Direcional Engenharia S A : 1Q23 Operating Preview

OPERATING PREVIEW

1Q23

Belo Horizonte, April 10th, 2023 - Direcional Engenharia S/A, one of the largest homebuilders and real estate development companies in Brazil, focused on the development of low-income and medium-income projects and operating in several regions of the Brazilian territory, discloses here its operating statements for the first quarter of 2023 (1Q23). Unless otherwise stated, the information in this document is expressed in national currency (Brazilian Reais - R$ or BRL) and the Potential Sales Value ("PSV") demonstrates the consolidated amount (PSV 100%).

NOTICE TO THE MARKET

1Q23 OPERATING PREVIEW

BEST 1ST QUARTER IN NET SALES IN COMPANY'S HISTORY: BRL 803 MILLION, A 29% GROWTH VERSUS 1Q22 AND A 16% GROWTH VERSUS 4Q22

HIGHLIGHTS

• In the last 12 months ending in 1Q23 (1Q23 LTM), Launches totaled BRL 3.6 billion, a 15%growth in relation to 1Q22 LTM.
• Net Sales of BRL 3.2 billionin 1Q23 LTM, an amount 25%higher than in 1Q22 LTM.
• Net Sales Speed ratio (VSO) of 17%in the quarter in the consolidated view.
• VSO of Direcional segment reached 19%in 1Q23.
• Net Sales in Riva segment totaled BRL 234 millionin 1Q23, a 37%growth over 1Q22 and a 13%growth over 4Q22.
• Cash Generation of BRL 8 millionin 1Q23.

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OPERATING PREVIEW

1Q23

LAUNCHES

In the first quarter of 2023 (1Q23), Group Direcional launched 9 new products, totaling a PSV of BRL 611 million (BRL 611 million

• Company), up by 2% versus the volume launched in 1Q22. Thus, the Group had its best 1st quarter in history in terms of Launches.

It is worth mentioning that the products under Direcional brand accounted for 78% of total PSV launched, and the products under Riva brand accounted for 22% of the mix in 1Q23.

Considering the 12-month period ending in March, 2023 (1Q23 LTM), Launches totaled BRL 3.6 billion (BRL 3.2 billion % Company), a 15% growth over 1Q22 LTM.

Quarterly Launches	Last 12 months Launches
(PSV 100% - BRL million)	(PSV 100% - BRL million)
	+2%		+15%
599	611	3,160	3,648
	134
203		1,332
		1,369
396	477		2,316
	1,791
1Q22	1Q23	1Q22 LTM	1Q23 LTM
	Riva	Direcional

Table below presents further information on 1Q23 Launches:

	Launches			1Q23
			(a)
	PSV Launched - 100% (BRL million)			611.2
	Direcional	477.2
	Riva	134.0
	PSV Launched - % Company (BRL million)			611.2
	Direcional	477.2
	Riva	134.0
	Launched Units			2.762
	Direcional	2.476
	Riva	286
	Average % Company			100.0%

4Q22

(b)

1.057.7

709.8

347.9

896.1

651.3

244.8

4.320

3.504

816

84.7%

1Q22

(c)

599.1

396.4

202.6

557.3

354.7

202.6

2.831

2.136

695

93.0%

Δ %	Δ %
(a/b)	(a/c)
-42.2%	2.0%
-32.8%	20.4%
-61.5%	-33.9%
-31.8%	9.7%
-26.7%	34.6%
-45.3%	-33.9%
-36.1%	-2.4%
-29.3%	15.9%
-65.0%	-58.8%
15 p.p.	7 p.p.

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OPERATING PREVIEW

1Q23

NET SALES

In line with what had been observed in the final weeks of 4Q22 - when there was a significant increase in the sales volume, after the presidential elections and the World Cup -, Net Sales remained at a strong pace in 1Q23, totaling BRL 803 million (BRL 643 million % Company). When compared to the previous quarter, the growth rate reached 16%, and when compared to the year- ago period, there was a 29% growth. Thus, Direcional also recorded its best performance for a 1st quarter in terms of Net Sales.

Taking into account 1Q23 LTM, Net Sales came in at BRL 3.2 billion (BRL 2.6 billion % Company), which represented a 25% increase in relation to 1Q22 LTM, with growth in both Direcional and Riva products.

			Net Sales					1st Quarter Track Record
			(PSV 100% - BRL million)					(PSV 100% - BRL million)
Old Harvest			+25%
Riva					3,180								803
Direcional
					2,547	1,002							622
					14
					825							515
		+29%				2,180			250	287	298
			803
622	694		1,708
+16%			151
234		125
171	3	207
		570
448	489
		-2	-1			-2	1Q16	1Q17	1Q18	1Q19	1Q20	1Q21	1Q22	1Q23
1Q22	4Q22	1Q23		1Q22	1Q23
					LQM	LQM

The table below shows the breakdown of 1Q23 Net Sales:

Net Sales

Net Sales - PSV 100% (BRL million)

Direcional

Riva

Old Harvest1

Net Sales - PSV % Company (BRL million)

