NEW YORK - CI&T Inc. (NYSE:CINT), a global digital solutions provider, announced that it will restate its financial statements for the year ended December 31, 2022, and the interim periods within 2023 due to non-cash accounting errors. The company, in consultation with KPMG, its independent accounting firm, identified discrepancies related to the accounting for tax-deductible goodwill under International Financial Reporting Standards (IFRS).
The audit committee of CI&T's board of directors concluded on Saturday that the financial statements for the year ended December 31, 2022, and the interim periods ending March 31, June 30, and September 30, 2023, should not be relied upon. This decision affects the company's annual report on Form 20-F filed with the SEC on March 28, 2023, and the unaudited condensed consolidated interim financial statements for 2023.
The errors stem from business combinations completed in 2021 and 2022, which resulted in discrepancies in income tax expense reporting. For the year ended December 31, 2022, the income tax expense was understated by R$40.5 million, while for the nine months ended September 30, 2023, it was understated by R$30.9 million.
Conversely, due to the amortization of identifiable intangible assets from the Dextra business combination, the income tax expense was overstated by R$10.3 million for 2022 and by R$4.1 million for the nine months of 2023.
CI&T expects the net impact of these adjustments to increase its income tax expense by approximately R$30.2 million for 2022 and R$26.7 million for the nine months of 2023, consequently reducing net income for those periods. The restatement will also include reclassifications that will affect the company's balance sheet but not its profit or loss statements.
The company plans to file its restated financial statements for 2022 along with its 2023 audited financials in the 2023 Form 20-F before April 30, 2024. It also intends to furnish a current report on Form 6-K to the SEC to show the impact of the restatement on its unaudited condensed consolidated interim financial statements for the affected periods.
CI&T has acknowledged that the restatement is indicative of a material weakness in its internal controls and is taking steps to address this issue. The company has discussed the necessary corrective measures with KPMG and its audit committee.
This announcement is based on a press release statement.
InvestingPro Insights
CI&T Inc. (NYSE:CINT), amidst its financial restatement process, presents a mixed picture from an investment perspective. According to real-time data from InvestingPro, the company's market capitalization stands at $589.83 million, reflecting its size in the market. Investors may find CI&T's valuation metrics of particular interest; the company's Price-to-Earnings (P/E) ratio is currently at 18.3, with an adjusted P/E ratio for the last twelve months as of Q3 2023 at 16.38. This suggests that the stock is trading at a lower earnings multiple, which is corroborated by one of the InvestingPro Tips indicating that CI&T is trading at a low earnings multiple.
Moreover, the company's stock performance has been under scrutiny, with a significant hit over the last six months, as evidenced by a 25.71% drop in the 6-month price total return. This aligns with another InvestingPro Tip highlighting that the stock has taken a big hit over the last week, which may signal investor sentiment and market reactions to the recent financial restatement news.
Despite these challenges, CI&T's fundamentals may offer a silver lining for potential investors. The company's Gross Profit Margin for the last twelve months as of Q3 2023 stands at 34.13%, indicating a healthy profitability relative to its revenues. Additionally, the company's management has been actively engaged in share buybacks, which can be a positive signal of confidence in the company's future prospects and an effort to enhance shareholder value.
For readers interested in a more comprehensive analysis, there are 11 additional InvestingPro Tips available, which can provide deeper insights into CI&T's financial health and future outlook. To access these tips and further enrich your investment decision-making process, consider subscribing to InvestingPro using the coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription.
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