CI&T Inc Q1 2023 Earnings Call
Speaker 1: Technology is more than a device, system or industry. Technology is built by people for people. It's built for people's desires and needs and ambitions. By our people who are talented, curious.
Speaker 1: creative, and the diverse. Our people use innovative strategy, design, and engineering to offer end-to-end solutions that help companies to quickly transform and scale their operations globally. While we create technical solutions, all we really want and what motivates us is to make that tomorrow.
Speaker 1: CINT with Brits and Buick tax to make their tomorrow.
Speaker 2: Good morning and welcome to CIMT earnings call for the first quarter of 2023. I am Eduardo Galvão, Investor Relations Director at CIMT and I'm happy to be here again to talk about our results.
Speaker 2: With me on today's call are Seza Gón, founder and CEO , Bruno Gicaggi, founder and president for North America and Europe , and Stanley Rodriguez, our CFO .
Speaker 2: 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 would like to submit a question, please send it via email to investors at cint.com.
Speaker 2: The presentation is available on the company's investor relations website and the replay will be available shortly after the event is concluded.
Speaker 2: Some of the matters we'll discuss on this call, including our expected business outlook, our 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 factor section of our annual report on Form 20F.
Speaker 2: and other reports we may file from time to time with the FCC. 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.
Speaker 2: During this presentation, we will 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. Thank you.
Speaker 2: Our agenda for today includes an update on our financial highlights, followed by some of our successful business cases. We'll then talk about our people and deep dive on our quarterly financial results. After the presentation, there will be a Q&A session. Now I invite Cesar going to begin our presentation.
Speaker 3: Thanks Eduardo. Good day everyone. Thank you for joining us. It's a great pleasure to be with you today and discuss our results and achievements.
Speaker 3: It's inescapable to start by sharing a few reflections on artificial intelligence.
Speaker 3: 77 years after the introduction of ENIAC in 1946, the first general purpose digital computer, I believe we are on the verge of probably the most disruptive moment in the history of computers on Earth. However, I must start by saying we are still decades behind achieving sci-fi like…
Speaker 3: artificial general intelligence.
Speaker 3: But no, AI is not just a hype. It's a transformative technology with real-world applications and rapid advancements.
Speaker 3: However, there is hype surrounding artificial intelligence, leading to inflated expectations and misconceptions.
Speaker 3: A few weeks ago, I published an article in the MIT's Law Management Review titled
Speaker 3: Software is eating the world and AI is changing the menu, organizing my reflections on opportunities and risks associated with this unprecedented productivity disruption in science and engineering.
Speaker 3: You can download my article on my LinkedIn account.
Speaker 3: Turning our attention to the corporate world and what is actionable right now, I see two major opportunities. The first one is what I call hyper productivity in the entire flow of producing digital platforms and solutions. Maybe I could get beat.
Speaker 3: This is a very welcome and needed solution for the efficiency dilemma that large companies are facing after so many years of investing in digital.
Speaker 3: And the second opportunity is starting to explore an entirely new set of possibilities to engage and generate value for customers.
Speaker 3: starting by moving away from a smartphone and app-based interface to more human natural language interactions and going further for things we will have to invent.
Speaker 3: At CINT, we are already partnering with our clients, co-creating the future in this new chapter of innovation and endless possibilities.
Speaker 3: And for me personally, I feel blessed to be living in such exciting times.
Speaker 3: Now, moving on to our quarterly financial highlights, I'm happy to kick off this Cloudy 2022 with solid results from top to bottom.
Speaker 3: Our net revenue was 610 million REI in the first quarter of 2023, an increase of 24.3% at constant currents year over year.
Speaker 3: We reached 100 AD clients with annual revenue above 1 million REI, adding 70 new clients using multi-million accounts in the last 12 months.
Speaker 3: The adjusted IPDOT margin in the quarter was 19.1%, an increase of 1.9 percentage points compared to first quarter 2022.
Speaker 3: Adjusted net profit was 67 million REI's, 70% higher than first quarter 2022, with an adjusted net profit margin of 11%.
Speaker 3: In addition, we generated $160 million in cash from operating activities in the quarter.
Speaker 3: These figures indicate our strong performances, showcasing our agility in maintaining a lean organizational structure and successfully adapting to changes in the external market environment.
