Good afternoon, ladies and gentlemen, and thanks for standing by. Welcome to the conference call of LPS Brasil to discuss the earnings regarding the first quarter 2018. Right now with us are Mr. Marcos Lopes, CEO, Francisco Lopes Neto, Vice President, and Marcello Leone, Executive Financial and IR Officer. We would like to inform you that this event is being recorded and that all participants are going to be in listen only mode during the presentation of the company. Later on, we are going to start the Q&A session when further instructions will be provided. Should any of you need assistance during the conference call, please reach the operator by pressing star zero. This event is also being simultaneously webcast on the company's website, www.lopes.com.br/ir. In there, you will also find the respective presentation. You will control slide selection.
The replay of this event will be available soon after its closing. We remind that webcast participants may record the questions on the website. These are going to be answered after the end of the conference call. Before moving on, we would like to let you know that any statements made during this conference call relative to LPS business outlooks, projections, operating and financial goals, are based on beliefs and assumptions of the company management. Forward-looking statements are no guarantee of performance since they involve risks, uncertainties, and assumptions being referred to future events, and therefore depend on circumstances that may or may not happen. Investors and analysts should understand that general conditions, industry conditions, and other operating factors may affect the company's future results and lead to results that will materially differ from those in such forward-looking statements.
First, Mr. Marcos Lopes will present the operating results, and then Marcello Leone will present the results of CrediPronto and other financial results. Finally, we are going to open for your questions. With that, I'm going to turn the call to Mr. Marcos Lopes. Please, Mr. Lopes, you may go on.
Good afternoon, everyone, and thanks for attending our conference call to discuss the earnings of the first quarter 2018. I would like to start this presentation highlighting the good results that we observed in the first quarter 2018, which historically has a reduced volume of launches because of a calendar with school vacation and Carnival. We observed that the first time since 2014, there was growth in company sales, with significant improvement in our own operations and in our franchises as well.
In this quarter, as in the end of 2017, we're able to see that the market in São Paulo is recovering its demand. We expect that along the year, macroeconomic conditions that are more favorable to the industry enable a gradual recovery of demand in other markets, and therefore, those markets can also show better sales compared to previous years. At the same time, we're able to reap the results of a well-structured and executed plan that reviewed our businesses and was implemented in recent years. That enabled us to keep our positioning in the real estate sales sector and increased our popularity in the franchise segment. As for cost and expenses, we closed the quarter with the lowest level since the third quarter 2007, the year after our IPO.
In this manner, we continue confident that when we have an improvement in the demand for real estate and an increase in the offer of launches, we will be prepared to present good results and consequently generate value to our shareholders. I am going to start the presentation with slide number five, talking about the company highlights in the period. On slide five, you can see that in the first quarter of 2018, company had a total sales of BRL 1.4 billion, an increase of 18% in the comparison year-on-year. Out of this total, BRL 850 million were generated from our own operations, an increase of 7.5% compared to the first quarter 2017. I would like to highlight that for the first time since 2014, we had growth in sales year-on-year.
When we analyze the performance of the franchise segment, we see significant increase in sales invoiced with 83%+ compared to the same period 2017. Aligned to an increase in sales, we had a reduction of 33% in company costs over the same comparison base, closing the quarter with BRL 18.4 million, the lowest level of expenses since the third quarter 2007, the year after we had our IPO. As a result of the factors above, our quarterly EBITDA was positive in BRL 3.8 million, showing an increase of 207% compared to the first Q17, and net income of controllers improved 49%, reaching -BRL 2.8 million in the quarter. Now we go to slide six, and we are going to see the operating results of the company. We can go straight to slide number seven, where we show sales of our own operations and franchises.
In the first chart, we have total sales transacted that added up to BRL 1.4 billion in the first quarter, 18% above the same period last year. Out of this total, BRL 853 million were originated by our own operations, growth of 7.5% under the same criterias of comparison. Out of the BRL 534 million remaining, these were originated by our franchisers. It is important to highlight that in this business model, companies pay royalty to Lopes over the value transacted, but some of them are still in a grace period of collection. So the total number invoiced by the segment was BRL 463 million, 83% above that of the same period last year, as you can see on the upper right chart. On the next slide, number eight, we show the segmentation of our transactions in own operations per region.
