Good morning, ladies and gentlemen, and thank you for holding. Welcome to Even's earnings call concerning the results of the first quarter of 2023. Here with us today are Mr. Leandro Melnick, Mr. Marcelo Dzik, and Mr. Tiago Krall. We would like to inform you that this event is being recorded and will have simultaneous translation into English. To select your preferred audio, click on the icon Interpretation. You can mute the original audio in Portuguese for a clearer sound. During the company's presentation, all participants will have their microphones on mute, and following that, we will begin the questions and answers session.
Before we proceed, we would like to clarify that any statements that might be made during this presentation regarding the company's business prospects, as well as its operating financial projections and goals, are based on the beliefs and assumptions held by Even's management and on information currently available. Forward-looking considerations are not a guarantee of performance and involve risk, uncertainties, and assumptions since they refer to future events and therefore depend on circumstances that may or may not happen. General economic conditions, industry conditions, and other operating factors may affect the company's future outcomes and may lead to results that materially differ from those expressing these forward-looking considerations. I will now give the floor to Mr. Marcelo Dzik. Mr. Dzik, you may proceed.
Good morning to you all. It is with great satisfaction that I present Even's results for the first quarter of 2023. With the goal of providing more transparency to Even's and Melnick's separate operations, the following figures refer to Even São Paulo, excluding Melnick's participation. In our release, you will find the details for the consolidated figures excluding Melnick. I would like to begin with the highlights for Even São Paulo. In slide number 4, we want to draw your attention to the reduction in inventory thanks to strong sales of remaining inventory as a direct result of the strategy adopted in 2022. Our deliveries remain at a high volume, and in this quarter, we delivered BRL 733 million, with a special mention to the residential units of our emblematic project, Fasano Itaim. Our net revenues grew 29% in relation to the first quarter of 2022, reaching BRL 326 million.
We reported a gross profit of BRL 87 million, a 57% growth in relation to the same period of last year, and a gross margin of 29%. The net income for São Paulo's operation was BRL 47 million, which represents an annualized ROE of 14%. We maintain a solid financial structure with a net debt corresponding to 5% of our equity in a cash position of BRL 554 million. Moving on to the next slide. In this quarter, we did not launch any project in São Paulo. We did, however, begin preparations for two launches in the second quarter with a PSV of around BRL 500 million Even share. In slide number 6, we present our sales performance. Our net inventory sales amounted to BRL 167 million, 27% higher than last year.
Concerning cancellations, the graph on the right-hand side of the page, we ended the quarter with BRL 48 million, which is in line with previous quarters. In spite of the significant increase in deliveries in these past months, it is worth noting that we still maintain very low default levels in our customer portfolio. In the next slide, you can see our deliveries. In this quarter, we delivered Open Marajoara and Fasano Residencial projects with a total PSV of BRL 733 million. The pictures of these projects evidence the high quality of the projects delivered by Even. In slide number 8, we break down our inventory. Our total inventory is BRL 1.8 billion in São Paulo, and only 13% of this inventory corresponds to concluded units.
Out of the inventory under construction, 77% will be delivered from 2024, and therefore, we have plenty of time to try to reach the best possible prices for our products. As for the deliveries in 2023, 64% are sold, as shown in the bar graph. Moving on to our land bank in slide 9. Even share present corresponds to BRL 4.9 billion, comprising 24 lots located in prime neighborhoods in the city of São Paulo, mainly in the south and west sides. In the first quarter, we bought one plot in partnership with RFM Incorporadora. It is located in Jardins neighborhood and has a PSV of BRL 261 million, of which BRL 65 million is Even share. It will strengthen our positioning in high-end projects. In slide 10, as a relevant part of our strategy, we present our solid capital structure.
We ended the quarter with a gross debt of BRL 627 million and a cash position of BRL 554 million, meaning a net debt to equity ratio of 5%. In the quarter, we consumed BRL 52 million in operating cash, mostly due to the payment for land. In addition, we paid out in January, BRL 31 million in dividends. In slide 11, we present our consolidated financial indicators. Net revenues in the quarter totaled BRL 625 million, a 36% increase in relation to the first quarter of 2022. We delivered a gross profit of BRL 138 million with an adjusted gross margin of 24% and net income of BRL 55 million in the quarter with a net margin of 12%, and an annualized ROE of 11%. I will now give the floor to Leandro Melnick, Even's CEO.
