Atento S.A. Ordinary Shares

Good morning, and welcome to Attento's first quarter 2022 results conference call. Today's call is being recorded. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. If you are at your computer, please use the submitted question box on your webcast from your. I would now like to turn the conference over to Mr. Hernan Van Wyveren, Investor Relations Director for Attento. Please go ahead.

Thank you, Operator, and welcome everyone to our fiscal first quarter 2022 earnings call to discuss Attento's financial and operating results. Here with us for today's call are Carlos Lopez Abadia, ATENTOS Chief Executive Officer, and Jose Acevedo, Chief Financial Officer. Following a review of ATENTOS financial and operating results, we will open the call for your questions. Please, operator, turn to slide two. Before proceeding, please note that certain comments made on this call will contain financial information that has been prepared under international financial reporting standards. In addition, this call may contain information that constitutes forward-looking statements which are not guarantees of future performance and involve risk and uncertainties. Surgeon results may differ materially from those in the forward-looking statements as a result of various factors. We encourage you to review our publicly available disclosure documents filed with the relevant security regulators. And we invite you to read the complete disclosure included here on the second slide of our earnings call presentation. Our public filings and earnings presentation can be found at investors.attento.com. Please be advised that unless noted otherwise, all growth rates are on a year-over-year and constant currency basis. I will now turn the call over to Carlos.