Speaker 3: I'm grateful to all CITers worldwide who have been dedicated to creating value for our stakeholders.
Speaker 3: Now let's see some examples of our clients engagements and some of our business highlights for the quarter.
Speaker 4: Alelo, a financial services company specializing in benefits, incentives, and corporate expense management.
Speaker 4: wanted to expand its multi-benefits product to the retail sector. It was previously only available for large and medium-sized companies.
Speaker 4: The company needed to integrate the multi-benefits product with the retail sector system in 4 months.
Speaker 4: Alello worked with CINT Engineering team to identify innovation and architecture evolution opportunities. Alello and CINT work together to modernize the retail sector system. The engineering team successfully integrated the multi-benefits product into the retail sector system.
Speaker 3: within four months.
Speaker 4: The new architecture allows for implementing additional features and phases out legacy technology. The product orders increased significantly, boosting revenue and customer base. The collaboration between Allelo and CINT demonstrates the power of technology and innovation to drive business success.
Speaker 4: Flight Center, one of Australia's most recognised travel brands, had been on a journey for over 40 years as a travel expert, organising flights, stays, cruises, tours, travel insurances and more. When the partnership with CINT came in
Speaker 4: The goal was to enhance scalability and create a seamless online presence consistent with the brand's image across the world. Through complementary skill sets and collaboration, the teams work together to rapidly globalize elements of the website, migrate blog content, and develop a next JS.
Speaker 4: core, making it easier to adapt to changing business needs and support multiple languages.
Speaker 4: The sweet sound of app modernization success. While a major US audio company featuring broadcast, podcast, digital, social and events was dominating their industry, the existing sales technology platform was not keeping up.
Speaker 4: Knowing that speed to market and the ability to adapt and innovate were key to maintaining their market dominance, the company reached out to CIT to make improvements that would keep them at the top of their industry, worked with the company's in-house IT team to not only modernize the foundation platform but also improve apps.
Speaker 4: by creating new features demanded by the business base. Each successful product or feature rollout helped build confidence in the CIT approach, helping to shift the legacy mindset.
Speaker 4: The combination of increased efficiency and reduced costs have strongly positioned the organization for the future.
Speaker 4: The event brought together more than 15,000 people at Rio de Janeiro.
Speaker 4: Our speakers delivered insights.
Speaker 4: to transform the future of organizations, highlighting perspectives to think about a digitally efficient future powered by artificial intelligence.
Speaker 4: CI&T was invited to bring insights such as benefits and challenges around the usage of generative AI and presented a session with Tab 9, Google Data Cloud and AI Summit on March 29. In the session called Using Generative AI to code with Tab 9 and Google Cloud, we will
Speaker 4: Luis Ribeiro and Brandon Jung discussed what generative AI is and why leveraging it for developers is the ideal place to start.
Speaker 4: In the better future, the world's largest network of design award programs announced CI&T Australia as a silver winner of the AwardGov Design Awards 2023 in the category Equity and Inclusion, the VicEmergency Mobile app, a collaboration with Emergency Management Victoria.
Speaker 4: Aim to use AI translations to provide real-time emergency warnings in multiple languages while maintaining visual and textual context.
Speaker 4: The project's pilot phase successfully implemented the AI translation solution and delivered a world-leading solution with improved accessibility, features and multilingual information.
Speaker 4: Throughout International Women's Month, CI&T continued the commitment to gender equality and equity. In Brazil, Tech Voices, Women Edition 2023 was a series of free online events.
Speaker 4: aimed at providing insight for the next generation of women in tech. Other countries celebrated with many events and initiatives, such as workshops, talks and meetups. The initiatives aimed at the female sphere, including those of Women's Month, were only possible thanks to the Women's Action Group at CI&T.
Speaker 5: percentage points. We believe in continuous improvement supported by numbers. That's why the Women's Action Group has developed and implemented a fake gap and glass ceiling module which led us to close the gap between male and female settlers to a maximum of 2%.
Speaker 4: which currently stands at 2.6%. We are committed to empower and support women and are always striving to improve. We believe in building a better tomorrow for all women as we continue to unlock the potential of business transformation.
Speaker 6: CINT prides itself on having a team of specialists who bring expertise to a wide range of industries.
Speaker 6: We count on valuable insights from two of our specialists, David Ritter, who specializes in financial services, and Melissa Minkow, who brings her expertise to the retail industry.
