Atento Reports Fiscal 2021 Second Quarter and First Half Results

Record sales (+148% YoY) and revenue growth (+17.6% YoY constant currency and 21.7% current currency)

Consolidated EBITDA in Q2 2021 up 123% to $51 million YoY, with margin reaching 13.3%

Reiterating FY 2021 guidance

Atento S.A., the largest provider of customer relationship management and business-process outsourcing services in Latin America, and among the top five providers globally, today announced its second quarter and first half operating and financial results for the period ending June 30, 2021. All comparisons in this announcement are year-over-year (YoY) and in constant-currency (CCY), unless otherwise noted.

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Record sales and solid revenue growth

• Q2 2021 revenues grew 17.6% YoY in CCY and 21.7% on a reported basis, fueled by full impact of programs won in Brazil and US in Q1 2021. Revenues in hard-currency at 25% of total in H1 2021, up from 21% in H1 2020
• New sales with Total Annual Value of $226 million, up 148% from Q2 2020
• US revenues increased 33.1% in Q2 and 40.8% in H1 2021
• Multisector revenues grew 13.6% in Q2, continue focusing on fast-growing verticals such as, media, tech and born-digital verticals and targeting to increase penetration with Global Accounts. In H1 2021, Multisector revenues reached 67.4%

Sustainable EBITDA and margin expansion leading to improved capital structure

• Consolidated EBITDA in Q2 2021 expanded 123.2% to $50.7 million YoY
• EBITDA margin of 13.3% vs 7.1% in Q2 2020
• EBITDA in hard currencies already at 30% of total, on strong US growth
• US EBITDA up 53.3% YoY, already 11% of total
• Margins expanded in all regions, highlighting Brazil, where margin went up sequentially to 15.5% from 12.0%
• Net leverage at 3.0x, down from 3.3x in Q1 2021 and 4.0x in Q2 2020, already within 2021 guidance range of 2.5 to 3.0x
• Solid cash position of $153.8 million
• Positive Recurring EPS of $0.11 in the quarter

Transformation entering last phase: accelerating growth

• Key areas of growth remain NGS for Multisector and US business
• Investing in innovation and partnerships to accelerate growth: Atento Next, Innovation Hub, Interfile organizational restructuring and partnership with ManpowerGroup
• 70% of FY growth capex budget already deployed in H1 in new programs with high returns
• Right structure in place: new Global CIO, CHRO and Transformation Director appointed, increasing management diversity, and focusing on preparing talent and technology for new expansion phase

Summarized Consolidated Financials

Message from the CEO and CFO

We are proud to report a quarter with very strong results. In Q2 we have continued our growth trajectory with significant improvements in revenue, EBITDA and continued cash flow discipline, leading leverage to be already within full year guidance.  With half of the year behind us, we are even more confident in our ability to deliver on our commitments for 2021, the same way we have done in 2019 and 2020.

We can definitely state that the most critical phases of our transformation plan have been delivered, and the focus now is on accelerating growth, as the world heads out of the pandemic and demand for high value CX services is skyrocketing.

Growth remains strong in Multisector, especially with Global Accounts and with fast growing verticals such as born-digital, media and tech. In terms of geographies, our US revenues went up 33% in the quarter, in line with the objective of increasing exposure to hard currencies, which now represent 25% of revenues and 30% of EBITDA. In addition, our business with Telefónica has also resumed growth on the back of a recent win in Q1 which was fully implemented in Q2. After several quarters of volatile revenue contributions mostly related to lower volumes from the pandemic, Telefonica revenues are now back to 2019 levels. The strong increase in revenues in the quarter, of 26.5%, attests to the great relationship developed with Telefónica, in which we remain the leader in the share of wallet for CX services.

We are also collecting the benefits of well-executed efficiency initiatives – that is boosting our margins. Our EBITDA more than doubled in Q2, up by +123% to $51 million, with margin reaching 13.3%, compared to 7.1% in Q2 2020, the quarter that was most adversely impacted by the pandemic. H1 2021 EBITDA margin, of 11.9%, is the higher EBITDA margin for an H1 since the implementation of the Three Horizon Plan, in the beginning of 2019. All regions are reporting double-digit EBITDA margin, with US programs already reaching almost 20% margin.

Atento is very well positioned to ride the wave of increased demand for customer experience services. The pandemic forced companies all over the world accelerate or initiate deep digital transformations, to reinvent themselves, and CX was one of their main priorities. It demands from providers a mix of talent and technology, and for this reason, we recently strengthened both areas by bringing in a new CPO and appointing a CIO and a Transformation Officer. They will work together to improve the quality of leadership, accelerating our transformation process through technology and human talent, with innovation as a key pillar of our successful journey. We have also appointed a new ESG Director. While we feel we have done a lot in the past in this area, especially on the people front, we did not have a formal program at the right level. Therefore, we have now structured a formal ESG program under a new leader and have elevated the visibility to the BOD under a new Compensation and Sustainability committee. We expect to present our ESG plan and commitments publicly in the coming months.

