Q1 2022 Atento SA Earnings Call

[music].

Good morning, and welcome to attack those first quarter 2022 results conference call.

Today's call is being recorded.

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Now I'll turn the conference over to Mr. Han on Van Viverrine Investor Relations director for it that though please go ahead.

Thank you operator, and welcome everyone to our fiscal first quarter 2020 earnings call to discuss <unk> financial and operating results.

With us for today's call are Carlos Lopez, Abadia, <unk>, Chief Executive Officer, and close after they don't Chief Financial Officer.

Following a review of our chemical financial and operating results, we will open the call for your questions.

Please operator.

Sure.

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.

<unk> 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 restate. 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 <unk> com.

Be advised that unless noted otherwise all growth rates are.

On a year over year and constant currency.

I will now turn the call over to Carter.

Yeah.

Thank you, Matt and good morning, ladies and gentlemen.

First of all let me apologize for my voice I would like to voice.

Recovering from.

Hi, Michael.

Reported that this time around is not common.

Colby on my last visit.

To rescue and.

Tomorrow is clear.

Hey, basketball that I'm, a recovering from I think you're right I apologize.

Let me take.

Now let me start with.

We expect permit.

Thanks to you last call that although we had a slow start for the year in the first quarter. We achieved this improvement month to month leases.

Allows us to be more confident on the guidance that we have provided.

Now let me.

Break that into different components.

Q1 results in our last call, we discussed that we expected Q1 to stockpile.

Reasons for that one lingering impacts of fiber.

Mitra.

Thank you that particularly in January and February .

It might've been back to normal levels now.

In April and higher inflation redeem that we see in many countries, but as you know Latin America, particularly for us too.

High inflation and he has impacted us more than that.

And beautiful.

These effects have been offset by any number.

Factors, one obviously is the actions that we've taken.

But two.

Two very important one are different.

Terrific.

Alpha offset us all.

All day.

Also a very effective completion fast food each year normally.

At this point of the year.

We have much less 60.

But we have had people ready.

So inflation pass through to our customers.

With that I'll, just be very comfortable in terms of reaching our 80% or 80.

Thank you.

Inflation for the year.

Now we've seen a clear a month two months he's proven it can be bought or with higher margin.

March that we had in Q1.

We again <unk> said.

Give me comfort that the actions that we've taken and the improvements that we see.

Puts us in a good position.

To continue.

Improving through the year and two to meet or exceed the guidance that we get.

Oh.

Let me talk about the different components first of all sales from Remy.

Pipeline.

Volume on the quality of that volume continues to improve through the quarter.

Mark.

Yeah.

It allows us to do a it can be done we are on track to improve the sales year on year vis vis last year, we have already achieved more than $50 million in total annual volume of sales.

Out of week 1919 study 19, new clients.

All of that.

Volume and.

While at DMV revenues.

<unk>.

These new clients come on more than 19%.

Martin.

So customers are mostly in Texas.

90%.

He is in three key sectors e-commerce feedback that wanted to payments we send those those are some of them would be effective.

We made that have proven for us to be.

Our hydro sectors Watson you have customers in Houston.

The rate growth, obviously that helps you.

The base and grow with them so acquiring customers in there.

Right.

So we are we have been we've made before.

As well as to the quality of the sales that we.

Okay.

Another important aspect for asset intensive part of the revenues.

Uh huh.

Hi.

Hum.

310 basis points versus last year and we.

Please proceed.

As I mentioned before.

For the year.

30%.

Hard currency.

As a percentage of our revenue.

Most importantly, they become so we feel we're in a good track.

We achieved our objectives.

Okay.

And speaking of hard currency.

Our highest growth markets in the U S.

The pipeline.

Pipeline improvement and sales growth in the quarter.

But also very importantly, both existing accounts as well.

All of them.

In EMEA, we see significant expansion in travel and energy sectors.

Travel has been a victim.

Yes.

Last few years.

It would appear that these year above.

Pent up demand that will be generating quite a bit of volumes very important for us leading into Q2.

Quarter four.

On the balance sheet.

Namely the sector as you know.

