Q4 2020 Atento SA Earnings Call

Thank you and welcome everyone to our fiscal fourth-quarter and full-year 2020 earnings conference call here with us for today's call are Carlos Lopez of the DIA at 10 a.m. And just as a Chief Financial Officer following a review of Atlantis financial and operating results. We'll open the call for Clear questions. Please turn to slide to be 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 the relevant Securities regulator, 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 that investors. Please note that unless noted. Otherwise all growth rates are on a year-over-year and constant currency beige. Just I'll now turn the call over to Carlos.

Thank you, and good morning and good afternoon to love you.

Twenty-twenty has been a year full of challenges for all of us, but also a year of many accomplishments.

We're finished Q4 with the same results exit in the year with a significant upward trend.

Yep, going every time 20% in 2020 despite the impact of the crisis and the Brazilian real devaluation exiting key for with improvements across the board in Revenue customer margin.

Last year has been defined for many of us by the impact of the economic a tent though it meant to reorganize operations to ensure the safety of our employees maintain a service store clients and secure the financial strength of the company.

What is it for?

More than 80,000 employees to work safely at home and restructure our Center operations to ensure that the services that needed to be provided in Secure locations that perform safely and efficiently.

We can get a phone with people. It's at the core of our culture as evidenced by the numerous awards were received.

During the year, we have deployed a completely new platform to support work at home. This is a new service modality, which is now part of our standard service portfolio.

Respect attend to at home services to continue to be very attractive to our clients will be on the current Health crisis.

We managed to pandemic. We have not slowed down our transformation. We have accelerated the transformation of our sales leading to an 18% year-on-year growth.

More importantly is the quality of those cells with an improvement of ten percentage points in contribution. Margin.

We also continue to make progress a hybrid verticals and the US market what we showed 100% And 43% growth in Q4, respectively. We also continue to develop our relationship to the funk.

Despite the high growth and focus on new markets and sectors California remains a very important client you continue to gain share of wallet with telefonica while winning new contracts, both International and Naturalization Services.

We have all seen proof of a delivery achieving cost Savings of more than eighty million while restructuring our operations on at home. This has been done while improving quality. We have achieved 20 the highest NPS and customers scores in the history of Atlanta.

We have continued to advance our Innovation transformation. Our next Generation Services portfolio has reached 50% or total sales our commitment to invest in Innovation Hudson to becoming the first company in our sector to get ISO Innovation management certification.

You know, this isn't where Innovation work internally and we established Partners. We have launched attention X space or a jelly startups to work with us in key areas such as a division intelligence and law or brown activation on social networks.

We have also improved our financial strength successfully refinancing our long-term debt until 2026 fully hitting both interest and principal have also produced record in cash flow in a liquidity in the face of the uncertainty of epidemic was Paramount.

Finally, but not less importantly. We have changed our governance and shareholders structure.

We have welcomed a new set of world-class investors to our shareholder community and expanded the number of independent directors in our world to find out of it.

Twenty-twenty has been recognized by the market with improving stock and the performance but also by industry analysts and clients.

Donna at the top of the driver leaders quadrant

first and Sullivan has ranked as as the leader in Innovation Latin America and evidence has recognized us as one of the companies showing fastest Improvement globally last year off.

Successful twenty twenty and a strong exit rate makes a C 21 with Optimus.

To be clear still in full force particular markets, but we have today in a much better position to manage than we were at the beginning of 2020.

I'm happy to report recent significant wins such as an additional $4,000 contract in Brazil and an important when helping the state of Maryland managed attacks in Iraq.

Thus with confident to continue delivering improved results in or France cuz the Top Line spanning evident and continuing to deleverage the balance sheet.

20-21 will bring us its own challenges some of those we know and some we may not know yet, but we transformation plan already.

Having successfully navigated the historical challenges of twenty-twenty while continuing our transformation is confidence on a very positive outlook for the future. Thank you very much.

Thank you, Carlos and good day everyone. I will start by presenting to you in more detail how we are progressing in terms of revenues and then breaking it down by region may be recorded to go off in all the regions during the fourth quarter, especially in Brazil that will 5.5% and that 7.1% Mainly Driven Life will be set in the quarter. We should fifty three point five million dollars.

But the highlights of the Flies that's I want you to focus on our debited a margins on the right side, as you can see we ended the quarter with a customer that has a margin of 14.5% an increase of nine point five percentage points compared to the same quarter last year. All regions are performing very well with high profitability across-the-board Brazil. Margin was 18.4% the highest please leave permitted the three Oregon plan while the marriage wishes a 14.7% margin compared to a negative margin last year and m a 16.1%

I will decide the reason for this performance during this presentation the results today from implementing the plan give us confidence that we will continue to age didn't either positive results and the team already. Margin guidance of between 12.5% and 13.5% for twenty Twenty-One and between forty and fifty at the end of 22.

