Atento SA (ATTO) 2017 Q3 法說會逐字稿

Greetings, and welcome to the Atento S.A. Third Quarter 2017 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Shay Chor, Corporate Treasurer and Investor Relations Director. Thank you sir, you may begin.

Thank you, operator. Please turn to Page 2. Welcome to our Fiscal 2017 Third Quarter Earnings Call. With me today are Alejandro Ample, Atento's Chief Executive Officer and Mauricio Montilha, Atento's Chief Financial Officer.

Alejandro will begin with a brief review of our performance and strategy and then Mauricio will review our financial results and guidance for fiscal 2017 in more deals. Afterwards, we will open the call for questions. Following Q&A, Alejandro will have a few closing remarks.

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 involve risks and uncertainties.

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 documents filed with the relevant security 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 at investors.atento.com. Please note that unless noted otherwise, all growth rates are on a year-over-year basis and constant currency. In addition, our revenue growth rates for our consolidated results in EMEA segment exclude the impact of our divestiture of Morocco, which occurred in our third quarter fiscal 2016.

Now, let me turn the call over Alejandro.

Thank you, Shay. Good morning everybody and thank you for joining us today. Please turn to page 4. Our results this quarter yet again are evidence of our progress against our long-term strategy. We delivered solid operating and financial results in the third quarter. We experienced significant improvement in topline growth. Adjusted EBITDA margins are in line with our full-year guidance and we continue to improve our cash flow.

In the third quarter, revenues increased 9%, driven by strong revenue growth of 15% from multisector clients. We experienced broad-based gains in multi-sector in all our regions, which resulted in an improvement in our revenue mix, up 420 basis points to 62%. Revenues from Telefonica were stable year-over-year. In addition, our revenue mix from higher value-added solutions increased by 230 basis points to a new company record of 27%.

Adjusted EBITDA margins were 11.9% in the quarter, while our year-to-date margins of 11.5% are in line, again, with our full-year guidance. In the quarter, adjusted earnings per share increased by [20%] to $0.24, while year-to-date presented a growth of 12.8% to $0.53.

We also delivered a solid free cash flow generation. Our free cash flow before interest and acquisitions totaled USD 48 million in the quarter, an 80% free cash flow conversion. On September 18, we completed the refinancing of our debt with the issuance of USD 400 million senior secured notes due in 2022. We continue to estimate a reduction of interest expense of USD 10 million to USD 15 million per annum as of 2018. Our net leverage in the third quarter reduced to 1.5x from 1.9x in the third quarter of 2016.

As a result of our improved financial flexibility and ongoing commitments to maximizing shareholder value, I am proud to announce the Board's approval of Atento's dividend policy and declaration of Atento's first dividend payment of USD 25 million or $0.34 per share declared on October 31; a new and important milestone in our trajectory as a listed company.

Overall, we continues to drive an optimal balance of growth, profitability and liquidity that provides us with the confidence to reaffirm our full-year outlook for revenue growth of 5% to 8% and adjusted EBITDA margin between 11% and 12%.

Please turn to Page 5. Now, I'd like to remind you of Atento's long-term growth strategy and our progress to-date, since it provides the framework for the solid quarter performance, our continued market leadership in Latin America, and our confidence in the business moving forward.

As you know, we have articulated our growth strategy around 3 main initiatives; consolidating our leadership in the Core Voice Services, continuing growth into higher value-added solutions, and accelerated profitable growth with a mainstream digital offering. In our first focus area, there remain significant whitespace opportunities with existing and new clients across our footprint, especially in Non-Telefonica Telcos and financial services. Telcos and financial services are key verticals since they make up roughly 3/4 of the CRM Spanish market in Latin America.

We also remains focused on capturing business opportunities in Brazil, particularly following signs of macroeconomic recovery and the opportunities that derived from the regulatory environments, which will likely push further outsourcing in the midterm. As a reminder, Brazil accounts for 40% of the total Latin America CRM market and Atento enjoys a clear leadership position in the country with a 25% market share, well ahead of its closest competitor.