Per week.

It depends.

Average worldwide, particularly in Europe .

Media intelligence.

And we see it looks like GDP.

Yes.

Bookings.

Yeah.

I want to start on operational efficiencies are as important as the generation of new revenue.

What we see of new cash somewhere around moving into the right sectors over time.

Importantly, all of that is people for Facebook.

Continued improvement of our basics.

As you know, we launched a delivery transformation a couple of years ago, and we continue to work and get improvements.

We have deployed now our excellent.

All the geography, and they are working at full capacity full blown.

Yes.

<unk> aligned on nomenclature.

We call it the incentives are fundamentally the continuous improvement centers that allow us to on a continuous basis most of the mafia per year to continue to improve the way we provide services.

60 program.

We also continue to improve the capability of our garrison.

Where we are.

And Friday.

Not.

So that particular program or a particular customer or things like workforce management quality assurance support team.

Continuous improvement.

You bet.

We also are reaching these.

The targets that we hadn't been full deployment of global delivery model.

All of these technologies.

And approaches that are critically important wholly for components that I mentioned are critically important for athletes Stephen alcohol objectives people geared towards efficiency. The first thing that people think cash advances cost, whereas we started with this allows us to.

Better quality.

Better services, New services of course also to improve our cost position, but.

It's very important when I took a walk improvement.

It is not a one off.

Our opportunity to reduce costs, but it allows us to continue to improve.

Improve our cost structure.

We can deliver more with less to our customers.

Year on year, the pressures on our industry like most industries are not going to decrease over time, so we need to build a capability that allow us to.

On a truly that the EBIT.

Also I would like to add that the component that I'd mentioned last.

Perhaps more importantly, the global delivery model.

Globally.

Particularly important for those customers that we are have been targeting over last couple of years, we're getting.

The transaction brought customers customer set.

US same quality same approaches to steadily and we've seen them in different geographies.

In addition to that $1 billion in models.

Blow off methodology.

It allows us.

To deliver those capabilities.

Also you have the opportunity to provide continuous improvement.

These values.

More difficult to do where you have these pockets of different approaches to delivery.

Fortunate for us both in terms of.

You can see.

Ongoing recurring cost impact as well as capability to deliver what the customers and markets.

On the on the science front, we've seen increased financing costs due to increased interest rate regime across essentially all the market, but for us, particularly important and impactful is the best in the market are we working with our bankers to improve our financing structures to mitigate.

The potential impact of continued high interest rate regime.

Not expecting these two cases assembly in the short term.

In the foreseeable future. So we plan to adjust our financing structure to mitigate the potential impact of that.

<unk>.

The team to grow over the last.

With that I would like to see in my comments that we started.

We.

Our businesses and actually getting traction and we do feel more confident about the full year and the guidance that we have provided to you.

With that thank you very much.

Over to you.

Thank you Carlos and good day, everyone has been nothing in the earnings release, the first quarter is always a station in these loans.

Monthly in January and February .

It seems our weakest quarter by far in terms of profitability.

Profitability and cash flow.

Hey, that's we exited March at a healthy rate despite coming home and we are very confident.

To achieve our guidance for this year.

This quarter was especially difficult due to the very high Atkins rates in each of our market include.

Including Brazil, our lunches.

The combination of lower volumes Hiseq base.

The hiring of temporary workers and overtime pay.

Payments impacted EBITDA and cash flow, particularly hot.

In Brazil this was offset.

By accruing insurance that cover at the back of the October et cetera.

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.

Note that the current high levels of inflation and the stronger U bank this quarter.

As new Israeli inflation adjustments in our contract teaching during the remainder of the year.

We are happy to communicate that we have successfully managed to adjust most of our biggest Keith Cline.

Sure.

Although as we noted in our previous earnings call.

Some of our clients in Brazil, diversify their volumes away from us to either Vince.

This is reflected in the seven 7% degrees in Brasil multi sector revenue in the quarter.

Thankfully less volume shifted than we expected.

I should also point out that some of the decline Oswald reflect.

Contract, that's attentive choose not to do.

