Good morning, everyone. As always, we are here every quarter, Marita Bernhoeft and Marcelo Hampshire, to present the results of the third quarter of 2024. We are going to start from the highlights of the quarter. Net revenue of BRL 4,113 million, 56% higher than the third quarter of last year. Major contribution comes from M&A: 7% of the organic growth when compared to the third quarter of 2023. An EBITDA of BRL 424 million, adjusted EBITDA, that amounted for the level of 41%, with a robust EBITDA margin of 10.3% in the third quarter of 2024. Adjusted net profit has some effects, especially financial results: a total of BRL 178 million, 7% higher when compared to the third quarter of 2023, and net margin of 4.3%. The total number of customers reached 4,767 groups of customers. Inside, we have an estimate of 450 clients coming from GRSA.
We are probably going to make some adjustments to those numbers when we have the final alignment of our systems and our NPS of 78%, which does not consider the acquired companies. In other words, it doesn't consider GRSA in the number of NPS. Our net revenue line by solution, we have facilities, you see 46%, and we include 14% in relation to catering, and the 14% account for what has already been considered for catering of our GRSA from June to September, and as facilities, we also include after 12 months, we are going to have a breakdown of this figure so that we can have a total visibility of catering in a separate way, and our logistics, which is very representative for us, industrial and maintenance of industrial aspects, logistics with 7%.
We continue with our policy of dividing the activity to clients because we have different clients. Sometimes one replaces the other. Our intention is to maintain an exclusive dependence of some few clients. This is the idea we have for that. As I said, the quarter net revenue reached a higher level of 56% in comparison to the previous quarter. I would like to draw your attention to the contribution of GRSA. It was a relevant addition to our revenue and organic growth of 7%. We are going to talk about this organic growth. We have an environment which is harsher, and we are under pressure from the customers, especially as to prices. Our policy has always been maintaining agreements with profitability, and as a result, we tend to focus on the margin, and we do not have a relevant pace of growth.
We'd like to remind you that when we remove the effect of the 2022 cohort, which was atypical in our case, the organic growth would reach 9.6%, very much in line with our history. As to inorganic growth, I would like to mention the revenue of BRL 900 million of GRSA for this quarter in Victus and Marfood, in addition to other acquisitions from last year. In the nine months of the year, revenue had an increase of 37% in relation to the same period of last year. The organic growth of 7%. And the comment that I made about the quarter is also valid to the six months of the year. And we have a harsher attitude from the customers, and that inorganic net revenue that has the GRSA added, and it surpasses BRL 1 billion as a contribution for this year.
In relation to EBITDA, we had a growth of 41% when compared to the third quarter, a margin of 10.3%. Talking about the main drivers, when we compare to the third quarter of last year, we have the share of revenue of GRSA coming with a margin of 7.3%, 7.5%. In other words, we have the effect of an important share with a margin lower than our historic past, in addition to lawsuits that reached 2.3%. As we have mentioned, we are making some adjustments in the lawsuit liabilities. We are eliminating older lawsuits, and we have already made some changes to the approach we adopted by completing and settling those lawsuits. And that causes impact on the revenues, and we believe this is going to be like that until the mid of next year. And then we are going to go back to a more normalized level.
The growth of 24% in the nine months of adjusted EBITDA is 1% lower than the same period of last year as a result of the same effect. We are talking about the impact of GRSA with a lower margin and also the labor liabilities that are above our historic levels. Adjusted net profit and the effect. We have the financial results that are resulted with the adjustment that are non-cash but affect the financial results, and when we consider provisions and taxes on interest, these are all considered financial results. And these are the impacts that we had within this period, and that's both for the quarter and for the semester. We have lower financial expenses as a result of the investments we made in GRSA. And obviously, our cash generated fewer revenue in this period, so 7% growth for the adjusted profit in the period.
And this is all caused by GRSA that affects the result of the net profit. So, if you could put back the slide in relation to non-cash financial expenses, because this is a very relevant comment. From January to September, the correction of provisions of interest had a negative impact, and as corrections, we maintained this provision. And that's the reason why we have to make the correction according to the Selic that accounted for $30 million in the year-to-date up to September. So, the net profit was impacted actively because these are non-cash effects. Of course, we have to discount the benefits of the income tax year-to-date up to September. You may proceed. And now I turn the floor to you, Marcelo, to talk about M&A.
