Good morning, everybody. Welcome to the earnings release, Direcional Engenharia, regarding the third quarter 2025. Welcome investors, market analysts, and all participants in this video conference. I am André Damião, IR Engenharia. Together with me is Ricardo Gontijo, CEO, and Paulo Sousa, CFO, and our presentation is destined to analysts and investors. We are going to show you the main financial highlights of the third quarter, and then we open for questions and answers. Those of you that want to pose your questions, use the raise your hand tool in Zoom so we can moderate them, and we will keep the questions in order. Also, we are listening to the YouTube channel, Engenharia. The link for the transmission is in our IR site and also in our homepage, we have the link for the download of the material we are going to show you in this event.
We are recording this presentation, and as always, we can give it to you in IR site in the results center. All material can be accessed in our IR site. To begin here, the initial highlights, I will give the floor to Ricardo, our CEO.
Thank you, André. Good morning, everybody. It is a pleasure to be talking to you in this earnings release call with regards to the third quarter 2025. In our vision, we are delivering, once again, very consistent results following a continuous improvement sequence with regards to our operations and efficiency. In the third quarter, we had the greatest level of launches in the history of the company. When we see the fair, it was the best quarter in terms of net sales, greatest revenue, greatest net profit, best ROI.
In fact, it is a quarter that makes us very happy with what we have been able to deliver. In this long cycle, quarter after quarter, we see our strategy materializing into numbers. Also, I would like to use the moment to highlight the gross margin we delivered. For the first time, it was over 40%. When adjusted by rates, when we consider our SPEs on our projects, the gross margin exceeded 42%. Here we are seeing the benefits with negotiation capacity that is even greater with our suppliers. Here we have a construction process where productivity of our labor is incremented, and this has allowed us, in a moment of a lack of labor and where most cost increments come from labor, because we have a huge productivity in this process we adopted since 2009.
For more than 15 years, we have been able to maintain gains in terms of costs, capacity and efficiency costs. I would like to highlight this gross margin we delivered this quarter. When we considered 12 months, we had a gain of more than 3 percentage points of gross margin in a period of almost one year, which is very relevant in our business. Another very important and positive indicator is our REF margin. The results of future also continues growing, and in this quarter, it also reached the record over 45%, 45.2%. It was a 0.3 percentage points growth compared to what we had in the second quarter this year. Also today, we have an inventory of BRL 3.7 billion in terms of REF margin.
16% gross margin in one quarter demonstrates that sales have been done with margins that were much greater than the previous margins. These are the ones that have the works go to future revenue and the margins have been very healthy, which is an indicator for what we can expect from future margins in a short period of time, considering the quarters that are to come. In this third quarter, we also delivered a net profit of BRL 230 million, 43% growth when compared to the third quarter last year. The ROE, as I said, was a record 35% when we annualized the results of this quarter. When we look at the chart to the right, we can see that in three years we doubled the net margin. It went from 8.7% and now it is 17.6%, slightly more than double.
This clearly demonstrates that the scale we have been able to gain in time has translated in the gains of gross margin and benefits of operational leverage. We have the reduction of expenses, which allowed us to have a growth of net margin, which was over the gross margin. This makes clear that the growth has given us greatest competitiveness and more benefits. As long as there is demand and we continue constructing commercialized units, growth generates value and makes sense. We've been able to show that quarter after quarter, this growth has been sustainable, we are competitive, and we have been able to benefit from this. Well, another important item to highlight, because the third quarter, there was already a partial sale of the Riva subsidiary operations, we had a growth in the line of minority industry.
If we consider this minority industry minority, we reached BRL 280 million in the quarter. Since we consolidated the total revenue and the minority stake of these partners, and to see the efficiency of the real efficient, it makes sense to add the profit corresponding to the stake of this minority to the profit of Direcional, which reached BRL 258 million, allowing our net margin, considering the stake of this minority, over 22.3% this quarter. It demonstrates what I wanted to say with regards to the benefits of this greater scale that we have operated within and has been very positive for the company. Also, I would like to add that in October, the first month of the fourth quarter, the total sale of what had been agreed upon at the end of last year with Riva was concluded. They acquired an additional stake.
They had the right to acquire it. 15% of the stake of the company, Direcional now continues with 85%. Based on this 15%, we received in the second quarter until now, October, BRL 416 million. It's important to remember that we still have things to do. Lastly, also here, with regards to our highlights, I'd like to stress the robust cash generation we had this year in the nine first month, almost BRL 500 million. Third quarter, cash generation, BRL 113 million. Even after paying BRL 350 million in dividends in the beginning of July, in the beginning of the third quarter, we closed the quarter with extremely low leverage, reaching 3.8% in terms of net debt over the net equity. Slightly over BRL 100 million.
