Operator: Hello, and welcome to today's Third Quarter 2026 Results Conference Call and Webcast. My name is Leslie, and I will be your event specialist today. All lines have been placed on mute to prevent any background noise. Please note that today's conference call and webcast are being recorded. During the presentation, we will have a question and answer session. To follow the conference online, please visit https://consorcioara.transmision.com.mx. The word transmission is with one S only. If you would like to view the presentation in a full screen view, please click the full screen button in the upper left-hand corner of your screen. Press the same button to return to your original view.
Operator: It is now my pleasure to turn today's program over to Alicia Enríquez, Administrative and Financial Director. Please go ahead.
Alicia Enríquez Pimentel: Thank you, Leslie. Good morning, and a warm welcome to our conference call on the third quarter 2026 results of Consorcio Ara. This call will be also transmitted via webcast, accompanied by a slideshow for visual support. With me on the call to discuss the results are Luis Felipe Ahumada Russek, Vice Chairman of the board, Miguel Lozano, Chief Executive Officer, and Felipe Loera, Chief Financial Officer. I want to alert everyone that certain statements and comments made during the course of this call must be considered forward-looking statements as defined by the Securities Litigation Reform Act of 1995. Consorcio Ara believes that such statements are based on reasonable assumptions, but there are no assurances that current outcomes will not be substantially different from those discussed today. All forward-looking statements are based on the information available to the company on the date of this call.
Alicia Enríquez Pimentel: The company is under no obligation to publicly update or revise any forward-looking statements as a result of new information that may become available in the future. As usual, at the end of our prepared remarks, there will be time for Q&A. We will wait until then to open the queue for questions. Results for the third quarter of 2026 compared to the third quarter of 2025. We are coming up on the close of the year with solid financial and operating results in line with the goals we set for 2026, confirming the positive trajectory we have maintained in the past few quarters. In the third quarter of 2026, total revenue amounted to MXN 2.58 billion, the highest level in the past decade, and 28.7% above the third quarter 2026 level.
Alicia Enríquez Pimentel: EBITDA was MXN 340.3 million, a growth of 14.2%, while net income came to MXN 199.8 million, remaining practically stable year over year. Housing revenues in the third quarter of the year totaled MXN 2.47 billion, a 33.2% increase over the year earlier period, driven by the sale of 1,763 homes, 28% more than the year before. The average price was MXN 1,403,000, 4.1% higher than in the third quarter of 2025. Revenues from sales of Middle-Income homes performed exceptionally well, rising to MXN 1.41 billion, a significant growth of 68.6% compared to the third quarter of 2025. Affordable Entry-Level home sales came to MXN 456.4 million, up 4.4%, while Residential category sales totaled MXN 604.5 million, up 3.9%.
Alicia Enríquez Pimentel: Revenues from other real estate projects, mainly from the sale of commercial land and shopping center leases, amounted to MXN 107.6 million and fell 27.6% from the year earlier level, mainly due to lower sales of commercial land. Looking at the sales mix for Q3 2026, Affordable Entry-Level homes contributed 17.7%, Middle-Income homes 54.7%, and Residential 23.4%, while other real estate projects accounted for the remaining 4.2%. Our operating margin in Q3 2026 was 8.8%, and the net margin was 7.7%, 230 basis points lower than in the same period of the previous year because of higher costs, an increase in the tax reserve, and a drop in financial income. The EBITDA margin stood at 13.2%. Between July and September of this year, free cash flow to the firm was slightly negative by MXN 27.3 million.
Alicia Enríquez Pimentel: Results for January-September 2026 compared to the same period of last year. In the first nine months of the year, total revenues, meaning housing revenues plus revenues from other real estate projects, came to MXN 7.17 billion, a 21% increase over the same period of 2025. Housing revenues totaled MXN 6.92 billion, 23% higher than in the first nine months of last year, corresponding to the sale of 4,903 homes, 10.6% higher. The average price was MXN 1,412,300, a year-over-year increase of 11.1%. Sales of Affordable Entry-Level housing between January and September 2026 totaled MXN 1.48 billion, 12.6% less than in the same period of 2025, mainly because we completed a development in Tijuana. As we mentioned in the previous conference call, we already have another development operating in that city, which began contributing revenues in Q2 of this year.
