Good morning, everybody. Welcome to Direcional Engenharia's Earnings Release of the First Q 2024. I am André Damião. Together with me is Ricardo Ribeiro, CEO, our new CFO, Paulo Sousa, and also IR Director. This is for investors and analysts and will be conducted just like we have always done. We will go through the main highlights of the quarter. Then we will open for questions and answers. Those of you that would like to ask questions, use the raise your hand tool here in the Zoom, and we will moderate it here by order.
This presentation is being transmitted live via YouTube. The presentation itself, which will transmit now, is in our IR site for those of you that do not have it. Lastly, I would like to remind you that this event is being recorded, and it will be available for replay in our IR site very soon.
Now I give the floor to Ricardo to begin the presentation.
Good morning, everybody. It is a huge pleasure to have you with us again today to see our first-Q 2024 results. Thank you for your participation, and I will begin with the presentation addressing the main highlights of our first quarter. Also, I will give you the operating data. Then Paulo Sousa will show us the financial data. I will be at your disposal at the end of the presentation for questions and answers, where we can clarify any questions that still remain during the presentation.
Beginning with page three, where we address the main highlights of our quarter, it is important to say that in our vision, this was by far the best quarter in terms of the results for the company. We delivered a net profit of BRL 897 million, a 156% growth when compared to the net profit of the first quarter last year. The net margin went from 10% in the first quarter 2023, and the operating net profit here, to make clear the operating, we have a relationship. We sold two SPEs in this quarter, and as a result of BRL 19 million. Also, we have a swap of shares of Direcional, where we are exposed to the increase of the price of the share versus the CDI. Since our shares were appreciated this year, we had a gain of BRL 11 million.
When we exclude the two sales, we had an operational net profit of BRL 120 million, 18%, the greatest net margin in the companies this year. When we look at the net profit of the operation, we had a growth of more than 20% relative to the fourth- Q, three months ago. So this was a 20% growth in the operating net profit from one quarter to the other. Also, we delivered this first quarter a gross margin with a continuity of growth. Our growth margin reached 37.4%. Also, one of the greatest gross margin levels of the company. More important, as well as have been able to give a growth in gross margin, we delivered a backlog margin growth. Our backlog margin growth was 43.1%, having gone from the last quarter of 42.5%.
There was 0.6% growth in the backlog margin based on a backlog margin of BRL 1.9 billion. This will remain in very elevated and solid levels. When we look at the results as a whole, this is in keeping with what we said. We delivered a reported gross margin growth, a backlog margin of net sales speed growth, and a reduction of commercial expenses. One of the things we always say to you, the increase of net sales speed in the scenario of a very controlled inflation, increased of costs too that are controlled, and a very expensive capital in Brazil, we have tried to increase our sales speed so that in our growth process, we have less demand for working capital.
We always say that the path for the increase of net sales when we look at the price of the sales of a product is not price reduction. It's a good, well-done work, and this takes time to materialize. When we reach and we deliver these results with an increase of margin, an increase of backlog, net sales speed, and reduce of commercial expenses, we have been able to demonstrate the work that we've done and how this vision with regards to net sales speed, our vision some months ago was right. It's also important to highlight, when we look to the right here, upper right, the blue chart here, we launched in the last 12 months, BRL 5.1 billion. We sold BRL 4.5 billion.
In terms of revenue, when we see the SPEs where we did not consolidate the revenue, our results with those SPE via net income, we had BRL 3.5 billion in revenue. When we compare the launches with BRL 3.5 billion in revenue, there is a continuity of revenue in the next months of around 49%. This is if the launches levels are maintained. Given the demand we have noticed for our product, I think in the current scenario, it is possible for this to happen, and we in fact have launch volumes close to what we had in the last 12 months.
This perspective of continuity of growth of revenue makes us convinced that we will continue benefiting from operating leverage, where with the growth margin levels solid, our financial expenses and minority interest that has a less representativity, it is possible that we will continue delivering net margin growth. Another point that I would like to stress here in this beginning of the presentation, our priority is speed of sales. It is here in our vision that we will have the greatest value for our shareholders. With this increment of net sales speed that we delivered in the first quarter, it is possible that demand for working capital that we had imagined in the beginning of the year for 2024 is reduced. An eventual reduction in this need for working capital to deliver this growth that you have seen in our operations.
Naturally, this will translate into greater return of capital to the shareholder because we have a leverage level that is very heavy. We closed with a net debt, in relation to the equity of about BRL 60 million, 2%- 3% of net equity. What we had foreseen is going to become dividends, capital return to our shareholders in a time that is inferior to what we imagined. That is our main priority, our greatest effort implemented in the company at the moment. Now going to page five, where we address the launches of the quarter, leaving the highlights now. Our quarter, the launches grew 47% compared to the first quarter 2023, BRL 897 million in launches. In the last 12 months, closed March 2024, our launches reached more than BRL 5.1 billion. 41% growth compared to launches in the last 12 months, closed in March 2023.
It is a very expressive growth. It is great for you to analyze. We multiplied the company by threefold in terms of launches from 2020 to the first quarter 2024. This is a huge effort and very gratifying to see the results that all our team has been able to deliver. In this relatively short period, we multiplied the company by three. To page six here now. With regards to our sales, we had a sales growth of 63% comparing the first quarter this year to the first quarter 2023. Sales growing at a pace that is over launches. This is in keeping with what addressed in the beginning of my presentation with regards to our highlights. This was by far the best quarter in the company in terms of net sales.
