Multiplan Empen Unsp/Adr

Good morning, ladies and gentlemen. Welcome to the first quarter 2023 conference call for Multipline. We have here today Mr. Eduardo Camnitz-Perez, Mr. Armando Da Almeida Neto, Mr. Marcelo Barnes, Mr. Wander Giordano, Mr. Hans Melker, and Mr. Richard Smartman. Today's live webcast and presentation may be accessed through the Multiplan website at irmultiplan.com.br. Should any participant need assistance during this call, please press asterisk zero to reach the operator. Before proceeding, let us mention that forward-looking statements that are based on the beliefs and assumptions of Multiplanes 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 four locating statements and depend on circumstances that may or may not occur. Professors should understand that General Economic Conditions, Microeconomic 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 Padisky. We'll start the presentation. Please, the floor is yours. Hello, everyone. I would like to thank you for your presence, all the investors here, 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 in this year. We have the trend of strong growth regardless of the external challenges. The company has presented two-digit growth in sales, reaching 4.6 billion reais, increasing 16% in regards to the same period of 2022. Our gross revenue has grown 9.9%, totaling 498,600,000. And the revenue has has come to the total of 384 million, so 8.8% growth. And we generated an EBITDA of 357 million, 21% higher than the first quarter of last year. FFO, 261 million, 23, almost 24% higher. Our net income has reached the standard of 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 20 times from 10.2 million Rez in the first quarter of 2007 to 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're just taking into consideration this first quarter, we've invested 215 million Reais in Capex. And we have two expansions ongoing, about 18,000 square meters of the total area, and Foreign Study 2 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 of stores proactively. Now we've registered in this period 115 stores subletted 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 75 million in interest rates over 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 four 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 or clients so we can communicate better with them and we can get, you know, their habits So we can improve the operation due to everything that we were just mentioning. We are interconnecting the digital and physical worlds to facilitate life and positively transform the experiences of our users, of our clients. Well, 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're increasing the transparency and the controls. We're always promoting the best practices. Well, 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.

We will start the Q&A session now for investors and analysts. Should you have any question, please type asterisk one, star one. If your question has been answered, you can type star two. The questions will be answered as they are received. First question, Illinical Data, Bank of America. Good morning. Thank you for accepting my question. I want to talk about the occupancy cost. Well, it's consistently higher than what it did in the past. I have two 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. Thank you. Thank you. Thank you for the questions.

Well, we've had, you reminded me of a commercial.

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 saw, if you see the cost there, they are aligned. So you invest your cost. There is an increase, of course, in your basic costs, 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, or at least 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 pandemic numbers, which was in the fourth quarter of 21, it was five consecutive quarters delivering growth in sales, double digits. It's very strong. And now we are seeing everything in the world is normalizing and 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 investments 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 that will impact the occupancy cost and which will be lightening the load. The growth in sales will lighten the load as well. I hope I answered your question. Yes, thank you. Our next question, Antonio Castruti Santander. Hello, thank you for accepting my question. Two questions actually. We would like to understand how the rent readjustments will be given the IGT negative conversion, and if you can explore a bit more on the drivers of the sales of Villa Olimpia Shopping in Zamballa. They were very positive. Could you comment on that? All right, Antonio, thank you very much. Thank you for your questions. Readjustment in rent. Well, when it's negative, then it's zero. So when you have, well, the next year, it will be negative. So you do not readjust with inflation, so it's zero. The next year, the inflation is 3%. This year is 1%. They readjust by the difference. That's the way that we do the renewal of our tenant contracts. Villa Olimpia, you can see Villa Olimpia recovering very well in sales over the quarter after quarter. There are things that are structural, of course. The region of Villa Olimpia is a unique region that has primarily had an influence of offices and that all throughout 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 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 Villa Olympia, not just in this quarter, but many, many quarters. If you take into consideration the last 12 months, Villa Olympia 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. A good revenue. And for us, it is a privilege. Well, it's in a good income neighborhood. Well, a terrain such as ours in Villa Olimpia, you don't find the size of the terrain needed for a shopping mall of that magnitude anymore. Well, thank you very much and congratulations on the results.

Our next question, Pedro Lobato. Hello, good morning everyone. Thank you for the presentation. 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 you to understand the project that is being built of the stock, the land bank, what can you tell us this quarter? Are you gonna keep a price and be patient or you're gonna be more flexible looking at the next phases? Pedro, Armando, do you mind repeating the first part of the question? It was very low. 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, the issue of the benefit on the quarter. Do you have any low hanging fruits that can be used in the next few quarters? All right, in regards to the taxes over 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 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 gonna happen in the next six 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 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 costs and the economy can 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. Since it's our own building, we can build our own buildings, we can negotiate and capture the inflation reductions in construction. So we can have that margin, we can work the lepers better.

Pedro? Okay, thank you. Next question, Diana Costa, UBS.

Hello, congratulations on the results. I wanted to know the homework that you've done in regards to the trend when you have a break of the satellite stores. Well, the second line is how can we see tax advantages for 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?

Hi, this is Eduardo. Work with the larger stores or smaller stores.

It all depends on what you can do, can or cannot do. It doesn't depend on a lot of our will. I would like to make the whole satellite. On the moment that you are living, today you have a national crisis. All these big stores, you cannot get, you cannot occupy big spaces because there was the event of the Americanas school film event. 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'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 Lodges American event that happened at the first quarter that, you know, deoccupied the large spaces. I don't know if I answered directly your question, but no, no, yes. And just to compliment, we worked on that with an internal goal of X percent of the main stores and then the satellite stores. So it's natural, but we are not, we are not pursuing an objective. As Eduardo commented, you have the opportunities. If you take Diamond Mall, it's just satellite. There's no big stores, no crown jewels per se. So it's not a lot. The next question now is from Igor Altado from XP.