Due to low profitability.

The decline in Telefonica revenues in Brazil, and the Americas that.

It was mainly due to cost cutting program that is playing through as simply implemented globally.

The exception was in EMEA, where telefonica consolidate the number of <unk> providers excuse me.

In other words.

And we've made that a cat and picking up additional volumes that have been a finance to other competitors.

Although EMEA revenue was flat and between the a decrease due to one time severance payments to be made.

Related to rationalizing capacity at the call center in this market.

We expect to be in calibrating, our capacity in all markets throughout the year.

Leslie <unk>.

Our revenue in the Americas region was soft compared to the previous year.

Last year, we had won a big contract in the U S. But we expect to resume our growth trajectory in this market.

On the volumes we are seeing currently.

And the sales pipeline.

On the next slide.

EBITDA to free cash flow bridge.

Three items.

Mainly they are off the change in working capital.

This includes the cyber insurance, that's I noted are new.

And the delay in the signing of a new tender funding a contract.

And at that time that banks may deliver to clients at the end of each year.

Regarding capex and $6 3 million.

It reflects.

And that's what's left.

Last year for.

For this year, we are budgeting between capex to be between four and four 5% of Greg.

It's 85 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 in.

And granted revolvers.

Moving to our capital structure, we maintained a healthy cash position at the end of the partner and expected to improve along with leverage and test the year progress.

Keep in mind, that's all or leverage ratio is calculated on a trailing 12 month basis.

So the impact of the fourth quarter cyber attack will be carrying.

In the rescue until the end of the third quarter 2020.

It's also important to note that our interest coverage ratio is at one nine times versus two three times in the last year.

He is first one.

Last but not least we have successful one more our euro denominated deferred.

We had a positive cash impact of approximately.

Our ability to ethanol.

We continue to monitor currency and interest rate market for further opportunities to reduce our cost.

On the next slide we bridge equity REIT.

Remain in negative at the end of the court.

The bulk of these these are three good table to net $104 3 million in financial items.

<unk>.

$70 4 million is noncash items related to the balance sheet and P&L Congress.

These items are broken down in.

So the box at the center of this way.

As you can see at the top off the slides the CD aimed mystery.

Our cross currency swap this linkage to have risen substantially.

Over the last year that impacted our U S D BRL cross currency swaps.

Mark to market.

Moving to the left side Q1 was another challenging quarter, but our underlying fundamentals remain strong.

And our growth strategy continues gaining traction with.

We therefore expect to achieve our guidance targets pencil it out and exit 2022 in a strong way.

Operator, please open the call for questions.

Yes. Thank you well now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two if you write your computer.

These uses submit a question box in Europe has you are at this time, we will pause momentarily to assemble our roster.

And I would now like turn the call over to Mr. Art outbound wavefront for questions received via the webcast.

Yes.

Thank you operator, we have a question from our webcast.

So Carlos and Jose I think you've mentioned that you were able to pass through 60% to 80% inflation historically what is the number now.

Uh huh.

As I mentioned in my remarks, so we are over 60% which is.

Very good given the time of the year the way the since the work is.

As contracts reach their annual renewal of the unwell a point.

The egg.

The inflation closest trigger so some of those contracts are happened to be renewed or the trigger in January .

Very good small then in December the sooner we can get there.

They.

Yeah, the inflation pass through.

Tibet and normally it's a combination of what the conflicts a little bit of a negotiation. So we're being 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 are we.

<unk> seen.

The 80% that we normally target by the end of the year is not only we can 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 touched on your business moving forward.

Good question hopefully this would be less unless the question over time.

Because the answer is less and less as I mentioned.

I mentioned in our previous call and we May sit today, we still have some impacts in Q1.

We expect much less in Q2.

In fact to be even more specific.

In Q1, we had to have both on the cost.

As evidenced by the impact.

The bulk of the cost side as I mentioned in a previous call.

The anticipation of a lot of the measures that we had in the cyber plan with more of those will accelerate adults to Q4 and Q1. So so that was increased costs. The bulk of that is is done that literally and from that perspective.

In terms of customers and volumes.