29% over the second-best quarter in our history, which by chance was the fourth- Q last year. Another interesting point to highlight here is that we noticed the continuity of demand for our product, strong sales in April this year. We continue noticing an important demand for the products we have offered, Direcional and Riva. Also, it is important to mention that in April, the future FGTS began operating. That might have an important impact on the lower incomes and bringing to our addressable market a huge volume of families in Minha Casa, Minha Vida, where we have governments and state municipalities also gaining traction here. In our point of view, the perspective is very positive in terms of demand for our products in the following quarters.
Page seven, when we talk about net sales speed, we have reached net sales speed of 22% in this first quarter. One of the greatest net sales speed in our company, Direcional and Riva, were very similar net sales speeds. These two operations doing very well, 22% and 21%. This is our priority. We have been going towards what we have shown you as being our priorities in the different moments we go through in the country. At the current moment, priority is speed of sales. Less demand for working capital means more capital for return to our shareholders, greater perspective of growth of our ROE. Also I would like to stress to close my part of the presentation, when we look at the results of this first quarter, the operating result, this is important to say, it is results excluding the non-recurring effects of our profit, BRL 120 million.
Annualized ROE of 24%. This has been a resilient growth, sustainable and healthy. Quarter after quarter, our company has been able to deliver this ROE growth. We intend to continue here with this work. We believe that we still have results from the efforts we have done in the last months, and they will come in the future, and we believe that this should materialize in the following quarters.
Now I will give the floor to Paulo to talk to you about the main financial results, and then I will come back for questions and answers.
Thank you very much, Ricardo. Good morning, everybody. It's a huge pleasure to be here to present the first quarter's results. As we can see in the next slides, this was a memorable quarter. We positively advanced in almost all our results. We've highlighted the growth of the revenue gains and gross margin gains and backlog margin, reduction of expenses. And with this, we have been able to have a relevant gain of operating leverage with an increase of our net profit.
On slide nine, with the revenue, here we can see the revenue of our segment is a product of sales versus works. In this quarter, we can see here, as Ricardo said, we have a relevant gain of revenue, specifically when comparing the first quarter last year. It grew 38%, BRL 947 million, when considering the net revenue of the SPEs we consolidate, which is the blue part of the chart. These are the ones that are not consolidated in the results. They come via income equity. In the last 12 months, we reached BRL 3.5 billion, 28% compared to the last 12 months that ended in 2023. This is the company as a whole.
To the right, when we see, here we have a chart of a future revenue. Deferred revenue, right? The backlog has grown 72% compared to the first quarter last year. The highlight is the backlog margin gain. It went from 39.1% to 43.1%. This shows a gain in margin, and we have been able to sell more, gain price with regards to the behavior of the costs and the budgets of our works. Somehow this KPI signalizes a maintenance of gross margin when we look to the future. This depends on the launches, if we continue launching products with high gross margin. This shows us that we are in the right direction.
Slide number 10. It is important to stress the growth of the gross margin. When we look here, our gross margin reached 37.4%, 0.3 percentage points relative to the previous quarter, and 1.1 percentage points relative to the first quarter last year. When we look at the last 12 months, our gross margin in the first- Q 2023 was 35.7% compared to 37% now. This is a gain in sales price compared to construction costs. We see this trend every quarter, us gaining room here. When we look at the backlog margin, we have the possibility to continue with this margin gain.
When we go to slide number 11, this is another very important point of our results, which is the dilution of expenses. The company has grown its revenue faster than expenses. Our business is where we gain operating leverage, and we see in the micro. When we have a larger work site, a larger project operating in larger places, we can see the rise in the level of operating leverage. The chart here shows us when we compare our G&A over the total gross margin, together with the non-consolidated SPEs, we reached, in the last 12 months, 5.1%. When we compare with sales, it is even lower, 3.8% in the quarter, 4% in the 12 months vision.
Here it is important to stress the continuous work of the team trying to go for more, trying to do more here. In the quarter specifically, it is important to highlight there was an increase of 10% compared to the previous quarter. The main impact is a non-recurring effect. For example, the bargaining here in Belo Horizonte happened with a delay. Generally, it happens in November, and in this quarter it happened from February to March. We had to recognize this increase of the payroll for the months of December, January, February, and March recurring, and the 13th salary. This happened in the first quarter.
There was an effect here. I do not have the back, I cannot see it in the back, but it was well-aligned with inflation, and we do not expect a similar behavior. The selling expenses is another important dilution KPI. Here we diluted less, but when we go back, there was a strong dilution. We have gain in scale. We have sales strategies in stores, and the productivity gain in our stores is very relevant. We reached in the quarter 8.1% commercial selling expenses in relation to the gross revenue of development, 4.2% in relation to sales. When we look in the 12 months, we are still 8.6% and 4.8%.
The next slide here talking about the EBITDA. Perhaps in a very summarized way, this reflects the operating results and a little bit of what I said, the gain in gross margin with dilution of expenses, and this is the best way of looking at the EBITDA here. In the last three quarters, we navigated over 24% when we compared where we were around 20% in the past. We see a gain in the operations. 12 months vision, our EBITDA reached almost BRL 600 million. I would like to remind you that our net debt is BRL 600 million. We generated 10x the EBITDA compared to the debt. When we look at the EBITDA, the generation of cash, operating cash, compared to indebtedness, we are very leveraged with a good scenario and a very healthy margin of 24%.
