CI&T Inc

Technology is more than a device, system or industry.

Technology is built by people for people. It's built for people with desires and needs and ambitions.

By our people who are

Talented. Curious. Creative.

Oh, the diverse. Our people use innovative strategy, design, and engineering to offer end-to-end solutions that help companies to quickly transform and scale their operations globally.

While we create AI-powered solutions, all we really want and what motivate us is... To make their tomorrow.

CINT. We've reached and built tech to make their tomorrow.

Good morning. Welcome to CINT Earnings Call for the third quarter of 2023. I am Eduardo Galvão, Head of Investor Relations at CINT, and it's a pleasure to be here again to talk about our operating and financial results. With me on today's call are Cesar Ghosn, Founder and CEO, Bruno Guicardi, Founder and President for North America in Europe, and Stanley Rodrigues, our CFO. This event is being recorded and all participants will be in a listen-only mode during the company's presentation. After that, there will be a question and answer session for analysts and investors. If you'd like to submit a question, please send it via email to investors at cint.com. The presentation is available on the company's investor relations website, and the replay will be available shortly after the event is concluded. Some of the matters we'll discuss on this call, including our expected business outlook, are forward-looking statements, and as such are subject to known and unknown risks and uncertainties, including but not limited to those factors described in our earnings release and discussed in the risk factor session of our annual reports on Form 20-F. These risks and uncertainties could cause actual results to differ materially from those expressed on this call. We caution you not to place undue reliance on those forward-looking statements because they're valid only as of the date when made. During this presentation, we'll comment on certain non-IFRS financial measures to evaluate our business. Please refer to the reconciliation tables of non-IFRS measures in the appendix for more details. Our agenda for today includes an update of our quarterly highlights, followed by some of our business cases. We'll then talk about our people and our quarterly financial results. Now, I invite Cesar Ghosn to begin our presentation.

Thank you, Eduardo. Good day, everyone. It's great to be here again to talk about our results and achievements. Based in London for the past few months, a hub superbly positioned for global travel, I've had the opportunity to visit many CI&T teams around the globe. This is a routine I've always valued, and I'm now able to resume in this post-pandemic world. Our team's spirit, rich global culture, and enthusiasm for our vision and plans are truly heartening. These trips have been focused on introducing CI&T Flow, our AI platform for hyperdigital, in cities like New York, London, Sao Paulo, and Melbourne. These events presented our value prop of radically enhanced productivity and customer experience through AI. It's been remarkable to witness the evolution of our platform since its July launch. We are proud to report that over 20 of our largest clients are now engaged, with more than 2,000 active users from CI&T and our co-build clients, utilizing the beta version of CI&T Flow. We are at the beginning of this exciting differentiation journey, yet the early results have been very promising. Now let me comment on our operating and financial performance. Our net revenue reached R$ 529 million in the third quarter of 2023, compared to R$ 559 million in the second quarter last year. The number of clients with annual revenue above R$ 1 million in the last 12 months continued to expand, reaching 187 in this quarter and serving as a strong growth driver once the overall market conditions improve. The adjusted EBITDA margin reached 18.5% in the third quarter of 2023, which demonstrates our commitment to maintaining a lean organizational structure and optimizing our operations during a period of lower growth. In addition, we generated R$ 254 million in cash from operating activities in the nine months of 2023. This strong cash generation further strengthens our financial position and provides us with the flexibility to invest in strategic initiatives that will drive future growth. Stanley will deep dive into these figures later. Now let's take a look at some examples of our client engagements and business highlights for the quarter.

Franklin Templeton is one of the world's largest investment managers, with millions of clients based in over 150 countries worldwide. Their US sales teams approached the INT as they were restricted by the need to use several different systems in order to prepare for client meetings, which was taking approximately four hours for each meeting. We wanted to reduce this in order to allow for quality and valuable face-to-face time with their clients and ultimately support their sales flow. Our solution was the creation of Digital Briefcase, a user-friendly iPad application that not only improves efficiency for the sales team, but enhances their clients' meeting experience. We turned product data into usable information that can be presented quickly and accurately in just a few taps. The project itself was delivered with an agile approach, tapping into our best-in-class engineering, integrating several internal systems and secured using Okta authentication, with CI&T teams straddling six time zones and five different languages. For the sales teams at Franklin Templeton, it's been a real game changer. Driving efficiency by reducing meeting prep time from hours to minutes, improving client relationships and the speed of sales. And at the same time as providing a 100% sustainable paperless solution.

