Multiplan Empreendimentos Imobiliários S.A. (MULT3) Earnings Call Transcript & Summary

Good morning. Welcome, everyone, to Multiplan's First Quarter 2025 Earnings Conference Call. Today with us, we have the company's Executive Directors. Our presentation today may be accessed through Multiplan's website at ri.multiplan.com.br/en. Before proceeding, let us mention that forward-looking statements are based on the beliefs and assumptions of Multiplan management and on information currently available to the company. We have to mention that they involve risks and uncertainties because they relate to future events and therefore, depend on circumstances that may or may not occur. Having said that, investors should understand that conditions related to the macroeconomic scenario, industry and other factors could also cause results to differ materially from those expressed in such forward-looking statements. Now I'm going to turn the floor over to Mr. Eduardo Peres, our CEO, who will begin the presentation. Mr. Peres, you may begin.

Ladies and gentlemen, good morning. It is with great pleasure that we begin our financial results conference call for the first quarter of 2025. Thank you all for joining us today. Once again, we have had a quarter of strong performance, growing steadily. We have to highlight the rental income or revenue, which is starting to be affected by inflation, also services, parking lot and [ rights ]. Our management model once again has proven to be effective, bringing even better results and new operating records. Tenant sales have reached BRL 5.5 billion with emphasis to the developments that have undergone recent expansions, such as ParkShoppingBarigui and Diamond Mall and those that have been revamped such as BarraShopping. I would also draw your attention to the consolidation process at Park Jacarepaguá, the second shopping mall that's grown the most in sales this quarter. Another very positive aspect is the occupancy rate that has risen to 96.3% and a lower turnover. The combination of these two factors shows a greater retail stability and continued demand for space in shopping malls. We have seen greater demand from both national and international brands. This good operational momentum and the strong growth in revenue have positively leveraged our results, mitigating the impact on profit of the share buyback that we had last year. As a result, we have managed to grow earnings per share by 44% in the first -- in the last 12 months. For 2025, we will continue to invest in Multiplan's growth through these expansions, Parque Shopping Maceio and MorumbiShopping. They already have 90% of their GLA leased and ParkShopping in Brasilia, with 40% of its area leased. In total, we will have 27,000 square meters of additional areas. This year, we will also conclude the cycle of revitalization of our shopping malls. They include BarraShopping, MorumbiShopping and Pátio Savassi. We expect the allocation of capital to be lower than last year. By the end of 2026, we will have expanded and modernized all of the company's first 5 shopping malls, preparing them for the next 20 years to come. Now talking about real estate. We know that the heavy rains that hit Rio Grande do Sul have forced us to revisit costs of Lake Victoria in order to meet the construction schedule. But the good news is that now this year, we will deliver the first phase of our private neighborhood in Porto Alegre. Another positive thing is that the second phase of Lake Eyre, the second phase of the project has already sold around half of the 127 units. And in June, we will begin the construction, which shows our commitment, seriousness and long-term vision as well in Porto Alegre. When it comes to digital innovation, the Multi app is now consolidating its position as our main channel of contact with our clients. In the first quarter, we have surpassed the mark of 8.5 million cumulative downloads. Now the multiyear relationship program, which is hosted within the app, has seen an increase of 73% in the value of invoices that have been registered. Now to conclude, I would like to highlight the improvement in the company's corporate governance with the election of a third independent member in the Board of Directors. And now we have a total of 4 external consultants. We will continue to work to build our next decade at Multiplan, focusing on improving our portfolio and increasingly efficient management. I would like to thank all of our employees for their tireless commitment and the trust of investors, analysts and journalists that have joined us. Thank you very much.

[Operator Instructions] Let's start with our first question from [ Juan Luca ] from XP.

Two questions basically. First of all, I wanted to know about expenses for properties. We know -- we've seen a reduction in that in the first quarter. So I wanted to understand what has been the most relevant topic in that regard. And if you could tell us more about what you're expecting from now on in the future, what can we expect of those margins, which is different from what we've seen historically? And also about failure to pay, we've seen that, that is lower nowadays. So have you noticed that effect as well in terms of gross and not just net failure to pay? Or is it still an effect on recovery of rentals?

Thank you, [ Juan. ] Thank you for that question. This is Eduardo Peres. That's a great question. We have been very focused on improving the results of our company, our operational results in every way that is possible, especially when it comes recovering any lost credit, and that includes as well what you have mentioned, costs basically. So whenever we have an issue with a tenant and the tenant is no longer paying, you also have to recover those charges that are not paid. So this is something that we're constantly looking at. We are trying to recover that credit. Many times, it is difficult. We know how complex it is here in Brazil, especially it is very difficult. It takes a while. But it's something that we have been looking at, and hopefully, we're going to have better -- even better results in the future.

