Lavvi Empreendimentos Imobiliários S.A. (LAVV3) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to the conference call of Lavvi to announce the results for the third quarter of 2025. The presentation and comments on the results will be presented by Ralph Horn, CEO; Sandra Attie, CFO; and Vitor Charak, IR Coordinator. Simultaneous interpretation is available at [indiscernible] platform. [Operator Instructions] So this presentation will be recorded and will be available afterwards for your reference at www.lavvi.com.br. The slide deck will also be available in our platform. [Operator Instructions] We would like to inform that forward-looking statements are based on the beliefs and assumptions of Lavvi's management and information currently available for the company. Forward-looking statements involve risks, uncertainties and assumptions because they relate to future events and therefore, depend on circumstances that may or may not occur. Investors, analysts and journalists should consider that factors related to the macroeconomic environment, industry-specific factors might lead results to be materially different from those expressed in such forward-looking statements. Now I will turn the conference to Mr. Ralph Horn. Please, Mr. Horn, you may start.

Good morning, everyone. I would like to thank everyone. It's an honor to have you here at this conference call to comment the results of Lavvi's for the third quarter of 2025. We are very pleased with Lavvi's performance in this quarter despite a slightly more timid quarter in launches with the Minha Casa, Minha Vida. We had good inventory sales in the period. About our accounting results in these first 9 months of 2025, we had records in the lines of revenue, gross profit, net profit. We were able to generate some cash in the quarter and announced the payout of approximately BRL 125 million or BRL 0.64 per share following the consistency of value generation for our shareholders. For the third quarter of this year, we will have the launch of Casa Cerâmica, which is located in the city of Santa São Caetano. We are very excited. This is very well located, very close to the shopping mall and the park. In addition, we have the launch of other high-end partnerships projects in partnership with Cyrela. Finally, last week, we finalized our third capital raising totaling BRL 400 million, and we are now ready to invest in new land, our raw material that must continue growing. Now I would like to give the floor to Sandra to talk about the operating results.

Good morning. As Ralph said, we had a timid quarter in terms of launches, but we remain strong in performance. Starting on Slide #4 and 5, we had just 2 launches of Minha Casa, Minha Vida totaling BRL 425 million -- so on one side, we had the new Vila Prudente, where we opened for sale half of the project, and we sold 22%. Today, we have already sold 45%. This project is going to be booked in Q4. In contrast, Astro Santa Marina sold 75% -- is 75% sold. And then we are going to book the equivalent share that we hold in the project. In Slide 7, launches and sales have dropped if we compare the 9 months of 2024 when we had major launches that have been strategically delayed from 2023. In this quarter, sales exceeded the launched volume and once again, SoS is above 54%, as you can see here on the slide. So we have to be in our shares as we delivered a deluxe project, our finished inventory increased to 7.3% in VGV or 4% in number of units. So selling at these higher ticket luxury units, and we're now going to relaunch the product. We finished a decorated apartment, and it's wonderful, and we are going to charm our customers and resume sales. On Slide 10, still about Villa Versace delivered in August, everything decorated with Versace Home Furniture. We have already sold 83% of the project, so it's between -- they're either settled or transferred to the bank. It was not difficult to transfer our customers that got to their keys very easily. We still have access even though it's more expensive, but we sold fast and with a shorter portfolio, which ends up covering our construction. On Slide 11, you can see the Landbank. The Lavvi brand is concentrated in the south zone of the city of Sao Paulo, the higher end districts of the city. We have BRL 6.6 billion in Lavvi's percentage, 87%, high, medium to luxury. And then we also have Minha Casa, Minha Vida, which is the low income. We also signed the 100% swap of the only plot of land outside the city of Sao Paulo in the city of São Paulo capital, Casa Cerâmica BRL 782 million TSV. Lavvi is going to manage the project. We launched it in October 30. And as expected, it was a huge success. In less than 1-week, we already have 90% sold. The other units are also allocated. Now I would like to give the floor to Vitor, who is going to report the financial results.