Thank you, Hernan. Good morning, ladies and gentlemen. First of all, let me apologize for my voice or my lack of voice. I'm recovering from a cold, and I'm happy to report that this time around is not COVID. I had the opportunity to get COVID on my last visit to Brazil, and this time around is simply a bad cold that I'm recovering from. At any rate, I apologize in advance. Let me, getting down to business, let me start with confirming as an advance to you in our last call that although we had a slow start for the year, this first quarter, we have seen significant improvement month to month leading to Q2, which allows us to be more confident on the guidance that we have provided to you. Now, let me break that into different components. Q1 results. In our last call, we discussed that we expected Q1 to start to slow. Three main reasons for that. One, lingering impacts of cyber, Omicron, which affected us, particularly in January, February, decreasing in March and back to normal levels now in April. And the higher inflation regime that we see in many countries, but as you know, Latin America is particularly prone to to higher inflation, and it has impacted us more than usual. Now, these effects have been offset by a number of factors. One, obviously, is the actions that we have taken. But two very important ones are the insurance, cyber insurance recognition, which allows us to offset some of the cyber impacts. Also, a very effective inflation pass-through this year. Normally, at this point of the year, we are much less than the 60% that we have achieved already in terms of inflation pass-through to our customers, which allows us to be very comfortable in terms of reaching our 80% or plus 80% inflation pass-through for the year. Now, we've seen a clear month-to-month improvement, except in the quarter with higher margin in March than we had in Q1 last year, which, again, gives us the comfort that the action that we're taking and the improvements that we see puts us in a good position to continue the improvement through the year and to meet or exceed the guidance that we're getting. Now, let me talk about the different components. First of all, sales and revenue. pipeline, pipeline volume and the quality of that volume continues to improve through the quarter and month to month, which allows us to estimate that we are on track to improve the sales year on year vis-a-vis last year. We have already achieved more than $50 million in total annual value of sales. out of which 19, that includes 19 new clients, 58% of that total value. And this, in terms of the quality of this revenue, these new clients come at more than 19% EBITDA margin. Those customers are in, mostly in three key sectors, 90% of that revenue is in three key sectors. E-commerce, fintech, entertainment, those are some of our key sectors. These are sectors that we estimate have proven for us to be high growth sectors. Once you have customers in the right sectors with the right growth, obviously that helps you lift the base and grow with them. So acquiring customers in the right sectors is very important to us. So we're happy with the volume as well as with the quality of the sales that we're intaking. Another important aspect for us in terms of the quality of the revenues is hard currency. Hard currency revenues are up 310 basis points versus last year, and we're reaching 28% of total revenue. As I mentioned to you before, Our aspiration for the year is to get to 30% hard currency as a percentage of our revenue and our EBITDA, most importantly the EBITDA. So we feel we're on good track to achieve our objectives for the year. Speaking of hard currency, talking about our hard currency markets in the U.S., We have seen significant pipeline improvement and sales growth through the quarter, but also, very importantly, both in existing accounts as well as new logos. we see a significant expansion in travel and energy sectors. Two sectors that travel has been a bit depressed the last few years due to COVID. It would appear that this year a lot of pent-up demand in travel is generating quite a bit of volume, very important for us leading into Q2, which is a big quarter for the peak of the travel season. The energy sector, as you know, is a sector with significant challenges worldwide, particularly in Europe. There are significant challenges and opportunities, and we see a lot of activity in the energy sector we expect to continue through the year. I want to also touch on operational efficiencies. As important as the generation of new revenue, acquisition of new customers and moving into the right sectors over time, as important as all that is, it's also very important for us the continued improvement of our basic operations. As you know, we launched a delivery transformation a couple of years ago and we continue to work and get improvements on that. We have deployed now our excellent centers to all the geographies and they're working at full capacity, full blown. Just to align on nomenclature, what we call the excellent centers are fundamentally the continuous improvement centers that allow us to, on a continuous basis, month to month, year to year, to continue to improve the way we provide services to specific programs to specific customers. We also continue to improve the capabilities of our shared service centers, which is where we centralize the capabilities that are not specific to a particular program or particular customer, things like workforce management, quality assurance reporting. We continue to improve the capabilities there. We also are reaching the targets that we had in terms of the deployment of global delivery models, which include methodologies, technologies, and approaches that are critically important. All these four components that I mentioned are critically important for us to achieve a number of objectives. When people hear the word efficiencies, the first thing that people think sometimes is cost. For us, we start with this allows us to provide better quality, better services, new services, and, of course, also to improve our cost position. But it's very important when I talk about improvement of the cost position, it's not a one-off opportunity to reduce costs, but it allows us to continue to improve our cost structure so that we can deliver more with less to our customers. year on year, year on year. The pressures on our industry, like most industries, are not going to decrease over time. So we need to build the capabilities that allows us to keep on improving that delivery to customers. Also, I would like to add that the component that I mentioned last, perhaps very important, the global delivery models and methodologies are critically important for those customers that we have been targeting over the last couple of years. We're getting significant traction from global customers, customers that expect same quality of service, same approaches to servicing them in different geographies. In addition to that, once that you have a model that is global, a methodology, a set of methodologies that allows us to deliver those capabilities to customers, also you have the opportunity to provide continuous improvement of those methodologies. That is more difficult to do when you have these pockets of different approaches to delivery. So very important for us, both in terms of efficiencies, ongoing and recurring cost impact, as well as capabilities to deliver what the customers and the markets demand. On the challenge front, we've seen increased financing costs due to increased interest rate regimes across essentially but for us, particularly important and impactful is the Brazilian market. Now, we're working with our bankers to improve our financing structure to mitigate the potential impact of continued high interest rate regimes. We are not expecting this to change necessarily in the short term or in the foreseeable future. So we're trying to adjust our financing structure to mitigate the potential impact of these interest rates that we've seen to grow over the last few months. With that, I would like to finish my comments the way I started. we see our businesses and actions gain traction, and we do feel more confident about the trend for the year and the guidance that we have provided to you previously. With that, thank you very much, and over to you, José.

