Good morning, everyone. Welcome to CI&T third quarter of 2021 results conference call. I am Eduardo Galvão, H ead of Investor Relations at CI&T. Today we have with us Cesar Gon, Founder and CEO, Bruno Guicardi, Co-Founder and President for North America and Europe, and Stanley Rodrigues, CFO. This event is being recorded, and all participants will be in a listen only mode during the company's presentation. After that, there will be a questions and answer session for analysts and investors only. At that time, further instructions will be given. Should any participant need assistance during this call, please press star zero to reach the operator. This event is also being broadcast live via webcast and may be accessed through the company's investor relations website at investors.ciandt.com, where the presentation is available. The replay will be available shortly after the event is concluded.
Those following the presentation via the webcast may pose their questions on our website. Some of the matters we'll discuss on this call, including our expected business outlook, are forward-looking statements and as such are subject to known and unknown risks and uncertainties, including, but not limited to those factors described in our earnings release and discussed in the Risk Factors section of our registration statement on Form F-1 in connection with our initial public offering and other reports we may file from time to time with the SEC. These risks and uncertainties could cause actual results to differ materially from those expressed on this call. We caution you not to place undue reliance on those forward-looking statements because they are valid only as of the date when made. During the presentation, we'll comment on certain non-IFRS financial measures to evaluate our business.
Please refer to the reconciliation tables of non-IFRS measures in the appendix for more details. Our agenda for today includes an update of who we are and the CI&T way, a discussion of our quarterly financial results, including our business outlook, followed by a Q&A session. Now I'm pleased to invite Cesar Gon to begin our presentation. Thank you.
Good day, everyone, and thank you for attending our call today. It is a great pleasure to be here to start this call talking about our IPO, a milestone in our journey and the beginning of a new chapter as a publicly traded company. On November 10, we rang the bell at the New York Stock Exchange. This achievement was only possible due to the trust of well-known investors across the globe, the long-term partnership with our clients, and mainly due to the ingenious and hard work of more than 5,500 CI&Ters. Our total offering was $225 million with net primary proceeds of $157 million that we expect to use mainly to pursue strategic acquisitions in order to leverage our organic growth.
We are glad to have attracted tier one and sophisticated global investors that share a long-term philosophy, and we are looking forward to strengthening these relationships over time. Now, before diving into our third quarter results, let's see how CI&T is delivering digital transformation to the world's leading brands.
Since the 1990s, companies have been trying to digitally transform their operations and how they interact with customers. The rapid expansion of technology, driven by the ubiquity of mobile applications and other connected devices, has increased the prevalence of connected consumers. Empowered by these technologies, consumers are more sophisticated than ever and are increasingly demanding seamless digital experiences. CI&T is a global digital services specialist and has helped companies adapt to these new demands since 1995, quickly gaining a reputation for providing digital solutions that delivered on both speed and quality. From its humble beginnings, CI&T now provides strategy, design, and software engineering services to enable digital transformation for the world's leading brands.
CI&T is a technology service company, founder-led with 26 years of consecutive growth and innovation with a global team of more than 5,500 digital professionals, including software engineers, designers, data scientists, and digital strategists. CI&T has long-term relationships with more than 50 large enterprises and fast-growth clients with a solid track record of continuous growth, best-in-class profitability, and a highly recurring revenue model with a strong net revenue retention rate. CI&T also operates with a very healthy employee retention figure. In the market of digital services, large enterprises and new fast-growing digital firms are facing challenges with digital transformation. The former struggle to innovate and quickly transform, while the latter struggle to scale their operations. To help these companies, CI&T combines digital strategy with customer-centric design and top-of-the-line software engineering to offer end-to-end solutions from the business opportunity to the hands of the consumers.
CI&T combines these competencies under one set of principles, practices, and methodologies called Lean Digital, a methodology unique to CI&T that is a combination of the disruption of digital and the discipline and leadership frame of mind of Lean. CI&T generates business impact for clients across several geographies and industries such as financial services, food and beverage, and pharmaceuticals, always focused on building strong client relationships that expand over time. Metaphorically speaking, giving giants nimble feet, like in the three case studies that follow.
