CI&T Inc

Welcome to CINT earnings call for the third quarter of 2024. I am Eduardo Galvão, investor relations director at CINT. Joining me on today's call are Cesar Ghosn, founder and CEO, Bruno Guisardi, 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 presentations. After that, there will be a Q&A session. 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. They are subject to known and unknown risks and uncertainties, which would cause actual results to differ from those expressed on this call. We caution you not to place undue reliance on these forward-looking statements as they are valid only as of the date when made. During this presentation, we'll comment on certain non-IFRS financial measures to evaluate our businesses. Please refer to the reconciliation tables of non-IFRS measures in the earnings release for more details. Our agenda for today includes an overview of our quarterly highlights, followed by some of our business cases. We'll then talk about our people and our financial results. At this time, I'll pass it on to Cesar Ghosn to begin our presentation. Cesar, please. Thanks, Eduardo.

Today I want to take a moment to talk about something that is at the very heart of our success and growth, our company culture. At this time of great change and excitement with the AI disruption, I'm intensifying my travels to connect with our teams around the world. CIT now has people in 25 countries, and in each visit, I feel the key element that unites and sets us apart. Our deeply rooted culture. Corporate culture does not happen by chance. It's the result of years of intentional choices, behaviors, and leadership. Our company culture is built on six tenets that guide everything we do. Let me briefly give you some context on them. It starts with our clients. They are the reason we exist. They face complex challenges and we bring our expertise as tech specialists to solve them with agility and innovation. To achieve this, we foster an environment of trust, built among smart, hard-working and resilient people, which enables deep collaboration and teamwork. This teamwork is driven by an obsession with excellence and continuous improvement, delivering superior results for everyone we serve. To remain relevant to our clients and sustain these results over the long run, in our infinite game, we must continuously learn, adapt and reinvent ourselves. Finally, we live by the belief that the more diverse we are, the stronger we become as a collective and more fulfilled we are as individuals. As we embrace exciting transformations, Including our AI reinvention, our culture remains the bedrock of our strategic vision and operational excellence, and the key element to attracting and empowering top talent. Now moving to our financial highlights. CIT continues to excel in an ever-evolving digital landscape. In the third quarter of 2024, we achieved a record net revenue of R$ 622.2 million, which marking a 17.6% increase compared to the third quarter of 2023, with constant currency net revenue growth of 90% year-over-year. Growth was especially strong among our top 10 clients, with net revenue up 25.3% year-over-year. The tangible productivity gains from the CI&T flow platform resonate well with our clients, giving us the opportunity to continue expanding our share with them. We continue to refine the process and methods of our AI growth machine, our expert sales team, boosting agility and effectiveness in meeting client needs. This enables us to onboard large clients with substantial tech investments, reinforce our long-term land and expand growth strategy. We conclude the quarter with a solid adjusted EBITDA margin of 19.5%. Additionally, our cash generation from operating activities reached 295 million reais in the first nine months of 2024, underscoring our strong financial position. We continue to attract and develop talent in the regions where we operate. This quarter, we onboarded 520 new CIN tiers across the globe. Notably, we have streamlined our talent acquisition process with AI, enhancing our ability to support our high-growth ambitions. In summary, we are excited with the perspectives for 2025, as we embrace AI as a transformative force and optimize our sales machine. Now let's explore some compelling stories of our clients leveraging AI in diverse contexts.

Earlier in 2024, CI&T was re-awarded Aldi of America's Digital Agency of Record, continuing the partnership between the companies for another three years.

Itau, Latin America's giant bank, was looking for a way to streamline their project management, moving away from manual, time-consuming processes. Our solution? We partnered with them to use Backlog Refiner, an agent within Flow, our AI-powered solution that automates their backlog creation and refinement process. Now, about 1,000 active users utilize the system, and approximately 100 communities within the bank use the system monthly. With Flow, Itau saw remarkable improvements efficiency with 4,000 stories generated monthly and a significant boost in team productivity with 30% of improvement in stories quality. That's the power of human and AI working hand in hand, transforming giants like Itado.

