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General Category => Investment Ideas => Topic started by: SafetyinNumbers on January 31, 2019, 07:17:20 AM

Title: ATTO - Atento
Post by: SafetyinNumbers on January 31, 2019, 07:17:20 AM
Borrowing this from Maran Capitals Q419 letter:

Atento (ATTO)
Atento was another frustrating holding last year. I think intrinsic value is in the teens per share, yet over the last few months, the stock fell from ~$8 to ~$4 on no major change in the companyís fundamentals.
I never have a single ďprice targetĒ for any of my investments. While I do estimate intrinsic value of companies I study and own, I try to think probabilistically, and in ranges. I can come up with what I think are reasonable scenarios that put Atento anywhere from ~$8/sh to ~$25/sh over the next few years. It is very hard for me to come up with a scenario that justifies the current ~$4 price. ATTO is trading at around 3x EBITDA on estimates of trough EBITDA, and at under 5x FCF (after maintenance capex). I think this is very far below private market value for the business. Of course, it could trade lower in the near term, but I am confident that the business is less volatile than the market seems to think it is, and that the business is worth considerably more than where shares are currently exchanging hands.
The company, controlled by a 66%+ owner who I believe to be rational and committed to a successful outcome, instituted a share buyback in the second half of last year. At current prices, share buybacks are the single best use of the companyís copious FCF generation, above M&A or growth capex.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on January 31, 2019, 07:25:55 AM
I own ATTO and think besides itís inherent cheapness (~6x EPS), another catalyst might be a regular dividend.

The company paid a special dividend in Nov 17 but hasnít paid one since. When the CEO retirement announcement was put out a few weeks ago, one of his achievements noted was a dividend policy.

I followed up with IR, and the dividend policy is 25-35% of recurring income and will be determined in March/April if the BOD decides itís appropriate. With adjusted EPS around $0.70, a 25% payout ratio, would be a dividend yield above 4% so perhaps it will catch the interest of dividend funds but it also might surprise quant funds.
Title: Re: ATTO - Atento
Post by: petec on January 31, 2019, 10:20:55 AM
How do you think about the quality of the business vs the debt load?
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on January 31, 2019, 11:21:16 AM
Doesnít seem too levered at 1.8x and free cash flow conversion seems pretty high. I guess currency mismatching is probably my biggest concern.
Title: Re: ATTO - Atento
Post by: petec on January 31, 2019, 02:16:14 PM
Doesnít seem too levered at 1.8x and free cash flow conversion seems pretty high. I guess currency mismatching is probably my biggest concern.

Consensus seems to have FCF at 60-80 and debt at nearly 500. Iíll take a deeper look.
Title: Re: ATTO - Atento
Post by: Spekulatius on January 31, 2019, 03:40:19 PM
Interesting stock. looks like net debt is increasing and EBITDA is falling. Itís supposed to be the other way around. I am always surprised to see companies raising their debt in USD and having their revenues in emerging market currencies (BRL etc). I know that borrowing in USD is cheaper, but itís also risky, if the local currency goes down against the USD making credit metrics worse. Why donít these companies just pay more interest in local currencies and forget about gambling with the exchange rate? I guess these currencies shifts causing losses every couple of years can be discounted as extraordinary events losses and itís all good?
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on January 31, 2019, 09:03:15 PM
Doesnít seem too levered at 1.8x and free cash flow conversion seems pretty high. I guess currency mismatching is probably my biggest concern.

Consensus seems to have FCF at 60-80 and debt at nearly 500. Iíll take a deeper look.

I was using net debt and EBITDA for my calculation.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on September 10, 2019, 07:13:03 AM
This has not been a good pick but has started to show some signs of life lately.

I theorized about a potential dividend earlier in the year but instead a new CEO came in and shelved the dividend and buyback until he assessed the situation. In August, they decided to renew the buyback which is over 30% of the float (higher when they announced it). This seems to have recently started to impact the stock although we wonít know how active they have been until November. I believe they have bought at least 2m shares back.

I recently learned that Bain (the controlling shareholder) issued some PIK Notes that are due in 2020 that use the ATTO shares as collateral. This might be incentivize to sell their shares but selling the whole company would get a bigger premium.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on November 19, 2019, 06:56:24 PM
Anyone else looking at this name?
Title: Re: ATTO - Atento
Post by: Amitsham on November 24, 2019, 11:39:26 AM
Yes, Atento is one of our fund's large positions. Wellington and other funds sold their positions and caused to collapse of the share price.  We talk with the new management and other large investors. Management understands that the company is trading at a significant discount (more than 100%). They will continue to return capital to shareholders, investing in growth and lowering leverage. They bought back ~3M shares in Q3, but we think it's the time for a large tender offer and we told that to the CEO. Based on our analysis of 13F database, we are very close to or at the point where there aren't big sellers. The company will continue to buy them out and to shrink the outstanding shares via a buyback or tender.
Title: Re: ATTO - Atento
Post by: Spekulatius on November 24, 2019, 12:33:50 PM
FCF before interest is not going to get them very far with their debt load.. My rule to avoid stocks where managements uses moronic metrics seems to be vindicated when I look at ATTO.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on November 24, 2019, 02:46:05 PM
Yes, Atento is one of our fund's large positions. Wellington and other funds sold their positions and caused to collapse of the share price.  We talk with the new management and other large investors. Management understands that the company is trading at a significant discount (more than 100%). They will continue to return capital to shareholders, investing in growth and lowering leverage. They bought back ~3M shares in Q3, but we think it's the time for a large tender offer and we told that to the CEO. Based on our analysis of 13F database, we are very close to or at the point where there aren't big sellers. The company will continue to buy them out and to shrink the outstanding shares via a buyback or tender.

It's one of my biggest positions now too. I thought the investor day was very impressive.

We'll see how the Bain PIK bond works itself out but I think it's fascinating game theory.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on November 24, 2019, 02:48:18 PM
FCF before interest is not going to get them very far with their debt load.. My rule to avoid stocks where managements uses moronic metrics seems to be vindicated when I look at ATTO.

I don't think FCF before interest is a "moronic" metric. It just gives you an idea of what FCF yield on the EV is which some people find interesting for valuation.
Title: Re: ATTO - Atento
Post by: Spekulatius on November 24, 2019, 03:46:46 PM
FCF before interest is not going to get them very far with their debt load.. My rule to avoid stocks where managements uses moronic metrics seems to be vindicated when I look at ATTO.

I don't think FCF before interest is a "moronic" metric. It just gives you an idea of what FCF yield on the EV is which some people find interesting for valuation.

It is easy to make very wrong capital allocation decisions using this metric, like acquisitions that would be adding debt. I would hope that they donít get paid using this metric.
Title: Re: ATTO - Atento
Post by: Amitsham on November 24, 2019, 11:27:03 PM
So, don't use this metric, value the company base on the levered FCF, at any case it is extremely undervalue.
The company is the largest CRM/BPO provider in Latin America and trading at above 50% discount to peers.
There is money on the table and someone will take it soon.

Title: Re: ATTO - Atento
Post by: Amitsham on November 25, 2019, 08:19:38 AM
"We apply a 2020E EV/EBITDA multiple of 6.0X, consistent with current valuation for Global CRM/BPO peers, yielding a theoretical M&A value of $7.0 per share" - Goldman Sachs, July 2019
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on November 25, 2019, 08:36:16 AM
"We apply a 2020E EV/EBITDA multiple of 6.0X, consistent with current valuation for Global CRM/BPO peers, yielding a theoretical M&A value of $7.0 per share" - Goldman Sachs, July 2019

Who do they throw in their peer group?

Title: Re: ATTO - Atento
Post by: Broeb22 on November 26, 2019, 05:19:26 AM
FCF before interest is not going to get them very far with their debt load.. My rule to avoid stocks where managements uses moronic metrics seems to be vindicated when I look at ATTO.

I don't think FCF before interest is a "moronic" metric. It just gives you an idea of what FCF yield on the EV is which some people find interesting for valuation.

It is easy to make very wrong capital allocation decisions using this metric, like acquisitions that would be adding debt. I would hope that they donít get paid using this metric.

Isn't that true of probably any valuation metric? Is P/E ever misleading? Do firms with low multiples of owner earnings ever underinvest in equipment and new products and kill their golden goose? It happens.

I think what these folks are saying is qualitatively they like the company and they think it is cheap. It has a lot of debt, which makes it more like an option in my opinion, but attacking the use of EV/FCFF as a moronic metric even though its commonplace says more about the poster than the metric.

Title: Re: ATTO - Atento
Post by: SafetyinNumbers on November 26, 2019, 05:48:52 AM
FCF before interest is not going to get them very far with their debt load.. My rule to avoid stocks where managements uses moronic metrics seems to be vindicated when I look at ATTO.

I don't think FCF before interest is a "moronic" metric. It just gives you an idea of what FCF yield on the EV is which some people find interesting for valuation.

It is easy to make very wrong capital allocation decisions using this metric, like acquisitions that would be adding debt. I would hope that they donít get paid using this metric.

Isn't that true of probably any valuation metric? Is P/E ever misleading? Do firms with low multiples of owner earnings ever underinvest in equipment and new products and kill their golden goose? It happens.

I think what these folks are saying is qualitatively they like the company and they think it is cheap. It has a lot of debt, which makes it more like an option in my opinion, but attacking the use of EV/FCFF as a moronic metric even though its commonplace says more about the poster than the metric.

