6-K
CI&T Inc (CINT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
| Form 6-K |
|---|
Report Of Foreign Private Issuer
Pursuant To Rule 13a-16 Or 15d-16 Of
The Securities Exchange Act Of 1934
For the month of November 2022
Commission File Number: 001-41035
CI&T Inc
(Exact Name of Registrant as Specified in its Charter)
N/A
(Translation of registrant’s name into English)
R. Dr. Ricardo Benetton Martins, 1,000
Pólis de Tecnologia-Prédio 23B,
Campinas-State of São Paulo
13086-902 - Brazil
+55 19 21024500
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F ____X____ Form 40-F ________
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Yes ________ No ____X____
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Yes ________ No ____X____
Table of Contents
CI&T Inc
TABLE OF CONTENTS
| ITEM |
|---|
| 1. 3Q22 Earnings Release |
| 2. Unaudited condensed consolidated interim financial information for the three and nine- month periods ended September 30, 2022 and 2021. |
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Table of Contents
CI&T Reports Solid Third Quarter 2022 Financial and Operational Results
New York - November 17, 2022 /Business Wire/ - CI&T (NYSE: CINT, “Company”), a global digital specialist, today announces its results for the third quarter of 2022 (3Q22) and the nine months ended on September 30, 2022 (9M22) in accordance with International Financial Reporting Standards (IFRS). For comparison purposes, we refer to the results for the third quarter of 2021 (3Q21) and for the nine months ended on September 30, 2021 (9M21).
Third Quarter (3Q22) Operating and Financial Highlights
● Net Revenue was R$559.0 million, an increase of 48.7% compared to 3Q21 or a 51.3% growth at constant currency.
● The number of clients with annual revenue above R$1 million in the last twelve months grew from 76 in 3Q21 to 147 in 3Q22.
● Net Profit was R$40.6 million compared to a net loss of R$2.2 million in 3Q21.
● Adjusted EBITDA was R$107.3 million, a 34.1% growth year-over-year, equivalent to an Adjusted EBITDA margin of 19.2%.
● Adjusted Net Profit was R$69.5 million, 156.7% higher than 3Q21. Adjusted net profit margin was 12.4%.
● CI&T ended 3Q22 with 6,887 CI&Ters, a net addition of 1,489 employees (27.6% growth) compared to the end of 3Q21.
Nine months ended September 30, 2022 (9M22) Operating and Financial Highlights
● Net Revenue was R$1,575.9 million, an increase of 59.6% compared to 9M21, or a 65.5% growth at a constant currency.
● Net Profit was R$95.8 million, an increase of 16.7% in relation to 9M21.
● Adjusted EBITDA was R$293.8 million, 32.2% higher than 9M21, with an Adjusted EBITDA margin of 18.6%.
● Adjusted Net Profit was R$162.9 million, an increase of 45.6% compared to 9M21.
Cesar Gon, founder and CEO of CI&T, commented, "As we complete one year of our debut in the capital markets, I am excited to share another set of high growth with sound profitability results. With the cash proceeds of the IPO, we have expanded our operations globally through acquisitions, opening new markets and verticals, and extending our global talent base. With these moves, we amplified our footprint for robust organic growth in our four operating regions: North America, Latin America, Europe, and Asia Pacific."
"A nontrivial macro environment marked these twelve months. Nevertheless Digital transformation is a secular trend and remains a priority in the corporate world. And CI&T positioning and value proposition focused on speed and digital efficiency resonates extremely well with large and innovative companies.
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Comments on the 3Q22 financial performance
In 3Q22, the net revenue was R$559.0 million, an increase of 48.7% compared to 3Q21, or a 51.3% net revenue growth at constant currency. The acquisitions of Somo, Box 1824, and Transpire concluded in 2022 contributed to 14 percentage points of revenue growth in the quarter compared to 3Q21.
We added 20 new clients to our portfolio in 3Q22 (with annual revenue above R$1.0 million in the last twelve months), increasing our client base from 127 in 2Q22 to 147 in 3Q22. We maintained a solid year-over-year growth across all regions and all industry verticals we operate.
The cost of services provided in 3Q22 reached R$363.6 million, an increase of 47.3% compared to 3Q21, and the gross profit was R$195.4 million. Excluding costs with depreciation and amortization and stock-based compensation, the adjusted gross profit in 3Q22 was R$206.5 million, 47.9% higher than in 3Q21. The adjusted gross profit margin was 36.9%, a slight decrease compared to 37.1% in 3Q21, mainly due to lower margins from recently acquired companies.
In 3Q22, selling, general and administrative (SG&A), and other operating expenses were R$130.8 million, an increase of 45.3% compared to 3Q21, mainly due to (i) acquisition-related expenses, including bonus retention, consulting expenses, and amortization of intangible assets from acquired companies; and (ii) the strengthening of our back-office teams in connection with our IPO.
In 3Q22, the Adjusted EBITDA was R$107.4 million, an increase of 34.1% compared to 3Q21. Adjusted EBITDA margin was 19.2% in the quarter, a reduction of 2.1 percentage points compared to 3Q21, mainly due to the increase in SG&A expenses. Sequentially, the Adjusted EBITDA margin improved to 19.2% in 3Q22 from 19.1% in 2Q22 and 17.5% in 1Q22, as a result of gradual price readjustments on our contracts, a seasonal effect.
In 3Q22, net financial expenses were R$7.4 million, a decrease of 66.8% compared to 3Q21, as a result of positive foreign exchange variations in 3Q22, partially compensated by higher interest rates on loans.
In 3Q22, depreciation and amortization expenses totaled R$23.6 million, an increase of 67.3% or R$9.5 million compared to 3Q21, due to the amortization of R$10.3 million from intangible assets from acquired companies.
In 3Q22, income tax expense was R$16.5 million, a reduction of 12.3% compared to 3Q21. In the 9M22, income tax expense was R$49.8 million, a reduction of 13.3% year over year, while the income tax paid (cash effect) was R$33.5 million in the period, equivalent to a cash tax rate of 23%.
In 3Q22, the net profit was R$40.6 million, compared to a net loss of R$2.2 million in 3Q21. Adjusted net profit was R$69.5 million, 156.7% higher than 3Q21, equivalent to an adjusted net profit margin of 12.4%. The increase in the adjusted net profit margin was mainly due to a reduction in financial expenses, income tax expenses, and depreciation of property, plant, and equipment.
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Business Outlook
We expect our net revenue in the fourth quarter of 2022 to be at least R$605 million compared to a net revenue of R$457 million in the fourth quarter of 2021, a 41% growth at constant currency or a 32% growth on a reported basis, which includes a negative foreign currency translation impact of approximately nine percentage points.
For the full year of 2022, we are increasing our outlook and expect a net revenue growth at constant currency of at least 58% year-over-year and net revenue growth on a reported basis of at least 51%, which includes a negative foreign currency translation impact of approximately seven percentage points.
In addition, we estimate our adjusted EBITDA margin to be at least 19% for the full year of 2022, assuming an average exchange rate of 5.10 Brazilian Reais to the U.S. dollar for the full year.
These expectations are forward-looking statements and actual results may differ materially. See "Cautionary Statement on Forward-Looking Statements" below.
Conference Call Information Cesar Gon, Bruno Guicardi, Stanley Rodrigues, and Eduardo Galvão will host a video conference call to discuss the 3Q22 and 9M22 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=qeVVSmOaVAg.
About CI&T
CI&T (NYSE:CINT) is a global digital specialist, a partner in digital transformation for 100+ large enterprises and fast growth clients. As digital natives, CI&T brings a 27-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 6,800 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”).
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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, 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. Reported Net Revenue in 2021 considers the FX rate at the end of each month, while Net Revenue at Constant Currency considers the average FX rate for the period.
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) consulting expenses related to the initial public offering and corporate reorganization; (iii) government grants related to tax reimbursement in the Chinese subsidiary; (iv) non-cash expenses related to the write-off due to the inventory of property, plant, and equipment, tax write-off, and the impairment related to the discontinuation of certain investments made by Dextra on intangible assets related to digital platforms; and (v) acquisition-related expenses, including fair value adjustment on accounts payable for business combination, consulting expenses and retention bonuses.
In calculating Adjusted Net Profit, we exclude cost components unrelated to the direct management of our services. For the periods herein, the adjustments applied were: (i) consulting expenses related to the initial public offering and corporate reorganization, (ii) non-cash expenses related to the write-off due to the inventory of property, plant, and equipment, tax write-off, and the impairment related to the discontinuation of certain investments made by Dextra on intangible assets related to digital platforms; and (iii) acquisition-related expenses, including amortization of intangible assets from acquired companies, fair value adjustment on account payables for business combination, consulting expenses and retention bonuses.
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Cautionary Statement on Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, which include but are not limited to: the statements under "Business outlook," including expectations relating to revenues and other financial or business metrics; statements regarding relationships with clients; and any other statements of expectation or belief. The words “believe,” “will,” “may,” “may have,” “would,” “estimate,” “continues,” “anticipates,” “intends,” “plans,” “expects,” “budget,” "scheduled,” “forecasts” and similar words are intended to identify estimates and forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements represent our management's beliefs and assumptions only as of the date of this press release. You should read this press release with the understanding that our actual future results may be materially different from what we expect. These statements are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from results expressed or implied in this press release. Such risk factors include, but are not limited to, those related to: the current and future impact of the COVID-19 pandemic, the ongoing war in Ukraine and economic sanctions imposed by Western economies over Russia on our business and industry; the effects of competition on our business; uncertainty regarding the demand for and market utilization of our services; the ability to maintain or acquire new client relationships; general business and economic conditions; our ability to successfully integrate Dextra, Somo, Box 1824, Transpire and Ntersol; 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.
Contacts:
Investor Relations Contact:
Eduardo Galvão
investors@ciandt.com
Media Relations Contact:
Zella Panossian
ciandt@illumepr
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Unaudited condensed consolidated statement of profit or loss
(In thousands of Brazilian Reais)
| Quarter ended September 30, | Nine months ended September 30, | |||
|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |
| Net Revenue | 559,018 | 375,970 | 1,575,905 | 987,586 |
| Costs of services provided | (363,617) | (246,846) | (1,034,111) | (640,986) |
| Gross Profit | 195,401 | 129,124 | 541,794 | 346,600 |
| Selling expenses | (43,337) | (24,122) | (118,428) | (61,902) |
| General and administrative expenses | (84,804) | (38,966) | (228,115) | (93,056) |
| Research and technological innovation expenses | - | - | - | (4) |
| Impairment loss on trade receivables and contract assets | 325 | (1,662) | (385) | (2,030) |
| Other income (expenses) net | (3,008) | (25,309) | (7,492) | (23,862) |
| Operating profit before financial income and tax | 64,577 | 39,065 | 187,374 | 165,746 |
| Finance income | 32,750 | 17,591 | 155,638 | 43,421 |
| Finance cost | (40,182) | (40,007) | (197,315) | (69,523) |
| Net finance costs | (7,432) | (22,416) | (41,677) | (26,102) |
| Profit before Income tax | 57,145 | 16,649 | 145,697 | 139,644 |
| Income tax expense | ||||
| Current | (22,273) | (28,809) | (44,796) | (63,367) |
| Deferred | 5,736 | 9,952 | (5,071) | 5,852 |
| Net profit for the period | 40,608 | (2,208) | 95,830 | 82,129 |
| Earnings per share | ||||
| Earnings per share – basic (in R$) | 0.30 | (0.02) | 0.72 | 0.68 |
| Earnings per share – diluted (in R$) | 0.30 | (0.02) | 0.72 | 0.67 |
| Weighted average number of basic shares held by shareholders | 133,332,778 | 119,960,451 | 133,006,973 | 119,960,422 |
| Weighted average number of diluted shares held by shareholder | 133,332,778 | 119,960,451 | 133,006,973 | 122,895,435 |
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Table of Contents
Unaudited condensed consolidated statements of financial position
(In thousands of Brazilian Reais)
| Assets | September 30, 2022 | December 31, 2021 | Liabilities and equity | September 30, 2022 | December 31, 2021 |
|---|---|---|---|---|---|
| Cash and cash equivalents | 151,850 | 135,727 | Suppliers and other payables | 26,512 | 33,566 |
| Financial Investments | 181,857 | 798,786 | Loans and borrowings | 252,629 | 164,403 |
| Trade receivables | 462,793 | 340,519 | Lease liabilities | 29,199 | 21,214 |
| Contract assets | 229,165 | 134,388 | Salaries and welfare charges | 256,028 | 234,173 |
| Recoverable taxes | 6,667 | 7,785 | Accounts payable for business combination | 63,947 | 48,923 |
| Tax assets | 1,089 | 2,810 | Loss adjustments on hedge accounting | 50,315 | - |
| Gain adjustments on hedge accounting | 13,028 | - | Derivatives | 6,095 | 535 |
| Derivatives | 11,775 | 896 | Tax liabilities | 3,379 | 13,345 |
| Other assets | 33,173 | 29,994 | Other taxes payable | 14,173 | 5,423 |
| Total current assets | 1,091,397 | 1,450,905 | Contract liability | 11,760 | 13,722 |
| Other liabilities | 34,133 | 13,669 | |||
| Recoverable taxes | 3,591 | 3,046 | Total current liabilities | 748,170 | 548,973 |
| Deferred tax assets | 34,285 | 31,989 | |||
| Judicial deposits | 9,468 | 3,079 | Loans and borrowings | 453,729 | 624,306 |
| Restricted cash - Escrow account and indemnity asset | 32,877 | - | Lease liabilities | 50,722 | 60,674 |
| Other assets | 3,925 | 2,974 | Provisions | 14,587 | 633 |
| Property, plant and equipment | 60,376 | 57,721 | Accounts payable for business combination | 55,279 | 36,803 |
| Intangible assets and goodwill | 1,123,626 | 738,803 | Other liabilities | 2,020 | 1,660 |
| Right-of-use assets | 70,366 | 73,827 | Total non-current liabilities | 576,337 | 724,076 |
| Total non-current assets | 1,338,514 | 911,439 | |||
| Equity | |||||
| Share capital | 37 | 36 | |||
| Share premium | 946,173 | 915,947 | |||
| Capital reserves | 26,045 | 10,105 | |||
| Profit reserves | 221,787 | 125,957 | |||
| Other comprehensive income | (88,638) | 37,250 | |||
| Total equity | 1,105,404 | 1,089,295 | |||
| Total assets | 2,429,911 | 2,362,344 | Total equity and liabilities | 2,429,911 | 2,362,344 |
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Unaudited condensed consolidated statement of cash flow
(In thousands of Brazilian Reais)
| September 30, 2022 | September 30, 2021 | |
|---|---|---|
| Net profit for the period | 95,830 | 82,129 |
| Adjustments for: | ||
| Depreciation and amortization | 67,154 | 30,102 |
| Loss on the sale of property, plant and equipment and intangible assets | 2,137 | 338 |
| Interest, monetary variation and exchange rate changes | 29,562 | 25,998 |
| Exchange rate changes and monetary adjustments on accounts payable for business combinations | (7,601) | - |
| Exchange variation on escrow account related to Somo acquisition | 3,798 | - |
| Interest on lease | 6,306 | 4,409 |
| Unrealized loss (gain) on financial instruments | (5,709) | 3,898 |
| Income tax expenses | 49,867 | 57,515 |
| Impairment losses on trade receivables | 203 | 1,112 |
| Impairment losses on contract assets | 182 | 918 |
| Provision for labor and tax risks | 386 | 346 |
| Impairment of intangible assets | - | 21,818 |
| Share-based plan | 1,894 | 694 |
| Income on financial investments | (1,628) | - |
| Fair value adjustment - accounts payable for business combination | 5,243 | - |
| Price adjustment - accounts payable for business combination | 1,997 | - |
| Others | (1,824) | 52 |
| Variation in operating assets and liabilities | ||
| Trade receivables | (107,311) | (87,669) |
| Contract assets | (85,091) | (67,530) |
| Recoverable taxes | (2,297) | (13,260) |
| Tax assets | 930 | (2) |
| Judicial deposits | (6,389) | 7 |
| Suppliers and other payables | (34,281) | 4,075 |
| Salaries and welfare charges | 7,448 | 43,788 |
| Tax liabilities | 1,568 | (3,797) |
| Other taxes payable | 4,509 | 1,448 |
| Contract liabilities | (4,893) | (9,036) |
| Payment of share-based indemnity | - | (628) |
