Direcional Engenharia S A : 2Q22 Earnings Release

EARNINGS RELEASE

2Q22

Belo Horizonte, August 8th, 2022 - 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 and financial statements for the second quarter of 2022 (2Q22). Unless otherwise expressed, the information in this document is expressed in the national currency (Brazilian Reais - R$ or BRL) and the Potential Sales Value (PSV) demonstrates the value consolidated (100%). The Company's consolidated financial statements are prepared in accordance with accounting practices adopted in Brazil, which are based on Brazilian Corporate Law and on the regulations issued by the Brazilian Securities Commission (CVM).

2Q22 EARNINGS RELEASE

• RECORD-HIGHNET REVENUE: BRL 586 MILLION IN 2Q22, GROWING 25% VERSUS 1Q22 AND 39% VERSUS 2Q21
• ADJUSTED GROSS MARGIN¹ OF 35.4% IN 2Q22 AND 35.6% IN 1H22
• ADJUSTED EBITDA¹ OF BRL 119 MILLION IN 2Q22, +23% VERSUS 1Q22 AND +32% VERSUS 2Q21
• ADJUSTED NET INCOME² OF BRL 55 MILLION IN 2Q22 AND BRL 91 MILLION IN 1H22, AND ADJUSTED ANNUALIZED ROE² OF 16%

HIGHLIGHTS

• Net Sales record in 2Q22: BRL 836 million, growing 34%versus 1Q22 and 36%versus 2Q21.
• Net sales speed index (VSO) reached 20%in the quarter and 23%in Direcional segment.
• Dilution of 1.2 p.p.of Sales Expenses over Development Gross Revenue when compared to 2Q21.
• Dilution of 1.4 p.p.of G&A over Gross Revenue when compared to 2Q21.
• Adjusted EBITDA Margin1 of 20.3%in the quarter and 20.5%in the semester.
• Cash Generation of BRL 20 millionin 2Q22.
• Subsequent event: payment of dividends of BRL 0.47per share, an approximate amount of BRL 70 million.
• Subsequent event: Direcional's 1st social bond issuance, with a fund raising of BRL 300 million, and maturity in 10 years, extending the weighted average maturity of debt to 47 months.

RIVA

• 2Q22 net sales totaled BRL 236 million, a 38%growth versus 2Q21.
• In 1H22, net sales grew 35%over 1H21, totaling BRL 407 million.
• Riva's VSO reached 17%in the quarter, 3 p.p.above 1Q22.

1 - Adjustment excluding capitalized interest for financing of production.

2 - Adjustment excluding expenses with the sale of receivables and the equity swap result.

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EARNINGS RELEASE

2Q22

TABLE OF CONTENTS
MESSAGE FROM THE BOARD...............................................................................................................................................................................	3
MAIN INDICATORS ..................................................................................................................................................................................................	6
LAUNCHES...............................................................................................................................................................................................................	7
CONTRACTED SALES ............................................................................................................................................................................................	8
NET SALES SPEED (VSO) ......................................................................................................................................................................................	9
Canceled Sales......................................................................................................................................................................................................	9
INVENTORY............................................................................................................................................................................................................	10
TRANSFERS...........................................................................................................................................................................................................	11
PROJECTS DELIVERED........................................................................................................................................................................................	11
LANDBANK ............................................................................................................................................................................................................	11
Land Acquisition.................................................................................................................................................................................................	11
ECONOMIC AND FINANCIAL PERFORMANCE ..................................................................................................................................................	12
Gross Operating Revenue..................................................................................................................................................................................	12
Revenue from Real Estate Sales .......................................................................................................................................................................	12
Revenue from Services ......................................................................................................................................................................................	12
Net Revenue ........................................................................................................................................................................................................	13
Gross Profit .........................................................................................................................................................................................................	13
General and Administrative Expenses (G&A) ..................................................................................................................................................	14
Sales Expenses...................................................................................................................................................................................................	14
Other Operational Revenues and Expenses ....................................................................................................................................................	14
Financial Results ................................................................................................................................................................................................	15
EBITDA.................................................................................................................................................................................................................	15
Net Income before Minority Interest..................................................................................................................................................................	16
Net Income...........................................................................................................................................................................................................	16
Deferred Results from Real Estate Sales .........................................................................................................................................................	17
BALANCE SHEET HIGHLIGHTS ...........................................................................................................................................................................	18
Cash, Cash Equivalents and Financial Investments .......................................................................................................................................	18
Accounts Receivable..........................................................................................................................................................................................	18
Indebtedness.......................................................................................................................................................................................................	19
Cash Generation (Cash Burn)1 ..........................................................................................................................................................................	20
SHARE BUYBACK PROGRAM .............................................................................................................................................................................	20
SUBSEQUENT EVENT: DIVIDENDS .....................................................................................................................................................................	20
SUBSEQUENT EVENT: DEBT ISSUANCE (CRI)..................................................................................................................................................	20
RIVA - Operating Highlights ................................................................................................................................................................................	21
CONSOLIDATED BALANCE SHEET ....................................................................................................................................................................	23
CONSOLIDATED INCOME STATEMENT .............................................................................................................................................................	25
CONSOLIDATED CASH FLOW STATEMENT ......................................................................................................................................................	26
GLOSSARY ............................................................................................................................................................................................................	27

