UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2023
Commission File Number: 001-41465
SEMANTIX, INC.
(Name of Registrant)
Avenida Eusébio Matoso, 1375, 14º andar
São Paulo, São Paulo, Brazil, 05423-180
Tel: +55 11 5082-2656
(Address of Principal Executive Office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Yes ☐ No ☒
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Yes ☐ No ☒
INFORMATION CONTAINED IN THIS REPORT ON FORM 6-K
On August 17 2023, Semantix, Inc. (the “Company”) announced its financial results for the six months ended June 30, 2023. A copy of that announcement is furnished as Exhibit 99.1 to this report on Form 6-K.
A copy of the Company’s unaudited interim condensed consolidated financial statements as of June 30, 2023 and for the six-month periods ended June 30, 2023 and 2022 is furnished as Exhibit 99.2 to this report on Form 6-K.
EXHIBIT INDEX
| | | | | | | | |
| Exhibit | | Description of Exhibit |
| | |
| 99.1 | | |
| 99.2 | | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 17, 2023
| | | | | | | | |
| SEMANTIX, INC. |
| |
| By: | /s/ Leonardo dos Santos Poça D’Água |
| Name: | Leonardo dos Santos Poça D’Água |
| Title: | Chairman of the Board and
Chief Executive Officer |
Semantix Announces 2Q 2023 Financial Results
Proprietary SaaS Revenue and Gross Profit increases 47% and 51% in 2Q23 yoy respectively
August 17, 2023
SÃO PAULO--(BUSINESS WIRE) – August 17, 2023 - Semantix, Inc. (NASDAQ: STIX), a leading Latin American enterprise AI platform and applications provider, today announced its financial results for the quarter ended June 30, 2023.
“Second Quarter results reflect ongoing momentum in margin accretive proprietary SaaS revenue, which has been primarily fueled by the adoption of our cutting-edge AI applications. As an AI centric company, we have always been at the forefront of innovation, and we are thrilled to witness our customers' increasing realization of how AI can solve their challenges.” said Leonardo Santos, CEO and Founder of Semantix. “With the benefits of AI becoming more tangible, we are leveraging our product positioning and go-to-market communication to showcase our AI platform and application capacities and empowering our customers with real-world solutions to unleash the full potential of artificial intelligence.”
Second Quarter 2023 Financial Highlights
◦Proprietary SaaS revenue for the second quarter of 2023 grew 47% year-over-year.
◦Gross profit increased 51% in the second quarter of 2023 year-over-year, with gross margin improving 15 percentage points year-over-year to 47% in the second quarter of 2023.
◦Net revenue for the second quarter of 2023 of R$48 million, reflecting an increase of 4% year-over-year as compared to the second quarter of 2022.
◦Semantix had 14 customers in 2Q23 each contributing more than US$1 million in revenue in the last twelve months.
◦Adjusted EBITDA loss in the second quarter of 2023 was R$26 million. Cash and cash equivalents of R$151 million as of June 30, 2023. Net cash (net of the loans and borrowings) was R$90 million as of June 30, 2023.
Key Business Highlights
•Product and Go-to-market natural evolution towards AI platform and applications: substantial investments in product development and acquisitions over the past twelve months have propelled Semantix to evolve its product portfolio and refine its go-to-market communication to a comprehensive, integrated AI platform and a range of readily applicable AI applications tailored to diverse business use cases, such as in the finance, retail, health and pharma industries.
“The partnership with Semantix enables Quasar to explore machine learning and GenAI. Projects include data integration, advanced models, and automation. This strategic move forms the basis for cognitive application intelligence with GenAI, transforming processes and service.” – Carlos Maggioli, CEO of Quasar, a Brazilian independent investment manager and foundational customer of Semantix AI Finance Applications.
•Synergistic Offerings via User-Friendly Web Portal: Semantix has strengthened its strategic alliances with Elastic and NEO4J and is strategically integrating these renowned global providers' complementary products with Semantix's cutting-edge AI platform and applications on a unified channel. Therefore, Semantix will reinforce its partners go-to-market in Latam while simultaneously expanding its own market penetration across diverse customer segments.
◦Elastic1: Semantix will be the agent for building the LATAM reseller chain, which will be trained and certified in Elastic’s technology.
◦Neo4j2: The partnership between Semantix, Google Cloud and NEO4J aims to serve all Latin America and will provide local support in Portuguese and monthly payment in local currency.
1 – Elastic is a prominent software company known for its search and analytics solutions, helping organizations efficiently manage and obtain insights from vast amounts of data.
2 – Neo4j is a leading graph database platform that specializes in managing and analyzing complex relationships in data.
•Cash Control and Efficiency: Semantix has identified key opportunities to reduce cash outflows by approximately 20% of its annual costs1 and expenses. These efforts, focused on contract optimization including insurance, cloud services, and vendor arrangements, alongside with workforce adjustments aligned with employee performance, are expected to significantly contribute to the company's path to profitability. The implementation of these strategies is anticipated to be realized over the next 12 months, commencing from July 2023.
1 – do not consider Resale of Third-party Software related costs.
2Q23 and 1H23 Financial Metrics
(In BRL million, except for percentages)
| | | | | | | | | | | | | | | | | | | | | | | |
| 2Q 2023 | 2Q 2022 | Y/Y Change | | 1H23 | 1H22 | Change |
| Net Revenue | R$ 48 | R$ 46 | 4% | | R$ 88 | R$ 86 | 3% |
| Gross Profit | R$ 23 | R$ 15 | 51% | | R$ 40 | R$ 28 | 42% |
| Gross Margin | 47% | 33% | 15 pp | | 45% | 32% | 13 pp |
| Adjusted EBITDA | (R$ 26) | (R$21) | (20%) | | (R$ 58) | (R$ 36) | (61%) |
| Adjusted EBITDA Margin | (54%) | (47%) | (7 pp) | | (66%) | (42%) | (24 pp) |
| | | | | | | | | | | |
| Jun 30, 2023 | Dec 31, 2022 | Change |
| Cash and Cash Equivalents | R$ 151 | R$ 338 | (55%) |
| Net Cash (Debt) | R$ 90 | R$ 259 | (65%) |
Financial Outlook
Based on current market conditions and management expectations, Semantix continues to expect that proprietary SaaS revenue for 2023 will be between R$ 75 million and R$ 80 million. Aligned with Semantix’s financial objectives to prioritize improved product margins and revenue quality and its long-standing strategy of focusing on proprietary SaaS growth, the company is no longer guiding for full year total revenue.
Historically, Semantix has received a higher volume of orders from new and existing customers during the second half of the year and, in particular, in the fourth quarter of each year, which we believe is due to, among other factors, the procurement, budgeting, and deployment cycles of many of our customers, particularly large enterprise customers.
Conference Call and Webcast Information
Semantix will host a conference call today, August 17, 2023, at 8:30 a.m. Eastern Time to discuss its financial results and financial outlook. The conference call will be webcast live on Semantix’s Investor Relations website at ir.semantix.ai/news-events/events. Parties interested in participating via telephone may register using this online form. Upon registration, all telephone participants will receive the dial-in number along with a unique PIN number that can be used to access the call. A replay of the conference call webcast will be archived on Semantix’s Investor Relations website for at least 30 days.
Forward-Looking Statements
This press release and the earnings call referencing this press release contain forward-looking statements and forward-looking information within the meaning of applicable United States securities legislation that involve substantial risks and uncertainties (collectively herein referred to as “forward-looking statements”). All statements other than statements of historical facts contained in this press release and addressed on our earnings call, including statements regarding our future financial position, results of operations, business strategy and plans and objectives of management for future operations, are forward-looking statements. For example, forward-looking statements include, without limitation, statements concerning the following: the growth of Semantix’s business and its ability to realize expected results, including with respect to its net revenue, gross profit, gross margin, EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, cash and cash equivalents and net cash (debt); the viability of its growth strategy, including with respect to its ability to grow market share in Brazil and internationally, particularly through the expansion of its proprietary SaaS data solutions, grow revenue from existing customers, and consummate and achieve expected benefits through acquisitions; opportunities, trends and developments in the data industry, including with respect to future financial performance in the industry; the size of Semantix’s total addressable market; macroeconomic and geopolitical factors, including as a result of the policies and actions of the new administration in Brazil following the 2022 presidential election. In some cases, you can identify forward looking statements by terminology such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “would,” “could,” “plan,” “project,” “forecast,” “predict,” “potential,” “seem,” “seek,” “future,” “outlook,” “target,” “trend” or other similar expressions (or the negative versions of such words or expressions).
Such forward-looking statements are based on the current expectations of our management and are inherently subject to uncertainties and changes in circumstance and their potential effects and speak only as of the date of such statement. There can be no assurance that future developments will be those that have been anticipated. Such forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from those expressed or implied by such forward-looking statements and could adversely affect the outcome and financial effects of the plans and events described herein. In addition, even if the outcome and financial effects of the plans and events described herein are consistent with the forward-looking statements contained in this press release and the earnings call referencing this press release, those results or developments may not be indicative of results or developments in subsequent periods. Although Semantix has attempted to identify important risks and factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors and risks that cause actions, events or results not to be as anticipated, estimated or intended. Forward-looking information contained in this press release and the earnings call referencing this press release are based on current estimates, assumptions, expectations and projections, including with respect to the management’s expectations regarding Semantix’s growth based on historical financial results and anticipated commercial developments, the anticipated success of current strategies for market penetration in Brazil and globally in light of competition from existing market participants and the emergence of competitors in the future, management’s expectations with respect to the development of technology and other proprietary intellectual property by Semantix based on existing technological realities and strategies with respect to intellectual property development, management’s expectations regarding the likelihood Semantix will be able to enter into commercial arrangements with relevant third-parties and customers, Semantix’s ability to maintain adequate margins based on financial metrics available to management, the ability of Semantix to finance its ongoing capital needs, the continued involvement of Semantix’s management in Semantix’s operations and the ability of Semantix to attract and retain talent in the future, which are based on the information available as of the date of this press release, and, while considered reasonable by Semantix, are inherently uncertain. Historical statements contained in this document regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. In this regard, certain financial information contained herein has been extracted from, or based upon, information available in the public domain and/or provided by Semantix. In particular, historical results should not be taken as a representation that such trends will be replicated in the future. No statement in this document is intended to be nor may be construed as a profit forecast.
Nothing in this press release and the earnings call referencing this press release should be regarded as a representation by any person that the forward-looking statements set forth herein will be achieved or that any of the contemplated results of such forward-looking statements will be achieved. You should not place undue reliance on forward-looking statements in this press release and the earnings call referencing this press release, which speak only as of the date they are made and are qualified in their entirety by reference to the cautionary statements herein. This press release also contains certain financial forecast information of Semantix. Such financial forecast information constitutes forward-looking information and is for illustrative purposes only and should not be relied upon as necessarily being indicative of future results. The assumptions and estimates underlying such financial forecast information are inherently uncertain and are subject to a wide variety of significant business, economic, competitive, and other risks and uncertainties. Actual results may differ materially from the results contemplated by the financial forecast information contained in this press release, and the inclusion of such information in this press release should not be regarded as a representation by any person that the results reflected in such forecasts will be achieved. You must make your own determinations as to the reasonableness of these projections, estimates, goals, trends and other statements and should also note that if one or more estimates change, or one or more assumptions are not met, or one or more unexpected events occur, the performance and results set forth in such projections, estimates, goals, trends and other statements may not be achieved. We can give no assurance as to future operations, performance, results or events.
