Q2 2026 Gps Participacoes e Empreendimentos SA Earnings Call
Speaker #1: Are with Marcelo the head of IT, M&A, and corporate areas, and my favorite: the director of governance, press, and CFO, to present the earnings results for the second quarter 2025.
Speaker #1: Let's begin with our main results in the second quarter: net revenue reaching $4 million 600 and increase of 7% vis-à-vis the second quarter 2025.
Speaker #1: Bom dia a todos. Estamos aqui hoje, Marcelo Hampshire, GPS.
Speaker #2: Here with Marcelo. The head of IT, M&A, and corporate areas, and my sales director. Governance, press, and. CFO to present the earnings results for the second quarter 2025.
Speaker #1: Of the 7%, 6% are organic growth. Adjusted EBITDA XIFRS: we reached $445 million in the quarter, 10% higher than the same quarter last year, with a 9.7% margin higher than last year once again, and higher than the first quarter of this year.
Speaker #2: Let's begin with our main results in the second quarter. Net revenue reached $4.6 million, an increase of 7% vis-à-vis the second quarter of 2025.
Speaker #1: In adjusted net profit, we had a non-recurring event in the S system. Further ahead, I will detail this: the cash impact of this so I won't speak about this net profit.
Speaker #2: Of these 7%, 6% are organic growth. Adjusted EBITDA XIFRS, we reach $445 million in the quarter, 10% higher than the same quarter last year, with a 9.7% margin higher than last year once again and higher than the first quarter of this year.
Speaker #1: I'll speak about the elimination of that non-recurrent effect: $180 million adjusted net profit X system S, 16% higher than the same quarter last year, with a 3.9% net margin in this quarter.
Speaker #2: In adjusted net profit, we had a non-recurring event in the S system. Further ahead, I will detail this. The cash impact of this so I won't speak about this net profit.
Speaker #1: We have $4,543 customers and an NPS score of 67%. We carry this out every half-year. Now, the percentage of net revenue by line of solution catering spearheading this, with 25%.
Speaker #2: I'll speak about the elimination of that non-recurrent effect: $180 million adjusted net profit X system S, 16% higher than the same quarter last year, with a 3.9% net margin in this quarter.
Speaker #1: This is a relevant solution in our service portfolio. Facilities: 23. Maintenance and industrial services: 21. And security: 19. We have a broad diversity of solutions and we are able to offer the customer a very broad and full-service portfolio.
Speaker #2: We have $4,543 customers and an NPS score of 67%. We carry this out every half-year. Now, the percentage of net revenue by. Line of solution catering spearheading this with 25%.
Speaker #1: Additionally, we have temporary labor services and field marketing: 7%. Indoor logistics: 5%. We are not concentrated on any customer this quarter. The main customers represented 5% of our—well, the top customer represents 5%, and within this we can have a broad number of contracts as we offer a broad diversity of services.
Speaker #2: This is a relevant solution in our service portfolio: facilities, 23; maintenance and industrial services, 21; and security, 19. We have a broad diversity of solutions, and we are able to offer them to the customer.
Speaker #1: So we have more than 15 contracts with these top customers per service, and per region let's speak a bit about the net revenue for the quarter.
Speaker #2: 5%.
Speaker #1: As I mentioned, we had a net revenue of 7% higher than in the second quarter 2025, and 6% organic growth. Now, we remind you that our organic growth is still being impacted by the 2024 cohort that was enormous in our M&A program.
Speaker #1: It includes the GRSA, and obviously we make the adjustment of contracts, contracts that have no rentability within our minimum standard. And this means we have a certain drop of revenues.
Speaker #1: In the cohorts, we acquired through time. As of 2024, cohort was very relevant. It's still exerts pressure on our net revenue. It's still going through organic growth, and the negative effect here is of approximately 2%.
Speaker #1: If we look at the quarter, the scenario is very similar. Total net revenue: 8% higher than in the first quarter of 2025, with an organic net revenue of 6%.
Speaker #1: Still impacted by that effect of the 2024 cohort for the 2025 cohort, made up of RH Med, Nutricar, and Tag. We also had a growth for the quarter.
Speaker #1: Now, I will turn the floor over to Marcelo to speak about our M&A program. Thank you, Marietta. Good day to all of you. Here you see a summary of our acquisition program for 2025 and 2026.
Speaker #1: 2024 was a highly intense year where we acquired GRSA. A very relevant acquisition, and we had an increase in leverage: 1.1 times net EBITDA.
Speaker #1: In 2025, because of this, we slowed down the pace a bit, but last year we acquired 3 companies: RH Med, Tag, and Nutricar, with a combined revenue of $3 million.
Speaker #1: Now they are under our management, and they are beginning to contribute results. This year, our proposal is to recover the speed and intensity of the M&A program.
Speaker #1: We have net EBITDA standing at a very comfortable level. This is a considerable advance regarding this indicator. Now, along with GPS, we have one of the largest companies in security.
Speaker #1: We have already signed the contract for purchase. We have UNIPEX, a company for marine hotel services. And this will consolidate our leadership in Macaie, in the basin of Campos.
Speaker #1: We have a significant participation there. If I'm not mistaken, this company has already been approved by the CADI, the Anti-Trust Agency, and we're now moving toward a closing the full acquisition.
Speaker #1: And Aster, which is a security company, concentrated in São Paulo, interesting program for the monitoring of residential buildings. If I'm not mistaken, it has been approved by the Anti-Trust Agency.
Speaker #1: We're simply awaiting the decision of the federal police. These companies invoice $500-some million, $12 months before the acquisition. Where I'm going to speak about the program accrued, as a whole, and then I will speak more about M&As.
Speaker #1: Well, this is a slide we always share with you. Showing you the M&As since the IPO in 2021. We have acquired 29 companies with 9.1 billion in terms of gross revenue, 1.8 million of revenues acquired per year.
Speaker #1: It's been 5 years of course, and there's no reason to slow down our pace. Quite the contrary, we would like to step up the pace a bit.
Speaker #1: And here you see the acquisitions carried out, and the importance of each of these: first of all, we have qualified enhanced our operation in industrial maintenance through the acquisition of 8 companies.
Speaker #1: SUSE and T Vertical Control and TLSD. This was relevant for us until the IPO. After the acquisitions, they have become our third main business in the company.
Speaker #1: Representing 21% of our revenue. Second relevant point that I would like to mention is our growth in catering. Once again, not very relevant until the IPO.
Speaker #1: Now we have the acquisitions of Marfood, GRSA, and more recently the acquisition of Uniflex. This has become our main business at GPS, responsible for 25% of our revenues.
Speaker #1: Well, I believe that we have successfully used the M&A tool to penetrate new businesses. Businesses that have synergy with us, that have good labor and share the management systems.
Speaker #1: To speak of our pipeline going forward, we're quite optimistic, and I had mentioned this at our last call. The scenario remains unaltered. The pipeline is extremely active.
Speaker #1: We have a complicated scenario of high interest rates, customer suffering in the day-to-day. Our procurement teams of our customers working more intensely, negotiating price.
Speaker #1: And of course, this is difficult for our competitors, especially the small and medium-sized competitors. So this is a favorable moment for M&A. We're not concerned with the origination of possibilities.
Speaker #1: Quite the contrary, our pipeline changed very little compared to our last meeting. We have approximately 20 companies interacting with us, with approximately $8 billion BRLs of combined revenue.
Speaker #1: We're working with the diligence going forward. We have 9 companies in this. And we had 10, one of them has dropped out. We converted 3.
