Good afternoon, ladies and gentlemen, and welcome to Plano & Plano Q1 2024 Earnings Conference Call. This call is being recorded and can be replayed at the company's IR website. The slide deck will also be available to be downloaded. We'd like to inform you that all participants will be in a listen-only mode during the presentation. Later on, we'll hold a question and answer session when more instruction will be provided. Before proceeding, we would like to mention that statements that may be made during this conference call about the business prospects, forecasts, and operating and financial targets are beliefs and assumptions of the management of the company, as well as information currently available to Plano & Plano.
Forward-looking statements are no guarantee of performance as they involve risks, uncertainties and assumptions as they refer to future events and therefore depend on circumstances that may or may not come to pass. Investors and analysts should understand that events, depending on macroeconomic environment and the sector and other factors may impact future results of Plano & Plano and cause them to be materially different from those contained in the forward-looking statements. With us today, we have Rodrigo Luna, Rodrigo Luna, and João Hopp, our CFO, our Vice President and CFO, and IRO respectively. I'd now like to turn the call over to Mr. Rodrigo Luna, VP, who will start the call. Mr. Rodrigo, you may start sir.
Hello, everyone. Good afternoon. Thank you very much for joining our Q1 2024 Earnings Call. It is a pleasure to be here with you.
Before we recap our operating and financial results in the Q1 of 2024, I'd like to highlight some important points in our journey. Plano & Plano has been growing sustainably and continuously ever since our IPO in 2020. I'd like to highlight our net sales that amounted to BRL 874 million in 2020, and in the last 12 months, ending in the Q1 2024, they added up to BRL 3.12 billion. The company has been investing in people, processes and technology to be up to the challenge of the amount of business, the volume of business that we have. Our engineers continue to improve continuously on construction techniques so that we can have the most suitable techniques and solutions wherever we are operating, be it in more industrialized and standardized low-income products or more sophisticated middle-income products.
Our governance has been improving quarter after quarter, and we can see that in the independent assessment of Reclame Aqui, where we have the best rating compared to all of the other developers focusing on low-income products. Our NPS is 5 points in contacts with clients, and our average NPS this year is above 71 points rather, in a scale that goes from - 100 to + 100. We continue to act on mitigating risks and increasing our resilience so that we can increase and maximize return on investment to shareholders. Once again, our profitability or profit over net income had a margin of 47% in the last 12 months. We distributed BRL 100 million in our dividend payout in the fiscal year of 2023, increasing our payout ratio to 37%.
We're going to continue to work so that we can slowly but surely increase this payout ratio. The perspective of the Minha Casa, Minha Vida program, as everyone knows, they have improved, and they have improved clearly. They allowed low-income families to go back to the position of buying housing again. That allows companies like ours that have a part and experience in the whole customer journey in the Minha Casa, Minha Vida program and customer have the chance to continue to intensify and improve their operations even further. We're very optimistic about the opportunity we have in the Faixa 1 Urbano segment, which is basically for families that have up to BRL 2,600 as their income in a month. We aim to increase our participation in that or our share in that in 2024.
In the Q1 of 2024, we have had very good performance in PSV. Our launches in this quarter were fewer than on average, but that does not change our original plan to increase our percentage PSV, Plano & Plano in the private market to be launched in 2024. Our agenda has launches in the Q2 , an increase in the Q2 , and a peak in launches in the Q3 . As for the Pode Entrar program, construction works began at the start of the year. As of the Q2 , the construction works are going to be accelerated. Consequently, in line with the POC methodology, the Pode Entrar results are going to be recorded in the company's results in a more representative fashion as of now.
We're very optimistic for 2024 considering our very good position in the main market in Brazil and also considering all of the projects that have been approved for the metropolitan area of São Paulo. Now I'll turn the call over to João Hopp, who will present the operating and financial results for the quarter. João, you have the floor.
Thank you, Luna. Hello, everyone. It's a pleasure to be joining you again. In the Q1 of the year, we launched four new projects totaling a PSV 100%, including physical swaps of BRL 165 million, which is a 12.2% drop, which was BRL 530 million year-on-year. There was also a 72.6% drop quarter-on-quarter.
The excellent performance we had in the Q4 2023 was influenced by the non-recurring launch of BRL 692 million in the Pode Entrar program, and also the BRL 1 billion in PSV that we had in the private market. Our pipeline for 2024 will have an increase of launches in the Q2 , and the peak of launches will be in the Q3 . When we analyze the PSV Plano & Plano launches, our PSV was BRL 418 million, a 5% drop in comparison to the BRL 440 million launched in the Q1 last year. With this criteria, we see the same non-recurring effect in the Q4 2023, and consequently a dip quarter-over-quarter.
