CI&T Inc

Thank you, Sasa, and good afternoon, everyone. I'm excited to share our progress regarding our people in this first quarter of the year. We entered Q1 with 7,400 employees, a .6% increase compared to Q1 2024. This growth demonstrates our commitment to strengthen our teams and cultivate the next generation of leaders in technology. As part of our next-gen program, we successfully onboarded 420 trainees. This initiative not only enriches our organizational culture, but also prepares today's AI professionals for the challenges they will face in the future. Another group of trainees will join us in Colombia in the second half of this year, broadening learning and growth opportunities for young talents in the region. These trainees will undergo a comprehensive AI training and become billable in the second half of the year. Our focus on attracting and developing high-potential individuals is vital to our ongoing success. By fostering a culture of innovation and continuous learning, we ensure that our teams are well-equipped to drive value for our clients and contribute to our collective growth. I'm excited to announce the launch of our 2024 Global ESG Report, which underscores our commitment to transparency and sustainable practices. As the video illustrated, we achieved significant milestones in 2024 that reflect our ongoing dedication to ESG principles. In addition, last year we introduced our new environmental policy and engaged 3,700 community members through our volunteer programs. We're also proud of the third edition of the Black Leadership Career Acceleration Program, which supports the development of professions of color. This report reaffirms our dedication to building a sustainable and innovative future. It highlights how we transform challenges into opportunities, creating value for both our business and society. We invite you to explore the report and join us in our commitment to sustainability and inclusion. Now let me share some insights into some of our services powered by generative AI. One offer we see significant traction is in modernization of legacy systems. These platforms are holding clients back and preventing them from adapting quickly to an ever-changing business environment. By leveraging AI, we greatly reduce risks and errors while exponentially accelerating modernization efforts. Another key offering is our AI professional services. This program provides clients with a safe and compliant generative AI platform, together with services to help them establish an adoption roadmap, training and coaching programs, ensuring they can fully scale AI across their organization, harnessing its potential while minimizing risks. We also unlock inefficiency through AI-first augmented teams. This approach enhances productivity and delivers significant business outcomes, allowing our clients to operate with greater agility and effectiveness. We are at the forefront of this transformation. We have industry-leading AI adoption, with more than 85% of our employees already utilizing our AI-powered CIT Flow platform daily to modernize systems, create agents, and drive tangible results for our clients. Now I'd like to invite Stanley to share our financial results from this quarter.

Thank you, Bruno, and good afternoon, everyone. In the first quarter of 2025, CIT achieved net revenue of $110.9 million, which represents a .9% increase compared to $105.7 million in the first quarter of 2024. When adjusted for currency fluctuations, our organic net revenue growth at constant currency was .7% -over-year. This growth can be attributed to our focused internal initiatives aimed to enhancing client relationships and expanding our service offering. Our strategic emphasis on AI and digital transformation continues to drive new business opportunities and deepen engagements with our existing clients. Now let's review our revenue breakdown by geography and industry verticals for the first quarter of 2025. Our two main markets reported healthy growth on a -over-year basis. Revenue from Latin America grew by 11%, while revenue from North America increased by 12%. These figures highlight our strong presence and growth potential in key markets. In terms of industry verticals, revenue from financial services increased by 25% and retail and industrial goods grew by 32%. This performance reflects our strategic focus on industries that are prioritizing digital transformation and modernization. Notably, our top 10 clients' revenue grew by .2% compared to the first quarter of 2024. This robust performance illustrates the effectiveness of our proprietary CINT Flow Platform, which has proven instrumental in delivering innovative solutions that meet our clients' evolving needs. We have been successfully onboarding high-profile clients, showcasing our ability to expand our engagement with top-tier organizations. Our commitment to nurturing these relationships has led to significant revenue contributions from our top clients. Currently, we have 10 clients generating over 10 million in revenue and 13 clients within the $5-10 million range. This robust performance demonstrates our effective land and expand strategy, allowing us to deepen our partnerships and capture greater wallet share. In this quarter, we recorded an adjusted EBITDA of $19.6 million, which is a .2% increase compared to $17 million in the first quarter of 2024. The adjusted EBITDA margin improved to .6% in the first quarter of 2025, up from .1% in the same quarter last year. This improvement was primarily driven by lower selling general and administrative expenses, reflecting our ongoing commitment to operational efficiency and cost management. Importantly, cash generating from operating activities was $19.6 million in the first quarter of 2025, representing a 100% cash conversion from adjusted EBITDA into operating cash. This strong cash conversion highlights our ability to generate cash from our operations, providing us with the flexibility to invest in strategic initiatives and support our growth. Adjusted net profit increased by .2% to $9.6 million in the first quarter of 2025, up from $8.4 million in the first quarter of 2024. The adjusted net profit margin rose to .7% in the first quarter of 2025, compared to 8% in the first quarter of 2024. This improvement was primarily driven by lower SG&A expenses, along with reduced net finance costs. Our adjusted diluted EPS was 0.07 in the first quarter of 2025, marking a .6% increase from the previous year. This growth in adjusted diluted EPS demonstrates our ability to translate increased profits into shareholder value. Additionally, our free cash flow to adjusted net income ratio stood at an impressive 151.6%, underscoring our strong capacity to generate cash flow from our operations. Now, I invite Cesar back to comment on our business outlook.

