Helbor Empreendimentos S.A. (HBOR3) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and thank you very much for waiting. Welcome to Helbor's conference to discuss the results of the second Q '24. We inform all participants that this broadcast is being recorded and simultaneously translated. [Operator Instructions] Before proceeding, we'd like to inform that any statement made during this webcast regarding the company's business outlook, operational and financial projections and goals, constitute beliefs and assumptions of Helbor's management as well as information currently available to the company. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties, and assumptions as they relate to future events and therefore, depend on circumstances that may or may not occur. General economic conditions and industry conditions, and other operational factors may affect the company's future results and may lead to outcomes that differ materially from those expressed in such forward-looking statements. Now I would like to give the floor to Henry Borenstein, the CEO of the company. Please Henry, you may proceed.

Good afternoon to everyone attending Helbor's earnings release. Alongside our CFO and Investor Relations Officer, Leonardo Piloto; and our Sales Director, Marcelo Bonanata, we are here to discuss the company's results for the second quarter, and the cumulative results for 2024. We closed the second quarter with consolidated sales of BRL 532 million and BRL 87 million of this amount corresponds to the sale of completed and ongoing construction units. In the first half of this year, we accumulated a total PSV of BRL 975 million marking the best sales semester since the cancellation crisis. We launched 4 projects this quarter, 3 of which were phased representing a total net PSV of BRL 267 million. We delivered a total of 3 projects this quarter, which together amount a total net PSV of BRL 403 million, with 2 located in Sao Paulo, achieving an average sales rate of 84% and 1 in Mogi das with 57 of units sold. It's also worth mentioning that the So a Helbor Tem event, which this time was exclusively held in the cities of Mogi das Cruzes and Curitiba, reached a total PSV of BRL 6 million sold, marking another excellent sales performance. On the economic and financial front, we achieved a year to near date revenue of BRL 618 million, with a gross margin of 32.4%. The parent's company net profit amounted to BRL 15.5 million for the year, representing BRL 0.12 in earnings per share. Thes leverage index measured by the net debt, net equity ratio, registered a slight increase reaching 71.2%, due to the reasons we'll explain throughout this presentation. Thus, we remain committed to reducing our inventory of completed and under construction units, focusing on the scheduled deliveries throughout this year, and working on the continuous improvement of our operational, and financial indicators with subsequent deleveraging. Now Leonardo Piloto and Marcelo Bonanata will present Helbor's key operational and financial data. Leonardo and Marcelo, you have the floor.

Good afternoon, everyone. Marcelo Bonanata, good afternoon, Henry. And I would like to thank you all for being here. The first slide we are going to talk about is the land bank with the potential of BRL 10.8 billion, 7 billion is Helbor's share. We have 33 projects with a total land bank of 73% in the city of Sao Paulo. In the second slide, we show the diversity as regards our land bank. So we are present in practically all regions of Sao Paulo, mainly in the premium neighborhoods of Sao Paulo. We can list Jardins, Fazenda Itapety, Moema, Chacara Santo Antonio, Vila Nova Conceicao, the region of Ibirapuera Park. We value the beginning of everything that begins the incorporation, the purchase of the land. These are special lands and we are very proud to have a land bank of this quality. In the city of Sao Paulo, we have a potential land bank of BRK 8 billion and Helbor shares 5.2 billion. So in the next slide, we present the launches. And Henry had already talked about in the second quarter of '24, 4 launches. Three of them were phases, a development that we had already launched at Fazenda Itapeti, which is a success case of sales in Mogi das Cruzes. Roya is the second phase of studios in the Perdizes neighborhood. Metropolitan Vila Nova and we also have finished the studies. And the new launch in the second quarter was at Helbor Patteo Vila Mariana at Franca Pinto, corner of Domingos de Moraes. We have launched the first phase of compact unit studios, business suites and 1 bedroom studios. And we are preparing the second phase for 3 dorms and 3 suites. Now the deliveries we made in the second quarter of '24, we delivered 3 developments, 2 in Sao Paulo, the Vila Nova, close to Ibirapuera. And they are 180 square meters apartment, Parque Sao Paulo, 2, 3 bedrooms. At the Freguesia do O neighborhood, there are 400 units close to the Tiete riverside. It's a success of sales, a beautiful project, and an undertaking Mogi das Cruzes in the Reserva Ipoema, which is a new neighborhood. So this was also a great success. Now the contracted sales. So this is 1 of the differentiating highlights for the second quarter. And we totaled BRL 532 million sales, 45% increase when we compare with the second quarter, 23% and 20% when compared the first Q '24. And we compared the 6 first months, '24 and '23, we had a 35% increase. We would like to highlight that this is a very strong quarter. We worked a lot, especially to decrease our exposure. Now in the next slide, continuing the contracted sales, we talk about the SoS that also had a significant increase. We leave from 12.2% in the second Q '23 to 17.7% in the second Q24. Compared with the first semester '24, we had a 14% increase and Helbor share leaving from 11.9% to 17% in the second quarter '24. Now about the inventory, the Helbor inventory, it has been decreasing every quarter. We have a total inventory of 2.5% and Helbor share 1.4%. 97% of this inventory is in the Southeast Brazil. Now in showing the diversity of Helbor as regards its land bank, and also its products, we are not concentrated in no specific neighborhood or typology. We have diversity, something we built over the years. We have a very high distribution of inventory, extremely high, high commercial, medium high, average, and medium low. And our inventory has decreased, because we have always talked about after. We also had the inventory of legacy was huge. Today, we have only BRL 150 million as compared to the past. The majority of the ready units is a project we delivered recently. And the majority of our inventory is under construction, 74% of our inventory is under construction. Now I would like to give the floor to Leonardo Piloto, who is going to talk about our financial information.

