Ladies and gentlemen, good morning. Thank you for holding, and welcome to MRV's second quarter of 2024 results conference call for analysts and investors. Today with us, we have the CEOs of the company, Mr. Rafael Menin and Mr. Eduardo Fischer, and the Chief Financial and IR Officer, Mr. Ricardo Paixão. We would like to inform that our participants will be in listen-only mode during the company's presentation. After the company's remarks are completed, there will be a question- and- answer session when further instructions will be given. Now, I would like to turn the floor over to Mr. Rafael Menin. Mr. Menin, you may proceed.
Good morning, everyone. Thank you for attending another earnings conference call of MRV. I would go through the subsidiaries. Starting with MRV Incorporação Brasil, MRV Real Estate development company.
Now, going through the main KPIs of MRV, we've already operate better than we used to before COVID pandemic. We had a record high quarter with a record pre-sales, with cancellations almost close to zero, gross margins better than the before COVID period, exceptional gross margins, and contribution to SG&A also better. Pro soluto falling quarter-on-quarter, reaching a level we haven't seen for a long time. It's important to talk about the line of capital allocation to land bank, which is BRL 2.6 billion in capital allocated to land. But for several quarters in a row, we are working with land swap, and it was close to 90%. Land purchased in this last 18 months were compared to VGV future pre-sales, below historical averages.
So this leads us to believe that it will have future sales with even higher quality. In addition, the ecosystem of Minha Casa, Minha Vida, MCMV, is outstanding. Several states announced regional incentive programs that continues, and there are other states that will join shortly. There are two or three that will have a subsidy until the end of the year. Rio Grande do Sul is an important state, where I would like to mention, and this is a state we have a good land bank, and the market is very in need of construction of new housing units, especially after this disaster, after flooding. And so I believe Rio de Janeiro is also at their final stage of agreements. Bahia state has something going on also in the North and Northeast of Brazil.
So the ecosystem of housing and our RET 1, the special tax regime, is very important for us, and the adjustment of the income brackets is about to happen soon. So the ecosystem for housing in Brazil is at a very good historical moment, the best. So our in-house operations are working very well, growing, and so we have a very future look towards the future that will lead the balance sheet and the income statement to record highs at some time in the future. Now, I'll speak about Luggo. Luggo is something that has a bright future ahead of us, and it's very innovative. There's a great market adherence to the market. There's nothing in the market with a digital solution, with the same quality and democratic coverage in Brazil.
This is a gigantic market, and our competitors offer apartments for rental and/or houses for rental in a rental market for individuals that rent, so C2C. We build and develop a property that is designed for rental. So we control the entire customer experience from the product to the leasing or to the rental model and how the products are offered, how the customers can lease or rent properties and leave, you know, moving from one to the other. We are growing significantly, and people— We are on the wish list of consumers, as a very desirable product. So it started as a startup four years ago. We had to invest a lot of capital to make it work, but looking forward, it would be increasingly asset light.
We've been able to use new funding sources, allocating capital inside the execution of the project, and not no longer at the end of the project, and that changes Luggo's game altogether. There are other instruments that we would like to announce soon. It's a business where there's no competition, and the adoption is huge. We see the capital market helping us without the need for higher capital investment. That causes Luggo to have a bright future. Now, we talk about Urba. Urba, I'd say that has two tough years, 2022 and 2023. I'd say we went through a moment close to MRV Inc. Some inputs for Luggo doubled during the pandemic. We had a good sales cycle, and profitability of Luggo was very much affected negatively by that.
But now we see that margins have come, gone back to pre-COVID, high levels, and we have a very innovative funding. We are able to recycle the portfolio, causing the financial cycle of Luggo to be completely different from the companies that can... The property, and Luggo is, has a huge, sales over supply, very good, sales over supply levels in the markets that it's chosen to operate, and we'll have a neutral cash generation, and then, net income close to zero, which will be very good compared to the results of last year. So these two subsidiaries that have, negatively affected our balance sheet will from now on, will not use up capital and will start providing, return. Now, let's talk about Resia of the United States. Resia is focusing on the discipline of operations. We continue to reduce our G&A.
