Q2 2023 CI&T Inc Earnings Call
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Speaker 1: Music
Technology is more than a device, system or industry. Technology is built by people for people. It's built for people with desires and needs and ambitions.
by our people who are talented curious 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 AI powered solutions all over the world.
make their tomorrow.
Good morning. Welcome to CINT earnings call for the second quarter of 2023. I am Eduardo Galvão, Director of Investor Relations at CINT, and I'm happy to be here again to talk about our results.
With me on today's call are Cesar Gon, founder and CEO , Bruno Gicaggi, founder and president for North America and Europe , and Stanley Rodriguez, 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 would like to submit a question, please send it via email to investors at cint.com. The presentation is available on the company's investor relations website.
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 factor session of our annual report on Form 20-S.
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 are valid only as up to date when made.
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.
Our agenda for today includes an update on our quarterly highlights, followed by some of our business cases. We'll then talk about our people and our quarterly financial results. Now, I invite Sather going to begin her presentation.
Thank you Eduardo and good day everyone. I'm thrilled to have you all here for another quality awareness call.
I'm eager to engage with you and present our performance and accomplishments.
Let me start by sharing her evolution into Hamas Artificial Intelligence.
Every once in a while, a revolutionary technology emerges that changes everything.
And I believe we are standing at the brink of the most groundbreaking moment in the history of computing.
San T has been fortunate to participate in and to contribute to the fourth chapter of the digital revolution as the creators of the link digital book of knowledge for digital transformation. Now I feel blessed to guide C.I.N.T. in co-authoring the next chapter of this revolution, the digital world powered by artificial intelligence.
AI is a transformative technology and also the gateway to a new disruption in the corporate world.
the one we call hyper digital.
Over the next decade, I believe in hyperdigital we all fold in three acts. Act one is hyper productivity, paving a way for act two, hyper personalization, and this progression down ladies to act three, the advent of disruptive new business models enabled.
by the exponential reduction in the cost of complex decision making.
The challenge with this revolutionary moments is that they tend to drive in the photo refilled environment of startups.
and digital natives. But often it takes years to make a relevant impact in the Brownfield setting of large established enterprise.
In a nutshell, these advancements need to become enterprise-ready. They must reach a level of maturity where the potential of the new technologies can be translated into customer value within a framework of reliability, security and privacy. Factors that are non-negotiable.
for traditional and successful companies. So this is our ambition. This is C.I.N.T. vision and what we are bringing to life to make a hyper digital enterprise ready.
As you know, to achieve that, let's move. We proudly launched CINT Flow, an AI platform for Hyper Digital.
Ready? Rebell initiated engagements with 12 of our largest clients from varied industry verticals and embarking on the journey of computing C.I. and T-flow. over the next 12 to 24 months.
We plan to scale this platform across all CIT clients and combine over a hundred new AI agents developed by both CIT and partners.
We are at the beginning of Act 1 and we plan ourselves to read ripping tangible results.
Sourcing productivity that has in some cases Debord our previous benchmarks
We can only forecast that we are going to achieve more fold increases in productivity in the years to come.
serve the results are from icing
And we are enthusiastic about the potential to significantly enhance productivity, improve quality and accelerating progress.
The Ram of Art Division Intelligence presents a newer array of exciting opportunities.
and we are positioning CIT as a front runner.
Now let's take a look at our second quarter financial highlights. Once again, we are proud to deliver a sound result amid macro certainty.
Our natural revenue was 572 million reais in the second quarter of 2023, 90% higher than the second quarter of 2022.
In the last 12 months, we added 56 new clients to our portfolio mood-million accounts, reaching 183 clients with annual revenue above 1 million reais.
That just if the margin of quarter was 20%, an increase of 90 basis points compared to the second quarter of last year. And just net profit was 63 million reais, 21% higher year-to-year, with an adjusted net profit margin of 11%.
These strong results serve us evidence of our ability to uphold efficiency despite the challenges posed by a volatile market environment. I extend my gratitude to all CINT team members who were wild.
