SABESP (SBSP3) Q1 2025 earnings summary

Executive summary

• Significant year-over-year reduction in personnel expenses due to a voluntary dismissal program, with over 2,000 employees departing and most departures occurring in Q2 2025.

• Net revenue rose 3.9% year-over-year to R$5,428 million, with adjusted EBITDA up 17.1% to R$3,008 million and reported net income up 80% to R$1,482 million.

• R$2.9 billion invested in infrastructure, more than double the prior year, supporting universalization and service quality.

• Operational efficiency initiatives advanced, including internalizing outsourced positions, hiring at lower costs, and campaigns against consumer fraud.

• Nearly 130,000 new connections were added, supporting universalization targets.

Financial highlights

• Q1 saw a BRL 105 million negative impact from tariff mix changes, mainly due to the adoption of Cadastro Único for subsidized tariffs.

• Commercial discount contract rescissions have captured about BRL 500 million in potential discounts, with ongoing legal proceedings for remaining contracts.

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

• Net income rose to R$1.48 billion from R$823 million year-over-year, a 79% increase.

• Personnel costs fell 7.6% year-over-year due to a 7% reduction in headcount.

Outlook and guidance

• Most voluntary dismissal program departures will be completed by end of Q2 2025, with expected cost savings and lower average personnel costs going forward.

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

• Tariff mix impact is expected to be addressed in the upcoming tariff revision, with compensation for the negative working capital effect.

• Regulatory gaps are being addressed, and new concession agreements and obligations are being implemented.

• Management expects operational cash generation and available credit lines to be sufficient for future commitments and investments.