First Quarter 2015 Results Conference Call May 20, 2015

Transcription

1 Atento S.A. First Quarter 2015 Results Conference Call May 20, 2015

2 C O R P O R A T E P A R T I C I P A N T S Alejandro Reynal, Chief Executive Officer Mauricio Montilha, Chief Financial Officer Ed Yuen, Investor Relations C O N F E R E N C E C A L L P A R T I C I P A N T S Michel Morin, Morgan Stanley Flavio Campos, Credit Suisse Susana Salaru, Itaú Securities Adam Dahms, Robert W. Baird P R E S E N T A T I O N Good morning and welcome to Atento s First Quarter 2015 Results conference call. The call will begin with prepared comments by Management followed by a question and answer session. Today s call is being recorded. A brief question and answer session will follow the presentation, and should anyone require Operator assistance during the conference today, please press star, zero on your telephone keypad. I would now like to turn the call over to Ed Yuen with Atento Investor Relations. Please go ahead. Ed Yuen: Good morning and welcome to our first quarter 2015 results call. Before proceeding, let me mention that certain comments made on this call will contain financial information that has been prepared under International Financial Reporting Standards. This financial information is unaudited. In addition, this call may contain announcements that constitute forward-looking statements which are not guarantees of future performance and involve risks and uncertainties, and that certain results may differ materially from those in the forward-looking statements as a result of various factors. We encourage you to review our publicly available disclosure documents filed with the relevant securities and market regulators, and we invite you to read the complete disclosure included in the second page of our earnings presentation. Our public filings and earnings presentation can be found in the Investor Relations section of our website. 1

3 Our presenters this morning are Alejandro Reynal, Atento s Chief Executive Officer, and Mauricio Montilha, Atento s Chief Financial Officer. Alejandro will begin with a brief update on the evolution of our strategy and overall business performance. Mauricio will then review our financial results and future outlook in more detail before we open the call for your questions. I would now like to turn the call over to Alejandro. Thank you, Ed. Good morning and welcome to Atento s first quarter 2015 results call. We re very pleased with our strong performance in the first quarter, which illustrates once again the great momentum that we enjoy as an independent company and the strength and resilience of our business model. Across the group, revenue from continuing operations increased 9.5% in constant currency basis, driven by a robust performance in our Latin markets. Our Latin markets grew 13.9% in constant currency. Particularly remarkable during the quarter has been our performance in Brazil, our largest market, where we continue delivering very strong solid growth results despite macro headwinds. In the first three months of the year, we experienced a robust 19.5% growth in non-telefónica revenue. In addition, the execution of our margin expansion initiatives resulted in an increased profitability during the quarter. Adjusted EBITDA increased 11.8% in constant currency while margins expanded by 10 basis points, further illustrating our ability to deliver strong top line growth but at the same time driving efficiencies across the group. Adjusted earnings were $50 million for the first quarter or $0.20 per diluted share, an increase of 284% in constant currency from the prior year. We also continue to make good progress in enhancing our financial flexibility by further reducing our net leverage to 1.4 times from 2.2 times last year. Overall, a very robust set of results that allows us to strengthen our number one market leadership position in the BPO CRM Latin market. Our solid performance for the first quarter gives us the confidence to reiterate our guidance for Mauricio will speak to our financial results in greater detail. I would like to spend the next few minutes to provide an update on our operational performance and our strategic initiatives to drive profitable growth over time. As you know, we have articulated these initiatives across three main pillars to unveil Atento s full potential as an independent company. First, we outlined a series of strategic initiatives designed to drive our top line growth. These initiatives, including the development and deployment of higher value added solutions, continued focus on revenue diversification through new acquisitions in key verticals, and further penetration of the US nearshore market. We are off to a very strong start to the year. During the first quarter, we increased the share of our higher value added solutions by 1.3 percentage points to represent approximately 24% of our revenue. We are making great progress, further embedding ourselves into the value chain of our clients by delivering higher value added solutions, especially in the financial services and telecommunication verticals. Also, during the first quarter, we won approximately 2,200 new workstations of new business across key verticals and geographies. We continue to leverage our strong credentials within the telco vertical to accelerate growth, winning nine non-telefónica telco deals with five clients in three different countries. The financial services vertical continues to be a strong growth opportunity for us, where we won five deals with four clients in three different countries. These achievements result in non-telefónica revenue representing in the quarter 55.1% of total revenue compared to 52.8 for the same period last year, an increase of 2.3 percentage points. This is very important as we continue to diversify from our largest client, Telefónica, which now represents less than 45% of our revenue. We also continue to successfully ramp up our nearshore operations, a high potential opportunity for us. During the first quarter, we won approximately 120 workstations with 15 new clients. For the coming 2

