Atento S.A.
Q1 2015 Earnings Call Transcript

Published: 20 May 2015

[Operator:]

Good morning and welcome to Atento’s First Quarter 2015 Results Conference Call. The call will begin with prepared comments by Management, followed by a question-and-answer session. Today’s call is being recorded. A brief question-and-answer session will follow the presentation [Operator Instructions] I would now like to turn the call over to Ed Yuen, with Atento Investor Relations. Please go ahead.

[Ed Yuen:]

Good morning and welcome to our first quarter 2015 results call. Before proceeding, let me mention the certain comments made on this call, will contain financial information that has been prepared our international financial reporting standards. This financial information is unaudited. In addition, this call may contain announcements that constitute forward-looking statements, which are not guarantees of future performance and involve risks and uncertainties and that certain results may differ materially from those in the forward-looking statements as a result of various factors. We encourage you to review our publicly available disclosure document filed with the relevant securities and market regulators and we invite you to read the complete disclosure included in the second page of our earnings presentation. Our public filings and earnings presentation can be found in the Investor Relations section of our website. Our presenters this morning are Alejandro Reynal, Atento’s Chief Executive Officer; and Mauricio Montilha, Atento’s Chief Financial Officer. Alejandro will begin with a brief update on the evolution with our strategy and overall business performance. Mauricio will then review our financial results and future outlook in more detail before we open the call for your questions. I would now like to turn the call over to Alejandro.

[Alejandro Reynal:]

