Gafisa S.A.

Thank you very much. Good morning, everyone.

I would like to start by thanking all of you for being here today. Thank you for your interest to be part of our earnings release call.

I would like to start by saying we are mindful of everything that has been happening in the world and especially in Brazil concerning COVID restrictions. I hope you were all well, healthy with your dear ones.

We would like to thank further your interest and availability to be here with us to share the earnings release for the market. 2020 was a turning point for Gafisa.

2020 just at our upturning growth and our sustainability reached in the fourth quarter 2020. We've launched BRL898 million in PSV, the best annual performance since 2016.

Our gross sales reached a very significant growth, double of what we obtained in the third quarter '20 and 4x the volume that we sold in the fourth quarter '19, which was a market with very positive conditions. We had a fourfold increase than the market in 2019, which was already positive, showing our best sales offered and also sales activities of the Company.

We delivered 12 projects, 2,000 units, a total PSV which was very high, all agreed in terms of conditions with the new clients and the top management. You are going to hear further that out of the 12 projects, two of them were anticipations.

We have delivered -- just delivered 10, but we delivered 12. In terms of Landbank, we had an increase in PSV, 14 new acquired ones through M&A and organic acquisitions.

At Gafisa, we are neutral, and we won two options of growth, organic and through M&A. We have had a transformation of Gafisa in a platform of a number of real estate, construction and development to diversify our operations.

And we have created Gafisa Propriedades so that in the long run, we can value long-term assets. We have here Guilherme Pesenti with us, who is the CEO of Gafisa Propriedades.

We have a well-created portfolio of dedicated management and a lot of activity happening in this new business of Gafisa, which is going to be a support for all the new markets we are operating. It's important to emphasize that financial and operating results of Gafisa were achieved within the concept of a consolidation of a new DNA, innovation, merit, brand repositioning, everything very well we signified.

So we are reaching results, but in a new way, in a dynamic way, focused on results and in collaboration, creating and developing our team of excellence. In terms of financial highlights.

The fourth quarter '20 and the whole year reflects the growth of our operating activities, which also reflecting our new line of projects. We had an increase of net profit over the third to the fourth quarter, BRL580 million in revenues in the fourth quarter as opposed to BRL150 million that we had in the third quarter.

And the annual growth of 120%, '20 over '19, and this is 400 that we had in 2019. Likewise, the increase in revenue, our gross profit also followed a significant growth.

Gross profit was BRL410 million as opposed to BRL24 million in the third quarter '20, an increase of 375% over the third quarter '20 and 214% over the third quarter '19. In terms of profitability and results of our operations, we have maintained our gross margin of 24% comparing the third quarter to the fourth quarter.

And our margin of backlog is above the result, 33%, which is the level of backlog results margin. All this increase and strengthening of results have helped us take us to the recurring net profit of BRL224 million in the fourth quarter as to recurring loss of BRL33 million in the fourth quarter '19.

As you can see in the financial slides, if you have the slides, we can see the sustainable level of the Company's trend that is going to remain, directly related with the increase of our operating volume and higher margin and results of projects that are being launched by the Company. Our balance is still strong, showing an excellent level of liquidity, BRL622 million in cash as opposed to a net debt of BRL920 million.

With these highlights in a very dynamic context in our new DNA, we are absolutely sure that 2020 is a solid basis to our sustainable growth in the future, just generating a lot for our company. I'm now going to hand it over to you, Guilherme Benevides, our VP of Operations.

Thank you, Ian. Good morning, everyone.

Thank you for being here with us. We are delighted to be here to share with you the results of a lot of work to the new culture of Gafisa, which all focus on results and valuing our shareholders.

Now talking about operating performance in Slide 5, we show the budget for the fourth quarter. So we brought to the market projects Ecoville in Curitiba and Cyano in Rio de Janeiro, BRL630 million in PSV.

As the main highlight, this construction is in Rio de Janeiro, unique plot, just facing the ocean and a top-quality project, and we have already sold 40% of the available units. Slide 6, we can see our results in sales.

On the left, we can show BRL292 million in gross sales in the quarter, over 300% increase over the fourth quarter '19 and over 100% comparing the third quarter '20. On the right, we can show that the breakout of sales was over 87% of construction and to be launched and 13% in ready units, showing the quality of our ongoing projects and the trust of our clients.

As a highlight, we have obtained nearly 30% on the fourth quarter. Slide 7, it shows our inventory fully broken down.

In 2020, we had BRL1 billion in inventory, approximately BRL460 million in new launches and BRL340 million new constructions. Approximately 70% of our inventory is in São Paulo, 25% in Rio and 5% in other regions.

