EARNINGS RELEASE Q1' 22 - Earnings Conference Call - Mziq
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EARNINGS RELEASE Q1’ 22 Earnings Conference Call Portuguese English May 13, 2022 May 13, 2022 3:00 p.m. (Brasília time) 3:00 p.m. (Brasília time) 2:00 p.m. (NY time) 2:00 p.m. (NY time) Phone: +55 11 4090 – 1621 Phone: +1 412 717 9627 IR Team Daniel Guerbatin Luiz Augusto R. e Silva CEO FP&A e IR Andrea de Rizzio Paulo Mikan Bertoldo CFO & IRO IR
1. OPERATIONAL AND FINANCIAL HIGHLIGHTS .................................................................................. 9 2. GROSS REVENUE FROM SERVICES ................................................................................................ 10 3. COST, ADMINISTRATIVE EXPENSES AND LEGAL LIABILITIES ......................................................... 16 4. ESG ............................................................................................................................................... 18 5. OPERATING RESULTS .................................................................................................................... 19 6. INVESTMENTS AND CASH POSITION ............................................................................................ 20 7. CORPORATE GOVERNANCE .......................................................................................................... 21 8. SUBSEQUENT EVENTS................................................................................................................... 21
MANAGEMENT REPORT Management of Nexpe Participações S.A. (“Nexpe” or “Company”) presents for your appreciation its Manage- ment Report and the parent company and consolidated financial statements, accompanied by the independent auditor's report, for the quarter ended March 31, 2022. Message from Management 2021 was very important year and marked a new milestone for our Company. In this year, we defined our busi- ness model in alignment with our experience in the traditional real estate market by offering technological transformations with humanized services that allowed us to become a “Figital” company. As a result of these changes, on March 29, 2022, Nexpe was born, the new name of our Holding company, which will have its shares traded on the stock exchange market managed by B3 S.A with the new ticker “NEXP3”. At NEXPE, we believe that buying, selling, or leasing a property is an individualized client experience since we can align our processes according to each client, offering them a unique experience while seeking their best interests. We want to provide our clients with complete solutions in their real estate journey, starting with the search for a property to the conclusion of a purchase or rent, including the search for real estate financing, if necessary. We are currently the first real estate curatorship tech platform in Brazil and we are focused on becoming one of the main players in the real estate market. Also in this first quarter, we concluded two fundraising transactions, in the amount of R$115 million. The first transaction was on January 20, 2022, when we signed a bank credit note, in the amount of R$60 million, and the second was on March 25, 2022, when we carried out our private capital increase that had been approved by our Board of Directors. The proceeds from these transactions are intended to be used to recompose our cash posi- tion, in addition to strengthening the Group's capital structure to improve our liquidity so we many continue to invest in technology that is aligned with our digital transformation and market repositioning. Operating Performance Given this scenario, real estate financing through funds from the Brazilian System of Savings and Loans (SBPE) reached R$41.21 billion in the first quarter of 2022, down by 4.7% compared to the R$43.22 million of the same quarter of 2021. Looking at the market in which we operate, with private banks partners, the drop was more representative, around 40%. As a result, Credimorar's origination in the first three months of 2022 reached R$639.8 million in real estate credit (produced GFV), reducing by 35% over the first quarter of 2021. The retrac- tion in credit origination is a consequence of successive increases in the Selic rate, which reflected in increases in the interest rate on home loans. In the primary market, we reached a potential sales value (PSV) of R$284.6 million, down by 26% from the R$387.1 million recorded in the first quarter of 2021, with an average ticket was R$562.5 thousand, increasing by 5% over the same period in 2021. On the other hand, we had a 24% growth in the share in PSV launched, reaching R$1.6 billion against R$1.3 billion in the first quarter of 2021. The secondary market was also impacted at the beginning of the year, in which the PSV of sold units fell by 36%, ending the quarter at R$192.2 million against R$299.4 million in the first quarter of the previous year. Just like
the primary market, the average ticket for units sold also increased to R$696.4 thousand, corresponding to a 14% growth. As a result, the Group’s gross revenue ended the first quarter of the year at R$26.2 million, down by 31% over the R$38.1 million recorded in the first three months of 2021. Our financial services vertical, which accounted for 50% of revenues, reached R$13.2 million, followed by the primary market, with R$5.6 million, and the sec- ondary market, with R$4.5 million, rental market and others totaled R$ 2.9 million. Our gross margin (as a per- centage of gross revenue) at the end of March 2022, was 51.1%, reducing by 2.3 p.p. from the 53.3% recorded in 2021. Our administrative expenses, which remain flat in about R$ 22 million per quarter, as a percentage of gross rev- enue, increased by 31.3 p.p., reaching 86.9% in the first quarter of 2022, against 55.5% in the same period of 2021. Mainly due to a contraction in revenue generation. The adjusted EBITDA after legal liabilities was a negative R$9.4 million in the first three months of 2022, de- creasing by R$8.7 million from the negative R$0.7 million recorded in the same period in 2021. Adjusted EBITDA from continued operations at the period ended March 31, 2022, reaching a negative R$12.9 million compared to a negative R$3.0 million for the same period of the previous year. The table below shows the breakdown of EBITDA and Adjusted EBITDA from the Group's continued operations, based on the losses recorded in the quarter ended March 31, 2022 and March 31, 2021, reconciled to the Com- pany's consolidated interim financial information, in line with CVM Instruction 527/12: Quarter ended (R$ thousand, except %)1 March 31, 2022 and 2021 Medições não contábeis 2022 AH% 2021 AH% Loss attributed to controlling shareholders -19,685 17.40% -23,833 73.26% Net income attributed to non-controlling shareholders -2 98.79% -165 -100.90% Loss for the period -19,687 17.96% -23,998 66.09% (-) Financial result 3,599 -67.25% 10,990 402.74% (-) Income tax and social contribution 68 -77.10% 297 -57.33% (-) Depreciation and amortization 3,145 16.78% 2,693 121.77% EBITDA(1) -12,875 -28.52% -10,018 87.52% (-) Asset impairment adjustments 0 -100.00% 7,000 100% Adjusted EBITDA from the Continued Operations(1) -12,875 -326.61% -3,018 94.81% 1 1 EBITDA and Adjusted EBITDA from continued operations are not recognized measures under Brazilian GAAP or International Financial Reporting Stand- ards ("IFRS"), do not have a standard definition and may not be comparable to similar measures provided by other companies. The Group uses EBITDA and Adjusted EBITDA from continued operations as additional performance indicators for management purposes and for comparison with similar companies.
