CI&T Reports Solid First Quarter 2022 Financial Results and Raises Full Year 2022 Guidance

NEW YORK--()--CI&T (NYSE: CINT, “Company”), a global digital specialist, today announces its results for the first quarter of 2022 (1Q22) in accordance with International Financial Reporting Standards (IFRS). For comparison purposes, we refer to the results for the first quarter of 2021 (1Q21).

1Q22 Operating and Financial Highlights

  • Net Revenue of R$491,9 million, an increase of 66.0% compared to 1Q21.
  • Net Revenue growth in constant currency was 75.3%
  • The number of clients with annual revenue above R$1 million in the last twelve months grew from 94 in 4Q21 to 110 in 1Q22.
  • CI&T ended 1Q22 with 6,435 CI&Ters, a net addition of 2,674 employees (71% growth) compared to the end of 1Q21.

Cesar Gon, founder and CEO of CI&T, commented "We are excited to initiate 2022 with a strong net revenue growth in the first quarter, a post covid environment, which demonstrates the resilience and consistency of our engagements with our long-term clients. Digital transformation has been enabling companies to unlock their business potential, increasing sales and improving profitability metrics, and demand for our services remains strong in all industry verticals we operate.

We have been disciplined to onboard new clients every quarter to guarantee our sustainable growth and our hiring machine continues to operate at full speed. Based on our annual engagements for the year and the robust demand environment, we are increasing our net revenue guidance for 2022 and expect it to be at least R$2,300 million (USD442 million), a 59% growth compared to last year. Finally, we are maintaining our Adjusted EBITDA margin of at least 20% for the full year of 2022."

Comments on the 1Q22 financial performance

Net Revenue

Revenue

(in BRL thousand)

1Q22

1Q21

Var. 1Q22 x 1Q21

Net Revenue

491,872

296,292

66.0

%

In 1Q22, net revenue was R$491.9 million, an increase of 66.0% compared to 1Q21. The acquisition of Somo concluded on January 27, 2022 contributed to 10 percentage points of revenue growth in the quarter. Net revenue in constant currency grew 75.3% in the comparable period. The strong performance in the quarter reflects the expansion of our engagement with existing clients, the addition of 16 new logos with revenues above R$1.0 million in the last twelve months, combined with additional revenue from recent acquisitions.

CI&T decreased its top one clients' revenue share to 15% in 1Q22 from 24% in 1Q21 and reduced its top 10 clients' share to 51% from 73% in the same comparison period. In addition, CI&T increased its revenue exposure to Europe with the acquisition of Somo in the UK, diversifying further its geographic footprint. In terms of revenue by industry, the verticals that are growing faster are Technology, Media and Telecom (TMT) and Retail and Manufacturing, due to strong demand for our services from our clients in those industries, as well as the addition of new clients in those verticals.

Revenue Breakdown

Net Revenue by industry

(in BRL thousand)

1Q22

1Q21

Var. 1Q22 x 1Q21

Financial Services

153,598

31.2

%

98,821

33.4

%

55.4

%

Food and Beverages

94,068

19.1

%

84,056

28.4

%

11.9

%

Technology, Media and Telecom

67,753

13.8

%

32,349

10.9

%

109.4

%

Pharmaceuticals and Cosmetics

63,422

12.9

%

41,806

14.1

%

51.7

%

Retail and Manufacturing

35,430

7.2

%

15,978

5.4

%

121.7

%

Education and Services

19,688

4.0

%

12,191

4.1

%

61.5

%

Logistic and Transportation

17,036

3.5

%

5,232

1.8

%

225.6

%

Others

40,877

8.3

%

5,859

2.0

%

597.7

%

Total

491,872

100

%

296,292

100

%

66.0

%

Net Revenue by geographic

(in BRL thousand)

1Q22

1Q21

Var. 1Q22 x 1Q21

NAE (North America and Europe)

