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ATENTO SAÂ (ATTO)
Q4Â 2018 Earnings Conference Call
March 20, 2019, 10:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
See all our earnings call transcripts.
Prepared Remarks:
Operator
Greetings, and welcome to the Atento S.A. Fourth Quarter 2018 Earnings Results 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.
I would now like to turn the conference over to your host, Shay Chor, Treasurer and Investor Relations Director for Atento.
Thank you, you may begin.
Shay Chor -- Investor Relations Director & Corporate Treasurer
Thank you and welcome everyone to our fiscal 2018 fourth quarter earnings conference call. Here with us today is Carlos Lopez-Abadia, Atento's new Chief Executive Officer and also a new member of the Company's Board of Directors. Carlos joined the Company seven weeks ago, and this will be his first earnings call. He will discuss his top priorities and his initial views on the Company, followed by Mauricio Montilha, Atento's Chief Financial Officer, who will review our fourth quarter and full-year financial results. We will then open the call for your questions.
Before proceeding, please note 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 information that constitutes 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 securities regulators, and we invite you to read the complete disclosure included here on the second slide of our earnings call presentation.
Our public filings and earnings presentations can be found at investors.atento.com. Please note that unless noted otherwise, all growth rates are on a year-over-year and constant currency basis.
Please turn to Slide 3, and I'll turn now the call over to Carlos.
Carlos Lopez-Abadia -- Chief Executive Officer
Thank you, Shay, and good morning everyone. Thank you for joining us today. I would like to start the call by sharing with you how excited I am to have joined Atento as its CEO. As Shay noted, this is my first earnings call with Atento and I look forward to interacting with many of you in the analyst and investor community over the weeks and months to come.
Please turn to Slide 4. Since this is the first time many of us in the call are meeting, I thought it would be helpful to kick things off with a quick overview of my professional background. I've spend the vast majority in my 30-year career in the technology sector spanning strategic, operational and advisory leadership roles at some of the world's top companies.
Throughout my career, I have been responsible for leading the digital transformation of global organizations, leading major lines of business, transforming businesses and driving growth as well as operational efficiencies. I believe my experience and expertise fits well with Atento in terms of where we are today, but particularly where we're heading.
As part of my overview, today, I would like to briefly share my initial observations and assessments made during my first seven weeks at Atento including highlighting some relevant financial results of fiscal 2018, while letting Mauricio cover the details of the results.
Most importantly, I would like to discuss with you my approach to the business and the direction in which we intend to take the Company. Although we're not providing guidance today, during the first quarter earnings call in May, I will provide details of our strategic plan along with our performance outlook for 2019. We also plan to host an Investor Conference in September to focus in depth in the long-term plan, and particularly on our digital and new services strategy.
Please turn to Slide 5. To begin, I'm extremely proud of the strong leadership position that Atento has in the markets where we compete and the solid long-standing relationships with our clients. I have spent quite a lot of time meeting with many of our clients over the last few weeks.
I left those meetings very impressed with the strength and depth of Atento's relationships, including relationships at the senior most levels of these companies. It's clear to me that they have great confidence in Atento; consider us a trusted partner; and to be honest, every conversation include a discussion about what else we could be doing for and with them.
I have been visiting our operations throughout Latin America and Spain, talking with and learning from colleagues working in all capacities at Atento. I was struck by the energy, talent and commitment of employees at all levels in Atento. While these are very strong assets to lead upon, I would be remiss if I did not acknowledge that Atento is not achieving its full potential, particularly in terms of growth and profitability.
This Management intends to address Atento's performance issues with at most urgency. Prior to going to my priorities for improving the business near and long-term, let me highlight some of the key financial results for fiscal year 2018 that I view as opportunities to build upon for the future.
Please turn to Slide 6. We delivered significant progress in our flagship Brazil operations, especially in the second half of the year, and in 2018, on a high note, with a strong revenue expansion and solid EBITDA margin improvement. Also, while growing our key telefonica accounts, our Multisector clients grew at a faster rate, improving the diversification of our business.
In addition to delivering solid growth in this important lines of business, we also generated a strong cash flow in 2018, providing a basis for making strategic investments and preparing our Company for more predictable results and a more profitable growth path.
