Good morning. Welcome to CI&T Earnings Call for the Second Quarter of 2024. I am Eduardo Galvao, Head of Investor Relations at CI&T. Joining 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 Q&A session. [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. They are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those expressed on this call. We caution you not to place undue reliance on these forward-looking statements as they are valid only as of the date when made. During the Company's 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 overview of our quarterly highlights, followed by some of our business cases. We'll then talk about our people and our financial results. At this time, I'll pass it on to Cesar Gon, to begin our presentation. Cesar?

Thanks, Eduardo. Good day, everyone. Thank you for joining us today. It's always a pleasure to discuss our recent performance and strategic advancements with you. A year ago, we proudly announced the launch of CI&T Flow, our end-to-end AI-powered platform, alongside a bold vision to radically transform CI&T. It was a decisive moment, to fully commit to a future boasted by artificial intelligence. Today, I am thrilled to share the remarkable advances, learnings and tangible results we have achieved, thanks to the unwavering partnership and trust of our clients and the extraordinary dedication of our teams, who have embraced this vision and made it a reality. In our vision, the AI disruption will unfold along the next 10 years in three acts. Act one is efficiency and hyper-productivity, paving the way for act two, customer experience and hyper-personalization, and this progression then leads to act three, decision-making and new business models. Now CI&T is totally focused on act one by turning our teams into AI-boosted teams. Thus far, this approach has generated impressive results in time-to-market quality and productivity. One important learning is that adoption of Generative AI is not a straightforward process. It's not natural for the enterprises or for the teams. So it demands a structured a method-based approach. For the companies or clients, you need to introduce tangible benefits of AI in an enterprise right approach, meaning within wide rails of reliability, security and privacy. For the teams, you need to combine a reskilling roadmap with a concrete view of purpose. So during the last 18 months, we cracked the nut with CI&T Flow for these two fronts, onboarding more than 100 clients and achieving almost 70% adoption across CI&T teams. Bruno will address our engagement metrics shortly. And this is just the beginning of this new…

Thank you, Cesar. The world of technology is undergoing a significant transformation, fueled by advancements in artificial intelligence and changing consumer behaviors. This shift presents immense opportunities and challenges for business across all sectors. As a global leader in digital transformation, CI&T is well-positioned to capitalize on these trends. In the second quarter of 2024, we surpassed 6,200 employees, a 0.6% increase year-over-year and a 2.4% increase compared to the first quarter of 2024. Our voluntary attrition rate remains at a healthy level of 10.4%, which strongly indicates employee satisfaction and engagement. As we navigate these technology changes, I'm excited to share our vision for growth and opportunity at CI&T. We are once again boosting our hiring machine to attract technology professionals across the globe to strengthen our artificial intelligence initiatives. Our investments in talent are a response to the surging demand for our digital services. Our clients increasingly turn to us for innovative solutions that drive efficiency and enhance consumer experiences. This demand is expected to grow in 2025 and beyond, and we're committed to equipping our teams to meet these needs ahead of time. By attracting top-tier technology talent, we are not only preparing ourselves for the challenges ahead but also positioning CI&T as the workplace of the future in an industry poised for decades of growth. The successful adoption of Generative AI is paramount for workers, leaders, and organizations to continue to thrive. In 2024, we intensified our efforts to elevate internal adoption rates of CI&T Flow, our own GenAI platform. And I'm pleased to report that 68% of CI&T teams have now integrated Flow into their daily activities, and 2,400 CI&Ters are Flow-certified, a fairly recent effort that we initiated earlier this year. Achieving these high adoption rates requires a well-structured and phase strategy emphasizing training, user engagement, and skill development. These efforts are not just about technology, they're about transforming our culture and workflows to fully realize the benefits of GenAI. Most importantly, over 100 clients have been scaling up their results with the Flow platform, boosting productivity and efficiency within the full software development process, delivering more with less sets CI&T apart from other vendors, strengthening our relationship. We are at a pivotal moment where embracing this opportunity can propel us to new heights, allowing us to play a crucial role in the upcoming global technology landscape. Now, I invite Stanley, to present our financial performance for the second quarter of 2024.

