Earnings Call: Q2 2021

Aug 13, 2021

Good morning, 1 and all, and welcome to EasyTEST's Results Presentation for the Q2 of 2021. Please note that this call is being recorded and that all participants are in listening only mode. By the end of this presentation, we will begin a Q and A session when future discussion will be given. In case any of you may need any assistance over the call, please let us know through the chat box. In case you have any connection issue, you may reuse the same web link or ID to return to the presentation. You may find that link and ID as well as the slides for this presentation at our website, ir. Aeditec. Com. Br. Before we start, we'd like to mention that any statements during this call pertaining to EasyTech's business projections, Operational and financial targets are based on management's beliefs and premises as well as on currently available information. Future considerations do not constitute an assumption to outperformance. They involve risks, uncertainties and premises. Investors may take into account that general economic conditions, industry or operational circumstances may ultimately affect Ezeitel's future performance. They may cause the company's results to differ materially from those expressed in those forward statements. I am Pedro Lorenzo, EZYTech's Investor Relations Coordinator. Along with me to talk about the company's results In this presentation, I have here Mr. Henry Fugaza, our CFO, Investor Relations Officer. Starting our presentation, let's move to the next slide where we are going to talk about what we launched this quarter. During the 1st semester of 2021, Editec announced the launches of 3 products inside the city of Sao Paulo. In the Q1, we launched ID ParaUs, a product of RMB 28,000,000 focused on smart leading units in Aquinasama. This product is already 52% sold. In the Q2, we launched Dreamview Sky Resort and Easy Infinite projects. The first one is a minimum income project with a dollars 253,000,000 EPSB located in Huyperdense that was launched as soon as the sales stand will reopen in April. The second one was announced on the last day of the quarter and it is a high income project of BRL 675,000,000 in the Ice ETSB. We believe that this product will become a new icon for the city of Sao Paulo located in Paraiso besides the IBM tower. Last but not least, at a subsequent event, We launched the Arcadio project, another high income project in the group labor with BRL460 BRL60 1,000,000 in DSP. It is important to mention that with all of these launches, the company has reached 50% of implicit guidance for 2021. Now moving to the next slide, Following our operational performances, we can see that the gross sales have increased 25% from the first to the Q2, motivated by an increment in sales of ready and under construction inventory. The main reason for this increment is the the main reason for this is the increment of the Construction Inflation Index, also known as INCC, making clients be more likely to make agreements if you break fixed an index then being exposed to the construction inflation. This quarter, our consolidation have grown to BRL 39,000,000 but are still aligned with the historical volumes and the majority, Approximately 40% of these cancellations are, in fact, transfers, downgrades or upgrades of units. Talking about our land bank, we can see that this quarter we didn't make any acquisition of new lands, But due to the inflation and changes in some products, we finalized the quarter with a management position close to the previous one. As you can see in the chart in the bottom right, the majority of this land bank is well located in premium zones of the city of Sao Paulo. We are still pursuing to add the lands that are now as options in our land bank. Most of them already have an agreement. With a total of €30,000,000 for future products. The company covers more than 3 years of launches and we are driven to only looking for opportunities These are special and aligned with our historical financial results. Moving to the next slide, to the slide about our inventory. We can see an increment in the volume of launches under of the volume of inventory of launches and under construction units, especially in the south zone of Sao Paulo, where the company has made majority of these recent launches. Indeed, the volume of ready inventory is still concentrated in Guaruru, more specifically in the Cizal de Mayo project, but it has been shrinking significantly in the last quarters. We believe that this red inventory We will only start to grow again in 2022 when the products are when the products that were launched and 2018 will be concluded. Now our efforts are now in preparing the launches for the next months. As a preview, for the Q3 of 2021, We have in the top left in the slide the Alta Vista project with a mid high project with 60% Isitex share Located in Sharpe Santanoi, we have an estimated PSV of BRL 185,000,000. The other one in the bottom of the slide is a massive project for the middle income client, a product near the Revolodino Polygonal, very similar to the Cidade Maya project that was