CI&T, Inc. (NYSE:CINT) Q1 2022 Earnings Conference Call May 19, 2022 8:00 AM ET Company Participants Eduardo Galvao - Head of Investor Relations Cesar Gon - Chief Executive Officer Stanley Rodrigues - Chief Financial Officer Bruno Guicardi - Director of Operations Conference Call Participants Ashwin Shirvaikar - Citibank Puneet Jain - JPMorgan Arturo Langa - Itau Jason Kupferberg - Bank of America Eduardo Galvao Good morning, everyone. Welcome to CI&T First Quarter 2022 Results Conference Call. I am Eduardo ...

[PART I](index=5&type=section&id=PART%20I) [Presentation of Financial and Other Information](index=5&type=section&id=PRESENTATION%20OF%20FINANCIAL%20AND%20OTHER%20INFORMATION) This section outlines the basis for the financial statements and other information presented, prepared under IFRS with Brazilian Reais (R$) as presentation currency - CI&T Inc is a Cayman Islands exempted company incorporated on June 7, 2021, which became the ultimate holding company of the group following a corporate reorganization in November 2021[13](index=13&type=chunk) - The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the IASB, with the Brazilian real (R$) as the functional and presentation currency[12](index=12&type=chunk)[13](index=13&type=chunk) - The report presents several non-IFRS financial measures, including Adjusted Gross Profit, Adjusted EBITDA, Adjusted Net Profit, and Net Revenue at Constant Currency, which management believes provide supplemental measures of core operational performance[16](index=16&type=chunk) [Key Information](index=11&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section details significant investment risks, including client concentration, competition, talent retention, and the dual-class share structure [D. Risk factors](index=11&type=section&id=D.%20Risk%20factors) The company faces substantial risks from client concentration, intense competition, talent retention, geopolitical events, and material weaknesses in internal controls - Significant client concentration risk exists, with the top client accounting for **20% of net revenue** and the top ten clients accounting for **63% of net revenue in 2021**[53](index=53&type=chunk) - The company faces intense competition from digital transformation providers like Globant and EPAM, as well as traditional IT services companies like Accenture and Cognizant[65](index=65&type=chunk) - Material weaknesses in internal control over financial reporting have been identified, specifically related to general information technology controls (GITCs) and the review of manual journal entries[42](index=42&type=chunk)[104](index=104&type=chunk) - The dual-class share structure concentrates voting control with Class B shareholders, who hold ten votes per share compared to one vote per Class A share, limiting the influence of public shareholders on corporate matters[50](index=50&type=chunk)[136](index=136&type=chunk) - The business is subject to geopolitical risks, including potential adverse effects from the military conflict between Russia and Ukraine and the resulting economic sanctions[33](index=33&type=chunk)[57](index=57&type=chunk) [Information on the Company](index=47&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This section provides a comprehensive overview of CI&T's business, history, structure, and strategic acquisitions, including its service model and market position [A. History and Development of the Company](index=47&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Founded in 1995 in Brazil, CI&T has grown into a global digital transformation specialist through strategic investments and acquisitions, including its 2021 NYSE IPO - In 2019, funds managed by Advent International made a strategic minority investment, enabling the company to accelerate its global growth strategy[151](index=151&type=chunk) - The company completed its initial public offering (IPO) on November 10, 2021, with its Class A common shares trading on the NYSE under the symbol 'CINT'[151](index=151&type=chunk) - CI&T has pursued strategic acquisitions to fuel growth, including Dextra Investimentos S.A. in Brazil (closed August 2021) and Somo Global Ltd in the EMEA region (closed January 2022)[151](index=151&type=chunk)[153](index=153&type=chunk) [B. Business Overview](index=48&type=section&id=B.