The Company operates in four main markets, all of which located in Brazil, defined as financial services market, primary and secondary market, and rental market. There is a lot to celebrate when we analyze the breakdown by operating market: • The financial services market, which offers advisory services for the trade of financial services, such as home loans and home equity, recorded 1,609 financed units in the first quarter of 2022, a drop of 41% over the same quarter of 2021, when a total of 2,747 units were financed. Credimorar Serviços Financeiros e Securitários S.A. ended the quarter with R$894.9 million in billed GFV. Gross revenue reached R$13.2 million in the first quarter of 2022, against R$21.5 million recorded in the same quarter of 2021, reducing by 39% as a result of rising in interests’ rates. • The secondary market, which is responsible for the sale of used or ready-to-move-in properties, sold a total of 276 units, down by 44% in relation to the first quarter of 2021, when a total of 490 units were sold. The potential sales value (PSV) fell by 36%, from R$299.4 million in the first quarter of 2021 to R$192.2 mil- lion in 2022, however, the average ticket for units sold increased by 14% in the quarter, from R$611.0 thou- sand to R$696.4 thousand per unit. Gross revenue from this segment ended the quarter at R$4.5 million, down be 32% from the same period in 2021, when gross revenue totaled R$6.6 million. • In the rental market, “Desenrola”, a digital platform to buy, rent, and sell commercial and residential prop- erties operating in São Paulo (SP), Niterói (RJ), Cuiabá (MT), and Goiânia (GO), brokered 218 properties as of March 31, 2022, decreasing by 13% over the same period in 2021, when a total of 251 properties were bro- kered. • In the primary market, real estate projects launched by developers decreased in the number of units sold by 30%, ending the quarter with 506 units sold versus 725 units in the first quarter of 2021. We participated in the launching of 12 developments during the first three months of the year, of which 10 were in the city of São Paulo and 2 in Rio de Janeiro. The potential sales value (PSV) of the units sold went from R$387.1 million in the first three months of 2021 to R$284.6 million in 2022, reducing by 26%. The average ticket increased by 5%, from R$534.0 thousand in the first quarter of 2021 to R$562.5 thousand in the same period of 2022. Gross revenue ended the quar- ter at R$5.6 million, down by 22% over the R$7.2 million recorded in the first quarter of 2021.
Closing message For the coming quarters, we believe developers will prioritize their future launches with projects that are able to pass-through the increases in prices of inputs, which may impact launch volumes until the end of the year. We still believe in our potential to gain Market Share given the scalability of our business and the organic growth of our digital platforms. This, combined with our business diversification (financial, secondary, primary and leasing services) allows us to be prepared to face a possible deterioration in the real estate market, minimizing its future impacts. The Group’s service portfolio has proven to be essential for the sustainability of the business, increasing revenue through operational synergy and great potential for organic growth. All the Company's actions are aimed to pave the way for new trends in this increasingly digital universe, turning Nexpe into a Proptech company. The drivers of the new strategic guidance being implemented are business profitability, digital transformation, improved customer experience, and work as an ecosystem, which expand and integrate the products and ser- vices portfolio. In addition, we cyclically revised costs and administrative expenses, as well as all spending in- curred in operations and the corporate division. Through this initiative, we increased profitability and preserved cash without jeopardizing the Group's target growth. Finally, Management daily manages cash, monitoring financial and non-financial assets and investments focused on digital transformation to improve the Group’s business model and increase profitability.
