LPS Brasil - Consultoria de Imóveis S.A. (LPSB3) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and thank you for waiting. Welcome to the earnings webinar of LPS Brasil to discuss the results of the third quarter of 2024. [Operator Instructions] Before proceeding, we would like to clarify that any statements that may be made during this webinar regarding business prospects of LPS, projections, operating and financial goals constitute the beliefs and assumptions of the company's management. Forward-looking statements are not a guarantee of performance and involve risks and uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not occur. Investors and analysts should understand that general conditions, industry conditions and other operating factors may affect the future results of the company and lead to results that differ materially from those expressed in such forward-looking statements. First, Mr. Marcos Lopes will make the introduction and present the operating results followed by Mr. Francisco Lopes who will present the results of CrediPronto. And then Cyro Naufel will talk about the financial results. After that, we'll start the Q&A session. Therefore, I would like to turn the floor to Mr. Marcos Lopes. Mr. Marcos, you may begin.

Good afternoon. Thank you for participating in one more conference call of LPS Brasil in which we present the results of the third quarter of 2024. Taking part in this presentation are Vice President Francisco Lopes Neto; our Investor Relations Officer, Cyro Naufel; and our CFO, Robson Paim. The company demonstrated for yet another quarter its commitment to results with consistent operational and financial performance. We remain attentive to macroeconomic issues such as rise in inflation and interest rate variations, which may impact availability and cost of funds for launches and real estate financing. We participated in 54 launches that reached almost BRL 10 billion in general launch value with a large percentage concentrated in Rio de Janeiro and São Paulo. In São Paulo, specifically, we observed a robust recovery in the number of projects launched given the postponement that occurred in the previous quarter due to the review of the master plan and the lack of approval of projects by the city hall. In terms of volumes sold, Rede Lopes with its 198 stores reached BRL 3.7 billion in intermediation in the quarter, with almost 70% of this volume concentrated in the states of the Southeast. CrediPronto also generated satisfactory results in the third quarter following the growth in the volume of the real estate financing market, which had a greater availability of funds to generate financing. CrediPronto financed more than BRL 1.2 billion in contracts in the quarter with a market share of 6.2% among private banks, showing a good strategic market positioning. Due to this performance, the company's EBITDA margin was 39.4% in the quarter and 35.4% in the last 12 months, which is the best margin obtained by the company since 2014 for EBITDA. After these initial remarks, I would like to move on to the presentation, starting on Slide 4 with the highlights of the period. Lopes own operations and franchises participated in 54 launches in the third quarter of 2024, reaching BRL 9.7 billion in launch volume, a number 81% higher than the third quarter of 2023. The total transactions closed totaled BRL 3.7 billion in the third quarter of '24, an increase of 39% compared to the same period of last year. CrediPronto's volume originated BRL 1.2 billion contracts, which represents an increase of 81% compared to the third quarter of 2023. Regarding financial results, the EBITDA margin reached 39.4% in the third quarter of 2024, 1.3 percentage points higher than the third quarter of 2023. As I said above, in the last 12 months, the EBITDA margin was 35.4%, and it is the highest margin in the last 10 years. Net income before IFRS increased by 22%, totaling BRL 14.9 million in the third quarter of '24. Moving on to Slide 5. We'll comment on the launches of Rede Lopes in the third quarter of 2024. Rede Lopes launches totaled BRL 9.7 billion in the third quarter, 81% higher than the same period of last year. The state of Rio de Janeiro launched BRL 3.8 billion in the quarter and surpassed the state of São Paulo in launches. As we can see on the map, the launches in the year have a diverse geographic distribution which, despite a strong presence in São Paulo and Rio de Janeiro, also included Espírito Santo, Paraná, Goiás, Amazonas, Bahia, Ceará and Paraíba. Continuing the presentation on Slide 6, we see the results of brokerage or intermediations. In the second quarter of 2024, in the consolidated result of Rede Lopes, the company intermediated BRL 3.7 billion, 39% more than in the same period of the previous year. Rede Lopes ended the third quarter present in 26 states and the federal district with a total of 198 stores. On the next slide, #7, we present the intermediation of Rede Lopes by geographic region of Brazil. The state of São Paulo accounted for 39% of the intermediated volume in the quarter, totaling BRL 1.4 billion, followed by Rio de Janeiro with 26% and BRL 964 million. The other regions combined accounted for 35%, totaling BRL 1.3 billion, with emphasis on the South region with BRL 606 million of intermediated volume. On the next slide, #8, we present the division of Rede Lopes intermediation between primary and secondary markets. The primary market accounted for the majority of Rede Lopes intermediations in the quarter with 77% of the intermediated gross general sales value and 75% of the units sold. The average ticket in the primary market was BRL 852,000 and in the secondary market, BRL 728,000. Moving on to Slide 9, we present the company's evolution and indicators related to Lopes Labs. In the chart at the top, we can see that organic visits to Lopes Portal continue to increase and exceed historical marks, reaching BRL 11 million in the last 12 months, a volume 14% higher than in the third quarter of 2023. Leads from organic search generated by Portal Lopes totaled 185,000 in the last 12 months and 29% higher than in the third quarter of 2023. Those were my remarks regarding the operating results. I now turn the floor over to Francisco who will speak about CrediPronto and then to Cyro who will present the company's financial results. Thank you.