Speaker 6: Our specialists further elevate CINT's research capabilities and analytical insights. Minku and Ritter both possess deep knowledge of industry trends and challenges that merge with a cross-section of technology.
Speaker 6: With decades of industry experience covering financial services, payments, consumer finance, and financial technology as a research analyst on Wall Street, Ritter is our director of financial strategy where he brings an informed point of view to executive marketing and sales efforts as well as lead solutions for identified banking pain points.
Speaker 6: Melissa Minko, Director of Retail Strategy, is responsible for synthesizing strategy, insights and data to help identify actionable retail, services trends and lead strategic sales and client engagements. She is a RetailWire brain trust expert and a retail futurist whose methodology is rooted in cross-industry consumer insights and innovation.
Speaker 6: Software is eating the world and AI is changing the menu. An artificial intelligence's odyssey through ethical challenges and societal transformation by Caesar Gaughan. AI can potentially transform the software landscape and redefine work. AI will likely impact every profession.
Speaker 6: Just as each technological revolution has created and deprecated activities, in most jobs, this technology has the potential to revolutionize medicine and science, improving the well-being of humanity. But there's also controversy surrounding AI, particularly around issues like privacy, copyright, and transparency in model training.
Speaker 6: to use these tools to solve seemingly impossible problems, such as human biology, cancer, dementia, longevity, or anticipating natural disasters is astonishing.
Speaker 6: The emergence of an industry battle among tech giants to dominate the generative AI space and its foundations is just a symptom of AI's vast potential. I believe the benefits of AI far outweigh the risks. It's a brave new world of possibilities and I'm excited to see where it takes us.
Speaker 7: To learn more about the potential and controversy of AI, be sure to check out Gon's article.
Speaker 3: I hope you like it. Our client stories, news and highlights selection.
Speaker 3: From here, I invite Bruno to talk about our talent management.
Speaker 3: Thank you, Sather, and good morning, everyone. It's great to be here again.
Speaker 3: Our attrition rate in the first quarter of 2023 was 12% compared to 16% in the first quarter of 2022, and it continues in a downward trend. We are glad to be back at our historic attrition levels and to see that our investments in our people are bearing fruits.
Speaker 3: Most importantly, our leadership attrition rate is below 4%, ensuring consistency in our delivery and high-quality service for our clients.
Speaker 2: We ended March 2023 with 6,500 CI-Inters, a slight reduction compared to the previous quarter. This decrease reflects our active headcount management to adapt to the current demand environment.
Speaker 3: Part of this reduction comes from back office functions as we are capturing synergies from the recently acquired companies.
Speaker 2: On the delivery side, we are reducing the number of people on the bench in order to maintain a lean and nimble organization and adapt to a slower pace of growth.
Speaker 3: These actions will allow us to direct investments to research and development in our artificial intelligence initiatives, as Cesar mentioned earlier.
Speaker 3: In other words, we are committed to balancing healthy profitability margins in the short term while keeping investments that will sustain long-term growth.
Speaker 3: Last year, we made strategic moves to diversify our geographic footprint.
Speaker 3: Our decision to expand globally was driven by a vision of creating more value for our global clients and pursuing new opportunities in dynamic markets. First, our expansion to the US market with the acquisition of Intersol has proven it's strategic.
Speaker 3: we have established a relevant footprint in the U.S. and expanded our expertise in the financial services vertical.
Speaker 3: The U.S. continues to show great potential for sustaining growth and we are committed to maximizing its opportunities organically.
Speaker 2: In parallel, our foray into the European market has yielded promising results. We have gained traction in this highly competitive landscape by leveraging our established brand with song's reputation.
Speaker 3: We aim to strengthen our position in Europe even further and develop strategic partnerships to drive growth in this region.
Speaker 3: In Asia-Pacific, the acquisition of Transpire has allowed us to incorporate key Australian clients successfully and the growth trajectory in this region is very encouraging. We remain dedicated to capitalizing this momentum.
Speaker 3: Last but not least, Brazil continues to be an excellent opportunity for us.
Speaker 3: besides offering significant market potential, being one of the top 10 tech markets globally.
