Indicate by check mark whether the registrant files
or will file annual reports under cover of Form 20-F or 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):
Note: Regulation S-T Rule 101(b)(1) only permits the
submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
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):
NOTES TO
THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 2022
| 1) | COMPANY ACTIVITY AND CORPORATE INFORMATION |
| (a) | Description of business |
Atento S.A. (the
“Company”) and its subsidiaries (“Atento Group”) offer customer relationship management services to their clients
through delivery centers or multichannel platforms.
The Company was incorporated
on March 5, 2014 under the laws of the Grand-Duchy of Luxembourg, with its current registered office in Luxembourg at 1, rue Hildegard
Von Bingen, L-1282.
The principal shareholders
with majority of interest of the Company are Mezzanine Partners II Offshore Lux Sarl II, Mezzanine Partners II Onshore Lux Sarl II, Mezzanine
Partners II Institutional Lux Sarl II, Mezzanine Partners II AP LUX SARL II (funds controlled by HPS Investment Partners, LLC) and Chesham
Investment Pte Ltd. (fund controlled by GIC Asset Management Pte., LTD) and Taheebo Holdings LLC (fund controlled by Farallon Capital
Management, LLC).
The Company may act
as the guarantor of loans and securities, as well as assisting companies in which it holds direct or indirect interests or that form part
of its group. The Company may secure funds, except for public offerings, through any kind of lending, or through the issuance of bonds,
securities, or debt instruments in general.
The Company may also
carry on any commercial, industrial, financial, real estate business or intellectual property related activity that it deems necessary
to meet the aforementioned corporate purposes.
The corporate purpose
of its subsidiaries, except for the intermediate holding companies, is to establish, manage and operate through multichannel platforms;
to provide telemarketing, marketing and “call center” services, as well. The Company’s ordinary shares are traded on
NYSE under the symbol “ATTO”.
The unaudited interim
condensed consolidated financial information was approved by the Board of Directors on April 21, 2022.
2) BASIS
OF PRESENTATION OF THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The interim condensed
consolidated financial information for the three months ended March 31, 2022 has been prepared in accordance with IAS 34 - Interim
Financial Reporting as issued by the International Accounting Standards Board (“IASB”) prevailing on March 31, 2022.
The information
does not have all disclosure requirements for the presentation of full annual financial statements and thus should be read in conjunction
with the consolidated financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”)
for the year ended December 31, 2021. The interim condensed consolidated financial information has been prepared on a historical costs
basis, except for Argentina that is adjusted for inflation as required by IAS 29 Financial Reporting in Hyperinflationary Economies in
Argentina, and derivative financial instruments and financial liability related to the option for acquisition of non-controlling interest,
which have been measured at fair value. The interim condensed consolidated financial information is for the Atento Group.
The figures in
this interim condensed consolidated financial information are expressed in thousands of U.S. dollars and all values are rounded to the
nearest thousand, unless otherwise indicated. U.S. Dollar is the Atento Group’s presentation currency.
3) ACCOUNTING
POLICIES
There were no significant changes
in accounting policies and calculation methods used for the interim condensed consolidated financial information as of March 31, 2022
in relation to those presented in the annual financial statements for the year ended December 31, 2021.
a) Critical
accounting estimates and assumptions
The preparation
of interim condensed consolidated financial statements under IFRS as issued by the IASB requires the use of certain assumptions and estimates
that affect the carrying amount of assets and liabilities within the next financial year.
Some of the accounting
policies applied in preparing the accompanying interim condensed consolidated financial statements required Management to apply significant
judgments in order to select the most appropriate assumptions for determining these estimates. These assumptions and estimates are based
on Management experience, the advice of consultants and experts, forecasts and other circumstances and expectations prevailing at year
end. Management’s evaluation considers the global economic situation in the sector in which the Atento Group operates, as well as
the future outlook for the business. By virtue of their nature, these judgments are inherently subject to uncertainty. Consequently, actual
results could differ substantially from the estimates and assumptions used. Should this occur, the values of the related assets and liabilities
would be adjusted accordingly.
Although these estimates
were made on the basis of the best information available at each reporting date on the events analyzed, events that take place in the
future might make it necessary to change these estimates in coming years. Changes in accounting estimates would be applied prospectively
in accordance with the requirements of IAS 8, “Accounting Policies, Changes in Accounting Estimates and Errors”, recognizing
the effects of the changes in estimates in the related statements of operations.
An explanation of
the estimates and judgments that entail a significant risk of leading to a material adjustment in the carrying amounts of assets and liabilities
is as follow:
Provisions and
contingencies
Provisions are recognized
when the Atento Group has a present obligation as a result of a past event, it is probable that an outflow of resources will be required
to settle the obligation and a reliable estimate can be made of the amount of the obligation. This obligation may be legal or constructive,
deriving from, regulations, contracts, customary practice, or public commitments that would lead third parties to reasonably expect that
the Atento Group will assume certain responsibilities. The amount of the provision is determined based on the best estimate of the outflow
of resources embodying economic benefit that will be required to settle the obligation, considering all available information as of the
reporting date, including the opinions of independent experts such as legal counsel or consultants.
The Company classifies
the risk of loss in legal proceedings as probable, possible, or remote. If the Company has lawsuits whose values are not known or reasonably
estimated, but the likelihood of loss is probable, these will not be recorded, but their nature will be disclosed as well the lawsuits
classified as possible.
Given the uncertainties
inherent in the estimates used to determine the amount of provisions, actual outflows of resources may differ from the amounts recognized
originally on the basis of these estimates.
Fair value of
derivatives
The Atento Group uses derivative
financial instruments to mitigate risks, primarily derived from possible fluctuations in exchange rates. Derivatives are recognized at
the inception of the contract at fair value.