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EARNINGS RELEASE

2Q22

MESSAGE FROM THE BOARD

The changes we observed over the latest months in the real estate industry, especially with the current economic conditions, brought new challenges to the Companies. The dynamism of that scenario has tested the resilience of players and their capability to overcome setbacks, resulting in a wary view of the market in relation to the execution capacity of the participants.

In parallel, significant changes recently occurred within the Casa Verde e Amarela housing program, in order to recover the purchasing power of families eligible for the benefit and the pace of contracts, opened new possibilities for the players, which we see to be beneficial for Direcional, the industry, and Brazil. The results we are presenting below make us believe we have conducted our operations in line with our planning and enjoyed all the opportunities that come.

In the second quarter of 2022, we launched 3,261 units, distributed in 10 new projects, which are part of Direcional and Riva's product portfolio. The Potential Sales Value for the launches totaled BRL 790 million in 2Q22, contributing to an accumulated volume of BRL 1.4 billion in the first half of the year.

Despite the uncertainties of the current scenario about the pace of the economy and the consumer's confidence, we saw a strong demand for our products as we had already seen in the latest years. In that sense, we set another record in Net Sales in the quarter, with BRL 836 million in 2Q22, surpassing by 25% the previous record, which was set in 4Q21. Likewise, Net Sales Speed ratio (VSO) went up by 4.4 p.p. when compared to 1Q22, reaching 20% - 23% in Direcional segment and 17% in Riva segment. Considering the first quarter of 2022, net contracted PSV totaled BRL 1.5 billion. It is worth mentioning that Riva's Net Sales in 2Q22 went up by 38% when compared to the previous quarter and 32% when compared to the same quarter of the previous year, totaling BRL 236 million. In 1H22, Riva's Net Sales accounted for BRL 407 million of the volume sold by Direcional Group.

Graph below shows Net Sales over the latest years, including the last twelve months ended in 2Q22 (2Q22 LTM). We can see how evident our operations are rising, with an expressive compound annual growth rate in the period.

Net Sales Track Record

(PSV 100% - BRL million)

			CAGR:			2,768
				2,440
			+33%
		1,451		1,680
		1,320
	914
494
2016	2017	2018	2019	2020	2021	2Q22
						LTM

In the latest earnings releases, we have commented that the successive records in sales we have had since 2020, and the consequent increased backlog revenue, pointed out to a positive expectation about the revenue in the upcoming quarters. The progress of construction works is allowing us to recognize good part of the revenue contracted, as evidenced in the 2Q22 results.

Gross Revenue in 2Q22 totaled BRL 614 million, an all-time high level for the Company, with 96% accounting for revenue from real estate sales and 4% accounting for revenue from services. As a result, Net Revenue in 2Q22 set a new record in 2Q22, reaching BRL 586 million - 20% above the previous record. In 1H22, Net Revenue reached BRL 1.1 billion, a growth rate of 26% versus 1H21.

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EARNINGS RELEASE

2Q22

We also stand out our resilient Gross Margin, despite another challenging quarter when it comes to the prices of inputs. Our constant attention to the unit prices dynamics - always adjusted under the pricing policy -, the management of supply inventories, the product mix, and the frequent follow-up of the budgets of construction works in progress

Adjusted Gross Profit¹ Track Record

(BRL million and %)

36% 33% 36% 37% 36% 38% 36% 37% 36% 35%

• and those of products yet to be launched - has allowed us to keep our Gross Margin in stable levels over time. Adjusted Gross Profit¹ totaled BRL 207 million in 2Q22, a growth rate of 23% over 1Q22 and 29% over 2Q21, resulting in an Adjusted Gross Margin¹ of 35.4%. In 1H22, Adjusted Gross Profit totaled BRL 375 million, a 21% increase versus 1H21, with an Adjusted Gross Margin of 35.6%.

