Q3 2022 Atento SA Earnings Call
Good morning, and welcome to the in terms of the third quarter 2022 results conference call.
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I would now like to turn the conference over to Mr. Herman von Willebrand.
Investor Relations Director for example.
Go ahead.
Thank you operator, and welcome everyone to our fiscal third quarter 2022 earnings call to discuss our financial and operating results.
Here with us for todays call are Carlos Lopez, Abadia, <unk>, Chief Executive Officer.
I'm, sorry jump Hustles, Chief Financial Officer.
Following a review of us tend towards financial and operating results.
We will open the call for your questions.
Before proceeding. Please note that certain comments made on this call will contain financial information that has been prepared under <unk>.
International financial reporting standards in <unk>.
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 sector.
We're encourage you to review our publicly available disclosure documents filed with the relevant securities regulators.
We invite you to read the complete disclosure included here on the second slide of our earnings call presentation.
Our public filings and earnings presentation can be found at investors tend toward dot com.
Please be advised that are left.
Noted otherwise all growth rates are on a year over year and constant currency basis.
I will now turn the call over to Carlos.
Thank you Matt.
Good morning to all of you.
Uh huh.
So.
That's proven to be more difficult year than we expected.
I'm happy to report that the measures that we've taken during the first half of the year are beginning to show results.
We are focused on five key areas.
Continue to build our sales ability.
Accelerated operational efficiency.
Improve our cost structure, a Boston based increase and pass to management.
Significantly I wish I was.
As a result, we have.
<unk> EBITDA margin sequentially.
Two percentage points.
But almost every 10, 2%.
Our expansion of the Philippines, and locked up the commitment ooma yourself there.
We expect these actions to continue to impact positively the business Q4 EBITDA.
Between 14% to 15%.
If a decent movement, we have seen some of our customers probably lose some volumes in Q4.
So to answer the business.
Particularly in Brazil.
Easily just expecting a little EBITDA margin for the year is in the range of 10.1st of all.
Well, we are just beginning to see the impact of it.
As a result of this.
So.
We do expect to have a significant effect.
I'll ask one for Mike.
Continuing the trend and the exit rate.
I'm going to try to.
Let me take you through the actions taken on the impact.
That's a key component of our transformation plan.
Funding or was this capability is essential to grill to the right.
Yes.
And one of the things we have just started in the pharmacy channel. We haven't started it administrative sales program, we have improved our management, we keep Russell.
And so this whole we've seen an improvement of 10, 2% growth year on year to a record.
We expect to see Q4.
$60 million.
Placing us in a much better place.
Yes.
But you also know.
We have placed significant emphasis on the continuous improvement of our delivery capacity.
Okay.
The 27 million achieved in 2022.
We kept focus on program Liberty improvement.
Yeah.
Think of operational improvements with a broader focus on air separation absolute tissue.
We call it puts it breaks out.
That's different than not purposes.
So any improvements between one to two percentage points over the coming months.
We expect the four out of these programs to be completed before the end of Q2 next year.
I want to emphasize that these improvements and not simply a cost takeout.
They represent a gen y and operational improvements, resulting in better service to customers as well.
Yeah.
We have completed our consolidation.
The weekend with the reduction of more than 700 or rules and having oops I would've been the mindset.
We know what to get too cool.
Took a lot of the one time costs of these measures in Q1.
Well the bulk of the benefits are beginning to accrue not only can see Q4 yeah.
We have also accelerated the improvement of our inflation pass through.
Close to 90%.
I think he has been call it.
Well no contracts now.
Plus we.
We have improved our management of the negotiation those legacy contracts that do not have these classes.
Finally, making breakthrough out of necessity.
Our investments in infrastructure have been nothing certainly publicly.
You can look this up on sites.
The scorecard.
Company wide, we are significantly ahead of the competition.
I'm also very happy to announce.
The launch of a new operation.
On the back of new demand of existing claims Philippines.
Philippines Filipino specific no plan.
With respect to revenue and deferred deal to be between $20 million to $40 million.
Also this quarter, we announced the lockup commitments may yourself, representing more than 70% of the company workshops.
Our 2023 will be our last year of abnormally high.
We have a.
Twin cities is funded.
Monday.
Only cohort.
Yes.
In order to provide additional restaurants to customers and investors well.
We are evaluating a number of offers from financial financing from existing investors and also for me, but I saw that.
The proceeds.
To provide additional liquidity if needed could be used to improve the structure.
Choline could ban in a repurchase and part of that.
Taking advantage of current market prices.
We expect to make an announcement on this.
Okay.
I would now like to finish with I've seen them with your own progress continues to be an ongoing priority for us until we made real progress month to month corridor.