Good morning, everyone. We made 10 acquisitions in the years of 2023 and 2024 with combined revenues of BRL 5.3 billion. They are all combined and being aligned because GRSA is a more complex acquisition. We were more cautious in the integration process. It's estimated that as of January 1st, 2025, we are going to start running the GRSA in our ERP. The acquisition has been very well planned. The depth level is really significant, and everything goes according to the plan so that GRSA is going to start operating as of January 1st. This is something that we have been commenting with you. Our expectation as to GRSA is to turn the key on January 1st. Another mark important is going to happen in April when we are going to have the physical combination of the teams of GRSA and GPS.
As of April, we are going to start the capture of synergies. We are very enthusiastic about the potentials that we have. There is a lot of synergy to be captured, but we are only going to start implementing the reductions or those synergy captures as of April. As I have already mentioned, Marfood, for example, they are already integrating our ERP. We are in the process of capturing synergies in those companies. Another important data to mention, as Marita has already mentioned, this is the first quarter when we had full contribution of the 10 companies in our results. GRSA in the previous quarter, in the second quarter, it had only one month of contribution, and this quarter we had full contribution from GRSA. This is why we saw an increase in EBITDA and also in our revenues.
Another important data is that we do not show the pro forma result. We do not usually do that. When we present on the slide about the leverage ratio, I'm going to go back to this point. We do not present pro forma results, but if we did, we would have something like BRL 3 billion in additional revenues in the results of the last 12 months and something from BRL 250 million or BRL 300 million in additional EBITDA. You may proceed, Marita.
This is a summary of what we did in terms of acquisitions. Since the IPO, we acquired 23 companies with a combined revenue of BRL 1.1 billion. All the acquisitions happened according to the profile that we consider to be the ideal profile, which is a profile that shows the most potential of return according to the capital employed.
So, 22 were medium-sized companies, companies that have a margin that suffers more pressure because they have less margin for the dilution of indirect costs. I would like to show the high concentrations that we had of acquisitions in the maintenance sector. And before the IPO, this is a sector which was irrelevant to GPS. But after the number of acquisitions we made, it started to be very relevant to us.
So, I would like to draw your attention to this point. And as of the acquisitions in maintenance and industrial services with eight acquisitions and growth in catering up to before IPO, catering was irrelevant to GPS in terms of revenues. We only had LC, which was the company we had in the segment, and now with the acquisition of GRSA and Marfood, this started to be our main business, our main vertical together with a vertical of facilities.
And a third important data that I would like to mention is that last year we started to have three new verticals, which is the TLSV, which is the maintenance of telephony network, Control, which is for the maintenance of electrical network, and Lyon. And we are at the moment when we are getting to know the business better. We are testing the fit according to our management model, and the first signs are very favorable. And we really believe that there is a very significant fit with our management model, with our systems. So, the expectation is that the three verticals may be in the future a new pathway for growth, both organic and inorganic. I think this is it, Marita.
Okay. Now, a view in terms of cash generation was the nine first months. The cash generation was very positive, 107% of the adjusted EBITDA, and the major contributor was the stabilization of the account receivable. If you see our history, we can see that we reported growth every quarter, and that movement stopped. And as to GPS legacy, we had a slight destabilization, but we incorporated GRSA. Everything that we have been talking to you in terms of incentives, alignment, and to prioritize the accounts receivable, we now can see the results in the operational cash generation. So, in the third quarter, you can see the accounts have been more stabilized, and we even reported a reduction if you compare quarter on quarter, or if you compare the first nine months of this year as compared to the previous year.
We would also like to mention that we had a very positive offset in the income tax paid, which was very consistent, and we had a positive generation in the period. We made a lot of compensations of the income tax, and as to funding and financing, the big highlight that we have is the capture of loans and the ventures, in addition to other items that affect this movement, and as for investments, the highlight is the acquisition of GRSA. We end the period with a cash level of BRL 1,364 million. Good news in terms of accounts receivable and the capacity that we had to offset the income tax credits. In terms of leverage ratio, we'd like to remind you that we only consider what was effectively invoiced in the period.
