Good afternoon, ladies and gentlemen. Welcome to Mills' conference call to discuss the company's results for the second quarter of 2026. Joining us today are Mr. Sergio Kariya, CEO, and Ms. Renata Vaz, Chief Financial Officer and Investor Relations Officer. Please note that this presentation is being recorded and is available with simultaneous interpretation. To access the English audio, click the interpretation button. If you are listening to the conference in English, you may also mute the original Portuguese audio by selecting mute original audio. During the company's presentation, all participants will remain on mute. We will then go on to the question and answer session. To ask a question, please click the Q&A icon and type your name and company. When your name is announced, a prompt will appear on your screen asking you to unmute your microphone.
Please bear in mind that any statements made during this conference regarding Mills' business outlook, projections, and operating and financial targets are forward-looking statements based on the expectations of the company's management. Such statements are subject to risks and uncertainties and may or may not materialize. Investors should understand that political, macroeconomic, and other operational factors may affect the company's future performance and cause these results to differ materially. To begin our second quarter 2026 earnings conference call, I would like to turn the floor over to Mr. Sergio Kariya .
Good afternoon, everyone, and thank you for joining our conference call to discuss the results for the second quarter 2026. Starting with slide three, we delivered another quarter of solid results. Adjusted EBITDA reached BRL 269 million, with a growth of 18.3% compared to the second quarter of the previous year.
Adjusted EBITDA margin reached 57%, an increase of 6.5 percentage points year-over-year. We also maintained a consistent revenue growth trajectory. Net revenue totaled BRL 472 million in the quarter, up 5% compared with the second quarter of 2025. Net income was BRL 106 million, 22% rise year-on-year. Over the last 12 months, return on equity reached 26.5%, where return on invested capital totaled 21.7%, reinforcing our ability to combine growth, profitability, and value creation. Adjusted operating cash flow totaled BRL 188 million, an increase of 23% compared with the same period last year. At the same time, gross debt remained virtually unchanged compared with the previous year, with leverage declining further year-on-year, now standing at 1.16 times net debt over adjusted EBITDA. Finally, I would like to share another important achievement for the company.
During the quarter, we were awarded with the Pró-Ética seal by Brazil's Office of the Comptroller General, reinforcing our commitment to the highest standards of ethics, integrity, and compliance. Turning now to slide five, we continue to capture the benefits of our portfolio diversification strategy. Our heavy equipment and intralogistics business units continue to increase their relevance within our portfolio. Intralogistics accounted for 11.3% of rental and freight net revenue, surpassing 10% threshold for the first time, while heavy equipment increased its share by nearly 23%. This performance partially offset the more competitive environment in the aerial work platform segment, which continues to face pricing pressure. We remain focused on commercial discipline, cost rationalization, and long-term contracts, while also offering integrated equipment and service. These initiatives are intended to preserve profitability and improve revenue visibility.
In the formwork and shoring business, we continue to benefit from demand driven by infrastructure and construction projects, maintaining revenue growth and strong profitability levels. Another evolution development during the quarter was our continued improvement in our contract profile. We ended the quarter with 55% of rental revenue generated from long-term contracts, an increase of 5% points vis-à-vis the second quarter of 2025. This evolution reinforces the quality of our customer and contract portfolio. Operationally, we ended the quarter with 16,400 pieces of equipment in operation, representing a 7.7% year-over-year growth. We also closed the period with 50,000 tons of formwork and shoring equipment. The expansion of our fleet remains fully aligned with our strategy of sustainable growth with Attractive returns and greater revenue visibility.
Our multi-product platform continues to deliver tangible results, expanding our presence in markets with significant addressable potential and strong alignment with our customer operations. Cross-selling across our business units remains one of the company's key growth drivers, enabling us to broaden our solution offering, deepen customer relationships, and capture new revenue opportunities. With that, I will now turn the call over to Renata, our CFO and IRO, who will present the quarter's financial highlights.
Thank you, Kariya. Moving on to slide six, net revenue totaled BRL 472 million in the quarter, representing a 5% growth vis-à-vis the same period last year. This performance was mainly driven by the growth of our heavy equipment and formwork and shoring business units, reflecting the continued evolution of our multi-product portfolio across different markets and customer segments. Costs, excluding depreciation, totaled BRL 120 million, a reduction of approximately 6% vis-à-vis the previous quarter.
Selling, general and administrative expenses, including depreciation, remained virtually unchanged at BRL 56 million, while the expected credit loss provision totaled BRL 11 million. Considering cost selling, SG&A expenses and ECL, we recorded a 15.8% reduction and a 3% decrease versus the previous year. The cost adjustment and investments related to Next Rental and recognition of prior period tax credits helped us. Excluding these effects, total cost, SG&A expenses, and ECL would have amounted to BRL 248 million in the quarter. Moving on to the next slide. EBITDA reached BRL 269 million in the second quarter, representing an 18.3% growth vis-à-vis the same period last year. Adjusted EBITDA margin reached 56.9%, an expansion of 6.5 percentage points year-over-year. This performance reflects the combination of Revenue growth, discipline cost and expense management, productivity gaze and greater operating leverage across our business units.
Adjusted EBITDA margin, excluding gains from equipment sales, also remained at a strong level, reaching 56.7% in the quarter. Recurring adjusted EBITDA would have been BRL 236 million, representing a 4% year-on-year growth and 50% margin. In the graph to the right, we show you the evolution of net income totaling BRL 106 million in the quarter, an increase of 21.7% compared to the second quarter of 2025. Net margin reached 22.5%, remaining at a strong level and reflecting the continued improvement of the company's operating and financial performance. Recurring net income totaled BRL 62 million in the quarter. Compared with the previous quarter, the decline in net income was primarily attributable to the higher concentration of positive non-recurring effects related to the recognition of prior period tax credits in the first quarter of 2026.