Relationship with Independent Auditors The Company engaged BDO RCS Gestão Empresarial Ltda. (“BDO”) to audit the parent company and consolidat- ed interim financial information, prepared under the accounting practices adopted in Brazil and the International Financial Reporting Standards (IFRS) for the quarter ended March 31, 2022. Nexpe’s policies for engaging services not related to the external audit with its independent auditors aim to en- sure that there is no conflict of interest and loss of independence or objectivity, ensuring the principles that pre- serve the auditor's independence. BDO was not engaged to provide services other than the review of the parent company and consolidated interim financial information for the quarter ended March 31, 2022. Daniel Guerbatin CEO of the Group
1. Operational and Financial Highlights Financial Results ▪ Gross revenue of R$26.2 million in the first quarter of 2022, down by 31% over the same period in 2021. This resulted in a net revenue of R$22.4 million, a 31% reduction against the first quarter of 2021. ▪ The Company’s digital presence ended the year at 75% of gross revenue, remaining at an excellent level and accounting for R$19.6 million of gross revenue. Financial Services Market ▪ Home loan grants totaled of R$894.9 million in Potential Sales Value financed through Credimorar, which is dedicated to the trade of Financial Services. This amount reduced by 2% against the first quarter of 2021. In line with a lower origination volume in the overall market. Secondary Market ▪ Gross revenue in the secondary market was R$4.5 million in the first three months of the year, reducing by 32% over the same period in 2021. ▪ The number of units sold fell by 44%, from 490 in the first quarter of 2021 to 276 units sold at the beginning of the year. The average ticket increased by 14%, from R$611.0 million in the last quarter of 2021 to R$696.4 million in the first three months of 2022. Rental Market ▪ The number of properties brokered fell by 13% against the first quarter of 2021, from 251 to 218 properties. The property portfolio managed by the Company ended the quarter with 2.2 thousand properties, down by 8% against the first quarter of 2021. Primary Market ▪ Gross revenue in the primary market was R$5.6 million, down by 22% in the first quarter of 2022 versus the same period in 2021. ▪ Potential Sales Value (PSV) reached R$284.6 million against R$387.1 million in the first three months of 2021. Average ticket of R$562.5 thousand against R$534.0 thousand in the quarter ended in March 2021, increasing by 5%.
2. Gross Revenue from Services Gross revenue from services, represented by the sum of commission fees from the different operating markets, reached R$26.2 million in the quarter ended in March 2022, down by 31% from the same period in 2021 and by 19% from the last quarter of 2021. The financial services vertical accounted for 50% of all the Group’s revenues, totaling R$13.2 million. As a result, the Company's net revenue was R$22.4 million at the beginning of 2022, versus R$32.5 million at the beginning of 2021, down by 31%. Table 1 - Revenue and Brokerage Fee Gross Operating Revenue per Vertical (R$ million) Q1'22 Q1'21 Q1'22 vsQ1'21 Financial Services 13.2 21.5 -39% Secondary Market (Finished Properties) 4.5 6.6 -32% Rental* 2.6 2.6 3% Primary Market (Lauches) 5.6 7.2 -22% Other Revenues 0.3 0.3 -5% Gross Operating Revenue 26.2 38.1 -31% Taxes 3.4 4.9 -30% Cancellations 0.4 0.7 -51% Net Revenue 22.4 32.5 -31% * The gross operating revenue of the Rental Market includes related businesses, such as insurance and receivables management, among others. 2.1 Digital Presence The Company ended the first quarter of 2022 with a digital presence of 75%, that is, of the total gross revenue, 75% was originated through 100% online platforms and/or started through digital channels. Of the total customer interactions in the first quarter of 2021, 70% originated from 100% digital and/or through a digital platform. This is the result of the Company’s investments and strategy to improve its digital platforms, which are highly scalable at all companies of the Group. Presença Digital - 1T22 Volume de Leads (%) - 1T22 25% 30% 70% 75% Digital Offline Digital Off-line
Excluding Desenrola and Credimorar, where their sales are already a 100% digital, we can observe how the digi- tal DNA of these verticals extends to other operations. In the first quarter of 2022, 39% of sales in the secondary market were digitally versus 67% in the first quarter of 2021. In the primary market, 20% of sales were originated digitally at the beginning of the year against 39% in the same period in 2021. Sales through digital channel was impacted by a lower sales volume in the quarter. Are considered as sales through the digital channel any customer who started their process through our digital platforms, but who may have had some type of face-to-face interaction, such as when visiting the property. Digital Sales Origination (%) - Q1' 22 Conversion Rate (%) - Q1' 22 80% 10.00% 67% 8.00% 60% 6.00% 39% 39% 40% 4.00% 20% 20% 1.81% 2.00% 1.36% 1.20% 0.89% 0% 0.00% Q1' 22 Q1' 21 Q1' 22 Q1' 21 Secondary Primary Secondary Primary 2.2 Financial Services Market The financial services market offers, through Credimorar, the largest multi-bank platform in Brazil, advisory ser- vices for the trade of real estate products, such as home loans, home equity, personal loan, and public consorti- ums. By offering these products, Credimorar is Banco Bradesco's major home loan generator. Home loans are offered through the Housing Financing System (SFH) or Real Estate Financial System (SFI) through Credintegrados, a platform created and developed by Nexpe, that is connected in with Brazil’s main financial institutions in a fully automated fashion, ensuring fast services and reducing problems across the ser- vice contracting process. Table 2 – Credimorar Operations Real State Credit (R$ million) Q1'22 Q1'21 Q1'22 vsQ1'21 Produced GFV 639.8 987.1 -35% Billed GFV 894.9 908.9 -2% Funded Units 1,609 2,747 -41% Loan to Value 67% 69% -3% Gross revenue from this segment was R$13.2 million and accounted for 50% of the Company's total gross reve- nue at the quarter ended March 31, 2022, reducing by 39% from the R$21.5 million recorded in the same quar- ter of 2021. The contracted sales of the financial services market, the billed GFV, reached R$894.9 million in the first three months of the year, reducing by 2% against the R$908.9 million recorded in the same period in 2021. The number of units financed reduced by 41%, from 2,747 units in the first months of 2021 to 1,609 units in this quarter.