The debt certainly looks worse post IFRS changes but it seems entirely manageable. At what point of leverage does the equity become an ďoptionĒ in your view?
Title: Re: ATTO - Atento
Post by: Spekulatius on November 26, 2019, 06:13:11 AM
Moronic is probably too strong of a word , but Their FCF before interest is pretty misleading. It looks like after I retest, their FCF is close to zero.

They are in a crummy business ( call center etc) with a high debt loss operating in countries that are economically struggling with a high customer concentration. If their main customer ( Telefůnica ) leaves, they are most likely toast.
Title: Re: ATTO - Atento
Post by: Amitsham on November 26, 2019, 06:47:10 AM
"We apply a 2020E EV/EBITDA multiple of 6.0X, consistent with current valuation for Global CRM/BPO peers, yielding a theoretical M&A value of $7.0 per share" - Goldman Sachs, July 2019

Who do they throw in their peer group?

I don't know. Mybe SYKE, TTEC, SRT, TELEPERFORMANCE, CNDT
Title: Re: ATTO - Atento
Post by: Amitsham on November 26, 2019, 07:00:54 AM
Moronic is probably too strong of a word , but Their FCF before interest is pretty misleading. It looks like after I retest, their FCF is close to zero.

They are in a crummy business ( call center etc) with a high debt loss operating in countries that are economically struggling with a high customer concentration. If their main customer ( Telefůnica ) leaves, they are most likely toast.

I agree that in 2019 we will see ~$0 of FCF.
I think they can generate ~$40M of FCF in 2020 (after interest). The Market Cap is ~$205M
For me, it looks undervalue and they have a plan to return capital to shareholders.
The debt was effected from IFRS16

Title: Re: ATTO - Atento
Post by: cameronfen on November 26, 2019, 01:19:26 PM
Moronic is probably too strong of a word , but Their FCF before interest is pretty misleading. It looks like after I retest, their FCF is close to zero.

They are in a crummy business ( call center etc) with a high debt loss operating in countries that are economically struggling with a high customer concentration. If their main customer ( Telefůnica ) leaves, they are most likely toast.

I agree that in 2019 we will see ~$0 of FCF.
I think they can generate ~$40M of FCF in 2020 (after interest). The Market Cap is ~$205M
For me, it looks undervalue and they have a plan to return capital to shareholders.
The debt was effected from IFRS16

I looked at this company and reached the same conclusion as Spek.  Bad business too much debt.  Why will FCF improve significantly next year?  I didnít research than in depth before moving on. 
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on November 26, 2019, 02:16:30 PM
Moronic is probably too strong of a word , but Their FCF before interest is pretty misleading. It looks like after I retest, their FCF is close to zero.

They are in a crummy business ( call center etc) with a high debt loss operating in countries that are economically struggling with a high customer concentration. If their main customer ( Telefůnica ) leaves, they are most likely toast.

I agree that in 2019 we will see ~$0 of FCF.
I think they can generate ~$40M of FCF in 2020 (after interest). The Market Cap is ~$205M
For me, it looks undervalue and they have a plan to return capital to shareholders.
The debt was effected from IFRS16

I looked at this company and reached the same conclusion as Spek.  Bad business too much debt.  Why will FCF improve significantly next year?  I didnít research than in depth before moving on.

I think so. New management came in earlier in the year and made a bunch of investments which hurt FCF this year but should reverse next year and help margins. Also, they have made improvements to accelerate deployments and reduce DSOs which should reduce working capital requirements. Both of these things should help FCF.

Title: Re: ATTO - Atento
Post by: Broeb22 on November 26, 2019, 02:42:24 PM
FCF before interest is not going to get them very far with their debt load.. My rule to avoid stocks where managements uses moronic metrics seems to be vindicated when I look at ATTO.

I don't think FCF before interest is a "moronic" metric. It just gives you an idea of what FCF yield on the EV is which some people find interesting for valuation.

It is easy to make very wrong capital allocation decisions using this metric, like acquisitions that would be adding debt. I would hope that they donít get paid using this metric.

Isn't that true of probably any valuation metric? Is P/E ever misleading? Do firms with low multiples of owner earnings ever underinvest in equipment and new products and kill their golden goose? It happens.

I think what these folks are saying is qualitatively they like the company and they think it is cheap. It has a lot of debt, which makes it more like an option in my opinion, but attacking the use of EV/FCFF as a moronic metric even though its commonplace says more about the poster than the metric.

The debt certainly looks worse post IFRS changes but it seems entirely manageable. At what point of leverage does the equity become an ďoptionĒ in your view?

I guess I would say when the outcome becomes binary, like an option. Heads you win a ton, tails you lose everything.

Qualitatively I agree that the customer concentration in Telefonica makes this option like already, except in that respect itís more like selling puts you kind of grind along never earning great returns until one day itís worth zero. Not saying thatís what happens here...

Iím not saying positions like this donít have a place in somebodyís portfolio, but I wouldnít want to put a lot of my money in this.

Here are the areas where this sits on a knifeís edge:
Substantial USD debt with foreign cash flows
Substantial debt relative to cash flow...10 years worth of cash flow in debt is a lot of time to get back to a decent balance sheet whether itís 3 or 5 or whatever many years of cash flow
Customer concentration
Business that is or easily could be disintermediated by technology

In the end itís somewhat qualitative on what makes something option like.

Title: Re: ATTO - Atento
Post by: Spekulatius on November 26, 2019, 03:25:54 PM
Moronic is probably too strong of a word , but Their FCF before interest is pretty misleading. It looks like after I retest, their FCF is close to zero.

They are in a crummy business ( call center etc) with a high debt loss operating in countries that are economically struggling with a high customer concentration. If their main customer ( Telefůnica ) leaves, they are most likely toast.

I agree that in 2019 we will see ~$0 of FCF.
I think they can generate ~$40M of FCF in 2020 (after interest). The Market Cap is ~$205M
For me, it looks undervalue and they have a plan to return capital to shareholders.
The debt was effected from IFRS16

I think sometimes in this cases, it helps to step back and look at the thesis a bit. If the thesis is that this is a 20% FCF next year, my immediate inclination would be too look at other stocks that have a similar FCF yield and we now they compare.

I actually did so a while ago and came up with 3 high FCF yield stocks back then - CX (cement), MPC (refinery, midstream) and BRY (packaging). I guess you could add ATTO tot his mix.

Then I ranked the 3 companies , based on my confidence that they would make their numbers and  my  perception of risk.

My ranking was BRY> MPC> CX. I admit it is entirely subjective of course, but I decided to buy BRY.

If I would add ATTO to this mix, it would probably dead last. Again, this is my subjective rating and to be fair, ATTO projected FCF yield is higher than BRY (~15%). I also want to point out they I did this a couple of month ago, when all these were priced lower.

Anyways , it may not worth going into details, but I think it is worthwhile  to look at other stocks that may sort of fit under the same thesis or umbrella so it speak. I always try to make a comparison of any investment and play out why I should buy X and not Y and Z. Often when I do that, I end up buying  Y or Z.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on November 29, 2019, 08:26:23 AM
I'm much more bullish on the company's prospects but I don't think we'll have a remotely clear picture of what the market thinks it's worth until the Bain PIK note negotiation is over.

Title: Re: ATTO - Atento
Post by: SafetyinNumbers on December 05, 2019, 06:04:17 AM
This acquisition by TELUS sparked my interest as I think it illustrates the divide between public and private market valuations at this time.

https://www.globenewswire.com/news-release/2019/12/04/1956543/0/en/TELUS-Corporation-announces-agreement-to-acquire-Competence-Call-Center-through-TELUS-International.html

TELUS International seems to compete in the high end of what ATTO does and probably doesnít have a low margin legacy contract like ATTO has with Telefonica.

By my math TELUS paid about 13x EV/EBITDA and the pro forma business has margins of ~22% which are about double ATTO. If ATTO management is successful in getting EBITDA margins to 15% by 2022 and have revenues stabilized at say 1.6bn, what multiple would the private market be willing to pay for that?

Title: Re: ATTO - Atento
Post by: Homestead31 on December 09, 2019, 10:45:01 AM
This has not been a good pick but has started to show some signs of life lately.

I theorized about a potential dividend earlier in the year but instead a new CEO came in and shelved the dividend and buyback until he assessed the situation. In August, they decided to renew the buyback which is over 30% of the float (higher when they announced it). This seems to have recently started to impact the stock although we wonít know how active they have been until November. I believe they have bought at least 2m shares back.

I recently learned that Bain (the controlling shareholder) issued some PIK Notes that are due in 2020 that use the ATTO shares as collateral. This might be incentivize to sell their shares but selling the whole company would get a bigger premium.

Can you share any documentation you have seen around those Bain PIK notes?  i have been looking on sec.gov for the source docs that describe the arrangement, but haven't been able to find?

thanks
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on December 09, 2019, 12:23:51 PM
This has not been a good pick but has started to show some signs of life lately.

I theorized about a potential dividend earlier in the year but instead a new CEO came in and shelved the dividend and buyback until he assessed the situation. In August, they decided to renew the buyback which is over 30% of the float (higher when they announced it). This seems to have recently started to impact the stock although we wonít know how active they have been until November. I believe they have bought at least 2m shares back.

