CINT - CI&T Inc (CINT) Q2 2023 Earnings Call Transcript

2023-08-18 16:53:08 ET

CI&T Inc (CINT)

Q2 2023 Earnings Conference Call

August 18, 2023, 08:00 AM ET

Company Participants

Eduardo Galvao - Director of Investor Relations

Cesar Gon - Founder and Chief Executive Officer

Bruno Guicardi - Founder and President for North America and Europe

Stanley Rodrigues - Chief Financial Officer

Conference Call Participants

Puneet Jain - JPMorgan

Ernesto Gonzalez - Morgan Stanley

Tyler DuPont - Bank of America

Ashwin Shirvaikar - Citi

Carlos de Legarreta - Itau BBA

Presentation

Eduardo Galvao

Good morning, welcome to CI&T Earnings Call for the Second Quarter of 2023. I am Eduardo Galvao, Director of Investor Relations at CI&T, 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 Guicardi, Founder and President for North America and Europe; and Stanley Rodrigues, our CFO.

This event is being recorded and all participants will be in a listen-only mode during the company's presentation. After that, there'll be a question-and-answer session for analysts and investors. If you'd like to submit a question please send it via email to investors at ciandt.com. The presentation is available on the company's Investor Relations website and the replay will be available shortly after the event is concluded.

Some of the matters we'll discuss on this call, including our expected business outlook, are forward-looking statements and as such are subject to known and unknown risks and uncertainties, including but not limited to those factors described in our earnings release and discussed in the Risk Factors section of our Annual Report on Form 20-F. These risks and uncertainties could cause actual results to differ materially from those expressed on this call. We caution you not to place undue reliance on those forward-looking statements because they're valid only as of the date when made.

During this presentation, we'll comment on certain non-IFRS financial measures to evaluate our business. Please refer to the reconciliation tables of non-IFRS measures in the appendix for more details.

Our agenda for today includes an update 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 Cesar Gon to begin our presentation.

Cesar Gon

Thank you, Eduardo, and good day, everyone.

I'm thrilled to have you all here for another quarterly earnings call. I'm eager to engage with you and present our performance and accomplishments.

Let me start by sharing our evolution in the realm of 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.

CI&T has been fortunate to participate in and contribute to the first chapter of the digital revolution as the creators of the LEAN DIGITAL book of knowledge for digital transformation. Now I feel blessed to guide CI&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 Hyper Digital will unfold in three acts; Act One is hyper-productivity, paving the way for Act Two, hyper-personalization, and this progression then led us 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 these revolutionary moments is that they tend to thrive in the fertile greenfield environment of startups and digital natives, but often it takes years to make a relevant impact in the brownfield setting of a 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 CI&T's vision and what we're bringing to life to make a Hyper Digital enterprise-ready.

As you know, to achieve that, last month, we proudly launched CI&T/FLOW, an AI platform for Hyper Digital. Already we've initiated engagements with 12 of our largest clients from various industry verticals, embarking on the journey of computing CI&T/FLOW. Over the next 12 to 24 months, we plan to scale this platform across all CI&T clients and combine over 100 new AI agents developed by both CI&T and partners. We are at the beginning of Act One and we find ourselves already reaping tangible results, a surge in productivity that has in some cases doubled our previous benchmarks. We can only forecast that we are going to achieve multi-fold increases in productivity in the years to come.

Early results are promising and we are enthusiastic about the potential to significantly enhance productivity, improve quality, and accelerating progress. The realm of artificial intelligence presents a new array of exciting opportunities and we are positioning CI&T as a front-runner.

Now let's take a look at our second quarter financial highlights. Once again, we're proud to deliver solid results amid macro uncertainty. Our net revenue was BRL572 million 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 in multi-million accounts, reaching 183 clients with annual revenue above BRL1 million. The adjusted EBITDA margin for the quarter was 20%, an increase of 90 basis points compared to the second quarter of last year. Adjusted net profit was BRL63 million, 21% higher year-over-year with an adjusted net profit margin of 11%.

These strong results serve as evidence of our ability to uphold efficiency despite the challenges posed by a volatile market environment. I extend my gratitude to all CI&T team members worldwide who have shown unwavering dedication in creating value for our clients and for our stakeholders.

Now let's dive in some examples of our client engagements and explore some of the noteworthy business highlights for the quarter.

[Commercials]

I hope you liked our client stories, news, and highlight selection. Now, I invite Bruno to talk about our talent management.

