Cyrela Brazil Realty S.A. Empreendimentos e Participações (CYRE3) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to Cyrela Brazil Realty S.A. Second Quarter of 2026 Earnings Call. Today with us are Mr. Miguel Mickelberg, CFO and IRO; and Mr. Iuri Campos, Head of Investor Relations. This call is being recorded and simultaneously translated. [Operator Instructions] Also, you can find the slide presentation in English on the company's Investor Relations website at www.ri.cyrela.com.br. [Operator Instructions] We would like to inform you that any statements that may be made during the call related to Cyrela's business perspectives, operating and financial targets are projections made by the company's management that may or may not occur. Investors should understand that political, macroeconomic and other operating factors may affect the future of the company and lead to results that differ materially from those expressed in such forward-looking statements. To open Cyrela's Q2 2026 Earnings Call. I'd like to turn it over to Mr. Miguel Mickelberg, CFO and IRO. Mr. Mickelberg, you may proceed.

[indiscernible] in the second quarter of 2026, Cyrela maintained its consistent execution track record, delivering continued progress across its operating and financial indicators despite a still challenging macroeconomic environment. The period was marked by increased foreign uncertainty, particularly due to geopolitical tensions and volatility in the domestic markets impacting financial assets. In this context, the company continued to advance its strategy with discipline in decision-making, selectivity in launches, and rigorous capital allocation. From an operating standpoint, our Q2 performance was consistent. Launches came to BRL 3.8 billion, a 120% rise quarter-on-quarter, reflecting our strategy of developing different products. Presales totaled BRL 2.6 billion in the period, 18% more quarter-on-quarter, demonstrating consistent demand for our products. Financial results reinforce Cyrela's ability to combine growth, profitability, and discipline. We posted net revenue of BRL 2.5 billion, a 23% increase quarter-on-quarter, and gross margin of 34.4%, reflecting the quality of our portfolio and discipline in execution. Net income came to BRL 452 million, and the adjusted ROE in the last 12 months remained at a healthy 20.9%, reflecting our ability to create shareholder value. The cash generation of BRL 272 million was a highlight, contributing to the reduction of the net-debt-to-adjusted-equity ratio to 16.5% and further strengthening the company's capital structure. We remain attentive to the evolving environment and opportunities arising throughout the cycle while maintaining rigorous criteria in the selection of new projects. We'll continue to focus on excellent journey for the customers and generating sustainable long-term results. We thank our employees, customers, shareholders, and other stakeholders for their continued trust. Now I'll turn it over to Iuri to comment on our results.

Thank you, Miguel. Let's talk about Cyrela's launches on Slide 4. We had a robust launch volume of almost BRL 4 billion, growing year-on-year and quarter-on-quarter as well. And the contribution was very significant in each segment. In the year, we exceeded the mark of BRL 5.5 billion in launches. Now on Slide 5, let's talk about our sales performance. The numbers as we consider them are strong and solid, exceeding BRL 2.5 billion in sales in the quarter. It's important to highlight that we are mentioning the figures here always excluding swaps and in the company's share. Starting next quarter, we are going to remove those terms from our disclosure materials. So we are going to assume that when we mention any figures, they exclude swaps, and they only consider the Cyrela share of the projects. And you can see here that this quarter was higher in numbers than 2Q '25 and 1Q '26 and also year-to-date, we grew by 10% year-on-year. And you can see that every segment once again contributed significantly to our results, including Vivaz and high income. Now on Slide 6, let's take a look at our SOS. Our launch and sales performance took us to a quarterly SOS, actually a year-to-date SOS of 42.8%. It is in line with the previous quarters. And our launch SOS this quarter, Q2 was 32% we sold almost 30%, more than 30% of the BRL 4 billion that we launched in 1 quarter, less than 3 months, and we consider that performance to be satisfactory. Now on Slide 7, let's take a look at our inventory. Our inventory went up by 13%, reaching BRL 12.8 billion, almost BRL 13 billion. This growth is the result of a quarter that had, again, a high level of new launches, and that's part of the gain that's expected. Now when we look at the breakdown of our inventory, 73% is in the city of Sao Paulo. And this inventory is new, it's recent. So that shows once again the strategy that we have been following. Now let's take a look at the finished units on Slide 8. Our sales of finished units was very strong with a drop of 2% in the finished units inventory. So everything that we have been doing on this front is paying off. And you can also see the breakdown of our finished units per location. The biggest concentration is in Sao Paulo, as you can see. Now on Slide 9, let's talk about the delivered units. They surpassed BRL 1.5 billion in the quarter. And this is important because it supports our cash generation, as you are going to see in the coming slides. The growth in our deliveries has supported and sustained our cash generation. Now let's talk about the financial results on Slide 11, starting with revenue and gross margin. Considering that there was a higher volume of launches and sales, the revenue grew accordingly. Those indicators are closely linked, as you know, net revenue came to BRL 2.4 million in the quarter and BRL 4.5 million in the year. Year-to-date, the revenue came to BRL 4.5 billion. And the gross margin in the quarter came to 34.4% and 33.7% year-to-date. On the right-hand side, you can see that the gross margin this quarter was stronger. And as a consequence, the margins for the first 6 months of the year was stronger as well with a very strong contribution of the low-income Vivaz products. Now let's take a look at Slide 12 to talk about our net income and ROE. Our net income exceeded BRL 450 million, growing year-on-year and quarter-on-quarter. And in the first half of the year, the net income came to BRL 748 million compared to BRL 715 million year-on-year, and that is the result of the growth in our margin. And our ROE can be seen on the right-hand side of the slide. We adjust the denominator. We use the net income of the last 12 months, and we exclude AVJORA from CashMe to get to a more realistic indicator, which came to 20.9%, in line with the previous quarters, as you can see on the chart. And it is a satisfactory level. But as you know, the company will always pursue higher numbers. Now let's talk about our debt on Slide 13. The cash generation, as you're going to see on the next slide, was positive and that reduced our relative indebtedness. We are adjusting the net debt and our equity according to AVJORA from CashMe. And you can see that the net debt went down, and it stood at -- the indicator stood at 16.5%, the net debt-to-equity ratio. And on the right-hand side, you can see the qualitative indicators showing how comfortable we are in terms of our debt. It comes at a cheap cost, and most of it is long term, as you're going to see. And now let's talk about the last part, last financial bit of the presentation, cash generation. We sold our finished units. We delivered new units, as we said earlier, and that took us to a cash generation of BRL 272 million in the quarter, BRL 406 million in the first 6 months of the year. And last year, in the same period, we had a minus BRL 320 million in the first half of the year. But again, the quarter was very positive.