Thank you, Carlos, and good day, everyone. As we noted in the earnings release, the first quarter is always sessionally slow. mostly in January and February. It is our weakest quarter by far in terms of sales, profitability, and cash flow. Say that we exited March at a healthy rate to face the coming month, and we are very confident to achieve our guidance for this year. This quarter was especially difficult due to the very high absent rates in each of our markets, including Brazil, our largest. The combination of lower volumes, high sick pay, the hiring of temporary workers, and overtime payments impacted EBITDA and cash flow particularly hard. In Brazil, this was offset by accrued insurance that covered the impact of the October cyber attack. In total, the residual impact of the attack was 25 million in the first quarter in terms of lost revenue and costs. These costs included upgrades of our cyber defenses. It is also important to point out that the current high levels of inflation had a stronger impact this quarter, as new annual inflation adjustments in our contracts kick in during the remainder of the year. We are happy to communicate that we have successfully managed to adjust most of our biggest key clients' contracts. Also, as we noted in our previous earnings call, some of our clients in Brazil diversified their volumes away from us to other vendors. This is reflected in the 7.7% decrease in Brazil's multi-sector revenue in the quarter. Thankfully, less volume shifted than we expected. I should also point out that some of the decline also reflects contracts that tend to choose not to renew due to low profitability. The decline in Telefónica revenues in Brazil and the Americas was mainly due to a cost cutting program that this client recently implemented globally. The exception was in EMEA, where Telefónica consolidated the number of CX providers it uses. In other words, we made the cuts and picked up additional volumes that had been assigned to other competitors. Although EMEA revenue was flat, EBITDA decreased due to one-time severance payments we made in relation to rationalizing capacity at the call center in this market. We expect to continue calibrating our capacity in all markets throughout the year. Lastly, revenue in America's region was soft compared to the previous year, as last year we had won a big contract in the U.S. But we expect to resume our growth trajectory in these markets based on the volumes we are seeing currently and the sales pipeline. On the next slide is an IBTDA to free cash flow bridge. Three items mainly drove the change in working capital. This includes the cyber insurance that I noted earlier, a delay in the signing of a new telephonic contracts, and advanced funds that banks may deliver to clients at the end of each year. Regarding capex 6.3 million, of its reflects spend that was postponed last year. For this year, we are budgeting between capex to be between 4 and 4.5% of revenue. The 25 million in net financial expenses primarily consisted of 20 million in bond interest payments and 5.2 million in interest expenses, mainly those related to our hedges and credit revolvers. Moving to our capital structure, we maintained a healthy cash position at the end of the quarter and expected to improve along with leverage and haste the year progresses. Keep in mind that our leverage ratio is calculated on a trailing 12-month basis. So the impact of the fourth quarter cyber attack will be carried in the ratio until the end of the third quarter 2022. It's also important to note that our interest coverage ratio is at 1.9 times versus 2.3 times in the last year's first quarter. Last but not least, we have successful one month, our Euro-denominated hedge with a positive cash impact of approximately 4 million US dollars. We continue to monitor currency and interest rate markets for further opportunities to reduce our financial costs. On the next slide, we reached equity, which remained negative at the end of the quarter. The bulk of this is attributable to a net 104.3 million in financial items, of which 70.4 million is non-cash items related to the balance sheet and P&L conversions. These items are broken down into the box at the center of the slide. As you can see at the top of the slide, the CDI interest rates, our cross currency swap is linked to has risen substantially over the last year. That's impacted our USD BRL cross currency swap mark to market. Moving to the last slide, Q1 was another challenging quarter, but our underlying fundamentals remain strong, and our growth strategy continues gaining traction. We therefore expect to achieve our guidance targets as well as exit 2022 in a strong way. Operator, please open the call for questions.

Yes, thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. If you are at your computer, please use the Submit a Question box in your webcast viewer. At this time, we will pause momentarily to assemble our roster. And I would now like to turn the call over to Mr. Anand VanWaveren for questions received via the webcast.

Thank you, operator. We have a question from our webcast. So, Carlos and Jose, I think you mentioned that you were able to pass through 60% to 80% inflation historically. What is the number now?

As I mentioned in my remarks, we are over 60%, which is very good given the time of the year. The way this tends to work is – as contracts reach their annual renewal or the annual point, the inflation closest trigger. So some of those contracts happen to be renewed or they trigger in January. That's very good. Some of them in December. The sooner we can get the inflation pass-through done, the better. And normally it's a combination of what the contracts say and a little bit of a negotiation. So we've been very proactive this year, as you can imagine, given the higher level of inflation. So we are at 60% at this point of the year. So reaching the 80% that we normally target by the end of the year is not only within reach, but we expect to exceed that.

Thank you, Carlos. We have a next question from our webcast. Could you please give us an update on the impact of the cyber attack on your business moving forward?

