Earnings call transcript Q1 2023

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Eduardo Galvao

Good morning, and welcome to CI&T Earnings Call for the First Quarter of 2023.

I am Eduardo Galvao, Investor Relations Director at CI&T, and I'm happy to be here again to talk about our results. With 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 question-and-answer session for analysts and investors.

submit please to e-mail it like investors@ciandt.com. to you'd a send question, via If available company's the on and is presentation The the will available concluded. the Investor be shortly is after event replay website Relations

the described of and and from including, business the risks are with on Factors those subject but XX-F to date other on to, actual expected from to of reports Risk because to not matters could including such, call. statements unknown uncertainties forward-looking on discussed and factors and outlook, discuss file this limited forward-looking we results These not valid on Form time We Some our SEC. expressed undue differ call, in only the of risks release our you as materially annual may known as in when statements our those earnings place are we'll the section and reliance those cause they're uncertainties, to time made. and this report caution

comment presentation, appendix to refer to measures our evaluate of this non-IFRS financial on Please During reconciliation details. more measures in business. tables for non-IFRS the the certain we'll

of on We'll and today will a agenda an Our After presentation, by business results. on the our financial dive Q&A then there deep be successful update includes followed highlights, some talk for about people session. our cases. our our quarterly financial

presentation. I Now, to Cesar? Gon our begin invite Cesar

Cesar Gon

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on the probably disruptive on introduction believe intelligence. a of on the digital computer, are computers the I XX Earth. moment history after start verge first to sharing purpose by artificial unescapable reflections of the most of general It's ENIAC in the in XXXX, we years few

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inflated is disruption titled expectations organizing Changing weeks risks and productivity an intelligence this and the Review is leading World, I my is the published in surrounding hype science to article on "Software ago, few Eating with unprecedented misconceptions. and Menu," reflections associated Management engineering. in opportunities and there However, artificial the AI A Sloan MIT's

download my LinkedIn on my can You article account.

to world opportunities. what now, Turning our attention and major actionable. I Right corporate the is two see

The app-based we first starting companies times. are engage and for flow to value to investing such for we in in the exciting from feel toward have I for this of future platforms new going And solution the in human personally, starting partnering already hyper entire and in of further natural very of and second will This smartphone a interface interactions by CI&T, one an what of that be language for endless And after moving is dilemma is I new call blessed possibilities. are away me digital. years explore things efficiency producing innovation many possibilities digital our the living and and solutions. opportunity At invent. large welcome with customers, set is to and co-creating chapter so facing productivity needed the entirely generate to clients,

results highlights. happy to from off on cloudy financial I'm our with XXXX to Now kick to this moving quarterly solid bottom. top

an XX% profit quarter was in XX%. net margin EBITDA with million, adjusted BRLX XX.X%, XXXX, last constant of higher first was margin XXX an points net to increase months. the X.X currency clients an year-over-year. annual Our above XX XXXX, compared revenue adding with The BRLXXX percentage profit XX clients Adjusted new multi-million first We've accounts million, in reached increase quarter XX.X% quarter adjusted first net XXXX. was of quarter BRLXX in revenue than the in million of the at

operating from cash in million BRLXXX generated the activities quarter. in we addition, In

These figures all structure our grateful all the agility strong for market adapting stakeholders. successfully changes performances, CI&Ters to in to creating a environment. organizational indicate external our in maintaining been and our to I'm worldwide lean showcasing value have dedicated who

let's highlights for business see client's some examples of engagements our of some and Now, the our quarter.

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liked news talent I From I our and hope client you selection. talk to stories, about Bruno highlight invite our here, management.

