Atento S.A. (ATTO) Q3 2020 Earnings Call Transcript

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Atento S.A. (NYSE:ATTO)
Q3 2020 Earnings Call
Nov 12, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen. And welcome to Atento’s Third Quarter 2020 Results Conference Call. My name is Beatrice, and I’ll be your operator. [Operator Instructions] We will conduct a question-and-answer session toward the end of today’s conference. [Operator Instructions]

As a reminder, today’s call is being recorded. Now I’d like to turn this call over to Mr. Shay Chor, Investor Relations. Please go ahead, sir.

Carlos Lopez-AbadiaChief Executive Officer

Good morning to all of you, and thank you for joining us today. In our Q2 call, we communicated that we expected the recovery of the business in Q3 and in general for the rest of the year. Q3 results reflect such recovery is sequential and most importantly given the growth and the profitability improvements. Also we are happy to confirm that we continue to project extension of the business improvements for Q4. Although, we had experienced a significantly adverse FX rate movement during the last few months, we expect our product along with the impact of the pandemic and delivery in 2020 at or better EBITDA levels than last year in current for FX.

We are seeing that Q3 a significant sequential improvement extending to our key operational metrics. Q3 revenue as in booked 12%, EBITDA has more than doubled and EBITDA margin activities by 5.6 percentage points. More importantly, these results improved above pre-crisis levels. With the same period that we have been in 2019, we have grown by over 2% and EBITDA has improved, close to 14%. We expect the business to continue the Q4, sales are up 2% over our 2019 levels despite the slowdown in Q2, we have seen higher average contribution margin in those sales, comparable to 2019 levels which reflect a higher quality of those sales.

Multisector continues to be our growth with 10% year-on-year revenue growth. More importantly, Telefonica volumes are also recovering. In Q3, Telefonica grew 17% sequentially and we forecast additional volumes growth in Q4. With these results and forecast we are back on track to deliver on our three-year transformation plan which we communicated last November. We expect to exceed the year at or above the rates reported by that time.

Let me touch on the pandemic status. 2020 has been full of fuss, a year dominated by the focus on addressing the challenges presented by the pandemic. Although there are hopeful signs in the horizon, we are still in the middle of a developing COVID crisis. We think that the redeployment of our employees to attend to our at home model and the configuration of our centers is working. The deployment permanent platform that will serve us well into 2021 and beyond. However, we are not complacent. We remain vigilant to continue to deliver on our priorities. The safety of our employees and the continued service to our clients.

Let me touch on the progress of the business transformation. Despite immediate challenges and opportunities of 2020, we continue to be focused on the completion of our business information, both externally and internally. We continue to make progress in our operation and business plans. The results can be seen in higher growth and significantly good margins, which will continue to diversify our business. Our Multisector clients now represent almost 70% of revenues, up from 60% when we start to implement the Three Horizon plan. Moreover, we have been expanding into fast growing verticals, such as born digital, tech, e-commerce and media, which are businesses that demand more digital and tech enabled solutions and therefore carry higher margins.

Although we have been focusing on diversifying our client base, Telefonica remains a very important client. The relationship with Telefonica continues to move in the right direction. First, and very importantly Telefonica volumes had recovery. As I mentioned earlier, Q3 revenues up 17% sequentially and continue to gain traction in the fourth quarter. Second, the quality of our business is improving, particularly as we move more and more in to the next-generation services. This [indecipherable] continued to make better margins in Telefonica and also to strengthen our position to be the partner of choice for customer experience services.

As we consistently improved our performance, we are strengthening our market position in Latin America. We are capitalizing on our leadership position, and to capture more market share in the region. In domestic segment, we maintain a commanding 22% market share, 3 times larger than the next company here. In Brazil, our market share is nearly 29%, our lead as number two player by almost 19 percentage points. Our transition to next generation services continues to accelerate, 50% of our sales and next generation services, up from 42% last quarter.

This program yielded an average more than 10 percentage points higher contribution margin than our average legacy contract. We have deployed our first innovation centers in Brazil and now in Spain. We know that innovation is not [indecipherable] our process. It needs to be part of the day-to-day thinking and part of the culture of the company. This year alone, over 10% of our sales come from completing new services developed in the last 12 months. We are also deploying innovations internally, we have developed a fully digital end to end recruitment, selection and training process. We use Artificial Intelligence and advanced automation to improve the speed and the success rate of these critical activities.

