New York - May 22, 2024 /Business Wire/ - CI&T (NYSE: CINT, “Company”), a global digital specialist and fast-growing technology company, today announces its results for the first quarter of 2024 (1Q24) in accordance with International Financial Reporting Standards (IFRS). For comparison purposes, we refer to the results for the first quarter of 2023 (1Q23) and the fourth quarter of 2023 (4Q23).
First quarter of 2024 (1Q24) operating and financial highlights
● Net Revenue was R$523.5 million compared to R$610.0 million in 1Q23 and R$522.6 million in 4Q23, a sequential growth of 0.2%.
● Net Profit was R$22.4 million compared to R$43.6 million in 1Q23.
● Adjusted EBITDA was R$84.3 million compared to R$116.5 million in 1Q23. The Adjusted EBITDA margin was 16.1%.
● Adjusted Net Profit was R$41.7 million compared to R$62.4 million in 1Q23. The Adjusted Net Profit margin was 8.0%.
● CI&T ended 1Q24 with 6,083 CI&Ters compared to 6,111 at the end of 4Q23.
Cesar Gon, founder and CEO of CI&T, commented, "Our first quarter of 2024 has been truly transformative as we continue to make tremendous strides in our journey to becoming an AI-first company. By integrating AI into our operations and fostering a culture of efficiency and innovation, we capitalize on the amazing opportunities for value creation in this next chapter of the digital revolution. As early results, we are pleased to announce a 70 basis point revenue growth above our guidance in 1Q24 and to guide at least a 350 basis points sequential increase in 2Q24, resuming our growth trajectory. We anticipate this momentum will accelerate in the following quarters, leading to a period of resurgent growth in 2024 and beyond."
Comments on the 1Q24 financial performance
The net revenue was R$523.5 million in 1Q24, a decline of 14.2% compared to 1Q23, or a reduction of 12.1% at constant currency. Compared to 4Q23, net revenue grew 0.2%. The geographic distribution of net revenue for 1Q24 was 41.6% from North America, 42.5% from Latam, 11.7% from Europe, and 4.2% from Asia Pacific.
The cost of services provided in 1Q24 was R$355.9 million, 12.7% lower than in 1Q23, and the gross profit was R$167.6 million. The adjusted gross profit in 1Q24 was R$178.4 million, with an adjusted gross profit margin of 34.1%, 1.0 percentage point lower than in 1Q23.
In 1Q24, selling, general and administrative (SG&A), and other operating expenses were R$114.4 million, a reduction of 2.1% compared to 1Q23. This reduction can be primarily attributed to the non-recurring M&A expenses incurred in 2023, partially compensated by business restructuring expenses and increased sales efforts to resume growth in 1Q24.
In 1Q24, the adjusted EBITDA was R$84.3 million, a reduction of 27.7% compared to 1Q23. Adjusted EBITDA margin was 16.1% in the quarter, a reduction of 3.0 percentage points compared to 1Q23, mainly due to the decline in the gross profit margin and higher SG&A expenses as a percentage of net revenue.
In 1Q24, net financial costs were R$12.4 million, 38.1% lower than in 1Q23, mainly driven by lower net foreign exchange volatility in the comparable period, and lower net debt position and interest rates.
Income tax expense was R$16.8 million in 1Q24, 17.9% lower than in 1Q23. The income tax paid (cash effect) was R$3.3 million, equivalent to a cash tax rate of 8.4%.
The net profit was R$22.4 million in 1Q24, compared to a net profit of R$43.6 million in 1Q23. Adjusted net profit was R$41.7 million, a decrease of 33.1% compared to 1Q23. The adjusted net profit margin decreased from 10.2% in 1Q23 to 8.0% in 1Q24, mainly due to lower Adjusted EBITDA, partially compensated by lower net financial costs and tax expenses, as explained above.
As of 1Q24, we are adding back stock-based compensation expenses to calculate Adjusted Net Profit, a non-IFRS financial measure, to align comparability with our main peers. For more details, please refer to the Non-IFRS Financial Measures and Reconciliation tables below.
Cash generated from operating activities was R$130.3 million in 1Q24, 11.8% higher than in 1Q23, due to an improvement in working capital, specifically in trade receivables.
Business Outlook
We expect our net revenue in the second quarter of 2024 to be at least R$542 million on a reported basis, equivalent to a 3.5% growth compared to 1Q24. It assumes an average FX rate of 5.04 BRL/USD in 1Q24.
For the full year of 2024, we expect our net revenue growth at constant currency to be in the range of -2.5% to +2.5% year-over-year. In addition, we estimate our Adjusted EBITDA margin to be in the range of 17% to 19%.
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 1Q24 financial and operating results on May 22, at 8:00 a.m. Eastern Time / 09:00 a.m. BRT. The earnings call can be accessed on the Company’s Investor Relations website at https://investors.ciandt.com or at the following link: https://www.youtube.com/watch?v=FA14fVjgLuY.
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 29-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 6,000+ professionals.
Basis of accounting and functional currency
CI&T maintains its books and records in Brazilian reais, which is the presentation currency of 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. They 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’ understanding of our operations’ historical and current financial performance.
CI&T is not providing a quantitative reconciliation of its forward-looking non-IFRS Net Revenue Growth at Constant Currency and Adjusted EBITDA to the most directly comparable IFRS measure because it cannot reasonably predict the 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 measures, foreign currency exchange gains/losses, and other items. These items are uncertain, depend on various factors, and could have a material impact on our 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 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 presented, the adjustments applied were: (i) depreciation and amortization related to the 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. We calculate Adjusted EBITDA for the periods presented as Net Profit, plus net finance costs, income tax expense, depreciation and amortization, plus: (i) stock-based compensation expenses; (ii) government grants related to tax reimbursement in our Chinese subsidiary; (iii) acquisition-related expenses, including the present value and fair value adjustment to accounts payable for business acquired, consulting expenses, and retention packages; and (iv) business restructuring expenses, associated with employees' separation from acquired companies.
In calculating Adjusted Net Profit, we exclude components unrelated to the direct management of our services. For the periods presented, the adjustments have been made for (i) acquisition-related expenses (including amortization of intangible assets from acquired companies, present value and fair value adjustments to accounts payable for business acquired, consulting expenses, and retention packages); (ii) business restructuring expenses, associated with employees' separation from acquired companies; (iii) stock-based compensation expenses; and (iv) the tax effects of non-IFRS adjustments.
