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Operator: Good morning and welcome to Cyrela Brazil Realty S.A.'s Fourth Quarter of 2023 Earnings Conference Call. Today, with us are Mr. Raphael Horn, CEO; and Miguel Mickelberg, CFO and IRO. The presentation will be recorded and simultaneously translated. You can hear the translation by clicking the interpretation button. To those hearing the English translation, you can mute the original audio by clicking Mute Original Audio. Also, you can find the slide deck in English on the company's investor relations website at www.ri.cyrela.com.br. During the company's presentation, all participants will be in a listen-only mode. After the presentation, we will hold a question-and-answer session. [Operator Instructions] We would like to inform you that any statements that may be made during the call related to Cyrela's business perspectives, operating and financial targets are projections made by the company's management that may or may not occur. Investors should understand that political, macroeconomic, and other operating factors may affect the future of the company and lead to results that differ materially from those expressed in such forward-looking statements. To open Cyrela 4Q '23 earnings call, I'd like to turn it over to Mr. Raphael Horn, CEO. Mr. Horn, you may proceed.
Raphael Horn: Good morning. The company's 2023 performance contributed to strengthen the strategy that Cyrela implemented over the past few years. Although we started the year with several uncertainties on the local and global macroeconomic contexts, we delivered solid operating and financial results. We ended the year with BRL6.6 billion and BRL6.4 billion in PSV of launches and sales in the Cyrela's share respectively, up by 13% and 17% year-on-year. It is important to note the maintenance of sales speed at comfortable levels, which has allowed us to reduce relative inventory as a percentage of sales despite an increase in launches. Financial performance also proved solid. Net revenues grew by 16% in the year, reaching BRL6.3 billion. And there was a recovery in gross margin, which totaled 32.7%, an increase of 0.7 percentage points year-on-year. Despite the fact that operation grew, we were able to keep sales general and administrative expenses at control levels. As a result, net income reached BRL942 million in the year, with a net margin of 15.1% and ROE of 13.1%. We ended the year satisfied with our performance, but we know that 2024 will be challenging. We will maintain our strategy of product differentiation and keep our eyes peeled for the best market opportunities, but always with caution. Let's talk about our operating results now.
Miguel Maia Mickelberg: Thank you, Raphael and good morning. On Slide Four, we will address Cyrela launches. In 4Q '23, we launched 13 new products with a PSV of BRL2.7 billion, 3% lower year-on-year and 27% higher quarter-on-quarter. The company's stake and the volume launched in the quarter was 64%, totaling BRL1.8 billion launched in Cyrela stake. Excluding swaps, the volume launched in Cyrela stake was BRL1.7 billion in the quarter. Slide Five shows launch of Casa Eden By Yoo in the city of Sao Paulo with a PSV of BRL734 million. On Slide Six, let's talk about our sales performance. In 4Q '23, pre-sales came to BRL2.6 billion, 4% lower year-on-year and 15% higher quarter-on-quarter. Cyrela's stake in the volume launched was 72%, coming to BRL1.9 billion in sales in Cyrela's stake. Excluding swaps, sales reached BRL1.8 billion in Cyrela's stake. On Slide Seven, we'll address sales speed. The company's SOS in the last 12 months was 47.2%. Looking at sales speed by launch vintage, projects launched in 4Q '23 have been 46% sold. On Slide Eight, we'll talk about our inventory. At the end of the quarter, inventory at market value totaled BRL9.9 billion, 2% higher quarter-on-quarter. Inventory totaled BRL7.5 billion in the company stake. The change in our inventory can be seen in the chart on the left. Slide Nine shows our finished units. In 4Q '23, we sold 12% of the finished units at the beginning of the period, adding the inventory of projects delivered along the quarter and pricing of units at market value, finished units increased by 15% quarter-on-quarter, reaching BRL1.6 billion and BRL1.3 billion in Cyrela's stake. Slide 10 shows the delivered units. Cyrela delivered 18 projects in the quarter with a PSV of BRL2.1 billion. In the year, 58 projects were delivered with a PSV of BRL6 billion. On Slide 12, we will present our financial results. Net revenue was BRL1.7 billion in the quarter, 25% higher year-on-year and 5% higher quarter-on-quarter. In the year, Cyrela posted BRL6.3 billion in revenue, 16% higher year-on-year. Gross margin in the quarter was 33.7% against 31.4% in 4Q '22 and 33.5% in 3Q '23. In the year, gross margin came to 32.7%. Please go now to Slide 13 to see our net income and profitability. Cyrela's net income in 4Q '23 was BRL248 million compared to BRL208 million in 4Q '22 and BRL251 million in 3Q '23. In the year, our net income came to BRL942 million, 16% higher year-on-year. In 4Q '23, our return on equity, that is net income of the last 12 months over the average shareholders' equity was 13.1%. On Slide 14, we can see our debt. Gross debt at the end of the quarter was BRL5.1 billion. The cash position was BRL4.2 billion, thus our net debt was BRL868 million. 74% of the total gross debt is long-term. Our net debt over equity ratio was therefore at the end of the quarter, 10.7%. On Slide 15, we can see the company's cash generation. In 4Q '23, our cash burn was BRL94 million against a cash burn of BRL54 million year-on-year and a cash generation of BRL7 million quarter-on-quarter. In the year, cash burn reached BRL101 million against a cash generation of BRL33 million in 2022. Now, Raphael and I will be available to take your questions. Thank you very much.