This success has allowed us to take share from our competition in the highly competitive markets such as the US, during the current pandemic. We continue to see improvements in our governance. We have welcomed to our Board of Directors, two traditional Independent Board of Directors, which increases diversity of expectation of the Board and increasing the number of Independent Directors to five out of a total of eight.

In summary, we continue to execute our transformation and deliver results as planned. We have recovered from the initial impact of the COVID crisis and are operating at a higher performance levels than last year, with higher growth and significantly improved margins. We expect to finish the year, at EBITDA levels equal or better than last year, after having managed a significant market and operating crisis and an adverse foreign exchange rate exchange of 35% in the [indecipherable]. In constant terms, we have improved revenue in Q3 by 2.2% and EBITDA by close to 14% for the year-on-year.

In current terms, we expect to finish the year at or better than 11% EBITDA margin, 2 percentage points better than our results in 2019. In terms of recovering, we have begun the recovery in Q3. In the second half of the year, we expect to grow 7% sequentially, which represent a 2% year-on-year growth. This improvement is beginning to address the drop that we have in the first half of the year as a result of the pandemic. Finally, we have been able to maintain our leverage under control, even with the Brazilian real depreciation.

Our higher cash flow generation has led net debt to improve for three consecutive quarters. With continued EBITDA improvement in 2021, we expect to deliver on long-term leverage target ahead of the end of 2022. We know that the crisis is not over, and will continue in to 2021. We also know that there will be other challenges that are waiting us next year. But overcoming the difficulties of 2020 and exiting the year on plan, over the significant trajectory, give us the confidence to face 2021 with the sense of optimism and opportunities. Thank you very much. And let me turn it over to Jose.

Jose Antonio de Souza AzevedoChief Financial Officer

Thank you, Carlos. Please turn to the next slide. During the quarter, we continued to make a significant headway in terms of profitable revenue growth as Carlos mentioned, a 19% increase in Multisector revenues — 2% increase in consolidated revenues, which is encouraging as we were able to resume growth following a difficult crisis environment. Sequentially, our revenue grew 10.5%. The main service of growth there was Multisector Brazil and the US. I should also say that Telefonica revenue were nearly 17% sequentially.

A greater mix of Multisector revenues and next generation services drove a nearly 14% increase in EBITDA, while our margin expanded 100 basis points to 12.7% on a sequentially basis our EBITDA doubled. Our profitability also improved on higher efficiency levels that we have been achieving through the operational improvements under our Three Horizon platform that we will expand on this in a moment. At the end of the quarter, Multisector sales has the growth of 78% of Brazil’s revenue. This growth was driven by higher demand for next generation services, which can [indecipherable]

In Telefonica, we continue to see the effects of the programs that we implemented in Q4 2019. Although, year-over-year Telefonica revenue decreased, it increased 28% sequentially. More importantly by improving the profitability of our revenue mix, we were able to increase EBITDA by a strong 15% with margin expanding by 260 basis points to 16.2%. Multisector growth was strongest in the Americas led by the US, which increased by 14% and in Colombia. We expect Colombia to continue delivering growth as it’s ahead for our nearshore business.

Telefonica revenue decreased nearly 15% mainly from lower volumes in Peru, where the economic impact of the pandemic has been very strong. Looking at the trend, our Telefonica business innovation increases 15.5% quarter over quarter. Also higher Multisector sales and greater operating efficiencies, led to a 9% increase in EBITDA and 50 basis points expansion in the margin. In EMEA higher volumes, additional business with existing customers and new clients, increased the market, Multisector sales by just over 6%. Telefonica revenues increased 15.4% on the high volumes and out of these volumes compared with the lower base in the third quarter 2019, they resulted in 14% sequential increases in Telefonica revenue.

Looking at EMEA’s profitability, an improved mix of Multisector revenue, next generation services as we all — as higher efficiency levels rate enhanced margins 18.7%, while the margin expanded 70 basis points. Now I’d like to provide an update on our ongoing operational improvements. Please turn to the next slide. During the quarter, we continued to drive operating efficiencies, which have contributed to profitable growth along improving revenue. Of the $18 million in the related cost savings that we are targeting, we have implemented approximately $65 million over the last nine months, and we remain on track to achieve our results.