Very deleveraged operation, which is extremely positive in this moment where capital cost is high, where we need to work in a very conservative way. We have maintained our conservatism, and also in a moment where we have this discussion on eventual taxes of income parting from next year and dividends that would be taxed. Those shareholders that receive more than BRL 50,000 a year, BRL 600,000 a year. This low leverage gives us a very flexible position to define what to do with regards to this when we consider this period we have to the end of the year. Now to page 5. In terms of launches, we launched BRL 2 billion, 152 million. We grew 54% compared to last year. The first nine months of this year, our launches reached almost BRL 5 billion, growing 33% in relation to the first nine months last year.
It's interesting to analyze here to the right, that from 2020 to 2025, we multiplied this company almost 4x , 3.9 x in total amount of launches. Now going to page 6 with regards to sales. In the third quarter, net sales reached BRL 1 . 642 billion. It's important to stress that the share of Direcional grew in an important way this quarter. When we look at the Direcional share, it was record in terms of sales. Although the sales in the third quarter compared to the second had a slight reduction. But when we look at the Direcional share, the growth was 11% in the third quarter compared to the second, and 16% when we compared the third quarter this year to third quarter last year.
When we consolidate the first nine months of 2025, sales were over BRL 4. 600 billion, almost BRL 4 . 650 billion. Here growth 5%. When we look at the Direcional shares, the growth was 9.1% when comparing the first nine months of this year compared to the first nine months in 2024. Now I'm going to give the floor to Paulo for the main financial highlights, and I will be at your disposal then for questions and answer afterwards.
Thank you, Ricardo, for the presentation. To continue and with financial results, and beginning here with revenue, and aligned with what Ricardo said and also the works ongoing in the third quarter, our revenue grew 9% compared to the previous quarter. Almost BRL 1.2 billion, going from 27% compared to the third quarter 2024.
With this, we accumulated 29% growth in the year, reaching BRL 3 billion in revenue compared to BRL 2.400 billion last year. Here to the right, here in this red bar here, our accounting revenue, SPEs that we do not consolidate in the results. We see in nine months, we reach BRL 4 billion. The point to observe here in the fourth. When we compare to the number of launches Ricardo just mentioned, we launched almost BRL 5 billion in the period, a little more than BRL 5 billion. This indicates that we still have a catch-up to make in terms with the launches, almost 25% catch-up. We still have a growth journey in revenue and results also. With this, try to go after dilutions in the next quarters.
To continue, now going to gross margin, we closed the quarter with a 41.1% gross margin, and it was very complicated because of market, past price transfers and because of the scenarios. Also we had the macro scenario helping with inflation and everything relative controlled. We grew 41.8% in the year. We closed the year with 41.8%, almost 4 percentage points of margin year-after-year. To the right, we closed the third quarter with almost BRL 4 billion in revenue, almost the whole month that we had the REF margin. It is important that the growth of REF margin means that we are selling products that are entering, and they are greater than what is leaving. Here it is a solid gross margin. In the short term, they will remain close to the levels we are delivering now.
We see a scaling quarter-after-quarter, a growth of the REF margin still with growth this quarter. This is a very positive scenario to continue. Now going to the net profit. Our net profit, the adjusted for non-recurring effects, the accounting was BRL 230 million and the result is BRL 205 million. We are removing BRL 25 million of non-recurrent results in this second quarter. Here, in order to show you in numbers what Ricardo said, we have the effect of the minority stake in our business. This red bar is the net impact of the results of SPEs that we have here with partners. Here we are with removing the minority stake and the equity income here from our results. Here we see an important growth, less dilution of this line.
In the upper part of the chart where we have the margin, although the accounting net margin, which is the blue line, was 600 compared to the last quarter of 5 basis points. When we look at the red margin, the gross, the net margin, discounting the minority effect, this is the profit of the business. We are removing the effect of the stake of our project. Our net profit grew a lot. It went from 17.7% to 20.9% gain of gross margin, and in the nine months, 17.1% to 19.9%. This is the net margin of the business, and we should look at our operations here, a net margin of almost 20% in nine months and 21% when I look at the semester. It is a very expressive result. To the right, we have the quarterly evolution.
