Atento S. A. (NYSE: ATTO) Third Quarter 2022 Results Conference Call November 16, 2022 8:00 a. m. m. ET
Participating companies
Hernán van Waveren – Investor Relations
Carlos López-Abadía – CEO
Sergio Passos – Chief Financial Officer
Conference Call Participants
Declan Hanlon-Santander
Vincent Colicchio – Barrington Research
Beltran Palazuelo – DLTV
Operator
Good morning and welcome to Atento’s third quarter 2022 earnings conference call. Today’s call is recorded. All participants will be in listen-only mode. [Operator Instructions]
I would now like to speak with Mr. Hernan van Waveren, Director of Investor Relations at Atento. Continue.
Hernan van Waveren
Thank you, Operator, and welcome everyone to our third quarter 2022 earnings conference call to discuss Atento’s monetary and operating results. For today’s call, we are joined by Carlos López-Abadía, CEO of Asanto; and Sergio Passos, Chief Financial Officer. After a review of Atento’s monetary and operating results, we open the call for your questions.
Before proceeding, please note that some of the comments made on this call will include monetary data that has been prepared in accordance with International Financial Reporting Standards. In addition, this call will likely include data that constitute forward-looking statements, not long-term promises. execute functionality and involve risks and uncertainties. Certain effects could differ materially from those of forward-looking statements as a result of various factors.
We invite you to review our public disclosure documents filed with the appropriate securities regulators. And we invite you to read the full disclosure included here on the slide at the time of our call for effects presentation. Our public documents and the presentation of our effects are available in inverter. atento. com. Please note that, unless otherwise stated, all expansion rates are annual and in uniform currency.
Now I’ll pass the one on to Carlos.
Carlos López-Abadía
Thank you, Hernan. Hello everyone. Good afternoon. 2022 has turned out to be more complicated here than originally expected. However, I am pleased to report that the steps we have taken in the first part of the year are beginning to bear fruit. We are focusing on five key areas, proceeding to our sales capabilities, accelerating operational efficiency, improving our cargo structure, advancing head-on inflation beyond management, and particularly improving the security of our services.
As a result, we sequentially increased EBITDA margin by 3. 3 percentage points, increased our sales by 10. 3%, introduced our expansion in the Philippines and showed the commitment of our major shareholders. We hope that those movements will continue to have a positive effect. an effect on the business in the fourth quarter with an EBITDA margin of between 14% and 15%.
Regarding this improvement, we saw that some of our consumers decreased some volumes in the third and fourth quarters due to uncertainties in their business environment, specifically in Brazil. This leads us to expect an overall EBITDA margin for the year in diversity of 10. 5%. to 11 %. While we are just beginning to see the effect of our movements on the current part of the 2022 results, we expect to have a significant continued effect and also position ourselves for 2023 much stronger, following the trend and leaving the current rate part. de 2022.
Let me give you the movements made and the expected impact. As a key component of our transformation plan, expanding our sales functions is critical to developing in the right segments and geographies. In many ways, we have introduced a new component channel. We have introduced an inside sales program. We have advanced in account control with a special on Platinum accounts.
As a result, we saw a 10. 3% year-over-year improvement in expansion after a record quarter, compared to the end of the fourth quarter with sales exceeding $60 million in overall annual value, putting us in a much better position. position to start in 2023. But also now, we attach great importance to the continuous improvement of our delivery capabilities. In addition to the $27 million in efficiencies achieved in 2022, which in program-level innovations, we have introduced a new phase of operational innovations with wider space such as [abandonment], absenteeism. We call this the advancement of the project. We tested the new processes in 10 centers with innovations between one and two percentage points appearing in the EBITDA margin. We expect the full rollout of this programme to be completed by the end of this quarter of next year.
I must emphasize that those innovations are not just fee relief, but constitute genuine operational innovations that result in increased visitor service and higher margins. We completed our consolidation of 3 regions with the relief of more than 700 aid posts and advanced in our supplier control. As I mentioned in our phone call in the current quarter, we shoulder a large portion of the one-time costs of those measures in the first and current quarters, while most of the benefits begin to accrue in the third, fourth quarter and beyond. We have also accelerated the improvement in our pass-through to inflation, reaching almost 90% of the IPT, as we call it. All new contracts now have a popular IPT clause, and we have made progress in our control of old contract negotiations. that they don’t have those clauses yet.
