CI&T (CINT) Risk Factors

In the past, prior to 1994, Brazil experienced extremely high rates of inflation.  Inflation and some of the measures taken by the Brazilian government in an attempt to curb inflation have had significant negative effects on the Brazilian economy generally. Inflation policies adopted to curb inflationary pressures and uncertainties regarding possible future governmental intervention have contributed to economic uncertainty and heightened volatility in the Brazilian capital markets. According to the National Consumer Price Index (Índice Nacional de Preços ao Consumidor Amplo, "IPCA"), which is published by the Brazilian Institute for Geography and Statistics (Instituto Brasileiro de Geografia e Estatística, or IBGE), Brazilian inflation rates were 4.62%, 5.79% and 10.06%, as of December 31, 2023, 2022 and 2021, respectively. Brazil may experience high levels of inflation in the future and inflationary pressures may lead to the Brazilian government's intervening in the economy and introducing policies that could harm our business and the price of our Class A common shares.  In the past, the Brazilian government's interventions included the maintenance of a restrictive monetary policy with high interest rates that restricted credit availability and reduced economic growth, causing volatility in interest rates.  For example, the official interest rate in Brazil oscillated from 14.25% as of December 31, 2015 to 6.50% as of December 31, 2018, as established by the Monetary Policy Committee (Comitê de Política Monetária do Banco Central do Brasil - COPOM). As of August 5, 2020, the SELIC rate target was set at 2.0% p.a. From 2021, COPOM started to gradually increase the interest rate, until it reached 13.75% p.a. on August 3, 2022. Since August 3, 2023, the COPOM has been gradually lowering the interest rate. As of December 31, 2023, the SELIC rate target was 11.75% p.a.. Conversely, more lenient government and Central Bank policies and interest rate decreases have triggered and may continue to trigger increases in inflation, and, consequently, growth volatility and the need for sudden and significant interest rate increases, which could negatively affect us and increase our indebtedness. In addition, our employees' salaries are adjusted annually according to inflation indexes and based on labor union negotiations.  Therefore, an increase in inflation may increase our costs and expenses and reduce our profitability metrics.

The Brazilian currency has been historically volatile and devalued frequently over the past three decades. Throughout this period, the Brazilian government has implemented various economic plans and used various exchange rate policies, including sudden devaluations, periodic mini-devaluations (during which the frequency of adjustments has ranged from daily to monthly), exchange controls, dual exchange rate markets and floating exchange rate system. Although long-term depreciation of the real is generally linked to the rate of inflation in Brazil, depreciation of the real occurring over shorter periods of time has resulted in significant variations in the exchange rate between the real, the U.S. dollar and other currencies.  The real/U.S. dollar exchange rate reported by the Central Bank was R$5.580 per U.S.$1.00 on December 31, 2021, which reflected a 7.4% depreciation in the real against the U.S. dollar during 2021. The real/U.S. dollar exchange rate reported by the Central Bank was R$5.2177 per U.S.$1.00 on December 31, 2022, which reflected a 7.85% appreciation in the real against the U.S. dollar during 2022. The real/U.S. dollar exchange rate reported by the Central Bank was R$4.8413 per U.S.$1.00 on December 31, 2023, which reflected a 7.8% appreciation in the real against the U.S. dollar during 2023. Although the real appreciated in 2023, there can be no assurance that the real will not again depreciate against the U.S. dollar or other currencies in the future. A devaluation of the real relative to the U.S. dollar could create inflationary pressures in Brazil and cause the Brazilian government to, among other measures, increase interest rates. Any depreciation of the real may generally restrict access to the international capital markets. It would also reduce the U.S. dollar value of our results of operations. Restrictive macroeconomic policies could reduce the stability of the Brazilian economy and harm our results of operations and profitability.  In addition, domestic and international reactions to restrictive economic policies could have a negative impact on the Brazilian economy.  These policies and any reactions to them may harm us by curtailing access to foreign financial markets and prompting further government intervention.  A devaluation of the real relative to the U.S. dollar may also, as in the context of the current economic slowdown, decrease consumer spending, increase deflationary pressures and reduce economic growth. On the other hand, an appreciation of the real relative to the U.S. dollar and other foreign currencies may deteriorate the Brazilian foreign exchange current accounts. Depending on the circumstances, either depreciation or appreciation of the real relative to the U.S. dollar and other foreign currencies could restrict the growth of the Brazilian economy, as well as our business, results of operations and profitability. The Brazilian federal government has exercised, and continues to exercise, significant influence over the Brazilian economy.  This involvement as well as Brazil's political and economic conditions could harm us and the price of our Class A common shares. The Brazilian federal government frequently exercises significant influence over the Brazilian economy and occasionally makes significant changes in policy and regulations.  The Brazilian government's actions to control inflation and other policies and regulations have often involved, among other measures, increases or decreases in interest rates, changes in fiscal policies, wage and price controls, foreign exchange rate controls, blocking access to bank accounts, currency devaluations, capital controls and import and export restrictions.  We have no control over and cannot predict what measures or policies the Brazilian government may take in the future.  We and the market price of our securities may be harmed by changes in Brazilian government policies, as well as general economic factors, including, without limitation: -        expansion and contraction of the Brazilian economy, measured by the gross domestic product growth rates;-        growth or downturn of the Brazilian economy;-        interest rates and monetary policies;-        exchange rates and currency fluctuations;-        inflation;-        liquidity of the domestic capital and lending markets;-        import and export controls;-        exchange controls and restrictions on remittances abroad and payments of dividends;-        modifications to laws and regulations according to political, social and economic interests;-        fiscal policy and changes in tax laws;-        economic, political and social instability, including general strikes and mass demonstrations;-        the regulatory framework governing the education industry;-        labor and social security regulations;-        energy and water shortages and rationing;-        commodity prices; and -        other political, diplomatic, social and economic developments in or affecting Brazil. Uncertainty about the implementation of reforms or changes by the Brazilian federal government generates instability in the Brazilian economy, as well as greater volatility in the domestic capital market and in the securities of issuing companies.  We cannot predict what measures the Brazilian federal government will take in the face of mounting macroeconomic pressures or otherwise. Political crises have affected and continue to affect the confidence of investors and the general public, which have historically resulted in economic deceleration and heightened volatility in the securities offered by companies with significant operations in Brazil.  The Brazilian markets have seen an increase in volatility due to the uncertainties resulting from investigations in progress, which have affected the country's economic and political environment.  In addition, public disagreements between the Brazilian former government officials and members of the Brazilian Supreme Court, social and political unrest and demonstrations have exacerbated uncertainty around an already unstable political environment in Brazil, which may adversely affect our business, operations, results and share price. Uncertainties regarding the recently elected government's implementation of changes in monetary, fiscal and social policies, as well as concerns with government expenditures and fiscal responsibility, may contribute to economic instability. These uncertainties and new measures may increase the volatility of the Brazilian securities market. The president of Brazil has the power to establish policies and perform governmental acts related to the conduction of the Brazilian economy and, consequently, affect the operations and financial performance of companies, including ourselves.  We cannot predict which policies the newly appointed President will adopt, much less whether such policies or changes in current policies could have an adverse effect on us or on the Brazilian economy.  Any lack of decision by the Brazilian government to implement changes in certain policies or regulations may contribute to economic uncertainty for investors with respect to Brazil and increase market volatility. These uncertainties, the recession with a slow recovery period in Brazil and other future developments in the Brazilian economy may adversely affect our business and, consequently, our results of operations, and may also adversely affect the trading price of our shares.