I recently learned that Bain (the controlling shareholder) issued some PIK Notes that are due in 2020 that use the ATTO shares as collateral. This might be incentivize to sell their shares but selling the whole company would get a bigger premium.

Can you share any documentation you have seen around those Bain PIK notes?  i have been looking on sec.gov for the source docs that describe the arrangement, but haven't been able to find?

thanks

I haven't been able to find much but I included some references I found below. My understanding is that all of the proceeds from the IPO for shares sold by Bain and from the secondary sold by Bain were used to reduce the loan outstanding. I have been told the PIK rate is 13% but I haven't been able to corroborate that. My math suggests, Bain starts to participate in returns once the share price is over $8-8.50.

Details from page 163 of the final prospectus filed on 10/3/2014
PIK Notes due 2020

"On May 30, 2014, PikCo, our parent company, issued Ä137.5 million and $191.5 million aggregate principal amount of PIK Notes pursuant to an indenture, dated May 30, 2014, among PikCo, as issuer, Topco, the direct holding company of PikCo, as security provider, Citibank, N.A., London Branch, as trustee, security agent and paying agent, and Citigroup Global Markets Deutschland AG, as registrar, governing the Senior PIK Toggle Notes. The PIK Notes are senior secured obligations of PikCo and are not guaranteed by any party.

The PIK Notes will mature on May 30, 2020. PikCo may decide in its sole discretion to pay all or a portion of the interest payable for any interest period in cash or in kind.

The indenture governing the Senior PIK Toggle Notes contains covenants that, among other things, restrict the ability of PikCo and certain of its subsidiaries, including us, to: incur or guarantee additional indebtedness; issue, redeem or repurchase certain debt; issue certain preferred stock or similar equity securities; make loans and investments; sell assets; incur liens; enter into transactions with affiliates; enter into agreements restricting certain subsidiariesí ability to pay dividends; and consolidate, merge or sell all or substantially all of its assets. These covenants are subject to a number of important exceptions and qualifications. In addition, in certain circumstances, if PikCo sells assets (including a sale of capital stock to third parties pursuant to a public equity offering or otherwise), or experiences certain changes of control, it must offer to purchase all or a portion of the Senior PIK Toggle Notes at a price equal to par plus a premium."

Details from the 20-F filed on 3/31/2015 page 86

A proportion of the PIK Notes were redeemed at the time of the IPO, amounting to 24,368,574.97 of the EUR tranche and 33,747,581.60 of the USD tranche.

Title: Re: ATTO - Atento
Post by: Amitsham on December 26, 2019, 07:32:11 AM
I doubt the company will stay public if the price continues to be so ridiculous.
I believe we will see a shareholders' meeting very soon (Jan 2020) to approve a new capital return plan. We want to see a tender offer.

From many converations with management, they understand this situation well and think the company is worth much more. I would expect them to act faster rather than just focus on operational improvement.

I guess we won't have to wait until the last minute to know who is the controlling shareholder of the company.

Title: Re: ATTO - Atento
Post by: SafetyinNumbers on December 26, 2019, 08:03:05 AM
I doubt the company will stay public if the price continues to be so ridiculous.
I believe we will see a shareholders' meeting very soon (Jan 2020) to approve a new capital return plan. We want to see a tender offer.

From many converations with management, they understand this situation well and think the company is worth much more. I would expect them to act faster rather than just focus on operational improvement.

I guess we won't have to wait until the last minute to know who is the controlling shareholder of the company.

It would be nice if they can buy some stock back before they report in March. Even with FCF in Q4 likely over $40m and TTM EBITDA likely up at least $10m. Even if it can just keep its discounted multiple of 4.5x EV/EBITDA, the stock would tick up over US$4 from US$2.80 now.
Title: Re: ATTO - Atento
Post by: Amitsham on December 26, 2019, 12:59:06 PM
It will be difficult for them to buy a significant amount of shares in the market. The better way would be to make a tender offer.
For that we need a sharholders' meeting, which will hopefully be in January.
I told the management that we were disappointed with their slowness as the stock trades as if the company was going bankrupt.
I believe that in the end of the first quarter of 2020 we will be after the sharholders'  meeting and with a solution for Bain's PIK loan.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on December 26, 2019, 01:20:09 PM
It will be difficult for them to buy a significant amount of shares in the market. The better way would be to make a tender offer.
For that we need a sharholders' meeting, which will hopefully be in January.
I told the management that we were disappointed with their slowness as the stock trades as if the company was going bankrupt.
I believe that in the end of the first quarter of 2020 we will be after the sharholders'  meeting and with a solution for Bain's PIK loan.

Yeah, a few catalysts ahead of the earnings catalyst. I will add the end of tax loss selling tomorrow which may alleviate selling by tax sensitive disenchanted shareholders.

I think we could trade to 6x EV/EBITDA once the Bain PIK is out of the way, which is pretty close to $8 post Q4 results.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on January 02, 2020, 09:39:57 AM
Wrote this up

‪https://seekingalpha.com/article/4314926-atento-deserves-your-attention?source=tweet ‬
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on January 09, 2020, 05:01:31 AM
Wrote this up

‪https://seekingalpha.com/article/4314926-atento-deserves-your-attention?source=tweet ‬

I added a couple of comments to the article, yesterday afternoon and this morning with respect to recent pressure on the shares presumably due to RSUs vesting a few days ago and the company filing for a shareholder meeting to authorize a share tender at a premium or discount to the current share price.

Title: Re: ATTO - Atento
Post by: StevieV on January 09, 2020, 07:08:52 AM
Quote
Thank you.

They also filed yesterday for a shareholder meeting to be held on Feb 4 to authorize the BOD to pursue a premium (or discount) tender for up to 30% of the shares at their discretion over the next 5 years.

https://www.sec.gov/Archives/edgar/data/1606457/000119312520003870/0001193125-20-003870-index.htm

More details in the article above as well.

Safety - Above is what you said in the buying today thread.  Seems important, but somewhat undefined.  Up to 30% is big, but over the next 5 years is a long time.  Plus, they issue a good number of shares.

I see a big move up as I check the quote right now. The stock is too thinly traded to put much weight behind every move, but up is better than down and comparatively big volume this morning.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on January 09, 2020, 07:16:13 AM
Quote
Thank you.

They also filed yesterday for a shareholder meeting to be held on Feb 4 to authorize the BOD to pursue a premium (or discount) tender for up to 30% of the shares at their discretion over the next 5 years.

https://www.sec.gov/Archives/edgar/data/1606457/000119312520003870/0001193125-20-003870-index.htm

More details in the article above as well.

Safety - Above is what you said in the buying today thread.  Seems important, but somewhat undefined.  Up to 30% is big, but over the next 5 years is a long time.  Plus, they issue a good number of shares.

I see a big move up as I check the quote right now. The stock is too thinly traded to put much weight behind every move, but up is better than down and comparatively big volume this morning.

Stevie, what do you mean by ďPlus, they issue a good number of sharesĒ?

The stock could just be bouncing because itís down big in the last few days presumably helped down by the RSU vesting and related sales.

When I was at the Investor Day and if you listen to the webcast, I think you will agree management believes the stock is undervalued. While I expect them to move on the buyback in the next 6 months, I can understand not assuming that they do.
Title: Re: ATTO - Atento
Post by: StevieV on January 09, 2020, 08:09:24 AM
From the Q2 2019 conference call (https://seekingalpha.com/article/4281193-atento-s-atto-ceo-carlos-lopez-abad-on-q2-2019-results-earnings-call-transcript?part=single)

You may have noticed that our shares outstanding have increased despite our buybacks. We're compensating more of our management with restricted stock, further aligning management with shareholders.

That quarter had a limited number of buybacks because they just resumed the buyback program in the last month of the quarter (214K shares).

Quite frankly, I don't have a good idea off the top of my head how many shares they grant/year and how significant it is to the overall share count.  I think I just had recalled this line from the Q2 call and have it on my mind to look into. You mentioned 886K in RSUs vesting this year.  That is a significant number, especially in a less than $200 million market cap company.

Also, I agree that it is likely that ATTO does a significant share repurchase in the near term rather than extend the 30% out over 5 years.  Just like to also be aware of specifically what they said.

If you have an estimate of yearly dilution due to share grants, I'd be interested to hear it.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on January 09, 2020, 08:52:45 AM
Last year was an exceptional year for RSU grants because of all of the management changes and they issued about 3.3m RSUs of which 75% were for management and the balance for the board. In the three years prior to that, they had issued about 2.9m RSUs in aggregate of which ~22% were forfeited so far.

The RSUs issued last year were pretty much offset in Q3 when they bought back 3m shares. They have about 71.1m net shares outstanding before what ever RSUs vested last week. I should say on closer inspection of that 866k shares that were supposed to ves last week, 380k were forfeited as of the end of Q3.

I think last year was exceptional for RSU issue because of the management change and I like that new management is aligned with shareholders.

Thanks for highlighting, I think it's definitely something to keep an eye on going forward.



Title: Re: ATTO - Atento
Post by: StevieV on January 14, 2020, 01:02:42 PM
Wow, this stock moves quickly, both ways unfortunately.  Up 20+ cents today.  Could give it up tomorrow.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on January 14, 2020, 02:07:08 PM
Yeah for sure.

I think the RSU selling probably accelerated another seller or sellers. So many institutional accounts use percentage of volume/VWAP algos so that they get fills and don't look "bad" doing it. I suspect the RSU program probably used a similar sell strategy. Every time I would buy stock, the stock would plunge lower!