We consider the EBITDA of GRSA only from June and September, but even so, we can see a reduction of four percentage points. When we compare the second quarter to the third quarter of 2024, showing an upward trend of reduction of our leverage ratio already in the period of the second quarter and the third quarter of this year. In a pro forma analysis that adjusted EBITDA, ex-IFRS 16 would reach BRL 1,700 million. We would reach this level if we analyze the acquisition because we're not only talking about GRSA. There are other companies involved: Control, Marfood, Lyon. They are not completely included in this base of results. This is not so fair because the disbursements are already considered, but they are not reflected on the EBITDA. In a pro forma analysis, we would have reached the EBITDA.
So, we have the target, we have a goal, we have been communicating our objective to go back to 1.5x , and then we would be on track to deliver this target, and then we are going to resume the acquisition plan. But this was a very important time because we had the tranquility to see what would happen with the companies that offered the payback. I think the first quarter of next year, we will have everything aligned so that we are going to resume the leverage ratio of 1.5 x and resume the acquisition plan. With this, we end our presentation.
We are going to open for questions. So, I have already the sequence of those who would like to ask questions. So, let's open the audio to Mauricio Cepeda.
Thank you very much for the opportunity. I have two questions on my side.
The first is related to GRSA. According to the net revenue that you posted, so it is above what had been announced as from the acquisition. So, first, what has been the drivers for the growth? And how can we look at this item down the road? Because typically, there is a correction of agreements. So, you remove the agreements which are not economic, and that would affect the growth. And our second question is a reflection on organic growth that has been happening in the purest way. What we see now is a benchmark that we can expect for the future. In other words, a situation that you have to focus on the headquarters, and then you get a regular pace of including and excluding agreements. So, wouldn't this be a trend for the medium and long terms?
Yes, I can make this comment. In relation to GRSA, it was really a surprise. They had a growth in their revenue, and the revenue has a recurring revenue of BRL 320 million, growth at growth level, BRL 3.8 billion per year. So, this is the recurring revenue, which was a surprise for us because during the due diligence, we expected less than that. In relation to organic growth, I can start making comments, and then you can proceed.
Organic growth will depend on the intensity of the acquisitions. It will depend also on the characteristics of the companies that we will purchase. So, most likely, GRSA, there are some contracts which are not profitable. So, of course, our work is to try to renegotiate the agreements in a more balanced situation with the clients, the agreements which are deficitary, and we may lose some agreements. So, this is not the ideal scenario when we lose a contract.
Ideally, we should renegotiate the contract, but this will happen statistically, and then we are going to lose some revenue, and that would adversely affect the organic growth. I think the organic growth, when we look into the future, will depend on the intensity of the acquisition that we will have. Also, the characteristics of the companies that we will purchase, the more opportunistic the acquisition is, I mean, the less compressed is the margin of the companies we purchase, the higher will be the loss of contracts because in the base, they will have lots of negative contracts. There's no rule. It would depend on the volume of the revenues that are acquired and the characteristics of the companies we are going to purchase. I think we have to add in the organic growth.
If you go back to 2015, you're going to see that organic growth has more volatility. It's more susceptible to an environment exposed to the competition and the client's environment, so our objective for the medium and long term is not to bring in contracts that can affect the margin of the company, but we are going to continue growing at a good level in the organic dimension, so in the period of nine months that you saw that we reached 7%, and as Marcelo said, we would have delivered more than that, and these are all effects of the macro effect, the M&A, and we have enough experience to say that sometimes it will be a little bit more, a little bit less, but at the structural level, we do not see this as a future aspect for the organic growth.
We continue with our targets to grow organically, and we believe there is room to grow in this market, which is very pulverized, but in a profitable way, in a sustainable way, of course, in terms of margin, and I believe that this is the aspect that would make the pace of growth to be a bit slower or a bit faster. I think this is what is relevant for us. We are always going to have this to consider. There are many variables. For example, at this moment when the economy is more complicated, we have some contracts that we're going to lose, but it's our option to lose them. We have a volume of contracts where the customer is not paying. They are in default, so in the moment when interest rates are higher, we lose many contracts.