Finally, as a hallmark of need, our investments in cyber infrastructure have been detected externally and publicly. You can check us out on sites like SecurityScorecard, a corporate security score where we finish way ahead of the competition. And also, very pleased to announce the launch of a new operation in the Philippines thanks to a new call from existing consumers and new express consumers in the Philippines. We expect revenue in the first year between $20 million and $50 million.
In addition, this quarter, we announced the small-cap commitment of our major shareholders representing more than 70% ownership of the Company. However, 2023 will be our last year with abnormally high monetary charges. We have a business plan for 2023 that deserves to sufficiently cover our monetary obligations, however, to further reassure consumers and investors about our abundant liquidity, we are comparing a number of monetary donations, for investment opportunities from existing investors and also from foreign banks. Income, in addition to offering more If needed, liquidity can be used for our capital structure, adding payment or redemption of some of our existing debt, taking advantage of existing market prices. We expect to make an announcement in the coming weeks.
Now I would like to conclude by sharing with you our advances in ESG. This remains an ongoing precedent for Atento. We measure our progress month by month and quarter by quarter. You can consult us with independent parties such as Sustainalytics, which already positions Atento as a leader.
Let me now turn to Sergio, who will go into more detail. Sergio, it’s your turn.
Sergio Passos
Well, thank you, Carlos, and thank you all for participating in our third quarter earnings call. a very quick comparison between Q2 and Q3. So how is our sequential movement going in terms of key KPIs?I’d like to start with income. So in the second quarter, if we compare the second quarter to the third quarter, we essentially had a 1. 3 percentage point increase in consistent exchange rates on earnings, which is a smart signal because we assess the evolution of the recession or possible slowdowns in some economies. The earnings base of 1. 1% is the result of what we told you in the current quarter, which was that we had record sales, so it’s a smart signal on the earnings side.
As far as EBITDA is concerned, this is where we can, for example, report significant construction. So we had 7. 8 percentage EBITDA issues that we reported last quarter, and we communicated a lot about accelerating a lot of moves that would hurt in the moment. quarter with more prices such as closing, liquidation and some others. But it would gain advantages in our part of the year. What the third quarter brings is that those movements are paying off. So now we’re a long way from 7. 8, so we’re building profit through 3. 3 percentage emissions at 11. 1% EBITDA, even with everything we communicate, the economy and everything else. In operating cash flow, we maintain the same trend. So we were at 8. 1 positive in the 3rd quarter of this year.
Looking at the flow of loose money. Then I have a graph that will improve. We had all the monetary expenses and bonuses and hedging bills we had in August, which reduced the flow of loose money for the quarter.
Looking more at the classic way of hunting, then now hunting in the T3 instead of the Q3, then the Q3 22 compared to what we had in the Q3 21. We see that again, consistently, we had minus 0. 4% relief in revenue, which, again, is a smart sign because in the current quarter we showed you that we had, consistently, a decrease of four percentage points. Thus, the second quarter of 22 fell by four percent compared to Q2 of 21. So, in a way, it shows a slight slow relief or relief from that volume relief area that we saw in the quarter at the time.
Looking again, consolidated as I mentioned, 11. 1 is our EBTIDA margin compared to last year, we are down 2. 3 percentage points. We still have one-time prices such as severance pay, which peaked in the current quarter. But we still have some in the third quarter, not so much, but some of them. And we had the biggest impact in the third quarter compared to last year in Brazil, where we had a lot of lingering effects in terms of volume because we discussed that we had some volume relief from consumers who had a very large percentage of portfolio with Atento, somehow, when they go backwards, the volume component doesn’t go back and also the economic situation that lowers volumes.
So, looking in more detail in Brazil, volumes or revenues have decreased by 8%, of that 6% in which sector, and in that 6%, we have a part that relates to volumes of cyberattacks similar to cyberattacks that did not return. , as well as some worthwhile relief targets we earned last quarter that were below our minimum return that we could achieve. So, somehow, we made the decision not to participate.
At Telefónica, we recorded a 13. 6% reduction in profit, basically due to profitability. Telefónica has a massive profitability program that they launched at the beginning of the year and continues the year. It makes us our source of profit down. And two components: one is volume, volumes really decrease; and the other is the value adjustment we’ve made with them to make sure they’re more competitive so that 8% of the profit reduction is partially passed on to the EBITDA margin. So we went down 4 percentage points in Brazil. We still have package indemnities because of that volume relief there. But we controlled to offset some of the volume decline in EBITDA margin, which we closed at 10. 8.
