CINT - Earnings call 3 2023

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Eduardo Galvao

Good morning and welcome to CI&T Earnings Call for the Third Quarter of 2023. I am Eduardo Galvao, Head of Investor Relations at CI&T and it's a pleasure to be here again to talk about our operating and financial results.

With me on today's call are Cesar 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 [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, and as such, are subject to known and unknown risks and uncertainties, including, but not limited to those factors described in our earnings release and discussed in the Risk Factors section of our annual report on Form 20-F.

could on results this uncertainties from differ and expressed those call. risks cause to actual materially These We caution as you those when forward-looking not to place because made. are undue they valid only of date statements the reliance on

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

talk highlights, about for Our people cases. an followed quarterly by includes our business some today quarterly agenda We'll our of then our and financial our of update results.

begin Now Cesar Gon I invite our to presentation.

Cesar Gon

great Thank of our be this many CI&T you, to the [indiscernible] Eduardo. in few Good routine world. day, the achievements. for around able resume and in teams superbly again everyone. London about had This It's global talk helped to the is I've a past to valid. months opportunity to visit Based post-pandemic globe. now for here I'm results positioned travel.

Our are enthusiasm team in spirit, vision heartening. truly and and our for reach global culture plans

These our of in experience launch. AI introducing since York, events platform CI&T productivity Melbourne. presented It's prop customer AI. July trips to remarkable [indiscernible] evolution been the of flow, our London, our These and hyper-digital like New value cities on through for been witness its have Paulo Sao and folks platform

the with utilizing proud to clients, X,XXX than more active engaged version largest our our users flow. now co-build are We CI&T are report that of of over clients from and CI&T X beta

of promising. the results very early at the yet beginning have We exciting this journey differentiation are been

performance. and comment let on me Now operating financial our

which the quarter of BRL quarter to expand, BRL demonstrate the last third XXX overall year. once of a XXXX, written structure our continued in period annual in improve. months XXX optimizing organizational during the million margin EBITDA maintaining above a clients XX lower revenue X revenue with as in and third this XX.X% the net driver serving number BRL of growth to strong million quarter growth. market last lean reached quarter the XXXX Our reaching conditions million The and compared to same a operations of adjusted The our in in XXX commitment

activities months invest in XXXX. In addition, cash that This in our operating initiatives is generated of XXX the cash future generation, strength X BRL a million strategic from the financial with provide growth. and in to flexibility strong we will drive further us position

We later. will into deep dive these figures

highlights at look client the a of some business and quarter. engagement take let's Now for our examples

[Presentation]

Cesar Gon

and I hope you news highlights. enjoyed stories, our client selection of

discuss like global would to invite strategy. I to talent our Bruno Now

Bruno Guicardi

It's with with here balanced year, everyone. market in downward morning, near a while be preparing demand pleasure Good a to again. trend. prevailing and of and quarter up ended X,XXX We term. diligently supply the resume streamlined a voluntary skills CI&Ters organizational the structure keeping this in we ourselves our to conditions continues Throughout growth the have [indiscernible]

is a Above a all, ability our key our of Diversity progress in of some initiatives. made the and of service new And third cornerstone rate continuity X%, we culture. and our introducing of a generation CI&T role inclusion vital at and delivery which turnover high-quality to plays leadership XXXX, our by leaders. develop organizational quarter remains

fresh program and cohort For people inclusive Welcomed we month disability hosted Black our for training. September. people career a instance, in students of the acceleration of provided into leadership

culture workshops, promoting wellbeing. centered around enhancing training and and numerous awareness organized we emotional sessions Additionally, events

environmental our CI&T shift focus fully environmental let's to is Now to social initiatives. changing committed responsibility. our

and on positive an less revolves around impact and generating a environment. society objective primary Our

America. for reporting The emissions [Technical the corporate brought awarded emissions Golden Difficulty] This in news. protocol leading exciting quarter, our GHD public gas quality. first Latin In the Brazilian registry, us year forth on the greenhouse platform

organization. inventory this and report. of environmental in year journey, diligently collaborative our projects powerhouse our operations. In as we such achieved with Since sustainability and we strive gas aspect to then, significant sustainability our sustainability ESG mild our emissions, and Leveraging emissions our actively initiatives, comprehend we responsibility publishing every minimize ESG greenhouse integrate a our across into by have infusing business our units,