Lastly, we continue to expand our market penetration and extending our relationships during 2018, growing in the right areas. We had some exciting new logos. For example, in Brazil, we announced a partnership with Samsung for a customer relationship center with more than 1200 workstations, and the Unimed-Rio carve-out, a strategic move into the fast-growing healthcare sector.
Other examples include digital strategy to enhance Kia's customer experience in Mexico along with expanding our partnerships with several major organizations in banking and financial services, insurance, technology, media and several verticals.
As I mentioned earlier, we have great assets to build from, but we are far from reaching our potential. Therefore, I would like to share with you the immediate business priorities that will form the basis of our near-term plan that we will share with you in our first quarter earnings call.
Please turn to Slide 7. We believe that urgency, accountability, business agility and (inaudible) need to be the basis of Atento going forward. You will see these guiding principles underpinning the following immediate priorities. Our focus this year will be, first and foremost, improving our execution. We need to start with reliability in our results to our clients and investors, predictability of our results and making commitments by a measure of our sense of accountability. We are starting here a new incentive compensation system for our operating and financial management teams will directly tie to the reliability of our results.
The second and most important area for operational improvement is profitability. We have already identified and are in the early stages of implementing cost optimization initiatives. We streamlining operations in our traditional business and are adjusting our cost base where there has been a decline in volumes.
We anticipate that this action would put us on a steady path to returning to improved EBITDA margins in the medium-term. Once we have our operational improvements fully under way, we cannot ignore the future of Atento; that is digital growth. We're starting in fact to lead the digital transformation of CRM and BPO in our markets.
We serve the large market that remains under-penetrated across verticals in Latin America, and I believe the strong prevailing digital trends present a tremendous opportunity that, for us, that we have not even began to tap. As you know, the critical areas of our business have found important assets in Atento digital and solutions factory. These address the data-driven digital sales and customer care as well as digital back office and collection solutions.
Our focus in 2018 will be the transformation of Atento along the above priorities. We are aligning management incentives and planning to make the necessary investments to place Atento on a different growth and profit trajectory, oriented to supporting our plans on the digital journeys. I see our competitive advantages as well as our passionate culture of innovation as the right mix to extend our market leadership and to accelerate our penetration of the digital space, ultimately, making our Company a more durable, long-term winner.
In turn, I believe these will lead to a more consistent profitable business for our shareholders. As we're still developing a very detail plan, we believe that it is prudent to defer our 2019 guidance to our Q1 earnings release. To be clear, this decision in no way reflects a lack of confidence in Atento's long-term opportunities.
In closing, I would like to reiterate how excited I am to be Atento's CEO. As I hope you can see, we believe that we have a tremendous opportunity ahead of us. Overall, I am committed to work with Atento team, our clients and our partners to build on our strengths and our market position to maximize our potential.
I will now turn the call over to Mauricio, who will discuss the details of Atento's fourth quarter and full year 2018 financial results.
Mauricio Montilha -- Chief Financial Officer
Thank you, Carlos. Please turn to Slide 9. Good morning, everyone. Glad to be here today to talk about Q4 and full year 2018. Before I discuss the details of Atento's results, I would like to highlight a number of key performance areas.
As Carlos mentioned, Atento is delivering growth in the right areas with 11.4% revenue growth in Brazil, our most important market. Also, the implementation of our operational improvement plan in the first half of 2018 led to back-to-back margin expansions in the third and fourth quarters, with the latter quarter being particularly strong at our flagship operations.
With sales growing just over 6% in the quarter, Multisector continues to be growth engine for Atento and now represent nearly 61% of total revenue. Total revenues were 4.4% higher than the quarter -- in the quarter and 4.3% on a full year basis, which was within our guidance range.
Atento's EBITDA margin was 9.2% in the fourth quarter and 10.2% in the year. These margins include $10 million in one-off costs related to changes in our management team. Excluding these costs, our EBITDA margin would have been 11.6% in the quarter and 10.7% in 2018, slightly below the guidance range for the year that we gave in our third quarter 2018 earnings call.