As far as the Americas are concerned, the situation in terms of volume is absolutely different. We had a 3. 4% increase in the earnings base. Multisector is almost in line with less: last year, the same quarter last year, which is a smart sign because, even with all the economic downturn we can, we can see in each and every country in the Americas segment, we still have our – pretty much online. Therefore, it is a smart result in terms of profits.
Telefónica, we are up because we are recovering some countries that took longer to react and resume expansion after COVID. And in 2021, we essentially had this volume increasing from Telefonica. In those cases, we also had a positive hyperinflation effect in Argentina, which has a positive effect on earnings but really negative on EBITDA because margins in Argentina are low. That’s one of the drivers of the minus-0. 4% problems we have in the Americas.
In EMEA we grew by 14% in Multisector, driven by secure contracts. We had contracts in the electricity sector. We have had contracts in the insurance sector that have reached the multisector. And also in the case of Telefónica, we took over some volumes from another competition at the beginning of the year, which is noticeable here in the third quarter. The 0. 8 percentage point reduction in the EBITDA margin in EMEA is basically due to a combination of onshore and offshore.
So we are more, a little more on land than at sea. It is expected that in the fourth quarter, this scenario will recede because we are developing now, we can see an expansion in recent weeks more offshore than on land.
In terms of our money shortage, necessarily, as I mentioned, a lot of the overhead and operational innovations we made in the current quarter were worth it. So we had $28 million in the current quarter. Now that we have $38 million, that’s a $10 million accrual in EBITDA for the quarter. By taking leases, we achieved monetary EBITDA of $25 million or EBITDA under US GAAP. We have had negative adjustments of $5 million in current capital.
I discussed in the current quarter that we implemented a billing power program, the billing process to pay, which is going very, very well. But the biggest challenge for this minus $5 million is that right at the end of the quarter we had the implementation, the last wave of implementation of the new SAP, essentially Mexico, Colombia, Peru and some of the southern countries in a way that delayed our billing procedures a bit, which also delayed recoveries. compensate Q4. So, not only did it offset that $5 million, but it had a particularly positive replacement in current equity as a result of all the stocks. Combine that with what we already discussed at the end of the first quarter, that the fourth quarter is still our most productive quarter. in terms of collections. Some consumers will be waiting for bills until December. So, in a way, we’re going to be expecting a very, very positive fourth quarter in terms of loose cash flow.
CapEx, we continue with the same checkpoint we discussed in less than a quarter. Everything similar to growth, security, cybersecurity, we do. But because we have availability on our sites, some investments are reduced by that. And that’s necessarily what brought our operating money to a positive $8 million and the $46 million in negative finance fees are essentially in August, we have bonuses plus hedging. The legal liability was $20 million, the coverage, $22. 5 million and about $4 million which are other expenses that we have regularly in our quarter and that would make us – our numbers are down 38.
For the fourth quarter, EBITDA is expected for the fourth quarter and a very positive update in current equity will show very, very positive money before the fourth quarter. That negative $38 million is necessarily what made money. At the end of the current quarter, we had $103 million in liquidity. We’ve dropped to $66 million in money this year. But again, as I mentioned, we expect positive loose money in the fourth quarter to take us back to around $100 million and that’s what we expect to close out the year.
From a leverage perspective, we closed the third quarter with all figures reported at 6. 1 times EBITDA. But what I’ve done here is just a simulation of what leverage would be if we excluded the cyber effect of the fourth quarter of last year. in brain that, in net leverage, we have used EBITDA for the last 12 months and the last 12 months are necessarily from the fourth quarter of 21 to the third quarter of 22. So I just want a cyber-adjusted simulation in the fourth quarter of 21, which would be pretty much what we’d have at the end of the year. Because when we close the year, the new Q4 will enter and last year’s Q4 will come out of the last 12 months. So, it’s a smart simulation for what we hope to have by the end of the year.
From the debt repayment schedule, what I would like to point out is that we have necessarily renovated all our facilities. So the one shown there in the 22nd was essentially at the end of the quarter, but we’ve already revamped. We don’t have, let’s say, a payment commitment for the last quarter. And the other thing I’d like to point out is that within the 23rd, which is considered as short-term debt, our super senior credit line with the IDB is included, which is a $43 million facility that is an almost revolving facility based on commitment. And we stand very strong with alliances, and we agree with all those alliances, so renewal would be a kind of automatic action.
