Multiplan Empreendimentos Imobiliarios SA

BOVESPA:MULT3

Earnings Call Transcript 2023-Q2

[Operator]

Welcome once again to the earnings call regarding the second quarter of 2023 of Multiplan. We have here with us Mr. Eduardo Kaminitz Peres; Mr. Armando d'Almeida Neto, Mr. Marcello Barnes [indiscernible]; Mr. Hans Melchers, and Mr. Richard Schwartzman. We'll inform you that the presentation of the earnings call is ready for download at the website ri.multiplan.br. [Operator Instructions] Before continuing, I would like to clarify that any forward-looking statements that might be stated during the earnings call regarding the business, the company and projections and operational goal are based on beliefs of the Board of Directors of Multiplan's Board of Directors based on information available as of now. They are not a guarantee of performance, and they involve uncertainties and premises. They are regarding to forward-looking statements events in the future, things that might happen or not. So macroeconomic conditions, industry conditions and other operational factors might affect the results of the company and might lead to results that are materially different to the forward-looking statements. I would like to give the floor to Eduardo Peres who will start the presentation. Please, the floor is yours.

[Eduardo Peres, executive]

Good morning. Thank you very much for everyone that is here. It is a great pleasure to be here with us . Today, we will start with a quarter that was exceptional for the company. We reached BRL 5.2 billion in the quarter, an increase of 6%. In regards to the same quarter '22. When we see the growth, the advance in June was already 7.4%. And to our great surprise, July has been an exceptional month going back to the 2-digit growth and until the 25th of July, we measured and we were above 10%. That is a great surprise. It is a positive indicator that makes us believe that we are going to continue to grow in the future. Well, the company has had a growth of BRL 247 million in this quarter. So, this is an - we are looking for efficiencies, and this is the result of that. Everywhere, over the last 12 months, we have over BRL 800 million in revenue - 33.8% higher than 2022. I believe that this is one of the key things of the company. It is an extremely satisfactory number. Occupancy rates, we reached 96%. We are constantly seeking new tenants, and we realized that over the last quarter, this they are searching for optimized space as we were - we had a little bit of a slowdown, but people, brands, optimize space want to go back to Brazil and work in Brazil. So, this is good for our expectations. 75 stores. Over 75 stores. New stores. 42,000 in land bank, we continue to rent very strongly. Our digital platform, the multi-app it's evolved and added new functionalities, taking the experience of the mall to our customers. 4.4 million downloads since its inception, 15 million accesses over the last 12 months. And we are here talking about the access of the mall Well, access Multi without - well, to the parking lot will be installed in most malls. We will not have the entryways anymore. So the consumers will have 2 ways of paying. You register in the multi-app and then you will have there a lot of benefits and discounts. And then you get automatically out the mall or you physically or your parking ticket to -- directly to Multiplan. I believe that this will bring less friction, more fluency and it's better for the company as a whole.

Expansions. Let's continue with our growth strategy. 7 expansions, 2 undergoing. Briefly, MorumbiShopping, Maceió, Sao Caetano, Junciai, and we have added Brasilia . For those of you that do not know the capital of the country. This year we, well the ParkShopping is 40 years old. We are going to have a great event there. And this is the biggest GDP in Brazil. It's a city that is ever-growing. 70,000 meters of ABL and that will go through improvements. And we have that in most enterprises. I wanted to highlight what are we doing At ParkShopping Brasilia, well, it's almost reconstruction. We've gone through the pandemic. It was a shopping mall that had the movies and we know what happened with that activity during the pandemic we managed to revitalize things. And today, we got a bank, to a moment where we have over 90% rented. So revitalization is key and an indicator of the malls and you can see the gross lettable area. And now BRL 26 million in revenue just in this quarter. BRL 40 million just over the last semester.

Well let's talk about real estate since we talked about the ABL or gross lettable area. We have discussed in several cities -- well, in all the malls that we operate in Curitiba, Ribeirao Preto here close by, we have the land bank of BarraShopping even. We have real -- we have several real estate enterprises and have Golden Lake more focused right now, and this is what we are developing. But with improvement of the market, we will launch more enterprises of them, such as that. We would like to highlight a project. We have several initiatives in the community level and I would like to highlight one from BarraShopping. BarraShopping, Rio de Janeiro has a program from Multiplan that was created by a former collaborator, employee in 2006. Here, people can study and includes the high school secondary education in a free way, tenants, employees, everybody can study.