We terminate the contract because we're not receiving from the customers. It's complex. There are many factors to consider, and those factors affect the organic growth, the economy, the activities of M&A, the characteristics of the companies that we acquire. So, there are many factors that influence. So, this is the reason why we show a CAGR of five or three years, because, as I said, we are talking about volatility.
Okay, that's very clear. Thank you.
Thank you, Mauricio. So, how about Fernanda Heck? You can unmute your microphone.
Marita, Marcelo, thank you very much for taking my question. There are two points I would like to consider. First, the dynamics of accounts receivable. So, one of the highlights was this improvement in this line.
So, I would like to understand if this would be the normalized level to expect, or do you see room for improvement considering that you started to implement the measures only recently? Do you see any additional possibilities of improvement for this, or would this be the normalized level? And another point is still in relation to organic growth. I would like to understand how you see the effects of, for example, you had the effect of 2022 cohort, and when do you expect those effects to play out? Do you expect that to influence the results of the fourth quarter? And are you facing difficulties in renewing contracts, or are you facing more difficulties in capturing new customers considering your history? I would like to understand those points better.
As to accounts receivables, what we can expect in this line is some level of stabilization. It's not an item that we can make very quick changes in the short term. We intend to implement measures next year. So, there are new things that are going to be aligned with incentives for the control of working capital, applicable to accounts receivable. So, we may have positive effects, but we see that those effects are not so immediate. They are going to be felt along the time, and these are translated as a reduction of days.
I think we have the very important mobilization. We can see that GRSA brought some contribution, but GPS itself is stabilized in some aspects and even managed to have a slight reduction. So, down the road, what we do not see it as something that cannot be changed so quickly. So, this is something that we are going to do gradually.
We are in the search of improving this line, and we continue using measures that are going to have the effects materialize next year. But as I said, these are marginal improvements, improvements that are going to be felt along the year. In relation to 2022 cohort, there is not going to be a step. We are going to have residual effects. When you look back in the first quarter, 2022 had a better, higher effect. And if you compare this quarter, you see that the results were a bit less. So, I believe we are going to have a stabilization in the 2022 cohort, but quite close to zero as soon as we get to the end of the year or the beginning of next year. So, this is what we would expect from the 2022 cohort. As to organic growth, mostly is what Marcelo mentioned.
When we have an organic growth, which is more negative, so as to say, is the current contract. The achievements are working well. We can have a positive growth edge, but it's a customer that is in default or during the bid, may negotiate a reduction in price, or maybe he may be looking for something which would not insure us with profitability in the agreement. So, this is what we have seen in the churn. The customer wants to negotiate, extend the deadline, or he may be in default, and/or he may be looking for a price which is not interesting for us.
Would you like to add anything?
No, I think this is it.
Okay, thank you. João Frizo, you have the floor.
Marita. Good morning, Marcelo. Good morning, Marita. Thank you for taking my question. I have a question in relation to GR in relation to the trajectory of the margin from here to the future, considering that you are going to integrate the system up to the end of the year, and then everything's going to be consolidated in January, and in the short run, this is a movement that is going to be reflected in the margin. So, starting from 10.5% that you are posting, what would be the margin expected for the first quarter of next year, and what would you expect up to the end of the year, considering that part of the synergy has already been captured?
No, we cannot provide guidance. We are going to try to answer your question without mentioning numbers. This is what you said.
In fact, we might have some pressure on the margin as in the second quarter, because this is when, in fact, we are going to start capturing the synergies, and you have some costs involved that may hurt the margin. So, it's likely to be a quarter which will be under pressure in terms of margin, and we are very positive in terms of our expectation that in the second quarter, after the synergies are captured, we are going to go back to the GPS historic margins. This is our expectation.
So, adding to what Marcelo said, the way we see the condition of bringing GRSA to a margin of the level of GPS up to 2025, this is becoming ever clearer to us, which are according to the synergies that we identified for GRSA.
Thank you very much. That was very clear.
Now, André Ferreira.