[ Juan, ] just to complement, to add to what Eduardo was saying. This is something that we're doing on a daily basis. It's part of our activity, trying to recover all those costs, all those charges. Now as for gross nonpayment, it's true that it has fallen so many points versus last year. And it's impossible to have that without an active -- a proactive action basically. As for expenses at the shopping malls, we've been more efficient for many reasons. First of all, an improvement in the occupancy rate. Also, we've just mentioned very low nonpayment rates. And we've also been recovered all those charges, as Eduardo has mentioned. So the margin, yes, we have seen a record in that direction. But if you look at the fourth quarter of 2024, that was also an important margin. It was also a record. So that means that we have been very proactively trying to have more efficiency in our operations. So as Eduardo was saying, it's something we do on a daily basis. We really want to deliver excellent results. The only thing that I just wanted to mention is that we had nonrecurring expenses last year in the fourth quarter, and though we had good results, but we're now having those expenses now.

Let's continue with our second question from Fanny Oreng from Santander.

I have a couple of questions. First of all, about Services. We've seen a great revenue in Services in this first quarter. And I wanted to understand the main reasons for that. I know you have been collecting the administration revenues as well. But I wanted to know if there's anything else to that. That's my first question. And the second one is the following. What do you think we can expect for the next few quarters? We've seen a growth against the fourth quarter. So what is the expectation for the next few quarters?

Fanny, thank you for the question. Well, when it comes to Services, yes, there are many factors here. It grows because you've seen -- we've seen a great NOI growth that affects, of course, our results. Also, there was a growth ever since last year, growth in Services. So we have many reasons to grow the Services revenue. As for provisioning, I think it's part of the way we account for these financial expenses. And it's usually on the total value of the project. It's cumulative. That's why we've seen a more important, more significant change in terms of CapEx. Is that your question, Fanny?

Yes, yes, Armando. And also about Services and about what we can expect for the future, do you think this recovery has been relevant?

Well, Fanny, I would say so yes. I think it's important because it contributes with the results. I think there wasn't just one event with good results. There are many factors, and it's continuous effort really that leads to that higher productivity. And as for provisioning for interests, we also had constructions, and we also had some other projects that finished -- that concluded last year. And from now on in value, in terms of CapEx values, it's going to be lower. If you see the expectation for investment in these expansions, they are lower than what was invested last year. So our expectation is that it's going to be reduced over the next few quarters.

We will continue with Elvis Credendio from BTG.

I have a couple of questions. First of all, about sales. I wanted to understand what the performance was. Do you think Easter has had any impact in sales this last quarter? Do you think it's going to continue like that in April? And also the second question has to do with the real growth in rent. I mean, thinking about sales going up, I would like to understand if that will continue, if you think it's possible to still have that growth in rentals. You mentioned 3%, if I'm not wrong. And GDPI is not going in that same direction. Therefore, my question.

Thank you for that question, Elvis. We started with very strong sales in January and in February as well, not so much in March. I believe -- well, I'm pretty certain that part of what we had here in the Southeastern region had a very important impact of tourism, especially coming from Argentina. It's a group of tourists that wouldn't travel to Brazil, they hadn't travel to Brazil in ages. And with a currency exchange favorable to them, they came to Brazil, especially to the south of Brazil. But we noticed that in other regions of the country as well. I went to Maceió and we know this the same. We noticed that Argentinian tourists were also there. So that was a strong presence at the malls. So that brought us a relevant improvement. Now for this month, we've seen a growth of 16.3% in total sales. So that means it's also very strong. We're very optimistic. I think the year has started in a very strong trend. And I don't see why we won't have also GDPI going on the contracts, why not. I think that's very clear. The sales gap is very high. I don't see any difficulties. The numbers of GDPI are not absolute numbers. So I think, that's fine.

Well, if I may, about real growth of rental, if you see from June 2017 until now, if you see capital, we've seen a similar growth as well this quarter. It was 3.4 this quarter. So basically, we're trying to have improvements and investments, and we're very optimistic for the future. When it comes to tourism, we have a stronger tourism. For instance, in BarraShopping in Rio de Janeiro, it grew 23% in February, which is very surprising for malls such as BarraShopping of that size. Same thing for the New York shopping mall. The ones where we expanded the same thing, they had that impact as well, very positive impact in sales.

We have a question from Pedro Lobato from Bradesco BBI.

First question is about CapEx, which is lower as well this quarter. I wanted to understand why we've seen that evolution, thinking about the future as well. And if you can tell us more about expansions, [ rent realization ], IT. What do you think is going to happen in 2025? And also about Golden Lake, the first phase has 50% sold, right? And now you're reaching the time for delivery of the rest. So what do you think the sales are going to be, given the fact that the timeline -- the moment for delivering all that is almost up? So do you think you're comfortable with the rhythm, the sales?