We have shown an waiver in dedication and grading value for our clients and for our stakeholders.
Now let's delve into some examples of our client engagements and explore some of the no-world business highlights for the quarter.
Porsche 2021
Ford's business model in Brazil changed as a result.
CINT was engaged to collaborate in building a new sales journey. One of the goals was to impact the company's culture, leaving a legacy beyond digital experiences. During the project, we had the opportunity to work with agile methods, implementing dynamic processes and suggesting improvements.
to transform the way of building products and driving innovation within Ford. We started the project with a one-week lean inception, involving an average of 25 people from Ford, plus the CI and T-Tint. After seven months of discovery and delivery, we launched and pre-sales platform of the F-150, the world's best-selling pickup truck. On launch day, Ford sold out of all available vehicles in 9 minutes. The impact of the CI and T-Way was felt throughout Ford and the pre-sales became a benchmark for the South American market due to its positive outcome.
To transform its customer service, operating model through case intent, standardization and Salesforce OmniChannel strategy that unifies channels such as Mail, Phone, Chat, and Web aiming to achieve the company's goals. The teams worked together to implement Salesforce Service Cloud.
Starting with the Salesforce chat and Einstein bots, then gradually moved into supporting the enhancement of the overall case management framework. We successfully launched to all regions, more than 50 countries across different regions globally by mid-2023.
for front of the agile methods required for digital transformation.
Now, a new fast-paced world has emerged. The hyper-digital world. In this new reality, hyper-productive teams can quickly pay off technical debts and tackle new backlog tasks that were previously impossible. This reality is enabled by the increasing use of AI in software development, which is
with double the productivity, freeing up time or cloud migration, devops, and other strategic work that directly impacts lead time and the quality of each deliverable. This in turn increases customer satisfaction in business efficiency using our approach to hyper digital. One of our clients recently saw more than 50% increase in productivity.
the hyper digital world. Once more, we are leading the way in implementing new high standards in state-of-the-art software development practices globally. And the revolution has just started.
to our latest update. We have gathered the most recent information and insights from our leadership team to share with you.
We are committed to building a better tomorrow by fostering a culture of respect for the LGBT, QIA, P and N+. Community. This year we developed a global Pride Month to raise awareness, build allyship networking.
support local communities. In Brazil, we launched a groundbreaking project dedicated to supporting the trans community, who are disproportionately impacted by hatred. During Pride Month 2023, we reaffirmed our commitment to promoting a better future for all.
At CINT, the Pride community represents 11% of the workforce globally.
In June , we were at London Tech Week, a global celebration of tech, uniting the most innovative thinkers and talent of tomorrow, in a week-long festival. Our event, bot or not, accelerating business success in a post-digital transformation world.
explored how organizations can thrive in the ever-changing digital landscape, including discussions on agile working, customer centricity, and emerging technologies like Generative AI, Chris George, VP Product, and Mark Robseth. VP Technology, Lead a Keynote
followed by a panel discussion with leaders from clients. The day concluded with an engaging workshop on Generative AI.
C-I-N-T has achieved certification from the Women on Board Initiative. Women on Board is an independent initiative whose purpose is to acknowledge, value and promote corporate environments in which women are part of the Board of Directors or at advisory councils.
In C, I and T's case, women represent 25 of our Board of Directors, and we are actively working to increase this number.
Attorney , wife of the Ministry, in a matter of such a state of view from longuminum framing, is different from the details of the inspection we have, from one greater point of view. I have discussed???y, that they do not know each other. And I think that Justice does not need to sit down alone on the field, we have to be careful!
That gealso Fir G damag. Make the C Board plain, clely GP when make B just.
We have acquired renewable energy certificates to cover 100% of the electricity consumption of our operations in Brazil. To further reduce our environmental impact, starting in 2023, we will also seek to support cleaner and renewable energy for this reason.
All energy consumption from our Brazilian operations has been offset through renewable energy certificates. This means that all company electricity in Brazil comes from clean and renewable energy sources, representing our firm pledge to long-term sustainability.