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 that may be deemed forward-looking statements 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 expectations or beliefs. 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 our expectations. 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 be materially different from those expressed or implied by such statements in this press release. Such risk factors include, but are not limited to, those relating to: the ongoing war in Ukraine and the economic sanctions imposed by Western economies on Russia, as well as the conflict between Israel and Hamas, and their impact on our business and industry; the impact of competition on our business; uncertainty regarding the demand for and market utilization of our services; our ability to maintain or acquire new client relationships; general business and economic conditions; our ability to successfully integrate the recent-acquired business; the impact of pandemics, epidemics and disease outbreak; and our ability to successfully implement our growth strategy and strategic plans. Additional information about these and other risks and uncertainties is 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 we may file from time to time with the SEC. Except as required by law, we assume no obligation to and do not intend to update these forward-looking statements or to update the reasons why actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
Contacts:
Investor Relations Contact:
Eduardo Galvão
investors@ciandt.com
Media Relations Contact:
Zella Panossian
ciandt@illumepr.com
Unaudited condensed consolidated statement of profit or loss
(In thousands of Brazilian Reais)
|
|
Quarter ended March 31,
|
|
|
2024
|
|
2023
|
|
|
|
|
Restated
|
|
Net revenue
|
523,509
|
|
609,991
|
|
Costs of services provided
|
(355,948)
|
|
(407,861)
|
|
Gross profit
|
167,561
|
|
202,130
|
|
|
|
|
|
|
Selling expenses
|
(46,250)
|
|
(45,554)
|
|
General and administrative expenses
|
(68,112)
|
|
(71,222)
|
|
Impairment loss on trade receivables and contract assets
|
(1,787)
|
|
(1,605)
|
|
Other income net
|
160
|
|
324
|
|
Operating expenses net
|
(115,989)
|
|
(118,057)
|
|
|
|
|
|
|
Operating profit before net finance costs and income tax expenses
|
51,572
|
|
84,073
|
|
|
|
|
|
|
Finance income
|
10,703
|
|
20,664
|
|
Finance cost
|
(23,056)
|
|
(40,632)
|
|
Net finance costs
|
(12,353)
|
|
(19,968)
|
|
|
|
|
|
|
Profit before income tax
|
39,219
|
|
64,105
|
|
|
|
|
|
|
Current
|
(8,437)
|
|
(13,401)
|
|
Deferred
|
(8,373)
|
|
(7,070)
|
|
Total income tax expense
|
(16,810)
|
|
(20,471)
|
|
|
|
|
|
|
Net profit for the year
|
22,409
|
|
43,634
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
Earnings per share – basic (in R$)
|
0.16
|
|
0.33
|
|
Earnings per share – diluted (in R$)
|
0.16
|
|
0.32
|
|
|
|
|
|
|
Weighted average number of basic shares
|
137,385,836
|
|
133,834,456
|
|
Weighted average number of diluted shares
|
140,078,180
|
|
137,279,821
|
Unaudited condensed consolidated statement of financial position
(In thousands of Brazilian Reais)
|
Assets
|
March 31, 2024
|
|
December 31, 2023
|
|
Liabilities and equity
|
March 31, 2024
|
|
December 31, 2023
|
|
Cash and cash equivalents
|
360,296
|
|
211,638
|
|
Suppliers and other payables
|
20,196
|
|
21,690
|
|
Financial Investments
|
-
|
|
3,164
|
|
Loans and borrowings
|
133,680
|
|
112,719
|
|
Trade receivables
|
312,016
|
|
471,951
|
|
Lease liabilities
|
15,708
|
|
17,862
|
|
Contract assets
|
250,998
|
|
147,620
|
|
Salaries and welfare charges
|
210,748
|
|
196,396
|
|
Recoverable taxes
|
38,400
|
|
23,588
|
|
Accounts payable for business acquired
|
110,180
|
|
13,365
|
|
Current Tax Assets
|
4,255
|
|
17,483
|
|
Current Tax liabilities
|
1,744
|
|
2,602
|
|
Derivatives
|
7,135
|
|
9,620
|
|
Other taxes payable
|
14,294
|
|
15,275
|
|
Other assets
|
28,991
|
|
27,072
|
|
Contract liability
|
29,632
|
|
48,079
|
|
Total current assets
|
1,002,091
|
|
912,136
|
|
Other liabilities
|
15,844
|
|
27,290
|
|
|
|
|
|
|
Total current liabilities
|
552,026
|
|
455,278
|
|
Recoverable taxes
|
742
|
|
959
|
|
|
|
|
|
|
Deferred tax assets
|
19,407
|
|
18,284
|
|
|
|
|
|
|
Judicial deposits
|
7,471
|
|
7,280
|
|
Loans and borrowings
|
660,269
|
|
614,744
|
|
Restricted cash - Escrow account and indemnity asset
|
29,779
|
|
29,061
|
|
Deferred tax liabilities
|
77,659
|
|
68,465
|
|
Other assets
|
1,168
|
|
1,027
|
|
Lease liabilities
|
25,395
|
|
27,037
|
|
Property, plant and equipment
|
34,926
|
|
38,584
|
|
Provisions
|
9,696
|
|
9,620
|
|
Intangible assets and goodwill
|
1,691,283
|
|
1,669,865
|
|
Accounts payable for business acquired
|
30,802
|
|
122,689
|
|
Right-of-use assets
|
35,936
|
|
39,695
|
|
Other liabilities
|
14,067
|
|
7,807
|
|
Total non-current assets
|
1,820,712
|
|
1,804,755
|
|
Total non-current liabilities
|
817,888
|
|
850,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Share capital
|
37
|
|
37
|
|
|
|
|
|
|
Share premium
|
983,194
|
|
980,893
|
|
|
|
|
|
|
Treasury share reserve
|
(4,143)
|
|
-
|
|
|
|
|
|
|
Capital reserves
|
176,774
|
|
174,153
|
|
|
|
|
|
|
Retained earnings reserves
|
376,649
|
|
354,240
|
|
|
|
|
|
|
Other comprehensive loss
|
(79,622)
|
|
(98,072)
|
|
|
|
|
|
|
Total equity
|
1,452,889
|
|
1,411,251
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
2,822,803
|
|
2,716,891
|
|
Total equity and liabilities
|
2,822,803
|
|
2,716,891
|
Unaudited condensed consolidated statement of cash flows
(In thousands of Brazilian Reais)
|
|
March 31, 2024
|
|
March 31, 2023
|
|
|
|
|
Restated
|
|
Cash flows from operating activities
|
|
|
|
|
Net profit for the period
|
22,409
|
|
43,634
|
|
Adjustments for:
|
|
|
|
|
Depreciation and amortization
|
21,876
|
|
25,053
|
|
Loss (income) on sale and write-off of fixed assets
|
326
|
|
(95)
|
|
Interest, monetary variation and exchange rate changes
|
18,410
|
|
24,584
|
|
Unrealized gain on financial instruments
|
(243)
|
|
(4,544)
|
|
Income tax expenses
|
16,810
|
|
20,471
|
|
Impairment losses on trade receivables and contract assets
|
1,787
|
|
1,605
|
|
Provision (reversal of) for tax and labor risks
|
76
|
|
(273)
|
|
Share-based plan
|
3,772
|
|
5,393
|
|
Changes in present value of accounts payable for business acquired
|
1,063
|
|
1,589
|
|
Others
|
10
|
|
41
|
|
Changes in operating assets and liabilities
|
|
|
|
|
Trade receivables
|
166,683
|
|
49,460
|
|
Contract assets
|
(101,257)
|
|
(18,900)
|
|
Recoverable taxes
|
(7,119)
|
|
245
|
|
Suppliers
|
(319)
|
|
(11,672)
|
|
Salaries and welfare charges
|
12,177
|
|
(7,628)
|
|
Contract liabilities
|
(19,587)
|
|
(12,657)
|
|
Other receivables and payables, net
|
(6,603)
|
|
256
|
|
Cash generated from operating activities
|
130,271
|
|
116,562
|
|
Income tax paid
|
(3,303)
|
|
(6,808)
|
|
Interest paid on loans and borrowings
|
(7,019)
|
|
(15,534)
|
|
Interest paid on lease
|
(820)
|
|
(1,148)
|
|
Net cash from operating activities
|
119,129
|
|
93,072
|
|
Cash flows from investment activities
|
|
|
|
|
Acquisition of property, plant and equipment and intangible assets
|
(11,175)
|
|
(4,247)
|
|
Redemption of financial investments
|
3,164
|
|
1,474
|
|
Net cash used in investment activities
|
(8,011)
|
|
(2,773)
|
|
Cash flows from financing activities
|
|
|
|
|
Exercised share-based compensation
|
921
|
|
478
|
|
Payment of lease liabilities
|
(5,707)
|
|
(5,919)
|
|
Proceeds from loans and borrowings
|
49,801
|
|
-
|
|
Proceeds from settlement of derivatives
|
2,728
|
|
2,839
|
|
Payment of loans and borrowings
|
(8,924)
|
|
(19,432)
|
|
Payment of installment related to accounts payable of business acquired
|
-
|
|
(1,235)
|
|
Repurchase of treasury shares
|
(4,143)
|
|
-
|
|
Net cash from (used in) financing activities
|
34,676
|
|
(23,269)
|
|
Net increase in cash and cash equivalents
|
145,794
|
|
67,030
|
|
Cash and cash equivalents as of January 1st
|
211,638
|
|
185,727
|
|
Exchange variation effect on cash and cash equivalents
|
2,864
|
|
(1,207)
|
|
Cash and cash equivalents
|
360,296
|
|
251,550
|
Net Revenue Distribution
|
Net Revenue by industry
(in BRL thousand)
|
1Q24
|
|
1Q23
|
|
Var.
1Q24 x 1Q23
|
|
Financial Services
|
147,720
|
|
174,783
|
|
-15.5%
|
|
Consumer Goods
|
110,002
|
|
116,156
|
|
-5.3%
|
|
Technology and Telecommunications
|
60,628
|
|
125,060
|
|
-51.5%
|
|
Retail and Industrial Goods
|
91,058
|
|
75,814
|
|
20.1%
|
|
Life Sciences
|
54,372
|
|
63,281
|
|
-14.1%
|
|
Others
|
59,729
|
|
54,897
|
|
8.8%
|
|
Total
|
523,509
|
|
609,991
|
|
-14.2%
|
|
Net Revenue by geography
(in BRL thousand)
|
1Q24
|
|
1Q23
|
|
Var.