Thank you, Bruno, and good morning, everyone. I am pleased to be here once again to present our financial performance. In the second quarter, 2024, our net revenue was BRL565.7 million, representing a 1.1% decline compared to the same period last year. However, compared to the first quarter of 2024, we achieved an impressive 8.1% revenue growth. This rebound was primarily driven by the sequential growth of our top 10 clients. This achievement demonstrates our ability to expand our wallet share with clients, seize new opportunities, and strengthen relationships even in a dynamic market environment. Now, let's deep dive into our net revenue distribution by geography and industry verticals. North America remains our largest market, accounting for 43% of our total revenue in the first half of 2024. The revenue contribution from North America grew 15% sequentially boosted by the expansion of our largest clients in the region, demonstrating our ability to grow within our core market. LATAM remains a crucial part of our operations, contributing 41% of our total revenue in the first half of 2024. Revenue from LATAM grew 1.5% quarter-over-quarter, indicating a resumption on its growth trajectory. Europe and Asia Pacific accounting for 11% and 4%, respectively of our total revenue in the first half of 2024. Both regions reported sequential growth, fostering market opportunities for CI&T. We are pleased to highlight that we have observed sequential growth across nearly all of our industry verticals. Consumer goods and retail and industrial goods experienced above-average growth, recording sequential increases of 19.7% and 15.7%, respectively. This strong performance was driven by two main factors, accelerated growth from large clients we onboarded last year that are gaining traction in ramping up their engagements and the deepening of existing relationships with our long-term clients. Finally, both of our top clients and…

Thank you, Stanley. Now, let me add some color to our business outlook for the next quarter and year. We expect our net revenue in the third quarter of 2024 to be at least BRL591 million on a reported basis, equivalent to an 11.7% growth in revenue compared to the third quarter of 2023, and a 4.5% increase on a sequential basis. For the full year of 2024, we are increasing our guidance to reflect the growing demand for our services. We now expect our net revenue growth at constant currency to be in the range of minus 0.5% to 2.5% year-over-year. In addition, we estimate our adjusted EBITDA margin to be in the range of 17% to 19%. Once again, I want to highlight that our full-year guidance implies a significant sequential growth throughout 2024. We anticipate a faster recovery from the unusual challenges of 2023, leading to double-digit revenue growth year-over-year in the second half of 2024. This robust performance will set the stage for a strong growth trajectory in 2025 and the years to follow. In closing, I want to extend my gratitude to our team for their unshakable dedication and resilience. Together, we will continue to propel our company towards a future marked by innovation, collaboration and meaningful impact. Thank you all for your trust and support. We now conclude our presentation and may begin the Q&A session.

[Operator Instructions] The first question comes from Leonardo Olmos from UBS. Leo, go ahead.

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.

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.

Very good. Congrats again. Have a good day. Bye-bye.

Thank you, Leo. Our next question comes from Thiago Kapulskis from Itau. Thiago, please go ahead.

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.

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. But it's -- the timeline, I would guess, my educated guess is three to five years for that. And after that, I think there is another huge battle along decision-making and business models. So this is basically, we are guiding our clients don't focus on short-term. I think in terms of -- in the world of technology disruption, companies and we as human, we tend to radically overestimate the impact in the short term, but radically underestimate in a timeline of 10 years, for example. So it's time for preparing the capabilities and capture the benefits of efficiency and prepare for the experience battle ahead. The second question was regarding I think…

Budgets.

Yeah. What I see is gradually now 2024, I think the world is stable. That is good. It's very good to play in a stable environment without ups and downs of budget. What I expected and is natural is an increase for next year basically, because I have no doubt that tech and digital are secular trends. So this now is -- this relatively conservative investment this year and last year are not sustainable in terms of competitiveness and client engagement. So companies will need to accelerate their digital strategies in the following years and -- so I am expecting regaining also an increase on investments around digital. So a new cycle of investments in technology that will play in favor of companies with a very solid better [problem] (ph) as us.

Fair enough. Thanks a lot for the answers, Cesar.

My pleasure, Thiago.

Thank you, Thiago. Our next question comes from Puneet Jain from JPMorgan. Puneet, your line is open.

Yes. Hi. Thanks for taking my question. A quick question on bill, your average revenue per employee. It seems like revenue per employee was down a little bit on a year-on-year basis, even like on constant currency. Would you attribute that to, like, the change in revenue mix like maybe more offshore or nearshore delivery in the mix or are you also seeing any pricing pressure in an overall environment?

