ATTO Atento SA

Segment Reporting

Brazil

Notes:

Revenue in Brazil, Atento’s flagship operation, increased 5.5% during the quarter to $156.9 million, fueled by a 13.0% multisector growth. This growth reflects the company’s focus on continuing to sell Next Generation Services and further penetrating fast-growing verticals such as born-digital, tech and media. FY 2020 revenues from Multisector grew 3.4%, reaching 78.0% of Brazil’s 2020 total revenue versus 72.6% in the prior year. Revenues from Telefónica decreased 15.4% in Q4 2020, still reflecting the discontinuation of unprofitable programs that were phased out throughout Q4 2019. It is important to highlight that we have been gaining new contracts with Telefónica in Brazil in the first months of the year and expect this to be reflected in 1H21 revenues.

The better revenue mix combined with higher efficiencies boosted EBITDA by 26.6% versus Q4 2019, with EBITDA margin expanding 310 basis points to 18.4%. On FY 2020, EBITDA Margin was flat, reflecting the impact of the pandemic mainly in Q2 2020.

In the Americas, revenue recorded a slight increase of 0.6% YoY to $156.1 million, with Multisector sales increasing 4.8% YoY, driven mainly by the 43% expansion of US revenues and by over 60% increase on the US Nearshore countries. Telefónica revenues decreased 7.2% YoY, mainly in Peru where the lockdown effects were more severe in this country.

FY 2020 revenue decreased 1.4%, as a 13.0% decrease in TEF revenue more than offset a 5.7% increase in Multisector sales during the year. The decline in the former category was due the pandemic’s impact in the second quarter of the year, mainly in Peru. As a percentage of Americas 2020 revenue, Multisector revenue was 66.3% versus 63.2% in the previous year, a 310 basis point increase.

The region’s Adjusted EBITDA was $23.0 million, with the corresponding margin at a solid 14.7%. For the year, Adjusted EBITDA increased 35.2% to $66.8 million, with the margin expanding 660 basis points to 11.5%, due to an improved revenue mix, higher efficiencies and a low comparison base due to the $30.9 million impact from the Argentina Impairment on Q4 2019.

In EMEA, an 11.7% increase in Multisector sales, driven by telco, utilities and public services, coupled with a 2.5% increase in TEF revenues, led to a 7.1% increase in revenue during the quarter, totaling $66.2 million. For the year, revenues were slightly down as the 9.7% increase in Multisector revenues was offset by a 9.3% decline in TEF revenue, mainly reflecting impacts from the pandemic in Q2 2020. Multisector sales accounted for 49.2% of the region’s total revenue in FY 2020 compared to 43.1% in FY 2019.

EMEA’s Adjusted EBITDA more than doubled to $10.7 million, while the EBITDA margin expanded 900 basis points to 16.1%. The region’s profitability improved as a result of better revenue mix, including Next Generation services, combined with higher operating efficiencies. On an annual basis, Adjusted EBITDA decreased 2.8% to $21.3 million, mainly due to the impact of Covid-19, especially in Q2 2020.

Indirect Cash Flow View – FY 2020 ($ in millions)

The combination of higher EBITDA in the period with a positive impact from working capital as a result of the efforts to improve overdue collections was responsible for the improvement in both Operating Cash Flow and Free Cash Flow generation. In 2020, Atento generated $39.8 million in FCF, compared to negative $65.5 million in 2019.

Cash Capex was 2.7% of revenues in 2020, compared to 2.4% in 2019. Going forward, we expect cash capex to be aligned with industry standards, close to 4% of revenues.

(1) Cross currency swaps cover 100% of coupon payments until maturity

Net Leverage

At year-end 2020, gross debt was $726.6 million, which included $142.9 million in leasing obligations under IFRS 16. Atento finished the year with cash and cash equivalents of $209.0 million, a sequential and YoY increase of $12.4 million (+6.3%) and $84.3 million (+67.6%), respectively, including the $60 million of drawn revolving credit facilities. Net debt decreased 13.1% when compared to December 2019, reflecting the strong FCF generation in 2020.

Net leverage as of Q4 2020 decreased 0.7x when compared to Q4 2019, as a result of higher EBITDA from better revenue mix and improved efficiencies, and also the phase out of the impact of the impairment in Argentina during Q4 2019. Excluding the impact of the impairment in Argentina during Q4 2019, net leverage remained flat in Q4 2020 YoY, which is a remarkable result considering the challenging environment from the pandemic and the 30% BRL devaluation effect on EBITDA.

