Indicate by check mark whether the registrant files
or will file annual reports under cover of Form 20-F or Form 40-F.
Indicate by check mark if the registrant is submitting
the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Note: Regulation S-T Rule 101(b)(1) only permits the
submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting
the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
The accompanying notes (Consolidated statements) are an integral part of
the unaudited interim condensed consolidated financial statements.
NOTES TO
THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
| 1) | COMPANY ACTIVITY AND CORPORATE INFORMATION |
| (a) | Description of business |
Atento S.A. (the
“Company”) and its subsidiaries (jointly with the Company, “Atento Group”) is one of the largest worldwide providers
in customer relationship management services and business process outsourcing (CRM / BPO), with a presence in 14 countries, especially
in Latin America.
The corporate purpose
of the Company and its subsidiaries, except for the intermediate holding companies, is to establish, manage and operate through multichannel
platforms; to provide telemarketing, marketing and “call center” services to its clients.
The Company, directly
and through its subsidiaries as applicable, may also carry on any commercial, industrial, financial, real estate business or intellectual
property related activity that it deems necessary to meet the aforementioned corporate purposes. Likewise, the Company and its subsidiaries,
as may correspond, may act as the guarantor of loans and securities, as well as assisting companies in which it holds direct or indirect
interests or that form part of the Atento Group. The Company may secure funds, except for public offerings, through any kind of lending,
or through the issuance of bonds, securities, or debt instruments in general.
(b) Corporate
and other information
The Company was incorporated
as public limited company (société anonyme) under the laws of the Grand-Duchy of Luxembourg on March 5, 2014 for
an unlimited period. The Company is registered with the Luxembourg Register of Commerce and Companies with number B 185.761 and has its
current registered office in Luxembourg at 1, rue Hildegard Von Bingen, L-1282.
The principal shareholders
with majority of interest of the Company are Mezzanine Partners II Offshore Lux Sarl II, Mezzanine Partners II Onshore Lux Sarl II, Mezzanine
Partners II Institutional Lux Sarl II, Mezzanine Partners II AP LUX SARL II (funds controlled by HPS Investment Partners, LLC) and Chesham
Investment Pte Ltd. (fund controlled by GIC Asset Management Pte., LTD) and Taheebo Holdings LLC (fund controlled by Farallon Capital
Management, LLC) and Kyma Capital Limited (fund controlled by Kyma Capital Opportunities Fund Limited)
The Company’s
ordinary shares are traded on NYSE under the ticker “ATTO”.
2) BASIS
OF PRESENTATION OF THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The interim condensed
consolidated financial information for the three and nine months ended September 30, 2022 has been prepared in accordance with IAS 34
- Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”) prevailing
on September 30, 2022. The unaudited interim condensed consolidated financial information was approved by the Board of Directors on November
09, 2022.
The information
does not have all disclosure requirements for the presentation of full annual financial statements and thus should be read in conjunction
with the consolidated financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”)
for the year ended December 31, 2021. The interim condensed consolidated financial information has been prepared on a historical costs
basis, except for Argentina that is adjusted for inflation as required by IAS 29 Financial Reporting in Hyperinflationary Economies in
Argentina, and derivative financial instruments and financial liability related to the option for acquisition of non-controlling interest,
which have been measured at fair value. The interim condensed consolidated financial information is for the Atento Group.
The figures in this
interim condensed consolidated financial information are expressed in thousands of U.S. dollars and all values are rounded to the nearest
thousand, unless otherwise indicated. U.S. Dollar is the Atento Group’s presentation currency.
3) ACCOUNTING
POLICIES
There were no significant changes
in accounting policies and calculation methods used for the interim condensed consolidated financial information as of September 30, 2022
in relation to those presented in the annual financial statements for the year ended December 31, 2021.
a) Critical
accounting estimates and assumptions
The preparation
of interim condensed consolidated financial statements under IFRS as issued by the IASB requires the use of certain assumptions and estimates
that affect the carrying amount of assets and liabilities within the next financial year.
Some of the accounting
policies applied in preparing the accompanying interim condensed consolidated financial statements required Management to apply significant
judgments in order to select the most appropriate assumptions for determining these estimates. These assumptions and estimates are based
on Management experience, advice of consultants and experts, forecasts and other circumstances and expectations prevailing at year end.
Management’s evaluation considers the global economic situation in the sector in which the Atento Group operates, as well as the
future outlook for the business. By virtue of their nature, these judgments are inherently subject to uncertainty. Consequently, actual
results could substantially differ from the estimates and assumptions used. Should this occur, the values of the related assets and liabilities
would be adjusted accordingly.
Although these estimates
were made on the basis of the best information available at each reporting date on the events analyzed, events that take place in the
future might make it necessary to change these estimates in coming years. Changes in accounting estimates would be applied prospectively
in accordance with the requirements of IAS 8, “Accounting Policies, Changes in Accounting Estimates and Errors”, recognizing
the effects of the changes in estimates in the related statements of operations.
An explanation of
the estimates and judgments that entail a significant risk of leading to a material adjustment in the carrying amounts of assets and liabilities
is as follows:
Provisions and
contingencies
Provisions are recognized
when the Atento Group has a present obligation as a result of a past event, it is probable that an outflow of resources will be required
to settle the obligation and a reliable estimate can be made of the amount of the obligation. This obligation may be legal or constructive,
deriving from, regulations, contracts, customary practice, or public commitments that would lead third parties to reasonably expect that
the Atento Group will assume certain responsibilities. The amount of the provision is determined based on the best estimate of the outflow
of resources embodying economic benefit that will be required to settle the obligation, considering all available information as of the
reporting date, including the opinions of independent experts such as legal counsel or consultants.
The Company classifies
the risk of loss in legal proceedings as probable, possible, or remote. If the Company has lawsuits whose values are not known or reasonably
estimated, but the likelihood of loss is probable, these will not be recorded, but their nature will be disclosed as well the lawsuits
classified as possible.
