MRV Engenharia e Participacoes SA (BSP:MRVE3) (Q2 2026) Earnings Call Highlights: Record Cash ...

Negative Points

• The production-transfer gap remains, with 9,000 more units produced than transferred in the last two years, requiring time to close and potentially delaying cash generation.

• Cancellations in the Flex sales line increased by BRL30 million due to higher default rates, leading to a slower pace of gross margin recovery in Q2.

• Caixa's temporary loan restrictions in late June and early July impacted the entire market, though adjustments were made, highlighting credit risk concerns.

• The company's exposure to state government programs, which account for about 40% of sales, faces uncertainty for 2027 due to upcoming elections and potential fiscal constraints.

• Resia's strategy of selling assets before stabilization leaves money on the table, and the remaining long-tail assets (land plots and North City) may not be sold until 2027-2028, prolonging the deleveraging process.

Q & A Highlights

Q: Regarding Resia, you've announced a series of asset sales. What changed in the company's rationale? Is the idea to sell things as quickly as possible, even if you don't capture the highest price, and should we expect the total divestment process to be faster? A: Rafael Menin, CEO: We are prioritizing cash over asset valuation. We are leaving some money on the table by selling faster, but this generates BRL1.5 billion in cash for MRV & Co. and a 28% reduction in leverage. The next asset to be sold will be Golden Glades, given its strong rental performance, but that sale may not happen until 2026. The remaining plots of land should be sold throughout 2027, with a small residual value left for that year.

Q: Could you give an update on the Manaus operation, the importance of state programs in your sales, and how feasible is it for MRV to reach the 35% gross margin level of new sales? A: Rafael Menin, CEO: We cleansed the Manaus database last year, and it is now an extremely profitable operation. We only start selling in state programs after we have a guarantee the process works, and we have no liabilities regarding checks. State programs are being managed more maturely now, with funds budgeted for the year, so we are safe for 2026. Regarding margins, the pace of recovery was slower in Q2 due to a one-off cancellation of Flex units, but we expect margins to converge to the current 35% gross margin of new sales in the coming quarters.

Q: Regarding the default scenario, how do you see the assumptions used for provisions in your pro-soluto portfolio? Are investors more demanding when negotiating pro-soluto portfolios? A: Ricardo Rodrigues, CFO: Our provisions for the same ratings have remained stable. The PDV (present value of losses) for trade receivables has grown a bit because we have been able to reduce the pro-soluto after keys, which has a higher default rate. Our provisions are totally covered and in line with the real PDV. Receivables are performing very well, and we have not seen pressure to increase rates. We should actually expect a reduction in rates given the portfolio's behavior, but macroeconomic fundamentals have had a negative effect, so we have maintained the same rates.

Q: Sales expenses increased compared to the first quarter. What would be the recurring level for this line, and what should we expect in terms of percentage of revenue? Also, what should be the cash output to pay for plots of land purchased in the past? A: Eduardo Fischer, CEO: We are investing in our Super House, which brings new expenses, but as the team gains productivity, this initial expense is diluted. Our vision is for sales expenses to be around 9% to 9.5% of revenue, with a downward trend. Regarding the land bank, a large portion of the disbursements has already been made. The vast majority of the paid-for land bank has been paid for, so I wouldn't worry about additional disbursements. The remaining amounts will be less and less significant in the balance sheet.

Q: How do you envisage the price increase dynamics and how that should offset the VSO? And how do you see the progression of cash generation and land transfers looking forward? A: Eduardo Fischer, CEO: Our expectation is at least to match inflation, with possibilities of increases in operations spread throughout the country. Our strategy is to cause pro-soluto after key to continue to drop. Our disbursement per unit has capped below inflation, while pricing includes inflation at a minimum, putting us on a trajectory of constant cash generation. The land bank has already been disbursed, so when we launch products on paid-for land, cash generation comes net of land costs, boosting our potential. MRV will deliver growing cash generation dynamics in the second half and into 2027.

Q: Regarding the participation of noncontrolling parts of Resia, do minority shareholders have a preferred right in terms of settlement against losses, or should they absorb losses on a pro rata basis? A: Ricardo Rodrigues, CFO: Most of the shares of minority shareholders have a guaranteed return. The capital return, since it's equity, goes through the results after net income. Regarding the BRL138 million result in the share of minority shareholders in Memorial, it's a deconsolidation of results. When we received those funds, we automatically paid funding for construction and minority shareholders before settling.

Q: How is the plan to strengthen your proprietary house performing? And how do you see the development of the sales base for the third quarter? Also, how do you see the evolution of indebtedness and liabilities of assignments? A: Rafael Menin, CEO: In the last two years, gross sales and transfers have grown 5% to 10% per year, while production has grown faster. We are restructuring our Super House, investing in brokers, managers, and digital infrastructure. The difference in productivity between a mature team and a recently recruited one is almost twice as big, so we expect productivity gains. We have an extra stock of 9,000 units to transfer in the next 1 to 1.5 years. Ricardo Rodrigues, CFO: Regarding indebtedness, we expect liabilities from assignments to drop in the second half, close to zero. Overall indebtedness will drop, boosted by asset sales already made, providing a 30% reduction in leverage compared to December 2025.

Q: We saw in the news that Caixa was restricting loans due to systemic default rates. How much has that negatively affected MRV's results? And is it feasible to have an extraordinary meeting to discuss improvements to the housing program this year? A: Eduardo Fischer, CEO: There was an impact between the end of June and beginning of July for the entire market, but Caixa made a quick adjustment. The default rate at Caixa is improving compared to the past, and this is not a structural thing. We are having structural discussions about financing for lower-income housing, but nothing has been concluded. As for improvements to the program, it is feasible to have an extraordinary meeting this year, despite the elections. We defend the sustainability of the FGTS fund, and according to our calculations, these movements do not make the fund fragile. The prospects are good.

Q: Could you mention the cancellation of the Flex line? Is this due to a worsening in credit or a specific region? And do you have any pressure on the side of labor or equipment that could cause delays in project delivery? A: Ricardo Rodrigues, CFO: We operate in a system of guaranteed sales, so we virtually have no cancellations in My

For the complete transcript of the earnings call, please refer to the full earnings call transcript .