Next slide number 13, where we show you the results of equity income, and this is the result that went through our SPEs' financial statements. We showed in the past that this revenue reached BRL 280 million, BRL 26 million in results from the SPEs. This is the results of our stake here. In the last 12 months, we are BRL 73 million. Here, this is a normal growth. We had some projects developed in partnerships that we do not consolidate. When we look at the right, at the chart here, these are the SPAs where we consolidate the results, and we have the control, we have the management of the project, the control, the governance where we have agreements of quota holders. However, we pay dividends to the minority interest.
Here we saw a relevant dilution compared to the revenue. Our revenue grew 30%, almost 40% year-after-year. This minority interest line is also here year-after-year. On the next slide, as a result of everything we presented here and already well mentioned by Ricardo, the results of BRL 150 million in the first quarter. This is a net profit. In a 12-month vision, we went over BRL 423 million. Gross margin, 17.1%. Net margin, 17.1%. Best results in the company. To the right, we have the history of our operating results as stressed by Ricardo. With discounting non-recurrent 18%, and a return of 24%.
The historical record here in terms of return. I think here, clearly we see the results and the work that is being done. We are on the right path and clearly a gain in operating leverage that is very relevant. In our 12-month vision, our net margin went from 9%- 17%. This is amazing when you look this quarter-after-quarter. It is a growth of around. In 2022 was 10%, and now it is 18% in this quarter. This is an amazing work. Lastly, to talk to you about capital structure, and perhaps this is the most important structure. It is the starting point of all our internal discussions, right? We always go from, we talk about capital structure to talk about the size of the company, where we are going to, volume of dividends and all the rest.
The scenario is very good in terms of leverage. 2.9% of our net equity. Cash position that is very solid. Long debt. Long on gross debt has an average term of 52 months compared, and it is very well dimensioned. We can see this in the chart in the middle of the slide. We are AAA by S&P, one of the few developers in Brazil that has this rating score. As mentioned by Ricardo, this level of leverage gives us comfort to continue with growth. Certainly with this new sales growth strategy and the speed here and reduction of the cycle, it is most probable starting very soon we will go back and continue being one of the greatest payers of dividends in the stock exchange because of the nature of our business that generates a lot of cash.
Well, I have shown you the main highlights, so now I would like to go back to André so as to manage questions and answers. Thank you very much.
Now let us begin with the first question. Fanny from Santander. Fanny, you have the floor.
Good morning. Congratulations for your results. Increasingly better. I have two questions. The first one with regards to the cash generation for the year. Ricardo mentioned that the average POC is 50%, so I want to know what you are doing here to eventually to try to sell more stock, more inventory, to speed up cash generation.
The second one was with regards to level 1. Direcional has a very relevant exposure to this kind of public in the north and northeast, and there are many places, as Ricardo said in the beginning of his presentation, that has Minha Casa, Minha Vida - Cidades programs. The Amazonas region in the Amazon, you are there, and you have a competitor there. You are doing very well there. I want to understand what you think you can reach. How can you reach in terms of level 1? It would be interesting to have a vision with regards to level 1 in the future.
Fanny, thank you very much for your question. I will begin with cash generation or cash burn. We have a POC that is very high in terms of inventory. This is normal because of our strategy. We wanted to gain margin with regards to inventory, and as Ricardo said, we are working strongly to increase the net sales and shorten our cycle. The result, the last derivative is cash generation and less cash exposure in the operation. This is our focus. I think it is difficult to show you a projection, but we have been working with sales, faster transfers, and having cash here. I do not think we have a distortion here. We have not sold more launches than inventory.
The idea is to increase the net sales speed. In the first quarter, we made a good sales volume, a different net sales speed, well over the recurring in the last quarters. We have to keep up with this work. Ricardo?
Fanny, no doubt level 1 of Minha Casa, Minha Vida and this is financed by within FGTS, families earning more than BRL 2,600. We are talking about FGTS traditional developer, where a buyer has an income below BRL 2,600 and this has gained attractiveness. We have hedge 1 in this game. We have 3 percentage points of gain when we see to this client. We have Minha Casa, Minha Vida gaining traction in several areas we work in already in about to enter operations very soon or already operating. We have the future FGTS also with gain of capacities for purchasing for these families.
It is natural for us to have an increment of our sales coming from these families. I think this is also positive for our country, our society. We will serve families that were not served in the past, and these were units, these were sales that represented 15% of our business in the last years. Most probably with so many positive news in this segment, we believe that this certainly level will rise, not because the other segments will have a reduction in size, but in this level, we have families that can buy more, and we increase our net sales. It is difficult to say how much it will be, 20%, 25% of the business, but certainly we will have an increment with regards to past levels.
Margins that are very similar to what we have reported currently, specifically because of the change of the hedge and pro soluto has been much lower in this range, in this level because we have Minha Casa, Minha Vida in several states and several areas. This is a weaker, a more fragile customer. It is important to have a small pro soluto level here. So that we do not need greater provisions to serve these families. It is natural that they have greater difficulty and volatility in terms of employments and income. This reduction of pro soluto helps us to work in this segment. Recanto, Minha Casa, Minha Vida in Cidades and future FGTS, this is an attractive segment in these cities where we have strong land banks that can see to these families. It will gain representativeness and will have an important participation here.
I just can't tell you up to what point this segment of Minha Casa, Minha Vida will go within the FGTS. Is Minha Casa, Minha Vida Cidades in Ceará, this is very important for you. Our operations in Ceará is the greatest operation we have in the northeast, and it was announced in Ceará. It's still not operating. It's natural, right? You have time for it to go into operation. When Minha Casa, Minha Vida Cidades goes into effect in Ceará, this is another positive news in terms of net sales and increment of our operations because this is a city where we have land banks that allows us to offer products of around BRL 200,000 and there we'll be able to serve these families.