This is our partnership with BASF, where innovation meets beauty. Today we're excited to introduce our revolutionary application, the AI Lab Mixer, guided by the friendly robot named Mixi. This interactive tool is designed to empower professionals in research and development to create innovative cosmetic products in skin care, hair care, and sun care. Using generative artificial intelligence, Mixi collects user data and preferences, processing this information against industry trends and BASF's innovative ingredients. The results? Customized product concepts that meet market demands and reflect BASF's expertise. This generative AI application is revolutionary, enabling hyper-personalization like never before. CI&T and BASF, navigating the immersive experience as changes.

At the heart of the financial market, B3, the Brazilian stock exchange, operates as an essential market infrastructure and is committed to educating its users. The challenge was clear how can we innovate in financial education and make investments accessible while maintaining compliance and security? CINT, with its expertise in technology and innovation, was the partner chosen to tackle this challenge, working closely with B3 to implement a generative AI solution for the financial education chat. The task was not trivial. The team needed to navigate a sea of regulations and ensure data security while developing an interactive and engaging educational tool. CI&T stood out by forming a highly qualified multidisciplinary team that worked with agility and transparency. The solution was an educational chat powered by GenAI, which responded to user queries and educated them about the capital market and investments, helping them to learn and choose the best investment options. The educational chat became a revolutionary tool, offering users valuable information and promoting financial education efficiently and securely. GenAI enabled personalized and adaptive interaction, raising the bar for the user experience.

etc the incubation arm of bt group creates and incubates products platforms and businesses in emerging categories including drones health tech ev charging active intelligence and fintech utilizing bt group's unique assets using a startup mindset to reimagine the traditional etc solve real world problems to transform businesses and people's lives with a relentless focus on the customer and a product mindset Culture sits at the heart of the etc business helping celebrate diverse perspectives outside the box and entrepreneurial thinking With those they collaborate with they need partners that can match their vision and their pace Etc runs as a set of startups within a corporation So working with a team which understood the business's product first mentality underpinned by zero to one thinking was key to a successful collaboration They found this in CINT. With our unmatched end-to-end capabilities and strategic rightshoring approach, CINT was the ideal fit. Together, we embarked on a journey focusing on key ETCETRA projects. One of the most ambitious projects with this collaboration was Project Lisbon. which cint and etc set up in 2023 aimed at building an extension of etc's team underpinned by a common culture located in lisbon the goal create a strong and united hybrid team that can rapidly scale to deliver initiatives across etcetera's key verticals etc. and CINT established guiding principles across all of their projects. These principles focused on an agile, lean and product-led approach, customer-centric innovation and continuous improvement, all underpinned by shared values and culture. The results were astounding. In just one year Etc and CI&T have collaborated across six product areas, scaled to 13 squads and maintained 100% on-time project delivery.

I'm Becky Lake, Head of Product at Etc, the incubation arm of BT Group. CI&T have been instrumental in supporting us in aligning our products and our strategic architecture and tools to ensure our solutions are built to scale from day one. all while helping us deliver at the pace of the startup. Our shared ways of working and strong focus on culture are at the core of our success.

The secret to their success was a shared vision, a strong culture of accountability, a relentless focus on doing what's right for the customer and a deep understanding of each other's businesses. The values and common culture created by Etcetera and CINT go beyond words. It's at the heart of everything they do, which is when the power of collaboration can truly be realized.

We team up with Amazon Web Services AWS to make our clients reach the sky. Recently, we achieved three significant designations, the AWS Migration Competency, which enables businesses to achieve their cloud migration objectives effectively, the AWS Well-Architected Authorized Partner, and the AWS Service Delivery Designation for EKS. By partnering with us, our clients gain access to a framework and financial incentives from AWS to reduce migration costs. In August, we also launched a center of excellence for AWS, a dedicated team to unlock the potential of generative AI with Amazon Bedrock and AWS new competencies and designations.

CIMP is a great AWS partner that's growing fast due to their customer obsession delivering value to our customers. Their expertise in migrations and application modernizations using GenAI is paving the way for a great future.