Given the uncertainties
inherent in the estimates used to determine the amount of provisions, actual outflows of resources may differ from the amounts recognized
originally on the basis of these estimates.
Fair value of
derivatives
The Atento Group uses derivative
financial instruments to mitigate risks, primarily derived from possible fluctuations in exchange rates. Derivatives are recognized at
the inception of the contract at fair value.
The fair values of derivative
financial instruments are calculated based on observable market data available, either in terms of market prices or through the application
of valuation techniques. The valuation techniques used to calculate the fair value of derivative financial instruments include the discounting
of future cash flow associated with the instruments, applying assumptions based on market conditions at the valuation date or using prices
established for similar instruments, among others. These estimates are based on available market information and appropriate valuation
techniques. The fair values calculated could differ significantly if other market assumptions and/or estimation techniques were applied.
b) Standards issued but not yet
effective
There are no other
standards that are not yet effective and that would be expected to have a material impact on the Atento Group in the current or future
reporting periods and on foreseeable future transactions.
4) MANAGEMENT
OF FINANCIAL RISK
4.1 Financial risk factors
The Atento Group’s
activities are exposed to various types of financial risk: market risk (including foreign currency risk and interest rate risk), credit
risk and liquidity risk. The Atento Group’s global risk management policy aims to minimize the potential adverse effects of these
risks on the Atento Group’s financial returns. The Atento Group also uses derivative financial instruments to hedge certain risk
exposures.
This unaudited interim condensed
consolidated financial information does not include all financial risk management information and disclosures required in the annual financial
statements and therefore they should be read in conjunction with the Atento Group’s consolidated financial statements as of and
for the year ended December 31, 2021. For the nine months ended September 30, 2022 there have not been changes in any risk management
policies.
a) Market
risk
Interest rate
risk in respect of cash flow and fair value
Interest risk arises
mainly as a result of changes in interest rates which affect finance costs of debt bearing interest at variable rates (or short-term maturity
debt expected to be renewed), as a result of fluctuations in interest rates, and the value of non-current liabilities that bear interest
at fixed rates.
Atento Group’s
finance costs are exposed to fluctuations in interest rates. On September 30, 2022, 10,7% of financial debt with third parties (not including
derivative financial instrument) bore interests at variable rates, while on December 31, 2021 this amount was 4.4%. In both December 31,
2021 and September 30, 2022, the exposure was to the Brazilian CDI rate and the TJLP (Brazilian Long-Term Interest Rate).
We also have exposure
to the Brazilian CDI rate on some of our cross-currency swaps entered after the Senior Secured Notes refinancing in February 2021. In
such instruments, we exchange a fixed amount of U.S. dollars for a variable amount of Brazilian Reais, which is determined as a percentage
of CDI (the Brazilian Interbank Market Rate).
Foreign currency
risk
Our foreign currency
risk arises from local currency revenues, receivables, and payables, while the U.S. dollar is our functional and reporting currency. We
benefit to a certain degree from the fact that the revenue we collect in each country, in which we have operations, is generally denominated
in the same currency as the majority of the expenses we incur.
In accordance
with our risk management policy, whenever we deem it appropriate, we manage foreign currency risk by using derivatives to hedge any exposure
incurred in currencies other than those of the functional currency of the countries.
The main source
of our foreign currency risk is related to our operations in foreign countries with functional currencies different than U.S Dollars.
To reduce the foreign currency risk in our operations in Brazil, we entered into cross-currency swaps pursuant to which we exchange a
fixed amount of U.S. dollars for variable amount of Brazilian Reais (fixed-floating rate cross-currency swaps).
The total amount
of interest (coupon) payments is covered until the final maturity date (February 2026) of the Senior Secured Notes due 2026. The cross-currency
swaps in place also include Principal Exchange in the same currency pairs mentioned above, which mature in February 2024. The referred
cross-currency swaps are the only derivative transactions we have in place in Atento Group.
As of September
30, 2022, the estimated fair value of the cross-currency swaps totaled a net liability of 91,752 thousand U.S. dollars (net liability
of 39,957 thousand U.S. dollars as of December 31, 2021).
b) Credit
risk
The Atento Group
seeks to conduct all of its business with reputable national and international companies and institutions established in their countries
of origin, to minimize credit risk. As a result of this policy, the Atento Group has no material adjustments to make to its credit accounts.
Accordingly, the Atento Group’s commercial credit risk management approach is based on continuous monitoring of the risks assumed
and the financial resources necessary to manage the Group’s various units, in order to optimize the risk-reward relationship in
the development and implementation of business plans in the course of their regular business.
Credit risk arising
from cash and cash equivalents is managed by placing cash surpluses in high quality and highly liquid money-market assets. These placements
are regulated by our Corporate Treasury policy based on the conditions prevailing in the markets and the countries where Atento operates.
The Corporate Treasury policy establishes: (i) the maximum amounts to be invested per counterparty, based on their ratings (long- and
short-term debt ratings); (ii) the maximum period of the investment; and (iii) the instruments in which the surpluses may be
invested.
The Atento Group’s
maximum exposure to credit risk is primarily limited to the carrying amounts of its financial assets. The Atento Group holds no guarantees
as collection insurance.
c) Liquidity
risk
For September
2022, Company has presented in its interim condensed consolidated Financial Statement a negative shareholders’ equity. Since our
last extensive analysis performed on December 31, 2021 Company is monitoring monthly the events and transactions that direct impact on
equity accounts. On September 30, 2022 there was an impact on equity due to derivative transactions that are a non-cash events so when
their effects are excluded, operating profit is generated.
From a cash and
cash equivalents perspective, excluding the effect of interest paid due coupon payment, the Company has presented a positive operational
cash flow by eight million U.S. dollars from June 30, 2022 until September 30, 2022.
From a financial
commitments perspective, the Company has presented a decrease in the debt with third parties through payments and no new significant debts.
Additionally, Company maintained the same credit facility limit with financial institution and presented a decrease in the drawn revolving
credit facility from June 30, 2022 until September 30, 2022 that complies with company strategy to match its debt maturity.