BEES is a global B2B digital platform that completely reimagined ABI's sales and distribution processes for the digital world. BEES' ecosystem of applications connect ABI digitally with all of the stakeholders involved in the distribution chain. To understand the scale of this challenge, the platform today connects ABI to more than 1 million points of consumption, including small businesses. By the end of 2022, ABI expects that approximately 52% of its revenues will be generated through BEES. This strategic engagement showcases a key part of CI&T's value proposition, the ability to articulate and utilize deep technical skills to build innovative global solutions rapidly at scale.
Another case is LifeScan, a global leader in blood glucose monitoring and digital health solutions for people with diabetes and related health conditions. CI&T was chosen as a key strategic partner to help LifeScan enhance its digital capabilities. CI&T is helping LifeScan design and build digital solutions that integrate hardware and software to comply with the FDA regulations and reduce its go-to-market time. This engagement illustrates how CI&T combines digital competencies with domain expertise.
To help accelerate the business digital transformation of Nestlé Brazil, CI&T is building a unified data platform and a center of excellence capable of driving business impact at scale. This initiative is a combination of an aggressive use of technology, data, and a cultural shift to achieve the following objectives. Reimagine consumer engagement to drive business impact. Build a data platform architecture that is able to quickly adapt to opportunities. Build data pipelines, structures, and machine learning models that are readily scalable. Come now take a look in the kitchen where this magic happens. This figure illustrates the three main pillars of the CI&T way, meaning impact, learning, and people, having ESG as a foundation for everything. CI&T's value proposition is about concrete business impact.
Digital transformation is a long journey, but CI&T's approach is to define a long-term view early on while generating business results, meaning revenue or profit, in very short cycles, typically quarterly. Going from strategy or POV discussion with clients to building and testing hypotheses, which are normally digital products like mobile apps, e-commerce experiences, data/AI platforms, and/or any digital journeys reaching target customers. First is the range of services from strategy to the full stack engineering needed to turn any digital dream into reality, seamlessly combining services in order to drive concrete results in very short cycles. Second is CI&T's reputation of walking the talk. There's nothing harder than consistently delivering the value you've promised year after year. Third is the ability to support developed markets such as the U.S. with nearshore capabilities, which offers clients the best talent and a flexible cost structure.
Fourth is CI&T's very singular organizational model. The CI&T way generates the best of both worlds for clients, a big, solid company with the vigor of a young and innovative company. Finally, the way CI&T partners with its clients is radically different from the traditional outsourcing industry. CI&T is an insourcing partner in the sense that all learnings, practices, and processes are available to the clients.
To understand CI&T's work, it's important to understand how this singular organization architecture fosters corporate learning and growth strategies. CI&T has an entrepreneurial organizational model and ecosystem designed for growth, approaching the market through autonomous units called Growth Units. Growth Units are empowered to focus on the needs of clients and leverage CI&T's centralized shared services platform for branding, human capital strategy, and corporate learning support. With this divide and conquer model, CI&T can continue to grow aggressively while keeping the organization very flat, nimble, and agile. This model is based on the concept called adhocracy, for which CI&T has already received international recognition. Each unit is in charge of a portfolio of customers, avoiding any competitive conflicts. This enables CI&T to serve large competitive companies within the same sector. Growth Units are in charge of bringing together multifunctional teams that will work on multi-year journeys along with clients.
To foster innovation and corporate learning among the Growth Units, CI&T created its Powerhouses. Powerhouses are virtual cross-Growth Units communities focused on speeding up learning on market verticals, new technologies, security practices, or any specific subject relevant in the digital world. To summarize CI&T's management model in one sentence, Growth Units and Powerhouses are able to provide everything clients need in terms of digital competencies, organized in a set of squads working under a common set of methods and practices to deliver strategy, design, and engineering, and generate business results in very short cycles.