The margin goes from 16.5% in 2024, reaching 29% in the third quarter 2025. The brown line is the ROE. Here, considering our profit over our net equity, we reached 35.2% in returns, a strong scale in these last quarters. The first quarter of 2024 was close to 25%, so it was almost 10 percentage points. It is important to say that everything is deleveraged, and this return came from results, not leverage of the balance sheet. This is an important point and a reflex of the work we have been doing here. Now going to the next page, the last slide here before we go to Q&A. This is capital structure. Here, all the discussion here, this is a quarter where we worked to reinforce our balance.
We maintained the company deleverage, very low, 3.8% when we see the first chart to the left, and we worked in these last months to increase the cash volume. Here in the middle chart, we see one year ago, our cash was BRL 1.5 billion, and we closed the cash with almost BRL 2.5 billion now in the third quarter. Also we are working here trying to stretch our debt. It has the longest term in the sector, 67 months. The cash reinforcement, the capturing from the market, a long debt, and with this, we have been able to reinforce even more our capital structure. A lot of cash, long debt, everything deleveraged, gives us enormous comfort to be able to continue with our business without the balance being something that we have to concern ourselves with. It is the maintenance of our profile.
Those of you that are with us many years, you can see that we have always worked in this way, and there is no hint that we are going to change this. Now I will go back to André for the Q&A session, and we are available for your answers.
Thank you, Paulo, Ricardo, for the presentation. We will begin now with our Q&A. Now, Fanny, Santander.
Hello, everybody. Congratulations for the results. I have a question. What draws my attention is the improvement you presented in gross margin in this third quarter, which already came from a very strong base. You had expanded the margin, and now you presented a very expressive margin.
My question here, there are some government measures that might help you increase the margin, for example, the change of the subsidy curve that will help you in a state where you have important representation of sales in the Amazonas. I want to understand your mindset with regards to the balance between gross margin and VSO, net sales bill. Would it make sense to waive, to forego expanding margin because we have a positive scenario for costs in order to try to speed up this net sales? That was my question. How are you with this balance between net sales and margin?
Fanny, I am going to tell you. Well, in the first. To tell you about the changes approved the day before yesterday. These are very positive changes, and I think here, these changes, these adjustments that are very consistent, always considering the sustainability of the FGTS, is very positive.
Clearly, the north region in this moment had a strong focus where subsidy curves not only went towards the right, also increasing average subsidy. In the north region, there was an increment of BRL 10,000. No doubt, we have important operations in Manaus, and certainly we have a volume of families included in the market where we will be able to meet their needs. When you see our REF margin growing, this is an important indicator for future growth margin. We always say this moment, our priority is turnover, sales speed, net sales. We had an important increment of launches this quarter.
This is in the quarter where launches grow, you have a smaller period, a shorter period to sell recent launches because they can occur during the quarter, not exactly in the first month. Launches that happen in the first month of the quarter has a shorter period to be sold. There is an impact of the VSO here. Here our priority is sales speed to have a greater amount of families buying and not margin gain. The main point here, and where we believe we will be able to extract the best value, is in the working capital.
Today, can you tell us the areas where you would be able to work to improve the net sales speed?
I think, Fanny, there are some places where we see opportunities here. Once we gain on scale in these areas, as well as having a greater negotiation capacity with suppliers, which translate into more competitive construction costs and the gross margin, we also notice we see net sales there. We have a well-known brand. We have more products to offer to the client. We have a greater conversion into sales here. The areas where we have less mature operations, certainly there are net sales speed gains opportunities, like in the Northeast, Recife, Salvador. This is very clear, and I believe that in Rio, there is an important work to be done here where we see net sales speed gains in this moment. I would mention these three areas where we see the gains in net sales speed.
This is not from one day to the other, specifically in the Northeast, where we have a long path, a long journey before us. Products being offered simultaneously for potential buyers. This happens gradually. In Rio, which is an operation where we have been working more time in, we have perspective of gain in shorter period when we do the right work.
Thank you very much. Congratulations for your results.
Thank you, Fanny.
Thank you Fanny for your question. Next one, André Mazini, Citi.
Good morning, Ricardo, Paulo, André, thank you for the call. My first question, if you could tell us about the transactions results. Do you expect to have more events of this type in terms of the minority interest?
The disclosure of reason, we see that the ROE of Riva, when we analyze the grid, is 71%, which is very high and greater than the consolidated of Direcional now. What are the main reasons for this being greater in Riva? Would it be the purchase of lands or working capital? If we can see the demonstrations of Riva, can it be independent than Direcional maintaining this ROE and net margin? If you would separate things, would the demonstration results grow here?
Paulo, will you tell us about the non-recurrent event, new sales in terms of scale? Then I will add to another point here.
