Earnings Call Transcript - CINT Q4 2021

Eduardo Galvão, Head of Investor Relations

Since the 1990s, companies have been working to digitally transform their operations and customer interactions. The rapid growth of technology, fueled by the prevalence of mobile applications and connected devices, has resulted in more connected consumers. These consumers, empowered by technology, have become increasingly sophisticated and demand seamless digital experiences. CI&T, a global digital services specialist, has been assisting companies in meeting these new demands since 1995, building a reputation for delivering digital solutions that excel in both speed and quality. From its modest origins, CI&T now offers strategy, design, and software engineering services to enable digital transformation for leading brands worldwide. With a global team of over 5,500 digital professionals, including software engineers, designers, data scientists, and digital strategists, CI&T maintains long-standing relationships with more than 50 large enterprises and rapidly growing clients. The company boasts a strong track record of continuous growth, best-in-class profitability, and a highly recurring revenue model with impressive net revenue retention. Additionally, CI&T enjoys a very healthy employee retention rate. In the digital services market, large enterprises and nimble digital firms face significant challenges regarding digital transformation. Established companies often struggle to innovate and adapt quickly, while newer firms find it challenging to scale their operations. To assist these organizations, CI&T merges digital strategy with customer-focused design and top-tier software engineering to provide comprehensive solutions that connect business opportunities with consumers. This approach is encapsulated in a unique methodology termed Digital Transformation, which fuses digital disruption with disciplined leadership. CI&T aims to create business impact for clients across various sectors, including financial services, food and beverage, and pharmaceuticals, always prioritizing the cultivation of strong, long-lasting client relationships. Good morning, everyone. Welcome to CI&T's Fourth-quarter and full-year 2021 results conference call. We have Cesar Gon, Founder & CEO; Bruno Guicardi, Co-Founder and President for North America and Europe; and Stanley Rodrigues, our CFO, with us today. This event is being recorded, and all participants will be in listen-only mode during the presentation. Afterward, there will be a question-and-answer session for analysts and investors. If you would like to submit a question, please email investors@CI&T.com. This event is being broadcast live and can be accessed through the company's Investor Relations website at investsearch.CI&T.com, where the presentation is also available. A replay will be available shortly after the event concludes. Some matters we will discuss during the call, including our business outlook, involve forward-looking statements and are subject to known and unknown risks and uncertainties, including those outlined in our earnings release and discussed in the Risk Factors section of our Form F-1 registration statements related to our initial public offering and other reports we may file with the SEC. These risks and uncertainties might lead to actual results differing significantly from the statements made. We advise you not to place undue reliance on those forward-looking statements as they are only valid as of their date. During this presentation, we will reference certain non-IFRS financial measures to assess our business. Please review the reconciliation tables of non-IFRS measures in the appendix for further details. Our agenda today will cover our financial highlights and recent events, followed by successful business cases. We will also delve into our people and ESG strategy and examine our quarterly and annual financial results, concluding with a Q&A session. Now, I invite Cesar Gon to start our presentation.

