Ci&T Inc

NYSE:CINT

Earnings Call Analysis

CI&T Achieves Record Revenue and Positive Outlook for 2024

In the third quarter of 2024, CI&T reported a record net revenue of BRL 622.2 million, a 17.6% increase year-over-year, driven by strong performance from top clients and innovative AI solutions. Revenue growth is particularly notable in Financial Services and Retail, with a 25.3% increase among the top 10 clients. Looking ahead, the company expects fourth quarter net revenue between BRL 620 million and BRL 655 million, reflecting a robust 22% year-over-year growth at the midpoint. Additionally, adjusted EBITDA margins are projected to rise to between 18% and 19%, indicating continued profitability and operational efficiency.

Strong Revenue Growth and Record Results

CI&T has delivered impressive financial performance for the third quarter of 2024, achieving a record net revenue of BRL 622.2 million. This represents a significant increase of 17.6% compared to BRL 529.1 million for the same period last year. When adjusted for constant currency, the growth remains substantial at 9%. Sequentially, revenue has also grown by 10%, underscoring sustained momentum throughout the year. The company’s top 10 clients contributed significantly to this growth, with a remarkable 25.3% year-over-year revenue increase, illustrating strong demand and effective client relationships.

Geographical and Sector Diversity

CI&T's revenue growth is well-distributed across various regions: 44% of revenues come from North America, followed by 41% from Latin America, 11% from Europe, and 4% from Asia Pacific. Notably, revenue from Latin America saw an 11% sequential increase. The company has demonstrated robust performance across key verticals, with double-digit revenue growth in Financial Services, Consumer Goods, and particularly in Retail and Industrial Goods, where revenues have effectively doubled compared to last year, greatly supported by the onboarding of new clients in these sectors.

Emphasis on Client Expansion and Retention

CI&T's strategy is centered around a 'land and expand' approach, focusing on deepening existing client relationships while also onboarding new significant clients. Over the past year, they have acquired several clients, with 8 generating over $10 million in revenue and 17 between $5 and $10 million. The company aims to increase its wallet share among these clients by broadening its service offerings and reinforcing strategic partnerships.

CI&T FLOW: A Game Changer

One of the standout initiatives contributing to CI&T’s success is the CI&T FLOW platform, which integrates artificial intelligence to enhance software development and operational efficiencies. Over 75% of the company’s teams have engaged with this platform, resulting in immediate productivity improvements, allowing clients to achieve significantly higher operational speeds. This initiative helps the company stay competitive and delivers greater value to its clients, thereby further solidifying long-term partnerships.

Adjusted EBITDA and Profit Margins

The adjusted EBITDA for Q3 2024 reached BRL 121 million, reflecting a year-over-year increase of 24.2% and yielding an adjusted EBITDA margin of 19.5%, up from 18.5% in Q3 2023. The improved margins are attributed to effective cost management strategies and higher operational efficiency. The company successfully achieved a cash generation from operating activities amounting to BRL 295 million during the first nine months of 2024, indicating solid cash conversion capabilities.

Updated Guidance for Future Performance

Looking ahead, CI&T has adjusted its guidance for Q4 2024, projecting net revenue between BRL 620 million and BRL 655 million, equivalent to a year-over-year growth rate of approximately 22% at the midpoint. For all of 2024, the company expects constant currency revenue growth to range between 0.5% and 2%. In addition, the adjusted EBITDA margin has been revised to a new range of 18% to 19%, reflecting a commitment to maintaining profitability amid an evolving market landscape.

Positive Outlook Amid Challenging Market Dynamics

Despite the ongoing macroeconomic uncertainties, CI&T’s leaders express confidence in the stability and visibility of their clients' budgets, particularly in North America and Latin America. The company recognizes the competitive nature of the financial services industry but perceives accelerated demand for their services. This reflects their strategic positioning to replace underperforming vendors and capitalize on evolving client needs, particularly regarding digital transformation initiatives.

Earnings Call Transcript 2024-Q3

[Eduardo Galvao, executive]

Good morning. Welcome to CI&T Earnings Call for the Third Quarter of 2024. I am Eduardo Galvao, Investor Relations Director 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] 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 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 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, please?

