Gafisa S.A 6-K, filed Aug 12, 2020
Gafisa S.A. (GFASY)
About this 6-K
Gafisa S.A filed this 6-K on August 12, 2020.
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FOR IMMEDIATE RELEASE - São Paulo, August 11, 2020 – Gafisa S.A. (B3: GFSA3; OTC: GFASY), a leading Brazilian homebuilder, announced today its operational and financial results for the second quarter ended June 30, 2020.
GAFISA
ANNOUNCES
2Q20 RESULTS
New growth cycle with 8.8% ND/SE ratio
and adjusted gross margin above 35%
Undoubtedly, the second quarter of 2020 will make history for most of the companies as one of the greatest challenges faced by businesses and managers. Gafisa was not an exception. We implemented home office, we adopted and controlled measures to prevent the COVID-19, we maintained our construction works running, ensuring everyone’s safety. We also had to deal with the effects of a pandemic on our clients, suppliers, banks, and notary offices. We proudly achieved the goals re-planned for the quarter, and through our Management Committee – COVID 19, we had the daily discipline to understand the care and adjustments necessary to keep the Company fully operational, always compliant with our quality policy.
The results below evidence we maintained our focus, in most of the cases, sustaining or improving ratios compared to 1Q20, even amid all the challenges faced this quarter. Our sales saw an upward trend at the end of the quarter, which also resulted in July recording the best monthly sales performance in the last 18 months.
Concerning launches, we currently have 3 projects under the pre-launch phase, with an estimated total PSV of R$288 million. After postponing the launches resumption in 2Q20, due to market conditions caused by the Covid-19 pandemic that restricted people’s traffic, suspended the activity of sales stands, affected the economic activity and investor/buyer confidence, we understand we have the minimum conditions to resume launches.
This new growth cycle relies on differentiated assets, unique projects located in high-valued regions, with good liquidity in the city of São Paulo, such as Jardins, Perdizes, and Moema. We acquired 2 excellent plots of land, highlighting the last area available at Av. Delfim Moreira (Leblon) in the city of Rio de Janeiro, signaling Gafisa’s return to Rio de Janeiro market, and its first step to accomplishing another iconic project, with an estimated PSV of R$197 million in 2Q20, and another in Vila Mariana, São Paulo, with an estimated PSV of R$116 million in July. We also have several projects ready to be launched over the upcoming months.
This quarter, we delivered 4 projects, with a total PSV of R$543 million. This year will be marked by a high volume of deliveries, a total of 8 projects corresponding to R$765 million PSV and 1,350 units. Of this amount, we already delivered 67%, evidencing the Company’s focus and delivery capacity.
The quality of the Company’s new management is also reflected in the maintenance of gross margin (without financial cost) above 35%, as well as the REF margin (backlog results). This confirms that the backlog result sustains the Company’s margin at healthy levels in continued and consistent improvement. We also received the ISO 9000 and PBQH re-certification, attesting the quality and control of our processes.
It is also worth noting the capital increase approved on April 30, 2020, that injected R$259.7 million into the Company’s cash. This enabled a continual improvement of our balance sheet and the Company’s deleverage. Within one year, we went from a Net Debt/Shareholders’ Equity ratio of 162% in 1Q19 to current 8.8% in 2Q20.
Considering that part of the resolution of April 30, 2020, referred to the payment of Upcon acquisition, a new capital increase was recently approved of up to R$390 million.
Gafisa relies on a traditional brand and is recognized as a benchmark in the Brazilian market. We are refining our new management model with dynamism and discipline, to prepare the Company for a new development and growth cycle that will restore Gafisa’s history of success and value creation for our shareholders.
Ian Andrade
Chief Financial and Investor Relations Officer
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OPERATIONAL RESULTS
Table 1 – Operational Performance (R$ 000)
| 2Q20 | 1Q20 | Q/Q (%) | 2Q19 | Y/Y (%) | 6M20 | 6M19 | Y/Y (%) | |
| Launches | - | - | - | - | - | - | - | - |
| Gross Sales | 41,383 | 38,737 | 6.8% | 87,893 | (52.9%) | 80.120 | 179,163 | (55.3%) |
| Dissolutions | (21,543) | (10,135) | 112.6% | (31,672) | (32.0%) | (31,678) | (73,035) | (56.6%) |
| Net Sales | 19,840 | 28,602 | (30.6%) | 56,221 | (64.7%) | 48,442 | 106,128 | (54.4%) |
| Speed of Sales (SoS) | 2.39% | 3.24% | -0,9p.p. | 5.00% | -2.6p.p. | 2.83% | 4.63% | -1.8p.p. |
| Delivered PSV | 543,719 | 65,168 | 734.3% | 91,317 | 495.4% | 608,887 | 171,396 | 255.3% |
Table 2 – Financial Performance (R$ 000)
| 2Q20 | 1Q20 | Q/Q(%) | 2Q19 | Y/Y (%) | 6M20 | 6M19 | Y/Y(%) | |
| Net Revenue | 83,800 | 71,703 | 16.9% | 99,659 | (15.9%) | 155,503 | 195,080 | (20.3%) |
| Gross Profit | 22,714 | 20,462 | 11.0% | 36,971 | (38.6%) | 43,176 | 43,418 | (0.6%) |
| Gross Margin | 27.1% | 28.5% | -1.4p.p. | 37.1% | -10p.p. | 27.8% | 22.3% | 5.5p.p. |
| Adjusted EBITDA1 | 7,722 | 4,109 | 87.9% | 37,467 | (79.4%) | 11,832 | 36,686 | -67.7% |
| Adjusted EBITDA Margin1 | 9.2% | 5.7% | 3.5p.p. | 14.0% | -4.8p.p. | (12.6%) | 7.1% | -19.7p.p. |
| Net Income | (23,545) | (25,462) | (7.5%) | (12,724) | 85.0% | (49,007) | (59,078) | (17.0%) |
| Revenue Backlog | 306,484 | 364,757 | (16.0%) | 506,418 | (39.5%) | 306,484 | 506,418 | (39.5%) |
| Backlog Results2 3 | 109,614 | 129,851 | (15.6%) | 177,847 | (38.4%) | 109,614 | 177,847 | (38.4%) |
| Backlog Results Margin2 3 | 35.8% | 35.6% | 0.2p.p. | 35.1% | 0.6p.p. | 35.8% | 35.1% | 0.7p.p. |
| Net Debt | 103,493 | 346,832 | (70.2%) | 587,898 | (82.4%) | 103,493 | 587,898 | (82.4%) |
| Cash and Cash Equivalents4 | 570,156 | 363,337 | 56.9% | 182,817 | 211.9% | 570,156 | 182,817 | 211.9% |
| Equity + Minority Shareholders | 1,177,187 | 882,957 | 33.3% | 575,353 | 104.6% | 1,177,187 | 575,353 | 104.6% |
|
(Net Debt, – Proj. Fin.) / (Equity + Minority) |
(39.2%) | (32.2%) | -7p.p. | (15.7%) | -23.5p.p. | (39.2%) | 21.9% | -61.1p.p. |
1Adjusted by capitalized interest with stock option plan (non-cash) and minority shareholders.