Mazini. This is a non-recurring effect, but this is a sale of shares that we do of SPEs, the corporate. This happens with some interest. These are SPEs where we have capital invested, and after approval and feasibility of project approved, we try to have an investor that has a lower capital cost than us to carry this invested capital.
We continue capturing results from the SPE, but at a lower scale, and we go together with this investor. We carry the capital. The result is we do a DCF of the result. We capture an important part of this result and have positive result, and we classify this as non-recurring. In the pipeline, obviously, there are opportunities and possibilities. We here always work with this vision. For example, if we have a good business to do, we will do, and it might continue happening. I wouldn't have this as something that is fixed.
With regards to Riva, tell us about the ROE.
We have the information, and our intention is to open some story, right? We should have this in our eyesight. We are preparing this. I think those of you that want to consider Riva separately, we will give you information for this. Riva has been able to operate with greater efficiency. The level 4 has grown, and a fast net sales speed has to do what Fanny asked, the net sales speed versus margin. Riva is in the best of both scenarios, high gross margin and high net sales speed. Riva was over 27% in the last quarter. We have this benefit, and also we have the benefit of the balance of Direcional helping generating efficiency for the balance of Riva. Of course, it's in a growth cycle. When there is expressive growth, the return is high. You have less portfolio.
The return at the beginning of the project is always greater than the end, but this adjustment is small. Most of this return comes from the efficiency, high margin, high net sales speed. To add to this, no doubt, the fact that we have works execution and engineering being done together, Riva Engenharia, Direcional gives a synergy. It is very positive to have a works execution structure of Direcional and the support for this execution. Projects, supplies, safety, where Direcional is doing these Riva works. This is positive for the company with greater scale, with greater negotiation capacity, greater gains. Also, it's important to remember the first two years, what Direcional demands from Riva rates is greater. We have two years of Riva with this benefit. But this is it. Riva operations are very solid.
There are benefits in the level 4 products, partly launched and the other part in the end phase of approval. Here we had the possibility of using Direcional balances. When we had this, it has operated with a fantastic ROE, 75% of this business. No doubt we have generated value to our shareholders in the operation of this subsidiary that has performed really well.
Perfect. Thank you.
André, thank you. Next question. Carla Graça, UBS. You have the floor, Carla.
Good morning, everybody. Thank you for the opportunity of asking a question. I have two here. The first one about the level 4, you just said that the Riva results have been grown because of this.
Could you tell us about how you see the absorption of level 4, the stake of this level in the current mix, how you see space to expand this in the next quarters? Second question, cash generation. If we adjust cash burn from SPEs, you end up burning cash in the quarter. Part of this comes from that change from cash, some kind of delay in transfers, right? I would like to understand how you understand cash burn in the next quarters, specifically for 2026. Is there going to be a greater convergence with net profit, or do we have adjustments from here on?
Carla, I will start with your first part of the question. Level 4, no doubt, for us, has had a large representativeness. Riva, when it was created in 2020, it used to work, operate out of Minha Casa, Minha Vida.
In 2023, with an increase of the cap, which went from BRL 264,000 to BRL 250,000, part of the Riva products began to be eligible for the program, more than 30%. Now with the increase of BRL 350,000 to BRL 500,000, most Riva products have become eligible for level 4, as long as the buying family is below BRL 12,000. Of course, in this moment of a greater funding scarcity because of higher interest rates out of the Minha Casa, Minha Vida program, we have aimed to have products in the Riva segment that have a ticket below BRL 500,000 so that we can always offer to the potential buyer level 4 conditions of the program, which are very interesting, not because of the lower interest rates, but because of the amortization system.
We have tried to have most products eligible for the program, and this makes an important difference in our net sales speed. I believe that if we continue having this strong demand, as we have noticed, it is natural for us to continue offering products considering the future. I think our priority is to be constructing sold priorities. We in no way want to build inventory where capital cost is high. We always have stressed that our priority is sales speed. Here, as long as there is a high absorption of this kind of product, we are going to try to prioritize launches of this product so that this growth can happen in a solid and healthy way. Let us see the behavior of demand, the conditions of the program, how will they reach, so that we have greater visibility. The expectation is positive for level 4.
Cash burn. We had operational cash generation, Carla. I do not know the calculation of the cash burn, but we always consider every receipt from previous portfolios. We also discount everything we had in terms of cash generation from the sale of assets, which is the stake of future generation, but the market discounts. We had a cash generation of BRL 40 million this quarter. Obviously, the change in the way of payment of cash and also in keeping with what the banks in the market do, which means just pay the amount corresponding to the amount financed by the customer after it went from the registry office. Before they would begin paying from contract. It would become unlocked after the registry.