WE DO NOT UNDERTAKE ANY OBLIGATION AND EXPRESSLY DISCLAIM ANY RESPONSIBILITY TO UPDATE OR REVISE, OR PUBLICLY DISCLOSE ANY UPDATE OR REVISION TO, ANY FINANCIAL FORECASTS CONTAINED HEREIN TO REFLECT CIRCUMSTANCES OR EVENTS, INCLUDING UNANTICIPATED EVENTS, THAT MAY HAVE OCCURRED OR THAT MAY OCCUR AFTER THE PREPARATION OF THESE FORECASTS. HOWEVER, WE MAY ELECT TO UPDATE OUR BUSINESS OUTLOOK AT ANY TIME FOR ANY REASON.
Non-GAAP Financial Measures
This press release includes certain non-IFRS financial measures and industry metrics such as EBITDA, EBITDA margin, Adjusted EBITDA, Adjusted EBITDA margin and net cash (debt). These measures are an addition, and not a substitute for or superior to, measures of financial performance prepared in accordance with IFRS and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with IFRS. Semantix believes that these measures (including on a forward-looking basis) provide useful supplemental information to investors about Semantix, particularly as they exclude the impacts of certain events that we believe are isolated in nature incurred as part of our recent expansion and, therefore, not reflective of our underlying results. Semantix’s management does not consider these non-IFRS measures in isolation or as an alternative to financial measures determined in accordance with IFRS. Semantix’s management uses forward-looking non-IFRS measures to evaluate Semantix’s projected financials and operating performance. However, there are a number of limitations related to the use of these measures, including that they exclude significant expenses that are required by IFRS to be recorded in Semantix’s financial statements, including certain expenses with share based plan expenses, D&O insurance, gains from fair value of Semantix’s warrants and concentrated expenses of an extraordinary nature incurred in connection with our completed business combination with a SPAC occurred in 2022 and the earn-out compensation related to our acquisitions. In addition, other companies may calculate non-IFRS measures or industry metrics differently or may use other measures to calculate their financial performance, and therefore, Semantix’s non-IFRS measures and industry metrics may not be directly comparable to similarly titled measures of other companies. Additionally, to the extent that forward-looking non-IFRS financial measures are provided, they are presented on a non-IFRS basis without reconciliations of such forward-looking non-IFRS measures due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations.
Other Business Metrics
Proprietary SaaS and Resale of Third-party Software: Proprietary SaaS consists of Semantix’s data platform software, while resale of third-party Software consists of the resale of licenses from third-party data platform software providers.
Customers with Trailing 12-Month Revenue Greater than US$1 Million: Large customer relationships lead to scale and operating leverage in our business model. Compared with smaller customers, large customers present a greater opportunity for us to sell additional capacity because they have larger budgets, and a wider range of potential use cases. As a measure of our ability to scale with our customers and attract large enterprises, we count the number of customers that contributed more than US$1 million in revenues in the trailing 12 months, considering the Brazilian real to US Dollar exchange rate as of March 31, 2023. Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity.
Net Cash (Debt): Net cash (debt) reflects Semantix’s cash and cash equivalents balance at a given date in time, net of the loans and borrowings balance as of the same date.
About Semantix
Semantix is a leading Latin America integrated AI software platform and applications provider. Semantix has more than 300 clients with operations in approximately 15 countries using Semantix’s software and services to enhance their businesses. The company was founded in 2010 by CEO Leonardo Santos. For more information, visit www.semantix.ai.
Semantix, Inc.
Unaudited Consolidated Statement of Profit or Loss
(in BRL thousands)
| | | | | | | | | | | | | | |
| Three Months Ended,
Jun, 30 | Six Months Ended,
Jun, 30 |
|
| 2023 | 2022 | 2023 | 2022 |
| Revenues | 48,003 | 46,108 | 87,682 | 85,542 |
| Cost of sales | (25,346) | (31,067) | (48,151) | (57,793) |
| Gross profit | 22,657 | 15,041 | 39,531 | 27,749 |
| Operating expenses | | | | |
| Sales and marketing expenses | (12,952) | (15,578) | (27,204) | (24,830) |
| General and administrative expenses | (40,111) | (19,730) | (76,303) | (59,498) |
| Research and development | (8,626) | (13,287) | (21,322) | (20,565) |
| Operating loss | (39,032) | (33,554) | (85,298) | (77,144) |
| | | | |
| Financial income | 9,487 | 2,335 | 19,850 | 6,630 |
| Financial expenses | (3,703) | (12,715) | (18,164) | (19,208) |
| Net financial results | 5,784 | (10,380) | 1,686 | (12,578) |
| | | | |
| Loss before income tax | (33,249) | (43,934) | (83,612) | (89,722) |
| Income tax | (2,795) | 1,670 | (246) | 3,572 |
| Loss for the period | (36,044) | (42,264) | (83,858) | (86,150) |
Semantix, Inc.
Revenue Mix (Unaudited)
(in BRL thousands)
| | | | | | | | | | | | | | |
| Three Months Ended,
Jun, 30 | Six Months Ended,
Jun, 30 |
|
| | 2023 | 2022 | 2023 | 2022 |
| Third-party software | 26,867 | 28,888 | 50,470 | 52,246 |
| Deductions on third-party software | (3,151) | (2,996) | (5,344) | (4,943) |
| Revenue from Third-party software | 23,716 | 25,892 | 45,126 | 47,303 |
| |
| AI & data analytics services | 9,393 | 10,524 | 17,831 | 19,076 |
| Deductions on AI & data analytics services | (631) | (690) | (1,194) | (1,250) |
| Revenue from AI & data analytics services | 8,762 | 9,834 | 16,637 | 17,826 |
| |
| Proprietary software as a service (SaaS) | 16,356 | 11,108 | 27,500 | 21,839 |
| Deductions on proprietary software as a service (SaaS) | (1,143) | (726) | (1,893) | (1,429) |
| Revenue from proprietary software as a service (SaaS) | 15,213 | 10,382 | 25,607 | 20,410 |
| |
| Other revenue | 312 | — | 312 | 3 |
| Other revenue | 312 | — | 312 | 3 |
| Total revenue | 48,003 | 46,108 | 87,682 | 85,542 |
Semantix, Inc.
Unaudited Consolidated Statement of Cash Flows
(in BRL thousands)
| | | | | | | | |
| Six months ended
June 30 |
|
| | 2023 | 2022 |
| Loss for the period | (83,858) | (86,150) |
| Adjustments to reconcile loss for the period | | |
| Depreciation and amortization | 16,165 | 7,471 |
| Deferred income tax | 333 | (3,683) |
| Onerous contract | — | (477) |
| Fair value adjustment of derivatives financial instruments | 5,164 | 1,586 |
| Stock option plan | 1,732 | 2,292 |
| Trade and other receivables expected loss | 7,461 | 484 |
| Accounts receivable write-off and Write-off of creditor invoice | (227) | (4,590) |
| Provision for contingencies | 443 | 774 |
| Interest accrued | 4,208 | 14,979 |
| Interest paid | (1,954) | (11,815) |
| Change in operating assets and liabilities | (92,777) | (76,481) |
| Net cash outflow from operating activities | (94,731) | (88,296) |
| Purchase and development of intangible assets | (19,389) | (14,652) |
| Acquisition of subsidiaries net of cash acquired | (24,386) | — |
| Acquisitions of property and equipment | (76) | (319) |
| Net cash outflow from investment activities | (43,851) | (14,971) |
| Loans obtained | — | 122,016 |
| Proceeds from exercise of stock options | 511 | 276 |
| Acquisition of non-controlling interest | 5,018 | (148) |
| Payment of loans | (20,027) | (21,210) |
| Purchase of treasury shares | (34,633) | — |
| Lease payments | (794) | (535) |
| Net cash inflow (outflow) from financing activities | (49,925) | 100,399 |
| Increase (decrease) in cash and cash equivalents | (188,507) | (2,868) |
| Cash and cash equivalents at the beginning of the year | 338,020 | 52,149 |
| Cash and cash equivalents at the end of the year | 151,223 | 48,881 |
| Effect of exchange rate changes | 1,710 | (400) |
| Increase (decrease) in cash and cash equivalents | (188,507) | (2,868) |
| | |
| Supplemental non-cash flow information | | |
| Remeasurement of lease agreement | 199 | — |
| Unpaid amount related to business combination | 9,558 | — |
| Other receivables related to the sale of non-controlling interest | 5,018 | — |
Semantix, Inc.
Unaudited Consolidated Statement of Financial Position
(in BRL thousands)
| | | | | | | | |
| June 30, 2023 | December 31, 2022 |
| ASSETS | | |
| Cash and cash equivalents | 151,223 | 338,020 |
| Trade receivables and other, net | 140,801 | 139,546 |
| Tax receivables | 17,037 | 11,317 |
| Prepaid expenses and other assets | 23,338 | 35,060 |
| PP&E, Intangible and right of use asset | 165,770 | 156,110 |
| Deferred tax asset | 21,818 | 22,488 |
| Total current assets | 326,459 | 519,169 |
| Total non-current assets | 193,528 | 183,372 |
| Total assets | 519,987 | 702,541 |
| | |
| LIABILITIES | | |
| Loans and borrowings | 60,789 | 78,671 |
| Trade and other payables | 68,756 | 107,695 |
| Lease liabilities and other liabilities | 51,538 | 64,676 |
| Taxes payable | 12,700 | 14,733 |
| Derivatives financial instruments | 12,811 | 6,412 |
| Deferred income tax | 8,592 | 8,929 |
| Total current liabilities | 115,686 | 181,390 |
| Total non-current liabilities | 99,500 | 99,726 |
| Total liabilities | 215,186 | 281,116 |
| | |
| EQUITY | | |
| Share capital | 425 | 425 |
| Additional paid-in capital | 872,771 | 872,771 |
| Capital reserves | 22,543 | 20,300 |
| Other comprehensive income | (7,216) | (6,840) |
| Treasury shares | (35,141) | (508) |
| Accumulated loss | (552,224) | (468,869) |
| Non-controlling interests | 3,643 | 4,146 |
| Total equity | 304,801 | 421,425 |
| Total equity + liabilities | 519,987 | 702,541 |
Semantix Inc.