While we expect these changes to be critical to the last phase of our transformation, we are already seeing opportunities to accelerate growth. We have signed in H1 contracts that require 70% of the growth capex we have budgeted for full year. We have also deployed IT-related capex that will pave the way for future growth. Other initiatives that we are assessing include partnerships, such as the strategic alliance with ManpowerGroup to offer multilingual and robotic process automation services from centers located in the Iberian Peninsula – one of the European regions with the highest demand for these offerings. ManpowerGroup is a leading people solutions company globally, and we expect to enable more than 2,000 customer service positions with the partnership, and at the same time help drive productivity, improve operational efficiency, reduce costs and speed up turnaround times for our clients.

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Consumers are demanding creativity and innovation from businesses, who in turn look to CX providers to enchant their clients. We are happy to report that we were awarded the ISO 56002 Certification for innovation management, for the second consecutive year. Atento was the first in its sector in the world to receive this certification, which is currently held by only 100 companies worldwide. The renewal of this certification attest to Atento’s commitment to driving innovation and to constantly evolve in line with market trends, something we believe is the basis for our future business growth. This ensures we can continue providing the best customer service for our clients, while delivering returns to our shareholders.

Carlos López-Abadía                                              José Azevedo
Chief Executive Officer                                          Chief Financial Officer

Second Quarter Consolidated Financial Results

Atento’s revenue increased 17.6% YoY in Q2 2021, to $382.7 million, driven by both Telefónica and Multisector, in a market with record demand for CX solutions in all regions we operate. Sequentially, revenues increased 3.0%, mainly in Americas where it had a 9.0% growth. Revenues in the US continue to expand, boosting hard currency to 25% of total revenues in H1 2021.

Telefónica revenues went up 26.5% YoY, reflecting the full impact of the program won in Brazil in Q1, coupled with the recovery from COVID impact that hit stronger in the first months of Q2 2020, and the higher volumes registered mainly in Peru and Colombia. Telefónica revenues this quarter are back to 2019 levels and higher than pre-pandemic levels.

Revenues from Multisector grew 13.6% in the quarter, also expanding in all regions, especially in Americas, boosted by a 33% increase in US revenues. We continue to accelerate sales of NGS in fast-growing verticals such as born-digital, technology and media customers, that already represent 10.9% of total revenues compared to 8.6% a year ago. In H1 21, Multisector revenues reached 67.4% of total sales, mainly stable sequentially.

Consolidated EBITDA in Q2 2021 expanded 123.2% to $50.7 million YoY, while the corresponding margin reached 13.3%, increasing 620 basis points year-over-year, and landing already within FY guidance range. In H1 2021, EBITDA margin was 11.9%, the higher EBITDA margin since the implementation of the Three Horizon Plan in 2019, stating the success of the delivered turnaround. This margin expansion is a result of higher profitability programs recently won and the efficiency initiatives delivered throughout 2020 and 2021. Sequentially, EBITDA margin has improved 280 bps from 10.5% in Q1 2021, also as a result of the efficiency initiatives. It is worth noting that, as we continue to gain business with US clients, our EBITDA in hard currency amounted to $26.9 million in H1 2021, representing 30% of total EBITDA generated in the period.

Recurring EPS was $0.11 in Q2, compared to –$0.72 in the same period of last year. Reported EPS of –$1.05 was impacted by a $10.8 million negative impact from mark-to-market of the hedging instruments. It is important to highlight that these adjustments are non-cash, with the benefit of protecting interest payment, and therefore cashflow generation, from FX fluctuations over our USD-denominated debt.

Atento continued to maintain a comfortable level of financial liquidity in the quarter and, as EBITDA continued to expand, net leverage decreased to 3.0x and is already within FY provided guidance range. FCF was negative $37.1 million, mainly impacted by taxes payments that were postponed from H2 2020 due to the pandemic, in the amount of $16.1 million and a $10.9 million one-off expense related to the debt refi. Excluding these effects, and growth-related expenses (working capital and capex), run-rate FCF was positive almost $7 million in H1 2021.

Atento had an average Headcount of 144,518 employees in H1 2021, which compared to the 12.7% revenue growth in the period, implies an almost 7% higher revenue per employee.

Segment Reporting

Brazil

Revenue in Brazil, Atento’s flagship operation, increased 13.5% during the quarter to $156.0 million, fueled by the 54.9% growth in Telefónica, reflecting the full impact of a program won in Q1 2021, coupled with a 3.0% Multisector increase, mostly with born-digital and healthcare companies.

