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. To use it, you have to click on the button Interpretation, the globe icon at the bottom of the screen, and choose your preferred language, Portuguese or English. For those who will listen to this teleconference in English, there is an option available to mute the original audio in Portuguese by clicking on Mute Original Audio button. 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. To ask questions, click on the raise hand or Q&A icons at the bottom of your screen and type in your question to join the queue. When you are called, a request to activate your microphone will show on the screen, and then you must accept it to ask your question. We would like to clarify that any statements 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.
[Non-English content] 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 three of this presentation. In the box on the left-hand side of this 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 the 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 four, we observe the BRL 122 million in gross PSV launched in the quarter, of which BRL 114 million is the net amount referring 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 number five, we have an image of Square Garden, a complex with three residential towers on top of a food hall 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 six, 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 sale of launches.
In the pie chart on the top right-hand corner of the 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 this 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 slide, number seven, in the chart on the left, we can see the company's deliveries, where in the first half year, BRL 553 million of PSV was delivered, BRL 530 million of which in this quarter alone, distributed among six 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, three in our Urbanizadora unit, and three 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 six deliveries of the quarter, which are 87% sold on average. We highlight the three deliveries of the Nilo Square complex with a hotel, compact and commercial units, two 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 is a commercial success. In slide nine, 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 launched 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 this 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 the slide, we demonstrate the decrease in the company's finished inventory in recent years. It once represented 30% of total inventory and now represents 18%, largely coming from our reversible lease strategy. In the next slide, number 10, we discuss our land bank.
In the box on the left-hand side of this 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 the 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 the bottom of the 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. In slide 12, where we demonstrate our capital structure. In the table on the left-hand side of this 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-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 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 CEO, for his final remarks, and then we will open for the Q&A session.
[Non-English content] Good morning. I would like to continue our earnings call explaining the evolution of our operating strategy. Historically, Melnick operates in the upper middle, upper, and luxury segments in Fortaleza.
A few years ago, we began to study intensively a way to diversify our operations. As a first effort, about four years ago, we launched some small projects in the affordable segment, the only segment in which we did not yet operate in the Porto Alegre region. Our intention was to test this market and slowly 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 PSV launch 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 Renée, 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 Renée'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 four years ago, testing the thesis with low risk before any major movement. To overcome this learning curve successfully, we structured the entry into the markets of São Paulo and Florianópolis through a model of investing in projects of the highest standard and extremely well-located plots. Each partnership has its particularities, but they all respect some concepts of our business model. Traditional partners with a proven track record and a 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 five projects already underway, two of which have already been launched.
It is important to analyze the location and size of these lots, which allows us to develop high-quality and unique projects. 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 businesses. On slide 16, we highlight our businesses in the state of Santa Catarina. The lot on Jurerê Beach is a rare, large area asset which enabled a significant PS V. We invited Dimas Construções, a traditional and very well-structured company in Florianópolis, 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, I will introduce you to O tempo, where Melnick participated as a consultant.
It is a unique luxury development with a huge PS V, which brings together in a project signed by Norman Foster, a residential project and an Emiliano Hotel. It is certainly a future landmark for the region of Praia Brava, close to Balneário Camboriú. Acting only as a consultant guarantees relevant revenue for the company without exposing Melnick to the risk of developing in a region where we still do not have depth of knowledge of the real estate market. The practical results of this diversification strategy is that we have today in Rio Grande do Sul, including the affordable segment to our portfolio through Open. We gain the capacity, the optionality to allocate our capital in high-end projects, very well located in São Paulo and Florianópolis. Over time, the diversification will provide us with the choice of capital allocation, which will certainly mean better results for our shareholders.
From the point of view of financial structure, Melnick has always been guided by being conservative, solid, and unleveraged, prioritizing the highest profitability for our shareholders. This discipline has translated into a policy of intense dividend payouts in recent years, with virtually 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 diversification movement that we explained here. Investments in the purchase of land have increased our leverage, with corporate debt reaching 16% of shareholder equity and have added to production financing a total debt of approximately 40% of shareholder's 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 we start a de-leveraging curve. Our cash position should further be reinforced by a relevant volume of projects to be delivered in future quarters. 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 shareholders.
Lastly, I'd like to thank everyone for their presence and for their continued trust in Melnick. Thank you.
[Non-English content] We will now begin our Q&A session. Remember that to ask questions, you must click on the raise hand or Q&A at the bottom of your screen, and type in your question to join the queue. When you are called, your request to activate your microphone will show on the screen, and then you must activate it to ask your question. Let us now proceed. Our first question comes from Ygor from XP. You may now proceed.
Hello. Thank you for taking my question. I'd like to understand how you see the situation of banks. We see Caixa Econômica Federal squeezing, shutting down the faucet a little bit more in terms of credit. How you see this behavior in June and July?
If you see this affecting your affordable income segment or other income segments, and in how the private banks are behaving, if you notice any change in behavior. In the affordable segment, I would like to understand what your end game in terms of size of operation, VGV, what you see looking forward.
[Non-English content] Good morning, Ygor. Thank you for your question. I mean, both Caixa Econômica and other banks, we are in the next situation as previous quarters. There is nothing different now. At least for us here in Rio Grande do Sul. In relation to private banks, it is the same situation. The credit is squeezing, but we still have partners that are following through with their operations. On our side, everything is stable. Then we will answer your second question.
[Non-English content] Ygor, good morning. Open's 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 Renée entering our team reinforces it. In Melnick we have a functional structure that is always conservative, and we do not speed up too much in the segment, even though market conditions are favorable as we see them. We see this in the South. It is important to note that our knowledge in the southern region market is open to all analysts. It is a market that was much less offered in the affordable segment through Minha Casa, Minha Vida, especially in band three, due to a series of structural issues.