Operator: Thank you. We will now begin the Q&A session. [Operator Instructions] The first question comes from Rafael Rehder from Safra.
Rafael Rehder: Hello. Good morning. I have two questions. The first one is about backlog margin, which increased significantly by almost one percentage point quarter-on-quarter. I would like to know if part of that is related to a greater recognition of recent launches or if that's related to a better mix and recognition of the launches in 2021 that were adjusted for inflation. And also if you could give us more color about the margin of the new launches in comparison with backlog margin? And another question. This one's about price dynamic. If you look at 2024 and '25, we are going to see a peak in deliveries in Sao Paulo. So I would like to know if you're going to have price pressure so that you can sell your finished units and also your perspective about the whole dynamic.
Miguel Maia Mickelberg: Rafael, thank you very much for your question. This is Miguel. Well, about the backlog margin, yes, there was a significant increase in the quarter and the main reason behind it was the fourth quarter launches with the biggest margin in the year around 37%. And the margin for the year 2023 was about 33%, which is an increase of 100 bps in comparison with launches in 2022. And that level of margins of the launches in 2023 is more or less in line with our backlog margin. So to improve the backlog margin, we need to improve the margin of the launches, which we don't believe is going to happen. We are going to keep the same levels that we have right now considering the market conditions. And Raphael is going to address your second question.
Raphael Horn: Hello, good morning. This is Raphael. Well, I can't really tell you about the market overall, I can tell you about our products and we can see very healthy levels. Considering our products, I don't feel any price pressure for any reason whatsoever. I think we're going well. That's not a concern for me. The real prices might go up, but I don't know. But I don't think the prices are going to go down, if you consider inflation. This is not a concern for us right now. And of course, I'm telling you that considering our products, some other segments might have to lower their prices to sell more. But considering our vintage, we are not concerned about that.
Rafael Rehder: Okay. Thank you. That's very clear. Thank you very much. Have a good day.
Operator: The next question comes from Gustavo Cambauva, with BTG Pactual.
Gustavo Cambauva: Hello. Good morning. I have two questions. The first one is about your perspective for dividends. In 2023, you posted significant profit, your shareholders' equity increased drastically. So I would like to know if it would make sense to pay higher dividends, perhaps close to 2023 net income considering that with the shareholders' equity that you have right now, which is significant, it is harder to see an increase in ROE. When we look at the sales volume, it's solid, margins are solid, so I imagine that it wouldn't be easy to increase ROE unless we decrease shareholders' equity. That could be a lever. So what's your perspective about that? And the second question is about financing. We know that savings accounts are not so strong anymore and they haven't been for a while and the banks are reaching their limit and they are -- some of them are using other sources for funding. So considering your talks with the banks, what do you think is going to happen for real estate financing in 2024? Do you think interest rates can go down, or financing costs can go down? So if you could give us more color about your perspective on financing, that would be great.
