Gafisa S.A.

Good morning, ladies and gentlemen for listening to our conference call today. It is my pleasure to be here speaking to you live representing the Board of Directors and the Management Committee of GAFISA.

I am here with all the officers of our company. Before presenting the numbers of 4Q ‘19 and our annual results, I would like to give you an overview of 2019 income statement.

2019 was a very important year in GAFISA’s history. We went through a deep restructuring process, which resulted in improvement of our operating results and financial results of ours.

In terms of cash restructuring, we mentioned two capital increases, raising a total of R$100 million, which resulted in the addition of new institutional investors to the company’s shareholder base. We hired Bain Company to support our planning process and Falconi Consultores Company to implement our work methods and targets for 2020.

In 2019, we decided not to make new launches before having full control of our operations and most importantly our finances. Leverage measured by net debt to shareholders’ equity ratio fell to 34%, a decrease of 118.6 percentage points compared to the same period last year.

Subsequently, we also received the approval by Central Bank of Brazil in terms of restructuring our debt with the institution, which will extend our short-term liabilities. We reduced significantly our fixed and variable costs by more than R$50 million and resumed construction of 18 projects, 2 of which were already delivered to our customers.

We dedicated a lot of effort and we were able to recertify to re-obtain the ISO certification and also the Brazilian certification in our market. We hired executives and professionals with large experienced into market and we also resumed the training program which has always been very important in GAFISA when it comes to helping these new professionals entering the construction market.

We renegotiated many events with suppliers and financial institutions and we significantly reduced the accounting provisions. We also resumed the process of re-listing our shares in the American market, so as to increase our access to new investors.

Our financial results improved significantly. Our net debt fell to R$325 million accounting for 57% year-on-year.

We went from cash and cash equivalents of R$73 million in 1Q ‘19 to R$414 million in 4Q ‘19. Our gross margin improved significantly as well reaching nearly 30% compared to 12% in 2018.

Lastly, we managed to revert an adjusted net result of minus R$356 million in 2018 to minus R$14 million in 2019. Excluding the divestment of Alphaville Urbanismo S.A., the company’s result was positive at R$15 million.

This achievement is extremely relevant since the company’s last positive result was posted in the fourth quarter of 2015. In December, we signed an MoU for the acquisition of UPCON, a reputable homebuilder in the São Paulo market.

With this transaction, we didn’t have to make disbursement from GAFISA’s assets and we are going to have enough resources in our cash to cover our responsibilities not compromising our cash. With this transaction which will be submitted to our shareholders approval next April, we will strengthen GAFISA’S assets and also GAFISA’s expertise since our new executive team will add value to our existing team.

I would like to turn the floor over to Guilherme Benevides, our Operations Head who will comment on our operating results in 2019.

Thank you very much, Eduardo. Good morning everyone who are listening to our conference call today.

Now, moving on to the operational results in 2019, on Page 5 of our presentation, you can see a comparison from the net sales of the 4Q ‘19 where we had R$73 million in gross sales, R$13 million in the solutions and R$60 million in net sales and that is for the 4Q ‘19. In 2019, you can see that we had R$292 million sales and R$96 million in dissolutions totaling R$196 million in net sales.

That reduction in the sales reflect the assertive attitude by the company in 2019 as we underwent a debt restructuring with Bain Company and also Falconi and we restructured the entire operation resuming full control of the company and improving all of our processes. And because of that, we decided not to launch any project this year.

During this period, that we are going through and still about inventories, you can see that all of our consultants are working online remotely with electronic material supporting all of our offers to our customers. They are complying with all of these service rules with new prospects digitally improving and increasing our customer base and the contracts are being signed online as well.

We had significant improvement in the number of dissolutions throughout the year, only R$13 million in dissolutions in 4Q ‘19. Now, taking a look at the chart on the right hand side of the slide, you can see that we had roughly 74% of our net sales accounting for finished units, which shows that our finished inventory is highly – has a high liquidity.

Now, moving on to Slide 6, you can see the inventory segmentation at the end of the year. We had R$882 million in inventory, 39% of them were finished units and about R$530 million were units that will be delivered by the end of 2022.

Now looking at the graph on the left side, you can see the segmentation of our inventory. Most of that inventory is in São Paulo accounting for over R$700 million and 14% is in Rio de Janeiro with R$119 million.

Other regions account for less reais. Therefore taking all that into account, most part of our inventory is in a very good position in the most – in the market that has the most liquidity in Brazil which is São Paulo.