Thank you, Ed. Good morning and welcome to Atento’s first quarter 2015 results call. We're very pleased with our strong performance in the first quarter, which illustrates once again the great momentum that we enjoyed as an independent company and the strength and resilience of our business model. Our current group revenue from continuing operations increased 9.5% in constant current basis, driven by a robust performance in our LatAm market. Our LatAm markets grew 13.9% in constant currency. Particularly remarkable during the quarter has been our performance in Brazil, our largest market where we continue delivering very strong solid growth results despite macro headwinds. In the first three months of the year, we experienced a robust 19.5% growth in Non-Telefónica revenue. In addition, the execution of our margin expansion initiatives resulted in an increased profitability during the quarter. Adjusted EBITDA increased 11.8% in constant currency, while margins expanded by 10 basis points, further demonstrating our ability to deliver strong topline growth, but at the same time, driving efficiencies across the Group. Adjusted earnings were $15 million for the first quarter or $0.20 per diluted share, an increase of 284% in constant currency from the prior year. We also continued to make good progress in enhancing our financial flexibility by further reducing our net leverage to 1.4 times from 2.2 times last year. Overall a very robust set of results that allow us to strengthen our number one market leadership position in the BPO CRM LatAm market. Our solid performance for the first quarter give us the confidence to reiterate our guidance for 2015. Mauricio will speak to our financial results in greater detail. I would like to spend the next few minutes to provide an update on our operational performance and our strategic initiatives to drive profitable growth over time. As you know, we have articulated these initiatives across three main pillars, to avail Atento's full potential as an independent company. First we outlined a series of strategic initiatives designed to drive our top line growth. These initiatives including the development and deployment of higher value-added solutions, continued focus on revenue diversifications through new acquisition in key verticals and further penetration of the U.S. Near Shore market. We are off to a very strong start to the year. During the first quarter, we increased the share of our higher value added solutions by 1.3 percentage points to represent approximately 24% of our revenue. We are making great progress further embedding ourselves into the value chain of our clients, by delivering high value added solutions, especially in the financial services and telecommunication verticals. Also during the first quarter, we won approximately 2,200 new work stations of new business across key vertical and geographies. We continue to leverage our strong credentials within the Telco vertical to accelerate growth, winning nine non-Telefónica Telco deals with five clients with three different countries. The financial services vertical continues to be a strong growth opportunity for us, where we won five deals with four clients in three different countries. These achievements result in non-Telefónica revenue representing in the quarter 55.1% of total revenue compared to 52.8% for the same period last year, an increase of 2.3 percentage points. This is very important as we continue to diversify from our largest client Telefónica, which now represents less than 45% of our revenue. We also continue to successfully ramp up our Near Shore operation, a high potential opportunity for us. During the first quarter, we won approximately 120 workstations with existing and new clients. For the coming months, we expect to continue to rely upon our strong commercial pipeline, to continue to win new business across our key verticals and geographies. We also remain focused on developing and providing higher value added customer experience solutions. Second, we keep transforming the way we operate to drive consistency in operations and to leverage economies of scale across our geographies. The ongoing margin transformational progress we implemented last year have continued to yield very tangible resource in 2015. Our strategic initiatives to enhance operations productivity resulted in our billable versus payable ratio improving by 4.3 percentage points versus the same period last year. A key to this improvement in productivity has been the centralization and standardization of our planning and forecasting processes. After the successful implementation of our first operations command center in Brazil last year, we recently established our second command center located in Mexico City. Therefore, we expect to continue to see positive impact in our operations productivity in the coming months. In addition, our continuous focus on enhancing our HR effectiveness by improving sourcing selection and training processes has allowed us to use our turnover ratio by one percentage point during the first quarter versus the same period last year. We also continue to make great progress in the optimization of our site footprint by relocating a portion of our delivery centers from Q1 to Q2 series. This series are more comparative location and that of course an access to labor. As of the first quarter in Brazil, 56% of total workstations were located in Q2 series, an increase of two percentage points versus the first quarter of last year. In the coming months, we will bill upon this great progress by launching the second site of relocation incentives in Brazil and by expanding the program to Columbia, Peru and Chile. Overall, sustaining in 2015, the success achieved by our margin incentives in the prior year will enable us to set a standard for competitiveness within the industry while continuously improve margins over time. Finally our third pillar is center on human capital capabilities. This is key component to our strategy and a clear enabler to drive high client and employee satisfaction. In this quarter, we have continued to make great strides in our evolution into high performance organization while being recognized for the fifth year in a row as one of the best companies to work for in Latin America and a great place to work institute. We're very proud of the results in the first quarter as we deliver robust growth in revenue and adjusted EBITDA. We've demonstrated quarter-on-quarter our ability to consistently execute profitable growth in the adverse set of market conditions. Our performance in the quarter allow us to reiterate our 2015 outlook. Our business is quite unique as it benefits from strong visibility year-on-year. On top of that, we benefit concern market growth in the LatAm BPO CRM industry. Our market leadership position us well to capture this expected growth. We also remain focused on delivering the growth opportunity through our strategic initiatives. We made significant progress already in 2014, achieving significant customer wins. We have a robust commercial pipeline in 2015 to continue capturing new business opportunities and increase share of wallet with existing clients. We also aim to continue transforming the way we operate as we are just at the early stages of reaping the full benefits from our margin expansion plan. All of this combined should translate into significant long-term earnings growth and sustained value creation for our shareholders. I’d like to finish by extending my gratitude to each of our 150,000 employees. We would not have been able to achieve our strong results without your hard work and commitment to our company’s vision and strategy. I would now hand over the call to Mauricio, who will walk you through our financial results in greater detail. Thank you.

[Mauricio Montilha:]