4 months, we expect to continue to develop on our strong commercial pipeline to continue to win new business across our key verticals and geographies. We also remain focused on developing and providing higher value added customer experience solutions. Second, we keep transforming the way we operate to drive consistency in operations and to leverage economies of scale across our geographies. The ongoing margin transformation on programs we implemented last year have continued to yield very tangible results in Our strategic initiatives to enhance operations productivity resulted in our billable versus payable ratio improving by 4.3 percentage points versus the same period last year. A key to these improvements in productivity has been the centralization and standardization of our planning and forecasting processes. After the successful implementation of our first operations command center in Brazil last year, we recently established our second command center located in Mexico City, therefore we expect to continue to see positive impact in our operations productivity in the coming months. In addition, our continuous focus on enhancing our HR effectiveness by improving sourcing, selection and training processes has allowed us to reduce our turnover ratio by 1 percentage point during the first quarter versus the same period last year. We also continue to make great progress in the optimization of our site footprint by relocating a portion of our delivery centers from Tier 1 to Tier 2 cities. These cities are more competitive locations in terms of cost and access to labor. As of the first quarter, in Brazil, 56% of total workstations were located in Tier 2 cities, an increase of 2 percentage points versus the first quarter of last year. In the coming months, we will build upon this great progress by launching a second site of relocation initiatives in Brazil and by expanding the program to Colombia, Peru and Chile. Overall, sustaining in 2015 the success achieved by our margin initiatives in the prior year will enable us to set the standards for competitiveness within the industry while continuously improving margins over time. Finally, our third pillar is centered on human capital capabilities. This is a key component to our strategy and a clear enabler to drive high client and employee satisfaction. In this quarter, we have continued to make great strides in our evolution into a high performance organization while being recognized for the fifth year in a row as one of the best companies to work for in Latin America by the Great Place to Work Institute. We are very proud of the results in the first quarter as we delivered robust growth in revenue and Adjusted EBITDA. We have demonstrated quarter-on-quarter our ability to consistently execute profitable growth in a diverse set of market conditions. Our performance in the quarter allows us to reiterate our 2015 outlook. Our business is quite unique as it benefits from strong visibility year-on-year. On top of that, we benefit from some market growth in the LatAm BPO CRM industry. Our market leadership positions us well to capture this expected growth. We also remain focused on delivering the growth opportunity through our strategic initiatives. We made significant progress already in 2014, achieving significant customer wins. We have a robust commercial pipeline in 2015 to continue capturing new business opportunities and increase share of wallet with existing clients. We also aim to continue transforming the way we operate as we are just at the early stages of reaping the full benefits from our margin expansion plans. All of this combined should translate into significant long-term earnings growth and sustained value creation for our Shareholders. I would like to finish by extending my gratitude to each of our 160,000 employees. We would not have been able to achieve our strong results without your hard work and commitment to our Company s vision and strategy. I will now hand over the call to Mauricio, who will walk you through our financial results in greater detail. Thank you. Mauricio Montilha: 3