Thank you, Stanley. In the second quarter of 2025, we expect our reported net revenue to be at least $115.5 million, equivalent to an .9% -over-year increase on a constant-currency basis and .5% growth in reported revenue. This estimate assumes an average FX rate of 5.79 Brazilian reais to the US dollar in the second quarter of 2025, compared to 5.21 Brazilian reais to the US dollar in the second quarter of 2024. For the full year of 2025, we are reaffirming your guidance. We expect our net revenue growth at constant-currency to be in the range of 90% to 15% -over-year. In addition, we estimate our adjusted EBITDA margin to be in the range of 18% to 20%. This outlook is supported by a solid commercial pipeline, strong sales conversion, and a secure expansion of our top 10 clients in our two largest markets, the US and Brazil, along with ramp-ups of high potential new accounts. To conclude, I want to express my heartfelt appreciation for the dedication and resilience of our team. Your commitment to our vision has been truly inspiring. As we look ahead, our ability to collaborate, innovate, and transform will continue to define CINT and drive our success. This brings us to the end of our presentation, and we may now begin the Q&A session. Thank you.

All right. We'll now begin the Q&A 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 Vitor Tomita from Gold NOSACS. Hi, Vitor.

Hello, and thanks for taking our questions. Two questions from our side. The first one would be more on the given all the further shift in macro perspectives globally, if you have any updates on how clients are feeling about IT investment, I guess, both in the US and in Brazil. And our second question would be on the solid -on-year margin expansion this quarter. You cited some SG&A efficiency initiatives that help it supports that margin expansion. If you could give us a bit more color on those, it would be great. Thank you.

Thank you. Thank you, Vitor. I can get the first one and Stanley can address the second. In terms of demand environment in the commercial activity, I think the demand remains stable, despite this ongoing macro uncertainty in all the regions we are playing, especially US and Brazil. I think, as they always mention, stability continues to create a favor environment for our strategy of replacing underperforming competitors with our AI driven solutions. And secondly, in terms of commercial activity, we have now 30% higher commercial pipeline versus the same pure last year. That allows us to be very confident in our growth guidance. Stanley, can you get the margin? Thank

you for the question. Since last quarter, last year, first quarter last year, we had improved basically all the, basically we've maintained all the costs while the business grew significantly with regard to SG&A, which is your question. Also, in the first quarter last year, we had some costs related to restructuring and that they are not occurring this year. So I would say mainly those two items in general terms are recording this efficiency that you see in the SG&A.

Very clear. Thank you very much.

Our next, thank you, Vitor. Our next question comes from Gustavo Farias from UBS. Gustavo, go ahead.

Hi, guys. Thanks for taking my questions too as well. So the first one, if you could comment on the demand side, I'd like to double click and considering that you have delivered a bit on the guidance for Q1 in terms of constant currency growth, considering also that you are growing headcount and you commented there is more to come in the second quarter and also considering that results from tech peers in the US mainly have come, let's say, last and feared. How can we expect, how do you see the demand? Is there any upside for growth considering the full year? Is this year still considered a transition year for IT budgets in your vision? That's my first question. And the second question, if you could comment on an update as well on the capital location priorities for the year. Do you see any M&As on the radar or R&D continues to be a priority for capital allocation? Thank you.