Pedro, it's a great question. On CapEx, I think, I made it clear that it is the -- the most important investment of the company in revitalization is in the past. Now we're going to have to invest less. I don't have exact numbers but it's going to be less than last year. I don't want to give you exact numbers again because I don't know the exact numbers, but it's probably less than 1/3 of what we had last year. We're still investing. We have just finished the expansion of ParkShopping. So you still won't see that, but it's going to be growing from now on. And probably, you will notice an improvement and increase actually in CapEx for expansions or for maintenance of CapEx and expansions and a decrease in revitalization because indeed, we have done what we had to do. It's not something we're going to continue to spend a lot of money because we want something completely different. No. Actually, we have to be effective and we want to have our shopping malls with a certain standard, and we're very close to that standard that we want to achieve. As for Golden Lake, you were asking about sales, right? I think it's important that we've seen a moment of difficulty with so much rain last year. It basically destroyed and floods destroyed Porto Alegre and many other cities in the region. We had some issues with local suppliers as well, but we've been able to overcome that. And the thing is we will deliver what was our commitment. Of course, we could use the fact that we had public calamity in the city, we could use that as an excuse. But the thing is we had a reduction in cost, but we had to make sure that we would deliver what was -- what we had committed to deliver with the quality that we deliver at Multiplan. I think for sales from now on, we're going to have much better performance. It was very strong, by the way, at Lake, this first quarter, but it's still not in [ DE ] because we haven't started the construction. But I am very positive about it, very optimistic. I think this is really a neighborhood that we're creating in the city. I think it's -- we've been trying to approve that project for over 10 years. And now we're finally developing that, and we have Golden Lake in Porto Alegre. I -- again, I am very optimistic for future sales like Victoria and Eyre as well. It's going to be ready now in June, so we'll deliver all that. And we'll also have more expansion after that. We'll have people being able to use those facilities, and it's going to also leverage our sales.

We now have a question from Jorel Guilloty from Goldman Sachs.

I have a couple of questions here. First of all, I wanted to ask you about the following. You had a historical turnover, 9% of the GLA so -- at the gross leasable area. So theoretically, people should be paying for that real step-up in 2025, I would say. What I wanted to know is the following. We're trying -- we're starting to see that trend now or is that going to happen in 2026? When is the step-up going to happen? Also about Morumbi Corporate. We've seen a decrease in occupancy. And I think rental went down 15%. So I wanted to understand what happened there. And besides, I would like to understand how you see that within Multiplan? Is your revenue coming from malls? Have you monetized other -- another tower in Morumbi? I mean do you see more Morumbi Corporate as part of multiple in the long run? That's my question.

Jorel, thank you for the question. I am going to answer about Morumbi. We are not immune to a global issue that we're all dealing with in terms of offices -- office spaces. People can now work from any places. So offices in office spaces have lost part of their value around the world. That place where Morumbi Corporate is that area of the city has a huge offer right now. I would say that for the amount of offer that we have in that region in that part of city, we've had quite a good performance still. I believe that for Multiplan, it is strategic to maintain Morumbi Corporate because we also have MorumbiShopping across from that street, across the street. So we can use, I don't know, the parking lot in one to compensate for the other. I mean, the coexistence of both projects is very good for both. So we sold -- as you have mentioned, we sold -- during the pandemic, we sold part of it. There was no other way. We had to sell, the company was going through its most critical moment, but I don't see that happening in the future.

And about the turnover, Jorel. That's a great question. When we see that decrease in turnover, when we see that in an isolated way, we can interpret the numbers in different ways. When you start to see the occupancy rate side by side with the lower turnover and very low nonpayment rate, you see quite stability in retail. It has started to have good performance over the last few years, inflation is under control as well, close to zero in many cases. So it's very positive. You can see many different types of contracts. But about that question about real growth, well, we have delivered 3.5% ever since we or listed until now, I think that really shows what our commitment is and what we expect from now on. We want to continue to grow and to have the best mall possible for our customers, and we want to monetize that in rental as well.

We now have a question from Mario Simplicio from Morgan Stanley.

Congrats on the results. You've talked about April a little bit, but I wanted to see how you're feeling in terms of the interest rates going up in Brazil lately, especially for tenants and customers. And also, if you could tell us how the plans have changed? Do you see more or higher interest rates in the future?