Good morning. We began the year with a clearer macro scenario than in 2022. Despite interest rates remaining high, the market has been displaying significantly better commercial results in this past month. Our performance in the quarter was positive. In addition to reducing our inventory and reach an important volume of deliveries, we had an increase in margin and a significant increase in net income, which keeps the company in a strong cash position and unleveraged. This result was achieved in a quarter when we did not launch any projects. However, Even has a highly qualified land bank, and our plan is to increase the number of launches in relation to last year. We did our planning for the company last year, very conservatively, in light of a scenario with many uncertainties presented in 2022.
This year, cautiously, and after analyzing the company's and the market's performance, we see the possibility of producing a positive outcome. The beginning of this year has also brought important results for the company. In this month, we have concluded the full delivery of Fasano Itaim, and we entered into a partnership with Faena to develop a project that will become a landmark in the city of São Paulo. Thank you. We will now begin the questions and answers.
We will now begin our Q&A session. You may ask questions by audio, by clicking on the Raise Hand icon, found at the bottom of your screen. At that moment, a request to activate your microphone will show on the screen, and then you must unmute your microphone to ask your question. To send your question by text, you must click on the Q&A icon at the bottom of your screen and type in your question. Our first question comes from Pedro Lobato, analyst for Bradesco BBI. Pedro, please, you may proceed.
Good morning. Thank you for the presentation. I have two points here. The first, we had a very strong first quarter regarding the operating results and in the segment. Can you tell me something about April, if it will follow the same trend? Looking at margins only for São Paulo, we had a considerable improvement in this quarter. But to understand if this is a question of mix or if it's a budget question, I would like to understand this improvement and what you expect for the rest of the year. Thank you.
Hello, Pedro. It's Dzik here. Pedro, we have just begun the second quarter, so you have some reference of what we had after the closing of the quarter. Talking about the market, we maintain our optimistic perspective. We think our products are performing well. As we said, we did not have launches, but we were expecting two projects with good expectations. Talking about the second quarter, the expectation is the same market at the same level as the first quarter. Regarding margins, we had an improvement, and we believe in a slow reconstruction of our margin, especially because of the change in the mix of sale. In 2022, our focus was very clear in selling studio units and part of our inventory in the affordable segment. Sales this year are more distributed along our total inventory. So we had an incremental improvement in our margins.
Thank you, Dzik.
Good morning. Thank you, Pedro, for your question. Our next question comes from Hugo Grassi from Citibank. Hugo, you may proceed.
Hello. Good morning. Thank you for your presentation. Thank you for taking my question. I would like, before anything, to give you some space so you can talk about this announcement about Faena. I think it's extremely relevant that you have this in your pipeline. It has repercussion. Brazil Journal talked about this recently. So I'd like to understand what you expect from this project. When and under what conditions it will be launched? Besides that, in a more general way, what do you see, what do you need to see in the market and performance for you to feel confident and motivated to follow on with your pipeline, in terms of speed of sales for each project? What kind of discount, what kind of trigger you expect to keep launching? On the other hand, what would make you stop launching?
Leandro here. Thank you for your question. First point, the Faena. It was a very important partnership for Even, and it is within a context that is very important to mention. We are positioning at a high added value project in the most prime neighborhoods of São Paulo. We have been building the last few years to concentrate our work, our operation, this kind of segment. We understand it is the company's profile, and we can bring in better results. We delivered Fasano, which has the same characteristics, and Faena is a brand that we have studied quite a lot. We have worked a lot on this. It is a hotel that brings with it a history of transformation of the regions, of a lot of culture, high gastronomy. We understand that this complements the high-end residential projects as we have conceived it. It is a very special hotel.
We are very happy in entering into this partnership. We understand this will be a very successful project. It is a very big project. It is a very important project, but it is part of a larger strategy of Even's positioning itself in projects with these characteristics of projects in very prime locations with a high value added. Talking about the market of launches, we are very disciplined in terms of our strategy. Last year, we made a choice, a very conservative choice. We saw a year as a lot of uncertainties. The macro scenario this year is still challenging, but it is different from 2022. COVID was still impacting and affecting our society. The war that started in Europe. It was an electoral year in Brazil. Now in 2023, the scenario is clearer. It presents its difficulties, but it is clearer.
