Good afternoon, ladies and gentlemen. Welcome to Mills' earnings conference call to discuss the results for the first quarter 2026. Joining us today are Mr. Sergio Kariya, CEO, and Ms. Renata Vaz, CFO and Investor Relations Officer. Please note that this presentation is being recorded and simultaneously translated. Translation is available by clicking on the interpretation button. For those listening in English, there is an option to mute the original Portuguese audio by selecting Mute Original Audio. During the company's presentation, all participants will be in listen-only mode. Ensuing this, we will begin the Q&A session. To pose questions, please click on the Q&A icon and enter your name and company. When your name is announced, a prompt will appear on your screen to enable your microphone. You should then activate it to ask your question.
We would like to clarify that any forward-looking statements made during this conference regarding Mills' business outlook, projections, and operational and financial targets constitute beliefs and assumptions of the company management based on currently available information. Investors should understand that macroeconomic, political, and other operational factors may affect the company's future performance and lead to results that differ materially from those expressed in such forward-looking statements. To begin the presentation, I turn the floor over to Mr. Sergio Kariya.
Good afternoon, everyone. It is a pleasure to be with you once again to speak about Mills' earnings results for the first quarter 2026. Starting on slide three, despite the seasonality historically observed in our business at the beginning of the year, we delivered another quarter of consistent growth with margin expansion and strong operating cash generation.
We also recorded the highest net income in the company's history, reflecting both operational improvements and non-recurring effects recognized during the period. We closed the quarter with net revenue of BRL 461 million, a 12% growth vis-à-vis the same period 2025. Adjusted EBITDA reached BRL 235 million, increasing 14% year-over-year, with an expansion of 1 percentage point, which reached 51%. This performance mainly reflects scale gains, the operational evolution of the business units, and continued advances in efficiency and productivity. Net income totaled BRL 197 million, with strong growth compared to the first quarter of the previous year, driven by the recognition of prior period tax credits, with approximately BRL 131 million positive impact on results. We remain focused on maintaining a healthy capital structure.
In the first quarter of 2026, we once again reduced our leverage ratio by 0.3x vis-à-vis the same period last year and 0.2x versus the fourth quarter 2025, ending the period at 1.1x net debt over EBITDA, the lowest level in the last two years. Another important highlight was cash generation. Adjusted operating cash generation reached approximately BRL 221 million, expanding 46% versus the first quarter 2025, with EBITDA to cash conversion of approximately 83% above the company's historical average. It is also important to mention our continuing progress on the ESG agenda. During the period, we achieved important milestones. For the first time, we are part of the B3 Corporate Sustainability Index ISE portfolio. These recognitions reinforce the maturity of our governance and integration of sustainability into our long-term strategy. We also had the IAGRO recognition.
This is important for institutional investors, especially those with ESG-focused mandates. In slide five, we continue to reap the benefits of our portfolio diversification strategy and disciplined capital allocation. Heavy equipment and intralogistic business units continue to increase their relevance within the portfolio in a more competitive and still pressured environment. In this segment, we remain focused on commercial discipline, cost rationalization, and longer-term contracts, seeking to preserve profitability and increase revenue predictability. In the formwork and shoring business unit, we continue to capture demand associated with infrastructure and civil construction projects with continued revenue growth and maintenance of high margins. Another important point is the evolution of the company's contractual profile.
We ended the quarter with 55% of rental revenue coming from long-term contracts, an increase of 8 percentage points vis-à-vis the first quarter of 2025, reinforcing the predictability of future revenues and the quality of our client and contract portfolio. From an operational standpoint, we ended the period with more than 16,000 machines in the fleet, approximately 50,000 tons of formwork and shoring equipment. This consolidates Mills as one of the leaders in equipment rental and engineering solutions in Brazil. Our multi-product platform strategy continues to deliver tangible rents, especially by expanding our presence in markets with greater addressable potential. Cross-selling among business units has been a key pillar in our strategy for consolidated earnings growth. With that, I will now turn the floor over to Renata, our CFO and IRO, who will detail the main financial highlights for the quarter.
Thank you, Kariya.
