CI&T Inc. 3Q22 Financial Summary
Business Context and Reporting Period
CI&T Inc. (NYSE: CINT), a global digital specialist, reported unaudited financial results for the third quarter (3Q22) and nine months (9M22) ended September 30, 2022. The company operates across North America, Latin America, Europe, and Asia Pacific, providing software development, consulting, and digital transformation services. The reporting period marks one year since the company's IPO.
Key Financial Metrics
| Metric | 3Q22 (R$) | 3Q21 (R$) | 9M22 (R$) | 9M21 (R$) |
|---|---|---|---|---|
| Net Revenue | 559.0M | 376.0M | 1,575.9M | 987.6M |
| Net Profit | 40.6M | (2.2M) | 95.8M | 82.1M |
| Adjusted EBITDA | 107.3M | 80.0M | 293.8M | 222.3M |
| Adjusted EBITDA Margin | 19.2% | 21.3% | 18.6% | 22.5% |
| Adjusted Net Profit | 69.5M | 27.1M | 162.9M | 111.9M |
| Cash and Equivalents | 151.9M | - | 151.9M | - |
| Total Debt (Loans & Borrowings) | 706.4M | - | 706.4M | - |
Note: All figures in Brazilian Reais (R$) unless otherwise noted. 3Q22 Net Profit represents a turnaround from a net loss in 3Q21.
Material Changes vs. Prior Period
- Revenue Growth: 3Q22 revenue increased 48.7% year-over-year (YoY), or 51.3% at constant currency. Acquisitions (Somo, Box 1824, Transpire) contributed 14 percentage points to this growth.
- Profitability: The company returned to profitability in 3Q22 with R$40.6M net profit compared to a R$2.2M loss in 3Q21. Adjusted Net Profit surged 156.7% YoY.
- Expense Dynamics: SG&A expenses rose 45.3% YoY due to acquisition-related costs (retention bonuses, consulting) and IPO-related back-office strengthening. Adjusted Gross Profit margin decreased slightly to 36.9% from 37.1% due to lower margins from recent acquisitions.
- Financial Costs: Net financial expenses decreased 66.8% YoY to R$7.4M, driven by positive foreign exchange variations offsetting higher interest rates.
- Headcount: Employee count grew 27.6% to 6,887, adding 1,489 employees in the quarter.
Guidance, Outlook, and Risks
- 4Q22 Guidance: Management expects 4Q22 net revenue of at least R$605M (32% reported growth, 41% constant currency growth).
- Full Year 2022 Outlook: Raised guidance to expect at least 58% constant currency revenue growth and 51% reported revenue growth. Adjusted EBITDA margin is estimated at a minimum of 19%.
- Management Commentary: CEO Cesar Gon highlighted robust organic growth amplified by global acquisitions and a strong value proposition in digital efficiency. The company noted that digital transformation remains a secular trend despite a challenging macro environment.
- Risks and Contingencies:
- Acquisition Integration: Risks related to successfully integrating Dextra, Somo, Box 1824, Transpire, and the newly announced NTERSOL.
- Foreign Exchange: Significant exposure to currency fluctuations (USD, GBP, AUD) impacting reported results; guidance includes negative FX translation impacts.
- Legal: Provisions for labor and tax lawsuits, including unmaterialized labor contingencies assumed in the Box 1824 acquisition.
- Macro: Impact of the war in Ukraine, economic sanctions, and general economic conditions.
Investor Verification Checklist
- Acquisition Accounting: Verify the final valuation and goodwill recognition for Transpire and Box 1824, as preliminary valuations were used in 3Q22.
- Constant Currency Impact: Assess the divergence between reported growth and constant currency growth due to FX volatility.
- Debt Covenants: Confirm continued compliance with Net Debt to EBITDA covenants given the increase in leverage from acquisitions.
- Client Concentration: Review the top client concentration (16% of total revenue from a single client) and potential churn risks.
- Non-IFRS Reconciliations: Scrutinize the adjustments made to reach Adjusted EBITDA and Adjusted Net Profit, specifically acquisition-related expenses and stock-based compensation.