ATTO Atento SA

NEW YORK, May 7, 2020 /PRNewswire/ -- Atento S.A. (NYSE: ATTO) ("Atento" or the "Company"), the largest provider of customer-relationship management and business-process outsourcing services in Latin America, and among the top five providers globally, today announced its first-quarter operating and financial results for the period ending March 31, 2020. All comparisons in this announcement are year-over-year (YoY) and in constant-currency (CCY), unless noted otherwise, and may differ from the corresponding 6-K filing due to certain intra-group eliminations.

Q1 2020 highlights

Message from the CEO and CFO

Carlos López-Abadia, Atento's Chief Executive Officer, commented, "Atento responded early to the COVID-19 crisis, rapidly implementing measures to protect our employees, reinforcing our balance sheet, and ensuring that we continue to effectively deliver services, some of which are mission-critical, across our markets. I would like to thank each and every person on our teams for their commitment during this challenging period.

Our first quarter results were largely ahead of plan, as our transformation plan gained additional traction that further improved revenue mix, profitability and cash flow. While the economic effects of the crisis are impacting volumes and utilization rates, resulting market dynamics are creating opportunities with respect to the higher-growth in multisector customers, such as born-digital and tech.

We have also been able to continue building out our portfolio of next-generation services, such as digital, high-value voice, integrated multichannel and back office, which many companies continue purchasing as they seek to reduce costs in this difficult economic environment. In addition to safeguarding business continuity, our transition to a work-at-home model is providing access to a wider pool of talent, helping reduce absenteeism and turnover, as well as increase scale advantages and operating leverage. We expect, therefore, to emerge from the crisis far stronger than many of our competitors, near and far, enabling us to secure more profitable business opportunities and capture greater market share."

José Azevedo, Atento's Chief Financial Officer said, "Owing to significantly improved working capital policies, enhanced cash management, as well as stronger cost controls, we improved our first-quarter operating cash flow, helping increase our cash position in combination with drawdowns from Atento's credit facilities, to navigate the pandemic crisis.

Although we have been able to further accelerate our transformation initiatives, the bulk of related investments are now behind us and we are being cautious and prudent in this complex business environment, postponing non-essential capital expenditures, further reducing indirect costs, and protecting hard-earned margin gains. And while we have largely completed the process of discontinuing unprofitable client programs, we will continually review remaining programs and make any necessary adjustments.

Looking ahead, we believe we will be able to continue effectively executing our Three Horizon Plan, through new growth avenues, next generation services and digital acceleration, as well as operational improvements and financial discipline."

Institutional Investors to Acquire Bain Capital's Equity Stake in Atento

On May 7, the Company announced arrangements to facilitate HPS Investment Partners, GIC and an investment fund affiliated with Farallon Capital Management's acquisition of shares of the Company currently held indirectly by Bain Capital in exchange for notes currently held by them.

The transaction is subject to regulatory conditions, including anti-trust approvals in Brazil and Mexico. Following the transaction, Atento expects that HPS will hold approximately 25%, GIC 22% and Farallon 15% of the shares in the Company. The institutional investors will invest independently in Atento and will be able to propose candidates to be nominated to the Company's Board of Directors, subject to shareholder approval. HPS will have the right to propose two directors, while GIC and Farallon will each have the right to propose one director.

Each of HPS, GIC and Farallon have also agreed to certain transfer restrictions with regards to their Atento shares for a period of 24 months from the date of completion of the transaction. The arrangements with these investors are intended to ensure that there are no impacts on Atento's day-to-day business operations.

Summarized Financials

First Quarter Consolidated Operating Results

The first quarter of 2020 registered significant improvements in growth and quality coupled with higher margins, as a result of continued diversification of Atento's client portfolio mix toward faster growing verticals and away from low-margin businesses, benefiting overall profitability. 

Multisector remains the core growth engine of the Company, with sales in this segment increasing 8.4% across all regions to 67.5% of total revenue, up 510 bps compared to Q1 2019.

In Brazil, Multisector revenues increased 3.6%, mainly among born-digital clients and as a result of the pipeline acquired throughout 2019. In the Americas, higher volumes in the financials vertical, combined with the pipeline acquired last year among mostly tech and born-digital companies, also drove the 8.4% increase in Atento's Multisector revenues, particularly in Mexico and Colombia. In EMEA, Multisector growth was driven by the pipeline acquired in 2H 2019, leading to a mix 840 bps higher than Q1 2019.

Telefónica revenues decreased 19.9%, mainly reflecting the discontinuation of lower margin programs in 2H 2019 in Brazil and lower volumes in EMEA.

Reported EBITDA increased 10.1% YoY to $40.8 million, with EBITDA Margin at 10.9%, a 120 bps improvement versus Q1 2019, fueled by Brazil and the Americas and extending a positive EBITDA trend as a result of (i) customer and service mix moving to more profitable verticals and services; (ii) operational improvement initiatives gaining additional traction; and (iii) exiting low-margin business.