The final pillar of the CI&T way is people. Compared to main competitors, CI&T has the most experienced workforce with an average of 11 years of experience per professional. This is the result of having a low attrition rate combined with the ability to provide continuous professional growth to people. This is the result of an intentional and consistent effort to have an environment where people can flourish. CI&T's reputation has been built consistently over the years, being recognized for it numerous times along the journey. The majority of new hires join at entry and mid-level positions, steering away from the highly competitive market for senior talent and with great success developing teams. It may seem paradoxical, but the scarcity of digital talent ends up generating even more demand and price elasticity for companies like CI&T.
The differentiated talent enables CI&T to attract and retain the most sought-after resources, which is difficult for traditional IT providers and clients. During the last decade, nearshore delivery became the dominant model in the digital services industry. For the last 16 years, CI&T has streamlined a robust and distributed delivery operation with both on-site and nearshore tech talent, which uniquely positions CI&T to serve both developed and emerging markets. Finally, it's important to add that at this point, it's evident that the future of work will be work from anywhere. Given CI&T's history of expanding globally, this is a massive opportunity to continue attracting top talent even as the market evolves. Today, CI&T has established ESG practices for each of its regions, all of which are orchestrated by a dedicated ESG team supported by the leadership, including the ESG board committee.
CI&T's true north for ESG is based on the United Nations Sustainable Development Goals from which were selected six main goals. CI&T also signed up to the United Nations commitment and is preparing to sign up to the Target Gender Equality program with goals regarding women in leadership positions by 2025. This is CI&T. This is how we make their tomorrow.
Well, let's now double-click on the third quarter of 2021 highlights. We are very excited to present a robust 55% year-over-year net revenue growth in the quarter, or 57% in constant currency basis. Of which 36% was organic growth and 19% from the Dextra acquisition. The U.S.A continues to be a fast-growing market with 44% growth in the quarter year over year. We are proud to say that this is our 21st consecutive quarter of top-line growth, even during the pandemic and the other periods of market volatility. Our pro forma adjusted EBITDA margin was 22% in this third quarter and 24% in the nine months of 2021. Another mark of our business model is the solid cash flow generation. The nine months of 2021, we generating BRL 90 million in cash from our operating activities.
We are also pleased to announce that Dextra integration has been running smoothly, and we expect to conclude it by the end of this year. By now, Dextra is already operating as four new Growth Units under the CI&T brand. Another highlight in the quarter was the expansion of the number of clients with net revenue above BRL 1 million in the last 12 months. We grew from 62 in the second quarter to 75 in the third quarter. We onboarded new clients in all regions we operate from several industry verticals. The onboarding of new clients is a key component in our land and expand growth engine, building strong client relationships that expand over time. Finally, we expanded our team with the addition of 1,400 people in the quarter, including 1,200 from Dextra, ending the quarter with 5,400 CI&Ters.
Based on remote work, we have been able to hire people from different places and countries. It's worth mentioning that in September this year, we inaugurated a new office in Chengdu, Southwest China. Now, I invite Stanley, our CFO, to delve into our financial results.
Thank you, Cesar, and good morning, everyone. Let me start with our pro forma results for the third quarter of 2021, which considers a combination of both companies as if the acquisition of Dextra had occurred on January 1, 2021. Pro forma net revenue totaled BRL 411 million, and the adjusted EBITDA was BRL 92 million, a 22% adjusted EBITDA margin. The performance in the quarter reflects our investments on hiring new people and also promoting our employees to foster our growth and our delivery model. We also invested in strengthening our administrative teams such as finance, accounting, legal, and compliance to comply with all the requirements of being a publicly traded company from now on. Now, analyzing our pro forma numbers for the nine months of 2021.
Our pro forma net revenue reached BRL 1,160 million for the nine months, almost the same pro forma net revenue for the full year of 2020. In this case, we are comparing our actual pro forma results in the nine months with the full year of 2020, just as a reference of our current performance. Our pro forma adjusted EBITDA year to date was BRL 278 million with an adjusted EBITDA margin of 24%. These numbers are in the top range of the flash numbers we provided in the IPO prospectus. Now I will talk about CI&T results in the third quarter of 2021, this time considering the consolidation of Dextra from August 10, 2021, the effective date of the acquisition.