And as the highlight, 96% of our inventories are residential units. Following the presentation of the fourth quarter, for operating results, we delivered 12 new projects, 17 towers, 2,015 units with a PSV of over BRL1 billion in 2020.

Our expectation was to deliver 10 projects, but we have outperformed our budget, delivering two more projects than expected. In the fourth quarter alone, five projects, 831 units total and over BRL400 million in sales amount, showing our good capacity to deliver good projects with quality and speed.

Last slides of operations, we have maintained our guidance of launch, BRL1.5 billion and BRL1.7 billion for 2021. We present a Landbank of BRL5 billion and BRL3 billion in short- and mid-term projects, 18 projects total.

15 already approved or under approval, 6 with projects still being developed, maintaining the strength in our Landbank and maintaining the best opportunities focused in São Paulo and Rio. In the fourth quarter, we acquired BRL800 million of PSV and Landbank.

Thank you all very much. Now I would like to hand it over to Guilherme Pesenti, CEO of Gafisa Propriedades.

Thank you, Guilherme, and good morning, everyone. It's a pleasure to be part of this call with you.

Gafisa Propriedades, as Ian Andrade has just told you, is the result of our strategic planning, developed by the new management of the Company during 2019. While we were going through the restructuring of the Company, we were already thinking about the foundations for the future growth and one of them what is just an expansion of its core business is the area of real estate for additional income.

So Gafisa Propriedades is a way of diversifying value generation of Gafisa within its expertise in real estate market. We are making investments concerning acquisition of assets from third parties, so growth through M&A as we have done in the area of development and building and also organic growth by developing products in partnership with the area of development of Gafisa.

These products will be transformed into products that can yield revenues. In the next slide, we talk about the current portfolio of the Company.

So Slide 12 for you. Gafisa Propriedades has over 100,000 square meters of GLA in Rio and São Paulo, and we have exclusivity in commercial real estate, hotel business, shopping malls and also stores and small organizations.

This is something that we are going to maintain but also complement with residential activity as well. One of the areas that we want to focus on as a lease of small-sized apartments -- apartment units focused in São Paulo and Rio de Janeiro and most of the new assets will resell from the development process of Gafisa.

We are really very excited about this new business. We are a full subsidiary of Gafisa S.A., and we are creating a highly motivated, dedicated team to build a new line of revenue and cash generation for the Company.

Thank you very much.

Thank you, Guilherme. Gafisa Propriedades is a very dynamic subsidiary of the Company.

The market is following it with great enthusiasm. It is the most -- it's the clearer and evident sign that Gafisa really enthusiastic about the market and expanding its footprint.

And we are very glad to bold -- to be bold and to combine the development, revenue, service, technology and expanding into new businesses. Thank you, Guilherme.

The whole market is following it very closely, and we are very bullish in the real estate market. This is a clear evidence of our bullish belief that the real estate market will have in Brazil for upcoming cycles.

Now financial results in Slide 14. As mentioned by me in the beginning of the presentation, our financial results have been positively impact by the increase in operating volumes of the Company and by the new line of projects that present better margins than we used to have before.

Net revenue fourth quarter, there was a growth of 300%, BRL589 million in the fourth quarter as opposed to BRL115 million in the third quarter. Annualized, our net revenue amounts to BRL885 million.

Gross revenue is almost BRL1 billion in gross revenue in 2020, a significant leap, both qualitative and quantitative, of our management. Gross profit followed the same line.

There was an increase without margin deterioration, which is really important to emphasize. It's quite common to think companies, whenever there is an increase in revenues, they tend to have an impact in margins, but that's not the case.

We have increased our revenue and maintained the same margins, and our backlog margins still see an indication of margin increase for future years. And all moving towards sustainable profit in the fourth quarter of BRL24 million, which is no recurring effect, no non-operating adjustment, no discussion whatsoever of the net income of the fourth quarter over the third quarter or the fourth quarter of '19 in which there was a legal benefit of BRL70 million.

So a quarter-over-quarter, '19 to '20 really shows BRL60 million in terms of profit gain. And when it's annualized, when we exclude the recurring events, we can also see a reversion of the trend of loss.

In the fourth quarter, we had a sustainable growth and profit without any recurring adjustments. We are also capturing a substantial increase in revenue and operating impact without deterioration of margin.

And let me emphasize that again because this is really important for our financial performance and results. Now on Slide 15, we can see in detail the heart of business generation.

So we have the results of all the different projects. So gross margin is the first indicator of how healthy and sustainable our projects are.