Good question. Hopefully this will be less and less the question of a tank. because the answer is less and less. As I mentioned in our previous call and we mentioned today, we still have some residual impacts in Q1. We expect much less in Q2, Q3, and so on. In fact, to be even more specific, In Q1, we had both on the cost and revenue side impacts. The bulk of the cost side, as I mentioned in a previous call, were the anticipation of a lot of the measures that we had in the cyber plan. We moved those, we accelerated those to Q4 and Q1. So that was increased costs. The bulk of that is done. The rest of the year from that perspective is normal. In terms of customers and volumes, I mentioned before, by and large, with one exception where we decided to part ways on a mutual agreement, all the customers have remained with us. In some cases, as we expected, the customers that had a lot of volume with us, 90% plus, decreased their volumes. We had included in our forecast for the year, we looked at all the customers that have high exposure to us, and we have assumed or we put on the forecast that potentially they're going to decline those volumes. That may or may not happen, but we wanted to be prudent to have that in the forecast, and the forecast obviously is the basis of the guidance that we provided to you. As the year progresses, what we've seen is some of those volume decreases either not happening or happening more slowly than we had in the forecast, which is a good thing. And then again, as time passes by, all this gets diluted into new sales and the natural growth of the business, which leads to fundamentally these receipts into the background of the past noise. So in short, we expect not to be talking too much about cyber Q3, Q4, and hopefully ever.

Thank you, Carlos. We have one more question from our webcast. Could you develop an Attento sales strategy for the remainder of the year?

Well, as I mentioned a second ago, very important for us, particularly when you have the, what's always important, sales is important when you're doing a transformation. It's very important to move from A to B, obviously. You know, that transformation includes sales, changing customers, changing services, et cetera, or adding customers, adding services, of course. Particularly important for us, years like this, where we had undesirable events, tough events in Q4 and so on and so forth to replenish the revenue streams. So I made some of my remarks regarding sales strategy in particular. A couple of things I would highlight. Obviously, sales strategy is a complex and broad topic that will be very happy, since it's something I personally get very involved and I enjoy. I'd be very happy to discuss in detail with anyone that cares to endure that from me. But many thanks. We introduced new channels. We've introduced an inside sales channel, and we have introduced also a partner channel, which we didn't have before. We're getting very good traction. We started with the partner channel a bit earlier than inside sales. Very good traction on both. We have in the partner channel, I think right now, around 85, 90 million dollars in the pipeline. That's a relatively late stage pipeline. So good traction on those. We started rolling those out in the U.S. and we're extending them to other regions of the world as we see what works, what doesn't work, etc. So we'll continue to do that with these and other channels. I believe that in any aspect of the business, it's very important to try things, see how they work. Not everything that you try in business works, as in life. and recognize very quickly what doesn't work and try something else. These two seem to be getting very good traction right now, and we're rolling them out to the rest of the world as well. Other aspects of the sales strategy that would highlight, for example, a very important market for us is Brazil. It's our largest and most important market. We are taking a new approach to sales and to the market to re-energize Brazil. We have introduced changes on the sales incentive program that are different from what we used to do before. We're focusing both in new sales, new customers, and existing accounts where we think we have a significant opportunity to grow into new areas of the business of our customers. We're also looking at the overall Brazilian market. Quite frankly, we are the largest provider in the Australian market by a large margin. It's a very competitive market, and although we are interested to continue to be At the top end of the market, we don't have any interest to go to the bottom where, you know, getting to a rise, sorry, a race to the bottom in terms of price or quality of service. We want to continue to be the premier provider. But we're looking at the upper part of the market, and we're segmenting that and taking a a specific and different approach for the different segments. One of the things we're introducing is a Hanatento Light. I don't think we have a commercial name yet, but one of the things is a part of the market that is desirable for us have different needs from the top tier Sao Paulo or large city-based customers, and we are doing a targeted offer for those segments. Again, I'm very happy to discuss in more detail our sales strategy with any of you in particular, or as we develop our investor relations day, make sure we have a deep monographic on sales and marketing strategy.

Thank you. And we do have a phone question. That comes from Ryan O'Hagan with EIP.

Hi, guys. Thanks for taking the time and taking us through the presentation. And congrats on being able to confirm guidance. It's great to see, given the difficulties you had in Q1. I just have three very quick questions. The first is in relation to the cyber attack. You mentioned having a $25 million net impact on costs and revenue. I just wanted to get more color on how I should think about that number. And could you give us an overview of the quantum of the insurance refund that you got in relation to that attack?

Okay. Insurance is easy. It's 10 million euros. So whatever the exchange rate is. The cyber impact, you wanted the color on the cyber impact in Q1.