%20Business%20Overview) CI&T provides end-to-end digital transformation services to large enterprises, operating with a 'Growth Unit' and 'Squads' model, demonstrating strong client retention - CI&T operates in the global digital transformation services market, which IDC forecasts will reach **US$958 billion** in annual spending by 2024[153](index=153&type=chunk) - The company's delivery model is structured around autonomous 'Growth Units' of approximately **400 people**, which are further broken down into 'Squads' of about **10 people** dedicated to specific clients or projects[153](index=153&type=chunk) - The company has demonstrated strong client relationships and expansion, with a five-year average Net Revenue Retention Rate of **120%**[155](index=155&type=chunk)[178](index=178&type=chunk) Net Revenue by Industry Vertical (2021 vs 2020) | By Industry Vertical | 2021 (in thousands of R$) | 2021 (%) | 2020 (in thousands of R$) | 2020 (%) | | :--- | :--- | :--- | :--- | :--- | | Financial Services | 487,177 | 34% | 324,118 | 34% | | Food and Beverages | 340,709 | 24% | 244,590 | 26% | | Pharmaceuticals and Cosmetics | 206,375 | 14% | 134,763 | 14% | | Technology, Media and Telecom | 169,311 | 12% | 81,961 | 9% | | Retail and Manufacturing | 93,871 | 7% | 83,046 | 9% | | Education and Services | 64,336 | 5% | 41,323 | 4% | | Others | 82,600 | 6% | 46,718 | 5% | | **Total Net revenue** | **1,444,380** | **100%** | **956,519** | **100%** | Client Concentration (2021 vs 2020) | Client Concentration | 2021 (in thousands of R$) | 2021 (%) | 2020 (in thousands of R$) | 2020 (%) | | :--- | :--- | :--- | :--- | :--- | | Top Client | 283,311 | 20% | 190,599 | 20% | | Top Ten Clients | 913,890 | 63% | 644,722 | 67% | | **Total Net revenue** | **1,444,380** | | **956,519** | | [C. Organizational Structure](index=60&type=section&id=C.%20Organizational%20Structure) CI&T Inc., a Cayman Islands holding company, became the indirect parent of CI&T Brazil through a U.S. subsidiary following a corporate reorganization prior to its 2021 IPO - The current corporate structure was established through a series of contributions prior to the IPO, resulting in CI&T Inc. (Cayman Islands) holding CI&T Delaware LLC (USA), which in turn holds CI&T Brazil[199](index=199&type=chunk) [Operating and Financial Review and Prospects](index=62&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section analyzes CI&T's financial performance, highlighting 2021 revenue growth driven by client expansion and acquisitions, alongside a slight net profit decrease due to increased expenses [A. Operating Results.](index=62&type=section&id=A.%20Operating%20Results.) In 2021, net revenue grew **51%** to **R$1.44 billion**, but net profit decreased **1%** to **R$126.0 million** due to higher operating expenses and acquisition-related costs Consolidated Results of Operations (2021 vs. 2020) | Metric | 2021 (in thousands of R$) | 2020 (in thousands of R$) | Change (%) | | :--- | :--- | :--- | :--- | | Net revenue | 1,444,380 | 956,519 | 51% | | Gross Profit | 508,648 | 355,653 | 43% | | Operating profit | 244,606 | 208,244 | 17% | | Net profit for the year | 125,957 | 127,654 | (1)% | - Net revenue growth in 2021 was driven by a **128% Net Revenue Retention rate**, the addition of **36 new clients** with over **R$1.0 million** in revenue, and a **R$107 million** contribution from the Dextra acquisition[215](index=215&type=chunk) - Operating expenses increased by **79%** in 2021, mainly due to higher employee expenses from new hires, M&A consulting fees, and a **R$21.9 million** impairment charge on intangible assets related to the Dextra acquisition[223](index=223&type=chunk)[224](index=224&type=chunk)[227](index=227&type=chunk) Non-IFRS Financial Measures (2021 vs. 2020) | Metric | 2021 (in thousands of R$) | 2020 (in thousands of R$) | | :--- | :--- | :--- | | Adjusted Gross Profit | 542,463 | 379,877 | | Adjusted Gross Profit Margin | 37.6% | 39.7% | | Adjusted EBITDA | 324,081 | 237,917 | | Adjusted EBITDA Margin | 22.4% | 24.9% | | Adjusted Net Profit | 157,029 | 128,082 | | Adjusted Net Profit Margin | 10.9% | 13.4% | [B. Liquidity and Capital Resources](index=76&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) As of December 31, 2021, the company maintained strong liquidity with **R$934.5 million** in cash and investments, despite significant cash usage for acquisitions and debt financing Cash and Financial Investments (as of Dec 31, 2021) | Item | Amount (in thousands