CI&T Inc. — FY2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021; filed April 22, 2022. This is an annual report, not a standalone Q4 earnings release. Financial statements are prepared under IFRS and presented in Brazilian reais (R$); amounts below are generally R$ millions unless stated otherwise.
Financial results and key metrics
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Net revenue | R$1,444.4m | R$956.5m | +51%; +47% at constant currency |
| Gross profit / margin | R$508.6m / 35.2% | R$355.7m / 37.2% | Profit +43%; margin down 2.0 points |
| Operating profit | R$244.6m | R$208.2m | +17% |
| Net profit / margin | R$126.0m / 8.7% | R$127.7m / 13.3% | Profit down 1%; margin contracted |
| Adjusted EBITDA / margin | R$324.1m / 22.4% | R$237.9m / 24.9% | EBITDA +36%; margin down 2.5 points |
| Operating cash flow | R$132.4m | R$101.0m | +31% |
| Cash and cash equivalents | R$135.7m | R$162.8m | Down R$27.1m |
| Financial investments | R$798.8m | — | Held in a USD interest-bearing account |
| Loans and borrowings | R$788.7m | R$89.2m | Increase primarily related to Dextra acquisition financing |
Adjusted EBITDA, adjusted gross profit and adjusted net profit are non-IFRS measures defined by management; their adjustments include acquisition/IPO consulting costs and impairment. Adjusted net profit was R$157.0m versus R$128.1m, while adjusted net profit margin declined to 10.9% from 13.4%.
Net cash used in investing activities was R$1,507.5m, including R$784.9m invested from IPO proceeds and R$692.7m paid for Dextra, net of cash acquired. Financing activities provided R$1,376.8m, including IPO proceeds and new borrowings. Capital expenditures were R$29.9m.
Year-end cash plus financial investments totaled R$934.5m, compared with R$788.7m of borrowings, before considering lease liabilities and other obligations. Management said available liquidity was expected to meet 2022 needs; R$164.4m of borrowings were current, and R$624.3m were non-current. Debt covenants included a net debt-to-EBITDA ceiling of 3.0x; the company reported compliance at year-end.
Business context and material changes
CI&T provides digital strategy, design and software engineering services. It reported 5,564 employees at year-end, including employees added through Dextra. The United States and Brazil accounted for 47.4% and 48.1% of revenue, respectively. Its largest client represented 20% of revenue and its ten largest clients 63%, down from 67% in 2020. Financial services, food and beverage, and pharmaceuticals and cosmetics together contributed 72% of revenue.
Revenue growth reflected expansion with existing clients, new clients and the Dextra acquisition, completed August 10, 2021. Dextra consideration was estimated at R$783.6m, with R$595.7m of goodwill recognized. The company recorded R$21.9m of impairment on acquired intangible assets after discontinuing certain software and non-compete-related assets. CI&T completed its IPO in November 2021, with Class A shares listed on the NYSE as CINT.
Cost of services rose 56%, faster than revenue, largely due to hiring and compensation adjustments; headcount increased 73%. Operating expenses rose 79%, including higher selling and administrative costs and the Dextra-related impairment. Net finance costs more than doubled to R$34.2m, reflecting higher interest costs and borrowing levels. Revenue from technology, media and telecom increased to 12% of the mix from 9%, while food and beverage declined to 24% from 26%.
Outlook, risks and unusual items
The filing gives no quantitative revenue, profit or margin guidance. Management identified continued demand for digital transformation, talent recruitment and retention, client expansion, pricing, utilization, foreign exchange and acquisitions as important performance drivers. Management expected to increase capital expenditures as the workforce grows.
- Acquisition and funding: CI&T acquired Somo Global in January 2022 for R$341m cash plus 225,649 Class A shares, with an earn-out of up to R$70m. This followed year-end cash deployment and acquisition-related borrowing.
- Client and sector concentration: Clients can terminate many engagements on 30–90 days’ notice; the top client was 20% of revenue. Demand is concentrated in a few industries.
- People, pricing and execution: Competition for skilled IT staff, wage inflation, attrition, utilization, contract cost overruns and pricing pressure may affect margins and delivery.
- Currency, interest rates and macro conditions: Revenue is largely in foreign currencies while many costs are in reais. Brazilian real volatility, rising interest rates, inflation, geopolitical tensions including the Ukraine conflict, and COVID-19 uncertainty may affect results.
- Controls: Management concluded disclosure controls were ineffective at year-end due to material weaknesses in IT access/report controls and formal review of manual journal entries. Remediation was underway; effectiveness remained to be monitored. The auditor had not attested to internal controls.
- Contingencies: R$0.6m of tax and labor provisions were recorded; R$4.3m of possible-loss lawsuits were unprovided, including matters assumed with Dextra. The company reported no proceedings expected to have a material adverse effect.
- Dividends: CI&T did not expect to pay cash dividends in the foreseeable future. Its Brazilian subsidiary paid R$126.0m in dividends and interest on equity during 2021.
Important facts for investors to verify
- How the Dextra acquisition, goodwill and remaining purchase-price obligations perform and are ultimately settled; the filing contains differing Dextra revenue contribution figures in its narrative disclosures.
- Whether the reported margin contraction stabilizes as hiring, compensation and acquisition costs evolve, and how reported IFRS results compare with management’s adjusted measures.
- The availability and currency exposure of the R$798.8m financial investment balance, and liquidity after the Somo cash payment and scheduled debt repayments.
- Progress in remediating the disclosed material weaknesses and the results of management’s required internal-control assessment for FY2022.
- Whether client concentration, talent availability, foreign exchange movements and debt covenant headroom change materially after the acquisitions.