Multiplan Empreendimentos Imobiliarios SA

BOVESPA:MULT3

Earnings Call Transcript 2023-Q1

[Operator]

Good morning, ladies and gentlemen. Welcome to the first quarter 2023 conference call for Multiplan. We have here today, Mr. Eduardo Kaminitz Peres, Mr. Armando d'Almeida Neto, Mr. Marcello Barnes, Mr. Vander Giordano, Mr. Hans Melchers and Mr. Richard Svartman. Today's live webcast and presentation may be accessed through the Multiplan website at ir.multiplan.com.br. [Operator Instructions]

Before proceeding, let us mention that forward-looking statements that are based on beliefs and assumptions of Multiplan's management and on information currently available to the company. They involve risks and information that is currently available to the company. These are not guarantees of performance. They involve risks, uncertainties and premises. These are related to the forward-looking statements and depend on circumstances that may or may not occur.

Investors should understand that general economic conditions, macroeconomic scenarios, industry and other factors may affect the results of the company. And such results may differ materially from those expressed in such forward-looking statements. Now I'll give the floor to Mr. Eduardo Peres who will start the presentation. Please, the floor is yours.

[Eduardo Peres, executive]

Hello, everyone. I would like to thank you for your presence, all the investors here in this call. And I would like to go over a few issues, a few details of this first quarter. So once again, I'm going to comment the excellent results of Multiplan. And this year, we have the trend of strong growth regardless of the external challenges. The company has presented 2-digit growth in sales, reaching BRL 4.6 billion, increasing 16% in regards to the same period of 2022. Our gross revenue has grown 9.9%, totaling BRL 498,600,000.

And the revenue rent has come to the total of BRL 384 million so 8.8% growth. And we generated an EBITDA of BRL 357 million, 21% higher than the first quarter of last year. FFO, BRL 261 million, almost 24% higher. Our net income has reached the standard of BRL 207 million with a growth of 20.8%. And I would like to highlight, if you compare the beginning when we were listed, since we were listed 16 years, the net income has increased 20x from BRL 10.2 million in the first quarter of 2007 to BRL 207 million, which is what we see in this quarter growth.

These results have allowed us to invest ever more in our strategy, which was always to invest in our own assets and improve them. If you just take into consideration this first quarter, we've invested BRL 215 million in CapEx. And we have 2 expansions ongoing, about 18,000 square meters of the total area and [Indiscernible] totaling 52,000 square meters of expansion of a total of 200,000 square meters that we still have the capacity to grow. Also, we continue to invest in improvements, adapting to the new trends. And at the same time, we diversify our mix of tenants stores proactively.

Now we've registered this period, 115 stores [indiscernible] just in the first quarter. And if we just take into consideration the first part of the first quarter, we got to 170 contracts signed besides the investments. We've returned BRL 75 million in interest rates over the -- on our own capital, and we kept the low leverage, which helps us to seize the opportunities that make sense for us.

Digital innovation. Now in that context of digital innovation, the super app, Multi is growing. And it's -- well, it's at the 4 million downloads registered thus far. Another news. The parking is done now through the reading of the license plate. Now the registration is done through Multi. And so the app is another tool that will facilitate the lives of the consumers, of our clients, so we can communicate better with them, and we can get to know their habits. So we can improve the operation due to everything that we are just mentioning.

We are interconnecting the digital and physical world to facilitate life and positively transform the experiences of our users, of our clients while also generating value for our tenants. Corporate governance. Well, finally, for the first quarter in this year, we've increased our corporate governance area with the creation of an internal audit. And we are perfecting our whistleblower channel, and we are increasing the transparency and the controls. We're always promoting the best practices.

Now, Last but not least, I would like to thank all of our employees, our tenants for the excellent work that was done this quarter, the shareholders, investors, analysts, the journalists. Thank you for your trust deposited on Multiplan. Now let's go for the Q&A. Thank you.

[Operator]

[Operator Instructions] First question.

[indiscernible] Bank of America.

[Unknown Analyst]

I want to talk about the occupancy cost. Well, it's consistently higher than what it did in the past. I have 2 questions, actually. Could you discuss how much of that increase is due to the stores that are more open in the portfolio? And how much is the space becoming more expensive in regards to what it was? Second question. The occupancy trajectory, how do you expect it, given that there is a normalization of the number of the level of growth that we've seen already in April?