Moving on to slide six, net revenue totaled BRL 461 million in the quarter, up 20% vis-à-vis the same period the previous year, marking a record level of revenue for the first quarter. This performance was mainly driven by the expansion of rental revenue and the growth observed in the formwork and shoring business unit, reflecting the evolution of our portfolio and multi-product strategy and penetration across different market segments. Regarding costs, we recorded BRL 128 million in the quarter, a growth of 15% versus the first quarter of 2025, in line with the highest level of rental activity and increased consumption of parts for fleet mobilization and maintenance. Operating expenses totaled BRL 57 million in the quarter, positively impacted by the recognition of prior period tax credits.
Excluding this, the company's recurring expenses totaled BRL 89 million, an annual growth of 3%, once again reflecting the company's expense control strategy. Even with the absolute increase in costs and expenses, both improved as a percentage of net revenue, reflecting scale gains and ongoing efforts to optimize the organizational structure and increase operational efficiency. Moving to slide seven, adjusted EBITDA reached BRL 235 million in the first quarter 2026, a growth of 14% vis-à-vis the same period last year with a margin of 51%. The margin expansion reflects the combination of revenue growth, disciplined cost and expense management, and productivity gains across the different business units. On the chart to the right, we see the evolution of net income totaling BRL 197 million in the quarter, reaching a new all-time record for the company with a net margin of 43%.
This result was positively impacted mainly by the recognition of prior period tax credits, representing BRL 131 million affecting different lines of the income statement, including non-recurring items, financial results, and income tax and social contribution. Excluding this effect, the company's recurring net income would have been BRL 66 million. On slide eight, adjusted operating cash flow totaled BRL 221 million in the quarter, a growth of 46% compared to the same period in the previous year, with the EBITDA to cash conversion standing at 82.5% above the company's historical average. This performance mainly reflects improved working capital management, purchase schedules, machine receipt, and payment schedules.
The CapEx totaled BRL 97 million during the period, a reduction of 44% compared to the first quarter of 2025, while still showing growth of 20% versus the previous quarter, in line with the company's planning. The reduction observed in CapEx on a year-on-year basis reflects greater discipline in capital allocation and selectivity in originating new contracts. Throughout the quarter, there were specific postponements of investments due to delays in the receipt of important equipment and delays in construction projects as a result of the rainy season. They are expected to resume over the next quarter. For the remaining quarters of the year, we will continue evaluating organic and inorganic growth opportunities, focusing on markers with greater revenue predictability. In slide nine, the reduction of indebtedness was another positive highlight of the quarter.
We closed the first three months of the year with gross debt of BRL 1.7 billion. As a result, we maintain the company's average cost of debt at CDI +1.0% per year, also extending the average maturity to close to four years. We ended the quarter with 1.1x net debt over EBITDA, with a reduction of 0.3x versus the first quarter 2025 and 0.2x compared to the fourth quarter 2025, well below our financial covenants. Another positive point is the debt amortization schedule, which remains close to what was reported in the previous quarter. Currently, 95% of the debt has a maturity longer than 12 months. There are no further significant principal amortizations for this year and 2027, leaving the company in a comfortable position to continue executing its growth diligently.
On slide 11, we delivered another quarter of positive results in the rental business unit. Net revenue totaled BRL 382 million in the quarter, a growth of 10% vis-a-vis the first quarter of the previous year. Once again, driven by the performance of heavy equipment and intralogistics, partially offsetting the more competitive environment in light equipment. Adjusted EBITDA reached BRL 183 million in the quarter, 11% year-on-year increase, with adjusted EBITDA margin of 48%, an expansion of 20 basis points versus the first quarter 2025, and 90 basis points compared to December. Finally, on slide 12, Formwork and Shoring business unit had another quarter of solid performance, mainly driven by the commercial strategy implemented and the evolution of the company's pipeline. Net revenue totaled BRL 80 million in the quarter, a growth of 20% year-on-year.
Adjusted EBITDA reached BRL 52 million, an increase of 27% vis-a-vis the first quarter of 2025, with an EBITDA margin of 65%, an expansion of 3.5 percentage points. With this, we would like to conclude the presentation of our first quarter 2026 results. We would like to thank everyone for your participation and time today. We will now go on to the Q&A session.
Thank you. We will now begin the question and answer session. We remind you that if you wish to pose a question, click on Raise Hand. When you are announced, there will be a prompt to activate your microphone. The first question comes from Matheus Sant'Anna from Bradesco BBI.