From a working
capital perspective, the Company usually has a tight working capital due to the payment of coupon to be paid twice a year (August and
February) accrued on short-term. Company cash and cash equivalents position and to be generated is sufficient to comply with these commitments.
Despite this effect related to debts, the Company has a reasonable working capital to continue operation on a monthly basis.
The directors
have, at the time of approving the financial statements, a reasonable expectation that the Group have adequate resources to continue in
operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the
financial statements. The Atento Group seeks to match its debt maturity schedule to its capacity to generate cash flows to meet the payments
of financial commitments. In practice, this means that the Atento Group’s average debt maturity must be long enough to support business
operation normal conditions.
4.2 Capital Management
The Atento Group’s
Finance Department, which is responsible for capital management, takes various factors into consideration when determining the Group’s
capital structure. Atento Group’s capital management goal is to determine the financial resources necessary both to continue its
recurring activities, as a going concern, and to maintain a capital structure that optimizes own and borrowed funds.
The Atento Group
sets an optimal debt level to maintain a medium-term borrowing structure, in order to carry out its routine activities under normal conditions
and to address new opportunities for growth. Debt levels are kept in line with forecasted future cash flows and with quantitative restrictions
imposed under financing contracts. In addition to these general guidelines, we take into account other considerations and specifics when
determining our financial structure, such as country risk, tax efficiency and volatility in cash flow generation.
The Super Senior
Revolving Credit Facility, carries no financial covenant obligations regarding debt levels. However, the notes do impose limitations on
dividend distributions, payments or distributions to the shareholders, the incurrence of additional debt, and on investments and disposal
of assets.
As of the date of these interim
condensed consolidated financial information, the Atento Group complies with all restrictions established in the aforementioned financing
contracts and does not foresee any future non-compliance. To that end, the Atento Group regularly monitors figures for net financial debt
with third parties and EBITDA.
4.2 Fair value estimation
a)
Level 1: The fair value of financial instruments traded on active markets is based on the quoted
market price at the reporting date.
b)
Level 2: The fair value of financial instruments not traded in active market (i.e., OTC derivatives)
is determined using valuation techniques. Valuation techniques maximize the use of available observable market data, and place as little
reliance as possible on specific company estimates. If all of the significant inputs required to calculate the fair value of financial
instrument are observable, the instrument is classified in Level 2. Atento Group’s Level 2 financial instruments comprise interest
rate swaps used to hedge floating rate loans and cross currency swaps.
c)
Level 3: If one or more significant inputs are not based on observable market data, the instrument
is classified in Level 3.
Atento Group’s assets and
liabilities measured at fair value as of December 31, 2021 and September 30, 2022 are classified as Level 2. No transfers were carried
out between the different levels during the period.
5) SEGMENT INFORMATION
The Atento Group
uses EBITDA to track the performance of its segments and to establish operating and strategic targets. Management believes that EBITDA
provides an important measure of the segment’s operating performance to evaluate and compare the segments’ operating results
from period to period. EBITDA is defined as profit/(loss) for the period before net finance expense (which includes finance income, finance
costs, change in fair value of financial instruments and net foreign exchange losses), income taxes and depreciation and amortization.
The following tables
present financial information for the Atento Group’s operating segments (EMEA, Americas and Brazil) for the period nine months ended
September 30, 2021 and 2022 (in thousand U.S. dollars):
|
|
|
|
|
|
|
|
|
|
|
Nine months period ended September 30, 2021 (Thousands of U.S. dollars) |
|
EMEA |
|
Americas |
|
Brazil |
|
Other and eliminations |
|
Total Group |
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
Sales to other companies |
98,941 |
|
321,184 |
|
336,647 |
|
- |
|
756,773 |
Sales to Telefónica Group |
93,221 |
|
152,049 |
|
119,932 |
|
- |
|
365,203 |
Sales to other group companies (*) |
- |
|
2,961 |
|
705 |
|
(3,666) |
|
- |
Total Revenue |
192,162 |
|
476,194 |
|
457,285 |
|
(3,666) |
|
1,121,975 |
|
|
|
|
|
|
|
|
|
|
Income/(Expenses) |
Supplies |
(26,711) |
|
(8,963) |
|
(38,896) |
|
2,830 |
|
(71,740) |
Employee benefit expenses |
(137,318) |
|
(372,005) |
|
(331,439) |
|
(3,871) |
|
(844,633) |
Other operating income and expense |
(9,282) |
|
(50,033) |
|
(22,854) |
|
17,634 |
|
(64,535) |
EBITDA |
18,851 |
|
45,193 |
|
64,096 |
|
12,927 |
|
141,067 |
Net finance expense |
|
|
|
|
|
|
|
|
(81,147) |
Depreciation and amortization |
|
|
|
|
|
|
|
|
(89,771) |
Profit/(loss) before income tax |
|
|
|
|
|
|
|
|
(29,851) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months period ended September 30, 2022 (Thousands of U.S. dollars) |
|
EMEA |
|
Americas |
|
Brazil |
|
Other and eliminations |
|
Total Group |
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
Sales to other companies |
94,363 |
|
302,575 |
|
329,351 |
|
- |
|
726,289 |
Sales to Telefónica Group |
87,271 |
|
141,680 |
|
111,977 |
|
- |
|
340,928 |
Sales to other group companies |
5 |
|
3,869 |
|
896 |
|
(4,770) |
|
- |
Total Revenue |
181,639 |
|
448,124 |
|
442,224 |
|
(4,770) |
|
1,067,217 |
|
|
|
|
|
|
|
|
|
|
Income/(Expenses) |
Supplies |
(35,096) |
|
(18,731) |
|
(39,538) |
|
546 |
|
(92,819) |
Employee benefit expenses |
(126,489) |
|
(357,198) |
|
(333,384) |
|
(1,408) |
|
(818,479) |
Other operating income and expense |
(9,379) |
|
(40,750) |
|
(17,495) |
|
13,555 |
|
(54,069) |
EBITDA |
10,670 |
|
31,445 |
|
51,807 |
|
7,923 |
|
101,850 |
Net finance expense |
|
|
|
|
|
|
|
|
(85,911) |
Depreciation and amortization |
|
|
|
|
|
|
|
|
(92,121) |
Profit/(loss) before income tax |
|
|
|
|
|
|
|
|
(76,182) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period nine months ended September
30, 2022, “other operating income and expense” includes the indemnity income recognized and already paid related to the cyber-attack
incurred in 2021 by a total of 10.000 thousand U.S dollars. Other and eliminations includes allocated revenue among operating segments
and holding elimination
6) LEASES
The main changes in lease between
the nine-month period ended September 30, 2022 and the year ended the December 31, 2021 are related to amortization of the period; shutdown
of 5 service delivery centers mainly in Brazil (3) and América (2) and revaluation based on the renegotiation with suppliers on
prices. Service delivery center´s shutdown is related to the strategy of the Company for an operational restructuring based on the
recent actions to improve and gain efficiency and synergy on the operation. Company does not expect any new significant disposal or shutdown
in the short term.