EBITDA, in turn, grew 122.4% YoY, totaling R$24.2 million, while EBITDA margin increased 770 bps YoY and 350 bps sequentially, to 15.5% from 12.0% a quarter ago, mainly due to the efficiency initiatives implemented.

In May, the Company appointed Marcelo Alves as General Director of Interfile, Atento’s BPO specialist, who is undergoing a major restructuring aimed at creating additional synergies within the Group. The BPO offering has recently gained significant relevance within Atento’s portfolio, and the goal is to expand its services offering across all regions where Atento operates, focusing on industries such as finance, healthcare, insurance, education, and born-digital. Among the main initiatives is the sponsorship of NeuralMind, one of 4 startups chosen to integrate Atento Next, the startup acceleration program that focuses on helping companies increase back-office processes productivity through scanning and automation, being fully aligned with Interfile’s value offering.

Americas Region

In the Americas, the Company recorded an increase in revenues of 23.0% YoY to $164.2 million, with Multisector sales increasing 24.4% YoY, mainly in the US, with the full impact of programs won in Q1 2021, and Colombia. Telefónica revenues increased 20.0% YoY, with the main increase coming from Peru, as this country was, and continues to be, more affected by the pandemic.

The region’s Adjusted EBITDA was $19.8 million in the quarter, up 32.5% YoY mainly due to higher revenue from the US coupled with improved operational efficiencies. EBITDA margin stood at 12.1%, an increase of 90 bps.

Reflecting our strategy of expanding our presence in the US market and increasing exposure to hard currencies, our revenues and EBITDA from US clients in Q2 increased by 33% and 53%, respectively, reaching an EBITDA margin of 19.1%. In H1, US revenues went up 41%, while EBITDA went up 93%. As a result, our revenues in hard currency represented 25% of total in H1 2021, while EBITDA generation of $26.9 million in the first half of the year is already equivalent to 30% of total.

At the end of May, we launched our first Atento Virtual Hub in Mexico City, our command center designed to optimize operations in telecommuting models, through which our clients will count on a single centralized point to manage all remote operations, from agent recruiting and training to campaign development, everything under strict security protocols.

EMEA Region

In EMEA, a 22.1% increase in Multisector sales, driven by utilities, transportation, and government services related to providing pandemic information to citizens, coupled with an 8.7% increase in TEF revenues, led to a 15.2% increase in revenues in the quarter, totaling $63.6 million.

One of the highlights is the contract renewal with the Government of Catalonia, a Spanish regional authority, to manage citizen services. This is a benchmarking project in Public Administration involving highly advanced digital and omnichannel solutions aimed at improving citizens’ experience.

EMEA’s Adjusted EBITDA reached $8.8 million in Q2 2021 compared to a negative $0.3 million in Q2 2020, while the EBITDA margin was 13.8%. The region’s profitability improved as a result of better operational efficiencies coupled with revenue growth.

Cash Flow

FCF was negative $37.1 million, mainly impacted by taxes payments that were postponed from H2 2020 due to the pandemic, in the amount of $16.1 million and a $10.9 million one-off expense related to the debt refi. Excluding these effects, and growth-related expenses (working capital and capex), run-rate FCF was positive almost $7 million in H1 2021.

Cash Capex was 3.4% of revenues in H1 2021, compared to 2.7% in the same period of 2020, reflecting mainly investments in IT to allow for an acceleration of future growth. Important to highlight that the Company already entered in H1 into new programs with clients that represent 70% of full-year growth Capex budget. As most of the payments are scheduled for H2, we reiterate our guidance of Capex to be between 4-4.5% of revenues for the full year 2021.

Indebtedness & Capital Structure

At end of Q2 2021, gross debt was $715.2 million, which included $143.2 million in leasing obligations under IFRS 16. Atento finished the quarter with cash and cash equivalents of $153.8 million. During the quarter, the Company repaid $10 million in revolvers, to optimize liquidity to higher EBITDA generation. Therefore, at the end of June, we had approximately $80 million in available revolving credit facilities, of which $50 million were drawn down.

Net leverage decreased to 3.0x, down from 3.3x in Q1 2021 and 4.0x in Q2 2020, reflecting the 51.3% EBITDA growth year-on-year. This leverage is already within the 2021 guidance range of 2.5 to 3.0x. Management reiterates its confidence to remain deleveraging the balance sheet to achieve the long-term target of 2.0x-2.5x by the end of 2022.

Fiscal 2021 Guidance

Share Repurchase Program

In the quarter, the Company repurchased 22,132 shares under its Share Repurchase Program, at a cost of $0.4 million. At the end of June 2021, Atento held 940,482 shares in treasury.

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