241,529

49.1

%

155,367

52.4

%

55.5

%

North America

205,985

41.9

%

153,038

51.7

%

34.6

%

Europe

35,544

7.2

%

2,329

0.8

%

1426.1

%

LATAM (Latin America)

234,706

47.7

%

129,432

43.7

%

81.3

%

APJ (Asia, Pacific and Japan)

15,637

3.2

%

11,493

3.9

%

36.1

%

Cost of Services Provided and Adjusted Gross Profit

Gross Profit

(in BRL thousand)

1Q22

1Q21

Var. 1Q22 x 1Q21

Net Revenue

491,872

 

296,292

 

66.0

%

Cost of Services

(328,992

)

(188,372

)

74.7

%

Gross Profit

162,880

 

107,920

 

50.9

%

Adjustments

 

 

 

Depreciation and amortization (cost of services provided)

9,318

 

6,225

 

49.7

%

Stock Options

1,182

 

52

 

2180.2

%

Adjusted Gross Profit

173,381

 

114,197

 

51.8

%

Adjusted Gross Profit Margin

35.2

%

38.5

%

-3.3p.p

The cost of services provided in 1Q22 reached R$329.0 million, an increase of 74.7% compared to 1Q21, and the gross profit was R$162.9 million. Excluding costs with depreciation and amortization and the stock option plan, the adjusted gross profit in 1Q22 was R$173.4 million, 51.8% higher than 1Q21, with an adjusted gross profit margin of 35.2%, a reduction of 3.3 percentage points (p.p.) compared to 1Q21.

The decline in the gross profit margin is explained by (i) the impact of 1.9 p.p. in margin from foreign exchange rate variation in the period, (ii) M&A, as recent acquired companies have lower margins, and (iii) seasonal annual wage adjustments in the first quarter while contractual price readjustments occur throughout the year. It is worth mentioning that seasonality in 2020 and 2021 was affected by the pandemic, changing the typical patterns in our industry.

SG&A and Other Expenses

SG&A expenses

(in BRL thousand)

1Q22

1Q21

Var. 1Q22 x 1Q21

Selling

(35,129

)

(18,979

)

85.1

%

General and administrative

(64,921

)

(25,726

)

152.4

%

SG&A expenses

(100,050

)

(44,705

)

123.8

%

Other income (expenses) net

(515

)

1,590

 

-

 

Impairment loss on trade receivables and contract assets

(1,066

)

(3,258

)

(67.3)

%

SG&A and other operating expenses

(101,631

)

(46,373

)

119.2

%

Selling, General and Administrative (SG&A) expenses grew 123.8% in 1Q22 compared to 1Q21, mainly explained by (i) an increase in expenses associated with the expansion of the hiring and attracting teams, aligned with our revenue and headcount growth; (ii) higher depreciation and amortization expenses due to the recognition of intangible assets related to acquisitions; and (iii) the strengthening of our back-office teams as a result of our IPO. Most of the SG&A are fixed expenses and are expected to be diluted throughout the next quarters, based on the projected revenue growth for 2022.

Adjusted EBITDA

Adjusted EBITDA

(in BRL thousand)

1Q22

1Q21

Var. 1Q22 x 1Q21

Net profit for the period

29,223

 

39,615

 

-26.2

%

Adjustments

 

 

 

Net financial cost

16,712

 

1,697

 

884.8

%

Income tax expense

15,314

 

20,235

 

-24.3

%

Depreciation and amortization

19,390

 

7,795

 

148.7

%

Stock options

1,239

 

173

 

617.3

%

Consulting expenses

2,695

 

225

 

1098.3

%

Government grants

(58

)

(1,405

)

-95.9

%

Write-off (1)

1,548

 

-

 

-

Adjusted EBITDA

86,062

 

68,335

 

25.9

%

Adjusted EBITDA Margin

17.5

%

23.1

%

-5.6p.p

 

(1) Non-cash expenses related to the inventory of property, plant, and equipment of the recently acquired Dextra.