Alicia Enríquez Pimentel: The Middle-Income and Residential segments continued to perform exceptionally well in the first nine months of the year, showing double-digit growth. Middle-Income home sales totaled MXN 3.56 billion, an increase of 37.9%, and Residential segment sales amounted to MXN 1.88 billion, up 38.7%. Revenues from other real estate projects, mainly from commercial land sales and shopping center leases, came to MXN 249.9 million and declined 15.4% from the same period of last year, mainly due to lower sales of commercial land. Looking at the sales mix for the first nine months of 2026, Affordable Entry-Level homes contributed 20.5%, Middle-Income homes 49.7%, Residential 26.3%, and other real estate projects 3.5%. In the first nine months of this year, operating income totaled MXN 648.9 million, 12.7% higher than in the same period of last year. Net income was MXN 563 million, a 2.2% increase, while EBITDA came to MXN 964.7 million, up 14.8%.
Alicia Enríquez Pimentel: Between January and September 2026, the operating margin was 9%. The net margin was 7.9%, 140 basis points lower than in the same period of last year, primarily because of increased costs and reduced financial income. The EBITDA margin was 13.4%. Free cash flow to the firm in the first nine months of the year was positive by MXN 351.7 million, which comes to MXN 172.2 million after interest payments. Financial position as of 30 September 2026. At the close of Q3 2026, the balance of cash and cash equivalents totaled MXN 2.02 billion, 3.7% lower than at the close of the last year. As of 30 September 2026, accounts receivable totaled MXN 748 million, a 5.4% increase compared with 31 December 2025. Accounts receivable turnover was 29 days.
Alicia Enríquez Pimentel: Total inventories as of 30 September 2026 amounted to MXN 19.92 billion, a 2.8% increase over the close of the previous year. At the end of Q3 2026, cost-bearing debt came to MXN 2.64 billion, a decrease of 0.6% from the balance reported as of 31 December 2025. Short-term maturities, meaning debt coming due in the next 15 months, made up 64.1% of cost-bearing debt, and long-term debt, 35.9%. As we announced yesterday to holders of the ARA 23X note, which was set to expire on 25 November of this year, we will be paying that note off in advance of 29 October. We are deeply grateful to our bondholders for their trust. In this same month, we will be taking out a straight loan of MXN 1.2 billion. As of 30 September 2026, 64.2% of our cost-bearing debt consisted of sustainable notes.
Alicia Enríquez Pimentel: 17% was unsecured bank debt without real estate collateral, 10.6% was secured debt related to our shopping centers, and the remaining 8.2% corresponded to lease liability. Regarding our leverage ratios, cost-bearing debt to EBITDA was 2.06 times, and net debt to EBITDA was 0.48 times, which we think are very robust levels. The interest coverage ratio was 4.36 times, and if we base this ratio on coverage of net interest, meaning interest expense less interest income, 7.79 times. Net debt totaled MXN 619.9 million. During Q3, S&P Global Ratings reaffirmed Ara's long-term credit rating of mxAA- on the national scale, while HR Ratings reaffirmed its HR AA rating, both with a stable outlook. Both reports can be viewed on our corporate website, consorcioara.com.mx. Housing industry performance.
Alicia Enríquez Pimentel: According to Mexico's National Institute of Statistics and Geography, INEGI, as of August 2026, in annual terms, industrial activity grew by 3.6%, driven largely by the construction industry, which marked a 7.9% expansion. In turn, driven by the building subsector, which includes housing and industrial properties, with a 7.2% rise. According to data from the Unified Housing Registry, in the first nine months of the year, 334,574 homes were registered, a significant 114% increase over the same period of the previous years, driven primarily by the registry of homes under the Federal Housing Program, and 103,859 homes were produced, 8.6% higher than in the first nine months of 2025.
Alicia Enríquez Pimentel: Regarding mortgage lending between January and July 2026, which is the latest information available, based on data from the Secretariat of Agrarian, Land, and Urban Development, or SEDATU, Infonavit granted 103,312 loans for the purchase of new homes and increased by 3.6% compared to the same period of last year. These loans represented an investment of MXN 84.1 billion, 11.9% higher. The average size of a new home loan between January and July 2026 was MXN 814,000, an 8% increase over the same period of the previous year. FOVISSSTE, for its part, granted 8,019 loans for new homes in the first seven months of the year, 6.2% more than in the same period of last year. The investment in these totaled MXN 9.5 billion, advancing 21.8%.