of R$) | | :--- | :--- | | Cash and cash equivalents | 135,727 | | Financial investments | 798,786 | | **Total** | **934,513** | Consolidated Cash Flow Summary (FY 2021) | Cash Flow Activity | Amount (in thousands of R$) | | :--- | :--- | | Net cash from operating activities | 132,379 | | Net cash used in investing activities | (1,507,544) | | Net cash from financing activities | 1,376,766 | - Total outstanding consolidated indebtedness was **R$788.7 million** as of December 31, 2021, an increase of **R$699.5 million** from 2020, mainly to finance the Dextra acquisition[273](index=273&type=chunk) - Capital expenditures in 2021 were **R$29.9 million**, primarily for IT equipment and software investments to support company growth[276](index=276&type=chunk) [E. Critical Accounting Policies and Estimates](index=79&type=section&id=E.%20Critical%20Accounting%20Policies%20and%20Estimates) The company's critical accounting policies involve significant judgment in lease term determination, revenue recognition, and fair value measurement in business combinations - Significant judgments are made in determining lease terms, specifically whether the company is reasonably certain to exercise extension options[280](index=280&type=chunk) - A key area of estimation uncertainty is the measurement of fair value for assets acquired and liabilities assumed in business combinations, as demonstrated in the Dextra acquisition[281](index=281&type=chunk) [Directors, Senior Management and Employees](index=81&type=section&id=ITEM%206.%20Directors%2C%20Senior%20Management%20and%20Employees) This section details the company's seven-member board, executive compensation, and significant employee growth to **5,564** in 2021, with a **15.6%** voluntary attrition rate - The Board of Directors is composed of seven members, including three independent directors: Silvio Romero de Lemos Meira, Maria Helena dos Santos Fernandes de Santana, and Eduardo Campozana Gouveia[286](index=286&type=chunk) - Aggregate compensation for the board of directors and executive officers for the year ended December 31, 2021, was **R$11.1 million**[294](index=294&type=chunk) Employee Headcount by Geography | Region | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | North America & Europe | 210 | 145 | 110 | | Latin America (Brazil) | 5,139 | 2,910 | 2,090 | | Asia Pacific and Japan | 215 | 164 | 150 | | **Total** | **5,564** | **3,219** | **2,350** | - The company's voluntary employee attrition rate for the period 2020 through 2021 was **15.6%** (excluding employees with less than six months of tenure)[303](index=303&type=chunk) [Major Shareholders and Related Party Transactions](index=87&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section outlines CI&T's dual-class share structure, concentrating **92.9%** of voting power with founders and Advent, and details the Shareholders' Agreement Major Shareholders and Voting Power | Shareholder | Class B Shares | % of Class B | % of Total Voting Power | | :--- | :--- | :--- | :--- | | Cesar Nivaldo Gon (Founder) | 23,303,273 | 19.9% | 19.6% | | Fernando Matt Borges Martins (Founder) | 22,722,913 | 19.4% | 19.1% | | Bruno Guiçardi Neto (Founder) | 15,298,381 | 13.0% | 12.9% | | Advent Managed Fund LLCs | 49,081,192 | 41.9% | 41.3% | - Due to the dual-class structure (10 votes per Class B share), the holders of Class B common shares (Founders and Advent) collectively control approximately **92.9%** of the total voting power[305](index=305&type=chunk)[314](index=314&type=chunk) - A Shareholders' Agreement is in place, granting the Founders the right to appoint a majority of the board of directors and giving Advent the right to appoint directors based on its voting power percentage[316](index=316&type=chunk) [Financial Information](index=90&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section confirms the inclusion of consolidated financial statements, notes no material legal proceedings, and states the company's policy of retaining earnings for growth instead of paying dividends - The company is not presently a party to any legal proceedings that would have a material adverse effect on its business[322](index=322&type=chunk) - CI&T has not adopted a dividend policy and does not anticipate paying cash dividends in the foreseeable future, intending to retain earnings for business development and expansion[323](index=323&type=chunk) - The