In addition to the strict cost controls that we implemented early in the year, a combination of various ongoing initiatives are still raising efficiency levels. This included right-sizing of operations, including the reduction of SG&A expenses through shared services across our past operating footprint. And the zero based budgeting which we are gradually making and expect to be fully functional by mid 2020. Please turn to the next slide.

The combination of an improving revenue mix and higher operating efficiencies has also been driving operating and free cash flows. During the third quarter, we generated $9 million in operating cash flows, bringing this to $40 million on a nine month basis, a $70 million increase over the same period in 2019. Free cash flow decreased $10 million during the quarter as we have paid interest on our 2022 bond, partially rebates of our more expensive credit line, and paid certain taxes that have been deferred in the second quarter because of the pandemic. Over the course of the nine months, our average free cash flow improved almost $100 million to a positive $9 million.

Please turn to the next slide. The cash flow, we are generating is keeping us on track to reduce leverage. Our cash position remained strong at the end of the quarter at $197 million, while net debt fell for the third consecutive quarter to $514 million, a decrease of 9% over the last year. Our leverage was flat on a basis at 3.2 times net debt to EBITDA, when excluding the impairment charge that we took in Argentina in Q4 of 2019. To summarize our financial liquidity, as we drive EBITDA we expect to achieve a leverage ratio of between 2 times and 2.5 times in the near term.

As a final point, before we open the call for questions, we continue to monitor the financial markets with regard to financing our 2022 senior notes. As we stated in our Q2 earnings call, we are thinking to refinancing alternatives that are best aligned with what we believe is our preference. That concludes our review of our third quarter results. Operator, please open the call for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from Vitor Tomita, Goldman Sachs.

Vitor TomitaGoldman Sachs — Analyst

Hello, good morning all. Two questions from our side, and thanks for the time. The first question is, given that the 3% capex to sales guidance for 2020, is below historical levels, could you give us some color on what you are seeing on the recurring levels for capex in 2020 and ahead. And second question would be, if you could give us some more color on the services strong margin improvements in Q3 and the year, with the seasonal one-off factors. And if we should expect that 12% margin leverage is sustainable. Thank you.

Carlos Lopez-AbadiaChief Executive Officer

Thank you, Vitor. So let me — let me give you a little bit of the philosophy on the capex and I’m going to ask Jose to give you more specifics on it, and actually Shay is also here, we also in addition to his duties in IR, he also manages specifically on capex, but let me make a quick comment on that. Let me address the margin improvement as well. So on the capex front, I think my philosophy is, is the same as in other parts of the cost equation, which is, you know, you have to move the things that are right and getting the results through choking capex, you will end up paying the price later on.

I think that was because of these two build the business for the long term. So we have to make, we know we have to make and we will make investments that we need to do for the long term. So we are not trying to get what we are artificially choking costs to results. Having said that, this year was a very special year and we were very careful postponing those things that we could for the second half and we made sure that that’s been the impact of the crisis that we had in Q2, but I’ll let Jose and Shay to comment more specifically on capex that we have in the plans.

On the margin improvement, I look at the margin improvement in a couple of ways. Again, we’re operating the business for the long-term, right. So we look at the margin improvement through one, let’s say the contribution margin and to the EBITDA and obviously eventually to cash flow, but they — at the top level, the contribution margin has two components, operational efficiencies, but also the quality of what we — I mean the inherent and margin of the contract. So we are improving on all those three dimensions. I think you’ve heard us talk about the emphasis we’re putting on next generation services, services that inherently give us higher margins than the legacy — the type of services that we’ve done in for many years.

So that’s one of the components. The second component is, we have and so you have heard me a number of times. We have a multi-year plan to completely remake our operations to be much more efficient and much more effective in doing what we do. So that’s the second component of improvement of margin. And then the third one, which is, hey we were not the best in terms of efficiencies in the SG&A department, and we’ve addressed those. So, the margin improvements that you see are in combination of those three, and we will continue and as you probably have heard me say many times, we take very seriously our three-year plan and we worked very hard to stay on target for the multi-year improvement that we promised to all of you guys, to all investors and our employees as well.