Thank you, Ricardo and Paulo. Congratulations.
Pro soluto in this segment is around 3%-4%. Our average pro soluto is around 10%-10.5%. This is very positive from the point of view of cash flow duration, where we receive the sale price 97%-98% during the works and one reduces the need of provisions for default. This is considering the future FGTS. No, not considering. The future FGTS will impact the reduction of pro soluto, but we're still limited to an LTV of 18%. This 80%, right? Before they weren't approved, you had 75%, 73%, but with future FGTS, we'll get to an LTV of 80%.
And the non-finance 20%, when we consider Minha Casa, Minha Vida subsidies, what the FGTS the family has to draw, and the growth of Minha Casa, Minha Vida Cidades, the portion of pro soluto is very positive. Minha Casa, Minha Vida Cidades has had an important impact.
Thank you, Ricardo.
Thank you for the question. Next, Ygor from XP. You have the floor, Ygor.
Thank you for your presentation. To understand the net sales dynamics that grew this last quarter, what were your initiatives to be able to evolve here? I would like to see if there was a contribution of the new parameters of the program, and if you believe that this net sales speed level is sustainable for the future. Another point I'd like to touch upon, because of the stronger net sales speeds that you're in, does it make sense to rethink the amount of launches in the company?
Ygor, thank you for your question. With regards to sales, it's funny. We see our history and the market demands, and the market is always very immediate, it's going after the results as fast as possible. On our side, we have this long cycle. The result of our works takes a certain time to appear, and we end up having to have a lot of discipline to maintain that direction we took until we see the results, and not necessarily do we have the results in the speed the market imagines. With regards to sales, it will be with discount because the margin is solid. We said we don't need to give a discount. Our products are very well priced.
The price of our products are not out of the market. The increase in sales speed will occur because of work, our sales force, the increase of our online sales. In our internal chain in the company, a simplification of the sales process, a shortening of the term of the deadline, the commission that is paid to our workforce, our sales force. That would be the wrong way. To reduce prices would be the wrong way to do it, right? But we did the right thing. You see gross margins rising, backlog margin rising, and net sales rising, and expenses dropping. But these demands work and the results will materialize gradually.
Our first quarter was very positive and shows very clearly the path we're taking. When we showed you the operational results, you see that the gain in sales speed occurred in a correct way with the training of the team, works by the team. Investments in the online sales has gained representativeness in our works. We're impacting more customers, having a marginal cost to understand if that customer has a purchasing potential, what product he can buy. When this is automated, what we see is the results of a work that we said to you, and we believe will be a trend from here on, because this is a path of development.
Day after this, you don't have a silver bullet. You have a series of actions, series of small adjustments that translate into results in time. I don't think that in the first quarter, the change of the parameters of the program has motivated a net sales speed gain.
Yes, I think in the first quarter, because when the future FGTS came into effect, which still is in a ramp-up phase, but has gained representativeness. This is natural that this happens gradually. We have Minha Casa, Minha Vida, Cidades gaining traction from here on. São Paulo that has always had, and last year we had coming into operation, starting operations in Pernambuco too, and I think we expect to have Amazonas and Ceará too, which is very relevant to us.
I wouldn't say there would be any change with regards to the parameters of the fourth-Q. This is work. This is it, one day after the other, and a lot of efforts being implemented here in this net sales speed gain. With regards to launches, Ygor , this is not our priority. We had an expressive growth of launches in 2023 compared to 2022, and this growth in launches occurred in the second semester of the year after the announcements of the change of the program in June, and this led us to increment launches, and we also did a follow-on.
Because of the need for capital to implement this growth, we have a working capital demand here and we did a follow-on in June, and the volume of launches was BRL 1 billion more than we had imagined in the second semester 2023. 2024, our need is sales of cash generation. The sales speed of our works is specifically after March, the end of the raining period and cash generation. Launches is not our priorities. It might rise, but it is not something that should be relevant. And we can deliver net sales speed growth without need to launch launches. Only by reducing the volume of units available for commercialization for sale.
Another important point, our first quarter, we had an important growth of launches compared to the first quarter of the previous year. When we analyze the perspective for the year, most probably we will have a volume of launches in the second, third, and fourth quarters that are much superior to the first quarter. Generally, the first quarter is a weaker quarter for launches here. Launches concentrate in March, and even so, we had an increase of year so. We have a lower period for sales of these launches done in March. However, in the first quarter, the perspective of stronger launches, a quarter with a weaker.
The maintenance of sales speed in these levels with an increment of the volume of launches compared to the first quarter is not trivial. Obviously, we are working. April was significantly stronger than what we had planned for the month when we did our business plan for the year. Things continue solid, but I think it would be precipitated from my part to say that the sales speed will be 20%, 1%--[audio distortion] But we are trying to go for the greatest net sales. Quarterly, we will see impacts of the launches in the first quarter if they are concentrated in the beginning or the end of the quarter.
In terms of nominal values, we see a strong sales quarter. However, in terms of sales speed, we have to expect to see what is going to be launched in the quarter.
Thank you very much, Ricardo, Paulo, and André.
Thank you, Ygor , for your question. Next question, Jorel, Goldman Sachs. Jorel?
