CI&T Inc 6-K, filed May 18, 2022
CI&T Inc (CINT)
About this 6-K
CI&T Inc filed this 6-K on May 18, 2022.
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 May 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____
CI&T Inc
TABLE OF CONTENTS
ITEM
|
|
| 1Q22 Earnings Release |
| Unaudited condensed consolidated interim financial information for the three months ended March 31, 2022 and 2021. |
CI&T Reports Solid First Quarter 2022 Financial Results and Raises Full Year 2022 Guidance
New York - May 18, 2022 /Business Wire/ - CI&T (NYSE: CINT, “Company”), a global digital specialist, today announces its results for the first quarter of 2022 (1Q22) in accordance with International Financial Reporting Standards (IFRS). For comparison purposes, we refer to the results for the first quarter of 2021 (1Q21).
1Q22 Operating and Financial Highlights
● Net Revenue of R$491,9 million, an increase of 66.0% compared to 1Q21.
● Net Revenue growth in constant currency was 75.3%
● The number of clients with annual revenue above R$1 million in the last twelve months grew from 94 in 4Q21 to 110 in 1Q22.
● CI&T ended 1Q22 with 6,435 CI&Ters, a net addition of 2,674 employees (71% growth) compared to the end of 1Q21.
Cesar Gon, founder and CEO of CI&T, commented "We are excited to initiate 2022 with a strong net revenue growth in the first quarter, a post covid environment, which demonstrates the resilience and consistency of our engagements with our long-term clients. Digital transformation has been enabling companies to unlock their business potential, increasing sales and improving profitability metrics, and demand for our services remains strong in all industry verticals we operate.
We have been disciplined to onboard new clients every quarter to guarantee our sustainable growth and our hiring machine continues to operate at full speed. Based on our annual engagements for the year and the robust demand environment, we are increasing our net revenue guidance for 2022 and expect it to be at least R$2,300 million (USD442 million), a 59% growth compared to last year. Finally, we are maintaining our Adjusted EBITDA margin of at least 20% for the full year of 2022."
Comments on the 1Q22 financial performance
Net Revenue
|
Revenue (in BRL thousand) |
1Q22 |
1Q21 |
Var. 1Q22 x 1Q21 |
|
Net Revenue |
491,872 |
296,292 |
66.0% |
In 1Q22, net revenue was R$491.9 million, an increase of 66.0% compared to 1Q21. The acquisition of Somo concluded on January 27, 2022 contributed to 10 percentage points of revenue growth in the quarter. Net revenue in constant currency grew 75.3% in the comparable period. The strong performance in the quarter reflects the expansion of our engagement with existing clients, the addition of 16 new logos with revenues above R$1.0 million in the last twelve months, combined with additional revenue from recent acquisitions.
CI&T decreased its top one clients' revenue share to 15% in 1Q22 from 24% in 1Q21 and reduced its top 10 clients' share to 51% from 73% in the same comparison period. In addition, CI&T increased its revenue exposure to Europe with the acquisition of Somo in the UK, diversifying further its geographic footprint. In terms of revenue by industry, the verticals that are growing faster are Technology, Media and Telecom (TMT) and Retail and Manufacturing, due to strong demand for our services from our clients in those industries, as well as the addition of new clients in those verticals.
Revenue Breakdown
|
Net Revenue by industry (in BRL thousand) |
1Q22 |
1Q21 |
Var. 1Q22 x 1Q21 |
||
|
Financial Services |
153,598 |
31.2% |
98,821 |
33.4% |
55.4% |
|
Food and Beverages |
94,068 |
19.1% |
84,056 |
28.4% |
11.9% |
|
Technology, Media and Telecom |
67,753 |
13.8% |
32,349 |
10.9% |
109.4% |
|
Pharmaceuticals and Cosmetics |
63,422 |
12.9% |
41,806 |
14.1% |
51.7% |
|
Retail and Manufacturing |
35,430 |
7.2% |
15,978 |
5.4% |
121.7% |
|
Education and Services |
19,688 |
4.0% |
12,191 |
4.1% |
61.5% |
|
Logistic and Transportation |
17,036 |
3.5% |
5,232 |
1.8% |
225.6% |
|
Others |
40,877 |
8.3% |
5,859 |
2.0% |
597.7% |
|
Total |
491,872 |
100% |
296,292 |
100% |
66.0% |
|
Net Revenue by geographic (in BRL thousand) |
1Q22 |
1Q21 |
Var. 1Q22 x 1Q21 |
||
|
NAE (North America and Europe) |
241,529 |
49.1% |
155,367 |
52.4% |
55.5% |
|
North America |
205,985 |
41.9% |
153,038 |
51.7% |
34.6% |
|
Europe |
35,544 |
7.2% |
2,329 |
0.8% |
1426.1% |
|
LATAM (Latin America) |
234,706 |
47.7% |
129,432 |
43.7% |
81.3% |
|
APJ (Asia, Pacific and Japan) |
15,637 |
3.2% |
11,493 |
3.9% |
36.1% |
Cost of Services Provided and Adjusted Gross Profit
|
Gross Profit (in BRL thousand) |
1Q22 |
1Q21 |
Var. 1Q22 x 1Q21 |
|
Net Revenue |
491,872 |
296,292 |
66.0% |
|
Cost of Services |
(328,992) |
(188,372) |
74.7% |
|
Gross Profit |
162,880 |
107,920 |
50.9% |
|
Adjustments |
|
|
|
|
Depreciation and amortization (cost of services provided) |
9,318 |
6,225 |
49.7% |
|
Stock Options |
1,182 |
52 |
2180.2% |
|
Adjusted Gross Profit |
173,381 |
114,197 |
51.8% |
|
Adjusted Gross Profit Margin |
35.2% |
38.5% |
-3.3p.p |
The cost of services provided in 1Q22 reached R$329.0 million, an increase of 74.7% compared to 1Q21, and the gross profit was R$162.9 million. Excluding costs with depreciation and amortization and the stock option plan, the adjusted gross profit in 1Q22 was R$173.4 million, 51.8% higher than 1Q21, with an adjusted gross profit margin of 35.2%, a reduction of 3.3 percentage points (p.p.) compared to 1Q21.
The decline in the gross profit margin is explained by the (i) the impact of 1.9 p.p. in margin from foreign exchange rate variation in the period, (ii) M&A, as recent acquired companies have lower margins, and (iii) seasonal annual wage adjustments in the first quarter while contractual price readjustments occur throughout the year. It is worth mentioning that seasonality in 2020 and 2021 was affected by the pandemic, changing the typical patterns in our industry.
SG&A and Other Expenses
|
SG&A expenses (in BRL thousand) |
1Q22 |
1Q21 |
Var. 1Q22 x 1Q21 |
|
Selling |
(35,129) |
(18,979) |
85.1% |
|
General and administrative |
(64,921) |
(25,726) |
152.4% |
|
SG&A expenses |
(100,050) |
(44,705) |
123.8% |
|
Other income (expenses) net |
(515) |
1,590 |
- |
|
Impairment loss on trade receivables and contract assets |
(1,066) |
(3,258) |
-67.3% |
|
SG&A and other operating expenses |
(101,631) |
(46,373) |
119.2% |
Selling, General and Administrative (SG&A) expenses grew 123.8% in 1Q22 compared to 1Q21, mainly explained by (i) an increase in expenses associated with the expansion of the hiring and attracting teams, aligned with our revenue and headcount growth; (ii) higher depreciation and amortization expenses due to the recognition of intangible assets related to acquisitions; and (iii) the strengthening of our back-office teams as a result of our IPO. Most of the SG&A are fixed expenses and are expected to be diluted throughout the next quarters, based on the projected revenue growth for 2022.
Adjusted EBITDA
|
Adjusted EBITDA (in BRL thousand) |
1Q22 |
1Q21 |
Var. 1Q22 x 1Q21 |
|
Net profit for the period |
29,223 |
39,615 |
-26.2% |
|
Adjustments |
|
|
|
|
Net financial cost |
16,712 |
1,697 |
884.8% |
|
Income tax expense |
15,314 |
20,235 |
-24.3% |
|
Depreciation and amortization |
19,390 |
7,795 |
148.7% |
|
Stock options |
1,239 |
173 |
617.3% |
|
Consulting expenses |
2,695 |
225 |
1098.3% |
|
Government grants |
(58) |
(1,405) |
-95.9% |
|
Write-off (1) |
1,548 |
- |
- |
|
Adjusted EBITDA |
86,062 |
68,335 |
25.9% |
|
Adjusted EBITDA Margin |
17.5% |
23.1% |
-5.6p.p |
(1) Non-cash expenses related to the inventory of property, plant, and equipment of the recently acquired Dextra.
In 1Q22, Adjusted EBITDA was R$86.1 million, an increase of 25.9% compared to 1Q21. Adjusted EBITDA margin was 17.5% in the quarter, a reduction of 5.6 percentage points compared to 1Q21, due to the increase in cost of services provided and SG&A expenses, as explained above.
Net Financial Expenses - Net financial expenses was R$16.7 million in 1Q22, compared to R$1.7 million in 1Q21, mainly due to the new debt raised in July 2021 to finance the Dextra acquisition in the amount of R$650 million.
Depreciation and Amortization - Depreciation and amortization expenses totaled R$19.4 million in 1Q22, an increase of R$11.6 million compared to 1Q21, mainly due to the amortization of R$7.6 million from intangible assets related to the acquistion of Dextra.
Income tax expense - In 1Q22, income tax expense was R$15.3 million, 24.3% lower than 1Q21, due to the corporate reorganization conducted by the Company in the end of 2021, in connection with our IPO. In addition, the Company recognized R$595.7 million in goodwill from the acquisition of Dextra, which is expected to be deductible for tax purposes from January 2022.
Net Profit and Adjusted Net Profit
|
Net Profit (in BRL thousand) |
1Q22 |
1Q21 |
Var. 1Q22 x 1Q21 |
|
Net profit for the period |
29,223 |
39,615 |
-26.2% |
|
Adjustments |
|
|
|
|
Consulting expenses |
2,695 |
225 |
1098.3% |
|
Write-off (1) |
1,548 |
- |
- |
|
Adjusted Net Profit |
33,465 |
39,840 |
-16.0% |
|
Adjusted Net Profit Margin |
6.8% |
13.4% |
-6.6p.p |
(1) Non-cash expenses related to the inventory of property, plant, and equipment of the recently acquired Dextra.
In 1Q22, adjusted net profit was R$33.5 million, 16.0% lower than 1Q21, and adjusted net profit margin reduced to 6.8% in 1Q22 from 13.4% in 1Q21, mainly due to higher depreciation and amortization and financial expenses, partially compensated by lower income tax expense, as explained above.
Business Outlook
We expect our net revenue in the second quarter of 2022 to be at least R$530 million, a 68% growth compared to our net revenue of R$315 million in the second quarter of 2021.
For the full year of 2022, we are raising our outlook and expect our net revenue to be at least R$2,300 million or USD442 million, a 59% growth compared to our net revenue of R$1,444 million in 2021. In addition, we estimate our adjusted EBITDA margin to be at least 20% for the full year of 2022. This guidance for 2022 assumes an average exchange rate of 5.20 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 1Q22 financial and operating results on May 19 at 8:00 a.m. Eastern Time / 9:00 a.m. BRT. The earnings call can be accessed at the Company’s Investor Relations website at https://investors.ciandt.com or at the following link: https://www.youtube.com/watch?v=DeN0-tBzG8s
About CI&T
CI&T is a global digital specialist, a partner in end-to-end digital transformation for 100+ Large Enterprises & Fast Growth Clients. As digital natives, we bring a 27-year track record of accelerating business impact through complete and scalable digital solutions. With a global presence in 9 countries with a nearshore delivery model, CI&T is the Employer of Choice for more than 6,400 professionals in strategy, data science, design, and engineering, unlocking top-line growth, improving customer experience, and driving operational efficiency.