Thank you, Sandra. Good morning, everyone. I will start on Slide 13 with the financial highlights of the third quarter. Net revenue rose 5% in the quarter Y-o-Y, mainly driven by the evolution of our construction works. In the first 9 months of '25, we had an increase of 26% year-on-year record for the period. The adjusted gross margin was 37.6% quarter-on-quarter and the same 37.6% in the first 9 months, up 3.7 and 3.4 percentage points year-on-year. As a result, net income reached BRL 104 million in the quarter and BRL 309 million in the year with a net margin of 25.1%. ROE remained at 29%. Our backlog grew 18% when compared to the same period of the previous year. The quarter, we had just cash generation in the amount of BRL 3.4 million. And year-to-date, we burned BRL 74 million in cash, and we would have generated BRL 319 million without investment in land. Finally, we ended the quarter with a debt of BRL 74 million. In addition to these results on Slide 14, on the right, you can see the investment income. The positive change is a reflection of a more robust cash flow and a higher Selic rate in 3Q '24. At the bottom of slide, starting with G&A, we see a high that reflects the company's growth. Even so, we managed to remain practically stable in terms of percentage of net revenue. In sales expenses, we increased 12% in the quarter and 19% in the 9 months. Finally, we had a 20% growth in net income for the quarter when compared to the third quarter of '24. In the 9 months, net income reached BRL 309 million, a record for Lavvi in the period. On Slide 15, you can see a consistent growth of revenue and net income year-on-year, keeping net margins above 20% since the IPO. On Slide 16, ROE 29%, showing its resilience. On the next slide, you can see the unearned revenue totaling BRL 2.4 billion with a slight reduction against the previous quarter. The margin of 37% implies approximately BRL 900 million of future gross profit. Now on Slide 18. In this quarter, the company generated BRL 3.5 million in cash, which would be a generation of BRL 73 million without investments in land. Year-to-date, we burned BRL 74 million cash or generated BRL 319 million in the ex land deal. We are now on Slide 19. On Tuesday this week, we approved dividends totaling BRL 124.7 million that will be paid out to shareholders later this month on the 26th. And in this manner, we have BRL 879 million paid out to shareholders since 2021. And finally, on Slide 20, you can see that we completed our third CRI issuance. Total volume was BRL 400 million, 3 series amortization, the seventh, eighth and ninth and 10 years at rates close to 101% of the CDI. With this, we reinforced our cash and are ready to buy new land. Thank you very much for your participation. And now we are open for your questions.

[Operator Instructions] Our first question comes from Herman Lee from Bradesco BBI.

Just one question about SoS that dropped slightly, so which are the factors that explain the drop in SoS, maybe funding? Or is it something more micro comparison basis? Can you explain that?

Yes. In August and September, there has been a drop in the market in terms of our inventory at 2 launches, we didn't have. And now in October, inventory came back to us and launches are very strong too. But in talking to the market, September -- August and September, there was a drop in the market. We don't really know why. It might have been seasonal, but it's good because we had a good October, both in launches and inventory.

Our next question comes from Gustavo Fabris from BTG.

I would get the details about Minha Casa, Minha Vida, [ My Home My Life ] project. What is the maturity stage that we are in now? And then I'm going to divide my question 2 points. First, in terms of margin to understand the execution? Is it better? Or is there any gap to close versus the competition? And number two is the landbank. How is the -- how does the current landbank relate to your target? And what is the marginal landbank going to look like, the landbank that you're going to purchase from now onwards? Any specific range, location? So what is your objective with the new land that you're going to buy?

So until today, we have launched 3, [ My Home My Life ] and the result of the sales and margins was very good. So it's about 18%, some 16% to 18%. So we are going to deliver the first project 6 months late. We are bracing to do that. So we are happy with the operation and this delay was because people didn't do all the piping below the land before starting. First, we wanted to outsource this part and then we had to do it, and this is a lesson learned. And now for the next 2 projects, we are slightly more knowledgeable, and we have a large landbank coming next year with very well-located land. We have Santa Marina, very close to the subway. And we bought another one in -- here in Sao Paulo in Largo [indiscernible]. And then there's a second one in [indiscernible], the famous land of Itaú, and we're very optimistic with the operation. So in short, we are happy, but we've been learning. I think that we have learned a lot. We are going to deliver 2 projects now, the one in Barra Funda and another project in Brazil. So the entire building to Brooksfield and there we are not making any of the mistakes that we made in the first one. We have already hired market agents of the companies. And they are helping us to understand this process better. Thank you.

Gustavo, just complementing, Ralph mentioned the margin of 16%, 18%, but he is talking -- this is not accounting margin. It's a profit at present value. Now the margin -- the accounting margin is driven up in accounting.

Our next question comes from Ruan Argenton from XP.

I have 2 questions. Number one, could you share with us your expectations in volume of launches in '26? I think that you have some major projects in your pipeline, [indiscernible] also to be launched at some point in time. So how are these projects going to fit into your pipeline? And what is the expected volume next year? And the second question is just for investments in land. So I would like to understand how we should see the land replacement scenario that you're seeing in the future. And overall, how is this going to relate to cash? So there is an investment scenario in land and cash generation. And is this -- should this volume continue? How should we imagine investments in land looking into the future?

