Melnick Desenvolvimento Imobiliário S.A. (MELK3) Earnings Call Transcript

Good morning and thank you for holding. Welcome to Melnick's earnings call concerning the results of the second quarter of 2026. I would like to point out that for those who need simultaneous translation, the tool is available on the platform. [Operator Instructions] We would like to inform you that this event is being recorded and will be made available on the company's website, ri.melnick.com.br where the complete material concerning this earnings call will be available. It is also possible to download this presentation by way of the chat icon in both Portuguese and English. During the company's presentation, all participants will have their microphones on mute. Following that, we will begin the Q&A session.[Operator Instructions]. We would like to clarify that any statement that might be made during this teleconference regarding Melnick's business prospects as well as its operating financial projections and goals are based on the beliefs and assumptions held by the company's management and on information currently available. Forward-looking considerations are not a guarantee of performance and involve risks, uncertainties and assumptions since they refer to future events and therefore, depend on circumstances that may or may not happen. Investors should understand that general economic conditions, industry conditions and other operating factors may affect Melnick's future outcomes and may lead to results that materially differ from those expressed in these future considerations. Here with us today are the Chief Executives of the company; Mr. Leandro Melnick, CEO; Mr. Juliano Melnick, CFO; and Investor Relations Director -- and Mr. Joelson Boeira, Administrative and Investor Relations Director. I will now give the floor to Mr. Juliano Melnick.

Good morning. I would like to thank everyone for attending Melnick's earnings call for the second quarter of 2026. First, let's go through the quarter's highlights on Slide 3 of this presentation. In the box on the left-hand side of the slide, we present BRL 115 million in net launches in the quarter and BRL 328 million in net launches in the first half year. In the next box, we highlight BRL 108 million in net sales in the quarter and BRL 408 million in net sales in the first half year. In the box to the right of this slide, we highlight the gross margin, excluding financing of 30.9% in the quarter with an increase of 1.1% compared to the same period of previous year. Net income of BRL 34 million in the quarter and a net margin of 18.6%, which is an increase of 3.8% compared to the second quarter of 2025. Moving on to Slide 4. We observed the BRL 122 million in gross PSV launched in the quarter, of which BRL 114 million is the net amount referred to the launch of the second phase of Square Garden project in Porto Alegre. In the first half year, we launched BRL 370 million in gross PSV and BRL 328 million in net PSV. On Slide #5 we have an image of Square Garden, a complex with 3 residential towers on top of a foot wall with almost 5,000 square meters located on one of the main corners of the city, and it is currently 53% sold. Let us now move on to Slide 6, where we address the company's net sales. In the graph on the left-hand side, we can see that SoS of launches in the quarter was 15%, while the SoS of inventory was 7%, which means an average SoS of 7% in the quarter. We made BRL 108 million in net sales, of which BRL 90 million was from inventory sales and BRL 18 million from sales of launches. In the pie chart on the top right-hand corner of this slide, we present the breakdown in sales by business unit, where 68% of sales were concentrated in our development unit and the remaining 32% in open, our Minha Casa, Minha Vida unit. Finally, in the bar graph on the bottom right-hand corner of the slide, when we look at the projects that will be delivered this year, 81% of the units have already been sold. With the entire second half of the year still ahead of us to reduce the remaining 19%. On the next hand Slide #7, in the chart on the left, we can see the company's deliveries. We are in the first half year BRL 553 million of the PSV was delivered, BRL 530 million of which in this quarter alone, distributed among 6 deliveries. On the right-hand side of this slide, we bring you some information about our operating capacity. We currently have 20 active construction sites, 14 in our development unit, 3 in our Urbanizadora unit, and 3 in our open Minha Casa, Minha Vida unit. For a total of nearly 4,500 units under construction. On the 8th slide, we break down the 6 deliveries of the quarter which are 87% sold on average. We highlight the 3 deliveries of the Nilo Square Complex with a hotel, compact and commercial units, 2 high-end towers and a shopping mall on the first floor. It is one of the largest PSVs ever delivered by the company and it's a commercial success. In Slide 9, we break down the company's inventory by year of completion. To facilitate the understanding of the company's finished inventory, the box on the left-hand side of this slide shows a doughnut chart that highlights the inventory launches prior to 2020 composed mostly of commercial units, which make up 89% of the inventory of this group, which amounts to BRL 102 million. In the bar chart, in the same box, we can see that we currently have BRL 1.291 billion in inventory, excluding the inventory launched prior to 2020. Out of the total inventory, only 11% of it, BRL 149 million is finished inventory from after 2020. Of the remaining inventory, BRL 33 million of it will be completed by the end of 2026. In the graph on the top right-hand corner, we break down the composition of our finished inventory worth BRL 251 million, of which only BRL 30 million is in Urbanizadora, BRL 117 million is residential, and BRL 3 million of it is leased. The oldest and least liquid inventory, the commercial units corresponding to office space, stores and hotels, amounts to BRL 104 million, of which BRL 44 million is leased or is from hotel units. It is worth noting that 29% increase in the finished inventory in the quarter is due to the high volume of deliveries that happened in this quarter. At the bottom of this slide, we demonstrate the decrease in the company's finished inventory in recent years. It was represented 30% of total inventory and now represents 18%, largely coming from our reversible lease strategy. In the next Slide #10, we discuss our land bank. In the box on the left-hand side of the slide, we see that currently we have BRL 4.6 billion in total PSV, BRL 3.2 billion of which is Melnick's share distributed in 26 plots or phases. Of these, about 24% have already been approved. In the next box, we show the composition of our land bank, where approximately half of it is in our development unit. In Slide 11, where we present the company's financial indicators, we can see in the graph on the top left-hand corner that net revenue in the quarter was BRL 271 million in the first half year. Net revenue was BRL 591 million, a 5 % increase when compared to the same period of previous year. In the chart on the right, we have the gross profit for the quarter of BRL 67 million with a gross margin excluding financing to production of 30.9%. In the first half year, gross profit was BRL 145 million, a 4 % growth when compared to the first half of 2025, with the margin growing 0.8%. At bottom of this slide, we show our net income of BRL 34 million in the quarter, and net margin before minorities' interest of 18.6%. In the first half year, net income reached BRL 59 million, a 12 % increase when compared to the same period last year with a 1.9% margin gain. Turning to Slide 12, where we demonstrate our capital structure, in the table on the left-hand side of the slide, we ended the quarter with a net debt of BRL 492 million. translated into a gross debt of BRL 818 million, mostly to finance the projects under construction, and a total cash position of BRL 326 million. Currently, total shareholders' equity is approximately BRL 1.2 billion to BRL 1 billion, and our capital structure represents a net debt-to-equity ratio of 40.3%. We highlight in the box below our consolidated cash position of BRL 326 million and the profile of our debt in which roughly 64% goes to financing and production. In the quarter, the company had an operating cash burn of BRL 39.6 million of which approximately BRL 25 million was directed to purchase of land. Thank you for everyone's attention. I would like to give the floor to Leandro, the company's CEO for his final remarks and then we will open for the Q&A session.