If we add up, they show the total result of our company. There has been a stabilization of margin, 29% adjusted gross margin.

Backlog margin over 30%. That's exactly 33%.

We can clearly see that we have a portfolio of projects which is very healthy and net, delivering results and generating very good volumes to our company. In Slide 16, we can talk about the balance.

We have indebtedness level, 94% of our gross indebtedness is 100% related with projects. There is nothing of corporate debt here.

An increase in our gross indebtedness results from the fact that the Company has picked up its growth. We are making launches, and we need financial structures to launch them.

Our company, it's very disciplined. We don't start any construction without having the funding line in place, and we never launch when we have funding alternatives to the project.

All discussions are tested and really provided to make sure that the project pays off. Considering our indebtedness level as opposed to the sum of our cash and level of receivables, it gives us a very important liquidity to really pay all our financial dues.

We have allocated a good amount of cash for investments in newer business and also for liquidity of the Company so that we can keep on growing and managing opportunities. We have a very good cash management routine.

We all focus all -- we always focus on investment growth. So bringing together cash, percentage of debt based on projects, a good level of liquidity and a healthy and significant portfolio of receivables, our equity balance really makes us very confident that we can really benefit from all the good opportunities of the Brazilian cycle, which is part of our philosophy as a company.

We are really confident in the real estate market as a good provider of market assets. It's an industry that's filling with a hidden demand because of the crisis that we have had from 2016 to 2019.

So we see there is some hidden demand for the final users of real estate. And we can see a natural attraction for real estate as an investment option, considering the interest rates in Brazil and everything that is probably going to be maintained in the short and midlevel.

So the interest rates will probably be maintained at lower levels than we used to have in the past. So with that, I close our presentation and the financial results.

We had a very important opportunity today to share with you the operating side of the Company, the financial side of the Company, our strategy with our new line of business. And said that, I would like to thank you all for your attention, and now we open for the Q&A session.

Thank you.

Let's start with the question-and-answer session. [Operator Instructions] There are some questions which were submitted through the webcast.

I'm going to read the questions, and then we have them answered. The first question is from Danielle Lopes‏ from Nord Research.

What is the maximum percentage that you anticipate you will have of consolidated EBITDA? Well, Daniel, first would be in response to providing guidance.

So of course, I cannot give you this answer in terms of percentage of future EBITDA. We never provide guidance on financial results.

We just follow market practices, which is to have a guidance on new launches. Let me hand it over to Pesenti.

Maybe he can elaborate further our business strategy.

Thank you, Ian. What we want to do is to structure the Company is to get assets that we think Gafisa is developing with a great advocation to also adding revenues and have real estate for revenue and investment purposes and be paying attention to potential M&A opportunities, especially in Rio and São Paulo.

This is the current status of our company. We cannot say anything about cash generation because of guidance limitations.

The next question comes from Danielle Lopes‏ from Nord Research. What can you do to make sure the Company is in full operation?

Well, this is a question applicable to the whole industry, right? So what are the conditions and interest rate that would really keep us into full operation, we are at the lowest level ever of interest rate, and I have to say that it really generates positive conditions for real estate businesses.

Historically, the market had operated with a two-digit interest rate, right? I cannot really precisely tell you what's the interest rate that would prevent us from keep on working.

Maybe the question would be what would be the interest rate level that would start maybe impacting our whole center. I've heard about covering an interview recently, Jacob from [indiscernible], saying that a 4% interest rate, which is twice what we have today, would still maintain our industry in its full operation.

The next question comes from Casiano from Pedro Branca. You can now ask your question please.

The next question comes from Marcelo MDN. Hello, good morning.

You've mentioned that you want to rent some apartment units that you have go on leasing business. Have you studied the possibility of renting it for periods such as [indiscernible] or any other way of just leasing it for a limited period of time because the return is better than having a long-term lease contract because, of course, it takes more time of course, that if it's a short-term lease, you also have to add services with.

But still, have you considered that?

This is Guilherme Pesenti answering. Thank you for the question.

Yes, we are creating this business model of offering residential lease and also a short-term, mid-term and long-term lease contracts. We are considering our possibilities.

And in developing our business model, we are going to refer back to the market and report a number of technology solutions fully aligned with other platforms available in the market.

Great. I noticed that the return on investment tends to be better if you have a regular lease contract.

I would also like to hear about the assertiveness of the sales of units of Cyano in terms of value, sales of the unit.

This is Guilherme Benevides speaking. Yes, the project Cyano was very well received in the market.