Alicia Enríquez Pimentel: The average size of a new home loan granted between January and July 2026 was MXN 1.18 million, a 14.7% increase compared to the same period of the previous year. As for commercial bank home financing, in the first seven months of 2026, 50,905 mortgages were granted for the acquisition of new and used homes, a 3.3% reduction compared to the same period of last year. The investment in these totaled MXN 103.8 billion, 2.4% higher. The average size of a loan granted between January and July 2026 was MXN 2.57 million, a 5.8% growth over the same period of the previous year. In the first nine months of 2026, 61% of our revenues came from homes financed by Infonavit, 10.5% from FOVISSSTE, and the remaining 28.5% from commercial banks and home purchase without financing. Shopping centers.
Alicia Enríquez Pimentel: The shopping centers division also performed well in Q3, with revenues of MXN 144.1 million, a 5.6% increase over the same period of last year, while net operating income was MXN 102.3 million, 6.1% higher. Revenues in the first nine months of 2026 totaled MXN 421.5 million, a 7.1% increase over the same period of last year. While net operating income was MXN 292.7 million, a 6.3% increase. These results correspond to shopping centers that are 100% owned by Ara and are consolidated into our financial statements, as well as 50% of Centro Las Américas and Paseo Ventura, according to our stake in both properties, which are entered under the equity method. Total gross leasable area in our six shopping centers and the unicentros and minicentros was 211,872 square meters. The occupancy rate as of 30 September 2026 was 93.4%, a very competitive level.
Alicia Enríquez Pimentel: Public tender offer. On 29 September, we announced in a material event filing that our founding shareholders, Germán Ahumada Russek and Luis Felipe Ahumada Russek, intend to begin the process of launching a tender offer through a company they would incorporate. The offer would cover up to 100% of Ara's outstanding shares not already owned, directly or indirectly, by these shareholders or their subsidiaries. The proposed offer price is approximately MXN 5.63 per share. This represents a 20% premium over the volume-weighted average trading price at a share from the National Securities Registry or delist them from the Mexican Stock Exchange. As for progress on the transaction, the special purpose vehicle was recently incorporated. This will allow the founding shareholders to take the next step, submitting the filing to the National Banking and Securities Commission or CNBV.
Alicia Enríquez Pimentel: The board of directors has also tasked the Corporate Practices Committee, composed entirely of independent directors, with selecting an independent firm to prepare the fairness opinion. Following its review of the proposals received, the committee has chosen one of the three firms under consideration. The founding shareholders are confident in Ara's long-term potential and prospects. They also believe the purchase price offers a financially reasonable option for shareholders who accept the offer. The proposed price represents the highest level for Ara shares in just over five years. Conclusions. As we approach the close of this year, we will continue to aim at reaching the goal we set for 2026, maintaining the financial and operating discipline that has guided our strategy to date. The fundamentals of our industry remain solid, continuing demand for housing and a steady flow of mortgage lending.
Alicia Enríquez Pimentel: To conclude, I would like to share my view that we are going through a very significant time in Ara's history. First, because this past September marked the 30th anniversary of our listing on the Mexican Stock Exchange. Second, this coming January, we will celebrate half a century as a company. Along the way, we have sold around 407,000 units, which today are home to more than 1.6 million Mexicans. Five decades of doing what we know best and above all, what we enjoy the most, building homes and creating communities. We arrive at this anniversary with a presence in 16 Mexican states and 44 developments in operations, backed by a solid financial position and a long-term vision. We feel very proud of what we have built, but also very excited about what lies ahead and about continuing to create value for our home buyers, employees, and shareholders.
Alicia Enríquez Pimentel: Thank you, and we will now move on the questions and answers.
Operator: We will now start the Q&A session. We would like to take any questions you might have for us today. If you would like to ask a question over the audio lines, please enter star 8 on your telephone keypad. In case your question has been answered, you may cancel it by pressing star 8 again. If you have been listening to the webcast and would like to ask a question, you may type your question using the chat area located on the right-hand side of your screen and click submit. We will begin by answering questions from the audio lines, followed by those we receive from the webcast. The first question is from the audio lines from Mr. Enrique Cantú from GBM. Please go ahead.