| Other receivables and payables, net | 6,714 | (6,538) |
| Cash (used in)/ generated from operating activities | 28,704 | 90,187 |
| Income tax paid | (33,467) | (44,468) |
| Interest paid on loans and borrowings | (51,152) | (2,296) |
| Interest paid on lease | (4,796) | (3,972) |
| Net cash used in operating activities | (60,711) | 39,451 |
| Cash flows from investment activities: | ||
| Acquisition of property, plant and equipment and intangible assets | (20,163) | (22,112) |
| Acquisition of subsidiary net of cash acquired – Dextra | - | (641,784) |
| Acquisition of subsidiary net of cash acquired - Somo | (247,764) | - |
| Acquisition of subsidiary net of cash acquired - Box 1824 | (19,040) | - |
| Acquisition of subsidiary net of cash acquired - Transpire | (54,995) | - |
| Escrow deposit (acquisition of Somo) | (23,061) | - |
| Hedge accounting realization | 20,981 | - |
| Redemption of financial investments | 582,367 | - |
| Payment of investment obligations - Dextra | (62,338) | - |
| Net cash from / used in investment activities | 175,987 | (663,896) |
| Cash flow from financing activities: | ||
| Share-based plan contributions | - | 989 |
| Dividends paid | - | (71,039) |
| Exercised stock options | 10,339 | - |
| Interest on equity, paid | - | (713) |
| Payment of lease liabilities | (19,828) | (12,407) |
| Proceeds from loans and borrowings | 186,239 | 740,596 |
| Settlement of derivatives | 390 | - |
| Payment of loans and borrowings | (279,940) | (71,702) |
| Net cash from financing activities | (102,800) | 585,724 |
| Net decrease in cash and cash equivalents | 12,476 | (38,721) |
| Cash and cash equivalents as of January 1st | 135,727 | 162,827 |
| Exchange variation effect on cash and cash equivalents | 3,647 | (2,937) |
| Cash reduction due to spin-off effect | - | (7,752) |
| Cash and cash equivalents as of September | 151,850 | 113,417 |
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Reconciliation of Non-IFRS financial measures to comparable IFRS financial measures
(Unaudited)
Reconciliation of revenue growth as reported on a IFRS basis to revenue growth on a constant currency basis:
| Net Revenue<br><br><br>(in BRL thousand) | 3Q22 | 3Q21 | Var.<br><br><br>3Q22 x 3Q21 | 9M22 | 9M21 | Var.<br><br><br>9M22 x 9M21 |
|---|---|---|---|---|---|---|
| Net Revenue | 559,018 | 375,970 | 48.7% | 1,575,905 | 987,586 | 59.6% |
| Net Revenue at Constant Currency | 568,759 | 375,812 | 51.3% | 1,634,761 | 987,953 | 65.5% |
Revenue Breakdown
| Net Revenue by industry<br><br><br>(in BRL thousand) | 3Q22 | 3Q21 | Var.<br><br><br>3Q22 x 3Q21 | 9M22 | 9M21 | Var.<br><br><br>9M22 x 9M21 |
|---|---|---|---|---|---|---|
| Financial Services | 161,185 | 134,984 | 19.4% | 476,250 | 345,073 | 38.0% |
| Food and Beverages | 114,835 | 78,258 | 46.7% | 316,891 | 250,426 | 26.5% |
| Technology, Media and Telecom | 77,710 | 45,515 | 70.7% | 215,153 | 108,006 | 99.2% |
| Pharmaceuticals and Cosmetics | 74,847 | 51,503 | 45.3% | 208,837 | 139,107 | 50.1% |
| Retail and Manufacturing | 32,753 | 20,930 | 56.5% | 99,807 | 55,140 | 81.0% |
| Education and Services | 18,855 | 16,458 | 14.6% | 55,508 | 40,096 | 38.4% |
| Logistic and Transportation | 20,229 | 10,713 | 88.8% | 54,861 | 20,868 | 162.9% |
| Others | 58,604 | 17,609 | 232.8% | 148,598 | 28,870 | 414.7% |
| Total | 559,018 | 375,970 | 48.7% | 1,575,905 | 987,586 | 59.6% |
| Net Revenue by geography<br><br><br>(in BRL thousand) | 3Q22 | 3Q21 | Var.<br><br><br>3Q22 x 3Q21 | 9M22 | 9M21 | Var.<br><br><br>9M22 x 9M21 |
| --- | --- | --- | --- | --- | --- | --- |
| NAE (North America and Europe) | 289,758 | 170,883 | 69.6% | 798,751 | 487,811 | 63.7% |
| North America | 232,697 | 165,015 | 41.0% | 655,941 | 470,563 | 39.4% |
| Europe | 57,061 | 5,868 | 872.4% | 142,810 | 17,248 | 728.0% |
| LATAM (Latin America) | 247,200 | 192,200 | 28.6% | 724,480 | 465,900 | 55.5% |
| APJ (Asia, Pacific and Japan) | 22,060 | 12,887 | 71.2% | 52,674 | 33,875 | 55.5% |
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| Reconciliation of various income statement amounts from IFRS to non-IFRS for the three and nine months ended September 30, 2022 and 2021: | ||||||
|---|---|---|---|---|---|---|
| Gross Profit<br><br><br>(in BRL thousand) | 3Q22 | 3Q21 | Var.<br><br><br>3Q22 x 3Q21 | 9M22 | 9M21 | Var.<br><br><br>9M22 x 9M21 |
| --- | --- | --- | --- | --- | --- | --- |
| Net Revenue | 559,018 | 375,970 | 48.7% | 1,575,905 | 987,586 | 59.6% |
| Cost of Services | (363,617) | (246,846) | 47.3% | (1,034,111) | (640,986) | 61.3% |
| Gross Profit | 195,401 | 129,124 | 51.3% | 541,794 | 346,600 | 56.3% |
| Adjustments | ||||||
| Depreciation and amortization (cost of services provided) | 10,688 | 10,345 | 3.3% | 30,302 | 23,121 | 31.1% |
| Stock-based compensation | 369 | 116 | 219.0% | 1,190 | 348 | 241.7% |
| Adjusted Gross Profit | 206,458 | 139,584 | 47.9% | 573,285 | 370,069 | 54.9% |
| Adjusted Gross Profit Margin | 36.9% | 37.1% | -0.2p.p | 36.4% | 37.5% | -1.1p.p |
| SG&A and other expenses<br><br><br>(in BRL thousand) | 3Q22 | 3Q21 | Var.<br><br><br>3Q22 x 3Q21 | 9M22 | 9M21 | Var.<br><br><br>9M22 x 9M21 |
| --- | --- | --- | --- | --- | --- | --- |
| Selling | (43,337) | (24,122) | 79.7% | (118,428) | (61,902) | 91.3% |
| General and administrative | (84,804) | (38,966) | 117.6% | (228,115) | (93,056) | 145.1% |
| SG&A expenses | (128,141) | (63,088) | 103.1% | (346,543) | (154,958) | 123.6% |
| Other income (expenses) net ^(1)^ | (3,008) | (25,309) | -88.1% | (7,492) | (23,866) | -68.6% |
| Impairment loss on trade receivables and contract assets | 325 | (1,662) | - | (385) | (2,030) | -81.0% |
| SG&A and other operating expenses | (130,824) | (90,059) | 45.3% | (354,420) | (180,854) | 96.0% |
(1) Include research and technological innovation expenses
| Adjusted EBITDA<br><br><br>(in BRL thousand) | 3Q22 | 3Q21 | Var.<br><br><br>3Q22 x 3Q21 | 9M22 | 9M21 | Var.<br><br><br>9M22 x 9M21 |
|---|---|---|---|---|---|---|
| Net profit for the period | 40,608 | (2,208) | - | 95,830 | 82,129 | 16.7% |
| Adjustments | ||||||
| Net financial cost | 7,432 | 22,416 | -66.8% | 41,677 | 26,102 | 59.7% |
| Income tax expense | 16,537 | 18,857 | -12.3% | 49,867 | 57,515 | -13.3% |
| Depreciation and amortization | 23,558 | 14,083 | 67.3% | 67,154 | 30,102 | 123.1% |
| Stock-based compensation | 761 | 193 | 294.6% | 1,894 | 693 | 173.5% |
| Consulting expenses ^(1)^ | - | 3,080 | -100.0% | - | 3,080 | -100.0% |
| Government grants | (204) | (4) | n.m | (378) | (1,418) | -73.4% |
| Write-off and Impairment ^(2)^ | 2,156 | 21,818 | -90.1% | 3,703 | 21,818 | -83.0% |
| Acquisition-related expenses ^(3)^ | 16,497 | 1,815 | 809.0% | 34,051 | 2,277 | n.m |
| Adjusted EBITDA | 107,343 | 80,049 | 34.1% | 293,799 | 222,297 | 32.2% |
| Adjusted EBITDA Margin | 19.2% | 21.3% | -2.1p.p | 18.6% | 22.5% | -3.9p.p |
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Table of Contents
| (1) | IPO-related expenses, including consulting and corporate reorganization expenses. | |||||
|---|---|---|---|---|---|---|
| (2) | Non-cash expenses related to the write-off due to the inventory of plant and equipment in the amount of (R$1,548) in 9M21, tax write-off of (R$2,156) in 3Q22, and impairment of intangible assets of Dextra, acquired in August 2021 in the amount of (R$21,818) in 3Q21. | |||||
| (3) | Include fair value adjustment on accounts payable for business combination, consulting expenses and retention bonuses. | |||||
| Net Profit<br><br><br>(in BRL thousand) | 3Q22 | 3Q21 | Var.<br><br><br>3Q22 x 3Q21 | 9M22 | 9M21 | Var.<br><br><br>9M22 x 9M21 |
| --- | --- | --- | --- | --- | --- | --- |
| Net profit for the period | 40,608 | (2,208) | - | 95,830 | 82,129 | 16.7% |
| Adjustments | ||||||
| Consulting expenses | - | 3,080 | -100.0% | - | 3,080 | -100.0% |
| Write-off and Impairment ^(1)^ | 2,156 | 21,818 | -90.1% | 3,703 | 21,818 | -83.0% |
| Acquisition-related expenses^(2)^ | 26,743 | 4,389 | 509.3% | 63,321 | 4,852 | n.m |
| Adjusted Net Profit ^(3)^ | 69,507 | 27,079 | 156.7% | 162,854 | 111,878 | 45.6% |
| Adjusted Net Profit Margin | 12.4% | 7.2% | 5.2p.p | 10.3% | 11.3% | -1p.p |
| (1) | Non-cash expenses related to the write-off due to the inventory of plant and equipment in the amount of (R$1,548) in the 9M21, tax write-off of (R$2,156) in the 3Q22 and 9M22, and impairment of intangible assets of Dextra, acquired in August 2021 in the amount of (R$21,818) in the 3Q21 and 9M211. | |||||
| --- | --- | |||||
| (2) | Include amortization of intangible assets from acquired companies, fair value adjustment on accounts payable for business combination, consulting expenses and retention bonuses. | |||||
| (3) | Adjustments' amounts are gross of tax. Tax effects on non-IFRS adjustments totaled (R$1,943) in 3Q22, (R$1,413) in 3Q21, (R$2,605) in 9M22, and (R$1,570) in 9M21. | |||||
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CI&T
Inc.
Unaudited condensed consolidated
interim financial statements
September 30, 2022
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| Content | |
|---|---|
| Unaudited condensed consolidated statements of financial position | # |
| Unaudited condensed consolidated statements of profit or loss | # |
| Unaudited condensed consolidated statements of other comprehensive income | # |
| Unaudited condensed consolidated statements of changes in equity | # |
| Unaudited condensed consolidated statements of cash flows | # |
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Table of Contents
CI&T Inc.
Unaudited condensed consolidated statements of financial position
as of September 30, 2022 and December 31, 2021
(In thousands of Brazilian Reais - R$)
| Assets | Note | September 30, 2022 | December 31, 2021 | Liabilities and equity | Note | September 30, 2022 | December 31, 2021 |
|---|---|---|---|---|---|---|---|
| Cash and cash equivalents | 6.1 | 151,850 | 135,727 | Suppliers and other payables | 26,512 | 33,566 | |
| Financial investments | 6.2 | 181,857 | 798,786 | Loans and borrowings | 12 | 252,629 | 164,403 |
| Trade receivables | 7 | 462,793 | 340,519 | Lease liabilities | 11.b | 29,199 | 21,214 |
| Contract assets | 19 | 229,165 | 134,388 | Salaries and welfare charges | 13 | 256,028 | 234,173 |
| Recoverable taxes | 6,667 | 7,785 | Accounts payable for business combination | 14 | 63,947 | 48,923 | |
| Tax assets | 1,089 | 2,810 | Loss adjustments on hedge accounting | 24.2 | 50,315 | - | |
| Gain adjustments on hedge accounting | 24.2 | 13,028 | - | Derivatives | 24.3 | 6,095 | 535 |
| Derivatives | 24.3 | 11,775 | 896 | Tax liabilities | 3,379 | 13,345 | |
| Other assets | 8 | 33,173 | 29,994 | Other taxes payable | 14,173 | 5,423 | |
| Contract liability | 11,760 | 13,722 | |||||
| Total current assets | 1,091,397 | 1,450,905 | Other liabilities | 34,133 | 13,669 | ||
| Total current liabilities | 748,170 | 548,973 | |||||
| Recoverable taxes | 3,591 | 3,046 | |||||
| Deferred tax assets | 34,285 | 31,989 | |||||
| Judicial deposits | 15 | 9,468 | 3,079 | ||||
| Restricted cash - Escrow account and indemnity asset | 2/14 | 32,877 | - | ||||
| Other assets | 8 | 3,925 | 2,974 | Loans and borrowings | 12 | 453,729 | 624,306 |
| Property, plant and equipment | 9 | 60,376 | 57,721 | Lease liabilities | 11.b | 50,722 | 60,674 |
| Intangible assets and goodwill | 10 | 1,123,626 | 738,803 | Provisions | 15 | 14,587 | 633 |
| Right-of-use assets | 11.a | 70,366 | 73,827 | Accounts payable for business combination | 14 | 55,279 | 36,803 |
| Other liabilities | 2,020 | 1,660 | |||||
| Total non-current assets | 1,338,514 | 911,439 | |||||
| Total non-current liabilities | 576,337 | 724,076 | |||||
| Equity | 18 | ||||||
| Share capital | 37 | 36 | |||||
| Share premium | 946,173 | 915,947 | |||||
| Capital reserves | 26,045 | 10,105 | |||||
| Profit reserves | 221,787 | 125,957 | |||||
| Other comprehensive income | (88,638) | 37,250 | |||||
| Total equity | 1,105,404 | 1,089,295 | |||||
| Total assets | 2,429,911 | 2,362,344 | Total equity and liabilities | 2,429,911 | 2,362,344 |
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
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CI&T Inc.
Unaudited condensed consolidated statements of profit or loss
For the three-months and nine-months period ended on September 30, 2022 and 2021
(In thousands of Brazilian Reais – R$)
| Note | Period ended September 30, 2022 | Quarter ended September 30, 2022 | Period ended September 30, 2021 | Quarter ended September 30, 2021 | |
|---|---|---|---|---|---|
| Net revenue | 19 | 1,575,905 | 559,018 | 987,586 | 375,970 |
| Costs of services provided | 20 | (1,034,111) | (363,617) | (640,986) | (246,846) |
| Gross profit | 541,794 | 195,401 | 346,600 | 129,124 | |
| Selling expenses | 20 | (118,428) | (43,337) | (61,902) | (24,122) |
| General and administrative expenses | 20 | (228,115) | (84,804) | (93,056) | (38,966) |
| Research and technological innovation expenses | 20 | - | - | (4) | - |
| Impairment loss on trade receivables and contract assets | 20 | (385) | 325 | (2,030) | (1,662) |
| Other expenses | 20 | (7,492) | (3,008) | (23,862) | (25,309) |
| Operating expenses net | (354,420) | (130,824) | (180,854) | (90,059) | |
| Operating profit before financial income and tax | 187,374 | 64,577 | 165,746 | 39,065 | |
| Finance income | 21 | 155,638 | 32,750 | 43,421 | 17,591 |
| Finance cost | 21 | (197,315) | (40,182) | (69,523) | (40,007) |
| Net finance costs | (41,677) | (7,432) | (26,102) | (22,416) | |
| Profit before income tax | 145,697 | 57,145 | 139,644 | 16,649 | |
| Income tax expense | |||||
| Current | (44,796) | (22,273) | (63,367) | (28,809) | |
| Deferred | (5,071) | 5,736 | 5,852 | 9,952 | |
| Net profit (loss) for the period | 95,830 | 40,608 | 82,129 | (2,208) | |
| Earnings (loss) per share | |||||
| Earnings (loss) per share – basic (in R$) | 23 | 0.72 | 0.30 | 0.68 | (0.02) |
| Earnings (loss) per share – diluted (in R$) | 23 | 0.72 | 0.30 | 0.67 | (0.02) |
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
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CI&T Inc.
Unaudited condensed consolidated statements of other comprehensive income
For the nine-months period ended on September 30, 2022 and 2021
(In thousands of Brazilian Reais – R$)
| Note | Period ended September 30, 2022 | Quarter ended September 30, 2022 | Period ended September 30, 2021 | Quarter ended September 30, 2021 | |
|---|---|---|---|---|---|
| Net profit (loss) for the period | 95,830 | 40,608 | 82,129 | (2,208) | |
| Other comprehensive income (OCI): | |||||
| Item that are or may be reclassified subsequently to profit or loss | |||||
| Exchange variation in foreign investments | 18.f | (88,601) | (18,913) | 19,722 | 11,071 |
| Cash flow hedges - effective portion of changes in fair value | 24.2 | (37,287) | 2,448 | - | - |
| Total comprehensive (loss) income for the period | (30,058) | 24,143 | 101,851 | 8,863 | |
| Total comprehensive (loss) income attributed to | |||||
| owners of the Company | (30,058) | 24,143 | 101,851 | 8,863 | |
| Total comprehensive (loss) income for the period | (30,058) | 24,143 | 101,851 | 8,863 |
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
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CI&T Inc.
Unaudited condensed consolidated statements of changes in equity
For the nine-months period ended on September 30, 2022 and 2021
(In thousands of Brazilian Reais – R$)
| Profit reserves | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Notes | Share capital | Share premium | Capital reserve | Legal reserve | Retained earnings reserve | Retained earnings | Other comprehensive income | Total equity | |
| Balances as of December 31, 2021 | 36 | 915,947 | 10,105 | - | 125,957 | - | 37,250 | 1,089,295 | |
| Net profit for the period | - | - | - | - | - | 95,830 | - | 95,830 | |
| Business combination (Somo) | 2.2 | - | 14,037 | - | - | - | - | - | 14,037 |
| Business combination (Box) | 2.3 | - | - | 4,124 | - | - | - | - | 4,124 |
| Business combination (Transpire) | 2.4 | - | 16,189 | - | - | - | - | - | 16,189 |
| Exercise of share options | 17/18.a | 1 | - | 10,446 | - | - | - | - | 10,447 |
| Share-based compensation | 17.a | - | - | 1,370 | - | - | - | - | 1,370 |
| Exchange variation in foreign investments, net of tax effects | 18.f | - | - | - | - | - | - | (88,601) | (88,601) |
| Cash flow hedges - effective portion of changes in fair value | 24.2 | - | - | - | - | - | - | (37,287) | (37,287) |
| Balances as of September 30, 2022 | 37 | 946,173 | 26,045 | - | 125,957 | 95,830 | (88,638) | 1,105,404 | |
| Balances as of December 31, 2020 | 68,968 | - | 6,764 | 13,793 | 95,515 | - | 13,420 | 198,460 | |
| Net profit for the period | - | - | - | - | - | 82,129 | - | 82,129 | |
| Spin-off of the CI&T IOT | (9,426) | - | 597 | - | - | - | - | (8,829) | |
| Merger of Hoshin | - | - | 108 | - | - | - | - | 108 | |
| Additional dividends related to 2020 approved at the extraordinary general meeting (EGM) held on April 30, 2021 | 18.e | - | - | - | - | - | (40,363) | - | (40,363) |
| Exchange variation in foreign investments, net of tax effects | 18.f | - | - | - | - | - | - | 19,722 | 19,722 |
| Share-based compensation | 17.d | - | - | 1,538 | - | - | - | - | 1,538 |
| Tax effect on the compensation of the share-based plan | - | - | - | - | - | (147) | - | (147) | |
| Interest on equity | 18.e | - | - | - | - | - | (4,757) | - | (4,757) |
| Balances as of September 30, 2021 | 59,542 | - | 9,007 | 13,793 | 95,515 | 36,862 | 33,142 | 247,861 |
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
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CI&T Inc.