Now moving on to Slide 7, you can see the schedule of expected deliverers. We delivered 3 projects in 2019, Like Aclimação, Choice Santo Amaro and one in Santos, accounting for 426 units and R$210 million in PSV.

It is also important to notice that we had – we obtained 4 certificates of occupancy, finishing 438 in PSV. Now, going back to our schedule of expected delivers, we have 17 ongoing projects that will be delivered by the end of 2022.

In 2020, we will deliver 8 of them and the rest will be delivered by the end of 2022, 7 of them we will be delivered in 2021. We have a total of roughly 1,000 [ph] units delivered in the few years with a PSV of roughly R$2 billion.

Now, let’s talk about our short-term landbank. There are 50 projects approved or under approval totaling R$1.7 billion in high end regions of São Paulo with high liquidity.

We also finished the Alphaville operation, the Alphaville Urbanismo operation. It is important to notice that, in that when we concluded that transaction, the entire amount was R$100 million paid by the offset of credits and assets.

Now to wrap up our financial results presentation, I would like to tell you that we finished our restructuring process and we now have an executive team that is extremely responsible and prepared to execute our growth plan with a solid foundation and generating value for the company. Thank you all very much.

And I would like to turn the floor over to our Finance VP Management and Investor Relations Officer, Ian Andrade.

Thank you very much, Guilherme. Good morning.

Thank you very much for participating in our earnings conference call. Slide 9, we are going to take a look at our statement of income.

It shows that we changed our net revenue structure. We had R$961 million in 2018 and R$400 million in 2019.

But the gross profit increased from 20% in 2018 to 29% in 2019. In terms of net income in 4Q ‘19, we had R$47 million as a profit.

Since the fourth quarter of 2015, we had not posted positive results. We reverted losses of R$420 million to R$14 million from 2018 to 2019.

Now, on Slide 10, you can see the breakdown of our adjusted gross margin. You can see that our adjusted gross margin reached 37% in 2019, a very good figure when compared to the previous years.

The significant gross margin is a result of the discipline [indiscernible] in the management of our projects focusing on pricing our products correctly and the disciplined and technical execution of our plans. Our prospective for maintaining our gross margin is reflected on our backlog margin.

Those are the results that have not been recognized in our financial results. The backlog gross margin is at 36% at the same level of our adjusted gross margin.

Therefore, we believe that we are going to maintain that same level and that is in line with our portfolio of new launches, ongoing projects and sold units. On the next slide, you can see a breakdown of our general and administrative expenses.

Those are the recurring expenses. Those are the fixed expenses of the company.

The commercial expenses vary according to the volume of businesses and commercial activities of the company. When we manage the general and administrative expenses that’s when we have a good result from all of the initiatives that we have been executing in the restructuring.

There was a reduction of 32% in our recurring expenses, that reduction was captured throughout the year of 2019, that reduction is close to R$50 million. So, all of the efforts for restructuring the fixed costs of the company generated savings of R$50 million as Eduardo mentioned earlier.

This reduction is the reflects of a sustainable process since it is based on the improvement of the management processes of the company. We are not talking about savings that are only related to one-off savings in the company, it is based on the improvements of systems processes and naturally that brings reductions in the fixed expenses of the company.

Now, let’s take a look at our balance sheet. At the end of 2019, we can see the results of the strengthening of our capital structure that we conducted throughout 2019.

On 31 December 2019, our cash and cash equivalents totaled an increase compared to 2018, which is that reflects of the rigorous discipline in our structure preserving the resources that we obtained from the capital increases bringing liquidity so that we can resume our growth. In 2019, we adjusted the flow with the curve of monetization of our units and all of that process and our commitment to the new management shows that the company and allows the company to reestablish a good relationship with the financial market pursuing new businesses in the market.

By the end of 4Q ‘19 our net debt went down to R$370 million compared to over R$400 million in the previous year, a reduction of almost 60%. Since 90% of our debt is related to projects, they are directly related to the delivery schedule that was presented by Guilherme earlier.

So that is the end of our presentation. And now, we would like to take your questions if you have any.

Thank you very much.

Good morning. My question is very simple.

It is related to your results. We can see in your results in the other revenues and other general expenses, there is a line of R$6 million to R$7 million, I would like to know more details about that?

And if you allow me to ask a second question in relation to launches I believe that you expected to resume launches this year, but now we are facing a very tough period with the coronavirus, which may hinder your plans. So I would like to know your perspective in terms of launches for 2020?