Meaning that in these figures, we have 50 days of Dextra results within the third quarter of 2021. Net revenue was BRL 376 million, an increase of BRL 133 million or 55% year-over-year, mainly due to the higher demand for digital transformation from our existing clients and the addition of new clients to our portfolio. During the second half of 2020 and throughout 2021, we have been accelerating the hiring process as well as promoting employees that have been taking on new roles as we expanded our relationship with our clients. We also invested in our administrative teams in preparing the company for the IPO and to comply with all the necessary requirements of a publicly traded company. These expenses should be diluted as we continue to grow our revenue over time.
In the third quarter, we also incurred certain expenses, such as an increase of BRL 4 million in the provision of profit sharing and bonuses at Dextra, aligned with its current performance year to date. This effect is normalized when we analyze the results for the nine months of 2021. Our adjusted net income was BRL 24 million, a reduction of BRL 16 million compared to the same quarter last year, with 7% adjusted net income margin. Adjusted net income was impacted by higher expenses related to M&A, including BRL 6 million of depreciation and amortization and an addition of BRL 13 million of higher financial expenses. In addition, we had BRL 7 million in financial expenses related to foreign exchange variation with no cash effect. Considering the net proceeds from the IPO as of November, we have a higher cash position than our total debt.
Our main markets continue to be the U.S. and Brazil. The highlight for the quarter was the net revenue increase in the U.S. from $150 million in the third quarter 2020 to $165 million in the third quarter 2021, a 44% growth. Our main industry verticals are financial services with 36%, food and beverage 21%, and pharmaceutical and cosmetics with 14%. We increased our exposure to TMT from 10%-12% and reduced our top ten client concentration from 72% in the previous quarter to 60% in the third quarter. As we mentioned during our roadshow, we have a solid pipeline of M&A global opportunities to foster our inorganic growth with new markets, industry verticals, and talent locations.
Now I will pass back to Cesar to go through our business outlook for the fourth quarter and to close the presentation. Cesar, please.
Looking forward, we continue to see strong demand for digital transformation services. We expect our revenue growth to continue accelerating during the next quarter. We expect our net revenue in the fourth quarter of 2021 to be at least BRL 440 million, a 66% growth compared to the same period last year. For the full year of 2021, we expect our pro forma net revenue to be at least BRL 1.6 billion, a 38% growth compared to our pro forma net revenue in 2020. This acceleration is based on higher demand from our current clients, combined with a consistent addition of new clients. To conclude and open for Q&A, I would like to reinforce our investment highlights.
CI&T is playing in a massive, very fragmented, and expanding market, positioned as a solid end-to-end native player using a proven global delivery model with access to robust talent and a very attractive culture. Plus, a solid track record of growth and profitability and a business model that allows the rare combination of high revenue growth and cash generation, all in the hands of a very entrepreneurial leadership and an innovative culture created over the last 26 years. Thank you.
Ladies and gentlemen, we'll now begin the question and answer session. If you have a question, please press the star key followed by the one key on your touchtone phone now. If at any time you would like to remove yourself from the questioning queue, press star two. Our first question comes from Mr. Arturo Langa with Itaú BBA. Please, Mr. Arturo, you may now make your question.
Anytime you would like to report.
The next question comes from Mr. Diego Aragão with Goldman Sachs.
Yes. Hi, good morning, everybody. Thanks for taking my question. The first question is on Dextra. Just wondering if you can help us to understand what was the headline growth for Dextra on a standalone basis. I mean, what was the year-on-year growth rate for Dextra in the third quarter? How fast are you guys expecting this business to grow in the fourth quarter? Thank you. That's the first question.
Thank you, Diego. I can get this one. I think Dextra has a very similar profile of growth and profitability as CI&T. Basically we have the same pace. As you saw, we grew 36% organically, and then we add 19% from Dextra. For the next quarter is almost the same. We are expecting 66% of top line growth. Basically you can consider that Dextra is growing the same pace as CI&T.
Okay, perfect. Thank you so much. The second question is regarding the margins. You mentioned a couple of, let's say, additional costs. There seems to be no recurring items in nature. Can you just help us to understand the year-on-year trends and maybe size the amount of, let's say, those extra costs that will no longer impact your margins in the fourth quarter? Thank you.