Mario, well, we're talking about high interest rates like 14.25% is indeed high enough but much higher rates. I am 54, I started working in the '90s, and I've seen much, much higher interest rates in my life, as you can imagine. Well, my feeling nowadays for sales, for rental, for leasable area is very good. We've just seen a very good, very strong Easter time with relevant growth. There are people trying to find spaces for international and national brands. So many tenants. I think, with the tariffs now in the U.S., a lot of people will stop trying to grow in the U.S. and will try to grow in other parts of the world. So we may benefit from the situation, right? So this is a very good feeling, I would say. I'm very optimistic. And about the indebtedness of the company and the cost of that, of course, with the movement that we had last year, 15%, and by the way, I do not regret that; and we had -- so the growth was lower because of the financial costs. So the attitude is, of course, being more selective about what we're going to invest. So we are of course -- I am not --I'm very happy about what we've done so far, and we'll continue to grow and to follow these trends for sure.

We now have a question from Tainan Costa from UBS.

Given all the scenario in Rio Grande do Sul and the floods, I wanted to know what is going to happen the next few quarters? Or are we expecting something similar? Is it going to also impact the consolidated margins of the project as a whole? Is there going to be a change in the final numbers?

Thank you for the question. Well, in Lake Victoria, we don't think there is going to be any further consequence in terms of expenses and costs and also with the end of this project in this first semester. As for Lake Eyre, I think Eduardo has talked about the sales that we have. We're going to start very soon, and we're going to also recognize the results for Lake Eyre. Now in June, to be more precise, we will continue with some of the foundations. And from then on, we'll also see everything that has been sold. So the quarter was not as great as we wanted for Lake Victoria, I think there was an impact due to that delay/the quality of what we were receiving in the construction but we've been able to fix that. And from now on, I think the future is very positive. I don't see any costs rising. I do believe that we're going to have good results from Lake Eyre, and that had a sales performance that has been higher over last few quarters, higher than Lake Victoria. Well, yes, we have to keep in mind that it's because -- it's due to the floods. It's due to what we had last year, of course. We wanted to make sure that we would have the construction being delivered within the timeline. I don't see any changes in margins right now.

Our next question from Diego Almeida from Citi.

I have a couple of questions. First one is a follow-up of the first question about property costs. It was much lower, as you mentioned before. But I want to understand if you can give us more details about changes in provisioning or supply, I think that would be good for us to have an idea. And also about expenses with earnings with shares actually. I wanted to understand what might happen from now on, what your projection is?

Of course, Diego to answer your question, we didn't have any changes in the matrix for provisioning this year. Of course, because of what we've seen historically, that had an impact on the matrix. But about the shares, we put that on the report. We had the approval of a new program in April, that is still going to impact this line, but we didn't have any further expenses due to that in this quarter. It was approved in the second quarter. So we had good stability.

And now we have a question from Marcelo Motta from JPMorgan.

If you could tell us what the M&A scenario is now in the sector, we've seen this expectation of sale of an asset, very close to you with relevant numbers in the market. And it's not excellent. We know that you had also a sale last year. So what do you see in terms of opportunities, even though the macro scenario is changing right now? I wanted to know if you're looking at any possible asset or any M&A in mind.

Marcelo, what assets are you referring to? I'm not sure.

I think it's [ Iguatemi ] that signed they're going to sell their stakes at marketplace. I think that was the asset I was referring to.

Well, look, we see the figures here, the opportunities. And it's very far from what we had last year. Look, it's very important to remember here that the company had an important movement, I would say, an important move actually. We purchased 15% of the company, and we're very happy with what we've done. I think everyone here is very happy about it. It was difficult, it was a tough negotiation. It was in parallel with everything else that Multiplan does, all the developments that we had last year. I've seen conversations about participation in malls that are in places that are much worse than ours, and we're talking about very low caps. But -- so I don't see myself buying at those prices. And as for selling, well, we don't need that. We're very balanced. I think it could happen if we have an offer, anything that is not relevant for us, it could happen. But future will tell, time will tell. So I just wanted to remind you that we're coming from an acquisition of 15%, as I mentioned, of all of the assets of the company, the cap of 12. So for us, it's a lot.

Thank you very much. This concludes our earnings conference call Q&A. We would like to invite anyone that still has questions to contact the Investor Relations department. I will turn it over to Mr. Eduardo Peres for final considerations. Mr. Eduardo Peres, you have the floor.

Thank you very much. I would like to thank everyone joining us today. I am still very optimistic despite all the turbulence that we've seen with tariffs around the world. I do not believe that's going to affect Brazil. I believe we're going to continue to prosper, as has been the case in the last 2 years. And I see very solid growth for the company from now on. Once again, I would like to thank everyone for joining us, all the investors, consultants, the press. Thank you to each and every one of you and see you next time.

Thank you very much. This concludes Multiplan's First Quarter 2025 Earnings Conference Call. [Statements in English on this transcript were spoken by an interpreter present on the live call.]