We've reported recurring EPS of $0.21 in the quarter and $0.77 in 2018, which was a nearly 25% increase versus 2017. Our fourth quarter recurring EPS was impacted by certain events, which I will explain in detail in the next slide.
We generated strong free cash flow before interest and acquisitions of $45.2 million during the quarter and $88.8 million for all of 2018. Cash conversion was 48% for the year, above the 40% at the top end of our guidance range. Cash generation brought net debt down 9.7% sequentially to $326 million, with net debt-to-EBITDA ratio finishing the year at 1.8 times.
Under Atento's share repurchase program, we bought back 400,000 shares during the quarter at a total cost of $2.9 million. Since the approval of the program in July and the end of 2018, we purchased 1.1 million shares at a cost of $8.2 million.
Before I move to the next slide, I would like to highlight that our capital allocation priority continues to be focused on delivering profitable growth. As we expect to incur extraordinary costs and making investments during the year, we have not been executing share buybacks thus far in 2019. It does not mean we are cancelling the buyback program, it only means that we are waiting to assess the actual size of these costs and investments before resuming the program.
For the same reasons, we did not announce a dividend for fiscal year 2018. We remain focused on returning capital to shareholders, but it's important to align expectations in the short-term while we make the adjustments needed to prepare the Company for delivering profitable growth in the future.
Please turn to slide 10. Fourth quarter sales were driven mostly by our flagship business, with higher volumes among existing clients in Brazil. There were also higher volumes generated by new clients in Spain and this growth was particularly offset by lower Multisector volumes in the Americas. For the year, Atento sales increased 4.3%, within our 3% to 6% guidance range.
Sales of higher value-added solutions accounted for 26.6% of full-year revenues versus just around the 26% in 2017. Atento's EBITDA margin was 11.6% in the quarter and 10.7% in 2018 when excluding the one-time $10 million charge for management changes.
Our recurring EPS of $0.21 was negatively impacted by a $3.3 million pre-tax loss related to market-to-market Brazilian reals hedged on the interest on our bond, the negative $10 million pre-tax impacts of one-off related to management changes; and a positive $10 million adjustment for hyperinflation accounting related to Argentina. Excluding those -- these effects, recurring EPS in the quarter would have been $0.19.
Although there are clear signs that Atento is recovering and performed well against most of our 2018 targets, EBITDA margin fell just short of it. As Carlos said, we need to improve profitability in our traditional business and in Americas, in particular. Weaker volumes in Argentina and Mexico again impacted EBITDA during the quarter.
Following the leadership change that were made in Brazil last June, our flagship business is leading Atento's digital transformation and the performance results there have been encouraging with our second half EBITDA margin of nearly 13%. Our margin in America deteriorated in the second half of the year, reflecting the challenging environment in Argentina and Mexico.
As we go into 2019, we will right-size our operations in Americas to adjust to the new reality of the market environment there. Because Telefonica represents 60% of EMEA revenues, our margin in that business is still subject to volatility, hence the weaker fourth quarter. Nevertheless, full year profitability was within the expected normalized level of 8% to 9%.
Please turn to Slide 11. In Brazil, I'd like to highlight the combination of revenue growth and improved profitability as a sign of what we've been -- of what we are targeting for Atento's future. Revenue growth was fueled by Multisector clients, specialty financial services most from the volume ramp-up (ph) into new contract signings throughout the year. The strong growth -- this strong growth in Multisector clients led to further revenue diversification, with Multisector sales up 0.5 percentage point to 69.6%, which can -- you can see in the bottom left of this slide.
The diversification of our revenue mix also resulted in improved profitability in Brazil where our adjusted EBITDA margins increased 70 basis points in the quarter to 13.9% and by 200 basis points during the year. In addition to the operational improvements we have implemented in the first half of 2018, favorable seasonality in the second half of the year also contributed to the higher profitability.
Please turn to slide 12. As opposed to the good result that we delivered in Brazil, our America business was pressured by challenging environment in Argentina and Mexico. For the year, revenue from Multisector clients expanded 5.4%, accounting for just over 59% of total revenue, a 1.2 percentage point increase, despite the recurring revenue in the quarter. The decline in adjusted EBITDA for the quarter reflected lower revenues in one-time charge related to the management changes. Excluding this charge, adjusted EBITDA margins would have been 9.5% in the quarter and 11.4% in full-year.