The population, the market in Porto Alegre and region did not have the same kind of offer other regions had. We do not have in the South, the companies, the great sized 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 Melnick will be able to use its strength to generate very qualified projects in this affordable segment. As I mentioned, structurally, it is a company that has been much less offered in these last 10 years than other places. So we think it is reasonable to expect in coming quarters that these numbers increase and become more relevant, but without determining the exact pace we will follow. It is very clear. Thank you. Have a good day.
[Non-English content] Our next question comes from Juliana Veiga, Itaú BBA. Juliana, you may proceed.
[Non-English content] Good morning. I have two questions on my side here. The first one is concerning the launches. This pipeline, when we look at the market, it was mentioned in the previous graph. We see a more challenging market for the middle income and more favorable for the lower income. We would like to understand how you see the composition of pipeline looking forward between Melnick and Open, and how much you have been revisiting this pipeline in terms of expectations of changes in it. My second question is a little more detail on your expectations for cash generation this year, and how it will impact your payout expectations or dividend payout.
[Non-English content] Thank you for your question. Let us begin with the launches and cash generation.
Because Melnick is operating different segments, it gives us the opportunity to allocate capital in a more intelligent way and notice how the market is absorbing it. It's reasonable to expect that Open will increase its participation in future quarters, not just the second quarter of this year, but we are looking forward in terms of quarters. We know that in the real estate market, movements occur in medium, long-term trends. Within the high end, we are concentrating launches in the very high-end luxury segments, which is a different performance from São Paulo, which doesn't have a very concentrated offer in this high-end segment. Our figures are a reflection of the year.
We had launches predicted in a high volume for the second and third quarters in the middle and upper middle income, which we understand that the market nowadays, because of the high interest rate, makes it more difficult. It's not such a positive moment to absorb these launches. It was land acquired through swaps, so without the carryover cost. We were in a position to manage these and hold off on these launches in the middle income and concentrate in the high-end and luxury. For the year, we will have a similar volume to previous years in the high end, but with more concentration in the fourth quarter in these projects in the very high-end luxury segments.
[Non-English content] Regarding cash generation, I will make a few remarks. I will talk about a more strategic issue.
We've had a movement that I explained in these past 12- 18 months of work in which we diversified our operations, moving out of Hostalled and going especially through Melnick Partners, which is a partnership we have in São Paulo and Santa Catarina. As we showed in the presentation, we have some very important projects, and this implies an increase in cash burn. In this movement, we increased it, and we've seen the second quarter. We are planning in the second half of the year to not have such high cash burn. Starting next year, we'll probably go into a very important cycle of cash generation. In dividends and then we'll be impacted by this because we see these curves that we are still learning.
We are going to match this strategy that we are communicating now of not increasing cash burn starting the second half year, and decrease our leverage. Depending on operating movements, we are going to adjust the dividend payout to respond to this behavior. Another important point in cash generation that affects these two issues is that in the next quarters, we have very important deliveries from projects that have sold very well, which generate very positive cash. To explore two other themes, our growth margins have grown because the projects we have been delivering are projects that have a higher gross margin than the average of our inventory.
[Non-English content] Just to complement the answer by focusing more on sales, I think it's important when we look at Melnick Day, which is a moment for sales that's very important when you compare this year to last year. They happen in different quarters. When you compare a more comparable way in terms of sales of our second quarter is the third quarter of last year. We have very similar sales in terms of inventory. In the third quarter of last year were the sales of launches because we had fewer launches. We see a quarter post Melnick Day in terms of volume of sales that is very similar to last year when Melnick Day happened [Non-English content ]
Thank you [Non-English content ] I would like to remind you that to ask questions, you must click on the Raise Hand or Q&A icon at the bottom of your screen and type in your question to join the queue. Our next question comes from José Irineu, investor. [Non-English content] He asks two questions.
After the impact of the floods in 2024 that affected work construction costs, does the company see this as an overcome situation? The second question, reconstruction and the recovery of the real estate market in Rio Grande do Sul has already brought some positive effect for Melnick in terms of demand and new opportunities for projects.
[Non-English content] José, thank you for your question. There are some subtopics here. The market, in terms of the consumption of real estate projects because of the flood, has already been overcome. Of course, the impact of the flood happened, but the state was able to overcome this. Of course, we are influenced by the same structural situation that affect the whole country, high interest rates. It impacts the southern region. But concerning the flood itself, it is already in the past. It will have some important effects. As, for example, the location of some projects.
There is a very important situation here, a movement in the state where we see some high consumption in some projects that sold a lot of inventory, and projects in high demand nowadays are in regions that were not flooded. This favors us because the land that Melnick owns are in regions that were not flooded. There are important issues that are related to the flood. But the second part I commented. The market itself has already put this issue in the past. For Melnick, it is important to mention relation to the market, which is a consequence of the flood.
The number of companies with a solid and growing economic capacity in our market in Rio Grande do Sul is lower than in other regions, which makes the number of the launches to be regulated because the market is not consuming, so the company are launching less products with certain types, and this makes a difference with markets in other regions, where we see an exaggeration of launches in some segments. This difficulty in the southern market decreased the number of launches, which led the inventory at a healthy level [Non-English content ]
[Non-English content] Remind you that to ask questions, you must click on the Raise Hand or Q&A icon at the bottom of your screen and type in your question to join the queue.
Non-English content] The Q&A session is now closed. Melnick's earnings call concerning the results of the second quarter of 2026 is now concluded. The investor relations department is at your disposal to answer any further questions you may have. Thank you all for attending this earnings call, and we wish you a good day.