CI&T Inc (CINT) Q1 2026 Earnings Call Transcript

AI doesn't fix your SDLC. AI has reduced the cost of generating code to near zero, but the bottleneck didn't disappear. It moved from writing code to deciding whether code is ready to move. We introduced agentic SDLC by drawing on our deep knowledge of software engineering and operational efficiency. This framework represents a fundamental shift in software delivery, prioritizing decision-making over task completion to maintain momentum. Decisions are propagated through an orchestration layer that connects humans, agents, tools, and shared context. The transformation unfolds across three stages of maturity. Augmentation, where AI accelerates individual tasks. Coordination, where agents connect across stages. and autonomy where the life cycle itself is redesigned reported gains of 2 5 and up to 20 times not from faster tasks but from a system that stops waiting the organizations that lead in this period will not be those that generate the most code but those that orchestrate the system best with trust and decision criteria explore the full paper online good afternoon and thank you

for joining us for cint first quarter of 2026 earnings call i am eduardo galvão director of investor relations joining me today to discuss our results and strategic milestones are cesar gong our founder and ceo bruno guicardi founder and president for north america and europe and Stanley Rodriguez, our CFO. Before we begin, I would like to remind you that our remarks today will include forward-looking statements. These statements, including our business outlook, are based on the management's current expectations and are subject to risks and uncertainties that could cause actual results to the firm materially. We caution you not to place undue reliance on these forward-looking statements as they are valid only as of the date when made. Additionally, we'll discuss certain non-GAAP financial measures. We believe this provides a more comprehensive view of our underlining operational performance. For a full reconciliation of these measures to the most directly comparable GAAP metrics, please refer to the tables in our earnings release. Today's session is being recorded and all participants are currently in a listen-only mode. Following our presentation, we'll host a Q&A session. To participate, please submit your question via email to investors at cint.com. The full presentation deck is available on our Investor Relations website, and a replay of this call will be posted shortly after we conclude. With that, I'm pleased to hand the floor over to our founder and CEO, Cesar gone.

Thank you Eduardo and good day everyone. A year ago I said the future of business is technology and the future of technology is business. Six consecutive quarters of double-digit organic growth tell me that that was right. What exchange is the kind of partner companies are looking for? Not a traditional horizontal service firm but what we are choosing to call tech-integrated business solutions partner. We continue to advance two distinct AI-driven growth vectors for CINT. AI deployment with expanded revenue through IP-based solutions and AI adoption engagements, and AI monetization with expanded margins by evolving our pricing models to capture a greater share of the productivity gains and business value created by AI. 2025 was a very strong year for AI deployment and this trend has only strengthened in 2026. At the same time, 2026 marks the year when our AI monetization efforts are becoming more tangible. In Q1 2026, 20% of new sales were already based on new pricing models. We expect these models to contribute to gross margin expansion over the coming quarters as adoption continues to accelerate by combining strategy AI native execution with agent SDLC and IP based solutions we are positioning CIT to help lead the next decade of business reinvention turning to our financial performance the first quarter of 2026 was a period of significant scale and sustained momentum we achieved record revenue of 136.6 million representing 23.2 year-over-year organic growth. This auto performance is notably broad based with robust demand across all core geographies and a diversified footprint spanning our key industry verticals. Profitability remains the core strength of our model with adjust EBITDA reaching $20.8 million, representing a 15.2% margin. On an FX-neutral basis, this would be equivalent to an adjust EBITDA margin of 17.4%. This performance reflects our ability to continue investing in our AI growth vectors while maintaining a disciplined operational profile. Furthermore, our business continues to demonstrate high-quality cash conversion, with $13.5 million in cash operating cash flow this quarter, equivalent to 65% of adjusted EBITDA. The first quarter of 2026 marks our 60 consecutive quarter of double-dish organic growth, and this growth remains fully organic. This consistency is not accidental. It reflects a structural shift in client demand and CIT's ability to capture it. We are now seeing a clear acceleration of AI deployment. Clients are moving beyond experimentation and beginning to rebuild their technology foundations, operating models, and business processes around AI. They need partners capable of connecting strategy, execution, and measurable outcomes in the complex reality of large enterprise environments. This is where CINT is increasingly differentiated. Our proprietary IP, AI native delivery capabilities, and CINT flow are helping us convert its demand into large, higher-quality engagements, both with new clients and within existing accounts. The case studies that follow show how this AI deployment momentum is translating into tangible business outcomes.