Another important thing for the comments is that, of course, we are well aware of the considerations about our monetary obligations and the expansion of monetary costs. Based on the future rates of our market, we expect 2023 to be the last year of higher monetary spending, as demonstrated by Carlos. in your chart. So, what we have done is first make sure that we have resumed the business, what appears is that we have [Technical difficulty], so new savings, especially from the currencies that EMEA has noticed and we will have new sales in the USA and within a while as Carlos also presented it, in the Philippines.
Another vital comment is that we are constantly comparing any source of investment, refinancing and any option with our equity design, of course, we are very close to the maturities of existing debt and we are looking at other sources, adding debt investments that can simply say, our liquidity scenario.
The last thing I would like to mention is fairness. We reported a negative equity of $131 million in the current quarter and now have a negative equity of $165 million. Here again, the operating result is positive. Even the ongoing policy had a slight positive impact on the quarter. But the main cause of the decline in equity was the monetary cost, as I mentioned, and basically the variation in replacement rates, basically in the replacement of the euro and some other currencies as well. .
So, at the end of the quarter, we have $165 million. It is important to mention that the maximum of this is similar to a small effect on cash, so we had the market price of the hedge, which is now $170 million and we had all the variation of the currency that has a non-monetary effect on capital, but it is important that you have that $165 million, to conclude.
So I think that’s what I had on my side. I think we are now opening the question and answer session.
Q&A session
Operator
[Operator Instructions] I shall now pass the call on to Mr Hernan van Waveren so that the questions can be transmitted over the Internet.
Hernan van Waveren
Thank you, Carlos and Sergio, I have one of our audience. What is the pricing environment in your key markets and how competitive is it?
Carlos López-Abadía
Well, we work in a very competitive industry, and it’s transparent that the value is: the value of the charge is vital for each and every client. It is a general statement, but it fits from sector to sector and geography to geography. Our expansion – our expansion is aimed at spaces where the load we can create allows us to achieve higher margins. We. . . You can say that it is less worth touching. They are all worth touching. But sectors that have the strong expansion and burden it can generate can also give us smart margins. There are some legacy sectors that we have that are worth much more, they are much more delicate and much more competitive in terms of value.
So one of the things we do to serve consumers well is to present offers. For example, everything we did in Brazil this year, we call [Atento Lite]. But essentially we have an offer that has a lower charge structure. , allows us to be more competitive in terms of price. Of course, there are contracts, consumers, or segments where we feel we can’t make the margins we need to get us to decide to leave. We have those 3 parts in our pricing technique and collection pressures is more productive for us.
Hernan van Waveren
We have another query from our audience. Please see how you can reduce your costs so specifically as you continue to build them.
Carlos López-Abadía
Well, I think I alluded to that in my comments and let me expand here. There are certain types of prices that you just want to reduce. For example, SG
I discussed at the beginning that a big component of our strategy is to be more effective in this dimension. And I also discussed that it will be a multi-year effort. It’s not about doing the same things the same way with the. . . simply with fewer people or fewer assets. It’s about converting the way we do things to make them more efficient. And in that sense, it’s a win-win-win. You can continue to do so. And not only do you get more power and higher costs, but you also provide better service to our customers.
As an example, I think I discussed in what we now call phase two of our project advancement. One domain of focus, for example, is abandonment. Abandonment is a clever example. If wear decreases, it reduces prices. We want to rent less, exercise less. You lower your prices and are more efficient. But in addition, the visitor also benefits because your agents, the workers you have at the service of your visitors, stay longer with that visitor and have more fun and give a better service. That’s a win-win. So by doing that, although it is more difficult, takes more time, and is a multi-year project, you can keep doing it and, of course, grow.
Hernan van Waveren
How does the 10. 3% accumulation in VMC reflect on the impact of existing and long-term earnings?
Carlos López-Abadía
Maybe I want, for us, it’s very vital. I mean the vital, very vital, to distinguish sales from profits. As you sell, profits: you have an acceleration time, and then profits begin to increase. up. So, for example, when I commented that we were very positive for the start of 2023 because of sales in the fourth quarter, for us, the sales that we have in the fourth and first quarters are very vital, because those are the sales that start generating profits at the beginning of the year and have an impact throughout the year.
From that perspective, all the sales we have in the third quarter, especially in the fourth quarter, will have the biggest impact in terms of earnings expansion during, in this case, 2023, next year.
