Atento Reports Fiscal 2016 First-Quarter Results; Improved Balance of Growth, Profitability and Liquidity
- Consolidated revenue grew 2.5%; Company strengthens leadership position in Latin America CRM BPO market
- Revenue in
Americas up 16% supported by broad-based country and sector gains - Adjusted EBITDA rose 5.6% with margin of 11.6%
- Focus on liquidity drives improvement in working capital
- Reaffirmed key financial targets for Fiscal 2016
Summary | |||
(\\$ in millions) |
Q1 2016 |
Q1 2015 |
CCY Growth |
Revenue |
419.4 |
515.9 |
2.5% |
Adjusted EBITDA |
48.8 |
58.3 |
5.6% |
Margin |
11.6% |
11.3% |
|
Adjusted EPS(1) |
\\$0.13 |
\\$0.21 |
-18.8% |
Leverage (x) (2) |
1.9 |
1.4 |
(1) |
Adjusted earnings per share, for the period ended March 31, 2016, were calculated considering the number of ordinary shares of 73,751,131. For the period ended March 31, 2015 the number of ordinary shares was 73,619,511. |
(2) |
Considered the pro-forma Net Debt adjusted to give effect to the Reorganization Transaction, regarding Preferred Equity Certificates. |
Alejandro Reynal, Atento?s Chief Executive Officer, commented, "We delivered top-line growth in the first quarter, as we made progress on our priorities for Fiscal 2016, which include: driving the optimal balance of growth, profitability and liquidity; making targeted investments to deliver even greater value to our clients; and further strengthening our balance sheet. We extended our CRM BPO leadership position in
Mauricio Montilha, Atento?s Chief Financial Officer, said, "We continue to navigate the challenging growth environment in
First Quarter Consolidated Operating Results
All comparisons in this announcement are year-over-year and in constant-currency (CCY), unless noted otherwise.
Revenue increased 2.5%, driven by a 16.0% increase in the
Adjusted EBITDA increased 5.6%, while adjusted EBITDA margin increased 30 basis points to 11.6%. In Fiscal 2016,
As expected, first quarter reported financial results included
Adjusted EPS declined 18.8% to
Free cash flow in the quarter before interest was
Adjusted earnings and adjusted EBITDA are non-GAAP financial measures and are reconciled to their most directly comparable GAAP measures in the accompanying financial tables.
Segment Reporting | |||
Q1 2016 |
Q1 2015 |
CCY growth | |
Brazil Region |
|||
Revenue |
182.5 |
264.1 |
-5.6% |
Adjusted EBITDA |
24.9 |
31.7 |
4.6% |
Margin |
13.6% |
12.0% |
|
Americas Region |
|||
Revenue |
177.3 |
187.4 |
16.0% |
Adjusted EBITDA |
23.4 |
23.4 |
23.2% |
Margin |
13.2% |
12.5% |
|
EMEA Region |
|||
Revenue |
60.0 |
64.8 |
-5.4% |
Adjusted EBITDA |
2.7 |
4.0 |
-32.5% |
Margin |
4.5% |
6.2% |
Revenue for
Adjusted EBITDA increased 4.6%, while margin increased 160 basis points to 13.6%. These actions included rationalization of headcount and an acceleration in the relocation of sites to lower-cost Tier 2 locations. At the end of the quarter, 62% of sites were located in Tier 2 locations, up from 58% at the end of Fiscal 2015. Excluding the timing impact of wage increases, adjusted EBITDA margin was 11.2%.
Revenue for
Adjusted EBITDA increased 23.2%, while margin increased by 70 basis points to 13.2%. The improvement in profitability was driven by the strong growth in revenue and improved operating leverage.
EMEA Region
Revenue for EMEA declined 5.4%, driven by a 3.1% decrease in revenue from Telef?nica in
Adjusted EBITDA declined 32.5%, while adjusted EBITDA margin declined 170 basis points to 4.5%. The decline in profitability was driven by the decline in revenue and ramp of new clients.
Strong Balance Sheet and Ample Liquidity Enhance Financial Flexibility
At
During the first quarter of 2016, the Company invested
Fiscal 2016 Guidance
The Company expects to operate in a challenging growth environment in many of its markets during the balance of 2016. In this environment, the Company remains focused on driving the optimal balance of profitable growth and liquidity, strengthening its balance sheet and maintaining financial flexibility. By continuing to execute on its priorities for Fiscal 2016, including tight cost controls and disciplined capital allocation, the Company is well-positioned to outperform the market, increase its leadership position in
For the full year Fiscal 2016, the Company expects:
- Consolidated revenue growth in the range of 1% to 5%, in constant currency.