[Cesar Gon, executive]

Thanks, Eduardo. Today, I want to take a moment to talk about something that is at the very heart of our success and growth, our company culture. At this time of great change and excitement with the AI disruption, I'm intensifying my travels to connect with our teams around the world. CI&T now has people in 25 countries. And in each visit, I feel the key element that unites and set us apart, our deeply rooted culture.

Corporate culture does not happen by chance. It's the result of years of intentional choices, behaviors and leadership. Our company culture is built on 6 tenets that guide everything we do. Let me briefly give you some context on them. It starts with our clients. They are the reason we exist. They face complex challenges and we bring our expertise as tech specialists to solve them with agility and innovation.

To achieve this, we foster an environment of trust built among smart, hard-working and resilient people, which enables deep collaboration and teamwork. This teamwork is driven by an obsession with excellence and continuous improvement, delivering superior results for everyone we serve. To remain relevant to our clients and sustain these results over the long run in our infinite game, we must continuously learn, adapt and reinvent ourselves.

Finally, we live by the belief that the more diverse we are, the stronger we become as a collective and more fulfilled we are as individuals. As we embrace exciting transformations, including our AI reinvention, our culture remains the bedrock of our strategic vision and operational excellence and the key element to attracting and empowering top talent.

Now moving to our financial highlights. CI&T continues to excel in an ever-evolving digital landscape. In the third quarter of 2024, we achieved a record net revenue of BRL 622.2 million, marking a 17.6% increase compared to the third quarter of 2023 with constant currency net revenue growth of 9% year-over-year. Growth was especially strong among our top 10 clients with net revenue up 25.3% year-over-year. The tangible productivity gains from the CI&T/FLOW platform resonate well with our clients, giving us the opportunity to continue expanding our share with them.

We continued to refine the process and methods of our AI growth machine, our expert sales team, boosting agility and effectiveness in meeting client needs. This enabled us to onboard large clients with substantial tech investments, reinforce our long-term land and expand growth strategy. We concluded the quarter with a solid adjusted EBITDA margin of 19.5%. Additionally, our cash generation from operating activities reached BRL 295 million in the first 9 months of 2024, underscoring our strong financial position.

We continue to attract and develop talent in the regions where we operate. This quarter, we onboarded 520 new CI&Ters across the globe. Notably, we have streamlined our talent acquisition process with AI, enhancing our ability to support our high-growth ambitions. In summary, we are excited with the perspectives for 2025 as we embrace AI as a transformative force and optimize our sales machine.

Now let's explore some compelling stories of our clients leveraging AI in diverse context.

[Presentation]

I hope you enjoyed it. Now I would like to invite Bruno to talk about our global delivery model, CI&T/FLOW evolution and our talent strategy.

[Bruno Guicardi, executive]

Thank you, Cesar, and good morning, everyone. It's a pleasure to be here again. We ended the third quarter of 2024 with 6,700 CI&Ters, reflecting 10.5% year-over-year growth and 8.3% growth compared to the second quarter of 2024. We're glad to resume our headcount growth as we expand our services with our clients. This quarter, specifically, we are onboarding more than 500 CI&Ters globally.

During the first half of this year, we prepared ourselves for a higher growth pace and strengthened our talent attraction machine. In addition, we are accelerating the onboarding and training process using AI, which helped to maintain a healthy utilization rate during the quarter. Also, our voluntary attrition rate remains at a healthy 10.5%. As Cesar explained earlier, we firmly believe that our culture is our biggest differentiator that drives our long-term resilience, excellence and sustainable growth.

Talking a bit more about our people. I'm delighted to share some exciting updates about our CI&T Next Gen, our trainee program that holds a special place in our hearts. We're passionately committed to developing the next generation of tech leaders by providing them a platform to learn, innovate and excel. This program stands out for its unique approach. It goes beyond conventional learning, offering an immersive experience where theory integrates with hands-on practice. Also, our proprietary platform, CI&T/FLOW, plays a central role in leveraging artificial intelligence to enrich and accelerate the learning journey.