The focus area which continues is to grow into high value-add solutions. We are providing customizable solutions to our clients through the integration of our vertical expertise and core services. We are also leveraging recent acquisition and strategic partnerships to expand our capabilities.

The third focus area is accelerating profitable growth with a mainstream digital offering. While digital is just 10% of the market, penetration in Latin America is accelerating and growing faster than voice with the consolidation of new digital technologies. Atento has recently integrated all its recent digital assets to form a new business unit Atento Digital as a way to strengthen and accelerate our growing focus on digital services.

Please turn to Page 6. As a result of our relentless execution to deliver on each of these initiatives, Atento remains well positioned to grow its market share. We are a clear leader in the core voice service segment. However, as an example of the growth potential that Atento still has Non-Telefonica Telcos, financial services and other verticals, we're responsible for more than 10,000 new workstations won year-to-date.

More significantly, almost half of these work stations came from new clients. Specifically, in the telecommunications vertical, we have won more than 4,000 workstations from Non-Telefonica Telco client's year-to-date. Our expertise continues to makes us a reliable partner to telcos, as evidenced by these wins.

In parallel, our Telefonica business was stable in the quarter, as we continues to win business with more than 400 workstation additions in the quarter. We continue to address ongoing opportunities in the financial services vertical, where we have a 26% share of a USD 2.5 billion market. In the quarter, we won over 400 workstations.

We also continue to see opportunities for growth in other industry verticals, where outsourcing is less penetrated such as; utilities, consumer goods, healthcare, technology, among others. During the quarter, we added 1,300 new workstations coming from this vertical.

Please turn to Page 7. We remain focused on expanding our high value-added solutions penetration specifically for the financial sector, focusing on credit management and end-to-end collections solutions. Our recent acquisitions and partnerships have enhanced our capabilities including the acquisitions of RBrasil and Interfile and our recently announced relationship with a management consulting; FALCONI.

We are very excited about the opportunities that our alliance with FALCONI will bring to our clients in Brazil and the wider Latin America region. We are both leaders in our respective fields and now are combining our unique insight and expertise to deliver clients greater efficiency through the optimization and outsourcing of their business processes.

FALCONI and Atento shares common vision, which is to generate value and competitive advantage for companies operating in highly competitive and digitalized environments. We are convinced that our partnership will expand both company's addressable markets and bring new opportunities to our clients.

Please turn to Slide 8. We have reached, during the quarter, a new milestone of our mix of revenues coming from higher value-added solutions, which increased by 230 basis point to a new company record of 27%. Since 2015, we have been driving consistent expansion of higher value- added solutions portfolio. Quarter-on-quarter we keep enhancing Atento's value offered to evolve into the leading provider of high value-added customer experience solutions for companies in our region.

Please turn to Slide 9. In line with market growth trends and client needs, we are evolving our core service offering into a complete digital portfolio. As mentioned before, we have recently launched Atento Digital, a new business unit integrating all the digital assets we have in our company that fosters development of services to support our clients with their digital transformations. By leveraging our capabilities in this area, we have developed a robust client base and a pipeline for digital services which makes us the leader in Latin America.

Please turn to Slide 10. With Atento Digital, we are also leveraging partnerships to accelerate our execution and enhance our value proposition. Along these lines, our announced strategic partnership with Keepcon further expands our digital capabilities. We are now able to manage, in real time, customer engagement through social media, enable monitoring of customer sentiment and drive automation.

We have also significantly expanded the Artificial Intelligence capabilities of Atento's omni-channel platform. Overall, Keepcon allows us to provide a differentiated digital customer experience, generating increased satisfaction for our own consumers.

Now in summary, before I hand it over to Mauricio, let me say that I'm very pleased with the results we have achieved in the third quarter and the progress we've made year-to-date. And I remain confident in our ability to deliver solid topline growth in 2017, reflected in our reaffirmed guidance for the year.