But now with the payments only after the registry office during this transition period until we wait for this stabilization, there is being a cash burn, and in our case, in Direcional Engenharia, BRL 150 million. It is part of the process. It is clear. Obviously, there is an impact, but I think no way this has jeopardized the operations.
With regards to a recurrent cash burn and how we see cash generation compared to the profit, could you comment upon this too? Thank you for the answer.
Well, this is what I wanted to say. Our calculations here, when we move non-recurrent effects and when we look at the cash generation, the cash effect last quarter was close to 30, this almost 50. So I have talked about this. Our business is quarter after quarter. We have seen cash oscillations, but it is positive even month after month.
Sometimes it burns more, other months it generates more. So there is some volatility, but it is always very positive, and that is the trend, right? So if we can use this strategy mentioned by Ricardo, focusing on net sales and working capital, once you do this, things increase. Even in a moment of growth, it is probable for us to grow here. Lastly, you mentioned about transfers. I do not know if you were referring to the programs of state. Yes, we have an impact in the north region, the Midwest, and also in the northeast, but we do not report this as non-operational. It belongs to our business. There are always challenges for us to solve here. Programs are fantastic and we want them to continue. We believe that this snow in the States, it generates a value, even if it takes longer.
We sell fast and transfer takes longer, but we reduce the pro soluto. When we have fiscal benefits, so it might take longer and there might be an impact in cash generation in the year. If we put this in numbers, it is not small, it is relevant, but we are not considering this as non-recurrent. Yes, we certainly had an impact, not only this quarter, but this year, almost this whole year.
This business improved and worsened, improved and worsened during the year. The net here, we should have generated more cash if the program was transferring the same speed as normal, but certainly we want to continue in the program.
Thank you very much. It is clear.
Thank you, Carla. Just a correction. Carla is from Bank of America, not UBS. Next question, Pedro Lobato, Bradesco.
Thank you, André. Thank you for the time. I have two questions here, too.
The first one, Direcional now presented a concentration of launches in the end of the quarter. They had slight problems with the net sales, so I want to see the evolution of these sales in October, beginning of November. The second is the dividends perspective from here to the end of the year and also an idea for 2026. Do you imagine some kind of level of dividends for next year, too? Thank you.
Well, Pedro, with regards to sales, we have noticed a program that has performed well. We still have a solid demand. This was a quarter that ends up being shorter because of the Christmas period in December and New Year's. So in fact, we have to work to have most products launched by the end of November.
We have noticed a positive performance and always the question point here is the impact of the period of festivities in this reduction of the time we have to commercialize the unit. Starting from 15th, 20 December, we noticed the market really cooling down. Everything is performing as usual, but the point here is to see the end of the quarter. With regards to dividends, Pedro, we have had some discussions. We had a law that was approved by Senate, where there is going to be a taxation of the sale of people going and in practice, people that have a strong level of dividends. Here in the process of approval of this law, guarantee was given that dividends declared in 2025 would not be taxed. This would happen from 2026.
Because we have a private reserve that is significant, I believe when we believe what is fair, what is fair here is that this reserve not be taxed or be very little taxed. We see what we are going to do here in order to have our shareholder benefiting from this that was given with regards to the dividends of 2025. We are analyzing things now. We want to be conservative here with regards to capital structure. But somehow we believe we are prepared for this reality when we consider our cash position and low leverage below the optimum level in terms of what we believe is more optimized from the point of view of leverage. Here we have a certain flexibility with this decision.
There are some discussions occurring, right?
The new law of the corporations, a new bill being approved, but we are going to try to minimize the impact for our shareholders with regards to the profit reserves we have. We believe by 2025, the taxes will be exempt, right? But we continue being conservative, and this decision should be taken by the end of the exercise, which is the period we have for this.
Thank you very much, Ricardo.
Thank you very much, Pedro. Question, Gustavo Cambauva, BTG Pactual.
Hello, everybody. I want to ask a question here with regards to growth. You are going to live another year here at 2026 with good growth of launches and sales. My question, Ricardo has always mentioned that the challenges of engineering the sales team, but when we look at your balance, everything seems to be very well equalized, right?
How do you see the possibility of growing more if there is a level that you are already aiming for 2026?
Thank you. Good morning. Cambauva, thank you for your question. We have noticed that our growth has given us competitiveness with gains of gross margin, greatest operational leverage. We have become more competitive, more efficient. I think it is important to say that we have been able to grow, maintaining our operations under control and even with a lack of labor that we have in the country because of low unemployment rates. This is positive. The buyer of our project is a person that has to have income. It is positive when we look at the market we serve and the main point of attention in this growth prova is available of qualified and trained labor to main productivity levels that we have in our business.