Speaker #1: We acquired 3 companies since the last call. These companies have 9.4 billion of combined revenues. So this is not a matter of concern. We're concerned with the quality of price.
Speaker #1: The rule for M&As becomes ever more stringent. And compared to the last meeting, we have become even more rigorous while the interest rate in the last quarter was very high, but we had a perspective for a greater drop in the midterm.
Speaker #1: We no longer have this perspective GPS is negotiating 6.5 times EBITDA. To acquire a company, even though we paid 5 times EBITDA in the acquisition, we have to have a highly relevant potential for synergy.
Speaker #1: So, well, the pipeline has increased. We are being very conservative, very cautious. I think the moment demands this, and we are only going to acquire companies that offer a very relevant, very clear, and tangible potential for synergy.
Speaker #1: Companies with a highly qualified customer portfolio. Little concentration on specific customers and highly qualified customers. Now, we're enthusiastic with the pipeline that continues to be qualified, and our degree of stringency has increased as I mentioned.
Speaker #1: Once again, due to the economic context. We're going to continue on, speaking about our EBITDA. We always use adjusted EBITDA. This quarter, we also had an adjustment in the EBITDA of the S system.
Speaker #1: We had a provision for this that had impacted our EBITDA last year. But in the reversion, we're considering this as a non-recurring item withdrawing the impact on EBITDA.
Speaker #1: Basically, therefore, we have an EBITDA with a 10% growth vis-à-vis the second quarter with a 9.7% margin. And we can see this for the first half of the year as well.
Speaker #1: What we can say about this margin is that it had a qualitative evolution in the first quarter. We had low labor expenses, 1.3. This quarter, we're back to 1.8 again.
Speaker #1: And we have maintained the margin of 9.7%. So we begin to see an improvement in operating performance. When it comes to margins, the labor issues increasing almost 50 basis points.
Speaker #1: And we had a result of 9.7% this quarter. And we've done our homework. Our priority is to stabilize the contracts. This is something constant under management.
Speaker #1: And through time, we seek a margin improvement in the sustainable contracts. Long-term contracts. So this will be one of our strong performance indicators. A consistent and sustainable indicator as we always mention.
Speaker #1: Now, regarding adjusted net profit, we had a non-recurring effect. With this, we had an exceptional net profit result this quarter. When we withdraw this effect, we still have an evolution in net profit.
Speaker #1: Well, we had the reversion of the S system. There was a positive effect for this quarter. If we withdraw that effect, net profit grew 16% quarter on quarter.
Speaker #1: And compared between the first quarter, 26, and the second quarter, now, cash flow, this is a highlight. It was highly positive this quarter. We had an improvement in the quality of our build contracts.
Speaker #1: Significant work was carried out with the customers. And when you look in the rearview mirror, there are some contracts that were not performing. We made adjustments there in their cash.
Speaker #1: Adjustments in control in the maintenance of electrical system. And now we have a positive cash flow effect. It is consistent through time. I believe this is a great highlight.
Speaker #1: A very positive cash flow. Simply a contribution might yet this is an example of some of those difficult situations we mentioned what has contributed to this relevant cash flow is the decision that Gustavo and his team made at the beginning of the year.
Speaker #1: They were working with a large number of contracts for the maintenance of electrical wiring. Poor control and poor telephony networks for TLSV. These were mobilized in the first and second quarters.
Speaker #1: With relevant mobilization costs that hampered our margin. But besides being in deficit, they had a monumental consumption of working capital. So these results in the second quarter are very relevant.
Speaker #1: Simply because of these mobilizations. And in terms of cash generation, what we now have is C hotel services, maritime hotel services. We're becoming consolidated in this sector, which is very positive for us.
Speaker #1: Do listen to the podcast by William, who is the regional director. He's leading this business. And you can listen from here. Him and understand how this business truly operates.
Speaker #1: It's a business that requires initial investment, but that has a good cash return. And margin, especially at the end of the year and beginning of this year, we're still in the second quarter, but we will have an improvement in the second half.
Speaker #1: Another highlight is leverage. Thanks to our discipline, when we acquired GRSA, we were at 2.2 tons net debt EBITDA. Presently, we're at 1.3 tons net debt EBITDA.
Speaker #1: A very comfortable leverage for us that we deem to be our goal to remain at 1.5 and below. And with this, of course, we can continue with our M&A program and investments that we deem to be important.
Speaker #1: I would like to stop here for a minute to speak about the S system. We had several questions about this yesterday. So I'll make the most of this earnings call to reach an alignment.
Speaker #1: We had a provision in the S system representing 740 million. It was made up of two topics or two processes. One, the 10179 that deals with SESC, SESI, SENI.
Speaker #1: Go and witness, of course, we can continue with our M&A program and investments that we deem to be important. I would like to stop here for a minute to speak about the S system.
Speaker #1: And S, that's why it's called the S system. And this topic received a favorable positive decision. And that is why we are reversing that provision that positively impacts our results.
Speaker #1: We had several questions about this yesterday, so I'll make the most of this earnings call to reach an alignment. We had a provision in the S system representing $740 million.
Speaker #1: It was made up of 2 topics or 2 processes. One, the 1017-9 that deals with SESC, SESI, SENI, and S. That's why it's called the S system.
Speaker #1: There's 1390, another topic contribution to third parties. Specific for SEBRA INCRA and salary for education. Now, this also had movements in the provision. Differently from the 1079 system, the decision was not favorable.
Speaker #1: And this topic received a favorable positive decision, and that is why we are reversing that provision. That positively impacts our results. There's 1390, another topic contribution to third parties.
Speaker #1: And IRS is now collecting for this. We are forced to reverse the provisions. And make deposits for the provision to different topics. One with a positive effect on our results, the 1079.
Speaker #1: Specific for SEBRA, INCRA, and salary for education. Now, this also had movements in the provision. Differently from the 1079 system, the decision was not favorable, and IRS is now collecting for this.
Speaker #1: The other one, a write-up of the reversion of the provision. But with a neutral effect null effect. We had to revert the provision. And this does have a cash effect.
Speaker #1: Very well. We began with 740 million. We reversed the 1079. The principal and the currency the monetary redressing. We also revert the part of the 1390, 83 million plus 181 million.
Speaker #1: We are forced to reverse the provisions, and make deposits for the provision to different topics. One with a positive effect on our results, the 1079.
Speaker #1: The other one a write-of of the reversion of the provision, but with a neutral effect: null effect. We had to revert the provision, and this does have a cash effect, very well.
Speaker #1: And with the balance, we have only 145 million. Now, this balance that you see a large part refers to TRSA. And we have an indemnity that refers to the S system.
Speaker #1: We began with $740 million. We reversed the 1079. The principal and the currency the monetary redressing. We also revert the part of the 1390, 83 million plus $181 million, and with the balance we have only $145 million.
Speaker #1: Because of contractual issues. And a large part of those 145 million are due to that. Now, it doesn't make sense to anticipate and pay the debit what is left because this topic is still under discussion.
Speaker #1: There is a recourse at the Supreme Court to speak about the minimum duration of 1390 and other processes. So this is simply a balanced moving on no 28.
Speaker #1: Now, this balance that you see in large part refers to TRSA, and we have an indemnity that refers to the S system because of contractual issues.
Speaker #1: And a large part of those $145 million are due to that. Now, it doesn't make sense to anticipate and pay the debit of what is left because this topic is still under discussion.
