Ci&T Inc

NYSE:CINT

Earnings Call Analysis

CI&T’s Strong Q2 with Positive AI-driven Outlook

In Q2 2024, CI&T reported BRL 565.7 million in net revenue, marking an 8.1% sequential growth, with significant contributions from expanding engagements with major clients, particularly in North America. The adjusted EBITDA was BRL 108.7 million with a 19.2% margin. Despite a 4.8% year-over-year decline, sequential growth soared by 29%. The net profit increased by 5.8% year-over-year and 56.7% sequentially. The company expects Q3 2024 revenue to be at least BRL 591 million, an 11.7% year-over-year growth. Full-year 2024 guidance anticipates 17-19% EBITDA margin and revenue growth between -0.5% and 2.5%, emphasizing sustainable long-term growth driven by AI initiatives.

Navigating Through Growth Challenges

In the second quarter of 2024, CI&T reported a net revenue of BRL 565.7 million, which reflects a slight year-over-year decline of 1.1%. However, this is a significant recovery from the first quarter, where the company registered an 8.1% sequential growth, marking a crucial rebound driven primarily by expanded engagements with top clients. This trend showcases the company's resilience and focuses on maximizing relationships within its established portfolio.

Geographic and Sector Performance

Geographically, North America continues to be a stronghold, contributing 43% of CI&T's total revenue and growing 15% sequentially. Latin America follows closely, accounting for 41% of revenue with a quarter-over-quarter growth of 1.5%. Both Europe and Asia Pacific are emerging markets for CI&T, contributing 11% and 4% respectively to total revenue, with positive growth reported therein. Notably, sectors such as consumer goods, retail, and industrial goods showed robust growth rates of 19.7% and 15.7%, indicating that CI&T is strategically positioned to leverage industry-specific demands.

Financial Highlights and Margin Management

The financial performance is complemented by strong operational metrics. Adjusted EBITDA for the quarter stood at BRL 108.7 million, with a solid margin of 19.2% despite a slight year-over-year decline of 4.8%. CI&T has reported a substantial 29% sequential increase in adjusted EBITDA, attributed to improved gross margins and effective cost management, reinforcing its focus on balancing growth and profitability.

Future Revenue Guidance

Looking ahead, CI&T is optimistic, projecting third-quarter net revenue of at least BRL 591 million, indicating an 11.7% growth year-over-year, along with a 4.5% increase sequentially. The company has also revised its full-year revenue growth guidance to a range of -0.5% to 2.5%, reflecting a recovery in client spending and demand for their services. This further supplements expectations of a double-digit revenue growth in the second half of the year.

Strategic Focus on AI and Talent

CI&T’s strategic pivot towards artificial intelligence represents a significant part of its future growth narrative. The CI&T Flow platform, which has seen a 68% adoption rate among teams, exemplifies this commitment. The company plans to increase its workforce by hiring top technological talent, ensuring they remain a competitive force in the AI-driven landscape. There’s a clear focus on enhancing productivity and efficiency through AI, which CI&T believes will become a centerpiece of digital transformation across industries.

Preparing for Long-Term Success

CI&T is positioning itself for long-term success by building capabilities and establishing a robust financial foundation. The company reported a 11.6% adjusted net profit margin, a notable improvement over the previous year, attributed to lower tax and financial expenses. Furthermore, with BRL 131.3 million generated from operating activities, the company is in a strong position to pursue strategic initiatives and capitalize on market opportunities.

Adapting to Market Dynamics

As marketplace dynamics evolve, CI&T is responding by enhancing its approach to client engagement. The company’s focus on vendor consolidation within large enterprises plays to its advantage, offering clients streamlined operations and solutions. With expectations of tech budgets stabilizing, CI&T anticipates continued demand for its services, driven by efficiency and innovation, setting the stage for a potential reinvigoration of investment cycles post-2024.

Earnings Call Transcript 2024-Q2

[Eduardo Galvao, executive]

Good morning. Welcome to CI&T Earnings Call for the Second Quarter of 2024. I am Eduardo Galvao, Head of Investor Relations at CI&T. Joining me on today's call are Cesar Gon, Founder and CEO; Bruno Guicardi, Founder and President for North America and Europe; and Stanley Rodrigues, our CFO.

