Moura Dubeux Engenharia S.A. (MDNE3) Earnings Call Transcript & Summary

Good morning, everyone. We're going to begin our earnings call for the first quarter of 2024 at Moura Dubeux. I'm Alan Aquino, and to present our earnings for this quarter, we have Diego Villar, the CEO of the company; Diego Wanderley, our CFO; and Diogo Barral, our Investor Relations Officer. [Operator Instructions] It's worth mentioning that possible statements that could be made during the earnings call are based on assumptions from Moura Dubeux management. Future statements are not a guarantee of performance. They involve risks and uncertainties and rely on factors that could or not occur. Having said that, Villar, the floor is yours.

Thank you, Alan. Good morning, everyone. Once again, very close to the call in the fourth quarter of 2023, but we want to bring the highlights of the first quarter of '24 now. Before we begin and we discuss each number, I wanted to talk about the formula and how we've been conducting this, right? So we see that 2024 is a year where, once again, we'll overcome the numbers we had in '23 in the operational data for sales and launches and also with all the financial indicators, the gross and net revenue, the net income and the growth of our margins. So basically, part of this is already hired. And at the same time, we also have been going through an execution process of what we had already sold in previous launches, and we're still quite optimistic about the launches for '24. I'm going to talk about a few of these I've already done in the first quarter. I'll give you some clarity about what will be the next ones, especially based on what we've already communicated to the market about, such as the iconic projects Othon, the former Othon Palace in the city of Salvador. Before we begin and get into more details, I want -- one thing that people have been asking about because we recently had published in the Brazil Journal an interview with me about the forecast in the company for the payment of dividends. We are in a cycle with the cash burning process. We had already provided this disclosure to you in all the market, and Wanderley will talk about this up ahead. But our expectation and forecast, especially those that are reviewed considering the results in this quarter already indicate that in the fourth quarter, we'll be getting into a cash generation phase. You all know as well that the company, after going public, had an accumulated loss that will be reversed now in the second quarter. So the combination of both of these factors gives us room so that in the fourth quarter, we can pay out dividends with the results of the third quarter. So this is our strategy, and it's becoming more feasible and realistic day after day. And from this day onwards, we'll start balancing out the company in a recurring manner for the payment of dividends biannually, and we'll move on as in the same way in '25 and '26. And all of the company's growth will be based on this assumption and the assumption with the very low or even no debt level. So throughout the period in the company, we always intended to make the company reach a state of deleveraging or even very low leverage. And now the strategy remains even in this cycle with the payment of dividends and growth. So we're going to get into details. We had launches of BRL 347 million when compared to the same quarter in '23. This is a growth of 40%. When we compare with the last quarter of '23, it's a reduction of almost 23%. And this is how Moura Dubeux has always performed its strategy. We start the year with more caution, and that's why we reduced some of the launches in regards to the last quarter of the previous year, but we grow because this year will be a year with more launches on the same base as '23 when compared to the first quarter. And what's most important, we sold BRL 372 million. It's the best first quarter. If we compare with the same quarter last year, we grew 14%. We reduced this in regards to the fourth quarter. It's also natural if you consider the Northeast, where you have a lot of holidays and vacancy in the cities. But we performed more when compared to the same quarter last year, and we sold more than what we launched, which made the company reached 47% VSO in the accumulated 12 months, which would be the SOS, the net SOS. And it's really important to consider that Moura Dubeux has been keeping this up for quite a while, 45%, 46%, 47% of SOS. So you can see multiple quarters consecutively with really good acceptance. We reached BRL 308 million in our net revenue, which is also a growth of 22% compared to the first quarter last year, almost 10% when compared to the last quarter. And that's combined with what I mentioned recently. We've been growing our revenue nominally and our profits, and most of this is basically due to what was already previously hired and now it's just under execution. So BRL 42 million was our net income, and we had almost 40% growth upon the first quarter last year, which shows us what the year were like, and this is our expectation for profitability growth year-over-year. And the first quarter was the watch that we had projected. So 25% growth in the profit when compared to the last quarter, which led to 13% ROE in the first quarter of '24, a growth of 3 percentage points compared to the first quarter, 0.5 percentage points compared to the first quarter. So our ROE has been growing quarter-over-quarter. And here, you can see one question people always ask us is about the volume negotiated in the last 30 days. We went from BRL 2 million and now we're stable at BRL 7 million, which made us enter another 6 indexes by B3. If you look at our behavior in the last 30 days in Moura Dubeux, you can see these change levels very quickly. This also demonstrates greater interest in new investors to look at our stock. And when you consider -- in the end of the Q&A, I'll be back. But now I'll pass the floor to Diogo Barral. I just want to show you some highlights of our launches. We had a launch called Jardins do Parque em Maceio. This is a market that's been surprising us. And the indicators for average price of sales in Brazil have been quite surprising, 141 mn and Beach Class is a closed condominium, another retrofit project. It used to be a former hotel. We acquired it and launched it. We sold almost all of it and BRL 69 million in PSV and net and also [indiscernible] close to [indiscernible]. And now this is a whole another kind of audience, and we have 137 net PSV launched in the last few days of the closing of the quarter. We're moving along very well with the development of the Othon project. We believe that between the third and fourth quarter, we're going to be able to present both of the projects. And it's actually a complex of 3 developments, the retrofit, the corporate and residential, which is really high class. So between the third and fourth quarter, we'll be launching this, and we hope that it's really welcome considering the demand we have. Simultaneously, we've been working with the Beach Class segment also. We performed very well, Moura Dubeux. And in the last 2 ones, we really believe that ones we're going to be presenting this year in the south of Pernambuco will be a success. And then the rest, which are almost ready to be launched, and we have the launch of the concept Jardins em Aracaju. Here in Recife, we also have the Mood Aurora, which is doing really well. And we just launched here in Recife, another project. But in the second quarter, we'll share more data about the launches in the company. So Barral, the floor is yours about the operational highlights, and I'll be back with you guys at the end of the presentation.