7) EQUITY
Share capital
On
July 28, 2020, an extraordinary shareholder’s meeting approved a reverse share split of 75,406,357 ordinary shares without nominal
value, representing the entire share capital of the Company, into 15,000,000 ordinary shares without nominal value using a ratio of 5.027090466672970,
and subsequently amended article 5 of the articles of association of the Company.
On
January 14, 2022, the Board approved the increase of the Company´s share capital within its authorized share capital by an amount
of one thousand twenty-three Euros and thirteen cents (EUR 1,023.13) through the issuance of four hundred fifty-one thousand six hundred
sixty-seven (451,667) new shares without nominal value each having an implied par value of EUR 0.002265256, to be paid out of distributable
reserves of the Company. The purpose of that share capital increase was to deliver shares to the Atento Group employees under Atento’s
Omnibus Plan.
As
of September 30, 2022, the Company’s share capital was set as €35,001.98 equivalent to U.S. dollars 50 thousand (€33,979
as of December 31, 2021 equivalent to U.S. dollars 49), represented by 15,451,667 shares (15,000,000 shares on December 31, 2021).
Share
premium
The
share premium refers to the difference between the subscription price that the shareholders paid for the shares and their nominal value.
Since this is a capital reserve, it can only be used to increase capital, offset losses, redeem, reimburse, or repurchase shares. In 2022,
the Company vested the total of 451,667 TRSUs with a total impact in share premium of 1,450 thousand of U.S. dollars.
Treasury
shares
For
September 30, 2022, Atento S.A. held a total of 951,957 own shares.
Legal
reserve
According
to commercial legislation in Luxembourg, Atento S.A. must transfer 5% of its year profits to legal reserve until the amount reaches 10%
of share capital. The legal reserve cannot be distributed.
On
September 30, 2022, no additional legal reserve had been allocated, mainly due to the losses incurred by Atento S.A.
Hedge
accounting effects
On
January 1, 2019 Atento formalized at a meeting of the “Board of Directors”, which took place on December 20, 2018, its intention
to renew the loan agreement between Atento Luxco 1 and Atento Brasil on its maturities per indefinite time and designate it as
permanent equity, as the repayment is neither planned nor likely to occur in the foreseeable future. Therefore, changes in fair value
related to the USD-BRL exchange rate is recorded in equity as part of other comprehensive income.
At
the same time, on January 1, 2019, the Cross-Currency Swap USD BRL was designated as a net investment hedge. Prior to the date of designation
of the Cross-Currency Swap, this hedging instrument was electively not designated as a hedge accounting because the change in fair value
was intended to partially offset changes in the USD-BRL foreign currency component of the BRL denominated intercompany debt, which were
recorded in earnings. Therefore, changes in fair value related to the USD-BRL Cross-Currency Swap are recorded in equity as part of other
comprehensive income.
Also,
on January 1, 2020 the Company assigned the loan agreement between Atento Luxco 1 and Atento Mexico Holdco as permanent in equity, with
its maturities to be renewed per indefinite time, since the repayment is neither planned nor likely to occur in the foreseeable future.
Therefore, changes in fair value related to the USD-MXN exchange rate are now recorded in equity as part of other comprehensive income.
The
Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends
on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge
accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated
and qualifying as hedges of the foreign currency exposure of a net investment in a foreign operation are considered net investment hedges.
The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting
does not apply, or the Company elects not to apply hedge accounting.
Translation
differences
Translation
differences reflect the differences arising on account of exchange rate fluctuations when converting the net assets of fully consolidated
foreign companies from local currency into Atento Group’s presentation currency (U.S. dollars).
Stock-based compensation
a) Description
of share-based payment arrangements
The
2019 Plan
On
June 3, 2019, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and its
subsidiaries. The share-based payment had the following arrangements:
1.
Time Restricted Stock Units (“RSU”)
(equity settled)
•
Grant date: June 3, 2019
•
Amount: 2,560,666 RSUs
•
Vesting period: 100% of the RSUs vested on January 3, 2022
•
There are no other vesting conditions
The 2020 Plan – Stock Option
On
August 3, 2020, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and its
subsidiaries. The share-based payment is composed by Stock Options with the following arrangements:
• Grant
date: August 3, 2020
• Amount:
1,524,065 SOPs
• Vesting
period: 1/3 each year (August 3, 2021, August 3, 2022 and August 3, 2023)
• Expiration
date: 4.5 years since the grant date or on February 3, 2025
• There
are no other vesting conditions
On August
3, 2020, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and its subsidiaries.
