Good morning. Welcome to Lavvi's conference call to announce the results of the first quarter of 2024. The presentation and comments about its performance will be presented by Mr. Ralph Horn, Chief Executive Officer, Sandra Attie, Chief Financial Officer, and Francisco de Paula, IR Manager. There is simultaneous interpretation available at the platform. To access, click on the button "interpretation" on the lower portion of your screen and choose your preferred language. This conference call is being recorded and will be available at the company's investor relations website, www.ri.lavvi.com.br, as well as the slides here presented. All participants will be connected in listen-only mode during the company's presentation. Then we are going to start a questions and answer session when further instructions will be provided.
Before continuing, we would like to reinforce that forward-looking statements are based on the beliefs and assumptions of Lavvi's management, and they are based on information currently available to the company's management. Forward-looking statements may involve risks and uncertainties because they refer to future events that therefore depend on circumstances that may or may not occur. Investors, analysts, and journalists should consider that events related to the macroeconomic environment, the segment, and other economic factors may lead the results to be materially different from those expressed in such forward-looking statements. To start the presentation, we are going to give the floor to Mr. Ralph Horn. Mr. Ralph, please.
Good morning, everyone. First of all, I would like to thank you all. It's an honor to have you on this conference call to announce the results of the first quarter of 2024. We are very pleased with the company's performance in this first quarter, both in its operations, where we grew in launches and sales when compared to the year before. Also in accounting results, where profits grew even more at a strong three-digit level. A highlight is the launch of Alive, a very large project with almost 20,000 sqm . So the project's a great success. When we started sales, there was a line of customers at the sales booth already early in the morning. With a complete leisure area, we have partnered with some service providers such as the Red Balloon English School, Sports Advisory Services, and others. The launch's sales strength, together with a good performance of the inventory, boosted our results. They drove our SOS to 54% over the past 12 months, which is consistently strong.
They boosted our accounting revenue, which for the first time exceeded BRL 1 billion in the 12-month period. With a net margin of 25%, Lavvi remains its position among the most profitable companies in its industry. In addition, we continue to distribute payouts to shareholders through the quarterly payment of dividends. As for the land bank, we have acquired a new plot of land through the company Novvo, which will be used in the economy segment. If all goes well, the launch is going to be later this year. We would also like to highlight that we have strengthened our cash position issues of corporate CRI with a gross amount of BRL 220 million. Finally, with great products already in-house to work on this year of 2024, we want to continue on delighting our customers with each launch. Now I would like to give the floor to Sandra. Thank you.
Thank you, Ralph. Now I am going to talk about the operational results. On page seven, another launch success. As Ralph said, we continue our commitment of charming our customers. We launched in Q1 the Alive project in São Paulo with a potential SOS of BRL 20 million. It is residential with flats of different footage. It is a wonderful leisure area, a very large pool, covered pool, sports court, sauna. It is like a resort. The product was very well accepted, and in less of one month, we sold 60%, including the studio tower, sold to a fund, but which has not yet been booked. In terms of launches and sales, we launched BRL 820 million, 88% growth as compared to Q1 2023, and we sold BRL 803 million, 245% compared to Q1 2023.
If we compare the last 12 months that ended in Q1 2023/2024, we had a 20% growth in launches and 54% growth in sales in Lavvi's percentage. Once again, we have reached a great SOS of 54% in the last 12 months. This SOS has remained quarter after quarter, close to 50%, as you can see on the next slide. On slide number eight, you can see the breakdown of our inventory. So it has remained stable with a good pace of sales of Alive and inventory. Even though we launched BRL 820 million, we kept the inventory at BRL 1.8 billion. With the recent delivery of Wonder by Praças, we closed with 14 ready units, less than 1% of the total. At the end of Q1, we had 96% of this project already sold between settlements and transfers.
In addition to the low percentage of ready inventory, almost 60% of our inventory as Lavvi's percentage comes from launches after 2023. On average, our projects have 85% of its units sold. Now, going to the next slide about the land bank. In Q1 2024, we bought the second plot of land for the segment, Minha Casa, Minha Vida, in the southern region of the city of São Paulo. We closed the quarter with a land bank of BRL 6.6 billion of potential PSV of BRL 4.7 as Lavvi's percentage, which is sufficient to support our launches in 2024 and 2025. On slide number 10, as a follow-on to the or a subsequent event to the first quarter, we announced the launch of Palace. We got to almost BRL 1 billion launch this year in the company's percentage, which represents 65% of everything that we launched during the entire year of 2023. Now, I would like to give it over to Francisco de Paula to talk about the financial results.