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 information and the functional currency of our operations in Brazil. CI&T prepares its unaudited condensed consolidated interim financial information in accordance with IFRS, as issued by the IASB, and International Financial Reporting Standard No 34—Interim Financial Reporting (“IAS 34”).
Non-IFRS Financial Measures
We regularly monitor certain financial and operating metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. These non-IFRS financial measures include Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Profit, Adjusted Net Profit Margin, Net Revenue at Constant Currency and Net Revenue Increase 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 be different from the calculation 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 the historical and current financial performance of our operations.
CI&T is not providing a quantitative reconciliation of forward-looking Non-IFRS Adjusted EBITDA to the most directly comparable IFRS measure because it is unable to predict with reasonable certainty the ultimate outcome of certain significant items without unreasonable effort. These items include, but are not limited to, stock-based compensation expense, acquisition-related charges, 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.
In calculating Adjusted Gross Profit, we exclude cost components that are not related 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 options compensation plan expenses.
In calculating Adjusted EBITDA, we exclude components that are not related to the direct management of our services. For the periods herein, the adjustments were: (i) consulting expenses related to corporate reorganization and initial public offering expenses, as well as mergers and acquisitions activity; (ii) government grants related to tax reimbursement in the Chinese subsidiary; (iii) stock options compensation plan expenses; and (iv) non-cash expenses related to the inventory of property, plant, and equipment of the recently acquired Dextra.
In calculating Adjusted Net Profit, we exclude cost components that are not related to the direct management of our services. For the periods herein, the adjustments applied were: (i) consulting expenses related to corporate reorganization and initial public offering expenses, as well as mergers and acquisitions activity, and (ii) non-cash expenses related to the inventory of property, plant, and equipment of the recently acquired Dextra.
We calculate Net Revenue at Constant Currency and Net Revenue Increase at Constant Currency by translating Net revenue from entities reporting in foreign currencies into Brazilian reais using the comparable foreign currency exchange rates from the prior period.
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 and Somo; 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
egalvao@ciandt.com
Media Relations Contact:
Zella Panossian
ciandt@illumepr
Unaudited condensed consolidated statement of profit or loss
(In thousands of Brazilian Reais)
|
|
Three months ended March 31, |
||
|
|
2022 |
|
2021 |
|
Net Revenue |
491,872 |
|
296,292 |
|
Costs of services provided |
(328,992) |
|
(188,372) |
|
Gross Profit |
162,880 |
|
107,920 |
|
Selling expenses |
(35,129) |
|
(18,979) |
|
General and administrative expenses |
(64,921) |
|
(25,726) |
|
Research and technological innovation expenses |
- |
|
(4) |
|
Impairment loss on trade receivables and contract assets |
(1,066) |
|
(3,258) |
|
Other income (expenses) net |
(515) |
|
1,594 |
|
Operating profit before financial income and tax |
61,249 |
|
61,547 |
|
Finance income |
69,582 |
|
9,049 |
|
Finance cost |
(86,294) |
|
(10,746) |
|
Net finance costs |
(16,712) |
|
(1,697) |
|
Profit before Income tax |
44,537 |
|
59,850 |
|
Income tax expense |
(15,314) |
|
(20,235) |
|
Current |
(5,408) |
|
(13,518) |
|
Deferred |
(9,906) |
|
(6,717) |
|
Net profit for the period |
29,223 |
|
39,615 |
|
|
|
|
|
|
Earnings per share |
|
|
|
|
Earnings per share – basic (in R$) |
0.22 |
|
0.33 |
|
Earnings per share – diluted (in R$) |
0.22 |
|
0.32 |
Unaudited condensed consolidated statements of financial position
(In thousands of Brazilian Reais)
|
Assets |
March 31, 2022 |
|
December 31, 2021 |
|
Liabilities and equity |
March 31, 2022 |
|
December 31, 2021 |
|
Cash and cash equivalents |
131,827 |
|
135,727 |
|
Suppliers and other payables |
23,672 |
|
33,566 |
|
Financial Investments |
405,602 |
|
798,786 |
|
Loans and borrowings |
168,547 |
|
164,403 |
|
Trade receivables |
310,380 |
|
340,519 |
|
Lease liabilities |
25,998 |
|
21,214 |
|
Contract assets |
212,976 |
|
134,388 |
|
Salaries and welfare charges |
253,299 |
|
234,173 |
|
Recoverable taxes |
10,532 |
|
7,785 |
|
Accounts payable for business combination |
109,555 |
|
48,923 |
|
Tax assets |
6,245 |
|
2,810 |
|
Derivatives |
35,724 |
|
535 |
|
Derivatives |
5,230 |
|
896 |
|
Tax liabilities |
361 |
|
13,345 |
|
Other assets |
36,234 |
|
29,994 |
|
Other taxes payable |
8,170 |
|
5,423 |
|
Total current assets |
1,119,026 |
|
1,450,905 |
|
Contract liability |
11,143 |
|
13,722 |
|
|
|
|
|
|
Other liabilities |
17,670 |
|
13,669 |
|
Recoverable taxes |
3,587 |
|
3,046 |
|
Total current liabilities |
654,139 |
|
548,973 |
|
Deferred tax |
27,110 |
|
31,989 |
|
|
|
|
|
|
Judicial deposits |
6,101 |
|
3,079 |
|
Loans and borrowings |
579,429 |
|
624,306 |
|
Escrow account |
19,938 |
|
- |
|
Lease liabilities |
56,506 |
|
60,674 |
|
Other assets |
2,509 |
|
2,974 |
|
Provisions |
1,189 |
|
633 |
|
Property, plant and equipment |
59,381 |
|
57,721 |
|
Accounts payable for business combination |
59,508 |
|
36,803 |
|
Intangible assets |
1,050,008 |
|
738,803 |
|
Other liabilities |
2,364 |
|
1,660 |
|
Right-of-use assets |
74,204 |
|
73,827 |
|
Total non-current liabilities |
698,996 |
|
724,076 |
|
Total non-current assets |
1,242,838 |
|
911,439 |
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
Share capital |
37 |
|
36 |
|
|
|
|
|
|
Share premim |
929,984 |
|
915,947 |
|
|
|
|
|
|
Capital reserves |
15,377 |
|
10,105 |
|
|
|
|
|
|
Profit reserves |
155,180 |
|
125,957 |
|
|
|
|
|
|
Other comprehensive income |
(91,849) |
|
37,250 |
|
|
|
|
|
|
Total equity |
1,008,729 |
|
1,089,295 |
|
Total assets |
2,361,864 |
|
2,362,344 |
|
Total equity and liabilities |
2,361,864 |
|
2,362,344 |
Unaudited condensed consolidated statement of cash flow
(In thousands of Brazilian Reais)
|
|
March 31, 2022 |
|
March 31, 2021 |
|
Net profit for the year |
29,223 |
|
39,615 |
|
Adjustments for: |
|
|
|
|
Depreciation and amortization |
19,390 |
|
7,795 |
|
Gain/loss on the sale of property, plant and equipment and intangible assets |
1,926 |
|
81 |
|
Interest, monetary variation and exchange variation |
4,488 |
|
1,460 |
|
Exchange variation on escrow account releated to Somo acquisition |
(11,628) |
|
- |
|
Exchange variation on escrow account |
3,123 |
|
- |
|
Interest on lease |
2,146 |
|
1,376 |
|
Unrealized gain on financial instruments |
(4,487) |
|
7,751 |
|
Income tax expenses |
15,314 |
|
20,807 |
|
Impairment losses on trade receivables |
(1,194) |
|
60 |
|
Provision for (reversal of) impairment losses on contract assets |
1,064 |
|
3,198 |
|
Provision for labor risks |
571 |
|
2 |
|
Provision for indemnity |
- |
|
(629) |
|
Share-based plan |
1,239 |
|
172 |
|
Others |
- |
|
(1) |
|
Variation in operating assets and liabilities |
|
|
|
|
Trade receivables |
21,293 |
|
53,734 |
|
Contract assets |
(78,979) |
|
(106,818) |
|
Recoverable taxes |
(3,330) |
|
(1,078) |
|
Current tax assets |
(15,242) |
|
(7,310) |
|
Judicial deposits |
(3,022) |
|
- |
|
Suppliers and other payables |
(31,279) |
|
3,693 |
|
Salaries and welfare charges |
15,553 |
|
7,413 |
|
Tax liabilities |
(901) |
|
(1,431) |
|
Other taxes payable |
(682) |
|
849 |
|
Contract liabilities |
(2,021) |
|
(1,644) |
|
Other receivables and payables, net |
(9,529) |
|
(4,159) |
|
Cash generated from operating activities |
(48,964) |
|
24,936 |
|
Income tax paid |
(4,818) |
|
(15,394) |
|
Interest paid on loans and borrowings |
(19,458) |
|
(1,412) |
|
Interest paid on lease |
(1,479) |
|
(1,311) |
|
Net cash from operating activities |
(72,719) |
|
6,819 |
|
Cash flows from investment activities: |
|
|
|
|
Acquisition of property, plant and equipment and intangible assets |
(8,295) |
|
(9,607) |
|
Acquisition of subsidiary net of cash acquired |
(242,076) |
|
- |
|
Escrow deposit (acquisition of Somo) |
(23,061) |
|
- |
|
Hedge accounting realization |
16,134 |
|
- |
|
Redemption of financial investments |
350,128 |
|
- |
|
Net cash used in investment activities |
92,830 |
|
(9,607) |
|
Cash flow from financing activities: |
|
|
|
|
Exercised stock options |
5,128 |
|
- |
|
Payment of lease liabilities |
(6,084) |
|
(3,647) |
|
Proceeds from loans and borrowings |
- |
|
22,382 |
|
Payment of loans and borrowings |
(38,506) |
|
(38,675) |
|
Settlement of derivatives |
(381) |
|
- |
|
Net cash from financing activities |
(39,843) |
|
(19,940) |
|
Net increase/(decrease) in cash and cash equivalents |
(19,732) |
|
(22,728) |
|
Cash and cash equivalents as of January 1st |
135,727 |
|
162,827 |
|
Exchange variation effect on cash and cash equivalents |
15,832 |
|
(7,426) |
|
Cash and cash equivalents as of March 2022 and 2021 |
131,827 |
|
132,673 |
|
|
|
|
|
|
Net Revenue at Constant Currency |
March 31, 2022 |
|
March 31, 2021 |
|
Net Revenue at Constant Currency |
514,944 |
|
293,747 |
|
|
|
|
|
| 12 |
CI&T Inc.
