Atento S.A.
Q2 2015 Earnings Call Transcript

Published: 12 Aug 2015

[Operator:]

Greetings. And welcome to the Atento’s Second Quarter 2015 Earnings Conference Call. At this time all participants are in a listen only mode. A brief question-and-answer session will follow the presentation. [Operator Instructions] As reminder, this conference is being recorded. It is my pleasure to introduce your host Lynn Antipas Tyson, Vice President of Investor Relations. Thank you. You may begin.

[Lynn Antipas Tyson:]

Good morning and welcome to our fiscal 2015 second quarter earnings call. Before proceeding, let me mention that certain comments made on this call, will contain financial information that has been prepared under 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 may 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 on the Investor Relations section of our website. Please note that unless noted otherwise all growth rates are on a constant currency basis and year-over-year. 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 review of our strategy and highlights from the quarter and then Mauricio will review our results in more detail before we open the call for your questions. After questions we will end with some closing remarks from Alejandro. I would now like to turn the call over to Alejandro.

[Alejandro Reynal:]

Thank you, Lynn. We're very pleased with our robust performance in the second quarter. One more quarter we successfully executed on our strategy to drive profitable growth, while increasing our leadership position in the Latin American CRM BPO market. Our performance through the first half of the year provides us with a confidence to reaffirm our outlook for 2015. In the phase of challenging macro headwinds, we continue to acquire new business, growth, share of wallet with existing clients and increased our penetration of high value added solutions. In addition, we continued to execute on our margin expansion initiatives in order to increase operational efficiencies and enhance competitiveness. Turning to the quarter, revenue grew 11% supported by double-digit growth in Brazil and the America's. More significantly, we experienced a 14.3% increase in revenue in Brazil where we continued to deliver strong growth despite a deteriorated macro economic environment. Overall, our growth agenda benefited extensively, once again from strong commercial activity with new and existing clients. As a key proof point, we have been awarded approximately 3000 work stations worth of business in the second quarter, about half coming from new clients. These good commercial momentum is visible in almost every vertical [ph] in where we operate, with Telco and finance standing out as a major drivers of our top line growth across our footprint. Equally important, we increased our penetration of high value added solutions which comprised 23.8% of our revenue in the quarter, up 200 basis points. About a third of the business won in the quarter is coming from higher value added solutions. Our demonstrated ability to provide end-to-end customer experience solutions allow us to continue addressing a larger portion of our client’s base. Looking at profitability, our ongoing margin expansion initiatives continued to deal [ph] meaningful improvements in productivity and efficiency, which contributed to a 40 basis point improvement in adjusted EBITDA margin. Our billable versus payable which is a key measure of operations productivity increased by approximately 4 percentage points, while our continued focus on enhancing HR effectiveness allowed us to reduce the turnover ratio by 0.5 percentage points in the quarter. A key enabler to drive operational excellence, while maintaining industry leading service level has been the consolidation and standardization of our planning and forecasting process. After a successful implementation of our First Operations Command Center in Sao Paulo last year, in the second quarter of 2015 we have established a second and a third command center in Mexico City and in Madrid to service the Americas and EMEA regions respectively. Over the last year, we have completed out Global Network of Command Centers to raise business - monitors in real-time the operations in our clients. We also remained focused in generating OpEx efficiencies by leveraging our scale and site locations. With our global procurement initiatives we have been able to achieve a 20% savings in Cec bank fagaras [ph] over last year. In addition, we continue to make great progress in the optimization of our site footprint, by relocating a portion of our delivery centers from Tier 1 to Tier 2 cities. As of the end, of the second quarter in Brazil 56% of work stations were located in Tier 3 cities, an increase of 2 percentage points. Finally, our stock – top line growth and increased profitability has strengthened our balance sheet and enhanced our financial flexibility. At the end of the second quarter, we had a net leverage of 1.6 times with a liquidity position of $173.1 million in cash and cash equivalent. Looking at the medium term, macro economic headwinds will continue to press in challenges, but also opportunities for us. That region is experiencing a generalized cost inflation, particularly in Brazil and companies are increasingly focused on reducing cost and improving efficiencies. These trends will likely continue in the second half of 2015. In this context we are addressing opportunities to continue to add value to our clients and therefore sustain above the market growth rate for Atento, specifically clients are looking to increase outsourcing or to accelerate the evolution into digital platforms of avenues to generate efficiencies and reduce cost. No company is better positioned than us to capitalize on this trend. We are the clear the leaders with an optimized [ph] footprint and value proposition in the LatAm, CRM BPO market. Other macro economic trends such as currency depreciation are increasing the attractiveness of Latin America as a near short destination, adding to existing competitive advantages, such as control and geographical proximity. We are also addressing this opportunity through further investments in the US Near-Shore business. Furthermore, macro economic impacts in labor markets, such as increase unemployment will result in lower employee turnover, therefore lowering employee related cost such as hiring and training. In summary, although macro headwinds are and will continue to be present, we are best positioned to capture the opportunities that are arising out of this environment. In order to deliver above industry market growth and improved profitability. I will like to close the highlights by reiterating our 2015 outlook and mid term strategy to deliver sustainable earning growth. Our results for the first half of this year demonstrates once again we are executing well against our strategy to drive profitable growth. Despite the macro headwinds, Atento is optimally positioned to acquire new business, grow share of wallet with existing clients and increase penetration of higher value added solutions, while remaining focused on expanded markets. We continue increasing our leadership position in Latin America and will remain the reference partner for the CRM BPO needs of our clients, while making the right investments to support our long-term competitive and financial position. Thank you very much for your attention. I will now hand over the call to Mauricio, who will walk you through the financial results in greater detail.