Segment Reporting

Brazil

In Brazil, Atento's flagship operation, first quarter Multisector revenue increased 3.6%, accounting for 76.3% of Brazilian revenues in the quarter, a 580 bps expansion year-over-year, mainly with born-digital clients and as a result of the pipeline acquired throughout 2019.

The decision to discontinue unprofitable programs in 2H 2019, which has also contributed to improved margins, led to a 30.2% decrease in Telefónica revenues during the quarter.

Reported EBITDA totaled $24.4 million, 4.5% higher than first quarter 2019, reflecting the improved revenue mix. The corresponding margin expanded 150 bps to 14.2%, driven by a 130 bps positive impact from discontinuing lower margin programs.

Americas Region

First quarter revenue in the Americas region grew 1.1% year-over-year to $147.4 million, mainly driven by higher volumes in tech and born-digital companies, combined with the pipeline acquired in 2019. Volumes were particularly strong in Mexico and Colombia, leading to an 8.4% increase in Multisector sales, up 360 bps to 65.1% of total revenue. TEF revenues declined 10.3%, mainly due to lower volumes in Peru.

EBITDA in the first quarter totaled $13.7 million, up 1.3%, with a corresponding margin of 9.3%, 60 bps higher than last year's comparable quarter. Most countries in the region reported higher profitability stemming from an improved service mix and better margins associated with tech and born-digital verticals, among others.

EMEA Region

Multisector sales grew 16.5% during the first quarter, driven by a pipeline of clients acquired during 2H 2019. Multisector sales represented 48.1% of total revenue, 840 bps higher when compared to Q1 2019.

TEF revenues decreases 18.5%, due to lower volumes, which led to a decrease of 4.8% in total revenues.

EMEA's reported EBITDA totaled $3.7 million in the first quarter, down 39.2% year-over-year. The corresponding margin was 6.5%, 360 bps lower versus Q1 2019 as a result of decreased TEF volumes, partially offset by a margin recovery associated with Multisector customers and stricter control of indirect costs.

Cash Flow

Operational improvements under the transformation plan, along with enhanced contract and working capital management policies, led to a significant improvement in working capital during the first quarter, with net cash flow generated from operating activities totaling $4.4 million , compared to an outflow of $39.8 during the prior year's comparable period. Among the improvements in working capital was a reduction in days sales outstanding (DSO) resulting from a stricter collection that led to one-off overdue collection, which were highlighted during Atento's fourth quarter earnings conference call.

Cash capex was 3.0% of first quarter revenue, compared to 3.8% in Q1 2019, and still reflects the supplier payments carry-over related to projects executed in the 2H 2019, per the Company's Q4 2019 financial results materials. Due to risks associated with the COVID-19 pandemic, the company is postponing, for the foreseeable future, all non-essential capex.

Capital Structure

At March 31, 2020, cash and cash equivalents totaled $162.8 million, which included a drawdown of approximately $77 million from available revolving credit lines. Additionally, on April 6, 2020, Atento paid down a daily revolver line of $8.6 million, as part of a negotiation to increase the credit line to $21.7 million for a 12-month period, which was subsequently drawn upon on April 9^th, bolstering the Company's cash position and financial flexibility.

Net debt was $564.3 million at the end of the first quarter, which included an additive effect of $141.3 related to IFRS16. Atento's total debt with third parties has an average maturity of 2.1 years and an average LTM cost of 7.0% per annum. At the end of the first quarter, reported net debt-to-EBITDA was 3.7x, compared to 3.9x in Q4 2019. Approximately $502 million, or 85.5% of the Company's debt with third parties, will mature in August 2022.

Update On COVID-19 Response: Executing on Immediate Plan and Preparing the Company for the Post-crisis

As a socially responsible company, Atento is fully committed to helping ensure that many essential services remain available to citizens around the world through remote and secure customer services. This commitment includes the implementation of a robust plan to protect the health and safety of Atento employees and to ensure business continuity, in response to the COVID-19 pandemic. The national governments of many of the countries in which the company operates have designated Atento's services as essential, three of which are using the Company's services to facilitate information management and delivery during the pandemic.

Currently, Atento has over 60,000 work-at-home agents (WAHA), or approximately 55% of the Company's call center employees. For agents still working at Atento facilities, distances between workstations have been increased and personal work equipment (individual headset, keyboard, mouse, etc.) made available. The implementation of strict health and safety measures in all operations has allowed Atento to keep almost all of its work sites open, which gives the Company broad capacity to meet the needs of all clients. The transition to Telework by Atento employees has been facilitated by the digital transformation process underway since last year, which has included re-skilling and digital recruiting, among other forms of employee development that are being strengthened under the Company's transformation plan.