The I&T sponsored the Agro Day 2023 conference with the central theme future of food. The event brought together representatives from some of the biggest companies in the sector. Rodrigo Fantinati from CINT.
featured a panel presenting Agro projects and initiatives with Nestle and Tetra Park executives. The event was widely viewed with over 27,000 people watching the live transmission and more than 400 representatives from 15 companies registered to attend.
This is our latest news. Our aim is to continue providing transparent and relevant information to keep you informed and up to date on our latest developments and achievements.
AI marks the dawn of transformative era where innovation reaches boundless horizons.
So we made our own revolution. CI and TFlow. A platform that combines humans and AI agents to unlock the hyper digital for the enterprise world.
Increase the speed and efficiency of teams throughout the entire build cycle. Join the flow.
What does it look like? More than a concept, C.I. and T.Flow is a platform that envisions a brand new world of possibility. This revolution combines the work of A.I. agents hand in hand with humans throughout the entire building cycle.
It all starts from ideation, going through design development, testing and deployment until finally reaching the operating phase. With all the steps connected with AI, the enterprise world can boost productivity, improve quality and accelerate delivery times to create a hyper digital world.
This is the power of AI and humans working together. This is the vision of CI and T-Flow that we are bringing to life.
We brought CIN and T flow to life at the New York Stock Exchange. In the event, CIN and T partners participated, including Bruno Guassardi,
moderated by Bob Wohlheim, brought together industry leaders to discuss the potential of AI in the enterprise world and how to establish a strong foundation for achieving efficiency while testing out new work models.
This event was a groundbreaking initiative by CIT and generated significant interest from the market, including both existing clients and potential new customers.
With unwavering dedication and capabilities, our powerhouses are responsible for CINTs, creative and innovative energy, and are the very essence of what makes our company truly inspiring. We invite you to get to know our true essence as we spotlight three of our powerhouses.
institutions.
The gaming powerhouse gathers a group of specialists united by a single goal to establish CINT as a reference in game development, including art services and cloud gaming. The cybersecurity powerhouse comprises experts who enable technologies and processes and empower people with the skills they need to be able to use the technology they need to make the game a reality.
They embody our unwavering dedication to continuous learning and improvement, circulating knowledge within CINT and propelling us to make the impossible possible.
Hi, my name is Renata Feliparini. I work as Executive Director, focused on business development and innovation in the Latin American market. So Mentorella is a program I'm at exclusively to women seeking to apply senior leadership positions in companies participating in the UNITAR Nations Global Compact.
to do a volunteer project outside the NTs because they occupy a clear position of privilege in a session society.
It makes me aware of my responsibility for the complex social context in which we live. Doing nothing is also having a position. Writing and computers, those have been my two passions. They haven't stopped and I continue to do that throughout my life.
So the book that I'm writing is Hello World and it's a near-term science fiction thriller where all AI research has been banned and research takes place in Sandboxes to contain the risk of super intelligence. So I started writing Hello World about two years ago and I write a few chapters and then put it on the shelf and then recent
the future races ahead of me. So seeing everything that's going on at CINT and speaking to people and reading articles such as Cesar's paper all were good inspirations to pick up the book and finish it.
about our talent management.
Thank you, Cesar, and good morning, everyone. It's a pleasure to be here again to discuss our people and delivery model. In Q2 2023, we continue to efficiently manage our headcount to maintain a lean organization structure and prepare for our hyperproductivity era. We now have 6,200 volunteers.
Attrition has always been a crucial area of focus for us, and I'm happy to report that attrition keeps improving. In Q2, it achieved a rate of 10.5%, a testament to the positive work environment we have created.
In addition, our leadership attrition is at a remarkable low of just 2.6%, reinforcing our commitment to develop and retain top-notch leadership talent.
The average executive tenure at CIT is 15 years, which demonstrates the strong leadership culture we have nurtured, providing sustainability to our growth and superior quality to our clients. We're committed to being a more diverse and inclusive organization, and I'm delighted to share that we were awarded the esteemed Woman on the Board CEO .