Yeah, just an overview of kind of what the revenue impact was and what the cost impact was and whether that cost impact was purely operational or was there some capex element, I don't know, like IT infrastructure?

There was. We might want to look at this closing a little more in more detail. If there's particular interest in this, we didn't bring that today, but I can tell you at a high level what that is. We have, as I mentioned, there's a cost element to that impact. That cost element, we took a lot of that in Q4 and some fit in Q1. And the cost element is fundamentally the investments on, we took our cyber program for the full fiscal year 22, and we accelerated that. Some of that we did in Q4, to be honest, but we still had some additional stuff above and beyond what we had planned for the budget for Q1. So those are incremental costs of acceleration of things we were going to do through the year. On the revenue, it's very simple. What I tried to explain a few times a number of customers, not lots of them, to be honest, it's a handful, where we represent 90 plus percent of their call center capacity, for example, right? In some cases, some large customers, it doesn't apply to the whole customer, but it's a line of service, a particular product, a particular service we provide for them where we are the only provider for that service. When that happens and you have, well, I think, in all fairness, I think it makes sense to do it anyway for redundancy and business continuity, right? But clearly, the cyber event brought to the fore. Gee, you know, from a redundancy perspective, it might make sense to have my volumes distributed across more than one provider. So some of that happened. Most of that happened during Q1 to be the same way I'm telling you that most of the incremental costs happening in Q4, most of the decrease in volumes happened in Q1. We have assumed that anyone that had a higher, a high percentage dependency on us, either in total for the company or For line of service, for a specific line of service, we have assumed that that would decrease and that's in the forecast and that's in the guidance. That conservative assumption is not happening in all cases, which is good, or it's not happening early enough in the year. So my expectation is that, you know, there may be some more of that during the year, again, already in the forecast and in the guidance. but it may not happen or may happen later, which I think would be an upside. That is the nature of the impact. In terms of the specific line items of the cost, software, hardware, and services. By the way, we also have upgraded the services of a number of cybersecurity providers. We can look at making a specific disclosure of those by line item if it is of interest to all of you guys. Most of that is a one-time event, so we didn't think about having that here today for you, but happy to break it down.

Got it. That's super helpful to learn. I appreciate that. My next question is more kind of the strategic side. I know there are quite a few rumors in the market that you guys are assessing strategic options for the go-forward shape of the business, et cetera, and clearly the cyber attack has been a meaningful kind of impact on Q4 and Q1, and I know any kind of sales process or strategic options might be impacted by that. Just wondering, given the kind of near-term conclusion of the lockup period for the big three investors, Is that something that you guys are actively discussing right now, about extending that lockup to give you kind of extra time as a result of this kind of disruption?

Okay, so I thought your question was going in one direction, but maybe it's another one. On the question of M&A activity, my answer from last time stays, and it will always stay, that we don't comment on M&A activity until... you know, we have something to say. We're a public company, and obviously we trade it every day, and we always look at opportunities that could enhance for the value. Beyond that, I will never comment on any specific rumors. On the share lockup, look, a number of you have asked me the question over the last few weeks, to be honest with you. And I have approached, I mean, I'm in constant discussions with my major shareholders, as you can imagine. And I have approached this question to a number of them. I can tell you with confidence that they have all expressed confidence in the company and confidence in the value of the long term, the long term value of the investment. So that I can tell you unambiguously. I've also approached the specific concern of some of you, as you are right now expressing, and I'm in discussion with some of them about the possibility of them making a further commitment that we could make public. Stay tuned, and I might have something to talk to you about. Got it.

Got it. That's super helpful to know. And just the last question on my side, I appreciate the color in that and appreciate your hands tied on the M&A side. You mentioned the investor day as part of your release materials and as part of your spoken comments. Is that an event that you guys think will happen in Q2 or is that more kind of in the back half of the year? What kind of timeline, broad, broad spaces are you thinking for that?

