CI&T Reports 3Q23 Results

CI&T (NYSE: CINT, “Company”), a global digital specialist and fast-growing technology company, today announces its results for the third quarter of 2023 (3Q23) and the nine months ended on September 30, 2023 (9M23) in accordance with International Financial Reporting Standards (IFRS). For comparison purposes, we refer to the results for the third quarter of 2022 (3Q22) and nine months ended on September 30, 2022 (9M22).

Third Quarter of 2023 (3Q23) Operating and Financial Highlights

• Net Revenue was R$529.1 million compared to R$559.0 million in 3Q22.
• Net Profit was R$36.2 million compared to R$40.6 million in 3Q22.
• Adjusted EBITDA was R$97.7 million compared to R$105.2 million in 3Q22. The Adjusted EBITDA margin was 18.5%.
• Adjusted Net Profit was R$45.5 million versus R$67.4 million in 3Q22.
• The number of clients with annual revenue above R$1 million in the last twelve months rose to 187 from 147 in 3Q22.
• CI&T Board of Directors approved a new share repurchase program.

Nine months ended September 30, 2023 (9M23) Operating and Financial Highlights

• Net Revenue was R$1,710.9 million, an increase of 8.6% compared to 9M22 or a 9.9% growth at constant currency.
• Net Profit increased by 42.3% to R$136.4 million from R$95.8 million in 9M22.
• Adjusted EBITDA rose to R$328.5 million from R$290.1 million in 9M22, 13.2% higher. The Adjusted EBITDA margin was 19.2%.
• Adjusted Net Profit increased 10.5% to R$175.9 million from R$159.2 million in 9M22. The Adjusted Net Profit margin was 10.3%.
• Cash generated from operating activities rose to R$254.5 million in 9M23 from R$28.6 million in 9M22.
• CI&T ended 3Q23 with 6,114 CI&Ters.

Cesar Gon, founder and CEO of CI&T, commented, "In 2023, we navigated with a cautious approach, achieving sustainable profitability and robust cash generation. Looking ahead, we are at the forefront of an exciting new technological revolution driven by AI. This new chapter in digital disruption signifies an imminent redesign of competitive dynamics across all sectors and aspects of modern life. In paving the way for this future, we have effectively partnered with our clients, prepared our teams, and enhanced our AI capabilities to realize the vision of 'CI&T Powered by AI.' Building on this momentum, we aim to resume more aggressive growth in 2024 and beyond."

Comments on the 3Q23 financial performance

The net revenue was R$529.1 million in 3Q23, a decline of 5.4% compared to 3Q22, or a reduction of 1.7% at constant currency. In the third quarter of 2023, 44% of the revenue came from Latam, 42% from North America, 10% from Europe and 4% from Asia Pacific.

The cost of services provided in 3Q23 was R$356.8 million, 1.9% lower than in 3Q22, and the gross profit was R$172.3 million. The Adjusted Gross Profit in 3Q23 was R$184.4 million, with an Adjusted Gross Profit margin of 34.8%.

In 3Q23, selling, general and administrative (SG&A), and other operating expenses were R$101.8 million, 22.3% lower than in 3Q22. ​​This reduction can be primarily attributed to the non-recurring M&A expenses incurred in 2022 and our efforts to optimize operational expenses in 2023.

Depreciation and amortization expenses totaled R$22.9 million in 3Q23, a decrease of 2.9% compared to 3Q22, explained by the reduction of real estate property leases. Amortization of intangible assets from acquired companies was R$10.7 million in 3Q23, a 4.6% increase compared to 3Q22.

In 3Q23, the Adjusted EBITDA was R$97.8 million, a reduction of 7.1% compared to 3Q22, mainly due to the decline in the gross profit margin, partially offset by the improvement in SG&A expenses. Adjusted EBITDA margin was 18.5% in the quarter.

In 3Q23, net financial expenses were R$20.3 million, R$12.8 million higher than in 3Q22, mainly driven by lower foreign exchange (FX) gains in the comparable period and a derivative gain from an interest rate swap that benefited our results in 3Q22.