Bruno Guicardi

Cesar, you, here It's and Thank morning, everyone. be good great again. to

XXXX it rate first in attrition to continues XXXX, trend. quarter and in the XX% in compared a Our of of quarter was first the downward XX%

to is our fruits. in at below and bearing that consistency people We are leadership our in high-quality attrition attrition importantly, ensuring historic delivery glad and for service X%, rate investments our see to be are back levels Most our clients. our our

X,XXX with to from management decrease a Part reduction current headcount acquired this the the reduction, from reflects XXXX comes to functions to synergies capturing adapt our previous March ended This active office as environment. slight back the recently compared We we demand CI&Ters, quarter. are companies. of

in order artificial Cesar development balancing are and to to organization mentioned profitability long-term pace nimble growth. in the reducing will a lean margins while on healthy investments In keeping a other people us we as to and our On intelligence committed short the investments of delivery in sustain These initiatives, adapt will direct side, maintain we bench to earlier. that research term, words, the are slower of the growth. and actions number to allow

footprint. made our geographic to year, we a Last diversify strategic move

more pursuing expand for driven creating to vision in value markets. a opportunities of by new globally decision clients Our global dynamic our was and

market has the of proven to strategic. First, a our the expansion acquisition NTERSOL with U.S.

we sustaining footprint its maximizing potential expanded in in growth, We show have the expertise and relevant a financial our organically. U.S. to The opportunities U.S. services committed vertical. great established to are and for continues

market results. yielded our into has promising European the parallel, In foray

reputation. further highly-competitive by partnerships with aim established in in landscape leveraging our region. brand drive Europe We in We gained strengthen to have position Somo's and to strategic our our traction this develop this growth even

very encouraging. the on clients We is acquisition region Asia successfully, remain us capitalize allowed momentum. to and key dedicated in In has trajectory to incorporate growth Transpire this Pacific, the of this Australian

trends for progressive visual to significant consumer opportunity potential, excellent continues in services, also XX one offering commanding trendsetting is market very least, a This innovative fertile tech tech it be segments of us. market, adapt solution create the globally, our are an position us impactful globally. base and to ground financial that not of that markets to has that being retail characteristic, quick our with and to Besides digital consumer with combined provides goods. top clients but Last, to Brazil like

tech As workforce today's paramount remote is teams competitive we age. We from to strategy and anywhere, to faster clients to understand top and that digital operating across the staying combining high-skilled is teams model in continue globe. by to nurture diverse close attract talent a and working our our

forefront So, industry learning our talent trends development ensures emerging technologies. and a that in culture commitment fostering to tech at of the our remains continuous of personal

will over it I to Now, Stanley comment to on pass financial our results.

Stanley Rodrigues

with Thank I'm here financial you, discuss performance everyone. be good to to happy again of Bruno, our and all you. morning,

another are to of proud during We results solid quarter deliver of set XXXX. the first

the first BRLXXX in than both revenue higher of XXXX of XX% the basis. XXXX, constant and quarter net million, was on currency first quarter on reported Our a a

existing derives every M&A the of expansion programmatic Our and new quarter within our addition from strategy. our strong clients revenue growth clients,

of with of revenue our economies. contribution, XX% with than mentioned. XX% mature 'XX. great a emerging we is accounting and And America with Bruno coming XX% have for it the LATAM Asia revenue X% exposure North we more if Europe largest X% to as revenue revenue revenue first our combine market, our and from in represents of quarter Pacific an of market,

revenue As industry classification of new this our quarter, we vertical. by present you with a

and mainly trends a to Pharmaceutical changing broader adjustments We have Life strategy. to classification We the it, Cosmetics believe move small business similar this new done go-to-market from more a and Consumer Beverage our and of and represents Goods, to Food better Sciences. category

more new in of Investor sheet the previous revenue website. You available details on find the can from Relations the fact our breakdown years

our revenue top logos continue of revenue we the to clients, base M&A XX further. addition to and grow new Finally, our while our diversify from contributed even base

million first detail let diversify to growth base components BRLX In continue consistently as our adding revenue 'XX, exceeding period to portfolio to our the clients Now, XX we in client new our the by compared same quarter XXXX. with volume me profile. of

clients to the clients from In with quarter 'XX. addition, revenue XX increased above quarter first in the number in of we previous XX BRLXX million

base clients represents providing client times. our XX% revenue, XX%, while to around predominantly remains approximately digital-native of representing during uncertain from Our business brick-and-mortar resilience our