Speaker 2: It also has a very progressive digital consumer base that is quick to adapt to tech trends in segments like financial services, retail and consumer goods. This characteristic combined with our commanding position of that market provides us with fertile ground to create innovative digital solutions that are impactful to our clients and trend-setting globally. As we continue to foster our operating model by combining teams close to clients and remote teams.
Speaker 2: industry trends in emerging technologies.
Speaker 2: Now I will pass it over to Stanley to comment on our financial results.
Speaker 2: Thank you Bruno and good morning everyone. I'm happy to be here again to discuss our financial performance with all of you. We are proud to deliver another set of solid results during the first quarter of 2023. Our net revenue in the first quarter of 2023 was 610 million reais
Speaker 2: 24% higher than the first quarter of 2022, both on a reported and on a constant currency basis.
Speaker 2: Our strong revenue growth derives from our expansion within existing clients, the addition of new clients every quarter, and our programmatic M&A strategy. North America is our largest market accounting for 46% of our revenue in the first quarter.
Speaker 2: represents 39% of revenue and a great exposure to an emerging market, as Bruno mentioned.
Speaker 2: As of this quarter, we presented with a new classification of our revenue by industry vertical. We have done small adjustments to it, mainly changing the food and beverage to a more broader category of consumer goods and a similar move from pharmaceutical and cosmetic energy equipment.
Speaker 2: on our Investor Relations website.
Speaker 2: Finally, we continue to grow our revenue base from our top 10 clients, while the addition of new logos and M&A contributed to diversify our revenue base even further.
Speaker 2: Now let me detail the components of our growth profile. In first quarter 23, we continued to consistently diversify our client base by adding 70 new clients, with revenue exceeding 1 million REIs to our portfolio as compared to the same period in 2022.
Speaker 2: In addition, we increased the number of clients with revenue above 20 million REIs from 22 clients in the previous quarter to 26 in first quarter 23.
Speaker 2: Our client base remains predominantly from brick-and-mortar clients, representing around 90% of our revenue, while digital native represents approximately 10%, providing resilience to our business during uncertain times.
Speaker 2: Our net revenue retention rate over the past five years has been around 123%, demonstrating that new clients have the potential to expand and thrive over time, which is critical for our sustainable growth through 2023 and beyond.
Speaker 2: Moving on to our profitability metrics, our adjusted EBITDA increased by 37.9% from 84.5 million REIs in the first quarter 2022 to 116.5 million REIs in first quarter 2023.
Speaker 2: in managing costs combined with the dilution of sales, general, and administrative expenses, as we indicated in our previous calls.
Speaker 2: We are taking a proactive and disciplined approach to identify areas where we can optimize our operations. By diligently analyzing our cost structure and streamlining processes, we are promoting innovative cost-saving initiatives and
Speaker 8: and continuously seeking opportunities to enhance productivity.
Speaker 8: Part of this savings will be dedicated to invest in research and development of artificial intelligence initiatives as we understand the significance of investing strategically in areas that generate long-term value and drive future growth.
Speaker 8: The adjusted net profit was 67.2 million REI's in the first quarter 23, an impressive 70% growth when compared to the same period of last year. The adjusted net profit margin increased from 8% in the first quarter 22, and the overall
Speaker 8: 16 million REIs in cash from operating activities, which represents 100% of cash conversion to adjusted EBITDA. And free cash flow was 89 million REIs excluding the capex from our net operating cash flow.
Speaker 8: Finally, our board of directors recently approved a share buyback program, authorizing the company to purchase up to 1.5 million of the company's Class A shares over the next 12 months.
Speaker 8: The amount of shares approved in the program was based on the company's commitment to deliver shares for its stock-based compensation plan and M&A purposes.
Speaker 8: Therefore, this program will allow the company to substantially offset dilution expected in 2023 and 2024.
Speaker 8: We project to continue generating solid free cash flow in 2023, providing us flexibility on our capital allocation strategy.
Speaker 8: With that, I invite Cesar back to comment on our business outlook.
Speaker 3: Thank you, Stanley. As we set our sights on the future, it is essential to acknowledge the prevailing uncertainty in the global economy. While our core client base, primarily comprising large enterprises, is in general maintaining their digital budgets for the year, it is also essential to acknowledge the prevailing uncertainty in the global economy.
Speaker 3: we continue to observe a cautious approach when embark on new initiatives.