We have partnered with leading universities in Brazil and Colombia, and we were invigorated by the overwhelming response to our program, receiving over 10,000 applications. We plan to onboard 500 of the most talented people in the first quarter of 2025. Attracting highly talented young professionals has been a cornerstone of our operating model. We foster the development of our people and promote from within. This approach not only strengthens our culture, but also ensures that we continue to grow and innovate.

Now moving on to our delivery model. Last year, we launched CI&T/FLOW, our end-to-end AI-powered platform with a bold vision to transform software development for CI&T and our clients. This decisive moment marked our commitment to a future powered by artificial intelligence. Today, I'm thrilled to share some tangible results we have achieved. I'm pleased to report that over 75% of our teams have integrated Flow into their daily activities and over 3,000 of them are Flow certified. We are truly proud of this achievement given that GenAI is not just another technology. It requires a different way of working and a mindset shift, which makes the adoption journey quite challenging.

We're also very proud that more than 100 clients have embraced Flow since the platform launch. They are experiencing immediate value creation through significant improvements in velocity and productivity, doing more with less, which is a great way to create momentum and foster a more extensive adoption and transformation. This is an exciting time for us in the world of digital and software engineering. We are front-runners in a massive transformation that is just starting and we are determined to continue ahead.

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

[Stanley Rodrigues, executive]

Thank you, Bruno, and good morning, everyone. I'm pleased to share our financial performance for the third quarter of 2024. Our net revenue reached a record BRL 622.2 million, marking a 17.6% increase compared to BRL 529.1 million in the same period of last year. On a constant currency basis, this represents a solid 9% growth. In addition, we are glad to report a 10% revenue growth on a sequential basis, reflecting our sustained momentum throughout 2024 as we have been guiding the market.

Our top 10 clients have shown particularly strong performance with net revenue growth rising by 25.3% year-over-year. This impressive figure underscores our unwavering commitment to delivering exceptional value and building long-term relationships with our key clients. Our financial results this quarter reflect not only our robust client relationships, but also our strategic focus on expanding our market presence and delivering innovative solutions.

We have achieved net revenue growth across all regions on a year-over-year basis, demonstrating our balanced global presence. For the 9 months of 2024, our geographic distribution of net revenue is as follows; 44% from North America, 41% from Latin America, 11% from Europe and 4% from Asia Pacific. In the third quarter, net revenue from Latin America grew by an impressive 11% on a sequential basis, driven by our strategic initiatives with top clients in the region. North America continues to be our fastest-growing market, showcasing our ability to drive value in diverse markets.

Throughout 2024, we have consistently experienced growth across our primary verticals. In third quarter '24, revenue from Financial Services, Consumer Goods and Retail and Industrial Goods verticals grew by double-digits year-over-year. Notably, revenue from Retail and Industrial Goods sectors actually doubled compared to third quarter '23, fueled by new clients we acquired in the last 18 months who are growing at a rapid pace. This growth includes significant contributions from automotive players and food retail companies.

Over the last 12 months ending in the third quarter of 2024, we had 8 clients generating over $10 million in revenue and 17 clients within the $5 million to $10 million range. One of our top priorities is to increase our wallet share among our largest clients. We are committed to fostering strong, long-lasting relationships with them and broadening the range of services we provide. This aligns with our land and expand strategy, which focuses on retaining existing clients, while expanding our presence within their organizations.

Moreover, we are excited about the addition of new clients we have recently engaged, including large and well-known enterprises, presenting significant technology investment opportunities. As Cesar mentioned, our AI growth machine, a specialized sales team, has been refining our offerings, enhancing our effectiveness and speed to meet client needs.

Our adjusted EBITDA for the third quarter of 2024 reached BRL 121 million, representing a 24.2% increase compared to BRL 98 million in the same period of last year. The adjusted EBITDA margin improved to 19.5% in the third quarter of 2024, up by 1 percentage point from the third quarter of 2023. We have been dedicated to maintaining healthy margins through a diligent cost management approach. In addition, we have strategically invested in our sales team to drive sustainable revenue growth.