In the total net sales 100% pre-sold in the Q1 2024, we had BRL 594 million, which is 8.6% higher than the BRL 547 million we had in the Q1 2023. Comparing it to last quarter, there was a 54.6% drop. Again, in the Q1 2023, we had BRL 692 million in the social program, BRL 692 million in sales. On the 31st March 2024, our SOS indicator in the private market for the last 12 months was 51%, showing a 3 percentage point increase year-on-year. When we look at total SOS, which includes the social program sales, the Q1 2024 was 57.2%, a 9.2 percentage points increase quarter-on-quarter.
All of the units sold in the Pode Entrar trial program were recorded as 100% sold on the date the contracts were signed, which was the 26th December 2023. We ended the Q1 2023 with the inventory of units available for sales in approximately 0.9 years of sales when we look at the last 12 months sales. The drop in the inventory has been consistent in the recent quarters. Quarter after quarter, the sales teams can focus on selling recent newer launches and from the past three months. It's a virtuous circle allowing a better proportion, a better ratio between what is available to be sold. The company's net revenue was BRL 201 million in the Q1 , 28.3% higher year-on-year. Quarter-on-quarter, we had a 21.7% dip.
In this Q1 of 2024, revenue stemming from Pode Entrar was BRL 12.6 million, a BRL 109 million reduction in comparison to the Q1 2023 when we had a BRL 121.4 million recorded. In the Q4 2023, we had the POC referring to the land lots of Pode Entrar recorded. In the Q4 2024, we had only part of the construction works recorded. When we compare the level of revenue in the last 12 months, we see a 39% rise in comparison to the same figure last year. Future revenue not yet recorded in our results should be highlighted. We have had strong growth in launches, and the revenue will be recorded in the course of time as the construction works progress.
On the 31st December 2022, the future revenue was BRL 504 million, and on the 31st March 2024, five quarters later, it is BRL 1,795 million, BRL 100 million higher. It is clear to us that as these revenues are recorded, there will be an increase in our financial results too. In the Q1 2023, the gross profit of capitalized interest was BRL 173 million. The adjusted gross margin in the Q1 was 34.7%, 0.5 percentage points higher quarter-over-quarter. We went from 38.6% to 34.7% due to the budgetary effects and the discounts applied to projects where we use the benefits of the Casa Paulista project.
They have lower gross margins, but they have a benefit when it comes to SOS and cash generation. At the end of this quarter, our REF margin was 39.4%. An increase in comparison to the 38.3% at the end of the Q1 2023, and a dip in comparison to the 40.5% in the Q4 2023. That does not include the Pode Entrar projects. When we look at commercial expenses, we see there was an improvement year-on-year. It was a 1.8 percentage points dip, going from 12.7% to 10.9%. This improvement is due to more efficiency in customer conversion and due to an increase in scale.
When we measure the share represented in the revenue, we see that it goes from 10.7% to 10.9%, a 0.2 percentage points increase. This increase is due to the drop in revenues year-on-year, as nominally there was a drop in the commercial expenses in the Q1 , going from BRL 68.8 to 54.8 million. The increase in commercial expenses is also explained by the record of some expenses connected to the sales, the good sales in the Q4 of 2023. Especially as some of these are only recorded after there's a transfer from the client to the Caixa Econômica Federal, and it only happens 30-40 days after the sales.
When we look at overhead or general SG&A, we see that was a slight increase going from 7.1% to 7.2% year-on-year. This slight increase was due to the adjustments that needed to be restructured so that we could be on a par with the demands that have increased in the past 12 years. These expenses are seen immediately on our results, while the results of the growth that made them necessary is only to be seen in the longer run. We see that our net margin and our net income both improved year-on-year. The net margin went from 9.7% to 12.3%, and the net income went from BRL 152 to 269 million, a 77% increase.
Net margin in the Q1 was 8.3%, and the net income was BRL 41.5 million. That is a 1.8% increase year- on- year. In the year- to- date, our EBITDA, our adjusted EBITDA was BRL 60.5 million with a margin of 12.1%, a drop in comparison to the 15.4% we had in the Q1 2023. In 2023, we had many records in the company, including our cash generation results. We ended 2023 with BRL 38 million in net cash. In 2021 and 2022, we had a payout that was as at a minimum level. In January 2024, we agreed on the payout of BRL 100 million in dividends referring to the year of 2023. It's a payout ratio of 37%.