Cesar Gon, Founder & CEO

Thanks, Eduardo. Good day, everyone. I hope you're all doing well and staying safe. It's a privilege to be here again with all of you. We are excited to conclude 2021 with strong results regarding our growth guidance for the quarter and the year. This marks our first year as a public company. Before we delve into those results, I want to take a moment to discuss our industry in light of the current economic environment and the opportunities it presents for CI&T. While there are certainly challenges, including the ongoing recovery from a severe pandemic and new geopolitical threats, one constant remains: software is increasingly integrated into all aspects of life, driving significant changes in society, values, and consumer behavior. Companies must adapt, and uncertainty often drives the need for change. Digital solutions are essential for reconnecting businesses with a new class of consumers, resulting in a sustained demand for digital services in the corporate sector. This positions us for considerable growth in the coming decade, which is reflected in our positive results and optimistic long-term outlook. Our net revenue growth in the fourth quarter of 2021 was 72% year-over-year, marking our 22nd consecutive quarter of revenue growth. For the year, our net revenue reached R$1.44 billion, a 51% increase over 2020. This growth stemmed from three primary factors: increased demand from existing clients, with a net revenue retention rate of 128%; the addition of 36 new clients generating annual revenue exceeding 1 million Brazilian reais, rising from 58 in 2020 to 94 in 2021; and the efficient integration of Dextra as four new growth units. In addition to our solid growth, our adjusted EBITDA margin stood at 22.4%, a benchmark in our industry, and our cash conversion rate was 66%. This is an impressive outcome, and I want to extend my gratitude to all CI&T employees worldwide. I am very proud of what we have accomplished as a team. Thank you. Stanley will provide a more detailed overview of our financial results shortly. Another important update: in January this year, we announced our first BOS IPO acquisition, which aligns with our objective to pursue strategic M&A to enhance our organic growth. Somo is a distinguished digital project agency based in the UK, sharing a similar culture to ours. They are founder-led, innovation-focused, and enjoy a strong reputation with global brands for delivering digital solutions across various sectors, particularly automotive and utilities. The company generated £25 million in net revenue last year, achieving a 41% growth compared to 2020. Somo brings approximately 300 digital specialists with extensive expertise in digital products, a robust leadership team, and offices in the UK, the U.S., and Colombia. This will accelerate our growth in Europe, the second-largest market for digital services globally. Now, let's examine some recent success stories we are developing with our clients. The first involves a high-end U.S. manufacturer redefining the home audio experience. The second showcases Somo assisting a large UK utility company in enhancing customer experience at scale. Lastly, we successfully launched a financial services marketplace for millions of consumers in Brazil within just four months. We are proud to partner with Somo, a leading company in sound experiences, to support its growth ambitions and create exceptional customer experiences. Our services are crucial in implementing various technology solutions that allow Somo to innovate quickly and address business needs. A key aspect of our collaboration is the modernization of Somo's platform, which has helped to launch the Somo radio subscription service and improve the company's essential digital offerings. In the data sector, we are assisting Somo in structuring and developing its data platform to facilitate quicker and more precise decision-making. CI&T is also closely collaborating with Somo to empower its product organization and ensure alignment through digital value streams with a strong focus on consumer needs. This structured approach accelerates progress, enhances value creation, and boosts efficiency. E.ON, a European utility company present in over 30 countries and serving over 33 million customers, approached Somo to create a self-service customer platform. The objective was to launch a new digital product quickly, allowing for the management of both new and existing customers while simplifying account management and improving customer experience for E.ON Next, E.ON's renewable energy division. Somo delivered innovative digital products within just 14 weeks of the initial briefing, effectively transforming the leading energy provider into a digital-first organization by migrating 5.7 million customer accounts to the new platform, a significant step toward cutting costs. The digital product enabled millions of recently acquired customers to transition to a unified platform. Amid the challenges posed by COVID-19, Somo adapted swiftly to develop an effective, agile, and transparent work method, conducting remote customer testing to ensure rapid response and expedite the product launch. By leveraging advanced technologies, including the integration of Octopus Energy's Kraken platform and an agile delivery approach, they created a more enjoyable and meaningful experience for customers, allowing E.ON Next and their clients to manage account needs in one convenient location. Somo and E.ON Next continue to collaborate to enhance digital services for both customers and employees, maintaining E.ON's market-leading position. Next Shop is the marketplace created by Next for digital banking services. With over 10 million users, it enhances Next's standing as a digital platform offering diverse financial services. The marketplace includes instant cashback, providing a competitive advantage. CI&T worked alongside Bang Company and VTEX to implement the solution, showcasing our unique ability to leverage deep technical skills to create impactful solutions through collaboration with various partners. We managed the deployment of the business strategy and all development for the VTEX platform. Within four months, the Next Shop marketplace launched successfully, with high-end technology ready in time for Black Friday 2021, enabling Next to achieve a new record in downloads. Within just two months, 100,000 products were made available across more than 30 departments. These examples illustrate how CI&T is delivering significant impact at speed and scale for our clients. Now, I invite Bruno to discuss our delivery model and share insights on our people and ESG strategy.