Hello, good morning. Thank you for

Thank you for the opportunity to ask you a question here. Well, the first one is the following. We're looking at some possibilities on growth for the company, considering that you had a low leverage level for the first semester. But I wanted to know what the opportunity rate is for the next few months, especially for the second quarter. And what's the dynamics for the entire year as well? Hello Igor, this is Eduardo Perez. 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. 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 assets is a company that is not going to work, not going to grow. So it's important to think about Resembling our products to make it grow. 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 see it being a dynamic place. So that's why it's very important to have good occupancy rate. Multiplan makes things easy. We're not just a building that is We're not waiting there for people to enter. We're making things happen. That's what I'm trying to say. By the way, Igor, in March, the occupancy rate was the same as December. We know that the first quarter is usually seasonal. There is usually an effect in that regard. By the end of March, 95.2 is similar to the fourth quarter rate. So that is very satisfying. As Eduardo 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 two different operations and we're improving the portfolio. So I hope I answered your question, Edward. Thank you. Thank you, Armando. Thank you, Eduardo. That's great. Our next question is from Daniel Gasparetti, Itaú BBA. Good morning. Thank you for the conference. I also have two quick questions. The first one is the following. I agree with what Igor 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%, so I wanted to know for next quarter what you're going to invest mostly on. If you could tell me more about that. Hello, Danielle. Good morning. Thank you for your question. About the levers, we've had the lowest leverage in the past 10 years, 1.54. And since you were mentioning what Igor mentioned before, I wanted to say the following. In the first quarter, we invested 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. Reducing expenses. And if you read the newspapers, you know that this is very difficult to do. So it gives us an opportunity to use our money way that we think it's appropriate. What we usually say is there are three pillars. Investment, whether it is in terms of acquisitions or expansion or 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 could 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. Within that leverage that we're working on, we'll continue to work with these three pillars for cash flow or the use of our cash flow. We've always told you that with being 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, Daniel. 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 planned for the future ahead of us. We have everything planned for the entire year. We're looking at very good projects. We're working intensively, really. And this is what you have to do in tough situations. I mean, if we had a country that was growing 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. If 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 of 6.1% up to the beginning of April. And anyway, just think about this perspective, sales in April 2022 versus what we had in April 2019. 33% change. I mean, we opened Arc Jacare-Pavois, of course, but even if we remove that, it's 29.9%. So we grew 6.1% versus on 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. Thank you.

Have a great weekend. Our next question is from Hugo from Citibank. Hello, everyone. Good morning.

Thank you for the opportunity to ask you a question. 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 Lajas Americanas that you have, if we could maybe start thinking about a change in that trend.

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 down in the curve. So there are many factors that you can't really say that have to do with the performance of that certain segment. It is also a change in mix. There are some other factors at play and there's also the comparison base. I mean, I'm sorry, I cannot really answer your question because of confidentiality. No problem, thank you.

Next question is from Marcelo Loto, JP Morgan. Hello, Mata. Are you there? We cannot hear you. Hello, Mata. You can unmute your microphone. Maybe we'll continue with our next question. I think my telephone connection is not good.

Okay. Now, Jor-El from Goldman Sachs then. Thank you. I have two 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 than GPD. I wanted to know more about the margins, what the perspective is. Do you believe we are 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. What do you think would be concerning in terms of the short, medium and long term?

If you could share that with us. Hello, Gérald.

I'll answer the first question and I will think about the second question as I do that. It's really an important overview, an important perspective here. Well, in terms of margins, it is true. We had better margins across the board. I mean, Harloway 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 reducing expenses. If we think about Omol's 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. That's also connected with sustainability. Well, this is Eduardo Perez-Durrell. I am going to start answering the second We were asking about our concerns at Multiplan in the short, medium, long term. I think we're aligned with everyone else. I mean, we are concerned with the macro situation. I mean, what we may have in terms of Thank you.

Oh, and by the way, when I think about what Eduardo was saying is 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. If you think about our report, if you see our report, we have a good history of performance ever since we were listed. And if you see the results, there may be 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. Thank you, Jarell, for the question. Do we have Marcelo Mota with us now? Yes, Marcelo Mota is not connected. JP Morgan. Hello, good morning. Hi, Marcelo. You may ask your question. Okay, I have two quick questions. One has to do with the expansion. Eduardo was saying in the beginning that there are four 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 important impact for 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.

Hello, Marcelo. This is Eduardo Perez.

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 fixed or a solid proposition. I mean, there are projects, there are many conversations going on, and we hope that's not going to affect the economy as a whole. Hopefully, that's what's going to happen, you know, and Brazil will continue to grow. For expansions, we have been thinking about modem B, we've been thinking about Sao Caetano, Jundiaí and Maceió. We don't really know when. It's going to depend on the demand. It's going to depend on where there's more pressure for stores to complement the atmosphere, the environment of the mall. There's no specific trigger to say, well, we're going to begin with this or that. I think the main trigger here is We don't really want to go beyond the limit of investment per year. So this year we're developing. We're looking at two large expansions that need our attention. So I'm not going to just go ahead and launch such expansions if I'm not able to consolidate these two. 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 department for further clarifications. Now, Eduardo Perez, please, the floor is yours. 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. Thank you. The earnings call for the first quarter of 2023 of Multiplan is closed.