Thank you, Gustavo. Let me start with your first questions. Yes, we also recognize a better environment. And what I can say is that the high end of our guidance assumes that we capitalize with the current commercial momentum as a mission, our strong commercial pipeline and also client growth trends we are seeing. But the low end of our guidance reflects, let's say, a more prudent approach, given that we still see some macro volatility. And if I double click in the way I see demand overall, we continue to see a big trend regarding what we call horizontal demand. Maybe half of our, we can estimate half of our demand is basically legacy and application modernization, cloud migration, several data engagements where companies, our clients are preparing the foundation for the future. And we see a lot of trends also what we call vertical demand. So improving customer experience to engage new customers, really build new digital products. We also see what I can call the first wave of AI force transformation programs, where we design a comprehensive program to help our clients to really accelerate their adoption of AI and also a growing number of business use cases around AI and generative AI folks, especially on hyper personalization. So this is the way I see it. I think it's, we are paying attention, we are capturing our pipeline, but still, I believe we still need to consider that we have some macro volatility in our forecast and estimations. Starting to answer your second questions regarding capital allocation. Yes, our priority is R&D in our AI force transformation, so turning CIT and CIT flow in our main drive for differentiations. And, but we also, of course, in terms of M&A, we continue to scan the market for opportunities, but I would like to mention that we are doing that with a very high bar. The reason for elevated threshold is clear. Due to the AI disruption, many smaller companies are struggling to scale client relationships to the level required for meaningful AI transformation. So, but with that in mind, our M&A folks continues to be on targets that can expand, especially our US presence, bringing in high potential clients. And critically, we are looking for companies that offer the kind of client engagements where we can clear room for scaling CIT AI solutions. And that's a very high bar. Stalin, if you want to add something?

Well, besides R&D, as you already mentioned, yeah, I would add the share buyback program that we currently have in place. So as we envision this high cash generation that we see for 2025, we see that is always a good way to provide a return to shareholders via those share buybacks. That prevents also dilution from our stock based compensations and so on. And also paying down debt. This is also, we've been executing all the debts, all the schedules for payments of our debts.

Thanks, Cesar and Stanley.

Thank you, Rosalvo. Our next question comes from Ryan Bergen from TD Cowan. Ryan, go ahead.

Hey guys, good to see you. Thanks for the time. First question on your top 10 clients. So I wanted to see if you could dig in more about the trends you're experiencing with some of your largest clients. So if we look at what you report in US dollars, obviously that top client number is very impressive from a year over year growth standpoint. But if we think about just the overall top 10 client portfolio, is it possible to talk about what constant currency growth is there just so we kind of separate some of the effects? And again, just give us some of the puts and takes about some of those close client relationships at the top.

Thank you, Brian. Great to see you. Thank you, David. Let's be, well first, I think, as you know, our first, our top one client is a very large financial services organization. So we are really expanding different business in areas of this client, powered by CIT flow and our ability to demonstrate superior results across the board. So it's a very strong and long term relationship that we are forcing now in boosting with AI. In terms of our top 10 clients, I think if you exclude the top one, we still see a very strong growth among our one to nine clients. I think this is around 11%. Maybe Yavall and Esten can help me with this. So we are seeing the whole pack of large customers evolving, not only the top one, but of course we are very happy with the trust and evolution of our partnership with all our clients, especially the large and long, tenure ones.

Okay. Okay. And then a follow up on Gen. AI and client expectations and how that's evolving. So, you mentioned, you know, hyper efficiency as one of the offerings you've leaned into most. Can you just talk about productivity assumptions from clients and how much it is kind of a pull motion from them expecting this productivity versus how much is CIT pushing into the client base to obviously differentiate competitively? Talk about that dynamic and I'm more so interested about more of the mature clients that are adopting and, you know, generate Gen. AI solutions.

I think it's 100% CIT pushing for that. I think we anticipate that. I think we were very pioneers on creating CIT flow and launching our initiative. I think we are ahead of our peers and the average market in general for what we can see and what our clients are telling us. So I think by now we have a very concrete ways to showcase the numbers we are getting and the evolution of this productivity gains as we add more agents to our platform, as we reinvent the methodology of building digital solutions end to end, as we re-skill or we improve the skill of our teams to be AI boosted teams. So it's 100% let's say pushed by CIT and the response from our clients is amazing. I think that's why we are now starting what I mentioned this AI first transformation is kind of we learn a lot in terms of how to convert a team in an AI based team, how to approach adoption of AI that is a non trivial challenge. So by now we are helping our clients to start their journey with the learnings of our own two and a half years journey around AI. So I think it's an amazing moment where we can really support our clients in not only capturing productivity, remember productivity or hyper efficiency is just a chapter one. We still have customer experience in hyper personalization and also the powerful act of revolutionizing decision making and business models. I think we are really moving in a very good pace and I think our our clients recognize that.

Okay, okay. If I could just fit one more in here on margin. So understanding of seasonality in the first quarter. Can you comment on gross margin expectations as you move through 2025?

Yes, I can. Ryan can take that one. Well, as you already mentioned, we have that seasonality, which is mainly with regard to the salary increase that we have in the first quarter every year. And throughout the year, as we pass prices forward and etc. those margins will grow. So you should expect the same type of pattern that you saw in previous years.

Thank you all. Thank you, Brian. Our next question comes from Pune Jain from JP Morgan. Pune, go ahead.