1Q24 x 1Q23
|
|
North America
|
217,945
|
|
263,386
|
|
-17.3%
|
|
Latin America
|
222,682
|
|
240,616
|
|
-7.5%
|
|
Europe
|
61,127
|
|
73,726
|
|
-17.1%
|
|
Asia Pacific
|
21,755
|
|
32,263
|
|
-32.6%
|
|
Total
|
523,509
|
|
609,991
|
|
-14.2%
|
|
Top Clients
(in BRL thousand)
|
1Q24
|
|
1Q23
|
|
Var.
1Q24 x 1Q23
|
|
Top Client (1)
|
33,839
|
|
67,425
|
|
-49.8%
|
|
Top 10 Clients
|
215,116
|
|
270,461
|
|
-20.5%
|
|
(1) The top client considered in one period may differ from that disclosed in another period.
|
Reconciliation of various income statement amounts from IFRS to non-IFRS measures
|
Net Revenue
(in BRL thousand)
|
1Q24
|
|
1Q23
|
|
Var.
1Q24 x 1Q23
|
|
Net Revenue
|
523,509
|
|
609,991
|
|
-14.2%
|
|
Net Revenue at Constant Currency
|
536,299
|
|
609,991
|
|
-12.1%
|
|
Adjusted Gross Profit
(in BRL thousand)
|
1Q24
|
|
1Q23
|
|
Var.
1Q24 x 1Q23
|
|
Net Revenue
|
523,509
|
|
609,991
|
|
-14.2%
|
|
Cost of Services Provided
|
(355,948)
|
|
(407,861)
|
|
-12.7%
|
|
Gross Profit
|
167,561
|
|
202,130
|
|
-17.1%
|
|
Adjustments
|
|
|
|
|
|
|
Depreciation and amortization (cost of services provided)
|
8,032
|
|
9,410
|
|
-14.6%
|
|
Stock-based compensation
|
2,757
|
|
2,376
|
|
16.0%
|
|
Adjusted Gross Profit
|
178,351
|
|
213,916
|
|
-16.6%
|
|
Adjusted Gross Profit Margin
|
34.1%
|
|
35.1%
|
|
-1p.p
|
|
Adjusted EBITDA
(in BRL thousand)
|
1Q24
|
|
1Q23
(Restated)
|
|
Var.
1Q24 x 1Q23
|
|
Net profit for the year
|
22,409
|
|
43,634
|
|
-48.6%
|
|
Adjustments
|
|
|
|
|
|
|
Net financial cost
|
12,353
|
|
19,968
|
|
-38.1%
|
|
Income tax expense
|
16,810
|
|
20,471
|
|
-17.9%
|
|
Depreciation and amortization
|
21,876
|
|
25,053
|
|
-12.7%
|
|
Stock-based compensation
|
3,772
|
|
5,393
|
|
-30.1%
|
|
Government grants
|
(71)
|
|
(140)
|
|
-48.9%
|
|
Acquisition-related expenses (1)
|
1,350
|
|
2,124
|
|
-36.4%
|
|
Business restructuring (2)
|
5,758
|
|
-
|
|
0.0%
|
|
Adjusted EBITDA
|
84,258
|
|
116,504
|
|
-27.7%
|
|
Adjusted EBITDA Margin
|
16.1%
|
|
19.1%
|
|
-3p.p
|
(1) Include present value and fair value adjustments on accounts payable for business acquired, consulting expenses, and retention packages.
(2) Associated with employees' separation from acquired companies.
|
Adjusted Net Profit
(in BRL thousand)
|
1Q24
|
|
1Q23
Restated
|
|
Var.
1Q24 x 1Q23
|
|
Net profit for the year
|
22,409
|
|
43,634
|
|
-48.6%
|
|
Adjustments
|
|
|
|
|
|
|
Acquisition-related expenses (1)
|
12,144
|
|
14,836
|
|
-18.1%
|
|
Business restructuring (2)
|
5,758
|
|
-
|
|
0.0%
|
|
Stock-based compensation (3)
|
3,772
|
|
5,393
|
|
-30.1%
|
|
Tax effects on non-IFRS adjustments (4)
|
(2,335)
|
|
(1,446)
|
|
61.5%
|
|
Adjusted Net Profit
|
41,749
|
|
62,418
|
|
-33.1%
|
|
Adjusted Net Profit Margin
|
8.0%
|
|
10.2%
|
|
-2.3p.p
|
| (1) |
Includes amortization of intangible assets from acquired companies totaled (R$10,794) thousand in 1Q24 and (R$12,712) thousand in 1Q23, present value and fair value adjustment on accounts payable for business acquired, consulting expenses and retention packages.
|
| (2) |
Associated with employees' separation from acquired companies.
|
| (3) |
As of 1Q24, we are adding back stock-based compensation expenses to the Adjusted Net Profit calculation. Thus, comparison with previously reported numbers will differ.
|
| (4) |
As of 4Q23, we are contemplating the tax effects on non-IFRS adjustments as part of the Adjusted Net Profit calculation. Thus, comparison with previously reported numbers will differ.
|
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2024
(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)
CI&T Inc. (“CI&T” or “Company”), is a publicly held company incorporated in the Cayman Islands in June 2021, headquartered at Estrada Giuseppina Vianelli Di Napoli, 1455, Polo II de Alta Tecnologia, in the City of Campinas, State of São Paulo, Brazil. As a holding Company, it is mainly engaged in the investment, as a partner or shareholder, in other companies, consortia or joint ventures in Brazil and other countries. The Company’s subsidiaries are mainly engaged in the development of customizable software through implementation of software solutions, including machine learning, artificial intelligence (AI), analytics, cloud migration and mobility technologies.
These unaudited condensed consolidated interim financial statements comprise the Company and its subsidiaries (collectively referred to as the “Group”).
Since November 10, 2021 CI&T has been a publicly-held company registered with the US Securities and Exchange Commission (the “SEC”) and its shares are traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “CINT”.
These unaudited condensed consolidated interim financial statements for the three-month ended March 31, 2024 have been prepared in accordance with IAS 34 – Interim Financial Reporting and should be read in conjunction with the Group’s last annual consolidated financial statements as at and for the year ended December 31, 2023. This financial information does not include all the information required for a complete set of financial statements prepared in accordance with IFRS Accounting Standards. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group’s financial position and performance since the last annual financial statements.
The accounting policies applied in these unaudited condensed consolidated interim financial statements are the same as those applied in the Group’s consolidated financial statements as at and for the year ended December 31, 2023.
The new accounting standards and amendments to accounting standards that became effective after January 1, 2024, have not significantly affected these unaudited condensed consolidated interim financial statements.
As previously publicly available, these financial statements have been restated to reflect the correction of certain errors identified by the Company in its unaudited condensed consolidated interim financial statements for the three-month ended March 31, 2023 (see note 22).
These unaudited condensed consolidated interim financial statements were authorized for issue by the Company’s Board of Directors on May 21, 2024.
| (i) |
Accounting standards issued but not yet effective |
A number of new accounting standards and amendments to accounting standards are effective for annual periods beginning after January 1, 2024 and earlier application is permitted. However, the Group has not early adopted any of the forthcoming new or amended accounting standards in preparing these unaudited condensed consolidated interim financial statements.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2024
3
|
Functional and presentation currency |
These unaudited condensed consolidated interim financial statements are presented in Brazilian Reais (“R$”), which is the Company's functional currency. All balances are rounded to the nearest thousands, except when otherwise indicated.
