Eduardo Galvao; Investor Relations Director; Ci&T Inc
Cesar Gon; Chief Executive Officer; Ci&T Inc
Bruno Guicardi; North America & Europe President; Ci&T Inc
Stanley Rodrigues; Chief Financial Officer; Ci&T Inc
Puneet Jain; Analyst; JPMorgan
Vitor Tomita; Analyst; Goldman Sachs
Thiago Kapulskis; Analyst; Itau BBA
Bryan Bergin; Analyst; TD Cowen
Ernesto Gonzalez; Analyst; Morgan Stanley
Gustavo Farias; Analyst; UBS
Eduardo Galvao
(introduction playing)
Welcome to CI&T earnings call for the fourth quarter in full year of 2024. I am Eduardo Galvao, Director of Investor Relations at CI&T. Joining me today are Cesar Gon, our Founder and CEO; Bruno Guicardi, Founder and President for North America and Europe; and Stanley Rodrigues, our CFO. (Operator Instructions)
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 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 this presentation, we'll comment on certain non-IFRS financial measures to evaluate our business. Please refer to the reconciliation tables of non-IFRS measures in the earnings release for more details. Our agenda for today includes an overview of our 2024 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?
Cesar Gon
Thank you, Eduardo, and good day, everyone. Before discussing our quarterly results, I would like to acknowledge a significant milestone in our journey, CI&T's 30th anniversary. Founded in 1995, CI&T began with a bold vision, to become a globally recognized leader in tech services. Over the past three decades, we have successfully navigated various market conditions and economic shifts, proudly achieving 30 consecutive years of growth.
Today, we are a global force of 7,000 passionate CI&Ters across 25 countries, collaborating with some of the world's most admired brands. That's why I'm so thrilled to share that Forrester Research has recently recognized CI&T as a leader in modern application development services, a right on time honor as we mark 30 years of innovation and growth.
Looking ahead, our continued success rests on three strategic pillars. First, artificial intelligence, reshape industries, with CI&T as a protagonist through CI&T FLOW. Second, our culture of excellence, driven by top tier talent, our key advantage. And finally, our client centric approach, blending expertise and innovation to create lasting value and long-term relationships with our clients.
Now moving on to our financial highlights for the fourth quarter of 2024. We're proud to report a record net revenue of BRL656.5 million, representing a 25.6% increase compared to Q4 2023. At constant currency, net revenue grew 14.7% year-over-year. This remarkable growth was driven by the outstanding performance of our top 10 clients whose revenue increased 40% in Q4 2024 versus the same period in the previous year. These clients have been leveraging CI&T FLOW, our AI powered platform, to accelerate their digital transformation journeys.
On the profitability side, our adjusted EBITDA just if the margin reached 19.5%, surpassing the industry average. In addition, adjusted net profit totaled BRL78 million, reflecting a 41.3% year-over-year increase.
For the full year of 2024, we reached a net revenue of BRL2,368 million, representing a 6.0% increase compared to 2023. At the constant currency, net revenue grew by 1.3% year-over-year. We concluded the year with a robust adjusted EBITDA margin of 18.7%, demonstrating consistent operational efficiency over the years. Our cash generation from operating activities totaled BRL467 million in 2024, a strong indicator of the strength and resilience of our organic operations. We are excited about the momentum we have built and remain focused on driving sustainable growth as we continue to deliver solid results for our clients and stakeholders.
Now let's explore some inspiring clients' success stories that highlighted the diverse applications of AI.
(video playing)
I hope these stories illustrate the impact we create for our clients. Now I would like to invite Bruno to share insights on our global delivery model, the evolution of CI&T FLOW, and our talent strategy.
Bruno Guicardi
Thank you, Cesar. Good evening, everyone. It's a pleasure to be here once again. We finished the year with over 6,900 CI&Ters, reflecting a 13% year-over-year growth. We have been utilizing AI to enhance our onboarding and training processes, which has been key in maintaining a strong utilization rate throughout the year. In 2024, we focused on promoting from within, cultivating a dynamic culture of opportunity and empowering our teams to grow and embrace new challenges. As a result, our voluntary attrition rate stands at 10.7%, while the leadership attrition rate remains very healthy at 3.5%.
As we enter 2025, we are excited to welcome 450 new trainees, reinforcing our commitment to strengthen our team and cultivating the next generation of technology leaders. This program enriches our organizational culture and prepares the AI professionals of the present. We have had over 10,000 applications, and we will develop the first generation of AI native coders. Another group will also join us in Colombia in the second half of this year, broadening learning and growth opportunities for young talents in the region.