Unaudited condensed consolidated statements of cash flows
For the nine-months period ended on September 30, 2022 and 2021
(In thousands of Brazilian Reais – R$)
| Note | September 30, 2022 | September 30, 2021 | |
|---|---|---|---|
| Cash flow from operating activities | |||
| Net profit for the period | 95,830 | 82,129 | |
| Adjustments for: | |||
| Depreciation and amortization | 9, 10, 11 | 67,154 | 30,102 |
| Loss on the sale of property, plant and equipment and intangible assets | 9, 10 | 2,137 | 338 |
| Interest, monetary variation and exchange rate changes | 29,562 | 25,998 | |
| Exchange rate changes and monetary adjustments on accounts payable for business combinations | 14 | (7,601) | - |
| Exchange variation on escrow account related to Somo acquisition | 3,798 | - | |
| Interest on lease | 12 | 6,306 | 4,409 |
| Unrealized loss (gain) on financial instruments | (5,709) | 3,898 | |
| Income tax expenses | 49,867 | 57,515 | |
| Impairment losses on trade receivables | 7 | 203 | 1,112 |
| Impairment losses on contract assets | 19 | 182 | 918 |
| Provision for labor and tax risks | 15 | 386 | 346 |
| Impairment of intangible assets | 10 | - | 21,818 |
| Share-based plan | 17.d | 1,894 | 694 |
| Income on financial investments | (1,628) | - | |
| Fair value adjustment - accounts payable for business combination | 14 | 5,243 | - |
| Price adjustment - accounts payable for business combination | 14 | 1,997 | - |
| Others | (1,824) | 52 | |
| Variation in operating assets and liabilities | |||
| Trade receivables | (107,311) | (87,669) | |
| Contract assets | (85,091) | (67,530) | |
| Recoverable taxes | (2,297) | (13,260) | |
| Tax assets | 930 | (2) | |
| Judicial deposits | (6,389) | 7 | |
| Suppliers and other payables | (34,281) | 4,075 | |
| Salaries and welfare charges | 7,448 | 43,788 | |
| Tax liabilities | 1,568 | (3,797) | |
| Other taxes payable | 4,509 | 1,448 | |
| Contract liabilities | (4,893) | (9,036) | |
| Payment of share-based indemnity | - | (628) | |
| Other receivables and payables, net | 6,714 | (6,538) | |
| Cash (used in)/ generated from operating activities | 28,704 | 90,187 | |
| Income tax paid | (33,467) | (44,468) | |
| Interest paid on loans and borrowings | 12 | (51,152) | (2,296) |
| Interest paid on lease | 12 | (4,796) | (3,972) |
| Net cash (used in)/ generated from operating activities | (60,711) | 39,451 | |
| Cash flows from investment activities | |||
| Acquisition of property, plant and equipment and intangible assets | 9, 10 | (20,163) | (22,112) |
| Acquisition of subsidiary net of cash acquired – Dextra | 2.1.e | - | (641,784) |
| Acquisition of subsidiary net of cash acquired – Somo | 2.2.e | (247,764) | - |
| Acquisition of subsidiary net of cash acquired – Box_1824 | 2.3.e | (19,040) | - |
| Acquisition of subsidiary net of cash acquired - Transpire | 2.4.e | (54,995) | - |
| Escrow deposit (acquisition of Somo) | 2.2.a | (23,061) | - |
| Hedge accounting realization | 20,981 | - | |
| Redemption of financial investments | 6.2 | 582,367 | - |
| Payment of investment obligations - Dextra | 14 | (62,338) | - |
| Net cash from / (used in) investment activities | 175,987 | (663,896) | |
| Cash flow from financing activities | |||
| Share-based plan contributions | - | 989 | |
| Dividends paid | - | (71,039) | |
| Exercised stock options | 17.a | 10,339 | - |
| Interest on equity, paid | - | (713) | |
| Payment of lease liabilities | 11 | (19,828) | (12,407) |
| Proceeds from loans and borrowings | 12 | 186,239 | 740,596 |
| Settlement of derivatives | 390 | - | |
| Payment of loans and borrowings | 12 | (279,940) | (71,702) |
| Net cash from / (used in) financing activities | (102,800) | 585,724 | |
| Net (decrease) / increase in cash and cash equivalents | 12,476 | (38,721) | |
| Cash and cash equivalents as of January 1^st^ | 135,727 | 162,827 | |
| Exchange variation effect on cash and cash equivalents | 3,647 | (2,937) | |
| Cash reduction due to spin-off effect | - | (7,752) | |
| Cash and cash equivalents as of September 30 | 151,850 | 113,417 |
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
Notes to the unaudited condensed consolidated interim financial statements
(Amounts in thousands of Brazilian Reais – R$, unless otherwise stated)
1 Reporting Entity
CI&T Inc. (“CI&T” and/or “Company”), previously named CI&T Cayman, is a publicly held company incorporated in the Cayman Islands in June 2021, headquartered at Rua Dr. Ricardo Benetton Martins, 1000, Pólis de Tecnologia, in the City of Campinas, State of São Paulo, Brazil (see note 18.c). As a holding company, it is mainly engaged in the investment, as a partner or shareholder, in other companies, consortia or joint ventures in Brazil and other countries where most of the Company’s operations are located. The Company’s subsidiaries are mainly engaged in the development of customizable software through implementation of software solutions, including Machine Learning, Artificial Intelligence (AI), Analytics, Cloud and Mobility technologies.
These unaudited condensed consolidated interim financial statements comprise the Company and its subsidiaries (collectively referred to as the “Group”).
Unless otherwise indicated or if the context otherwise requires, all references in these unaudited condensed consolidated interim financial statements to “CI&T Brazil” refer to the subsidiary CI&T Software S.A.
On November 10, 2021, the Company completed its initial public offering (“IPO”) (see note 17) and offered 15,000,000 Class A common shares, of which 11,111,111 were offered by CI&T Inc. and 3,888,889 were offered by certain selling shareholders. The IPO price per Class A common share was US$ 15.00. On November 15, 2021, the IPO was concluded with a total offering of US$ 225,000, of which the Group received net proceeds of R$ 860,993 (US$ 156,667), after deducting the underwriting discounts and commissions. The Company incurred incremental costs directly attributable to the public offering in the amount of R$ 66,876, net of taxes. The Group Class A common shares are traded on the New York Stock Exchange, or NYSE, under the symbol “CINT”.
- Corporate restructuring
CI&T Inc. became the holding entity of CI&T Software S.A. (“CI&T Brazil”) in connection with the initial public offering. Prior to the IPO, CI&T Inc. had not begun operations, had nominal assets and liabilities, and had no material contingent liabilities or commitments.
On October 4, 2021, CI&T established, as a sole member, the subsidiary CI&T Delaware LLC (“CI&T Delaware”). The main office is located at 251 Little Falls Drive, Wilmington, Delaware, 19808. On November 8, 2021, all of CI&T Brazil’s shares were contributed to CI&T Delaware and, subsequently CI&T Delaware’s shares were transferred to CI&T Inc. Until this corporate reorganization, CI&T Brazil, an operating company, was the ultimate holding of the Group, and it consolidated the results of all companies until that date.
The Group accounted for the restructuring as a business combination of entities under common control, and the pre-combination carrying amounts of CI&T Brazil are included in CI&T’s consolidated financial statements with no fair value uplift. Thus, these unaudited condensed consolidated interim financial statements reflect:
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
| (i) | The historical operating results and financial position of CI&T Brazil prior to the restructuring; |
|---|---|
| (ii) | The assets and liabilities of CI&T Brazil and its then subsidiaries at their historical cost; |
| (iii) | The number of ordinary shares issued by CI&T, as a result of the restructuring is reflected retroactively to January 1, 2020, for purposes of calculating earnings per share; |
| (iv) | CI&T Brazil shares were contributed in CI&T Delaware at its book value as of November 8, 2021; |
| (v) | As the remaining equity reserves of CI&T Brazil are no longer applicable to CI&T, they were added to the initial capital reserve balance (see note 18.c). |
2 Business combination
2.1 Business combination - Dextra
On June 26, 2021, the CI&T Brazil entered into a purchase agreement to acquire 100% of the shareholding control of Dextra Investimentos S.A. (“Dextra Holding”) and its subsidiaries (“Dextra Group”). On July 22, 2021, the transaction was approved by the Administrative Council for Economic Defense (CADE). All conditions precedent were met on August 10, 2021, the date on which the closing term of the acquisition was formalized, and CI&T Brazil obtained the shareholding control of the Dextra Group. Dextra Group is primarily involved in customized software development.
The total consideration of acquisition in the purchase agreement was R$ 800,000. The Company paid R$ 650,000 on August 10, 2021, and R$ 50,938 on December 2, 2021. The remaining balance was paid on the first anniversary of the closing date (August 10, 2022).
a) Consideration transferred on the acquisition date
The following table summarizes the fair value of each major class of consideration transferred on the acquisition date:
| Cash | 700,938 |
|---|---|
| Accounts payable for business combination (note 14) | 82,635 |
| Accounts payable | 45,726 |
| Retained amount ^(i)^ | 30,000 |
| Other | 6,909 |
| Total consideration transferred (Note 2.1.d) | 783,573 |
| (i) | The amount of R$ 30,000 related to a portion of the remaining balance payable was retained for any materialized contingencies, which will be paid on the fifth anniversary of the closing date. |
| --- | --- |
b) Acquisition-related cost
The Company incurred acquisition-related costs of R$ 2,109 on legal fees and due diligence costs. These costs have been recognized in “general and administrative expenses”.
c) Identifiable assets acquired and liabilities assumed
The following table summarizes the recognized amounts of assets acquired and liabilities assumed on the acquisition date (August 2021):
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
| Assets | Fair value |
|---|---|
| Current | |
| Cash and cash equivalents | 8,216 |
| Trade receivables^(a)^ | 56,313 |
| Recoverable taxes | 1,668 |
| Other assets | 2,386 |
| Current assets | 68,583 |
| Non-current | |
| Recoverable taxes | 3,932 |
| Property, plant and equipment | 9,149 |
| Intangible assets^(i)^ | 148,523 |
| Right-of-use assets | 5,414 |
| Non-current assets | 167,018 |
| Total assets | 235,601 |
| Liabilities | Fair value |
| Current | |
| Suppliers | 5,627 |
| Lease liabilities | 3,105 |
| Salaries and welfare charges | 23,436 |
| Tax liabilities | 10,569 |
| Contract liabilities | 1,933 |
| Other liabilities | 26 |
| Current liabilities | 44,696 |
| Non-current | |
| Other liabilities | 18 |
| Lease liabilities | 3,035 |
| Non-current liabilities | 3,053 |
| Total liabilities | 47,749 |
| Total identifiable net assets acquired (Note 2.1.d) | 187,852 |
(a) Gross contractual amount receivable is R$ 56,854 and R$ 541 is not expected to be collected.
| (i) According to the purchase price on August 10, 2021: | |
|---|---|
| Fair value | |
| Network software (note 10) | 191 |
| Internally developed software (note 10) | 22,613 |
| Customer relationship (note 10) | 88,961 |
| Non-compete agreement (note 10) | 16,257 |
| Brands (note 10) | 20,501 |
| Total intangible assets at fair value (note 10) | 148,523 |
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
Measurement of fair values
The following fair values have been determined on the assumptions:
The fair value estimate for brands was calculated based on the “Relief from Royalty or Savings of Royalties” method, which estimates the asset's value based on hypothetical royalty payments that would be saved by the asset holder compared to what would be paid for licensing the asset owned by third parties, considering its useful life. The useful life for brands is 1.4 year.
The fair value estimate for the non-compete agreement was calculated based on the “With and Without” method. Its useful life is 5 years.
The fair value estimate for customer relationship was calculated based on the multi-period excess earnings. Its useful life is 7.4 years.
d) Goodwill
Goodwill arising from the acquisition has been recognized as follows:
| Note | Goodwill | |
|---|---|---|
| Consideration transferred | 2.1.a | 783,573 |
| Fair value of identifiable net assets | 2.1.c | (187,852) |
| Goodwill (note 10) | 595,721 |
Goodwill is attributable mainly to the skills and technical talent of Dextra’s work force and the synergies expected to be achieved from integrating the Company. The recognized goodwill is deductible for tax purposes during the merger, which occurred on December 31, 2021. This tax benefit is occurring from January 2022.
e) Purchase consideration cash outflow
| Outflow of cash to acquire subsidiary, net of cash acquired | Note | Amount |
|---|---|---|
| Cash consideration | 2.1.a | 700,938 |
| Less: Balances acquired – Cash and cash equivalents | 2.1.c | (8,216) |
| Net outflow of cash - investing activities | 692,722 |
2.2 Business combination - Somo
On January 14, 2022, the Company entered into a Sale and Purchase Agreement (“Agreement” or “SPA”) to acquire 100% of the shareholding control of Somo Global Ltd ("Somo") and its subsidiaries (“Somo Group”), a digital product agency headquartered in the United Kingdom (UK. On January 27, 2022, after all conditions precedent were met, the acquisition was formalized, and the Company obtained the shareholding control of the Somo Group. Somo has offices in the UK, USA and Colombia.
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
The total consideration of acquisition in the purchase agreement was R$ 454,271 as detailed below. The Company paid R$ 363,837 (£47,970), of which R$ 16,134 were related to the exchange rate variations in proportions of cash flows from financial investments in US dollars (non-derivative financial instruments) designated as hedging instruments (see note 24.2.a.2), on January 27, 2022. The remaining balance payable retained for any materialized contingencies was paid on June 3, 2022, per an amount of R$ 5,688 (£939), after negotiation agreed upon per both parties.
a) Consideration transferred
The following table summarizes the fair value of each major class of consideration transferred on the acquisition date:
| Cash | 340,777 |
|---|---|
| Escrow account | 23,061 |
| Retained amount ^(i)^ (note 14) | 7,206 |
| Earn-out^(ii)^ (note 14) | 59,868 |
| Other (note 14) | 2,465 |
| Class A common shares issued^(iii)^ | 14,037 |
| Total consideration transferred (note 2.2.d) | 447,414 |
| (i) | The amount of R$ 7,206 (£ 1,000) is related to a portion of the remaining balance payable was retained for any materialized contingencies. |
| --- | --- |
| (ii) | The Agreement also contemplates an earn-out clause of up to R$ 59,868 (£ 8,307) based on future performance (see note 14). As of September 30, 2022, the earn-out clause was updated to R$ 55,078 (£ 9,150). |
| (iii) | Issuance of new 225,649 Class A common shares in connection with the transaction, per a total amount of R$ 14,037, issued to electing sellers in accordance with the Agreement. |
b) Acquisition-related cost
The Company incurred acquisition-related costs of R$ 2,601 on legal fees and due diligence costs. These costs have been recognized in “general and administrative expenses”.
c) Identifiable assets acquired and liabilities assumed
The following table summarizes the recognized amounts of assets acquired and liabilities assumed on the acquisition date:
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
| Assets | Fair value |
|---|---|
| Current | |
| Cash and cash equivalents | 98,701 |
| Trade receivables (a) | 38,677 |
| Contract assets | 13,359 |
| Recoverable taxes | 275 |
| Other assets | 2,454 |
| Current assets | 153,466 |
| Non-current | |
| Deferred taxes | 8,061 |
| Property, plant and equipment (note 9) | 2,359 |
| Right-of-use assets (note 11) | 6,800 |
| Intangible assets^(i)^ (note 10) | 57,285 |
| Non-current assets | 74,505 |
| Total assets | 227,971 |
| Liabilities | Fair value |
| Current | |
| Suppliers and other payables | 30,409 |
| Loans and borrowings (note 12) | 25,213 |
| Lease liabilities | 4,440 |
| Contract liabilities | 730 |
| Tax liabilities | 3,948 |
| Salaries and welfare charges | 9,668 |
| Other liabilities | 11,295 |
| Current liabilities | 85,703 |
| Non-current | |
| Loans and borrowings (note 12) | 9,267 |
| Lease liabilities | 2,360 |
| Other liabilities | 406 |
| Non-current liabilities | 12,033 |
| Total liabilities | 97,736 |
| Total identifiable net assets acquired (note 2.2.d) | 130,235 |
(a) Gross contractual amount receivable is R$ 38,703 and R$ 26 is not expected to be collected.
| (i) According to the purchase price on January 27, 2022: | |
|---|---|
| Fair value | |
| Customer relationship (note 10) | 49,539 |
| Brands (note 10) | 7,746 |
| Total intangible assets at fair value (note 10) | 57,285 |
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Table of Contents
CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
Measurement of fair values
The following fair values have been determined on the assumptions:
| ● | The fair value estimate for brands was calculated based on the “Relief from Royalty or Savings of Royalties” method, which estimates the asset's value based on hypothetical royalty payments that would be saved by the asset holder compared to what would be paid for licensing the asset owned by third parties, considering its useful life. The useful life for brands is 15 months. |
|---|---|
| ● | The fair value estimate for customer relationship was calculated based on the multi-period excess earnings. Its useful life is 227 months. |
d) Goodwill
Goodwill arising from the acquisition has been recognized as follows:
| Note | Goodwill | |
|---|---|---|
| Consideration transferred | 2.2.a | 447,414 |
| Fair value of identifiable net assets | 2.2.c | (130,235) |
| Goodwill (note 10) | 317,179 |
Goodwill is attributable mainly to the skills and technical talent of Somo’s work force and the synergies expected to be achieved from integrating the Company (at transaction date £41,485).
e) Purchase consideration cash outflow
| Outflow of cash to acquire subsidiary, net of cash acquired | Note | Amount |
|---|---|---|
| Cash consideration | 2.2.a | 340,777 |
| Retained amount payment | 14 | 5,688 |
| Less: Balances acquired – Cash and cash equivalents^(i)^ | 2.2.c | (98,701) |
| Net outflow of cash - investing activities | 247,764 | |
| (i) | As of September 30, 2022, the outflow of cash used in operating activities is R$ 40,951 thousand, and the outflow of cash used in financing activities is R$ 28,720 thousand. | |
| --- | --- |
2.3 Business combination – Box 1824
On June 1, 2022, the Company entered into a Sale and Purchase Agreement (“Agreement” or “SPA”) to acquire 100% of the shareholding control of BOX 1824 PLANEJAMENTO E MARKETING LTDA ("Box 1824"), an award-winning future-focused strategic consulting firm headquartered in São Paulo, Brazil, to accelerate its global strategic capabilities.
On September 30, 2022, the Company concluded the valuation analysis of the fair value of Box 1824 assets acquired and liabilities assumed. The final measurement includes changes in the measurement of goodwill and changes in the fair value of intangible assets.