The factors that explain the result were: (i) increase in the Selic rate; (ii) increase in prices of financed properties; and (iii) lower origination volume by our partners banks. GFC Produced vs Partnership – Q1' 22 GFC Billed per Quarter B2C 0% 1,257 1,118 Shop 1,034 39% 909 895 Partnership 61% Q1' 21 Q2' 21 Q3' 21 Q4' 21 Q1' 22 2.3 Real Estate Market 2.3.1 Secondary Market The secondary market is responsible for the commercial sale of used or ready-to-move-in properties, where the real estate agent, acting as a commercial broker, earns a commission payable by the property owner. The gross revenue from the secondary market totaled R$4.5 million, accounting for 17% of the Company's total gross rev- enue in the quarter ended March 31, 2022. Table 3 – Ready-To-Move-In or Used Property Sales Potential Sales Value (PSV) - Secondary (R$ million) Q1'22 Q1'21 Q1'22 vsQ1'21 PSV 192.2 299.4 -36% Units Sold 276 490 -44% Average Ticket (R$ thousand) 696.4 611.0 14% The potential sales value (PSV) of brokerages carried out in the secondary market reached R$192.2 million in the first three months of 2022, a drop of 36% compared to R$299.4 million recorded in the same period of 2021. The number of units sold reached 276 against 490 units sold in the first quarter of 2021, reducing by 44%. The aver- age ticket of the units sold in 2022 was R$696.4 thousand, increasing by 14% over the R$ 611.0 thousands of the first three months of 2021. Rio de Janeiro continues to be our main location for the secondary market, with a 58% share in the quarter end- ed March 31, 2022, followed by São Paulo, with 37%, and other regions, with 4%. In the quarterly comparison between 2022.
PSV Secondary - Q1' 22 Average Ticket - Secondary Up to 240K 6% From 240K to 718 500K 696 16% 667 626 Over 1MM 611 53% From 500K to 1MM 25% Q1' 21 Q2' 21 Q3' 21 Q4' 21 Q1' 22 The breakdown of the PSV of the secondary market is as follows: 53% from properties priced over R$1 million; 25% from properties priced between R$500 thousand and R$1 million; 16% from properties priced between R$240 thousand and R$500 thousand; and 6% from properties priced up to R$240 thousand. Units above R$500 thousand helped in the 14% increase of average ticket in this first quarter. 2.3.2 Rental Market In the rental market, Nexpe operates through its digital platform “Desenrola”, which is currently one of the Company's main growth drivers. Desenrola aims to simplify the lives of tenants and owners. One of its competi- tive advantages is the ability to assist those who wish to rent a commercial or residential property by offering online services, not asking for any type of guarantees nor bureaucracies, without losing the humanization while providing this service. The rental segment ended the first quarter of 2022 with a gross revenue of R$2.65 million, increasing by 3% against the R$2.58 million in the same quarter of 2021. The property portfolio managed by the Company ended the quarter with 2,246 properties, decreasing slightly, by 8% against the first quarter of 2021. Despite this, our team is making efforts to maintain the real estate portfolio and, consequently, its growth. Table 4 – Rental Rent (R$ million) Q1'22 Q1'21 Q1'22 vsQ1'21 Number of Intermediated Properties 218 251 -13% Real Estate Portfolio 2,246 2,454 -8% The customers’ journey in the rental segment is highly replicable to the model of buying and selling ready-to- move-in properties, as the processes of advertising, selection, scheduling, visit and submission of proposals are virtually identical in both operations. The biggest difference would be the negotiation and regularization stage, which, in the case of the secondary market, needs to be addressed differently, given the complexity involved in this process. Our greatest advantage is the ability to assist clients in any segment by offering an end-to-end ex- perience, from the moment of searching for the desired property to assisting them with the property financing.