XXXX over retention past to and expand our growth years revenue for around that net new time, the sustainable rate critical been demonstrating the through five have beyond. Our which over is XXX%, and has potential clients thrive

metrics. Moving our profitability on to

higher indicated costs adjusted managing EBITDA in BRLXXX.X was X.X in to million percentage the first from the 'XX. EBITDA administrative improvement substantial increased margin in than calls. and first dilution our as Adjusted in Our BRLXX.X first in expenses, 'XX. with general of XX.X% 'XX, quarter our points million EBITDA in the reflects 'XX quarter quarter margin quarter by we first previous discipline the The sales, combined XX.X%

We are we seeking proactive continuously significance initiatives of research we will the these Part of dedicated value operations. where promoting cost disciplined are opportunities savings optimize investing our in areas processes, diligently productivity. and of generate future long-term identify taking our in innovative artificial understand approach initiatives drive we streamlining development strategically By a that can enhance structure saving to cost as and areas and and intelligence and growth. be analyzing to invest to

when the to in compared 'XX, from lean expenses. quarter an the profit in the structure same cost last net The first income period the XX% with was our adjusted to due maintaining first X% year. to profit quarter XX% focus tax The in adjusted a and first impressive combined expenses growth lower 'XX on BRL of quarter margin increased net BRLXX.X 'XX

And in the of addition, million to cash cash from cash XXX% In million our free CapEx BRLXXX net BRLXX conversion represents activities, cash we excluding operating operating flow flow. adjusted from which EBITDA. generated was

program, plan capital to M&A to up substantially XXXX. program to flow on free The Finally, of XXXX Class offset company the strategy. in amount A months. its cash in Directors allocation the over and of program million XXXX, share XX was deliver commitment our on the providing dilution compensation shares for next authorizing our allow recently generating Board buyback stock-based project BRLX.X Therefore, solid this and the the to the We purposes. company shares expected us continue will flexibility in company's to approved company's a of shares based approved purchase

outlook. invite I Cesar comment to on back business our that, With

Cesar Gon

Thank you, Stanley.

we essential global our As the in uncertainty sights to set it's prevailing acknowledge future, the the economy. on

preparing and aggressive more resume capabilities, growth scenario, navigating in bottom-line budgets primarily new client digital core base, continue comprising a cautious large approach on we in general, while maintaining In in our we and will embark is, and intelligence, especially initiatives. XXXX, prioritizing our to enterprise, cash XXXX artificial carefully this their beyond. for the when persist year, While teams generation, observe in to

For of quarter the revenue least growth year-over-year. million, BRLXXX be expect our XXXX, at XX% second we to

For growth of the are adjusted and our XX%. XX% full we to of revenue year least of expectation guidance in XXXX, year-over-year, EBITDA margin at range net our FX-neutral maintaining XX% the

conclusion, vision our long-term and toward to your our In to stakeholders, like I my express gratitude objectives. support CI&Ters clients, for investors, dedication partners, and would shared and

Thank you now our and all you. today. session. Q&A presentation the Thank conclude We call our for begin attending may

Eduardo Galvao

each All done, now the your question-and-answer Then your your name, and you're question. please announce Once when participant's name. you line right. We'll unmute please ask begin your hear mute session. line. I'll

from comes is line Tyler, question your from open. Bank DuPont of Tyler First America.

Tyler DuPont

some assumptions into you, that I everyone. baked speak just were wanted asking Thank it like morning, on that you thinking It or assuming through and you on can based Great. like about if to to demand you cadence revs demand? revenue. and margins but current up guidance of how stable back revenue start I the anticipating outlook? the Are will know reacceleration the in you're we of looks the by both expecting XXXX guidance, 'XX? relatively of some the XQ year, reiterated, remain you the a have macro Eduardo, half the ramp should looks good be back-half

any just clarity helpful. be there So would

Cesar Gon

in QX top- Tyler. you. think Well, one. you, probably as industry, the and you are this Thank I saw, got I to Great see our think delivering we bottom-line. strong best I

in So -- line QX with budget our guidance and is forecast. our and

I it with there two we think QX. effects is when compare

engagements our due to Firstly, for effect are dollar. also QX And appreciation above reported the expectations with -- to real in engagements now due turn delivering strategy due recent second believe new on. half are short-term can FX our QX, revenue from end-to-end to we we we this long-term And clients. against the mainly the year of that revenue the an anticipating additional the into in of

year. a say, non-trivial are So, we very, this considering I will would be

our keeping are guidance. We

we but still about are We playing cautiously the are -- conservatively the optimistic to uncertainties. optimistic macro year, due