This event is being recorded. [Operator Instructions] If you'd like to submit a question, please send it via e-mail to [e-mail]. The presentation is available on the company's Investor Relations website, and the replay will be available shortly after the event is concluded.

Some of the matters we'll discuss on this call, including our expected business outlook, are forward-looking statements. They are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those expressed on this call. We caution you not to place undue reliance on these forward-looking statements as they are valid only as of the date when made.

During the company's presentation, we 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 overview of our quarterly highlights followed by some of our business cases. We'll then talk about our people and our financial results.

At this time, I'll pass it on to Cesar Gon to begin our presentation. Cesar?

[Cesar Gon, executive]

Thanks, Eduardo. Good day, everyone. Thank you for joining us today. It's always a pleasure to discuss our recent performance and strategic advancements with you. A year ago, we proudly announced the launch of CI&T Flow, our end-to-end AI-powered platform, alongside a bold vision to radically transform CI&T. It was a decisive moment to fully commit to a future bolstered by artificial intelligence.

Today, I'm thrilled to share the remarkable advances, learnings and tangible results we have achieved, thanks to the unwavering partnership and trust of our clients and the extraordinary dedication of our teams who have embraced this vision and made it a reality.

In our vision, the AI disruption will unfold along the next 10 years in 3 acts. Act 1 is efficiency and hyper productivity, paving a way for Act 2, customer experience and hyper-personalization. And this progression then leads to ACT 3, decision-making and new business models. Now CI&T is totally focused on Act 1 by turning our teams into AI-boosted teams. Thus far, this approach has generated impressive results in time to market, quality and productivity.

One important learning is that adoption of generative AI is not a straightforward process. It's not natural for the enterprises or for the teams. So it demands a structured and method-based approach. For the companies, our clients, you need to introduce tangible benefits of AI in an enterprise ready approach, meaning within guardrails of reliability, security and privacy. For the teams, you need to combine a reskilling roadmap with a concrete view of purpose.

So during the last 18 months, we cracked the nut with CI&T Flow for these 2 fronts, awarding more than 100 clients and achieving almost 70% adoption across CI&T teams. Bruno will address our engagement metrics shortly. And this is just the beginning of this new chapter. We have a lot more to do regarding efficiency, the Act 1, and we are barely touching the Act 2, the customer experience disruption that is ahead and is inescapable in a time frame of 3 to 5 years.

With the continuous evolution of technology, we see possibilities, once unimaginable, becoming reality. Artificial intelligence has redefined our methods, enhancing our capabilities and accelerating our results. As we resume our growth trajectory, we are expanding our teams to accelerate AI initiatives across the globe. This is an exciting time for all of us immersed in a world of digital and software engineering, challenging us to rethink what is possible.

Now let me comment on the financial highlights for the quarter. In the second quarter of 2024, our net revenue totaled BRL 565.7 million, an increase of 8.1% compared to the first quarter of 2024, exceeding our guidance and market expectations. This strong growth was primarily driven by the expansion of our existing engagement with our top clients with additional contribution from ramp-ups of some new clients we recently acquired.

Our AI growth machine, a sales team of experts, strategies and AI specialists, continue to enhance our speed and precision in understanding clients' needs, making us more effective in proposing unique solutions. These efforts are reinforcing our reputation as a trusted partner, and this trend supports our positive outlook for the second half of the year and into 2025.

Our value proposition is to deliver state-of-the-art digital services in a hyper-productivity way, powered by CI&T Flow. As a result, we have been growing our business in the U.S. and Brazil, our core markets, while also fostering growth in emerging regions for us, such as Europe and Asia Pacific.

We ended the quarter with an adjusted EBITDA margin of 19.2%, demonstrating our ability to deliver high growth with solid profitability metrics.

Finally, our cash generation from operating activities was BRL 131 million in the first half of 2024, 11.6% above the same period last year. Our cash flow profile allows us to continue investing in strategic initiatives and drive long-term growth.