In 1Q22, Adjusted EBITDA was R$86.1 million, an increase of 25.9% compared to 1Q21. Adjusted EBITDA margin was 17.5% in the quarter, a reduction of 5.6 percentage points compared to 1Q21, due to the increase in cost of services provided and SG&A expenses, as explained above.

Net Financial Expenses - Net financial expenses was R$16.7 million in 1Q22, compared to R$1.7 million in 1Q21, mainly due to the new debt raised in July 2021 to finance the Dextra acquisition in the amount of R$650 million.

Depreciation and Amortization - Depreciation and amortization expenses totaled R$19.4 million in 1Q22, an increase of R$11.6 million compared to 1Q21, mainly due to the amortization of R$7.6 million from intangible assets related to the acquisition of Dextra in the quarter.

Income tax expense - In 1Q22, income tax expense was R$15.3 million, 24.3% lower than 1Q21, due to the corporate reorganization conducted by the Company in the end of 2021, in connection with our IPO. In addition, the Company recognized R$595.7 million in goodwill from the acquisition of Dextra, which is expected to be deductible for tax purposes from January 2022.

Net Profit and Adjusted Net Profit

Net Profit

(in BRL thousand)

1Q22

1Q21

Var. 1Q22 x 1Q21

Net profit for the period

29,223

 

39,615

 

-26.2

%

Adjustments

 

 

 

Consulting expenses

2,695

 

225

 

1098.3

%

Write-off (1)

1,548

 

-

 

-

Adjusted Net Profit

33,465

 

39,840

 

-16.0

%

Adjusted Net Profit Margin

6.8

%

13.4

%

-6.6p.p

 

(1) Non-cash expenses related to the inventory of property, plant, and equipment of the recently acquired Dextra.

In 1Q22, adjusted net profit was R$33.5 million, 16.0% lower than 1Q21, and adjusted net profit margin reduced to 6.8% in 1Q22 from 13.4% in 1Q21, mainly due to higher depreciation and amortization and financial expenses, partially compensated by lower income tax expense, as explained above.

Business Outlook

We expect our net revenue in the second quarter of 2022 to be at least R$530 million, a 68% growth compared to our net revenue of R$315 million in the second quarter of 2021.

For the full year of 2022, we are raising our outlook and expect our net revenue to be at least R$2,300 million or USD442 million, a 59% growth compared to our net revenue of R$1,444 million in 2021. In addition, we estimate our adjusted EBITDA margin to be at least 20% for the full year of 2022. This guidance for 2022 assumes an average exchange rate of 5.20 Brazilian Reais to the U.S. dollar for the full year.

These expectations are forward-looking statements and actual results may differ materially. See "Cautionary Statement on Forward-Looking Statements" below.

Conference Call Information

Cesar Gon, Bruno Guicardi, Stanley Rodrigues and Eduardo Galvão will host a video conference call to discuss the 1Q22 financial and operating results on May 19 at 8:00 a.m. Eastern Time / 9:00 a.m. BRT. The earnings call can be accessed at the Company’s Investor Relations website at https://investors.ciandt.com or at the following link:

https://www.youtube.com/watch?v=DeN0-tBzG8s.

About CI&T

CI&T is a global digital specialist, a partner in end-to-end digital transformation for 100+ Large Enterprises & Fast Growth Clients. As digital natives, we bring a 27-year track record of accelerating business impact through complete and scalable digital solutions. With a global presence in 9 countries with a nearshore delivery model, CI&T is the Employer of Choice for more than 6,400 professionals in strategy, data science, design, and engineering, unlocking top-line growth, improving customer experience, and driving operational efficiency.

Basis of accounting and functional currency

CI&T maintains its books and records in Brazilian reais, the presentation currency for its unaudited condensed consolidated interim financial information and the functional currency of our operations in Brazil. CI&T prepares its unaudited condensed consolidated interim financial information in accordance with IFRS, as issued by the IASB, and International Financial Reporting Standard No 34—Interim Financial Reporting (“IAS 34”).