Thank you, Sandra. Good morning, everyone. We are on slide 12. I will talk about the very good accounting results and how we got to it. Net revenue up by 79% year-on-year, gross margin going up by 5% year-on-year. Net income with a three-digit growth. All of these are very strong data points that together led to an eight-point expansion in the net margin year-on-year. ROE, as a consequence, continued to grow, and at this level above 25% is more than twice as much as we had in 2022, which is quite significant.
Our backlog result grew with a gross margin of 36.6%, which is very healthy. The company is still burning cash, BRL 70 million, but we have a good net cash position on March 30th amounting to BRL 70 million. Moving to slide 13. Revenue exceeded BRL 1 billion in the last 12 months. Gross margin was favored by the sales mix in the quarter. In this manner, it reached 35% in a 12-month period. The net investment income remained flat year-over-year, as you can see on the chart, as G&A have grown strongly. This is true, but they still continue to go down as a percentage of revenue, which has been growing even more.
Talking about commercial expenses or sales expenses in the middle below, with an increase of 25%, reflects especially the higher volume of launches that we have for this year, which should affect our expenses with sales, both marketing and sales. The strong growth is a consequence of everything that has been said so far. Now we can move to the next slide, where I am going to explain this better. On slide 14, in addition to talking about the BRL 1 billion revenue. We are going to zoom in on the right-hand side of the slide. If you look at net margin, it is consistently above 20% for a few years now, actually since our IPO in 2020. The strong level of net margins certainly makes Lavvi one of the most profitable in its industry.
Moving to slide 15, you can see how net margins have resulted in increasing ROE quarter after quarter, reaching 22% at the end of the first quarter of 2021. On slide 16, I have already said before that the backlog revenue has grown, but it is important for us to note this backlog margin. So an evolution of more than two percentage points year-on-year of 35.5% to 36.5% this year as compared to last year. Going to slide 17, and we are getting to the end. I would like to highlight the increase in the long-term debt as well as the increase in our bonds. As Ralph said in the beginning, they reflect the success of our issuance in February this year, amounting to approximately BRL 220 million.
On the last line of the table, you can see that the ratio net debt and equity is very good with a position of net cash, and then very good. Lastly, this is our last slide number 18. Here, the board of directors has approved in its meeting the payout of BRL 16 million of dividends relative to the results of the first quarter. This is going to be paid this million, as you can see on the slide, continuing our policy and practice of paying out dividends every quarter. It is almost BRL 530 million, approximately BRL 2.63 per share, in payout of dividends to shareholders when we started paying out dividends. I end now, and now we can open our Q&A session. Thank you so much. We are now going to start our questions and answer session.
If you want to ask a question, please click on the Q&A icon and type in your question. If you want to ask questions through the microphone, click on Raise Hand button. Our first question comes from Mr. Elvis Credendio from BTG . Please, Mr. Elvis, your microphone is open.
Good morning. We have two questions. First is tax. What is going to be the effect of the new proposal in terms of average ticket? Your perceptions would be great. The other one is more related to launches and the most recent phase of Brás that went very well. What do you have in the pipeline for the rest of the year?
Hi, Elvis. Good morning. Thank you for the question. I do not know whether I will be able to give you a very accurate answer, because there is a lot of uncertainty. The tax reform was supposed to simplify payment of taxes by creating a single tax, also without changing or increasing what we pay. What we are seeing for our industry, especially in medium and high standard properties, this is not applicable. This did not happen. We had something that was simple. Now it is very complex, and I need to admit that we do not know yet. A lot is uncertain. We do not know what is going to be the average rate, tax rate. It can change, 26.5% reference amount. To see how this definition is going to be, sales amounts, INCC, transition rules.
Well, there is a lot yet to happen and to be defined so that we can understand better the tax reform. Then, for example, what we can use at the cost of construction and whether we can use this in credit. In the end, we have kind of a macro calculation with average amounts of our average tickets, and this may represent or double our hedge from 4% to 8%. But this is very much preliminary. It is temporary. I do not even know whether it is valid, because lots can change.
Hi, Elvis. As to launches, we have a pipeline. We have a next release in front of Eden, where we have a partnership with Cyrela, which is doing very well at 60%. There is a last phase with smaller flats, and there is another launch just across the street with apartments with 160 sqm, 200 sq m, more or less. Then there is a big launch, more than BRL 1 billion, in front of a big hospital in São Paulo. We also have another BRL 900 million project. One is going to be launched this year, the one that is approved first.