One of the world's largest healthcare companies, pharmaceuticals, medical devices, global scale. The challenge was simple to state and hard to deliver. unlock value faster without growing the team without expanding the budget we didn't add people we didn't increase spend we changed the model the introduction of CINT's agentic SDLC marked a turning point for the client AI based agents plus human in the loop equals sharper judgment excellence at every step. Now, CINT's Agentic SDLC is already delivering five times faster. AI designs and codes, humans orchestrate and validate. Next, 20 times faster. Not a pilot, a production system. This is the power of the Agentic SDLC.

Software delivery on a new cadence, running inside one of world's largest healthcare companies built with us the future starts monday in digital credit growth is mandatory scaling with consistency that's the real interest rate jato migrated to flutter launched on ios and wired ai into the development workflow with ci and t productivity up 87%, development time down 44%, cycle time 15 days flat. AI isn't a feature Jado added. It's the new credit line running through the code.

AI first happens where speed, scale, and judgment finally move together. Udukes rewrote how its learning hubs run. Software development through AI allows teams to move beyond manual tasks and focus on higher level strategic thinking. AI workflows wired in, audit ready, always on. A feature once scoped for a month, shipped in a week. Productivity didn't inch up, it multiplied. Five times during the initial phase and reached seven times in the subsequent wave. Because in education, the best lessons aren't taught. They're engineered with the right partner.

We are recognized as a sustainable supplier by Porto. This is the result of a real collaboration and shared accountability, strengthening an entire ecosystem, not just a business relationship. Our ESG journey is continuous and firmly aligned with the UN Global Compact. At CINT, sustainability isn't a future ambition. It's a decision we make today.

AI is already in the checkout line but according to our latest retail tech reality check most consumers aren't yet impressed by the experience to explore the story behind the data Melissa Minkow our global director of strategy and insights sat down with the UK's leading retail press in London including the BBC Retail Week and City AM to unpack the findings. The takeaway? AI isn't on the horizon. It's already in the cart. But for retailers, the real work of winning over the customer has only just begun.

We are around the clock, across time zones, with the partners shaping what comes next. Sao Paulo Adobe Partner Day, aligning priorities for the year ahead. Still in Sao Paulo, Adobe AI Forum, AI in action with our clients side by side. Many places in Brazil, industry conversations driving data and AI forward. Las Vegas, Databricks Partner Kickoff, connecting globally. With AWS Kickoff 2026, Gen AI Workshops, working backwards sessions from strategy to execution. With Microsoft, AI tour, summits, training, scaling AI across markets. Different places, same direction.

Innovation only matters when it delivers real impact. That's what the IT Forum 100-plus Most Innovative Companies Ranking recognizes organizations that turn strategy into execution. We are proud to be among them. Let's keep talking about recognitions. we are also proud to be named the 2026 google cloud partner of the year for databases in latin america recognizing how we mix strategy data engineering and analytics to make that transformation real we will be always connecting ai data and engineering to real business challenges and making it work where it matters most inside our clients operations these cases serve as empirical evidence of how our agent SDLC is fundamentally resetting the baseline for

enterprise productivity and speed to value. I will now hand over to Bruno to discuss how we are scaling this hyper productivity to our global delivery model and our evolved talented strategy.

Thank you Cesar. Good afternoon everyone. I'm excited to share our operational and talent progress for this quarter. We ended the first quarter of 2026 with over 8,000 professionals, including an average of 6,600 AI builders. While our headcount increased 13.3% year-over-year, this remained below our 15.5% revenue growth at Constant Curves. This delta has already begun lifting our revenue per professional, and we expect it to widen as AI monetization scales. Value-based pricing let us capture more of the value we create per engagement, strengthening our unit economics as we continue to grow the team. As Cesar noted, we have pivoted from technology execution to strategic AI deployment. Our talent is no longer merely building code. They are curators of AI, leveraging CIT flow and the agentic SDLC to collapse development times and deliver hyper-productivity. This shift is only possible because of our culture of continuous adaptation. We ended the quarter with a 4.1 Glassdoor score, the highest among our peer group, and having been recognized by Great Place to Work for 19 consecutive years. Our voluntary attrition remains at a half of 10.3%, the lowest level in our recent history. In an era where AI is redefining technical careers, our industry-leading rotation proves that our people feel empowered by these tools, not replaced by them. Our AI builders are the engine of our innovation and their ability to orchestrate complex AI agents is the fundamental differentiator for C&T in the global market. I'm proud to announce the launch of our 2025 Global ESG report this quarter, reaffirming our commitment to the UN Global Compact. Our culture remains a primary competitive advantage and 52.2 percent of our global workforce is from underrepresented groups. The diversity of perspective is what allows us to navigate the ethical complexity of AI responsibly. It's not separate from the business, it's why clients trust us with the work. The report also covers our social impact. Over 100,000 people reached through funded projects, alongside governance and environmental milestones, including the Golden Seal from the Brazil GHG protocol and 100% renewable energy across our Brazilian operations. I invite you to explore the full report published on our website. Now, over to Stanley to guide us through our financial performance.