Speaker #1: We went from 100 and some million to 140 million. Another impact is in the results. Now, the only one that impacts our results is the 1079.
Speaker #1: That received a favorable decision in May. We began to pay contributions to the S system. But we had a prior favorable decision. We did not have to pay that in June.
Speaker #1: There is a recourse at the Supreme Court to speak about the minimum duration of 1390 and other processes. So this is simply a balance moving on no 28.
Speaker #1: Therefore, this reversion came into effect. This topic, this last decision is now classified as a possible probability and it will come out of our balance.
Speaker #1: We went from $100 and some million to $140 million. Another impact is in the results. Now, the only one that impacts our results is the 1079.
Speaker #1: That received a favorable decision in May. We began to pay contributions to the S system, but we had a prior favorable decision. We did not have to pay that in June.
Speaker #1: And with that, we revert almost 240 million of principal plus 108 million of monetary correction with an effect of 209 million. Here we are adjusting this net profit and we only adjust the part of the principal in the EBITDA 240 million in the EBITDA and 229 million as we have that part of monetary correction.
Speaker #1: Therefore, this reversion came into effect. This topic, this last decision, is now classified as a possible probability and it will come out of our balance.
Speaker #1: And with that, we revert almost $240 million of principal plus $108 million of monetary correction with an effect of $209 million. Here we are adjusting this in net profit and we only adjust the part of the principal in the EBITDA: $240 million in the EBITDA and $229 million as we have.
Speaker #1: We also have an effect of that 1390 portion that has no impact on our results. It was a contingency. We reverted the contingency. The effect is nil.
Speaker #1: It will have a cash effect because I will remove it from cash to deposit. That portion of the provision because we have lost the process.
Speaker #1: That part of monetary correction. We also have an effect of that 1390 portion that has no impact on our results. It was a contingency.
Speaker #1: We have a total of 274 million including interest rates. As we have been remarking, we can always use tax credits which enables us to offset most of these 274 million now the remaining part that we would also have to pay.
Speaker #1: We reverted the contingency. The effect is nil. It will have a cash effect because I will remove it from cash to deposit. That portion of the provision because we have lost the process.
Speaker #1: We have decided to divide it in installments. The cash effect of these 274 million will have a net effect of 108 million throughout six months.
Speaker #1: We have a total of $274 million including interest rates. As we have been remarking, we can always use tax credits which enables us to offset most of these $274 million.
Speaker #1: And this expense had a provision. It was not deductible. It now becomes deductible and will have a positive effect in our calculation of income tax.
Speaker #1: Now, the remaining part that we would also have to pay. We have decided to divide it in installments. The cash effect of these $274 million will have a net effect of $108 million throughout 6 months.
Speaker #1: It's a cash benefit. That we will capture in July. Where we pay the income taxes for the second quarter. So here you have the three effects.
Speaker #1: The effect balance, the cash effect, and well, should you still have any doubts, we can dissipate them here or subsequently. With this, I would like to end the presentation.
Speaker #1: And this expense had a provision. It was not deductible. It now becomes deductible and will have a positive effect in our calculation of income tax.
Speaker #1: I remind you of two important points. The podcast. We are on our fifth episode. For those who have not watched the others, please come to our channel watch this live.
Speaker #1: It's a cash benefit that we will capture in July, where we pay the income taxes for the second quarter. So here you have the three effects: the effect balance, the cash effect, and well, should you still have any doubts, we can dissipate them here or subsequently.
Speaker #1: And through the podcast, we make important presentations for you to have more contact with the GPS leaders. This quarter, we have Williams Salgado and we asked them to go more in depth in the maritime hotel services.
Speaker #1: With this, I would like to end the presentation. I remind you of two important points. The podcast. We are on our fifth episode. For those who have not watched the others, please come to our channel, watch this live, and through the podcast.
Speaker #1: Additionally, we're also disclosing our sustainability report, which you will be able to find on our site. We will have the version in English in September.
Speaker #1: All of this available to all of you. With this, we would like to close the presentation and go on to the questions. Let's open the audio for Andre from Bradesco, please.
Speaker #1: We make important presentations for you to have more contacts with the GPS leaders. This quarter we have William Salgado and we asked them to go more in depth in the maritime hotel services.
Speaker #1: Good morning, everybody. Thank you for taking my questions. Congratulations for your results. I have two topics. Organic growth for the second quarter. I know that further ahead in the year, this will be a factor of slow down.
Speaker #1: Additionally, we're also disclosing our sustainability report, which you will be able to find on our site. We will have the version in English in September.
Speaker #1: All of this available to all of you. With this, we would like to close the presentation and go on to the questions. Let's open the audio for André from Bradesco, please.
Speaker #1: This is the base of comparison, of GPS. The further ahead, the lower the base of comparison because of churn. So why is the organic growth closer to six instead of seven that you had in the first quarter?
Speaker #1: Good morning, everybody. Thank you for taking my questions. Congratulations for your results. I have two topics. Organic growth for the second quarter. I know that further ahead in the year, this will be a factor of slowdown.
Speaker #1: The second question, about the development of contracts in GRSA, if these have been well accepted and which is the level of acceptance? Let's speak about the organic growth in the following way.
Speaker #1: This is the base of comparison, of GPS. The further ahead, the lower the base of comparison, because of churn. So why is the organic growth closer to 6 instead of 7 that you had in the first quarter?
Speaker #1: The companies priority has always been and continues to be margin. In that context, if we have to withdraw from some contracts, that will be the option.
Speaker #1: Through time, in a more cautious way, we have done this movement, especially in GRSA. This is something constant for the company. We have a minimum margin that we seek.
Speaker #1: The second question, about the development of contracts in GRSA, if these have been well accepted and which is the level of acceptance? Let's speak about the organic growth in the following way.
Speaker #1: And in the renegotiation, we resort to the customer to ensure that the contracts are balanced. So a relevant point for the organic growth is this one.
Speaker #1: The company's priority has always been and continues to be margin. In that context, if we have to withdraw from some contracts, that will be the option.
Speaker #1: We're seeking margin and it's always a trade-off. Margin and organic growth. We're building the path towards more sustainable margin going back to two digits.
Speaker #1: Through time, in a more cautious way, we have done this movement, especially in GRSA. This is something constant for the company. We have a minimum margin that we seek.
Speaker #1: But we may have some contract losses. Marcelo mentioned some of them. Now, these two contracts that we made the decision to discontinue because of their margin levels and consumption of our working capital.
Speaker #1: And in the renegotiation, we resort to the customer to ensure that the contracts are balanced. So, a relevant point for the organic growth is this one.
Speaker #1: We're seeking margin, and it's always a trade-off—margin and organic growth. We're building the path toward more sustainable margin, going back to two digits.
Speaker #1: Well, they were demobilized through the first quarter and had non-performed revenue in the second quarter. This is relevant for organic growth. Control and TLSD from the 2024 cohort.
Speaker #1: But we may have some contract losses. Marcelo mentioned some of them. Now, these two contracts that we made the decision to discontinue were due to their margin levels and consumption of our working capital.
Speaker #1: One from the 2025 cohort. It's a cleaning out process of the contracts, acquired that will have an impact on organic growth. And it will be relevant in the second half.
Speaker #1: In GRSA, the behavior is very similar. So besides transfers of prices, we're seeking a rebalance. Always with the necessary care. These are different contracts.
Speaker #1: Well, they were demobilized through the first quarter and had a full impact on non-performed revenue in the second quarter. This is relevant for organic growth.