2 Backlog results net of PIS/COFINS taxes (3.65%), excluding the impact of the PVA (Present Value Adjustment) method according to Law No. 11.638.
3 Backlog results comprise the projects restricted by a condition precedent.
4 Cash and cash equivalents and marketable securities.
Launches
Gafisa concluded its restructuring process in 1Q20 and was planning to kick off its phase of growth with launches resumption in 2Q20. However, due to the COVID-19 pandemic, Management decided to postpone launches for the second half of 2020. This postponement was not relevant, since the real estate market revealed to be more resilient to the crisis, compared to other sectors. Currently, we have 3 projects under the pre-launch phase and launches foreseen in 3Q20, with an estimated total PSV of R$288 million.
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Sales
Gross sales rose 6.8% to R$41.4 million in 2Q20 versus 1Q20, despite the pandemic. On the other hand, we saw a 52.9% decline compared to the same period last year. The quarter-on-quarter increase reflects the sales area’s restructuring, by reinforcing and increasing the Gafisa Sales structure. A lower speed of sales compared to the previous year is due to reduced options available for sales, as our last launch took place in 4Q18. With launches resumption in 3Q20, we expect improved sales indicators over the next earnings releases.
Dissolutions reached R$21.5 million in 2Q20, increasing by 112.6% from 1Q20 and declining 32% year-on-year. The quarter-on-quarter increase partially derives from a higher volume of deliveries in the period, which is not a concern for Management, and the COVID-19 pandemic. The year-on-year decrease reflects the efforts made in the 2019 restructuring process, which resulted in renegotiations with Gafisa’s clients, more accurate credit analysis of potential clients, as well as the recovery of client confidence in the Company.
¹ Considering 12M20.
Net pre-sales totaled R$19.8 million in 2Q20.
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Sales Over Supply (VSO)
Sales Over Supply (SoS) reached 2.3% in 2Q20, a decrease of 0.9 p.p. from 1Q20 and 2.7 p.p. from 2Q19. Despite this slowdown, we believe that this figure should improve when the Company resumes launches, which besides making available new products, usually has a significant impact on inventory units sale.
Inventory (Property for Sale)
Inventory at market value totaled R$841.7 million in 2Q20.
Table 3 – Inventory at Market Value 1Q20 x 2Q20 (R$ 000)
| Inventories 1Q20 | Launches | Dissolutions | Gross Sales | Adjustments | Inventories 2Q20 | % Q/Q | |
| São Paulo | 696,926 | - | 21,543 | (36,876) | 4,531 | 686,125 | -1.5% |
| Rio de Janeiro | 120,828 | - | - | (2,845) | 2,589 | 120,572 | -0.2% |
| Other Markets | 36,202 | - | - | (1,662) | 492 | 35,032 | -3.2% |
| Total | 853,956 | - | 21,543 | (41,383) | 7,613 | 841,729 | -1.4% |
¹ Adjustments in the period reflect the updates related to the project scope, launch date, and pricing.
Inventory turnover in the last 12 months increased from 59 months in 1Q20 to 73 months in 2Q20, 24.5% higher than in the previous quarter, also due to the lack of launches and the pandemic impacts. We are poised to launch new projects, with a restructured sales area, as soon as we see favorable conditions, thus directly impacting this index.
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Approximately 74% of our inventory is composed of residential units located in the State of São Paulo and with higher liquidity.
Table 4 – Inventory at Market Value– Financial Progress – POC - (R$ 000)
| Not Initiated | Up to 30% built | 30% to 70% built | More than 70% built | Finished Units | Total 2Q20 | |
| São Paulo | - | - | 293,498 | 186,393 | 206,234 | 686,125 |
| Rio de Janeiro | - | - | - | - | 120,572 | 120,572 |
| Other Markets | - | - | - | 12,327 | 22,705 | 35,032 |
| Total | - | - | 293,498 | 198,720 | 349,511 | 841,729 |
* % POC does not necessarily reveal the status of construction works, but the project’s financial progress.