This program already reached in 100 people. People are - well anybody can take part. And we want to take these programs for every [indiscernible] is installed in every mall is a logistics issue of the people that install that service, we can take this to the other real estate the other equipment. We should do that soon. We would like to have that installed in the future. Well, this is a quarter that is very strong. That is very good for us and reinforces our strategy for growth for the future. We started the year with some doubts but now we have a space for growing with more speed and in more directions. Thank you very much, thank you everyone that is listening today. Let's open for a Q&A. Thank you.

[Operator]

[Operator Instructions] First question, Elvis Credendio from BTG Pactual.

[Elvis Credendio, analyst]

2 questions on our side. First of all about sales. You talked about the introduction that the sales in June improved in comparison to the previous months [Technical Difficulty].

[Operator]

Our next question is from Fanny Oreng from Santander.

[Fanny Oreng Avino, analyst]

Congratulations on the results. Well, I have 2 questions. First of all in regards to Multi -app. I wanted to understand more on the revenue budget, there is others? Where is exactly, that is, Multi is generating that revenue? How do you see? What are the opportunities in the Multi-app. Because before it was something that was simply servicing the client better and now we see that this is an app that can have an upside for the company. So that's my first question. Question second. Eduardo talked about expansions. I wanted to understand, in regards to the timings of the expansions. It would be nice to understand that. Thank you.

[Eduardo Peres, executive]

Well first of all, first question you asked about the Multi-app. We have a few opportunities. We're using the monetization tool of Multi, but that's not the main objective. The main objective is to take - well, to facilitate the lives of - make life easier for the users and have more usability of the app. People are taking part of the process. This is growing. And we do not -- we're not focusing on monetization. Here the idea is not monetization, it's to create actually - our idea is to create a database. That is important for the company so that you as a customer - The company can see where the mall is going and we can leverage on the information of our customers.

The second question is the timing of the expansion. Well thinking out loud, possibly we are going to launch between 3 to 4 expansions over the next year. I imagine that we're going to deliver Diamond Mall and [indiscernible] until the end of next year. And we are going to launch Morumbi, Maceio and Brasilia end of this year and so on and so forth. The idea is not to do all this expansions in order in the market. Otherwise we are going to have a decrease in value because of the amount of stores in the market. So that's the train of thought. Does that makes sense?

[Operator]

Our next question is from Elvis Credendio, BTG Pactual.

[Elvis Credendio, analyst]

Sorry, I dropped off the line in the middle of my question. 2 questions on our side. First of all, sales. July, you commented that there was an acceleration in comparison to the second quarter. Could you explore this better assets that's been growing more in the segments that have been catching your attention? And also the expectation for the growth in the second semester would be nice. So the second question, same-store rent, which you mentioned that was above the record historical record. So it would be compatible to keep this growth rate with the same store that you are presenting? And what are the levers that are triggering this growth?

[Eduardo Peres, executive]

That's -- thank you very much. Thank you for your question. Well, I wanted just to complement the previous question. Fanny, one way to monetize, we mentioned over the last call, it's important that we -- well, we have the payment of the parking lot. You remember the booth where people were working, and now we are substituting this by the app. This is just one of the several examples of operational optimization that we are doing right now. And we are improving not only revenue with that, but we're improving our capabilities. So we saw that in the middle of June, there was a change in standards. It's improving in July. We have had a very good July over the last 25 over the first 25 days -- there are several factors for economy. But what I can say on my side is that we the first semester, several events in the mall, and we have an extensive schedule.

So we want to bring the people to the mall. People can be together, creating a sense of community, and that will also improve the sales. And with an overview of the growth of the GDP over 2%, you can [indiscernible] incorrect with the numbers. There is also the FTTS release there is a lower inflation, interest rates are better. So our vision is optimistic. And also, we are increasing the occupancy rate. The number of scores are a record for our tenants for - So this is positive for us to continue with the operational efficiency and decrease of expenses in regards to the same-store rent is high. And we have the real growth, and we have a long record of 15 years 13.5%, 3.6%, it's a bit higher. And it shows that this is not a performance Well, just for the pay of delivering good results in real growth, and we can bring better operations. And there is an incredible gauge that is happening. It would be -- well, it's better than the inflation is decreasing. Does that make sense?

[Operator]

Our next question is from Ygor Altero, XP Investments.

[Ygor Altero, analyst]

Congratulations on your results. 2 questions. First, to understand the expansion of the occupancy rate that was very strong. We also have another detail that has to be added, but it seems that the tax reform doesn't impact the tenant so much. Do you think that -- and the second question in regards to Golden Lake. It seems that there is with a decrease in the curve of interest rates, there is a positive impact. Do you have any appetite of increasing the dynamics with a more favorable interest rate?

