CI&T (NYSE: CINT, “Company”), a global digital specialist, today announces its results for the first quarter of 2023 (1Q23) in accordance with International Financial Reporting Standards (IFRS). For comparison purposes, we refer to the results for the first quarter of 2022 (1Q22).
First Quarter of 2023 Operating and Financial Highlights
- Net Revenue was R$610.0 million, an increase of 24.0% compared to 1Q22 or a 24.3% growth at constant currency.
- The number of clients with annual revenue above R$1 million in the last twelve months grew from 110 in 1Q22 to 180 in 1Q23.
- Net Profit was R$52.4 million compared to R$29.2 million in 1Q22, a 79.2% increase year over year.
- Adjusted EBITDA was R$116.5 million, a 37.9% growth year-over-year, equivalent to an Adjusted EBITDA margin of 19.1%.
- Adjusted Net Profit was R$67.2 million, 70% higher than 1Q22, with an Adjusted Net Profit margin of 11.0%.
- Cash generated from operating activities was R$116.5 million in 1Q23, compared to a cash consumption of R$47.0 million in 1Q22.
- CI&T ended 1Q23 with 6,522 CI&Ters, compared to 6,435 at the end of 1Q22.
Cesar Gon, founder and CEO of CI&T, commented, “I'm glad to kick off this cloudy 2023 with solid results from top to bottom, demonstrating our agility in maintaining a lean structure and adapting to changes in the external market environment.
“At the same time, I believe that we are on the verge of probably the most disruptive moment in the history of computers on Earth. AI is a transformative technology with real-world applications and rapid advancements. And we, at CI&T, are moving thoughtfully fast with our clients, co-creating the future in this new chapter of innovation and endless possibilities.”
Comments on the 1Q23 financial performance
The net revenue was R$610.0 million in 1Q23, an increase of 24.0% compared to 1Q22, or a 24.3% net revenue growth at constant currency. We experienced growth in net revenue across all regions we operate in compared to the same period last year.
The cost of services provided in 1Q23 reached R$407.9 million, 24.0% higher in relation to 1Q22, and the gross profit was R$202.1 million. The Adjusted Gross Profit in 1Q23 was R$213.9 million, an increase of 23.4% compared to 1Q22, and the Adjusted Gross Profit margin was 35.1%, in line with 1Q22.
In 1Q23, selling, general and administrative (SG&A), and other operating expenses were R$116.5 million, 15.8% higher when compared to 1Q22, mainly attributed to an increase in personnel expenses, and higher amortization of intangible assets from the acquired Companies. As a percentage of revenue, SG&A and other expenses decreased to 19.1% in 1Q23 from 20.4% in 1Q22, as planned, since SG&A are mainly fixed expenses.
Depreciation and amortization expenses totaled R$25.1 million in 1Q23, 29.2% higher than in 1Q22, as a result of an increase in the amortization of intangible assets from acquired companies, from R$7.6 million in 1Q22 to R$12.7 million in 1Q23.
In 1Q23, the Adjusted EBITDA was R$116.5 million, 37.9% higher compared to 1Q22. Adjusted EBITDA margin was 19.1% in the quarter, an increase of 1.9 percentage points compared to 1Q22, mainly due to the dilution of SG&A expenses.
In 1Q23, net financial expenses were R$20.0 million, 19.5% higher than 1Q22, mainly driven by a higher debt position, an increase in interest rates, and a negative foreign exchange (FX) variation in the period. In 1Q23, the reported net FX loss was R$2.2 million, while in 1Q22 it was a net FX gain of R$ 1.3 million. In 1Q23, income tax expense was R$11.7 million, a reduction of 23.4% in relation to 1Q22.
The net profit was R$52.4 million in 1Q23, 79.2% higher than in 1Q22. Adjusted Net Profit was R$67.2 million, an increase of 70% over 1Q22. The Adjusted Net Profit margin increased 3 percentage points, from 8.0% in 1Q22 to 11.0% in 1Q23, mainly as a result of a reduction in SG&A expenses as a percentage of revenue and lower income tax expense.
Business Outlook
We expect our net revenue in the second quarter of 2023 to be at least R$570 million compared to net revenue of R$525 million in the second quarter of 2022, a 9% growth on a reported basis.
For the full year of 2023, we are maintaining our net revenue growth in the range of 13% to 17% year-over-year, assuming a constant currency outlook. 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 May 17, 2023, the Board of Directors approved a share repurchase program, pursuant to which CI&T may repurchase up to 1.5 million of its outstanding class A common shares in the next 12 months. The program was approved taking into consideration the Company's commitments to deliver shares under its stock-based compensation plan and M&A transactions.