Please turn to Slide 13. In EMEA, we generated our third consecutive quarter of increasing revenue. Sales grew strongly up to 9.3%, further evidencing our ability to compete in this mature and increasingly digital market. New client wins, especially in the utility sector mostly drove our 8.4% increase in Multisector sales during the quarter and an 8.8% increase for the year. This brought the mix 2.1 percentage points higher to nearly 40% of annual EMEA sales. Profitability for the year is aligned with expectations.
Please turn to Slide 14. We continue to generate strong free cash flow and maintaining a healthy balance sheet, both of which will allow us to make Atento's digital push as well as pursue other growth opportunities. The $41 million free cash flow that we generated in the quarter reflects favorable seasonality, but also higher than expected revenue anticipation by clients. For the year, our EBITDA to cash conversion rate was 48%, above the upper range of our guidance, which was 40%. The lower cash CapEx compared to our guidance reflects optimization of our utilization rate, mainly in Brazil.
Before we move to Q&A session, I would like to point out some of our views related to 2019. As Carlos indicated, we expect this will be an adjustment year for Atento. In addition to addressing our cost structure, change will be made to accelerate innovation at Atento.
Additionally, we expect strong dilution on negative seasonality in Brazil in the beginning of the year, reflecting mainly the 4.6% increase in minimum wage and other benefits as a result of the collective agreement negotiated with the units. Therefore, and although we are not providing full year guidance, we expect profitability in the first half of '19 to be under pressure, recovering in second half of the year.
That concludes our prepared remarks. Operator, you are now ready to start the question and answer part of our call. Please open the call for questions.
Questions and Answers:
Operator
Thank you. (Operator Instructions) Thank you. Our first question comes from the line of Diego Aragao with Goldman Sachs. Please proceed with your question.
Diego Aragao -- Goldman Sachs -- Analyst
Thank you. Hi, good morning, Carlos, Mauricio and Shay. Thank you for taking my question. My first question is for Carlos. I know that it might be too early for you to say, Carlos, but I was wondering if you can just comment about what do you view as your main challenge at Atento and in particular, how do you think you can consolidate top line growth and improve profitability in a moment where the industry is facing the disruption from new technology and digital platforms. Thank you.
Carlos Lopez-Abadia -- Chief Executive Officer
Let me try to answer in the order you asked the question. What is the main challenge in Atento? The main challenge in Atento is the same main challenge in just about any one of these situation. It's always the people and culture. The challenges, and the opportunities created by those challenges come from different immediate sources, but typically most difficult one is people and culture, that takes some time to change and but that has to start and we have started already.
I think the second part to your question, how we can address the problems. As I said in the remarks, we will discuss with all of you the detailed plan. Today, we share the main directions and priorities. But immediately, we're going to focus on the operational improvements in terms of predictability, reliability and above all the things, profitability. It's a combination of changes in process, structure and incentives.
Some of those are already in place, particularly incentives. We're already placing these incentives for the management and the financial management and operational management teams in Atento to align with these objectives, and particularly to align better with shareholder and investor objectives.
Diego Aragao -- Goldman Sachs -- Analyst
Perfect. Thank you, Carlos. My second question is related to recent M&A transactions in the region. Specifically, I would like to get your thoughts on the deals related to Telefonica which fully divested from their operations in Central America. So what should we expecting here in terms of impact and if -- let's say, if you would lose some of these customers throughout the year. Thank you.
Carlos Lopez-Abadia -- Chief Executive Officer
I'll let Mauricio answer in detail. But let me answer in general terms. Obviously, those where some of the big (inaudible) with our main client Telefonica in my short tenure. I'm very confident in Telefonica and the Telefonica relationship and business.
I mentioned earlier that one of my most -- I won't say surprises, but some of the things that really were positive impressions in the first few weeks was the relation with the clients and specifically, Telefonica, a very strong relation with Telefonica and we have renewed recently some of the key contracts and still working on others. But I'm very confident on the short and long-term future with Telefonica.
Some of the divestitures that Telefonica is in the process of doing, those are things that happen in any business and we need to make sure that we handle those as they happen.