This payment is composed by a Long-Term Performance Award with the following arrangements:
| 2. | Long-Term Performance Award |
• Grant
date: August 3, 2020
• Amount:
USD 4,305,100
• *Matching
shares Amount: USD 2,152,550
• Vesting
conditions: linked to the degree of achievement of the objective – 3-year average EBITDA margin (external view / as reported) on
August 3, 2023 and the possibility to opt to receive part of this incentive in shares – at least 50% (*with a 3-year holding restriction
condition until August 2026 to be eligible to receive the additional matching shares)
• There
are no other vesting conditions
The 2020 Plan – Extraordinary
SOP
On
August 3, 2020, Atento granted a new share-based payment arrangement to directors as an Extraordinary Grant for a total in a one-time
award with a three-year vesting period.
• Grant
date: August 3, 2020
• Amount:
195,000 SOPs
• Vesting
period: 100% of the SOPs vests on August 3, 2023
• There
are no other vesting conditions
The 2021 Special
Grant
On
January 29, 2021, Atento granted a new share-based payment arrangement to Board directors for a total in a one-time award with a two-year
performance conditions vesting period.
• Grant
date: January 29, 2021
• Amount:
121,802 SOPs
• Vesting
period:100% of the SOPs will vests on 2023 (50% subject to 2021 EBITDA’s achievement targets and 50% subject to 2022 EBITDA´s
achievement targets)
• There
are no other vesting conditions
As of September
30, 2022 the EBITDA´s achievement targets was not met, thus no potential shares are expected to be delivered
Board
Grant 2021
On February
24, 2021, Atento granted a new share-based payment to Board directors a total in a one-time award with a one-year vesting period.
| 1. | Time Restricted
Stock Units (“RSU”) (equity settled) |
• Grant
date: February 24, 2021
• Amount:
51,803 RSUs
• Vesting
period: 100% of the RSUs vested on January 3, 2022
• There
are no other vesting conditions
As of June
9, 2021, was issued a complementary grant of 3,204 new RSUs, linked to a new appointment in the Board
The 2021 Plan – Stock Option
On
February 24, 2021, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and
its subsidiaries. The share-based payment is composed by Stock Options with the following arrangements:
• Grant
date: February 24, 2021
• Amount:
621,974 SOPs
• Vesting
period: 1/3 each year (February 24, 2022, February 24, 2023 and February 26, 2024)
• Expiration
date: 4.5 years since the grant date or on August 25, 2025
• There
are no other vesting conditions
As of September
1, 2021, was issued a new grant of 17,343 SOPs to a new Board member.
On
February 24, 2021, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and
its subsidiaries. This payment is composed by a Long-Term Performance Award with the following arrangements:
| 4. | Long-Term Performance Award |
• Grant
date: February 24, 2021
• Amount:
USD 5,409,837
• *Matching
shares Amount: USD 2,704,919
• Expiration
date: 4.5 years since the grant date or on August 25, 2025
• There
are no other vesting conditions
As of September
1, 2021, was issued a new amount of USD 137,504 to a new Board member.
The
2021 Plan – Board and Extraordinary
On November
3, 2021, Atento granted a new share-based payment to directors, officers and other employees for the Company and its subsidiaries. The
share-based payment had the following arrangements:
• Grant
date: November 23, 2021
• Amount:
40,000 SOPs
• Vesting
period: 100% of the SOPs vest on November 3, 2024
• There
are no other vesting conditions
Board
Grant 2022
On February
03, 2022, Atento granted a new share-based payment to to Board directors a total in a one-time award with a one-year vesting period.
| 1. | Time Restricted
Stock Units (“RSU”) (equity settled) |
• Grant
date: February 03, 2022
• Amount:
26,708 RSUs
• Vesting
period: 100% of the RSUs vested on January 2, 2023
• There
are no other vesting conditions
b) Measurement
of fair value
The
fair value of the RSUs, for all arrangements, has been measured using the Black-Scholes model. For all arrangements are equity settled
and the fair value of RSUs is measured at grant date and not remeasured subsequently.
The
fair value of cash-settled share-based payment transactions is measured using the same principles as for measuring equity-settled transactions.
The fair value of the liability for cash-settled transactions is re-measured at each reporting date and at the date of settlement. Any
changes in fair value are recognized in profit or loss for the period.
c) Outstanding
RSUs
The table below summarizes the total of Outstanding shares for September
30, 2022
Shared-Based Payment |
Shares Outstanding |
|
The 2020 Plan – Stock Options |
1,121,714 |
SOP |
The 2020 Plan – Performance Award (Potential Matching Shares) |
760,975 |
SOP |
The 2020 Plan – Extraordinary SOP |
95,000 |
SOP |
The 2021 Special Grant |
- |
PRSU |
The 2021 Plan – Stock Options |
337,243 |
SOP |
The 2021 Plan – Performance Award (Potential Matching Shares) |
1,030,569 |
SOP |
The 2021 Plan – Board and Extraordinary |
40,000 |
SOP |
The 2022 Plan – Board Grant |
21,628 |
RSU |
Total |
3,407,129 |
|
d) Impacts in
Profit or Loss
For the nine months ended September
30, 2022, a total of 1,612 thousand U.S. dollars related to stock-based were recorded as employee benefit expenses. For three months ended
September 30, 2022 Company presented a reduction on stock-based compensation expenses due share price fall and the review of the target
related to Performance award.
8) FINANCIAL ASSETS
As of December 31,
2021 and September 30, 2022, all the financial assets of the Company are classified as amortized cost except for the derivative financial
instruments that are classified as financial assets at fair value.
Credit risk arises
from the possibility that the Atento Group might not recover its financial assets at the amounts recognized and in the established terms.
Atento Group Management considers that the carrying amount of financial assets is similar to the fair value.
The breakdown of “Trade and other receivables”
as of December 31, 2021 and September 30, 2022 is as follows:
|
Thousands of U.S. dollars |
|
December 31, 2021 |
|
September 30, 2022 |
Non-current trade receivables |
3,466 |
|
593 |
Other non-financial assets (*) |
16,336 |
|
22,456 |
Non-current Prepayments |
2,438 |
|
3,409 |
Total non-current |
22,240 |
|
26,458 |
Current trade receivables billed |
134,652 |
|
157,175 |
Current trade receivables unbilled |
148,055 |
|
139,497 |
Other receivables |
756 |
|
1,735 |
Prepayments |
7,275 |
|
9,553 |
Personnel |
4,571 |
|
14,283 |
Total current |
295,309 |
|
322,243 |
Total |
317,549 |
|
348,701 |
(*) "Other non-financial assets" as of December 31, 2021 and September
30, 2022 primarily comprise tax credits with the Brazilian social security authority (Instituto Nacional do Seguro Social), recorded in
Atento Brasil S.A.