Okay check us out with independent parties, such as the analytics.
Persistence of dental as a leader in me.
Now, let me turn this over to St. James what's going to add that.
Yeah.
Oh, yes.
Thank you Carlos and thank everyone for participating.
Our Q3 earnings call.
I like to start.
Okay.
It's slightly different talking about the change from Q3 to Q3 of next year, but just.
Making a very quick comparison between Q2 and Q3, so how are we our sequential movement.
Uh huh.
GPI.
I would touch on revenue in Q2.
If we compare Q2 to Q3, we basically had a one three percentage points on constant currency.
Kris on resin, which is a good sign because we are.
We've been evaluating the evolution of a potential recession or downturn and some of the economy.
So we are having a positive 1.1.
And revenue base.
Is that.
As a result of some of what we told you on Q2 that we had a record sales day.
So revenue.
Had basically one three even with all of the recession or downturn only so that's a good thing from the revenue side looking at EBITDA the areas, where we can.
Let's say report a significant increase so we had seven eight.
Presented points I'll EBITDA that we reported last quarter.
And we've talked about.
A lot of Opex in reading a lot of actions that would hurt Q2.
We had some incremental costs like sites shut down like Teva costs.
And some modest but that would benefit our second half of the what Q3 screens that.
Those actions are paying off so we are not.
Very far from the $7 8 billion, increasing three two percentage points of revenue to 11.1 Christian can be done even with all of what we are talking about.
The economy and everything else.
On the operating cash flow, we are keeping the same trend. So we are we.
We were at $8 one positive.
Two or three a busier looking at free cash flow Dan I have response that we've explained to you we had all of the financing and the ball on band edge.
That we had in August which drove the free cash flow down for the quarter.
Looking more on the.
The traditional way of looking so now looking at the Q3 compared to Q3, So Q3 22 compared to what we had in Q2 'twenty one we see that again on a constant basis.
We had a minus 0.4%.
A reduction.
The revenue, which again is a good sign because Q2, we showed you that we had on the B four percentage point down to two.
Due to obtaining two was 4% down.
Compared to Q2 of 'twenty, one so in a way it's showing.
Slide <unk>.
We did file a gradual reduction on the R&D based off of volume reduction that we saw in Q2.
Looking at again consolidated as I mentioned 11.1 is our EBITDA margin.
Compared to last year, we are down by two three percentage points.
Some.
And one off costs like severance costs, most of that where in Q2, but we do have some.
Q3, not that much but some.
All of them and we had the main impacts Q.
Q3, compared to last year was on Brazil, where we had a lot of lingering effects in terms of volume as we mentioned that we had some volume reduction from clients that.
Our share of wallet with potential very big in that way when they get back part of the volume did not return it.
Also the economic scenario Ritchie is driving volumes down so looky module games in Brazil volume.
Revenue was down by 8% out of that 6%.
In that 6%, we do have our debt relates to the cyber.
Cyber attack volumes related to this hybrid that Gibbons retired.
And also some price reduction target that's EBIT throughout.
The last quarter.
That's what's below our.
Our minimum.
Stability at.
That we could do so in a way.
We decided not to participate.
Telefonica, we hedge.
At 13, 6% down.
Revenue.
Driven by the cost efficiency and a funny guy has a huge cost efficiency.
<unk> that they implemented early in the year and they continue throughout the entire year.
Our revenue down in two components one is volume they are actually.
Producing volumes and the other one I just spent on pricing that we did together with them to make sure that they are more complex.
18, OE that 8% of revenue reductions.
Partially moved to the EBITDA margin. So we are a four percentage point down.
Do you have some evidence because of that volume reduction there.
But we managed to offset.
Part of the volume downturn and are all in the EBITDA margin reached closer that template looks.
Looking at the Americas.
The scenario in terms of volume.
Completely different we had a two 4% increase on the revenue base.
Would you expect to be almost in line with less.
Okay.
You had the same quarter last year, which is a good time because we.
Even with all of the economic downturn that we could achieve throughout all of the country.
The Americas.
Segment, we continue to have.
Pretty much in line so that's good.
In terms of revenue Telefonica, we are Uh huh.
Higher Ed we recover some countries that.
Longer and to react to the wisdom drove us to a cold leads and enter 2021, we basically had that funding increase that company.
In those cases, we also had a positive impact of the Argentina hyperinflation.
Which.
Again, it has a positive effect on the revenue.
A negative impact on the EBITDA as the marches in Argentina, a little so that's one of the drivers for the minus four percentage points that we do have.
In the Americas.
In EMEA we.
The goal of 14%.
A mood sector, almost 20% and driven by some contracts we.
