Good morning, everyone. You are welcome to Lavvi's Conference Call for the Third Quarter of 2024. We would like to inform that all participants will be presented by Ralph Horn , Sandra Attie, CFO, and Francisco de Paula, IR Manager. We would like to inform that simultaneous interpretation is available in the platform. All you have to do is to click on the interpretation button and to choose the language of your preference. This conference is being recorded and will be available at the company's website at www.ri.lavvi.br, as well as the presentation here. We would also like to inform that all participants will be on listen-in mode only during the presentation. We will begin the Q&A session when further information will be made available.
Before proceeding, I would like to inform that forward-looking statements are based on the beliefs and assumptions of Lavvi management and on information currently available to the company. They involve risks, uncertainties, and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. You should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Lavvi and could cause results to differ materially from those expressed in such forward-looking statements.
Now I will turn over to Mr. Ralph Horn. Please, Mr. Ralph Horn, you may begin your presentation.
Well, good morning, everyone. I would like to thank you all for attending this meeting and say that it is an honor to have you with us on this meeting for the third quarter of 2024. Once again, we are very pleased with the company's performance. We achieved the best nine-month period in our history in terms of launches and sales. In these nine months of our operation, we produced a higher volume than in the entire year of 2023. In addition, we had record net revenue, both in a quarter and in the nine months. The gross margin has been growing, and the net margin remained very healthy.
Furthermore, we continue to distribute value to shareholders through the quarterly payment of dividends in this quarter. We are going beyond the mandatory minimum and including an additional amount to be paid this month. Finally, we are very excited about our most recent launch, which took place in October, Heaven BP, our biggest project of the year with BRL 1.2 billion. It is located close to Beneficência Portuguesa and other hospitals, including Paulista mall. Thank you for being here with us.
I turn over to Sandra.
Good morning, everyone. I will start on slide number five. As announced for the third quarter, we launched the Petra at Roque Petroni in partnership with a very famous design area with exclusive parts that will be part of the common area of our investments. In an area of over 3,000 sq m, we have one tower with a studio and another one with about 160- 200 sq m. In one month, we have sold 40%. We also launched Brás building with one tower, which has been sold 100%. We also opened the Barra Funda tower. With this tower, we reached almost 80% of our VGV sold. We are very happy with our performance, and we are confident with future launches. With these enterprises, we have closed the quarter with BRL 106 million.
In slide number seven, we can see the VGV, which is a little bit lower than the average of the previous quarters. On the other hand, we have overcome our results, and in the accumulated for the year, we had a growth of 91% in our launches and 126% in sales and the Lavvi percentage year-over-year. Once again, our VSO surprised us, and we sold well in the last months. We are very excited about the fourth quarter. In the next slide, we show you our inventory. We are very happy with it. We have delivered a Lavvi investment, and our inventory remains very low. Today, we only have five units there and two units in Moema. We can see that the deliveries anticipated for 2025, 2026, and 2027 have an average of 20% of our stock.
In slide number 10, we can see the Lumiere. The assembly was held in September, and we have sold 95%. We only have five units in the inventory, as mentioned in the previous slide, and two to be transferred. For next year, we have five deliveries with a VGV of BRL 1 billion. As we have seen, the LTV is healthy so that we can cope with times of high interest rates. Finally, in slide 11, we have our land bank. You can see the launches for the quarter. We had two partnerships with Cyrela in Beaches and in Bahia. Lavvi is a minority partner in these projects with 35% and 40%, respectively, the management will be held by our partners. We have closed the quarter with BRL 3.9 billion in our percentage.
I now turn over to Francisco for the financial results.
Thank you very much, Sandra. Good morning. I will start with slide number 13, where I will comment on how the excellent operating results are reflected in the audited accounting figures. Net revenue increased to 92% in the quarter, year-over-year, and it was a record both for the quarter and for the nine-month accumulated growth. In nine months, we grew 50%. The adjusted gross margin for interest was 33.9% in the quarter and 34.2% in the year-to-date, almost 1 pp above the same period in the previous year. Net income reached BRL 87 million in the quarter and BRL 223 million in nine months with a net margin of 22.9%. The ROE was 23%, very good when compared to our peers.
Now, on the bottom, in summary, we see that the result has grown. The margin remains good, close to 35%, and we spent BRL 14 million of cash in the quarter with all of our dividends paid in August. With that, we closed this period with a net cash of BRL 95 million in September, which is still very healthy.