Non-IFRS Financial Measures

We regularly monitor certain financial and operating metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. These non-IFRS financial measures include Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Profit, Adjusted Net Profit Margin, Net Revenue at Constant Currency and Net Revenue Increase at Constant Currency, and should be considered in addition to results prepared in accordance with IFRS, but not as substitutes for IFRS results. In addition, our calculation of these non-IFRS financial measures may be different from the calculation used by other companies, and therefore comparability may be limited. These non-IFRS financial measures are provided as additional information to enhance investors’ overall understanding of the historical and current financial performance of our operations.

CI&T is not providing a quantitative reconciliation of forward-looking Non-IFRS Adjusted EBITDA to the most directly comparable IFRS measure because it is unable to predict with reasonable certainty the ultimate outcome of certain significant items without unreasonable effort. These items include, but are not limited to, stock-based compensation expense, acquisition-related charges, the tax effect of non-IFRS adjustments and other items. These items are uncertain, depend on various factors, and could have a material impact on IFRS reported results for the guidance period.

In calculating Adjusted Gross Profit, we exclude cost components that are not related to the direct management of our services. For the periods herein, the adjustments applied were: (i) depreciation and amortization related to costs of services provided; and (ii) stock options compensation plan expenses.

In calculating Adjusted EBITDA, we exclude components that are not related to the direct management of our services. For the periods herein, the adjustments were: (i) consulting expenses related to corporate reorganization and initial public offering expenses, as well as mergers and acquisitions activity; (ii) government grants related to tax reimbursement in the Chinese subsidiary; (iii) stock options compensation plan expenses; and (iv) non-cash expenses related to the inventory of property, plant, and equipment of the recently acquired Dextra.

In calculating Adjusted Net Profit, we exclude cost components that are not related to the direct management of our services. For the periods herein, the adjustments applied were: (i) consulting expenses related to corporate reorganization and initial public offering expenses, as well as mergers and acquisitions activity, and (ii) non-cash expenses related to the inventory of property, plant, and equipment of the recently acquired Dextra.

We calculate Net Revenue at Constant Currency and Net Revenue Increase at Constant Currency by translating Net revenue from entities reporting in foreign currencies into Brazilian reais using the comparable foreign currency exchange rates from the prior period.

Cautionary Statement on Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, which include but are not limited to: the statements under "Business outlook," including expectations relating to revenues and other financial or business metrics; statements regarding relationships with clients; and any other statements of expectation or belief. The words “believe,” “will,” “may,” “may have,” “would,” “estimate,” “continues,” “anticipates,” “intends,” “plans,” “expects,” “budget,” "scheduled,” “forecasts” and similar words are intended to identify estimates and forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements represent our management's beliefs and assumptions only as of the date of this press release. You should read this press release with the understanding that our actual future results may be materially different from what we expect. These statements are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from results expressed or implied in this press release. Such risk factors include, but are not limited to, those related to: the current and future impact of the COVID-19 pandemic, the ongoing war in Ukraine and economic sanctions imposed by Western economies over Russia on our business and industry; the effects of competition on our business; uncertainty regarding the demand for and market utilization of our services; the ability to maintain or acquire new client relationships; general business and economic conditions; our ability to successfully integrate Dextra and Somo; and our ability to successfully execute our growth strategy and strategic plans. Additional information concerning these and other risks and uncertainties are contained in the "Risk Factors" section of CI&T's annual report on Form 20-F. Additional information will be made available in our annual reports on Form 20-F, and other filings and reports that CI&T may file from time to time with the SEC. Except as required by law, CI&T assumes no obligation and does not intend to update these forward-looking statements or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Unaudited condensed consolidated statement of profit or loss

(In thousands of Brazilian Reais)

 

Three months ended March 31,

 

2022

 

2021

 

 

Net Revenue

491,872

 

 

296,292

 

Costs of services provided

(328,992

)

 

(188,372

)

Gross Profit

162,880

 

 