Thank you, Bruno, and good afternoon, everyone. Let me walk you through our financial performance for the first quarter of 2026. We achieved 136.6 million in net revenue, representing a robust 23.2% growth compared to the same period last year, fully organic. On a constant currency basis, revenue grew 15.5% year over year. I want to highlight that this performance exceeded our guidance and surpassed current analyst estimates. This outperformance is underpinned by exceptional momentum in our go-to-market execution. Throughout the quarter, we observed a significant expansion in our sales pipeline and an improved conversion rate the direct result of intentional sales initiatives and the tangible impact our AI deployment is delivering for our clients what excites us most is the underlying quality and breadth of this performance from a geographic perspective Latin American led the acceleration with 33 percent growth while north america delivered a solid increase of 16 percent and new markets grew 11 percent year over year we achieved an 18.9 expansion within our top 10 accounts yet our growth remains healthily distributed this resilience was visible across nearly all industry verticals, which grew at double digits, with our consumer goods segment remaining stable. This broad-based performance confirms that our AI deployment is not a localized success. It is a global catalyst that is driving deeper penetration across all regions and industries we serve. This chart illustrates our land and expand strategy in action. We grew our 5 to 10 million client cohort from 15 to 18 clients in the quarter, a compounding effect of our ability to scale wallet share through AI-driven impact. Our performance is fueled by exceptional go-to-market momentum. We observed significant pipeline expansion and improved conversion rates this quarter, the direct result of intentional sales initiatives and the tangible return on investments our AI deployment provides. This strength creates a highly predictable and resilient revenue base as we deepen these strategic partnerships. In the first quarter of 2026, our adjusted EBITDA reached 20.8 million, a 6.3% increase year-over-year, resulting in a 15.2% margin. It is important to note that this margin reflects two specific headwinds, unfavorable foreign exchange comparisons and the impact of increased Brazilian payroll taxes. To provide a clearer view of our operational performance, if we exclude the FX impact, our first quarter 26 EBITDA would have reached 22.2 million, equivalent to a 17.4% margin and a robust 13.2% year-over-year growth. This FX impact was more pronounced in the first quarter due to the year-over-year Brazilian Reais US dollar comparison base and it is expected to attenuate over the coming quarters. We remain focused on ensuring that the hyper-productivity we are engineering today becomes the permanent foundation for long-term sustainable profitability. As Cesar mentioned, we expect our new engagement models to contribute to profitability margin expansion over the coming quarters as adoption continues to accelerate and we capture a greater share of the value we create. Moving to our bottom line, adjusted profit reached 10.2 million in the first quarter of 2026 this represents a 6.2 percent increase compared to the same period last year resulting in an adjusted net income margin of 7.5 percent most importantly our adjusted diluted earnings per share was eight cents representing a robust 11.8 percent increase over first quarter 25 this double-digit growth in earnings per share surpassing our net profit growth is a direct result of our disciplined capital allocation strategy and the increasing operating leverage within our ai native platform i will now turn the call back to caesar to discuss our business outlook and the strategic path forward for the remainder of 2026 thank you Stanley for the second quarter of 2026 we expect revenue of at least 140 million dollars representing 19.5 percent growth year-over-year or 13.9 percent at constant currency based on our strong first quarter performance and the

quality of our current pipeline we are increasing our full year 2026 revenue guidance to a range of 556 million to 575 million dollars this implies organic growth of 13.5 to 17.5 percent with a midpoint of 15.5 percent our revised growth outlook includes a positive effects impact of approximately 350 150 basis points with its 50 basis points higher than our previous guidance effectively of our 150 basis points increase of our revenue guidance 100 basis points are driven by pure organic momentum and improved pipeline conversion our updated guidance reflect the continuing strength of our first AI-driven growth vector, AI deployment, which is fooling revenue expansion through IP-based solutions and AI adoption engagements, combining with our well-wired go-to-market strategy. In addition, we estimate our adjusted EBITDA margin to be in the range of 17% to 19%. We project margin expansion to build sequentially throughout the year, supported by our second AI-driven growth vector, AI Monetization, as the adoption of new pricing models accelerates and enables us to incrementally capture a great share of the productivity gains and business value created by AI. With that, we are ready to begin the Q&A session. Thank you.