Our geographic coverage continues the same. We will operate in only four cities, larger Miami, Tampa, Houston, and Dallas. These markets have 30 million inhabitants with a $2 trillion GDP. It's a gigantic market, and we're very sure and confident that the thesis of income niche, geographic area, and our solution that's 100% industrialized and standardized, will cause Resia to have a very differentiated future. And it's a different company compared to U.S. competitors. It's much more industrialized and it, therefore, it's more efficient than its competitors. So the focus of Resia today is to continue to recycle its assets, and our plan with that for the year as a recycling for the year, we're confident that we'll reach it because the U.S. market is improving, long-term interest rates are dropping.
I know that the Fed will reduce rates until the end of the year, which favors Resia thesis. It's also worth highlighting that since we believe a lot in the business, we are reinforcing our team. Leo Corrêa, the board member of MRV, has moved to Miami and will be the new CFO of Resia. We also brought two important additions. Nicola Calicchio, he is the Vice Chairman of MRV. He is, he's an outstanding career. He has been a CEO of McKinsey for several years. He's very experienced. So in addition to supporting MRV in Brazil, Nicola will be a board member of Resia. And finally, Matias Rotella. Matias was a banker at Goldman Sachs for several years.
He left Goldman Sachs more than a year ago, and he's supporting Conedi, which is our family holding company in some business, and he will dedicate more and more time to the companies in which Conedi has an interest. So Matias is also part of the is also a board member of Resia. And in addition to being the chairman, CEO, advisor, he's helping us a lot. We are very optimistic that despite these difficult times we've been through with the unexpected increase in the cost of capital, but those times are behind us now, and we have good surprises regarding that indicator.
Along this operational development, at least in a deleverage of the balance sheet with the recycling of assets, all this will contribute to place Resia on the right track, so that in the future, we'll make a lot of difference on our business. So having said that, we remain very optimistic. We've been through a very good learning cycle, after which we are more prepared, and I say, and I'm absolutely confident that MRV & CO. will be the star of the industry in a very short time. You can bet on that. If you bet against it, we—you will lose, because we are very confident.
We did our homework, whatever we had to do and all we had to do, and our team has worked very hard with a lot of union in all the lines of business, and we're ready to deliver the best possible results for the industry, as we have done for several years. MRV was one of the best companies in the industry, and I'm sure we'll do that again. Now, I'll turn the floor over to Kaká, who will talk about the financial indicators.
I would like to talk about the real estate development. Let's talk about record BRL 5 billion with a net pre-sales for MRV real estate development. The ROL, net operating revenue, was higher also.
The net margin operated reached 26%, which is a good result of prices above inflation, discounting the RET effect of 1% of the first quarter. EBITDA doubled when compared, reaching BRL 286 million, 19% higher than the first quarter of 2024. The evolution of the ROL and the good process of expense control reduced expenses that closed the quarter at 13.9% as a percentage of the ROL, which is lower. The combination of such indicators resulted in the net adjusted growth at BRL 76 million, 41% higher than the first quarter of 2024, compared to a loss of BRL 38 million in the year. Half first half data, BRL 138 million, against a loss of BRL 103 million. We continue strong. We're to attain our guidance.
Our results are growing steadily throughout the year. We are at the average of the guidance with BRL 3.9 billion in the first half of 2024. Net revenue continued to grow. We are very confident we'll reach the guidance. Gross margin is at the guidance level, 26%, and it tends to continue to grow as we remove projects from 2022 and grow and build projects of 2023 to 2024. So we are on guidance, and we'll even exceed that towards the end of the year, or even reach the top of it. Cash generation of BRL 32 million may seem that we're lagging behind, but not. This is what we projected, because production also grows and revenues and receivables grow.
