Iguatemi S.A. (IGTI11) Earnings Call Transcript & Summary

Good morning, and thank you for holding. Welcome to the Iguatemi S.A. earnings conference call to discuss the results for the second quarter 2026. Present with us today are Ciro Neto, Chief Executive Officer; and Mr. Guido Oliveira, Vice President of Finance and Investor Relations Officer. We would like to inform you that this event is being recorded. [Operator Instructions] The presentation is available for download at ri.iguatemi.com.br. Before proceeding, we would like to clarify that any statements that may be made during the conference call regarding Iguatemi's business prospects, projections and operational and financial targets are the beliefs and assumptions of the company's management as well as information currently available. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that overall economic conditions, industry conditions and other operating factors may affect Iguatemi's future performance and lead to results that differ materially from those expressed in such forward-looking statements. I would now like to turn the floor over to Mr. Ciro Neto, who will begin the presentation. You may proceed.

Good morning, everybody. It's wonderful to be with you once again to speak about our second quarter results. We reached sales of BRL 6.6 billion, a growth of 4.6% vis-a-vis the same period last year, a performance that reaffirms the strength of our assets, the quality of our mix and the ability that Iguatemi has of continuing with growth in a challenging environment. And with the FIFA World Cup, we had more games this year, an attractive period, a very family event. Many of our customers travel, but despite this, we did attain a growth of 4.6%. It's also worth highlighting that the growth of sales per square meter was more than 13%, robust growth, reflecting our strategy of allocating capital in assets with greater productivity. After the FIFA World Cup, we had sales returning to their formal level and the flow of vehicles in the malls also returned to the levels before the World Cup. Now if we look at our rentals, we have a very balanced operation, same area rent reaching 2.2%. The participation of Iguatemi rental square meter was 11.8%, reflecting the strategy of investing in assets with greater productivity. Occupancy rate at a healthy level, 10.8%, preserving our -- the operation of our tenants. We ended the quarter looking at the occupancy rate rising to 96.9%, a result that reinforces how attractive our ventures are. We had the arrival of H&M at RioSul as well as other malls, a full success, the arrival of Zara, Carolina Herrera and Birkenstock signing a contract in Iguatemi Campinas and Ara Vartanian and Dominique also Maison Dior reaching JK, one of the main luxury brands, showing the confidence of the brand in the competition of our assets. We also inaugurated H&M in the RioSul Mall, absolute success in Rio de Janeiro. We changed operations that we're selling a certain amount, and we're selling sixfold in that space presently, concentrating the sales in Rio de Janeiro. This is the first H&M store in Rio de Janeiro, a door of entry to other international and domestic brands. International brands continue to have that desire to come to Brazil, expanding with us. This is the greatest challenge, and we deliver a performance above average for that segment. So this reinforces that Iguatemi is the door of entry for relevant brands in the markets where we are active. Now let's speak about capital recycling comparing the second quarter '25, second quarter of '26. We had stake changes in 9 assets and active management of our portfolio. We had an increase of stake in strategic assets relocating capital to projects with higher productivity. We have Patio Higienopolis, Patio Paulista, RioSul, raising the quality of our portfolio and strengthening our ability to obtain good results in the long term. I said this in the first quarter, when we think of the main 15 malls in terms of revenue, we have 6 of those. Iguatemi is in the first place. We have Iguatemi Sao Paulo and JK. Iguatemi is double than the third runner. So our capital allocation has been ever more intelligent. And once again, we invest in projects with higher productivity, obtaining higher productivity in our rentals. Let's look at our consequences, the results of this strategy. Adjusted EBITDA reached BRL 1.78 billion since 2022 with a CAGR of more than 18%, reflecting the evolution of our rentals and the greater efficiency of our assets. The graph that I show you here on Slide 6. I would like to show you the status of development of our expansion projects. We continue to move forward in our main initiatives. We have the rooftop of Iguatemi Sao Paulo and Iguatemi Brasilia, incredible projects with real estate development that is very strong. Here, we see Iguatemi Campinas where we began the works of our Iguatemi tower and the first phase of infrastructure of the Figueira neighborhood. We will be delivering this work at the end of the year. These developments continue to evolve. We have Tower A and the advance of expansions. And we will invest continuously in the advance of our assets. On Slide #8, let's look at our experiences, culture and ESG commitment. Events are an important differential of Iguatemi when it comes to our customers. We have new initiatives reinforcing that our assets are the center of experiences and culture. We held the first Iguatemi Talks Wellness with both national and international experts debating quality of life. This had a huge repercussion. We had more than 2 million people. We also launched Brasil Contemporaneo in Iguatemi theater with Fernando Schuler to speak about challenges and opportunities of Brazil vis-a-vis global changes. This was sold out in all of the editions, several people seeking us out to be able to participate to speak about the future of our country. We're strengthening our calendar of proprietary events, for example, Cine Vista in JK, Arraia Shopping, RioSul, Patio Gourmet with the help of Bradesco Principal. So every year, we create very attractive proprietary events that are attractive not only for customers, but for the public at large. They're important in our results, and we will continue offering these differentiated experiences to our customers, a very unified portfolio, but also generating proprietary revenues and bringing this closer to our customers. In ESG, the main highlight is the publication of the fourth edition of Sustainability Report. Among the highlights, we have moved forward in our decarbonizing effort. We're using 100% renewable energy in our operations. We're still in the ISE B3 Grade B and CDP and 94.3% approval of the Board of Directors. I will now turn the floor over to Guido. We ended the quarter with an ever more qualified portfolio, discipline in capital allocation, reinforcing our value in the long term. I will turn the floor over to Guido and we'll join you in the questions and answers.