Good morning. I would like to continue our earnings call by explaining the evolution of our operating strategy. Historically, Melnick operates in the upper medium, upper and luxury segments in Porto Alegre. A few years ago, we began to study intensively a way to diversify our operations. As a first effort, about 4 years ago, we launched some small projects in the affordable segments, the only segment in which we did not yet operate in the Porto Alegre, which our intention was to test the smartness and slow and gradually learn how to operate in it and get through the learning curve with low risk. You can follow these figures on Page 14. After a few launches, we decided last year to take another important step in this journey. We created a company to operate exclusively in the affordable segment with our own brand, Open, and a dedicated team. Results came quickly. We went from BRL 71 million of the PSV launched in 2024 to BRL 196 million in 2025. Focusing on projects in Band 3 of Minha Casa, Minha Vida Program, where we see a relevant and profitable market for Melnick to position itself. Commercially, these launches were very successful, which proves that our initial thesis was correct. To continue this journey, we recently brought in Renee, a highly experienced executive, recognized for her competence, who arrives at Open with a very relevant background in this segment. The combination of our ability to create new businesses, the knowledge we have of the Southern region market and Renee's experience gives us confidence that Open will have a very positive trajectory in coming years. If Open represents our diversification by segment, Melnick Partners represents our geographic diversification. Melnick Partners is a real estate investment partnership company, which also started in Porto Alegre approximately 4 years ago, testing the thesis with low risk before any major movement. To overcome this learning curve, we are successful. We structured the entry into the markets of Sao Paulo and Florianopolis through a model of investing in projects of the highest standard and extremely well located in the class. Each partnership has its particularities, but they all respect some concepts of our business model. Traditional partners, with a proven track record and in high capacity to integrate quality and operating safety, contractual protection, and very judicious investments exclusively in land that allows for the development of projects that are highly desired by the market and so greatly reducing commercial risk. On Slide 15, we show 5 projects already underway, 2 of which have already been launched. It is important to analyze the location and size of these plots, which allows us to develop these high-quality and unique structures. In this model, our partners are responsible for the day-to-day operation, which provides operating security, while our expertise adds control and value to the investment business. On Slide 16, we highlight our businesses in the state of Santa Catarina. The lot on Jurere Beach is a rare large area asset which enabled us significant PSVs. We invited Dimas, a traditional and very well-structured company Florianopolis to be our local partner. It is a project with the potential to generate a great impact for our entry into the capital city of Santa Catarina. Still in Santa Catarina, we introduce you to O TEMPO, where Melnick participates as a consultant. It is a unique luxury development with a huge PSV, which brings together in a project signed by Norman Foster, a residential project and a Emiliano Hotel. It is certainly a future landmark for the region of Praia Brava, close to Balneario, in Camboriu. Acting only as consultants guarantees relevant revenue for the company without exposing now to the risk of developing in a region where we still do not have depth of knowledge of the real estate market. The practical result of this diversification is strategy because we have today Rio Grande do Sul, including the affordable segments to our portfolio to Open, and we gain the capacity, the optionality to allocate our capital in high-end projects that are well-located in Sao Paulo and Florianopolis. Over time, the diversification will provide us with the choice of the capital allocation, which will certainly be better results for our shareholders. From the point of view of financial structure, Melnick has always been guided by being conservative, solid and unleveraging, prioritizing the highest profitability for our shareholders. This discipline has translated into a policy of intensive dividend payout in the same year, with rituals 100% of profit paid out. Last year, we had an additional increase in earnings generated to our shareholders through capital reduction. It was precisely this solidity that has given us room to fund the investments needed for the diversification movement that we explained here. Investments in the purchase of land have increased our leverage with corporate debt reaching 16% of shareholders' equity and have added to production financing a total debt of approximately 40% of shareholders' equity. Even though these levels of leverage are still healthy, as of next year -- starting next year, the situation will begin to move back to the company's traditional capital structure, which is based on low leverage. We should see in our figures the return on investments made, the increase in the results from Open, which, when added to the maintenance of the results from the launches in Porto Alegre should increase our results and start a deleveraging curve. Our cash position should further be reinforced by a relevant volume of projects to be delivered in future quarters. And so we have concluded the initial investment cycle that allowed for the diversification of the company's operations, maintaining our strategy of being a solid company with a long-term vision and focused on the highest return for our shareholder. Lastly, I would like to thank everyone for their presence and for their continued trust in Melnick. Thank you.