Adjusted net profit was BRL 56.5 million, an increase of 32.9% compared to the third quarter of 2023. The adjusted net profit margin increased from 8% in the third quarter of 2023 to 9.1% in the third quarter of 2024. This improvement was mainly due to the increase of the adjusted gross profit, partially compensated by higher income tax expenses in the quarter. In the 9 months of 2024, we generated BRL 295 million from our operating activities, a 15.9% increase compared to the previous year. This represents a cash conversion to adjusted EBITDA of 94%, demonstrating our healthy capacity to generate cash from our operation.

Now I invite Cesar back to comment on our business outlook.

[Cesar Gon, executive]

Thank you, Stanley. For the fourth quarter of 2024, we expect our net revenue to be in the range of BRL 620 million to BRL 655 million on a reported basis. At the midpoint of this range, our net revenue guidance represents a 22% year-over-year growth.

For the full year of 2024, we are updating our guidance range and raising the midpoint. We now expect net revenue growth at constant currency to be between 0.5% and 2% year-over-year. On a reported basis, net revenue growth at the midpoint of the range for 2024 is expected to be approximately 4 percentage points higher than growth at constant currency, assuming an exchange rate of BRL 5.55 to the U.S. dollar in the fourth quarter.

Additionally, we are raising the midpoint of our guidance for the adjusted EBITDA margin, which we now estimate to be in the range of 18% to 19%. In 2024's first quarter, we set the groundwork for a year of solid sequential growth, signaling a robust V-shaped rebound from 2023's atypical year and aligning with our historical track record. The solid exit rate in the fourth quarter of 2024 position us favorably for a sustainable growth trajectory heading into 2025 and beyond.

As we conclude, I extend heartfelt gratitude to our clients, stakeholders and my exceptional team for the trust, support and dedication that drive us forward. Let's continue to collaborate, innovate and transform.

We now conclude our presentation and open the floor to your questions.

[Eduardo Galvao, executive]

[Operator Instructions] The first question comes from Leonardo Olmos from UBS BB.

[Leonardo Olmos, analyst]

Congratulations on the great results and the perspectives going forward. Very happy to see it. 2 questions on my side. First, on employee growth. If you could talk a little bit about the good problem you have to face. So you got a lot of demand and you may need to hire a lot of people. Can you talk a little bit about that and how the utilization rates are doing? And the second question was, we noticed that income tax was a little higher than we expected. Can you talk a little bit about the expectation of tax rate going forward?

[Bruno Guicardi, executive]

I can take the first one on the headcount. The headcount has been growing in line with revenue growth, right? So we don't think it's a big problem right now. The market is still stable. So it's not as hard as it was in the years -- in the pandemic years. And we were able to grow even during pandemic years. So at this point, it's been an easy problem to solve. So not too hard. And we've been competing in this market for 29 years and it's never been easy. It's never easy, but it's easier than, I guess, '21, '22.

Stanley, do you want to...

[Stanley Rodrigues, executive]

Yes. Let me get this about tax rate. Leo, thanks for the question. Well, about the effective tax rate, the better way to see that is to see in the 9 months of 2024. As you can see, we have a 38.7% in effective tax rate compared to the 9 months in 2023, which was 36.5%. This increase pretty much we have included there. First, some business restructuring that they are one-off expenses in this year, affecting the tax rate and also some loss-making from emerging regions that we have within the year.

Another way to see that is to see the cash tax rate. The cash tax rate for the 9 months is 10% this year compared to 14.8% from the 9 months of 2023, which are both exceptional effective cash tax rate, let's say. With regard to going forward, we expect to behave in that way. So in the cumulative way, it's the best way to see -- to translate our effective tax rate.

[Bruno Guicardi, executive]

Leo, about the utilization rate, I forgot you mentioned. It's been -- it's still very healthy, around between 85% and 90%. So even with the growth, we've been able to kind of onboard people faster than in the past just with use of AI-based learning tools and onboarding processes. So that's still very high.

[Eduardo Galvao, executive]

Our next question comes from Vitor Tomita from Goldman Sachs.

[Vitor Tomita, analyst]

So we have 2 questions from our side. The first one is if you could give us a bit more color on which factors were most important for the margin improvement in the quarter and for the guidance raise? You cited cost management approaches, but also if factors such as capacity utilization improving, FX, AI and other drivers might have surprised you in how effective they were in supporting your margins?

