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.