We had contract in the energy sector contracts can be shouldn't sector.
<unk> on the multi sector and also in the case of Telefonica, we took over some volumes from other competitors in the beginning of the year, which is showing up here in Q3.
The 0.8 percentage points down in terms of EBITDA margin Oniomania, mainly as a result of a mix between onshore and offshore. So we are more slightly more to onshore.
Then two offshore are the expectation is that in Q4 that situation with Greenberg because we are growing now we can go on throughout the less a week.
We.
The offshore than onshore.
Looking at our cash flow a breach we basically as I mentioned, a lot of indirect costs and operational improvements that we can.
In Q2.
The dogs. So we had $28 million in Q2 now we have 38 is a $10 million increase in terms of EBITDA for the quarter.
It came out.
We reached the $25 million of cash could be down or U S. GAAP EBITDA.
We had a negative $5 million.
Changes in working capital.
I mentioned in Q2 that we implemented a new T shirt program in the beginning in the bill to pay our closest Ricci.
Going very very well.
But that the main.
Issue for that minus $5 million, that's exactly the closing of the water. We had the implementation the last wave of implementation of the new USA.
Basically, Mexico, Colombia, Peru, and some of the Alder.
In a way that delayed a little bit our daily procedures.
Delay also collection, we expect that more to compensation Q4, so not only compensate that at 5 million, but I actually have a significantly positive change in working capital as a result for all of us.
These actions combine it with what we already discussed it when we had the Q1 closing that Q4 is always our best quarter in terms of collections from clients actually anticipate.
Payment to December so in a way we expect a very very positive Q4 in terms of free cash flow.
Capex, we continue the same level of control that we need to catch up next quarter.
Everything that we need to grow securities.
I wish to Ritchie at we are doing.
But as we have the ability in our sites.
Some investments are reduced because of that and that's basically what drove our operating cash flow pool.
Deposits of $8 million and the 46 million of Mega Chief Finance extensive basically in August we have bonds plus hedged the bone to essentially million dollars.
Page 22, and a half.
Around $4 million debt or other finance expenses.
We usually have on our quarter and that would mean.
The cash flow down by 38.
Thank you for the good thing is that we don't have any payment of bond hedge which will make best bar on 46 are pretty close to the tweets and better EBITDA expected for Q4, and a very positive change in working capital. We spoke a Q4 pre cash flow very very bullish.
Chip.
Death magnitude $38 million will be the two what drove cash.
We as we reported in the closing of Q2, we had $103 million of cash.
We are down to $66 million of cash this year.
But again as I mentioned, the expectation that the positive free cash flow of Q4 will that make us back to the range of $100 million and that's how our expectation to close during the year.
From the leverage standpoint, we.
We have clothing can treat.
We have all of the numbers as reported at <unk>, One times EBITDA, but what I did hear you took the simulation of what would be the leverage if we exclude the hybrid respect of Q4 last year.
Remember that in the net leverage we use the last 12 months EBITDA.
And the last 12 months basically from Q4 of <unk>.
And he wanted to Q3 of 'twenty two.
So I just need a cumulation I just for.
Or cyber in Q4 of.
'twenty, one which would pretty much what we would have ultimately when we called the year because when we closed that you enter the new 242.
Q4 of last year will go out of the last 12 months.
That's a good accumulation for what we expect to have.
Yeah.
In the year end.
On the debt payment schedule.
What I would like to report that we have basically removed all of our facilities. So the one that is shown there at 122 was basically at the closing of the quarter, but we already renewed so we don't have any.
Let's say repayment commitment toward the less slaughter.
And the other piece that I would like to point out that inside the 23.
Considering its short term debt is included.
Our Super senior facility with IGT, which is a $43 million drawn.
We cheap.
Nearly renewable facility based on the continent, and we keep very close control of the covenants and.
We are.
Okay and all of those covenants are renewing would be a kind of a no to monkey.
Thanks.
Another thing that is important to two two comments is that we are.
Of course, well aware of our concerns about our financial obligations and the increase in finance costs.
Based on our market.
Forwards rates, we expect that 2023 will be the last year of high financial expenses, it's cold shoulder.
So what we do the first.
Sure that we are.
We recover the business what we have told you that we accelerate all of the cost efficiencies and make sure that.
<unk> is back on track.
And we brought new customers, so new sales, particularly from currencies the sarcomere.
And our we have some.
Sales in U S.
Shortly.
Carlos also presented in the Philippines.
Another important comment is that we are continuously evaluating.
Any source of finance refinance any alternatives.
To enhance our capital structure of course.
We are very.
Very close.
Two the maturities under the existing debt and we're looking for other sources, including receivables finance that's good let's.