The management of the company is working so that we can increase the dividend payout and so that we can increase the payout ratio as well. The company's operations had a cash consumption or a cash burn of BRL 24.9 million in the Q1. In the Q1, the net debt increased in BRL 125 million. On the 31st March 2024, gross debt amounted to BRL 270 million. Considering cash and cash equivalents, we had BRL 283 million, and the net debt amounts to BRL 87 million at the end of Q1 2024. Net debt over net equity was 14% on the 31st March 2024, meeting the target set by the company, which is up to 20%.
This is the end of the oral presentation, and now we're available to any questions. We'll now start the Q&A session for investors and analysts. If you'd like to ask a question, just click the button, Raise Hand at the bottom of your screen. First question from Ruan Argenton from XP. Mr. Ruan, please, you may unmute your microphone.
Hello, everyone. Thank you for your presentation, and thank you for taking my question. I'd like to talk about two subjects. The first is launches. At the start of the call, Luna mentioned an increase of the Faixa 1, Faixa 1 Urbano. We've been talking about the middle income projects in the past calls. How do you see this share, the distribution when you think about different segments in the course of the year? The second point has to do with sales.
Maybe how is sales going in April, or how have sales been going in April? When I think of higher income products, how have sales been performing, and what is the SOS of these projects in comparison to other more standard projects of the company? Thank you.
Hello, Ruan, and thank you for your questions. Well, Faixa 1 is a great opportunity at this moment, and we have the necessary land bank, so we're going to be making use of it with the people with an income level of up to BRL 2,640 a month. We're gonna be seizing this opportunity. Our expectation is that it should be about 21% with Faixa 1. Now, Faixa 4 it's a bit further up than Minha Casa, Minha Vida.
We expect it to be 25% for the portfolio in the year in this fourth tier. Faixa 4, the fourth tier. The fourth tier hasn't been much affected. We feel that it is a great opportunity, and we're quite confident that the projects that are going to be launched in this market are going to have a good acceptance rate. As for sales, we're in line with our forecast for the year. Just going back to the launches we had in the Q1. As we had Pode Entrar last year, and we launched BRL 1.3 billion in launches, and about BRL 700 million would be in 2023. We directed that to Pode Entrar.
We brought forward what we were going to be launching in the Q1 2024 to recompose what was our strategy and our forecast for the launches in 2023. With that, our 2024 budget already had fewer launches than we had in the last quarter 2023, which was about BRL 1 billion. What's happening today in this Q1 and in the first months of the Q2 is well in line with our budget. You ask about SOS in middle-income projects, right? Minha Casa, Minha Vida projects have a higher SOS than middle-income projects. We have been increasing our SOS in middle class as well.
We're not yet happy about sales over supply there, but it's meeting the expectations we had for those products, but we're still adamant that there's a lot of room for improvement.
Thank you, Luna.
Should you wish to ask a question, you just need to click on the Raise Hand button at the bottom of the screen. Rafael Rehder from Safra will ask the next question. Rafael, you may unmute yourself, sir.
I've got two questions, too. The first about production. What is your understanding of this market in São Paulo if there is any type of scarcity and also manpower, labor? May, there's the payment adjustment, right? I'd like to hear that from you. What do you think? In the REF quarter-on-quarter, there was a minor drop.
I'd like to understand if it's part of your strategy to accelerate your SOS or if you're going to be, or if you have been more flexible in price with these launches, or if there was an impact on price.
This is Rodrigo Luna. Thank you for your question, Rafael. We've been feeling a decrease in production. We've been struggling more to execute our construction works. Nothing that can't be managed. Nothing that will keep things from happening, so much so that we had BRL 27 million delivered on the right date at the right price last year. We do see a shortage of some machines for the foundation to be laid and in scaffolding lifts and Atlas Schindler lift deliveries, Otis. We just need to live with that problem. We're trying to bring forward our execution so that the deadline to deliver the constructions is not impacted.
We see a shortage not in labor, but empathy with the contractors. In Plano & Plano, we have the philosophy that we should build relationships, and these relationships in times of need are very important. We do not see that the manpower is lacking because contractors have been choosing to work with us. Now, the inflation pay adjustment is being negotiated. It's probably going to be 4% to 5%, but it's not going to be major. It's not going to cause a major impact, no. 2024 will have challenges, of course. They will be weathered and we will deliver what we need to.