As we announced 2 days ago, and you might have noted, and I hope you did, we have refreshed our branding to better reflect our identity as an AI-first technology partner. CI&T stands for collaborate, innovate and transform, and it highlights our core mission and values. We are thrilled to embark on this new chapter and continue our mission with renewed energy and focus.

Now let's explore some concrete examples of how we are creating value for our clients and revolutionizing our offerings through the power of AI.

[Presentation]

It's exciting to witness tangible AI advancements in our offerings.

Now I invite Bruno to talk about our people and how we are preparing our teams to the future.

[Bruno Guicardi, executive]

Thank you, Cesar. The world of technology is undergoing a significant transformation, fueled by advancements in artificial intelligence and changing consumer behaviors. This shift presents immense opportunities and challenges for our business across all sectors. As a global leader in digital transformation, CI&T is well positioned to capitalize on these trends.

In the second quarter of 2024, we surpassed 6,200 employees, a 0.6% increase year-over-year and a 2.4% increase compared to the first quarter of 2024. Our voluntary attrition rate remains at a healthy level of 10.4%, which strongly indicates employee satisfaction and engagement.

As we navigate these technology changes, I'm excited to share our vision for growth and opportunity at CI&T. We are once again boosting our hiring machine to attract technology professions across the globe to strengthen our artificial intelligence initiatives.

Our investments in talent are a response to the certain demand for our digital services. Our clients increasingly turn to us for innovative solutions that drive efficiency and enhance consumer experiences. This demand is expected to grow in 2025 and beyond, and we're committed to equipping our teams to meet these needs ahead of time.

By attracting top-tier technology talent, we are not only preparing ourselves for the challenges ahead, but also positioning CI&T as the workplace of the future in an industry poised for decades of growth.

The successful adoption of generative AI is paramount for workers, leaders and organizations to continue to thrive. In 2024, we intensified our efforts to elevate internal adoption rates of CI&T Flow, our own GenAI platform. And I'm pleased to report that 68% of CI&T teams have now integrated Flow into their daily activities and 2,400 CI&Ters are Flow certified, a fairly recent effort that we initiated earlier this year.

Achieving this high adoption rates requires a well-structured and phased strategy, emphasizing training, user engagement and skill development. These efforts are not just about technology, they're about transforming our culture and workflows to fully realize the benefits of GenAI.

Most importantly, over 100 clients have been scaling up their results with the Flow platform, boosting productivity and efficiency within the full software development process, delivering more with less, [ setting ] CI&T apart from other vendors, strengthening our relationship. We are at pivotal moment where embracing this opportunity can propel us to new heights, allowing us to play a crucial role in the upcoming global technology landscape.

Now I invite Stanley to present our financial performance for the second quarter of 2024.

[Stanley Rodrigues, executive]

Thank you, Bruno, and good morning, everyone. I'm pleased to be here once again to present our financial performance. In the second quarter 2024, our net revenue was BRL 565.7 million, representing a 1.1% decline compared to the same period last year. However, compared to the first quarter of 2024, we achieved an impressive 8.1% revenue growth. This rebound was primarily driven by the sequential growth of our top 10 clients. This achievement demonstrates our ability to expand our wallet share with clients, seize new opportunities and strengthen relationships, even in a dynamic market environment.

Now let's deep dive into our net revenue distribution by geography and industry verticals. North America remains our largest market, accounting for 43% of our total revenue in the first half of 2024. The revenue contribution from North America grew 15% sequentially, boosted by the expansion of our largest clients in the region, demonstrating our ability to grow within our core market.

Latam remains a crucial part of our operations, contributing 41% of our total revenue in the first half of 2024. Revenue from Latam grew 1.5% quarter-over-quarter, indicating a resumption on its growth trajectory.

Europe and Asia Pacific accounted for 11% and 4%, respectively, of our total revenue in the first half of 2024. Both regions reported sequential growth, fostering market opportunities for CI&T.

We are pleased to highlight that we have observed sequential growth across nearly all of our industry verticals. Consumer goods and retail and industrial goods experienced above-average growth, recording sequential increases of 19.7% and 15.7%, respectively. This strong performance was driven by 2 main factors: accelerated growth from large clients we onboarded last year that are gaining traction in ramping up their engagements, and the deepening of existing relationships with our long-term clients.

