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

Good morning, ladies and gentlemen. Welcome to the earnings call regarding the third quarter of 2026 of Multiplan. We have with us the Executive Directors of the company. And we inform everyone that the presentation of the results is available for the download on the Investor Relations website of the company. The forward-looking statements that are done during this earnings call regarding the business perspectives of the company, projections and operational goals, financial goals are based on beliefs of the Board of Directors of Multiplan and based on information that is currently available to the company. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and premises. These are regarding to future events and they depend on circumstances that may or may not occur. Investors should understand that general economic conditions and industry conditions and other operational factors might affect the results of the company and might lead to results that are different from those expressed in the forward-looking statements. We'd like to give the floor to Mr. Eduardo Peres, CEO. He will start the presentation. The floor is yours.

Good morning, everyone. Thank you for joining us for another Multiplan earnings call. The third quarter conveys an important message about how we think about and build value. These results do not begin here. They are a consequence of our initial strategy started in 2023 when we decided to accelerate a new investment cycle all across our portfolio combining expansions, revitalizations, tenant mix enhancement and disciplined capital allocation. During this period, we operated in an environment of uncertainties, high interest rates and a lot of volatility yet we still implemented our long-term vision delivering solid results and creating value for shareholders. We ended the quarter with sales growing and we have a high occupancy across all our shopping centers. The 7 expansions completed over the last 3 years are an essential part of these results. We do not view these projects as just an increase of gross leasable area. When we see them as opportunities to modernize assets. And MorumbiShopping for example is a great reference. The expansion is enhancing the assets appeal and contributing for the performance of the shopping mall as a whole. Other assets that have received recent investments also show a positive evolution such as Parque Shopping Maceio. This year alone we have 4 expansions. Besides MorumbiShopping Shopping, we have new areas in BariguiShopping and BarraShopping. To conclude the cycle: on November 18, we will deliver the 10th expansion of ParkShopping at Brasilia. All of this transformative project in the portfolio is followed by more and more efficiencies at the company. We are preparing Multiplan to use AI in a responsible way, practical and guided towards results, both at the offices and enhancing our shopping centers for our clients. Along this direction, Multi, our app, expands our relationship and engagement with tenants and creates new points of contacts with them. The growth of the app shows that we are advancing down this path. Over the last 12 months, over 82 million engagements with the platform. Just in 2026 alone, over 1 million benefits redeemed through the relationship program. There's still much to be done. We continue to be confident in the future supported by the quality of our assets, the dedication of our team and the solidity of Multiplan. Regardless of the challenges, we will always be there and we will remain focused on what is within our control; well execution, investing with discipline and generating value at the long term. I would like to thank our employees for the excellent work; our investors, analysts and journalists for the ongoing dialog. Thank you very much.

[Operator Instructions] Next question, Fanny Oreng Avino from Santander.

I have a question and it goes along the lines of the initial considerations that you've done, Eduardo. I think they added a lot of value to the portfolio and there is another 4 potential expansions to come. I wanted to understand how you would see the possibility of keeping these expansions given that the scenario changed a little bit -- the initial scenario that the company -- is different from the initial scenario that the company expected. So I wanted to understand capital allocation. What do you think about maybe distributing more capital to the shareholders once we are in the process of deleveraging. You closed the quarter with 1.7x debt to EBITDA. So the cash generation will continue to be strong, we expect that for the next quarter. So I want to understand how is your mind in growth and capital distribution for the shareholders?

Thank you for the question, very pertinent. Let me start by the end. So capital allocation and distribution of dividends. I don't see any problem in distributing more than what we already do. Nonetheless, for the dividend distribution and the development of projects, I need to understand in which world we're going to live from now on. We just had an event. We had the beginning of the government, fourth government of President Lula. We don't know who is the economical team. We don't know anything. So we need to know what is the level and the economic conditions that we're going to have for one thing or the other, distributing more dividends or getting back these 4 projects or the other one closed. So it depends on the rhythm of the music.

Our next question is Ygor Altero, XP.