The Company’s subsidiaries functional currencies are:
|
Subsidiaries
|
|
Country of origin
|
|
Functional currency/ defined as
|
|
CI&T Delaware LLC
|
|
United States
|
|
Brazilian Reais (“R$” or “BRL”)
|
|
CI&T Software S.A. (“CI&T Brazil”)
|
|
Brazil
|
|
Brazilian Reais (“R$” or “BRL”)
|
|
CI&T Japan, Inc.
|
|
Japan
|
|
Yen
|
|
CI&T China Inc.
|
|
China
|
|
Yuan
|
|
CI&T Portugal Unipessoal Lda.
|
|
Portugal
|
|
Euro
|
|
CI&T Australia PTY Ltd.
|
|
Australia
|
|
Australian dollar (“AU$”)
|
|
CINQ Inc.
|
|
United States
|
|
US dollar (“US$” or “USD”)
|
|
CI&T Inc. (“CI&T US”)
|
|
United States
|
|
US dollar (“US$” or “USD”)
|
|
CI&T Software Inc. (“CI&T Canada”)
|
|
Canada
|
|
Canadian dollar
|
|
CI&T UK Limited. (“CI&T UK”)
|
|
United Kingdom
|
|
Pound sterling (“£” or “GBP”)
|
|
CI&T Colombia
|
|
Colombia
|
|
Colombian peso
|
|
CI&T Argentina S/A
|
|
Argentina
|
|
Argentinian Peso
|
|
CI&T Financial Services Solutions, LLC
|
|
United States
|
|
US dollar (“US$” or “USD”)
|
|
CI&T FinTech Services, Inc.
|
|
United States
|
|
US dollar (“US$” or “USD”)
|
|
CI&T Ltd.
|
|
United Kingdom
|
|
Pound sterling (“£” or “GBP”)
|
|
CI&T Digital Ltd.
|
|
United Kingdom
|
|
Pound sterling (“£” or “GBP”)
|
|
Somo Global Inc.
|
|
United States
|
|
US dollar (“US$” or “USD”)
|
|
Somo Global SAS.
|
|
Colombia
|
|
Colombian peso
|
|
Ideonyx Ltd (in liquidation)
|
|
United Kingdom
|
|
Pound sterling (“£” or “GBP”)
|
|
Somo Ltd (dormant)
|
|
United Kingdom
|
|
Pound sterling (“£” or “GBP”)
|
|
CI&T Oceania PTY Ltd (“CI&T Oceania”)
|
|
Australia
|
|
Australian dollar (“AU$”)
|
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2024
| 4 |
Use of judgments and estimates |
In preparing these unaudited condensed consolidated interim financial statements, management, has made judgments and estimates about the future that affect the application of the Company's accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates.
The significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual consolidated financial statements.
| a. |
Measurement of fair values |
A number of the Group’s accounting policies require the measurement of fair values, for both financial and non-financial assets and liabilities.
The Group has established an internal process with respect to the measurement of fair value. This includes the review of significant fair value measurements, significant unobservable data and valuation adjustments. If third-party information, such as broker quotes or pricing services, is used to measure fair values, this information is evaluated to support the conclusion that such valuations meet the requirements of the Accounting Standards, including the level in the fair value hierarchy in which the valuations should be classified.
When measuring the fair value of an asset or a liability, the Group uses observable market data as much as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
- Level 1: Quoted prices (not adjusted) in active markets for identical assets or liabilities;
- Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
- Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the changes have occurred.
Further information about the assumptions made in measuring fair values is included in note 19.
| 5 |
Cash and cash equivalents |
|
|
March 31, 2024
|
|
December 31, 2023
|
|
Cash and cash equivalents
|
124,248
|
|
63,690
|
|
Short-term financial investments
|
236,048
|
|
147,948
|
|
Total
|
360,296
|
|
211,638
|
Short-term financial investments are mainly represented by fixed income securities, with interest rates ranging from 100% to 103% on March 31, 2024 (100% to 101% as of December 31, 2023) of the changes of Interbank Deposit Certificate (CDI) variation which (i) management expects to use for short-term commitments; (ii) present daily liquidity; and (iii) are readily convertible into a known amount of cash, subject to an insignificant risk of change in value.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2024
13 Provisions, judicial deposits and restricted cash – escrow account and indemnity asset
The Group is involved in tax and labor lawsuits that were considered probable losses and are provisioned according to the table below:
|
|
Tax
|
|
Labor (i)
|
|
Total
|
|
Balance as of January 1, 2023
|
205
|
|
12,142
|
|
12,347
|
|
Reversal
|
(192)
|
|
(81)
|
|
(273)
|
|
Balance as of March 31, 2023
|
13
|
|
12,061
|
|
12,074
|
|
Balance as of December 31, 2023
|
-
|
|
9,620
|
|
9,620
|
|
Provisions
|
-
|
|
76
|
|
76
|
|
Balance as of March 31, 2024
|
-
|
|
9,696
|
|
9,696
|
| (i) |
In relation to Box 1824 business combination, the Group has assumed an amount of R$ 13,583 related to labor contingencies liability, on the acquisition date. As of March 31, 2024, the amount provisioned was R$ 9,040 (R$ 9,040 as of December 2023). |
The Group is a party to labor and tax lawsuits, whose likelihood of loss is regarded as possible, for which no provision was recorded, in the amount of R$ 8,571 as of March 31, 2024 (R$ 8,519 as of December 31, 2023).
As of March 31, 2024, the Group’s judicial deposits totaled R$ 7,471 (R$ 7,280 as of December 31, 2023), recognized in the statement of financial position, in non-current assets. Of this amount, R$ 7,199 (R$ 7,008 as of December 31, 2023) refer to tax lawsuits and R$ 272 (R$ 272 as of December 31, 2023) refer to labor lawsuits.
| c. |
Restricted cash – escrow account and indemnity asset |
|
|
March 31, 2024
|
|
December 31, 2023
|
|
Escrow account (i)
|
20,739
|
|
20,021
|
|
Indemnity asset (ii)
|
9,040
|
|
9,040
|
|
Total
|
29,779
|
|
29,061
|
| (i) |
Refers to guarantee in connection with business combination, in order to satisfy certain claims, if occur. |
| (ii) |
Refers to an indemnification asset in connection with a business combination, where the Group has the right to be indemnified for all losses that may occur related to labor contingent liabilities. |
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2024
| 14 |
Equity |
|
|
| a. |
Share capital |
|
|
March 31, 2024
|
|
December 31, 2023
|
|
Number of ordinary nominative shares
|
134,532,236
|
|
134,412,014
|
|
Class A
|
21,787,514
|
|
21,365,297
|
|
Class B
|
112,744,722
|
|
113,046,717
|
|
Par value
|
R$ 0.00027
|
|
R$ 0.00027
|
|
Share capital
|
R$ 37
|
|
R$ 37
|
The holders of the Class A common shares and Class B common shares have rights that differs in: (i) the holders of Class B common shares are entitled to ten votes per share, whereas holders of Class A common shares are entitled to one vote per share, (ii) Class B common shares have certain conversion rights and (iii) the holders of Class B common shares are entitled to maintain a proportional ownership interest in the event that additional Class A common shares are issued, however that such rights to purchase additional Class B common shares may only be exercised with Class B Shareholder Consent.
After the Company completed its initial public offering in November 2021 (note 1), the share premium relates to the difference between the subscription price (US$ 15.00 per share) that the shareholders paid for the shares and their nominal value (US$ 0.00005 per share), as a total amount of R$ 915,947 (US$ 166,666). In connection with the subsidiaries acquired in 2022, the share premium increased by R$ 14,037 and R$ 16,189 from shares issued as part of the payment for some acquisitions.
In 2024, the share premium increased by R$ 2,301 due to the restricted stock units exercised. As of March 31, 2024, the total amount of share premium is R$ 983,194 (R$ 980,893 as of December 31, 2023).
| c. |
Treasury share reserve |
In November 2023, the Board of Directors approved a new share repurchase program, pursuant to which the Company may repurchase up to 2.5 million of its outstanding class A common shares until December 31, 2024. As of March 31, 2024, the Company had repurchased 188,516 of its outstanding class A common shares at a total amount of R$ 4,143.
Stock-based compensation
As of March 31, 2024, the amount of R$ 125,677 (R$ 123,056 as of December 31, 2023) refers to the Group’s share-based compensation plans.
Share-based payment – vested immediately
As of March 31, 2024, the amount of R$ 117,973 (R$ 117,973 as of December 31, 2023) refers to the purchase price to be paid in common shares in connection with business combination but considered as share-based payment vested immediately at each acquisition date. The amount is being converted into an equivalent number of shares on each anniversary of the closing date.
