CI&T Reports 3Q23 Results

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

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

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

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

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

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

Comments on the 3Q23 financial performance

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

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

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

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

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

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

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

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

Business Outlook

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

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

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

Share Repurchase Program

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

Conference Call Information

Cesar Gon, Bruno Guicardi, Stanley Rodrigues, and Eduardo Galvão will host a video conference call to discuss the 3Q23 financial and operating results on November 17, at 8:00 a.m. Eastern Time / 10:00 a.m. BRT. The earnings call can be accessed at the Company's Investor Relations website at https://investors.ciandt.com or at the following link: https://www.youtube.com/watch?v=yEW4TBCbR1Q.

About CI&T

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

Basis of accounting and functional currency

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

Non-IFRS Financial Measures

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

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

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

In calculating Adjusted Gross Profit, we exclude cost components unrelated to the direct management of our services. For the periods herein, the adjustments applied were: (i) depreciation and amortization related to costs of services provided; and (ii) stock-based compensation expenses.

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

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

Cautionary Statement on Forward-Looking Statements

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

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