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Atento Third quarter results
New York, November 20th, 2014
2
Disclaimer
This presentation is provided to you on the condition that you agree that you will hold it in strict confidence and not reproduce, disclose, forward or distribute it to any third party in whole or in part without the prior written consent of Atento S.A. (“Atento”).
This presentation has been prepared by Atento. The information contained in this presentation is for informational purposes only. The information contained in this presentation is not investment or financial product advice and is not intended to be used as the basis for making an investment decision. This presentation has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person.
This presentation contains forward-looking statements within the meaning of the U.S. federal securities laws, that are subject to risks and uncertainties. All statements other than statements of historical fact included in this presentation are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. Forward-looking statements can be identified by the use of words such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "intends," "continue“, the negative thereof and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. These forward-looking statements are based on assumptions that we have made in light of our industry experience and on our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you consider this presentation, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results and cause them to differ materially from those anticipated in the forward-looking statements.
Because of these factors, we caution that you should not place undue reliance on any of our forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this presentation after the date of this presentation.
The historical and projected financial information in this presentation includes financial information that is not presented in accordance with International Financial Reporting Standards (“IFRS”). We refer to these measures as “non-GAAP financial measurers.” The non-GAAP financial measures may not be comparable to other similarly titled measures of other companies and have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our operating results as reported under IFRS.
Our company at a glance
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Performance in the third quarter was evidenced by our strong momentum as an independent company
5.9% CCY growth in revenues in Q3 and8.4% over the first 9 months of the year
10.1% increase in adjusted EBITDA in Q3and 13.9% over the first 9 months of the year
Increase in y-o-y solutions penetration in Q3 from 22% to 27% of total revenue, reaching 37% in Brazil
Solid Q3 financial
results
Delivering the growth opportunity: Awarded 20 contracts and 4,100+ WS since June 2014.
Strong margin expansion: Best-in-Class Operations initiatives delivering 15% Adj. EBITDA margin in Q3 2014
Ongoing people focus: Only company in the industry among the 25 World´s Best Multinationals Workplaces
Company strategy delivering results across three pillars
LatAm market: Region with the highest growth potential within the CRM/BPO industry worldwide
Competitive landscape: #1 player in LatAm with continued above-market growth
ATTO: Successfully completed IPO opening new possibilities to invest in growth
Strengthened leadership in the most attractive region for
growth
5
We are a young and vibrant company with a great track record and a bright future
$2.3B of revenue across 15 countries
#1 player in LatAm and #3 worldwide
20% market share in LatAm with a track record of growing market share over the past 4 years
Market leader in the CRM BPO LatAm sector
99% revenue retention rate(3), growing retention rate for each of the last 3 years
69% of non-TEF revenue from clients with 10+ year relationship
TEF revenues protected through 2021 MSA
Increasingly diversified client base with 54% non-TEF revenue (3pp y-o-y increase)
Robust & loyal client base of 400+ leading
brands 83k+ workstations
150,000+ highly engagedand motivated employees
Leading technology partners: Avaya, Cisco, Microsoft, HP
Standardized large scale processes
Strong leadership team with a proven track record
Superior pan-LatAm delivery platform
(1) Market share in terms of revenues(2) Brazil market share position as of Q1 2014 (management estimate); Spain market share as of 2011(3) Client retention rate based on 2012 revenues of clients retained in 2013 as a % of total 2012 revenues
35%
26% 23% 22% 19%
Brazil SpainArgentinaChilePeru
Some of our clients
