Good morning, welcome to CI&T Earnings Call for the Third Quarter of 2023. I’m 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 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. If you'd like to submit a question, please send it via e-mail to investors@ciandt.com. 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. These risks and uncertainties could cause actual results to differ materially from those expressed on this call. We caution you not to place undue reliance on those forward-looking statements because they're 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 appendix for more details. Our agenda for today includes an update of our quarterly highlights, followed by some of our successful business cases. We'll then talk about our people and our quarterly financial results. Now, I invite Cesar Gon to begin our presentation.

Thank you, Eduardo. Good day, everyone. It's great to be here again to talk about our results and achievements. Based in London for the past few months, I've superbly positioned it for global travel. I've had the opportunity to visit many CI&T teams around the globe. This is a routine I've always valued, and I'm now able to resume in this post-pandemic world. Our team's spirit, rich global culture, enthusiasm for our vision and plans are truly heartening. These trips have been focused on introducing CI&T/FLOW, our AI platform for hybrid digital in cities like New York, London, Sao Paulo and Melbourne. These events presented our value prop of radically enhanced productivity and customer experience through AI. It's been remarkable to witness the evolution of our platform since its July launch. We are proud report that over 20 of our largest clients are now engaged, with more than 2,000 active users from CI&T and our co-built clients, utilizing the beta version of CI&T/FLOW. We are at the beginning of this exciting differentiation journey, yet, the early results have been very promising. Now let me comment on our operating and financial performance. Our net revenue reached BRL529 million in the third quarter of 2023 compared to BRL559 million in the second quarter last year. The number of clients with annual revenue above BRL1 million in the last 12-month continued to expand, reaching 187 in this quarter and serving as a strong growth driver once the overall market conditions improved. The adjusted EBITDA margin reached 18.5% in the third quarter of 2023, which demonstrate our commitment to maintaining a lean organizational structure and optimizing our operation during a period of lower growth. In addition, we generated BRL254 million in cash from operating activities in the nine months of 2023. This strong cash generation further strengthens our financial position and provide us with the flexibility to invest in strategic initiatives that will drive future growth. Stanley will deep dive into these figures later. Now let's take a look at some examples of our client engagements and business highlights for the quarter. [Video Presentation] I hope you enjoyed our selection of client stories, news, and highlights. Now, I would like to invite Bruno to discuss our global talent strategy.

Thanks, Cesar, and good morning, everyone. It's a pleasure to be here again. Throughout this year, we have diligently balanced the supply and demand of skills with prevailing market conditions, keeping a streamlined organizational structure while preparing ourselves to resume growth in the near-term. We ended up the quarter with 6,100 CI&Ters, and our voluntary attrition rate continues in a downward trend. Above all, our leadership turnover rate remains at 4%, which plays a vital role in the continuity of our high-quality service delivery, and our ability to develop a new generation of CI&T leaders. Diversity and Inclusion is a cornerstone of our organizational culture, and in the third quarter of 2023, we made progress by introducing some key initiatives. For instance, we hosted the month of people with disabilities in September, welcomed a fresh cohort of students into our Career Acceleration for Black People program, and provided inclusive leadership training. Additionally, we organized numerous workshops, training sessions and events centered around enhancing cultural awareness and promoting emotional well-being. Now let's shift our focus to our environmental initiatives. CI&T is fully committed to championing social and environmental responsibility. Our primary objective revolves around generating a positive and lasting impact on society and environment. This quarter brought forth exciting news. In our first year on the Public Emissions Registry, the leading platform for reporting corporate greenhouse gas emissions in Latin America. The Brazilian GHG Protocol awarded us the Golden Seal of Quality. In our sustainability journey, we achieved a significant mile this year by publishing our greenhouse gas emissions inventory in our ESG report. Since then, we have diligently strived to comprehend and minimize emissions, infusing environmental and sustainability responsibility across our organization. Leveraging initiatives such as our ESG powerhouse and collaborative projects with our business units, we actively integrate sustainability into every aspect of our operations. Our commitment involves consistently refining our approach to environmental matters and in alignment with industry best practices. Now I invite Stanley to give you more details about our financial performance.