Here you can see the same information. But the year what I'd like to highlight here is that we delivered 161 million a BDA which is a 23% growth in constant currency even more impressive on a reported basis. We were able to deliver a 5% increase in every TV a cock fight the pandemic and the devaluation of major currencies in Latin America, especially the thirty percent devaluation of the Brazilian real during the previous month was 11.5% in the year a 2.4 percentage Point increase versus 2019. This is the result of our strategic plan which birth top-line growth driven by multi-sector and increase the penetration in the US that is reinforced by operational efficiencies, which will decide dead.

In the next looks like our three our is on planning has been driving the Improvement in Revenue mix in the last two years. We are we're able to assuage diversification to multi-sector with an increase of seven percentage points in these revenues has a percentage of the total after a stability around 50% We have the day here with 68.2% of revenues coming from multi-sector has referred fast-growing Vertical Search as birth Media Tech equipment and Healthcare. This vertical is not only go faster, but also allow us to sell more next generation service jobs that have better margins why we do the revenues with these verticals has a percentage of total telcos in financials are more mature vertical and yep.

No more slowly or even decrease.

On the other hand telefonica revenues now represent 31.8% of total revenues, even though they are lower year-over-year. They are found out any adults much W already knew me a schedules already explained we have been able to reshape our relationship with telefonica exploring new avenues of partnership including new programs at that early this year that will already be reflected in the first semester result.

As we move on with our strategy of Revenue diversification, we expect the Panic already used to represent between twenty-five and thirty per-cent of our Consolidated service revenues to the end of 2022 with increased profitability.

I am happy to report that as we had problems. We deliver nearly $85 million dollars in cost Savings in 2021 as a result of using the company.

Budgeting that we are gradually implementing and expect to be fully functional by me twenty Twenty-One. There was a model that's allowed us to reduce the number of sites.

This chat service director that allow us to reduce our sg&a expenses across our entire operating footprint.

The most important take away from this life is that sixty million out of the 85 million and a larger cost savings is structural effects reduction that may be carried forward to 20 21.

Therefore the margin Improvement in 2020 was a direct result of the officiating we delivered and will remain in place in 2021 from 8:20 to on the Improvement will come mainly from The Rim part of the new clients program especially has a pencil concurs more clients in the first choice in verticals inside margin markets has u.s.

20/20 was an important milestone in our tenure on process and this lights tests to the achievement as a result of the vet implemented in every aspect of operation from every TV a to working capital newer able to generate seventy-four million in operating cash flow thirty-four million in the fourth quarter alone, in terms of free cash flow. We generate forty million in 2020 compared -65 million in 2019, which represents an increase of one hundred five million dollars in the.

This is a result of not only the higher BTA in the. But also the positive impact from the changes in the way how we manage our working capital not terribly from the box removed. Yes, so that end of the year at sixty sixty days. It also reflects our internal sets collection support to recover off receivables. The stricter control of working capital will provide greater stability in our cash flow moving forward with much less than a bullet Tire free cash flow and stable around 15 million a year for the next two years.

We ended the period with a cash balance of 209 million including the sixty billion of the revolvers while we expect to repeat these range from twenty Twenty-One. It will essentially depends on how the pandemic and our cash flow evolve.

Last but not least. We are also pleased to report that we saw the uncertainty related to our capital structure has we just concluded that referencing the smoke despite being concluded in February twenty Twenty-One. The process was indeed tickets of in September last year. We issued a new laws say about that million secured notes that will matter in February 2026 increasing the average life all of our debts from 1.5 to 4.5 years.

The books was over subscribers by six times and the search is a testament that investors recognize we have delivered one month than the wrong story in Q3 and Q4.

Keeping our commitments with investors. These new notes are charges with the principal fares for three years and coupons until maturity. The instruments mainly wage cross-currency swaps in Brazilian real Peruvian soles and Eros has a reference. The Via Rail cost is approximately 1 month 80% of CDI equivalent to 3.5% a year with the current TDI fast compared to the vrl cost of 7/9 various of the previous one.

Not that went down 13% compared to the last year to telling 580 million and reflecting the strong free cash flow generation in 2025. Let's cue for net leverage to decrease 0.7 times, which is a remarkable result considering the challenging environment from the enemy and the effects of the thirty percent devaluation of the Brazilian Real on our ETA.

We are starting 20 21 with no relevant debt maturity in the next five years with operational efficiency. That will be carried out to twenty Twenty-One. And we the much more profitable operation that will allow us to continue to deliberate our balance sheets and deliver on our 2022 targets of between 2000 to 2.5 times. We believe that these key elements are lines the interest of all stakeholders and we expect is one of the most important part get the lights for our shares to continue the very strong momentum. We have seen in the last ten months.

Thank you all for your interest in a potential. We believe there is much more to come in the next year's ahead and we are committed to deliver Superior value to our shareholders.

We will now begin the question-and-answer session to ask a question. You may press star than one on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing the keys off to withdraw your question, please press Stars into again those listening through the webcast May submit questions by clicking on the word questions on your screen. And at this time we will pause momentarily to assemble Thursday.

And our first question today will come from Vincent pelliccio with Berrington research, please go ahead.

Yes, Carlos nice quarter. I'm curious. Do you think the refinancing of your of your debt will improve your standing with some customers now that you know, you're in a better financial position?

