Atento S.A. Ordinary Shares

Good morning, and welcome to Intento's second 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 stars and one on your touchtone phone. To withdraw your question, please press star then two. If you are at your computer, please use the submit a question box in your webcast viewer. I would now like to turn the conference over to Mr. Hernan Van Waveren, Industrial Relations Director for Intento. Please go ahead.

Thank you, operator, and welcome everyone to our fiscal second quarter 2022 earnings call to discuss ATENTOS financial and operating results. Here with us for today's call are Carlos Lopez Abadilla, ATENTOS chief executive officer, and Sergio Pasos, chief financial officer. Following a review of ATENTOS financial and operating results, we will open the call for your questions. 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 risks and uncertainties. Certain 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 securities 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 advise that unless noted otherwise, all growth rates are on year-over-year and constant currency basis. I will now turn the call over to Carlos.

Thank you, Hernan, and good morning, ladies and gentlemen. As you have seen in our press release, although we knew that our first half of 2022 was going to be difficult, it has proven to be more challenging than what we anticipated when we last spoke with you. We believe, however, that we have seen the worst, and we do anticipate a solid improvement month to month and quarter to quarter for the rest of the year based on a strong June and July sales and current demand levels for our services. Let me cover briefly our Q2 results, the main challenges that we faced, and which of those challenges have been addressed and which still remain. I also want to cover the reasons we project improving performance levels from this point on and to set expectations for the rest of the year. On Q2 results, we saw a significant decrease in EBITDA year-on-year due to reduced volumes in several markets, slower sales early in the year, and significantly higher cost inflation. The lower EBITDA, however, includes severance costs associated with reducing our cost structure further, including the consolidation of our regional structure with annual cost savings that will accrue in Q3, Q4, and beyond. Also, the year-on-year comparison was unfavorable because we benefited from some one-off positive effects last year, particularly COVID-related work. But even accounting for one of costs of structural measures and one of upsides that we experienced last year, we still had a residual effect of inflation and reduced business in the order of 25%. Not where we wanted to be, nor where we expected to be at this point. On the other hand, our focus on cash management and generation has yielded excellent results, enabling us to finish the quarter with a strong cash position that allows us to comfortably meet our debt obligations. This result is not only due to a more efficient cost structure, but also to significantly better working capital management process. Now, what do we see from here and what is our level of confidence? Let's take a look at our key challenges in the first half, slowing business environment and inflation. Microeconomic uncertainties do remain, but the slower sales environment that we saw earlier in the year has improved steadily. and significantly in the months of June and July. We generated record sales in June, our second best month on record, followed closely by a strong July and with a solid pipeline for the rest of the year, which puts us on track to achieve another consecutive annual sales record. These sales have a growing hard currency component at 60% versus 37% in Q2 last year. We feel that the sales organization we are rebuilding with new account management structure as well as new channels and partnerships is proving its worth. Inflation is high across our markets, and although we have been negatively impacted by inflation this year, we are on track to meet or exceed the levels of inflation pass-through that we achieved last year, and we will accrue the larger part of this benefit in the second half of this year. Additionally, the cost structure improvements that we made in the first half of the year should result in over 25 million of annualized cost savings, improving our second half performance beyond the measures we've taken to improve sales and mitigate inflation. That said, even with higher sales, lower costs, and inflation mitigation, we do face uncertain macroeconomic conditions. This leads us to revise our annual guidance to flat revenue growth, an evident margin between 11.5 to 12.5%, and a leverage ratio between 3.0 and 3.5x. Although we have revised our guidance downward, we still forecast a healthy exit rate at the end of the year, with a better cost structure, placing us on a course for a much better cash flow and leverage in 2023. Let me introduce our newly appointed CFO, Sergio Pasos, who will expand on these points.