3Q18 EARNINGS RELEASE. Viver Announces its Results for the Third Quarter of Highlights

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1 3Q18 EARNINGS RELEASE Conference Call Wednesday, November 14 th, 2018 Portuguese (with simultaneous interpreting into English) 11:00 a.m. (Brasilia) 08:00 a.m. (New York) Phone: +55 (11) (11) Access code: Viver Replay: +55 (11) Password: English Phone: +1 (516) Access code: Viver Replay: +55 (11) Password: Viver Announces its Results for the Third Quarter of 2018 São Paulo, November 13 th, 2018 Viver Incorporadora e Construtora S.A. (VIVR3) announces today its operating and financial results related to the third quarter (3Q18). Highlights ServRe Real Estate, a new business unit of Viver Group, was created with the mission to provide tailored services to manage Real Estate assets, and solutions to all stages of the Real Estate cycle. After the end of the quarter, an agreement was reached with an investment fund managed by Jive Asset Gestão de Recursos Ltda., to settle debt of R$ million which it owned. This debt was formerly held by Banco Bradesco S/A. The transaction involves the payment in kind of R$ million in units and receivables and the remaining balance in shares as stated in the Judicial Recovery Plan. This transaction will result in a reduction of approximately 90% of the debt not subject to the Judicial Reorganization Process. This debt conversion into equity will generate a positive impact of approximately R$ 297 million in Viver Shareholder s Equity. Viver 3Q Proforma Shareholder Equity, considering the effect of the capitalization of this debt, would turn positive to approximately R$ 120 million. The 2 nd tranche of the Capital Increase was homologated in the Board of Directors meeting of November 12 th, 2018, which was partially subscribed and amounted to a capital increase of R$ 302,117,849.00, resulting in the issuance of 152,584,772 common shares. 1

2 As a result, the investment fund under management of Jive Asset Gestão de Recursos Ltda. Will own approximately 38% stake of Viver. On October 31 st, 2018, a debtor-in-possession financing ( DIP financing ) was signed between the Company and Paladin Prime Residential Investors (Brazil) LLC, in the amount of up to R$ 7 million to support the working capital of Viver. 2

3 List of Contents Operating and Financial Indicators... 4 Operating Performance... 5 Financial Performance... 6 Balance Sheet... 8 Judicial Reorganization Process and subsequent events Appendix

4 Operating and Financial Indicators Operating Highlights (BRL million) 3Q18 3Q17 9M18 9M17 Var% Launches (100%) n.a. Launches (% Viver) n.a. Launches (Units) n.a. Average Unit Launch Price (000) n.a. Pre-Sales (100%) 2,2 (5,8) 10,7 3,9 174,1% Pre-Sales (% Viver) 1,7 (5,3) 11,1 3,0 271,4% Pre-Sales (Units) 28 (30) ,3% Average Unit Sales Price (000) ,5% Financial Highlights (BRL million) 3Q18 3Q17 9M18 9M17 Var% Average Unit Sales Price (000) 4,7 0,1 16,5 2,5 560,0% Gross Profit (0,9) (2,7) (4,0) (12,8) -68,8% Gross Margin -19,9% -1881,0% -24,6% -495,6% bps Adjusted Gross Profit¹ (0,8) (1,9) (1,2) (7,5) -84,0% Adjusted Gross Margin¹ -16,9% -1362,0% -7,1% -291,9% bps EBITDA ² 1,5 (14,2) (26,5) (63,9) -58,5% EBITDA Margin ² 32,8% ,5% -160,5% -2477,5% bps Net Income (Loss) (72,0) 17,8 (118,1) (96,2) 22,8% Net Margin -1531,9% 17800,0% -715,8% -3848,0% bps Backlog of Revenues 87,8 84,0 87,8 84,0 4,5% Backlog of Results 15,4 13,9 15,4 13,9 10,8% Backlog Margin 17,6% 16,5% 17,6% 16,5% 104 bps Selling Expenses (0,7) (0,7) (2,3) (2,4) -4,2% G&A³ (5,9) (4,7) (14,7) (15,6) -5,8% ¹ Excluding capitalized interest. ² Excluding ex-severance and restructuring cost the G&A would be R$ 2.8 4