I think I think on the margin. Yes, I think they they they are refinancing think is very important for the company as a whole but I think probably more for Four Sisters to make sure that they everybody understands that we have a solid capital structure. Some customers are sophisticated enough to to look into these things. So that would obviously winning back positively but I think is is is mostly an investor and management and board type of be so we feel as I say has said and I mentioned we for us this has been a milestone because we will resolve this issue for until 2026 plus we we've done it in in in very good conditions including the catching of the capital and the sort of the the principal and interest which was not the case before so we feel from a financial perspective much stronger from this perspective.

Thinking about the business model of once we get past the pandemic. Do you have any sense for a good portion of your clients would be okay keep things at home. We've heard from some other contact center players that you know security and and and and quality of of of of Technology makes them want to go back into the office at some point. So just what is the mix look like longer-term any thoughts on that?

Not sure they that's that's a very good question is one that a lot of people are are asking including ourselves. Let me tell you what I know and let me let me tell you the birth of of what we don't know right work-at-home is is is not going to go away that I can tell you and it's something that is going to continue to be in in in Christian. Do what do I say this? Because this is one of the things that these the current pandemic has accelerated and crystallized in other words things that were already happening in society. So the things that are not necessarily unique was a pandemic but the depend on me has accelerated.

So from that perspective, excuse me.

So from that perspective it will continue the trend will continue that direction that that's clear to us. What will happen after we put that make whether it there is a little dip down and then to resume the the the upward Trend. I think that probably would be the case but the attractiveness of the work at home, I think it's it's Crystal Clear or all the participants right for company employees and most importantly customers. The customers gives the the the gives birth and see you know distributed, uh, What uh Workforce or base? It gives you the ability to recruit more much more broadly particular as you're looking for a specific skill sets that you know, now you don't have to look for them concentrated around a very small geographical area. So a lot of benefits there for for customers employees love it would run a lot of money.

Surveys, and it's absolutely Low by the employees and for us although it's an investment in the short-term. So there's some costs associated with with them doing this at scale in the long term. It provides also more flexibility for us and as an employer and and provider but also potentially cause things we we have plans, uh that we you know, we we have different scenarios in terms of what we do and what centers we could reduce or consolidate depending on on different wage is in the exact number, you know, nobody knows it's going to depend on the market, but I can tell you with certainty that at least with conviction that the the the trend wage is is clearly in that direction.

Thank you. Thank you. I'll go back in the queue.

Thank you.

And again, if you'd like to ask a question, please press * then 1 also if you're at your computer, please use the submit a question box and your webcast year and I would now like to turn the conference over to me that cord for any show or for any questions received via the web cast.

Thanks call. So we have a question here on on dividend policy and and share buyback for 21 and 22 off the shareholders view about it. And uh, what are the priorities of the companies kept all occasion for the next two years.

Sure, specifically on dividends and BuyBacks. They there's no no plans for what dividends at this time. They they the board has excuse me. The board has authorized us to have extended the authorization for Buy Backs, which we will continue to use uh, uh adequately but I will repeat what I said in every every time that the question came up the priority our priority is to invest in growth and in the transformation of the company. Those are the the the critical uses of of cash. Our our policy is to make sure that we invest in the long-term value of the company not any particular quarter or year. So with that in mind and with those projects

fees for the use of cash we

In the past to use the the the authorization to to do a limited stock BuyBacks and we will continue to do so, but again, you know first and foremost use of cash is the growth and the the investment in the in the company.

There's a follow-up question the same theme here on the and the lock up. As probably they have slightly over a year-and-a-half. Now of of lock up. Uh, do you have any sense of what do you mean talking to them? And do you have any sense of their plans once the lock-up is over?

Well, I mean, I probably used to be like that that question to the whole this as far as you asking my sense of it. I don't have any sense of urgency from them whatsoever. Um or whatever that's worth. But as to intentions of any shareholder would you know, I would not want to presume to know uh to know so long. I would be like those two to them. But in terms of the communications to the management of the company or or or indication, there's no allow any sense of urgency or definitely not any peer pressure from the from the shareholders.

One question here on on cash flow. Can you help us and navigating through your 21 cash flow expectation wage, uh, and uh and assuming a at the CARFAX is around the sixty million dollars, uh, and your interest costs will be higher because of the debt refinancing. Can you explain to them run us through the uh cash flow? So so we can understand those moving parts.

As you probably you say it's already, you know, you know can see if there's something I'm going to be directed to to him and and you shy off the bridge specifics other ones to put my foot in my mouth to say yes only to to clarify. It's it's fact that we may have more interest in here because we we have a high interest rate. But if you invest sixty million, our expectation is to have a free cash flow of between five and ten million u.s. Dollar end of the year.

Yeah, I'll just add that to to help people understanding and on those numbers. So obviously if it depends on each one of you and how how you you you do your model, but you can assuage around as I mentioned sixty million dollars in in Carfax. Then we have around 15 one five million dollars in working capital headwind page fifteen million dollars one five in Texas and then the interest which should be around the 45 or 50 million dollars. So so this is pretty much and then you you do your own life. And that's how we gets to around five to ten million dollars over a free cash flow.

