In the third quarter of 2024, CI&T (ticker: CINT) reported a substantial increase in net revenue, with a record BRL 622.2 million, marking a 17.6% year-over-year growth. The company's financial performance was underscored by a 25.3% revenue growth from its top 10 clients and an improved adjusted EBITDA margin of 19.5%.
CEO Cesar Gon highlighted the company's strong corporate culture and strategic focus on AI-driven initiatives, which are expected to drive future growth, especially in the US market. CI&T anticipates Q4 2024 net revenue to be between BRL 620 million and BRL 655 million, with a projected 22% growth year-over-year. The company also raised its full-year adjusted EBITDA margin guidance to 18%-19%.
Key Takeaways
- CI&T reported a record net revenue of BRL 622.2 million for Q3 2024, a 17.6% increase year-over-year.
- The company's top 10 clients contributed to a 25.3% revenue growth.
- Adjusted EBITDA margin stood at 19.5%, with adjusted net profit rising 32.9% to BRL 56.5 million.
- CI&T expects Q4 net revenue to be between BRL 620 million and BRL 655 million, forecasting a year-over-year growth of 22%.
- The company plans to continue capitalizing on AI-driven market opportunities, particularly in the US.
Company Outlook
- CI&T forecasts a solid Q4 2024, with a favorable position for sustainable growth into 2025.
- Management is focusing on AI-driven initiatives to capture increased demand, especially in the US market where conditions are stabilizing.
- The full-year net revenue growth forecast has been updated to 0.5% to 2% at constant currency, with an expected reported growth approximately 4 percentage points higher.
Bearish Highlights
- The company faces growth challenges in employee onboarding and retention, with a voluntary attrition rate of 10.5%.
- Tax rate expectations were discussed, indicating potential future financial impacts.
Bullish Highlights
- CI&T's AI integration and enhanced sales structure, the "AI growth machine," have contributed to a record pipeline for future opportunities.
- The company has successfully onboarded 520 new employees globally, maintaining a competitive position in the talent market.
- Generative AI applications are expected to see significant customer interest, with substantial demand anticipated by 2026.
Misses
- While the company has shown strong performance, it did not provide specific details on the financial impact of the Flow initiative on operational efficiency and potential margin improvements.
Q&A Highlights
- CEO Cesar Gon confirmed that 75% of teams are utilizing AI, positioning CI&T at the forefront of industry disruption.
- Traditional IT service companies represent 70% of CI&T's competition, with a strategic focus on replacing underperforming vendors.
- CI&T marked the highest booking quarter of the year in Q3, leading to a strong revenue outlook, with detailed guidance for 2025 to be provided in the next earnings call.
CI&T's Earnings Call for Q3 2024 showcased a robust financial performance and an optimistic outlook for the future, driven by AI initiatives and market expansion, particularly in the United States. With a strong corporate culture and strategic investments in technology, CI&T is well-positioned to capitalize on the growing demand for digital transformation and AI-driven solutions.
InvestingPro Insights
CI&T's strong financial performance in Q3 2024 is reflected in its market valuation and recent stock performance. According to InvestingPro data, the company's market capitalization stands at $919.31 million USD, with a price-to-earnings (P/E) ratio of 45.57. This relatively high P/E ratio suggests investors have high expectations for future growth, aligning with the company's positive outlook and focus on AI-driven initiatives.
An InvestingPro Tip reveals that CI&T has seen a large price uptick over the last six months, which is corroborated by the impressive 96.58% price total return over the same period. This significant stock appreciation likely reflects the market's positive reaction to the company's strong financial results and its strategic positioning in the AI space.
Another relevant InvestingPro Tip indicates that analysts predict the company will be profitable this year. This prediction is consistent with CI&T's reported adjusted net profit increase of 32.9% to BRL 56.5 million in Q3 2024 and the raised full-year adjusted EBITDA margin guidance to 18%-19%.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips for CI&T, providing a deeper understanding of the company's financial health and market position.
Full transcript - Ci&T Inc (CINT) Q3 2024:
Eduardo Galvao: Good morning. Welcome to CI&T Earnings Call for the Third Quarter of 2024. I am Eduardo Galvao, Investor Relations, Director at CI&T. Joining me on today's call are Cesar Gon, Founder and CEO; Bruno Guicardi, Founder and President for North America and 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 Q&A session. [Operator Instructions] 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 could 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 business. 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 Gon, to begin our presentation. Cesar, please?