Right, we'll now begin the question and answer 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 gustavo farias from ubs gustavo please go ahead everyone thanks for taking my questions to on my end first of all congratulations on the results uh first question uh if you could provide a caller on the current pipeline of projects and the mix between the types among the types of contracts the materials outcome based fixed price and how this has been evolving and the margin profile you've been encountering in each of them my second question is related to margins we've seen the margin below a little bit below our numbers and consensus numbers of course you explained very clearly the main drivers just to double check here uh how much of that was already expected by the previous uh and current margin guidance and if it's fair to assume uh margin uh based on q1 results could be brought towards the lower end of this 17% to 19% range? That's my second question. Thank you, guys.

Thanks, Gustavo. I can handle the first one and then Stanley can get the second one. Regarding pricing models, as planned, we are now advancing what we are calling the AI monetization effort that basically is an effort to synchronize AI deployment with the evolution of our pricing models to be more value-based and of course giving us the opportunity to capture more margins from the efficiency and impact we are generating. We disclosed for the first time this evolution by giving the data point of 20% of all All the new sales in the first quarter were arrayed based on these value-based models. Value-based models, for us, is a combination of output-based with price-per-consumption, or we call Asian computing units when we sell in a SAS model, and outcome-based. So, output, consumption, and outcome-based. This is basically what is behind the 20% we disclose, the combination of a mix of these different pricing models. We believe the future will be really a hybrid model where we combine, depends on the situation, the scenario, we combine all these alternatives. In the end, with the will to provide more flexibility to our clients, skin the game from CINT regarding our ability to leverage value from the AI deployment and also, of course, capture more of the share of the impact we are generating. Of course, our business model is very current, so we have long-term contracts, so that's why quarter over quarter you're going to see a visible, tangible increment in our gross margin as a result of this move towards new pricing models. But we also will keep, I'm sure we will have part of our revenue still based on time material. But even time material, if you see what's happening in the industry, time material is being rebranded, right, as forward engineering deployment. So there's a new set of opportunities, even for time material engagements, to reprice it based on deep AI competence. So, I think all good moves, vectors, are in our favor, and I see a very consistent strategy for CINT on these two vectors, AI deployment combined with a disciplined AI monetization. Stanley, if you could address specifically the second question from Gustavo.

Yes, Gustavo, thank you for the question about margins. Well, if you see, Gustavo, we are maintaining our guidance of EBITDA of the range of 17% to 19%. And what is built in in that guidance? First, structural characteristics of our business. Seasonality, we have higher margins towards second half of the year. We also have an operating leverage going on for the last years, and we will continue to see that throughout 2026. And on top of that, we have the margin expansion out of the AI monetization through new engagement models. So all of that combined is, let's say, compensating for the real appreciation, which is a headwind to the margins, which is already within or in this 17 to 19 guidance. And at the end, if you see in absolute terms, EBITDA will increase in comparison to 2026. So the question is more towards the margin effects in the revenue.

That's very helpful. Thank you, guys.

Thanks, Gustavo. Our next question comes from Pune Jane from JP Morgan. Hi, Pune.

Hey, thanks for taking my question. I also have a question on this new AI-based delivery model, Agentic SDLC. So assuming if some of those contracts stay as time and material, how do you integrate the token cost and like the overall like the ai portion of cost in your delivery structure and how does like the margin profile of some of those contracts compare with your typical people-based models thanks Pune basically in terms of pricing even even in the time at your engagements we consider you see a very rational price environment and a lot of openness from our clients to discuss