Hernan van Waveren
Thanks Carlos. Operator, do you open the questions? [Multiple speakers]
Operator
Our first consultation comes from Declan Hanlon with Santander.
Declan Hanlon
A few questions. First of all, I suppose it’s worrying that we’re seeing a downplayed moment in advice. We perceive the context and the microproblems related to it. But since we’re at 50% in the fourth quarter, I guess their numbers for the full year are based on pretty smart visibility. And to that end, just doing the math here, I guess it takes a fourth quarter margin of about thirteen moments to get there. This takes you quite a bit to where you think on the balance sheet and brings some cash. So if you can comment a little further in terms of granularity on this, I would appreciate it.
The consultation of the moment is related to what Carlos discussed about the management of responsibilities. While I perceive that you can’t go into detail about this, I’m just thinking here. According to my calculations, it has – does not have – has minimal or practically 0 availability under its lines, according to the criterion of secured debt at this stage. Just hypothetically, how would you continue with an LM initiative at this time?Those are my two queries. Thank you so much.
Carlos López-Abadía
Of course. So, on the first question, I think the answer is correct: I’ll let Sergio give you the main points about math. But I think you’re right on the directional side, and I think you see this, so I think it’s a three-part question.
So, to the first question, do you have visibility at this point?The answer is yes. We have a month and a half left. So we’re pretty close to the numbers. And you can see that our direction of fourth-quarter EBITDA expansion will be in line with, and at least conservative relative to, the whole.
With regard to the moment component, liability management, how do they proceed?As I mentioned, we are looking at a number of proposals that we have from institutional investors who are invested in the business, as well as from foreign banks. And component of that — a vital element, the various proposals that we’re looking at — looking in, several of them, the design that underpins them are accounts receivable — their claims package. So we. . . – several of them. And as you mentioned, I think we probably can’t go into a lot of detail while we’re doing this.
Sergio, in EBITDA, does not
Sergio Passos
I think he is quite right in his hypothesis. We believe that we will be in a diversity of thirteen to 14%, in fact more by 14%, which would be two quarters in a row of accumulation. So we’re up 3. 3 percent trouble from the second to third quarters, and expect another accumulation of at least 3 percentage problems in the fourth quarter.
At his point, I know this was not an express problem, however, most likely, the accumulation in EBITDA plus the current capital we expect to have will be much better. And no, it is not, no, however, it had very limited money prices in the last quarter of the year. We will bring our cash back to the 90 to hundred range, which was the same as we were when we finished the current quarter.
Hernan van Waveren
Thank you, Operator. We have one of our audience. What is the competitive merit of going to the Philippines right now?What CapEx and operating capital are needed for this, and how will it be funded?
Carlos López-Abadía
Let me respond first to the last one. It is a self-financed initiative, as I wanted to call it later. We’ve had the opportunity and thought about going to the Philippines on other occasions over the last few years, but one of the things we need to do is in a very careful way. We, this specific advertising scale, the one we’re launching right now is essentially self-financing and positive in the year. And as I mentioned, it’s not like we’re opening a site and we’re going to get there, we have existing consumers and we express new consumers for that site.
So we paid in. . . within the year. And as I said, this is done with an express company that is moving to the Philippines. The other component of the question is competition, can you read it again?
Hernan van Waveren
What is the competitive merit of going to the Philippines?
Carlos López-Abadía
Therefore, the Philippines is a vital step in this festival tool in the United States. We have the most productive infrastructure in the world, from a moment to none on the coast. And we’ve been very successful in promoting that and promoting consumers. — promoting consumers who use it. The Philippines is another very important capability in the U. S. market.
Now that we are very small in the US market, could we have grown much more just with nearshore?Certainly. But those, as I mentioned, various consumers, existing consumers have asked us and presented us with volumes in the Philippines, we serve them. And that’s an additional activity for us. And also in terms of new consumers, we closed a number of consumers recently, but we also have significant consumers on the way that will put us in a very favorable position to win their business with that capability.
Operator
Merci. Et our next consultation comes from Vincent Colicchio of Barrington Research.
Vincent Colicchio
Carlos, I’m curious that your high-value sales have increased in the mix year over year and are also expanding in the sales channel to the last quarter or the period year after year.
Carlos López-Abadía
Thank you Vincent. Are you thinking in terms of high-growth verticals, or are you thinking in particular?