What we are planning is exactly what you asked. We have been following quarter after quarter, project after project, and what is good in our segment is that every project we launch, we are able to launch it and analyze its performance to plan to then decide next steps. Our main points for analysis is the performance of inventory sales and the performance of launches. As this is going well, the first quarter has shown a very good performance in inventory sales. We see a great possibility of a good number of launches. We have very good projects at an advanced stage of approval. Quarter after quarter, we are going to update this, especially considering these two factors, the speed of launches and the performance of each launch in our inventory to continue the subsequent launches.
Thank you.
Thank you, Hugo, for your question. Our next question comes from Matheus Meloni for Santander. Matheus, you may proceed.
Hello. Thank you for taking my question. Here on our side, I would like to understand the sales of inventory, if you are going to keep this strategy, and also the issue of discounts. Both discounts on the list price and the discounts on the transfer.
Hello, Matheus. It is Dzik here. Our strategy continues. We think it is appropriate to our projects, our positioning in the high-end segment. We have a very low percentage of concluded units inventory, and we are going to work on this project in the time we have to add as much value as possible. It is part of our strategy. We have maybe some exception. It was a slightly more aggressive strategy in 2022, especially regarding affordable segment and compact units, because of the situation of the interest rates in the market. We are going to work on our young, new inventory that has more added value, and it will take time to absorb as much value as possible for the company.
Only complementing a point here that you mentioned, because our inventory is new, they are going to become concluded units inventory in a long window of time until the conclusion of this inventory. This brings us the opportunity to work with more calm, the price, and the speed. We have been trying to get the best price possible and building strategies to enable us to recover the price. The prices recover the margins that has been affected, especially in that moment when the INCC inflation grew too much, and the margins were squeezed. Last year, I am just reinforcing what Dzik said. We concentrated sales in the inventory that, let us call it more difficult. Now we are going after more tranquility because our inventory is newer, so a better balance between margin and price.
Thank you.
Thank you, Matheus Meloni, for your question. Our next question is from Igor Gomes, analyst for XP. Igor, you may proceed.
Hello, everyone. Thank you for the presentation. I have two questions. One is a follow-up to what Leandro Melnick was saying, to understand where the company's head is at when we look at speed of sales vis-a-vis gain of margins. We can see that with these higher interest rates, what the priority of the company is in this trade-off. The second regard is concerning cancellation that I thought was a little higher. I would like to understand if it is something you see that is only the moment, or if this is because of a more difficult macro scenario.
I will begin here, and then Dzik will talk about cancellations. No question, this is a balance. There is a clear recipe, and this is a consequence of what we have been building together with the market. We have a strategy that is very strong, that has been widely discussed in the company. The same way we have a commercial structure. We work with the conception of these products, which is looking to raise the price and the margin for this project. We, at the level of the SPEs, try to go after projects like Arbo in the neighborhood of Perdizes, Platô, Fasano, we have just delivered. These have been projects that were different.
We are moving to the highest price per square meter in the region. We have been developing projects in lots that are well located, and they are a huge area. We can develop a product for which the supply is very low. It is a region that has a good infrastructure that is super valued now. We have seen many clubs that start growing after COVID. Our development thesis is to go after projects that are looking for land that allow us to be in places that are highly valued, where there is a high demand, where they are differentiated projects from the competition. There has been a moment, I have already mentioned this, that margin was very lower because the costs went higher than the capacity of the buyer.
And now we have been searching this, we have been going after this balance, and the market has been responding. Working on a long-term strategy of focusing our more difficult inventory, which allows us to follow this strategy of having our inventory newer, younger, as Dzik mentioned. We can implement a strategy of going after better prices. Following this balance, we see this month by month. We are being trying to improve margins, but if the market is stagnated, then we change course. But these first three or four months, we have been able to keep the speed of sales that we think is appropriate, looking for recovery in price.
Hello, Igor. It's Dzik here to complement what Leandro said, talking about cancellations. If you look at an absolute number of cancellation, it has been at a reasonably stable level considering the past quarters, in spite of the great volume of deliveries we have had. We continue. We do not see any surprises here in terms of cancellation. Our portfolio is very healthy. We have some oscillation here and there, but we see a slightly lower level in these last two quarters. But the important is to consider that our portfolio is very healthy, and we do not foresee any surprise in this item.
Thank you.
Thank you, Igor, for your question. Our next question is from Rafael Rehder, analyst for Safra. Rafael, you may proceed.