Table 5 – Inventory at Market Value – Commercial x Residential Breakdown- (R$ 000)
| Estoque GFSA % | Residencial | Comercial | Total |
| SP | 566,216 | 119,909 | 686,125 |
| RJ | 18,143 | 102,429 | 120,572 |
| Others | 35,032 | 0 | 35,032 |
| Total | 619,392 | 222,338 | 841,729 |
Delivered Projects and Transfer
In 2Q20, we delivered four projects, totaling 706 units, and total PSV of R$543.7 million. It is also worth noting that besides delivering these four projects, in the second quarter, the Company obtained an occupancy permit for a project with 307 units and PSV of R$106.6 million. Total deliveries foreseen for 2020 is 8 with a PSV of R$765 million and 1,350 units. Therefore, out of the total, we already delivered/obtained an occupancy permit of 78%.
Table 6 – Deliveries
| Project | Delivery Date | Launch Date | Location | % Share | Units 100% (Ex-Swap)¹ |
PSV % R$000 |
| Moov Estação Vila Prudente | Apr/20 | Aug/16 | São Paulo | 100% | 150 | 72,097 |
| Gafisa Like Alto da Boa Vista | May/20 | Aug/16 | São Paulo | 100% | 220 | 158,676 |
| Gafisa Square Ipiranga | May/20 | Oct/16 | São Paulo | 100% | 224 | 263,490 |
| Marquês 2900 | May/20 | Dec/16 | São Paulo | 50% | 112 | 49,455 |
| Total 2Q20 | 706 | 543,719 | ||||
| Total 2020 | 775 | 608,887 |
¹ Number of units corresponding to a 100% share in projects, net of swaps;
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PSV transferred in 2Q20 was R$76.2 million, 126.7% higher than in 1Q20, and 72.5% higher than in 2Q19. Higher transfer volume is due to the delivery of projects this quarter, compared to the previous quarter and the same period last year. We highlight that this result was achieved even amidst a pandemic, with restricted business hours at notary offices, banks, people’s traffic, and our team in home office most of the time. We again reiterate the Company’s expectation of a significant increase in PSV transferred during 2020, due to the expected delivery of 8 projects, totaling a potential PSV to be transferred of approximately R$268.8 million, excluding Upcon acquisition.
Table 7 – Transfer and Delivery - (R$ 000)
| 2Q20 | 1Q20 | Q/Q (%) | 2Q19 | Y/Y (%) | 6M20 | 6M19 | Y/Y (%) | |
| PSV Transferred¹ | 76,244 | 33,637 | 126.7% | 44,202 | 72.5% | 109,881 | 109,023 | 0.8% |
| Delivered Projects | 4 | 1 | 300.0% | 1 | 300.0% | 5 | 2 | 150.0% |
| Delivered Units² | 716 | 69 | 937.7% | 227 | 215.4% | 785 | 363 | 116.3% |
| PSV Delivered³ | 543,719 | 65,168 | 734.3% | 91,317 | 495.4% | 608,887 | 171,396 | 255.3% |
¹ PSV transferred refers to the effective cash inflow from units transferred to financial institutions;
² Number of units corresponding to a 100% share in projects, net of swaps;
³ PSV = Potential Sales Value of units, net of brokerage, and swap.
Landbank
With an estimated PSV of R$3.9 billion, the Company’s landbank represents 33 potential projects/phases totaling 7,140 Gafisa units. Approximately 47% of the acquisition value of our land consists of swaps, most of which located in the city of São Paulo. This quarter, the Company acquired a plot of land in the city of Rio de Janeiro, at Av. Delfim Moreira (Leblon), with an estimated PSV of R$197 million. Next quarter, we will have consolidated Upcon projects, besides potential new plots of land, as the Company has been prospecting and analyzing opportunities. In July, the Company acquired a plot of land in the city of São Paulo, Vila Mariana district, with an estimated PSV of R$116 million.
Table 8 - Landbank (R$ 000)
| PSV¹ (%Gafisa) | % Swap Total | % Swap Units | % Swap Financial | Potential Units (%Gafisa) | Potential Units (100%) | ||
| São Paulo | 2,015,053 | 56.7% | 46.4% | 10.4% | 4,262 | 4,433 | |
| Rio de Janeiro | 1,257,632 | 41.6% | 41.6% | 0.0% | 1,140 | 1,395 | |
| Other Markets | 593,614 | 38.1% | 38.1% | 0.0% | 1,037 | 1,314 | |
| Total | 3,866,299 | 47.4% | 43.2% | 4.1% | 6,439 | 7,142 |
¹ The PSV (% Gafisa) reported is net of swap and brokerage fee.
² The swap percentage is measured compared to the historical cost of land acquisition.
³ Potential units are net of swap and refer to the Gafisa’s and/or its partners’ interest in the project.
Table 9 – Changes in the Landbank (1Q20 x 2Q20 - R$ 000)
| Initial Landbank | Land Acquisition | Launches | Dissolutions | Adjustments | Final Landbank | ||
| São Paulo | 2,005,369 | - | - | - | 9,683 | 2,015,053 | |
| Rio de Janeiro | 1,085,840 | 196,875 | - | - | 0 | 1,282,715 | |
| Other Markets | 594,327 | - | - | - | (713) | 593,614 | |
| Total | 3,685,536 | 196.875 | - | - | 8,971 | 3,866,299 |
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FINANCIAL RESULTS
Revenue
Net revenue amounted to R$83.8 million in the second quarter of 2020, 16.9% higher than in 1Q20, reflecting the progress of works in the period. Net revenue plunged 15.9% compared to the second quarter of 2019, due to lower sales volume.