The fair values of derivative
financial instruments are calculated based on observable market data available, either in terms of market prices or through the application
of valuation techniques. The valuation techniques used to calculate the fair value of derivative financial instruments include the discounting
of future cash flow associated with the instruments, applying assumptions based on market conditions at the valuation date or using prices
established for similar instruments, among others. These estimates are based on available market information and appropriate valuation
techniques. The fair values calculated could differ significantly if other market assumptions and/or estimation techniques were applied.
b) Standards issued but not yet
effective
There are no other
standards that are not yet effective and that would be expected to have a material impact on the Atento Group in the current or future
reporting periods and on foreseeable future transactions.
4) MANAGEMENT
OF FINANCIAL RISK
4.1 Financial risk factors
The Atento Group’s
activities are exposed to various types of financial risk: market risk (including foreign currency risk and interest rate risk), credit
risk and liquidity risk. The Atento Group’s global risk management policy aims to minimize the potential adverse effects of these
risks on the Atento Group’s financial returns. The Atento Group also uses derivative financial instruments to hedge certain risk
exposures.
This unaudited interim condensed
consolidated financial information does not include all financial risk management information and disclosures required in the annual financial
statements and therefore they should be read in conjunction with the Atento Group’s consolidated financial statements as of and
for the year ended December 31, 2021. For the three months ended March 31, 2022 there have not been changes in any risk management policies.
a) Market
risk
Interest rate
risk in respect of cash flow and fair value
Interest risk arises
mainly as a result of changes in interest rates which affect finance costs of debt bearing interest at variable rates (or short-term maturity
debt expected to be renewed), as a result of fluctuations in interest rates, and the value of non-current liabilities that bear interest
at fixed rates.
Atento Group’s
finance costs are exposed to fluctuations in interest rates. On March 31, 2022, 6,2% of financial debt with third parties (not including
derivative financial instrument) bore interests at variable rates, while on December 31, 2021 this amount was 4.4%. In both December 31,
2021 and March 31, 2022, the exposure was to the Brazilian CDI rate and the TJLP (Brazilian Long-Term Interest Rate).
We also have exposure
to the Brazilian CDI rate on some of our cross-currency swaps entered after the Senior Secured Notes refinancing in February 2021. In
such instruments, we exchange a fixed amount of U.S. dollars for a variable amount of Brazilian Reais, which is determined as a percentage
of CDI (the Brazilian Interbank Market Rate).
Foreign currency
risk
Our foreign currency
risk arises from local currency revenues, receivables, and payables, while the U.S. dollar is our functional and reporting currency. We
benefit to a certain degree from the fact that the revenue we collect in each country, in which we have operations, is generally denominated
in the same currency as the majority of the expenses we incur.
In accordance
with our risk management policy, whenever we deem it appropriate, we manage foreign currency risk by using derivatives to hedge any exposure
incurred in currencies other than those of the functional currency of the countries.
The main source
of our foreign currency risk is related to our operations in foreign countries with functional currencies different than U.S Dollars.
To reduce the foreign currency risk in our operations in Spain, Peru and Brazil, Spain we entered into cross-currency swaps pursuant to
which we exchange a fixed amount of U.S. dollars for a fixed amount of Euro and Peruvian Soles (fixed-fixed rate cross-currency swaps),
and a fixed amount of U.S. dollars for a variable amount of Brazilian Reais (fixed-floating rate cross-currency swaps).
The total amount
of interest (coupon) payments is covered until the final maturity date (February 2026) of the Senior Secured Notes due 2026. The cross-currency
swaps in place also include Principal Exchange in the same currency pairs mentioned above, which mature in February 2024. The referred
cross-currency swaps are the only derivative transactions we have in place in Atento Group.
As of March 31,
2022, the estimated fair value of the cross-currency swaps totaled a net liability of 133,849 thousand U.S. dollars (net liability of
39,957 thousand U.S. dollars as of December 31, 2021).
b) Credit
risk
The Atento Group
seeks to conduct all of its business with reputable national and international companies and institutions established in their countries
of origin, to minimize credit risk. As a result of this policy, the Atento Group has no material adjustments to make to its credit accounts
(see Note 13). Accordingly, the Atento Group’s commercial credit risk management approach is based on continuous monitoring of the
risks assumed and the financial resources necessary to manage the Group’s various units, in order to optimize the risk-reward relationship
in the development and implementation of business plans in the course of their regular business.
Credit risk arising
from cash and cash equivalents is managed by placing cash surpluses in high quality and highly liquid money-market assets. These placements
are regulated by our Corporate Treasury policy based on the conditions prevailing in the markets and the countries where Atento operates.
The Corporate Treasury policy establishes: (i) the maximum amounts to be invested per counterparty, based on their ratings (long- and
short-term debt ratings) ; (ii) the maximum period of the investment; and (iii) the instruments in which the surpluses may be
invested.
The Atento Group’s
maximum exposure to credit risk is primarily limited to the carrying amounts of its financial assets. The Atento Group holds no guarantees
as collection insurance.
c) Liquidity
risk
For March 2022,
Company has presented in your interim condensed consolidated Financial Statement a negative shareholders’ equity performed an extensive
analysis over events and transactions that arise deterioration of equity. Company identified that main factors in which this decrease
was driven by refers to non-cash events and when it’s excluded any effect of non-cash, operating profit are being generated. The
directors have, at the time of approving the financial statements, a reasonable expectation that the Group have adequate resources to
continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing
the financial statements. The Atento Group seeks to match its debt maturity schedule to its capacity to generate cash flows to meet the
payments of financial commitments. In practice, this has meant that the Atento Group’s average debt maturity must be long enough
to support business operation normal conditions.
4.2 Capital Management
The Atento Group’s
Finance Department, which is in charge of the capital management, takes various factors into consideration when determining the Group’s
capital structure. The Atento Group’s capital management goal is to determine the financial resources necessary both to continue
its recurring activities, as going concern, and to maintain a capital structure that optimizes own and borrowed funds.
The Atento Group
sets an optimal debt level in order to maintain a medium-term borrowing structure, in order to be able to carry out its routine activities
under normal conditions and to address new opportunities for growth. Debt levels are kept in line with forecasted future cash flows and
with quantitative restrictions imposed under financing contracts. In addition to these general guidelines, we take into account other
considerations and specifics when determining our financial structure, such as country risk, tax efficiency and volatility in cash flow
generation.