Let's say improve our liquidity scenario.
The last thing.
That I would like to mention to us is all equity.
Reported in Q2, our negative equity of over $131 million.
And now we are reporting $165 million negative equity.
Again operating profit.
The chiefs.
Even the hedge actually in the quarter had a slight positive impact, but the main thing that pro athletes downward.
<unk> costs.
And mainly exchange rate variation, mainly on the new change in some of other currencies too.
So the closing of the Florida, we have the 165.
Important to mention that most of that relates to noncash.
Impact so we had the mark to market of the hedge which is now at.
$170 million and we had one of the exchange variation Debbie.
A noncash impact on the equity that you can point to.
For you to have that one at five years blood.
So I think that's what I had.
For my end.
I think that we know should open to Q&A session.
Thank you.
We will now begin the question and answer session.
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At this time, we will pause momentarily to assemble our roster.
I would now turn the call over to Mr. Her known then wherever it for questions received via webcast.
Thank you Cor knows I'm sure you I have a question from our audience.
What is the pricing environment in your key markets and how competitive are you.
Well, we are we operate in a very competitive industry.
Clearly price is.
Price cost piece is important to every customer.
Now much stimulus statement, but you can't just from sector to sector and geography to geography.
Our growth focus of our growth is in sectors, where the big value that we can create allows us to get better margins.
You can call it less price sensitive everybody's price sensitive sectors that have high growth and the value you can create.
So allow us to get a good market.
There are some legacy sectors that we do have that are much more price sensitive and therefore, much more competitive and Brian . So one of the things that we're doing to serve those customers.
Well as well.
Interval.
Yeah offerings for example, something we've done in Brazil.
Here, we call it out into lifeboat, we fundamentally have a.
Yeah I know.
Framed that have a lower cost structure allows us to.
To be more competitive price watchful of course, there are some contracts customers those are segments, where we feel we cannot make the margins that we want to make that we just collect but we think that having those three components to the way we approach pricing.
Cost pressures ease at that for us.
Thank you Carlos we have another question from our audience.
Please help us understand how can you be reducing so significantly your coffee and tea.
We'll expect to keep on growing.
Well I am.
I alluded in.
In my remarks, and linear amplifier here.
This Fisher contextual thoughts that you have to simply cut costs.
For example at <unk>, Inc.
Always have to try to be more efficient and make sure that close to not creeping and those may be more what people are thinking when thinking about post that.
We will continue to invest to London and be more efficient in the way we handle the back office.
But.
The big ticket items or the bulk of the valuation in terms of efficiency.
In the efficiencies in delivery in our operation in the core operation when we deliver our services to the customer.
I've mentioned from the beginning that would be a big part of why we're stepping east being more efficient in that definition and I also mentioned that it would be a multiyear effort. These are not about doing the same things in the same way with a yes, we let people or overlap.
Yeah.
Do you think about thinking that way, we do things more efficiently.
And in that sense, it's a win win win you can keep on doing that.
And not only you get more efficiency and better cost, but also provide better service to our customers. As an example, I think I've mentioned, that's part of what we call now the phase two or project ratio.
One of the areas of focus for example in some attrition that they consider the samples if you will.
Attrition.
You have to hire less training lab.
You reduced your costing you more efficient it further.
I would also benefit because the agents and the employees that you have certain customers.
They longer in that customer and they they have more experience and they provide a better it's a win win win so in doing that although it's more difficult. It takes more time and it's a multi year project you can keep on doing that and of course.
Thank you Carney.
So we have another question from our audience, how does the 10, 3% PCB increase reflect on the current and future revenue impact.
Yeah.
Hmm.
Perhaps I I need to amplify fresh is very important.
But very importantly extinguished.
<unk>.
From revenue as you scale revenue ramp.
Ramp up Diamond and revenue will start occurring. So for example, when I mentioned that we feel very positive about the startup.
Because of the sales since before.
We're actually very important to show that you have in Q4 and Q1, because those are the sales that start producing revenue earlier.
In the year and have an impact throughout the year.
From that perspective, all the sales that we have QC, particularly Q4 are going to.
The biggest impact in terms of increase of.
Revenue putting debt.
Hum.
Excuse me.
The initiative.
Thank you Carlos.
Operator would you mind opening to questions.
Absolutely people dining.
Yes, Sir our first question today comes from Declan Hanlon with Santander. Please go ahead.
Hi, Good morning, everyone. Thank you for the call a.
Couple of couple of questions first off.
I guess, while it is it is.
Hmm concerning that we are witnessing a second decrease in guidance.