I can take that one. Puneet, that is the first option, right? So it's -- as we kind of grew, we kind of replaced also some on-site to nearshore revenue, so that's the outcome you see there. It's less about price pressure. We don't see that. That's the Cesar -- to Cesar's point early, the market is stable and so the pressure on prices are also stable. So it's very competitive but still stable. So we don't see any need to reduce price at this point. The average price consequence that you see, there is more a mix between onshore and nearshore. We predict that will continue to be the case for the next couple of years.

Got it. And then margins obviously came in well above at least our estimate for this quarter. Can you talk about -- and they ramped up significantly on a sequential basis as well. So can you talk about like what drove margins in this quarter? Were they in line or better than your expectations? And what should we think about margins for the second half of this year?

I can take that one. Thank you, Puneet. With regard to margins, if you see, we grew our margins sequentially, comparing to one year ago we are even. So we will continue to focus on productivity gains from our diligent cost management approach. Also, we are leveraging on top of G&A as we grow -- G&A has fixed costs. On the other hand, we are investing on hiring, training people. Also, we have expenses related to AI and we foresee that this -- we will continue to focus on those margin management, let's say, but also investing in what really matters which is propelling growth and the opportunities that they are ahead of us. So you should expect the same type of margins as we are guiding EBITDA between 17% to 19%. So we are on track to deliver that guidance. So that's pretty much what you should expect.

Got it. Thank you.

Thank you, Puneet. We have a few questions here from Bryan Bergin, TD Cowen. So the first one is related to GenAI. So how are clients approaching the contracting dynamics when GenAI has been utilizing your delivery? Is it impacting the structure? Or do you expect it to in any material way or early indications on how conversions are going?

I can get this one, Eduardo. Thank you, Bryan, for the question. Basically, I think at this moment, we are really focused more on turn the hyper-productivity in new business than trying to replace the business model. So even the AI-boosted teams are still working in a very time-mature way, but the difference is that you can work with a much more aggressive time-to-market in terms of deliverables. And this is new in the market. Companies were not prepared for the level of difference among players and they are getting used to it. There is still some discussions about evolving the business model of the whole industry towards a more output base, but I think this is a very early stage. So what I see now is as companies are being aggressive on capturing the efficiency opportunities regarding AI, but very conservative in terms of changing the way they acquire services in the market. So basically, it's an overview of what I see. Probably, it will evolve in different pathways in the years to follow.

All right. The second question from Bryan is regarding the quarte-over-quarter growth. So guiding strong Q4 sequential growth, is there any way to separate large deal ramp-ups versus normal Q4 seasonality as we try to [call] (ph) exit rate of 2024 into '25?

I think it's basically, increasing demand. We don't have seasonality in the top line. Normally we have seasonality in the -- in our bottom line regarding salary adjustment in the beginning of the year, contract price adjustment along the year. But in terms of top line, we have been seeing a lot of consistent on sequential growth. So we expect to continue growing sequentially along Q3, Q4 and first quarter of next year.

The final question here regarding the workforce planning. So the second quarter headcount grew 2% sequentially. What is your expectation as you move through Q3 and Q4? Can you provide color on balancing utilization with the need to add incremental billable employees to support the growth? Take this one.

I’ll take this one. As we see more demand and demand accelerating towards 2025, we're actually rebuilding bench a little bit more, so we can expect utilization rate to go down a little bit as we kind of build that bench preparing for a higher growth in 2025. So that's already started, we started hiring and preparing for many training programs and to really strengthen our roots and to develop people and to build our own people, so that investment will resume the second half of the 2024, again preparing for a higher growth in 2025.

Thank you, Bruno. So, that concludes our Q&A session. Thank you all for attending our event today. I now invite Cesar to proceed with his closing remarks. Cesar, please go ahead.

Sure. Thank you all for participating in our call. Thanks, Bruno, Stanley, Eduardo. I think you probably saw this week, we proudly launched our new visual identity. We are not just updating our brand. We are celebrating who we are and what we stand for. And I love the feedback from our clients, partners, and especially our teams. So once again, thank you all CI&Teers around the world for your spectacular hard work and achievements in this quarter. And I continue counting on you. And a special thank for our clients for selecting CI&T to co-create this new exciting chapter of innovation powered by AI. So stay well, see you soon.