Conference Call Information
Cesar Gon, Bruno Guicardi, Stanley Rodrigues, and Eduardo Galvão will host a video conference call to discuss the 1Q23 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://youtube.com/live/u-QkX4MFGjA?feature=share
About CI&T
CI&T (NYSE:CINT) is a global 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 6,500 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 adjustment on accounts payable for business combination, 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 adjustment on accounts payable for business combination, 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) |
|||||
|
March 31, |
|
March 31, |
||
|
2023 |
|
2022 |
||
|
|
|
|
||
Net Revenue |
609,991 |
|
|
491,872 |
|
Costs of services provided |
(407,861 |
) |
|
(328,992 |
) |
Gross Profit |
202,130 |
|
|
162,880 |
|
|
|
|
|
||
Selling expenses |
(45,554 |
) |
|
(35,129 |
) |
General and administrative expenses |
(71,222 |
) |
|
(64,921 |
) |
Impairment loss on trade receivables and contract assets |
(1,605 |
) |
|
(1,066 |
) |
Other income (expenses) net |
324 |
|
|
(515 |
) |
Operating expenses net |
(118,057 |
) |
|
(101,631 |
) |
|
|
|
|
||
Operating profit before financial income and tax |
84,073 |
|
|
61,249 |
|
|
|
|
|
||
Finance income |
20,664 |
|
|
69,582 |
|
Finance cost |
(40,632 |
) |
|
(86,294 |
) |
Net finance costs |
(19,968 |
) |
|
(16,712 |
) |
|
|
|
|
||
Profit before Income tax |
64,105 |
|
|
44,537 |
|
|
|
|
|
||
Current |
(14,780 |
) |
|
(5,408 |
) |
Deferred |
3,057 |
|
|
(9,906 |
) |
Total Income tax expense |
(11,723 |
) |
|
(15,314 |
) |
|
|
|
|
||
Net profit for the period |
52,382 |
|
|
29,223 |
|
|
|
|
|
||
Earnings per share |
|
|
|
||
Earnings per share – basic (in R$) |
0.39 |
|
|
0.22 |
|
Earnings per share – diluted (in R$) |
0.38 |
|
|
0.22 |
|
Unaudited condensed consolidated statements of financial position |
||||||||||
(In thousands of Brazilian Reais) |
||||||||||
|
|
|
|
|
|
|
|
|
||
Assets |
March 31,
|
|
December 31,
|
|
Liabilities and equity |
March 31,
|
|
December 31,
|
||
|
|
|
|
|
|
|
|
|
||
Cash and cash equivalents |
251,550 |
|
185,727 |
|
Suppliers and other payables |
21,542 |
|
|
33,376 |
|
Financial Investments |
93,884 |
|
96,299 |
|
Loans and borrowings |
233,583 |
|
|
231,296 |
|
Trade receivables |
445,455 |
|
501,671 |
|
Lease liabilities |
19,922 |
|
|
21,539 |
|
Contract assets |
232,459 |
|
217,250 |
|
Salaries and welfare charges |
251,801 |
|
|
260,156 |
|
Recoverable taxes |
15,051 |
|
7,619 |
|
Accounts payable for business combination |
72,005 |
|
|
71,650 |
|
Tax assets |
1,256 |
|
2,959 |
|
Derivatives - hedge accounting |
40,052 |
|
|
35,169 |
|
Derivatives - hedge accounting |
30,698 |
|
19,637 |
|
Derivatives |
450 |
|
|
4,109 |
|
Derivatives |
9,240 |
|
11,194 |
|
Tax liabilities |
8,246 |
|
|
3,890 |
|
Other assets |
31,856 |
|
38,269 |
|
Other taxes payable |
13,040 |
|
|
14,382 |
|
Total current assets |
1,111,449 |
|
1,080,625 |
|
Contract liability |
20,491 |
|
|
32,136 |
|
|
|
|
|
|
Other liabilities |
50,745 |
|
|
47,501 |
|
Recoverable taxes |
3,644 |
|
3,624 |
|
Total current liabilities |
731,877 |
|
|
755,204 |
|
Deferred tax assets |
37,848 |
|
35,138 |
|
|
|
|
|
||
Judicial deposits |
9,710 |
|
9,819 |
|
Loans and borrowings |
714,741 |
|
|
742,935 |
|
Restricted cash - Escrow account and indemnity asset |
30,459 |
|
31,552 |
|
Lease liabilities |
37,036 |
|
|
41,269 |
|
Other assets |
3,637 |
|
3,654 |
|
Provisions |
12,074 |
|
|
12,347 |
|
Property, plant and equipment |
52,032 |
|
55,266 |
|
Accounts payable for business combination |
132,681 |
|
|
133,299 |
|
Intangible assets and goodwill |
1,719,226 |
|
1,750,898 |
|
Other liabilities |
2,929 |
|
|
3,530 |
|
Right-of-use assets |
50,402 |
|
56,187 |
|
Total non-current liabilities |
899,461 |
|
|
933,380 |
|
Total non-current assets |
1,906,958 |
|
1,946,138 |
|
|
|