Thank you, Villar. Good morning, everyone. Now I'll keep up with the operational highlights and talking about the launches, Diego has already mentioned the variations in regards to the quarter, and I think it's worth mentioning the vision in the last 12 months when it comes to the right side here of the slide. So the company was able to accumulate BRL 1.7 billion, growth of 6% compared to '23. And here, it's worth mentioning that we -- about our expectation in regards to growth in this volume of launches throughout this year of '24, and it tends to grow significantly compared to '23. However, we'll have a stronger growth and more relevant growth from the second half of '24. Moving on with our sales. Diego also mentioned some of the variations in the quarter when we look at the last 12 months, the company has commercialized BRL 1.5 billion, which represented a growth of 3% compared to the year of '23. And now when we look at the composition of our sales, when we add the sales of development, adhesion to condominiums and closed sales, we accumulated BRL 415 million in gross sales. And when we consider cancellations, we reached a net sale of BRL 372 million. So we want to highlight some of the cancellations. Here, once again, the company had a level of cancellations that we believe is healthy and compatible with the size of our operation. If you look at the first quarter from the BRL 43 million that were canceled, basically 60% of this number was left in-house in Moura Dubeux. And these are cancellations that are really connected to a switch in ownership or migration between units within the company. And when we eliminate this number from our calculation, then the cancellations only represent 4% of our gross sales. Moving on with our speed of sales. Here, you can see the consolidated numbers. And on the right side, you can see the launches SOS. And you can see that we've been keeping up this level of SOS in the last 12 months above 40% for quite a while, 15 quarters consecutively. And besides the company being very precise in its projects, I think it also demonstrates the consistent demand on average on middle and high-income launches that's really focused on the products we had operated with and launched constantly. Here, we have our land bank. And here, you can see it's very close to the volumes we had last year. We end the first quarter with BRL 1.855 billion in our land bank, which represents 15 months coverage, a really healthy level. If we consider the commercialization in the last 12 months, so the LTM. And if we consider the breakdown of this BRL 1.855 billion, 28%, the BRL 511 million our stock or land bank of units to be launched. 65% are units that are under construction and only 7% or BRL 139 million are related to our units that have already been complete. On the right side, you can see a breakdown per region, but also per business model. On the [ pizza ] on the upper side, you can also see a greater volume of our markets that are most relevant in our plan. So we have Ceara with BRL 616 million under stock. That represents 33% of our total stock. And then we have Pernambuco with BRL 460 million, representing 25% of the total stock or land bank. Then on the bottom part, you have the breakdown per business model. And you can see how we're quite balanced between condominiums, developments where each of them represent about 50% of our total land bank or stock. Then when we move on to the end of the operational part of our presentation, we end the period with 61 properties. They represent BRL 8 billion in possible potential PSV. We've been keeping up with this level. It should be quite interesting. And from this BRL 8 billion has an acquisition process that should be about 60% through physical swaps and 40% in cash. The project is in progress, we ended the quarter with 53. And from these, 22 are in a development regime and 31 as condominiums. And from these 53 projects, we have 45 construction sites that are active. About deliveries in the first quarter, we had 2 projects in Recife, still in a condominium model. When we look at the amount of deliveries expected throughout the year, we can notice that there is a concentration in the development model where you have 7 projects and 3 of them are still in condominiums. So in this way, we can confirm 10 projects to be completed and delivered throughout 2024. Now I'll pass the floor on to Diego Wanderley as he moves on with our accounting data.