We have experienced rapid revenue growth in recent periods.  Our Net revenue increased by 2.1% and 51.5% in the years ended December 31, 2023 and 2022 respectively, compared to the prior year.  We may not be able to sustain revenue growth consistent with our recent history or at all. You should not consider our revenue growth in recent periods as indicative of our future performance.  We believe our ability to attract new clients and our revenue growth depends on a number of factors, including: - our current or potential clients' spending levels; - competitive factors affecting the digital transformation market, including the introduction of competing services, discount pricing and other strategies that may be implemented by our competitors; - our ability to execute our growth strategy and operating plans; - our clients' level of satisfaction with our solutions; - changes in our relationships with third parties, including our business partners, app developers, theme designers, referral sources and payment processors; - the timeliness and success of our solutions; - the frequency and severity of any system outages; - technological change; - our ability to adequately obtain, maintain, protect and enforce our intellectual property and proprietary rights; - concerns relating to actual or perceived breaches of our IT systems or the data contained therein; - the continued willingness of the end-consumers of our clients to use the internet for commerce; and - our focus on long-term value over short-term results, through strategic decisions that may not maximize our short-term revenue or profitability if we believe that the decisions are consistent with our mission and will improve our financial performance over the long term. As we grow our business, our revenue growth may decline in future periods due to a number of factors, which may include slowing demand for our services, increasing competition, decreasing growth of our overall market, our inability to engage and retain a sufficient number of IT professionals or otherwise scale our business, prevailing wages in the markets in which we operate or our failure, for any reason, to capitalize on growth opportunities. Moreover, as we introduce new services or enter into new markets, we may face new market, technological and operational risks and challenges with which we are unfamiliar, and it may require substantial management efforts and skills to mitigate these risks and challenges.  We expect to continue to spend substantial financial and other resources on, among other things: - investments in our IT team, improvements in security and data protection, the development of new products, features and functionality and enhancements to our solutions; - sales and marketing, including the continued expansion of our direct sales and marketing programs, especially for businesses outside of Brazil; - expansion of our operations and infrastructure, both domestically and internationally; and - general administration, including legal, accounting and other expenses related to being a public company. These investments may not result in increased revenue or the growth of our business.  Accordingly, we may not be able to generate sufficient revenue to offset our expected cost increases and achieve and sustain profitability. As a result of any of these problems associated with expansion, our business, financial condition and results of operations could be materially adversely affected.