Our consistently and best environmental refining industry in practices. alignment commitment with involves to our approach matters

Stanley more Now to I invite performance. details give financial about our you

Stanley Rodrigues

our XXX.X Thank quarter here all the you, million, sharing to part $XXX net portfolio. was and 'XX, third everyone. the quarter was results million I'm to be acquired our variation In budget more The financial mainly in with Bruno, net revenue and third you. glad top good of XXXX. to compares of in client our morning, of once it revenue one unexpected our BRL and preplanning due the

BRL months months X our largest to success in revenue market X.X to a and currency of is have revenue geography, revenue. X of up Pacific Asia in net billion, holds while last compared by When our Europe region. for [Technical share. XX% This analyzing is the significant share total is substantial we constant of North at 'XX, XX% same a with our our this of presence increased the revenue the year. strong share in follows revenue to XX% testament representing Difficulty] our America a XXXX. distribution market total another the period of X% X.X% For achieved us, a accounting

revenue XXXX. of Services revenue primary source Financial our XX% segment continues X the the verticals, of total be to months our terms in In contributing to of

proficiency consumer this showcasing XX% our total Additionally, in ability the and solutions accounting for sector. rapidly our telecommunications goods transformative in vertical a of industry. revenue, evolving The in XX% contributor meeting the needs significant this exemplifying technology contributes is our deliver revenue, to our unique sector to

as XX% well as the from to including one top our X the to This robots. in improved top the period. spending in XXXX of new client to and Finally, share XX% the of successful months from clients' share the revenue XX% cautious variety today enterprise same improved revenue is the a our XX of due onboarding factors, in approach from XX% environment

streams throughout the onboarded the revenue our last base our million. exceeding forward, diversifying generating Most that regions BRL enter expand client clients XX base we client revenue months, and about diversification as new X Talking of have it XX are we successfully and industries. our into we geographic represents importantly, new as look

excited catalyst as as to for our these share are and serve We will engagements a traction growth clients time. that expand these new gain over

ability to a consistent a approximately time. sustainable growth aspect retention exemplifies X our over not is XXX% The This revenue rate pivotal clients. rate net the years retain our ensuring value expand indicator of new but trajectory. This we our them the clients, in our of only over past plays also to strong with engagement provide role

continue Moving both of acquisition prioritize the new of and the we to will nurturing forward, clients existing relationships.

detail third for financial me our X let the the 'XX and Now months performance 'XX. quarter

XXX in EBITDA third quarter million the million increased to XX third BRL was the in million EBITDA to 'XX in in XXXX. 'XX months results quarter 'XX. The XXX XXXX, year-to-date, up X the XX.X% adjusted margin BRL versus Analyzing $XXX XX.X% the the compared EBITDA X BRL million from X months The was the XX.X%. to months XX.X% EBITDA Our the margin in rose

a disciplined our offset identified our on operational strategic need a It a year, optimization resulting aggressive we our have reduction coming expenses. current market navigate margin, the results prudence of important to in more SG&A with cautious approach while preparing years. of reflecting that and to efficiency. to maintaining is resumption in this the throughout recognizing resilience adopted the to dynamics financial growth of and note the helped systematic These through our has we actively these This approach, commitment impact expenses gross optimizing have focus opportunities demonstrate our

ourselves we for As our success. and we continue in to growth to sustained and long-term confident adapt are ability refine position strategies, our

million X tend net position year. quarter lower is as our gain our XX effect, exchange variation derivative I comparable adjusted 'XX of profit interest million, third BRL details. a M&A as explain Our quarter which net throughout financial the rate third results expenses to financial of and which due balance XX versus strategy. higher million in a the in expenses will third a an in was The the foreign net that foreign million more derivative higher in 'XX the gains BRL than swap the BRL result were and in out quarter mainly to results part XXXX, from In noncash exchange quarter benefited higher debt BRL third quarter XX factors: 'XX, XX the period,

by XXXX. Our X increased months adjusted XXX XX.X% XXX net BRL million million 'XX of from BRL to period in profit the the same in