Moving on to slide 14, we see revenue growing 50% in the nine months to record almost BRL 1 billion for the first time in our history. In this period, gross profit reached BRL 333 million, with an expansion of BRL 1 million in the year-to-date compared to 2023. When we look at the longer run, in this case nine months, and sometimes we analyze the last 12 months, we can see a more stable gross margin, and we grew almost 1 percentage point. In terms of the financial result, the financial result is in our favor, but not as much, and this reflects the impact of the interest rates.
In the beginning of the year, we had that, and we had a decrease of 28% in the cumulative of the year, but results are still favorable for the company. Overall, administrative expenses went up in the period significantly, but the revenue grew more, and therefore, in the accumulated for the year, they were kept stable, close to BRL 44 million. Commercial business went up significantly in the quarter, especially because of more expenses, marketing, among others, which are normal and expected for the moment we have in the company. We are launching a lot more than we did in the same period of 2023. They are growing and changing their levels.
Finally, on the right side, we can see net profit and the accumulated for the year with an excellent net growth of 22.9%. On the next slide 15, we present the data added up for the last 12 months. We always like to look at the last 12 months. In 12 months, we grew more than BRL 2 billion, which is a record for us. In the last 12 months, the net profit was 20%, which is a very healthy level. We can see recurring results with 25%, 29%, and for any of these columns, the net margin is very stable when compared to our peers.
Now in slide number 16, we have our returns. We are trying to keep high returns, as you can see here in the evolution of our graph. In the more recent period for September, the ROE reached 23%. Next slide, the backlog slide. We see a slight growth for BRL 2 billion resulting from sales already made. You all know what our mechanism is like, and according to our result, we are increasing sales. They have more than double when compared to the same period last year, and therefore, the revenue has been high, and the backlog also grows significantly. This margin of 34.5% represents almost BRL 700 million in gross profit to come. It is quite significant.
In slide 18, I will briefly mention our cash consumption. We like to analyze them according to our dividends. In fact, we spent BRL 15 million, BRL 14.4 million actually, or BRL 14.7 million in the accumulated for the year. We closed this period with BRL 95 million of free cash, and then in net cash. You can see that this negative of -5.8% is our net debt equity ratio, which reflects a net cash position for the company.
Finally, we are now on our last slide. The board approved this week the amount of BRL 80.6 million in dividends for the quarter's results added to dividends. You have BRL 20.6 million + BRL 60 million additional, totaling BRL 80.6 million, according to the schedule on the screen. This will be paid in November in accordance with our practice of distributing them quarterly at least 25%. Right now, we are going above that with an additional amount. In the last bullet, we noted that since 2021, after the IPO, when we started distributing our dividends and resales, we have almost BRL 630 million in value generation to our shareholders.
I will now close here and I open for Q&A.
We will now start our Q&A session for investors and analysts. In case you wish to ask any questions, please click on the Q&A icon on the lower Zoom bar and type your questions. To use the microphone, click Raise your hand. Please wait while we collect our questions. Our first question is from Mariangela Castro , Itaú BBA. Your microphone is open.
Good morning, everyone. Congratulations for the results, and thank you for taking my question. I have two questions. First of all, I understand funding. We can see funding decreasing a little bit, and Caixa has also limited that a little bit. I would like to know if that has affected the company and what you expect for the market. I also wanted to explore this recurring sales. When you sell a full tower to real estate funds, I know it makes sense, but this usually affects margin in some areas.
Would you please explain a little bit better to us what you are planning to do and whether you consider selling this to the end client? Could you please explore this strategy a little bit? Does it make sense? It would be useful to know.
Hello, Mariangela. Good morning, and thank you for your question. I will talk about the funding, and then Ralph will talk about the studios. Regarding the funding, the banks have been more selective to whom they are going to loan, and I am talking about companies. We have not seen any difficulties in obtaining funding for companies. Of course, the banks are not as flexible now. In the past, when funding was saved to use later, the banks will tell you to release the funding if you are not going to use it so that they can loan to other players. Other than that, other than this flexibility, we have had funding available for our projects.