[Unknown Executive]

Thank you for the questions. Well, we've had -- you reminded me of a commercial. Tostines, which is basically a biscuit here, to do an analysis. We've invested a lot in this quarter. For example, in events, 257 events that have helped increase our sales. And it caused -- well, if you see the cost, they are aligned. So you invest your cost, there is an increase, of course, and you have a basic cost, but you lower the occupancy cost in that sense. We are getting into a very healthy environment of the occupancy cost.

Where you have a negative inflation, while these accumulated, you have the selling at 16% in this quarter. And I would like to remind you that since we started to get to the range of the pre-pandemic numbers, which was in the fourth quarter of '21, it was 5 consecutive quarters still delivering growth in sales, double digits. It's very strong. And now we are seeing everything in the world is normalizing. And in Brazil, it was even quicker.

But we can see that the inflation is at a threshold that is much lower, so it makes it a lot more easy. We have the strategy for investment via campaigns, improving our investments. We can talk about that. And obviously, we are growing through expansion. Our expectation is, therefore, very positive that we will continue to grow our revenues and consequently, the -- that will impact the occupancy cost and which will be lightened load -- the growth in sales will lighten the load as well. I hope I answered your question.

[Operator]

Our next question, [Antonio Castro], Santander.

[Unknown Analyst]

Two questions actually. We would like to understand how the rent readjustments will be, given the ITT negative conversion? And if we can explore a bit more on the drivers of the sales of VilaOlímpia Shopping in Sao Paulo. They were very positive. Could you comment on that?

[Unknown Executive]

All right, Antonio. Thank you very much. Thank you for your questions. Readjustment in rent. Well, when it's negative, then it's 0. So when you have -- well, the next year, it won't be negative, so you do not readjust with the inflation, so it's 0. The next year, the inflation is 3%. This year is 1% readjust by the difference. That's the way that we do the renewal of our tenant contracts.

VilaOlímpia, it's -- you can see recovering very well in sales over the rest of the quarter. There are things that are structural, of course. The region of VilaOlímpia is a unique region that has primarily had an influence of offices and that [Indiscernible] time changed, and it is still changing. You can see the number of people that chose to live close to the mall.

Well, during the period of pandemic that the people were working from home, there was a negative effect, of course, in the shopping mall. But now we have a positive effect in the shopping mall. And more than that, it's a mix of -- changing of the mix, the commercialization strategy, what the tenant can offer, so we can bring a great growth of VilaOlímpia not just in this quarter but in many, many quarters. If you take into consideration the last 12 months, VilaOlímpia has grown almost 47.1%, 35% just on this first quarter.

On the long term, which I think that we are always seeking and this is the right path, we can see a region that is very strong, very dense, good revenue. And for us, it is a privilege. Well, it's in a good income neighborhood. Well, a terrain such as the one, such as ours in VilaOlímpia you don't find the size of the [Indiscernible] needed for a shopping mall that magnitude anymore.

[Unknown Analyst]

Well, thank you very much, and congratulations on the results.

[Operator]

Our next question, Pedro Lobato.

[Pedro Lobato Garcia Fernandes, analyst]

Two points. It's the dynamic trend on the revenue. It was lower than what we expected. So how is the issue of the benefits of the quarter? Second, I want to understand the project that is being built of the stock to land bank, how -- what can you tell us this quarter? Are you going to keep apprised and be patient? Or you're going to be more flexible looking at the next phases?

[Armando Neto, executive]

Do you mind repeating the first part of the question? It was very low.

[Pedro Lobato Garcia Fernandes, analyst]

On the first question, the first part of the last question. The first question about revenue. I just wanted to understand how that dynamic unfolded. It's lower than what we expected of the benefit on the quarter. Do you have any low-hanging fruits that can be used in the next few quarters?

[Armando Neto, executive]

All right. In regards to the taxes of our revenue, these are cumulative credits that we got through tax, and this is lower than what's possible in the next quarters. Well, the Golden Lake actually, this is a challenge for the real estate. And the -- this is impacting financing. We have high interest rates. There is credit that is more restricted, so it's natural that you have a deceleration.

In Porto Alegre, during the summer months, it's seasonal when people leave the cities. What we have here is not the selling of a building. We have an enterprise. It's not about what's going to happen in the next 6 months. It's the next 10 years. This is what we are pursuing. So I can tell you that the civil real estate, we can see construction booming. We can see the works that are impeccable. They're growing strongly. All the infrastructure is being -- is growing, and this is a very attractive enterprise.

Our expectation is that the sales will regain strength as we see more access to real estate financing and lower cost and economy and have a clear direction and not all the uncertainties in the first quarter. Well, it impacts definitely the market is cyclical, but I believe that we're going to reach the prices that are projected. And the INCC has increased the rate. So since it's our own building, we can build our own buildings, so we can negotiate and capture the inflation reductions in construction. So we can have that margin, we can work [Indiscernible] better.