5 Operating Performance Launches The Company did not launch any projects in 2018, due to its strategy of cash preservation and to direct efforts in its restructuring and Judicial Reorganization Process. Pre-sales and Cancellations In 3Q18, gross pre-sales totaled R$ 8.7 million and net pre-sales were R$ 1.7 million. Cancellations amounted to R$ 7.0 million in 3Q18. The table below shows the details of net pre-sales in 3Q18 compared to the same period in 2017: Pre Sales % Viver (R$ million) # of units Average unit price (R$000) Segment 3Q18 3Q17 3Q18 x 3Q17 3Q18 3Q17 3Q18 x 3Q17 3Q18 3Q17 3Q18 x 3Q17 Super Low Income 1.2 (6.5) % 14 (37) % 108, , % Low Income 0.6 (0.4) % % 177,695 (83,734) % Mid Income % % 277, , % Mid High (0.6) (0.3) 97.3% (1) (1) 0.0% - (104,490) na High - - na - - na - - na Tourism and Commercial - - na - - na - - na TOTAL 1.7 (5.3) % 28 (30) % 173, , % Region 3Q18 3Q17 3Q18 x 3Q17 3Q18 3Q17 3Q18 x 3Q17 3Q18 3Q17 3Q18 x 3Q17 São Paulo (0.8) (1.6) -51.3% (1) (8) -87.5% 102, , % Southest (ex SP) (2.0) (2.4) -14.7% (1) (3) -66.7% 246, , % South 1.0 (3.7) % 10 (29) % 122,323 81, % Mid West 0.3 (1.4) % 17 (5) % 132, , % North % % 207, , % Northeast % % 171,080 (595,992) % TOTAL 1.7 (5.3) % 28 (30) % 173, , % Launch Year 3Q18 3Q17 3Q18 x 3Q17 3Q18 3Q17 3Q18 x 3Q17 3Q18 3Q17 3Q18 x 3Q17 Launches from na - - na - - na Launches from (0.2) na - (1) na - 255,226 na Launches from % % 163, , % Launches from % % 207,334 1,548, % Launches from 2010 (0.4) (6.0) -93.5% 4 (36) % 109, , % Launches up to (0.3) % % 195,410 (218,362) % TOTAL 1.7 (5.3) % 28 (30) % 173, , % Projects under Construction and Completed Projects On September 30 th, 2018 the Company had 3 sites with Patrimônio de Afetação under construction, and 2 of them had received partial permits. The Company is negotiating with banks and clients to find alternatives for resuming construction of these projects. The table below shows the detail of delivered projects and projects to be delivered with their expected receivables and inventory at market value:.r$ (000) Delivered To be Delivered Total Sites n.a. 3 3 Receivables Schedule 225, , ,148 Inventory 196, , ,689 Land bank On September 30 th, 2018, the Company s land bank represented an estimated PSV of R$ 1.57 billion. 5

6 Important to mention that R$ 406 million of the potential PSV consists of projects approved for launches, representing 2,413 units. The table below shows the breakdown of the Company s current land bank: PSV Viver's share (R$ million) Super Low Income Low Income Mid Income Mid High High Commercial Total São Paulo (state) Southeast (ex SP) South Mid West North Northeast Total of VGV (% Viver) ,571.6 % of Total 15.9% 14.0% 28.3% 10.6% 28.6% 2.5% 100.0% # of units 1,834 1,215 2, ,617 Financial Performance Results are shown in accordance with the accounting practices adopted in Brazil, in Brazilian Reais (R$) and in compliance with Brazilian corporate law. Net Revenue Net operating revenue was R$ 4.7 million in 3Q18, an increase of R$ 4.5 million compared to 3Q17. Property Costs Property costs totaled R$ 5.6 million in 3Q18, compared to R$ 2.8 million in 3Q17, reflecting the higher volume of net sales and its cost appropriation. The table below shows a breakdown of property costs: Gross Profit and Backlog of Revenues and Results The gross loss amounted to R$ 0.9 million in 3Q18, due to the low margin of legacy projects and the amortization of SFH interest, as well as the fact that the Company has not launched any new projects in 3Q18. 6