Speaker #1: Control and TLSD from the 2024 cohort, and one from the 2025 cohort. It’s a cleaning-out process of the contracts acquired that will have an impact on organic growth.
Speaker #1: They're not similar to those of control. And TLSD, but we do seek a margin. That is more aligned with our target margin. We can say that so far there has been no significant attrition in GRSA.
Speaker #1: And it will be relevant in the second half. In GRSA, the behavior is very similar. So besides transfers of prices, we're seeking a rebalance.
Speaker #1: Of course, this takes time. And when you carry out the negotiation, the negotiation can end up being lengthy. And if you look at accounts receivable, for example, they will grow through time.
Speaker #1: Always with the necessary care. These are different contracts; they're not similar to those of Control and TLSD. But we do seek a margin that is more aligned with our target margin.
Speaker #1: And they will reflect that readjustment we're seeking. And in November, we will see what we have been able to transfer or increase. So the summary here is the organic growth does have an impact.
Speaker #1: We can say that so far, there has been no significant attrition in GRSA. Of course, this takes time. And when you carry out the negotiation, the negotiation can end up being lengthy.
Speaker #1: In the cleaning out of our contracts, not necessarily reflected within GRSA, the other two businesses were more relevant. And in GRSA, we have a negotiation without relevant attrition up to this point.
Speaker #1: And if you look at accounts receivable, for example, they will grow over time, and they will reflect that readjustment we're seeking. And in November, we will see what we have been able to transfer or increase.
Speaker #1: Thank you. Thank you very much. Have a good day. Let's unmute the microphone for Kiefer Good morning, Kiefer. Thank you for taking our question.
Speaker #1: So the summary here is that organic growth just has an impact. In the cleaning out of our contracts, not necessarily reflected within GRSA, the other two businesses were more relevant.
Speaker #1: Perhaps a follow-up of previous questions. I would like to explore the challenges with GRSA. I think the issue of margin is very clear in these heavy catering companies.
Speaker #1: And in GRSA, we have a negotiation without relevant attrition up to this point. Thank you. Thank you very much. Have a good day. Let's unmute the microphone for Kiefer Good morning, Kiefer.
Speaker #1: Before the acquisition, now after somewhat more than two years of the acquisition, has this ended up being more challenging than you had imagined. From the viewpoint of contracts, the system and profitability of the operation.
Speaker #1: Thank you for taking our question. Perhaps a follow-up of previous questions. I would like to explore the challenges with GRSA. I think the issue of margin is very clear in these heavy catering companies before the acquisition.
Speaker #1: How do you carry out that assessment two years after the fact and which are the learnings of this new company? Secondly, in terms of margin.
Speaker #1: Despite the challenges of the quarter contracts, inputs, you maintained a flat margin. Quarter on quarter. And from previous comments. I understand that in the second half of the year, we should see an increase in the margins at least.
Speaker #1: Now, after somewhat more than two years of the acquisition, two years after the fact in which are the learnings of this new company. Secondly, in terms of margin, despite the challenges of the quarter contracts, inputs, you maintained a flat margin quarter on quarter.
Speaker #1: The company has made this clear in the comments in the release. And which is a possibility that this will not happen. We have an asymmetry of risks from the viewpoint of profitability.
Speaker #1: Which were your learnings from GRSA and margin going forward given your previous remarks? Well, thank you, Kiefer, for the question. Regarding GRSA, we turned the key of the systems in January of last year.
Speaker #1: And from previous comments, I understand that in the second half of the year, we should see an increase in the margins at least. The company has made this clear in the comments in the release.
Speaker #1: Now, after almost two years system integration, is only one year and a half. And of course, we expect more we want it to be in a better position than today.
Speaker #1: And which is the possibility that this will not happen? We have an asymmetry of risks from the viewpoint of profitability. Which were your learnings from GRSA and margin going forward, given your previous remarks?
Speaker #1: We have high expectations. Now, all of that synergy that we could have captured through indirect systems management were captured. And they created a significant increase in the results.
Speaker #1: Well, thank you, Kiefer, for the question. Regarding GRSA, we turned the key of the systems in January of last year. Now, after almost two years system integration, is only one year and a half.
Speaker #1: We are now in that phase of capturing cost reductions and synergies with a greater complexity. When you implement measures to capture that synergy, you have a higher cost that you can reduce in the future.
Speaker #1: And of course, we expect more. We want it to be even better today. We have high expectations. Now, all of that synergy that we could have captured through indirect systems management was captured.
Speaker #1: For example, we made the decision that the logistics of GRSA would be outsourced. The distribution of catering and the DC would be outsourced. We made the decision that this was a strategic operation that had to be organic.
Speaker #1: And they created a significant increase in the results. We are now in that phase of capturing cost reductions and synergies with a greater complexity.
Speaker #1: We had to operate that. So in São Paulo, where we have the operation of GRSA, we changed the operation. We took away the outsourced operator, rented a huge warehouse in Paranabaíba, and during part of the first quarter, but mainly in the second quarter, we had the full cost of the outsourced supplier, plus the total cost of lease, the T-Mobilized, the everything to start working at our distribution center.
Speaker #1: When you implement measures to capture that synergy, you have a higher cost that you can reduce in the future. For example, we made the decision that the logistics of GRSA would be outsourced.
Speaker #1: The distribution of catering and the DC would be outsourced. We made the decision that this was a strategic operation that had to be organic.
Speaker #1: We had to operate that. So in São Paulo, where we have the operation of GRSA, we changed the operation. We took away the outsourced operator, rented a huge warehouse in Parnaíba, and during part of the first quarter—but mainly in the second quarter—we had the full cost of the outsourced supplier, plus the total cost of lease, the T-mobilized, everything to start working at our distribution center.
Speaker #1: We only began to work without the outsourced team in August. And this is, of course, an element that had a significant impact on the results of the quarter.
Speaker #1: It was an additional cost of 2 million and some per month. But we no longer have that double cost. We have already removed the outsourced people and going forward, we will capture better results.
Speaker #1: The cost of the operation is lower. We have a buffer. We will have higher inventories. To buy spot to buy based on opportunity. So there are measures for efficiency gain and cost reduction that are more for the long term.
Speaker #1: We only began to work without the outsourced team in August. And this is, of course, an element that had a significant impact on the results of the quarter.
Speaker #1: It was an additional cost of $2,000,000 per month. But we no longer have that double cost. We have already removed the outsourced people and going forward, we will capture better results.
Speaker #1: They're more costly to put in practice. And this is what we're doing now, implementing the long-term measures. At GRSA, of course, we would like to be at a better margin level.
Speaker #1: The cost of the operation is lower. We have a buffer, and we will have higher inventories to buy spot, to buy based on opportunity. So there are measures for efficiency gain and cost reduction that are more for the long term.
Speaker #1: Unfortunately, it was not possible. Notwithstanding this, we're very confident for the future. We have several actions that will benefit our results. In the long term, you in the short term, I'm sorry, you impact the results.
Speaker #1: Some structures, but in the long term, the margin results will be relevant. We acquired a business of 25%. We have greater margin volatility in this business.
Speaker #1: They're more costly to put in practice. And this is what we're doing now, implementing the long-term measures. At GRSA, of course, we would like to be at a better margin level.
Speaker #1: Unfortunately, it was not possible. Notwithstanding this, we're very confident for the future. We have several actions that will benefit our results. In the long term, you in the short term, I'm sorry, you impact the results.