As expected, the largest share comes from the region of São Paulo, with a total of 55% share. The second-largest area of the company, the South region, increased its share in 6 percentage points compared to the first quarter 2017, and closed the period with 26% of the total transactions. The other regions of company operation, like the Northeast, Brasília, Espírito Santo, accounted for 19% of sales. As it can be observed, we do not have sales of own operations in the Rio de Janeiro market since in this quarter, we no longer consolidate PatriMóvel's operation. This is a subject to be approached by Marcello Leone in his presentation. On slide nine, next, we are going to explore the regional distribution of the franchise segment.
As you can see on the map to the left of the screen, we currently have 83 franchise stores, 13 under the process of implementation and 70 in operation. The state of São Paulo is the most relevant, with 38 stores in operation. Together, they are responsible for 57% of the total transaction transacted in the second. Second, with three stores and 24% of sales, we have Rio de Janeiro, followed by the South region with 21 stores, from whom 13% of the sales volume was originated in this quarter. The other regions of operation have eight stores, accounting for 7% share in the total of sales. As it was possible to note by means of this operation model, Lopes can increase its capillarity with a larger number of points of sale and therefore intensifying the relationship with its customers.
On slide 10, we can see the speed of transactions over supply and the speed of sales over launches. To your left, we can see a slight variation in the speed over supply when compared to the first quarter 2017, reaching 8.5% in the period. To your right, we can see the results of the speed of sales over launch in the city of São Paulo that showed significant improvement of 16 percentage points compared to the first Q 2017. Totally 36% in the period. On slide number 11, we can see on the chart to your left our own operations according to the company segments of operation. The primary market accounted for 94%, with highlights for the participation of non-listed brokers with 71% in the period.
A reflex of the company's restructuring strategy, the secondary market had the least share, with 6% of the value transacted in the first quarter 2018. Since we have only one store in this segment and all the others work as franchisees. To your right, you can see the variation of the distribution of the primary market between listed and non-listed brokers. As you can see, the breakdown was relatively stable. 75% for non-listed and 25% for listed brokers. On the next slide, we show the diversification of the company clients in the primary market in the first quarter 2018. To your left, in the first chart, we can see that in the first quarter, 65% of the value transacted refers to the 10 largest brokers. Builders, 13% above the same period 2017.
In the second chart to your right, you can see in the share of the five largest players that in the first place had a variation of 4 percentage points compared to the first quarter 2017. The other positions had slight variations, however, stable as presented in recent periods. Now we are going to slide number 13, where we are going to see the launches of the company in the first quarter this year. In the first chart, if you think of the current base, we have an increase of 34% in the volume launched compared to the first Q 2017. We believe that this expressive increase in volumes launched in this quarter is typically marked by a low offer of new products, and it reflects the beginning of the recovery of the sector. To your right, we see the breakdown of launches per region.
As you can see, we launched new projects only in the state of Espírito Santo and São Paulo. The latter consecrating 93% of the total volume with 1,379 units distributed along seven different projects. When we segment the state of São Paulo, we see that 60% of launches happened in the capital, 23% in the other cities of the metropolitan region, and 15% in the inland of the state. These were my considerations to start talking about our operating results. Now I'm going to turn the call to Marcello Leone, that is going to talk about the results of CrediPronto and then the company's financial results. Thank you very much.
Thank you, Marcos. Good afternoon, everyone. I'm going to start my part of the presentation with the results of CrediPronto on slide 15.
As you can see, we see a recovery of growth in the concession of real estate credit. We see growth of 42% year-on-year. Last year, the company had a volume of BRL 146 million financed and a volume of BRL 208 million in the first quarter this year. It's important to mention that this growth happened in credit conditions that are quite conservative. As you can see on the chart next, we have an average rate that is a high 9.9%, and the LTV is also very conservative, 56%. Now I'm going to go to the financial results of Lopes. On page 17, we see a detail about the new accounting classification of PatriMóvel. On a board decision ratified by the company, the company understood that the only option was to sell PatriMóvel. So we are actively working in the process since the beginning of the year.
All that said, PatriMóvel was reclassified, accounting-wise, as an asset available for sale, and therefore, under the profit of the operation, we have a result of a discontinued operation. This corresponds to PatriMóvel's loss and added to the loss of the company in this period, we can have the total loss of this operation. For you to analyze the company's operational performance, we recommend you not to look into PatriMóvel's losses because the company no longer has any cash disbursements with this asset. In fact, we haven't had any cash disbursements for two years now. On the next slide, on slide 18, we can see the company's net fees. We had a drop in the company's net fees in the first quarter this year, and this drop is explained because of levels of products in São Paulo.