Good morning, everyone. Thank you very much for taking my question. Congratulations on the results. Two points I would like to consider. First, I would like to make a comment in relation to the competition in this quarter. If you could provide some color of the competition, if you could say that what you said in the release is something that goes beyond what you expect, or is it a business decision in the sector which, in fact, is very competitive? The second point is the leverage ratio for the quarter ended at 1.8 x, and in the past, you said that you would need a leverage ratio below 1.5 before you resume the activity of M&A, and that would happen in the second quarter of 2025. At the end of the presentation, Marcelo commented that maybe it will happen in the first quarter.
And when we look at the annualized leverage ratio, we would say that it reaches 1.49. Just to clarify, when we saw the comment in the presentation, when you mentioned the possibility of resuming M&A activities, would you expect this to be announced in the first quarter, or are you going to resume negotiations, or will it take a bit longer?
André, let me make a comment about the first question. The competitive environment in which we live is controlled because I have many competitors, small competitors, large competitors. So I have a lot of offers. So the customer has a lot of possibilities to negotiate prices. And when it happens, when the customer is putting pressure for lower prices and extended deadlines, and that's the moment when negotiations become more difficult.
In a structural manner, we are always going to look at our sectors and say, I'm competing with a medium-sized company and maybe the local company, a local supplier. But when the customer has this attitude, let's say, a more cautious attitude, or maybe even more daring when the customer is trying to negotiate the deadline or the prices, and this is what we see now, major customers are looking for better conditions, and we have a different line of doing this, and we would not accept a contract where the margin is not as we expect, because we know that if the contract is going to last three months, we are not going to be able to recompose the margin along the three-year period. We would not be able to maintain the margin without creating a structural negative effect on our own margin.
So it's a trade-off that we have. We give a more, we prioritize profitability. So this is what we see, that we have customers which are more assertive. They put more pressure on us, and they talk about prices and extended deadlines in a very strong way. And in relation to leverage ratio, as you observed, we are at 1.5 x on a pro forma basis. And this is a harder quarter because we pay the Christmas bonus. So the cash generation tends to be affected, and we want to maintain the net debt for the fourth quarter. But this is a challenge that we have because we have to pay the Christmas bonus, the 13th salary. So if we manage to maintain the net debt in the fourth quarter, next year, next year, we are going to start with this target of 1.5 x.
So I believe that announcing new M&As will depend on the negotiations. To be frank, we are not in a hurry, but rather we want to have a qualified pipeline because the integration of GRSA is consuming a lot of energy from the team because of the integration. And this is what we're going to still have in the first quarter of next year because this is the moment when we are going to align and integrate the system. This is going to be a period that you have to be very careful in order to avoid problems or any distortion. So next year, the first quarter, we are going to have in this period of making the adaptations. And the team is very concentrated in making a seamless integration. So it's very likely that we are going to start announcing as of the second quarter of next year.
But I think this is going to be an exception. So most of it is likely to happen in the second half of the year of 2025.
So, Gabriel Rezende, you may open your microphone. Gabriel? Gabriel?
Can you hear me?
Yes. Yes, go ahead.
Só queria chamar a atenção para. I would like to draw your attention to GPS margin when we exclude GRSA effect. This is something you commented along the presentation, but I would like to talk more a bit about it. Some levers that the company has been using in order to deliver a higher profitability that we have been historically observing. So as when we see ex-GRSA, we are very close to what you did last year, even though the new M&As are much more relevant now.
I would like to understand the margin dynamics, the organic margin, when we do not consider the M&A and consider the company as a whole. Another follow-up in relation to the GRSA. Do you expect an additional growth of the revenue in addition to the 4% quarter on quarter that we observed previously? So the 4% attracts our attention. It's a significant growth in relation to the due diligence, but how can you explain what's happening?
Gabriel, yes, in fact, our margin, if we exclude the effects of GRSA and the other acquired companies, are according to the historic levels, and the lawsuit liabilities are really adversely affecting our margin. But this is a result of the work Gustavo has done and his team. It's a result of all the monitoring we have been having on the results. We are counting the dimes.