new pricing models and to incorporate uh eventually uh new opportunities regarding ai so we we now we see a lot of opportunity of course the the easy or let's say the low-hanging fruit is just adjust as as now we are really i think with a very superior approach on ai deployment we can accommodate any additional uh cost in our pricing model but i think the the the real the most strategic part is moving uh from as i mentioned from uh time material to new output based outcome based and consumption based model so i think this this as the demand is huge and the the eaginess of our clients to leverage ai benefits are increasing we are not seeing of of course we need to synchronize everything and and it's what we do yeah i think we are very good on that and so we i think we are we are kind of very happy with uh uh what we could could do in the previous uh uh quarters and regarding ai deployment and what what we see the speed of what we are seeing the advance of ai monetization efforts so uh very i see more as

as our ability to demonstrate value in the end if you are able to demonstrate the impact you can generating with ai for our clients they they respond accordingly in terms of adjusting the model in the right direction got it got it and uh quickly and if i can complement like the adjustment is not a is not a gradual incremental one right we're talking about 3x 5x 7x so when you kind of create that type of impact to caesar's point like clients are are open to having more of that and expand and that's how we've been growing with you know if increasing wallet share within clients getting getting more space uh you know that those making those relationships closer right so and again the the the engagement model they're they're open to to have more of that so it's it's it's a win-win conversation i appreciate that uh and are you seeing like any impact from like the geopolitical uncertainty the war in the middle east uh to your client's decision making at all like any verticals anywhere where you might be seeing signs of slow down in second quarter compared to in cuban not really no so far we haven't uh again to the the dynamics of this growth and the growth that we're kind of guiding is it's based on the on the dynamic within our clients and you know and our ability to kind of create more value than our competitors and within those clients and in wheeling you know in winning uh wallet share and growing with them and they're they're they're big stable uh companies leaders in their market so they're solid companies they're growing they're doing well so if we do our part which is you know great great value for them and being ahead of the pack which we think we are at this point and we have to keep ahead of the pack uh i don't think uh you know the the macro will impact a ton

Roger. Thank you.

Thanks, Pune. Our next question comes from Stephen from Wedbush. Hey, Stephen.

Hey, thanks, guys. Congrats on the quarter. Thanks for taking the question. So, I have two questions, one on the value-based pricing and then one also on the headcount growth specifically for the value-based pricing. You mentioned that 20 percent of the net sales is coming from this value-based pricing approach. Do you have any sort of long-term gauge or any sort of long-term target that we can take into account for this value-based pricing and what the company's expectations are to really get a lot of these new customers onto this value-based pricing approach? And then turning to the headcount, especially when you're starting to see over 80% of your headcount really leveraging AI and becoming the curators of AI, as you described, Is that going to lead to any sort of head cap reduction in the near term or in the long term and something that we can take into account from there?

I can get the first one. Thank you for your question. And Bruno can help with the second. And regarding new pricing models, we see this change happening in a horizon of maybe 18 months as a natural evolution of as the new sales become relevant in terms of revenue quarter over quarter. So, gradually, you're going to see the effect happening, especially in our gross margin, where you can clearly see the difference on the value we are captured from the engagements. Another thing that is not just pricing models. I think our offerings are evolving to generate much, much more impact to our clients. so it gives us a lot of flexibility and as we see the momentum of ai deployment increase and the way we are very well positioned we see room for for really uh uh accommodate the the cit in in in a better uh shape regarding value capture so uh gradually quarter by quarter following the impact, the increased impact we are generating for our clients. Impact around, let's say, horizontal impact regarding efficiency. So, a lot of things that we can do now with an amazing return on investment for them regarding data, regarding app modernization and so on. and direct AI impact with the new user cases that are emerging for every vertical and segment. So a lot of opportunities, and I think we are well positioned to capture that. Regarding our workforce, I think Bruno can address that.

Yeah, so thank you for the question, Steve. The way we see this, right? So even if the total addressable market reduces in size. It would not reduce by a lot, and it may be not even not reduced at all. But our ambition here is actually to be a leader in this new industry, in the industry of AI builders. And if we accomplish that, and to our point here, we're ahead of the curve, and our plan is to be aggressively ahead of that curve and we'll capture, we'll be a winner in this new market. So being a winner in this new market i think will not not necessarily mean that uh that will grow by revenue but even even by headcount will continue to grow uh so that's that's the ambition is to is to win in this new game and to keep you know give an opportunity for our people and having them have their own grow and becoming this you know this this leading professionals in their industry and creating value for our clients and i don't think we'll kind of anticipate any headcount reduction in that scenario Just to add to that, Steve, one way to look at that, as we evolve on these new engagement models, we should see higher revenue per headcount.