Sure. I'm glad you asked the question. I was having a debate just as he is my LinkedIn The plan is to have a a formal face-to-face, proper investor day in the October-November timeframe. We'd like to have the time to organize and also for those of you that are interested to structure, to make plans to see us in person. I think there's most value in doing that. That was not possible the last couple of years due to COVID and other things, but I think now that it's possible, I think there's a ton of value on that. We were also having a discussion earlier event, potentially even in June. But that would have to be more of a virtual nature, right? That would be an extended maybe half a day or we'll figure out the agenda and the format. We're having a bit of a debate internally as to the value of doing that. If you or anybody on this call would care to give us some input and feedback in terms of how that would allow us to gauge the level of interest on that virtual event in the next month or couple months. Very happy to organize that as well. But we thought that we will organize an Investor Day in October, November 10th.

Got it. That's super helpful. Guys, I appreciate that steer. For what it's worth, I think something shorter and virtual in June makes a lot of sense. Presumably you guys are very busy, so just be good to touch base more kind of informally. I'm sure the rest of the investor base would appreciate something like that. But, yeah, this has been super helpful. I appreciate you taking my questions, guys, and best of luck for the rest of Q2 and the rest of the year. Thanks.

Thank you, Brian.

Thank you. And the next final question comes from Vincent Colicchio with Barrington Research.

Yes, good morning, Carlos. I'm curious, are you seeing signs of economic weakness in any of your geographies? I think you're a good read on the broader Latin market and America as well.

As you can imagine, we all look at that constantly, and particularly this year with all the all the turmoil, geopolitical issues, Ukraine, China, and the whole economic situation at the global level. So for us in particular, we have not, and I always say these things with a level of nervousness, we haven't seen that weakness. I never say that because, I mean, sorry, when I say that, I always say with a level of nervousness because I think I could jinx it. But no, we haven't seen that. As I mentioned in my prepared remarks, the beginning of the year was a bit slow in many markets, to be honest, but sales pipeline have been ramping up pretty nicely the last few weeks. And leads me to have more confidence for the year. You know, predicting macro events is You know, it's hard and there's a lot of people are much better qualified than myself to do so. But if your question, which I think it is, is do we see it on the ground? I don't see significant weaknesses on the ground in general. We can talk about a specific market, but we don't see it right now. We see the last four or five weeks significant uptick on our pipeline and our sales.

And what was the level of low margin contracts not renewed in Brazil significantly higher than your plan?

Well, there's one in particular that I think I mentioned in a previous call that, you know, we were not planning. We were, I don't know how many negatives I can put in a sentence. We were not planning not to renew. In other words, we were planning to renew. But given the complexity after the the cyber attack and it was taking a long time to bring them back, we decided that it was just not worth it. So there was one in particular, but that nothing comes to mind. So the answer would be no, but with that exception that comes to mind.

And Jose, what are your thoughts on free cash flow for the year?

Vincent, our thoughts about the free cash flow with the guidance that we give, and we are very confident on that, it's to be between breakeven and 10 million positive.

Okay, thank you. Thanks for answering my questions. Thanks, guys. Thank you, Vincent. Thank you.

So our next question comes from our webcast. Has the negative equity triggered any technical loan defaults or breached any covenants?

No, the short answer is no. Most of that, as you mentioned, is account improvement. We don't take that extremely seriously. But from a perspective of covenants, the right answer is a simple one, no.

Thank you, Carlos. Next question from our webcast. Could you please talk about the further potential of managing costs? How does that translate into margin numbers? I think you said in one of the previous calls that there is less room to cost compared to the initial stage of the three-horizon plan.