Our strategy to deliver above-market growth reinforce my excitement about the prospects of our business and our ability to strengthen our position as the leading customer experience solutions player in our markets.

I would now turn it to Mauricio to walk through the financials in greater detail. Mauricio?

Thank you, Alejandro. Please turn to Slide 12. As a reminder, I will be referring to growth rates on a constant-currency and year-over-year basis, unless noted otherwise. In addition, as a result of our divestiture of Morocco in September of 2016, this business is in discontinued operations and the revenue growth rates for our consolidated and EMEA results have been adjusted to reflect this.

We continued to present a positive revenue momentum with solid topline growth and stable margins and a stability has benefits from -- profitability has benefit from enhanced capital structure to the recent debt refinancing. Looking at our consolidated results, revenue increased by 9%, driven by 15.3% strong growth in multisector business, which experienced a broad-based gains in all regions aided by new service and new client wins.

Our diversification strategy continues to progress well. As revenue from multi-sector clients' increased 420 basis points to 62%, while revenues from Telefonica remaining stable end of quarter. Our mix of revenue from higher value-added solutions increased 230 basis points to a record of 27% in the quarter, as we had significant new client wins in the period with the addition of around 18,000 workstations, mainly from financial service and other clients.

Margins are in line with our full-year guidance, 2017 guidance down 170 basis points to 11.9%, but an improvement of 80 basis points versus Q2 of 2017. The decline year-over-year reflect the ramp-up of new clients, lower margin to renew the basic service for specific clients, they will take some time to be recovered, and adjustments to new lower volumes levels, particularly with Telefonica in some countries.

Adjusted EPS increased by 20% in the third quarter to $0.24. On a year-to-date basis, EPS increased by 12.8% to $0.53, driven mostly by the decline in interest expenses due to acceleration in prepayment of Brazilian debentures in the first half of '17 and the debt refinance concluded in August '17.

Our free cash flow before interest and acquisition was positive $48 million, in line with seasonality, reducing our leverage to 1.5x versus 1.9x in the same period of 2016 and 1.8x in the second quarter.

Please turn to Slide 13. Looking at our segments. In Brazil, we are encouraged by the improving growth profile as declines in GDP continues to moderate and consumer confidence strengthens. Revenues increased 11.4%, driven by strong 18.3% growth in multisector, which includes recent acquisitions.

Revenues from Telefonica decreased 1.8% versus prior period, driven by volume reductions. We continue to make significant progress with our revenue diversification. Our revenues from multisector client increased 410 basis points to 69.9%, while the mix of higher value-add solutions reached 37.5% of revenues.

Adjusted EBITDA margin declined 230 basis points to 12.9%, while our year-to-date margins of 13.2% declined 90 basis points versus last year. The decline in margin was mainly driven by ramp up from newly acquired clients and service and lower margins in the renewal of basic service for some specific clients that will take some time to be recovered.

Please turn to Slide 14. America has resumed growth with an increase of 10.4%. Revenues from multisector grew 14% supported by new client wins and volume increases in Argentina, Colombia, Chile and all our U.S. Nearshore business. And Telefonica grew 5.6% reflecting positive results in Argentina, Chile and Colombia.

As a percentage of revenues, multisector increased 220 basis points to 58.8%, and our mix of higher value-added solution reached historical high of 18% of revenues, up 570 basis points compared to the prior period. Adjusted EBITDA for Americas margin decreased a 160 basis points to 11.9%, as we continue to ramp up the new contracts won in Colombia, Chile and U.S. Nearshore business, offset by volume adjustment in some clients, particularly in Mexico.

Please turn to Slide 15. In EMEA, revenues from multisector reached 38.7% from 36.5% and our mix of revenue from higher value-added solutions remained stable at 11%. Revenue in EMEA decreased 4.2% in Q3 of '17, driven by 1.4% growth in multisector, reflecting new client wins, offset by 7.3% decrease in revenues from Telefonica, particularly driven by lower volumes in Spain. Adjusted EBITDA margin was 6.4% in the quarter, reflecting sequential volume reductions in Spain.