Finally, both of our top client and our top 10 clients posted an increase of 5.6% and 10.2% compared to the first quarter of 2024, respectively. The expansion of our existing engagements with our major clients has been our main growth driver and underscores our ability to generate value on a recurring basis.

Last quarter, we announced our intention to change our reporting currency to U.S. dollars by the end of the year. Thus, as of this quarter, we will begin presenting the number of our multimillion accounts in U.S. dollars. This approach offers a better segmentation of our client cohorts, given the growth trends of our business.

For the 12 months ended in the second quarter of 2024, we had 9 clients with revenue exceeding $10 million and 16 clients with revenue between $5 million and $10 million. We are quite excited about the addition of new logos as well as the development of our recent engagements.

As Cesar mentioned, our AI growth machine, a dedicated sales team, have been fine-tuning our offerings according to client needs, fostering the addition of new logos, including blue-chip companies with relevant technology investment opportunities. Our track record of delivering on our commitments and navigating the challenges and opportunities within our clients speaks for itself. We are proud of our long-term relationships with our clients built on value creation and continuous innovation.

Now moving on to our financial performance. In the second quarter of 2024, adjusted EBITDA reached BRL 108.7 million, representing a year-over-year decline of 4.8%. This decrease mainly reflects our strategic investments in sales efforts aimed at fostering long-term growth, combined with a strong comparison basis in the second quarter 2023.

The adjusted EBITDA margin was a solid 19.2% in the quarter. On a sequential basis, we observed a significant 29% increase in adjusted EBITDA. This improvement was driven by better gross margins and the dilution of fixed expenses. We remain committed to generating healthy margins through our diligent cost management approach. While we continue investing to resume our sustainable growth trajectory, our focus remains on balancing short-term profitability with long-term growth initiatives.

Our adjusted net profit for the quarter was BRL 65.4 million, 5.8% higher than the same period last year. Our adjusted net profit margin rose from 10.8% in the second quarter of 2023 to 11.6% in the second quarter of 2024. This improvement is attributed to a lower income tax and financial expenses. Sequentially, adjusted net profit increased by 56.7%, showing our commitment to operational efficiency and financial discipline.

Finally, in the first half of 2024, we generated BRL 131.3 million from our operating activities, which is 11.6% higher than the first half of 2023. Free cash flow calculated as net cash generated from operating activities, excluding CapEx, was BRL 71.9 million. Our cash conversion ratio for the period was 68%. Our financial strength provides us flexibility to pursue opportunities that enhance our competitive position and deliver long-term value to our stakeholders.

Now I will pass it on to Cesar to comment on our business outlook.

[Cesar Gon, executive]

Thank you, Stanley. Now let me add some color to our business outlook for the next quarter and year. We expect our net revenue in the third quarter of 2024 to be at least BRL 591 million on a reported basis, equivalent to an 11.7% growth in revenue compared to the third quarter of 2023 and a 4.5% increase on a sequential basis.

For the full year of 2024, we are increasing our guidance to reflect the growing demand for our services. We now expect our net revenue growth at constant currency to be in the range of minus 0.5% to 2.5% year-over-year. In addition, we estimate our adjusted EBITDA margin to be in the range of 17% to 19%.

Once again, I want to highlight that our full year guidance implies a significant sequential growth throughout 2024. We anticipate a faster recovery from the unusual challenges of 2023, leading to double-digit revenue growth year-over-year in the second half of 2024. This robust performance will set the stage for a strong growth trajectory in 2025 and the years to follow.

In closing, I want to extend my gratitude to our team for their unshakable dedication and resilience. Together, we will continue to propel our company towards the future marked by innovation, collaboration and meaningful impact.

Thank you all for your trust and support. We now conclude our presentation and may begin the Q&A session.

[Eduardo Galvao, executive]

Okay. We'll now begin the 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.

The first question comes from Leonardo Olmos from UBS.

[Leonardo Olmos, analyst]

Well, we are so impressed with the numbers. Congratulations. Very good results and perspectives ahead. Well, I'd like you to talk about revenue first. If you could disclose a little bit how our bookings, the projects pipeline, talk a little bit about how the verticals are performing. It looks like across the board, but we can see, for example, that the growth in the U.S. was 10x higher than the growth in Latam. So if you could talk a little bit about those success stories in the U.S. and what we're looking for, what verticals are performing well?