Bruno Guicardi, Co-Founder and President North America & Europe

Thank you, Cesar. Good morning, everyone. It's great to be here with you again. We take great pride in our organizational design, which we have refined over many years. It is fundamentally a model aimed at growth and entrepreneurship. We engage with the market through autonomous units known as growth units, responsible for assembling multi-functional teams that collaborate on long-term journeys with our clients. Our approach emphasizes rapid innovation and corporate learning across these growth units, creating powerhouses. Powerhouses are virtual communities that span multiple growth units, focusing on marketing verticals, new technologies, security practices, or any topic relevant in the digital landscape. Through our powerhouses, we can form adaptable teams with deep expertise in the digital product lifecycle and its associated practices, a mastery of a wide array of technologies, and serve as exemplars of our new, more agile, and collaborative organizational culture. Let's examine a practical example of one of our effective powerhouses. The open finance powerhouse unites a global array of strategists, designers, and technologists who have extensive experience in the financial services industry. This includes teams that have implemented open banking at some of the largest banks worldwide, along with market insights from countries at different stages of adopting open finance. It goes beyond merely meeting the regulatory requirements for open banking, where applicable, to explore the business advantages of a comprehensive open finance strategy. A key instance of how the powerhouse harnesses this global network is our participation in the global open finance challenge, which led to our victory in this international competition put forth by four global banks, now paving the way for us to partner with them. This initiative creates a platform that supports global financial mobility and addresses a longstanding issue faced by millions of immigrants every year. Overall, the open finance powerhouse enables CI&T to better serve its clients in their local markets by drawing on multi-market experience, resulting in a more insightful approach in our increasingly interconnected world. Moving on to our most valuable asset, our people. In 2021, we surpassed a remarkable milestone of 5,000 CI&Ters worldwide, finishing the year with over 5,500 employees. This represents a net addition of 2,300 CI&Ters, reflecting a 73% increase year-over-year. At the end of 2021, our attrition rate was 15.6%, which is an increase compared to our historical levels due to the heightened competition for tech talent. However, our leadership attrition rate remained low at 3.6%, ensuring we can still anticipate consistent growth alongside high net revenue retention. We continuously work to enhance the experiences and opportunities for CI&Ters internally by promoting their career advancement. Our approach is to attract talent for entry and mid-level roles, nurture their development, and promote them from within. As they gain experience with us, they tend to stay longer. We are proud that our average tenure remains at 15 years at the same level. At the start of 2022, we welcomed 400 new hires into our trainee program called Next Gen, which has been active for over two decades. We have established long-term partnerships with leading universities in Brazil to support our program and strengthen our employer brand. Our hiring and training efforts have been fully operational globally to attract and retain top talent in the industry to facilitate our rapid growth. We are honored to be recognized as one of the Top 5 Great Places to Work in Brazil in 2021, showcasing our ongoing commitment to providing an innovative and collaborative workplace for our employees. Additionally, CI&T has been highly rated as a Great Place to Work in most countries where we operate, and we are thrilled to include Colombia in that list, a recognition earned through our Somo acquisition in 2021. Over the past two decades, we have refined our strong and distributed delivery model, allowing us to deliver exceptional performance for our clients while maintaining high net revenue retention. Our operational model combines onsite teams close to our clients with nearshore tech talent from cost-effective and time-zone compatible locations. While Brazil continues to be our main source of tech talent due to our origins, we are actively working to diversify our talent pool. In this regard, we are excited about adding Colombia to our operational landscape as we integrate it from the Somo acquisition. We are dedicated to cultivating a diverse, inclusive, and equitable company focused on creating a better future for everyone around us. This is an ongoing journey that requires a compelling vision, well-planned actions, and a practical approach. Our goal is not just to make the right choices but to be a guiding light for societal change. Our aspiration is to set an example of responsible leadership in the corporate world, broadening our definition of success to encompass more than just business outcomes, aiming for a significant positive influence on the lives of our employees and the communities surrounding us. Last year, we made a global commitment to the United Nations, selecting six sustainable development goals that resonate with our mission and serve as a foundation for our future objectives and initiatives. In the second quarter of 2022, we will publish our ESG report, detailing our major initiatives, achievements, and future aspirations. Now, I'll turn it over to Stanley to discuss our financial results.