So BRL 32 million is in line with the plan for the year, and in the second half, we'll reach BRL 300 million-BRL 400 million, and to be on the guidance. The net debt over equity, we are at 41% now, so it has improved four percentage points when compared to the end of 2023, and we still have 4 to 5 points to reach the guidance. That's also under control. Net income, BRL 130 million. We're almost reaching the guidance level. With revenues going up and margins recovered, we expect, net income better in the second half of the year. Other points that I would like to highlight regarding our pro soluto had a reduction, which is a reduction of the funding for us.
Pro soluto closed at 2.6%, seven percentage points below one year ago, and now our goal is to reduce the pro soluto percentage in the next quarters. Now, looking ahead, we are sure that results will continue to evolve. Our unearned revenues is BRL 1.3 billion, with REF margin growing almost five percentage points. I would like to highlight the Flex P ortfolio, our direct financing. We developed a new funding source, which is direct financing is innovative for clients who do not qualify for Minha Casa, Minha Vida program. Now it's available for clients with a minimum income of BRL 8,000 above MCMV program limit. It's valid both for Sensia units and developments aimed at MCMV.
The assignment of the direct financing portfolio distributed in retail has generated significant demand among investors, and sales with direct finance and subsequent assignment of receivables have higher IRR and NPV when compared to the traditional model of development with bank financing. This was the first quarter in which we were able to assign the portfolio with a premium. So it's fully paid by the customer, and we expect the next assignments will also happen with a premium. Now, Luggo, we have presented in this quarter an important improvement in our business model. We, along with the financing bank, we now have a new format that allows Luggo to grow without a need for capital. The LTV, the percentage is received by Luggo according to the evolution of construction, which is similar to the associative credit. So these are the points I would like to highlight.
We can now move on to the Q&A session.
Thank you. We'll now start the Q&A session. If you have a question, please click on R aise H and. If your question has been answered, you can leave the queue by clicking on Lower Hand. Please wait while we collect questions. The first question is from Pedro Lobato, from Bradesco BBI.
Good morning. Thank you for the question. First question is regarding potential changes in the income brackets that was mentioned in the beginning of the presentation. We would like to have, would like to have some color. How much of your customer base or potential customers do you expect to be impacted by that? What is the estimated impact on MRV with the potential change in the income brackets of the MCMV program? And second is about Resia.
Of course, it's clear that everything's been done there, but in terms of sales in the second quarter, we saw cap rates reducing from 6.2%-6.3%, now they're close to 5.5%. I would like to understand whether this makes you— If this is good, and do you expect sales close to this cap of 5.5%? Thank you.
Hello, this is Fischer speaking. I'll answer the first question, the next one to Rafael. Well, a change in income brackets was announced that would be affected in September or October, depending on the approvals. And the impact for us is very positive. There is a growth in bracket, Group 1, of around 12% from BRL 2,640 to BRL 2,680.
We have around 30% of our sales in this Group 1. Obviously, this figure will increase with the change in the income brackets because the affordability is important. And so for us, it only reinforces what Rafael said in the beginning, that there are several tailwinds, either on checks, on the brackets, on the parameters of MCMV, that help us to recover even quicker. So being objective, the main impact is this potential, increase in the population that can afford Group 1, G1, and on G2, because there is an important step between Groups 1 and 2 in zero subsidies and a drop in the purchasing potential due to the interest rates. So when I decrease this gap between the two groups, the potential increases. So the impact for us will be very positive.
Good morning, Pedro. I'll answer your question on Resia.
To date, we have five projects in the rental and stabilization, two that are stable and the third one that's almost stable. You are 100% right, the U.S. market is improving, cap rates are decreasing slightly, and the commercial activities are working stronger. The funds we've been talking to in the last quarters have come to us more frequently. Be executed. That's important to stick to our plans regarding the zero cash burn in Resia subsidiary. We're going everything's going well towards that direction and to attain that goal.
Okay, thank you, Fischer.
Okay, Tainan Costa from UBS will ask the next question.