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
The final total consideration of acquisition in the purchase agreement was R$ 34,179 as detailed below.
a) Consideration transferred
The following table summarizes the fair value of each major class of consideration transferred on the acquisition date:
| Cash | 20,768 |
|---|---|
| (-) Price adjustment | (558) |
| Retained amount(i) (note 14) | 8,871 |
| Share-based payment – vested immediately (note 18.c) | 4,124 |
| Other (note 14) | 974 |
| Total consideration transferred (note 2.3.d) | 34,179 |
| (i) | The amount of R$ 8,871 is related to a portion of the remaining balance payable that was retained for any materialized contingencies that occurred after June 1, 2022, but related to contingencies liabilities before the acquisition date. The remaining balance will be paid in the next three years, on each anniversary of the closing date. |
| --- | --- |
b) Acquisition-related cost
The Company incurred acquisition-related costs of R$ 717 on legal fees and due diligence costs. These costs have been recognized in “general and administrative expenses”.
c) Identifiable assets acquired and liabilities assumed
The following table summarizes the recognized amounts of assets acquired and liabilities assumed on the acquisition date:
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
| Assets | Fair value |
|---|---|
| Current | |
| Cash and cash equivalents | 1,728 |
| Trade receivables^(a)^ | 1,695 |
| Contract assets | 1,598 |
| Recoverable taxes | 104 |
| Other assets | 312 |
| Current assets | 5,437 |
| Non-current | |
| Property, plant and equipment (note 9) | 51 |
| Intangible assets ^(i)^ (note 10) | 11,981 |
| Non-current assets | 12,032 |
| Total assets | 17,469 |
| Liabilities | Fair value |
| Current | |
| Suppliers and other payables | 533 |
| Contract liabilities | 962 |
| Tax liabilities | 920 |
| Salaries and welfare charges | 442 |
| Contingent liabilities (note 15) | 13,583 |
| Other liabilities | 6 |
| Current liabilities | 16,446 |
| Non-current | |
| Tax liabilities | 1,952 |
| Non-current liabilities | 1,952 |
| Total liabilities | 18,398 |
| Total identifiable net assets acquired (note 2.3.d) | (929) |
(a) Gross contractual amount receivable is R$ 1,696 and R$ 1 is not expected to be collected.
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
| (i) According to the purchase price on May 31, 2022: | |
|---|---|
| Fair value | |
| Customer relationship (note 10) | 6,430 |
| Brands (note 10) | 5,530 |
| Total intangible assets at fair value (note 10) | 11,960 |
Measurement of fair values
The following fair values have been determined on the assumptions:
| ● | The fair value estimate for brands was calculated based on the “Relief from Royalty or Savings of Royalties” method, which estimates the asset's value based on hypothetical royalty payments that would be saved by the asset holder compared to what would be paid for licensing the asset owned by third parties, considering its useful life. The useful life for brands is 252 months. |
|---|---|
| ● | The fair value estimate for customer relationship was calculated based on the multi-period excess earnings. Its useful life is 91 months. |
d) Goodwill
The Goodwill arising from the acquisition has been recognized as follows:
| Note | Goodwill | |
|---|---|---|
| Consideration transferred | 2.3.a | 34,179 |
| Fair value of identifiable net assets | 2.3.c | 929 |
| (-) Indemnity asset ^(i)^ | (13,583) | |
| Goodwill (note 10) | 21,525 | |
| (i) | The amount of R$ 13,583 is related to an indemnification asset recognized at the acquisition subsequently measured on the same basis of the unmaterialized labor contingencies liability assumed (note 15). This indemnification asset will be derecognized when the rights to it will be ceased. | |
| --- | --- |
Goodwill is attributable mainly to the skills and technical talent of Box 1824’s workforce and the synergies expected to be achieved from integrating the Company.
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
e) Purchase consideration cash outflow
| Outflow of cash to acquire subsidiary, net of cash acquired | Note | Amount |
|---|---|---|
| Cash consideration | 2.3.a | 20,768 |
| Less: Balances acquired – Cash and cash equivalents | 2.3.c | (1,728) |
| Net outflow of cash - investing activities | 19,040 |
- 4 Business combination – Transpire
On September 1, 2022, the Company entered into a Sale and Purchase Agreement (“Agreement”) to acquire 100% of the shareholding control of Transpire Technology Pty Ltda ("Transpire"), an award-winning digital product agency based in Australia.
On September 30, 2022, the Company performed a preliminary valuation analysis of the fair value of Transpire assets acquired and liabilities assumed. This preliminary valuation has been used to prepare the transaction accounting adjustments in the unaudited condensed interim statements of financial position.
The final measurement may include changes in the measurement of goodwill and changes in the fair value of intangible assets. The Company estimated the fair value to such assets and liabilities, based on available information and certain estimates and assumptions and, therefore, the actual effects of these transactions may differ from the transaction accounting adjustments. The Company expects to finalize the valuation of all assets and liabilities by December 31, 2022.
The total consideration of acquisition in the purchase agreement was R$ 76,581 as detailed below. The Company paid R$ 60,392 (AUD 15,535), of which R$ 4,847 were related to the exchange rate variations in proportions of cash flows from financial investments in US dollars (non-derivative financial instruments) designated as hedging instruments (see note 24.2.a.2), on September 1, 2022.
a) Consideration transferred
The following table summarizes the fair value of each major class of consideration transferred on the acquisition date:
| Cash | 60,392 |
|---|---|
| Class A common shares issued (note 18.a) | 16,189 |
| Total consideration transferred (note 2.4.d) | 76,581 |
b) Preliminary acquisition-related cost
The Company incurred preliminary acquisition-related costs of R$ 1,219 on legal fees and due diligence costs. These costs have been recognized in “general and administrative expenses”.
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
c) Preliminary identifiable assets acquired and liabilities assumed
The following table summarizes the preliminary recognized amounts of assets acquired and liabilities assumed on the acquisition date:
| Assets | Fair value |
|---|---|
| Current | |
| Cash and cash equivalents | 5,397 |
| Trade receivables^(a)^ | 9,322 |
| Contract assets | 239 |
| Other assets | 277 |
| Current assets | 15,235 |
| Non-current | |
| Bank guarantee | 766 |
| Property, plant and equipment (note 9) | 1,183 |
| Right-of-use assets (note 11) | 1,314 |
| Intangible assets ^(i)^ (note 10) | 6,197 |
| Non-current assets | 9,460 |
| Total assets | 24,695 |
| Liabilities | Fair value |
| Current | |
| Suppliers and other payables | 4,384 |
| Contract liabilities | 2,065 |
| Tax liabilities | 479 |
| Salaries and welfare charges | 7,963 |
| Lease liability (note 11) | 1,314 |
| Other liabilities | 1,380 |
| Current liabilities | 17,585 |
| Non-current | |
| Loans and borrowings (note 12) | 5,490 |
| Non-current liabilities | 5,490 |
| Total liabilities | 23,075 |
| Total preliminary identifiable net assets acquired (note 2.4.d) | 1,620 |
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Table of Contents
CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
(a) Gross contractual amount receivable is R$ 9,333 and R$ 11 is not expected to be collected.
| (i) According to the preliminary purchase price on September 01, 2022: | |
|---|---|
| Fair value | |
| Customer relationship (note 10) | 6,170 |
| Total preliminary intangible assets at fair value (note 10) | 6,170 |
Preliminary measurement of fair values
The following preliminary fair value has been determined on the assumption:
● The fair value estimate for customer relationship was calculated based on the multi-period excess earnings. Its useful life is 46 months.
d) Preliminary Goodwill
The preliminary Goodwill arising from the acquisition has been recognized as follows:
| Note | Goodwill | |
|---|---|---|
| Consideration transferred | 2.4.a | 76,581 |
| Fair value of identifiable net assets | 2.4.c | (1,620) |
| Goodwill (note 10) | 74,961 |
Goodwill is attributable mainly to the skills and technical talent of Transpire’s workforce and the synergies expected to be achieved from integrating the Company.
e) Purchase consideration cash outflow
| Outflow of cash to acquire subsidiary, net of cash acquired | Note | Amount |
|---|---|---|
| Cash consideration | 2.4.a | 60,392 |
| Less: Balances acquired – Cash and cash equivalents | 2.4.c | (5,397) |
| Net outflow of cash - investing activities | 54,995 |
3 Basis of accounting
These unaudited condensed consolidated interim financial statements for the nine-months period ended September 30, 2022, 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, 2021. This financial statement does not include all the information required for a complete set of financial statements prepared in accordance with IFRS 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.
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Table of Contents
CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
The issuance of these unaudited condensed consolidated interim financial statements was authorized by the Company’s Management and Audit Committee on November 16, 2022.
4 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 main exchange rates used in the preparation of the Company's financial statements are Brazilian Reais, US dollar, Yen, Euro, Australian dollar, Pound sterling, and Colombian peso as the Company’s subsidiaries have the following functional currencies: CI&T Brazil and BOX 1824 have the local currency, the Brazilian Reais, as its functional currency; CI&T Inc (USA) and Somo Global Inc have the local currency, the US dollar, as their functional currency; CI&T Japan Inc has the local currency, Yen, as its functional currency; CI&T Portugal has the local currency, Euro, as its functional currency; CI&T Australia and Transpire have the local currency, Australian dollar, as its functional currency; CI&T United Kingdom, Somo Global and Somo Custom have the local currency, the Pound sterling, as their functional currency; and CI&T Colombia and Somo Global SAS have the local currency, the Colombian peso, as its functional currency. When applicable, all the amounts presented in these currencies are rounded to the nearest thousands, except when otherwise indicated.
5 Use of judgments and estimates
In preparing these unaudited condensed consolidated interim financial statements, Management has made judgments and estimates that affect the application of the Company's accounting policies and the reported amounts of assets, liabilities, income, and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. The revisions to estimates are recognized prospectively.
a. Judgments
Information about judgments made in the application of accounting policies that have significant effects on the amounts recognized in the financial statements are included in the following notes:
● Note – 11 - lease term: whether the Group is reasonably certain to exercise extension options.
● Note – 19 - revenue recognition: whether service revenue is recognized over time or at a point in time.
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
b. Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities in the next fiscal year is included in the following note:
| ● | Note 2 – acquisition of subsidiaries: fair value of the consideration transferred, fair value of the assets acquired, and liabilities assumed. |
|---|---|
| ● | Note 10 - Impairment test of intangible assets and goodwill: assumptions regarding projections of generation of future cash flows. |
c. Measurement of fair values
Several of the Company’s accounting policies and disclosures require the measurement of fair values for both financial and non-financial assets and liabilities.
The Group has established a control framework with respect to the measurement of fair value that 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, the valuation team assesses the evidence obtained from third parties 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 classified at different levels in a hierarchy based on the information (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, except for quoted prices, included in Level 1, which are observable for the asset or liability, either directly (prices) or indirectly (derived from prices). |
| ● | Level 3: Inputs for the asset or liability, which are not based on observable market data (unobservable inputs). |
Additional information on the assumptions used to measure fair values is included in the following notes:
| ● | Note 2 – business combination - acquisition of subsidiaries; |
|---|---|
| ● | Note 17 – share-based payment transactions; and |
| ● | Note 24 – financial instruments. |
6 Cash and cash equivalents and financial investments
6.1 Cash and cash equivalents
| . | September 30, 2022 | December 31, 2021 |
|---|---|---|
| Cash and cash equivalents | 78,403 | 69,720 |
| Short-term financial investments | 73,447 | 66,007 |
| Total | 151,850 | 135,727 |
Short-term financial investments are represented by fixed income securities, with interest rate ranging from 101.5% to 102% on September 30, 2022 (100% to 103% as of December 31, 2021) 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.
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
6.2 Financial investments
| September 30, 2022 | December 31, 2021 | |
|---|---|---|
| Financial investments | 181,857 | 798,786 |
| Total | 181,857 | 798,786 |
The changes in the balances are as follows:
| Balance as of January 1, 2022 | 798,786 |
|---|---|
| Effect of movements in exchange rates | (15,209) |
| Income on financial investments | 1,628 |
| Redemption of financial investments | (582,367) |
| Hedge accounting realization | (20,981) |
| Balance as of September 30, 2022 | 181,857 |
As of September 30, 2022, the balance of R$ 181,857 (US$ 33,636) (R$ 798,786 (US$ 143,139) as of December 31, 2021) is allocated between an interest-bearing account and time deposits. Both instruments are in USD, and they bear interest rates ranging from 0.12%p.a., and such accounts present immediate liquidity. The Company holds USD amount for short-term commitments in the same currency. A foreign currency exposure arises from these financial investments held in USD, since the amount may be subject to a significant exchange rate once translated to BRL. Part of the Company’s financial investments is addressed for forecast transactions, so hedge accounting is applied to hedge exposures to exchange variations (for further information about cash flow hedge accounting, see note 24).
7 Trade receivables
The balances of trade receivables are presented, as follows:
| September 30, 2022 | December 31, 2021 | |
|---|---|---|
| Trade receivables - US market | 296,570 | 226,154 |
| Trade receivables - Brazil market | 113,497 | 101,122 |
| Trade receivables - Other markets | 53,141 | 14,302 |
| (-) Expected credit losses | (415) | (1,059) |
| Trade receivables, net | 462,793 | 340,519 |
The balances of trade receivables by maturity date are as follows:
| September 30, 2022 | December 31, 2021 | |
|---|---|---|
| Not due | 367,124 | 319,450 |
| Overdue: | ||
| from 1 to 60 days (i) | 83,419 | 20,020 |
| 61 to 360 days | 11,769 | 1,564 |
| Over 360 days | 896 | 544 |
| Total | 463,208 | 341,578 |
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Table of Contents
CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
| (i) | As of September 30, 2022, the balance of trade receivables overdue from 1 to 60 days of R$ 83,419 (R$ 20,020 as of December 31, 2021), refers to a series of individual clients. The Group considers these extensions and delays as expected in its credit risk analysis. |
|---|
The movement of impairment loss on trade receivables is as follows:
| Balance as of January 1, 2022 | (1,059) |
|---|---|
| Provision | (603) |
| Reversal | 400 |
| Write-off | 655 |
| Exchange variation | 192 |
| Balance as of September 30, 2022 | (415) |
| Balance as of January 1, 2021 | (692) |
| Provision | (1,865) |
| Reversal | 753 |
| Exchange variation | (20) |
| Balance as of September 30, 2021 | (1,824) |
8 Other assets
| September 30, 2022 | December 31, 2021 | |
|---|---|---|
| Prepaid expenses ^(a)^ | 31,846 | 29,743 |
| Rental security deposits | 3,020 | 2,471 |
| Suppliers’ advances | 17 | 162 |
| Other | 2,215 | 592 |
| Total | 37,098 | 32,968 |
| Current | 33,173 | 29,994 |
| Non-current | 3,925 | 2,974 |
| Total | 37,098 | 32,968 |
(a) Prepaid expenses are mostly comprised of prepaid insurance, mainly related to directors’ and officers’ liability insurance, consulting and software support prepayments.
9 Property, plant and equipment
| September 30, 2022 | December 31, 2021 | |
|---|---|---|
| IT equipment | 40,887 | 35,230 |
| Furniture and fixtures | 5,944 | 6,283 |
| Leasehold improvements (a) | 13,534 | 16,051 |
| Property, plant and equipment in progress | 11 | 157 |
| Total | 60,376 | 57,721 |
(a) Improvements are depreciated on a straight-line basis based over the duration of the lease agreement.
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
The changes in the balances are as follows:
| IT equipment | Furniture and fixtures | Vehicles | Leasehold Improvements | In progress property, plant and equipment | Hardware devices | Total | |
|---|---|---|---|---|---|---|---|
| Cost: | |||||||
| Balance as of January 1, 2021 | 34,852 | 12,941 | 86 | 28,292 | 222 | 487 | 76,880 |
| Exchange rate changes | (193) | (175) | - | (262) | - | - | (630) |
| Spin-off | (128) | (3) | - | - | (313) | (625) | (1,069) |
| Additions | 13,892 | 63 | - | 23 | 214 | 138 | 14,330 |
| Disposals | (243) | (150) | (86) | (363) | (43) | - | (885) |
| Transfers | - | - | - | 75 | (75) | - | - |
| Balance as of September 30, 2021 | 48,180 | 12,676 | - | 27,765 | 5 | - | 88,626 |
| Balance as of December 31, 2021 | 63,640 | 13,869 | - | 30,915 | 157 | - | 108,581 |
| Exchange rate changes | (1,545) | (237) | - | (297) | - | - | (2,079) |
| Addition due to business combination (note 2.2.c/2.3.c/2.4.c) | 2,812 | 468 | - | 313 | - | - | 3,593 |
| Additions | 17,475 | 270 | - | 62 | 119 | - | 17,926 |
| Disposals | (4,530) | (646) | - | (5,096) | (19) | - | (10,291) |
| Transfers | 6 | - | - | 240 | (246) | - | - |
| Balance as of September 30, 2022 | 77,858 | 13,724 | - | 26,137 | 11 | - | 117,730 |
| Depreciation: | |||||||
| Balance as of January 1, 2021 | (19,445) | (6,577) | (59) | (11,832) | - | (196) | (38,109) |
| Exchange rate changes | 106 | 87 | - | 143 | - | - | 336 |
| Investment spin-off | 9 | 2 | - | - | - | 280 | 291 |
| Additions | (4,004) | (735) | (5) | (1,699) | - | (84) | (6,527) |
| Disposals | 62 | 129 | 64 | 371 | - | - | 626 |
| Balance as of September 30, 2021 | (23,272) | (7,094) | - | (13,017) | - | - | (43,383) |
| Balance as of December 31, 2021 | (28,410) | (7,586) | - | (14,864) | - | - | (50,860) |
| Exchange rate changes | 854 | 89 | - | 72 | - | - | 1,015 |
| Additions | (12,282) | (1,066) | - | (2,540) | - | - | (15,888) |
| Disposals | 2,867 | 783 | - | 4,729 | - | - | 8,379 |
| Balance as of September 30, 2022 | (36,971) | (7,780) | - | (12,603) | - | - | (57,354) |
| Balance as of: | |||||||
| December 31, 2021 | 35,230 | 6,283 | - | 16,051 | 157 | - | 57,721 |
| September 30, 2022 | 40,887 | 5,944 | - | 13,534 | 11 | - | 60,376 |
The Group does not have property, plant or equipment pledged as collateral.