And our second question would be on the North America and U.S. business. How have you seen the commercial environment and moods among clients in the U.S. leading up to elections? And now after elections, do you believe there might have been some repressed demand for new initiatives there that might be unlocked now or anything like that?

[Stanley Rodrigues, executive]

Well, I can get -- I can start here about margins. Well, Tomita, thank you for the question. We continue to focus on productivity gains from our diligent cost management approach. For the near future, most of the SG&A are fixed expenses. We should provide operating leverage on top of that as we resume growth. On the other side, we project investments in hiring, training, fostering our growth trajectory, and of course, in AI initiatives.

In summary, we are on track to deliver the EBITDA that we are guiding between 18% to 19%. In fact, we raised the midpoint as a consequence of the reasons I mentioned here. You also mentioned the ones we've been announcing, right? So yes, you can [indiscernible]

[Cesar Gon, executive]

Great to see you, Vitor. What we see in the U.S. is I think the demand environment is slightly better. Of course, we still see ongoing macro uncertainty. But it's clear that the budgets are more stable, especially for large companies. So this translates to less volatility and more visibility that is good for our strategy of replacing underperforming competitors.

What we also see by now is it's still early. I think we are still seeing what's happening after the election result. But Q3 was a quarter with our highest booking in the year. And we ended Q3 with a very strong pipeline, really our -- we reached our record pipeline, especially due to the U.S. So it's a good indication, but we need to continue looking to see if we will have any real good or bad impact. But things are moving I think in a good way.

[Eduardo Galvao, executive]

Our next question comes from Thiago Kapulskis from Itau BBA.

[Thiago Kapulskis, analyst]

Congratulations for the results. I have 2 on my side as well. I think the first one, as you guys know, I cover U.S. tech and we've been hearing a lot about [ Agentech ] AI. You guys being very early on this theme with the CI&T/FLOW and you showed a lot also on the videos before the Q&A session. So I just want to hear a little bit from you. My first question is, how AI is actually driving results, this acceleration? Is it -- I mean, can you actually, even if possible, quantify or say like is this helping or not already? And maybe sharing a little bit of, out of curiosity, the use cases that you're seeing with these agents? And if the theme of Agentech AI is getting more traction as we see the likes of Salesforce and [ ServiceNow ]

And then the other question is about the IT budgets in Brazil actually. I remember a very clear conversation about stabilization last quarter. So if you could update us on that? And going forward into 2025, your expectations if the acceleration implied in Q4, which is very strong, can actually remain in the beginning of next year or flow into -- throughout 2025?

[Cesar Gon, executive]

Sure. Great to see you, Thiago. For your first question, I think we basically grab our solid revenue growth not to a better macro environment, but to 2 key factors. One is the way we enhanced our offerings and competitiveness because of CI&T/FLOW and AI. I think we moved fast and positioned CI&T in a very strong way and our ability to demonstrate the kind of tangible results we can get.

I think now a team with Flow can easily show at least 50% of being faster than a non-Flow team. And it depends on the content, it goes for 200%, 300% faster. So it resonates very well with our top clients. Probably you saw our top 10 clients grew 25% year-over-year. Basically, we are expanding our -- as we showcase, our efficiency, our productivity, we call hyper productivity. We have more space to expand our share with them.

We -- I think we played 2024 at the end of 2023 and probably will be the main initiative for 2025 focus CI&T/FLOW and efficiency as our main drive for getting new clients and expand in our portfolio. But what we see now is the beginning of demand. I think now we have a good number of exploratory business use case around Generative AI as the maturity of the models evolve. I think you saw -- we showcased, [ BASF ] a few minutes ago. So a lot of things focused on hyper personalization using AI, but it's still exploratory. It's across all verticals. And I believe we could foresee reasonable demand around business use case based on customer experience and personalization using AI next year, but probably huge demand only from 2026 on.