Today, we're excited to share the success of our CINT NextGen AI Edition Internship Program. At CINT, we believe in nurturing the next generation of tech leaders by providing them a platform to learn, innovate, and excel. Our internship program is more than just learning. It's an immersive experience. Our program combines theory with hands-on practice, focusing on using artificial intelligence through our proprietary platform, CI&T Flow. With an overwhelming response, we received more than 10,000 applications this year, reflecting our program's growing interest and trust. We look forward to nurturing more talent and continuing to make a significant impact in the tech industry.

In San Francisco, we engaged in discussions with industry leaders about AI's current impact on businesses and the opportunities it presents. The event featured a keynote speech by Jeffrey Moore, the author of Crossing the Chasm. Additionally, we hosted a panel moderated by Bob Wohlheim, which included representatives from prominent brands. The event marked a significant moment in engaging a community of leaders in AI transformation.

In September, we hosted our ESG Day, a morning of learning, connection, and inspiration focusing on the role of technology in promoting sustainability and social cohesion. Specialists from clients, partners, and other stakeholders came together to discuss, present cases, and foster a culture of innovation rooted in social and environmental responsibility.

I think we are seeing, as a society, as citizens, in these recent months, weeks, the planet giving us more and more evident signs that the time to act has passed. And this is definitely not just an agenda of the public sector. It is an agenda of the public sector and of the private sector as well. And I think today's event is a way for us to make this debate in the private sector advance.

The ESG Day brought us close to our purpose of using tech as a force for good. Join us.

Welcome to CINT's Future Ready Summit. Held at the iconic New York Stock Exchange, this event brought together leading tech experts to share insights on advancing AI-first business strategies. From modernizing customer experiences to harnessing data-driven growth, our keynote by Elisa Cohn and panels featuring leaders from Microsoft, Vector 3 Consulting, and more explored the future of innovation. We delved into the real-world impact of Gen AI with discussions led by experts from CINT, AWS, and Kenview. Thank you for joining us at the Future Ready Summit. Together, we're navigating change and driving value.

We've been around Gartner events in Brazil and the United States in the past few months. In San Paolo, the Gartner CIO and IT Executive Summit is the region's most important gathering for senior IT leadership. We sponsored the event to show our AI journey. In Orlando, Gustavo showcased how generative AI applications drive efficiency at scale with practical examples that can transform our clients' innovation journey. In each event, one message impacted hundreds of people. CI&T is the right partner for your AI transformation.

I hope you enjoyed it. Now I would like to invite Bruno to talk about our Global Delivery Model CI&T Flow Evolution and our Talent Strategy. Thank you, Cesar.

And good morning, everyone. It's a pleasure to be here again. We ended the third quarter of 2024 with 6,700 CI&Ts, reflecting 10.5% year-over-year growth and 8.3% growth compared to the second quarter of 2024. We're glad to resume our headcount growth as we expand our services with our clients. This quarter, specifically, we are onboarding more than 500 CITers globally. During the first half of this year, we prepared ourselves for a higher growth pace and strengthened our talent attraction machine. In addition, we are accelerating the onboarding and training process using AI, which helped to maintain a healthy utilization rate during the quarter. Also, our voluntary attrition rate remains at a healthy 10.5%. As Cesar explained earlier, we firmly believe that our culture is our biggest differentiator that drives our long-term resilience, excellence, and sustainable growth. Talking a bit more about our people. I'm delighted to share some exciting updates about our CIT NextGen, our trainee program that holds a special place in our hearts. We're passionately committed to developing the next generation of tech leaders by providing them a platform to learn, innovate, and excel. This program stands out for its unique approach. It goes beyond conventional learning, offering an immersive experience where theory integrates with hands-on practice. Also, our proprietary platform, SanctiFlow, plays a central role in leveraging artificial intelligence to enrich and accelerate the learning journey. We have partnered with leading universities in Brazil and Colombia, and we were invigorated by the overwhelming response to our program, receiving over 10,000 applications. We plan to onboard 500 of the most talented people in the first quarter of 2025. Attracting highly talented young professionals has been a cornerstone of our operating model. We foster the development of our people and promote from within. This approach not only strengthens our culture, but also ensures that we continue to grow and innovate. Now, moving on to our delivery model. Last year, we launched CI&T Flow, our end-to-end AI-powered platform. with a bold vision to transform software development for CNET and our clients. This decisive moment marked our commitment to a future powered by artificial intelligence. Today, I'm thrilled to share some tangible results we have achieved. I'm pleased to report that over 75% of our teams have integrated Flow into their daily activities and over 3,000 of them are Flow certified. We're truly proud of this achievement, given that GenAI is not just another technology. It requires a different way of working and a mindset shift, which makes the adoption journey quite challenging. We're also very proud that more than 100 clients have embraced Flow since the platform launch. They are experiencing immediate value creation through significant improvements in velocity and productivity, doing more with less. which is a great way to create momentum and foster a more extensive adoption and transformation. This is an exciting time for us in the world of digital and software engineering. We are frontrunners in a massive transformation that is just starting, and we are determined to continue ahead. Now I invite Stanley to present our financial performance for the quarter.