Good morning, everyone. Good morning, Fischer and Rafael. My question is about the subsidiaries, Luggo and Urba. Luggo was the main point. It was it came very strong, and you explained that you sowed some projects.
What are the expectations of sales to future? And with this new business model, not only cash, but revenue and income will repeat as compared to the associative model. So we'll still have seasonality and losses, then coming back with income. And looking at Urba, where has been the effort of the company to improve the operations? Do you have anything in your radar to reduce cash burn and start delivering more positive results?
Thank you. Hello, Tainan. Good morning. Regarding Luggo, we do have other projects that are being discussed, not only the transaction model. This transaction model we implemented in the second quarter is one of them, but there's a second transaction model that's may also be implemented. But once again, it's been defined that Luggo can no longer allocate entire equity of the project and just sell at the end.
We had to do this in order to make the wheel turn. As I said, it was a startup, and this business model was new to Brazil, and we had this mission of implementing and creating this innovating. We tested the model, we proved that it works, and today we have capital market partners that understand the Luggo model better. And so from now on, we believe Luggo will have an interesting growth and become more and more asset light. There's a very interesting feature about Luggo because it takes all the technology that MRV has in terms of buying land, construction, approving project, due to our scale. So it's a hidden jewel, so to speak. This is how we see Luggo product, because when it's ready, the rental speed is very high, and the rental prices of Luggo are considerably higher to the market average in the region.
Because customers start to live in a development that's made for rental. You know, services, it's safe, it can come furnished, and the leasing, the rental process is very easy. In a few hours, you have. You don't need anyone to secure your loan. So it's easy approval process for rental. Luggo has a portfolio of 3,000-4,000 units, so the portfolio of Luggo is so small when compared to the size of this market. So we believe that Luggo has a very well-built chain that start with a project that's conceived by MRV. And Luggo is an operator of this hardware built by MRV with a very modern software. So the combination of these factors and the third component of the capital market, now, we believe we have something very powerful in our hands.
So revenues of Luggo will start to appear faster. And so therefore, we would have a cleaner balance sheet, and we generate more cash from now on. Urba has always been a profitable company with good margins. What happened in the last three years is that the profitability fell considerably because we allocated a lot of money in land. This is a mistake we made, but it's no longer happening. The last lands we brought were all with the land swap. But Urba is unique in terms of competition, because we can have a securitize or asset-backed securities for the portfolio. We have very good guarantees. So our resumption in terms of building lands and Urba in 5,000 units, there's only one house that was canceled and returned to us. So there is the high quality security or collateral.
So it's a receivable that's performing very well. So everything leads us to believe that Urba will be profitable as of next year. We're generating cash and growing. We're very happy and optimistic about the business model we built for these two subsidiaries.
Perfect. That's very clear. Thank you.
Thank you, Tainan. Have a good day.
The next question will be asked by Gustavo Cambauva from BTG Pactual.
Hello, everyone. Good morning. I have two questions. The first regarding Resia. Rafael said that explained about the change, that you're building Leo Corrêa and other executives that were somehow connected to MRV to focus on Resia. I would like to understand, to what extent will that bring changes to the business model or strategy of Resia? Or whether you're looking for alternatives to bring more visibility and funding to Resia.
It's like I would like to understand what's this reinforcement in the team of Resia means. And the second question is, you treated the changes in the sale in the portfolio of Resia with the decrease in rates. So I think it makes a sense to make a total sale of this portfolio to generate a lower, a cheaper funding. So I would like to understand how you're what are your thoughts on selling this portfolio from now on?
Hello, Gustavo. Resia, what we're doing, this investment we're making in the team because we believe in the business. As I said in the beginning, we are present in four huge markets in the United States. We are very confident of the fact that our product and the construction building technology are unique.