We have a new project to be approved this year in Klabin and maybe a low income. Also, towards the end of this year, if we manage to get it approved, in 2025, we are probably going to have Paraíso, Hípica, and maybe another Klabin. So everything is in a phase of approval, and we are at full speed. We want to have everything approved so that we can choose what we are going to launch this year. The city administration is also defining many rules, and approvals have stopped for some time. I do not think this is going to go on very long, because the market has stopped. This is not going to go very long, because there is huge pressure for them to define the rules for the plan that was approved in a city council.
Just a follow-on in what you said about the approvals. It's been quite a while that these approvals are at a standstill. How long has it been?
No, not too long. It's been one or two months. Because the master plan for the city defined many new rules, and the city needs to determine how it works. They need to give details, and this is in their hands. There are meetings with lawyers, with the city. A letter has been published yesterday, and our lawyers were going to go there to talk. We do not believe that it's going to take very long, because otherwise the market is at a standstill, and nothing can be approved.
Thank you, Ralph. Thank you, Sandra.
Our next question comes from Ms. Luma Pious from UBS. You may ask your question, please, miss.
Good morning, Ralph, Sandra, and Francisco. I have two questions. The first is about launches. This is very clear what you have for this year. But thinking in the future, do you intend to go on expanding with many more launches, or do you think this is going to stabilize after some point, maybe BRL 3 billion to BRL 4 billion once you get to that point? Question number two about gross margin. This was affected by the mix this quarter. So are you okay with this level of 35%-36%? Do you expect anything different for the rest of the year, or this is the level that we are going to see in the future?
Thank you for your question, Luma. First, about the launches. We intend to grow as the cash flow allows. This is our mindset. We do not want to go too fast. But if cash flow allows, we are not going to stop growing. This is what we want to do. This is our mission, to grow with safety, to grow with confidence. The more we can grow, the more we are going to grow without major leverage and in a very safe way. Francisco is going to answer the rest of the question.
Good morning, Luma. This is Francisco. Thank you for your question. As to margins, we did see an expansion this quarter, both quarter-on-quarter and LTM. So quarter-on-quarter is more volatile. The adjusted margin was 37%. Depending on the mix, it might be slightly higher or lower. So if we focus on quarter-on-quarter, it's always more volatile here. We like to look at the last 12 months. It's a snapshot of the last 12 months, which is a smoother trend, which is easier for us to work with and to smooth the fluctuations that take place month after month.
As we said to the market, that we were expecting a flat margin year-on-year. If we compare 2024 to 2023, we are seeing a slight expansion, but it's kind of flat, maybe one point above what we've been seeing or close to what we've seen in the last 12 months level as we have shown in March. So in the adjusted, the 12-month margin in March is close to 35%. Thank you for your question.
Our next question comes from Herman Lee from Bradesco BBI. You may ask your question, mister, please.
Good morning, everyone. Thank you for the space. Congratulations on the results. We have two questions. First, I would like to know what you think your strategy for capital use. Are you okay to focus more on growth? Maybe this year or next year, you might want more yield and pay out dividends. So I would just like to understand your mindset. Do you feel that there is any limitation in credit granting by the big mainstream banks? Do you feel it? Can you do everything that you were planning to do?
Hi, Herman. This is Sandra. Well, on the debt. Today, with the issuance of CRI that we had in the first quarter, we are getting to the last time in terms of 5% net debt as compared to our equity. This is a very, very conservative number, but we do not want to get to 8%, 10%. When we do our projections, we think of buying new plot of land amounting to BRL 2 billion to replace the launches of this year. To be 2.5 around time. If we generate more cash, we might expedite that number.
But at this level of BRL 2 billion and BRL 2.5 billion per year, we are getting structured to do that. The second question about credit. We have been hearing more than feeling because we are healthy and banks come to us because they want to loan to us to fund our projects. But with the lack of funding, they are being more stringent. So in the past, we had a more flexible line in banks, and today, when we do not use that line, you cannot just leave it there. You need to reduce the contract for the bank to be able to loan to a different company. But other than that, we are okay. We are not missing anything. We are not short of anything to fund our projects.
Our next question comes from Ruan Argenton from XP Investimentos.
Good morning, Ralph, Sandra, Francisco. First, it is about payment. Do you know the internal impact in terms of your payroll? The second is structured projects. The more recent projects you see that most of the sales are directed for that purpose, and it is part of a larger contract that you have. But looking into the future, what should we expect? In the end, this may happen, sales performance. So I just want to understand what you see looking into the future.