7 In 3Q18, the revenue backlog was R$ 87.8 million, and the backlog of results to be recognized reached R$ 15.4 million. The backlog margin for the quarter was 17.6%, 104 bps higher than 3Q17. Costs to be recognized do not consider financial charges and guarantee provisions, which are recognized as operating costs in proportion to the units sales, when incurred. Selling, General and Administrative Expenses In 3Q18, selling expenses totaled R$ 0.7 million, in line with our marketing policy of only investing on variable expenses linked to sales. General and administrative expenses, net of depreciation and amortization, severance and restructuring costs, totaled R$ 2.8 million in 3Q18, the same level as in the last quarters, representing an annualized amount of R$ 12 million. Financial Result The net financial result was negative R$ 72.3 million in 3Q18, mainly because of interest and contractual charges that were being negotiated and were included for the settlement of the debts with Banco Bradesco S.A. It is important to mention that only extra-court debts generated financial expenses. Net Profit/Losses In 3Q18, the Company presented a net loss of R$ 72.0 million, which was significantly impacted by the debt agreement with Banco Bradesco S.A. due to the recognition of non-recurring financial expenses. The recurring negative result, as already highlighted in previous quarters, is a consequence of the absence of new launches, the impact of cancellations on the recognition of revenue and gross profit, the provisions for lawsuits, as well as the interest accrual of the extra-court debts. 7

8 Looking forward, the Company will be focused on the implementation of its restructuring plan as well as pursuing profitability, together with the new business unit ServRE. EBITDA EBITDA was R$ 1.5 million in 3Q18. The table below shows EBIT, EBITDA and EBITDA margin trends in recent quarters. EBITDA (R$ 000) 3Q18 2Q18 3Q17 EBT (71,841) (27,127) (30,181) (+) Financial Result Net Financial Expenses (Income) 72,297 1,052 14,245 SFH interest on Cost (22) Corporate Interest on Cost (260) EBIT 599 (25,169) (15,199) Depreciation EBITDA 1,534 (24,220) (14,239) Balance Sheet Cash and Cash Equivalents and Securities On September 30 th, 2018, cash, cash equivalents and securities totaled R$ 9.4 million, compared to R$ 9.3 million on June 30 th, Portfolio Management and Client Mortgage Transfers ( Repasse ) The Company ended 3Q18 with total receivables of R$ million, comprised of R$ million from completed projects and R$ million from projects to be delivered, as shown in the chart below. The funds generated by repasse and client receivables totaled to R$ 8.7 million in 3Q18. 8

9 Inventory (properties for development and completed units) The Company s inventory balance on September 30 th, 2018 stood at R$ million and includes sites acquired with cash and through swaps, construction in progress, advances to suppliers and completed units, as detailed below. Inventory at Market Value The table below provides a breakdown of the inventory PSV at market value by segment. On September 30 th, 2018, the market value of the completed unit inventory represented a PSV of R$ 197 million. It should be noted that at the end of the third quarter approximately 80% of the units in inventory of completed projects were unable to be sold because they are collateral for various of financial institutions: with the announced transaction of debt settlement with Banco Bradesco SA, only 3% of the remaining units will be blocked from being sold. Inventory at market value (R$ 000) Segment Units completed To be Delivered Total High Mid High 98,248-98,248 Mid Income 64,190 70, ,260 Low and Super Low Income 28,899 42,983 71,882 Tourism e Commercial 5,299-5,299 TOTAL 196, , ,689 % 63.5% 36.5% 100.0% Indebtedness Viver ended the 3Q18 with debt outstanding of R$ million. This increase compared to the previous quarter was mainly due to interest and contractual charges. After the end of the quarter, approximately R$ million debt was reduced, being R$ 380 million of Viver participation. The table below shows the debt evolution and its Proforma position considering the effects of the debt settlement agreement with Banco Bradesco S.A. as placed in the subsequent events. It is important to mention that Viver has reduced its total indebtedness in the last 12 months by approximately 74% and continues to negotiate with the remaining creditors. 9