[Operator]

[Indiscernible] Costa, UBS.

[Unknown Analyst]

Congratulations on the results. Wanted to know the homework that you've done in regards to the trend when we have a break of the satellite stores. Well, the second line is how can we see tax advantages with the larger stores? Well, you'll have more rent per square meters, but they attract also more public. So can you tell us more about the mix? And what is the ideal point for the main stores and the satellite stores?

[Eduardo Peres, executive]

This is Eduardo. The work with the larger stores or smaller stores, it all depends on what you can do or cannot do. It doesn't depend on a lot of our will. I would like to make the whole [Indiscernible] satellite. At the moment that you are living today, you have a crisis of big stores [Indiscernible]. You cannot occupy big spaces because there was the event of the Americanas [Indiscernible]. And also the credit for these stores is much more difficult to access. It would be ideal for us to have a balance of 50-50, which is what we have in all the shopping malls. Yes, that's what's happening. There are -- there's a lot of demand. It's much more difficult for you to occupy the larger spaces because the investment is much higher. The companies are better structured. But at the same time, you have a retraction of the credit for this segment. So we have to take into consideration the Lojas Americana event that happened in the first quarter that they occupied the large space. So I don't know if I answered directly all your question.

[Unknown Analyst]

No, no. Yes.

[Eduardo Peres, executive]

And just to complement, we worked out with an internal rule of X percent of the main stores and then the satellite stores, so it's natural, but we are not pursuing an objective. [Indiscernible] commented, you have the opportunities. If you take [Indiscernible] satellite, there is no big stores or crown jewels, per se. So it's not a lot of what the company wants, but it's what market is ready to do.

[Operator]

The next question is from Ygor Altero from XP.

[Ygor Altero, analyst]

Well, the first one is the following. We're looking at some possibilities on growth for the company, considering that you have -- you had a low leverage level for the first semester. But I wanted to know what the occupancy rate is for the next few months, especially for the second quarter. And what's the dynamics for the entire year as well.

[Eduardo Peres, executive]

Hello, Ygor. This is Eduardo Peres. Thank you for the question. Well, to answer your question, I would say that we still believe in the approach of trying to improve what we already have. I mean, there are opportunities. We're going to look at those opportunities, of course. That is actually our responsibility to do that. But we will have to analyze the situation and see what elements are most important. We've grown so far by defending our assets. I mean, a company that is not able to defend its asset is a company that isn't going to work, not going to grow. So it's important to think about revamping our products to make it grow. I mean, as for the occupancy rate, I think it's been a bit more difficult in the first quarter than what we expected. We would have liked to have better results, but now we're focused on improving the occupancy rate, not because of the expenses per se, but because of the lack of satisfaction for people going to a mall. I mean, people will go to a mall to try and see new stores, to see things happening to [Indiscernible]. So that's why it's very important to have the occupancy rate. Multiplan makes [Indiscernible] -- we're not just a building that is waiting there for people to enter. We're making things, that's what I'm trying to say. Ygor, in March, the occupancy rate was the same as December. So we know that the first quarter is not really seasonal. There is usually an effect in that regard. But the end of March, [95.2] is similar to the fourth quarter rate. So that is very satisfying. And then I was saying, this is something that we have to do on a daily basis. We need to continue to work on occupancy rate. We're looking at 2 different operations. And we're improving the portfolio. So I hope I answered your question, Ygor.

[Ygor Altero, analyst]

Thank you, Armando. Thank you, Eduardo. That's great.

[Operator]

Our next question is from Daniel Gasparete, Itau BBA.

[Daniel Gasparete, analyst]

I also have 2 quick questions. The first one is the following. I agree with what Ygor was saying about levers, about -- I wanted to know more about the distribution of capital, thinking about growth, dividends, et cetera. If you could tell me more about that. And also, I wanted to know about your perspective on the second semester. I mean, maybe you're going to open a little bit below 10%. I wanted to know for next quarter, what you're going to invest mostly on, if you could tell me more about that.