Well, thank you, Iuri. Now we are going to take your questions. But before that, I would like to announce something. We just published a material fact last Wednesday, saying that we signed a non-binding agreement for the sale of some of our assets. I'm sure the investors are interested in knowing more about the deal, but we have a confidentiality clause in this non-binding agreement. So there's not much that we can disclose here. We cannot talk about anything that's not mentioned in the material fact. Thank you for your understanding. And with that, I'm glad to take your questions. Thank you.

[Operator Instructions] The first question comes from Gustavo Cambauva.

I have 2 questions. Well, first, I would like to understand more about the precedent -- the conditions precedent related to the material fact that you disclosed. And if there's any risk of not delivering on any of those conditions and maybe having a cancellation of the deal. And I would also like to know what the proceeds will be used for your leverage was low at the end of the quarter, the company generated operating cash and with this large volume of funds, I'd like to know more about your rationale. Maybe you're disposing of the asset to distribute dividends or maybe to buy shares back? Are you going to invest in buying land bank maybe? I'd like to understand what the proceeds will be used for. And the second question is related to the high-income market. It has been very resilient over the past years, although interest rates have been consistently high. Still your results are very strong in the high-income segment. But more recently, we've seen a slowdown in this market. The inventory is higher for you and competitors alike. So I'd like to know if you see that slowdown in the market. Is that concerning to you at all? Are you going to slow down launches in the segment? If you can give us more color about that, that would be great.

Cambauva, thank you for your questions. Well, first, about the TRX deal. We have 105 days to close the deal. And -- for now, it's tough to say if it's going to be more or less than that. And as soon as we have more information, we are going to disclose it to the market, but the deadline is 105 days. About risks in this deal, as we said, it is a non-binding MOU. So yes, there are risks as always, but we are confident that the deal will be closed. And that's why we signed the non-binding agreement because we are confident in it. Now about the use of proceeds, you said it very well yourself. We generated operating cash, very strong one, and it even exceeded our expectations for this year. The first half of the year was better than we thought in terms of cash generation. And we always pay close attention to discipline in generation and allocation of capital. Since we are generating a lot of cash, if we see any inflow of cash on a non-recurring basis, we will be more comfortable to optimize return for the shareholders following the options that we always have, dividend payouts, or a buyback, or even redeeming preferred shares, we are still going to assess the possibilities. Nothing is defined yet. But yes, cash generation is good. So that puts us in a more comfortable position to make some or one of those movements in the future. Now about the high-income market, I agree with you, in our earnings calls, we have been saying that the market is indeed more challenging, probably it has been so since early 2025. I don't think it deteriorated recently, but we do know that there are many projects from the competitors that do not perform that well and that can always add more challenges. But the demand in the market is still strong and solid. We see a volume of transactions in the high-income segment that is rampant. And if we can set ourselves aside from the competition with differentiated products and if we can really attract the customers with a beautiful sales -- point of sales, we are going to continue with our strategy and with our success. We always try to talk about that in our meetings with you. We understand that the stock market right now is complicated, families are in debt. But when we look at our numbers and when we compare it against our own numbers for the past 4 or 5 years, we are actually exceeding our track record, and it's pretty in line with the budget that we have forecasted. In the fourth quarter of 2024, we sold almost everything in 1 month. And right after the pandemic, we launched a project in Vila Mariana in Sao Paulo, and we sold everything in a month. So we knew that, that moment wouldn't last forever, as we said, but things are going back to normal and the company is happy.