Hi, Ruan. Well, about the payroll. So we believe that on May 20, we will need to pay the tax on April payroll. Then the minister said that they were going to talk whether this is going to be, but we are getting ready to pay it on the 20th. We have LV, our construction development company. It is not so big, but it is the third party that we hire. How much the contractors that we have, and we have estimated about 1% of the cost of a construction. I do not know whether I am being very precise, but we are going to feel this as contractors do. None of them have yet talked to us about that, about price increases, but we are estimating about 1% of the cost of the construction.
Thank you, Sandra. What do you call structured sales when you sell through a fund?
Well, we have signed an agreement for four businesses, and now we are doing the third, Alive, and there is another one in another part of São Paulo. So five overall. For now, this is what we have. There is nothing outdone with anyone else. We did this also because there was good offer in the market, and we thought we should not run the risk. We lost a little bit in the margin, but we think that we gain, that we do not have the inventory of studios. We have just had the approval of Brás Lot 6, it is sold, and also Roque Petroni. We are supposed to approve now and to consolidate the sales of the studios, and this is it for now.
Thank you very much. Have a good day.
Our next question comes from Mariangela de Castro from Itaú. Please, Ms. Castro.
Good morning. Thank you for the presentation. I have two questions. A few companies are telling us that they are feeling the pressure of materials, especially copper and cement. Do you feel any price pressures from suppliers in the market and also labor? Last year, we talked a lot about specialized labor for elevators. How do you see it performing in the next few months?
Hello, Mariangela. Thank you for your questions. We do not feel any cost pressure. Cement, concrete, the prices have been going up. There are very few companies that are concentrating, three big ones that concentrate the sales of cement and concrete. It kind of offsets with steel prices that went down a little bit. For us, it is kind of flat. We are not worried about that for the time being. There is an attention point, is lease of equipment. This is a point of concern. We are feeling a lack of equipment in the market, and our directors even tries to reserve those, or book those pieces of equipment before.
It does not account for too much in terms of the total cost of the construction. Our main concern is not to have the piece of equipment when we are going to start the construction, because this would represent a delay in construction site for longer, and this could affect us. We have said this before. In some constructions, they were supposed to start in February, and since September last year, we already had reserved and booked a part of those pieces of equipment to try and protect ourselves. We have a few work sites, so we have been able to plan in advance. Now, about labor. Yes, there is specialized labor, such as carpenters, electricians, plumbers, which is more difficult to get. What we have been doing, we have built electric and plumbing structure in-house.
It does not meet the needs of all our constructions, but 30% or 40%, we have our own labor, and this makes it possible for us to save. Now we are thinking of creating a carpentry structure, and we are going to run a pilot project in one of our constructions, so that we build the same structure that we have built for electric and hydraulic aspects, and we do not depend so much in the market.
Thank you so much, Sandra.
Our next question comes from Flávio from Rossi Gor Capital. He says: "Good morning, everyone. Congratulations on the excellent results of the company. Could you elaborate how you see the current situation of the market, whether this is better or worse compared to recent years? What is the competition like, and how does it translate in terms of expected volumes of sales and margins for future years?
Thank you very much. Good morning, Flávio. The market is still selling reasonably well, similar to last year. We cannot have a good margin of a very warmed-up market, but there are sales if we can adjust prices. One highlight is that in the first quarter, in the last few years, there are many launches, both in terms of number of units and also PSV. Maybe because of the city of São Paulo and the master plan that has not yet been fully approved. We are very excited. Alive is selling very well. We are really happy about that. We want to grow. We are confident, and as soon as the cash flow permits, we want to continue to grow significantly. We want to get the products right as we have always been doing, get it right in each region. We think that São Paulo is a very big city with lots of people. If we do it right, we will be able to have good results.
Our next question comes from Pedro Moro from Reach Capital. He says, "Good morning. Could you comment more on the strategy of the purchase of plots of land for a more competitive scenario? Do you have any difficulty to close deals? Thank you."
Good morning, Pedro. Thank you for your question. We are going to grow very slowly. We are not in a hurry. Sales are better in our Novvo project. We sold 61 units. Very good performance. We are feeling the market slowly. We are buying one- by- one, no stress, waiting for good business to be present and to learn. We need to learn by doing. We need to look at it. We are talking to Cyrela about the cost of construction. Cyrela sells more than us because their brand is very strong. We are not really in a hurry. We are learning little by little.
If there are no further questions, our questions and answers has ended for investors and analysts. I would like to give the floor to Mr. Ralph Horn for his closing remarks.
Good morning. I am very happy with this quarter. We are very excited, motivated. I hope that we can always surprise our investors. We are going to continue focused on delivering profitability. Thank you all very much. Our conference call has now ended. Thank you for your participation. Have a good day.