I have two questions. First, I would like to talk about the gross margin. You talked in your release that the gross margin, which is very solid for inventory and launches. Is there a lot of difference between the gross margin between these two modalities? And the second question, are the SPE sales and the stakes here. I would like to know what is the impact of these sales and cash generation in this quarter, and also if you have more sales planned for the SPE stakes.
Paulo, will you talk about the launch and inventory gross margins and the stake of the SPEs?
Jorel, we have seen here a strong similarity of gross margin in my backlog margin and inventory and new launches. Some products have larger margins. But today, we have strong similarity here. In general, the gain of efficiency that we have here in the projects in inventory are also reflected in the backlog margin and what is coming in the market has gross margins that are very similar. In brief, everything is aligned here. Ricardo?
With regards to cash generation, there were two SPEs we sold with lands that had completely been paid for. We bring back cash for the company. We anticipate this in an important days. We only do this with lands that have already been fully paid for. We are doing this. When we do the sales of the SPEs, since they are land that have been fully been paid for, the return is smaller because you have a lot of capital allocated in the project. And in the context after the CMN decision, where there was a long reduction of backups here, we have seen a strong demand for our assets because these are backups, right? This is a backup that gives origin to this exemption. We have sold these assets with discount rates that make a lot of sense, well below the capital cost of the company.
It makes sense to bring this capital back and reallocate to projects with superior margins or return to shareholders. When one maintains the market in this format with discount rates that make sense, we will sell the assets. When it generates value, we sell. We have only one more project at this moment where we would have the possibility to sell with a land plot that is fully paid for, things done in a very short period. Because we eliminated all the risks of the real estate development in terms of deadline, we managed to have very attractive discount rates in sales. If scenario remains low, we might sell. At the moment, I would only say one that is mature enough for this to happen. We will wait. When everything is right, we can sell this project.
Once again, when we sell these projects, these are projects, and in 2025, perhaps we might have anticipated the profit and the cash generation. No matter how much the market considered these sales, we have to be careful, because if we do not do the sale, these would be recurring results. But it is so much value that this generates in our discount rates for the sale of these assets, it makes sense to continue working with our discipline and not necessarily excluding this from the recurring results of the company, because this is recurrent. This is my disclaimer, and this is wherever we see a value generation, we will continue.
Just to add, Ricardo, the impact of cash generation. The sales of these SPEs generated more than BRL 50 million in cash generation, BRL 19 million in profit and BRL 500 million in cash generation.
Next question, Pedro Lobato from Bradesco.
Good morning, everybody. I would like to understand the dynamics of transfer in the quarter. We saw sales growing. We see the gap between sales and transfers. Transfers has grown below sales. I would like to see the dynamics here. Also another question is related to taxes and your vision with regards to this team.
I will answer the first question here, Pedro. It is natural in our business to have a mismatch between sales and transfer. Transfer usually happens after sales. Launches, there is a delay for transfer to start, right? Because you register contracts. This is operational. It is natural in our business. Since our sales has shifted strongly quarter after quarter, one expects a gain in transfer in the second quarter. Seasonally, this might generate. The fourth and first quarter are seasonal. The first quarter that has holidays, Carnival, things seems to extend, right? The transfer, it depends on other aspects too, right?
The issue of documentations from the local government. We need a registry office, Caixa Econômica . There is always a delay, right? The first and fourth Q is weaker in terms of transfer. Second and third, very strong, and this is normal. We have a strong magnifying glass here. We are very focused. We know that sales only becomes cash after transfers, and we need to speed up this aim to have cash back.
Second, Pedro, with regards to the tax reform, there one introduced a parameter that is very interesting, which is progressiveness of the taxes. From a social point of view, this makes sense. You have the exclusion in the original proposal of BRL 100,000 for effects of calculation of the calculation base of the amount to be taxed. This makes sense.
From a social point of view, this is fair, it is positive for lower income families. This is positive for Minha Casa, Minha Vida. However, once again, it is very early to come to conclusions. The reform is still going through Congress, and there might be changes. It is a little too early to consider the scenario of the initial proposal a definite scenario. We do not know how things will materialize themselves. In principle, it seems to me that the reduction is very little. The 20% reduction relative to the basic taxation parameter. It seems small to the development sector.
I think we could have, in the higher segments, an increase of the tax burden. This was not the objective of the reform. It is too early. I think with regards to the sector as a whole, not necessarily the segment we work in, but when we address the lower income segments. BRL 100,000 reduction in the calculation base, this is positive. Let us wait. I think it is a little early. We will see what the Congress will say and see so that we can trace a more reliable scenario for you. In numbers, 20% is very little. This is it. From a social point of view, I think it is very fair. There are two considerations here with regard to the reform, and we have to wait to see how things go.
Thank you.
Thank you once again. Next question, Elvis Credendio from BTG.
Two questions on our side. The second one has to do with the funding, Minha Casa, Minha Vida. We see that this is being done in a faster way, considering concession, it is over the annual budget. I want to understand how do you see the scenario for the supplementation of this budget and if the stronger execution of the budget concerns you, and whether you would change the strategy with regards to how you see the budget.
The second one is cash burn or generation. You talked about having something more structural, something more stabilized in the cycle. I want to know how you imagine the leverage more at the end of the year and the size for a return of capital to the shareholders.
The Minha Casa, Minha Vida funding. Here, we have a really good challenge, which means that demand is strong, and we would have problem if we had budget and no demand. That would be a serious problem, even more concerning. With regards to funding, the program has performed really well. This was something that was expected, specifically after adjustments done in the last year. Adjustments were in June because we have the approval of projects, so we have a greater volume of supply in the market.