And I understand the backdrop and the macro issues associated with that but as we're you know 50% through the fourth quarter I presume you're you're now full year numbers are built on a pretty good visibility.
And to that end.
Just doing the math here I'm, assuming that a fourth quarter margin of somewhere in the mid thirteen's is required to achieve that that gets you to kind of where you were thinking about on the balance sheet and brings cash back up a little bit. So if you can comment a little bit more in terms of granularity on that I'd appreciate it.
The second question relates to what was mentioned by Carlos around liability management.
While I understand you can't get into details on that I'm, just thinking broadly here. According to my calculations. Your you don't have them here.
Minimal or basically no availability under your lines under the secured debt test at this point just hypothetically how would you go about and L. M initiative at this point.
Those are my two questions. Thank you very much.
Sure.
So on the first question I've seen that bridges and I'll, let <unk>.
Figure to give you the specifics on the math, but.
I think Youre Directionally correct on the PTC that we Oh.
I think of a three part question. The first question do you have or at least stability ambitious state I think the answer is yes.
We have a month of in house developed so I think we are pretty pretty close to the numbers and you can see that our expectation for EBITDA.
Maybe that growth in Q4 be in.
In line.
If anything.
Yeah.
Conservative to that.
On the second part.
Liability management, how do you go about that as I mentioned, we are looking at.
Number of proposals we have some.
Institutional investors that are with.
Hum.
In in.
The company as well as international.
And part of the.
An important component.
Proposals now we'll look at looking at.
And several.
Several of them.
The structure that has behind the knee.
Receivables are.
Rituals back. So we think we have the capacity to do what we need to do.
And not every proposal is identical but.
I think that we're evaluating a number of them.
And I feel correctly mentioned I truly cannot get into a little detail. What we are doing this.
Yeah.
And on the on the EBITDA I think asking that.
That's a new York pretty really.
Right.
Assumption, we consider that we're going to be in the range of 13% to 14% actually more to the 14th.
Which would be.
Two quarters roll will increase so we are reaching $3 three from Q2 to Q3 and expect to have.
Another two percentage point decrease in.
In the fourth quarter.
You're all quite I know it was not any specific question, but probably will come that.
Supports the increase in EBITDA.
Working capital that we expect to have much better and more.
It's not nobody is in a very limited.
Finding costs in the last quarter of the year, we make our cash back to the range of 90 to 100.
The haynesville.
We ended June .
Thank you very much.
Thank you. Thank you.
Thank you operator, we have a question from our audience what is the competitive advantage of going to the Philippines. In this moment, what's the capex and working capital needed for this and how will this be funded okay. Let me answer the last.
The last first.
This is a self funding.
Initiative project, what I want to call it.
We had the opportunity of we entertained isn't going to the Philippines at different points in the last few years, but one of the things you don't want to do it in a very prudent way.
We are.
Yeah.
This particular piece of scared that while we're launching right now is fundamentally self funding and bullshit dates within the year and we actually mentioned it is not that we are opening a site and hoping that we will get the pieces that we have.
Customers, both existing and new customer specific for for these sites. So.
He will be helping us in the year and.
Sure.
He has done with its specific.
That was just going to them it is.
He's going to go into the.
The other part of the question.
He was the.
It was a bit competitive.
Yeah.
Sure.
At the beginning of it.
With a competitive advantage I want to go into it so.
So.
Philippines. These days is that important.
Our legs on the stool are competing in the U S. We are.
We have the.
Infrastructure in the World second to none on our near shore and we've been very successful in selling that and serving customers.
Sydney customer using that.
The Philippines is another capability that is very important and the go to market now with very small in the U S market. So who we have grown much more with just the new short for sure but this as I mentioned a number of catalysts.
<unk> customers have been asking us.
And offering volume was for asking the Philippines two weeks you can shut them.
And that's an incremental business for us.
Also in terms of new customers.
We have.
We've closed a number of customers recently, but also we have significant customers in the pipeline that.
Put us in a very favorable position to win the business having that.
Doug.
Thank you and our next question today comes from Vincent Colicchio with Barrington Research. Please go ahead.
Yes Carlos.
I'm curious your.
Your high value sales does that increase in the mix year over year.
Is it increasing in the sales pipeline versus the prior quarter or the year over year period as well.
Yeah.
Are you are you thinking in terms of.
Our high growth verticals for what do you think of anything in particular.
Our high value sales used to talk about high value sales.
No automation things of that nature.
That's higher than average in terms of margin.
That tends to be tends to be fairly stable.
One of the things that we've seen in terms of sales and I think part of that is.
Im not putting additional focus and says we've seen that.
The marketing.
Volatility if you will.
Even more traditional services have been moving up.
As well so as important I E.