The Super Senior
Revolving Credit Facility, carries no financial covenant obligations regarding debt levels. However, the notes do impose limitations on
dividend distributions, payments or distributions to the shareholders, the incurrence of additional debt, and on investments and disposal
of assets. As of the date of these interim condensed consolidated financial statements, the Atento Group was in compliance with all restrictions
established in the aforementioned financing contracts and does not foresee any future non-compliance. To that end, the Atento Group regularly
monitors figures for net financial debt with third parties and EBITDA.
As of the date of these interim
condensed consolidated financial information, the Atento Group was in compliance with all restrictions established in the aforementioned
financing contracts and does not foresee any future non-compliance. To that end, the Atento Group regularly monitors figures for net financial
debt with third parties and EBITDA.
4.2 Fair value estimation
a)
Level 1: The fair value of financial instruments traded on active markets is based on the quoted
market price at the reporting date.
b)
Level 2: The fair value of financial instruments not traded in active market (i.e., OTC derivatives)
is determined using valuation techniques. Valuation techniques maximize the use of available observable market data, and place as little
reliance as possible on specific company estimates. If all of the significant inputs required to calculate the fair value of financial
instrument are observable, the instrument is classified in Level 2. The Atento Group’s Level 2 financial instruments comprise interest
rate swaps used to hedge floating rate loans and cross currency swaps.
c)
Level 3: If one or more significant inputs are not based on observable market data, the instrument
is classified in Level 3.
The Atento Group’s assets
and liabilities measured at fair value as of December 31, 2021 and March 31, 2022 are classified as Level 2. No transfers were carried
out between the different levels during the period.
5) SEGMENT INFORMATION
The Atento Group
uses EBITDA to track the performance of its segments and to establish operating and strategic targets. Management believes that EBITDA
provides an important measure of the segment’s operating performance to evaluate and compare the segments’ operating results
from period to period. EBITDA is defined as profit/(loss) for the period before net finance expense (which includes finance income, finance
costs, change in fair value of financial instruments and net foreign exchange losses), income taxes and depreciation and amortization.
The following
tables present financial information for the Atento Group’s operating segments for the period ended March 31, 2021 and 2022
unaudited (in thousand U.S. dollars):
For the three Months ended March 31, 2021 |
|
|
|
|
|
|
Thousands of U.S. dollars |
|
EMEA |
Americas |
Brazil |
Other and eliminations |
Total Group |
Revenue |
|
|
| |
|
Sales to other companies |
34,672 |
102,533 |
112,095 |
- |
249,300 |
Sales to Telefónica Group |
34,415 |
49,974 |
36,490 |
- |
120,879 |
Sales to other group companies (*) |
- |
1,636 |
294 |
(1,471) |
459 |
Total Revenue |
69,087 |
154,143 |
148,879 |
(1,471) |
370,638 |
|
|
|
|
|
|
Income/(Expenses) |
|
|
|
|
|
Supplies |
(10,048) |
(3,469) |
(8,481) |
(1,074) |
(20,924) |
Employee benefit Expenses |
(48,904) |
(120,669) |
(111,918) |
1,350 |
(282,840) |
Changes in trade provision |
64 |
(125) |
(1,600) |
- |
1,538 |
Other operating income and expense |
(65,522) |
(141,315) |
(130,176) |
2,427 |
(331,586) |
EBITDA |
6,565 |
12,828 |
18,703 |
956 |
39,052 |
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
(30,484) |
Net finance expense |
|
|
|
|
(27,769) |
Profit/(loss) before income tax |
|
|
|
|
(19,201) |
Other disclosures |
|
|
|
|
|
|
|
|
Capital expenditure |
1,094 |
850 |
|
10,006 |
|
(1) |
|
11,949 |
Intangible, Goodwill and PP&E |
43,553 |
139,336 |
|
216,120 |
|
405 |
|
399,414 |
Allocated assets |
395,853 |
527,245 |
|
497,432 |
|
(329,249) |
|
1,091,281 |
Allocated liabilities |
150,034 |
300,481 |
|
421,732 |
|
158,285 |
|
1,030,352 |
|
|
|
|
|
|
|
|
|
(*) Includes the allocated revenue among the operating segments. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period ended March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
Thousands of U.S. dollars |
|
EMEA |
|
Americas |
|
Brazil |
|
Other and eliminations |
|
Total Group |
Revenue |
|
|
|
|
|
|
|
|
|
Sales to other companies |
31,523 |
|
104,763 |
|
108,522 |
|
- |
|
244,808 |
Sales to Telefónica Group |
32,801 |
|
41,923 |
|
37,826 |
|
- |
|
112,550 |
Sales to other group companies (*) |
- |
|
- |
|
- |
|
(770) |
|
(770) |
Total Revenue |
64,325 |
|
146,686 |
|
146,348 |
|
(770) |
|
356,589 |
|
|
|
|
|
|
|
|
|
|
Income/(Expenses) |
|
|
|
|
|
|
|
|
|
Supplies |
(9,296) |
|
(4,817) |
|
(13,913) |
|
(612) |
|
(27,415) |
Employee benefit expenses |
(47,139) |
|
(119,216) |
|
(111,971) |
|
935 |
|
(279,261) |
Impairment charges |
- |
|
- |
|
- |
|
- |
|
- |
Changes in trade provision |
(125) |
|
11 |
|
(55) |
|
- |
|
(169) |
Other operating income and expense |
(4,465) |
|
(14,239) |
|
(10,655) |
|
(3,225) |
|
(26,133) |
EBITDA |
3,559 |
|
9,187 |
|
21,689 |
|
542 |
|
34,977 |
|
|
|
|
|
|
|
|
|
|
Net finance expense |
|
|
|
|
|
|
|
|
(79,755) |
Depreciation and amortization |
|
|
|
|
|
|
|
|
(30,221) |
Profit/(loss) before income tax |
|
|
|
|
|
|
|
|
(74,999) |
|
|
|
|
|
|
|
|
|
|
Other disclosures |
|
|
|
|
|
|
|
|
|
Capital expenditure |
1,455 |
|
2,710 |
|
4,305 |
|
- |
|
8,469 |
Intangible, Goodwill and PP&E |
36,877 |
|
149,891 |
|
233,877 |
|
281 |
|
420,926 |
Allocated assets |
360,689 |
|
551,671 |
|
534,144 |
|
(326,315) |
|
1,120,189 |
Allocated liabilities |
133,057 |
|
346,894 |
|
483,271 |
|
149,759 |
|
1,112,981 |
|
|
|
|
|
|
|
|
|
|
(*) Includes the allocated revenue among the operating segments
6) INTANGIBLE ASSETS
The main changes in intangible
assets between the three-month period ended March 31, 2022 and the year ended the December 31, 2021 are related to amortization of period
and the positive impact of exchange variance mainly in Brazil. There is no significant acquisition or disposal of intangible assets for
the three-month period ended March 31, 2022.