Speaker #1: This brings about more volatility quarter on quarter. This is part of the business. The acquisition per se had a very positive effect. It's a business where we have grown the most.
Speaker #1: Some structures, but in the long term, the margin results will be relevant. We acquired a business of 25%. We have greater margin volatility in this business.
Speaker #1: In fact, we were able to put in place the cross-sell of the service. And as Marcelo mentioned, we're confident that we will take the margin to the standard margin of GPS.
Speaker #1: Because of the initiatives we're putting in place for operational efficiency, and that's where the greatest risk lies as well. To converge to an EBITDA margin of 10% or somewhat higher, we have to have GRSA performing at that level as well.
Speaker #1: This brings about more volatility quarter on quarter. This is part of the business. The acquisition per se had a very positive effect. It's a business where we have grown the most.
Speaker #1: In fact, we were able to put in place the cross-sell of the service. And as Marcelo mentioned, we're confident that we will take the margin to the standard margin of GPS.
Speaker #1: And that's where the risk lies. We're transferring readjustments, successful implementations of the DC, stabilization of the maritime hotel services, this was always our business with the most qualified margin.
Speaker #1: Because of the initiatives we're putting in place for operational efficiency. And that's where the greatest risk lies, as well. To converge to an EBITDA margin of 10% or somewhat higher, we have to have GRSA performing at that level as well.
Speaker #1: And in the last quarters, well, we have gotten rid of several contracts. We're sure that this business will have more positive margins and it is very important business for GPS, the maritime hotel services.
Speaker #1: And that's where the risk lies. We're transferring readjustments, successful implementations of the DC, stabilization of the maritime hotel services, this was always our business with the most qualified margin.
Speaker #1: And this is where the greatest risk lies in the catering services. Thank you. That was very clear. Let's unmute the microphone for Lucas. Good morning, everybody.
Speaker #1: And in the last quarters, well, we have gotten rid of several contracts. We're sure that this business will have more positive margins, and it is a very important business for GPS, the maritime hotel services.
Speaker #1: I have two topics as well. First of all, I understand that you have that trade-off of margin versus growth. Looking towards 2027, we have the headwinds of the tax reform to businesses performing with a margin low.
Speaker #1: And this is where the greatest risk lies in the catering services. Thank you. That was very clear. Let's unmute the microphone for Lucas. Good morning, everybody.
Speaker #1: Catering and others. And 2027 will not be an easy year. I don't know what will happen with the economy. Perhaps the margin can bring you a relief for all of these challenges that we see.
Speaker #1: I have two topics, as well. First of all, I understand that you have that trade-off of margin versus growth. Looking towards 2027, we have the headwinds of the tax reform, two businesses performing with a margin low.
Speaker #1: The second point, and to test your capital allocation, in cash, you have a positive cash because of the system. GPS is at a six-time trailing after that it will be below the range is there a window for you to allocate capital payback dividends which is your matrix of priority for capital allocation.
Speaker #1: Catering and others. And 2027 will not be an easy year. I don't know what will happen with the economy. Perhaps the margin can bring you relief for all of these challenges that we see.
Speaker #1: The second point, and to test your capital allocation, in cash, you have a positive cash because of the system. GPS is at a six-time trailing.
Speaker #1: Therefore, I would like to understand which is the priority for capital allocation within these scenarios. I just mentioned now when we speak about margins for 2027, we will have the reductions from the tax reform and that specific regime that we have with a reduction of 60 base points or something around that 60, 70, which is a given reduction.
Speaker #1: After that, it will be below the range is there a window for you to allocate capital payback dividends which is your matrix of priority for capital allocation?
Speaker #1: So with this, we don't have the expectation for margins for 2027 that will represent an increase vis-à-vis 2026. That effect of top will not happen during the year.
Speaker #1: Therefore, I would like to understand which is the priority for capital allocation within these scenarios I just mentioned. Now, when we speak about margins for 2027, we will have the reductions from the tax reform and that specific regime that we have with a reduction of 60 base points or something around that 60, 70, which is a given reduction.
Speaker #1: It will take place through time, peaceful fees as a transition that will last 12 months. And there will be a change in the top regime.
Speaker #1: And this will lead to a change in margins. 2027 will be very peculiar in terms of margins. What we're seeking is that pattern incremental margin where trading that past.
Speaker #1: So with this, we don't have the expectation for margins for 2027 that will represent an increase vis-à-vis 2026. That effective top will not happen during the year.
Speaker #1: This year. For incremental margin after every quarter and 2027 will not be different. Our priority has always been and will continue to be that trade-off of the organic growth and margins.
Speaker #1: It will take place over time. Peaceful phase has a transition that will last 12 months, and there will be a change in the top regime.
Speaker #1: And this will lead to a change in margins. 2027 will be very peculiar in terms of margins. What we're seeking is that pattern incremental margin where trading that past this year for incremental margin after every quarter and 2027 will not be different.
Speaker #1: It's a trade-off that sometimes with pain as Marcelo mentioned, we have to continue with in the sector that we're in. We create a vision of the growth of top line without consistency and profitability.
Speaker #1: And of course, in the mid and long term, this path will derail. This is what we see with the competitors. We want to prioritize profitability.
Speaker #1: Our priority has always been, and will continue to be, that trade-off between organic growth and margins. It's a trade-off that sometimes, as Marcelo mentioned, comes with pain. We have to continue with it in the sector that we're in.
Speaker #1: If we speak about margin in 2027, we have to remember the top line. But operationally, it is the constant quest for evolution of the standard levels for GPS.
Speaker #1: We create a vision of the growth of top line without consistency in profitability. And of course, in the mid and long term, this path will derail.
Speaker #1: 10, 13%. But we will have that impact in 2027. The top line effect 2027 will be a very complicated year. We're attentive to that issue of the tax reform.
Speaker #1: This is what we see with the competitors. We want to prioritize profitability. If we speak about margin in 2027, we have to remember the top line.
Speaker #1: I think it will be a rather turbulent year with significant changes in pricing. To add some points to what Marita said, in the day-to-day we already see a greater pressure of customers are customers are being pressured.
Speaker #1: But operationally, it is the constant quest for evolution of the standard levels for GPS: 10%, 13%. But we will have that impact in 2027.
Speaker #1: There's pressure on their profitability. And the procurement groups of customers gain force. And they're going to see cost reductions. This is what is expected from them.
Speaker #1: The top line effect 2027 will be a very complicated year. We're attentive to that issue of the tax reform. I think it will be a rather turbulent year with significant changes in pricing.
Speaker #1: And we have perceived enormous pressure and growing pressure in our contracts. In our conversations with the customers, and as Marita mentioned, the priority is always profitability.
Speaker #1: To add some points to what Marita said, in the day-to-day we already see greater pressure—our customers are being pressured. There's pressure on their profitability.
Speaker #1: Eventually, the growth will be higher one year, lower another year. These are temporary situations. The negative effect that you have in a company of living with a definite contract is a permanent situation.
Speaker #1: And the procurement groups of customers gain force. And they're going to see cost reductions. This is what is expected from them. And we have perceived enormous pressure and growing pressure in our contracts.
Speaker #1: So the cash impact and the company's leverage is a cultural effect we tell the companies that we accept to live with contracts in a deficit if we do that.
Speaker #1: In our conversations with the customers, and as Marisa mentioned, the priority is always profitability. Eventually, the growth will be higher one year, lower another year.