Bruno Guicardi

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 hyper productivity era. We now have 6,200 CI&Ters with a geographically diversified talent base. Our global presence has allowed us to enhance our near shore delivery model, fostering our competitiveness and delivering with speed and efficiency.

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 CI&T 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 esteemed Women on the Board. This prestigious certification recognizes our efforts in fostering gender equality within our environment. We're 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 continue to do more to empower women in the 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. We're 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 fuel and create better engagement. Some other groups are applying Gen AI to our own software development process to achieve higher productivity and unprecedented levels of speed. So we can offer our clients the best performance in the industry and help them to 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, ahead of the pack and are trailblazing our path to the future.

Now, I invite Stanley to give you more details about our financial performance.

Stanley Rodrigues

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 [BRL507.1 million] (ph), 9% 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 BRL1,181.8 million.

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 mature 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's worth mentioning that we are further diversifying our revenue streams in terms of client 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 BRL1 million 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 BRL20 million rose from 21 in the last 12 months ending in second quarter '22 to 26 in the last 12 months ending in the second quarter '23. In addition, the number of clients with revenue above BRL10 million grew from 12 to 22 in the same comparable period.

Over the past five years, our net revenue retention 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 BRL100.4 million in second quarter '22 to BRL114.2 million in second quarter '23. 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 BRL230.7 million 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 initiatives as discussed in our previous earnings call to leverage our future growth.

Finally, the adjusted net profit was BRL63.1 million in second quarter '23, 21% higher than the same period of last year. The adjusted net profit margin increased to 11% in second quarter '23 from 10% in the second quarter '22. In the first half of 2023, net profit was BRL

130.3 million, 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.

Cesar Gon

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 and cash generation while preparing our 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 BRL545 million 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 from our acquired portfolio and a budget replanning of our top client. Thus, we expect our annual FX-neutral net revenue growth to be in the range of 4% to 8% 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 underpinned by our AI strategy. Finally, we are maintaining our adjusted EBITDA margin expectation of at least 19%.

In conclusion, I would like to express my gratitude to our clients, partners, investors and CI&Ters 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'll begin the Q&A session. Thank you.

Question-and-Answer Session

A - Eduardo Galvao

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. Then when you're done, please mute your line. First question comes from Puneet from JPMorgan. Puneet, please go ahead.

Puneet Jain

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?

Cesar Gon

Good to see you, Puneet, and thank you for your question. I believe, what we see is still a market that reflects a lot of uncertainties. 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 are 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 related to hyper productivity based on CI&T/FLOW. So, I believe it's probably the first good sign that we can have a better 2024. And for sure, we are preparing CI&T for capturing this new set of demand that will inevitably happen around the opportunities of hyper productivity and hyper personalization using artificial intelligence.

Puneet Jain

Got it. 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?

Cesar Gon

Bruno, can you take this one?

Bruno Guicardi

Sure thing. Puneet, we've been running a very lean organization, right, so trying to kind of keep it very efficient. Utilization rates are still very high, right? So, we still being able to kind of do the investments and dedicate resources to build those platforms like FLOW and other components that will kind of build the future for uncertainty, but we've been running a very lean organization, and you can expect to see that going forward as well, right, the following demand.

Puneet Jain

Thank you.

Eduardo Galvao

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

Ernesto Gonzalez

Hi, thank you for taking our question. Any additional color that you could provide into the new projects and the AI engagements and hyper productivity with clients that will boost 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.

Cesar Gon

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 efficiency, really streamlined the whole flow of producing digital solution using AI agents. That's the -- what we are calling CI&T/FLOW tech. And then we have a growing number of use case experience in different verticals around improved customer experience or employee experience around new use case based on generative AI. So, basically, we call CI&T Flow biz for this part. So basically, it's a combination of efficiency that we have amazing early results, but we expect it's going to -- as the platform matures and we add more agents, AI agents to the platform, it will be for sure, it will drive multi-fold increase in productivity. And also, we are, I would say, in the discovery phase of what are the killer use case of AI for different verticals: education, banking, telco and so on. So basically, this is our main agenda in terms of AI and CI&T/FLOW.

Eduardo Galvao

Thank you, Ernesto. Our next question comes from Tyler DuPont from Bank of America. Tyler, go ahead.