Cesar Gon: 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. CI&T now has people in 25 countries. And in each visit I feel the key element that unites and set 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. CI&T continues to excel in an ever-evolving digital landscape. In the third quarter of 2024, we achieved a record net revenue of BRL622.2 million, marking a 17.6% increase compared to the third quarter of 2023 with constant currency net revenue growth of 9% 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 continued to refine the process and methods of our AI growth machine, our expert sales team, boosting agility and effectiveness in meeting client needs. This enabled us to onboard large clients with substantial tech investments, reinforce our long-term land and expand growth strategy. We concluded the quarter with a solid adjusted EBITDA margin of 19.5%. Additionally our cash generation from operating activities reached R$295 million 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 CI&Ters 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 context. [Video Presentation] 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.
Bruno Guicardi: 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&Ters, 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 CI&Ters 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 CI&T Next (LON:NXT) Gen, 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, CI&T FLOW, 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 CI&T 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 are 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 front-runners 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.
Stanley Rodrigues: 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 BRL622.2 million, marking a 17.6% increase compared to BRL529.1 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 2024, 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 2023, 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 eight clients generating over $10 million in revenue and 17 clients within the $5 million 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 investment 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 BRL 121 million, representing a 24.2% increase compared to BRL 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 one 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 BRL 56.5 million, 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 BRL 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.
Cesar Gon: Thank you, Stanley. For the fourth quarter of 2024, we expect our net revenue to be in the range of BRL 620 million to BRL 655 million, 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 four percentage points higher than growth at constant currency, assuming an exchange rate of BRL 5.55 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 exit rate in the fourth quarter of 2024, position us favorably for a 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.
A - Eduardo Galvao: All right. We’ll now begin the question-and-answer session. [Operator Instructions] The first question comes from Leonardo Olmos from UBS. Leo, go ahead.
Leonardo Olmos: 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 are doing? 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.
Bruno Guicardi: I can take the first one on the headcount. The headcount has been growing in line with revenue growth. 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 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 29 years and it's never been easy. It's never easy, but it's easier than I guess 2021-2022. Stanley do you want to…
Stanley Rodrigues: Yeah. Let me get this about tax rate. Hi, Leo, 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 a 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 rate.
Bruno Guicardi: Leo about the utilization rate I forgot you mentioned, it's still very healthy 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.
Leonardo Olmos: Very good, good news. Have a good day all. Thank you.
Eduardo Galvao: Thank you, Leo. Our next question comes from Vitor Tomita from Goldman Sachs (NYSE:GS). Vitor, go ahead.
Vitor Tomita: 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 raise, you cited cost management approaches but also if factors such as capacity utilization improving, FX, 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 America and US business, how have you seen the commercial environment and moods among clients in the US 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.
Stanley Rodrigues: Well, I can get -- I can start here 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, yes, you can – second part
Cesar Gon: Great to see you, Vitor. 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 underperforming competitors. What we also see by now is it's still early. I think we are still seeing what's happening after the election result. But Q3 was a quarter with our highest booking in the year. And we ended Q3 with a very strong pipeline really our -- we reached our record pipeline especially due to the US. So it's a good indication, but we need 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.
Vitor Tomita: Very clear. Thank you both very much.
Cesar Gon: Thank you.
Eduardo Galvao: Thank you, Vitor. Our next question comes from Thiago Kapulskis from Itau BBA. Thiago, your line is open.
Thiago Kapulskis: Hi, everyone. Thanks a lot for 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 being very early on this theme with the CI&T FLOW and you showed a lot also on 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? Is it -- I mean can you actually even if possible quantify or say like is this helping or not already? And maybe sharing a little bit of out of curiosity the – these cases that you're seeing with these agents? And if the theme of Agentic AI is getting more traction as we see the likes of Salesforce (NYSE:CRM) and Service…
Cesar Gon: Okay.
Thiago Kapulskis: 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 implied in Q4 which is very strong can actually remain in the beginning of next year or flow into -- throughout 2025?
Cesar Gon: Sure. Great to see you, Thiago. For your first question, I think, we basically grab 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 CI&T/FLOW and AI. I think we moved fast and positioned CI&T 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 non-Flow team. And it depends on the content it goes for 200%, 300% 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 have more space to expand or share with them. I think we played 2024 at the end of 2023 and probably will be the main initiative for 2025 focus CI&T/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 case around Generative AI as the maturity of the models evolve. I think you saw -- we showcased BASF a few minutes ago. So a lot of things focused 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 single corporation. So this is my brief scenario. On the second question regarding Brazil Thiago, I see stability and visibility among budgets. It's still early. I think we -- by now we are already discussing with our clients. We are working to understand their plans for the next year, and 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.
Thiago Kapulskis: Great. Super helpful, Cesar. Thanks a lot for insights.
Cesar Gon: My pleasure.
Eduardo Galvao: Thank you, Thiago. 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 in the second half of this year. So the next question comes from -- see who we have on the line. It's Bryan Bergin from TD (TSX:TD) Cowen. Bryan, please go ahead.