So it's the management in practice, and we do not fall into the temptation of making or executing contracts by hurting our margins. If the margin is not balanced, you cannot renegotiate at a later time with the customer, and it's not good for us to renegotiate with the customer. So it's the result of the discipline that we have had, our everyday activities. And this is something that our team does very well. And our commercial team has to not fall into the temptation of making any agreements. There was an important share of adjustments that was passed through in June or July, and that helped this level of growth. And the target that we have, what we expect from GRSA, is to grow at the same level of GPS, 10%-12% of organic growth, qualified growth.
We know that in the short term, especially in the first year after those systems are integrated, we know that probably there will have the organic growth impacted by the renegotiations of some contracts. We understand that some contracts will have to be renegotiated, and we are going to do everything that we can to maintain the customer. But we know it's not easy. We expect this pressure, and the organic growth is going to be adversely affected because of this. But on a recurrent effect, what we expect from GRSA is a growth close to GPS, 10%-12% in organic growth.
Yeah, that's clear. Thank you.
Yes, after acquisition, because this is what usually happens after the adjustments of the contracts.
A follow-up question. The adjustment included July or did it affect October as well?
The adjustment is not applicable to all the contracts. Each union has its own rule. Each contract has a specific month for the adjustment. That happened in July, but that affected the quarter as a whole.
Okay, thank you. Gabriel.
Thank you, Gabriel. Let's move on. Now, André Mazini, please unmute your microphone.
H ello, Marita Marcelo. André Mazini from Citi.
Follow-up. First, the trade-off between organic growth, more or less accelerated, and the margin. The margin continues to be very positive in spite of we see that GRSA is already coming in and whose margin is a bit lower. How do you see the trade-off? Do you want to have a double-digit margin at all times? This is going to have the growth, organic growth modulated. What's the rationale behind it? What's the trade-off that you have in mind? Would you expect the margin to be always high? My second question is related to the competitive environment that you mentioned during the call. The customers are putting pressure for lower prices. Did anything change in the competitive environment? We saw major companies in security and in catering more M&As. What are the changes in this competitive landscape when we talk about the main peers? Did anything change?
Yeah, thank you for the question. Would you like to make any comments? Yes? We have the scale, which is a competitive edge that we have. We can have more revenue.
Since we have high revenue, we can dilute the fixed costs. Our business demands a lot of back-office efforts. We have contracts that require back-office. You have lots of materials, you have many employees, benefits. So it's a business that requires a lot from the back-office team. And because of the high scale, you have more room to invest in technology to automate the processes. With this, we can have a very competitive indirect level of 5-6% of the net revenue. And what we see in medium-sized companies is 10% or 11%. We expect the operational level to reach 17%. This is the average margin that we expect, and this is what we demand from the commercial team. Of course, there are exceptions, specific cases that have to be looked at specifically, but the guideline is to maintain this operational margin of 17%.
In relation to the trade-off that you mentioned, this is something that is well established here, and that includes some pillars that we have read and mentioned. So when you are having the pricing strategy, when you're doing the negotiation, you have visibility of the contract, and you can demand, and you can prioritize a return of that contract. If you do not have that visibility, it's very difficult to have a negotiation with the customer if you do not have the correct information about the contract. This is an assumption which may not be very visible to you, may not be very intuitive to you, but it's very concrete to us. We are not talking about a thesis. We are talking about accounting data based on that contract. And then we establish a minimum level bar so that we can continue with the negotiation.
If we cannot reach that minimum level, we are going to decline. We do that in such a way that we are going to continue to have a very good relationship with the customer because it's very, very likely that the customer would come back to us. It happens every day when the customer decides on a competitor that offers a very good price, which is not feasible sustainably. That same customer will come back to us considering that the competitor cannot continue with offering the same conditions. We have higher scale, we can make the evaluation about each contract, and we establish what are the minimum rules for us to play. I can ensure that in my contract, I'm going to have a margin that would make sense to our business.
During the negotiation, I'm going to say, "I cannot meet your demands in terms of prices and deadlines." We've seen the situation many times. It's something cyclic. There are moments when the interest rates are high, companies are under pressure. And then let's imagine a company that is not in good financial conditions. So it has all the costs you have to pay, the indemnity you have to pay, all the taxes and all the fees. And they're going to say, "Oh, I'm going to do business with this company because I don't have enough money at this moment." So this is the cycle that we see. This is a moment when everybody's prioritizing price.