launched in Uaruix in 2012, But inside the city of Sao Paulo, it comes with 897 units, making an estimated PSV of BRL729 1,000,000. Now I will give the word to Mr. Emilio Fugada to collect the company's financial results. Please, Mr. Emilio? Thank you very much, Pedro. Hello, everyone. It's a pleasure to be here. Conference call about the Q2 2021. Financial performance, Slide number 9. Let's start with net revenue. Net revenue came at BRL 289,000,000, 48% and more than the 1st Q2001 and something around 80% more than the 2nd Q2020. It's important to bear in mind that units coming units sold coming from the performance side means that the recognition of the revenues are on time in this in our balance sheet. Let me remind you that the pace of the construction are okay in the second quarter, better than the Q1 of 20 And the Q1 is specifically because there were not stops, there were not hard stops in our construction sites given the pandemic outbreak. More Revenues, more net revenues means that the volume of gross profit is better than the 1st Q. And better than that, Gross margin came at 46%, 46% is about 4 percentage points better than 1Q and even better, 6 percentage points from the full year 2020. Let me say a little bit deeper about this specific subject. When you think about the second half 2020, you can understand that margins dropped a little bit because of the increment in construction costs. Increment in construction costs means that we're retiring that the costs were rising and the inflation index for the construction We're not showing this increment in the same path. That can be explained because The volume of the construction, kind of construction we have, we got here in the city simply because the index, the measure of this index is much more related to houses, a townhouses or even buildings up to 8 floors. There is not the type or even the Projects of over 40,000 square meters of private area, more than 60 600 or 5 or €600,000,000 or €600,000,000 each one. So it's a little bit different. And these inflations would be more, I would say, can match a little bit better in the first half twenty twenty one and that's why we can see margins improving gross margins improving a little bit in the second quarter. The gross margin expenses, the Highlight here is BRL 15,000,000 of sales extended in Publicis. The price Mr. Pedro mentioned before, Vandelier's unique garden is a project that we spend something around BRL 6,000,000 to start doing the wholesale expense. And this is booked in our Q2. So more selling expenses because we have been incrementing the volume of launches in the coming quarters. G and A came at BRL 28,000,000 pretty much in line Q on Q in the next in the last, I'm sorry, 2 quarters that's important, but because of more volume of net revenues, The relation between J and A expenses and revenues are getting better a little bit to 10%. On Page number 10, let's start with financial results. Financial results came in line with the Q1, BRL 46,000,000. The bright side is, so financial result is getting a little bit lower, is coming to a stage a little bit lower compared to the operational results. It's important to bear in mind that the majority of this financial results is supported by Our portfolio of proposed receivables, financing our clients ITP plus 10% to 12% yearly, The amount of ITP in the last 6 months were pretty much higher or higher than ever. And we do expect to see the same pattern for the next for the coming quarters. Terms of equity income, BRL 26,000,000 was higher than the Q1, higher than the 2nd Q1 year ago. That's because in the Q4 2020, we launched 3 projects in partnership and those projects were recognized in the Q2. Those products were signature by us, the Akimasome, the is south of Sao Paulo, it's a very well sold project and it's a high end project, apartments of almost 100 square meters, so by something around the 12,000 to 13,000 reais per square meter. The second one was Maria Ubudubaca. Ubudubaca is a low income product, Miya Cardanias Visa. It's a partnership with VivaZ, belonging to Sirela, fifty-fifty. And lastly, We have Itarpaca, it's Zone of Sao Paulo. It's a mid I mean, high end projects, I suppose to say that we got 10 more launches on the same region, on the same neighborhood, Aperitita, Artemorca. This is a product shown by Over BRL 10,000 for Esplanente, very well sold so far. So all in all, the projects represented a BRL 26,000,000, 19% of the whole net income for this quarter. Finally, the net income was BRL 100 BRL 39,000,000. All in for the half twenty twenty one, something like BRL 212,000,000, I imported the increment compared to 1 year ago, so more than 100% than 1 year ago and subs in around 90% compared to the 1st Q. Starting 48% Margin, net margin for this company supported by obviously financial results, incremental gross margin and an improvement for this quarter in equity income. It's important to understand the gross margin to come. The backlog margin is something around 44%. The variation of less than 1% from the Q1 to 2nd Q is mostly because There was a recognition of the Chicaza, Chuseco