GAAP to Non-GAAP Adjusted EBITDA and Adjusted EBITDA Margin Reconciliations
(in BRL thousand)
| | | | | | | | | | | | | | |
| Three Months Ended, June 30, | Six Months Ended, June 30, |
| 2023 | 2022 | 2023 | 2022 |
| Loss for the period | (36,044) | (42,263) | (83,858) | (86,150) |
| (+/-) Net interest income (expenses) | (4,647) | 7,735 | (10,476) | 11,736 |
| (+/-) Income tax | 2,794 | (1,675) | 246 | (3,577) |
| (+) Depreciation and amortization | 8,205 | 3,760 | 16,164 | 7,478 |
| EBITDA | (29,692) | (32,444) | (77,925) | (70,512) |
| (+) Share based plan expenses (1) | 1,086 | 1,342 | 2,173 | 2,907 |
| (+) Transaction expenses (2) | - | 9,645 | - | 31,408 |
| (+) D&O Expenses (3) | 4,391 | - | 9,002 | - |
| (+/-) Fair Value of Derivative Financial Instruments (4) | (3,617) | - | 5,079 | - |
| (+) Earn-Outs (5) | 2,052 | - | 3,552 | - |
| Adjusted EBITDA | (25,780) | (21,458) | (58,119) | (36,198) |
| Net Revenue | 48,003 | 45,918 | 87,682 | 85,353 |
| Adjusted EBITDA Margin | (54%) | (47%) | (66%) | (42%) |
(1)Consists of expenses related to share based compensation grants, including payroll expenses in the amounts of R$0.2 million and R$0.3 million in the three-month periods ended June 30, 2023 and 2022, respectively.
(2)Consists of concentrated expenses of an extraordinary nature related to third-party advisory, support services, travelling and events incurred in connection with our business combination with a SPAC that are not expected to be ongoing.
(3)Consists of expenses related to D&O Insurance (directors’ and officers’ liability insurance).
(4)Consists of gains from fair value of Semantix Warrants.
(5)Consists of expenses related to earn-out payment to the former shareholders of Zetta and Elemeno.
Investor Contact
Adriano Alcalde
Chief Financial Officer & IR
ir@semantix.ai
Press Contact
semantix@rpmacomunicacao.com.br
Source: Semantix, Inc
Index to Interim Condensed Consolidated Financial Statements
| | | | | |
| |
| Semantix, Inc. | |
Unaudited Interim Condensed Consolidated Statement of Financial Position As of June 30, 2023 and December 31, 2022 (In thousands of Brazilian Reais, unless otherwise stated) |
| | | | | | | | | | | | | | | | | |
| Notes | | June 30, 2023 | | December 31, 2022 |
| ASSETS | | | | | |
| Current assets | | | | | |
| Cash and cash equivalents | 4 | | 151,223 | | | 338,020 | |
| Trade receivables | 5 | | 54,661 | | | 43,675 | |
| Contract assets | 5 | | 86,140 | | | 95,871 | |
| Tax receivables | | | 17,037 | | | 11,317 | |
| Prepaid expenses and other assets | | | 17,398 | | | 30,286 | |
| Total current assets | | | 326,459 | | | 519,169 | |
| Deferred tax asset | 6 | | 21,818 | | | 22,488 | |
| Other assets | | | 5,940 | | | 4,774 | |
| Property and equipment, net | | | 3,125 | | | 3,474 | |
| Right of use asset | | | 1,636 | | | 2,106 | |
| Intangible assets, net | 7 | | 161,009 | | | 150,530 | |
| Total non-current assets | | | 193,528 | | | 183,372 | |
| Total assets | | | 519,987 | | | 702,541 | |
| | | | | |
| LIABILITIES | | | | | |
| Current liabilities | | | | | |
| Loans and borrowings | 8 | | 27,353 | | | 31,001 | |
| Trade and other payables | 5 | | 67,233 | | | 106,023 | |
| Contract liabilities | 9 | | 1,523 | | | 1,672 | |
| Lease liabilities | | | 1,483 | | | 1,292 | |
| Deferred consideration, contingent liabilities and others | 9 | | 5,394 | | | 26,669 | |
| Taxes payable | | | 12,700 | | | 14,733 | |
| Total current liabilities | | | 115,686 | | | 181,390 | |
| Loans and borrowings | 8 | | 33,436 | | | 47,670 | |
| Lease liabilities | | | 423 | | | 1,141 | |
| Derivatives financial instruments | 10 | | 12,811 | | | 6,412 | |
| Deferred consideration, contingent liabilities and others | 9 | | 44,238 | | | 35,574 | |
| Deferred income tax | 6 | | 8,592 | | | 8,929 | |
| Total non-current liabilities | | | 99,500 | | | 99,726 | |
| Total liabilities | | | 215,186 | | | 281,116 | |
| | | | | |
| Net assets | | | 304,801 | | | 421,425 | |
| | | | | |
| EQUITY | | | | | |
| Share capital | 11 | | 425 | | | 425 | |
| Additional paid in capital | 11 | | 872,771 | | | 872,771 | |
| Treasury shares | 11 (b) | | (35,141) | | | (508) | |
| Capital reserves | 11 | | 22,543 | | | 20,300 | |
| Other comprehensive loss | 11 (c) | | (7,216) | | | (6,840) | |
| Accumulated loss | | | (552,224) | | | (468,869) | |
| | | 301,158 | | | 417,279 | |
| Non-controlling interests | | | 3,643 | | | 4,146 | |
| Total equity | | | 304,801 | | | 421,425 | |
The above unaudited interim condensed consolidated statement of financial position should be read in conjunction with the accompanying notes.
2
| | | | | |
| |
| Semantix, Inc. | |
Unaudited Interim Condensed Consolidated Statement of Profit or Loss
For the six and three months period ended June 30, 2023 and 2022
(In thousands of Brazilian Reais, except earnings per share) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three-month period ended June 30, | | Six-month period ended June 30, |
| | Notes | | 2023 | | 2022 | | 2023 | | 2022 |
| Revenues | | 13 | | 48,003 | | | 46,108 | | | 87,682 | | | 85,542 | |
| Cost of sales | | 14 | | (25,346) | | | (31,067) | | | (48,151) | | | (57,793) | |
| Gross profit | | | | 22,657 | | | 15,041 | | | 39,531 | | | 27,749 | |
| | | | | | | | | | |
| Operating expenses | | | | | | | | | | |
| Sales and marketing expenses | | 14 | | (12,952) | | | (15,578) | | | (27,204) | | | (24,830) | |
| General and administrative expenses | | 14 | | (40,111) | | | (19,730) | | | (76,303) | | | (59,498) | |
| Research and development | | 14 | | (8,626) | | | (13,287) | | | (21,322) | | | (20,565) | |
| Operating loss | | | | (39,032) | | | (33,554) | | | (85,298) | | | (77,144) | |
| | | | | | | | | | |
| Financial income | | 15 | | 9,487 | | | 2,335 | | | 19,850 | | | 6,630 | |
| Financial expenses | | 15 | | (3,704) | | | (12,715) | | | (18,164) | | | (19,208) | |
| Net financial results | | | | 5,783 | | | (10,380) | | | 1,686 | | | (12,578) | |
| | | | | | | | | | |
| Loss before income tax | | | | (33,249) | | | (43,934) | | | (83,612) | | | (89,722) | |
| Income tax | | 6 | | (2,795) | | | 1,670 | | | (246) | | | 3,572 | |
| Loss for the period | | | | (36,044) | | | (42,264) | | | (83,858) | | | (86,150) | |
| | | | | | | | | | |
| Net loss attributed to: | | | | | | | | | | |
| Controlling interest | | | | (35,732) | | | (42,363) | | | (83,355) | | | (86,187) | |
| Non-controlling interest | | | | (312) | | | 99 | | | (503) | | | 37 | |
| | | | (36,044) | | | (42,264) | | | (83,858) | | | (86,150) | |
| Loss per share: | | | | | | | | | | |
| Basic and diluted losses per share (R$) | | 18 | | (0.45) | | | (0.68) | | | (1.05) | | | (1.39) | |
The above unaudited interim condensed consolidated statement of profit or loss should be read in conjunction with the accompanying notes.
3
| | | | | |
| |
| Semantix, Inc. | |
Unaudited Interim Condensed Consolidated Statement of Other Comprehensive Income or Loss For the six and three months period ended June 30, 2023 and 2022 (In thousands of Brazilian Reais, except earnings per share) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | For the three-month periods ended June 30, | | For the six-month periods ended June 30, |
| | Notes | | 2023 | | 2022 | | 2023 | | 2022 |
| Loss for the period | | | | (36,044) | | | (42,264) | | | (83,858) | | | (86,150) | |
| Other comprehensive income (loss) | | | | | | | | | | |
| Items that can be reclassified subsequently to profit or loss | | | | | | | | | | |
| Foreign exchange variation of investees located abroad | | | | 991 | | | (2,335) | | | 1,710 | | | (400) | |
| Loss - Hedge activities | | 10 | | (1,203) | | | (3,895) | | | (2,086) | | | (3,895) | |
| Total comprehensive loss for the period | | | | (36,256) | | | (48,494) | | | (84,234) | | | (90,445) | |
| | | | | | | | | | |
| Comprehensive income (loss) attributed to: | | | | | | | | | | |
| Controlling interest | | | | (35,944) | | | (48,593) | | | (83,731) | | | (90,482) | |
| Non-controlling interest | | | | (312) | | | 99 | | | (503) | | | 37 | |
The above unaudited interim condensed consolidated statement of other comprehensive income or loss should be read in conjunction with the accompanying notes.