Now, talking about physical persons, we have not had any difficulties. I always say that even though the interest rates are very high, we have a very healthy portfolio, and therefore, it has not been difficult to sell to our clients. Caixa Econômica, which has reduced its LTV to 60%, our 40%- 45% are within this range, and I do not see any difficulties. We are, though, monitoring. What I am delivering now is an enterprise that was launched in 2021 when I had a CDI of about two and a lot of anticipation.
What we are doing this year is monitor new launches to see what the LTV is going to be like and what the next trend is going to be, whether it is going to be 40% something or higher than that. We are watching closely so that we do not have any surprises in three years.
Hello, Mariangela. How are you doing?
Hello.
I wanted to mention something. These sales to funds was a transaction carried out 1.5 year ago. We are launching it now. From now on, we do not have anything that we anticipate that we will do like that. But if these studios are normal, it is more difficult to sell unless the location is very good. If it is very well located, we think they sell. But we go on a case-by-case basis. We have nothing that we anticipate that we will sell with credits. We did everything we had to do 1.5 year ago, and we have had five.
Well, perfect. It is very clear. What you mentioned about location, you mean it would be more difficult to sell for physical persons? When the location is very good, you sell to physical persons, and you sell well.
We just launched one near Beneficência Portuguesa with around 85 sq m, and we're selling everything. We're selling very strongly because of the location, because it's close to the hospital. The demand is almost certain because people want to be close to the hospital. We almost sold that to the fund, but we gave up because it's more profitable to sell for physical persons, and we did well. The liquidity was very good. We sold another one near the Anhangabaú subway station, and it sold well. When the business is very good, when the enterprise is very good, we sell well.
Thank you very much for your answers.
The next question is from Tainan Costa from UBS. Mr. Tainan, your microphone is open.
Good morning, everyone. I wanted to talk about the launching pipeline for 2025 so that I can better understand what we can expect from next year, if there's room for growth based on what you intend to have in 2024. Also in terms of strategy, how can we see this to low-income segments when we will have more difficulty to obtain credit? Thank you very much.
Well, good morning, Tainan. This is Francisco. Thank you very much for your question. I will start with the first one, and then I will turn over to Ralph. First question regarding the launch pipeline for 2025. We're very enthusiastic. Excellent conditions to work. We are already preparing them and preparing our schedules so that we can start heavily next year. In terms of the overall volume of all of the projects we're going to launch next year, they are already there. We're very enthusiastic about it.
In terms of volume, just to quantify them combined, we estimated BRL 2.5 billion in launches with our participation. In our participation, it is close to BRL 2.5 billion. More or less, in 2024, we will be delivering BRL 2.8 billion in launches. In terms of our participation, it will range between BRL 2.5 billion and BRL 3 billion. Even if the launches decrease in 2025 when compared to 2024, which was a very strong year, we believe that sales will continue growing. Even if the launches grow down marginally, the sales will continue growing, and this is very favorable for our revenue and net profit.
Hello, Tainan. How are you doing? Our strategy, Minha Casa, Minha Vida, is to grow slowly. We have to follow engineering. This is not something that we do overnight. We did really well on the first launch, and that was in November last year. Basically today, we have 80% already sold. Everything is under control. We're very enthusiastic. We will start with pre-sales in the region of Marajoara. The market is heated in this segment, and that's why we want to remain there. That's not our focus. We will have at least 20%-30% of our whole.
We will grow safely with no stress. We're not going to invest a lot of money in the operation because the operation pays for itself. To date, it is a good one. Regarding funding, we have not had any problems, as Sandra mentioned.
Perfect, Francisco. Thank you.
The next question comes from Rafael Rehder from Safra. Your microphone is now open.
Can you hear me?
Yes.
Well, thank you for the opportunity. I have two questions myself. The first one is a follow-up regarding deliveries. You said you have BRL 1 billion to deliver next year. I wanted to see how that will communicate with the cash generation that you foresee. Especially taking into account this extraordinary dividend payment. Also, in terms of capital allocation, I wanted to talk about plots a little bit more. You have a pipeline already, but in 2026, you are still buying. I wanted to know what the new dynamics are for the market and the size of plots, acquisition or purchase costs. I want to know if you have a lot that could come in the short term in your pipeline.
Hello, Rafael. Thank you for your questions. I will talk about deliveries. I mentioned five enterprises, BRL 1 billion of VGV with 40%-45% of LTV. We should not forget that we do not have debt. We will pay for our debts, and this number is already reflected in your cash generation. We are talking about spending cash between 2024 and 2025, especially because we will be buying plots. The figure went down to BRL 80 million to BRL 90 million for these two years.