The next question comes from Tainan Costa from UBS.

I'd like to follow up on the last question. I think Miguel has already said that your strategy is the same, although things are more challenging. But from a sales standpoint, I'd like to know more about your strategy. Faced with this scenario, did anything change at all? Are you being more aggressive maybe to sell finished units? Are you spending more to attract customers? or to offer differentiated products that stand out in the competition. And that's linked to my second question. Your sell-in is higher than expected. Was there any one-off event? Is that linked to your strategy? Is that related to a higher volume of launches? Should we expect this line to grow? Should we expect your selling efforts to spend more money than in the past? Or should those costs dilute over the course of 2026?

Thank you for your questions, Tainan, addressing the first question, nothing changed in our sales strategy this quarter, and we did not start spending more to sell our inventory or adjusting prices. We adjust prices when we deem necessary. We did it in late '25, early '26. But this quarter, that did not happen. Thank goodness, we are performing well in terms of selling our inventory, especially finished units and that allowed us to reach the good results that we posted. Now when it comes to the selling expenses, the effects that we saw in the second quarter are not related to selling inventory or changing our strategy or anything like that. There are 2 main factors involved here. The first one is an increase in the media line, which is linked to the growth in launches. We grew by 120% quarter-on-quarter. So there's an initial expenditure to capture leads as well to accelerate the sales of the products in the beginning of the launch period. Another line that I would highlight is the point of sales line. Indeed, the amount is high. And if you look at our explanatory note #8 about fixed assets, you're going to see the reason why that happened. In '24 and '25, our financial expenses with stand and points of sale was higher. And now we are in the phase of demobilizing many of those points of sale. And now it is clear to us that the financial expenditure is going to be lower than the accounted numbers. So the fixed assets will go down by BRL 52 million approximately. So the accounting effect that we see is higher than the financial expenses. In the year, the point-of-sale expenses will be lower than last year, and that's the main factor for us. We need to be very disciplined. We have a marketing budget for each product. We need to meet it, and we are indeed. And sometimes there are booking effects. For example, in '24, that line went down year-on-year, but we actually spent 40% more, if I'm not mistaken. That happens because in 2024, 50% of the launches took place in the fourth quarter. So the expenditures occurred financially, but not in accounting terms because those expenditures were amortized in 2025. So those effects do happen. In the first quarter, we were asked about our SG&A expectations as a function of the revenue, and I said it would be 15% for the year. Now with Q2 results, my expectations have changed. It could be more than 15%, but it doesn't mean that we are spending more in marketing or points of sale or any other line in our selling expenses. We grew a lot over the past years, and that effect is natural. However, we keep strict budgets for each product to sell in the volume that we need to sell with the budget that we decide to have for each project.

The next question comes from Fanny Oreng with Santander.

I have 2 questions. I know that you don't give any guidance, but the trend in your gross margin really caught my eye. The Vivaz margin year-on-year continues to improve and living as well with better margins. But what can we consider in terms of consolidated margins for the rest of the year? Should we expect that same level to continue? That's the first question. And the second one, Miguel, can you give us an update about your CashMe operation that also caught my attention. The CashMe result has improved a lot. So if you can give us any update on the trend going forward, if you think that the portfolio will grow? And also, if you can give us an overview of the interest rate effects, that would be great.

