CI&T, Inc. (Brazil) Q3 FY2024 earnings call

• Company culture: Built on six tenets including clients as the reason for existence, trust, collaboration, obsession with excellence, continuous learning, and diversity. Intensified travels to connect with global teams, with CI&T in 25 countries.
• Financial highlights: Record net revenue, adjusted EBITDA margin of 19.5%, cash from operating activities of R$295 million in the first nine months of 2024, onboarded 520 new CI&Ters, streamlined talent acquisition with AI.
• CI&T FLOW platform: Over 75% of teams integrated, over 3,000 Flow-certified, over 100 clients embraced Flow.
• Talent strategy: Headcount growth to 6,700, 10.5% YoY growth, 8.3% QoQ growth, voluntary attrition 10.5%, CI&T Next Gen trainee program with 10,000+ applications, leveraging AI in onboarding and training.

In the third quarter of 2024, CI&T 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. The top 10 clients saw net revenue up 25.3% year-over-year. For the nine months of 2024, the geographic distribution of net revenue was 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. North America continues to be the fastest-growing market. Revenue from Financial Services, Consumer Goods and Retail, and Industrial Goods verticals grew by double-digits year-over-year, with Retail and Industrial Goods sectors doubling compared to the third quarter of 2023.

• Q4 2024 net revenue expected to be in the range of BRL 620 million to BRL 655 million, midpoint represents 22% YoY growth.
• Full year 2024 constant currency net revenue growth expected between 0.5% and 2% YoY, reported basis midpoint higher. Adjusted EBITDA margin guidance in the range of 18% to 19%.

Forward-looking statements are subject to known and unknown risks and uncertainties which could cause actual results to differ from those expressed on this call.

Q: 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?

A: Bruno Guicardi: The headcount has been growing in line with revenue growth. Utilization rates are still very healthy around between 85% and 90%. Stanley Rodrigues: About the effective tax rate, in the nine months of 2024, the effective tax rate was 38.7% compared to 36.5% in the same period in 2023. Cash tax rate for the nine months is 10% this year compared to 14.8% in 2023. Expect to behave in that way going forward.

Q: 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?

A: Stanley Rodrigues: Focus on productivity gains from cost management. Most SG&A are fixed expenses, providing operating leverage on growth. Cesar Gon: In the US, demand environment is slightly better, budgets more stable. Q3 was highest booking quarter, strong pipeline, favorable for sustainable growth heading into 2025 and beyond.