Tyler DuPont

Great. Thank you, Eduardo, and good morning, everyone. I just wanted to start by following up on Puneet's 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 13%, 14%, give or take, to down 5%. And at the lower end of the guide, it looks like we could potentially even see some negative sequential growth as we exit 2023. So I guess two-parter: one, does that sound right to you? And two, sort of what are you seeing more broadly in the market that's leading to this change in the demand outlook?

Cesar Gon

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 portfolio, combined with, I would say, unexpected budget we're planning 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 our attrition values.

Tyler DuPont

I appreciate that. And just as a follow-up. Sort of in the prepared remarks, it sounded like, Cesar, you briefly mentioned the lower full year guide was partially due to a ramp down in some top-line funding. So I was just wondering if you could provide additional color on what verticals and geographies those clients are in? And sort of how much of that are you anticipating will come back as we exit 2023 versus projects that are just no longer in scope? Thank you.

Cesar Gon

Tyler, to be clear, we -- I think the budget manager is top one client. It's really one client. I think our two to nine top clients are continuing in a solid position. And even for our top one client, we believe this is a temporary adjustment based on market challenges, but they have a long-term strategy, and we are definitely part of building this digital future for that. 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 more certain around what's going to happen probably by the end of this year, early next year. But I would say still cautious, but good early signs, especially around the efficiency and experience the opportunities relate to the AI disruption.

Eduardo Galvao

Our next question comes from Ashwin Shirvaikar from Citi.

Ashwin Shirvaikar

My first question is with regards to the bookings that you mentioned. And when I look at sort of the current result with deceleration across the board as it relates to the growth rate [indiscernible] by geography, by end market and so on, so 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 you're -- that the ramps would 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.

Cesar Gon

Thanks, Ashwin. I think in general, if we look by vertical. It's a tough year for financial source globally, and we have -- it is our largest vertical where we are playing. And in the other side of this, we see a lot of traction on telco and where we are growing faster, as Stanley 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's become more relevant in our -- as a 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 use case. So it's -- I think it's a good door for a stronger 2024 in terms of demand.

And also, of course, we are betting a lot on the differentiation of CI&T performance based on what we are doing with initial important set of clients. I mentioned, we are working hand-to-hand with CI&T/FLOW with 12 of our largest clients. And I'm sure this is already generating new demand. So this is part of what we see as regain sequential growth from Q4 on. And also, it's, of course, is our main bet for really roll out the same strategy across our whole portfolio of clients and achieve, I would say, regain higher growth next year.

So, basically, I believe we -- as 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 our -- 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 uncertainties 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 changes a lot the scenario for our demand in digital, even though we still see a lot of uncertainties in the macro-environment, and it's hard to predict if how fast the economy -- the global macroeconomy will recover.

So very confident, more related to the way we are positioning CI&T and the response we are getting from our clients in different verticals from banking to education, telco, retail and so on. And I think the last related to the -- I would say, optimist view of the macroenvironment.

Ashwin Shirvaikar

Understood. Thank you for that very comprehensive answer. Can I ask with regards to the CI&T/FLOW presentation at [MIC] (ph) was good one. As it relates to, so maybe the need to upscale and give your full population of employees sort of AI scales and so on and so forth, what is the process and investment needed to do that? If you can provide some details on that?

Cesar Gon

Sure. 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 opportunities and capabilities. And -- but we are heavily invest on having the ability to scale FLOW and this strategy from next year on. I think Bruno can give more details on how we are doing this internally.

Bruno Guicardi

As I mentioned in my talk there, Ashwin, and thanks for the question, I think this is going to be very different, like this is the process of building digital solutions, the process of building software will be very, very different in the next three, five, 10 years. And I think we're very happy where we are right now. Like we have a quarter of CI&Ters already going through that challenge in learning what those new skills and all the new tools are and kind of trailblazing that path, because that will be completely different in the future, the roles in the team, the team themselves, how they're organized like they will be completely different. And I think we're kind of ahead of the pack there. We're learning what that means. And hopefully, we'll be 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.

Ashwin Shirvaikar

Understood. By the way, Bruno, I love the map behind you.

Bruno Guicardi

Thank you.

Eduardo Galvao

Our next question comes from Carlos de Legarreta from Itau BBA.

Carlos de Legarreta

Two questions from my side. The first one, just looking at the geography breakdown of your revenues, particularly what stands out is the softness in LATAM results, not only for the quarter, for the full year, or the first half of the year. So I just wanted to know your insights on whether you think this is perhaps what will drive the softer guidance and it is attributable to maybe this main client?