134 136

106

207

157 149 160 163 179 168

The increased earned revenue also resulted in another positive factor for the quarterly results: the dilution in both Sales Expenses and General & Administrative Expenses. In that sense, we have:

1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22

Gross Profit¹ Adjusted Gross Margin¹

1. Sales Expenses accounted for 9.0% over Development Gross Revenue in 2Q22, resulting in a dilution of 1.2 p.p. when compared to 2Q21. Sales Expenses over Net Sales index went down to 6.3%, resulting in a 1.1 p.p. dilution in the same period;
2. General & Administrative Expenses accounted for 5.9% of the Gross Revenue in 2Q22, versus 7.3% in 2Q21, resulting in a dilution of 1.4 p.p. when comparing both periods.

We have once more translated our operational efficiency into positive signs, with an Adjusted EBITDA1 achieving the highest level in our history. We reached BRL 119 million in EBITDA in 2Q22, a 23% growth when compared to 1Q22 and a 32% growth when compared to 2Q21, with an Adjusted EBITDA Margin1 of 20.3%. Adjusted EBITDA reached BRL 216 million in 1H22, a growth rate of 29% versus 1H21, and Adjusted EBITDA Margin reached 20.5%.

Net Income totaled BRL 41 million in 2Q22, a 50% increase versus 1Q22, with a Net Margin of 7.0%. In 1H22, it totaled BRL 69 million, in line with the results observed in 1H21. . To analyze the Net Income disregarding the effects caused by (i) the equity swap indexed to the Company's stocks, within the scope of the share buyback program, in the amount of BRL 9 million in 2Q22; and (ii) the expenses arising from the portfolio sale operation incurred in the lines of financial expenses and other revenues and expenses, in the total amount of approximately BRL 5 million, Adjusted Net Income2 totaled BRL 55 million in 2Q22, with an Adjusted Net Margin2 of 9,4%. In 1H22, Adjusted Net Income totaled BRL 91 million, and Adjusted Net Margin reached 8.6%.

Considering the benefits from the accelerated revenue with real estate sales, we reduced our Accounts Receivable Days to 85 days in 2Q22, one of the best in the industry. The indicator is a result from the ratio between the Accounts Receivable for real estate sales and the Net Revenue for that segment within a determined time frame. The 16% drop when compared to 1Q22 and 15% versus 2Q21 shows the receivables management has kept controlled levels.

Our leverage ratio, calculated by the Adjusted Net Debt3 over Equity, closed the quarter at 14.1% and went down by 1.3 p.p. when compared to 1Q22, with a net debt of BRL 215 million. Our leverage ratio, calculated by the Adjusted Net Debt3 over Equity, closed the quarter at 14.1% and went down by 1.3 p.p. when compared to 1Q22, with a net debt of BRL 215 million. It is worth mentioning that 88% of our total indebtedness is long-term, and the average maturity of our indebtedness is of 38 months in 2Q22.

Taking advantage of the opportunities that we have identified, we closed, after the end of 2Q22, another public offering of Certificates of Real Estate Receivables (CRI), pursuant to CVM Instruction No. 400. The success we had in the proceeds allowed us to issue additional bonds, with the fundraising reaching BRL 300 million - 20% above the initial estimated amount. With a brAAA rating, the CRI has a 10-year maturity, a time frame that is very uncommon among the bonds in the industry. We managed to extend the Company's debt profile, which is now above 47 months, with a final cost of CDI + 1.22% per annum, already including the interest rate swap.

Considering the allocation of funds raised in the proceeds for developing projects for low-income families, there are several social and economic impacts that will result from those projects. Therefore, our CRI has been classified as a bond with social

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EARNINGS RELEASE

2Q22

positive outcomes (social bond) by a Second-Party Opinion, issued by an independent company. Of the four components assessed for alignment with the best practices of the Social Bond Principles, governed by the International Capital Market Association (ICMA), we had the best rating ("leadership") in three of them. The Second-Party Opinion pointed out the offer is in line with the Sustainable Development Goals (SDGs), especially within the SDGs 1, 8, 10, and 11.

The maintenance of a responsible and balanced capital structure allows us to keep committed to value creation to our shareholders. In that sense, we made a buyback of 549,000 shares in 2Q22, corresponding to an amount of approximately BRL

5.5 million. Additionally, in an event subsequent to the end of the quarter, our Board of Directors approved the distribution of interim dividends at BRL 0.47 per share, totaling an approximate amount of BRL 70 million. The payment was made on July 25th, 2022. Considering dividends and share buyback, Direcional has already returned over BRL 1.0 billion to its shareholders since the IPO, in 2009.

We thank everyone who contributed to another quarter full of historical milestones and achievements, taking our results to another level and making Direcional soar high.

Thank You,

The Management - Direcional Engenharia S.A.

1 - Adjustment excluding capitalized interest for financing of production.

2 - Adjustment excluding expenses with the sale of receivables and the equity swap result. 3 - Adjustment by balance of interest swap operations contracts.

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