CI&T Inc. — FY2022 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2022; filed March 28, 2023. This is an annual report, not a standalone fourth-quarter filing, and the supplied text does not provide separate Q4 results. Financial statements are audited and prepared under IFRS as issued by the IASB; amounts below are in Brazilian reais (R$), generally rounded to millions.
Business context and results
CI&T provides digital strategy, design and software engineering services. It reported 6,904 employees across nine countries and operated as one reportable segment. FY2022 growth included four acquisitions: Somo, Box 1824, Transpire and NTERSOL.
| Metric | FY2022 | FY2021 | Change / context |
|---|---|---|---|
| Net revenue | R$2,187.7m | R$1,444.4m | +51.5%; +57.9% at constant currency |
| Gross profit / margin | R$762.5m / 34.9% | R$508.6m / 35.2% | Profit +49.9%; margin down 0.3 percentage points |
| Operating profit | R$273.9m | R$244.6m | +12.0% |
| Net finance costs | R$73.6m | R$34.2m | More than doubled, mainly on higher interest expense and debt |
| Profit before tax | R$200.3m | R$210.4m | -4.8% |
| Net profit / margin | R$125.9m / 5.8% | R$126.0m / 8.7% | Profit essentially flat; margin compressed |
| Basic earnings per share | R$0.95 | R$1.03 | Lower year over year |
| Adjusted EBITDA / margin | R$417.5m / 19.1% | R$324.1m / 22.4% | EBITDA increased; margin declined 3.3 percentage points |
| Adjusted net profit / margin | R$213.6m / 9.8% | R$164.1m / 11.4% | Adjusted profit increased; margin declined |
Revenue growth reflected expansion with existing clients (2022 net revenue retention rate: 126%), 84 additional clients generating more than R$1m each, and R$234.2m of revenue contributed by 2022 acquisitions. The top client represented 14.9% of revenue and the top ten 49.4%, versus 19.6% and 63.3%, respectively, in 2021. North America and Europe contributed 51.6% of revenue, up from 48.0%; Latin America contributed 44.6%.
Cash flow, debt and liquidity
| Metric | FY2022 / year-end | FY2021 / comparison |
|---|---|---|
| Net cash from operating activities | R$36.1m | R$132.4m |
| Net cash used in investing activities | R$82.6m | R$1,507.5m |
| Net cash from financing activities | R$100.7m | R$1,376.8m |
| Cash and cash equivalents | R$185.7m | R$135.7m |
| Financial investments | R$96.3m | R$798.8m |
| Loans and borrowings | R$974.2m total; R$231.3m current and R$742.9m non-current | R$788.7m total |
| Lease liabilities | R$62.8m | R$81.9m |
| Capital expenditures | R$23.0m | R$29.9m |
Operating cash generation fell principally because receivables and contract assets increased with revenue, and interest paid rose to R$70.1m from R$12.1m. Trade receivables were R$501.7m and contract assets R$217.3m at year-end. The company reported R$54.8m in undrawn credit lines. Management said cash, investments and expected financing sources should meet capital expenditure and liquidity needs for at least the next 12 months; R$231.3m of borrowings mature in 2023. Debt includes fixed- and floating-rate facilities, including CDI-, LIBOR- and SOFR-linked borrowings. The company reported compliance with its financial covenants at year-end, including a net-debt-to-EBITDA ceiling of 3.0-to-1.0.
Material changes, outlook and risks
- Profitability and costs: Selling, general and administrative expenses rose 85.3% to R$488.2m. The company cited expanded hiring, acquisition integration costs, acquired-intangible amortization, consulting, D&O insurance and retention packages. Acquired-intangible amortization was R$43.1m. Higher financing costs also weighed on profit.
- Acquisitions and balance-sheet exposure: Goodwill and other intangible assets increased substantially following acquisitions; goodwill was R$1,432.9m at year-end. Acquisition-related payables were R$204.9m. Management reported no goodwill impairment in 2022; the impairment assessment depends on forecasts and discount-rate assumptions.
- Management outlook: No quantified revenue, earnings or margin guidance is provided. Management expects capital expenditures, mainly for IT equipment, to increase as hiring and operations expand. It cited continuing demand for digital transformation and its focus on international growth, particularly North America and Europe.
- Key risks: Client concentration and contract termination; competition, pricing and employee retention; execution and integration of acquisitions; foreign-exchange and interest-rate volatility; Brazil’s political, economic, tax and labor environment; data privacy and cybersecurity; and possible changes in digital-services demand amid macroeconomic uncertainty.
- Contingencies and unusual items: Provisions for probable litigation were R$12.3m; additional possible-loss claims of R$10.6m were not provisioned. The Brazilian payroll tax incentive is expected to expire in December 2023, which could increase costs if not renewed. FY2022 adjusted measures exclude specified acquisition-related expenses; these non-IFRS measures are not substitutes for IFRS results.
- Controls and audit: Management concluded disclosure controls and internal control over financial reporting were effective at December 31, 2022, and said previously identified material weaknesses had been remediated. The auditor did not attest to internal controls because CI&T qualified for the emerging-growth-company exemption. KPMG issued an unqualified opinion on the IFRS financial statements.
Important facts for investors to verify
- Review the audited statements and notes for the significant decline in operating cash flow, receivables and contract assets, and the timing of customer collections.
- Check debt maturities, interest-rate terms, covenant calculations and the funding plan for 2023 obligations and acquisition-related payments.
- Assess acquisition performance against purchase assumptions, including NTERSOL and Somo earn-outs, retained consideration, integration costs, goodwill and intangible-asset impairment assumptions.
- Reconcile reported IFRS profitability with adjusted EBITDA and adjusted net profit, including the nature and recurrence of excluded acquisition-related costs.
- Monitor renewal of the Brazilian payroll tax incentive, tax and labor-law developments, and the possible-loss litigation disclosures.
- Consider the governance and dilution implications of the dual-class structure: Class B shares carry ten votes per share, and share-based awards and acquisition consideration may increase Class A shares outstanding.