5 Thank you, Alejandro, and good morning everyone. Thank you all for joining us today. I would now like to spend a few minutes to walk you through our financial results in more detail and we will highlight the variance in constant rates that better represent the results, as we are exposed to several currencies and geographies. As Alejandro mentioned earlier, we are extremely pleased with our financial performance during the first quarter. Constant currency revenue growth from continuing operations, excluding Czech Republic which was divested in December 2014, achieved 9.5% in the quarter. The outstanding top line performance was driven by strong growth in the Americas and Brazil, which combined, grew 13.9% in constant currency in the quarter, offset by reduced activity in EMEA. Revenue from Telefónica increased by 3.1% in constant currency, driven primarily by strong performance in the Americas, in particular, in Chile, Peru, Argentina and Central America. This positive performance in the Americas largely offset the reduction in EMEA caused by adverse economic conditions in Spain. Our revenue from non-telefónica clients increased by 14% in constant currency due to strong double-digit growth in the Americas and Brazil, and the first quarter non-telefónica revenue represented 55.1% of total revenue compared to 52.8% for the same period of last year, representing an increase of 2.2 percentage points. We have continued to increase our revenue diversification from Telefónica with significant customer wins in the telco sector in Brazil and most sector segments across the board, in addition to higher volumes with existing clients, primarily in the financial service industry. As important as our top line growth is our ability to deliver profitable growth. In the first quarter, Adjusted EBITDA increased 11.8% on a constant currency basis, a margin expansion of 10 basis points versus same period last year to reach 11.3% of revenue. We continue to drive margin expansion through our efficiency programs and improved business mix resulting from higher margin revenues from LatAm, representing nearly 88% of total revenue, an increase of 5 percentage points versus same period of last year, above average growth with non-telefónica clients, and finally, increasing penetration of solutions, reaching over 23.8% of total revenue in the first quarter, a 1.3 percentage point increase versus the same period of last year. Now let s take a look on the segments (phon). We reported solid results in the Brazil segment with revenues in the quarter growing at 11.8% at constant rates, despite the challenging macroeconomic environment. Revenue from Telefónica increased by 1.5% in constant currency, driven by the deployment of new services in Brazil. We continue to see strong revenue diversification in Brazil as non- Telefónica revenue increased by double-digit rates, or 19.5% in constant currency in the quarter. The outstanding growth was driven primarily by the carve-out of the internal call center of a leading retailer in Brazil, volume growth, and the introduction of new services to existing clients, driven by the financial services sector. We won approximately 1,100 workstations in Brazil during the first quarter, including almost 400 in the non-telefónica telco space. Adjusted EBITDA increased 11.2% in constant currency in the quarter. Excluding the allocation of corporate costs, Adjusted EBITDA margin increased 30 basis points to 12.9%. This has been driven primarily by our own volume margin improvement initiatives and a better revenue mix, largely due to the increasing importance of solutions in our portfolio. In the case of Brazil, solutions achieved 36.5% of total revenue in the quarter. Now let s talk about the Americas segment, which increased 17.3% in constant currency the revenue in the quarter. This growth was supported by strong performance across the region, and in both Telefónica and non-telefónica segments. Revenue from non-telefónica clients increased by 13.9% in constant currency, driven by strong growth in most markets supported by the new and existing clients, particularly in Argentina, Peru, Colombia, and the US nearshore business. During the first quarter, we added approximately 1,100 workstations, including more than 320 in the non-telefónica telco space, further highlighting our ability to diversify our revenues as an independent company from Telefónica. 4