We had a net fee in São Paulo between 2.35 and we had 2.22. And why is that? Because in the city of São Paulo, we had 61% of the total units transaction in the Minha Casa Minha Vida project. We reactivated the Minha Casa Lopes brand and we launched the Reserva Raposo development in December last year. And we had a very large number of units transacted in this first quarter of this year. This economic segment works at lower fees, so the net fee of the company was 1.5%, and therefore we had a drop in our whole fees. The commission of medium and high-end developments was even higher. It got to 2.5% in the period. On the next page 19, we have the conciliation of the company's gross revenue, as we always do. You can see the company gross revenue being broken down as follows.
We have our own operations with volume transacted of 853, a net fee of 2.05. With that, we have 3.7. A gross of revenues with sales BRL 17.5 million. The appropriation of revenues from Itaú BRL 3.6 million, revenues from franchise BRL 1.6 million, and other revenues BRL 1.5 million. All together, we have gross revenues of BRL 24.5 million. To the chart on your right, we have the total royalties of the company. Franchise operations transacted BRL 534 million, out of which BRL 71 million are still in the grace periods of new franchise units that joined the network. Therefore, for operating franchises, we had BRL 463 million, with an average royalty of 0.4%.
Total revenues in the area, BRL 1.784 million. On page 20, we can see the evolution of net revenues for the company. We had net revenue of BRL 22.2 million in the first quarter this year, against BRL 23.7 million in the first quarter last year. However, it's important to observe that when we exclude the operations that were sold by the company along last year, the net revenue had slight growth of 1%, from BRL 22.1 million to BRL 22.2 million. The breakdown of net revenue per segment, we have BRL 15.1 million in real estate transactions, BRL 5.5 million real estate credit, BRL 1.6 million franchising.
On the next page, we have the results per segment. We can see that franchise continues to be negative, with the EBITDA margin getting close to 40%. Financing is still profitable for the company, and real estate transactions in known stores, despite the reduction of costs, still had negative results of BRL 1,000,280. We have a negative net profit of BRL 2.5 million. On page 22, we have the evolution of our costs and expenses. In the first quarter, we had BRL 18.4 million, a drop of 33% year-on-year. In addition, the cost level of the company is the lowest level of costs in a quarter since the third quarter 2007. On page 23, we can see the evolution of our EBITDA and EBITDA margin, as well as net income and the net margin to controllers and shareholders.
We had growth of 207% in the company EBITDA in the period. That went from -15% and -BRL 3.6 million to +BRL 3.8 million positive with margin of 17%. Net income also had a positive evolution, reducing its loss from -BRL 4.9 million or -21%, to -BRL 2.5 million or -11% in the first quarter this year. On page 24, we exclude the non-cash effects of the companies of IFRS in the company. This is basically for you to have a better analysis of our operating results. On page 25, we have the evolution of our cash flow in our operational activities.
The cash flow was -BRL 4.1 million. The main reason for the company's cash flow to be - BRL 4.4 million in the period is that there was the payment of contingencies that were already provisioned in the balance sheet in previous years in the first quarter, accounting for BRL 3.6 million. On page 26, we have the cash balance and cash availability. We have a total of BRL 49.8 million between cash and accounts receivable, and we believe this is enough right now for all our cash needs. We are going to open for your questions. Thank you very much.
Ladies and gentlemen, we will now start the Q&A session. If you have to ask a question, please press star one. To withdraw your question from the list, press star two. Our first question comes from Rita Capio from Bradesco BBI. Good morning, everyone.
I would like to approach two things with you, if you could give me a bit more color. What is the market like in the second quarter? We already closed April, we are in mid-May. What are your expectations in terms of the volume of launches? It seems that on the 16th, you are going to have some news for São Paulo. I would like to know what are your expectations. Second, I know that you had a drop in cost that is quite healthy, but for the reasons you mentioned, the payments of some contingencies you had to burn cash operationally, so you continue to burn cash as a whole.
I would like to know what is your mindset from now on, what the cost structure is going to be, if it is going to be in this level in the coming quarters, and how does that affect the generation or burn of cash for the future? Thank you.