Enrique Cantú: Hi. Good morning. Thank you for taking my question. It is about the EBITDA margin. Could you give us some color on which costs drove this pressure and whether this is the margin level we should expect going forward?
Alicia Enríquez Pimentel: Yes. Hi, Enrique. Thank you for your question. Well, as we mentioned, we have some pressure in our cost. It was because we have fixed costs in new projects that they are not still stabilized or with the level of revenues at this moment. Also, housing inflation is running above overall inflation. While obviously we try to pass those increases to sales prices, in some markets, we have to balance pricing with absorption, as raising prices too much could affect sales velocity. With the fixed cost of new projects, we are expecting a better performance in this Q4 to get back to around the 2026 level that we used to have. In terms of general expenses, I think we are in a good level. As we have mentioned previously in other calls, we have the administrative and operational structure to handle a higher volume of revenues.
Alicia Enríquez Pimentel: As revenue increases, we will achieve better margins through greater efficiency. In fact, for the first 9 months of the year, our expense ratio improved by 40 basis. For this quarter, we expect to improve EBITDA ratio to around 14%.
Enrique Cantú: Perfect, Alicia. Thank you very much.
Alicia Enríquez Pimentel: Thank you, Enrique.
Operator: Thank you very much for your question. Our next question is from Mr. Armando Rodríguez from Signum Research. Please go ahead.
Armando Rodríguez Díaz: Hello, Alicia. Nice to meet you. Thank you, everyone. Thank you for the call, and congratulations on this strong revenue results. My question is about the interest rate, particularly the mortgage rate environment, Alicia. As you know, we saw major movements in the fixed income market, particularly in the government bonds in the long-term maturities. How are you seeing the interest rate environment for your customers, particularly the mortgage rate side? That is my question. Thank you, Alicia.
Alicia Enríquez Pimentel: Yes. Thank you, Armando. Well, we think that at least for this year, we do not expect increase in the interest rate, talking about the mortgages. In fact, now, this interest rate is in a very good level, levels that we have not seen in the previous year. What we have heard is that it is highly probable that in the following year, yes, we are going to see an increase in the interest rates of mortgages. But in my point of view, it would not be significant. It would be around 100 basis points. And something interesting that we have seen in previous periods is that it does not have a significant impact in the mortgages. Is what we have seen. Maybe talking about Ara, because our Residential segments, we are talking about a price of a little more than MXN 3 million.
Alicia Enríquez Pimentel: I think it is not going to affect our revenues because of that.
Armando Rodríguez Díaz: Perfect. Thank you very much, Alicia, and congratulations again.
Alicia Enríquez Pimentel: Thank you, Armando.
Operator: Thank you very much for your question. As a reminder, if you have a question over the audio lines, please enter star eight on your telephone keypad. We have finished with the conference call questions and will now continue with the webcast questions.
Alicia Enríquez Pimentel: There are no questions, Leslie, so we can end the call. Thank you very much for your interest in Ara, and have a great day.
Operator: We have one final question from the audio lines.
Alicia Enríquez Pimentel: Okay. Perfect.
Operator: From Enrique Cantu from GBM. Please go ahead.
Enrique Cantú: Hi, Alicia. Sorry. I have another question about the development pipeline. What does this seven? Which regions and housing segments are you prioritizing? When should we expect these projects to start contributing sales?
Alicia Enríquez Pimentel: Well, definitely Middle-Income. For the following year, we expect to have around the same average price, that this would be MXN 1.3, MXN 1.4 million. For the following year, as we mentioned in our previous conference call, we expect to have in the first quarter of the following year, revenues from Mérida. Mérida is the new city where we are planning to have operations in the following year. We are evaluating some new locations, but at this moment, we are going to maintain operations in the same states and in the same cities.
Enrique Cantú: Perfect. Thank you very much, Alicia.
Alicia Enríquez Pimentel: Thank you, Enrique.
Operator: Thank you very much for your question. That was the last question. This concludes the Q&A session for today. Consorcio Ara would like to thank you for participating in today's conference call and webcast. You may now disconnect.