I remember when I worked on a prop desk in NYC during the financial crisis and my PM was panicking about someone else's (thankfully) risk arb position. He decided he wanted to sell 100k shares at 25% of the volume and the stock started plummeting. He started asking why it was going down like he didn't realize he was probably the fifth guy to sell at 25% of the volume.

In the ATTO situation, part of the thesis here is that fundamental institutional buyers are waiting for the Bain resolution to either initiate or add to positions (if they bothered to look that far). That puts us in a bit of strange situation for where the stock should trade. Any sellers need to be met by fundamental value investors that don't have to worry about short term volatility or drawdowns and there aren't that many of those types of investors around anymore. Those investors stepped up in a big way last week but those are also the type of investors to be spoiled by low prices.

All that to say, price discovery will have to wait until we find out Bain's plans and/or a tender offer is initiated by the company following the expected approval on Feb 4. I suspect that the company might pair the news of the tender with Bain's news. The tender price will then act as an anchor for the stock price which might be useful if the objective is trying to buy back as much stock as possible at the lowest price. 

Title: Re: ATTO - Atento
Post by: SafetyinNumbers on January 18, 2020, 09:10:25 AM
I thought I would add the SA article as an attachment for reference to those who might not have access.
Title: Re: ATTO - Atento
Post by: Spekulatius on January 18, 2020, 12:22:24 PM
I thought I would add the SA article as an attachment for reference to those who might not have access.

SafetyinNumbers, thanks for attaching the SA article which explains the mechanics about the PIK note. This is very helpful for me and probably for others on the fence.  I have a small position only acquired recently (between $2.5-$2.6) and feel like I have now a better understanding of the situation. If the PIK note indeed becomes due by settling with shares and this flood the market, it would be a great opportunity to just add more shares.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on January 18, 2020, 01:05:56 PM
I thought I would add the SA article as an attachment for reference to those who might not have access.

SafetyinNumbers, thanks for attaching the SA article which explains the mechanics about the PIK note. This is very helpful for me and probably for others on the fence.  I have a small position only acquired recently (between $2.5-$2.6) and feel like I have now a better understanding of the situation. If the PIK note indeed becomes due by settling with shares and this flood the market, it would be a great opportunity to just add more shares.

No problem. I think you are right but either way, I expect a tender offer from the company. Perhaps less of a premium and greater participation if the shares become wildly held.




Title: Re: ATTO - Atento
Post by: mikazo on January 18, 2020, 03:08:02 PM
Interesting stock. looks like net debt is increasing and EBITDA is falling. Itís supposed to be the other way around. I am always surprised to see companies raising their debt in USD and having their revenues in emerging market currencies (BRL etc). I know that borrowing in USD is cheaper, but itís also risky, if the local currency goes down against the USD making credit metrics worse. Why donít these companies just pay more interest in local currencies and forget about gambling with the exchange rate? I guess these currencies shifts causing losses every couple of years can be discounted as extraordinary events losses and itís all good?

Hi, I'm late to the party, but I saw this idea in the multi-bagger opportunities thread and thought I'd do some research. I read through this thread first and then started looking at documents from the Atento website. I'm only just getting started, but a footnote stood out to me in their Q3 2019 results, in answer to your comment about exchange rates affecting interest rates:

"(1) Cross currency swaps covers 100% of interest until maturity in Aug/2022" (page 13 https://s3.amazonaws.com/mz-filemanager/89e54f51-9039-43b3-9c2c-45e55fab990c/956c297c-a833-4ee3-ab45-2e24ed5d1705_Q3%202019%20Atento%20Earnings%20Presentation%2011.13.19.pdf (https://s3.amazonaws.com/mz-filemanager/89e54f51-9039-43b3-9c2c-45e55fab990c/956c297c-a833-4ee3-ab45-2e24ed5d1705_Q3%202019%20Atento%20Earnings%20Presentation%2011.13.19.pdf))

I don't yet know what the cost of these swaps are.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on January 18, 2020, 09:08:00 PM
Interesting stock. looks like net debt is increasing and EBITDA is falling. Itís supposed to be the other way around. I am always surprised to see companies raising their debt in USD and having their revenues in emerging market currencies (BRL etc). I know that borrowing in USD is cheaper, but itís also risky, if the local currency goes down against the USD making credit metrics worse. Why donít these companies just pay more interest in local currencies and forget about gambling with the exchange rate? I guess these currencies shifts causing losses every couple of years can be discounted as extraordinary events losses and itís all good?

Hi, I'm late to the party, but I saw this idea in the multi-bagger opportunities thread and thought I'd do some research. I read through this thread first and then started looking at documents from the Atento website. I'm only just getting started, but a footnote stood out to me in their Q3 2019 results, in answer to your comment about exchange rates affecting interest rates:

"(1) Cross currency swaps covers 100% of interest until maturity in Aug/2022" (page 13 https://s3.amazonaws.com/mz-filemanager/89e54f51-9039-43b3-9c2c-45e55fab990c/956c297c-a833-4ee3-ab45-2e24ed5d1705_Q3%202019%20Atento%20Earnings%20Presentation%2011.13.19.pdf (https://s3.amazonaws.com/mz-filemanager/89e54f51-9039-43b3-9c2c-45e55fab990c/956c297c-a833-4ee3-ab45-2e24ed5d1705_Q3%202019%20Atento%20Earnings%20Presentation%2011.13.19.pdf))

I don't yet know what the cost of these swaps are.

I'm not an expert on currency swaps but they seem to just be risk management. Certainly if the USD keeps going up, they will have to reduce their USD debt outstanding which is the plan anyway.

 From the 20-F disclosure:

"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 the Senior Secured Notes due 2022 denominated in U.S. dollars. Upon
issuance of the Notes, we entered into cross-currency swaps pursuant to which we exchange an amount of U.S. dollars for a fixed amount
of Euro, Mexican Pesos, Peruvian Soles and Brazilian Reais. The total amount of interest (coupon) payments are covered (until maturity
date) and also a portion of the principal (until January 2020). "

From the latest 10-Q:

"As of September 30, 2019, the estimated fair value of the cross-currency swaps designated as hedging instruments totaled a net asset of 11,047 thousand U.S. dollars (net asset of 11,066 thousand U.S. dollars, as of December 31, 2018)."
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on February 02, 2020, 08:41:30 AM
Reminder the shareholder vote to authorize the BOD to pursue a tender offer at their discretion is on Tuesday morning.

 https://www.sec.gov/Archives/edgar/data/1606457/000119312520003870/d849129dex991.htm

Title: Re: ATTO - Atento
Post by: StevieV on February 03, 2020, 08:35:20 AM
Safety,

I assume that the authorization will be approved.  Seems to me as though the original announcement was more important to tomorrow's authorization vote.

Are you expecting anything additional, such as an announcement as to what action they will take on buybacks and when?
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on February 03, 2020, 08:49:13 AM
Safety,

I assume that the authorization will be approved.  Seems to me as though the original announcement was more important to tomorrow's authorization vote.

Are you expecting anything additional, such as an announcement as to what action they will take on buybacks and when?

Iím not sure if there will be any additional announcement. Itís just that the possibility will be live assuming they get authorization tomorrow.

My current belief is that the note holders will be taking equity from Bain. Perhaps, I am being optimistic, but I donít think they are sellers. If thatís the case there is no reason to rush the conversion of the PIK notes to equity before maturity (May 31) and the company could announce a tender at any time.

The BOD also has some special RSUs that vest on March 1 so it might be in their best interest to launch a tender before then.

My preferred strategy is to pair the news of the conversion of the PIK notes with the tender because I think it would anchor the share price. I want ATTO to be able to buy as many shares as possible as cheaply as possible.
Title: Re: ATTO - Atento
Post by: StevieV on February 04, 2020, 09:38:24 AM
Meeting was early today, right?  10 am Eastern European?
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on February 04, 2020, 09:42:56 AM
Meeting was early today, right?  10 am Eastern European?

Yup. They got approval at 98% is my understanding. Expecting a 6-K filing after the close.

I continue to be confused by all of the selling at these prices. It will be interesting to see how quick they move (if at all).
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on February 08, 2020, 07:31:22 AM
Finally filed the 6-K. No idea why it took so long.

https://www.sec.gov/Archives/edgar/data/1606457/000119312520028318/d878992d6k.htm
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on February 14, 2020, 04:28:58 AM
Q4 results scheduled for March 3 after the market close with the conference call on March 4 at 10am.

This is a few weeks earlier than last year.

Iím hopeful we get news around Bain, debt refinancing and a tender for the shares around the same time. Even if we donít get any other news, the results should show strong FCF which will reduce net debt meaningfully. That could be a catalyst.

http://www.atento.com/news-room/press-releases/atento-sets-date-for-fiscal-2019-fourth-quarter-results/
Title: Re: ATTO - Atento
Post by: StevieV on February 14, 2020, 12:30:07 PM
Who knew that announcing an earnings release date could be worth 9%.

I think the earlier earnings date is a good thing, but trying to glean info from the date of an earnings call is pretty speculative.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on February 14, 2020, 12:37:20 PM
Who knew that announcing an earnings release date could be worth 9%.

I think the earlier earnings date is a good thing, but trying to glean info from the date of an earnings call is pretty speculative.