C6 Bank, a CINT client, is the first bank in Brazil to launch a product to both calculate and have the ability to offset a customer's carbon footprint. The carbon footprint product serves as a driver for sustainable consumption and a catalyst for positive change in consumer behavior. CINT along with C6 Bank, played a pivotal role in operationalizing the project's development, delivering it in a remarkably short timeframe, exceeding client expectations in terms of both outcome and quality. To make the carbon footprint product viable, it was necessary to create an architecture that guaranteed an end-to-end board integration with multiple partners, allowing the calculation access to the carbon credit marketplace and purchase of carbon offsets. As a result of the project, C6 Bank customers now have access to three innovative features. Calculation of their carbon footprint, which considers their card purchases and instant transfers. The ability to purchase VERA certified carbon credits to offset their carbon footprint directly through the app. And, evolving valuable consumption tips and guidance on adopting sustainable practices. Since the launch in March 2023 up until May 19, 2023, C6 Bank has made the product freely available to 100% of more than 25 million individuals and companies' customers.

In the vibrant city of Melbourne, where urban living meets coastal charm, Hobson's Bay City Council has taken a giant leap forward with a groundbreaking partnership. Three years ago, they introduced Android and iOS applications that provided residents with notifications such as bin schedules, local news, as well as guidance on recycling. But challenges arose as the app's code of base aged. That's when C&T Partnership stepped in. Together, they devised a plan to upgrade the React Native app. Also migrate the legacy JavaScript server code to TypeScript. Streamline notifications by transitioning to NAC. Automate synchronization with Algolia and create a dedicated PowerShell script. For residents, the results were transformative. Location-specific information and services, reliable bin collection notifications, enhanced community engagement through feedback and tips, and a convenient look-up feature for bin disposal. And for Hobson's Bay City Council, they streamlined processes and data management, also improved user experiences, fostering community connection, and reduced call centre volumes, facilitating easier resident council interactions. The new app is a shining example of how thoughtfully designed digital products can make a significant impact on a community.

Welcome to our latest update. We have gathered the most recent information and insights from our leadership team to share with you.

In August, Professor Julian Birkenshaw, a renowned professor at the London Business School, authored a paper in partnership with CINT that explores how artificial intelligence is reshaping the world of business. Join us in co-thinking this technology's profound implications guided by Professor Julian Birkenshaw Insights. You can check this paper in our website.

CINT is now ISO 27001 certified. The international standard sets guidelines for information security management, helping organizations safeguard their data, comply with regulations, and manage risks. Achieving this certification demonstrates our commitment to cybersecurity and competitiveness in the market, enhancing our resilience against security threats and incidents. All of this aligns seamlessly with the principles we cherish at CI&T. We've upheld our commitment to safeguarding our data, implementing stringent controls, and maintaining top-notch infrastructure to shield our entire organization from any external threats. This certification is a testament to CI&T's unwavering commitment to excellence and security. We are now better equipped than ever to navigate the challenges of the digital landscape.

Santee Flow made a breakthrough with its release in Asia Pacific, North America and Europe. In China and UK, we are promoting Santee Flow in keynote speeches, events and meetings. In the United States and Australia, leaders and guest speakers discussed the current state of AI adoption in enterprises, indispensable metrics for hyperproductivity, and the potential of the human touch in AI development to foster inclusivity. Internally, more than 2,000 users have access to C&T Flow, and more than 20 clients are already using this technology. Around the world, C&T Flow is gathering a global community of pioneering users and co-builders of this solution for a hyperdigital world.