[Mauricio Montilha:]

Thank you, Alejandro. And good morning, everyone. Thank you for joining us today. Now let me turn to our results in greater detail. As a reminder, I will refer to growth rates on a constant currency basis, which we believe is a better representation of our underlying performance easing our exposure to several currencies and geographies. The growth rates are also adjusted for the divesture of our Chez Republic business in December 2014 and are on a year-over-year basis. As Alejandro mentioned, we are pleased with our operating and financial performance during the second quarter. We delivered balanced results within 11% increase in revenue, driven by double-digit gains in Latin America, which includes the Americas, and Brazil regions. Adjusted EBITDA increase 15.8% and margins increases 40 basis points to 12%. Both our top line and margins results were benefited from our focus on expanding deep penetration of our higher valued added solutions, which were 23.8% of our revenue in the quarter, were up 200 basis points. Adjusted EPS increases 5.6% to $0.21 in the quarter. Its important note that in the second quarter of last year we had a one time tax benefit related to amortization of goodwill for a contract with Telefónica. If we exclude that one-off [ph] on time benefit adjusted EPS actually grew 110%. Our results are even more noteworthy when you consider the persistent challenging market environment in many of the markets in which we operate. For example, this year in Brazil where the macro headwinds persist, we have grown both revenue and adjusted EBITDA at a low teen rate. The macro climate has clearly presented some very real challenge for us, but they also present opportunities. Our yearly commitment to best-in-class margin efficiencies initiative and our financial flexibility has optimally positioned Atento to navigate this macro pressures to continue to capture [ph] market share and extend our leadership in the CRM BPO market. In addition, and I'd say with Telefónica provides us with a predictable recurring revenue stream. Let's turn now into our segments. In Brazil where we are now the market leader of CRM BPO service we delivered revenue growth of 14.3% despite a very challenging market environment. Our strong top line growth was broad basis as we continue to execute on multifaceted growth strategy. We increased the share of wallet with existing clients, we owned new clients and improved the business mix through greater penetration of a higher value added solution. In the quarter, we won approximately 1000 work stations within new and existing clients. We achieved a healthy growth of 8.6% with Telefónica, while Telefónica remains a key partner for us, we have further increased our revenue diversification in Brazil. Non-Telefónica revenue increased by 18.4% driven by significant commercial wins with existing customers in the financial sector and an increase in share of wallet with clients across several key verticals. We achieved a good operating leverage as we benefit from our ongoing margin transformation initiatives. This benefit offset the ramp of new clients and higher than expected cost inflation. Adjusted EBITDA increases 15.7%, while adjusted EBITDA margin excluding their location of corporate cost increases 50 basis points to 14.3%. Turning to Americas. We delivered revenue growth of 16.8%. Our strong top line growth was driven by good performance across all verticals, revenue from Telefónica increases by 18.5% supported by solid performance across the region, particularly in Argentina, Chili and Peru. Revenue from non-Telefónica clients increased by 15.3% driven by strong growth in most markets, supported by new and existing clients, especially in Argentina, Peru, Columbia and the U.S. Near-Shore business. Our ongoing margin transformation initiatives provided operational average and similar to Brazil, gains from [indiscernible] new business. Adjusted EBITDA increases 32% while adjusted EBITDA margin excluding the allocation of corporate cost was 15.3%. In AMEA, its taking longer to than we expect to stabilize, driven