Share issuance costs
In November 2021, the Company incurred incremental costs directly attributable to the public offering in the amount of R$ 66,876, net of taxes.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2024
The Group generates revenue primarily through the provision of services described in the table below, which is summarized by nature:
|
|
March 31, 2024
|
|
March 31, 2023
|
|
Software development revenue
|
503,345
|
|
580,876
|
|
Software maintenance revenue
|
10,348
|
|
17,020
|
|
Consulting revenue
|
7,368
|
|
10,599
|
|
Other revenue
|
2,448
|
|
1,496
|
|
Total net revenue
|
523,509
|
|
609,991
|
The following table sets forth the net revenue by industry vertical for the periods indicated:
|
|
March 31, 2024
|
|
March 31, 2023
|
|
By industry vertical
|
|
|
|
|
Financial services
|
147,720
|
|
174,783
|
|
Consumer goods
|
110,002
|
|
116,156
|
|
Technology and telecommunications
|
60,628
|
|
125,060
|
|
Retail and industrial goods
|
91,058
|
|
75,814
|
|
Life sciences
|
54,372
|
|
63,281
|
|
Others
|
59,729
|
|
54,897
|
|
Total net revenue
|
523,509
|
|
609,991
|
The table below summarizes net revenues by geographic region:
|
|
March 31, 2024
|
|
March 31, 2023
|
|
North America
|
217,945
|
|
263,386
|
|
Latin America
|
222,682
|
|
240,616
|
|
Europe
|
61,127
|
|
73,726
|
|
Asia Pacific
|
21,755
|
|
32,263
|
|
Total
|
523,509
|
|
609,991
|
Net revenues by geographic area were determined based on the country where the sale was made. The net revenue from a single customer represents 6% of the Company’s total net revenues as of March 31, 2024 (11% as of March 31, 2023).
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2024
Revenue by client concentration
The following table sets forth net revenue contributed by the top client, and top ten clients for the periods indicated:
|
|
March 31, 2024
|
|
March 31, 2023
|
|
Top client
|
33,839
|
|
67,425
|
|
Top 10 clients
|
215,116
|
|
270,461
|
16 Expenses by nature
Information on the nature of expenses recognized in the unaudited condensed consolidated interim statement of profit or loss is presented below:
|
|
March 31, 2024
|
|
March 31, 2023
|
|
Employee expenses
|
(393,118)
|
|
(441,992)
|
|
Third-party services and other inputs
|
(28,840)
|
|
(34,070)
|
|
Short-term leases
|
(1,221)
|
|
(1,714)
|
|
Insurance
|
(2,005)
|
|
(3,375)
|
|
Travel expenses
|
(4,955)
|
|
(2,563)
|
|
Depreciation and amortization
|
(21,876)
|
|
(25,053)
|
|
Share-based compensation
|
(3,772)
|
|
(5,393)
|
|
Impairment loss on trade receivables and contract assets
|
(1,787)
|
|
(1,605)
|
|
Other post-acquisition expenses
|
(1,238)
|
|
(1,784)
|
|
Other costs and expenses (a)
|
(13,125)
|
|
(8,369)
|
|
Total
|
(471,937)
|
|
(525,918)
|
|
|
|
|
|
|
Disclosed as:
|
|
|
|
|
Costs of services provided
|
(355,948)
|
|
(407,861)
|
|
Selling expenses
|
(46,250)
|
|
(45,554)
|
|
General and administrative expenses
|
(68,112)
|
|
(71,222)
|
|
Impairment loss on trade receivables and contract assets
|
(1,787)
|
|
(1,605)
|
|
Other income
|
160
|
|
324
|
|
Total
|
(471,937)
|
|
(525,918)
|
| (a) |
Other costs and expenses include mainly the restructuring expenses occurred in 2024 (R$ 5,758) in subsidiaries located in the United Kingdom. |
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2024
17 Net finance costs
|
|
March 31, 2024
|
|
March 31, 2023
|
|
Finance income:
|
|
|
|
|
Income from financial investments
|
1,977
|
|
2,750
|
|
Foreign-exchange gain
|
3,065
|
|
9,073
|
|
Gains on derivatives
|
1,645
|
|
8,602
|
|
Interest received
|
654
|
|
43
|
|
Monetary variation
|
2,546
|
|
195
|
|
Other finance income
|
816
|
|
1
|
|
|
10,703
|
|
20,664
|
|
Finance cost:
|
|
|
|
|
Exchange variation loss
|
(2,443)
|
|
(11,302)
|
|
Loss on derivatives
|
(1,402)
|
|
(4,058)
|
|
Interest and charges on loans and leases (note 9)
|
(17,650)
|
|
(22,258)
|
|
Monetary variation
|
(988)
|
|
(1,365)
|
|
Other finance costs
|
(573)
|
|
(1,649)
|
|
|
(23,056)
|
|
(40,632)
|
|
Net finance costs
|
(12,353)
|
|
(19,968)
|
Income tax expense recognized in profit or loss for the periods are shown as follows:
|
|
|
March 31, 2024
|
|
March 31, 2023 restated
|
|
Current income tax
|
|
(8,437)
|
|
(13,401)
|
|
Deferred income tax
|
|
(8,373)
|
|
(7,070)
|
|
Total income tax expenses
|
|
(16,810)
|
|
(20,471)
|
The reconciliation of the Company's effective rate computed at the Brazilian federal tax rate of 34%, with the average combined rate, is shown as follows:
|
|
|
March 31, 2024
|
|
March 31, 2023 restated
|
|
Profit before income tax
|
|
39,219
|
|
64,105
|
|
Combined income tax rate
|
|
34%
|
|
34%
|
|
Tax using the combined income tax rate
|
|
(13,334)
|
|
(21,796)
|
|
Non-deductible expenses / non-taxable gains
|
|
114
|
|
(784)
|
|
Taxation of earnings before interest and taxes generated in subsidiaries
|
|
255
|
|
5,432
|
|
Exchange difference
|
|
833
|
|
1,532
|
|
Tax effects on income of subsidiaries abroad (taxed at zero rate)
|
|
(928)
|
|
(1,625)
|
|
Current-year losses for which no deferred tax asset is recognized
|
|
(3,750)
|
|
(3,230)
|
|
Income tax expense
|
|
(16,810)
|
|
(20,471)
|
|
Current
|
|
(8,437)
|
|
(13,401)
|
|
Deferred
|
|
(8,373)
|
|
(7,070)
|
|
|
|
(16,810)
|
|
(20,471)
|
|
Effective rate
|
|
43%
|
|
32%
|
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2024
Movement in deferred tax balances:
|
|
|
March 31, 2024
|
|
|
|
Net balance at January 1st
|
|
Recognition in profit or loss
|
|
Exchange variation effect
|
|
Net amount
|
|
Deferred tax asset
|
|
Deferred tax liabilities
|
|
Goodwill - tax benefit on unamortized goodwill
|
|
(86,896)
|
|
(11,712)
|
|
(165)
|
|
(98,772)
|
|
-
|
|
(98,772)
|
|
Bonus accrued
|
|
4,987
|
|
(1,108)
|
|
72
|
|
3,951
|
|
3,951
|
|
-
|
|
Property, plant and equipment
|
|
5,166
|
|
686
|
|
37
|
|
5,889
|
|
7,089
|
|
(1,200)
|
|
Derivatives
|
|
1,546
|
|
714
|
|
-
|
|
2,260
|
|
2,260
|
|
-
|
|
Lease
|
|
2,438
|
|
(78)
|
|
29
|
|
2,388
|
|
38,310
|
|
(35,922)
|
|
Other temporary differences
|
|
7,099
|
|
1,362
|
|
204
|
|
8,665
|
|
8,671
|
|
(6)
|
|
Provisions
|
|
4,161
|
|
1,101
|
|
(20)
|
|
5,242
|
|
5,242
|
|
-
|
|
Research and development tax credit
|
|
3,131
|
|
-
|
|
129
|
|
3,260
|
|
3,260
|
|
-
|
|
Share-based compensation
|
|
6,263
|
|
702
|
|
83
|
|
7,048
|
|
7,048
|
|
-
|
|
Tax loss carryforward
|
|
1,924
|
|
(40)
|
|
(67)
|
|
1,817
|
|
1,817
|
|
-
|
|
Tax assets (liabilities) before set-off
|
|
(50,181)
|
|
(8,373)
|
|
302
|
|
(58,252)
|
|
77,648
|
|
(135,900)
|
|
Set-off of tax
|
|
|
|
|
|
|
|
-
|
|
(58,241)
|
|
58,241
|
|
Net tax assets (liabilities)
|
|
|
|
|
|
|
|
(58,252)
|
|
19,407
|
|
(77,659)
|
|
|
|
March 31, 2023 restated
|
|
|
|
Net balance on January 1st 2023 restated
|
|
Recognition in profit or loss
|
|
Exchange variation effect