In the high value sales week.
Exercises technology approaches as well.
Can I answer that.
Customers et cetera, et cetera, we've seen both the high value.
Additional sales.
Improving in terms of.
Martin.
And which I thought I asked the question because I thought.
I've been asked the question by a number of initiatives recently.
Themselves.
A high tech and hydro verticals.
On the.
On the.
The branch about layouts.
Hi differently sets ourselves so to figure opportunity also to answer it.
To answer that.
We we've seen from year on year from last year to be here.
Les a decrease in terms of.
Those are high.
High growth companies, having said that we've seen the year, we've seen increased quarter on quarter to quarter. So.
It's a positive positive strained.
So that's a likelihood for example, we had.
Quarter around 35% on the in terms of the hydro, but it doesn't Pennsylvania.
Here, we have 20%, but we we've.
We've seen 12% in Q2, 20% in Q3 I was thinking you know really Jack with the sales that we have closed on with clothing.
Higher than in the twenties.
For Q4, which indicated that there was a decrease year on year clearly.
Christine.
Quarter to quarter.
The other thing I hope not.
I would point out.
Despite the fact I mean, you've seemed a lot of the news these days someday.
Hum.
All of a sudden and.
Challenges in high Tech companies, we we leap day.
The actions we are.
We saw the problem can be not necessarily on just those sectors, but being the way that I, particularly towards shaping and potentially putting 23, depending on this certification.
You've seen the world.
We took action early.
Thank you wanted to tools he took the bandwidth of the costs that we're beginning to get the benefit so.
That said with the Houseware ahead of the curve compared to those high Tech Hum.
Okay.
Did I answer your question Vincent Yeah that was helpful. Thanks.
And Sergio one for you if we assume no change to currency rates between now and year end.
How much would the currency headwind.
To your nominal revenue in 'twenty three versus 22.
Sorry, I can you can you please repeat it.
Yeah Yeah.
I'm looking for some help in terms of estimating that the currency headwind.
Nominal revenue and 23 versus 22 any help there.
You know the.
Expectations of the exchange rate.
We do believe that.
Our main business is in Brazil, and we believe that after the election.
Our Python and.
Foreign exchange that was actually a nice.
2023, as the new government come gene inflation.
Another topic that I believe is very important.
The Kindle reviews, the Central Bank raised it very early our interest rates, which as you are well aware. He said, there's a lot in the in the hedge because of.
Danny has reacting.
Impact to us, but in another site.
Makes inflation much more under control.
Government and now expect that inflation for this year.
There to the $10 three that we had last year would be around five.
In that sense, we believe that foreign exchange act should be better damage was actually in 2022. So we know we are maybe.
Foreign exchange can be kind of a tailwind not a headwind.
Fourth mainly I E.
In the Pennsylvania portion of the business.
Looking at it roofs.
Heart, but.
Hard to predict but again, we had a headwind on their new roles.
The last quarter, which is now more stable. So we believe that foreign exchange should not be a huge impact.
I mean, not a huge headwind for us.
That needs to be actually a slight tailwind.
So a conservative estimate would be no impact of year over year I suppose.
Yes.
And then do you have the contract value of sales growth in the quarter was up was it was nice to see the 10% I think it was do you have a number for the.
Nine months.
The prior year nine months.
I don't know if I have it here, but definitely we can get it to you.
Okay. Thank.
Thank you gentlemen.
Okay.
Thank you operator, we have another question from our audience what are the expectations of your cash and free cash flow.
For the end of the year.
And that's what you suggest.
Yes, we are as I mentioned in our Q4 is a very very solid quarter for us. So we expect first EBITDA to grow compared to the same.
Base that we had at Q2 to Q3 from Q3 to Q4, so that's one side.
I thought that working capital is significantly positive Q4 remember that in Q1 I explained that we had some advances that we received in Q4, we keep.
Negatively Q1, but it is positive in Q4 on top of the same control in terms of topics. So overall, we expect a.
Our free cash flow in Q4 to be in the range of $40 million.
Free cash flow and operating cash flow.
Is that different from the time the interest.
It's very small compared to what we had.
2016 in this quarter. So we believe that our free cash flow to be in the range of $40 million and that would make our.
Our cash balance sheet differing between 90 and $100 million.
<unk>.
Thank you and our next question today comes from Beltran pause whaler with Delta. Please go ahead.
Hello, Good morning.
Thank you for taking my question.
I have three.
First of all.
So it'll be very quickly that's usually maybe if I get the number and I think you and EBIT covenants and in your prepared remarks that you expect a strong well.
Walter in terms of margins I think you got it.