I mentioned before.

By and large with.

One exception, where we decided to part ways.

Mutual agreement.

All the all the customers are familiar with us in some cases.

We expect that the.

Absolutely that had a lot of volume with that 90% plus.

Because the volumes we had included in our forecast for the year.

Looked at all the customers that have high exposure to us.

We have assumed that we put in the forecast that what they say they're going to decline those.

Those volumes that may or may not happen, but we wanted to be prudent to have that in the forecast and included.

So obviously as the basis of the guidance that we provided to you.

The year progresses.

<unk> seen some of those volume decreases either no happening are happening more slowly than we had in the forecast.

With cyclic thing.

And then again as time passes by.

These are all these capabilities into new sales.

The natural growth of the business, which leads.

It leads to fundamentally these are if.

Receipts into the background of the fasteners so in short.

We expect much.

We're sticking with we thought things two months about thyroid Q3, Q4 and hopefully ever.

Thank you Carlos.

We have one more question from our webcast could you develop on a percent of sales strategy for the remainder of the year.

She has a certain whereas I mentioned, a second ago very important, particularly when you have the it was always important Celsius importantly transformation.

It's very important to us to move from so we obviously.

Affirmation close.

Sales since the customers.

Services et cetera, but we're adding customers on the services of course.

Particularly important for us.

Like like this where we have.

And discernible events our performance in Q4.

Let me see.

That revenue stream.

So I made some of my remarks, because itself strategy in particular.

A couple of things I would highlight obviously surface strategies that it's a complex topic of that will be very happy.

It's something I personally.

The involvement I enjoy you'd be happy to discuss in detail with anyone that carefully.

We can do that for me.

Many thanks.

So let's move south.

We think the loose inside sales channel and we have also.

The challenge we have.

Before.

We're getting very good traction week instead of with it with the former tenant earlier, then instead itself very good traction on both we have.

In the partner channel I think of them right now with them.

By $90 million.

Those in the pipeline.

In the later stage pipeline.

So a good fraction of dose we started rolling this out in the U S and we are extending them to other regions of the world as we see.

What works with us who work so well.

Looking through that.

With all the channels I believe that in any aspect of the business is very important to try things and see how they work not everything that you're saying amusement works I think life.

And recognized very quickly with us and work on this.

<unk>.

Getting very good traction right now and we're rolling them out.

To the rest of the workflow.

Well there are aspects of them the service that we don't highlight for example.

But for US is Brazil is somewhat more.

Our largest and most important market.

We are approaching that we're taking a new approach to.

Who fail since the market too.

We in our guidance.

We are we have for each of those changes on the sales incentive program.

Different from what we used to do before we are focusing both in new sales and new customers and existing accounts, where we think we have a significant.

Opportunity to grow.

<unk> into new areas.

The thesis of our customers. We are also looking at the Brazilian market.

We quite frankly, we are.

Largest provider.

In the rest of the market by by a large margin.

It's a very competitive market.

So we are interested to continue to meet the.

At the top end.

Don't have any.

The vessel to go through the bottom where you know.

Getting to our rice sorry.

Right 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 that.

The upper part of the market and we are segmenting that and taking it.

If we can get an approach for the different segments. One of the things we are introducing is.

In the light.

I don't think we have.

A commercial name yet, but I wonder if this is some of the.

It's part of the market that is suitable for us.

However different needs from the top.

From the top tier Sao Paolo or large.

E base customers and we are doing it.

It's not going to go for four four those are those segments again.

I'd be happy to discuss more detail our sales strategy.

Any of you in particular or as we as.

As we did a little older.

Investor Relations day make sure we have.

His deep one of ethic on on sales and marketing strategy.

Thank you and we do have a final question that comes from Rhino Hagan with AIP.

Hi, guys. Thanks for taking the time to take us through the presentation and I, congrats on being able to confirm guidance.

It's great to see given the difficulties we had in Q1 I just have three very quick questions.

First is in relation to the cyber attack you mentioned out of 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 a lot of talk.

Okay influences E. C. You said 10 million euros, so whatever the exchange rate.