4
| | | | | |
| |
| Semantix, Inc. | |
Unaudited Interim Condensed Consolidated Statement of Changes in Equity For the six and three months period ended June 30, 2023 and 2022 (In thousands of Brazilian Reais, unless otherwise stated) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Attributable to the owner of the Company | | | | | | |
| Notes | | Share capital | | Additional
Paid-in
Capital | | Treasury Shares | | Capital reserves | | Loss -Hedge
activities | | Foreign currency
translation reserve | | Accumulated loss | | Total | | Non-controlling interest | | Total Equity |
| Balance as of December 31, 2021 | | | 55,818 | | | — | | | — | | | 15,999 | | | — | | | (1,022) | | | (140,477) | | | (69,682) | | | 5,787 | | | (63,895) | |
| Loss for the period | | | — | | | — | | | — | | | — | | | — | | | — | | | (86,187) | | | (86,187) | | | 37 | | | (86,150) | |
| Foreign currency translation differences | | | — | | | — | | | — | | | — | | | — | | | (400) | | | — | | | (400) | | | — | | | (400) | |
| Hedging gains and losses and costs of hedging of loans and borrowings | | | — | | | — | | | — | | | — | | | (3,895) | | | — | | | — | | | (3,895) | | | — | | | (3,895) | |
| Total comprehensive income (loss) for the period | | | — | | | — | | | — | | | — | | | (3,895) | | | (400) | | | (86,187) | | | (90,482) | | | 37 | | | (90,445) | |
| Transactions with owners of the Group: | | | | | | | | | | | | | | | | | | | | | |
| Share-based payment | | | — | | | — | | | — | | | 2,292 | | | — | | | — | | | — | | | 2,292 | | | — | | | 2,292 | |
| Transaction with non-controlling interest-Tradimus | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (148) | | | (148) | |
| Exercise of stock option | | | — | | | — | | | — | | | 276 | | | — | | | — | | | — | | | 276 | | | — | | | 276 | |
| Balance as of June 30, 2022 | | | 55,818 | | | — | | | — | | | 18,567 | | | (3,895) | | | (1,422) | | | (226,664) | | | (157,596) | | | 5,676 | | | (151,920) | |
| | | | | | | | | | | | | | | | | | | | | |
| Balance as of December 31, 2022 | | | 425 | | | 872,771 | | | (508) | | | 20,300 | | | (3,341) | | | (3,499) | | | (468,869) | | | 417,279 | | | 4,146 | | | 421,425 | |
| Loss for the period | | | — | | | — | | | — | | | — | | | — | | | — | | | (83,355) | | | (83,355) | | | (503) | | | (83,858) | |
| Foreign currency translation differences | | | — | | | — | | | — | | | — | | | — | | | 1,710 | | | — | | | 1,710 | | | — | | | 1,710 | |
| Hedging activities losses | | | — | | | — | | | — | | | — | | | (2,086) | | | — | | | — | | | (2,086) | | | — | | | (2,086) | |
| Total comprehensive income (loss) for the period | | | — | | | — | | | — | | | — | | | (2,086) | | | 1,710 | | | (83,355) | | | (83,731) | | | (503) | | | (84,234) | |
| Transactions with owners of the Group: | | | | | | | | | | | | | | | | | | | | | |
| Share based plan | 12 | | — | | | — | | | — | | | 1,732 | | | — | | | — | | | — | | | 1,732 | | | — | | | 1,732 | |
| Exercise of stock option | 12 | | — | | | — | | | 1,480 | | | 511 | | | — | | | — | | | — | | | 1,991 | | | — | | | 1,991 | |
| Treasury shares | 11 | | — | | | — | | | (36,113) | | | — | | | — | | | — | | | — | | | (36,113) | | | — | | | (36,113) | |
| Balance as of June 30, 2023 | | | 425 | | | 872,771 | | | (35,141) | | | 22,543 | | | (5,427) | | | (1,789) | | | (552,224) | | | 301,158 | | | 3,643 | | | 304,801 | |
| | | | | |
| |
| Semantix, Inc. | |
Unaudited Interim Condensed Consolidated Statement of Cash Flows For the six-months period ended June 30, 2023 and 2022 (In thousands of Brazilian Reais, unless otherwise stated) |
| | | | | | | | | | | | | | | | | |
| | | Six month periods ended June 30 |
| Notes | | 2023 | | 2022 |
| Cash flows from operating activities | | | | | |
| Loss for the period | | | (83,858) | | | (86,150) | |
| Adjustments for: | | | | | |
| Depreciation and amortization | 14 | | 16,165 | | | 7,471 | |
| Deferred income tax | 6 | | 333 | | | (3,683) | |
| Onerous contract | 14 | | — | | | (477) | |
| Fair value adjustment of derivatives financial instruments | 15 | | 5,164 | | | 1,586 | |
| Share based plan | 12 | | 1,732 | | | 2,292 | |
| Write-off of creditor invoice | 14 | | — | | | (4,301) | |
| Trade and other receivables expected credit loss | 5 | | 7,461 | | | 484 | |
| Accounts receivable write-off | 5 | | (227) | | | (289) | |
| Provision for contingencies | | | 443 | | | 774 | |
| Interest accrued related to loans and leases | | | 4,208 | | | 14,979 | |
| | | | | |
| Adjusted loss for the period | | | (48,579) | | | (67,314) | |
| Change in operating assets and liabilities | | | | | |
| Trade and other receivables | 5 | | (8,488) | | | (14,051) | |
| Tax receivables | | | (5,720) | | | (1,040) | |
| Prepaid expenses and other assets | | | 8,112 | | | (11,913) | |
| Account payables and accrued expenses | | | (39,743) | | | 19,507 | |
| Taxes payable | | | (2,033) | | | 1,083 | |
| Deferred consideration, contingent liabilities and others | 9 | | 3,674 | | | (2,753) | |
| | | | | |
| Cash used in operations | | | (92,777) | | | (76,481) | |
| Interest paid | | | (1,954) | | | (11,815) | |
| Net cash outflow from operating activities | | | (94,731) | | | (88,296) | |
| | | | | |
| Cash flows from investment activities | | | | | |
| Purchase and development of intangible assets | 7 | | (19,389) | | | (14,652) | |
| Acquisition of subsidiaries net of cash acquired | 3/9 | | (24,386) | | | — | |
| Acquisitions of property and equipment | | | (76) | | | (319) | |
| Net cash outflow from investment activities | | | (43,851) | | | (14,971) | |
| | | | | |
| Cash flows from financing activities | | | | | |
| Loans obtained | 8 | | — | | | 122,016 | |
| Proceeds from exercise of stock options | 12 | | 511 | | | 276 | |
| Proceeds from non-controlling interest | | | 5,018 | | | (148) | |
| Payment of loans | 8 | | (20,027) | | | (21,210) | |
| Purchase of treasury shares | 11 | | (34,633) | | | — | |
| Lease payments | | | (794) | | | (535) | |
| Net cash inflow (outflow) from financing activities | | | (49,925) | | | 100,399 | |
| | | | | |
| Increase (decrease) in cash and cash equivalents | | | (188,507) | | | (2,868) | |
| Cash and cash equivalents at the beginning of the period | 4 | | 338,020 | | | 52,149 | |
| Cash and cash equivalents at the end of the period | 4 | | 151,223 | | | 48,881 | |
| Net foreign exchange difference | | | 1,710 | | | (400) | |
| Increase (decrease) in cash and cash equivalents | | | (188,507) | | | (2,868) | |
| | | | | |
| Supplemental non-cash flow information | | | | | |
| | | | | |
| Remeasurement of lease agreement | | | 199 | | | — | |
| Unpaid amount related to business combination | 9 | | 9,558 | | | — | |
| Other receivables related to the sale of non-controlling interest | | | 5,018 | | | — | |
The above unaudited interim condensed consolidated statement of cash flows should be read in conjunction with the accompanying notes.
6
| | | | | |
| |
| Semantix, Inc. | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements As of June 30, 2023 (In thousands of Brazilian Reais, unless otherwise stated) |
Note 1. General Information
Semantix, Inc. (the "Company" or "Semantix") is a Cayman Island exempted limited liability company, incorporated on November 8, 2021. The registered office of the Company is PO Box 309, Ugland House, Grand Cayman, KYI-1104, Cayman Islands. The Company's principal executive office is located in the city of São Paulo, Brazil. The Company is a holding company controlled mostly by a group of individuals, which hold collectively 77.6% of the outstanding shares.
The Company and its subsidiaries (jointly, the "Group") are engaged in the provision of big data, data analytics and artificial intelligence, developing disruptive solutions and platforms as a one-stop-shop for data driven solutions. The Group provides software as a service ("SaaS") and platform as a service ("PaaS") as its core business, with a focus on providing complete solutions in data integration, data engineering, analytics, data sharing and governance, and artificial intelligence and machine learning tools to assist with automation.
Corporate reorganization and transaction with Alpha Capital
On August 2, 2022, the Group carried out a capital reorganization transaction (referred to as the “SPAC merger”) in order to prepare the structure for the transaction with Alpha Capital Acquisition Company ("Alpha"), a special purpose acquisition company. The original capital contributed by the shareholders of Semantix Tecnologia da Informação S.A ("Semantix Tecnologia") was contributed to the Company, resulting in those shareholders obtaining a direct interest in the Company. In additional, as part of this corporate reorganization, Semantix became the controlling shareholder of Semantix AI Ltd. ("Semantix AI") which directly controls Semantix Tecnologia and the other operating companies of the Group.
On August 4, 2022, Semantix became a publicly traded company through the merger with Alpha. On the date, Semantix’s ordinary shares and warrants began trading on the Nasdaq Global Market under the ticker symbols “STIX” and “STIXW”, respectively. The shares offered were registered under the Securities Act of 1934, as amended, pursuant to the Company's Registration Statement on Form F-4 (Registration No. 333-262552), which was declared effective by the Securities and Exchange Commission on July 11, 2022. After the effectiveness of the Registration Statement, the corporate reorganization and subsequently approval of the transaction with Alpha could be made.
These unaudited interim condensed consolidated financial statements as of June 30, 2023, were approved by the Board of Director’s meeting on August 15, 2023.
| | | | | |
| |
| Semantix, Inc. | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements As of June 30, 2023 (In thousands of Brazilian Reais, unless otherwise stated) |
Note 2. Basis of preparation and changes to the Group's accounting policies
2.1. Basis of preparation
The unaudited interim condensed consolidated financial statements for the six-month period ended June 30, 2023 have been prepared in accordance with IAS 34 – Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”).
The unaudited interim condensed consolidated financial statements do not include all the information and disclosures required in an annual consolidated financial statement. Accordingly, this report is to be read in conjunction with the Group’s annual consolidated financial statements as of and for the year ended December 31, 2022. Additionally, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group’s financial position and performance since the last annual consolidated financial statements.
The accounting policies adopted are consistent with those of the previous financial year and interim reporting periods.
The unaudited interim condensed consolidated financial statements have been prepared on a historical cost basis, except for financial instruments that have been measured at fair value.
2.2. New standards, interpretations and amendments adopted by the Group
Certain new accounting standards and interpretations have been published that are not mandatory for the June 30, 2023 reporting periods and have not been early adopted by the Group. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
Several amendments apply for the first time in 2023, but do not have an impact on the unaudited interim condensed consolidated financial statements of the Company.
2.3. Basis of consolidation
There were no changes since December 31, 2022 in the accounting practices adopted for consolidation of the Company’s direct and indirect interests in its subsidiaries for the purposes of these unaudited interim condensed consolidated financial statements, except for the following items:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Place of Business/Country of Incorporation | | Group’s interest (i) | | Principal Activities |
| | | June 30, 2023 | | December 31, 2022 | |
| | | % | | % | |
| Indirectly controlled | | | | | | | | |
| Semantix, US Holding, Inc (ii) | | United States | | 100.0 | | — | | Holding company and SaaS and PaaS provider |
| Elemeno Inc. (iii) | | United States | | 100.0 | | — | | SaaS and PaaS provider |
(i) Represents the Group’s interest in total capital and voting capital of its subsidiaries.
(ii) New subsidiaries that commenced operations during the six month periods ended of June 30, 2023
(iii) New subsidiary acquired. See further details in note 3.
| | | | | |
| |
| Semantix, Inc. | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements As of June 30, 2023 (In thousands of Brazilian Reais, unless otherwise stated) |
2.4. Segment reporting
In reviewing the operational performance of the Group and allocating resources purposes, the Chief Operating Decision Maker ("CODM") of the Group, who is the Group’s Chief Executive Officer (“CEO”) and the Board of Directors (“BoD”), reviews the consolidated results as a whole. The CODM considers the whole Group a single operating and reportable segment, when monitoring operations, making decisions on fund allocation, and evaluating performance. The CODM reviews relevant financial data on a consolidated basis for all subsidiaries and business lines. Disaggregated information is only reviewed at the revenue level (Note 13), with no corresponding detail at any margin or profitability levels.
The Group’s revenue, profit or loss, and assets and liabilities for this one reportable segment can be determined by reference to the consolidated financial statements.
See Note 13 for a breakdown of Group's non-current assets and revenue by geographic area.
2.5. Functional and reporting currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The functional currency of Semantix is US Dollar (“USD” or “$”). The unaudited interim condensed consolidated financial statements are presented in Brazilian Reais (“BRL” or “R$”), as the Group understands that financial statements presented in BRL brings more relevant information to its stakeholders when evaluating the Group’s operation performance. All amounts are rounded to the nearest thousands, except when otherwise indicated.
