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

Rhea-AI Summary

CI&T (NYSE: CINT) reports strong 1Q22 results, with net revenue reaching R$491.9 million, marking a 66% increase from 1Q21. In constant currency, growth was 75.3%. The firm added 16 new clients with revenues exceeding R$1 million and increased its workforce by 71%. CI&T forecasts 2022 net revenue of at least R$2,300 million, a 59% increase, and maintains a 20% adjusted EBITDA margin. Adjusted net profit was R$33.5 million, down 16% year-over-year, influenced by rising costs and financial expenses. The company is well-positioned in North America and Europe, with strong demand across various sectors.

Positive

• Net revenue of R$491.9 million in 1Q22, a 66% year-over-year increase.
• Strong constant currency growth of 75.3%.
• Increase in clients with annual revenue above R$1 million from 94 to 110.
• Workforce grew by 71% to 6,435 employees.
• Raised 2022 net revenue guidance to at least R$2,300 million, a 59% increase.
• Adjusted EBITDA margin expected to remain at least 20%.

Negative

• Adjusted net profit decreased 16% to R$33.5 million.
• SG&A expenses surged by 123.8%, impacting margins.
• Adjusted EBITDA margin fell to 17.5%, down 5.6 percentage points.

NEW YORK--(BUSINESS WIRE)-- 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

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220517006273/en/

Investor Relations Contact:

Eduardo Galvão

egalvao@ciandt.com

Media Relations Contact:

Zella Panossian

ciandt@illumepr.com

Source: CI&T Inc.

FAQ

What were CI&T's financial results in 1Q22?

CI&T reported a net revenue of R$491.9 million in 1Q22, a 66% increase from 1Q21.

How did CI&T perform in terms of profitability in 1Q22?

CI&T's adjusted net profit decreased by 16% to R$33.5 million in 1Q22.

What is CI&T's revenue guidance for full year 2022?

CI&T raised its 2022 revenue guidance to at least R$2,300 million, indicating a 59% growth.

What were the main drivers of revenue growth for CI&T in 1Q22?

Revenue growth was driven by the acquisition of Somo and an increase in clients with high revenue.

How did CI&T's adjusted EBITDA margin change in 1Q22?

The adjusted EBITDA margin fell to 17.5% in 1Q22, down 5.6 percentage points year-over-year.