I think it's the best way to see that trend going forward. So as Bruno mentioned, growing headcount and growing revenue per headcount as well. So that should be a good indicator to track as we evolve in these new models.

Let me add one thing that I think is important. Looking back, we did an amazing job in the past three years. We really introduced CINT flow. We foster adoption. We're reskilling our whole team around artificial intelligence. And we also turn every single CINT engagement into an AI engagement. So now we have builders, AI builders, that is, I think, the most important talent to make AI deployment feasible. So I think it was a very good strategy not to create a different business unit for AI services. We said, let's look at our core offerings and redesign around AI three years ago. So now we are leveraging the results of these bets.

Got it. Thanks, guys. Thank you, Steve. Our next question comes from Brian Pergen from TD Cowen. Hey, Brian, your line is open.

Hey, guys. Good afternoon. Thank you. I wanted to also ask about this contract structure evolution. Is this across industries, kind of across the portfolio? Can you talk about the nature of the clients that are going along with this and kind of the characteristics that those clients have that you could learn from to better kind of cross-pollinate across the entire portfolio?

Thanks, Brian. Great to see you. As I think part of the evolution of the pricing models is combining with our IP-based offerings. As more IP is on the table in a deal, more, I would say, more feasible is to introduce new commercial models. So we are combining, and as we are working hard around our vertical IP-based solutions, by now we have, I think, a solid set of assets that allow us to really foster our AI monetization to the new model. So, I think IP, intellectual property, is an important foundation of our strategy. If I can summarize our strategy in first two growth vectors we mentioned, AI deployment, AI monetization, and four pillars, IP-based offerings, commercial models, data, It's incredible what we are doing around data and partnerships with the hyperscales. So, these four pillars are fostering our growth factors, I think, in an amazing way. So, our job is to synchronize all these momentums and capture the growth and the value we deserve by the impact we are generating.

Okay. As it relates to your large clients, so you had another good performance, top one, top 10. Maybe just dig in there, your visibility to continue momentum in those accounts.

Yeah, we are, I think this quarter, we reported, we grew in all verticals and cohort of clients. Top one, top 10, X top one, X top 10. And so, it's a very broad, good momentum regarding AI deployment. Of course, we stay focused on the kind of client that we believe is the hotspot for CIT, large, complex organizations that are really looking for ways to leverage AI impact. And I think it's even regions we grew in Latin America, North America, even new markets had a good response in this last quarter. So, we are expecting the momentum will continue in all the verticals and regions.

Very good.

Thank you. Thanks, Brian. Thanks, Brian. Our next question comes from Luke Morrison from Canaccord. Hey, Luke, please go ahead.

Hey, guys. Good to see you. Thanks for taking the question. So maybe one on gross margins. You know, they compressed quite a bit in the quarter. Can you just help us unpack, you know, what's driving that, whether it's entirely, you know, this FX and payroll tax impact or if there's maybe an element of AI spend and AI investment that you maybe need to scale into? and how should we be thinking about modeling gross margins for the rest of the year and onward?

Look, thank you for the question. Well, let's unpack as you want. First, by far, it is the effects effect, and it's more than 200 basis. Only in that aspect, we present it in the slides, It's adjusted by current currency equivalent, right? And you have to bear in mind that by seasonality, we have a load every first quarter of the year, a load of salary adjustments that will be throughout the year compensated by contract adjustments and so on. so again here we have the combination of the structural aspect and this specific effects effect so those are i would say that the the main aspects for for the first quarter and as as as modeling for for the for for the next quarter um again we have the seasonality here. We have higher working days throughout the next quarter in comparison to first quarter, for example. We have the leveraging of SG&A as we grow the business. So, what else? We have a combination of structural aspects and, in addition, we do have the monetization of the new engagement models taking a play an important role here as well throughout the next quarters. So I wouldn't say that you shouldn't model anything different than what we guided in terms of EBITDA. That's why we are guiding, right? And we have the range for the reasons usually we have for that range right uh on the top of the range we have a reflex reflection of what the what we envision in in all the pipe the pipeline that we have midpoint we have a more conservative uh aspect of that and and in the lower uh we have a macro effects or something compounding there to be more conservative. So, yeah, that's a breakdown, Luke.

Got it, very helpful. And then maybe a quick follow-up there. You know, of that 20% of new sales in Q1 that are on these new pricing models, can you just give us a sense of, like, what do gross margins look like on those engagements?