flow million our above Finally, maintaining BRL from the initiatives in in flow, generated capital period further increased to to CapEx BRL empowers growth rose in our same in XXX the in flow cash consumption operating XXX substantially cash and generation free XX our to our investing the million advantage, of the cash our in months flexibility cash from cash million XXXX million net X our The priorities. X XX and that BRL excluding of XXXX. consistent of operating 'XX simultaneously while allocation strong continue competitive strategic months drive will enhance our BRL us activities

comment our business Cesar on Now invite back outlook. to I

Cesar Gon

Stanley. you, Thank

years to supporting AI as for a spending While prepare we growing initiatives are of core with their be and the clients design ahead. enterprise sentiments they cautious investments remain glad number their digital

sequential this For indicates million midpoint BRL basis. be the the to revenue. fourth on million XXX in reported revenue of net a to of of our XXXX, BRL quarter expect range range XXX we stable The guidance

within range previous year For XXXX, the are the guidance. narrowing the of full we

we X% our to net growth of expect to compared Now last to XXXX revenue be range in FX-neutral year. X% the

adjusted least maintaining expectations our we Finally, are for at of XX%. margin EBITDA the

focused on we evolving and amount cash capabilities solid In year, trajectory. significant such team our of growth generating our we our volatile solid the resume a profitability a have AI maintaining as of

Q&A We will attending session. for our today. begin you the presentation, call and our conclude we now Thank

Eduardo Galvao

All question Ashwin right. comes The from Instructions] first from begin question-and-answer the now Citi. session. Shirvaikar We'll [Operator

Ashwin Shirvaikar

and appreciate everyone. Thank good you, the Eduardo, morning, comments. I

there regards a on And asking the about Let to back when down in at step like that? the client. something temporary to things more client? of to start furloughs, steps maybe might the more nature client going level. there are is normalized with regards with me come the that something Or of with any spending Is else greater top indications

Cesar Gon

unexpected your than situation. top Good day, has client was one And been Great foreseeing. you for our now. to now us thank years That's have for , I that more stable a XX as see are we it questions. very with replanning one believe This top client. and budget Ashwin, Well, we what for think an we [indiscernible] you.

most we are the think they budget, strategic still, a and just leader that's why a this result decide I I adjust volatile partner very think, So to digital. saw decline. And and for I we it's of think

we foresee stable now a So situation.

Ashwin Shirvaikar

the from others early And any how you as What to you're client, higher say as year. are into backlogs a year give can XXXX? with heard thoughts later higher you start convert hope is of that we one should broadly in there that visibility to consistent forward things for think provide comments. and parts as the you can that the us slow Are that we've planning to more

Cesar Gon

Sure.

I way services, current [Technical an I think, demand environment different see think Difficulty] acting our Ash, there for in directions. is [Technical the to Difficulty] equipment

one our company to investments and spending is to to of [indiscernible] first to second the clients But of prepare our I clients. capture revolution happen and the inexorable every tech force [indiscernible] eye. pointing macroeconomic because the The company single our to customer by, this increase in a going is that new [indiscernible] behavior disruption efficiency by I is then think digital around think competitive pushing that is their first environment driven for is and there

customer to macro and AI If budget opening for the we game. of we across So translate -- indicating I experience flow, pushing this mentioned, play demand demand, board. space we if exclude observing our to recommendation the and with our is that -- are capture efficiency think that variations CI&T we demand new equation course, [indiscernible] constraining Stanley the our how new simple, environment, growth

year. on That's So sequential accelerating is start conditions. progress XXXX growth delivery under QX, we standard the very and stable I what our we through current market in current are of the our visibility marking as believe of confident the and strong

Eduardo Galvao

Gonzalez from Stanley. comes Morgan Ernesto with question next Our

Ernesto Gonzalez

and It's your see And expectations? anything end an be to XXXX international year relative expansion, how it's would you great. just can doing comment to into into going

Bruno Guicardi

[indiscernible] outside America I the question. like how going? Not your are sure repeat Can if got revenues the Latin you seeing

Ernesto Gonzalez

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

Cesar Gon

services, cohort which but by like a the than lot than of sector it's XXXX Fortune for more was strong others, very regions. clients looks like some don't We financial a regions mainly us, similar demand still Ernesto, softer any little a the in right, differences clients see difference smaller have traditional the but doesn't stable, across so sectors relevant Big a board, softer tech like that's across itself, the so across others, on of going it like tech across softer, CPG, too in companies the board one

I've what seen that's So everywhere.