I got a question here on on on seasonality and people trying to understand if the annualized q46 Zen Zen ebitda. Margin your your guidance Loops, uh conservative, uh in all aspects in terms of damage looks conservative in terms of Leverage looks conservative. So can you walk us on on how how you got the rationale behind the the guidance that you provided in in light of your Goodreads into for sure. So not the first time I am I hear this question. So let me separate it into seasonality and and how well we we build the the the guidance seasonality we have I mean, if you look at the history of this company, you can see clearly. This is not a traditionally. Yep.

Hi Porter, while q1 is East originally a low quarter that difference was much more pronounced. If you go back in history, one of the things that these management team has done a hey look we understand this certain unavoidable, uh a factors of seasonality. But you know, if we can improve you know, how we start the year off you want. We have a an issue. It needs your job the rest of the year. So we we looking closely and if you look at you know, how we have improved the q12 q1 Home Improvement is what we look at. So we're trying to decrease that that seasonality effect between 4 until 1 but there is a seasonal defect so multiplying for bath before he's probably giving you the the wrong the wrong numbers having said that take a look at us and see how we doing. You want to q1 our our a.m.

At least this is to continue to improve that uh every year. How do we construct the the the guidance you lose conservative to them? Well, look, can we do better than that and we do much better, but we certainly can write a number of circumstances this year any year in some of the markets where we operate in America for example in any year, but particularly this year are there potential for announced on the downside which were there are we think we can manage them? Of course, we can't what we're trying to give you is arrange that the fundamental is built our credibility with you. I promise from the one that uh, life intention of this management team is to prove to you Improvement quarter after quarter after quarter year after year. We don't expect to earn The credibility of any investor by having birth.

And order one year or an an a very high.

Guidance with respect to earn that comfort and convenience of the investor Base by delivering a quarter after quarter year after year and part of that is is giving you guidance that that we have a high confidence of of making it could we do better. Of course we can but this is the the the range what we feel very confident to deliver see mm.

Okay call do you have questions over the phone before we continue with the questions over the webcast here?

We do and we are first question will come from Beltran palazuelo with Santa Lucia, please go ahead.

Hello, good morning. Carlos. Just say I would like to congratulate all of you and employees of a tenth of very hard work and let's say a very positive results May. I have maybe two questions maybe regarding the the topics and where you are located in the topics. If you could give us more more, let's see the profile for the year. You gave me six digit growth. You could talk a little bit about the client you're bringing to an introduction clients that you grow with them. Is it possible that maybe in the back end of the year with these constant currency growth? This is higher and then the second question is regarding the the strength everybody seen the strength of the company and and the possible precursor generous. This company has generated and can generate maybe about maybe value-added Acquisitions. What are you seeing in the market? What do you think and cannot attend to to to keep improving the relationship Thursday?

It's actual clients. Thank you very much.

Nice to hear from you. I will transfer you for your questions. Let me try the if I forget some part of the question, please please remind me. I'm also going to ask just try to come and also long as well in the whole thing particularly any specifics on the on the Carfax and cash flow in terms of topics they wage and just answer I will give you more specifics, but one thing to keep in mind, we we still trying to be very uh conservative and very prudent because we're done with the with the Health crisis worldwide by a long stretch of the imagination as a very you'll know. We all have a great hopes and expectations for the year, but we still managing in a in a very complex environment still trying to be prudent including many ways putting with the forecast present with the way we have constructed our budget and put how we make the

Of different types cost and and and and and capex. So we been proven with Catholics having said that I told you that I feel very optimistic about twenty Twenty-One. I think the science the TV sales thank you for and the way we've started the year seems to indicate that that we have a lot of potential in in one. So if things you know materialize, uh back on the the the budget for sure we will invest more in growth and potentially information increasing some of that capex expenditure, but we giving you off the changes have given you is what we have in the budget what we have in the plan and and it's a present put in plant that if we we exceed it will be for very good reason to be very happy to to to talk to you if that happens second part on m&a and Acquisitions, um, nothing specific, you know in the Horizon we wage

Basis, you know our transformation on on organic transformation. What do you mean by that? I fully believe that to do they kind of

Confirmation, we we are executing, you know Dental we have to change every fiber of the company we discussed many times and we have initiatives in sales operations cost management of the of the back office. We talked about also the capital structure off pretty much touching everything we do but particularly let me emphasize Innovation, right Innovation is we have made a lot of progress in that area in terms of new Services Next Generation Services the way we operate internet and that requires changing everything that you do Innovation is not something that you do Monday Wednesday Friday, but you don't do it Tuesday. Thursday is something you do everyday has to be part off saying that you have to be part of the way you think the way every employee think and operates. You cannot do that by bolting on a number of Acquisitions dead.

You can't right that's not to say that you cannot accelerate or by some very specific skill set or very specific technology that you need to complement that awful transformation. So that's the way we look at the moment. We don't have anything in in the rear at the moment, but you know, I don't discount it, but I want to tell you that our focus is is off the plan that I described to you and and quite frankly that the results that we have so far. Give us the confidence that we're on the right flank.