Now let me comment on one of our AI powered offerings which has been a key driver of our recent revenue growth. In 2024, the role of AI in application modernization has evolved from being a nice to have to an essential tool for success. Legacy platforms slow down agility and our hurdles to innovation, and our clients are turning to AI to overcome those challenges.
AI brings great value to modernization efforts, greatly reducing risk and errors while we're increasing efficiency and speed in the process. Our clients are seeing exponential reductions in modernization timelines, enabling them to accelerate time to value and stay ahead of their competition.
We are at the forefront of this transformation with our CI&T FLOW platform, which modernizes legacy systems and unlocks innovation. Through generative AI, CI&T FLOW is driving significant efficiencies in speed gains. The platform minimizes risks by automating error prone, time intensive tasks and ensures reliability when migrating old systems to modern application architectures. Our AI powered modernization solutions are contributing to stronger sales pipelines and revenue growth as more clients recognize the need to replace all data systems that are killing efficiency.
Now, let me hand it over to Stanley to comment on our financial results.
Stanley Rodrigues
Thank you, Bruno, and good afternoon, everyone. I'm pleased to share our financial performance for the fourth quarter and full year 2024.
In the fourth quarter of 2024, our net revenue achieved a record BRL656.5 million, reflecting a 25.6% increase compared to the fourth quarter of 2023. On a constant currency basis, our net revenue grew a robust 14.7% year-over-year. This strong double digit organic revenue growth exceeds industry averages, underscoring our competitive position and operational effectiveness.
For the full year 2024, our net revenue totaled BRL2,368 million, marking a 6% increase year-on-year. Net revenue at constant currency increased by 1.3% compared to 2023. In 2024, net revenue from North America grew by 7.5% compared to 2023, driven by the successful expansion of large clients that we onboarded in recent years. In Latin America, revenue increased by 6.2% year-over-year, largely supported by clients in the financial services vertical.
When analyzing our revenue by industry vertical, we saw particularly robust growth in the retail and industrial goods sectors, which recorded an impressive 70% year-over-year increase. Revenue from the consumer goods sector rose by 14.9% compared to 2023. Additionally, revenue from financial services increased by 5.7% in 2024, primarily driven by our clients in Latin America. For the full year, our top client and top 10 clients accounted for 8% and 41% of our net revenue respectively.
At CI&T, we aim to be the partner of choice for our clients, scaling our engagements as they mature to expand wallet share and foster long-term partnerships. In 2024, our focus has been on organic revenue growth and optimizing our client base by targeting large accounts with significant technology investments.
Our top 10 clients, each generating a minimum of $10 million in revenue, experienced a year-over-year revenue growth of 9.7% in 2024. This increase underscores the efficiency and value we provide to our largest clients. We are particularly excited about the onboarding of new large clients with long-term commitments in the digital space. Our strong pipeline and conversion rates affirm that we are on the right path.
Moving on to our financial metrics. In the fourth quarter of 2024, our adjusted EBITDA reached BRL128 million, reflecting a 23.7% increase year-over-year, with an adjusted EBITDA margin of 19.5%. For the full year, adjusted EBITDA totaled BRL442 million, a 2.4% increase compared to 2023, resulting in an adjusted EBITDA margin of 18.7%.
We have been diligent in managing costs and expenses, allowing us to enhance our sales initiatives while effectively diluting general and administrative expenses. As a result, we have consistently delivered strong profitability metrics in recent years.
In the fourth quarter of 2024, our adjusted net profit reached BRL78 million, reflecting a 41.3% increase compared to the same period in 2023. The adjusted net profit margin improved from 10.6% to 11.9% in the fourth quarter of 2024. For the entire year, our adjusted net profit was BRL241.8 million, an 8.9% increase from 2023, with the net profit margin reaching 10.2%. This improvement was primarily driven by a reduction in net financial expenses, given the lower net debt position and a lower income tax rate.
In 2024, we generated BRL467 million from our operating activities, a 12.7% increase from the previous year, primarily due to improved working capital management. This translates to a cash conversion to adjusted EBITDA ratio of 105%, underscoring our strong capacity to generate cash from organic operations.
Our free cash flow defined as net cash from operating activities less CapEx reached BRL317 million in 2024, up 16.9% compared to 2023, representing a free cash flow conversion to adjusted net income ratio of 131%. This robust cash generation enables us to pursue strategic priorities to accelerate our growth.