Table 10 – Revenue Recognition (R$ 000)
| 2Q20 | 2Q19 | |||||||
| Launches | Pre-Sales | % Sales | Revenue | % Revenue | Pre-Sales | % Sales | Revenue¹ | % Revenue |
| 2018 | 3,196 | 16.1% | 21,969 | 26.2% | (2,276) | (4.0%) | 21,630 | 21.7% |
| 2017 | 4,025 | 20.3% | 28,415 | 33.9% | 1,658 | 3.0% | 12,650 | 12.7% |
| 2016 | 5,416 | 27.3% | 34,465 | 41.1% | 33,694 | 59.9% | 44,403 | 44.5% |
| 2015 | 3,803 | 19.2% | 4,452 | 5.3% | 19,696 | 35.0% | 22,583 | 22.7% |
| <2014 | 3,400 | 17.1% | (5,501) | -6.6% | 3,449 | 6.1% | (1,606) | (1.6%) |
| Total | 19,840 | 100.0% | 83,800 | 100.0% | 56,221 | 100.0% | 99,659 | 100.0% |
Gross Profit & Margin
Gafisa’s adjusted gross profit reached approximately R$29.6 million in 2Q20, versus R$26.7 million in 1Q20 and R$48.9 million in 2Q19. The adjusted gross margin in the quarter was 35.3%, evidencing the Company’s margins were maintained, even amidst a challenging scenario of Covid-19 pandemic, reflecting a successful restructuring, and a motivated team with a great adaptation capacity.
Table 11 – Gross Margin (R$ 000)
| 2Q20 | 1Q20 | Q/Q(%) | 2Q19 | Y/Y (%) | 6M20 | 6M19 | Y/Y(%) | |
| Net Revenue | 83,800 | 71,703 | 16.9% | 99,659 | (15.9%) | 155,503 | 195,080 | -20% |
| Gross Profit | 22,714 | 20,462 | 11.0% | 36,971 | (38.6%) | 43,176 | 43,418 | -1% |
| Gross Margin | 27.1% | 28.54% | -1.4 p,p, | 37.1% | -10 p,p, | 27.8% | 22.3% | 551 bps |
| (-) Financial Costs | 6,857 | 6,274 | 9.3% | 11,891 | (42.3%) | 13,131 | 23,208 | -43% |
| Adjusted Gross Profit ¹ | 29,571 | 26,736 | 10.6% | 48,862 | (39.5%) | 56,307 | 66,626 | -15% |
| Adjusted Gross Margin | 35.3% | 37.29% | -2 p,p, | 49.0% | -13.7 p,p, | 36.2% | 34.2% | 206 bps |
¹ Adjusted by capitalized interests.
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Selling, General and Administrative Expenses (SG&A)
Selling, general and administrative expenses totaled R$19.2 million in 2Q20, without variation in relation to the previous quarter and 33.6% higher than in 2Q19.
General and administrative expenses came to R$15.1 million, 8.1% lower than in the previous quarter. In 2Q20, recurring general and administrative expenses totaled R$14.2 million, 12.2% lower than the R$16.2 million recorded in the previous quarter.
Table 12 – SG&A Expenses (R$ 000)
| 2Q20 | 1Q20 | Q/Q(%) | 2Q19 | Y/Y (%) | 6M20 | 6M19 | Y/Y(%) | |
| Selling Expenses | (4,047) | (2,793) | 45% | (3,011) | 34% | (6,840) | (9,513) | -28% |
| Despesas Gerais e Administrativas | (15,133) | (16,460) | -8% | (11,340) | 33% | (31,593) | (19,240) | 64% |
| Total SG&A Expenses | (19,180) | (19,253) | 0% | (14,351) | 34% | (38,433) | (28,753) | 34% |
Other Operating Income/Expenses totaled expenses of R$20.0 million. Out of this amount, R$12 million refer to litigation settlements made by the Company, as part of its project to settle contingent liabilities.
Table 13 – Other Operating Income/Expenses (R$ 000)
| 2Q20 | 1Q20 | Q/Q(%) | 2Q19 | Y/Y (%) | 6M20 | 6M19 | Y/Y(%) | |
| Litigation Expenses | (19,353) | (11,997) | 61% | (23,544) | -18% | (31,350) | (45,769) | -32% |
| Other | (662) | (748) | -11% | (98) | 576% | (1,409) | (99) | 1323% |
| Total | (20,015) | (12,745) | 57% | (23,642) | -15% | (32,759) | (45,868) | -29% |
Adjusted EBITDA
Adjusted EBITDA came to R$7.2 million in 2Q20, higher than the R$4.1 million reported in the previous quarter, but a decrease compared to R$37.5 million in 2Q19.
Table 14 – Adjusted EBITDA (R$ 000)
| 2Q20 | 1Q20 | Q/Q(%) | 2Q19 | Y/Y (%) | 6M20 | 6M19 | Y/Y(%) | |
| Net Income (Loss) | (23,545) | (25,462) | -7.5% | (12,724) | 85.0% | (49,007) | (59,078) | -17.0% |
| (+) Financial Results | 2,354 | 8,396 | (72.0%) | 10,469 | -77.5% | 10,750 | 20,428 | -47.4% |
| (+) Income Tax / Social Contribution | 886 | 1,129 | (21.5%) | 309 | 186.7% | 2,015 | 713 | 182.6% |
| (+) Depreciation and Amortization | 1,882 | 2,166 | (13.1%) | 4,143 | -54.6% | 4,048 | 8,516 | -52.5% |
| (+) Capitalized Interest | 6,857 | 6,274 | 9.3% | 11,891 | -42.3% | 13,131 | 23,208 | -43.4% |
| (+) Expenses w/ Stock Option Plan | 47 | (404) | (111.6%) | (412) | -111.4% | (357) | (2,872) | -87.6% |
| (+) Minority Shareholders | (112) | 13 | (961.5%) | 247 | -145.3% | (98) | 2 | -5000.0% |
| (+) Litigation Expenses | 19,353 | 11,997 | 61.3% | 23,544 | -17.8% | 31,350 | 45,769 | -31.5% |
| Adjusted EBITDA¹ | 7,722 | 4,109 | 87.9% | 37,467 | -79.4% | 11,832 | 36,686 | -67.7% |
¹ Adjusted by capitalized interests, with a stock option plan (non-cash) and minority shareholders.