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Table of Contents
CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
10 Intangible assets and goodwill
| . | September 30, 2022 | December 31, 2021 |
|---|---|---|
| Network software | 2,459 | 2,399 |
| Internally developed software | 2,949 | 3,911 |
| Software in progress | 1,358 | 391 |
| Customer relationship ^(i)^ | 135,110 | 84,195 |
| Non-compete agreement ^(i)^ | 11,623 | 13,897 |
| Brands ^(i)^ | 12,074 | 14,541 |
| Subtotal | 165,573 | 119,334 |
| Goodwill ^(ii)^ | 958,053 | 619,469 |
| Total | 1,123,626 | 738,803 |
| (i) | Refers to customer relationship, non-compete agreement and brands arising from acquisition of a) Dextra Technologies S.A., on August 10, 2021 (note 2.1.c), b) Somo Global Ltd, on January 27, 2022 (note 2.2.c); c) Box 1824, on June 1, 2022 (note 2.3.c) and d) Transpire, on September 1, 2022 (note 2.4.c). | |
| --- | --- | |
| (ii) | Refers to goodwill arising from acquisitions of: a) CI&T IN Software Ltda., which was merged into the subsidiary CI&T Software in 2014 in the amount of R$ 2,871, b) CI&T Japan Inc. in 2015, in the amount of R$ 951 (R$ 1,233 as of December 31, 2021), c) acquisition of Comrade Inc. in 2017, in the amount of R$ 19,032 (R$ 19,644 as of December 31, 2021), which was merged into the subsidiary CI&T Inc; d) Dextra Technologies S.A., in August 2021, in the amount of R$ 595,721 (note 2.1.d); e) Somo in January 2022, in the amount of R$ 249,730 (R$ 317,179 as of January 27, 2022); f) Box 1824 in June 2022, in the amount of R$ 21,525 and e) Transpire in September 2022, in the preliminary total amount of R$ 68,224. | |
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Table of Contents
CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
The change in the balances of intangible assets as follows:
| Network software | Internally developed software | Software in progress | Customer relationship | Non-compete agreement | Brands | Goodwill | Total | |
|---|---|---|---|---|---|---|---|---|
| Cost: | ||||||||
| Balance as of January 1, 2021 | 9,732 | 13,351 | 115 | - | - | - | 14,570 | 37,768 |
| Additions related to business combination Dextra (note 2.1) | 191 | 22,614 | - | 88,961 | 16,257 | 20,501 | 595,721 | 744,245 |
| Exchange rate changes | 18 | - | - | - | - | - | 8,178 | 8,196 |
| Additions | 1,790 | 866 | 476 | - | - | - | - | 3,132 |
| Disposals | - | (20,647) | - | - | (2,795) | - | - | (23,442) |
| Transfers | - | (87) | 87 | - | - | - | - | - |
| Balance as of September 30, 2021 | 11,731 | 16,097 | 678 | 88,961 | 13,462 | 20,501 | 618,469 | 769,899 |
| Balance as of December 31, 2021 | 11,942 | 16,581 | 391 | 88,961 | 13,462 | 20,501 | 619,469 | 771,307 |
| Additions due to business combination Somo (note 2.2) | - | - | - | 49,539 | - | 7,746 | 317,179 | 374,464 |
| Additions due to business combination Box (note 2.3) | 15 | - | - | 6,430 | - | 5,536 | 21,525 | 33,506 |
| Additions due to business combination Transpire (note 2.4) | - | 5 | - | 6,170 | - | 22 | 74,961 | 81,158 |
| Exchange rate changes | (50) | - | - | - | - | - | (75,081) | (75,131) |
| Additions | 790 | - | 1,447 | - | - | - | - | 2,237 |
| Write-off | (788) | - | (32) | - | - | - | - | (820) |
| Transfers | 50 | 398 | (448) | - | - | - | - | - |
| Balance as of September 30, 2022 | 11,959 | 16,984 | 1,358 | 151,100 | 13,462 | 33,805 | 958,053 | 1,186,721 |
| Amortization: | ||||||||
| Balance as of January 1, 2021 | (8,636) | (10,966) | - | - | - | - | - | (19,602) |
| Exchange rate changes | 10 | - | - | - | - | - | - | 10 |
| Additions | (344) | (778) | - | - | - | - | - | (1,122) |
| Balance as of September 30, 2021 | (8,970) | (11,744) | - | - | - | - | - | (20,714) |
| Balance as of December 31, 2021 | (9,543) | (12,670) | - | (4,766) | 435 | (5,960) | - | (32,504) |
| Exchange rate changes | 84 | - | - | - | - | - | - | 84 |
| Additions | (789) | (1,365) | - | (11,224) | (2,274) | (15,771) | - | (31,423) |
| Write-off | 748 | - | - | - | - | - | - | 748 |
| Balance as of September 30, 2022 | (9,500) | (14,035) | - | (15,990) | (1,839) | (21,731) | - | (63,095) |
| Balance at: | ||||||||
| December 31, 2021 | 2,399 | 3,911 | 391 | 84,195 | 13,897 | 14,541 | 619,469 | 738,803 |
| September 30, 2022 | 2,459 | 2,949 | 1,358 | 135,110 | 11,623 | 12,074 | 958,053 | 1,123,626 |
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Table of Contents
CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
Impairment test – Goodwill
For the period ended September 30, 2022, Management did not identify factors that could significantly change the assumptions used in the annual impairment analysis and, therefore, did not identify any indicator of impairment of intangible assets and goodwill.
11 Leases
- Right-of-use assets
| September 30, 2022 | December 31, 2021 | |
|---|---|---|
| Properties | 62,805 | 69,441 |
| Vehicles | 7,561 | 4,173 |
| IT equipment | - | 213 |
| Total | 70,366 | 73,827 |
Some of the Group’s leases have the option of an extension that can be exercised for an indefinite period, and in these cases the Group has already considered in the measurement of the lease amounts the extensions that are reasonably certain to be exercised.
The Group applies the short-term lease recognition exemption to its short-term leases of properties (those leases that have a lease term of 12 months or less). It also applies the lease of low-value assets recognition exemption to leases that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognized as expenses on a straight-line basis. The remaining rental expenses for the period totaled R$ 4,424 as of September 30, 2022 (R$ 3,874 as of September 30, 2021).
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Table of Contents
CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
The changes to balances of the right-of-use are:
| Properties | Vehicles | IT equipment | Total | |
|---|---|---|---|---|
| Cost: | ||||
| Balance as of January 1, 2021 | 88,549 | 5,008 | 851 | 94,408 |
| Additions due to business combination | 5,414 | - | - | 5,414 |
| Exchange rate changes | 1,584 | 3 | - | 1,587 |
| Additions | 10,656 | 1,109 | - | 11,765 |
| Derecognition of right-of-use assets | (1,364) | (1,359) | - | (2,723) |
| Remeasurement of right-of-use assets | 1,377 | - | - | 1,377 |
| Balance on September 30, 2021 | 106,216 | 4,761 | 851 | 111,828 |
| Balance as of January 1, 2022 | 107,640 | 6,372 | 851 | 114,863 |
| Additions due to business combination | 8,114 | - | - | 8,114 |
| Exchange rate changes | (1,571) | - | - | (1,571) |
| Additions | 5,682 | 5,775 | - | 11,457 |
| Derecognition of right-of-use assets | (3,708) | (870) | - | (4,578) |
| Remeasurement of right-of-use assets | (234) | - | - | (234) |
| Balance on September 30, 2022 | 115,923 | 11,277 | 851 | 128,051 |
| Depreciation: | ||||
| Balance as of January 1, 2021 | (22,090) | (2,199) | (354) | (24,643) |
| Exchange rate changes | (555) | (1) | - | (556) |
| Depreciation | (11,747) | (1,467) | (213) | (13,427) |
| Derecognition of right-of-use assets | 1,155 | 1,054 | - | 2,209 |
| Remeasurement of right-of-use assets | (273) | - | - | (273) |
| Balance on September 30, 2021 | (33,510) | (2,613) | (567) | (36,690) |
| Balance on January 1, 2022 | (38,200) | (2,199) | (638) | (41,037) |
| Exchange rate changes | 310 | - | - | 310 |
| Depreciation | (17,314) | (2,316) | (213) | (19,843) |
| Derecognition of right-of-use assets | 2,086 | 799 | - | 2,885 |
| Balance on September 30, 2022 | (53,118) | (3,716) | (851) | (57,685) |
| Net balance at: | ||||
| December 31, 2021 | 69,440 | 4,173 | 213 | 73,826 |
| September 30, 2022 | 62,805 | 7,561 | - | 70,366 |
- Lease liabilities
| Average discount rate (per year) | September 30, 2022 | December 31, 2021 | |
|---|---|---|---|
| Properties | 8.26% (2021: 10.88%) | 71,790 | 77,366 |
| Vehicles | 16.63% (2021: 14.54%) | 8,131 | 4,285 |
| IT equipment | 7.70% (2021: 7.70%) | - | 237 |
| Total | 79,921 | 81,888 | |
| Current | 29,199 | 21,214 | |
| Non-current | 50,722 | 60,674 | |
| Total | 79,921 | 81,888 |
The change in lease liabilities is disclosed in the reconciliation of change in liabilities to cash flows in note 12.
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Table of Contents
CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
12 Loans and borrowings
Loans and borrowings operations can be summarized as follows:
| Currency | Average interest rate per year (%) | Year of maturity | September 30, 2022 | December 31, 2021 | |
|---|---|---|---|---|---|
| Itaú (i) | USD | 4.82% p.a. | 2022 | - | 2,349 |
| Itaú (ii) | USD | 4.86% p.a. | 2023 | 52,866 | - |
| Citibank - CI&T Inc. (iii) | USD | Libor 3 months rate + 1.90% | 2022 | - | 11,164 |
| Banco do Brasil (ii) | USD | 3.68% p.a. | 2022 | 49,301 | 56,551 |
| Citibank (ii) | USD | 4.06% p.a. / 2.47% p.a. | 2023 | 14,795 | 28,328 |
| Bradesco (i) | BRL | CDI + 1.10% p.a | 2023 | 4,173 | 11,684 |
| Citibank (ii) | USD | 3.80% p.a. | 2023 | 10,095 | - |
| Bradesco (ii) | USD | 3.98% p.a. | 2023 | 15,033 | - |
| Santander Bank S/A (iv) | BRL | CDI + 1.60% p.a. | 2026 | - | 204,047 |
| Bradesco (i) | BRL | CDI + 1.75% p.a. | 2026 | 310,441 | 306,417 |
| Citibank (i) | USD | Libor 3 months rate + 2.07% | 2026 | 129,365 | 168,169 |
| Santander - CI&T Inc. (v) | USD | 5.02% p.a. | 2026 | 120,289 | - |
| Total | 706,358 | 788,709 | |||
| (i) | Export credit note - NCE: Refers to financing to export software development services. | ||||
| --- | --- | ||||
| (ii) | Advance on Foreign Exchange Contract (ACC). | ||||
| (iii) | Refers to Revolving Credit Facility. | ||||
| (iv) | Refers to Law 4131 - Foreign currency loans granted by the banks abroad to a Brazilian company. Loan settled in advance in May 2022. | ||||
| (v) | Refers to working capital loan. |
These balances were included as current and non-current borrowings in the consolidated statement of financial position as follows:
| September 30, 2022 | December 31, 2021 | |
|---|---|---|
| Current | 252,629 | 164,403 |
| Non-current | 453,729 | 624,306 |
| Total | 706,358 | 788,709 |
The principal balances of long-term loans and borrowings as of September 30, 2022, mature as follows:
| Maturity | |
|---|---|
| 2023 | 17,982 |
| 2024 | 116,715 |
| 2025 | 173,167 |
| 2026 | 145,865 |
| Non-current liabilities | 453,729 |
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Table of Contents
CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
The reconciliation of change in liabilities to cash flows arising from financing activities is shown below:
| Liabilities | Leases | Net Equity | Total | |
|---|---|---|---|---|
| Loans and borrowings | Leases (Note 11.b) | Share premium and Reserves | ||
| Balance as of December 31, 2021 | 788,709 | 81,888 | 1,052,045 | 1,922,642 |
| Changes in cash flow from financing activities | ||||
| Proceeds from loans and borrowings | 186,239 | - | - | 186,239 |
| Loan and borrowings payments, and lease payments | (279,940) | (19,828) | - | (299,768) |
| Proceeds from exercise of share options | - | - | 10,447 | 10,447 |
| Total changes in financing cash flows | (93,701) | (19,828) | 10,447 | (103,082) |
| Exchange rate changes | 8,179 | (1,485) | - | 6,694 |
| Other changes - liabilities | ||||
| Additions due to business combination | 39,970 | 8,114 | - | 48,084 |
| New leases | - | 11,457 | - | 11,457 |
| Interest expenses | 48,853 | 6,306 | - | 55,159 |
| Interest paid | (51,152) | (4,796) | - | (55,948) |
| Other borrowing/lease costs | (34,500) | (195) | - | (34,695) |
| Lease write-offs | - | (1,540) | - | (1,540) |
| Total other changes - liabilities | 3,171 | 19,346 | - | 22,517 |
| Total other changes - equity | - | - | 131,550 | 131,550 |
| Balance as of September 30, 2022 | 706,358 | 79,921 | 1,194,042 | 1,980,321 |
| Liabilities | Leases | Net Equity | Total | |
| --- | --- | --- | --- | --- |
| Loans and financing | Leases (Note 11.b) | Reserves | ||
| Balance as of January 1, 2021 | 89,230 | 75,228 | 116,072 | 280,530 |
| Changes in cash flow from financing activities | ||||
| Proceeds from loans and borrowings | 740,596 | - | - | 740,596 |
| Loan and borrowings payments, and lease payments | (71,702) | (12,407) | - | (84,109) |
| Share-based plan contributions | - | - | 989 | 989 |
| Interest on equity paid | - | - | (713) | (713) |
| Dividends paid | - | - | (71,039) | (71,039) |
| Total changes in financing cash flows | 668,894 | (12,407) | (70,763) | 585,724 |
| Effect of changes in exchange rates | 321 | 1,130 | - | 1,451 |
| Other changes - related to liabilities | ||||
| Additions due to business combination | - | 6,139 | - | 6,139 |
| New leases | - | 11,765 | - | 11,765 |
| Remeasurement | - | 1,351 | - | 1,351 |
| Interest expense | 10,184 | 4,409 | - | 14,593 |
| Interest paid | (2,296) | (3,972) | - | (6,268) |
| Other costs | 15,814 | (192) | - | 15,622 |
| Lease write-offs | - | (487) | - | (487) |
| Total other changes related to liabilities | 23,702 | 19,013 | - | 42,715 |
| Total other changes related to equity | - | - | 109,868 | 109,868 |
| Balance as of September 30, 2021 | 782,147 | 82,964 | 155,177 | 1,020,288 |
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Table of Contents
CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
Loans and borrowings covenants
The loans and borrowings described above are subject to covenants, which establish the early maturity of debts. Some of the Group’s debt contracts have covenants that require it to maintain certain ratios, such as Net Debt to EBITDA (Earnings Before Interest, Depreciation and Amortization). The Group has complied with these covenants as of September 30, 2022 and December 31, 2021.
In addition, early maturity of the loans could be caused by:
| — | Disposal, merger, incorporation, spin-off, or any other corporate reorganization process that implies a change in the shareholding control, except for the prior consent from the creditor, and if it does not affect the liquidity capacity of this instrument. |
|---|---|
| — | Failure to send the annual financial statements within 180 days of the fiscal year-end. |
13 Salaries and welfare charges
| September 30, 2022 | December 31, 2021 | |
|---|---|---|
| Salaries | 30,647 | 31,342 |
| Accrued vacation and charges | 106,458 | 83,750 |
| Accrued (13th) salary | 20,161 | - |
| Bonus | 55,033 | 72,810 |
| Withholding income tax | 19,601 | 20,604 |
| Payroll charges (social contributions) | 13,091 | 18,124 |
| Others | 11,037 | 7,543 |
| Total | 256,028 | 234,173 |
The table below shows the movement of the bonus accrual:
| 2022 | ||||||
|---|---|---|---|---|---|---|
| Balance as of January 1, 2022 | Addition | Addition due to business combination (*) | Payment | Effect of movements in exchange rates | Balance as of September 30, 2022 | |
| Bonus | 72,810 | 52,156 | 675 | (71,407) | 799 | 55,033 |
| 2021 | ||||||
| --- | --- | --- | --- | --- | --- | |
| Balance as of January 1, 2021 | Addition | Payment | Effect of movements in exchange rates | Balance as of September 30, 2021 | ||
| Bonus | 52,312 | 53,610 | (51,920) | - | 54,002 |
(*) Refers to business combination of Somo on January 27, 2022 (note 2.2).
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
14 Accounts payable for business combination
| September 30, 2022 | December 31, 2021 | |
|---|---|---|
| Dextra (note 2.1) | ||
| Acquisition cost | - | 48,817 |
| Retained amount | 33,152 | 30,000 |
| Other | - | 6,909 |
| 33,152 | 85,726 | |
| Somo (note 2.2) | ||
| Earn-out | 55,078 | - |
| Escrow account | 19,263 | - |
| Other | 2,059 | - |
| 76,400 | - | |
| Box 1824 (note 2.3) | ||
| Retained amount | 8,700 | - |
| Other | 974 | - |
| 9,674 | - | |
| Current | 63,947 | 48,923 |
| Non-current | 55,279 | 36,803 |
| Total | 119,226 | 85,726 |
The table below shows the movement of the accounts payable for business combination:
| 2022 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Balance as of January 1, 2022 | Monetary adjustment<br><br><br>(iii) | Price adjustment review (i) | Acquisitions (note 2.2, 2.3) | Exchange variation | FVA (ii) | Payment | Balance as of September 30, 2022 | |
| Accounts payable for business combination (note 2) | 85,726 | 7,786 | 1,439 | 102,445 | (15,387) | 5,243 | (68,026) | 119,226 |
| 2021 | ||||||||
| --- | --- | --- | --- | --- | --- | |||
| Balance as of January 1, 2021 | Acquisitions (note 2.2) | Monetary adjustment | Payment | Balance as of December 31, 2021 | ||||
| Accounts payable for business combination | - | 133,573 | 3,091 | (50,938) | 85,726 | |||
| (i) | Refers to the review of the purchase price of Dextra and Somo: a) the Management revised the purchase price on the closing date based related to the acquisition of Dextra Investimentos S.A. and reduced the price based in the amount of R$ 16,427, thus the total of consideration transferred was R$ 783,573. After the revision and agreement with the sellers, on March 30, 2022, the reduction of adjusted price was agreed in the amount of R$ 14,062, resulting in an increase in the balance to payable of R$ 2,365, recognized in the statement of profit or loss; b) In May, the Management revised the purchase price related to the acquisition of Somo and reduced the price based in the amount of R$ 368, , recognized in the statement of profit or loss; and c) In September, the Management revised the purchase price related to acquisition of BOX 1824 and reduced the price based in the amount of R$ 558, recognized in the goodwill. | |||||||
| --- | --- | |||||||
| (ii) | Refers to the remeasurement of the SOMO earn-out due to the achievement of the Net Revenue cap foreseen in the SPA. | |||||||
| (iii) | Adjusted by the CDI rate. | |||||||
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Table of Contents
CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
15 Provisions
The Group is involved in tax and labor lawsuits that were considered probable losses and are provisioned according to the table below:
| 0 | Balance as of January 1, 2021 | Provisions | Balance as of December 31, 2021 | Provisions | Provisions assumed in a business combination (note 2.3.c) | Reversal | Charges | Payments | Balance as of September 30, 2022 |
|---|---|---|---|---|---|---|---|---|---|
| Tax | 11 | 120 | 131 | 77 | - | (3) | - | - | 205 |
| Labor | 150 | 352 | 502 | 582 | 13,583 | (270) | (11) | (4) | 14,382 |
| Total Provisions | 161 | 472 | 633 | 659 | 13,583 | (273) | (11) | (4) | 14,587 |
The main labor lawsuits above refer to the compliance with a minimum quota of employees with disabilities and lack of control over working hours.