Also, which is very clear, most of this increment for a demand of the budget of the program came from the used property where parameters for financing subsidies and LP/FP were also changed last year, encouraging financing of used property. You saw now recently a first adjustment being communicated, going back to parameters of used property, going in the direction to what they were in the last year.
Clearly, there is a priority of new property because of the deficit we have in our country, which is the base of residential units to combat this deficit. It is important to have a new property than negotiate a used property without increase of the base of housing units we have in the country. I think the Ministry of Cities has shown this with regards to budget, and one has to prioritize the new buildings, right? Because of tax collection, job generations, more properties in the country. It is clear when we see the path the ministry has taken. I think now we have to monitor to see what is going to happen with the consumption of used property, right? I believe the ministry has been very careful here so that the program can operate normally during 2024.
We wouldn't like there to be any kind of problem like we had in the past with the budget being fully consumed in October and November. I hope this is not the scenario. The ministry has shown concern with regards to this. Also, the FGTS has the greatest amount of liquidity in its history, right? There was a cash exit of BRL 5 billion and the FGTS has elevated liquidity. The country has generated jobs, which is important here for this collection. I think it is plausible to have a budget increase because of the financial health of the FGTS. We've seen some members in the government and the cash showing this. Somehow we've seen a certain strong conviction from the team, the government's team responsible for the program. They're looking at this budget with a lot of conscious, and they're okay with this.
This is a point to monitor. It is a point of attention, but still, we've had even more greater concerns in this sector than this one. I think this is a good reality we're going through. From the point of view of demand, I think it is important for this to remain.
With regards to cash generation in the company, I talked about this in my presentation. Elvis, we have aimed for the increase of net sales. We, in Direcional, have been one of the largest payers of dividends in the stock exchange with very high yields and dividends. When there is a demand of greater opportunities, we use these opportunities. This is what we did last year. The program improved. We raised capital. We launched BRL 1 billion more than we imagined. The company is in a whole other level.
Three quarters after a follow-on, we had the third, fourth, and fourth- Q this year. Three quarters after, we raised BRL 400 million. We raised the book of the company 25%, three quarters after ROE of 24%. It is clear we're allocating this capital that was raised in a very efficient way, generating return to the shareholders. Somehow we are returning a capital that they gave to us, and believed in our work. I think there is a possibility of continuity of ROE gains, and for sure, capital will not be paralyzed in the company. The capital will be the necessary size for operation. Any surplus here, and that is not necessary for growth, we will return to the shareholder.
Perhaps this is our greatest priority. This VSO, this sales speed, will be one of these leverages to have a greater return of capital to shareholders. Sales of SPEs go in this direction. This is a priority. In our history, you have never seen us not using capitals in our balance sheet. It is possible that you will see this happen in case the scenario remains as we see it today. You will see this happen during the next quarters.
Thank you. Everything very clear.
Thank you, Elvis . Those of you that want to ask questions, just use the raise your hand tools. Next question, Rafael Rehder from Safra Bank. His screen froze, so the next question, Aline Caldeira. You have the floor.
Hello, good morning. Thank you for the opportunity for the questions. I would like to go back to the net sales. You took a series of measures to drive this, but I would like to understand Riva, because this is where we saw the greatest net sales speed increment here. Did you take an action to explain this, or partnerships with da Lúcio , did they have a role in this greater net sales speed?
My other question is more specific, but I would like to see if you saw impact in cash generation this quarter because of the change of the transfers, together with Caixa. If you could tell us about the impact we could see during the year with the rollout for more relevant areas too, would be great.
The sales strategy for Riva and Direcional have been the same. There is not a different strategy from Riva that made us deliver this net sales speed. I would say that the Riva product ends up having an effect that is closer to what you see to the mid-size companies, where the speed of sales is over the speed of sales after launching. This quarter, we launched more Riva products than Direcional. Since Riva sales generally are strong because of this mid-to-higher income product. This is different than the Minha Casa, Minha Vida, right? Since we launched more Riva this quarter, it is natural to have a greater representativity of Riva sales and greater sales speed. In terms of strategy, strategies are very similar.
Of course, the publicity we do online to reach the Riva customer is different than the Direcional because of the profile of the family. But the strategy is the same. This year we had launches in partnership with Lúcio, da Lúcio. There were three Riva launches that were very relevant this quarter, very high net sales. One was partnership with Lúcio, but the other was 100% Riva, and they performed really well in terms of sales speed. It is not one Lúcio product that this. There were three launches. One was with Lúcio, but all three had very positive performance.
With regards to the change of the parameter, the way Caixa gives proceeds here. Caixa would pay for the value of the land, and they would do this during the signature of the contract of financing between customer and Caixa. This would be dis-blocked once this was registered. But Caixa would enter during the signature of the financing contract. There was a change in this process. This has been happening gradually for a year now.
The credit of these resources has occurred after registration of the financing contract in the registry office. You have a gap of 30, 45 days where these resources are going to become a credit for the company, right? This period, the resource is paid for. You don't have a financial loss. This is a cash flow issue. During the last months, every month you would have a ruler of Brazilian states where this change in the way of payment of this initial amount would occur. Because of this, from an accounting point of view, there might be a postponement of a delay of the payment and greater cash burn temporary for the company, and this affects us too. This is something that happens as a rule that happens everywhere.