On February 19, 2021, Atento successfully completed its $500M bond refinancing. The new $500 million Senior Secured Notes mature on February 10, 2026 and will pay interest at a rate of 8.0% per annum. With this transaction, the Company’s average debt life increased from 1.5 years to 4.5 years.

The new notes are protected by certain hedging instruments, with the coupons hedged through maturity, while the principal is hedged for a period of 3 years. The instruments consist mainly of cross-currency swaps in BRL, PEN and Euro. As a reference, the BRL cost is approximately 180% of CDI (equivalent to circa 3.5% p.a. with the current CDI).

Share Repurchase Program

In the quarter, the Company repurchased 37,364 shares under its Share Repurchase Program, at a cost of $0.4 million, at an average price of $10.96. At the end of December 2020, Atento held 1,010,502 shares in treasury. On February 24, 2021, the Board of Directors approved the extension of the current program for additional 12 months, with the new expiration date on March 10, 2022.

Conference Call

The Company will host a conference call and webcast on Thursday, March 4, 2021 at 10:00 am ET to discuss its financial results. The conference call can be accessed by dialing: USA: +1 (866) 807-9684; UK: (+44) 20 3514 3188; Brazil: (+55) 11 4933-0682; or Spain: (+34) 91 414 9260. 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 (Click here). A web-based archive of the conference call will also be available at the above website.

About Atento

Atento is the largest provider of customer relationship management and business process outsourcing (“CRM BPO”) services in Latin America, and among the top five providers globally. 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 approximately 139,800 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, 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®. Also, in 2021 Everest named Atento as a star performer Gartner named the company as a leader in the 2021 Gartner Magic Quadrant. 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 are preliminary, unaudited and are based on management's initial review of operations for the fourth quarter and year ended December 31, 2020 and remain subject to the completion of the Company's customary annual closing and review procedures. Final adjustments and other material developments may arise between the date hereof and the filing of the Company's Annual Report on Form 20-F.

(1) For the reconciliation of these non-GAAP measures to the closest comparable IFRS measure, see section "Summary Consolidated Historical Financial Information - Reconciliation of EBITDA and Adjusted EBITDA to profit/(loss)".

N.M. means not meaningful

(1) Included revenue and expenses at the holding-company level (such as corporate expenses and acquisition related expenses), as applicable, as well as consolidation adjustments.

(2) For the reconciliation of these non-GAAP measures to the closest comparable IFRS measure, see section "Summary Consolidated Historical Financial Information - Reconciliation of EBITDA and Adjusted EBITDA to profit/(loss)".

Adjustments to EBITDA by Quarter

 

	Fiscal 2018					Fiscal 2019					Fiscal 2020
($  in millions)	Q1	Q2	Q3	Q4	FY	Q1	Q2	Q3	Q4	FY	Q1	Q2	Q3	Q4	FY
Profit/(loss) for the period	(1.7)	4.0	3.1	15.0	20.5	(45.6)	(6.6)	1.3	(29.6)	(80.7)	(7.4)	(18.3)	(13.1)	(7.9)	(46.8)
Net finance expense	19.6	21.9	18.3	(4.2)	55.6	17.3	19.1	13.8	6.9	57.1	16.9	14.2	25.6	25.3	82.0
Income tax expense	5.5	(0.5)	3.8	4.6	13.4	(2.9)	(3.1)	2.3	2.0	36.2	(0.2)	(2.4)	2.3	5.3	5.1
Write-off of deferred tax assets	-	-	-	-	-	37.8	-	-	-	-	-	-	-	-	-
Depreciation and amortization	26.3	23.6	21.8	23.6	95.2	35.3	33.2	30.8	41.4	140.8	31.5	28.7	30.0	30.7	120.9
EBITDA (non-GAAP) (unaudited)	49.8	49.1	46.9	39.0	184.8	42.0	42.6	48.1	20.7	153.4	40.8	22.2	44.8	53.5	161.2
Adjusted EBITDA Margins	10.1%	10.4%	10.9%	9.2%	10.2%	9.6%	9.6%	11.7	5.0%	9.0%	10.9%	7.1%	12.7%	14.5%	11.4%