Bryan Bergin: Hi. Thank you. So I wanted to ask about some top clients since your top 10 looks to have shown very strong performance. Can you speak about the sustainability of that performance that you forecasted here particularly for 4Q? Any early 2025 considerations in those top 10?
Cesar Gon: Sure. Hey Bryan, thank you for your question. 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 allow us to continue to grow by replacing or getting more share even without, let's say, a macro tailwind. So -- 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 onboarded a very good set of new large clients, especially in the automotive industry and food retail. So we expect this cohort will also be part of -- will complement our growth and become really big clients for CI&T. 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 clients we acquired in the last quarter of 2023 and first quarter of this year basically.
Bryan Bergin: 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 increased speed and the delivery there. Just anything to call out as it relates to the financial impact and the profitability that might be different?
Cesar Gon: Sure. It's really early to say, but we see some, I think, space for margin improvement, because we can really reduce some non-quality costs within the contracts using AI. Bruno mentioned, one of the cost 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 more -- 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 on that and fostering ways to not only get growth by our CI&T FLOW initiative but also getting some efficiency gains.
Bruno Guicardi: If I can chime in Cesar. For 2024, Bryan, we were deliberately passing on all those productivity benefits to clients, so we can kind of grow. So the strategy was deliberate to kind of prioritize growth. And if we can be 30%, 50% more productive than our -- the underperformers then we will capture that wallet share within those accounts, right? So that was the strategy by design. So, of course, we're doing some experiments to actually try to capture a little bit of that value creation to ourselves. That will certainly intensify in 2025. But in 2024, this was by design.
Bryan Bergin: Okay. Make sense. Thank you.
Eduardo Galvao: Thanks Bryan. Our next question comes from Joseph Vafi from Canaccord. Joe, your line is open.
Joseph Vafi: Hi, guys. Good morning and congratulations on the good results here. Anything -- I know you called out kind of pretty broad vertical strength. Just wanted to drill down a little bit more into Financial Services. And it's an important vertical for IT services, what you may be seeing there here late in 2024 looking into 2025? And obviously, you've got some large LatAm and Brazilian Financial Services clients. Any outlook on North America for Financial Services? And then I have a quick follow-up.
Bruno Guicardi: I can take this one.
Cesar Gon: Yes, you can start with…
Bruno Guicardi: 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 use of GenAI there, I think we make something happen on the Legacy modernization, that's been sitting there for decades to modernize very old infrastructure. That is – I think that can be a really promising play for the upcoming years for us within that industry. So we're investing a lot in the go-to-market with that offering to that specific industry vertical. Thanks for the question, Joe.
Cesar Gon: Let me complement with the Brazil or Latin America scenario. What we see is a very competitive environment, really the competitive – the competition among the digital-native, Financial Service companies and the incumbents is increasing. And that means everyone needs to accelerate their digital initiatives. So we see a lot of room for continuing to grow in this space in Brazil and other 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 betting on that. And it will drive a lot of demand from both sides from the incumbents and from the fintech world.
Joseph Vafi: Great. Thanks for that. Thanks for that color Bruno and Cesar. And then maybe it seems like you're outperforming peers in growth right now a little bit and there may be a few factors for that; maybe smaller size maybe it's Flow and how quickly you've implemented it across the employee base and the customer base. It could just be a few large customers growing more quickly. I was wondering if you could maybe rank what you think are the kind of the most important drivers of outperformance at a broad level? Thanks.
Cesar Gon: 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 CI&T Flow. I think we were having 75% of the teams already intensively 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 call, we really enhanced 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.
Joseph Vafi: Thanks, Cesar.
Cesar Gon: My pleasure.
Eduardo Galvao: Thank you, Joe. Our next question comes from Ernesto González from Morgan Stanley (NYSE:MS). Ernesto, please go ahead.
Ernesto González: 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 full 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.
Cesar Gon: Thanks, Ernesto. I will start with the second question. I think 70% of our real daily competitors are not our peers, our traditional IT services or consulting companies. And I think now around 30% is really our other digital specialists or native players. So -- and we see attendance as the protagonism of the digital specialists evolve, we see more -- probably in 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 quarter 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.
Ernesto González: Really clear. Thank you.
Cesar Gon: Thank you.
Eduardo Galvao: Thank you, Ernesto. That concludes our Q&A session. Thank you all for attending our event today. I'll now invite Cesar Gon to proceed with his closing remarks. Cesar?
Cesar Gon: 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 CI&Ters across the globe for your hard work and the huge achievement this quarter. A special thank you to you as well to our clients for choosing CI&T as their partner for co-creating, this exciting new chapter of AI-driven innovation. Stay well. See you soon.
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