Yes.

The salary impact you.

You wanted the color on the Saturday impacting Q1.

Yeah, just just an overview of kind of what the revenue impact was and what the cost impact was weather that caused that might've, it's purely operational or was there was there some capex element I don't know like infrastructure.

They watch.

You might want to look at.

Disclosing.

More and more detail.

Yeah.

This particular system. This oh, we didn't bring that that's what they are I can tell you at a high level what that is.

We have a similar to this.

It cost elements that impact that cost element.

We took a lot of that in Q4.

Some of it in Q1, and then of course that I missed.

Mentally fundamentally the investment on we took our cyber program for the fall.

Fiscal year, 'twenty, two and we accelerated that some of that.

To be honest.

We still have some additional.

Above and beyond what we had.

One for the budget for Q1, so those are incremental costs of acceleration of things we were going to go.

Through the.

On the revenue is very simple what I would explain it.

A few times.

A number of customers.

Lots of them to be honest, there's a handful where we.

<unk> 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 there's the line of service that particular program.

We will provide for them, where we arent the only provider for that.

For that service.

When that happens then you have.

I think.

In all fairness I think it makes sense to do it anyway for four for redundancy and business continuity right, but clearly.

The cyber event brought 222 to the four G. Now from that perspective, I'm it might make sense, what might make sense to have my volumes distributed across more than one more than one provider. So some of that happen.

Happen most of that happened during.

Q1 to be the same way I'm, telling you that most of the metal costs happening for most of the.

The decrease in what has happened.

In Q1, we have assume that anyone that has a higher high a percentage.

Dependency on us either in total for the company or or line of service.

Typical handle service, we have assumed that that would decrease and thats in the forecast production.

That conservative assumption is not happening all cases, which is good what is not happening.

Nothing of the year. So my expectation is that you know them.

Maybe some more of that going into the year again already in the forecast or the guidance, but it may not happen on behalf happened later, we just think it would be unethical.

I'm not saying that that is the nature of the of the impact in terms of the specific line items of the cost.

Software.

Outerwear.

Et cetera, and services by the way.

We also have upgraded the services of a number of security.

Cyber security providers, we can look at making this specific disclosure.

Those by line item.

Interest.

Although you guys. There is most of that is a onetime event.

Eventually you think about you know having that.

To break it down.

Got it that's super helpful color and I. Appreciate that my next question is more kind of a 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, I clearly that the cyber attacks, but a meaningful kind of impact in Q4, and Q1 that I know any kind of sales process a strict.

<expletive> options might be might be affected 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 are about extending that lock up to give you kind of extra time as a result of this kind of disruption.

Okay.

I thought the question was going in one direction the other way.

On the question of M&A activity.

My my answer from last time that space and it will always to say that.

We don't comment on M&A activity.

Until now we have something to say.

Hey.

We're a public company in August they would trade at everyday and and we always look at opportunities that could enhance it further beyond that.

We'll never comment on anything specific there.

On the.

On the share lockup.

A number of you have asked me the question over last few weeks to be honest with you.

And I have approached I mean, I'm in constant discussions with our major shareholders as you can imagine and have approached this.

This question to a number of them I can tell you with confidence that they are.

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 approach the specific concern of.

You are right now expressing and I'm in discussions with some of them.

What about the possibility of making that commitment that we could.

We could make public stay tune and might have something to talk to you about.

Yeah.

Got it.

Got it that's super helpful to know and I just thought that the last question on my side I appreciate the color and I appreciate your hands tied on the M&A side.

You mentioned, the Investor day as part of your at least material. Good part is you still can comment is that an event that you guys think will happen in Q T. R or is that more kind of in the back half of the year, what kind of timeline broad broad spaces or are you thinking for that.

Sure I'm glad you asked the other question I was having a debate just says he is smiling.

So the debate just said.

The plan is to have a.

A formal face to face or investor debate in the October November timeframe, we would like to have the time to organize and also for those of you that are interested to.

Structured to make plans to see us in personal I think this most value in doing that.

It was not possible last couple of years, who took over the whole thing, but I think now that he's supposed to ask me. This is done the value on that.