Financial Result
Financial income significantly increased to R$21.1 million in 2Q20 from R$8 million recorded in 1Q20, with a relevant amount of reserves after the capital increase. Financial expenses rose 43.0% to R$23.4 million in 2Q20 compared to 1Q20, due to higher recognition of interest rates and default interest in the period in SFH financing, which are under the phase of renegotiation.
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Net Result
Net result in 2Q20 was an expense of R$23.5 million, compared to a net loss of R$25.4 million and R$12.7 million recorded in 1Q20 and 2Q19, respectively.
Table 15 – Net Result (R$ 000)
| 2Q20 | 1Q20 | Q/Q(%) | 2Q19 | Y/Y (%) | 6M20 | 6M19 | Y/Y (%) | |
| Net Revenue | 83,800 | 71,703 | 16.9% | 99,659 | -15.9% | 155,503 | 195,080 | -20.3% |
| Gross Result | 22,714 | 20,462 | 11.0% | 36,971 | -38.6% | 43,176 | 43,418 | -0.6% |
| Gross Margin | 27.1% | 28.5% | -5.0% | 37.1% | -26.9% | 27.8% | 22.3% | 24.8% |
| (-) Financial Cost | (6,857) | (6,274) | 9.3% | (11,891) | -42.3% | (13,131) | (23,208) | -43.4% |
| Recurring Adjusted Gross Result¹ | 29,571 | 26,736 | 10.6% | 48,862 | -39.5% | 56,307 | 66,626 | -15.5% |
| Recurring Adjusted Gross Margin¹ | 35.3% | 37.3% | -5.4% | 49.0% | -28.0% | 36.2% | 34.2% | 6.0% |
| Adjusted EBITDA² | 7,722 | 4,109 | 87.9% | 13,923 | -44.5% | (19,518) | 13,923 | -240.2% |
| Adjusted EBITDA Margin² | 9.2% | 5.7% | 60.8% | 14.0% | -34.0% | -12.6% | 7.1% | -275.9% |
| Net Result | (23,545) | (25,462) | -7.5% | (12,724) | 85.0% | (49,007) | (59,078) | -17.0% |
| ( - ) Litigation Expenses | (19,353) | (11,997) | 61.3% | (23,544) | -17.8% | (31,350) | (45,769) | -31.5% |
| Net Result (ex-litigation expenses) | (4,192) | (13,465) | -68.9% | 10,820 | -138.7% | (17,657) | (13,309) | 32.7% |
1 Adjusted by capitalized interests.
2 Adjusted by capitalized interests, with stock option plan (non-cash) and minority shareholders.
Revenue Backlog and Results
At the end of 2Q20, the balance of revenue backlog according to the PoC method totaled R$109.6 million, compared to R$129.8 million and R$177.8 million reported in the previous quarter and the same period last year, respectively. Margin to be recognized was 35.8%, in line with 1Q20.
Table 16 – Backlog Results (REF) (R$ 000)
| 2Q20 | 1Q20 | Q/Q(%) | 2Q19 | Y/Y (%) | |
| Revenue Backlog | 306,484 | 364,757 | -16% | 506,418 | -39% |
| Backlog Costs (units sold) | (196,870) | (234,906) | -16% | (328,571) | -40% |
| Backlog Results | 109,614 | 129,851 | -16% | 177,847 | -38% |
| Backlog Margin | 35.8% | 35.6% | 17 bps | 35.1% | 65 bps |
Notes: Backlog results net of PIS/COFINS taxes (3.65%) and excluding the impact of the PVA (Present Value Adjustment) method according to Law No. 11.638.
Backlog results comprise the projects restricted by a condition precedent.
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BALANCE SHEET
Cash and Cash Equivalents and Marketable Securities
On June 30, 2020, cash and cash equivalents and marketable securities totaled R$570.2 million, compared to R$363.3 million in 1Q20, reflecting the inflow of funds from a capital increase in the amount of R$259.7 million, so that to sustain a liquidity cushion and enable our growth resumption. The Company believes that disciplined cost control and the maintenance of a liquidity reserve are essential for the operation. This business vision and team’s readiness allowed the company to go through this period of uncertainty very consistently and smoothly.
Receivables
At the end of 2Q20, total accounts receivable came to R$857.4 million. Of this amount, R$539.4 million were already recognized in the balance sheet.
Table 17 – Total Receivables (R$ 000)
| 2Q20 | 1Q20 | Q/Q(%) | 2Q19 | Y/Y (%) | |
| Receivables from developments – Backlog | 318,095 | 378,575 | -16% | 525,602 | -39% |
| Receivables from PoC - ST (on balance sheet) | 445,811 | 464,463 | -4% | 449,356 | -1% |
| Receivables from PoC - LT (on balance sheet) | 93,529 | 95,664 | -2% | 116,835 | -20% |
| Total | 857,435 | 938,702 | -9% | 1,091,793 | -21% |
Notes: ST – Short term | LT- Long term | PoC – Percentage of Completion Method.
Receivables from developments: Accounts receivable not yet recognized according to PoC and BRGAAP.
Receivables from PoC: Accounts receivable already recognized according to PoC and BRGAAP.
