Even Construtora e Incorporadora SA

BOVESPA:EVEN3

Earnings Call Transcript

[Operator]

Good afternoon and thank you for holding. Welcome to Even's earnings call concerning the results of the first quarter of 2025. I would like to point out that for those who need simultaneous translation, the tool is available on the platform. To use it, you have click on the button, interpretation, the globe icon at the bottom of the screen and choose your preferred language, Portuguese or English.

For those who will listen to this teleconference in English, there is an option available to mute the original audio in Portuguese, by clicking on the mute original audio button. We'd like inform you that this event is being recorded and will be made available on the company's Investor Relations website, where the complete material concerning this earnings call will be available. [Operator Instructions].

We would like to clarify that any statements that might be made during this teleconference regarding Even's business prospects, as well as its operating and financial projections and goals are based on the beliefs and assumptions held by the company's management and on information currently available. Forward-looking considerations are not a guarantee of performance and involve risks, uncertainties and assumptions since they refer to future events and therefore, depend on circumstances that may or may not happen. Investors should understand that general economic conditions, industry conditions and other operating factors may affect Even's future outcomes and may lead to results that materially differ from those expressed in these future considerations.

Here with us today are the Chief Executives of the company; Mr. Marcio Moraes, CEO; Mr. Marcelo Dzik, CFO; Mr. Tiago Krall, Strategic Planning and Investor Relations Director. And I will now give the floor to Mr. Marcelo Dzik, Even's CFO.

[Marcelo Dzik, executive]

Good morning, everyone. It is with great pleasure that we are here to present Even's results concerning the first quarter of 2025. Let us begin with the main indicators for the quarter, where we would like to highlight cash generation, gross profit and net income. The operating cash generation was BRL 166 million in the quarter, same level as in previous quarters, amounting to close to BRL 0.5 billion in the last 9 months. Our capital structure remains solid with BRL 867 million in cash by the end of the quarter, representing a leverage of 11.2% of shareholders' equity.

We reported a gross profit of BRL 79 million with an adjusted gross margin of 29.4%, same level as previous quarters. The REF and inventory margins remain at higher levels, reinforcing the trend of increasing gross margins for the next quarters. We reported BRL 81 million of comprehensive net income in the period, which takes into consideration the sales of equity that were recognized direct on the shareholders' equity. The result is 53% higher when compared with the first quarter of '24 and corresponds to an ROE of 12.6% in the last 12 months.

As already mentioned, out of the BRL 81 million in comprehensive net income in the period, BRL 27 million results from sales of equity in SPEs, whose impact is felt directly on the shareholders' equity without affecting the income statement, due to the fact that the company remains the controlling interest in these projects even after selling part of its equity in them. Considering these operations generate results that can effectively be attributed to shareholders and have a cash effect, we deem it appropriate to present them together in the net income. In the graph, we demonstrate the reconciliation with these amounts in the quarter.

In the next slide, we present the track record of the net income for Sao Paulo's operation in the last 9 months -- 9 quarters. We can observe the consistent profit generation quarter-over-quarter and the increase in profitability levels, fostered mainly by the gradual recovery of margins as well as by gains of efficiency in operations and capital allocation.

Now sales performance. The volume of net sales in the quarter was BRL 246 million with consolidated SoS of 9%. Concerning cancellations, the quarter ended with BRL 68 million, same level as previous quarters in spite of a significant increase in the volume of deliveries. It's worth noting that we still have a healthy receivables portfolio, more and more increased concentration in high-end projects.

Moving on to the next slide, we delivered the second phase of Monumento San Paulo, accounting for a PSV of BRL 322 million in 454 units. We are in a relevant delivery cycle estimated at BRL 1.8 billion in the next 12 months. Here, you can see some photos that attest to the high execution standards of the company.