Well, good morning, everybody. It's a pleasure to be with you in the second quarter 2026. In this table, you'll see a reduction of our own GLA. We had a sale that took place in the first quarter of '26. We sold some assets with minority participations. This was disseminated in March of the first quarter. In March, we acquired 3% of the Patio Paulista as well. This led to a reduction of 2.8% in our own GLA to 426,000 vis-a-vis 489,000. Our malls have 17 in total number. The total sales reached BRL 6.5 billion, as mentioned before, 4.6% above the second quarter of '25 and in the 6 months, BRL 12.2 billion, growing 8.2%. The same area sales at about 5% in the first 6 months and same area sales for the second quarter, 4.2%. Throughout the quarter, several malls have same area sales above 10%, especially Iguatemi Sao Paulo and JK and sales of 10% for Iguatemi, 10.5% for JK and 11% for others. Now besides the impact of the mismatch of Easter in March, we also had the impact of the FIFA World Cup that we highlighted. We had an impact on sales. They were 32% lower when compared with the day of the matches in Brazil in the previous year. We compared the day of the matches of Brazil with other days, and we had that drop of 32%. Were it not for this, our sales would have been 7% for June. Even if we consider that we had the effect of the traveling of our customers as this was a much larger World Cup, different from other World Cups with a larger number of games. And the last World Cup was in Qatar and this one, of course, held in the United States, closer for our customers. As Ciro mentioned, as of 15th of June, our sales returned to the levels pre World Cup and traffic flow as well with a large entertainment event with films such as Spider-Man and others, which are truly very successful at our movie theaters. If we look at same-store range, same area range, 2.7%, 2.5% above the IGPM. Now even with lower sales, we show you the occupancy rate at 97% and the occupancy cost of 10.8%, net delinquency rate of 0.1% and discount of 1% on rentals, one of the lowest discounts in the last few years, if we think about 15 years ago. This shows you how healthy our portfolio is. Now the best of the worlds for us is the rent per square meter. Our stake grew 13% in the second quarter '26 vis-a-vis the second quarter '25 and 12% in the 6 months vis-a-vis 2025, showing you the portfolio moves that we carried out in assets with better performance and productivity. Going on to the next page, we show you the effects of the -- financial effects adjusted by pro forma in the release and in the table that Ciro presented. Since 2024, we had movements in 10 assets. Since last year, 9 assets. We have Smart Place, Galleria Market Place per se and the movements of Iguatemi Alphaville, Praia de Belas, Ribeirao Preto and others. Besides what we had done last year of removing from our results, the results of our partners because of the financial instrument that we used to purchase Sao Paulo, the CRI that was purchased in April 2025. We paid off that CRI on 20th of June, delivering the results to those partners. So our results were above EBITDA, and they came out in the financial results as interest for the CRI. Our recurring net revenue was BRL 396 million. If we take away the pro forma event, we got to BRL 354 million. When compared with the second quarter of '26, the growth is 11.6% in net revenue and EBITDA growth of 11% in net income 21% and in FFO 22%. Now in this table that we have included, we show you the consolidation of recurring and pro forma results. We went from the second quarter '25 adjusted to the capital gain of Market Place, Galleria and the results of our partners, we went from BRL 445 million of EBITDA to BRL 448 million. And between sales and purchases, we lost BRL 26 million in EBITDA between the EBITDA of BRL 270 million and BRL 290 million of the second quarter '26 to the pro forma EBITDA, we had a growth of 10.8%. If we look at our metrics for minimum rentals, percentage of rentals, temporary rentals, parking rates, all with a growth of above 10%. I highlight the retail market with excellent figures in the second quarter in same-store growing 15% and growing 25.8% in total sales with a strong impact of Birkenstock and Polo Ralph Lauren with very good performance in the second quarter. For the semester, the same effect, we grew with growth revenue, net revenue above 11% when we carry out adjustments for pro forma adjustment. Now to go on to our balance. We get to a net debt of BRL 2.138 billion, an increase compared to March. In March, we carried out our sales. In the second quarter, we paid the parcel for RioSul, we paid out dividends and our leverage without taking into account capital gains goes back to being 1.8x. We began the purchase and sale of asset operations in April, and we end this cycle with the sales of the first quarter with the same leverage, somewhat lower perhaps in the second quarter with leverage standing at 1.8x. So we have preserved leverage between 1.6x and 1.8x in these last 2 years. Now the growth that we carried out by focusing on our main assets, our trophy assets allows us to have a take rate of 8.38% on sales for the last 12 months. We had lower sales this quarter, but we maintained the same take rate, losing a bit of overage because we had less sales from the international part, because of the traveling of our customers through the World Cup, but we have a healthy level of 8.3% growth. Sales per square meter reaching BRL 2,600-and-some per square meter. This is the highest figure for the sector and rentals reaching BRL 227 per square meter, the highest once again for the entire sector. With this, I would now open the floor for questions and answers.