Unaudited condensed consolidated statement of financial position as of March 31, 2022 and 2021
(In thousands of Brazilian Reais - R$)
|
Assets |
Note |
March 31, 2022 |
|
December 31, 2021 |
|
Liabilities and equity |
Note |
March 31, 2022 |
|
December 31, 2021 |
|||
|
Cash and cash equivalents |
6.1 |
131,827 |
|
135,727 |
|
Suppliers and other payables |
|
23,672 |
|
33,566 |
|||
|
Financial investments |
6.2 |
405,602 |
|
798,786 |
|
Loans and borrowings |
12 |
168,547 |
|
164,403 |
|||
|
Trade receivables |
7 |
310,380 |
|
340,519 |
|
Lease liabilities |
11.b |
25,998 |
|
21,214 |
|||
|
Contract assets |
19 |
212,976 |
|
134,388 |
|
Salaries and welfare charges |
13 |
253,299 |
|
234,173 |
|||
|
Recoverable taxes |
|
10,532 |
|
7,785 |
|
Accounts payable for business combination |
14 |
109,555 |
|
48,923 |
|||
|
Tax assets |
|
6,245 |
|
2,810 |
|
Derivatives |
24.2 |
35,724 |
|
535 |
|||
|
Derivatives |
24.3 |
5,230 |
|
896 |
|
Tax liabilities |
|
361 |
|
13,345 |
|||
|
Other assets |
8 |
36,234 |
|
29,994 |
|
Other taxes payable |
|
8,170 |
|
5,423 |
|||
|
|
|
|
|
|
|
Contract liability |
|
11,143 |
|
13,722 |
|||
|
Total current assets |
|
1,119,026 |
|
1,450,905 |
|
Other liabilities |
|
17,670 |
|
13,669 |
|||
|
|
|
|
|
|
|
Total current liabilities |
|
654,139 |
|
548,973 |
|||
|
Recoverable taxes |
|
3,587 |
|
3,046 |
|
|
|
|
|
|
|||
|
Deferred tax |
|
27,110 |
|
31,989 |
|
|
|
|
|
|
|||
|
Judicial deposits |
15 |
6,101 |
|
3,079 |
|
|
|
|
|
|
|||
|
Escrow account |
2/14 |
19,938 |
|
- |
|
|
|
|
|
|
|||
|
Other assets |
8 |
2,509 |
|
2,974 |
|
Loans and borrowings |
12 |
579,429 |
|
624,306 |
|||
|
Property, plant and equipment |
9 |
59,381 |
|
57,721 |
|
Lease liabilities |
11.b |
56,506 |
|
60,674 |
|||
|
Intangible assets |
10 |
1,050,008 |
|
738,803 |
|
Provisions |
15 |
1,189 |
|
633 |
|||
|
Right-of-use assets |
11.a |
74,204 |
|
73,827 |
|
Accounts payable for business combination |
14 |
59,508 |
|
36,803 |
|||
|
|
|
|
|
|
|
Other liabilities |
|
2,364 |
|
1,660 |
|||
|
Total non-current assets |
|
1,242,838 |
|
911,439 |
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
Total non-current liabilities |
|
698,996 |
|
724,076 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
Equity |
18 |
|
|
|
|||
|
|
|
|
|
|
|
Share capital |
|
37 |
|
36 |
|||
|
|
|
|
|
|
|
Share premium |
|
929,984 |
|
915,947 |
|||
|
|
|
|
|
|
|
Capital reserves |
|
15,377 |
|
10,105 |
|||
|
|
|
|
|
|
|
Profit reserves |
|
155,180 |
|
125,957 |
|||
|
|
|
|
|
|
|
Other comprehensive income |
|
(91,849 |
) |
37,250 |
|||
|
|
|
|
|
|
|
Total equity |
|
1,008,729 |
|
1,089,295 |
|||
|
Total assets |
|
2,361,864 |
|
2,362,344 |
|
Total equity and liabilities |
|
2,361,864 |
|
2,362,344 |
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
CI&T Inc.
Unaudited condensed consolidated statements of profit or loss
For the three-month period ended on March 31, 2022 and 2021
(In thousands of Brazilian Reais – R$)
|
|
Note |
March 31, 2022 |
|
March 31, 2021 |
|||
|
Net revenue |
19 |
491,872 |
|
296,292 |
|||
|
Costs of services provided |
20 |
(328,992 |
) |
|
(188,372 |
) | |
|
Gross profit |
|
162,880 |
|
107,920 |
|||
|
Selling expenses |
20 |
(35,129 |
) |
|
(18,979 |
) | |
|
General and administrative expenses |
20 |
(64,921 |
) |
|
(25,726 |
) | |
|
Research and technological innovation expenses |
20 |
- |
|
(4 |
) |
||
|
Impairment loss on trade receivables and contract assets |
20 |
(1,066 |
) |
|
(3,258 |
) | |
|
Other income (expenses) net |
20 |
(515 |
) |
|
1,594 |
||
|
Operating expenses net |
|
(101,631 |
) |
|
(46,373 |
) | |
|
Operating profit before financial income and tax |
|
61,249 |
|
61,547 |
|||
|
Finance income |
21 |
69,582 |
|
9,049 |
|||
|
Finance cost |
21 |
(86,294 |
) |
|
(10,746 |
) | |
|
Net finance costs |
|
(16,712 |
) |
|
(1,697 |
) | |
|
Profit before income tax |
|
44,537 |
|
59,850 |
|||
| Income tax expense | |||||||
|
Current |
|
(5,408 |
) |
|
(13,518 |
) | |
|
Deferred |
|
(9,906 |
) |
|
(6,717 |
) | |
|
Net profit for the period |
|
29,223 |
|
39,615 |
|||
|
Earnings per share |
|
|
|
|
|||
|
Earnings per share – basic (in R$) |
23 |
0.22 |
|
0.33 |
|||
|
Earnings per share – diluted (in R$) |
23 |
0.22 |
|
0.32 |
CI&T Inc.
Unaudited condensed consolidated statement of other comprehensive income
For the three-month period ended on March 31, 2022 and 2021
(In thousands of Brazilian Reais – R$)
|
|
Note |
March 31, 2022 |
|
March 31, 2021 |
|||
|
Net profit for the period |
|
29,223 |
|
39,615 |
|||
|
Other comprehensive income (OCI): |
|
|
|
|
|||
|
Item that are or may be reclassified subsequently to profit or loss |
|
|
|
|
|||
|
Exchange variation in foreign investments |
18.f |
(93,375 |
) |
|
14,806 |
||
|
Cash flow hedges - effective portion of changes in fair value |
24.2 |
(35,724 |
) |
|
- |
||
|
Total comprehensive income for the period |
|
(99,876 |
) |
|
54,421 |
||
|
Total comprehensive income attributed to |
|
|
|
|
|||
|
Owners of the Company |
|
(99,876 |
) |
|
54,421 |
||
|
Total comprehensive income for the period |
|
(99,876 |
) |
|
54,421 |
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
CI&T Inc.
Unaudited condensed consolidated statement of changes in equity
For the three-month period ended on March 31, 2022 and 2021
(In thousands of Brazilian Reais – R$)
|
|
|
|
|
|
|
|
|
Profit reserves |
|
|
|
|
|
|
||
|
|
Notes |
Share capital |
|
Share premium |
|
Capital reserve |
|
Legal reserve |
|
Retained earnings reserve |
|
Retained earnings |
|
Other comprehensive income |
|
Total equity |
|
Balances as of December 31, 2021 |
|
36 |
|
915,947 |
|
10,105 |
|
- |
|
125,957 |
|
- |
|
37,250 |
|
1,089,295 |
|
Net profit for the period |
|
- |
|
- |
|
- |
|
- |
|
- |
|
29,223 |
|
- |
|
29,223 |
|
Business combination (Somo) |
2 |
- |
|
14,037 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
14,037 |
|
Exercise of share options |
17/18.a |
1 |
|
- |
|
5,128 |
|
- |
|
- |
|
- |
|
- |
|
5,129 |
|
Share-based compensation |
17.a |
- |
|
- |
|
144 |
|
- |
|
- |
|
- |
|
- |
|
144 |
|
Exchange variation in foreign investments, net of tax effects |
18.f |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(93,375) |
|
(93,375) |
|
Cash flow hedges - effective portion of changes in fair value |
24.2 |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(35,724) |
|
(35,724) |
|
Balances as of March 31, 2022 |
|
37 |
|
929,984 |
|
15,377 |
|
- |
|
125,957 |
|
29,223 |
|
(91,849) |
|
1,008,729 |
|
Balances as of December 31, 2020 |
|
68,968 |
|
- |
|
6,764 |
|
13,793 |
|
95,515 |
|
- |
|
13,420 |
|
198,460 |
|
Net profit for the period |
|
- |
|
- |
|
- |
|
- |
|
- |
|
39,615 |
|
- |
|
39,615 |
|
Share-based compensation |
17.d |
- |
|
- |
|
160 |
|
- |
|
- |
|
- |
|
- |
|
160 |
|
Other comprehensive income for the period |
18.f |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
14,806 |
|
14,806 |
|
Balances as of March 31, 2021 |
|
68,968 |
|
- |
|
6,924 |
|
13,793 |
|
95,515 |
|
39,615 |
|
28,226 |
|
253,041 |
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
CI&T Inc.
Unaudited condensed consolidated statement of cash flows
For the three-month period ended on March 31, 2022 and 2021
(In thousands of Brazilian Reais – R$)
|
|
Notes |
March 31, 2022 |
|
March 31, 2021 |
|||
|
Cash flow from operating activities |
|
|
|
|
|||
|
Net profit for the period |
|
29,223 |
|
39,615 |
|||
|
Adjustments for: |
|
|
|
|
|||
|
Depreciation and amortization |
9, 10, 11 |
19,390 |
|
7,795 |
|||
|
Gain/loss on the sale of property, plant and equipment and intangible assets |
9, 10 |
1,926 |
|
81 |
|||
|
Interest, monetary variation and exchange rate changes |
|
4,488 |
|
1,460 |
|||
|
Exchange rate changes and monetary adjustments on accounts payable for business combinations |
14 |
(11,628 |
) |
|
- |
||
|
Exchange variation on escrow account related to Somo acquisition |
|
3,123 |
|
- |
|||
|
Interest on lease |
12 |
2,146 |
|
1,376 |
|||
|
Unrealized loss (gain) on financial instruments |
|
(4,487 |
) |
|
7,751 |
||
|
Income tax expenses |
|
15,314 |
|
20,807 |
|||
|
Impairment losses on trade receivables |
7 |
(1,194 |
) |
|
60 |
||
|
Provision for (reversal of) impairment losses on contract assets |
19 |
1,064 |
|
3,198 |
|||
|
Provision for labor risks |
15 |
571 |
|
2 |
|||
|
Provision for indemnity |
|
- |
|
(629 |
) | ||
|
Share-based plan |
17.d |
1,239 |
|
172 |
|||
|
Others |
|
- |
|
(1 |
) | ||
|
Variation in operating assets and liabilities |
|
|
|
|
|||
|
Trade receivables |
|
21,293 |
|
53,734 |
|||
|
Contract assets |
|
(78,979 |
) |
|
(106,818 |
) | |
|
Recoverable taxes |
|
(3,330 |
) |
|
(1,078 |
) | |
|
Tax assets |
|
(15,242 |
) |
|
(7,310 |
) | |
|
Judicial deposits |
|
(3,022 |
) |
|
- |
||
|
Suppliers and other payables |
|
(31,279 |
) |
|
3,693 |
||
|
Salaries and welfare charges |
|
15,553 |
|
7,413 |
|||
|
Tax liabilities |
|
(901 |
) |
|
(1,431 |
) | |
|
Other taxes payable |
|
(682 |
) |
|
849 |
||
|
Contract liabilities |
|
(2,021 |
) |
|
(1,644 |
) | |
|
Other receivables and payables, net |
|
(9,529 |
) |
|
(4,159 |
) | |
|
Cash generated from operating activities |
|
(46,964 |
) |
|
24,936 |
||
|
Income tax paid |
|
(4,818 |
) |
|
(15,394 |
) | |
|
Interest paid on loans and borrowings |
12 |
(19,458 |
) |
|
(1,412 |
) | |
|
Interest paid on lease |
12 |
(1,479 |
) |
|
(1,311 |
) | |
|
Net cash from operating activities |
|
(72,719 |
) |
|
6,819 |
||
|
Cash flows from investment activities |
|
|
|
|
|||
|
Acquisition of property, plant and equipment and intangible assets |
9, 10 |
(8,295 |
) |
|
(9,607 |
) | |
|
Acquisition of subsidiary net of cash acquired |
2.2.a |
(242,076 |
) |
|
- |
||
|
Escrow deposit (acquisition of Somo) |
2.2.a |
(23,061 |
) |
|
- |
||
|
Hedge accounting realization |
|
16,134 |
|
- |
|||
|
Redemption of financial investments |
6.2 |
350,128 |
|
- |
|||
|
Net cash used in investment activities |
|
92,830 |
|
(9,607 |
) | ||
|
Cash flow from financing activities |
|
|
|
|
|||
|
Exercised stock options |
17.a |
5,128 |
|
- |
|||
|
Payment of lease liabilities |
11 |
(6,084 |
) |
|
(3,647 |
) |
|
|
Proceeds from loans and borrowings |
12 |
- |
|
22,382 |
|||
|
Settlement of derivatives |
|
(381 |
) |
|
- |
||
|
Payment of loans and borrowings |
12 |
(38,506 |
) |
|
(38,675 |
) | |
|
Net cash from financing activities |
|
(39,843 |
) |
|
(19,940 |
) | |
|
Net increase/(decrease) in cash and cash equivalents |
|
(19,732 |
) |
|
(22,728 |
) |
|
|
Cash and cash equivalents as of January 1st |
|
135,727 |
|
162,827 |
|||
|
Exchange variation effect on cash and cash equivalents |
|
15,832 |
|
(7,426 |
) | ||
|
Cash and cash equivalents as of March 31 |
|
131,827 |
|
132,673 |
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
(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 the 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. to become 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 no material contingent liabilities or commitments.