We would also have a new system.

Earlier event potentially even in June .

But that would have to be more of a.

Virtual nature that would be an extended.

Maybe help today are figured out the agenda on the format.

We had a bit of a debate.

Not only absolute value of doing that.

For you or anybody else.

This code care to give us some some input and feedback in terms of how.

That would allow us to gauge the level of interest on that virtual events in the next month or a couple of months are very happy to organize that as well, but we thought that we will organize an investor day in the October November timeframe.

Got it that's super helpful color, guys and I appreciate that steer.

For what it's worth I think something shorter in virtual and June makes it makes a lot of sense. Presumably you guys are very busy so just be good to touch base more kind of formulaic I'm sure. The rest of the Investor base, what would depreciate it 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 again at the rest of the year.

Thank you Ryan.

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.

Good read on.

The broader a lot market in America as well.

As you can imagine we all.

We will look at that.

Constantly and particularly this year, we saw the order to memorial.

Geopolitical leases, Ukraine, China and in the hole.

The economic situation.

The global level.

So for us in particular.

We have not and I always say these things you know.

With the level of never there was this we haven't seen that that weakness I never say that because I mean, when I say that I always say with the level of nervousness, because I think.

They could get it.

But no we haven't seen that.

As I mentioned in my prepared remarks, we are.

If he can give you.

The year was slow in many markets to be honest, but.

The sales pipeline have been ramping up.

The last few weeks and.

Leads me to have it.

More confidence for the year.

Addictive macro events as they know it is hard and there's lots of people are much better qualified than myself too.

But if your question, which I think it is do we see on the ground I don't see significant weaknesses are on the ground is it alright, we can pick up on it.

A specific market.

We don't see it right now we see it.

Four or five weeks significant obstacle on our.

Our pipeline and our sales.

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

Well if there's one in particular that I think I think I mentioned in a previous call that.

No we're not planning we were.

Sure.

I dunno, how many negatives that can put in the system, we would not planning not to in other words, we were planning to Reno.

But given the complexity of after them.

The cyber attack.

It's taken a long time to bring them back.

We decided that it was.

I don't know who wants it so that there was one.

In particular.

You know that nothing comes to mind.

So absolutely we'll be now, but you know with that exception that come from the line.

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

Uh huh.

Since our thoughts about the great cash flow with a the guy.

We are very confident.

Could be.

Between breakeven and 10 million plus.

Okay. Thank you.

Thanks for answering my questions. Thanks.

Thanks, guys.

Thank you. Thank you.

So our next question comes from our webcast.

Had been negative equity triggered any technical loan default or breached any covenants.

No. The short answer is it's not most of that as you say I mentioned.

<unk>.

Accounting treatment, but we don't take that extremely seriously, but from a perspective of covenant.

Right answer is.

People want them.

Thank you Carlos.

Next question from our webcast could you. Please talk about the further potential of managing costs, how does that translate into them into margin numbers. I think you said in one of the previous calls that there is less room to cut cost compared to the initial stage of the three year round trip plan.

Uh huh.

I always want to make the specific point.

Regarding cost.

<unk>.

One off cost cutting that you know many companies we deal with win win.

What are we doing constant that we honest with you.

The zip codes that a hygienic it now.

We're cutting your fingernails, because you know things.

Tend to expand and particularly cost into expanding that is on cut.

Our people around me that those are more let's call them tactical cost.

Cost cuts, which we do regularly and I think they are important.

For any company they have not a that is strategic what is more strategic for us.

What we were.

I was referring in my in my remarks.

Do you think about updates is is they.

Reduction of the cost structure.

This is Dave is not doing the same things with less is it changing the way is not doing the same thing in the same way.

With less is doing.

At 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 prices are one of the focuses of the.

Well 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 Pepe.

At Pisa spend.

I will or less many of you know.

5% of the people or things like that.

Because you're changing the way you believe things, but he is the most volatile thing we can do.

Because one you know, yes, you become more efficient and you lower your cost structure.