Please turn to Slide 16. In the quarter, operating cash flow was positive $66 million with free cash flow before interest and acquisitions reaching $48 million as a result of our focus on disciplined capital allocation, improving returns and a strict working capital management. We continue to have financial flexibility with positive cash flow generation and low leverage of 1.5x.

As Alejandro mentioned, we are pleased about the declaration of our first dividend payment in the local -- in the total amount of $25 million, implying $0.34 per share and a dividend yield of 2.8%. We expect dividends to be paid on November 28 to shareholders of record as of November 10th and the share will trade ex-dividend on November 9.

Please turn to Page 17. Before we open the call up for Q&A, I would like to reaffirm our guidance for fiscal '17 with some important highlights. The earthquakes in Mexico and the hurricane in Puerto Rico impacted our operation. In Mexico, our Puebla and Yucatan sites were unable to provide service for 10 days and are gradually being restored.

In Puerto Rico, this storm severely impacted the Island-based infrastructures and our operations are expected to take longer to resume. While the impact of it in the third quarter revenues and EPS were limited, we estimate the impact in revenues during fourth quarter to be in the range of $8 million to $10 million, with the impact on EPS between $0.03 to $0.05.

In Brazil, we do not expect normal seasonality revenue increase in Q4, due to its low economic recovery in the country. Therefore, we estimate revenue growth and EBITDA margin for fiscal 2017 to be in the mid-to-low range of our guidance.

Now, I would like to turn the call over to the operator and take the questions from the audience.

(Operator Instructions) Our first question is coming from the line of Valder Nogueira with Santander. It appears he has his phone on hold, we'll move on to our next question, which is coming from the line of Dave Koning with Robert W. Baird.

Hey guys, nice growth in the quarter, first of all. And then, I guess, in terms of my question, so you talked about the lower part of -- the low-to-mid part of your guidance range for the year; that would still suggest pretty good growth in Q4 though, I think still kind of around the high-single digits. Is that kind of what you're thinking and if not, what would cause a little more slowness in Q4?

Hi, Dave, how are you? This is Alejandro. You want to take the question, Mauricio?

Yes, hi Dave. I think the growth rates what we are having in the third quarter, they really refer to the business -- the run rates of new contract. The only, I'd say setback in the fourth quarter is related to the lack of the operations in Puerto Rico and Mexico primarily. So the growth rates in Q4 will be very healthy, as you can do the math. It will be healthier if it was not for the lack of operation -- full operation in Puerto Rico and the ramp up of operation in Mexico. But it will be, I would say, given we are keeping the guidance, we'll continue to be very solid.

And then I guess secondly, the EBITDA margins year-to-date are right kind of at the midpoint of your range, like right around 11.5% year-to-date. Usually Q4 is a pretty good margin quarter, do you expect that to continue to be seasonally strong or does some of the storm impacts and stuff cause a little bit of margin pressure in Q4 as well?

Yes. I think in line with what I just commented that we keep -- as we're going to lose some revenue, there is some deleverage in Q4 the fact that we have lower revenue, but we continue to have some fixed cost. So there will be now, I would say the seasonality, as also mentioned is for Brazil for Q4, we will not be solely skewed for Q4 as has been the -- and also in normal years, given the, I would say the negative impact of lower leverage given lower volumes from particularly those 2 countries.

And then finally, what's the normalized debt expense going to be in the future? I know -- I think usually it's been around $15 million a quarter or so, but now with the new financing, what's kind of the quarterly run rate in the future?

We -- what we said, if you take, what will be the normalized -- with the new debt refinance, probably it's going to be $15 million to $18 million below the regular annualized number we will have in 2017. So, if you do the math, you think that our cost of debt prior to refinance, the new cost of debt is at least $15 million to $18 million a year lower than this year.

Yes. So maybe $12 million a quarter for financing expense in the future?

Okay.