This prestigious certification recognizes our efforts in fostering gender equality within our environment. We are proud to have two women on our board of directors, making up 25% of the board composition.
This recognition reinforces our commitment to promoting gender diversity and continuing to do more to empower women in leadership roles.
We are super excited to see the massive involvement of our people in the Gen AI movement. We've been witnessing the explosive growth of our AI powerhouses. Now, almost a quarter of our global talent pool, around 1,600 people, is involved in one of these specialized communities, or exposed to Gen AI engagements directly with clients.
They are developing critical skills in this new set of technologies and helping us build agents to accelerate the development of digital experiences.
Some groups are focused on what we call business use cases, where we are completely reimagining our clients' customer experience, using Gen AI to achieve a more human feel and create better engagement.
Some other groups are applying Gen AI to our own software development process to achieve high productivity and unprecedented levels of speed. So we can offer our clients the best performance in the industry and help them overcome their challenges toward adopting Gen AI.
We believe these technologies will completely change how digital solutions are created and software is developed today. Processes, roles and team topologies will change profoundly in the next decade and we're very proud that our teams have embraced that challenge. I have it back in our trailblazing our path to the future.
Now, I invite Stanley to give you more details about our financial performance. Thank you, Bruno, and good morning, everyone. It's a pleasure to be here again presenting our financial results.
We are happy to share that we have achieved another set of consistent results during the second quarter of 2023. Our net revenue in the second quarter of 2023 was 507.1 million REI's, 9% higher than the second quarter of 2022, and 5.3% higher than the second quarter of 2022.
both on a reported and on a constant currency basis.
For the first half of 2023, our net revenue grew 16% on a reported basis, totaling 1,181,800,000 reais.
Analyzing our revenue distribution by geography, North America contributed to 46% of our total revenue in the first half of 2023. LATAM represented 40%, followed by Europe with 10% revenue share, and Asia Pacific with 5% contribution.
As we develop our global operations, we are witnessing a noteworthy expansion in material economies, now representing 60% of our total revenues.
During the first half of 2023, we saw positive growth across our primary verticals.
financial services experienced a 5% increase in revenue compared to the first half of 2022.
The consumer goods vertical witnessed an increase of 6% in revenue while technology and telecommunications sector exhibited the strongest performance recording a 66% growth in revenue in the period, boosted by the acquisitions concluded in 2022.
Lastly, it is worth mentioning that we are further diversifying our revenue streams in terms of clients' share through the incorporation of new logos and successful M&A endeavors.
Now let me detail the components of our growth profile.
During the last 12 months, we maintained a steady focus on diversifying our client base, successfully onboarding 56 new clients with revenue exceeding 1 million REI into our portfolio. Most importantly, we continue to expand our wallet share within our large clients.
fostering our main growth engine. The number of clients with revenue surpassing 20 million REI's rose from 21 in the last 12 months ending in 2nd quarter 2022 to 26 in the last 12 months ending in the 2nd quarter 2023. In addition, the number of clients with revenue above 10 million REI's grew from 12...
rate has consistently hovered around 123%.
This highlights the fact that new clients not only remain with us, but also have the potential to further expand our engagement and grow over time.
This aspect plays a crucial role in ensuring our sustainable growth.
Moving on the presentation of our financial performance, our adjusted EBITDA increased 14% from 100.4 million REIs in second quarter 2022 to 114.2 million REIs in second quarter 2023.
adjusted EBITDA margin was 20% in the second quarter 23, 0.9 percentage point higher than in second quarter 22. In the first half of 2023, our adjusted EBITDA grew 25%, reaching 230.7 million reais.
with an EBITDA margin of 19.5%. The improvement in the EBITDA margin in the first half of 2023 is a result of our systematic and disciplined approach to identify operational optimization opportunities.
For example, through detailed analysis of our cost structure, we are implementing innovative cost-saving actions and actively improving our productivity through the use of artificial intelligence tools. A substantial portion of these savings will be allocated to foster research and development in artificial intelligence.
in second quarter 23, 21% higher than the same period of last year.
