Gafisa S.A.

Sandro Gamba - Chief Executive Officer Carlos Eduardo Moraes Calheiros - CFO and Investor Relations Gerson Cohen - Administrative Director Fernando Cesar Campos - Investor Relations

Enrico Trotta - Itaú BBA Luiz Mauricio Garcia - Bradesco Victor Tapia - Bradesco BBA

Good morning, everyone. The first quarter 2018 showed that the inflection process of the operational and financial performance of Gafisa had been bit low during the last quarters and then was enhanced.

Besides the uncertainty that still exists on the Brazilian economic landscape with direct and relative impact on the real estate segment by incrementing in the mid and mid to high income residential segment. It's very important to mention that this inflection, although more notable in this, it is gradual and linear.

Talking about operating performance. We launched in March the only project for the first quarter, the Upside Pinheiros in São Paulo with a PSV of 139 million, reaching impressive sales over supply of 77.5%.

Such performance, coupled with consistent results on the sales of the inventory of existing units resulted in growth sales of 294 million in the first Q '18. So, regarding the operational performance, another positive highlight was the significant reduction of the cancellations, which dropped from 58 million in the first Q, a level that we believe will continue for the next quarters.

As a result of these factors and the drop in the cancellations, the net sales totaled 236 million, nearly twice the sales oversupply. So, in the 4Q '17 and the first Q '17, with quarterly sales of supply of 14.4% and in the last 12 months of 37.5%.

The good commercial performance is also reflected in inventories that reduced 9% as regards the fourth quarter '17 and total 1.4 billion. Of this total, 32% account for the completed units.

We acquired one new land area in São Paulo as a swap with a potential PSV of 114 million. Now regarding the financial performance.

In the first Q '18, net revenue was 213 million, 56% higher than the first quarter '17, reflecting the sales performance of project launched in 2016 and 2017, which had a percentage of completion that was greater and therefore increased their share of revenues. Sales performance also had a positive impact in the growth results since these projects have better margins.

Gafisa's adjusted gross margin 2018 was 59 million with a gross adjusted margin of 27.7%. Gross profits, considering capitalized interest, totaled 23 million in the first Q '18 and gross margin 10.7%.

Another impact of sales concentrate on the most recent launch can be seen in the backlog results with totaling 231 million in the first Q '18 and a gross margin of 37%. In line with our philosophy of austerity and efficiency, general and administrative expenses decreased by a further quarter, in this case, by 12% in relation to the fourth Q '17 and totaled 43 million in the first Q '18.

So, debt inflection, which was being signaled is also demonstrated in the recurring adjusted EBITDA, which was positive for the first time since 2016 and was 3 million in the first Q '18. As a result of these events discussed above, Gafisa's net loss came to 56 million in the first Q '18 versus a net loss of 163 million in the 4Q '17 and 49 million in the first Q '17.

I also would like to highlight that, in February, we finished the capital increase totaling BRL 251 million, and resulted in the postponement of BRL 456.3 million in corporate debt for 2020 and 2021, substantially reducing pressure over short-term cash flow obligations. The successful completion of this process, strengthened the company's position to operate in this new cycle of the real estate market.

Continuing with the company's strategy to adjust its capital structure, gross debt totaled BRL 983 million at the end of the first Q '18, 11% lower than in the fourth Q 2017. And net debt, in turn, was 19% lower than in the fourth quarter '17 totaling BRL 778 million.

Leverage, as measured by the ratio of net debt to shareholders' equity, fell from 121.1% at the end of 2017 to 83.1% at the end of the first Q '18. Excluding project finance, the net debt was 9.6%.

The gradual inflection in recent quarters was sharper in the first Q '18 with better operational and financial performance, strategy adopted in the previous periods, which included assertiveness in launches, deleveraging, focus on inventory sales, and operational and administrative efficiency. We are confident that this positive trend should be consolidated throughout the year, with increase in the participation of more recent projects in the formation of the company's results, together with the resumption of the real estate market growth.

Thank you for your attention, and we are now available for Q&A.

I have two questions, the first one talking about the backlog margin, it has improved in the quarter as compared to the previous one. I would like to understand if -- what should we expect from recurring backlog and gross margin?

What do you expect? Do you expect a lower margin?

And also, the second question, it's more -- I would like to understand what do you see, if there is -- considering the positive reduction of G&A?

Sandro speaking. As regard, the gross margin that we were completing in the last quarters.

As the recent project, especially 2016 and 2017 start being more representative in the income, and we're going to have an increase in the gross margin. That, what happened in the first Q '18, we had a greater representative there concerning the launches in the last few years.