Tyler DuPont

sticking the Thank Okay. growth Great. the And the strong, you. that. basis performance, guidance. XXX seemed guess above XQ fairly appreciate results points quarter, during with I I

you particular you So growth? experienced signings if geographies the outside speak you this I during just anticipating, vertical Were was to wondering surprised that new or client surprise quarter. that any what can weren't to an that there any or leads

Cesar Gon

I clients -- a is playing good think, there of believe long-term news good Tyler, chance this in the we strategy onboarding on engagements, global with us. this is main still QX, term in new initiatives but

but set AI, of deal a I is of mainly strategy? artificial I we demand will the advancements. reshape disruptive possibilities your think strategy moment? I on credit So, new a the not new how this AI this discussion around would set this should digital really with possibilities based on only good to a on intelligence? reflection digital our How around on think How adjust such hypothesis

Tyler DuPont

Great. Thanks. Okay.

Bruno Guicardi

Tyler, the our like, understood of new the in real quick all downturn that that's perfect the that matter, mainly set I operational of this this tools, moment kind possibilities for most chime can and is on if going right, in generative I AI of activities, economic clients lot AI a saving of type everybody of of exploration, through. costs this and automating that in think

discussions innovation a up engagements them creating lot in that of invest maybe will also traction freeing clients initiatives. but the a resources of bandwidth kind be in been year. of and us, second think beneficial That half more creating in to it's of lot some So for will for the in a in beneficial of materialize the digital great we

Tyler DuPont

all the Okay. Appreciate color. Thanks.

Eduardo Galvao

Thank you, Tyler.

comes question Morgan. (ph) [Brandon] Brandon, ahead. from Next J.P. from please go

Unidentified Analyst

first all, congratulations and Hey, strong guys. well. performance Yes, super [indiscernible] Thanks much. of congratulations, so as

I'll on on another So, it guide. the kick off XQ kind question of

guided than the -- crushed deceleration guys in decline roughly BRLXX you just for quarter you guidance. under million, it BRLX a less got a issued one you now, XQ sequential sequential by BRLXX just about sequential a million the BRLXX a decline. then And So like million And when -- we've million guidance.

of you it towards So, expect that And makes not should is guys a in on steeper sequential kind the XQ? crush what's in lean there decline -- we again? business going you to

Cesar Gon

you, Brandon. Thank

take I second of the QX -- think is And with QX but it I is, we to I quarters on first appreciation are news think, surprisingly two new least this on. real we better onboarding really anticipating was our we and the dollar. one when good mentioned line forecast, the long-term so Brazilian FX based this with on converting clients compare recent versus original But revenue onboarding at believe source. in that sustainable or will

what are our of optimistic, doing volatility conservatively about So, but we could are again, we optimistic really the playing to But year. cautiously -- the say we due with discussing we I and are clients.

(ph), prop extraordinary. since As the year, you'd results [in digital mentioned, the remember, value value probably the messaging] are efficiency boosting this And intelligence. -- we prop early beginning artificial playing now were and are with we last Bruno when of we

really can we how to set help So, are of we efficiency, possibilities. about clients our exploring gain this really optimistic new

see So, right I think the year cautiously now. again we optimistic

Unidentified Analyst

over of to bit do more off Yes, of what Great. longer guys growth? we're Asia, little obviously operationally a do that excited -- a one I a out could And guys How like a unfold. Europe do of strong see to strong think Thanks. really If it term? on ask smaller mid that little you to you propel growth maybe bit and one longer that's about base. in unfolding term the more,

Cesar Gon

one. please Yes, can go. take that I

Bruno Guicardi

look three they though, China, CI&T and long like, a in markets long So, number part look the and those in China term, are number are, so should like of I more Brandon, revenue distribution you they the top and term, if revenue. think Australia our pie right? at size Japan like like, markets, think should represent I two like world, Japan and bigger of

So market. bigger In is so is as our actually Australia two that's than long which Brazil, well. plan. term number Australia

like so of pie biggest the they And rankings -- world. term should markets look it's the long should the revenue CI&T for in

Unidentified Analyst

Thanks Great. much, guys. Congrats. so

Eduardo Galvao

Thank you, Brandon.