Yeah, I agree on that. Although, I bet there are lots of quant models who have that as a factor.

Itís possible, there was a plan by an institutional holder to buy X per day until the expected earnings date and now its 2X.

Title: Re: ATTO - Atento
Post by: StevieV on February 19, 2020, 07:42:15 AM
Safety,

I like how your stock is trading.  Up big most days and some volume coming in.  About 3x normal volume yesterday and already good volume again today. 
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on February 19, 2020, 08:02:54 AM
Safety,

I like how your stock is trading.  Up big most days and some volume coming in.  About 3x normal volume yesterday and already good volume again today.

I thought it was your stock too!

Hopefully the improving technicals foreshadow strong earnings, a resolution to the Bain ownership and a partial tender offer for the shares.
Title: Re: ATTO - Atento
Post by: StevieV on February 20, 2020, 07:35:28 AM
Safety,

I do own a small position, but I think I'll continue to call it your stock in view of the work you've done on this thread.

At least so far, my timing has been unusually good.  It's important that the company actually deliver with a good report on March 3rd.  I'd like some good news on a tender, but for me the number one thing are the business results.  Show good results and then build on that with tender and Bain news.

Title: Re: ATTO - Atento
Post by: SafetyinNumbers on February 20, 2020, 08:01:15 AM
Yeah, I agree. The report should show intrinsic value going higher and increase our margin of safety.

Iím not a technician but apparently this $3.45 level is important. It will be interesting if we can clear it before we get any news.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on March 02, 2020, 08:16:25 AM
A reminder that earnings are out tomorrow night after the close and the conference call is on Wednesday morning.

Also, the company had some more RSUs vest yesterday so we might see some pressure this week as they sell a portion to pay taxes.

That seems like a good set up to buy today and tomorrow ahead of earnings, but with this market volatility, itís hard to say how shares will react.

I expect we will also get some sort of announcement about the PIK note which may clear the overhang which is probably just as important for sentiment as earnings.
Title: Re: ATTO - Atento
Post by: StevieV on March 03, 2020, 10:16:36 AM
I took a refresher look at the VIC write-up in advance of this afternoon's earnings release.  Had forgotten how high the price was when that was written and how high the targets were. 

Will be interesting to see what they report.  Stock has been trading strong today, but not the volume or moves of a couple weeks ago.
Title: Re: ATTO - Atento
Post by: Spekulatius on March 03, 2020, 05:30:31 PM
Results are out:
 https://s3.amazonaws.com/mz-filemanager/89e54f51-9039-43b3-9c2c-45e55fab990c/c6fbad5c-6fd4-4685-ba41-9d3e69e5806a_ATTO%20Fiscal%202019%20Q4%20earnings%20release%2003.03.20.pdf (https://s3.amazonaws.com/mz-filemanager/89e54f51-9039-43b3-9c2c-45e55fab990c/c6fbad5c-6fd4-4685-ba41-9d3e69e5806a_ATTO%20Fiscal%202019%20Q4%20earnings%20release%2003.03.20.pdf)

I hear a sucking sound.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on March 04, 2020, 05:04:20 AM
Results are out:
 https://s3.amazonaws.com/mz-filemanager/89e54f51-9039-43b3-9c2c-45e55fab990c/c6fbad5c-6fd4-4685-ba41-9d3e69e5806a_ATTO%20Fiscal%202019%20Q4%20earnings%20release%2003.03.20.pdf (https://s3.amazonaws.com/mz-filemanager/89e54f51-9039-43b3-9c2c-45e55fab990c/c6fbad5c-6fd4-4685-ba41-9d3e69e5806a_ATTO%20Fiscal%202019%20Q4%20earnings%20release%2003.03.20.pdf)

I hear a sucking sound.

Iím assuming ďa sucking soundĒ is bad for the share price?

The results were a lot better than they looked in my view but I agree the share price could be under pressure.

- Revenues came in at $417m beating consensus of $412m.
- Adjusted EBITDA was $63m vs the $21m reported and the consensus of $43m. To get the adjusted number, I added back the transformation plan spending ($11.9m) and non-cash impairment charges ($30.9m). IFRS 16 rule changes also added $17.9m to EBITDA which should be included going forward since the related net debt includes the related leases.
- Free cash flow was $44m
- Net debt went up to $596m from $565m because of a $47m increase in leases which offset a $15m decline in non lease related debt.
- Margin guidance for 2020 is 12-13% vs consensus of 11.7%. Q4 adjusted EBITDA margins were 15% so the guidance doesnít seem aggressive but there is seasonality to account for (back half generally has stronger margins). They also expect low single digit constant currency revenue growth in 2020 which is in line consensus without adjusting for currency.
- Share buyback of $30m (15% of current market cap and about half of the free float at current share price) was announced without any information on the PIK note. Itís probably best for long term shareholders (who are predominantly the PIK note holders post May 31) for the company to buyback stock after a messy quarter when there is a high degree of uncertainty. I am long and biased, however, so take my analysis with a grain of salt.

Net net, I thought it was an ok quarter with the strong adjusted EBITDA offset by the higher than expected net debt. A lot of investors (especially quants) may react negatively to the higher than expected net debt and the low reported EBITDA numbers so I wouldnít be surprised if the stock is weak.
 
Conference call is at 10am.

Title: Re: ATTO - Atento
Post by: Spekulatius on March 04, 2020, 05:13:50 AM
Thanks for the walkthrough. I guess I didnít take into account all those adjustments. I wasnít aware of consensus numbers either.

Of course doing a ton of adjustment such that you canneries truck between the GAAP and the adjusted results isnít necessarily a great thing either.

At least the price of the stock reflects the troubles. We will see.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on March 04, 2020, 05:29:27 AM
Thanks for the walkthrough. I guess I didnít take into account all those adjustments. I wasnít aware of consensus numbers either.

Of course doing a ton of adjustment such that you canneries truck between the GAAP and the adjusted results isnít necessarily a great thing either.

At least the price of the stock reflects the troubles. We will see.

No problem.

I would take the consensus numbers for EBITDA with a grain of salt too. I'm not sure how many analysts are including IFRS 16 and how many are not. Now that we have a year in the books with the IFRS changes, I don't know if ATTO will continue to break those numbers out going forward. Their EBITDA margin guidance includes the IFRS impacts going forward.
Title: Re: ATTO - Atento
Post by: StevieV on March 04, 2020, 06:24:49 AM
Thanks for the comments Safety and Spek.

Two things stood out to me at first glance.  The first is the continuing shift away from the Telefonica business.  From a business perspective, it seems to me as though this is important for improving the margins in this low margin industry.  Not to mention the customer diversity.  I think a successful transition means growing revenue at some number (doesn't have to be high), while increasing the margin significantly.  The margin improvement should be more impactful, but I think you want to accomplish it with positive revenue numbers.

Second was the size of the buyback.  Even though not a tender, 15% of the market cap at today's pricing is an aggressive buyback.  I say aggressive and not good or bad, as I guess that will depend on what happens going forward.

At very first glance, I thought it was mixed.  Company is still turning (or trying to turn).  Doesn't seem like Q4 was the turn or sealed the turn, which is what was necessary for a good or great report.
Title: Re: ATTO - Atento
Post by: StevieV on March 04, 2020, 07:46:05 AM
Even though not a tender, 15% of the market cap at today's pricing is an aggressive buyback.  I say aggressive and not good or bad, as I guess that will depend on what happens going forward.

Well, it looks like they'll get the opportunity to purchase a lot of shares under the plan.
Title: Re: ATTO - Atento
Post by: Broeb22 on March 04, 2020, 07:55:23 AM

Net net, I thought it was an ok quarter with the strong adjusted EBITDA offset by the higher than expected net debt. A lot of investors (especially quants) may react negatively to the higher than expected net debt and the low reported EBITDA numbers so I wouldnít be surprised if the stock is weak.
 
Conference call is at 10am.
[/quote]

What quants? Isnít ATTO the kind of stock a quant wouldnít touch with a 10 foot pole, purely due to liquidity?  A cursory look at 13-F filings does not uncover any quant funds that Iím aware of, but there are names I donít recognize.

Sometimes it feels like value investors yell to the heavens ďdamn you quantsĒ without really understanding what they do or how they do it. Iím not saying I do either but I donít use quants as a rationalization for why my idea isnít working at a given point in time.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on March 04, 2020, 08:06:23 AM

Net net, I thought it was an ok quarter with the strong adjusted EBITDA offset by the higher than expected net debt. A lot of investors (especially quants) may react negatively to the higher than expected net debt and the low reported EBITDA numbers so I wouldnít be surprised if the stock is weak.
 
Conference call is at 10am.

What quants? Isnít ATTO the kind of stock a quant wouldnít touch with a 10 foot pole, purely due to liquidity?  A cursory look at 13-F filings does not uncover any quant funds that Iím aware of, but there are names I donít recognize.

Sometimes it feels like value investors yell to the heavens ďdamn you quantsĒ without really understanding what they do or how they do it. Iím not saying I do either but I donít use quants as a rationalization for why my idea isnít working at a given point in time.
[/quote]

You might be right on the quants. I use that term more broadly for those that might weight a factor highly like debt/EBITDA without necessarily making all of the adjustments to normalize the results.

Iím not surprised itís down given the reported numbers but the reactions from investors might be different if they highlighted the adjusted EPS of $0.21/share or the adjusted EBITDA of $63.2m in Q4. Iím not saying the one off items should be ignored but they should have less impact on the prospects of the business and thus the go forward valuation.