Good afternoon, everyone. So I would like to begin with the net operating revenue, total BRL 322 million the second quarter, reflecting part of the sales we did in the first Q. And the revenue was 9% higher and 4% lower the second quarter, '23. When we compare the 6 months, '23 and '24, we grew little by little. Now talking about the backlog revenue and margin, we have signaled the delivery of some projects with margin. And our backlog margin was reduced, it was 26.8% in the first Q, and now it's 25.4% in the second Q this year. So the backlog revenue declined, a little bit due to the deliveries and what we have already received. Now in the next slide, talking about the gross profit and margin, we closed the quarter with 32.2% of gross margin. It is in line what we have told the market that what the company can do in a sustainable way, it's around 30%. The net margin was slightly from 11.2% to 9.8%, due to commercial expenses. We had a good quarter of sales, and this has reduced our margin slightly. And the gross profit was above the first quarter from 92% to 104%. General administrative expenses, the most important information, this slide is in the bottom. So the general expenses represent vis-a-vis, the revenue compared. The second quarter, '23, it was 8%, and now it's 9%. And we think it's stable. We shouldn't have any negative surprise along this line. The idea is to seek more efficiency, and we believe that this is well-controlled. Now the next slide, talking about the net income of this, in the 6 months of this year, we closed in line. It was BRL 14 million, and this, we grew a little more, as compared to the first, so from 7 to 9, the net profit in this semester. Now talking about the last slides, the debt, our total debt for the second quarter, compared with the first quarter is slightly higher, BRL 4 million higher, due to the leverage we foresaw, and we can understand better by looking at this table below, and not our debt. It was 68.5% in the first Q, and went back to 71%, above 70%. And the last slide, talking about the cash burn, BRL 107 million. So we are going to talk more about the reasons later on. We already have some questions in this regard, and we are going to explain better. So now we would like to open for Qs and As.

[Operator Instructions] The first one is from Herman Lee from Bradesco. I'm going to read it]. I would like to understand more about the cash during this quarter. We have some expenses that can persist, and I would like to understand the gross and the net margin, and explain this discrepancy?

The first one about the cash burn. It's important to highlight that the company, in addition to finishing the construction work and put cash, we continue with some important lines. The payment for lands and construction work and debts, and in the quarter we paid dividends, and the 107, we have not purged it. So there were some important effects this quarter, and some specific for this semester, for this quarter, and some are continuous, and the expenses work will continue to decline. We still have many construction expenses. Now concerning the land, the payment for plots of land bought previously, we have had a good land bank, and I think for all of us, the focus is on this area. There were several operational issues until the end of the year. We have a lot of projects to deliver, and we are focused on selling and on lending, not everything. We transfer BRL 360 million. One part of that is related to equivalence. Now going to the next, concerning the GAAP, concerning the gross margin. The gross margin in our TRE is a composition of the heavy margin plus the margin of the completed inventory. So we've recognized that we sold it, and more what we had in the inventory, so we have a mix of the two. That's why we have the [indiscernible]. The gross is 72, and the inventory tends to be higher. I think it would be interesting to bring our inventory margin - even to make it clear that's an inventory margin hedge market. I don't know if this explanation is clear.