Hi, Rita. This is Marcello Leone. I am going to start answering a question about costs and cash burn. In fact, we already expected it. Although we knew that we were going to work with an incredibly reduced budget in the first quarter, we knew we were going to burn cash because we had the predictability of these contingencies, that they were going on, they were being judged in court, and they would have to pay at some point. Our objective is to continue to work with a very streamlined, lean budget.
Working with a level of expenses is likely above this of the first quarter along the year, because the first quarter is a period of low operation, so it is easier for you to have a lower cost, forgive me, but continue the level of expenses at a low level. All that said, the company expectations along the year is to improve its cash exposure. Little by little, reverse the cash burn. Now, I am going to turn to Marcos to talk about the market.
Well, about the market, we have expectations of new launches for mid-May and June. There is the impact of the injunction for São Paulo. Most launches are concentrated in the city of São Paulo. Some we already started with pre-sales. Some were already launched successfully. Last year, we sold a new building completely from scratch, 100%, a middle-income development. We started sales on Saturday.
On a Sunday, we were fully sold. There are other developments to be launched in May and June, but we have the negative impact of the injunction. So it is positive if we compare the inflection point that we had in January. It is going to be a growing curve. It is not going to be a steep curve, because we had to stop with the launches because of the problem with the city administration of São Paulo, and you know that most launches are in São Paulo. But we are quite optimistic in terms of demand. The launches that are coming out are very well fit. There will be launches in the Great São Paulo region, in Guarulhos, ABC, Alphaville, Campinas. So launches will come. They are picking up.
It's not a very strong movement right now, but it was already something that signalizes the inflection point and that we are going to start an upwards curve.
Okay, thank you. I have a follow-up for both questions. The total cost and expenses that you expect for the year would be close to what number? And second, what's your expectation with regards to the resolution of this injunction? If I'm not mistaken, this is to be judged on the 16th.
We have no guidance about costs for the company this year. I really cannot give you a number right now in terms of how much we expect to spend for the company. But we know that the first quarter is a good predictor of cost for the company. We are going to work at lower levels than last year, but we don't have an official guidance for that.
About the injunction, again, the whole industry is very much monitoring that. It's very difficult to tell you in this call what the final result is going to be on the 16th. I am member of Secovi's consulting board. All industries are very much involved. Large players in the market are involved for us to have a favorable decision. But it is a suit that is going on, and we really don't know what the outcome is going to be. But it's going to be decided on the 16th. What is important is that the whole industry is very much engaged, and we are really hoping for the best.
Without thinking of what the results are going to be, we have launches that are already in compliance with the new law, and several companies are looking for our company when they want to launch, and they see our company as the best solution for now.
Okay. Thank you very much.
Our next question comes from Marcelo Motta from JP Morgan.
Hello, good morning. If you could talk a bit about CrediPronto. We saw an acceleration of volumes, several news that the banks are being more aggressive in credit. Itaú is perhaps lagging a bit behind, was not so aggressive. What should we expect in the next coming? Do you think the numbers are going to grow even further despite any impact that may be one-off? What's the outlook for the area?
Hi, Marcelo. Your question is quite relevant. Till today, we are able to grow origination by improving the behavior of consumers and also improving CrediPronto's operational process because our product is quite efficient and therefore it's appealing, although it has a higher financing fee. We cannot comment about the fee that is going to be in use in the next quarter. It still has not gone down. We believe that financing is going to grow and the decisions on CrediPronto's interest rates are decided by our partner, Itaú, on their credit decision. This is something that we really cannot comment.
Okay. Thank you very much.
Thank you.
As a reminder, if you have a question, just press star one. Once again, if you have a question, just press star one. We are now closing the Q&A session. We are going to turn the call back to the company CEO, Marcos Lopes, for his final remarks.
Well, thank you very much for attending this conference call to discuss the earnings of the first quarter 2018. I would like to reinforce our message. We are quite optimistic about the company's solidity, its market positioning. The homework we have been doing along the last four years is paying off. They were very hard years, but our company is very well-positioned in the Brazilian real estate market, in the primary market of launches. We are privileged by most of the home builders in their launches. Our pipeline is quite robust, and also our strategy of opening new franchises is being positive with positive EBITDA and growth showing that our strategy is correct. We also expect to grow substantially in the segment. Real estate credit as well, we have expectations to grow. Data is positive.
I believe that this is an inflection point for the real estate market, and that makes us very optimistic. I wish you all a good day, and thank you very much.
LPS Brasil's conference call is now closed. We thank you very much for joining us and wish you a good day.