Release Date: August 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CI&T Inc (CINT, Financial) reported a net revenue of BRL565.7 million for Q2 2024, an 80.1% increase compared to Q1 2024, exceeding guidance and market expectations.
- The company achieved an adjusted EBITDA margin of 19.2%, demonstrating strong profitability metrics.
- CI&T Inc (CINT) onboarded over 100 clients and achieved almost 70% adoption of its AI-powered platform, CI&T Flow, across its teams.
- The company reported a healthy voluntary attrition rate of 10.4%, indicating strong employee satisfaction and engagement.
- CI&T Inc (CINT) generated BRL131 million in cash from operating activities in the first half of 2024, an 11.6% increase compared to the same period last year.
Negative Points
- Net revenue for Q2 2024 showed a 1.1% decline compared to the same period last year.
- Adjusted EBITDA for Q2 2024 saw a year-over-year decline of 4.8%, reflecting strategic investments in sales efforts.
- The company is still in the early stages of AI adoption, requiring a structured, method-based approach for both enterprises and teams.
- Despite strong growth in North America, the growth in LATAM was significantly lower, indicating regional disparities.
- The company faces a dynamic market environment with uncertain macroeconomic conditions, impacting budget stability and client spending.
Q & A Highlights
Q: Hi. Good morning, everyone. We are so impressed with the numbers. Congratulations. Very good results and perspective ahead. Well, I'd like you to talk about revenue first. If you could disclose a little bit how are bookings, the projects pipeline, talk a little bit about how the verticals are performing, it looks like across the board. But we can see, for example, that the growth in the US was 10 times higher than the growth in LATAM. So if you could talk a little bit about those success stories in the US, and what you're looking for, and what verticals are performing well? And that's it. That's my question. I think it’s long enough. Thank you.
A: I can get this one. Hello, Leonardo, great to see you here. Well, let me talk about the environment, then budgets, and then commercial activities. First, I think, in general, there is still a lot of uncertain macro environment. However, there is an important difference from last year, from 2023, especially for our clients, large companies. I think what we see now is the tech budgets are more stable. So we are operating still in a mode of scarcity but without the ups and downs of last year. And budget stability is key for us for two reasons. One of our main strategies for gaining client share is replacement of underperforming competitors. And clients will only be open for this type of, let's say, intervention if they have a good budget visibility. And the second factor is a similar process. I think it's also a child of this scarcity period and also play in favor of Ci&T is a lot of vendor consolidation process. So I think during the previous years, companies, especially large companies, increased the number of vendors and leading to a lot of complexities and overhead. So now they are searching for efficiency and this process of consolidation playing favors in favor of Ci&T strength and positioning. In terms of commercial activity, I think if you -- and pipeline for this year, if we compare the same year of last -- same period of last year, it's considerably higher, probably double in terms of opportunities and bookings. So -- and also another good indicator is the deal closing ratio continues to improve along the year. So -- and it give us a very positive outlook for the second half of the year and for 2025. In terms of regions, as you mentioned, I think US and our North America operation was the star of this first half of the year, mainly because we onboard some amazing new clients last year that are still ramping up. But during this first half of the year, I think we evolve a lot, especially in Brazil. So you should expect a lot of traction in our Brazilian operation in Q3 and Q4. So we are expecting good growth across the board, even in our smaller regions like Europe and Asia Pacific. I think, in general, it's a combination of some big new deals we did in the second half of last year and the beginning of this year, and also I think the success of this combination of offerings powered by AI and our new sales approach we are calling AI growth machine that is a more aggressive sales structure.
Q: Hi, guys. Good morning. Thank you for the opportunity to make questions. So I [Technical Difficulty] the first one is on AI, right? You -- I mean, there's a lot that you guys are doing and really interesting stuff. We heard great things from other digital IT services this quarter that we covered. And one of the things that kind of -- is kind of question that we have after hearing everything is about the cycle, right? Because there are companies that are mentioned, they're still at very early stages and still need to educate people about AI, and -- but just there still have a lot to ramp up. So if you could mention a little bit what you're seeing and where we are in the cycle, if it should be a cycle as strong as others like the cloud implementation and the migration, et cetera that would be great. And also in terms of the strength that you're seeing in the conversations, do you think that such strength will or stabilization at least in terms of the budgets, how you see that trend going into 2025? Do you see a more benign environment that could make us more confident about the exit rate this year and it being extended towards next year? Thank you.
A: Thanks, Thiago. I can address, I think, basically two questions, right? The first one, regarding timeline of investments, what we see is this is the moment for efficiency. Of course, everyone is expecting future, I would say, war around customer experience, but the technology is not there yet. There is still a mature cycle that we need to wait for before expose the clients of our clients to the models -- to this new technology. But the efficiency is already there. And if you have a good method-based approach, you can capture that. It's not easy. It's a combination of a strategy for adoption for the teams and also how you guarantee for large companies that you are playing within the wide range of security, of privacy and reliability that are non-negotiable for large established enterprise. So what I see as a roadmap is probably you continue to see the majority of the investment relate to Generative AI linked to efficiency. This year and next year and probably in two or three or five years, we're going to see the beginning of a lot of -- a huge investment in a radical change in customer experience. Basically, we are going to move from the current paradigm, the smartphone screens, buttons to a more natural language-based interaction between computer and machine. I like to say that the interaction with the machines will become more human and this will be a huge opportunity for disruption for customer -- getting customer attention and engagement. And I think this will be a huge cycle of investment, very similar or even higher what we saw with the mobile revolution a few years ago.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