So it is a multi-year plan. We are on track and you should see a continued improvement along that plan. You were asking specifically the one-offs. There were not very many one-offs in this quarter, but I think just again little bit more specifically, but fundamentally, the margin improvement you’re seeing is part of the term. Jose?

Jose Antonio de Souza AzevedoChief Financial Officer

Yeah, capex, I will let Shay answer and then I’ll answer, I’ll complete the second question. Shay, please go ahead with capex.

Shay ChorInvestor Relations

[Speech Overlap] Yeah, sorry, sorry about that. So Vitor, if you look into the three-year plan that we published in November last year in our Investor Day, and we have within the last, Carlos stated that in his presentation, we are targeting capex will be between 3.5% to 4.5% on a recurring basis for the next couple of years. So as Carlos mentioned, 2020 very specific, we put everything that was other essential in the Q2 but we expect going forward for next year that will be between 3.5% to 4.5% of revenues. That’s pretty much aligned with the industry standards, so you should not expect us to be any different from that. And then just before Jose go into EMEA, you should expect it to be between 11% and 12%.

I’ll let Jose talk about any non-recurrence but EMEA should be steady state between the 11% to 12%, EMEA is slightly more volatile than other regions, because the dependence of Telefonica is still higher. It’s moving fast more and more into Multisector but because of design and specifically now that they need to more dependent Telefonica, Telefonica is more volatile than others by design. But you should expect non-recurring basis to be between a 11% to 12% margin in EMEA.

Jose Antonio de Souza AzevedoChief Financial Officer

Perfect. About the one-offs, it’s very important to mention that in terms of revenues this year, we expect it to have about 5% in terms of impact in the revenue. What we have done was, we started some programs to do the right-sizing and the zero based budgeting that we want to start by 2021, we started EBITDA and now that we can cover that. But even that we have some extra costs coming from COVID that we have inside our results.

At the end, and to give you an idea is that from the $80 million that we have in terms of rightsizing, we have $60 million in ongoing basis, which we don’t give any disclosure about the one-off because that was one thing that we agreed. If we can do some actions to cover the gaps that we have coming from the pandemic, and we will try to cover. And that is exactly what we are doing. But ongoing basis $60 million for the next year.

Carlos Lopez-AbadiaChief Executive Officer

In other words, just to make sure that we are clear, we had a number of one-offs, but they were negative and we’re not — we chose to include them in the numbers. So this is not the number we reported you guys is not excluding one-offs, it’s everything and kind of indicated that are negative with the results. So they would not have an immediate [Technical Issues]

Vitor TomitaGoldman Sachs — Analyst

Very clear. Thank you very much.

Carlos Lopez-AbadiaChief Executive Officer

Thanks.

Operator

Our next question comes from Vincent Colicchio, Barrington.

Vincent ColicchioBarrington Research — Analyst

Yes, Carlos, could you give us some more color on what’s driving the multi-sector strength in the US nearshore market? Is it one large contract or is it multiple clients?

Carlos Lopez-AbadiaChief Executive Officer

Sure, Vincent. It’s mostly Multisector clients, and there was in Q2, one significant win that we have and we did have a spike also in volume in the US because of the pandemic. [Technical Issues] how much we are focusing on different types of sectors. Companies more of the detailed economy and that was probably [Technical Issues] in a number of those companies, number of those contracts increased naturally in volume. So [Technical Issues] we are working on that as well.

[Technical Issues] a little bit of a — a peak volume-wise, but the vast majority comes from new contracts that we continue to win at pace in the US. Did that answer your question, Vincent?

Vincent ColicchioBarrington Research — Analyst

Yes, thank you. And then the strong sequential growth with Telefonica in next generation services, if I heard correctly the success is tied to new capabilities. First of all, if that’s — is that correct, and if that is correct. Could you give us more color on what those new capabilities are?

