Diario | Latin America

Research evidence excerpt

Diario | Latin America

Diario

Equity Research

May 11, 2026

Management clarified that recent increases in SG&A are non-recurring and linked to integration of

acquired companies and contract ramp-ups, with clear potential for normalization as synergies are

captured. Labor costs, which were elevated due to provisions and adjustments in prior periods,

are expected to improve versus 2025, though not replicate last year’s unusually favorable levels.

Overall, the message is that cost inflation exists (notably food inputs), but is manageable and partially

recoverable via contractual pass-through mechanisms, typically renegotiated mid-year.

While organic growth may be closer to single digits in the near term, this reflects active portfolio

management, including the renegotiation or exit of low-margin contracts to protect profitability. This

reinforces the strategic positioning of GPS as prioritizing margin quality over pure volume, even at the

expense of short-term revenue growth.

On working capital, the increase in receivables was explicitly framed as temporary and technical, driven

by contract renegotiations and integration effects (e.g., delayed invoicing during client transitions post-

acquisition). Management stressed that this should normalize and does not signal deterioration in

underlying collection quality.

M&A remains a central pillar of the investment case, with management describing a robust

and increasingly qualified pipeline, albeit slowed by high interest rates. The company is taking a

conservative approach to valuations and expects conversion into deals to be gradual. Importantly,

strategy remains unchanged: focus on mid-sized, fragmented businesses with low customer

concentration and margin expansion potential post-integration. While macro conditions (including