7) GOODWILL
The main changes in goodwill
between the three-month period ended March 31, 2022 and the year ended the December 31, 2021 are related to positive impact of exchange
variance mainly in Brazil. There is no acquisition or disposal of entities or any transaction that could arise a goodwill for the three-month
period ended March 31, 2022.
8) PROPERTY, PLANT AND EQUIPMENT (PP&E)
The main changes in intangible
assets between the three-month period ended March 31, 2022 and the year ended the December 31, 2021 are related to amortization of period
and the positive impact of exchange variance mainly in Brazil. There is no significant acquisition or disposal of property, plant and
equipment for the three-month period ended March 31, 2022.
9) LEASES
The main changes in lease between
the three-month period ended March 31, 2022 and the year ended the December 31, 2021 are related to amortization of period and the positive
impact of exchange variance mainly in Brazil. There is no significant acquisition or disposal of lease for the three-month period ended
March 31, 2022.
10) EQUITY
Share capital
On
July 28, 2020, an extraordinary shareholder’s meeting approved the reverse share split of 75,406,357 ordinary shares without nominal
value, representing the entire share capital of the Company, into 15,000,000 ordinary shares without nominal value using a ratio of 5.027090466672970,
and subsequently amending article 5 of the articles of association of the Company.
On January 14, 2022, the Board approved to increase
the share capital of the Company within its authorized share capital by an amount of one thousand twenty-three Euros and thirteen cents
(EUR 1,023.13) through the issuance of four hundred fifty-one thousand six hundred sixty-seven (451,667) new shares without nominal value
to employees each having an implied par value of EUR 0.002265256, to be paid out of distributable reserves of the Company from the current
amount of EUR 33,978.85 to EUR 35,001.98.
As
of March 31, 2022, share capital was 50 thousand U.S. dollars, equivalent to €35,001 (49 thousand U.S. dollars, equivalent to €33,979
as of December 31, 2021), divided into 15,451,667 shares (15,000,000 shares on December 31, 2021).
Share
premium
The
share premium refers to the difference between the subscription price that the shareholders paid for the shares and their nominal value.
Since this is a capital reserve, it can only be used to increase capital, offset losses, redeem, reimburse, or repurchase shares.
In
2022, the Company vested the total of 451,667 TRSUs with a total impact in share premium of 1,450 thousand of U.S. dollars.
Treasury
shares
For
March 31, 2022, Atento S.A. had the corresponding to 951,957 shares of the reserve share split)
Legal
reserve
According
to commercial legislation in Luxembourg, Atento S.A. must transfer 5% of its year profits to legal reserve until the amount reaches 10%
of share capital. The legal reserve cannot be distributed.
On
March 31, 2022, no legal reserve had been established, mainly due to the losses incurred by Atento S.A.
Hedge
accounting effects
On
January 1, 2019 Atento formalized at a meeting of the “Board of Directors”, which took place on December 20, 2018, its intention
to renew the loan agreement between Atento Luxco 1 and Atento Brasil on its maturities per indefinite time and designate it as permanent
equity, as the repayment is neither planned nor likely to occur in the foreseeable future. Therefore, changes in fair value related to
the USD-BRL exchange rate is recorded in equity as part of other comprehensive income.
At
the same time the, on January 1, 2019, the Cross-Currency Swap USD BRL was designated as a net investment hedge. Prior to the date of
designation of the Cross-Currency Swap, this hedging instrument was electively not designated as a hedge accounting because the change
in fair value was intended to partially offset changes in the USD-BRL foreign currency component of the BRL denominated intercompany
debt, which were recorded in earnings. Therefore, changes in fair value related to the USD-BRL Cross-Currency Swap are recorded in equity
as part of other comprehensive income.
Also,
on January 1, 2020 the Company assigned the loan agreement between Atento Luxco 1 and Atento Mexico Holdco as permanent in equity, with
its maturities to be renewed per indefinite time, since the repayment is neither planned nor likely to occur in the foreseeable future.
Therefore, changes in fair value related to the USD-MXN exchange rate are now recorded in equity as part of other comprehensive income.
The
Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends
on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge
accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated
and qualifying as hedges of the foreign currency exposure of a net investment in a foreign operation are considered net investment hedges.
The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting
does not apply, or the Company elects not to apply hedge accounting.
Translation
differences
Translation
differences reflect the differences arising on account of exchange rate fluctuations when converting the net assets of fully consolidated
foreign companies from local currency into Atento Group’s presentation currency (U.S. dollars).
Stock-based compensation
a) Description
of share-based payment arrangements
The
2019 Plan
On
June 3, 2019, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and its
subsidiaries. The share-based payment had the following arrangements:
1.