2013 CRM BPO market share (%)(1)
(2)
(2)
Sources: Frost & Sullivan, company fillings
6
We connect more than 400 clients with over 500 million consumers across Latin America…
High population growth & growing middle class fuels consumer intensive industries
Lower contact center penetration vs. more mature markets
LatAm productivity gap vs. more mature markets drives need for efficiencies and accelerates outsourcing demand
Consolidated market with top 3 competitor's share of 59% in Brazil vs. 16% in US, resulting in more rationale pricing behavior
… in a region with long term market growth potential and attractive
competitive dynamics
Only company operating with the scale of a pan-regional leader…
$10B CRM BPO
market
Atento operations in LatAm
20% Atento LatAm market share
Source: Frost & Sullivan
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…and share a passion to turn customer experience into business value for our clients every day
Superior customer experience & business efficiency
Unique blend of solutions, peopleand channels
Mortgage CreditInsurance ManagementComplaints ManagementCredit Card Management
Customer Experience Solutions
Multichannel Customer ExperienceAdvance Technical Support
Smart CollectionsB2B sales
+
+
Tele-phone
E-mail Social Networks
Chat SMSAppsOnsite VPAWeb & kiosks
Credit Card Management Solution
200,000 auto loans per year 93% reduction in process errors 35% reduction in lead time
Smart Credit Solution
Ranked #1 in collection by client $100MM recovered in 2013 15% improvement in credit recovery
Smart Collections Solution
900,000+ credit cards processed annually
17% increase in sales
B2B Efficient Sales 10% increase in new accounts
Leading Brazilian financial institution
Leading US financial institution in Mexico
Leading telco in Brazil
Leading online social networking service
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STR
ATEG
IC
PIL
LA
RS
GLO
BA
L
STR
ATEG
IC
INTIT
IATIV
ES
Deliver CRM BPO solutions
Aggressively grow client base
Penetrate U.S. Near-Shore
Enhance operations productivity
Increase HR effectiveness
Deploy one procurement
Drive consistent and efficient IT platform
Optimize site footprint
Distinct culture and values
Strengthen talent
High performance organization
The relentless execution of our strategy for sustained growth and strong shareholder value creation…
Above-Market Growth
Addressing untapped client growth
opportunities and increasing SoW to deliver
accelerated growth
Best-in-Class Operations
Leveraging economies of scale and driving
consistency in operations
Inspiring People
Delivering our medium-term vision through our
unique culture and people
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…is delivering results in Q3 across our three main axes and multiple lines of action…
Above-Market Growth
Best-in-Class Operations
Inspiring People
37% of revenue coming from higher value added services (solutions) in Brazil
Awarded contracts with leading LatAm regional telco in 5 countries in LatAm
Awarded contracts with every major telco operator in Brazil (700+ WS since June 2014)
Significant new customer wins in non-telco vertical since June 2014 (2,300+ WS)
Awarded 5 contracts with top US clients to provide near-shore solutions
Ramp up of capacity to serve US near-shore market in CAM
15% Adj. EBITDA margin in Q3 2014
State of the art Brazil Operations Command Center
Turnover reduced in Brazil by 2% byimproving sourcing, selection and training processes
Reduced up to 80% of unitary costs in certain categories by implementing global procurement
Lowered costs per seat by an average of 10% by moving centers fromTIER 1 to TIER 2 cities. 1,700 WS relocated in Brazil in 2014, totaling 54% of WS in TIER 2 cities
Strengthened Executive Committee - robust mix of long tenures and new world class hires
Strengthened TOP 80 executive team - 45% of the team are new hires or have new roles
Relocated HQ to drive a globally integrated enterprise
Recognized for second year in a row as one of the 25 Best Multinational Workplaces by GPTW
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Q3 2013
Q3 2014
9M 2013
9M 2014
Revenue 580.3 589.6 1,747.3 1,743.3
CCY growth 5.9% 8.4%
Adjusted EBITDA
85.8 88.2 209.6 219.8
Margin 14.8% 15.0% 12.0% 12.6%
CCY growth 10.1% 13.9%
Free Cash Flow 10.2 18.7 15.7 44.0
growth 83.3% 180.3%
Net Debt 503.8 430.6 503.8 430.6
Cash and Cash equivalents
218.6 243.3 218.6 243.3
…and has a visible impact on our solid Q3 company results
Key highlights
We remain the leader in the highly attractive LatAm CRM BPO market with continued above the market growth