[Operator Instructions] Our first question is from Fanny Oreng from Santander.

I have 2 questions at my end. A first question referring to sales. When you open up, you have a breakdown by category. What draws attention are home products and bookstores. Perhaps you could share with us what happened in that part specifically, if that refers to the World Cup or is this a specific problem of a retailer? Perhaps you can share this with us. The second question, have you begun the process of rentals for your expansion, the rooftop Sao Paulo, rooftop Brasilia? And how do you look upon the issue of allowances? How will they evolve? We see some investors somewhat concerned because of the multiplan application that showed more allowances. So how do you consider this trend of the retailers? Are retailers more concerned with the economic scenario? I don't know if the demand is for the opening of new stores.

Thank you, Fanny, for the question. If we look at home products, what we have seen in the market is a reduction in the size of those areas, if we look at Casas Bahia, for example. But in our case, for example, we have always had a more premium brands such as Fast Shop. There is a slowdown because of the problems you have all followed up on. There's an issue of inventory in those operations at this point. But we do believe in a reduction that opens up an opportunity for reduction ourselves and opening up the GLA in those spaces as we did in RioSul. In RioSul, we had the operation of a home appliance store and now we're selling 6x more than that because of H&M. Yes, we did focus on those operations. But as a next step, there is a reduction of spaces geared to those operators, offering us the opportunity for spaces with higher profitability. Well, we closed several operations, retail operations in terms of GLA. I give you the example of RioSul. They closed Casas Bahia. We opened up H&M and are selling sixfold more. Now to go back to your second question, the issue of expansion, we're doing well in the negotiations of the rooftop in the fourth floor of Iguatemi Sao Paulo and the expansion of Iguatemi Brasilia and we have allowances and the sale of points. Throughout this year, we had a movement that was somewhat lower in terms of sales points vis-a-vis last year. You can see this in other revenues, but we will recover this in the second half of the year. Several negotiations are ongoing. In July, we just sold an important point in Iguatemi Sao Paulo for Sisley. Therefore, we see the metric of sales -- point sales doing very well, and we will have important figures in the third and fourth quarters. Now regarding the allowances for new expansions, if we consider Brasilia and Iguatemi Sao Paulo, the negotiations are to resell the point and really not for allowances -- so we're at the same level we have always had. There are no increases or concerns, sudden concerns. It's more of the same. Shopping malls that are weaker. H&M, for example, we negotiated 5 stores. We paid in only one mall. In the others, this was a sales point resale. It depends on the negotiation, but there's nothing out of normal in terms of our commercial negotiation. We have had a very balanced situation offset by resale. So we try to net the 2. There is a greater pressure in the market. Other operators who attempt to improve their portfolio are investing more to bring in these operations. In Iguatemi these brands have to partner with us, and this reinforces our positioning. We charge for the sales point and don't offer allowances to all brands.

That was very clear. If I could follow up on your sales. Are there any retailers that have drawn attention, bringing the same-store sales down in different product categories.