And now having said that, that represents a relatively small potential impact for us, but the most important thing for me is the overall relationship with Telefonica, which keeps on growing, not just from the perspective of the personal-professional relationship with Telefonica, but also from a business growth perspective.
Mauricio Montilha -- Chief Financial Officer
I just would like to add one or two points on, Diego. As we always said, our relationship with Telefonica is based on the local contracts and the performance we have with those contracts. So we do expect those changes that do actually -- eventually give us more opportunity. When the shareholders change in those units, eventually we can actually get more business with the new shareholder or MSA with Telefonica also has some protection that help us to handle those transitions.
So and -- we are working actually with Telefonica, to make sure that transition also fits within the agreement -- within MSA. So -- but we -- as Carlos mentioned, I think the first focus we always have in this is, we are doing very good job for Telefonica in those areas. The new ownership probably open opportunities for us actually with the new owners and we -- Telefonica being working with us, we've been working together proactive before the acquisitions are done in order to protect the minimal requirements MSA. So I don't see any major downside; eventually potential, actually, new opportunities for us in the future, for those deals.
Diego Aragao -- Goldman Sachs -- Analyst
That's great Mauricio. Thank you.
Mauricio Montilha -- Chief Financial Officer
Okay.
Operator
Thank you. Our next question comes from the line of Vince Colicchio with Barrington Research. Please proceed with your question.
Vincent Colicchio -- Barrington Research -- Analyst
Yes. Carlos, I'm curious if you -- from what you understand thus far, is the Company missing out on growth opportunities due to the state of the current CRM automation capabilities?
Carlos Lopez-Abadia -- Chief Executive Officer
What I can tell you is that we have a bigger opportunity than we're capturing. We are growing and we have, I think I mentioned in my earlier remarks that one of the things that I think is a key asset of Atento is the leadership in the markets where we compete. Are we capturing all the opportunities for growth? No, not by a long shot. Do we have opportunities eventually in other markets? Well, for sure. But I would like to underscore the fact that we are growing in the markets where we compete.
Vincent Colicchio -- Barrington Research -- Analyst
And in Mexico, aside from the economy which, my understanding is weak, but still growing, are there any other factors that you might want to mention that are an issue over there?
Carlos Lopez-Abadia -- Chief Executive Officer
We have some issues, as you know, with some natural disasters that we are recovering from. We've made some changes in management and definitely my early assessment is that things are moving in the right direction. I met with some of our key clients in Mexico. I mentioned particularly, without exception, all my meetings with clients, including those very large accounts in Mexico, are not only good but moving into even better direction. So I'm positive about the future of our Mexico operation, but without a doubt, we did face some challenges in the not too distant past.
Vincent Colicchio -- Barrington Research -- Analyst
And Mauricio, one for you; what vertical did the new clients come from EMEA? Where they from communications? And what's the margin outlook for the clients that were added versus the average?
Mauricio Montilha -- Chief Financial Officer
Now this year, I think, they came all from utilities and other sectors, some on the financial sector as well. But there is a big -- a big jump in revenue here coming from the utility sector that we won very good deals on that, as we -- some of the financial sector.
As we have always explained, the difference in profitability between those segments is not that we charge more for clients that are not telcos. The mix of service we provide to telcos is largely skewed toward more simple calls or simple service, so therefore these are more commodity, they have a lower margin.
When we talk about intuitive financial sector, you have a mix of service that are higher margin, in any kind of plan. So the mix of service of the utilities and also on the financial sector, they typically bring slightly better margin and you've been seeing this reflect on the EMEA. If you look at three years ago, last year and this year, we are steadily improving margins of EMEA as the penetration of -- or the diversification to move, separate financing improves.
Vincent Colicchio -- Barrington Research -- Analyst
Okay, thanks for answering my questions.
Mauricio Montilha -- Chief Financial Officer
Thank you.
Operator
Thank you. (Operator Instructions) Our next question comes from the line of Beltran Palazuelo with Santalucia. Please proceed with your question.