Thank you, Marcos. It's a pleasure to be here again to be able to present the results of CrediPronto, which we're very proud of. This is an operation that performs very well. We noticed the resilience of the real estate credit industry of Brazil that is now mature and is trying to grow even more. Given the demand, there's a lot of room to grow and also because of the structure of our credit facility systems, using the mechanisms we have with a very good structure and delinquency rates that are quite low. So this is a segment that is very beneficial for the company and the industry as a whole. In the last quarter, the origination volume has grown with more than BRL 1.2 billion. That means more than 80% if compared to the same period of 2023. If we look in the last 9 months, BRL 2.5 billion. And we see that this 9%, which is the BRL 2.5 billion against BRL 2.3 billion, will increase as we show the results for the next quarter. Caixa Econômica made a change, which was not so structural, but limited the credit volume to BRL 1.5 million, but this is not responsible for our growth. What is causing our growth is the positioning of CrediPronto, which is well positioned in the market, and the fact that it's present with the main players, small real estate dealers, brokerage firms and real estate brokers. So we are present in the market, generating a large amount of financing despite the increase in interest rates in recent. I don't think this reduced the volume of credit facilities. On the contrary, we believe there is still room for growth despite the increase in interest rates. So our portfolio is quite healthy, almost reaching BRL 16 billion, and we'll get there by the end of the year. And this shows our performance in adding more customers constantly. On the next slide, we see basically what we mentioned in terms of origination. It's interesting to mention here the profit sharing, that we're paying BRL 10.5 million and BRL 8 million of profit sharing, BRL 10.5 million by paying commissions and BRL 8.5 million in terms of profits that are shared in the partnership we have with Itaú. Loan-to-value has changed a bit, but not very significant, but it was 65% when compared to 73% in the last 9 months. And we have more than 1,500 new contracts in the first 9 months of the year, 3x more in terms of time, we had 400. So we've grown a lot in this quarter. And also given the increase in interest rates, people want to close the negotiated contracts to maintain the initial interest rates agreed to in the beginning of the negotiation. Next slide. Now we see the monthly net result, recognition in the results of LPS Brasil in the months of June, July and August that make up the results for the third quarter. And September ended at a volume of BRL 2.8 million. Our structure has been resilient, as mentioned previously. And the scenario I see, based on the news of savings and SBPE, something that I consider an interesting sign to keep track of is that, in the beginning of January, the total balance of funds from SBPE was BRL 734 million. And this is composed of the inventory deposits made on savings accounts and also withdrawals from savings accounts. So that either increases or decreases. And if we look in September of 2024, the BRL 634 billion has reached BRL 764 billion, so the volume has grown. That's the overall volume available for funding. So this addition of BRL 30 billion shows that that's a source of funding that is resilient, is available, and it's a very well-known structure within the engineering of real estate industry. Buyers look for that type of credit. And default rates have been very low, and the real estate credit structure in Brazil works very well. Another important point is that at the end of 2019, before the pandemic, the same balance of SBPE was BRL 650 billion. So today, the market went through the pandemic, deposits, a lot of withdrawals, families got indebted, they used the savings to pay debt after the pandemic, and now the industry has almost BRL 100 billion more in terms of funds than it used to have at the end of 2019 before the pandemic. So that's the additional comment I make about the current structure of the savings and loans structure. These were my comments about CrediPronto. We are very confident given the performance of the company. And now I turn the floor over to Cyro to talk about the financial aspects of the company. Thank you. Have a good day.