Then the maturity of the infrastructure environment, I think there is a lot of, let's say, infrastructure modernization is still in place, Legacy. We have a lot of the horizontal demand like Legacy or application modernization, cloud migration, a lot of data engagements. So preparing the foundation for a future AI-driven world. So there is still some lessons, some homework from the first chapter of the digital revolution before companies can explore the potential of AI. And also, there is this amazing curve of the capabilities of the models that are astonished and will converge to huge reinvention of customer experience and decision-making in any single corporation. So this is my brief scenario.

On the second question regarding Brazil, Thiago, I see stability and visibility among budgets. It's still early. I think we -- by now, we are already discussing with our clients. We are working to understand their plans for the next year, and of course, adjusting our forecast accordingly. But I think in the next 3 to 4 weeks, we will have a good visibility of the way our customers are planning the investments for 2025. But what I see is good signs of stability around tech and digital budgets.

[Eduardo Galvao, executive]

And just to highlight that revenue from LatAm also grew 11% on a sequential basis. So it's also demonstrating an important improvement in this quarter in the second half of this year.

So the next question comes from -- see who we have on the line. It's Bryan Bergin from TD Cowen.

[Bryan Bergin, analyst]

So I wanted to ask about some top clients since your top 10 looks to have shown very strong performance. Can you speak about the sustainability of that performance that you forecasted here, particularly for 4Q? Any early '25 considerations in those top 10?

[Cesar Gon, executive]

Sure. Bryan, thank you for your question. We are seeing a lot of space to continue our value prop of efficiency, replacing underperforming vendors. I think we take advantage of a very fragmented market. So this allow us to continue to grow by replacing or getting more share even without, let's say, a macro tailwind. So -- but if we have some macro tailwind, and there is a chance to have that in the quarters to follow, I think we could see this trend of growing in our major clients continue.

And we have also I think we onboarded a very good set of new large clients, especially in the automotive industry and food retail. So we expect this cohort will also be part of -- will complement our growth and become really big clients for CI&T. So it's going to be a combination of expanding in our long-term clients and fostering -- continue to grow in this new set of clients we acquired in the last quarter of 2023 and first quarter of this year basically.

[Bryan Bergin, analyst]

Okay, that's good to hear. And then on Flow, it's good to see the traction with the solution now impacting, I believe it was 80% or so of revenue. As you analyze the client engagements where the use of Flow is more mature, is there any variability in the profit profile of those relationships versus accounts that are not leveraging Flow? So you gave good data points on the increased speed and the delivery there. Just anything to call out as it relates to the financial impact and the profitability that might be different?

[Cesar Gon, executive]

Sure. It's really early to say, but we see some I think space for margin improvement because we can really reduce some non-quality costs within the contracts using AI. Bruno mentioned one of the cost is onboarding. When we streamline onboarding, we're using AI with the context of the engagement for a fast training of the new team members, we gain margins. And there's a lot of other opportunities around that. We see an initial correlation, less price pressure more -- you can say, more price elasticity where we are using AI more heavily. And so -- but I think it's early to project some real impact. But we are really looking -- paying attention on that and fostering ways to not only get growth by our CI&T/FLOW initiative, but also getting some efficiency gains.

[Bruno Guicardi, executive]

If I can chime in, Cesar. For 2024, Bryan, we were deliberately passing on all those productivity benefits to clients so we can kind of grow. So the strategy was deliberate to kind of prioritize growth. And if we can be 30%, 50% more productive than our -- the underperformers, then we will capture that wallet share within those accounts, right? So that was the strategy by design. So of course, we're doing some experiments to actually try to capture a little bit of that value creation to ourselves. That will certainly intensify in 2025. But in 2024, this was by design.

[Eduardo Galvao, executive]

Our next question comes from Joseph Vafi from Canaccord.

[Joseph Vafi, analyst]

Congratulations on the good results here. Anything -- I know you called out kind of pretty broad vertical strength. Just wanted to drill down a little bit more into Financial Services. And it's an important vertical for IT services, what you may be seeing there here late in 2024 looking into 2025? And obviously, you've got some large LatAm and Brazilian Financial Services clients. Any outlook on North America for Financial Services? And then I have a quick follow-up.