We ended the year with BRL 2.7 billion in inventory, mainly in the upper income and luxury segments with highly liquid products in excellent locations. Our inventory is fairly new and the inventory of finished units corresponds to only 11% of total volume and around 70% of the inventory under construction will be delivered only in 2027 and later. The projects to be delivered this year were 84% sold as of March 31, as can be seen in the graph on the lower right-hand corner of this slide. Of those that will be delivered next year, 74% are sold.

Our land bank comprises 21 lots or phases for a total PSV of BRL 3.9 billion, located mostly in prime neighborhoods in the south and west sides of Sao Paulo City and concentrated in segments ranging from middle income to luxury.

In the next slide, as a relevant part of our strategy, we present our solid capital structure. We ended the quarter with a significant cash position of BRL 867 million, and our net debt totaled BRL 246 million, which corresponds to 11% of the company's equity, 9% reduction when compared with the previous quarter. In this quarter, we generated BRL 166 million of operating cash, resulting in approximately BRL 0.5 billion in the last 9 months.

Now I'd like to give the floor to Marcio Moraes, Even's CEO.

[Marcio Moraes, executive]

Good morning, everyone. Let me begin by thank you all, analysts, investors and others for attending our earnings call for the first quarter of '25. In the last 2 years, we have achieved consistent results when it comes to growing profitability, cash generation and dividend payouts. This track record is the result of our capacity to structure good deals, develop products with high added value and allocate capital in an efficient way.

Since 2022, we have prioritized the purchase of land in cash, initially allocating more of our own capital in the business and recycling in the appropriate moment, bringing in partners and investors to the business at a later more advanced stage. As a result of these partnerships, we have accrued approximately BRL 70 million from new partners in the last 2 quarters.

In the last few months, we have noticed a significant change in the credit landscape characterized by more restrictive credit lines with higher costs. Our cash position of almost BRL 900 million, our capital structure with low leverage and our strategic positioning in the high-end segment has allowed us to safely launch and build new projects in addition to giving us a competitive advantage in the closing of new deals in a more restrictive environment when it comes to access to capital.

We are preparing very special launches for future quarters, among which is Casa Madalena in the neighborhood of Vila Madalena, a high-end apartments of 355 square meters in an imposing 44 floor tower. Another very important launch is under preparation of Sao Paulo Bay in Rio Park neighborhood, located 15 minutes away from Faria Lima Avenue with more than BRL 1 billion of PSV Even's share. This project has several unique selling points besides granting access to Sao Paulo [ Circlub ].

With regards to RFM, our partnership is beginning to yield results in 2025. We're going to launch Melo Alves, a project in the heart of Jardins neighborhood, 500 square meter luxury apartments located between Oscar Freire and Estados Unidos streets. A location needs no introduction. We are confident in future opportunities and prepared to seize every moment the market makes. With a solid pipeline of projects, we have been making careful decisions on a launch-by-launch basis.

I would like to thank you for attending the call. We can proceed to Q&A.

[Operator]

[Operator Instructions] Let us now proceed to our first question from Matheus from Santander.

[Matheus de Carvalho Meloni, analyst]

I have 2 questions. First, regarding the SPEs. I would like to see how you see this -- if there is room in the future to make more sales. And the next question regarding delivery, the volume of deliveries for the next 12 months. I would like to understand how this tops with cash generation along the year and how you see the transfers in this year?

[Marcelo Dzik, executive]

Matheus, thank you for the question. Dzik here. First, talking about the SPEs, we saw last year in this first quarter that is part of our strategy to keep our volume at around BRL 2 billion a year. We realized more or less this in the next 2 years. Our capacity for generating business is big and bringing partners for our deals, our business is the way we see our -- is the way to improve profit and decrease our operating risk. So it's been part of our strategy in the last years. And looking forward, we also see this possibility of generating big deals and in an opportunity moment to bring partners to increase our profitability and decrease risk.

Regarding your second question, deliveries for the next 12 months and cash, we are in a cycle of deliveries that is relevant in these 12 months. We have seen a significant generation of BRL 166 million. So BRL 500 million, if you consider the last 3 quarters, and we see a high volume of delivery in the next 12 months. So it's a very positive cycle of cash generation and the effective generation for 2025 will depend mainly on market issues depending on the allocation we make, how we reinvest part of this money in new land or new businesses. So we expect a very strong cash generation.