Table 18 – Receivables Schedule (R$ 000)
| Total | 2020 | 2021 | 2022 | 2023 | 2024 – and after | |
| Receivables Backlog | 318,095 | 157,195 | 122,823 | 10,312 | 6,706 | 21,059 |
| Receivables from PoC | 539,340 | 266,529 | 208,251 | 17,485 | 11,370 | 35,705 |
| Total | 857,435 | 423,724 | 331,074 | 27,797 | 18,076 | 56,764 |
Cash Generation
Table 19 – Cash Generation (R$ 000)
| 1Q19 | 2Q19 | 3Q19 | 4Q19 | 1Q20 | 2Q20 | |
| Cash Available 1 | 63,068 | 182,817 | 394,216 | 414,330 | 363,337 | 570,156 |
| Change in Cash Available (1) | (74,092) | 119,749 | 211,399 | 20,114 | (50,993) | 206,819 |
| Total Debt + Investor Obligation | 790,172 | 770,715 | 750,826 | 730,678 | 710,169 | 673,649 |
| Change in Total Debt + Investor Obligation (2) | (99,241) | (19,457) | (19,889) | (20,148) | (20,509) | (36,520) |
| Capital Increase (3) | - | 132,266 | 206,927 | 65,768 | - | 259,729 |
| Cash Generation in the Period (1) - (2) - (3) | 25,149 | 6,940 | 24,361 | (25,506) | (30,484) | (16,390) |
| Final Accumulated Cash Generation² | 25,149 | 32,089 | 56,450 | 30,944 | 460 | (15,930) |
¹ Cash and cash equivalents and marketable securities.
² Considers 12M20.
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Liquidity
Continuing the work of strengthening the Company’s balance sheet, net debt significantly reduced from R$346,8 million in 1Q20 to R$103.5 million. The Net Debt /Shareholders’ Equity ratio at the end of 2Q20 reached 8.8%, compared to 39.3% reported in 1Q20, due to higher cash deriving from the capital increase. Within one year, we went from a Net Debt/Shareholders’ Equity ratio of 162% in 1Q19 to current 8.8% in 2Q20! Also, a new capital increase of up to R$390 million was already authorized at the ESM held on August 7, 2020.
Table 20 – Debt and Investor Obligation (R$ 000)
| 2Q20 | 1Q20 | Q/Q(%) | 2Q19 | Y/Y (%) | |
| Housing Finance System - SFH | 266,210 | 288,873 | -8% | 281,605 | -5% |
| Real Estate Finance System - SFI | 146,613 | 161,801 | -9% | 180,035 | -19% |
| Debentures (Projects) | 112,338 | 141,679 | -21% | 196,638 | -43% |
| Bank Credit Note (Projects) | 40,219 | 39,020 | 3% | 20,170 | 99% |
| Subtotal of Project Debt (A) | 565,380 | 631,373 | -10% | 678,448 | -17% |
| Debentures (Working Capital) | 33,529 | 39,188 | -14% | 48,448 | -31% |
| Bank Credit Note (Working Capital) | 62,799 | 23,588 | 166% | 34,206 | 84% |
| Other Transactions (Working Capital) | 11,941 | 16,020 | -25% | 9613 | 24% |
| Subtotal of Working Capital Debt (B) | 108,269 | 78,796 | 37% | 92,267 | 17% |
| Total Debt (A)+(B)= (C) | 673,649 | 710,169 | -5% | 770,715 | -13% |
| Cash and Cash Available¹ (D) | 570,156 | 363,337 | 57% | 182,817 | 212% |
| Net Debt (C)-(D) = (E) | 103,493 | 346,832 | -70% | 587,898 | -82% |
| Shareholders’ Equity + Minority Shares (F) | 1,177,187 | 882,957 | 33% | 575,353 | 105% |
| (Net Debt) / (PL) (E)/(F) = (G) | 8.8% | 39.3% | -3010bps | 102.2% | -9300bps |
| (Net Debt –Proj. Funding) / PL ((E)-(A))/(F) = (H) | -41.0% | -32.2% | -876bps | -15.7% | -2525bps |
¹ Cash and cash equivalents and marketable securities.
The Company ended 2Q20 with R$364.9 million indebtedness falling due this year, accounting for 55% of total debt. On March 31, 2020, the consolidated average cost of debt was 10.8% p.a. Note that approximately 89% of the Company’s debt is linked to projects, therefore, maturities are linked to the delivery of projects to still occur in 2020.
Table 21– Debt Maturity (R$ 000)
| Average Cost (p.a.) | Total | Until Dec/20 | AtéDez/21 | AtéDez/22 | AtéDez/23 | ApósDez/23 | |
| Housing Finance System - SFH | TR+7.00% to 14.20% | 266,210 | 192,295 | - | - | - | 73,915 |
| Real Estate Finance System - SFI | Pre+13.66%/143%CDI | 146,613 | 432 | 97,559 | 7,800 | 7,800 | 33,022 |
| Debentures (Projects) | CDI+3%/CDI+3.75%/CDI+5.00%/CDI+5.25% | 112,338 | 99,965 | 11,624 | 749 | - | - |
| Bank Credit Note (Projects) | CDI+3.70%/CDI+4.25% | 40,219 | 38 | 40,181 | - | - | - |
| Subtotal of Project Debt (A) | 565,380 | 292,730 | 149,364 | 8,549 | 7,800 | 106,937 | |
| Debentures (Working Capital) | IPCA+7.8% | 33,529 | 5,983 | 11,290 | 10,535 | 5,721 | - |
| Bank Credit Note (Working Capital) | CDI+2.5%/19.56% | 62,799 | 54,213 | 4,826 | 3,760 | - | - |
| Other Transactions (Working Capital) | 12.68% | 11,941 | 11,941 | 0.0% | 0.0% | - | - |
| Subtotal of Working Capital Debt (B) | 108,269 | 72,137 | 16,116 | 14,295 | 5,721 | ||
| Total Debt (A)+(B)= (C) | 673,649 | 364,867 | 165,480 | 22,844 | 13,521 | 106,937 | |
| % Total maturity per Period | - | 54.2% | 24.6% | 3.4% | 2.0% | 15.9% | |
| Project debt maturity as % of total debt (B)/ (E) | - | 80.2% | 90.3% | 37.4% | 57.7% | 69.1% | |