I believe this was the impact of the World Cup. We sold less in June because of the FIFA World Cup. Yes, everybody traveled and bought outside of Brazil. I don't know if they bought, but they were traveling -- and well, they were watching the matches, the World Cup matches. We had an acceleration in international sales. And I always said this was a structural moment because international brands are investing in Brazil. We are a door of entry into Brazil. We're working with Maison Dior. These companies want to expand their spaces with us. Most of the brands in the last conversations I have had when we compare Americas, United States, Canada, Mexico and South America, our stores in Iguatemi and have the 5 best stores in performance in dollar. So the calendar effect was very different compared to that of the previous World Cup. This was more of a family event where you would take the entire family. And for high-income customers, they do travel a lot. So we saw that our customer was making the most of this family moment abroad. As soon as the World Cup ended, our sales sped up again in the last fortnight of June. And this allows us the tranquility to know that we will go back to the same figures we have in terms of sales growth.

We continue with Morgan Stanley, Marco Simplicio. (sic) [ Mario Simplicio ]

First of all, which is your view of leasing spreads this year? If you could give us more color if one asset is performing better than others? The second question, the improvement after the World Cup. What is happening to your sales in July? Perhaps you could give us more color and speak about trends.

We have a lease spread above 10% for renewals. We're doing very well with spreads in the last 12 months -- last 6 months, we held high occupancy. We -- last month, we ended at 97.2% and for the quarter, 96.7%. We had a higher churn in some satellites, but we have been recovering this in the second quarter with the hiring that we have already closed. The second question, if you could refresh me in that. July sales, exactly. We saw a first fortnight suffering because of the World Cup. Well, in the last match of Brazil, we had the same impact. that we saw in the first weeks of June. And if we look at the vehicle flow, which is a sign we recovered practically all the negative flow of the first fortnight and the second fortnight and the sales that dropped in the first fortnight, we recovered fully in the second fortnight. Sales came back strongly. The sales of July are positive, not high. But if we look at the thermometer of the second fortnight, we see that the sales are normal vis-a-vis what happened before the World Cup. We have sales of 9% to 10%.

We continue with Joao Pedro Rodrigues from XP.

I have 2 questions at my end. First of all, I would like to discuss with you the square meter. We look at the 3 states here, and we see that recently, you have moved away from the main player in terms of revenues per square meter. I would like to gain an understanding of how you justify these changes. Is this the result of the investments that you made, the new investments you made? Are there factors such as mix management that you carried out during the quarter that will justify this change? And in the new assets in RioSul and Patios, do you still have square meters where you can continue to maintain this leadership? That's the first question. My second question refers to the tax reform. Well, it's been some time since you have a framework to incorporate the clauses of the contract following the new tax reform. Well, it's a view of half empty cup from the commercial viewpoint, the impact this could have on negotiations. So how are your conversations going with tenants? Are the conversations getting better? And as 2027 comes closer, if you observe any pressure to offer discounts perhaps because of default or any other problems.