CINT and IDEX, a technology and education services group, proudly announced their partnership with Impotera, a startup dedicated to diversity, equity, and inclusion. This collaboration aims to break the cycle of exclusion in the Brazilian workforce. Together, they are working on an innovative platform that revolutionizes the recruitment and selection process. It identifies diverse talents, nurtures their technical and behavioral skills, and connects them with the most fitting job opportunities. The platform transforms recruitment into a journey of self-discovery and learning. This collaboration means a big step towards a more diverse workforce, aligning with our goal of making their tomorrow by empowering communities.

This is our latest news. Our aim is to continue providing transparent and relevant information to keep you informed and up to date on our latest developments and achievements.

In the fast-paced world of AI, our priority is to foster the power of collective intelligence and knowledge sharing. We believe that collaboration between AI and human intelligence is the key to trailblazing in this new frontier. In our DNA, we are always ahead creating and trying with new methods and technologies. With AI, wouldn't be different. Our upskilling and reskilling programs facilitate continuous learning by enabling global teams to share the best of human intelligence with the exponential capacity of AI, focusing on critical skills for a hyperproductive era. The CINT Flow Week ventured valuable content to foster the flow mindset globally, bringing together partners, clients, and our people to explore the potential of this new technology. We are also supporting the journey of valuable brands around the world to add this technology to their business, changing uncertainty into confidence. Our Impact AI events, held in Australia and the United States, brought together business and tech leaders from companies like Wells Fargo, Amazon, and BlackRock to collaborate, exchange ideas, foster partnerships, and navigate the expanding ecosystem of AI technology.

I think the challenge with this revolutionary moment is that they tended to thrive in the fertile environment of startups and digital names. But normally it takes years to have an impact, a relevant impact in the brownfield setting of large established enterprise. In a nutshell, these advance need to become enterprise ready. So they need to reach a level of maturity where the potential of the new technology can be translated into customer value within a framework of reliability, security, and privacy. Factors that are non-negotiable for large successful enterprises.

We truly believe that you can't improve the things that you can't measure. And how does it do that? It does that by collecting a lot of data points. It collects data points by connecting to the systems that you already use, like your CICD, your JIRA, your Bitbucket, your GitHub and all that.

So our goal with Cintiq Flow is to dramatically reduce the lead time from innovation to production. So we allow the organizations to put value generation product in the hands of the users earlier.

We aim to make their tomorrow more sustainable and socially responsible while generating long-term positive impact for all our multiple and diverse stakeholders. Our digital solutions for sustainability offer was born from our firm commitment to lead the way in transformation. Using our years of experience with social and environmental projects, we offer solutions that promote sustainable business practices, inclusivity, and environmentally responsible value chains. With one of Latin America's biggest educational solutions companies, we created an entirely accessible application for people with visual disabilities. Our approach has helped our client understand the importance of prioritizing accessibility at the start of any project, improving development efficiency and results while promoting inclusion and social impact. Similarly impactful, with one of our clients we created a platform to help in the reduction of carbon emissions and waste generation in the client's value chain. Our approach proves that it's possible to have a positive social and environmental impact while remaining profitable. We believe that by creating value for society, investors, and clients, we can do good, make a difference, and lead the world's most critical sustainable digital projects.

I'm Eric Lovelace, VP of Marketing, North America and Global Problems. I was very honored to be featured in Forbes. The article talks about something that's very close to my heart and it's women in leadership. I talked about the new findings that show that women lead, profits increase. A lot of this is because women introduce new ideas and perspectives, problem solving. We bring different ideas, lived experiences to the table and overall help to increase innovation. So beyond my work at CINT, I'm very passionate about giving back to the community and specifically really being and helping be a mentor to the next generation of leaders. And when I talk about women in leadership, it's not focused on women who are at the highest levels of the company. It really can be any one leader at any level. So as part of our strategy of Global Digital Specialist Brand, it is important that we are building tomorrow, today, that we are staying ahead of the future, staying ahead of the trends.