Thank you, Alejandro and good morning, everyone. Thank you all for joining us today. I would now like to spend a few minutes to walk you through our financial results in more detail and we will highlight the variance in constant rates that better represent the results as we are exposed to several currencies and geographies. As Alejandro mentioned earlier, we are extremely pleased with our financial performance during the first quarter. Constant currency revenue growth from continuing operations excluding Chez Republic, which was divested in December 2014 achieved 9.5% in the quarter. The outstanding topline performance was driven by strong growth in the Americas and Brazil, which combined grew 13.9% in constant currency in the quarter offset by reduced activity in EMEA. Revenue from Telefónica increased by 3.1% in constant currency driven primarily by strong performance in the Americas in particular in Chile, Peru, Argentina and Central America. This positive performance in the Americas largely offset the reduction in EMEA held by a diverse economic condition in Spain. Our revenue from non-Telefónica clients increased by 14% in constant currency due to strong double-digit growth in Americas and Brazil. In the first quarter, non-Telefónica revenue represented 55.1% of total revenue compared to 52.8% for the same period of last year, representing an increase of 2.2 percentage points. We have continued to increase our revenue duplication from Telefónica with significant customer wins in the Telco sector in Brazil and each sector segments across the Board, in addition to higher volumes with existing clients, primarily in the financial service industry. As important as our topline growth is our ability to deliver profitable growth. In the first quarter, adjusted EBITDA increased 11.8% on a constant currency basis, a margin expansion of 10 basis points versus same period of last year to reach 11.3% of revenue. We continue to drive margin expansion through our efficient products and improve the business mix resulting from higher margin revenues from LatAm representing nearly 88% of total revenue, an increase of five percentage points versus same period of last year. Above average growth with non-Telefónica clients and finally increasing penetration of solution reaching over 23.8% of total revenue in the first quarter a 1.3 percentage point increase versus the same period of last year. Now let's take a look on the segment. We reported solid results in the Brazil segment with revenues in the quarter growing at 11.8% at constant rate, despite a challenging marked economic environment. Revenue from Telefónica increased by 1.5% in constant currency, driven by deploying the new service in Brazil. We continue to see strong revenue diversification in Brazil as non-Telefónica revenue increased by double-digit rates or 19.5% in constant currency in the quarter. The outstanding growth was driven primarily by the [indiscernible] in Brazil, volume growth and the introduction of new service to existing clients driven by the financial service sector. We won approximately 1100 work stations in Brazil during the first quarter including almost 400 in the non-Telefónica Telco space. Adjusted EBITDA increased 11.2% in constant currency in the quarter. Excluding the location of corporate clients, adjusted EBITDA margin increased 30 basis points to 12.9%. This has been driven primarily by our ongoing margin proven initiatives and updated revenue mix largely due to increasing importance of solutions in our portfolio. In the case of Brazil, solutions achieved 36.5% of total revenue in the quarter. Now let's talk about Americas segment, which increased 17.3% in constant currency revenue in the quarter. This growth was supported by strong performance across the region and in both Telefónica and non-Telefónica segment. Revenue from non-Telefónica clients increased by 13.9% in constant currency, driven by strong growth in most markets supported by the new and existing clients, particularly in Argentina, Peru, Columbia and the U.S. Near-Shore business. During the first quarter, we added approximately 1100 work stations including more than 320 in the non-Telefónica Telco space further highlighting our ability to diversify our revenues as an independent company from Telefónica. Our U.S. Near-Shore business added over 120 work stations during the expansion of service to existing clients as well as the addition of three new clients in the quarter. Adjusted EBITDA increase by 7.2% in constant currency or 12.5% of revenue, driven primarily by strong growth in Chili, Peru and Argentina as well as continued efficient improvement across the Board in the region. Excluding the location of corporate clients, adjusted EBITDA margin was 14.1%, which was flat as compared for the prior year. Our margins were impacted by the ramp up of new business offset by ongoing efficient product gains. The AMEA segment continues to be challenged. Revenue decreased 15.8% in constant currency and excluding Czech Republic, it decreased by 12.8% in constant currency mainly due to Telefónica volume declines in connection with weakness in the Spanish telecom market. However, we are encouraged by the positive trends we have seen in the non-Telefónica business, particularly with the multi sector. Adjusted EBITDA decreased by 7.4% in constant currency for the period. However, adjusted EBITDA margin increased 40 basis points as a result of positive impact from ongoing deficient problems and the results of restructuring implemented in Q4 2014. Our balance sheet remains strong with the low leverage of 1.4 times net debt to adjusted EBITDA and we have ample liquidity with $192.1 million in cash and cash equivalents at the end of the period and we still have €50 million under our own revolving credit facility. As a reminder, we have limited currency exposure as 98% of our costs are denominated in the same currency as the revenue is generated at the local level. On the debt side, we have a good protection against currency fluctuation and this is mostly done mainly in local currency. The debentures in Brazil are denominated into Brazilian Real as well as U.S. denominated bonds is hedged back into the currency over the currency coming through security. Finally, let me now review our guidance for the full year of 2015. We would like to reiterate our previously disclosed outlook. We expected group revenue growth in the range of 6% to 9% in constant currency mainly driven by the help of line expansion in the Americas and Brazil. We expect the consolidated adjusted EBITDA margin to be in the range of 13% to 13.5% and total CapEx as a percentage of sales to be approximately 5% with the potential to increase consolidated growth. Our effective tax rate is expected to be around 32% and finally we expect the exceptional cost to be approximately $9 million for the year. This cost will include ongoing site relocation efforts, small restructurings in our activities and other miscellaneous expenses. As a reminder, our guidance is based on organic growth and assumes no impact from exchange rate movements on the translation of our financial statements to U.S. dollar. Also note that we expect normal seasonal impact causing our revenue and adjusted EBITDA to follow similar trends as last year with stronger results in the second half of the year. I will now turn it back over to Alejandro for his closing remarks.