In relation to the business combination with Box 1824, the Group has also assumed an amount of R$ 13,583 of unmaterialized labor contingencies liability (note 2.3.c/d)
Additionally, the Group is a party to civil, labor and tax lawsuits, whose likelihood of loss is regarded as possible, for which no provision was recorded, in the amount of R$ 3,568 as of September 30, 2022 (R$ 4,292 as of December 31, 2021) of which all R$ 3,562 related to lawsuits assumed in the business combination with Dextra Group.
The main discussion assessed as possible loss refers to:
- Tax lawsuits related to non-contribution tax credits referring to payroll in the period from January 1 to December 31, 2011.
- In relation to the business combination with Box 1824, the Group has also assumed the unmaterialized labor contingencies liability, whose likelihood of loss is regarded as possible, for which no provision was recorded, in the amount of R$ 7,514 as of September 30, 2022.
Judicial deposits
As of September 30, 2022, the Group’s judicial deposits totaled R$ 9,468 (R$ 3,079 as of December 31, 2021), recognized in the statement of financial position, in non-current assets. Of this amount, R$ 9,034 (R$ 2,933 as of December 31, 2021) refers to tax lawsuits, R$ 415 (R$ 142 as of December 31, 2021) refers to labor lawsuits and R$ 4 (R$ 4 as of December 31, 2021) refers to civil lawsuits.
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
16 Employee benefits
The Group provides its employees with benefits that include medical care, dental care, and life insurance during their employment. These benefits are paid by the Group and according to the category of health plans elected, with a consideration paid by the employee.
Additionally, the Group offers its employees the option to adhere to a private pension plan to which voluntary contributions are made. For CI&T Brazil, the contributions are made exclusively by the participants; for CI&T US, CI&T UK and CI&T Canada the companies contribute with the same amount as the participants up to 4% of the employee salary. In both scenarios, there is no consideration to be paid by the subsidiaries, as there are no post-employment obligations. The nature of the plan allows employees to suspend or discontinue their contributions at any time and allows the Management to transfer the portfolio to another administrator.
The Group does not have additional post-employment obligations and no other long-term benefits, such as time-of-service leave, lifetime health plan, and other time-service benefits.
17 Stock option plan and share-based compensation
a. Plan in force
First plan (2020 / 2021)
On March 30, 2020, the Board of Directors approved the 1^st^ and 2^nd^ stock option programs and, on February 26, 2021, approved the 3^rd^ and 4^th^ stock option programs, through which selected executives were granted options that confer the right to exercise the stock purchase, subject to certain conditions under the “Stock Option Plan”, with the option to settle in equity and cash.
On October 29, 2021, in connection with a restructuring (see note 1.a), the Board of Directors approved the migration of the plan from the subsidiary CI&T Brazil to the Company. The Company recognized the rights of each participant accrued under the corresponding plan and related programs and shall assume all obligations of CI&T Brazil under such plan. Since that, the Company remeasured the fair value of the stock options granted, both of the Company and of the subsidiary CI&T Brazil on the date of the plan migration. The remeasurement to the fair value of the stock options granted was immaterial.
The options already granted become options granted under the CI&T Cayman Plan, provided that each option shall confer the right to acquire one class A common share issued by Company.
Considering that the number of shares forming the Company’s capital stock is approximately 68.14 times the number of shares forming the subsidiary CI&T Brazil, the number of granted options and the exercise price were adjusted in the same proportion.
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
Stock option program (equity settled)
The following are the general conditions of the Group’s stock option plan:
| Characteristics of the plans: | Plan 2020/2021 - Equity-settled | ||||
|---|---|---|---|---|---|
| 1st and 2nd Program | 3rd Program | 4th Program | |||
| Grant date | 01/04/2020 | 01/04/2021 | 01/04/2021 | ||
| Exercise Period: | 6.8 years | (i) | 5.8 years | 5.8 years | (i) |
| Exercise | - | (i) | - | - | (i) |
| Limit date | 01/01/2027 | (i) | 01/01/2027 | 01/01/2027 | (i) |
| Activity of stock option number | |||||
| (+) Total number of granted options | 3,940,478 | 666,616 | 187,820 | ||
| (-) Canceled options | 78,360 | - | 19,900 | ||
| (-) Exercised options | 805,039 | 54,854 | 12,367 | ||
| (=) Number of options not exercised | 3,057,079 | (ii) | 611,762 | 155,553 | (ii) |
| (=) Number of outstanding options on 09/30/2022 | 3,057,079 | 611,762 | 155,553 | ||
| (=) Number of exercisable options on 09/30/2022 | 1,902,444 | - | - | ||
| Inputs used in the measurement | |||||
| Exercise price (in reais) | 9.58 | (ii) | 19.84 | 19.84 | (ii) |
| Share price on the grant date (in reais) | 21.68 | (v) | 21.68 | 21.68 | (v) |
| Volatility (% p.a.) | 24.19% | (iv) | 27.73% | 27.73% | (iv) |
| Interest rate (% p.a.) | 1.53% | 2.66% | 2.66% | ||
| Option value (in reais) | 0.48 | (iii) | 1.81 | 1.85 | (iii) |
| Remaining average term (expected lifetime) | 3.7 years | (vi) | 4.3 years | 4.3 years | |
| Effects on income for the year: | |||||
| Total expense attributed to the granting of options (R$) | 1,846 | 1,275 | 298 | ||
| Expenses incurred until December 31, 2020 (R$) | 142 | - | - | ||
| Expenses incurred until December 31, 2021 (R$) | 668 | 251 | 48 | ||
| Expenses incurred until September 30, 2022 (R$) (note 17.d) | 204 | 191 | 33 | ||
| Expenses to incur | 832 | 833 | 217 | ||
| (i) | Conditional upon the grace period and assuming the possibility of anticipated vesting in face of a liquidity event. | ||||
| --- | --- | ||||
| (ii) | Price was established based on valuation at the time the options were granted. | ||||
| (iii) | Fair value based on the Black-Scholes method. | ||||
| (iv) | The expected volatility was estimated based on the historical volatility of the comparable companies share prices. | ||||
| (v) | The share price was determined based on a valuation prepared by the Group on the date of the plan migration. | ||||
| (vi) | Average calculated considering that, according to the definition of the plan, 25% of the options can be exercised before the vesting period. | ||||
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Unaudited condensed consolidated interim financial statements
September 30, 2022
The Board of Directors is entitled to select the participants of the program, at its sole discretion, among the Management, executives, employees and service providers of the Company and its subsidiaries. Additionally, the Board of Directors defines the terms of each program, when the option granted to the participants will become eligible for exercise (“vesting period”), including the possibility of anticipating the vesting period.
The fair value of the stock options granted is estimated on the grant date, based on the Black-Scholes model, which considers the terms and conditions for granting the shares.
On October 29, 2021, as a result of the corporate reorganization, the exercise price of the options changed from R$ 653.21 to R$ 9.58 for the 1^st^ and 2^nd^ programs and changed from R$ 1,352.00 to R$ 19.84 for the 3^rd^ and 4^th^ programs, to be updated according to the official national price index (IPCA / IBGE). The participants must pay the exercise price in cash and the program does not provide alternatives for paying cash back to participants.
In the period from January to September 2022, 872,260 (428,495 January to March, 326,727 in May and 117,038 July to September) ordinary shares were issued as a result of the exercise of vested options arising from the share option programs (see note 18.a). Options were exercised at a price of R$ 10.89 and R$ 11.32 for the 1st and 2nd stock option programs and R$ 21.68 and R$ 22.53 for the 3rd and 4th stock option programs, respectively.
Second plan (2022)
On June 9, 2022, the Board of Directors approved the 2^nd^ stock option plan, through which selected executives were granted options that confer the right to exercise the stock purchase, subject to certain conditions under the “Stock Option Plan”, with the option to settle in equity.
Stock option program (equity settled)
| Plan 2022 - Equity-settled | ||||||
|---|---|---|---|---|---|---|
| Characteristics of the plans: | ||||||
| Grant date | 01/04/2022 | 01/08/2022 | 01/09/2022 | |||
| Exercise Period: | 6.8 years | (i) | 6.8 years | (i) | 6.8 years | (i) |
| Limit date | 01/01/2029 | (i) | 01/01/2029 | (i) | 01/01/2029 | (i) |
| Activity of stock option number | ||||||
| (+) Total number of granted options | 290,099 | 133,245 | 87,629 | |||
| (=) Number of options not exercised | 290,099 | (i) | 133,245 | (i) | 87,629 | (i) |
| (=) Number of outstanding options on 09/30/2022 | 290,099 | 133,245 | 87,629 | |||
| Inputs used in the measurement | ||||||
| Exercise price (in dollar) | 16.95 | (ii) | 15.00 | (ii) | 16.95 | (ii) |
| Share price on the grant date (in dollar) | 17.50 | (v) | 11.50 | (v) | 8.13 | (v) |
| Volatility (% p.a.) | 27.44% | (iv) | 27.44% | (iv) | 27.44% | (iv) |
| Interest rate (% p.a.) | 0.39% | 2.60% | 3.26% | |||
| Option value (in dollar) | 3.37 | (iii) | 1.08 | (iii) | 0.65 | (iii) |
| Remaining average term (expected lifetime) | 3.0 years | (vi) | 2.4 years | (vi) | 2.4 years | (vi) |
| Effects on income for the year: | ||||||
| Total expense attributed to the granting of options (R$) | 4,593 | 743 | 170 | |||
| Expenses incurred until September 30, 2022 (R$) | 666 | 45 | 36 | |||
| Exchange variation | (54) | - | - | |||
| Expenses to incur | 3,981 | 698 | 134 | |||
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Unaudited condensed consolidated interim financial statements
September 30, 2022
(i) Conditional upon the grace period and assuming the possibility of anticipated vesting in face of a liquidity event.
(ii) Price established was based on valuation at the time the options are granted.
(iii) Fair value based on the Black-Scholes method.
(iv) The expected volatility was estimated based on the historical volatility of the comparable companies share prices.
(v) The share price on the grant date.
(vi) Average between vesting period and plan term that was set for 01/01/2029.
In the nine-months period ended on September 30, 2022, the Group recognized in the statement of profit or loss an amount of R$ 1,175 (R$ 300 as of September 30, 2021) related to expenses of equity-settled stock option program (see details in item “d”).
b. Stock option program (settled in cash)
As described above, the stock option program settled in cash was also migrated from the subsidiary CI&T Brazil to the Company. The number of granted options was proportionally adjusted by the equivalent of the Company’s shares.
The amount to be settled in cash is based on the increase in the Group’s share price between the grant date and the exercise date.
| Payable in cash | ||||
|---|---|---|---|---|
| Granting date | 04/2020 | 10/2021 | ||
| Exercise Period: | 6.8 years | (i) | 5.2 years | (i) |
| Exercise Date | - | (i) | - | (i) |
| Limit date for exercising the options | 01/01/2027 | (i) | 01/01/2027 | (i) |
| Total number of options granted | 69,774 | 12,130 | ||
| Liabilities carrying amount as of September 30, 2022 | 1,488 | 82 |
(i) Conditional upon the grace period and assuming the possibility of anticipated vesting in face of a liquidity event.
In the nine-months period ended on September 30, 2022, the Group recognized in the statement of profit or loss an amount of R$ 463 (R$ 147 as of September 30, 2021) related to expenses of the stock option program settled in cash (see details in item “d”).
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Unaudited condensed consolidated interim financial statements
September 30, 2022
c. Share-based compensation - shares granted to executive officers
Box 1824
On May 31, 2022, the Company granted to the former controlling shareholder of the subsidiary Box 1824 the right to receive 45,255 shares. Box’s shareholder became an executive of the Group, and the granting of the shares is conditioned to continuing employment in the Group until the first and second maturities, on May 31, 2026 and 2027, respectively. The fair value of the shares was estimated on the acquisition date of the subsidiary, based on the share price, in the amount of R$ 3,521.
In the nine-months period ended on September 30, 2022, the Group recognized in the statement of profit or loss an amount of R$ 256 related to expenses of the share-based compensation plan (shares granted) (see details in item “d”).
d. Expenses recognized in profit or loss
| September 30, 2022 | September 30, 2021 | |
|---|---|---|
| Plan in force: | ||
| Equity settled | 1,175 | 300 |
| Cash settled | 463 | 147 |
| Shares granted to executives’ officers | 256 | 246 |
| Expenses recognized in profit or loss (note 20) | 1,894 | 693 |
| Other effects in shareholders’ equity | - | 989 |
| Total | 1,894 | 1,682 |
| (-) Effect of cash settled | (463) | (147) |
| Effect of movements in exchange rates | (61) | 3 |
| Total shareholders’ equity | 1,370 | 1,538 |
18 Equity
a. Share capital
| September 30, 2022 | December 31, 2021 | |
|---|---|---|
| Number of ordinary nominative shares | 133,637,436 | 132,197,896 |
| Par value | 0.00027 | 0.00027 |
| Total share capital | 37 | 36 |
As of September 30, 2022, the total issued share capital of R$ 37 (R$ 36 as of December 31, 2021) is divided into 133,637,436 common shares (132,197,896 as of December 31, 2021).
Those common shares are divided into 19,792,235 Class A common shares, including 225,649 Class A common shares that were issued as part of the payment for the Somo acquisition in January 2022 (see note 2.2), 341,631 Class A common shares that were issued in August 2022 as part of the payment for the Transpire acquisition in September 1, 2022 (see note 2.4), both of them issued accordingly the CI&T´s share price at their respective transaction dates, and 872,260 Class A common shares issued from January to September 2022 in connection with our stock option plan (see note 17), and 113,845,201 Class B common shares.
The holders of the Class A common shares and Class B common shares have identical rights, except that (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.
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Unaudited condensed consolidated interim financial statements
September 30, 2022
b. Share premium
The share premium refers 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 business combinations occurred from January to September 2022, the share premium increased by R$ 14,037 of shares issued as part of the payment for the Somo acquisition in January 2022 (see note 2.2) and R$ 16,189 of shares issued as part of the payment for the Transpire acquisition in September 2022. As of September 30, 2002, the total amount of share premium is R$ 946,173 (R$ 915,947 as of December 31, 2021).
c. Capital reserve
Corporate restructuring
As described in note 1.a above, CI&T completed its corporate restructuring in November 2021. CI&T Brazil ceased to be the ultimate parent company, and CI&T (non-operating holding company) became the ultimate parent company. This transaction occurred through the transfer of the shares of its shareholders from CI&T Brazil to CI&T Delaware and, subsequently, to CI&T, which resulted in the capital increase of 121,086,781 shares at a par value of R$ 0.00027 per share.
Share-based compensation
The Group has share-based compensation plans that are accounted as Capital reserve.
Additionally, in connection with the business combination of Box 1824, the Group recorded as Capital reserve a share-based payment award included in a change-in-control clause (see note 2.3.a). Once an acquiree award that includes a change-in-control that does not require post-combination service to the vest, the unvested awards are vested immediately at the transaction date.
Share issuance costs
In 2021, the Company incurred incremental costs directly attributable to the public offering, recorded in the Capital reserve.
d. Earnings reserves
| September 30, 2022 | December 31, 2021 | |
|---|---|---|
| Retained earnings reserve | 125,957 | 125,957 |
| Retained earnings – net profit for the period | 95,830 | - |
| Total retained earnings | 221,787 | 125,957 |
e. Dividends and interest on equity
As of September 30, 2022, the Company had no dividends liability.
f. Other comprehensive income
Translation differences
Accumulated translation adjustments include all foreign currency translation differences on investments abroad.
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Unaudited condensed consolidated interim financial statements
September 30, 2022
Cash flow hedges
As mentioned on note 24, in January 2022, the Company decided to apply hedge accounting for financial instruments (non-derivates), with the purpose of hedging exchange rates in transactions related to highly probable risk operations. The movement of exchange variation to be realized by highly probable transactions is accumulated in other comprehensive income.
19 Net revenue
The Group generates revenue primarily through the provision of services described in the table below, which is summarized by nature:
| Period ended September 30, 2022 | Quarter ended September 30, 2022 | Period ended September 30, 2021 | Quarter ended September 30, 2021 | |
|---|---|---|---|---|
| Software development revenue | 1,508,853 | 533,060 | 952,745 | 364,626 |
| Software maintenance revenue | 42,093 | 15,136 | 20,194 | 6,667 |
| Consulting revenue | 13,978 | 3,780 | 11,641 | 3,924 |
| Revenue from software license agent | 882 | 357 | 1,244 | 209 |
| Other revenue | 10,099 | 6,685 | 1,762 | 544 |
| Total net revenue | 1,575,905 | 559,018 | 987,586 | 375,970 |
The following table sets forth the net revenue by industry vertical for the periods indicated:
| Period ended September 30, 2022 | Quarter ended September 30, 2022 | Period ended September 30, 2021 | Quarter ended September 30, 2021 | |
|---|---|---|---|---|
| By Industry Vertical | ||||
| Financial Services | 476,250 | 161,185 | 345,073 | 134,984 |
| Food and Beverages | 316,891 | 114,835 | 250,426 | 78,258 |
| Technology, Media and Telecom | 215,153 | 77,710 | 108,006 | 45,515 |
| Pharmaceuticals and Cosmetics | 208,837 | 74,847 | 139,107 | 51,503 |
| Retail and Manufacturing | 99,807 | 32,753 | 55,140 | 20,930 |
| Education and Services | 55,508 | 18,855 | 40,096 | 16,458 |
| Logistic and Transportation | 54,861 | 20,229 | 20,868 | 10,713 |
| Others | 148,598 | 58,604 | 28,870 | 17,609 |
| Total net revenue | 1,575,905 | 559,018 | 987,586 | 375,970 |
Performance obligations and revenue recognition policies
The revenue is measured based on the consideration specified in the contract with the client. The Group recognizes revenue when it transfers control over the product or service to the customer.
The table below provides information on the nature and timing of performance obligations in contracts with customers, including the revenue recognition policies listed in the main types of services:
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Unaudited condensed consolidated interim financial statements
September 30, 2022
| Type of service | Nature and timing of performance obligations | Revenue recognition in accordance with IFRS 15 |
|---|---|---|
| Services provision: <br>- software development; <br>- software maintenance; <br>- consultancy. | The Group has determined that the customer controls all work in progress as the services are provided. This is because, according to these contracts, services are provided according to the client’s specifications and, if a contract is terminated by the client, the Group will be entitled to reimbursement of the costs incurred to date, including a reasonable margin.<br><br><br><br><br><br>Invoices are issued in accordance with contractual terms and are usually paid on average in 69 days as of September 30, 2022 (70 days as of December 31, 2021). Unbilled amounts are presented as contract assets. | The associated revenue and costs are recognized over time. The progress of the performance obligation is measured based on the hours incurred. |
| Software License Agency | The Group acts as an agent in software license agreements between the developer and the customer.<br><br><br><br><br><br>Invoices (related to agency fees) are issued in accordance with the contractual terms and are generally paid on average within 45 days. | Revenue related to fees as agent is recognized when contracts are entered into. |
Contract assets
Contract assets relate mainly to the Group’s rights to consideration for services performed, for which control has been transferred to the client, but not invoiced on the reporting date. Contract assets are transferred to receivables when the Group issues an invoice to the client.