The adjusted net profit margin increased to 11% in the second quarter of 2022 from 10% in the second quarter of 2022. In the first half of 2023, net profit was 130.3 million reais, a 42% growth compared to the first half of 2022.
The improvement in our net profit margin is attributed mainly to the dilution of SG&A expenses as a percentage of revenue and lower income tax expenses.
Now, I invite Cesar back to comment on our business outlook.
Thank you, Stanley. As we set our sights on the future, we continue to see uncertainty in the global economy throughout the second half of the year.
So we will persist in navigating 2023 with caution.
prioritizing bottom line in cash generation while repairing teams and AI capabilities to resume more aggressive growth in 2024 and beyond.
For the third quarter of 2023, we expect our revenue to be at least 545 million reais at constant currency, a 2% decline year-over-year. For the full year, we are updating our guidance mainly to reflect a higher impact.
in the demand for our acquired portfolio and a budget replanning of our top clients.
Thus, we expect our annual FX neutral net revenue growth to be in the range of 4 to 80% year-over-year. In the midpoint, the implied revenue in Q4 of 2023 represents a sequential growth of 6% and can be attributed primarily to new bookings.
of at least 19%.
In conclusion, I would like to express my gratitude to our clients, partners, investors and CITers for their support and trust in our long-term shared objectives.
Thank you for attending our call today. We now conclude our presentation and we will begin the Q&A session. Thank you.
Okay, we'll now begin our Q&A session. I'll announce each participant's name. Once you hear your name, please unmute your line and ask your question. When you're done, please mute your line.
First question comes from Pune from JP Morgan. Pune, please go ahead. Hey, thanks for taking my question. Cesar, I wanted to ask on demand, like when do demand trends begin to improve? Like what needs to happen?
for clients to start spending on digital projects like they did before. And what are the leading indicators that suggest that the turnaround in growth rates is around the corner.
Great to see you, Puneet, and thank you for your question.
I believe what we see is still a market that reflects a lot of uncertainty.
What we see is still a market that reflects a lot of uncertainty.
Probably you remember we have a Q1 a little above our expectations, but that was related to short-term strategy.
engagements. So the second quarter was in line with our projections. What we see now is still companies very cautious on starting new initiatives. I think the only leading indicator as related to artificial intelligence.
As you probably saw, we are projecting a sequential, finally a sequential growth in the fourth quarter of this year, primarily to new bookings underpinned by artificial intelligence and our strategy relate to hyper productivity based on CIT flow.
I believe it's probably the first good sign that we can have a better 2024. And for sure we are preparing CIT for capturing this new set off.
demand that will inevitably happen around the opportunities of
hyper-productivity and hyper-personalization using artificial intelligence.
Okay. And as a follow-up, your headcount was down in the second quarter as well, maybe more than the revenue was down. so
How do you think about your current utilization levels and what should we expect for headcount rest of the year? Bruno, can I get this one?
thing. We've been running a very lean organization.
trying to keep very efficient with the additional rates are still very high.
We've been able to do the investments and dedicate resources to build those platforms like Flow and other components that will build the future for CIT.
But we've been running a very lean organization and you can expect to see that going forward as well, the following demand.
Thank you.
Thank you. Thank you.
Our next question comes from Ernesto Gonzalez from Morgan Stanley . Ernesto, please go ahead.
Hi, thank you for taking your question. Any additional color that you could provide into the new projects and AI engagements and hyper productivity with clients that will boost the higher growth going into the fourth quarter? And also any additional color for 2024? What could we expect? What are your thoughts going into next year? Thank you.
Thank you Ernesto for your question. I believe we can summarize our demand around AI that is starting to
happen in two buckets. One is directly related to
really streamline the whole flow of producing digital solutions using AI agents. That's what we are calling CI&G Flow Tech.