Itau go comes Next BBA. (ph) please from question [Carlos] ahead. Carlos, from

Unidentified Analyst

on you, Ye, and congrats results. thank the good morning, and

of ones couple here. a Just

First that particularly were profitability, of that the had terms labor increase you commented in expecting all, in of with labor have understood on I pressure the annual Brazil, you -- increase.

So, that. obviously, I'm favorable. are the able result quite how is wondering we offset to

lower I that rate tax And was saw secondly, much year-over-year. housekeeping perhaps model. the thing effective a for more your

wonder about I should how we So that Thank forward. think going you.

Stanley Rodrigues

I expenses Thank the as the EBITDA in Carlos, by SG&A company question, margin mainly those. for is quarter we the first take dilution explained first can questions. expected Well, grow. improvement you, as of

We monitoring on. linear a R&D. and on those the Part especially organization, structure environment are savings though, of this redirecting healthy cost expenses we investments are growth margins, we are that and closely maintain during to to AI

thus, full And -- so for horizon, we year, Carlos, we're expect maintaining EBITDA say. that let's XX% the to

question, acquired those tax, are tax the previous right we they NTERSOL, Dextra, second provided for year, with we to the now. regard acquired maturing last some benefit that And year acquisition

getting we now. So the are benefit full right

We to -- the but to be rate, expect year, expect have quarter add rate, we effects full the although in XX%-XX%. FX range That's the for that first the let's extra the sorry, of say full tax we year lower expectation.

lower year, should that's a lower the have the -- first quarter, but we there. seasonality, we to expectation due have So even the full

Unidentified Analyst

for Thank clear. that. you Very

Eduardo Galvao

Carlos. you, Thank

Next question comes from Ashwin from Citi.

go please ahead. Ashwin,

Ashwin Shirvaikar

everyone. guess, the the sales, revenue I concerns the you first And, to I would also the because would if if when and see by cycle, on that, Good question mind. conversion, but helpful. you sales -- say, don't comment initial geography, that that is macro sales morning, be be to cycle say you the to Good could of my with clients, Yes, Eduardo. sales among regard you, all. Thank impact

Cesar Gon

Sure. see great Thank you, Ash, and you. to

the continue are see think I good But visibility investment lot initiatives, the of doing. what very, ramping still on we consistence already new a in we of, -- to would low very visibility on up say, on current I keeping on initiatives. so there's

our seeing half still the really the second I companies, year. as but optimistic, powered expectations ramp the initiatives the be is concrete considered now to for update related earlier, think to we by digital I efficiency We said things what -- second year. are I in are AI think, the this of half especially to to we seeing of up,

But this clients equation I large of the of traditional XX% terms I think is where fact and see companies -- [indiscernible] what have budget that brick-and-mortar an in of is investments. our are a we

Of course, and more on where their capital fintech companies, ambitions playing tech from of investments. companies, have the is revenue leveraging volatility we a environment the XX% new digital-native against of

and So, think discussions we is in beginning this the this is would -- than But still of set a this moment now I better the cautious year, better half. engagements the of second ability much beginning are than in in a still but to year. real of pipeline the our convert moment I on say new

Ashwin Shirvaikar

sense. that No, Okay. makes

Cesar Gon

And among difference relevant Latin or Europe, America, APJ. see America, North then, we regarding don't regions,

Ashwin Shirvaikar

to it? margins? Okay. then, is, have -- margin can keep about No, on the work? year? revenues? the that makes and keep should AI clients? through what up does course own And you the that sense. I that said related do applying brought Do it to you for you I productivity, question improving follow you guess, it of AI Do you give expect your then the your since we How own have benefit? what what your cadence processes guess, Should impact