Stanley Rodrigues, CFO

Thank you, Bruno. And good morning, everyone. I hope you're all doing well. I am excited to present the details of 2021—another great year for CI&T. In Q4 '21, our net revenue was R$456.8 million, an increase of 72% compared to Q4 '20 and above our guidance of at least R$440 million. Net revenue organic growth was 40%, while our net revenue in constant currency grew 69% in the comparable period. During the quarter, we expanded our engagement with our existing clients and added to our portfolio 19 new clients with net revenue above R$1 million in the last 12 months, going from 75 clients in Q3 '21 to 94 in Q4 '21. Our adjusted EBITDA was R$101.8 million, an increase of 78% compared to Q4 '20, with an adjusted EBITDA margin of 22.3% in Q4 '21. Adjusted net profit reached R$47.7 million, an increase of 62% compared to Q4 '20. In 2021, CI&T’s net revenue was R$1.44 billion, an increase of R$488 million or 51% year-over-year. Net revenue growth in constant currency was 47%. Our performance was driven by our net revenue retention rate of 128%, demonstrating the recurrence and the resilience of our business. Adjusted EBITDA was R$324 million, 36.2% higher than in 2020. Adjusted EBITDA margin was 22.4% in 2021, below the level of 24.9% reported in 2020 when the results benefited from lower costs and expenses during the first year of the pandemic. The adjusted net profit was R$157 million, an increase of 22.6% compared to 2020. The adjusted net profit margin was 10.9% in 2021, a reduction from the level observed in 2020, mainly explained by the increase in the cost of services provided and higher expenses with depreciation and amortization and financial expenses. CI&T continues to deliver solid cash flow. In 2021, CI&T generated R$214.4 million in cash from operating activities, 37% higher compared to the amount of R$156.9 million recorded in 2020. Deducting payments for income tax and interest on loans, borrowings, and leasing, net cash from operating activities was R$132.4 million, an increase of R$31.4 million compared to 2020. CI&T ended December 31, 2021, with a financial net cash position of R$145.8 million, composed of a gross debt position of R$788.7 million and R$934.5 million in cash, cash equivalents, and financial investments, including the net proceeds of our IPO. Moving on to our pro forma numbers, our pro forma net revenue for 2021 totaled R$1.62 billion, 39.4% higher than in 2020 and above our guidance of at least R$1.6 billion in 2021. In terms of geography, the West operation continues to be the fastest-growing market, recording a 50% organic growth in Q4 '21 compared to Q4 '20. All industry verticals presented significant growth. It's worth mentioning that technology, media and telecommunications, retail, and manufacturing were the verticals that grew faster in terms of revenue in Q4 '21 year-over-year. In 2021, we improved significantly our revenue breakdown by client. We reduced our top one client concentration from 21% in Q4 '20 to 16% in Q4 '21 and reduced our top 10 client concentration from 72% to 54% in the same period. As of the first quarter of '22, Somo will contribute to increasing our revenue exposure in Europe, earning hard currency and adding exposure to two new verticals—automotive and utilities—and diversify our client concentration with its portfolio of solid and well-known brands. Now, talking about our land and extend strategy, the average net revenue retention rate in the past five years reached 120%, and in 2021, our net revenue retention was 128%. Most of our growth in the upcoming years will happen by expanding within current clients, which provides greater visibility on the trends in our business. In addition, we pursue the entry of new logos every quarter to foster future growth. In 2021, we successfully increased the number of clients with annual revenue above $1 million from 58 in 2020 to 94 in 2021. The number of clients above $5 million and $10 million also consistently grew over the same period, building a solid cohort for the upcoming years.

Cesar Gon, Founder & CEO

Thanks, Stanley. Let's talk about the future. It's worth looking back to understand how we will move forward. Founded in 1995, CI&T has 27 years of consecutive growth and profitability. From 2006, the emblematic year we launched CI&T in the USA, to 2016, we had an organic 10-year CAGR of 30% in revenue. From 2016 on, we introduced three new growth forces: a domain-driven digital strategy as a core component of our offering; our growth unit business architecture, fostering a scalable entrepreneurial organizational model; and a programmatic approach for M&A as an enduring new capability focused on the flow of selective and strategic acquisitions. As a result of those moves, we are accelerating our annual growth base: 41% in 2020, 51% in 2021, and guiding at least 56% in 2022. To operate at this new base, we are constantly increasing our investments in hiring, training, and leadership development while keeping solid margins and cash conversion rates. That said, we can indicate a solid business outlook for Q1 '22 and full-year 2022. Based on current market conditions, we expect our net revenue in the first quarter of 2022 to be at least R$485 million, a 64% growth compared to our net revenue of R$209.6 million in the first quarter of 2021. For the full year of 2022, we expect our net revenue to be at least R$2.25 billion, a 56% growth compared to our net revenue of R$1.44 billion in 2021. In addition, we estimate our adjusted EBITDA to be at least 20% for the full year of 2022. This guidance for 2022 assumes an average exchange rate of R$5.2 to the US dollar for the full year. That's what we had for today. We are fully committed to generating value for our clients, investors, society, and our people, and we are confident we are on the right track. Thank you all for your trust in CI&T and for attending our call today. We conclude our presentation here and may now begin the Q&A session.