So next year, we have a quite large landbank. We have [indiscernible]. We have high standard in Itaim. We have Moema. We have Paraíso, none of that has 100 meters except for [indiscernible]. So there are some for '27 because the approval will come at the end of the year. We don't like to work from 70 to 100 square meters is an exception when it is within a condo. So we have life, we have those -- that footage. So 70, 80 up to 130, everything did well, except for the 70 and 30 because -- so middle class is having more difficulty to buy. And the 70 to 100 are suffering today, they're not being able to get the margins that we would like. We do not operate very well in that market. So we don't focus on them. We are going to focus on high income club condos in my whole my life. This is going to be our focus for next year.

Now, as to the landbank replacement, we are focusing on purchases. We should have new swaps because new negotiations are coming at swaps. I think that Lavvi is getting better known. So it's easier for them to accept the swaps because of the results that we've been producing. So we are going to buy cash if there's good business, but we are always looking at cash, so that we are not out of capital. So we want to keep it because of the CRIs, the debt that we have. We don't want to pay interest. We are going to leave the money in cash, and we just pay delta. So if any good businesses come up because the CRI is the cheapest debt in the market. Just complementing what Ralph said, also considering our landbank and São Caetano, we are at an average of 67% of the landbank bought in cash. And historically, we're talking about 80%, 85-15. This has gone down. We have already bought some additional land. And in swap, we were able to purchase, as Ralph said.

Our next question comes from Rafael Rehder from Safra.

I have just one question. I would like to ask about your deliveries. I think that you have lots of deliveries, maybe even Saffire before the end of the year. And how is that going to relate to cash generation because there's also lots of construction. So thinking of the BRL 100 million extraordinary. So I think there is a more positive expectation. How do you see that?

Rafael, we have many deliveries for next year, even some that were carried over from this year because of these 3 months delay in construction. And then -- and we said that this year, we are going to burn cash because some transfers that will be carried over to next year. So this generates cash. I'm sorry, I thought I had been -- I was mute. So we had burn BRL 250 million because of transfers that were carried over for next year. So obviously, next year, we will end up generating more cash. So next year, we have the delivery of the new Barra Funda, the first project delivered for [ My Home My Life ]. We have Green View and Grand Square. The 3 have been carried over. We have Galleria Klabin and Saffire, which is the luxury project. So we are likely to generate lots of cash next year. Some of those deliveries, there's the studio tower that we sold to a fund, and they pay 100% delivery. So 85% of delivery and then 15% 6 months later. So the generation will be significant. Yes.

Our next question comes from Mariangela Castro from Itaú BBA.

I have a few questions. First, I would like to check with you which launches we should expect in Q4 and next year, what is the percentage of the operation for Novo. So about the payout of dividends, you have announced the payout this quarter. Should we expect new payouts considering possible taxing of dividends as it's being discussed in the Senate. What -- how do you see that?

Mariangela. So 4Q launches, we have Casa Cerâmica, we did very well. Thank God. And then we have a major launch with Cyrela Zen, which is a large plot of land in Moema, high standard. We also have the third launch, [ My Home My Life ], which is very good. We have already been approved. So we have these 3 launches and Villa Versace is also going to go to Q4 also in accounting -- accounting purpose is the 900 units, [ My Home My Life ] is going to be on Q4. So now as to [ My Home My Life ], I think it's about 20%. We have lots of [ My Home My Life ], but we have lots of medium, high to be launched. Now Sandra is going to talk about the dividends.

About dividends, well, first, about the one that we have just announced, as we always say every quarter, as we have been doing every year, we always look at our cash flow. And when we have surprises in launching sales, we end up paying out additional. So that's why we are paying out this BRL 100 million additional this quarter. So as we had expected with the news of taxes on dividends, we are going to assess which amount we are likely to pay out still this year.

[Operator Instructions] Next question comes in writing from Heloisa Cruz from Stoxos. Are we likely to see other launches in Greater Sao Paulo in addition to the one in São Caetano do Sul?

Yes, whenever we think it's good. So São Caetano is exactly half an hour from my office. It's closer than other parts of the city. So São Caetano is a very good market and others too well, it depend on the business. If it's good, we're going to go there.

[Operator Instructions] The question-and-answer session has now ended. We would like to give the floor to Ralph Horn for his closing remarks.

So I would like to thank everyone for your presence. We are still excited despite the Selic interest rate. The year has been very good with very good news. We have sold lots of inventory, and there's lots of work next year, and we hope we will be able to keep on the good work. Thank you all very much.

Our conference call has now ended. Thank you so much for your attendance, and have a good day.