Thank you, Bruno, and good morning, everyone. I'm glad to be here once more sharing our financial results with all of you. In the third quarter '23, our net revenue was BRL529.1 million and it compares to BRL559 million in the third quarter 2022. The variation in net revenue was mainly due to the unexpected budget replanning of our top one client and part of our acquired portfolio. For the nine months '23, our net revenue increased to BRL1.7 billion, up 9.9% at constant currency compared to the same period of last year. When analyzing our revenue distribution by geography, North America is our largest market, accounting 44% of our total revenue in the nine months of 2023. This is a testament to the strong presence and success we have achieved in this region. Latin America is another significant market for us, representing a substantial share of 41% in our total revenue. Europe follows with a revenue share of 10%, while Asia-Pacific holds a 5% share. In terms of verticals, the financial services segment continues to be our primary source of revenue, contributing 29% to our total revenue in the nine months of 2023. Additionally, the consumer goods sector is a significant contributor, accounting for 20% of our total revenue, exemplifying our ability to deliver transformative solutions in this industry. The technology and telecommunications vertical contributes 18% to our revenue, showcasing our proficiency in meeting the unique needs in this rapidly evolving sector. Finally, our revenue share from our top one client improved to 10% today from 16% in the nine months of 2022 and the top 10 clients' revenue share improved to 42% from 52% in the same period. This is due to a variety of factors, including the cautious approach in the enterprise spending environment, as well as…

Thank you, Stanley. While enterprise spending sentiments remain cautious, we are glad to be supporting a growing number of clients with their core digital initiatives as they design and prepare their AI investments for the years ahead. For the fourth quarter of 2023, we expect our net revenue to be in the range of BRL519 million to BRL540 million on a reported basis. The midpoint of this guidance range indicates stable sequential revenue. For the full year of 2023, we are narrowing the range within the previous guidance. Now, we expect our 2023 FX neutral net revenue growth to be in the range of 4% to 5% compared to last year. Finally, we are maintaining our expectations for the adjusted EBITDA margin of at least 19%. In such a volatile year, we have focused on maintaining our solid profitability, generating a significant amount of cash, and evolving the AI capabilities of our team as we resume our solid growth trajectory. Thank you for attending our call today. We now conclude our presentation and we'll begin the Q&A session.

All right. We'll now begin the question-and-answer session. I'll announce each participant's name. Once you hear your name, please unmute your line and ask your question. Then, when you're done, please mute your line. The first question comes from Ashwin Shirvaikar from Citi. Hi, Ashwin. Please go ahead.

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

Good day, Ashwin, and thank you for your question. Great to see you. Well, I think as Stanley mentioned, it was an unexpected budget replanning for our top one client, and as -- now we believe this, we have a very stable situation, that's what we are foreseeing. This top one client have been with us for more than ten years now. So I think we are still, I think, the most strategic partner for digital, and I think it's just a result of a very volatile year and they decide to adjust budget and that's why we saw this decline. So now we foresee a stable situation.

I see. Okay. And as you think more broadly past the one client, any early thoughts that you can give us as to how you're planning for 2024? What we've heard from others is a slow start to the year with the hope that higher backlogs should convert in later parts of the year. Are you consistent and are there things that you can say that provide higher visibility into forward comments?

Sure. I think, Ashwin, a good way to see the current demand environment for our services, I think there is an equal [Technical Difficulty] forces acting in different directions. The first one is macroeconomic and two [indiscernible] I think pointing to still a cautious spending of our clients. But there is a second force that is the new tech revolution driven by, I think this is pushing our clients and every single company to increase their investments around digital to capture efficiency first and then prepare the company for inexorable customer behavior disruption that is going to happen because of the competitive environment in a world powered by AI. So macro constrainting, AI pushing demand. And our recommendation is simple, capture efficiency with CI&T/FLOW, of course, opening budget and space for play the new customer experience game. If we -- how we translate that to our -- this demand equation to our environment. I think if we exclude the variations that Stanley mentioned, we are observing new demand indicating growth across the board. So we are confident on deliver a very stable and strong Q4 marking what I believe is the start of our standard sequential growth through 2024 and accelerating as we progress in the year, that's our current visibility under the current market conditions.

Understood. Thank you, all.

Thank you, Ashwin. Our next question comes from Ernesto Gonzalez with Morgan Stanley. Ernesto, please go ahead.

Hi. Thank you for taking our question. It's an international expansion just to see how it's doing relative to your expectations. And anything you can comment going into year-end and into 2024 would be great. Thank you.