Along those lines of the higher interest rates and less appetite for investments, it makes sense to reduce the CapEx. So what would be more discretionary on your opinion on what you can do to adjust this CapEx lower? And getting some color on your idea on the other parts that were published on CBS and IBS taxes. Was that aligned with what you expected? And do you think that the tenant has the capacity to absorb it?

Ygor, thank you for the question. Let me start by the IBS/ CBS taxes. No, it's not aligned. I didn't think that it would be so high. I think nobody saw it, Armando. We were working with the 28% base, maybe 30%, but nobody knows where that's going. So another uncertainty of the current moment. You asked me of what's our mind to develop and allocate and developing projects. Well, we are always going to prioritize the philosophy of the company, which is the shopping mall experience. Now as long as that's executable, I'm not going to try and build or do a project that I want to do. A shopping mall is formed of tenants so I need to develop, I need to have an economic climate that is positive where the tenants also want to grow. I cannot do this by myself. So it might happen that we're not going to have this moment of doing more projects, yes. It might be that we're going to have to operate the ones that we've done and I'm very at ease to do this. The presentation shows the last 3 years. We're going to develop Brasilia in November. We're going to have 50,000 meters of JBL of expansion. So I'm sure of everything that we wanted to do and improve in the experience of the malls have been done. If this company has to be 5 years without getting a nail on the wall, 0 problem. Shopping malls are revamped. When we had a potential for expansion, we did. What's going to be now in the future? I'm not a magician. We're going to have to wait and understand what are we living in the future. I could be irresponsible and give you scenarios. I have no idea. Government will change or will continue as it was, but we need to see where this boat is headed.

Well, my comment is -- well, the first question of Fanny. First of all, you have a CapEx that is reduced because we didn't launch a project at this moment. The 4 expansions that we indicated in the last quarter. So naturally even if it's good commercialized, you're going to have a reduction of the CapEx completed by this calendar. So then we prepared for a moment of uncertainty. That same doubt that we have looking forward is the same one as a year before. Well, at the beginning of this year, I said a few times, well, there's going to be a moment of election that things can change. We're going to prepare for this moment and let's be ready. So what do we do? We finished the capital commitment and we have Golden Lake, which is self-financed. We don't have a capital commitment, which -- another point. Even liability management is very little. We prepared to have this freedom that Eduardo did to do this and it might be a scenario of stress and we might have another investment. But I think to be ready is always important. It's not that I need to do something to continue alive. No, I've lived this situation and I'm never going to live again. My sense of responsibility where I am obliges me to be very cautious. More so, to complement what you said on the modernization that we've done on the malls. Another data that is published, we don't pay attention at the long term. Between 2023-2026, the period that Eduardo commented that we announced, this revamping cycle we changed 206,000 square meters of stores on the turnover of stores plus the expansion, 9,000 stores changed in this period. Besides the expansions, we've done 4,500 events and this doesn't change. This work will continue. Will continue to improve. Me and Eduardo, we always say there is no limit to do the best. The important thing is to know whatever you find of the shopping mall experience will reflect in the results of the company. This is a maxim. You can take it, it's a truth. It works. It cannot be a company that delivers a service that is bad and it has a wonderful results. That doesn't last. It's not the DNA of Multiplan.

Our next question is Gustavo Cambauva, BTG.

Two questions. First is if you can tell us on the setup cost with these changes, the tax next year and the 5x2. Did you have any discussion? Well, thinking about the suppliers and service providers, do you have an increase of cost for next year? And the second question is in regards to understanding the dynamic of the end of the year during Christmas. How is the company preparing for that? Sales are doing strong even though we're having retail that is more difficult, but your portfolio is doing very well. So I wanted to understand if you think if we need to do another campaign investment for marketing? How do you see the tenants being prepared for -- are you more excited for? We wanted to understand how is this expectation for the fourth quarter.