For the purpose of the interim condensed consolidated
financial statements of cash flows, cash and cash equivalents are comprised of the following:
|
Thousands of U.S. dollars |
|
December 31, 2021 |
|
September 30, 2022 |
Cash at bank and in hand |
93,464 |
|
42,431 |
Short-term financial investments |
35,360 |
|
23,877 |
Total |
128,824 |
|
66,308 |
“Short-term financial investments”
comprises short-term fixed income securities in Brazil, which mature in less than 90 days from acquisition date and can be converted into
cash immediately and accrue interest pegged to the CDI.
9) FINANCIAL LIABILITIES
As of December 31,
2021 and September 30, 2022, all the financial liabilities of the Company are classified as other financial liabilities at amortized cost,
except for the derivative financial instruments that are classified as financial liability at fair value.
Details of debt
with third parties as of December 31, 2021 and September 30, 2022 are as follows:
|
Thousands of U.S. dollars |
|
December 31, 2021 |
|
September 30, 2022 |
Senior Secured Notes |
488,389 |
|
489,584 |
Bank borrowing |
358 |
|
- |
Lease liabilities |
110,515 |
|
87,946 |
Total non-current |
599,262 |
|
577,530 |
Senior Secured Notes (interest) |
15,556 |
|
5,556 |
Super Senior Credit Facility |
25,027 |
|
43,000 |
Bank borrowing |
33,117 |
|
45,685 |
Lease liabilities |
45,317 |
|
43,787 |
Total current |
119,017 |
|
138,028 |
TOTAL DEBT WITH THIRD PARTIES |
718,279 |
|
715,558 |
Details of the Senior
Secured Notes at each reporting date are as follows:
|
|
|
Thousands of U.S. dollars |
|
|
|
December 31, 2021 |
|
September 30, 2022 |
Maturity |
Currency |
|
Principal |
|
Accrued interests |
|
Total debt |
|
Principal |
|
Accrued interests |
|
Total debt |
2022 |
U.S. dollar |
|
488,389 |
|
15,556 |
|
503,945 |
|
489,584 |
|
5,556 |
|
495,140 |
The fair value hierarchy
of the Senior Secured Notes is Level 1 as the fair value is based on the quoted market price at the reporting date.
The fair value of
the 8.00% Senior Secured Notes due 2026, calculated on the basis of their quoted price on September 30, 2022, is $226,710 ($536,818 million
on December 31, 2021).
Bank borrowings
The follow table
presents the main transaction relates to bank borrowings:
Description |
|
Currency |
|
Signed Date |
|
|
Maturity |
|
Interest rate |
|
As of September 30, 2022 (USD) |
BNDES |
|
BRL |
|
September 2016 |
|
|
October 2022 |
|
TJLP + 2% |
|
26 |
Banco ABC Brasil |
|
BRL |
|
February 2022 |
|
|
February 2023 |
|
DI+3,1% |
|
9,410 |
Banco de Lage |
|
BRL |
|
June 2020 |
|
|
June 2023 |
|
9,0% |
|
555 |
Banco ABC Brasil |
|
BRL |
|
June 2022 |
|
|
June 2023 |
|
DI+2,5% |
|
6,786 |
Banco do Brasil |
|
BRL |
|
August 2021 |
|
|
November 2022(*) |
|
DI+2,6% |
|
5,627 |
Banco Daycoval |
|
BRL |
|
September 2022 |
|
|
November 2022(*) |
|
18,53% |
|
11,883 |
Banco Bradesco |
|
BRL |
|
November 2021 |
|
|
November 2022(*) |
|
DI+2,3% |
|
11,398 |
|
|
|
|
|
|
|
|
|
Total Debt |
|
45,685 |
(*) Company is under final process to renewal the debts
in which the maturity is November 2022 for an extension for 2023
Details of derivative financial
instruments as of December 31, 2021 and September 30, 2022 are as follows:
|
|
Thousands of U.S. dollars |
|
|
December 31, 2021 |
|
September 30, 2022 |
|
Assets |
|
Liabilities |
|
Assets |
|
Liabilities |
Cross currency swaps |
|
15,992 |
|
(55,948) |
|
- |
|
(91,753) |
Total |
|
15,992 |
|
(55,948) |
|
- |
|
(91,753) |
|
|
|
|
|
|
|
|
|
Current portion |
|
3,235 |
|
(29,646) |
|
- |
|
(45,382) |
Non-current portion |
|
12,757 |
|
(26,302) |
|
- |
|
(46,370) |
The Company is hedging
the risk of changes in the USD equivalent value of a portion of its net investment in its consolidated Subsidiaries attributable to changes
in the USD-subsidiary currency between the designation date and maturity date of the Hedging Instrument.