Thank you, Bruno, and good morning, everyone. I'm pleased to share our financial performance for the third quarter of 2024. Our net revenue reached a record R$ 622.2 million, marking a 17.6% increase compared to R$ 529.1 million in the same period of last year. On a constant currency basis, this represents a solid 9% growth. In addition, we are glad to report a 10% revenue growth on a sequential basis, reflecting our sustained momentum throughout 2024 as we have been guiding the market. Our top 10 clients have shown particularly strong performance with net revenue growth rising by 25.3% year-over-year. This impressive figure underscores our unwavering commitment to delivering exceptional value and building long-term relationships with our key clients. Our financial results this quarter reflect not only our robust client relationships, but also our strategic focus on expanding our market presence and delivering innovative solutions. We have achieved net revenue growth across all regions on a year-over-year basis, demonstrating our balanced global presence. For the nine months of 2024, our geographic distribution of net revenue is as follows. 44% from North America, 41% from Latin America, 11% from Europe, and 4% from Asia-Pacific. In the third quarter, net revenue from Latin America grew by an impressive 11% on a sequential basis, driven by our strategic initiatives with top clients in the region. North America continues to be our fastest-growing market, showcasing our ability to drive value in diverse markets. Throughout 2024, we have consistently experienced growth across our primary verticals. In third quarter 24, revenue from financial services, consumer goods and retail, and industrial goods verticals grew by double digits year over year. Notably, revenue from retail and industrial goods sectors actually doubled compared to third quarter 23, fueled by new clients we acquired in the last 18 months who are growing at a rapid pace. This growth includes significant contributions from automotive players and food retail companies. Over the last 12 months, ending in the third quarter of 2024, we had 8 clients generating over $10 million in revenue and 17 clients within the $5 to $10 million range. One of our top priorities is to increase our wallet share among our largest clients. We are committed to fostering strong, long-lasting relationships with them and broadening the range of services we provide. This aligns with our land and expand strategy, which focuses on retaining existing clients while expanding our presence within their organizations. Moreover, we are excited about the addition of new clients we have recently engaged, including large and well-known enterprises, presenting significant technology investments opportunities. As Cesar mentioned, our AI growth machine, a specialized sales team, has been refining our offerings, enhancing our effectiveness and speed to meet client needs. Our adjusted EBITDA for the third quarter of 2024 reached R$ 121 million, representing a 24.2% increase compared to R$ 98 million in the same period of last year. The adjusted EBITDA margin improved to 19.5% in the third quarter of 2024, up by 1 percentage point from the third quarter of 2023. We have been dedicated to maintaining healthy margins through a diligent cost management approach. In addition, we have strategically invested in our sales team to drive sustainable revenue growth. Adjusted net profit was 56.5 million reais, an increase of 32.9% compared to the third quarter of 2023. The adjusted net profit margin increased from 8% in the third quarter of 2023 to 9.1% in the third quarter of 2024. This improvement was mainly due to the increase of the adjusted gross profit partially compensated by higher income tax expenses in the quarter. In the nine months of 2024, we generated R$ 295 million from our operating activities, a 15.9% increase compared to the previous year. This represents a cash conversion to adjusted EBITDA of 94%, demonstrating our healthy capacity to generate cash from our operation. Now, I invite Cesar back to comment on our business outlook.