- Adjusted EBITDA margin in the range of 11% to 12%, in constant-currency.
- Non-recurring items, which are included as add-backs in adjusted EBITDA, of approximately
\\$15 million with roughly two-thirds expected in the first-half of the year as the Company continues to align its cost structure with prevailing market conditions. - Net interest expense in the range of
\\$60 million to \\$65 million . - Debt pay down of
\\$27 million . - Cash capital expenditures of approximately 5% of revenue, reflecting investments in both growth and maintenance.
- Effective tax rate of approximately 32%.
- Fully diluted share count of approximately 73.8 million shares.
This guidance assumes no acquisitions or changes in the current operating environment, capital structure or exchange rates movements on the translation of our financial statements in USD.
Conference Call
About
Forward-Looking Statements
This press release contains forward-looking statements. Forward-looking statements can be identified by the use of words such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "intends," "continue" or similar terminology. These statements reflect only
These forward-looking statements speak only as of the date on which the statements were made.
SELECTED FINANCIAL DATA
The following selected financial information should be read in conjunction with the interim consolidated financial statements and the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" presented elsewhere in the Form 6-K.
Consolidated Income Statements |
|||||
For three months |
Change | ||||
(\\$ in millions, except percentage changes) |
2016 |
2015 |
FX (%) | ||
(unaudited) |
|||||
Revenue |
419.4 |
515.9 |
2.5 | ||
Other operating income |
0.8 |
0.5 |
100.0 | ||
Supplies |
(15.2) |
(19.7) |
(0.7) | ||
Employee benefit expenses |
(315.5) |
(380.4) |
4.1 | ||
Depreciation |
(10.9) |
(14.0) |
(1.8) | ||
Amortization |
(10.8) |
(14.0) |
(5.3) | ||
Changes in trade provisions |
(0.3) |
(0.2) |
N.M. | ||
Other operating expenses |
(51.9) |
(60.4) |
9.0 | ||
Total Operating Expenses |
(404.6) |
(488.7) |
4.1 | ||
OPERATING PROFIT/(LOSS) |
15.6 |
27.7 |
(26.1) | ||
Finance income |
1.5 |
6.3 |
(67.4) | ||
Finance costs |
(17.9) |
(20.5) |
10.5 | ||
Change in fair value of financial instruments |
0.5 |
13.0 |
(96.2) | ||
Net foreign exchange gains/(loss) |
(3.5) |
(0.4) |
N.M. | ||
NET FINANCE EXPENSE |
(19.4) |
(1.6) |
N.M. | ||
PROFIT/(LOSS) BEFORE TAX |
(3.8) |
26.1 |
(116.9) | ||
Income tax expenses |
(1.0) |
(5.6) |
(75.0) | ||
PROFIT/(LOSS) FOR THE PERIOD |
(4.8) |
20.5 |
(125.9) | ||
Basic result per share (in U.S. dollars) (*) |
0.06 |
0.28 |
(125.9) |
(*) The adjusted basic and diluted result per share, for the period presented in the table above, were calculated based on the number of ordinary shares of 73,751,131 as of March 31, 2016. For the period ended March 31, 2015 the number of ordinary shares was 73,619,511. |
For the three months ended | ||||
(\\$ in millions) |
2016 |
2015 | ||
(unaudited) | ||||
Profit/(loss) for the period |
(4.8) |
20.5 | ||
Net finance expense |
19.4 |
1.6 | ||
Income tax expense |
1.0 |
5.6 | ||
Depreciation and amortization |
21.7 |
28.0 | ||
EBITDA (non-GAAP) (unaudited) |
37.3 |
55.7 | ||
Acquisition and integration related costs(a) |
- |
0.1 | ||
Restructuring costs(b) |
6.2 |
1.0 | ||
Site relocation costs(c) |
5.7 |
0.4 | ||
Financing and IPO fees (d) |
- |
0.3 | ||
Asset impairments and Others (e) |
(0.4) |
0.8 | ||
Total non-recurring items |
11.5 |
2.6 | ||
Adjusted EBITDA (non-GAAP) (unaudited) |
48.8 |
58.3 |
(a) |
Acquisition and integration related costs incurred for the three months ended March 31, 2015 are costs associated primarily with financial and operational improvements related to SAP IT transformation project cost. |
(b) |
Restructuring costs incurred during the three months ended March 31, 2015 and 2016 primarily included a number of restructuring activities and other personnel costs that are not related to our core result of operations. Of the \\$1.0 million costs incurred for the three months ended March 31, 2015, \\$0.5 million are related to restructuring in Spain to adapt the organization to lower levels of activity and minor restructurings in Chile and Mexico, totaling \\$0.5 million. Restructuring costs for the three months ended March 31, 2016, primarily relates to costs to adapt the organization in EMEA to lower levels of activity, and severance costs in Brazil. |