Direcional

Riva

Old Harvest

Contracted Units

Direcional

Riva

Old Harvest

Net Sales Speed (VSO) in PSV

Direcional

Riva

Old Harvest

1Q23	4Q22	1Q22	Δ %	Δ %
(a)	(b)	(c)	(a/b)	(a/c)
803.4	694.4	621.9	15.7%	29.2%
570.2	489.3	447.9	16.5%	27.3%
234.0	206.7	171.2	13.2%	36.7%
-0.8	-1.6	2.8	-49.4%	-129.4%
642.9	551.5	508.0	16.6%	26.6%
463.2	397.6	372.0	16.5%	24.5%
180.0	153.9	134.6	17.0%	33.8%
-0.4	0.0	1.5	7532.6%	-125.6%
3.246	2.899	2.945	12.0%	10.2%
2.532	2.315	2.347	9.4%	7.9%
716	586	592	22.2%	20.9%
-2	-2	6	0.0%	-133.3%
17%	15%	16%	2 p.p.	1 p.p.
19%	17%	18%	2 p.p.	1 p.p.
13%	12%	14%	2 p.p.	-1 p.p.
-3%	-4%	3%	1 p.p.	-6 p.p.

1 - Old Harvest: Comprises projects of the middle income, upper-middle income and commercial segments, developed in the former model.

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OPERATING PREVIEW

1Q23

NET SALES SPEED (VSO)

Considering the aforementioned sales performance, 1Q23 Net Sales Speed, measured by the VSO index (Net Sales over Supply ratio), reached 17% in the consolidated view, a 2 p.p. increase in relation to the previous quarter. The index breakdown shows the VSO of Direcional projects (excluding Old Harvest projects) reached 19% in the quarter, while Riva´s VSO came in at 13%. It is worth mentioning that the index was impacted by the fact that Riva's only launch in the quarter took place in the last two weeks of March.

			Net Sales and VSO
			(PSV 100% - BRL million)
		23%	19%
		20%		19%
18%		19%
		17%
		19%	17%
16%		17%
		15%	13%
14%
				12%
		836	847		803
		1		Old Harvest Sales
			694
622	236
326	234	Riva Sales
	3		207
171				Direcional Sales
448	601	520	489	570	Direcional VSO
Consolidated VSO
		0		-2	-1	Riva VSO
1Q22	2Q22	3Q22	4Q22	1Q23

INVENTORY

At the end of 1Q23, Company's Inventory had 15,224 units, accounting for a PSV of BRL 4.0 billion (BRL 3.4 billion % Company).

Table below shows the Inventory at market value, detailed by stage of construction and by the type of product. It is worth mentioning that about 2% of the total PSV refers to completed units, with 1% related to Direcional projects (ex-OldHarvest products).

Total PSV

% Company PSV

Breakdown of Inventory at Market Value

In progress (BRL million)

% Total

Completed (BRL million)

Direcional	Riva	Old Harvest	Total
2,451	1,516	0	3,967
61%	37%	0%	98%
34	2	40	76

Direcional

2,121

62%

33

Riva	Old Harvest	Total
1,257	0	3,378
37%	0%	98%
2	25	59

% Total	1%	0%	1%	2%	1%	0%	1%	2%
Total (BRL million)	2,485	1,518	40	4,043				2,154	1,259	25	3,437
% Total	61%	38%	1%	100%			63%	37%	1%	100%
Total Units	11,037	4,070	117	15,224		11,037	4,070	117	15,224
% Total Units	72%	27%	1%	100%			72%	27%	1%	100%

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OPERATING PREVIEW

1Q23

LANDBANK

At the end of 1Q23, Direcional landbank totaled a development potential of 169,819 units with a PSV of BRL 32.5 billion (BRL 29.8 billion % Company).

The average cost of acquisition was equivalent to 11% of the PSV, and 81% of the payment shall be made through swaps, which causes a reduced impact on the Company's cash position before the beginning of the development of the projects

Landbank Evolution	2022	1Q23		1Q23
(BRL million)	Landbank	Acquisition		Launches
Total PSV	32,459	633	(611)

1 - Adjustments: update of sales price; canceled sales and swaps.

Adjustments 1

25

1Q23

Landbank

32,505

1Q23

PSV % Co.

29,759

Units

169,819

Land Acquisition

During 1Q23, 5 plots of lands were acquired, with a construction potential of more than 2,000 units and a PSV of BRL 633 million (BRL 574 million % Company).

The average cost of acquisition in the quarter was equivalent to 14% of PSV, and 74% of the payment shall be made via swaps.

CASH GENERATION ¹

In the first quarter of 2023, there was a Cash Generation of BRL 8 million. Thus, considering the 12-month period ending in 1Q23, the Cash Generation totaled BRL 120 million.

Cash Generation by Quarter	Cash Generation by Year
(BRL million)	(BRL million)

		98					362
								167	146		78	120
				53	38
20
		8	-71				-17
	-6
2Q22	3Q22	4Q22	1Q23	2015	2016	2017	2018	2019	2020	2021	2022	1Q23
												LTM

1 - Cash Generation: variation in net debt adjusted by payment of dividends, repurchase of shares and the variation in the balance of interest swap operation agreements Prior unaudited information.

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