Beltran Palazuelo -- Santalucia Group -- Analyst
Hello, good morning. Carlos, nice to hear from you. Good morning Mauricio and good morning Shay. It's a pleasure being here after two quarters. I have a couple of questions. First of all, it's on the buyback program, the Board approved a $30 million buyback program because they thought or they saw as the intrinsic value of the share was not reflecting the fundamentals. Who made the decision to stop the buyback around half of October? When you see average price, it looks like the buyback was stopped in the half of October of 2018. If you could give more color on that.
Second question is, of course, Carlos you need to -- took over everything to give a guidance and to give a plan, but I was willing to have more color for example, when we see the good quarter in Brazil, in constant currency growth, is that going to keep going in next year? And for example, in Americas are we be able to maintain margins this year? Or the situation in the Mexico and in Argentina is it tougher than we think? And then in EMEA, is it just a one-off quarter of strong growth or is it going to continue?
Then with working capital, when I analyzed, for example, last year, we grew 5.1% and the cash consumption was $32.8 million. This year, we're growing 4.3%, that's less, but our consumption of working capital is higher. So if you can give us a little color on what is happening? Why we are consuming more working capital than last year, the 2017?
Then fourth question is interest rates. What do you think the low cost will be next year? Is it efficient to have $133 million in gross cash position without doing anything? How much cash do you need to actually manage the business efficiently?
And then my last question comes from the cost from the management change. Why is it put in Americas? As far as I know the management team is in the Brazil. So why is it budgeted in Americas? So that are my questions.
Carlos Lopez-Abadia -- Chief Executive Officer
Okay. First of all, thank you very much for the questions. I think the vast majority of those are going to -- let Mauricio take a crack at it, including the one regarding the decision made back in October, since I wasn't here at that time.
Mauricio Montilha -- Chief Financial Officer
Sure.
Carlos Lopez-Abadia -- Chief Executive Officer
I'll tell you, however, about the Brazil and US; about the prospects in Brazil market and EMEA. Again, we're not providing guidance today. But I was very -- I'm very happy with what has happened in the second half of the year in the Brazil operation, it's quite a number of commitments, we are really executing on Brazil. And we are going to replicate in other parts of Atento. So I think quite a few things that we have going on, there will be not only durable in Brazil but extendable and will be extended in the rest of Atento.
Also we have too is the trend that we have in EMEA and it is not a quarter-to-quarters trend. That's an operation that -- again, this is very -- I find it to be solid and as well as in many other places, we have one very large client Telefonica, their relationship is particularly close there for obvious geographical reasons, as you know. So again, without giving a specific guidance; those two markets, I'm very happy and we would like to extend some of the things that we've doing there in other places. Mauricio?
Mauricio Montilha -- Chief Financial Officer
Sure, hey Beltran. Well, I'll start with the question on the buybacks. Well, first just to remind all of us, we got up on buyback approval last year when a mandated up to $30 million can and for year to be completed. So we are within the framework of the program and we're being focusing, as also we've said, the buyback will be is executed as we see opportunities and also -- and if the cash flow of the Company permits.
So, our first priority in capital allocation continues to fund growth and to fund the initiatives that will put the Company back on the profitable way, So it was management's suggestion to the board that given the change -- the trajectory of the business and the initiatives we are taking, as Carlos mentioned in terms of focus on the business and hoping to improve profitability to hold on the buyback and to focus more on those first priorities, as we laid out, but I'll just remind you we have $22 million to be done and this will be revised, the execution of the plan as we go along Q1, as the results of those initiatives already started and also the needs for the new initiatives, and this will be decided as we go.
So the second point, if I would say, on terms of working capital, I need to probably take a look on this, on the constant days -- but if you, we have, I'll say have a larger growth happening in the end of quarter, so the end of the quarter, when you measure the working capital versus the other quarter that has some increase in revenue, particularly in Q4. And also as you're looking, there is currency moving between last year and now.
So generally speaking, our DSOs or let's say our working capital primarily is composed by the receivables. The DSOs are stable, which is not likely declining. There is more seasonality on the revenue in Q4, but also there is a significant exchange movement between the beginning and the last year balance. But the working capital is completely under control and actually, as I mentioned, we actually got some anticipation of us even further reducing the DSO in December this year, for example.