On September 30,
2022 details of cross-currency swaps that do not qualify for hedge accounting and net investment hedges were as follows:
Bank |
|
Maturity |
|
Purchase currency |
|
Selling currency |
|
Notional (thousands) |
|
Fair value assets |
|
Fair value liability |
|
Other comprehensive income |
|
Change in
OCI |
|
Statements of operations - Change in fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nomura International plc |
|
Feb-26 |
|
USD |
|
BRL |
|
326,450 |
|
- |
|
(16,101) |
|
1,401 |
|
(1,645) |
|
448 |
Morgan Stanley |
|
Feb-26 |
|
USD |
|
BRL |
|
651,350 |
|
- |
|
(18,551) |
|
- |
|
-
|
|
(4,389) |
Morgan Stanley |
|
Feb-26 |
|
USD |
|
PEN |
|
277,050 |
|
- |
|
(36,981) |
|
6,757 |
|
- |
|
- |
Goldman Sachs International |
|
Feb-26 |
|
USD |
|
BRL |
|
1,301,000 |
|
- |
|
(20,120) |
|
- |
|
(3,494) |
|
(1,353) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Active |
|
|
|
|
|
|
|
|
|
- |
|
(91,753) |
|
8,158 |
|
(5,139) |
|
(5,294) |
Effect on OCI of derivatives terminated in 2022* |
|
|
|
|
|
|
|
|
|
- |
|
- |
|
(7,268) |
|
- |
|
- |
Effect on OCI of derivatives terminated prior to 1 January |
|
|
|
|
|
|
|
|
|
- |
|
- |
|
(10,045) |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
- |
|
(91,753) |
|
(9,155) |
|
(5,139) |
|
(5,294) |
On January 04, 2022,
Atento Luxco 1 S.A. unwound the 80.0 million U.S dollars principal exchange in the USD/BRL cross-currency swap entered with Morgan Stanley
on February 26, 2021. The resulting cross-currency swap with Morgan Stanley is now coupon-only and the BRL pay leg rate was reduced from
182.0% to 142.25% of the CDI (Brazilian Interbank Market Rate).
On March 23, 2022,
Atento Luxco 1 S.A. unwound the full EUR/USD cross-currency swap entered with Nomura on February 25, 2021. The resulting fair value of
4,130 thousand U.S. dollars was credited on March 25, 2022.
On July 27, 2022, Atento Luxco
1 S.A. unwound the full PEN/USD cross-currency swap entered with Morgan Stanley on March 10, 2021. The proceeds were used to decrease
the % CDI with Morgan Stanley BRL swap. The floating leg was reduced from 142.25% to 133.45% CDI (Brazilian Interbank Market Rate).
Summary of outstanding derivatives
as of September 30, 2022 are as follows:
Counterparty |
Product |
Receive/Pay Currency |
Coupon * Notional Receive |
Coupon Notional Pay |
Receive Rate |
Pay Rate |
USD Principal Exchange (Feb. 2024) |
|
|
|
|
|
|
|
|
Goldman Sachs |
Cross Currency Swap |
USD /USD |
200,000,000 |
200,000,000 |
8.00% |
6M Libor + 6.96% |
150,000,000 |
|
|
USD /BRL |
200,000,000 |
1,101,000,000 |
6M Libor + 6.93% |
175.91% of CDI |
|
Morgan Stanley |
Cross Currency Swap |
USD /USD |
100,000,000 |
100,000,000 |
8.00% |
6M Libor + 6.90% |
- |
|
|
USD /BRL |
100,000,000 |
551,350,000 |
6M Libor + 6.90% |
142.25% of CDI |
|
Nomura |
Cross Currency Swap |
USD /USD |
50,000,000 |
50,000,000 |
8.00% |
6M Libor + 6.90% |
50,000,000 |
|
|
USD/BRL |
50,000,000 |
276,450,000 |
6M Libor + 6.90% |
188.80% of CDI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10) PROVISIONS AND CONTINGENCIES
Atento is involved
in legal proceedings, litigation and claims incidental to the conduct of our business, the outcome of which is inherently uncertain. Labor-related
litigation account for the vast majority of our active judicial caseload (with respect to the total number of outstanding proceedings),
due to the operational cycle of our business, given that agreements with our clients have a direct impact on our workforce. This implies
both individual and collective employment disputes within normal course of business, including claims for dismissals or claims concerning
other employment conditions (i.e., daily and general work routines, overtime rules). In addition, we are regularly party to ongoing disputes
with local social security authorities in the jurisdictions in which we operate.
The main changes
in provisions and contingencies between the nine-month period ended September 30, 2022 and the year ended the December 31, 2021 are related
to provisions relating to employee claims mainly in Brazil.
Notwithstanding
the above, as of September 30, 2022, our main outstanding proceedings are of a tax nature in Brazil and are summarized below:
In March 2018, Atento
Brasil S.A. an indirect subsidiary of Atento S.A. received a tax notice from the Brazilian Federal Revenue Service, related to Corporate
Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) for the period from 2013 to 2015. Tax authorities has challenged the disallowance
of the expenses related to goodwill tax amortization, the deductibility of certain financing costs originated by the acquisition of Atento
Brasil S.A. by Bain Capital in 2012, and the Withholding Income Tax for the period of 2012 related to payments made to certain of our
former shareholders.
The amount of the
tax assessment from the Brazilian Federal Revenue Service, not including interest and penalties, was 350,542 thousand Brazilian Reais
(approximately 66,945 thousand U.S. dollars considering the current currency exchange rate) and was assessed by the Company’s outside
legal counsel as possible loss to the merit discussion. Since we disagree with the proposed tax assessment, we are defending our position,
which we believe is meritorious, through applicable administrative and, if necessary, judicial remedies. On September 26th, 2018 the Federal
Tax Office issued a decision accepting the application of the statute of limitation on the withholding tax discussion. We and the Public
Attorney appealed to the Administrative Tribunal (CARF). On February 11th, 2020 CARF issued a partially favourable decision to Atento,
confirming the application of the statute of limitation on the withholding tax discussion and reducing the penalty imposed. On September
18, 2020 the decision issued by CARF regarding the Withholding Income Tax became final (the Public Attorney filed a Special Appeal challenging
the penalty reduction and Atento Brasil filed a Special Appeal challenging the goodwill and the financing costs discussion. Both Appeals
were not judged yet). Thus, the tax at stake was reduced from 350,542 thousand Brazilian Reais to 230,771 thousand Brazilian Reais (approximately
44,070 thousand U.S. dollars considering the current currency exchange rate). Based on our interpretation of the relevant law and based
on the advice of our legal and tax advisors, we believe the position we have taken is sustainable. Consequently, no provisions are recognized
regarding these proceedings.