company's Brazilian subsidiary is required by local law to distribute a mandatory minimum dividend of at least **25%** of its adjusted net income for the prior year[325](index=325&type=chunk) [Additional Information](index=92&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION.) This section details CI&T's corporate governance, dual-class share structure with Class B shares having ten votes and preemptive rights, and anti-takeover provisions - The company has a dual-class share structure: Class A common shares with one vote per share and Class B common shares with ten votes per share[334](index=334&type=chunk)[340](index=340&type=chunk) - Each Class B common share is convertible into one Class A common share at the holder's option or automatically upon most transfers, and all Class B shares will automatically convert if their total number falls below **10%** of total outstanding shares[344](index=344&type=chunk) - Holders of Class B shares have preemptive rights to purchase additional Class B shares in new issuances to maintain their proportional ownership, subject to the consent of a majority of Class B shareholders[343](index=343&type=chunk) - The Articles of Association include anti-takeover provisions, such as the dual-class voting structure and the board's authority to issue preferred shares with special rights without shareholder approval[371](index=371&type=chunk)[374](index=374&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=111&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to credit, interest rate, and significant foreign currency exchange rate risks, which are partially hedged using derivative financial instruments - The company's primary market risk is foreign currency exchange rate risk, as most revenue is in foreign currency (mainly USD) while most expenses are in Brazilian Reais (BRL)[416](index=416&type=chunk) - As of December 31, 2021, the company's net exposure to USD was **R$725.4 million**[416](index=416&type=chunk)[770](index=770&type=chunk) Sensitivity Analysis for Interest Rate Risk (Effect on Earnings) | Scenario | Probable | Adverse | Remote | | :--- | :--- | :--- | :--- | | **Effect on earnings (reduction in R$ thousands)** | **(8,367)** | **(12,763)** | **(17,160)** | Sensitivity Analysis for Exchange Rate Risk (Effect on Earnings) | Scenario | Probable (USD/BRL 5.30) | Adverse (USD/BRL 5.50) | Remote (USD/BRL 5.70) | | :--- | :--- | :--- | :--- | | **Effect on earnings (increase/(decrease) in R$ thousands)** | **303** | **88** | **(357)** | [PART II](index=116&type=section&id=PART%20II) [Controls and Procedures](index=118&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls were ineffective as of December 31, 2021, due to material weaknesses in IT and manual journal entry controls, with a remediation plan underway - Management concluded that disclosure controls and procedures were ineffective as of December 31, 2021, due to material weaknesses in internal control over financial reporting[439](index=439&type=chunk) - Two material weaknesses were identified: 1) Ineffective design and implementation of general information technology controls (GITCs) related to user access, and 2) Ineffective design and implementation of formal controls for the review of manual journal entries[441](index=441&type=chunk) - A remediation plan is underway, involving the implementation of new access management processes, a privileged access management (PAM) tool, and automated preventive controls for journal entries within the ERP system, which were implemented in February 2022 and will be monitored for effectiveness[441](index=441&type=chunk) [PART III](index=123&type=section&id=PART%20III) [Financial Statements](index=124&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section presents CI&T's audited consolidated financial statements for the three years ended December 31, 2021, prepared under IFRS, including notes on corporate restructuring and acquisitions Consolidated Statement of Financial Position (Abridged) | (in thousands of R$) | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Total Assets** | **2,362,344** | **585,082** | | Total Current Assets | 1,450,905 | 434,552 | | Total Non-Current Assets | 911,439 | 150,530 | | **Total Liabilities and Equity** | **2,362,344** | **585,082** | | Total Current Liabilities | 548,973 | 310,992 | | Total Non-Current Liabilities | 724,076 | 75,630 | | **Total