Regarding transfers, it's a good question. We have been going through this. The credit market is more restrictive. So transfers have been happening according to schedule, but with more restrictions when we are dealing with the banks. The interest rates are high. So this has been happening for the last 2, 3 years. So we have an interest rate on average 9% and then 10% and now even above 12%, with lower LTVs with more difficult processes with banks, but the transfers are happening. And we're going to talk about cancellations a little bit. We are in line with previous quarters. So at the end, it's been working, but in a more restrictive and difficult environment.

[Operator]

Our next question from Herman Lee from Bradesco BBI.

[Herman J. Lee, analyst]

I have 2 questions. The first one is how you see sales at the end with the final consumer, the client. We see a lot of numbers and SoS. We see some deterioration in these numbers. Maybe this is related to the high-income client feeling the squeeze. How do you feel this in your conversations with brokers? And if we can expect a growth of this in the second quarter? And second, if you could talk about cancellation, the increase that happened.

[Marcelo Dzik, executive]

Herman, thank you for the question. Dzik here. Let me talk about sales a little bit, and Marcio will complement my answer. We see a market at the end of the year and beginning of this year that the quarter was very similar to the previous quarters. We have seen some change in the atmosphere in -- we saw in April, a change in the atmosphere. We are beginning a colder season that people are working at the end, but we have not seen a change in interest in the number of visits to the sales stands. Even prices, every issue of margins we had in the quarter was more related to interest or a lower -- higher interest rate than actually the end price. So we see our products -- high-end products and knowing that we have -- we are preparing it with interest and we are having visits. The market is a little colder in April, but not structurally different.

[Marcio Moraes, executive]

And just to complement, Marcio here. When you talk to the clients at the end in the sales stand in the model apartment, we haven't seen a decrease in interest. There is a delay because of the high interest rates. But usually, this client already has the capital invested. So he's waiting -- he's waiting -- to wait to get more return on this investment. So we do not believe in a loss of interest. We have seen a delay in the decision to purchase in April, but this is being reversed now in May, and we're going to go back to the normal levels.

And the last point here, in the very, very high end, we have seen the instability in the United States. The tariffs makes everyone a little more anxious, but it's not a structural issue for our market here. But we have seen in these last markets, people have been a little more anxious because of the American instability. But regarding cancellation, we have mentioned it briefly, but there has been no change. We have been working with units that have very high added value.

So from one month to another, from one deal to another, we may have some changes. But our average in the last quarters, we have seen a reasonable stability. And when you look at our portfolio, it's at a very healthy level. We haven't seen any real change here.

[Operator]

Our next question is from [ Juan Argito ] from XP.

[Unknown Analyst]

I have 2 questions here. The first one regarding this -- the issue of buying land, if you have more purchase to make of land this year? And how you see this scenario of replacing land or maybe a scenario in which you see some opportunity to actually increase the purchase of new land and how you can see this regarding payments. We can see some payments have been done in cash and how you see this and how this links to the capital allocation have been made?

And the second question is, just I would like to understand the issue -- of your -- the issue regarding your provisions for contingencies that this quarter was made. And if we can see the recognition of this in the next quarters.

[Marcio Moraes, executive]

Juan. Marcio here. let me start by buying land purchase. We are cautious when buying land. But on the other hand, we see competition for this land because of the difficulty in accessing capital. So the opportunities are starting to come up with a little more discount. So I think it's a good moment to buy. The financial aspect is bad, but the moment to purchase is good. But we have been operating very cautiously to see very carefully which products we can buy in order to launch in 2 or 3 years. So we keep this very close to us, and we participate in all these purchases.

Regarding payment, what's happening is land that used to be higher priced. The owner of this land see that if he gets paid in advance, he can invest this money. So if he reduces the price. So we see a good environment for buying land, but we are very cautious for the next 2 years.