Vincent Colicchio
High-value sales, you’re talking about high-value sales, automation, things of that nature. But an above-average activity in terms of margin?
Carlos López-Abadía
Yes. This has a tendency to be quite stable. One of the things we’ve noticed in terms of sales, and I think part of that is putting more emphasis on sales. We have noticed that the margins and quality, so to speak, of even more classic installations have also increased. As important as it could be in sales of higher aggregate price, because the generation exercises, positions us well, gives us identification data for customers, etcetera, etcetera. We have noticed both the top price and classic sales in terms of margin. – which I think – I made the query – which I think several investors asked me recently in terms of high-tech and high-growth verticals with all the news in the press about layoffs in high tech and so on.
So, to also seize the opportunity to answer this question, we have noticed a smaller reduction in the number of higher-growth corporations from one year to the next. That said, over the course of the year, we saw a quarter-quarter increase. So this is a positive trend. So last year, for example, we had this quarter around 35% in terms of higher-growth verticals, in terms of sales percentage. This year we have 20%, but we saw 12% in the second quarter of 2020. % in Q3 and we are already waiting with sales to close and close a ceiling that in the 20s for Q4, which indicates that if there has been a year-on-year minimum, it is obviously expanding from one quarter to the next.
Which I would point out despite the fact, I mean, you’ve noticed a lot of news these days about layoffs and demanding situations in tech companies. We have taken the measures. We saw the challenge coming, not necessarily only in the sectors, but by seeing how 2022 and potentially 2023 are shaping up, depending on the uncertainties seen in the world. We take action at birth in the first trimester and the moment. We have taken the trouble, we have taken office and we are born to reap the benefits. So in that sense, maybe we were ahead of the curve compared to those high-tech ads.
Did I answer your question, Vincent?
Vincent Colicchio
And Sergio, one for you, if we assume there will be no change in replacement rates until the end of the year, what would be the headwind for the currency in your nominal source of income at 23 instead of 22?
Sergio Passos
Sorry, can you repeat? It is cut a little.
Vincent Colicchio
Yes, I ask for help estimating the headwind of the currency in its nominal source of income at 23 instead of 22. Any help there?
Carlos López-Abadía
Do you mean sales expectations?
Vincent Colicchio
Yes.
Sergio Passos
We think well, our core business is in Brazil, and we think that after the elections where we saw profits in the foreign exchange market, that would really do, let’s say, 2023. With the arrival of the new government, inflation is again some other issue that I think is very important. In the case of Brazil, the Central Bank raised our interest rates very early, which, as you well know, there is a lot of coverage because it affects us directly. .
But on the other hand, it makes inflation much more controlled. So the government now expects inflation for this year, compared to the 10. 3 we had last year, to be around 5. In that sense, we, the exchange rate, deserve to be higher than we actually were in 2022. So, in a way, maybe the exchange can be a kind of tailwind rather than a headwind for us, basically in the Brazilian component of the business.
As for euros, it is difficult, however, it is difficult to predict. But again, we had a narrow headwind last quarter, which is now more stable. Therefore, we believe that the exchange rate deserves not to have a massive impact. I mean, a big headwind for us for the next few years, I think it may be just a light tailwind.
Vincent Colicchio
So a conservative estimate wouldn’t have any effect from year to year, I guess.
Sergio Passos
Yes, I did.
Vincent Colicchio
And then the contract price for sales expansion in the quarter was great to see 10%, I think it was. Do you have a figure for the nine months compared to nine months last year?
Sergio Passos
I don’t know if I have it here, but we can send it to you.
Hernan van Waveren
What are your expectations of money and loose money for the end of the year?
Carlos López-Abadía
For you sergio
Sergio Passos
We’re in, as I mentioned, the fourth quarter is a very, very solid quarter for us. So, first we expect EBITDA to grow compared to the same speed we had from the second to the third quarter, from the third to the fourth quarter. facet of that. Working capital was particularly positive in the fourth quarter. Remember that in Q1 I explained that we made progress in Q4, which had a negative impact on Q1, but are positive in Q4 in addition to the same control in terms of CapEx. So, in general, expect the money lost in the fourth quarter to be on the order of $40 million.
Free money and operating moneyArray because, in a way, the difference in interest is very small compared to what we had, the $46 million this quarter. As a result, we expect our loose money to be on the order of $40 million, which would put our money balance in diversity from $90 million to $100 million.