And that's it. That's my question. [ Think it's ] long enough.

[Cesar Gon, executive]

I can get this one. Hello, Leonardo. Great to see you here. Well, let me talk about the environment, then budgets and then commercial activities. First, I think, in general, there is still a lot of uncertain macro environment. However, there is an important difference from last year from 2023, especially for our clients, large companies. I think what we see now is the tech budgets are more stable. So we are operating still in a mode of scarcity, but without the ups and downs of last year.

And budget stability is key for us for 2 reasons. One of our main strategies for gaining client share is replacement of underperforming competitors. And clients will only be open for this type of, let's say, intervention if they have a good budget visibility. And the second factor is a similar process. I think it's also a shadow of this scarcity period and also play in favor of CI&T is a lot of vendor consolidation process. So I think during the previous years, companies, especially large companies, increased the number of vendors and leading to a lot of complexities and overhead. So now they are, I think, searching for efficiency, and this process of consolidation playing in favors -- in favor of CI&T strength and position.

In terms of commercial activity, I think if you -- and pipeline for this year, if we compare the same year of last -- same period of last year, is considerable, higher, probably the double in terms of opportunities and bookings. So -- and now so, another good indicator is the deal closing ratio continues to improve along the years. So -- and it gives us a very positive outlook for the second half of the year and for 2025.

In terms of regions, as you mentioned, I think the U.S. and our North America operation was where the -- was the star of this first half of the year, mainly because we onboarded some amazing new clients last year that are still ramping up. But during this first half of the year, I think we evolved a lot, especially in Brazil. So you should expect a lot of traction in our Brazilian operation in Q3 and Q4. So, we are expecting a good growth across the board, even in our smaller regions like Europe and Asia Pacific.

I think in general, it's a combination of some big new deals we did in the second half of last year and the beginning of this year. And also, I think the success of this combination of offerings powered by AI and our new sales approach we are calling AI growth machine that is a more aggressive sales structure.

[Leonardo Olmos, analyst]

Very good. Congrats again.

[Eduardo Galvao, executive]

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

[Thiago Kapulskis, analyst]

So I have -- the first one is on AI, right? You -- I mean there's a lot that you guys are doing and really interesting stuff. We heard great things from other digital IT services this quarter that we cover. And one of the things that kind of -- is kind of question that we have after hearing everything is about the cycle, right? Because there are companies that are mentioned, they are still at very early stages and still need to educate people about AI and budgets, they still have a lot to ramp up.

So if you could mention a little bit what you're seeing and where we are in the cycle, if this should be a cycle as strong as others like the cloud implementation and the migration, et cetera, that would be great.

And also, in terms of the strength that you're seeing in the conversations, do you think that such strength will or [indiscernible] at least in terms of the budgets, how do you see that trend going into 2025? Do you see a more benign environment that could make us more confident about the exit rate this year and it being extended downwards next year?

[Cesar Gon, executive]

Thanks, Thiago. I'm going to address, I think, basically 2 questions, right? The first one, regarding time line of investments, what we see is -- this is the moment for efficiency. Of course, everyone is expecting future, I would say, war around customer experience, but the technology is not there yet. There is still a mature cycle that we need to wait for before expose the clients of our clients to the models to this new technology. But the efficiency is a [ red there ]. And if you have a good method-based approach, you can capture that. It's not easy. It's a combination of a strategy for adoption for the teams and also how you guarantee for large companies that you are playing in -- within the guardrails of security or privacy and reliability that are nonnegotiable for large established enterprise.

So what I see as a roadmap is probably we will continue to see the majority of the investment related to generative AI, linked to efficiency this year and next year, and probably in 2 or 3 or 5 years, we're going to see the beginning of a lot of huge investment in a radical change in customer experience. We -- basically, we are going to move from the current paradigm, the smartphones, screens, buttons to a more natural language-based interaction between computer and machine.