Equity** | **1,089,295** | **198,460** | Consolidated Statement of Profit or Loss (Abridged) | (in thousands of R$) | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | :--- | | Net revenue | 1,444,380 | 956,519 | 677,133 | | Gross profit | 508,648 | 355,653 | 228,154 | | Operating profit | 244,606 | 208,244 | 91,699 | | **Net profit for the year** | **125,957** | **127,654** | **56,569** | - The acquisition of Dextra Group on August 10, 2021, involved a total consideration of **R$783.6 million** and resulted in the recognition of **R$595.7 million** in goodwill[635](index=635&type=chunk)[650](index=650&type=chunk) - Subsequent to year-end, on January 27, 2022, the company completed the acquisition of Somo Global Ltd for **R$341 million** in cash and **225,649 Class A common shares**, plus a potential earn-out[815](index=815&type=chunk)

| --- | --- | --- | |-------|-------|-------| | | | | | | | | | | | | | | | | | | | | click the screen to play video TODAY'S SPEAKERS Cesar Gon Founder & CEO Bruno Guicardi Founder & NAE President https://www.linkedin.com/in/ cesargon/ https://www.linkedin.com/in/ bguicardi/ https://www.linkedin.com/in/ stanley-rodrigues-152113/ Stanley Rodrigues Partner, CFO Eduardo Galvão Head of IR https://www.linkedin.com/in/ eduardo-galv%C3%A3o-b4 7bb315/ Q&A SESSION Submit your question via email to INVESTORS@CIANDT.C ...

Financial Data and Key Metrics Changes - In Q4 2021, the company's net revenue was R$456.8 million, a 72% increase compared to Q4 2020, exceeding guidance of at least R$440 million [23] - For the full year 2021, net revenue totaled R$1.44 billion, a 51% increase year-over-year [24] - Adjusted EBITDA for Q4 2021 was R$101.8 million, up 78% from Q4 2020, with an adjusted EBITDA margin of 22.3% [23] - The adjusted net profit reached R$47.7 million in Q4 2021, a 62% increase compared to Q4 2020 [23] - The net revenue retention rate was 128%, indicating strong client engagement and recurring revenue [24] Business Line Data and Key Metrics Changes - The company added 19 new clients with net revenue above R$1 million in the last 12 months, increasing the total from 75 clients in Q3 2021 to 94 in Q4 2021 [23] - The integration of Dextra contributed to the growth, with the company now operating 26 growth units [42] Market Data and Key Metrics Changes - The West operation was the fastest-growing market, recording 50% organic growth in Q4 2021 compared to Q4 2020 [26] - All industry verticals showed significant growth, particularly technology, media, telecommunications, retail, and manufacturing [26] Company Strategy and Development Direction - The company aims for a 56% growth in 2022, driven by both organic growth and the contribution from the Somo acquisition [29] - The strategy includes a focus on M&A to foster organic growth, with a strong pipeline for future acquisitions [31] - The company is committed to enhancing its talent pool and diversifying its operations, particularly in Europe following the Somo acquisition [21][46] Management's Comments on Operating Environment and Future Outlook - The management acknowledged challenges in the global economy but emphasized the ongoing demand for digital services as a significant growth opportunity [7][8] - The company expects to maintain a strong growth trajectory, with guidance for Q1 2022 net revenue of at least R$485 million, a 64% increase year-over-year [29] Other Important Information - The company reported a financial net cash position of R$145.8 million at the end of 2021, with a gross debt position of R$788.7 million [26] - The attrition rate at the end of 2021 was 15.6%, with leadership attrition at only 3.6%, indicating stability in management [19][50] Q&A Session Summary Question: Growth and margin cadence expectations for the year - Management guided for an annual growth of 56% for 2022, with 41% being organic growth and contributions from Somo [31][38] Question: Impact of geopolitical situations on business - The company has no direct exposure to the Ukraine and Russia regions but is monitoring the situation closely [34][35] Question: Revenue growth breakdown considering MRR and M&A - The growth profile includes 41% organic growth and over 10% from Somo, with a focus on established markets [38] Question: Attrition rate comparison with 2020 - The attrition rate was 15.6% in 2021, influenced by market conditions and the acquisition of Dextra [48][50]