In 3Q23, income tax expense was R$13.2 million, 20.4% lower than in 3Q22, mainly due to the amortization of goodwill for tax purposes from the Ntersol acquisition. The income tax paid (cash effect) was R$6.8 million, equivalent to a cash tax rate of 13.8%.

The net profit was R$36.2 million in 3Q23, 11% lower than 3Q22. Adjusted Net Profit was R$45.5 million, a decrease of 32.4% compared to 3Q22, mainly due to higher net financial expenses, as aforementioned. Consequently, the Adjusted Net Profit margin was 8.6%.

Business Outlook
We expect our net revenue in the fourth quarter of 2023 to be in the range of R$519 million to R$ 540 million on a reported basis (average FX rate of 4.95 BRL/USD in 4Q23).

For the full year of 2023, we expect our net revenue growth to be in the range of 4.0% to 5.0% year-over-year, assuming a constant currency outlook (average FX rate of 5.17 BRL/USD in 2022). In addition, we estimate our Adjusted EBITDA margin to be at least 19% for the full year of 2023.

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

Share Repurchase Program
On November 16, 2023, the Board of Directors approved a new share repurchase program, pursuant to which CI&T may repurchase up to 2.5 million of its outstanding class A common shares until December 31, 2024.

Conference Call Information
Cesar Gon, Bruno Guicardi, Stanley Rodrigues, and Eduardo Galvão will host a video conference call to discuss the 3Q23 financial and operating results on November 17, at 8:00 a.m. Eastern Time / 10:00 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=yEW4TBCbR1Q.

About CI&T
CI&T (NYSE:CINT) is a global hyper digital specialist, a partner in AI-powered digital transformation and efficiency for 100+ large enterprises and fast growth clients. As digital natives, CI&T brings a 28-year track record of accelerating business impact through complete and scalable digital solutions. With a global presence in nine countries with a nearshore delivery model, CI&T provides strategy, data science, design, and engineering, unlocking top-line growth, improving customer experience and driving operational efficiency. Recognized by Forrester as a Leader in Modern Application Development Services, CI&T is the Employer of Choice for more than 6,100 professionals.

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 statements, and the functional currency of our operations in Brazil. CI&T prepares its unaudited condensed consolidated interim financial statements 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 Growth 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 differ from those 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 our operations’ historical and current financial performance.

CI&T is not providing a quantitative reconciliation of forward-looking Non-IFRS Net Revenue Growth at Constant Currency and Adjusted EBITDA to the most directly comparable IFRS measure because it is unable to reasonably predict the ultimate outcome of certain significant items without unreasonable efforts. These items include but are not limited to, stock-based compensation expenses, acquisition-related expenses, the tax effect of non-IFRS adjustments, foreign currency exchange gains/losses, 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.

We calculate Net Revenue at Constant Currency and Net Revenue Growth at Constant Currency by translating Net Revenue from entities reporting in foreign currencies into Brazilian reais using the comparable foreign currency exchange average rates from the prior period to show changes in our revenue without giving effect to period-to-period currency fluctuations.

In calculating Adjusted Gross Profit, we exclude cost components unrelated 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-based compensation expenses.

In calculating Adjusted EBITDA, we exclude components unrelated to the direct management of our services. For the periods herein, the adjustments were: (i) stock-based compensation expenses; (ii) government grants related to tax reimbursement in the Chinese subsidiary; and (iii) acquisition-related expenses, including present value and fair value adjustment on accounts payable for business acquired , consulting expenses, and retention packages.

In calculating Adjusted Net Profit, we exclude components unrelated to the direct management of our services. For the periods herein, the adjustments applied were acquisition-related expenses, including amortization of intangible assets from acquired companies, present value and fair value adjustment on accounts payable for business acquired , consulting expenses, and retention packages.