 

 

IFRS 16 Effect

 

IFRS 16: Effect	FY 2020	FY 2019
Revenue	0.0	0.0
EBITDA	47.8	52.4
Depreciation & Amortization	(44.0)	(49.3)
Operating Profit	3.8	3.1
Finance costs	(14.4)	(17.5)
(Loss)/profit before income tax	(10.6)	(14.4)
Income tax expense	0.0	0.4
(Loss)/profit after income tax	(10.6)	(14.1)

 

Add-Backs to Net Income by Quarter

	Fiscal 2018					Fiscal 2019					Fiscal 2020
($ in millions, except percentage changes)	Q1	Q2	Q3	Q4	FY	Q1	Q2	Q3	Q4	FY	Q1	Q2	Q3	Q4	FY
Profit/(Loss) attributable to equity holders of the parent	(1.7)	4.0	3.1	15.0	20.5	(45.6)	(6.6)	1.3	(29.6)	(80.7)	(7.4)	(18.3)	(13.1)	(7.9)	(46.8)
Amortization of Acquisition related Intangible assets	5.7	5.3	5.1	5.1	21.2	5.1	5.0	4.9	5.5	20.6	5.0	4.3	4.5	4.5	18.3
Net foreign exchange gain on financial instruments	3.1	(9.0)	5.9	-	0.0	-	-	-	-		-
Net foreign exchange impacts	2.8	19.0	9.3	(2.3)	28.8	1.6	1.4	(2.3)	8.4	9.1	3.5	5.8	8.8	9.7	27.8
Tax effect	(2.4)	(3.7)	(4.6)	(1.6)	(11.3)	34.6	(6.8)	(2.2)	2.2	27.7	(4.5)	(2.0)	(1.4)	(1.7)	(9.4)
Other	-	-	-	-	-	-	-	-	-
Adjusted Earnings (non-GAAP) (unaudited)	7.5	15.1	15.7	16.2	59.1	(4.3)	(6.9)	1.6	(13.5)	(23.2)	(3.4)	(10.2)	(1.2)	4.5	(10.1)
Adjusted Earnings per share (in U.S. dollars) in the reverse split basis	0.51	1.01	1.27	1.11	4.03	(0.29)	(0.47)	0.11	(0.97)	(1.61)	(0.24)	(0.70)	(0.09)	0.32	(0.72)
Adjusted Earnings attributable to Owners of the parent  (non-GAAP) (unaudited)	7.8	14.3	18.4	15.7	57.2	(4.7)	(7.2)	1.6	(13.5)	(23.9)	(3.4)	(10.2)	(1.2)	4.5	(10.1)
Adjusted Earnings attributable to Owners of the parent (in U.S. dollars) in the reverse split basis	0.53	0.96	1.25	1.06	3.89	(0.32)	(0.49)	0.11	(0.97)	(1.65)	(0.24)	(0.70)	(0.09)	0.32	(0.72)

 

(*)

We define non-recurring items as items that are limited in number, clearly identifiable, unusual, are unlikely to be repeated in the near future in the ordinary course of business and that have a material impact on the consolidated results of operations. Non-recurring items can be summarized as demonstrated below:

 

(a)

Amortization of acquisition related intangible assets represents the amortization expense of customer base, recorded as intangible assets. This customer base represents the fair value (within the business combination involving the acquisition of control of Atento Group) of the intangible assets arising from service agreements (tacit or explicitly formulated in contracts) with Telefónica Group and with other customers.

14

(b)

Since April 1, 2015, the Company designated the foreign currency risk on certain of its subsidiaries as net investment hedges using financial instruments as the hedging items. As a consequence, any gain or loss on the hedging instrument, related to the effective portion of the hedge is recognized in other comprehensive income (equity) as from that date. The gains or losses related to the ineffective portion are recognized in the statements of operations and for comparability, and those adjustments are added back to calculate Adjusted Earnings.

 

(**)	Adjusted Earnings per share is calculated based on weighted average number of ordinary shares outstanding of 13,903,439 and 14,004,490 for the three months ended December 31, 2019 and 2020, respectively.