Before I pass it over to Cesar to discuss our business outlook, I want to provide an update on a commitment we made earlier this year in the first quarter '24. Starting with our 2024 annual report on Form 20-F, we will be transitioning our presentation currency from Brazilian reais to US dollars. This change aims to better align our financial reporting with the global nature of our business operations and support our growth strategy as we continue to expand our presence in key markets.
Cesar, back to you.
Cesar Gon
Thank you, Stanley. Before diving into our business outlook, let me first provide a recap of our growth trajectory in 2024. We set out to achieve consistent sequential growth, overcoming the challenges of 2023. Our unique AI approach and CI&T FLOW were key drivers, accelerating our recovery and position us for sustainable expansion. As we close the year, we are proud to have delivered on this commitment and setting a strong exit rate for continued growth in 2025 and beyond.
Now let me comment on our business outlook. For the first quarter of 2025, we expect net revenue of at least $110.5 million, reflecting a 12.6% year-over-year growth at constant currency. This outlook corresponds to a 4.5% growth in US dollars and 23.7% in Brazilian reais as we expect Q1 to mark the peak of FX impact throughout 2025 based on the volatility curve of 2024.
For the full year of 2025, we project organic net revenue growth at constant currency in the range of 90% to 15% year-over-year. The midpoint of this range of 12% translates to an 8.4% increase in US dollars and a 16.8% growth in Brazilian reais. In addition, we estimate our adjusted EBITDA margin for 2025 to be in the range of 18% to 20%.
To conclude, I want to express my deep appreciation for our team's dedication and resilience. The way you have embraced our AI first transformation over the past two years is truly extraordinary. Together, we will continue to navigate change and drive CI&T forward, shaping a future defined by innovation, collaboration, and impact. This brings us to the end of our presentation.
We may now begin the Q&A session.
Operator
(Operator Instructions) Puneet Jain, JPMorgan.
Puneet Jain
Hey, thanks for taking my question and good quarter. Let me ask Cesar. Like there have been like a lot of concerns around like the geopolitical macro news over the last few months. Are you seeing any pause or any caution in your client's spending over the last few months? And if yes, then are there any differences in your outlook across US versus other regions like Brazil or Europe?
Cesar Gon
Thank you, Puneet. First -- and thank you for your question. Overall, we continue to see, let's say, stable demand from our cohort that is particularly large, very large organizations despite this ongoing macro uncertainty and even the recent discussions around tariffs. And stability is good for us because it's a favored environment for our strategy for replacing underperformed competitors with our AI driven solutions.
And one point that I continue to see is a shift toward AI driven solutions, so reinforcing our focus on AI. And to give you a data point, right now, we have a stronger pipeline compared to the same period of last year, roughly 30% higher. This is for me is a promising leading indicator for 2025. So we continue to be cautious, but in our cohort of clients, we see stability.
Puneet Jain
So no incremental delays or pause in your pipeline.
Cesar Gon
Not yet.
Puneet Jain
Good. That's good to know. And then can you review your use of cash? Like it's been a while since you pursued -- you completed an M&A. Your peers have been very acquisitive adding assets and data, AI one of the strategic areas that you mentioned. Can you share like what should we expect for use of cash in 2025?
Cesar Gon
Yeah, I can start and then Stanley can complement. First, I think we made a strategic decision to focus last year 2024 on transforming CI&T into an AI first company, and I think this focus has been a key driver of our organic growth. By the way, organic growth has always been our primary value creation engine, and we will continue to be.
But moving forward, we may resume M&A as a way to speed up our organic growth. So our focus would be targets that help us to expand, particularly in the US, leveraging our near shore capabilities in Brazil and Colombia and adding new high potential clients to our portfolio.
Regarding capital allocation, Stanley, you want to complement that?
Stanley Rodrigues
Yes. Puneet, additionally, to any M&A that may happen in the near future, we are continuing our investments towards the R&D, meaning our AI platform FLOW which, as Cesar mentioned, has been delivering outstanding results, so driving efficiency, leveraging our growth. So of course, we will continue investing in that.
Also, given the high cash generation we project for this year, we also see that a good way to provide return to shareholders is via share buybacks, so preventing dilution from stock options, compensation or even increasing earnings -- dilution from stock options, compensation, or even increasing earnings per share, for example. We also are prioritizing paying down debt, reducing interest payments. I would say those are the main items.
Puneet Jain
Thank you. Good luck.
Operator
Vitor Tomita, Goldman Sachs.