Raphael Horn: Thank you, Cambauva, for your questions. Well, about financing, in fact, we have a dichotomy right now because the SELIC rate is going down, but savings accounts have a significant outflow. We have BRL36 billion in 2023, then BRL20 billion. But if we continue to see that outflow from savings accounts, I don't think we're going to see a decrease in the funding interest rates because banks are using marginal funding. And we don't think either that the banks are going to increase interest rates. The banks did it last year -- late last year and the year was very healthy in terms of transfers and cancellations. So I believe that we are going to see a similar situation as we did in 2023. And if savings accounts react or recover, we can see maybe an improvement, but I don't think the interest rates are going to go up. Now, about ROE and dividend distribution, well, Miguel and I think about that every single day. Obviously, if net income goes up, equity goes up and it's harder to increase ROE as a consequence. We assess that every single day. We look around and shop around for a landbank to increase ROE or pay dividends. We like to do that. We paid a lot of dividends in 2015, '16, '17, '18, '19, because of what you said, precisely. ROE needs to be at an acceptable level. And I think I have good news for you. Our ROE might increase. We had some issues last year that you are familiar with and our ROE is good, but we don't love it. I think that it could be better. We have every condition to make it go up, considering our people, our backlog, our team can deliver more than that. So I think our ROE is going to increase. If it doesn't, then the only solution is to pay more dividends. So I think that we should be excited. I don't know if we are going to distribute dividends or increase our ROE, but one of them is going to happen, and we ask ourselves about that every single day. Your question is perfect, and I hope that we will be able to deliver an appropriate response in numbers and not just words.
Gustavo Cambauva: Okay. Thank you very much.
Operator: The next question comes from Ygor Altero from XP.
Ygor Altero: Hello. Good morning. Thank you for taking my question. I would like to know what the size of the Company is going to be in 2024 in terms of launches. The Company has grown and there's room to grow even further. So I would like to know exactly which segment can give you more space to grow, maybe with the new Minha Casa, Minha Vida program parameters. So if you could break down your perspectives per segment, that would be great. And also, when it comes to funding, we know that interest rates are going down. So I would like to know what explains such a good PSV that you have posted in recent quarters. I would like to know what's behind that.
Raphael Horn: Well, what explains our good PSV is not discounts for sure. So if it's not discounts, by process of elimination, maybe we are blessed by God or we are working hard and the team is great and the product is great. So by a process of elimination, discount is not what explains our good PSV. Now, considering the segments, we don't like to provide so many details about it because those are strategic details. But you know our mix, you know that we like high income, ultra high income, mid-high income, and we are going to continue to do what we have done for the past 10 years. We are not really into breaking down our strategic decisions looking forward. And yes, we operate more bottom -- up -- rather up bottom and not so bottom up. And it's not about launching BRL5 billion or BRL4 billion. Our discussion is much more related about -- it's much more related to the products that we want to launch and not exactly in which segments. And the launches that we are going to have is actually a consequence of what we can deliver with high quality. We don't see any pressure when it comes to growth. On the contrary, if we believe that distributing dividends is better than buying a landbank, that's what we are going to do. We assess that decision every single day. So we don't have discussions around that so much about how much we're going to launch in each segment. It's actually the opposite. We need to find the right places, the right landbanks and then decide what we are going to launch there.
Operator: The next question comes from Daniel Gasparete with Itau BBA.
Daniel Gasparete: Hello. Thank you very much for the presentation. I have two questions and a comment. You said, Raphael, that 2024 will be challenging. And I understand and agree, you always say that Brazil is challenging. So I would like to know your perspective about 2024 in comparison with the beginning of 2023. Do you think this is a more challenging year? Or is 2024 a better year than 2023 in terms of macro scenarios? I know you're not a prophet, but I'd just like to know how you are feeling about this year so far. And the second question is about the fourth quarter results and if we exclude the adjustments that need to be done in terms of one-off losses, your annualized income looks very good. Again, I know you're not a prophet, but considering the information that you already have, what could be different in terms of the annualized income for 2024? Is it going to be higher, or lower than 2023? What do you think? Thank you.