Speaker 3: In this scenario, we will persist carefully in navigating 2023, prioritizing bottom line in cash generation, while preparing our teams and capabilities, especially in artificial intelligence, to resume more aggressive growth in 2024 and beyond.
Speaker 3: For the second quarter of 2023, we expect our revenue to be at least 570 million REI's, a 90% growth year over year.
Speaker 3: For the full year of 2023, we are maintaining our FX neutral net revenue growth guidance in the range of 13 to 17% year-over-year and our adjusted EBITDA margin expectation of at least 19%.
Speaker 3: In conclusion, I would like to express my gratitude to our stakeholders, clients, investors, partners, and CITers for your support and dedication toward our long-term shared vision and objectives. Thank you all for attending our call today. We now conclude our presentation and may begin the Q&A session. Thank you.
Speaker 2: 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.
Speaker 2: The first question comes from Tyler DuPont from Bank of America. Tyler, your line is open. Great. Thank you, Eduardo, and good morning, everyone. I just wanted to start by asking if you can speak to some of the demand assumptions that you have baked into the 2023 guidance outlook.
Speaker 2: I know it looks like both revenue and margins were reiterated, but how should we be thinking about the cadence of demand? Are you assuming that the current macro will remain relatively stable through the year? Or are you anticipating a ramp-up in the back half of 23? It looks like based on the 2Q REBS guidance, you're expecting some back half re-acceleration on revenue. So just any clarity there would be helpful. I think I just went. Thank you. Great to see you, Tyler.
Speaker 3: Well, I think as you saw, we are probably delivering the best Q1 in our industry, strong top and bottom line.
Speaker 3: So, and our Q2 guidance is in line with our budget and forecast. I think there's two effects when we compare it with Q1.
Speaker 3: Firstly, in our reported revenue for Q2, we are anticipating an FX effect due to the recent appreciation of the real against the dollar.
Speaker 3: And we are also delivering.
Speaker 3: a key one above our expectations, mainly doing to additional revenue from short-term strategy engagements with new clients.
Speaker 3: And now we believe that this...
Speaker 3: can turn into long-term end-to-end engagements in the second half of the year on. So we are considering this will be a very, I would say, non-trivial year. We are keeping our guidance. We are cautiously optimists.
Speaker 3: about the year but we still are playing conservatively due to the macro uncertainties.
Speaker 3: Okay, great. Thank you. I appreciate that. And I guess sticking with the OneCube performance, during the quarter, the results seemed fairly strong, you know, growth 400 base points above guidance. So I was just wondering if you can speak to what surprised you during the quarter. Were there any particular vertical geographies that experienced an outside surprise that you were anticipating or any new client signings?
Speaker 9: turn.
Speaker 9: this in long-term initiatives with us. I think this demand on a strategy is a reflection on the discussion on how to deal with the new set of possibilities around artificial intelligence. How this will reshape your digital strategy. How should we really.
Speaker 9: adjust our hypothesis based on such a disruptive moment. So I think I would credit this good new set of.
Speaker 2: digital possibilities around not only AI but mainly AI advancements. Okay great, thank you. If I can chime in real quick on this matter, like I think that the most of our clients understood that the possibilities of this new set of AI tools, mainly generative AI in saving.
Speaker 2: operational costs and kind of automating a lot of activities. And that's the perfect moment for that type of exploration, right? The economic downturn that everybody's going through. So it's been created a lot of traction in a lot of discussions that we think some of them will materialize. And great engagements in the second half of the year. A Andrew
Speaker 2: that will be beneficial for us, but also beneficial for clients, kind of freeing up resources and maybe creating the bandwidth to invest in more innovation in the digital initiatives.
Speaker 3: I appreciate all the colors. Thanks. Thank you, Tyler. Our next question comes from Brendan from JP Morgan.
Speaker 10: Appreciate all the color. Thanks. Thank you, Tyler. Next question comes from Brendan from JP Morgan. Brendan, please go ahead.
Speaker 2: Hey guys, thanks so much. Yeah, and first of all congratulations super strong performance Puneet Kadeja, congratulations as well. So I'll kick it off kind of on another question on the 2Q Guide. So you guys got it for like a 20 million sequential deceleration when you issued the one quarter guidance and you crushed it by roughly 20 million, you know, just about at last.