10 Indebtedness Evolution (R$ million) 3Q18 Proforma 3Q18 2Q18 1Q18 4Q17 3Q17 Debt 267,4 647,0 573,0 592,1 589,5 879,6 Corporate Debt 25,5 25,5 25,5 23,9 22,6 232,1 SFH / Project Debt 241,9 621,5 547,5 568,2 566,9 647,5 Securitization 9,2 9,2 9,5 10,8 11,4 22,2 Co-obligation 9,2 9,2 9,5 9,9 10,5 12,6 CRI ,8 0,8 9,6 Sub-total Indebtedness 276,6 656,2 582,5 602,9 600,9 901,8 Related-Party Transactions+DIP + Convertible 19,3 19,3 17,5 16,9 15,3 232,0 Related-Party Transactions ,8 Debtor-in-possession financing (DIP Financing) 19,3 19,3 17,5 16,9 15,3 8,7 Debentures Convertible ,5 Indebtedness Total 295,9 675,5 600,0 619,8 616, ,8 Judicial Reorganization Process and subsequent events New business unit of Viver Group On October 1st, 2018, the Company announced the creation of ServRE the new business unit of Viver Group, whose mission is to provide the market a complete, integrated and intelligent solution on real estate assets management, serving all stages of the real estate cycle. Faced with a scenario in which real estate assets almost represent a parallel currency, ServRE was created to facilitate the process of monetizing these assets. ServRE has the expertise of more than 25 years in the real estate market, high governance and controls, and a highly scalable platform, which the company believes positions it to be a full-service provider for the Real Estate market. Debt settlement of approximately R$ 420 million On October 19th, 2018, a deal was closed with Fundo de Liquidação Financeira Fundo de Investimento em Direitos Creditórios Não Padronizados ("Fundo"), under the management of Jive Asset Gestão de Recursos Ltda. ("Jive"), that comprised on the sale of the credit held by Banco Bradesco S/A, related to SPEs under the Patrimônio de Afetação regime, and resulting in the settlement of the Company s debt in the amount of nearly R$ million. The debt payment occurred through: (a) payment in units of the SPEs, (b) an assignment of receivables, and (c) conversion into shares (as per the Judicial Recovery Plan) of the remaining balance of approximately R$ 297 million, equivalent to approximately 33.8% of the Company's capital ("Post- Conversion Stake"). The Post-Conversion Stake, plus the 6.3% stake acquired by Kirton Bank Banco Múltiplo S/A (estimated at 4.2% after post 2nd Tranche dilution), that will be held by another vehicle managed by Jive, will result in a participation of the Jive vehicles of approximately 38.0% after the 2nd Tranche capital increase describe below is finished. 10