Now in June, Minha Casa, Minha Vida in Rio de Janeiro goes into effect. SBPE in Rio and in São Paulo. Since Direcional is not concentrated in any state or region, I believe that this change in criteria will not impact us. We are very diversified. We've had greater impact because of all the other areas we worked in. This change has already occurred, right? For companies before this turnaround, credit continued during the contract. This change of credit after the registration of contracts is for new companies, right? Today, if one remains with the old criteria payment at the moment of the signature of the financing contract, we would have almost BRL 70 million more in cash generation. This is the impact that emerges that would have appeared for you if one had not changed the parameter. Our net debt would be zero.
Now it's BRL 106 million. But I think it is natural. We had its announcement by Caixa, and we have to prepare for this reality. There's no problem here. In regulatory points of view, everything is correct. Caixa is doing that all the other banks do, so it's normal. But the impact was this, more than BRL 60 million and today we have this registration process in the registry office, right? But I think everything is in keeping. The impact that's happened in São Paulo and here is just Minha Casa, Minha Vida. I think it's nothing. It won't impact Direcional.
To add to this, it is important to stress, since this is something that has already been communicated and this is a midterm process, this has always been in our budget. So this is an impact. There is an impact here, but it is in our accounts here. There's no surprise here. Let's continue.
Perfect. Thank you.
Thank you. Now we go back to Rafael. Rafael?
Good morning, everybody. Thank you for the time. I have two questions here. The first one I'd like to see with you, if you could give us an update with regards to the price dynamics of the main products, because we've seen more developers here in São Paulo. We've seen a price increase of products. I'd like to see how you see this and also with regards to gross margin. Do you still see margin going to that level of 34%-35%? We see an inflationary environment still unstable, backlog margins still high, and you're talking about the acquisition of land plots below the average price that you had been doing in the last periods.
Also, I'd like to understand how you think with regards to all of this.
Rafael. When we look at our backlog margin, it went up 0.6% from one quarter to the other based on a base of BRL 1.9 billion in terms of backlog. When we look at the next quarters, the gross margin trend will remain strong with a slight increment. Not so significant, but we might have a slight increment because of the backlog margin's growth. Growing at 0.6% based on this inventory of BRL 1.9 billion has been done with very healthy margins. In terms of gross margin, it is solid. The trigger for us to approve a launch is here, is a gross margin of 34%, 35% something. I see in the next quarters our gross margins over this level.
I think the scale we have managed to reach is over what we imagined before with works under control, and we have benefited from the scale we have in each area we work in and our capacity to offer volume here to our suppliers. I think the scale that we're reaching most probably will lead our recurring gross margin to have to change and be over the 34%. The reality today says that the recurring level in three years' time will be over 34% in case the parameters of the program remains the same and close to what it is today. Today I am more comfortable with solid gross margins this quarter. Also with regards to inputs or products, we bought thousands of products. The most representative for our business is cement and steel, 7%, 8% of our cost.
Also the labor. With the products that are not labor, there was an increase of copper at 2%. It went up 10%, zero put, but then it drops and other products' price drops. There is no cost pressure here. I think the main, when we weigh one thing, one went up and the other drop, there's nothing. There's no problem where we should say to you, "Oh, we are concerned with a certain product that might impact our business." No, I think what must be monitored is the labor in São Paulo. I think this is what we have to monitor. I don't see a change in growth margin in the budgets that we have for our projects. But there's a point to monitor, right? Because there is impact. The cycle of our works and the labor is representative in our cost. But we have to monitor this.
I've been saying this for two years too. It is normal. It is our daily work. In terms of inputs or products, no, it is well controlled. One might increase and the other might drop. Commodities, the case of copper, it's part, it's our daily work. I think I talked about gross margin. I think we are all comfortable and everything is under control. We have a reasonable time before us with very healthy gross margin, well over the 34%, which is not recurring today. I have to say that the recurring is above this because of what we have been able to accomplish in the areas we are. We have benefited from here. Also you've seen sales expenses that are very controlled.
Since we're gaining scales in these areas, we've had a strong benefit of reduction of sales expenses, the cost of acquisition of clients. We have a conversion of prospects becoming clients, and this has grown. This generates value too, and we want to continue here gaining market share in the areas we already operate in and also new areas. Still we see a lot of synergy to capture in areas where our operations are recent. I think we have good perspectives here and in the following quarters when we look at today's scenarios and the variables we have today and how we analyze all of this. This is the conclusion of your question, Rafael.
Perfect. Thank you very much. Everything very clear.
Thank you, Rafael. Next question, Victor Tápia, UBS.
Good morning. First, I didn't see what Ricardo you said. I don't know if you talked more qualitatively speaking, the sales. The strong work you've been doing, how this has behaved in April, beginning of May, expectations for the quarter, in a qualitative way. Also trying to understand what could be a dilution of sales for 2024 and 2025. Because you're already doing this work of growing sales then[audio distortion].
Tápia, you're choppy because we lost the last.
We got to the dilution and an increment of sales that could be a reduction of sales expenses. That's where I got to. The second point of the questions, I have technical problems here. The second part of the question has to do with the G&A and the dilution. You had the bargaining, the payroll wage bargaining. We have payroll generation. I want to know how this can impact general and administrative expenses from here on.
