CI&T Inc. — 2023 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2023; filed March 28, 2024. This is an annual report, not a standalone fourth-quarter report; the supplied filing text does not provide a clear set of Q4-only financial results. Financial statements are prepared under IFRS in Brazilian reais (R$).
Business context
CI&T provides digital strategy, design and software engineering services to enterprise and growth-company clients. At year-end it had 6,111 employees across nine countries. Revenue is generated mainly from software development, maintenance and consulting; the company identifies client demand, talent, utilization, pricing, foreign exchange and integration of acquisitions as important operating drivers.
Key financial metrics
| Metric (R$ millions, except percentages) | 2023 | 2022, restated | Change |
|---|---|---|---|
| Net revenue | 2,233.5 | 2,187.7 | +2.1% |
| Gross profit | 745.7 | 762.5 | -2.2% |
| Gross margin | 33.4% | 34.8% | -1.4 percentage points |
| Operating profit before net finance costs and income tax | 285.5 | 273.9 | +4.2% |
| Net finance costs | 76.2 | 73.6 | +3.4% |
| Profit before income tax | 209.3 | 200.3 | +4.5% |
| Income tax expense | 76.7 | 104.6 | -26.6% |
| Net profit | 132.6 | 95.7 | +38.5% |
| Net margin | 5.9% | 4.4% | +1.5 percentage points |
| Adjusted EBITDA (non-IFRS) | 432.1 | 417.5 | +3.5% |
| Adjusted EBITDA margin (non-IFRS) | 19.3% | 19.1% | +0.2 percentage points |
| Adjusted net profit (non-IFRS) | 193.9 | 169.5 | +14.4% |
| Adjusted gross margin (non-IFRS) | 35.6% | 36.9% | -1.3 percentage points |
Reported revenue growth was 2.1%; management’s constant-currency measure showed 4.1% growth. Non-IFRS measures are management-defined and should be considered alongside, not instead of, IFRS results.
- Cash flow: Operating cash flow was R$295.2 million, versus R$36.1 million in 2022. Investing activities generated R$66.2 million, primarily reflecting R$90.3 million of financial-investment redemptions; financing activities used R$333.3 million. Cash and cash equivalents ended the year at R$211.6 million, up from R$185.7 million.
- Liquidity: Separate financial investments were R$3.2 million. Current assets were R$912.1 million and current liabilities R$455.3 million. Management stated available cash and investments were expected to cover 2024 capital expenditure and liquidity needs.
- Debt: Loans and borrowings totaled R$727.5 million: R$112.7 million current and R$614.7 million non-current, down R$262.3 million year over year. Scheduled 2024 maturities were R$112.7 million; long-term maturities included R$168.7 million in 2025. The company also reported R$44.9 million in lease liabilities and R$136.1 million payable for acquired businesses. Financial covenants were met at year-end.
- Other metrics: Basic and diluted earnings per share were R$0.97 and R$0.95, respectively, versus restated R$0.72 and R$0.71. Capital expenditures were R$25.6 million. Voluntary employee attrition was reported at 9.25% for 2022–2023; headcount fell 11% from 2022.
Material changes versus 2022
- Growth slowed markedly: net revenue rose 2.1% in 2023, following 51.5% growth in 2022. Constant-currency revenue growth was 4.1% in 2023.
- Cost of services increased 4.4%, faster than revenue, and gross profit declined 2.2%; adjusted gross margin also narrowed. Operating expenses fell 5.8%, helping operating profit rise 4.2%.
- Net profit rose 38.5%, supported in part by lower income tax expense. The effective tax rate was 37%, compared with 52% in restated 2022.
- Operating cash flow improved substantially, while financing cash flow turned negative, including R$407.0 million of debt repayments and R$43.4 million used to repurchase shares.
- Revenue concentration eased: the largest client represented 8% of revenue versus 15% in 2022; the top ten represented 40% versus 49%. Management attributed revenue growth mainly to expansion of larger client accounts, partly offset by a reduction in work from the largest client.
- Geographically, North America and Europe together accounted for 53.9% of revenue, up from 51.6%; Latin America’s share declined to 41.4% from 44.6%.
Outlook, risks and unusual items
- The filing provides no specific 2024 revenue, profit or margin guidance. Management expects capital expenditures to increase, mainly for IT equipment as hiring supports growth, and says cash flow, borrowing or potential equity issuance could fund requirements.
- Management cited ongoing demand for digital transformation and AI as opportunities, including its July 2023 launch of the CI&T/FLOW AI-powered platform. It also cautioned that demand, product competitiveness and evolving AI regulation remain uncertain.
- Key risks include client reductions or termination, competitive pricing pressure, talent retention and utilization, foreign-exchange and interest-rate volatility, cybersecurity and data-protection exposure, geopolitical and macroeconomic uncertainty, and acquisition integration. The largest client reduced contract scope during 2023.
- Results included R$21.0 million of restructuring severance expense associated with senior employees of acquired companies and R$28.1 million of share-based compensation. Management’s adjusted measures exclude specified acquisition, restructuring and other items; review the reconciliations before relying on them.
- Restatement and controls: 2022 financial statements were restated, reducing reported 2022 net profit by R$30.2 million to R$95.7 million. The corrections involved deferred taxes on tax-deductible goodwill, tax treatment of acquired intangible amortization and classification of foreign-exchange effects on hedged foreign-currency debt. Management reported a material weakness involving insufficient trained technical-accounting resources and ineffective controls in these areas; disclosure controls and internal control over financial reporting were assessed as ineffective at December 31, 2023. Remediation is underway, but the company said it could not assure completion by year-end 2024. The auditor expressed an unqualified opinion on the IFRS financial statements, but did not opine on internal-control effectiveness.
- A subsequent event was a March 1, 2024 working-capital loan of R$49.5 million (US$10 million), bearing interest at six-month SOFR plus 2.80%. The company also authorized repurchases of up to 2.5 million Class A shares through December 31, 2024; it reported purchasing 15,000 shares in January 2024.
Important facts for investors to verify
- Review the 2022 restatement, its effects on comparability, and progress and testing of the internal-control remediation plan.
- Track client-scope changes and whether lower top-client concentration persists without weakening overall revenue or margins.
- Check cash conversion, receivables and contract-asset movements, and whether operating cash flow remains strong after the 2023 working-capital benefit.
- Monitor debt maturities, interest costs, acquisition-related payables, covenant headroom and the terms and use of the March 2024 loan.
- Assess the assumptions behind adjusted measures, goodwill impairment testing and the company’s 2024 capital-spending and growth plans.