On October 04, 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 CI&T Brazil’s shares were contributed to CI&T Delaware and, subsequently the 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 the CI&T’s consolidated financial statements with no fair value uplift. Thus, these unaudited condensed consolidated interim financial statements reflect:
| (i) | The historical operating results and financial position of CI&T Brazil prior the restructuring; |
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
| (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 at 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 the 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 02, 2021. The remaining balance will be paid on the first anniversary of the closing date, subject to the application of any purchase price adjustments (note 14). The Management revised the purchase price on the closing date (August 2021) based on the agreement, and reduced the price in the amount of R$ 16,427, thus the total of consideration transferred was R$ 783,573. On March 30, 2022, after new revision and agreement the reduction of adjusted price was confirmed at R$ 14,062.
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”.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
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):
|
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 |
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 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 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 |
|
2.1c |
(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 was occurred on December 31, 2021. This tax benefit is occurring from January 2022.
2.2 Business combination - Somo
On January 14, 2022, the Company entered into a Sale and Purchase Agreement (“Agreement”) to acquire 100% of the shareholding control of Somo Global Ltd ("Somo") and its subsidiaries (“Somo Group”) (see note 18.a), 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.
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.a.2), on January 27, 2022.
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. The Company shall prepare and submit to the Seller´s Representative, not later than ninety (90) days after the completion date, a draft of the financial statement (“Draft Completion Statement”). Within thirty (30) days after this submission and if the Seller’s Representative agrees with the Draft Completion Statement, the Company shall pay the amount of R$ 7,206 within ten (10) business day of the final agreement. The price adjustment is under negotiation as agreed per both parties.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
(ii) The Agreement also contemplates an earn-out clause of up to R$ 59,868 (£8,307) based on future performance (see note 14).
(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:
|
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 |
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) |
26,515 |
|
|
Lease liabilities |
4,380 |
|
|
Contract liabilities |
730 |
|
|
Tax liabilities |
3,948 |
|
|
Salaries and welfare charges |
9,668 |
|
|
Other liabilities |
11,295 |
|
|
Current liabilities |
86,945 |
|
|
Non-current |
|
|
|
Loans and borrowings (note 12) |
15,753 |
|
|
Lease liabilities |
2,420 |
|
|
Other liabilities |
406 |
|
|
Non-current liabilities |
18,579 |
|
|
Total liabilities |
105,524 |
|
|
Total identifiable net assets acquired (note 2.2.d) |
122,447 |
(a) Gross contractual amount receivable is R$38,703 and R$26 is not expected to be collected.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
|
(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 |
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 |
(122,447 |
) | |
|
Goodwill (note 10) |
|
324,967 |
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 £42,566).
3 Basis of accounting
These unaudited condensed consolidated interim financial statements for the three-month period ended March 31, 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 information 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.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
The issuance of these unaudited condensed consolidated interim financial information was authorized by the Company’s Management and Audit Committee on May 18, 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 has 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 has 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 Somo Global SAS has the local currency, the Colombian peso, as its functional currency.
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.b - 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 point in time. |
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. |
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.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
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
|
. |
March 31, 2022 |
December 31, 2021 |
|||
|
Cash and cash equivalents |
65,807 |
69,720 |
|||
|
Short-term financial investments |
66,020 |
66,007 |
|||
|
Total |
131,827 |
135,727 |
Short-term financial investments are represented by fixed income securities, with interest rate ranging from 75% to 103% on March 31, 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.
6.2 Financial investments
|
. |
March 31, 2022 |
December 31, 2021 |
|||
|
Financial Investments |
405,602 |
798,786 |
The changes in the balances are as follows:
|
Balance as of January 1, 2022 |
798,786 |
|
|
Effect of movements in exchange rates |
(26,922 |
) |
|
Redemption of financial investments |
(350,128 |
) |
|
Hedge accounting realization |
(16,134 |
) |
|
Balance as of March 31, 2022 |
405,602 |
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
As of March 31, 2022 the balance of R$ 405,602 (US$ 78,070) (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% to 0.65% p.a., and such accounts present immediate liquidity. The Company holds USD amount for short-term commitments in 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:
|
|
March 31, 2022 |
December 31, 2021 |
|||
|
Trade receivables - US market |
185,421 |
226,154 |
|||
|
Trade receivables - Brazil market |
85,566 |
101,122 |
|||
|
Trade receivables - Other markets |
39,594 |
14,302 |
|||
|
(-) Expected credit losses |
(201 |
) |
(1,059 |
) | |
|
Trade receivables, net |
310,380 |
340,519 |
The balances of trade receivables by maturity date are as follows:
|
|
March 31, 2022 |
December 31, 2021 |
|||
|
Not due |
297,325 |
319,450 |
|||
|
Overdue: |
|
|
|||
|
from 1 to 60 days (i) |
7,613 |
20,020 |
|||
|
61 to 360 days |
5,218 |
1,564 |
|||
|
Over 360 days |
425 |
544 |
|||
|
Total |
310,581 |
341,578 |
| (i) | As of March 31, 2022, the balance of trade receivables overdue from 1 to 60 days of R$ 7,613 (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 |
(299 |
) |
|
Reversal |
297 |
|
|
Write-off |
655 |
|
|
Exchange variation |
205 |
|
|
Balance as of March 31, 2022 |
(201 |
) |
|
Balance as of January 1, 2021 |
(692 |
) |
|
Provision |
(75 |
) |
|
Reversal |
15 |
|
|
Exchange variation |
(5 |
) |
|
Balance as of March 31, 2021 |
(757 |
) |
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
8 Other assets
|
|
March 31, 2022 |
December 31, 2021 |
|||
|
Prepaid expenses (a) |
32,296 |
29,743 |
|||
|
Rental security deposits |
1,832 |
2,471 |
|||
|
Suppliers’ advances |
104 |
162 |
|||
|
Other |
4,511 |
592 |
|||
|
Total |
38,743 |
32,968 |
|||
|
Current |
36,234 |
29,994 |
|||
|
Non-current |
2,509 |
2,974 |
|||
|
Total |
38,743 |
32,968 |
| (a) |
Prepaid expenses are mostly comprised of prepaid insurance, mainly related to directors’ and officers’ liability insurance, consulting, software support prepayments. |
9 Property, plant and equipment
|
. |
March 31, 2022 |
December 31, 2021 |
|||
|
IT equipment |
39,314 | 35,230 | |||
|
Furniture and fixtures |
5,866 | 6,283 | |||
|
Leasehold improvements (a) |
14,136 | 16,051 | |||
|
Property, plant and equipment in progress |
65 | 157 | |||
|
Total |
59,381 | 57,721 |
(a) Improvements are depreciated on a straight-line basis based over the duration of the lease agreement.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
The changes in the balances are as follows:
|
. |
IT equipment |
Furniture and fixtures |
Vehicles |
Leasehold improvements |
In progress |
Hardware devices |
Total |
|||||||||||||
|
Cost: |
|
|
|
|
|
|
|
|||||||||||||
|
Balance as of January 1, 2021 |
34,852 |
12,941 |
86 |
28,292 |
222 |
487 |
76,880 |
|||||||||||||
|
Exchange rate changes |
100 |
290 |
- |
857 |
16 |
- |
1,263 |
|||||||||||||
|
Additions |
8,401 |
63 |
- |
31 |
155 |
138 |
8,788 |
|||||||||||||
|
Disposals |
(41 |
) |
(33 |
) |
(86 |
) |
(363 |
) |
(44 |
) |
- |
(567 |
) | |||||||
|
Transfers |
- |
- |
- |
- |
- |
- |
- |
|||||||||||||
|
Balance as of March 31, 2021 |
43,312 |
13,261 |
- |
28,817 |
349 |
625 |
86,364 |
|||||||||||||
|
Balance as of December 31, 2021 |
63,640 |
13,869 |
- |
30,915 |
157 |
- |
108,581 |
|||||||||||||
|
Exchange rate changes |
(1,770 |
) |
(531 |
) |
- |
(1,218 |
) |
- |
- |
(3,519 |
) | |||||||||
|
Addition due to business combination (note 2.2.c) |
2,334 |
25 |
- |
- |
- |
- |
2,359 |
|||||||||||||
|
Additions |
7,868 |
75 |
- |
26 |
48 |
- |
8,017 |
|||||||||||||
|
Disposals |
(3,301 |
) |
(434 |
) |
- |
(5,079 |
) |
(19 |
) |
- |
(8,833 |
) | ||||||||
|
Transfers |
6 |
- |
- |
115 |
(121 |
) |
- |
- |
||||||||||||
|
Balance as of March 31, 2022 |
68,777 |
13,004 |
- |
24,759 |
65 |
- |
106,605 |
|||||||||||||
|
Depreciation: |
|
|
|
|
|
|
|
|||||||||||||
|
Balance as of January 1, 2021 |
(19,445 |
) |
(6,577 |
) |
(59 |
) |
(11,832 |
) |
- |
(196 |
) |
(38,109 |
) | |||||||
|
Exchange rate changes |
125 |
(104 |
) |
- |
(450 |
) |
- |
- |
(429 |
) | ||||||||||
|
Additions |
(1,811 |
) |
(376 |
) |
(6 |
) |
(848 |
) |
- |
(62 |
) |
(3,103 |
) | |||||||
|
Disposals |
17 |
30 |
65 |
363 |
- |
- |
475 |
|||||||||||||
|
Balance as of March 31, 2021 |
(21,114 |
) |
(7,027 |
) |
- |
(12,767 |
) |
- |
(258 |
) |
(41,166 |
) | ||||||||
|
Balance as of December 31, 2021 |
(28,410 |
) |
(7,586 |
) |
- |
(14,864 |
) |
- |
- |
(50,860 |
) | |||||||||
|
Exchange rate changes |
973 |
188 |
- |
354 |
- |
- |
1,515 |
|||||||||||||
|
Additions |
(3,770 |
) |
(347 |
) |
- |
(842 |
) |
- |