[Marcelo Dzik, executive]

Juan. Dzik here. Complementing the company's strategy since 2022 of purchasing land in cash. We have changed a little our previous strategy of leveraging a little more. Of course, it depends on the product, on the volume of the project. We look for partners that can help us in doing a good structure of leverage. Regarding contingencies, we did have some effects in this quarter -- in the accumulated -- the positive accumulated in the year, small reversals, nothing very significant. So it's a work we have been doing and continue doing to minimize these effects for the next quarters, but it's nothing that we can forecast a changing scenario here for the company.

[Unknown Analyst]

If you allow me one small figure. Regarding buying land in cash, we see that the company has been generating more cash. I'd like to see how you balance this. If there is room to leverage a little bit more to try to buy -- to put more money on land or that's not the case?

[Marcio Moraes, executive]

Juan. Marcio here. Obviously, we have a comfortable cash position, but our CFO does not release our cash so easily, so we can buy land. We have been holding on to this. I think it's a strength we have in the negotiations, but we are very cautious. But yes, we are purchasing. I don't know if wants to complement. Yes, just ending this summarize. When we see some advantage, we put cash in the deal. But otherwise, we wait for the right moment to do some leverage to find the right partners. So it's a moment to be cautious. The market is not very stable, but everyone is negotiating, everyone is dealing. So we will -- we may do this year.

[Operator]

Next question is from Juliana Paulino from Itau BBA.

Juliana, I see your microphone is open but we cannot hear you.

[Technical Difficulty]

I believe we have some technical problems on Juliana's side. [Operator Instructions].

[Unknown Executive]

We received Juliana's question by writing -- in writing. The first question is, I would like to have a few more details regarding the launches forecast for this year.

[Marcio Moraes, executive]

Juliana, I think you can hear us. Marcio here. We have 2 launches in the pipeline for this year. One is Casa Madalena in Vila Madalena neighborhood. These are the 2 projects in the legislation that allows us for a higher floor. So it has 44 floors. And the second one is Sao Paulo Bay in Rio Park neighborhood, which is a big launch that will happen this year. This in relation to -- in relation to RFM, we will have some launches by the end of the year, Melo Alves, which is a high-end project. over 500 square meters. And these are the 3 launches that are in the pipeline for the next months. We are very excited. I think we see the products being accepted very well, and it will happen in the next months.

[Unknown Executive]

We also have a question from [indiscernible]. What is the strategy regarding the projects launched in 2022, where the sales percentage is low?

[Marcelo Dzik, executive]

Thank you for the question, Dzik here. The percentage of sales, the curve of sales for these projects, our inventory is very healthy and balanced. We have finished inventory at around 11%. And as we see the deliveries for this year are selling very well and even next years are selling very well. But the strategy of projects, we are working on the high end, and we are working very carefully to get the most value out of this project. So we have a strategy that is focused on the quality of the project and the quality of the place of how we serve the customer. The sales stands are very well decorated a big apartment, which is not usual in the market. We -- a few years ago, we had the 3 or 4 biggest model apartments in the market. So we try to charm the client and have -- and close the deal, but we pay close attention to our inventory.

Marcio talked about the next launches, but we have been very cautious, and we are cautious. And when we see our inventory, we are very happy with it. It's in line with our strategy. We have very little finished inventory, mainly concentrated in high-end segment. And when we break it down by year of launch of sales, we see projects that have sold very well and also for next year. And we have been working very carefully, so we can have a speed of sales that is appropriate, but also to get the most value out of these projects.

[Operator]

The Q&A session is now concluded. We'd like now to give the floor back to the company for their final remarks.

[Marcio Moraes, executive]

Thank you for attending this call. Analysts, investors and others will see you on the next call in the second -- for the second quarter. Thank you very much.

[Operator]

Even's earnings call concerning the results of the first quarter of 2025 is now concluded. The Investor Relations department is at your disposal to answer any further questions you may have. Thank you all for the attendees. We wish you a nice day.