Thank you, Stanley. For the fourth quarter of 2024, we expect our net revenue to be in the range of 620 million reais to 655 million reais on a reported basis. At the midpoint of this range, our net revenue guidance represents a 22% year-over-year growth. For the full year of 2024, we are updating our guidance range and raising the midpoint. we now expect net revenue growth at constant currency to be between 0.5% and 2% year-over-year. On a reported basis, net revenue growth at the midpoint of the range for 2024 is expected to be approximately 4 percentage points higher than growth at constant currency, assuming an exchange rate of 5.55 Brazilian reais to the US dollar in the fourth quarter. Additionally, we are raising the midpoint of our guidance for the adjusted EBITDA margin, which we now estimate to be in the range of 18% to 19%. In 2024's first quarter, we set the groundwork for a year of solid sequential growth, signaling a robust V-shaped rebound from 2023's atypical year and aligning with our historical track record. The solid activity rate in the fourth quarter of 2024 positioned us favorably for our sustainable growth trajectory heading into 2025 and beyond. As we conclude, I extend heartfelt gratitude to our clients, stakeholders, and my exceptional team for the trust, support, and dedication that drive us forward. Let's continue to collaborate, innovate, and transform. We now conclude our presentation. and open the floor to your questions.

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 Leonardo Olmos from UBS-PV. Leo, go ahead.

Hi, everyone. Good morning. Congratulations on the great results and the perspectives going forward. Very happy to see it. Two questions on my side. First, on employee growth, if you could talk a little bit about the good problem you have to face, so you got a lot of demand and you may need to hire a lot of people. Can you talk a little bit about that and how the utilization rates And the second question was, we noticed that income tax was a little higher than we expected. Can you talk a little bit about the expectation of tax rate going forward? Thank you.

I can take the first one on the headcount. Hi, Leo. The headcount has been growing in line with revenue growth, right? So we don't think it's a big problem right now. The market is still, stable, so it's not as hard as it was, you know, in the years, in the pandemic years. And we were able to grow even during pandemic years. So, at this point, it's been an easy problem to solve, so not too hard. And we've been competing in this market for, you know, 29 years, and it's never been easy. It's never easy, but it's easier than, I guess, 21, 22.

Stanley, you wanted to... Let me get this about tax rate. Well, thanks for the question. Well, about the effective tax rate, the better way to see that is to see in the nine months of 2024. As you can see, we have 38.7% in effective tax rate compared to the nine months in 2023, which was 36.5%. This increase pretty much we have included there first some business restructuring that they are one-off expenses in this year affecting the tax rate and also some loss making from emerging regions that we have within the year. Another way to see that is to see the cash tax rate. The cash tax rate for the nine months is 10% this year compared to 14.8% from the nine months of 2023, which are both exceptional effective cash tax rate, let's say. With regard to going forward, we expect to behave in that way. So in the cumulative way, it's the best way to see, to translate our effective tax rates.

Leo, about the utilization rate I forgot to mention. It's still very healthy, you know, around between 85% and 90%. So even with the growth, We've been able to kind of onboard people faster than in the past just with use of AI-based learning tools and onboarding processes. So that's still very high.

Very good. Good news. Have a good day, all. Thank you.

Thank you, Leo. Our next question comes from Vitor Tonita from Goldman Sachs. Vitor, go ahead.

Good morning, everyone, and thanks for taking our questions. So we have two questions from our side. The first one is if you could give us a bit more color on which factors were most important for the margin improvement in the quarter and for the guidance rate. You cited cost management approaches, but also if factors such as capacity utilization improving, effects, AI, and other drivers might have surprised you in how effective they were in supporting your margins. And our second question would be, on the North American and U.S. business, how have you seen the commercial environment and mood among clients in the U.S. leading up to elections and now after elections? Do you believe there might have been some repressed demand for new initiatives there that might be unlocked now or anything like that? Thank you.