Time Restricted Stock Units (“RSU”)
(equity settled)
•
Grant date: June 3, 2019
•
Amount: 2,560,666 RSUs
•
Vesting period: 100% of the RSUs vests on January 3, 2022
•
There are no other vesting conditions
The 2020 Plan – Stock Option
On
August 3, 2020, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and its
subsidiaries. The share-based payment is composed by Stock Options with the following arrangements:
• Grant
date: August 3, 2020
• Amount:
1,524,065 SOPs
• Vesting
period: 1/3 each year (August 3, 2021, August 3, 2022 and August 3, 2023)
• Expiration
date: 4.5 years since the grant date or on February 3, 2025
• There
are no other vesting conditions
On August
3, 2020, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and its subsidiaries.
This payment is composed by a Long-Term Performance Award with the following arrangements:
| 2. | Long-Term Performance Award |
• Grant
date: August 3, 2020
• Amount:
USD 4,305,100
• *Matching
shares Amount: USD 2,152,550
• Vesting
conditions: linked to the degree of achievement of the objective – 3-year average EBITDA margin (external view / as reported) on
August 3, 2023 and the possibility to opt to receive part of this incentive in shares – at least 50% (*with a 3-year holding restriction
condition until August 2026 to be eligible to receive the additional matching shares)
• There
are no other vesting conditions
The 2020 Plan – Extraordinary
SOP
On
August 3, 2020, Atento granted a new share-based payment arrangement to directors as an Extraordinary Grant for a total in a one-time
award with a three-year vesting period.
• Grant
date: August 3, 2020
• Amount:
195,000 SOPs
• Vesting
period: 100% of the SOPs vests on August 3, 2023
• There
are no other vesting conditions
The 2021 Special
Grant
On
January 29, 2021, Atento granted a new share-based payment arrangement to Board directors for a total in a one-time award with a two-year
performance conditions vesting period.
| 1. | Performance
Restricted Stock Units (“PRSU”) (equity settled) |
• Grant
date: January 29, 2021
• Amount:
121,802 PRSUs
• Vesting
period:100% of the PRSUs will vests on 2023 (50% subject to 2021 EBITDA’s achievement targets and 50% subject to 2022 EBITDA´s
achievement targets)
• There
are no other vesting conditions
Board
Grant 2021
On February
24, 2021, Atento granted a new share-based payment to to Board directors a total in a one-time award with a one-year vesting period.
| 1. | Time Restricted
Stock Units (“RSU”) (equity settled) |
• Grant
date: February 24, 2021
• Amount:
51,803 RSUs
• Vesting
period: 100% of the RSUs vests on January 3, 2022
• There
are no other vesting conditions
As of June
9, 2021, was issued a complementary grant of 3,204 new RSUs, linked to a new appointment in the Board
The 2021 Plan – Stock Option
On
February 24, 2021, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and
its subsidiaries. The share-based payment is composed by Stock Options with the following arrangements:
• Grant
date: February 24, 2021
• Amount:
621,974 SOPs
• Vesting
period: 1/3 each year (February 24, 2022, February 24, 2023 and February 26, 2024)
• Expiration
date: 4.5 years since the grant date or on August 25, 2025
• There
are no other vesting conditions
As of September
1, 2021, was issued a new grant of 17,343 SOPs to a new Board member.
On
February 24, 2021, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company
and its subsidiaries. This payment is composed by a Long-Term Performance Award with the following arrangements:
| 4. | Long-Term Performance Award |
• Grant
date: February 24, 2021
• Amount:
USD 5,409,837
• *Matching
shares Amount: USD 2,704,919
• Expiration
date: 4.5 years since the grant date or on August 25, 2025
• There
are no other vesting conditions
As of September
1, 2021, was issued a new amount of USD 137,504 to a new Board member.
The
2021 Plan – Board and Extraordinary
On November
3, 2021, Atento granted a new share-based payment to directors, officers and other employees for the Company and its subsidiaries. The
share-based payment had the following arrangements:
| 1. | Time Restricted
Stock Units (“RSU”) (equity settled) |
• Grant
date: November 23, 2021
• Amount:
40,000 RSUs
• Vesting
period: 100% of the RSUs vests on November 3, 2024
• There
are no other vesting conditions
b) Measurement
of fair value
The
fair value of the RSUs, for all arrangements, has been measured using the Black-Scholes model. For all arrangements are equity settled
and the fair value of RSUs is measured at grant date and not remeasured subsequently.
The
fair value of cash-settled share-based payment transactions is measured using the same principles as for measuring equity-settled transactions.
The fair value of the liability for cash-settled transactions is re-measured at each reporting date and at the date of settlement. Any
changes in fair value are recognized in profit or loss for the period.
c) Outstanding RSUs
The table below summarize the total of Outstanding shares for March 31, 2022 |
Shared-Based Payment |
Shares Outstanding |
|
The 2020 Plan – Stock Options |
1,222,269 |
SOP |
The 2020 Plan – Performance Award (Potential Matching Shares) |
1,797,550 |
SOP |
The 2020 Plan – Extraordinary SOP |
195,000 |
SOP |
The 2021 Special Grant |
121,802 |
PRSU |
The 2021 Plan – Stock Options |
376,785 |
SOP |
The 2021 Plan – Performance Award (Potential Matching Shares) |
2,372,524 |
SOP |
The 2021 Plan – Board and Extraordinary |
40,000 |
RSU |
Total |
6.125,930 |
|
d) Impacts in
Profit or Loss
In the three months ended March
31, 2022, 2,571 thousand U.S. dollars related to stock-based compensation and the related social charges were recorded as employee benefit
expenses.
11) FINANCIAL ASSETS
As of December 31,
2021 and March 31, 2022, all the financial assets of the Company are classified as amortized cost except for the derivative financial
instruments that are classified as financial assets at fair value.
Credit risk arises
from the possibility that the Atento Group might not recover its financial assets at the amounts recognized and in the established terms.
Atento Group Management considers that the carrying amount of financial assets is similar to the fair value.