Operator
Merci. Et our next consultation comes from Beltran Palazuelo with DLTV.
Beltran Palazuelo
First of all, it’s a bit confusing if I get the number. I think you alluded, Carlos, in your prepared remarks, to the fact that you expect a solid third quarter in terms of margins, I think, if I’m not mistaken, between 14% and 15%. And then Sergio said more conservatively than between 13% and 14%. So maybe the first question is what do you expect from the margin?
Carlos López-Abadía
I’ve seen it myself, and I’d usually say, well, I’m sure I was wrong because the numbers: Sergio knows them best. But I don’t think I forget I was on that slide. the one you use
Sergio Passos
Yes. We expect a diversity of 14% to 15%.
Carlos López-Abadía
So I don’t know who is looking to be more conservative, or just as important. So that’s right.
Beltran Palazuelo
Thank you so much. It is better to distrust than to lead with those margins and with the generation of loose money that Sergio commented each and every one of the years, let’s say that the net debt with respect to EBITDA is also conservative. Let us move on to the questions, if I may.
In 2023, if you can give us, let’s say a little bit, I know it’s difficult, you know where our [indistinguishable] volumes are, you know the sales. But let’s see, what it knows, what it does, budgets for next year in terms of, say, stable currency growth. And then grab onto those new contracts like in the Philippines, the so-called margins and loose money is more or less, of course, everything can replace that.
Carlos López-Abadía
Let me see what I can, to be precise, we have the board assembly on Friday to approve the budget. Therefore, I need to comment on the express budget because until we have approved it, there is still no budget. I give you anything directional.
From a macro environment, I don’t know if you probably have your own assumptions, but we don’t assume the world will be any less confusing in 2023 than it did in 2022. So, in terms of turnover, I personally think Brazil is probably a bigger market in 2023. We have a choice that has made many other people nervous about what’s going to happen. And as you know, for businesses, it rarely matters who wins the election and uncertainty is the enemy. truth? So I think it’s us. And as Sergio said very well, I think the Central Bank of Brazil acted before the others.
Now it has charged us a fortune in terms of prices that we had not anticipated. But for Brazil’s economy, I think it’s good. We expect to see, and we already see less inflation for next year than this year. And I hope it will also allow the government to lower interest rates and, in general, the business environment. But we’re not assuming that for Brazil or the rest of the world, other than that, there’s some uncertainty there.
That said, what do you do in a scenario of uncertainty?So we’ve done everything we can this year to make sure we have a smart charge structure, a smart structure – we’re accelerating efficiencies and that’s the most productive way to prepare for uncertainty and a potentially confusing year in the markets. If you combine that with frankly, we’ve noticed more powerful sales, and again, you might just not know how many dots make up a line, right?But we saw smart sales in the second and third quarters. Frankly, I think we’ve realized: it’s tricky with sales because whether you close a deal in January or December, there’s no difference in terms of earnings for the year, however, it does in terms of numbers for the fourth quarter. But we expect a very strong fourth quarter in sales as well.
So if you combine the sales that are vital to us for the year that’s at the beginning, right, Q4, Q1 and a larger charge structure, we actually expect greater effects for next year. I recognize that it is management, but it is probably the most productive thing I can do before a budget is approved.
Beltran Palazuelo
And maybe the last question, if I may, I think they discussed on the slide that the last 3 or five money prices would be 2023. They discussed 2024, their position is. . . The policy is 25 to 30, but I think he’s not mentioning that if things continue as they are, most of the precept of the policy also gets an exception. So, just to put that in place, is there still an option that in 2024, $25 million, $30 million, there will be a one-time charge as you indicated in the quarter filing for the moment on page 16?
Carlos López-Abadía
So, the positive, you can clearly take the negative of hedging, is that we did not expect such an immediate expansion of the interest rate to hit us in 2022. We assume that by 2023, even future rates will mean particularly, but beyond 2023 at 24, starting at age 25, the largest component of the coverage burden that is the precept no longer exists. So whatever the CBI is, whatever the interest rate is, our money burden is being transmitted particularly from that point of view, okay, in the most sensible part of that, interest rates go down a lot more, but regardless, the main component of hedging expires at 23. So, we need to be careful, we need to be conservative and manage money at 23 and things get better after that. – Was he right, Sergio?