(***)

Adjusted Earnings per share in the reverse split basis is calculated by applying the ratio of conversion of 5.027090466672970 used in the reverse split into the previous weighted average number of ordinary shares outstanding

 

Effective Tax Rate

($ in millions, except percentage changes)	Fiscal 2018	Fiscal 2019	Fiscal 2020	Q1 2018	Q2 2018	Q3 2018	Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019	Q1 2020	Q2 2020	Q3 2020	Q4 2020
Profit/(loss) before tax1	33.9	(44.5)	(41.7)	3.9	3.6	6.9	19.6	(10.6)	(9.7)	3.5	(27.6)	(7.6)	(20.7)	(10.8)	(2.6)
(+) Total Add-backs to Net Income (excluding tax effect)	50.0	29.7	46.1	11.5	15.3	20.3	2.8	6.7	6.5	2.6	13.9	8.5	10.1	13.3	14.2
Amortization of Acquisition related Intangible assets	21.2	20.6	18.3	5.7	5.3	5.1	5.1	5.1	5.0	4.9	5.5	5.0	4.3	4.5	4.5
Net foreign exchange gain on financial instruments	0.0	-	-	3.1	(9.0)	5.9	-	-	-	-	-	-	-	-	-
Net foreign exchange impacts	28.8	9.1	27.8	2.8	19.0	9.3	(2.3)	1.6	1.4	(2.3)	8.4	3.5	5.8	8.8	9.7
= Recurring Profit/(loss) before tax (non-GAAP) (unaudited)	83.9	(14.8)	4.4	15.4	18.9	27.2	22.4	(3.9)	(3.2)	6.1	(13.7)	0.9	(10.6)	2.5	11.6
(-) Recurring Tax	(24.8)	(8.5)	(14.5)	(7.9)	(3.2)	(8.4)	(6.2)	(0.4)	(3.7)	(4.5)	0.1	(4.3)	0.4	(3.7)	(7.1)
Income tax expense (reported)	(13.4)	(36.2)	(5.1)	(5.5)	0.5	(3.8)	(4.6)	(35.0)	3.1	(2.3)	(2.0)	0.2	2.4	(2.3)	(5.3)
Tax effect (non-recurring)	(11.3)	27.7	(9.4)	(2.4)	(3.7)	(4.6)	(1.6)	34.6	(6.8)	(2.2)	2.2	(4.5)	(2.0)	(1.4)	(1.7)
= Adjusted Earnings (non-GAAP) (unaudited)	59.1	(23.2)	(10.1)	7.5	15.7	18.7	16.2	(4.3)	(6.9)	1.6	(13.5)	(3.4)	(10.2)	(1.2)	4.5
Recurring ETR	30.5%	57.4%	N.M.	51.3%	17.7%	31.1%	31.4%	9.8%	N.M.	74.1%	0.8%	N.M.	3.8%	N.M.	61.0%

 

(1) Profit/(loss) before income tax from continuing operations

 

Financing Arrangements

Net debt with third parties as of December 31, 2019 and 2020 is as follow:

 

($ in millions, except Net Debt/Adj. EBITDA LTM)	On December 31, 2020	On December 31, 2019
Cash and cash equivalents	209.0	124.7
Debt:
Senior Secured Notes	505.6	501.9
Super Senior Credit Facility	30.0	-
BNDES	0.6	1.2
Lease Liabilities (3)	151.5	194.8
Other Borrowings	38.9	22.8
Total Debt	726.6	720.6
Net Debt with third parties (1) (unaudited)	517.6	595.9
EBITDA LTM (2) (non-GAAP) (unaudited)	161.2	153.4
Net Debt/Adjusted EBITDA LTM (non-GAAP) (unaudited)	3.2x	3.9x

(1)

In considering our financial condition, our management analyzes Net debt with third parties, which is defined as total debt less cash and cash equivalents. Net debt with third parties is not a measure defined by IFRS and it has limitations as an analytical tool. Net debt with third parties is neither a measure defined by or presented in accordance with IFRS nor a measure of financial performance and should not be considered in isolation or as an alternative financial measure determined in accordance with IFRS. Net debt is not necessarily comparable to similarly titled measures used by other companies.

(2)

EBITDA LTM (Last Twelve Months)

(3)

Consider the impact in December 31, 2020 of application of IFRS16 (former operating leases not related to short-term or low-value leases are now shown as debt) was $142.8 million and $8.7 million of other financial leases.