So the value proposition, that is, how much we charge and what we offer to customers, is very competitive. But it's known that this market, due to the fact that the cap rates increased very quickly, that did not affect. It was not a good for the market and therefore not for Resia. So the cap rate is started to follow and then to decrease, and will decrease even further. And we are in the right segment. So we are confident that Resia will be a very significant company in the future with the right balance sheet, with the right profitability. And this moment caused us, made us to more creative in terms of cost of capital of each product. In the past, we used to buy land, invested all the capital, didn't have any partner.
Today, we have other very efficient instruments, allowing our return on each project to be much higher. So I see Resia very ready with a board of executives that's high quality. We are still decreasing its SG&A to make it work even better. And as the figures go down and our assets are recycled at higher prices, profitability will come back, and it will be that Resia we used to talk about three years ago, but slowly, one step at a time. We won't grow above a volume that will have an impact on Resia's balance sheet. We always say that Resia must be a company of zero cash burn. Today, our business plan, including everything I said, allows us to have some growth without burning cash. And as interest rates go down further and quicker, the growth curve could speed up.
We're still very cautious, but we're doing our homework very well. And when the market reaches the point that we have imagined and planned with a lower cap rate, we can accelerate the business. Now, in terms of equity, there's no news about that. We said in the past that Resia has to be less and less dependent on MRV, and this is happening. And we're still testing the market to make sure of what's the best model. But at the end of the day, we do not want Resia to depend on MRV Brazil, so that Resia can have a very high-level path ahead of itself. Okay, talking about Flex, credit p ortfolio, we're very careful when we give credit, so we have a very good track record for investors.
So investors buy the portfolio, are very comfortable and pleased with the credit performance of this portfolio, with the direct assignment of credit. And it has fiduciary sale security, so you have a guarantee of subordinated amount and fiduciary alienation when the units are completed. And we have been able to assign that credit portfolio at lower rates than we charge from customers in terms of interest. So you were right. Our plan is to continue to assign all Flex P ortfolio of credit portfolio that we have and originate. Thank you.
The next question comes from Aline Caldeira from Bank of America.
Good morning, everyone. Thank you for taking my question. I have two questions. First is the follow-up on Cambauva about the Flex P ortfolio. It's clear that everything you originated, where you assign, that's what you've been done so far.
But what is the potential of this F lex P ortfolio? And how much would it account for in total sales of MRV? And where would you like--is the level--what's the level you would like to reach? Do you need any adjustments to be made? Do you believe that this encourages the growth of this line in terms of supply of products to higher income customers? And what's the appetite for this type of credit? And on the other... My other question is, if it would be nice, if you could comment on what you feel about cost dynamics at the end. In the other calls, other companies are also discussing labor inflation. But in addition to labor, do you start feeling something in materials of the--according to the INCC, the inflation cost of construction materials?
Okay. Hello, Aline. This is about the F lex P ortfolio.
We use direct credit for customers that do not qualify for MCMV, so whose income is above BRL 8,000 , and we try to direct this flex credit line when between a project with a bank financing, sales within FB, we look for flex because it has a better VPL. And that's until the project reaches 70%-80% of execution. After that, the other is more advantageous. So the customer adopts the financial model or chooses the financial model that best fits its financial situation. So we could expect that with as the sales of company grow, the portfolio will grow from 10%-12%. It's quite stable.
Look, this is Fischer speaking, Aline. As for your second question, costs. In our cost matrix, we look at construction cost, that's the highest figure, but there's also land cost.
Rafael talked about that briefly. We've been able, in the last two years, to specify, more specifically, to make better deals in terms of purchasing land, in terms of payment method, payment terms, with not increasing demanding cash, but also lower prices. The cost of acquisition has dropped in the last two years, and that's important if you look at current figures of the land bank. Also, regarding direct costs, labor and raw material. We have, in our perception of MRV, I cannot see this in operations yet. We've seen in the supply area, in engineering, also in when hiring labor, there is a small pressure regarding inflation. Actually, we are operating a bit lower than INCC. We've been more efficient than inflation. So in practical terms, I have stable costs at the end.