Also we have noticed that our growth has been very healthy and sustainable. From point of view of land banks, we have a huge land bank and with sales speed, that is, we have sales there that is interesting that allows us to get this with the least demand for working capital. That is why it is important to have a high net sales pace between launch and beginnings of works, so that works can begin with a certain amount of units already sold where we minimize our cash exposure. Here I see that our execution is doing really well. Once again, growth is not our priority at this moment. Our priority is continuity, where we increment our ROE, where we continue growing, returning capital to our shareholders, where our book has the lowest growth, even when we see revenue and profit growing.
This is what has allowed our ROE to have the best performance quarter after quarter. If we have demand and net sales speed and keep delivering this growth with the least demand per working capital, we can continue growing gradually. But once again, it is not a priority. Priority is sales speed and depending of what we find in terms of demand. The comfort in terms of execution capacity, I would say, is greater than a year ago, Cambauva. I think this is the scenario.
Thank you very much. Have a very good day.
Thank you, Cambauva. [Ygor] from XP.
Hello, everybody. Congratulations for the results. I would like to explore the partnerships that you have with Amora. Can you give us an update? Do you have more granularity on the launches pipeline? Would you increase launches?
Would it be more, would it be greater launches than you would do anyway? How do you see Amora helping and where do you have space here? I want to know this evolution with this new. Also with regards to Riva. Riva, you said the dynamics was very good in terms of sales speed, and margin. When we think of this point here, does it make sense to Riva continue growing? Could Riva grow even more?
[Ygor], with regards to the partnership with Amora. Well, a disclaimer, we cannot begin any operations without the approval of CADE. We are in this process now. CADE, once it authorizes us, and this is what we have been waiting for. There is no movement. Nothing will happen before this approval. We are in this process now.
But once we have the approval by CADE, we are very optimistic with these operations. We have noticed in the Northeast, Minha Casa, Minha Vida has had a growth, has gained relevance this year. Adjustments were done before that increased affordability in the Northeast. Now, the day before yesterday, it was focused in the north region. We are very positive. We are very optimistic. Amora, the operation here, can bring us growth in relation to what we had imagined before, because business origination capacity in the Northeast by Amora is big. Everything that is going to happen, there is always a demand, right? Then we can redistribute our operations in Brazil. We can prioritize growth in a region or another. I do not want to give an perspective for the operation as a whole, right?
Because we can migrate launching from one region to the other, depending on the demand. We see positive perspectives for the Northeast. We are enthusiastic with Amora's relevance in the region. So Geração now, with the execution and the experience in Minha Casa, Minha Vida, Amora has huge capacity for origination in the region. It is known, access to land. I think here there is a very positive symbiosis for both companies. Let us wait for CADE, and then we will define how we are going to do and what happens with these perspectives from here on. They tend to be good for both companies. Riva. Yes, we have noticed very positive Riva performance. Once again, how is this defining our business? Well, here we have demand, and depending on what happens with demand, we can have a greater amount of launches. We can have more.
What I can say, until now, Riva has performed well. Sales speed has been good. Level 4 has been positive. This is why in this third quarter, you saw Riva having greater net sales than Geração and strong relevance in launches. We cannot say it will have the same relevance than the third quarter. Because of the size of the land banks, Riva has BRL 15 billion, Geração BRL 35 billion. So Riva is almost 30% of the land bank of the company as a whole. So it is natural that the large volume in Geração tends to be Riva. The fact that we always have the possibility to choose in what segment to work in is a huge flexibility for our operations, and this has made sense for Riva. From here on, we will always look for sales speed.
These adjustments done in the program increases the product attractiveness of the north region. There was a strong change in the subsidy curve, and this change is more relevant the lower the income. These adjustments allow the demands to change, and we have flexibility to operate from one to four, and we migrate part Riva, part Geração, according to what we perceive in terms of demand or sales speed. This is our priority. We cannot say one company is going to grow more than the other. It is demand that rules things here, right?
Thank you, Ricardo.
Thank you, [Ygor], for your question. Next one, [Rafael Rehder].
Good afternoon, everybody. Thank you for the question. Two points I would like to explore with you. First one, gross margin. The separation between Geração and Riva. What drew attention was the gross margin of Riva this quarter, over 43%.
I want to see with you if you consider this as a recurring level for the next quarters. Also, I want to understand if you see Riva operating with a gross margin above Geração. More than Geração the next quarter. Second point, I want to consider the sensitivity you see with cash generation and net sales speed. Do you have a level or some kind of idea, 1% of net sales speed margin, or how much it can contribute with cash generation in the company? Things you can detail here would be great.