Eduardo Galvao

next from Puneet JPMorgan. Our Jain question comes with

Puneet Jain

doing margin I on this question like as of on have . that are obviously, year? enable? is lot you like cuts pricing including a next cost-cutting for year, move into expect or margins. Stanley, we in you Like what are And for gross seeing a margin upside SG&A

Stanley Rodrigues

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

Puneet Jain

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

Stanley Rodrigues

already the experience. consumer we willing is have into doing that platform, top of initiating experimentation, phase, say would optimization, clients which I already Yes. to trajectory clients flow jump some the all [indiscernible] on the biggest to next of the towards but

You may add [indiscernible]

Cesar Gon

go-to-market strategy X different I think time I in CI&T X ways. flow frames. Puneet, helps set in think

The first is efficiency productivity.

main already leveraged in concrete marathon it's years based It's ahead XX-year not evolution by many boosted opportunity see software we are because happening, So big flow. AI. for development and and competitors I replacing is XXXX. CI&T software a by on gains for engineering now around a the it's the sprint. efficiencies And This around opportunity a tech

will believe happening, relevant cases be technology the some and to is The early customer but environment already and by natural terms second opportunity new in new by business the on it advent relevant it competition in investment and days, XXXX still associated I it's maturity experience, the that vertical, really natural increase will in reshape, it's demand with customer use of is industry, so the and of the have AI. based language stability their revenue all in as experience, gains or hyper-personalization --

but -- on. big this shift, is this is So probably from XXXX a

Eduardo Galvao

Corretora Itau de comes Diaz question go Valores. Legarreta from ahead. Carlos with next please Our de Carlos,

Carlos Antonio de Legarreta Diaz

ones. I have end, very my X quick on

is XXXX? of if at acquisitions its on first say, the I do them. you the, made going see you it digesting was mean comment secondly, utilization And of one, rate you The the can the forward? least that in X and if let's that about how you evolution, can talk how

if at can about be some So that, the level, us give helpful. very qualitative color will talk that you

Bruno Guicardi

Utilization Carlos, thanks for the question. been the been we've workforce, rate adjusting demand. right, has high as to according

open. we and kind we high we high, hundred have growth, kept will of a that it forecasting we positions continue of couple as So and are already resume

the that in So see very track closely. near a So that's we growth future, substantial we right? metric

rate sorry, was when what even question was demand in very low hitting Right? your again, previous second that so high. the To quarters is the And the Carlos. still utilization

Second question was around?

Carlos Antonio de Legarreta Diaz

the acquired.. Adjusting

Bruno Guicardi

of So integration. we're happy speed with very the that

we already the seamlessly right companies. across in the that delivery tech, companies business already kind so highlights, of the a board actually Low demand is I the that's before, now. And we've lights the really seen a teams acquired integrate that But mentioned acquired with a all had how and some the soft teams the process bigger in exposure of as has segment of coming engagement type those clients. different of working, really tapping to that $XX $X CI&T clients of scaling companies relevance scale engagements, a to theses had completely [indiscernible] those of for of million level rapidly were the acquisitions smaller we many of million kind reaching and and $X engagements So of capabilities right? million, have in complementary those the that under from

see very to we're happening that happy So already. that

in so cases. We that see many U.S., we in have EMEA,

So us. we we going long-term and the that for XXXX to opportunities wave maybe coming sense, of of -- in to resume -- M&A coming long forward, soon we'll this like as more market game as kind prices continue activity. they see for make as continue we a second do it's M&As still feel that's look conditions to and as to

Carlos Antonio de Legarreta Diaz

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

Bruno Guicardi

want of navigated as public if demand companies we're companies target assets of been resilience see to the private reality are at we companies already market for well No, of markets. on kind we that well, right? And environment. as looking that for course, So the soft right? looking is we've at in the the pricing, So doing that reflecting

things the X want before think, are to there main those moving with forward with M&A processes. the, So see we I

Eduardo Galvao

e-mail. X have we've that got We questions here by

The to . first or expect the [indiscernible] is regarding to one new contribute we clients existing expanding How with do CI&T ones? flow. it relationship

Cesar Gon

Again, we results. excited the are very with early

As efficiency clients CI&T people from of reaching platform. user are now a cases the the team, for of of large and number we more And I X,XXX largest before, our than onboard the XX than more mentioned in clients in platform.