Credit ratings affect the perception of risk of investors.  Rating agencies regularly review Brazil's sovereign credit ratings based on a number of factors, including macroeconomic trends, tax and budgetary conditions, indebtedness metrics and the prospect of changes in any of these factors. Rating agencies started to review Brazil's sovereign ratings in September 2015.  Subsequently, Brazil lost its investment grade, according to the credit rating reviewed by the three main credit rating agencies.  After an initial downgrade in September 2015, Standard & Poor's downgraded again from BB-plus to BB and, in January 2018, downgraded Brazil's sovereign credit rating from BB to BB-minus, in addition to changing the outlook from negative to stable.  In December 2015, Moody's placed Brazil's Baa3 issuer and bond rating under review for a downgrade and subsequently downgraded Brazil's ratings to below investment grade, or Ba2, with a negative outlook.  In April 2018, Moody's maintained Brazil's Ba2 rating and changed the outlook from negative to stable.  In December 2015, Fitch downgraded Brazil's sovereign credit rating to BB- plus, with a negative outlook, and made a further downgrade in May 2016 to BB with a negative outlook, which was maintained in 2017. In February 2018, Fitch further downgraded Brazil's sovereign credit rating to BB-minus, with a stable outlook, which was maintained in 2022.  In June 2023, Standard & Poor's raised Brazil's sovereign credit outlook to positive.

We are a Cayman Islands-exempted company with limited liability. As a holding company, our corporate purpose is to invest, as a partner or shareholder, in other companies, consortia or joint ventures in Brazil, where most of our operations are located, in the United States, where a significant amount of our revenues come from, and other countries such as United Kingdom, Portugal, Canada, China, Japan and Australia, Colombia and Argentina. Accordingly, our material assets are our direct and indirect equity interests in our subsidiaries, and we are therefore dependent upon the results of operations and, in turn, the payments, dividends and distributions from our subsidiaries for funds to pay our holding company's operating and other expenses and to pay future cash dividends or distributions, if any, to holders of our Class A common shares, and we may have tax costs in connection with any dividend or distribution.  In addition, the payments, dividends and distributions from our subsidiaries to us for funds to pay future cash dividends or distributions, if any, to holders of our Class A common shares, could be restricted under financing arrangements that we or our subsidiaries may enter into in the future and we and such subsidiaries may be required to obtain the approval of lenders to make such payments to us in the event they are in default of their repayment obligations.  Furthermore, we may be adversely affected if the Brazilian government, or the governments of any of the jurisdictions in which our subsidiaries are located, impose legal restrictions on dividend distributions by our existing subsidiaries.  Exchange rate fluctuations will also affect the U.S. dollar value of any distributions our subsidiaries make with respect to our equity interests in those subsidiaries. For further information, see "- Risks Relating to Brazil - Exchange rate instability may have adverse effects on the Brazilian economy, us and the price of our Class A common shares," "- Risks Relating to Brazil - The Brazilian federal government has exercised, and continues to exercise, significant influence over the Brazilian economy.  This involvement as well as Brazil's political and economic conditions could harm us and the price of our Class A common shares" and "Dividends and Dividend Policy." Certain Compliance, Tax, Legal and Regulatory Risks

The services we provide are often critical to our clients' businesses. Certain of our client contracts require us to comply with security obligations, which could include maintaining network security and backup data, ensuring our network is virus-free, maintaining business continuity planning procedures, and verifying the integrity of employees who work with our clients by conducting background checks.  Any failure in a client's or third-party service provider's system, whether or not a result of or related to the services we provide, or a breach of security relating to the services we provide to the client could damage our reputation or result in a claim for substantial damages against us.  Our liability for breaches of data security requirements or breaches or incidents affecting our clients' equipment or systems, for which we may be required to indemnify our clients, may be extensive and could result in reputational damage or a loss of clients and revenue.

Our business depends on our ability to successfully receive payment from our clients for the amounts they owe us for work performed. We evaluate the financial condition of our clients and maintain provisions for expected losses against receivables. Actual losses on client balances could differ from those we currently anticipate and, as a result, we may need to adjust our provisions.  We may not accurately assess the creditworthiness of our clients.  Macroeconomic conditions, such as a potential credit crisis in the global financial system as well as in the local markets in which we operate, could also result in financial difficulties for our clients, including limited access to the credit markets, insolvency or bankruptcy.  Such conditions could cause clients to delay payment, request modifications of their payment terms, or default on their payment obligations to us, all of which could increase our receivables balance and our provision for doubtful debts.  Timely collection of fees for client services also depends on our ability to complete our contractual commitments on schedule and subsequently bill for and collect our contractual service fees. If we are unable to meet our contractual obligations, we might experience delays in the collection of or be unable to collect our client balances, which would adversely affect our results of operations and could adversely affect our cash flows. In addition, if we experience an increase in the time required to complete our services, bill and collect for our services, our cash flows could be adversely affected, which in turn could adversely affect our ability to make necessary investments and, therefore, our results of operations.