While limited on-site capacity in most countries has been partially offset by expanding WAHA operations, slowing economies across markets have resulted in lower volumes. On the other hand, relevant changes in market dynamics are taking place and are expected to create medium- and long-term opportunities. Accordingly, management is adjusting certain elements of the Three Horizon Plan to effectively capture these emerging market opportunities and enable Atento to emerge from the COVID-19 crisis as a stronger company. With regard to pursuing new growth avenues within the CRM-BPO market, greater emphasis is being placed on global accounts, while continuing to attract born-digital and other Multisector clients and expanding in the US market. With respect to expanding Atento's portfolio of next-generation services and accelerating the development of related digital capabilities, WAHA is a new key capability that will hasten and facilitate the transformation of the Company's services portfolio. Additionally, as initiatives under the operational excellence plan continue to be implemented, improving financial and cost controls as well the performance of client programs will play an even greater role in Atento leading Next Generation Customer Experience in its markets.

Share Repurchase Program

On February 26, 2020, Atento's Board of Directors approved a new share buyback program, following approval at the Ordinary General Meeting of Shareholders on February 4, 2020. Under the program, the Company is authorized to repurchase up to $30 million of Atento shares for a period of 12 months, beginning March 10, 2020. The Company did not repurchase shares during the first quarter.

Conference Call

The Company will host a conference call and webcast on Friday, May 8, 2020 at 10:00 am ET to discuss its financial results. The conference call can be accessed by dialing: +1 (877) 407-3982 toll free domestic, UK: (+44) 0 800 756 3429 toll free, Brazil: (+55) 0800 891 6221 toll free, or Spain: (+34) 900 834 236 toll free. All other international callers can access the conference call by dialing: +1 (201) 493-6780 toll free. No passcode is required. Individuals who dial in will be asked to identify themselves and their affiliations. The live webcast of the conference call will be available on Atento's Investor Relations website at investors.atento.com. A web-based archive of the conference call will also be available at the website.

About Atento

Atento is the largest provider of customer relationship management and business process outsourcing (CRM BPO) solutions in Latin America, and among the top five providers globally, based on revenues. Atento is also a leading provider of nearshoring CRM/BPO services to companies that carry out their activities in the United States. Since 1999, the company has developed its business model in 13 countries where it employs 150,000 people. Atento has over 400 clients to whom it offers a wide range of CRM/BPO services through multiple channels. Atento's clients are mostly leading multinational corporations in sectors such as telecommunications, banking and financial services, health, retail and public administrations, in addition to born-digital ones, among others. Atento´s shares trade under the symbol ATTO on the New York Stock Exchange (NYSE).  In 2019, Atento was named one of the World's 25 Best Multinational Workplaces and one of the Best Multinationals to Work for in Latin America by Great Place to Work®. For more information visit www.atento.com.

Forward-Looking Statements

This press release contains forward-looking statements. Forward-looking statements can be identified by the use of words such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "intends," "continue" or similar terminology. These statements reflect only Atento's current expectations and are not guarantees of future performance or results. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the potential impacts of the COVID-19 pandemic on our business operations, financial results and financial position and on the world economy. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. These risks and uncertainties include, but are not limited to, competition in Atento's highly competitive industries; increases in the cost of voice and data services or significant interruptions in these services; Atento's ability to keep pace with its clients' needs for rapid technological change and systems availability; the continued deployment and adoption of emerging technologies; the loss, financial difficulties or bankruptcy of any key clients; the effects of global economic trends on the businesses of Atento's clients; the non-exclusive nature of Atento's client contracts and the absence of revenue commitments; security and privacy breaches of the systems Atento uses to protect personal data; the cost of pending and future litigation; the cost of defending Atento against intellectual property infringement claims; extensive regulation affecting many of Atento's businesses; Atento's ability to protect its proprietary information or technology; service interruptions to Atento's data and operation centers; Atento's ability to retain key personnel and attract a sufficient number of qualified employees; increases in labor costs and turnover rates; the political, economic and other conditions in the countries where Atento operates; changes in foreign exchange rates; Atento's ability to complete future acquisitions and integrate or achieve the objectives of its recent and future acquisitions; future impairments of our substantial goodwill, intangible assets, or other long-lived assets; and Atento's ability to recover consumer receivables on behalf of its clients. In addition, Atento is subject to risks related to its level of indebtedness. Such risks include Atento's ability to generate sufficient cash to service its indebtedness and fund its other liquidity needs; Atento's ability to comply with covenants contained in its debt instruments; the ability to obtain additional financing; the incurrence of significant additional indebtedness by Atento and its subsidiaries; and the ability of Atento's lenders to fulfill their lending commitments. Atento is also subject to other risk factors described in documents filed by the company with the United States Securities and Exchange Commission. 

These forward-looking statements speak only as of the date on which the statements were made. Atento undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

SELECTED FINANCIAL DATA:

The following selected financial information should be read in conjunction with the interim consolidated financial statements presented elsewhere in the Form 6-K.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE Atento S.A.