Thank you. Now if we look at the results of our revenue, there are some important factors. The first factor is our portfolio qualification. It has allowed us to speed up our performance per square meter. We have captured this, and we have increased this significantly. In the last quarters, the growth of overage has been quite strong. It's an expressive growth. It comes from that qualification, the performance of our assets. The second point is our diligence in seeking additional revenue in square meter in same-store range stores. For several quarters, we have been offering higher figures in the renovations that we carry out. We analyze contract by contract. We have a smart table so that we can increase the lease spreads. And an important factor is allocation of capital in our trophy assets, dominant assets when it comes to square meter, what I said at the beginning, we have 6 malls among the most productive malls in sales, and sales is a consequence of the rentals that you are able to charge, increasing your revenue through time. So this is what we have been doing in the last 2 years. Consolidating these assets, 2 of these assets are in the ranking of the 15 malls. It's a sum of all of these factors, doing new things, creating an ecosystem where we could bring in additional revenues, media-sponsored events, our lounges that are up for rentals, Casa Higienopolis. We have residences, the apartments in JK, for example, that have significant demand and important revenues in our deliveries. So it's a blend. If we look at the second part of your question, if you look at the assets we have acquired, we still have great opportunities for growth in revenue in those malls. In Higienopolis, 30-some square meters of GLA. It delivers NOI. RioSul has the same NOI among the last 3 that we acquired. So we have opportunities for growth in all 3 of these malls. And it begins with the movements we did before. We have H&M and RioSul, Birkenstock already showing growth. This will enable us to seek better rentals. We have signed more than 20 contracts in RioSul in the last 6 months, for example. So those malls are part of our process, and we see significant opportunities for growth there. And I would like to underscore the international part that is trying to enhance their footprint in Brazil. We see this in the negotiations of the rooftop and the expansion of Brasilia, several international brands that do not operate in the country so far. Many spoke about the Zara Group. The greatest Zara player is in Iguatemi between the Zara stores and Zara Home. We expanded Zara in Iguatemi Campinas and Brasilia as well. We have a significant agenda with Zara for the coming months. And you will receive the news once they are newsworthy. Now the tax reform, we have been preparing for that since 2019. We review this quarter-on-quarter. We have a base of contracts of 80% with a clause where it states that rent is priced. Additionally to that, throughout the discussions of the tax reform and the PEC that created the complementary law for the tax reform Article 255, which is complementary Law 214-218 states that the CBS is on gross rent. So legislation in this case shelters us, protects us. If we are able to pass this through to tenants is a discussion that is not foreseen in the legislation. Now Iguatemi differently from other players, invoices through condominiums and consortiums, and condos and consortiums are exempt. They don't pay taxes. So the co-owners of Iguatemi in their malls where we don't have a 100% stake. Even if we have 100% stake, this is invoiced through our consortiums and condominiums. So this idea that the taxes have to come out of your invoicing because you pay taxes on rent. No. we are exempt from paying taxes. If you're going to hold the discussion with tenants, I'll give you an example. We received an e-mail from a tenant yesterday. He wants the rents beginning in January to be invoiced, including CBS and IBS. You have to remove your aliquot of taxes. But we have already responded to them because we do not pay taxes. Our paying entity does not pay taxes. So there are ongoing discussions. We have made it very clear that this is how we work. And the CBS that will be around 9% will have a discount of about 70%. We're not going to pass through 9%. We're going to pass through 3%. We also have to keep in mind that several of our operators still do not know -- well, some of the franchisees truly do not know our discount of 70% that will be scaled up besides the Article 255 that says rent is priced. Now we need to explain to the tenants about the doubts that they have. And with most of them, we're quite comfortable in working with these necessary pass-throughs.

We continue with the questions Herman Lee from Bradesco BBI.