primarily by the tough market and competitive and telecom environments in Spain. Revenue decreases 13.2% excluding the Czech Republic, and adjusted EBITDA decrease at 45.5%, mainly due to Telefónica volume drop and lower volumes with Public Administrations contract in Spain. We continue to have important commercial wins within new clients in Spain, but not an awful steady clients with Telefónica and Public Administrations. While it’s out of our reach to influence the market environment, we are confident in our ability to adjust to the market reality in AMEA. Before I turn to guidance, let me touch on cash flow and our balance sheet, which are both critical enhancing financing flexibility. During the second quarter, we had free cash flow use of $40.3 million, which we believe is temporary result of two main factors. First, of working capital requirements have increased it to supporter’s strong top line growth which includes the impact of new client wins. Second, we had seen temporary increase in DSOs with a number of key clients. We are now about half way through our third quarter and as expected we are seeing an improvement in DSOs and in free cash flow as we return to more normal seasonality. Our balance sheets remain strong with low leverage of 1.6 time’s net debt to adjusted EBITDA and we have ample liquidity with $173.1 million in cash and cash equivalents and an additional €50 million in undrawn revolving credit facility. As a reminder, we have limited currency exposure as 98% of our cost are denominated in the same currency as the revenue generated at local level and our debt is mostly denominated in local currencies which give us good protection against currency fluctuation. The debentures in Brazil are denominated in Brazilian Real and US denominated bonds is hedged back into a basket of local currencies of countries bad debt security. Before we open the call for the Q&A, let me review our outlook our fiscal 2015. We are pleased to confirm – reaffirm our guidance which we believe really speaks for derivative and self identical [ph] operating model. We expect revenue growth to be in the range of 6% to 9% and adjusted EBITDA margin to be in the range of 13% to 13.5%. We expect CapEx as a percent of revenue to be approximately 5%. Our effective tax rate is expected to be around 32%, as you consider our performance for the balance of the year there are few puts and takes I want to highlight for your consideration. The first is exceptional [ph] cost, we exclude it for non-adjusted figures. This cost includes ongoing site relocation for a small restructuring in our activities and other miscellaneous expenses. Year-to-date, we have expensed $6.80 million compared with our initial target of $9 million for the full year. In light of the protected macro economics headwinds, we will continue to take actions to adjust the cost structures of our operations where we are seeing lower activity level. As a result, we believed our current run rate of exceptional cost is a good proxy for what we expect to plan for the full year. Second is net interest. We now expect net interest expense for the year to be in the range of 72 million to 76 million, driven by high interest rates and our debentures and a higher debt to balance. And third, as a reminder, our guidance is based on organic growth and assumes no impact from exchange rates moving on the translation of our financial statements in US dollars. Now let me turn the call over to the operator for the Q&A.

[Operator:]

Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Susana Salaru with Itau. Please proceed with your question.

[Susana Salaru:]

Hi. Good morning, guys. If you guys could comment a little bit more on the dynamics of the market, because you mentioned that you are seeing more demand from existing customers and at the same time specifically here in Brazil you have been seeing the economic downturn that was even was in the second half of the year. So for the next quarter, next quarter, would you expect the pipeline to continue to be strong or should we anticipate a deceleration in Brazil basically? Thank you.