Carlos Lopez-AbadiaChief Executive Officer

It’s a mix. [Technical Issues] Based on the Telefonica, it’s very, very substantial, it’s very large. So it’s a mix. The improvement in, first of all, there is a fundamental improvement in volumes. We had the mix during the pandemic for what we discussed — sorry, [Technical Issues] particularly, happy that we are moving the mix of business we have with Telefonica also more toward the next generation services. [Technical Issues] Telefonica quite some time to make that mix predominant [Technical Issues] some new contracts, particularly a significant one in Brazil, but we are still competing with the — with a completely different set of people.

We’ve completed recently with for example with Accenture in some of these comparison you can get the idea that they are very different in nature with what we done traditionally. We still have a long way to grow will be able to tell you that we are mostly may change in services, but we are making very good progress across the board. I mentioned the US, Telefonica, I’m pretty proud to say that we’re beginning to make progress with our most important customer as well.

Vincent ColicchioBarrington Research — Analyst

And then last question we’re hearing from some of the US based players that clients are getting increasingly comfortable virtual delivery and may become a piece of their business over the longer term. How does it feel in Latin America on the ground. Do you see that happening?

Carlos Lopez-AbadiaChief Executive Officer

That’s a good question. [Technical Issues] to be dealing with the pandemic on an ongoing basis, right. Hopefully, all these vaccines would be in place and things will get better, but we expect to be operating in the pandemic position, and therefore the [Technical Issues] in some services from the staff will likely continue in a very similar way. We’re looking pass that what happens in 2022. That’s now because everything passes, right.

How much of the business will continue in the — at home model. We see a lot of benefits of having the at home model at least for a significant proportion. For the business, we see that the advantages for us. We could consolidate the number of centers for example. We could provide services in that model that we do provide services in that model that and more difficult to provide the center and if there is some element of cost [Technical Issues].

Shay ChorInvestor Relations

Carlos, couldn’t — because it’s very bad, the audio.

Carlos Lopez-AbadiaChief Executive Officer

Oh sorry, hello.

Jose Antonio de Souza AzevedoChief Financial Officer

Yeah, go ahead. Try again, yeah.

Carlos Lopez-AbadiaChief Executive Officer

Well, [indecipherable], but there is a lot of advantages to the at home model for employees [Technical Issues] and for our customers. Now, can we — how much can we do, let’s say 2022 we would like to see a good fraction of the business to move to the at home model. 30% of the reasons, will be a great [Technical Issues]

Vincent ColicchioBarrington Research — Analyst

Nice quarter. Thanks for answering my questions.

Operator

[Operator Instructions]

Shay ChorInvestor Relations

So, while we wait for questions over the phone, let me get some questions here from the webcast. We have two questions on the bond and walk through what happened, what was the decision and what we expect for the next steps on refinancing the bond.

Carlos Lopez-AbadiaChief Executive Officer

Let me — I mean not having heard the specific question. I assume there is along the lines what, what was the decision or where, what the decision was? We had a quite a bit of interest in fact Jose, Shay [Technical Issues] quite a long-term talking with, I don’t know I lost track of how many investors. And having said that, we didn’t see that. I think we were very clear if that we would only to do the refinance when and with the conditions that were satisfactory to all stakeholders. We’ve seen similar conditions at that point in time that were satisfactory to the — were satisfactory to us and quite frankly because of this call [Technical Issues] in terms, that we’re not part of it. So, not having that out of the — we expect to continue to put incremental business and different window maybe more interesting to look if it [Technical Issues]

Shay ChorInvestor Relations

No, that’s it. I don’t have anything to add. I don’t know if Jose has anything to add.

Jose Antonio de Souza AzevedoChief Financial Officer

The decision was as you mentioned Carlos, the decision was basically wait for a better moment and to be aligned with all the interest of the stakeholders and what we believe is the right credit profile of the company.

Shay ChorInvestor Relations

Yes, we have more questions over the phone or should I continue with the webcast.

Operator

Yes we have one more. Our next question comes from Soummo Mukherjee, Lucror.

Soummo MukherjeeLucror Analytics — Analyst

Hello. And congratulations on the results and thanks for taking my question. Yeah, mine was related to the previous question, just in terms of whether you see a window now in terms of issuance because we are seeing, we had total play in Mexico. There was also, there is a Peruvian healthcare company that’s in the market that has a similar rating as Atento. So if you’re getting that feedback from the banks that if you wanted to go, now, perhaps you could, if you could comment on that. And then just along those lines in case market remains closed and basically, the yield is — the coupon is not commensurate with what you believe it should be, if you could comment a little bit in terms of the plan B asset sales, you know how to address, which I think for bondholders is a main concern $500 million maturing in August of 2022. Thank you.