What can it scale to over time? how can that like impact the overall gross margin profile of the business over like a two to five year period yeah well we what we we are doing as we we capture value on this monetization ai monetization that the trend is to reinvest in sales so if we you would see increments in gross margin we will the trend is that we would reinvest in sales to capture and and to to benefit growth so at the end of the day is about the growth and the organic growth and to to continue in this strong momentum that we are. So, usually that's the engineering.

Let me help here, Luke. We can be a little more specific. I think the new pricing models can increase, depends on the, of course, in the context, the engagement, from 3 or 4 percent of points to 10 or 15 percent of points in terms of a contribution margin in the engagement. uh so and that's why we we we see as a as a pillar in our strategy to to capture part of the this is this is only possible because we are not delivering the same kind of impact we are delivering much higher impact if you try to discuss pricing model with the client delivering the same value it's it's Of course, it's not going to work, but we are discussing delivering a different level of impact, and this is allowing us to move towards these more powerful pricing models. Another thing is, I think, if you look at the numbers we just released, if you combine our organic growth of 23.2% with our adjusted EBITDA margin of 15.2%, we reached, and we add that, we reached 38.4%, nearly back to the famous rule of 40. So if we put in perspective everything we are doing, looking ahead, I think we can expect better. You're going to see from next quarter better gross margins as a result, of course, the fundamental seasonality, a lot of things that Stan described, but also the beginning of the impact of the new pricing models. And this will allow us to increase our sales investments. what is the strategy to full high growth and a strong borderline in the long term. So this is the piece of the puzzle we handle now, I think, in a very good way.

Excellent. Excellent, Tyler. Thank you very much.

Thanks, Luke. Thank you, Luke. Our next question comes from Cesar Medina from Morgan Stanley. Hey, Medina, please go ahead.

Hey, congratulations on the results, quite strong and broad-based. The question that I had was twofold. One, sorry to keep pressing on the new pricing mechanism, but it's just 20% of the new sales, right? It's not of the total revenues of the quarter. And if I were to ask you in terms of when you look at your pipeline, the one that you're building, not on the second quarter, but on the pipeline, how prevalent is that new sales mechanism? That would be the first question, and then I'll have a different topic.

Very good, Medina. Thank you for the question. Basically, as you know, we have a lot of recurring long-term revenue, but in a timeline of 18 months, everything that we will be doing will be new sales. So, you know, that's the first data point. So, it takes basically 18 months to renew 100% of the engagements of CIMT. And the second is pipeline healthy. The data point now is 30% large. So the number of deals in terms of value is 30% higher now than the same period last year and 100% relate to AI deployment. So this is, if you combine this data, you see how we are growing and that is AI deployment and evolving our AI monetization along the next quarters.

But pursuant to what Stanley mentioned in terms of the margins of the new pricing mechanism, that you are reinvesting in growth. But if I were to look at the gross margin component, these growth margins of these new type of engagements, is the margin closer to software or, you know, higher?

Ben, what software? Yeah, okay. I think now we are looking at our – I think we have a very healthy strategy. But the new reality is a business with higher gross margin, significant higher gross margin, but also with different elements in the P&L. But I think in the end, it's moving to a more scalable and profitable business model. but gradually as we deploy these new models and increase our effort. The mention regarding sales is because we see a huge opportunity. If the market continues to move in our direction, as we are seeing, we have the opportunity to really accelerate our expansion, and this will require broad investments around go-to market and sales.

Okay, and then the second question is present to your full-year guidance. Like if I were to do the math in terms of cost and currency for first quarter, second quarter, that suggests that in the second half of the year you're sort of going to have more muted growth. Is that sort of the right way to see it?

Yeah, we kind of detailed what we increased in 150 basis points. 100 is pure reflection of demand and pipeline and so on, and 50 basis points is FX tailwind. And, of course, as we have been doing for several, six consecutive quarter, we intend to do better, increase our numbers as we win the AI deployment game.

Okay.

Thank you, Medina. So, that concludes our Q&A session. I'll now invite Cesar to go on to proceed with his closing remarks.

Thanks, Galvão. Thank you, Bruno, Stanley, Eduardo, again. Thank you all for joining us today. And more especially, I want to thank you all, CITs around the world. Congratulations for one more record quarter. Let's keep pushing. And a special thank you as well for our clients for choosing CIT in this extraordinary moment of AI deployment and AI-driven innovation. So stay well. See you soon.