- |
(4,959 |
) | |||||||||
|
Disposals |
1,744 |
607 |
- |
4,729 |
- |
- |
7,080 |
|||||||||||||
|
Balance as of March 31, 2022 |
(29,463 |
) |
(7,138 |
) |
- |
(10,623 |
) |
- |
- |
(47,224 |
) | |||||||||
|
Balance as of: |
|
|
|
|
|
|
|
|||||||||||||
|
December 31, 2021 |
35,230 |
6,283 |
- |
16,051 |
157 |
- |
57,721 |
|||||||||||||
|
March 31, 2022 |
39,314 |
5,866 |
- |
14,136 |
65 |
- |
59,381 |
The Group does not have property, plant or equipment pledged as collateral.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
10 Intangible assets
|
. |
March 31, 2022 |
December 31, 2021 |
|||
|
Network software |
2,269 |
2,399 |
|||
|
Internally developed software |
3,436 |
3,911 |
|||
|
Software in progress |
535 |
391 |
|||
|
Customer relationship (i) |
130,714 |
84,195 |
|||
|
Non-compete agreement (i) |
13,139 |
13,897 |
|||
|
Brands (i) |
18,436 |
14,541 |
|||
|
Subtotal |
168,529 |
119,334 |
|||
|
Goodwill (ii) |
881,479 |
619,469 |
|||
|
Total |
1,050,008 |
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) and b) Somo Global Ltd, on January 27, 2022 (note 2.2.c). |
| (ii) | Refers to goodwill arising from acquisitions of: a) Dextra Technologies S.A., on August 10, 2021, in the amount of R$ 595,721 (note 2.1.d); b) acquisition of Comrade Inc. in 2017, in the amount of R$16,678 (R$19,644 as of December 31, 2021), which was merged into the subsidiary CI&T Inc; c) CI&T IN Software Ltda., which was merged into the subsidiary CI&T Software in 2014 in the amount of R$2,871, d) CI&T Japan Inc. in 2015 in the amount of R$ 993 (R$ 1,233 as of December 31, 2021) and e) Somo in 2022 in the amount of R$ 265,215 (R$ 324,967 as of January, 27, 2022). |
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 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 |
|||||||||||||||
|
Exchange rate changes |
37 |
- |
- |
- |
- |
- |
- |
37 |
|||||||||||||||
|
Additions |
64 |
479 |
248 |
- |
- |
- |
- |
791 |
|||||||||||||||
|
Balance as of March 31, 2021 |
9,833 |
13,830 |
363 |
- |
- |
- |
14,570 |
38,596 |
|||||||||||||||
|
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 |
324,967 |
382,252 |
|||||||||||||||
|
Exchange rate changes |
(78 |
) |
- |
- |
- |
- |
- |
(62,957 |
) |
(63,035 |
) |
||||||||||||
|
Additions |
52 |
- |
226 |
- |
- |
- |
- |
278 |
|||||||||||||||
|
Write-off |
(731 |
) |
- |
(32 |
) |
- |
- |
- |
- |
(763 |
) | ||||||||||||
|
Transfers |
50 |
- |
(50 |
) |
- |
- |
- |
- |
- |
||||||||||||||
|
Balance as of March 31, 2022 |
11,235 |
16,581 |
535 |
138,500 |
13,462 |
28,247 |
881,479 |
1,090,039 |
|||||||||||||||
|
Amortization: |
|
|
|
|
|
|
|
|
|||||||||||||||
|
Balance as of January 1, 2021 |
(8,636 |
) |
(10,966 |
) |
- |
- |
- |
- |
- |
(19,602 |
) | ||||||||||||
|
Exchange rate changes |
(28 |
) |
- |
- |
- |
- |
- |
- |
(28 |
) | |||||||||||||
|
Additions |
(150 |
) |
(375 |
) |
- |
- |
- |
- |
- |
(525 |
) | ||||||||||||
|
Balance as of March 31, 2021 |
(8,814 |
) |
(11,341 |
) |
- |
- |
- |
- |
- |
(20,155 |
) | ||||||||||||
|
Balance as of December 31, 2021 |
(9,543 |
) |
(12,670 |
) |
- |
(4,766 |
) |
435 |
(5,960 |
) |
- |
(32,504 |
) | ||||||||||
|
Exchange rate changes |
96 |
- |
- |
- |
- |
- |
- |
96 |
|||||||||||||||
|
Additions |
(260 |
) |
(475 |
) |
- |
(3,020 |
) |
(758 |
) |
(3,851 |
) |
- |
(8,364 |
) | |||||||||
|
Write-off |
741 |
- |
- |
- |
- |
- |
- |
741 |
|||||||||||||||
|
Balance as of March 31, 2022 |
(8,966 |
) |
(13,145 |
) |
- |
(7,786 |
) |
(323 |
) |
(9,811 |
) |
- |
(40,031 |
) | |||||||||
|
Balance at: |
|
|
|
|
|
|
|
|
|||||||||||||||
|
December 31, 2021 |
2,399 |
3,911 |
391 |
84,195 |
13,897 |
14,541 |
619,469 |
738,803 |
|||||||||||||||
|
March 31, 2022 |
2,269 |
3,436 |
535 |
130,714 |
13,139 |
18,436 |
881,479 |
1,050,008 |
Impairment test – Goodwill
For the period ended March 31, 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.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
11 Leases
- Right-of-use assets
|
. |
March 31, 2022 |
December 31, 2021 |
|||
|
Properties |
67,945 |
69,441 |
|||
|
Vehicles |
6,117 |
4,173 |
|||
|
IT equipment |
142 |
213 |
|||
|
Total |
74,204 |
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 remained rental expenses for the period totaled R$ 1,717 as of March 31, 2022 (R$ 1,797 as of March 31, 2021).
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 |
|||||||
|
Exchange rate changes |
3,623 |
20 |
- |
3,643 |
|||||||
|
Additions |
4,650 |
600 |
- |
5,250 |
|||||||
|
Derecognition of right-of-use assets |
(1,155 |
) |
(295 |
) |
- |
(1,450 |
) | ||||
|
Balance on March 31, 2021 |
95,667 |
5,333 |
851 |
101,851 |
|||||||
|
Balance as of January 1, 2022 |
107,640 |
6,372 |
851 |
114,863 |
|||||||
|
Additions for business combination |
6,800 |
- |
- |
6,800 |
|||||||
|
Exchange rate changes |
(1,073 |
) |
- |
- |
(1,073 |
) | |||||
|
Additions |
2,209 |
2,637 |
- |
4,846 |
|||||||
|
Derecognition of right-of-use assets |
(340 |
) |
(469 |
) |
- |
(809 |
) | ||||
|
Balance on March 31, 2022 |
115,236 |
8,540 |
851 |
124,627 |
|||||||
|
Depreciation: |
|
|
|
|
|||||||
|
Initial amount on January 1, 2021 |
(22,090 |
) |
(2,199 |
) |
(354 |
) |
(24,643 |
) | |||
|
Exchange rate changes |
(897 |
) |
(12 |
) |
- |
(909 |
) |
||||
|
Depreciation |
(3,561 |
) |
(500 |
) |
(72 |
) |
(4,133 |
) |
|||
|
Derecognition of right-of-use assets |
1,155 |
198 |
- |
1,353 |
|||||||
|
Balance on March 31, 2021 |
(25,393 |
) |
(2,513 |
) |
(426 |
) |
(28,332 |
) | |||
|
Balance on January 1, 2022 |
(38,200 |
) |
(2,199 |
) |
(638 |
) |
(41,037 |
) |
|||
|
Exchange rate changes |
(3,732 |
) |
- |
- |
(3,732 |
) |
|||||
|
Depreciation |
(5,359 |
) |
(637 |
) |
(71 |
) |
(6,067 |
) |
|||
|
Derecognition of right-of-use assets |
- |
413 |
- |
413 |
|||||||
|
Balance on March 31, 2022 |
(47,291 |
) |
(2,423 |
) |
(709 |
) |
(50,423 |
) | |||
|
Net balance at: |
|
|
|
|
|||||||
|
December 31, 2021 |
69,440 |
4,173 |
213 |
73,826 |
|||||||
|
March 31, 2022 |
67,945 |
6,117 |
142 |
74,204 |
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
- Lease liabilities
|
|
Average discount rate (per year) |
March 31, 2022 |
December 31, 2021 |
|||
|
Properties |
9.19% (2021: 10.88%) |
75,815 |
77,366 |
|||
|
Vehicles |
15.71% (2021: 14.54%) |
6,527 |
4,285 |
|||
|
IT equipment |
7.70% (2021: 7.70%) |
162 |
237 |
|||
|
Total |
|
82,504 |
81,888 |
|||
|
Current |
|
25,998 |
21,214 |
|||
|
Non-current |
|
56,506 |
60,674 |
|||
|
Total |
|
82,504 |
81,888 |
The change in lease liabilities is disclosed in the reconciliation of change in liabilities to cash flows in note 12.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
12 Loans and borrowings
Loans and borrowings operations can be summarized as follows:
|
|
Currency |
Average interest rate per year (%) |
Year of maturity |
March 31, 2022 |
December 31, 2021 |
|||||
|
Itaú (i) |
USD |
4.82% p.a. |
2022 |
1,140 |
2,349 |
|||||
|
Bradesco (i) |
BRL |
CDI + 3.57% / CDI + 1.10% |
2023 |
9,180 |
11,684 |
|||||
|
Citibank - CI&T Inc. (iii) |
USD |
Libor 3 months rate + 1.90% |
2022 |
9,480 |
11,164 |
|||||
|
Banco do Brasil (ii) |
USD |
2.37% p.a. |
2022 |
48,292 |
56,551 |
|||||
|
Citibank (ii) |
USD |
2.28% p.a. / 2.47% p.a. |
2022 |
24,187 |
28,328 |
|||||
|
Santander Bank S/A (iv) |
BRL |
CDI + 1.60% p.a. |
2026 |
204,935 |
204,047 |
|||||
|
Bradesco (i) |
BRL |
CDI + 1.75% |
2026 |
307,970 |
306,417 |
|||||
|
Citibank (ii) |
USD |
Libor 3 months rate + 2.07% |
2026 |
142,792 |
168,169 |
|||||
|
Total |
|
|
|
747,976 |
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. |
These balances were included as current and non-current borrowings in the consolidated statement of financial position as follows:
|
|
March 31, 2022 |
December 31, 2021 |
||
|
Current |
168,547 |
164,403 |
||
|
Non-current |
579,429 |
624,306 |
||
|
Total |
747,976 |
788,709 |
The principal balances of long-term loans and borrowings as of March 31, 2022, mature as follows:
|
2023 |
86,114 |
|
|
2024 |
138,141 |
|
|
2025 |
190,605 |
|
|
2026 |
164,569 |
|
|
Non-current liabilities |
579,429 |
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 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) |
Reserves |
|
||||
|
Balance as of December 31, 2021 |
788,709 |
81,888 |
1,052,042 |
1,922,639 |
||||
|
Changes in cash flow from financing activities |
|
|
|
|
||||
|
Loans, borrowings and lease liabilities payments |
(38,506) |
(6,084) |
- |
(44,590) |
||||
|
Proceeds from exercise of share options |
- |
- |
5,128 |
5,128 |
||||
|
Total changes in cash flow from financing activities |
(38,506) |
(6,084) |
5,128 |
(39,462) |
||||
|
Exchange rate changes |
(2,604) |
(5,174) |
- |
(7,778) |
||||
|
Other changes - liabilities |
|
|
|
|
||||
|
Additions due to business combination (note 2.2.c) |
42,268 |
6,800 |
- |
49,068 |
||||
|
New leases |
- |
4,847 |
- |
4,847 |
||||
|
Interest expenses |
15,990 |
2,146 |
- |
18,136 |
||||
|
Interest paid |
(19,458) |
(1,479) |
- |
(20,937) |
||||
|
Other borrowing/lease costs |
(38,423) |
(195) |
- |
(38,618) |
||||
|
Lease write-offs |
- |
(245) |
- |
(245) |
||||
|
Total other changes - liabilities |
377 |
11,874 |
- |
12,251 |
||||
|
Total other changes - equity |
- |
- |
43,408 |
43,408 |
||||
|
Balance as of March 31, 2022 |
747,976 |
82,504 |
1,100,578 |
1,931,058 |
|
|
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 |
22,382 |
- |
- |
22,382 |
||||
|
Loan and borrowings payments, and lease payments |
(38,675) |
(3,647) |
- |
(42,322) |
||||
|
Total changes in financing cash flows |
(16,293) |
(3,647) |
- |
(19,940) |
||||
|
Effect of changes in exchange rates |
1,105 |
2,909 |
- |
4,014 |
||||
|
Other changes - related to liabilities |
|
|
|
|
||||
|
New leases |
- |
5,250 |
- |
5,250 |
||||
|
Interest expense |
558 |
1,376 |
- |
1,934 |
||||
|
Interest paid |
(1,412) |
(1,311) |
- |
(2,723) |
||||
|
Other costs |
902 |
- |
- |
902 |
||||
|
Lease write-offs |
- |
(97) |
- |
(97) |
||||
|
Total other changes related to liabilities |
48 |
5,218 |
- |
5,266 |
||||
|
Total other changes related to equity |
- |
- |
39,773 |
39,773 |
||||
|
Balance as of March 31, 2021 |
74,090 |
79,708 |
155,845 |
309,643 |
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 to maintain certain ratios, such as Net Debt to EBITDA (Earnings Before Interest, Depreciation and Amortization).