Our next question is coming from the line of Valder Nogueira with Santander.

First question is, this is a very interesting opportunity with FALCONI; can you share with us more detail on this relationship? What type of remuneration you have agreed with them, if that's public? That's my first question.

Hi Valder, this is Alejandro. It's a very good partnership or alliance what we have been able to come up with FALCONI and I think it's driven by the mutual needs. One of the things for certain types of projects, which I think is interesting because it speaks about how we are evolving in terms of -- less of a traditional BPO company to more offer higher value-added company, is that in some cases we will face some competitors such Accenture in some of the projects and as you know Accenture has 2 sites; they have the consulting capabilities, and also in some places, the execution capabilities. So in discussions with FALCONI what we figured out is that they come with a very strong management consulting firm, specifically in process consulting and of course we have a very strong execution arm in the execution of the outsourcing opportunities. So therefore, we decided to join forces and address a project that require process transformation and require both the consulting and the execution part. I think the piece that is interesting is that a lot of these projects right now in Brazil are outside the traditional segments of Telcos and financial services. So you're seeing a lot of these in retailers and other sectors, which are less of the traditional ones. So we are very excited about this alliance. There are some more specific terms for the different projects, we will take a look at it from a -- on a project-by-project basis. I think the nature -- in this industry, the nature of the projects vary depending on the type of work that it's going to be contracted. So we have set out a flexible economic model, so that we can take a look at it in each of the projects that we work together. But again, I think the most important thing is that this partnership addresses an opportunity which I think strengthens both sides, both FALCONI and us.

I agree and FALCONI is extremely well regarded and it's a completely out of the box sort of consulting firm for -- especially for Brazilian companies, but does these relation goes beyond Brazil?

Yes. We want to be very focused and initially work on a Brazilian scope, but they have operations through Latin America as we do and we talk about potentially approaching certain projects in the Mexican markets. So yes, I mean, the initial focus is the Brazil, but we have a scope beyond just Brazil.

Okay. And my second question is, any update on the payroll taxation discussions in Brazil?

Yes, no particular update. You know that now, there is a new measure being discussed. We are -- last discussions, we were excluded as a sector from the payroll tax increase. That measure expired, so discussions are happening again. We're making the same arguments that this is a sector that generates a lot of importance. So we are confident that the arguments will be heard again that we have good chances to be excluded. But it's early to tell. I mean the process just started. They're still forming the commission and it's still being discussed. So I think it's hard to tell how this is going to evolve. But like I said, I mean, I think last time we were able to exclude ourselves and we're going to go with the same argument to the Congress and we hope and expect that the outcome will be the same.

Our next question is coming from the line of Vitor Tomita with Itau BBA.

For our first question, could you elaborate on the higher labor contingencies that affected Brazil margins? And as our second question, could you give us an update on the M&A strategy and pipeline now that RBrasil and Interfile have been consolidated?

Yes, thank you for the question. Let me take the second first and then Mauricio can address the first one on the labor liabilities. I think what we've done and I think it's a nice story to tell because, we've been able to form a series of partnerships and conclusive acquisitions that at the end of the day, expand the product offer that we have for our clients. So we just spoke about FALCONI, which is more of the consultant. And we recently closed the acquisition of Interfile, which basically extends our portfolio of solutions in credit management, which as you know, these are more back office related type of processes for banks. Last year, we finalized the acquisition of RBrasil, which is more in the field of M2M collections, and again, mainly for financial services. And just recently, we finalized a partnership with Keepcon, which addresses the digital segment and enable us to manage now digital interactions with customers primarily through texts. So I think besides the core offering of Atento, now we have an expanded portfolio of solutions. This has been, I would say, very well received from our clients. When you look at, for example, the case of Interfile, they have already a pipeline of potential commercial clients. This pipeline has been expanded after the acquisition. Same thing for RBrasil, after the acquisition the pipeline of potential clients has expanded. And I think it's very interesting what is happening with Keepcon, because as digital is an area that it's in the need of many of our clients, we have expanded the dialogues with them and we have already working projects with a series of Telcoms in the digital space. So I would say that, as a result of these acquisitions and partnerships, we have not only been able to increase the pipeline, but also solidify our value proposition to our clients. In terms of future plans, whatever we do in the field of M&A would be more in the line of capability building. So whatever things we can do to continue to expand our capabilities in high value add solutions, we will pursue and as well whatever capabilities we need to expand our digital offer in our Atento Digital business unit, we will also do. So we're very much focused on addressing growth and potential increase in our product offer through the acquisitions and partnerships.