And secondly, Cesar, I'd love to hear your thoughts on CI&T/FLOW. Obviously, I know you had the event. But I think totally great to hear firsthand from you. And what are the expectations in terms of which verticals do you think this could particularly benefit, or should it be across the board? Thank you.

Cesar Gon

Thank you, Carlos. I think as we mentioned, I think LATAM is recovering faster than other regions, but I think it's more related to our portfolio of clients than general market conditions. And our -- and of course, the top one client impact is in the U.S., so it changes the game among the regions. And Europe is responding in a very good way. So -- but for sure, we count a lot on the fact that we can lead LATAM in a -- very good, especially in Brazil in a very strong way based on our amazing client portfolio here.

Regarding CI&T/FLOW, by now, we have a set of verticals where we are experimenting and getting this enthusiastic results. Banking is one industry. Education is amazing opportunity in different perspective. The telco is another especially where you see opportunities to improve customer services and also optimize very complex operations. And we also have retail -- two big retail companies, one in Brazil and other in the USA in this initial pack of customers. So I believe it's going to be across the board.

Of course, as I would say, large operations with the challenges on customer experience probably will be the main hit for artificial intelligence and CI&T/FLOW. But as we evolve the platform, I believe it's going to be a very horizontal way to drive efficiency. And also, as I mentioned, I think we probably in a few quarters, we will start to see the initial set of killer use case around generative AI and then this will drive a lot of demand for specific verticals.

So, we're excited with our results. Amazingly proud of the set of customers that are already working with us on computing CI&T/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.

Carlos de Legarreta

Thank you for that. And if I may follow-up, just I'd love to hear your thoughts. I'm sure you're aware now that Globant announced recently an ambitious plan to double down their investment in LATAM and particularly in Brazil. I just want to hear your thoughts about that. Obviously, we talk 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 more in the bigger picture?

Cesar Gon

Sure, Carlos. It's amazing to see a company invest on where we already are. Brazil, I always repeat that, Brazil is the largest and the best tech talent pool in Latin America, it's the second largest in the America's time zone. And it's an amazing place to play the supply side of our game. And 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 CI&T.

I believe the good and another aspect of Brazil is this combination of quality and scale, it is around talent plus domain vertical expertise. So, we have a big internal market. So, you can leverage a lot of like banking, you can -- retail expertise, telco expertise, in a game that will change toward this new disruption during 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 U.S., Europe and Australia and Asia. But having Brazil as is still our main source of talent, say a lot of the possibilities of scale, CI&T in the future.

Eduardo Galvao

Thank you, Carlos. We have two questions here from e-mail. First one is regarding the EBITDA margin. So, how should we expect EBITDA margin for the second half of the year, given you reported 14.5% in the first half of the year and the guidance is pointing to 19% margin?

Stanley Rodrigues

I can take that one. Thank you for the question. EBITDA margin has improved in the first half of the year, mainly due to SG&A dilution. Of course, we are closely monitoring our costs and expenses to maintain this lean organization that Bruno mentioned and 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 endeavor. And we will continue to do it so. 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 19%. So, I think that covers.

Eduardo Galvao

Thank you, Stanely. And the final question we have is regarding 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?

Cesar Gon

I can start this one. As you know, we conclude our first wave of acquisition last year, that was amazing to increase, diversify the markets we are -- in verticals we are serving. And now we are dedicated to fully integrate these acquired companies focused on leveraging the relationship of large and global clients that we onboarded. And of course, we are preparing CI&T 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 combined or accelerate our organic growth through a very specific set of acquisitions. So, I think we continue to analyze opportunities in the market. I don't believe we are going to do short-term moves in this space, but I'm sure we are going to do more deals from next year on -- based on the kind of results we could leverage in the past.

Eduardo Galvao

All right. So that concludes our Q&A session. Cesar, could you please proceed with your closing remarks, please?

Cesar Gon

Sure. Thank you, Galvao, Stanley, Bruno to join me. Thank you all for participating in our call. Again, a big thank for all CI&Ters for the solid results in this first half of the year. A lot of challenges ahead, but we are here to overcome that. And a special thank you for our clients that select CI&T to co-create this exciting new chapter of innovation around powered by artificial intelligence. That's it. Stay well. See you soon.

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CI&T Inc (CINT) Q2 2023 Earnings Call Transcript