107,920

 

 

 

 

 

Selling expenses

(35,129

)

 

(18,979

)

General and administrative expenses

(64,921

)

 

(25,726

)

Research and technological innovation expenses

-

 

 

(4

)

Impairment loss on trade receivables and contract assets

(1,066

)

 

(3,258

)

Other income (expenses) net

(515

)

 

1,594

 

 

 

 

 

Operating profit before financial income and tax

61,249

 

 

61,547

 

 

 

 

 

Finance income

69,582

 

 

9,049

 

Finance cost

(86,294

)

 

(10,746

)

Net finance costs

(16,712

)

 

(1,697

)

 

 

 

 

Profit before Income tax

44,537

 

 

59,850

 

Income tax expense

(15,314

)

 

(20,235

)

Current

(5,408

)

 

(13,518

)

Deferred

(9,906

)

 

(6,717

)

Net profit for the period

29,223

 

 

39,615

 

 

 

 

 

Earnings per share

 

 

 

Earnings per share – basic (in R$)

0.22

 

 

0.33

 

Earnings per share – diluted (in R$)

0.22

 

 

0.32

 

Unaudited condensed consolidated statements of financial position

(In thousands of Brazilian Reais)

Assets

March 31,
2022

 

December 31,
2021

 

Liabilities and equity

March 31,
2022

 

December 31,
2021

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

131,827

 

135,727

 

Suppliers and other payables

23,672

 

33,566

Financial Investments

405,602

 

 

798,786

 

 

Loans and borrowings

168,547

 

 

164,403

 

Trade receivables

310,380

 

 

340,519

 

 

Lease liabilities

25,998

 

 

21,214

 

Contract assets

212,976

 

 

134,388

 

 

Salaries and welfare charges

253,299

 

 

234,173

 

Recoverable taxes

10,532

 

 

7,785

 

 

Accounts payable for business combination

109,555

 

 

48,923

 

Tax assets

6,245

 

 

2,810

 

 

Derivatives

35,724

 

 

535

 

Derivatives

5,230

 

 

896

 

 

Tax liabilities

361

 

 

13,345

 

Other assets

36,234

 

 

29,994

 

 

Other taxes payable

8,170

 

 

5,423

 

Total current assets

1,119,026

 

 

1,450,905

 

 

Contract liability

11,143

 

 

13,722

 

 

 

 

 

 

Other liabilities

17,670

 

 

13,669

 

Recoverable taxes

3,587

 

 

3,046

 

 

Total current liabilities

654,139

 

 

548,973

 

Deferred tax

27,110

 

 

31,989

 

 

 

 

 

 

Judicial deposits

6,101

 

 

3,079

 

 

Loans and borrowings

579,429

 

 

624,306

 

Escrow account

19,938

 

 

-

 

 

Lease liabilities

56,506

 

 

60,674

 

Other assets

2,509

 

 

2,974

 

 

Provisions

1,189

 

 

633

 

Property, plant and equipment

59,381

 

 

57,721

 

 

Accounts payable for business combination

59,508

 

 

36,803

 

Intangible assets

1,050,008

 

 

738,803

 

 

Other liabilities

2,364

 

 

1,660

 

Right-of-use assets

74,204

 

 

73,827

 

 

Total non-current liabilities

698,996

 

 

724,076

 

Total non-current assets

1,242,838

 

 

911,439

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

Share capital

37

 

 

36

 

 

 

 

 

 

Share premim

929,984

 

 

915,947

 

 

 

 

 

 

Capital reserves

15,377

 

 

10,105

 

 

 

 

 

 

Profit reserves

155,180

 

 

125,957

 

 

 

 

 

 

Other comprehensive income

(91,849

)

 

37,250

 

 

 

 

 

 

Total equity

1,008,729

 

 

1,089,295

 

 

 

 

 

 

 

 

 

 

Total assets

2,361,864

 

 

2,362,344

 

 

Total equity and liabilities

2,361,864

 

 