This idea definitely isnít ďworkingĒ yet and I am wearing it.

Title: Re: ATTO - Atento
Post by: Broeb22 on March 04, 2020, 12:04:34 PM
I just donít see the value.

Even if you get back to $40 MM FCF from 2018, and I donít if thatís a good baseline or not, but even if you do, this trades at 5x FCF with 10 years worth of debt if 100% of FCF were used towards debt pay down.

I can name a half dozen companies with similar FCF multiples and debt profile. Iíve owned some of them and I have the grey hairs to prove it.

For posterity, some of those names are ETM, NXST, DISCA, Viacom, FTD before BK, MOD, HBI, REZI, STKL, PBH, THS, SRCL, COMM, BIG, BDC.
Title: Re: ATTO - Atento
Post by: Broeb22 on March 04, 2020, 12:13:55 PM
Iím not trying to be so negative on this, I just get VERY suspicious when PE sponsors begin playing both sides of the capital structure. Sometimes I think these folks know they overleveraged the entity so they lend unsecured money so they get another bite at the equity in a restructuring.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on March 04, 2020, 12:16:34 PM
Iím not trying to be so negative on this, I just get VERY suspicious when PE sponsors begin playing both sides of the capital structure. Sometimes I think these folks know they overleveraged the entity so they lend unsecured money so they get another bite at the equity in a restructuring.

I donít think that applies here. PE firms (Bain) arenít involved with the senior secured notes of the company.

Itís fine that you are negative. Thatís what makes a market.



Title: Re: ATTO - Atento
Post by: valuedontlie on March 04, 2020, 12:45:44 PM
Where are we getting $40m FCF from?

2020 guide was

Bake all that together and I get $32.5m before working capital and income taxes, no?

What's the PIK debt situation again?

Any idea why debt jumped by $200m+ from FY18 to FY19? At $700m (gross) and ~$46.5m in op cash flow that seems a bit lopsided...
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on March 04, 2020, 12:53:15 PM
Where are we getting $40m FCF from?

2020 guide was
  • LSD rev growth ~$850m?
  • 12-13% EBITDA margin $106m?
  • $37.5m interest exp
  • 4-4% cash capex $36m

Bake all that together and I get $32.5m before working capital and income taxes, no?

What's the PIK debt situation again?

Any idea why debt jumped by $200m+ from FY18 to FY19? At $700m (gross) and ~$46.5m in op cash flow that seems a bit lopsided...

They did 1.7bn in revenue last year. The debt jumped because IFRS 16 changes brought leases onto the balance sheet.

If you want more background on the PIK note, it's probably best to read the SA article attached a little while ago.
Title: Re: ATTO - Atento
Post by: valuedontlie on March 04, 2020, 03:09:32 PM
Woops... was looking at the Brazil region revenue...

So $1.7bn at LSD growth call it ~$1.75bn @ 12.5% EBITDA margin is $220m... 4.25% cash capex is another $75m... $37.5m interest expense = $108m before income taxes and WC... no?



Title: Re: ATTO - Atento
Post by: valuedontlie on March 25, 2020, 01:27:18 PM
Finally got around to looking at this name... pretty interesting really...

Revenue growing (despite huge customer concentration issue)... good balance sheet... generates cash... margins improving...

I typically steer clear with these levels of customer concentration. Also, they are doing themselves a huge disservice by recording op leases as debt... especially if they compare it to EBITDA instead of EBITDAR... they didn't just magically add 2.5 turns of leverage this year.
Title: Re: ATTO - Atento
Post by: StevieV on May 09, 2020, 05:53:43 AM
Hey Safety.  Q1 report this week.

Looks like Bain is out.  Consortium of others in.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on May 09, 2020, 06:18:36 AM
Hey Safety.  Q1 report this week.

Looks like Bain is out.  Consortium of others in.

Yeah, the consortium of others were the PIK note holders (HPS, GIC, Farallon). The two year lock up was a good result and ties in with the senior notes that are due August 2022. Presumably, if they havenít refinanced the notes by 2022, they will run a sale process.

Overall, the results were decent given the circumstances. They were able to generate positive operating cash flow in what is usually a negative quarter due to seasonality. On the conference call, they were less concerned about the liquidity situation than the market is so hopefully that can ease concerns a bit.

Obviously, this was a terrible idea and has been since I posted it so my apologies to anyone else that got hurt too. I didnít expect a pandemic or the impact it would have on Latin American currencies. So I have held all the way down and still think the stock is cheap. With USD debt though, if the currencies keep falling, I think they will have to move quick to sell to a strategic buyer but the equity value could get hit.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on June 02, 2020, 02:33:52 PM
The stock has bounced a bit in the last few days.

- Perhaps the big move in the BRL off of the lows is helping or the general weakness in the USD.
- the company could be buying stock back which would be a big signal and relatively cheap to send
- the company might be able to convince one of its new large sophisticated shareholders to lend itís some money to buy back some of the 2022 debentures. Those bonds traded as low as 58 and are now around 72. It would be very accretive to equity to buy them back.

From a fundamental perspective, Covid should keep pressure on revenues and EBITDA. They are operating under capacity so fixed costs are going to cut into margins. They were doing about $50m run rate EBITDA for Q1 pre-Covid and they might be lucky to do $20m in Q2.

Title: Re: ATTO - Atento
Post by: StevieV on July 08, 2020, 07:09:39 AM
Safety - Any idea what is going on this week?
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on July 08, 2020, 07:15:54 AM
Safety - Any idea what is going on this week?

I think people or computers got excited about the multiple 13D filings (from HPS and GIC) but other than that, I have no idea. They were filed Monday night and the stock jumped in after hours and continued yesterday.


Title: Re: ATTO - Atento
Post by: SafetyinNumbers on July 29, 2020, 05:17:21 AM
Some recent updates:

- ~5 for 1 share consolidation approved  yesterday and effective tomorrow for trading.

- The new board members from HPS, GIC and Farallon were all officially appointed to the BOD as well.

- The company's 2022 bonds traded above 90 for the first time since March.

- recent USD weakness could translate to BRL strength which would be incredibly bullish but we are still a long way to get back to pre-covid levels.

I expected EBITDA to be down significantly quarter over quarter when they report next week but they might be able to defer enough payables to be free cash flow positive. We'll also find out if they were active on the buyback which might send a signal over their comfort on liquidity.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on July 30, 2020, 11:56:51 AM
My working theory is that today's sell off is people not realizing the shares are consolidated and selling their win fall profits.

Obviously, it's a volatile stock but the volume on an adjusted basis is the highest this year and I can't see another catalyst for big volume.

It sounds silly even writing it but 2020 has been anything but normal.
Title: Re: ATTO - Atento
Post by: capitalg on July 31, 2020, 10:52:22 AM
Strange trading action today...
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on July 31, 2020, 11:13:09 AM
I think related to my comment from yesterday. Overselling kicked off some short covering and then momentum traders also jumped on. Wild stuff.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on August 06, 2020, 04:26:22 AM
I really liked the Q2 results reported last night. It was much better on free cash flow and overall profitability appears to have recovered in June. Revenue in USD is down a lot given their exposure to Latin American currencies but that was expected.

https://s3.amazonaws.com/mz-filemanager/89e54f51-9039-43b3-9c2c-45e55fab990c/61af9c48-ac2d-4ad6-a83c-d65bef0e18fa_fiscal%202020%20q2%20earnings%20release%20080520.pdf

The most important news is they have started the process to refinance the senior notes due in August 2022 and unlock shareholder value. The bonds should trade up from the recent price of 92.
Title: Re: ATTO - Atento
Post by: StevieV on August 06, 2020, 09:46:17 AM
I thought it was positive as well.  The stock has bounced around a bit today, but up a bit as I type.

I didn't view the announcement of beginning the financing process as that significantly favorable as you appear to have.  I think that is pretty much a given.  The key will be getting the financing done and at what terms.

Is your assumption that the announcement that they have started the process means they think things are or will go reasonably well?

Anything from the conference call of note?
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on August 06, 2020, 10:01:02 AM
I thought it was positive as well.  The stock has bounced around a bit today, but up a bit as I type.

I didn't view the announcement of beginning the financing process as that significantly favorable as you appear to have.  I think that is pretty much a given.  The key will be getting the financing done and at what terms.

Is your assumption that the announcement that they have started the process means they think things are or will go reasonably well?

Anything from the conference call of note?

They didnít get into too much detail on the financing except that new financing would be done at terms that are beneficial to all stakeholders including shareholders which includes the cost of debt.

They bought about 80k shares (post consolidation basis) and it sounds like buybacks would continue.

Itís worth a watch. Itís the first company I have seen do a video chat for a conference call. I think they are saying and doing the right things. Hopefully, itís just a matter of time.

At least the Robinfolk got everyone to keep sell orders outstanding so if any new buyers want in, there should be more supply this time around between 8 to 18 than there was last week.