Did I miss any part built on? No, thank you very much for your answer and for the hard work of you know, the team all the support wage. Keep on working right now. Just say anything you want.

Yeah on on Carfax only if if I can I can tell it's only from the sixty million that we talked about it 45 is for maintenance and Page the difference the the the 15 million is for new contracts that we we expect basically that the high amount of money attendance is another issue movements in terms of digital that we need because we have our big part of our it still on-premise and we have a big opportunity to move to Georgia to clouds it goes up to save more money in the future.

Okay, let me put the only thing is that when we looking to into the growth Catholics, we aim with project that with minimum return on invested capital of 30% and the average pay back that we look at is around twelve months just to help you understand the growth capital.

Okay, very very interesting. I'm thinking three of you for your answer.

thank you for calling

and our next question will come from with, please. Go ahead.

Hi, good morning. Good afternoon. Gentlemen, I go a little bit of what doctor on just said, I would applaud the management team and and the new shareholders for the performance in what is Kelly been a tough year off and look. I mean you look at the numbers for Q4. I think the company is unrecognizable from two years ago under the previous ownership. So lots of credit for that. I've got a series of questions. So maybe I'll just move forward one at a time as you as you look at your telefonica, which is multi-sector mix evolving and maybe use Brazil just because that's why it seems to be most Progressive. The phone is now getting down to plus or minus twenty 22% What does The Narrative of what that multi-sector business looks like looking out right? Because God for too long, I think people have you depend too as a as a CX business applying to the Telecom industry and obviously that narrative as evidenced by Brazil seems to be evolving quite rapidly. So maybe dead

Question for Carlos Carlos, how would you define that narrative or invest over the five-year view looking out looking at that month affect a business?

Sure. So let me answer that quantitatively and qualitatively so our expectation is that the telephone wait in the in the portfolio that we continues to climb having said that and heard in my remarks that telefonica will continue to be a very important client. I mean we found out in fact, this is a client that that we cherish in in many ways not because of the size but the length and and the type of relationship relationship that continues to improve we have wage increase, uh, our wallet share of telefonica and we consistently consistently get the feedback from telefonica the the tell us we we are consistently very best providing strive to to to continue to be in that position. Right? So, let me be clear about that. Now, you know, the evolution of that of that business will depend a lot on choices.

My make about internalizing some some services or or or the growth or the direction of the the telephonic a business and that's that's that's normal life tell you is on the other side and multi-sector. We continue to grow at significantly higher than the market rates and and we proceeded to continue to do that on an ongoing basis. Also qualitatively. What is that multi-sector as as you know, actually we we discuss this if you times we we made a a bit of a shift a couple of years ago, we decided to focus a bit less on the traditional sectors of these industry that there is no banking on the page on the Telecom and focus much more in other sectors sector. We saw not only more growth but also more interesting the Advanced Services that we moving towards we call log

Those companies Bond either companies includes media includes a technology companies and so on.

So we have a lot of growth in those in those segments the growth in those segments probably is. Uh, so for example that that we the growth indignation Services being 50% of what we sell today. They they one of the the beauties of of moving into Hydro segments is that you may start with the 1 million dollar contract, but that tends to grow with with your clients as long as you do a good job, which we we we do intend to continue to install wage. So so I spent and she should expect our multi-sector to continue growing after better than that Marketplace and the focus to continue to be on those a higher wage more detail, uh-uh industry sectors that we have focused as they said before when you create a plan is dead.

A bit of a theory right you need you need to be tested in in practice. This is one of those aspects of our initial plan, which has proven to be very successful. So we will continue to to pursue it the answer your question.

Perfect. Thank you Carlos. The next one might be but really on a similar vein as the business has evolved. How would you how would you describe and Define your cost base looking out you have the pandemic impact Yamaha model, but also presumably these multi-sector clients needs a different sort of service from your traditional Legacy Telecom client. So what I'm trying to get to is the cost for getting more flexible.

As the Top Line you want.

Yes.

Can I answer calls? Of course, you can so, you know, okay, perfect. No actually, thank you for your your question off our our cost structure still this year with the bits of of mix. Yeah. We have you know, we have done a lot of efforts in terms of cost reductions, uh, or operational improvements has Carlos like it they but wage in fact ongoing basis for the future of X, we can consider less sixty million, even we have with a new product page real have another typed of uh, you know of needs if I can say for example, uh, we need more technology to attend wage.

These kind of clients the new client of course, but these amounts should be allocated. Almost of these amount should be allocated more in terms of capex. This is why we insist that uh, the Car Fax that we spend or spent in the last two years or three years was life. And when you compare against our peers we can see that we spend less. Yeah, but that will be in the future our needs it will be more for the new clients in terms of God. He's giving soft costs as I mentioned. We have ongoing bless sixty million in terms of opec's still mix it with some extra costs that we still maintain terms of because the pandemic yeah, we have some amount there that we have to maintain Ur in the future. We can adjust this costs, of course, but dead

And for example, we have to invest to close some sites. For example. Yeah, that is why.