And then in the following cycle, what happens? Those companies that accepted those conditions, because a company that accepts to renew agreements to avoid the costs of demobilization, is just extending the problem of putting the problem to the future. And when the company goes bankrupt, this is the moment when the customer notices that what is important, of course, price is important, but to have corporate security is very important because the company faces the lawsuits jointly. Sometimes lawsuits are under the responsibility of the customer, and the customer will have to pay for that because he's co-responsible for the lawsuit, and the customer would have no document to defend from the labor lawsuit. So we see those cycles.
There's a cycle when the customer would prioritize cost, and there's another moment of the cycle when the customer regrets because the cost was much higher considering the liability that was assumed. And then he may say, "I'm going to go for more corporate security." And this is a fluctuation that we have seen at GPS. And within this context, we have very clear what is a priority and what has to be included in our discipline. It's not the lowest price, but rather the profitability of each contract. And we continue on this pathway, delivering in a sustainable way, in a robust and aligned way, all the margin. And in relation to M&A, I think it was worse. I think the competitive environment is much lighter today. I don't see a lot of competition in the M&A dimension.
And it was very good that we bought GRSA because we had other companies on our radar and that made us stronger for negotiations. And in relation to the competition, I believe the competition is putting pressure on us because customers are facing financial difficulties because of the economic landscape. And this pressure is exerted in all the chain, and the competitors do not want to lose the contract. And sometimes they accept a cost which is not feasible. So we are facing a moment when the cost pressure is very high, and in the future, quality is going to be prioritized. So this is the cycle that we see. Very clear.
Thank you. Yes, Marcelo, you have the floor.
Good morning, everyone. Thank you. I would like to discuss top costs.
So, high level of inflation and in a condition of full employment. So, I would like to ask you. So, is the pricing of costs of labor and hiring of labor. Another point, in addition to labor, are there other cost-related areas that you feel more pressure? And if you could review, what are the main indexes for the adjustments of agreement, of the agreements and contracts? And what's the risk of having a mismatch between the full index and the cost growth that may happen in the future that can be much higher than the full index? We do not see any pressure in our supplier base because our suppliers are in the same environment that we are. And all the chains are under pressure.
Pressure to pass through adjustments. Well, what I can say is that the unions follow the rule of the minimum, and this is what they have been following in the past years. So it's an adjustment index very close to the minimum wage adjustment. So we are not very concerned with passing through the salary levels. I think in the past we had more delicate situations when the pass-through was 8-10%. And this is all good because it helps us in the organic growth. But the difficulty to pass through the customer is more difficult. But this is not what we see today. In fact, we have some difficulties to complete our functions, our positions. We see that the job market is heated. It is very difficult to hire personnel. So we are reinforcing our human resources team.
Our CV base helps us a lot, but it's been very difficult to hire personnel much more than we saw last year, so this is a fact. And also in relation to the adjustment indexes, I would say that 95%, 95% of our contracts are aligned because typically our contract 75% is corrected according to the collective bargaining and 35% is the IPCA. So this is the composition of cost, so our cost base is about 70% our salaries and benefits, and 30% would be related to services and materials. So 90% of our contracts follow this rule, and the moment of adjustment is according to the base data of the union, so this happens in the same month, so both adjustments happen in the same month. It has always been like that.
And historically, we have been able to maintain the margins even in those moments or in those years when the percentages of adjustments were much higher. So it's always a challenge to pass through the price to our customer. It's never easy. GPS is a congregation of 500 small companies, and the contract managers are the ones who do the job, and they are there doing their best to pass through the adjustments. So we have an army of contract managers to pass through the adjustment because at the end of the day, the company depends on this. It's always a big challenge, and our management model helps us a lot. Our contracts are all aligned with this.
Okay, thank you.
We came to the end. I would like to thank everyone for attending this conference.
I wish you a very good week, and we are here available to take any questions you might have. Thank you. Have a good day.