2,362,344

 

Unaudited condensed consolidated statement of cash flow

(In thousands of Brazilian Reais)

 

March 31, 2022

 

March 31, 2021

 

 

 

 

Net profit for the year

29,223

 

 

39,615

 

Adjustments for:

 

 

 

Depreciation and amortization

19,390

 

 

7,795

 

Gain/loss on the sale of property, plant and equipment and intangible assets

1,926

 

 

81

 

Interest, monetary variation and exchange variation

4,488

 

 

1,460

 

Exchange rate changes and monetary adjustments on accounts payable for business combinations

(11,628

)

 

-

 

Exchange variation on escrow account related to Somo acquisition

3,123

 

 

-

 

Interest on lease

2,146

 

 

1,376

 

Unrealized gain on financial instruments

(4,487

)

 

7,751

 

Income tax expenses

15,314

 

 

20,807

 

Impairment losses on trade receivables

(1,194

)

 

60

 

Provision for (reversal of) impairment losses on contract assets

1,064

 

 

3,198

 

Provision for labor risks

571

 

 

2

 

Provision for indemnity

-

 

 

(629

)

Share-based plan

1,239

 

 

172

 

Others

-

 

 

(1

)

Variation in operating assets and liabilities

 

 

 

Trade receivables

21,293

 

 

53,734

 

Contract assets

(78,979

)

 

(106,818

)

Recoverable taxes

(3,330

)

 

(1,078

)

Tax assets

(15,242

)

 

(7,310

)

Judicial deposits

(3,022

)

 

-

 

Suppliers and other payables

(31,279

)

 

3,693

 

Salaries and welfare charges

15,553

 

 

7,413

 

Tax liabilities

(901

)

 

(1,431

)

Other taxes payable

(682

)

 

849

 

Contract liabilities

(2,021

)

 

(1,644

)

Other receivables and payables, net

(9,529

)

 

(4,159

)

Cash generated from operating activities

(46,964

)

 

24,936

 

Income tax paid

(4,818

)

 

(15,394

)

Interest paid on loans and borrowings

(19,458

)

 

(1,412

)

Interest paid on lease

(1,479

)

 

(1,311

)

Net cash from operating activities

(72,719

)

 

6,819

 

Cash flows from investment activities:

 

 

 

Acquisition of property, plant and equipment and intangible assets

(8,295

)

 

(9,607

)

Acquisition of subsidiary net of cash acquired

(242,076

)

 

-

 

Escrow deposit (acquisition of Somo)

(23,061

)

 

-

 

Hedge accounting realization

16,134

 

 

-

 

Redemption of financial investments

350,128

 

 

-

 

Net cash used in investment activities

92,830

 

 

(9,607

)

Cash flow from financing activities:

 

 

 

Exercised stock options

5,128

 

 

-

 

Payment of lease liabilities

(6,084

)

 

(3,647

)

Proceeds from loans and borrowings

-

 

 

22,382

 

Payment of loans and borrowings

(38,506

)

 

(38,675

)

Settlement of derivatives

(381

)

 

-

 

Net cash from financing activities

(39,843

)

 

(19,940

)

Net increase (decrease) in cash and cash equivalents

(19,732

)

 

(22,728

)

Cash and cash equivalents as of January 1st

135,727

 

 

162,827

 

Exchange variation effect on cash and cash equivalents

15,832

 

 

(7,426

)

Cash and cash equivalents as of March 2022 and 2021

131,827

 

 

132,673

 

Net Revenue at Constant Currency

March 31, 2022

 

March 31, 2021

Net Revenue at Constant Currency

514,944

 

293,747

 

Contacts

Investor Relations Contact:
Eduardo Galvão
egalvao@ciandt.com

Media Relations Contact:
Zella Panossian
ciandt@illumepr.com

Contacts

Investor Relations Contact:
Eduardo Galvão
egalvao@ciandt.com

Media Relations Contact:
Zella Panossian
ciandt@illumepr.com