Well, about the gross margin, our margins were close to 34%, as we said in previous calls. So we thought it would be feasible to reach 34% and we always highlight how volatile this line is launches affect the sales of finished units, inflation can impact it as well. So we know that this line can be very volatile. The level that we are at right now is very similar to what it has been in the previous launch periods. I don't think there is a lot of room for the gross margin to grow. However, if we exclude the volatility issue, we can envision a gross margin that is close to that level. And one of the factors that underpins that expectation is precisely what we -- what you said. Vivaz has a good margin. But in 2025, for example, Vivaz accounted for over 14% of the company's net revenue, but it accounted for 31% of the company's sales. In the first half of 2026, net revenue from Vivaz accounted for 20% of the total net revenue, but sales of Vivaz's products accounted for 40% of the company's sales. So that net revenue share of 20% is lower than the share of Vivaz's products in our sales volume. So if we can keep that margin for Vivaz's products, that is going to allow us to be at a level close to what it was this quarter in terms of gross margin. Of course, it all depends on the performance of selling finished units, and we are going to see indeed some volatility in this line. I forgot to talk about CashMe, I'm sorry. About CashMe, we are very excited about it. It's performing well. We finished the second quarter with a portfolio of about BRL 4 billion. This quarter, specifically, CashMe was benefited in its results by the 3-month period of high IPCA inflation rates. And CashMe is a creditor based on IPCA rates in its entire portfolio. And the liabilities are also adjusted by inflation. But since the portfolio is also adjusted by IPCA, it offsets that effect. And sometimes the results can be -- can suffer if the rate goes down. And this quarter, it was the opposite. It benefited for -- from the 3 months of high IPCA rates. Now when we look at the third quarter, July had a lower IPCA rate. So that will affect the third quarter numbers. Probably it is not going to perform as well as it did in the past quarter. So let's see how it goes, but we are indeed very happy about all the hard work put in this project by the team.

What is the average rate that CashMe is charging? Do you disclose that number?

No, we don't. We don't disclose that number. But if you go on the website, I'm sure you can simulate and model the numbers and calculate how much it is.

The next question comes from Rafael Rehder from Safra.

I have 2 questions, too. I believe that you are already working on your pipeline for 2027. What should the mix be between the 3 verticals? And the second question was about the sales of finished units. It was surprising. Do you think that's related to a specific product? Or do you think there's any nonrecurring effect that we should consider? And what do you expect for this line going forward?

I apologize. I think my mic was on mute. So I'm going to repeat it. About the mix, we are usually more bottom up than top down. We don't have the defined pipeline for 2027, and we look at each brand separately, trying to find the best opportunities in each of them. Our partners pay close attention to the land bank in each of those segments. For Vivaz, growth is more natural because of its past performance. So I believe that the share of Vivaz products will grow. But about the other verticals, we can't tell you anything about it yet. We are still taking a look at land bank and all that. About the sales of finished units. Well, we always have aggressive targets for finished units. We believe that finished units have to sell fast. Last year, we fell behind our target for finished units. Now this year, we are right on target or even slightly above our target. So for the second half of the year, we need to do things similar as we did in the first half. And we are still working hard to keep that strong pace of finished unit sales. This quarter, I don't think there was any specific product that stood out. The finished units are pretty scattered across different products. And of course, some will have more weight on the numbers, but I don't think any specific product stands out this quarter.

The next question comes from Elvis Credendio from Itau BBA.

The first question is about cash generation. I'd like to know more about what's behind that strong performance? Is it finished unit sales? Was that any one-off impact this quarter? And what can we expect for cash generation going forward? Do you think it is sustainable to generate as much cash as you have over the next quarters? And what do you have to do to pull that off? And the equity line, the equity method line was weaker than previous quarters. I'd like to know why that happened? And what can we expect going forward from this line?

Thank you, Elvis, for your questions. About cash generation, the number for the first half of the year was very strong, especially in the second quarter. There were 2 effects that are non-recurring that took place in Q2. The first one is the disposal of a plot of land, and we received the payment in one single quarter. And the other one was the -- the receipt of an installment of a payment for an asset that we sold. We sold it a long time ago, and we received the payment this quarter. That number was already accounted for in our cash since the beginning of the year. So it doesn't change the expectation for the whole year, but it impacted the second quarter. I believe that BRL 90 million to BRL 100 million was the recurring part of this result. And the main driver is sales of finished units, a little bit related to land bank as well. Those are the main factors. Now going forward, I would say that cash generation for the second quarter should be close to neutral or slightly positive. And what's going to determine that is expenditures with land bank and keeping up with a good performance in the sales of finished units. Now about the equity method line. This quarter specifically, there was a negative non-recurring event. A partner of ours sold his operation. He sold his stake, and that gave us a loss of BRL 36 million, and that impacted our P&L in BRL 18 million. That's non-recurring. And apart from that, there's nothing really to highlight about this line. It is going to be volatile because it is influenced by projects and JVs. So it is going to be volatile. Elvis just following up on your question about cash generation. Q2 and Q4 are the quarters in which we concentrate the payment of interest of real estate bonds. The volume of interest that we pay is high, and that always drives cash generation down. But this quarter, we generated a lot of cash despite the payment of interest. And even if we exclude the sale that Miguel commented on, still cash generation was very robust.

The next question comes from Pedro Lobato with Bradesco BBI.

The first question is about the Minha Casa, Minha Vida housing program. What's the competition like in this market? You have a very long track record. So I'd like to know if there has been any movement, any different movement in the competition as of late. And also, I would like to know more about the competition dynamic for the customers and also about the funding for customers. Do you think that they are facing more difficulties to get funding from banks?