Well, Gustavo, talking about the operational part and doing the additional investments. We are very invested as every year. Christmas, you start your program in January. So now when you're here, there's nothing else to do. You start to open the Christmas decorations now. On the 1st in Rio de Janeiro and other places, you're going to have the launch of several campaigns and the decorations with its attractions for each mall. I don't see the need. We're always deeply invested in this. I don't know. It seems that today in Rio, it will be the only Christmas tree in the city. I hope that it's not. I want to have others, but it's a very important event, which is about having the launch of the Christmas tree. So we are very careful with that since the beginning of the year. That is very scheduled. Every event and special dates, especially Christmas, that we know that has a fundamental importance for the survival of the tenant is scheduled in advance. So it's very much worked and invested. It's going to be very strong in this Christmas. My expectation, taking into consideration what happened in the election, is that we're going to have a very strong end of the year. How the next year is going to handle? I don't know. The end of the year is going to be strong because of everything that we are investing and that inertia of the consumption. Well, the launch gives this additional push for the shopping malls that we've just opened, the expansions. You have a big part on BarraShopping, another one on the 18th in Brasilia. So that will give a push for the shopping mall new brands. So the first part of the question, if I understand correctly, you are mentioning the effect of the changes 6x1, 5x2 in the condominium cost. If it's that, let me tell you the following. My biggest concern with the increase of the condominium cost is with the tax reform. Obviously the scale changes have their inherent cost, but we can handle them very well. But we need to see the effect of the tax reform, what can be used as credits or not and the channels. So I wanted to bring you -- we saw in the report on Page 22, 23 and 26. We saw the property expenses adjusted by inflation over the last 5 years. So the property expenses specifically in condominium, it dropped in real terms 42%, 41.7%. And the expenses of the company in the same period in real terms, it just grew 2.7%. So we're talking about the first period of the prepandemic. So see how much efficiency we saw, which helps us to absorb these things that appear naturally. There's always going to be something. The increase was the increase of the cost of energy. There's always something. This is what we want to create. We want to be sustainable. To summarize: occupancy cost, which is 40% in the third quarter of 2022 is 13% now because the sales are growing faster, specifically the cost of rent and the condominium cost. So this is what we want to create a healthier environment in the shopping mall for our tenants. The delinquency is negative in 9 and 3 quarters. It's very high even with this amount of stores that we have with the opening and the expansion. Gustavo, I hope that I answered.

Next question is Pedro Perone, Bank of America.

Two questions. First, PIS and COFINS tax. So the results of the last quarter. In the last quarter, you show a solution of the [ 144 ] where we question the credits of PIS/COFINS on the allocation and why that are permanently for allocation. So I wanted to get the context of how is your discussion on this recognition of the credits? Does that change the credit? And while that is not decided, how can you think that versus PIS/COFINS? And the second one is expansion. We saw MorumbiShopping almost 19%. If we include the effects, this is the level that is normal for the expansions for BarraShopping in this fourth quarter and the next quarters. Just to get a bit of a notion for the pipeline expansion.

Pedro, just to correct here. Well, this is Multiplan team not Iguatemi. First of all, in regards to the appointment, we had a second consultation which doesn't affect the accounting that was done by the company in the second quarter of this year. So in regards to the expansions, each expansion -- if the question is correct, you are mentioning about the return of the expansion comparing with Morumbi. So every expansion is going to have their own specificity. Every expansion, we're going to need other investments infrastructure. So you get [indiscernible]. We build the machinery. So each of them are going to have a dynamic and they're going to help us reflect with this expansion and especially how long can you grow? So what type of operation do you want? If it's something that pays more, something that pays less? Now that doesn't change the direction. You know that we like to use this as the best reference. There is always a discussion of the inputs. We can use one, we can use the other. But we need to leave the capacity of the company to allocate every real that we get here has to be very well reflected. So even though I can say that we're not going to have the same losses of Morumbi, well, we have the best capital allocation well thought out for our shareholders.

Next question, Andre Mazini, Citibank.

Well, also 2. The first about same-store sales. We had an interesting number, 3%. The clothing apparel a bit worse than the rest so being affected by BarraShopping, but even the satellite apparel is not so strong and at the same time, the margin in clothing apparel increased as a proportion of GLP. So how do you think about the services, the articles that are doing better in the margin? Of course that's going to be for the long term. Well, for the short term, it shouldn't dictate the mix. But thinking structurally, how do you see in clothing apparel? And the second on the Golden Lake, we saw that Itau Bradesco increased the real estate interest rate. So what do you think about Lake Baikal and the other phases that are going to be delivered before Baikal with a higher cost? Does it change your mindset to launch more space? And can you finance the buyers with the -- since you have a balance, it's deleveraged as it was commented, is that a possibility that you consider?