Growing revenues with strong visibility: We continue benefiting from positive commercial momentum with existing and new clients as well as from higher margin LatAm revenue (9.1% growth in Q3) delivering solid top line growth in the quarter
Strong and continued margin expansion: Stable employee costs, operating discipline, business mix evolution and margin expansion initiatives delivering incremental earnings growth
Brazil’s solid performance highlights the resiliency of our business and our ability to deliver strong performance in different macro-economic environments
Improved cash flow generation coupled with a strong balance sheet (1.4x PF net leverage)
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We envision a great future for Atento and our ability to drive superior earnings growth and shareholder value
Becoming the
#1 customer experience solutions provider
Driving leadership to full potential as independent company
Maximizing the opportunities for growth offered by our loyal blue chip client base and long-term LatAm market growth
Addressing untapped client growth opportunities and gaining SoW through evolved offerings to deliver above-market growth
Becoming a scale player in the US near-shore market
Leveraging economies of scale and driving consistency in operations to deliver next wave of cost saving opportunities
Delivering high single-digit constant currency growth and industry leading Adj. EBITDA margins of 13-15%
Ongoing people focus
Medium-term vision
Q3 Financial performance
13
Q3 2014 Financial Highlights
High and consistent margin expansion
Adj. EBITDA margin 15% ~20bps expansion
Limited & managed FX exposure
~98% matched at local level
Growing revenue with strong visibility
5.9% Group CCY growth9.1% CCY growth excl. EMEA
Sound capital structure with optimization
potentialPF Net Leverage of 1.4x
Increased revenue diversification reducing TEF
dependency 9.1% CCY Non-TEF growth
+3 pp non-TEF y-o-y revenue share
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Revenue growth
Increasing contribution from higher margin LatAm revenues and non-TEF clients
Q3 2013 Q3 2014 9M 2013 9M 2014
580 590
1,747 1,743
CCYGrowth
+5.9%
CCYGrowth
+8.4%
+1.6%
(0.2)%
Strong non-TEF growth
Q3 2013 Q3 2014 9M 2013 9M 2014
51% 54% 51% 53%
49% 46% 49% 47%
Non-TEF TEF
+9.1% +12.2%
TEF CCY
growth+2.7% +4.4%
Non-TEF CCY
growth
Q3 q-o-q 9M y-o-y
5.9%
8.4%9.1%
11.3%
Group CCY growth LatAm CCY growth
LatAm driving outperformance
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Q3 2013 Q3 2014 9M 2013 9M 2014
85.8 88.2
209.6219.8
Adjusted EBITDA
Adj. EBITDA margin
CCYGrowth
14.8%
$MM
+13.9%
15.0% 12.0% 12.6%
CCYGrowth
+10.1%
+2.8%
+4.9%
Continued margin expansion
y-o-y margin expansion (bps)
Improved mix
2011 2012 2013 9M 2013 9M 2014
10.2
11.612.6
12.012.6+140
+100 +61%
Q3 2013 Q3 2014
51% 54%
49% 46%
Non-TEF TEF
Q3 2013 Q3 2014
85% 87%
15% 13%
LatAm EMEA
Q3 2013 Q3 2014
22% 27%
78% 73%
Solutions Services
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Brazil summary financials
Revenue Comments
Strong CCY revenue growth despite weakening Brazilian macro-environment
Strong performance of non-TEF revenue growth (12.5% CCY y-o-y)
Successful growth diversification in telco sector
40 bps margin improvement q-o-q (130 bps y-o-y)
Higher growth in multi-sector clients and solutions
Increased operating leverage through higher revenues and cost efficiencies from our margin initiatives programs
20.6% y-o-y CCY Adj. EBITDA growth outpacing revenue growth
$MM
Q3 2013 Q3 2014 9M 2013 9M 2014
293.0 307.7
899.5 906.2
Q3 2013 Q3 2014 9M 2013 9M 2014
43.3 46.8
111.2123.7
CCYGrowth
CCYGrowth
+4.5%
+9.2%
+9.1%
+20.6%
Adj. EBITDA margin: 14.8% 15.2% 12.4% 13.7%
Adjusted EBITDA
$MM
17
Q3 2013 Q3 2014 9M 2013 9M 2014
199.1 204.3
574.4 576.7
Americas summary financials
Double-digit CCY revenue growth driven by leveraging scale and leading market position
Increased volumes with existing clients and new customer wins
20 bps margin improvement YTD y-o-y
Strong CCY Adj. EBITDA growth of 18.1% in Q3 outpacing revenues
Operating leverage and cost efficiencies benefits
$MM
Revenue Comments
CCYGrowth
CCYGrowth
+15.9%
+18.1%
+14.6%
+12.1%
Q3 2013 Q3 2014 9M 2013 9M 2014
34.8 35.5
83.8 85.2
Adj. EBITDA margin: 17.5% 17.4% 14.6% 14.8%
Adjusted EBITDA$MM
18
EMEA summary financials
Revenue Comments
Revenues impacted by TEF exposure to weak Spanish macro-environment
1.7% y-o-y CCY non-TEF growth in Q3 and 9.6% y-o-y CCY growth YTD despite a difficult macro-environment
TEF exposure to weak Spanish macro-environment impacting utilization and margins y-o-y
$MM CCYGrowth
CCYGrowth
(11.8)%
(24.4)%
(7.4)%
(23.2)%