11 This debt was renegotiated through the "Instrumento Particular de Renegociação de Dívidas e Outras Avenças" ("Renegotiation Contract"). As a result of the Renegotiation Contract, the SPE Mirante do Sol, SPE Residencial Línea, SPE The Spot and SPE Altos do Umarizal will pay the Fund approximately R$ 69.2 million in real estate units of their projects, and SPE Beira Mar will assign approximately R$ 53.6 million of its receivables in favor of the Fund. These assets were already collateral of the debt with Banco Bradesco S.A. The approximately R$ 297 million debt will be converted into shares issued by the Company, at the issue price established in the Company s Judicial Recovery Plan of R$ 1.98 (one real and ninety-eight cents) per share. The conclusion of this transaction, in addition to the expected settlement of approximately R$ 420 million in debt, mainly through conversion into shares, will generate a positive impact of more than R$ million in the Company's Shareholders' Equity. Considering the conversion of credits in the form set forth above, the Company's equity would be as follows: Balance Sheet - R$ (000) Shareholders' Equity 3Q18 (176,874) Net equity effect 297,632 Shareholders' Equity Proforma 3Q18 120,758 DIP debtor-in-possession financing On November 1st, 2018, the Company received new funding in the amount of R$ 7.0 million from a DIP Financing Agreement signed on October 31st, 2018 with Paladin Prime Residential Investors (Brazil) LLC. The DIP financing disbursement aims to balance the working capital. 2 nd tranche of the Capital Increase On November 12th, 2018, the Company's Board of Directors approved a capital increase, within the limit of the authorized capital and as per article 6 of the Company's Bylaws. The partial homologation of the capital increase was approved at the meeting on the Board of Directors of August 1st, The capital increase was partially subscribed and resulted in a capital increase of R$ 302,117,849, at the issue price of R$ 1.98 per share, totaling an issuance of 152,584,772 common shares, nominative and without par value. As approved by the Company s Board of Directors at its meeting held on August 1st, 2018, a partial approval of the capital increase was allowed, provided that the minimum amount of R$ 2,131, (two million, one hundred and thirty-one thousand, one hundred and ninety-two reais and eighty cents) was reached, by issuing at least 1,076,360 (one million, seventy-six thousand, three hundred and sixty) common shares ("Minimum Subscription"). Of the proposed capital increase of 311,487,975 shares, 4,708 new common shares were subscribed during the exercise period of the preemptive right, at the issuance price of R$ 1.98 each, with a total amount of R$ 9, paid in national currency. During the leftovers period 498 common shares were subscribed resulting in the amount of R$ , and no shares were subscribed during the period of 11

12 additional leftovers. There was an increase of 152,579,566 common shares that were paid through the capitalization of debts, under the terms of the Judicial Recovery Plan, at the issuance price of R$ 1.98 each, thus surpassing the Minimum Subscription. In order to achieve the Minimum Subscription, the Capital Increase homologation may be approved immediately, without the auction provided for in article 171, paragraph 7, letter "b", in fine, of the Law of S.A. The 158,903,203 (one hundred and fifty-eight million, nine hundred and three thousand two hundred and three) registered, book-entry common shares with no par value that have not been subscribed or withdrawn will not be issued, and therefore will be canceled. The new shares have the same characteristics and conditions and will enjoy the same rights and benefits all current common shares and in the future assigned to the common shares issued by the Company and will fully participate in the dividends and interest on own capital that may be approved by the Company. Accordingly, the capital stock of the Company is now R$ 2,192,987, (two billion, one hundred and ninety-two million, nine hundred and eighty-seven thousand, three hundred and twenty eight and sixty-three cents) represented by 445,394,921 (four hundred and forty-five million, three hundred and ninety-four thousand, nine hundred and twenty one) common, nominative shares with no par value, and such amendment shall be reflected in the Company's Bylaws on the occasion of the next Shareholders General Meeting. About Viver Incorporadora e Construtora S.A. Viver is a real estate developer and builder established over 20 years ago and renowned for its highquality developments and pioneering role in construction technology. It focuses on the middle and upper-middle segments of the residential market, especially in the Porto Alegre area and the state of São Paulo. The Company adopts a management model based on strict standards of corporate governance and close alignment between the executive officers, Board of Directors and shareholders. Viver s stock is listed on the BM&FBOVESPA s Novo Mercado trading segment under the ticker VIVR3. Investor Relations Phone: (55 11) ri.viver@viver.com.br 12

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