[Alejandro Reynal:]

Thank you, Mauricio. Overall, we’re up to a strong start to the year. We continue to make significant progress in the execution of our strategy to deliver sustainable volume for our shareholders. Thank you very much for your attention and now we’re ready to take your questions.

[Operator:]

Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Michel Morin with Morgan Stanley. Please go ahead with your question.

[Michel Morin:]

Yes, thank you. Good morning everyone. You mentioned the improvement in the billable to payable ratio and I was wondering, Alejandro, if you can give us a sense of how much room is there still left to improve on that metric? And then secondly, regarding the outlook, you were looking for a constant currency revenue growth of between 6% and 9% and I was just wondering given that you just did 9.5% in what is arguably the most challenging quarter of the year at least, it seems that way from a macro perspective, what are some of the puts and takes that kind of led you to that? It appears that you're assuming some deceleration. I don’t know if it has to do with more difficult comparisons later during the year or something like that, but if you could walk us through some of the thinking that went into that, that would be great. Thank you.

[Alejandro Reynal:]

Sure. Good morning, Michel. Thanks for the questions. In terms of the first question, the billable versus payable, we, as you may recall, we implemented the first round of operational improvements at the beginning of last year. On a numerical basis, last year we started the year around 66% of billable versus payable and over a year, we were able to improve three percentage points. Over that period last year, we have been able to improve four percentage points. So right now we are on 70. So overall year-on-year it is an improvement of four. To that extent, we run the consolidation of a command center in Brazil. Now we’re doing the consolidation of our command center activities in Mexico then to spread around to the Americas. I think if you ask me, what’s the ideal rate, we are at 70% billable versus payable. I would foresee for us to be within the 72% to 75% range, which would be overall close to 8 to 10 percentage point improvement over the starting point of last year. When we define the full potential for this initiative two years ago, that’s what we set out and we’re now way to reach that level. So in summary, I do think that there is still some room to go perhaps as more chance we did last year, but at least from two to four percentage points improvement over this year. In terms of the second question, yes the implied analysis based on our Q1 numbers we show that revenues might have a deceleration in next quarters. I don’t think that's going to be the case. We see a very strong commercial pipeline at this stage. We’re just being prudent in our guidance in terms of revenue and value rating our commitment in terms of the 6% to 9% constant currency growth. Reality is that the commercial pipeline right now is strong. Proof of that 2,200 workstations we closed last year. So we remain very optimistic in terms of potential opportunities to continue to reach additional revenues and new client activities during 2015. But I wouldn’t assume that the fact that we are maintaining the guidance means that we foresee this acceleration at this stage.