And you are in Rio, you know it is a very special, top-quality project, very well positioned in Bajada. It hadn't seen a project of that level for a while in the region.

So it has been very well received. It's between 25,000 and 35,000 square meters for constructed area, depending on the position of the units in the building.

Over 40% of the units have already been sold. So we have been very well received in the market.

But we always saw the new line of the Company. We want to have good projects, well positioned and a good launch made in the market.

Yes, you're right. It's a very good place.

I used to live very close with. I believe you are going to succeed in selling the units.

[Operator Instructions] The next question comes from Casciano from Pedro Bronco.

I am sorry. There was a delay here in my connection and I couldn't ask the question before.

My question concerns the increase in IGPM index and pandemic. I would like to hear about the options that Gafisa put in place to reduce the impact of IGPM.

And I would like also to congratulate you on a great presentation and good results.

Hi, Casino, this is Guilherme Benevides speaking. Thank you.

Concerning the pandemic, we have put in place a number of measures. One of them, which was an emergence measure, right in the beginning of the first wave is to create a COVID committee.

Every single day, we met so that the top management could understand the impact that we have had resulting from pandemic on that specific date and what would be the macro impact that we could fill. So we had just keep on steering the everyday activities by sitting in this committee.

And we adopted a number of sanitary restrictions, prevention measures, both in our office operations and in the construction sites. The civil construction industry was perceived as an essential activity, and we have taken all the necessary measures and put them in place to avoid an impact in our construction sites and still preserving the life of all our professionals.

Concerning sales, we have also taken all the necessary measures in terms of point of sales or sales stands and our contact points with our customers. Of course, we have embraced all the appropriate sanitary measures, making pre-schedule.

But the pandemic has also helped to speed up the process of digitalization of real estate industry, not only to Gafisa, but to all other players. Now we have 100% of our contracts fully digitalized.

Our sales force, over 700 people are working using a digital platform, just providing quotes and attracting new clients. Everything done without having to be on site, everything done online and digital, we have adapted quite well.

And we keep on showing resilience by meeting in our COVID committee, analyzing all the macro scenarios so that we are not impacted negatively by the pandemic.

Great. Thank you.

Concerning the increase of IGPM and the impact and the potential effect it could have had, have you put any new measures in place to offset that?

Could you please repeat your question? Could you please repeat your question?

Sure. Concerning the increase of IGPM, which has been much higher than anyone had expected or anticipated, have you put in place any action to avoid the impact, to avoid charging over 23%, which was the IGPM rate.

Thank you. Great question.

We have Gafisa Propriedades, but the results tend to come from really development and construction. IGPM is not very relevant.

The rate for development INCC, which is a construction, civil construction rate and it adjusts all our sales contracts during the construction period, until the moment we deliver the unit. When we deliver the unit and the project is concluded, it's a very short period of time.

So during this period of development, we are not very really exposed to IGPM. IGPM rate tends to be of greater concern when it comes to rental contract because then the lease and rental contracts are readjusted by IGPM.

But it's a new company for us. Our portfolio is still in development.

So today, we still haven't felt any impact of IGPM at Gafisa operations.

Next question comes from Guilherme [indiscernible].

Hello, good morning. Thank you for answering my question.

Congrats on the excellent result of the fourth quarter. My question is about cash flow.

You delivered a number of projects, but we've seen that it hasn't been reflected into your cash flow yet. I'd like to hear about seasonality, what -- how it is going to impact the first quarter 2021.

And do you plan to transform Gafisa Propriedades into a real estate fund? What do you think about that?

Considering cash generation to start, we all know there is a cash theme going on. As we've pointed out, we have delivered over BRL1 billion PSV in 2020, projects that once they are delivered, they go into transfers as well.

In the fourth quarter, we went over BRL80 million, very similar to what was done in the third quarter in terms of transfers. A number of other transfers will come in place.

But there have been some operating -- operational difficulties because of the real estate registration offices and some of those elements. So in terms of our open portfolio today, the cash flow is well offset because we have a number of units being transferred and all the constructions are very much advanced, coming to conclusion.

So if we forecast what we currently have under construction today. And we've lost sound here.

Please hold while the speaker gets back to the room. [Technical Difficulty] Okay.

We are using our backup here. You can move on, please.

So how far could you hear us?

Well, you were telling us about the BRL30 million as being the expected cash flow, considering the deliveries and similar to the third quarter. And you were talking about the operating cash flow, what has been built.

But my main point concerns the backlog.

Well, Guilherme, I'm so sorry we broke up exactly in the middle of my answer. So let me resume it here.