I'd like to say that the interaction with the machines will become more human. And this will be a huge opportunity for disruption for customer -- getting customer attention and engagement. And I think this will be a huge cycle of investment, very similar or even higher what we saw with mobile revolution a few years ago. But it's -- the time line, I would guess, my educated guess is 3 to 5 years for that.

And after that, I think there is not a huge battle along decision-making and business models. So this is basically -- we are guiding our clients, don't focus on short term. I think in terms of -- in the world of technology disruption, companies and we as humans, we tend to radically overestimate the impact in the short term, but radically underestimate in a time line of 10 years, for example. So it's time for preparing the capabilities and capture the benefits of efficiency and prepare for the experience battle ahead.

The second question was regarding, I think...

[Thiago Kapulskis, analyst]

Budgets 2025...

[Cesar Gon, executive]

Yes. What I see is gradually -- now, 2024, I think the word is stable. That is good. It's very good to play in a stable environment without ups and downs of budget. What I expected and is natural is an increase for next year basically because I have no doubt that tech and digital are secular trends. So this -- now is this relatively conservative investment in this year and last year are not sustainable in terms of competitiveness and client engagement.

So companies will need to accelerate their digital strategies in the following years. And so I am expecting regaining also an increase on investments around digital. So a new cycle of investments in technology that will play in favor of companies with a very solid value prop as us.

[Eduardo Galvao, executive]

Thank you, Thiago. Our next question comes from Puneet Jain from JPMorgan.

[Puneet Jain, analyst]

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

[Bruno Guicardi, executive]

I can take that one. Puneet, that's the first option, right? So it's -- as we kind of grew, we kind of replaced also some on site to nearshore revenue. So that's the outcome you see there. It's less about price pressure. We don't see that. As to Cesar's point early, the market is stable. And so the pressure on prices are also stable.

So it's very competitive, but still stable. So we don't see any need to reduce price at this point, but the average price consequence that you see there is more a mix between onshore and nearshore. And we predict that will continue to be the case for the next couple of years.

[Puneet Jain, analyst]

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

[Stanley Rodrigues, executive]

I can take that one. Thank you, Puneet. With regard to margins, if you see, we grew our margins sequentially. Comparing to 1 year ago, we are even. So we will continue to focus on productivity gains from our diligent cost management approach. Also, we are leveraging on top of G&A as we grow, G&A as fixed costs. On the other hand, we are investing on hiring, training people.

Also we have expenses related to AI. And we foresee that this -- we will continue to focus on those margin management, let's say, but also investing in what really matters, which is propelling growth and the opportunities that they are ahead of us. So you should expect the same type of margins as we are guiding EBITDA between 17% to 19%. So we are on track to deliver that guidance. So that's pretty much what you should expect.

[Eduardo Galvao, executive]

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

[Cesar Gon, executive]

I can get this one. Thank you, Bryan, for the question. Basically, I think at this moment, we are really focused more on turning the hyper productivity in new business than trying to replace the business model. So even the AI-boosted teams are still working in a very time mature way. But the difference is that you can work with much more aggressive time to market in terms of deliverables.

And this is new in the market. Companies were -- I think were not prepared for the level of difference among players, and they are getting used to it. There is still some discussions about evolving the business model of the [ whole interest ] towards some more output based. But I think this is very early stage.

So what I see now is as companies are being aggressive on capturing the efficiency, opportunities regarding AI, but very conservative in terms of changing the way they acquire services in the market. So basically, it's an overview of what I see. Probably it will evolve in different pathways in the years to follow.

[Eduardo Galvao, executive]

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

[Cesar Gon, executive]

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

[Eduardo Galvao, executive]

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

[Bruno Guicardi, executive]

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

[Eduardo Galvao, executive]

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

[Cesar Gon, executive]

Sure. Thank you all for participating in our call. Thanks, Bruno, Stanley, Eduardo. I think probably you saw this week, we proudly launched our new visual identity. We are not just updating our brand. We are celebrating who we are and what we stand for. And I love the feedback from our clients, partners and especially our teams.

So once again, thank you all CI&Ters around the world for your spectacular hard work and achievements in this quarter, and I continue counting on you. And a special thanks for our clients for selecting CI&T to co-creating this new exciting chapter of innovation powered by AI. So stay well. See you soon.