also the CADE meetings, and so that's why we expect 4 months to be the time due to legal requirements.

Our next question comes from Mariângela from Itau.

Congrats on the results. I have 2 questions. First, I want to explore the net profit that you mentioned in this quarter. Should we consider that this is going to be recurring for the next quarter? What's your outlook? And my next question, back to the topic of funding. I want to ask for -- on behalf of EZTEC, how easy has it been for you to get loans from banks and rates? Have you been getting any pushback from the banks?

There are a number of factors that affect net profit. What I can tell you is that within the company's plans, we are firmly planning to increase those numbers. So when we look at the 12-month outlook, there are some aspects that are specific and they change the development. But we believe that our net profit is going to increase next year. And every year, we want a better ROI than our current one. We are currently approximately at 7 to 8. We want 12 first, then we want 16, then we want to hit 20. We want to go back to working at a 20 ROI, which is what we used to have in the past. And we have a long-term plan to achieve that. This doesn't happen overnight unless some kind of shift occurs, but that -- the conditions are not currently in place for that. So the increase is slow and steady, so that you can have some kind of a forecast. And talking about funding for EZTEC. EZTEC, as everyone knows, is a very well-rated company among the banks, and they've been coming very much aligned with the financing that we've been signing. Financing for production is aligned for -- up until June '25 and so far. And the rates, the banks have been setting are very stable. It's approximately BRL 1 billion in resources and at the same rates as we previously practiced.

Our highest concern seriously, Mariângela, really we're worried about is the final client because the company is very protected, very well protected because of its own balance and its results. However, the final customers are concerned. And we always want to have very close relationships with the banks because the banks are able to offer our customers competitive rates. And at the end of the day, 75% of that credit is going to be held by them.

Our next question comes from Igor Machado from Goldman Sachs.

I have 2 questions as well. First, about inventory, we saw a 9% sequential increase and 56% of which is in high income. So how do you view the future? Do you foresee some kind of a drop, considering we've got more liquidity in the high income products? And my next question, still on the topic of land bank and property. You said that for the next 3 years, your pipeline is ready. I'd like to understand, if you can, what is the distribution of those properties within the segments?

Could you -- Igor, could you repeat your first question, please? Igor, could you please repeat your first question? Yes, we hear you.

Sure. The first question was about inventory. We saw a 9% sequential increase and 56% of total projected sales are in the high income segment. So I'd like to understand from you how you see the development of this inventory, considering there's more liquidity in high income during this quarter?

Sure, Igor. Thanks for the question. Look, this position, this growth in high-income inventory is temporary and circumstantial. We work on one strategy at a time. And we're currently in this quarter, working to reduce high income inventory, and we were able to do that. So I don't see any kind of a stall in terms of inventory stock. We've been working on many products such as Lindenberg Ibirapuera. We worked to reduce that, and we were able to reduce it. So it's a discretionary change -- discretionary reduction as and when we see a need to do so. The company's overall inventory follows tracks our launches. The inventory does not shift with regard to the volume of launches. Inventory is always going to be stable or under. I think we have 2.2 -- 2,200 in inventory. But if I launch 3 or 4 buildings, then in that quarter, I'm going to have an uptick in our inventory level. And you can't liquidate all of that immediately. Of course, it gets liquidated over the course of the year. So inventory is always going to remain either at present levels or lower than present levels that is what we manage. The key, is what I mentioned, is our land bank. Our land bank is very well distributed among many different income levels, including low income with My Home, My Life. This is very important. We've got many partnerships there. I think, BRL 1.5 billion -- Emilio, please correct me if I'm wrong, something in the order of BRL 1.5 billion. And we don't operate any of those directly. Those are all through partnerships. As far as our geography, our distribution, is very well distributed around the Greater São Paulo region, low income I'm talking about. We are well distributed in the east and south of São Paulo. We're currently launching in Paraíso with Lindenberg as well. We've got high income ventures in the South end as well, Moema, Chucri Zaidan near the Alto das Nações region. We've got properties in Roque Petroni. So our land bank is very well distributed. It's very varied and diversed in terms of geography and in terms of income level. Now all of our land bank without exception was purchased at good rates. It's all very well positioned, and for all of them, the final sale level is highly competitive for the reason where it's located. Igor, did we answer your question?