I'm David Bacon. I'm the Director of Design at CINT here in Melbourne, Australia. Empathy Lab is an online workshop to help clients and partners better understand digital inclusion and accessibility. It involves a series of digital-based exercises designed to help build empathy for people with disabilities, whether they be permanent, temporary or permanent. or situational. Disability will affect most people in some form throughout their life, so retaining a customer for life means catering for their changing needs. Designing for Inclusivity not only opens our products and experiences to more people and a wider range of abilities, it also reflects how people really are. All humans are growing, changing and adapting to the world around them every day. Products should reflect this diversity. Accessibility, regardless of who you are, is critical to allow people to collaborate, people to do their job, people to take part in society.

I hope you enjoyed our selection of client stories, news and highlights. Now I would like to invite Bruno to discuss our Global Talent Strategy.

Thank you, Cesar. And good morning, everyone. It's a pleasure to be here again. Throughout this year, we have diligently balanced the supply and demand of skills with prevailing market conditions, keeping a streamlined organization structure while preparing ourselves to resume growth in the near term. We ended up the quarter with 6,100 CITers, and our voluntary attrition rate continues in a downward trend. Above all, our leadership turnover rate remains at 4%, which plays a vital role in the continuity of our high-quality service delivery and our ability to develop a new generation of CIT leaders. Diversity and inclusion is a cornerstone of our organizational culture, and in the third quarter of 2023, we made progress by introducing some key initiatives. For instance, we hosted the Month of People with Disabilities in September, welcomed a fresh cohort of students into our Career Acceleration for Black People program, and provided inclusive leadership training. Additionally, we organized numerous workshops, training sessions, and events centered around enhancing cultural awareness and promoting emotional well-being. Now, let's shift our focus to our environmental initiatives. CIT is fully committed to championing social and environmental responsibility. Our primary objective revolves around generating a positive and lasting impact on society and the environment. This quarter brought forth exciting news. In our first year on the Public Emissions Registry, the leading platform for reporting corporate greenhouse gas emissions in Latin America, the Brazilian GHD Protocol awarded us the Golden Seal of Quality. In our sustainability journey, we achieved a significant mile this year by publishing our greenhouse gas emissions inventory in our ESG report. Since then, we have diligently strived to comprehend and minimize emissions, infusing environmental and sustainability responsibility across our organization. Leveraging initiatives such as our ESG powerhouse and collaborative projects with our business units, we actively integrate sustainability into every aspect of our operations. Our commitment involves consistently refining our approach to environmental matters and in alignment with industry best practices. Now, I invite Stanley to give you more details about our financial performance.