2.6. Critical estimates and accounting judgments
Management has made judgments and estimates that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, revenues, and expenses. Actual results may differ from these estimates. Accounting estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are recognized prospectively.
In preparing these unaudited interim condensed consolidated financial statements, the significant judgments and estimates made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that are set at the consolidated financial statements as of and for the year ended December 31, 2022.
Note 3. Business combinations
Acquisiton of Elemeno
On January 4, 2023, Semantix entered into an agreement, through its for the acquisition of 100% of total share capital of Elemeno Inc. (“Elemeno”), a US-based, cloud-managed, machine learning operations (MLOps) platform provider focused on helping businesses leverage the benefits of artificial intelligence. Elemeno specifically aims to automate the development, deployment, and management of machine learning (ML) software with an easy-to-use interface and, in so doing, accelerate artificial intelligence adoption for businesses and organizations. Semantix expects the acquisition of Elemeno to complement and enhance its flagship proprietary platform, the Semantix Data Platform (SDP), and specifically strengthen SDP’s MLOps suite. The transaction was structured as a merger of a Semantix subsidiary with Elemeno, with the surviving company becoming a subsidiary of Semantix. On February 21, 2023, the acquisition was consummated.
The acquisition of Elemeno is recently completed and the allocation of the purchase price to acquire assets, including goodwill, and assumed liabilities is still preliminary pending receipt of the final fair value valuations of the acquired assets and assumed liabilities as of the closing date of the transaction.
| | | | | |
| |
| Semantix, Inc. | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements As of June 30, 2023 (In thousands of Brazilian Reais, unless otherwise stated) |
For the concluded acquisition, the total consideration paid is R$6,379, being: i) R$1,999 paid in cash and ii) R$2,032 payable in annual installments from 2024 to 2026 and iii) R$2,348 as a fair value of the contingent consideration.
The preliminary goodwill recognized amounts to R$ 3,383 and it includes the value of expected synergies arising from the acquisition, which is not separately recognized. The goodwill recognized is not expected to be deductible for income taxes purposes.
For the purchase price allocation, the following intangible assets were identified. The valuation techniques used for measuring the fair value of separately identified intangible assets acquired were as follows:
| | | | | | | | | | | | | | | | | | | | |
| Assets | | Amount | | Method | | Expected amortization period |
| Technology | | 2,985 | | Relief from royalty | | 5 years |
The results of these operations of the businesses acquired for periods prior to acquisition dates, individually and in the aggregate, were not material to the Company´s unaudited interim consolidated statements of profit or loss. Therefore, the unaudited interim consolidated financial statements do not include this information.
Note 4. Cash and cash equivalents
| | | | | | | | | | | | | | |
| | June 30, 2023 | | December 31, 2022 |
| Cash and bank accounts | | 22,994 | | | 60,278 | |
| Short-term investments | | 128,229 | | | 277,742 | |
| | 151,223 | | | 338,020 | |
Financial investments have immediate convertibility characteristics in a known amount of cash and are not subject to risk of significant change in value, being recorded by the increased cost values of income earned up to the statement of financial position dates, which do not exceed their market or realization value.
Note 5. Trade receivables and other payables
a) Trade and other receivables and contract assets
Trade receivables and contract assets are as follows:
| | | | | | | | | | | | | | |
| | June 30, 2023 | | December 31, 2022 |
| Trade receivables | | 78,044 | | | 68,040 | |
| Contract assets (a) | | 94,256 | | | 95,871 | |
| Expected credit loss (b) | | (31,499) | | | (24,365) | |
| | | | |
| | 140,801 | | | 139,546 | |
(a)Amounts related to services provided but not yet billed.
(b)The loss allowance was calculated based on the provision matrix calculated by the Group related to the historical loss experienced on its trade receivables. The Group further added qualitative management overlays to arrive at management’s best estimate.
| | | | | |
| |
| Semantix, Inc. | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements As of June 30, 2023 (In thousands of Brazilian Reais, unless otherwise stated) |
The movement for the expected credit loss balance is as follows:
| | | | | | | | |
| Opening balance as of January 1, 2023 | | (24,365) | |
| Additions, net | | (7,461) | |
| Foreign exchange translation | | 100 | |
| Write-off | | 227 | |
| Closing balance as of June 30, 2023 | | (31,499) | |
The trade receivables by aging are distributed as follows:
| | | | | | | | | | | | | | | | |
| | June 30, 2023 | | December 31, 2022 | | |
| Current | | 62,936 | | | 54,112 | | | |
| Overdue between: | | | | | | |
| From 1 to 30 days | | 6,488 | | | 11,680 | | | |
| From 31 to 60 days | | 938 | | | 2,216 | | | |
| More than 61 days | | 7,682 | | | 32 | | | |
| | 78,044 | | | 68,040 | | | |
b) Trade and other payables
The breakdown of trade and other payables is as follows:
| | | | | | | | | | | | | | |
| | June 30, 2023 | | December 31, 2022 |
| Suppliers | | 44,131 | | | 74,621 | |
| Labor and social obligations | | 23,067 | | | 31,379 | |
| Other accounts payables | | 35 | | | 23 | |
| | 67,233 | | | 106,023 | |
| | | | |
| Current | | 67,233 | | | 106,023 | |
Note 6. Income tax
a)Reconciliation of income tax expense and social contribution
The tax on the Group's pre-tax profit differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities. The following is a reconciliation of income tax expense to profit (loss) for the year, calculated by applying the combined Brazilian statutory rates at 34% for the period ended June 30:
| | | | | |
| |
| Semantix, Inc. | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements As of June 30, 2023 (In thousands of Brazilian Reais, unless otherwise stated) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three-month periods ended June 30, | | For the six-month periods ended June 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
| Loss before income tax | | (33,249) | | | (43,934) | | | (83,612) | | | (89,722) | |
| | | | | | | | |
| Income tax at the nominal Brazilian tax rate - 34% | | 11,304 | | | 14,938 | | | 28,428 | | | 30,506 | |
| | | | | | | | |
| Tax paid on profits of overseas subsidiaries | | 846 | | | 351 | | | — | | | 549 | |
| Non-deductible expenses | | (799) | | | (110) | | | (799) | | | (110) | |
| Deferred tax not recognized (b) | | (10,647) | | | (19,081) | | | (28,428) | | | (34,666) | |
| Effects from entities taxed at different taxation regimes (a) | | (2,595) | | | 3,779 | | | 3,406 | | | 6,656 | |
| Share-based payment | | 518 | | | 656 | | | 810 | | | 779 | |
| Others | | (1,422) | | | 1,137 | | | (3,663) | | | (142) | |
| Total adjustments | | (14,099) | | | (13,268) | | | (28,674) | | | (26,934) | |
| | | | | | | | |
| Income tax as reported | | (2,795) | | | 1,670 | | | (246) | | | 3,572 | |
| | | | | | | | |
| Current income tax | | — | | | — | | | 87 | | | (111) | |
| Deferred income tax | | (2,795) | | | 1,670 | | | (333) | | | 3,683 | |
| | | | | | | | |
(a) Certain eligible subsidiaries adopted the Presumed Profit Method (“PPM”) tax regime and the effect of the presumed profit of subsidiaries represents the difference between the taxation based on this method and the amount that would be due based on the statutory rate applied to the taxable profit of the subsidiaries. Additionally, some entities adopt different taxation regimes according to the applicable rules in their jurisdictions.
The tax expense was determined based on the Brazilian corporate income tax (CIT) rate considering that, currently, the main operation is in Brazil. This table reconciles the expected income tax expense, computed by applying the combined Brazilian tax rate of 34%, to the actual income tax expense.
b) Unrecognized deferred taxes
Unrecognized deferred tax assets correspond to the tax benefit related to future utilization of net operating losses of the Group. In that case, the deferred tax asset was not recognized due to the lack of expectation of utilization of such net operating losses in the foreseeable future. The net operating loss not recognized for the Brazilian entities are in the amount of R$ 83.612 (June 30, 2022 - R$101.959).
| | | | | |
| |
| Semantix, Inc. | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements As of June 30, 2023 (In thousands of Brazilian Reais, unless otherwise stated) |
c) Deferred tax assets
| | | | | | | | | | | | | | | | | | | | |
| | Balance as of
January 1, 2023 | | Recognized in profit or loss | | Balance as of
June 30, 2023 |
| Bonus provision | | 3,366 | | | (2,185) | | | 1,181 | |
| Contingency | | 8,387 | | | (249) | | | 8,138 | |
| Right of use asset | | 1,710 | | | 226 | | | 1,936 | |
| Impairment of trade receivables | | 4,407 | | | 313 | | | 4,720 | |
| Share-based payment | | 4,618 | | | 867 | | | 5,485 | |
| Effect of changes in foreign exchange rates | | — | | | 358 | | | 358 | |
| Deferred tax assets | | 22,488 | | | (670) | | | 21,818 | |
d) Deferred tax liabilities
| | | | | | | | | | | | | | | | | | | | |
| | Balance as of
January 1, 2023 | | Recognized in profit or loss | | Balance as of
June 30, 2023 |
| Effect of changes in foreign exchange rates | | (155) | | | 153 | | | (2) | |
| Net gain or loss on hedge instruments | | (1,581) | | | (264) | | | (1,845) | |
| Identifiable assets acquired | | (7,193) | | | 448 | | | (6,745) | |
| Total | | (8,929) | | | 337 | | | (8,592) | |
Note 7. Intangible assets, net
Details of intangible assets and changes in the Group's intangible assets balances are presented below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Goodwill | | Software | | Brands | | Contract with customers | | Development costs | | Total |
| As of As of December 31, 2021 | | 24,854 | | | 5,843 | | | 8,633 | | | 6,924 | | | 28,374 | | | 74,628 | |
| Additions | | — | | | — | | | — | | | — | | | 14,652 | | | 14,652 | |
| Amortization | | — | | | (569) | | | (150) | | | (370) | | | (5,468) | | | (6,557) | |
| As of As of June 30, 2022 | | 24,854 | | | 5,274 | | | 8,483 | | | 6,554 | | | 37,558 | | | 82,723 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Goodwill | | Software | | Brands | | Contract with customers | | Development costs | | Total |
| As of December 31, 2022 | | 73,596 | | | 8,902 | | | 8,340 | | | 8,308 | | | 51,384 | | | 150,530 | |
| Additions | | — | | | 2,630 | | | 30 | | | — | | | 16,729 | | | 19,389 | |
| Business combination (Note 3) | | 3,383 | | | 2,985 | | | — | | | — | | | — | | | 6,368 | |
| Foreign exchange translation | | (206) | | | — | | | — | | | — | | | — | | | (206) | |
| Amortization | | — | | | (1,276) | | | (148) | | | (542) | | | (13,106) | | | (15,072) | |
| As of June 30, 2023 | | 76,773 | | | 13,241 | | | 8,222 | | | 7,766 | | | 55,007 | | | 161,009 | |
There were no events or changes in circumstances that indicate that the carrying amount of intangible assets with finite useful life may not be recoverable and therefore no impairment charges were recorded for the six-month periods ended June 30, 2023.