Just, modestly speaking -- just look back at the part of your question on the contingencies, we had -- just to step back, when we look at labor contingency in Brazil versus our competitors and also versus largest exporters in Brazil, Atento in a very -- I would say it is in a very good position, when I compare, for any measure by the number -- labor claims by the number of employees or in relation to turnover so on and so forth. But we saw in the recent months, this particularly begin in this year, the legal process has speeded up. So I would say that we had, I would say a surge in terms of finalization of some of the labor, with amounts slightly above what we had accrued, particularly giving longstanding cases. And as you know, we shut down sites in the last 3 years in areas that were much more expensive. In some case, where I'd say that the justice was much more favorable to employees and we had more issues related to labor claims. And those situations, they're being resolved in court right now, and this has been, I'll say, an upsurge in the costs versus the accrual abnormally. But we don't see this a trend, the labor -- outside the labor contingency or the labor cases that are continue coming up, align with the turnover; that's the major driver. Of course the continuous, I would say, GDP or economic constraints, continuous high unemployment force more people -- it stimulates more people to try to find money if they lost a job. Outside that, we don't see a major implication for the future on that, particularly as I said, as we shut down a lot of sites in the last 2 years and there has been a catch-up on the legal process, finalizing process on that. And I would say worst economic conditions, we saw a surge -- slightly surged on the number of the case as a percentage of our turnover, but also, we saw penalization of the old case, particularly in areas that we left with some more favorable results, outcome from the employees than we did expect in accruals. It is not a major issue, it probably -- when we look at the future, it won't change dramatically our costs related to those expense. But there is 1 or 2 quarters we delivered higher expense than we planned.

(Operator Instructions) Our next question is coming from the line of Vincent Colicchio with Barrington Research.

I've got a couple of questions. Brazil, the margins continue to be relatively low and I know you are ramping up on new business. What are your thoughts on when we might see that improve?

Let me take the question, and perhaps Mauricio can also fill in. I think the positive on Brazil is that the pipeline of new business is very strong. As a matter of fact, we -- as part of the workstations we mentioned, we had a very important deal that will just materialize in the third quarter and we're going to see the ramp-up end of fourth quarter, and with that we become the key provider to lead a technology company in the region out of Brazil, consolidating all the other providers that we're offering this service. So it's already important project for us but that again is going to come with implementation cost. So the thing about the implementation cost is that there is an ongoing pattern of activity that we are materializing and therefore has its cost. The contrary, I mean, as you can see we continuously improve although this quarter in Brazil was not as high as in prior quarters, the percentage of business coming from higher value-add solutions, we had an 80 basis point increase versus last year which to an extend helps margins, really in this particular quarter, the improvement was not as high, so therefore it doesn't have a material impact. So I think those -- the implementation cost is a headwind and also there is ongoing set of negotiations with a specific clients that sometimes also are headwinds in terms of the margins. I think the view is that going into 2018, again, given the seasonality of the Brazilian and Latin America business, but they should be stabilizing.

I see that you continue to see nice growth in the value-added solutions in Brazil, wondering if you're seeing any impact yet in the pipeline from the change of regulation.