Raphael Horn: Hello, Daniel. Well, we always think that the new year is going to be challenging. In 2021, we said that '22, '23 and now '24, it's always a challenge, because the competitors are good. There are many good players out there. Landbank is hard to get. We try to make our best efforts in every launch, but we have to hope that the customers will agree with us. So if it's going to be more or less challenging than 2023, I can tell you we will only be able to answer that at the end of the year. What I can tell you is that 2023, in the beginning of the year, I was very worried and at the end of the year, our performance was much better than we expected. So looking back, it's much easier, right? 2024 looks challenging for sure, but we are going to work as hard as possible so that we can celebrate a good performance at the end of 2024, with a better performance than 2023. And the launch volume for this year is a little bit higher. So that's an additional challenge. So again, it is indeed going to be challenging with a significant, considerable volume of launches and we are going to work as hard as possible to deliver satisfactory results, and the macro scenario is very similar. Brazil is not so hot, but it's not going bad. It's not so good to attract foreign investment, but it's not so bad that everybody's going to go bankrupt. So at the end of the year, we'll find out how big of a challenge the year was.
Miguel Maia Mickelberg: Hello, Gasparete. About your question related to the net income for this year, indeed, if we exclude the one-off situations and annualize our net income, our ROE would be close to 17%. And fourth quarters are usually very strong in our sector. And 4Q '23 was very strong because of good performance in some launches. And our JVs also performed really well, contributing positively to our results. So it's hard to tell if we are going to have a result in 2024 that is similar to the results in 4Q '23 if we were to annualize 4Q's result. What I can tell you that our revenue was BRL6,250 million. So we might see some gains in revenue, because of the evolution of the constructions, considering the PoC method and SG&A will probably, in the worst case scenario, grow in line with the revenue. And we are going to see good results from CashMe and the JVs are performing well so far. So I think that we have good fundamentals to believe that the year is going to be good. And as you know, we start from scratch every single day in our sector. So if the launches are not successful, this is not going to come to pass, everything that I said. But if we perform well in the launches, I believe that 2024 will be even better.
Daniel Gasparete: Okay. Thank you. Thank you very much.
Operator: The next question comes from Tainan Costa from UBS.
Tainan Costa: Hello. Good morning, Miguel and Raphael. I have a follow-up question about margins. This was the fourth quarter in a row with better margins and you said that the result is the launches with higher margins. So I would like to know what the margin should be looking forward. We are at 33%, especially if we consider backlog margin at 36% to 37%. Well and about CashMe, I would like to know your perspectives for the Company in 2024. If you could give us more color about the portfolio and the amount that you want to securitize. And what about Resolution 5,118? Is it going to change anything in terms of new issuances?
Miguel Maia Mickelberg: Hello, Tainan. Thank you very much for the question. First about the margins. Indeed, there was an increase and we actually thought that it would take longer for our gross margin to reach that level of 33% to 34%. We thought that it would only happen throughout 2024, but it actually happened in 2Q '23. We already reached 33.6% at that time. And today, we don't believe it is going to increase. Our launches are more or less at that level. Of course, we might have good news with the launches that will come, but we believe that the margins should be around that level. If there's any room for improvement, it's going to be a very little one. About CashMe, we announced two issuances early this year and we were able to securitize a large volume in 2023, north of BRL1 billion and that improved CashMe's leverage. We are now closer to what we expect will be the recurring level. Our portfolio was at BRL2.1 billion at the end of the year in CashMe. Let's see what's going to happen in the year but we intend to continue the things that we did in 2023, keeping that leverage level. And about the new regulation, it is not going to change our plans because the driver for securitization is to create credit and they are not -- the driver is not the conditions of capital markets. But we might see some improvement in spread, but this change is not going to change the company's strategy.
Tainan Costa: Okay, thank you very much. That was very clear.
Operator: The next question comes from Aline Caldeira from Bank of America.
Aline Caldeira: Hello. Good morning. Can you hear me?
Raphael Horn: Yes. Yes, we can. Good morning.
Aline Caldeira: Well, thank you very much for taking my question. You addressed many interesting topics already, but I would like to know about the cash generation dynamic this year since you have a larger launch volume planned. I know you talked a little bit about this, but if you could give us more color about your expectations about that, that would be great. Thank you.