Q3 2013 Q3 2014 9M 2013 9M 2014
88.5 77.7
274.1260.8
Q3 2013 Q3 2014 9M 2013 9M 2014
9.06.5
22.4
17.4
Adj. EBITDA margin: 10.2% 8.4% 8.2% 6.7%
Adjusted EBITDA
$MM
19
Free Cash Flow
Free cash flow Comments$MM
Improved OpCF generation supported by EBITDA growth and lower working capital needs
Q3 2014 OpCF impacted in the quarter largely by restructuring outlay in Spain ($11.4MM) and other exceptional costs ($5.6MM)
Free cash flow growth excl. restructuring impact and exceptionals to reach $35.7MM
Working capital
$MM
Decreased working capital requirements supporting increased cashflow generation
Improvement driven by better management of accounts receivable in Brazil, Spain and Mexico
Q3 2013 Q3 2014 9M 2013 9M 2014
Net cash flow from operating activities
34.2 43.5 68.4 109.4
Capital expenditures (24.0) (24.8) (52.7) (65.4)
Free cash flow (non-GAAP) (unaudited)
10.2 18.7 15.7 44.0
Q3 2013 Q3 2014 9M 2013 9M 2014
(25.4) 0.2 (38.9)
9.6
20
Strong balance sheet and minimal leverage with potential for further optimization
Pro forma capital structure Comments
PF net leverage of 1.4x
Local currency denominated debt or USD debt hedged back in local currencies
High liquidity profile through $243MM of available liquidity and €50MM undrawn RCF
Lower cost of debt due to repayment of Brazilian Debentures and increasing BNDES leveraging
Financial flexibility:
– Repayment of debentures
– Continued investments in the business
– Dividends in 2016 onwards & other return of capital
(1) Total capitalization as adjusted to give effect to the Reorganization Transaction, which occurred in connection with our IPO
Actual As Adjusted (1) Pro Forma
($MM) ($MM) ($MM)
Cash and cash equivalents 190.7 190.7 190.7
Short term financial investments 52.6 52.6 52.6
Total cash and cash equivalents 243.3 243.3 243.3
Debt:
7.375% Sr. Sec. Notes due 2020 294.4 294.4 294.4
Brazilian Debentures 267.7 267.7 267.7
Vendor Loan Note 29.3 29.3 -
Contingent Value Instrument 36.1 36.1 36.1
Revolving Credit Facility - - -
Preferred Equity Certificates 578.8 - -
Finance lease payables 8.7 8.7 8.7
Other borrowings 67.0 67.0 67.0
Total Debt 1,282.0 703.2 673.9
Net Debt 459.9 430.6
Adj. EBITDA 305.4 305.4
Net Debt / Adj. EBITDA 1.5 x 1.4 x
As of September 30, 2014
21
Market growth
Strategic initiatives to drive above-market
revenue growth
Strategic initiatives to drive margin
expansion
Capital structure optimization
Earnings growth
Independent company focused on strong, continued shareholder value creation
High single digit+ constant currency growth
13-15%+Adj. EBITDA
margins
Significant capital structure
flexibility
Denotes long-term goal
Appendix
23
Q3 2013 Q3 2014
Profit / (Loss) for the period from continuing operations
4.7 8.0
Net finance expense 25.2 31.1
Income tax expense 7.6 8.4
Depreciation and amortization 30.9 30.0
EBITDA (non-GAAP) (unaudited) 68.4 77.5
Acquisition and integration related costs 8.3 2.3
Restructuring costs 2.5 2.3
Sponsor management fees 2.4 2.5
Site relocation costs 1.5 0.4
Financing and IPO fees 1.9 3.5
Asset impairments and Other 0.8 (0.3)
Adjusted EBITDA
(non-GAAP) (unaudited)
Depreciation and amortization (1) (30.9) (30.0)
Adjusted EBIT
(non-GAAP) (unaudited)
85.8 88.2
54.9 58.2
Reconciliation of EBITDA to Adj. EBITDA
Breakdown of exceptional costs
$MM
17
11
Non-GAAP EBITDA Reconciliation$MM
(1) Excludes Intangibles Amortization
Acquisition and integration
Restructuring costs
Sponsor management fees
Site relocation costs
Financing and IPO
Other
Q3 2013 Q3 2014
(57%)
24
Adj. earnings reconciliation
Comments
Adj. EPS in Q3 of 0.35, down 6.9% in reported currency but growing at 12.0% CCY, despite $22M negative impact from non-cash FX translation losses
Accumulated 9M Adj. EPS up 35.7% in CCY
Earnings largely impacted by a number of items
Non-cash amortization of intangibles of acquisition of customer portfolio relationships
PECs interest expense capitalized post-offering
Exceptional costs including IPO fees
(1) Pro-forma EPS computed using total number of shares of 73,619,511 at Atento S.A. as adjusted to give effect to the Reorganization Transaction
Q3 2013 Q3 2014 9M 2013 9M 2014
Profit for the period 4.7 8.0 (18.4) (16.3)
Acquisition and integration Costs 8.3 2.3 21.1 7.7
Amort. of Acquisition of Intangibles 9.6 8.9 29.9 28.5
Restructuring Costs 2.5 2.3 4.0 23.8
Sponsor management fees 2.4 2.5 5.9 7.3
Site relocation costs 1.5 0.4 1.8 1.4
Financing and IPO fees 1.9 3.5 5.1 11.1
PECs interest expense 6.5 7.2 18.9 25.8
Asset impairments and Other 0.8 (0.3) 1.6 (2.9)
Tax effect (10.7) (9.2) (28.2) (35.4)
Adjusted Earnings 27.5 25.6 41.7 51.0
Adjusted EPS 0.37 0.35 0.57 0.69