[Armando Neto, executive]

Hello, Daniel. Good morning. Thank you for your question. About the levers, we've had the lowest leverage in the past 10 years, 1.54 and as you were mentioning, what Ygor mentioned before, I wanted to say the following. In the first quarter, we invested BRL 215 million, BRL 216 million, basically. So along 2022, it was BRL 194,200,000. So I mean, we were able to reduce leverage, even though we had a higher investment level. So I think this is a very good thing. We're looking at a higher interest rate, and this gives us a great advantage. I mean, we have more efficiency. We're reducing expenses. And if you read the newspapers, you know that it is very difficult to do. So it gives us an opportunity to use our money in a way that we think it's appropriate. What we usually say is there are 3 pillars: investments, whether it is in terms of acquisitions or expansion or utilize many market place. The second pillar would be returning that money to investors. And we've done that in terms of volume and it's been a record. I mean, last year, it was higher than in 2021, which was better than 2020. So we've been able to make that go up, that can go up. And the third pillar would be thinking about progression. I mean, we're talking about a very good strategy now for the next quarters. And within that leverage, we're working on, we'll continue to work with these 3 pillars for cash flow or the use of our cash flow. We've always told you that we've been very comfortable with this threefold growth. We would like to have fourfold growth. We usually like -- at these times, we usually like a lower leverage. And also, we like to have the opportunity to change our direction if it is necessary. And also another thing that was mentioned here. Sometimes, we also have to think about improving our portfolio, especially when the situation is difficult. Now as for the second quarter, I'm sorry, I forgot the exact figures here. I'm not going to be able to tell you the numbers, but we're working to promote our malls. And I mean, it is a volatile situation. Of course, it's difficult to have a perfect forecast. But what we're doing is here at the company, we're organizing ourselves in a way that we can generate more value for our tenants. So we're trying to manage on a daily basis intensively. We're trying to do that perfectly to make it better for our tenants. We had a record in the first quarter, and we have a lot of plans for the future ahead of us. We have everything planned for the entire year. We're looking at very good projects. What intensively really. And this is what you have to do in tough situations. I mean, if we had a country that was growing on an accelerated rhythm, that would be easy. We would just follow along. But in this case, we're looking at turmoil in a way. We're looking at different directions, and we need to be very assertive, very efficient in our management. That's our main strategy. We want to generate more value per square meter, and that's what we have been doing over the past few years. You think about when we were listed and ever since we were listed, we've been growing steadily.

One more thing that my colleague was mentioning here, we had sales up 6.1% up to end of April. And anyway, just think about this perspective. Sales in April 2022 versus what we had in April 2019 had a 33% change. I mean, we opened Jacarepaguá, of course. But even if we remove that, it's 29.9%. So we grew 6.1% versus [Indiscernible] 29.9%. So if you think about 2019 versus 2018 that was pretty much a similar number. So we're looking at something similar in difficult times with different interest rates. So I think it is very positive for the future. It's hard to say what retail is going to look like in the future. But we are managing the best way we can to create a better atmosphere for the future of retail. And that's why we're bringing the app, Multi. We are bringing so many functionalities, as well to help tenants have a better performance.

[Operator]

Our next question is from [Indiscernible] from Citibank.

[Unknown Analyst]

Congrats on the results. Well, I'm looking at some of the results that were a bit lower against the previous quarter. There was a growth of 9% year-on-year and the other lines were double-digit growth. So I wanted to confirm with you the effect of Americanas on this line. I mean, if you could tell us more details on that, talk about the perspective for Lojas Americanas that you have. If we could maybe start thinking about a change in that trend.

[Unknown Executive]

I think you're right. That's where we have the effect of Lojas Americanas. I think it would be tough to tell you more about that because of confidentiality. So what I can say is this is part of the game for lack of a better word. I mean, we sometimes see a few operations such as home and office going a little bit up and down in the curve. So there are many factors that you can't really say that have to do with the performance of that term segment. It is also a change in mix. There are some other factors at play. And there is also the comparison base. I mean, I'm sorry, I cannot really answer your question because of confidentiality.

[Unknown Analyst]

No problem.

[Operator]

Our next question is from Marcelo Motta with JPMorgan.

[Unknown Executive]

Hello, Motta. Are you there? We cannot hear you. Maybe we'll continue with our next question. Marcelo Motta's connection is not good.

[Operator]

Okay. Now Jorel from Goldman Sachs then.

[Wilfredo Jorel Guilloty, analyst]

I have 2 questions. First one has to do with margins. I see margins are better, and we've seen some acceleration. And now we're looking at a different dynamic in [GDPR] and IPCA as well. I think the curves are usually a little bit better [Indiscernible]. So I wanted to know more about the margins, what the perspective is. Do you believe we're going to see these margins sustained or not? What do you think is going to happen? And also, I have another question here, which is more of an overview. I think things are going very well for the company. We see that trends are good, et cetera. But I wanted to know what your main concerns are right now for the future. I mean, what do you think would be concerning in terms of the short, medium and long term? If you could share that with us.