Good afternoon. Thank you for taking my question. In truth, I have two questions here.
First of all, I would like to understand your outlook on the current platform scenario, which is your vision in terms of volume and pricing, if it still makes sense to invest in this scenario. Secondly, how has the integration of Next been? Thank you very much.
Well, good afternoon to all of you. Matheus, thank you for your question. Let's begin with the competitive environment. It hasn't changed compared to the fourth quarter. It is still challenging in this first quarter of 2026. We're trying to see if there will be an increase of pace in competitiveness. In terms of our strategy, we continue with our key pillars, protecting our market share, working on operational excellence with differentiation, and of course, focusing on price competitiveness. We're trying to migrate our contracts to long-term contracts evermore.
Rental very generally already represents 55% of our total revenues. We have several long-term contracts and growth vis-a-vis the previous year with a year-over-year growth of 8%. We're also bundling equipment with other segments. We have been keeping a very sound strategy to continue to deliver results in that segment. The environment is still very competitive. Regarding Next, we have had good evolution. We're in the final stage and integration of Next into Mills. Definitely, this is a sound process. Our integration of Next has been integrated with our heavy equipment segment. Thank you.
Thank you very much, Sergio.
The next question comes from Filipe Nielsen from Citi.
Hello, good afternoon, and thank you for taking my question. I would like to explore capital allocation. We've seen a quarter with strong generation of cash.
We see all of the opportunities you have in heavy equipment and intralogistics besides shoring as well. You spoke about light equipment somewhat. Which is your mindset for opportunities? Which is the size of organic growth versus inorganic growth? The possibility of M&A, we see that competitors are increasing the pace when it comes to M&A. On the same topic, which would be an optimal capital structure? We observe consistent deleveraging. The dividends were very good in previous years. Which is your mindset for this relationship between investment, capital structure, and dividends for the year 2026?
Good afternoon. Let's speak about the company's mindset in terms of capital allocation. We continue to be highly disciplined with a focus on growth and a return on the cost of capital for the company.
We have a healthy balance, we have low leverage, and this allows the company to flexibly speed up growth both organically and inorganically, always keeping cash in mind. We look at all of this as a company, not only the organic, inorganic CapEx and the distribution of payouts. Last year we paid out above our minimum mandatory amount precisely to have that flexibility. It's a positive moment with several opportunities for M&A, and our pipeline has several projects. Everything will depend on what makes sense. The strategy of the company, a midterm return, and we tend to say that we have an ideal leverage. We like to work with a comfortable leverage to have this flexibility, especially in a year where there are several events taking place.
Simply to complement this, and thank you for the question, Filipe, in M&A, we have very stringent criteria. We have to look at a multiple that will make sense, strategic complementarity in terms of product or clients or to bring in new products as we have done in our last transactions, our ability for integration as well. All of this gives us a great deal of confidence in our playbook. We don't make deals simply to make them. We several transactions have gone through our radar, but we were always looking for that fit. We work in a highly disciplined way. As Renata Vaz said, we have main pillars: organic growth, M&A, dividends and, of course, share buyback.
Thank you. Thank you very much.
We would like to remind you that should you wish to pose a question, please click on Raise Hand. The next question comes from Gabriel Rezende from Itaú BBA.
Hello, Kariya. Hello, Renata. Good afternoon. Follow up on the previous discussion on a challenging competitive environment. If you could explain to us what underlies this environment. Are they new entrants? Are they the usual players? Equipment that has come in with a lower ticket, forcing you to lower your prices. What is there in that competitive environment? A follow-up on a comment in your press release. You said that you're anticipating a more intense sale of heavy equipment in the coming quarters. How are you getting ready for this? Will this lead to depreciation and investment on quality, the purchase of new equipments, this because of your greater needs in terms of fleets?
Well, Gabriel, can you hear us?
Yes, we can hear you well. You can continue. We can hear you.
No. Gabriel, can you hear me?
Yes, I can hear you very well, Kariya.