[Eduardo Peres, executive]

Let's comment on what you mentioned. Very important which is the tax load in the tax reform, I am certain that if we didn't have the discussion, well, the uncertainties that will happen, of course, we have -- that's the break of everyone as -- so as you start to clarify the horizon independent of what will happen and what will not happen. I think that the growth in sales, the store rent will increase. And in the beginning of the year that impacted us very strongly. And now people start saying, well, it's not -- not goes, as I imagine, and you start to have trust where it's supposed to be. Is it where we want it to be. No, there are many doubts -- and we managed to do an investment. Well, we have the 4 first buildings that we launched at the end of 2024, when we have products almost ready to launch that some consumers have recurred, and we believe that we should do some sort of launch in 2024 in real estate.

[Operator]

Next question, André Dibe, Itau BBA.

[André Dibe, analyst]

So 2 questions. First, the capital structure. Given the continuous trajectory of reduction in the leverage, I wanted to understand how do you evaluate the capital allocation of the company besides the opportunities that you've mentioned on the expansions. There would be better for the capital distribution and also in the macroeconomic scenario, would be -- were there development in the greenfield? And if positive, where do you think that there would be more demand to receive projects? And the second one, occupancy cost, how we have the trajectory in the future with a scenario where the sales are going to grow on a [indiscernible] so what is -- well, with the occupancy cost normalizing lower standards and how would the promotion fund be working in this appointment? [Technical Difficulty]

[Operator]

Excuse me, ladies and gentlemen. Let's wait for the reconnection of the speaker. Ladies and gentlemen, you may continue.

[André Dibe, analyst]

So you can hear me right?

[Eduardo Peres, executive]

Yes.

[André Dibe, analyst]

Did you hear my question?

[Eduardo Peres, executive]

I heard it. Sorry. I was talking about expansions. Expansion. Once again, we have a very good record based on growth and expansion, the expansion as a function, not only taking more services and offering more benefits for our customers, but the impact in the whole is very big. So we are very excited about the expansion and these 2 effects, you complete, and then you work with the whole and then you increase profitability and much more services for everyone. I - with what I have seen, I've realized that the involvement specifically of July is that we continue to look at benefits, we never stop looking again. I don't have a specific region or think to talk about, but we are always open to -- as the sales grow, then we will continue to develop the Greenfields.

[Armando Neto, executive]

Armando here also and the question, if you look at the capital allocation -- we have a slide on that on the strategy for shareholders, which is to do the reminding of the shares and getting money and investment, BRL 940 million allocated recently. So if you compare it to any cash generation metrics, there is a big growth in regards to -- if you compare to last year, the strategy of the need to deleverage last year is much more than just the great results and strong growth in the company and a bigger margin inefficiencies, which are consequences of this leverage. So these are the expansions. In regards to the occupancy cost, there is we are preparing ourselves for the events. There were 4 events, and we have a schedule for the semester. -- you gather the money first, so you can prepare for the event [indiscernible]. So it is a natural considers of this cost but there is an environment of growth in sales that is growing very fast because of the rent that's adjusted over time. And one this is our concern to the occupancy costs. And we are always grid to help the tenant to -- and this will not change in the future. The important thing. Do you have any more questions, André?

[André Dibe, analyst]

Nope, you answered.

[Operator]

Next question. Victor Tapia, UBS.

[Victor Tapia Migliorin, analyst]

First one that I wanted to talk to you in regards to costs and expenses. When we look at the expenses of property, we see occupancy with the marketing expenses in the land bank. And looking at the presentation, given that June we have an of, which is already a bit higher than the average occupancy. So -- are we going to have the expense way the properties are going to draw and how do you see the marketing expenses, what can we imagine from now on? And also in regards to G&A, we always have lower than the net revenue in the second semester. So how do we see this point of now. On the second point - second question. Also in regards to other revenues, if you can comment with us and give us more opening on what triggered the growth of other revenues, please?

[Armando Neto, executive]

Thank you for the questions. You ask me a lot of questions anyway. Marketing. Marketing in the past had a growth, for example, [indiscernible] the shopping mall 2022, we opened in November '21. So there was a lot promotion, events, marketing, when we've had an impacted growth of the enterprise, but the expense lines, they're very much controlled. If you look at the expense, is 5% in nominal terms, nominal terms in regards to last year, 4.6%. 5% is the ideal and this was very positive. And the expenses of property expenses, which are significant, are reducing as the location increases and so we are very optimistic that the company is well directed. We are always enjoying -- we foresee areas infrastructure, qualify, improve. This is a part, but it's not an expressive change. And there isn't a significant change in terms of eh. Well, in regards to other revenues, the -- that's traditionally the shopping mall that this quarter is specific. There was a monetization, which is a very expressive part of the app, of course. So that's why that line was higher than what you expected in the past.