Hi. I can take that, Diego. Thank you for the question. If you get our flash numbers, we already anticipated those effects in a broader view coming from net income. BRL 56 million is the amount that affected net income, so 15 percentage points. If you take from the EBITDA perspective, we are talking about the BRL 33 million. Going forward, we basically have two items, amortization coming from the acquisition of Dextra. You can consider a monthly number of BRL 2.5 million going forward.
Interests with regard to the debts that we contracted to finance the acquisition, and that as well we can consider like BRL 4 million per month in the beginning. Of course, toward the future, this will dilute and of course interest will reduce as long as we go with the amortization schedule.
Understood. Thank you so much.
A-and additionally-
Perfect.
Diego. Sorry. Additionally, Diego, if you want more color, we already described, for example, we have the write-off of software, et cetera. Those are also pre-described in the flash numbers. We didn't have any change in those aspects.
The next question comes from Mr. Jason with Bank of America.
Thanks, guys. Congratulations on the IPO. Just a couple of questions. I guess first off, I would love to hear a little bit more about the pipeline for new clients and how that is shaping up at this point. You know, where is it strongest in terms of verticals and geographies?
Sure. Thanks, Jason, for your question. I can start here. Well, basically, as we mentioned, this was a great quarter. We added net three new clients with last 12 months revenues above BRL 1 million. I think as this growth in our growth strategy, it's very important that not only we expand within our current clients, but we ensure the entry of new logos every single quarter. The idea is that these new clients will mature in two or three years and guarantee we continue in a solid growth pace. We are seeing a lot of demand from digital distribution services. We expect that we will continue onboarding new clients in the following quarters.
I think in terms of verticals, financial services and it is still very solid. We even increased the participation in our revenue from 34% to 36%. We see really two new verticals being more relevant. TMT now is getting traction from 10%-12%, you know, as a share. We see retail as a big trend too. A lot of demands coming from this vertical. Basically we see this as the main drivers for continuing to grow in this space.
Understood. Thank you for that. Any preliminary thoughts on hiring targets for 2022 and what the potential mix of freshers versus non-freshers could look like?
I can take this one. As you know, our headcount will go up according to revenue growth. Right? It's pretty linear. We're expecting the number of headcount to increase according to revenue growth, which we predict to be, you know, the levels we have today. The number of people that will be added. In Q3 we added around 1,300 people, including the Dextra acquisition, where we have 1,100 people, right? We're kind of ramping up the efforts, like our own hiring structure there and a lot of marketing and other efforts to keep the hiring and our attractiveness at the top of the industry, right?
As you know, we have a very high attractive rate. We continue to have most of over three quarters of the proposals that we extend to candidates accepted. We wanted that to keep that way, going into 2022.
Let me add one. I think it's worth mentioning that last Q1, the first quarter of this year, we onboarded in our trainee program around 200 new trainees. For the next first quarter of 2022, we are forecasting 400. We are double the size of our trainee program. We intend to onboard 400 new trainees in Q1 next year. I think this is a relevant part of our strategy to develop our own talent since the early stage of their careers.
Just last one real quick for me. What was voluntary attrition in the quarter, and how much of the 66% revenue growth in Q4 do you expect will be organic? Thanks, guys.
Uh.
Attrition for the quarter. Historically, attrition for us, as you know, that's the industry benchmark around 12%. Now that we had added Dextra had a little higher attrition rate. The combined attrition rate in the quarter was 14%. That was the number for the quarter.
The Q4 organic.
Yeah. As you saw, we are forecasting 66% growth. This is basically, I would say, CI&T and Dextra now already combining. It's pure organic in the sense that it's already integrated. You have, if you think about the sizes, 80% is original CI&T clients and around 20% is Dextra growth. We see now Growth Units growing the same pace now.
Just to add to that. On the third quarter, we have 55% growth, and we had 60 days of Dextra within the quarter. The 19% inorganic tends to expand on the fourth quarter as we're gonna have full Dextra within the fourth quarter. We expect to maintain a similar organic growth level and a higher contribution from inorganic growth.