[Alejandro Reynal:]

Yes. Thanks for the question Susana. And nice talking to you. The first one I would say that in terms of the growth, clearly has bee positive for us this quarter, you mentioned the case of Brazil, we grew outside Telefónica 18%, so this is very, very strong growth that we see in Brazil coming out of the second quarter. We do continue to see a strong pipeline going forward. And I think also this is clearly a positive for Brazil and what is happening after I mention in the call is that I continue to see opportunities with our existing client base in terms of - because of the macro economic climate in the country then looking to outsource more or then looking into - go more into the digital platforms. So therefore driving more demand for our services. So in summary, I think from the Brazilian perspective we remained optimistic. The thing though is that, there are macro pressures and on the other hand what this is driving is that clients are taking more care in terms of how much they spend, therefore to an extent controlling the volume of activity, et cetera and et cetera. So I think that’s going to cause that with – some clients are going to feel pressure in terms of volumes. So in and out sale and when you add it to fix stop a very positive evolution in terms of time wins, very positive evolution in terms of new opportunities to continue to strengthen our growth going forward and I clearly see this happen in the cost of the economic content. But that balance with the fact that there is pressure on volumes and that there is pressure on cost from our clients. That’s why in the – when you sum both effects that from our perspective we maintain the guidance going into revenues. I think that ahead of - in the first half of the year we were ahead in terms of the – range of the 6 to 9, but for us we one of the play prudent [ph] in terms of making sure that we consider both effects, the positives and the negatives. I would say as well that in terms of the top line you saw the result in EMEA where we had request of activity, request of volumes in the second quarter of the year, this is again, an affect of the macro economics situation in the region and therefore this should be taken into account as well the rest of the year. So overall our view is that we will continue to have a very strong year in terms of top line growth coming mostly from Brazil and from the Americas with some headwinds in Spain. But the overall macro environment in Brazil in particular will also cost some of their volumes in – our clients to rebound.

[Susana Salaru:]

Perfect. Very clear. Thanks, Alejandro.

[Alejandro Reynal:]

Thank you.

[Operator:]

Our next question comes from the line of Diego Iñigo with Morgan Stanley. Please proceed with your question.

[Diego Iñigo:]

Hi. Good morning, guys. Thanks for taking my question. So just basically a follow up from Susana's question. I want to understand how the market is trending, especially on the market share side? I mean, if you could explain this involvement and how is your competitive position as with the main local players, if you can go more deeply in the case of Brazil it will be very helpful? Thank you.

[Alejandro Reynal:]

Sure. Thanks for the question. Diego, nice talking to you as well. I mean, I think this is clearly why we remain optimistic in 2015 because in spite of all the macro headwinds that we have in the region and specifically in Brazil, we are market leaders. And I think this plays to an advantage from the perspective that the clients will continue to count on us for their BPO CRM needs. In the case of Brazil, and this is something that we had already mentioned in the past quarters, we track our market share and as of the fourth quarter of last year in that particular quarter we already were leading the market, first quarter as well. And now as of this quarter all the external studies validate and verify that we are clearly the market leaders in Brazil. Right now we have a 25% market share in the market. So clearly this is playing to our advantage. We are as I mentioned growing – we grew 18% in the client support [ph] in Telefónica in the second quarter. So clearly we're growing much faster than the market. So I do expect that our leadership position will continue to strengthen in Brazil. And again, this is clearly a plus because in spite of the macro headwinds, been the leader and been the company's that your clients can rely always is very important. If I do the expansion to the other markets, our market leadership has also consolidated, we right now have about 20% market share in the Latin America region. So this is America plus Brazil. So clearly it continues to be the leader of the market and as I mentioned before not only for Brazil or for rest of the countries we are growing faster than the market, therefore our market share is increasing against the older players. We just don’t see a strong competitor or regional competitor in the Latin America market. So we will see - attempt to continue to consolidate, it’s so the leader in the region.