 

15

 

Revenue Mix by Service Type

 

	Fiscal 2018					Fiscal 2019					Fiscal 2020
	Q1	Q2	Q3	Q4	FY	Q1	Q2	Q3	Q4	FY	Q1	Q2	Q3	Q4	FY
Customer Service	51.1%	51.8%	50.6%	50.3%	50.7%	51.7%	52.0%	53.0%	54.6%	52.8%	56.4%	60.9%	58.2%	59.5%	58.5%
Sales	18.1%	18.0%	18.3%	18.5%	17.7%	17.0%	16.9%	16.9%	15.6%	16.6%	13.3%	9.8%	12.6%	12.9%	12.3%
Collection	7.3%	7.5%	8.2%	8.8%	8.2%	7.9%	7.8%	7.4%	7.1%	7.5%	7.1%	7.0%	7.1%	6.6%	6.9%
Back Office	12.0%	12.2%	13.1%	12.5%	12.9%	12.8%	12.3%	12.8%	13.0%	12.7%	13.5%	13.0%	12.3%	12.8%	12.7%
Technical Support	7.7%	6.9%	6.3%	6.3%	6.9%	6.7%	7.1%	6.2%	5.9%	6.4%	6.1%	5.9%	5.5%	5.4%	5.8%
Others	3.8%	3.7%	3.5%	3.6%	3.6%	3.9%	3.9%	3.7%	3.8%	4.0%	3.6%	3.3%	4.3%	2.8%	3.8%
Total	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100%	100.0%

 

Number of Workstations and Delivery Centers

 

	Number of Workstations		Number of Service Delivery Centers (1)
	2020	2019	2020	2019
Brazil	49,294	49,486	31	33
Americas	38,761	37,765	49	48
Argentina (2)	4,025	4,363	12	12
Central America (3)	2,842	2,319	3	3
Chile	2,310	2,595	4	4
Colombia	9,184	9,006	9	9
Mexico	10,179	9,800	15	14
Peru	8,918	8,479	3	3
United States (4)	1,303	1,203	3	3
EMEA	5,253	5,321	14	15
Spain	5,253	5,321	14	15
Total	93,308	92,572	94	96

(1) Includes service delivery centers at facilities operated by us and those owned by our clients where we provide operations personnel and workstations.

(2) Includes Uruguay.

(3) Includes Guatemala and El Salvador.

(4) Includes Puerto Rico.

 

FX Rates

FX Assumptions (Average)	Q1 2018	Q2 2018	Q3 2018	Q4 2018	FY 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019	FY 2019	Q1 2020	Q2 2020	Q3 2020	Q4 2020	FY 2020
Euro (EUR)	0.81	0.84	0.86	0.88	0.85	0.88	0.89	0.90	0.90	0.89	0.91	0.91	0.86	0.84	0.88
Brazilian Real (BRL)	3.25	3.60	3.96	3.81	3.65	3.77	3.92	3.97	4.12	3.94	4.46	5.38	5.38	5.40	5.15
Mexican Peso (MXN)	18.71	19.42	18.98	19.85	19.24	19.20	19.12	19.44	19.25	19.25	20.00	23.33	22.09	20.55	21.49
Colombian Peso (COP)	2,858.33	2,838.34	2,961.69	3,162.98	2,955.34	3,135.29	3,240.94	3,340.81	3,408.36	3,281.35	3,534.22	3,847.83	3,732.36	3,663.43	3,694.46
Chilean Peso (CLP)	601.97	620.73	663.19	679.62	641.38	667.01	683.69	705.50	754.86	702.77	802.78	823.43	780.80	761.68	792.17
Peruvian Soles (PEN)	3.24	3.26	3.29	3.36	3.29	3.32	3.32	3.34	3.36	3.34	3.40	3.43	3.55	3.60	3.50
Argentinean Peso (ARS)	19.71	23.55	32.09	37.12	28.12	39.05	43.91	50.56	59.38	48.22	61.55	67.64	73.31	80.06	70.64

 

16

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.

	ATENTO S.A.
Date: March 3, 2021.
	By:	/s/ Carlos López-Abadía
	Name: Carlos López-Abadía
	Title: Chief Executive Officer
	By:	/s/ José Antonio de Sousa Azevedo
	Name: José Antonio de Sousa Azevedo
	Title: Chief Financial Officer

 

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