Thank you very much for your questions. I am going to answer the first one about other revenues and then Guilherme will answer your question about launches.

That R$77 million that you identified is in our audited financial information. That number is related to an arbitration proceeding that had a favorable decision for our company against a construction company here in São Paulo.

The arbitration process was very long and it was a very pleasant win for us in the arbitration process. So that’s what that number is related to.

It is related to the arbitration against the construction company.

Now Eduardo, when it comes to launches, the company is prepared to resume launches and we are executing all operating stages to have all projects ready to be launched when the moment is more favorable to us, but again, we are fully prepared to resume launches with the projects being adjusted to be launched into market as soon as possible ideally still in the first half of 2020.

Okay thank you very much. Have a good day.

Good morning, everyone. We have been following your turnaround company with the new processes and the message that you have been conveying is very positive and optimistic in relation to the future of the company.

So I have two questions during – is it worth to sell inventory and generate liquidity for new projects? And the second question is about the material fact that you announced today with the issuing of debentures and also the repurchase of shares, is that in anyway related – are those two facts related?

Is the issuance of debentures aimed at new launches or purchasing landbank or maybe is it related to organic growth, I would like to know your take on that?

This is Guilherme. When it comes to inventory, we are maintaining the same philosophy giving the best [indiscernible] rates.

We are not burning our inventory. On the contrary, we are working in a very disciplined way without – with our inventories.

And we don’t rely on selling inventories to get new businesses. We have other solutions to acquire landbank and we still have liquidity in our sales.

We are actively pursuing new businesses and new projects. Now, I am going to turn the floor over to Ian Andrade who will answer the second question.

Your second question related to the material facts announced today about the repurchase of shares and issuance of debentures is a very good question by the way. Even though they were disclosed in the same notice of material fact and even though they are part of the same effort by the Board of Directors and our shareholders to strengthen the capital structuring and generate value to the shareholders those two movements are not related to each other and they have different motivations and purposes.

The repurchase of shares is an effort that’s not linked in anyway to the issuance of debentures. It is actually related to the technical foundation for any movement of repurchasing shares.

The management of the company sees that these shares are under their value, their ideal value and that is not reflecting the performance of the company. So the repurchase of shares is for that reason.

The issuance of debentures is related to another reason. We wish to strengthen the company and our capital structure in a continuous way so that we have capital to face the growth challenges in the medium and long-term.

Ian, I would like to add a bit of information to your answer and thank you very much Raul [ph] for asking those questions. I was going to include those announcements in my final remarks including the inventory OpEx that we just disclosed this morning after meetings with the Board of Directors that we held yesterday.

Ian explained everything very well, but I would like to add something that we included in our notice of material fact. We are recommending for the next shareholders meeting an action that we believe to be very important, which is the absorption of the accumulated losses of GAFISA.

That is going to allow us to distribute dividends in the short-term in relation to our expectations. That’s the only thing that I wanted to add.

Sure. Thank you.

Thank you very much.

I would like to thank you all very much for participating in our conference call and also I would like to – our main goal is to bring GAFISA back to the same position it was before, the leading company in the construction segment. I would like to lead my example.

And because of that, last week, even though we had major impact caused by the coronavirus we announced a new bonus program for 50 professionals who were absolutely instrumental in their work to improve the performance of the company throughout 2019. That program was not provided for in our documents.

We are launching that new bonus program for 2020, but in our understanding in the Board of Directors and the Management Committee, we believed that, that award program was absolutely important. We didn’t expect it, but it brought a very good level of satisfaction in our team.

So, before finishing our presentation as Guilherme and Ian said, we have projects already approved. We are continuing to prospect businesses in landbank.

We have capital now after the capital increase that we had in 2019. And now, we have an extremely motivated team for the new launches of the new projects that we mentioned for the year 2020.

You all know that we are very traditional brand. We are benchmark in the Brazilian market.

Our management model is being improved every single day. We are now taking a new position for the new growth cycle.

We are going to go back to that successful history that we had providing value to our shareholders. I would like to thank the shareholders for their support who proved that they are supporting the company no matter what.

I would like to thank the customers for their loyalty and the supply as well and also the contribution of our team. They showed their full commitment to GAFISA and that was absolutely important for the restructuring of our company and also to pave the way to our new trajectory, our new journey that we are going through right now is extremely tough.

It has a major impact on the social and economic level. So, I would like you to stay safe and stay home with your families.

Thank you very much. Have a nice day.