|
|
||
|
|
|
|
|
Equity |
|
|
|
||
|
|
|
|
|
Share capital |
37 |
|
|
37 |
|
|
|
|
|
|
Share premium |
946,173 |
|
|
946,173 |
|
|
|
|
|
|
Capital reserves |
209,093 |
|
|
203,218 |
|
|
|
|
|
|
Profit reserves |
304,255 |
|
|
251,873 |
|
|
|
|
|
|
Other comprehensive income |
(72,489 |
) |
|
(63,122 |
) |
|
|
|
|
|
Total equity |
1,387,069 |
|
|
1,338,179 |
|
|
|
|
|
|
|
|
|
|
||
Total assets |
3,018,407 |
|
3,026,763 |
|
Total equity and liabilities |
3,018,407 |
|
|
3,026,763 |
|
Unaudited condensed consolidated statement of cash flows |
|||||
(In thousands of Brazilian Reais) |
|||||
|
March 31, 2023 |
|
March 31, 2022 |
||
|
|
|
|
||
Cash flows from operating activities |
|
|
|
||
Net profit for the period |
52,382 |
|
|
29,223 |
|
Adjustments for: |
|
|
|
||
Depreciation and amortization |
25,053 |
|
|
19,390 |
|
Gain/loss on the sale of property, plant and equipment and intangible assets |
(95 |
) |
|
1,926 |
|
Interest, monetary variation and exchange rate changes |
22,085 |
|
|
4,488 |
|
Interest and exchange variation on accounts payable for business combinations |
1,445 |
|
|
(11,628 |
) |
Exchange variation on escrow account related to Somo acquisition |
67 |
|
|
3,123 |
|
Interest on lease |
1,179 |
|
|
2,146 |
|
Unrealized gain on financial instruments |
(4,544 |
) |
|
(4,487 |
) |
Income tax expenses |
11,723 |
|
|
15,314 |
|
Reversal of impairment losses on trade receivables |
(89 |
) |
|
(1,194 |
) |
Impairment losses on contract assets |
1,694 |
|
|
1,064 |
|
Provision for labor risks |
(273 |
) |
|
571 |
|
Stock-based plan |
5,393 |
|
|
1,239 |
|
Income on financial investments |
(193 |
) |
|
- |
|
Present value adjustment - accounts payable for business combination |
1,589 |
|
|
- |
|
Others |
41 |
|
|
- |
|
Variation in operating assets and liabilities |
|
|
|
||
Trade receivables |
49,460 |
|
|
21,293 |
|
Contract assets |
(18,900 |
) |
|
(78,979 |
) |
Recoverable taxes |
245 |
|
|
(3,330 |
) |
Tax assets |
(11,281 |
) |
|
(15,242 |
) |
Judicial deposits |
110 |
|
|
(3,022 |
) |
Suppliers and other payables |
(11,672 |
) |
|
(31,279 |
) |
Salaries and welfare charges |
(7,628 |
) |
|
15,553 |
|
Tax liabilities |
- |
|
|
(901 |
) |
Other taxes payable |
633 |
|
|
(682 |
) |
Contract liabilities |
(12,657 |
) |
|
(2,021 |
) |
Other receivables and payables, net |
10,795 |
|
|
(9,529 |
) |
Cash generated from (used in) operating activities |
116,562 |
|
|
(46,964 |
) |
Income tax paid |
(6,808 |
) |
|
(4,818 |
) |
Interest paid on loans and borrowings |
(15,534 |
) |
|
(19,458 |
) |
Interest paid on lease |
(1,148 |
) |
|
(1,479 |
) |
Net cash from (used in) operating activities |
93,072 |
|
|
(72,719 |
) |
Cash flows from investment activities: |
|
|
|
||
Acquisition of property, plant and equipment and intangible assets |
(4,247 |
) |
|
(8,295 |
) |
Acquisition of subsidiary net of cash acquired - Somo |
- |
|
|
(265,137 |
) |
Cash outflow on hedge accounting settlement |
- |
|
|
16,134 |
|
Redemption of financial investments |
1,474 |
|
|
350,128 |
|
Net cash from (used in) investment activities |
(2,773 |
) |
|
92,830 |
|
Cash flows from financing activities: |
|
|
|
||
Exercised stock options |
478 |
|
|
5,128 |
|
Payment of lease liabilities |
(5,919 |
) |
|
(6,084 |
) |
Settlement of derivatives |
2,839 |
|
|
(381 |
) |
Payment of loans and borrowings |
(19,432 |
) |
|
(38,506 |
) |
Payment of investment obligations - Somo |
(1,235 |
) |
|
- |
|
Net cash used in financing activities |
(23,269 |
) |
|
(39,843 |
) |
Net increase/(decrease) in cash and cash equivalents |
67,030 |
|
|
(19,732 |
) |
Cash and cash equivalents as of January 1st |
185,727 |
|
|
135,727 |
|
Exchange variation effect on cash and cash equivalents |
(1,207 |
) |
|
15,832 |
|
Cash and cash equivalents as of March 31 |
251,550 |
|
|
131,827 |
|
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) |
1Q23 |
1Q22 |
Var.