In terms of cash generation, using historical numbers that have already been communicated and considering the fact that we cannot present any anticipated or forecast, in every single quarter, fourth quarter, BRL80 million in transfer, BRL250 million over the whole year. And we delivered BRL1 billion in projects, all of them selling quite well.

So we have really an inventory of units that are going to be transferred to us and to have the amortization of that and then generating cash. So the portfolio that is today under construction and to be transferred has a very relevant amount of cash to be realized, and we are going to have that take place throughout 2021.

The second question of concern, Gafisa Propriedades, and transforming it into a real estate fund. Yes, I wanted to know about the balance of BRL1 billion, you said BRL250 million had already been accounted for.

So based on that, we can have a match against the debt you have.

Well, let me take the opportunity and share that with everyone because you were trying to model our projects. We are going to provide in our Investor Relations slide a very user-friendly Excel file with all the projects, all the percentage of construction and operations.

So that all market participants can perform their analysis and modeling and projections based on information shared with the market. I believe this file will be available shortly, and it's going to be very useful to help you perform your analysis.

And our IRs channel are available to you and to everyone who would like to hear more about the cash flow forecast. Let me now hand it to Guilherme Pesenti.

Gafisa Propriedades is already structuring and acquiring its assets through real estate funds. So we do not expect our operations to become a fund, but we want to keep on playing role of being a manager and also a consultant of real estate operations at large.

The next question asked by Mario Mariani.

I have two questions. One question about the trends, but you have already answered it.

In your history, you had increased expenses, SG&A with some lose caused in -- from previous project. And in this year, we can see that it dropped and it impacts your bottom line.

So we'd like to hear from you whether this is a trend, if these account really belong to the past and whether it had been the main factor that impacted your results in the past. And another question concerning Gafisa Propriedades, you have a very important pipeline and expectations to keep on growing in acquisition of assets.

Will the Company need some additional capital? Will it go into capitalization considering that you will need -- you will probably have greater volumes in upcoming months?

So -- and also congrats on your excellent performance.

Thank you, Mario. Thank you for the questions.

Thank you for your comments. First about legal issues, some old time dispute.

In the third quarter, we reviewed that and made some adjustments, and they impacted our results in the third quarter. Now according to our balance, the legal issues resulted from internal audit, revisiting all of them and also cleaning our basis of legal losses.

Throughout 2020, we have created some working groups with top-quality law firms to really advance some settlements and agreements to try to reduce as much as possible this legal backlog of the Company and making it more transparent as possible, things that have been in place from previous years. In the third quarter, there was no impact.

And I am positive that the work that we have done throughout 2020 was very serious, very detailed. We have really reorganized things.

We have came to settlement, to agreements. It's a continuous effort.

And we believe that the level of contingency and provision allowed to that is enough to deal with a likely risk of any legal issues that the Company still have. So based on everything that has been done throughout the year and as a result of the adjustments of the contingency in the last quarter, our expectation is to have a stabilized number, not impacting our results anymore.

Now the second question, concerning business plan and capitalization of the Company, capital increase because as the Company is going to grow and acquire new projects, I really wonder whether you're going to need additional capital levels.

As Guilherme Pesenti pointed out to you in his presentation, we are currently focused on creating a portfolio of projects. And each project and each opportunity of investment is already being connected to reinvestments to specific capital structure.

It's a combination of our own capital in a pay to pay with a capital of third-party investors and debt. Each transaction that we are analyzed at Gafisa Propriedades, when the transaction and the acquisitions are made, we create a funding structure which is specific and tailored to that project.

So we don't see in the midterm any intention of bringing more capital at Gafisa S.A. to deal with this new pipeline of projects and business at GafisaPropiedades.

And once again, kudos to you on the results.

Well, I think it was -- the results were very good. Our conference call has attracted interest of our shareholders, the investors, market specialists, and we really anticipate a very good year with very assertive, impactful results.

We are very proud, and we are firm in our purpose to say that this is just the beginning. We have a lot to do.

2020 was the beginning of it, and we are already obtaining results with the new management of the Company, focusing on the interest of shareholders. Shareholders have really had an inflow of capital to all of us.

2020 was a year where we have overcome our own difficulties and produced good and strategic and good financial results, but it has just begun. We have a lot to do, always be very transparently in the market.

We'll follow along and above everything that we are planning to do. Thank you all very much for your time and interest today.

And let me reinforce that all our IR channels are 100% available for any additional questions, exchange of information. It's an open, transparent channel to all of you to resort to.

Thank you very much the conference call. And now, thank you very much for being with us.

Have a good day. Thank you.