[Bruno Guicardi, executive]

I can take this one. I think for North America, we do have already a footprint, not exactly in banking, but a lot of fintech and asset management with a very relevant and with some medium-sized small banks. So working our way up to the large banks. We see a large opportunity going forward, which is with the Legacy modernization. With the use of GenAI there, I think we make something happen on the Legacy modernization that's been sitting there for decades to modernize very old infrastructure. That is -- I think that can be a really promising play for the upcoming years for us within that industry. So we're investing a lot in the go-to-market with that offering to that specific industry vertical. Thanks for the question, Joe.

[Cesar Gon, executive]

Let me complement with the Brazil or Latin America scenario. What we see is a very competitive environment, really the competitive -- the competition among the digital-native financial service companies and the incumbents is increasing. And that means everyone needs to accelerate their digital initiatives. So we see a lot of room for continuing to grow in this space in Brazil and other parts of the region because of the competition, especially among digital-native and incumbents. And I see the next 3 or 4 years will be very intensive, especially when -- probably financial services will be the first real reinvention of hyper-personalization and customer experience based on AI. I'm betting on that. And it will drive a lot of demand from both sides, from the incumbents and from the fintech world.

[Joseph Vafi, analyst]

Great. And then maybe it seems like you're outperforming peers in growth right now a little bit and there may be a few factors for that; maybe smaller size, maybe it's Flow and how quickly you've implemented it across the employee base and the customer base. It could just be a few large customers growing more quickly. I was wondering if you could maybe rank what you think are the kind of the most important drivers of outperformance at a broad level?

[Cesar Gon, executive]

Sure, Joe. We credit our fast growth to basically 2 factors. The way we move with Flow and the way we enhance our offerings based on AI and CI&T/FLOW. I think we were having 75% of the teams already intensively using AI in a little more than 1 year is a big win for us and position us really in the edge of this disruption. And the second, we mentioned in our last call, we really enhanced our sales structure. We call this initiative the AI growth machine. I think this is also part of having the ability to address the opportunities in the market more aggressively since we have maybe a compelling offering than our competitors. So basically, positioning AI, boosting our offering. And the second factor I think is our new enhanced sales structure.

[Eduardo Galvao, executive]

Our next question comes from Ernesto Gonzalez from Morgan Stanley.

[Ernesto Gonzalez, analyst]

It's 2. The first one is, can you comment a bit on the sustainability of demand trends? And also, what drove the increase to your revenue guide? 3Q was stronger than expected. So I was wondering if it was a stronger ramp-up of projects or maybe if there's some conservatism baked into your full year guide? And also, if you could briefly comment what kind of players are you replacing within your clients? Is it higher end digital transformation players or maybe more traditional IT services?

[Cesar Gon, executive]

I will start with the second question. I think 70% of our real daily competitors are not our peers, our traditional IT services or consulting companies. And I think now around 30% is really our other digital specialists or native players. So -- and we see attendance as the protagonism of the digital specialists evolve, we see more -- probably in the future, we will see more competition, direct competition among the peers. But the reality is the majority of our competitors are traditional horizontal IT service players.

The second part, yes, we are guiding based on the current condition what we see. Of course, every guidance has a conservative by nature. And we -- I mentioned, we have -- Q3 was our highest booking quarter in the year and we end with our record pipeline for future opportunities. So it depends on the -- if we will continue with the current success rate, we believe, yes. And we believe also that the environment will continue at least stable. So we see a good outlook. But it's too early to really guide 2025. I think this is our main work in the next 3 to 4 weeks. And after that, we will have I think a clear vision on what's ahead. And of course, our complete guidance for 2025, we will present in detail in our next call.

[Eduardo Galvao, executive]

That concludes our Q&A session. Thank you all for attending our event today. I'll now invite Cesar Gon to proceed with his closing remarks. Cesar?

[Cesar Gon, executive]

Thanks, Eduardo, Bruno, Stanley. I think with this, we have now completed a dozen earnings calls. So just enough to call it a collection of earnings calls. Thank you all for joining our call. I'd like to extend my gratitude once again for all CI&Ters across the globe for your hard work and the huge achievement this quarter. A special thank you to you as well to our clients for choosing CI&T as their partner for co-creating this exciting new chapter of AI-driven innovation. Stay well. See you soon.