SABESP (SBSP3) Q1 2025 earnings summary

Executive summary

• Net income increased 80% to R$1.48 billion, with adjusted EBITDA up 17.1% to R$3.01 billion and net revenue rising 3.9% to R$5.43 billion, driven by tariff hikes, higher consumption, and efficiency gains.

• Personnel expenses dropped significantly due to a voluntary dismissal program, with over 2,000 employees departing and further cost savings expected from rehiring at lower costs and internalizing roles.

• Investments in infrastructure more than doubled to R$2.9 billion, resulting in nearly 130,000 new connections and supporting universalization targets.

• Operational efficiency initiatives advanced, including a campaign against consumer fraud, metering upgrades, and reductions in general and administrative expenses.

• Commercial discount contract rescissions are progressing, with most of the BRL 500 million in discounts already addressed and remaining issues expected to be resolved by year-end.

Financial highlights

• Adjusted EBITDA margin improved to 55.4% from 49.2% in 1Q24.

• Operating costs and expenses (adjusted) fell 8.3% year-over-year.

• Capex reached R$2.85 billion, up 100.7% year-over-year.

• Cash flow from operations decreased 21.2% year-over-year.

• Free cash flow to equity rose to R$1.96 billion from R$1.18 billion year-over-year.

Outlook and guidance

• The bulk of voluntary dismissal program cost savings will materialize after Q2 2025, with rehiring at lower costs expected to further reduce personnel expenses.

• Management reaffirmed commitment to universalization and infrastructure expansion, aiming to further increase connections and service coverage.

• Regulatory discussions are ongoing regarding the expansion of subsidized tariffs, with compensation mechanisms anticipated for any additional public policy-driven impacts.

• Investment program execution is on track, with capex and operational targets aligned to universalization goals.

• The rural census fieldwork begins June 2025, with intermediary results expected in the second half of the year and final results by the end of 2026, potentially impacting future CapEx and tariff adjustments.