Eduardo Galvão, Head of Investor Relations

We'll now begin the question-and-answer session. I will announce our name. Once you're hearing, please unmute your line and ask your question. Then when you're done, please unmute your line. The first question comes from Ashwin from CITI. Ashwin, please.

Ashwin Shirvakar, Analyst

Good morning, everyone. And thank you for the presentation. If I can start with a question on the growth and margin cadence that you expect through the year. If you can comment on that, and the drivers particularly because of the comp associated with Dextra and so on.

Cesar Gon, Founder & CEO

Thank you, Ashwin. Great to see you again. Well, as we mentioned, we are guiding an annual growth of 56% for 2022. Part of this is organic; 41% of this growth is organic. And then we have the contribution of Somo for this growth. In this guidance, we have not included any additional M&A. Even though we have a very strong pipeline, I'm confident we are going to do significant moves in this space. This is basically leveraging our—there's an amazing opportunity in the market. I think digital is more than ever being broadened and being strategic for every single company. And I think we are really showing our ability to manage the supply side of this equation, combining a very aggressive organic hiring, training, and leadership strategy with our M&A programmatic strategy.

Ashwin Shirvakar, Analyst

In terms of just the cadence of what you're expecting or roughly speaking, Q1, Q2, Q3, Q4, how do you expect that to vary over time, both for margins?

Cesar Gon, Founder & CEO

In terms of revenue growth, we will probably have a very similar pace quarter-over-quarter throughout the year. In terms of margins, there is some seasonality, especially because of salary inflation. Salary costs in Brazil see adjustments normally at the beginning of the year, and our price adjustments are designed to occur throughout the year. So typically, the first half is more challenging in terms of margins than the second half. However, we are confident, and we are guiding for a 20% plus EBITDA along the full year.

Ashwin Shirvakar, Analyst

If I can ask just one quick question, we get this a lot because of the geopolitical situation you mentioned with Ukraine and Russia as well. I know you have no direct exposure there, but are you seeing maybe more opportunities as clients who may have done some work in those areas turn to you for more work? Or do you see maybe on the margin side because of those companies hiring in other regions? Are you seeing any pressure?

Cesar Gon, Founder & CEO

As you mentioned, CI&T does not have offices or any meaningful client exposure in the region. Certainly there is—this is an event that creates imbalance globally, and we are closely monitoring developments in that region to prepare to adapt ourselves and more importantly, support our clients as needed. But at this time, it’s difficult to make any further projections or expectations. We do hope this conflict will be over soon and we are prepared to support our clients as needed.

Ashwin Shirvakar, Analyst

Thank you for that.

Eduardo Galvão, Head of Investor Relations

Thank you, Ashwin. Our next question comes from Diego Aragao from Goldman Sachs. Diego, please.

Diego Aragao, Analyst

Yes. Good morning, everyone. Thank you for taking my question. Maybe just a quick follow-up on Ashwin's question. If I would try to bridge your revenue growth expected in 2022 considering your MRR, new clients, and maybe M&A, how should we be thinking about it? And simple margin, maybe just trying to understand what will be your margins without Somo because if I'm not mistaken, Somo comes with lower margins than CI&T. So this is the first question.

Cesar Gon, Founder & CEO

Sure. Thank you. I think first, our growth profile is basically 41% organic, and then a little more than 10% coming from Somo acquisition. And again, we have not considered further M&A in this growth. It's concentrated in the main markets where we are well established—U.S., Brazil, and now the UK—and we foresee a lot of growth coming from Europe, compounding our historical growth in the U.S. and Brazil. The second in terms of margins, you are right. Somo and our M&A targets operate at lower levels of margins than CI&T, so it’s a small impact if you consider that Somo is a company with very good margins—in the high teens for EBITDA—but less than 10% of our business. We also see a very good opportunity to gradually improve their margins because of their current exposure to nearshore, which is only 20%. We believe that as they grow, we can increase adding CI&T global nearshore capability to enhance their margin. Our strategy and expectation is that we can expect some volatility in the bottom line as part of adding CI&T's ability to increase margins to the companies we are acquiring.