|
|
Net Revenue |
609,991 |
491,872 |
24.0 |
% |
Net Revenue at Constant Currency |
621,193 |
499,617 |
24.3 |
% |
As of this quarter, we present an enhanced classification of our revenue by industry verticals, encompassing more comprehensive and representative industry categories that better align with our evolving business trends.
Net Revenue by industry (in BRL thousand) |
1Q23 |
1Q22 |
Var.
|
|
Financial Services |
174,783 |
156,326 |
11.8 |
% |
Consumer goods |
116,156 |
104,369 |
11.3 |
% |
Technology and telecommunications |
125,060 |
68,056 |
83.8 |
% |
Retail and industrial goods |
75,814 |
73,222 |
3.5 |
% |
Life sciences |
63,281 |
62,893 |
0.6 |
% |
Others |
54,897 |
27,006 |
103.3 |
% |
Total |
609,992 |
491,872 |
24.0 |
% |
Net Revenue by geography (in BRL thousand) |
1Q23 |
1Q22 |
Var.
|
|
North America |
263,386 |
203,940 |
29.1 |
% |
Europe |
73,726 |
37,589 |
96.1 |
% |
LATAM (Latin America) |
240,616 |
234,706 |
2.5 |
% |
APJ (Asia, Pacific and Japan) |
32,263 |
15,637 |
106.3 |
% |
Total |
609,991 |
491,872 |
24.0 |
% |
Reconciliation of various income statement amounts from IFRS to non-IFRS measures for the three months ended March 31, 2023 and 2022: |
Gross Profit (in BRL thousand) |
1Q23 |
1Q22 |
Var. 1Q23 x 1Q22 |
|||
Net Revenue |
609,991 |
|
491,872 |
|
24.0 |
% |
Cost of Services |
(407,861 |
) |
(328,992 |
) |
24.0 |
% |
Gross Profit |
202,130 |
|
162,880 |
|
24.1 |
% |
Adjustments |
|
|
|
|||
Depreciation and amortization (cost of services provided) |
9,410 |
|
9,318 |
|
1.0 |
% |
Stock-based compensation |
2,376 |
|
1,182 |
|
101.0 |
% |
Adjusted Gross Profit |
213,916 |
|
173,380 |
|
23.4 |
% |
Adjusted Gross Profit Margin |
35.1 |
% |
35.2 |
% |
-0.2p.p |
|
Adjusted EBITDA (in BRL thousand) |
1Q23 |
1Q22 |
Var.
|
|||
Net profit for the period |
52,382 |
|
29,223 |
|
79.2 |
% |
Adjustments |
|
|
|
|||
Net financial cost |
19,968 |
|
16,712 |
|
19.5 |
% |
Income tax expense |
11,723 |
|
15,314 |
|
-23.4 |
% |
Depreciation and amortization |
25,053 |
|
19,390 |
|
29.2 |
% |
Stock-based compensation |
5,393 |
|
1,239 |
|
335.3 |
% |
Government grants |
(140 |
) |
(58 |
) |
140.5 |
% |
Acquisition-related expenses (1) |
2,124 |
|
2,695 |
|
-21.2 |
% |
Adjusted EBITDA |
116,504 |
|
84,515 |
|
37.9 |
% |
Adjusted EBITDA Margin |
19.1 |
% |
17.2 |
% |
1.9p.p |
|
(1) |
Includes present value adjustment on accounts payable for business combination, consulting expenses and retention packages. |
Net Profit (in BRL thousand) |
1Q23 |
1Q22 |
Var.
|
|||
Net profit for the period |
52,382 |
|
29,223 |
|
79.2 |
% |
Adjustments |
|
|
|
|||
Acquisition-related expenses (1) |
14,836 |
|
10,323 |
|
43.7 |
% |
Adjusted Net Profit (2) |
67,218 |
|
39,546 |
|
70.0 |
% |
Adjusted Net Profit Margin (2) |
11.0 |
% |
8.0 |
% |
3p.p |
|
(1) |
Includes amortization of intangible assets from acquired companies, present value adjustment on accounts payable for business combination, consulting expenses and retention packages. |
|
(2) |
Adjustments' amounts are gross of tax. Tax effects on non-IFRS adjustments totaled (R$67) in 1Q23 and (R$24) in 1Q22. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20230518005795/en/
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