[Diego Iñigo:]

Thanks. Very helpful, Alejandro. One question is how strong let say the 18% growth you did in Brazil. Can you share with us the main, the main factors that are driven this growth I mean, excluding the Telefónica, what's driving your growth? Thank you.

[Alejandro Reynal:]

Yes. When you look at the number of work stations, one for the broadband, but this could be also production for Brazil, half is on existing clients and half is on new clients. And out of the existing clients where we see the strongest growth in Brazil it’s mostly from the financial services. There is where we continue to sell more and win more business into higher value added solutions, win back office activities and later state collections, et cetera. So again, most of the activity probably half on half, new clients existing clients and out of existing client’s mostly financial services and with financial services mostly through higher value added solutions. We continue to work – to grow in order verticals as well, being Telco an important one. I assume I recall this is one area where we have invested growing in non-Telefónica, Telco companies. That continues to be a strong area of growth. So after financial services that’s the second area of growth.

[Diego Iñigo:]

Thank you.

[Operator:]

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

[Flavio Campos:]

Sorry. Good morning. Thank you for taking my questions. Just focusing on the Telefónica revenues for a second. That we'll be seeing that’s been pretty resilient in Brazil up 8% and still very strong in the America segment. Is the driver of that higher solutions, are the Telefónica revenues in Brazil at risk with the slow down, in the overall economy, just give some color on that and why has that meant capped being strong despite the macro headwinds?

[Alejandro Reynal:]

Sure. Thanks for the question Flavio, and also nice talking to you. In terms of the Telefónica revenues, yes, they remain resilient and this is – we saw this happening in the first quarter, where quarter increased against first quarter last year, although we came from a third quarter and a fourth quarter particularly in Brazil where revenues with Telefónica decreased. So one of the things with this fact then, focus in other businesses other than their traditional services as you pointed out. So with that it’s implementing some of the solution offerings that we have. More specifically we started a project with them very much focused on technical support/back office servicing that we didn’t have in the past with them and therefore with that we were able to compensate some of the declines that we have in the more traditional business. I would say that and with Telefónica and in general with many of the Telco's what we see is that they will continue to drive efficiencies and perhaps try to rise volumes down and basically that would mean that more of the traditional type of activities such as servicing prepaid cost customers to prepaid calls those should have eventually continue to trend down and that’s what we have seen. But towards where the interest and opportunity comes is why we differ Telefónica is addressing other areas of the CRM spend and this is specifically it goes very much into our solutions business and therefore focusing on technical support, back office and other activities that actually for us better because I think that they add more value to our clients, but also the come at typically better margins at a more traditional services. And you should foresee this to be the pattern going forward.

[Flavio Campos:]

Perfect. Perfect, that’s very helpful. Just turning to EMEA for a second. So is it fair to say that ex-government and Telefónica revenues increased on an local currency basis and is there any update on the footprint there. I mean we saw already a reduction, but given that revenues have remained weak on those two pretty major accounts and we still saw some restructuring charges been taken to this quarter for some I am assuming some further footprint optimization, should we keep seeing things like this in EMEA, the company getting smaller there or we see this turning?

[Alejandro Reynal:]

Yes. Very good question. I mean, what you see in the second quarter in EMEA is as you said I mean, there we have to lower volume of activity coming from Telefónica and the Public Administrations sector, if we exclude that – here the clients [ph] they have been growing. Keep in mind that in EMEA typically we have less flexibility in terms of the labor force. So it typically takes a few quarters to adjust to their realities of their volume. So when we started to doing the second quarter is reducing the activity, the capacity that we have to adjust it to the volume that we were receiving from Telefónica and for Public Administrations and that probably will continue over the next few quarters. I think the positive thing is that we have already closed to very bigger pieces of business during the second quarter in EMEA and those should be ramping up starting in the fourth quarter of this year going into 2016. So our view right now is that some of the softness that will continue but change in starting of fourth quarter and in particular regarding to 2016.

[Flavio Campos:]

Perfect. Perfect, and that’s very helpful. Thank you for taking my questions.

[Alejandro Reynal:]

Thank you.

[Operator:]

Our next question comes from the line of Adam Dahms with Robert W. Baird. Please proceed with your question.