Speaker #1: This will go through the culture of the company and our culture will simply disappear. So we speak about this a great deal to gain contracts, lose contracts, grow six or seven, grow more one year than another.
Speaker #1: These are temporary situations. The negative effect that you have in a company when living with a definite contract is a permanent situation. So, the cash impact and the company's leverage is a cultural effect. We tell the companies that we accept to live with contracts in a deficit.
Speaker #1: This is part of the business to lose profitability is something permanent for the company. Cultures. So our priority is always profitability. Yes, we are concerned with the coming year.
Speaker #1: We're getting ready for it. We had a huge challenge to maintain our profitability level without the benefit of the top line. We're seeking efficiency gains, to maintain our margins.
Speaker #1: If we do that, this will go through the culture of the company. And our culture will simply disappear. So we speak about this a great deal to gain contracts, lose contracts, grow six or seven, grow more one year than another.
Speaker #1: And the challenge will be significant we have perceived growing pressure in our daily interactions with customers. This scenario is very difficult for everybody. Regarding capital allocation, our board has to deliberate on this.
Speaker #1: This is part of the business—to lose profitability is something permanent for the company culture. So our priority is always profitability. Yes, we are concerned with the coming year.
Speaker #1: We're getting ready for it. We had a we have a huge challenge to maintain our profitability level without the benefit of the top line.
Speaker #1: We're awaiting a position for this. But mathematically, even though we acquire companies at 5.5 times EBITDA, and we have a better EBITDA after capturing synergies, with an improvement of 2.53 times the level of risk is enormous in the buyback of shares.
Speaker #1: We're seeking efficiency gains, to maintain our margins. And the challenge will be significant we have perceived growing pressure in our daily interactions with customers.
Speaker #1: This scenario is very difficult for everybody. Regarding capital allocation, our board has to deliberate on this. We're awaiting a position on this. But mathematically, even though we acquire companies at 5.5 times EBITDA, and we have a better EBITDA after capturing synergies—with an improvement of 2.53 times—the level of risk is enormous in the buyback of shares.
Speaker #1: We're buying back shares in a controlled environment when we carry out an M&A. There's information that we're lacking. The level of asymmetry in M&As is enormous when you begin to weigh the risks buying at six times or carrying out an M&A where if everything works out can converge at three times.
Speaker #1: Well, this is where we begin that conversation about buyback of shares. Mathematically, it is very complex. Capital allocation, has always been and will always be in M&As.
Speaker #1: We're buying back shares in a controlled environment when we carry out an M&A. There's information that we're lacking; the level of asymmetry in M&As is enormous. When you begin to weigh the risks, buying at six times or carrying out an M&A, where if everything works out, can converge at three times.
Speaker #1: And in the future, we may have an interesting opportunity so let's continue. Thank you. Thank you. Thank you, Lucas. Let's unmute the audio for Lucas Magano.
Speaker #1: Well, this is where we begin that conversation about buyback of shares. Mathematically, it is very complex. Capital allocation has always been and will always be in M&As.
Speaker #1: Good morning. Marcelo and Marita. I also have two questions. Thinking about the rest of the year, organic growth from a more macro viewpoint, the scenario for the customers is still under stress.
Speaker #1: And in the future, we may have an interesting opportunity so let's continue. Thank you. Thank you. Thank you, Lucas. Let's unmute the audio for Lucas Magano.
Speaker #1: So how is this impacting your loss of contracts? And on the part of the supply of labor, what is a bottleneck to ensure growth?
Speaker #1: Good morning. Marcelo and Marita. I also have two questions. Thinking about the rest of the year, organic growth from a more macro viewpoint, the scenario for the customers is still under stress.
Speaker #1: Secondly, about your catering contracts, which percentage of the contracts have that readjustment in mid-year which is the attitude of customers when it comes to price adjustment?
Speaker #1: This could perhaps point towards margin for the third quarter. Our vision on organic growth in the second half of the year and this is something we're monitoring is that the customer with an electoral scenario plus a tax reform will lead to a behavior of holding back of being on standby to hold back on bids, hold back on investments, and pressure in terms of prices.
Speaker #1: So how is this impacting your loss of contracts and on the part of the supply of labor? What is a bottleneck to ensure growth?
Speaker #1: Secondly, about your catering contracts. Which percentage of the contracts have that readjustment in mid-year? Which is the attitude of customers when it comes to price adjustment?
Speaker #1: This could perhaps point towards margin for the third quarter. Our vision on organic growth in the second half of the year—and this is something we're monitoring—is that the customer, with an electoral scenario plus a tax reform, will lead to a behavior of holding back, of being on standby, to hold back on bids, hold back on investments, and pressure in terms of prices.
Speaker #1: In this, context, if the intensity arises a great deal of course the organic growth will be hampered by this what we see so far is not something that points to something highly negative we see a bit of that standby effect which is natural if I'm working with a bidding the price will change going forward in four months because of the tax reform.
Speaker #1: In this context, if the intensity arises a great deal of course, the organic growth will be hampered by this what we see so far is not something that points to something highly negative we see a bit of that standby effect, which is natural.
Speaker #1: It's natural therefore for the customer to look at that and say you know what I'm going to wait a bit now this does impact our achievement and it also impacts the contracts with our present-day customers.
Speaker #1: It could create the pace of lower growth in organic systems in the second half of the year if this becomes exacerbated if customers decide to wait a bit because of the uncertainty of the elections, the tax reform, and there we will they will wait to bid further on.
Speaker #1: If I'm working with a bidding, the price will change going forward in four months because of the tax reform. It's natural, therefore, for the customer to look at that and say, you know what?
Speaker #1: I'm going to wait a bit now. This does impact our achievement, and it also impacts the contracts with our present-day customers. It could create a pace of lower growth in organic systems in the second half of the year.
Speaker #1: Once again, this does not mean that we will have more churn necessarily. Everything will be at the same standpoint but obviously organic growth will be impacted because our level of achievement will be impacted.
Speaker #1: If this becomes exacerbated if customers decide to wait a bit because of the uncertainty of the elections, the tax reform, and there we will they will wait to bid further on.
Speaker #1: We won't have a greater number of losses of course we're monitoring that environment and this is a possible scenario for the second half it doesn't make sense for a customer's procurement team to open up a bidding process at present.
Speaker #1: Once again, this does not mean that we will have more churn necessarily. Everything will be at the same standpoint. But obviously, organic growth will be impacted because our level of achievement will be impacted.
Speaker #1: It's a burdensome process that will change in four months. The price will change in four months. What does make sense is a slowdown in the bidding processes.
Speaker #1: We won't have a greater number of losses, of course. We're monitoring that environment, and this is a possible scenario for the second half. It doesn't make sense for a customer's procurement team to open up a bidding process at present.
Speaker #1: What has happened with customer interaction is customers asking for reductions, a better scope. We put in more equipment. We take out people. It's part of the game.
Speaker #1: And this is happening because the scenario is truly not very favorable for our customers or for anybody regarding the supply of labor. The main consequence of supply of labor is that we have several vacancies I think we spoke about this in the previous call.
Speaker #1: It's a burdensome process that will change in four months. The price will change in four months. What does make sense is a slowdown in the bidding processes.
Speaker #1: What has happened with customer interaction is customers asking for reductions, a better scope. We put in more equipment, we take out people. It's part of the game.
Speaker #1: And we can't comply with everything paying the salary of our employees. We have to resort to extra hours. And this has been happening since last year.