Yes, you did.

Our next question comes from Mr. Gustavo from BTG Pactual. Gustavo?

I have 2 questions as well. First, could you mention with regard to those 2 large properties in São Caetano and Extra. Could we get some clarity, are those 2 the only ones in the pipeline? Silvio suggested that a significant portion of next year's cash generation is due to the lack of a need to purchase land. And also, are you thinking about bringing in any kind of a partner to reduce the risk, considering its significant risk or is EZTEC going to work on that project alone? And my second question for Emilio, I'd like to understand indebtedness and capital structure and dividends. Today, the company has a very low net debt with a history of net cash, and you announced this extraordinary dividend payout now. So I'd like to understand, moving forward, how should we think, was this dividend payout an advance of the expected cash for next year? Or are you going to work with a little bit higher leverage in the short term because you've got receivables? Are you going to work with more leverage to deliver at higher rates? And is this dividend going to track cash generation for next year? Or was it already paid out right now?

Gustavo, thanks for your question. First, São Caetano. This is a property that is located in a city that had an urban planning problem that has already been overcome. So we bought that property. We're going to start paying it next week. It has already been approved. It is actually divided into 4 lots. So this property is divided into 4 lots. They each have their own need. The project is going to be paid in, I think, 24 installments. So we're going to launch this venture before we pay even as much as 30% of this property, we will already have started launching it. Now this is a city with high repressed demand because of that urban planning problem. It's one of the cities with the highest HDIs in the region, and they are really starving for residents. So we purchased this property at a very good cost. And I should mention, we are alone in that property, in that venture. It's 100% EZTEC. Now this is 150 meters and 4 bedrooms, all the way down to units that don't have -- that don't have any parking spaces and that are sized at much smaller sizes. But I think considering the diversity, we're going to have sales much faster than ordinarily would occur for a standard for an average property of that size. Now for Extra, we did not overcome the acquisition clause. Extra is currently in a suspensive clause. It's an excellent deal, but all of that analysis, all of that study and the potential for partnerships when we actually execute the purchase. That's what we're looking at. But when I look at land bank and mentioned land bank, I am not considering Extra. The Extra property is outside of what I mentioned with regard to property and land bank. Now in addition to those properties, we've got 1 property, the Bandeirantes property. It's also bigger. I don't recall exactly the total sales, BRL 1.5 billion, I think. It is currently in the pipeline. And it's the only property that I would say is extraordinary within our pipeline because the city of São Caetano the way it's divided, it's no longer extraordinary, either BRL 500 million, BRL 400 million, another one that's BRL 500 million. So it's really just a day to day for the company. It's not extraordinary.

I want to answer about the capital structure. The extraordinary payout is not in advance of anything that we are looking at in the future. No. This is an account of what the company can pay out comfortably today. I'd like to remind you that we've been using everything we can from real estate financing. The cost of real estate financing for us are lower than the ICD rate here in Brazil. The cost of debt is low, which means that ventures are making full use of that rate -- the policy rate. With regard to what Silvio mentioned and not needing to purchase new property, the company has, based on its plans and knowing -- in addition, other than São Caetano, I know, which is still going to be paid, all the other properties have already been paid. The company understands that those BRL 150 million are additional to any kind of cash need that the company is going to have for the next year or year-and-a-half. Did we answer your question, Gustavo?

Yes. Yes, you did. Great answer.

Now our next and last question is from Mr. Rafael from Safra Bank.

I have 2 questions. The first is about Esther Towers. I saw that in the quarterly comparison, you adjusted to 94,000. I thought it was 86,000 before. Was there a change to the project? Or is it something more specific? And could you please give us a catch-up about the company's balance how much cost have you incurred in Esther Towers? And how much is still pending? And my next question is with regard to the fiduciary portfolio. Is there any kind of a rule of thumb as far as the ideal size of that portfolio? Or where would you put the -- what would you draw the line for risk?