We still work on the structure. In fact today. What we have is less sixty million US dollar in terms of our backs ongoing basis with the new technology is we expect it to invest more a bit more in terms of capex, not Direct in in the objects and the op we can adjust more money for sure because with the new technologies maybe we we will need less less people to operate that is the the future but not for this year. Yeah, I think is more ongoing basis for twenty twenty two twenty twenty-three.

Very helpful. Thank you and one final question. Obviously, it's local currency business. I applaud your decision to grab them you refinancing done and then headed local currencies. Could you spend a minute just talking about the nature of that has I know you said a hundred eighty percent of CD I am but if she goes up by a percentage Point does your cost go up by 180 basis points for instance and then secondly,

How you think through that local currency exposure also in terms of equity does it still make sense to be a dollar reporting companies?

I think there's one particular thing is for you guys. So let me take the the Hedge one. So actually we went when we when we started off into the Alternatives that we had to do the b r l. Uh, Edge we had obviously three Alternatives right to had a pre-fixed. Uh, and and then I would have the entire career from here until the maturity on a fixed basis. We had a CDI plus alternative and we had a percentage of CDI Alternatives all of them have they have problems right? Uh, the pros of of of what we did is that if we believe that the rates are not going up as as as as the curve is implying now, it gets cheaper than doing a a predetermined the cost. So just to give you an idea they predetermine cost for doing principal plus interest on the brl would be close to $13 off.

Open 13% And the way we did it with the city percentage of CDI 180% and you're right that exactly a hundred percent hundred eighty percent of the city is OCD. I'm not 2% We paid three and a half percent of of interesting CDI goes to 5% We pay 180% of 5% right? So I simple as that now from our jobs that we did the CD I can go up to 7% 10% is the break-even between if we did the pre the fixed or the floating's with digital 7% to the break-even the difference is that the way we did it we pay way less in the first two or three years and as our expectation is always to refinance that uh, two years ahead of maturity. We thought it would be better off to do the savings on the interest in the first two or three years and then and then we see how it works for the remainder of the of the debt.

Thank you. Thanks a lot. That was the second part in n n on on a second part maybe Carlos can talk about it and if what our plans if we talk about the uh doing a lifting a different place than us or doing reporting in India or in other currencies set of US dollars. I think this is the nature of the question look, Um, yeah, as you know, actually we we have discussed medications, they they the benefits and the the of being listed in the u.s. Listed in other places or or in a private company for that matter. No no plans. No specific plans in the near future to to do any of them. So they sorry the least thing. What was the other part of the question?

No, it wasn't a d-list in question. That's early. It was it was not a d listing question. It was for a question around the company is now out and out of local-currency laughing and exposure right especially off of the dollars that has been hedged. So is there is there is there any thinking

To representing that more clearly 3 or financial statements, right and whether they continue to remain on the end, but just bought I just think it's a as a dollar investor. I am consciously taking Brazil rest, right? And I think it's just it's just how you end up representing that in real life.

Yeah, no. Okay. I understand. Is there a clear way to to represent if happy to take any any suggestions if there was a way you know that would occur to us. We would of course there as you know, there are certain Financial regulations that we have the right by but in terms of we do we do something in addition to we will consider any any suggestions that that you may have. I mean, we we are all four for transparency and trying to talk to communicate the best possible way the the the performance and and of the company in terms of the intrinsics of you know, like if we operate on the market will bear they have some positives and some challenges for an exchange for a u.s. Dollar investor as most of you all of you are dead.

Is is clearly one of the challenges we talked about the hatching for the debt and another instrument. We also have a very balanced. I think it's called dog hates his need to use the the technical word on the what is immunization we try to do to balance, uh, uh inflows and outflows, uh within the same currency month or so, we're fairly balanced from that perspective in addition to that money strategically, you may have noticed that some of our currency markets are experiencing significant grossed. I'll put a lot of emphasis particularly the the us we had a very good growth quarter in in me as well. But I put a particular emphasis on the page us which is performing very well for us twenty-twenty has been very very good year of growth and and and an improvement in the US market and and we see twenty Twenty-One to confirm.

On the trend. So in the in terms of the long train of the company, we see the also the intrinsics to

To to be better from that from that perspective now, I realize there's not I'm not answer any question of how to represent or or or disclose. But what do we see even more important than the to improve the the stability with respect to foreign exchange of the company cash flows?

Very helpful, Carlos. And once again, we applaud everything you have accomplished in your yard. Everything was accomplished in one year. So keep up the good. Thank you God. Thank you Akshay.

Ed once again, if you'd like to ask a question, please press * then 1

I'd like to turn the conference back over to shave for any questions or for the webcast.

Thank you all so so we have a two questions here on on telefonica one is about.