6 Our US nearshore business added over 120 workstations due to the expansion of service to existing clients as well as the addition of three new clients in the quarter. Adjusted EBITDA increased by 7.2% in constant currency, or 12.5% of revenue driven primarily by strong growth in Chile, Peru and Argentina, as well as continued efficiency improvements across the board in the region. Excluding the allocation of corporate costs, Adjusted EBITDA margin was 14.1%, which was flat as compared to the prior year. Our margins were impacted by the ramp-up of new business offset by ongoing efficiency program gains. The EMEA segment continues to be challenged. Revenues decreased 15.8% in constant currency, and excluding Czech Republic, decreased by 12.8% in constant currency mainly due to Telefónica volume declines in connection with weakness in the Spanish telecom market. However, we are encouraged by the positive trends we have seen in the non-telefónica business, particularly with the (inaudible) sector. Adjusted EBITDA decreased by 7.4% in constant currency for the period; however, Adjusted EBITDA margin increased 40 basis points as a result of positive impact of our ongoing efficiency programs and the results of restructuring implemented in Q Our balance sheet remains strong with low leverage of 1.4 times net debt to Adjusted EBITDA, and we have ample liquidity with $192.1 million in cash and cash equivalents at the end of the period, and we still have 50 million undrawn revolving credit facility. As a reminder, we have limited currency exposure, as 98% of our costs are denominated in the same currency as the revenues generated at the local level. On the debt side, we have a good protection against currency fluctuations as it is mostly denominated in local currency. The debentures in Brazil are denominated in the Brazilian Reais as well as US-denominated bond is hedged back into the currency of the countries that are backing that security. Finally, let me now review our guidance for the full year of We would like to reiterate our previously disclosed outlook. We expect group revenue growth in the range of 6 to 9% in constant currency mainly driven by a healthy pipeline expansion in the Americas and Brazil. We expect consolidated Adjusted EBITDA margin to be in the range of 13 to 13.5%, and total cap ex as a percent of sales to be approximately 5% with the potential to increase (inaudible). Our effective tax rate is expected to be around 32%, and finally, we expect exceptional costs to be approximately $9 million for the year. These costs mainly include ongoing site relocation efforts, small restructurings in our activities, and other (inaudible) expenses. As a reminder, our guidance is based on organic growth and assumes no impact from exchange rate movements on the translation of our financial statements to US dollars. Also note that we expect normal seasonal impacts causing our revenue and Adjusted EBITDA to follow similar trends as last year, with stronger results in the second half of the year. I will now turn it back over to Alejandro for his closing remarks. Thank you, Mauricio. Overall, we are off to a strong start to the year. We continue to make significant progress in the execution of our strategy to deliver sustainable value for our Shareholders. Thank you very much for your attention, and now we are ready to take your questions. Thank you. We will now be conducting a question and answer session. If you d like to ask a question, please press star, one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star, two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. 5

7 Thank you. Our first question comes from the line of Michel Morin with Morgan Stanley. Please go ahead with your question. Michel Morin: Yes, thank you. Good morning everyone. You mentioned the improvement in the billable to payable ratio, and I was wondering, Alejandro, if you can give us a sense of how much room is there still left to improve on that metric. Secondly, regarding the outlook, you re looking for constant currency revenue growth of between 6 and 9%, and I was just wondering, given that you just did 9.5% in what is arguably the most challenging quarter of the year, at least it seems that way from a macro perspective, what are some of the puts and takes that led you to that? It appears that you are assuming some deceleration. I don t know if it has to do with more difficult comparisons later during the year or something like that, but if you could walk us through some of the thinking that went into that, that would be great. Thank you. Sure. Good morning, Michel, and thanks for the questions. In terms of the first question, the billable versus payable, we as you might recall, we implemented the first round of operational improvements at the beginning of last year. On a numerical basis, last year we started the year around 66% of billable versus payable, and over the year we were able to improve 3 percentage points. Over that period last year, we have been able to improve 4 percentage points, so right now we are around 70. So overall yearon-year, it s an improvement of 4. To that extent, we ve done the consolidation of the command center in Brazil. Now we re doing the consolidation of our command center activities in Mexico, then to spread that out to the Americas. I think if you ask me what s the ideal rate, we are at 70% billable versus payable. I would foresee for us to be within the 72 to 75 range, which would be overall close to 8 to 10 percentage point improvement over the starting point of last year. When we defined the full potential for this initiative two years ago, that s what we set out, and we re on our way to reach that level. So in summary, I do think that there is still some room to go, perhaps not as much as we did last year, but at least from 2 to 4 percentage points improvement over this year. In terms of the second question, yes, the implied analysis based on our Q1 numbers would show that revenues might have a deceleration in the next quarters. Honestly, I don t think that s going to be the case. We see a very strong commercial pipeline at this stage. We re just being prudent in our guidance in terms of revenue and validating our commitment in terms of the 6 to 9% constant currency growth. The reality is the commercial pipeline right now is strong. Proof of that is the 2,200 workstations we closed last year, so we remain very optimistic in terms of potential opportunities to continue to reach additional revenues and new client activity during But I wouldn t assume that the fact that we our maintaining the guidance means that we foresee this acceleration at this stage. Michel Morin: Okay, that s very helpful. Alejandro, if I can throw in an additional one, also about the guidance, because you were specific in saying that that s organic, and there has been some press around the potential sale of one of the large telco s contact centers. I was wondering if you can not specific to that opportunity, but if you can give us a bit more color as to how those types of carve-outs actually work. How much capital do you actually need to deploy typically when you do this kind of a transaction, or is it really just that you re hiring a lot of people? 6