The balances from contract assets are shown and segregated in the statement of financial position as follows:
| . | September 30, 2022 | December 31, 2021 |
|---|---|---|
| Local market | 121,571 | 80,107 |
| Foreign market | 108,558 | 55,194 |
| (-) Expected credit losses from contract assets | (964) | (913) |
| Total | 229,165 | 134,388 |
The movement of expected credit losses of contract assets, is as follows:
| Balance as of January 1, 2021 | (675) |
|---|---|
| Reversal (Provision) | (918) |
| Effect of movements in exchange rates | (5) |
| Balance as of September 30, 2021 | (1,598) |
| Reversal (Provision) | 701 |
| Effect of movements in exchange rates | (16) |
| Balance as of December 31, 2021 | (913) |
| Reversal (Provision) | (182) |
| Effect of movements in exchange rates | 131 |
| Balance as of September 30, 2022 | (964) |
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Unaudited condensed consolidated interim financial statements
September 30, 2022
20 Expenses by nature
Information on the nature of expenses recognized in the condensed consolidated interim statement of profit or loss is presented below:
| Period ended September 30, 2022 | Quarter ended September 30, 2022 | Period ended September 30, 2021 | Quarter ended September 30, 2021 | |
|---|---|---|---|---|
| Employee expenses | (1,147,641) | (401,405) | (693,686) | (271,276) |
| Third-party services and other inputs | (83,994) | (32,671) | (46,124) | (18,111) |
| Depreciation and amortization ^(a)^ | (67,154) | (23,558) | (30,102) | (14,083) |
| Insurance | (11,388) | (3,701) | (759) | (287) |
| Short-term leases | (5,071) | (1,736) | (4,554) | (1,129) |
| Travel expenses | (9,059) | (3,940) | (1,398) | (789) |
| Training | (4,854) | (1,925) | (2,844) | (1,159) |
| Share based compensation ^(b)^ | (1,894) | (761) | (693) | (193) |
| Expected credit loss | (385) | 325 | (2,030) | (1,662) |
| Consulting ^(c)^ | (14,818) | (5,728) | (5,357) | (4,895) |
| Impairment of intangible assets | - | - | (21,818) | (21,818) |
| Other post-acquisition expenses^(d)^ | (19,233) | (10,769) | - | - |
| Other costs and expenses | (23,040) | (8,572) | (12,475) | (1,503) |
| Total | (1,388,531) | (494,441) | (821,840) | (336,905) |
| Disclosed as: | ||||
| Costs of services provided | (1,034,111) | (363,617) | (640,986) | (246,846) |
| Selling expenses | (118,428) | (43,337) | (61,902) | (24,122) |
| General and administrative expenses | (228,115) | (84,804) | (93,056) | (38,966) |
| Research and technological innovation expenses | - | - | (4) | - |
| Impairment loss on trade receivables and contract assets | (385) | 325 | (2,030) | (1,662) |
| Other expenses | (7,492) | (3,008) | (23,862) | (25,309) |
| Total | (1,388,531) | (494,441) | (821,840) | (336,905) |
| (a) | Depreciation and amortization include R$ 30,302 (R$ 23,121 as of September 30, 2021) classified as cost of services, R$ 7,582 (R$ 4,406 as of September 30, 2021) as expenses, and R$ 29,270 (R$ 2,574 as of September 30, 2021) regarding identifiable net assets amortization as expenses. | |||
| --- | --- | |||
| (b) | Share-based compensation includes R$ 1,190 (R$ 348 as of September 30, 2021) classified as cost of services and R$ 704 (R$ 345 as of September 30, 2021) as expenses. | |||
| (c) | Consulting expenses in the total amount of R$ 14,818 (R$ 2,277 as of September 30, 2021) related to acquisitions and R$ 3,080 as of September 30, 2021 referring to costs directly attributable to secondary public share offerings. | |||
| (d) | Other post-acquisition expenses include the fair value adjustment on account payables for business combination (R$ 7,240) and other expenses related to the obligation of business combination (R$ 11,992). | |||
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Unaudited condensed consolidated interim financial statements
September 30, 2022
21 Net finance costs
| Period ended September 30, 2022 | Quarter ended September 30, 2022 | Period ended September 30, 2021 | Quarter ended September 30, 2021 | |
|---|---|---|---|---|
| Finance income: | ||||
| Income from financial investments | 5,383 | 1,828 | 3,534 | 2,810 |
| Foreign-exchange gain ^(a)^ | 128,883 | 21,525 | 23,998 | 11,597 |
| Gains on derivatives | 18,849 | 7,984 | 15,282 | 3,054 |
| Interest received | 1,965 | 1,144 | 115 | 43 |
| Positive monetary variation | 35 | 25 | - | - |
| Other finance income | 523 | 244 | 492 | 87 |
| Total | 155,638 | 32,750 | 43,421 | 17,591 |
| Finance costs: | ||||
| Exchange variation loss ^(b)^ | (108,500) | (15,791) | (36,159) | (18,262) |
| Loss on derivatives | (12,631) | (1,961) | (15,258) | (7,687) |
| Interest and charges on loans and leases (note 12) ^(c)^ | (55,159) | (18,104) | (14,593) | (10,920) |
| Bank guarantee expenses | (471) | (158) | (17) | - |
| Negative monetary variation | (7,786) | (3,174) | - | - |
| Other finance costs | (12,768) | (994) | (3,496) | (3,138) |
| Total | (197,315) | (40,182) | (69,523) | (40,007) |
| Net finance results | (41,677) | (7,432) | (26,102) | (22,416) |
| (a) | Foreign exchange gains are increased by the translation of assets and liabilities held in foreign currencies. The variation is mainly led by the translation of trading and financial operations R$ 88,847 (R$ 23,998 in September 2021) and cash functional currency R$ 17,396. | |||
| --- | --- | |||
| (b) | Foreign exchange losses are increased by the translation of assets and liabilities held in foreign currencies. The variation is mainly led by the translation of trading and financial operations R$ 64,000 (R$ 36,159 as of September 2021) and cash functional currency R$ 32,605. | |||
| (c) | The main variation of the interest and charges on loans and leases is related to loans for the Dextra acquisition of R$ 32,621. |
22 Income tax and social contribution
Income tax expenses are recognized at an amount determined by multiplying the profit (loss) before tax for the interim reporting period based on the Management's best estimate of the weighted average annual income tax rate expected for the full financial year, adjusted for the tax effect of certain items recognized in full in the interim period. Income tax expenses include current and deferred tax and social contribution on net profit.
The Group’s consolidated effective tax rate in respect of continuing operations for the nine-months period ended September 30, 2022, was 34%, and for the nine-months period ended September 30, 2021 was 41%.
23 Earnings per share
Basic and diluted earnings per share
The calculation of basic earnings per share was based on the net income attributed to holders of common shares and the weighted average number of outstanding common shares. The calculation of diluted earnings per share was based on the net income attributed to holders of common shares and the weighted average number of outstanding common shares, after adjustments for all potential diluted common shares.
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
| Period ended September 30, 2022 | Quarter ended September 30, 2022 | Period ended September 30, 2021 | Quarter ended September 30, 2021 | |
|---|---|---|---|---|
| Numerator | ||||
| Profit attributable to holders of ordinary shares | 95,830 | 40,608 | 82,129 | (2,208) |
| Denominator | ||||
| Weighted average number of basic shares held by shareholders | 133,006,973 | 133,332,778 | 119,960,422 | 119,960,451 |
| Earnings per share—basic | 0.72 | 0.30 | 0.68 | (0.02) |
| Numerator | ||||
| Profit attributable to holders of ordinary shares | 95,830 | 40,608 | 82,129 | (2,208) |
| Denominator | ||||
| Weighted average number of diluted shares held by shareholders | 133,006,973 | 133,332,778 | 122,895,435 | 119,960,451 |
| Net earnings per share – diluted | 0.72 | 0.30 | 0.67 | (0.02) |
Weighted average number of common shares
| Period ended September 30, 2022 | Quarter ended September 30, 2022 | Period ended September 30, 2021 | Quarter ended September 30, 2021 | |
|---|---|---|---|---|
| Weighted average ordinary shares (basic) | 133,006,973 | 133,332,778 | 119,960,422 | 119,960,451 |
| Effect of stock options when exercised | - | - | 2,935,013 | - |
| Weighted average number of ordinary shares | 133,006,973 | 133,332,778 | 122,895,435 | 119,960,451 |
24 Financial instruments and risk management
24.1 Financial instrument categories
The Group maintains operations with derivative and non-derivative financial instruments. The control policy consists of monitoring the terms contracted against current terms and conditions in the market. The Company does not make investments of speculative nature in derivatives or any other risk assets (see note 6.2).
The estimated fair value of the Group's financial instruments considered the following methods and assumptions:
| ● | Cash and cash equivalents and financial investment: recognized at cost plus income earned up to the closing date of the financial statements, which approximate their fair value. |
|---|---|
| ● | Trade receivables: arise directly from the Group's operations, classified at amortized cost, are recorded at their original values, adjusted based on the exchange rate changes, when applicable, and subject to a provision for losses. Their carrying amount is a reasonable approximation of fair value. |
| ● | 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. |
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September 30, 2022
| ● | Derivative financial instruments: The Group used derivative financial instruments to manage the interest rate risk exposure. This risk arises from the possibility of the Group incurring losses because of interest rate fluctuations that increase finance costs related to loans. Since April 2021, the Group has decided to not engage in new derivative agreements to manage the foreign exchange risk exposure. Existing contracts were maintained: NDFs — non-deliverable forwards are used for operations with derivative instruments, for the discounted cash flow model for fair value calculation, with future dollar and interest assumptions obtained at B3 — Brasil, Bolsa, Balcão. Black and Scholes fair value statistical model is used for transactions with currency option (dollar), with future dollar and interest assumption obtained at B3. The financial instruments were valued by calculating the present value through the use of market curves that impact the specific instrument on the calculation dates. For this, future curves of USD Libor 3M, exchange coupon, and currency quotation are used. For interest rate swaps, the present value of the asset position and the liability position, both are 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, both are 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. |
|---|
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, segregated by category:
| September 30, 2022 | ||||
|---|---|---|---|---|
| Amortized cost | Assets/liabilities measured at FVTPL | Assets/liabilities measured at FVOCI | Total | |
| Financial assets | ||||
| Cash and cash equivalents | 151,850 | - | - | 151,850 |
| Financial investments | 181,857 | - | - | 181,857 |
| Trade receivables | 462,793 | - | - | 462,793 |
| Contract assets | 229,165 | - | - | 229,165 |
| Derivatives | - | 11,775 | - | 11,775 |
| Non-derivatives financial instruments – exports revenue | - | - | 13,028 | 13,028 |
| Other assets | 37,098 | - | - | 37,098 |
| 1,062,763 | 11,775 | 13,028 | 1,087,566 | |
| Financial liabilities | ||||
| Suppliers and other payables | 26,512 | - | - | 26,512 |
| Loans and borrowings | 706,358 | - | - | 706,358 |
| Lease liabilities | 79,921 | - | - | 79,921 |
| Accounts payable for business combination | 119,226 | - | - | 119,226 |
| Derivatives | - | 6,095 | - | 6,095 |
| Non-derivatives financial instruments – exports revenue | - | - | 43,749 | 43,749 |
| Non-derivatives financial instruments – financial investments | - | - | 6,566 | 6,566 |
| Contract liabilities | 11,760 | - | - | 11,760 |
| Other liabilities | 36,153 | - | - | 36,153 |
| 979,930 | 6,095 | 50,315 | 1,036,340 | |
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
| December 31, 2021 | ||||
|---|---|---|---|---|
| Amortized cost | Assets/liabilities measured at FVTPL | Assets/liabilities measured at FVOCI | Total | |
| Financial assets | ||||
| Cash and cash equivalents | 135,727 | - | - | 135,727 |
| Financial investments | 798,786 | - | - | 798,786 |
| Trade receivables | 340,519 | - | - | 340,519 |
| Contract assets | 134,388 | - | - | 134,388 |
| Derivatives | - | 896 | - | 896 |
| Other assets | 32,968 | - | - | 32,968 |
| 1,442,388 | 896 | - | 1,443,284 | |
| Financial liabilities | ||||
| Suppliers and other payables | 33,566 | - | - | 33,566 |
| Loans and borrowings | 788,709 | - | - | 788,709 |
| Lease liabilities | 81,888 | - | - | 81,888 |
| Accounts payable for business combination | 85,726 | - | - | 85,726 |
| Derivatives | - | 535 | - | 535 |
| Contract liabilities | 13,722 | - | - | 13,722 |
| Other liabilities | 15,329 | - | - | 15,329 |
| 1,018,940 | 535 | - | 1,019,475 |
24.2 Financial risk management
The Group’s operations are subject to the following risk factors:
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 national economic policy, 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 Foreign exchange risk management
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. The Group’s revenue is mainly 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. The Group is exposed to exchange rate risk on its financial investments, suppliers and other payables, trade receivables, loans and borrowings, accounts payable for business combination, lease liabilities and derivatives. See below the total amount exposure to foreign currency:
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Unaudited condensed consolidated interim financial statements
September 30, 2022
| September 30, 2022 | December 31, 2021 | |||||
|---|---|---|---|---|---|---|
| USD | GBP | Other | USD | GBP | Other | |
| Financial investments | 181,857 | - | - | 798,786 | - | - |
| Suppliers and other payables | (8,690) | (2,334) | (2,352) | (8,763) | - | (722) |
| Trade receivables | 302,831 | 32,610 | 14,283 | 233,724 | - | 7,273 |
| Loans and borrowings | (271,455) | - | - | (266,561) | - | - |
| Accounts payable for business combination | - | (76,400) | - | - | - | - |
| Lease liabilities | (29,418) | (1,693) | (3,136) | (32,159) | - | (962) |
| Derivatives | (6,095) | - | - | 361 | - | - |
| Net exposure | 169,030 | (47,817) | 8,795 | 725,388 | - | 5,589 |
Accounting policy for hedge accounting
At inception of the hedge relationship, the Company documents its objective and strategy, including identification of the hedging instrument, the hedged item, the nature of the hedged risk and evaluation of hedge effectiveness requirements.
At the beginning of the transaction, the Company documents the relationship between the hedging instruments and the hedged items, for the purpose of risk management and the strategy for carrying out hedging transactions.
Cash flow hedge for the Group's future investments:
In January 2022, the Group decided to apply hedge accounting for certain financial instruments (non-derivatives) (see note 2.2.), with the purpose of hedging exchange rates in transactions related to highly probable risk operations.
Based on the Group's risk management and considering the existing natural hedge on exchange rate variations, the Group designates hedge relationships between “highly probable future acquisitions” (hedged item) and non-derivative US dollar financial investments (hedging instruments), and their exchange effects are recognized at the same time in the statements of profit or loss.
Exchange rate variations in proportions of cash flows from financial investments in US dollars (non-derivative financial instruments) are designated as hedging instruments. At the inception of designated hedging relationships, the Group documents the risk management objective and strategy for undertaking the hedge. The Group also documents the economic relationship between the hedged item and the hedging instrument, including identification of: (i) the hedging instrument; (ii) the hedged item; (iii) the nature of the risk being hedged; and (iv) the assessment whether the hedging relationship meets the hedge effectiveness requirements.
At January 3^rd^, 2022, the Company has designated hedge relationships “highly probable future acquisitions” and non-derivative US dollar financial investment per a total amount of US$ 104,615. On January 27, 2022, as mentioned in note 2.2, the Company has acquired the Somo Group. In connection with this acquisition, an amount of US$ 64,615 was realized to investments. On September 1, 2022, as mentioned in note 2.4, the Company has acquired Transpire. In connection with this acquisition, an amount of US$ 10,725 was realized to investments. The remaining balance of US$ 29,275 as of September 30, 2022, is still aligned to highly probable future acquisitions for the year of 2022. The Group monitors on a monthly basis the relationships between the hedge item and hedging instruments.
The individual hedge relationships are established on a one-to-one basis, that is, the “highly probable future acquisitions” of each month and the proportions of cash flows from financial investments made abroad, used in each relationship and individual hedge, have the same face value in US dollars. The Company considers as “highly probable future acquisitions” only part of its total planned acquisitions.
The exposure of the Group's future investments in acquisitions 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 financial investments (asset position) to the same type of risk.
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
a.2 Cash flow hedge for the Company's future Revenues:
export revenues:
Considering the natural hedge and the risk management strategy, the Company 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 U.S. dollar denominated future export revenues, so that gains or losses associated with the hedged transaction (the highly probable future exports) and the hedging instrument (debt obligations) are recognized in the statement of profit or loss in the same periods.
The schedule of cash flow hedge involving the Company´s future exports as of September 30, 2022 is set below:
| Present value of hedging instrument notional value at September 30, 2022 | |||||
|---|---|---|---|---|---|
| Hedging Instrument | Hedged Transaction | Nature of the Risk | Maturity Date | USD | BRL |
| Foreign exchange gains and losses on proportion of non-derivative financial instruments cash flows | Foreign exchange gains and losses of highly probable future monthly exports revenues | Foreign Currency - Real vs U.S. Dollar Spot Rate | 2022 to 2026 | ||
| Citibank ^(i)^ | 2026 | 30,000 | 162,198 | ||
| Citibank^(ii)^ | 2022 | 2,000 | 10,813 | ||
| Citibank ^(ii)^ | 2023 | 3,000 | 16,220 | ||
| Banco do Brasil ^(ii)^ | 2022 | 10,000 | 54,066 | ||
| Bradesco ^(ii)^ | 2023 | 3,000 | 16,220 | ||
| Citibank ^(ii)^ | 2023 | 2,000 | 10,813 | ||
| Itaú^(ii)^ | 2023 | 10,000 | 54,066 | ||
| Total amounts designated as of September 30, 2022 | 60,000 | 324,396 |
(i) Export credit note - NCE: Refers to financing to export software development services.
(ii) Advance on Foreign Exchange Contract (ACC).
Changes in the fair value of USD 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 (expense). The amounts accumulated in Equity are recognized in the Statement of Profit or Loss in the years 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 exports” 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 exports 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.
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
Hedge Accounting Effects
The movement of exchange variation accumulated in other comprehensive income as of September 30, 2022, realized by investments in acquisitions and to be realized by future investments in acquisitions are set out below:
| Exchange variation | |
|---|---|
| Balance as of December 31, 2021 | - |
| Recognized in Other comprehensive income | (27,547) |
| Reclassified to the statements of financial position - occurred investments in acquisitions | 20,981 |
| Balance as of September 30, 2022 | (6,566) |
The movement of exchange variation accumulated in other comprehensive income as of September 30, 2022, realized by occurred exports and to be realized by occurred exports are set out below:
| Exchange variation | |
|---|---|
| Balance as of December 31, 2021 | - |
| Recognized in Other comprehensive income | (33,104) |
| Reclassified to the statements of profit or loss - occurred exports | 2,383 |
| Balance as of September 30, 2022 | (30,721) |
As of September 30, 2022, the annual expectation of realization of the exchange variation balance accumulated in equity is R$ 5,466.