| | | | | |
| |
| Semantix, Inc. | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements As of June 30, 2023 (In thousands of Brazilian Reais, unless otherwise stated) |
Note 8. Loans and borrowings
Loans and financing operations are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities | | Interest rate | | Currency | | Maturity | | June 30, 2023 | | December 31, 2022 |
| Itaú Unibanco S.A. – Nassau Branch (i) | | 12.28% per annum | | EUR | | 2025 | | 9,172 | | | 12,061 | |
| Banco BMG S.A. (ii) | | CDI + 6.32% per annum | | Brazilian | | 2023 | | — | | | 3,130 | |
| Itaú Unibanco S.A. (iii) | | 12.15% per annum | | Brazilian | | 2025 | | 353 | | | 433 | |
| Banco Santander S.A. (iv) | | 5.98% per annum | | Brazilian | | 2024 | | 19,266 | | | 25,000 | |
| Itaú Unibanco S.A. – Nassau Branch (v) | | 3,05% per annum | | USD | | 2026 | | 7,044 | | | 8,921 | |
| Banco Bradesco S.A. (vi) | | 14.77% per annum | | Brazilian | | 2026 | | 24,954 | | | 29,126 | |
| Total | | | | | | | | 60,789 | | | 78,671 | |
| | | | | | | | | | |
| Current | | | | | | | | 27,353 | | | 31,001 | |
| Non-current | | | | | | | | 33,436 | | | 47,670 | |
The following table shows the changes in loans and borrowings during the year:
| | | | | | | | |
| Opening balance at January 1, 2023 | | 78,671 | |
| | |
| Payment of loans | | (20,027) | |
| Interest paid | | (1,954) | |
| Accrued interest | | 4,099 | |
| | |
| Closing balance at June 30, 2023 | | 60,789 | |
(i) Loan agreement with Itaú Unibanco S.A. – Nassau Branch with maturity on May 28, 2025. The principal and accrued interest are paid quarterly.
(ii) Loan agreement with Banco BMG S.A was fully paid on June 19, 2023.
(iii) Loan agreement with Itaú Unibanco S.A with maturity on May 20, 2025, payable in monthly installments.
(iv) Loan agreement with Banco Santander (Brasil) S.A with maturity on December 30, 2024, payable in monthly installments.
(v) Loan agreement with Itaú Unibanco S.A. – Nassau Branch with maturity on February 18, 2026. The principal and accrued interest are paid quarterly.The Group contracted a swap to hedge against foreign exchange rate, converting the financial charges of the loan (3.05% per annum) into an effective annual rate of 16.35%. This loan is secured by a standby letter of credit issued by Itaú Unibanco S.A., as well as receivables from financial investments and derivative financial instruments.
(vi) Loan agreement with Banco Bradesco SA with maturity on March 4, 2026, payable in 48 monthly installments.
Certain loans and borrowings are subject to financial covenants, which have certain performance conditions. Details of the compliance of the Group's financial covenants are set out in note 17.
| | | | | |
| |
| Semantix, Inc. | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements As of June 30, 2023 (In thousands of Brazilian Reais, unless otherwise stated) |
Note 9. Deferred consideration, contingent liabilities and others
The breakdown of deferred consideration, contingent liabilities and others are as follows:
| | | | | | | | | | | | | | |
| | June 30, 2023 | | December 31, 2022 |
| Accounts payable from acquisition of subsidiaries (i) | | 9,558 | | | 29,814 | |
| Contingent liabilities (ii) | | 26,520 | | | 24,667 | |
| Contract liabilities | | 1,523 | | | 1,672 | |
| Contingent consideration (iii) | | 11,148 | | | 3,248 | |
| Other liabilities | | 2,406 | | | 4,514 | |
| | 51,155 | | | 63,915 | |
| | | | |
| Current | | 6,917 | | | 28,341 | |
| Non-current | | 44,238 | | | 35,574 | |
(i) The reduction is primarily related to the payment of R$22,500 related the business combination of Zetta.
(ii) The Group has contingent liabilities related to social security issues resulting from the normal course of the business. The recognized provision reflects the Management’s best estimate of the most likely outcome. The Group understands that the provision recognized is enough to cover the probable losses and Management evaluates and updates the amount on a periodic basis, as needed. There is no contingency classified as possible by the Group.
(iii) Contractual contingent consideration mostly associated to the acquisition of Zetta and Elemeno.
On December 13, 2021, the Municipality of São Paulo Revenue Service issued a tax assessment against us seeking the payment of municipal taxes and fines due on the provision of services (ISS) arising from (i) the alleged underpayment of ISS taxes in the city of São Paulo between January 2016 and February 2017, claiming that our reporting of our headquarters in the city of Cotia, another municipality in the state of São Paulo, was improper and unsubstantiated and (ii) our resale of third-party software licenses between 2016 and 2018. In January 2022, we filed our answer before the administrative court. In August 2022, an unfavorable decision was issued and we appealed to the relevant administrative court in order to revert this decision. As of June 30, 2023, the estimated value involved in this proceeding was R$13,205 million. Based on the advice of both in-house and external counsels, we estimate that the risk of loss in this proceeding is remote in relation to R$3,689 million and possible in relation to R$9,516 million. We do not currently intend to record any provisions or make judicial deposits in respect of such amounts. This decision may be reassessed by us once the related administrative proceeding is concluded, which is currently expected to occur between 2024 and 2026. Any judicial proceedings on this matter would likely require us to make judicial deposits in the amounts involved.
| | | | | |
| |
| Semantix, Inc. | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements As of June 30, 2023 (In thousands of Brazilian Reais, unless otherwise stated) |
Note 10. Derivatives and hedge activities
The Group is exposed to certain risks relating to its ongoing business operations. The primary risks managed using derivatives instruments are foreign currency risk. The Group’s risk management strategy and how it is applied to manage risk. Therefore, the derivative financial instruments are not speculative. See below the composition of the derivative financial instruments portfolio (assets and liabilities) by type of instrument, stated fair value, maturity date and index.
| | | | | | | | | | | | | | | | | | | | |
| Idex | | Maturity | June 30, 2023 | | December 31, 2022 |
| Non-current liabilities | | | | | | |
| Interest rate swaps - cash flow hedges | | | | | | |
| Itaú Unibanco S.A. EUR | EUR/BRL | | May 28, 2025 | 3,541 | | | 2,554 | |
| Itaú Unibanco S.A. USD | USD/BRL | | February 18, 2026 | 2,155 | | | 972 | |
| Derivative warrants liabilities | | | | 7,115 | | | 2,886 | |
| Total non-current derivative financial instrument liabilities | | | | 12,811 | | | 6,412 | |
The following amounts were recognized in profit or loss in relation to derivatives:
| | | | | | | | | | | |
| June 30, 2023 | | June 30, 2022 |
| Loss on derivative financial instruments | (5,164) | | | (1,586) | |
a) Derivative warrant liability
As part of the SPAC merger, each issued and outstanding warrant to purchase Alpha class A ordinary shares was converted into the right to purchase one Semantix ordinary share at an exercise price of $11.50 per share (“Semantix Warrants”), subject to the same terms and conditions existing prior to such conversion. These warrants are considered financial instruments (derivatives) and are recorded at fair value through profit or loss.
Upon the completion of the SPAC merger, there are 18,499,984 Semantix Warrants outstanding, of which 11,499,984 are public warrants (“Public Warrants”) listed on NASDAQ and 7,000,000 are private placement warrants held by certain former Alpha shareholders ("Private Placement Warrants").
Public Warrants
The Public Warrants became exercisable on September 2, 2022 and will expire on the earlier of August 3, 2027 or upon redemption or liquidation, in accordance with their terms. The fair value of the Public Warrants was determined using the market trading price as of June 30, 2023, which was U$S 0.0798 per share.
Private Placement Warrants
The Private Placement Warrants are identical to the Public Warrants in all material respects, except that the Private Placement Warrants, so long as they are held by certain former Alpha shareholders or its permitted transferees:
(i)will not be redeemable by the Company,
(ii)may not, subject to certain limited exceptions, be transferred, assigned or sold by the holders until September 2, 2022,
(iii)may be exercised by the holders on a cashless basis, and
(iv)will be entitled to registration rights.
The fair value of Private Placement Warrants was determined using the market trading price as at June 30, 2023, which was US$ 0.0798 per share. The fair value calculation methodology was determined to be the same as the Public Warrants as both financial instruments have the same material rights and characteristics (i.e., both give the right to purchase one Semantix ordinary share for the same price with the same exercisable period).
| | | | | |
| |
| Semantix, Inc. | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements As of June 30, 2023 (In thousands of Brazilian Reais, unless otherwise stated) |
The Group has recognized the following warrant obligations:
| | | | | | | | | | | | | | | | | |
| Public Warrants | | Private Placement Warrants | | Total |
| Balance at December 31, 2022 | 1,794 | | | 1,092 | | | 2,886 | |
| Change in fair value | 2,628 | | | 1,601 | | | 4,229 | |
| Balance at June 30, 2023 | 4,422 | | | 2,693 | | | 7,115 | |
b) Derivatives designated as hedging instruments
Cash flow hedges - Foreign currency risk
During 2021 and 2022, the Group entered into loans denominated in foreign currency and in order to protect against the risk of change in the foreign exchange rates entered into derivative financial instruments (swap and non-deliverable forward "NDF") with Itau (see note 8) that was elected as hedging instruments.
The cash flow hedge strategies of the Group consist of hedging exposure to variations in cash flows, in interest payment and currency exposure which are attributable to changes in interest rates on recognized and unrecognized assets and liabilities.
The Company formally designates its operations subject to hedge accounting, documenting:
(i) the hedge ratio; (ii) the Company's objective and risk management strategy in adopting the hedge; (iii) identification of the financial instrument; (iv) the object or transaction covered, (v) the nature of the risk to be covered; (vi) the description of the hedging relationship and (vii) the demonstration of the correlation between the hedge and the object of coverage.
The effects of hedge accounting on the financial position and performance of the Group are presented below:
| | | | | | | | | | | | | | | | | | | | |
| | | | | | June 30, 2023 |
| Hedge item | | Hedge instrument |
| Book value | Variation in value recognized in income | | | Variation in the amounts used to calculate hedge ineffectiveness |
| Assets | Liabilities | | Notional value |
| Strategies | | | | | | |
| Interest rate and foreign exchange risk | | | | | | |
| NDF | — | | 16,216 | | 2,794 | | | 29,418 | | (5,696) | |
| Total | — | | 16,216 | | 2,794 | | | 29,418 | | (5,696) | |
As of June 30, 2023, there was no ineffectiveness in relation to the cash flow hedge.