Sergio Passos
Yes, I think, exactly. The year 2023, based on existing advance rates, is the year in which we will have the greatest impact. We’re ahead of rates, which again, looking at the situation in Brazil and the inflation we’re probably going through to see probably part of — or anything that happens from last year, there may be a situation where later this year, interest rates go down even further, so enjoy them starting at 24 hours. Rates
Carlos López-Abadía
Estamos. Es better to prepare for war. Therefore, we assume that 2023 will have a very high monetary cost, but we know for sure that 24: this scenario improves significantly, regardless of rates.
Beltran Palazuelo
Thanks Carlos. Just for having that, I completely understand. I think you just discussed that 24 out of 25 and 30, when I look at page 16 of the second quarter presentation, there’s a single positive out of 24. So if I do minus 17, minus 14, and go up 24 from minus 25 or 30 by 2024, it’s much lower. So my query is that there is still an expectation that when the policy corresponds to the beginning, there is still a single positive in February 2024?
Sergio Passos
Yes, Beltran. The fact is, well, we can communicate all the main points offline to you. But since the exchange rate has replaced a lot, do not forget that in the third quarter, the exchange rate was around 5. 5 and now we are at another level of exchange. The merit fits a lot. So we can take, I think, offline, the main points. But yes, we expect the benefits in 24.
Carlos López-Abadía
Oui. Et I think it’s a vital point. I think for one of you, obviously the service offering, let me make a detailed service offer for anyone interested. Unfortunately, hedging is something that has had a huge effect, a great effect on our business and is relatively complex, it took me a while and of course the maximum of you will take much less. But perceive and perceive what the variables are and put their own assumptions in terms of interest rates and exchange rates.
But Sergio has very intelligent research, honest research and explanation. So of course Sergio and I are here in Spain and all week, so I don’t know if you’re in Spain, but I’m satisfied with this percentage. with you face to face and do many of the
Offer Array, which I think is vital to perceiving those impactful components. So, if you are interested, Hernan, make sure we want. . . Schedule a workshop or. . .
Hernan van Waveren
What is the comparative merit of Atanto and how do they stay competitive in such a competitive market?
Carlos López-Abadía
Well, that, well, there probably aren’t unusual parts and other things that are faster from market to market at some level, even faster from one segment to another. But let me refer to the maxims. I think, in general, one thing that’s not unusual at Atento is agility. I think you’ve noticed business agility at least in the form of resilience. We have many demanding situations and we come out stronger. In 2020, COVID hit us i. e. in the current quarter, we didn’t have any workers running from home. We did not have the generation infrastructure at that time, and in a quarter of an hour we had close, if memory is right, about 80% of the workers running from home. And we recovered in a quarter, a quarter and a part of this thing.
Last year we had a big impact until 2022 from the cyber attack and here we are about 12 months away and we have recovered the EBITDA margin in, necessarily at the point we would have had without this event. And we are in the most sensible of graphs, look at us in the most sensible. I was proud when I saw that we were ahead of everyone else when it came to cyber capabilities. And, frankly, those are independent sites that do their own analysis. . It’s not someone you hire to do it for you. They just do it. So you might think there is. . . There is a connection. But Hernan, we deserve to provide links to those sites, I think it shows our resilience. But it translates into the way we interact with customers. So, one of the things what we do is that we are very agile to respond to their needs, their ever-changing needs, when things change, etcetera, etcetera, etcetera. And it’s probably all over Atento.
In terms of express markets, let me refer to a few. So Brazil, very obviously, we have a very strong leadership position in the market. We use it to give confidence to our consumers. And, by the way, not only our existing consumers, but a third of our sales in Brazil this year have been new rolls. Therefore, even though we are by far the market leader, we continue to gain new consumers in Brazil.
In the – for example, in the United States, which is the opposite of ours – the best kept secret in the United States. We have the largest and most successful nearshore platform in the world. For example, a government – in fact a federal government government here in the United States congratulated us recently because we are the only provider capable of offering 90% of bilingual agents in the fullest sense of our hat. And now we have the other leg of this tool, as I mentioned earlier, in the Philippines, that’s even more true.
Again, it adjusts from market to market, but I believe that agility or the ability to adapt, grow and evolve with our consumers is something that works through Atena.
Hernan van Waveren
Thank you Carlos. So thank you all for attending the presentation. This concludes our call for convention for the 3rd quarter of 2022. We look ahead to answer any other questions you may have. I remind you that you can locate all the data presented on our website Investors. atento. com.
Operator, you can now disconnect the call.
Operator
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