Yes. The evolution in Brazil, and I would say extend as well in America, the solution was very good in the quarter. I mean, Brazil, as I mentioned before had the 80 basis point expansion in solutions in Americas. We also had a very nice expansion in solution, so I just want to bring the point that we're expanding our solution offer not only to Brazil, but to other countries as well. In terms of the new regulations, I think this is a very good point because in the quarter we haven't seen any impact of that. I don't foresee any impact in fourth quarter this year either, but there is a couple of discursions we are having with clients as we speak in terms of potential carve-out of internal call centers, and the main driver for these potential carve-outs has been the changes in regulation in terms of any outsourcing law. So we continue to engage, as the pipeline strengthens in terms of opportunity to carve-out assets as a result of the new outsourcing law, nothing that has materialized yet, but we hope that for '18 we will be able to materialize one of these fields. And again, the interesting part of these carve-outs is that they are outside of traditional sector. So the companies that we're talking to are not in the Telco or financial services. These are different sectors that we are addressing which also would have a nice business mix to the revenue it materialize. So, probably more for '18 than for this year, where we might see one of these deals, as a result of the new regulation materializing.

And then on the digital side, you're talking about a better pipeline. I'm just curious if you could give us more color on what you think you have today that some of your -- some of the bigger peers, competitors are lacking on digital side?

Yes, you know I think what's going on in the digital space is that, if you think about the traditional product offers; so customer service, sales, collections, back office, all of that is migrating to a digital environment. So, what we are building from a product point of view is being able to have solutions for digital sales, digital consumer service, digital collections, digital back office. And this partnership with Keepcon is fairly unique in the region as they're the only ones that we doing -- what we are doing in Latin America. So Keepcon basically help us address the digital customer service. And at the end of the day, what the platform -- and they're working on an exclusively basis with us and they are a partner. And what their platform enable us is to manage in real-time customer interactions primarily through text. So we have been able to manage social media transactions amongst other tech transactions real life. But if you are only managing those transactions, it's also good providing on analytic on those our transactions back to our clients and then also been able to address some of those in an alternative way which is the beginning of artificial intelligence, because those transactions have been answered in "in an intelligent way". And again, I would say that this year is fairly unique in the region right now. When we partner with them, we didn't see the capabilities anywhere else and we have been successfully and they have as well, is offering this solution in the digital customer space to telco clients [for margin]. So they've been driving automation and self-serve and some of these text transaction management in Telcos. We are of course a big partner to Telefonica, helping them on that space, and now are in the process of addressing other Telcos and then eventually migrating into financial services. This, to be honest, I mean, has changed the dialog with our clients' because everybody is thinking about digital transformation and how to address that and the fact that we have a digital platform to address part of our challenges, it's been very successful. So we're very happy and encouraged by the progress and are very excited about the prospects for next year in this particular area.

Our next question is coming from the line Cesar Medina with Morgan Stanley.

Quick question, just wanted to confirm something that Mauricio was saying. The debt refinancing and the savings on an annual basis, I understood, per the call that it was around $15 million to [$18 million] lower per year, but on the presentation it says $10 million to $15 million. I just wanted to confirm that.

Hi, Cesar. Sorry -- you're right, it's $10 million to $15 million versus this year. I was using run rate number that was -- for the year was fully completed with the other structure. You're right. It is a good question for the audience as well.

Sure, then the second question, I wanted to have more clarity in terms of what type of (technical difficulty) and I know that you've commented on this before, what type of dividend policy should we expect going forward for 2018?

I will take that question. When we put together the dividend policy, as you know, the dividend policy we will consider the circumstance at the moment. We also are looking at what is the norm and the practice in the industry, and finally, we -- our capital allocation strategy has not changed and we will continue to fund in our growth and to take the opportunities that are -- larger opportunities ahead of us in the markets we operate. So having said that, if you look at the industry with what we are benchmarking our comps, tele tech converges telecommerce, besides all the large CRM/BPO players, I would say that they -- typically they are 25% to 30%, 35% of recurring net income as policy. If you look at, depends on the year, our competitors between 1%, 1.5% to 1.8% or 2% yield. So I would say that probability that our policy will fall within a range as we've been seeing our competitors and on a year-by-year basis, we also depend and as I said on the capital allocation strategy and the consequence that we are facing in the market at that point in time.