2.4 Primary Market The primary segment is responsible for commercial activities in real estate projects launched by developers in a condominium system even before these units are finished. It is present in different markets through own or li- censed stores, operating from the identification of market and region trends, conception and planning of the development, planning of the marketing strategy, to the sale and formalization of the transaction. Gross revenue was R$5.6 million in the year, accounting for 21% of the Company’s total gross revenue, down by 21% from the same quarter in 2021. Table 5 - Brazil Launches Launches (R$ million) Q1'22 Q1'21 Q1'22 vsQ1'21 PSV Launched 1,563.0 1,264.2 24% Launched Units 2,539 1,465 73% Average Ticket (R$ thousand) 615.6 863.0 -29% A total of 12 developments were brokered by the Company in the quarter, of which 10 were in the city of São Paulo and 2 in Rio de Janeiro. A total of 2,539 units were launched, compared to 1,465 units in the first quarter of 2021, increasing by 73% quarter of 2021. The potential sales value (PSV) of launches in the quarter totaled R$1,563.0 million, up by 24% from the first three months of 2021, which had a total of R$1,264.2 million. São Paulo accounted for 82% of the PSV launched in the first quarter of 2022, while Rio de Janeiro accounted for 18%. PSV Launched per range of price Up to 240K 6% From 240K to 500K Over 1MM 22% 36% From 500K to 1MM 36% Of the R$1,563.0 million in developments launched in 2021, 36% refer to properties priced over R$1 million; 36% to properties priced between R$500 thousand and R$1 million; 22% to properties priced between R$240 thousand and R$500 thousand; and 6% to properties priced up to R$240 thousand.
Table 6 – Primary Market Contracted Sales Primary Q1'22 Q1'21 Q1'22 vsQ1'21 I - Sales of Launches (R$ million) Potential Sales Value (PSV) 284.6 384.8 -26% Units Sold 506 718 -30% Average Ticket (R$ thousand) 562.5 536.0 5% II - Sales of Remnants (R$ million) Q1'22 Q1'21 Q1'22 vsQ1'21 Potential Sales Value (PSV) 0.0 2.3 -100% Units Sold 0 7 -100% Average Ticket (R$ thousand) 0.0 331.0 -100% I + II = Primary Market Total (R$ million) Q1'22 Q1'21 Q1'22 vsQ1'21 Potential Sales Value (PSV) 284.6 387.1 -26% Units Sold 506 725 -30% Average Ticket (R$ thousand) 562.5 534.0 5% The PSV of the primary market contracted sales reached R$284.6 million in the first quarter of 2022, down by 26% versus the same period in 2021. The number of units sold fell by 30%, totaling 506 in the quarter against 725 units in the first quarter of 2021. In contrast to the reduction at the beginning of the year, average ticket increased 5%, to R$562.5 thousand compared to R$534.0 thousand in the first three months of 2021. In this quarter, São Paulo continued to lead the primary market, accounting for 56% of total sales, followed by Rio de Janeiro with 42%. PSV Primary - Q1' 22 Average Ticket - Primary Up to 240K 5% 815 592 563 534 523 Over 1MM From 240K to 43% 500K 36% From 500K to Q1' 21 Q2' 21 Q3' 21 Q4' 21 Q1' 22 1MM 16% Of the total sales in the primary market in the first quarter, 43% refers to properties priced over R$1 million; 36% to properties priced between R$240 thousand and R$500 thousand; 16% to properties from R$500 thousand to R$1 million; and 5% to properties up to R$240 thousand.
3. Cost, Administrative Expenses and Legal Liabilities 3.1 Cost of Services Cost of services ended the first quarter of 2022 at R$9.0 million, reducing by R$3.1 million, or 26%, from the same quarter in 2021. This variation was mainly attributed to the lower revenue in all verticals in the quarter. Table 7 – Costs of Services Costs of Services Rendered (R$ million) Q1'22 Q1'21 Q1'22 vsQ1'21 Financial Services 6.7 10.6 -37% Secondary Market (Finished Properties) 0.3 0.5 -26% Rental* 0.2 0.3 -32% Primary Market (Lauches) 1.8 0.8 114% Other Revenues 0.0 0.0 -96% Total of Costs of Services Rendered 9.0 12.2 -26% 3.2 Administrative Expenses Administrative expenses totaled R$ 22.83 million in the first quarter ended on March 31, 2021, up by 7%, when compared to the same period of 2021 which was R$ 21.2 million. Table 8 - Administrative Expenses Costs of Services Rendered (R$ million) Q1'22 Q1'21 Q1'22 vsQ1'21 Financial Services 6.7 10.6 -37% Secondary Market (Finished Properties) 0.3 0.5 -26% Rental* 0.2 0.3 -32% Primary Market (Lauches) 1.8 0.8 114% Other Revenues 0.0 0.0 -96% Total of Costs of Services Rendered 9.0 12.2 -26% The main items are explained below: Personnel and Charges – Increased by 16% in the quarter compared to the same quarter in 2021, from R$13.8 million in R$16.1 million. This increase is explained by the strengthening of our operational teams, mainly in our tech team, the digitalization process, and Nexpe's new market positioning. Occupancy – Decreased by 16% in the first months of 2022 against the first quarter of 2021, falling to R$2.2 million from R$2.6 million. It should be noted that this expenses have been maintained in recent quarters due to the renegotiation of leases and the change of the Holding company’s headquarters in 2021, as previ- ously reported. Outsourced Services – Remained flat at R$4.4 million in relation to the first quarter of 2021, when R$4.3 mil- lion was recorded. Among the outsourced services at the beginning of 2022, we had services related to the Company’s rebranding within the usual marketing services, consulting services for the cultural transfor- mation process, and provisions for IT services. Other operating income (expenses) – This line was fat in the beginning of 2022 presented a reduction of 60% reaching R$ 0.2 million versus R$ 0.5 million on the same period of 2021.