| Corporate debt maturity as % of total debt ((A)+(C))/ (E) | - | 19.8% | 9.7% | 62.6% | 42.3% | 0.0% | |
| Corporate Debt / Real Estate Credit Ratio | 16,1/83,9 | ||||||
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Consolidated Income Statement
| 2Q20 | 1Q20 | Q/Q(%) | 2Q19 | Y/Y(%) | 6M20 | 6M19 | Y/Y(%) | |
| Net Revenue | 83,800 | 71,703 | 16.9% | 99,659 | (15.9%) | 155,503 | 195,080 | -20% |
| Operating Costs | (61,086) | (51,241) | 19.2% | (62,688) | (2.6%) | (112,327) | (151,662) | -26% |
| Gross Profit | 22,714 | 20,462 | 11.0% | 36,971 | (38.6%) | 43,176 | 43,418 | -1% |
| Gross Margin | 27.1% | 28.5% | -1.4p,p, | 37.1% | -10p,p, | 27.8% | 22.3% | 551bps |
| Operating Expenses | (43,131) | (36,386) | 18.5% | (38,670) | 11.5% | (79,516) | (81,353) | -2% |
| Selling Expenses | (4,047) | (2,793) | 44.9% | (3,011) | 34.4% | (6,840) | (9,513) | -28% |
| General and Administrative Expenses | (15,133) | (16,460) | (8.1%) | (11,340) | 33.4% | (31,593) | (19,240) | 64% |
| Other Operating Revenue/Expenses | (20,015) | (12,745) | 57% | (23,642) | (15.3%) | (32,759) | (45,868) | -29% |
| Depreciation and Amortization | (1,882) | (2,166) | (13.1%) | (4,143) | (54.6%) | (4,048) | (8,516) | -52% |
| Equity Income | (2,054) | (2,222) | (7.6%) | 3,466 | (159.3%) | (4,276) | 1,784 | -340% |
| Operational Results | (20,417) | (15,924) | 28.2% | (1,699) | 1101.7% | (36,340) | (37,935) | -4% |
| Financial Income | 21,091 | 7,999 | 163.7% | 5,369 | 292.8% | 29,090 | 8,734 | 233% |
| Financial Expenses | (23,445) | (16,395) | 43.0% | (15,838) | 48.0% | (39,840) | (29,162) | 37% |
| Net Income Before Taxes on Income | (22,771) | (24,320) | (6.4%) | (12,168) | 87.1% | (47,090) | (58,363) | -19% |
| Deferred Taxes | - | - | - | - | - | - | - | - |
| Income Tax and Social Contribution | 1,882 | (1,129) | 50.2% | (309) | (24.8%) | (2,015) | (713) | 183% |
| Net Income After Taxes on Income | (23,657) | (25,449) | (7.0%) | (12,477) | 89.6% | (49,105) | (59,076) | -17% |
| Minority Shareholders | (112) | 13 | (961.5%) | 247 | (145.3%) | (98) | 2 | -5000% |
| Net Income | (23,545) | (25,462) | (7.5%) | (12,724) | 85.0% | (49,007) | (59,078) | -17% |
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Consolidated Balance Sheet
| 2Q20 | 1Q20 | Q/Q(%) | 1Q19 | Y/Y(%) | |
| Current Assets | |||||
| Cash and Cash equivalents | 19,512 | 6,001 | -100% | 11,373 | -100% |
| Securities | 550,644 | 357,336 | 60% | 171,444 | 233% |
| Receivables from clients | 445,811 | 464,463 | -4% | 449,356 | -1% |
| Properties for sale | 855,315 | 780,738 | 10% | 807,992 | 6% |
| Other accounts receivable | 178,058 | 138,685 | 28% | 133,061 | 34% |
| Prepaid expenses and other | 1,131 | 1,426 | -21% | 2,318 | -51% |
| Land for sale | 7,014 | 7,014 | 0% | 38,681 | -82% |
| Subtotal | 2,057,485 | 1,755,663 | 17% | 1,614,225 | 27% |
| Long-term Assets | |||||
| Receivables from clients | 93,529 | 95,664 | -2% | 116,835 | -20% |
| Properties for sale | 293,573 | 295,734 | -1% | 218,616 | 34% |
| Other | 221,739 | 208,240 | 6% | 125,705 | 76% |
| Subtotal | 608,841 | 599,638 | 2% | 461,156 | 32% |
| Intangible Property and Equipment | 17,444 | 18,862 | -8% | 29,344 | -41% |
| Investments | 138,566 | 141,731 | -2% | 302,797 | -54% |
| Total Asset | 2,822,336 | 2,515,894 | 12% | 2,407,522 | 17% |
| Current Liabilities | |||||
| Loans and financing | 283,923 | 307,904 | -8% | 332,693 | -15% |
| Debentures | 119,367 | 142,983 | -17% | 170,955 | -30% |
| Obligations for purchase of land | 111,790 | 112,616 | -1% | 96,979 | 15% |
| Material and servisse suppliers | 131,941 | 101,167 | 30% | 161,722 | -18% |
| Taxes and constributions | 83,689 | 75,367 | 11% | 60,359 | 39% |
| Provision for Contingencies | 184,084 | 135,356 | 36% | - | 0% |
| Other | 253,603 | 233,436 | 9% | 372,617 | -32% |
| Subtotal | 1,168,397 | 1,108,829 | 5% | 1,195,325 | -2% |
| Long-term liabilities | |||||
| Loans and financings | 243,859 | 221,398 | 10% | 192,936 | 26% |
| Debentures | 26,500 | 37,884 | -30% | 74,131 | -64% |
| Obligations for Purchase of Land | 92,998 | 102,549 | -9% | 157,582 | -41% |
| Deferred taxes | 12,114 | 12,114 | 0% | 49,372 | -75% |
| Provision for Contingencies | 78,809 | 123,878 | -36% | 119,559 | -34% |
| Other | 22,472 | 26,285 | -15% | 45,477 | -51% |
| Subtotal | 476,752 | 524,108 | -9% | 639,057 | -25% |
| Shareholders’ Equity | |||||
| Shareholders’ Equity | 1,175,852 | 881,508 | 33% | 573,554 | 105% |
| Minority Interest | 1,335 | 1,449 | -8% | 1,799 | -26% |
| Subtotal | 1,177,187 | 882,957 | 33% | 575,353 | 105% |
| Total liabilities and Shareholders’ Equity | 2,772,336 | 2,515,894 | 12% | 2,409,735 | 17% |
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Consolidated Cash Flow