[Operator Instructions] Let us now proceed. Our first question comes from Ygor from XP.

I'm glad to understand how you see the situation of banks. We see Caixa Economica squeezing, shutting down the faucet a little bit more in terms of credit. How do you see this behavior in June and July? If you see this affecting your affordable income segment or other income segments? And how the private banks are behaving if you notice any change in behavior? In the affordable segment, I like to understand what's your end game in terms of size of operations, PSV, what you see looking forward?

In the meantime, both Caixa Economica and other banks we are in the next situation as previous quarters. There's nothing different now. That is for us in here in Rio Grande do Sul. In relation to private banks, it's the same situation. The credit is squeezing, but we still have partners that are following through with their operations. And on our side, everything is stable. And then Leandro will answer your second question.

Open vision in a strategic way to complement these results, the explanation that we gave is that we started a cycle of growth and the size of this growth will be based on the way we understand the market to be able to absorb this and our operating capacity. So it reinforces the -- and then, our team reinforces it. And then, has a functional structure that's always conservative. And we do not speed up too much in the segment even, even though market conditions are favorable as we see them. We see this in the South. It's important to note that our knowledge in the southern region market is open to all analysts. It's a market that was much less offered in the affordable segment through Minha Casa, Minha Vida, especially in Band 3. Due to a series of structural issues, the population of the market in Porto Alegre region did not have the same kind of offer other regions have. And we do not have in the south the companies that great size operations that operate in this segment. So, BRL 200 million was our operation last year, we had great results. So we have a growth journey without determining the speed of this growth. We have a very positive view that Open is a key strength to generate very qualified projects in this affordable segment. And as I mentioned, structurally, it's a company that was much less offered -- has been much less offered in these last 10 years than other places. So we think it's reasonable to expect in coming quarters that these numbers increase and become more relevant. But without determining the exact based with the following.

Our next question comes from Juliana Veiga, Itau BBA.