Speaker 9: Thank you, Brendan. I think I mentioned first is facts. We are really anticipating the recent appreciation of Brazilian Reais versus
Speaker 9: dollar and the second is I think is when we compare it we are with the Q2 in line with our original forecast but Q1 was was was surprisingly better based on good news on onboarding new plans and so on but this onboarding
Speaker 9: we believe it will take at least one or two quarters to convert in sustainable long-term revenue source. So we again, we are cautious, optimist, but playing conservatively due to the volatility of the year. But I could say we are really optimist.
Speaker 9: about what we are doing and discussing with our clients. As Bruno mentioned, when we probably you remember since the beginning of the last year we were playing the digital efficiency value-propped message and now we are boosting this value-propped with artificial intelligence.
Speaker 9: and the early results are extraordinary. So we are really...
Speaker 9: optimist about how we can help our clients to really gain efficiency exploring this new set of possibilities. So I think we see the year again cautiously, optimist right now.
Speaker 2: Great, thanks. Yeah, we're excited to see it unfold. If I could ask one more, a little bit of a longer term one maybe, on really strong growth out of Europe and Asia, obviously off a little bit of a smaller base. How do you guys think about that unfolding over more like the mid?
Speaker 2: to longer term and what do you guys do in operationally to propel that strong growth? I can take that one. I think like a long-term, Brandon, I think our revenue distribution pie should look like more, you know, the size of those markets. So if you look at the...
Speaker 9: markets like Australia and Japan and China, they are in the top, like China and Japan are number two and number three in the world. Long term they should represent a bigger part of CIT or driving, so that's a long term plan.
Speaker 9: and Australia is actually bigger than Brazil, which is our number two market. So it's a long term issue, you know, the key revenue pie should look like the rankings of the biggest markets in the world.
Speaker 10: Great, thanks so much guys. Congrats. Thank you, Brandon. Next question comes from Carlos from Itau, Itau, baby. Carlos, please go ahead.
Speaker 11: Thank you. Good morning and congrats on the results. Just a couple ones here. First of all, in terms of profitability, I had understood that you had commented on that you were expecting pressure in Brazil particularly with the...
Speaker 11: labor increase that the annual labor increase so obviously the result is quite favorable. I'm wondering how we were able to offset that and secondly perhaps a more housekeeping thing for the model I saw that your effective tax rate was much lower than you ever hear.
Speaker 8: So I wonder how should we think about that going forward. Thank you. I can take those. Thank you, Carlos, for the questions. Well, first question, EBITDA margin improvement in first quarter is mainly explained by the dilution of SGA expenses as we expected.
Speaker 8: as the company grows. We are closely monitoring the cost and expenses structure to maintain a linear organization, healthy margins, especially during this growth environment that we are on.
Speaker 8: Part of those savings though, we are redirecting to investments on AI and R&D. So this, Carlos, we expect for the full year, we are maintaining that 19% EBITDA.
Speaker 8: horizon, let's say. And for the second question,
Speaker 8: with regard to tax. Last year we acquired and so the previous year we acquired the extra. Those acquisitions provided some tax benefits that they are maturing right now. So we are getting the full benefit right now.
Speaker 8: in the range of 21, 22%. That's the full year expectation. So due to seasonality, we have a lower, even lower for the first quarter, but the full year, that's the expectation should have there.
Speaker 10: Thank you for that very peer. Thank you Carlos. Next question comes from Ashley from Citi.
Speaker 10: Ashwin, please go ahead.
Speaker 10: Thank you, Eduardo. Good morning, everyone. Good to see you all. I guess my first question is with regard to the impact to the sales cycle because of macro concerns among clients. And if you could comment on that and say, by geography, that that would be would be helpful. And I guess.
Speaker 9: we are red doing but it's still a lot of I would say low visibility on ramping up of new initiatives. I think what we are seeing now is really companies I think consider to ramp up especially things related to the digital efficiency.
Speaker 9: powered by AI initiatives in the second half of the year. We, as I said earlier, we are optimists, but still seeing this to be concrete, to update our expectations for the second half of the year. We're everybody for everybody for everybody
Speaker 9: What I see is, I think this is an equation of the fact that 90% of our clients are traditional large brick and mortar companies where we have a less volatility in terms of budget and
Speaker 9: investments of course more volatility on the 10% of revenue we have from digital natives companies tech companies FinTechs where the environment is playing against
Speaker 9: their ambitions of leveraging new capital and investments.