3.3 Legal Liabilities The Company's legal liabilities have already been normalized, but the work to extinguish them continues. In the quarter ended in March, the number of lawsuits dropped by 26%, from 300 in the same period in 2021 to 223. Compared to the fourth quarter of 2021, the number of lawsuits fell by 7%, illustrating the recurring reductions quarter after quarter. This quarter also began without any new labor lawsuit filed against Nexpe. New labor lawsuits Stock of labor lawsuits -26% 300 277 261 -100% 239 223 5 2 2 0 0 Q1' 21 Q2' 21 Q3' 21 Q4' 21 Q1' 22 Q1' 21 Q2' 21 Q3' 21 Q4' 21 Q1' 22 Table 9 – Legal Expenses Legal Expenses (R$ million) Q1'22 Q1'21 Q1'22 vsQ1'21 Loss in Labor Lawsuits 7.9 3.6 118% Reversal of Labor Provisions -5.6 -3.2 76% Procedural costs and other Legal Expenses 1.1 1.8 -37% Total Legal Expenses 3.4 2.3 51% Legal expenses totaled R$3.4 million against R$2.3 million in the first quarter of 2022, therefore increasing by 51% in 1Q21. Increase due to a higher number of agreements, which resulted in a higher cash disbursement.
4. ESG We believe that the future is everyone's responsibility and that we need to be committed to doing our part within our ecosystem. The ESG agenda of all Nexpe Group brands is integrated through a multidisciplinary committee of employees that seeks to integrate the business strategy with environmental, social and govern- ance (ESG) commitments. The first quarter allowed us to revisit projects such as Empreenda Jovem, which makes it possible for young people from disadvantaged communities to enter the job market. The success of the program in one of the Group's companies, Abyara, gave us a vision of the benefits that this project can bring in the long term. Today, the program has 7 young people who show great potential and can be a successful reference for young people in their community in the near future. We replicated the project in the city of Niterói, Rio de Janeiro, and it can be seen that, due to regional differences, some adaptations are necessary. Despite the lack of a group for- mation, the Brasil Brokers Niterói and Rio de Janeiro units have a high rate of adhesion of brokers to social caus- es. And, therefore, the project will have special attention to evolution and adaptation to regional realities. In addition to this, the Housing Project is undergoing a restructuring period, where we can amplify our vision and impact, bringing the chance to provoke a reverberation of social impact never before realized among part- ners in our market. However, the #Gigantesca campaign, under the motto “Everything fits. There is just no prejudice.” had its evolu- tion designed and completed, and now enables the participation of employees directly, not only in suggesting ideas, but also in their implementation, strengthening the culture and deepening the understanding of what it really means to practice the values of the organization. We will focus this year on the issue of inclusion and di- versity in order to provide an environment in which all individuals are valued, supported and treated with fair- ness and respect, have equal access to opportunities and resources and can fully contribute to the success of the group, in addition to guaranteeing the conditions for everyone to reach their full potential. To support us in this project, we hired the consultancy of Lee Hecht Harrison (LHH), a company present in more than 60 coun- tries and with extensive experience in D&I projects. At the same time, the environmental pillar evolved in the review of data on greenhouse gas emissions and con- sumption of non-renewable energy sources, enabling the test period for the use of renewable energy in 10% of the units present in Rio de Janeiro.
5. Operating Results 5.1 EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization Adjusted EBITDA Performance Q1' 21 Q1' 22 (3.0) (0.7) (12.9) Adjusted EBITDA ex. Legal Liabilities (9.4) Adjusted EBITDA Adjusted EBITDA after Legal Liabilities was negative by R$9.4 million in the first three months of the year, com- pared to a negative R$0.7 million in the first quarter of 2021, decreasing by R$8.7 million. Adjusted EBITDA be- fore Legal Liabilities ended the first three months of the year in a negative R$12.9 million, compared to a nega- tive R$3.0 million in the first quarter of 2021. It is worth noting that the decline in EBITDA in the quarter was exclusively due to lower revenue, since administrative expenses remained flat, as described in item 3.2. 5.2 Adjusted net income. Net Income (loss) Performance Q1' 21 Q1' 22 (19.7) (23.8) (16.2) (21.6) Net Income (loss) attributed to controlling shareholders ex Legal Liabilities Net Income (loss) attributed to controlling shareholders Net Result attributed to the controlling shareholders, after Judicial Liabilities, was negative by R$19.7 million at the end of the quarter ended March 31, 2022, improving by 17% over the R$23.8 million in the first quarter of 2021. Adjusted net income before Legal Liabilities was a negative R$16.2 million, improving by 25% over the negative R$21.6 million in the quarter ended in March 2021. This result was mainly impacted by interest up- dates, interest on loans, and expenses from the sale of companies.