[Michel Morin:]

Okay. That’s very helpful. And Alejandro, if I can throw in an additional one also about the guidance because you were specific in saying that that’s organic and there has been some press around the potential sale of one of the large Telcos contact centers. And I was wondering if you can, not specific to that opportunity, but if you can give us a bit more color as to how those types of carve-outs actually work, how much capital do you actually need to deploy typically when you do this kind of a transaction? Or is it really just that you’re hiring a lot of people?

[Alejandro Reynal:]

Right I think a good way to look at it, and I would personally would say that for us carve-out is an integral part of our growth strategy because we believe that is improving that way over time that we have a lot of value to that when we do a carve-out because this is the same way when an activity is managed as an in-house activity by our clients versus sales coming up with ways of improving the customer experience, but also improving efficiencies, productivities such as what we have done in Atento. So it’s an integral part of our growth strategy. A way to look at carve-outs for us and the reason perhaps is attractive is that if we start an activity or a business frontier typically we have to invest on building of sites, training personnel. So therefore these are always an upfront investment that we need to make. With a carve-out those type of investment you would make because at the end of the day what you do is you end up acquiring facilities you have already personnel which is trained and ready to operate. So at the end of the day, we do the analysis that comparison is pretty much about the same in terms of what would it take us to invest on a new call center? What would it take us to ramp up the activity, which typically is between three to six months in terms of training cost and that at the end of the day is sort of the upfront fee that you pay for the contract. It's very attractive because also what you end doing is you set up conditions for five years at the minimum in terms of a contractual agreement with the client that you’re pursuing the carve-outs again. So what it gives you is a you acquire the activity gives you a lot of visibility on the revenue gives you very trained personal. Gives you the facilities and then you have a long term contract with that. So if we see those opportunities for us, like I said, I think because this is our business and because we know how to add value in terms of customer experience and in terms of operations, we see this opportunities as very attractive to us.

[Michel Morin:]

Thanks fantastic. Thank you, Alejandro.

[Alejandro Reynal:]

Thanks Michel.

[Operator:]

Our next question comes from the line of Flavio Campos with Credit Suisse. Please proceed with your questions.

[Flavio Campos:]

Hi, thank you for taking my question. Good morning. I was wondering, if you could talk a little bit of the Brazil growth since it was so strong this quarter, breaking it down between if it was strengthening solutions or the traditional business and if it's more new customer wins or deeper penetration within existing customers?

[Alejandro Reynal:]

Yes, thank you, Flavio. First I would say that in terms of the split between new clients and existing clients is about half on half. I think the interesting thing in terms of that growth is that the new client growth has come from strategic when it comes to us we were able to close a business with a financial services institution in Brazil, which is one of the banks that we have in Brazil. So it’s a new service that we're -- we closed that and we’re starting to ramp up activity over the next a quarter. So very positive from that perspective. In terms of where it comes from a product type of contribution, Brazil right now has 36% of the revenues coming from solutions and a lot of the existing client activities that came, lot of that came from the solutions business. We have in the existing client business one activity with Telcos and with financial services as well. And to that extent most of the existing client activity came from the solutions business. Specifically the type of business that we won is mostly related to things are in back office and technical support.

[Flavio Campos:]

Perfect, perfect. That’s very helpful. And thank you for the comment around the carve-outs. I was wondering if you have any updates on the GVT stations that Telefónica owns them if there is any developments there about those being outsourced and who would be getting that business?

[Alejandro Reynal:]

Yes, thanks for good question as well. Reality is that acquisition we just materialized and as you might be aware there is new management coming into play and that’s going to happen end of May. There is going to be a new CEO for now the integrated the longevity and of course we are in commercial conversations with them, but still very early stages to say how that’s going to evolve. I would say though I mean when we were doing our projections for '15, we’ve considered GVT as adding additional revenues to the Telefónica business in Brazil. We thought it was more of an interim opportunity. But clearly, this is an opportunity and we’re going to be engaging with this caution with the new management in Brazil when time comes.