Here and there, we do have some concerns, for example, in Rio Grande do Sul, more specifically, but it still hasn't happened. And even in São Paulo City, I see no pressures that's, you know, deserve our attention, special attention. So things are under control with an important gain in the land bank line.
Okay, perfect. Thank you very much, Fischer and Kaká.
The next question comes from André Mazzini from Citi.
Good morning, Rafael , Fischer and Kaká. I have two questions. First, about guidance. Among the items of the guidance, the ones that more distant is cash generation, that's BRL 32 million. I know that the second half of the year is better seasonality, but even considering that, how confident you are that you will reach the generation guidance? Sales portfolio could boost the guidance to reach the guidance.
You have an inventory of like Flex pro soluto that could be sold in terms of receivables. Resia, U.S. market, we've keeping track of multifamily transactions in the U.S. We saw EQR buying $1 billion from Blackstone and Dallas KKR purchased $1.2 billion. All these transactions at 100% cap. These are... Have you talked to them? They, they have a part- Brutus has a partnership in Brazil. They are here in Brazil with Luggo. So these major global investors would be important counterparts to do something in the medium and short and medium term?
Okay, Mazzini. First, about guidance. We are very confident that we'll reach the cash generation guidance. Like I said, it's according to plan. The first half of the year has a lower volume, and the second half will be much stronger.
Which will drive improved operations, will be driven by improved operations and growth of sales, production, and better margins. So these will allow us to reach the guidance of the year, especially in the second half of the year. And as you said, we do have a possibility of accelerating the receivable sales.
Mazzini, I'll answer the second question. About Resia. Yes, that's it. I mean, the U.S. market is performing better. We've been talking to several investors, not only in this recycling of assets process, but to be partners also for the next SPEs. The market is more active, and the mood regarding compared to the beginning of the year and the second half of last year's has improved considerably.
Today, everyone understands what's the direction of interest rates, which is something that was not very clear some time ago. So, players are more organized, less opportunistic. That which reinforces our thesis that Resia, from now on, will have a path of recovery.
Okay, thank you, Rafael, Kaká.
The next question comes from Rafael Rehder from Safra.
Thank you for the opportunity. I have two questions. I would like to talk about the gross margin of new sales. You said that it reached 34%, and you said that at Investor Day, that you could reach 35% until the end of the year. How much this one percentage point will come from? Any specific place?
About the change in reporting of cash, how long is this entire process taking until the deed is signed at the registry, deed registry? And what are you doing to reduce this time to improve cash generation?
This is Fischer speaking. I would like to answer both questions. Regarding gross margin of new sales, yes, we are keeping track of it. Quarter-on-quarter, we deliver growing margins of new sales. Obviously, as we get closer to our goals, the slope is not so steep. But whether it comes from group one, two, or three, I mean, we've made an effort of pricing that's ever more sophisticated for all the groups, so it comes from all groups and also from Sensia. So we are on the right track.
We've been performing well, and this effort deserves a lot of credit because it doesn't only involve price, it's price plus a substantial reduction attained in the assignment of receivables. That used to be 20%, running in 12%, and that's now above 20%, provides a considerable gains for the company. So we are on track on that. And I remind you that this margin is even higher when you do not consider the cost of financing in it. So the prospects are of growth in the margin. In some cities, we are already running above this guidance. So nothing tells us that we won't reach that within the time guidance that we have. As for your second question, this Caixa process has been going on for some time now. We had a change in two important areas, Rio and São Paulo.
But we saw this happening in other states, and it performed well. So the efforts we're making in these last two states is a management that's much more active of registrations of the agreements of individuals. We were able to reduce by 20 days in the last six months, which is very important. We have some initiatives in progress that involve not only the registers, but also Caixa Econômica Federal. We've been working with them for them to be more agile. So but everything we focus on, Rafael, the results are seen. So we in the last six months, we reduced this registration process by 20 days, which is very important.