Yep, makes perfect sense. Okay, thanks again.
Ladies and gentlemen, as a reminder, if you would like to pose a question, please press the star key followed by the one key on your touchtone phone now. The next question comes from Puneet Jain with JP Morgan.
Hey, thanks for taking my question and congrats for the recent IPO. Cesar or Stanley, if you can talk about like, the business momentum you are seeing as it relates to next year's growth. What visibility you have right now at this time on next year's growth? Without getting into numbers, do you have better visibility than same time last year or maybe the year before that?
Thanks for your question. I can get this one. Well, as you know, our growth strategy is based on. It's an extremely recurring business model. It's based on a land-and-expand strategy. I think what we can see is for now, it's for this second half of the year and for next year is an increase in our net revenue retention. Historically, our net revenue retention was around 118%-120%. We are this year seeing this number increasing. We are going to have around 128% of net revenue retention. That means a lot of demand coming from our portfolio.
Of course, it's been a combination of more demand from the portfolio and CI&T gain more wallet share due to our performance and our end-to-end value proposition. I think we have even more visibility. That's why we expect a very strong, not only Q4 as we give the guidance, but also for next year. We have the discipline of opening room for onboarding new clients to make this engine continue to work. The land expansion engine guarantee not only short-term growth but long-term growth.
We have a very high visibility at the end of the day. I think it's a result of companies we see, especially large corporations investing even more in digital. We will take advantage of this scenario and continue our very solid growth.
Understood. Can you also talk about wage inflation trends you see in Brazil? Has there been any change in wage inflation trends like over the last one or two quarters there?
Inflation trends, we see that inflation is a consequence of post-pandemic effects, especially coming from exchange rates. Naturally, those costs are adjusting in most recently. We see a stabilization towards the future. That's pretty much the overall scenario we're foreseeing. I don't know, Galvao, if you have something to add.
Yeah. Just to add to that, Puneet, we do have pass-through clauses on our contracts locally in Brazil. Pretty much this is pretty standard in Brazil to pass it to our clients based on contracts. We certainly expect to manage that based on our existing agreements. If you think about our operations in the U.S., then you have the FX component that also helps to offset inflation impacts on our results.
Got you. Thank you.
Okay, we got a few questions here on the webcast. Arturo Langa from Itaú BBA. He says, "I don't think you were able to hear me, sorry for the technical issues. Can you please help us understand how we should think about growth and margins? In other words, we saw a big pickup in new hires. Should we expect the same pace going forward? And my second question is if you can share headcount attrition rate and what are the main drivers for talent acquisition and retention you're seeing in your footprint?
I think Roberto already did.
Yeah. I already answered the attrition one, right? It's 12% standalone, 17%, 14% combined. We expect that we're going to bring that down as we integrate Dextra and kind of impose our own HR processes. In terms of the revenue growth, I also think we answered how we're expecting that to grow, right? The how we actually are kind of planning to attract and retain people, I think it's back to our value proposition for employees, right? We have a very simple and clear and powerful value proposition for attracting and retaining people, which is we grow, you know, faster than the industry and people grow with us, right?
We open a lot of opportunities to people to step up, to grow into their other roles and to take on new responsibilities. We'll give those opportunities for people that are with us. We promote from within, and we support that development, right? People have here faster careers than they would have elsewhere. That's a very compelling value proposition in this market. That's what actually drives our very low, you know, attrition rate and a very high attractiveness kind of KPI as well. Okay. Arturo is back on the line queue here, so we can open him to listen live here. Operator, please.
Let me know if you have any follow-up questions.
Mr. Arturo Langa, you may proceed.
Hi. Thank you. Thank you for answering my questions via webcast as well. Maybe just a follow-on on the headcount. Is there any particular geography that you're seeing a higher share or a higher mix of new hires? Is there any color in terms of geography that you can provide in terms of talent acquisition?
We're kind of, as you know, most of our headcount is still concentrated in Brazil as we serve the biggest markets are the U.S. and Brazil itself. It's mostly in Brazil. We're seeing this quarter, we saw 20% of new hires coming from other locations, right? Mostly the new development centers in Canada, Portugal and other locations in Latin America as we open to hire more people from a work from anywhere setup. We see that as a trend. We expect that ratio to even increase going forward and that talent pool to get more diversified over time.