| 2Q20 | 2Q19 | 6M20 | 6M19 | |
| Net Income (Loss) before taxes | (22,770) | (14,443) | (47,090) | (58,363) |
| Expenses/revenues that do not impact working capital | 76,637 | 1,983 | 76,973 | 10,375 |
| Depreciation and amortization | 1,882 | 4,143 | 4,048 | 8,516 |
| Impairment | (1,044) | (17,011) | (1,044) | (28,219) |
| Expenses with stock otion plan | 47 | (412) | (357) | (2,872) |
| Unrealized interest and fees, Net | 678 | 2,882 | 2,134 | 3,086 |
| Equity Income | 2,054 | (3,466) | 4,276 | (1,784) |
| Provisions for guarantee | 1,358 | (1,444) | (896) | (1,782) |
| Provision for contingencies | 19,353 | 13,305 | 31,350 | 45,885 |
| Profit Sharing provision | 765 | 500 | 3,087 | 500 |
| Provision (reversal) for doubtful accounts | 49,020 | 6,075 | 31,364 | (11,774) |
| Provision for fine due to construction work delay | 2,524 | (2,589) | 3,011 | 1,408 |
| Clients | (31,255) | 24,187 | (20,287) | 85,810 |
| Properties for Sale | (71,372) | 38,090 | (81,977) | 130,479 |
| Other Receivables | (52,533) | (14,100) | (66,045) | (24,095) |
| Deferred Selling Expenses and Advanced Expenses | 297 | 148 | 729 | 350 |
| Obligations for Property Acquisition | (10,377) | (13,623) | (17,640) | (54,871) |
| Taxes and Contibutions | 8,322 | 2,914 | 13,821 | 3,082 |
| Suppliers | 30,472 | 36,815 | 36,686 | 37,138 |
| Payroll, Charges and Bonus Provision | 1,183 | (786) | (4,887) | (1,820) |
| Other Accounts Payable | 56,225 | (46,393) | 39,632 | (155,624) |
| Transactions with Related Parties | 2,890 | 7,429 | 21,512 | 18,280 |
| Taxes Paid | (886) | (309) | (2,015) | (713) |
| Cash used in operating activities | (13,167) | 21,912 | (50,588) | (9,972) |
| Acquisition of properties and equipment | (464) | (5,674) | (249) | (6,017) |
| Redemption of securities, collaterals, and credits | 70,286 | (29,322) | 136,402 | 48,134 |
| Investment in marketable securities and restricted credits | (263,594) | (94,173) | (285,151) | (117,438) |
| Equity Securities | - | - | 2,717 | |
| Cash used in investment activities | (193,772) | (129,169) | (148,998) | (72,604) |
| Increase in Addition of loans and financing | 79,836 | 29,078 | 118,453 | 51,787 |
| Amortization of loans and financing | (117,034) | (51,417) | (177,616) | (173,571) |
| Loan operations | (1,933) | (9,400) | (5,549) | (9,358) |
| Sale of treasury shares | (148) | - | - | 148 |
| Proceeds from sale of treasury shares | - | 5,702 | 11,646 | 60,374 |
| Subscription and payment of common shares | 259,729 | - | 259,729 | - |
| Cash Flow from Financing Activities | 220,450 | 106,228 | 206,663 | 61,645 |
| Increase (Decrease) in cash and cash equivalents | 13,511 | (1,029) | 7,077 | (20,931) |
| Beginning of the period | 6,001 | 12,402 | 12,435 | 32,304 |
| End of the period | 19,512 | 11,373 | 19,512 | 11,373 |
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This release contains forward-looking statements about business prospects, estimates for operating and financial results, and Gafisa’s growth prospects. Readers can identify many of these statements when reading words such as “estimates,” “believes,” “expects,” and “will,” as well as similar words or their respective negatives. Although management believes the expectations conveyed in such statements to be reasonable, it is unable to guarantee that such expectations will come to fruition, and they should not be deemed as projections. By their nature, forward-looking statements require us to make assumptions and, as such, are subject to risks and uncertainties. They are mere expectations and therefore are based exclusively on what management expects concerning the future of the business and its continued access to capital to fund the Company’s business plan. Such forward-looking statements depend, substantially, on changes in market conditions, government regulations, competitive pressures, the performance of the Brazilian economy, and the industry, among other factors; therefore, they are subject to change without prior notice. The forward-looking statements included in this release are based on the assumption that our plans and operations will not be affected by such risks, but if our plans and operations happen to be affected by these risks, the forward-looking statements might become inaccurate. We do not commit to revising these forward-looking statements unless it is explicitly required by the applicable securities regulation. |
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SIGNATURE
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Gafisa S.A. | |
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By: |
/s/ Ian Andrade |
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Name: Ian Andrade
Title: Chief Financial Officer | |