Carlos Lopez-AbadiaChief Executive Officer

Yeah, we do have a plan B, as it would be imprudent not so not to have that, I think we are still to be honest on plan A. [Technical Issues] markets. I’ll let Shay share particular we feel that the end of it. If and when is the right thing for the market. I definitely not have opinion [Technical Issues] and we keep on looking at what would be a good margin and good window. From my perspective [Technical Issues] So I think from a company perspective just better position to do so, but [Technical Issues] happening in the market [Technical Issues] particular opinion in terms of when that window is likely to be.

I trust myself [Technical Issues] potential likely windows multi wise.

Jose Antonio de Souza AzevedoChief Financial Officer

And just some of the things, Carlos and get this to add. Again, we are ready. There were a lot of interest in the road show that we did in September. So the idea is to continue monitoring the market for all alternatives so Plan A and Plan B, we are in no way in any financial distress. Right. So we have at least to August of next year to refining. But they’re going to have to always of next year, you have one year to do that. We don’t see now and you’re going to expect to have any silver bullet, basically it’s a negotiation process. After all, they need to treat fairly bond holders shareholders all the time. So we will continue monitoring, if there is any good opportunity we will take the chance that, that’s the strategy going forward.

Carlos Lopez-AbadiaChief Executive Officer

And [Technical Issues] profitable market. And the way we look at things right now, we are still in the COVID crisis and some element of pessimism markets particularly in Latin America, but my [Technical Issues] things are going to get much better in next year, we told you right I communicated that we are planning for COVID to be an issue of through ’21, but we all know that there is a number of vaccines that are coming or about to come, the market will take a while to to our distributor and vaccinate. So we expect that to take some time, but the sense of [indecipherable] versus a sense of optimism. My expectation is things will get our will start improving in terms of optimism, it’s starting a point next year. [Technical Issues] things are going to get in the next few months.

Sorry, I didn’t answer your question in terms of the specific timing [Technical Issues] margin and sector there is the right window. In the meantime, we continue to bring the company to to deliberate parameters. I think that’s the right [Technical Issues]

Soummo MukherjeeLucror Analytics — Analyst

Perfect, no, that makes perfect sense. Thank you very much.

Shay ChorInvestor Relations

So let me [Technical Issues] from the webcast, typically Q4 is the strongest from a free cash flow perspective, what should we expect for Q4, any material changes, any non-recurring that we should expect, given that you reported an accumulated $9 million free cash flow in the first nine months of the year.

Carlos Lopez-AbadiaChief Executive Officer

Well, I’ll let Jose address this one, I know he has been our cash flow champion in the company. Jose?

Jose Antonio de Souza AzevedoChief Financial Officer

Honestly, what we have in terms of expectations in cash flows through to have, still have a positive cash flow at the end of the year, we still improve it would be in the operating cash flow in good way, yeah, we have closed already October and we can see, we are on the same — on the same track and our expectation is exactly to have positive free cash flow end of the year, and the expectation in terms of cash.

Shay ChorInvestor Relations

Okay. Beatrice, any other questions from the phone?

Operator

[Operator Instructions]

Shay ChorInvestor Relations

Okay. So let me take another one from the webcast. I see you have almost $200 million in cash position what is essentially the minimum cash flow to operate and when we should expect you working on revolvers and when we should expect you to return the revolver as probably you have a negative carry now on those revolvers that you are using?

Carlos Lopez-AbadiaChief Executive Officer

Yeah when I came to the company, I was a bit uncomfortable, this was two years ago on the cash levels and how we manage things, I am being much more comfortable right now in terms of levels in management of the cash flow that Jose and Shay are carrying out so we think we are in a — we have a good level. The specifics over the next few months, we will have to see but let Jose and Shay to be more specific on this, but I can tell you from my perspective that I’ve been very comfortable with the management of the cash flow and the evolution of the cash flow under Jose, and at the moment it’s just a question of what is more efficient rather than perhaps in Q2 where we were being more risk averse basis — on the basis of — over the pandemic. So Jose, Shay, you may want to comment the way you think is the most efficient way to handle in the next few months.