They that situation has not changed. So number one. The telephone is putting a lot of priority on our business with them. We have been which happened to be in Spain and in Brazil second, the the the way we not particularly worried about the the the the rest of the telefonica fully from the perspective of what may or may not do in terms of partnering selling or or whatever they choose to do with that or keeping it, uh that rest of the portfolio for a variety of reasons. And and the number one reason is we we base our business with telephone not on the same basis that we do with anybody else, which is we strive to earn and the business that we we have our clients every day the day that you age

To depend on an obligation to buy from you is the day that things are going the wrong way. That's the way we we have performed with everyone and that's the way we perform with with telefonica month we continue to to to win. I think I mentioned that in my prepared remarks we continue to win business with telefonica and the business continues to be across-the-board in traditional and next-generation services and and all those new contracts that we win with them. We win them inconsistent. We get the feedback from them that we win them not because of the MSA but because we we happen to be the the best provider in in that area in that market in that those sort of services that is that is the way to manage anything telefonica anybody else's so from that perspective not not worried either in the in in the wage.

What about to call in? I think the phone here comes the East and markets versus the Brazil or Spain. Um

No worries at all, the do we have discussions on renewal of the so we had that several and that they happen again, but again to me the day that you have to depend on on an obligation to buy two to sell to to a customer. That's that's the day that you have to be worried that received the order that dish. So we base everything that we do on learning the business with our customers.

Okay, next one we get we have a question on our business listing two in two questions first is growth instead of the ebitda. Margin that that we are extracting in the US. This is the rest of the the regions and the second question on the u.s. Is how is the pipeline looking you mentioned bought a new Enon Maryland state of Maryland? How is the pipeline looking last first pipeline looking very good as I mentioned. Is it going to go home? Um, we we expect it to continue to grow the fast pace, uh in the US so I'm very pleased with what we see there. We took ambitious but you know, we will continue to pushing ourselves. They're even for the um, in terms of the margins. I'll give you the actual answer wage.

Compared to the rest is is high. It's at the top of our of our range in size US is an attractive market for a variety of reasons off one. One of them is we we can we are focusing not only we're focusing on the right verticals, but it's the market demands higher-quality more Innovation and when you actually deliver those and you can you can deliver significant value, you can also get a significant margin. So the evidence is there are at the top lower range.

The next one is on on covita specially in Brazil seen a lot of news about potential lockdowns in Brazil. What is your expectations of the fact that the Resurgence of of go with in Brazil would be could could do on on revenues on the cost side. Can you elaborate on this the hard to say right off? They tell you what the win as usual. I'll tell you what we know and and and the limits of what we now the situation in the country. Well, let's just say check to come and they they live there I get the reports and it's it's a tough situation. It's a tough situation with a there's a lot of cases and and the the month the Health Care system is is strained to say the least. So so what the human level I'm I'm worried they from the yep.

You're the business as I told you.

Again, it's very difficult to predict. I think Humanity as a whole has never been in a Shouldn't Say Never Humanity as a whole has not been recently in the last couple of years, uh in a situation like this so hard to to predict. What I can tell you is that we are in a much better position to manage the crisis than we were off each time last year. We know much more about the crisis the consequences the impact the the the transmission et cetera. We have reconfigured our business. We have found a very large proportion of employees it more than 80,000 worldwide working from home. Now. Let's recognize that working from home doesn't necessarily mean that you're free off of off this key. You still have it the significant risk of the risks that that you have, you know home, right but definitely improves the the the the situation wage.

We have much much much better, uh control protocols in the in the center's social distance, uh, hygiene disinfect protocols to to detect, you know, any early signs of a problem. So so it's not perfect by any stretch of the imagination. We all live in in a risky World Cup match better position that we were in in in 2020. They brought a risk of the economy, you know, what would happen to the economy of Priscilla know the countries in the months off again, you know, probably many of you on this call are in as good or better position to to make the projections for different economies. There's some uncertainty wage, but one thing I would tell you is that and particularly Brazil. Um, we did have in in in Q2 and uh significant impact not only in Revenue birth.

We we could see the impact on sales Etc. Priscilla is recording very well in terms of Pipeline and sales. So the business there seems to be not just us adapting the new normal, but the economy as a whole so business seem to be doing well having said all that with all my optimism you have to temper with the fact that Humanity has never been through these in the last hundred years, right? So so you have to be cautious but optimistic, but cautious.

I don't just say say yeah, have you see Brazil? I you know, I don't want to characterize it second-hand. Yes. No Brasil. It's it's tough situation Thursday. We have all regions in Brazil with red flag. It means it was even from Palo will start a lockdown up 30 days and real expectation needs to be locked down the next two two weeks minimum. Yeah, but the big situation is exactly the month is let's see. No because

These guys don't have any.

Planning before 4 for by vaccines and and selfs to organize between the regions and that is our our main impacts if I can say because it's an incentive to to live in this way. It's not easy in our case has company here Thursday we have

An advantage because we are considerate essential service. It means we can still operating and with the quantity of people that we have work from home. I think that's will not affect a lot our business. Yeah, we we still maintain the same measures that we we start one year ago. I bought it means in terms of masks in terms of alcohol in terms of attacks and the one we still doing the same in in attend to that is why I can tell it's it will be ongoing. Yeah, our expectation is to end that faster as we can but unfortunately will contains will continuing during a year but in again in terms of operation, I don't think so that we have a lot of X-ray issues.