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 the recent-acquired companies; 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)
	Quarter ended September 30,						Nine months ended September 30,
	2023			2022			2023			2022
Net Revenue	529,083			559,018			1,710,907			1,575,905
Costs of services provided	(356,779	)		(363,617	)		(1,138,836	)		(1,034,111	)
Gross Profit	172,304			195,401			572,071			541,794
Selling expenses	(40,405	)		(43,337	)		(132,243	)		(118,428	)
General and administrative expenses	(64,807	)		(84,804	)		(207,968	)		(228,115	)
Impairment loss on trade receivables and contract assets	(836	)		325			(2,573	)		(385	)
Other income (expenses) net	3,363			(3,008	)		2,025			(7,492	)
Operating expenses net	(102,685	)		(130,824	)		(340,759	)		(354,420	)
Operating profit before financial income and tax	69,619			64,577			231,312			187,374
Finance income	13,506			32,750			62,387			155,638
Finance cost	(33,799	)		(40,182	)		(121,130	)		(197,315	)
Net finance costs	(20,293	)		(7,432	)		(58,743	)		(41,677	)
Profit before Income tax	49,326			57,145			172,569			145,697
Current	(14,285	)		(22,273	)		(32,953	)		(44,796	)
Deferred	1,120			5,736			(3,233	)		(5,071	)
Total Income tax expense	(13,165	)		(16,537	)		(36,186	)		(49,867	)
Net profit for the period	36,161			40,608			136,383			95,830
Earnings per share
Earnings per share – basic (in R$)	0.27			0.30			1.02			0.72
Earnings per share – diluted (in R$)	0.26			0.30			0.99			0.72
Weighted average number of basic shares	132,943,114			133,332,778			133,515,441			133,006,973
Weighted average number of diluted shares	137,184,056			133,332,778			137,756,383			133,006,973

Unaudited condensed consolidated statement of financial position (In thousands of Brazilian Reais)
Assets	September 30, 2023		December 31, 2022		Liabilities and equity	September 30, 2023			December 31, 2022
Cash and cash equivalents	194,295		185,727		Suppliers and other payables	16,958			33,376
Financial Investments	39,192		96,299		Loans and borrowings	224,579			231,296
Trade receivables	422,218		501,671		Lease liabilities	18,921			21,539
Contract assets	239,796		217,250		Salaries and welfare charges	216,606			260,156
Recoverable taxes	19,739		7,619		Accounts payable for business acquired	41,301			71,650
Tax assets	6,319		2,959		Non-derivatives - hedge accounting	34,721			35,169
Non-derivatives - hedge accounting	26,525		19,637		Derivatives	-			4,109
Derivatives	11,017		11,194		Tax liabilities	6,796			3,890
Other assets	38,259		38,269		Other taxes payable	14,880			14,382
Total current assets	997,360		1,080,625		Contract liability	12,954			32,136
					Other liabilities	34,551			47,501
Recoverable taxes	3,703		3,624		Total current liabilities	622,267			755,204
Deferred tax assets	29,633		35,138
Judicial deposits	9,995		9,819		Loans and borrowings	620,589			742,935
Restricted cash - Escrow account and indemnity asset	31,013		31,552		Lease liabilities	29,834			41,269
Other assets	2,202		3,654		Provisions	12,061			12,347
Property, plant and equipment	41,674		55,266		Accounts payable for business acquired	124,168			133,299
Intangible assets and goodwill	1,690,801		1,750,898		Other liabilities	8,595			3,530
Right-of-use assets	43,236		56,187		Total non-current liabilities	795,247			933,380
Total non-current assets	1,852,257		1,946,138
					Equity
					Share capital	37			37
					Share premium	946,173			946,173
					Treasury share reserve	(37,827	)		-
					Capital reserves	225,436			203,218
					Profit reserves	388,256			251,873
					Other comprehensive income	(89,972	)		(63,122	)
					Total equity	1,432,103			1,338,179
Total assets	2,849,617		3,026,763		Total equity and liabilities	2,849,617			3,026,763