Speaker 9: So, still I think a better moment now than the beginning of the year, but we are still cautious.
Speaker 9: on our ability to convert this new set of pipeline and discussions in real engagements in the second half. But this is a, I would say is a much better moment than in the beginning of this year.
Speaker 9: Okay, now that makes sense. Regarding regions we don't see relevant difference among Latin America, North America, Europe or ABJ. Okay, okay now that makes sense. I guess you know what should we then expect for margin cadence?
Speaker 10: through the course of the year, should it follow what you have said about the revenues? And then the related question is,
Speaker 10: you know, since you brought up AI, applying AI to your own.
Speaker 10: you know, processes and improving your own productivity, what impact can that have on your margins? I guess, do you keep it, do you keep the benefit, do you give it to clients, how does that work?
Speaker 9: I can start and Stanley you can compliment if you want regarding our plan for margins sequentially. I think you are right we are really boosting our digital efficiency value problem.
Speaker 9: offering with AI. This has an amazing
Speaker 9: to generate efficient gains. That means opportunities for increasing our base of replacing our performance competitors and increase our client share. And also opportunities to tackle a new set of
Speaker 9: or migrate from app-based smartphone interfaces to more human natural language interactions and things that we will have to invent. Internally there's a lot of opportunities. We are fully committed to apply this efficiency in our internal process.
Speaker 9: But as I mentioned, we are also dedicating part of these savings to increase our creation of capabilities around AI and digital efficiency because we believe this will be our main vector of AI and digital efficiency.
Speaker 9: And we are also dedicating part of these savings to increase our creation of capabilities around AI and digital efficiency because we believe this will be our main vector of regaining high growth. We are also dedicating part of this savings to increase our creation of capabilities around AI and digital efficiency because we believe this will be our main vector of regaining high growth.
Speaker 10: around 2024. Okay, okay understood. So it's very interesting you mentioned, you know, the time increases also, it's not just the productivity. So that's a very interesting point. Thank you.
Speaker 8: I think to the Ebi-Da as I mentioned before, hi Ashley, thank you for the question there. Well Ebi-Da, again we are in this focus let's say to bring and continue to bring the data
Speaker 8: We are focused this year on integrating those acquisitions, as we mentioned previously. So, and again, as Cesar reinforced here, we are investing in those AI capabilities. So, the sum of everything, that's why we keep...
Speaker 8: focusing on having a delivering a 19% EBITDA as in line with the guidance we provided. We see lots of opportunities ahead of us and we really have to be in line with those opportunities.
Speaker 8: So that's why margins are projected the way we mentioned. Okay, okay. So flattish through the course of the year. That's it. Okay, thank you. Some seasonality in between, but the full year is.
Speaker 8: Because as I remember, we have some seasonality, but it's all factured in.
Speaker 8: As I remember, we have some seasonality, but it's all factured in. Thank you.
Speaker 9: Thank you, Ashwin. We have one question here from the email associated with Ashwin's question. Given the seasonality in your business, how do you expect the EBITDA margin to evolve in the coming quarters? And a related question, cash generation was impressive in the first quarter. How do you protect the cash?
Speaker 8: generation for the remainder of the year? Well, I can take that one. Cash generation in the fourth quarter, we have this 116 million realizing operating cash flow which represents 100% cash conversion to just a little bit.
Speaker 8: Free crash flow was 89 million in the quarter, that's after CapEx.
Speaker 8: Cash generation benefited from improvement, mainly from improvement in working capital in the first quarter and mainly in the accounts receivable zone, let's say. For the second quarter, we have this profit sharing cash disinbursement.
Speaker 8: percent cash conversion from EBITDA to cash.
Speaker 8: which is our historical. So this 100% that we see now in first quarter, we should consider that seasonality plays here. So for the full year, we aim for this 50 to 70% cash conversion from BNAP. Does that answer the question?
Speaker 9: all CINT'ers for the amazing achievements in this water. And a special thanks for our clients that are selecting CINT to cook ribs.
Speaker 9: this exciting new chapter of innovation powered by artificial intelligence. Stay well, I will see you soon.
Speaker 9: chapter of innovation powered by artificial intelligence. Stay well, I will see you soon. Bye.