[Flavio Campos:]

Perfect, perfect, that’s very helpful. I’ll jump back in the queue.

[Operator:]

Our next question is from the line of Susana Salaru with Itau. Please go ahead with your questions.

[Susana Salaru:]

Hi, good morning guys. I just would like to ask you if you’re seeing, an improvement in turnover in Brazil statistical because of the downturn in the economy that maybe helping you in compelling the cost and if that could be -- could provide room for an upside in terms of cost control specifically in Brazil that will be our first question. And then our second question will be related to the Near-Shore market, commission that you got new clients, if you could elaborate a bit more what are the sectors of this new clients and if they are -- we think the diversity, did you factor that you wanted to engage your presence and if you could elaborate a bit if you initially started solution -- right away with solutions or you started with service with them, thank you?

[Alejandro Reynal:]

Sure. Thanks for the questions, Susana and nice talking to you. In terms of the turnover question, this is an important factor that we are monitoring and specifically how the unemployment in Brazil is going to change over time. I would say that in terms of the first quarter results, we seen no impact because we feel probably very little effect in terms of higher unemployment in Brazil, but if the projections materialize and that happens probably closer to year end or beginning of 2016 this is something that would clearly help us specifically in our turnover numbers. I think we mentioned in the presentation, we were very good in terms of executing another improvement in our attrition numbers quarter-on-quarter. This was mostly due because of the relocation of sites and because of the improvement in HR processes, but as a macro factor such as higher unemployment in Brazil happened this would be a factor that would help us and therefore helping us in terms of decreased training cost and additional value to our bottom line. So yes it is something that we’re monitoring closely, but I would say that in the short term and at least for the first quarter of the year hasn’t had an impact yet. In terms of the Near Shore activity, I think this continues to be positive news for us. We perform as how we’re planning in terms of the new business that we won. I would say that in terms of where it comes from, is a mix between existing client base and where we continue to grow and existing client base was mostly in financial services and Telcos. And then the order piece was our new client activity. New client activity I would say that the new business that we have is consistent with those two verticals as well with financial services and Telco. In terms of the -- I would say also that we have a very good pipeline looking into the year and actually there is potential opportunities in the technology sector that we’re considering now. So probably within 2015, we will branch out from financial services and Telco in the Near Shore activity. In terms of where this activity or this volumes are coming from or the type of services that we provide, I would say that still to this date and this is normal for Near Shore activity, most of the services that we provide are in the more traditional services. I think it’s going to take us some time, but it’s not because as far as I would say it’s because more of general client perception where they tend to outsource offshore or Near Shore activity that is probably less value added and more in the traditional servicing. What I would say though is that where we get benefits here is on the labor arbitrage, so we can have attractive margins on this business even though it might not be higher value added in the solutions space.

[Susana Salaru:]

Perfect. Thank you. I will hand over.

[Operator:]

Thank you. [Operator Instructions] The next question is from the line of Adam Dahms with Robert W. Baird. Please proceed with your question.

[Adam Dahms:]

Good morning guys. Thanks for taking my questions. My first one is on free cash flow, negative $39 million in the quarter. I wondered if you could talk a little bit about is there some seasonality there kind of what’s -- little more detail on what’s driving that and then if you could also comment on how we should think about free cash flow conversion going forward? That would be helpful, thanks.

[Mauricio Montilha:]