After the issuance
of the tax notice in March 2018, the Brazilian tax administration started a procedure to audit the Corporate Income Tax (IRPJ) and Social
Contribution on Net Income (CSLL) of Atento Brasil S.A. for the period from 2016 to 2017. This tax audit was concluded on July 10th, 2020
with the notification of a tax assessment that rejected the deductibility of the above-mentioned financing expenses and the deductibility
of the tax amortization of goodwill.
The total tax assessment
notified by the Brazilian Federal Revenue Service, not including interest and penalties, was 101,604 thousand Brazilian Reais (approximately
19,404 thousand U.S. dollars considering the current currency exchange rate). We disagree with the proposed tax assessment and we are
defending our position, which we believe is meritorious, through applicable administrative and, if necessary, judicial remedies.
11) INCOME TAX
The breakdown of the Atento Group’s income tax
expense for the three and nine months ended September 30, 2021 and 2022 are as follows:
|
Thousands of U.S. dollars |
|
For the three months |
|
For the nine months |
|
2021 |
|
2022 |
|
2021 |
|
2022 |
|
(unaudited) |
|
(unaudited) |
Current tax expense |
(3,872) |
|
(5,572) |
|
(16,883) |
|
(9,803) |
Deferred tax |
(2,473) |
|
(7,269) |
|
1,670 |
|
4,330 |
Tax adjustments over previous years |
(409) |
|
(659) |
|
(1,538) |
|
143 |
Total income tax benefit/(expense) |
(6,754) |
|
(13,500) |
|
(16,751) |
|
(5,330) |
For the three months ended September
30, 2022, Atento Group’s interim condensed consolidated financial information presented a profit before income tax in the amount
of 14,986 thousand U.S. dollars and a tax expense of 13,500 thousand U.S. dollars compared to a loss before income tax in the amount of
(4,935) thousand U.S. dollars and a tax expense of 6,754 thousand U.S. dollars for the three months ended September 30, 2021.
For the nine months ended September
30, 2022, Atento Group’s interim condensed consolidated financial information presented a loss before income tax in the amount of
loss of (76,182) thousand U.S. dollars and a tax expense of 5,330 thousand U.S. dollars compared to a loss before income tax in the amount
of (29,897) thousand U.S. dollars and a tax expense of 16,751 thousand U.S. dollars for the nine months ended September 30, 2021.
IFRIC 23 Uncertainty
over Income Tax Treatment
Atento reviewed the tax treatment
under the terms of IFRIC 23 in all subsidiaries and as at the reporting date, the group did not identify any material impact on the financial
statements.
Atento implemented a process
to periodically review the income tax treatments are consistent under IFRIC 23 requirements across the Atento Group.
12) EARNINGS/(LOSS) PER SHARE
Basic
earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to equity owners of the Company by the weighted average
number of ordinary shares outstanding during for the three and nine months ended September 30, 2021 and 2021 are as
below:
|
For the three months |
|
For the nine months |
|
2021 |
|
2022 |
|
2021 |
|
2022 |
|
(unaudited) |
|
(unaudited) |
Result attributable to equity owners of the Company |
|
|
|
|
|
|
|
Atento’s Profit/(loss) attributable to equity owners of the parent (in thousands of U.S. dollars) |
(11,676) |
|
1,486 |
|
(46,602) |
|
(81,512) |
Weighted average number of ordinary shares (1) |
14,103,757 |
|
14,600,859 |
|
14,090,577 |
|
14,600,859 |
Basic Profit/(loss) per share (in U.S. dollars) |
(0.83) |
|
0.10 |
|
(3.31) |
|
(5.58) |
Diluted results
per share are calculated by adjusting the weighted average number of ordinary shares outstanding to reflect the conversion of all dilutive
ordinary shares. The weighted average number of ordinary shares outstanding used to calculate both basic and diluted net loss per share
attributable to common stockholders is the same. The losses in the periods presented are anti-dilutive.
|
For the three months |
|
For the nine months |
|
2021 |
|
2022 |
|
2021 |
|
2022 |
|
(unaudited) |
|
(unaudited) |
Result attributable to equity owners of the Company |
|
|
|
|
|
|
|
Atento’s loss attributable to equity owners of the parent (in thousands of U.S. dollars) |
(11,676) |
|
1,486 |
|
(46,602) |
|
(81,512) |
Adjusted weighted average number of ordinary shares (1) |
14,103,757 |
|
14,600,859 |
|
14,090,577 |
|
14,600,859 |
Diluted earnings/(loss) per share (in U.S. dollars) |
(0.83) |
|
0.10 |
|
(3.31) |
|
(5.58) |
(1) For the
nine months ended September 30, 2021 and 2022, potential ordinary shares of 10,558,968 and 3,407,129 respectively, relating to the stock
option plan were excluded from the calculation of diluted loss per share as the losses in the period are anti-dilutive.
13) RELATED PARTIES
Directors
The directors of the Company
as of September 30, 2022 are John Madden, Roberto Rittes, Antenor Camargo, Bill Payne, Carlos López-Abadía, Anil Bhalla
and Akshay Shah.
On September 30, 2022, some
members of Board of Directors have the right to the stock-based compensation as described in Note 7.
Key management personnel
Key management personnel include
those persons empowered and responsible for planning, directing and controlling the Atento Group’s activities, either directly or
indirectly.
The following table shows the
total remuneration paid to the Atento Group’s key management personnel in the nine months ended September 30, 2021 and 2022:
|
For the nine months ended September 30, |
2021 |
|
2022 |
|
(unaudited) |
Total remuneration paid to key management personnel |
4,102 |
|
3,060 |
14) SUBSEQUENT EVENTS
At the date of this report Company
has no subsequent events to disclosure.
PART II – OTHER INFORMATION
LEGAL PROCEEDINGS
See page 10 to the unaudited interim condensed
consolidated financial information notes
RISK FACTORS
There were no material changes
to the risk factors described in section “Risk Factors” in our Annual Form 20-F, for the year ended December 31, 2021.