|
|
Net amount
|
|
Deferred tax asset
|
|
Deferred tax liabilities
|
|
Goodwill - tax benefit on unamortized goodwill
|
|
(40,509)
|
|
(10,127)
|
|
-
|
|
(50,636)
|
|
-
|
|
(50,636)
|
|
Bonus accrued
|
|
21,011
|
|
3,663
|
|
(160)
|
|
24,514
|
|
24,514
|
|
-
|
|
Property, plant and equipment
|
|
1,212
|
|
2,249
|
|
14
|
|
3,475
|
|
3,475
|
|
-
|
|
Derivatives
|
|
(2,271)
|
|
816
|
|
-
|
|
(1,455)
|
|
-
|
|
(1,455)
|
|
Lease
|
|
2,634
|
|
27
|
|
(49)
|
|
2,612
|
|
31,439
|
|
(28,827)
|
|
Other temporary differences
|
|
851
|
|
12
|
|
(100)
|
|
763
|
|
763
|
|
-
|
|
Provisions
|
|
3,014
|
|
(3,286)
|
|
(7)
|
|
(279)
|
|
-
|
|
(279)
|
|
Research and development tax credit
|
|
4,794
|
|
-
|
|
7
|
|
4,801
|
|
4,801
|
|
-
|
|
Share-based compensation
|
|
1,928
|
|
1,420
|
|
(55)
|
|
3,293
|
|
3,293
|
|
-
|
|
Tax loss carryforward
|
|
1,965
|
|
(1,844)
|
|
3
|
|
124
|
|
124
|
|
-
|
|
Tax assets (liabilities) before set-off
|
|
(5,371)
|
|
(7,070)
|
|
(347)
|
|
(12,788)
|
|
68,409
|
|
(81,197)
|
|
Set-off of tax
|
|
|
|
|
|
|
|
-
|
|
(51,826)
|
|
51,826
|
|
Net tax assets (liabilities)
|
|
|
|
|
|
|
|
(12,788)
|
|
16,583
|
|
(29,371)
|
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2024
19 Financial instruments and risk management
19.1 Accounting classifications and fair values
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including the levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
|
|
March 31, 2024
|
|
|
Carrying amount
|
|
Fair value
|
|
Financial assets
|
Amortized cost
|
|
Assets / liabilities measured at FVTPL(i)
|
|
Total
|
|
Level 2
|
|
Derivatives
|
-
|
|
7,135
|
|
7,135
|
|
7,135
|
|
Cash and cash equivalents
|
360,296
|
|
-
|
|
360,296
|
|
-
|
|
Trade receivables
|
312,016
|
|
-
|
|
312,016
|
|
-
|
|
Contract assets
|
250,998
|
|
-
|
|
250,998
|
|
-
|
|
Other assets
|
30,159
|
|
-
|
|
30,159
|
|
-
|
|
|
953,469
|
|
7,135
|
|
960,604
|
|
7,135
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
Suppliers and other payables
|
(20,196)
|
|
-
|
|
(20,196)
|
|
-
|
|
Loans and borrowings
|
(793,949)
|
|
-
|
|
(793,949)
|
|
-
|
|
Lease liabilities
|
(41,103)
|
|
-
|
|
(41,103)
|
|
-
|
|
Accounts payable for business acquired
|
(140,982)
|
|
-
|
|
(140,982)
|
|
-
|
|
Contract liabilities
|
(29,632)
|
|
-
|
|
(29,632)
|
|
-
|
|
Other liabilities
|
(29,911)
|
|
-
|
|
(29,911)
|
|
-
|
|
|
(1,055,773)
|
|
-
|
|
(1,055,773)
|
|
-
|
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2024
|
|
December 31, 2023
|
|
|
Carrying amount
|
|
Fair value
|
|
Financial assets
|
Amortized cost
|
|
Assets / liabilities measured at FVTPL(i)
|
|
Total
|
|
Level 2
|
|
Derivatives
|
-
|
|
9,620
|
|
9,620
|
|
9,620
|
|
Cash and cash equivalents
|
211,638
|
|
-
|
|
211,638
|
|
-
|
|
Financial investments
|
3,164
|
|
-
|
|
3,164
|
|
-
|
|
Trade receivables
|
471,951
|
|
-
|
|
471,951
|
|
-
|
|
Contract assets
|
147,620
|
|
-
|
|
147,620
|
|
-
|
|
Other assets
|
28,099
|
|
-
|
|
28,099
|
|
-
|
|
|
862,472
|
|
9,620
|
|
872,092
|
|
9,620
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
Suppliers and other payables
|
(21,690)
|
|
-
|
|
(21,690)
|
|
-
|
|
Loans and borrowings
|
(727,463)
|
|
-
|
|
(727,463)
|
|
-
|
|
Lease liabilities
|
(44,899)
|
|
-
|
|
(44,899)
|
|
-
|
|
Accounts payable for business acquired
|
(136,054)
|
|
-
|
|
(136,054)
|
|
-
|
|
Contract liabilities
|
(48,079)
|
|
-
|
|
(48,079)
|
|
-
|
|
Other liabilities
|
(35,097)
|
|
-
|
|
(35,097)
|
|
-
|
|
|
(1,013,282)
|
|
-
|
|
(1,013,282)
|
|
-
|
(i) FVTPL: Fair value through profit or loss.
19.2 Measurement of fair values
The Group has financial instruments measured at fair value, which are classified as defined in the note 4.a, and all of them are under the Level 2 in the fair value hierarchy.
The estimated fair value of the Group’s financial instruments considered the following methods and assumptions:
Loans and borrowings: classified as financial liabilities measured at amortized cost and are recorded at their contractual values. The contractual flow of loans and borrowings is adjusted to the future value of the liabilities considering the interest until maturity.
Leases liabilities: classified as financial liabilities measured at amortized cost and are recorded at their contractual values. The contractual flow of leases liabilities is adjusted to the future value of the liabilities considering the interest until maturity.
Accounts payable for business acquired: the account was initially recognized as fair value through profit or loss and subsequently classified as financial liabilities measured at amortized cost and are recorded at their contractual values. Some contractual flow of this obligation is adjusted to the future value of the liabilities considering the interest until maturity. For some obligations, the contractual flow is adjusted considering the present value of expected payments, discounted using a risk-adjusted discount rate (discounted cash flows).
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2024
Derivative financial instruments: The financial instruments were valued by calculating the present value using market curves that impact the specific instrument on the calculation dates. For this, future curves of CDI and SOFR, exchange coupon, and currency quotation are used. For interest rate swaps, the present value of the asset position and the liability position are both estimated by discounting cash flows at the interest rate of the currency in which the swap is denominated. The difference between the present value of the asset and the liability position of the swap generates its fair value. For exchange forward swaps, the present value of the asset position and the liability position are both estimated by discounting cash flows at the rate of currency in which the swap is denominated. The difference between the present value of the asset and the liability position of the swap generates its fair value.
19.3 Financial risk management
The Group has exposure to the following risk arising from financial instruments:
Market risk;
Credit risk; and
Liquidity risk.
a. Market risks
The Group is exposed to market risks resulting from the normal course of its activities, such as inflation, interest rates and exchange rate changes.
Thus, the Group's operating results may be affected by changes in economic policies especially regarding short and long-term interest rates, inflation targets and exchange rate policy. Exposures to market risk are measured by sensitivity analysis.
a.1 Currency risk
The Group is exposed to foreign exchange risk to the extent that there is a mismatch between the currencies in which sales, purchases, receivables, and borrowings are denominated and the respective functional currencies of the Company and its subsidiaries.