I do apologize. I think we had a small glitch. Thank you for the question, Gabriel. The competitive environment for the light equipment is the same equipment we saw in previous quarters. That slowdown in China, exports of deflation throughout the world, the incoming equipment at more competitive prices, not only the entry of OEMs, new OEMs, new manufacturers that also create new players that are acting in this sector. This is what we have observed in the last two years. I would say that it is stable. There hasn't been a dramatic change vis-à-vis what we observed in this competitive scenario. Now, about your second question, the sale of semi-new equipment. This is a lever for the company. It's part of our value chain, and I think it has been underexplored by the company. What have we done therefore? We have focused on the semi-new channel.
We're creating a specific pillar for that with a dedicated team, a dedicated working team. We have expanded commercial channels. We have well-structured processes for inspection and start standardization of our sales process. What we observe is a gradual ramp-up to build this chain for the sale of semi-new equipment. This was geared to light equipment previously, but because of the needs, we're going to ramp up this in the coming years, including heavy equipment. We're structuring this channel and a sales team. Once again, the results are not expressive. They're not considered that relevant for the company in terms of revenue, of course.
Thank you, Kariya. Thank you, Renata.
The next question comes from Luiza Mussi from Safra.
Good afternoon. Can you hear me? I would like to further explore the formwork and shoring. You said the pipeline is very strong.
Which is your mindset for the rest of the year, and which will be your margins this quarter? The margins were quite high because of indemnities. Now, how can we think about this without those revenues? Which would be a good level for the rest of the year?
Thank you, Luiza. Thank you for the question. Our formwork and shoring unit has had a very positive impact because of the infrastructure works ongoing in the country. I think there are two important dynamics here. Structurally, they are very positive. We did have some one-off events that you read in the release. The rental volume is growing. We have a sound infrastructure pipeline in the company and operating leverage with a control of SG&A, more efficient processes. Therefore, the margin that we have delivered in these last quarters are the reflection of some one-offs.
Structurally, this is not a sustainable way. They'll bring to the business 60%-65% as a margin. Structurally, this would be sound and perfect for that business segment.
Thank you. That was very clear. Thank you.
We would like to remind you that should you wish to pose a question, please click on Raise Hand. The next question comes from Gabriel Frazão from Bank of America.
Go od afternoon. Thank you for taking my question. I have two questions at my end. First of all, the non-recurring events mentioned in the release, the past tax credits that were included in your expenses and the PERSE amounts. If you could confirm that this refers to the main tax discussion because of PERSE, if you have more tax credits that should be recognized or if they have all been recognized already.
The second segment is about equipment, so I can hear from you about competition in that segment, if you see a greater competition or if the competitive environment is healthy.
I'll answer the first question on credit and then give the floor over to Kariya. It's important to highlight that we're seeking tax opportunities. It's part of our agenda, and we're very attentive to those movements. We're very conservative complying with the regulatory limits. It's good to recognize these prior past tax credits. Those that we recognize now were linked to our accounting rules. Most of them have not had a cash impact so far. We hope this will happen in the coming months. Most of them have been accounted for by the company so far.
Gabriel, to answer the question about the forklifts, for example.
The intralogistics business with forklifts has a long cycle from pipe to revenue, conversion into revenue. As we carried out the acquisition of JM at the end of 2024, all of the cross-selling work, the increase of penetration and growth for the sector have been harvested in the fourth quarter and throughout this year. The increase in competitiveness, if we have more players or acquisitions happening, this is a natural movement. I wouldn't say it is something abnormal. It's something natural that takes place in all product lines. There hasn't been a significant change in terms of competitiveness. The business continues to proceed in a healthy way, allied to our strategies, like the heavy equipment. What comes in the pipeline is very robust. We select what adheres to our strategy. Nothing very different between what we do with heavy equipment and intralogistics.
Now, in intralogistics, we have pipe to revenue. We grew the pipeline, and we have been collecting revenue since the fourth quarter, and this is what you will see beginning with this first quarter, 2026.
Thank you, Kariya. Renata. That was very clear. Thank you very much.
Once again, should you wish to pose a question, please click on Raise Hand. The question and answer session ends here. I would like to give the floor to Mr. Sergio Kariya for the closing remarks.
Thank you all very much for your attendance at our video conference. We remind you that our investor relations team is at your entire disposal. Have a good afternoon. The earnings result conference for Mills ends here. Should you have any questions, please send your question to the investor team at ri@mills.com.br. Thank you all for your attendance, and have a very good afternoon.