Raphael Horn: Thank you, Aline, for your question. Well, in 2023, we were at BRL180 million in operating cash. It was below our expectations, we thought it would be at BRL300 million or more. And that was the result of sales and advanced payments from clients. We had a large volume of payments before delivery. For example, the vintage that we are going to deliver in 2024. We started at 82% sold and the clients paid already 47% of that. So that contributed to 2023's cash. In 2024, the picture seems to be better than 2023, so we imagine that we are going to be at a neutral cash or slightly positive cash, but not too much. It is going to be slightly better than 2023. And of course, that number might vary greatly in case we buy landbank. Sometimes we approve the purchase of landbank and you have to pay BRL100 million in three or four months. So if we buy two plots of land, that can change things completely. And we also had payments of BRL70 million in landbank in 4Q '23 for one specific plot. So there's a lot of volatility in that line item, but we think '24 will be better than '23.
Aline Caldeira: Okay, thank you. That was very helpful. Have a good day.
Operator: The next question comes from Fanny Oreng from Santander.
Fanny Oreng Avino: Hello. Good morning and thank you for taking my question. I have just one. Can you talk a little bit more about workforce in Sao Paulo? And considering this outlook, what are the types of labor that could cause you problem in the future? And what are you doing internally to prevent potential risks in terms of workforce shortage in the future? Thank you very much.
Raphael Horn: Hello, Fanny. Good morning. Thank you for your question. In our previous call, we talked about that, about labor workforce, which has been challenging. Cyrela grew and the whole market grew. So we can see shortage in the market right now. But good news is that 2023 and '24 were stable in terms of launches. So the demand for workforce has not grown so much. I think that we're going to see more launches in the city, so that might cause shortage. In 2023, our construction cost went up in excess of the INCC rate and our cost was 4.8% and the INCC was around 3%. So that was related to workforce. The impact was not so big, but there was an impact. And what we hear from our team is that especially the roles related to the structure -- to concrete structure, they are problematic and also the hydro installations are a problem. So we created our own installer and increased its volume over the years to prevent issues. And also we have some actions related to training contractors. But honestly, the impact of that is limited. It is difficult to prevent those issues, but there has been a concern about that but things have not worsened in the past months at least. Is there any possibility to automate some processes, for example, the installers? Is there any other area that could profit or benefit from automation? Well, we have not changed the construction process and honestly, I am not so knowledgeable in this area. I'm not an engineer, so I cannot tell you exactly what the perspective is. What I can tell you is that we have not been affected so much. But we know that in other economies, the construction sites are more capital-intensive and workforce-intensive. So if there's a structural problem looking-forward, we might have problems. But I don't see that happening in the near future.
Operator: The next question comes from Bruno Mendonca from Bradesco BBI.
Bruno Mendonca: Hello. Good morning. I have a question about Vivaz and your thoughts about Minha Casa, Minha Vida, and low income, and Cury, Plano & Plano were the major highlights in terms of results this quarter. And you have a seat in the board of the two companies. So I would like to know your perspectives for the progress with Vivaz. Can we expect it to reach the same level of operation of your subsidiary companies? And also I would like to know more about the competition with Vivaz and other players in this segment.
Raphael Horn: Hello, Bruno. Well, first of all, our relationship with them is great with Cury and Plano & Plano. They are our personal friends, you know, our family friends and that's going to continue. And we're all friendly and the relation is great. If we are going to be at the same size of our partners, we should be realistic. We are like the little brother to big brothers that are the best-in-class. So we're not aiming towards being as big as they are or as good as they are, and we are much better than them at Vivaz, and this is how we are going to continue. We don't have any problems with them. On the contrary, they are our partners and friends. And the more they grow, the better for us. We're going to strive to be better than them at Vivaz. We don't want to be as big as they are because that's way beyond our current capacity.
Bruno Mendonca: Okay. Thank you.
Operator: Next question with Jorel Guilloty with Goldman Sachs.
Jorel Guilloty: Good morning. I have two questions. The first one is finished units. There was an increase in the number of finished units. I know part of that is related to the deliveries in 2023. So I would like to know more about your perspective on finished units. What is the driver for cash generation for the next month? Would that be your current inventory and how difficult it is to sell finished units? Earlier you said that you might buy landbank with your cash. Do you think that the owners of landbank want to sell for cash instead of swaps? And do you think that that is going to continue looking forward since the market is heated right now, especially in the cities where you operate the most like Sao Paulo?