We have 2 questions as well. What draws attention is the rent that grew 111% of Patio Paulista in the first semester. Could you give us more color underlying this growth and the expansion of Iguatemi Sao Paulo, which has been your negotiations of rent vis-a-vis the rest of your portfolio? And what will happen with this new expansion?

Patio Paulista. The growth of rents in Patio Paulista reflects the movement that we have already carried out. We still have a great deal to do. We took on the management of Patio Paulista last year. We acquired it in April, but took on management only beginning in August. So there was a period of transition. We have been managing it for a year. The rental revenues grew 7%, and this reflects the new brands we have put in movement in the portfolio. Patio Paulista and RioSul do not have valet parking, which is where we grow more the rents for parking are 2%. And in RioSul because of the new brands, because of the inauguration of H&M grew 20.5% in terms of parking. We're going to implement this in both parking place. We're going to implement valet, and we will have a significant growth in revenue. And in Patio Paulista and RioSul, several novelties. We can't refer to them at present, but novelties that will drive the revenue, and this includes new brands coming into the mall. Now regarding the rooftop and expansions and negotiations when we drew up the business plan for the expansion on the rooftop in the fourth quarter, well, let's think about Iguatemi. On the third floor, we had a price in the fourth floor, we had a 10% discount because of the distance, you have to go up to the fourth quarter. Our negotiations are in line with the negotiation above that 10% we had put in for rent. All the restaurants have been leased. We have brands that have been leased, and we should reach 100% of leasing in the rooftop. The same holds true for Brasilia. We offer a discount in the area of expansion. but we have some anchors that we're breaking down that will be announced in the coming 2 months. In November, we should reach occupancy of 90% of the expansion of Brasilia with pricing highly aligned with the pricing of the rest of the mall. Now the question about the growth of rentals and spaces. We continue to have strong demand in Iguatemi, the request of international brands, relevant brands or an expansion for flagships, for example, as we have done now for Maison Dior that will have an incredible store here. And in the new rentals, even for international brands and national brands and for renewals, we have a rental growth above 2-digit high figures for Iguatemi Mall and JK Mall. From the viewpoint of product and rentals, we're qualifying these assets. We're making them more profitable.

We continue with Goldman Sachs, Jorel Guilloty.

I have 2 questions. First, about parking. You say that you have adjusted the rentals of parking 12% year-on-year. But you said that the flow of vehicles was stable around 8 million vehicles. I'm sorry, you also mentioned the flow of vehicle. I'll begin again. First, about your parking revenue, adjusted that figure is 12% year-on-year and the flow of vehicles is stable. It was 7.7 million vehicles. Now the growth of your parking revenue, is this based on price? Is this a permanent change? And if it is price, what's going to happen with your tariffs? Will you continue to increase them through time? And a question on your occupancy rate. You had an increase of 30 basis points year-on-year. I'd like to understand the dynamic and how much of that was the rental for the present day tenants and what will happen with the new tenants that are paying a higher occupancy cost.

Now to speak about parking 12% a year, even with a stable flow of vehicles, we have 2 components here. One is a tariff. We readjusted these rates at the beginning of the year on January 2. That has an impact, and a strong composition of valet parking. Valet is growing vis-a-vis self-park, all of our valet growing around 30%. As valet parking has a higher price, it increases the invoicing of our parking. I invite all of you to come visit our new valet in Iguatemi Sao Paulo of the Maffei Vita Street. We have a new lounge for the parking that is worthwhile visiting. In terms of CO, we had an increase of 30 basis points, as you mentioned, the occupancy, we have a positive spread of the new rentals same area range, same area sales are being occupied by new stores. They have a better price. When we look at the inside with a greater base, we took away those tenants that had been there for 5 years with renewals. So we're taking away that rent that was somewhat lower to maintain occupation during those years. Now commercial tables were readjusted and we have repriced everything. So you will see an increase of rents per square meter. We had a lag in terms of this. And now we have had an evolution because of the lease spreads in the new [indiscernible] of overage, we had a drop of overage when we look at the international stores that so less, and this generated an impact on sales and an increase in occupancy.

If you allow me one more question. You said the leasing spread for the contract was 10% and for renewals?

Around 10% as well.