So basically, it's closing the gap with peers like a 25%, 30% of payout ratio?

Yeah. It depends on the year, and as I said, that has been the range of our competitors. Sometimes if you look our comps, they are below that; sometimes they are ahead. Those depend on the street consensus. But there has been, I would say, the regular average range in the last 2 to 3 years our competitors and we will try to stay on the range unless the markets or the street consensus are different or you have much more opportunities to invest on not, but this will happen -- every year, we're going to do this and have a big board and take a decision on that.

(Operator Instructions). We do have a follow-up question coming from the line of Vincent Colicchio with Barrington Research.

Yes, just a one big-picture question, maybe you guys can give us your thoughts on the economic outlook for your bigger Latin markets; Brazil, Argentina and Mexico, maybe over the next few quarters?

Thanks, Vince. I'll give you my view, and Mauricio, feel free to add your thoughts. I think -- I mean overall, I would say that this year has been much more constructive than last year, for sure. I mean from a stability point of view and from an exchange rate point of view. Brazil I think is in a mild recovery. We are seeing some improvement in consumer expenditure and investment. The truth is that when you look at our client base, where we're growing is with -- mainly with new clients and new services. The existing base of our business has remained stable, last year was declining. So I think from that perspective, it is good, because since relatively stable with puts and takes depending on the client, but we're seeing the growth in new business and less with the existing business. So that tells me that there are some recoveries, but it's not a strong recovery at this stage and we foresee -- everybody is predicting a better year, next year, granted that there is elections in Brazil. So with -- I guess our view is the recovery will continue, but it will be a fragile recovery. In the case of Argentina, we're doing well. The part of the recovery in revenue growth we're seeing in Americas is coming from Argentina. We are encouraged by some of the structural measures that have been taken and by how the economy is progressing. So we see some leading indicators that are positive and therefore we're starting to see that materialize in our activity and growth. So for Argentina, I think we have a good and optimistic view going into next year. Mexico, mixed view. Mexico this year, although the economy is not doing bad, some of the areas that impacts us, which are consumption and investment, have not done extremely well, because initially Mexico, the relationship with the U.S. and now next year there are elections in the Mexican market. We've seen investments by companies, by our clients not as high as perhaps in prior years. And same thing applies to private consumption. So -- and again, Mexico will go through elections next year. So Mexico, we wouldn't see that's a concern for sure, but probably out of the 3 that I've spoken, the Brazil, Argentina and Mexico; Mexico is the one where we're seeing a very mild to slow trend in the economy. So in Argentina, for us, so far very good and hopefully we'll keep that way; Brazil okay and looking relatively stable and; Mexico probably out of 3 the one that has been slower for us.

Thank you. It appears to be no additional questions at this time, so I'd like to pass the floor back over to Mr. Alejandro, for any additional concluding comments.

Great. Well if there are no more questions. Thanks everybody. Just brief recap. As I mentioned at the beginning, we're very happy with the third quarter results, which was driven by the strong growth in revenues, mainly from multisector across all regions as well as the significant improvement we had in revenue mix, particularly coming from higher value-add solutions. Adjusted earnings presented a solid growth in the quarter, reflecting good operating performance and the lower interest expense from the debt refinance.

Also, an area that we feel very good about is the solid cash flow generation in the quarter and as we discussed, our decision to declare the first dividend payment, which is the reflection of our commitment to disciplined capital allocation, the confidence in the outlook of the business and the strength of our balance sheet.

Also, as we discussed, we are reaffirming our guidance for 2017, which is important. I'm very confident to conclude in our ability to deliver profitable market growth, further increase our leadership position in Latin America, and continue to be the preference partner for the CRM/BPO needs of our clients.

Thank you very much for your attention today and we look forward to our next interaction.

Ladies and gentlemen, this does conclude today's teleconference. Again, we thank you for your participation and you may disconnect your lines at this time.