8 Right. I think a good way to look at it first I would say that for us, carve-outs is an integral part of our growth strategy because we believe that, and it has been proven that way over time, that we have a lot of value to add when we do a carve-out because it is not the same when an activity is managed as an inhouse activity by our client versus us coming up with ways of improving the customer experience but also improving efficiencies, productivity, such as what we have done in Atento. So it s an integral part of our growth strategy. A way to look at carve-outs for us and the reason perhaps it s attractive is that if we start an activity or a business from zero, typically we have to invest on building of sites, training personnel, so therefore there s always an upfront investment that we need to make. With a carve-out, those type of investments you don t make because at the end of the day, what you do is you end up acquiring facilities and you have already personnel which is trained and ready to operate. So at the end of the day, when we do the analysis, the comparison is pretty much about the same in terms of what would it take us to invest in a new call center, what would it take us to ramp up the activity, which typically is between three to six months in terms of training costs, and that at the end of the day is sort of the upfront fee that you pay for the contract. It s very attractive because also what you end up doing is you set up conditions for five years at the minimum in terms of a contractual agreement with the client that you are pursuing the carve-outs against, so what it gives you is you acquire the activity, it gives you a lot of visibility on the revenue, gives you already trained personnel, gives you the facilities, and then you have a long-term contract with that. So if we see those opportunities for us, they are attractive and like I said, I think because it s our business and because we know how to add value in terms of customer experience and in terms of operations, we see these opportunities as very attractive to us. Michel Morin: That s fantastic. Thank you, Alejandro. Thanks Michel. Your next question comes from the line of Flavio Campos with Credit Suisse. Please proceed with your question. Flavio Campos: Thank you for taking my question. Good morning. I was wondering if you could unpack a little bit of the Brazil growth since it was so strong this quarter, breaking it down between if it was strength in solutions or the traditional business, and if it s more new customer wins or deeper penetration within existing customers. Yes, thank you, Flavio. First, I would say that in terms of the split between new clients and existing clients, it s about half-and-half. I think the interesting thing in terms of that growth is that the new client growth has come from strategic verticals to us. We were able to close business with a financial services institution in Brazil, which is one of the banks that we didn t have in Brazil, so it s a new service that 7