Between 14, and 15% and then show you have more please forgive me Chad it was 13% to 14%. So the first question maybe as well.
It wont be it takes them on one day.
I know I'm, not things that myself and normally I, I'd say, well I'm sure I've stood up because the numbers I'm sure.
As you know them better, but I think I recall that to be on this slide so that's probably the one that you should yeah, but we are at.
I expect the range of 14% to 50%.
So I don't know who is trying to be more conservative with just this week with them anyway.
So that's correct.
Okay. Thank you very much as you'd like it could be conservative.
And what.
With those margins.
We'll generate some nice I was just commenting Jeremy.
And let's say.
No no no guidance just conservative.
Let's get through that door questions if I may.
In 2020.
If you could give us let's say.
I know this is going to be demand.
Maybe there's some actual guidance.
But let's see what B malls, what are you budgeting for next year.
In terms of let's say constant currency World and then a little grass with these new contracts like the Philippines supposedly better margins on the free cash flow, it's more or less of course anything can change with it.
Yeah, Let me, let me see what I can probably yes to be precise. It now we are we have oh on Friday.
The board meeting to approve the budget so.
I don't want to talk to.
Comment on the specific budget because until we have that.
There is no no budget, yet, but let me let me give you some.
Something directional.
From a from a macro environment I don't know you probably have your own assumptions and we are not assuming that the world is going to get less complicated in 2000.
33, then 2022.
So oh in terms of the top line.
I personally think that Brazil currently it might be a better market in in 'twenty 'twenty three we have behind an election that got a lot of people are nervous about.
What's going to happen as you know.
For business, sometimes it doesn't matter who wins.
The elections.
Certainly I shouldnt use the interest rate. So I think that's behind us and a surge of anyway.
<unk> commented on I think the Brazilian.
Central Bank has taken action earlier than all of it now.
Unfortunately in terms of you know.
Now it's closer than we are we.
We did not anticipate but for the economy over a ceiling I think it should we expect to see.
You know already less inflation for next year than this year and hopefully that will also.
Allow the government to keep these interest rates and overall.
A better business environment, but we're not so means for Brazil, or the rest of the war on Hey, there's still some uncertainty out there, having said that and whether you're doing the integration of uncertainty. So we've taken a lot of pay.
This year to make sure that we have.
Good cost structure a good.
We accelerate.
Efficiencies and that's the best way you can prepare for uncertainty and potentially you know its a complicated year on in the market. If you couple that we quite frankly, we've seen you know.
Stronger sales and again you know he could you know I don't know how many points make a line right but.
We've seen good Q2 sales Q3.
And quite frankly I think.
We've seen it as.
So we're sticking with it sounds like you're close to contract on on January <unk>.
Or December it makes no difference in terms of the revenue for the year, but it makes it because it didn't show the numbers for Q4, but we expect a very strong Q4 old. So yeah. So if you couple.
Total sales for us for the year, which is at the beginning right Q4 Q1.
And at a better cost structure.
We definitely expect.
Hey, a better a better results for next year.
Hum.
I think when I said that does get action all the time, but tornadoes.
I can do it before we have a.
Get approved.
Okay. Thank you. Thank you got it so for clarity and maybe the last question if I may I think they're doing it.
Mentioned.
Right.
The luxury applies financial close or not.
The science of course would be 2023, you mentioned that you got.
Of course, there's 25 to 30, what they think you'd go not to mention that if things stay on they are.
The majority of our peers.
Okay. Okay. So just to get it up and in place or is there still a possibility that on 'twenty 'twenty four up one point from liquidity.
If I take the million of course, there might be all one off of you you put them all in the patient based on them, although second quarter 2016.
So the positives you can take.
I mean, clearly the negative on the hedges.
Didn't expect.
Rapid interest rate.
Growth and heaters 2022 and we're assuming for 2023, even the forward rates.
So I'm gonna significantly, but the young.
'twenty 'twenty three 'twenty four 'twenty five.
The biggest component of the cost of the hedge which is the principal use no more so regardless of the pediatric other interest rates, our financial costs dropped significantly from that perspective, right now keeps on top of that interest rates decreased so much about it but regardless.
The principal components of the overhead.
Expires in 'twenty, three so we need to be prudent we need to we are conservative.
And manage cash flow in 'twenty, three and things get better after that.
Yeah.
Correct.
Okay.
The <unk> 23 based on the current forward rate.
Where are we going to have the biggest impact.
Are you moving forward.
Again looking at the scenario for Brazil, and the inflationary.
That's probably we're going to see probably half or something ranging half of next year, there may be a scenario where nature this year.
Yeah.
First rates go further down.
It does.
24 onwards, but we are not pushing beyond that.