We now AI of XX have agents. around

of enterprise fulfilling this make [indiscernible] with with that this our our going we basically traditional and going teams we're on new tech towards On ready. is top started work agents handle to AI boast powered even privacy, demand or to we foundation efficiency, So use the is security, case. AI with be digital [indiscernible] tackle, that, hyper business productivity AI by

rates, generating this enterprise experience. is the by terms back being is X layers basically the we in And the the seeing way productivity. [indiscernible] demand efficiency So of and are of that

replacing that the most So competitors and the gains tech around open on and based teams space can the space, concrete, performance tradable experience. that around opportunities creating AI tackle poor budget efficiency

current CI&T, now, for So the push main and to year the folks and next Right And of of scale flow. a launch on. clients, technology available and -- preparing onboard our from around on, terms in clients huge basically, it's we current everything platform. and new only next in beta in will we the capabilities are this portfolio, year we from initial it's

Eduardo Galvao

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

Stanley Rodrigues

the we or X of we have generating on the you We're Thank second in that may that, the a mainly of stronger we that allocating usually take in bear cash. seasonality flow traditional of and areas. can deploying year top Well, generation, the for cash that question. are one. that cash cash I half in mind

First, we have our debt service.

moves for next down this debt future. we are are our inorganic -- paying -- near will we the in to we order that sheet strategic prepare in more make the So balance

comply one be, this a share are I that it's here. we that we some proper Second And third repurchase, we have with in as we to We R&D, shares we out have we repurchase investing for price no the would AI. there to -- towards proper well. a in area policy And great shareholders and as and have those that we a timing return see towards scope opportunity timely are those dividend we, and been example. And as as way with M&A to have promoting great value mentioned, with that opportunity with we've the obligations our may well, use obligations. a

mainly areas capital X So allocations. those for

Eduardo Galvao

by that evolution how another the There's question you response e-mail just do came intelligence? structure of in on demands client foresee our to artificial up organizational and

Bruno Guicardi

[indiscernible] industry the think we years, very we so learning. completely -- reshape So we're pace with happy think we're I our

can bring. that for thinking done that no know happen hiring to actually what will not the the amount there is it's we're of of going demand be get to that new scale people So like it's

faster, really And We who and be have right? to to game our we're efforts where retrain our of the whole fast. staff dedicating move that's will kind learns

to we that people AI X/X more clients XX like than or our houses, either have X,XXX we already the using company of Today, that flow. almost those exposed of already mentioned one

we and So development, to needs X/X have contributing we software to company, do exposed need to reformulate be need to done. the what of we the what what and learning

So to kind happy of of the [Technical speed to upgrade Difficulty] open and staff. flow support of kind investments the very CI&T is with conditions now we're in and XXX%

in to of external creating productivity. in hyper-experimentation applying world, gains potential capture kind user completely speed, of to for the of kind going potential immense out next clients, soft a to more experiences and lot X, hyper-personalization to how the an with even their more those X, XX, different always it for changing next just be figure and there happen year, joining our people reformulate clients' is going this course, of and we'll tools for our whole And kind next get and in customers. we're clients we development helping So processes really of next

Eduardo Galvao

proceed concludes Cesar, his Cesar invite All please? today's now right. I'll with . remarks. That to Q&A closing session.

Cesar Gon

[indiscernible] the hard and a all world new of for are call. work Eduardo, Stanley in chapter well. our and all artificial amazing CI&Ters you intelligence. clients thank that Thank you achievements in for Stay See to selecting by innovation around Thanks, special Once want powered again, CI&T participating the next to for in thanks you and the quarter quarter. Bruno. the I this our

CI&T (CINT) 17 Nov 232023 Q3 Earnings call transcript