The breakdown of “Trade and other receivables”
as of December 31, 2021 and March 31, 2022 is as follows:
|
Thousands of U.S. dollars |
|
|
12/31/2021 |
|
03/31/2022 |
|
Non-current trade receivables |
3,466 |
|
492 |
|
Other non-financial assets (*) |
16,336 |
|
20,199 |
|
Non-current Prepayments |
2,438 |
|
2,895 |
|
Total non-current |
22,240 |
|
23,586 |
|
Current trade receivables billed |
134,652 |
|
134,021 |
|
Current trade receivables unbilled |
148,055 |
|
176,56 |
|
Other receivables |
756 |
|
9,208 |
|
Prepayments |
7,275 |
|
10,509 |
|
Personnel |
4,571 |
|
10,636 |
|
Total current |
295,309 |
|
340,934 |
|
Total |
317,549 |
|
364,520 |
|
(*) "Other non-financial assets" as of December 31, 2021 and March 31, 2022 primarily comprise tax credits with the Brazilian social security authority (Instituto Nacional do Seguro Social), recorded in Atento Brasil S.A. |
|
|
For the purpose of the interim condensed consolidated
financial statements of cash flows, cash and cash equivalents are comprised of the following:
|
Thousands of U.S. dollars |
|
12/31/2021 |
|
03/31/2022 |
Cash at bank and in hand |
93,464 |
|
78,498 |
Short-term financial investments |
35,360 |
|
18.480 |
Total |
128,824 |
|
96,977 |
“Short-term financial investments”
comprises short-term fixed income securities in Brazil, which mature in less than 90 days from acquisition date and can be converted
into cash immediately and accrue interest pegged to the CDI.
12) FINANCIAL LIABILITIES
As of December 31,
2021 and March 31, 2022, all the financial liabilities of the Company are classified as other financial liabilities at amortized cost,
except for the derivative financial instruments that are classified as financial liability at fair value.
Details of debt
with third parties as of December 31, 2021 and March 31, 2022 are as follows:
|
Thousands of U.S. dollars |
|
12/31/2021 |
|
03/31/2022 |
Senior Secured Notes |
488,389 |
|
488,524 |
Bank borrowing |
1358 |
|
211 |
Lease liabilities |
110,515 |
|
111,772 |
Total non-current |
599,262 |
|
600,507 |
Senior Secured Notes |
15,556 |
|
5,556 |
Super Senior Credit Facility |
25,027 |
|
43,287 |
Bank borrowing |
33,117 |
|
48,615 |
Lease liabilities |
45,317 |
|
49,587 |
Total current |
119,017 |
|
147,045 |
TOTAL DEBT WITH THIRD PARTIES |
718,279 |
|
747,552 |
Details of the Senior
Secured Notes at each reporting date are as follows:
|
|
|
Thousands of U.S. dollars |
|
|
|
2021 |
|
2022 |
Maturity |
Currency |
|
Principal |
|
Accrued interests |
|
Total debt |
|
Principal |
|
Accrued interests |
|
Total debt |
2022 |
U.S. dollar |
|
488,389 |
|
15,556 |
|
503,945 |
|
488,524 |
|
5,556 |
|
494,080 |
The fair value hierarchy
of the Senior Secured Notes is Level 1 as the fair value is based on the quoted market price at the reporting date.
The fair value
of the 8.00% Senior Secured Notes due 2026, calculated on the basis of their quoted price on March 31, 2022, is $501,642 ($536,818 million
on December 31, 2021).
Bank borrowings
The follow table
presents the main transaction relates to bank borrowings:
Description |
|
Currency |
|
Signed Date |
|
Principal Amount (LC million) |
|
Maturity |
|
Interest rate |
|
As of March 31, 2022 (USD) |
BNDES |
|
BRL |
|
February 2014 |
|
300,000 |
|
October 2022 |
|
Energy Efficiency Project: TJLP + |
|
0,203 |
Banco de America Central |
|
USD |
|
October 2017 |
|
1,600 |
|
October 2022 |
|
8,0% |
|
1,169 |
Banco ABC Brasil |
|
BRL |
|
February 2022 |
|
50,000 |
|
October 2022 |
|
DI+3,0% |
|
10,697 |
Banco de Lage |
|
BRL |
|
June 2020 |
|
10,000 |
|
June 2023 |
|
9,0% |
|
1,055 |
Banco ABC Brasil |
|
BRL |
|
August 2020 |
|
50,000 |
|
February 2022 |
|
DI+2,7% |
|
7,660 |
Banco do Brasil |
|
BRL |
|
October 2020 |
|
30,000 |
|
August 2022 |
|
DI+2,65% |
|
6,391 |
Banco ITAU |
|
BRL |
|
March 2022 |
|
45,000 |
|
June 2022 |
|
DI+3,2% |
|
9,566 |
Banco Bradesco |
|
BRL |
|
November 2021 |
|
55,000 |
|
November 2022 |
|
DI+2,3% |
|
12,085 |
|
|
|
|
|
|
|
|
|
|
Total Debt |
|
48,826 |
Details of derivative financial
instruments as of December 31, 2021 and March 31, 2022 are as follows:
|
|
Thousands of U.S. dollars |
|
|
12/31/2021 |
|
03/31/2022 |
|
Assets |
|
Liabilities |
|
Assets |
|
Liabilities |
Cross currency swaps |
|
15,992 |
|
(55,948) |
|
2,570 |
|
(136,419) |
Total |
|
15,992 |
|
(55,948) |
|
2,570 |
|
(136,419) |
|
|
|
|
|
|
|
|
|
Current portion |
|
3,235 |
|
(29,646) |
|
272 |
|
(51,537) |
Non-current portion |
|
12,757 |
|
(26,302) |
|
2,298 |
|
(84,882) |
The Company is
hedging the risk of changes in the USD equivalent value of a portion of its net investment in its consolidated Subsidiaries attributable
to changes in the USD-subsidiary currency between the designation date and maturity date of the Hedging Instrument.