For all other hedged forecast transactions, the amount accumulated in the hedging reserve and the cost of hedging reserve is reclassified to profit or loss in the same period or periods during which the hedged expected future cash flows affect profit or loss.
Hedge relationships may be discontinued and/or restarted in compliance with the risk management strategy. In this sense, such evaluations are carried out quarterly. In such hedges, the effective portion of foreign exchange gains and losses arising from hedging instruments is recognized in equity, in other comprehensive income, and transferred to statements of profit or loss when the hedged item affects profit or loss for the period. If the future investments (hedged item) are no longer considered highly probable, the hedge relationship is revoked, and the exchange variation accumulated up to the date of revocation is reclassified to profit or loss.
Additionally, when a financial instrument designated as a hedging instrument expires or is settled, the Group may replace it with another financial instrument, in order to ensure the continuity of the hedging relationship. Similarly, when a transaction designated as a hedged item takes place, the Group may designate the financial instrument that hedged that transaction as a hedging instrument in a new hedging relationship. The ineffective portion of exchange rate variations arising from hedging instruments is recorded in the financial result for the period. The Group decided to apply cash flow hedge accounting and financial instruments designated for hedge accounting were classified as cash flow hedges. The effective amount of gain or loss on the instrument is accounted for under the heading “Other comprehensive income” and the ineffective amount under the heading of “Profit or loss”, with the accumulated gains and losses recognized in profit or loss or balance sheet.
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
a.3 Interest rate risk management
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.
Sensitivity analysis of non-derivative financial instruments
Exchange rate fluctuation and changes in interest rates may positively or adversely affect the financial statements, due to an increase or decrease in the balances of trade receivables and investments in foreign currency and the variation in the balances of financial investments and loans and borrowings.
The Group mitigates its risks relating to non-derivative financial assets and liabilities substantially, through the contracting of derivative financial instruments and natural hedge, balancing financial assets and liabilities in foreign currency. Accordingly, the Group identified the main risk factors that may generate losses for its operations with derivative financial instruments and this sensitivity analysis is based on three scenarios that may impact the Group’s future results and cash flows, as described below:
| (i) | Probable scenario: The Group’s projections, based on internal and external data, considered the highest projection expected by the Company for the next 12 months: (i) the interest rate index in order to analyze the sensitivity of the index in short-term investments and loans and borrowings was 13.18% for CDI and 4.45% for Libor (only applicable for some loans and borrowings); (ii) the exchange rate of R$ 5.1593 for USD and R$ 5.9856 for GBP, related to the closing rate projected by the Company, for the purposes of analyzing the foreign exchange exposure. Based on these factors, variations in the adverse and remote scenarios were calculated. |
|---|---|
| (iii) | Adverse scenario: considered a variation of 25% in the main risk factor of each transaction. |
| (iii) | Remote scenario: considered a variation of 50% in the main risk factor of each transaction. |
For each scenario, the gross finance income or finance costs were calculated, excluding taxes and the maturity flow of each agreement. The base date considered was September 30, 2022, projecting the indexes for one year and verifying their sensitivity in each scenario.
Sensitivity analysis for interest rate risk
| Risk | Exposure in R$ | Period rates | Probable scenario (I) | Adverse Scenario (II) | Remote Scenario (III) | |
|---|---|---|---|---|---|---|
| Short-term financial investments | Interest rate increase – CDI | 73,447 | 13.65% | 13.18% | 16.48% | 19.77% |
| (345) | 2,079 | 4,495 | ||||
| Loans and borrowings | Interest rate increase – CDI | (314,614) | 13.65% | 13.18% | 16.48% | 19.77% |
| 1,479 | (8,904) | (19,254) | ||||
| Loans and borrowings | Interest rate increase - Libor | (129,365) | 2.74% | 4.45% | 5.56% | 6.68% |
| (2,212) | (3,648) | (5,097) | ||||
| Derivatives (interest rate swap) | Interest rate increase - Libor | 129,365 | 2.74% | 4.45% | 5.56% | 6.68% |
| 2,212 | 3,648 | 5,097 | ||||
| Net effect | 1,134 | (6,825) | (14,759) | |||
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
Sensitivity analysis for exchange rate risk
| Risk | Exposure in US$ | Probable scenario (I) | Adverse Scenario (II) | Remote Scenario (III) | |
|---|---|---|---|---|---|
| Net exchange variation on transactions | |||||
| Exchange variation in the year | Foreign currency appreciation - USD | 5.4066 | 5.1593 | 6.4491 | 7.7390 |
| Financial investments | 32,422 | (14,582) | 27,236 | 69,057 | |
| Suppliers and other payables | (1,607) | 399 | (1,674) | (3,747) | |
| Trade receivables | 56,011 | (13,853) | 58,390 | 130,638 | |
| Loans and borrowings | (57,327) | (24,312) | (98,253) | (172,199) | |
| Derivatives | 20,899 | (5,167) | 21,789 | 48,746 | |
| Lease liabilities | (5,441) | 1,346 | (5,672) | (12,690) | |
| Net effect | (56,169) | 1,816 | 59,805 | ||
| Risk | Exposure in $ | Probable scenario (I) | Adverse Scenario (II) | Remote Scenario (III) | |
| --- | --- | --- | --- | --- | --- |
| Net exchange variation on transactions | |||||
| Exchange variation in the year | Foreign currency appreciation - GBP | 6.0197 | 5.9856 | 7.4820 | 8.9784 |
| Suppliers and other payables | (388) | 12 | (569) | (1,150) | |
| Trade receivables | 5,417 | (186) | 7,920 | 16,026 | |
| Lease liabilities | (281) | 11 | (409) | (830) | |
| Accounts payable for business combination | (12,692) | 431 | (18,562) | (37,554) | |
| Net effect | 268 | (11,620) | (23,508) |
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.
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$ 151,850 on September 30, 2022 (R$ 135,727 as of December 31, 2021) and financial investments of R$ 181,857 on September 30, 2022 (R$ 798,786 as of December 31, 2021). The cash and cash equivalents and financial investments are held with banks and financial institution counterparties, which are rated BB- to A+.
The carrying amount of financial assets represents the maximum credit exposure. The maximum credit risk exposure on the date of the financial statements is:
| September 30, 2022 | December 31, 2021 | |
|---|---|---|
| Hedge financial instruments – SWAP | 11,775 | 896 |
| Cash and cash equivalents | 151,850 | 135,727 |
| Financial investments | 181,857 | 798,786 |
| Trade receivables | 462,793 | 340,519 |
| Contract assets | 229,165 | 134,388 |
| Other receivables (current and non-current) | 37,098 | 32,949 |
| 1,074,538 | 1,443,265 | |
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
On September 30, 2022, the exposure to credit risk for trade receivables, contract assets and other receivables by geographic region was as follows:
| September 30, 2022 | December 31, 2021 | |
|---|---|---|
| NAE (North America and Europe) | 462,974 | 297,430 |
| North America | 394,146 | 287,992 |
| Europe | 68,828 | 9,438 |
| LATAM (Latin America) | 248,179 | 202,528 |
| APJ (Asia, Pacific and Japan) | 17,903 | 7,917 |
| Total | 729,056 | 507,875 |
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 in order 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 12.
The following are 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:
| 2022 | |||||||
|---|---|---|---|---|---|---|---|
| Carrying amount | Cash contractual cash flow | 6 months or less | 6- 12 months | 1-2 years | 2-5 Years | More than 5 years | |
| Non-derivative financial liabilities | |||||||
| Trade payables | 26,512 | 26,512 | 26,512 | - | - | - | - |
| Loans and borrowings | 706,358 | 838,849 | 95,311 | 188,073 | 149,009 | 406,456 | - |
| Lease liabilities | 79,921 | 84,401 | 17,730 | 14,654 | 21,832 | 29,351 | 834 |
| Accounts payable for business combination | 119,226 | 137,846 | 55,078 | 10,818 | 12,294 | 59,656 | - |
| Contract liabilities | 11,760 | 11,760 | 11,760 | - | - | - | - |
| Other payables (current and non-current) | 36,153 | 36,153 | 36,153 | - | - | - | - |
| Non-derivatives financial instruments | 50,315 | 50,315 | 50,315 | - | - | - | - |
| Derivatives | 6,095 | 6,095 | 6,095 | - | - | - | - |
| 1,036,340 | 1,191,931 | 298,954 | 213,545 | 183,135 | 495,463 | 834 | |
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Unaudited condensed consolidated interim financial statements
September 30, 2022
| 2021 | ||||||
|---|---|---|---|---|---|---|
| Carrying amount | Contractual cash flow | 6 months or less | 6-12 months | 1-2 years | 2-6 years | |
| Non-derivative financial liabilities | ||||||
| Trade payables | 33,566 | 33,566 | 33,566 | - | - | - |
| Loans and borrowings | 788,709 | 974,942 | 136,161 | 88,045 | 171,022 | 579,714 |
| Lease liabilities | 81,888 | 87,662 | 12,435 | 12,251 | 22,284 | 40,692 |
| Accounts payable for business combination | 85,726 | 85,726 | 1,064 | 47,860 | 12,179 | 24,623 |
| Contract liabilities | 13,722 | 13,722 | 13,722 | - | - | - |
| Other payables (current and non-current) | 15,329 | 15,329 | 15,329 | - | - | - |
| Derivatives | 535 | 535 | 535 | - | - | - |
| 1,019,475 | 1,211,482 | 212,812 | 148,156 | 205,485 | 645,029 |
Bank credit lines
| September 30, 2022 | December 31, 2021 | |
|---|---|---|
| Used | - | 11,161 |
| Not used | 56,769 | 47,434 |
| 56,769 | 58,595 |
The Group has credit lines for working capital with the banks HSBC and Citibank, in the amount of US$ 10,500 or R$ 56,769, at the exchange rate of 5.4066, the commercial selling rate for U.S. dollars as of September 30, 2022, as reported by the Brazilian Central Bank, partially used (note 12).
24.3 Derivative financial instruments
The Group held derivative financial instruments to hedge its foreign currency and interest rate risk exposures. As of September 30, 2022, the Group no longer entered into purchase and sale agreement for derivative financial instruments (NDFs).
Fair value estimated for derivative financial instruments contracted by the Group was determined according to information available in the market, mainly through financial institutions and specific methodologies of assessment. However, considerable judgment is necessary to understand market data in order to produce the fair value estimate for each operation. Consequently, the estimates do not necessarily indicate the amounts that will be effectively realized at settlement.
For comparison purpose, as of December 31, 2021, the Group had the following agreements for financial derivatives (NDFs):
| 2021 | |||||
|---|---|---|---|---|---|
| Maturity | Nominal value (USD) | Contracted rate | Amount in R$ | Market rate | Fair value |
| February 25, 2022 | (560) | 5.6220 | (3,148) | 5.3459 | (17) |
| Total | (17) |
The Group also used options in order to protect exports against the risk of exchange variation. The Group may enter into zero-cost collar strategies, which consists of the purchase of a put option and the sale of a call option, contracted with the same counterparty and with a net zero premium.
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
As of September 30, 2022, the Group has no balances involving options to buy and sell currencies. For comparison purposes, the composition of the balances involving options to buy and sell currencies as of December 31, 2021, is as follows:
| 2021 | |||||
|---|---|---|---|---|---|
| Maturity | Nominal value (USD) | Contracted rate | Amount in R$ | Market rate | Fair value |
| 01/21/2021 - 01/17/2022 | 875 | Put option | 4,900 | 5.8257 | (349) |
| 02/25/2021 - 02/25/2022 | 490 | Put option | 2,909 | 5.6490 | (170) |
| Subtotal | (519) | ||||
| 01/21/2021 - 01/17/2022 | 875 | Call option | (4,900) | 5.5563 | 298 |
| 02/25/2021 - 02/25/2022 | 490 | Call option | (2,909) | 5.4690 | 196 |
| Subtotal | 494 | ||||
| Total | (25) |
During 2021, the Group entered into an interest rate swap transaction with the purpose of hedging the exposure to variable interest rate related to the Export Credit Note – NCE with Citibank.
In May 2022, the group negotiated a swap operation exchanging the CDI based rate to a USD prefixed rate, related to a portion of an Export Credit Note - NCE with Bradesco.
The interest rate profile of the Group’s interest-bearing financial instruments, as reported to the Group’s Management, is as follows:
| 2022 | |||||
|---|---|---|---|---|---|
| Maturity | Notional (USD) | Amount in R$ | Floating rate receivable | Fixed rate payable | Fair value |
| 07/16/2026 | 30,000 | 152,100 | 3-months LIBOR | 3.07% | 11,775 |
| 07/07/2026 | - | 100,000 | CDI | Foreign Exchange + 4.90% | (6,095) |
| 5,680 | |||||
| 2021 | |||||
| --- | --- | --- | --- | --- | --- |
| Maturity | Notional (USD) | Amount in R$ | Floating rate receivable | Fixed rate payable | Fair value |
| 07/16/2026 | 30,000 | 152,100 | 3-month LIBOR | 3.07% | 403 |
| 403 |
24.4 Classification of financial instruments by type of measurement of fair value
The Group has financial instruments measured at fair value, which are qualified as defined below:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that the group may have access to on the measurement date;
Level 2 - Observable information for the asset or liability, directly or indirectly, except for quoted prices included in Level 1; and
Level 3 - Unobservable data for the asset or liability.
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Unaudited condensed consolidated interim financial statements
September 30, 2022
| Carrying amount | Fair value | |||
|---|---|---|---|---|
| September 30, 2022 | December 31, 2021 | September 30, 2022 | December 31, 2021 | |
| Level 2 | ||||
| Derivatives: | ||||
| Non-Deliverable Forward - NDF | - | (17) | - | (17) |
| Interest rate swap | 5,680 | 403 | 5,680 | 403 |
| Call and put option term | - | (25) | - | (25) |
| Total | 5,680 | 361 | 5,680 | 361 |
| Non-derivatives | ||||
| Lease liabilities | (79,921) | (81,888) | (84,401) | (87,662) |
| Loans and borrowings | (706,358) | (788,709) | (838,849) | (974,942) |
| Accounts payable for business combination | (119,226) | (85,726) | (137,846) | (85,726) |
| Total | (905,505) | (956,323) | (1,061,096) | (1,148,330) |
| Total | (899,825) | (955,962) | (1,055,416) | (1,147,969) |
Cash and cash equivalents, financial investments, trade receivables and suppliers and other payables were not included in the table above. The Group understands that these financial instruments have no classification, as the carrying amount of these items is a reasonable approximation of fair value.
25 Related parties
Transactions with key management personnel
The Group paid R$ 8,788 as of September 30, 2022 (R$ 9,214 as of September 30, 2021) as direct compensation to key management personnel. These amounts correspond to the executive board compensation, related social charges and short-term benefits and are recorded under the line “General and administrative expenses”.
The executive officers also participate in the Group's stock option program (see note 17). For the nine-month period ended on September 30, 2022, R$ 16 (R$ 24 in 2021) were recognized in the statement of profit or loss.
The Group has no additional post-employment obligation, as well as no other long-term benefits, such as premium leave and other severance benefits. The Group also does not offer other benefits in connection with the dismissal of its Senior Management’s members, in addition to those defined by the Brazilian labor legislation in force.
26 Operating segments
Operating segments are defined based on business activities that reflect how CODM - Chief Operating Decision Maker reviews financial statements for decisions.
The Group's CODM is the Group's Board of Director. The CODM is in charge of the operational decisions of resource allocation and performance evaluation. The CODM considers the whole Group as a single operating and reportable segment, monitoring operations, making decisions on fund allocation and evaluating performance based on a single operating segment.
The CODM reviews relevant financial data on a consolidated basis for all subsidiaries. CODM makes decisions and regularly evaluates the performance of Group’s services as a whole in a single operational and reportable segment.
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CI&T Inc.
Unaudited condensed consolidated interim financial statements
September 30, 2022
The table below summarizes net revenues by geographic region:
| . | Period ended September 30, 2022 | Quarter ended September 30, 2022 | Period ended September 30, 2021 | Quarter ended September 30, 2021 |
|---|---|---|---|---|
| NAE (North America and Europe) | 798,751 | 289,758 | 487,811 | 170,883 |
| North America | 655,941 | 232,697 | 470,563 | 165,015 |
| Europe | 142,810 | 57,061 | 17,248 | 5,868 |
| LATAM (Latin America) | 724,480 | 247,200 | 465,900 | 192,200 |
| APJ (Asia, Pacific and Japan) | 52,674 | 22,060 | 33,875 | 12,887 |
| Total (Note 19) | 1,575,905 | 559,018 | 987,586 | 375,970 |
Net revenues by geographic area were determined based on the country where the sale was made. The net revenue from a single customer represents 16% of the Company’s total net revenues as of September 30, 2022 (21% as of September 30, 2021).
Revenue share by top clients
The following table sets forth net revenue contributed by the top client, and top ten clients for the periods indicated:
| . | Period ended September 30, 2022 | Quarter ended September 30, 2022 | Period ended September 30, 2021 | Quarter ended September 30, 2021 |
|---|---|---|---|---|
| Top client | 249,356 | 86,748 | 211,141 | 65,074 |
| Top 10 clients | 812,754 | 283,999 | 675,295 | 226,866 |
Geographic information of the Group's non-current assets
The table below summarizes non-current assets, except deferred taxes, based on assets geographic location:
| . | September 30, 2022 | December 31, 2021 |
|---|---|---|
| Brazil | 844,980 | 837,865 |
| Abroad: | ||
| Cayman | 394,691 | - |
| United States of America | 53,079 | 38,417 |
| United Kingdon | 2,885 | 74 |
| China | 2,568 | 2,239 |
| Australia | 3,196 | 8 |
| Colombia | 1,614 | - |
| Portugal | 493 | 387 |
| Japan | 416 | 176 |
| Canada | 307 | 284 |
| Total | 1,304,229 | 879,450 |
27 Subsequent events
Business combination – NTERSOL acquisition
On November 1, 2022, the Company announced the completion of the acquisition of NTERSOL Consulting LLC (“NTERSOL”), a U.S. based digital transformation provider, to expand its financial services expertise in North America.
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Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 17, 2022
| CI&T Inc | |
|---|---|
| By: | /s/ Stanley Rodrigues |
| Name: Stanley Rodrigues | |
| Title: Chief Financial Officer |
(3Q22 Earnings Release, Unaudited condensed consolidated interim financial information for the three and nine-month periods ended September 30, 2022 and 2021)