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. |
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
13 Salaries and welfare charges
|
|
March 31, 2022 |
December 31, 2021 |
||
|
Salaries |
31,229 |
31,342 |
||
|
Accrued vacation and charges |
95,565 |
83,750 |
||
|
Accrued (13th) salary |
16,304 |
- |
||
|
Bonus |
65,733 |
72,810 |
||
|
Withholding income tax |
18,645 |
20,604 |
||
|
Payroll charges (social contributions) |
16,347 |
18,124 |
||
|
Others |
9,476 |
7,543 |
||
|
Total |
253,299 |
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 March 31, 2022 |
||||||
|
Bonus |
72,810 |
17,534 |
675 |
(18,680) |
(6,606) |
65,733 |
||||||
|
|
|
|
|
|
|
|
||||||
|
|
2021 |
|||||||||||
|
|
Balance as of |
Addition |
Payment |
Effect of movements in exchange rates |
Balance as of March 31, 2021 |
|||||||
|
Bonus |
52,312 |
11,848 |
(15,675) |
(10,802) |
37,683 |
|||||||
(*)Refers to business combination of Somo on January, 27 2022 (note 2.2).
14 Accounts payable for business combination
|
|
March 31, 2022 |
December 31, 2021 |
||
|
Dextra (note 2.1) |
|
|
||
|
Acquisition cost |
50,515 |
48,817 |
||
|
Retained amount |
31,262 |
30,000 |
||
|
Other |
8,347 |
6,909 |
||
|
|
90,124 |
85,726 |
||
|
Somo (note 2.2) |
|
|
||
|
Earn-out |
50,305 |
- |
||
|
Escrow account |
19,938 |
- |
||
|
Retained amount |
6,231 |
- |
||
|
Other |
2,465 |
- |
||
|
|
78,939 |
- |
||
|
Current |
109,555 |
48,923 |
||
|
Non-current |
59,508 |
36,803 |
||
|
Total |
169,063 |
85,726 |
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
The table below shows the movement of the accounts payable for business combination:
|
|
2022 |
|||||||||||
|
|
Balance as of January 1, 2022 |
Monetary adjustment |
Price adjustment review (*) |
Acquisition of Somo (note 2.2) |
Exchange variation |
Balance as of March 31, 2022 |
||||||
|
Accounts payable for business combination (note 2) |
85,726 |
2,033 |
2,365 |
92,600 |
(13,661) |
169,063 |
||||||
|
|
2021 |
|||||||||
|
|
Balance as of January 1, 2021 |
Acquisition of Dextra* |
Monetary adjustment |
Payment |
Balance as of December 31, 2021 |
|||||
|
Accounts payable for business combination |
- |
133,573 |
3,091 |
(50,938) |
85,726 |
|||||
(*) 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 increased in the balance to payable of R$2,365.
15 Provisions
The Group is involved in tax and labor lawsuits that were considered probable losses and are provisioned according to the table below:
|
0 |
Balance as of January 1, 2021 |
Provisions |
Balance as of December 31, 2021 |
Provisions |
Reversal |
Charges |
Payments |
Balance as of March 31, 2022 |
||||||||
|
Tax |
11 |
120 |
131 |
69 |
- |
- |
- |
200 |
||||||||
|
Labor |
150 |
352 |
502 |
840 |
(338) |
(11) |
(4) |
989 |
||||||||
|
Total Provisions |
161 |
472 |
633 |
909 |
(338) |
(11) |
(4) |
1,189 |
The main labor lawsuits referred to above refer to the compliance with minimum quota of employees with disabilities and lack of control over working hours.
As of March 31, 2022, the Group’s judicial deposits totaled R$ 6,101 (R$ 3,079 as of December 31, 2021), recognized in the statement of financial position, in non-current assets. Of this amount, R$ 6,011 (R$ 2,933 as of December 31, 2021) refer to tax lawsuits, R$142 (R$142 as of December 31, 2021) refer to labor lawsuits and R$ 4 (R$ 4 as of December 31, 2021) refers to civil lawsuits.
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$ 4,289 as of March 31, 2022 (R$ 4,292 as of December 31, 2021) of which R$ 4,228 related to lawsuits assumed in the business combination with Dextra Group.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
The significant lawsuits assessed as possible loss refer to:
| (i) | The labor infraction notices that addresses the hiring of employees with disabilities. The Group filed an administrative defense, but the notice was maintained. In February 2019, the Group appealed at administrative level and is awaiting the review. |
| (ii) | Tax lawsuits related to non-contribution tax credits referring to payroll in the period from January 1 to December 31, 2011. |
| (iii) | Civil lawsuit regarding an employee claiming alleged breach of employment contract by Dextra, therefore, requiring receipt of double amounts (undue refund). |
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 (note 24.2.c).
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 none other long-term benefits, such as time-of-service leave, lifetime health plan and other time-service benefits.
17 Stock option plan
a. Plan in force
On March 30, 2020, the Board of Directors approved the 1st and 2nd stock option programs and, on February 26, 2021, approved the 3rd and 4th 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 to 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 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 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.
Stock option program (equity settled)
The following are the general conditions of the Group’s stock option plan:
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
|
Characteristics of the plans: |
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 |
385,712 |
|
32,756 |
10,027 |
|
|
(=) Number of options not exercised |
3,476,406 |
(ii) |
633,860 |
157,893 |
(ii) |
|
(=) Number of outstanding options on 03/31/2022 |
3,476,806 |
|
633,860 |
157,893 |
|
|
(=) Number of exercisable options on 03/31/2022 |
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$) |
668 |
|
251 |
48 |
|
|
Expenses incurred until March 31, 2022 (R$) (note 17.e) |
69 |
|
64 |
11 |
|
|
Expenses to incur |
967 |
|
960 |
239 |
|
| (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 price. |
| (v) | The share price was determined based on valuation prepared by the Group on the date of 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. |
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.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
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 1st and 2nd programs and changed from R$ 1,352.00 to R$ 19.84 for the 3rd and 4th 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 for alternatives for paying cash back to participants.
In the period from January to March 2022, 428,495 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 for 1st and 2nd stock option programs and R$ 21,68 for 3rd and 4th stock option programs.
In the year ended on March 31, 2022, the Group recognized in the statement of profit or loss an amount of R$ 144 (R$ 53 as of March 31, 2021), see details in item “e”.
b. Stock option program (settled in cash)
As described above, 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 of 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 December 31, 2021 |
1,307 |
|
52 |
|
(i) Conditional upon the grace period and assuming the possibility of anticipated vesting in face of a liquidity event.
c. Shares granted to executive officers
In August 2017, the Company granted to the former controlling shareholders of the subsidiary Comrade, Inc. (later merged into CI&T, Inc.) the right to receive 16,530 shares. Comrade’s shareholders became executives of the Group, and the granting of the shares is conditioned to continuing employment in the Group for a period of four years from the acquisition date of Comrade. The fair value of the shares was estimated on the acquisition date of the subsidiary, using the “Black-Scholes” pricing model, in the amount of R$ 5,120.
As of March 31, 2022, there was no impact on profit or loss (R$104 as of March 31, 2021), see details below in item “c” – expenses recognized in profit or loss.
On October 8, 2021, the executive officers exercised the options through the issuance of 16,530 new common shares, with no par value, at the total issuance price of R$ 28,697, subscribed by McMillian Family Trust. The subscribed shares were paid through the transfer of 15,896 shares issued by the subsidiary CI&T Inc to the subsidiary CI&T Brazil.
d. Expenses recognized in profit or loss
|
|
March 31, 2022 |
March 31, 2021 |
||
|
Plan in force: |
|
|
||
|
Equity settled |
144 |
53 |
||
|
Cash settled |
1,095 |
15 |
||
|
Shares granted to executives’ officers |
- |
104 |
||
|
Expenses recognized in profit or loss (note 20) |
1,239 |
172 |
||
|
Other effects in shareholders’ equity |
|
|
||
|
Total |
1,239 |
172 |
||
|
(-) Effect of cash settled |
(1,095) |
(15) |
||
|
Effect of movements in exchange rates |
- |
3 |
||
|
Total shareholders’ equity |
144 |
160 |
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
18 Equity
a. Share capital
|
|
March 31, 2022 |
December 31, 2021 |
||
|
Number of ordinary nominative shares |
132,852,040 |
132,197,896 |
||
|
Par value |
0.00027 |
0.00027 |
||
|
Share capital |
37 |
36 |
As of March 31, 2022 the total issued share capital of R$ 37 (R$36 as of December 31, 2021) is divided into 132,852,040 common shares (132,197,896 as of December 31, 2021).
Those common shares are divided into 15,654,144 Class A common shares, including 225,649 Class A common shares that were issued as part of the payment for the Somo acquisition in January 2022 (see note 2.2) and 428,495 Class A common shares issued in the first quarter of 2022 in connection with our stock option plan (see note 17), and 117,197,896 Class B common shares.