Title: Re: ATTO - Atento
Post by: StevieV on August 13, 2020, 07:41:48 AM
Looks like it is going to be another crazy day in Atento trading.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on August 13, 2020, 07:48:12 AM
The float looks really small post consolidation (even though itís unchanged on a $ basis). 4m shares is hardly anything and about half of that think itís worth at least $40.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on August 22, 2020, 11:51:00 AM
Forgot to put this recent seekingalpha article here:

https://seekingalpha.com/article/4369479-atento-deeply-undervalued-significant-potential?v=1597840895&comments=show
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on September 16, 2020, 05:39:59 AM
Nice twitter thread from the recent conference call on refinancing the debt after Labor Day.

https://twitter.com/shamiramit/status/1306172640139370497?s=21

The bonds traded at 98 yesterday and there is a 103 call provision so there might be some incentive for existing holders to push it through.

The stock has been pulling back on low volume which might be an interesting entry point. The float is tight with only about 4m shares outside of GIC, HPS and Farallon.

Net debt is $525m (includes leases), market cap $125m and normalized EBITDA over $200m.

Post debt refinancing (if it happens) I think we see $40 and not $4 (again) but I am also long and biased. Even if the market doesnít care to revalue the equity if they begin applying free cash flow to buybacks it will have the same impact. Q2 free cash flow (permanent working cap improvements) was enough to buy the entire float at current prices.
Title: Re: ATTO - Atento
Post by: Broeb22 on September 16, 2020, 06:35:54 AM
Is there any possibility/likelihood of a sale here? Seems Atento would be a much better fit inside a larger company to reduce customer concentration.

I'm just thinking out loud here since Synnex recently announced they're moving forward with their Concentrix spin. I think Concentrix has some overlap with Atento in what they do.

Seems like Concentrix will be priced at a much higher multiple post-spin based on Synnex's current valuation than Atento currently trades.

Is there a stubborn majority owner here who would not accept a 4-5x EBITDA multiple buyout? You could provide equity owners a nice gain.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on September 16, 2020, 06:47:50 AM
Is there any possibility/likelihood of a sale here? Seems Atento would be a much better fit inside a larger company to reduce customer concentration.

I'm just thinking out loud here since Synnex recently announced they're moving forward with their Concentrix spin. I think Concentrix has some overlap with Atento in what they do.

Seems like Concentrix will be priced at a much higher multiple post-spin based on Synnex's current valuation than Atento currently trades.

Is there a stubborn majority owner here who would not accept a 4-5x EBITDA multiple buyout? You could provide equity owners a nice gain.

I will take a look at Comcentrix, thanks.

The three big holders own over 60% and Iím guessing they would take fair value. I think management would like to see it through their 2022 plan but would sell at the right price. Presumably the controlling shareholders think ATTO might as well buy as much of the equity back and get margins up as high as possible before pursuing a sale.

Each multiple point is worth $15/share so getting 4x or 6x makes a giant difference to returns although both are considerably higher from here.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on September 18, 2020, 07:45:59 AM
Atento announces a new debt offering:

https://www.prnewswire.com/news-releases/atento-announces-proposed-offering-of-senior-secured-notes-301133930.html

To pay for a tender for the existing debt:

https://www.prnewswire.com/news-releases/atento-announces-any-and-all-cash-tender-offer-for-outstanding-notes-301133931.html

Success on this offering would extend out maturities for at least 3 years and allow the company to use more free cash flow for equity repurchases. The float cap is only 4m shares or less than $40m so it doesnít take a lot of capital to make a meaningful difference.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on September 20, 2020, 05:44:03 PM
Big bond trade reported near the end of the day Friday at 98.875 which perhaps is a good signal that this tender and new issue will be successful.

I don't have much experience with US debt markets so take it with a grain of salt!

https://finra-markets.morningstar.com/BondCenter/BondTradeActivitySearchResult.jsp?ticker=C701229&startdate=09%2F20%2F2019&enddate=09%2F20%2F2020
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on October 02, 2020, 05:17:52 AM
Unfortunately, ATTO pulled the debt refinancing. Markets had become more unfavourable since they announced the proposal a few weeks ago. Brazilian CDS was up and the Real weakened which increased the potential cost of debt by 100bps.

The current notes arenít due until Aug 2022 so there is still lots of time to roll the debt or sell the company.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on October 27, 2020, 11:58:04 AM
Atento will have its conference call on Nov 11 for Q320 results.

https://investors.atento.com/investor_news/atento-sets-date-for-fiscal-third-quarter-2020-results/

I think the street is too low for Q3 so there is an opportunity for a beat. I don't know if the stock will react but we'll find out soon enough.

The street is expecting EBITDA of $34m on revenues of $326m or a margin of ~10%. That's despite the company reporting that margins were north of 14% in June as the business normalized somewhat after significant spending on the pandemic response. There might be more of those types of expenses in Q3 but I think a 14% margin assumption makes more sense than 10% which would put EBITDA at $45m on the consensus revenue.

I think the consensus revenue is reasonable. I calculate revenues around $320m for the quarter with no growth in local currency but the company did indicate some revenues will come back from Telefonica in Q3 and outside of TEF, they have been growing pretty well. Constant currency sales grew 5%+ in Q2 and 7%+ YTD outside of TEF. On that basis, there is potential for a beat on revenue too, in my opinion.

Consensus EBITDA for 2021E is ~150m which at the current share price puts valuation at 4.3x EV/EBITDA ($525m net debt / 14.1m shares / $8.20 share price).

Consensus revenue for 2021E is 1.4bn. If margin assumptions lift to 14% for 2021E, the EBITDA estimate would jump to $196m, which at the same multiple of 4.3x, spits out a share price of $22.50.

All this of course if anyone notices and if the estimates end up being a reasonable prognostication.

Title: Re: ATTO - Atento
Post by: StevieV on October 27, 2020, 01:35:16 PM
The trading volume is nothing.  Really, really low.

If they want to raise the share price, they don't need anyone to notice.  They just need to actually hit those margin and EBITDA numbers and refinance the debt so that they can do the tender you mention above.  Tender may not actually retire many shares given the volume.  I don't know, but it should retire shares, raise the price or both.  Earnings and refinancing are very important IMHO.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on November 11, 2020, 02:24:27 PM
Earnings out.

https://www.prnewswire.com/news-releases/atento-reports-fiscal-2020-third-quarter-results-301171370.html

               Actual      Consensus
EBITDA    44.8m          $34.4m
Revenue   352m           326m

Margins were a bit lower than I was hoping for but revenue beat is probably more important as margins will catch up.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on November 11, 2020, 04:36:24 PM
Based on $45m in EBITDA just annualized for 2021 gives $180m which is $30m above consensus. With only 14m shares outstanding at 4.5x EBITDA adds about $10 to the share price which is a double from here.

As the market cap is lower than EBITDA, multiple expansion would also have a huge impact to the share price. Each multiple point of EV/EBITDA adds an additional $13/share to the share price. It trades at 3.6x EV/EBITDA based on the run rate EBITDA of $180m noted above and current net debt of $515m.

Title: Re: ATTO - Atento
Post by: StevieV on November 12, 2020, 05:20:02 AM
They have room for some EBITDA margin improvement.  1% improvement in EBITDA margin improvement is $14 million in EBITDA/year.  I think there is a a reasonable path to $200+ in 2021.

Refinancing and currency remain the big risks I think.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on November 12, 2020, 05:25:28 AM
They have room for some EBITDA margin improvement.  1% improvement in EBITDA margin improvement is $14 million in EBITDA/year.  I think there is a a reasonable path to $200+ in 2021.

Refinancing and currency remain the big risks I think.

Yeah, I agree. They reiterated the EBITDA margin guidance for 2022 of 14-15%. Dare to dream we get multiple expansion on top. Thatís what multibaggers are often made of but weíll see what happens.
Title: Re: ATTO - Atento
Post by: StevieV on November 12, 2020, 07:26:21 AM
Wow, even a little bit of volume today.  Typically I think the daily moves don't mean much given the anemic volumes associated with the trading.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on November 12, 2020, 08:15:14 AM
Biggest volume in 3 months, when it last got to these price levels.

Title: Re: ATTO - Atento
Post by: irnovo on December 11, 2020, 11:08:35 AM
I am a shareholder and believe that ATTO is mispriced.  It is trading above volume today. Maybe market knows something that I don't.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on December 11, 2020, 11:21:07 AM
I am a shareholder and believe that ATTO is mispriced.  It is trading above volume today. Maybe market knows something that I don't.

Wouldnít that mean the market could be starting to see what you see?
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on December 16, 2020, 10:13:39 AM
New SeekingAlpha article

https://seekingalpha.com/article/4395037-atento-turnaround-in-progress-100-potential-upside-and-catalyst
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on December 16, 2020, 11:19:08 AM
A new article on Concentrix CNXC from a different author.

https://seekingalpha.com/article/4394996-concentrix-interesting-spin-off#comments_header


I think CNXC buys ATTO in 2022 because it would be accretive in many ways even at multiples of the current ATTO price. 
Title: Re: ATTO - Atento
Post by: StevieV on December 18, 2020, 03:14:14 PM
I don't think the Ex-Goldman consensus EBITDA of $183m in 2021 and $212m in 2022 makes sense.

Q3 EBITDA was $44.8.  The 2021 estimate projects almost no improvement to that run-rate.  The 2022 estimate then projects a 15% improvement versus 2021.  Why no improvement in 2021 and then a big improvement in 2022?  I don't think that will play out.

I think 2021 estimate is too low. 
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on December 18, 2020, 08:01:51 PM
I don't think the Ex-Goldman consensus EBITDA of $183m in 2021 and $212m in 2022 makes sense.