On March 31, 2022
details of cross-currency swaps that do not qualify for hedge accounting and net investment hedges were as follows:
2022 Derivative´s operation results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank |
|
Maturity |
|
Purchase currency |
|
Selling currency |
|
Notional (thousands) |
|
Fair value assets |
|
Fair value liability |
|
Other comprehensive income |
|
Change in
OCI |
|
Statements of operations - Change in fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nomura International plc |
|
Feb-26 |
|
USD |
|
BRL |
|
326,450 |
|
43 |
|
(23,988) |
|
8,620 |
|
(8,812) |
|
8,776 |
Morgan Stanley |
|
Feb-26 |
|
USD |
|
BRL |
|
651,350 |
|
65 |
|
(27,955) |
|
3,464 |
|
- |
|
12,850 |
Morgan Stanley |
|
Feb-26 |
|
USD |
|
PEN |
|
277,050 |
|
2,298 |
|
(889) |
|
(1,218) |
|
5,172 |
|
2,121 |
Goldman Sachs International |
|
Feb-26 |
|
USD |
|
BRL |
|
1,301,000 |
|
164 |
|
(83,587) |
|
23,096 |
|
(22,616) |
|
36,375 |
Nomura International plc* |
|
Feb-26 |
|
EUR |
|
USD |
|
61,526 |
|
- |
|
- |
|
(3,585) |
|
(113) |
|
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Active |
|
|
|
|
|
|
|
|
|
2,570 |
|
(136,419) |
|
33,952 |
|
(36,600) |
|
60,122 |
Effect on OCI of derivatives terminated in 2022* |
|
|
|
|
|
|
|
|
|
- |
|
- |
|
(3,585) |
|
(113) |
|
35 |
Effect on OCI of derivatives terminated prior to 1 January |
|
|
|
|
|
|
|
|
|
- |
|
- |
|
(13,510) |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
2,570 |
|
(136,419) |
|
16,867 |
|
(36,713) |
|
60,157 |
On January 04, 2022,
Atento Luxco 1 S.A. unwound the 80.0 million U.S dollars principal exchange in the USD/BRL cross-currency swap entered with Morgan Stanley
on February 26, 2021. The resulting cross-currency swap with Morgan Stanley is now coupon-only and the BRL pay leg rate was reduced from
182.0% to 142.25% of the CDI (Brazilian Interbank Market Rate).
On March 23, 2022,
Atento Luxco 1 S.A. unwound the full EUR/USD cross-currency swap entered with Nomura on February 25, 2021. The resulting fair value of
4,130 thousand U.S. dollars was credited on March 25, 2022.
Summary of outstanding derivatives
as of March 31, 2022 are as follows:
Counterparty |
Product |
Receive/Pay Currency |
Coupon * Notional Receive |
Coupon Notional Pay |
Receive Rate |
Pay Rate |
USD Principal Exchange (Feb. 2024) |
Goldman Sachs |
Cross Currency Swap |
USD /USD |
200,000,000 |
200,000,000 |
8.00% |
6M Libor + 6.96% |
150,000,000 |
|
|
USD /BRL |
200,000,000 |
1,101,000,000 |
6M Libor + 6.93% |
175.91% of CDI |
|
Morgan Stanley |
Cross Currency Swap |
USD /USD |
100,000,000 |
100,000,000 |
8.00% |
6M Libor + 6.90% |
80,000,000 |
|
|
USD /BRL |
100,000,000 |
551,350,000 |
6M Libor + 6.90% |
142.25% of CDI |
|
Nomura |
Cross Currency Swap |
USD /USD |
50,000,000 |
50,000,000 |
8.00% |
6M Libor + 6.90% |
50,000,000 |
|
|
USD/BRL |
50,000,000 |
276,450,000 |
6M Libor + 6.90% |
188.80% of CDI |
|
Morgan Stanley |
Cross Currency Swap |
USD/PEN |
75,000,000 |
277,050,00 |
8,00% |
9,40% |
70,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13) PROVISIONS AND CONTINGENCIES
Atento is involved
in legal proceedings, litigation and claims incidental to the conduct of our business, the outcome of which is inherently uncertain. Labor-related
litigation account for the vast majority of our active judicial caseload (with respect to the total number of outstanding proceedings),
due to the operational cycle of our business, given that agreements with our clients have a direct impact on our workforce. This implies
both individual and collective employment disputes within normal course of business, including claims for dismissals or claims concerning
other employment conditions (i.e., daily and general work routines, overtime rules). In addition, we are regularly party to ongoing disputes
with local social security authorities in the jurisdictions in which we operate.
The main changes in provisions
and contingencies between the three-month period ended March 31, 2022 and the year ended the December 31, 2021 are related to provisions
relating to employee claims mainly in Brazil.
As of March 31,
2022, main lawsuit outstanding in the courts were as follows:
Brazil
In March 2018, Atento Brasil S.A. an indirect subsidiary
of Atento S.A. received a tax notice from the Brazilian Federal Revenue Service, related to Corporate Income Tax (IRPJ) and Social Contribution
on Net Income (CSLL) for the period from 2013 to 2015. Tax authorities has challenged the disallowance of the expenses related to goodwill
tax amortization, the deductibility of certain financing costs originated by the acquisition of Atento Brasil S.A. by Bain Capital in
2012, and the Withholding Income Tax for the period of 2012 related to payments made to certain of our former shareholders.
The amount of the tax assessment from the Brazilian Federal Revenue Service,
not including interest and penalties, was 350,542 thousand Brazilian Reais (approximately 70,499 thousand U.S. dollars considering the
current currency exchange rate) and was assessed by the Company’s outside legal counsel as possible loss to the merit discussion.
Since we disagree with the proposed tax assessment, we are defending our position, which we believe is meritorious, through applicable
administrative and, if necessary, judicial remedies. On September 26th, 2018 the Federal Tax Office issued a decision accepting the application
of the statute of limitation on the withholding tax discussion. We and the Public Attorney appealed to the Administrative Tribunal (CARF).