The Group’s hedging reserves relate to the following hedging instruments:
| | | | | |
| Cost of Hedging reserve |
| Change in fair value of hedging instrument recognized in OCI | 2,086 | |
| Closing balance as of June 30, 2023 | 2,086 | |
| |
| |
| | | | | |
| |
| Semantix, Inc. | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements As of June 30, 2023 (In thousands of Brazilian Reais, unless otherwise stated) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | December 31, 2022 |
| Hedge item | | Hedge instrument |
| Book value | Variation in value recognized in income | | | Variation in the amounts used to calculate hedge ineffectiveness |
| Assets | Liabilities | | Notional value |
| Strategies | | | | | | |
| Interest rate and foreign exchange risk | | | | | | |
| NDF | — | | 21,010 | | 1,507 | | | 27,188 | | (2,831) | |
| Total | — | | 21,010 | | 1,507 | | | 27,188 | | (2,831) | |
As of December 31, 2022, there was no ineffectiveness in relation to the cash flow hedge
The Group’s hedging reserves relate to the following hedging instruments:
| | | | | |
| Cost of Hedging reserve |
| Change in fair value of hedging instrument recognized in OCI | 3,341 | |
| Closing balance as of Closing balance as of December 31, 2022 | 3,341 | |
Note 11. Equity
a) Share capital and additional paid in capital
The Company is incorporated with limited liability in the Cayman Islands. The Company’s affairs are governed by Articles and the Companies Act.
On August 3, 2022, Semantix and Alpha consummated a capital reorganization transaction (referred to as the “SPAC merger”), pursuant to which (i) Semantix Tecnologia became a wholly owned, indirect subsidiary of Semantix, (ii) Semantix Tecnologia’s shareholders became shareholders of Semantix at a pre-determined exchange ratio of 1 : 37.747 (the "Exchange Ratio"), and (iii) Alpha’s shareholders became shareholders of Semantix in exchange for the net assets of Alpha. The net assets of Alpha primarily consisted of cash and marketable securities held in a trust account and certain public and private warrants. The SPAC merger was approved at an extraordinary general meeting of Semantix Tecnologia and Alpha’s shareholders on August 2, 2022.
The authorized share capital is US$287,500 consisting of 287,500,000 Ordinary Shares, par value US$0.001 per Ordinary Share. As of June 30, 2023, there were 80,521,096 Ordinary shares issued and 78,642,791 outstanding.
b) Capital reserve and stock repurchase plan
The Group operates equity-settled stock option plan that are designed to provide long-term incentives for selected directors and employees to deliver long-term shareholder returns. Refer to note 12 for more details.
On November 22, 2022, the Board of Directors approved a Stock Repurchase Plan. Under the plan, Semantix, Inc. may repurchase up to US$5 million of ordinary shares of the Company over period of one year. On March 29, 2023, the Board of Directors has authorized an increase in the Company’s existing stock repurchase plan approved by the Board in November 2022 from up to US$5 million to a total of up to US$10 million.
As of June 30, 2023, the Company held 1,878,305 shares in treasury. The Company paid a total amount of R$34,633 for the period ended June 30, 2023 in repurchase shares.
As of June 30, 2023, the company transferred 87,009 shares related to the exercise of the Stock Option Plan options in the total amount of US$ 298 (equivalent to R$ 1,480), which were transferred at an average price of US$ 3.43 per share .
| | | | | |
| |
| Semantix, Inc. | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements As of June 30, 2023 (In thousands of Brazilian Reais, unless otherwise stated) |
c) Other comprehensive income
Other comprehensive income is comprised of changes in the fair value of financial derivatives assets and financial derivatives liabilities at fair value through other comprehensive income, while these financial derivatives are not realized. Also includes gains (losses) on foreign exchange variation of investees located abroad.
Note 12. Share-based plan
a) Share-based plan
During 2021, the Board of Directors approved the “Option Plan” that provides share-based compensation to selected directors and employees as an equity-settled stock-option plan. The plan includes options to 45,000 preferred shares from the Company. During the six-month period ended on June 30, 2023, the Group have no granted of options related to the stock option plan establish before the corporate reorganization.
On August 3, 2022 the establishment of the long-term incentive plan was approved by the Board of Director’ the first grant of RSUs (restricted unit shares) and stock options. RSUs are awarded at no cost to the recipient upon their grant. Stock options have generally been granted with an exercise price equal to the value defined by the Board of Director’s on the grant date.
Under the plan, participants are granted options which only vest if certain performance standards are met. Participation in the plan is at the board’s discretion, and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits.
On May 23, 2022 the first grant of RSU and stock option were made. Both stock options and Restricted Stock Units instruments (“RSUs”) are exercisable as long as the director or employee fulfills the worked periods after the options are granted.
b) Fair value of shares granted
Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model and underlying assumptions, which depends on the terms and conditions of the grant and the information available at the grant date. The fair value of the stock options granted was calculated based on the Binomial Pricing Model considering the average contract term. The model inputs for options included:
•Strike Price - Average price weighted by the quantity granted;
•Target Asset Price - The trading price closest to the granting date;
•Risk-Free Interest Rate - US Treasury interest rate, according to the contractual term;
•Volatility - According to comparable peer entities listed on the stock exchange.
c) Outstanding shares granted and valuation inputs
| | | | | |
| |
| Semantix, Inc. | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements As of June 30, 2023 (In thousands of Brazilian Reais, unless otherwise stated) |
As of June 30, 2023, the outstanding number of Company reserved under the plan were 691,880 shares including 339,590 RSUs.
The average grant-date fair value of RSU shares was US$ 3,79 respectively.
Set out below are summaries of options granted under the plans:
| | | | | | | | |
| Number of Options
(in thousands) | Weighted average
exercise price |
| At December 31, 2021 | 25 | | 93.26 | |
| Forfeit during the period | (10) | | 186.92 | |
| Exercised during the period | (5) | | 54.56 | |
| At June 30, 2022 | 10 | | 25.19 | |
| | |
| At December 31, 2022 | 10 | | 25.19 | |
| Granted during the period (i) | 340 | | 3.41 | |
| Forfeit during the period (ii) | (31) | | 66.00 | |
| Exercised during the period (iii) | (88) | | 6.00 | |
| At June 30, 2023 | 231 | | 4.90 | |
(i) This represents options held by participants who left the Group and did not exercise the options already vested, and with no future right to exercise.
(II) Exercise of vested options by participants in the Stock Option Plan, in accordance with the Plan’s predetermined rules. For the six-month period ended June 30, 2022, the Group received R$511 regarding the exercise of 88.091 options.
As of June 30, 2023 there were 691,880 options granted of which 382,974 options were vested and 362,905 options were unvested.
As of June 30, 2023, there was R$5,570 (June 30, 2022 - R$ 3,584), of remaining unrecognized compensation cost related to unvested stock options to the Group’s employees. This cost will be recognized over an estimated remaining graded period of 3 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.
For the period ended June 30, 2022,the total compensation expense of both plans were R$ 1,732, with its corresponding entry to shareholders’ equity.
| | | | | |
| |
| Semantix, Inc. | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements As of June 30, 2023 (In thousands of Brazilian Reais, unless otherwise stated) |
Note 13. Revenues
a)Disaggregation of revenue from contracts with customers
The Group revenue derives mostly from the resale of third-party software, proprietary software as a services and AI & data analytics services rendered. Disaggregation of revenue by major product lines are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three-month periods ended June 30, | | For the six-month periods ended June 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
| Third-party software | | 26,867 | | | 28,888 | | | 50,470 | | | 52,246 | |
| Deductions on third-party software | | (3,151) | | | (2,996) | | | (5,344) | | | (4,943) | |
| Revenue from Third-party software | | 23,716 | | | 25,892 | | | 45,126 | | | 47,303 | |
| | | | | | | | |
| AI & data analytics services | | 9,393 | | | 10,524 | | | 17,831 | | | 19,076 | |
| Deductions on AI & data analytics services | | (631) | | | (690) | | | (1,194) | | | (1,250) | |
| Revenue from AI & data analytics services | | 8,762 | | | 9,834 | | | 16,637 | | | 17,826 | |
| | | | | | | | |
| Proprietary software as a service (SaaS) | | 16,356 | | | 11,108 | | | 27,500 | | | 21,839 | |
| Deductions on proprietary software as a service (SaaS) | | (1,143) | | | (726) | | | (1,893) | | | (1,429) | |
| Revenue from proprietary software as a service (SaaS) | | 15,213 | | | 10,382 | | | 25,607 | | | 20,410 | |
| | | | | | | | |
| Other revenue | | 312 | | | — | | | 312 | | | 3 | |
| Other revenue | | 312 | | | — | | | 312 | | | 3 | |
| Total revenue | | 48,003 | | | 46,108 | | | 87,682 | | | 85,542 | |
b)Contract assets and deferred revenue related to contracts with customers
The Group has recognized the following contract assets and deferred revenue related to contracts with customers:
| | | | | | | | | | | | | | |
| | Six month periods ended June 30 |
| | 2023 | | 2022 |
| Current contract assets relating to third-party software (Note 5) | | 94,256 | | | 12,835 | |
| Total contract assets | | 94,256 | | | 12,835 | |
| | | | |
| Contract liabilities relating to SaaS (Note 9) | | 1,523 | | | 1,317 | |
| Total contract liabilities | | 1,523 | | | 1,317 | |
c)Disaggregation by geographic location
(i)Segment revenue by region
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three-month periods ended June 30, | | For the six-month periods ended June 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
| Brazil | | 45,307 | | | 41,898 | | | 79,770 | | | 73,859 | |
| Latin America (other than Brazil) | | 2,444 | | | 4,187 | | | 7,539 | | | 11,660 | |
| United States of America | | 252 | | | 23 | | | 373 | | | 23 | |
| Total | | 48,003 | | | 46,108 | | | 87,682 | | | 85,542 | |
For the year ended June 30, 2023, 53%of the revenue is represented by six of our major clients (five clients represents 35% of the Group's revenue the year ended June 30, 2022).
| | | | | |
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| Semantix, Inc. | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements As of June 30, 2023 (In thousands of Brazilian Reais, unless otherwise stated) |
(ii)Segment non-current assets by region
From the total of non-current assets other than financial instruments and deferred tax assets, 100% is in Brazil as of June 30, 2023 (December 31, 2022- 100% at Brazil).
Note 14. Costs and expenses by nature
The operating costs and expenses by nature incurred as of June 30, 2023 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three-month periods ended June 30, | | For the six-month periods ended June 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
| Personnel | | 29,603 | | | 35,157 | | | 66,182 | | | 66,414 | |
| IT and hosting expenses | | 5,700 | | | 1,798 | | | 12,240 | | | 4,661 | |
| Transaction Expense (iii) | | — | | | 9,645 | | | — | | | 31,408 | |
| Outsourced services | | 7,074 | | | 4,046 | | | 11,806 | | | 8,351 | |
| Traveling | | 1,071 | | | 598 | | | 4,536 | | | 981 | |
| Depreciation and amortization | | 8,195 | | | 3,760 | | | 16,165 | | | 7,471 | |
| Facilities | | 5,816 | | | 136 | | | 11,032 | | | 1,864 | |
| Expected credit losses | | 6,406 | | | 151 | | | 7,461 | | | 484 | |
| Accounts receivable write-off | | (11) | | | (66) | | | 227 | | | 289 | |
| Cost of third party licenses sold | | 19,707 | | | 22,210 | | | 36,571 | | | 41,703 | |
| Tax expenses | | 1,306 | | | 435 | | | 2,182 | | | 1,162 | |
| Onerous contract reversion (i) | | — | | | 697 | | | — | | | (477) | |
| Write-off of creditor invoice (ii) | | — | | | (1) | | | — | | | (4,301) | |
| Other | | 2,168 | | | 1,096 | | | 4,578 | | | 2,676 | |
| Total | | 87,035 | | | 79,662 | | | 172,980 | | | 162,686 | |
| | | | | | | | |
| (-) Cost of services provided | | 5,639 | | | 8,072 | | | 11,580 | | | 15,305 | |
| (-) Cost of sales of goods | | 19,707 | | | 22,995 | | | 36,571 | | | 42,488 | |
| (-) Sales and marketing expenses | | 12,952 | | | 15,578 | | | 27,204 | | | 24,830 | |
| (-) General and administrative expenses | | 40,111 | | | 19,730 | | | 76,303 | | | 59,498 | |
| (-) Research and development | | 8,626 | | | 13,287 | | | 21,322 | | | 20,565 | |
| Total | | 87,035 | | | 79,662 | | | 172,980 | | | 162,686 | |
(i) Refers to one onerous contract recognized in May 2021 that was reverted in 2022.