Perfect. Thank you. Congratulations for the results in that field.
Thank you. Okay, I have some follow-up questions here on the webcast. Otavio Tanganelli from Bradesco. Thanks for taking the question. Congratulations on the results. Can you provide us more color on the slight margin compression that we saw in the quarter? Is this solely a matter of consolidation of Dextra? How do we expect this to evolve going forward? Thank you. I think this Stanley mentioned briefly during the first question. I think it's important. We do have some one-offs in the quarter, and we mentioned the
Also the provision for bonus at Dextra that normalized when you look at the nine months and was spec-provision specific in the third quarter. Certainly we're gonna look at a fourth quarter as a cleaner result that will be a better reference in terms of margins of what we expect going forward. In terms, we mentioned the 66% revenue growth that we expect for the fourth quarter. On top of that we're confident that we'll be able to deliver a solid EBITDA margin the fourth quarter as well. Also some follow-up questions here on the web. Vera from T. Rowe Price: "Could you please comment on the outlook for top line growth and profitability for 2022? Thank you.
Sure. By now we are not giving you specific guidance, but we can say that we have a very amazing visibility. We expect to continue to grow organically in a very good pace, but we expect also to combine this organic growth with M&A, right? We have, I think, a good pipeline of opportunities to expand our talent pool capabilities, vertical expertise, and geographic reach. We expect that 2022 will be a year with a very solid organic growth combined with M&A or inorganic growth, if you will. Another thing is in terms of margins, we really expect to continue best-in-class profitability above the industry.
Of course M&A as we probably are going to acquire some companies with lower EBITDA margin as we expect some fluctuation, but it's also, we see as an opportunity to really add our streamline operations to this new target and bring them to the level of profitability of CI&T.
Okay. Two follow-ups here, one from Bruce Quinn from Kennedy Capital: "Have you seen any significant wage inflation of Brazil labor market which could press your gross margin?" Think we'd comment on that. He adds, "Or you still can you still growth at high 30%, 40% going forward? High 30s, low 40s going forward.
In terms of inflation in Brazil, our business model is very resilient to Brazil's habitual turbulence. I think over the last 26 years, we continue to grow and to profit in any and every single year. I think it's important to note that we have half of our revenues in hard currencies, mainly U.S. dollars. Most of our costs are in Brazilian real. FX normally more than offset inflation and other turbulence effect in Brazil. I think Galvao mentioned for our local contracts, 100% of them have annual price adjustment clause based on inflation indicators. By the way, this is a very standard business practice in Brazil.
Of course we can have some seasonality because normally seller adjustments are more concentrated in Q1 and contract price adjustment are distributed along the year. At the end of the day, it means we can guarantee continue in a very good level of profitability. The second part was regarding the. Yeah. I mentioned we're not, at this moment, we are not giving a specific target, but very confident we will continue a very good pace of growth and also having an additional growth coming from M&A. That's what we expect right now.
The final question we have on the webcast is another follow-up here. Rodrigo Gastim from Clave Capital: "Could you please share a little bit more about the net revenue retention dynamic during the quarter? Thank you." It's a topic that Cesar mentioned we're currently waiting for the year.
Yeah. I mentioned it's increasing, right? We are now in the level of 128% of net rev retention. I think this is really the result of seeing our current clients increasing their investment in digital and of course CI&T gain more wallet share with them. We expect that for the future, our net rev retention will continue to be around or above 120%. This is an important part of our land-and-expand strategy.
All right. We have no further questions. Cesar, would you like to proceed with your closing remarks, please?
Sure. Thank you, Galvao, Stanley, Bruno, and of course thank you everyone for participating. We are very excited about the future of CI&T, about our purpose to unlock business technology and million people potential. Again, thank you very much. Looking forward to see you in the next quarter. Of course, let's make the tomorrow. Bye.
Thank you all.
Thank you.
That does conclude the conference call for today. Thank you very much for your participation, and have a good day.