Q3 EBITDA was $44.8.  The 2021 estimate projects almost no improvement to that run-rate.  The 2022 estimate then projects a 15% improvement versus 2021.  Why no improvement in 2021 and then a big improvement in 2022?  I don't think that will play out.

I think 2021 estimate is too low.

I agree.

Morgan Stanley was the broker that update their EBITDA estimates for 2021 ($191m) and 2022 ($212m) that pulled the consensus up a bit earlier in the week. The weird thing is that their target is $10.50 based on a multiple of 3x EV/EBITDA which they describe as a 75% discount to peers.

Meanwhile Goldman has a $114m EBITDA estimate and have a 6x EV/EBITDA multiple for their target.

Both are just bizarre especially as someone who used to work in equity research and helped determine estimates/targets/ratings.

Using Goldman's multiple on MS's estimates spits out a target of $47.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on January 01, 2021, 08:43:38 AM
Reproduced from this board: https://www.cornerofberkshireandfairfax.ca/forum/general-discussion/favorite-stock-for-2021/

Iím doubling down on Atento (ATTO) for 21.
 
I think Covid obscured the operational improvements in 2020. Net debt has declined materially in 2020 ($595m to $515m) to make the stock relatively cheaper and safer in my opinion. I held on (and added early unfortunately) through the volatility and feel better about the business than a year ago.
 
Management did a great job managing through Covid and the decline in the BRL but the hit to headline EBITDA was hard in Q1 and Q2 especially. EBITDA margins bounced back to 12.7% in Q3 and Iím expecting improvement in 2021 to 14%.
 
USDBRL has been stable for three quarters @5.4 and is currently below that average (which is good!). If oil rallies as many expect, ATTO could be an indirect beneficiary through its emerging market currency exposure.
 
At current exchange rates, ATTO could put up north of $200m in EBITDA in 2021, at 8x EBITDA which is a low end multiple, my intrinsic value estimate is $67 using $500m in net debt which accounts for dilution of options and RSUs. Lots of risk in that estimate of course but too much in the price of ATTO, in my opinion.
 
Street estimates for 2021, are very deceptive. The ďstreetĒ is expecting $160m in EBITDA (11.4% EBITDA margin) but thatís made up of three estimates:
 
Barrington $174m
Goldman $114m
Morgan Stanley $192m
 
To the extent there are active managers left, I have been in the room when a PM asks an analyst what came up on the quant screen. In this case, Atento screens at 4.6x consensus EV/EBITDA. The PM will ask the analyst who covers it, heíll ask what the multiple is on Goldmanís estimates and the analyst will correctly answer 7.8x. You see Goldmanís net debt ($686m vs $515m) is way higher because itís EBITDA estimate is way lower.
 
The PM will then look the analyst directly in the eye and say ďCan we short it or buy puts?Ē and the analyst will say ďNo, it has no listed options and itís illiquid.Ē Thatís the end of the discussion. What the PM doesnít know is that Goldman has not updated their estimates since before ATTO reported $45m in EBITDA in Q3. In fact, their 2020 EBITDA estimate is $94.9m while ATTO has already reported $107.8m 9MTD.
 
Goldman will eventually drop coverage or change their estimate if ATTO decides to pursue refinancing the 2022 debt in January forcing them to update the street on Q4 preliminary estimates which will likely improve on Q3. If consensus moves to Morganís $192m in EBITDA, even at the current EV/EBITDA multiple of 4.6x that would result in an ATTO price of $25.
 
If the active funds donít come, maybe the quant funds will. If there is a lot of variation in estimates, it makes sense for low volatility quant strategies (most of them!) to avoid those stocks. ATTOís estimates will become significantly less variable if Goldman updates or removes itís estimates although the former is better as more estimates are helpful.
 
Recently spun out peer Concentrix (CNXC) trades at around 9x EV/EBITDA.and has very strong free cash flow. Their business strategy (growth by acquisition) and market position (big in Asia and smaller in LATAM) makes them seem like the perfect dance partner for Atento in 2022 when ATTO has achieved 15% EBITDA margins and has grown sales for a couple of years (assuming stable exchange rates).
 
At 8x 2023E EBITDA of $270m (assumes 16% EBITDA margin expectations with 5% CC revenue growth) which CNXC would pay in the summer of 2022, ATTO would fetch ~$100/share give or take. ATTO would still be accretive to CNXC even if paying a fair multiple because of synergies and CNXC has a much lower cost of capital and would save on refinancing the bonds.
 
Itís possible, CNXC wants to buy ATTO now but the three controlling shareholders of ATTO, GIC, HPS and Farallon (~70% ownership) will want a fair price and I think they recognize itís a lot higher than here.
 
I donít know whatís going to happen but with the stock less than $14 and a recently incentivized management team and BOD (1.7m options with an 8 handle in August), I like the odds.

Next week should see some stock for sale as RSUs vest today and there is some forced selling to pay taxes next week by the RSU trustee. I'm estimating about 150k shares for sale.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on January 13, 2021, 11:23:41 AM

It looks like Goldman updated its estimates for $ATTO yesterday because consensus changed dramatically although I havenít seen the note.

Consensus EBITDA has raced higher to $186.5m and $207.8m for 2021E and 2022E, respectively.

Now trading at 3.9x 2021E EV/EBITDA.

The thread below shows the changes in EBITDA

https://twitter.com/BrownMarubozu/status/1349434852244926471?s=20
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on February 01, 2021, 05:37:13 AM
Big beat for $ATTO on Q4. I put my preliminary analysis on Twitter.

https://twitter.com/brownmarubozu/status/1356226519413256193?s=21
Title: Re: ATTO - Atento
Post by: StevieV on February 01, 2021, 10:47:43 AM
Great news!

As you note, Q4 mid-point annualized would mean 2021 EBITDA of $210 million.  As I posted earlier in the thread, I thought the adjusted analysts expectations of $183 were too low.  Almost certainly will be.

I also think $210 is going to turn out to be lower than actual 2021 EBITDA.  I don't think we are near the top in EBITDA margins or quarterly results.  If Q4 2020 run-rate is $210, I'd expect 2021 to be higher, perhaps by a decent bit depending on currency.

I know the $210 number wasn't a prediction.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on February 01, 2021, 11:13:01 AM
Great news!

As you note, Q4 mid-point annualized would mean 2021 EBITDA of $210 million.  As I posted earlier in the thread, I thought the adjusted analysts expectations of $183 were too low.  Almost certainly will be.

I also think $210 is going to turn out to be lower than actual 2021 EBITDA.  I don't think we are near the top in EBITDA margins or quarterly results.  If Q4 2020 run-rate is $210, I'd expect 2021 to be higher, perhaps by a decent bit depending on currency.

I know the $210 number wasn't a prediction.

I think you are right.

Consensus EBITDA margins are 12.8% for 2021E with revenue estimates just below annualized Q4.

Annualizing Q4 revenue (mid point) and adding 3% growth and using 14.5% margins gives us ~$220m in EBITDA. The growth and margins might be low with that estimate but itís still easy to underwrite the investment at these prices.

The stock might actually be cheaper than it was before we got confirmation of the results despite the stock being up 14% today.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on February 01, 2021, 03:37:11 PM
Nice article by Atentoís CEO.

https://www.fastcompany.com/90599103/next-generation-is-the-new-generation-in-customer-experience

I donít think itís a coincidence that this article, the debt refinancing and the customer event tomorrow for Atento are all happening the same week.

This is about narrative change and ultimately multiple expansion when analysts/investors recognize that this new digital growth is expanding margins.
Title: Re: ATTO - Atento
Post by: StevieV on February 02, 2021, 05:45:41 AM
Well, another go at the debt offering.  They pulled their attempt last fall.  No way they do that a second time, right?

If this goes correctly, they should do a follow-up announcing with the pricing in a day or two.
Title: Re: ATTO - Atento
Post by: SafetyinNumbers on February 24, 2021, 08:44:06 AM
Posted the below yesterday on different thread.



Added a touch more ATTO.

A full position for me but I trade around the edges.

I can't see a specific reason for the sell off but it is up a lot this year and some fund might be looking to take profits.

They report next Wednesday night with the conference call on Thursday morning (Mar 4) at 10 am.

At the very least we should have analyst estimates increased post report as all of the analysts have been restricted because of a debt refinancing since they pre-reported better than expected revenues and EBITDA.

Consensus 2021 EBITDA is $186.5m and they reported an EBITDA range of $50-55m for Q4. That should lift consensus above $200m. At 5% cc revenue growth and 14% margins, 2021E EBITDA would be $217m. They pre-reported margins of 14-14.5% for Q420 so it doesn't seem like a big stretch to assume that for the full year. Each point of margin adds ~$15m to EBITDA.

At $22.50, the company is trading at 4.6x EV/EBITDA on current consensus 2021E EBITDA. If consensus jumps to $217, at 4.6x, the stock would trade at $30.50.

The beauty of leverage and only 16.3m shares outstanding on a fully diluted basis.

I am a valueHODLer here until the strategic sale of the company in 2022 or 2023. Peers trade 8-15x EBITDA. If a sale could be based on 2023E estimates, assuming the same sales growth and a lift of EBITDA margins to 14.5% or the half way point of guidance. We could have a selling price of $90+ based on the low end of the comp range at 8x.

Still a long way to go from here of course but I think it's important to understand the roadmap.