Okay, Carlos in your in your prepared remarks you talked about Technology Center next and we've seen in recent years a lot of uh, platform-as-a-service Cloud communication offerings. How do you see the technology affecting attend to for good and bad can even a great how how you plan to leverage on technology to to continue improving the business technology depending on where in any business by the way, depends on what side of the road you are you is your enemy of your friend for us. Not Dental. We absolutely see it as our friends. We have talked about quite a bit of an education services Etc, but perhaps at some point we should do a specific model graphic on on technology and and and the The Innovation at the tent. Oh,

Today, there's very few if any service which we don't put a lot more technology than we did literally a couple of years ago. So even traditional Services is introducing a lot of Technology a lot of analytics artificial intelligence automation to to support what the agents do in many cases. We we have a a large percentage of the transactions that we we managed. I managed in a completely automated way through a lie chatbots through web front-end or apps but even in the in in in the many cases where we actually have agents and actually met a look at the more traditional service with a lot of technology and we continue to to do so that allows us to do a number of things to manage whether the service to provide a dog.

our customers to make the

They were more efficient. We could do more with less agents and on and on and on is thanks to some of these innovations that we have been able to walk to manage very effectively eighty thousand employees working from home. We can lose a lot of tools they rapidly and when I talked about having a platform, we have no permanent platform that includes not only technology but they they the supporting technology but a methods process that allows us to to to manage the whole the whole the whole process from recruiting to to hiring to training to the living the service the whole process in a in a in a digital way home and all that is thanks to technology which will continue to to have a very significant and increasing positive impact for us in in Atlanta.

Okay. Next question. Do you measure turn in this is the indicator that you follow how how you compare children with with a new client wins? Can you elaborate on that wage?

We do we do measured turn are we compared with no wings, but we have a number ma'am. It's not only in the absolute value of those components but very importantly the quality. You've heard me talking about the quality of sales. We also look at the quality of life contracts wins and term some of the The Matrix that we use things that I mentioned to you contribution. Margin, for example, right, talk to you about certain contracts that we discontinued because we were not getting the the the the margin so we're looking for position margin of mention is how we measure new sales and and and how they are significantly higher ten percentage points higher contribution margin. So we look at at those quality methods, but also, yep.

So the quality metrics such as that may be less easy to to communicate very important for us which is some of the terms and conditions of the contract the Technologies content private a private dancer. We we looking for places where we can deploy more Innovation and Technology conferences. Those are metrics that we use as well to look at the Quality not only in sales and perhaps I talked about it more around sales, but also in terms of trans so we look at Absolute numbers. I consistently shared them with you in terms of the the growth of different sectors and and and so on but also the quality of of the revenue very important for us.

Okay, one question here on can you talk about your the mid single-digit growth profile how you seen the different verticals born digital is Healthcare grown now, I I know that Health Care is uh, one of the largest outsources in the u s is something replicable in in in Latin America. How do you see that?

A lot of the local high growth sectors and companies tend to to translate very well worldwide again a pounding on the technology topic technology is not a country specific as you very well know technology and and a lot of the innovations that have technology behind them tend to be Global now, it may be introduced in one country before others, but tend to be Global in nature. So pretty much all the comments that I've made regarding different sectors different Industries, June 10th, apply generally across the board and it's pretty applicable to different to to to the different countries. That's one of the reasons for example that I mentioned off until next and and and we doing there we started as with many things in Brazil and then we with extending it to all the countries. Uh, I talked a lot about 1 a.m.

Work that we do in the US the winds in the US tend to be uh, have some strategic value in addition to the uh to the dollar figure. They tend to be in in the news section eight hundred percent of the u.s. Growth. These days is multi-sector and particularly in the high growth sectors that we talked about. It tends to have more Innovation and more technology content, which is also very good in terms of having credentials in different sectors of different Technologies and with different partners that we can take to other parts of of of all the countries so so very synergistic, uh across the board, but if you think that a lot of these Trends are pretty much Global you probably won't be very far from the dead.

Okay, we have some follow-up questions on the free cash flow. And so I'll take that directly calls. And the question is uh-uh. Can you clarify on the ebit? You mentioned you have a guidance of a 12 and 1/2 thirteen and a half percent. So if I do that or if I look at consensus we're talking about wage around one eighty one ninety million dollars inhibit. So I'm not able to reconcile with your fiber $10 free cash flow. So and my apologies on that page just to make clear the a hundred and eighty or ninety that you're considering on that is I appreciate screen to remember you have to take out around 45 give or take a million thoughts on the leasing expenses. So that is how we get to the five to ten million dollars in a in in free cash flow another question just quickly birth.

on the average cost

Of depth, it has been around 7% the effective cost of that in the last year or so, and this is a pretty much all the all the questions we have here on the web. You don't know call if you have any questions over the phone. If not, we can just go back to Carlos for his closing remarks off.

And currently at this time. I'm seeing no further questions. So so now be closing remarks to thank you all of you for your attention, and I am with them and and for the very very good questions that we've been getting. So thank you very much and wish you a great day.

Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.