In terms of cash position, we ended year with $133 million (ph). Just to give -- generally speaking, for the day to day transactions, we need $100 million more or less in cash, giving we are a very decentralized company. And in Latin America, it's not very easy to do cash flowing, during -- well this should impact. So, the cash typically is a $100 million that we would need to run smoothly the day-to-day operations.
The excess cash in the quarter will be utilized in the next -- in the coming year and we will lay it out clearly, what did we do in Q1, which are the priorities of the business and how the cash will be allocated, although going back to the main point, our priority will be to support the business growth and improving efficiency to the business and to return to the shareholders after we guarantee that the Company has the proper funding to deliver on the objectives.
The question about the interest rates, as you know, our capital structure is pretty much, was renewed last year in 2017. So we continue as, of course, look at the market. If there are opportunities for that management, we will take them, along the road and as you -- the first, the important eminent of the bonds we have has a two-year call. So there is an opportunity for that to (inaudible) when we pass this two-year, but we will continue to access the capital markets and to see if there is a more efficient way to adjust our capital structure. At this point there's nothing, I'll say material, that can be done and this area. If there is, we will go for that.
I think that's all, I had to provide -- oh on the -- oh sorry, there is a final question on the Americas. It's just to the accounting as we do because some part of the management is we split a cost of management through several regions. There are other costs that we do and the allocation was just been Americas historically, so we keep it for comparability, but that has nothing to do with America specifically, but the majority of the changes or the impact of the changes was in America for -- as comparable as we do see in the IPO, there is no particular reason, that was all the reason that was in Americas. That's why we also communicated what will be the results excluding those charges.
Beltran Palazuelo -- Santalucia Group -- Analyst
Okay, thank you very much. And if I may, maybe the last question though, for Carlos. When you hear a -- of course you are focused in all the opportunities the Company can achieve and kind of improve. But maybe that's on the operational side, on the financial side. Is the share price is going to be a priority for you? You are happy with the evaluation. You think the price reflects the intrinsic value? Do you think there are some things about making the stocks trade where it is, you're happy? Is it going to be a priority? Are you happy with those minors, I don't know, another 50%. Are you going to do something or you are happy and you let the market put the stock where you think it should put it?
Carlos Lopez-Abadia -- Chief Executive Officer
I think there were several question there, but I think they all revolve around the same topic, the share price. I'm definitely not happy with the share price and I think we have the potential of being a much higher value. No question about it. What am I doing about it? I believe the number one thing that we can do, that I can do, is to improve operations that I said earlier, improve the predictability of our forecast, the reliability of our results and particularly focus on the profitability in the short term.
We have had a pressure on profits for quite some time. I believe that setting Atento in a different growth and particularly, a profit trajectory is the number one thing we can do for Atento in the short term. Medium-term is the focus on the digital growth. We are successful on those counts. I believe that the share price will follow. At that point, we can talk about many other options, but my number one responsibility and priority is to affect the stock price, to the improvement of the operations of Atento.
Beltran Palazuelo -- Santalucia Group -- Analyst
Okay, thank you very much for taking all my questions. I appreciate it.
Carlos Lopez-Abadia -- Chief Executive Officer
Thank you.
Operator
(Operator Instructions) Our next question comes from the line of Amy Sheng with Equinox Partners. Please proceed with your question.
Amy Sheng -- Equinox Partners, L.P. -- Analyst
Hi Carlos, great to hear from you, and hi Mauricio and Shay, again. Just two questions, one is a slight follow up. You mentioned that you wanted to pause the share buybacks as you evaluate other investment opportunities. I was wondering if you could elaborate on what some of those opportunities look like, what the return do you -- if there is a return hurdle that you would expect from those opportunities, given where your share price is trading today. And then if you think about sort of the share buybacks versus the dividends, sort of how you balance those two as well.
The second question is on Brazil. I know you're not giving guidance, but I was curious if you could talk a bit more on expected wage increases and the union negotiation and how much you expect to be able to pass on to customers?