Thank you, Bruno, and good morning, everyone. I'm glad to be here once more sharing our financial results with all of you. In the third quarter 23, our net revenue was 529.1 million reais, and it compares to 559 million in the third quarter 2022. The variation in net revenue was mainly due to the unexpected budget replanning of our top one client and part of our acquired portfolio. For the nine months 23, our net revenue increased to R$ 1.7 billion, up 9.9% at constant currency compared to the same period of last year. When analyzing our revenue distribution by geography, North America is our largest market, accounting 44% of our total revenue in the nine months of 2023. This is a testament to the strong presence and success we have achieved in this region. Latin America is another significant market for us, representing a substantial share of 41% in our total revenue. Europe follows with a revenue share of 10%, while Asia Pacific holds a 5% share. In terms of verticals, the financial services segment continues to be our primary source of revenue, contributing 29% to our total revenue in the 9 months of 2023. Additionally, the consumer goods sector is a significant contributor, accounting for 20% of our total revenue, exemplifying our ability to deliver transformative solutions in this industry. The Technology and Telecommunications Vertical contributes 18% to our revenue, showcasing our proficiency in meeting the unique needs in this rapidly evolving sector. Finally, our revenue share from our top 1 client improved to 10% today from 16% in the 9 months of 2022, and the top 10 client's revenue share improved to 42% from 52% in the same period. This is due to a variety of factors, including the cautious approach in the enterprise spending environment, as well as the successful onboarding of new logos. Most importantly, as we look forward, it represents the diversification of our revenue streams as we expand our client base and enter into new geographic regions and industries. Talking about diversifying our client base, throughout the last 12 months, we have successfully onboarded 40 new clients that are generating revenue exceeding 1 million reais. We are excited to share that these new clients will serve as a catalyst for our growth as these engagements expand and gain traction over time. The consistent net revenue retention rate of approximately 123% over the past five years is a strong indicator of the value we provide to our clients. This rate exemplifies our ability to not only retain new clients, but also expand our engagement with them over time. This aspect plays a pivotal role in ensuring our sustainable growth trajectory. Moving forward, we will continue to prioritize both the acquisition of new clients and the nurturing of existing relationships. Now let me detail our financial performance for the third quarter 23 and the nine months 23. Our adjusted EBITDA was 98 million reais in the third quarter 23 compared to 105 million in the third quarter 22. The EBITDA margin was 18.5%. Analyzing the results year-to-date, the EBITDA increased to 328 million versus 290 million in the nine months 2022, up 13.2%. The EBITDA margin rose to 19.2% in the 9 months 23 from 18.4% in the 9 months 2022. These results demonstrate our strategic focus on optimizing our SG&A expenses. Through a systematic and disciplined approach, we have actively identified operational optimization opportunities resulting in a reduction of these expenses. This has helped to offset the impact of our gross margin, reflecting our commitment to maintaining financial resilience and efficiency. It is important to note that we have adopted a cautious approach throughout this year, recognizing the need to navigate the current market dynamics with prudence while preparing our resumption of more aggressive growth in the coming years. As we continue to adapt and refine our strategies, we are confident in our ability to position ourselves for sustained growth and long-term success. Our adjusted net profit was 45 million reais in the quarter versus 67 million in the third quarter 2022, mainly due to higher net financial expenses, which I will explain in more details. In the third quarter 23, net financial expenses were R$ 20 million, R$ 13 million higher than third quarter 22, as a result of three factors. Lower foreign exchange gains in the comparable period, which is a non-cash effect. a derivative gain from an interest rate swap that benefited our results in the third quarter 22, and higher debt position as part of our M&A strategy. The foreign exchange variation and derivative results tend to balance out throughout the year. Our adjusted net profit in the 9 months 23 increased by 10.5% to R$ 176 million from R$ 159 million in the same period of 2022. Finally, our cash generated from operating activities rose to R$ 254 million in the 9 months 23 from R$ 29 million in the same period in 2022. And our free cash flow excluding the capex of our net operating cash flow increased to R$ 163 million substantially above our cash consumption of $81 million in the nine months 2022. The consistent generation of strong cash flow empowers us to continue investing in strategic initiatives that will further drive our growth and enhance our competitive advantage, while simultaneously maintaining flexibility in our capital allocation priorities. Now, I invite Cesar back to comment on our business outlook.

Thank you, Stanley. While enterprise spending sentiments remain cautious, we are glad to be supporting a growing number of clients with their core digital initiatives as they design and prepare their AI investments for the years ahead. For the fourth quarter of 2023, we expect our net revenue to be in the range of R$ 519 to R$ 540 million on a reported basis. The midpoint of this guidance range indicates stable sequential revenue. For the full year of 2023, we are narrowing the range within the previous guidance. Now we expect our 2023 FX neutral net revenue growth to be in the range of 4% to 5% compared to last year. Finally, we are maintaining our expectations for the adjusted EBITDA margin of at least 19%. In such a volatile year, we have focused on maintaining our solid profitability, generating a significant amount of cash, and evolving the AI capabilities of our team as we resume our solid growth trajectory. Thank you for attending our call today. We now conclude our presentation and will begin the Q&A session.

All right. We'll now begin the question and answer session. I'll announce each participant's name. Once you hear your name, please unmute your line and ask your question. Then when you're done, please mute your line. The first question comes from Ashwin Shivika from Citi. Hi, Ashwin. Please go ahead.