We still have to see some room to gain efficiency, but the fact is that the fact that we now receive the funds only after the deed is registered, it takes a bit longer. But I think we can improve that still, but we depend on third parties. But we've been able to be more efficient. Thank you.
Okay, perfect. That's very clear. Have a good day.
The next question comes from Antonio Castrucci, from Santander.
Good morning. Thank you for taking my question. With this strong growth you have delivered in production lately, I would like to understand how is the development of legacy projects, and what's the weight of 2021 and 2022 projects in the revenue recognition of MRV?
Could you also make a parallel with the development of construction works from 2021 and 2022, with the prospects for cash generation for the year, and how much impact do they have?
Good morning, Antonio. What's going on is a growth of the new projects and the reduction of old projects. So the performance is very different. These projects of 2021, 2022... The 2020 is no longer the balance sheet, but 2021 and 2022, yes. We had very poor margins in projects from those two years, and even worse, because inflation came later on much higher levels than we expected. In addition to inflation, the KPIs of the projects that started in 2021 and 2022 are very bad. So these are years to get rid of as much as, as quickly as possible.
As of the second half of 2022, projects have a much better performance, and that become more and more relevant. So naturally, both the income statement and cash generation will be more and more impacted by the new projects, the most recent projects, as compared to older projects. So as Kaká said in the previous question, we're very comfortable with the guidance, not only for 2024, but also for 2025, because we see the quality of these more recent projects, and we know when the old projects will leave our balance sheet. So unless there is a lack of control of costs or some unexpected inflation in the industry, and according to our indicators, we hear some players talking about inflation, but we see our disbursement for the first half of 2023, when compared to the first half of 2024, is flat, zero inflation.
The land we purchased in the last 18 months, as compared to PSV, are below historical average in prices. So the cost line components are positive. Sales prices continue to rise, slightly above inflation. So everything leads us to believe that from now on, the new projects will have a very good performance that will be, provide strong cash generation and strong profitability in the future. But there's no leap between quarters. This is a curve of evolution, both in income statement as well as cash generation. Is it clear, Antonio?
Super clear, Rafael. Just to follow up, when do you expect these old projects to stop impacting?
Well, the balance sheet, 2021, at some point in time next year, we'll have zero impact. 2022, it will have some impact on 2025 and 2026, zero. So this is pretty much it.
Okay, perfect. That's very clear. Thank you.
The next question comes from Jorel Guilloty from Goldman Sachs. Goldman Sachs.
I have two questions. First, for MRV Inc. I would like to know what's the current breakeven for cash generation from operations, or rather, the breakeven for gross margin? It used to be 25%-27%. I would like to know if it remains at those levels. And the second question, I'd like to learn a bit more about the net revenue. In the last quarters, it hadn't suffered a negative impact from equity subs on mark-to-market of debts. Is there anything that you plan to do to minimize or get rid of those impacts? Thank you.
Hello, Jorel, this is Ricardo speaking.
Regarding cash generation, something like 26.5%-27% of gross margin would be the breakeven of the operation, so we're very close to reaching that level. Second point, if I understood correctly, you're asking about the mark- to- market of swap transactions, equity swap, debt swap, and impact on net income. If this is what you asked, the swap, equity swap has to do with the share value. We now renew this transaction with a share value at BRL 6.80. So we, when it increases its value in the future, we will decrease this end this operation. We don't wanna carry this transaction in our balance sheet. In terms of swap, we made some bad issues according to IPCA, and we changed the indicator to CDI.
Although there is a mark- to- market for swap transactions every quarter in our balance sheet, so a lot of the development of the curves are in the past. So now curves are very much more stable than the past. So we should expect lower impacts for such a transactions. Another important point is that new issues of that, we won't use derivatives to change the debt indexer.
So, okay, that's very clear. Thank you.
The next question comes from Ygor Altero, from XP.
I would like to understand a bit more to what you attribute this significant pro soluto reduction. If you could share with us the initiatives, whether this level is sustainable from now on, and also if the adjustment on income brackets could have a positive contribution? And also about Sensia.