Unaudited condensed consolidated statement of cash flows (In thousands of Brazilian Reais)
	September 30, 2023			September 30, 2022
Cash flows from operating activities
Net profit for the period	136,383			95,830
Adjustments for:
Depreciation and amortization	70,980			67,154
Loss on the sale of property, plant and equipment, intangible assets and leases	875			2,137
Interest, monetary variation and exchange rate changes	65,796			30,437
Unrealized gain on financial instruments	(13,257	)		(5,709	)
Income tax expenses	36,186			49,867
Impairment losses on trade receivables and contract assets	2,573			385
(Reversal of) provision for labor risks	(286	)		386
Stock-based plan	21,740			1,894
Present/fair value/price adjustment - accounts payable for business combination	2,783			7,240
Others	(559	)		(1,824	)
Variation in operating assets and liabilities
Trade receivables	61,268			(107,311	)
Contract assets	(26,934	)		(85,091	)
Recoverable taxes	(23,279	)		(2,297	)
Tax assets	935			930
Suppliers and other payables	(16,185	)		(34,281	)
Salaries and welfare charges	(42,070	)		7,448
Tax liabilities	-			1,568
Other taxes payable	1,274			4,509
Contract liabilities	(18,484	)		(4,893	)
Other receivables and payables, net	(5,235	)		217
Cash generated from operating activities	254,505			28,596
Income tax paid	(25,516	)		(33,467	)
Interest paid on loans and borrowings	(52,356	)		(51,152	)
Interest paid on lease	(3,070	)		(4,796	)
Income tax refund	4,198			-
Net cash from (used in) operating activities	177,761			(60,819	)
Cash flows from investment activities:
Acquisition of property, plant and equipment and intangible assets	(14,738	)		(20,163	)
Acquisition of subsidiary net of cash acquired (Somo, Box and Transpire)	-			(321,799	)
Escrow deposit (acquisition of Somo)	-			(23,061	)
Cash outflow on hedge accounting settlement	-			20,981
Redemption of financial investments	54,214			582,367
Net cash from (used in) investment activities	39,476			238,325
Cash flows from financing activities:
Exercised stock options	578			10,447
Payment of lease liabilities	(18,465	)		(19,828	)
Proceeds from loans and borrowings	47,950			186,239
Settlement of derivatives	9,325			390
Payment of loans and borrowings	(163,457	)		(279,940	)
Payment of investment obligations	(47,461	)		(62,338	)
Repurchase of treasury shares	(37,827	)		-
Net cash used in financing activities	(209,357	)		(165,030	)
Net increase in cash and cash equivalents	7,880			12,476
Cash and cash equivalents as of January 1st	185,727			135,727
Exchange variation effect on cash and cash equivalents	688			3,647
Cash and cash equivalents as of September 30	194,295			151,850

Reconciliation of Non-IFRS financial measures to comparable IFRS financial measures
Reconciliation of revenue growth as reported on an IFRS basis to revenue growth on a constant currency basis:
Net Revenue (in BRL thousand)	3Q23	3Q22	Var. 3Q23 x 3Q22		9M23	9M22	Var. 9M23 x 9M22
Net Revenue	529,083	559,018	-5.4	%	1,710,907	1,575,905	8.6	%
Net Revenue at Constant Currency	548,946	558,525	-1.7	%	1,739,972	1,583,792	9.9	%

Net Revenue by industry (in BRL thousand)	3Q23	3Q22	Var. 3Q23 x 3Q22		9M23	9M22	Var. 9M23 x 9M22
Financial Services	158,592	161,185	-1.6	%	492,406	479,172	2.8	%
Consumer goods	105,562	127,097	-16.9	%	343,712	351,116	-2.1	%
Technology and telecommunications	84,147	78,146	7.7	%	313,334	216,097	45.0	%
Retail and industrial goods	64,438	79,226	-18.7	%	208,351	227,615	-8.5	%
Life sciences	57,372	72,063	-20.4	%	185,040	202,791	-8.8	%
Others	58,972	41,301	42.8	%	168,064	99,114	69.6	%
Total	529,083	559,018	-5.4	%	1,710,907	1,575,905	8.6	%