Thank you, Eduardo. And good morning, everyone. Appreciate the comments. Let me start with maybe asking about the step down the top client. Is that more in nature of furloughs, temporary steps, things like that, or is there something um greater with regards to you know something else going on with regards to the client and are there any indications of when uh spending at the client might come back to a more normalized level

Good day, Ashwin, and thank you for your question. Great to see you. Well, I think, as Stanley mentioned, it was an unexpected budget replanning for our top one client. And now we believe we have a very stable situation. That's what we are foreseeing. This top one client has been with us for months. uh more than 10 years now so I think it's we are still I think the most strategic partner for digital and I think it's just a result of a very volatile year and they decide to adjust budget and that's why we we we saw this this decline so now we foresee a stable situation I see okay okay

And as we think more broadly past the one client, any early thoughts that you can give us as to how you're planning for 2024? You know, what we've heard from others is a slow start to the year with the hope that, you know, higher backlogs should convert in later parts of the year. ARE YOU CONSISTENT IN THINGS THAT YOU CAN SAY THAT PROVIDE HIGHER VISIBILITY INTO FORWARD COMMENTS?

SURE. I THINK, ASHEN, A GOOD WAY TO SEE THE CURRENT DEMAND ENVIRONMENT FOR OUR SERVICES, I THINK THERE'S ACTING IN DIFFERENT DIRECTIONS. THE FIRST ONE IS MACROECONOMIC. pointing to still a cautionary spending of our clients, but there is a second For us, that is the new tech revolution driven by AI. I think this is pushing our clients and every single company to increase their investments around digital, to capture efficiency first, and then prepare the company for inexorable customer behavior disruption that is going to happen because of the competitive environment. environment in a world powered by AI. So, macro constraining, AI pushing demand, and our recommendation is simple, capture efficiency with CI&T flow, of course, opening budget and space for playing the new customer experience game. If we, how we translate that to our, this demand equation to our environment. I think if we exclude the variations that Stanley mentioned, we are observing new demand indicating growth across the board. So, we are confident on delivering a very stable and a strong Q4, marking what I believe is the start of our standard sequential growth through 2024 and accelerating as we progress in the year. That's our current visibility under the current market conditions.

Understood. Thank you all.

Thank you, Ashwin. Our next question comes from Ernesto Gonzalez with Morgan Stanley. Ernesto, please go ahead.

Hi, thank you for taking your question. It's an international expansion just to see how it's doing relative to your expectations and anything you can comment going into year and into 2024 would be great. Thank you.

I don't know when I want to end this one.

I'm not sure if I got the question. Can you repeat? You're interested in seeing how the revenues outside Latin America are going?

Yes, how they're doing relative to your expectations for the year. Have you seen any improvements in demand and trends or anything you can comment going into year end and 2024?

Yeah, you know, like we don't see a lot of differences in demand across regions, Ernesto. It looks like very similar across the board. So some sectors a little softer than others, like mainly the tech sector itself, which was a relevant one for us, softer than others. still strong, you know, in the CPG, financial services. So it's more like by the cohort of clients, like traditional big Fortune 1000 clients still going stable, right? And smaller tech companies, software, but that's across the board, doesn't have any difference across regions. And so that's what I've seen everywhere. Really clear. Thank you. No problem. Thank you.

Thank you, Ernesto. Our next question comes from Puneb Jain with JPMorgan. Puneb, please go ahead.

Hey, thanks for taking my question. I have a question for Stanley, like on margins, like obviously you are doing like a lot of cost cutting this year. including cuts in SG&A. Is that margin upside sustainable and what are you seeing on pricing or expect for gross margin as we move into next year?

Hi, Pune. Thank you for the question. What we've seen in this quarter, I would say that this is the lowest. It's a transition phase, a quarter of transition. It's the bottom of a moment that is changing, coming from this depressed market, you know, transitioning through a stabilization and heading to a growth period again, as we calculate. And in terms of the margins, of course, we see margins regaining to our track record in the next quarters. And with regard to sustainability, we see everything fairly sustainable and what Everything that we've been managing in terms of cash, in terms of margins, in terms of cost, everything has been fairly sustainable. And mainly we've been preparing ourselves to regain growth. And, for example, taking the opportunities of especially towards AI. I think we did a great move. really at speed and with a strong strategy towards optimization and later down the road to capture all the consumer experience that is it will really drive further growth and we've been focusing on that and cost and cash management all combined everything fairly sustainable and we'll continue in that path.