[Unknown Executive]

Hello, Jorel. I'll answer the first question and I will think about the second question as I do that. It's really an important overview or an important perspective here. Well, in terms of margins, it is true. We had better margins across the board. I mean, ROA was better, EBITDA also better. According to the projections of the analysts, it is going up. It is much better than before. So I mean, yes, overall, very good margins as was presented, and that's thanks to the diligence of the company. It's because we're not just focusing on revenue, but also expenses. If we think about expenses, that was a very factor. There was a reduction in overall expenses. Also, failure to pay was much better. That also had an impact. We had some provisioning, but still we had very good results. I think again, we were focusing not just on improving or having better revenue, but also reducing expenses. And of course, we're not just going to stop working on all these elements. We're going to continue to focus on all that. That's one of the main strategies. I think that's clear. And we may have a different inflation rate, maybe lower. But I think anyway, that's going to be positive [Indiscernible] sustainability.

[Eduardo Peres, executive]

Well, this is Eduardo Peres, Jorel. I am going to start answering the second question, if that's okay?

[Wilfredo Jorel Guilloty, analyst]

Yes, of course. Go ahead.

[Eduardo Peres, executive]

You were asking about our concerns at Multiplan in short, mid and long term. I think we're aligned with everyone else. I mean, we are concerned with the macro situation. I mean, what may -- what we may have in terms of tax reforms or what's going to happen with the inflation rate, with the growth of the country. So I think external factors, basically, nothing internally because internally, the company is doing well. We're investing in our assets. We are expanding such assets to have better performance in the future.

[Wilfredo Jorel Guilloty, analyst]

Excellent. Yes, I agree.

[Armando Neto, executive]

And by the way, when I think about what Eduardo was saying as the following. We are a company that is always trying to focus on the future and do things in a better way. I think we're looking at the long-term growth. So if you think about our report, if you see your report, we have good history of performance ever since we were listed. And if you see the results, they're maybe not great results in the short run, but we are looking at a very good steady growth in the long run ever since we were listed. So I think part of that has to do with the constant concern that we have of doing better of managing things the best way. Do we have Marcelo Motta with us now?

[Operator]

Yes. Marcelo Motta is now connected, JPMorgan.

[Marcelo Motta, analyst]

Okay. I have 2 quick questions. One has to do with expansions. Eduardo was saying in the beginning that there are 4 projects. I don't know if he can maybe give us more details, what kind of triggers so that we'll see you and also when the announcement is going to be made. And thinking about those macroeconomic concerns, if we think about the VAT reform in Brazil, do you think that's going to have an impact with tenants? Of course, we don't know the fees. We don't really know how it's going to work, but I wanted to know what you've been thinking about that, what the possible outlook is and how to mitigate any possible risks?

[Eduardo Peres, executive]

Marcelo, this is Eduardo Peres. Well, it's true. When it comes to taxes, tax reform, we're just estimating, I would say, what might happen. We don't really have a [Indiscernible] project. There are many conversations going on, and we hope that's not going to reflect the economy as a whole. Hopefully, that was trying to happen and Brazil will continue to grow. Our expansions, we have been thinking about [Model B]. We think about [Indiscernible], we don't really know when. It's going to depend on the demand and it's going to depend on when there is more pressure for [Indiscernible] complement the atmosphere environment of the mall. There is no specific trigger to say, well, we're going to be with this or that. I think the main trigger here is capacity of investment. We don't really want to go beyond limit of investments per year. So this year, we're developing [Parque] and Diamond Mall. We are looking at 2 large expansions that need our attention. So I'm not going to just go ahead and launch such expansion if I am not able to consolidate these 2. [Indiscernible] is for most to be able to grow and offer more in that regard. As for when, it is hard to say because we really need to have mature operations and deliver what we're doing right now to then continue, okay?

[Marcelo Motta, analyst]

Okay. Perfect.

[Operator]

Thank you for all the questions. We will close now the Q&A session, and we invite all the participants that have any questions, they can get into the Investor Relations website or a department for further clarifications. Now Eduardo Peres, please, the floor is yours.

[Eduardo Peres, executive]

Thank you very much. I would like to thank everybody's participation, the investors that took part in this call. And to reaffirm our commitment with the investment, with the attention to the operation and management of our shopping malls. I would like to highlight our concern and the importance with the transparency of the company. Thank you very much.

[Operator]

The earnings call for the first quarter of 2023 of Multiplan is closed.