And then we have a growing number of use case experiments in different verticals around improved customer experience or employee experience around new use case based on generative AI. So basically we call CIT flow BIS.
for this part. So basically it's a combination of efficiency that we have amazing early results but we expect it's gonna as the platform mature and we add more AI agents to the platform it will be
for sure it will drive a multifold increase in productivity. And also we are, I would say, in the discover phase of what are the killer use case of AI for different verticals, education, banking, telco, and so on, so basically this is.
is our main agenda in terms of AI and CIAT flow. Thank you, Ernesto. Our next question comes from Tyler Lupone from Bank of America.
Tyler, go ahead. Great. Thank you, Eduardo and good morning everyone. I just wanted to start by following up on the next demand question, specifically what you're anticipating for the back half of the year based on the new full year guide.
Back of the envelope math seems to show a change in growth from the second half going from up 1314 give or take to down 5 and. You know, at the lower end of the guide, it looks like we could potentially even see some negative sequential growth as we exit 2023. Um, so I guess 2 part of your 1, does that sound right to you and 2.
So what are you seeing more broadly in the market that's leading to this change in the demand outlook?
Good to see you, Tyler. Thank you for your question. I think we are projecting Q3, really with two factors. One is a higher impact.
in the demand of our acquired proof volume, combined with, I would say, unexpected budget replanning in our top one client. So this is basically what we are seeing.
and forecasting for Q3. And for Q4 is really
a sequential growth based on the new bookings.
80%, 90% around new demand based on their attrition tolerance.
I appreciate that and just as a follow up sort of in the prepared remarks, it sounded like Cesar you briefly mentioned the lower folio guide was partially due to a ramp down and some top client spending. So I was just wondering if you could provide additional color on what verticals or geographies those clients are in. I think we're going to be able to evaluate that.
And sort of how much of that are you anticipating will come back. No, as we exit 2023 versus versus projects that are just no longer no longer in scope.
Sort of how much of that are you anticipating will come back as we exit 2023 versus. Um, this is projects that are just no longer no longer in scope. Thank you.
To be clear, I think the re-budget is top one client.
Two to nine top clients are continuing in a solid position. And even for our top of one clients, we believe it is a temporary adjustment based on market challenges, but they have a long term strategy and we are definitely part of it.
of building this digital future for them. So we expect even this top one client will regain traction probably from next year on. So it's hard to really by now to predict 2024.
We see good signs in these new bookings for Q4, but we expect, I think we will have.
see good signs in these new bookings for Q4, but we expect, I think we will have more a Spokane.
around what's going to happen probably by the end of this year or next year. But I would say still cautions but good early signs especially around the efficiency and experience opportunities.
relate to the AI disruption. Thank you again. Appreciate it.
Thank you, Tyler. Our next question comes from Eshring Shevaykar from Citi. Eshring, please go ahead.
Thank you and good morning. My first question is with regards to the cooking that you mentioned.
When I look at the current results of deceleration across the board, it relates to deceleration by geography, by environment and so on.
which of those verticals or geographies are notable in your bookings that you expect it should help lead the return of growth, if you will. And then from a timing perspective,
Is it sort of contractual that the
that the ramps will start in 4Q or could this get pushed out because of the uncertainty in the market to maybe next year? How can you help us understand the challenge for the entire industry?
that the ramps will start in 4Q or could this get pushed out because of the uncertainty in the market to later maybe next year? How can you help us understand? It's a challenge for the entire industry actually so help us understand.
Thanks, Ashwin. I think in general if we look.
by vertical. It's a tough year for financial services globally and we have the desired largest
vertical where we are playing
And on the other side of this, we see a lot of traction on telco, where we are growing faster, as Tim mentioned.
especially in Europe . I see this as a result more specific of our strategy for this vertical and less related to general market conditions but even though we are getting it to become more relevant in our
revenue source. And in terms of, I think
Regarding the new bookings and how I think we are quite sure that
This demand indicates that
especially our main clients are really starting to explore, first the efficiency opportunities around AI and then initial experiments around the...
use case. So it's, I think it's a good door.
for a stronger 24 in terms of demand. And also, of course, we are betting a lot on...
the differentiation of CINT performance based on what we are doing with initial
important set of clients. I mentioned we are
working hand-to-hand with CIT Flow with 12 of our largest clients. And I'm sure this is already generating new demand. So this is part of...
of what we see as regained sequential growth from Q4 on. And also it's of course, it's our main bet for really rule out the same strategy across our whole portfolio of clients and achieve.