Paulo.
So [Rafael], Riva gross margin versus Geração. In fact, Riva has a margin that is slightly over Geração. Greater, right? If we look at the previous quarters, we can see some other quarters, right? This is a common scenario somehow.
But it is difficult to say that this will happen, this level 4 will occur in a recurrent way, right? I want to say, I think it's a good scenario. Riva helped by level 4. If we look at Riva's REF margin is over. So in the short term, these levels should remain. But I think it's very difficult to just say yes. But another point with regards to cash generation versus the net sales speed. Well, no doubt it's net sales speed, as long as there is that transfer to the plant. Less cash exposure here, but I don't want to risk committing myself with these percentage points versus BRL billion, millions in the other.
And even because it depends on many variables. But no doubt, if we can have this strategy of increasing sales speed, things will be lighter and smoother, and less working capital in the operations. Ricardo, would you like to add to this?
I think that, yes. I think we have more or less BRL 5 billion in inventory. 1% of net sales in every quarter increases in growth. Our sales have been direct payable. So with less cash generation. The average should be close to 40%- 50%. So you can do some calculations here. But not everything is as simple. Things vary. You might have a period of transfers, higher period, lesser periods. Generally, a net sales speed is done in recent launches with less POCs. But this data is all public, right? So this is more or less. The impact is big, and the greatest value we can generate here is the net sales speed. So we're very focused here. In spite of this improvement happening gradually, it's not from one day to the other. So it's important to stress this.
It's not going to be from one month to the other or quarter to the other. It's one day after the day, during several days, until operation is more mature, sales is more qualified, more products being offered. It's gradual. But because definitely we're not going after this in the areas, we see the perspectives of continuing having this improvement. This is what we've gone afterwards.
Great. Thank you very much, everybody.
Thank you, [Rafael], for your question. Next one, [Marcelo], JP Morgan.
Thank you. A question. Ricardo, you mentioned in the beginning of the call, Riva, the performance. I don't know if you can tell us a little bit about how the value of the due date here, as was mentioned, after approval of level four, at least in our vision here, it would be possible to reach this.
I want to know how this can impact Direcional's operations.
Paulo, help me here.
Just to confirm some detail. This was in the third year with a profit goal that we need to deliver in Riva. So there is reasonable time before us. I don't know if it's another two or three years in function of this liquidation. I think it's very early to count on anything now. But certainly, we thought it would be important in case the operation had a better performance than projected. So we want to continue having good performance in the company. 85% is captured by Direcional, but still it out. But we're very conservative, so it's a little difficult to talk about this. Let's focus in the operations and generating value, and then afterwards, we're going to see whether we're going to have this in the defined date.
Can you give us details here?
The earn-out is 20% over the SCD, and the most important is that more than 80% of Riva is ours. Somehow, I am saying this that the earn-out is good, but it is not so relevant for the consolidated data results of the company, because it is based on the percentage that was sold. It is a calculation we have time to do. It is not something that will transform Direcional.
Perfect. Thank you.
Thank you. [Marta], our question. [Elvis, Itaú].
Hello, everybody. I want to explore the distribution between level 1 and level 2, and increase of subsidy for the client of the company, and also because there is a regional checking. How do you capture this? With more products in the area, increasing sales speed, or is it by margin? The second topic here is about the exemption of tax.
How should this benefit the average buyer of Direcional? How this market can change here? How much of sales come from informal market? If you can give us an idea of these numbers here.
In Manaus specifically, the level 1 and 2 share is one of the greatest we have in our operations when compared to any city in the country. Perhaps Manaus and Brasília. But Manaus certainly is the most relevant in those income rates that are below the program. We have products for this product. Certainly we had the conditions of offering product in a short period very quickly. We are very enthusiastic with these perspectives of subsidy increase because many people can begin to have purchasing power and we can offer products destined to these families in Manaus. Manaus is 15% of our business.
In terms of launches and sales, between 13% and 15%. These are small details that when summed make the difference in our operations. There is one detail that completely changes results because of the fact that we do not have a concentration in one single region, one single segment. But we see very positive perspectives for Manaus because it is an area where we have a lot of products that meet the needs of families in this income level because these families that had an increase of affordability with this change. Now, Paulo, tell us about the income tax exemption here.