The holders of the Class A common shares and Class B common shares have identical rights, except that (i) the holders of Class B common shares are entitled to ten votes per share, whereas holders of Class A common shares are entitled to one vote per share, (ii) Class B common shares have certain conversion rights and (iii) the holders of Class B common shares are entitled to maintain a proportional ownership interest in the event that additional Class A common shares are issued, however that such rights to purchase additional Class B common shares may only be exercised with Class B Shareholder Consent.
b. Share premium
The share premium refers to the difference between the subscription price (US$ 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).
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 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 par value of R$ 0.00027 per share.
Share-based compensation
The Group has share-based compensation plans that are accounted as Capital reserve.
Share issuance costs
In 2021, the Company incurred incremental costs directly attributable to the public offering, recorded in the Capital reserve.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
d. Earnings reserves
|
|
March 31, 2022 |
December 31, 2021 |
||
|
Retained earnings reserve |
125,957 |
125,957 |
||
|
Retained earnings – net profit for the period |
29,223 |
- |
||
|
Total retained earnings |
155,180 |
125,957 |
The application of earnings reserves will be decided at the Annual and Extraordinary Shareholders’ Meeting.
e. Dividends and interest on shareholders’ equity
As of March 31, 2022, the Company had no dividends liability. The approvals and payments of dividends and interest on shareholder´s equity occurred before the corporate reorganization, during 2021.
f. Other comprehensive income
Translation differences
Accumulated translation adjustments include all foreign currency translation differences on investments abroad.
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 future investments in acquisition 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:
|
|
March 31, 2022 |
March 31, 2021 |
||
|
Software development revenue |
470,662 |
284,441 |
||
|
Software maintenance revenue |
13,380 |
6,637 |
||
|
Revenue from software license agent |
249 |
542 |
||
|
Consulting revenue |
5,173 |
4,048 |
||
|
Other revenue |
2,408 |
624 |
||
|
Total net revenue |
491,872 |
296,292 |
The following table sets forth the net revenue by industry vertical for the periods indicated:
|
. |
March 31, 2022 |
March 31, 2021 |
||
|
By Industry Vertical |
|
|
||
|
Financial services |
153,598 |
98,821 |
||
|
Food and beverages |
94,068 |
84,056 |
||
|
Technology, media, and telecom |
67,753 |
32,349 |
||
|
Pharmaceuticals and cosmetics |
63,422 |
41,806 |
||
|
Retail and manufacturing |
35,430 |
15,978 |
||
|
Education and services |
19,688 |
12,191 |
||
|
Logistic and Transportation |
17,036 |
5,232 |
||
|
Others |
40,877 |
5,859 |
||
|
Total net revenue |
491,872 |
296,292 |
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
Performance obligations and revenue recognition policies
The revenue is measure 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:
|
Type of service |
Nature and timing of performance obligations |
Revenue recognition in accordance with IFRS 15 |
|
Services provision: |
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.
Invoices are issued in accordance with contractual terms and are usually paid on average in 70 days. 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.
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:
|
. |
March 31, 2022 |
December 31, 2021 |
||
|
Local market |
127,744 |
80,107 |
||
|
Foreign market |
87,032 |
55,194 |
||
|
(-) Expected credit losses from contract assets |
(1,800) |
(913) |
||
|
Total |
212,976 |
134,388 |
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
The movement of expected credit losses of contract assets, is as follows:
|
Balance as of January 1, 2021 |
(675) |
|
|
Reversal (Provision) |
(3,198) |
|
|
Effect of movements in exchange rates |
(16) |
|
|
Balance as of March 31, 2021 |
(3,889) |
|
|
Reversal (Provision) |
2,981 |
|
|
Effect of movements in exchange rates |
(5) |
|
|
Balance as of December 31, 2021 |
(913) |
|
|
(Provision) |
(1,064) |
|
|
Effect of movements in exchange rates |
177 |
|
|
Balance as of March 31, 2022 |
(1,800) |
20 Expenses by nature
Information on the nature of expenses recognized in the condensed consolidated interim statement of profit or loss is presented below:
|
. |
March 31, 2022 |
March 31, 2021 |
||
|
Employee expenses |
(365,596) |
(199,990) |
||
|
Third-party services and other inputs |
(24,226) |
(14,807) |
||
|
Depreciation and amortization (a) |
(19,390) |
(7,795) |
||
|
Insurance |
(4,107) |
(250) |
||
|
Short-term leases |
(1,717) |
(1,797) |
||
|
Travel expenses |
(1,378) |
(258) |
||
|
Training |
(1,275) |
(764) |
||
|
Stock options (b) |
(1,239) |
(173) |
||
|
Expected credit loss |
(1,066) |
(3,258) |
||
|
Consulting (c) |
(2,695) |
(225) |
||
|
Other costs and expenses |
(7,934) |
(5,428) |
||
|
Total |
(430,623) |
(234,745) |
||
|
|
|
|
||
|
Disclosed as: |
|
|
||
|
Costs of services provided |
(328,992) |
(188,372) |
||
|
Selling expenses |
(35,129) |
(18,979) |
||
|
General and administrative expenses |
(64,921) |
(25,726) |
||
|
Research and technological innovation expenses |
- |
(4) |
||
|
Impairment loss on trade receivables and contract assets |
(1,066) |
(3,258) |
||
|
Other income (expenses) net |
(515) |
1,594 |
||
|
Total |
(430,623) |
(234,745) |
| (a) | Depreciation and amortization include R$ 9,318 (R$ 6,225 as of March 31, 2021) classified as cost of services and R$ 10,072 (R$ 1,570 as of March 31, 2021) as expenses. |
| (b) | Stock options include R$ 1,182 (R$ 52 as of March 31, 2021) classified as cost of services and R$ 57 (R$ 121 as of March 31, 2021) as expenses. |
| (c) | Consulting expenses in the total amount of R$ 2,695 (R$ 225 as of March 31, 2021) related to acquisitions. |
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
21 Net finance costs
|
. |
March 31, 2022 |
March 31, 2021 |
||
|
Finance income: |
|
|
||
|
Income from financial investments |
1,384 |
418 |
||
|
Foreign-exchange gain (a) |
62,034 |
8,283 |
||
|
Gains on derivatives |
5,801 |
275 |
||
|
Interest received |
200 |
38 |
||
|
Positive monetary variation |
4 |
- |
||
|
Other finance income |
159 |
35 |
||
|
Total |
69,582 |
9,049 |
||
|
Finance costs: |
|
|
||
|
Exchange variation loss (b) |
(60,688) |
(1,574) |
||
|
Loss on derivatives |
(805) |
(7,066) |
||
|
Interest and charges on loans and leases (note 12) (c) |
(18,137) |
(1,934) |
||
|
Bank guarantee expenses |
- |
(9) |
||
|
Negative monetary variation |
(2,033) |
- |
||
|
Other finance costs |
(4,631) |
(163) |
||
|
Total |
(86,294) |
(10,746) |
||
|
Net finance costs |
(16,712) |
(1,697) |
| (a) | The main increase in foreign exchange gains is related to the Group functional currency translation of R$10,811 and related to the Group trading and financial operations translation of R$51,223 (R$8,283 in March 2021). |
| (b) | The main variation in foreign exchange loss is related to the Group functional currency translation of R$ 38,092 and loss related to the Group trading and financial operations translations of R$ 22,596 (R$ 1,574 as of March, 2021). |
| (c) | The main variation of the interest and charges on loans and leases is related to loans for Dextra acquisition of R$ 15,934. |
22 Income tax and social contribution
Income tax expenses are recognized at an amount determined by multiplying the profit (loss) before tax for 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 three-month period ended March 31, 2022 and for the three-month period ended March 31, 2021 was 34%.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
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.
|
|
March 31, 2022 |
March 31, 2021 |
||
|
Numerator |
|
|
||
|
Profit attributable to holders of common shares |
29,223 |
39,615 |
||
|
Denominator |
|
|
||
|
Weighted average number of basic shares held by shareholders |
132,639,430 |
119,960,383 |
||
|
Earnings per share – basic |
0.22 |
0.33 |
||
|
|
|
|
||
|
Numerator |
|
|
||
|
Profit attributable to holders of common shares |
29,223 |
39,615 |
||
|
Denominator |
|
|
||
|
Weighted average number of diluted shares held by shareholders |
132,963,392 |
123,663,075 |
||
|
Net earnings per share – diluted |
0.22 |
0.32 |
Weighted average number of common shares
|
|
March 31, 2022 |
March 31, 2021 |
||
|
Weighted average common shares (basic) |
132,639,430 |
119,960,383 |
||
|
Effect of stock options when exercised |
323,962 |
3,702,692 |
||
|
Weighted average number of common shares |
132,963,392 |
123,663,075 |
24 Financial instruments and risk management
24.1 Financial instrument categories
The Group maintains operations with derivative and non-derivative financial instruments. These instruments are managed to assure liquidity and profitability. The control policy consists of monitoring the terms contracted against the terms and condition current in the market. The Company does not make investments of a 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. |
| ● | 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. |
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, segregated by category:
|
|
March 31, 2022 |
|||||||
|
|
Amortized cost |
Assets/liabilities measured at FVTPL |
Assets/liabilities measured at FVOCI |
Total |
||||
|
Financial assets |
|
|
|
|
||||
|
Cash and cash equivalents |
131,827 |
- |
- |
131,827 |
||||
|
Financial investments |
405,602 |
- |
- |
405,602 |
||||
|
Trade receivables |
310,380 |
- |
- |
310,380 |
||||
|
Contract assets |
212,976 |
- |
- |
212,976 |
||||
|
Derivatives |
- |
5,230 |
- |
5,230 |
||||
|
Other assets |
36,378 |
- |
- |
36,378 |
||||
|
|
1,097,163 |
5,230 |
- |
1,102,393 |
||||
|
|
|
|
|
|
||||
|
Financial liabilities |
|
|
|
|
||||
|
Suppliers and other payables |
23,672 |
- |
- |
23,672 |
||||
|
Loans and borrowings |
747,976 |
- |
- |
747,976 |
||||
|
Lease liabilities |
82,504 |
- |
- |
82,504 |
||||
|
Accounts payable for business combination |
169,063 |
- |
- |
169,063 |
||||
|
Non-derivatives financial instruments |
- |
- |
35,724 |
35,724 |
||||
|
Contract liabilities |
11,143 |
- |
- |
11,143 |
||||
|
Other liabilities |
20,034 |
- |
- |
20,034 |
||||
|
|
1,054,392 |
- |
35,724 |
1,090,116 |
||||
|
|
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 |
- |
- |
32,949 |
||||
|
|
1,442,388 |
896 |
- |
1,443,265 |
||||
|
|
|
|
|
|
||||
|
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 |
||||
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
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 currency – Exchange rate changes
Foreign currency risk is inherent to the Group’s business model. The Group’s revenue is mainly denominated in foreign currency and, therefore, 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, therefore, 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, lease liabilities and derivatives. See the total amount exposure to foreign currency in note 24.a.2.
a.2 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), in order to 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 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 3rd, 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, 2021, 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. The remaining balance of US$40,000 as of March 31, 2022 is still aligned to highly probable future acquisitions for the year of 2022. The Group monitors on the monthly basis the relationships between the hedge item and hedging instruments.