So I always want to make the specific point regarding cost. There is... one-off cost-cutting that, you know, many companies, we do it when, we do it constantly, to be honest with you, which just say calls it hygienic, you know, like cutting your fingernails, because, you know, things tend to expand, and the particular cost tend to expand if you don't, you know, cut regularly. Those are more, let's call them tactical cost-cuts, which, We do regularly, and I think although they are important for any company, they are not that strategic. What is more strategic for us is what I was referring in my remarks, and I tried to give you regular updates, is the reduction of the cost structure. And the difference there is it's not doing the same things with less. It's changing the way, sorry, it's not, doing the same things in the same way with less is doing, you know, the same things in a different way that is more effective. And obviously with less and doing that. So the whole focus of our, or one of the horizons or one of the focuses of the, of the, of the three horizon plan is exactly that is to change the cost structure, to change the way we do business. That's not as easy as, cut this or spend, you know, don't travel or let's lay off, you know, 5% of the people or things like that. It takes time because you're changing the way you're doing things. But it's the most valuable thing we can do because one, you know, yes, you become more efficient and you lower your cost structure. But two, you know, the focus is also to provide Better service, high quality. That's why when we look at that program, we frequently talk about, you know, here's the impact in terms of efficiency, but also here's the impact of NPS or customer satisfaction, because we're looking at both. You know, better service, you know, in a more efficient way. Now, that's harder, but that takes multi-years, multiple years, and quite frankly, it's something that will continue to evolve forever. way beyond what we stopped talking about with the Horizon Plan. I think part of the question there was the impact of that on ResolveWe. And again, this is another one of those areas that would be great probably to expand on an investor day, because it can give you a simplistic answer, but probably doesn't do it justice. This year we're targeting to have an impact in the one, two, perhaps 3% on direct impact in terms of efficiency. But you need to take a look at the ongoing improvement on cost structure as something that puts you in a better position to compete. As I mentioned in my remarks, customers always look for more And that's true today. It will be true five years from now. So a level of improvement has to be always, always be produced. Part of that will go to improvement on, definitely in our case, part of that will go to improvement on net margin, on EBITDA margin. But part of that goes into being more competitive in a forever more competitive market. So how those two get split, that probably would be a very good topic for that Investor Day so that we can explain exactly what we're doing in operations and how that materializes in a more competitive position in the markets where we compete and how much of that materializes in better margins.

Thank you, Carlos. Another question from our webcast. Good to see things are getting back on track. How do you see cash flow fluctuating throughout the year, and how would cash flow look excluding growth working capital and growth CapEx investments?

Okay, I think that's one that I want to punt very quickly. to just say, I don't know, we have that information handy. I definitely don't have it in my computer memory.

Yeah, no, I can give a color. At the end, as I mentioned before, we will be between breakeven and 10 million positive. If we take out the growth capex, we will have more 15 million, between 15 and 20 million. That is what we have. If we take out the 100% of the capex, and that is impossible, of course, because we have ongoing maintenance capex, and it's not less, it's about 40 million, we have more 71 million. It means we can end the pre-cash flow with 80 million. But it don't make sense to make the math on that. And about the growth, the same. We cannot say here, we need to grow, and I can invest to grow. That is why Again, we work to make an ABTDA in order that allow us to pay everything and to give us a positive free cash flow. It's not so much as we wish, but as we know, we have a lot of financial costs and so on that we have to pay. But in the next years, our wish is, of course, to increase the free cash flow through the operational results.

Thank you, Jose and Carlos. Next question from our webcast. When looking at different financial structures, how do you think about the pros and cons of adjusting the hedge?

At a high level, very simply. The hedge makes much more sense the more dependent you are of one or several specific non-dollars or foreign currencies, foreign to the dollar. As we increase our percentage of hard currency, and we consider those euro and dollar, that becomes less and less necessary. That's one component. The other component is the cost of that hedge. At the time where we did it, it was relatively inexpensive. Everything is relatively inexpensive. In a world of higher interest rates, it's more expensive. So given that the balance there has changed, that's the reason we're looking at restructuring that.

Thank you. So last question from our webcast. Could you talk about your current progress of hitting your guidance this year based on your current sales pipeline and new client contracts? Are we ahead or behind expectation?

Well, as I mentioned in my remarks, we obviously will keep you updated as the year progresses. But again, The guidance that we set four weeks ago, we feel more strongly about it than a few weeks ago. I mentioned how the upticks that we've seen in pipeline sales, et cetera, some of the downsides that we were forecasting, and we're still having to forecast, are not materializing. We do We are, however, in a very potentially difficult year from a microeconomic perspective with all the global uncertainties that we have. So we continue to be conservative in terms of how we look at things. But from last time we spoke, which I think was four or five weeks ago, until now, things are ahead. So more confident than when I made the commitment a few weeks ago.

Thank you. And this concludes our question and answer session. I will then turn the conference back over to Mr. Hernan Van Weveren for any closing comments.

Thank you, Operator. We wanted to thank our stakeholders and analysts joining the call today. We look forward in further answering any questions you may have. As a reminder, our public filings and earnings presentation can be found at investors.adkento.com. Operator, please conclude the call. Thank you very much.