With regards to sales, we are in a very efficient level in terms of sales expenses when we compare this to revenue. When we do sales expenses compared to sales, we have dilution to gain here. The gain of scale is relevant. This work we've been doing and what Ricardo has been doing in the beginning of the presentation. Going after an increase in productivity of our broker. This will allow us to dilute sales expenses. We have continuity here. It is difficult to price this and give it an expenses level here, but this seems to be the path. Another thing where you have dilution are our sales that are concentrated in stores. The greatest the inventory shelf around the stores, the greater the dilution in that store, and we've seen this happen, too.
Today, compared to 12 months ago, and looking forward, this is the path. Have more products in the different areas and a better sized inventory per point of sale. The difference is this, and it's difficult to price. G&A, the wage bargainings. The last ones negotiates are very close to inflation. The growth of our revenue has been very relevant, and it will go together with sales. In the last 12 months, sales grew more than the revenue, and the good part of the revenue was the backlog margin. The first quarter is not one we begin works with. We usually begin works at the end of the first quarter, and we speed up in the second and third quarter.
We will see a growth of revenue now in these next two quarters all the way to the end of the year because of works that have begun. Then we see a continuity of the reduction of administrative expenses. Ricardo, would you like to add to this?
I think you did cover everything here.
What about the payment compensation? If there is an impact here.
Yesterday, there was some news with regards to this. It seems to be a convergence between the legislative and the executive. We will see here. Apparently, this compensation, this payment will occur gradually in time. The impact will be low here, if it is so. I would say the impact for us of an eventual change from one day to the other would be BRL 12 million, BRL 15 million. But I do not think that this will be the most probable scenario. Deburdening is important for the sector. Our suppliers, they are deburdened.
There might be a change of costs, of works because of this. It is difficult to evaluate because we do not know what suppliers that lose costs. But from what we saw in terms of news, it is not something we should be concerned with at this moment. This will be gradual and there will not be any trauma here. From one day to the other. If it is gradual, this will be gradual in terms of problem. It would be more traumatic if things would happen from one day to the other, just suddenly, right, which would be complicated. So BRL 12 million, BRL 15 million is. But this is annual. But if it happens gradually in four years, it is okay. We will adapt here without any kind of change in margin.
Very clear. Thank you very much.
Thank you, Tápia. Next one, André Mazini , Citibank.
Hello, thank you for the call. Firstly, I would like to congratulate Paulo for the new CFO position. Congratulations. And two questions with regards to São Paulo. The first one, the approval in São Paulo with the new plan. They said that approvals are very slow in São Paulo, almost paralyzed, because of the change of new rules. The local government has to understand the new rules and the process is very slow, at least this year. Do you believe that this also happened in the [audio distortion] Direcional segment or for the upper income families?
The second one with regards to São Paulo, the HIS caps have increased 10% year-after-year. And also the local government seems to be more demanded, reforcing much more the income of the HIS buyer. It is very good for people who have done by the book like you, and also more verticalization for HIS, right? Do you believe that this new HIS that has grown will be a changer for net sales speed in São Paulo?
I think in my point of view, there is nothing that will really. It is going back to the silver bullet or game changer, in your words. I do not think there should be something this. I think São Paulo is a very competitive market and any benefit that comes from a change in the master plan ends up adjusting and becoming a benefit to the end buyer. It is a market that it is very close to the economic theory practice. I do not think there should be a gain of margin with regards to what we have today. The market is doing really well. Margins are solid.
The São Paulo market is balanced, and these changes will translate into benefits to the end consumer because of the supply and competition we have in the city. Approvals in São Paulo, we had launches in the first quarter. The projects were approved and within the normal schedule. Now in the second quarter, the fact that we do not have a strong dependence of Article 170, this is very positive. Our operations are resilient, right, to impact of change because of change in the master plan or any other thing that might impact the city isolatedly. We are not so subject to this in spite of the fact that São Paulo is 20% of our business, right? We have not noticed a problem where I can say it is very serious or where we have noticed something very significant.
On the other side, we have no launches postponed or delayed, right? We cannot say our pipeline of launches suffered an impact because of the change of the master plan or eventual adjustments of the technical team, right? I think we have to wait for me to be able to be more assertive to your answer. Perhaps I am not the best person to answer this because I can say it will not impact anything we projected in terms of launches.
Also, like in any other city in the country, we are very well distributed and no city is most relevant here. In case this is happening, everything will be okay. Technicians will adapt. São Paulo has a very qualified team. This is natural. We see this when there are changes in mandates, and then after time, things go back to normal. We are in a business that is not a quarterly cycle. It is more than a year cycle. It is not one or two-month adjustment, right, which would justify a change in position. We are in a long cycle. We report results every three months, and I think this is natural. For [Direcional] now, this is zero impact for us. Thank you.
I am very happy. Thank you for your congratulations. I am very animated, excited with this challenge. Thank you.
Thank you, André. We have no more questions here at the moment. I will give you the floor for the RI teams, and I will give the floor to Ricardo Ribeiro for his wrap-up.
I would like to thank you for your participation. Wonderful questions and answers. Thank you for the participation of so many people. It is wonderful to see the main points that you have tried to find more information with regards to our operations. This generates a lot of value. It brings about a series of provocations. We are very optimistic with our operations, but we have been able to address the most relevant points for the continuity of the improvements of our results and numbers. I think we are in this path. There is a lot to do, a lot to improve, but certainly we are very happy with the results we have delivered.
The whole team has done a fantastic work. I would like to congratulate the whole team. I think the whole thing is very gratifying and we hope to continue with this work. We will do our very best. We will make the greatest effort. We will always make the greatest effort, right? We will continue delivering the results you would like to see here in the company. Thank you very much and have a very good morning, everybody. A very good day.