6. Investments and Cash Position 6.1 Adjusted CAPEX (Accrual Basis) The Company’s investments totaled R$8.0 million in the 12-month period ended March 31, 2022, compared to R$2.1 million in the first quarter and R$1.5 million in the fourth quarter of 2021, respectively. Therefore, the growth was by R$5.9 million and R$6.5 million compared to the first and fourth quarters of 2021. Investments have been concentrated in technological development, in line with the previous quarters. Capex 8.0 2.1 Q1' 21 Q1' 22 6.2 Cash and Financial Investments Table 10 – Cash and Financial Investments Fluxo de Caixa (R$ MM) 1T21 1T22 1T22 vs 1T21 Caixa e equivalentes inicial 9,0 12,8 43% FC Operacional -3,4 -19,9 -489% Capex -2,1 -8,0 -277% FC Livre 3,5 -15,1 -536% Aplicações financeiras 9,4 -3,7 -139% Financiamento com terceiros -3,2 59,5 1985% Financiamento com acioistas 0,0 54,8 0% Fluxo de caixa 9,7 95,5 890% Cash generated from operating activities was negative by R$19.9 million at the end of the first quarter in 2022, versus a negative R$3.4 million in the same period in 2021, falling by R$16.5 million. Capex for the period was R$8.0 million versus R$2.1 million in the first quarter of 2021. The significant growth was impacted by the addition of intangible assets, corresponding to investments in proprietary technology that supports the digital transformation and new positioning of Nexpe. Financial investments are basically concentrated in bank certificates of deposit and fixed income funds, with yields varying based on the interbank deposit (CDI) rate. Total amount at the end of the first quarter of 2022 was R$3.7 million.
During the first quarter of 2022, a financing transaction was signed with third parties, namely Bradesco, though a CCB loan, which positively impacted the flow by R$59.5 million. We also had financing with shareholders through a private capital increase, in a total amount of R$54.8 million, which together with the funding from Bradesco amounted to R$114.3 million. Therefore, cash was R$95.5 million at the end of the first quarter of the year, against R$9.7 million in the same period of the previous year, representing an increase of 890% or R$85.9 million. 7. Corporate Governance Table 11 – Corporate Agenda Earnings Release Agenda Event Date th Conference Call Q1' 22 May 13 ,2022 Earnings Release Report Q2' 22 August 11th,2022 Conference Call Q2' 22 August 12th,2022 Earnings Release Report Q3' 22 November 10th,2022 Conference Call Q3' 22 November 11th,2022 8. Subsequent Events • On May 4, 2022, pursuant to the Material Fact released on this date, Nexpe announced the creation of its new brand focused on providing legal solutions for the real estate ecosystem. SAVYE will initially aim to provide guidance and support for small and medium-sized real estate companies on how to adapt their operations to the Brazilian Data Protection Law (“LGPD”). In partnership with Wibson, SAVYE aims to provide the best technology to manage cookies and data pri- vacy on websites and campaigns, in addition to providing documents to prove consent, thus facilitating any inspection or audit process. • On May 10, 2022, and in accordance with the Notice to the Market published on the same date, Nexpe informed its shareholders and the market in general that as of May 18, 2022, the shares issued by the Company will be traded on the stock exchange market managed by B3 S.A. – Brasil, Bolsa, Balcão under the new ticker code “NEXP3”, replacing the current code “BBRK3”, and its trading name will become “NEXPE”, replacing “BR Brokers”.
Anexo I – Demonstração de Resultados Trimestral (R$ mil). Demonstrações financeiras Disclaimer: Neste relatório demonstraremos os resultados das operações em 31 de março de 2022 e 2021, destacando os efeitos de amortização de recuperação de ativos, para melhor comparação com o histórico operacional. Todos os ajustes serão explicitados na tabela que segue abaixo: 1T22 1T21 Receita de serviços 26.197 38.119 Descontos e abatimentos (365) (741) Impostos incidentes (3.415) (4.890) Receita líquida 22.416 32.489 Custo dos serviços prestados (9.037) (12.154) Resultado bruto 13.380 20.335 Despesas administrativas e operacionais (26.255) (23.353) Despesas administrativas (22.411) (20.345) Honorários de diretoria (503) (794) Provisão para devedores duvidosos (24) 131 Outras receitas (despesas) operacionais 120 (69) Equivalência Patrimonial - - Passivos Judiciais (3.438) (2.277) EBITDA Ajustado das operações continuadas (12.875) (3.018) Amortização de Recuperação de Ativos - (7.000) Resultado Líquido das Operações Descontinuadas - - EBITDA (12.875) (10.018) Depreciações e amortizações (3.145) (2.693) Depreciações (410) (529) Amortização do Intangível (1.343) (694) Amortização Arrendamentos (1.392) (1.470) Resultado Financeiro (3.599) (10.990) Despesas financeiras (5.508) (11.218) Receitas financeiras 1.909 228 LAIR (19.619) (23.701) Provisão para imposto de renda (48) (215) Provisão para contribuição social (20) (82) Lucro Líquido das Operações (19.687) (23.998) Participação acionistas minoritários 2 165 Lucro (prejuízo) Líquido atribuído aos acionistas controladores com Passivos Judiais (19.685) (23.833)