Speaker #1: And this is happening because the scenario is truly not very favorable for our customers or for anybody regarding the supply of labor. The main consequence of supply of labor is that we have several vacancies I think we spoke about this in the previous call.
Speaker #1: Because of the vacancies when we don't have a new employee at disposal. We have to pay additional hours for those who are under contract and but we have faced that reality since last year.
Speaker #1: And nowadays the price of the GRSA has already been remarked on. There's nothing different this year. Every year we have to transfer a readjustment for the customer the inflation this year is somewhat higher.
Speaker #1: And we can't comply with everything paying the salary of our employees. We have to resort to extra hours. And this has been happening since last year.
Speaker #1: It will be more typical. But in the market all competitors have to also transfer these new prices. You can't survive without that is the entire industry focused on this to maintain the contract.
Speaker #1: Because of the vacancies, when we don't have a new employee at our disposal, we have to pay additional hours for those who are under contract. But we have faced that reality since last year.
Speaker #1: There's nothing very different this year vis-à-vis previous years, Lucas. Thank you. Thank you very much. Thank you, Lucas. Let's open the audio for Gasparete, please.
Speaker #1: And nowadays, the price of the GRSA has already been remarked on. There's nothing different this year. Every year we have to transfer a readjustment for the customer the inflation this year is somewhat higher.
Speaker #1: It will be more difficult. But in the market, all competitors have to also transfer these new prices. You can't survive without that is the entire industry focused on this to maintain the contract.
Speaker #1: Good morning, everybody. Thank you for taking my call. We have two questions. The first one about organic growth in the release. You spoke about the company NPS.
Speaker #1: You had difficulty in receiving answers 8 percentage points I believe is this a reason of concern if it could translate into greater churn? Secondly, once again to speak about M&A.
Speaker #1: There's nothing very different this year vis-à-vis previous years, Lucas. Thank you. Thank you very much. Thank you, Lucas. Let's open the audio for Gasparetti, please.
Speaker #1: We heard comparisons, shares, the situation of 2027. Although the pipe has never been this qualified as you mentioned in quantity and quality. I would like to understand your expectation in terms of conversion we know that the customers are holding back on the bid.
Speaker #1: Good morning, everybody. Thank you for taking my call. We have two questions. The first one is about organic growth in the release. You spoke about the company NPS.
Speaker #1: You had difficulty in receiving answers—8 percentage points, I believe. Is this a reason for concern, if it could translate into greater churn? Secondly, once again, to speak about M&A, we heard comparisons, shares, and the situation of 2027.
Speaker #1: Perhaps negotiations are somewhat colder. Would you like to speak about the NPS system? Sure. Go ahead. NPS, net promoter score. We carried out a change of platform.
Speaker #1: Although the pipe has never been this qualified, as you mentioned, in quantity and quality, I would like to understand your expectation in terms of conversion. We know that the customers are holding back on the bid.
Speaker #1: We changed the way in which we approach and send the questionnaire and of course this may have an impact on initial engagement. We did make efforts to work better with engagement.
Speaker #1: Perhaps negotiations are somewhat colder. Would you like to speak about the NPS system? Sure. Go ahead. NPS, net promoter score. We carried out a change of platform.
Speaker #1: This is one of the aspects and about the score itself. We're not concerned with that. Not as you mentioned. Why? Because what we see in the change of the score when you carry out the breakdown of the score there hasn't been an increase in detractors I think the main issue here was the way in which we approach the customer.
Speaker #1: We changed the way in which we approach and send the questionnaire, and of course, this may have an impact on initial engagement. We did make efforts to work better with engagement.
Speaker #1: Different from what we did historically. Until the customer understood that he will receive this through email and no longer through the quality area. They have to work through a link.
Speaker #1: This is one of the aspects. And about the score itself, we're not concerned with that, not as you mentioned. Why? Because what we see in the change of the score when you carry out the breakdown of the score there hasn't been an increase in detractors.
Speaker #1: The link has a different way of asking vis-à-vis what we did last year. So our analysis on this result is that what happened is that we had a higher number of neutral responses.
Speaker #1: I think the main issue here was the way in which we approach the customer. Different from what we did historically. Until the customer understood that he will receive this through email and no longer through the quality area, they have to work through a link.
Speaker #1: When we look at the NPS scale it's like having a score eight. You reduce the number of promoters and in fact this is what happened.
Speaker #1: We had a migration between nine and eight and not detractors or very negative answers. But this is a very relevant indicator for us. It is part of the variable remuneration for the regional director for example.
Speaker #1: The link has a different way of asking vis-à-vis what we did last year. So our analysis on this result is that what happened is that we had a higher number of neutral responses.
Speaker #1: When we look at the NPS scale, it's like having a score of eight. You reduce the number of promoters and, in fact, this is what happened.
Speaker #1: So we are focusing on this. There has been a system change a process change about regardless of that we are looking at the results and creating action plans with the customers to look at this as a goal that we always had a goal above 70 percent historically.
Speaker #1: We had a migration between nine and eight and no detractors or very negative answers. But this is a very relevant indicator for us. It is part of the variable remuneration for the regional director, for example.
Speaker #1: But concretely this is not an indicator that refers to potential churn. It is not a warning sign of criticism, an increase in criticism or very negative relationship with the customers.
Speaker #1: So we are focusing on this. There has been a system change or process change. But regardless of that, we are looking at the results.
Speaker #1: And creating action plans with the customers to look at this as a goal—we always had a goal above 70% historically. But concretely, this is not an indicator that refers to potential churn.
Speaker #1: The churn refers much more to the price issue. That is more relevant than the quality is something we're focusing on. Of course and is an important indicator.
Speaker #1: But that did suffer the effects I mentioned. Now regarding the M&A pipeline some important points. We're only going to carry out acquisitions of companies where our goals are aligned if companies have low EBITDA well we want EBITDA maximum 5.5 times companies with high revenues 2 percent of net profit if they have 2, 3, 4 percent of EBITDA margin with a highly qualified customer portfolio that will allow us to work with cross-selling of our new services.
Speaker #1: It is not a warning sign of criticism, an increase in criticism, or a very negative relationship with the customers. The churn refers much more to the price issue, which is more relevant than the quality—that is something we're focusing on.
Speaker #1: Of course, and it is an important indicator. But that did suffer the effects I mentioned. Now, regarding the M&A pipeline, some important points: we are only going to carry out acquisitions of companies where our goal is companies that have low EBITDA.
Speaker #1: Companies that do not have that concentration of revenue on a single customer when the economic conditions were better the interest rates were better we were more flexible.
Speaker #1: Well, we want EBITDA maximum 5.5 times. Companies with high revenues 2% of net profit. If they have 2, 3, 4% of EBITDA margin with a highly qualified customer portfolio, that will allow us to work with cross-selling of our new services.
Speaker #1: At this point we're completely inflexible. Now despite all of this we do have things in the pipeline that comply with our requirements. It's a cost of negotiation that tends to delay the closing.
Speaker #1: But we have the right raw material in our pipeline to allow us to acquire 1.5 times revenue. This year companies that fulfill our requirements well will define if we're going to deliver that volume of M&A is a decision that we will take to buy back shares or not.
Speaker #1: Companies that do not have that concentration of revenue on a single customer—when the economic conditions were better, the interest rates were better—we were more flexible.
Speaker #1: At this point, we're completely inflexible. Despite all of this, we do have things in the pipeline that comply with our requirements. It's a cost of negotiation that tends to delay the closing.