Diego Aragao, Analyst

That's great. Thank you, Cesar. And I guess looking through your net revenue retention of 128%, if I'm not mistaken, this implies a great increase relative to 2020. So can you just provide some color on what is driving such improvement? Maybe new applications, new solutions, new services? Just want to understand where the incremental demand is coming from?

Cesar Gon, Founder & CEO

Sure. Historically, our net revenue retention was around 120%. We are seeing an acceleration of this rate. It's basically more demand coming from our portfolio clients. I think especially our global companies are really vastly increasing their investment in digital. There is plenty of opportunities regarding cloud and data to really improve customer experience, using technology more aggressively to support their customers. This drives more demand, and I think we have a very strong positioning and reputation within our market, which helps us to navigate to new business units and geographies with our portfolio as we increase these historical levels of net revenue retention. That is very important, as it guarantees a new base of growth. Our strategy continues to be land to expand, and whether they're short-term or long-term, growth will depend a lot on our ability to increase our positioning in revenues with our current portfolio while adding new logos and clients every quarter. That will guarantee future long-term growth. That's what we have been doing to reach this new pace of 40% plus of organic growth; we definitely need a higher natural rotation, and we are being able to do that.

Diego Aragao, Analyst

Perfect. Thank you.

Eduardo Galvão, Head of Investor Relations

Thank you, Diego. Our next question comes from Puneet from JP Morgan. Puneet, please.

Puneet Jain, Analyst

Hey, thanks for taking my question. With Real appreciating against the U.S. dollar, are you seeing any impact on pricing for either Pacific-based or U.S.-based clients? And what margin implication does this currency move have?

Cesar Gon, Founder & CEO

Sure. Bruno, can you take this one?

Bruno Guicardi, Co-Founder and President North America & Europe

Sure. Of course, there are no implications for the part of the business that is in Brazil as long as it's the same currency implications for serving the U.S. market from Brazil. Of course, there are some short-term implications in margins, but in our experience, having operated for more than 20 years, it evens out in the mid to long term. The foreign exchange rates end up incorporating more than enough the inflation of the local market, and ultimately, that evens out in the mid-term. However, we can expect some volatility in the short term.

Puneet Jain, Analyst

And then how much visibility do you have on 2022 revenue guidance? 40% organic growth? And excuse me if you already mentioned this, how much is Somo's contribution going to be this year?

Cesar Gon, Founder & CEO

From this number, we have a forecast of 41% plus organic growth and then we have the contribution of Somo. In terms of visibility for the expanded part, that is basically the majority of this growth. We have full visibility right now. The part that we have less certainty with is the land part. The demand is really high, and we have been able to onboard new clients every single quarter and a good number across different industries and geographies. So right now, I would say the visibility is full. As always, in this industry and for CI&T, the complexity lies in the supply side, and we are doing a great job in the hiring front, training our people, and developing our leadership to cope with the demand.

Puneet Jain, Analyst

Quick clarification just to make sure: organic growth calculation does not include incremental contribution from Dextra?

Cesar Gon, Founder & CEO

Yes. We concluded the integration of Dextra last November, so now it’s fully integrated as four new growth units, operating within our platform. So it's now about organic growth. As of now, we have 26 growth units and we are fostering growth in each of them. For 2022, it's CI&T as a platform growing 41% plus, plus Somo as a new growth unit with strongly expected performance, contributing for a 56% year-over-year revenue growth.

Puneet Jain, Analyst

Understood. Thank you.

Eduardo Galvão, Head of Investor Relations

Thank you, Puneet. We have a question here via email from Arturo Lang from Itau. Could you please provide insight into the pace and climate for hiring? How are you seeing wage inflation, and are you able to pass this on to your clients?