Thank you, Barral. Good morning, everyone. And we'll start off with our net revenue, which ended the first quarter of '24 with BRL 308 million, 22% higher than what we had in the first quarter last year and 9% above the last quarter of '23. The breakdown here of the revenue is 66% coming from developments and 33% coming from condominiums. And we can notice that there's a growth in share of the incorporation or development in our revenue structure. So on the right side, you can see our accumulated numbers for the last 12 months, and we reached BRL 1.2 billion revenue, 5% above the closed year of '23. Then moving on to the gross profit. We always bring in the adjusted capitalized interest. We ended the first quarter with BRL 108 million, really in line with what the fourth quarter was and 23% above what that was. And so here, you can mention the drop in margins that dropped at 35% of audited margins, and that's mainly due to 2 factors. The first one is the mix with the incorporation or development, which is part of the gross profit more and also the drop in margin doesn't affect the profitability of the overall business. On the right side, we have the accumulated numbers in the last 12 months, reaching BRL 444 million, 5% above the closed year in 2023 and a margin of approximately 37%. Moving on to our expenses. On the right side, you can see our commercial expenses that are still in line with our sales, even a slight drop, closing with about 7% and a total of BRL 28 million. On the right side, you can see our administrative expenses, and we did have a dilution here with 7.1% of our share in our revenue and 5.1% compared to -- in regards to our sales with a total amount of BRL 22 million. Moving on to the adjusted EBITDA in the first quarter, it was BRL 54 million with an EBITDA margin of 17.5%. And we accumulated the last 12 months BRL 216 million in EBITDA, 6.7% above the year of '23 and a growth of the EBITDA margin reaching close to 18%. To end the earnings topic, we have the net income, which was BRL 42 million in the first quarter of '24, a net margin of 13.7%, which is accumulating BRL 167 million in profit in the last 12 months and 7.5% higher than the closed year in '23. And this is important to highlight the ROI is always present close to about 13%. We also bring in the higher results that are already considered in our earnings. On the left side, you can see the results of our incorporation, BRL 270 million of profit with a margin of 35% and 1 percentage point gain in regards to the fourth quarter. And on the right side, you can see the revenue from condominiums and closed sales of BRL 29 million and a margin of 27.5% and administrative fee of BRL 240 million to be accounted for. So finally, the financial indicators, we have the cash consumption and our debt level. And ever since the first quarter of '23, when we started this cycle with the burning of cash, we anticipated this movement, and we've been keeping this according to our plans. We ended the first quarter of '24 with about BRL 70 million of operational cash. We had accumulated BRL 107 million of net debt that represents 7.7% of our equity, which we see in our plan that we're still going to be burning a bit of cash in the second and third quarter, reaching the peak at about 15% of our equity. And then in the fourth quarter, we get back to generating cash and give us more room for the payout of dividends. So now we end the financial indicators, and I'll pass the floor on to Alan to start the Q&A.

[Operator Instructions] The first question comes from Juan. He's from XP, and he's asking about the expectation for the payout of dividends in '24 and the estimate for '24 and also the next cycles? And the second question he's asking us is about the expectation for the launch of the Othon.

I think I was kind of guessing this question by Juan when I mentioned the highlights, right? But Juan, thanks for your question. I think that when we mentioned this, the company closes the second quarter with accumulated loss and the profit in the third quarter is our main sign towards an expectation for distribution. And if we confirm this, as Wanderley mentioned, we'll have a cash burning process for the third quarter. We should reach about 15% of the company's profits and losses, and then we have room and this becomes recurring because our growth will always be higher than the exceeding amount of the contribution of the profit distribution. So our expectation for amounts will, of course, share when we're closer. Now we're trying to work on bringing the most possible. It wasn't even on your radar for '24, right? Due to the performance in the last quarter, we decided to open up this opportunity, right? So Othon is doing very well. And between the third and fourth quarter, we'll be launching. Alan?

Then we have another question from Herman at Bradesco. He's asking about the level of leverage that we have and the net debt to EBITDA and when it's going to happen until you actually get the cash generation phase. Well, we also have the question from Mari Angela passed through from Itau about the gross margin that you imagine to be stabilized when you consider the dynamic of the mix between condominiums and developments.