Bruno, you want to hand this one?

I'm not sure if I got the question. Can you repeat like you interacting, seeing how the revenues outside Latin America are going? That's..

Yes. How they're doing relative to your expectations for the year? Have you seen any improvements in demand and trends or anything you can comment going into year-end and 2024?

Yeah. Like, we don't see a lot of differences in demand across regions, Ernesto. Like, that's -- it looks like a very similar across the board. So with some sectors a little softer than others, like, mainly the tech sector itself, which was a relevant one for us, softer than others, but still strong in CPG, financial services, or -- it's more like by the cohort of clients, like, traditional big Fortune 1000 clients still going stable and in smaller tech companies, softer. But that's across the board, it doesn't have any difference across regions. And so that's what I've seen everywhere.

Really clear. Thank you.

No problem. Thank you.

Thank you, Ernesto. Our next question comes from Puneet Jain with JP Morgan. Puneet, please go ahead.

Hey. Thanks for taking my question. I have a question for Stanley, like, on margins. It's like, obviously, you are doing, like, a lot of cost-cutting this year, including cuts in SG&A. Is that margin upside sustainable? And what are you seeing on pricing or expect for gross margin as we move into next year?

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

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

Okay. Go ahead, Stanley.

Okay.

Go ahead, Stanley. I'll complement you.

Yeah. I would say that we have 20 of the biggest clients already into FLOW platform, doing all the experimentation, initiating the trajectory on top of optimization. And -- but some clients already willing to jump to the next phase, which is towards consumer experience. Cesar, you may add your view on that.

Sure, Stanley. I think CI&T/FLOW helps CI&T go-to-market strategy in two ways, Puneet, I think in two different timeframes. The first is, efficiency, productivity, so it's already happening and we are replacing competitors based on concrete gains around tech efficiencies leveraged by CI&T/FLOW. This is the main opportunity for now and 2024, and I see a big opportunity for many years ahead because it's not a sprint, it's a 10-year marathon around the revolution in software development and software engineering boosted by AI. The second opportunity is the demand associated with the advent of new business use case by industry, by vertical. It's already happening, but it's still in the early days and I believe it will be relevant -- really relevant in terms of revenue in 2025 on. So, as the technology gains some maturity and stability and the competition environment reshape, it's natural that customer will have to increase their investment in hyper-personalization and new customer experience, natural language experience, all based on AI. So this is a big shift but probably from 2025 on.

Got it. Thank you.

Thank you, Puneet. Our next question comes from Carlos de Legarreta with Itau BBA. Carlos, please go ahead.

Hi. Can you hear me?

Yes.

Sorry, I'm not sure my video is working. I'm connected from mobile. Thank you. Good morning. Thanks for taking the call and the question. I have two on my end, very quick ones. The first one, if you can talk about the utilization rate and its evolution, how do you see that going forward? And secondly, if you can comment on how's the, let's say, the digesting of the acquisitions that you made in 2022, I mean, it was at least four of them so if you can talk about that, give us some color at the qualitative level, that'll be very helpful. Thank you.

I can take that one. Carlos, thanks for the question. Utilization rate has been high as we've been adjusting the workforce, right, according to demand. So it kept high and we are forecasting that, as we kind of resume growth, we'll continue high and we already have, a couple of hundred positions open so we see some potential growth in the near future, right? So, that's a metric that we are -- that we track very closely and -- so even in the previous quarters when low demand was hitting the utilization rate was still very high. To your second question, what was that again? Sorry, Carlos. Second question was around...

Digesting the acquired…

Digesting the -- I get it. So, we're very happy with the speed of that integration. And so how the -- how we already kind of really seamlessly integrate the business teams and the delivery teams across the board with all the acquired companies. Low lights in that process is actually some of the acquired companies had a bigger exposure in tech as I mentioned before, that's a segment that is -- that has a soft demand right now. But in the highlights, we have already seen the thesis of those acquisitions working, right? So we have many clients that were coming from those smaller companies that had, under a million dollar type of engagements, scaling rapidly to $5 million $10 million engagements, kind of really tapping into the scale of CI&T and the complementary capabilities of CI&T and reaching a completely different level of engagement and relevance for those clients. So that we're very happy to see that happening already. We see that in U.S., in EMEA. So we have many cases. So we feel like that's going forward. We will still continue to -- it's a long-term game for us. The M&A continue to look for more opportunities to do this in 2024 and maybe a second wave of M&As coming as soon as we see kind of market conditions and, prices coming to -- as long as they make sense, we resume that activity.