Hi Adam, thanks for your question, Mauricio speaking. Typically there is some cash flow in the first quarter we have two, three elements usually, there is one seasonality typically giving our -- cost base is primarily 70% really to people and usually at year end in Latin America payment we usually tend to receive some anticipation from our clients at the end of the year. That usually makes the Q1 a quarter where you receive less money from your clients and then this also happened in this quarter. The second element is as you -- the seasonality of our business in terms of EBITDA generation, we tend to have a lower EBITDA in Q1 given we provide some increase in LatAm for most of our countries in the beginning of the year and then we pass through crisis alone in the following months. So typically when you look at that combination, you have less generation of cash in Q1 from the operation, from the EBITDA. The third the element that we grew lot in this quarter. So as we have DSO on average of about 58 days, growth requires working cap injection and actually when we -- all the contracts we have and the way we operate we take decisions in terms of our payback. We take into account the normal CapEx invested to build out new sites and provide a service, but also the working capital and this happened in this quarter. There was a big increase in the growth in the quarter. Some of the CapEx was committed also in last quarter. Some of the payments, I think these are the key elements why the cash flow was negative this quarter and more negative in the next year. In terms of cash conversion, we plan or let’s say our mid-term goal of 2017 when compared to the industry, we are in a growth mode. So we are growing much faster than the competition and we see also great opportunities that Alejandro mentioned the strength of our pipeline and the carve-out opportunities. So our priority in terms of cash allocation is to support growth. So the cash conversion for the business would be below what we see more matured competitors. We believe that if we deliver on our objectives probably by 2017, we will be more or less in the average of the industry that's 4% to 5% or 6% depends on the competitive yield on the price of the stock. So this year given the accelerated growth, we will generate positive cash flow that won’t be that significant next year. We plan of course as those new investments, new clients start generating -- arrive to their run rate, they start generating more cash, but you have to fund growth. So we see -- add together in the next three years as the growth continues to be strong in our business.

[Adam Dahms:]

That makes sense. Thanks. Quick follow up here, I think in your last quarterly filing, you guys called out potential change in the Brazilian tax law. I think taking it from 2% to 4.5% if I remember it correctly of revenue. Can you provide an update I think that was hadn’t been voted on at that time, is there an update on the potential timing and impact of that and then maybe is it possible that you guys would be able to pass through some of that declines as well?

[Mauricio Montilha:]

Sure yes there is portfolio in the major update. The measure continues to be this cost and probably there is nearly billable every week, provided there is going to be some more detail this week, we continue to monitor that very closely. And of course the action that we mentioned at that point in time in the last call where we were going to actively lobby through with Congress to make sure that whatever is approved it is favorable to our specific industry. There is active lobby happening from that perspective and as you said the other piece that we’re working is when that materializes we actively talking to our clients to pass in terms -- at this stage in terms of the process of approval, my understanding is that still in the Lower House of representatives in Brazil. So it still hasn’t passed the First House. Whatever is approved we have to go to the Senate for discussions and then it takes time to implement the law as it’s finally approved. So, our view -- but it’s the consensus view of many people that we talk to is that probably the impact in '15, it’s going to be minimal or not. So, therefore, we’re monitoring what may be the potential impact in 2016. That’s why, probably, also the conversations with clients although we bring the issue to them at this stage feel a bit generic in terms of what the specific impacts is going to be. But we’re engaging in those conversations and we will attempt to pass along whatever increase we’ve received from the changes in this law.

[Adam Dahms:]

Okay. Great. And if I can sneak one quick one in. You guys made a small acquisition on December 30 I think it had a run rate of about $27 million at the time. Can you just call out what the contribution was to this quarter and then I think you said your guidance was on an organic basis, so I would assume that this is on top of that; is that correct?

[Mauricio Montilha:]

That’s what -- you mentioned the carve out, we did at the end of December, I would say that for the 9.5 points of the growth in this quarter, 1.8 came from that new business. That one is in the guidance when we reported Q4 results that business was already done. So, it was included in the numbers when we provided you guidance.

[Adam Dahms:]

Okay. Perfect. That’s all I got. Thanks a lot guys.

[Mauricio Montilha:]

Thank you.

[Operator:]

Thank you. [Operator instructions] Thank you. At this time, I will turn the floor back to Mr. Alejandro Reynal for closing comments.

[Alejandro Reynal:]

Thanks everybody for your attention. I look forward to your questions and of course, we look forward to interacting over the next few days in terms of additional questions and also in terms of explaining current business performance and future outlook for Atento. Thanks again and have a great day.

[Operator:]

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.