[Adam Dahms:]

Hey, guys. Thanks for taking my questions. First, I just wanted to kind of make sure I am clear on the guidance which seems to imply some deceleration in the second half of the year, even though comps seem like they are getting a little bit easier. Is it correct, you were saying that it seems like that there is some prudence and maybe some conservatisms in the back of guidance and its not - it’s more a function of the macro uncertainties and not anything you are seeing on the demand side? Is that correct?

[Alejandro Reynal:]

Yes. That’s absolutely correct. And it’s a very good way to summarize it. I think what we're seeing is strong commercial opportunities and strong commercial demands still coming our way particularly in Brazil and the Americas business. But on the other hand we are playing I guess, a cargo [ph] been prudent because of the macro headwinds that are things that we cannot control. Also you have to take into consideration the EMEA situation which in terms of revenues is lower activity than expected. But you summarized it well.

[Adam Dahms:]

Great. That makes sense. On Brazil, looks very nice I the quarter, it looks like, how much of that was from the CBCC acquisition you guys did, I think the very beginning of the year?

[Alejandro Reynal:]

Yes, probably that activity from the acquisition we did its less than, its fair during the quarter and the third of the growth of other business in Brazil.

[Adam Dahms:]

Okay, great. Thank you. And then I guess one last one, free cash flow, I think you guys had previously said for the full year you expected that to be positive, is that still the expectations?

[Mauricio Montilha:]

Hi, Adam. Mauricio, speaking. We feel as you can see this year we are on the top of the range on growth. So one of the calamus [ph] of the cash flow is to fund growth, and the requirements of working capital in that. I think for the year we expect some improvements the quarter being to seasonality and also this temporary DSO increase we will wait in the next quarters. However, just to remind we communicated that this year when we did the IPO, resetting the terms with Telefónica as part of the sales and purchase agreements. So we're going to have an increase in DSO towards the end of the year. So for Telefónica in Brazil the other countries that’s already have been just opt that acquisition. So there is strong growth we have and resetting conditions with Telefónica will probably take as more in the neutral position on the cash flow for the year.

[Adam Dahms:]

Yes. That makes sense. Thanks a lot guys.

[Operator:]

Our next question comes from the line of Mauricio Fernandes with Merrill Lynch. Please proceed with your question.

[Mauricio Fernandes:]

Thank you. Good morning. Alejandro, and some of the questions have been touched on, it still seems with economy as weak as it is, growing by 14% out of it. So I feel in a self-affectively even last, but overall be stable to deliver almost 9% growth in Telefónica and 18% non-Telefónica. How it seems - its still a bit unclear to me how much of that is being coming particularly in the [indiscernible] how much of that is coming from adding new services to them with all these clients, how much that come from new clients, how much of that is coming from price increase. And so if you could maybe all these three potential reasons for such a revenue increase in this environment if you could say, you would weighed how much of that - would that been come from each of three that will be great, please? Thank you.

[Alejandro Reynal:]

Sure. Nice talking to you as well Mauricio, and thanks for this question. In terms of revenue split about half of the revenues are coming form existing – of the growth when you analyze the growth in the quarter about half if coming from existing clients and about half is coming from new clients. And as I mentioned before some of the growth from existing clients most of that is coming from what we call the higher value added solutions business and that is off selling to existing clients in particularly to clients in the financial services. And if you look at what we sold total new plus existing clients about 30% of what we sold is coming from higher value added solutions. Where you'll be assuming the existing clients about 70% of what we sold to existing clients is coming from the solutions business. So I think the equation that is playing on our way is that companies, and in particularly Brazil in the financial services are looking outsource things that perhaps they didn’t think about outsourcing before and these are interesting business opportunities for us such as back office services. So therefore this is driving a growth and this is driving the increase in higher value added solutions as a percentage of the total revenue. So I want to recap that piece, half from existing clients, half from new clients and out of the existing clients most of that coming from solutions, high value added solutions and in particularly in the financial services. In terms of the volume price trade off or equation, I would say that this year in particularly most of that is coming from volume sold out. As you know we have wage factoring inflation because of their tougher economic unemployment, because of clients looking into addressing cost, the wage factor is higher to get, I mean we are achieving data’s in prior years, but its something that is very harder to negotiate. So our historic ratio of that was around out of our total increased a third would come from pricing and through pressure [ph] volume, that equation is changing a little bit and most of it by now its coming from volume and still some from pricing which is their wage factor.