(c) |
Site relocation costs incurred for the three months ended March 31, 2015 include costs associated with our current strategic initiative of relocating call centers from tier 1 cities to tier 2 cities in Brazil in order to achieve efficiencies through rental cost reduction and attrition and absenteeism improvement. Site relocation costs incurred for the three months ended March 31, 2016 are related to the anticipation for site closures in Brazil in connection of the site relocation program to tier 2 and tier 3 cities. |
(d) |
Financing and IPO fees for the three months ended March 31, 2015 relate to remaining costs in connection with the IPO process. |
(e) |
Asset impairments and other costs for the three months ended March 31, 2015 refers mainly to the consultancy costs related to the sale of Czech Republic operation and some processes related to our headquarters relocation. Asset impairments and other costs incurred for the three months ended March 31, 2016 primarily relates to the collection in EMEA of receivables that has previously been impaired. |
Reconciliation of Adjusted Earnings to profit/(loss): | |||||
For the three months ended |
|||||
(\\$ in millions, except percentage changes) |
2016 |
2015 |
|||
(unaudited) |
|||||
Profit/(Loss) attributable to equity holders of the parent |
(4.8) |
20.5 |
|||
Acquisition and integration related Costs (a) |
- |
0.1 |
|||
Amortization of Acquisition related Intangible assets (b) |
5.4 |
7.7 |
|||
Restructuring Costs (c) |
6.2 |
1.0 |
|||
Site relocation costs (d) |
5.7 |
0.4 |
|||
Financing and IPO fees (e) |
- |
0.3 |
|||
Asset impairments and Others (f) |
(0.4) |
0.8 |
|||
Net foreign exchange gain on financial instruments (g) |
(0.5) |
(13.0) |
|||
Net foreign exchange impacts (h) |
3.5 |
0.4 |
|||
Tax effect (i) |
(5.3) |
(2.9) |
|||
Total of Add backs |
14.6 |
(5.2) |
|||
Adjusted Earnings (non-GAAP) (unaudited) |
9.8 |
15.3 |
|||
Adjusted Basic Earnings per share(in U.S. dollars) (*) (unaudited) |
0.13 |
0.21 |
(a) |
Acquisition and integration related costs incurred for the three months ended March 31, 2015 are costs associated primarily with financial and operational improvements related to SAP IT transformation project cost. |
(b) |
Amortization of acquisition related intangible assets represents the amortization expense of intangible assets resulting from the acquisition and has been adjusted to eliminate the impact of the amortization arising from the acquisition which is not in the ordinary course of our daily operations, and also distorts comparison with peers and our results for prior periods. Such intangible assets primarily include contractual relationships with customers, for which the useful life has been estimated at primarily nine years. |
(c) |
Restructuring costs incurred during the three months ended March 31, 2015 and 2016 primarily included a number of restructuring activities and other personnel costs that are not related to our core result of operations. Of the \\$1.0 million costs incurred for the three months ended March 31, 2015, \\$0.5 million are related to restructuring in Spain to adapt the organization to lower levels of activity and minor restructurings in Chile and Mexico, totaling \\$0.5 million. Restructuring costs for the three months ended March 31, 2016, primarily relates to costs to adapt the organization in EMEA to lower levels of activity, and severance costs in Brazil. |
(d) |
Site relocation costs incurred for the three months ended March 31, 2015 include costs associated with our current strategic initiative of relocating call centers from tier 1 cities to tier 2 cities in Brazil in order to achieve efficiencies through rental cost reduction and attrition and absenteeism improvement. Site relocation costs incurred for the three months ended March 31, 2016 are related to the anticipation for site closures in Brazil in connection of the site relocation program to tier 2 and tier 3 cities. |