Cesar Gon

our complement sequentially. for the you want Stanley -- I regarding can can start, if and margins plan you

Ashwin, I right. think you are

gains. technology This new also problems to our hard has digital performance to of increase opportunities boosting increase possibilities. offering efficiency client for really amazing tackle competitors our opportunities set our solve means set replacing to efficiency, prop, were are value That a of AI. our generate in without and of this an pace potential and We with that share, new

migrate we about and and clients invent. talking new or smartphone natural to app-based to I'm from that will So more human create have to things solutions hyper-personalized interactions ways interfaces for language

opportunities. And internally, there's a lot of

AI to apply savings also of XXXX committed efficiency we capabilities to high regaining digital part our of in process. efficiency, vector and be this as internal But from fully because are on. are creation mentioned, this growth our we main around We of these dedicating will increase Stanley believe our

Ashwin Shirvaikar

Okay. Understood.

TAM it's So interesting just productivity. increases not also, it's very the you mentioned the

point. very that's Thank interesting So you. a

Eduardo Galvao

comment want EBITDA? you do Stanley, to on

Stanley Rodrigues

this continue course, before Adding the and of -- taking to again, M&As. to Ashwin, the maintain expenses. focus, the say, Well, synergies cost EBITDA, in as efficiency mentioned of thank for question. hi, I throughout to EBITDA, opportunity -- you we from And the all to the let's are from bring

on. So integrations are going

acquisitions, focused this those year previously. We on as we've are mentioned integrating

Cesar -- AI capabilities. are again, reinforced in and as So investing we here, those

of why everything, see So of that's -- and lots whole, the a be in in and having XX% we we have the keep we delivering to line as We -- -- the focusing opportunities line sum guidance us, EBITDA on with really of with those opportunities. provided. ahead

So margins projected we are way that's why mentioned. the

Ashwin Shirvaikar

Okay.

the of through flattish the course So, year?

Stanley Rodrigues

it. That's

Ashwin Shirvaikar

Okay. Thank you.

Stanley Rodrigues

seasonality as year Some have remember, XX%, -- it's in. but and the between, some but because is factored we all in seasonality you full

Ashwin Shirvaikar

Okay. Thank you.

Eduardo Galvao

you, Thank Ashwin.

the have question. question here with Ashwin's one email We associated from

your first was coming quarter. cash impressive How a year? for of in the question. generation business, remainder generation Cash to project in the seasonality the margin evolve the the in related the do quarters? do you EBITDA And how expect you Given

Stanley Rodrigues

cash I take adjusted the Well, conversion in BRLXX the that's generation cash BRLXXX first which this represents flow, million CapEx. quarter, to operating flow -- XXX% after we in with that cash EBITDA. can Cash have in one. Free million quarter, was

improvement the accounts Cash benefited capital say. in mainly from -- generation first working zone, in in mainly improvement quarter and let's receivable the from

profit this disbursement. sharing have second cash the For quarter, we

usually here. So plays seasonality

generate half. cash half, we comparison to second in less First

a to conversion to is XX% from year, So, XX% historical. whole, the mean, cash cash, we for to I EBITDA EBITDA, expect full our around as be which

plays see here. that we that XXX% this in consider So first seasonality should now quarter, we

cash for for year, the full So XX% EBITDA. XX% this to from aim conversion we

just... Eduardo, the answer that question, Does

Eduardo Galvao

Yes.

I complete. pretty it's think

attending today. disclosing now you I'll session. with to So event proceed that for Thank invite Gon Q&A remarks. please. Cesar all our our Cesar, concludes

Cesar Gon

Thank participating you, powered to by that clients CI&Ters Thank of innovation Once this selecting Stay artificial all Bruno are quarter. intelligence. our a Galvao, our again, corporate I this the in call. and amazing chapter for Stanley. to thank will Bye. And well. you you exciting for CI&T in all you thank you special see want achievements new for I soon.

CI&T (CINT) 19 May 232023 Q1 Earnings call transcript