Hello, this is João. As for the REF margin, there is a natural variation depending on the profile of the launches and also the speed of sales.
We see that the SOS for these projects this year are better than last year, and 2022 was better than 2022. If you've been keeping up with our work for a longer period, you know that there has been continuous improvement in our SOS. I'd say that this is a one-off or a spot change. We have been having good SOS this year, especially in the Minha Casa, Minha Vida projects, and all of the launches we had this year have been Minha Casa, Minha Vida launches so far.
All right. Excellent. Thank you very much.
Tainan Costa from UBS will ask his question now. Tainan, you may unmute your microphone.
Hello, Luna and Hopp. I'd like to hear more about this BRL 18 million that we have in the other expenses line item. This is what doesn't really match what we expected here.
Estimated losses in credit is another thing. Can you just give us some more details about this line item? Is it due to the Q1? Can you just give us some more color? Thank you.
Hello, Tainan. This is João. In other expenses, we have the allowance for bad payers. It's in line with what we have in our reports, provision for bad debts. In December, we see that some clients are not able to pay that installment, so then this figure goes up at this time, and they reorganize themselves to make that payment in the coming months. That's a natural phenomena. There's another phenomena, and we saw that last year. We see that over 70 million families in Brazil have debts, and there was even the Desenrola government program, right? The Untangle It program.
Let's Sort It Out program. We see that there has been an increase in the number of delinquency rates in general, and that increases our allowance for bad debt as well. That is 4% of our portfolio, which is still very low, and we charge as an interest the IPCA rate +1% a month. The allowance for bad payers has increased a little, and there is also this seasonal impact that we have for this moment. Thank you, Tainan, for your question.
That's quite clear. If I may just ask a follow-up question. I'd like to understand this from an accounting point. Why is it that this allowance for bad debt also taps into other expenses, and it doesn't go into revenue?
I think this line item, when we look at other players in the industry, it's normally in revenues. Do you do that for some specific accounting reason?
In revenue, we have the cancellation item, and then our allowance for bad debt is in other expenses. That's what our accountants have said.
Bruno Mendonça will ask the next question. Bruno Mendonça from Bradesco BBI. You may ask your questions, sir.
Good afternoon, everyone. Thank you for taking my question. I'd like to ask you about the reorganization of your land plots in the Pode Entrar projects and normal projects. You had a substantial part of your land bank for that last year, and part of that is. It's not clear if some of that will actually take place. The question is, how is it that this decision is made?
What plot from the land bank is going to go into the Pode Entrar project, and when could it go back to other development projects? And how is it that this interacts with other approval projects and speed of launches and if this is somehow connected with the slight increase we had in the number of cancellations we had in the Q1, if they're interconnected in any way? Thank you.
Hello, Bruno. Good afternoon, thank you for your question. We still have BRL 290 million approved for the Pode Entrar project. Considering the history of the program and the timeline approved by the municipality, Plano & Plano can launch that to the market at any moment. As we have the expectation that this can be contracted in the coming weeks, we're still holding back. We're waiting.
If it happens, we will continue, and we'll go ahead with these projects in Pode Entrar. As for the contract, as for the agreement, theoretically, we could launch them to the market outside that program, and this is basically the result it will bring to the company, considering that we would already have BRL 290 million contracted, prepared for production. We see this final phase of the remaining balance, and that is also connected with the city election level that we have. We have mayor elections soon. This is directly connected to that. We did have a slight increase in cancellations for a number of reasons, but not for this one reason you named.
Hello, Bruno. This is João.
Basically, what's happened is there was an increase of our terms to transfer clients as we brought some projects forward from 2020 for 2023 with Pode Entrar , and we decided to launch it in spite of having our agreement with CAIXA that came slightly after. We had these terms that were slightly longer with CAIXA and also the transfers, and with that combined, we have this spot, this one-off increase in cancellations. What we see is as we increase the launches and we have the CAIXA contract, then we go back to the regular transfer terms. Our expectation is to phase out this phenomenon this year and go back to our 9% to 11% cancellation rate based on gross sales. I think that was clear, right, Bruno? Thank you for your question.
Thank you. Have a good afternoon.
Our next question comes from Antonio Castrucci from Santander. You may ask your question, sir.
Thank you for taking my question. I've got two questions, actually. The first is a follow-up around production. There were many one-off impacts this quarter. How did production start at the beginning of this quarter? The Faixa 1, is that connected to the burdensome budget? There's an increase of about BRL 20 billion, right? But I'm not sure if that is covering that. How do you see it?