9 we re we closed that and we re starting to ramp up activity over the next quarter, so very positive from that perspective. In terms of where it comes from, product type of contribution, Brazil right now has 36% of their revenues coming from solutions, and a lot of the existing client activity that came, a lot of it came from the solutions business. We have in the existing client business one activity with telcos and with financial services as well, and to that extent most of the existing client activity came from the solutions business. Specifically, the type of business that we won is mostly related to things around back office and technical support. Flavio Campos: Perfect, actually that s very helpful. Thank you for that comment around the carve-outs. I was wondering if you have any updates on the GVT stations, now that Telefónica owns them, if there is any developments there about those being outsourced, and who would be getting that business. Yes, thanks Flavio, good question as well. The reality is that acquisition opportunity just materialized, and as you might be aware, there is new Management coming into play and that s going to happen end of May. There s going to be a new CEO for now the integrated Vivo and GVT. Of course, we are in commercial conversations with them but it s still very early stages to say how is that going to evolve. I would say, though, when we were doing our projections for 15, we didn t consider GVT as adding additional revenues to the Telefónica business in Brazil. We thought it was more of a midterm opportunity. But clearly, this is an opportunity and we re going to be engaging in discussions with the new Management Team in Vivo in Brazil when the time comes. Flavio Campos: Perfect, that s very helpful. I ll jump back into queue. Our next question is from the line of Susana Salaru with Itaú. Please go ahead with your question. Susana Salaru: Hi, good morning. I just would like to ask you if you are seeing an improvement in turnover in Brazil, specifically because of the downturn in the economy, that may be helping you in controlling the cost and if that could be could provide room for an upside in terms of cost control specifically in Brazil. That would be our first question. Then our second question would be related to the nearshore market. You mentioned that you got new clients. If you could elaborate a bit more what are the sectors of these new clients and if they are within the diversity, the new sector that you wanted to enhance your presence, and if you could elaborate a bit if it s you initially started right away with solutions or you started with service with them. Thank you. Sure, excellent questions Susana, and nice talking to you. In terms of the turnover question, yes, this is an important factor that we are monitoring and specifically how the unemployment in Brazil is going to change over time. I would say that in terms of the first quarter results, we see no impact because we feel probably very little effect in terms of higher unemployment in Brazil. But if the projections materialize and that happens probably closer towards the year-end or beginning of 16, this is something that would 8

10 clearly help us specifically in our turnover numbers. I think we said in the presentation, we were very good in terms of executing a lot of improvement in our attrition numbers quarter-on-quarter. This was mostly due because of the relocation of sites and because of the improvement in HR processes, but if some macro factors such as higher unemployment in Brazil happen, this would be a factor that would help us, and therefore helping us in terms of decreased training costs and adds additional value to our bottom line. So yes, it is something that we re monitoring closely, but I would say that in the short term and at least for the first quarter of the year, it hasn t had an impact yet. In terms of the nearshore activity, I think this continues to be positive news for us. We performed as our plan in terms of the new business that we won. I would say that in terms of where it comes from, it s a mix between existing client base, where we continue to grow, and existing client base was mostly in financial services and telcos. Then, the other piece was our new client activity. New client activity, I would say that the new business that we have is consistent with those two verticals as well, with financial services and telco. In terms of the I would say also that we have a very good pipeline looking into the year, and actually there s potential opportunities in the technology sector that we are considering now, so probably within 2015 we will branch out from financial services and telco in the nearshore activity. In terms of where this activity or these volumes are coming from or the type of services that we provide, I would say that still to this day and this is normal for nearshore activity most of the services that we provide are in the more traditional services. I think it s going to take us some time, but it s not because of us. I would say it s because more of general client perception where they tend to outsource offshore or nearshore activity, that it s probably there s value added and more in the traditional service. What I would say, though, is that where we get benefits here, it s on the labor arbitrage so we can have attractive margins on this business, even thought it might not be higher value added in the solutions space. Susana Salaru: Perfect. Thank you, Alejandro. Thank you. As a reminder, to ask a question, you may press star, one on your telephone keypad at this time. The next question is from the line of Adam Dahms with Robert W. Baird. Please proceed with your question. Adam Dahms: Morning guys. Thanks for taking my question. My first one is on free cash flow negative $39 million in the quarter. I wondered if you could talk a little bit about is there some seasonality there, kind of what s a little more detail on what s driving that, and then if you could also comment on how we should think about free cash flow conversion going forward, that would be helpful. Thanks. Mauricio Montilha: Hi Adam, thanks for your question. This is Mauricio speaking. Typically there is some the cash flow in first quarter, they have two, three elements usually. There is one that s seasonality, typically giving our cost base is primarily 70% related to people, and usually the year-end in Latin America, you have an extra payment, we usually tend to receive some anticipation from our clients at the end of the year. That usually makes the Q1 quarter where you receive less money from your clients, and this also happened in this quarter. 9