Bruno Guicardi, Co-Founder and President North America & Europe

I can take that one. Thank you for your question, Arturo. Regarding your first question about hiring, in 2021, we hired more than 2,300 people, achieving a 73% growth year-over-year. Half of that came from the incorporation of Dextra, and the other half was a result of our ability to go to market and hire talent. As we accelerate our organic growth, we are also investing more to support our hiring, training, and leadership development teams. The competitive market for tech talent continues to be very challenging, but we believe we have a strong value proposition. Our strategy is focused on attracting talent early in their careers rather than only looking for senior professionals. For example, we recently onboarded 400 trainees and have ongoing relationships with the best universities in Brazil to foster our program and enhance our employer brand. Our hiring and training efforts are in full swing worldwide to attract and retain the best talent in the industry to support our accelerated growth. We are proud to have been recognized as one of the Top 5 Great Places to Work in Brazil in 2021, a recognition that showcases our dedication to providing an innovative, collaborative environment for our employees. Moreover, CI&T has ranked as a Great Place to Work in most countries where we operate, and we recently added Colombia to that list—an acknowledgment given to Somo in 2021. Regarding inflation recovery, we're witnessing this trend across the board, especially in developed countries where tech talent shortages are more pronounced. In the end, this will create price elasticity, allowing us to adjust our prices with clients as we have been successfully doing year over year, based on our close relationships and the value we create for our clients.

Eduardo Galvão, Head of Investor Relations

Thank you, Bruno. Our next question comes from Rodrigo Gastim from Clave Capital. Considering the Somo acquisition, how should we expect the growth breakdown among the different regions? Should we expect growth in Europe to be similar to that in the U.S., and regarding the 2022 guidance, how much of the revenue comes from Somo?

Cesar Gon, Founder & CEO

I think we've already discussed Somo's contribution. In terms of regions, I believe the acquisition of Somo was a pivotal move to position Europe, especially the UK, as a primary source of growth for CI&T. Europe is the second-largest market for digital services globally, and we now have an impressive platform, reputation, and skills—strategy skills, design skills, and full-stack technology expertise—to operate there. So you're right; we are anticipating aggressive growth in the UK, much like we've been experiencing in the U.S.

Eduardo Galvão, Head of Investor Relations

Thank you, Cesar. So that concludes the questions we have from emails. I'd like to extend here to see if some of the analysts, Ashwin, Diego, or Puneet, would like to do a follow-up question.

Diego Aragao, Analyst

Sorry, Eduardo.

Eduardo Galvão, Head of Investor Relations

Go ahead, Diego.

Diego Aragao, Analyst

Apologies; I was trying to unmute my phone. So just a quick question: can you just comment on the attrition rate for 2021 and how this compared to 2020? I know that 2020 was a very different year because of COVID, but I just want to understand what the trends are there.

Stanley Rodrigues, CFO

I can take that one. We have a 15.6% attrition rate. Mainly, we see two effects: first, the current market conditions. If you compare 2021 to 2020, during 2020—the first year of the pandemic—we had a higher retention rate due to uncertainties in the market, and then later we saw the opposite effect. We have performed well in the market as we continue to be a reference in the industry against our competitors. The acquisition of Dextra also had a higher attrition rate, but we have already begun to drive their attrition to our lower levels, as Cesar mentioned. So if you compare this higher attrition rate to 2020, the two significant factors are those I mentioned.

Diego Aragao, Analyst

Thank you.

Cesar Gon, Founder & CEO

Diego, just adding: there's another KPI we monitor carefully. Our leadership attrition rate in 2021 was only 3.6%, which allowed us to continue projecting consistent growth in our revenue retention rate. It's important to not only look at the overall attrition rate but also at the leadership attrition. At the end of the day, leadership is the primary bottleneck for growth in this space.

Diego Aragao, Analyst

That's amazing. Thank you.

Eduardo Galvão, Head of Investor Relations

That concludes our Q&A session. I'll now pass to Cesar to proceed with his closing remarks.

Cesar Gon, Founder & CEO

Sure. Thank you, Eduardo, Stanley, and Bruno for joining me today. Again, thank you to all the analysts for your questions. I want to take this moment to thank all CI&Ters, clients, investors, and partners for their ongoing support. We continue to be very confident that we will have another great year ahead. Ultimately, I hope you all stay safe and well, and I look forward to seeing you in a couple of months. Thank you.

Eduardo Galvão, Head of Investor Relations

Thank you, all.

Bruno Guicardi, Co-Founder and President North America & Europe

Thank you.

Ashwin Shirvakar, Analyst

Thank you.