See below the movement of exchange variation accumulated in other comprehensive income as of March 31, 2022, realized by investments in acquisitions and to be realized by future investments in acquisitions:
|
|
Exchange variation |
|
|
Balance as of December 31, 2021 |
- |
|
|
Recognized in equity |
(51,858) |
|
|
Transfer realized to investments in acquisitions |
16,134 |
|
|
Balance as of March 31, 2022 |
(35,724) |
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
As of March 31, 2022, the annual expectation of realization of the exchange variation balance accumulated in equity is R$ 17,168.
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 a 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.
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.
|
|
March 31, 2022 |
|
December 31, 2021 |
|||||
|
|
USD |
Other |
|
USD |
Other |
|||
|
Financial investments |
180,366 |
- |
|
798,786 |
- |
|||
|
Suppliers and other payables |
(3,305) |
(3,041) |
|
(8,763) |
(722) |
|||
|
Trade receivables |
191,599 |
33,415 |
|
233,724 |
7,273 |
|||
|
Loans and borrowings |
(225,891) |
- |
|
(266,561) |
- |
|||
|
Lease liabilities |
(28,422) |
(4,398) |
|
(32,159) |
(962) |
|||
|
Derivatives |
5,230 |
- |
|
361 |
- |
|||
|
Net exposure |
119,577 |
25,976 |
|
725,388 |
5,589 |
|||
a.3 Exchange rate risk
The Group is exposed to foreign currency 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.
a.4 Interest rate risk
Derives from the possibility of the Group incurring gains or losses resulting from changes in interest rates applicable to its financial assets and liabilities. The Group may also enter into derivative contracts in order to mitigate this risk.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
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: (i) the interest rate index in order to analyze the sensitivity of the index in short-term investments, whose average was 11.74% for CDI and loans and borrowings, whose average was 1.43% for Libor (only applicable for some loans and borrowings); (ii) the exchange rate of R$5.20 USD, related to the closing rate projected by the Company, for the purposes of analyzing the foreign exchange exposure. Based on these factors, variations in the adverse and remote scenarios were calculated. |
| (ii) | Adverse scenario: The adverse scenario rate is half the difference between the probable rate and the remote rate. |
| (iii) | Remote scenario: the highest projection expected by the Company for the next 12 months. |
For each scenario, the gross finance income or finance costs were calculated, excluding taxes and the maturity flow of each agreement. The base date considered was March 31, 2022, projecting the indexes for one year and verifying their sensitivity in each scenario.
Sensitivity analysis for interest rate risk
|
|
Risk |
Exposure in R$ |
Period rates |
Probable scenario (i) |
Adverse Scenario (ii) |
Remote Scenario (iii) |
||||||
|
Short-term financial investments |
Interest rate increase - CDI |
66,020 |
11.65% |
11.74% |
12.29% |
12.84% |
||||||
|
|
|
|
|
7,751 |
8,114 |
8,477 |
||||||
|
Loans and borrowings |
Interest rate increase - CDI |
(595,704) |
11.65% |
11.74% |
12,29% |
12,84% |
||||||
|
|
|
|
|
(69,936) |
(73,212) |
(76,488) |
||||||
|
Loans and borrowings |
Interest rate increase - Libor |
(152,272) |
0.24 |
1.43% |
2.32% |
3.22% |
||||||
|
|
|
|
|
(2,174) |
(3,533) |
(4,903) |
||||||
|
Derivatives (interest rate swap) |
Interest rate increase - Libor |
142,792 |
0.24 |
1,43% |
2,3200% |
3,22% |
||||||
|
|
|
|
|
2,038 |
3,313 |
4,598 |
||||||
|
Effect on earnings (reduction) |
|
|
|
589 |
4,861 |
9,145 |
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
Sensitivity analysis for exchange rate risk
|
Operation |
|
|
|
|
|
|||||
|
|
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 |
|
5,2017 |
5,3005 |
5,3994 |
|||||
| Financial investments | 38,070 | 17,663 | 17,999 | 18,683 | ||||||
| Suppliers and other payables | (695) | (310) | (316) | (328) | ||||||
| Trade receivables | 40,407 | 18,586 | 18,939 | 19,659 | ||||||
| Loans and borrowings | (47,633) | (21,882) | (22,298) | (23,145) | ||||||
| Lease liabilities | (5,999) | (2,783) | (2,836) | (2,944) | ||||||
|
Effect on earnings (increase) |
|
|
11,274 |
11,488 |
11,925 |
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 analyses 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$ 128,775 on March 31, 2022 (R$ 135,727 as of December 31, 2021) and financial investments of R$ 405,602 at March 31, 2022 (R$ 798,786 as of December 31, 2021). The cash and cash equivalents and financial investments are held with bank and financial institution counterparties, which are rated BB- to A+, based on Standard & Poor’s ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum credit risk exposure on the date of the financial statements is:
|
|
March 31, 2022 |
December 31, 2021 |
||
|
Hedge financial instruments |
5,230 |
896 |
||
|
Cash and cash equivalents |
131,827 |
135,727 |
||
|
Financial investments |
405,602 |
798,786 |
||
|
Trade receivables |
310,380 |
340,519 |
||
|
Contract assets |
212,976 |
134,388 |
||
|
Other receivables (current and non-current) |
38,743 |
32,949 |
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
At 31 March 2022, the exposure to credit risk for trade receivables, contract assets and other receivables by geographic region was as follows:
|
|
March 31, 2022 |
December 31, 2021 |
||
|
NAE (North America and Europe) |
324,322 |
297,430 |
||
|
North America |
268,737 |
287,992 |
||
|
Europe |
55,585 |
9,438 |
||
|
LATAM (Latin America) |
232,131 |
202,528 |
||
|
APJ (Asia, Pacific and Japan) |
5,646 |
7,917 |
||
|
Total |
562,099 |
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, and other indebtedness such as working capital agreements 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 |
23,672 |
23,672 |
23,672 |
- |
- |
- |
- |
|||||||
|
Loans and borrowings |
747,976 |
943,035 |
134,395 |
90,495 |
170,547 |
547,598 |
- |
|||||||
|
Lease liabilities |
82,504 |
94,611 |
15,743 |
15,299 |
27,001 |
34,343 |
2,225 |
|||||||
|
Accounts payable for business combination |
169,063 |
190,039 |
61,620 |
51,761 |
10,212 |
54,607 |
11,839 |
|||||||
|
Contract liabilities |
11,143 |
11,143 |
11,143 |
- |
- |
- |
- |
|||||||
|
Other payables (current and non-current) |
20,034 |
20,034 |
20,034 |
- |
- |
- |
- |
|||||||
|
Non-derivatives financial instruments |
35,724 |
35,724 |
35,724 |
- |
- |
- |
- |
|||||||
|
|
1,090,116 |
1,318,258 |
302,331 |
157,555 |
207,760 |
636,548 |
14,064 |
|||||||
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 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 |
40,682 |
||||||
|
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 |
645,019 |
||||||
Bank credit lines
|
|
March 31, 2022 |
December 31, 2021 |
||
|
Used |
9,476 |
11,161 |
||
|
Not used |
40,271 |
47,434 |
||
|
|
49,747 |
58,595 |
The Group has credit lines credit lines for working capital with the banks HSBC and Citibank, in the amount of US$10,500 or R$49,747, at the exchange rate of 4.7378, the commercial selling rate for U.S. dollars as of March 31, 2022, as reported by the Brazilian Central Bank, partially used (note 12).
24.3 Derivative financial instruments
The Group held derivative financial instruments to hedge its foreign currency and interest rate risk exposures. As of March 31, 2022, the Group no more entered into purchase and sale agreement for derivative financial instruments (NDFs).
Fair value estimated for derivative financial instruments contracted by the Group was determined according to information available in the market, mainly through financial institutions and specific methodologies of assessment. However, considerable judgment is necessary to understand market data in order to produce the fair value estimate for each operation. Consequently, the estimates do not necessarily indicate the amounts that will be effectively realized at settlement.
For comparison purpose, as of December 31, 2021, the Group had the following agreements for financial derivatives (NDFs):
|
|
2021 |
||||||||||
|
Maturity |
Nominal value (USD) |
Contracted rate |
Amount in R$ |
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.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
As of March 31, 2022, the Group has not balances involving options to buy and sell currencies. For comparison purpose, 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.
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-month LIBOR |
3.07% |
5,230 |
||||||
|
|
|
|
|
|
5,230 |
||||||
|
|
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.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
|
|
Carrying amount |
Fair value |
|||||||
|
|
March 31, 2022 |
December 31, 2021 |
March 31, 2022 |
December 31, 2021 |
|||||
|
Level 2 |
|
|
|
|
|||||
|
Derivatives: |
|
|
|
|
|||||
|
Non-Deliverable Forward - NDF |
- |
(17) |
- |
(17) |
|||||
|
Interest rate swap |
5,230 |
403 |
5,230 |
403 |
|||||
|
Call and put option term |
- |
(25) |
- |
(25) |
|||||
|
Total |
5,230 |
361 |
5,230 |
361 |
|||||
|
Non-derivatives |
|
|
|
|
|||||
|
Lease liabilities |
(82,504) |
(81,888) |
(94,611) |
(87,662) |
|||||
|
Loans and borrowings |
(747,976) |
(788,709) |
(943,035) |
(974,942) |
|||||
|
Accounts payable for business combination |
(169,063) |
(85,726) |
(190,039) |
(85,726) |
|||||
|
Total |
(999,543) |
(956,323) |
(1,227,685) |
(1,148,330) |
|||||
|
Total |
(994,313) |
(955,962) |
(1,222,455) |
(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$ 4,700 as of March 31, 2022 (R$ 4,191 as of March 31, 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 line “General and administrative expenses”.
The executive officers also participate in the Group's stock option program (see note 17). For the year ended on March 31, 2022, R$12 (R$ 7 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 information for decision.
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.
CI&T Inc.
Unaudited condensed consolidated interim financial statements
March 31, 2022
The table below summarizes net revenues by geographic region:
|
. |
March 31, 2022 |
March 31, 2021 |
||
|
NAE (North America and Europe) |
241,529 |
155,367 |
||
|
North America |
205,985 |
153,038 |
||
|
Europe |
35,544 |
2,329 |
||
|
LATAM (Latin America) |
234,706 |
129,432 |
||
|
APJ (Asia, Pacific and Japan) |
15,637 |
11,493 |
||
|
Total (Note 19) |
491,872 |
296,292 |
Net revenues by geographic area were determined based on the country where the sale was made. The net revenue from a single customer represents 15.4% of the Company’s total net revenues as of March 31, 2022 (24% as of March 31, 2021).
Revenue by client concentration
The following table sets forth net revenue contributed by the top client, and top ten clients for the periods indicated:
|
. |
March 31, 2022 |
March 31, 2021 |
||
|
Top client |
75,831 |
71,037 |
||
|
Top 10 clients |
253,427 |
217,264 |
Geographic information of the Group's non-current assets
The table below summarizes non-current assets, except deferred taxes, based on assets geographic location:
|
. |
March 31, 2022 |
December 31, 2021 |
||
|
Brazil |
817,289 |
837,362 |
||
|
Abroad: |
|
|
||
|
United States of America |
390,295 |
38,417 |
||
|
Japan |
139 |
176 |
||
|
China |
1,747 |
2,239 |
||
|
Canada |
272 |
284 |
||
|
Portugal |
385 |
387 |
||
|
Other countries |
5,601 |
82 |
||
|
Total |
1,215,728 |
878,947 |
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: May 18, 2022
| CI&T Inc |
|||
| By: | /s/ Stanley Rodrigues | ||
| Name: Stanley Rodrigues | |||
| Title: Chief Financial Officer | |||