The possible benefits of our business with regards to tax exemption or income. Our business is credit. The reduction of taxes increases net income. The first impact is to have the client to have more available income to pay the installments of cash and ours. We see a huge possibility of reduction of default and more credits being granted to these clients. Also second point that I believe can be relevant, obviously it depends on other movements, but is the possibility of a huge formalization of income of the Brazilian man.
Today in the credit analysis of the financing bank, the informal income, it is only accepted for families with income below BRL 2,850. Any client or customer that has informal income and wants financing, they need to formalize the income. This change in allowing customers to formalize their income without having to pay in tax, this is an important impact. But the financier has to work together with the Federal Reserve and include these customers with informal income to formalize their income so that they can get financing. But there is a positive increase of demand in the addressable market.
It's very important in the program. Those are the two main impacts that could influence our business and net sales build and increase of net sales and a reduction of default. This is very positive.
Thank you, Paulo. Ricardo.
Next question, Ana Júlia, UBS.
Good morning, everybody. I want to go back to margin. As has been mentioned, Riva's gross margin ended up raising the consolidated results this quarter. More information with what explains the difference in performance of margin. Riva's trend to be growing margin and Direcional more flat. Also the partnership with Amora. What margin level can we expect for products within this partnership? Would they be closer to Riva or Direcional? Is there a perspective you can share with us? This would be great. Thank you.
Ana, as we mentioned, Riva ended up being more benefited. The program improved for both Direcional and Riva. We have been able to transfer prices, but with regards to sales speed and the sales build delivered by Riva in these first nine months, we see a strong demand and greater price elasticity in the program. The entrance of level 4 allowed us to gain in price, increase area of units. We don't have BRL 350,000. Now we have a product that would fit two rooms and a suite. Now we sell with three rooms. We gain a margin here, but there is a lot of things that helped Riva this year specifically and allowed the Riva margin to be faster than Direcional.
When we look in a macro way that both companies were very healthy margins, cost scenarios positively impacted both Direcional and Riva benefits with inflation below expected certainly helps both companies. From here on, it is difficult to see how this is going to continue. You might have new factors. This Minha Casa, Minha Vida impacts Direcional Engenharia now, and not Riva, but things might change. It's difficult to say. I don't know if Ricardo would like to say. With regards to Amora, I think it's too early to talk about margins. Generally, we shouldn't have margins that are different than what we operate in. Otherwise, we wouldn't be making business. Generally, we don't begin a business where we don't have margin that is not enough to pay for our capital. But, as Ricardo said, we're waiting for the approval of CADE to begin doing things.
This is a discussion for after this approval and the beginning of the business, in fact, launching the first product and really understanding the land bank. The fact is that we have a relevant opportunity here to expand operations in the region that is object of this partnership.
Perfect. Thank you very much, everybody.
Thank you for the question. Next question, [Ygor], Goldman Sachs.
Good morning, everybody. Thank you. I want to explore more the acquisition of these 12 lands you talked about. One has already mentioned that the land inventory is big, but I want to understand more about these land lots acquired. The potential of sales of BRL 2.7 million. I want to understand where these land lots are, product focus, anything that would help us understand.
Also, I would like to understand how you see the land acquisitions for the next quarter and the next year.
Thank you, [Ygor]. Well, the land lots, we have always tried to prioritize land lots in those areas we notice greater absorption speed of the market, and where we have room to increase launches. There are places where our land bank is healthy and big. But when we consider it as a whole, it is healthy for the amount of launches we have had for more than five, six years. Most is acquired via soft, so there is no capital allocated here. It does not damage our return when it is in the approval phase. But there are certain areas we see need an opportunity to continue growing and launching and gaining share. This is what we need to have gains in net sales.
I said Salvador and Recife, for example, are areas that are less mature than others. Our operations began at a later period. São Paulo is an area where our share is small, but there is room. There is a huge market. We try to prioritize areas in those cities where sales speeds are high and where we can have more products being launched than we have when we analyze the demand. Obviously, when we notice sales speed of Riva and we have a greater demand, a need to acquire land lots in these segments, most probably we are going to go after more areas where you have this Riva product and where we have greater net sales and lower land lots.
We always prioritize the land lot which has as a target the city where we have target clients that can buy these lands, and in cities where we can gain share so that we can have a return over the capital we spend in that area.
Thank you very much.
Well, I think we have no more questions here at the moment, so we close our questions and answer session. I would like to thank you all for your presence and give the floor to Ricardo for the final highlights here.
Once again, thank you very much, everybody. I would like to say that our team is always at your disposal for any questions that might emerge after the end of this call and eventual announcements of the program. We want to be always at your disposal.
We want to continue very optimistic and trying to do the best work possible from our side. Thank you very much, everybody, and have a very good day.