CI&T Reports Solid Results in 2Q23

CI&T (NYSE:CINT, "Company"))), a global digital specialist, today announces its results for the second quarter of 2023 (2Q23) and the six months ended on June 30, 2023 (6M23) in accordance with International Financial Reporting Standards (IFRS). For comparison purposes, we refer to the results for the second quarter of 2022 (2Q22) and six months ended on June 30, 2022 (6M22).

Second Quarter of 2023 (2Q23) Operating and Financial Highlights

• Net Revenue was R$571.8 million, an increase of 8.9% compared to 2Q22 or a 9.2% growth at constant currency.
• The number of clients with annual revenue above R$1 million in the last twelve months grew from 127 in 2Q22 to 183 in 2Q23.
• Net Profit was R$47.8 million compared to R$26.0 million in 2Q22, a 84.0% increase year over year.
• Adjusted EBITDA reached R$114.2 million, an increase of 13.8% over 2Q22, equivalent to an Adjusted EBITDA margin of 20.0%.
• Adjusted Net Profit was R$63.1 million, 20.8% higher than 2Q22, with an Adjusted Net Profit margin of 11.0%.

Six months ended June 30, 2023 (6M23) Operating and Financial Highlights

• Net Revenue was R$1,181.8 million, an increase of 16.2% compared to 6M22 or a 16.4% growth at constant currency.
• Net Profit was R$100.2 million compared to R$55.2 million in 6M22, an 81.5% increase year over year.
• Adjusted EBITDA reached R$230.7 million, a 24.8% growth year-over-year, equivalent to an Adjusted EBITDA margin of 19.5%.
• Adjusted Net Profit was R$130.3 million, 42.0% higher than 6M22, with an Adjusted Net Profit margin of 11.0%.
• Cash generated from operating activities was R$117.6 million in 6M23, compared to a cash consumption of R$87.1 million in 6M22.

Cesar Gon, founder and CEO of CI&T, commented, "CI&T has been fortunate to participate in the first chapter of the digital revolution, as the creators of the LEAN DIGITAL book of knowledge for digital transformation. Now, I feel blessed to guide CI&T in co-authoring the next chapter of this revolution: a digital world powered by Artificial Intelligence.

The challenge with these revolutionary moments is that they tend to thrive in the fertile environment of startups and digital natives, but it takes years to make a relevant impact in the brownfield setting of large enterprises. These advancements need time to become enterprise-ready. They must reach a level of maturity to be translated into customer value within a framework of reliability, security, and privacy.

So, this is our ambition, and this is CI&T's vision: to make Hyper Digital enterprise-ready. Early results are promising, and we are enthusiastic about the potential to significantly enhance productivity, improve quality, and accelerate progress. The realm of artificial intelligence presents a new array of exciting opportunities."

Comments on the 2Q23 financial performance

The net revenue was R$571.8 million in 2Q23, an increase of 8.9% compared to 2Q22, or a 9.2% net revenue growth at constant currency. The geographic revenue distribution for the second quarter of 2023 was 45% from North America, 40% from Latam, 10% from Europe and 5% from Asia Pacific. Regarding industry verticals, financial services and consumer goods remain our most relevant markets, while technology and telecommunications have grown and gained relevance in our portfolio of clients.

The cost of services provided in 2Q23 was R$374.2 million, a 9.6% increase compared to 2Q22, and the gross profit was R$197.6 million. The Adjusted Gross Profit in 2Q23 was R$211.4 million, 9.3% higher compared to 2Q22, and the Adjusted Gross Profit margin was 37.0%, an increase of 0.2 percentage points over 2Q22.

In 2Q23, selling, general and administrative (SG&A), and other operating expenses were R$120.0 million, 1.6% lower than in 2Q22, mainly attributed to non-recurring M&A expenses in 2022. Depreciation and amortization expenses totaled R$23.1 million in 2Q23, a decrease of 4.7%, explained by the reduction of real estate property leases. Amortization of intangible assets from acquired companies was R$11.3 million in 2Q23, fairly stable year over year.

In 2Q23, the Adjusted EBITDA was R$114.2 million, 13.8% higher than in 2Q22. Adjusted EBITDA margin was 20% in the quarter, an increase of 0.9 percentage point compared to 2Q22, mainly due to lower SG&A expenses as a percentage of revenue.

In 2Q23, net financial expenses were R$18.5 million, 5.4% higher than in 2Q22, mainly driven by higher debt position and interest rates, combined with a negative foreign exchange (FX) variation in the comparable period. In 2Q23, the reported net FX loss was R$6.2 million, while in 2Q22, it was a net FX gain of R$ 13.3 million.

In 2Q23, income tax expense was R$11.3 million, a reduction of 37.3% compared to 2Q22, mainly due to the amortization of goodwill for tax purposes. The income tax paid (cash effect) was R$11.9 million, equivalent to a cash tax rate of 20.1%.

The net profit was R$47.8 million in 2Q23, 84% higher than in 2Q22. Adjusted Net Profit was R$63.1 million, an increase of 20.8% compared to 2Q22. The Adjusted Net Profit margin increased by 1.0 percentage points, from 10.0% in 2Q22 to 11.0% in 2Q23, mainly as a result of the dilution of SG&A expenses and lower income tax expense.

Business Outlook

We expect our net revenue in the third quarter of 2023 to be at least R$545 million at constant currency (R$525 million on a reported basis), a 2% decline compared to 3Q22.

For the full year of 2023, we are updating our business outlook. We expect our net revenue growth to be in the range of 4.0% to 8.0% 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 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. Such program is active and management expects to continue executing the share repurchase.

Conference Call Information

Cesar Gon, Bruno Guicardi, Stanley Rodrigues, and Eduardo Galvão will host a video conference call to discuss the 2Q23 financial and operating results on August 18, 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/E1yCVDunv6w?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 6,200 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.

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