Vitor Tomita
Hello and thanks for taking our questions. So I have two questions from my side. The first one is a bit of a follow up on the question by Puneet on cash deployments. You also enlarged quite a bit your sales capabilities in 2024 with more dedicated sales teams. Should we see the level of selling expenses and sales investment in Q4 as a good guide for 2025? Or do you see room to invest further in customer acquisition to further boost the growth as well?
And our second question would be related to capacity utilization. If you could give us a bit more color on how that is trending at the moment. I recall from the opening statement that you mentioned it was strong, going well. But if you could give us a bit more color on that, it would be great. Thank you.
Cesar Gon
Thank you, Vitor. I will start with the first question and then Bruno can handle the second one.
Yeah, you are right. In the last couple of years, we have been enhancing and expanding our sales structure and our sales approach across all four regions we operate. We will continue this process. It's paying off. I think we have a much more strong pipeline and commercial pipeline in visibility due to, of course, our effort and differentiation around AI and FLOW but also a more proactive and intense sales effort. So in general terms, you will continue to see increasing investment around sales, and of course, take advantage of the efficiency we are gaining with AI and also diluting our G&A expanse as we expand.
Bruno can handle the second part.
Bruno Guicardi
Your questions are around utilization rate, right, Victor?
Cesar Gon
Yes.
Bruno Guicardi
Yes. We estimate utilization rate to keep at a very strong level as we finished Q4. So we see good levels of utilization rate between 85% and 89%. And there's a natural oscillation there, seasonal oscillation over the quarters, but that's what we estimate to be in 2025 as well. So we don't see any differences there coming from 2024.
Vitor Tomita
Very clear. Thank you very much.
Operator
Thiago Kapulskis, Itau.
Thiago Kapulskis
Hi, everyone. Thanks a lot for jumping to ask questions. I have two questions as well and all related to the guidance, right? So just want to get a little bit more sense of the puts and takes in the full year guidance. In the Q1, you guided for a dollar of 580 something. Just want to understand if you have the same assumptions for the dollar, which has been very volatile during this period over the past few months.
And also, trying to understand a little bit if you are -- what you're considering in terms of activity in the United States, more specifically, given one of the questions that is happening here. So anything, any color would be interesting. And also, one very last point as well, if you could give us call on the organic growth involved on that guidance, that would be interesting as well. Thank you.
Cesar Gon
(multiple speakers) I can complement.
Stanley Rodrigues
Go ahead.
Cesar Gon
No, you can start.
Stanley Rodrigues
Okay, yeah. Well, thank you, Thiago, for the questions. With regard to FX, as Cesar mentioned in the voiceover, we understand that we are at the peak of that scenario of devaluation of reais. So for 2025, we are considering that stabilization.
And of course, given that we have the -- our business continue to have a mix of different currencies underneath, right? So we have reais, we have US dollars, and hard currencies in the top line while we have a different mix in the cost, so those are not changing. And that's why we are always guiding, using, the constant currency which better translate the actual increments on the business.
So with regard to the guidance we are providing, 12% constant currency for the full year is fully organic growth, right? Cesar, if you want to add there.
Cesar Gon
Sure. In terms of regions, we are guiding very strong growth in our two main regions, North America and Latin America, mainly the US and Brazil, and more stable outlook for Europe, mainly due to cautions regarding geopolitical and macro and a good expansion in Asia Pacific too. But mainly our two main regions, the larger region will be driving our growth.
Thiago Kapulskis
Sounds good. Thank you very much for the answers, guys.
Operator
Bryan Bergin, TD Cowen.
Bryan Bergin
Hey, guys, good afternoon. Thank you. First question on the outlook for 2025 and really kind of the shape of the year. So we see we're guiding for first quarter nearly at the midpoint of that constant currency range for the full year, 12 plus. I'm curious, as you go through 2Q through 4Q, as we think about cadence of '25, is there anything that is an important consideration? And at the same time too, when you think about your 2025 guide visibility, do you have a sense of what's contractually committed versus what you have to still go get in pipeline?
Cesar Gon
Okay. Thanks, Bryan. Basically, I think we are consistent with our historical growth engine. So in seasonality, we are projecting a solid Q1 with a good year-over-year concentration growth at 12.6%. And we are forecasting, continue our sequential expansion from Q2 on our -- in a very good base.
Regarding the visibility is we have a good visibility. We are working with a reasonable range in our full-year guidance. So we consider that we are very conservative, but in a good way also counting on a very strong commercial pipeline as I mentioned before. So good visibility, but some cautions regarding maybe an intensified volatility. So top of range of our guidance is driven by our solid commercial pipeline, while the low range reflects caution in case of intensified micro volatility.