We are following we are truly.
It's always better to prepare for the worst so we assume that play to the street is going to be a very high financial cost, but we know for a fact that the 20.
24.
Situations chicken chicken improved regardless of the way.
Thank you.
During this time, but I think it says something about 'twenty.
Before between 25 on Thursday, and when they see page 16.
The Q2 presentation, there was a one off hopefully people when people so baidu minus 17 minus 14.
24, instead of minus 25, or 30 or 2024, it's.
Much lower so.
My question is is there still an expectation on when the hedge as much as the principal.
There's been no one wants it.
Let me talk before.
Yes.
The thing is that where we can take.
Are you through all of the details offline, yes, we do but at foreign exchange change at the last I remember that in Q3 Foreign exchange was in the range of five five and now we are in a different foreign exchange a landfill that benefit changes a lot. So we can take I think offline.
Details, but yes, we do expect the benefits of <unk>.
And I think that's an important point.
And I think before anyone of you that.
Clearly, let me make accenture Guilford for anyone that is interested.
Unfortunately, the edge, it's something else.
Taken at a big impact.
A huge impact on our business and it's a relatively complex. It took me quite a while and of course most of it will take much less but.
To understand them and understand what are the variables and you put your own assumptions in terms of.
No.
Interest rates and foreign exchange rates, but said you'll have some pretty good analysis of scenario analysis and explanation. So of course I'm by the way will trigger an Iot industry today and so the week. So I'm gonna have you are in the space.
Happy to share that with you a fluctuation maintenance can make it expensive there.
'twenty, one, which I think is important to understand these very impactful component. So.
That might be interested.
Make sure that we will.
We schedule, a workshop autos and tablet Thats right absolutely.
Absolutely. Thank you, but we have another question from our audience.
What is the percent of comparative advantage and how do you keep on being competitive in such an aggressive market.
Well that well there's probably.
Some come on components and all the things that are more specific market to market at some level even more specific.
The segment, but Linda.
Because I think a crystal ball I one thing that has come on in you know one thing though.
This agility I think I think you've seen there.
Agility of the company at least in that vulnerability.
We have a lot of challenges then we come back out of them are stronger in 2020, we had.
Covid hit us, particularly bad in Q2, we have veto veto employees working at home we didn't have the data.
Ignore infrastructure at that time, and we've seen a quarter, we had close to if memory serves me right close to 80% of them. Please.
Working from home and we recover we've seen.
Quarter to quarter in house from that.
So nothing.
The.
Last year, we had a.
Big.
Impact big impact that you know trailing two into 2022.
All the.
Oh for cyber attack and <unk>.
We are at.
Essentially 12 months March and then we would go over that.
EBITDA margin update essentially at the level that we would've had it without that.
Hum.
Event, and we added double the charts look us up what's particularly problem with I saw that we were ahead.
On Tyler.
Hum.
Capabilities over everybody else.
And quite frankly.
The T shirt independent sites that are doing analysis on their own because she's not somebody you hired to do it they just do it.
Do tend to think there's another there's a link but timeline, which would provide.
And to the sites.
Uh huh.
That shows.
It talks to refinish as well, but that translates into the way we work with customers. So I don't think that we would always.
They are generally in terms of.
Meeting the needs they have evolving needs.
Thanks.
It's Roger.
And that is truly across all I think in terms of our specific markets and touch on a couple of them So Brazil.
Obviously, we have the biggest competition for leadership in the market.
Hum.
We use that then to give.
To give you confidence or finance them by the way not only our existing clients.
But first of all with shell in Brazil. This year has been <unk>.
It has been the lowest so just like the fact that we are.
The market leader by a long shot we continue to gain new customers.
Okay.
For example in the U S.
Just the opposite.
Secondly in terms of our level of penetration and if you want a relevant in the markets, we alright customer put it to me that.
Something we use.
The best kept secrets.
In the U S. We have the the.
Largest more.
People need to show for the phone platform.
By month.
In the world So.
Government.
Federal government clients here in the U S. We should be congratulated us because.
We are the only provider that can really provide.
90%.
Our bilingual.
<unk> tried to double that.
And now we have the other leg of the stool as I mentioned earlier on.
So thats, even more so so it teaches market to market, but I think the agility of a she didn't share related to adapt grow and enable our customers face is probably something that cuts across.
Yeah.
Thank you Carlos.
So thank you all for attending today's presentation. This concludes our third quarter 2022 conference call. We look forward in answering any further questions you may have.
I'll remind you that you can find all the information presented today in our website investors <unk> com.
Dot Com operator, you may now disconnect the call.
Thank you.
Thank you for attending today's presentation you may now disconnect.