If you could give us an update on how much you intend to launch, what is the operational dynamics of, sales speed, sales over supply, and what are the cities that you're concentrating on?
Hello, good morning, Ygor. Pro soluto. Pro soluto is a combination of actions. There are external factors such as the new MCMV, the regional checks, or incentives by local governments have happened a lot. Also, the evaluation that banks make for each unit and our price, sales price, this is important because our prices increased very quickly as of the second half of 2022. There was a mismatch between evaluations, bank evaluations and the prices. Since we're growing more slowly, there was a catch-up from the bank evaluation of our properties. So these three factors, as evaluation of properties, the new MCMV bracket and the regional check.
But inside the company, since we've improved our commercial process, we've been able to sell at a very healthy level and with lower credit facilities. We have a bank that's quite sophisticated with the rating analysis for each credit rating for each customer. We've improved credit granting, being able to keep a good sales volume, giving less credit. So today, the pro soluto is at 12% something, 12.5%, approximately. And at this level, you see that pro soluto has not grown compared to the last quarter. And if you consider the receivables that were assigned, it even dropped a bit despite new sales, so we want to reduce it even further. So what we provide in credit is lower than we receive from our customers, is good for cash generation.
As for Sensia, your second question, this is an operation we don't want to grow for now. We believe at the current interest rates of Brazil, it's not interesting to grow. Even the flags and direct financing becoming healthier and, and better organized. Sensia is a company of BRL 1 billion per year, and we're working heavily on improving the sales over supply of Sensia. Sensia is a business unit that has a good gross margin, but it used to have a lower sales, SOS, and there was a learning process. It's a new segment for us. So the first cycle had a lower sales over supply, and quarter-on-quarter, it has improved. And we want this SOS to be close to the economics segment of our business. It has a longer construction cycle, so we can fit sales with that with a good profitability.
So that's a good size for us, BRL 1 billion per year, more efficient with the IRR that's better, and that's what we envisage for Sensia.
Just to follow up on the adjustment of brackets, income brackets, does that contribute to boost the p ro soluto reduction?
Yes, they would help both Group 1 and 2, an increase of BRL 200 and BRL 300 per month for Group 2. It's not major, but it's a tailwind. So in Group 1, subsidies are higher, lower interest rates, so the terms are better for these customers. We can provide less pro soluto. As for G roup 2, the affordability of customers is improved, so you can sell a bit faster or increase prices or reduce pro soluto. We're very sensitive today to reducing pr o soluto.
So for us, it's important to reach the end of the year with the p ro soluto close to 11% or slightly above that. So looking at the future of the company and the size of receivables we want to have, we see p ro soluto total, pre and after key delivery. It's important to distinguish, because the pre, one plus the other, close to 11%. Pre- delivery of keys and after delivery of keys. Thank you.
This ends the Q&A session. I would like to turn the floor over to MRV CEO, Eduardo Fischer, for his final remarks.
Well, thank you very much. I would like to make this closing remark of someone who's really constantly involved in the operations. All the indicators and curves of operations point out to a very healthy place for the company.
We've gone through some of these points today. When you look at what's being purchased, the cost of construction, the speed at which construction is being completed. Last month, we beat the completion rate, everything or the speed of construction. All the indicators, the KPIs of the company, are at very healthy levels and moving towards being even better than they were before the pandemic. So after these two or three years of recovery, we're very confident. The spirits are high because all our indicators point out to a company that will be much more profitable than we used to be before the pandemic. This is a path, there's naturally a delay for cash generation, for income statement, but we are going fast towards that direction. I cannot see any KPI in the company that points out to a different direction.
Rafael mentioned that we have a huge gap between the legacy projects and those that started afterwards, a gap in margin, I mean. So as these legacy projects fall behind us and the new projects become stronger in our production, this, cash generation, generation of margins, tends to grow much faster and improve. So we're very optimistic and excited about what we've built in these last three years. Thank you very much, and we see each other in three months.