Shay ChorInvestor Relations

Okay, thank you, Carlos. Just to put numbers, we need approximately $77 million, $75 million as minimum operating cash of this company. This slightly less than our monthly payroll, and then we need an additional $75 million, $80 million in credit lines available. So the total liquidity is probably around two monthly payrolls. That said, we actually already repaid part of the revolvers in July, one line that was very expensive in Brazil, and we are renegotiating some of the lines we have in Brazil, for lower rates now that it seems that the liquidity has improved in the season, and that we will play as we go. If we continue to generate free cash flow as we are above of what we originally expect it for the beginning of the year, we may start releasing the revolvers in a way that we will probably in the year end and in the first half of next year probably closer to the minimum operating cash that we need, and reduce the interest that we are paying this year.

But as Carlos mentioned, we took prudent approach, we thought it was benefit to spend a little more in interest expense as this year, and make sure that — ensure that the liquidity is proper to any need that we had throughout the crisis. I have another question here from the webcast. The $80 million savings that you are planning this year, and already delivered around $65 million, how much is expect to be carried for next year, and how much believe is recurring on the business.

Carlos Lopez-AbadiaChief Executive Officer

Yeah there is nothing 100% to say gradation and I like the chat that put this together, in terms of indicating. Some things are very structural and some things are one off and some things are in between. Rough estimate, $60 million of $80 million are structural, meaning that they are relatively easily recurring, nothing comes easy in business. You have to continue to work in making sure you maintain properly, but $60 million of $80 million are probably recurring we will have to work [Technical Issues] Do you hear me? Am I still connected?

Shay ChorInvestor Relations

Yeah, yes you are.

Carlos Lopez-AbadiaChief Executive Officer

Okay. So the short answer is probably in the order of $60 million of $80 million are probably recurring.

Shay ChorInvestor Relations

Okay. Carlos, can you describe, if any preparation are made to a second wave of the pandemic?

Carlos Lopez-AbadiaChief Executive Officer

Yes, for sure. As I mentioned, we are counting on and then going to continue into well into 2021, right. And so one thing I can tell you is, again, is very difficult to forecast how much worse or better things are going to get. One thing I can tell you I feel extremely confident that even in the difficult — even in a very difficult scenarios we are much better prepared right now than we were in Q2. That’s bright of the whole world is particularly true of us, we managed to go from zero to — at the moment we have in the order of 80,000 employees working at home with deployed, already the first version of our permanent platform to do work at home.

So it’s not any more just doing through the effort of our employees, we are testing and probably be deploying in the next couple of months. The second version of the platform with more capabilities, we intend to make this the way we do business. And as I mentioned, we expect this has a lot of value for customers, for Atento and also for employees. So for this to be the way we operate. So we are n much better position to handle the second wave, than we, we are aware. I mean, so well I cannot, you can never say that it will have no impact on us because, again, these things are very difficult to predict. I can tell you we are in a much, much more solid position to deal with deterioration of the pandemic. We are counting the pandemic to continue well into 2021. Anything else, Shay?

Shay ChorInvestor Relations

We don’t have anything else here on the webcast.

Carlos Lopez-AbadiaChief Executive Officer

Okay. In that case, we don’t have any more questions from the phone, we can probably close.

Shay ChorInvestor Relations

Beatrice, any other question over the phone?

Operator

No, we don’t have any, we don’t have any more questions from the phone.

Carlos Lopez-AbadiaChief Executive Officer

Very good. In that case, let me thank everyone for joining us today and wish everyone great rest of the day and the week and as the times are these days, stay safe. Thank you.

Shay ChorInvestor Relations

Thank you all.

Jose Antonio de Souza AzevedoChief Financial Officer

Thank you.

Duration: 50 minutes

Call participants:

Carlos Lopez-AbadiaChief Executive Officer

Jose Antonio de Souza AzevedoChief Financial Officer

Shay ChorInvestor Relations

Vitor TomitaGoldman Sachs — Analyst

Vincent ColicchioBarrington Research — Analyst

Soummo MukherjeeLucror Analytics — Analyst

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