I am talking about the next two years because when we buy plots, we do not know whether we will close the transactions this year or early next year. But in a two-year period, we will spend BRL 80 million to BRL 90 million.
Rafael, regarding the plots, we do have some things. It is difficult to buy plots. We always analyze prices and projects. When we think that something is very good, we will do everything possible to buy the plot. The São Paulo market has not stopped. It is heated. The higher middle class will buy if you have a good product. This year, we did well with our inventory and launches as well. If you ask me, I will say that we are enthusiastic, and we are not concerned. There are not that many people in our segment.
A lot of people are migrating. This segment is a bit slow, but we want to remain in the high middle class. We want to buy plots with middle to high level, and we will follow the same line.
Could you follow up on the purchase terms? Historically, you have been buying cash. I want to know if you will keep this strategy or if you work with exchanges.
When the plot is good, I do not make that call. There is competition involved. If we can buy using exchanges, I will. If the plot is very good, we will have to put money in. It does not depend on us. Of course, we start negotiating, offering exchanges, long-term payments. That is how we start our negotiations, and then we get what we get. But of course, the best thing is always to exchange and to pay in the longer run. We once had a trade, an exchange of plots, which was not very successful. It was not good. As things are right now, it would be best to try and do it instead of having to pay high interest rates.
Thank you very much.
Next question is from Mr. Herman Lee, from Bradesco BBI .
Good morning, Ralph, Sandra, Francisco. We have questions regarding dividends. You have announced BRL 0.31 for the quarter, BRL 1.30 for the year. These are very high and attractive levels. You already mentioned that you have a payout of 25%. I would like to know if this payout will increase next year, if you have enough margin for that.
Second question regarding leveraging. You had a slight increase with free cash, but is it a possibility for you to be more aggressive or the net percentage? Will you accelerate dividends? I just wanted to understand whether that is a possibility or not.
Hello, Herman. Regarding dividends, we will pay 25% quarterly. Always looking at our cash flow, our operation, not just something more specific, but we will look at the whole and then decide. Our base is 25%, but we evaluate it quarter after quarter. Regarding leveraging, we have a leverage of 8%- 10% of net debt, and it's usually around 8%- 10%. We think that it is healthy.
Thank you very much.
Our next question is from Mr. Elvis de Andrade from BTG Pactual.
Two questions. I don't know if you can open that, but I would like to know what the sales pace is for specific projects, if you foresee selling any launches this quarter. A second question, as to the side of the company and the launches in the fourth quarter with Lavvi, where the company will reach a VGV which is much higher than in previous years. I wanted to know what you think your challenges will be to keep this size of company. Is it more related to good plots, or if you're concerned about engineering points of sales? What are the challenges? Thank you very much.
Hello, Elvis. We did really well. BRL 1.2 billion of sales, so we are reaching 60 of sales. We only have some units left. In the other tower, out of 121, we have sold almost half. That's a very good region. Every time I launch there, we sell really well, so we're very enthusiastic. Regarding keeping what we're doing, it is a challenge. We had a very good year, and I think that is due to the purchase of plots, and our challenge is to buy again. We have to study the market so that we can repeat these results, but we are happy and enthusiastic about doing more.
We will try to keep the launch pace, and we will try to grow a little whenever the cash flow allows. If a plot-- You buy a plot now, but you only see the money back when you deliver the enterprise. But we will try to keep this strategy.
Excellent, Ralph. There's something about Heaven. I wanted to better understand what helped you have such good sales performance. Was it the product, the region that doesn't have a lot of offer? And also, if I'm not mistaken, you have a plot in the same region, another plot. So will this performance of Heaven make you a little bit more optimistic regarding this region?
Elvis, I've been in the market for many years, and we learned something in the past. There is an enterprise called Vereda Paraíso. I launched four towers. We sold them in a month. At the time, I launched another one, and then it sold, and then we sold another one. This history is something I keep in mind. I talked to our partners, and then they said they were not sure they would sell there. But when you work in a region and it works well, you're likely to repeat it. And that's why we were very confident that the region is very good, and it has confirmed to be good.