Good morning, everyone. Thank you, Francisco. We'll now start the presentation of the financial results of the company, starting on Slide 13. We see the net revenue broken down by segment. On the chart, we can see that in the third quarter of '24, the company had a total net revenue of BRL 52.4 million, 17% above the same period of last year. By segment, we see intermediation accounted for 56% of the total net revenue in the period, 31% was from CrediPronto and 13% came from franchises. On the following slide, #14, we can see in the last 12 months' view the net revenue broken down by segment. Brokerage accounted for, 57%; franchises 16% and CrediPronto accounted for 27% of the net revenue of the company in the last 12 months. Moving on to Slide 15. We see that costs and expenses broken down. In the last 9 months compared to the same period of 2023, there has been a decrease of 4%, showing that we are always looking for higher efficiency in processes. When we break it down by segment, in the third quarter of '24, the volumes of expenses regarding our own operations, the ratio was stable with a change of 3%. Franchises went from BRL 2.4 million to BRL 3.8 million, an increase of 59%; and CrediPronto, a 27% increase due to the reasons explained by Francisco. In the lower chart, we can see the historical series since 2009 with the inspection by transaction. And we can see that the company continues to seek efficiency in its processes, reaching the lowest level of expense by transaction, around BRL 7,500 in the last 12 months' view. On Slide 16, we see the historical series since 2014, the EBITDA margin and EBITDA value. In the third quarter of 2024, in the last 12 months' view, we have reached the best EBITDA margin in the last 10 years at 35.4%. On Slide 17, we see the IFRS impacts in the results of the company. Please refer to amortization, gains and expenses with nonliquid cash effect, deferred IFRS on intangible assets, calls and puts of LPS Brasil and noncontrolling shareholders and such impact that resulted of BRL 5.420 million negative. And in order to better understand the results of the company, we recommend analyzing it without IFRS impacts since they don't have an effect on cash. On Slide 18, we show cash originated from operating activities, cash from operations, BRL 12.3 million with a total cash of BRL 43.590 million. That is 90% higher than the third quarter of 2024. We have total availability of cash and cash equivalent of BRL 65 million, 6% higher than in the last quarter, and 10 million shares available in treasury stock. Now we open for the Q&A session. Thank you.

[Operator Instructions]

We have compiled the answers based on the main questions asked by our people attending the call. The first question is about the average rate of loan agreements by CrediPronto and whether they have an annual fixed rate. So the average rate at CrediPronto in the last quarter was 10.7% as shown in the material. And yes, almost all the agreements today by CrediPronto are made at a fixed annual rate plus TR. The trend is for it to go up a bit because there was an increase in Selic interest rate. So there will probably be an increase in interest rates from private banks, including Banco Itaú. The second question was about the increase in the cash, if we expect to cancel treasury stocks and launch a new share buyback program. None of those options are being studied by the company's management. No decision made about that. Finally, some questions about the renewal of the agreement between CrediPronto and Itaú. This contract has been enforced for 4 years, and there are no conversations to renew it. We haven't started any conversations about that. And finally, a question asked about the reduction in the total number of brokers of the company all over Brazil. This reflects of a higher efficiency in the company, in the sales teams, by using digital tools and digital processes, which bring greater efficiency and a smaller number of brokers that can make the same number of deals that we have. And we observed this trend of greater efficiency in terms of labor.

This ends the Q&A session. I would like to turn the floor over to Mr. Cyro Naufel for his final remarks.

We thank you all for attending the call for the earnings of the third quarter of 2024 of LPS Brasil. We thank you all again for attending and wish you all a very good afternoon. Thank you.

The conference call of LPS Brasil has ended. We thank you all for attending. Have a good afternoon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]