Miguel Maia Mickelberg: Good morning, Jorel. This is Miguel. Well, about our inventory, indeed, it increased in terms of finished units. But the finished units is concentrated at least 20 -- two-thirds of it comes from deliveries in 2022 and '23. And those two vintages sold very well. And the vintage that we are going to deliver in '24, it has been 82% sold so far. So we sold very well. So finished units indeed went up, but as a proportion or a percentage of the overall inventory, it is at 15% to 16%, which is low. We try to sell as fast as possible, but I don't think that's a major driver for cash generation. It contributes a little bit to cash generation because we're going to receive a little bit more than last year because our inventory is a little bit higher at the beginning of the year, but this is not a concern for us right now, and I think that we are going to keep the current levels trying to sell finished units as fast as possible. About your question related to paying for landbank in cash or swaps. Well, I don't think that's actually an issue. It's been the same for many years. And the owners of landbank, they don't really talk. They each act independently. There's no union or cartel for owners of landbank. There's no such thing. And each negotiation is different, each negotiation is specific. Nothing has changed. At least I don't know anything about it. Companies usually like to buy for swaps, but the individual owners, they are different. There's no overall dynamic in terms of what they prefer. You can buy using cash or swaps, but that mix is usually the same. And the companies that have money use cash, the ones that don't, they use swaps, but it's really related about the risk appetite of the companies that are buying landbank and not so much what the owners of the landbank want to do.
Operator: The next question comes from Hugo Grassi from Citi.
Hugo Grassi: Hello. Good morning. Congratulations on the results and thank you for the opportunity of asking questions. I have two. The first one is about selling expenses, which increased significantly in this quarter, especially because of the sales of stands and showrooms. I would like to know more about your launch pipeline in terms of selling expenses for 2024. And the second question is about landbank acquisition. You talked about six projects that you launched in the fourth quarter, and you also mentioned that you paid BRL70 million to buy one plot of land. So I would like to know more about how landbanks are evolving, how hard has it been to sign the contracts and negotiate. I'd like to know more about also the volume of negotiations for a new landbank. That would be very helpful. Thank you.
Miguel Maia Mickelberg: Hello. Good morning, Hugo. This is Miguel. First about the selling expenses. There was an increase of BRL20 million and it is 100% related to the showrooms and sales stands that we shut down in December. When you launch a project in the beginning of the year, for example, in the beginning of 2023 and you need to start construction in early 2024, we decided to close those sales stands earlier because in January and February, customers don't visit them so much, because they're on vacations and traveling. And therefore, we can start construction with more gas, if you will. And in that line item, we don't see expenses related to 2024 launches. When we built the showroom, we turned that amount into assets. And if you look at our fixed assets, at the end of 3Q, we had BRL107 million in assets for sales stands and we finished fourth quarter with BRL38 million in sales stands assets. So it means that we did not invest so much in sales stands for the 2024 projects. The expenses that we had were in line with depreciation and we shut down four sales stands. And the balance of those assets are reflected in our results. Now, about landbanks. Indeed, we purchased six plots of land, five in Sao Paulo. And throughout the year, we bought more than that. But we only disclose them when we finished -- when we conclude all conditions necessary for signing the deal. And what we want to have is to have two years' worth of landbank, especially here in Sao Paula and we are very close to that level right now.
Hugo Grassi: Okay, thank you very much. That was very helpful. Have a good day.
Operator: The next question comes from Jonathan Koutras with JPMorgan.
Jonathan Koutras: Good morning. I had a question about low-income segments when it comes to funding. I know that the Minha Casa, Minha Vida program will still change more throughout the year. So I would like to know if that's a risk for funding with Vivaz and the JVs. Thank you.
Miguel Maia Mickelberg: Hello, Jonathan. Thank you very much for your question. Well, we monitor the regulation changes but not so closely. And I can't really tell you if they can pose risks in terms of causing funding shortage. But in the first three months of the year, funding consumption was very high in the launches market. That volume was very high. So this is something that we have to pay attention to. But I can't really tell you if those changes can cause additional impact.
Jonathan Koutras: Okay. Thank you very much, Miguel.
Operator: This concludes the Q&A session. I would like to turn it back to Mr. Raphael Horn for his closing remarks.
Raphael Horn: Thank you very much for participating in our conference call and you can count on us. We're going to work as hard as we can to deliver good results in 2024. Have a good day.
Operator: This concludes Cyrela's earnings call for today. If you have questions, please submit them to the company's investor relations team through the email ri@cyrela.com.br. Thank you very much. Have a good one.