(e) |
Financing and IPO fees for the three months ended March 31, 2015 relate to remaining costs in connection with the IPO process. |
(f) |
Asset impairments and other costs for the three months ended March 31, 2015 refers mainly to the consultancy costs related to the sale of Czech Republic operation and some processes related to our headquarters relocation. Asset impairments and other costs incurred for the three months ended March 31, 2016 primarily relates to the collection in EMEA of receivables that has previously been impaired. |
(g) |
As of 2015, management analyzes the Company financial condition performance excluding net foreign exchange financial instruments which eliminates the volatility related to the gain or loss of the ineffective portion of the hedge instruments. For the three months ended March 31, 2015 an amount of \\$13.0 million was reversed from equity to profit/(loss) in the consequence of the company designated the foreign currency risk on certain of its subsidiaries as net investment hedges using financial instruments as hedging items. |
(h) |
As of 2015, management analyzes the Company financial condition performance excluding net foreign exchange impacts, which eliminates the volatility to foreign exchange variances from our operational results. |
(i) |
The tax effect represents the tax impact of the total adjustments based on tax rate of 31.4% for the period from January 1, 2016 to March 31, 2016 and 28.2% for the period from January 1, 2015 to March 31, 2015. |
(*) |
The Adjusted Earnings per share, for the period presented in the table above, was calculated considering the number of ordinary shares of 73,751,131 (weighted average number of ordinary shares) as of March 31, 2016. For the period ended March 31, 2015 the number of ordinary shares was 73,619,511. |
Reconciliation of Total Debt to Net Debt with Third Parties | |||||
As of March 31, | |||||
(unaudited) | |||||
(\\$ in millions, except Net Debt/Adj. EBITDA LTM) |
2016 |
2015 |
|||
Cash and cash equivalents |
148.6 |
177.0 |
|||
Short term financial investments |
- |
15.0 |
|||
Debt: |
|||||
7.375% Sr. Sec. Notes due 2020 |
296.6 |
295.1 |
|||
Brazilian Debentures |
192.3 |
211.5 |
|||
Contingent Value Instrument |
23.9 |
36.1 |
|||
Finance Lease Payables |
4.2 |
8.7 |
|||
Other Borrowings |
80.0 |
60.4 |
|||
Total Debt |
597.0 |
611.8 |
|||
Net Debt with third parties (1) (unaudited) |
448.4 |
419.8 |
|||
Adjusted EBITDA LTM (2) (non - GAAP) (unaudited) |
240.6 |
301.8 |
|||
Net Debt/Adjusted EBITDA LTM (non-GAAP) (unaudited) |
1.9x |
1.4x |
(1) |
In considering our financial condition, our management analyzes net debt with third parties, which is defined as total debt less cash, cash equivalents, and short-term financial investments. Net debt with third parties is not a measure defined by IFRS and it has limitations as an analytical tool. Net debt is neither a measure defined by or presented in accordance with IFRS nor a measure of financial performance, and should not be considered in isolation or as an alternative financial measure determined in accordance with IFRS. Net debt is not necessarily comparable to similarly titled measures used by other companies. |
(2) |
Adjusted EBITDA LTM (Last Twelve Months) is defined as EBITDA adjusted to exclude acquisition and integration related costs, restructuring costs, sponsor management fees, asset impairments, site-relocation costs, financing fees, IPO costs and other items, which are not related to our core results of operations for the last twelve months. |
Free Cash Flow | ||||||
(\\$ in millions) |
For the three |
|||||
2016 |
2015 |
|||||
(unaudited) |
||||||
EBITDA (non-GAAP) (unaudited) |
37.3 |
55.7 | ||||
Changes in Working Capital |
(38.0) |
(71.2) |
||||
Payments for acquisition of property, plant, equipment and intangible assets |
(19.1) |
(9.1) |
||||
Disposals of property plant, equipment, and intangible assets |
- |
0.4 |
||||
Income tax paid |
(6.5) |
(4.5) |
||||
Free cash flow before interest |
(26.3) |
(28.7) |
||||
Net interest |
(14.4) |
(6.3) |
||||
Free cash flow (non-GAAP) (unaudited) |
(40.7) |
(35.0) |
||||
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