de Paz, a low end project, a project that we launched in the city of Sao Paulo, something around 25 miles from our headquarters in a very far Eastern of Sao Paulo. If you know, it's a project with very good gross margin, but obviously little bit worse than or lower than the average margin of this company and that's why there was a variation so 45% to 44% this quarter specifically. Let's go to Slide number 11. Slide number 11 I can show you the bottom line of the portfolio receivables I'm sorry, the receivables from portfolio units. The first half, we ended up in BRL 451,000,000 as something around 1300 units under management from this company are provided financing to our clients. The volume of payments we haven't received So far, it's about BRL 135,000,000,000, mostly because there was a transition from Easy to export portfolio to the commercial banks. Obviously, I think it's important to remind that even You know guys that the basis we're seeing in Brazil is growing a little bit from 2% The beginning of this year as you something around 5.25 percent, but The mortgage rates are not increasing at the same time. So, So far, it's very well competitive for the clients that has a loan to value low enough and with an incremental possibilities to make this transition to the banks in order to avoid ITP plus 10, to pay, targeting around 7% to 8% fixed rates. This is a movement that we don't expect to increase in the next coming quarters, specifically because their mortgage rates increase in analytics and the volume of people we have been seeing during this movement are majority coming from the 2013, 2014, some years that we made these originations And nowadays, they have a loan to value low enough to I would say to make this happen. On slide on Page number 12, financial Net profit in the first half was an exciting 48.5% gross margin. The majority of the projects Launches in Fiticasa are 1.5 years to 2 years. So some of them are going to be delivered by the end of this year. That's important. But 25% can drive us to a return on equity of almost 16%. So the total amount of equity coming from the company is about BRL 356 BN AI, so the construction of return is down 16%. Finally, Gentlemen, let's go to Slide on Page number 15. So I can now show you the situation of Our balance sheet, the shareholders' equity is now again to a point of a call of BRL 3,000,000,000 In terms of liabilities, financial liabilities, only BRL 11,000,000 coming from Project Finance. So even talking about the dividends, the dividends paid for this company approved by the general meaning our shareholders As happened in last April, we have already paid, so we paid something around 15 days after the general meeting. So BRL 96,000,000, there is no more debt with our shareholders. And the results the Q2 results is driving us to with an equity of something around the level of sale. From the assets, the main highlights, I would say, the land bank. So when Pedro, Stefano mentioned before about something around 11,000,000,000 of land bank already booked in our accountancy. It means that the cost of this land bank is about BRL 1,200,000,000. As we discussed, Arcelor, one of our vice presidents said before, this is land bank by cost. This is not the fair value of this land bank. Nowadays, the fair value, given the inflation, given the The new values of the properties, specifically Sao Paulo, nowadays is worth more than BRL 2,000,000,000 in a land bank like this one. In terms of receivables, something around BRL 1,100,000,000. In terms of inventory, ready inventory or under construction, something around BRL 150,000,000. Let me only highlight that the value inventory is one of the bright side of the results and the sales in the last, I would say, 2 years. Nowadays, it's coming to an end. So less than 12% of the whole inventory. So in inventory, Majority of that is the middle income segments and the volume of sales are coming, The majority of that because of the mortgages, rates provided by the financial agents to room right now. But the data that we are in construction right now is one of the highlights of this company because it's coming from the mid high and high end with margins above 40%. So what do we expect for the next coming quarters is a very, I would say, We have controlled this operation with a very interesting or quite interesting amount of launches and the kind of launches Launches that are very well known by this company, like this unique garden, middle income segment, mid I suspect in a very consistent neighborhood, a project like New One, a project that definitely is again changing for that neighborhood for that region of Sao Paulo. So what we expect More definitely more good results supported by the margins with the same track record. So thank you very much, Tocqueville, and we are completely available for any further questions. Thank you very much. Thank you, Emilio. We will now open the call for a Q and A session. In case there is any, We will get questions for our sell side analysts first and then pick up questions from the chat box. You can use or you can maybe use the raise hand button.