We started this year saying that our two main objectives were bottom line cash generation. I think we are doing this in a very disciplined way and are again preparing. We need to see the future. The future is clear now. We need to prepare our offering and capability to play this new chapter.
of disruption and disruption always means more demand so it's unavoidable. I think of course we need to consider the current uncertainty that...
are impacting the whole demand environment, but it's unavoidable because of the opportunities to capture efficiency and disruption in the experience are...
at the door. So I think this changed a lot the scenario for
or demanding digital, even though we still see a lot of
in the macro environment and it's hard to predict how fast the economy, the global macro economy will recover. So, very confident, more related to the way we are positioning CIT and the response we are getting from our clients in different verticals.
from banking to education, telco, retail, and so on. And I think let's relate to the, I would say an optimist view of the micro environment.
Understood. Thank you for that very comprehensive answer. Can I ask with regards to the CNC-PLO presentation at NYC was a really good one. As it relates to, so maybe the need to...
up-skill and give your full population of employees sort of AI skills and so on and so forth. What is the process and investment needed to do that? If you can provide some...
upskill and give your full population of employees sort of you know AI skills and so on and so forth. What is the process and investment needed to do that? If you can provide some details on that.
We are totally focused on creating these capabilities. Right now we have to be very selective.
selecting the clients that we can support in this new set of
of opportunities and capabilities. And, but we are heavily invest on having the ability to scale flow and digital strategy from next year on. I think Bruno can dip on more details on how we are doing this internally. Yeah. As I mentioned in my talk,
of building software will be very, very different in the next three, five, ten years. And I think we're very happy where we are right now. We have a quarter of SANTI already going through that challenge and learning what those new skills and, you know, the new.
teams themselves, how they organize, like they'll be completely different. And I think we are kind of ahead of the pack there. We're learning what that means and hopefully we'll be, you know, helping our clients actually to understand what needs to be done in their teams and their structures and we'll continue supporting them.
through that future. Understood. By the way, Bruno, I love the map behind you. Great. Thank you.
Thank you, Eshwin. Our next question comes from Carlos de la Garreta from Itau de Villa. Carlos, please go ahead.
Hi, thank you. Good morning.
Good morning guys, thank you. Good morning, Carlos. Just two quick questions on my side. The first one, just looking at the geography breakdown of your revenues, particularly what stands out is the softness in the time results, not only for the quarter, for the full year, or the first half of the year.
Just want to know your insights of whether you think this is perhaps what will drive the software guidance and if this is attributable to maybe this main client.
And secondly, Cesar, I'd love to hear your thoughts on C&Dflow. Always didn't know you had the event, but I think totally great to hear firsthand, you know.
from you and what are the expectations in terms of which verticals you think this could particularly benefit or should be across the board. Thank you.
Thank you, Carlos. I think as we mentioned...
I think Letta is recovering faster than
than other regions.
But I think it's more related to our portfolio of clients than general market conditions. And of course the top one client impact is...
in the US, so it changes the game among the regions. And Europe is responding in a very good way. But for sure we account a lot on the fact that we can lead.
but in a very good, especially in Brazil, in a very strong way. Based on our amazing client.
especially in Brazil, in a very strong way based on our amazing client portfolio here.
Regarding CIT flow, by now we have a set of verticals where we are experimenting and getting this earned enthusiastic results. Banking is one industry. Education is an amazing opportunity.
in different perspectives. The telco is another, especially where you see opportunities to improve customer services and also optimize very complex operations. We also have retail.
and two big retail companies, one in Brazil and another in the USA in this initial back-off of customers. So I believe it's going to be across the board, of course.