Exhibit II – Consolidated Balance Sheet on March 31, 2022 and 2021 (R$ thousand). Assets Q1' 22 Q1' 21 Current assetss Cash and cash equivalents 95,547 12,816 Financial assetss 1,678 634 Trade accounts receivable 6,668 6,255 Advances from suppliers 351 488 Taxes and contributions receivable 6,742 5,705 Dividends and interest on equity - receivable - - Prepaid expenses 17,542 - Accounts receivable - Resell companies 1,687 1,547 Other receivables 3,615 3,389 Total current assets 133,830 30,834 Non current assetss Financial assetss 3,779 1,133 Trade accounts receivable 1,065 1,105 Properties for sale 947 947 Taxes and contributions receivable - - Loan from related parties 13,169 12,972 Judicial Blockade 45,161 - Accounts receivable - Resell companies 39 39 Other credits 1,213 1,553 Lease-purchase agreement 11,707 9,537 Property, plant and equipment 5,959 5,628 Intangible assetss 97,850 95,328 Total non current assetss 180,889 128,242 Total assets 314,719 159,076
Exhibit III – Consolidated Balance Sheet on March 31, 2022 and 2021 (R$ thousand). Liabilities and Equity Q1' 22 Q1' 21 Current liabilities 11642 Suppliers 5,409 6,881 Lease-purchase agreement - costs 4605 4154 Payroll and related taxes 11,482 14,527 Judicial installments payable 13796 13979 Taxes and contributions payable 11,316 13,236 Derivative financial instruments 18120 0 Dividends payable 69 69 Provisions for lawsuits risks 20,143 22,502 Advances from customers 17 233 Operation values to be transferred 1,090 2,656 Other accounts payable 12,965 10,883 Total current liabilities 110,654 89,120 Non current liabilities Loans and financing 49,480 - Judicial installments payable 312 408 Payroll and related taxes 8,287 4,326 Taxes and contributions payable 15,556 13,894 Lease-purchase agreement - costs 9,525 7,718 Provisions for lawsuits risks 30,214 33,754 Derivative financial instruments 44,583 - Total non current liabilities 157,957 60,100 Equity Capital 815,460 760,671 Earnings reserve 37,433 37,433 Treasury shares (17,562) (17,562) Provision for Long Term Incentive Plan 6,194 5,044 Noncontrolling transations (79,591) (79,591) Earnings (deficit) reserve (716,196) (696,511) Shareholders' equity of controllers 45,738 9,484 Noncontrolling interests in subsidiaries 370 372 Total equity 46,108 9,856 Total liabilities and equity 314,719 159,076
Anexo IV - Fluxo de Caixa (R$ mil) - Consolidado em 31 de março de 2022 e 2021. CASH FLOW Q1' 22 Q1' 21 Cash flows from operating activities Net income (loss) of the period (19,619) (23,701) Adjustments to reconcile net income to net cash provided by operating activities Depreciation 410 529 Amortization 1,343 694 Amortization from lease-purchase agreement 1,392 1,470 Equity in subisidiaries - - Provisions - Allowance for doubtful accounts (24) (132) Provisions for lawsuits risks (2,513) 1,073 Present value adjustment - accounts receivable (468) (574) Write-off of property and Intangible assetss 692 1,185 Lease-purchase agreement expenses 250 302 Income from loan agreement (112) - Asset recovery adjustment 1,150 (121) Adjustment - 7,000 Amortization of issuance of debentures costs - 5,463 Decrease (increase) in Assets and Liabilities Trade accounts receivable 119 1,198 Advances from suppliers 137 107 Taxes recoverable (1,037) (229) Prepayments (140) (1,594) Accounts receivable - Resell companies - 80 Judicial Blockade (197) 137 Other credits (250) (220) Other long term assets 340 (344) Suppliers (1,472) 5,006 Lawsuits risks (3,386) (4,837) Interest paid - lease-purchase agreement (211) (112) Payroll and related taxes 916 (113) Taxes and contributions (330) (4,051) Advances from customers (216) 6,979 Others current liabilities 3,318 (649) Prepaid expeses - 2,076 Others liabilities - (1) Cash (used in) generated by continued operating activities (19,908) (3,379) Cash (used in) generated by descontinued operating activities - - Net cash (used in) generated by operating activities (19,908) (3,379) Cash flows from investment activities Securities (3,690) 9,353 Repurchase of shares - - Capital Increase (decrease) advance - Related parties - - Investiments - - Lands for sale - - Property, plant and equipment increase (781) (206) Intangible assetss increase (7,206) (1,914) Dividends received - Net Cash (used in) generated by investment activities from continued operating (11,677) 7,233 Net Cash (used in) generated by investment activities from descontinued operating - - Net Cash (used in) generated by investment activities (11,677) 7,233 Cash flows from financing activities Judicial installments (279) (1,659) Lease-purchase agreement - costs (1,319) (1,498) Loans and financing 61,122 - Net Cash (used in) generated by financing activities from continued operating 59,524 (3,157) Net Cash (used in) generated by financing activities from descontinued operating - - Net Cash (used in) generated by financing activities 59,524 (3,157) Cash flow from activities with shareholders Capita increase 54,789 - Non-controlling interest in subsidiaries - - Net Cash (used in) generated by financing activities with shareholders 54,789 - Net Cash (used in) generated by financing activities with shareholders from descontinued operating - - Cash and cash equivalents increase (decrease) 82,728 697 Cash and cash equivalents at the beginning of the period 12,816 8,957 Cash and cash equivalents at the end of the period 95,547 9,654
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