Well, I can start to you about margins. Well, Tomita, thank you for the question. We continue to focus on productivity gains from our diligent cost management approach. For the near future, most of the SG&A are fixed expenses. We should provide operating leverage on top of that as we resume growth. On the other side, we project investments in hiring, training, fostering our growth trajectory, and of course, in AI initiatives. In summary, we are on track to deliver the EBITDA that we are guiding between 18 to 19. In fact, we raised the midpoint as a consequence of the reasons I mentioned here. You also mentioned the ones we've been announcing, right? So, yeah.

You can have the second part. Great to see you, Victor. What we see in the US is, I think, the demand environment is slightly better. Of course, we still see ongoing macro uncertainty. But it's clear that the budgets are more stable, especially for large companies. So this translates to less volatility and more visibility. That is good for our strategy of replacing underperformer competitors. What we also see by now is it's too early. I think we are still seeing what's happening after the election results. But Q3 was acquired with our highest booking in the year. And we end C3 with a very strong pipeline. Really, we reach our record pipeline, especially due to the U.S. So it's a good indication, but we need to to continue looking to see if we will have any real good or bad impact. But things are moving, I think, in a good way.

Very clear. Thank you both very much.

Thank you. Thank you, Vitor. Our next question comes from Tiago Kapustis from Itaú PPA. Tiago, your line is open.

Hi, everyone. Thanks a lot for the opportunity to make questions and congratulations for the results. I have two on my side as well. I think the first one, as you guys know, I cover US tech, and we've been hearing a lot about agentic AI. You guys came very early on this theme with the CIMT flow, and you showed a lot also in the videos before the Q&A session. So I just want to hear a little bit from you. My first question is, how AI is actually driving results, this acceleration. I mean, can you actually even possibly quantify or say, like, is this helping or not already? And maybe sharing a little bit of audit curiosity. This case is that you're seeing this agent, and if the theme of agentic AI is getting more traction as we see the likes of Salesforce and ServiceMaker, And then the other question is about the IT budgets in Brazil, actually. I remember a very clear conversation about stabilization last quarter. So if you could update us on that and going forward into 2025. your expectations if the acceleration by Q4, which is very strong, can actually remain in the beginning of next year or throughout 2025?

Sure. Great to see you, Tiago. For your first question, I think we basically credit our solid revenue growth not to a better macro environment, but to two key factors. One is the way we enhanced our offerings and competitiveness because of CINT flow in the AI. I think we moved fast and positioned CINT in a very strong way, and our ability to demonstrate the kind of tangible results we can get. I think now a team with flow can easily show at least 50% of being faster than a normal flow team. It depends on the concept. It goes for 200%, 200% faster. So it resonates very well with our top clients. Probably you saw our top 10 clients grew 25% year over year. Basically, we are expanding our, as we showcase our efficiency, our productivity, we call hyper productivity. We have more space to expand our share with them. We, I think we played 2024, at the end of 2023 and probably will be the main initiative for 2025. Focus CIG flow and efficiency as our main drive for getting new clients and expand in our portfolio. But what we see now is the beginning of demand. I think now we have a good number of exploratory business use cases around generative AI as the maturity of the models evolve. I think you saw that we showcased BASF a few minutes ago. So, a lot of things focus on hyper-personalization using AI, but it's still exploratory. It's across all verticals. And I believe we could foresee reasonable demand around business use case based on customer experience and personalization using AI next year, but probably huge demand only from 2026 on. then the maturity of the infrastructure environment. I think there is a lot of, let's say infrastructure modernization is still in place, legacy. We have a lot of the horizontal demand like legacy or application modernization, cloud migration, a lot of data engagements. So preparing the foundation for a future AI driven world. So there is still some lessons, some homework from the first chapter of the digital revolution before companies can explore the potential of AI. And also there is this amazing curve of the capabilities of the models that are astonished and will converge to huge reinvention of customer experience and decision making in any space. This is my brief scenario. Oh, the second question regarding Brazil, right, Thiago? I see stability and visibility among budgets. It's too early. I think by now we are already discussing with our clients. We are working to understand our plans for the next year. Of course, adjusting our forecast accordingly. But I think in the next three to four weeks, we will have a good visibility of the way our customers are planning the investments for 2025. But what I see is good signs of stability around tech and digital budgets.