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

We've been looking at pricing, so if the private market is kind of already reflecting the reality of public markets, and of course, we're looking at for companies for assets that are doing well, right? So we want to see, that resilience on the target companies as well, companies that we navigate in the soft demand environment. So those are the -- I think, with the main two things we want to see there before moving forward with M&A processes.

Appreciate it. Thank you.

Thank you.

Thank you, Carlos. We have two questions here that we've got by email. The first one is regarding CI&T/FLOW. How do you expect it to contribute to winning new clients or expanding the relationship with existing ones?

Sure. I can get this one. Again, we are very excited with the early results. As I mentioned before, more than 20 of our largest clients on the team, more than 2,000 people from CI&T and clients on board in the platform. And we are now reaching a large number of use case for efficiency in the platform. We have now around of 30 AI agents. So this is basically fulfilling our value prop. That is, we started with a foundation that we're going to handle privacy, security, going to be -- make AI enterprise ready. On top of that, we boast the teams with AI agents towards tech efficiency. And this powered by AI teams that can tackle traditional digital demand with hyper productivity or even work on new AI business use case. So this is the three layers of the value prop, enterprise readiness, efficiency and experience. And, in terms of the way, we are seeing the demand being generating by that is basically tackle productivity. So replacing poor performance competitors based on concrete, the most tradable gains around tech efficiency and open space, budget space. And creating the AI teams that can tackle the opportunities around experience. So basically huge push around our current portfolio. And we -- it's the main focus in this initial beta launch of FLOW. And from next year on, we will onboard new clients in the platform. Right now it's available only for CI&T current clients. And we are preparing everything in terms of capabilities and the technology to scale from next year on.

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

Hi. Well, I can take that one. Thank you for the question. Well, on top of that, cash generation, we may bear in mind that usually traditional, or we have this seasonality of generating a stronger cash flow in the second half of the year. And we are deploying that cash, we're allocating that cash mainly in three areas. First, we have our debt service. So we are paying down debt in order to prepare our balance sheet for this more -- the next strategic inorganic moves that we are -- we will make in the near future. Second one, towards R&D, and we have this great opportunity towards AI. And, we -- as I mentioned, we are investing timely with the proper timing in the proper scope in that area as well. And the third would be, we're -- we've been promoting a share repurchase, for example. We see that we have a great opportunity with the price out there and it's a way to return value to our shareholders as we have no dividend policy here. And as well, we have some M&A obligations that we may use those repurchase shares to comply with that -- with those obligations. So mainly those three areas for capital allocations.

Thank you, Stanley. There's just another question that came up by email on, how do you foresee the evolution of our organizational structure in response to client demands and artificial intelligence?

I can take that one. So we think that, to Cesar's point before, right, so the next 10 years, I think will completely reshape our industry. So, we're very happy with the pace we're learning. So we're not thinking of there is no amount of hiring that can be done to actually get people that know what it's going to happen, like, it's a -- for the scale that the new demand will bring. We have to retrain our whole staff and the game will be who kind of learns faster, right? So -- and that's where we're dedicating our efforts, kind of, to really move fast. Today, we have more than 2,000 people. It's like -- almost like a third of the company already exposed to either our AI powerhouses, one of those 22 clients that we mentioned that already using FLOW. So we have a third of the company learning exposed and contributing to what we need to do and what we need to reformulate the software development, what needs to be done. So we're very happy with the speed and kind of a creating conditions and investments kind of support [Technical Difficulty] CI&T/FLOW is now open to 100% of the staff, so we get even more and more people joining it and kind of are helping clients to figure out how to kind of really reformulate their whole soft development processes. And this is going to happen in -- over the next, the next two, next three, next 10, we'll be always changing there with immense potential for gains in speed and in productivity, and of course, just applying those tools to the external world. We're going to capture a lot of, you know, potential for hyper-personalization and hyper-experimentation kind of creating completely different user experiences for our clients, our clients' customers.

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

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

Thank you.

Thank you all for attending today.