Got it. And then are you seeing any differences across regions or across verticals as it relates to clients' willingness to start, initiate new projects, specifically in AI area?

Okay. I compliment you.

Yeah, I would say that we have 20 of the biggest clients already into Flow platform, doing all the experimentation, initiating the trajectory on top of optimization. But some clients already willing to jump to the next phase, which is towards a consumer experience. Cesar, you may add your view.

Sure. I think CI&T Flow helps CI&T go to market strategy in two ways. I think in two different timeframes. The first is efficiency, productivity. So it's already happening and we are replacing competitors based on the concrete gains around tech efficiency leveraged by CI&T Flow. This is the main opportunity for now in 2024. And I see a big opportunity for many years ahead because it's not a sprint. It's a 10-year marathon around the revolution in software development and software engineering boosted by AI. The second opportunity is the demand associated with the advent of new business use case by industry, by vertical. it's already happening but it's still in the early days and i believe it will be relevant really relevant in terms of revenue uh in 2025 or so as the technology gains some maturity and stability and the competition environment uh reshape it's It's natural that customer will have to increase their investment in hyper personalization and new customer experience, natural language experience, all based on AI. So this is this is a big shift, but probably from 2025 on. OK, thank you.

Thank you, Pune. Our next question comes from Carlos de la Garreta with CBA. Carlos, please go ahead.

Hi, can you hear me? Yes. Sorry, I'm not sure my video is working. I'm connected from mobile. Thank you. Good morning. Thanks for taking the call on the question. Um, I have 2 on my end very quick ones. The 1st, 1, if you can talk about the utilization rate, then it's evolution. How do you see that going forward? And secondly, if you can comment on how's the, let's say the digesting of the acquisitions that you made in 2022. I mean, it was at least four of them. So if you can talk about that, give us some color at the qualitative level, that'll be very helpful. Thank you.

I'll take that one. Carlos, thanks for the question. Utilization rate has been high as we've been adjusting the workforce, right, according to demand. So it kept high, and we're forecasting that, you know, as we kind of resume growth, we'll continue high, and we already have, you know, a couple hundred positions open, so we see some potential growth in the near future, right? So that's a metric that we track very closely. So even in the previous quarters when low demand was hitting, the utilization rate is still not very high. To your second question, What was that again? Sorry, Carlos. Second question was around... Digesting the acquired components. Yeah. So we're very happy with the speed of that integration. So how we already kind of really seamlessly integrate the business teams and the delivery teams across the board. with all the acquired companies. Low lights in that process is actually not some of the acquired companies have a bigger exposure in tech. As I mentioned before, that's a segment that has a soft demand right now. But in highlights, we've already seen the thesis of those acquisitions working, right? So we have many clients that were coming from those smaller companies that had, you know, under a million dollar type of engagements. scaling rapidly to, you know, five, $10 million engagements, uh, kind of really tapping into the scale of CIT and the complimentary, uh, capabilities of CIT and reaching a completely different level of, uh, of engagement and relevance for those clients. Right. So that we're very happy to see that happening already. Um, We see that in the U.S., in EMEA. So we have many cases. So we feel like that's going forward. It's a long-term game for us. The M&A continue to look for more opportunities to do this in 2024 and maybe a second wave of of M&As coming as soon as we see kind of market conditions and you know, prices coming to, you know, as long as they make sense, we'll resume that activity.

Thank you, Bruno. And as a follow up to that, I guess, you know, the last comment you just made, like, what would be the conditions or the metrics that you would be looking at to assess that the outlook for M&A is getting better?

No, we've been looking at, you know, pricing, right? So the private market is kind of already reflecting the reality of public markets. And of course, we're looking at for companies, for assets that are doing well, right? So we want to see, you know, that resilience on the target companies as well, companies that are navigating the soft demand environment. So those are the, I think, the main two things we want to see there before moving forward with M&A processes.