Great. Super helpful, Cesar. Thanks a lot for the insights.

Thank you to Tiago. And just to highlight that revenue from LATAM also grew 11% on a sequential basis. So it's also demonstrating an important improvement in this quarter and the second half this year. So the next question comes from, let's see if we have you on the line. It's Brian Burgin from TD Cowen. Brian, please go ahead.

Hi, good morning. Thank you. So I wanted to ask about some top clients. Your top 10 looks to have shown very strong performance. Can you speak about the sustainability of that performance that you've forecasted here, particularly for 4Q and any early 25 considerations in those top 10?

Sure. Hey, Brian, thank you for our questions. We are seeing a lot of space to continue our value prop of efficiency, replacing underperforming vendors. I think we take advantage of a very fragmented market, so this allows us to continue to grow by replacing or getting more shares. even without, let's say, a macro tailwind. But if we have some macro tailwind and there is a chance to have that in the quarters to follow, I think we could see this trend of growing in our major clients continue. And we have also, I think, we onboard a very good set of new large clients, especially in the automotive industry. industry and food retail. So we expect this cohort will also be part of, will complement our growth and become really big clients for CIT. So it's going to be a combination of expanding in our long-term clients and fostering, continue to grow in this new set of of clients we acquire in the last quarter of 2023 and the first quarter of this year, basically.

Okay. Okay. That's good to hear. And then on flow, it's good to see the traction with the solution now impacting, I believe it was 80% or so of revenue. As you analyze the client engagements where the use of flow is more mature, is there any variability in the profit profile of those relationships versus accounts that are not leveraging flow? So you gave good data points on the increase speed and the delivery there. Just anything to call out as it relates to the financial impact and the profitability that might be different.

Sure. It's really early to say, but we see some, I think, space for more improvement because we can really reduce some low-quality costs within the contracts using AI. Bruno mentioned one of the costs is onboarding. When we streamline onboarding, we're using AI with the context of the engagement. for a fast training of the new team members, we gain margins. And there's a lot of other opportunities around that. We see an initial correlation, less price pressure, or you can say more price elasticity, where we are using AI more heavily. And so, but I think it's early to project some real impact. But we are really looking, paying attention to that and fostering ways to not only get growth by our CIT flow initiative, but also getting some efficiency gains.

If I can chime in, Cesar, for 2024, Brian, we were deliberately passing on all those productivity benefits to clients so we can kind of, you know, grow. So the strategy was deliberate to kind of prioritize growth. And if we can be, you know, 30%, 50% more productive than the underperformers, then we will capture that wallet share within those accounts. So that was a strategy by design. So, of course, we're doing some experiments to, you know, to actually try to capture a little bit of that value creation to ourselves, right? That will certainly intensify in 2025, but 2024, this was by design.

Okay. Makes sense. Thank you.

Thank you. Thank you, Brian. Our next question comes from Joseph from Canaccord. Joe, your line is open.

Hi, guys. Good morning, and congratulations on the good results here. Anything I know you called out, you know, kind of pretty broad vertical strength. I just wanted to drill down a little bit more into financial services. And, you know, it's an important vertical for IT services. You know, what you may be seeing there here late in 2024, looking into 2025. And, you know, obviously you've got some large Latam and Brazilian financial services clients. Any outlook on North America for financial services? And I'll have a quick follow-up.

You can take this one.

I think for North America, we do have already a footprint, not exactly in banking, but a lot of fintech and asset management with a very relevant and with some medium-sized small banks, so working our way up to the large banks. We see a large opportunity going forward, which is with the legacy modernization with the The use of Gen AI there, I think we make something happen on the legacy modernization that's been sitting there for decades to modernize very old infrastructure. I think that can be a really, you know, promising play for the upcoming years for us within that industry. So we invest in a lot and we go to market with that offering to that specific industry vertical. Thanks for the question, Joe.