Thanks for taking my question. I also wanted to ask about this year, especially around the second half of this fiscal year. Like, what's your visibility right now on second half and are you seeing any differences across US based clients or Latin America based clients, especially the clients you have in Brazil? Like, is there like any difference in behavior, spend patterns across those clients?

Thank you Pune. I can start and maybe Bruno can add more colors regarding the US market. Our guidance is basically supported by what I mentioned, a very solid pipeline. So we have a strong visibility and we are considering our current very strong sales conversion. As I mentioned pipeline now is 30% higher than the same year last year. We also consider the secure expansion in our top 10 clients as it's happening now. In both our largest market, US and Brazil. And also we are still leveraging Rambabs, very high potential customer we acquired last year, where we are still increasing the demand between there. So I don't see any significant difference now between Brazil and the US, but maybe Bruno can add more colors regarding the US.

Thanks for your question Pune. Yeah, we don't want to see a lot of differences in purchase patterns between US and Brazil at this point. We see, as Cesar kind of put it, put in the previous question, we see like the beginning of this new era of GEN.AI. I think we're past the pilots and the exploration that was 2024. I think we see clients more confident moving forward and taking GEN.AI to scale opportunities. And I think we're going to see this accelerating in the following years. It's just the beginning of a major revolution. So, and again, to Cesar's point, I think we're very well positioned, we're uniquely positioned to capture that demand. We're ahead of the curve, we're ahead of the pack in terms of what we're creating in terms of impact for clients and can improve that with stories, with real data, with real impact. And that kind of reflects in pipeline and in a higher pipeline than 2024. That's what gives us the confidence that we're going to get that growth.

That's great color. And then on GEN.AI, like I totally understand that there is like so much opportunity that's ahead. My question is like more like on like the structural level, like why is that IT services companies will necessarily be beneficiaries of this opportunity compared to like the software companies or pure play private companies that are leading with like an AI platform. Like what is it that companies like yourself, your peers bring to table that others can't in this evolving ecosystem?

That's a great question, Pune. That actually, we think that would be a great tailwind for us. Because if you look at the way that the buy versus build comparison today, right, it's cheaper to just go with one standardized solution that fits many clients. But when productivity goes, continues to improve exponentially, building will be much cheaper. So what we predict and some analysts in the industry also agree with us, is that will be a shift towards more custom software. So people, there's no reason why a client will be dependent on a package solution, a software provider, and base their future into the hands of their provider that ability to adapt and adjust to their needs when you can do it yourself. So we see that that will be a big tailwind for services companies, because more and more software will be just custom software. So that's what we're seeing some real case and errors with our clients right now. Like they're analyzing build versus buy and kind of when they will be factoring the productivity increases that we're going to have on the customer, on the custom software, that build side, you kind of conclude that that's the way to go for the future. And I think that will be a great, you know, source of demand for us going forward. Thank you. Thank you.

Thanks, Punez. Our next question comes from Maria Clara from Itaú. Maria, Clara, please go ahead.

Hi, everyone. Thanks for taking my question. I would like to ask you guys to better explore about the SG&A trends. This was the main positive surprise when we compared to our numbers. Should we expect the space of operating leverage to be a reality throughout the year? If you could please comment about the if the structural profitability of this business could be positively revised, given this operating leverage tailwind, it would be very interesting to hear your opinion. Thank you so much.

Maria Clara, thank you for your question. Well, SG&A, we've been operating a very stable platform of course, let's say, or we don't expect growth except by the S of SG&A, meaning we're investing on sales. So for that portion, you would expect a growth throughout the year. But everything said, we are very in line to deliver what we are guiding in terms of EBITDA, 18 to 20%. So you shouldn't expect any tailwind, as you mentioned, to go above whatever we already guided the market, right? So everything is already compounded into that number. And we, of course, from the operational side, we have been experiencing margin gains, small margin gains from AI, I would say, in terms of coming from this efficiency that we are also taking advantage in the operation. So some gross margin gains combined with that SG&A, as I mentioned, but at the same time, taking into consideration that we are investing in the growth side, meaning the sales, as I mentioned, and also in people. So all balanced, we're aiming for the EBITDA that you saw. So you have some ups and downs in the whole equation, but the EBITDA will translate everything.

Great, very clear. Thank you.

Thank you, Clara. That concludes our Q&A session. I now invite Cesar to proceed with his closing remarks. Thanks, Cesar.

Thanks, Calvão. Thank you, Bruno and Stanley. Thank you all for joining us today. I'd like to extend my sincere appreciation for all CIN tiers around the world for the dedication and accomplishments this quarter. Any special thank you as well for our clients for choosing CIN as a partner in co-creating this exciting new area of AI-driven innovation. Stay well. See you soon. Bye.