When we look at the production month- by- month, January was the weakest month. From then on, we have seen natural normal growth in production. We see no problem in productivity. We believe it's going to be maintained. All of our deliveries are expected to be delivered in time, on time.
All of the 15 projects are to be delivered on time. We see that production is following its normal pace, including Pode Entrar . This gap we saw in revenue in the Q1 is impacted by Pode Entrar , where we had substantial sales. We'll see an acceleration now. I'll give the floor to Luna for him to talk about the Faixa 1. Hello, good afternoon. The budget is always a living debate, right? It's a positive one because we see that the market is growing and there's a good demand. The size of this market is the size of a budget. The federal government clearly prioritizes lower income, for which reason we see the Faixa 1 restructuring.
As time goes by and new contracts are made, then you have the burdensome and non-burdensome budget. You have seen a change in the parameters for the finished units to be contracted. In the Q1, there was an acceleration there. They represented a high percentage in comparison to contractions. That allows other families to buy real estate that is still under construction. We have a number of other tools. The government is keeping track of that, and we want to recompose it if necessary. In previous years we saw a market that was more demanded than the size of the budget, and we needed to have some adjustments in infrastructure, including the FDS T&ST, the funds for the length of service that can be redeemed for the purchase of real estate.
This is a conversation that we have been having continuously with the government so that the amount of contracts can be subsidized, and there can be subsidies. We have a federal government that is really committed to this cause, and we'll find ways to get there.
Thank you, Luna.
We remind you that should you want to ask any questions, you just need to click on the Raise Hand button. Elvis Credendio from BTG Pactual will ask the next question.
Hello, Luna and João. First question is about project approval in São Paulo. Some companies have complained about the municipality taking longer to approve projects. I'd like to hear from you if that is also a hindrance to you. My second question has to do with minority shareholders. Should this line item be heavier but bigger from now on?
Hello, Elvis. Thank you for your question.
As for project approvals, we had changes in the master plan and then in the construction works law. That brought new situations that caused many companies to not submit projects that were adjusted to these new legislations. These legislations still lack regulations that are being discussed in the Department of Urbanism on a municipal level. The technical staff needs to approve these projects. There has been sort of pent-up approvals recently. Most of these approvals were middle income and high income. Social interest housing is basically operating normally. In our specific case, as we have projects that were brought forward from 2024 to the last quarter 2023, we already had it clear that we're going to be focusing on the Q2 and Q3 because of in terms of approvals.
We don't see anything much different in our day-to-day activities, in spite of legislation which still lacks some clarity when it comes to these new regulations, these new laws. Approvals have been faring well. We have been having recurring frequent meetings with the Department of Urbanism, and I am quite confident that these will be normalized soon and project approvals will go back to the normal speed, especially for projects that are not part of Minha Casa, Minha Vida. As for the minorities line item, just before I talk about this quarter specifically, just to set the stage, I'd like to say that in the last 10-15 years, Plano & Plano really specialized in the Minha Casa, Minha Vida in the city of São Paulo, and we have proven efficiency in this segment.
For two years now, our company has been sought by other developers who wanted to partner up with us. When you look at our financial statements two years back, this minority line item was basically not there. We have become a focus for new partnerships. We expect new partnerships to be forged in the future. They are part of our expansion plan. Having said that, we have a partner and a project. They are doing really well, and then this line takes a bigger size. But that's what it means.
All right, that's clear. Thank you very much.
Should you want to ask any questions, just click on the Raise Hand button at the bottom of the screen. Just bear with us while we're collecting any further questions.
This is the end of the Q&A session. I would now like to turn the call over to Mr. Rodrigo Luna for him to make his final remarks.
Thank you everyone for joining our Q1 Earnings Conference Call. We continue to say that we focus on mitigating risks and growing solidly, and we're very enthusiastic about this year. Our budget expects growth in 2024. Everything is happening as we planned according to plan when we think about approvals and launches to the market, and the housing demand continues to be really high. We see that the federal government is making adjustments of the program, and there's an expectation of interest rates or nominal interest rate to go down in the Brazilian economy. We have the expectation and the perspective that 2024 is going to be a record-breaking year for our company.
Again, thank you very much for joining our call, and I wish you all a fantastic weekend.
This is the end of Plano & Plano's Conference Call. Thank you very much for joining our call, and we wish you a great afternoon. Thank you.