Yes, I would say
large operations with
The challenges on customer experience probably will be the main hit.
for artificial intelligence and CI and C flow. But as we evolve the platform, I believe it's gonna be a very horizontal way to drive efficiency. And also, as I mentioned, I think we'll probably in a few quarters, we'll start to see.
the initial set of killer use case around JIRA TBI and then this will drive a lot of demand for specific verticals. So very excited with our results. Amazingly proud of this is the set of customers that are already working with us.
on computing CIT flow and I believe we did the right move in the right moment and I'm quite sure it will drive a lot of differentiation for us in the years to follow.
Thank you for that. And if I may just follow up, I'd love to hear your thoughts. I'm sure you're aware that GloVn has announced recently an ambitious plan to double down their investment in LATAM and particularly in Brazil.
You know, I just want to hear your thoughts about that. You know, obviously we talked to them, but we'd love to hear what's the opportunity that you're seeing and if these changes had all the outlook that you have, you know, more in the bigger picture.
Sure, Carlos. It's amazing to see company invest on what we already are.
I always repeat that Brazil is the largest and the best...
tactile and pulling lots of Americans the second-largest in the America's time zone and it's an amazing place to to play the supply side of our game and and it's I think it's just
one more evidence that what we have and the way we play our talent game will continue to be a huge differentiation for CIT. I believe the good another aspect of Brazil is this combination of quality
and scale, and our possibilities are around talent plus, domain, vertical expertise.
So we have a big internal market so you can leverage a lot of banking, you can retail expertise, delto expertise in a game that will change toward this new disruption.
new set of technologies but that will have to be applied in different ways for different verticals. I think we have the best blended combination of talent and domain expertise. So I see Brazil playing an even more important role in the future of...
global digital services and we are lucky to be born here and of course building a global business. Now around 60% of our revenue comes from US, Europe and Australia, New Zealand.
Having Brazil as still our main source of talent, say a lot of the possibilities of scale CINT in the future.
as is still our main source of talent, say a lot of the possibilities of scale CIN-T in the future. Thank you for your comments.
Thank you, Carlos. We have two questions here from email. First one is... Does theusa. CAS breaking Jennifer tur Bukov The Atheist
Regarding the EBITDA margin, so how should we expect the margin for the second half of the year, given you reported 14.5?
The first half of the year in the guidance is pointing to 19% margin. I can take that one. Thank you for the question.
EBITDA margin has improved in the first half of the year mainly due to SGA dilution. Of course we are closely monitoring our costs and expenses to maintain this lean organization that Bruno mentioned.
healthy margins. Of course that's what we are looking for. It's a good year of cash generation as well so we are fully focused on both aspects here as we are in this lower growth environment.
Of course, part of those savings, we have been directed to capabilities of our artificial intelligence in never. And we will continue to do it. So, we expect to maintain a more stable EBITDA margin throughout 2023. And just as a reminder, the EBITDA margin guidance that you mentioned is at least
M&A. Do you expect to resume M&A in the coming quarters? What are the lessons learned from the companies you acquired in 2022?
Okay, I'll start this one. As you know, we concluded our first wave of acquisition.
last year that was amazing to increase and diversify our
the markets and verticals we are serving. And now we are...
dedicated to fully integrate these acquired companies, focused on leveraging the relationship of large and global points that we onboarded. And of course, we are preparing CINT for, I would say to resume M&A activity next year.
I think we need to reinforce that our main core strategy is organic growth, but we could see the high potential of combine or accelerate our organic growth to you
a very specific set of acquisitions. So I think we continue to analyze opportunities in the market. I don't believe we are gonna do short term moves in this space, but I'm sure we're going to do.
more deals from next year on and based on the kind of results.
we could leverage in the best. Alright, so that concludes our Q&A session.
Saza, would you please proceed with your closing remarks, please?
Thank you, Gavon, Stanley, Bruno for joining me. Thank you all for participating in our call. Again, a big thank you for all CITR for the solid results in this first half of the year. A lot of charms I've had, but we are here.
to overcome that. And a special, special thank you for our clients that select CIT to co-create this exciting new chapter of innovation around powered by artificial intelligence. That's it. Stay well, see you soon.