Going on to slide number eight, adjusted operating cash flow totaled BRL 188 million in the quarter, a growth of 23.2% compared with the same period last year. The conversion of CVM EBITDA into adjusted operating cash flow was 66.2%, remaining consistent with the company's historical levels. This performance reflected timing differences in equipment purchasing, delivery, and payment schedules between periods, lower capital expenditures during the quarter, and the recognition of non-recurring items in earnings with no cash impact. Capital expenditures totaled BRL 89 million in the second quarter of 2026, a 46% decrease compared with the second quarter of 2025, and 8.4% decline versus the previous quarter. Of the total invested, approximately 91% was allocated to the acquisition of rental assets, in line with our strategy of selectively expanding and renewing our fleet.
The year-on-year reduction in capital expenditures reflects both our disciplined approach to capital allocation and mobilization schedules for new equipment. During the quarter, certain investments were also postponed due to the equipment deliveries and delays in specific construction projects. A portion of these postponed investments may resume during the second half of the year, depending on the progress of the underlying projects. Looking ahead, we will continue to evaluate both organic and inorganic growth opportunities, prioritizing markets that offer greater revenue visibility and contracts capable of generating attractive returns. On slide nine, we present the evolution of the company's debt profile. We ended the second quarter with a debt of BRL 1.8 million, remaining virtually unchanged from the previous quarter. Our average cost of debt remained competitive at CDI +1.09% per year, while the average maturity remained at 3.5 years.
Leverage closed at 1.1.6 net debt over adjusted EBITDA over the last 12 months, with a reduction of approximately 0.2 times compared to the same period last year. We continue to operate with a very comfortable leverage level, well below the limits set forth in our financial covenants. Our debt amortization schedule also remains well-balanced. Currently, 95.1% of our debt matures in more than 12 months, and there are no significant principal repayments scheduled for 2026 and 2027. This debt profile provides the company with the financial flexibility to continue executing its growth strategy, maintaining an efficient capital structure and strong liquidity. On slide 11, the rental business unit delivered another quarter of revenue growth and improved profitability. Net revenue totaled BRL 392.5 million, representing a 4.4% growth vis-à-vis the second quarter of 2025.
This performance was driven by the continued growth of our heavy equipment and intralogistics business unit, which is more competitive compared to the aerial work platform segment. Rental and freight revenue reached BRL 367 million in the quarter, a growth of approximately 6.3% compared with the second quarter of 2025, demonstrating the continued expansion of the unit's core business. Adjusted EBITDA, excluding non-recurring items, reached BRL 215 million, an increase of 17.7% year-over-year. Adjusted EBITDA margin reached 55%, expanding from the 49% recorded in the second quarter of 2025. These results reinforce the business unit's operational strength, reflect the benefits of continuous improvement initiatives, allowing us to generate value even in a more challenging environment across part of our portfolio. Finally, on slide 12, the formwork and shoring business had another quarter of solid performance, supported by the continuous expansion of the project pipeline.
Net revenue totaled BRL 80 million, representing a 7% growth compared to the second quarter of 2025, and remaining stable relative to the previous quarter. This performance was primarily driven by growth in rental and freight revenue, which reached BRL 71 million, as well as our one-time indemnification payments received from customers. Adjusted EBITDA totaled BRL 54 million, representing a 21% growth year-over-year. Adjusted EBITDA margin reached 67.6%, an expansion of 7.8 percentage points compared with the second quarter of 2025. Even excluding gains from equipment sales, adjusted EBITDA margin remained at a strong level, reaching 67% in the quarter. The improvement of profitability reflects the growth of our rental business, a dilution of fixed costs and expenses, the mobilization of significant contracts, and the impact of indemnification payments recognized during the period.
These results reinforce the business unit's resilient, strong cash generation, and a strong competitive position in infrastructure and construction markets. With this, we would like to end the presentation for the second quarter of 2026. Once again, we thank you for your participation and your continued interest in Mills. We will now go on to the question and answer session. Thank you.
We will now go on to the question and answer session. Should you wish to ask a question, please raise your hand. When you are announced, there will be a prompt to turn on your microphone. Please turn on your microphone to pose your questions. Our first question comes from Vittoria Andrade from Citibank. You may proceed, ma'am.
Thank you very much for taking my question. If you could give us more details on the approval process of CADE and what it is that you expect from this. Thank you very much.
Hello, Vittoria. Good afternoon, and thank you for the question. Regarding Loxam and the CADE, the antitrust agency process, this is a public process. It has been published in the official newspaper. If there are any relevant news, we will disclose them. For the time being, we don't have any additional information.
Thank you very much.
Our next question comes from Mr. Pedro Alencar from Safra. You may proceed, sir.
I would like to know if you still have an impact because of the adjustment that we will expect in coming quarters for Next Rental.
Hello. Good afternoon. Thank you for the question. Regarding the following quarters, we don't expect any more non-recurring events relating to Next Rental, as we mentioned. When it comes to extemporaneous credit, we have included a note that there is a part to be acknowledged in the results, but we should close this in the third quarter, and whatever comes after that will be only a cash impact. Thank you.
Thank you very much.
We would like to remind you that should you wish to pose questions, please click on Raise Hand. The question and answer session ends here. We would like to return the floor to Mr. Sergio Kariya for the company's closing remarks.
I would like to thank all of you for your interest and attendance in our conference call for the second quarter 2026 call, and our IR department is at your entire disposal should you have additional questions. The Mills conference call ends here. Should you have any questions, please send your questions to the IR team through ir@mills.com.br.
We would like to thank all of you for your attendance, and have a very good afternoon.