Bryan Bergin
Okay, very good. And then the second question here is on Gen AI impact in client engagement. So where you are further along in the usage of Gen AI and agentic solutions in your delivery? How is that impacting the commercial or the contracting terms in those engagements? Is it different than what you've seen historically? Maybe just give us some color there.
Cesar Gon
Sure, Bryan. I think, as expected, AI progress is progressively become embedded in all aspects of digital project development now, whatever for efficiency, for customer experience, or even for data and decision making. So what we see in our demand is, I would say, half of our demand is applying AI for speed up legacy and application modernization, cloud migration, several data engagements like preparing the foundation to a future AI-driven world.
And the second part, the second half of the demand is about improving customer experience journeys for consumers now with the new possibilities around AI designing and build new products, digital products, and also a growing number of user cases using Gen AI focus on hyper personalization, like the ones we showcase during our presentation. So half of the demand based on AI we classify as horizontal demand, and half we classify as vertical demand. And I believe it will remain along the year.
Bryan Bergin
All right. Thank you, guys.
Operator
Ernesto Gonzalez, Morgan Stanley.
Ernesto Gonzalez
Hi. Thank you for taking our question. It's one on our end. We saw some slight sequential weakness in North America and a little bit more in Europe. Could you please walk us through what you saw in each of those markets relative to the third quarter? Thank you.
Bruno Guicardi
I can take that one. In Europe, as Cesar mentioned before, we're seeing I think being shaped by the current geopolitical and economic environment in Europe. That's been with dealing since the beginning of 2024. But North America is -- for North America is just regular seasonality and volatility, but it's small. We don't consider that critical going forward to 2025 as Cesar mentioned. We're going to get a strong growth coming from that region. That's our biggest region at this point.
Ernesto Gonzalez
Clear. Thank you.
Operator
Gustavo Farias, UBS.
Gustavo Farias
Hi guys, can you hear me?
Operator
Yes.
Gustavo Farias
Well, good night. Thanks for taking my questions. I have two on my end. The first one regarding specifically some new legislation in Brazil impacting LatAm. If you could comment on the effects of the return of payroll taxes. And how you are seeing the reactions from clients, if you're being able to pass through this to prices? And to what extent this is embedded in your guidance for 2025?
And my second question regarding what Cesar mentioned about AI related projects, efficiency related versus more client facing projects, let's call it. What kind of scenario of those profile of projects, AI related projects, are you considering for 2025? How you're seeing this evolving going forward? Thank you.
Stanley Rodrigues
Well, I may take the first question. Gustavo, thank you for the question. With regard to payroll taxation in Brazil, it started in 2025. And this is a program that will progress increasing the tax for four years through 2028, right? So this gradual approach allowed us to prepare proactively and engage in discussions with our clients in advance.
We are fully committed in minimizing this impact through productivity gains and cost saving measures. And we are really on track to deliver our EBITDA margin that we guided that is 18% to 20% in 2025. Meaning that with your point, we are fully considering those aspects already in our guidance. Well, meaning that through all those initiatives I mentioned, we are already dealing with this change in Brazil with no impact.
Bruno Guicardi
I can take the second one on the profile of the demand. Gustavo, thanks for the question, because that thing is a big opportunity for us there. So one good thing that I know that there's a small amount of infrastructure that needs to be done to prepare for this new world of AI, right? So in terms of data and applications.
And the reality is that there's just a massive amount of backlog there, our clients still have in data and applications sitting in a very old infrastructure that needs to be modernized in order for them to actually really accelerates towards Gen AI future. And that profile I think will give us a little -- a couple of years of demand in terms of just the preparation infrastructure needed to be put in place for that future. So I don't see that profile changing very fast going forward to make it simple.
Gustavo Farias
All right. Thanks for the answers and congrats on the results.
Bruno Guicardi
Thank you.
Cesar Gon
Thank you.
Operator
So that concludes our Q&A session. I now invite Cesar to proceed with his closing remarks. Cesar?
Cesar Gon
Thanks, Eduardo, Bruno, Stanley. Thank you all for joining us in our call. I'd like to extend my gratitude again to all CI&Ters across the globe for your hard work and achievement in this quarter. And then special thanks to our clients for choosing CI&T as a partner to co-creating this exciting new chapter of AI driven innovation. Stay well. See you soon.