(ii) In 2022, the Group concluded negotiation with one of its suppliers which resulted in the forgiveness of the amount owed of approximately $800 thousand, corresponding to R$4,300.
(iii) This represents expense related to the SPAC merger non-capitalized as of June 30, 2022
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| Semantix, Inc. | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements As of June 30, 2023 (In thousands of Brazilian Reais, unless otherwise stated) |
Note 15. Financial income and expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three-month periods ended June 30, | | For the six-month periods ended June 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
| Interest income from financial assets | | 6,163 | | | 1,912 | | | 14,918 | | | 3,243 | |
| Foreign exchange gains | | 3,298 | | | 423 | | | 4,904 | | | 3,387 | |
| Other financial income | | 26 | | | — | | | 28 | | | — | |
| Total financial income | | 9,487 | | | 2,335 | | | 19,850 | | | 6,630 | |
| | | | | | | | |
| Foreign exchange losses | | (3,710) | | | (964) | | | (5,105) | | | (1,103) | |
| Income (Losses) from fair value of derivative financial instruments | | 3,574 | | | (1,586) | | | (5,164) | | | (1,586) | |
| Interest on loans | | (1,396) | | | (9,575) | | | (4,099) | | | (14,832) | |
| Interest on leases | | (51) | | | (72) | | | (113) | | | (148) | |
| Currency adjustment | | (316) | | | (391) | | | (628) | | | (542) | |
| Tax and contributions on financial expenses | | (1,088) | | | (255) | | | (1,803) | | | (407) | |
| Other financial expenses | | (717) | | | 128 | | | (1,252) | | | (590) | |
| Total financial expenses | | (3,704) | | | (12,715) | | | (18,164) | | | (19,208) | |
| | | | | | | | |
| Financial result, net | | 5,783 | | | (10,380) | | | 1,686 | | | (12,578) | |
Note 16. Related parties
Balances and transactions between the Group and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
There were no reportable transactions between related parties in the Group and members of the key management personnel and their close family members during the six-month period ended on June 30, 2023.
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| Semantix, Inc. | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements As of June 30, 2023 (In thousands of Brazilian Reais, unless otherwise stated) |
Note 17. Financial instruments by categories
a)Classification of financial instruments
The classification of financial instruments measured at amortized cost is presented in the following table:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2023 | | December 31, 2022 |
| | Measured at amortized cost | | Measured at amortized cost |
| | Financial Assets | | Receivables and other | | Financial Liabilities | | Financial Assets | | Receivables and other | | Financial Liabilities |
| Assets | | | | | | | | | | | | |
| Financial investments | | 151,223 | | | — | | | — | | | 338,020 | | | — | | | — | |
| Trade receivables, contract assets and other, net | | — | | | 54,661 | | | — | | | — | | | 43,675 | | | — | |
| | | | | | | | | | | | |
| Liabilities | | | | | | | | | | | | |
| Suppliers | | — | | | — | | | 44,131 | | | — | | | — | | | 74,621 | |
| Deferred consideration, contingent liabilities and others | | — | | | — | | | 45,559 | | | — | | | — | | | 63,915 | |
| Lease liabilities | | — | | | — | | | 1,906 | | | — | | | — | | | 2,433 | |
| Loans and borrowings | | — | | | — | | | 60,789 | | | — | | | — | | | 78,671 | |
| | | | | | | | | | | | |
| Total | | 151,223 | | | 54,661 | | | 152,385 | | | 338,020 | | | 43,675 | | | 219,640 | |
On June 30, 2023 financial investments, accounts receivable, trade payables and leasing liabilities, the fair value is close to the amortized cost value, therefore we consider the same value.
Using the discounted cash flow method, the fair value for loans and borrowings is R$ 42,338 in June 30, 2023. The discount average rate used was 2.67% per month. The calculation of discount rates was determined from loan agreements for June 30, 2023 in order to represent a reflection of the market as of the balance sheet date.
Fair value hierarchy
Financial instruments are classified at fair value through profit or loss, when this classification significantly reduces a possible measurement or recognition inconsistency (sometimes referred to as “accounting mismatch”) that would occur due to the measurement of assets or liabilities or the recognition of their gains and losses on different bases. Gains/losses on financial instruments that are measured at fair value through profit or loss are recognized as financial income or expense in the profit or loss for the period.
The Group measures financial instruments such as certain financial liabilities and derivatives at fair value at each balance sheet date.
Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and equity securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Group is the current bid price, these instruments are included in level 1.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable,the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3
Specific valuation techniques used to value financial instruments include:
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| Semantix, Inc. | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements As of June 30, 2023 (In thousands of Brazilian Reais, unless otherwise stated) |
• Swap: These operations swap cash flow based on the comparison of profitability between two indexers. Thus, the agent assumes both positions – put in one indexer and call on another.
• Derivatives warrants liabilities: the warrant liabilities issued by Semantix, as part of the capital reorganization, contain features that qualify as embedded derivatives. The fair value of Public Warrants and Private Warrants have been measured based on the listed market price of such warrants.
• Contingent consideration: Fair value of the contingent consideration liability related to acquisitions is estimated by applying the income approach and discounting the expected future payments to selling shareholders under the terms of the purchase and sale agreements.
All of the resulting fair value estimates are included in level 2, where the fair values have been determined based on present values and the discount rates used were adjusted for counterparty or own credit risk.
Below are the Group financial assets and liabilities by level within the fair value hierarchy. The Group assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels:
| | | | | | | | | | | | | | | | | | | | |
| | Fair value as of June 30, 2023 |
| Financial Liabilities | | Level 1 | | Level 2 | | Level 3 |
| | | | | | |
| Derivative warrants liabilities | | 7,115 | | | — | | | — | |
| Contingent consideration from acquisition | | — | | | — | | | 5,596 | |
| Derivatives instruments | | — | | | 5,427 | | | — | |
| | | | | | |
| | Fair values as of December 31, 2022 |
| Financial Liabilities | | Level 1 | | Level 2 | | Level 3 |
| Derivative warrants liabilities | | 2,886 | | | — | | | — | |
| Contingent consideration from acquisition | | — | | | — | | | 3,248 | |
| Derivatives instruments | | — | | | 3,526 | | | — | |
As of June 30, 2023 the total contingent consideration liability is reported at fair value and is dependent on the profitability of the acquired businesses. The total contingent consideration is classified within Level 3 of the fair value hierarchy. The contingent consideration liability represents the maximum amount payable under the purchase and sale agreements discounted using a weighted average rate of 13.75% p.a. Change in the discount rate by 100 bps would increase/decrease the fair value by 769. The change in the fair value in the contingent consideration between the acquisition date and June 30, 2023 was not material.
There were no transfers between levels 1 and 2 for recurring fair value measurements during the periods presented.
Transfers into and out of fair value hierarchy levels are analyzed at the end of each annual consolidated financial statement. As of June 30, 2023, the Group had no transfers between Level 2 and Level 3.
The Group’s policy is to recognize transfers into and out of fair value hierarchy levels as at the end of the reporting period.
b)Financial risk management
Financial risk factors
The Group's activities expose it to various financial risks: market risk (including foreign exchange risk), credit risk and liquidity risk. The Group's global risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on financial performance.
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| Semantix, Inc. | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements As of June 30, 2023 (In thousands of Brazilian Reais, unless otherwise stated) |
Risk management is carried out by the financial board, according to the policies approved by the Board of Directors. The financial board identifies, evaluates and protects the Group against any financial risks. The board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, the use of derivative and non-derivative financial instruments, and investment of excess liquidity.
c)Capital management
The policy of the Group is to maintain a strong capital base to secure investor, creditor, and market confidence also to sustain future development of the business. Management monitors the return on capital, as well as the dividend yield to ordinary shareholders.
In addition, the Group objectives to manage capital are to safeguard its ability to continue as a going concern to provide returns for shareholders and benefits for other stakeholders, to maintain an optimal capital structure to reduce the cost of capital, and to have resources available for optimistic opportunities.
In order to maintain or adjust the capital structure of the Group, management can make, or propose to the shareholders under their approval, adjustments to the amount of dividends paid or return capital to shareholders, to shareholders and issue new shares or sell assets.
The Group monitors capital based on the net cash / net debt.The Group’s strategy is to keep a positive net cash.
Financial covenants
On June 30, 2023, the loans and borrowings under financial covenants amount is R$ 28,791 (December 31, 2022—R$37,494). The Group has complied with these financial covenants as of June 30, 2023 and December 31, 2022, see note 8.
Eventual failure of the Group to comply with such covenants may be considered as breach of contract and, as a result, considered for early settlement of related obligations. We measure compliance with our financial covenants on an annual basis considering our performance and financial position as of December 31 of each year.
Note 18. Losses per share
Basic losses per share is calculated by dividing profit attributable to Company shareholders by the weighted average number of common shares available during the fiscal year. Diluted losses per share is calculated by adjusting the weighted average number of common shares, presuming the conversion of all the potential diluted common shares.
Since the Group reported a loss for the six months period ended in June 30, 2023 and 2022, the number of shares used to calculate diluted loss per share of common shares attributable to common shareholders is the same as the number of shares used to calculate basic loss per share of common shares attributable to common shareholders for the period presented because the potentially dilutive shares would have been antidilutive if included in the calculation.For the period included in these unaudited interim financial statements, the Group was loss making; therefore, anti-dilutive stock options and warrants are excluded from the diluted EPS calculation.
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| Semantix, Inc. | |
Notes to Unaudited Interim Condensed Consolidated Financial Statements As of June 30, 2023 (In thousands of Brazilian Reais, unless otherwise stated) |
The tables below show data of income and shares used in calculating basic and diluted earnings per share attributable to the ordinary equity holders of the Company:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three-month periods ended June 30, | | For the six-month periods ended June 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
| Loss for the period | | (35,731) | | | (42,363) | | | (83,355) | | | (86,187) | |
| Weighted average number of common outstanding shares¹ | | 78,706 | | | 62,000 | | | 79,324 | | | 62,000 | |
| Basic and diluted losses per share (R$) | | (0.45) | | | (0.68) | | | (1.05) | | | (1.39) | |
1. Share data have been revised to give effect to the share split as explained in note 11 equity
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