[Operator]

Next question Pedro Hajnal, Credit Suisse.

[Pedro Hajnal, analyst]

I wanted to understand the turnover. As you mentioned, it has a higher level than the historical record. Can you talk about a very proactive management? So I wanted to understand what is the proactive management commercial level? And maybe there was a pressure on the side of the company of closing operations that didn't make sense, and then we can substitute them by other. And at the same time, I wanted to see with the new contracts, there is a differentiation with the lower inflation scenario. So there is the levers of real growth or any one for negative growth.

[Armando Neto, executive]

I wondered you -- well, the active management that we do when we talk about that, we do not -- we do not escape vacancy. And I think that the substitution is healthy because who chooses who stays in the mall is not us. We can even choose who gets in, but those that stay are the ones that go to the mall. So you make a choice and then you go with the public that goes there, and then you have to change I see that with it's good for the enterprise, and this turnover is happening at this level, may be higher than in the past, but we never had problems to change anymore. We have had several stores that's stopped operating and leaving the country and you're finding a solution for everything. But once again, taking into consideration, an improvement and experience for the people that asked go to the mall. You asked us about a technical question, the rental contract. How the contract is changing and we adapt the contracts through the new realities? Specifically, we are always adopting and we are keeping the basic clause that bring more protection and comfort against inflation. Thank you. Have a nice day.

[Operator]

Next question is from Jorel Guilloty from Goldman Sachs.

[Wilfredo Jorel Guilloty, analyst]

I have 2 questions. The occupancy rate. You saw a great improvement -- so when I see the average, well, the historical record is pre-covid at the average. I wanted to know, does your goal that you want to go back to the 98% pre-covid, what would be the time frame for this to happen? Second question. The turnover has increased a lot. And as you say, we are increasing the occupancy rate. So we need to understand the rent. How should we think about the rental and the square meter of the new contract versus what you have now at the mall? These are materially higher anything that you give us would help.

[Eduardo Peres, executive]

Eduardo, thank you for the question. We want to go back to a pre-pandemic level. And talking about numbers and timing, right? Well, we are looking and for the maximum occupancy because it's not, well, we have that expense when the first one goes to the mall and you see that there is this and that, it's more than finance. You're not [indiscernible] of the possibility of the people to use and consume and use the service. Our -- we want to have the maximum occupancy until the end of the year. There are some bold goals on the team, the commercial team, they've done an incredible work -- everybody is I did, and we will continue to have to work with that. We have the rent, and we have the records of the company. And we don't have to go [indiscernible]. No, that's not our mindset. And just remember that the decreased inflation, the rent is really affected by it.

[Operator]

Next question André Mazini, Citibank.

[André Mazini, analyst]

2 follow-ups. First of all, the change in stores, 4.8% of the total debt, but you commented that it was driven by the supermarket, which was the big one in BarraShopping. So, for the number of stores that we are [indiscernible] was the all-time high because of ABL or was a big tenant. That was the first one. The second one, with the deflation and negative GP that the whole year GP will be negative and 2.7% to confirm the understanding that if it continues to be negative one more time, it's negative for a little time and the impact is positive 5.6% in the second quarter, but if its negative for the rest of the year until the beginning of [indiscernible] a negative -- so we will have positive consider decrease in inflation and other contract, but then you need a water [indiscernible] to complete for the future. Could you give us details?

[Armando Neto, executive]

Okay, a number of stores. You got us well talking and off the top of my head, the ABL was very high. As Eduardo has commented, and we are very happy, the commercial activity is very strong, and it was under that we have the reforms it's much easier to work with this. And it makes us very excited looking up ahead, not only with the quantity but the quality. This is very positive and it reflects in sales that we hope that they are going to be better in the second quarter, as we said in the past. Was the GP negative as you look ahead, you have 4% I think it was 4.2%. My understanding is that one. You say you do not give the negative inflation, you keep the minimum rent as we commented before. Thank you.

[Operator]

Thank you for all the questions and your interest. We close now and we invite the speakers that have questions to get in contact with the Investor Relations department. I would like to give the floor to Mr. Eduardo Peres for the last idea. Please, the floor is yours.

[Eduardo Peres, executive]

Thank you very much. Thank you to all the investors that had the patience to be with us and hear our explanations. My final offer, we are very optimistic, optimistic for the future that lies ahead. We see the increase in the news and people purchasing. Good things are yet to come, better things are yet to come. Growth can be more evident than the first quarter. Thank you very much for this very successful call. Thank you.

[Operator]

The earnings call of the second quarter of 2023 of Multiplan is closed. Thank you for your participation and have a nice day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]