Therefore, foreign exchange risk is inherent to the Group’s business model. A significant part of the Group’s revenue is denominated in foreign currency and, consequently, is exposed to exchange rate changes. The Group’s expenses, on the other hand, are mainly denominated in the Group’s functional currency (Brazilian Reais) and, consequently, are not exposed to exchange rate changes. See below the Group’s total exposure to foreign currency:
|
|
March, 2024
|
|
December, 2023
|
|
|
US$
|
|
£
|
|
Other
currencies
|
|
US$
|
|
£
|
|
Other
currencies
|
|
Financial investments
|
-
|
|
-
|
|
-
|
|
2,695
|
|
469
|
|
-
|
|
Trade receivables
|
125,099
|
|
57,492
|
|
8,933
|
|
245,763
|
|
65,196
|
|
11,100
|
|
Restricted cash - escrow account
|
-
|
|
20,739
|
|
-
|
|
-
|
|
20,021
|
|
-
|
|
Derivatives
|
177
|
|
-
|
|
-
|
|
2,728
|
|
-
|
|
-
|
|
Suppliers and other payables
|
(5,149)
|
|
(983)
|
|
(1,319)
|
|
(3,987)
|
|
(793)
|
|
(1,700)
|
|
Loans and borrowings
|
(114,139)
|
|
-
|
|
-
|
|
(110,648)
|
|
-
|
|
-
|
|
Lease liabilities
|
(19,901)
|
|
(309)
|
|
(1,517)
|
|
(20,880)
|
|
(1,085)
|
|
(1,796)
|
|
Accounts payable for business acquired
|
(77,683)
|
|
(20,816)
|
|
-
|
|
(74,499)
|
|
(20,051)
|
|
-
|
|
Net exposure
|
(91,596)
|
|
56,123
|
|
6,097
|
|
41,172
|
|
63,757
|
|
7,604
|
Cash flow hedge for the Group's future Revenues
The Group designates hedging relationships to account for the effects of the existing hedge between a foreign exchange gain or loss from proportions of its long-term debt obligations (denominated in U.S. dollars) and foreign exchange gain or loss of its highly probable future revenues denominated in U.S. dollar, so that gains or losses associated with the hedged transaction (the highly probable future revenues denominated U.S. dollar denominated) and the hedging instrument (debt obligations) are recognized in the statement of profit or loss in the same periods.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2024
The schedule of cash flow hedge involving the Company´s future revenues as of March 31, 2024 is set below:
|
|
|
|
|
|
|
|
|
|
|
Present value of hedging instrument notional value on March 31, 2024
|
|
Hedging instrument
|
|
Hedged transaction
|
|
Nature of the risk
|
|
Maturity date
|
|
US$
|
|
R$
|
|
Foreign exchange gains and losses on proportion of non-derivative financial instruments cash flows
|
|
Foreign exchange gains and losses of highly probable future monthly revenues
|
|
Foreign Currency - Real vs U.S. Dollar
Spot Rate
|
|
|
|
|
|
|
|
Export Credit Note (NCE)
|
|
|
|
|
|
2024 to 2026
|
|
22,500
|
|
112,415
|
|
Total amounts designated as of March 31, 2024
|
|
|
|
|
|
|
|
22,500
|
|
112,415
|
Changes in the fair value of US$ foreign exchange debt obligation (non-derivative financial instruments) designated as effective cash flow hedges have their effective component recorded in equity, other comprehensive income (“OCI”) and the ineffective component recorded in statement of profit or loss, in finance income (cost). The amounts accumulated in equity are recognized in the statement of profit or loss in the periods in which the hedged item affects the result, the effects of which are appropriated to the result, in order to minimize the variations in the hedged item.
The individual hedge relationships are established on a one-to-one basis, that is, the “highly probable revenue” of each month and the proportions of cash flows from foreign exchange debt obligation made abroad, used in each relationship and individual hedge, have the same face value in US dollars.
The exposure of the Group's future revenues in hard currency to the risk of variations in the R$/US$ exchange rate (liability position) is offset by an inverse exposure equivalent to its US dollars debt (asset position) to the same type of risk.
Hedge accounting effects
The movement of exchange variation accumulated in other comprehensive income as of March 31, 2024, resulting from completed and expected revenues are set out below:
|
|
Exchange variation
|
|
Balance as of January 1, 2023
|
(15,532)
|
|
Recognized in other comprehensive income – future revenues denominated in U.S. dollar
|
6,178
|
|
Balance as of March 31, 2023
|
(9,354)
|
|
|
|
|
Balance as of December 31, 2023
|
(2,329)
|
|
Recognized in other comprehensive income – future revenues denominated in U.S. dollar
|
(3,485)
|
|
Balance as of March 31, 2024
|
(5,814)
|
As of March 31, 2024, the annual expectation of realization of the exchange rate variation balance accumulated in equity is R$ 1,393.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2024
a.2 Interest rate risk
Derives from the possibility of the Group incurring gains or losses resulting from changes in interest rates applicable to its financial assets and liabilities. The Group may also enter into derivative contracts in order to mitigate this risk.
|
|
March 31, 2024
|
|
December 31, 2023
|
|
|
CDI
|
|
SOFR
|
|
CDI
|
|
SOFR
|
|
Short-term financial investments
|
236,048
|
|
-
|
|
147,948
|
|
-
|
|
Loans and borrowings
|
(234,955)
|
|
(476,448)
|
|
(236,058)
|
|
(406,786)
|
|
Accounts payable for business acquired
|
(41,509)
|
|
-
|
|
(40,529)
|
|
-
|
|
Derivatives (interest rate swap)
|
-
|
|
114,139
|
|
-
|
|
110,648
|
|
Net exposure
|
(40,416)
|
|
(362,309)
|
|
(128,639)
|
|
(296,138)
|
a.3 Sensitivity analysis
The Company, based on information from rating agencies, estimates that in a reasonably possible scenario, the foreign exchange rate variation against the Real on March 31, 2024, will be a depreciation of 0.12% for the US dollar and appreciation of 2.77% for the British pound. The Company conducted a historical analysis of the last ten years of its exposure and impacts on the results due to currency volatility, considering an adverse scenario and a remote scenario compared to the reasonably possible scenario, and realized a variation of approximately 25% and 50%, respectively. The presentation considered these scenarios both in appreciation and depreciation, as the percentages in historical scenarios showed both types of fluctuations.
Sensitivity analysis for exchange rate risk
|
|
Net effect - Profit or loss
|
|
|
Remote scenario (depreciation)
|
|
Adverse scenario (depreciation)
|
|
Reasonably possible scenario
|
|
Adverse scenario (appreciation)
|
|
Remote scenario (appreciation)
|
|
|
-50%
|
|
-25%
|
|
US$ -0.12% / £ 2.77%
|
|
25%
|
|
50%
|
|
March 31, 2024
|
|
|
|
|
|
|
|
|
|
|
US$
|
45,798
|
|
22,900
|
|
110
|
|
(22,900)
|
|
(45,798)
|
|
£
|
(28,062)
|
|
(14,031)
|
|
1,554
|
|
14,031
|
|
28,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect - Profit or loss
|
|
|
-50%
|
|
-25%
|
|
US$ 4% / £ 2%
|
|
25%
|
|
50%
|
|
December 31, 2023
|
|
|
|
|
|
|
|
|
|
|
US$
|
(20,586)
|
|
(10,293)
|
|
823
|
|
10,293
|
|
20,586
|
|
£
|
(31,879)
|
|
(15,940)
|
|
2,550
|
|
15,940
|
|
31,879
|
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2024
Sensitivity analysis for interest rate risk
The Company, based on information from rating agencies, estimates that in a reasonably possible scenario, the interest rates could decrease by up to 124 basis points for CDI and by up to 26 basis points for SOFR on March 31, 2024. The Company conducted a historical analysis of the last 10 years of its exposure and impacts on the results due to the interest rate changes, considering an adverse scenario compared to the reasonably possible scenario, and estimated a variation by 279 basis points for CDI and by 26 basis points for SOFR. The Company also considering a remote scenario compared to the reasonably possible scenario and estimated a variation by 572 basis points for CDI. The presentation considered these scenarios both in increase and decrease, as the percentages in historical scenarios showed both types of fluctuations. The Company considers it unfeasible to contemplate the remote scenario for SOFR, given the brief adoption in the market (beginning in June 2023).