But to the focus is also to provide better service high quality. That's why when we look at that when we look at that program are frequently talk about you know here's the impact in terms of efficiency, but also.

He is so NPS or customer satisfaction, because we were looking at both.

Better service.

In a more efficient way, that's harder, but that's a multi years multiple years and quite frankly, it's something that we'll continue to fall.

Forever.

We're beyond we stopped talking about it could be quite some time.

I think part of the question there was the impact of that on on which a.

A week.

And again this is another one of those areas that will be great probably to expand on that on Investor day.

He did a simplistic answer in.

But probably that's the justice.

This year, we are targeting.

Have any impact in there.

One two perhaps 3% on an E.

In terms of efficiency, but you need to take a look at the ongoing.

Improvement in cost structure is something that puts you in a better position to compete as I mentioned in my in my remarks, <unk> always look for more for less and that's true today. It will be true five years from now so.

A level of improvement has to we always always.

For those.

Part of that will go to improvement on on this I mean in our case part of them will go to improvement on on on net margin on the market, but part of that goes into being more competitive.

For ever more competitive market.

So.

The how that those to get the split is probably would be a very good topics with adding this the base of that.

We can explain exactly what we're doing in operations and how that you know.

How that materializes in a more competitive position in the markets where.

Well, we compete and how much of that materializes in at better margins.

Thank you Carlos.

Another question from our webcast.

See things are getting back on track, how do you see cash flow flop trading throughout the year and how would cash flow look excluding growth working capital and growth Capex investments.

Okay, and I think that's one that oh, not punting, but it quickly to Oh, we have that information handy.

We remain committed to memory.

I can give you a call on.

At the outset I need some people are will be breakeven and CMS.

10 million positive.

If we take out the growth Capex, we will have more 15 million.

And that is what we what we have if we take out the 100% of the Capex and that is impossible.

Ongoing maintenance Capex.

It's all important meeting.

We have more than one.

And the free cash flow.

But don't make sense to make the math on that.

And about the growth the thing that we cannot take here.

We need the world and I can.

That's the rule.

Again.

We work to make that EBITDA.

But by everything and.

So give us a positive free cash flow.

So much as we wish but as we know we have a lot of.

But I still call center, one that you have to pay it.

But in the next years or.

Of course increase the free cash flow.

Through the operational results.

Thank you Jose Carlos next question from our webcast.

We're looking at different financial structures, how do you think about the pros and cons of adjusting to hedge.

Hum.

And the high levels they simply.

The hedge are made makes much more sense are the more dependent at all.

<unk>.

Perfect.

Non dollar so foreign currencies according to the door.

We increase our percentage of HIFU.

Hi currency.

We can see those euro and dollar.

Sure.

Becomes less and less necessary.

One one component the other component is the cost of that.

At the time, where we are we would need it was Uh huh.

It was relatively inexpensive everything thats what this perceptively.

In a world of higher interest rates is more expensive so.

Given that.

Honestly there has changed so that's why the reason we're looking at.

<unk> restructured debt.

Thank you.

Our last question from our webcast could you talk about your current progress.

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 in my remarks.

Obviously, we'll keep you updated as the as the year progresses, but.

The guidance that we set four weeks ago, we feel more strongly about that about it then if few weeks ago I mentioned, how the athletes that we've seen in pipelines and sales et cetera. Some of the so.

So one of the downsides that we were forecasting I was still hard to forecast.

I'm not material I think we do we are however in a in a very potential difficulties.

Difficult year from a macroeconomic perspective with all the global uncertainties.

So we could see that to be.

Conservatives in terms of how we look at things, but the from last time, we spoke of it which I think it was four five weeks ago till now the fleets are I had so more confidence than when I made the commitment.

So.

Thank you and this concludes our question and answer session, how well, they're kind of conference back over to Mr. Arnott van waiver and for any closing comments.

Thank you operator, we wanted to thank our stakeholders and analysts joining the call today, we look forward and further answering any questions you may have.

As a reminder, our public filings and earnings presentation can be found at investors startup cantata com operator, please conclude the call. Thank you very much.

Okay.

Okay.

Yes.

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