I appreciate it. Thank you.

Thank you.

Thank you, Carlos. We have two questions here that we've got by email. The first one is regarding CIT flow. How do we expect it to contribute to winning new clients or expanding the relationship with existing ones?

Sure, I can get this one. Again, we are very excited with the early results. As I mentioned before, more than 20 of our largest clients on the team, more than 2,000 people from CIT and clients onboarding the platform. And we are now reaching a large number of use case for efficiency in the platform. We have now around 30 AI agents. So this is basically fulfilling our value prop that is We started with a foundation that we're going to handle privacy, security, going to be make AI enterprise ready. On top of that, we boast the teams with AI agents towards tech efficiency. And this powered by AI teams can tackle traditional digital demand with hyper productivity or even work on new AI business use case. So this is the three layers of the value prop enterprise readiness, efficiency and experience and and In terms of the way we are seeing the demand being generated by that is basically tackle productivity, so replacing poor performance competitors based on concrete, the most tradable gains around tech efficiency, and open space, budget space, and creating the the AI teams that can tackle the opportunities around the experience. So basically a huge push around our current portfolio and it's the main focus in this initial beta launch of Flow. And from next year on, we will onboard new clients in the platform. Right now it's available only for CIT, current clients, and we are preparing everything in terms of capabilities and the technology to scale from next year on.

Okay. The second question is, considering the strong cash generation this year, what are the priorities for capital to be deployed?

All right. Well, I can take that one. Thank you for the question. Well, on top of that cash generation, we may bear in mind that usually traditional or we have this seasonality of generating a stronger cash flow in the second half of the year. And we are deploying that cash. We're allocating that cash mainly in three ways. First, we have our debt service, so we are paying down debt in order to prepare a balance sheet for the next strategic inorganic moves that we will make in the near future. Second one towards R&D. And we have this great opportunity towards AI. And we, as I mentioned, we are investing timely with the proper technology. timing and in the proper scope in that area as well. And the third would be we've been promoting a share repurchase, for example. We see that we have a great opportunity with the price out there, and it's a way to return value to our shareholders as we have no dividend policy here. And as well, we have some M&A obligations that we may use those repurchased shares to comply with those obligations. So mainly those three areas for capital allocations.

Thank you, Stanley. There's just another question there. came up by email on how do you foresee the evolution of our organizational structure in response to plant demands and artificial intelligence?

Take that one. So within the next, to Cesar's point before, right? So the next 10 years, I think we'll completely reshape our industry, right? So we're very happy with the pace we're learning. So we're not thinking of, you know, there's no amount of hiring that can be done to actually get people that know what that's going to happen. it's for the scale that the new demand will bring we have to retrain our whole staff and you know the game will be who who kind of learns faster right so and that's where we're dedicating our efforts and to really move fast uh today we have more than two thousand people it's like uh almost like a third of the company already exposed you know to either uh you know our ai powerhouses uh one of those 22 clients that uh that we mentioned that already using Flow. So we have a third of the company learning, exposed and contributing to what we need to do and what we need to reformulate the software development, what needs to be done. And so we're very happy with the speed and we're kind of creating conditions and investments to kind of support that. CNIT Flow is now open to 100% of the staff. So we get even more and more people joining it and kind of helping clients to figure out how to kind of really reformulate their whole software development processes. And this is going to happen in the next year, the next two, next three, next 10. We'll be always changing there with immense potential for gains in speed and in productivity. And of course, just applying those tools to the external world, we're going to capture a lot of potential for hyper-personalization

and hyper experimentation kind of creating completely different user experiences for our clients our clients customers all right that concludes today's q a session i'll now invite cesar to proceed with his closing remarks cesar please

Eduardo, thank you all for participating in our call. Thanks, Eduardo, Stanley, and Bruno. Once again, I want to thank you all CINTers around the world for the hard work and achievements in the quarter. And a special thanks for our clients that are selecting CINT to co-build this amazing new chapter of innovation powered by artificial intelligence. Stay well. See you in the next quarter.

Thank you. Thank you all for attending today.