|
|
Net effect - Profit or loss
|
|
|
Remote scenario (decrease)
|
|
Adverse scenario (decrease)
|
|
Reasonably possible scenario
|
|
Adverse scenario (increase)
|
|
Remote scenario (increase)
|
|
|
CDI -572 bp
|
|
CDI -279 bp / SOFR -26 bp
|
|
CDI -124 bp / SOFR -26 bp
|
|
CDI 279 bp / SOFR 26 bp
|
|
CDI 572 bp
|
|
March 31, 2024
|
|
|
|
|
|
|
|
|
|
|
Variable-rate instruments CDI
|
2,312
|
|
1,128
|
|
501
|
|
(1,128)
|
|
(2,312)
|
|
Variable-rate instruments SOFR
|
-
|
|
1,239
|
|
1,239
|
|
(1,239)
|
|
-
|
|
Interest rate swaps SOFR
|
-
|
|
(297)
|
|
(297)
|
|
297
|
|
-
|
|
Cash flow sensitivity (net)
|
2,312
|
|
2,070
|
|
1,443
|
|
(2,070)
|
|
(2,312)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect - Profit or loss
|
|
|
CDI -565 bp
|
|
CDI -291 bp / SOFR -60 bp
|
|
CDI 154 bp / SOFR 60 bp
|
|
CDI 291 bp / SOFR 60 bp
|
|
CDI 565 bp
|
|
December 31, 2023
|
|
|
|
|
|
|
|
|
|
|
Variable-rate instruments CDI
|
7,268
|
|
3,743
|
|
(1,981)
|
|
(3,743)
|
|
(7,268)
|
|
Variable-rate instruments SOFR
|
-
|
|
2,441
|
|
(2,441)
|
|
(2,441)
|
|
-
|
|
Interest rate swaps SOFR
|
-
|
|
(664)
|
|
664
|
|
664
|
|
-
|
|
Cash flow sensitivity (net)
|
7,268
|
|
5,520
|
|
(3,758)
|
|
(5,520)
|
|
(7,268)
|
b. Credit risk
Credit risk refers to the risk that a counterparty will not comply with its contractual obligations, causing the Group to incur financial losses. Credit risk is the risk of a counterparty in a business transaction not complying with an obligation provided by a financial instrument or an agreement with a client, which would cause financial loss. To mitigate these risks, the Group analyzes the financial and equity condition of its counterparties, as well as the definition of credit limits and permanent monitoring of outstanding positions.
The Group applies the simplified standard approach to commercial financial assets, where the provision for losses is analyzed over the remaining life of the asset. For further details about the amounts related to the expected credit losses for trade receivables and contract assets, see note 6.
In addition, the Group is exposed to credit risk with respect to financial guarantees granted to banks.
The Group held cash and cash equivalents of R$ 360,296 on March 31, 2024 (R$ 211,638 as of December 31, 2023). The cash and cash equivalents are held with bank and financial institution counterparties, which are rated BB- to A-, based on Standard & Poor’s, Moodys and Fitch ratings.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2024
The carrying amount of financial assets represents the maximum credit exposure. The maximum credit risk exposure on the date of the financial statements is:
|
|
March 31, 2024
|
|
December 31, 2023
|
|
Derivatives
|
7,135
|
|
9,620
|
|
Cash and cash equivalents
|
360,296
|
|
211,638
|
|
Financial investments
|
-
|
|
3,164
|
|
Trade receivables
|
312,016
|
|
471,951
|
|
Contract assets
|
250,998
|
|
147,620
|
|
Other receivables (current and non-current)
|
30,159
|
|
28,099
|
|
|
960,604
|
|
872,092
|
As of March 31, 2024, the exposure to credit risk for trade receivables, contract assets and other receivables by geographic region was as follows:
|
|
March 31, 2024
|
|
December 31, 2023
|
|
Latin America
|
257,409
|
|
249,959
|
|
North America
|
232,462
|
|
293,195
|
|
Europe
|
92,270
|
|
91,471
|
|
Asia Pacific
|
11,032
|
|
13,045
|
|
Total
|
593,173
|
|
647,670
|
c. Liquidity risk
The Group monitors liquidity risk by managing its cash resources and financial investments.
Liquidity risk is also managed by the Group through its cash flow projection, which aims to ensure the availability of funds to meet the Group’s both operational and financial obligations.
The Group also maintains approved credit lines with financial institutions to adequate levels of liquidity in the short, medium, and long terms.
The maturities of the long-term installments of the loans are described in note 10.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2024
The following table shows the remaining contractual maturities of financial liabilities on the reporting date. The amounts are gross and undiscounted, including contractual interest payments and excluding the impact of netting agreements:
|
|
March 31, 2024
|
|
|
Carrying amount
|
|
Cash contractual cash flow
|
|
6 months or less
|
|
6-12 months
|
|
1-2 years
|
|
2-5 Years
|
|
Non-derivative financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Suppliers and other payables
|
20,196
|
|
20,196
|
|
20,196
|
|
-
|
|
-
|
|
-
|
|
Loans and borrowings
|
793,949
|
|
970,665
|
|
99,213
|
|
88,846
|
|
242,825
|
|
539,781
|
|
Lease liabilities
|
41,103
|
|
45,407
|
|
10,954
|
|
7,783
|
|
13,469
|
|
13,201
|
|
Accounts payable for business acquired
|
140,982
|
|
149,409
|
|
12,055
|
|
99,602
|
|
15,473
|
|
22,279
|
|
Contract liabilities
|
29,632
|
|
29,632
|
|
29,632
|
|
-
|
|
-
|
|
-
|
|
Other liabilities (current and non-current)
|
29,911
|
|
29,911
|
|
8,874
|
|
6,970
|
|
1,740
|
|
12,327
|
|
|
1,055,773
|
|
1,245,220
|
|
180,924
|
|
203,201
|
|
273,507
|
|
587,588
|
|
|
December 31, 2023
|
|
|
Carrying amount
|
|
Cash contractual cash flow
|
|
6 months or less
|
|
6-12 months
|
|
1-2 years
|
|
2-5 Years
|
|
Non-derivative financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Suppliers and other payables
|
21,690
|
|
21,690
|
|
21,690
|
|
-
|
|
-
|
|
-
|
|
Loans and borrowings
|
727,463
|
|
911,313
|
|
57,697
|
|
113,549
|
|
453,672
|
|
286,395
|
|
Lease liabilities
|
44,899
|
|
50,749
|
|
13,047
|
|
8,907
|
|
13,361
|
|
15,434
|
|
Accounts payable for business acquired
|
136,054
|
|
148,335
|
|
3,866
|
|
86,013
|
|
35,108
|
|
23,348
|
|
Contract liabilities
|
48,079
|
|
48,079
|
|
48,079
|
|
-
|
|
-
|
|
-
|
|
Other liabilities (current and non-current)
|
35,097
|
|
35,097
|
|
35,097
|
|
-
|
|
-
|
|
-
|
|
|
1,013,282
|
|
1,215,263
|
|
179,476
|
|
208,469
|
|
502,141
|
|
325,177
|
19.4 Derivative financial instruments
The Group may hold derivative financial instruments to hedge its foreign currency and interest rate risk exposures.
The interest rate profile of the Group’s interest-bearing financial instruments, as reported to the Group’s management, is as follows:
|
|
|
March 31, 2024
|
|
Maturity
|
|
Notional (US$)
|
|
Notional in R$
|
|
Floating rate receivable
|
|
Fixed rate payable
|
|
Fair value
|
|
07/16/2026
|
|
22,500
|
|
108,929
|
|
SOFR Overnight
|
|
3.09%
|
|
6,958
|
|
07/07/2026
|
|
-
|
|
78,571
|
|
CDI
|
|
Foreign Exchange + 4.90%
|
|
177
|
|
|
|
|
|
|
|
|
|
|
7,135 |
|
|
|
December 31, 2023
|
|
Maturity
|
|
Notional (US$)
|
|
Notional in R$
|
|
Floating rate receivable
|
|
Fixed rate payable
|
|
Fair value
|
|
07/16/2026
|
|
22,500
|
|
108,929
|
|
SOFR Overnight
|
|
3.09%
|
|
6,892
|
|
07/07/2026
|
|
-
|
|
78,571
|
|
CDI
|
|
Foreign Exchange + 4.90%
|
|
2,728
|
|
|
|
|
|
|
|
|
|
|
9,620 |