And there is a trend to be increased in the net as the construction work of 2016 and 2017, net income earning will be more represented. The PSV of these projects are well evolved.

One reference of gross margin of what we feel are appropriate is the REF, that's 37%. I would consider working a 35% as we evolve and we reduce the finished inventory having a more representative of the new projects that we actually are having.

An increase in this margin, reaching 35%. Concerning the G&A, we have worked harder adjusting the structure.

And you can see in the next quarters, we reduced the G&A, and the level reached in the first Q '18 is the level we should be working within the next quarters, always seeking for opportunities to reduce these expenses, but a reduction would be marginal from now onwards, since we are increasing the revenue and the launches.

I have two questions. The first one is concerning Alphaville.

What can you tell us about Alphaville? It has presented a weak result, and you said it reflected in the P&L.

What is your expectation? And the fact that you have separated the activities related to sales, what is your expectation?

Do you think it's feasible in relation to your participation in the short run? And when that happens, are you going to recognize retroactively this loss?

And the second one is concerning free cash flow. So, you have a high cash burnout.

So, what would be the behavior of cash flow from now onwards, concerning the cancellations? So how can we change the cash flow from negative to positive?

This is Gerson speaking. In relation to Alphaville, at the end of 2017, we had a relevant impact concerning adjustments of the Alphaville operation.

Two types of impact. The first one is investment during the negative equity [Indiscernible] on investment account was 0 and will remain while we still have a net equity as a company, recover then reversing the shareholders' equity remain resumed, when this happened.

And the accounting recognition of our expectation [Indiscernible] equity accounting. The other adjustment is concerning the premium that we recognized in our investment in Alphaville.

At the end of the year, we had an evaluation report that pointed to a certain value to the company. Due to the 30% stake that we have, we had to reduce part of this premium in the fourth Q and the first Q.

This premium is set to 175 million. From now onwards, we have two procedures.

The first one, as a company, resumes or presents new projects and profitability, when we reverse the shareholders' equity, we will start -- resume the process of recognition of 30%. Whenever there is an indication that the fair value of the company has been changed, we will update our study to compare with the premium accounted for.

None of these adjustments will be retroactive. They will always be forward-looking.

This is Carlos Calheiros. So, concerning your question, I would like to add, if you have doubts concerning Alphaville, you should talk to the people there, since we cannot talk much about it.

Concerning the cash flow, we had a performance below what we would like to have, a lot as a result to the lack of delivery in the first Q and fourth Q, and in the fourth -- 0 units in this quarter. Anyway, we expect that this can be resolved in the next quarter with the resumption of the delivery.

As you know, the transfer that takes place from the delivery of the project generates our cash.

And for next -- for this year, so have you changed your expectations or?

Which expectation? We believe we have cash flow...

So, do you have an expectation of a positive free cash flow that would help you to deleverage even more and -- but in the beginning of the year, that we have here, does that change your expectation for the earnings of this year? Or do you still wait for a free positive cash flow?

We're going to work with this free cash flow helped by the schedule we have of delivery for this year. We are going to work with this expectation for the whole year.

I would like to address concerning your earnings expenses, we saw a drop, a significant decline. And I would like to better understand the reason for that and to know, what is the expected level for these expenses from now onwards?

Carlos Calheiros, again. I think that the G&A and the adjustments have shown [indiscernible] now, due to the nonrecurring effect of the separation of Tenda that affected our G&A last year.

So, this is over. And now we have a view of G&A that's more realistic.

Our expectation is to maintain the same level from now onwards. We are going to have increase of delivery.

So, we are working at about 80 million throughout this year.

I'd like to know your gross delivery this year and the level of cancellation of the next quarter? Is it in line with the first quarter?

So, I would like to have a ballpark figure.

Georgia, this is Sandro speaking. Could you please repeat your question?

Expectation of Gafisa's deliveries? And the level of cancellation for the new quarter, is it due to accounted volume of delivery?

Georgia, the level of delivery will be similar to last year. Obviously, it's going to be according to the schedule of each project.

The first Q will have no deliveries for the next quarters. We're going to have some deliveries of projects.

So, I could consider level 2,000 units for 2018. As regards the cancellation, I think you have observed that, in this quarter, there was a relevant decline in the cancellations, and this will be the level for the next quarter.

So, we had a decline in cancellations this quarter, and this will be the new level for the next quarters.

Good morning, everyone. Thank you very much for your questions, for your participation.

The first Q '18 improved the evolution of the company's operation financially. We're confident that this positive trend will be confirmed throughout the year.

So, we are available if you have any questions. Have a nice day.