On February 11th, 2020 CARF issued a partially favourable decision to Atento, confirming the application of the statute of limitation
on the withholding tax discussion and reducing the penalty imposed. On September 18, 2020 the decision issued by CARF regarding the Withholding
Income Tax became final (the Public Attorney filed a Special Appeal challenging the penalty reduction and Atento Brasil filed a Special
Appeal challenging the goodwill and the financing costs discussion. Both Appeals were not judged yet). Thus, the tax at stake was reduced
from 350,542 thousand Brazilian Reais to 230,771 thousand Brazilian Reais (approximately 46,379 thousand U.S. dollars considering the
current currency exchange rate). Based on our interpretation of the relevant law and based on the advice of our legal and tax advisors,
we believe the position we have taken is sustainable. Consequently, no provisions are recognized regarding these proceedings.
Afterward the issuance of the tax notice in March 2018, the Brazilian tax
administration started a procedure to audit the Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) of Atento Brasil
S.A. for the period from 2016 to 2017. This tax audit was concluded on July 10th, 2020 with the notification of a tax assessment that
rejected the deductibility of the above-mentioned financing expenses and the deductibility of the tax amortization of goodwill.
The total tax assessment notified by the Brazilian Federal Revenue Service,
not including interest and penalties, was 101,604 thousand Brazilian Reais (approximately 20,420 thousand U.S. dollars considering the
current currency exchange rate). We disagree with the proposed tax assessment and we are defending our position, which we believe is
meritorious, through applicable administrative and, if necessary, judicial remedies.
14) INCOME TAX
The breakdown of the Atento Group’s income tax
expense is as follows:
|
Thousands of U.S. dollars |
|
For the three months ended March 31, |
|
2021 |
|
2022 |
(unaudited) |
Current tax expense |
(4,571) |
|
(3,259) |
Deferred tax |
3,592 |
|
7,688 |
Total income tax (expense)/benefit |
(979) |
|
4,429 |
For the three months ended March
31, 2022, Atento Group’s interim condensed consolidated financial information presented a loss before income tax in the amount of
loss of (79,755) thousand U.S. dollars and an income tax benefit of 4,429 thousand U.S. dollars compared to a loss before income tax in
the amount of (19,201) thousand U.S. dollars and an income tax expense of 979 thousand U.S. dollars for the three months ended March 31,
2021.
IFRIC 23 Uncertainty
over Income Tax Treatment
Atento reviewed the tax treatment
under the terms of IFRIC 23 in all subsidiaries and as at the reporting date, the group did not identify any material impact on the financial
statements.
Atento implemented a process
for periodically review the income tax treatments consistent under IFRIC 23 requirements across the group.
15) EARNINGS/(LOSS) PER SHARE
Basic earnings/(loss)
per share is calculated by dividing the profit/(loss) attributable to equity owners of the Company by the weighted average number of ordinary
shares ou tstanding during the periods as demonstrated below:
|
For the three months ended March 31, |
|
|
2021 |
|
2022 |
Result attributable to equity owners of the Company |
|
|
|
|
Atento’s (loss) attributable to equity owners of the parent (in thousands of U.S. dollars) |
|
(20,180) |
|
(70,570) |
Weighted average number of ordinary shares (*) (1) |
|
14,090,948 |
|
14,137,809 |
Basic earnings/(loss) per share (in U.S. dollars) (*) |
|
(1.44) |
|
(4.99) |
| (*) | As a consequence of the reverse share split occurred on July 28, 2020 as described in Note 19, weighted
average number of ordinary shares was calculated by applying the ratio of conversion of 5.027090466672970 into the previous weighted average
number of ordinary shares outstanding. |
Diluted results
per share are calculated by adjusting the weighted average number of ordinary shares outstanding to reflect the conversion of all dilutive
ordinary shares. The weighted average number of ordinary shares outstanding used to calculate both basic and diluted net loss per share
attributable to common stockholders is the same. The losses in the periods presented are anti-dilutive.
|
For the three months ended March 31, |
|
|
2021 |
|
2022 |
Result attributable to equity owners of the Company |
|
|
|
|
Atento’s profit/(loss) attributable to equity owners of the parent (in thousands of U.S. dollars) |
|
(20,180) |
|
(70,570) |
Adjusted weighted average number of ordinary shares (*) (1) |
|
14,090,948 |
|
14,137,809 |
Diluted earnings/(loss) per share (in U.S. dollars) (*) (1) |
|
(1.44) |
|
(4.99) |
(*) | As a consequence of the reverse share split occurred on July 28, 2020 as
described in Note 19, adjusted weighted average number of ordinary shares was calculated by applying the ratio of conversion of 5.027090466672970
into the previous weighted average number of ordinary shares outstanding. |
(1) |
For the three months ended March 31, 2021 and 2022, potential ordinary shares of 5,528,857 and 6.125,930 respectively, relating to the
stock option plan were excluded from the calculation of diluted loss per share as the losses in the period are anti-dilutive. |
16) RELATED PARTIES
Directors
The directors of the Company
as of the date on which the interim condensed consolidated financial information was prepared are John Madden, Roberto Rittes, David Garner,
Antenor Camargo, Bill Payne, Antonio Viana-Baptista and Carlos López-Abadía.
On March 31, 2022, some members
of Board of Directors have the right to the stock-based compensation as described in Note 10.
Key management personnel
Key management personnel include
those persons empowered and responsible for planning, directing and controlling the Atento Group’s activities, either directly or
indirectly.
The following table shows the
total remuneration paid to the Atento Group’s key management personnel in the three months ended March 31, 2021 and 2022:
|
For the three months ended March 31, |
2021 |
|
2022 |
|
(unaudited) |
Total remuneration paid to key management personnel |
1,474 |
|
1,778 |
17) SUBSEQUENT EVENTS
At the date of this report Company
has no subsequent events to disclosure.
PART II – OTHER INFORMATION
LEGAL PROCEEDINGS
See Note 13 to the unaudited interim condensed consolidated
financial information.
RISK FACTORS
There were no material changes
to the risk factors described in section “Risk Factors” in our Annual Form 20-F, for the year ended December 31, 2021.