Let me complement with the Brazil or Latin America scenario. What we see is a very competitive environment, really the competition among the digital native financial service companies and the incumbents is increasing, and that means everyone needs to accelerate their digital initiative. So we see a lot of room for continuing to grow in this space in Brazil and in other countries. parts of the region because of the competition, especially among digital native and incumbents. And I see the next three or four years will be very intensive, especially when probably financial services will be the first real reinvention of hyper-personalization and customer experience based on AI. I'm backing on that. And it will drive a lot of demand from both sides, from the incumbents and from the fintech world.

Great. Thanks for that. Excuse me. Thanks for that, Kala, Bruno, and Cesar. And then maybe, you know, you know, it seems like you're outperforming peers in growth right now a little bit. And, you know, there may be a few factors for that. Maybe, you know, smaller size Maybe it's flow and how quickly you've implemented it across the employee base and the customer base. You know, it could just be, you know, a few large customers growing more quickly. I was wondering if you could maybe rank what you think are the kind of, you know, the most important drivers of, you know, outperformance at a broad level. Thanks.

Sure, Joe. We credit our fast growth to basically two factors. The way we move with flow and the way we enhance our offerings based on AI and CIT flow, I think we were having 75% of the teams already intentionally using AIs in a little more than one year is a big win for us and position us really in the edge of this disruption. And the second, we mentioned in our last poll, we really enhance our sales structure. We call this initiative the AI Growth Machine. I think this is also part of having the ability to address the opportunities in the market more aggressively since we have maybe a compelling offering than our competitors. So, basically, positioning AI, boosting our offering, and the second factor, I think, is our new, enhanced sales structure.

Thanks, Cesar.

My pleasure. Thank you, Joe. Our next question comes from Ernesto Gonzalez from Morgan Stanley. Ernesto, please go ahead.

Hi. Thank you for taking our question. It's two. The first one is can you comment a bit on the sustainability of demand trends and also what drove the increase to your revenue guide? 3Q was stronger than expected, so I was wondering if it was a stronger ramp-up of projects or maybe if there's some conservatism baked into your four-year guide. And also, if you could briefly comment, what kind of players are you replacing within your clients? Is it higher-end digital transformation players or maybe more traditional IT services? Thank you.

Thanks, Ernesto. I will start with the second question. I think 70% of our real daily competitors are not our peers, our traditional competitors. IT services or consulting companies. And I think now, around 30% is really our other digital specialists or native players. So and we, we see attendance as as the bird protagonism of the digital specialists evolve, we see more, probably the future we will see more competition direct competition among the peers. But the reality is the majority of our competitors are traditional horizontal IT service players. The second part, yeah, we are guiding based on the current condition, what we see. Of course, every guidance has a conservative by nature And we, I mentioned, we have Q3 was our highest booking water in the year and we end with our record pipeline for future opportunities. So it depends on the, if we will continue with the current success rate, we believe, yes. And we believe also that the environment will continue at least stable, so we see a good outlook. But it's too early to really guide 2025. I think this is our main work in the next three to four weeks. And after that, we will have, I think, a clear vision on what's ahead. And, of course, our complete guidance for 2025 we will present in detail in our next call.

Really clear.

Thank you. Thank you. Thank you, Ernesto. That concludes our Q&A session. Thank you all for attending our event today. I now invite Cesar Ghosn to proceed with his closing remarks. Cesar.

Cesar Ghosn Thanks, Eduardo, Bruno, Stanley. I think with this, we have now completed a dozen earnings calls, so just enough to call it a collection of earnings calls. Thank you all for joining our call. I'd like to extend my gratitude once again for all CINTers across the globe for your hard work and the huge achievement this quarter. And a special thank you to you as well to our clients for choosing CINT as their partner for co-creating this exciting new chapter of AI-driven innovation. Stay well. See you soon.