[Mauricio Fernandes:]

Understood. Thank you. And Alejandro one more question if I may, is there any sector or group of sectors that are outside Telco's of course, they are consuming new products or you being, you seeing as the new driver of service and clients for you?

[Alejandro Reynal:]

Its interesting because typically of course the volume generators are Telco and financial services and we have this – our volume in Brazil in last year of the [indiscernible] which is driving clearly our business with a retail sector and this is a very interesting business activity for us because it comes with a lot of all line servicing. So this is going into the digital servicing of our clients, which is I mean, interesting areas of opportunity and clearly something and we're – clients are going to migrate to in years to come. So retail has been one area where we have developed more expertise and is growing and to Media RAOne [ph] that is interesting. It’s on the technology space. So working for companies such as handset manufactures, such as Motorola, Apple or company such as Google, Facebook in their region and they also have an interesting dynamic because in many of these clients a lot of the servicing is done either online or through digital means. So for example for one of these clients about 50% of the activity of the service being provided to them is done by chat. So it’s not a traditional voice service. So what we see and again they are using our services and we are managing the platform instead of voice calls where we manage all through chat. But that is really interesting because you some of the smaller side clients, but in other verticals such as technology leading us well the digital evolution. And these are clearly driving us in the direction of continue to develop this higher value added solutions in this particular case in the digital space which I think are going to be service offerings that we are able to acquire to many other clients in other verticals.

[Mauricio Fernandes:]

Okay. Thank you.

[Operator:]

[Operator Instructions] Our next question comes from the line of Leonardo Olmos with Santander. Please proceed with your question.

[Leonardo Olmos:]

Good morning, everyone. My question is regarding data turnover figure in your view, how has it being developing and have you noticed unemployment in Brazil broadly affecting the turnover already? Thank you.

[Alejandro Reynal:]

Thanks for the question Leonardo. And when you look turnover figure of the last year. it actually decreased. So we had an improvement of 0.5 percentage points. I would say thought that the improvement at this stage feels mostly driven by all the initiatives that we're doing to improve sourcing and training, processing in the company. So it’s mostly driven by our internal efficiencies. Having said this what, do we expect probably towards the second part of the year and going to '16, is that the increase on employment situation in Brazil should drive turnover in Atento I feel specifically further down. So this is – it’s an unfortunate situation the increase in unemployment, but in terms of an impact to the company its positive because the reduction of turnover would further decrease hiring and training cost. So again, we are not seeing as of this moment the impact in our training and turnover figures because of unemployment but it’s a trend that we are forecasting to see probably towards the end of the year and going into 2016.

[Leonardo Olmos:]

Okay. Thank you very much. And congrats for the results.

[Alejandro Reynal:]

Thank you.

[Operator:]

[Operator Instructions] Thank you. Mr. Reynal, it appears we have no further questions at this time. I would now like to turn the call floor back over to you for closing comments.

[Alejandro Reynal:]

Thank you very much and thank you everybody for your attention and of course for you questions. Very happy to follow up individually as we will do. And I just want to leave with three important takeaways from our perspective. First one is that we remain on track with the operational and financial initiatives. We are very much focused on driving top line growth, as you can see from the results. But also on continue to improve profitability and then increase or financial flexibility. So that’s number one. Second, that the macro headwinds as we have mentioned in the call, are the reality and these are out of our control. But I believe in our ability to adjust to this market realities and we're very confident that our Brazilian business model will allow us to continue to drive the right balance in terms of growth, profitability and liquidity. And third, again, its part of the macro headwinds, we're clear leaders and we will continue to make the investments to strengthen our competitive advantage in the region for the long-term. Thank you again for you time and look forward to interacting in the near future.

[Operator:]

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation. And have a wonderful day.