It's a neighborhood where it's very difficult to buy plots, but they have a demand there. There are so many hospitals nearby, and there aren't that many large plots. Some doctors also want to live there because they work in the hospitals. The next plot we have available in Paraíso, Rua Cubatão. It's a little bit bigger than here, but we believe it will be competitive. For us, it's excellent news. Once again, we'll have a big project with a big plot, good entertainment area. We have visited other areas. Of course, we have invested a lot in the plot. This is our model. We believe and hope we will do well.
Thank you very much.
Next question from Joao from XP Investimentos. Mr. Joao, your microphone is open.
Good morning, everyone. Thank you for the questions, and congratulations for the results. I wanted to ask you about the table. We talked a lot last quarter about it because of balance. I wanted to understand how you see this and how do you see the evolution. Also, according to what Sandra mentioned in terms of LTV reduction and whether that is a strategy for you to try to foment it to help with payments in the long run. I just wanted to understand whether there is a more relevant impact in terms of labor. I think an update would be really nice if you can. Thank you very much.
Regarding our tables, we don't choose that. The buyer chooses. But when they anticipate, we encourage them, and we tell them to give a higher initial payment. When we deal with a higher middle or upper middle class, that's easy, and it's good for us. But we do it on a client-by-client base. When we have upper middle class, they only buy with short tables. They have a lot of money available, and they pay a lot. In Heaven as well, and in the residential area, they like short tables. But in Petra, it's different. We go by the investment.
Sandra will talk a little bit about it now.
Hello. I wanted to complement Ralph's answer. When clients buy with a short one, they have a feeling that they are buying for less. If we think of a 7% interest rate, depending on the investment, the square meter is lower, and that encourages them to sell faster, which is good for us. Now, talking about expenses. We are now concerned about having specialized labor, rental of equipment. This is something that we've been discussing for a while.
Steel may go up, concrete as well, but we think that INCC will recover. That doesn't really worry us today. Our most concerned is with labor and equipment. That would have an impact on cost. We will try to pay for a part of our constructions. We launch one or two per quarter. We do it for part of our enterprises, and we are now evaluating carpentry. We have a pilot project following the example of the installations. I think that's it.
Excellent. I would like a quick follow-up. But in general, I do not see a lot of evolution. I would like to know if you consider to help foment sales, increase the discount rates a little bit. Is this something that you're considering?
Well, if you're asking me about a trend this year and the beginning of the year, we had a launch in Vila Prudente. I was monitoring it to see what the trend was going to be. This enterprise had 90% of LTV. We have to keep in mind that the studio tower that we sold will be enforced once we give the keys. We would have 40% of LTV. Palace, which was the next one, was atypical. Today it's 10%, but it's more to do with the niche of clients. The LTV is 10%. Then we have Petra, which is low. This is a trend that will be maintained, and we think that the 7% discount we're giving right now is good enough to be able to foment.
Some people think that we're losing money, but for us, it has to do with the quality of our portfolio, which makes it easier for us later on, and it's worthwhile.
Excellent. Thank you, Sandra and Ralph. Have a good day, all of you.
The next question comes in writing by Heloisa Cruz from Stoxos. She says, "Good morning. Congratulations for your results, and thank you for the dividend. Could you tell us a little bit about the type of plots you're trying to buy, size, neighborhood, type of project, and so on and so forth? I would also like to understand what clients have looked for in terms of quality products and where you understand the differentiation lies for such high sales."
I will repeat what I've been saying since the IPO. Large plots with entertainment areas, good plants. People do not want to have to drive their children around to take their lessons, study English, or do sports in the afternoon. So when they see that the building has all of that available, they want to buy, because that's the solution for their lives. 5,000 m, 6,000 m where there's good entertainment area. Also, we think that we will move on like this. Realtors prefer to sell to other clients, to smaller clients, instead of having to wait. People never stop buying plot. It can take six months, a year.
Today I have cash, but sometimes it takes them a long time. We've been able to use this strategy and hope that we will be able to continue like that. A lot of people don't like this strategy because it's risky. I have 10 with a very large VGV. We prefer to do that than having 30 with a low VGV. We want to offer that to our buyers.
If you have no further questions, our Q&A is now over, and we would like to turn over to Mr. Ralph Horn for his final considerations.
Thank you very much for your trust, for the shareholders. We remain very enthusiastic and focused. We want to continue growing and delivering results. Thank you all very much for your participation.
The conference is now over. We thank you all for your participation and wish you a wonderful afternoon.