Speaker #1: If our board in the future understands that at that price it makes more sense to buy back shares we may reduce our M&A pipeline now this perhaps could lead us not to comply with our global goal.
Speaker #1: But we have the right raw material in our pipeline to allow us to acquire 1.5 times revenue. This year, companies that fulfill our requirements will define if we're going to deliver that volume of M&A is a decision that we will take to buy back shares or not.
Speaker #1: It's a balance between M&A and the purchase of shares. Today we don't have a clear vision of what will happen. There's a third relevant factor.
Speaker #1: We have perceived the financial situation of our competitors especially midsize competitors onto 300, 400, 500 million a year. There has been a significant deterioration here midsize companies.
Speaker #1: If our board in the future understands that, at that price, it makes more sense to buy back shares, we may reduce our M&A pipeline.
Speaker #1: Now, this perhaps could lead us not to comply with our global goal. It's a balance between M&A and the purchase of shares. Today, we don't have a clear vision of what will happen.
Speaker #1: They pay 25 percent a year in interest rate. Now for you to carry out an M&A in Brazil you have to be patient know the right movement at the right time.
Speaker #1: There's a third relevant factor. We have perceived the financial situation of our competitors especially midsize competitors onto 300, 400, 500 million a year. There has been a significant deterioration here midsize companies.
Speaker #1: So we're in waiting mode in the next six months. There will be plenty clear opportunities for the acquisition of good companies with a good customer portfolio.
Speaker #1: Better financial complicated. Once again because of the context. And we have to be ready to explore that opportunity. These are the three variables therefore.
Speaker #1: They pay 25% a year in interest rate. Now, for you to carry out an M&A in Brazil, you have to be patient. Know the right movement at the right time.
Speaker #1: That were managing. Well thank you. Thank you very much. If you could speak about default if you have any time for this. I think we improved this quarter.
Speaker #1: So we're in waiting mode. In the next six months, there will be plenty of clear opportunities for the acquisition of good companies with a good customer portfolio.
Speaker #1: It has been a concern as well. We have been highly diligent. Now we always have an evolution here because at the end of the day this is a readjustment that grows until the third quarter and the fourth quarter we carry out a readjustment.
Speaker #1: Better financial complicated. Once again, because of the context. And we have to be ready to explore that opportunity. These are the three variables therefore that we're managing.
Speaker #1: But the default levels are more positive this quarter. Thank you Marita Marcelo. Have a good day. Let's unmute the audio for Luisa please.
Speaker #1: Well, thank you. Thank you very much. If you could speak about default, if you have any time for this. I think we improved this quarter.
Speaker #1: It has been a concern as well. We have been highly diligent. Now, we always have an evolution here because, at the end of the day, this is a readjustment that grows until the third quarter and the fourth quarter.
Speaker #2: Oi pessoal bom dia.
Speaker #1: Good morning.
Speaker #2: Lamento aqui da das perguntas anteriores né pra tentar quebrar pouco mais ali a composição.
Speaker #1: I'm going to try to break down the makeup of margin for the quarter you spoke about catering hotel services and telecom and electrical contracts.
Speaker #1: We carry out a readjustment. But the default levels are more positive this quarter. Thank you, Marita Marcelo. Have a good day. Let's unmute the audio for Luiza, please.
Speaker #1: We wanted to see which had a greater weight. How can we think about labor expenses at present if there has been a change in terms of what we discussed last quarter.
Speaker #1: Good morning. I'm going to try to break down the makeup of margin for the quarter. You spoke about catering, hotel services. Telecom and electrical contracts.
Speaker #1: Thank you. I don't know which is the breakdown in profitability here. A bit more catering. Secondly maritime hotel services and third as a sequence the electrical services and telephony.
Speaker #1: We wanted to see which had a greater weight. How can we think about labor expenses at present if there has been a change in terms of what we discussed last quarter?
Speaker #1: The good news is that catering and. Hotel services do have a solution that is underway. This was a one time pressure. I'm sorry which was your first question.
Speaker #1: Thank you. I don't know which is the breakdown in profitability here. A bit more catering. Secondly, maritime hotel services. And third, as a sequence, the electrical services and telephony.
Speaker #1: Labor expenses they're back to 1.8. This year we will have greater variations. Because continuously we make that effort to reduce the more expensive and lengthier suits.
Speaker #1: The good news is that catering and hotel services do have a solution that is underway. This was a one-time pressure. I'm sorry, which was your first question?
Speaker #1: There's a stock that we still have to eliminate. In the third quarter the figure will still be high and somewhat lower in the fourth quarter for the entire year.
Speaker #1: It will be somewhat below that of last year. You will always have an incremental improvement year on year. With large volatility quarter on quarter.
Speaker #1: Last year 1.9. This year it should be lower and in 2027. Well this is something we do constantly. Small reductions throughout the years. Thank you.
Speaker #1: Thank you very much. Let's unmute the microphone for Gabriel Frazao. Thank you for taking our questions. First of all about the acquisitions announced recently in security.
Speaker #1: Were you acquired a majority state of the company. If you could comment on why you chose this format in a sector where you're already present and if we if we will see this format in the remaining companies in the pipeline.
Speaker #1: Perhaps to move away from the prices. And about the non recurring items there are three that were more relevant acquisition processes. Non labor provision and tax credits.
Speaker #1: What led to a greater magnitude of these effects this quarter and if going forward everything will be more aligned with normality. In terms of the partial acquisition you I think observe well we don't like to carry out partial acquisitions in companies where operating already because of competition.
Speaker #1: It's very difficult to manage the issue of competition in the case of Axel what led to this partial acquisition is that they're very strong in monitoring those totems on the streets that we have been several neighborhoods in São Paulo and they have a small operation because this is a fragmented business but they know how to work on it.
Speaker #1: And despite the business being difficult financially because it is fragmented it does create adherence to our relationship with the customer in the long term you may lose a security station in a company but you will maintain the security services.
Speaker #1: So we acquired it partially because of this peculiarity it has and the expertise and the monitoring business those monitoring totems on the streets. Now to speak about the movement of these adjustments we have in EBITDA first about provisions for non labor contingencies the reclassification of three processes two civil one tax they became probable and with this we had an increase in the provision now there is a relevant parcel of that process that became probable and that is why we had a come up with a provision refers to GRSA and it has indemnities and you will see the effect of the indemnities in the asset so the provision that I had to come up with corresponds to the indemnity that refers to that contingency contractually defined in the acquisition of GRSA.
Speaker #1: Another item that changed processes with indemnity referring to the same issue and tax debits refers to the program zero litigation that we adhere to a short time ago when you adhere this you have to after having an approval by the IRS you have the obligation of reverting the provision and creating a debit the zero litigation process was an opportunity we negotiated this with the IRS and because of specifications of our IRS you stop paying fines in a very favorable context.
Speaker #1: These were the atypical movements this quarter. This is not something recurrent. It happened this quarter. I don't imagine that this will continue on in future quarters.
Speaker #1: That was very clear. Thank you very much. João if he's still there if we can unmute his microphone. We okay. Very well. No further questions.
Speaker #1: I would like to thank all of you. We're at your entire disposal. Have a very good day and thank you so much for your attendance.
Speaker #1: Officially. If this was a failure, don't call 10 minutes aqui de avanço. Então eu não sei. Não. Não tem mais. Tá ok. Gente, quero agradecer; ficamos à disposição.
Speaker #1: Tenham bom dia, e muito obrigada pela participação.
Speaker #2: Obrigado, pessoal. Bom dia.