Good morning. Thank you for taking my question. I would like to have a follow-up regarding deliveries. As you said, you have a more significant volume of deliveries. And thinking in this scenario, with interest rates a little higher, if you see if there's some projects that may be more restricted in terms of the transference of financing. Also ask you how you see the cash flow for the year. If this quarter, you have had some great relief in terms of cash position. How you see it?
Hello, Rafael, it's Dzik here. We have been going through in these past few quarters with a high volume of deliveries. And linking this to the issue of cancellations. We have been guiding the company, and we have been concentrating in this high-end segment. We have Say they make a huge down payment until delivery of the keys. Normally they pay off for the project with their own resources, so we have an LTV that's lower. In this segment, we haven't had any problems.
Maybe some clients that opted for getting some loan, seeing an opportunity in the market. But we have some affordable projects with a lower ticket. The difference in the interest rates in this case will make us work a little more. We are going to have a process of transfer that is more difficult, but it's a smaller part of our portfolio. As I said, it's very solid. And currently, we do not have any difficulty, any obstacle here, and we don't see any difficulty until the end of the year.
Thank you, Dzik. And regarding cash generation?
Cash generation will depend on our land acquisition, but the level we have had this quarter will be roughly the same level we are going to have in the next quarters. But it will depend on any acquisitions we might make and the prospect of launches. We expect good things for the year, but it will depend on the next quarters, our next steps to confirm this.
Thank you.
Thank you, Rafael, for your question. Our next question comes from Hugo Grassi from Citi. Please, Hugo, you may proceed.
Hello, it is me again. I would like to follow up, talking about the prospect, Even prospects, the clients. I would like to hear from you. If you have been talking about the competition, if you can talk about this segment of upper income, higher income segment, what the strategy is, how you see the volume of launches evolving, the level of inventory for São Paulo City. If you have seen some demand decreasing a little, this financing to company. Especially for lower I would like to see the quality of how you see this in terms of launch.
Let me start with a more qualitative view, and Dzik will talk about the data more. Since last year, we have seen these high interest rates, and this has been increasing and concentrating the high- end segment. We have some companies that this is already in their DNA, it is part of their natural strategy. We have seen companies that end up migrating to this segment because it is a more segment that theoretically is more protected. I have seen this in other moments, that because the high income, because they have more power to choose, they choose the property with a series of characteristics. It is not because the segment is good that the project will be good. This client wants a project with certain characteristics that is not easy to provide. The place where the view is great, with some architectural solutions.
In this race of high-end segment, just because of a macro scenario, we see some real estate solutions that are just average. We see some projects doing very well and some projects doing not so well. It is not just a question of interest rate. In the high-end segment, they have a more qualitative view of the project. There is more a discrepancy in the results that is directly related to the quality of the project itself. We have a good number of launches the customer can choose there. We are very pleased with our performance. Even is being following its purpose of producing unique projects and making partnerships that will bring elements that the upper income and the high-end segment demand. In a general view of the market, we see projects performing very well and project that are just average, not performing so well.
It is a conjunction of two factors. You have the question of the high interest rate, but you have the other characteristic of the high-end client, that the characteristics of the products are more important than macroeconomic scenario.
Hello. Complementing Leandro. We see the market that is more cautious in terms of volume of launches. Our market is extremely seasonal, so the first quarter is less representative in terms of launches. But if we compare with the first quarter of last year, we see a decrease of 25%. It is a little bit of the environment, it is a little bit of credit crunch, especially average size companies. But we see the market more cautious. The city has a very low level of concluded units inventory, so we monitor this very closely in absolute numbers and especially in relative numbers. São Paulo does not have a high volume of concluded inventory.
It's kind of an inventory that's more complicated, which probably require more discounts. Detailing this, breaking this down a little more, the high end is on average selling well. We see that the customer is more protected against these issues of inflation, high interest rate. The market's selling well, but in the higher end tail of the market. We see project that's on average selling well. We see the unique projects that have differentiating factors performing very well. With a few figures on what Leandro said.
Excellent. Thank you and congratulations.
Thank you, Hugo, for your question. We remind you that to ask questions by audio, you must click on the Raise Hand icon at the bottom of your screen. To send your question by chat, click on the Q&A icon and type in your question. It's also at the bottom of the screen. The Q&A session is now closed. We would like now to give the floor back to Mr. Dzik for his final remarks.
Thank you all for participating. Partners, analysts, market investors. Also our team at Even and the investor relations team is at your disposal for any doubts you might have, any questions you might have. Even's webinar is now concluded. We thank you all for your participation, and have a good day.