Andre, let me start by Golden Lake. The good news of Golden Lake is that we don't have any more investments in common areas to be done. Investments in common areas that was supposed to be done in 10 years, is done. So from now on, we're going to select what we're going to launch, when we're going to launch. So we have 2 expansions or 3. You have Lake Victoria, small stock. You have Lake Eyre, which is being built with a smaller stock so it doesn't worry us. It's 80-some percent sold. And you have Baikal, which is at the beginning of the launch. So what can happen? Baikal is not moving forward, it didn't sell enough. So we're going to do the project. But the important thing is I'm not going to invest and continue to build without the enterprise being sold. So how we're going to develop it is going to depend on the scenario that we're going to face in the future. To finance the company, we do it for a long time. Finance the buyer, the company. Well, this is a path that we're exploring. So the part of the mix of shopping malls, we chose -- the consumer chooses who stays in the mall. To get more or less an activity, again it will depend on how the retail will look at the future. We see a big trend for food and experiences. But whenever we have a good brand, we want to bring it close because from these good brands; whether if it's cosmetics, whatever. So our mind is more connected to good operators than for a specific sector that we want to cover or not. So there is a technical question. We have the same-store sales. So the stores that exist for another year. So today, we cannot say that apparel decreased 1.6% just because there was new areas that got in with the clothing apparel that are doing well. There are some stores that we cannot generalize and more important. For years, the increase of GLA has been in food courts and this quarter has been the same-store has dropped. So we cannot just get a conclusion from this indicator.

Our next question is Tainan Costa, UBS.

So I wanted to hear from what you can open on the sales of October. You had the third quarter on August, September. If you can show what is the trend for October? Should we wait for something more close by for the third quarter or is it going to be close to September? And do you see any changes in trends in regards to the mix of same-store sales per category? And the second point is the working scales 6x1. There was a little bit of how your team operates. Should we wait for change? And how is the discussion on the work of the shopping mall should that be impacted by the 6x1 scale?

Well, the scale. We've done that math. We've done it with the possibility of the existence of this condition and the shopping mall absorbs well without increases of costs for the tenant and in the operation. I always defend it and I thought that we should have more flexibility of scale, but the current rule is being worked out, but the cost -- the expectation for October. We see 5% of growth of sales. Here comparing with the base with a lower effect with the increase of sales that is generated and the shopping malls continue to sell well and I believe that this trend will continue until the end of the year. The same point of the stores opening and besides the events that we commented for Christmas. Well, more than choosing where we want to work, we choose the good operator where this guy is going to stay in the shopping mall. They're going to do a great work because if it's not sales, it's services. You need to understand the head of the consumer to create the tenant with -- and we're building the shopping mall with the tenant. So this is a pillar of our strategy, which is Multi. It's more tenants asking to understand who goes to the mall, who goes to their store, what do they want? So this is a way of success, helping the tenant to do well.

Our next question is [ Juliana Bayla ], Itau.

Now I wanted to ask on the line of cost of property. We saw an effect of PDD increasing and excluding the PDD, even the cost of property have dropped year-on-year. So I wanted you to detail on those lines, if there was an impact, the one-off that we shouldn't expect for the future? And what do you see on PDD and if there is any impact on this quarter?

Juliana, thank you for your question. The PDD or not, we're just going to understand. Last year it was less than 1.9 and was less than 1 and it increased and it continues negative. As we said in the presentation, 9 and 3 quarters, we had a prediction that is negative with a delinquency that is negative. We also had comparable with requests that are difficult to follow because last year we could recover a lot of expenses that had the property expenses below. But everything considered, the margin is above 91% of margin NOI, which is exceptional. So it shows that even though there is a higher growth of expenses of properties, the margin is very high due to this comparables. This is the best opinion.