Carlos Lopez-Abadia -- Chief Executive Officer
Yeah, thanks for the question. Let me try to take a crack at that and I'm going to underscore what Mauricio said in an earlier question. The discussion of the share buybacks and many other similar angles, we would like to have a discussion after we have in place our transformation plan. As we said earlier, we'll be in a position to discuss the Q1 earnings. And in the long-term plan, we could probably give you also a view in that timeframe, but particularly we will be discussing in depth the long-term plan in the September conference.
With having a fully formed plan and having the intention of transforming Atento significantly, I think it's prudent to defer decisions on share buybacks and similar until we have cleared the funding needs for the different initiatives that we're undertaking. Mauricio, any additions?
Mauricio Montilha -- Chief Financial Officer
No, I think you -- we said, the problem was designed that way. We have a mandate and we will always reassess what are the first priorities of the Company. And as Carlos said, the main priority for the Company is profitable growth. So as Carlos also mentioned in his remarks the fact that yes, we have to invest some money there is in a streamline organization also just synchronization to the new volume realized, particularly in Americas. So these are the key priorities and the other priorities, as Carlos mentioned, we are developing this transformational plan to Atento. And we will reassess it as -- after Q1 when we provide guidance. This is the normal part of the problem as we disclosed it in September last year.
Carlos Lopez-Abadia -- Chief Executive Officer
The good news is we have a solid balance sheet and solid cash flow generation. So we have a variety of options both in terms of funding the transformation of Atento and returning value to shareholders.
Mauricio Montilha -- Chief Financial Officer
Amy, just about your second -- can you repeat your second question, Amy?
Amy Sheng -- Equinox Partners, L.P. -- Analyst
Yes, my second question was just on your previous comment on Brazil. You mentioned that there are going to be wage increases. I was just curious sort of how much you can pass on to customers and has that changed from the past few years?
Mauricio Montilha -- Chief Financial Officer
No, thanks for the question. It is a very important topic typically in our seasonality -- impacting our seasonality of the business. The agreed inflation was 4.6%. That is already implemented in Brazil actually in Q1, as usually typically we implemented price -- the cost increase not only in Brazil, but also all of the other countries that have either minimum wage laws or they have important units typically in January and February those wage increases happen and we pass the price over the years. So, that's actually still put pressure in seasonality of our business; lower profitability in Q1 and Q2 and more in Q3 and Q4; one of the key elements of that.
In the case of Brazil, we typically being able to pass two-thirds on pricing and that's what we are shooting for. Again, of course the good news is, it is less relevant. You have years we had 14% to pass the prices. That was really challenging. 4.6% is also very challenge because everybody is looking at profitability or efficiency in their business but we continue to focus on (inaudible) price, but also we continue to work with our clients to help them to be more efficient overall, particularly with the tools that Carlos mentioned, with the digital, search bots and everything else we can do with technology that we can help them to have a better service to their clients with a lower cost base.
But on the individual business and volumes we operate that there's important cost elements related to depot started to decline. We're going to continue to focus on 70% and the rest we need to help our clients to be more efficient. For this 4.6% is an important number. That's why we made it higher than last year. And the implementation is, when we compare to last year, that's why I mention also that seasonality in '19 is going to be more skewed toward second half. One of the reasons is because this increase is higher than we had last year. There's the implication of the accrual, so there's a lot of effect, but we expect to recover it all over the year as we've being doing in the last couple of years.
Operator
Thank you. That does conclude our question and answer session. At this time, I'll turn the floor back to Mr. Lopez-Abadia for any final comments.
Carlos Lopez-Abadia -- Chief Executive Officer
Okay. Well, thank you very much to all of you for your time, attention and your thoughtful questions. Looking forward to interact with you in the next weeks and months; looking forward to working with you. And as always, our Investor Relations team is available to you with any further questions and clarifications. So, thank you very much.
Operator
Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Duration: 51 minutes
Call participants:
Shay Chor -- Investor Relations Director & Corporate Treasurer
Carlos Lopez-Abadia -- Chief Executive Officer
Mauricio Montilha -- Chief Financial Officer
Diego Aragao -- Goldman Sachs -- Analyst
Vincent Colicchio -- Barrington Research -- Analyst
Beltran Palazuelo -- Santalucia Group -- Analyst
Amy Sheng -- Equinox Partners, L.P. -- Analyst
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