Yes. So first, for Esther Towers, there was no change to the APL. It's always been 94,000 meters in terms of area, APL. In terms of the improvement for -- in demand for corporate offices, we are preparing to finish the first tower by the end of '25. So during that term, we're going to make investments along these lines, and we feel that there is already some kind of a demand, but nothing that would really anchor the building. Now this is speculation, but I think we're going to finish that tower within the 2025 calendar year. So we should be able to make some assignments within that nothing set in stone yet, but we are going to finish that tower. And during Q1 '25, we're also going to finish a much smaller tower, which is the Air Brooklin commercial tower. That's also going to be finished in Q1 '25. Again, because we understand that, that is the right time to finish that construction and start moving forward.

And again, I want to remind you that we have a financing already signed for that venture. This means that this venture will come from real estate credit as normal. And the other question you asked about the size of the fiduciary sale portfolio that we deem to be ideal, the sweet spot. Well, we should remember that this is a sale instrument. So we're not doing this in an opportunistic manner. No, this is part of our operations. It gives us opportunities to sell at a good price. And given the conditions where we study that portfolio, that credit, it's an important instrument for generating results for the company. Considering that the scenario can be a little bit more challenging in terms of asking these instruments on to clients. And when we see a good opportunity to make a bid, to make a move in that market, as I mentioned to Fanny, then we have the ability to do so, and we will do so when it's strategic, but we don't have a predefined level. It's growing gradually and slowly and this makes us very comfortable.

Emilio mentioned sales, and it is an important sales instrument. Now imagine, when you approve someone's credit, that person signs a lone with the bank 3 or 4 years before they receive the property at an interest rate of X, and they pay 30% to 40%. But when they come to us, it could be that they may find an interest rate that is far outside of what they expected. In other words, having this portfolio here and bringing that customer into our portfolio, this adds adherence to the bank transfer. So I can't make do without this kind of an instrument, and so when it's needed, we pass on part of this fund. I'm not going to lose sales because of this. I should mention that we manage real estate portfolios for over 40 years, over 4 decades. So we have a huge level of experience. And fiduciary sales never cause a downside for us because banks don't have the agility that we have to get a unit, renovate that unit and put it back on the market. For them, that's a problem. But for us, it's just a standard -- it's what we do every day, day in and day out. So we're going to keep using fiduciary sales at the level that we deem to be necessary. And whatever surplus we have, we will pass on. And just another reminder that many of our customers, when they enter the fiduciary sale portfolio, they spend 1 or 2 years in that portfolio temporarily. And then when they find a better interest rate with the bank for their financing or mortgage, then they will move away from our fiduciary sale portfolio and start doing business again with the bank. Did we answer your question?

Sorry, I was muted. Yes. Yes, it was very clear. Can I ask a quick follow-up about Esther Towers, if you feel comfortable. What percentage of total costs do you think you've already incurred?

We have that number, I think. Rafael, we've got that release. 67%, Rafael. I want to remind you that when Flavio mentioned conclusion of the tower, we're talking about the first tower which is closer to being completed. And of course, the second one is going to start after the first one so 67% approximately.

Gentlemen, since no other questions were asked, please submit any additional questions to our IR website. I now pass the floor to our directors for their final remarks.

Look, I can tell you that we've been working with a high level of coordination. We've been working with the best possible strategy. We've got important support from our Board with Samir, with Marcos with our external advisers, Anis, Juliana, Nelson. They've been helping us make important strategic decisions. The company is at a level of maturity that is very different from where we were for years. Regardless of our improvements -- financial improvements when it comes to corporate and governance, we are much more mature than we were. We always tried to pass information on with the utmost of correctness and transparency, but we are now at even more important levels of governance that give us more comfortable, more perennial and more continuous growth. This is something that needs to be highlighted. We have reached a significantly different level recently. And we're always open to questions, Flavio, as the Chairman of the Board needs to make his final remarks.

Silvio was very concise and objective today, very to the point. But everything he said is something that all of us believe. We're all very comfortable in our position. Thank you for being here with us. You can always count on us. Pedro and Emilio are always at your disposal and so are we. If you have any questions, you can always count on us. Thank you.

Thank you, members of the Board. Thanks to all of you participants. The EZTEC conference is hereby concluded. Please check our additional materials available on our Investor Relations website. Thank you all for being here, and have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]