11 The second element is, as you as the seasonality to our business in terms of EBITDA generation, we tend to have a lower EBITDA in Q1 given we provide some increase in Latin America for most of our countries in the beginning of the year, and then we pass through prices along in the following months, so typically when you look at that combination, you have less generation of cash in Q1 from the operations from the EBITDA. The third element is that we grew a lot in this quarter, so as we have a DSO on average of about 68 days, growth requires working cap injection. Actually, when we all the contracts we have, the way we operate, we take decisions in terms of IRR (phon) payback. We take into account not only the cap ex invested to build that new site to provide the service, but also to working capital, and this happened in this quarter. It was a big increase in the growth in the quarter. Some of the cap ex was committed also in the last quarter, some of the payments in this quarter. I think these are the key elements why the cash flow was negative this quarter and more negative than next year. In terms of cash conversion, we plan our let s say the midterm goal is up to 2017; when compared to the industry, we are in a growth mode, so we are growing much faster than the competition, and we see also great opportunities, as Alejandro mentioned, the strength of our pipeline and carve-out opportunities. So our priority in terms of cash allocation is to support the growth, so the cash conversion for the business is going to be below what we see for more mature competitors. We believe that if we deliver on our objectives probably by 2017, we will be more or less in the average of the industry, that s 4% to 5%, or 6 it depends on the competitors (phon) yield on the price of the stock. So this year, given the accelerated growth, we will generate positive cash flow but it won t be that significant. Next year, we plan for those new investments and new clients start generating; they arrive to their run rate to start generating more cash flow, which you have to fund growth. So we see our path to get there in the next three years as the growth continues to be strong in our business. Adam Dahms: That makes sense, thanks. A quick follow-up here. I think it was your last quarterly filing, you guys called out a potential change in the Brazilian tax law, I think taking it from 2 to 4.5%, if I remember correctly, of revenue. Can you provide an update? I think that hadn t been voted on at the time. Is there an update on the potential timing and impact of that, and then maybe is it possible that you guys would be able to pass through some of that to clients as well? Sure. Yes, there s following the (phon) major updates. I mean, the measure continues to be discussed and probably there s some new developments every week, probably there s going to be some more developments this week. We continue to monitor that very closely. Of course, the actions that we mentioned at that point in time in the last call were that we were going to actively lobby with Congress to make sure that whatever gets approved is favorable to our specific industry, as there s active lobby happening from that perspective. As you said, the other piece that we re working is when that materializes, to be actively talking to our clients to pass through that. At this stage, in terms of the process of approval, my understanding is that s still in the Lower House of Representatives in Brazil, so it still hasn t passed the First House. Whenever it s approved, then it would have to go to the Senate for discussions, and then it takes time to implement the law if it s finally approved. So our view, but it s the consensus view of many people that we talk to, is that probably the impact in 15 is going to be minimal or none, so therefore we re monitoring what may be potentially pertinent to That s with probably also the conservations with clients, although we bring the issue to them at this stage, still it d be generic in terms of what the specific impact is going to be. But we re engaging in those conversations and we will attempt to pass along whatever increase we receive from the changes in this law. 10

12 Adam Dahms: Okay, great. If I could sneak one quick one in, you guys made a small acquisition on December 30. I think it had a run rate of about $27 million at the time. Can you just call out what the contribution was to this quarter, and then I think you said your guidance was on an organic basis, so I would assume that this is on top of that. Is that correct? Mauricio Montilha: You mentioned the carve-out we did at the end of December. I would say that for the 9.5 points of the growth in this quarter, 1.8 came from that new business. That one is in the guidance. When we reported Q4 results, that business was already done, so it was included in the numbers when we provided guidance. Adam Dahms: Okay, perfect. That s all I ve got. Thanks a lot, guys. Thank you. Thank you. To ask a question, you may press star, one on your telephone keypad. Thank you. At this time, I will turn the floor back to Mr. Alejandro Reynal for closing comments. Thanks everybody for your attention and also for your questions, and of course we look forward to interacting over the next few days in terms of additional questions and also in terms of explaining current business performance and future outlook for Atento. Thanks again, and have a great day. This concludes today s teleconference. You may disconnect your lines at this time. Thank you for your participation. 11