Net Revenue by geography (in BRL thousand)	3Q23	3Q22	Var. 3Q23 x 3Q22		9M23	9M22	Var. 9M23 x 9M22
North America	222,860	232,697	-4.2	%	762,204	655,941	16.2	%
Europe	54,045	57,061	-5.3	%	167,645	142,810	17.4	%
LATAM (Latin America)	229,804	247,200	-7.0	%	698,478	724,480	-3.6	%
APJ (Asia, Pacific and Japan)	22,374	22,060	1.4	%	82,580	52,674	56.8	%
Total	529,083	559,018	-5.4	%	1,710,907	1,575,905	8.6	%

Reconciliation of various income statement amounts from IFRS to non-IFRS measures for the three months ended September 30, 2023 and 2022 and nine months ended September 30, 2023 and 2022:
Gross Profit (in BRL thousand)	3Q23		3Q22		Var. 3Q23 x 3Q22		9M23		9M22		Var. 9M23 x 9M22
Net Revenue	529,083		559,018		-5.4	%	1,710,907		1,575,905		8.6	%
Cost of Services	(356,779	)	(363,617	)	-1.9	%	(1,138,836	)	(1,034,111	)	10.1	%
Gross Profit	172,304		195,401		-11.8	%	572,071		541,794		5.6	%
Adjustments
Depreciation and amortization (cost of services provided)	9,116		10,688		-14.7	%	27,248		30,302		-10.1	%
Stock-based compensation	2,949		369		n.m		10,361		1,190		770.7	%
Adjusted Gross Profit	184,369		206,458		-10.7	%	609,680		573,286		6.3	%
Adjusted Gross Profit Margin	34.8	%	36.9	%	-2.1p.p		35.6	%	36.4	%	-0.7p.p

Adjusted EBITDA (in BRL thousand)	3Q23		3Q22		Var. 3Q23 x 3Q22		9M23		9M22		Var. 9M23 x 9M22
Net profit for the period	36,161		40,608		-11.0	%	136,383		95,830		42.3	%
Adjustments
Net financial cost	20,293		7,432		173.0	%	58,743		41,677		40.9	%
Income tax expense	13,165		16,537		-20.4	%	36,186		49,867		-27.4	%
Depreciation and amortization	22,871		23,558		-2.9	%	70,980		67,154		5.7	%
Stock-based compensation	6,627		761		771.3	%	21,740		1,894		1047.6	%
Government grants	(29	)	(204	)	-85.6	%	(306	)	(378	)	-18.9	%
Acquisition-related expenses (1)	(1,341	)	16,497		-108.1	%	4,748		34,051		-86.1	%
Adjusted EBITDA	97,747		105,188		-7.1	%	328,474		290,095		13.2	%
Adjusted EBITDA Margin	18.5	%	18.8	%	-0.3p.p		19.2	%	18.4	%	0.8p.p

(1)	Includes present value and fair value adjustment on accounts payable for business acquired, consulting expenses, and retention packages.

Net Profit (in BRL thousand)	3Q23		3Q22		Var. 3Q23 x 3Q22		9M23		9M22		Var. 9M23 x 9M22
Net profit for the period	36,161		40,608		-11.0	%	136,383		95,830		42.3	%
Adjustments
Acquisition-related expenses (1)	9,376		26,743		-64.9	%	39,486		63,321		-37.6	%
Adjusted Net Profit (2)	45,537		67,351		-32.4	%	175,869		159,151		10.5	%
Adjusted Net Profit Margin (2)	8.6	%	12.0	%	-3.4p.p		10.3	%	10.1	%	0.2p.p

(1)	Includes amortization of intangible assets from acquired companies, present value and fair value adjustment on accounts payable for business acquired, consulting expenses and retention packages.
(2)	Adjustments' amounts are gross of tax. Tax effects on non-IFRS adjustments totaled R$856 thousand in 3Q23, (R$1,877) thousand in 3Q22, R$23 thousand in 9M23 and (R$2,605) thousand in 9M22.

 

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The CI&T Incorporation Registered (A) Stock at the time of publication of the news with a fall of -0,18 % to 5,49USD on NYSE stock exchange (17. November 2023, 02:04 Uhr).